1
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ---------- to---------
Commission File number: 1-3750
BOATMEN'S BANCSHARES, INC.
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(Exact name of Registrant as specified in its charter)
Missouri 43-0672260
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
One Boatmen's Plaza, 800 Market Street, St. Louis, Missouri 63101
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(Address of principal executive offices) (Zip Code)
3l4-466-6000
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (l) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No ----
-----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Number of Shares Outstanding
Class of Common Stock as of April 28, 1995
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$1 Par Value 127,853,661
2
INDEX
PART I - FINANCIAL INFORMATION
------------------------------
PAGE NO.
Item 1 - Financial Statements 3
Consolidated Balance Sheet
March 31, 1995 and 1994 and December 31, 1994 4
Consolidated Statement of Income
Three months ended March 31, 1995 and 1994 5
Consolidated Statement of Changes in Stockholders' Equity
Three months ended March 31, 1995 and 1994 6
Consolidated Statement of Cash Flows
Three months ended March 31, 1995 and 1994 7
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 8-24
PART II - OTHER INFORMATION
---------------------------
Item 1 - Legal Proceedings None
Item 2 - Changes in Securities None
Item 3 - Defaults Upon Senior Securities None
Item 4 - Submission of Matters to a Vote of Security Holders None
Item 5 - Other Information None
Item 6 - Exhibits and Reports on Form 8-K 25
SIGNATURE 25
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PART I. FINANCIAL INFORMATION
-----------------------------
Item 1. Financial Statements
The consolidated financial statements for the three months ended March
31, 1995 and 1994 include the accounts of the Corporation and its
subsidiaries after elimination of all material intercompany
transactions. In the opinion of management, all necessary adjustments,
consisting of normal recurring adjustments, have been included to
present fairly the results of operations for the interim periods
presented herein. The results of operations for the three months ended
March 31, 1995 are not necessarily indicative of the results which may
be expected for any other interim period or for the entire year.
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Boatmen's Bancshares, Inc.
CONSOLIDATED BALANCE SHEET
(dollars in thousands) March 31, 1995 March 31, 1994 December 31, 1994
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Assets
Cash and due from banks $ 1,850,551 $ 1,836,714 $ 2,115,359
Short-term investments 43,563 100,707 44,717
Securities:
Held to maturity 5,297,625 5,223,791 5,216,968
Available for sale 4,027,124 4,912,553 4,052,205
Trading 18,381 33,846 31,674
Federal funds sold and securities purchased
under resale agreements 309,914 243,542 1,107,410
Loans 19,271,735 17,195,377 18,622,176
Less reserve for loan losses 380,278 379,736 375,740
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Loans, net 18,891,457 16,815,641 18,246,436
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Property and equipment 643,026 633,290 636,840
Other assets 1,285,075 1,310,014 1,261,449
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Total assets $32,366,716 $31,110,098 $32,713,058
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Liabilities and Stockholders' Equity
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Liabilities:
Demand deposits $ 4,937,713 $ 5,113,311 $ 5,239,024
Retail savings deposits and interest-bearing
transaction accounts 9,948,009 10,186,679 10,078,736
Time deposits 8,766,928 8,557,596 9,929,164
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Total deposits 23,652,650 23,857,586 25,246,924
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Federal funds purchased and securities sold
under repurchase agreements 2,807,165 3,109,311 2,053,609
Short-term borrowings 2,205,730 717,293 1,903,182
Capital lease obligations 39,803 40,910 40,098
Long-term debt 557,585 590,741 592,041
Other liabilities 447,435 332,884 342,679
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Total liabilities 29,710,368 28,648,725 30,178,533
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Redeemable preferred stock 1,142 1,142 1,142
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Stockholders' Equity:
Common stock ($1 par value; 150,000,000 shares authorized) 127,664 127,280 127,523
Surplus 959,446 955,579 958,249
Retained earnings 1,611,095 1,375,545 1,571,694
Treasury stock (76,992 and 508,698 shares at cost, respectively) (2,151) -- (14,516)
Unrealized net appreciation (depreciation),
available for sale securities (40,848) 1,827 (109,567)
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Total stockholders' equity 2,655,206 2,460,231 2,533,383
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Total liabilities and stockholders' equity $32,366,716 $31,110,098 $32,713,058
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Held to maturity securities, market value $ 5,172,678 $ 5,207,868 $ 4,965,930
Available for sale securities, amortized cost 4,090,661 4,909,711 4,230,580
Common stock, shares outstanding 127,586,798 127,280,359 127,014,624
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Boatmen's Bancshares, Inc.
CONSOLIDATED STATEMENT OF INCOME
Three months ended March 31 (in thousands) 1995 1994
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Interest income
Interest and fees on loans $405,222 $329,561
Interest on short-term investments 899 572
Interest on Federal funds sold and securities purchased under resale agreements 7,775 2,544
Interest on held to maturity securities
Taxable 64,308 48,634
Tax-exempt 14,449 15,198
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Total interest on held to maturity securities 78,757 63,832
Interest on available for sale securities 63,255 68,081
Interest on trading securities 421 840
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Total interest income 556,329 465,430
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Interest expense
Interest on deposits 183,669 140,723
Interest on Federal funds purchased and other short-term borrowings 65,354 25,477
Interest on capital lease obligations 970 993
Interest on long-term debt 12,015 11,008
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Total interest expense 262,008 178,201
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Net interest income 294,321 287,229
Provision for loan losses 9,798 6,025
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Net interest income after provision for loan losses 284,523 281,204
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Noninterest income
Trust fees 40,420 41,483
Service charges 45,646 45,782
Credit card 11,855 9,666
Investment banking revenues 8,790 9,729
Mortgage banking operations 22,904 19,045
Securities gains, net 47 2,554
Other 32,372 25,746
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Total noninterest income 162,034 154,005
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Noninterest expense
Staff 147,912 148,187
Net occupancy 20,279 20,602
Equipment 23,355 21,986
FDIC insurance 13,163 13,279
Intangible amortization 7,883 8,786
Advertising 7,481 6,810
Other 90,475 66,189
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Total noninterest expense 310,548 285,839
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Income before income tax expense 136,009 149,370
Income tax expense 50,635 51,450
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Net income $ 85,374 $ 97,920
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Net income per share $.67 $.77
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Dividends declared per share $.34 $.31
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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 127,324,333 in
1995 and 127,233,747 in 1994. Preferred dividends declared totaled $20
thousand in both 1995 and 1994.
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Boatmen's Bancshares, Inc.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Unrealized Net
Appreciation,
Common Stock Treasury Stock (Depreciation)
------------ Retained -------------- Available for
(in thousands) Shares Amount Surplus Earnings Shares Amount Sale Securities Total
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Balance, January 1, 1994 126,777 $126,777 $948,674 $1,312,495 -- -- $ 42,252 $2,430,198
Net income -- -- -- 97,920 -- -- -- 97,920
Cash dividends declared:
Common ($.31 per share) -- -- -- (32,299) -- -- -- (32,299)
Redeemable preferred -- -- -- (20) -- -- -- (20)
By pooled company prior
to merger--common -- -- -- (2,551) -- -- -- (2,551)
Common stock issued pursuant to
various employee and shareholder
stock issuance plans 94 94 1,256 -- -- -- -- 1,350
Common stock issued upon
acquisition of subsidiary 411 411 5,700 -- -- -- -- 6,111
Adjustment for treasury stock
activity--pooled company (3) (3) (69) -- -- -- -- (72)
Common stock issued upon
conversion of convertible
subordinated debentures 1 1 18 -- -- -- -- 19
Adjustment of available for sale
securities to market value -- -- -- -- -- -- (40,425) (40,425)
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Balance, March 31, 1994 127,280 127,280 955,579 1,375,545 -- -- 1,827 2,460,231
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Balance, January 1, 1995 127,523 127,523 958,249 1,571,694 (509) (14,516) (109,567) 2,533,383
Net income -- -- -- 85,374 -- -- -- 85,374
Cash dividends declared:
Common ($.34 per share) -- -- -- (43,387) -- -- -- (43,387)
Redeemable preferred -- -- -- (20) -- -- -- (20)
By pooled company prior
to merger--common -- -- -- (2,565) -- -- -- (2,565)
Common stock issued pursuant to
various employee and shareholder
stock issuance plans 138 138 1,156 -- 143 4,357 -- 5,651
Common stock issued upon purchase
acquisition of subsidiary -- -- -- -- 289 8,008 -- 8,008
Common stock issued upon conversion
of convertible subordinated debentures 3 3 43 -- -- -- -- 46
Adjustment of available for sale
securities to market value -- -- -- -- -- -- 68,719 68,719
Other, net -- -- (2) (1) -- -- -- (3)
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Balance, March 31, 1995 127,664 $127,664 $959,446 $1,611,095 (77) $(2,151) $ (40,848) $2,655,206
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Boatmen's Bancshares, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS
Three months ended March 31 (in thousands) 1995 1994
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Net cash provided by operating activities $ 158,488 $ 126,174
Investing Activities:
Net decrease in Federal funds sold and
securities purchased under resale agreements 797,496 250,638
Net increase in loans (660,043) (221,042)
Proceeds from the sales of foreclosed property 3,857 10,878
Proceeds from the maturity of held to maturity securities 84,462 278,237
Purchases of held to maturity securities (167,948) (909,556)
Proceeds from the maturity of available for sale securities 167,006 592,185
Proceeds from the sales of available for sale securities 1,267 51,113
Purchases of available for sale securities (30,742) (198,392)
Net (increase) decrease in short-term investments 1,154 (74,696)
Net increase in property and equipment (25,024) (51,019)
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Net cash provided (used) by investing activities 171,485 (271,654)
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Financing Activities:
Net (increase) decrease in Federal funds purchased and
securities sold under repurchase agreements 753,556 985,309
Net decrease in deposits (1,594,274) (285,459)
Net increase (decrease) in short-term borrowings 302,548 (451,578)
Payments on long-term debt (34,408) (1,245)
Proceeds from the issuance of long-term debt 28,850
Payments on capital lease obligations (295) (265)
Cash dividends paid (35,567) (34,796)
Common stock issued pursuant to various employee and
shareholder stock issuance plans 5,651 1,350
Common stock issued upon purchase acquisition of subsidiary 8,008
Decrease in redeemable preferred stock (13)
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Net cash provided (used) by financing activities (594,781) 242,153
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Increase (decrease) in cash and due from banks (264,808) 96,673
Cash and due from banks at beginning of year 2,115,359 1,740,041
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Cash and due from banks at March 31 $1,850,551 $1,836,714
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For the three months ended March 31, 1995 and 1994, interest paid
totaled $244 million and $174 million, respectively, and income taxes
paid totaled $1 million and $6 million. Additional common stock was
issued upon the conversion of $48 thousand of the Corporation's
convertible debt for the three months ended March 31, 1995, and $20
thousand for the same period a year ago. Loans transferred to
foreclosed property totaled $3 million in 1995, and $7 million in 1994.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Table 1: Summary of Selected Financial Information
Quarter Ended March 31
---------------------------------------------
(in millions except per share data) 1995 1994 % change
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Share Data
Net income $ .67 $ .77 (13.0)%
Net income before nonrecurring merger expenses .83 .77 7.8
Dividends declared .34 .31 9.7
Book value 20.81 19.33 7.7
Tangible book value 18.45 16.76 10.1
Common shares:
Average outstanding for the period 127.3 127.2 .1
Outstanding at period end 127.6 127.3 .2
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For the Period
Net interest income $ 294.3 $ 287.2 2.5 %
Provision for loan losses 9.8 6.0 62.6
Noninterest income 162.0 154.0 5.2
Noninterest expense 310.5<F1> 285.8 8.6
Net income 85.4 97.9 (12.8)
Net income before nonrecurring merger expenses 105.1 97.9 7.3
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Financial Position at Period End
Total assets $32,366.7 $31,110.1 4.0 %
Loans 19,271.7 17,195.4 12.1
Securities 9,324.7 10,136.3 (8.0)
Deposits 23,652.7 23,857.6 (.9)
Long-term debt 557.6 590.7 (5.6)
Stockholders' equity 2,655.2 2,460.2 7.9
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Selected Financial Ratios
Return on assets 1.06% 1.28%
Return on assets before nonrecurring merger expenses 1.31 1.28
Return on equity 13.14 15.92
Return on equity before nonrecurring merger expenses 16.17 15.92
Net interest margin 4.29 4.40
Noninterest income/operating income 34.8 34.2
Efficiency ratio 66.7 63.4
Efficiency ratio before nonrecurring merger expenses 61.3 63.4
Capital ratios:
Equity to assets 8.20 7.91
Risk-based capital:
Tier I capital 10.87 10.85
Total capital 13.98 14.21
Tier I leverage ratio 7.57 7.06
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Asset Quality
Nonperforming loans $127.5 $162.0 (21.3)%
Nonperforming assets 189.4 276.0 (31.4)
Nonperforming loans to total loans .66% .94%
Nonperforming assets to total loans and foreclosed property .98 1.59
Loan reserve to nonperforming loans 298.21 234.39
Loan reserve to net loans 1.97 2.21
Net charge-offs to average loans .13 .06
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<FN>
<F1> Includes nonrecurring merger expenses of $25.5 million.
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Acquisition Overview
Over the last several years the Corporation has made numerous
sizeable acquisitions establishing leading market positions in Missouri,
New Mexico and Arkansas, and significant presences in southern Illinois,
western Tennessee, Oklahoma, Iowa and Texas. In 1994 and through the
period ended March 31, 1995, the Corporation completed six acquisitions
in four states aggregating $4.0 billion in total assets. The acquisition
program has three objectives: geographic diversification, growth in
retail market share, and additional earnings generation capacity. The
Corporation's geographic profile provides credit and economic risk
diversification in that the Corporation is not significantly dependent
on any major market. All of the Corporation's major markets are
currently experiencing good economic conditions. The Corporation's
operations currently span nine states, with banking services delivered
from over 500 branch locations and approximately 515 off-premise ATM's.
A summary of the acquisitions consummated in 1994 and 1995 follows.
Table 2: Acquisitions--1995 and 1994
Accounting
Date State Assets Price Shares issued method
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Completed
Woodland Bancorporation, Inc. 3/94 Oklahoma $ .1 billion $ 12 million stock .4 million Pooling
Eagle Management and Trust Company 5/94 Texas -- 3 million cash -- Purchase
Dalhart Bancshares, Inc. 1/95 Texas .1 billion 23 million stock .7 million Pooling
National Mortgage Company 1/95 Tennessee .2 billion 153 million stock 5.0 million Pooling
Worthen Banking Corporation 2/95 Arkansas 3.5 billion 595 million stock 17.1 million Pooling
Salem Community Bancorp, Inc. 2/95 Illinois .1 billion 8 million stock .3 million Purchase
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Total assets of completed transactions $4.0 billion
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Pending at March 31, 1995
First National Bank in Pampa Texas $ .2 billion $ 42 million stock 1.4 million Pooling
West Side Bancshares, Inc.<F1> Texas .1 billion 18 million stock .6 million Purchase
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Total assets of pending transactions $ .3 billion
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<FN>
<F1> Completed on April 1, 1995.
Table 3: Asset Distribution
March 31, 1995 (dollars in billions) Assets % of total Locations
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Missouri $17.7 54.6% 172
Arkansas 4.3 12.9 152
New Mexico 3.3 10.2 66
Oklahoma 1.9 5.9 36
Texas 1.8 5.9 30
Iowa 1.2 3.7 33
Illinois 1.1 3.4 19
Tennessee .9 2.8 15
Kansas .2 .6 3
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Total $32.4 100.0% 526
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Arkansas Acquisition
On February 28, 1995, the Corporation acquired Worthen Banking
Corporation (Worthen), headquartered in Little Rock, Arkansas, in a
transaction accounted for as a pooling of interests. Under terms of the
agreement the Corporation exchanged one share of its common stock for
each Worthen share, resulting in the issuance of approximately 17.1
million shares. Worthen is the second largest banking organization in
Arkansas, with approximately $3.5 billion in assets, operating 112
retail banking offices throughout Arkansas and six offices in the
Austin, Texas area. The acquisition of Worthen, subsequently renamed
Boatmen's Arkansas, Inc., increased the Corporation's asset base in
Arkansas to approximately $4.3 billion, making the Corporation the
largest financial institution in Arkansas.
Mortgage Banking Acquisition
On January 31, 1995, the Corporation acquired National Mortgage
Company and certain affiliates (National Mortgage), headquartered in
Memphis, Tennessee, in a transaction accounted for as a pooling of
interests. Under terms of the agreement, the Corporation exchanged
approximately 5.0 million shares of its common stock for all of the stock
of National Mortgage. At the date of announcement, the transaction had a
value of approximately $153 million, which represented 1.2% of National
Mortgage's mortgage servicing portfolio. National Mortgage is a full-
service mortgage banking company which originates home loans through 8
company-operated offices as well as through a network of over 300
correspondents located in the southern and midwestern United States, and
presently services mortgage loans totaling approximately $15.3 billion.
With the completion of this acquisition, the Corporation now ranks among the
30 largest mortgage servicers in the country.
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Texas Acquisitions
On April 1, 1995, the Corporation acquired West Side Bancshares, Inc.
(West Side), a one bank holding company located in San Angelo, Texas, in
a stock transaction accounted for as a purchase. The acquisition of West
Side, with assets of approximately $142 million, resulted in the
issuance of approximately 600,000 shares of common stock with a
transaction value of $18 million. Upon consummation, West Side was merged
into the Corporation's Amarillo subsidiary. Goodwill arising from this
acquisition totaled $6 million.
On January 31, 1995, the Corporation acquired Dalhart Bancshares, Inc.
(Dalhart), in a pooling transaction involving the issuance of
approximately .7 million shares of Boatmen's common stock for all of the
shares of Dalhart. Dalhart, with assets of approximately $140 million
was merged with the Corporation's Amarillo subsidiary.
On November 15, 1994, the Corporation announced a definitive agreement
to acquire First National Bank in Pampa (Pampa) in a transaction to be
accounted for as a pooling of interests. Under terms of the agreement,
the Corporation will exchange approximately 1.35 million shares of
common stock for all of the outstanding shares of Pampa, which has
approximately $166 million in assets. This transaction, which is subject
to Pampa shareholder approval, is expected to be completed in the second
quarter of 1995.
On May 6, 1994, the Corporation completed the acquisition of Eagle
Management and Trust Company (Eagle), an investment advisory firm
located in Houston, Texas. Eagle, with $1.4 billion in trust assets, is
managed by the Corporation's trust subsidiary.
Illinois Acquisition
On February 28, 1995, the Corporation acquired Salem Community
Bancorp, Inc. (Salem) in a stock transaction accounted for as a purchase,
valued at approximately $8 million. Salem has two locations with
approximately $80 million in assets and will be merged into the Boatmen's
Bank of South Central Illinois in the second quarter of 1995.
Oklahoma Acquisition
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 providing services from 18 locations
primarily within the Oklahoma City and Tulsa metropolitan areas.
Nonrecurring Merger Expenses
The acquisitions of Worthen, National Mortgage and Dalhart
necessitated recognition of pre-tax nonrecurring merger expenses
totalling $25.5 million, consisting primarily of investment banking,
legal, and other professional fees, severance and retention costs,
obsolete equipment write-offs and estimated costs to close duplicate
branches. The major components of the merger expenses are quantified in
Table 4.
Table 4: Nonrecurring Merger Expenses
(in millions)
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Investment banking, legal, and other professional fees $ 9.4
Equipment and software write-offs, and branch closings 6.3
Compensation costs 4.6
Other 5.2
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Total $25.5
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Earnings Overview
Net income before the impact of nonrecurring merger expenses
increased to $105.1 million, up 7.3% from the same period of last year,
and net income per share, before such expenses, was $.83, an increase of
7.8%. The earnings growth reflected higher net interest income and
noninterest income, as well as lower noninterest expense, offset in part
by a higher provision for loan losses. Net income in the first quarter
was reduced by after-tax merger expenses totalling $19.7 million or $.16
per share. Including merger expenses, net income for the first quarter of
1995 was $85.4 million or $.67 per share. Previously reported financial
statements of prior periods have been restated to reflect the three
pooling-of-interests acquisitions which were completed in the first
quarter of 1995. Purchase acquisitions completed during the period had
no material impact on results of operations.
For the first quarter, the return on average assets before
nonrecurring merger expenses was 1.31% and the return on equity was
16.17%, compared to 1.28% and 15.92%, respectively in the first quarter
of 1994. Including merger expenses, the return on assets was 1.06% and
the return on equity was 13.14%.
Net interest income, on a fully-taxable equivalent basis,
increased 2.3% over the first quarter of 1994 principally due to an
increase in average earning assets, which was partially offset by a lower
net interest margin. The net interest margin was 4.29%, a decrease of 11
basis points from the first quarter of last year, and was comparable to
the fourth quarter 1994 margin of 4.30%.
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Noninterest income increased 5.2% over the first quarter of 1994
primarily due to growth in mortgage banking revenues and credit card
fees which were partially offset by declines in trust fees and
investment banking revenues. Noninterest income in the first quarter of
1995 also included a gain of $4.9 million from the sale of an ownership
interest in a regional electronic funds transfer network.
Noninterest expense before merger expenses totaled $285.0 million, a
decrease of .3% from the first quarter of last year and a decline of
3.5% from the fourth quarter of 1994. These declines reflect initiatives
to control operating costs. Including nonrecurring merger expenses,
noninterest expense was $310.5 million.
The provision for loan losses for the first quarter of 1995 was $9.8
million, up from $6.0 million for the first quarter of last year. For
the first quarter, net loan charge-offs were $6.2 million, compared to
$2.4 million in 1994. Net charge-offs as a percentage of average loans
were .13% compared to .06% for the first quarter of last year and .15%
for the full year 1994.
Presented in Table 5 is an income statement analysis expressed on a
per share basis for the quarter ended March 31, 1995, compared to the same
period last year and the three months ended December 31, 1994. A more
detailed discussion and analysis of the major factors impacting the
comparability between periods is provided throughout this report.
Table 5: Earnings Per Share Analysis
1st Qtr. '95 1st Qtr. '95
Per share vs. 1st Qtr. '94 vs. 4th Qtr. '94
- ------------------------------------------------------------------------------------------
Net income per share prior quarter $.77 $.81
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Net interest income .05 (.03)
Provision for loan losses (.03) (.04)
Noninterest income .06 .03
Noninterest expense (including nonrecurring merger expenses) (.19) (.12)
Income tax expense .01 .02
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Net decrease (.10) (.14)
- ------------------------------------------------------------------------------------------
Net income current period $.67 $.67
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Net Interest Income and Interest Rate Risk Management
Table 6: Summary of Net Interest Income
Three months ended March 31 (in millions) 1995 1994 % change
- ------------------------------------------------------------------------------------------------------------
Average loans $18,890.9 $17,033.3 10.9 %
Average earning assets 28,707.0 27,315.2 5.1
Average core deposits 20,687.2 20,857.4 (.8)
Average purchased funds 5,962.0 4,498.6 32.5
Net interest income (FTE) 303.3 296.5 2.3
Net interest margin 4.29% 4.40%
- ------------------------------------------------------------------------------------------------------------
Measured on a fully-taxable equivalent basis, net interest income
increased 2.3% over the first quarter of 1994. The higher level of net
interest income resulted primarily from earning asset growth and was
partially offset by an anticipated contraction in the net interest
margin.
Average earning assets increased 5.1% over the first quarter of last
year primarily due to strong loan growth. Loans, the highest yielding
earning asset, increased 10.9% over the first quarter of 1994 and as a
percentage of average earning assets was 65.8% compared to 62.4% for the
same period last year. Held to maturity and available for sale
securities decreased 6.7%, and represented 32.0% of average earning
assets, down from 36.1% for the first quarter of 1994. The decline in
the securities portfolio reflects redeployment of proceeds from maturing
securities to the loan portfolio.
The net interest margin for the first quarter of 1995 was 4.29%
compared to 4.40% for the same period last year but was comparable to the
fourth quarter margin of 4.30%. The decline in the net interest margin
from the first quarter of 1994 was primarily due to rising interest rates
which restricted the net interest margin to some extent due to the
Corporation's modest liability sensitive position. The average yield on
earning assets increased 94 basis points from the first quarter of last
year; however, the average rate paid on interest-bearing liabilities
increased by 122 basis points. The higher funding costs in 1995 also
reflect an increased use of purchased funds as loan growth exceeded
deposit growth. Purchased funds, which represented the principal funding
source for the loan growth, increased $1.5 billion or 32.5%. This
increase reflects the issuance of medium-term bank notes by several of
the Corporation's banking subsidiaries, which pay interest on a floating
rate basis.
Interest rate risk is the extent to which net interest income may be
affected by changes in market driven interest rates, and the Corporation
assumes varying degrees of interest rate risk as part of its normal
banking operations. It is the role of the asset/liability management
committee to manage and control the level of interest rate risk
contained in the balance sheet as well as off-balance sheet financial
instruments. The Corporation's interest rate risk policy is to maintain
a stable level of net interest income while also enhancing earnings
potential through limited risk positioning based on the forecast of
future interest rates. Interest rate risk exposure
-11-
12
(earnings at risk exposure) is currently limited, by policy, to 5% of
projected annual net income. Adherence to these risk limits is controlled
and monitored through simulation modeling techniques that consider the
impact that alternative interest rate scenarios will have on the
Corporation's financial results. In its simulations, the Corporation
estimates the impact on net interest income and net income resulting from
various changes in market interest rates. Utilization of the simulation
modeling results enables management to develop strategies to control the
Corporation's overall interest rate risk exposure and to monitor
specific risks associated with on-balance sheet financial instruments,
along with interest rate swaps. The assumptions used in the model are
intentionally designed to be conservative in that the balance sheet is
held static for the entire 12 month simulation horizon and, accordingly,
the model is not intended to represent an income forecast. Based on the
current interest rate sensitivity position, the simulation model
indicates that the earnings at risk exposure over the next 12 months is
less than 4%, assuming a gradual 200 basis point increase in interest
rates and no active management of the balance sheet components.
An effective asset/liability management function is required to
address the interest rate risk inherent in the Corporation's core banking
activities. If no other action is taken, the behavior of the core
banking activities, which includes lending and deposit activities,
results in an asset-sensitive position. Accordingly, to prudently manage
the overall interest rate sensitivity position, the Corporation utilizes
a combination of on- and off-balance sheet financial instruments to
balance the interest rate sensitivity of the core balance sheet.
Interest rate swaps are an effective mechanism to manage this interest
rate risk due to the inherent advantages related to flexibility in
product structure, size, liquidity, capital and market timing. The
contribution of the swap portfolio over time will expand or contract
with movements in market rates; however, this risk cannot be viewed in
isolation and is controlled and monitored within the overall context of
the aforementioned asset/liability management policies.
In 1995, $350 million of new swaps were added and $33 million matured
such that at March 31, 1995, the notional value of the interest rate
swaps totaled $2.6 billion. The most recent swaps were executed as a
means to convert a portion of the Corporation's variable rate short-term
bank notes to fixed rate instruments to extend the repricing sensitivity
of these instruments. Interest rate swaps executed in prior years were
undertaken to modify the interest rate sensitivity of subordinated debt
as well as alter the interest rate sensitivity of the Corporation's
prime-based loan portfolio. The Corporation's prime-based loan portfolio
(approximately $5.8 billion) is the primary cause of the large asset
sensitivity position of the core banking activity as it is primarily
funded by deposit liabilities that are less sensitive to movements in
market interest rates. As a means to alter the interest rate sensitivity
of the prime based portfolio, the Corporation has used interest rate
swaps to convert approximately $1.8 billion of prime-based loans to
fixed rate instruments. Additionally, the Corporation used $250 million
of interest rate swaps to alter the pricing basis on a small portion of
the prime-based loan and bank note portfolios. The Corporation accessed
the capital markets twice in recent years, resulting in the issuance of
$200 million of fixed rate subordinated debt. The impact of adding long-
term debt to the balance sheet resulted in increased asset sensitivity
as proceeds were initially used to replace short-term borrowings.
Accordingly, to reduce the impact on the Corporation's gap position,
$200 million of interest rate swaps were executed to convert fixed rate
debt to a floating rate instrument. Periodic correlation assessments are
performed to ensure that the swap instruments are effectively modifying
the interest rate characteristics of the respective balance sheet items.
The interest rate swaps are not leveraged in that they reset in step
with rate movements in the underlying index. The interest rate swap
programs are consistent with management's objective of balancing the
interest rate sensitivity of the core banking activities.
As summarized in Table 7, the swap portfolio is primarily comprised
of contracts wherein the Corporation receives a fixed rate of interest
while paying a variable rate. The average rate received at March 31,
1995 was 5.68% compared to an average rate paid of 6.56%, and the
average remaining maturity of the total portfolio was less than two
years. The variable rate component of the interest rate swaps is based
on LIBOR as of the most recent re-set date and will adjust with future
movements in this index. Table 8 provides information related to
weighted average rates paid and received, maturity profile, and fair
values of the major swap programs in place at March 31, 1995 and March
31, 1994. The estimated fair value of the swap portfolio was a negative
$99.6 million at March 31, 1995, based on discounted cash flow models.
In that these swaps are valued using anticipated forward interest rates
at quarter end, the estimated fair value is not necessarily indicative
of the future net interest potential of the portfolio over its remaining
life.
Table 7: Interest Rate Swap Portfolio Activity
(in millions) Receive Fixed Pay Fixed Basis Swaps Total
- ----------------------------------------------------------------------------------------------------------
Notional amount, December 31, 1994 $2,000 $ 31 $250 $2,281
Additions 350 350
Maturities (14) (19) (33)
- ----------------------------------------------------------------------------------------------------------
Notional amount, March 31, 1995 $1,986 $381 $231 $2,598
- ----------------------------------------------------------------------------------------------------------
Average remaining maturity (years) 1.6 1.2 .8 1.5
Weighted average rate received 5.52% 6.35% 5.95% 5.68%
Weighted average rate paid 6.49 7.00 6.46 6.56
- ----------------------------------------------------------------------------------------------------------
-12-
13
Table 8: Interest Rate Swap Portfolio
Weighted Estimated
Average Rate -------------------------
March 31, 1995 Notional ------------------------- Maturity Fair
(in millions) Amount Receive Pay (years) Value
- ------------------------------------------------------------------------------------------------------------
Prime loan swaps:
Receive fixed $1,786 5.59% 6.50% 1.6 $(94.4)
Basis swaps 181 5.84 6.51 .9 (.8)
- ------------------------------------------------------------------------------------------------------------
Total 1,967 5.61 6.50 1.6 (95.2)
Long-term debt swaps 200 4.87 6.46 1.2 (3.3)
Bank note liability swaps 350 6.34 6.84 1.2 (.3)
Other 81 6.41 7.24 .6 (.8)
- ------------------------------------------------------------------------------------------------------------
Total $2,598 5.68% 6.56% 1.5 $(99.6)
- ------------------------------------------------------------------------------------------------------------
Weighted Estimated
Average Rate -------------------------
March 31, 1994 Notional ------------------------- Maturity Fair
(in millions) Amount Receive Pay (years) Value
- ------------------------------------------------------------------------------------------------------------
Prime loan swaps:
Receive fixed $2,100 5.52% 3.62% 2.0 $(59.1)
Basis swaps 200 4.32 3.39 .8 .3
- ------------------------------------------------------------------------------------------------------------
Total 2,300 5.41 3.60 1.8 (58.8)
Long-term debt swaps 200 4.87 3.68 2.2 (1.6)
Other 31 3.67 8.86 2.1 (2.1)
- ------------------------------------------------------------------------------------------------------------
Total $2,531 5.35% 3.67% 1.9 $(62.5)
- ------------------------------------------------------------------------------------------------------------
The swap portfolio decreased net interest income by approximately
$3.5 million in the first quarter of 1995, resulting in a 5 basis point
reduction in the net interest margin. In the first quarter of 1994, the
swap portfolio increased net interest income by $7.3 million, adding 11
basis points to the margin. The results from the simulation model
indicate that in a rising rate environment the net interest contribution
from the swap portfolio will lessen as the variable component resets
upward. Based on interest rates at March 31, 1995, it is anticipated
that the swap portfolio will reduce net interest income by approximately
$17 million in 1995. However, it is anticipated that this will be offset
by a higher contribution from core banking activities. The increased
contribution from core banking activities will occur as variable rate
assets, such as the hedged prime-based loans, reprice upward, coupled
with an increased contribution from administered rate liabilities, which
are less sensitive to rate movements.
Approximately 76% of the portfolio is comprised of indexed
amortizing swaps, whereby the maturity distribution could lengthen if
interest rates increase from current levels. Assuming interest rates were
to increase 200 basis points from their current levels, the average
maturity distribution of the swap portfolio would extend by approximately
2 years.
Any future utilization of off-balance sheet financial instruments
will be determined based upon the Corporation's overall interest rate
sensitivity position and asset/liability management strategies.
While the Corporation is primarily an end-user of derivative
instruments, it also acts as an intermediary to meet the financial needs
of its customers. The notional amount of the customer swap portfolio at
March 31, 1995 totaled approximately $305 million. Interest rate risk
associated with this portfolio is controlled by entering into offsetting
positions with third parties.
Noninterest Income
Table 9: Summary of Noninterest Income
Three months ended March 31 (in millions) 1995 1994 % change
- ------------------------------------------------------------------------------------------------
Trust fees $ 40.4 $ 41.5 (2.6)%
Service charges 45.6 45.8 (.3)
Credit card 11.9 9.7 22.6
Investment banking revenues 8.8 9.7 (9.7)
Mortgage banking operations 22.9 19.0 20.3
Securities gains, net -- 2.6 (98.2)
Other 32.4 25.7 25.7
- ------------------------------------------------------------------------------------------------
Total noninterest income $162.0 $154.0 5.2 %
- ------------------------------------------------------------------------------------------------
As % of operating income 34.8% 34.2%
- ------------------------------------------------------------------------------------------------
Revenue per full-time equivalent employee (in thousands) $110.0 $102.8
- ------------------------------------------------------------------------------------------------
-13-
14
Noninterest income increased 5.2% over the first quarter of 1994
primarily due to growth in mortgage banking revenues and credit card
fees which were partially offset by declines in trust fees and
investment banking revenues. Noninterest income in the first quarter of
1995 also included a gain of $4.9 million from the sale of an ownership
interest in a regional electronic funds transfer network. Noninterest
income in the first quarter of 1994 included securities gains of $2.6
million. Noninterest income as a percentage of operating revenues
improved to 34.8% for the first quarter of 1995 from 34.2% for the same
period of 1994.
Trust fees decreased 2.6% from the first quarter of 1994 primarily
due to narrower spreads on securities lending activity, coupled with an
unusually large distribution fee recognized in the prior year period.
Excluding this activity, trust fees increased approximately 5% and was
led by growth in pension/institutional and personal trust business. The
decline in securities lending revenues reflects narrower spreads
primarily resulting from higher short-term market interest rates. Trust
assets under management totaled $40.1 billion at March 31, 1995,
compared to $35.2 billion at March 31, 1994, and $37.4 billion at
December 31, 1994. In 1994, the Corporation's trust subsidiary waived a
portion of its investment management fees on its short-term money market
mutual fund to ensure the fund provided a competitive yield to
investors. Additional yield maintenance and fund support may be
undertaken if short-term interest rates rise rapidly or significant
reductions in fund balances occur.
Service charge income totaled $45.6 million in the first quarter
of 1995 essentially unchanged from the same period last year. Service
charges in the first quarter of 1995 included growth in retail fees which
were offset by lower analysis fees on corporate customer accounts. The
lower level of corporate analysis fees is primarily a function of
corporate customers paying for services through deposit balance
maintenance in lieu of fees. Investment banking revenues decreased 9.7%
from the first quarter of 1994 primarily due to a reduction in the sales
volume of various retail brokerage products as general market conditions
have restricted growth. Foreign exchange income, another component of
investment banking revenues, increased $.8 million or 73% over the first
quarter of 1994.
Credit card income totaled $11.9 million in the first quarter of
1995, an increase of 22.6%. This increase reflects growth in cardholder
revenues, as well as increases in merchant-related fees due to new
merchant business and higher retail sales volume. Income from mortgage
banking operations increased $3.9 million or 20.3%, reflecting a $7.9
million gain from the sale of approximately $700 million of mortgage
servicing which was offset, in part, by lower levels of mortgage loan
originations and refinancings. The decline in loan originations reflects
an industry-wide trend and is a function of the rising interest rate
environment.
Other noninterest income increased $6.7 million or 25.7% over the
first quarter of 1994 primarily due to the aforementioned $4.9 million
gain on the sale of an ownership interest in a regional electronic funds
transfer network.
Noninterest Expense
Table 10: Summary of Noninterest Expense
Three months ended March 31 (in millions) 1995 1994 % change
- ------------------------------------------------------------------------------------------------
Staff expense $147.9 $148.2 (.2)%
Occupancy 20.3 20.6 (1.6)
Equipment 23.4 22.0 6.2
FDIC insurance 13.2 13.3 (.9)
Credit card 3.4 3.5 (2.9)
Printing, postage, paper 11.8 11.9 (.8)
Intangible amortization 7.9 8.8 (10.3)
Professional fees 4.9 7.2 (31.9)
Federal Reserve processing charges 2.6 2.7 (3.7)
Advertising 7.5 6.8 9.9
Communications 6.1 6.0 1.7
Other 61.5 34.8 76.7
- ------------------------------------------------------------------------------------------------
Total noninterest expense $310.5 $285.8 8.6 %
- ------------------------------------------------------------------------------------------------
Efficiency ratio 66.7% 63.4%
Efficiency ratio excluding nonrecurring merger expenses 61.3 63.4
Number of full-time equivalent employees 16,828 17,562
- ------------------------------------------------------------------------------------------------
Noninterest expense before nonrecurring merger expenses totaled
$285.0 million, a decrease of .3% from the first quarter of last year and
a decline of 3.5% from the fourth quarter of 1994. These declines are
reflective of recent initiatives to reduce operating costs. Such
initiatives include major back-office consolidations of deposit and
consumer lending functions. Including merger expenses of $25.5 million,
noninterest expense was $310.5 million. The efficiency ratio before
merger expenses improved to 61.3% for the first quarter of 1995
compared to 63.4% for the same period of last year. Including merger
expenses, the efficiency ratio in 1995 was 66.7%. Noninterest expense
levels over the balance of the year are expected to benefit as
potential cost savings stemming from the integration of operations at
recently acquired companies are realized.
-14-
15
Staff expense, which represents 48% of total noninterest expense,
decreased .2% from the first quarter of 1994 as the number of full-time
equivalent employees (FTE's) decreased from 17,562 at March 31, 1994 to
16,828 at March 31, 1995. Equipment expense increased 6.2% over the
first quarter of 1994, primarily due to higher depreciation expense
associated with investments in capital expenditures for upgraded
computer systems and software. The higher level of advertising expense
reflects increased promotional activity associated with retail
initiatives. Goodwill and core deposit premium amortization totaled
$7.9 million for the first quarter of 1995, compared to $8.8 million in
the prior year. This decline reflects lower levels of core deposit
amortization. Other noninterest expense increased $26.7 million which
is primarily attributable to the aforementioned nonrecurring merger
expenses.
Taxes
The Corporation's effective tax rate was 37.2% for the first quarter
of 1995 compared to 34.4% for the same period of last year. The increase
in the Corporation's effective tax rate resulted from nondeductible
merger expenses associated with the pooling-of-interests acquisitions
completed in the first quarter of 1995, and a continued decline in the
amount of tax-exempt income as a percentage of operating income.
Excluding the impact of the nondeductible merger expenses, the
effective tax rate was 34.9%. On a prospective basis, the effective tax
rate should approximate the statutory rate, adjusted for normal
operating items such as tax-exempt interest, goodwill amortization and
other nondeductible expenses.
Provision For Loan Losses And Asset Quality
Table 11: Summary of Reserve for Loan Losses
March 31 (in millions) 1995 1994
- ---------------------------------------------------------------------------------------------
Balance, beginning of year $375.8 $375.3
- ---------------------------------------------------------------------------------------------
Loans charged off (15.3) (16.3)
Recoveries on loans previously charged off 9.1 13.9
- ---------------------------------------------------------------------------------------------
Net charge-offs (6.2) (2.4)
Provision charged to expense 9.8 6.0
Reserves of acquired subsidiaries .9 .8
- ---------------------------------------------------------------------------------------------
Balance, end of period $380.3 $379.7
- ---------------------------------------------------------------------------------------------
At end of period:
Loan reserve as % of net loans 1.97% 2.21%
Loan reserve as % of nonperforming loans 298.21 234.39
Net charge-offs as % of average loans .13 .06
- ---------------------------------------------------------------------------------------------
Table 12: Summary of Nonperforming Assets
(in millions) March 31, 1995 December 31, 1994 March 31, 1994
- ------------------------------------------------------------------------------------------------------------------
Nonaccrual $105.8 $110.7 $137.5
Restructured 6.7 7.1 7.1
Past due 90 days or more 15.0 17.0 17.4
- ------------------------------------------------------------------------------------------------------------------
Total nonperforming loans 127.5 134.8 162.0
- ------------------------------------------------------------------------------------------------------------------
Foreclosed property 61.9 62.3 114.0
- ------------------------------------------------------------------------------------------------------------------
Total nonperforming assets $189.4 $197.1 $276.0
- ------------------------------------------------------------------------------------------------------------------
Nonperforming loans as % of total loans .66% .72% .94%
Nonperforming assets as % of total loans and foreclosed property .98 1.05 1.59
Nonperforming assets as % of total assets .59 .60 .89
Loan reserve as % of nonperforming loans 298.21 278.79 234.39
- ------------------------------------------------------------------------------------------------------------------
The provision for loan losses totaled $9.8 million in the first
quarter of 1995, an increase of 62.6% from the first quarter of last year
when the provision totaled $6.0 million. The provision for loan losses was
increased to maintain loan reserve coverage at acceptable levels during
a period of continued strong loan growth.
The reserve for loan losses represented 298% of nonperforming loans
at March 31, 1995, compared to 279% at December 31, 1994, and 234% at
March 31, 1994. The reserve for loan losses as a percentage of net
loans was 1.97% compared to 2.21% at March 31, 1994, and 2.02% at year-
end 1994. Net loan charge-offs for the first quarter of 1995 totaled
$6.2 million, compared to $2.4 million for the same period of 1994 when
net charge-offs included a $3.7 million recovery pertaining to one
credit. Annualized net charge-offs as a percentage of average loans
were .13% compared to .06% for the same period of last year and .15%
for all of 1994. Nonperforming assets, which include nonperforming
loans and foreclosed property, declined $86.6 million or 31.4% from
March 31, 1994, and $7.7 million or 3.9% from year-end 1994. As a
percent of total loans and foreclosed property, nonperforming assets
declined to .98% compared to 1.59% at March 31, 1994, and 1.05% at
December 31, 1994. The decline in nonperforming asset levels over the
last several quarterly periods largely resulted from a stronger economy
and the effectiveness of the Corporation's comprehensive loan
administration and workout procedures. As a percentage of total assets,
nonperforming assets were .59% at March 31, 1995, compared
-15-
16
to .89% at March 31, 1994 and .60% at December 31, 1994. Nonperforming
loans at March 31, 1995, declined to $127.5 million or .66% of total
loans, compared to .72% at December 31, 1994, and .94% at March 31, 1994.
Table 14 summarizes the nonperforming assets by major banking unit/
geographic location and illustrates the broad-based improvement achieved.
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 than 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 13, criticized loans totaled $613.7 million or 3.18%
of loans at March 31, 1995, a decline of $149.5 million from March 31,
1994, when criticized loans were 4.44%. Management carefully analyzes
changes and trends in both nonperforming and criticized loans in
assessing the risk characteristics of the loan portfolio.
Table 13: Loans Designated as Criticized Loans by Internal Risk Rating
System
Criticized Loans
- -----------------------------------------------------------------------------------------
(in millions) Nonperforming Performing Total
- -----------------------------------------------------------------------------------------
1994
March 31 $162.0 $601.2 $763.2
June 30 159.3 565.3 724.6
September 30 166.1 492.8 658.9
December 31 134.8 498.4 633.2
- -----------------------------------------------------------------------------------------
1995
March 31 $127.5 $486.2 $613.7
- -----------------------------------------------------------------------------------------
As % of loans at March 31, 1995 .66% 2.52% 3.18%
- -----------------------------------------------------------------------------------------
Table 14: Nonperforming Assets by Banking Unit
(in millions) March 31, 1995 December 31, 1994 March 31, 1994
- -----------------------------------------------------------------------------------------
Missouri $101.0 $103.2 $153.9
New Mexico 30.7 34.9 46.6
Arkansas 18.5 18.1 27.1
Oklahoma 10.8 11.1 10.9
Texas 8.7 8.2 9.5
Iowa 5.0 5.5 6.9
Illinois 5.4 5.0 7.8
Tennessee 3.6 5.0 6.3
Kansas 5.7 6.1 7.0
- -----------------------------------------------------------------------------------------
Total $189.4 $197.1 $276.0
- -----------------------------------------------------------------------------------------
On January 1, 1995, the Corporation adopted Financial Accounting
Standards No. 114 (SFAS 114), "Accounting by Creditors for Impairment of
a Loan" and No. 118 (SFAS 118), "Accounting by Creditors for Impairment
of a Loan - Income Recognition and Disclosures." These statements
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 the fair value of the
underlying collateral if the loan is collateral dependent. The
statements further require that specific reserves be established for any
impaired loan for which the recorded investment exceeds the measured
value of the loan. At March 31, 1995, the recorded investment in loans
that are considered to be impaired under SFAS 114 and SFAS 118 totaled
$112.5 million and consisted of nonaccrual loans and restructured loans.
Specific loan reserve allocations assigned to impaired loans were
immaterial. Table 11 summarizes the activity in the reserve for loan
losses. The Corporation's policy for income recognition was not impacted
by adoption of SFAS 114 and SFAS 118 and such interest recognized during
the period was immaterial. Interest income on nonaccrual loans is
recognized only in the period in which payments are received, and such
payments are applied to reduce principal when loans are unsecured or
collateral values are deficient.
-16-
17
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. These loans have the same risk
characteristics as nonaccrual loans and foreclosed properties. At March
31, 1995, segregated assets totaled $131.3 million, net of a $14.0
million credit valuation allowance, and are classified as other assets
for reporting purposes. At March 31, 1995, segregated assets consisted
of $37.3 million of commercial loans, $17.7 million of industrial
revenue bond loans, $84.0 million of commercial real estate related
loans and $6.3 million of foreclosed property. All other loans covered
under the loss-sharing arrangement are included in the loan portfolio
and totaled $286.2 million at March 31, 1995. Net charge-offs of $2.7
million, representing the Corporation's share of losses on the
segregated asset pool, were recognized in the first quarter of 1995. 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, 1995, $133.4 million of segregated assets were
accorded classification treatment consistent with nonaccrual reporting,
$6.3 million represented foreclosed property, and the balance of $5.6
million were 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 $3.5 million in the first quarter of 1995 and $3.3
million in the same period of 1994.
A summary of activity regarding segregated assets is provided
in Table 15.
Table 15: Segregated Assets
March 31, 1995 (in millions) Principal balance Allowance for losses Principal balance, net
- -------------------------------------------------------------------------------------------------------------------
Balance, beginning of year $193.9 $16.7 $177.2
Charge-offs (16.5) (3.3)
Recoveries .6
Net transfers (25.4)
Payments on segregated assets (6.7)
- -------------------------------------------------------------------------------------------------------------------
Balance, March 31, 1995 $145.3 $14.0 $131.3
- -------------------------------------------------------------------------------------------------------------------
Loan Portfolio
Table 16: Summary of Loan Portfolio
(in millions) March 31, 1995 December 31, 1994 March 31, 1994
- -------------------------------------------------------------------------------------------------------------------
Commercial $ 9,365.9 $ 8,744.9 $ 8,537.3
Real estate mortgage 3,661.9 3,624.1 3,516.3
Real estate construction 813.5 868.2 715.3
Consumer 5,326.0 5,295.5 4,375.2
Lease financing 150.6 136.8 93.8
- -------------------------------------------------------------------------------------------------------------------
Total domestic loans 19,317.9 18,669.5 17,237.9
Foreign loans 23.8 19.1 18.3
- -------------------------------------------------------------------------------------------------------------------
Total loans, before deduction of unearned income 19,341.7 18,688.6 17,256.2
Less unearned income 70.0 66.4 60.8
- -------------------------------------------------------------------------------------------------------------------
Total loans, net of unearned income $19,271.7 $18,622.2 $17,195.4
- -------------------------------------------------------------------------------------------------------------------
-17-
18
Table 17: Composition of Loan Portfolio
March 31, 1995 December 31, 1994 March 31, 1994
- ------------------------------------------------------------------------------------------------------------------
% Of % Of % Of
Total Total Total
(in millions) Amount Loans Amount Loans Amount Loans
- ------------------------------------------------------------------------------------------------------------------
Real estate:
1-4 family residential $ 3,661.9 18.9% $ 3,624.1 19.4% $ 3,516.3 20.4%
Land acquisition 189.1 1.0 246.8 1.3 198.1 1.1
Residential construction 300.8 1.6 275.0 1.5 222.3 1.3
Commercial construction 323.6 1.7 346.4 1.9 294.9 1.7
Commercial real estate 3,061.5 15.8 2,990.5 16.0 2,878.8 16.7
Mini-perms 100.9 .5 75.5 .4 88.7 .5
- ------------------------------------------------------------------------------------------------------------------
Total real estate 7,637.8 39.5 7,558.3 40.5 7,199.1 41.7
Commercial loans to Fortune 1,000 companies
and other large corporate borrowers 1,050.7 5.4 816.2 4.4 793.4 4.6
Middle market commercial 4,203.8 21.7 3,989.3 21.3 3,893.1 22.6
Bank stock loans 210.2 1.1 218.4 1.2 216.6 1.3
Agriculture 738.8 3.8 655.0 3.5 666.7 3.9
Consumer:
Home equity 437.8 2.3 423.2 2.3 365.5 2.1
Credit card 505.7 2.6 546.1 2.9 466.7 2.7
Indirect installment 2,760.5 14.3 2,711.5 14.5 2,123.5 12.3
Installment 1,622.0 8.4 1,614.7 8.6 1,419.5 8.2
- ------------------------------------------------------------------------------------------------------------------
Total consumer 5,326.0 27.6 5,295.5 28.3 4,375.2 25.3
Lease financing 150.6 .8 136.8 .7 93.8 .5
Foreign 23.8 .1 19.1 .1 18.3 .1
- ------------------------------------------------------------------------------------------------------------------
Total loans $19,341.7 100.0% $18,688.6 100.0% $17,256.2 100.0%
- ------------------------------------------------------------------------------------------------------------------
The majority of the Corporation's loans are made within its natural
trade territory. The portfolio is highly diversified in that the
Corporation's banking operations span a nine state area with over 500
branch locations. The Corporation's objective is to control credit risk
through geographic diversification and adherence to stringent credit
administration policies that limit industry concentrations and establish
lending authority and borrower limits. The Corporation's geographic
profile provides significant credit and economic risk diversification in
that the Corporation is not solely dependent on any major market. All of
the Corporation's major markets are currently experiencing good economic
conditions and unemployment rates within these markets are in line with
national averages. 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.
Table 18: Loan Portfolio Distribution
March 31, 1995 December 31, 1994 March 31, 1994
- ------------------------------------------------------------------------------------------------------------------
% Of % Of % Of
Total Total Total
(in millions) Amount<F1> Loans Amount<F1> Loans Amount<F1> Loans
- ------------------------------------------------------------------------------------------------------------------
Missouri $10,545.9 54.7% $ 9,908.8 53.2% $ 9,407.0 54.7%
Arkansas 2,472.9 12.8 2,451.6 13.2 2,098.4 12.2
New Mexico 1,446.0 7.5 1,430.2 7.7 1,335.0 7.8
Oklahoma 1,061.8 5.5 1,062.3 5.7 994.1 5.8
Texas 943.1 4.9 931.4 5.0 898.0 5.2
Iowa 741.3 3.9 729.3 3.9 659.1 3.8
Tennessee 767.9 4.0 754.8 4.1 644.1 3.7
Illinois 717.5 3.7 715.4 3.8 630.8 3.7
Kansas 89.9 .5 114.4 .6 84.8 .5
Credit card 485.4 2.5 524.0 2.8 444.1 2.6
- ------------------------------------------------------------------------------------------------------------------
Total $19,271.7 100.0% $18,622.2 100.0% $17,195.4 100.0%
- ------------------------------------------------------------------------------------------------------------------
<FN>
<F1> Net of unearned income.
At March 31, 1995, loans totaled $19.3 billion, an increase of
12.1% over the same period of last year. Based on average balances, loans
increased 10.9%, principally the result of loan growth within the
consumer and middle-market commercial portfolios. The growth was led by
an increase of 26.0% in consumer loans, coupled with an increase in
commercial loans of 7.2%. Consumer
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loan growth was largely the result of increased indirect auto loans and
credit card loans. The increase in commercial loans reflected
middle-market loan growth, as well as increases in loans to Fortune 1,000
companies.
At March 31, 1995, consumer loans represented approximately 27.6%
of the total loan portfolio compared to 25.3% at March 31, 1994. As a
percentage of total loans, middle-market commercial loans were 21.7%,
compared to 22.6% at March 31, 1994. Commercial real estate and real
estate construction loans represented 20.6% of total loans at March 31,
1995, compared to 21.3% at March 31, 1994. The balance of the real
estate portfolio is comprised of 1-4 family residential loans which
increased 4.1% from March 31, 1994, but as a percentage of the total
portfolio were 18.9% at March 31, 1995 compared to 20.4% at March 31,
1994. 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. Real estate
loans are generally secured by the underlying property at a 75% to 80%
loan to value ratio and are generally supported by guarantees from
project developers. Additional collateral is required on a project-by-
project basis depending on management's evaluation of the borrower.
Approximately 30% of the commercial real estate portfolio is comprised
of owner occupied properties for which the primary source of repayment
is not entirely dependent on the real estate market. At March 31, 1995,
the Corporation had unfunded commercial real estate and construction
commitments totaling $387 billion. The amount of collateral, if any,
obtained for other loans is based on general industry practice and the
creditworthiness of the borrower.
Table 16 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 17.
Financial Position and Liquidity
The basic financial structure of the Corporation's average and
period-end balance sheet changed moderately from the first quarter of
last year primarily due to loan growth and higher levels of purchased
funds. At March 31, 1995, assets totaled $32.4 billion compared to $31.1
billion at March 31, 1994, and $32.7 billion at December 31, 1994.
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 $20.7 billion for the first quarter
of 1995, a decrease of $.2 billion or .8% from the same period last year.
Core deposit growth in recent periods has been restricted, to some
extent, by a shift in customer preference to other investment
alternatives. In addition, the deposit base has been altered somewhat as
customers have redirected balances from traditional lower-cost savings
deposits to higher-rate money market deposit accounts. This is a
reversal of the trend from recent years when the spreads between savings
rates and rates on other retail deposits were at historical lows.
Average earning assets during this period increased approximately $1.4
billion or 5.1%; accordingly, the additional earning asset volume has
been funded by higher levels of short-term purchased funds. Average core
deposits supported 72.1% of earning assets for the first quarter of 1995
compared to 76.4% during the same period last year. Purchased funds,
which increased approximately $1.5 billion from the prior year,
supported 20.8% of average earning assets compared to 16.5% for the
first quarter of last year. Purchased funds at March 31, 1995, included
$1.9 billion of short-term bank notes which were issued by several of
the Corporation's banking subsidiaries in 1994 and 1995. 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's liquidity position is also managed by maintaining
adequate levels of liquid assets such as money market investments and
available for sale securities. At March 31, 1995, the available for sale
portfolio totaled $4.0 billion compared to $4.9 billion at March 31,
1994. The decline from the year ago period was primarily due to
redeployment of proceeds from maturing securities to the loan portfolio.
Given the current outlook for continued loan growth, the securities
portfolio balances are expected to show year to year declines throughout
1995. 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, 1995, unrealized depreciation in the
available for sale portfolio was approximately $63.5 million compared to
$178.4 million at December 31, 1994. The market value appreciation from
year end was primarily due to the decline in Treasury yields primarily
within the 2 to 4 year maturity range. The Corporation's mortgage-backed
securities portfolio totaled approximately $5.8 billion at March 31,
1995, of which approximately 90% represented government agency-backed
issues, and the remainder of the portfolio was comprised of private-
issue mortgage-backed securities with credit ratings of AA or better. As
a means to control interest rate and prepayment risk, each security
undergoes a thorough analysis prior to purchase and periodically
thereafter to examine the investment performance using a wide range of
interest rate scenarios and prepayment speeds. This ongoing process
insures that the mortgage-backed securities portfolio meets the
Corporation's investment strategies and internal risk guidelines.
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20
The variety of funding options available and strong cash flow
provide the Corporation flexibility in selecting funding alternatives most
appropriate in the circumstances, thereby avoiding the necessity to
access capital markets at inopportune times. 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 in Table 19. Approximately $38
million of the Corporation's long-term debt will mature in the second
quarter of 1995. The Corporation currently has a shelf registration
statement filed with the Securities and Exchange Commission providing
for the issuance of up to $500 million of debt, preferred stock or
common stock. There are no plans to issue securities pursuant to this
filing in the near term. There were also no commitments for capital
expenditures, at March 31, 1995, which would materially impact the
Corporation's liquidity position.
Table 19: Agency Ratings
Agency Ratings Moody's Standard & Poor's Thomson Bankwatch
- -----------------------------------------------------------------------------------------------------------------
Boatmen's Bancshares, Inc.: B
6 3/4% Subordinated notes due 2003 A3 A- A
7 5/8% Subordinated notes due 2004 A3 A- A
8 5/8% Subordinated notes due 2003 A3 A- A
9 1/4% Subordinated notes due 2001 A3 A- A
6 1/4% Convertible subordinated debentures due 2011 A3 A- A
Commercial paper P1 A-1 TBW-1
The Boatmen's National Bank of St. Louis: B
Long-term/short-term deposits and bank notes Aa3/P1 A+/A-1 TBW-1
Boatmen's First National Bank of Kansas City: B
Long-term/short-term deposits and bank notes A1/P1 A+/A-1 TBW-1
Multi-bank note program
(6 Boatmen's subsidiary banks) A1/P1 A+/A-1
- -----------------------------------------------------------------------------------------------------------------
Capital Structure
Table 20: Capital Structure
(in millions) March 31, 1995 December 31, 1994 March 31, 1994
- -----------------------------------------------------------------------------------------------------------------
Long-term debt $ 557.6 $ 592.0 $ 590.7
Stockholders' equity 2,655.2 2,533.4 2,460.2
- -----------------------------------------------------------------------------------------------------------------
Total capitalization $3,212.8 $3,125.4 $3,050.9
- -----------------------------------------------------------------------------------------------------------------
Tangible equity $2,354.2 $2,224.3 $2,133.3
- -----------------------------------------------------------------------------------------------------------------
Ratios
- -----------------------------------------------------------------------------------------------------------------
Equity/assets 8.20% 7.74% 7.91%
Tangible equity/assets 7.34 6.86 6.93
Long-term debt as % of total capitalization 17.36 18.94 19.36
Double leverage 107.94 107.32 107.82
Dividends paid
(for the period, in thousands):
Preferred $ 20 $ 80 $ 20
Common 35,547 142,822 34,776
Total dividends as % of net income 41.7% 35.3% 35.5%
- -----------------------------------------------------------------------------------------------------------------
Table 21: Intangible Assets
(in millions) March 31, 1995 December 31, 1994 March 31, 1994
- -----------------------------------------------------------------------------------------------------------------
Goodwill--Parent Company $ 88.5 $ 89.9 $ 94.0
- -----------------------------------------------------------------------------------------------------------------
Subsidiaries:
Goodwill 104.9 103.1 122.0
Core deposit premium 70.6 74.7 67.7
Credit card premium 2.8 3.0 3.6
Purchased mortgage servicing rights 34.2 38.4 39.6
- -----------------------------------------------------------------------------------------------------------------
Total subsidiaries 212.5 219.2 232.9
- -----------------------------------------------------------------------------------------------------------------
Total intangible assets $301.0 $309.1 $326.9
- -----------------------------------------------------------------------------------------------------------------
The Corporation continues to rank among the most strongly capitalized
bank holding companies in the country. This strong
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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 $2.7 billion or approximately 82.6% of total capitalization at
March 31, 1995, an increase of 7.9% from March 31, 1994. The equity to
asset ratio was 8.20% at March 31, 1995, compared to 7.91% at March 31,
1994, and 7.74% at December 31, 1994. 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.
An important measure of capital adequacy of a banking institution is
its risk-based capital ratios, which represent the primary capital
standard for regulatory purposes. The Corporation's risk-based capital
ratios of 10.87% for Tier I and 13.98% for total capital substantially
exceed the regulatory required minimums. At March 31, 1995, the
Corporation's Tier I leverage ratio was 7.57%, well in excess of
required minimums. At March 31, 1995, all of the Corporation's banking
subsidiaries were considered "well capitalized" based on the regulatory
defined minimums of a Tier I leverage ratio of 5%, a Tier I capital
ratio of 6% and a total capital ratio of 10%.
In the first quarter of 1995, the Corporation announced a common
stock buy back program authorizing the repurchase of up to 5 million
shares, or approximately 5% of the Corporation's shares outstanding. The
repurchased shares will be used to meet periodic stock requirements of
benefit plans and for other corporate purposes.
Table 22: Risk-Based Capital
(in millions) March 31, 1995 December 31, 1994 March 31, 1994
- ------------------------------------------------------------------------------------------------------------
Tier I capital:
Stockholders' equity $ 2,655.2 $ 2,533.4 $ 2,460.2
Unrealized net (appreciation) depreciation,
available for sale securities 40.9 109.5 (1.8)
- ------------------------------------------------------------------------------------------------------------
Stockholders' equity, net 2,696.1 2,642.9 2,458.4
Minority interest .7 .7 .7
Intangible assets:
Goodwill (193.4) (193.0) (216.0)
Core deposit premium (70.6) (74.7) (67.7)
- ------------------------------------------------------------------------------------------------------------
Total Tier I 2,432.8 2,375.9 2,175.4
- ------------------------------------------------------------------------------------------------------------
Tier II capital:
Allowable reserve for loan losses 281.0 275.2 250.2
Qualifying long-term debt 415.0 415.0 425.0
- ------------------------------------------------------------------------------------------------------------
Total Tier II 696.0 690.2 675.2
- ------------------------------------------------------------------------------------------------------------
Total capital $ 3,128.8 $ 3,066.1 $ 2,850.6
- ------------------------------------------------------------------------------------------------------------
Risk-adjusted assets $22,377.4 $22,034.7 $20,057.0
- ------------------------------------------------------------------------------------------------------------
Risk-based capital ratios:
Tier I 10.87% 10.78% 10.85%
- ------------------------------------------------------------------------------------------------------------
Total 13.98% 13.91% 14.21%
- ------------------------------------------------------------------------------------------------------------
Tier I leverage ratio 7.57% 7.30% 7.06%
- ------------------------------------------------------------------------------------------------------------
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Boatmen's Bancshares, Inc.
CONSOLIDATED QUARTERLY EARNINGS TREND
1995 1994
- ------------------------------------------------------------------------------------------------------------
(in thousands) First Fourth Third Second First
- ------------------------------------------------------------------------------------------------------------
Interest income
Interest and fees on loans $405,222 $387,017 $366,985 $353,139 $329,561
Interest on short-term investments 899 886 932 1,082 572
Interest on Federal funds sold and securities
purchased under resale agreements 7,775 7,732 3,952 2,728 2,544
Interest on held to maturity securities
Taxable 64,308 62,509 62,323 58,900 48,634
Tax-exempt 14,449 14,709 15,678 14,903 15,198
- ------------------------------------------------------------------------------------------------------------
Total interest on held to maturity securities 78,757 77,218 78,001 73,803 63,832
Interest on available for sale securities 63,255 63,707 63,227 64,598 68,081
Interest on trading securities 421 378 381 926 840
- ------------------------------------------------------------------------------------------------------------
Total interest income 556,329 536,938 513,478 496,276 465,430
Interest expense:
Interest on deposits 183,669 167,562 152,647 144,746 140,723
Interest on Federal funds purchased
and other short-term borrowings 65,354 57,361 49,884 40,522 25,477
Interest on capital lease obligations 970 993 1,000 997 993
Interest on long-term debt 12,015 12,197 12,052 11,468 11,008
- ------------------------------------------------------------------------------------------------------------
Total interest expense 262,008 238,113 215,583 197,733 178,201
- ------------------------------------------------------------------------------------------------------------
Net interest income 294,321 298,825 297,895 298,543 287,229
Provision for loan losses 9,798 4,899 7,192 7,739 6,025
- ------------------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 284,523 293,926 290,703 290,804 281,204
- ------------------------------------------------------------------------------------------------------------
Noninterest income:
Trust fees 40,420 42,746 39,777 40,930 41,483
Service charges 45,646 46,892 47,131 46,750 45,782
Credit card 11,855 14,046 11,073 9,839 9,666
Investment banking revenues 8,790 8,795 8,660 10,584 9,729
Mortgage banking operations 22,904 15,418 13,509 12,723 19,045
Securities gains, net 47 1,411 1,533 702 2,554
Other 32,372 28,690 27,736 31,845 25,746
- ------------------------------------------------------------------------------------------------------------
Total noninterest income 162,034 157,998 149,419 153,373 154,005
- ------------------------------------------------------------------------------------------------------------
Noninterest expense:
Staff 147,912 145,761 146,426 148,797 148,187
Net occupancy 20,279 20,521 21,130 20,538 20,602
Equipment 23,355 23,642 24,095 23,560 21,986
FDIC insurance 13,163 13,033 13,031 13,271 13,279
Intangible amortization 7,883 8,716 8,842 8,808 8,786
Advertising 7,481 10,339 8,440 7,835 6,810
Other 90,475 73,361 63,616 64,215 66,189
- ------------------------------------------------------------------------------------------------------------
Total noninterest expense 310,548 295,373 285,580 287,024 285,839
- ------------------------------------------------------------------------------------------------------------
Income before income tax expense 136,009 156,551 154,542 157,153 149,370
Income tax expense 50,635 52,666 53,264 54,903 51,450
- ------------------------------------------------------------------------------------------------------------
Net income $ 85,374 $103,885 $101,278 $102,250 $ 97,920
- ------------------------------------------------------------------------------------------------------------
Net income per share $.67 $.81 $.80 $.80 $.77
- ------------------------------------------------------------------------------------------------------------
Dividends declared per share $.34 $.34 $.34 $.31 $.31
- ------------------------------------------------------------------------------------------------------------
Returns:
Return on assets 1.06% 1.30% 1.29% 1.30% 1.28%
Return on equity 13.14 16.38 16.11 16.53 15.92
- ------------------------------------------------------------------------------------------------------------
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Boatmen's Bancshares, Inc.
CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEET AND NET INTEREST MARGIN
Average balances (in millions) 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
First Quarter Fourth Quarter Third Quarter
- ----------------------------------------------------------------------------------------------------------------------------------
Income/ Yields/ Income/ Yields/ Income/ Yields/
Assets Balance Expense Rates Balance Expense Rates Balance Expense Rates
- ----------------------------------------------------------------------------------------------------------------------------------
Loans, net of unearned income $18,890.9 $407.1 8.74% $18,368.6 $389.2 8.41% $17,957.9 $368.5 8.14%
Short-term investments 65.4 .9 5.57 68.6 .9 5.13 83.8 .9 4.41
Federal funds sold and
securities purchased
under resale agreements 526.5 7.8 5.99 573.8 7.7 5.35 329.7 4.0 4.76
Held to maturity securities:
Taxable 4,351.8 64.3 5.99 4,353.1 62.5 5.70 4,385.0 62.3 5.64
Tax-exempt 846.2 21.5 10.30 897.5 21.8 9.62 891.7 23.5 10.44
- ----------------------------------------------------------------------------------------------------------------------------------
Total held to maturity
securities 5,198.0 85.8 6.69 5,250.6 84.3 6.37 5,276.7 85.8 6.45
Available for sale securities 3,998.3 63.3 6.42 4,170.6 63.8 6.07 4,453.8 63.3 5.64
Trading securities 27.9 .4 6.40 26.1 .4 6.29 28.4 .4 5.56
- ----------------------------------------------------------------------------------------------------------------------------------
Total earning assets 28,707.0 565.3 7.99 28,458.3 546.3 7.62 28,130.3 522.9 7.37
Less reserve for loan losses (379.1) (382.5) (382.5)
Cash and due from banks 1,867.9 1,898.0 1,868.3
All other assets 1,920.6 1,871.1 1,842.2
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets $32,116.4 $31,844.9 $31,458.3
- ----------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
- ----------------------------------------------------------------------------------------------------------------------------------
Retail savings deposits
and interest-bearing
transaction accounts $10,045.3 $ 74.3 3.00% $10,014.0 $ 67.8 2.68% $10,001.9 $ 62.3 2.47%
Time deposits 8,944.6 109.3 4.96 8,752.6 99.8 4.52 8,518.4 90.3 4.21
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
deposits 18,989.9 183.6 3.92 18,766.6 167.6 3.54 18,520.3 152.6 3.27
Federal funds purchased and
other short-term borrowings 4,544.7 65.4 5.83 4,475.3 57.3 5.09 4,445.4 49.9 4.45
Capital lease obligations 39.9 1.0 9.85 40.2 1.0 9.79 40.5 1.0 9.80
Long-term debt 568.2 12.0 8.58 598.2 12.2 8.09 592.0 12.1 8.08
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities 24,142.7 262.0 4.40 23,880.3 238.1 3.96 23,598.2 215.6 3.62
Demand deposits 4,982.5 5,063.4 5,025.1
All other liabilities 391.1 363.1 318.7
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 29,516.3 29,306.8 28,942.0
Redeemable preferred stock 1.1 1.2 1.1
Total stockholders' equity 2,599.0 2,536.9 2,515.2
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $32,116.4 $31,844.9 $31,458.3
- ----------------------------------------------------------------------------------------------------------------------------------
Interest rate spread 3.59% 3.66% 3.75%
Effect of noninterest-bearing
funds 0.70 0.64 0.58
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest margin $303.3 4.29% $308.2 4.30% $307.3 4.33%
- ----------------------------------------------------------------------------------------------------------------------------------
Nonaccrual loans are included
in average balances and interest
payments on such loans are
recognized as income on a cash
basis when appropriate.
Interest income and yields are
presented on a fully-taxable
equivalent basis using the
Federal statutory income tax
rate, net of nondeductible
interest expense. Such
adjustments by earning asset
category are as follows:
Loans $1.9 $2.2 $1.5
Held to maturity securities 7.0 7.1 7.8
Available for sale securities .1 .1 .1
- ----------------------------------------------------------------------------------------------------------------------------------
Total $9.0 $9.4 $9.4
- ----------------------------------------------------------------------------------------------------------------------------------
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Boatmen's Bancshares, Inc.
CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEET AND NET INTEREST MARGIN
Average balances (in millions) 1994
- ------------------------------------------------------------------------------------------------------------
Second Quarter First Quarter
- ------------------------------------------------------------------------------------------------------------
Income/ Yields/ Income/ Yields/
Assets Balance Expense Rates Balance Expense Rates
- ------------------------------------------------------------------------------------------------------------
Loans, net of unearned income $17,561.1 $354.8 8.10% $17,033.3 $331.1 7.88%
Short-term investments 110.0 1.1 3.95 61.0 .6 3.80
Federal funds sold and
securities purchased
under resale agreements 259.6 2.7 4.22 290.2 2.5 3.56
Held to maturity securities:
Taxable 4,385.4 58.9 5.39 4,056.7 48.6 4.86
Tax-exempt 904.8 22.3 9.88 923.9 22.8 10.01
- ------------------------------------------------------------------------------------------------------------
Total held to maturity
securities 5,290.2 81.2 6.16 4,980.6 71.4 5.82
Available for sale securities 4,762.3 64.7 5.45 4,880.6 68.2 5.66
Trading securities 64.2 .9 6.04 69.5 .9 5.01
- ------------------------------------------------------------------------------------------------------------
Total earning assets 28,047.4 505.4 7.23 27,315.2 474.7 7.05
Less reserve for loan losses (383.2) (380.5)
Cash and due from banks 1,845.0 1,809.9
All other assets 1,851.6 1,852.4
- ------------------------------------------------------------------------------------------------------------
Total assets $31,360.8 $30,597.0
- ------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
- ------------------------------------------------------------------------------------------------------------
Retail savings deposits
and interest-bearing
transaction accounts $10,106.6 $ 59.3 2.35% $10,160.5 $ 56.5 2.25%
Time deposits 8,522.5 85.4 4.02 8,519.1 84.2 4.01
- ------------------------------------------------------------------------------------------------------------
Total interest-bearing
deposits 18,629.1 144.7 3.12 18,679.6 140.7 3.06
Federal funds purchased and
other short-term borrowings 4,239.3 40.5 3.83 3,446.8 25.5 3.00
Capital lease obligations 40.8 1.0 9.81 41.0 1.0 9.81
Long-term debt 587.9 11.5 7.82 588.2 11.0 7.59
- ------------------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities 23,497.1 197.7 3.38 22,755.6 178.2 3.18
Demand deposits 5,093.0 5,039.6
All other liabilities 295.9 340.4
- ------------------------------------------------------------------------------------------------------------
Total liabilities 28,886.0 28,135.6
Redeemable preferred stock 1.2 1.2
Total stockholders' equity 2,473.6 2,460.2
- ------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $31,360.8 $30,597.0
- ------------------------------------------------------------------------------------------------------------
Interest rate spread 3.85% 3.87%
Effect of noninterest-bearing
funds 0.55 0.53
- ------------------------------------------------------------------------------------------------------------
Net interest margin $307.7 4.40% $296.5 4.40%
- ------------------------------------------------------------------------------------------------------------
Nonaccrual loans are included
in average balances and interest
payments on such loans are
recognized as income on a cash
basis when appropriate.
Interest income and yields are
presented on a fully-taxable
equivalent basis using the
Federal statutory income tax
rate, net of nondeductible
interest expense. Such
adjustments by earning asset
category are as follows:
Loans $1.7 $1.6
Held to maturity securities 7.4 7.6
Available for sale securities .1 .1
- ------------------------------------------------------------------------------------------------------------
Total $9.2 $9.3
- ------------------------------------------------------------------------------------------------------------
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25
PART II. OTHER INFORMATION
--------------------------
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27. Boatmen's Bancshares, Inc. Financial Data
Schedule for the Period Ended March 31, 1995.
(b) Registrant filed current reports on Forms 8-K dated January 20,
1995, and March 14, 1995, covering Item 5 - Other Events
and Item 7 - Financial Statements and Exhibits.
SIGNATURE
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.
BOATMEN'S BANCSHARES, INC.
--------------------------------------------
(Registrant)
Date: May 8, 1995 /s/ JAMES W. KIENKER
----------- --------------------------------------------
James W. Kienker, Executive Vice President
and Chief Financial Officer
(On behalf of the Registrant and as
Principal Financial and Accounting Officer)
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