1
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
FINANCIAL
COMMENTARY
The historical trends reflected in the restated financial information
presented below are not reflective of anticipated future results.
Table 1: Summary of Selected Financial Data
- ------------------------------------------------------------------------------------------------------------------------
(in millions except per share data) 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------
Earnings
Net interest income $1,214.1 $1,188.3 $1,125.6 $1,001.5 $845.4
Fully taxable equivalent (FTE) adjustment<F1> 34.6 37.2 37.5 35.9 38.6
Net interest income (FTE) basis 1,248.7 1,225.5 1,163.1 1,037.4 884.0
Provision for loan losses 46.7 25.3 63.9 139.5 118.0
Noninterest income 676.4 615.1 593.5 500.4 401.7
Noninterest expense 1,199.0 1,156.7 1,143.0 1,000.4 865.2
Net income 418.8 407.8 350.4 262.7 199.9
Net income before nonrecurring merger expenses 438.8 407.8 354.2 282.4 205.1
- ------------------------------------------------------------------------------------------------------------------------
Financial Position (at year end)
Total assets $33,703.8 $32,878.0 $30,980.1 $28,353.3 $26,143.7
Securities 8,978.6 9,389.9 9,948.1 8,460.7 7,193.8
Loans 19,763.2 18,655.5 16,900.7 15,007.2 13,981.0
Reserve for loan losses 383.0 376.6 376.3 334.7 285.8
Deposits 25,932.1 25,384.1 23,951.6 22,723.2 20,826.0
Long-term debt 615.1 592.0 567.4 428.4 341.6
Equity 2,928.1 2,561.4 2,459.9 2,155.2 1,870.9
- ------------------------------------------------------------------------------------------------------------------------
Share Data
Net income $3.25 $3.17 $2.75 $2.25 $1.78
Net income before nonrecurring merger expenses 3.41 3.17 2.78 2.42 1.83
Dividends paid 1.39 1.27 1.15 1.09 1.07
Book value (year end) 22.62 19.95 19.20 17.11 16.32
Tangible book value (year end) 19.95 17.55 16.53 15.28 14.57
Shares outstanding (year end) 129.4 128.4 128.1 126.0 114.7
Average shares outstanding 129.0 128.7 127.3 116.6 112.4
- ------------------------------------------------------------------------------------------------------------------------
Selected Financial Ratios
Return on assets 1.28% 1.29% 1.20% .99% .81%
Return on assets before nonrecurring merger expenses 1.34 1.29 1.21 1.06 .83
Return on equity 15.15 16.14 15.25 13.21 11.33
Return on equity before nonrecurring merger expenses 15.88 16.14 15.42 14.20 11.62
Net interest margin 4.26 4.35 4.46 4.35 4.01
Noninterest income/operating income 35.1 33.4 33.8 32.5 31.2
Efficiency ratio 62.3 62.8 65.1 65.1 67.3
Efficiency ratio before nonrecurring merger expenses 60.9 62.8 64.8 64.9 66.7
Capital ratios:
Equity to assets 8.69 7.79 7.94 7.60 7.16
Risk-based capital:
Tier I capital 11.30 10.90 10.93 10.55 10.11
Total capital 14.30 14.03 14.35 13.74 13.05
Tier I leverage ratio 7.95 7.35 6.93 6.84 6.43
Nonperforming loans to total loans .84 .73 1.13 1.85 2.41
Nonperforming assets to total loans and
foreclosed property 1.00 1.06 1.80 2.74 3.69
Loan reserve to nonperforming loans 228.62 277.06 195.08 119.66 84.13
Net charge-offs to average loans .24 .15 .23 .75 .77
========================================================================================================================
<FN>
<F1> The fully taxable equivalent adjustments are calculated using the Federal
statutory tax rate.
17
2
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
ACQUISITION OVERVIEW
Table 2: Acquisitions
- ----------------------------------------------------------------------------------------------------------------------------------
Accounting
Date State Assets Price Shares issued method
- ----------------------------------------------------------------------------------------------------------------------------------
Completed
Centerre Bancorporation 12/88 Missouri $ 5.0 billion $467 million stock 28.6 million Pooling
RTC assisted--Community Federal S&L 12/90 Missouri 2.3 billion 27 million cash -- Purchase
First Interstate Bank of Oklahoma, N.A. 8/91 Oklahoma .9 billion 86 million cash -- Purchase
Founders Bancorporation, Inc. 3/92 Oklahoma .3 billion 34 million cash -- Purchase
Superior Federal Bank 3/92 Arkansas .7 billion -- -- Purchase
RTC assisted--Home Federal S&L 3/92 Arkansas .1 billion 1 million cash -- Purchase
First Interstate of Iowa, Inc. 4/92 Iowa 1.2 billion 94 million stock 4.2 million Pooling
FDIC assisted--Jackson Exchange Bank 5/92 Missouri .1 billion 1 million cash -- Purchase
Sunwest Financial Services, Inc. 10/92 New Mexico 3.4 billion 325 million stock 14.8 million Pooling
Security Bank and
1st Bank of Catoosa in Tulsa 11/92 Oklahoma .2 billion 33 million cash -- Purchase
FDIC assisted--First City-El Paso 3/93 Texas .3 billion 14 million cash -- Purchase
FDIC assisted--Missouri Bridge Bank, N.A. 4/93 Missouri 1.1 billion 16 million cash -- Purchase
RTC assisted--Cimarron Federal Savings 5/93 Oklahoma .4 billion 13 million cash -- Purchase
FCB Bancshares, Inc. 8/93 Kansas .2 billion 25 million cash -- Purchase
First Amarillo Bancorporation, Inc. 11/93 Texas .8 billion 192 million stock 5.9 million Pooling
Woodland 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
West Side Bancshares, Inc. 4/95 Texas .1 billion 18 million stock .6 million Purchase
First National Bank in Pampa 5/95 Texas .2 billion 42 million stock 1.4 million Pooling
Citizens Bancshares Corporation 10/95 Arkansas .2 billion 41 million stock 1.1 million Purchase
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets of completed transactions $21.5 billion
==================================================================================================================================
Pending at December 31, 1995
Fourth Financial Corporation Kansas $ 7.5 billion $ 1.2 billion stock 31.9 million<F1> Pooling
Tom Green National Bank Texas .1 billion 9 million stock .2 million Purchase
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets of pending transactions $ 7.6 billion
==================================================================================================================================
<FN>
<F1> Assumes conversion of existing preferred stock to approximately 3.4 million
shares of common stock.
Over the last several years the Corporation has made numerous acquisitions
establishing leading market positions in Missouri, Arkansas and New Mexico,
and sizable presences in southern Illinois, western Tennessee, Oklahoma and
northern Texas. As illustrated in Table 2, during the period 1988-1995, the
Corporation completed 24 acquisitions aggregating $21.5 billion in 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 significant credit and economic risk
diversification in that the Corporation is not significantly dependent on any
major market. In 1995, the Corporation completed seven acquisitions in four
states aggregating $4.4 billion in total assets and announced two other
acquisitions aggregating approximately $7.6 billion in assets, which are
expected to be completed in the first quarter of 1996. The Corporation's
operations currently span nine states, with services delivered from over 500
branch locations and over 1,000 ATM's. After consummation of the pending
acquisition of Fourth Financial Corporation, the Corporation will also have
the leading market position in Kansas and Oklahoma. A summary of the
acquisitions consummated in 1995 and those currently pending follows.
Arkansas Acquisitions
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 17.1 million shares. Worthen was the second largest banking
organization in Arkansas, with approximately $3.5 billion in assets, operating
101 retail banking offices throughout Arkansas and six offices in the Austin,
Texas area. The acquisition of Worthen increased the Corporation's asset base
in Arkansas to over $4 billion, making the Corporation the market leader in
Arkansas.
On October 27, 1995, the Corporation
18
3
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
acquired Citizens Bancshares Corporation (Citizens), located in Jonesboro,
Arkansas, in a stock transaction accounted for as a purchase. The acquisition
of Citizens, with assets of approximately $225 million, resulted in the
issuance of approximately 1.1 million shares of common stock from treasury
stock acquired in the open market.
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 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
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 $23 billion.
Texas Acquisitions
On January 31, 1995, the Corporation acquired Dalhart Bancshares, Inc.
(Dalhart), with assets of approximately $140 million, in a pooling transaction
involving the issuance of .7 million shares of Boatmen's common stock for all
of the shares of Dalhart.
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 .6 million
shares of common stock.
[Asset Growth-Assets as Originally Reported graph]
On May 31, 1995, the Corporation acquired First National Bank in Pampa
(Pampa), with assets of approximately $166 million, in a pooling transaction
involving the issuance of 1.35 million shares of Boatmen's common stock for
all of the shares of Pampa.
On August 30, 1995, the Corporation announced a definitive agreement to
acquire Tom Green National Bank, located in San Angelo, Texas, in a stock
transaction to be accounted for as a purchase. The acquisition of Tom Green
National Bank, with assets of approximately $80 million, will result in the
issuance of .2 million shares of common stock from treasury stock acquired in
the open market. This acquisition is expected to be completed in the first
quarter of 1996.
Illinois Acquisition
On February 28, 1995, the Corporation acquired Salem Community Bancorp,
Inc. (Salem), a one bank holding company located in Salem, Illinois, in a stock
transaction accounted for as a purchase, resulting in the issuance of .3
million shares of common stock. Salem had two locations and approximately $80
million in assets.
Kansas Acquisition (Pending)
On August 25, 1995, the Corporation announced a definitive agreement to
acquire Fourth Financial Corporation (Fourth Financial), headquartered in
Wichita, Kansas, in a transaction to be accounted for as a pooling of
interests. Under terms of the agreement, the Corporation will exchange one
share of its common stock for each Fourth Financial share, resulting in the
issuance of approximately 31.9 million shares of common stock, including 3.4
million shares from the anticipated conversion of outstanding preferred stock.
Fourth Financial is the largest banking company in Kansas, with approximately
$7.5 billion in assets, operating 87 retail banking offices in Kansas and 56
in Oklahoma. The acquisition of Fourth Financial will give the Corporation the
leading deposit market share in Kansas and Oklahoma, and is expected to be
completed in the first quarter of 1996.
Table 3: Asset Distribution
- ------------------------------------------------------------------
December 31, 1995 % of
(in billions) Assets total Locations
- ------------------------------------------------------------------
Missouri $17.5 52% 167
Arkansas 4.8 14 153
New Mexico 3.3 10 66
Texas 2.3 7 34
Oklahoma 1.9 6 37
Iowa 1.2 3 27
Illinois 1.1 3 21
Tennessee .9 3 15
Kansas .2 1 3
Credit card .5 1
- ------------------------------------------------------------------
Total $33.7 100% 523
==================================================================
Table 4: Nonrecurring Merger Expenses
- ------------------------------------------------------------------
(in millions)
- ------------------------------------------------------------------
Investment banking,
legal, and other
professional fees $ 9.7
Equipment and software
write-offs, and
branch closings 6.4
Compensation costs 4.6
Other 5.3
- ------------------------------------------------------------------
Total $26.0
==================================================================
Nonrecurring Merger Expenses
The acquisitions of Worthen, National Mortgage, Dalhart and Pampa
necessitated recognition of pre-tax nonrecurring merger expenses totalling
$26.0 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.
[Equity Growth-Equity as Originally Reported graph]
19
4
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
EARNINGS OVERVIEW
Table 5: Summary of Business Components
- ------------------------------------------------------------------------------------------------------------------------------------
Banking Trust Mortgage Other<F1> Consolidated
-------------------------------------------------------------------------------------------------------
% % % % %
(in millions) 1995 1994 change 1995 1994 change 1995 1994 change 1995 1994 change 1995 1994 change
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income
(FTE) $1,241 $1,229 1% $ 12 $ 9 33 % $25 $12 108% $(29) $(25) (16)% $1,249 $1,225 2%
Provision for loan
losses 47 25 84 47 25 84
Noninterest income 405 384 6 187 172 9 78 56 39 6 3 100 676 615 10
Noninterest expense 899 933 (4) 141 115 23 68 69 (1) 65 40 63 1,173 1,157 1
Net income<F2> $ 439 $ 411 7% $ 36 $ 41 (12)% $22 $(1) $(58) $(43) (35)% $ 439 $ 408 8%
====================================================================================================================================
<FN>
<F1> Includes costs of unallocated overhead and debt service.
<F2> Excludes nonrecurring merger expenses.
Net income, before the impact of nonrecurring merger expenses, increased
7.6% in 1995, to $438.8 million, compared to an increase of 15.1% in 1994. On
a per share basis, net income increased 7.6% to $3.41, compared to an increase
of 14.0% in 1994. The earnings growth in 1995 reflected higher net interest
income and noninterest income, offset in part by an increase in the provision
for loan losses and higher noninterest expense. The increase in 1994 was
primarily attributable to higher net interest income and noninterest income,
as well as a lower provision for loan losses. Net income, including
nonrecurring merger expenses, totaled $418.8 million or $3.25 per share in
1995, compared to $407.8 million in 1994 and $350.4 million in 1993. Net
income in 1995 was reduced by after-tax merger expenses totaling $20.0 million
or $.16 per share, and net income in 1993 was reduced by after-tax merger
expenses totaling $3.8 million or $.03 per share. Including merger expenses,
net income increased 2.7% in 1995 and 16.4% in 1994. Previously reported
financial statements of prior periods have been restated to reflect the
pooling-of-interests acquisitions which were completed in 1995. The purchase
acquisitions completed during the period had no material impact on results of
operations.
The return on average assets before nonrecurring merger expenses was 1.34%
in 1995, compared to 1.29% in 1994 and 1.21% in 1993. The return on equity was
15.88%, compared to 16.14% in 1994 and 15.42% in 1993.
Net interest income, on a fully-taxable equivalent basis, increased 1.9% in
1995 and 5.4% in 1994 due to moderate average earning asset growth, which was
partially offset by the impact of a declining net interest margin. Average
earning assets increased 4.2% in 1995 and 8.0% in 1994. The net interest
margin was 4.26% in 1995, compared to 4.35% in 1994 and 4.46% in 1993.
Noninterest income increased 10.0% in 1995 and 3.6% in 1994 primarily due
to growth in trust fees, mortgage banking revenues, credit card income and
securities gains. Excluding securities gains, noninterest income increased
8.7% in 1995.
Noninterest expense, excluding nonrecurring merger expenses, increased 1.4%
in 1995 and 1.6% in 1994, reflecting ongoing initiatives to control operating
costs. Noninterest expense in 1995 included the favorable impact of the
reduction in FDIC deposit insurance premiums, which was offset by higher levels
of financial yield maintenance and rebalancing support related to a money
market fund operated by the Corporation's trust function. Including
nonrecurring merger expenses, noninterest expense increased 3.7% in 1995 and
1.2% in 1994.
The provision for loan losses in 1995 was $46.7 million, compared to $25.3
million in 1994 and $63.9 million in 1993. Net loan charge-offs totaled $46.5
million in 1995, compared to $25.9 million in 1994 and $36.1 million in 1993,
and as a percentage of average loans were .24% in 1995, .15% in 1994 and .23%
in 1993. The increase in 1995 was primarily due to a large corporate borrower
that filed for bankruptcy, and an increase in consumer loan losses.
Presented in Table 7 is an income statement analysis expressed on a per
share basis summarizing the changes in earnings per share in 1995 and 1994.
The Corporation has three major business components: commercial and retail
banking (including a credit card operation), trust services and a mortgage
banking operation. The earnings contribution from each component for 1995 and
1994 is summarized in Tables 5 and 6.
Table 6: Earnings by Business Component
- ------------------------------------------------------
Per share<F1> 1995 1994
- ------------------------------------------------------
Commercial and
retail banking
operations (including
credit card) $3.41 $3.19
Trust services .28 .32
Mortgage banking .17 (.01)
Unallocated debt
service, administrative
overhead and
nonbank services (.45) (.33)
- ------------------------------------------------------
Consolidated
earnings per share $3.41 $3.17
======================================================
<FN>
<F1> Excludes nonrecurring merger expenses.
Table 7: Earnings Per Share Analysis
- ------------------------------------------------------
Per share '95 vs '94 '94 vs '93
- ------------------------------------------------------
Net income prior period $3.17 $2.75
- ------------------------------------------------------
Net interest income .20 .49
Provision for loan losses (.17) .30
Noninterest income .48 .17
Noninterest expense (.17) (.14)
Nonrecurring merger
expense (.16) .03
Income tax expense (.10) (.40)
Impact of additional
shares of common stock (.03)
- ------------------------------------------------------
Net increase .08 .42
- ------------------------------------------------------
Net income current
period $3.25 $3.17
======================================================
20
5
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
NET INTEREST INCOME AND INTEREST RATE RISK MANAGEMENT
Table 8: Summary of Net Interest Income
- ----------------------------------------------------------------------------------------------------------------------------------
Quarter
------------------------------------------------------- % change from
(in millions) First Second Third Fourth Year prior year
- ----------------------------------------------------------------------------------------------------------------------------------
1995
Average loans $18,924.4 $19,528.4 $19,817.3 $19,745.4 $19,507.0 9.8%
Average earning assets 28,863.7 29,442.8 29,518.1 29,539.9 29,343.5 4.2
Average core deposits 20,797.7 21,269.1 21,588.6 22,190.7 21,465.7 3.1
Average purchased funds 5,981.6 5,999.5 5,747.4 4,924.5 5,660.6 6.4
Net interest income (FTE) 304.7 309.9 313.2 320.9 1,248.7 1.9
Interest rate spread 3.58% 3.43% 3.40% 3.44% 3.46%
Net interest margin 4.28 4.22 4.21 4.31 4.26
- ----------------------------------------------------------------------------------------------------------------------------------
1994
Average loans $17,068.8 $17,596.5 $17,993.9 $18,402.5 $17,769.7 10.9%
Average earning assets 27,489.2 28,215.5 28,294.4 28,618.5 28,157.9 8.0
Average core deposits 20,976.9 20,855.5 20,700.0 20,752.2 20,820.2 1.9
Average purchased funds 4,524.4 5,401.0 5,558.4 5,788.8 5,322.3 51.2
Net interest income (FTE) 298.0 309.3 308.7 309.6 1,225.5 5.4
Interest rate spread 3.87% 3.85% 3.75% 3.66% 3.77%
Net interest margin 4.40 4.40 4.33 4.29 4.35
- ----------------------------------------------------------------------------------------------------------------------------------
1993
Average loans $14,807.7 $15,656.7 $16,099.4 $16,485.2 $16,029.4 12.1%
Average earning assets 24,720.9 25,538.1 26,199.2 26,766.9 26,066.9 9.3
Average core deposits 19,494.2 20,399.4 20,799.7 20,980.2 20,423.2 8.2
Average purchased funds 3,639.1 3,556.8 3,861.0 4,167.1 3,807.6 (.1)
Net interest income (FTE) 280.1 291.1 296.2 295.7 1,163.1 12.1
Interest rate spread 3.99% 3.99% 3.93% 3.82% 3.91%
Net interest margin 4.60 4.57 4.49 4.38 4.46
==================================================================================================================================
Net interest income, on a fully-taxable equivalent basis, increased 1.9% in
1995 and 5.4% in 1994. These increases reflected growth in average earning
assets which was partially offset by a contraction in the net interest margin.
Average earning assets increased 4.2% in 1995 and 8.0% in 1994 primarily
due to strong loan growth. Loans, the highest yielding earning asset, increased
9.8% in 1995 and 10.9% in 1994, and as a percentage of average earning assets
were 66.5% in 1995 compared to 63.1% in 1994 and 61.5% in 1993. Held to
maturity and available for sale securities decreased 7.4% in 1995 and
represented 31.2% of average earning assets, down from 35.1% in 1994 and 35.8%
in 1993. The decline in the securities portfolio reflected redeployment of
proceeds from maturing securities to the loan portfolio.
The net interest margin in 1995 was 4.26%, compared to 4.35% in 1994 and
4.46% in 1993. The decline in the net interest margin in 1995 and 1994 was
primarily due to rising short-term interest rates which caused contraction in
the net interest margin due to the Corporation's modest liability sensitive
position. As illustrated in Table 8, the net interest margin stabilized in the
third quarter of 1995 and expanded slightly in the fourth quarter. The average
yield on earning assets increased 71 basis points in 1995 and 3 basis points in
1994; however, during these same periods, the average rate paid on
interest-bearing liabilities increased 102 basis points and 17 basis points,
respectively. The funding cost in
[NET INTEREST MARGIN GRAPH]
[QUARTERLY NET INTEREST MARGIN GRAPH]
21
6
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
Table 9: Rate/Volume Analysis
- ----------------------------------------------------------------------------------------------------------------------------------
(in millions) 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
Change due to Change due to
- ----------------------------------------------------------------------------------------------------------------------------------
Total change Volume<FA> Rate<FB> Total change Volume<FA> Rate<FB>
- ----------------------------------------------------------------------------------------------------------------------------------
Interest income, fully taxable
equivalent basis
Loans $271.2 $141.4 $129.8 $157.2 $139.9 $ 17.3
Federal funds sold and securities
purchased under resale agreements 16.6 9.3 7.3 (1.7) (7.2) 5.5
Held to maturity securities:
Taxable 17.6 (10.2) 27.8 (230.1) (211.1) (19.0)
Tax-exempt (6.2) (4.0) (2.2) (2.9) (3.3) .4
Available for sale securities (4.4) (28.5) 24.1 237.6 252.9 (15.3)
Trading securities (.5) (.8) .3 (.1) (.3) .2
Short-term investments 1.0 (.3) 1.3 1.4 .7 .7
------- ------
Total interest income 295.3 86.6 208.7 161.4 152.2 9.2
- ----------------------------------------------------------------------------------------------------------------------------------
Interest expense
Savings accounts (11.1) (11.1) (3.7) 1.7 (5.4)
Interest-bearing transaction
accounts 80.2 14.0 66.2 16.7 11.0 5.7
Time deposits 118.5 16.3 102.2 (10.7) (17.4) 6.7
Federal funds purchased and other
short-term borrowings 84.0 10.0 74.0 90.9 52.7 38.2
Capital lease obligations (.1) (.1) (.1) (.1)
Long-term debt .6 (2.9) 3.5 5.9 4.6 1.3
------- ------
Total interest expense 272.1 24.4 247.7 99.0 59.9 39.1
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income, fully
taxable equivalent basis $ 23.2 $ 62.2 $(39.0) $ 62.4 $ 92.3 $ (29.9)
==================================================================================================================================
<FN>
<FA> Based on change in volume applied to prior year rate.
<FB> Based on change in rate applied to current year volume; therefore, effect
of change in rate on change in volume has been attributed to change in rate.
1995 and 1994 also reflects a shift in deposit mix from lower-cost savings
deposits to higher-cost money market deposit accounts. Purchased funds as a
percentage of average earning assets were 19.3% in 1995, 18.9% in 1994, and
14.6% in 1993. The increase from 1993 to 1994 reflected issuance of floating
rate short-term bank notes by several of the Corporation's banking
subsidiaries.
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
(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
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, and off-balance sheet instruments such as
interest rate swaps; however, 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 approximately 1%, assuming a gradual 200 basis point increase in
interest rates, and no active management of the balance sheet components in
response to the interest rate rise.
Another means of monitoring interest rate risk is the interest rate
sensitivity analysis appearing in Table 10. This analysis identifies the
repricing characteristics of the balance sheet and resulting gap or difference
between assets and liabilities repricing within and over given time periods.
It should be noted, however, that the traditional gap analysis can provide an
incomplete picture of a financial institution's interest rate risk position
due to its inability to portray the sensitivity associated with various
embedded options, such as mortgage prepayments. As such, the Corporation
generally relies on simulation modeling as its primary tool for managing
interest rate risk.
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 management action is taken, these core
22
7
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
Table 10: Rate Sensitivity at December 31, 1995
- ----------------------------------------------------------------------------------------------------------------------------------
Interest sensitive within
---------------------------------------------------------------------------------------------
0-30 31-90 91-180 181-365 Total One to Over
(in millions) days days days days one year five years five years Total
- ----------------------------------------------------------------------------------------------------------------------------------
Earning assets
Loans $ 8,113 $1,260 $1,217 $1,906 $12,496 $5,625 $ 1,642 $19,763
Securities<F1> 1,313 481 1,039 1,609 4,442 3,537 1,000 8,979
Other earning assets 1,239 1,239 1,239
- ----------------------------------------------------------------------------------------------------------------------------------
Total earning assets 10,665 1,741 2,256 3,515 18,177 9,162 2,642 29,981
Nonearning assets 3,723 3,723
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets $10,665 $1,741 $2,256 $3,515 $18,177 $ 9,162 $ 6,365 $33,704
==================================================================================================================================
Sources of funds
Noninterest bearing deposits $ 5,863 $ 5,863 $ 5,863
Retail savings and interest
bearing transaction accounts 11,027 11,027 11,027
Time deposits 1,471 1,473 1,913 1,799 6,656 2,378 8 9,042
Federal funds purchased and
other short-term borrowings 3,621 100 3,721 3,721
Long-term debt and capital
lease obligations 3 3 135 516 654
Other noninterest bearing sources 3,397 3,397
Effect of interest rate swaps (33) 481 591 (32) 1,007 (1,007)
- ----------------------------------------------------------------------------------------------------------------------------------
Total sources of funds 21,949 2,054 2,504 1,770 28,277 1,506 3,921 $33,704
- ----------------------------------------------------------------------------------------------------------------------------------
Period gap before adjustments (11,284) (313) (248) 1,745 (10,100) 7,656 2,444
- ----------------------------------------------------------------------------------------------------------------------------------
Adjustments<F2> 12,262 (865) (340) 44 11,101 (8,287) (2,814)
- ----------------------------------------------------------------------------------------------------------------------------------
Period gap after adjustments 978 (1,178) (588) 1,789 1,001 (631) $ (370)
- ----------------------------------------------------------------------------------------------------------------------------------
Cumulative gap after adjustments $ 978 $ (200) $ (788) $1,001 $ 1,001 $ 370
==================================================================================================================================
Cumulative gap as a percent
of earning assets 3.3% (.7)% (2.6)% 3.3% 3.3% 1.2%
==================================================================================================================================
<FN>
<F1> Includes held to maturity and available for sale securities.
<F2> For internal management purposes, the Corporation's gap position is
adjusted to reflect anticipated prepayments on mortgage-related assets, a
shift of a large percentage of the Corporation's administered-rate retail
deposit accounts to the one-to-five year time period, a shift of a large
percentage of the Corporation's noninterest bearing demand deposit
accounts to the one-to-five year period and the elimination of material
period-end fluctuations in daily deposit levels and short-term
borrowings. The adjustment for mortgage prepayments reflects both the
natural tendency of borrowers to prepay their loans prior to final
maturity due to non-rate factors and the financial incentive that
borrowers have to refinance their loans at the rates prevailing as of
December 31, 1995. The adjustment for the administered-rate retail
deposit accounts is based upon the Corporation's experience over the past
rate cycle where a large portion of the balances have been stable and the
rates paid on the accounts have not tracked movements in market interest
rates. The adjustment for the demand deposit accounts is based upon the
Corporation's experience over the past rate cycle where a large portion
of the balances have been stable.
banking activities, which include lending and deposit products, result in an
asset-sensitive position. Accordingly, the Corporation utilizes a variety of
discretionary on- and off-balance sheet strategies to manage the overall
interest rate sensitivity position. One such example of a recently employed
off-balance sheet strategy is the use of an auto loan securitization program.
In 1995, The Boatmen's National Bank of St. Louis filed a shelf registration
statement with the Securities and Exchange Commission providing for the
offering of up to $600 million of asset-backed certificates under an auto loan
securitization program. During the third quarter, $300 million of such
certificates were sold, thereby eliminating the interest rate risk associated
with holding these fixed-rate loans. Another off-balance sheet strategy used
by the Corporation in managing its overall interest rate sensitivity position
is the use of interest rate swaps to alter the rate sensitivity
characteristics of various assets and liabilities. Asset securitizations and
interest rate swaps are effective mechanisms to manage interest rate risk due
to the inherent advantages related to flexibility in product structure, size,
liquidity, capital and market timing. The contribution of interest rate swaps
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, $850 million of new swaps were added and $450 million matured such
that at December 31, 1995, interest rate swaps totaled $2.7 billion. The most
recent swaps were executed as a means to convert a portion of the
Corporation's variable rate bank notes to fixed rate instruments. Interest
rate swaps executed in prior years were undertaken to modify the interest rate
sensitivity of the Corpo-
23
8
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
ration's prime-based loan portfolio, converting a portion of these loans to
fixed rate instruments. Additionally, the Corporation has utilized swaps to
convert a portion of its long-term fixed rate debt to a floating rate basis.
Periodic correlation assessments are performed to ensure that the swap
instruments are effectively modifying the interest rate characteristics of the
respective balance sheet items.
As summarized in Table 11, the swap portfolio is primarily comprised of
contracts wherein the Corporation receives a fixed rate of interest while
paying a variable rate. As such, the contribution from the swap portfolio will
decrease in a rising rate environment and increase in a falling rate
environment. The average rate received at December 31, 1995, was 5.69%
compared to an average rate paid of 6.10%, and the average remaining maturity
of the total portfolio was less than one year. The variable rate component of
the interest rate swaps is based on LIBOR as of the most recent reset date.
The interest rate swaps are not leveraged in that they reset in step with rate
movements in the underlying index.
The swap portfolio decreased net interest income by approximately $14
million in 1995, resulting in a reduction in the net interest margin of
approximately 5 basis points. In 1994, the swap portfolio increased net
interest income by $15 million adding approximately 5 basis points to the
margin. Based on interest rates at December 31, 1995, it is anticipated that
the swap portfolio will reduce net interest income by approximately $5 million
in 1996 and approximately $1 million in 1997; however, it is anticipated that
these declines will be offset by a higher contribution from core banking
activities.
Table 12 provides information related to weighted average rates received
and paid, maturity profile, and fair values of the major swap programs in place
at December 31, 1995, and December 31, 1994. The estimated fair value of the
swap portfolio, based on dealer quotes, was an unrealized loss of $5.7 million
at December 31, 1995, compared to an unrealized loss of $168.5 million at
December 31, 1994. The Corporation's operating and liquidity position is not
expected to be materially impacted by the unrealized loss inherent in the swap
portfolio.
Approximately 60% 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 1.2 years, but in no event
would any component of the swap portfolio extend beyond four years. The
decision to use indexed amortizing swaps rather than some other financial
instrument is analogous to choices made between using on-balance sheet
instruments such as mortgage-backed securities and Treasury securities. While
both instruments can be effective at reducing the risk associated with the
asset sensitive profile of the core banking activities, the Corporation
frequently chooses to assume some modest extension/contraction
characteristics associated with investing in a mortgage-backed security.
Indexed amortizing swaps and mortgage-backed securities are similar in nature
in that the notional or principal values decline over time and changes in
market rates impact the degree to which the underlying instrument amortizes.
The specific indexed amortizing swaps used by the Corporation have a minimum
term which can potentially lengthen to a specified final maturity depending on
the level of movement in interest rates. While the underlying characteristics
of the specific indexed amortizing swaps used by the Corporation are similar
to on-balance sheet mortgage-backed securities, prepayment and other risk
factors are more predictable due to the structural features inherent in the
swaps. Any future utilization of off-balance sheet
Table 11: Interest Rate Swap Portfolio Activity
- ----------------------------------------------------------------------------------------------------
Receive Pay Basis
(in millions) Fixed Fixed Swaps Total
- ----------------------------------------------------------------------------------------------------
Notional amount, December 31, 1994 $2,000 $ 31 $250 $2,281
Additions 850 850
Maturities (295) (2) (153) (450)
- ----------------------------------------------------------------------------------------------------
Notional amount, December 31, 1995 $1,705 $879 $ 97 $2,681
====================================================================================================
Average remaining maturity (years) .8 .5 .2 .7
Weighted average rate received 5.54% 5.88% 6.76% 5.69%
Weighted average rate paid 6.00 6.29 6.06 6.10
====================================================================================================
Table 12: Interest Rate Swap Portfolio
- ----------------------------------------------------------------------------------------------------
Estimated
Weighted -------------------------
Average Rate
December 31, 1995 Notional -------------------- Maturity Fair
(in millions) Amount Receive Pay (years) Value
- ----------------------------------------------------------------------------------------------------
Prime loan swaps:
Receive fixed $1,505 5.62% 6.01% .8 $(2.0)
Basis swaps 97 6.76 6.06 .2 .2
- ----------------------------------------------------------------------------------------------------
Total 1,602 5.69 6.01 .8 (1.8)
Long-term debt swaps 200 4.87 5.90 .5 (.7)
Bank note liability swaps 850 5.88 6.21 .5 (2.5)
Other 29 5.89 8.81 .4 (.7)
- ----------------------------------------------------------------------------------------------------
Total $2,681 5.69% 6.10% .7 $(5.7)
====================================================================================================
Estimated
Weighted -------------------------
Average Rate
December 31, 1994 Notional -------------------- Maturity Fair
(in millions) Amount Receive Pay (years) Value
- ----------------------------------------------------------------------------------------------------
Prime loan swaps:
Receive fixed $1,800 5.59% 6.07% 2.2 $(155.6)
Basis swaps 200 5.46 5.59 1.3 (3.8)
- ----------------------------------------------------------------------------------------------------
Total 2,000 5.58 6.02 2.1 (159.4)
Long-term debt swaps 200 4.87 5.96 1.5 (8.6)
Other 81 5.97 7.24 .9 (.5)
- ----------------------------------------------------------------------------------------------------
Total $2,281 5.53% 6.06% 2.0 $(168.5)
====================================================================================================
24
9
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
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 certain
customers. Interest rate risk associated with this portfolio is controlled by
entering into offsetting positions with third parties. Including these
offsetting positions, the notional amount of the customer swap portfolio at
December 31, 1995, totaled approximately $852.2 million.
LIQUIDITY
Table 13: Earning Assets and Sources of Funds
- ----------------------------------------------------------------------------------------------------------------------------------
(average balances in millions) 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
Earning Assets Amount % of Total Amount % of total Amount % of total
- ----------------------------------------------------------------------------------------------------------------------------------
Securities<F1> $ 9,161.8 31.2% $ 9,891.9 35.1% $ 9,326.3 35.8%
Money market investments 674.7 2.3 496.3 1.8 711.2 2.7
Loans:
Commercial 10,419.1 35.5 9,182.1 32.6 8,739.5 33.5
Retail 9,087.9 31.0 8,587.6 30.5 7,289.9 28.0
- ----------------------------------------------------------------------------------------------------------------------------------
Total earning assets $29,343.5 100.0% $28,157.9 100.0% $26,066.9 100.0%
==================================================================================================================================
Sources of Funds
- ----------------------------------------------------------------------------------------------------------------------------------
Net investable demand deposits $ 3,465.7 11.8% $ 3,211.1 11.4% $ 3,019.7 11.6%
Retail core deposits:
Savings 1,864.5 6.4 2,330.1 8.3 2,265.8 8.7
Transaction accounts 8,375.3 28.5 7,808.0 27.7 7,348.0 28.2
Time 7,760.2 26.5 7,471.0 26.5 7,789.7 29.9
- ----------------------------------------------------------------------------------------------------------------------------------
Total retail core deposits 18,000.0 61.4 17,609.1 62.5 17,403.5 66.8
- ----------------------------------------------------------------------------------------------------------------------------------
Total core deposits 21,465.7 73.2 20,820.2 73.9 20,423.2 78.4
Negotiable CD's 1,266.3 4.3 1,167.0 4.1 1,272.5 4.9
Federal funds purchased and
other short-term borrowings 4,394.3 15.0 4,155.3 14.8 2,535.1 9.7
Capital, net 2,217.2 7.5 2,015.4 7.2 1,836.1 7.0
- ---------------------------------------------------------------------------------------------------------------------------------
Total sources of funds $29,343.5 100.0% $28,157.9 100.0% $26,066.9 100.0%
==================================================================================================================================
<FN>
<F1> Includes held to maturity and available for sale securities.
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 usually 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. The Corporation's auto loan
securitization and bank note programs represent additional sources of
liquidity.
As shown in Table 13, average core deposits totaled $21.5 billion for
1995, an increase of $.6 billion or 3.1% from 1994, when core deposits
increased 1.9%. The core deposit base mix has been altered as customers have
redirected balances from traditionally lower-cost savings deposits to
higher-rate money market savings accounts and retail certificates of deposit.
Average earning assets increased approximately $1.2 billion or 4.2% from 1994,
the majority of which has been funded by growth in core deposits. In 1994,
average earning assets increased $2.1 billion or 8.0%. The 1994 increase was
largely funded by growth in purchased funds. Average core deposits supported
73.2% of earning assets in 1995, compared to 73.9% in 1994 and 78.4% in 1993.
Purchased funds supported 19.3% of average earning assets compared to 18.9% in
1994 and 14.6% in 1993. Purchased funds at December 31, 1995, and December 31,
1994, included short-term bank notes which were issued by several of the
Corporation's banking subsidiaries totaling $1.3 billion and $1.6 billion,
respectively. In 1995, the Corporation's need for purchased funds was reduced
due to the proceeds received from the $300 million auto loan securitization.
In the near term, the Corporation expects earning asset growth to modestly
exceed core deposit growth, resulting in use of purchased funds at or slightly
above the present levels.
The Corporation's liquidity position is also managed by maintaining
adequate
25
10
BOATMEN'S BANCSHARES,INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
levels of liquid assets such as money market investments and available for
sale securities. At December 31, 1995, the available for sale portfolio
totaled $8.1 billion, compared to $4.2 billion at December 31, 1994. In the
fourth quarter of 1995, the Corporation reclassified approximately $4.0
billion of securities from held to maturity to available for sale in
accordance with the one-time reclassification permitted under Financial
Accounting Standards Board Special Report, "A Guide to Implementation of
Statement 115 on Accounting for Certain Investments in Debt and Equity
Securities" (SFAS Special Report). These securities, representing approximately
90% of the total securities portfolio, may be sold to meet liquidity needs or
in response to significant changes in interest rates or prepayment risks. A
more detailed discussion of the available for sale portfolio is provided in
the Securities Portfolio section of this report.
Parent Company liquidity is maintained through cash flows generated by
dividends and fees collected from subsidiaries, complemented by an active
commercial paper program and availability of credit totaling $100 million
under a revolving credit agreement. Commercial paper borrowings averaged $50
million in both 1995 and 1994. Commercial paper proceeds are generally used to
fund the Corporation's non-bank operations, with excess funds invested in
short-term instruments. The variety of funding options available and strong
cash flow provide the Corporation flexibility in selecting funding
alternatives most appropriate in the circumstances, thereby generally 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 Corporation's ability
to access the capital markets on a cost-effective basis is reflected by its
debt ratings, summarized in Table 15. 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 were no commitments for capital expenditures at December
31, 1995, which would materially impact the Corporation's liquidity position.
The Corporation's existing debt position is relatively moderate, and
projected cash flows are adequate to service this debt without additional
financing, given continued profitable operations by the Corporation's banking
subsidiaries. In 1995, Parent Company net cash provided from operations
totaled $259.6 million, which was available to pay dividends to shareholders
and support other financing and investing activities.
[AVERAGE EARNING ASSET MIX GRAPH]
[FUNDING MIX, 1995 GRAPH]
Table 14: Time Deposits $100,000 and Over
- -----------------------------------------------------------------------------------------
December 31 (in millions) 1995 1994
- -----------------------------------------------------------------------------------------
Maturing within three months $ 713.9 $1,965.7
Maturing after three months but within six months 323.2 289.2
Maturing after six months but within one year 214.1 207.2
Maturing after one year 220.7 205.0
- -----------------------------------------------------------------------------------------
Total $1,471.9 $2,667.1
=========================================================================================
Table 15: Debt Ratings
- -----------------------------------------------------------------------------------------
Standard Thomson
Agency Ratings Moody's & Poor's 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 (8 Boatmen's subsidiary banks) A1/P1 A+/A-1
=========================================================================================
26
11
BOATMEN'S BANCSHARES,INC. 1995 ANNUAL REPORT
- ------------------------------------------------------------------------------
SECURITIES PORTFOLIO
At December 31, 1995, held to maturity securities totaled $.9 billion,
compared to $5.2 billion in 1994, and consisted of securities the Corporation
has the intent and ability to hold to maturity. The held to maturity
securities at December 31, 1995, consisted primarily of tax-exempt municipal
bonds. Net market value appreciation at December 31, 1995 was $50.7 million
and included gross unrealized gains of $51.6 million and gross unrealized
losses of $.9 million. There were no sales of held to maturity securities in
1995.
In accordance with the provisions of the SFAS Special Report, the
Corporation reassessed its securities classifications and, based on this
reassessment, reclassified approximately $4.0 billion of securities from held
to maturity to available for sale at December 15, 1995. For the securities
transferred, amortized cost exceeded market value by approximately $9.3
million, resulting in an after-tax decrease to stockholders' equity of $5.8
million.
Available for sale securities at December 31, 1995 totaled $8.1
billion, compared to $4.2 billion at December 31, 1994, reflecting the
aforementioned reclassification from the held to maturity portfolio. These
securities may be sold to meet liquidity needs or in response to significant
changes in interest rates or prepayment risks. Proceeds from the sales of
available for sale securities totaled $260.8 million in 1995, and included
realized gains of $14.7 million.
At December 31, 1995, unrealized appreciation in the available for sale
portfolio was approximately $7.4 million, including gross unrealized gains of
$57.8 million and gross unrealized losses of $50.4 million. At December 31,
1994, the available for sale portfolio had unrealized depreciation of $181.7
million, including gross unrealized gains of $5.8 million and gross unrealized
losses of $187.5 million. The increase in market value from 1994 was primarily
due to the decline in interest rates, particularly as measured by the U.S.
Treasury yield curve. Approximately 34% of the available for sale portfolio is
comprised of adjustable-rate mortgage-backed securities, including
floating-rate CMOs. The remainder of this portfolio is comprised of Treasury
notes, Agency notes, fixed rate mortgage pass throughs and CMO tranches.
The average lives of the fixed rate and adjustable-rate available for sale
securities approximate 2.0 years and 5.6 years, respectively. Based on an
instantaneous yield curve increase of 200 basis points, it is estimated that
the lives of the fixed and adjustable-rate portfolios would extend to 2.6
years and 9.3 years, respectively, and the market value of the portfolio would
decline by approximately $183 million.
The amortized cost and market value of the held to maturity and available
for sale securities are presented in Tables 16 and 17, and the maturity
distribution, together with weighted average yields to maturity, is provided
in Table 19.
For comparison purposes, much of the following discussion will refer to
the held to maturity and available for sale securities in the aggregate as the
securities portfolio. At December 31, 1995, the securities portfolio totaled
$9.0 billion, compared to $9.4 billion at year end 1994. This decline largely
reflects redeployment of proceeds from maturing securities to fund growth in
the loan portfolio. Based on average balances, the securities portfolio
decreased 7.4% in 1995, compared to an increase of 6.1% in 1994. Average
securities represented 31.2% of earning assets in 1995, compared to 35.1% in
1994 and 35.8% in 1993.
The Corporation's mortgage-backed securities portfolio totaled
approximately $5.6 billion at December 31, 1995, of which approximately 87%
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. The composition of the mortgage-backed securities portfolio
at December 31, 1995 is summarized in Table 18.
The Corporation utilizes mortgage-backed securities (including CMOs) in
conjunction with other fixed income
Table 16: Held to Maturity Securities
- --------------------------------------------------------------------------------------------------------------------
Amortized Cost
December 31 (in millions) 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------
U.S. treasury $ -- $ 876.0 $ 751.3
Federal agencies:
Mortgage-backed securities:
Collateralized mortgage obligations 1,275.9 695.6
Adjustable-rate mortgages 636.0 850.1
Fixed rate pass-through 460.6 599.1
- --------------------------------------------------------------------------------------------------------------------
Total mortgage-backed 2,372.5 2,144.8
Other agencies 653.9 617.0
- --------------------------------------------------------------------------------------------------------------------
Total U.S. treasury and agencies 3,902.4 3,513.1
State and municipal 909.0 861.4 916.3
Other securities 5.7 453.2 341.7
- --------------------------------------------------------------------------------------------------------------------
Total $914.7 $5,217.0 $4,771.1
====================================================================================================================
Market Value
December 31 (in millions) 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------
U.S. treasury $ -- $ 844.8 $ 762.8
Federal agencies:
Mortgage-backed securities:
Collateralized mortgage obligations 1,171.5 691.3
Adjustable-rate mortgages 610.5 853.6
Fixed rate pass-through 435.3 607.6
- --------------------------------------------------------------------------------------------------------------------
Total mortgage-backed 2,217.3 2,152.5
Other agencies 616.4 617.1
- --------------------------------------------------------------------------------------------------------------------
Total U.S. treasury and agencies 3,678.5 3,532.4
State and municipal 959.7 880.0 993.2
Other securities 5.7 407.4 342.3
- --------------------------------------------------------------------------------------------------------------------
Total $965.4 $4,965.9 $4,867.9
====================================================================================================================
27
12
BOATMEN'S BANCSHARES,INC. 1995 ANNUAL REPORT
- ------------------------------------------------------------------------------
securities, to reduce the natural asset sensitivity of the balance sheet and
as a tool for yield enhancement. The wide range of structures, maturities and
alternative cash flows available provides the Corporation with a wide degree
of flexibility in matching the rate sensitivity of liabilities and managing
its overall interest rate sensitive position. Prepayment risk represents the
degree to which a security pays down at a faster or slower pace than
anticipated, and is a critical element to consider when purchasing
mortgage-backed securities and CMOs due to uncertainties related to the
prepayment of the underlying mortgages. 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. The
Corporation typically purchases CMO structures that have reasonably
predictable cash flow streams. Bank regulatory agencies also require financial
institutions to perform stress tests on mortgage-backed securities to
determine if the security is deemed "high risk" as defined by the regulatory
agencies. By policy, the Corporation does not purchase "high risk"
mortgage-backed securities.
The Corporation did not hold obligations of any individual state or
political subdivision for which the aggregate book value exceeded 10% of
stockholders' equity. At December 31, 1995, state and municipal securities
totaled $909.0 million, of which 88.7% were rated A or better. The
Corporation's portfolio at December 31, 1995 is summarized by quality rating
in Table 20.
Table 17: Available for Sale Securities
- --------------------------------------------------------------------------------------------------------------------
Amortized Cost
December 31 (in millions) 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------
U.S. treasury $1,369.4 $ 892.2 $1,152.6
Federal agencies:
Mortgage-backed securities:
Collateralized mortgage obligations 1,979.9 803.8 1,220.7
Adjustable-rate mortgages 2,380.7 2,106.2 2,096.2
Fixed rate pass-through 493.6 171.1 265.3
- --------------------------------------------------------------------------------------------------------------------
Total mortgage-backed 4,854.2 3,081.1 3,582.2
Other agencies 982.4 79.7 33.8
- --------------------------------------------------------------------------------------------------------------------
Total U.S. treasury and agencies 7,206.0 4,053.0 4,768.6
Equity securities 97.0 64.4 22.4
Other securities 753.4 237.3 317.3
- --------------------------------------------------------------------------------------------------------------------
Total $8,056.4 $4,354.7 $5,108.3
====================================================================================================================
Market Value
December 31 (in millions) 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------
U.S. treasury $1,381.0 $ 875.5 $1,195.8
Federal agencies:
Mortgage-backed securities:
Collateralized mortgage obligations 1,962.0 755.5 1,219.1
Adjustable-rate mortgages 2,380.5 2,008.5 2,112.7
Fixed rate pass-through 500.4 169.5 276.5
- --------------------------------------------------------------------------------------------------------------------
Total mortgage-backed 4,842.9 2,933.5 3,608.3
Other agencies 987.0 75.5 33.8
- --------------------------------------------------------------------------------------------------------------------
Total U.S. treasury and agencies 7,210.9 3,884.5 4,837.9
Equity securities 99.6 65.7 25.7
Other securities 753.3 222.8 313.4
- --------------------------------------------------------------------------------------------------------------------
Total $8,063.8 $4,173.0 $5,177.0
====================================================================================================================
Table 18: Mortgage-Backed Available for Sale Securities
- --------------------------------------------------------------------------------------------
December 31, 1995 (in millions) Market value % of total
- --------------------------------------------------------------------------------------------
Federal agencies:
Collateralized mortgage obligations $1,962.0 35.2%
Adjustable-rate mortgages 2,380.5 42.6
Fixed rate pass-through 500.4 9.0
- --------------------------------------------------------------------------------------------
Total Federal agencies 4,842.9 86.8
Private issue securities:
Collateralized mortgage obligations 623.9 11.2
Adjustable-rate mortgages 114.0 2.0
- --------------------------------------------------------------------------------------------
Total private issue securities 737.9 13.2
- --------------------------------------------------------------------------------------------
Total mortgage-backed securities $5,580.8 100.0%
============================================================================================
28
13
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
Table 19: Maturity Distribution
- ----------------------------------------------------------------------------------------------------------------------------------
Within After One But After Five But After
One Year Within Five Years Within Ten Years Ten Years
- ----------------------------------------------------------------------------------------------------------------------------------
December 31, 1995 (in millions) Amount Yield Amount Yield Amount Yield Amount Yield
- ----------------------------------------------------------------------------------------------------------------------------------
Held to maturity securities:
State and municipal<F1> $ 41.7 10.00% $ 161.8 9.30% $414.9 10.15% $ 290.6 9.19%
Other securities 1.6 6.95 4.1 5.84
==================================================================================================================================
Available for sale securities:
U.S. treasury $635.7 5.36% $ 741.6 5.89% $ 3.7 6.04%
Federal agencies:
Mortgage-backed securities:
Collateralized mortgage obligations 67.9 6.30 1,352.6 5.97 303.4 6.66 $ 238.1 5.70%
Adjustable-rate mortgages 2.9 6.54 8.7 6.12 2,368.9 7.00
Fixed rate pass-through 45.4 5.82 110.0 6.03 71.1 8.33 273.9 7.82
- ----------------------------------------------------------------------------------------------------------------------------------
Total mortgage-backed 116.2 6.12 1,471.3 5.98 374.5 6.98 2,880.9 6.97
Other agencies 121.5 5.58 681.5 6.21 111.9 5.87 72.1 7.04
- ----------------------------------------------------------------------------------------------------------------------------------
Total U.S. treasury and agencies 873.4 5.49 2,894.4 6.01 490.1 6.72 2,953.0 6.97
Other securities<F2> 37.2 6.44 391.8 6.59 209.6 7.11 114.7 7.43
==================================================================================================================================
<FN>
<F1> Yields on tax-exempt obligations are computed on a tax equivalent basis,
using a tax rate of 35%.
<F2> Excludes marketable equity securities, Federal Reserve Bank and Federal
Home Loan Bank stock, which have no stated maturities.
Table 20: Ratings of State and Municipal Securities
- -------------------------------------------------------------------------------
December 31, 1995 (in millions)
Ratings Book Value Percent of Total
- -------------------------------------------------------------------------------
Aaa $536.7 59.0%
Aa 106.8 11.7
A 163.3 18.0
Below A rated 7.9 .9
Not rated 94.3 10.4
- -------------------------------------------------------------------------------
Total $909.0 100.0%
===============================================================================
NONINTEREST INCOME
Table 21: Trust Fees by Component
- -------------------------------------------------------------------
(in millions) 1995 1994 1993
- -------------------------------------------------------------------
Personal trust $105.2 $ 99.9 $ 90.3
Pension and
institutional 56.0 50.8 57.0
Corporate trust 12.0 12.0 12.1
Mutual funds 4.0 2.2
- -------------------------------------------------------------------
Total $177.2 $164.9 $159.4
===================================================================
Noninterest income increased 10.0% in 1995 and 3.6% in 1994, primarily
due to growth in trust fees, mortgage banking revenues, credit card income and
securities gains. Noninterest income as a percentage of operating revenues
improved to 35.1% from 33.4% in 1994 and 33.8% in 1993. Revenue per full-time
equivalent employee increased 8.0% in 1995.
Trust fees increased 7.4% in 1995 and 3.5% in 1994. The increase in 1995
was primarily due to growth in pension/institutional and new personal trust
business, coupled with an increase in market values of trust assets on which
some fees are based. The increase in 1994 reflected growth in personal trust
business, partially offset by a decline in pension/institutional fees. Table
21 summarizes the major components of trust revenues. Trust assets under
management totaled $44.4 billion at December 31, 1995, compared to $37.4
billion at December 31, 1994, and $36.5 billion at December 31, 1993.
Service charge income increased 2.2% in 1995 and 5.6% in 1994, reflecting
growth in retail deposit 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 in the form of
deposit balance maintenance in lieu of fees. Credit card income increased
11.5% in 1995 and 33.5% in 1994, primarily due to growth in cardholder
revenues, as well as increases in merchant-related fees due to new merchant
business and higher credit card sales volume. Investment banking revenues
decreased 6.6% in 1995 and 9.9% in 1994, primarily due to a reduction in the
sales volume of various retail brokerage products.
Mortgage banking revenues increased 29.6% in 1995, compared to a decrease
of 11.6% in 1994. Mortgage banking revenues in 1995 include a $7.9 million
gain recognized on the sale of approximately $700 million of mortgage
servicing. In the second quarter of 1995, the Corporation adopted Statement of
Financial Accounting Standards No. 122 (SFAS 122), "Accounting for Mortgage
Servicing Rights." SFAS 122 requires capitalization
29
14
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
Table 22: Summary of Noninterest Income
- --------------------------------------------------------------------------------------------------------------------
% change
------------------------
(in millions) 1995 1994 1993 '95-'94 '94-'93
- --------------------------------------------------------------------------------------------------------------------
Trust fees $177.2 $164.9 $159.4 7.4% 3.5%
Service charges 190.8 186.8 176.9 2.2 5.6
Mortgage banking revenues 78.6 60.7 68.6 29.6 (11.6)
Credit card 49.8 44.6 33.4 11.5 33.5
Investment banking revenues 35.3 37.8 41.9 (6.6) (9.9)
- --------------------------------------------------------------------------------------------------------------------
Core business revenues 531.7 494.8 480.2 7.5 3.0
- --------------------------------------------------------------------------------------------------------------------
Securities gains, net 14.7 6.2 8.3 137.4 (25.7)
Other 130.0 114.1 105.0 13.9 8.7
- --------------------------------------------------------------------------------------------------------------------
Other revenues 144.7 120.3 113.3 20.2 6.2
- --------------------------------------------------------------------------------------------------------------------
Total noninterest income $676.4 $615.1 $593.5 10.0% 3.6%
====================================================================================================================
As % of operating income (net
interest income [FTE] plus noninterest income) 35.1% 33.4% 33.8%
Revenue per full-time equivalent employee
(in thousands) $113.7 $105.3 $101.4
====================================================================================================================
of purchased mortgage servicing rights as well as internally originated
mortgage servicing rights. Adoption of SFAS 122 increased mortgage banking
revenues in 1995 by approximately $5.8 million, net of amortization. At
December 31, 1995, mortgage servicing rights totaled $65.7 million. Mortgage
servicing rights are stratified by loan type and interest rate for purposes of
impairment measurement. An impairment loss is recognized to the extent the
unamortized mortgage servicing right for each stratum exceeds the current
market value. During 1995, no impairment valuation writedowns were required.
Table 23 summarizes the components of mortgage banking revenues.
Securities gains in 1995 totaled $14.7 million, compared to $6.2 million
in 1994 and $8.3 million in 1993. Much of the gains recognized in 1995 and
1994 reflected sales of equity securities by the Corporation's trust
subsidiary. Other noninterest income increased $15.9 million in 1995 and $9.1
million in 1994. The 1995 increase was attributable to a $4.9 million gain on
the sale of an ownership interest in a regional electronic funds transfer
network and gains recognized from the sale of surplus branch locations. Other
noninterest income in 1995 was also supplemented by higher gains on sales of
student loans, investment appreciation of bank-owned life insurance, and
increased revenue from debit cards and syndication fees. Other noninterest
income in 1994 included a $4 million gain from the sale of the former Union of
Arkansas Corporation's headquarters building.
[NONINTEREST INCOME GRAPH]
Table 23: Summary of
Mortgage Banking Revenues
- --------------------------------------------------------------------
(in millions) 1995 1994 1993
- --------------------------------------------------------------------
Servicing fees<F1> $53.4 $54.1 $42.4
Origination fees 5.8 6.4 10.3
Late fees 10.1 9.3 10.3
Gains (losses) on
sales of loans 1.4 (9.1) 5.6
Gain on sale of
mortgage
servicing
rights 7.9
- --------------------------------------------------------------------
Total $78.6 $60.7 $68.6
====================================================================
<FN>
<F1> Net of mortgage servicing rights amortization.
30
15
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
NONINTEREST EXPENSE
Table 24: Summary of Noninterest Expense
- --------------------------------------------------------------------------------------------------------------------
% change
------------------------
(in millions) 1995 1994 1993 '95-'94 '94-'93
- --------------------------------------------------------------------------------------------------------------------
Staff expense $ 597.2 $ 590.7 $ 568.5 1.1% 3.9%
Occupancy 80.2 83.0 88.2 (3.4) (5.9)
Equipment 95.7 93.4 89.6 2.4 4.2
FDIC insurance 31.2 52.9 52.0 (41.1) 1.8
Credit card 14.6 16.7 13.4 (12.6) 24.6
Printing, postage, paper 48.3 47.5 45.3 1.7 4.9
Intangible amortization 33.6 35.2 36.3 (4.5) (3.0)
Professional fees 23.6 26.4 27.2 (10.6) (2.9)
Federal Reserve processing charges 10.4 10.7 10.7 (2.8)
Advertising 34.0 33.5 31.7 1.6 5.7
Communications 27.5 24.9 21.0 10.4 18.6
Foreclosed property costs, net 3.0 -- 2.0
Other 199.7 141.8 157.1 40.8 (9.7)
- --------------------------------------------------------------------------------------------------------------------
Total noninterest expense $1,199.0 $1,156.7 $1,143.0 3.7% 1.2%
====================================================================================================================
Efficiency ratio (noninterest expense as % of
noninterest income and net interest income [FTE]) 62.3% 62.8% 65.1%
Efficiency ratio excluding nonrecurring merger
expenses 60.9 62.8 64.8
Staff expense as % of total noninterest expense 49.8 51.1 49.7
Number of full-time equivalent employees at
year end 17,023 17,165 17,722
====================================================================================================================
Noninterest expense increased 3.7% in 1995 and 1.2% in 1994. Noninterest
expense levels in 1995 and 1993 include nonrecurring merger expenses totaling
approximately $26.0 million and $4.7 million, respectively, consisting of
investment banking and other professional fees, severance costs, obsolete
equipment write-offs and estimated costs to close duplicate branches.
Excluding merger expenses, noninterest expense increased 1.4% in 1995 and 1.6%
in 1994, reflective of ongoing initiatives to control operating expenses. The
efficiency ratio before merger expenses improved to 60.9% in 1995, compared to
62.8% in 1994 and 64.8% in 1993.
Staff expense, which represents approximately 50% of total noninterest
expense, increased 1.1% in 1995 and 3.9% in 1994. At December 31, 1995, the
number of full-time equivalent employees declined to 17,023, compared to
17,165 in 1994 and 17,722 in 1993 as certain operating functions were
consolidated and centralized, and excess staffing from acquisitions was
eliminated.
Occupancy expense decreased 3.4% in 1995 and 5.9% in 1994, primarily the
result of lower leasehold expense after renegotiation of leases on several
major properties. Equipment expense increased 2.4% in 1995 and 4.2% in 1994
primarily due to capital expenditures for upgraded computer systems and
software to support trust and retail banking expansion.
FDIC insurance expense totaled $31.2 million in 1995, a decrease of 41.1%,
compared to $52.9 million in 1994 and $52.0 million in 1993. In the second
quarter of 1995, the FDICreduced the rate paid by most financial institutions
from 23 cents to 4 cents per $100 of insured deposits and, effective January
1996, the rate was reduced to a $2,000 minimum per bank. Congress is
considering proposals to recapitalize the Savings Association Insurance Fund
(SAIF), including a one-time levy on all SAIFinsured deposits. The Corporation
currently has approximately $3 billion of such deposits. The net effect of the
revised FDIC fees and SAIF proposals is not expected to have a material effect
on the Corporation's future results of operations.
Other noninterest expense increased $57.9 million in 1995 to $199.7
million, compared to $141.8 million in 1994 and $157.1 million in 1993. The
increase in 1995 is primarily attributable to the aforementioned nonrecurring
merger expenses recognized in the first half of 1995, higher levels of
uninsured losses, higher reserves for litigation and higher levels of
financial yield maintenance and rebalancing support related to a money market
fund operated by the Corporation's trust function. In 1994 and 1995, the
Corporation's trust subsidiary waived a portion of its investment management
fees on its short-term money market fund, provided yield maintenance to
provide a competitive yield to investors; and provided support to rebalance
the fund after the sale of certain fund investments. Substantial changes have
been made to the size and yield of the fund and any additional financial
support to this fund is expected to be minimal.
[NONINTEREST EXPENSE GRAPH]
31
16
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- ------------------------------------------------------------------------------
TAXES
The Corporation's effective tax rate was 35.0% in 1995, 34.4% in 1994 and
31.6% in 1993. 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 half 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 in
1995 was 34.6%. 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.
LOAN PORTFOLIO
Table 25: Summary of Loan Portfolio
- -------------------------------------------------------------------------------------------------------------------
December 31 (in millions) 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------
Commercial $ 9,623.2 $ 8,767.1 $ 8,384.7 $ 7,809.4 $ 7,133.5
Real estate mortgage 3,747.6 3,629.0 3,699.2 3,193.5 3,277.7
Real estate construction 921.6 868.3 683.2 478.5 506.5
Consumer 5,344.4 5,302.1 4,178.0 3,500.7 3,048.0
Lease financing 169.2 136.8 96.6 88.3 95.5
- -------------------------------------------------------------------------------------------------------------------
Total domestic loans 19,806.0 18,703.3 17,041.7 15,070.4 14,061.2
Foreign loans 20.9 19.1 18.1 11.9 12.7
- -------------------------------------------------------------------------------------------------------------------
Total loans, before deduction of
unearned income 19,826.9 18,722.4 17,059.8 15,082.3 14,073.9
Less unearned income 63.7 66.9 69.1 75.1 92.9
- -------------------------------------------------------------------------------------------------------------------
Total loans, net of unearned income $19,763.2 $18,655.5 $16,990.7 $15,007.2 $13,981.0
===================================================================================================================
At December 31, 1995, loans totaled $19.8 billion, an increase of 5.9%
over December 31, 1994. Based on average balances, loans increased 9.8% in
1995 and 10.9% in 1994. Loan growth from December 31, 1994, was primarily due
to a 9.8% increase in commercial loans and reflected middle-market loan growth
as well as increases in loans to Fortune 1000 companies. Adjusting for the
effect of $300 million of loans sold through an auto loan securitization
program in the third quarter of 1995, consumer loans increased 6.5% in 1995,
largely the result of increased indirect auto loans. Loan growth experienced
in 1994 was primarily due to growth in both the consumer and commercial loan
portfolios.
The majority of the Corporation's loans are made within its natural trade
territory. The portfolio is highly diversified with originations stemming from
the Corporation's nine state area, and the portfolio is well balanced between
wholesale and consumer lending. The Corporation's geographic profile provides
significant credit and economic risk diversification as the Corporation is not
solely dependent on any major market. All of the Corporation's major markets
are currently experiencing satisfactory economic conditions and unemployment
rates within these markets are in line with national averages. Table 27
provides some pertinent economic data on markets within the Corporation's
nine-state operating region, and Table 26 summarizes the loan portfolio by
banking location. Table 28 presents the major loan classifications based upon
Management's internal classification criteria. In addition, Table 36
summarizes the nonperforming asset trends experienced throughout the
Corporation's regions over the last three years.
The section that follows addresses specific risk elements and credit
administration practices related to the major components of the loan
portfolio.
Commercial Loans
The Corporation's commercial loan portfolio, excluding commercial real
estate, totaled $6.6 billion at December 31, 1995, representing approximately
Table 26: Loan Portfolio Distribution
- -------------------------------------------------------------------------------------------------------
December 31, 1995 December 31, 1994 December 31, 1993
- -------------------------------------------------------------------------------------------------------
% of % of % of
Total Total Total
(in millions) Amount<F1> Loans Amount<F1> Loans Amount<F1> Loans
- -------------------------------------------------------------------------------------------------------
Missouri $10,524.2 53.3% $ 9,908.4 53.1% $ 9,265.7 54.5%
Arkansas 2,745.8 13.9 2,430.2 13.0 2,088.6 12.3
New Mexico 1,447.3 7.3 1,430.2 7.7 1,375.9 8.1
Texas 1,087.6 5.5 964.4 5.2 895.0 5.3
Oklahoma 1,013.4 5.1 1,062.3 5.7 946.9 5.6
Illinois 788.4 4.0 715.4 3.8 613.9 3.6
Tennessee 784.1 4.0 754.8 4.1 611.8 3.6
Iowa 718.1 3.6 729.3 3.9 639.8 3.8
Kansas 112.6 .6 114.4 .6 75.6 .4
Credit card 541.7 2.7 546.1 2.9 477.5 2.8
- -------------------------------------------------------------------------------------------------------
Total $19,763.2 100.0% $18,655.5 100.0% $16,990.7 100.0%
=======================================================================================================
<FN>
<F1> Net of unearned income.
32
17
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
33.2% of the total portfolio compared to 30.5% in 1994. The Corporation's
objective is to control credit risk within the commercial loan portfolio
through geographic diversification and adherence to stringent credit
administration policies that limit industry concentrations and establish
lending authority and borrower limits. Within the commercial loan portfolio
there are no concentrations of credits to any borrower or industry in excess
of 5% of total loans, and the portfolio is primarily comprised of middle
market loans to customers within the Corporation's nine state operating
region. At December 31, 1995, middle-market commercial loans represented 22.5%
of the total loan portfolio and loans to Fortune 1000 companies comprised 5.7%
of total loans. Loans to middle-market companies, as a general rule, are made
on a secured basis, with personal guarantees and loan covenants appropriate to
the individual credit. These loans are to a diversified group of borrowers
conducting business in the Corporation's immediate market area, predominately
in the manufacturing, wholesale distribution and services industries. Loans to
Fortune 1000 companies and other large corporate borrowers are made on a
secured and unsecured basis depending on the risk assessment of the specific
borrowers. The composition of the commercial loan portfolio and level of
industry concentrations is reflected in Table 30. The Corporation's legal
lending limit to any individual borrower is in excess of $400 million.
However, at December 31, 1995, of the Corporation's five largest borrowers,
there was only one relationship with aggregate outstandings in the $50-$75
million range and four borrowers with aggregate outstandings in the $40-$49
million range.
[LOAN PORTFOLIO GRAPH]
Table 27: Economic Statistics
- --------------------------------------------------------------------------------------------------------------
Unemployment
Rates Growth in Real Building Permits
------------------ Personal Income 1995 Office % Change
(in millions) 1995 1994 1995 vs. 1994 Vacancy Rates<F1> 1995 vs. 1994
- --------------------------------------------------------------------------------------------------------------
Missouri 4.0% 4.3% 6.4% 11.7% (9.3)%
New Mexico 6.2 5.9 7.9 6.3 (3.4)
Oklahoma 4.9 5.4 4.1 21.2 (4.5)
Texas 6.2 6.0 6.6 (2.7)
Iowa 3.2 3.2 5.0 11.3 (11.4)
Tennessee 5.2 3.8 6.4 14.5 (4.9)
Illinois 4.8 4.2 6.3 (4.8)
Arkansas 4.9 5.0 5.8 9.8 (6.1)
Kansas 4.0 5.0 6.1 (9.5)
==============================================================================================================
National average 5.5% 5.4% 5.8% 14.7% (5.0)%
==============================================================================================================
<FN>
<F1> Office vacancy rates in metropolitan areas within major banking markets.
Table 28: Composition of Loan Portfolio
- --------------------------------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------------------------------
% of % of % of
Total Total Total
(in millions) Amount Loans Amount Loans Amount Loans
- --------------------------------------------------------------------------------------------------------
Real estate:
1-4 family residential $ 3,747.6 18.9% $ 3,629.0 19.4% $ 3,699.2 21.7%
Land acquisition 215.4 1.1 246.8 1.3 218.3 1.3
Residential construction 287.1 1.4 274.9 1.5 209.0 1.2
Commercial construction 419.1 2.1 346.6 1.8 255.9 1.5
Commercial real estate 2,953.3 14.9 2,996.9 16.0 2,814.8 16.5
Mini-perms 95.4 .5 75.5 .4 107.2 .6
- --------------------------------------------------------------------------------------------------------
Total real estate 7,717.9 38.9 7,569.7 40.4 7,304.4 42.8
Commercial loans to
Fortune 1,000 companies
and other large
corporate borrowers 1,127.0 5.7 816.3 4.4 712.9 4.2
Middle market commercial 4,463.2 22.5 4,003.0 21.4 3,830.2 22.4
Bank stock loans 187.0 1.0 218.4 1.2 232.4 1.4
Agriculture 797.3 4.0 657.0 3.5 687.2 4.0
Consumer:
Home equity 491.1 2.5 423.2 2.3 397.1 2.3
Credit card 541.7 2.7 546.1 2.9 477.5 2.8
Indirect installment 2,723.2 13.7 2,711.5 14.5 1,979.0 11.6
Installment 1,588.4 8.0 1,621.3 8.6 1,324.4 7.8
- --------------------------------------------------------------------------------------------------------
Total consumer 5,344.4 26.9 5,302.1 28.3 4,178.0 24.5
Lease financing 169.2 .9 136.8 .7 96.6 .6
Foreign 20.9 .1 19.1 .1 18.1 .1
- --------------------------------------------------------------------------------------------------------
Total loans $19,826.9 100.0% $18,722.4 100.0% $17,059.8 100.0%
========================================================================================================
Table 29: Commercial and Real Estate Construction Maturity Distribution
- ----------------------------------------------------------------------------------------------
December 31, 1995 Over 1 Year
(in millions) One Year or Less Through 5 Years Over 5 Years Total
- ----------------------------------------------------------------------------------------------
Commercial $5,520.5 $3,422.4 $680.3 $ 9,623.2
Real estate construction 600.4 251.1 70.1 921.6
- ----------------------------------------------------------------------------------------------
Total $6,120.9 $3,673.5 $750.4 $10,544.8
==============================================================================================
33
18
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
Credit risk associated with the commercial portfolio is primarily
influenced by economic conditions and the level of underwriting risk
the Corporation is willing to assume. A primary focus in managing risk when
extending credit is to adequately assess the borrower's capacity to repay and
to follow proper collateral protection policies. The Corporation has
consistently adhered to conservative underwriting standards as evidenced by
its ability to avoid the severe credit losses many other financial
institutions experienced in the late 1980's/early 1990's in lending to foreign
countries, highly leveraged industries and the energy sector. The
Corporation's credit culture is quickly
infused into newly acquired financial institutions and is one of the major
priorities of the acquisition integration process.
The commercial and real estate construction loan portfolio maturity
distribution at December 31, 1995, under standard financial reporting
definitions, is summarized in Table 29. Commercial and real estate
construction loans due after one year totaled $4.4 billion of which $2.1
billion have floating or adjustable rates.
Commercial Real Estate
This lending category consists primarily of commercial real estate,
residential construction, commercial construction and land acquisition loans.
At December 31, 1995, commercial real estate loans totaled $4.0 billion,
representing approximately 20.0% of total loans, compared to 21.0% at December
31, 1994. Table 31 displays the composition of the real estate portfolio by
property type and carrying status. The Corporation closely monitors the
composition and quality of the commercial 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 among 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 one third of the commercial real estate portfolio is comprised
of owner occupied properties--such as manufacturing facilities for middle
market borrowers--for which the primary source of repayment is not entirely
dependent on the real estate market.
Consumer Loans
The consumer loan category consists primarily of direct and indirect
install-
Table 30: Commercial Industry Concentration
- ----------------------------------------------------------------------------
% of Total % of
December 31, 1995 Commercial Loans<F1> Total Loans
- ----------------------------------------------------------------------------
Manufacturing:
Metal, machinery and fabrication 4.5% 1.5%
Food products 2.7 .9
Chemical, rubber and petroleum 1.5 .5
Printing and paper 2.2 .7
All other manufacturing 5.8 1.9
Services:
Health care 3.9 1.3
Amusement/recreation 1.5 .5
All other services 9.6 3.2
Finance, insurance, real estate 12.3 4.1
Retail trade:
Retail (non-auto) 7.8 2.6
Retail auto 1.3 .4
Agriculture, forestry and fishing 12.1 4.0
Wholesale trade--durable goods 7.0 2.3
Wholesale trade--non-durable goods 5.1 1.7
Individual personal loans 8.6 2.9
Transportation 3.0 1.0
Construction 2.8 .9
Communication 2.7 .9
Public administration and other 2.6 .9
Other 3.0 1.0
- ----------------------------------------------------------------------------
Total 100.0% 33.2%
============================================================================
<FN>
<F1> Excluding commercial real estate
Table 31: Construction, Mini-Perm and Mortgage Loans
- --------------------------------------------------------------------------------------
December 31, 1995 Nonperforming
(in millions) Performing Nonperforming Total as % of Total
- --------------------------------------------------------------------------------------
Commercial real estate:
Multifamily $ 513.8 $ 3.3 $ 517.1 .64%
Office/showroom 891.4 10.1 901.5 1.12
Industrial/warehouse 447.3 4.5 451.8 1.00
Retail strip 275.1 2.3 277.4 .83
Retail, other 375.2 12.6 387.8 3.25
Lodging 351.3 5.2 356.5 1.46
Land 245.2 4.6 249.8 1.84
Residential construction 283.3 3.8 287.1 1.32
Other 534.9 6.4 541.3 1.18
- --------------------------------------------------------------------------------------
Total commercial real estate 3,917.5 52.8 3,970.3 1.33
1-4 family residential 3,724.7 22.9 3,747.6 .61
- --------------------------------------------------------------------------------------
Total real estate $7,642.2 $75.7 $7,717.9 .98%
======================================================================================
34
19
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- ------------------------------------------------------------------------------
ment, credit card, and home equity lending. At December 31, 1995, consumer
loans totaled $5.3 billion, representing approximately 26.9% of total
loans, compared to 28.3% at December 31, 1994. Credit risk in each of these
lending categories is controlled through automated credit scoring techniques
and consistent adherence to conservative underwriting standards that consider
debt to income levels and, where applicable, loan to value ratios. In the home
equity category, loan to value ratios generally are limited to 80% of
collateral value. In certain markets higher loan to value ratios are
permitted; however, in these situations the Corporation obtains additional
credit protection from third party insurance providers. Installment loans,
both indirect and direct are subject to similar underwriting standards.
Approximately 63% of the installment category is comprised of indirect paper
of which over 90% are automobile loans. The remainder of the indirect
installment category is primarily limited to marine and home improvement
paper.
Growth in installment lending has occurred through direct originations
made available through the Corporation's extensive branch banking network and
through expansion of the indirect lending program. A primary source for the
indirect automobile loan production is a referral program negotiated with a
major insurance carrier whose customer base has a good credit scoring profile,
resulting in lower delinquencies and charge-offs than that typically
experienced from traditional indirect sources.
Credit card outstandings totaled $541.7 million at December 31, 1995,
representing approximately 2.7% of total loans. The Corporation is not a
participant in pre-approved nationwide mass marketing programs, rather,
marketing efforts target further penetration of its existing customer base.
1-4 Family Residential Loans
The 1-4 family residential loan portfolio totaled $3.7 billion at
December 31, 1995, and represented 18.9% of the total loan portfolio compared
to 19.4% at December 31, 1994. Risk exposure in this area is minimized through
underwriting policies that specify conservative loan to value ratios of
generally no more than 80%, coupled with a diversified geographic base that
naturally protects the Corporation from excessive concentrations in any given
market. In addition, the majority of the fixed-rate, long-term production is
sold in the secondary market through the Corporation's mortgage banking
subsidiary.
LOAN QUALITY
The provision for loan losses totaled $46.7 million in 1995, compared to
$25.3 million in 1994 and $63.9 million in 1993. The provision for loan losses
was increased in 1995 due to higher net charge-offs and to maintain loan
reserve coverage at acceptable levels during a period of strong loan growth.
At December 31, 1995, the reserve for loan losses represented 229% of
nonperforming loans compared to 277% at December 31, 1994 and 195% at December
31, 1993. The reserve for loan losses as a percentage of net loans was 1.94%
compared to 2.02% at December 31, 1994 and 2.21% at December 31, 1993. Net
charge-offs in 1995 increased to $46.5 million, from $25.9 million in 1994 and
$36.1 million in 1993. The increase in net charge-offs in 1995 reflected an
increase in commercial loan losses, which was the result of a $10 million
charge-off of one large commercial credit, and increases in credit card and
installment loan losses. Excluding the $10 million commercial charge-off, the
Corporation had net recoveries in the commercial loan category in 1995. Net
charge-off levels over the last three years continued to be well below
historical trends and as a percentage of loan losses were .24% in 1995,
compared to .15% in 1994 and .23% in 1993. As a percentage of average
installment loans, loan losses in the installment sector were .54% compared to
.30% in 1994, and credit card net charge-offs as a percentage of related
outstandings were 3.63% compared to 2.50% in 1994.
The reserve for loan losses represents the aggregate reserves of the
Corporation's banking subsidiaries. Loans which are determined to be
uncollectible are charged against the reserve and recoveries of loans which
were previously charged off are credited to the reserve. The charge-off policy
of the Corporation's banking subsidiaries varies with respect to the category
of and specific circumstances surrounding each loan under consideration. The
Corporation's general policy with respect to consumer loans is to charge off
all such loans when deemed to be uncollectible or 120 days past due, whichever
comes first. With respect to commercial, real estate, and other loans,
charge-offs are made on the basis of management's ongoing evaluation of
nonperforming and criticized loans. In addition, loans which are classified as
"loss" in regulatory examinations are charged off.
The provision for loan losses is sufficient to provide for current loan
losses and maintain the reserve at an adequate level commensurate with
management's evaluation of the risk inherent in the loan portfolio. In order
to identify potential risks in the loan portfolios of the subsidiary banks,
detailed risk assessment procedures are in place at the local bank level with
oversight provided by the Corporation's credit administration function. In
assessing risk, detailed information is obtained from the following sources:
* Internal risk ratings which are assigned to all individual loans (other
than 1-4 family residential and consumer loans). For loans which contain other
than the normal risk of collectibility, the ratings correspond to the
classifications utilized by the regulatory agencies for criticized loans
(Special Mention, Substandard, Doubtful, Loss). Criticized loan totals and the
trend thereof are reviewed monthly for all banking subsidiaries;
* Monthly reports prepared by each subsidiary bank's senior management
personnel which contain information on
[LOAN LOSS EXPERIENCE GRAPH]
35
20
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- ------------------------------------------------------------------------------
the overall characteristics of the subsidiary loan portfolio and analyses of
specific loans requiring special attention, including nonperforming and
certain criticized loans;
* Quarterly reviews of selected individual loans and loan concentrations
of the larger banking subsidiaries by senior credit administration personnel
of the Corporation;
* Examination of the loan portfolio by Federal and State regulatory
agencies; and
* Examinations, reviews, and risk assessments performed by the
Corporation's internal loan review function and independent auditors.
The data collected from these sources are evaluated with regard to current
national and local economic trends, prior loss history, underlying collateral
values, credit concentrations, industry risk, degree of off-balance sheet
risk, and the opinion of the subsidiary bank and corporate management. An
estimate of potential future loss on specific loans is developed in
conjunction with an overall risk evaluation of the total loan portfolio. In
addition, another key statistical measure used by management in establishing
loan reserves is the reserve coverage of nonperforming loans. As a matter of
general policy, the Corporation's objective is to maintain the loan reserve at
levels above 100% of nonperforming loans, although temporary deviations from
this standard may occur as situations warrant.
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 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. SFAS 114 and SFAS 118 do not apply to smaller balance, homogenous
loans, which the Corporation has identified as consumer loans, such as home
equity, credit card, installment and 1-4 family residential loans. At December
31, 1995, the recorded investment in loans that are considered to be impaired
under SFAS 114 and SFAS 118 totaled approximately $125.9 million and consisted
of nonaccrual and restructured commercial, commercial real estate, and real
estate construction loans. At December 31, 1995, the reserve for loan losses
included approximately $1.8 million allocated to $8.6 million of impaired
loans. The Corporation's recognition of income was not impacted by adoption of
SFAS 114 and SFAS 118. For 1995, impaired loans averaged $93.5 million and
cash basis interest recognition on these loans, during the time that they were
impaired, totaled less than $1 million.
The loan reserve allocation provided in Table 33 is based primarily on
analysis of prior loss experience and present and anticipated volume levels by
individual categories, and on management's evaluation of prevailing economic
conditions as they may affect segments of the portfolio. Accordingly, since
each of these criteria is subject to change, the allocation of the reserve is
not necessarily indicative of the trend of future loan losses in any
particular loan category.
Table 32: Summary of Reserve for Loan Losses
- -------------------------------------------------------------------------------------------------
(in millions) 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------
Balance, beginning of year $376.6 $376.3 $334.7 $285.8 $262.5
Loans charged off:
Domestic:
Commercial (26.1) (27.2) (34.3) (52.8) (42.7)
Real Estate:
Commercial real estate (2.0) (3.9) (8.3) (36.7) (26.4)
Construction (.3) (.8) (1.8) (11.6) (15.9)
1-4 family residential (1.8) (3.8) (4.5) (7.6) (6.2)
Consumer:
Credit card (22.1) (14.9) (11.3) (11.3) (10.1)
Other (35.8) (22.1) (20.2) (25.6) (34.8)
- -------------------------------------------------------------------------------------------------
Total charge-offs (88.1) (72.7) (80.4) (145.6) (136.1)
- -------------------------------------------------------------------------------------------------
Recoveries on loans
previously charged off:
Domestic:
Commercial 17.4 25.6 21.2 17.9 11.5
Real estate:
Commercial real estate 4.6 4.7 6.5 3.4 3.3
Construction 1.9 1.3 2.0 1.0 1.7
1-4 family residential 1.8 1.8 1.6 1.3 1.0
Consumer:
Credit card 3.3 2.5 1.7 1.8 1.6
Other 12.6 10.9 11.3 12.2 12.7
- -------------------------------------------------------------------------------------------------
Total recoveries 41.6 46.8 44.3 37.6 31.8
- -------------------------------------------------------------------------------------------------
Net charge-offs (46.5) (25.9) (36.1) (108.0) (104.3)
- -------------------------------------------------------------------------------------------------
Provision for loan losses 46.7 25.3 63.9 139.5 118.0
Loan reserve from acquisitions 6.2 .9 13.8 17.4 9.6
- -------------------------------------------------------------------------------------------------
Balance, end of year $383.0 $376.6 $376.3 $334.7 $285.8
=================================================================================================
Loan reserve at end of year:
% of net loans at year end 1.94% 2.02% 2.21% 2.23% 2.04%
% of nonperforming loans 228.62 277.06 195.08 119.66 84.13
Multiple of net charge-offs 8.24x 14.56x 10.42x 3.10x 2.74x
Net charge-offs during year:
% of net loans at year end .24% .14% .21% .72% .75%
% of net loans (average) .24 .15 .23 .75 .77
% of reserve at year end 12.14 6.87 9.59 32.27 36.49
=================================================================================================
36
21
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
Table 33: Loan Reserve Allocation
- ----------------------------------------------------------------------------------------------------------------------------------
December 31
----------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
----------------------------------------------------------------------------------------------------
Loans Loans Loans Loans Loans
as % of as % of as % of as % of as % of
Loan Total Loan Total Loan Total Loan Total Loan Total
(amounts in millions) Reserve Loans Reserve Loans Reserve Loans Reserve Loans Reserve Loans
- ----------------------------------------------------------------------------------------------------------------------------------
Domestic:
Commercial $209.3 48.6% $199.3 46.9% $198.3 49.1% $176.3 51.8% $148.2 50.7%
Real estate mortgage 54.2 18.9 53.7 19.4 52.4 21.7 48.7 21.1 40.7 23.3
Real estate construction 30.5 4.6 34.1 4.6 33.4 4.0 30.2 3.2 23.3 3.6
Consumer 53.5 26.9 47.3 28.3 44.4 24.5 38.4 23.2 32.2 21.6
Lease financing 1.1 .9 1.0 .7 1.0 .6 .6 .6 .5 .7
Not allocated 34.4 41.2 46.8 40.5 40.9
- ----------------------------------------------------------------------------------------------------------------------------------
Total domestic 383.0 99.9 376.6 99.9 376.3 99.9 334.7 99.9 285.8 99.9
Foreign .1 .1 .1 .1 .1
- ----------------------------------------------------------------------------------------------------------------------------------
Total reserve for loan losses $383.0 100.0% $376.6 100.0% $376.3 100.0% $334.7 100.0% $285.8 100.0%
==================================================================================================================================
NONPERFORMING ASSETS
Table 34: Nonperforming Assets
- ----------------------------------------------------------------------------------------------------------------------
December 31 (in millions) 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------
Nonperforming loans:
Nonaccrual $133.8 $111.9 $159.5 $237.1 $287.5
Restructured 7.4 7.1 14.8 22.1 26.3
Past due 90 days or more 26.3 17.0 18.6 20.5 25.9
- ----------------------------------------------------------------------------------------------------------------------
Total nonperforming loans 167.5 136.0 192.9 279.7 339.7
- ----------------------------------------------------------------------------------------------------------------------
Foreclosed property 31.6 62.4 115.5 137.8 185.9
- ----------------------------------------------------------------------------------------------------------------------
Total nonperforming assets $199.1 $198.4 $308.4 $417.5 $525.6
======================================================================================================================
Ratios
- ----------------------------------------------------------------------------------------------------------------------
Total nonperforming loans as % of total loans .84% .73% 1.13% 1.85% 2.41%
Nonperforming assets as % of total loans and foreclosed property 1.00 1.06 1.80 2.74 3.69
Nonperforming assets as % of total assets .59 .60 1.00 1.47 2.01
Loan reserve as % of nonperforming loans 228.62 277.06 195.08 119.66 84.13
======================================================================================================================
Management has followed a policy of discontinuing the accrual of interest
on any loan when full collectibility of principal or interest on that loan is
doubtful. Nonaccrual loans are reduced by the direct application of interest
receipts to loan principal, for accounting purposes only. If the principal
amount of the loan is well collateralized, interest income on such loans may
be recognized in periods in which payments are received. Gross interest
income that would have been recorded in 1995, if all nonaccrual and
restructured loans at December 31, 1995 had been current in accordance with
original terms, amounted to $8.6 million. Actual interest recorded was $3.8
million.
Nonperforming assets, which included nonperforming loans and foreclosed
property, totaled $199.1 million at December 31, 1995, essentially unchanged
from the level at December 31, 1994. As illustrated in Table 34, nonperforming
asset levels declined steadily during the 1991-1994 period, from $525.6
million at December 31, 1991 to $198.4 million at December 31, 1994, and
leveled off in 1995. This experience largely resulted from an improved economy
and the effectiveness of the Corporation's comprehensive loan administration
and workout procedures. As a percentage of total loans and foreclosed
property, nonperforming assets were 1.00% at December 31, 1995, compared to
1.06% at December 31, 1994 and 1.80% at December 31, 1993. Nonperforming loans
at December 31, 1995, totaled $167.5 million or .84% of total loans at
December 31, 1995, compared to .73% at December 31, 1994 and 1.13% at December
31, 1993. As a percentage of total assets, nonperforming assets remained below
the 1.00% level for the second consecutive year at .59%, compared to .60% at
December 31, 1994 and 1.00% at December 31, 1993. Foreclosed property declined
$30 million from December 31, 1994, primarily due to sales of several
properties throughout the year. The composition of foreclosed real estate by
property type is provided in Table 37.
As part of management's overall portfolio analysis, ongoing credit quality
37
22
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
Table 35: Loans Designated as Criticized Loans by Internal Risk Rating System
- ----------------------------------------------------------------------------------------
Criticized Loans
- ----------------------------------------------------------------------------------------
(in millions) Nonperforming Performing Total
- ----------------------------------------------------------------------------------------
1993
March 31 $245.5 $715.7 $961.2
June 30 208.9 677.3 886.2
September 30 207.1 665.0 872.1
December 31 192.9 640.4 833.3
- ----------------------------------------------------------------------------------------
As % of loans at December 31, 1993 1.13% 3.75% 4.88%
========================================================================================
1994
March 31 $162.0 $601.2 $763.2
June 30 159.3 565.3 724.6
September 30 167.0 492.8 659.8
December 31 136.0 498.4 634.4
- ----------------------------------------------------------------------------------------
As % of loans at December 31, 1994 .73% 2.66% 3.39%
========================================================================================
1995
March 31 $128.6 $486.2 $614.8
June 30 132.2 512.0 644.2
September 30 131.0 533.4 664.4
DECEMBER 31 167.5 520.3 687.8
- ----------------------------------------------------------------------------------------
As % of loans at December 31, 1995 .84% 2.63% 3.47%
========================================================================================
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 Corporation's
internal risk rating system. As displayed in Table 35, criticized loans
trended upward in 1995 and totaled $688 million or 3.47% of total loans at
December 31, 1995 compared to 3.39% at December 31, 1994 and 4.88% at December
31, 1993. Management carefully analyzes changes and trends in both
nonperforming and other criticized loans in assessing the risk characteristics
of the loan portfolio. Delinquency trends are another tracking mechanism used
by management to assess portfolio risk. As illustrated in Table 38, consumer
loan delinquencies have gradually trended upward over the last two years as
the industry experienced some moderate deterioration in consumer credit;
however, the Corporation's experience con-
Table 36: Nonperforming Assets by State
- ---------------------------------------------------------------------------------------
December 31 (in millions)
Location 1995 1994 1993
- ---------------------------------------------------------------------------------------
Missouri $100.7 $103.2 $171.4
New Mexico 25.9 34.9 53.4
Arkansas 22.9 18.1 26.9
Iowa 12.9 5.5 7.2
Oklahoma 12.3 11.1 14.3
Texas 8.6 9.5 13.7
Kansas 6.0 6.1 7.6
Illinois 4.9 5.0 7.1
Tennessee 4.9 5.0 6.8
- ---------------------------------------------------------------------------------------
Total $199.1 $198.4 $308.4
=======================================================================================
Table 37: Foreclosed Property
- ---------------------------------------------------------------------------------------
December 31 (in millions)
Property Type 1995 1994 1993
- ---------------------------------------------------------------------------------------
Land $17.9 $19.8 $ 28.0
Lodging 3.3 2.7 37.1
Residential 3.2 2.5 5.0
Agriculture related 2.3 2.4 8.0
Office 1.8 28.9 29.5
Multifamily .8 2.4 1.0
Warehouse .2 .4 1.7
Retail .4 1.6
Other 2.1 2.9 3.6
- ---------------------------------------------------------------------------------------
Total $31.6 $62.4 $115.5
=======================================================================================
[LOAN RESERVE COVERAGE GRAPH]
[NONPERFORMING ASSETS GRAPH]
38
23
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
tinues to compare favorably with industry averages. Credit risk associated
with the consumer portfolio, which is primarily comprised of credit card, home
equity and direct/indirect installment loans, is controlled through use of
standardized credit scoring techniques and consistent adherence to
conservative underwriting policies throughout the Corporation's nine state
region. Net loan losses from the consumer loan portfolio expressed as a
percentage of the related average loan balances were .80% in 1995 and .51% in
1994, and included credit card losses of 3.63% and 2.50% respectively.
Table 38: Consumer Loan Delinquency Trends
- ------------------------------------------------------------------------------------------------
Past Due 30 Days or More Past Due 90 Days or More
- ------------------------------------------------------------------------------------------------
As a % of outstandings Credit Card Loans Installment Loans Residential Mortgage
- ------------------------------------------------------------------------------------------------
1994
March 31 2.32% .79% .50%
June 30 2.42 .80 .54
September 30 2.67 .84 .49
December 31 2.99 1.02 .44
1995
March 31 3.17% .88% .35%
June 30 3.39 1.11 .42
September 30 3.72 1.43 .45
December 31 3.75 1.72 .43
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
characteristics as nonaccrual loans and foreclosed properties. At December 31,
1995, segregated assets totaled $103.3 million, net of a $13.3 million credit
valuation allowance, and are classified as other assets for reporting
purposes. At December 31, 1995, segregated assets consisted of $25.9 million
of commercial loans, $12.8 million of industrial revenue bond loans, $73.1
million of commercial real estate related loans and $4.8 million of foreclosed
property. All other loans covered under the loss-sharing arrangement are
included in the loan portfolio and totaled $189.5 million at December 31,
1995. Net charge-offs of $3.4 million, representing the Corporation's share of
losses on the segregated asset pool, were recognized in 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 December 31, 1995, $110.3 million of
segregated assets were accorded classification treatment consistent with
nonaccrual reporting, $4.8 million represented foreclosed property, and the
balance of $1.5 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 $11.9 million in 1995, $13.0 million in 1994 and $7.4 million in 1993.
A summary of activity regarding segregated assets is provided in Table 39.
Table 39: Segregated Assets
- ---------------------------------------------------------------------------------------
Principal Allowance Principal
(in millions) Balance for Losses Balance, Net
- ---------------------------------------------------------------------------------------
Balance at December 31, 1993 $266.6 $18.4 $248.2
Charge-offs (14.9) (3.0)
Recoveries 1.3
Net transfers 40.9
Payments on segregated assets (98.7)
- ---------------------------------------------------------------------------------------
Balance at December 31, 1994 193.9 16.7 177.2
Charge-offs (27.7) (5.5)
Recoveries 2.1
Net transfers (17.2)
Payments on segregated assets (32.4)
- ---------------------------------------------------------------------------------------
Balance at December 31, 1995 $116.6 $13.3 $103.3
=======================================================================================
39
24
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
CAPITAL RESOURCES
Table 40: Capital Structure
- ------------------------------------------------------------------------------------------------------------
December 31 (in millions) 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------
Long-term debt $ 615.1 $ 592.0 $ 567.4 $ 428.4 $ 341.6
Stockholders' equity 2,928.1 2,561.4 2,459.9 2,155.2 1,870.9
- ------------------------------------------------------------------------------------------------------------
Total capitalization $3,543.2 $3,153.4 $3,027.3 $2,583.6 $2,212.5
============================================================================================================
Tangible equity $2,582.6 $2,252.3 $2,118.0 $1,925.4 $1,670.3
============================================================================================================
Ratios
- ------------------------------------------------------------------------------------------------------------
Equity/assets 8.69% 7.79% 7.94% 7.60% 7.16%
Tangible equity/assets 7.74 6.92 6.91 6.85 6.44
Long-term debt as % of total capitalization 17.36 18.77 18.74 16.58 15.44
Double leverage 107.81 107.24 108.99 109.36 107.89
Dividends paid for the year (in thousands):
Preferred $ 75 $ 80 $ 86 $ 88 $ 91
Common<F1> 173,247 144,828 118,994 88,003 82,995
Total dividends as % of net income 41.4% 35.5% 34.0% 33.5% 41.6%
============================================================================================================
<FN>
<F1> Includes dividends of pooled companies.
Table 41: Intangible Assets
- --------------------------------------------------------------------------------------
December 31 (in millions) 1995 1994 1993
- --------------------------------------------------------------------------------------
Goodwill--Parent Company $ 84.4 $ 89.9 $ 95.3
- --------------------------------------------------------------------------------------
Subsidiaries:
Goodwill 121.5 103.1 111.7
Core deposit premium 60.0 74.7 85.3
Mortgage servicing rights 65.7 38.4 46.1
Credit card premium 13.9 3.0 3.5
- --------------------------------------------------------------------------------------
261.1 219.2 246.6
- --------------------------------------------------------------------------------------
Total intangible assets $345.5 $309.1 $341.9
======================================================================================
[RISK-BASED CAPITAL GRAPH]
The Corporation continues to rank among the most strongly capitalized bank
holding companies in the country. This strong capital position and overall
financial strength provide a good base for future expansion when profitable
investment opportunities arise. The cornerstone of the Corporation's capital
structure is its common equity, totaling $2.9 billion or approximately 82.6%
of total capitalization at December 31, 1995, an increase of 14.3% from
December 31, 1994. The equity to assets ratio was 8.69% at December 31, 1995,
compared to 7.79% at December 31, 1994, and 7.94% at December 31, 1993. In the
first quarter of 1995, the Corporation announced a common stock repurchase
program authorizing the repurchase of up to 5 million shares, or approximately
4% of the Corporation's shares outstanding. The Corporation purchased 2.2
million shares in 1995, most of which was reissued in purchase acquisitions,
such that at December 31, 1995, the Corporation held 476.5 million common
shares in Treasury at a cost of $18.1 million. The repurchased shares will be
used to meet periodic stock requirements of benefit plans and the pending
purchase acquisition.
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 11.30% for
Tier I and 14.30% for total capital substantially exceed the regulatory
required minimums. At December 31, 1995, the Corporation's Tier I leverage
ratio was 7.95%, well in excess of required minimums. At December 31, 1995,
all of the Corporation's banking subsidiaries were "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%. The Federal Deposit
Insurance Corporation Improvement Act of 1991 (FDICIA) mandated a requirement
to incorporate interest rate risk into the risk-based capital computation
which may become effective in 1996. As proposed, this change is not expected
to have a material effect on the Corporation's capital requirements.
40
25
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
Table 42: Risk-Based Capital
- -------------------------------------------------------------------------------------------------
(in millions) 1995 1994 1993
- -------------------------------------------------------------------------------------------------
Tier I capital:
Stockholders' equity $ 2,928.1 $ 2,561.4 $ 2,459.9
Unrealized net (appreciation) depreciation,
available for sale securities (4.7) 111.8 (42.3)
- -------------------------------------------------------------------------------------------------
Stockholders' equity, net 2,923.4 2,673.2 2,417.6
Minority interest .7 .7 .7
Intangible assets:
Goodwill (205.9) (193.0) (207.0)
Core deposit premium (60.0) (74.7) (85.3)
- -------------------------------------------------------------------------------------------------
Total Tier I 2,658.2 2,406.2 2,126.0
- -------------------------------------------------------------------------------------------------
Tier II capital:
Allowable reserve for loan losses 295.1 276.0 240.8
Qualifying long-term debt 410.0 415.0 425.2
- -------------------------------------------------------------------------------------------------
Total Tier II 705.1 691.0 666.0
- -------------------------------------------------------------------------------------------------
Total capital $ 3,363.3 $ 3,097.2 $ 2,792.0
=================================================================================================
Risk-adjusted assets $23,522.4 $22,070.4 $19,452.0
=================================================================================================
Risk-based capital ratios:
Tier I 11.30% 10.90% 10.93%
=================================================================================================
Total 14.30% 14.03% 14.35%
=================================================================================================
Tier I Leverage ratio 7.95% 7.35% 6.93%
=================================================================================================
FOURTH QUARTER DATA
Table 43: Summary of Fourth Quarter Earnings
- -------------------------------------------------------------------------------------------------
Fourth Quarter
- -------------------------------------------------------------------------------------------------
(in millions) 1995 1994 % change
- -------------------------------------------------------------------------------------------------
Net interest income $312.3 $300.2 4.0%
Provision for loan losses 16.7 4.9 240.4
- -------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 295.6 295.3 .1
Noninterest income 181.0 158.1 14.5
Noninterest expense 302.8 296.3 2.2
- -------------------------------------------------------------------------------------------------
Income before income taxes 173.8 157.1 10.7
Income tax expense 60.1 52.9 13.7
- -------------------------------------------------------------------------------------------------
Net income $113.7 $104.2 9.1%
=================================================================================================
Net income per share $.88 $.81 8.6%
=================================================================================================
Dividends declared per share $.37 $.34 8.8%
=================================================================================================
Net income for the fourth quarter of 1995 totaled $113.7 million, an
increase of 9.1% over the fourth quarter of 1994. Net income per share was
$.88, an increase of 8.6%.
Net interest income increased 4.0% to $312.3 million from $300.2 million
in the fourth quarter of 1994, due to an increase in average earning assets
and improvement in the net interest margin. Average earning assets increased
3.2%, led by a 7.3% increase in average loans. The net interest margin was
4.31% in 1995, compared to 4.29% in 1994 and 4.21% in the third quarter of
1995.
The provision for loan losses totaled $16.7 million in the fourth
quarter of 1995, compared to $4.9 million a year ago. Net loan charge-offs in
the fourth quarter of 1995 totaled $26.5 million, compared to $10.5 million in
1994, and as a percentage of average loans were .54%, compared to .23% in
1994. The increase in net charge-offs was primarily due to a $10 million
charge-off on a large corporate borrower that filed for bankruptcy, coupled
with an increase in consumer loan losses.
Noninterest income increased 14.5% to $181.0 million, from $158.1 million
in the fourth quarter of 1994. Excluding securities gains, noninterest income
increased $13.3 million, or 8.5%, attributable primarily to gains in trust
fees, service charges and mortgage banking revenues.
Noninterest expense totaled $302.8 million, an increase of 2.2% over the
fourth quarter of 1994. Noninterest expense in 1995 includes a $9.2 million
decrease in FDIC insurance premiums, which was offset by expense increases for
personnel, equipment, and funding support provided to the Corporation's trust
subsidiary's short-term money market fund.
41
26
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
Consolidated Quarterly Earnings Trend
1995
- -----------------------------------------------------------------------------------------------------------------
(in thousands) Fourth Quarter Third Quarter Second Quarter First Quarter
- -----------------------------------------------------------------------------------------------------------------
Interest income
Interest and fees on loans $435,731 $439,027 $430,829 $405,962
Interest on short-term investments 1,521 1,124 983 899
Interest on Federal funds sold and
securities purchased
under resale agreements 9,878 8,410 7,539 7,846
Interest on held to maturity securities
Taxable 54,097 64,781 66,317 64,792
Tax-exempt 14,325 13,915 13,903 13,965
- -----------------------------------------------------------------------------------------------------------------
Total interest on held to maturity
securities 68,422 78,696 80,220 78,757
Interest on available for sale securities 71,640 60,747 64,731 64,853
Interest on trading securities 676 521 338 421
- -----------------------------------------------------------------------------------------------------------------
Total interest income 587,868 588,525 584,640 558,738
- -----------------------------------------------------------------------------------------------------------------
Interest expense
Interest on deposits 207,613 204,315 200,577 184,751
Interest on Federal funds purchased and
other short-term borrowings 54,530 67,020 70,335 65,354
Interest on capital lease obligations 967 968 970 970
Interest on long-term debt 12,497 11,334 11,492 12,015
- -----------------------------------------------------------------------------------------------------------------
Total interest expense 275,607 283,637 283,374 263,090
- -----------------------------------------------------------------------------------------------------------------
Net interest income 312,261 304,888 301,266 295,648
Provision for loan losses 16,677 11,130 9,171 9,710
- -----------------------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 295,584 293,758 292,095 285,938
- -----------------------------------------------------------------------------------------------------------------
Noninterest income
Trust fees 45,796 44,624 46,345 40,420
Service charges 49,408 48,121 47,595 45,699
Mortgage banking revenues 19,763 19,680 16,291 22,904
Credit card 13,085 13,084 11,728 11,856
Investment banking revenues 8,762 8,849 8,880 8,790
Securities gains, net 11,015 843 2,815 46
Other 33,160 32,535 31,887 32,397
- -----------------------------------------------------------------------------------------------------------------
Total noninterest income 180,989 167,736 165,541 162,112
- -----------------------------------------------------------------------------------------------------------------
Noninterest expense
Staff 151,637 150,662 146,654 148,259
Net occupancy 19,763 20,820 19,277 20,310
Equipment 25,674 23,128 23,483 23,372
FDIC insurance 3,798 773 13,310 13,316
Intangible amortization 8,780 8,215 8,052 7,883
Advertising 9,807 8,055 8,674 7,496
Other 83,309 79,871 73,876 90,747
- -----------------------------------------------------------------------------------------------------------------
Total noninterest expense 302,768 291,524 293,326 311,383
- -----------------------------------------------------------------------------------------------------------------
Income before income tax expense 173,805 169,970 164,310 136,667
Income tax expense 60,114 59,332 55,613 50,858
- -----------------------------------------------------------------------------------------------------------------
Net income $113,691 $110,638 $108,697 $ 85,809
=================================================================================================================
Net income per share $.88 $.86 $.84 $.67
=================================================================================================================
Dividends declared per share $.37 $.37 $.34 $.34
=================================================================================================================
Returns
Return on assets 1.38% 1.34% 1.33% 1.06%
Return on total equity 15.81 15.77 15.85 13.06
=================================================================================================================
42
27
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
1994
- -----------------------------------------------------------------------------------------------------------------
(in thousands) Fourth Quarter Third Quarter Second Quarter First Quarter
- -----------------------------------------------------------------------------------------------------------------
Interest income
Interest and fees on loans $387,749 $367,691 $353,870 $330,198
Interest on short-term investments 886 932 1,082 572
Interest on Federal funds sold and
securities purchased
under resale agreements 7,802 3,994 2,760 2,580
Interest on held to maturity securities
Taxable 62,509 62,323 58,900 48,634
Tax-exempt 14,709 15,678 14,903 15,198
- -----------------------------------------------------------------------------------------------------------------
Total interest on held to maturity
securities 77,218 78,001 73,803 63,832
Interest on available for sale securities 65,324 64,855 66,335 69,847
Interest on trading securities 378 381 926 840
- -----------------------------------------------------------------------------------------------------------------
Total interest income 539,357 515,854 498,776 467,869
- -----------------------------------------------------------------------------------------------------------------
Interest expense
Interest on deposits 168,601 153,659 145,692 141,664
Interest on Federal funds purchased and
other short-term borrowings 57,361 49,884 40,522 25,477
Interest on capital lease obligations 993 1,000 997 993
Interest on long-term debt 12,197 12,052 11,468 11,008
- -----------------------------------------------------------------------------------------------------------------
Total interest expense 239,152 216,595 198,679 179,142
- -----------------------------------------------------------------------------------------------------------------
Net interest income 300,205 299,259 300,097 288,727
Provision for loan losses 4,899 6,855 7,740 5,846
- -----------------------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 295,306 292,404 292,357 282,881
- -----------------------------------------------------------------------------------------------------------------
Noninterest income
Trust fees 42,746 39,777 40,930 41,483
Service charges 46,947 47,188 46,811 45,840
Mortgage banking revenues 15,418 13,509 12,723 19,045
Credit card 14,047 11,074 9,841 9,666
Investment banking revenues 8,795 8,660 10,584 9,729
Securities gains, net 1,411 1,533 702 2,554
Other 28,716 27,760 31,863 25,792
- -----------------------------------------------------------------------------------------------------------------
Total noninterest income 158,080 149,501 153,454 154,109
- -----------------------------------------------------------------------------------------------------------------
Noninterest expense
Staff 146,382 146,732 149,092 148,492
Net occupancy 20,588 21,172 20,580 20,645
Equipment 23,662 24,113 23,579 22,018
FDIC insurance 13,033 13,195 13,271 13,448
Intangible amortization 8,716 8,842 8,808 8,786
Advertising 10,369 8,452 7,849 6,821
Other 73,561 63,778 64,407 66,347
- -----------------------------------------------------------------------------------------------------------------
Total noninterest expense 296,311 286,284 287,586 286,557
- -----------------------------------------------------------------------------------------------------------------
Income before income tax expense 157,075 155,621 158,225 150,433
Income tax expense 52,866 53,632 55,244 51,810
- -----------------------------------------------------------------------------------------------------------------
Net income $104,209 $101,989 $102,981 $ 98,623
=================================================================================================================
Net income per share $.81 $.79 $.80 $.77
=================================================================================================================
Dividends declared per share $.34 $.34 $.31 $.31
=================================================================================================================
Returns
Return on assets 1.30% 1.29% 1.31% 1.28%
Return on total equity 16.25 16.03 16.45 15.84
=================================================================================================================
43
28
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
Consolidated Quarterly Average Balance Sheet and Net Interest Margin
(dollars in millions) 1995
- -----------------------------------------------------------------------------------------------------------------------------------
Fourth Quarter Third Quarter Second Quarter
- -----------------------------------------------------------------------------------------------------------------------------------
Income/ Yields/ Income/ Yields/ Income/ Yields/
Assets Balance Expense Rates Balance Expense Rates Balance Expense Rates
- -----------------------------------------------------------------------------------------------------------------------------------
Loans, net of unearned income $19,745.4 $437.2 8.78% $19,817.3 $440.3 8.82% $19,528.4 $432.4 8.88%
Short-term investments 91.3 1.5 6.61 75.0 1.1 5.95 67.6 1.0 5.83
Federal funds sold and securities
purchased under resale agreements 675.7 9.9 5.80 571.0 8.4 5.84 492.8 7.5 6.14
Held to maturity securities:
Taxable 3,461.5 54.1 6.20 4,222.6 64.8 6.09 4,403.6 66.3 6.04
Tax-exempt 891.4 21.4 9.52 862.5 20.8 9.58 856.3 20.9 9.78
- -----------------------------------------------------------------------------------------------------------------------------------
Total held to maturity securities 4,352.9 75.5 6.88 5,085.1 85.6 6.68 5,259.9 87.2 6.65
Available for sale securities 4,627.5 71.7 6.15 3,938.9 60.8 6.13 4,073.5 64.8 6.38
Trading securities 47.1 .7 6.03 30.8 .6 7.21 20.6 .4 6.96
- -----------------------------------------------------------------------------------------------------------------------------------
Total earning assets 29,539.9 596.5 8.01 29,518.1 596.8 8.02 29,442.8 593.3 8.08
Less reserve for loan losses (393.7) (389.1) (386.3)
Cash and due from banks 1,771.0 1,885.0 1,825.5
All other assets 1,975.6 2,033.7 1,905.9
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $32,892.8 $33,047.7 $32,787.9
===================================================================================================================================
Liabilities and Stockholders' Equity
- -----------------------------------------------------------------------------------------------------------------------------------
Retail savings deposits and interest-
bearing transaction accounts $10,510.0 $ 82.8 3.13% $10,232.9 $ 80.1 3.10% $10,103.8 $ 79.2 3.14%
Time deposits 9,011.3 124.8 5.49 8,986.5 124.2 5.49 9,109.5 121.4 5.34
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 19,521.3 207.6 4.22 19,219.4 204.3 4.22 19,213.3 200.6 4.19
Federal funds purchased and
other short-term borrowings 3,764.0 54.5 5.75 4,592.4 67.0 5.79 4,682.4 70.3 6.03
Capital lease obligations 39.1 1.0 9.82 39.2 1.0 9.81 39.6 1.0 9.81
Long-term debt 599.4 12.5 8.27 522.5 11.3 8.61 528.9 11.5 8.71
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 23,923.8 275.6 4.57 24,373.5 283.6 4.62 24,464.2 283.4 4.65
Demand deposits 5,601.0 5,409.2 5,198.5
All other liabilities 490.4 457.8 381.0
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 30,015.2 30,240.5 30,043.7
Redeemable preferred stock .9 1.1 1.1
Total stockholders' equity 2,876.7 2,806.1 2,743.1
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders'
equity $32,892.8 $33,047.7 $32,787.9
===================================================================================================================================
Interest rate spread 3.44% 3.40% 3.43%
Effect of noninterest-bearing funds .87 .81 .79
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income/margin $320.9 4.31% $313.2 4.21% $309.9 4.22%
===================================================================================================================================
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 $1.4 $1.3 $1.6
Held to maturity securities 7.1 6.9 7.0
Available for sale securities .1 .1
Trading securities .1
- -----------------------------------------------------------------------------------------------------------------------------------
Total $8.6 $8.3 $8.7
===================================================================================================================================
44
29
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
First Quarter Fourth Quarter Third Quarter Second Quarter First Quarter
- ------------------------------------------------------------------------------------------------------------------------------------
Income/ Yields/ Income/ Yields/ Income/ Yields/ Income/ Yields/ Income/ Yields/
Balance Expense Rates Balance Expense Rates Balance Expense Rates Balance Expense Rates Balance Expense Rates
- ------------------------------------------------------------------------------------------------------------------------------------
$18,924.4 $407.8 8.74% $18,402.5 $390.0 8.41% $17,993.9 $369.2 8.14% $17,596.5 $355.5 8.10% $17,068.8 $331.8 7.88%
65.4 .9 5.57 68.6 .9 5.13 83.8 .9 4.41 110.0 1.1 3.95 61.0 .6 3.80
531.5 7.9 5.99 579.4 7.8 5.34 333.5 4.0 4.75 262.7 2.8 4.21 295.8 2.6 3.54
4,351.8 64.8 6.04 4,353.1 62.5 5.70 4,385.0 62.3 5.64 4,385.4 58.9 5.39 4,056.7 48.6 4.86
846.2 21.0 10.06 897.5 21.8 9.62 891.7 23.5 10.44 904.8 22.3 9.88 923.9 22.8 10.01
- ------------------------------------------------------------------------------------------------------------------------------------
5,198.0 85.8 6.69 5,250.6 84.3 6.37 5,276.7 85.8 6.45 5,290.2 81.2 6.16 4,980.6 71.4 5.82
4,116.5 65.0 6.40 4,291.3 65.4 6.05 4,578.1 64.9 5.63 4,891.9 66.4 5.45 5,013.5 69.9 5.66
27.9 .4 6.40 26.1 .4 6.29 28.4 .4 5.56 64.2 1.0 6.04 69.5 .8 5.01
- ------------------------------------------------------------------------------------------------------------------------------------
28,863.7 567.8 7.98 28,618.5 548.8 7.61 28,294.4 525.2 7.37 28,215.5 508.0 7.22 27,489.2 477.1 7.04
(380.0) (383.3) (384.0) (384.4) (381.5)
1,871.9 1,903.3 1,873.6 1,851.2 1,816.5
1,923.4 1,874.4 1,845.9 1,855.3 1,856.2
- ------------------------------------------------------------------------------------------------------------------------------------
$32,279.0 $32,012.9 $31,629.9 $31,537.6 $30,780.4
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
$10,108.4 $ 74.8 3.00% $10,078.2 $ 68.2 2.68% $10,068.7 $ 62.8 2.48% $10,175.8 $ 59.8 2.36% $10,232.4 $ 56.9 2.26%
8,999.1 110.0 4.96 8,809.6 100.4 4.52 8,576.7 90.8 4.20 8,582.4 85.9 4.01 8,581.3 84.7 4.00
- ------------------------------------------------------------------------------------------------------------------------------------
19,107.5 184.8 3.92 18,887.8 168.6 3.54 18,645.4 153.6 3.27 18,758.2 145.7 3.12 18,813.7 141.6 3.05
4,544.7 65.3 5.83 4,475.3 57.4 5.09 4,445.3 49.9 4.45 4,239.3 40.5 3.83 3,446.8 25.5 3.00
40.0 1.0 9.85 40.2 1.0 9.79 40.5 1.0 9.80 40.8 1.0 9.81 41.0 1.0 9.81
568.2 12.0 8.58 598.2 12.2 8.09 592.0 12.0 8.08 587.9 11.5 7.82 588.2 11.0 7.59
- ------------------------------------------------------------------------------------------------------------------------------------
24,260.4 263.1 4.40 24,001.5 239.2 3.95 23,723.2 216.5 3.62 23,626.2 198.7 3.37 22,889.7 179.1 3.17
4,999.0 5,081.2 5,041.3 5,110.3 5,057.4
391.0 363.3 319.0 296.4 341.3
- ------------------------------------------------------------------------------------------------------------------------------------
29,650.4 29,446.0 29,083.5 29,032.9 28,288.4
1.1 1.1 1.1 1.1 1.2
2,627.5 2,565.8 2,545.3 2,503.6 2,490.8
- ------------------------------------------------------------------------------------------------------------------------------------
$32,279.0 $32,012.9 $31,629.9 $31,537.6 $30,780.4
====================================================================================================================================
3.58% 3.66% 3.75% 3.85% 3.87%
.70 .63 .58 .55 .53
- ------------------------------------------------------------------------------------------------------------------------------------
$304.7 4.28% $309.6 4.29% $308.7 4.33% $309.3 4.40% $298.0 4.40%
====================================================================================================================================
$1.9 $2.2 $1.5 $1.6 $1.6
7.0 7.1 7.8 7.4 7.6
.1 .1 .1 .1 .1
.1
- ------------------------------------------------------------------------------------------------------------------------------------
$9.0 $9.4 $9.4 $9.2 $9.3
====================================================================================================================================
45
30
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
Consolidated Earnings Trend
(in thousands) 1995 1994 1993
- -------------------------------------------------------------------------
Interest income
Interest and fees on loans $1,711,549 $1,439,508 $1,282,802
Interest on short-term investments 4,527 3,472 2,101
Interest on Federal funds sold and
securities purchased
under resale agreements 33,673 17,136 18,799
Interest on held to maturity securities
Taxable 249,987 232,366 462,542
Tax-exempt 56,108 60,488 62,310
- -------------------------------------------------------------------------
Total interest on held to maturity
securities 306,095 292,854 524,852
Interest on available for sale
securities 261,971 266,361 29,057
Interest on trading securities 1,956 2,525 2,570
Interest on receivable due from
Resolution Trust Corporation
- -------------------------------------------------------------------------
Total interest income 2,319,771 2,021,856 1,860,181
- -------------------------------------------------------------------------
Interest expense
Interest on savings deposits 44,530 55,598 59,321
Interest on interest-bearing
transaction accounts 272,360 192,140 175,428
Interest on time deposits 480,366 361,878 372,600
Interest on Federal funds purchased
and other short-term borrowings 257,239 173,244 82,351
Interest on capital lease obligations 3,875 3,983 4,082
Interest on long-term debt 47,338 46,725 40,767
- -------------------------------------------------------------------------
Total interest expense 1,105,708 833,568 734,549
- -------------------------------------------------------------------------
Net interest income 1,214,063 1,188,288 1,125,632
Provision for loan losses 46,688 25,340 63,885
- -------------------------------------------------------------------------
Net interest income after provision
for loan losses 1,167,375 1,162,948 1,061,747
- -------------------------------------------------------------------------
Noninterest income
Trust fees 177,185 164,936 159,365
Service charges 190,823 186,786 176,850
Credit card 49,753 44,628 33,433
Investment banking revenues 35,281 37,768 41,934
Securities gains, net 14,719 6,200 8,348
Other 208,617 174,826 173,602
- -------------------------------------------------------------------------
Total noninterest income 676,378 615,144 593,532
- -------------------------------------------------------------------------
Noninterest expense
Staff 597,212 590,698 568,490
Net occupancy 80,170 82,985 88,198
Equipment 95,657 93,372 89,643
FDIC insurance 31,197 52,947 52,007
Other 394,765 336,736 344,659
- -------------------------------------------------------------------------
Total noninterest expense 1,199,001 1,156,738 1,142,997
- -------------------------------------------------------------------------
Income before income tax expense 644,752 621,354 512,282
Income tax expense 225,917 213,552 161,917
- -------------------------------------------------------------------------
Net income $ 418,835 $ 407,802 $ 350,365
=========================================================================
Net income per share $3.25 $3.17 $2.75
=========================================================================
Dividends declared per share $1.42 $1.30 $1.18
=========================================================================
Returns
Return on assets 1.28% 1.29% 1.20%
Return on equity 15.15 16.14 15.25
Return on common equity 15.15 16.14 15.25
=========================================================================
46
31
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
1992 1991 1990 % change 1995 % change 1994 5-year annual compound change 1991-1995
- ------------------------------------------------------------------------------------------------------------------------------------
$1,228,629 $1,329,086 $1,412,171 18.9% 12.2% 3.9%
3,245 9,500 9,656 30.4 65.3 (14.1)
58,396 88,945 94,107 96.5 (8.8) (18.6)
477,864 443,095 361,462 7.6 (49.8) (7.1)
67,322 70,850 75,426 (7.2) (2.9) (5.7)
- -----------------------------------------------------------------------------------------------------------------------------------
545,186 513,945 436,888 4.5 (44.2) (6.9)
(1.6)
3,312 7,812 4,029 (22.5) (1.8) (13.5)
28,955 5,359
- -----------------------------------------------------------------------------------------------------------------------------------
1,838,768 1,978,243 1,962,210 14.7 8.7 3.4
- -----------------------------------------------------------------------------------------------------------------------------------
60,229 69,510 57,796 (19.9) (6.3) (5.1)
197,650 245,796 238,233 41.8 9.5 2.7
464,554 657,494 679,326 32.7 (2.9) (6.7)
76,624 124,986 201,348 48.5 110.4 5.0
4,165 4,189 4,278 (2.7) (2.4) (2.0)
34,091 30,870 32,408 1.3 14.6 7.9
- -----------------------------------------------------------------------------------------------------------------------------------
837,313 1,132,845 1,213,389 32.6 13.5 (1.8)
- -----------------------------------------------------------------------------------------------------------------------------------
1,001,455 845,398 748,821 2.2 5.6 10.1
139,475 118,017 125,662 84.2 (60.3) (18.0)
- -----------------------------------------------------------------------------------------------------------------------------------
861,980 727,381 623,159 .4 9.5 13.4
- -----------------------------------------------------------------------------------------------------------------------------------
147,308 129,076 114,798 7.4 3.5 9.1
156,325 124,780 101,666 2.2 5.6 13.4
29,502 22,488 22,577 11.5 33.5 17.1
37,052 24,166 13,995 (6.6) (9.9) 20.3
32,231 5,931 3,011 137.4 (25.7) 37.4
97,942 95,253 79,027 19.3 .7 21.4
- -----------------------------------------------------------------------------------------------------------------------------------
500,360 401,694 335,074 10.0 3.6 15.1
- -----------------------------------------------------------------------------------------------------------------------------------
483,187 420,597 382,345 1.1 3.9 9.3
77,866 68,475 58,990 (3.4) (5.9) 6.3
75,405 65,062 63,576 2.4 4.2 8.5
48,574 41,829 20,215 (41.1) 1.8 9.1
315,417 269,253 226,561 17.2 (2.3) 11.7
- -----------------------------------------------------------------------------------------------------------------------------------
1,000,449 865,216 751,687 3.7 1.2 9.8
- -----------------------------------------------------------------------------------------------------------------------------------
361,891 263,859 206,546 3.8 21.3 25.6
99,228 63,925 38,808 5.8 31.9 42.2
- -----------------------------------------------------------------------------------------------------------------------------------
$ 262,663 $ 199,934 $ 167,738 2.7% 16.4% 20.1%
===================================================================================================================================
$2.25 $1.78 $1.57 2.5% 15.3% 15.7%
===================================================================================================================================
$1.10 $1.07 $1.06 9.2% 10.2% 6.0%
===================================================================================================================================
.99% .81% .75%
13.21 11.33 10.58
13.21 11.32 10.58
===================================================================================================================================
47
32
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
Consolidated Average Balance Sheet and Net Interest Margin
(dollars in millions) 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
Income/ Yields/ Income/ Yields/ Income/ Yields/
Assets Balance Expense Rates Balance Expense Rates Balance Expense Rates
- -----------------------------------------------------------------------------------------------------------------------------------
Loans, net of unearned income $19,507.0 $1,717.7 8.81% $17,769.7 $1,446.5 8.14% $16,029.4 $1,289.3 8.04%
Short-term investments 74.9 4.5 6.04 80.9 3.5 4.29 61.9 2.1 3.40
Federal funds sold and securities
purchased under resale agreements 568.2 33.7 5.93 368.5 17.1 4.65 595.7 18.8 3.16
Held to maturity securities:
Taxable 4,107.8 250.0 6.09 4,296.1 232.4 5.41 7,905.5 462.5 5.85
Tax-exempt 864.2 84.1 9.73 904.4 90.3 9.99 937.1 93.2 9.95
- -----------------------------------------------------------------------------------------------------------------------------------
Total held to maturity securities 4,972.0 334.1 6.72 5,200.5 322.7 6.21 8,842.6 555.7 6.28
Available for sale securities 4,189.8 262.3 6.26 4,691.4 266.7 5.68 483.7 29.1 6.01
Trading securities 31.6 2.1 6.55 46.9 2.6 5.63 53.6 2.7 5.12
Receivable due from
Resolution Trust Corporation
- -----------------------------------------------------------------------------------------------------------------------------------
Total earning assets 29,343.5 2,354.4 8.02 28,157.9 2,059.1 7.31 26,066.9 1,897.7 7.28
Less reserve for loan losses (387.3) (383.3) (366.3)
Cash and due from banks 1,838.2 1,861.4 1,814.9
Property and equipment 643.4 632.3 559.2
All other assets 1,316.6 1,225.7 1,079.3
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $32,754.4 $31,494.0 $29,154.0
===================================================================================================================================
Liabilities and Stockholders' Equity
- -----------------------------------------------------------------------------------------------------------------------------------
Savings deposits $ 1,864.5 $ 44.5 2.39% $ 2,330.1 $ 55.6 2.39% $ 2,265.8 $ 59.3 2.62%
Interest-bearing transaction accounts 8,375.3 272.4 3.25 7,808.0 192.1 2.46 7,348.0 175.4 2.39
Time deposits 9,026.6 480.4 5.32 8,638.0 361.9 4.19 9,062.2 372.6 4.11
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 19,266.4 797.3 4.14 18,776.1 609.6 3.25 18,676.0 607.3 3.25
Federal funds purchased and
other short-term borrowings 4,394.3 257.2 5.85 4,155.3 173.3 4.17 2,535.1 82.4 3.25
Capital lease obligations 39.4 3.9 9.82 40.7 4.0 9.80 41.6 4.1 9.80
Long-term debt 554.7 47.3 8.53 591.6 46.7 7.90 531.1 40.8 7.68
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 24,254.8 1,105.7 4.56 23,563.7 833.6 3.54 21,783.8 734.6 3.37
Demand deposits 5,303.9 5,072.6 4,834.6
All other liabilities 430.4 330.0 237.0
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 29,989.1 28,966.3 26,855.4
Redeemable preferred stock 1.1 1.1 1.2
Total stockholders' equity 2,764.2 2,526.6 2,297.4
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $32,754.4 $31,494.0 $29,154.0
===================================================================================================================================
Interest rate spread 3.46% 3.77% 3.91%
Effect of noninterest-bearing funds .80 .58 .55
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income/margin $1,248.7 4.26% $1,225.5 4.35% $1,163.1 4.46%
===================================================================================================================================
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 $ 6.2 $ 7.0 $ 6.4
Held to maturity securities 28.0 29.8 30.9
Available for sale securities .3 .3
Trading securities .1 .1 .2
- -----------------------------------------------------------------------------------------------------------------------------------
Total $34.6 $37.2 $37.5
===================================================================================================================================
48
33
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
1992 1991 1990 % change in average balances
- -----------------------------------------------------------------------------------------------------------------------------------
Five-year
annual
Income/ Yields/ Income/ Yields/ Income/ Yields/ compound
Balance Expense Rates Balance Expense Rates Balance Expense Rates 1995 1994 1991-1995
- -----------------------------------------------------------------------------------------------------------------------------------
$14,304.7 $1,233.6 8.62% $13,488.5 $1,335.9 9.90% $13,177.8 $1,421.2 10.78% 9.8% 10.9% 8.2%
81.8 3.3 3.96 130.4 9.5 7.28 118.2 9.6 8.17 (7.4) 30.7 (8.7)
1,592.8 58.4 3.67 1,578.0 88.9 5.64 1,187.3 94.1 7.93 54.2 (38.1) (13.7)
6,852.5 477.9 6.97 5,362.1 443.1 8.26 4,212.3 361.5 8.58 (4.4) (45.7) (.5)
972.7 98.1 10.09 1,007.7 102.4 10.17 1,068.8 108.1 10.12 (4.4) (3.5) (4.2)
- -----------------------------------------------------------------------------------------------------------------------------------
7,825.2 576.0 7.36 6,369.8 545.5 8.56 5,281.1 469.6 8.89 (4.4) (41.2) (1.2)
(10.7)
54.4 3.4 6.27 110.5 8.0 7.25 46.4 4.1 8.90 (32.6) (12.5) (7.4)
357.9 29.0 8.09 67.1 5.4 7.99
- -----------------------------------------------------------------------------------------------------------------------------------
23,858.9 1,874.7 7.86 22,035.1 2,016.8 9.15 19,877.9 2,004.0 10.08 4.2 8.0 8.1
(312.7) (275.4) (254.9) 1.0 4.6 8.7
1,682.1 1,574.1 1,552.2 (1.2) 2.6 3.4
515.2 465.8 444.6 1.8 13.1 7.7
813.0 774.4 631.7 7.4 13.6 15.8
- -----------------------------------------------------------------------------------------------------------------------------------
$26,556.5 $24,574.0 $22,251.5 4.0% 8.0% 8.0%
===================================================================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
$1,849.8 $ 60.2 3.26% $ 1,486.0 $ 69.5 4.68% $ 1,175.7 $ 57.8 4.92% (20.0)% 2.8% 9.7%
6,490.6 197.6 3.05 5,170.8 245.8 4.75 4,340.0 238.2 5.49 7.3 6.3 14.1
9,224.4 464.6 5.04 9,773.7 657.5 6.73 8,626.0 679.3 7.88 4.5 (4.7) .9
- -----------------------------------------------------------------------------------------------------------------------------------
17,564.8 722.4 4.11 16,430.5 972.8 5.92 14,141.7 975.3 6.90 2.6 .5 6.4
2,160.5 76.6 3.55 2,233.2 125.0 5.60 2,561.6 201.4 7.86 5.8 63.9 11.4
42.6 4.2 9.77 43.4 4.1 9.65 44.4 4.3 9.65 (3.2) (2.2) (2.4)
369.1 34.1 9.24 308.8 30.9 9.99 321.5 32.4 10.08 (6.2) 11.4 11.5
- -----------------------------------------------------------------------------------------------------------------------------------
20,137.0 837.3 4.16 19,015.9 1,132.8 5.96 17,069.2 1,213.4 7.11 2.9 8.2 7.3
4,205.2 3,552.1 3,356.0 4.6 4.9 9.6
224.0 239.8 240.0 30.4 39.2 12.4
- -----------------------------------------------------------------------------------------------------------------------------------
24,566.2 22,807.8 20,665.2 3.5 7.9 7.7
1.3 1.3 1.4 (8.3) (4.7)
1,989.0 1,764.9 1,584.9 9.4 10.0 11.8
- -----------------------------------------------------------------------------------------------------------------------------------
$26,556.5 $24,574.0 $22,251.5 4.0% 8.0% 8.0%
===================================================================================================================================
3.70% 3.19% 2.97%
.65 .82 1.01
- -----------------------------------------------------------------------------------------------------------------------------------
$1,037.4 4.35% $ 884.0 4.01% $ 790.6 3.98%
===================================================================================================================================
$ 5.0 $ 6.8 $ 9.0
30.8 31.6 32.7
.1 .2 .1
- -----------------------------------------------------------------------------------------------------------------------------------
$35.9 $38.6 $41.8
===================================================================================================================================
49
34
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
Consolidated Balance Sheet
December 31 (dollars in thousands) 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
Assets
Cash and due from banks $ 2,175,804 $ 2,119,579
Short-term investments 82,240 44,717
Securities:
Held to maturity (market value $965,414 and $4,965,930, respectively) 914,747 5,216,968
Available for sale (amortized cost $8,056,398, and $4,354,715, respectively) 8,063,815 4,172,964
Trading 57,442 31,674
Federal funds sold and securities purchased under resale agreements 1,099,696 1,111,720
Loans (net of unearned income of $63,729, and $66,904 respectively) 19,763,244 18,655,511
Less reserve for loan losses 382,984 376,618
- -------------------------------------------------------------------------------------------------------------------------
Loans, net 19,380,260 18,278,893
- -------------------------------------------------------------------------------------------------------------------------
Property and equipment 637,945 637,500
Other assets 1,291,881 1,264,015
- -------------------------------------------------------------------------------------------------------------------------
Total assets $33,703,830 $32,878,030
=========================================================================================================================
Liabilities and Stockholders' Equity
Liabilities:
Demand deposits $ 5,862,531 $ 5,256,494
Retail savings deposits and interest-bearing transaction accounts 11,027,383 10,142,719
Time deposits 9,042,216 9,984,860
- -------------------------------------------------------------------------------------------------------------------------
Total deposits 25,932,130 25,384,073
- -------------------------------------------------------------------------------------------------------------------------
Federal funds purchased and securities sold under repurchase agreements 2,361,204 2,053,609
Short-term borrowings 1,359,993 1,903,182
Capital lease obligations 38,910 40,098
Long-term debt 615,129 592,041
Other liabilities 467,444 342,512
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities 30,774,810 30,315,515
- -------------------------------------------------------------------------------------------------------------------------
Redeemable preferred stock 961 1,142
- -------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Common stock ($1 par value; 200,000,000 shares authorized;
129,923,507 and 128,873,322 shares issued, respectively) 129,924 128,873
Surplus 984,557 964,900
Retained earnings 1,827,023 1,593,911
Treasury stock (476,519 and 508,698 shares at cost, respectively) (18,096) (14,516)
Unrealized net appreciation (depreciation), available for sale securities 4,651 (111,795)
- -------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 2,928,059 2,561,373
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $33,703,830 $32,878,030
=========================================================================================================================
See accompanying notes to the consolidated financial statements.
50
35
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
Consolidated Statement of Income
Year ended December 31 (in thousands) 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------
Interest income
Interest and fees on loans $1,711,549 $1,439,508 $1,282,802
Interest on short-term investments 4,527 3,472 2,101
Interest on Federal funds sold and securities purchased
under resale agreements 33,673 17,136 18,799
Interest on held to maturity securities
Taxable 249,987 232,366 462,542
Tax-exempt 56,108 60,488 62,310
- -----------------------------------------------------------------------------------------------------------------------
Total interest on held to maturity securities 306,095 292,854 524,852
Interest on available for sale securities 261,971 266,361 29,057
Interest on trading securities 1,956 2,525 2,570
- -----------------------------------------------------------------------------------------------------------------------
Total interest income 2,319,771 2,021,856 1,860,181
- -----------------------------------------------------------------------------------------------------------------------
Interest expense
Interest on deposits 797,256 609,616 607,349
Interest on Federal funds purchased and other short-term borrowings 257,239 173,244 82,351
Interest on capital lease obligations 3,875 3,983 4,082
Interest on long-term debt 47,338 46,725 40,767
- -----------------------------------------------------------------------------------------------------------------------
Total interest expense 1,105,708 833,568 734,549
- -----------------------------------------------------------------------------------------------------------------------
Net interest income 1,214,063 1,188,288 1,125,632
Provision for loan losses 46,688 25,340 63,885
- -----------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 1,167,375 1,162,948 1,061,747
- -----------------------------------------------------------------------------------------------------------------------
Noninterest income
Trust fees 177,185 164,936 159,365
Service charges 190,823 186,786 176,850
Mortgage banking revenues 78,638 60,695 68,623
Credit card 49,753 44,628 33,433
Investment banking revenues 35,281 37,768 41,934
Securities gains, net 14,719 6,200 8,348
Other 129,979 114,131 104,979
- -----------------------------------------------------------------------------------------------------------------------
Total noninterest income 676,378 615,144 593,532
- -----------------------------------------------------------------------------------------------------------------------
Noninterest expense
Staff 597,212 590,698 568,490
Net occupancy 80,170 82,985 88,198
Equipment 95,657 93,372 89,643
FDIC insurance 31,197 52,947 52,007
Intangible amortization 33,576 35,152 36,265
Advertising 34,032 33,491 31,736
Other 327,157 268,093 276,658
- -----------------------------------------------------------------------------------------------------------------------
Total noninterest expense 1,199,001 1,156,738 1,142,997
- -----------------------------------------------------------------------------------------------------------------------
Income before income tax expense 644,752 621,354 512,282
Income tax expense 225,917 213,552 161,917
- -----------------------------------------------------------------------------------------------------------------------
Net income $ 418,835 $ 407,802 $ 350,365
=======================================================================================================================
Net income per share $3.25 $3.17 $2.75
=======================================================================================================================
Dividends declared per share $1.42 $1.30 $1.18
=======================================================================================================================
See accompanying notes to the consolidated financial statements.
51
36
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------------------------
December 31, 1992 74,835 $ 74,835 $972,024 $1,108,293 -- -- -- $2,155,152
Net income -- -- -- 350,365 -- -- -- 350,365
Cash dividends declared:
Common ($1.18 per share) -- -- -- (117,334) -- -- -- (117,334)
Redeemable preferred -- -- -- (85) -- -- -- (85)
By pooled companies prior to merger--common -- -- -- (6,865) -- -- -- (6,865)
Acquisition of treasury stock -- -- -- -- (52) (3,102) -- (3,102)
Common stock issued pursuant to employee
and shareholder stock issuance plans 694 694 16,583 -- 52 3,102 -- 20,379
Common stock issued upon acquisition
of subsidiary 250 250 5,949 -- -- -- -- 6,199
Adjustment for treasury stock activity--
pooled company (6) (6) (157) -- -- -- -- (163)
Common stock issued upon conversion
of convertible subordinated debentures 487 487 12,817 -- -- -- -- 13,304
Common stock issued upon
2-for-1 stock split 51,867 51,867 (51,867) -- -- -- -- --
Adjustment of available for sale securities
to market value -- -- -- -- -- -- 42,252 42,252
Other, net -- -- (25) (130) -- -- -- (155)
- -----------------------------------------------------------------------------------------------------------------------------------
December 31, 1993 128,127 128,127 955,324 1,334,244 -- -- 42,252 2,459,947
Net income -- -- -- 407,802 -- -- -- 407,802
Cash dividends declared:
Common ($1.30 per share) -- -- -- (135,920) -- -- -- (135,920)
Redeemable preferred -- -- -- (80) -- -- -- (80)
By pooled companies prior to merger--common -- -- -- (12,218) -- -- -- (12,218)
Acquisition of treasury stock -- -- -- -- (538) (15,406) -- (15,406)
Common stock issued pursuant to employee
and shareholder stock issuance plans 319 319 3,803 -- 29 890 -- 5,012
Common stock issued upon acquisition
of subsidiaries 411 411 5,700 -- -- -- -- 6,111
Adjustment for treasury stock activity--
pooled company (3) (3) (95) -- -- -- -- (98)
Common stock issued upon conversion
of convertible subordinated debentures 19 19 280 -- -- -- -- 299
Adjustment of available for sale securities
to market value -- -- -- -- -- -- (154,047) (154,047)
Other, net -- -- (112) 83 -- -- -- (29)
- -----------------------------------------------------------------------------------------------------------------------------------
December 31, 1994 128,873 128,873 964,900 1,593,911 (509) (14,516) (111,795) 2,561,373
Net income -- -- -- 418,835 -- -- -- 418,835
Cash dividends declared:
Common ($1.42 per share) -- -- -- (183,063) -- -- -- (183,063)
Redeemable preferred -- -- -- (75) -- -- -- (75)
By pooled companies prior to merger--common -- -- -- (2,565) -- -- -- (2,565)
Acquisition of treasury stock -- -- -- -- (2,152) (76,479) -- (76,479)
Common stock issued pursuant to employee
and shareholder stock issuance plans 467 467 5,686 -- 769 24,270 -- 30,423
Common stock issued upon acquisition
of subsidiaries 578 578 13,925 -- 1,413 48,574 -- 63,077
Common stock issued upon conversion
of convertible subordinated debentures 6 6 52 -- 2 55 -- 113
Adjustment of available for sale securities
to market value -- -- -- -- -- -- 116,446 116,446
Other, net -- -- (6) (20) -- -- -- (26)
- -----------------------------------------------------------------------------------------------------------------------------------
December 31, 1995 129,924 $129,924 $984,557 $1,827,023 (477) $(18,096) $ 4,651 $2,928,059
===================================================================================================================================
See accompanying notes to the consolidated financial statements.
52
37
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
Consolidated Statement of Cash Flows
Year ended December 31 (in thousands) 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
Operating Activities:
Net income $ 418,835 $ 407,802 $ 350,365
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 46,688 25,340 63,885
Depreciation, amortization and accretion 140,086 152,906 131,562
Decrease in deferred loan fees (6,256) (1,080) (767)
Realized securities gains (14,719) (6,200) (8,348)
Net (increase) decrease in trading securities (25,768) 16,407 (9,567)
(Increase) decrease in interest receivable (21,592) (17,763) 4,699
Increase (decrease) in interest payable 16,643 15,578 (12,785)
Increase (decrease) in tax liability 24,872 (23,280) 25,744
Net (gain) loss on sales and writedowns of foreclosed property (3,414) (7,601) (6,894)
Other, net (29,055) 43,642 (59,725)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 546,320 605,751 478,169
- ---------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Net (increase) decrease in Federal funds sold and
securities purchased under resale agreements 41,124 (608,840) 982,601
Net increase in loans (996,014) (1,679,681) (1,019,521)
Proceeds from the maturity of held to maturity securities 877,760 1,033,871 3,168,930
Proceeds from the sales of held to maturity securities 123,234
Purchases of held to maturity securities (553,718) (1,667,496) (4,492,996)
Proceeds from the maturity of available for sale securities 1,011,229 1,490,818 23,020
Proceeds from the sales of available for sale securities 260,802 76,860
Purchases of available for sale securities (858,960) (452,679) (61,199)
Net increase (decrease) in short-term investments (37,291) (18,347) 121,409
Increase in property and equipment (73,964) (111,867) (115,466)
Proceeds from the sale of foreclosed property 45,150 78,477 85,823
Net cash received from purchase acquisitions 16,811 443,922
- ---------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (267,071) (1,858,884) (740,243)
- ---------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Net increase (decrease) in Federal funds purchased and
securities sold under repurchase agreements 303,230 (71,510) 347,255
Net increase (decrease) in deposits 217,192 1,095,535 (846,379)
Net increase (decrease) in short-term borrowings (543,414) 666,006 571,786
Payments on long-term debt (70,572) (5,390) (44,181)
Proceeds from the issuance of long-term debt 91,287 30,350 167,313
Payments on capital lease obligations (1,188) (1,077) (983)
Decrease in redeemable preferred stock (181) (13) (93)
Cash dividends paid (173,322) (144,908) (119,080)
Common stock issued pursuant to various employee and
shareholder stock issuance plans 30,423 5,012 20,379
Acquisition of treasury stock (76,479) (15,406) (3,102)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities (223,024) 1,558,599 92,915
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and due from banks 56,225 305,466 (169,159)
Cash and due from banks at beginning of year 2,119,579 1,814,113 1,983,272
- ---------------------------------------------------------------------------------------------------------------------------
Cash and due from banks at end of year $2,175,804 $2,119,579 $1,814,113
===========================================================================================================================
See accompanying notes to the consolidated financial statements.
For the years ended December 31, 1995, 1994 and 1993, interest
paid totaled $1,090,350, $812,272, and $733,050, respectively.
Income taxes paid totaled $199,600 in 1995, $214,698 in 1994, and
$172,747 in 1993. Additional common stock was issued upon the
conversion of $118 of the Corporation's convertible subordinated
debt for the year ended December 31, 1995, $311 for the year ended
December 31, 1994, and $13,748 for the year ended December 31,
1993. Securities transferred to available for sale securities
totaled approximately $4.0 billion in 1995 and $5.2 billion in
1993. Loans transferred to foreclosed property totaled $11 million
in 1995, $19 million in 1994, and $23 million in 1993 . In 1995,
assets and liabilities of purchased subsidiaries at dates of
acquisition included investment securities of $149 million, loans
of $169 million, other assets of $56 million, deposits of $331
million and other liabilities of $7 million. In 1993, assets and
liabilities of purchased subsidiaries at dates of acquisition
included investment securities of $186 million, loans of $1.0
billion, cash of $487 million, other assets of $477 million,
deposits of $2.1 billion and other liabilities of $37 million.
53
38
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(amounts in thousands except per share data and when otherwise indicated)
1 SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
Business Boatmen's Bancshares Inc. ("Corporation"), is a multi-bank holding
company, headquartered in St. Louis, Missouri. At December 31, 1995, the
Corporation owned substantially all of the capital stock of 55 subsidiary
banks, including a federal savings bank, and provides commercial, retail and
correspondent banking services from over 500 banking offices and over 1,000
ATM's in Missouri, Arkansas, Illinois, Iowa, Kansas, New Mexico, Oklahoma,
Tennessee and Texas. At December 31, 1995, the Corporation had consolidated
assets of $33.7 billion, making it one of the 30 largest bank holding
companies in the United States. The Corporation's largest banking subsidiary,
The Boatmen's National Bank of St. Louis, had total assets of $11.2 billion
at December 31, 1995. The Corporation's other businesses include a trust
company, a mortgage banking company, a credit life insurance company, a
credit card bank and an insurance agency. The Corporation, through its
subsidiary, Boatmen's Trust Company, is among the twenty largest providers of
personal trust services in the nation, providing personal trust services
within its banks' market areas and institutional and pension related trust
services on a national scale. The Corporation's mortgage banking activities
are conducted through Boatmen's National Mortgage, Inc., a full service
mortgage banking company which originates home loans through company operated
offices as well as through a network of over 300 correspondents located in
the southern and mid-western United States. Boatmen's National Mortgage, Inc.
presently services mortgage loans totaling approximately $23 billion. The
traditional banking line of business represents the primary source of
earnings for the Corporation, followed by the trust and mortgage banking
activities.
Basis of Presentation The accounting and reporting policies of the
Corporation and its subsidiaries conform to generally accepted accounting
principles. The preparation of financial statements requires management of
the Corporation to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. While the
financial statements reflect management's best estimates and judgment, actual
results could differ from estimates. The following is a description of the
Corporation's more significant policies.
The consolidated financial statements include the accounts of the
Corporation and its subsidiaries after elimination of all material
intercompany balances and transactions. Certain amounts for 1994 and 1993 were
reclassified to conform with statement presentation for 1995. The
reclassifications have no effect on stockholders' equity or net income as
previously reported. Prior period financial statements are also restated to
include the accounts of companies which are acquired and accounted for as
poolings of interests. Results of operations of companies which are acquired
and subject to purchase accounting are included from the dates of acquisition.
In accordance with the purchase method of accounting, the assets and
liabilities of purchased companies are stated at estimated fair values at the
date of acquisition, and the excess of cost over fair value of net assets
acquired is being amortized on a straight-line basis over periods benefitted.
Held to Maturity Securities These securities are purchased with the original
intent to hold to maturity and events which may be reasonably anticipated are
considered when determining the Corporation's intent and ability to hold to
maturity. Securities meeting such criteria at date of purchase and as of the
balance sheet date are carried at cost, adjusted for amortization of premiums
and accretion of discounts. Gains or losses on the disposition of held to
maturity securities, if any, are based on the adjusted book value of the
specific security.
Available for Sale Securities Debt and equity securities to be held for
indefinite periods of time and not intended to be held to maturity are
classified as available for sale and carried at market value with net
unrealized gains and losses, net of tax, reflected as a component of
stockholders' equity until realized. Securities held for indefinite periods
of time include securities that may be sold to meet liquidity needs or in
response to significant changes in interest rates or prepayment risks as part
of the Corporation's overall asset/liability management strategy.
Trading Securities Trading securities, which primarily consist of debt
securities, are held for resale within a short period of time and are stated
at market value. These securities are held in inventory for sale to
institutional and retail customers. Investment banking revenues, a component
of noninterest income, include the net realized gain or loss and market value
adjustments of the trading securities and commissions on bond dealer and
retail brokerage operations.
Interest and Fees on Loans Interest on loans is accrued based upon the
principal amount outstanding. It is the Corporation's policy to discontinue
the accrual of interest when full collectibility of principal or interest on
any loan is doubtful.
Interest income on such loans is subsequently 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.
Nonrefundable loan fees are deferred and recognized as income over the life
of the loan as an adjustment of the yield. Direct costs associated with
originating loans are deferred and amortized as a yield adjustment over the
life of the loan. Commitment fees are deferred and recognized as noninterest
income over the commitment period.
Reserve for Loan Losses The reserve represents provisions charged to expense
less net loan charge-offs. The provision is based upon economic conditions,
historical loss and collection experience, risk characteristics of the
portfolio, underlying collateral values, credit concentrations, industry
risk, degree of off-balance sheet risk and other factors which, in
management's judgment, deserve current recognition.
Specific reserves are established for any impaired commercial, commercial
real estate, and real estate construction loan for which the recorded
investment in the loan exceeds the measured value of the loan. Loans subject
to impairment valuation are defined as nonaccrual loans, exclusive of smaller
balance
54
39
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
homogenous loans such as home equity, credit card, installment and 1-4 family
loans. The values of loans subject to impairment valuation are determined
based on the present value of expected future cash flows, the market price of
the loans, or the fair values of the underlying collateral if the loan is
collateral dependent.
The charge-off policy of the Corporation varies with respect to the
category of, and specific circumstances surrounding, each loan under
consideration. The Corporation's policy with respect to consumer loans is
generally to charge off all such loans when deemed to be uncollectible or 120
days past due, whichever comes first. With respect to commercial, real estate,
and other loans, charge-offs are made on the basis of management's ongoing
evaluation of nonperforming and criticized loans.
Foreclosed Property The maximum carrying value for real estate acquired
through foreclosure is the lower of the recorded investment in the loan for
which the property previously served as collateral or the current appraised
value of the foreclosed property, net of the estimated selling costs. Any
writedowns required prior to actual foreclosure are charged to the reserve
for loan losses. Subsequent to foreclosure, losses on the periodic
revaluation of the property are charged to current period earnings as
noninterest expense. Gains and losses resulting from the sale of foreclosed
property are recognized in current period earnings. Costs of maintaining and
operating foreclosed property are expensed as incurred and revenues related
to foreclosed property are recorded as an offset to operating expense.
Expenditures to complete or improve foreclosed properties are capitalized if
the expenditures are expected to be recovered upon ultimate sale of the
property.
Mortgage Banking Revenues Mortgage loans held for sale are valued at the
lower of cost or aggregate market value. Gains and losses on sales of
mortgage loans are recognized at settlement dates and are determined by the
difference between sales proceeds and the carrying value of the loans. The
Corporation generally sells mortgage loans without recourse.
Income from the servicing of mortgage loans is recognized in mortgage
banking revenues, a component of noninterest income, concurrent with the
receipt of the related mortgage payments on the loans serviced. Prior to 1995,
capitalization of mortgage servicing rights was limited to servicing purchased
from third parties. Effective with the Corporation's adoption of Statement of
Financial Accounting Standards No. 122, "Accounting for Mortgage Servicing
Rights" in 1995, the value of purchased and originated mortgage servicing
rights is capitalized and amortized in proportion to, and over the period of
estimated net servicing income as a reduction of mortgage banking revenues.
The value of mortgage servicing rights is determined based on the present
value of estimated expected future cash flows, using assumptions as to current
market discount rate, prepayment speeds and servicing costs per loan. Mortgage
servicing rights are stratified by loan type and interest rate for purposes of
impairment measurement. Loan types include government, conventional, private,
and adjustable-rate mortgage loans. Impairment losses are recognized to the
extent the unamortized mortgage servicing right for each stratum exceeds the
current market value, as reductions in the carrying value of the asset,
through the use of a valuation allowance, with a corresponding reduction to
mortgage banking revenues. The Corporation recognizes gains or losses on the
sales of mortgage servicing rights when all risks and rewards have been
irrevocably passed to the purchaser.
Trust Assets and Fees The Corporation's trust function manages assets in a
fiduciary or agent capacity; accordingly, such assets are not included in the
consolidated balance sheet of the Corporation. Fee income derived from
managing trust assets is recognized on an accrual basis.
Segregated Assets Segregated assets represent loans acquired in an
FDIC assisted transaction that are covered under a loss sharing arrangement
with the FDIC and possess more than the normal risk of collectibility. These
assets consist of loans that at acquisition were or have since become
classified as nonperforming loans or foreclosed property and are segregated
from other performing assets covered under the loss sharing arrangement.
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. Income
from the segregated asset pool is generally recognized on a cash basis as a
component of noninterest income. If collection of the unguaranteed portion of
the segregated asset is doubtful, income payments are applied to reduce the
principal balance to the extent of the government guarantee.
Interest Rate Swaps Interest rate swap transactions are utilized as part of
the Corporation's overall asset/liability management strategy to alter the
rate sensitivity characteristics of various assets and liabilities. Although
the notional amounts of these transactions are not reflected in the financial
statements, the interest differentials are recognized on an accrual basis
over the terms of the agreements as an adjustment to interest income or
interest expense of the related asset or liability. To qualify for accrual
accounting, the swaps must be designated to interest-bearing assets or
liabilities and alter their interest rate characteristics over the term of
the agreements. If an interest rate swap is terminated prior to maturity, any
realized gains and losses are deferred and amortized over the remaining life
of the contract. In the event the designated asset or liability is sold or
extinguished prior to maturity, fair value recognition is required and any
gains or losses are recognized in income.
Interest rate swaps entered into for trading purposes on the behalf of
customers are accounted for on a mark to market basis. Accordingly, realized
and unrealized gains and losses associated with this activity are reflected
as investment banking revenues, a component of noninterest income.
Foreign Exchange Contracts The Corporation's banking subsidiaries trade
foreign currencies on behalf of their customers and for their own account
and, by policy, do not maintain significant open positions. Foreign exchange
contracts are valued at the current prevailing rates of exchange and any
profit or loss resulting from such valuation is included in current
operations as a component of investment banking revenues.
Property and Equipment Property and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation and amortization are
recognized principally by the straight-line method applied over the estimated
useful lives of the assets, which are 10 to 50 years for buildings and 3 to
25 years for fixtures and equipment. Leasehold improvements are generally
amortized over the lease term, not to exceed 10 years.
Intangible Assets Goodwill arising from acquisitions consummated subsequent
to 1985 is being amortized on a straight-line basis over the periods
benefitted, ranging from 4-15 years. For acquisitions consummated in 1983 and
1985, goodwill is being amortized on a straight-line basis over 25 years, and
goodwill related to acquisitions prior to 1983 is being amortized on a
straight-line basis over 40 years. Core deposit intangibles and credit card
premiums are amortized over their useful economic lives on an accelerated
basis, not to exceed 10 years.
55
40
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
Income Taxes The Corporation accounts for income taxes under the asset and
liability method. Income tax expense is reported as the total of current income
taxes payable and the net change in deferred income taxes provided for
temporary differences. Deferred income taxes reflect the net tax effects of
temporary differences between the carrying values of assets and liabilities for
financial reporting purposes and the values used for income tax purposes.
Deferred income taxes are recorded at the statutory Federal and state tax rates
in effect at the time that the temporary differences are expected to reverse.
The Corporation files a consolidated Federal income tax return which
includes all its subsidiaries except for the credit life insurance company.
Income tax expense is allocated among the parent company and its subsidiaries
as if each had filed a separate tax return.
Net Income Per Share Net income per share is calculated by dividing net
income (after deducting dividends on redeemable preferred stock) by the
weighted average number of common shares outstanding. Common stock
equivalents have no material dilutive effect.
The net income per share calculation for 1995, 1994 and 1993 is
summarized as follows:
=============================================================================================================
(in thousands except share data) 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------
Net income $418,835 $407,802 $350,365
Less preferred dividends declared 75 80 85
- ------------------------------------------------------------------------------------------------------------
Net income available to
common shareholders $418,760 $407,722 $350,280
=============================================================================================================
Average shares outstanding 129,033,936 128,651,858 127,304,292
- ------------------------------------------------------------------------------------------------------------
Net income per share $3.25 $3.17 $2.75
=============================================================================================================
2 CHANGES IN ACCOUNTING POLICIES
On January 1, 1995, The Corporation adopted Financial Accounting Standards
No. 114 (SFAS No. 114), "Accounting by Creditors for Impairment of a Loan"
and No. 118 (SFAS No. 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. SFAS No. 114 and SFAS No.
118 do not apply to smaller balance, homogenous loans, which the Corporation
has identified as consumer loans, such as home equity, credit card,
installment and 1-4 family residential loans. Adoption of these standards had
no material impact on the Corporation's loan quality statistics or reserve
levels and had no effect on 1995 earnings.
In the second quarter of 1995, the Corporation adopted Statement of
Financial Accounting Standards No. 122 (SFAS No. 122), "Accounting for
Mortgage Servicing Rights." SFAS No. 122 requires capitalization of purchased
mortgage servicing rights as well as internally originated mortgage servicing
rights. These mortgage servicing rights are amortized in proportion to, and
over the period of estimated net servicing income. Adoption of SFAS No. 122
increased mortgage banking revenues in 1995 by approximately $5.8 million, net
of amortization, and increased net income by approximately $3.6 million.
In 1994, the Corporation adopted Financial Accounting Standards No. 112
(SFAS No. 112), "Employers' Accounting for Postemployment Benefits." SFAS No.
112 requires recognition of the cost to provide postemployment benefits on an
accrual basis. The Corporation's existing accounting policies were in general
compliance with the requirements of SFAS No. 112. Accordingly, adoption of
this standard had no material impact on the level of postemployment expense.
3 ACQUISITIONS
Purchase Acquisitions Results of operations of companies which are acquired
and subject to purchase accounting treatment are included from dates of
acquisition. Three purchase acquisitions were consummated in 1995. Disclosure
of pro forma condensed results of operations as if these acquisitions were
consummated as of the beginning of the period have been omitted due to the
immaterial effect on operations.
Other information regarding purchase acquisitions is summarized as
follows:
============================================================================================================
Core
Acquired Company Acquisition Purchase Deposit
(amounts in millions) Date Price Assets Goodwill Intangible
- ------------------------------------------------------------------------------------------------------------
1995
Salem Community
Bancorp, Inc. 2/28/95 $ 8.4 $ 79.2 $ 4.0 $ .8
West Side Bancshares,
Inc. 4/1/95 17.5 142.4 4.5 1.3
Citizens Bancshares
Corporation 10/27/95 41.0 224.1 19.5
- ------------------------------------------------------------------------------------------------------------
Total $ 66.6 $ 445.7 $28.0 $ 2.0
============================================================================================================
1994
Eagle Management and
Trust Company 5/6/94 $ 3.4 $ 3.8 $ 2.3
============================================================================================================
1993
First City-El Paso
(FDIC assisted) 3/5/93 $ 14.0 $ 340.0 $ 9.6 $13.7
Missouri Bridge Bank, N.A.
(FDIC assisted) 4/23/93 15.8 1,100.0 18.9 20.0
Cimarron Federal Savings
(RTC assisted) 5/26/93 13.1 430.0 13.1
FCB Bancshares, Inc. 8/2/93 25.0 185.0 15.1 2.3
- ------------------------------------------------------------------------------------------------------------
Total $ 67.9 $2,055.0 $43.6 $49.1
============================================================================================================
Pooling Acquisitions When material, results of operations of companies which
are acquired and subject to pooling of interests accounting are reflected on
a combined basis from the earliest period presented.
On January 31, 1995, the Corporation consummated the acquisition of
National Mortgage Company and certain affiliates (National Mortgage),
resulting in the issuance of approximately 5.0 million shares of common stock.
National Mortgage, subsequently renamed Boatmen's National Mortgage, Inc.,
headquartered in Memphis, Tennessee, is a full-service mortgage banking
company and presently services mortgage loans totaling approximately $23
billion. Nonrecurring after-tax merger expenses related to this acquisition
totaled $7.0 million or $.06 per share, comprised primarily of investment
banking and other professional fees, severance costs and abandonment of
equipment and software, and were recognized in the first quarter of 1995.
56
41
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
On January 31, 1995, the Corporation consummated the acquisition of
Dalhart Bancshares, Inc. (Dalhart), resulting in the issuance of approximately
.7 million shares of common stock. Dalhart, with assets of approximately $140
million, is located in north Texas and was merged into the Corporation's
Amarillo subsidiary.
On February 28, 1995, the Corporation consummated the acquisition of
Worthen Banking Corporation (Worthen), headquartered in Little Rock, Arkansas,
resulting in the issuance of approximately 17.1 million shares of common
stock. Worthen, subsequently renamed Boatmen's Arkansas, Inc., was the second
largest banking organization in Arkansas, with approximately $3.5 billion in
assets. Nonrecurring after-tax merger expenses related to this acquisition
totaled $12.3 million or $.10 per share, comprised primarily of investment
banking and other professional fees, severance costs, obsolete equipment
write-offs and estimated costs to close duplicate branches, and were
recognized in the first quarter of 1995.
On May 31, 1995, the Corporation consummated the acquisition of First
National Bank in Pampa (Pampa), resulting in the issuance of approximately
1.35 million shares of common stock. At acquisition, Pampa had approximately
$166 million in assets and was merged into the Corporation's Amarillo
subsidiary.
On March 31, 1994, the Corporation consummated the acquisition of Woodland
Bancorp, Inc. (Woodland), resulting in the issuance of approximately .4
million shares of common stock. Woodland, a retail banking organization with
assets of approximately $65 million, is located in Tulsa, Oklahoma and was
merged into the Corporation's Oklahoma bank. The results of operations of
Woodland, which qualified as a pooling of interests, are not included in the
consolidated financial statements prior to January 1, 1994, due to the
immaterial effect on the Corporation's financial results.
On November 30, 1993, the Corporation consummated the acquisition of First
Amarillo Bancorporation, Inc. (Amarillo), resulting in the issuance of
approximately 5.9 million shares of common stock. Amarillo, subsequently
renamed Boatmen's Texas, Inc., had approximately $.8 billion in assets at
acquisition, and is headquartered in Amarillo, Texas. Nonrecurring after-tax
merger expenses related to this acquisition totaled $3.8 million, comprised
primarily of investment banking fees, compensation-related expense and
abandonment of equipment and software.
Net interest income and net income as previously reported for the
Corporation and the four pooling-of-interests acquisitions completed in 1995
are summarized as follows:
=====================================================================================
(in millions) 1994 1993
- -------------------------------------------------------------------------------------
Net interest income:
Boatmen's Bancshares, Inc. $1,024.4 $ 974.5
Worthen Banking Corporation 141.3 132.8
Other pooling acquisitions 22.6 18.3
- -------------------------------------------------------------------------------------
Boatmen's Bancshares, Inc. restated $1,188.3 $1,125.6
- -------------------------------------------------------------------------------------
Net income:
Boatmen's Bancshares, Inc. $ 355.3 $ 317.4
Worthen Banking Corporation 47.6 32.3
Other pooling acquisitions 4.9 .7
- -------------------------------------------------------------------------------------
Boatmen's Bancshares, Inc. restated $ 407.8 $ 350.4
=====================================================================================
Pending Acquisitions The Corporation currently is in the process of
completing two acquisitions aggregating $7.6 billion in assets. Information
related to these acquisitions is summarized below.
On August 25, 1995, the Corporation announced a definitive agreement to
acquire Fourth Financial Corporation (Fourth Financial), headquartered in
Wichita, Kansas, in a transaction to be accounted for as a pooling of
interests. Under terms of the agreement, the Corporation will exchange one
share of its common stock for each Fourth Financial common share, resulting
in the issuance of approximately 28.5 million shares of common stock. In
addition, the Corporation will exchange one share of new preferred stock for
each Fourth Financial preferred share, resulting in the issuance of
approximately 248,000 shares ofpreferred stock. The preferred stock is
convertible into approximately 3.4 million shares of common stock. Fourth
Financial is the largest banking company in Kansas, with approximately $7.5
billion in assets, operating 87 retail banking offices in Kansas and 56 in
Oklahoma. The acquisition is expected to be completed early in the first
quarter of 1996.
On August 30, 1995, the Corporation announced a definitive agreement to
acquire Tom Green National Bank, located in San Angelo, Texas, in a stock
transaction to be accounted for as a purchase. The acquisition of Tom Green
National Bank, with assets of approximately $80 million, will result in the
issuance of approximately .2 million shares of common stock from treasury
stock acquired in the open market. This transaction is expected to be
completed in the first quarter of 1996.
4 HELD TO MATURITY SECURITIES
The amortized cost and approximate market value of held to maturity
securities are summarized as follows:
==============================================================================================================
Unrealized
December 31, 1995 Amortized ----------------------------- Market
(in thousands) Cost Gains Losses Value
- --------------------------------------------------------------------------------------------------------------
State and municipal $909,056 $51,584 $(917) $959,723
Other debt securities 5,691 5,691
- --------------------------------------------------------------------------------------------------------------
Total held to maturity
securities $914,747 $51,584 $(917) $965,414
==============================================================================================================
Unrealized
December 31, 1994 Amortized ----------------------------- Market
(in thousands) Cost Gains Losses Value
- --------------------------------------------------------------------------------------------------------------
U.S. treasury $ 876,011 $ 505 $ (31,682) $ 844,834
Federal agencies:
Mortgage-backed:
Collateralized mortgage
obligations 1,275,850 (104,363) 1,171,487
Adjustable-rate mortgages 636,028 429 (25,987) 610,470
Fixed rate pass-through 460,603 566 (25,814) 435,355
- --------------------------------------------------------------------------------------------------------------
Total mortgage-backed 2,372,481 995 (156,164) 2,217,312
Other agencies 653,904 85 (37,640) 616,349
- --------------------------------------------------------------------------------------------------------------
Total U.S. treasury
and agencies 3,902,396 1,585 (225,486) 3,678,495
State and municipal 861,385 28,535 (9,916) 880,004
Other debt securities 453,187 19 (45,775) 407,431
- --------------------------------------------------------------------------------------------------------------
Total held to maturity
securities $5,216,968 $30,139 $(281,177) $4,965,930
==============================================================================================================
Effective December 15, 1995, the Corporation transferred approximately
$4.0 billion of held to maturity securities to available for sale as permitted
under the Statement of Financial Accounting Standards Board Special Report,
"A Guide to
57
42
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities," issued in November 1995. The amortized cost of such
securities exceeded fair value by approximately $9.3 million, resulting in an
after-tax decrease to stockholders' equity of $5.8 million. The transfer had
no effect on 1995 earnings.
The maturity distribution of held to maturity securities at December 31,
1995 is summarized as follows:
=================================================================================
(in thousands) Amortized Cost Market Value
- ---------------------------------------------------------------------------------
Due in one year or less $ 43,348 $ 43,713
Due after one year through five years 165,823 171,759
Due after five years through ten years 414,971 444,658
Due after ten years 290,605 305,284
- ---------------------------------------------------------------------------------
Total held to maturity securities $914,747 $965,414
=================================================================================
There were no sales of held to maturity securities in 1995 or 1994. Gross
realized gains in 1993 totaled $9.6 million and gross realized losses were
$1.3 million.
5 AVAILABLE FOR SALE SECURITIES
The amortized cost and approximate market value of available for sale
securities are summarized as follows:
=======================================================================================
Unrealized
December 31, 1995 Amortized ----------------------- Market
(in thousands) Cost Gains Losses Value
- ---------------------------------------------------------------------------------------
U.S. treasury $1,369,407 $14,285 $ (2,688) $1,381,004
Federal agencies:
Mortgage-backed:
Collateralized mortgage
obligations 1,979,914 8,185 (26,129) 1,961,970
Adjustable-rate mortgages 2,380,737 11,178 (11,384) 2,380,531
Fixed rate pass-through 493,557 8,592 (1,764) 500,385
- ---------------------------------------------------------------------------------------
Total mortgage-backed 4,854,208 27,955 (39,277) 4,842,886
Other agencies 982,383 6,332 (1,702) 987,013
- ---------------------------------------------------------------------------------------
Total U.S. treasury
and agencies 7,205,998 48,572 (43,667) 7,210,903
Other debt securities 753,378 6,032 (6,143) 753,267
- ---------------------------------------------------------------------------------------
Total debt securities 7,959,376 54,604 (49,810) 7,964,170
Equity securities 97,022 3,235 (612) 99,645
- ---------------------------------------------------------------------------------------
Total available for sale
securities $8,056,398 $57,839 $(50,422) $8,063,815
=======================================================================================
Unrealized
December 31, 1994 Amortized ---------------------- Market
(in thousands) Cost Gains Losses Value
- ---------------------------------------------------------------------------------------
U.S. treasury $ 892,205 $1,703 $ (18,358) $ 875,550
Federal agencies:
Mortgage-backed:
Collateralized mortgage
obligations 803,769 87 (48,354) 755,502
Adjustable-rate mortgages 2,106,221 280 (98,053) 2,008,448
Fixed rate pass-through 171,077 2,397 (3,961) 169,513
- ---------------------------------------------------------------------------------------
Total mortgage-backed 3,081,067 2,764 (150,368) 2,933,463
Other agencies 79,669 (4,205) 75,464
- ---------------------------------------------------------------------------------------
Total U.S. treasury
and agencies 4,052,941 4,467 (172,931) 3,884,477
Other debt securities 237,323 71 (14,567) 222,827
- ---------------------------------------------------------------------------------------
Total debt securities 4,290,264 4,538 (187,498) 4,107,304
Equity securities 64,451 1,209 65,660
- ---------------------------------------------------------------------------------------
Total available for sale
securities $4,354,715 $5,747 $(187,498) $4,172,964
=======================================================================================
The maturity distribution of available for sale securities at December 31,
1995 is summarized as follows:
======================================================================================
(in thousands) Amortized Cost Market Value
- --------------------------------------------------------------------------------------
Due in one year or less $ 762,553 $ 764,077
Due after one year through five years 1,418,278 1,430,969
Due after five years through ten years 115,258 115,805
Due after ten years 71,080 72,502
Mortgage-backed securities 5,592,207 5,580,817
- --------------------------------------------------------------------------------------
Total debt securities 7,959,376 7,964,170
Equity securities 97,022 99,645
- --------------------------------------------------------------------------------------
Total available for sale securities $8,056,398 $8,063,815
======================================================================================
Available for sale securities at December 31, 1995 include mortgage-backed
government guaranteed agency securities of $4.9 billion and private issue
mortgage-backed securities totaling $.7 billion.
Sales and redemptions of available for sale securities resulted in
realized gains and losses as follows:
==========================================================================
Year ended December 31 (in thousands) 1995 1994
- --------------------------------------------------------------------------
Debt securities:
Realized gains $6,646 $2,673
Realized losses (10)
- --------------------------------------------------------------------------
Net realized gains $6,636 $2,673
==========================================================================
Equity securities:
Realized gains $8,052 $3,527
Realized losses (10)
- --------------------------------------------------------------------------
Net realized gains $8,042 $3,527
==========================================================================
Held to maturity and available for sale securities with book values
totaling $4,479,815 and $4,656,576 at December 31, 1995 and 1994,
respectively, were pledged to secure public deposits, trust deposits, and for
other purposes required by law.
6 LOANS
A summary of loan categories is as follows:
==========================================================================
December 31 (in thousands) 1995 1994
- --------------------------------------------------------------------------
Domestic:
Commercial $ 9,623,260 $ 8,767,109
Real estate-mortgage 3,747,581 3,629,014
Real estate-construction 921,601 868,279
Consumer 5,344,425 5,302,065
Lease financing 169,230 136,814
- --------------------------------------------------------------------------
Total domestic 19,806,097 18,703,281
Foreign loans 20,876 19,134
- --------------------------------------------------------------------------
Total loans 19,826,973 18,722,415
Less unearned income 63,729 66,904
- --------------------------------------------------------------------------
Total loans, net $19,763,244 $18,655,511
==========================================================================
58
43
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
Nonperforming assets, consisting of nonperforming loans and foreclosed
property, are summarized as follows:
==========================================================================
December 31 (in thousands) 1995 1994
- --------------------------------------------------------------------------
Nonaccrual $133,816 $111,846
Restructured 7,439 7,090
Past due 90 days or more 26,262 17,000
- --------------------------------------------------------------------------
Total nonperforming loans 167,517 135,936
Foreclosed property 31,597 62,434
- --------------------------------------------------------------------------
Total nonperforming assets $199,114 $198,370
==========================================================================
Gross interest income which would have been recorded, if all nonaccrual
and restructured loans at year end had been current in accordance with
original terms, amounted to $8.6 million in 1995 and $10.2 million in 1994.
Actual interest recorded amounted to $3.8 million in 1995 and $2.6 million in
1994.
At December 31, 1995, the recorded investment in loans that are considered
to be impaired under SFAS No. 114 and SFAS No. 118 totaled approximately $125.9
million, and the reserve for loan losses included approximately $1.8 million
allocated to $8.6 million of impaired loans. In 1995, impaired loans averaged
$93.5 million and cash basis interest recognition on these loans, during the
time that they were impaired, totaled less than $1 million.
Following is a summary of activity for 1995 regarding loans extended to
directors and executive officers of the Corporation and its largest
subsidiaries or to enterprises in which said individuals had beneficial
interests. Such loans were made in the normal course of business on
substantially the same terms, including interest rates and collateral, as
those prevailing at the same time for comparable transactions with other
persons.
=========================================================================================================================
(in thousands)
- -------------------------------------------------------------------------------------------------------------------------
Outstanding Net change from changes Outstanding
at 12/31/94 Additions Repayments in director status at 12/31/95
- -------------------------------------------------------------------------------------------------------------------------
$190,736 $54,331 $(22,824) $(52,350) $169,893
=========================================================================================================================
The following summarizes activity in the reserve for loan losses:
==========================================================================================================================
December 31 (in thousands) 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------
Balance, beginning of year $376,618 $376,265 $334,706
Loans charged off (88,131) (72,692) (80,401)
Recoveries on loans
previously charged off 41,636 46,832 44,326
- --------------------------------------------------------------------------------------------------------------------------
Net charge-offs (46,495) (25,860) (36,075)
Provision for loan losses 46,688 25,340 63,885
Loan reserve from acquisitions 6,173 873 13,749
- --------------------------------------------------------------------------------------------------------------------------
Balance, end of year $382,984 $376,618 $376,265
==========================================================================================================================
7 PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
======================================================================================
December 31 (in thousands) 1995 1994
- --------------------------------------------------------------------------------------
Land $ 87,724 $ 84,974
Buildings 457,858 425,356
Buildings under capital leases 48,666 48,666
Furniture, fixtures and equipment 557,075 511,695
Leasehold improvements 94,501 94,158
Construction in progress 9,029 28,333
- --------------------------------------------------------------------------------------
Total 1,254,853 1,193,182
Less accumulated depreciation/amortization 616,908 555,682
- --------------------------------------------------------------------------------------
Net property and equipment $ 637,945 $ 637,500
======================================================================================
Depreciation and amortization charged to expense in 1995, 1994 and 1993
amounted to $79,446, $74,585, and $66,670, respectively.
At December 31, 1995, the Corporation was obligated under long-term
leases, principally related to the use of land, buildings, and equipment in
banking operations. The following table summarizes future minimum rental
payments required under leases which have initial or remaining noncancellable
lease terms in excess of one year.
======================================================================================
(in thousands)
- --------------------------------------------------------------------------------------
Period Capital leases Operating leases
- --------------------------------------------------------------------------------------
1996 $ 4,972 $ 25,517
1997 4,972 21,888
1998 4,952 17,778
1999 4,893 16,135
2000 4,957 12,917
After 2000 50,139 64,584
- --------------------------------------------------------------------------------------
Total minimum lease payments 74,885 $158,819
========
Less amount representing interest 35,975
- -------------------------------------------------------------
Present value of minimum lease payments $38,910
=============================================================
Lease provisions that would cause rentals to vary from those reflected
above are not material. Property taxes, insurance, and maintenance expense
related to property under lease are principally paid by the Corporation. Total
rental expense for all operating leases amounted to $28,998, $30,401, and
$36,839 in 1995, 1994, and 1993, respectively.
In March, 1995, the Financial Accounting Standards Board issued Statement
of Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets to be Disposed Of." This statement requires that long-lived assets and
certain identifiable intangibles to be held and used by a company be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If such conditions exist,
companies must estimate the future cash flows from use of the asset and, if
the sum of the undiscounted estimated future cash flows is less than the
carrying amount of the asset, an impairment loss would be recognized. This
pronouncement becomes effective in 1996 and is not expected to have a
material effect on the Corporation's financial results.
59
44
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
8 INTANGIBLE ASSETS
Intangible assets, net of accumulated amortization are summarized as
follows:
======================================================================================
December 31 (in thousands) 1995 1994
- --------------------------------------------------------------------------------------
Goodwill $205,900 $193,015
Core deposit premium 60,024 74,704
Mortgage servicing rights 65,649 38,397
Credit card premium 13,932 2,980
- --------------------------------------------------------------------------------------
Total intangible assets, net $345,505 $309,096
======================================================================================
Intangible assets amortization charged to noninterest expense in 1995,
1994, and 1993 amounted to $33,576, $35,152, and $34,105, respectively.
Amortization of mortgage servicing rights charged to mortgage banking
revenues in 1995, 1994, and 1993 totaled $9,281, $16,173, and $17,108,
respectively. In 1995, the Corporation capitalized approximately $40 million
of mortgage servicing rights, and sold mortgage servicing rights with a net
book value of approximately $3.9 million. The fair value of mortgage
servicing rights at December 31, 1995 was approximately $85.3 million. At
December 31, 1995, no impairment writedown was required as the fair value of
the mortgage servicing rights exceeded carrying value.
9 SEGREGATED ASSETS
Included in other assets at December 31, 1995 are segregated assets
totaling $103.3 million net of a valuation allowance of $13.3 million. As part
of the regulatory assisted acquisition of Missouri Bridge Bank, N.A. (Bridge
Bank), 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 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.
Segregated assets are those loans acquired from the Bridge Bank and
covered under the loss-sharing arrangement with the FDIC that possess more
than the normal risk of collectibility. These assets consist of loans that at
acquisition were or have since become classified as nonperforming loans or
foreclosed property.
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 notrepresent 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.
A summary of activity regarding the segregated asset pool for the years
ended December 31, 1995 and 1994, is provided below.
=============================================================================================================
Principal Allowance Principal
(in millions) balance for losses balance, net
- -------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 $266.6 $18.4 $248.2
Charge-offs (14.9) (3.0)
Recoveries 1.3
Net transfers 40.9
Payments on segregated assets (98.7)
- -------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 193.9 16.7 177.2
Charge-offs (27.7) (5.5)
Recoveries 2.1
Net transfers (17.2)
Payments on segregated assets (32.4)
- -------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 $116.6 $13.3 $103.3
=============================================================================================================
10 DEPOSITS
Deposits are summarized as follows:
======================================================================================
December 31 (in thousands) 1995 1994
- --------------------------------------------------------------------------------------
Demand deposits $ 5,862,531 $ 5,256,494
Savings deposits 1,718,989 2,058,179
Interest-bearing transaction accounts 9,308,394 8,084,540
Time deposits $100,000 and over 1,471,920 2,667,071
Retail time deposits 7,570,296 7,317,789
- --------------------------------------------------------------------------------------
Total deposits $25,932,130 $25,384,073
======================================================================================
11 RESERVES ON DEPOSITS
Required reserves on deposits, included in the caption "Cash and due from
banks," were $344,532 and $591,073 at December 31, 1995 and 1994,
respectively.
12 FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
Federal funds purchased and securities sold under repurchase agreements
generally represent borrowings with overnight maturities. Information
relating to these borrowings is summarized as follows:
==================================================================================================
(in thousands) 1995 1994 1993
- --------------------------------------------------------------------------------------------------
Balance:
Average $2,390,465 $2,859,327 $1,872,653
Year end 2,361,204 2,053,609 2,125,119
Maximum month-end
balance during year 2,814,987 3,856,371 2,690,369
==================================================================================================
Interest rate:
Average 5.57% 4.04% 2.80%
==================================================================================================
Year end 5.33% 5.31% 2.59%
==================================================================================================
60
45
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
13 SHORT-TERM BORROWINGS
Short-term borrowings are summarized as follows:
======================================================================================
December 31 (in thousands) 1995 1994
- --------------------------------------------------------------------------------------
Short-term bank notes $1,265,000 $1,550,000
Commercial paper 49,497 43,531
Other 45,496 309,651
- --------------------------------------------------------------------------------------
Total $1,359,993 $1,903,182
======================================================================================
Information relating to short-term bank notes is summarized as follows:
======================================================================================
(in thousands) 1995 1994
- --------------------------------------------------------------------------------------
Average balance $1,648,178 $ 921,878
Maximum month-end
balance during year 2,015,000 1,650,000
======================================================================================
Interest rate:
Average 6.29% 4.19%
======================================================================================
Year end 6.10% 5.80%
======================================================================================
In 1995, approximately $.9 million of the short-term bank notes were
converted to fixed rate debt through the use of interest rate swaps.
Commercial paper is issued by the parent company in maturities not to
exceed nine months. The short-term bank notes are issued by the Corporation's
banking subsidiaries generally with maturities of less than one year. Other
short-term funds consisted principally of treasury, tax and loan accounts. At
December 31, 1995, the parent company had available additional credit totaling
$100 million under a revolving credit agreement, all of which was unused. The
revolving credit agreement is a three year facility extending to September,
1997.
14 LONG-TERM DEBT
Long-term debt is summarized as follows:
======================================================================================
December 31 (in thousands) 1995 1994
- --------------------------------------------------------------------------------------
Parent Company:
7-5/8% notes due 2004 $100,000 $100,000
6-3/4% notes due 2003 100,000 100,000
8-5/8% notes due 2003 50,000 50,000
9-1/4% notes due 2001 150,000 150,000
6-1/4% convertible subordinated
debentures due 2011 772 904
12% note due 1998 25,000 25,000
- --------------------------------------------------------------------------------------
Total Parent Company 425,772 425,904
- --------------------------------------------------------------------------------------
Subsidiaries:
Senior notes due 1998-2000 43,000 43,000
9-7/8% senior notes due April 15, 1995 35,000
Federal Home Loan Bank notes:
6.28%-6.39% notes due 1999-2001 90,000
4.9%-5.2% notes due 1997-1998 25,000 25,000
Other notes due 1999-2016 4,867 1,500
Other notes due through 1997 33,953
6.55% mortgage note due through 2009 26,430 27,679
Other 60 5
- --------------------------------------------------------------------------------------
Total subsidiaries 189,357 166,137
- --------------------------------------------------------------------------------------
Total long-term debt $615,129 $592,041
======================================================================================
The 7-5/8% subordinated notes and the 6-3/4% subordinated notes have been
effectively converted to variable rate debt for a portion of the term through
the use of interest rate swaps. The average interest rates paid on these notes
in 1995 and 1994 were 8.53% and 6.77%, respectively. These notes, and the
8-5/8% and 9-1/4% subordinated notes, are not redeemable by the holders or the
Corporation prior to maturity.
The 6-1/4% convertible subordinated debentures are redeemable at the option
of the holder without payment of premium by the Corporation. Redemption rights
are subject to an annual noncumulative principal limitation of $25 thousand
per holder and $1.2 million in the aggregate. Prepayments in whole or in part
may be made at the option of the Corporation with payment of premium. The
debentures are convertible into common stock of the Corporation at a
conversion price of $16.71 per share, subject to adjustments under certain
circumstances. During 1995, 1994 and 1993, $.1 million, $.3 million and $.2
million of the debentures, respectively, were converted into common stock.
The 12% note due in 1998 may not be prepaid at the option of the
Corporation.
The senior notes due 1998-2000 are unsecured and provide for payment of
interest semi-annually with principal payable at maturity. Maturities are $10
million due in 1998 priced to yield 7.21%, $10 million due in 1999 priced to
yield 7.56%, and $23 million due in 2000 priced to yield 7.81%.
The Federal Home Loan Bank notes may be prepaid at the option of the
Corporation with payment of premium.
The other notes due through 1997 were prepaid in full in 1995 and
represented long-term debt obligations of the Corporation's mortgage banking
subsidiary acquired in 1995.
The 6.55% mortgage note requires monthly principal and interest payments
of $252 thousand. The Corporation may prepay the note without payment of
premium.
Several of the note agreements contain various financial covenants
pertaining to minimum levels of net worth, limitations on additional
indebtedness, and limitations on repurchases of common stock and dividend
payments. The Corporation was in compliance with all such covenants at
December 31, 1995.
Obligations of the parent company included above are unsecured, and to a
large extent are subordinated in right of payment to any other indebtedness of
the Corporation. The indebtedness of the banking subsidiaries is subordinated
to rights of depositors.
Scheduled principal payments on total long-term debt in each of the five
years subsequent to December 31, 1995 are as follows:
=================================================
(in thousands)
- -------------------------------------------------
Year Parent Company Consolidated
- -------------------------------------------------
1996 $ 772 $ 2,652
1997 11,986
1998 25,000 52,099
1999 42,220
2000 55,318
=================================================
15 PREFERRED STOCK
At December 31, 1995, there were outstanding 9,609 shares of 7% Cumulative
Redeemable Preferred Stock, Series B, $100 per share stated value. Dividends
are payable quarterly. The stock is redeemable at the stated value at the
option of the holders and has equal voting rights with each share of common
stock.
61
46
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
16 COMMON STOCK
On August 10, 1993, the Corporation declared a two-for-one stock split,
which was effected as a 100% stock dividend to stockholders of record on
August 31, 1993 and paid on October 1, 1993. The Corporation maintains various
stock option plans which provide for the issuance of stock to certain key
employees of the Corporation. Under certain plans, stock appreciation rights
may be granted. The option price under these plans is equivalent to the fair
market value of the common stock at the date of grant. The Corporation
accounts for its stock options in accordance with APB Opinion No. 25,
"Accounting for Stock Issued to Employees."
The following table summarizes the status of the various plans.
=======================================================================================================================
1995 1994
- -----------------------------------------------------------------------------------------------------------------------
Shares Price Per Share Shares Price Per Share
- -----------------------------------------------------------------------------------------------------------------------
Options granted 1,508,357 $30.31 to $32.63 706,450 $27.75 to $31.63
Options
exercised 589,450 5.76 to 30.88 376,267 5.76 to 27.75
Stock
appreciation
rights
exercised 24,726 15.86 to 27.00 29,030 15.63 to 27.75
Options lapsed 117,200 5.76 to 30.88 58,457 5.76 to 27.75
Options
outstanding 4,685,697 5.76 to 32.63 3,908,716 5.76 to 31.63
Options
exercisable 2,680,373 5.76 to 30.88 2,198,492 5.76 to 28.31
=======================================================================================================================
A summary of the Corporation's common stock related plans is provided
below. Compensation expense related to the common stock plans totaled $17.0
million in 1995, $11.9 million in 1994, and $10.8 million in 1993.
1990 Stock Purchase Plan for Employees This Plan provides eligible employees
of the Corporation and its subsidiaries with the opportunity to purchase, at
market value, with the Corporation providing a one-third matching
contribution, common stock of the Corporation through regular payroll
deductions. The aggregate number of shares issuable under this Plan is limited
to 2,000,000 shares, and as of December 31, 1995, approximately 6,390
employees were participating in the Plan.
Dividend Reinvestment and Stock Purchase Plan 1,600,000 shares of the
Corporation's common stock have been reserved for sale, at market value,
pursuant to this plan, to holders of record of shares of common stock who
elect to use quarterly dividends or optional cash contributions to purchase
additional shares.
Thrift Incentive 401(k) Plan This is a savings plan for the benefit of
employees of the Corporation and its subsidiaries. Participation by eligible
employees is voluntary, and participants may contribute at least 2% and up to
12% of their salary, up to certain limits, by regular payroll deductions. All
participants' contributions are invested by the trustee, as directed by the
participant, in various investment funds, one of which consists solely of the
Corporation's common stock. The Corporation matches the contribution made by
the employee, in full, up to 3%, which is invested in a separate fund
consisting solely of the Corporation's common stock.
Shareholder Rights Plan In 1990, the Board of Directors of the Corporation
declared a dividend of one preferred share purchase right (a "Right") for each
outstanding share of common stock. The Rights trade automatically with shares
of common stock and become exercisable only under certain circumstances. The
Rights are designed to protect the interests of the Corporation and its
shareholders against coercive takeover tactics. The purpose of the Rights is
to encourage potential acquirers to negotiate with the Corporation's Board of
Directors prior to attempting a takeover and to give the Board leverage in
negotiating on behalf of all shareholders the terms of any proposed takeover.
17 REGULATORY CAPITAL
The Corporation's regulatory capital is summarized as follows:
==============================================================================================================
December 31 (in millions) 1995 1994
- ------------------------------------------------------------------------------------------------------------
Tier I capital $ 2,658.2 $ 2,406.2
Tier II capital 705.1 691.0
- ------------------------------------------------------------------------------------------------------------
Total capital $ 3,363.3 $ 3,097.2
============================================================================================================
Risk-adjusted assets $23,522.4 $22,070.4
============================================================================================================
Regulatory Minimums
-----------------------------
Adequately Well
December 31 Capitalized Capitalized 1995 1994
- --------------------------------------------------------------------------------------------------------------
Risk-based capital ratios:
Tier I 4% 6% 11.30% 10.90%
Total 8 10 14.30 14.03
Tier I leverage ratio 4 5 7.95 7.35
==============================================================================================================
The Corporation's risk-based capital and Tier I leverage ratios
substantially exceed the regulatory required minimums and, at December 31,
1995, all of the Corporation's subsidiaries were considered "well capitalized"
based on regulatory defined minimums.
18 RETIREMENT BENEFITS
Substantially all employees of the Corporation and its subsidiaries are
covered by the Boatmen's Bancshares, Inc. Retirement Plan for Employees, a
noncontributory defined benefit plan. Pension benefits are based upon the
employee's length of service and compensation during the final years of
employment. Normal service costs are funded currently using the projected
unit credit method.
An amendment was made to the Plan as of December 31, 1995 to standardize
credited service, which had the effect of increasing the projected benefit
obligation by approximately $22.8 million.
Contributions to the Plan totaled $3.8 million in 1995, $5.1 million in
1994, and $11.8 million in 1993.
Net pension expense for 1995, 1994 and 1993 was comprised of the
following:
=================================================================================================
Year ended December 31 (in thousands) 1995 1994 1993
- -------------------------------------------------------------------------------------------------
Service cost $13,835 $13,445 $11,800
Interest cost on projected
benefit obligation 18,575 17,765 16,082
(Return) loss on plan assets (57,851) 603 (29,842)
Net amortization and deferral 35,202 (22,152) 10,704
- -------------------------------------------------------------------------------------------------
Net pension expense $ 9,761 $ 9,661 $ 8,744
=================================================================================================
62
47
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
The following table sets forth the retirement plan's funded status and
amounts recognized in the Corporation's consolidated financial statements:
December 31 (in thousands) 1995 1994
- -------------------------------------------------------------------------------------
Plan assets at fair value, primarily listed
stocks and bonds $289,042 $239,539
- -------------------------------------------------------------------------------------
Actuarial present value of benefit obligation:
Vested benefits 215,106 162,398
Non-vested benefits 14,596 9,280
- -------------------------------------------------------------------------------------
Accumulated benefit obligation 229,702 171,678
Effect of projected future salary increases 66,946 45,637
- -------------------------------------------------------------------------------------
Projected benefit obligation 296,648 217,315
- -------------------------------------------------------------------------------------
Plan assets in excess of (lower than)
projected benefit obligation $ (7,606) $ 22,224
=====================================================================================
Comprised of:
Unrecognized net asset being amortized
over 17 years $ 11,937 $ 13,926
Unrecognized net gain from past
experience different from that assumed
and effects of changes in assumptions 10,159 8,964
Unrecognized prior service loss (22,978) (142)
Prepaid pension cost (liability) (6,724) (524)
- -------------------------------------------------------------------------------------
$ (7,606) $ 22,224
=====================================================================================
Assumptions used in computing pension expense were:
===============================================================================================================
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
Weighted average discount rate 8-1/2% 7-1/2% 7-3/4-8 %
Rate of increase in future
compensation levels 5-1/2% 5 % 4-5-1/2%
Expected long-term rate of
return on assets 8-3/4% 8-3/4% 8-8-3/4%
===============================================================================================================
The weighted average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 7.25% and 5.00%, respectively, at December
31, 1995 and 8.50% and 5.50% respectively, at December 31, 1994.
The Corporation provides postemployment life and contributory medical
benefits to retired employees. The liability for such benefits is unfunded and
costs of such benefits are accrued in a manner similar to actual pension
costs.
The following table presents the status of the plans:
======================================================================================
December 31 (in thousands) 1995 1994
- --------------------------------------------------------------------------------------
Accumulated postretirement
benefit obligation:
Retirees $52,371 $39,300
Fully eligible active plan participants 13,962 12,326
Other active plan participants 19,492 17,272
- --------------------------------------------------------------------------------------
Total accumulated postretirement
benefit obligation 85,825 68,898
- --------------------------------------------------------------------------------------
Unrecognized net gain 21,867 10,913
Unrecognized transition obligation 38,289 40,560
- --------------------------------------------------------------------------------------
Accrued postretirement
benefit cost $25,669 $17,425
======================================================================================
Net postretirement benefit cost included the following components:
Year ended December 31 (in thousands) 1995 1994 1993
- -------------------------------------------------------------------------------------------------------
Service cost $ 1,230 $ 1,460 $1,238
Interest cost 6,049 4,924 4,586
Amortization of transition
obligation over 20 years 2,906 4,338 2,396
- -------------------------------------------------------------------------------------------------------
Net postretirement benefit cost $10,185 $10,722 $8,220
=======================================================================================================
The weighted-average annual assumed rate of increase in the per capita
cost of covered benefits for the medical plan is 9.00% for 1996 (compared to
10.00% assumed for 1995) and is assumed to decrease gradually to 5.00% in 2003
and remain at that level thereafter. The health care cost trend rate
assumption has a significant effect on the amounts reported. For example,
increasing the assumed health care trend rates by one percentage point in each
year would increase the accumulated postretirement benefit obligation for the
medical plan as of December 31, 1995 by $6.7 million, and the aggregate of the
service and interest cost components of net periodic postretirement benefit
cost for 1995 by $.7 million. The weighted-average discount rate used in
determining the accumulated postretirement benefit obligation was 7.25% at
December 31, 1995 and 8.50% at December 31, 1994.
19 INCOME TAXES
Income tax expense is summarized as follows:
=====================================================================================================
Year ended December 31 (in thousands) 1995 1994 1993
- -----------------------------------------------------------------------------------------------------
Current:
Federal $197,351 $182,453 $168,616
State 27,147 29,878 27,049
- -----------------------------------------------------------------------------------------------------
Total current 224,498 212,331 195,665
- -----------------------------------------------------------------------------------------------------
Deferred:
Federal 1,206 3,657 (24,314)
State 213 (2,436) (9,434)
- -----------------------------------------------------------------------------------------------------
Total deferred 1,419 1,221 (33,748)
- -----------------------------------------------------------------------------------------------------
Income tax expense $225,917 $213,552 $161,917
=====================================================================================================
A reconciliation of the statutory Federal income tax rate with the
effective tax rate is as follows:
======================================================================================================
Percent of pre-tax income
- ------------------------------------------------------------------------------------------------------
Year ended December 31 1995 1994 1993
- ------------------------------------------------------------------------------------------------------
Statutory rate 35.0% 35.0% 35.0%
Tax-exempt securities interest
and other income (3.6) (4.0) (4.9)
State taxes, net of Federal benefit 2.7 2.9 2.2
Other, net .9 .5 (.7)
- ------------------------------------------------------------------------------------------------------
Effective rate 35.0% 34.4% 31.6%
======================================================================================================
63
48
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
The Corporation's deferred tax asset account was comprised of the
following:
===================================================================================
Year ended December 31 (in thousands) 1995 1994
- -----------------------------------------------------------------------------------
Deferred tax liabilities:
Lease financing $ (41,290) $ (25,859)
Net unrealized gain on
available for sale securities (2,766)
Depreciation (32,725) (30,498)
Other (31,090) (33,271)
- -----------------------------------------------------------------------------------
Total deferred tax liabilities (107,871) (89,628)
- -----------------------------------------------------------------------------------
Deferred tax assets:
Net unrealized loss on
available for sale securities 69,979
Provision for loan loss 155,976 152,289
Other real estate owned losses 9,733 15,992
Other 62,662 46,033
- -----------------------------------------------------------------------------------
Total deferred tax assets 228,371 284,293
- -----------------------------------------------------------------------------------
Net deferred tax asset $120,500 $194,665
===================================================================================
20 FAIR VALUE OF FINANCIAL INSTRUMENTS
The reported fair values of financial instruments are based on a variety
of factors. Where possible, fair values represent quoted market prices for
identical or comparable instruments. In other cases, fair values have been
estimated based on assumptions concerning the amount and timing of estimated
future cash flows and assumed discount rates reflecting varying degrees of
risk. Intangible values assigned to customer relationships are not reflected
in the reported fair values. Accordingly, the fair values may not represent
actual values of the financial instruments that could have been realized as of
year end or that will be realized in the future.
The carrying amounts reported in the balance sheet for cash and due from
banks, short-term investments, Federal funds sold and securities purchased
under resale agreements approximate fair value.
Fair values for held to maturity securities, available for sale
securities, and trading securities are based on quoted market prices or dealer
quotes. If quoted prices are not available for the specific security, fair
values are based on quoted market prices of comparable instruments.
The fair values of 1-4 family residential loans, home equity and other
homogeneous categories of consumer loans are estimated using quoted market
prices for similar traded loans or securities backed by such loans, adjusted
for differences between the quoted instruments and the instrument being
valued. The fair values for other loans are estimated using a discounted cash
flow analysis, based on interest rates currently offered for loans with
similar terms to borrowers of similar credit quality or in some situations,
due to the variable rate nature of the instrument, carrying value and fair
value are considered one and the same.
Fair values for nonperforming loans are estimated using assumptions
regarding current assessments of collectibility and historical loss
experience.
By definition fair values of deposits with no stated maturities, such as
demand deposits, savings and NOW accounts and money market deposit accounts,
are equal to the amounts payable on demand at the reporting date. The fair
values of all other fixed rate deposits are based on discounted cash flows
using rates currently offered for deposits of similar remaining maturities.
The carrying amounts of variable rate deposits approximate fair value at the
reporting date.
The carrying amounts of Federal funds purchased and other short-term
borrowings approximate their fair values as of the reporting date.
The fair value of long-term debt is based on quoted market prices for
similar issues, or current rates offered to the Corporation for debt of the
same remaining maturity.
The fair values of interest rate swaps and foreign exchange contracts are
estimated using dealer quotes. These values represent the costs to replace all
outstanding contracts at current market rates, taking into consideration the
current credit worthiness of the counterparties. The fair values of loan
commitments, commercial letters of credit and standby letters of credit are
determined using estimated fees currently charged to enter into similar
agreements. The fair value of loan commitments totaled approximately $1.9
million and $1.1 million at December 31, 1995 and 1994, respectively. The fair
value of commercial and standby letters of credit totaled approximately $1.5
million and $1.3 million at December 31, 1995 and 1994, respectively.
The estimated fair values of the Corporation's financial instruments were
as follows:
======================================================================================
December 31, 1995 (in millions) Carrying amount Fair value
- --------------------------------------------------------------------------------------
Financial assets:
Cash and due from banks and
short-term investments $ 3,357.7 $ 3,357.7
Held to maturity securities 914.7 965.4
Available for sale securities 8,063.8 8,063.8
Trading securities 57.4 57.4
Loans 19,380.3 19,713.0
Financial liabilities:
Deposits 25,932.1 26,002.7
Short-term borrowings 3,721.2 3,721.2
Long-term debt 615.1 660.5
Off-balance sheet financial instruments:
Interest rate swaps:
Asset/liability management (1.1) (5.7)
Customer swaps held in trading portfolio 1.6 1.6
Foreign exchange contracts held in
trading portfolio .4 .4
======================================================================================
December 31, 1994 (in millions) Carrying amount Fair value
- --------------------------------------------------------------------------------------
Financial assets:
Cash and due from banks and
short-term investments $ 3,276.0 $ 3,276.0
Held to maturity securities 5,217.0 4,965.9
Available for sale securities 4,173.0 4,173.0
Trading securities 31.7 31.7
Loans 18,278.9 18,152.1
Financial liabilities:
Deposits 25,384.1 25,375.9
Short-term borrowings 3,956.8 3,956.8
Long-term debt 592.0 577.5
Off-balance sheet financial instruments:
Interest rate swaps:
Asset/liability management (.5) (168.5)
Customer swaps held in trading portfolio .4 .4
Foreign exchange contracts held in
trading portfolio 2.2 2.2
======================================================================================
64
49
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
21 FINANCIAL INSTRUMENTS
WITH OFF-BALANCE SHEET RISK
In the normal course of business, the Corporation utilizes a variety of
off-balance sheet financial instruments to service the financial needs of
customers and to manage the Corporation's overall asset/liability position.
This activity includes commitments to extend credit, standby and commercial
letters of credit, securities lending, interest rate swaps and foreign
exchange contracts. Each of these instruments involve varying degrees of risk.
As such, the contract or notional amounts of these instruments may or may not
be an appropriate indicator of the credit or market risk associated with these
instruments.
Generally accepted accounting principles recognize these instruments as
contingent obligations or off-balance sheet items and accordingly, the
contract or notional amounts are not reflected in the consolidated financial
statements.
A summary of the Corporation's off-balance sheet financial instruments at
December 31, 1995 and 1994 is presented as follows.
======================================================================================
Financial instruments held for other than trading purposes
whose credit risk is represented by contract amounts
- --------------------------------------------------------------------------------------
December 31 (in millions) 1995 1994
- --------------------------------------------------------------------------------------
Commitments to extend credit $ 8,701.4 $ 8,319.2
Standby letters of credit 1,027.3 901.6
Commercial letters of credit 92.0 143.7
Forward commitments 86.6 155.9
Securities lent 2,719.4 2,968.2
- --------------------------------------------------------------------------------------
Total $12,626.7 $12,488.6
======================================================================================
Financial instruments whose credit risk is represented by
other than notional or contract amounts
- --------------------------------------------------------------------------------------
December 31 (in millions) 1995 1994
- --------------------------------------------------------------------------------------
Foreign exchange contracts held
in trading portfolio:
Commitments to purchase $ 343.9 $ 548.7
Commitments to sell 426.4 595.3
Interest rate swaps:
Asset/liability management 2,680.6 2,280.6
Customer swaps held in trading portfolio 852.2 649.2
- --------------------------------------------------------------------------------------
Total $4,303.1 $4,073.8
======================================================================================
A loan commitment represents a contractual agreement to lend up to a
specified amount, over a stated period of time as long as there is no
violation of any condition established in the contract, and generally requires
the payment of a fee. Standby letters of credit are issued to improve a
customer's credit standing with third parties, whereby the Corporation agrees
to honor a financial commitment by issuing a guarantee to third parties in the
event the Corporation's customer fails to perform. Since loan commitment
amounts generally exceed actual funding requirements and virtually all of the
standby letters of credit are expected to expire unfunded, the total
commitment amounts do not represent future cash requirements. The
Corporation's exposure to credit loss from loan commitments, standby letters
of credit and commercial letters of credit is measured by the contract amount
of these instruments. This credit risk is minimized by subjecting these
off-balance sheet instruments to the same credit policies and underwriting
standards used when making loans. The Corporation evaluates each customer's
credit worthiness on a case-by-case basis. The amount of collateral obtained,
if deemed necessary, is based on such evaluations. Acceptable collateral
includes cash or cash equivalents, marketable securities, deeds of trust,
receivables, inventory, fixed assets and financial guarantees. Interest rates,
in the event funding of the aforementioned commitments are required, are
predominantly based on floating rates or prevailing market rates at the time
such commitments are funded. Substantially all of these commitments expire in
1-2 years unless renewed by the Corporation. Commercial letters of credit are
short-term commitments issued for trade purposes, primarily to finance the
movement of goods between a buyer and seller dealing in international markets.
The Corporation, through its mortgage banking subsidiary, obtains mandatory
forward commitments of up to 120 days to sell mortgage backed securities to
hedge the market risk associated with a substantial portion of the mortgage
loan commitments that are expected to close (mortgage loan pipeline), and all
mortgage loans held for sale. The Company's risk management function closely
monitors the mortgage loan pipeline to determine appropriate forward
commitment coverage on a daily basis in order to manage the risk inherent in
these off-balance-sheet financial instruments.
The Corporation, through its trust subsidiary, is involved in off-balance
sheet securities lending. In this capacity, the Corporation, acting as agent,
lends securities on behalf of its customers to third party borrowers. The
Corporation indemnifies its customers against losses in the event of
counterparty default, and minimizes this risk through collateral requirements
and limiting transactions to pre-approved borrowers. Collateral policies
require each borrower to initially deliver cash or securities equal to or
exceeding 102% of the market value of the securities lent. Additional
collateral is required through the term of the lending agreement to ensure
that the value of collateral exceeds the market value of the securities lent.
Interest rate risk associated with securities lending activities arises from
rate movements affecting the spread between the rebate rate paid to the
borrower on his collateral and the rate earned on that collateral. This risk
is controlled through policies that limit the level of interest rate risk
which can be undertaken.
The Corporation enters into interest rate swap transactions primarily as
part of its asset/liability management strategy to manage interest-rate risk.
These transactions involve the exchange of interest payments based on a
notional amount. The notional amounts of interest rate swaps express the
volume of transactions and are not an appropriate indicator of the off-balance
sheet market risk or credit risk. The credit risk associated with interest
rate swaps arises from the counterparties' failure to meet the terms of the
agreements and is limited to the fair value of contracts in a gain (favorable)
position. The Corporation manages this risk by maintaining a well-diversified
portfolio of highly-rated counterparties in addition to imposing limits as to
types, amounts and degree of risk the portfolio can undertake. The limits are
approved by senior management and positions are monitored to ensure compliance
with such limits. The credit risk exposure at December 31, 1995 is minimal as
virtually all contracts were in an unfavorable position.
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 management action is taken, these core banking activities, which
include lending and deposit products, result in an asset-sensitive position.
Accordingly, the Corporation utilizes a variety of discretionary on- and
off-balance sheet strategies to prudently manage the overall interest rate
sen-
65
50
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
sitivity position. The Corporation's interest rate 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 alternative interest rate scenarios will
have on the Corporation's financial results.
In 1995, $850 million of new swaps were added and $450 million matured
such that at December 31, 1995, interest rate swaps totaled $2.7 billion. The
most recent swaps were executed as a means to convert a portion of the
Corporation's variable rate bank notes to fixed rate 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, converting a
portion of these loans to fixed rate instruments. Additionally, the
Corporation has utilized swaps to convert a portion of its long-term fixed
rate debt to a floating rate basis. Periodic correlation assessments are
performed to ensure that the swap instruments are effectively modifying the
interest rate characteristics of the respective balance sheet items.
As summarized in the following table, the swap portfolio is primarily
comprised of contracts wherein the Corporation receives a fixed rate of
interest while paying a variable rate. As such, the income contribution from
the swap portfolio will decrease in a rising rate environment and increase in
a falling rate environment. The average rate received at December 31, 1995,
was 5.69% compared to an average rate paid of 6.10%, and the average remaining
maturity of the total portfolio was less than one year. The variable rate
component of the interest rate swaps is based on LIBOR as of the most recent
reset date. The interest rate swaps are not leveraged in that they reset in
step with rate movements in the underlying index.
A summary of the interest rate swap activity for the years ended December
31, 1995 and December 31, 1994 is provided below.
========================================================================================================================
Asset/Liability Management Swaps Receive Pay Basis
(in millions) Fixed Fixed Swaps Total
- ------------------------------------------------------------------------------------------------------------------------
Notional amount,
December 31, 1993 $1,450 $ 31 $300 $1,781
Additions 1,000 50 1,050
Maturities (450) (100) (550)
- ------------------------------------------------------------------------------------------------------------------------
Notional amount,
December 31, 1994 2,000 31 250 2,281
Additions 850 850
Maturities (295) (2) (153) (450)
- ------------------------------------------------------------------------------------------------------------------------
Notional amount,
December 31, 1995 $1,705 $879 $ 97 $2,681
========================================================================================================================
At December 31, 1995:
Average remaining
maturity (years) .8 .5 .2 .7
Weighted average rate received 5.54% 5.88% 6.76% 5.69%
Weighted average rate paid 6.00 6.29 6.06 6.10
========================================================================================================================
At December 31, 1994:
Average remaining
maturity (years) 2.2 1.3 1.1 2.0
Weighted average rate received 5.52% 6.09% 5.55% 5.53%
Weighted average rate paid 6.06 8.86 5.72 6.06
========================================================================================================================
Summarized below is the unrealized gain (loss) of the swap portfolio at
December 31, 1995 and 1994.
========================================================================================================================
December 31, 1995 December 31, 1994
- ------------------------------------------------------------------------------------------------------------------------
Asset/Liability Management Swaps Notional Unrealized Notional Unrealized
(in millions) Amount Gain (loss) Amount Gain (loss)
- ------------------------------------------------------------------------------------------------------------------------
Prime Loan Swaps:
Receive fixed $1,505 $(2.0) $1,800 $(155.6)
Basis swaps 97 .2 200 (3.8)
- ------------------------------------------------------------------------------------------------------------------------
Total prime loan swaps 1,602 (1.8) 2,000 (159.4)
Long-term debt swaps 200 (.7) 200 (8.6)
Bank note liability swaps 850 (2.5)
Other 29 (.7) 81 (.5)
- ------------------------------------------------------------------------------------------------------------------------
Total $2,681 $(5.7) $2,281 $(168.5)
========================================================================================================================
Interest income and expense on interest rate swaps used to manage the
Corporation's overall interest rate sensitivity position is recorded on an
accrual basis as an adjustment of the yield of the related asset or liability
over the periods covered by the contracts.
The swap portfolio decreased net interest income by approximately $14
million in 1995, resulting in a reduction in the net interest margin of
approximately 5 basis points. In 1994, the swap portfolio increased net
interest income by $15 million adding approximately 5 basis points to the
margin. Based on interest rates at December 31, 1995, it is anticipated that
the swap portfolio will reduce net interest income by approximately $5 million
in 1996 and approximately $1 million in 1997; however, it is anticipated that
these declines will be offset by a higher contribution from core banking
activities. The estimated fair value of the swap portfolio, based on dealer
quotes, was an unrealized loss of $5.7 million at December 31, 1995, compared
to an unrealized loss of $168.5 million at December 31, 1994. The
Corporation's operating and liquidity position is not expected to be
materially impacted by the unrealized loss inherent in the swap portfolio.
Approximately 60% 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 1.2 years, but in no event
would any component of the swap portfolio extend beyond four years. The
decision to use indexed amortizing swaps rather than some other financial
instrument is analogous to choices made between using on-balance sheet
instruments such as mortgage-backed securities and Treasury securities. While
both instruments can be effective at reducing the risk associated with the
asset sensitive profile of the core banking activities, the Corporation
frequently chooses to assume some modest extension/contraction characteristics
associated with investing in a mortgage-backed security. Indexed amortizing
swaps and mortgage-backed securities are similar in nature in that the
notional or principal values decline over time and changes in market rates
impact the degree to which the underlying instrument amortizes. The specific
indexed amortizing swaps used by the Corporation have a minimum term which can
potentially lengthen to a specified final maturity depending on the level of
movement in interest rates. While the underlying characteristics of the
specific indexed amortizing swaps used by the Corporation are similar to
on-balance sheet mortgage-backed securities, prepayment and other risk factors
are more predictable due to the structural features inherent in the swaps. Any
future uti-
66
51
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
lization of off-balance sheet financial instruments will be determined based
upon the Corporation's overall interest rate sensitivity position and
asset/liability management strategies.
The Corporation has not terminated any of its interest rate swap
positions. Accordingly, there have been no deferred gains/losses associated
with this activity.
While the Corporation is primarily an end-user of derivative instruments,
it does act as an intermediary to meet the financial needs of its customers.
In this capacity, the Corporation executes foreign exchange transactions and
interest rate swaps to provide customers with capital markets products to
meet their financial objectives. All positions are reported at fair value and
changes in fair values are reflected in investment banking revenues as they
occur. Interest rate risk associated with the customer swap portfolio is
controlled by entering into offsetting positions with third parties. Including
these offsetting positions, the notional amount of the customer swap portfolio
at December 31, 1995 totaled approximately $852.2 million. Credit risk
associated with this activity is minimized by limiting transactions to highly
rated counterparties and through collateral agreements. Collateral is required
to be delivered when the credit risk exceeds acceptable thresholds, for
certain counterparties. Collateral thresholds are established based on the
creditworthiness of the counterparty and are bilateral. Acceptable collateral
includes U.S. Treasury and Federal agency securities. Foreign exchange
activity, which is marked to market based on prevailing rates of exchange, can
expose the Corporation to market risk, particularly when open positions exist,
and, to a lesser extent, credit risk associated with counterparties and their
ability to meet the terms of the foreign exchange contracts. The Corporation
minimizes market risk associated with foreign exchange activity by
establishing limits which prohibit traders from maintaining significant open
positions on a daily basis. The Corporation's exposure to credit risk on
foreign exchange contracts and customer swap contracts is measured as the cost
of replacing the contract in the event of default by the counterparty which is
limited to the market value of all contracts in a gain position. The
Corporation controls this credit risk by maintaining a well diversified
portfolio of highly rated counterparties and imposing counterparty limits and
collateral protection which is monitored by a credit committee for compliance.
In addition, counterparty credit risk for all derivative activity is managed
by subjecting these transactions to credit policies and underwriting standards
consistent with that used when making commitments to extend credit. At
December 31, 1995, the Corporation's credit exposure from interest rate and
foreign exchange contracts totaled $8.4 million and $10.2 million,
respectively. The following summarizes the fair value at period end and the
average fair value for the years ended December 31, 1995 and 1994 for
derivatives held or issued for trading purposes.
======================================================================================================================
Derivatives Held or Issued for Trading Purposes--Fair Value
1995 1994
- ----------------------------------------------------------------------------------------------------------------------
(in millions) Period end Average Period end Average
- ----------------------------------------------------------------------------------------------------------------------
Interest-rate swap contracts:
Assets $ 8.4 $ 4.9 $ 4.7 $ 4.1
Liabilities (6.8) (3.9) (4.3) (3.6)
Foreign exchange contracts:
Assets 10.2 18.8 18.6 19.0
Liabilities (9.8) (17.6) (16.4) (16.9)
======================================================================================================================
Net trading gains recognized in earnings on interest rate contracts
outstanding totaled $1.3 million in 1995, $.2 million in 1994 and $.8 million
in 1993. Net trading gains from foreign exchange contracts totaled $6.9
million in 1995, $5.9 million in 1994 and $5.4 million in 1993.
22 PARENT COMPANY CONDENSED
FINANCIAL STATEMENTS
Following are the condensed financial statements of Boatmen's Bancshares,
Inc. (Parent Company only) for the periods indicated:
Balance Sheet
=======================================================================================
December 31 (in thousands) 1995 1994
- ---------------------------------------------------------------------------------------
Assets:
Cash $ 834 $ 33
Short-term investments 2,398 4,063
Investment in subsidiaries:
Banks and bank holding companies 2,832,564 2,411,185
Nonbanks 239,750 215,851
- ---------------------------------------------------------------------------------------
Total investment in subsidiaries 3,072,314 2,657,036
- ---------------------------------------------------------------------------------------
Advances to subsidiaries:
Bank 257,901 286,239
Nonbanks 57,163 38,466
- ---------------------------------------------------------------------------------------
Total advances to subsidiaries 315,064 324,705
- ---------------------------------------------------------------------------------------
Goodwill 84,413 89,874
Other assets 55,544 46,070
- ---------------------------------------------------------------------------------------
Total assets $3,530,567 $3,121,781
=======================================================================================
Liabilities:
Accounts payable and accrued liabilities $ 78,342 $ 54,275
Dividends payable 47,936 35,556
Short-term borrowings 49,497 43,531
Long-term debt 425,772 425,904
- ---------------------------------------------------------------------------------------
Total liabilities 601,547 559,266
- ---------------------------------------------------------------------------------------
Redeemable preferred stock 961 1,142
- ---------------------------------------------------------------------------------------
Stockholders' equity:
Common stock 129,924 128,873
Surplus 984,557 964,900
Unrealized net appreciation (depreciation),
available for sale securities 4,651 (111,795)
Retained earnings 1,827,023 1,593,911
Treasury stock (18,096) (14,516)
- ---------------------------------------------------------------------------------------
Total stockholders' equity 2,928,059 2,561,373
- ---------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $3,530,567 $3,121,781
=======================================================================================
67
52
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
Statement of Income
=========================================================================================================
Year ended December 31 (in thousands) 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
Income:
Dividends from subsidiaries:
Banks and bank holding companies $276,654 $219,676 $216,425
Nonbanks 18,118 26,019 23,855
- ---------------------------------------------------------------------------------------------------------
Total dividends from subsidiaries 294,772 245,695 240,280
- ---------------------------------------------------------------------------------------------------------
Fees from subsidiaries 14,436 15,177 33,316
Interest on short-term investments 146 829 988
Interest on advances to subsidiaries 16,114 11,545 6,713
Other 5,912 760 791
- ---------------------------------------------------------------------------------------------------------
Total income 331,380 274,006 282,088
- ---------------------------------------------------------------------------------------------------------
Expense:
Interest expense 41,116 35,924 32,062
Staff expense 40,523 29,691 31,120
Other 34,143 23,971 30,139
- ---------------------------------------------------------------------------------------------------------
Total expense 115,782 89,586 93,321
- ---------------------------------------------------------------------------------------------------------
Income before income tax benefit
and equity in undistributed
income of subsidiaries 215,598 184,420 188,767
Income tax benefit 23,499 18,465 14,932
- ---------------------------------------------------------------------------------------------------------
Income before equity in undistributed
income of subsidiaries 239,097 202,885 203,699
Equity in undistributed income
of subsidiaries 179,738 204,917 146,666
- ---------------------------------------------------------------------------------------------------------
Net income $418,835 $407,802 $350,365
=========================================================================================================
Retained earnings include $1,577,156 and $1,399,982 of equity in
undistributed income of subsidiaries at year-end 1995 and 1994, respectively.
Annual dividend distributions to the Corporation from its banking
subsidiaries are subject to certain limitations by applicable banking
regulatory authorities. In the aggregate, the statutory maximum available
dividends which may be paid to the Corporation without prior regulatory
approval is $708,277, resulting in $2,336,524 or 76.2% of the total equity of
the subsidiaries being potentially restricted as of December 31, 1995.
Statement of Cash Flows
=========================================================================================================
Year ended December 31 (in thousands) 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 418,835 $ 407,802 $ 350,365
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 4,458 4,435 4,127
Equity in undistributed income
of subsidiaries (179,738) (204,917) (146,666)
(Gain) loss on sale of assets (5,049) 30 237
Increase (decrease) in taxes
payable (5,311) (3,435) 105
Other, net 26,374 14,452 (6,796)
- ---------------------------------------------------------------------------------------------------------
Net cash provided by
operating activities 259,569 218,367 201,372
- ---------------------------------------------------------------------------------------------------------
Cash flows from investment activities:
Purchase of net assets and increase in
investment in subsidiaries (57,985) (26,524) (125,364)
Net change in advances to subsidiaries 9,641 (54,903) (141,054)
Net change in short-term investments 1,665 12,340 78,597
Net change in property and equipment (183) 50 (3,595)
- ---------------------------------------------------------------------------------------------------------
Net cash used for
investing activities (46,862) (69,037) (191,416)
- ---------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net change in short-term borrowings 5,966 (6,103) (6,390)
Repayments of long-term debt (14) (1) (5,003)
Proceeds from issuance of
long-term debt 99,281
Cash dividends paid (170,757) (132,690) (112,216)
Common stock issued pursuant to
various employee and shareholder
stock issuance plans 29,561 4,530 16,993
Acquisition of treasury stock (76,479) (15,406) (3,102)
Decrease in redeemable preferred stock (183) (13) (93)
- ---------------------------------------------------------------------------------------------------------
Net cash used for
financing activities (211,906) (149,683) (10,530)
- ---------------------------------------------------------------------------------------------------------
Increase (decrease) in cash 801 (353) (574)
Cash at beginning of year 33 386 960
- ---------------------------------------------------------------------------------------------------------
Cash at end of year $ 834 $ 33 $ 386
=========================================================================================================
23 LEGAL PROCEEDINGS
Various claims and lawsuits, incidental to the ordinary course of
business, are pending against the Corporation and its subsidiaries. In the
opinion of management, after consultation with legal counsel, resolution of
these matters is not expected to have a material effect on the consolidated
financial statements.
68
53
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
STATEMENT BY MANAGEMENT
Boatmen's Bancshares, Inc.
The accompanying financial statements and the related financial
information in this Annual Report were prepared by the management of Boatmen's
Bancshares, Inc. in accordance with generally accepted accounting principles
and where appropriate reflect management's best estimates and judgment.
Management is responsible for the integrity, objectivity, consistency and fair
presentation of the financial statements and all financial information
contained in this Annual Report.
The independent auditors, whose report is contained herein, are
responsible for auditing the Corporation's financial statements in accordance
with generally accepted auditing standards.
In order to fulfill its responsibility, management relies in part on a
system of internal accounting control which has been designed to safeguard the
Corporation's assets from material loss or misuse and ensure that transactions
are properly authorized and recorded in its financial records. An extensive
internal auditing program monitors compliance with established procedures and
controls to provide assurance that the system of internal accounting control
is functioning in a proper manner. There are limits inherent in all systems of
internal control based on the recognition that the cost of such systems should
not exceed the benefits to be derived. Management believes the Corporation's
system of internal accounting control provides reasonable assurance that the
Corporation's assets are safeguarded and that its financial records are
reliable.
The Corporation's internal auditor and independent auditors have direct
access to the Audit Committee of the Board of Directors. This committee, which
is composed entirely of outside directors, meets periodically with management,
the internal auditor, and the independent auditors to ensure the financial
accounting and audit process is properly conducted.
Andrew B. Craig, III
Chairman of the Board
and Chief Executive Officer
James W. Kienker
Executive Vice President
and Chief Financial Officer
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Boatmen's Bancshares, Inc.
We have audited the accompanying consolidated balance sheet of Boatmen's
Bancshares, Inc. as of December 31, 1995 and 1994, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the management of Boatmen's
Bancshares, Inc. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Boatmen's
Bancshares, Inc. at December 31, 1995 and 1994, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
St. Louis, Missouri
January 18, 1996
69
54
BOATMEN'S BANCSHARES, INC. 1995 ANNUAL REPORT
- -------------------------------------------------------------------------------
DIRECTORS
- -------------------------------------------------------------------------------
Richard L. Battram
Executive Vice Chairman
The May Department
Stores Company
B. A. Bridgewater, Jr.
Chairman, President
and Chief Executive Officer
Brown Group, Inc.
William E. Cornelius
Retired Chairman and
Chief Executive Officer
Union Electric Company
Andrew B. Craig, III
Chairman of the Board
and Chief Executive Officer
Boatmen's Bancshares, Inc.
Gregory L. Curl
Vice Chairman
Boatmen's Bancshares, Inc.
John E. Hayes, Jr.
Chairman of the Board,
President and
Chief Executive Officer
Western Resources, Inc.
Samuel B. Hayes, III
President
Boatmen's Bancshares, Inc.
C. Ray Holman
Chairman of the Board,
President and
Chief Executive Officer
Mallinckrodt Group Inc.
Darrell G. Knudson
Executive Vice President
Boatmen's Bancshares, Inc.
John Peters MacCarthy
Retired Vice Chairman
Boatmen's Bancshares, Inc.
William E. Maritz
Chairman of the Board and
Chief Executive Officer
Maritz Inc.
Russell W. Meyer, Jr.
Chairman of the Board and
Chief Executive Officer
The Cessna Aircraft Company
Richard E. Peck
President
University of New Mexico
Jerry E. Ritter
Executive Vice President,
Chief Financial and
Administrative Officer
Anheuser-Busch
Companies, Inc.
William P. Stiritz
Chairman and
Chief Executive Officer
Ralston Purina Company
A. E. Suter
Senior Vice Chairman and
Chief Operating Officer
Emerson Electric Co.
Dwight D. Sutherland
Partner
Sutherland Lumber Company
Theodore C. Wetterau
Retired Chairman and
Chief Executive Officer
Wetterau Incorporated
PRINCIPAL OFFICERS
- -------------------------------------------------------------------------------
Andrew B. Craig, III
Chairman of the Board
and Chief Executive Officer
Samuel B. Hayes, III
President
Gregory L. Curl
Vice Chairman
John M. Brennan
Executive Vice President
Loan Administration
Thomas P. Johnson, Jr.
Executive Vice President
Retail Banking
James W. Kienker
Executive Vice President
and Chief Financial Officer
Darrell G. Knudson
Executive Vice President
Phillip E. Peters
Executive Vice President and
Chief Investment Officer
David L. Ahner
Senior Vice President
Corporate Real Estate
Larry D. Bayliss
Senior Vice President
Advertising and
Public Relations
Jacquelyn L. Dezort
Senior Vice President
and Auditor
Forrest S. FitzRoy
Senior Vice President,
General Counsel and
Secretary
Arthur J. Fleischer
Senior Vice President
Human Resources
John W. Fricke
Senior Vice President
Community Banks
Robert W. Godwin
Senior Vice President
Taxation
A. Laverne Howard
Senior Vice President
Operations
Michael E. Jennings
Senior Vice President
Electronic Banking
W. Bruce Phelps
Senior Vice President
and Controller
Gary S. Pratte
Senior Vice President
Loan Administration
James W. Schomaker
Senior Vice President
Retail Loan Administration
Raymond E. Senuk
Senior Vice President
Information Services
R. Patrick Shannon
Senior Vice President
Loan Review
Marvin W. Smith
Senior Vice President
Administrative Services
H. Chandler Taylor
Senior Vice President
Loan Administration
70
55
CORPORATE INFORMATION
- -------------------------------------------------------------------------------
Market Information
The Corporation's common stock is traded on the Nasdaq Stock Market's
National Market under the symbol "BOAT." Options on the Corporation's common
stock are traded on the Chicago Board Options Exchange ("CBOE") under the
symbol "BTQ." The following table sets forth the high, low and closing trade
prices of the common stock for each quarterly period during 1995 and 1994 as
reported by the National Association of Securities Dealers, Inc. ("NASD"):
Common Stock Share Data
- ---------------------------------------------------------------------------------------------------------------------------------
High Low Close Book Value Market/Book Dividends Declared
- ---------------------------------------------------------------------------------------------------------------------------------
1995
Fourth $42.63 $36.00 $40.88 $22.62 181% $.37
Third 38.75 34.50 37.00 21.90 169 .37
Second 36.25 30.25 35.25 21.55 164 .34
First 31.88 26.88 30.25 20.82 145 .34
- ---------------------------------------------------------------------------------------------------------------------------------
1994
Fourth $31.50 $26.13 $27.13 $19.95 136% $.34
Third 34.88 30.13 31.06 19.87 156 .34
Second 35.00 28.88 31.50 19.56 161 .31
First 30.50 26.75 29.63 19.36 153 .31
- ---------------------------------------------------------------------------------------------------------------------------------
At February 15, 1996, there were approximately 38,476 holders of record of
the Corporation's common stock and the closing price on that day was $40.13.
Trading Volume
The number of shares of the Corporation's common stock traded during the
fourth quarter of 1995 and full year 1995 as reported by NASD were 23,709,015,
and 96,924,480, respectively.
- --------------------------------------------------------------------------------------------------------
Standard Thomson
Agency Ratings Moody's & Poor's 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
(8 Boatmen's subsidiary banks) A1/P1 A+/A-1
- --------------------------------------------------------------------------------------------------------
Corporate Headquarters
One Boatmen's Plaza
800 Market Street
St. Louis, MO 63101
Transfer Agent
Boatmen's Trust Company
510 Locust Street
St. Louis, MO 63101
(314) 466-1357 or (800) 456-9852
Investor Relations Contact
Kevin R. Stitt
Director of Investor Relations
(314) 466-7662
(314) 466-5645 (FAX)
A Dividend Reinvestment and Stock Purchase Plan is available to
shareholders of the Corporation. The key features of this Plan are:
. Dividends on common stock may be automatically reinvested;
. Option to invest up to $10,000 cash per quarter;
. No brokerage commissions or service charges on reinvested dividends or
cash investments.
A Direct Deposit of Dividends program is also available to shareholders
of the Corporation. This program, which is offered at no charge, provides for
the deposit of quarterly dividends directly to a checking or savings account.
Please direct inquiries regarding these programs and requests for the
Reinvestment Plan Prospectus and Direct Deposit Authorization Form to:
Boatmen's Trust Company
P.O. Box 14768
St. Louis, MO 63178
(314) 466-1357 or (800) 456-9852
The Corporation's Bylaws require that notice of shareholder nominations
for directors and proposals of business to be transacted at the Corporation's
Annual Meeting of Shareholders must be received by the Secretary of the
Corporation not less than 75 days prior to the date of the meeting.
The Corporation's annual meeting will be held on April 23, 1996 at
10:30 a.m. at the Albuquerque Convention Center, Kiva Auditorium, 401 Second
Street N.W., Albuquerque, New Mexico.
71