1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to ___________________
COMMISSION FILE NUMBER 0-2610
ZIONS BANCORPORATION
____________________
(Exact name of Registrant as specified in its charter)
UTAH 87-0227400
_________________________________ ___________________
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
ONE SOUTH MAIN, SUITE 1380
SALT LAKE CITY, UTAH 84111
_________________________________________ __________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 524-4787
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirement for the past 90 days. Yes X No_____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, without par value, outstanding at May 2, 1997
14,448,230 shares
1
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ZIONS BANCORPORATION AND SUBSIDIARIES
INDEX
Page
----
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. Financial Statements (unaudited)
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Consolidated Statements of Retained Earnings 6
Notes to Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis 8
PART II. OTHER INFORMATION
-----------------
ITEM 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 20
- ----------
2
3
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31, March 31,
(In thousands, except share amounts) 1997 1996 1996
ASSETS ----------- ----------- -----------
Cash and due from banks $ 361,580 $ 404,331 $ 394,495
Money market investments:
Interest-bearing deposits 51,037 47,746 37,002
Federal funds sold 64,135 260,023 198,069
Security resell agreements 902,547 305,660 802,754
Investment Securities:
Held to maturity at cost (approximate market value
$1,356,412, $1,331,081 and $1,157,977):
Taxable 1,157,431 1,096,921 943,561
Nontaxable 195,967 225,240 200,740
Available for sale at market:
Taxable 377,184 412,686 354,211
Nontaxable 40,030 40,765 40,521
Trading account at market 157,957 34,076 81,888
----------- ----------- -----------
1,928,569 1,809,688 1,620,921
Loans:
Loans held for sale at cost, which approximates market 170,521 150,467 153,589
Loans, leases and other receivables 3,569,722 3,340,557 2,850,530
----------- ----------- -----------
3,740,243 3,491,024 3,004,119
Less:
Unearned income and fees, net of related costs 37,520 38,481 33,086
Allowance for loan losses 69,297 69,954 67,625
----------- ----------- -----------
3,633,426 3,382,589 2,903,408
Premises and equipment, at cost, less accumulated depreciation 96,684 92,874 82,799
Amounts paid in excess of net assets of acquired businesses 38,408 37,091 21,335
Other real estate owned 1,039 138 788
Other assets 163,187 144,824 141,112
----------- ----------- -----------
Total assets $ 7,240,612 $ 6,484,964 $ 6,202,683
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 1,106,096 $ 1,159,791 $ 936,262
Interest-bearing:
Savings and money market 2,575,274 2,474,821 2,295,557
Time under $100,000 625,498 635,568 646,782
Time over $100,000 185,199 167,545 181,488
Foreign 179,631 114,292 110,907
----------- ----------- -----------
4,671,698 4,552,017 4,170,996
Securities sold, not yet purchased 109,446 76,831 56,962
Federal funds purchased 195,635 155,407 173,667
Security repurchase agreements 1,331,070 771,361 1,126,039
Accrued liabilities 93,573 83,082 79,662
Federal Home Loan Bank advances and other borrowings:
Less than one year 14,887 13,533 18,414
Over one year 69,530 73,661 82,313
Long-term debt 251,204 251,620 56,008
----------- ----------- -----------
Total liabilities 6,737,043 5,977,512 5,764,061
----------- ----------- -----------
Shareholders' equity:
Capital stock:
Preferred stock, without par value; authorized 3,000,000
shares; issued and outstanding, none -- -- --
Common stock, without par value; authorized 30,000,000
shares; issued and outstanding, 14,544,404
14,729,720 and 14,555,191 shares 56,181 79,791 67,569
Net unrealized holding gains and losses on securities
available for sale (2,411) (1,835) 173
Retained earnings 449,799 429,496 370,880
----------- ----------- -----------
Total shareholders' equity 503,569 507,452 438,622
----------- ----------- -----------
Total liabilities and shareholders' equity $ 7,240,612 $ 6,484,964 $ 6,202,683
=========== =========== ===========
3
4
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
March 31,
--------------------
(In thousands, except per share amounts) 1997 1996
--------- ---------
Interest income:
Interest and fees on loans $ 77,893 $ 65,241
Interest on loans held for sale 2,845 2,740
Interest on money market investments 21,032 15,380
Interest on securities:
Held to maturity:
Taxable 18,754 15,687
Nontaxable 2,772 3,190
Available for sale:
Taxable 6,698 5,662
Nontaxable 561 562
Trading account 3,345 2,404
Lease financing 3,013 2,642
--------- ---------
Total interest income 136,913 113,508
--------- ---------
Interest expense:
Interest on savings and money market deposits 23,125 19,877
Interest on time deposits under $100,000 7,929 8,897
Interest on time deposits over $100,000 2,264 2,580
Interest on foreign deposits 1,581 1,157
Interest on securities sold, not yet purchased 1,244 990
Interest on borrowed funds 33,156 20,058
--------- ---------
Total interest expense 69,299 53,559
--------- ---------
Net interest income 67,614 59,949
Provision for loan losses 990 600
--------- ---------
Net interest income after provision for loan losses 66,624 59,349
--------- ---------
Noninterest income:
Service charges on deposit accounts 8,931 7,707
Other service charges, commissions and fees 9,292 6,841
Trust income 1,562 1,282
Investment securities gains, net 60 2
Trading account income 791 873
Loan sales and servicing income 9,091 7,110
Other income 2,061 2,262
--------- ---------
Total noninterest income 31,788 26,077
--------- ---------
Noninterest expense:
Salaries and employee benefits 31,688 26,995
Occupancy, net 3,025 2,784
Furniture and equipment 4,455 3,606
Other real estate expense (income) 176 (283)
Legal and professional services 1,457 739
Supplies 1,575 1,522
Postage 1,509 1,356
Advertising 1,626 1,482
FDIC premiums 127 5
Amortization of intangible assets 1,072 764
Other expenses 10,963 10,782
--------- ---------
Total noninterest expense 57,673 49,752
--------- ---------
Income before income taxes 40,739 35,674
Income taxes 14,037 12,003
--------- ---------
Net income $ 26,702 $ 23,671
========= =========
Weighted average common and common-equivalent shares 14,783 14,679
Net income per common share $ 1.81 $ 1.61
4
5
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
---------------------------
(In thousands) 1997 1996
------------ ------------
Cash flows from operating activities:
Net income $ 26,702 $ 23,671
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Provision for loan losses 990 600
Write-downs of other real estate owned 97 --
Depreciation of premises and equipment 3,519 2,985
Amortization of premium on core deposits and
other intangibles 1,072 764
Amortization of net premium/discount on
investment securities 1,241 1,576
Accretion of unearned income and fees, net of
related costs (961) 2,133
Proceeds from sales of trading account securities 25,711,280 14,759,949
Increase in trading account securities (25,835,161) (14,778,130)
Net gain on sales of investment securities (60) (2)
Proceeds from loans held for sale 154,355 152,783
Increase in loans held for sale (172,731) (179,272)
Net gain on sales of loans, leases and other assets (8,140) (5,380)
Net gain (loss) on sales of other real estate owned 6 (281)
Change in accrued income taxes 13,534 12,051
Change in accrued interest receivable (5,144) (1,535)
Change in other assets (12,612) (5,778)
Change in accrued interest payable 5,851 1,668
Change in accrued liabilities (8,735) (6,096)
------------ ------------
Net cash (used in) operating
activities (124,897) (18,294)
------------ ------------
Cash flows from investing activities:
Net increase in money market investments (404,290) (350,574)
Proceeds from maturities of investment securities
held to maturity 99,624 62,932
Purchases of investment securities held to maturity (132,092) (130,474)
Proceeds from sales of investment securities
available for sale 261 739
Proceeds from maturities of investment securities
available for sale 69,151 69,282
Purchases of investment securities available for sale (34,060) (69,286)
Proceeds from sales of loans and leases 181,454 141,261
Net increase in loans and leases (408,033) (269,416)
Purchases of assets to be leased -- (8,514)
Proceeds from sales of premises and equipment 137 60
Purchases of premises and equipment (7,405) (4,222)
Proceeds from sales of other real estate owned 104 876
Proceeds from sales of mortgage servicing rights 223 623
Purchases of mortgage servicing rights (58) (1,441)
Proceeds from sales of other assets 150 195
Purchases of other assets (50) --
------------ ------------
Net cash (used in) investing
activities (634,884) (557,959)
------------ ------------
5
6
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
Three Months Ended
March 31,
-----------------------
(In thousands) 1997 1996
--------- ---------
Cash flows from financing activities:
Net increase in deposits 119,681 73,882
Net change in short-term funds borrowed 634,064 495,096
Payments on FHLB advances over one year (4,131) (3,861)
Payments on long-term debt (416) (221)
Proceeds from issuance of common stock 356 854
Payments to redeem common stock (26,125) (7,099)
Dividends paid (6,399) (5,970)
--------- ---------
Net cash provided by
financing activities 717,030 552,681
--------- ---------
Net (decrease) in cash and due from banks (42,751) (23,572)
Cash and due from banks at beginning of period 404,331 418,067
--------- ---------
Cash and due from banks at end of period $ 361,580 $ 394,495
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
(Unaudited)
Three Months Ended
March 31,
---------------------
(In thousands) 1997 1996
-------- --------
Cash paid (received) for:
Interest $ 63,404 $ 51,870
Income taxes 80 (369)
Loans transferred to other real estate owned 1,108 291
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
Three Months Ended Twelve Months Ended
March 31, December 31,
--------- ---------
(In thousands) 1997 1996 1996
--------- --------- ---------
Balance at beginning of period $ 429,496 $ 353,179 $ 353,179
Add:
Net income 26,702 23,671 101,350
--------- --------- ---------
456,198 376,850 454,529
Deduct cash dividends:
Preferred, paid by subsidiary to minority shareholder (9) (10) (36)
Common, per share $.44 in 1997
and $.41 and $1.70 in 1996 (6,390) (5,960) (24,997)
--------- --------- ---------
Balance at end of period $ 449,799 $ 370,880 $ 429,496
========= ========= =========
6
7
ZIONS BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Basis of Presentation
The unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1997. For further information, refer to the consolidated financial statements
and footnotes thereto included in Zions Bancorporation's Annual Report to
Shareholders on Form 10-K for the year ended December 31, 1996.
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ZIONS BANCORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL HIGHLIGHTS
(UNAUDITED)
Three Months Ended
March 31,
----------------------------------
(In thousands, except per share and ratio data) 1997 1996 % Change
---------- ---------- ----------
EARNINGS
Net income $ 26,702 $ 23,671 12.80%
PER COMMON SHARE
Net income 1.81 1.61 12.42%
Dividends .44 .41 7.32%
Book value at March 31 34.62 30.19 14.67%
Market value at March 31 118.75 70.75 67.84%
Weighted average common and common-
equivalent shares outstanding 14,783,000 14,679,000
Common shares outstanding at March 31 14,544,404 14,528,191
BALANCES AT PERIOD END
Total assets $7,240,612 $6,202,683 16.73%
Money market investments 1,017,719 1,037,825 -1.94%
Securities 1,928,569 1,620,921 18.98%
Net loans and leases 3,702,723 2,971,033 24.63%
Allowance for loan losses 69,297 67,625 2.47%
Total deposits 4,671,698 4,170,996 12.00%
Shareholders' equity 503,569 438,622 14.81%
Nonperforming assets 11,107 9,393 18.25%
Loans past due 90 days or more 3,829 6,669 -42.59%
PERFORMANCE RATIOS
Return on average assets 1.42% 1.54%
Return on average common equity 21.52% 21.96%
Common dividend payout 23.93% 25.18%
Net interest margin 3.98% 4.36%
Efficiency ratio 57.07% 56.77%
Nonperforming assets to net loans and leases,
other real estate owned and other nonperforming assets at March 31 .30% .32%
CAPITAL RATIOS
Average equity to average assets 6.62% 7.02%
Leverage ratio at March 31 7.84% 6.20%
Tier I risk-based capital at March 31 14.03% 11.13%
Total risk-based capital at March 31 17.49% 13.89%
8
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ZIONS BANCORPORATION AND SUBSIDIARIES
OPERATING RESULTS
Zions Bancorporation achieved record earnings for the first quarter.
Consolidated net income for the quarter ended March 31, 1997 was $26.7 million
or $1.81 per share, an increase of 12.8% and 12.4%, respectively, over the
$23.7 million or $1.61 per share earned in the first quarter of 1996. The
quarterly dividend per share increased to $0.44 from $0.41 in 1996.
The Company's first-quarter earnings relative to the same period a year ago
reflect a $7.6 million (12.8%) increase in net interest income, a $5.7 million
(21.9%) increase in noninterest income, partially offset by a $.4 million
(65.0%) increase in the provision for loan losses, a $7.9 million (15.9%)
increase in noninterest expense and a $2.0 million (16.9%) increase in income
tax expense.
The annualized return on average assets for the first quarter of 1997 was
1.42%, resulting in a return on average common shareholders' equity of 21.52%,
compared to 1.54% and 21.96%, respectively, reported in the first quarter of
1996.
NET INTEREST INCOME AND INTEREST RATE SPREADS
Net interest income for the first quarter of 1997, adjusted to a fully
taxable-equivalent basis, increased 12.5% to $69.3 million compared to $61.6
million for the first quarter of 1996. Net interest margin was 3.98%, as
compared to 4.36% for the first quarter of 1996.
The yield on average earning assets decreased 19 basis points during the first
quarter of 1997 as compared to the first quarter of 1996, and the average rate
paid this quarter on interest-bearing funds increased 17 basis points from the
first quarter of 1996. The spread on average interest-bearing funds for the
first quarter of 1997 was 3.27%, down from the 3.63% for the first quarter of
1996.
The Company manages its earnings sensitivity to interest rate movements, in
part, by matching the repricing characteristics of its assets and liabilities
and, to a lesser extent, through the use of off-balance sheet arrangements such
as caps, floors and interest rate exchange contracts. Net interest income from
the use of such off-balance sheet arrangements for the first quarter of 1997
was $.4 million compared to $.5 million for the first quarter of 1996.
The increased level of taxable-equivalent net interest income in the first
quarter of 1997, compared to the same period in 1996, resulted primarily from
the increase in average earning assets, principally driven by a 22.6% growth in
average loans and leases. The decrease in net interest margin resulted
primarily from interest expense of the $200 million trust preferred securities
issued in December 1996 and the arbitrage activity in money market investments
and short term borrowings to mitigate the reduction of net interest income from
the securities.
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ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES
(UNAUDITED)
Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
---------------------------------------- ---------------------------------------
Average Amount of Average Average Amount of Average
(In thousands) Balance Interest 1 Rate Balance Interest 1 Rate
----------- ----------- ----------- ----------- ----------- -----------
ASSETS
Money market investments:
Interest-bearing deposits $ 49,888 $ 630 5.12% $ 35,926 $ 438 4.90%
Federal funds sold and security
resell agreements 1,520,898 20,402 5.44% 1,065,657 14,942 5.64%
----------- ----------- ----------- -----------
Total money market investments 1,570,786 21,032 5.43% 1,101,583 15,380 5.62%
----------- ----------- ----------- -----------
Investment securities:
Held to maturity:
Taxable 1,097,160 18,754 6.93% 935,696 15,687 6.74%
Nontaxable 194,172 3,960 8.27% 196,478 4,557 9.33%
Available for sale:
Taxable 397,535 6,698 6.83% 353,261 5,662 6.45%
Nontaxable 40,508 801 8.02% 41,230 803 7.83%
Trading account 232,576 3,345 5.83% 174,362 2,404 5.55%
----------- ----------- ----------- -----------
Total securities 1,961,951 33,558 6.94% 1,701,027 29,113 6.88%
----------- ----------- ----------- -----------
Loans:
Loans held for sale 154,483 2,845 7.47% 149,428 2,740 7.37%
Net loans and leases 2 3,370,267 81,137 9.76% 2,725,830 67,883 10.02%
----------- ----------- ----------- -----------
Total loans 3,524,750 83,982 9.66% 2,875,258 70,623 9.88%
----------- ----------- ----------- -----------
Total interest-earning assets $ 7,057,487 $ 138,572 7.96% $ 5,677,868 $ 115,116 8.15%
----------- -----------
Cash and due from banks 325,147 322,950
Allowance for loan losses (69,842) (67,451)
Other assets 292,100 244,949
----------- -----------
Total assets $ 7,604,892 $ 6,178,316
=========== ===========
LIABILITIES
Interest-bearing deposits:
Savings and NOW deposits $ 600,248 $ 4,608 3.11% $ 637,053 $ 4,903 3.10%
Money market super NOW deposits 1,922,695 18,517 3.91% 1,595,439 14,974 3.77%
Time deposits under $100,000 645,384 7,929 4.98% 663,867 8,897 5.39%
Time deposits $100,000 or more 154,168 2,264 5.96% 163,483 2,580 6.35%
Foreign deposits 141,366 1,581 4.54% 106,534 1,157 14.37%
----------- ----------- ----------- -----------
Total interest-bearing deposits 3,463,861 34,899 4.09% 3,166,376 32,511 4.13%
----------- ----------- ----------- -----------
Borrowed funds:
Securities sold, not yet purchased 87,336 1,244 5.78% 71,995 990 5.53%
Federal funds purchased and security
repurchase agreements 2,108,162 26,444 5.09% 1,362,078 17,131 5.06%
FHLB advances and other borrowings:
Less than one year 12,729 209 6.66% 22,300 360 6.49%
Over one year 71,520 1,072 6.08% 84,332 1,309 6.24%
Long-term debt 251,274 5,431 8.77% 56,141 1,258 9.01%
----------- ----------- ----------- -----------
Total borrowed funds 2,531,021 34,400 5.51% 1,596,846 21,048 5.30%
----------- ----------- ----------- -----------
Total interest-bearing liabilities $ 5,994,882 $ 69,299 4.69% $ 4,763,222 $ 53,559 4.52%
----------- -----------
Noninterest-bearing deposits 1,006,913 872,058
Other liabilities 99,909 109,472
----------- -----------
Total liabilities 7,101,704 5,744,752
Total shareholders' equity 503,188 433,564
----------- -----------
Total liabilities and shareholders' equity $ 7,604,892 $ 6,178,316
=========== ===========
Spread on average interest-bearing funds 3.27% 3.63%
====== ======
Net interest income and net yield on
interest-earning assets $ 69,273 3.98% $ 61,557 4.36%
=========== ====== =========== ======
1 Taxable-equivalent rates used where applicable.
2 Net of unearned income and fees, net of related costs. Loans include
nonaccrual and restructured loans.
10
11
ZIONS BANCORPORATION AND SUBSIDIARIES
PROVISION FOR LOAN LOSSES
The provision for loan losses increased 65.0% to $1.0 million for the first
quarter of 1997, as compared with $.6 million for the first quarter of 1996.
The provision for loan losses for the first quarter of 1997 and 1996 was
incurred in the Company's Arizona and Nevada bank subsidiaries. No provision
was recognized by the Company's Utah bank. Although the provision has
increased, annualized it is only .11% of average loans.
NONINTEREST INCOME
Noninterest income for the first quarter of 1997 was $31.8 million, an increase
of 21.9% over $26.1 million for the first quarter of 1996. Primary
contributors to the increase in noninterest income were service charges on
deposit accounts; other service charges, commissions and fees; and loan sales
and servicing income. Comparing the segments of noninterest income for the
first quarter of 1997 with the first quarter of 1996, service charges on
deposit accounts; other service charges, commissions and fees; trust income;
and loan sales and servicing income increased 15.9%, 35.8% 21.8% and 27.9%,
respectively, while trading account income decreased 9.4% and other income
decreased 8.9%.
NONINTEREST EXPENSE
Noninterest expense for the first quarter of 1997 was $57.7 million, an
increase of 15.9% over $49.8 million for the first quarter of 1996. Comparing
significant noninterst expense segments for the first quarter of 1997 with the
first quarter of 1996, salaries and employee benefits increased 17.4%,
occupancy increased 8.7% furniture and equipment expense increased 23.5%, and
FDIC premiums increased 244.0%. Significant increases were also reported for
other real estate expense, legal and professional services and amortization of
intangible assets for the first quarter of 1997.
In the first quarter of 1997, four new banking centers were opened, 71 ATMs
installed and additional investment in personnel was made in selected areas to
enhance future revenue growth.
The Company's "efficiency ratio," or noninterest expenses as a percentage of
total taxable-equivalent net revenues was 57.07% for the first quarter of 1997
as compared to 56.77 % for the first quarter of 1996.
INCOME TAXES
The Company's income taxes increased 16.9% to $14.0 million for the first
quarter of 1997 compared to $12.0 million for the first quarter of 1996. The
increase in the Company's income taxes was primarily due to the increase in
taxable income. The Company's effective income tax rate was 34.46% for the
first quarter of 1997, up slightly from 33.65% for the first quarter of 1996.
11
12
ZIONS BANCORPORATION AND SUBSIDIARIES
ANALYSIS OF FINANCIAL CONDITION
EARNING ASSETS
Average earning assets increased 24.3% to $7,057.5 million in the three months
ended March 31, 1997, as compared to $5,677.9 million in the three months
ended March 31, 1996. Earning assets comprised 92.8% of total average assets
for the first three months of 1997, compared with 91.9% for the first three
months of 1996.
Average money market investments, consisting of interest-bearing deposits,
federal funds sold and security resell agreements increased 42.6% to $1,570.8
million as compared to $1,101.6 million in the first three months of 1996.
During the first three months of 1997, average securities increased 15.3% to
$1,962.0 million as compared to $1,701.0 million in the first three months of
1996. Average held to maturity securities increased 14.1%, available for sale
securities increased 11.0%, and average trading account securities increased
33.4%, as compared with the same period in 1996.
Average net loans and leases increased 22.6% to $3,524.8 million for the first
three months of 1997 as compared to $2,875.3 million in the first three months
of 1996, representing 49.9% of earning assets in the first quarter of 1997 as
compared to 50.6% in the first quarter of 1996. Average net loans and leases
were 78.8% of average total deposits for the three months ended March 31, 1997,
as compared to 71.2% for the three months ended March 31, 1996.
12
13
ZIONS BANCORPORATION AND SUBSIDIARIES
INVESTMENT SECURITIES
The following table presents the Company's investment securities on March 31,
1997, December 31, 1996 and March 31, 1996.
March 31, December 31, March 31,
1997 1996 1996
---------------------- ---------------------- ----------------------
Amortized Market Amortized Market Amortized Market
(In thousands) cost value cost value cost value
---------- ---------- ---------- ---------- ---------- ----------
Held to maturity
U.S. government agencies and corporations:
Small Business Administration
loan-backed securities $ 485,730 $ 491,143 $ 487,748 $ 491,785 $ 510,875 $ 523,172
Other agency securities 593,818 587,968 518,308 517,892 347,556 343,719
States and political subdivisions 214,234 216,950 255,321 259,560 228,230 232,895
Mortgage-backed securities 59,616 60,351 60,784 61,844 57,640 58,191
---------- ---------- ---------- ---------- ---------- ----------
$1,353,398 $1,356,412 $1,322,161 $1,331,081 $1,144,301 $1,157,977
---------- ---------- ---------- ---------- ---------- ----------
Available for sale
U.S. Treasury securities $ 10,158 $ 10,157 $ 14,655 $ 14,707 $ 14,162 $ 14,185
U.S. government agencies 88,904 83,791 120,620 116,500 83,035 82,567
States and political subdivisions 38,886 40,030 39,118 40,766 39,014 40,521
Mortgage-backed securities 84,323 85,041 86,007 84,865 68,299 67,926
---------- ---------- ---------- ---------- ---------- ----------
222,271 219,019 260,400 256,838 204,510 205,199
---------- ---------- ---------- ---------- ---------- ----------
Equity securities:
Mutual funds:
Accessor Funds, Inc. 109,518 107,926 109,071 109,100 108,939 108,141
Other -- -- -- -- 571 571
Stock:
Federal Home Loan Bank 81,004 81,004 79,593 79,593 73,598 73,598
Other 8,313 9,265 7,343 7,920 6,823 7,223
---------- ---------- ---------- ---------- ---------- ----------
198,835 198,195 196,007 196,613 189,931 189,533
---------- ---------- ---------- ---------- ---------- ----------
$ 421,106 $ 417,214 $ 456,407 $ 453,451 $ 394,441 $ 394,732
---------- ---------- ---------- ---------- ---------- ----------
Total $1,774,504 $1,773,626 $1,778,568 $1,784,532 $1,538,742 $1,552,709
========== ========== ========== ========== ========== ==========
LOANS
The Company has structured its organization to separate the lending function
from the credit administration function to strengthen the control and
independent evaluation of credit activities. Loan policies and procedures
provide the Company with a framework for consistent underwriting and a basis
for sound credit decisions. In addition, the Company has well-defined
standards for grading its loan portfolio, and management utilizes the
comprehensive loan grading system to determine risk potential in the portfolio.
Another aspect of the Company's credit risk management strategy is the
diversification of the loan portfolio. The Company has a well-diversified loan
portfolio with no significant exposure to highly leveraged transactions and has
no foreign credits in its loan portfolio.
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ZIONS BANCORPORATION AND SUBSIDIARIES
The table below sets forth the amount of loans outstanding by type on March 31,
1997, December 31, 1996 and March 31, 1996.
(In thousands)
March 31, December 31, March 31,
Types 1997 1996 1996
---------- ---------- ----------
Loans held for sale $ 170,521 $ 150,467 $ 153,589
Commercial, financial, and agricultural 867,784 783,589 696,027
Real estate:
Construction 341,589 323,668 322,023
Other:
Home equity credit line 160,668 165,134 85,145
1-4 family residential 540,173 534,845 419,874
Other real estate-secured 1,131,846 1,057,962 822,006
---------- ---------- ----------
1,832,687 1,757,941 1,327,025
---------- ---------- ----------
2,174,276 2,081,609 1,649,048
Consumer:
Bankcard 27,267 37,089 43,728
Other 265,401 267,456 284,184
---------- ---------- ----------
292,668 304,545 327,912
Lease financing 158,140 159,825 144,609
Other receivables 76,854 10,989 32,934
---------- ---------- ----------
Total loans $3,740,243 $3,491,024 $3,004,119
========== ========== ==========
Loans held for sale on March 31, 1997 increased 13.3% from year-end 1996. All
other loans, net of unearned income and fees increased 7.0% to $3,532.2 million
on March 31, 1997, compared to $3,302.1 million on December 31, 1996.
Commercial loans, construction loans, other real estate-secured loans,
and other receivables increased from year end 10.7%, 5.5%, 4.3% and 599.4%,
respectively, as consumer loans decreased 3.9% and lease financing decreased
1.1%. Within the other real estate-secured loan portfolio, home equity credit
line loans decreased 2.7%, 1-4 family residential loans increased 1.0% and all
other real estate loans increased 7.0% from year end.
On March 31, 1997, long-term first mortgage real estate serviced for others
totaled $1,644.9 million and consumer and other loan securitizations, which
relate primarily to loans sold under revolving securitization structures,
totaled $861.5 million. During the first quarter of 1997, the Company sold
$152.1 million of loans and held for sale and securitized and sold home equity
credit line loans, credit card receivables and automobile loans totaling $176.0
million.
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ZIONS BANCORPORATION AND SUBSIDIARIES
RISK ELEMENTS
The Company's nonperforming assets, which include nonaccruing loans,
restructured loans, other real estate owned and other nonperforming assets,
were $11.1 million on March 31, 1997, down from 12.5 million on December 31,
1996, but up from $9.3 million on March 31, 1996. Such nonperforming assets as
a percentage of net loans and leases, other real estate owned and other
nonperforming assets were .30%, .36% and .32% on March 31, 1997, December 31,
1996, and March 31, 1996, respectively.
Accruing loans past due 90 days or more totaled $3.8 million on March 31, 1997,
up from $3.6 million on December 31, 1996, but down from $6.7 million on March
31, 1996. These loans equaled .10% on March 31, 1997, as compared to .10% on
December 31, 1996 and .22% on March 31, 1996.
No loans were considered potential problem loans on March 31, 1997, December
31, 1996 or March 31, 1996. Potential problem loans are defined as loans
presently on accrual and current by their terms, but about which management has
serious doubt as to the future ability of the borrower to comply with present
repayment terms and which may result in the reporting of the loans as
nonperforming assets.
The Company's total recorded investment in impaired loans, in accordance with
Financial Accounting Standard statements, and included in nonaccrual loans and
leases, amounted to $5.4 million on March 31, 1997, as compared to $7.8 million
on December 31, 1996, and $4.8 million on March 31, 1996. The Company
considers a loan to be impaired when the accrual of interest has been
discontinued and meets other criteria under the statements. The amount of the
impairment is measured based on the present value of expected cash flows, the
observable market price of the loan, or the fair value of the collateral.
Impairment losses are included in the allowance for loan losses through a
provision for loan losses. Included in the allowance for loan losses on March
31, 1997, December 31, 1996, and March 31, 1996, is a required allowance of
$526 thousand, $25 thousand and $365 thousand, resepectively, on $2.2 million,
$1.0 million and $1.9 million, respectively, of the recorded investment in
impaired loans.
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ZIONS BANCORPORATION AND SUBSIDIARIES
The following table sets forth the nonperforming assets on March 31, 1997,
December 31, 1996, and March 31, 1996.
March 31, December 31, March 31,
(In thousands) 1997 1996 1996
------- ------- -------
Nonaccrual loans $ 9,216 $11,526 $ 8,360
Restructured loans 852 857 245
Other real estate owned and other
nonperforming assets 1,039 138 788
------- ------- -------
Total $11,107 $12,521 $ 9,393
======= ======= =======
% of net loans and leases*, other real estate
owned and other nonperforming assets .30% .36% .32%
Accruing loans past due 90 days or more $ 3,829 $ 3,553 $ 6,669
======= ======= =======
% of net loans and leases* .10% .10% .22%
*Includes loans held for sale
ALLOWANCE FOR LOAN LOSSES
The Company's allowance for loan losses was 1.87% of net loans and leases on
March 31, 1997, compared to 2.03% on December 31, 1996, and 2.28% on March 31,
1996. Net charge-offs during the first quarter totaled $1.6 million, or .19%
on average net loans and leases, compared to $.5 million, or .07% of average
net loans and leases for the first quarter of 1996.
The allowance, as a percentage of nonaccrual loans and restructured loans, was
688.29% on March 31, 1997, compared to 564.92% on December 31, 1996, and 785.9%
on March 31, 1996. The allowance, as a percentage of nonaccrual loans and
accruing loans past due 90 days or more was 531.22% on March 31, 1997, compared
to 463.92% on December 31, 1996 and 450.0% on March 31, 1996.
On March 31, 1997, December 31, 1996, and March 31, 1996, the allowance for
loan losses includes an allocation of $7.8 million, $5.9 million and $6.6
million, respectively, related to commitments to extend credit on loans and
standby letters of credit. Commitments to extend credit on loans and standby
letters of credit on March 31, 1997, December 31, 1996 and March 31, 1996,
totaled $1,837.6 million, $1,906.9 million and $1,631.3 million, respectively.
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ZIONS BANCORPORATION AND SUBSIDIARIES
In analyzing the adequacy of the allowance for loan and lease losses,
management utilizes a comprehensive loan grading system to determine risk
potential in the portfolio, and considers the results of independent internal
and external credit review, historical charge-off experience, and changes in
the composition and volume of the portfolio. Other factors, such as general
economic conditions and collateral values, are also considered. Larger problem
credits are individually evaluated to determine appropriate reserve
allocations. Additions to the allowance are based upon the resulting risk
profile of the portfolio developed through the evaluation of the above factors.
The following table shows the changes in the allowance for loan losses and a
summary of loan loss experience.
Twelve Months
Three Months Ended Ended
(In thousands) March 31, December 31,
---------------------------------- -----------
1997 1996 1996
----------- ----------- -----------
Average loans* and leases outstanding
(net of unearned income) $ 3,524,750 $ 2,875,258 $ 3,126,899
=========== =========== ===========
Allowance for possible losses:
Balance at beginning of the period $ 69,954 $ 67,555 $ 67,555
Allowance of companies acquired -- -- 2,566
Provision charged against earnings 990 600 3,540
Loans and leases charged-off:
Loans held for sale -- -- --
Commercial, financial and agricultural (958) (317) (1,274)
Real estate (108) (242) (427)
Consumer (1,498) (1,883) (7,503)
Lease financing (32) -- (228)
Other receivables -- -- --
----------- ----------- -----------
Total (2,596) (2,442) (9,432)
----------- ----------- -----------
Recoveries:
Loans held for sale -- -- --
Commercial, financial and agricultural 206 637 2,411
Real estate 129 194 428
Consumer 613 690 2,344
Lease financing 1 391 542
Other receivables -- -- --
----------- ----------- -----------
Total 949 1,912 5,725
----------- ----------- -----------
Net loan and lease charge-offs (1,647) (530) (3,707)
----------- ----------- -----------
Balance at end of the period $ 69,297 $ 67,625 $ 69,954
=========== =========== ===========
*Includes loans held for sale
Ratio of net charge-offs to
average loans and leases .19% .07% .12%
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ZIONS BANCORPORATION AND SUBSIDIARIES
DEPOSITS
Average total deposits of $4,470.8 million for the first three months of 1997
increased 10.7% over the $4,038.4 million for the first three months of 1996,
with average demand deposits increasing 15.5%. Average money market and super
NOW deposits and foreign deposits for the first three months of 1997 increased
20.5% and 32.7% respectively, from the first three months of 1996. Average
savings and NOW deposits decreased 5.8%, time deposits under $100,000 decreased
2.8% and time deposits over $100,000 decreased 5.7% during the first three
months of 1997, compared with the same period one year earlier.
Total deposits increased 2.6% to $4,671.7 million on March 31, 1997, as
compared to $4,552.0 million on December 31, 1996. Comparing March 31, 1997 to
December 31, 1996, savings and money market deposits, time deposits over
$100,000 and foreign deposits increased 4.1%, 10.5% and 57.2%, respectively,
while demand deposits decreased 4.6% and time deposits under $100,000 decreased
$1.6%.
LIQUIDITY AND INTEREST RATE SENSITIVITY
The Company manages its liquidity to provide adequate funds to meet its
financial obligations, including withdrawals by depositors, and debt service
requirements as well as to fund customers' demand for credit. Liquidity is
primarily provided by the regularly scheduled maturities of the Company's
investment and loan portfolios. The Company's liquidity is enhanced by the
fact that cash, money market securities and liquid investments, net of
short-term or "purchased" liabilities and wholesale deposits, totaled $1,198.5
million or 27.8% of core deposits at March 31, 1997.
The Company's core deposits, consisting of demand, savings and money market
deposits and time deposits under $100,000, constituted 92.2% of total deposits
at March 31, 1997 as compared to 93.8% on December 31, 1996 and 93.0% at March
31, 1996.
Maturing balances in loan portfolios provide flexibility in managing cash
flows. Maturity management of those funds is an important source of medium- to
long-term liquidity. The Company's ability to raise funds in the capital
markets through the securitization process and by debt issuances allows the
Company to take advantage of market opportunities to meet funding needs at
reasonable cost.
The parent company's cash requirements consist primarily of principal and
interest payments on its borrowings, dividend payments to shareholders,
operating expenses and income taxes. The parent company's cash needs are
routinely satisfied through payments by subsidiaries of dividends, management
and other fees, principal and interest payments on subsidiary borrowings from
the parent company and proportionate shares of current income.
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ZIONS BANCORPORATION AND SUBSIDIARIES
Interest rate sensitivity measures the Company's financial exposure to changes
in interest rates. Interest rate sensitivity is, like liquidity, affected by
maturities of assets and liabilities. Interest rate sensitivity measures the
Company's financial exposure to changes in interest rates. The Company
assesses its interest rate sensitivity using duration, simulation, and gap
analysis. Duration is a measure of the weighted average expected lives of the
discounted cash flows from assets and liabilities. Simulation is used to
estimate net interest income over time using alternative interest rate
scenarios. Gap analysis compares the volumes of assets and liabilities whose
interest rates are subject to reset within specified periods.
The Company, through the management maturities and repricing of its assets and
liabilities and the use of off-balance sheet arrangments such as interest rate
caps, floors, futures, options, and interest rate exchange agreements, attempts
to minimize the effect on net income of changes in interest rates. The
Company's management exercises its best judgment in making assumptions with
respect to loan and security prepayments, early deposit withdrawals and other
noncontrollable events in managing the Company's exposure to changes in
interest rates. The interest rate risk position is actively managed and
changes daily as the interest rate environment changes; therefore, positions at
the end of any period may not be reflective of the Company's interest rate
position in subsequent periods. The prime lending rate is the primary basis
used for pricing the Company's loans and the short-term Treasury rate is the
index used for pricing many of the Company's deposits. The Company, however,
is unable to economically hedge the prime/91-day T-bill spread risk through the
use of off-balance sheet financial instruments.
CAPITAL RESOURCES AND DIVIDENDS
During the first quarter of 1997, the Company repurchased and retired 223,602
shares of its common stock at a cost of $26.1 million. In March 1997, the
Company's board of directors authorized an additional repurchase of its common
shares in the amount of $25 million.
Total shareholders' equity on March 31, 1997 was $503.6 million, a decrease of
.8% from the $507.5 million on Deceber 31, 1996, and an increase of 14.8% over
the $438.6 million on March 31, 1996. The ratio of average equity to average
assets for the first three months of 1997 was 6.62% as compared to 7.02% for
the same period in 1996. On March 31, 1997, the Company's Tier I risk-based
capital ratio was 14.03%, as compared to 14.38% on December 31, 1996 and 11.13%
on March 31, 1996. On March 31, 1997 the Company's total risk-based capital
ratio was 17.49%, as compared to 18.31% on December 31, 1996 and 13.89% on
March 31, 1996. The Company's leverage ratio on March 31, 1997 was 7.84%, as
compared to 8.77% on December 31, 1996 and 6.20% on March 31, 1996.
Dividends declared per common share for the first quarter of 1997 of $.44
increased 7.3%, as compared to $.41 for the first quarter of 1996. The common
cash dividend payout of net income for the first three months of 1997 was
23.93%, as compared to 25.18% for the first three months of 1996.
19
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ZIONS BANCORPORATION
MERGERS AND ACQUISITIONS
Zions Bancorporation has received regulatory approvals and now awaits
shareholders' approval to acquire Aspen Bancshares, Inc. and its banking
subsidiaries, in a purchase transaction to be paid through the exchange of
Zions Bancorporation common stock for Aspen Bancshares, Inc. stock. The
transaction is expected to be consummated during the second quarter of 1997.
On March 7, 1997, the Company announced an agreement to purchase the deposits
and branch facilities of 32 Wells Fargo offices in Arizona, Idaho, Nevada and
Utah. The offices have deposits of approximately $550 million. The Company
expects this transaction to close in July, 1997, subject to regulatory
approvals and other conditions of closing.
On May 1, 1997, the Company entered into an agreement to acquire Tri-State Bank
in Montpelier, Idaho. Tri-State Bank has two offices and $24 million in
assets. The transaction is to be accounted for as a purchase and is expected
to close in July 1997, subject to regulatory approvals and shareholders'
approval.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibit 10 Zions Bancorporation Penion Plan
Amended and Restated Effective April 1, 1997
Exhibit 27 Article 9 Financial Schedules for Form 10-Q
b) Reports on Form 8-K
A report on Form 8-K was filed March 11, 1997, containing the
Company's audited Consolidated Financial Statements for the
year ended December 31, 1996.
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ZIONS BANCORPORATION
/s/ Harris H. Simmons Harris H.
---------------------------------------
Simmons, President and Chief
Executive Officer
/s/ Dale M. Gibbons Dale M. Gibbons,
---------------------------------------
Senior Vice President
20