<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
August 30, 1995
____________________
U. S. BANCORP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Oregon
(STATE OR OTHER JURISDICTION OF INCORPORATION)
0-3505
(COMMISSION FILE NO.)
93-0571730
(IRS EMPLOYER IDENTIFICATION NO.)
111 S.W. Fifth Avenue
Portland, Oregon 97204
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code:
(503) 275-6111
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<PAGE> 2
ITEM 5. OTHER EVENTS.
As described under Item 5 of the registrant's quarterly report
on Form 10-Q for the quarter ended March 31, 1995, the registrant entered into
an Agreement and Plan of Merger with West One Bancorp on May 5, 1995, providing
for the merger of West One Bancorp into the registrant (the "Merger"). The
Merger, which is conditioned upon, among other things, the approval of the
shareholders of each party and certain regulatory approvals, is expected to be
completed by year-end 1995. The registrant is filing herewith the financial
statements and the pro forma financial information listed in Item 7 hereof for
the purpose of incorporating such financial statements and financial
information in certain of the registrant's registration statements under the
Securities Act of 1933.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
The following financial statements of West One
Bancorp and Subsidiaries are filed as a part of this
report:
Consolidated Balance Sheets at December 31, 1994, and
1993.
Consolidated Statements of Income for the years ended
December 31, 1994, 1993, and 1992.
Consolidated Statements of Shareholders' Equity for
the years ended December 31, 1994, 1993, and 1992.
Consolidated Statements of Cash Flows for the years
ended December 31, 1994, 1993, and 1992.
Notes to Consolidated Financial Statements.
Report of Independent Accountants.
Consolidated Balance Sheets at June 30, 1995, and
1994 and December 31, 1994.
Consolidated Statements of Income for the quarter and
for the six months ended June 30, 1995, and 1994.
Consolidated Statements of Cash Flows for the six
months ended June 30, 1995 and 1994.
Notes to Quarterly Consolidated Financial Statements.
- 2 -
<PAGE> 3
(b) Pro Forma Financial Information.
The following unaudited pro forma financial
information of U.S. Bancorp and Subsidiaries is
filed as part of this report:
Pro Forma Condensed Balance Sheet dated June 30, 1995.
Pro Forma Condensed Statement of Income for the six
months ended June 30, 1995.
Pro Forma Condensed Statement of Income for the year
ended December 31, 1994.
Pro Forma Condensed Statement of Income for the year
ended December 31, 1993.
Pro Forma Condensed Statement of Income for the year
ended December 31, 1992.
Notes to Pro Forma Condensed Financial Statements.
(c) Exhibits.
See the accompanying exhibit index.
- 3 -
<PAGE> 4
West One Bancorp and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Dollars in thousands at December 31, 1994 1993
<S> <C> <C>
Assets
Cash and due from banks $632,577 $450,384
Federal funds sold, securities purchased under
agreements to resell and other 112,516 14,654
Securities:
Available for sale 1,139,765 1,060,650
Held to maturity - market value of $568,488 and $595,146 581,155 565,165
Total securities 1,720,920 1,625,815
Loans - net of unearned income
of $38,086 and $40,244:
Real estate 2,526,475 2,150,835
Commercial and agricultural 2,205,459 1,996,865
Consumer 1,172,616 1,038,678
Leases 160,873 168,119
Total loans 6,065,423 5,354,497
Allowance for credit losses (81,757) (74,923)
Net loans 5,983,666 5,279,574
Premises and equipment 128,506 122,828
Interest receivable 66,605 50,141
Other assets 147,909 127,957
Total assets $8,792,699 $7,671,353
Dollars in thousands at December 31, 1994 1993
Liabilities
Deposits:
Noninterest bearing $1,397,843 $1,260,869
Interest bearing demand 749,755 729,247
Regular and money market savings 2,086,718 1,971,211
Time certificates under $100,000 1,755,013 1,505,177
Time certificates $100,000 and over 821,553 470,543
Total deposits 6,810,882 5,937,047
Short-term borrowings:
Federal funds purchased and securities sold
under agreements to repurchase 804,161 568,295
Other 122,153 330,609
Long-term debt 253,073 116,460
Other liabilities 86,661 95,376
Total liabilities 8,076,930 7,047,787
Commitments and contingencies (Note 9)
Shareholders' equity
Common stock - $1.00 par value; 75,000,000 shares authorized;
36,745,368 and 34,718,731 shares outstanding 36,745 34,719
Capital surplus 327,879 304,413
Retained earnings 364,041 275,351
Unrealized gain (loss) on securities, net of tax (12,896) 9,083
Total shareholders' equity 715,769 623,566
Total liabilities and shareholders' equity $8,792,699 $7,671,353
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 5
West One Bancorp and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Dollars in thousands except per share data,
for the year ended December 31, 1994 1993 1992
<S> <C> <C> <C>
Interest income
Loans $471,971 $402,550 $338,290
Short-term investments 3,000 1,371 8,278
Interest and dividends on securities:
United States Treasury and Government agencies 33,331 31,172 35,711
State and municipal bonds 30,147 25,056 15,392
Mortgage-backed securities 15,233 21,842 21,971
Other 9,304 15,334 14,146
Total interest income 562,986 497,325 433,788
Interest expense
Deposits 179,639 160,076 160,138
Federal funds purchased and securities sold
under agreements to repurchase 22,185 18,592 20,995
Other short-term borrowings 10,390 6,543 3,911
Long-term debt 9,147 8,224 10,046
Total interest expense 221,361 193,435 195,090
Net interest income 341,625 303,890 238,698
Provision for credit losses 13,278 13,383 14,308
Net interest income after
provision for credit losses 328,347 290,507 224,390
Noninterest income
Trust fees and commissions 14,201 13,627 11,819
Service charges on deposit accounts 39,536 36,588 30,882
Other service charges, fees and commissions 48,785 41,079 30,569
Other 11,991 10,720 8,501
Securities gains (losses) (1,067) 495 1,690
Total noninterest income 113,446 102,509 83,461
Noninterest expense
Salaries and employee benefits 142,512 128,886 104,024
Other 152,180 143,552 112,500
Total noninterest expense 294,692 272,438 216,524
Income before taxes 147,101 120,578 91,327
Provision for income taxes 43,930 37,391 27,955
Net income $103,171 $83,187 $63,372
Primary earnings per share $2.88 $2.50 $2.09
Fully diluted earnings per share 2.74 2.38 1.98
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 6
West One Bancorp and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Dollars in thousands except per share data
<TABLE>
<CAPTION>
Unrealized
Securities
Common Capital Retained Gain
Stock Surplus Earnings (Loss) Total
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1991 $28,062 $173,823 $165,163 $ - $367,048
Net income - - 63,372 - 63,372
Cash dividends declared -
$.675 per share - - (20,983) - (20,983)
Issuance of common stock -
3,375,062 shares 3,375 66,234 (1,687) - 67,922
Acquisition -
913,694 shares 914 8,758 1,982 - 11,654
Tax benefit of stock options
exercised - 812 - - 812
Balance at December 31, 1992 32,351 249,627 207,847 - 489,825
Net income - - 83,187 - 83,187
Cash dividends declared -
$.49 per share - - (16,421) - (16,421)
Issuance of common stock -
2,161,317 shares 2,162 52,300 (86) - 54,376
Acquisition -
206,254 shares 206 2,011 824 - 3,041
Tax benefit of stock options
exercised - 475 - - 475
Unrealized gain on securities,
net of tax - - - 9,083 9,083
Balance at December 31, 1993 34,719 304,413 275,351 9,083 623,566
Net income - - 103,171 - 103,171
Cash dividends declared -
$.76 per share - - (27,094) - (27,094)
Issuance of common stock -
381,039 shares 381 7,488 - - 7,869
Acquisitions -
1,639,687 shares 1,639 14,543 12,613 (1,048) 27,747
Conversion of subordinated
debentures -
5,911 shares 6 103 - - 109
Tax benefit of stock options
exercised - 1,332 - - 1,332
Unrealized loss on securities,
net of tax - - - (20,931) (20,931)
Balance at December 31, 1994 $36,745 $327,879 $364,041 $(12,896) $715,769
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE> 7
West One Bancorp and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Dollars in thousands
for the year ended December 31, 1994 1993 1992
<S> <C> <C> <C>
Cash flows from operating activities
Net income $103,171 $83,187 $63,372
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for credit losses 13,278 13,383 14,308
Depreciation of premises and equipment 16,446 15,619 11,451
Amortization and accretion of premiums
and discounts 11,409 14,013 9,479
Amortization of intangible and other assets 11,743 12,741 8,547
Originations of real estate loans held
for sale (274,119) (486,205) (304,612)
Proceeds from real estate and other
loans sold 291,068 421,141 309,249
Net gain on sale of real estate loans (3,258) (1,931) (4,756)
Net (gain) loss on sale of securities 1,067 (495) (1,690)
Purchase of trading account securities (101,905) (37,550) (95,266)
Sale of trading account securities 102,578 38,087 104,315
Changes in assets and liabilities, net of
effect of acquisitions:
Interest receivable (14,166) (156) 3,779
Other assets (7,428) (10,775) (7,027)
Other liabilities 577 7,557 4,290
Net cash provided by operating activities 150,461 68,616 115,439
Cash flows from investing activities
Change in short-term investments,
maturities less than 90 days (91,324) 177,186 4,776
Purchase of securities available for sale (609,658) (141,903) -
Maturity of securities available for sale 309,419 112,007 -
Sale of securities available for sale 264,278 82,043 -
Purchase of securities held to maturity (64,138) (453,933) (1,102,479)
Maturity of securities held to maturity 46,184 448,916 531,152
Sale of investment securities - 704 157,988
Change in net loans and leases (618,648) (746,376) (139,251)
Purchase of premises and equipment (15,431) (16,946) (14,162)
Sale of premises and equipment 346 1,034 677
Additions to intangible assets (9,556) (6,979) (9,455)
Sale of other real estate owned 8,861 9,712 10,960
Cash provided by acquisitions 176,918 2,019 370,159
Net cash used by investing activities (602,749) (532,516) (189,635)
Dollars in thousands
for the year ended December 31, 1994 1993 1992
Cash flows from financing activities
Change in deposits 495,063 268,448 249,910
Change in short-term borrowings,
maturities less than 90 days 33,103 59,305 12,721
Proceeds from short-term borrowings 41,107 128,283 164,795
Payments on short-term borrowings (48,611) (100,605) (197,406)
Additions to long-term debt 145,000 27,500 5,474
Payments on long-term debt (14,385) (28,943) (4,501)
Proceeds from issuance of common stock 8,463 54,526 67,922
Cash dividends paid (25,259) (19,392) (15,130)
</TABLE>
<PAGE> 8
<TABLE>
<S> <C> <C> <C>
Net cash provided by financing activities 634,481 389,122 283,785
Net increase (decrease) in cash and due
from banks 182,193 (74,778) 209,589
Cash and due from banks - January 1 450,384 525,162 315,573
Cash and due from banks - December 31 $632,577 $450,384 $525,162
Supplemental information
Interest paid $213,749 $195,094 $198,752
Income taxes paid 50,159 36,000 19,629
Noncash transactions
Reclassification of securities available
for sale - 939,254 160,989
Securities purchased not settled - 3,761 -
Loans held for sale transferred to the loan
portfolio 32,799 41,457 14,518
Loan charge-offs 18,999 16,156 19,445
Transfer of loans to other real estate owned 10,318 4,295 9,177
Additions to core deposit intangibles - - 8,188
Capital lease for computer equipment - - 10,857
Termination of capital lease for computer
equipment - - 6,460
Tax benefit of stock options exercised 1,332 475 812
Dividends declared not paid 8,084 6,249 9,220
Acquisitions:
Securities and short-term investments 94,693 11,792 31,807
Net loans 122,266 21,469 913,432
Premises and equipment 7,045 612 24,631
Intangible assets 11,389 - 13,757
Deposits 378,772 32,260 1,342,021
Other liabilities, net 5,792 591 111
Equity 27,747 3,041 11,654
</TABLE>
The accompanying notes are an integral part of the financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of West One Bancorp and its subsidiaries
(West One) conform with generally accepted accounting principles and general
practice in the banking industry.
Principles of Consolidation
The consolidated financial statements include the accounts of West One with
elimination of material intercompany transactions and balances. The Parent
Company only financial statements (Note 16) reflect investment in subsidiaries
using the equity basis of accounting. Certain reclassifications have been made
to prior year financial statements to conform to the 1994 presentation. Assets
owned by others and held in a fiduciary or agency capacity by subsidiaries are
not included in the consolidated balance sheets.
Securities
On December 31, 1993, West One adopted Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." Securities held to maturity are stated at cost, adjusted
for amortization of premiums and accretion of discounts. Securities available
for sale and trading account securities are stated at market value. Gains
and losses on sale of securities, recognized on a specific identification
basis, and valuation adjustments of trading account securities are included
in noninterest income. Net unrealized gains and losses on securities
<PAGE> 9
available for sale are included, net of tax, as a component of shareholders'
equity.
Loans
Loans and leases are stated at the principal amount outstanding, net of
unearned income. Interest on loans is recognized as income based on the
outstanding principal and the stated interest rates as adjusted for net
deferred loan fees, premiums and discounts. Loan origination fees and costs
are deferred and recognized as income on the interest method over the life of
the loans. Lease income, primarily from financing leases, is recognized on
the interest method. Recognition of interest income is discontinued and all
accrued, unpaid interest is reversed when a loan is placed on nonaccrual
status. A loan or lease is placed on nonaccrual status when timely collection
of interest becomes doubtful. Interest payments received on nonaccrual loans
and leases are applied to principal if collection of principal is doubtful
or reflected as interest income on a cash basis. Loans and leases are removed
from nonaccrual status when they are current and collectibility of principal
and interest is no longer doubtful. Loans held for sale are stated at the
lower of cost or market.
Allowance for Credit Losses
The allowance for credit losses is maintained at a level considered adequate
by management to provide for losses inherent in the portfolio of loans,
leases and commitments to extend credit. Loans sold with servicing released
have technical underwriting exception and repurchase risks. Any loans
repurchased are considered in the determination of the adequacy of the
allowance for credit losses. The estimate of additions to the allowance for
credit losses, and resulting charge to expense, requires judgment in evaluating
the borrower's management, financial position, cash flow, collateral values
and guarantees, as well as projection of the outcome of future events. The
continuing adequacy of the allowance for credit losses is determined based
upon the results of a credit classification system, internal and external
credit examinations, historic experience, economic conditions, industry
concentrations, elements of risk and other loss factors affecting the
quality of the loan portfolio.
Premises and Equipment
Premises, equipment, major improvements and replacements are stated at cost.
Depreciation is recognized on the straight-line method over the estimated
useful life of the asset. Leasehold improvements are amortized over the
shorter of the useful life of the asset or the remaining term of the lease.
Gains or losses from disposal of premises and equipment are reflected in
noninterest expense. Maintenance and repairs are expensed and improvements are
capitalized. Costs of purchased and internally-developed software are amortized
over periods up to five years.
Other Real Estate Owned
Other real estate owned consists principally of properties acquired through
foreclosure and is stated at the lower of cost or market value.
Other Assets
Other assets include goodwill and core deposit intangibles and are stated at
cost, net of amortization provided on straight-line and level interest
methods over useful lives ranging up to 25 years. Purchased mortgage
servicing rights are stated at cost, net of amortization based on the income
method and prepayment assumptions.
Earnings per Share
Primary and fully diluted earnings per share are computed using the weighted
average number of common and common equivalent shares outstanding. Common
equivalent shares result from the assumed exercise of outstanding stock
options, if dilutive. Fully diluted earnings per share assumes conversion
of the convertible debentures, if dilutive.
<PAGE> 10
New Pronouncements
The Financial Accounting Standards Board has issued SFAS No. 114, "Accounting
by Creditors for Impairment of a Loan," SFAS No. 116, "Accounting for
Contributions Received and Contributions Made" and SFAS No. 118, "Accounting
by Creditors for Impairment of a Loan - Income Recognition and Disclosures,"
effective for years beginning after December 15, 1994. None of these
statements is expected to have a material effect on West One.
NOTE 2. ACQUISITIONS
West One acquired the financial institutions listed below in transactions
accounted for as poolings of interests. The acquisitions were not material
to West One's financial position, results of operations and cash flows and
prior year financial statements have not been restated.
Dollars in thousands
<TABLE>
<CAPTION>
Year-to-
Year-to-date date net Total Number of
revenues at income at assets at West One
Acquisition acquisition acquisition acquisition shares
Entity acquired date date date date exchanged
<S> <C> <C> <C> <C> <C>
National Security Bank November 1994 $9,595 $1,701 $131,662 1,101,832
Valley Commercial Bank September 1994 2,803 255 63,576 404,523
Idaho State Bank January 1994 - - 47,949 133,332
Ben Franklin National Bank May 1993 2,171 (6) 36,531 206,254
Yakima Valley Bank October 1992 8,527 895 119,493 913,694
</TABLE>
West One acquired ten Far West Federal Savings Bank branches in Oregon from
Resolution Trust Corporation in April 1994. The transaction included the
receipt of $159,814 in cash, $2,257 of premises and equipment, $11,249 of
intangible assets, and the assumption of $173,320 of deposits and other
liabilities. The transaction was accounted for as a purchase of certain assets
and assumption of certain liabilities.
In September 1992, West One purchased 38 branches and seven specialty
offices in the Puget Sound region of Washington from Security Pacific
Corporation. The transaction included the receipt of $315 million of cash, the
purchase of approximately $837 million of loans, $21 million of premises and
equipment, $21 million of intangible and other assets and the assumption of
approximately $1.2 billion of deposits. In July 1992, West One purchased three
branches of Bank of America, Oregon. The transaction included the receipt of
$45 million of cash, the purchase of approximately $1 million of loans, $1
million of premises and equipment, $1 million of intangible and other assets
and the assumption of $48 million of deposits and other liabilities. Both of
these transactions were accounted for as purchases of certain assets and
assumptions of certain liabilities.
NOTE 3. SECURITIES
Dollars in thousands
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
<S> <C> <C> <C> <C>
1994
AVAILABLE FOR SALE
United States Treasury securities $371,139 $5 $(8,774) $362,370
United States Government agencies 389,355 4,498 (2,186) 391,667
</TABLE>
<PAGE> 11
<TABLE>
<S> <C> <C> <C> <C>
Mortgage-backed securities 240,916 107 (13,550) 227,473
Other 159,429 88 (1,262) 158,255
Total available for sale 1,160,839 4,698 (25,772) 1,139,765
HELD TO MATURITY
State and municipal bonds 581,155 4,958 (17,625) 568,488
Total securities $1,741,994 $9,656 $(43,397) $1,708,253
1993
AVAILABLE FOR SALE
United States Treasury securities $289,428 $2,706 $(56) $292,078
United States Government agencies 255,686 5,898 (97) 261,487
Mortgage-backed securities 295,421 3,592 (318) 298,695
Other 205,228 3,187 (25) 208,390
Total available for sale 1,045,763 15,383 (496) 1,060,650
HELD TO MATURITY
State and municipal bonds 565,165 32,723 (2,742) 595,146
Total securities $1,610,928 $48,106 $(3,238) $1,655,796
</TABLE>
Gross gains of $521 and gross losses of $1,588 were realized on 1994 sales.
Gross gains of $678 and gross losses of $183 were realized on 1993 sales.
Securities having book values of $1,409,755 and $1,342,023 at December 31,
1994 and 1993, respectively, were pledged as collateral for public and trust
deposits, United States Treasury borrowings and securities sold under
agreements to repurchase.
Contractual maturities of securities at December 31, 1994 follow. Average
yields are based on expected returns on cost and average lives for
mortgage-backed securities.
<TABLE>
<CAPTION>
Within One to Five After
one five to ten ten Serial
year years years years maturities Total
<S> <C> <C> <C> <C> <C> <C>
Available for sale
United States:
Treasury securities $118,757 $243,613 $ - $ - $ - $362,370
Government agencies 22,762 49,012 50,579 269,314 - 391,667
Mortgage-backed
securities - - - - 227,473 227,473
Other 34,716 49,891 18,067 55,581 - 158,255
Total market value 176,235 342,516 68,646 324,895 227,473 1,139,765
Total amortized cost 177,184 352,263 68,706 321,771 240,915 1,160,839
Average yield 5.68% 5.58% 7.53% 6.58% 6.75% 6.23%
Held to maturity
State and municipal
bonds at cost $33,215 $228,176 291,653 $28,111 - $581,155
Total market value 33,241 225,494 282,561 27,192 - 568,488
Average yield 5.22% 5.53% 5.50% 6.25% - 5.53%
</TABLE>
NOTE 4. ALLOWANCE FOR CREDIT LOSSES
<TABLE>
<CAPTION>
Dollars in thousands 1994 1993 1992
<S> <C> <C> <C>
Balance at January 1 $74,923 $68,243 $53,048
Loan charge-offs
</TABLE>
<PAGE> 12
<TABLE>
<S> <C> <C> <C>
Real estate 379 1,141 1,292
Commercial and agricultural 5,286 4,804 8,111
Consumer 13,164 9,802 9,597
Leases 170 409 445
Total charge-offs 18,999 16,156 19,445
Loan recoveries
Real estate 366 468 421
Commercial and agricultural 3,559 4,496 4,298
Consumer 4,740 3,970 4,641
Leases 107 169 264
Total recoveries 8,772 9,103 9,624
Net charge-offs 10,227 7,053 9,821
Provision for credit losses 13,278 13,383 14,308
Additions from acquisitions 3,783 350 10,708
Balance at December 31 $81,757 $74,923 $68,243
</TABLE>
NOTE 5. PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>
Dollars in thousands 1994 1993
<S> <C> <C>
Land $34,687 $33,030
Buildings 93,911 85,040
Furniture and equipment 95,138 87,053
Leasehold improvements 13,719 12,103
237,455 217,226
Accumulated depreciation and amortization (108,949) (94,398)
Net premises and equipment $128,506 $122,828
</TABLE>
Leases of bank premises and equipment generally provide for the payment of
taxes, maintenance, insurance and certain other related expenses and contain
extension provisions, escalation clauses and purchase options.
Lease expense included in net occupancy and equipment expense was $10,283 in
1994, $10,434 in 1993 and $7,506 in 1992. Occupancy expense was reduced by
rental income of $2,088 in 1994, $2,169 in 1993 and $2,283 in 1992.
At December 31, 1994, future minimum lease payments under long-term
noncancelable operating leases were $10,377 in 1995, $8,568 in 1996, $7,122 in
1997, $5,458 in 1998, $3,537 in 1999 and $33,565 thereafter. Management expects
to renew or replace expiring leases in the normal course of business
NOTE 6. MORTGAGE BANKING
<TABLE>
<CAPTION>
Dollars in thousands 1994 1993 1992
<S> <C> <C> <C>
REAL ESTATE LOANS ORIGINATED AND SERVICED
Sold with servicing released $221,458 $299,690 $304,493
Held for sale 28,523 76,625 50,988
Serviced for others 2,083,452 1,506,612 1,354,599
PURCHASED MORTGAGE SERVICING RIGHTS
Balance at January 1 $13,797 $10,884 $6,736
Additions 9,556 6,969 5,545
Amortization (2,894) (4,056) (1,397)
</TABLE>
<PAGE> 13
<TABLE>
<S> <C> <C> <C>
Balance at December 31 $20,459 $13,797 $10,884
</TABLE>
NOTE 7. SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
1994 1993 1992
Dollars in thousands Amount Interest Amount Interest Amount Interest
rate rate rate
<S> <C> <C> <C> <C> <C> <C>
Federal funds purchased
and securities sold under
agreements to repurchase
Balance at December 31 $804,161 5.55% $568,295 2.68% $668,631 2.75%
Average 576,968 3.85 665,106 2.80 624,864 3.36
Maximum month-end balance 804,161 735,046 688,689
Other short-term borrowings
Balance at December 31 122,153 4.66 330,609 2.68 141,392 2.56
Average 254,240 4.09 215,389 3.04 111,179 3.52
Maximum month-end balance 500,547 434,910 244,765
</TABLE>
The average balance is computed on a daily average method. The average rate is
computed by dividing total interest expense by the average outstanding balance.
Other short-term borrowings consist of United States Treasury borrowings and
bank notes. Unused lines of credit aggregating $45,000 at December 31, 1994
were maintained with banks in support of commercial paper. The lines bear
interest at short-term money market rates, if drawn upon. The lines required
commitment fees of $83, $84, and $76 in 1994, 1993 and 1992, respectively.
NOTE 8. LONG-TERM DEBT
<TABLE>
<CAPTION>
Dollars in thousands
1994 1993
<S> <C> <C>
Parent company
Convertible subordinated debentures at 7.75% due 2006,
interest payable semi-annually $49,890 $50,000
Convertible subordinated capital notes at 1/4% above the
three-month LIBOR due 1997, interest payable quarterly 20,987 20,983
Capital lease obligations at 10%, payable in monthly installments
through 1997 3,754 6,821
Subsidiaries
Federal Home Loan Bank Notes with interest payable monthly at floating
and fixed rates ranging from 3.98% to 7.95% and with principal
due 1995 through 2004 178,233 38,029
Other 209 627
Total $253,073 $116,460
</TABLE>
Scheduled reductions of debt are $40,150 in 1995, $86,379 in 1996, $72,869 in
1997, $815 in 1998, $817 in 1999 and $52,043 thereafter including reductions of
Parent Company debt of $3,387 in 1995, $273 in 1996, $21,081 in 1997 and
$49,890 in 2006. The convertible subordinated debentures are convertible into
<PAGE> 14
shares of common stock of West One at a conversion price of $18.605 per share,
and are callable by West One at a redemption price ranging from 104.650 in 1995
to 100.775 in 2000. The convertible subordinated capital notes may be called
and exchanged for common stock, preferred stock or other capital securities at
the option of West One. The interest rate on these notes was 6.25% at December
31, 1994 and 5.25% at December 31, 1993. The debt agreements limit
indebtedness and sale of subsidiaries' stock.
NOTE 9. COMMITMENTS AND CONTINGENCIES
West One is a party to certain financial instruments to meet the financing
needs of customers and to reduce exposure to interest rate risk. The following
is a summary of the contract or notional amount of these financial instruments,
all of which were held or issued for purposes other than trading, as of
December 31.
<TABLE>
<CAPTION>
Dollars in thousands 1994 1993
<S> <C> <C>
Financial instruments with credit risk
up to contract amounts (a)
Commitments to extend credit $2,858,143 $2,260,507
Standby letters of credit 177,349 188,029
Commercial letters of credit 30,353 25,527
Financial instruments with credit risk less
than contract or notional amounts
Mortgage-backed security contracts (b):
Forward sales 6,500 32,500
Purchased options 2,000 9,000
Notional value of interest rate swaps (b): 534,556 -
Foreign exchange contracts (c):
Commitments to purchase 3,492 5,422
Commitments to sell 7,608 1,500
</TABLE>
(a) Commitments to extend credit have fixed maturity dates and represent West
One's obligations to fund commercial and real estate loans, including home
equity lines, lines of credit, revolving lines of credit and other types of
commitments. Letters of credit are performance assurances of customer
obligations or guarantees of financing for trade transactions. West One's
exposure to credit loss for commitments to extend credit and letters of credit,
in the event of nonperformance by others, is represented by the contractual
amount of the instruments. Since many commitments to extend credit are expected
to expire without being drawn upon, the total commitments do not necessarily
represent future cash requirements. West One follows the same credit policies
in making commitments and conditional obligations as it does for on-balance
sheet instruments. Collateral varies, but may include accounts receivable,
inventory, premises and equipment and commercial properties. West One's
lending activities are concentrated in Idaho, Washington, Oregon and Utah.
(b) The forward sales and purchased options are contracts to buy or sell
mortgage-backed securities to hedge interest rate risk on fixed rate mortgage
loan or rate commitments. Net positions are valued at the lower of cost or
market. Gains or losses are recognized upon settlement of the forward sale
contracts based on the difference between the net sales proceeds and the net
carrying value of the loans sold. The option premium paid, which represents
loss exposure, is amortized over the life of the option.
Interest rate swaps are principally used to hedge interest rate risks
associated with certain loans and deposits and are accounted for on the accrual
method of accounting. The principal swap, which matures in 1999, requires
<PAGE> 15
payment of prime less 2.535% and receipt of the three month London Interbank
Offering Rate (LIBOR) with caps, which increase 25 basis points per quarter, on
the notional amount of $500,000.
The credit and market risks associated with forward sale and purchased option
contracts and interest rate swaps arise from the possible inability of
counterparties to meet the terms of the contracts and from fluctuations in
securities' values and interest rates. West One limits credit risk by
restricting counterparties to a list of approved institutions. Generally, West
One does not require collateral for these types of instruments.
(c) The credit and market risks associated with foreign exchange contracts,
which may arise from the counterparty's inability to make payment at the
settlement date and fluctuations in value of a foreign currency in relation to
the U.S. dollar, were nominal at December 31, 1994 and 1993.
West One is a defendant in various pending lawsuits, arising in the ordinary
course of business, none of which are expected to have a material effect on
West One's financial position or results of operations.
NOTE 10. SHAREHOLDERS' EQUITY
Authorized capital stock of West One consists of 75,000,000 shares of $1.00
par value common stock and 5,000,000 shares of $1.00 par value preferred stock,
of which 150,000 preferred shares are reserved for issuance under the
Shareholder Rights Plan.
At December 31, 1994 and 1993 securities available for sale were stated at
market and the resulting net after-tax unrealized loss of $12,896 and gain of
$9,083, respectively are presented as a component of shareholders' equity.
On October 19, 1989 the Board of Directors adopted a Shareholder Rights Plan.
Under the terms of the Plan, the Board declared a dividend distribution of one
Right for each share of common stock outstanding on October 31, 1989, or at
specified times thereafter. When initially issued each Right entitled the
registered holder to purchase from West One a unit consisting of one-hundredth
of a share of Series A Junior Participating Preferred Stock at a purchase price
of $150 per unit, subject to adjustment.
The Rights will become exercisable upon the occurrence of specified events
which could result in a change in control of West One or upon the determination
by the Board that an Adverse Person (as defined) beneficially owns 10 percent
or more of the outstanding common stock. Once the Rights become exercisable,
if the Board determines that a person is an Adverse Person or a person becomes
the owner of 25 percent or more of the then-outstanding shares of common stock
(with certain exceptions), each holder of a Right (other than an Acquiring
Person (as defined) or an Adverse Person) will thereafter become entitled to
receive, upon payment of the exercise price, common stock (or in certain
circumstances other consideration) having a value equal to two times the
exercise price or, at the discretion of the Board, to receive common stock (or
other consideration) having one-half that value without payment of the exercise
price. The Rights are nonvoting, may be redeemed by West One at a price of
$.01 per Right at any time until ten business days after an individual or group
acquires 20 percent of West One's common stock and expire on October 31, 1999.
The issuance of the Rights is intended to encourage any potential acquirer of
West One to negotiate the manner and terms of the transaction with the Board
and to protect shareholders from unsolicited tender offers which do not treat
all shareholders in a fair and equal manner, and from other coercive takeover
tactics.
Under shareholder approved incentive programs, the Board of Directors may grant
to key employees options to purchase common stock and other stock-based awards.
All options are to be granted at market value of the stock at date of grant and
<PAGE> 16
may be exercisable over periods up to ten years. The following summary sets
forth the activity under the option plan:
<TABLE>
<CAPTION>
Option price Available Options
range per share for grant outstanding
<S> <C> <C> <C>
December 31, 1991 $ 6.553 - 17.000 1,887,134 916,994
Granted 16.688 - 25.250 (289,226) 289,226
Exercised 6.553 - 14.188 - (91,806)
December 31, 1992 6.629 - 25.250 1,597,908 1,114,414
Granted 23.875 - 28.625 (263,701) 263,701
Exercised 6.629 - 14.188 - (125,520)
Canceled 11.438 - 24.500 5,000 (5,000)
Expired 11.438 - 12.313 (1,000) -
December 31, 1993 6.629 - 28.625 1,338,207 1,247,595
Granted 24.750 - 32.000 (322,744) 322,744
Exercised 6.629 - 25.938 - (177,645)
Canceled 11.438 - 26.375 32,750 (32,750)
Expired 11.438 - 13.938 (4,750) -
December 31, 1994 8.083 - 32.000 1,043,463 1,359,944
</TABLE>
Options exercisable under the plans were 662,319, 599,880 and 516,668 at
December 31, 1994, 1993 and 1992, respectively.
NOTE 11: FAIR VALUE OF FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
1994 1993
Dollars in thousands Book Estimated Book Estimated
value fair value value fair value
<S> <C> <C> <C> <C>
Financial assets
Cash and short-term investments $745,093 $745,093 $465,038 $465,038
Securities:
Available for sale 1,139,765 1,139,765 1,060,650 1,060,650
Held to maturity 581,155 568,488 565,165 595,146
Loans, net of leases and allowance 5,822,793 5,798,565 5,111,455 5,149,693
for credit losses
Financial liabilities
Demand and savings deposits $4,234,316 $4,234,316 $3,961,327 $3,961,327
Time certificates of deposit 2,576,566 2,351,241 1,975,720 1,994,389
Short-term borrowings 926,314 926,314 898,904 898,904
Long-term debt 253,073 272,909 116,460 146,675
</TABLE>
Financial assets and financial liabilities other than securities and certain
long-term debt of West One are not traded in active markets. Estimated fair
values require subjective judgments and are approximate. The above estimates
of fair value are not necessarily representative of amounts that could be
realized in actual market transactions, nor of the underlying value of West
One. The value of long-term relationships with depositors (core deposit
intangibles) is not reflected and such value is significant. Changes in the
following methodologies and assumptions could significantly affect the
estimates.
Financial Assets
The estimated fair value of cash and short-term investments approximates the
<PAGE> 17
book value. For securities, the fair value is based on quoted market prices at
December 31. The fair value of loans is estimated by discounting future cash
flows using current rates at which similar categories of loans would be made,
net of the present value of estimated net charge-offs.
Financial Liabilities
The estimated fair value of demand and savings deposits approximates book
value. The fair value of time certificates of deposit is estimated by
discounting future cash flows using current rates offered on similar
certificates. For short-term borrowings, the fair value approximates book
value. The estimated fair value of long-term debt is based on quoted market
prices or estimates of discounted cash flows using current rates at which
similar financing could be obtained.
Off-balance Sheet Financial Instruments
Commitments to extend credit, letters of credit and interest rate swaps
represent the principal categories of off-balance sheet financial instruments.
See Note 9 to the financial statements. The fair value of West One's
commitments to extend credit, letters of credit, forward sale, purchased option
and foreign exchange contracts are not material. The interest rate swaps hedge
interest rate risks associated with certain prime-related assets and supporting
deposits as a part of West One's interest rate risk management strategy. The
present value of the interest rate swaps using discounted cash flows and
assuming interest rates at December 31, 1994 remain constant is a liability of
$4.3 million. Based on implied forward interest rates at December 31, 1994, an
exit cost (fair value) of $34.9 million would be incurred to terminate the
contracts. These contracts are part of a continuing asset and liability risk
management strategy, and West One currently has no intent to exit the
contracts.
NOTE 12. EMPLOYEE BENEFITS
West One has a noncontributory defined benefit retirement plan covering
substantially all employees. Benefits to retired employees are based on years
of service and compensation. West One funds at least the minimum annual
contributions required by the Employee Retirement Income Security Act of 1974.
Since plan assets exceeded accumulated benefit obligation, no additional
funding was made in 1994, 1993 or 1992.
Pension (income) expense included the following components for the
year ended December 31:
<TABLE>
<CAPTION>
Dollars in thousands 1994 1993 1992
<S> <C> <C> <C>
Service cost $3,576 $2,319 $1,819
Interest cost 4,544 3,788 3,342
Actual return on plan assets 2,455 (4,618) (4,617)
Deferred loss (9,841) (1,912) (1,408)
Amortization (654) (725) (725)
Pension (income) expense $80 $(1,148) $(1,589)
</TABLE>
The funded status of the plan and pension asset at December 31
consisted of:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Actuarial present value of
accumulated benefit obligation
Vested $(43,396) $(44,497) $(27,202)
Nonvested (2,663) (2,891) (1,592)
Accumulated benefit obligation $(46,059) $(47,388) $(28,794)
</TABLE>
<PAGE> 18
<TABLE>
<S> <C> <C> <C>
Plan assets at fair value
U.S. Government securities $16,321 $16,563 $19,416
Equity securities 38,449 40,199 32,935
Other 10,133 11,963 12,927
Total 64,903 68,725 65,278
Projected benefit obligation (55,566) (54,489) (38,030)
Plan assets in excess of projected
benefit obligations
9,337 14,236 27,248
Unrecognized net (gain) loss 11,102 6,892 (6,238)
Unrecognized net transition asset (3,842) (4,610) (5,379)
Unrecognized prior service cost 101 260 -
Pension asset $16,698 $16,778 $15,631
</TABLE>
West One also has three unfunded supplemental retirement plans. The
Supplemental Executive Retirement Plan provides supplemental benefits to
eligible employees when the employee's earnings exceed the dollar amount used
for the definition of a highly compensated employee in the Internal Revenue
Code (IRC) Section 414 (q) (1) (B) during each of the three preceding years.
The Non-Qualified IRC 415 Benefit Limit Make-Up plan provides for additional
payments to be made to employees whose defined pension benefit exceeds the
limit for maximum benefits from the defined benefit pension plan. The
Executive Deferred Compensation Pension Make-Up plan covers pension benefits
resulting from salary deferrals which have not been included in the computation
of benefits under the regular defined benefit pension plan.
Pension expense for the supplemental retirement plans included the following
for the year ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Supplemental Executive Retirement Plan (SERP) $323 $316 $303
Non-Qualified IRC 415 Benefit Limit Make-Up 14 16 51
Executive Deferred Compensation Pension Make-Up 77 38 26
Total supplemental pension expense $414 $370 $380
</TABLE>
Pension expense for the SERP included the following components for the year
ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Service cost $151 $113 $115
Interest cost 130 154 139
Amortization 42 49 49
Pension expense $323 $316 $303
</TABLE>
The status of the SERP and pension liability at December 31 consisted of:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Actuarial present value of accumulated
benefit obligations:
Vested $(1,051) $(1,747) $(642)
Nonvested - (6) -
Accumulated benefit obligation $(1,051) $(1,753) $(642)
Projected benefit obligation $(1,609) $(2,185) $(1,596)
</TABLE>
<PAGE> 19
<TABLE>
<S> <C> <C> <C>
Unrecognized net (gain) loss (603) 320 (29)
Unrecognized net transition obligation 536 584 633
Unrecognized prior service cost 141 - -
Additional liability - (472) -
Pension liability $(1,535) $(1,753) $(992)
</TABLE>
Assumptions used for projected benefit obligations, computed using the
projected unit credit method, were:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Discount rate 8.75% 7.50% 9.50%
Rate of increase in compensation levels 4.00 3.00 6.00
Long-term rate of return on assets 10.00 10.50 10.50
</TABLE>
A change in method for determining the market-related value of plan assets
decreased pension expense $313 in 1994. The change in salary increase
assumption increased pension income by $319 in 1993. Changes in the assumed
participant withdrawal rates increased pension income $789 in 1992.
West One has an Employee Thrift Investment Plan, under IRC Section 401,
covering substantially all employees. Under the plan, West One made
contributions of 50% of participating employees' salary deferrals up to 6% of
salary in 1994 and 1993, and 5% of salary in 1992 aggregating $2,744 for 1994,
$2,384 for 1993 and $1,566 for 1992.
West One provides certain health care insurance benefits for retired employees
and their dependents (postretirement benefits). Substantially all of West
One's retirees are eligible for those benefits if they retired directly from
service with at least ten years of credited service. Retiree contributions are
required depending on age and number of years of service at the time of
retirement.
Postretirement benefit expense included the following components for the year
ended December 31:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Service cost $243 $165
Interest cost 968 959
Amortization 590 554
Postretirement benefit expense $1,801 $1,678
</TABLE>
The reconciliation of the status of the plan at December 31 follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees and dependents $(8,234) $(10,477)
Eligible active employees 218 243
Other active plan participants (3,239) (3,122)
Accumulated postretirement benefit obligation (11,255) (13,356)
Unrecognized net transition obligation 9,965 10,519
Unrecognized net (gain) loss (596) 1,884
Accrued postretirement benefit liability $(1,886) $(953)
Postretirement benefit claims for the year $868 $725
</TABLE>
<PAGE> 20
In 1994 West One assumed a 13% annual rate of increase in the per capita cost
of covered retiree and dependent health care benefits. The medical trend rate
was assumed to decrease gradually to 6% in 2006 and remain at that level for
future years. A one percentage point increase in the assumed health care cost
trend rate would increase the accumulated postretirement benefit obligation at
December 31, 1994 by $1,107 and the aggregate of the service cost and interest
cost components of net periodic postretirement benefit expense for 1994 by
$153.
The discount rate used in determining the actuarial present value of the
projected postretirement benefit obligation was 8.75%. The salary limits which
determine the amount of the deductible paid by the employee were assumed to
increase in proportion to West One salary levels.
NOTE 13. NONINTEREST EXPENSE
<TABLE>
<CAPTION>
Dollars in thousands for the year ended December 31, 1994 1993 1992
<S> <C> <C> <C>
Salaries $114,916 $104,737 $85,741
Employee benefits 27,596 24,149 18,283
Outside services 31,977 28,242 21,590
Equipment 21,942 21,725 17,174
Net occupancy 20,604 19,571 15,255
Insurance and miscellaneous taxes 19,224 16,899 13,506
Marketing 10,331 9,792 7,975
Postage and courier 9,756 8,568 6,344
Supplies 7,453 7,364 5,989
Telephone 7,515 6,551 4,739
Other 23,378 24,840 19,928
Total $294,692 $272,438 $216,524
</TABLE>
NOTE 14. INCOME TAXES
The provision for income taxes consisted of the following for the year ended
December 31:
<TABLE>
<CAPTION>
Dollars in thousands 1994 1993 1992
<S> <C> <C> <C>
Federal
Current $42,257 $29,480 $20,136
Deferred (5,225) 1,006 2,925
State
Current 6,773 6,329 4,621
Deferred 125 576 273
Total federal and state $43,930 $37,391 $27,955
</TABLE>
Deferred taxes were as follows for the year ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Provision for credit losses $ 300 $(2,218) $(926)
Depreciation and amortization (3,358) (778) (674)
Cash basis accounting (493) (1,288) (289)
Leasing (2,947) 2,546 2,745
Alternative minimum tax - - 1,154
Other 889 1,861 102
Use of subsidiary preacquisition tax carryforwards
</TABLE>
<PAGE> 21
<TABLE>
<S> <C> <C> <C>
to reduce purchased intangibles 509 1,459 1,086
Total deferred taxes $(5,100) $1,582 $3,198
</TABLE>
The provision for income taxes varied from amounts computed at the federal
statutory rate as follows for the year ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Provision at statutory rate $51,485 35.0% $42,202 35.0% $31,051 34.0%
Nontaxable interest income (12,041) (8.2) (10,473) (8.7) (7,045) (7.7)
State income taxes,
net of federal benefit 4,484 3.1 4,367 3.6 3,230 3.5
Other 2 - 1,295 1.1 719 .8
Provision for income taxes $43,930 29.9% $37,391 31.0% $27,955 30.6%
</TABLE>
The components of net deferred taxes are as follows for the year ended December
31:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Deferred tax assets
Allowance for credit losses $30,226 $29,491
Cash basis accounting 6,677 6,283
Unrealized securities losses 8,178 -
Other 3,098 3,744
Total deferred tax assets 48,179 39,518
Deferred tax liabilities
Depreciation and amortization (4,516) (7,712)
Leasing (24,881) (27,828)
Pension and retirement benefits (5,743) (6,492)
Purchase accounting (2,685) (2,170)
Unrealized securities gains - (5,990)
Other (2,521) (2,040)
Total deferred tax liabilities (40,346) (52,232)
Net deferred tax asset (liability) $7,833 $(12,714)
</TABLE>
A subsidiary has preacquisition net operating loss carryforwards remaining of
$1,954 which expire through 2008.
The corporation recorded tax benefits of $1,332, $475 and $812 for executive
stock option exercises in 1994, 1993 and 1992, respectively. The tax benefits
have been allocated to shareholders' equity. In 1994 the deferred benefit for
income taxes of $13,319 for unrealized securities losses has been allocated to
shareholders' equity.
Deferred tax liabilities of $2,133 have not been recognized for a thrift
subsidiary's base year tax bad debt reserve of $5,359. If the subsidiary fails
to qualify as a savings and loan association or is converted to a commercial
bank, the bad debt reserve would become taxable. Management does not expect
this difference to reverse in the foreseeable future.
NOTE 15. REGULATORY REQUIREMENTS AND RESTRICTIONS
Regulatory authorities require banks to maintain cash reserves against
deposits. These reserves vary according to the type and maturity of the
<PAGE> 22
deposit. Cash reserve balances at December 31, 1994 and 1993 were $152,312 and
$144,998, respectively.
Federal and state laws place limitations on the extension of credit by banking
subsidiaries to the Parent Company and nonbank affiliates. Under these
restrictions, banking subsidiaries may not extend credit beyond an aggregate of
$100,475 to the Parent Company and nonbank affiliates as of December 31, 1994.
Any extensions of such credit are subject to strict collateral requirements.
Federal and state laws also restrict the amount of dividends that may be
declared by banking subsidiaries without the approval of regulatory
authorities. Banking subsidiaries may declare dividends to the Parent Company
in 1995 up to $170,440 plus 1995 net income to the date of dividend
declaration.
Credit extensions to directors, executive officers and their associates, which
are within regulatory limitations, are as follows:
<TABLE>
<CAPTION>
Dollars in thousands 1994 1993
<S> <C> <C>
Balance at January 1 $74,849 $73,910
Increases 91,621 53,644
Decreases 77,746 52,705
Balance at December 31 $88,724 $74,849
</TABLE>
NOTE 16. PARENT COMPANY ONLY FINANCIAL STATEMENTS
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
Dollars in thousands
At December 31, 1994 1993
<S> <C> <C>
Assets
Cash and due from banks $122 $430
Loans and advances to subsidiaries:
Banks 55,025 47,475
Nonbanks 22,519 15,375
Investment in subsidiaries:
Banks 669,497 607,766
Nonbanks 5,344 5,351
Other loans and investments 22,261 19,563
Premises and equipment 15,972 19,455
Other assets 40,695 40,900
Total assets $831,435 $756,315
Liabilities
Commercial paper $ - $20,162
Long-term debt 74,631 77,804
Other liabilities 41,035 34,783
Total liabilities 115,666 132,749
Shareholders' equity 715,769 623,566
Total liabilities and shareholders' equity $831,435 $756,315
</TABLE>
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Dollars in thousands
For the year ended December 31, 1994 1993 1992
<S> <C> <C> <C>
</TABLE>
<PAGE> 23
<TABLE>
<S> <C> <C> <C>
Income
Dividends from subsidiaries:
Banks $65,513 $40,521 $41,650
Nonbanks 1,934 1,412 1,830
Interest:
Loans and advances to subsidiaries 4,080 3,212 2,516
Loans and short-term investments - nonaffiliates 1,298 497 763
Other, principally subsidiaries 87,711 79,564 54,975
Total income 160,536 125,206 101,734
Expense
Interest 6,351 8,345 9,845
Salaries and employee benefits 42,320 40,366 30,203
Other 55,492 51,799 45,045
Total expense 104,163 100,510 85,093
Income before taxes and equity in earnings of subsidiaries 56,373 24,696 16,641
Income tax benefit 5,654 7,016 10,327
Equity in undistributed earnings of subsidiaries 41,144 51,475 36,404
Net income $103,171 $83,187 $63,372
</TABLE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Dollars in thousands
For the year ended December 31, 1994 1993 1992
<S> <C> <C> <C>
Cash flows from operating activities
Net income $103,171 $83,187 $63,372
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in undistributed earnings of subsidiaries (41,144) (51,475) (36,404)
Depreciation and amortization 11,045 10,296 7,623
Changes in assets and liabilities 1,639 (7,094) (107)
Net cash provided by operating activities 74,711 34,914 34,484
Cash flows from investing activities
Change in other short-term investments,
maturities less than 90 days 157 (15,878) 9,567
Purchase of securities held to maturity (20,000) (3,416) (54,643)
Maturity of securities held to maturity - 6,139 51,053
Sale of securities 2,155 - 17,894
Change in loans to subsidiaries (2,144) (23,950) (9,279)
Change in loans to nonaffiliates 2,364 320 4,582
Other (2,156) (3,432) (3,429)
Capitalization of subsidiaries (14,864) (6,685) (114,211)
Net cash used by investing activities (34,488) (46,902) (98,466)
Cash flows from financing activities
Change in short-term borrowings,
maturities less than 90 days (15,878) (1,416) 14,259
Proceeds from short-term borrowings 4,162 13,200 -
Payments on short-term borrowings (8,952) (7,000) -
Payments on long-term debt (3,067) (27,566) (4,189)
Proceeds from issuance of common stock 8,463 54,526 67,922
Cash dividends paid (25,259) (19,392) (15,130)
Net cash provided (used) by financing activities (40,531) 12,352 62,862
Net increase (decrease) in cash and due from banks (308) 364 (1,120)
Cash and due from banks - January 1 430 66 1,186
Cash and due from banks - December 31 $122 $430 $66
</TABLE>
<PAGE> 24
<TABLE>
<S> <C> <C> <C>
Supplemental information
Interest paid $4,395 $8,737 $9,936
Income taxes paid 50,381 36,260 19,325
Noncash transactions
Additions to investment in subsidiaries 27,609 3,041 11,512
Capital lease for computer equipment - - 10,857
Termination of capital lease for computer equipment - - 6,460
Tax benefit of stock options exercised 1,332 475 812
Dividends declared not paid 8,084 6,249 9,220
</TABLE>
<PAGE> 25
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Directors of West One Bancorp
We have audited the consolidated balance sheets of West One Bancorp and
subsidiaries as of December 31, 1994 and 1993, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1994. These financial statements are
the responsibility of management. 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 West One Bancorp
and subsidiaries as of December 31, 1994 and 1993 and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1994, in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the consolidated financial statements, during 1993
the Company adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities."
/s/Coopers & Lybrand L.L.P.
Boise, Idaho
January 19,1995
<PAGE> 26
CONSOLIDATED BALANCE SHEETS (Unaudited)
WEST ONE BANCORP AND SUBSIDIARIES
<TABLE>
<CAPTION>
June 30, December 31,
Dollars in thousands 1995 1994 1994
----------- ----------- -----------
<S> <C> <C> <C>
Assets
Cash and due from banks $529,144 $414,289 $632,577
Federal funds sold, securities purchased under
agreements to resell and other 186,384 137,321 112,516
----------- ----------- -----------
Securities:
Available for sale 1,163,333 1,029,817 1,139,765
Held to maturity 600,655 603,736 581,155
----------- ----------- -----------
Total securities 1,763,988 1,633,553 1,720,920
----------- ----------- -----------
Loans:
Real estate - mortgage 2,336,830 2,012,316 2,207,247
Real estate - construction 332,183 256,190 319,228
Commercial and agricultural 2,346,348 2,160,629 2,205,459
Consumer 1,236,307 1,092,395 1,172,616
Leases 167,069 149,941 160,873
----------- ----------- -----------
Total loans 6,418,737 5,671,471 6,065,423
Allowance for credit losses (83,038) (78,202) (81,757)
----------- ----------- -----------
Net loans 6,335,699 5,593,269 5,983,666
----------- ----------- -----------
Premises and equipment 125,317 125,026 128,506
Interest receivable 67,310 50,870 66,605
Other assets 148,271 137,342 147,909
----------- ----------- -----------
Total assets $9,156,113 $8,091,670 $8,792,699
=========== =========== ===========
Liabilities
Deposits:
Noninterest bearing $1,353,015 $1,177,294 $1,397,843
Interest bearing demand 685,682 710,342 749,755
Regular and money market savings 2,019,345 2,130,398 2,086,718
Time certificates under $100,000 1,903,758 1,584,783 1,755,013
Time certificates $100,000 and over 900,116 711,897 821,553
----------- ----------- -----------
Total deposits 6,861,916 6,314,714 6,810,882
Federal funds purchased and securities
sold under agreements to repurchase 516,254 528,554 804,161
Other short-term borrowings 674,996 373,393 122,153
Long-term debt 321,970 129,142 253,073
Other liabilities 88,816 90,322 86,661
----------- ----------- -----------
Total liabilities 8,463,952 7,436,125 8,076,930
----------- ----------- -----------
Shareholders' equity
Common stock - $1.00 par value; 75,000,000 shares
authorized; 36,888,265, 35,070,083 and 36,745,368
shares issued 36,888 35,070 36,745
Capital surplus 324,633 316,187 327,879
Retained earnings 405,330 306,959 364,041
Unrealized gain (loss) on securities, net of tax 2,681 (2,671) (12,896)
Treasury stock - 2,269,494 shares at cost (77,371) - -
----------- ----------- -----------
Total shareholders' equity 692,161 655,545 715,769
----------- ----------- -----------
Total liabilities and shareholders' equity $9,156,113 $8,091,670 $8,792,699
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 27
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
WEST ONE BANCORP AND SUBSIDIARIES
<TABLE>
<CAPTION>
For the quarter ended For the six months ended
June 30, June 30,
Dollars in thousands except per share 1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Interest income
Loans $145,451 $113,499 $283,059 $219,042
Short-term investments 964 981 2,698 1,422
Interest and dividends on securities:
United States Treasury and
Government agencies 12,136 7,677 22,647 14,292
State and municipal bonds 7,626 7,557 15,131 14,714
Mortgage-backed securities 3,934 3,871 7,800 7,380
Other 2,395 2,372 4,579 5,093
--------- --------- --------- ---------
Total interest income 172,506 135,957 335,914 261,943
--------- --------- --------- ---------
Interest expense
Deposits 63,696 41,452 122,694 79,314
Federal funds purchased and securities
sold under agreements to repurchase 8,347 5,189 16,078 8,873
Other short-term borrowings 3,718 2,898 5,909 5,075
Long-term debt 5,258 1,814 9,728 3,575
--------- --------- --------- ---------
Total interest expense 81,019 51,353 154,409 96,837
--------- --------- --------- ---------
Net interest income 91,487 84,604 181,505 165,106
Provision for credit losses 3,311 3,787 6,470 7,776
--------- --------- --------- ---------
Net interest income after
provision for credit losses 88,176 80,817 175,035 157,330
--------- --------- --------- ---------
Noninterest income
Trust fees and commissions 4,018 3,803 7,497 7,346
Service charges on deposit accounts 10,370 9,913 20,439 18,897
Other service charges, fees
and commissions 15,064 11,917 28,827 22,541
Other 4,031 4,816 5,872 8,103
Loss on securities (33) (327) (148) (485)
--------- --------- --------- ---------
Total noninterest income 33,450 30,122 62,487 56,402
--------- --------- --------- ---------
Noninterest expense
Employee compensation and benefits 37,675 35,001 76,744 69,039
Outside services 10,285 8,112 18,669 15,576
Equipment 5,578 5,621 11,102 11,104
Net occupancy 5,390 5,027 10,745 9,745
Insurance and miscellaneous taxes 5,094 4,701 10,177 9,463
Marketing 2,754 2,468 5,143 4,942
Postage and courier 2,762 2,398 5,462 4,745
Supplies 1,958 1,859 3,823 3,658
Telephone 2,009 1,812 3,960 3,596
Other 5,854 5,848 10,430 11,452
--------- --------- --------- ---------
Total noninterest expense 79,359 72,847 156,255 143,320
--------- --------- --------- ---------
Income before taxes 42,267 38,092 81,267 70,412
Provision for income taxes 13,519 12,169 24,251 21,574
--------- --------- --------- ---------
Net income $28,748 $25,923 $57,016 $48,838
========= ========= ========= =========
Primary earnings per share $.79 $.73 $1.55 $1.38
Fully diluted earnings per share .75 .69 1.47 1.31
Dividends declared per share .22 .18 .44 .36
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 28
CONSOLIDATED STATEMENTS OF CASH FLOWS
WEST ONE BANCORP AND SUBSIDIARIES (Unaudited)
<TABLE>
<CAPTION>
For the six months ended
June 30,
(Dollars in thousands) 1995 1994
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $57,016 $48,838
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for credit losses 6,470 7,776
Depreciation of premises and equipment 8,811 8,038
Amortization and accretion of premiums and discounts 5,521 5,830
Amortization of intangible and other assets 5,472 5,650
Originations of real estate loans held for sale (118,727) (170,331)
Proceeds from real estate and other loans sold 98,137 199,256
Net gain on sale of real estate loans (2,765) (2,228)
Net loss on sale of securities 148 485
Purchase of trading account securities (67,020) (33,253)
Sale of trading account securities 61,967 28,755
Change in assets and liabilities:
Interest receivable (705) (181)
Other assets (6,345) (2,548)
Other liabilities (280) (3,610)
--------- ---------
Net cash provided by operating activities 47,700 92,477
--------- ---------
Cash flows from investing activities:
Change in short-term investments, maturities less than 90 days (68,068) (117,739)
Purchase of securities available for sale (280,393) (316,625)
Maturity of securities available for sale 156,896 200,897
Sale of securities available for sale 115,758 150,482
Purchase of securities held to maturity (42,613) (59,362)
Maturity of securities held to maturity 18,718 19,414
Sale of securities held to maturity 3,424 --
Change in net loans and leases (336,761) (336,177)
Purchase of premises and equipment (5,802) (9,193)
Sale of premises and equipment 130 141
Additions to intangible assets (4,663) (6,653)
Sale of other real estate owned 4,598 4,482
Cash provided by acquisitions -- 172,322
--------- ---------
Net cash used by investing activities (438,776) (298,011)
--------- ---------
</TABLE>
<PAGE> 29
<TABLE>
<S> <C> <C>
Cash flows from financing activities:
Change in deposits 51,034 160,110
Change in short-term borrowings, maturities less than 90 days 228,087 6,006
Proceeds from short-term borrowings 64,154 34,075
Payments on short-term borrowings (27,512) (37,310)
Additions to long-term debt 105,236 20,000
Payments on long-term debt (28,722) (7,320)
Proceeds from issuance of common stock 2,351 4,722
Repurchase of common stock (90,897) --
Cash dividends paid (16,188) (12,544)
--------- ---------
Net cash provided by financing activities 287,543 167,739
--------- ---------
Net decrease in cash and due from banks (103,533) (37,795)
Cash and due from banks - January 1 632,577 450,384
--------- ---------
Cash and due from banks - June 30 $529,044 $412,589
========= =========
Supplemental information:
Interest paid 153,439 96,534
Income taxes paid 25,247 25,172
Noncash activities:
Loans held for sale transferred to the loan portfolio 8,168 16,036
Loan charge-offs 10,010 8,986
Transfer of loans to other real estate owned 1,808 5,543
Tax benefit of stock options exercised 510 776
Dividends declared not paid 7,616 6,316
Securities purchased not settled -- 10,568
Securities sold not settled 5,000 --
Acquisitions:
securities and short-term investments -- 18,532
Net loans -- 17,331
Premises and equipment -- 1,191
Intangible assets -- 11,249
Deposits -- 217,557
Other liabilities, net -- 982
Equity -- 2,086
========= =========
</TABLE>
The accompanying notes are an integral part of the financials
<PAGE> 30
NOTES TO QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS
West One Bancorp and Subsidiaries
These statements are unaudited financial statements and should be read in
conjunction with the 1994 Annual Report of West One Bancorp and Subsidiaries
(West One). All adjustments (consisting only of normal recurring accruals
and the acquisitions as discussed below) which are, in the opinion of
management, necessary to present fairly the consolidated financial position,
results of operations and cash flows have been made in the accompanying
financial statements.
RECLASSIFICATION
Certain reclassifications of 1994 amounts were made in order to conform to
the 1995 presentation, none of which affect previously reported net income.
SALE OF HELD-TO-MATURITY SECURITIES
In the first six months of 1995, securities for three issuers which were
classified as held-to-maturity were sold due to downgrades in credit quality
which caused the securities to fall below West One's investment policy
guidelines. The combined amortized cost was $3.4 million and a net gain of
$36 thousand was recognized on the sales.
ACQUISITIONS
West One acquired the financial institutions listed below in transactions
accounted for as poolings of interests. The acquisitions were not material
to West One's financial position, results of operations and cash flows and
prior year financial statements have not been restated.
November 10, 1994, National Security Bank with assets of $132 million in
exchange for 1,101,832 shares of West One Bancorp common stock.
September 2, 1994, Valley Commercial Bank, a two-branch $64 million bank
headquartered in Clarkston, Washington, in exchange for 404,523 shares of
West One Bancorp common stock.
January 21, 1994, Idaho State Bank with assets of $50 million in exchange
for 133,332 shares of West One Bancorp common stock.
On April 15, 1994, West One Bancorp acquired ten Far West Federal Savings
Bank branches in Oregon from the Resolution Trust Corporation. The
transaction included the receipt of $160 million in cash, $2 million of
premises and equipment, $11 million of intangible assets and the assumption
of $173 million of deposits and other liabilities. The transaction was
accounted for as a purchase.
<PAGE> 31
OTHER EVENTS
On May 5, 1995, U. S. Bancorp entered into an Agreement and Plan of Merger
(the Merger Agreement) with West One Bancorp, an Idaho corporation (West
One), pursuant to which West One will be merged with and into U. S. Bancorp
(the Merger). As a result of the Merger, each outstanding share of West
One's common stock, par value $1.00 per share (West One Common Stock), will
be converted into 1.47 shares of U. S. Bancorp Common Stock, par value $5.00
per share (U. S. Bancorp Common Stock). The Merger is conditioned upon,
among other things, approval by shareholders of U. S. Bancorp and by
shareholders of West One, and upon certain regulatory approvals. The Merger
is expected to be completed by year-end 1995.
As a condition to entering into the Merger Agreement, on May 6, 1995, U. S.
Bancorp and West One entered into (i) a Stock Option Agreement between West
One, as issuer, and U. S. Bancorp, as grantee (the West One Stock Option
Agreement), pursuant to which West One granted to U. S. Bancorp the right
upon the terms and subject to the conditions set forth therein, to purchase
up to 19.9% of the outstanding shares of West One Common Stock at a price of
$34.00 per share, and (ii) a Stock Option Agreement between U. S. Bancorp,
as issuer, and West One as grantee (the U. S. Bancorp Stock Option
Agreement), pursuant to which U. S. Bancorp granted to West One the right to
purchase up to 19.9% of the outstanding shares of U. S. Bancorp Common Stock
at a price of $28.00 per share.
In May 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 122, "Accounting for Mortgage
Servicing Rights." The statement is effective for fiscal years beginning after
December 15, 1995. This statement is not expected to have a material effect
on West One's financial condition, results of operations, cash flows or
related disclosures.
During the first quarter of 1995, West One implemented SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan," SFAS No. 116,
"Accounting for Contributions Received and Contributions Made" and SFAS No.
118, "Accounting by Creditors for Impairment of a Loan - Income Recognition
and Disclosures." None of these statements had a material effect on West
One's financial condition, results of operations, cash flows or related
disclosures.
<PAGE> 32
U. S. BANCORP AND SUBSIDIARIES
PRO FORMA CONDENSED BALANCE SHEET
JUNE 30, 1995
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
U. S. BANCORP WEST ONE ADJUSTMENTS COMBINED
------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks................. $ 1,476,674 $ 529,144 $ $ 2,005,818
Federal funds sold, security resell
agreements and other short-term
investments........................... 129,983 179,922 309,905
Trading account securities.............. 140,368 6,462 146,830
Loans held for sale..................... 66,452 46,065 112,517
Securities available for sale, at fair
value (cost: $1,064,232; $1,158,891;
$2,223,123)........................... 1,078,798 1,163,333 2,242,131
Securities held to maturity, at
amortized cost (fair value:
$1,240,405; $612,979; $1,853,384)..... 1,265,551 600,655 1,866,206
Loans and lease financing, net of
unearned income....................... 15,956,600 6,372,672 22,329,272
Allowance for credit losses............. (313,274) (83,038) (396,312)
----------- ---------- --------- -----------
Net loans and lease financing........... 15,643,326 6,289,634 21,932,960
Other assets............................ 1,548,706 340,898 1,889,604
----------- ---------- --------- -----------
$21,349,858 $9,156,113 $ -- $30,505,971
=========== ========== ========= ===========
LIABILITIES
Deposits:
Noninterest-bearing deposits............ $ 3,901,749 $1,353,015 $ $ 5,254,764
Interest-bearing deposits............... 11,074,363 5,508,901 16,583,264
----------- ---------- --------- -----------
Total deposits..................... 14,976,112 6,861,916 -- 21,838,028
Federal funds purchased and security
repurchase agreements................. 1,898,211 516,254 2,414,465
Commercial paper and other short-term
borrowings............................ 944,371 674,996 1,619,367
Long-term debt.......................... 890,338 321,970 1,212,308
Other liabilities....................... 747,657 88,816 60,000 (D) 896,473
----------- ---------- --------- -----------
Total liabilities.................. 19,456,689 8,463,952 60,000 27,980,641
----------- ---------- --------- -----------
SHAREHOLDERS' EQUITY
Preferred stock......................... 150,000 -- 150,000
Common stock............................ 491,118 36,888 217,560 (B) 745,566
Capital surplus......................... 351,445 324,633 (294,931)(B) 381,147
Retained earnings....................... 892,677 405,330 (60,000)(D) 1,238,007
Net unrealized gain on securities
available for sale, net of tax........ 7,929 2,681 10,610
Treasury stock, at cost................. -- (77,371) 77,371 (B) --
----------- ---------- --------- -----------
Total shareholders' equity......... 1,893,169 692,161 (60,000) 2,525,330
----------- ---------- --------- -----------
$21,349,858 $9,156,113 $ -- $30,505,971
=========== ========== ========= ===========
</TABLE>
See Accompanying Notes to Pro Forma Condensed Financial Statements.
60
<PAGE> 33
U. S. BANCORP AND SUBSIDIARIES
PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
U. S. BANCORP WEST ONE(A) ADJUSTMENTS COMBINED
-------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, lease financing and loans held for sale,
including fees.......................................... $739,585 $296,179 $ $1,035,764
Securities................................................ 76,001 50,157 126,158
Trading account securities................................ 4,722 152 4,874
Interest-bearing deposits and short-term investments...... 4,364 2,546 6,910
-------- -------- ------ ----------
Total interest income................................... 824,672 349,034 -- 1,173,706
-------- -------- ------ ----------
INTEREST EXPENSE
Deposits.................................................. 217,022 122,694 339,716
Short-term borrowings..................................... 84,274 21,987 106,261
Long-term debt............................................ 30,778 9,728 40,506
-------- -------- ------ ----------
Total interest expense.................................. 332,074 154,409 -- 486,483
-------- -------- ------ ----------
NET INTEREST INCOME....................................... 492,598 194,625 -- 687,223
Provision for credit losses............................... 42,265 6,470 48,735
-------- -------- ------ ----------
Net interest income after provision for credit losses..... 450,333 188,155 -- 638,488
NONINTEREST REVENUES
Service charges on deposit accounts....................... 75,623 20,439 96,062
Bank card revenue, net.................................... 29,614 6,075 35,689
Trust and investment management........................... 26,263 7,497 33,760
Exchange fees............................................. 16,743 5,893 22,636
Mortgage banking income, net.............................. 3,485 6,415 9,900
Other operating revenue................................... 54,729 10,846 65,575
Equity investment income.................................. 475 -- 475
Securities gains (losses)................................. 1,690 (148) 1,542
-------- -------- ------ ----------
Total noninterest revenues.............................. 208,622 57,017 -- 265,639
NONINTEREST EXPENSES
Employee compensation and benefits........................ 208,484 91,355 299,839
Net occupancy expense..................................... 31,893 10,745 42,638
Equipment rentals, depreciation and maintenance........... 48,328 11,102 59,430
Regulatory agency fees.................................... 19,346 8,233 27,579
Other operating expense................................... 139,698 42,470 182,168
-------- -------- ------ ----------
Total noninterest expenses.............................. 447,749 163,905 -- 611,654
-------- -------- ------ ----------
Income before income taxes................................ 211,206 81,267 -- 292,473
Provision for income taxes................................ 74,685 24,251 98,936
-------- -------- ------ ----------
Net income................................................ $136,521 $ 57,016 $ -- $ 193,537
======== ======== ====== ==========
Average shares outstanding:
U.S. Bancorp............................................ 98,179
West One
Primary............................................. 36,830
Fully Diluted....................................... 39,516
Pro Forma............................................... 152,319
Earnings per common share:
U.S. Bancorp............................................ $1.33
West One
Primary............................................. $1.55
Fully diluted....................................... 1.47
Pro Forma............................................... $1.23(C)
</TABLE>
See Accompanying Notes to Pro Forma Condensed Financial Statements.
61
<PAGE> 34
U. S. BANCORP AND SUBSIDIARIES
PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
U. S. BANCORP WEST ONE(A) ADJUSTMENTS COMBINED
-------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, lease financing and loans held for sale,
including fees.......................................... $1,283,092 $498,241 $ $1,781,333
Securities................................................ 175,150 88,015 263,165
Trading account securities................................ 8,931 93 9,024
Interest-bearing deposits and short-term investments...... 12,912 2,907 15,819
---------- -------- ------ ----------
Total interest income................................... 1,480,085 589,256 -- 2,069,341
---------- -------- ------ ----------
INTEREST EXPENSE
Deposits.................................................. 344,194 179,639 523,833
Short-term borrowings..................................... 102,997 32,575 135,572
Long-term debt............................................ 70,736 9,147 79,883
---------- -------- ------ ----------
Total interest expense.................................. 517,927 221,361 -- 739,288
---------- -------- ------ ----------
NET INTEREST INCOME....................................... 962,158 367,895 -- 1,330,053
Provision for credit losses............................... 106,868 13,278 120,146
---------- -------- ------ ----------
Net interest income after provision for credit losses..... 855,290 354,617 -- 1,209,907
NONINTEREST REVENUES
Service charges on deposit accounts....................... 151,990 39,536 191,526
Bank card revenue, net.................................... 61,172 11,486 72,658
Trust and investment management........................... 51,082 14,201 65,283
Exchange fees............................................. 31,545 7,502 39,047
Mortgage banking income, net.............................. 17,308 9,651 26,959
Credit reporting revenue.................................. 13,204 -- 13,204
Other operating revenue................................... 80,511 22,630 103,141
Equity investment income (loss)........................... (5,429) -- (5,429)
Securities gains (losses)................................. (8,145) (1,067) (9,212)
Gain on sale of operations and loans...................... 62,883 -- 62,883
---------- -------- ------ ----------
Total noninterest revenues.............................. 456,121 103,939 -- 560,060
NONINTEREST EXPENSES
Employee compensation and benefits........................ 475,323 171,833 647,156
Net occupancy expense..................................... 67,121 20,604 87,725
Equipment rentals, depreciation and maintenance........... 107,554 21,942 129,496
Regulatory agency fees.................................... 39,635 14,887 54,522
Restructure charge........................................ 100,000 -- 100,000
Other operating expense................................... 305,682 82,189 387,871
---------- -------- ------ ----------
Total noninterest expenses.............................. 1,095,315 311,455 -- 1,406,770
---------- -------- ------ ----------
Income before income taxes................................ 216,096 147,101 -- 363,197
Provision for income taxes................................ 64,601 43,930 108,531
---------- -------- ------ ----------
Net income................................................ $ 151,495 $103,171 $ -- $ 254,666
========== ======== ====== ==========
Average shares outstanding:
U. S. Bancorp........................................... 99,448
West One
Primary............................................... 35,812
Fully diluted......................................... 38,497
Pro Forma............................................... 152,091
Earnings per common share:
U. S. Bancorp........................................... $1.40
West One
Primary............................................. $2.88
Fully diluted....................................... 2.74
Pro Forma............................................... $1.59(C)
</TABLE>
See Accompanying Notes to Pro Forma Condensed Financial Statements.
62
<PAGE> 35
U. S. BANCORP AND SUBSIDIARIES
PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
U. S. BANCORP WEST ONE(A) ADJUSTMENTS COMBINED
-------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, lease financing and loans held for sale,
including fees....................................... $1,212,461 $429,660 $ $1,642,121
Securities............................................. 202,560 93,404 295,964
Trading account securities............................. 8,607 107 8,714
Interest-bearing deposits and short-term investments... 10,068 1,264 11,332
---------- -------- ------ ----------
Total interest income................................ 1,433,696 524,435 -- 1,958,131
---------- -------- ------ ----------
INTEREST EXPENSE
Deposits............................................... 365,791 160,076 525,867
Short-term borrowings.................................. 58,934 25,135 84,069
Long-term debt......................................... 80,860 8,224 89,084
---------- -------- ------ ----------
Total interest expense............................... 505,585 193,435 -- 699,020
---------- -------- ------ ----------
NET INTEREST INCOME.................................... 928,111 331,000 -- 1,259,111
Provision for credit losses............................ 92,851 13,383 106,234
---------- -------- ------ ----------
Net interest income after provision for credit
losses............................................... 835,260 317,617 -- 1,152,877
NONINTEREST REVENUES
Service charges on deposit accounts.................... 134,668 36,588 171,256
Bank card revenue, net................................. 59,122 9,719 68,841
Trust and investment management........................ 48,678 13,627 62,305
Exchange fees.......................................... 28,051 6,383 34,434
Mortgage banking income, net........................... 28,786 8,718 37,504
Credit reporting revenue............................... 33,984 -- 33,984
Other operating revenue................................ 99,389 17,652 117,041
Equity investment income............................... 33,973 -- 33,973
Securities gains (losses).............................. 11 495 506
Gain on sale of mortgage loan servicing rights......... 55,846 -- 55,846
Gain on sale of operations and loans................... 9,311 -- 9,311
---------- -------- ------ ----------
Total noninterest revenues........................... 531,819 93,182 -- 625,001
NONINTEREST EXPENSES
Employee compensation and benefits..................... 495,224 158,684 653,908
Net occupancy expense.................................. 65,931 19,571 85,502
Equipment rentals, depreciation and maintenance........ 90,237 21,725 111,962
Regulatory agency fees................................. 41,335 13,600 54,935
Other operating expense................................ 290,103 76,641 366,744
---------- -------- ------ ----------
Total noninterest expenses........................... 982,830 290,221 -- 1,273,051
---------- -------- ------ ----------
Income before income taxes............................. 384,249 120,578 -- 504,827
Provision for income taxes............................. 126,300 37,391 163,691
---------- -------- ------ ----------
Net income............................................. $ 257,949 $ 83,187 $ -- $ 341,136
========== ======== ====== ==========
Average shares outstanding:
U. S. Bancorp........................................ 99,327
West One
Primary............................................ 33,292
Fully diluted...................................... 35,996
Pro Forma............................................ 148,266
Earnings per common share:
U. S. Bancorp........................................ $2.47
West One
Primary............................................ $2.50
Fully diluted...................................... 2.38
Pro Forma............................................ $2.22(C)
</TABLE>
See Accompanying Notes to Pro Forma Condensed Financial Statements.
63
<PAGE> 36
U. S. BANCORP AND SUBSIDIARIES
PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1992
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
U. S. BANCORP WEST ONE(A) ADJUSTMENTS COMBINED
-------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, lease financing and loans held for sale,
including fees......................................... $1,302,003 $354,699 $ $1,656,702
Securities............................................... 163,382 87,220 250,602
Trading account securities............................... 9,480 136 9,616
Interest-bearing deposits and short-term investments..... 16,609 8,142 24,751
---------- -------- ------ ----------
Total interest income.................................. 1,491,474 450,197 -- 1,941,671
---------- -------- ------ ----------
INTEREST EXPENSE
Deposits................................................. 448,372 160,138 608,510
Short-term borrowings.................................... 89,524 24,906 114,430
Long-term debt........................................... 93,220 10,046 103,266
---------- -------- ------ ----------
Total interest expense................................. 631,116 195,090 -- 826,206
---------- -------- ------ ----------
NET INTEREST INCOME...................................... 860,358 255,107 -- 1,115,465
Provision for credit losses.............................. 134,454 14,308 148,762
---------- -------- ------ ----------
Net interest income after provision for credit losses.... 725,904 240,799 -- 966,703
NONINTEREST REVENUES
Service charges on deposit accounts...................... 120,102 30,882 150,984
Bank card revenue, net................................... 50,163 6,994 57,157
Trust and investment management.......................... 45,738 11,819 57,557
Exchange fees............................................ 24,333 4,543 28,876
Mortgage banking income, net............................. 57,970 9,748 67,718
Credit reporting revenue................................. 33,315 -- 33,315
Other operating revenue.................................. 86,059 13,899 99,958
Equity investment income................................. 12,928 -- 12,928
Securities gains (losses)................................ 438 1,690 2,128
Gain on sale of mortgage loan servicing rights........... 7,467 -- 7,467
Gain on sale of loans.................................... 4,988 -- 4,988
---------- -------- ------ ----------
Total noninterest revenues............................. 443,501 79,575 -- 523,076
NONINTEREST EXPENSES
Employee compensation and benefits....................... 436,633 122,672 559,305
Net occupancy expense.................................... 55,709 15,255 70,964
Equipment rentals, depreciation and maintenance.......... 73,703 17,174 90,877
Regulatory agency fees................................... 36,095 11,389 47,484
Other operating expense.................................. 266,643 62,557 329,200
---------- -------- ------ ----------
Total noninterest expenses............................. 868,783 229,047 -- 1,097,830
---------- -------- ------ ----------
Income before income taxes............................... 300,622 91,327 -- 391,949
Provision for income taxes............................... 92,548 27,955 120,503
---------- -------- ------ ----------
Income before cumulative effect of accounting changes.... $ 208,074 $ 63,372 $ -- $ 271,446
========== ======== ====== ==========
Average shares outstanding:
U. S. Bancorp.......................................... 98,650
West One
Primary.............................................. 30,343
Fully diluted........................................ 33,126
Pro Forma.............................................. 143,255
Earnings per common share before cumulative effect of
accounting changes:
U. S. Bancorp.......................................... $2.05
West One
Primary.............................................. $2.09
Fully diluted........................................ 1.98
Pro Forma.............................................. $1.86(C)
</TABLE>
See Accompanying Notes to Pro Forma Condensed Financial Statements.
64
<PAGE> 37
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
(A) Certain reclassifications have been made to the condensed consolidated
statement of income of West One as discussed below in order to present the
operations of both companies on a consistent basis of accounting for
purposes of the pro forma combined statements (amounts in thousands):
Loan fees and direct loan origination costs in excess of deferred amount
are presented gross as components of interest income, mortgage banking
income and employee compensation and benefits expense as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
SIX MONTHS ENDED ----------------------------
JUNE 30, 1995 1994 1993 1992
---------------- ---- ---- ----
<S> <C> <C> <C> <C>
Increase in:
Loan fees..................... $13,120 $26,270 $27,110 $16,409
Mortgage banking income, net.. 1,491 3,051 2,688 2,239
Employee compensation and
benefits.................... 14,611 29,321 29,798 18,648
</TABLE>
Bank card revenue and expense and mortgage banking income and expense
have been reclassified from other operating revenue and other operating
expense to bank card revenue, net and mortgage banking income, net,
respectively, in noninterest revenues as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
SIX MONTHS ENDED ----------------------------
JUNE 30, 1995 1994 1993 1992
---------------- ---- ---- ----
<S> <C> <C> <C> <C>
Increase in:
Bank card revenue, net.......... $6,075 $11,486 $9,719 $6,994
Mortgage banking income, net.... 4,924 6,600 6,030 7,509
</TABLE>
ATM expenses have been reclassified from other expenses to be shown net
with ATM revenue in other operating revenue as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
SIX MONTHS ENDED -----------------------------
JUNE 30, 1995 1994 1993 1992
---------------- ---- ---- ----
<S> <C> <C> <C> <C>
Decrease in other operating
revenue........................ $681 $1,359 $1,214 $648
</TABLE>
Following the Merger, there may be other reclassifications to conform
certain West One reporting or accounting practices to those of U. S.
Bancorp.
(B) Pooling adjustments to reflect the exchange of 50,889,593 shares of U. S.
Bancorp Common Stock for 34,618,771 shares of West One Common Stock
outstanding at June 30, 1995. At that date, West One also held
approximately 2,269,494 treasury shares in anticipation of issuance
pursuant to the conversion of Convertible Debentures. The Convertible
Debentures were called for redemption in July 1995, and the majority of
holders of Convertible Debentures are expected to exercise their right of
conversion to West One Common Stock during the 1995 third quarter.
(C) Pro forma earnings per share are computed by dividing pro forma net income
less preferred dividends by the historical weighted average number of
shares of U. S. Bancorp Common Stock outstanding for each period, adjusted
to give effect to the new shares assumed to be issued at the beginning of
each period presented. Pro forma earnings per share on a fully diluted
basis is not presented as the dilution is not material.
(D) Merger related expenses currently estimated at $60 million after-tax will
be taken during the fourth quarter of 1995 for primarily employee
severance, including payments to retain certain employees through their
agreed upon termination dates, costs to eliminate redundant computer
systems, administrative functions, premises, furniture and equipment, and
professional fees.
Management plans to reduce the aggregate number of employees by
approximately 1,100 upon completion of the merger integration. The
estimated costs are based upon average costs for similar
65
<PAGE> 38
programs and actual amounts due upon displacement of certain employees and
include severance benefits, outplacement programs, and health benefits
during the severance period.
Management's review of the two companies' computer systems resulted in the
identification of certain hardware and software that will be retired
and/or sold. Management also intends to reduce the number of branches and
offices maintained in accordance with those plans. Furniture and equipment
will be sold or retired. The costs of reducing the number of branches,
offices and related furniture and equipment have been contemplated in the
Merger-related expenses estimate.
Investment adviser fees payable upon consummation of the Merger and
accountant and attorney's professional fees directly attributable to the
Merger will be accrued.
66
<PAGE> 39
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
U. S. BANCORP
(Registrant)
By /s/ STEVEN P. ERWIN
---------------------------
Steven P. Erwin
Executive Vice President and
Chief Financial Officer
Dated: August 30, 1995
<PAGE> 40
INDEX TO EXHIBITS
23 Consent of Coopers & Lybrand L.L.P.
<PAGE> 1
Consent of Independent Accountants
We consent to the incorporation by reference in the Registration Statements of
U. S. Bancorp on Form S-3 (File Nos. 33-15492, 33-43407, 33-48249, 33-64318 and
33-86472) and on Form S-8 (File Nos. 2-99615, 33-18706, 33-28785, 33-39765,
33-39860, 33-39861, 33-71904 and 33-83158) of our report dated January 19,
1995, on our audits of the consolidated financial statements of West One
Bancorp and subsidiaries as of December 31, 1994 and 1993, and for each of the
three years in the period ended December 31, 1994, which report includes an
explanatory paragraph relating to West One Bancorp's change in accounting for
investment securities in 1993 and is incorporated by reference in the 1994
Annual Report on Form 10-K from the 1994 Annual Report to Shareholders of West
One Bancorp.
/s/ COOPERS & LYBRAND L.L.P.
Boise, Idaho
August 30, 1995
