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Previous: ZENITH NATIONAL INSURANCE CORP, 10-Q, 1994-05-11 |
Next: NORTH SHORE GAS CO /IL/, 10-Q, 1994-05-11 |
<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to ___________________
COMMISSION FILE NUMBER 0-2610
ZIONS BANCORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
UTAH 87-0227400
------------- ------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
<TABLE>
<S> <C>
1380 KENNECOTT BUILDING
SALT LAKE CITY, UTAH 84133
-------------------------- -----------
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (801) 524-4787
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirement for the past 90 days. Yes X No_____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, without par value, outstanding at April 28, 1994 14,213,257 shares
1
<PAGE> 2
ZIONS BANCORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
----
PART I. FINANCIAL INFORMATION
---------------------
<S> <C>
ITEM 1. Financial Statements (unaudited)
Consolidated Balance Sheets 3
Consolidated Statements of Income 5
Consolidated Statements of Cash Flows 6
Consolidated Statements of Retained Earnings 7
Notes to Consolidated Financial Statements 8
ITEM 2. Management's Discussion and Analysis 9
PART II. OTHER INFORMATION
-----------------
ITEM 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 20
- - - ----------
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
(In thousands) 1994 1993
----------------- -----------------
<S> <C> <C>
Assets
Cash and due from banks $ 270,724 $ 338,970
Money market investments:
Interest-bearing deposits 24,939 24,967
Federal funds sold and security resell agreements 652,186 572,713
Investments:
Held to maturity at cost (approximate
market value $869,225 and $830,087):
Taxable 682,134 617,019
Nontaxable 182,349 196,241
Available for sale at market 331,176 347,346
Trading account securities at market 430,601 98,333
--------- ----------
1,626,260 1,258,939
Loans:
Loans held for sale at cost, which approximates market 208,238 238,206
Loans, leases and other receivables 2,344,479 2,269,970
--------- ---------
2,552,717 2,508,176
Less:
Unearned income and fees, net of related costs 20,911 21,830
Allowance for loan losses 67,984 68,461
---------- ----------
2,463,822 2,417,885
Premises and equipment, at cost, less accumulated depreciation 72,862 72,049
Amounts paid in excess of net assets of acquired businesses 11,820 11,920
Other real estate owned 1,941 3,267
Other assets 107,618 100,344
--------- ---------
Total assets $5,232,172 $4,801,054
========= =========
</TABLE>
3
<PAGE> 4
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
(In thousands) 1994 1993
----------- ---------------
<S> <C> <C>
Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing demand $ 832,222 $ 879,908
Interest-bearing:
Savings and money market 1,974,572 1,867,483
Time under $100,000 516,724 535,456
Time over $100,000 90,992 80,879
Foreign 78,992 68,563
---------- ----------
3,493,502 3,432,289
Securities sold, not yet purchased 348,951 46,640
Federal funds purchased and security repurchase agreements 763,220 595,200
Accrued liabilities 67,926 66,497
Federal Home Loan Bank advances and other borrowings:
Less than one year 25,429 136,140
Over one year 155,086 152,109
Long-term debt:
Subordinated notes 54,000 54,000
Industrial revenue bonds 1,550 1,550
Other long-term debt 3,800 4,037
---------- ----------
Total liabilities 4,913,464 4,488,462
--------- ---------
Shareholders' equity:
Capital stock:
Preferred stock, without par value; authorized 3,000,000 shares;
issued and outstanding, none -- --
Common stock, without par value; authorized 30,000,000
shares; issued and outstanding, 14,208,661
and 14,201,367 shares 66,381 66,257
Net unrealized holding gains and losses on securities available for sale (1,561) 415
Retained earnings 253,888 245,920
--------- ---------
Total shareholders' equity 318,708 312,592
--------- ---------
Total liabilities and shareholders' equity $5,232,172 $4,801,054
========= =========
</TABLE>
4
<PAGE> 5
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
<S> <C> <C>
(In thousands) 1994 1993
---- ----
Interest income:
Interest and fees on loans $45,876 $40,625
Interest on loans held for sale 3,259 2,999
Interest on money market investments 7,664 5,223
Interest on securities:
Held to maturity:
Taxable 8,152 13,315
Nontaxable 2,436 1,880
Available for sale 4,841 --
Trading account 2,477 1,052
Lease financing 2,508 2,497
------ ------
Total interest income 77,213 67,591
------ ------
Interest expense:
Interest on savings and money market deposits 13,016 12,116
Interest on time deposits under $100,000 5,115 6,555
Interest on time deposits over $100,000 760 710
Interest on foreign deposits 554 341
Interest on securities sold, not yet purchased 899 -
Interest on borrowed funds 12,068 6,777
------ ------
Total interest expense 32,412 26,499
------ ------
Net interest income 44,801 41,092
Provision for loan losses 290 1,365
------- ------
Net interest income after provision for loan losses 44,511 39,727
------ ------
Other operating income:
Service charges on deposit accounts 5,951 5,613
Other service charges, commissions and fees 5,201 4,367
Trust income 1,092 1,122
Investment securities gains (losses), net (169) 3
Trading account income (loss) (310) 427
Loan sales and servicing income 3,496 2,940
Other income 1,135 1,294
------ ------
Total other operating income 16,396 15,766
------ ------
Other operating expenses:
Salaries and employee benefits 22,953 18,911
Occupancy, net 2,123 1,957
Furniture and equipment expense 2,666 2,085
Other real estate expense 140 138
Legal and professional services 1,987 974
Supplies 1,277 1,233
Postage 1,189 1,016
FDIC premiums 1,821 1,855
Amortization of intangible assets 891 946
Loss on early extinguishment of debt -- 6,022
Other expenses 7,444 6,928
------ ------
Total other operating expenses 42,491 42,065
------ ------
Income before income taxes and cumulative effect
of changes in accounting principles 18,416 13,428
Income taxes 5,978 4,341
------ ------
Net income before cumulative effect of changes in accounting principles 12,438 9,087
Cumulative effect of changes in accounting principles -- 1,659
-------- -------
Net income $12,438 $10,746
====== ======
Weighted average common and common equivalent shares outstanding 14,155 14,422
Earnings per common share:
Income before cumulative effect of changes in accounting principles $0.88 $0.63
Cumulative effect of changes in accounting principles -- .12
----- -----
Net income per common share $0.88 $0.75
===== =====
</TABLE>
5
<PAGE> 6
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
<S> <C> <C>
(In thousands) 1994 1993
---- ----
Cash flows from operating activities:
Net income $ 12,438 $ 10,746
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 290 1,365
Write-downs of other real estate owned 85 55
Depreciation of premises and equipment 2,110 1,744
Amortization of premium on core deposits and
other intangibles 891 946
Amortization of net premium/discount on
investment securities 1,592 1,233
Accretion of unearned income and fees, net of
related costs (919) (876)
Proceeds from sales of trading account securities 20,325,247 772,146
Increase in trading account securities (20,657,515) (779,253)
Net (gain) loss on sales of investment securities 169 (3)
Proceeds from loans held for sale 242,803 224,530
Increase in loans held for sale (211,430) (137,042)
Net gain on sales of loans, leases and other assets (1,511) (1,895)
Net gain on sales of other real estate owned (11) (7)
Change in accrued income taxes 4,899 4,395
Change in accrued interest receivable (2,640) 732
Change in other assets (5,201) (5,711)
Change in accrued interest payable 3,244 44
Change in accrued liabilities (6,714) 7,586
-------------- ---------
Net cash provided by (used in) operating activities (292,173) 100,735
------------- --------
Cash flows from investing activities:
Net increase in money market investments (79,445) (107,594)
Proceeds from sales of investment securities held to maturity -- 63
Proceeds from maturities of investment securities held to maturity 23,149 50,298
Purchases of investment securities held to maturity (76,486) (205,559)
Proceeds from sales of investment securities available for sale 67,332 --
Proceeds from maturities of investment securities available for sale 70,523 --
Purchases of investment securities available for sale (123,661) --
Proceeds from sales of loans and leases -- 1,810
Net increase in loans and leases (75,981) (47,444)
Principal collections on leveraged leases -- 187
Proceeds from sales of premises and equipment 264 67
Purchases or premises and equipment (3,184) (3,232)
Proceeds from sales of other real estate owned 1,957 1,100
Proceeds from sales of mortgage servicing rights 11 449
Purchases of mortgage servicing rights (224) (155)
Proceeds from sales of other assets 92 9
Cash paid for acquisitions, net of cash received (1) 4,451
-------------- --------
Net cash used in investing activities (195,654) (305,550)
----------- -------
</TABLE>
6
<PAGE> 7
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
<S> <C> <C>
(In thousands) 1994 1993
---- ----
Cash flows from financing activities:
Net increase in deposits $ 61,213 $ 16,232
Net change in short-term funds borrowed 359,973 122,159
Proceeds from FHLB advances over one year 6,808 1,723
Payments on FHLB advances over one year (3,831) (66)
Payments on long-term debt (237) (212)
Proceeds from issuance of common stock 125 276
Dividends paid (4,470) (3,070)
------------- ---------
Net cash provided by financing activities 419,581 137,042
------------ --------
Net decrease in cash and due from banks (68,246) (67,773)
Cash and due from banks at beginning of period 338,970 323,932
------------ --------
Cash and due from banks at end of period $ 270,724 $ 256,159
============ ========
</TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
(In thousands) 1994 1993
---- ----
<S> <C> <C>
Cash paid for:
Interest $29,296 $26,153
Income taxes 585 922
Loans transferred to other real estate owned 705 780
</TABLE>
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
March 31, December 31,
--------------------- ------------------
(In thousands) 1994 1993 1993
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of period $245,920 $197,992 $197,992
Add:
Net income 12,438 10,746 58,205
Retained earnings of company acquired -- 2,428 2,428
--------- -------- --------
258,358 211,166 258,625
Deduct cash dividends:
Preferred paid to minority shareholder of 7 -- 13
subsidiary
Common, per share $ .28 in 1994 and 4,463 2,585 12,207
$ .21 and $ .98 in 1993 -- 485 485
---------- -------- --------
Common dividend of NBA prior to merger
Balance at end of period $253,888 $208,096 $245,920
======= ======= =======
</TABLE>
7
<PAGE> 8
ZIONS BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Basis of Presentation
The unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. The
consolidated financial statements give effect to the merger of Zions
Bancorporation and National Bancorp of Arizona Inc. (NBA) on January 14, 1994,
which has been accounted for as a pooling of interests, and amounts in the 1993
consolidated financial statements have been restated to give effect to this
merger. Operating results for the three months ended March 31, 1994 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1994. For further information, refer to the consolidated
financial statements and footnotes thereto included in Zions Bancorporation's
Annual Report to Shareholders on Form 10-K for the year ended December 31,
1993.
8
<PAGE> 9
ZIONS BANCORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------
(In thousands, except per share and ratio data) 1994 1993 % Change
---- ---- --------
<S> <C> <C> <C>
EARNINGS:
Net income before cumulative effect
of changes in accounting principles $12,438 $ 9,087 36.9
Net income 12,438 10,746 15.7
PER COMMON SHARE:
Net income before cumulative effect
of changes in accounting principles $ .88 $ .63 39.7
Net income .88 .75 17.3
Dividends .28 .21 33.3
Book value at March 31 22.43 19.42 15.5
Market value at March 31 37.00 48.00 (22.9)
(In thousands)
Weighted average common and common
equivalent shares outstanding 14,155 14,422
Common shares outstanding at March 31 14,209 14,094
PERFORMANCE RATIOS:
Net interest margin 3.79% 4.58%
Return on average assets .95% 1.07%
Return on average common equity 16.0% 16.2%
Dividend payout ratio 35.9% 28.6%
Nonperforming assets to loans, leases
and other real estate owned at March 31 .99% 1.72%
CAPITAL RATIOS:
Average equity to average assets 5.92% 6.62%
Tier I leverage at March 31 5.58% 6.47%
Tier I risk-based capital at March 31 10.84% 10.63%
Total risk-based capital at March 31 14.05% 15.07%
</TABLE>
9
<PAGE> 10
ZIONS BANCORPORATION AND SUBSIDIARIES
OPERATING RESULTS
Consolidated income before cumulative effect of changes in accounting
principles was $12,438,000 or $.88 per share for the first quarter 1994, an
increase of 36.9% and 39.7%, respectively, over the $9,087,000 or $.63 per
share earned in the same period a year ago.
Consolidated net income for the first quarter of 1994 increased 15.7% to
$12,438,000 from $10,746,000 a year ago, while earnings per share increased
17.3% to $.88 from $.75 in the first quarter of 1993. The Company adopted new
accounting principles with respect to post-retirement benefits and income taxes
in the first quarter of 1993, resulting in a benefit of $1,659,000 or $.12 per
share. The earnings of the first quarter of 1993, however, were also
negatively affected by a one-time expense of $6,022,000 included in other
operating expenses related to early extinguishment of certain long-term debt.
Amounts in the 1993 consolidated financial statements have been restated to
give effect to the merger of Zions Bancorporation and National Bancorp of
Arizona Inc. on January 14, 1994, which has been accounted for as a pooling of
interests.
The Company's first-quarter earnings relative to the same period a year ago
reflect a $3,709,000 (9.0%) increase in interest income, a $1,075,000 (78.8%)
decrease in the provision for loan losses, a $630,000 (4.0%) increase in other
operating income, a $6,448,000 (17.9%) increase in other operating expenses
(excluding the aforementioned expense relating to the early extinguishment of
debt) and a $1,637,000 (37.7%) increase in income tax expense.
The annualized return on average assets for the first three months of 1994 was
.95%, resulting in a return on average common shareholders' equity of 16.0%,
compared to 1.07% and 16.2%, respectively, for the first three months of 1993.
NET INTEREST INCOME AND INTEREST RATE SPREADS
Net interest income for the first quarter of 1994, adjusted to a fully
taxable-equivalent basis, increased 9.2% to $45,845,000 compared to $41,977,000
for the first quarter of 1993. Net interest margin was 3.79% compared to 4.58%
for the first quarter of 1993.
The yield on average earning assets decreased 100 basis points during the first
quarter of 1994 as compared to the first quarter of 1993, and the average rate
paid this quarter on interest-bearing funds decreased 30 basis points from the
first quarter of 1993. The spread on average interest-bearing funds for the
first quarter of 1994 was 3.30%, down from the 4.00% for the first quarter of
1993.
The Company attempts to minimize interest rate movement sensitivity through the
management of interest rate maturities and the use of off- balance sheet
arrangements such as caps, floors and interest rate exchange contract
agreements. The cost to the Company of the use of such off-balance sheet
arrangements for the first quarter of 1994 was $12,000 compared to $217,000 for
the first quarter of 1993.
The increased level of taxable-equivalent net interest income in the first
quarter of 1994, compared to the same period in 1993, was influenced primarily
by a 32.1% increase in average earning assets. The decrease in net interest
margin resulted primarily from increased borrowings related to increased
trading activity, and the effect of rates on earning assets declining more than
rates paid on interest-bearing funds.
10
<PAGE> 11
ZIONS BANCORPORATION AND SUBSIDIARIES
NET INTEREST INCOME AND RATES
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1994
-----------------------------
Average Amount of Average
(In thousands) Balance Interest* Rate
--------- ----------- -----------
<S> <C> <C> <C>
Money market investments:
Interest-bearing deposits $ 24,851 $ 248 4.05%
Federal funds sold and security
resell agreements 972,972 7,416 3.09%
Other money market investments -- -- --%
---------- ------- ----
Total money market investments 997,823 7,664 3.11%
-------- ------ ----
Securities:
Held to maturity:
Taxable 668,812 8,152 4.94%
Nontaxable 180,767 3,480 7.81%
Available for sale 346,134 4,841 5.67%
Trading account securities 208,633 2,477 4.81%
--------- ------ ----
Total securities 1,404,346 18,950 5.47%
--------- ------ -----
Loans:
Loans held for sale 223,830 3,259 5.90%
Loans, leases and other receivables** 2,281,905 48,384 8.60%
--------- ------ ----
Total loans 2,505,735 51,643 8.36%
--------- ------ ----
Total earning assets $4,907,904 $78,257 6.47%
========= ====== ====
Interest-bearing deposits:
Savings $ 738,907 $ 5,113 2.81%
Money market 1,180,735 7,903 2.71%
Time under $100,000 523,529 5,115 3.96%
Time over $100,000 82,888 760 3.72%
Foreign 80,181 554 2.80%
--------- ------ ----
Total interest-bearing deposits 2,606,240 19,445 3.03%
--------- ------ ----
Borrowed funds:
Securities sold, not yet purchased 78,692 899 4.63%
Federal funds purchased and security
repurchase agreements 1,195,889 8,737 2.96%
FHLB advances and other borrowings:
Less than one year 51,481 496 3.91%
Over one year 152,960 1,443 3.83%
Long-term debt 59,420 1,392 9.50%
--------- ------ ----
Total borrowed funds 1,538,442 12,967 3.42%
--------- ------ ----
Total interest-bearing funds $4,144,682 $32,412 3.17%
========= ====== ====
Net interest income $45,845
Net interest margin 3.79%
Spread on average interest-bearing funds 3.30%
</TABLE>
*Taxable-equivalent rates used where applicable.
** Net of unearned income and fees, net of related cost.
Loans include nonaccrual and restructured loans
11
<PAGE> 12
ZIONS BANCORPORATION AND SUBSIDIARIES
NET INTEREST INCOME AND RATES
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1993
---------------------------
Average Amount of Average
(In thousands) Balance Interest* Rate
--------- ----------- ----------
<S> <C> <C> <C>
Money market investments:
Interest-bearing deposits $ 169,130 $ 2,037 4.88%
Federal funds sold and security
resell agreements 354,651 2,919 3.34%
Other money market investments 38,672 267 2.80%
--------- ------ -----
Total money market investments 562,453 5,223 3.77%
--------- ------ -----
Securities:
Held to maturity:
Taxable 864,745 13,315 6.24%
Nontaxable 127,987 2,765 8.76%
Available for sale -- -- --%
Trading account securities 36,979 1,052 11.54%
--------- ------ -----
Total securities 1,029,711 17,132 6.75%
--------- ------ -----
Loans:
Loans held for sale 185,109 2,999 6.57%
Loans, leases and other receivables** 1,939,009 43,122 9.02%
--------- ------ -----
Total loans 2,124,118 46 121 8.81%
--------- ------ ----
Total earning assets $3,716,282 $68,476 7.47%
========= ====== =====
Interest-bearing deposits:
Savings $ 624,685 $ 4,648 3.02%
Money market 1,069,957 7,468 2.83%
Time under $100,000 595,597 6,555 4.46%
Time over $100,000 76,088 710 3.78%
Foreign 54,604 341 2.53%
--------- ------ -----
Total interest-bearing deposits 2,420,931 19,722 3.30%
--------- ------ -----
Borrowed funds:
Securities sold, not yet purchased -- -- --%
Federal funds purchased and security
repurchase agreements 442,852 3,027 2.77%
FHLB advances and other borrowings:
Less than one year 78,521 773 3.99%
Over one year 52,811 424 3.26%
Long-term debt 99,116 2,553 10.45%
--------- ------ -----
Total borrowed funds 673,300 6,777 4.08%
--------- ------ -----
Total interest-bearing funds $3,094,231 $26,499 3.47%
========= ====== =====
Net interest income $41,977
Net interest margin 4.58%
Spread on average interest-bearing funds 4.00%
</TABLE>
*Taxable-equivalent rates used where applicable.
** Net of unearned income and fees, net of related cost.
Loans include nonaccrual and restructured loans
12
<PAGE> 13
ZIONS BANCORPORATION AND SUBSIDIARIES
PROVISION FOR LOAN LOSSES
The provision for loan losses decreased 78.8% to $290,000 for the first quarter
of 1994, as compared with $1,365,000 for the first quarter of 1993. Net
charge-offs for the quarter were $767,000 or .03% of average net loans and
leases, compared to $676,000 or .03% of average net loans and leases for the
first quarter of 1993.
OTHER OPERATING INCOME
Other operating income for the first quarter of 1994 totaled $16,396,000, an
increase of 4.0% from the $15,766,000 for the first quarter of 1993. Comparing
the segments of other operating income for the first quarter of 1994 with the
first quarter of 1993, service charges on deposit accounts, other service
charges, commissions and fees, and loan sales and servicing income increased
6.0%, 19.1% and 18.9%, respectively, while trust income decreased 2.7% and
other income decreased 12.3%. Trading account income and loan sales income
were adversely affected by mark-to-market adjustments on trading securities and
mortgages held for sale as a result of rising interest rates during the first
quarter of 1994, and the sale of investment securities in the first quarter of
1994 resulted in net losses compared to small net gains in the first quarter of
1993.
OTHER OPERATING EXPENSES
Other operating expenses for the first quarter of 1994, totaling $42,491,000,
increased 17.9% from the $36,043,000 for the first quarter of 1993, excluding
the one-time expense of $6,022,000 related to the early extinguishment of debt.
Comparing the operating expense segments for the first quarter of 1994 and the
first quarter of 1993, salaries and employee benefits increased 21.4%,
occupancy, furniture and equipment expenses increased 18.5%, other real estate
expense increased 1.4% and the total of all other expenses increased 12.8%.
The increase in salaries and employee benefits resulted primarily from
increased staffing in investment and mortgage origination and servicing
activities, general salary increases, bonuses and commission costs. The
increase in occupancy, furniture and equipment expenses resulted primarily from
the expansion of the ATM network, and the installation of personal computers
and local area networks during 1993. The increase in all other expenses
resulted primarily from increases in legal and professional services, postage
and telecommunications related to acquisitions and expansion.
INCOME TAXES
The Company's income taxes increased 37.7% to $5,978,000 for the first quarter
of 1994 compared to $4,341,000 for the first quarter of 1993, primarily due to
the 37.1% increase in before-tax income. The Company's effective tax rate
increased slightly to 32.5% for the first quarter of 1994 from 32.3% for the
first quarter of 1993.
13
<PAGE> 14
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
(In thousands) 1994 1993
---- ----
<S> <C> <C>
Assets
Cash and due from banks $ 313,212 $ 285,380
Money market investments:
Interest-bearing deposits 24,851 169,130
Federal funds sold and security resell agreements 972,972 354,651
Other money market investments -- 38,672
Securities:
Held to maturity:
Taxable 668,812 864,745
Nontaxable 180,767 127,987
Available for sale 346,134 --
Trading account securities 208,633 36,979
-------- ---------
1,404,346 1,029,711
Loans:
Loans held for sale 223,830 185,109
Loans, leases and other receivables 2,302,821 1,963,580
--------- ---------
2,526,651 2,148,689
Less:
Unearned income and fees, net of related costs 20,916 24,571
Allowance for loan losses 68,000 60,586
--------- ---------
2,437,735 2,063,532
Premises and equipment, at cost,
less accumulated depreciation 72,353 65,353
Amounts paid in excess of net assets of acquired businesses 11,870 12,271
Other real estate owned 2,711 5,799
Other assets 94,048 49,161
--------- ---------
Total assets $5,334,098 $4,073,660
========= =========
Liabilities and shareholders' equity
Deposits:
Noninterest-bearing demand $ 813,053 $ 653,710
Interest-bearing:
Savings and money market 1,919,642 1,694,642
Time under $100,000 523,529 595,597
Time over $100,000 82,888 76,088
Foreign 80,181 54,604
--------- ---------
3,419,293 3,074,641
Securities sold, not yet purchased 78,692 --
Federal funds purchased and security repurchase agreements 1,195,889 442,852
Accrued liabilities 60,713 55,959
Federal Home Loan Bank advances and other borrowings:
Less than one year 51,481 78,521
Over one year 152,960 52,811
Long-term debt 59,420 99,116
---------- ---------
Total liabilities 5,018,448 3,803,900
--------- ---------
Shareholders' equity:
Preferred stock -- --
Common stock 66,319 65,502
Net unrealized holding gains and losses (573) --
Retained earnings 249,904 204,258
---------- ---------
Total shareholders' equity 315,650 269,760
--------- ---------
Total liabilities and shareholders' equity $5,334,098 $4,073,660
========= =========
</TABLE>
14
<PAGE> 15
ZIONS BANCORPORATION AND SUBSIDIARIES
ANALYSIS OF FINANCIAL CONDITION
EARNING ASSETS
Average earning assets grew to $4,907.9 million in the three months ended March
31, 1994 compared to $3,716.3 million in the three months ended March 31, 1993.
Earning assets comprised 92.0% of total average assets for the first three
months of 1994, compared with 91.2% for the first three months of 1993.
Average money market investments, consisting of interest-bearing deposits,
federal funds sold and security resell agreements, and other money market
investments, increased 77.4% to $997.8 million compared to $562.5 million in
the first three months of 1993.
During the first three months of 1994, average securities increased 36.4% to
$1,404.3 million compared to $1,029.7 million in the first three months of
1993. Average taxable securities increased 17.4%, nontaxable securities
increased 41.2%, and trading account securities increased 464.2% compared with
the same period in 1993.
Average net loans and leases increased 18.0% to $2,505.7 million for the first
three months of 1994 compared to $2,124.1 million in the first three months of
1993, representing 51.1% of earning assets in the first quarter of 1994
compared to 57.2% in the first quarter of 1993.
LOANS
The Company has structured its organization to separate the lending function
from the credit administration function to strengthen the control and
independent evaluation of credit activities. Loan policies and procedures
provide the Company with a framework for consistent underwriting and a basis
for sound credit decisions. In addition, the Company has well-defined
standards for grading its loan portfolio, and management utilizes the
comprehensive loan grading system to determine risk potential in the portfolio.
Another aspect of the Company's credit risk management strategy is the
diversification of the loan portfolio. The Company has a well-diversified loan
portfolio with no significant exposure to highly leveraged transactions and has
no foreign credits in its loan portfolio.
The table below sets forth the amount of loans outstanding by type at March 31,
1994 and December 31, 1993.
<TABLE>
<CAPTION>
(In thousands)
Types March 31, 1994 December 31, 1993
----- -------------- -----------------
<S> <C> <C>
Loans held for sale $ 208,238 $ 238,206
Commercial, financial, and agricultural 511,344 511,982
Real estate:
Construction 183,832 213,114
Other 1,097,128 1,022,888
Consumer 413,041 378,679
Lease financing 128,403 130,450
Other receivables 10,731 12,857
--------- ---------
Total loans $2,552,717 $2,508,176
========= =========
</TABLE>
15
<PAGE> 16
ZIONS BANCORPORATION AND SUBSIDIARIES
Loans held for sale at March 31, 1994 decreased 12.6% from year-end 1993. All
other loans, net of unearned income and fees increased 3.4% to $2,323.6 million
at March 31, 1994, compared to $2,248.1 million at December 31, 1993. Other
real estate-secured loans and consumer loans increased from year end 7.3% and
9.1%, respectively, as commercial loans remained about the same and real estate
construction loans, lease financing, and other receivables decreased 13.7%,
1.6% and 16.5%, respectively. Within the other real estate-secured loan
portfolio, 1-4 family residential loans increased 9.6%, home equity credit line
loans increased 1.0% and all other real estate loans increased 7.6% from year
end.
RISK ELEMENTS
The Company's nonperforming assets, which include nonaccruing loans,
restructured loans and other real estate owned, were $25,056,000 at March 31,
1994, down 31.0% from $36,339,000 at March 31, 1993, and down 18.2% from
$30,637,000 at December 31, 1993. Such nonperforming assets as a percentage of
net loans and leases and other real estate owned were .99%, 1.72% and 1.23% at
March 31, 1994, March 31, 1993, and December 31, 1993, respectively.
Accruing loans past due 90 days or more totaled $2,810,000 at March 31, 1994,
down 31.0% from $4,071,000 at March 31, 1993, and down 74.0% from $10,821,000
at December 31, 1993.
No loans at March 31, 1994 were considered potential problem loans compared to
no loans at March 31, 1993 and two loans totaling $1,114,000 at December 31,
1993. Potential problem loans are defined as loans presently current by their
terms, but about which management has serious doubt as to the future ability of
the borrower to comply with present repayment terms and which may result in the
reporting of the loans as nonperforming assets.
The following table sets forth the nonperforming assets at March 31, 1994 and
1993, and December 31, 1993.
<TABLE>
<CAPTION>
March 31, December 31,
--------- ------------
(In thousands) 1994 1993 1993
---- ---- ----
<S> <C> <C> <C>
Nonaccrual loans $21,327 $27,914 $23,364
Restructured loans 1,788 2,899 4,006
Other real estate owned 1,941 5,526 3,267
------- ------- -------
Total $25,056 $36,339 $30,637
====== ====== ======
% of net loans and leases* and other real estate owned .99% 1.72% 1.23%
Accruing loans past due 90 days or more $ 2,810 $ 4,071 $10,821
====== ====== ======
% of net loans and leases* .11% .19% .44%
</TABLE>
*Includes loans held for sale.
16
<PAGE> 17
ZIONS BANCORPORATION AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES
In analyzing the adequacy of the allowance for loan and lease losses,
management utilizes a comprehensive loan grading system to determine risk
potential in the portfolio, and considers the results of independent internal
and external credit review, historical charge-off experience, and changes in
the composition and volume of the portfolio. Other factors, such as general
economic conditions and collateral values, are also considered. Larger problem
credits are individually evaluated to determine appropriate reserve
allocations. Additions to the allowance are based upon the resulting risk
profile of the portfolio developed through the evaluation of the above factors.
The following table shows the changes in the allowance for loan losses and a
summary of loan loss experience.
<TABLE>
<CAPTION> Twelve Months
Three Months Ended Ended
(In thousands) March 31, December 31,
------------------------ ------------
1994 1993 1993
---- ---- ----
<S> <C> <C> <C>
Average loans* and leases outstanding
(net of unearned income) $2,505,735 $2,124,118 $2,222,182
========== ========== ==========
Allowance for possible losses:
Balance at beginning of the period $ 68,461 $ 59,807 $ 59,807
Allowance of companies acquired -- 546 546
Loans and leases charged-off:
Loans held for sale -- -- --
Commercial, financial and agricultural (1,750) (170) (1,804)
Real estate (41) (359) (1,179)
Consumer (916) (1,812) (5,461)
Lease financing (108) (195) (360)
Other receivables -- -- --
---------- ---------- ----------
Total (2,815) (2,536) (8,804)
---------- ---------- ----------
Recoveries:
Loans held for sale -- -- --
Commercial, financing and agricultural 885 923 10,117
Real estate 52 77 611
Consumer 1,085 824 3,043
Lease financing 26 36 148
Other receivables -- -- --
---------- ---------- ----------
Total 2,048 1,860 13,919
---------- ---------- ----------
Net loan and lease (charge-offs) recoveries (767) (676) 5,115
Provision charged against earnings 290 1,365 2,993
---------- ---------- ----------
Balance at end of period $ 67,984 $ 61,042 $ 68,461
========= ========== ==========
*Includes loans held for sale
Ratio of net charge-offs (recoveries) to
average loans and leases .03% .03% (.23)%
</TABLE>
17
<PAGE> 18
ZIONS BANCORPORATION AND SUBSIDIARIES
The allowance for loan losses as a percentage of net loans and leases was 2.69%
at March 31, 1994, compared to 2.89% at March 31, 1993 and 2.75% at December
31, 1993. The allowance, as a percentage of nonaccrual loans and accruing
loans past due 90 days or more was 281.7% at March 31, 1994, compared to 190.8%
at March 31, 1993 and 200.3% at December 31, 1993. The allowance, as a
percentage of nonaccrual loans and restructured loans was 294.1% at March 31,
1994, compared to 198.1% at March 31, 1993 and 250.1% at December 31, 1993.
Included in the allowance for loan losses is an amount for unused loan
commitments and standby letters of credit which at March 31, 1994 and 1993 and
at December 31, 1993, amounted to $3,135,000, $4,842,000 and $1,972,000,
respectively. Unused loan commitments and standby letters of credit, at March
31, 1994 and 1993 and at December 31, 1993, amounted to $1,042 million, $951
million and $1,106 million, respectively.
DEPOSITS
Average total deposits of $3,419.3 million for the first three months of 1994
increased 11.2% over the $3,074.6 for the first three months of 1993, with
average demand deposits increasing 24.4%. Average savings and money market
deposits, time deposits over $100,000 and foreign deposits for the first three
months of 1994 increased 13.3%, 8.9% and 46.8% respectively, from the first
three months of 1993. Average time deposits under $100,000, decreased 12.1%,
during the first three months of 1994, compared with the same period one year
earlier.
Total deposits increased 1.8% to $3,493.5 million at March 31, 1994, compared
to $3,432.3 million at December 31, 1993. Comparing March 31, 1994 to December
31, 1993, savings and money market deposit accounts, time deposits over
$100,000 and foreign deposits increased 5.7%, 12.5% and 15.2%, respectively,
while demand deposits decreased 5.4% and time deposits under $100,000 decreased
3.5%.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Average net loans and leases were 73.3% of average total deposits for the three
months ended March 31, 1994 compared to 69.1% for the three months ended March
31, 1993. Liquidity is primarily provided by the regularly scheduled
maturities of the Company's investment and loan portfolios. In addition, the
Company's liquidity is enhanced by the fact that cash, money market securities
and liquid investments, net of "short-term purchased" liabilities and wholesale
deposits totaled $1,198.6 million or 36.1% of core deposits at March 31, 1994.
The Company's core deposits, consisting of demand, savings and money market
deposits and time deposits under $100,000, constituted 95.1% of total deposits
at March 31, 1994 compared to 95.6% at December 31, 1993.
Maturing balances in loan portfolios provide flexibility in managing cash
flows. Maturity management of those funds is an important source of
medium-to-long-term liquidity. The Company's ability to raise funds in the
capital markets through the "securitization" process and by debt issuances
allows the Company to take advantage of market opportunities to meet funding
needs at reasonable cost. The Company manages its liquidity position in order
to assure its ability to meet maturing obligations.
18
<PAGE> 19
ZIONS BANCORPORATION AND SUBSIDIARIES
The Company, through the management of interest rate "maturities" and the use
of off-balance sheet arrangements such as interest rate caps, floors, and
interest rate exchange contract agreements, attempts to structure portfolios in
such a way as to minimize the effects of fluctuating interest rate levels on
net interest income.
Considering Zions Bancorporation independent from its subsidiaries (Parent
Company), the Parent Company's cash requirements consist primarily of principal
and interest payments on its borrowings, dividend payments to shareholders, and
cash operating expenses and income taxes. The Parent Company's cash needs are
routinely satisfied through payments by subsidiaries of dividends, management
and other fees, principal and interest payments on subsidiary borrowings from
the parent Company and proportionate share of income taxes.
CAPITAL RESOURCES AND DIVIDENDS
Total shareholders' equity at March 31, 1994 was $318.7 million, an increase of
2.0% over the $312.6 million at December 31, 1993, and an increase of 16.4%
over the $273.7 million at March 31, 1993. The ratio of average equity to
average assets for the first three months of 1994 was 5.92%, compared to 6.62%,
for the same period in 1993. At March 31, 1994, the Company's Tier I
risk-based capital ratio was 10.84%, compared to 10.85% at December 31, 1993
and 10.63% at March 31, 1993. At March 31, 1994 the Company's total risk-based
capital ratio was 14.05%, compared to 14.12% at December 31, 1993 and 15.07% at
March 31, 1993. The Company's leverage ratio as of March 31, 1994 was 5.58%,
compared to 5.44% at December 31, 1993 and 6.47% at March 31, 1993.
Dividends declared per common share for the first quarter of 1994 of $.28
increased 33.3% compared to $.21 for the first quarter of 1993. The cash
dividend payout to net income applicable to common shares for the first three
months of 1994 was 35.9%, compared to 28.6% for the first three months of 1993.
MERGERS AND ACQUISITIONS
On January 14, 1994, the pooling-of-interests merger transaction of Zions
Bancorporation and National Bancorp of Arizona Inc. and it's wholly owned
subsidiary, National Bank of Arizona, was consummated. The transaction enabled
the Company to merge Zions First National Bank of Arizona with National Bank of
Arizona producing an organization with $580 million in assets at quarter end,
and offices in Tucson, Phoenix, Scottsdale, Mesa and Flagstaff, Arizona.
Also during the first quarter of 1994, Zions Bancorporation received regulatory
and shareholders approvals to acquire Rio Salado Bancorp and it's wholly owned
subsidiary, Rio Salado Bank. The acquisition was completed at the close of
business, April 29, 1994 at a purchase price of $12.5 million, to be paid
through the exchange of Zions Bancorporation common stock for Rio Salado
Bancorp stock. The purchase transaction enables the Company to merge Rio
Salado Bank into Zions Bancorporation's wholly owned subsidiary, National Bank
of Arizona, and will result in an organization with approximately $700 million
in assets.
19
<PAGE> 20
ZIONS BANCORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits - None
b) Reports on Form 8-K
Zions Bancorporation filed the following report on Form 8-K during the
quarter ended March 31, 1994.
Form 8-K Dated January 14, 1994 and filed January 25, 1994
(Items 2 and 7), reported completion of the acquisition of
National Bancorp of Arizona Inc.
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ZIONS BANCORPORATION
/s/ Harris H. Simmons
Harris H. Simmons, President
/s/ Gary L. Anderson
Gary L. Anderson, Senior Vice President
and Chief Financial Officer
Dated: May 11, 1994
20
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