<PAGE>
As filed with the Securities and Exchange Commission on _________, 1994
Registration No. 33-_____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
____________________
ZIONS BANCORPORATION
(Exact name of registrant as specified in its charter)
Utah 6712 87-0227400
(State or other (Primary Standard Industrial (IRS Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
1380 Kennecott Building
Salt Lake City, Utah 84133
(801) 524-4787
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
____________________
Harris H. Simmons
President and Chief Executive Officer
Zions Bancorporation
1380 Kennecott Building
Salt Lake City, Utah 84133
(801) 524-4787
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
____________________
Copies to:
Brian D. Alprin, Esq. Sam P. Applewhite, III, Esq.
Laurence S. Lese, Esq. James E. Brophy, III, Esq.
Metzger, Hollis, Gordon & Mortimer Ryley, Carlock & Applewhite
Suite 1000 Suite 2700
1275 K Street, N.W. 101 North First Avenue
Washington, D.C. 20005 Phoenix, Arizona 85003-1973
(202) 842-1600 (602) 258-7701
Approximate date of commencement of the proposed sale of the securities to
the public:
The date of mailing the Proxy Statement/Prospectus contained herein.
<PAGE>
______________________________________________________________________________
CALCULATION OF REGISTRATION FEE
______________________________________________________________________________
Proposed Proposed
maximum maximum
Amount offering aggregate Amount of
Title of securities to be price per offering registration
to be registered registered share price fee
Common Stock,
no par value 400,000 shs. NA $ 5,404,000(1) $1,864
(1) Estimated solely for the purpose of calculating the
registration fee and calculated in accordance with Rule
457(f)(2) on the basis of the book value of the Common Stock,
no par value, of Rio Salado Bancorp, Inc. on November 30,
1993 of $ 5,404,000 and the maximum of 673,849 shares of
such stock to be converted in the Reorganization described
herein into Common Stock of the registrant.
____________________
The registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that
this registration statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
ZIONS BANCORPORATION
Cross-Reference Sheet between
Items of Form S-4
and Captions in Proxy Statement/Prospectus
<TABLE>
<CAPTION>
<S> <C>
Form S-4 Item Caption(s) or Location in
Number and Caption Proxy Statement/Prospectus
A. Information About the Transaction
1. Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus......................... Outside Front Cover Page of
Proxy Statement/Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus.......... Available Information; Table
of Contents
3. Risk Factors, Ratio of Earnings
to Fixed Charges and Other
Information........................ Summary; Introduction
4. Terms of the Transaction........... Plan of Reorganization;
Comparison of Zions Common
Stock and Rio Salado Common
Stock; Information Concerning
the Pro Forma Combined
Financial Data
5. Pro Forma Financial Information.... Pro Forma Combined Financial
Information; Pro Forma
Combined Financial
Information--Information
Concerning the Pro Forma
Combined Financial
Information; Pro Forma
Combined Financial
Information--Pro Forma
Combined Condensed Statement
of Condition; Pro Forma
Combined Financial
Information--Pro Forma
Combined Condensed Statements
of Income
6. Material Contracts with the
Company Being Acquired............. Plan of Reorganization; Plan
of Reorganization--Background
of and Reasons for the
Reorganization; Plan of
Reorganization--Voting
Agreements; Plan of
Reorganization--Interests of
Certain Persons in the
Transaction
<PAGE>
7. Additional Information Required
for Reoffering by Persons and
Parties Deemed to be Underwriters.. NA
8. Interests of Named Experts and
Counsel............................ NA
9. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities.................... NA
B. Information About the Registrant
10. Information with Respect to S-3
Registrants........................ Information Concerning Zions
11. Incorporation of Certain
Information by Reference........... Information Concerning Zions-
-Zions Documents Incorporated
by Reference
12. Information with Respect to S-2
or S-3 Registrants................. NA
13. Incorporation of Certain
Information by Reference........... NA
14. Information with Respect to
Registrants Other than S-3 or S-2
Registrants........................ NA
C. Information About the Company Being
Acquired
15. Information with Respect to S-3
Companies.......................... NA
16. Information with Respect to S-2
or S-3 Companies................... NA
17. Information with Respect to
Companies Other Than S-2 or S-3
Companies.......................... Information Concerning Rio
Salado
D. Voting and Management Information
18. Information if Proxies, Consents
or Authorizations are to be
Solicited:
<PAGE>
Item Number and Caption in Schedule
14A under the Securities Exchange Caption(s) or Location in
Act of 1934 or Regulation S-K Proxy Statement/Prospectus
(1) Date, Time and Place Information... Outside Front Cover Page of
Proxy Statement/Prospectus;
Summary; Introduction
(2) Revocability of Proxy.............. Introduction--Voting and
Revocation of Proxies
(3) Dissenters' Rights of Appraisal.... Plan of Reorganization--
Dissenters' Rights of Rio
Salado Shareholders
(4) Persons Making the Solicitation.... Introduction--Solicitation of
Proxies
(5) Interest of Certain Persons in
Matters to be Acted Upon........... Plan of Reorganization--
Boards of Directors Following
the Reorganization; Interests
of Certain Persons in the
Transaction
(6) Voting Securities and Principal
Holders Thereof.................... Introduction--Record Date;
Voting Rights; Principal
Holders of Zions Common
Stock; Information Concerning
Zions--Zions Documents
Incorporated by Reference;
Information Concerning Rio
Salado--Principal
Shareholders
(21) Vote Required for Approval....... Plan of Reorganization--
Required Vote; Management
Recommendation
(401) Directors and Executive
Officers......................... Information Concerning Zions-
-Zions Documents Incorporated
by Reference; Plan of
Reorganization--Boards of
Directors Following the
Reorganization; Information
Concerning Rio Salado--Rio
Salado Management
(402) Executive Compensation........... Information Concerning Zions-
-Zions Documents Incorporated
by Reference
(404) Certain Relationships and
Related Transactions............. Information Concerning Zions-
-Zions Documents Incorporated
by Reference; Information
Concerning Rio Salado--
Certain Transactions
Caption(s) or Location in
Form S-4 Item Number and Caption Proxy Statement/Prospectus
19. Information if Proxies, Consents
or Authorizations are Not to be
Solicited, or in Exchange Offer.... NA
/TABLE
<PAGE>
Proxy Statement/Prospectus
RIO SALADO BANCORP, INC.
and
ZIONS BANCORPORATION
This Proxy Statement/Prospectus is being furnished to the
shareholders of Rio Salado Bancorp, Inc. ("Rio Salado"), an Arizona
corporation, in connection with the solicitation of proxies by its Board
of Directors for use at a Special Meeting of Shareholders of Rio Salado to
be held on March __, 1994 (the "Special Meeting"). The purpose of the
Special Meeting is to consider a proposed corporate reorganization (the
"Reorganization") whereby Rio Salado will be merged into a newly-
incorporated subsidiary of Zions Bancorporation ("Zions") with the Zions
subsidiary being the surviving corporation and following which merger the
Zions subsidiary will be merged into Zions and following which mergers Rio
Salado Bank (the "Bank"), a wholly-owned subsidiary of Rio Salado, will be
merged into Zions First National Bank of Arizona ("Zions Arizona"), a
wholly-owned (except for directors' qualifying shares) subsidiary of
Zions, with Zions Arizona being the surviving institution. Upon
consummation of the Reorganization, all outstanding shares of Rio Salado's
common stock (the "Rio Salado Common Stock") will be cancelled and will be
converted into the right to receive that number of shares of Zions common
stock (the "Zions Common Stock") calculated by dividing $12,500,000 by the
average closing price, as defined, of Zions Common Stock, and by further
dividing that number by the number of issued and outstanding shares of Rio
Salado immediately prior to the effective date of the Reorganization. At
February __, 1994, the closing price of Zions Common Stock was $_____ per
share and Rio Salado had issued and outstanding 662,849 shares of its
Common Stock. If the Reorganization had been consummated as of that date
and assuming the Average Closing Price of Zions Common Stock was $___,
shareholders of Rio Salado would have received ______ shares of Zions
Common Stock for each share of Rio Salado Common Stock. The Zions Common
Stock to be distributed to Rio Salado shareholders will be registered with
the Securities and Exchange Commission and for all shareholders, other
than shareholders who are affiliates of Rio Salado or who become
affiliates of Zions, will be immediately tradable. See "Plan of
Reorganization--Conversion of Rio Salado Shares." Zions has filed this
Proxy Statement/Prospectus with the Securities and Exchange Commission as
part of a Registration Statement under the Securities Act of 1933 with
respect to the maximum of 400,000 shares of Zions Common Stock, no par
value per share, which may be issued in the Reorganization to the
shareholders of Rio Salado.
____________________
FOR THE ACTION OF THE SHAREHOLDERS TO BE EFFECTIVE, HOLDERS OF
TWO-THIRDS OF THE ISSUED AND OUTSTANDING SHARES OF COMMON STOCK OF RIO
SALADO MUST VOTE IN FAVOR OF THE REORGANIZATION. BEFORE THE
REORGANIZATION WILL BE IMPLEMENTED, THE REORGANIZATION MUST ALSO BE
APPROVED BY FEDERAL AND STATE BANKING REGULATORS. REGULATORY APPROVALS
HAVE NOT YET BEEN OBTAINED.
____________________
THE SHARES OF ZIONS COMMON STOCK TO BE ISSUED IN THE MERGER
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF ZIONS COMMON STOCK OFFERED HEREBY ARE NOT
SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS
ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
No person has been authorized to give any information or to
make any representation not contained in this Proxy Statement/Prospectus,
and, if given or made, any such information or representation should not
be relied upon as having been authorized by Zions or Rio Salado. This
Proxy Statement/Prospectus does not constitute an offer or solicitation by
any person in any state in which such offer or solicitation is not
authorized by the laws thereof or in which the person making such offer or
solicitation is not qualified to make the same. Neither the delivery of
this Proxy Statement/Prospectus at any time nor the distribution of Zions
Common Stock hereunder shall imply that the information contained herein
is correct as of any time subsequent to its date.
The date of this Proxy Statement/Prospectus is February __,
1994.
<PAGE>
AVAILABLE INFORMATION
Zions has filed with the Securities and Exchange Commission
(the "SEC") under the Securities Act of 1933 (the "Securities Act") a
Registration Statement on Form S-4 (the "Registration Statement") covering
the shares of Zions Common Stock issuable in the Reorganization. As
permitted by the rules and regulations of the SEC, this Proxy
Statement/Prospectus omits certain information, exhibits and undertakings
contained in the Registration Statement. The statements contained in this
Proxy Statement/Prospectus as to the contents of any contract or other
document filed as an exhibit to the Registration Statement are of
necessity brief descriptions and are not necessarily complete. Each such
statement is qualified in its entirety by reference to the copy of such
contract or document filed as an exhibit to the Registration Statement.
The Registration Statement and the exhibits thereto can be inspected at
the public reference facilities of the SEC at Room 1024, 450 Fifth Street,
N.W., Washington, D.C., and copies of such material can be obtained at
prescribed rates by mail addressed to the SEC, Public Reference Section,
Washington, D.C. 20549.
Zions is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and in accordance
therewith files reports, proxy statements and other information with the
SEC. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C.; Suite 700, 410
17th Street, Denver, Colorado; and Suite 505, 350 S. Main Street, Salt
Lake City, Utah. Copies of such material can also be obtained at
prescribed rates by mail addressed to the SEC, Public Reference Section,
Washington, D.C. 20549. Zions Common Stock is quoted on the NASDAQ
National Market System, and such reports, proxy statements and other Zions
information can also be inspected at the offices of NASDAQ Operations,
1735 K Street, N.W., Washington, D.C. Rio Salado is not subject to the
Exchange Act and therefore makes no filings with a governmental agency
pursuant to that Act.
This Proxy Statement/Prospectus incorporates by reference
certain documents relating to Zions which are not presented herein or
delivered herewith. See "Information Concerning Zions -- Zions Documents
Incorporated by Reference." Copies of such documents are available upon
request and without charge to any person to whom this Proxy
Statement/Prospectus has been delivered. Requests for Zions documents
should be directed to Zions Bancorporation, 1380 Kennecott Building, Salt
Lake City, Utah 84133, Attention: Gary L. Anderson, Corporate Secretary
(telephone: 801-524-4787). In order to ensure timely delivery of the
documents, any request should be made not later than __________, 1994.
<PAGE>
RIO SALADO BANCORP, INC.
and
ZIONS BANCORPORATION
_______________
PROXY STATEMENT/PROSPECTUS
_______________
TABLE OF CONTENTS
Page
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Record Date; Voting Rights . . . . . . . . . . . . . . . . . 11
Purpose of the Special Meeting . . . . . . . . . . . . . . . 11
Voting and Revocation of Proxies . . . . . . . . . . . . . . 12
Solicitation of Proxies . . . . . . . . . . . . . . . . . . 12
PLAN OF REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . 13
The Reorganization . . . . . . . . . . . . . . . . . . . . . 13
Background of and Reasons for the Reorganization . . . . . . 13
Voting Agreements . . . . . . . . . . . . . . . . . . . . . 15
Required Vote; Management Recommendation . . . . . . . . . . 16
Opinion of Financial Advisor . . . . . . . . . . . . . . . . 16
Conversion of Rio Salado Shares . . . . . . . . . . . . . . 21
Tax Consequences . . . . . . . . . . . . . . . . . . . . . . 22
Interests of Certain Persons in the Transaction . . . . . . 23
Stock Options . . . . . . . . . . . . . . . . . . . . . . . 25
Inconsistent Activities . . . . . . . . . . . . . . . . . . . 25
Conduct of Business Pending the Reorganization . . . . . . . 26
Conditions to the Reorganization . . . . . . . . . . . . . . 26
Representations and Warranties . . . . . . . . . . . . . . . 28
Amendment and Waiver . . . . . . . . . . . . . . . . . . . . 29
Authorized Termination and Damages for Breach . . . . . . . 29
Dissenters' Rights of Rio Salado Shareholders . . . . . . . 29
Restrictions on Resales by Rio Salado Affiliates . . . . . . 31
Effect on Outstanding Stock Options . . . . . . . . . . . . 31
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Government Approvals . . . . . . . . . . . . . . . . . . . . 32
Effective Date of the Reorganization . . . . . . . . . . . . 32
PRO FORMA CONBINED FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . 32
Information Concerning the Pro Forma Combined
Financial Data . . . . . . . . . . . . . . . . . . . . . . . 32
Pro Forma Combined Condensed Statement of Condition . . . . . 33
Pro Forma Combined Condensed Statements of Income . . . . . . 36
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements . . . . . . . . . . . . . . . . . . . . 39
INFORMATION CONCERNING ZIONS . . . . . . . . . . . . . . . . . . . . . . 41
Recent Developments . . . . . . . . . . . . . . . . . . . . 41
SUPERVISION AND REGULATION . . . . . . . . . . . . . . . . . . . . . . . 42
Zions . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Regulatory Capital Requirements . . . . . . . . . . . . . . 43
Other Regulations . . . . . . . . . . . . . . . . . . . . . 47
Deposit Insurance Assessments . . . . . . . . . . . . . . . 49
Interstate Banking . . . . . . . . . . . . . . . . . . . . . 50
Zions Arizona . . . . . . . . . . . . . . . . . . . . . . . . 50
MONETARY POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ZIONS BANCORPORATION SELECTED FINANCIAL DATA . . . . . . . . . . . . . . 51
STOCK PRICES AND DIVIDENDS ON ZIONS COMMON STOCK . . . . . . . . . . . . 55
ZIONS DOCUMENTS INCORPORATED BY REFERENCE . . . . . . . . . . . . . . . 57
INFORMATION CONCERNING RIO SALADO . . . . . . . . . . . . . . . . . . . 58
RIO SALADO BANCORP, INC. SELECTED FINANCIAL DATA . . . . . . . . . . . . 58
STOCKHOLDINGS OF DIRECTORS, OFFICERS AND CERTAIN OTHERS . . . . . . . . 61
RIO SALADO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . 63
Unaudited Interim Consolidated Financial Statements:
Consolidated Balance Sheets at September 30, 1993 and 1992 63
Consolidated Statements of Operations for the Nine
Months Ended September 30, 1993 and 1992 . . . . . . 64
Consolidated Statements of Changes in Stockholders'
Equity for the Nine Months Ended September 30,
1993 and 1992 . . . . . . . . . . . . . . . . . . . . 65
Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1993 and 1992 . . . . . . . 66
Notes to Interim Consolidated Financial Statements . . 67
Consolidated Financial Statements:
Independent Auditor's Report . . . . . . . . . . . . . . 70
Consolidated Balance Sheets at December 31, 1992 and
1991 . . . . . . . . . . . . . . . . . . . . . . . . . 71
Consolidated Statements of Operations for the Years
Ended December 31, 1992, 1991, and 1990 . . . . . . . 72
Consolidated Statements for Stockholder's Equity for
the Years Ended December 31, 1992, 1991, and 1990 . . 74
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1992, 1991, and 1990 . . . . 75
Notes to Consolidated Financial Statements . . . . . . . 77
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1993; RESULTS OF OPERATIONS AND FINANCIAL
CONDITION . . . . . . . . . . . . . . . . . . . . . . . . . .100
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THREE-YEAR PERIOD ENDED
DECEMBER 31, 1992 . . . . . . . . . . . . . . . . . . . . . 101
CERTAIN REGULATORY DEVELOPMENTS . . . . . . . . . . . . . . . . . . . . 104
STATISTICAL INFORMATION AND ANALYSIS . . . . . . . . . . . . . . . . . . 104
ZIONS BANCORPORATION SUPPLEMENTAL CONSOLIDATED
FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . .
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets at December 31, 1992 and 1991. . . . . .
Consolidated Statements of Income for the Years
Ended December 31, 1992, 1991, and 1990. . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for
the Years Ended December 31, 1992, 1991, and 1990. . . . . . . . .
Consolidated Statements of Retained Earnings for
the Years Ended December 31, 1992, 1991, and 1990. . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . .
COMPARISON OF ZIONS COMMON STOCK AND RIO SALADO COMMON STOCK . . . . . . 115
LEGAL OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
APPENDICES:
A. Statutory Provisions Concerning Dissenters' Rights of Rio Salado
Shareholders
B. Opinion of KPMG Peat Marwick as to Tax Matters
C. Fairness Opinion of Alex Sheshunoff & Co. Investment Banking
<PAGE>
SUMMARY
The following is a brief summary of certain information
which may also be contained elsewhere in this Proxy
Statement/Prospectus. This summary is provided for
convenience and should not be considered complete. It is
qualified in its entirety by the more detailed information
contained in this Proxy Statement/Prospectus and in the
Appendices hereto.
The Parties
Zions Bancorporation ("Zions") is a bank holding company
registered under the Bank Holding Company Act of 1956, as
amended, and organized under the laws of Utah, engaged
primarily in the commercial banking business through its
banking subsidiaries. Zions' principal executive offices are
at 1380 Kennecott Building, Salt Lake City, Utah 84133
(telephone: 801/524-4787). Zions is the second largest bank
holding company headquartered in Utah. Zions First National
Bank, Salt Lake City, Utah ("Zions Bank"), founded in 1873, is
a wholly-owned (except for directors' qualifying shares)
subsidiary of Zions and as of October 31, 1993 had 83 offices
located throughout the state of Utah, plus one foreign office,
for a total of 84 banking offices, including its Head Office.
Zions Bank is the second largest commercial banking
organization headquartered in the state of Utah. Zions also
owns Nevada State Bank, Las Vegas, Nevada, and Zions First
National Bank of Arizona, Mesa, Arizona ("Zions Arizona").
Nevada State Bank, with 19 offices in Nevada, is the sixth
largest bank in Nevada. Zions Arizona currently has six
offices in the metropolitan Phoenix area, three offices in
Tucson, and one office in Flagstaff, Arizona (including the
offices of the former National Bank of Arizona, which merged
into Zions Arizona on January 14, 1994). At September 30,
1993 Zions had total consolidated assets of $4.06 billion,
deposits of $2.89 billion, and shareholders' equity of $272
million. On August 11, 1993, Zions Bank acquired Discount
Corporation of New York ("Discount"). Discount is a primary
government securities dealer headquartered in New York City
with assets of approximately $1.0 billion at August 11, 1993.
Discount is being operated as a division of Zions Bank. On
October 29, 1993, Zions and Wasatch Bancorp ("Bancorp")
consummated their agreement and plan of reorganization whereby
Zions acquired Bancorp and whereby Wasatch Bank, a wholly-
owned subsidiary of Bancorp, merged with and into Zions Bank,
with Zions Bank being the survivor. Wasatch Bank was a Utah
chartered commercial bank with assets of approximately $70
million at September 30, 1993, doing business through five
branch offices located in Utah County, Utah. On January 14,
1994, Zions and National Bancorp of Arizona Inc. ("NBA")
consummated their agreement and plan of reorganization whereby
NBA merged with and into Zions in a two-step merger, with
Zions being the survivor, and whereby National Bank of
Arizona, a wholly-owned subsidiary of NBA, merged with and
into Zions Arizona, with Zions Arizona being the survivor.
National Bank of Arizona was organized under the laws of the
United States of America with assets of approximately $___
million as of December 31, 1993, doing business through three
offices in Tucson, two offices in Phoenix, one office in
Scottsdale, and one office in Flagstaff, Arizona. Upon
consummation of the merger between National Bank of Arizona
and Zions Arizona, Zions Arizona changed its name to National
Bank of Arizona and changed its main office location from Mesa
to Tucson. For ease of reference in this Proxy
Statement/Prospectus and to lessen any possible confusion,
Zions Arizona will continue to be referred to in this document
as Zions Arizona rather than as National Bank of Arizona. See
"Information Concerning Zions."
ZAZMAC, Inc. ("ZAZMAC") is a newly-organized Utah
corporation. ZAZMAC is a wholly-owned subsidiary of Zions.
For a very brief period during the course of the
Reorganization, ZAZMAC will own all of the outstanding stock
of Rio Salado.
Zions Arizona is a commercial bank organized under the laws
of the United States of America, with its main office located
at 5555 East Main, Mesa, Arizona 85205 (telephone 602/832-
2151). In addition to providing financial services for
businesses, including commercial loans, leasing, cash
management, payroll processing, lockbox, and customized draft
processing, Zions Arizona also makes mortgage loans within its
service area and provides a wide range of personal banking
services for individual customers, including bankcard,
installment loans, home equity credit line loans, checking and
savings accounts, time certificates, and safe deposit
facilities. As of September 30, 1993, Zions Arizona had total
assets of $79,628,000, deposits of $68,458,000, and loans of
$35,682,000. With the merger of National Bank of Arizona into
Zions Arizona on January 14, 1994, Zions Arizona added seven
branches with assets of approximately $___ million as of
December 31, 1993. See the description of this acquisition
under "The Parties--Zions Bancorporation," above.
Rio Salado Bancorp, Inc. ("Rio Salado") is a bank holding
company organized under the laws of the State of Arizona and
registered under the Bank Holding Company Act of 1956, as
amended. Rio Salado's principal executive offices are located
at 1400 East Southern Avenue, Tempe, Arizona 85282 and its
telephone number is 602/345-8800. Rio Salado is primarily
engaged in the commercial banking business through its wholly-
owned subsidiary, Rio Salado Bank. As of September 30, 1993,
Rio Salado had total assets of $107,494,000 (including loans,
net of allowances, of $43,317,000), deposits of $93,640,000,
and shareholders' equity of $5,070,000.
Rio Salado Bank (the "Bank") is the sole subsidiary of Rio
Salado and is an Arizona corporation licensed to conduct
commercial banking business in the State of Arizona. The Bank
currently operates four branches, including two in Tempe and
two in Mesa, Arizona. The Bank's main office is located at
1400 East Southern Avenue, Tempe, Arizona 85282. Its
telephone number is 602/345-8800. The Bank was founded in
1982. In 1984, pursuant to a plan of reorganization, the Bank
became a wholly-owned subsidiary of Rio Salado and shares of
the Bank were converted into shares of Rio Salado. The Bank
provides a full range of commercial banking services,
including consumer and commercial loans, residential real
estate loans, and construction and permanent mortgage loans.
The Bank offers a variety of deposit accounts, including non-
interest bearing demand accounts, interest bearing checking
and savings accounts, and certificates of deposit.
The Special Meeting
The Special Meeting of Shareholders of Rio Salado (the
"Special Meeting") will be held at 10 a.m. local time, on
March __, 1994 at Rio Salado's principal executive offices,
1400 East Southern Avenue, Tempe, Arizona. Only holders of
record of Common Stock, no par value, of Rio Salado ("Rio
Salado Common Stock") at the close of business on February 21,
1994 will be entitled to vote at the Special Meeting. At that
date, 662,849 shares of Rio Salado Common Stock were
outstanding, each share being entitled to one vote. See
"Introduction."
Proposed Reorganization
At the Special Meeting, the shareholders of Rio Salado will
be asked to consider and approve an Agreement and Plan of
Reorganization among Zions, Zions Arizona, Rio Salado, and the
Bank, a Plan of Merger between Rio Salado and ZAZMAC, and an
Agreement to Merge between Rio Salado Bank and Zions Arizona
(collectively, the "Plan of Reorganization"). The Plan of
Reorganization provides for the merger of Rio Salado into
ZAZMAC, whereby ZAZMAC will be the surviving corporation
(immediately following which merger ZAZMAC will be merged into
Zions), and for the subsequent merger of Rio Salado Bank into
Zions Arizona (the "Bank Merger"), whereby Zions Arizona will
be the surviving bank. See "Plan of Reorganization." As a
result of the Reorganization, each outstanding share of Rio
Salado Common Stock will be cancelled and will be converted
into the right to receive shares of Common Stock, no par value
per share, of Zions ("Zions Common Stock"), with cash to be
paid in lieu of any fractional shares. Upon consummation of
the Reorganization, shareholders of Rio Salado Common Stock
will be entitled to receive, in exchange for each share of Rio
Salado Common Stock that number of shares of Zions Common
Stock calculated by dividing the purchase price of $12,500,000
by the average closing price (as defined) of Zions Common
Stock, and by further dividing the number so reached by the
total number of shares of Rio Salado Common Stock issued and
outstanding on the Effective Date of the Reorganization. At
February __, 1994, the closing price of Zions Common Stock
quoted on NASDAQ was $_____ per share and there were issued
and outstanding 662,849 shares of Rio Salado Common Stock. If
the Reorganization had been consummated on that date and the
Average Closing Price had been $___, each shareholder of Rio
Salado Common Stock would have received ______ shares of Zions
Common Stock for each share of Rio Salado Common Stock. This
exchange would equate to a value of $______ for each share of
Rio Salado Common stock if the exchange were consummated as of
such date. The actual ratio for exchanging Rio Salado Common
Stock for Zions Common Stock will depend on the Average
Closing Price on the Effective Date.
Certain Definitions
In connection with the description of the Reorganization in
this Proxy Statement/Prospectus, shareholders of Rio Salado
should be aware of the following terms:
"Average Closing Price" means the average (rounded to the
nearest penny) of each Daily Sales Price of Zions Common Stock
for the twenty consecutive trading days ending on and
including the fifth trading day preceding the Effective Date.
"Daily Sales Price" means for any trading day, the last
reported sale price or, if no such reported sale takes place,
the mean (unrounded) of the closing bid and asked prices of
Zions Common Stock in the over-the-counter market as such
prices are reported by the automated quotation system of the
National Association of Securities Dealers, Inc. or, in the
absence thereof, by such other source upon which Zions and Rio
Salado shall mutually agree.
"Effective Date" means the date which is the latest of (a)
the date following the day upon which the Rio Salado
shareholders approve, ratify, and confirm the transactions
contemplated by the Reorganization Agreement; (b) the first to
occur of (i) the date thirty days following the date on which
the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") authorizes consummation of the merger
of Rio Salado into ZAZMAC; or (ii) the date ten days following
the date on which the Federal Reserve Board indicates its
waiver of jurisdiction over the merger of Rio Salado into
ZAZMAC; (c) thirty days after the date on which the
Comptroller of the Currency (the "Comptroller") approves the
merger of the Bank into Zions Arizona; (d) ten days following
the date upon which the Superintendent of Banks of Arizona
(the "Superintendent") approves the Reorganization; (e) the
date upon which any other material order, approval, or consent
of a federal or state regulator of financial institutions or
financial institution holding companies authorizing
consummation of the transactions contemplated by the Plan of
Reorganization is obtained, or any waiting period mandated by
such order, approval, or consent has run; (f) ten days after
any stay of the approvals of the Federal Reserve Board, the
Comptroller, or the Superintendent of the transactions
contemplated by the Plan of Reorganization, or any injunction
against closing of such transactions is lifted, discharged, or
dismissed; or (g) such other date as shall be mutually agreed
upon by Zions and Rio Salado.
"Purchase Price" means $12,500,000. The Purchase Price will
be paid in shares of Zions Common Stock, with cash in lieu of
fractional shares.
Reasons for the Reorganization
Management and a majority of the directors of Rio Salado
believe that the merger of Rio Salado into ZAZMAC and the
exchange of Rio Salado Common Stock for Zions Common Stock is
in the best interests of shareholders, employees, customers
and the community served by the Bank. In order to meet the
demands of the banking market in eastern Maricopa County,
Arizona, the Bank's principal market area, and to serve
adequately the Bank's present customers, Rio Salado and the
Bank would be required to raise in the near future
substantially more capital than either presently has. Raising
the capital required would, in the opinion of management, be
costly and would result in dilution of earnings of Rio Salado,
to the detriment of Rio Salado's existing shareholders. In
addition, to meet competition from other larger banks, the
Bank would be required to expand the services and credit
facilities beyond those presently offered to its customers.
Rio Salado's management foresees substantial new competition
among banks in Maricopa County, Arizona, and throughout
Arizona, generally, particularly from well-capitalized, large
out-of-state-owned banks, and believes that the proposed
merger with Zions offers Rio Salado's shareholders the best
possible method of realizing the value of their investment in
Rio Salado, preserving employees' jobs within the Bank, and
continuing to offer to the Bank's customers and the community
the deposit, lending, financing, and other banking services
they will require in the future. The contemplated merger is
expected to increase the Bank's lending limit, which will
enable it to attract customers which can now be served only by
larger institutions with greater lending limits. See "Plan of
Reorganization--Background of and Reasons for the
Reorganization" for a description of the factors considered by
Rio Salado's board of directors in determining to recommend
the reorganization to shareholders for their approval. A
majority of Rio Salado's Board of Directors believes that the
merger with Zions will realize substantial value for Rio
Salado's shareholders and allows them the option of realizing
a significant return on their original investment and
continuing to participate in the development of banking in
Arizona and in the West by holding the Zions Common Stock they
will receive in the Reorganization.
For Zions, the Reorganization will provide the opportunity
to continue to develop its franchise in the Arizona market by
expanding its operations in the greater Phoenix market by
broadening its geographical base in that market, and by
expanding the banking services it is able to provide. The
combination of the different skills, resources and services
offered by Rio Salado Bank and Zions Arizona, together with
the additional skills and resources available in the broader
Zions organization, will make the resulting bank better able
to effectively compete in its markets with other full-service
financial institutions. See "Plan of Reorganization-
-Background of and Reasons for the Reorganization--Zions."
Vote Required for Approval
Approval of the Plan of Reorganization requires the
affirmative vote of the holders of at least two-thirds of the
outstanding shares of Rio Salado Common Stock voting in person
or by proxy. A failure to vote, an abstention, or a failure
by a broker to vote shares held in street name will have the
same legal effect as a vote against the approval of the Plan
of Reorganization. See "Plan of Reorganization--Required
Vote; Management Recommendation."
As of December 31, 1993, the directors and executive
officers of Rio Salado beneficially owned an aggregate of 58%
of the outstanding Rio Salado Common Stock. All but one of
the directors of Rio Salado have entered into agreements with
Zions under which they have agreed, in their capacity as
shareholders, to vote their shares in favor of the
Reorganization. These agreements cover an aggregate of 51% of
the outstanding Rio Salado Common Stock (excluding any shares
subject to unexercised options held by Rio Salado employees).
See "Plan of Reorganization--Voting Agreements."
Board of Directors Recommendation
A majority of the Board of Directors of Rio Salado (with two
directors dissenting) believes that the Reorganization is in
the best interests of the shareholders, employees, and
customers of Rio Salado and recommends that the shareholders
of Rio Salado vote "FOR" approval of the Plan of
Reorganization. Of those directors who voted to approve the
Plan of Reorganization and submit it to Rio Salado's
shareholders for consideration and action, one director voted
to approve subject to the understanding that he was neither
committed to vote for the Plan of Reorganization at the
Special Meeting nor to execute any agreement to vote his
shares in favor of the Plan of Reorganization.
Of the two directors who voted against the resolution to
approve the Plan of Reorganization and to submit it to Rio
Salado's shareholders for consideration and action, each
explained that he was not opposed to approval of the Plan of
Reorganization or submitting it to shareholders, but that he
did not agree with the recital in the Board of Director's
approving resolution which stated that the proposed Plan of
Reorganization was in the best interests of Rio Salado's
employees and the community.
SHAREHOLDERS OF RIO SALADO ARE REQUESTED TO COMPLETE, DATE,
AND SIGN THE ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
Opinion of Financial Advisor
In order to evaluate the merger consideration offered to Rio
Salado shareholders by Zions, Rio Salado retained the
investment banking firm of Alex Sheshunoff & Co. Investment
Banking ("Sheshunoff") to render an opinion on the fairness of
Zions' offer from a financial point of view. Sheshunoff has
rendered an opinion to Rio Salado dated November 15, 1993 that
the terms of the Reorganization are fair, from a financial
point of view, to Rio Salado and its shareholders. The
opinion is attached as Appendix C to this Proxy
Statement/Prospectus and should be read in its entirety for
information as to the matters considered and assumptions made
in rendering such opinion. See "Plan of Reorganization--
Opinion of Financial Advisor."
Interests of Certain Persons in the Transaction
The Plan of Reorganization by means of an employment
agreement provides that, following the Reorganization, Mr.
Elden G. Barmore, currently president and chief executive
officer of Rio Salado and the Bank, will be appointed an
executive vice president of Zions Arizona, responsible for
East Valley Regional operations. Mr. Barmore will enter into
the five-year employment agreement with Zions Arizona on the
Effective Date. See "Plan of Reorganization--Interests of
Certain Persons in the Transaction."
Tax Consequences
The Reorganization will qualify as nontaxable
reorganizations under Section 368(a) of the Internal Revenue
Code of 1986. No gain or loss for federal income tax purposes
will be recognized by shareholders of Rio Salado on the
exchange of their shares for Zions Common Stock in the
Reorganization, except with respect to cash received in lieu
of fractional shares and cash paid to shareholders who elect
to excercise and perfect their dissenters' rights under
Arizona law. For a more complete description of the federal
income tax consequences of the Reorganization, see "Plan of
Reorganization--Tax Consequences."
Dissenters' Rights
Record holders of Rio Salado Common Stock who object to the
Reorganization and comply with the prescribed statutory
procedures are entitled to have the fair value of their shares
determined in accordance with the Arizona General Corporation
Law (Arizona Revised Statutes Sec. 10-080 et seq.) and paid to
them in cash in lieu of the shares of Zions Common Stock they
would otherwise be entitled to receive in the Reorganization.
A copy of the pertinent statutory provisions is attached to
this Proxy Statement/Prospectus as Appendix A. Failure to
follow such provisions precisely may result in a loss of
dissenters' rights. Under the Plan of Reorganization, Zions
is not obligated to consummate the Plan of Reorganization if
the holders of more than 5% of Rio Salado Common Stock
exercise and perfect their dissenters' rights. See "Plan of
Reorganization--Dissenters' Rights of Rio Salado
Shareholders."
"Anti-Takeover" Provisions
The Articles of Incorporation and Bylaws of Zions contain
provisions which may be considered to be anti-takeover in
nature, including staggered terms of office for directors,
absence of cumulative voting and special shareholder vote
requirements for certain types of extraordinary corporate
transactions. See "Comparison of Zions Common Stock and Rio
Salado Common Stock."
Regulatory Approvals
A condition to the Reorganization is approval of the
Reorganization by the Board of Governors of the Federal
Reserve System, the Office of the Comptroller of the Currency,
and the Arizona State Banking Department. Applications for
these approvals have been filed and are expected to be
approved, although no assurances may be given as to whether or
when such approvals may be received.
Conditions; Amendment; Termination
In addition to shareholder and regulatory approval,
consummation of the Reorganization is contingent upon the
receipt of a tax opinion and the satisfaction of a number of
other conditions. See "Plan of Reorganization--Conditions to
the Reorganization." Notwithstanding prior shareholder
approval, the Plan of Reorganization may be amended at any
time prior to the Effective Date of the Reorganization in any
respect that would not prejudice the economic interests of the
Rio Salado shareholders.
The Plan of Reorganization may be terminated and abandoned
at any time prior to the Effective Date, notwithstanding
approval of the shareholders, as follows: (i) by mutual
consent of Zions and Rio Salado; (ii) unilaterally, by either
party if any of the representations and warranties of the
other party was materially incorrect when made; (iii) by
either party if the Reorganization has become inadvisable or
impracticable by reason of federal or state litigation to
restrain or invalidate the Reorganization; or (iv) by either
party on or after September 30, 1994, if the Effective Date
has not occurred on or before that date.
Effective Date of the Reorganization
It is presently anticipated that if the Plan of
Reorganization is approved by the shareholders of Rio Salado,
the Reorganization will become effective in the second quarter
of 1994. However, there can be no assurance that all condi-
tions necessary to the consummation of the Reorganization will
be satisfied or, if satisfied, that they will be satisfied in
time to permit the Reorganization to become effective at the
anticipated time. See "Plan of Reorganization--Effective Date
of the Reorganization."
Exchange of Certificates
Instructions on how to effect the exchange of Rio Salado
Common Stock certificates for Zions Common Stock certificates
will be sent, as promptly as practicable after the
Reorganization becomes effective, to each shareholder of
record of Rio Salado immediately prior to such Merger.
Shareholders should not send in stock certificates until they
receive written instructions to do so.
Pre-Announcement Prices
Zions has agreed to purchase all of the outstanding shares
of Rio Salado Common Stock for the Purchase Price of
$12,500,000 by delivering to Rio Salado shareholders shares of
Zions Common Stock with a value equal to that amount. The
closing sale price for Zions Common Stock on the NASDAQ
National Market System on November 17, 1993, the last trading
day prior to the first public announcement of the
Reorganization, was $38.75. An equivalent per share price for
Rio Salado Common Stock computed by reference to the method
described above under "Proposed Reorganization" would result
in an exchange ratio of .49 shares of Zions Common Stock for
each share of Rio Salado Common Stock, assuming that the
Average Closing Price was $38.75. On February __, 1994, the
closing sale price for Zions Common Stock was $_____. If the
Average Closing Price equated to this price, the equivalent
per share price (as calculated above) for Rio Salado Common
Stock, assuming consummation of the Plan of Reorganization,
would have been $_____.
Rio Salado's Common Stock is not listed with a national
securities exchange or quoted on any automated quotation
system. The common stock occasionally trades through private
negotiated transactions between individuals and in brokerage
transactions in the over-the-counter market. As a result, no
established public trading market for Rio Salado's Common
Stock presently exists and the private market that has existed
is thin and not necessarily indicative of the value of Rio
Salado Common Stock. For the year ended December 31, 1993,
the high and low bid for Rio Salado Common Stock ranged from
$6.25 to $8.00 per share. There have been no trades in Rio
Salado Common Stock since the Plan of Reorganization was
publicly announced. See "Stock Prices and Dividends on Rio
Salado Common Stock," below.
Rio Salado's Common Stock was, prior to October 26, 1993,
subject to certain restrictions on transfer, which Rio Salado
has never elected to enforce. By resolutions and actions
taken by the Board of Directors, such restrictions were
waived.
<PAGE>
Selected Financial Information
The following table sets forth certain historical financial
information for Zions (restated to give effect to the mergers
of NBA, effective January 14, 1994, for all periods
presented, and Wasatch Bancorp and Subsidiary, effective
October 19, 1993, for the nine months ended September 30,
1993, only) and Rio Salado. With respect to pro forma
combined financial information for Zions giving effect to
the Reorganization using the purchase method of accounting,
see "Information Concerning the Pro Forma Combined Financial
Data." This information is based on the historical financial
statements of Zions appearing elsewhere herein and
incorporated herein by reference and the Rio Salado financial
statements appearing elsewhere herein, and should be read in
conjunction with such statements and information and the
related notes.
<TABLE>
<CAPTION>
Nine Months
Ended September 30 Year Ended December 31
1993 1992 1992 1991 1990 1989 1988
(unaudited) (In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Zions Earnings
Net interest income..... $ 130,024 $ 114,255 $ 157,278 $ 139,865 $ 128,114 $ 121,726 $109,581
Provision for loan
losses................ 2,255 9,319 10,929 25,561 20,084 30,436 53,746
Net income (loss)....... 42,778 31,744 47,209 30,449 27,765 18,803 (16,850)
Per Share
Net income (loss)....... $ 3.00 $ 2.31 $ 3.42 $ 2.23 $ 2.07 $ 1.41 $ (1.52)
Dividends............... .70 .54 .75 .72 .72 .72 .72
Statement of Condition at
Period End
Assets.................. $4,579,974 $3,879,310 $4,107,923 $3,883,938 $3,720,136 $3,116,700 $3,042,965
Deposits................ 3,370,553 2,976,492 3,075,109 2,877,859 2,684,826 2,454,754 2,379,827
Long-term debt.......... 60,342 75,756 99,223 81,134 92,794 95,740 98,485
Shareholders' equity.... 300,302 246,916 260,070 220,754 196,706 176,725 164,762
Rio Salado
Earnings
Net interest income..... $ 3,410 $ 2,833 $ 3,842 $ 2,988 $ 2,509 $ 2,792 $ 2,594
Provision for loan
losses................ 400 365 590 525 58 725 522
Net income (loss)....... 745 409 586 321 (53) (63) 100
Per Share
Net income (loss)....... $ 1.16 $ .64 $ .91 $ .50 $ (.08) $ (.10) $ .16
Dividends............... .00 .00 .00 .00 .00 .00 .00
Statement of Condition at
Period End
Assets.................. $ 107,494 $ 93,140 $ 103,672 $ 71,281 $ 61,410 $ 55,400 $ 51,464
Deposits................ 93,640 82,296 87,806 62,362 54,478 49,417 45,673
Long-term debt.......... 2,500 4,550 5,500 1,575 1,635 1,579 1,450
Shareholders' equity.... 5,070 4,135 4,313 3,727 3,405 3,450 3,522
</TABLE>
<PAGE>
Comparative Per Share Data
The following table sets forth for the periods indicated historical
earnings, book values and dividends per share for Zions and Rio Salado
Common Stock. The following data are based on the historical financial
statements of Zions appearing elsewhere herein and incorporated herein
by reference and of Rio Salado appearing elsewhere herein and should be
read in conjunction with such financial statements and such information
and the related notes to each.
<TABLE>
<CAPTION>
Nine Months
Ended September 30 Year Ended December 31
1993 1992 1992 1991 1990 1989 1988
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Net Income (Loss) Per Common Share
Zions............................. $ 3.00 $ 2.31 $ 3.42 $ 2.23 $ 2.07 $1.41 $ (1.52)
Rio Salado........................ 1.16 .64 .91 .50 (.08) (.10) .16
Book Value Per Common Share
Zions............................. $21.15 $18.01 $18.95 $16.23 $14.63 $13.23 $ 12.53
Rio Salado........................ 7.88 6.45 6.72 5.81 5.31 5.40 5.50
Cash Dividends Declared Per Common
Share
Zions(1)...................... $ .70 $ .54 $ .75 $ .72 $ .72 $ .72 $ .72
Rio Salado(2)................. .00 .00 .00 .00 .00 .00 .00
</TABLE>
(1) While Zions is not obligated to pay cash dividends, the Board
of Directors presently intends to continue the policy of
paying quarterly cash dividends. Future dividends will
depend, in part, upon the earnings and financial condition
of Zions.
(2) The only dividends paid by Rio Salado to date have been stock
dividends. Net income (loss) and book value per common share for
the nine months ended September 30, 1993 and 1992 and for the
years ended December 31, 1992, 1991, 1990, 1989, and 1988 have
been adjusted to reflect the stock dividend.
<PAGE>
RIO SALADO BANCORP, INC.
and
ZIONS BANCORPORATION
____________________
PROXY STATEMENT/PROSPECTUS for
Special Meeting of Shareholders
to be held on
March __, 1994
INTRODUCTION
This Proxy Statement/Prospectus is furnished in connection with
the solicitation by the Board of Directors of Rio Salado Bancorp, Inc.
("Rio Salado") of proxies to be voted at the Special Meeting of
Shareholders of Rio Salado to be held on March __, 1994 and at any
adjournment or adjournments thereof. The Special Meeting will be held
at 10 a.m., local time, at 1400 East Southern Avenue, Tempe, Arizona.
The approximate date on which this Proxy Statement/Prospectus will first
be mailed to the shareholders of Rio Salado is February __, 1994.
Record Date; Voting Rights
The Board of Directors of Rio Salado has fixed the close of
business on January 21, 1994 as the record date for determining the
shareholders of Rio Salado entitled to notice of and to vote at the
Special Meeting. At that date, 662,849 shares of Common Stock, no par
value, of Rio Salado ("Rio Salado Common Stock") were outstanding, held
by approximately 307 shareholders of record. Each such share of Rio
Salado Common Stock entitles its holder of record at the close of
business on the record date to one vote on each matter properly
submitted to the shareholders for action at the Special Meeting. Rio
Salado has no other outstanding class of capital stock.
Purpose of the Special Meeting
At the Special Meeting, the shareholders of Rio Salado will be
asked to consider and vote upon a proposal to approve an Agreement and
Plan of Reorganization dated as of November 18, 1993 among Rio Salado,
Rio Salado Bank (the "Bank"), Zions Bancorporation ("Zions"), and Zions
First National Bank of Arizona ("Zions Arizona"), a related Plan of
Merger between Rio Salado and ZAZMAC, Inc. ("ZAZMAC"), a newly-organized
wholly-owned subsidiary of Zions, and an Agreement to Merge between the
Bank, Rio Salado's wholly-owned subsidiary, and Zions Arizona, Zions'
wholly-owned (except for directors' qualifying shares) subsidiary
(collectively, the "Plan of Reorganization"). As more fully described
below under "Plan of Reorganization," the Plan of Reorganization
provides for the merger of Rio Salado into ZAZMAC, the merger of ZAZMAC
into Zions, and the merger of the Bank into Zions Arizona (hereinafter,
the two mergers and the intervening merger of ZAZMAC into Zions will be
referred to collectively as the "Reorganization"). In the
Reorganization, all outstanding shares of Rio Salado Common Stock will
be cancelled and each outstanding share of Rio Salado Common Stock
(other than shares subject to dissenters' rights) will be converted into
the right to receive shares of Zions Common Stock, in accordance with
the formula described below, with cash to be paid in lieu of any
fractional shares. Upon the Effective Date, each holder of Rio Salado
Common Stock will be entitled to receive, in exchange for each share of
Rio Salado Common Stock held by him, that number of shares of Zions
Common Stock calculated by dividing the Purchase Price of $12,500,000 by
the Average Closing Price, and by further dividing the number so reached
by the total number of shares of Rio Salado Common Stock issued and
outstanding on the Effective Date of the Reorganization. At February
__, 1994, the closing price of Zions Common Stock quoted on NASDAQ was
$____ per share and _____ shares of Rio Salado Common Stock were issued
and outstanding. If the Reorganization had been consummated on that
date, holders of Rio Salado Common Stock would have received _____
shares of Zions Common Stock for each share of Rio Salado Common Stock,
assuming that the Average Closing Price was $___. This exchange would
equate to a value of $_____ for each share of Rio Salado Common Stock if
the exchange were consummated as of such date.
Rio Salado has received an opinion of the investment banking firm
Alex Sheshunoff & Co. Investment Banking ("Sheshunoff") that the terms
of the Reorganization are fair to the shareholders of Rio Salado from a
financial point of view. See "Plan of Reorganization--Opinion of
Financial Advisor."
A MAJORITY OF THE BOARD OF DIRECTORS OF RIO SALADO BELIEVES THAT
THE REORGANIZATION IS IN THE BEST INTERESTS OF THE SHAREHOLDERS OF RIO
SALADO AND RECOMMENDS THAT RIO SALADO SHAREHOLDERS VOTE TO APPROVE THE
PLAN OF REORGANIZATION.
Voting and Revocation of Proxies
All properly executed proxies not theretofore revoked will be
voted at the Special Meeting or any adjournments thereof in accordance
with the instructions thereon. Rio Salado proxies containing no voting
instructions will be voted in favor of approval of the Plan of
Reorganization. As to any other matter brought before the Special
Meeting and submitted to a shareholder vote, proxies will be voted in
accordance with the judgment of the proxyholders named thereon.
A shareholder who has executed and returned a proxy may revoke it
at any time before it is voted by filing with the Secretary of Rio
Salado written notice of such revocation or a later dated proxy or by
attending the Special Meeting and voting in person. Attendance at the
Special Meeting will not, of itself, constitute a revocation of a proxy.
Solicitation of Proxies
In addition to solicitation by mail, directors, officers and
employees of Rio Salado may solicit proxies from the shareholders of Rio
Salado in person or by telephone or otherwise for no additional
compensation. Brokerage houses, nominees, fiduciaries and other
custodians will be requested to forward proxy soliciting materials to
beneficial owners of shares held of record by them and will be
reimbursed for their reasonable expenses. Rio Salado will bear its own
expenses in connection with the printing and solicitation of proxies for
the Special Meeting. Zions will pay for all costs attributable to
registering the Zions Common Stock under applicable federal and state
law. See "Plan of Reorganization--Expenses."
PLAN OF REORGANIZATION
This section of the Proxy Statement/Prospectus describes certain
of the more important aspects of the Plan of Reorganization. The
following description does not purport to be complete and is qualified
in its entirety by reference to the Plan of Reorganization. The Plan of
Reorganization has been filed with the SEC as an exhibit to the
Registration Statement. The Plan of Reorganization is incorporated in
this Proxy Statement/Prospectus by reference to such filing and is
available upon request. See "Available Information."
The Reorganization
The Plan of Reorganization provides for the merger of Rio Salado
into ZAZMAC, in which ZAZMAC will be the surviving corporation
(following which merger ZAZMAC will be merged into Zions), and
thereafter for the merger of the Bank with Zions Arizona, in which Zions
Arizona will be the surviving corporation. Upon consummation of the
latter merger, Zions Arizona will continue as a direct wholly-owned
subsidiary of Zions. Zions is a bank holding company incorporated in
Utah. The principal subsidiaries of Zions are Zions First National Bank
with 83 offices located throughout the state of Utah and one foreign
office; Nevada State Bank with 19 offices in Nevada; and Zions Arizona
with ten offices in Arizona, including the former offices of the
National Bank of Arizona. Rio Salado's only active subsidiary is the
Bank which has four offices in Arizona.
In the Reorganization, the shareholders of Rio Salado will become
shareholders of Zions. The approximately 662,849 outstanding shares of
Rio Salado Common Stock (other than shares subject to dissenters'
rights) will be converted into the right to receive that number of
shares of Zions Common Stock equal to the Purchase Price of $12,500,000,
as determined on the Effective Date of the Reorganization. See
"Conversion of Rio Salado Shares."
Background of and Reasons for the Reorganization
Rio Salado. Rio Salado has been contacted periodically by
banks, bank holding companies, and others with suggestions that the
possibility of a merger or purchase be explored. In general, management
has considered these approaches as either premature or not in
the best interests of Rio Salado and did not pursue them.
In the fall of 1992, Zions approached the Bank with a suggestion of
merger and renewed that proposal in the early spring of 1993. Rio
Salado's management did not pursue these discussions because the
proposed terms did not appear attractive and because the Bank was
engaged in efforts to improve the quality of its loan portfolio and
increase profitability.
Following Zions' announcement in September 1993 of its intention
to acquire National Bancorp of Arizona Inc., discussions of a possible
merger of Rio Salado and Zions were renewed. Both the management and
Board of Directors of Rio Salado determined to pursue the merger
discussions due to the Bank's improved earnings, the resolution of
problems with its loan portfolio, Zions' apparent interest in paying a
higher price than had been previously discussed, and the judgment of Rio
Salado's management that a merger would allow Rio Salado to address the
increased competition from larger and better capitalized banks and
financial institutions it will face in the future.
In the opinion of a majority of the Board of Directors,
consummation of the Plan of Reorganization is in the best interests of
the shareholders and employees of Rio Salado and the communities they
serve.
The Board of Directors of Rio Salado has continued to assess the
potential for the Bank's growth and the requirements of its existing and
anticipated future customers, including the services the Bank must
provide to remain competitive. The population of eastern Maricopa
County, Arizona (the communities of Tempe, Mesa, Chandler, Gilbert and
Apache Junction - commonly referred to as the East Valley) has grown and
is expected to grow faster than other local Arizona markets.
Rio Salado's management believes that the changing economic
conditions throughout the state of Arizona have generated a need to
offer customers additional services that the Bank presently does not
provide or provides only on a limited basis. For Rio Salado and the
Bank to serve this market and remain competitive, significant changes
would be required to support the growth of deposits, loans, and
personnel. To meet the demands of the banking market in the East Valley
and adequately serve the Bank's present customers, Rio Salado and the
Bank would be required to raise in the near future substantial capital.
Raising the capital required would, in the opinion of management, be
costly and would result in dilution of earnings of Rio Salado, to the
detriment of Rio Salado's existing shareholders. In addition, Rio
Salado's management foresees substantial new competition among banks in
Maricopa County, Arizona, and throughout Arizona, generally,
particularly large, well-capitalized, out-of-state owned banks. Rio
Salado and the Bank face significant competition in their lending
activities and in attracting deposits from the general public.
Competition is primarily from other commercial banks, mortgage banking
companies, diversified financial services companies, savings
institutions and credit unions, as well as from other investment
alternatives which compete for loans and deposits. Certain of those
competitors have substantially greater financial resources than Rio
Salado, which enables them to offer a broader range of services. In
recommending the Plan of Reorganization to the shareholders, Rio
Salado's Board of Directors carefully considered the social and economic
effects of the Reorganization on depositors, borrowers and employees of
the Bank and Rio Salado and on the communities which the Bank serves.
In the opinion of a majority of the Board of Directors and
management, the merger with Zions will provide Rio Salado shareholders
(other than certain affiliates) with marketable shares, its employees
with greater opportunities, and its customers with enhanced services.
The community, in turn, should benefit from the stronger and more
competitive banking institution which will result from the merger of Rio
Salado into Zions. A majority of the Board of Directors believes that
the proposed merger with Zions offers Rio Salado's shareholders the best
means of realizing the value of their investment, preserving employees'
jobs within the Bank, and continuing to offer to the Bank's customers
and the community it serves the deposit, lending, financing, and other
banking services they will require in the future.
After the Reorganization, in addition to existing services, the
Bank anticipates that it will be able to provide customers with an
expanded array of mortgage services, extensive installment lending
services, lease financing services, sweep accounts, discount brokerage
services, and bank-permissible insurance and annuity products.
Subsequent to the Reorganization, the Bank may offer other services
provided by non-bank subsidiaries of Zions and will have available to it
the substantial managerial and financial resources of Zions in
connection with its own plans to expand its customer base within its
market. In addition, the contemplated merger is expected to increase
the Bank's lending limit, which will enable the Bank to seek to attract
customers with larger lending needs than the Bank can presently service.
Zions. On October 1, 1986, Zions acquired Mesa Bank, a small
commercial bank in the fast-growing East Valley section of the greater
Phoenix area. In 1987, Mesa Bank received a new national charter and
was renamed Zions First National Bank of Arizona ("Zions Arizona"). On
December 31, 1987, Camel Bank in Phoenix, Arizona, was acquired in an
exchange of stock and merged into Zions Arizona. On January 14,
1994, Zions and NBA consummated their agreement and plan of
reorganization whereby NBA merged with and into Zions in a two-step
merger, with Zions being the survivor, and whereby National Bank of
Arizona, a wholly-owned subsidiary of NBA, merged with and into Zions
Arizona, with Zions Arizona being the survivor. Zions Arizona
currently has ten offices. Zions Arizona has provided Zions with the
opportunity to enter the Arizona commercial banking market by
establishing its operations in Phoenix and Mesa, Arizona.
For Zions, the Reorganization will provide the opportunity to
continue its expansion in the metropolitan Phoenix market. The
expansion will be evidenced by Zions' both broadening its geographical
base in this market and expanding the banking services it is able to
provide.
The combination of Zions and Rio Salado and their respective
Arizona banking subsidiaries will bring together the different skills
and resources of the two organizations and, together with the additional
skills and resources available in the broader Zions organization, will
result in the ability to make a wider spectrum of banking services
available to consumers, businesses and professionals in the geographic
areas currently served by both institutions.
Voting Agreements
In connection with the Plan of Reorganization, all but one of the
shareholder-directors of Rio Salado, whose common share holdings
aggregate 51% of the outstanding Rio Salado Common Stock (excluding
any shares which are subject to unexercised options held by employees of
Rio Salado), have entered into agreements with Zions under which
they have agreed, in their capacity as shareholders, to vote
their shares in favor of the Plan of Reorganization, and to
use their best efforts to cause any other shares over which
they have voting power to be voted in favor of the Plan of
Reorganization, subject to the exception that on or before the date of
the Special Meeting, Rio Salado shall receive from Sheshunoff, or from
another investment banking or financial advisory firm nationally or
regionally recognized in the valuation of securities and financial
institutions, a written opinion to the effect that, as of the date of
such opinion, the terms of the Reorganization are fair to Rio Salado and
its shareholders from a financial point of view. As of November 15,
1993, Sheshunoff had rendered its opinion that the Plan of
Reorganization was fair to Rio Salado and its shareholders from a
financial point of view. See "Opinion of Financial Advisor," below.
The shareholder-directors also agreed until the earlier of the
consummation of the Reorganization or the termination of the Plan of
Reorganization, not to vote their shares in favor of any other
acquisition transaction or to cause their shares to be sold pursuant to
any tender offer, exchange offer or similar proposal by a person other
than Zions or to any person who is seeking to gain control over Rio
Salado or to any person who does not agree to be bound by similar
restrictions. One director of Rio Salado, holding an aggregate of
28,039 shares (representing 4% of the outstanding shares of Rio Salado
Common Stock), declined to execute the voting agreement.
The voting agreements are applicable to the directors only in
their capacities as shareholders and do not legally affect the exercise
of any shareholder's responsibilities as a director of Rio Salado. The
agreements also do not apply to any shares of Rio Salado Common Stock
held by a director or executive officer as a trustee or other fiduciary.
The form of the voting agreements has been filed with the SEC as
an exhibit to the Registration Statement and is incorporated herein by
reference. The foregoing summary of the agreements is qualified in its
entirety by reference to such filing.
Required Vote; Management Recommendation
Approval of the Plan of Reorganization requires the affirmative
votes of the holders of at least two-thirds of the outstanding shares of
Rio Salado Common Stock at the Special Meeting by the holders of Rio
Salado Common Stock voting in person or by proxy. Because under Rio
Salado's bylaws approval requires the affirmative votes of two-thirds of
all outstanding shares, a failure to vote, an abstention, or a broker's
failure to vote shares held in street name will have the same legal
effect as a vote against approval of the Plan of Reorganization. In
order to evaluate the merger consideration offered to Rio Salado
shareholders by Zions, Rio Salado retained Sheshunoff to render an
opinion on the fairness of Zions' offer from a financial point of view.
See "Opinion of Financial Advisor," below. A MAJORITY OF THE BOARD OF
DIRECTORS OF RIO SALADO RECOMMENDS THAT RIO SALADO SHAREHOLDERS VOTE
"FOR" APPROVAL OF THE PLAN OF REORGANIZATION.
Opinion of Financial Advisor
In November 1993, Rio Salado retained Sheshunoff, an investment
banking firm based in Austin, Texas, on the basis of its experience, to
render a written fairness opinion (the "Opinion") to the Board of
Directors and shareholders of Rio Salado. Sheshunoff has been in the
business of consulting for the banking industry for twenty years,
including the appraisal and valuation of banking institutions and their
securities in connection with mergers and acquisitions and equity
offerings. Sheshunoff has a long history of familiarity and involvement
with the banking industry nationwide, as well as familiarity with the
Arizona market and recent transactions in this market. Sheshunoff
reviewed the negotiated terms of the Plan of Reorganization including
exchange ratio and corporate governance matters. Except as described
herein, Sheshunoff is not affiliated in any way with Rio Salado or Zions
or their respective affiliates.
On November 15, 1993, in connection with their consideration of
the Plan of Reorganization, Sheshunoff issued its Opinion to the Board
of Directors of Rio Salado advising that the terms of the Plan of
Reorganization were fair, from a financial point of view, to Rio Salado
and its shareholders. This Opinion is based upon conditions as they
existed on September 30, 1993. A copy of the Opinion is attached as
Appendix C to this Proxy Statement/Prospectus and should be read in its
entirety by Rio Salado shareholders.
In rendering its Opinion, Sheshunoff reviewed certain publicly
available information concerning Zions and Rio Salado, including each
party's audited financial statements and annual reports. Sheshunoff
considered many factors in making its evaluation. In arriving at its
Opinion regarding the fairness of the transaction, Sheshunoff reviewed
(i) the Plan of Reorganization; (ii) the September 30, 1993 Report of
Condition and Income for each organization and the audited December 31,
1992 Balance Sheets and Income Statements for each organization; (iii)
Rio Salado's listing of marketable securities showing rate, maturity and
market value as compared to book value; (iv) Rio Salado's internal loan
classification list; (v) a listing of other real estate owned for Rio
Salado; (vi) the 1993 and 1994 budgets for Rio Salado; (vii) the most
recent Board report for Rio Salado; (viii) the listing and description
of significant real properties for Rio Salado; (ix) material leases on
real and personal property of Rio Salado; and (x) market conditions and
current trading levels of outstanding equity securities of both
organizations. Sheshunoff conducted an on-site review of Rio Salado's
historical performance and current financial condition and performed a
market area analysis.
In addition, Sheshunoff discussed with the management of Zions
and Rio Salado the relative operating performances and future prospects
of each organization, primarily with respect to the current level of
their earnings and future expected operating results, giving weight to
Sheshunoff's assessment of the future of the banking industry and each
organization's performance within the industry. Sheshunoff compared the
results of operation of Rio Salado's subsidiary bank with those of banks
with total assets of $100 to $499 million. Sheshunoff compared the
results of Zion's operations with regional bank holding companies with
total assets of $1 billion and greater. Sheshunoff also considered
Zion's then-pending acquisition of NBA.
Many variables affect the value of banks, not the least of which
is the uncertainty of future events so that the relative importance of
the valuation variables differs in different situations, with the result
that appraisal theorists argue about which variables are the most
appropriate ones on which to focus. However, most appraisers agree that
the primary financial variables to be considered are earnings, equity,
dividends or dividend-paying capacity, asset quality and cash flow. In
addition, in most instances, if not all, value is further tempered by
non-financial factors such as marketability, voting rights or block
size, history of past sales of the banking company's stock, nature and
relationship of the other shareholders in the bank, and special
ownership or management considerations.
In rendering its Opinion, Sheshunoff analyzed the total purchase
on a case equivalent fair market value basis using the standard
evaluation techniques (as discussed below) including comparable sales
multiples, net present value, case flow analysis, return on investment
and the price equity index based on certain assumptions of projected
growth, earnings and dividends and a range of discount rates from 10% to
15%.
"Net asset value" is the value of the net equity of a banking
organization, including every kind of property and value. The net asset
value approach normally assumes liquidation on the date of appraisal
with the recognition of securities gains or losses, real estate
appreciation or depreciation and any adjustments to the loan loss
reserve, discounts to the loan portfolio or changes in the net value of
other assets. As such, it is not the best approach to use when valuing
a going concern, because it is based on historical costs and varying
accounting methods. Even if the assets and liabilities are adjusted to
reflect prevailing prices and yields (which is often of limited accuracy
because readily available data is often lacking), it still results in a
liquidation value for the concern. Furthermore, since this net asset
value method does not take into account the values attributable to the
going concern such as the interrelationship among the company's assets,
liabilities, customer relations, market presence, image and reputation,
and staff expertise and depth, little weight was given by Sheshunoff to
the net asset value method of valuation.
"Market value" is generally defined as the price, established on
an "arms-length" basis, at which knowledgeable, unrelated buyers and
sellers would agree. The market value is frequently used to determine
the price of a minority block of stock when both the quantity and the
quality of the "comparable" data are deemed sufficient. However, the
relative thinness of the specific market for the stock of the banking
organization being appraised may result in the need to review
alternative markets for comparative pricing purposes. The
"hypothetical" market value for a small bank with a thin market for its
stock is normally determined by comparison to the average price to
earnings, price to equity and dividend yield of local or regional
publicly-traded bank issues, adjusting for significant differences in
financial performance criteria and for any lack of marketability or
liquidity. The market value in connection with the evaluation of
control of a banking organization is determined by the previous sales of
banking organizations in the state or region. In valuing a business
enterprise, when sufficient comparable trade data is available, the
market value deserves greater weighting than the net asset value and
similar emphasis as the investment value as discussed below.
Sheshunoff maintains substantial files concerning the prices paid
for banking institutions nationwide. The database includes transactions
involving Arizona banking organizations and banking organizations in the
western region of the United States through the first half of 1993 and
over the past five years. The database provides comparable pricing and
financial performance data for banking organizations sold or acquired.
Organized by different peer groups, the data present averages of
financial performance and purchase price levels, thereby facilitating a
valid comparative purchase price analysis. In analyzing the fair market
value of Rio Salado, Sheshunoff has considered the market approach and
has evaluated price to equity and price to earnings multiples of Arizona
and Western region banking organizations.
Sheshunoff calculated an "Adjusted Book Value" of $12.17 per
share, based on Rio Salado's September 30, 1993 equity and the average
price to equity multiple for regional banking organizations sold in the
first half of 1993. Sheshunoff calculated an "Adjusted Earnings Value"
of $26.06 per share, based on Rio Salado's estimated 1993 earnings and
the average price to earnings multiple for regional banking
organizations sold in the first half of 1993. The financial performance
characteristics of the regional banking organizations vary, sometimes
substantially, from those of Rio Salado. When the variance is
significant for relevant performance factors, adjustments to the price
multiples is appropriate when comparing them to the fair market value
conclusion.
"Investment value" is sometimes referred to as the income value
or earnings value. The investment value is frequently defined as an
estimate of the present value of its future earnings or cash flow. In
addition, another popular investment value method is to determine the
level of current annual benefits (earnings, cash flow, dividends, etc.),
and then capitalize one or more of the benefit types using an
appropriate capitalization rate such as an earnings or dividend yield.
Yet another method of calculating investment value is a cash flow
analysis of the ability of a banking company to service acquisition debt
obligations (at a certain price level) while providing sufficient
earnings for reasonable dividends and capital adequacy requirements. In
connection with the case flow analysis, a determination of the return on
investment that would accrue to a prospective buyer at the fair market
value purchase price is calculated.
The investment or earnings value of any banking organization's
stock is an estimate of the present value of the future benefits,
usually earnings, cash flow or dividends, which will accrue to the
stock. An earnings value is calculated using an annual future earnings
stream over a period of time of not less that ten years, the residual
value of the earnings stream after ten years, assuming no earnings
growth and an appropriate capitalization rate (the net present value
discount rate). Sheshunoff's computations were based on the analysis of
the banking industry, the economic and competitive situations in Rio
Salado's market area, and Rio Salado's and its subsidiary bank's current
financial conditions and historical levels of growth and earnings.
Using a net present value discount rate of 10%, an acceptable discount
rate considering the risk-return relationship most investors would
demand for an investment of this type as of the valuation date, the "Net
Present Value of Future Earnings" equaled $26.12 per share.
Another method of valuing a control block of stock is the cash
flow method. This analysis assumes the formation of a holding company
with maximum leverage according to Federal Reserve System guidelines and
analyzes the ability of the bank to retire holding company acquisition
debt within a reasonable period of time while maintaining adequate
capital. Using this method Sheshunoff arrived at a value of $14.00 per
share.
Return on investment analysis (ROI) also assumes the formation of
a holding company using maximum regulatory leverage and analyzes the ten
year ROI of a 33.33% equity investment at the transaction value of
$18.64 per share for Rio Salado compared to a liquidation at book value
in the year 2003, and a sale at ten times projected earnings for the
year 2003. This ROI analysis provides a benchmark for assessing the
validity of the fair market value of a majority block of stock. The ROI
analysis is one approach to valuing a going concern and is directly
impacted by the earnings stream, dividend payout levels and levels of
debt, if any. Other financial and nonfinancial factors indirectly
affect the ROI; however, these factors more directly influence the level
of ROI an investor would demand from an investment in a majority block
of stock of a specific bank at a certain point in time. The ROI,
assuming liquidation at book value in 2003, is 9.08%, and the ROI,
assuming sale at ten times earnings in 2003, is 16.90%.
Furthermore, a price level indicator, the fair market value
equity index, may be used to confirm the validity of the fair market
value. The fair market value equity index adjusts the fair market value
to equity multiple in order to facilitate a truer price level comparison
with comparable banking organizations, regardless of the differing
levels of equity capital. The fair market value equity index is derived
by multiplying the fair market value to equity multiple by the equity-
to-assets ratio. In this instance, a transaction value of $18.64 per
share results in an equity index of 11.57. The price equity index for
banking organizations sold in the West during the first half of 1993
equaled 12.61. For the eight banking organizations included in the
purchase price analysis, the average equity-to-assets ratio equaled
8.11% and the average return on average assets equaled 0.67%.
Accordingly, given that Rio Salado's 1992 return on average assets is
equal to the average for the banking organizations included in the
purchase price comparables and the equity-to-assets ratios is lower than
the average for the banking organizations included in the purchase price
comparables, Sheshunoff determined that the equity index is fair.
Finally, another test of appropriateness for the fair market
value of a majority block of stocks is the net present value-to-fair
market value ratio. Theoretically, an earnings stream may be valued
through the use of a net present value analysis. In Sheshunoff's
experience with majority community bank stock valuations, it has
determined that a relationship does exist between the net present value
of an "average" community banking organization and the fair market value
of a majority block of the banking organization's stock. The net
present value-to-fair market value ratio equals 140.13% for Rio Salado.
There are many other factors to consider, when valuing a going
concern, which do not directly impact the earnings stream and the net
present value but which do exert a degree of influence over the fair
market value of a going concern. These factors include, but are not
limited to, the general condition of the industry, the economic and
competitive situations in the market area and the expertise of the
management of the organization being valued. Sheshunoff determined that
the net present value-to-fair market value analysis is fair.
When the net asset value, market value and investment value
methods are subjectively weighed, using the appraiser's experience and
judgment, it is Sheshunoff's opinion that the proposed transaction is
fair from a financial point of view.
Sheshunoff considered the Plan of Reorganization as a merger
rather than a cash acquisition. Consideration was given to the levels
of book value and earnings per share appreciation or dilution
percentages between the merger partners over the next three to five
years after consummation. A merger is usually completed with the hopes
of realizing economies of scale and earnings enhancement opportunities,
thereby providing a benefit to Rio Salado shareholders that otherwise
might not be attainable. To justify the fairness of the transaction for
Rio Salado shareholders, it is important to project, based upon
realistic projections of future performance, a positive impact for Rio
Salado shareholders. Sheshunoff projected that Rio Salado shareholders
will have a higher level of book value, earnings per share and dividends
per share after exchanging their common stock for Zions Common Stock
than they would on a stand-alone basis. Based upon discussions with
management of Zions and Rio Salado, Sheshunoff estimates that the
combined entity would also be able to realize after-tax savings and
earnings enhancement opportunities based upon economies realized over
time. Such after-tax savings and earnings enhancement opportunities are
estimated to equal $200,000 annually. The primary focus has been on the
short-term and long-term book value per share, earnings per share and
dividends per share appreciation potential for Rio Salado shareholders.
Neither Zions nor Rio Salado imposed any limitations upon the
scope of the investigation to be performed by Sheshunoff in formulating
such Opinion. In rendering its Opinion, Sheshunoff did not
independently verify the asset quality and financial condition of Zions
or Rio Salado, but instead relied upon the data provided by or on behalf
of Zions and Rio Salado to be true and accurate in all material
respects.
For its services as independent financial analyst for the
Reorganization, including the rendering of its Opinion referred to
above, Rio Salado has paid Sheshunoff aggregate fees and reimbursed
expenses totalling $18,861. Prior to being retained for this
assignment, Sheshunoff has provided professional services and products
to Rio Salado and Zions. The revenues derived from such services and
products are insignificant when compared to the firm's total gross
revenues.
Conversion of Rio Salado Shares
Exchange Formula. According to the valuation formula set forth
in the Plan of Reorganization, the total number of shares of Zions
Common Stock to be received by each Rio Salado shareholder will not be
determined until the fifth trading day preceding the Effective Date of
the Reorganization. The number of shares of Zions Common Stock to be
received by each Rio Salado shareholder is based upon the actual average
trading prices of Zions Common Stock as reported on NASDAQ over the
twenty consecutive trading days ending on the fifth trading day
preceding the Effective Date. On the Effective Date of the
Reorganization, all of the outstanding shares of Rio Salado Common Stock
will be cancelled and will be converted into the right to receive that
number of shares of Zions Common Stock with a value equal to
$12,500,000. Each holder of shares of Rio Salado Common Stock will be
entitled to receive, in exchange for each share of Rio Salado Common
Stock held of record by such shareholder as of the Effective Date, that
number of shares of Zions Common Stock calculated by dividing the
Purchase Price of $12,500,000 by the Average Closing Price, and by
further dividing the number so reached by the number of shares of Rio
Salado Common Stock that shall be issued and outstanding at the
Effective Date.
On February __, 1994, the closing sale price for Zions Common
Stock reported on the NASDAQ National Market System was $_____.
Assuming on that date that a total of 662,849 shares of Rio Salado
Common Stock were outstanding and further assuming that the Average
Closing Price was $_____, then each share of Rio Salado Common Stock
would be exchangeable for _____ shares of Zions Common Stock, excluding
any shares for which dissenters' rights were perfected. In view of the
method of calculating the Average Closing Price, it is not possible at
the date of this Proxy Statement/Prospectus to stipulate the rate of
exchange at the Effective Date.
Surrender of Certificates. As promptly as practicable after the
Effective Date of the Reorganization, Zions First National Bank, Salt
Lake City, Utah, the exchange agent designated by Rio Salado and Zions
in the Plan of Reorganization, will send to each shareholder of record
of Rio Salado Common Stock immediately prior to the Reorganization a
letter of transmittal containing instructions as to how to effect the
exchange of Rio Salado Common Stock certificates for certificates
representing the shares of Zions Common Stock into which their shares
have been converted. Rio Salado shareholders should not send in their
certificates until they receive such written instructions. However,
certificates should be surrendered promptly after instructions to do so
are received.
Any dividends declared on Zions Common Stock after the Effective
Date of the Reorganization will apply to all whole shares of Zions
Common Stock into which shares of Rio Salado Common Stock have been
converted in the Reorganization. However, no former Rio Salado
shareholder will be entitled to receive any such dividend (and will
receive no interest thereon) until such shareholder's Rio Salado Common
Stock certificates have been surrendered for exchange as provided in the
letter of transmittal. Upon such surrender, the shareholder will be
entitled to receive all such dividends payable on the whole shares of
Zions Common Stock represented by the surrendered certificate or
certificates (without interest thereon and less the amount of taxes, if
any, which may have in fact been imposed or paid thereon).
Payment for Fractional Shares. No fractional shares of Zions
Common Stock will be issued in connection with the Reorganization.
Instead, each Rio Salado shareholder who surrenders for exchange Rio
Salado Common Stock certificates representing a fraction of a share of
Zions Common Stock will be entitled to receive, in addition to a
certificate for the whole shares of Zions Common Stock represented by
the surrendered certificates, cash in an amount equal to such fractional
part of a share multiplied by the Average Closing Price of Zions Common
Stock.
Unexchanged Certificates. On the Effective Date of the
Reorganization, the stock transfer books of Rio Salado will be closed,
and no further transfers of Rio Salado Common Stock will be made or
recognized. Certificates for Rio Salado Common Stock not surrendered
for exchange will entitle the holder to receive, upon surrender as
provided in the letter of transmittal, only a certificate for the whole
shares of Zions Common Stock represented by such certificates, plus
payment of any amount for a fractional share or dividends to which such
holder is entitled as outlined above, and without any interest thereon.
Adjustment of Exchange Formula. The Plan of Reorganization
contains provisions for the proportionate adjustment of the exchange
ratio in the event of a stock dividend, stock split, reclassification or
similar event involving the Zions Common Stock or the Rio Salado Common
Stock which occurs prior to the Reorganization. Nevertheless, the total
purchase price to be paid by Zions for all of the outstanding shares of
Rio Salado Common Stock is fixed at $12,500,000 and will not be
adjusted. Neither Zions nor Rio Salado anticipates declaring any stock
dividend, stock split, or reclassification prior to the Effective Date.
Tax Consequences
The Plan of Reorganization requires as a condition to the
Reorganization that an opinion of independent public accountants be
received by each party to the effect that:
(1) The Reorganization will constitute a tax-free
reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
(2) No gain or loss will be recognized by Zions or Rio
Salado by reason of the Reorganization; and
(3) No gain or loss will be recognized by holders of Rio
Salado Common Stock on the exchange of their shares for whole
shares of Zions Common Stock.
No gain or loss for federal income tax purposes will be
recognized by shareholders of Rio Salado on the exchange of their shares
for whole shares of Zions Common Stock. However, gain or loss may be
recognized by Rio Salado shareholders upon the receipt of cash in
payment for a fractional share. To compute the amount, if any, of such
gain or loss, the cost or other basis of the Rio Salado Common Stock
exchanged must be allocated proportionately to the total number of
shares of Zions Common Stock received, including any fractional share
interest. Gain or loss will be recognized measured by the difference
between the cash received and the basis of the fractional share interest
as so allocated. Under Section 302(a) of the Code, any such gain or
loss will be entitled to capital gain or loss treatment if the Rio
Salado Common Stock was a capital asset in the hands of the shareholder.
If any shares of Zions Common Stock received in the
Reorganization are subsequently sold, gain or loss on the sale should be
computed by allocating the cost or other basis of the Rio Salado Common
Stock exchanged in the Reorganization to the shares sold in the manner
described in the preceding paragraph. The holding period for the shares
of Zions Common Stock received in the Reorganization will include the
holding period for the shares of Rio Salado Common Stock exchanged in
determining, for example, whether any such gain or loss is a long-term
or short-term capital gain or loss.
If a Rio Salado shareholder exercises dissenters' rights and
receives cash in exchange for his Rio Salado Common Stock, the cash will
generally be treated as received by the shareholder as a distribution in
redemption of the Rio Salado Common Stock subject to the provisions and
limitations of Section 302 of the Code. Cash received by a dissenting
Rio Salado shareholder will be taxed as if the dissenter's shares had
been sold to Rio Salado for the cash received and will generally be
entitled to capital gain or loss treatment under Section 302 of the
Code, provided the shares are a capital asset in the hands of the
shareholder. Each Rio Salado shareholder should consult with his own
personal tax advisor as to the federal, state and local tax consequences
of exercising dissenters' rights.
The foregoing is intended only as a summary of certain federal
income tax consequences of the Reorganization under existing law and
regulations, as presently interpreted by judicial decisions and
administrative rulings, all of which are subject to change without
notice and any such change might be retroactively applied to the
Reorganization. Among other things, the summary does not address state
income tax consequences, local taxes, or the federal or state income tax
considerations that may affect the treatment of a shareholder who
acquired his Rio Salado Common Stock pursuant to an employee stock
option or other special circumstances. Accordingly, it is recommended
that Rio Salado shareholders consult their own tax advisors for specific
advice concerning their own tax situations, potential changes in the
applicable tax law and all federal, state and local tax matters in
connection with the Reorganization.
A copy of the tax opinion rendered by KPMG Peat Marwick as to the
material federal income tax consequences relating to the Reorganization
is set out in Appendix B hereto.
Interests of Certain Persons in the Transaction
In connection with the Plan of Reorganization, all but one of Rio
Salado's shareholder-directors, whose common shareholdings aggregate 51%
of the outstanding Rio Salado Common Stock (excluding any shares
subject to unexercised options held by Rio Salado employees), have
entered into agreements with Zions under which they have agreed, in
their capacity as shareholders, to vote their shares in favor of the
Plan of Reorganization and to use their best efforts to cause any
other shares over which they have voting power to be voted
in favor of the Plan of Reorganization, subject to the exception
that on or before the date of the Special Meeting, Rio Salado
shall receive from Sheshunoff or from another investment
banking or financial advisory firm nationally or
regionally recognized in the valuation of securities and financial
institutions, a written opinion to the effect that, as of the date of
such opinion, the terms of the Reorganization are fair to Rio Salado and
its shareholders from a financial point of view. The shareholder-
directors also agreed until the earlier of the consummation of the
Reorganization or the termination of the Plan of Reorganization, not to
vote their shares in favor of any other acquisition transaction or to
cause their shares to be sold pursuant to any tender offer, exchange
offer or similar proposal by a person other than Zions or to any person
who is seeking to gain control over Rio Salado or to any person who does
not agree to be bound by similar restrictions. One director of Rio
Salado, holding an aggregate of 28,039 shares (representing 4% of the
outstanding shares of Rio Salado Common Stock), declined to execute a
voting agreement.
The Plan of Reorganization provides that after the Reorganization
becomes effective, Zions Arizona will employ Elden G. Barmore, currently
president and chief executive officer of Rio Salado and the Bank,
pursuant to a five-year agreement as an executive vice president of
Zions Arizona. The agreement provides that Mr. Barmore will receive an
annual salary of $127,000 and will be entitled to other benefits
normally afforded executive employees, including consideration for
periodic raises or bonuses, based upon performance and responsibility.
Zions Arizona has also agreed to continue an existing deferred
compensation plan maintained by the Bank or provide a substantially
similar plan pursuant to which Mr. Barmore may defer up to $10,000 per
year of base compensation, in consideration of a retirement benefit of
approximately $55,000 per year for 15 years, upon Mr. Barmore's
attaining age 65, and certain ancillary death and disability benefits.
Zions Arizona will also continue to maintain a term life insurance
policy on the life of Mr. Barmore and will pay all the premiums
therefor. The policy will be owned by Mr. Barmore and will provide for
the payment of death benefits to his estate in an amount not less than
$250,000. Zions Arizona has also agreed to provide Mr. Barmore an
automobile and to pay reasonable operating costs and to replace the
automobile every two years. In consideration of Mr. Barmore's agreeing
to the termination of his existing employment agreement with Rio Salado,
Zions Arizona has agreed to pay Mr. Barmore $250,000.
Pursuant to his employment contract with Zions Arizona, Zions
Arizona may terminate the agreement at any time. Upon termination of
the agreement, Mr. Barmore is entitled to certain severance benefits
unless his termination is for cause. In addition, Mr. Barmore may
terminate the contract in his sole discretion if his duties and
responsibilities are substantially diminished or reduced. In the event
Mr. Barmore is terminated other than for cause or his duties are
substantially diminished, Zions Arizona has agreed to pay him as
severance pay in periodic installments an amount equal to the amount
otherwise payable to him as base compensation under the agreement for
the remaining term of the agreement if it had not been terminated.
Termination for cause, resulting in the loss of severance
benefits, under Mr. Barmore's employment agreement means one or more of
the following: (i) any willful or gross misconduct with respect to the
business and affairs of Zions Arizona, (ii) the conviction of a felony
(after the expiration of any applicable appeal period) whether or not
committed in the course of his employment with Zions Arizona, (iii) any
willful neglect, failure or refusal to carry out his duties, or (iv) any
breach by Mr. Barmore of any representation, warranty, or agreement set
forth in the employment agreement which breach is material and adverse
to Zions Arizona.
In consideration of payment of severance benefits, Mr. Barmore
has agreed for a period equal to the unexpired term of the agreement as
of the date it was terminated, not to be employed by any bank, savings
and loan association, or credit union to render services of any kind to
customers within the East Valley (the cities of Tempe, Mesa, Chandler,
Gilbert and Apache Junction, Arizona). Any disputes under the
employment agreement are subject to arbitration. So long as the
employment agreement is in effect, Mr. Barmore is entitled to
participate in any stock options, stock appreciation rights, incentive
or bonus plans or other executive compensation made available by Zions
or Zions Arizona to its executive officers on such terms and conditions
as the Board of Directors of Zions Arizona or Zions may determine.
The Board of Directors of Rio Salado, in satisfaction of an
agreement to grant certain stock options, authorized the payment of
$40,392 to Lauren Kingery, a vice-president of the Bank.
Stock Options
Each stock option to purchase Rio Salado Common Stock not
exercised prior to the Effective Date of the Reorganization will remain
outstanding and will automatically be converted into an option to
purchase, with the same vesting and expiration dates as the option to
purchase Rio Salado Common Stock, that number of shares of Zions Common
Stock which the holder of such option would be entitled to receive under
the Plan of Reorganization had such option been exercised immediately
preceding the Effective Date. The per share option price in effect
immediately prior to the Effective Date will be adjusted by an amount
reflective of the rate of exchange. During the year ended December
31, 1993, Mr. Barmore excercised options for 22,000 shares of Rio
Salado Common Stock at an average exercise price of $5.45 per share
after adjustment for the stock dividend. The exercise price of all
options granted Mr. Barmore was not less than the fair market value
of the optioned shares as of the date of grant. An
additional 7,700 shares of Rio Salado Common Stock are
subject to stock options held by other officers of Rio
Salado. To the extent that any of these options are not
exercised prior to the Effective Date of the Reorganization, these
options will be converted into options to purchase Zions Common Stock.
Currently exercisable options permitting the purchase of 7,700 shares
at an average exercise price of $6.63 per share are held by other
officers. The remaining options have terms expiring in 1998 and 1999.
Inconsistent Activities
Rio Salado has agreed in the Plan of Reorganization that unless
and until the Reorganization has been consummated or the Plan of
Reorganization has been terminated in accordance with its terms, Rio
Salado will not (i) solicit or encourage any inquiries or proposals by
any third person to acquire more than 1% of the Rio Salado Common Stock,
any stock of the Bank or any significant portion of its or any
subsidiary's assets (whether by tender offer, merger, purchase of assets
or otherwise), (ii) afford any third party which may be considering any
such transaction access to its or any subsidiary's properties, books or
records except as required by law, (iii) enter into any discussions,
negotiations, agreement or understanding for any such transaction or
(iv) authorize or permit any of its directors, officers, employees or
agents to do any of the foregoing. Notwithstanding the foregoing, Rio
Salado may take an action referred to in clause (ii) or (iii) of the
previous sentence (or permit its directors, officers, employees or
agents to do so) if Rio Salado's Board of Directors, after consulting
with counsel, determines that such actions should be taken or permitted
in the exercise of its fiduciary duties. If Rio Salado or the Bank
becomes aware of any offer or proposed offer to acquire any shares of
Rio Salado or any significant portion of its assets, Rio Salado is
required to give immediate notice thereof to Zions.
Conduct of Business Pending the Reorganization
The Plan of Reorganization contains covenants, representations
and warranties by Rio Salado as to matters which are typical in
transactions similar to the Reorganization.
Prior to the Effective Date, Rio Salado has agreed that Rio
Salado will not, without Zions' prior written consent: (i) declare or
pay cash dividends or property dividends with the exception of customary
cash dividends in a manner consistent with past practice; (ii) except
for the issuance of Rio Salado Common Stock upon exercise of existing
stock options, declare or distribute any stock dividend, authorize any
stock split, authorize, issue or make any distribution of its capital
stock or other securities or grant any option to acquire such
securities; (iii) except as contemplated by the Plan of Reorganization,
merge into, consolidate with or sell any of its assets to any other
corporation or person, or enter into any other transaction or agree to
effect any other transaction not in the ordinary course of business or
engage in any discussions concerning such a possible transaction; (iv)
convert the charter of the Bank from that of an Arizona bank corporation
to any other charter or form of entity; (v) make any direct or indirect
redemption or any other acquisition of any of its capital stock; (vi)
incur any liability or obligation, make any commitment or disbursement,
acquire or dispose of any property or asset, make any agreement or
engage in any transaction, except in the ordinary course of business;
(vii) subject any of its properties or assets to any lien, claim,
charge, option or encumbrance, except in the ordinary course of
business; (viii) institute or agree to any increase in the compensation
of any employee, except for ordinary increases in accordance with past
practices not to exceed 5% per annum of the aggregate payroll as of
October 1, 1993; (ix) create or modify any pension or profit-sharing
plan, bonus, deferred compensation, death benefit or retirement plan, or
the level of benefits under any such plan, or increase or decrease any
severance or any other fringe benefit; or (x) except to directly
facilitate the Reorganization, enter into any employment or personal
services contract with any person or firm.
Rio Salado has also agreed to carry on its business and manage
its assets and property diligently in the same manner as it has
previously done and to use its best efforts to preserve its business
organization. Pending completion of Reorganization or termination of
the Plan of Reorganization, Rio Salado has agreed to provide Zions with
certain information and reports and access to other information.
Conditions to the Reorganization
The obligations of Rio Salado and Zions to consummate the
Reorganization are subject to, among other things, the satisfaction of
the following conditions: (i) the shareholders of Rio Salado shall have
approved the Plan of Reorganization; (ii) Rio Salado and Zions shall
have received all relevant orders, consents and approvals from all
requisite governmental authorities for the completion of the
Reorganization; (iii) there shall be an absence of certain litigation,
as specified in the Plan of Reorganization; (iv) the registration
statement to be filed by Zions pursuant to the Securities Act in
connection with the registration of the shares of Zions Common Stock to
be used as consideration in connection with the Reorganization shall
have become effective under the Securities Act, and Zions shall have
received all required state securities laws ("Blue Sky") permits and
other required authorizations or confirmations of the availability of
exemption from registration requirements necessary to issue Zions Common
Stock in the Reorganization, and neither the registration statement nor
any such required permit, authorization or confirmation shall be subject
to a stop-order or threatened stop-order by the SEC or any state
securities authority; (v) Rio Salado and Zions shall have determined
that the Reorganization shall qualify as a tax free reorganization under
the Code and the regulations and rulings promulgated thereunder; (vi)
there shall be no adverse legislation or government regulation which
would make the transaction contemplated impossible or which would
materially and adversely affect the economic assumptions of the
transactions contemplated by the Plan of Reorganization or the business
of Zions and Rio Salado or which would otherwise materially impair the
value of Rio Salado to Zions; and (vii) United New Mexico Bank at
Albuquerque ("United") shall have delivered to Rio Salado and the Bank,
in form and substance reasonably acceptable to Zions, United's written
consent to the Reorganization, the assumption and discharge by ZAZMAC
and Zions of the loan (principal amount of $2,387,500 as of December 31,
1993) that is subject to a certain loan agreement dated December 11,
1992 among United, Rio Salado, and the Bank, and the release of the
shares of the stock of the Bank which secures the loan.
The obligations of Zions to consummate the Reorganization are
subject to satisfaction or waiver of certain additional conditions,
including: (i) the shareholders of Rio Salado shall have authorized the
Plan of Reorganization, and dissenters' rights shall have been exercised
and perfected by owners of not more than 5% of the outstanding shares of
Rio Salado Common Stock; (ii) all representations and warranties made by
Rio Salado in the Plan of Reorganization shall be true in all material
respects on the Effective Date and Rio Salado shall have performed in
all material respects all its obligations under the Plan of
Reorganization; (iii) Ryley, Carlock & Applewhite, special counsel to
Rio Salado, shall have rendered a legal opinion to Zions in form and
substance satisfactory to Zions; (iv) during the period from September
30, 1993 to the Effective Date, there shall be no material adverse
change in the financial position or results of operations, properties,
liabilities or businesses of Rio Salado or the Bank; (v) on the
Effective Date the consolidated net worth of Rio Salado shall not be
less than the sum of the aggregate contributions to capital caused by
the payments accompanying the exercise of any stock options on or after
September 30, 1993 and the consolidated net worth of Rio Salado as of
September 30, 1993; (vi) prior to the Effective Date of the
Reorganization, Rio Salado and the Bank will have conformed, to the
reasonable satisfaction of Zions, the loan loss reserve methodology of
the Bank to that employed by Zions and its bank subsidiaries and the
Bank will have implemented such methodology by making appropriate
provisions to its reserve for loan losses; and (vii) Elden G. Barmore,
President and Chief Executive Officer of Rio Salado, shall have entered
into an employment and non-competition agreement with Zions and Zions
Arizona substantially in the form described in the Plan of
Reorganization. See "Interests of Certain Persons in the Transaction,"
above.
The obligations of Rio Salado to consummate the Reorganization
are subject to the satisfaction or waiver of certain additional
conditions, including: (i) all representations and warranties made by
Zions in the Plan of Reorganization shall be true in all material
respects on the Effective Date and Zions shall have performed in all
material respects all its obligations under the Plan of Reorganization;
(ii) receipt of a legal opinion of Metzger, Hollis, Gordon & Mortimer,
special counsel to Zions, satisfactory to Rio Salado; (iii) during the
period from September 30, 1993 to the Effective Date, there shall be no
material adverse change in the financial position or results of
operations, properties, liabilities or business of Zions; (iv) there
shall be, as of the Effective Date, no material error, misstatement or
omission in any of the representations and warranties of Zions or Zions
Arizona or any material failure to perform or satisfy any covenants of
Zions or Zions Arizona contained in the Plan of Reorganization; (v) Rio
Salado shall have received from Sheshunoff or from another investment
banking or financial advisory firm nationally or regionally recognized
in the valuation of securities of financial institutions, a written
opinion to the effect that, as of the date of the opinion, the terms of
the Reorganization are fair to Rio Salado and its shareholders from a
financial point of view; (vi) the directors and shareholders of ZAZMAC
and the directors and shareholders of Zions Arizona shall have
authorized and approved their respective mergers; and (vii) Zions Common
Stock shall be quoted on NASDAQ or shall be listed on a national
securities exchange.
Representations and Warranties
The representations and warranties of Zions and Rio Salado
contained in the Plan of Reorganization relate, among other things, to
the organization and good standing of Zions, Rio Salado, and their
subsidiaries; the capitalization of Zions and Rio Salado; the
authorization by Zions and Rio Salado of the Plan of Reorganization and
the absence of conflict with laws or other agreements; the accuracy and
completeness of the financial statements and other information furnished
to the other party; the absence of material adverse changes since
September 30, 1993; the absence of undisclosed liabilities; and
compliance with laws. Rio Salado has additionally warranted that there
will be no deterioration in the quality of its loan portfolio or any
major component thereof and no increase in the level of non-performing
assets or non-accrual loans at the Bank or in the level of its provision
for credit losses or its reserve for possible credit losses, any of
which deterioration or increase has resulted, or should reasonably have
resulted, in a provision to the consolidated reserve for possible loan
and lease losses in an amount exceeding $300,000. Rio Salado has also
warranted that its reserve for possible credit losses as of September
30, 1993, was adequate to absorb reasonably anticipated losses in the
consolidated loan and lease portfolios in view of the size and character
of such portfolios and that no facts have come to management's attention
which would cause Rio Salado or the Bank to restate by more than
$300,000 the level of its reserve for possible loan losses.
Zions has additionally warranted that there are no facts known to
it which might materially adversely affect its business, assets,
liabilities, financial condition, results of operations or prospects
which have not been disclosed in Zions' financial statements or a
certificate delivered to Rio Salado and the Bank. The representations
and warranties contained in the Plan of Reorganization will survive the
consummation of the Reorganization.
Amendment and Waiver
Notwithstanding prior approval by the shareholders of Rio Salado,
the Plan of Reorganization may be amended in any respect by written
agreement between the parties, except that after such shareholder
approval no amendment may prejudice the economic interests of the
shareholders of Rio Salado. Zions or Rio Salado may also (i) extend the
time for performance of any of the obligations of the other; (ii) waive
any inaccuracies in the representations and warranties of the other;
(iii) waive compliance by the other with any of its obligations under
the Plan of Reorganization; and (iv) waive any condition precedent to
its obligations under the Plan of Reorganization other than approval of
the Plan of Reorganization by the shareholders of Rio Salado,
governmental regulatory approvals required to consummate the
Reorganization, and securities registration requirements incident to the
issuance of Zions Common Stock in the Reorganization.
Authorized Termination and Damages for Breach
The Plan of Reorganization may be terminated and abandoned at any
time prior to the Effective Date, notwithstanding approval of the
shareholders of Rio Salado and without payment of damages by either
party except as provided below, as follows: (i) by mutual consent of
Zions and Rio Salado; (ii) unilaterally, by either party if any of the
representations and warranties of the other party was materially
incorrect when made; (iii) by either party if the Reorganization has
become inadvisable by reason of federal or state litigation to restrain
or invalidate the Reorganization; or (iv) by either party on or after
September 30, 1994, if the Effective Date has not occurred on or before
that date.
If either party terminates the Plan of Reorganization because any
of the representations and warranties of a party were materially
incorrect when made, or because of a material breach by a party of a
covenant made under the Plan of Reorganization, then such party whose
representations and warranties were materially incorrect or who
materially breached its covenant shall be liable to the other party or
parties to the Plan of Reorganization solely to the extent of the
actual, reasonable out-of-pocket expenses, not to exceed $250,000,
incurred by the other party in connection with the negotiation and
preparation of the Plan of Reorganization and the carrying out of the
transactions contemplated thereby.
Dissenters' Rights of Rio Salado Shareholders
A holder of shares of Rio Salado Common Stock is entitled to
exercise the rights of a dissenting shareholder under Arizona Revised
Statutes Secs. 10-081 et seq. (the Arizona General Corporation Law) to
object to the Plan of Reorganization and make written demand that Zions,
as the surviving corporation in the Reorganization (ZAZMAC having merged
with and into Zions on the Effective Date), pay in cash the fair value
of the shares held as determined in accordance with such statutory
provisions. The following summary does not purport to be a complete
statement of the provisions of Arizona law and is qualified in its
entirety by reference to such statutory provisions, which are set forth
in full as Appendix A to this Proxy Statement/Prospectus.
Arizona law requires that Rio Salado shareholders must follow
certain prescribed procedures in their exercise of the statutory right
to dissent in connection with the Reorganization. The failure to follow
such procedures on a timely basis, in the manner required by Arizona
Revised Statutes Sec. 10-081, may result in a loss of a shareholder's
dissenters' rights.
To be entitled to compensation as a dissenting shareholder to the
Reorganization, a shareholder must: (i) file written objection to the
proposed merger, as described below; (ii) not vote in favor of the
proposed merger, as described below; and (iii) make a demand for
compensation, as provided below.
Any shareholder, electing to exercise his or her right to
dissent, must file with Rio Salado, prior to the taking of the vote at
the Special Meeting to be held on March __, 1994, at 10 a.m., local
time, at 1400 East Southern Avenue, Tempe, Arizona, his or her written
objection stating the shares and the certificate numbers to which such
objection applies. Objections may be delivered to Mr. David Fischer,
Assistant Corporate Secretary, 1400 East Southern Avenue, Tempe, Arizona
85252. Upon timely receipt of an objection, Zions as the surviving
corporation shall have ten days after the meeting to notify any
objecting shareholder whose shares were entitled to vote and were not
voted in favor of the merger that the merger has been approved. Any
shareholder who has not timely objected will be bound by the merger and
will have the same rights as if a written objection had not been filed.
Zions' notice must contain an offer by Zions to purchase the shares as
to which an objection was made and must be accompanied by a balance
sheet of Rio Salado, as of the last available date not more than 12
months prior to the meeting of shareholders, and a profit and loss
statement for the 12 month period ended on the date of the balance
sheet. If within 20 days after the mailing of the notice by Zions any
shareholder demands in writing payment for his shares in accordance with
the offer, Zions must, within 30 days after the expiration of the 20 day
period, pay the demanding shareholder the consideration offered for his
shares upon surrender of the certificate(s) representing such shares.
If the shareholder does not elect to accept Zions' offer and demands an
amount in excess of the offer, Zions and the shareholder may negotiate
the fair market value during the 30 days after the expiration of the 20
day period and, if agreement is reached during that period, Zions must
pay the shareholder within 15 days after the surrender of his or her
certificate(s) representing the dissenting shares. Upon payment of any
agreed value, the dissenting shareholder shall cease to have any
interest in the shares. If, during the period of 30 days following the
20 day period (during which the shareholder may demand payment of the
amount offered), Zions and the shareholder fail to agree upon the value
of the dissenting shares, the shareholder, or Zions, within four months
after such 30 day period, may commence an action in the Superior Court
of the State of Arizona to determine the value of the shares. The fair
market value of the shares will be fixed on the day prior to the date on
which the shareholder's vote was taken on the Reorganization. The value
of any dissenting share may not exceed the amount demanded by a
particular shareholder, and there will be excluded from the
determination of fair market value any increase or decrease attributable
to the merger. The court will determine whether the shareholder has
complied with the provisions of Arizona Revised Statutes Sec. 10-081.The
court, by judgment, will determine the value of the stock of the
shareholder entitled to payment and will direct payment of such value,
together with interest at a rate determined by the court, in its
discretion. The court has the right to assess the costs of any
dissenter's action as it may deem equitable. The court, in its
discretion, may award either party any expenses, including reasonable
attorneys' fees and expenses for experts. Upon payment of any amount
determined by the court, the shareholder shall cease to have any
interest in the shares. The court may require, at any stage of the
proceeding, that shareholders who demand payment for their shares submit
their certificate(s) to Zions for notation thereon of the pendency of
the appraisal litigation.
RIO SALADO SHAREHOLDERS WISHING TO EXERCISE DISSENTERS' RIGHTS
ARE ADVISED TO CONSULT THEIR OWN COUNSEL TO ENSURE THAT THEY FULLY AND
PROPERLY COMPLY WITH THE REQUIREMENTS OF ARIZONA LAW.
Restrictions on Resales by Rio Salado Affiliates
The shares of Zions Common Stock issuable in the Reorganization
have been registered under the Securities Act, and such shares will
generally be freely tradable by the Rio Salado shareholders who receive
Zions shares as a result of the Reorganization. However, this
registration does not cover resales by Rio Salado shareholders who may
be deemed to control or be under common control with Rio Salado or Zions
and who therefore may be deemed "affiliates" of Rio Salado or Zions as
that term is defined in Rule 145 under the Securities Act. Such
affiliates are not permitted to sell their shares of Zions Common Stock
acquired in the Reorganization except pursuant to (i) an effective
registration statement under the Securities Act covering the shares to
be sold; (ii) the conditions contemplated by Rules 144 and 145 under the
Securities Act; or (iii) another applicable exemption from the
registration requirements of the Securities Act. The management of Rio
Salado will notify those persons who it believes may be such affiliates.
Effect on Outstanding Stock Options
As a performance incentive and to encourage ownership of Rio
Salado Common Stock by executive officers and certain selected key
employees of Rio Salado and the Bank, the Board of Directors of Rio
Salado adopted various stock option plans. Stock options for 7,700
shares of Rio Salado Common Stock are presently outstanding under the
plans at option prices equal to the fair market value of such shares on
the dates the options were granted.
Zions has agreed in the Plan of Reorganization to assume the
obligations of Rio Salado to comply with the terms of all presently
outstanding options under the various plans, which are unexercised at
the Effective Date of the Reorganization. Therefore, when the
Reorganization becomes effective, unexercised stock options will be
converted into options for the number of shares of Zions Common Stock
the optionee would have received under the Plan of Reorganization had
the option been exercised prior to the Reorganization, and the option
price per share will be proportionately adjusted.
Expenses
Each party to the Plan of Reorganization will pay its own
expenses, including those of its own counsel, accountants, and tax
advisors, incurred in connection with the Plan of Reorganization. Rio
Salado will pay the cost of printing and delivering this Proxy
Statement/Prospectus to its shareholders and for soliciting proxies for
the Special Meeting. Zions will pay all costs attributable to
registering its stock issuable pursuant to this Proxy
Statement/Prospectus under federal and state securities laws.
Government Approvals
Applications for approval (or requests for waiver of application
requirements) of the Reorganization must be made to, and approvals and
consents must be obtained from, appropriate federal and Arizona
regulators, including the Board of Governors of the Federal Reserve
System, the Office of the Comptroller of the Currency, and the Arizona
State Banking Department. Submissions have been made to each of these
regulatory authorities. Federal law prohibits consummation of the
Reorganization until 30 days after the approvals of the federal
regulators have been obtained. There can be no assurance that the
Arizona or federal regulatory approvals or waivers will be granted, and
if they are granted, there can be no assurance as to the dates of such
approvals or waivers. Management of Zions and Rio Salado are not
presently aware of any reasonable basis for regulatory disapproval of
the Reorganization.
Effective Date of the Reorganization
It is presently anticipated that if the Plan of Reorganization is
approved by the shareholders of Rio Salado, the Reorganization will
become effective during the second quarter of 1994. However,
as noted above, consummation of the Reorganization is subject to the
satisfaction of a number of conditions, some of which cannot be waived.
There can be no assurance that all conditions to the Reorganization will
be satisfied or, if satisfied, that they will be satisfied in time to
permit the Reorganization to become effective during the second quarter
of 1994. In addition, as also noted above, Zions and Rio Salado retain
the power to abandon the Reorganization or to extend the time for
performance of conditions or obligations necessary to its consummation,
notwithstanding prior shareholder approval.
PRO FORMA COMBINED FINANCIAL INFORMATION
INFORMATION CONCERNING THE
PRO FORMA COMBINED FINANCIAL DATA
The Reorganization will be accounted for as a purchase.
As such, the pro forma financial information represents the combined
historical financial data of Zions and Rio Salado, subject only to
certain adjustments described in the notes to the data presented.
The pro forma financial information is unaudited and is not
necessarily indicative of the financial condition or the results of
operations of Zions as they would have been had the Reorganization been
effective during the periods presented, or as they may be in the future.
The pro forma financial information should be read in conjunction with
the historical financial statements of Zions and Rio Salado, including
the notes thereto, incorporated by reference or presented herein. See
"Information Concerning Zions--Zions Documents Incorporated by
Reference" and "Information Concerning Rio Salado--Financial
Information."
PRO FORMA COMBINED CONDENSED STATEMENT OF CONDITION
SEPTEMBER 30, 1993
(unaudited)
The following unaudited pro forma combined condensed statement of
condition combines the historical unaudited consolidated condensed
statements of condition or balance sheets of Zions (restated to give
effect to the mergers of National Bancorp of Arizona Inc. and Subsidiary
("NBA") and Wasatch Bancorp and Subsidiary, effective January 14, 1994
and October 19, 1993, respectively, accounted for as pooling-of-
interests transactions), Rio Salado, and NBA as of September 30, 1993,
with certain pro forma adjustments resulting from the differences in par
values. These statements should be read in conjunction with the
historical financial statements of Zions and Rio Salado, including the
notes thereto; the supplemental financial statements of Zions, restated
to give effect to the merger with NBA, including the notes thereto; the
notes to this pro forma combined condensed statement of condition; and
the pro forma combined condensed statements of income, including the
notes thereto.
<PAGE>
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<CAPTION>
ZIONS BANCORPORATION AND SUBSIDIARIES,
AND RIO SALADO BANCORP, INC. AND SUBSIDIARY
PRO FORMA CONDENSED CONSOLIDATED STATEMEMT OF CONDITION (UNAUDITED)
September 30, 1993
Pro Forma
Consolidated
Pro Forma Balance
Zions Rio Salado Adjustments Sheet
<S> <C> <C> <C> <C>
(Dollars in thousands)
ASSETS
Cash and due from banks $ 268,515 $ 8,711 $ 277,226
Money market investments:
Interest-bearing deposits 44,433 194 44,627
Federal funds sold and security resell
agreements 381,653 1,600 383,253
Other money market investments 25,055 - 25,055
Receivable from brokers, dealers customers
and clearing organizations 104,284 - 104,284
Trading account securities 67,612 - 67,612
Investment securities 1,164,699 50,007 1,214,706
Loans:
Loans held for sale 184,224 - 184,224
Loans, leases, and other receivables 2,258,739 45,402 2,304,141
2,442,963 45,402 2,488,365
Less:
Unearned income and fees, net of
related costs 21,760 111 21,871
Allowance for loan losses 68,334 1,284 69,618
2,352,869 44,007 2,396,876
Premises and equipment 70,204 714 70,918
Other real estate owned 4,609 72 4,681
Amounts paid in excess of net assets
of acquired businesses 12,020 - (1) $ 7,430 18,150
(3) (1,300)
Other assets 82,021 2,189 84,210
Total assets $4,577,974 $107,494 $ 6,130 $4,691,598
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 823,314 $26,576 $ 849,890
Interest-bearing:
Savings, money market and time 2,492,121 67,064 2,559,185
Foreign 55,118 - 55,118
3,370,553 93,640 3,464,193
Securities sold, not yet purchased 30,121 - 30,121
Federal funds purchased and security
repurchase agreements 431,176 4,705 435,881
Payable to brokers, dealers, customers
and clearing organizations 109,192 - 109,192
Accrued liabilities 67,676 802 68,478
Federal Home Loan Bank advances and other
borrowings:
Less than one year 55,976 852 (2) $ 2,425 59,253
Over one year 152,636 2,425 (2) (2,425) 152,636
Long-term debt 60,342 - 60,342
Total liabilities 4,277,672 102,424 - 4,380,096
Shareholders' equity:
Capital account 5,070 (1) (5,070) -
Capital stock:
Preferred stock - - -
Common stock 66,234 - (1) 12,500 78,734
Retained earnings 234,068 - (3) (1,300) 232,768
Total shareholders' equity 300,302 5,070 6,130 311,502
Total liabilities and shareholders' equity $4,577,974 $107,494 $ 6,130 $4,691,598
</TABLE>
See notes to unaudited pro forma condensed financial statements.
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
(unaudited)
The Reorganization will be accounted for as a purchase. Accordingly,
the following unaudited pro forma combined condensed statements of income
result from the combination of the historical consolidated condensed
statements of income or operations of Zions (restated to give effect to the
mergers of NBA effective January 14, 1994 for the nine months ended
September 30, 1993 and the year ended December 31, 1992, and Wasatch Bancorp
and Subsidiary effective October 19, 1993, for the nine months ended
September 30, 1993 only), Discount Corporation of New York ("Discount") and
Rio Salado for each period presented (thirty-two weeks ended August 11,
1993, and year ended December 31, 1992, respectively, for Discount,
accounted for as a purchase transaction). These statements should be read
in conjunction with the historical financial statement of Zions, Discount,
and Rio Salado, including the notes thereto; the supplemental consolidated
financial statements of Zions, restated to give effect to the merger with
NBA, including the notes thereto; the notes to these pro forma
combined condensed statement of income; and the pro forma combined
condensed statement of condition, including the notes thereto. The pro
forma combined results are not necessarily indicative of the results that would
have been obtained had the Reorganization been effective during the periods
presented or of the combined results of future operations.
<PAGE>
<TABLE>
<CAPTION>
ZIONS BANCORPORATION AND SUBSIDIARIES, DISCOUNT CORPORATION OF NEW YORK
AND RIO SALADO BANCORP, INC. AND SUBSIDIARY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Nine Months Ended September 30, 1993
Pro Forma
Consolidated
Pro Forma Statement of
Zions Discount Rio Salado Adjustments Income
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Interest income $214,909 $ 26,333 $5,083 $246,325
Interest expense 84,885 21,336 1,673 107,894
Net interest income 130,024 4,997 3,410 138,431
Provision for loan losses 2,255 - 400 2,655
Net interest income after provision for loan
losses 127,769 4,997 3,010 135,776
Other operating income (loss) 57,632 (4,965) 1,252 53,919
Other operating expense 124,561 19,467 2,972 (3) $ 557 147,557
Income (loss) before income taxes and cumulative
effect of changes in accounting principles 60,840 (19,435) 1,290 (557) 42,138
Income tax expense (benefit) 19,721 (5,478) 545 - 14,788
Income before cumulative effect of changes
in accounting principles 41,119 (13,957) 745 (557) 27,350
Cumulative effect of changes in accounting
principles 1,659 - - - 1,659
Net income (loss) $ 42,778 $(13,957) $ 745 $ (557) $ 29,009
Weighted average common and common
equivalent shares outstanding (4) 14,283 8,158 642 14,606
Net income (loss) per common share (4) $ 3.00 $ (1.71) $ 1.16 $ 1.99
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ZIONS BANCORPORATION AND SUBSIDIARIES, DISCOUNT CORPORATION OF NEW YORK
AND RIO SALADO BANCORP, INC. AND SUBSIDIARY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Year Ended December 31, 1992
Pro Forma
Consolidated
Pro Forma Statement of
Zions Discount Rio Salado Adjustments Income
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Interest income $278,221 $131,911 $6,274 $416,406
Interest expense 120,943 124,134 2,432 247,509
Net interest income 157,278 7,777 3,842 168,897
Provision for loan losses 10,929 - 590 11,519
Net interest income after provision for loan
losses 146,349 7,777 3,252 157,378
Other operating income 62,739 20,923 1,058 84,720
Other operating expense 138,955 53,069 3,311 (3) $ 743 196,078
Income (loss) before income taxes 70,133 (24,369) 999 (743) 46,020
Income tax expense 22,924 114 413 - 23,451
Net income (loss) $ 47,209 $(24,483) $ 586 $(743) $ 22,568
Weighted average common and common equivalent
shares outstanding (4) 13,790 8,158 641 14,112
Net income (loss) per common share (4) $ 3.42 $ (3.00) $ .91 $ 1.60
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) To record merger of Zions Bancorporation and subsidiaries and
Rio Salado Bancorp, Inc. and subsidiary using the purchase
method of accounting and issuance of Zions Bancorporation common
stock in exchange for the shares of Rio Salado Bancorp, Inc. and
record the excess of purchase price over net assets asgoodwill.
(2) To record payment of note payable due January 1995 held by Rio
Salado Bancorp, Inc. secured by the common stock of Rio Salado Bank
by Zions Bancorporation from cash obtained from borrowings due less
than one year on the effective date of the merger.
(3) To record amortization of goodwill over a period of 10 years.
(4) Weighted average common and common equivalent shares outstanding and
net income (loss) per common share have been restated for all
periods presented to reflect the Rio Salado 10% stock dividend
paid in September 1993.
<PAGE>
The following table, which shows comparative historical per Common
Share data for Zions (restated to give effect to the mergers of NBA effective
January 14, 1994 for the nine months ended September 30, 1993 and the year
ended December 31, 1992, and Wasatch Bancorp and Subsidiary effective October
19, 1993, for the nine months ended September 30, 1993 only), Discount,
and Rio Salado (separately and pro forma combined), and equivalent pro
forma per share data for Rio Salado, should be read in conjunction with the
financial information appearing elsewhere in this Proxy Statement/
Prospectus or as incorporated herein by reference to other documents. The
pro forma data in the table, presented as of September 30, 1993, and for
December 31, 1992, are presented for comparative and illustrative purposes
only and are not necessarily indicative of the combined financial position
or results of operations in the future of what the combined financial position
or results of operations would have been had the Reorganization been consummated
during the periods or as of the dates for which the information in the table
is presented:
<TABLE>
<CAPTION>
Pro Forma
Zions,
Discount
Historical and Rio
Salada Rio Salado
Rio Pro-Forma Equivalent
Per Common Share Zions Discount Salado Combined Pro-Forma(4)
<S> <C> <C> <C> <C> <C>
NET INCOME (LOSS)(1,5)
For the nine months ended
September 30, 1993 $ 3.00 $(1.71) $1.16 $ 1.99 $1.00
For the year ended
December 31, 1992 3.42 (3.00) .91 1.60 .80
CASH DIVIDENDS(2,5)
For the nine months
ended September 30, 1993 .70 -0- -0- $ .70 $.35
For the year ended
December 31, 1992 .75 .40 -0- .75 .38
BOOK VALUE:(3,5)
As of September 30, 1993 $21.15 $ - $7.88 $21.45 $10.79
As of December 31, 1992 (5) 18.95 8.69 6.72 19.35 9.73
</TABLE>
______________________
(1) Net Income per share is based on weighted average common and
common equivalent shares outstanding.
(2) Pro forma cash dividends represent historical cash dividends
of Zions.
(3) Book value per common share is based on total period-end of
Zions shareholders' equity.
(4) Pro forma equivalent amounts are computed by multiplying
the pro forma combined amounts by the estimated exchange
ratio as of January 13, 1994.
(5) Restated for Zions to reflect 100% stock dividend paid in
January 1993, which had the effect of a 2-for-1 stock split
and a 100% stock dividend paid in June 1993 by NBA, which
had the effect of a 2-for-1 stock split for NBA. Restated for
Rio Salado to reflect a 10% stock dividend paid in September
1993.
INFORMATION CONCERNING ZIONS
Recent Developments
On August 11, 1993, Zions Bank acquired Discount Corporation of
New York ("Discount") by merging Zions Mergcorp, Inc., a wholly-owned
subsidiary of Zions Bank, with and into Discount pursuant to an Agreement
and Plan of Merger between Zions Bank and Discount, dated as of May 20,
1993 (the "Discount Merger Agreement"). Discount is a primary government
securities dealer headquartered in New York City with assets of
approximately $1.0 billion at August 11, 1993. The acquisition of
Discount will strengthen Zions' capabilities in the institutional
securities sales business and will provide Zions' institutional customers
with access to investment products and services. Discount is one of
39 primary dealers in U.S. government securities and is a member of the
underwriting syndicates of four U.S. government agencies. Discount is
being operated as a division of Zions Bank. Historically, the losses in
Discount were the result of activities where Discount took positions
in financial instruments for its own account and risk. This portion of
Discount's business has been terminated and is not being continued by
Zions Bank. Pursuant to the Discount Merger Agreement, each outstanding
share of Discount common stock (the "Discount Shares"), was converted into
the right to receive cash. The total amount of cash paid by Zions to the
shareholders of Discount was $65,260,720.
On May 11, 1993 Zions and Wasatch Bancorp ("Bancorp") entered into
an agreement and plan of reorganization whereby Bancorp would merge
with and into ZMAC, Inc., a newly-organized wholly-owned subsidiary of
Zions, with ZMAC being the survivor, and immediately thereafter ZMAC
would merge with and into Zions, with Zions being the survivor, and
whereby Wasatch Bank, a wholly-owned subsidiary of Bancorp, would merge
with and into Zions Bank, with Zions Bank being the survivor (the
above-referenced transactions collectively being referred to
hereafter as the "Wasatch Reorganization"). Bancorp was a Utah
corporation and bank holding company registered under the Bank Holding
Company Act of 1956, as amended. Bancorp's sole business was that of
a holding company for Wasatch. Wasatch was a Utah chartered commercial
bank with assets of approximately $70 million at September 30, 1993,
having done business through five branch offices located in Utah
County, Utah. Upon consummation of the Wasatch Reorganization on
October 29, 1993, Zions issued 373,335 shares of Zions Common
Stock in exchange for the issued and outstanding shares of common
stock of Bancorp. At the effective date of the Wasatch
Reorganization, Bancorp and Wasatch ceased to exist. The former
offices of Wasatch are being operated as branches of Zions Bank.
On September 20, 1993 Zions and National Bancorp of Arizona Inc.
("NBA") entered into an agreement and plan of reorganization whereby
NBA would merge with and into ZMAZ, Inc., a newly-organized wholly-
owned subsidiary of Zions, with ZMAZ being the survivor, and
thereafter ZMAZ would merge with and into Zions, with Zions being the
survivor, and whereby National Bank of Arizona, a wholly-owned
subsidiary of NBA, would merge with and into Zions Bank, with Zions
Bank being the survivor (the above-referenced transactions collectively
being referred to hereafter as the "NBA Reorganization"). NBA
was a Texas corporation and bank holding company registered under
the Bank Holding Company Act of 1956, as amended. NBA's sole business
was that of a holding company for National Bank of Arizona. National
Bank of Arizona was a national bank chartered under the laws of the
United States with assets of approximately $439 million at September
30, 1993, having done business through seven branch offices located
in Tucson, Phoenix, Scottsdale, and Flagstaff. Upon consummation
of the NBA Reorganization on January 14, 1994, Zions issued 1,455,000
shares of Zions Common Stock in exchange for the issued and outstanding
shares of common stock of NBA. At the effective date of the NBA
Reorganization, NBA and National Bank of Arizona ceased to exist
and Zions Arizona changed its name to National Bank of Arizona.
The former offices of National Bank of Arizona are being operated
as branches of Zions Arizona.
SUPERVISION AND REGULATION
The information contained in this section summarizes portions
of the applicable laws and regulations relating to the supervision
and regulation of Zions and its subsidiaries. These summaries do not
purport to be complete, and they are qualified in their entirety by
reference to the particular statutes and regulations described.
Zions
Zions is a bank holding company within the meaning of the Bank
Holding Company Act and is registered as such with the Federal Reserve
Board. Under the current terms of that Act, Zions' activities, and
those of companies which it controls or in which it holds more than
5% of the voting stock, are limited to banking or managing or
controlling banks or furnishing services to or performing
services for its subsidiaries, or any other activity which the
Federal Reserve Board determines to be so closely related to banking
or managing or controlling banks as to be a proper incident thereto.
In making such determinations, the Federal Reserve Board is
required to consider whether the performance of such activities by
a bank holding company or its subsidiaries can reasonably be expected
to produce benefits to the public such as greater convenience, increased
competition or gains in efficiency that outweigh possible adverse
effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest or unsound banking practices.
Bank holding companies, such as Zions, are required to obtain
prior approval of the Federal Reserve Board to engage in any new activity
or to acquire more than 5% of any class of voting stock of any company.
Generally, no application to acquire shares of a bank located outside
the state in which the operations of the applicant's banking subsidiaries
were principally conducted on the date it became subject to the Act may
be approved by the Federal Reserve Board unless such acquisition
is specifically authorized by the laws of the state in which the bank
whose shares are to be acquired is located. Various proposals are
currently pending in the U.S. Congress to ease or eliminate these
limitations. It is not possible to predict at the present time
whether any of these proposals will become law. In the meantime,
most states have specifically authorized the acquisition of banks
located in those states by out-of-state companies, in many cases
subject to various restrictions. (See "SUPERVISION AND REGULATION -
Interstate Banking.")
The Federal Reserve Board has authorized the acquisition and
control by bank holding companies of savings and loan associations
and certain other savings institutions without regard to geographic
restrictions applicable to acquisition of shares of a bank.
The Federal Reserve Board is authorized to adopt regulations
affecting various aspects of bank holding companies. Pursuant to
the general supervisory authority of the Bank Holding Company Act
and directives set forth in the International Lending Supervision
Act of 1983, the Federal Reserve Board has adopted capital
adequacy guidelines prescribing both risk-based capital and leverage
ratios.
Regulatory Capital Requirements
Risk-Based Capital Guidelines. The Federal Reserve Board
established risk-based capital guidelines for bank holding
companies effective March 15, 1989. The guidelines define
Tier 1 Capital and Total Capital. Tier 1 Capital consists of common
and qualifying preferred shareholders' equity and minority
interests in equity accounts of consolidated subsidiaries,
less goodwill and 50% (and in some cases up to 100%) of investment
in unconsolidated subsidiaries. Total Capital consists of Tier 1
Capital plus qualifying mandatory convertible debt, perpetual debt,
certain hybrid capital instruments, certain preferred stock not
qualifying as Tier 1 Capital, subordinated and other qualifying
term debt up to specified limits, and a portion of the allowance for
credit losses, less investments in unconsolidated subsidiaries and
in other designated subsidiaries or other associated companies at
the discretion of the Federal Reserve Board, certain intangible
assets, a portion of limited-life capital instruments approaching
maturity and reciprocal holdings of banking organizations' capital
instruments. The Tier 1 component must constitute at least 50% of
qualifying Total Capital. Risk-based capital ratios are calculated with
reference to risk-weighted assets, which include both on-balance
sheet and off-balance sheet exposures. The risk-based capital framework
contains four risk weight categories for bank holding company assets --
0%, 20%, 50% and 100%. Zero percent risk-weighted assets include,
inter alia, cash and balances due from Federal Reserve Banks and
obligations unconditionally guaranteed by the U.S. government or its
agencies. Twenty percent risk-weighted assets include, inter alia,
claims on U.S. Banks and obligations guaranteed by U.S. government
sponsored agencies as well as general obligations of states or
other political subdivisions of the United States. Fifty percent
risk-weighted assets include, inter alia, loans fully secured by first
liens on one-to-four family residential properties, subject to certain
conditions. All assets not included in the foregoing categories are
assigned to the 100% risk-weighted category, including loans to
commercial and other borrowers. As of year-end 1992, the minimum
required ratio for qualifying Total Capital became 8%, of which at
least 4% must consist of Tier 1 Capital. At September 30, 1993,
Zions' Tier 1 and Total Capital ratios were 10.93% and 14.36%,
respectively.
The current risk-based capital ratio analysis establishes
minimum supervisory guidelines and standards. It does not
evaluate all factors affecting an organization's financial
condition. Factors which are not evaluated include (i) overall
interest rate exposure; (ii) liquidity, funding and market risks;
(iii) quality and level of earnings; (iv) investment or loan portfolio
concentrations; (v) quality of loans and investments; (vi) the
effectiveness of loan and investment policies; and (vii) management's
overall ability to monitor and control other financial and operating
risks. The capital adequacy assessment of federal bank regulators
will, however, continue to include analyses of the foregoing considerations
and in particular, the level and severity of problem and classified assets.
<PAGE>
The following table presents Zions' regulatory capital position at
September 30, 1993 under the risk-based capital guidelines (restated to
give effect to the mergers of NBA and Wasatch Bancorp and Subsidiary
effective January 14, 1994 and October 19, 1993, respectively) and as
adjusted to give effect to the offering of its stock in the Reorganization.
Risk-Based Capital
<TABLE>
<CAPTION>
Zions Pro Forma Combined
(Dollars in thousands)
Percent Percent
of Risk- of Risk-
Adjusted Adjusted
Amount Assets Amount Assets
<S> <C> <C> <C> <C>
Tier 1 Capital . . . . . . . . $ 280,489 10.78% $ 285,559 10.74%
Minimum Requirement . . . . . . 104,054 4.00 106,352 4.00
Excess . . . . . . . . . . . $ 176,435 6.78% $ 179,207 6.74%
Total Capital . . . . . . . . . $ 367,448 14.12% $ 373,243 14.04%
Minimum Requirement . . . . . . 208,109 8.00 212,704 8.00
Excess . . . . . . . . . . . $ 159,339 6.12% $ 160,539 6.04%
Risk-Adjusted Assets,
Net of Goodwill and
Excess Allowance . . . . . . $2,601,357 100.00% $2,658,797 100.00%
</TABLE>
Minimum Leverage Ratio. On June 20, 1990 the Federal Reserve Board
adopted new capital standards and leverage capital guidelines that
include a minimum leverage ratio of 3% Tier 1 Capital to total assets
(the "leverage ratio"). The leverage ratio is used in tandem with the
final risk-based ratio of 8% that took effect at the end of 1992.
The Federal Reserve Board has emphasized that the leverage ratio
constitutes a minimum requirement for well-run banking organizations
having well-diversified risk, including no undue interest rate exposure,
excellent asset quality, high liquidity, good earnings, and a composite
rating of 1 under the Interagency Bank Rating System. Banking
organizations experiencing or anticipating significant growth, as well
as those organizations which do not exhibit the characteristics of a
strong, well-run banking organization described above, will be required
to maintain strong capital positions substantially above the minimum
supervisory levels without significant reliance on intangible assets.
Furthermore, the Federal Reserve Board has indicated that it will
consider a "tangible Tier I Capital Leverage Ratio" (deducting all
intangibles) and other indicies of capital strength in evaluating
proposals for expansion or new activities.
On December 21, 1993, the OCC, the Federal Reserve Board and the
FDIC (together, the "Agencies") announced that they are or will be
requesting public comment on proposed amendments to the regulatory
capital rules to explicitly include in Tier 1 Capital net unrealized
holding gains and losses on available-for-sale securities. Such
unrealized gains and losses are currently reported as a component of
stockholders' equity following a bank's adoption of Statement of
Financial Accounting Standards No. 115 (FAS 115). As of January 1,
1994, or the beginning of their first fiscal year thereafter, if later,
all banks must have adopted FAS 115 for purposes of preparing their
Reports of Condition and Income (Call Reports). During the comment
receipt and evaluation process, Tier 1 capital will be calculated as
currently defined.
The following table presents Zions' leverage ratio at September 30,
1993 (restated to give effect to the mergers of NBA and Wasatch Bancorp
and Subsidiary effective January 14, 1994 and October 19, 1993,
respectively), as adjusted to give effect to the offering of its common
stock made hereby. A leverage ratio of 3% will be the minimum required
for the most highly rated banking organizations, and according to the
Federal Reserve Board, other banking organizations would be expected to
maintain capital at higher levels.
<TABLE>
<CAPTION>
Zions Pro Forma Combined
(Dollars in thousands)
Percent Percent
of Average of Average
Assets, Net Assets, Net
Amount of Good Will Amount of Good Will
<S> <C> <C> <C> <C>
Tier 1 Capital $ 280,489 5.75% $ 285,559 5.74%
Minimum Requirement 146,463 3.00 149,260 3.00
Excess $ 134,026 2.75% $ 136,299 2.74%
Average Assets, Net of Goodwill $4,882,104 100.00% $4,975,334 100.00%
</TABLE>
Other Issues and Developments Relating to Regulatory Capital.
Pursuant to such authority and directives set forth in the International
Lending Supervision Act of 1983, the Comptroller, the FDIC and the
Federal Reserve Board have issued regulations establishing the capital
requirements for banks under federal law. The regulations, which apply
to Zions' banking subsidiaries, establish minimum risk-based and
leverage ratios which are substantially similar to those applicable to
Zions. As of September 30, 1993, the risk-based and leverage ratios of
each of Zions' banking subsidiaries exceeded the minimum requirements.
On December 19, 1991, the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") was signed into law. FDICIA subjects
banks to significantly increased regulation and supervision. Among
other things, FDICIA requires federal bank regulatory authorities to
revise, prior to June 19, 1993, their risk-based capital guidelines to
ensure that those standards take account of interest rate risk,
concentrations of credit and the risk of non-traditional activities, as
well as reflect the actual performance and risk of multifamily
mortgages. On September 14, 1993, the federal banking agencies
published in the Federal Register a proposed measure of interest rate
risk exposure which measures such exposure as the effect that a
specified change in market interest rates would have on the net economic
value of banks. Under this proposal, banks (excluding certain "low
risk" institutions as defined therein) would calculate and report
estimated changes in their net economic value resulting from the effect
of specified changes in market interest rates on their assets,
liabilities and off-balance sheet positions, utilizing either a
supervisory model or approved internal models. The proposal sets forth
two alternative methods for utilizing such results in assessing
institutions' capital adequacy for interest rate risk exposure. One
method would require institutions to hold capital equal to the dollar
decline in their net economic value exceeding a supervisory threshold of
one percent of total assets; the other method provides for an agency
assessment of institutions' capital needs for interest rate risk in
light of both the level of measured interest rate risk exposure and
qualitative factors. However, the proposal is still under
consideration. The federal banking agencies have also proposed
revisions to their risk-based capital rules to ensure that risks arising
from concentrations of credit and nontraditional activities are taken
into account when assessing an institution's capital adequacy. The
proposal calls on institutions to take account of such risks in
assessing their capital adequacy rather than imposing explicit capital
requirements with respect to them. Because the final terms of the
regulators' implementation of this requirement of FDICIA are not yet
known, Zions cannot predict the effect the inclusion of these risk
factors in the risk-based capital rules of the federal banking agencies
will have upon its capital requirements or those of its subsidiaries.
FDICIA amended Section 38 of the Federal Deposit Insurance Act
("FDIA") to require the federal banking regulators to take "prompt
corrective action" in respect of banks that do not meet minimum capital
requirements and imposes certain restrictions upon banks which meet
minimum capital requirements but are not "well capitalized" for purposes
of FDICIA. FDICIA establishes five capital tiers: "well capitalized,"
"adequately capitalized," "undercapitalized," "significantly
undercapitalized," and "critically undercapitalized." Implementing
regulations adopted by the federal banking agencies in September 1992
and effective on December 19, 1992 define the capital categories for
banks which will determine the necessity for prompt corrective action by
the federal banking agencies. A bank may be placed in a capitalization
category that is lower than is indicated by its capital position if it
receives an unsatisfactory examination rating with respect to certain
matters.
Failure to meet capital guidelines could subject a bank to a
variety of restrictions and enforcement remedies. Under FDICIA, all
insured banks are generally prohibited from making any capital
distributions and from paying management fees to persons having control
of the bank where such payments would cause the bank to be
undercapitalized. Holding companies of significantly undercapitalized,
critically undercapitalized and certain undercapitalized banks may be
required to obtain the approval of the Federal Reserve Board before
paying capital distributions to their shareholders. Moreover, a bank
that is not well capitalized is generally subject to various
restrictions on "pass through" insurance coverage for certain of its
accounts and is generally prohibited from accepting brokered deposits
and offering interest rates on any deposits significantly higher than
the prevailing rate in its normal market area or nationally (depending
upon where the deposits are solicited). Such banks and their holding
companies are also required to obtain regulatory approval prior to their
retention of senior executive officers. Banks which are classified
undercapitalized, significantly undercapitalized or critically
undercapitalized are required to submit capital restoration plans
satisfactory to their federal banking regulator and guaranteed within
stated limits by companies having control of such banks (i.e., to the
extent of the lesser of five percent of the institution's total assets
at the time it became undercapitalized or the amount necessary to bring
the institution into compliance with all applicable capital standards as
of the time the institution fails to comply with its capital restoration
plan, until the institution is adequately capitalized on average during
each of four consecutive calendar quarters), and are subject to
regulatory monitoring and various restrictions on their operations and
activities, including those upon asset growth, acquisitions, branching
and entry into new lines of business and may be required to divest
themselves of or liquidate subsidiaries under certain circumstances.
Holding companies of such institutions may be required to divest
themselves of such institutions or divest themselves of or liquidate
nondepository affiliates under certain circumstances. Critically
undercapitalized institutions are also prohibited from making payments
of principal and interest on debt subordinated to the claims of general
creditors and are generally subject to the mandatory appointment of a
conservator or receiver.
Other Regulations
FDICIA requires the federal banking agencies to adopt, by August 1,
1993, regulations prescribing standards for safety and soundness of
insured banks and their holding companies, including standards relating
to internal controls, information systems, internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset
growth, compensation, fees and benefits, asset quality, earnings and
stock valuation, as well as other operational and managerial standards
deemed appropriate by the agencies. Upon a determination by a federal
banking agency that an insured bank has failed to satisfy any such
standard, the bank will be required to file an acceptable plan to
correct the deficiency. If the bank fails to submit or implement an
acceptable plan, the federal banking agency may, and in some instances
must, issue an order requiring the institution to correct the
deficiency, restrict its asset growth, increase its ratio of tangible
equity to assets, or imposing other operating restrictions. On November
18, 1993, the federal banking agencies issued a notice of proposed
rulemaking setting forth general safety and soundness in areas
prescribed in FDICIA and solicited comments regarding the proposed
safety and soundness standards. In the view of the federal banking
agencies, the proposed standards do not represent a change in existing
policies but, instead, formalize fundamental standards already applied
by the agencies. In general, the proposed standards establish
objectives of proper operations and management while leaving the
specific methods for achieving those objectives to each institution.
However, the proposal establishes a maximum permissible ratio of
classified assets to capital for institutions. The proposal also
implements the requirements of FDICIA regarding the submission and
review of safety and soundness plans by institutions failing to meet the
prescribed standards and the issuance of orders where institutions have
failed to submit acceptable compliance plans or implement an accepted
plan in any material respect. Because the final terms of the
regulators' implementation of this requirement of FDICIA are not yet
known, Zions cannot predict the effect of its application to its
operations or the operations of its subsidiaries.
FDICIA also contains provisions which, among other things, restrict
investments and activities as principal by state nonmember banks to
those eligible for national banks, impose limitations on deposit account
balance determinations for the purpose of the calculation of interest,
and require the federal banking regulators to prescribe, implement or
modify standards, respectively, for extensions of credit secured by
liens on interests in real estate or made for the purpose of financing
construction of a building or other improvements to real estate, loans
to bank insiders, regulatory accounting and reports, internal control
reports, independent audits, exposure on interbank liabilities,
contractual arrangements under which institutions receive goods,
products or services, deposit account-related disclosures and
advertising as well as to impose restrictions on federal reserve
discount window advances for certain institutions and to require that
insured depository institutions generally be examined on-site by federal
or state personnel at least once every twelve (12) months.
In connection with an institutional failure or FDIC rescue of a
financial institution, the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA") grants to the FDIC the right, in many
situations, to charge its actual or anticipated losses against commonly
controlled depository institution affiliates of the failed or rescued
institution (although not against a bank holding company itself).
FIRREA also explicitly allows bank holding companies to acquire healthy
as well as troubled savings associations (including savings and loan
associations and federal savings banks) under Section 4 of the Bank
Holding Company Act. In connection with this authorization, the Federal
Reserve Board has been instructed not to impose so-called "tandem
operating restrictions" which might otherwise limit the joint marketing
or joint operations of affiliated banks and thrifts beyond those
restrictions otherwise embodied in law. FIRREA also relieves bank
holding companies that own savings associations of certain duplicative
or intrusive savings and loan holding company regulations and, in some
instances, allows savings associations that have been acquired by bank
holding companies to merge into affiliated banks or become banks
themselves.
On October 28, 1992, the Housing and Community Development Act of
1992 was enacted which, inter alia, modified prior law regarding the
establishment of compensation standards by the federal banking agencies,
deposit account disclosures, loans to bank insiders and real estate
appraisal requirements; made certain technical corrections to FDICIA;
imposed new sanctions upon banks convicted of money laundering or cash
transaction reporting offenses; and restricted the methods banks may
employ to calculate and refund prepaid interest on mortgage refinancings
and consumer loans. In addition, on October 23, 1992, the Depository
Institutions Disaster Relief Act of 1992 was enacted, affording the
federal banking agencies limited discretion to provide relief from
certain regulatory requirements to depository institutions doing
business or seeking to do business in an emergency or major disaster
area. Zions does not currently expect that the implementation of these
laws will have a material adverse effect upon its operations and
business or upon the operations and business of its subsidiaries.
On August 10, 1993 the President signed into law the Omnibus Budget
Reconciliation Act of 1993 which contains provisions that, inter alia,
affect the amortization of intangible assets by banks, require
securities dealers (including banks) to adopt mark-to-market accounting
to calculate income taxes, transfer surplus funds from the Federal
Reserve System to the Department of the Treasury, authorize the United
States Government to originate student loans and establish a preference
for depositors in liquidations of FDIC-insured banks. Zions is
currently assessing the consequences to its operations, earnings and
capital position, and that of its subsidiaries of the enactment of this
legislation. In addition, a number of legislative and regulatory
measures have been proposed to strengthen the federal deposit insurance
system and to improve the overall financial stability of the U.S.
banking system, including those to authorize interstate banking for
national banks, reduce regulatory burdens on financial institutions and
regulate the sale of securities and insurance by banks as well as bank
involvement in derivatives activities. It is impossible to predict
whether or in what form these proposals may be adopted in the future
and, if adopted, what their effect will be on Zions and its
subsidiaries.
Deposit Insurance Assessments
The insured bank subsidiaries of Zions are required to pay semi-
annual deposit insurance assessments to the BIF. FDICIA requires the
FDIC to establish a schedule to increase the reserve ratio of the BIF to
1.25% of insured deposits (or such higher ratio as the FDIC determines
to be justified for any year by circumstances raising a significant risk
of substantial future losses) over a 15 year period, and to increase the
assessment rate on banks, if necessary, to achieve that ratio. FDICIA
also requires the FDIC to establish by January 1, 1994, by regulation, a
risk-based assessment system for deposit insurance which will take into
account the probability that the deposit insurance fund will incur a
loss with respect to an institution, the likely amount of such loss and
the revenue needs of the deposit insurance fund.
On October 1, 1992, the FDIC published revisions to its deposit
insurance regulation to establish a transitional risk-based assessment
system pending establishment of a permanent risk-based assessment system
by January 1, 1994. Effective January 1, 1993, each insured bank's
insurance assessment rate is determined by the risk assessment
classification into which it has been placed by the FDIC. The FDIC
places each insured bank in one of nine risk assessment classifications
based upon its level of capital and supervisory evaluations by its
regulators: "well capitalized" banks, "adequately capitalized" banks or
"less than adequately capitalized" banks, with each category of banks
divided into subcategories of banks which are either "healthy," of
"supervisory concern" or of "substantial supervisory concern." An eight
basis point spread exists between the assessment rate established for
the highest and lowest risk classification, so that banks classified as
strongest by the FDIC are subject to a rate of .23% (the same rate as
under the previous flat-rate assessment system) while those classified
as weakest by the FDIC are subject to a rate of .31% (with intermediate
rates of .26%, .29% and .30%). The FDIC staff has stated that insured
banks will pay an average rate of approximately .254%. At a meeting on
June 17, 1993, the FDIC Board of Directors approved revisions to its
regulation establishing the transitional risk-based assessment system
with respect to the making of supervisory subgroup assignments and
review of such assignments by the FDIC, the making of capital group
assignments for new institutions by the FDIC, the payment of disputed
assessments by institutions and other matters. In addition, on May 25,
1993, the FDIC Board of Directors voted to amend the current
recapitalization schedule for the BIF to reflect the projected
achievement by the BIF of a reserve ratio of 1.25% of insured deposits
by 2002 (rather than 2006 under the current schedule) and retain the
current deposit insurance assessment rates for BIF-member institutions
for semi-annual periods beginning July 1, 1993. Zions does not
presently expect that implementation of the transitional risk-based
deposit insurance assessment system, as so revised, will have a material
adverse impact on its overall financial condition or results of
operations or those of its bank subsidiaries.
It is possible that the FDIC insurance assessments will be
increased further in the future. In addition, the FDIC has authority to
impose special assessments from time to time.
Interstate Banking
Existing laws and various regulatory developments have allowed
financial institutions to conduct significant activities on an
interstate basis for a number of years. During recent years, a number
of financial institutions have expanded their out-of-state activities
and various states have enacted legislation intended to allow certain
interstate banking combinations which otherwise would be prohibited by
federal law.
The Bank Holding Company Act generally does not permit the Federal
Reserve Board to approve an acquisition by a bank holding company of
voting shares or assets of a bank located outside the state in which the
operations of its banking subsidiaries are principally conducted unless
the acquisition is specifically authorized by the statutes of the state
in which such bank is located. Under the laws of Utah and Arizona,
respectively, any out-of-state bank or bank holding company may acquire
a Utah or Arizona bank or bank holding company upon the approval of the
bank supervisor of the state. There is no requirement that the laws of
the state in which the out-of-state bank or bank holding company's
operations are principally conducted afford reciprocal privileges to
Utah- or Arizona-based acquirers.
Zions Arizona
Zions Arizona, as a national bank, is subject to the supervision
of, and regulation and examination by, the Comptroller. Deposits,
reserves, investments, loans, consumer law compliance, issuance of
securities, payment of dividends, mergers and consolidations, electronic
funds transfers, management practices, and other aspects of Zions
Arizona's operations are subject to regulation. The approval of the
Comptroller is required for the establishment of additional branch
offices by Zions Arizona, subject to applicable state law restrictions.
Zions Arizona is a member of the Federal Reserve System, and the
deposits of Zions Arizona are insured by the FDIC. Accordingly, Zions
Arizona is subject to certain regulations of the Federal Reserve Board
and the FDIC as well as those of the Comptroller. Some of the aspects
of the lending and deposit business of Zions Arizona that are subject to
regulation by the Federal Reserve Board or the FDIC include disclosure
requirements in connection with personal and mortgage loans, interest on
deposits, and reserve requirements. In addition, Zions Arizona is
subject to numerous federal, state, and local laws and regulations which
set forth specific restrictions and procedural requirements with respect
to the extension of credit, credit practices, the disclosure of credit
terms, and discrimination in credit transactions.
As a consequence of the extensive regulation of the commercial
banking business in the United States, the business of Zions Arizona is
particularly susceptible of being affected by federal and state
legislation and regulations, which may increase the cost of doing
business.
MONETARY POLICY
The earnings of Zions, Zions Arizona, Rio Salado, and the Bank are
directly affected by the monetary and fiscal policies of the federal
government and governmental agencies. The Federal Reserve Board has
broad powers to expand and constrict the supply of money and credit and
to regulate the reserves which its member banks must maintain based on
deposits. These broad powers are used to influence the growth of bank
loans, investments and deposits, and may affect the interest rates which
will prevail in the market for loans and investments and deposits.
Governmental and Federal Reserve Board monetary policies have had a
significant effect on the operating results of commercial banks in the
past and are expected to do so in the future. The future impact of such
policies and practices on the growth or profitability of Zions, Zions
Arizona, Rio Salado, and the Bank cannot be predicted.
<PAGE>
ZIONS BANCORPORATION
SELECTED FINANCIAL DATA
The following unaudited table of selected financial data (restated
to give effect to the mergers of NBA effective January 14, 1994 for all
periods presented, and Wasatch Bancorp and Subsidiary effective October
19, 1993, for the nine months ended September 30, 1993 only) should be
read in conjunction with Zions' supplemental consolidated financial
statements and the related notes included herein. See "Zions Documents
Incorporated by Reference." In the opinion of management of Zions, all
adjustments (consisting only of normal recurring accruals) necessary to
a fair statement of the results for the interim periods have been
included. The results for the interim period ended September 30, 1993
are not necessarily indicative of the results for the entire year.
ZIONS BANCORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(dollars in thousands, except per share and ratio data)
<TABLE>
<CAPTION>
As of, and for the
Nine Months Ended As of, and for the
September 30, Year Ended December 31,
1993 1992 1992 1991 1990 1989 1988
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS SUMMARY
Net interest income $130,024 $114,255 $157,278 $139,865 $128,114 $121,726 $109,581
Provision for loan losses 2,255 9,319 10,929 25,561 20,084 30,436 53,746
Other operating income 57,632 44,426 62,739 52,463 47,926 39,159 31,973
Other operating expense (1)
Income (loss) before
cumulative effect of 124,561 102,184 138,955 123,000 116,288 109,709 104,026
changes in accounting principles
and extraordinary item 41,119 31,744 47,209 30,449 27,765 15,053 (16,850)
Cumulative effect of changes in
accounting principles (2) 1,659 - - - - - -
Extraordinary item (3) - - - - - 3,750 -
Net income (loss) 42,778 31,744 47,209 30,449 27,765 18,803 (16,850)
COMMON STOCK DATA (4)
Earnings per common share:
Income (loss) before cumulative
effect of changes in accounting
principles and extraordinary
item $ 2.88 $2.31 $3.42 $2.23 $2.07 $1.13 $(1.52)
Net income (loss) 3.00 2.31 3.42 2.23 2.07 1.41 (1.52)
Dividends paid per share .70 .54 .75 .72 .72 .72 .72
Dividend payout ratio (%) 21.34% 22.08% 20.31% 29.89% 32.20% 47.08% 293.66%
Book value per share at period end 21.15 18.01 18.95 16.23 14.63 13.23 12.53
Market to book value at period
end (%) 199.76% 166.57% 200.53% 132.47% 108.51% 104.88% 87.79%
Weighted average common and common
equivalent shares outstanding
during the period 14,283,000 13,768,000 13,790,000 13,634,000 13,430,000 13,317,000 13,154,000
Common shares outstanding at
period end 14,198,040 13,707,640 13,727,576 13,603,844 13,442,072 13,354,096 13,153,274
AVERAGE BALANCE SHEET DATA
Money market investments $ 633,335 $ 485,862 $ 469,062 $ 670,583 $ 550,222 $ 431,576 $ 330,884
Securities 1,179,234 902,833 928,105 702,199 529,878 468,021 465,799
Loans and leases, net 2,237,065 2,123,933 2,124,028 1,897,464 1,835,475 1,769,898 1,798,982
Total interest-earning assets 4,049,634 3,512,628 3,521,195 3,270,246 2,915,575 2,669,495 2,595,665
Total assets 4,427,663 3,764,576 3,807,581 3,536,657 3,209,260 2,993,881 2,902,487
Interest-bearing deposits 2,464,899 2,355,227 2,356,057 2,219,098 2,068,762 1,917,740 1,845,764
Total deposits 3,170,213 2,883,439 2,912,533 2,700,887 2,531,434 2,358,367 2,299,781
FHLB advances and other
borrowings 824,379 513,608 523,476 485,931 334,377 279,377 271,883
Long-term debt 79,061 77,139 82,219 86,967 94,923 97,730 101,783
Shareholders' equity 283,045 233,834 240,411 208,729 186,715 170,743 177,527
END OF PERIOD BALANCE SHEET DATA
Money market investments $ 451,141 $ 445,095 $ 616,180 $ 714,238 $ 831,086 $ 415,625 $ 413,847
Securities 1,232,311 930,605 981,695 853,031 630,972 493,277 527,539
Loans and leases, net 2,421,203 2,212,572 2,133,710 2,010,813 1,905,449 1,761,158 1,724,376
Allowance for loan losses 68,334 61,615 59,807 58,238 60,947 62,001 55,367
Total assets 4,577,974 3,879,310 4,107,923 3,883,938 3,720,136 3,116,700 3,042,965
Total deposits 3,370,553 2,976,492 3,075,109 2,877,859 2,684,826 2,454,754 2,379,827
FHLB advances and other
borrowings 669,909 530,701 628,119 646,295 695,428 298,994 346,052
Long-term debt 60,342 75,756 99,223 81,134 92,794 95,740 98,485
Shareholders' equity 300,302 246,916 260,070 220,754 196,706 176,725 164,762
Nonperforming assets:
Nonaccrual loans 24,813 22,042 21,282 33,178 35,802 41,324 60,903
Restructured loans 1,620 4,151 4,003 3,225 10,181 11,370 2,881
Other real estate owned 4,609 6,022 6,245 10,257 17,434 33,752 31,983
Total nonperforming assets 31,042 32,215 31,530 46,660 63,417 86,446 95,767
Accruing loans past due 90 days
or more 3,091 6,602 6,409 5,315 10,273 16,395 11,859
SELECTED RATIOS (5)
Net interest margin (6) 4.29% 4.45% 4.57% 4.36% 4.50% 4.67% 4.43%
Return on average assets 1.29 1.13 1.24 .86 .86 .64 (.64)
Return on average common equity 20.2 18.1 19.6 14.6 14.8 11.0 (10.7)
Ratio of average common equity
to average assets 6.39 6.21 6.31 5.90 5.82 5.70 6.12
Ratio of nonperforming assets
to total assets .68 .83 .77 1.20 1.70 2.77 3.15
Ratio of nonperforming assets to
net loans and leases and other
real estate owned 1.28 1.45 1.47 2.31 3.30 4.81 5.45
Ratio of allowance for loan losses
to net loans and leases and leases
outstanding at period end 2.82 2.78 2.80 2.89 3.20 3.52 3.21
Ratio of allowance for loan losses
to nonperforming loans 220.13 236.53 159.98 132.54 117.66 86.80 235.23
</TABLE>
(1) Other operating expense for the nine months ended September 30, 1993
included a one-time expense of $6,022,000 in the first quarter of 1993,
related to the early extinguishment of debt which was necessitated by
the decision in March 1993, to notify holders of floating rate notes
totaling $37,450,000 and industrial revenue bonds totaling $4,720,000
that the debt would be redeemed during the second quarter of 1993. The
expense consisted of marking to market an interest rate exchange
agreement entered into several years ago in conjunction with the
issuance of the floating rate notes and writing off deferred costs
associated with the notes and bonds. Early redemption of the bonds and
notes in the second quarter of 1993, allowed Zions Bancorporation to
avail itself of lower cost funding.
(2) Cumulative effect of changes in accounting principles for the nine
months ended September 30, 1993 resulted from the cumulative effect of
changes in accounting principles in the first quarter of 1993, arising
from the adoption as of January 1, 1993, of Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions," and SFAS No. 109,
"Accounting for Income Taxes." The election of immediate recognition of
the cumulative effect (transition obligation) of such change in
accounting method for postretirement benefit other than pensions of SFAS
No. 106 decreased pretax and after-tax net income by $5,760,000 and
$3,631,000, respectively. In addition to the $2,129,000 deferred tax
benefit resulting from the adoption of SFAS No. 106 the election to
apply SFAS No. 109 prospectively and not restate prior years resulted
in net deferred tax benefits of $5,250,000 for the expected future tax
consequences of temporary differences between the carrying amounts and
the tax bases of other assets and liabilities.
(3) Extraordinary item for the year ending December 31, 1989 resulted from
an income tax benefit from net operating loss carry forwards.
(4) Share information for all periods has been restated to reflect a Zions
Bancorporation 100% stock dividend paid in January 1993, which had the
effect of a two-for-one stock split and a 100% stock dividend paid in
June 1993 by National Bancorp of Arizona Inc. which had the effect of a
two-for-one stock split for National Bancorp of Arizona Inc.
(5) Ratios for the interim periods have been annualized.
(6) Net interest margin represents net interest income on a taxable-
equivalent basis as a percentage of average earning assets.
<PAGE>
STOCK PRICES AND DIVIDENDS ON ZIONS COMMON STOCK
Zions Common Stock is traded in the over-the-counter market under the
symbol "ZION" and is listed in the NASDAQ National Market System. The
following table sets forth the high and low bid quotations for Zions
Common Stock for the periods indicated, in each case as reported by
NASDAQ, and the cash dividends per share declared on Zions Common Stock
for such periods. Such over-the-counter market quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission,
and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
Quarterly Bid Cash
Price Range Dividends
High Low Declared
<S> <C> <C> <C>
1991
First Quarter........................... $18.50 $14.38 $.18
Second Quarter.......................... 21.88 18.13 .18
Third Quarter........................... 24.88 20.00 .18
Fourth Quarter.......................... 23.75 19.13 .18
$.72
1992
First Quarter........................... $24.50 $19.75 $.18
Second Quarter.......................... 28.38 23.75 .18
Third Quarter........................... 30.00 26.88 .18
Fourth Quarter.......................... 39.00 28.88 .21
$.75
1993
First Quarter........................... $49.00 $41.50 $.21
Second Quarter.......................... 48.75 38.50 .21
Third Quarter........................... 44.25 38.50 .28
Fourth Quarter.......................... 45.50 36.00 .28
$.98
1994
First Quarter
(through February __, 1994)........... $_____ $______ $___
</TABLE>
On November 17, 1993, the last NASDAQ trading day prior to the
public announcement of the Reorganization, the closing sale price for
the Zions Common Stock was $ 38.75. On February __, 1994, the closing
sale price for the Zions Common Stock was $_____. On February __, 1994,
there were approximately ___________ shares of Zions Common Stock
outstanding, held by approximately ______ shareholders of record.
While Zions is not obligated to pay cash dividends, Zions' Board
of Directors presently intends to continue the policy of paying
quarterly cash dividends. Future dividends will depend, in part, upon
the earnings and financial condition of Zions.
<PAGE>
PRINCIPAL HOLDERS OF ZIONS COMMON STOCK
The following table sets forth as of November 17, 1993, the
record and beneficial ownership of Zions Common Stock by the principal
common shareholders of Zions.
<TABLE>
<CAPTION>
Common Stock
Name and Address Type of Ownership No. of Shares % of Class
<S> <C> <C> <C>
Roy W. Simmons, David E. Simmons, Record 1,149,820 9.02%
Harris H. Simmons, I.J. Wagner,
and Louis H. Callister, Jr., as
Voting Trustees(1)
One Main Street
Salt Lake City, Utah 84133
Roy W. Simmons Record and Beneficial 412,846 3.24%
One Main Street Beneficial(2) 610,046 4.79%
Salt Lake City, Utah 84133 1,022,892 8.03%
FMR Corporation(3) Beneficial 755,200 5.93%
82 Devonshire Street
Boston, Massachusetts 02109
Zions First National Bank Record(4) 932,984 7.32%
One Main Street
Salt Lake City, Utah 84133
</TABLE>
_____________________
(1) The voting trust will expire on December 31, 1996, unless sooner
terminated by a vote of two-thirds of the shares deposited under
the voting trust. The voting trustees, three of the five of whom
are directors of Zions and/or its subsidiaries, have exclusive
voting rights with respect to the shares, and have the further
right to sell any or all of the shares after consultation with
the beneficial owners as to their desires to such sale and the
price thereof. The beneficial owners may transfer their voting
trust certificates, but are prohibited from selling any of the
underlying shares held by the voting trustees without the consent
of a majority of the voting trustees. The addresses of the
voting trustees are as follows: Roy W. Simmons, 1 South Main
Street, Salt Lake City, Utah; David E. Simmons, 303 E. South
Temple, Salt Lake City, Utah; Harris H. Simmons, 1 South Main
Street, Salt Lake City, Utah; I.J. Wagner, 910 Kennecott
Building, Salt Lake City, Utah; and Louis H. Callister, Jr., 800
Kennecott Building, Salt Lake City, Utah.
(2) Includes Roy W. Simmons' beneficial ownership interest in 590,714
shares deposited with the voting trust referred to in note (1)
above.
(3) The information is derived from a report dated February 14, 1993
filed with the Securities and Exchange Commission.
(4) These shares are owned of record as of November 17, 1993, by
Zions First National Bank, a subsidiary of Zions, in its capacity
as fiduciary for various trust and advisory accounts. Of the
shares shown, Zions First National Bank has sole voting power
with respect to a total of 669,670 shares (5.26% of the class) it
holds as trustee for the Zions Bancorporation Employee Stock
Savings Plan and the Zions Bancorporation Employee Investment
Savings Plan. Zions First National Bank also acts as trustee for
the Zions Bancorporation Dividend Reinvestment Plan, which holds
226,509 shares (2.43% of the class) as to which Zions First
National Bank does not have or share voting power.
Zions has been advised that the Corporation of the President of the
Church of Jesus Christ of Latter-day Saints beneficially owned as of
August 24, 1993, approximately 753,282 shares of Zions Common Stock,
which represents approximately 6.11% of the outstanding shares of
Zions Common Stock outstanding as of August 24, 1993. Such shares
include 605,232 shares owned directly by the Corporation of the
President, as well as 148,050 shares owned by its wholly-owned
subsidiary.
As of November 17, 1993, all directors and executive officers
of Zions as a group beneficially owned 2,052,426 shares of Zions
Common Stock, or 16.11% of the outstanding shares of Zions
Common Stock. Included in the above-referenced amount are 1,149,820
shares held by the Zions Voting Trust.
ZIONS DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed by Zions with the SEC
pursuant to the Exchange Act are hereby incorporated by reference in
this Proxy Statement/Prospectus:
1. Zions' Annual Report on Form 10-K for the year ended
December 31, 1992 ("Zions Form 10-K");
2. Zions' Quarterly Reports on Form 10-Q for the quarters
ended March 31, June 30, and September 30, 1993;
3. Zions Current Reports on Form 8-K dated August 11,
as amended on September 30, 1993, and on Forms
8-K dated September 20, 1993 and January 14, 1994; and
4. The audited consolidated financial statements of NBA
as of December 31, 1992 and 1991, and for each
of the years in the three-year period ended
December 31, 1992, and the unaudited interim
consolidated financial statements of NBA as of and for
the periods ended September 30, 1993 and 1992, as set
forth in Zions' Rule 424(b)(3) prospectus, dated
December 3, 1993.
For the convenience of Rio Salado shareholders, a copy of Zions'
1992 Annual Report to Shareholders ("Zions Annual Report") is being mailed to
Rio Salado shareholders along with this Proxy Statement/Prospectus. The
following portions of the Zions Annual Report have been incorporated by
reference into the Zions Form 10-K and by reference to the ZionsForm 10-K
are also incorporated by reference herein:
1. "Selected Financial Data" on pages 1 and 29 through 32;
2. "Management's Discussion and Analysis" on pages 9 through 28;
3. "Independent Auditors Report" and the consolidated financial
statements and notes to consolidated financial statements on
pages 33 through 47;
4. "Quarterly Financial Information" on page 29; and
5. "Market Prices and Dividends" on page 27.
Portions of the Zions Annual Report other than those listed
above as incorporated herein by reference are not part of this Proxy
Statement/Prospectus. The Zions Annual Report does not contain all
of the information contained in the Zions Form 10-K. Rio Salado
shareholders who wish to obtain copies of the documents incorporated
by reference herein may do so by following the instructions under
"Available Information" above.
All documents filed by Zions with the SEC pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy Statement/
Prospectus and prior to the date of the Special Meeting shall be deemed to be
incorporated by reference in this Proxy Statement/Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained
herein or in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Proxy Statement/Prospectus to the extent that a statement contained herein or
in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement/Prospectus.
INFORMATION CONCERNING RIO SALADO
Rio Salado was organized in 1982 under Arizona law as Rio Salado
Bank. Pursuant to a plan of reorganization, the Bank in 1984 became a
wholly-owned subsidiary of Rio Salado and shares of the Bank were converted
into shares of Rio Salado. Rio Salado, through the Bank, operates four
offices, including two in Tempe and two in Mesa. The Bank provides
a full range of commercial banking services, including consumer and
commercial loans, residential real estate loans, and construction and
permanent mortgage loans. The Bank offers a variety of deposit accounts,
including non-interest bearing demand accounts, interest bearing checking
accounts and savings accounts, and certificates of deposit.
See "Selected Financial Data," "Management's Discussion and
Analysis," "Consolidated Financial Statements," and "Statistical
Information" for additional information concerning the business of
Rio Salado and the Bank.
RIO SALADO BANCORP, INC.
SELECTED FINANCIAL DATA
The following selected financial data should be read in
conjunction with Rio Salado's consolidated financial statements and the
related notes and with Rio Salado's management's discussion and analysis of
financial condition and results of operations, provided elsewhere herein.
See "Rio Salado Financial Statements," below. In the opinion of
management of Rio Salado, all adjustments (consisting only of normal
recurring accruals, except for cumulative effect of accounting change)
necessary to a fair statement of the results for the interim periods have
been included. The results for the nine months ended September 30, 1993 are
not necessarily indicative of the results for the entire year.
RIO SALADO BANCORP, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
As of, and for the
Nine Months Ended As of, and for the
September 30, Year Ended December 31,
(Dollars and outstanding
shares in thousands, except
per share and ratio data)
1993 1992 1992 1991 1990 1989 1988
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
EARNINGS SUMMARY
Net interest income $3,410 $2,775 $3,842 $2,988 $2,509 $2,792 $2,594
Provision for loan and OREO
losses 430 515 750 680 385 725 522
Other operating income 1,252 770 1,058 949 412 410 374
Other operating expense 2,942 2,333 3,151 2,766 2,588 2,577 2,305
Net income (loss) 745 409 586 321 (53) (63) 100
COMMON STOCK DATA (1)
Earnings (loss) per common share $1.16 $0.64 $0.91 $0.50 $(0.08) $(0.10) $0.16
Book value per share at period
end 7.88 6.45 6.72 5.81 5.31 5.40 5.50
Weighted average common and
common equivalent shares
outstanding during the
period 642 641 641 641 641 642 630
Common shares outstanding at
period end 643 641 641 641 641 639 641
AVERAGE BALANCE SHEET DATA
Securities $ 46,693 $ 37,189 $ 39,854 $ 23,310 $ 16,772 $11,323 $ 8,283
Loans and leases, net 41,036 35,766 36,228 31,914 29,938 30,995 30,985
Total interest-earning assets 90,752 74,259 77,343 57,757 49,249 45,543 43,911
Total assets 100,660 82,355 86,021 64,269 55,483 51,295 49,030
Interest-bearing deposits 64,452 56,334 57,887 46,069 38,524 33,323 32,348
Total deposits 86,633 71,755 74,504 57,427 48,874 43,490 42,653
Long-term debt 4,740 2,471 3,033 1,514 1,613 1,480 1,521
Shareholders' equity 4,636 3,857 3,946 3,499 3,431 3,597 3,378
END OF PERIOD BALANCE SHEET DATA
Securities $ 50,007 $42,680 $ 49,461 $30,014 $20,406 $13,754 $ 7,008
Loans and leases, net 43,317 38,145 38,876 33,944 30,305 29,959 33,596
Allowance for loan losses 1,284 1,130 828 921 612 714 516
Total assets 107,494 93,140 103,672 71,281 61,410 55,400 51,464
Total deposits 93,640 82,296 87,806 62,362 54,478 49,417 45,673
Long-term debt 2,425 4,475 5,500 1,575 1,635 1,579 1,450
Shareholders' equity 5,070 4,136 4,313 3,727 3,405 3,450 3,522
Nonperforming assets:
Nonaccrual loans $1,122 $1,386 $1,006 $2,584 $1,042 $ 726 $ 734
Other real estate owned 72 636 302 507 763 965 430
Total nonperforming assets 1,194 2,022 1,308 3,091 1,805 1,691 1,164
SELECTED RATIOS
Net interest margin 67.08% 61.82% 61.24% 51.93% 47.40% 53.00% 55.00%
Return on average assets 0.74% 0.51% 0.68% 0.50% (0.10)% (0.12)% 0.20%
Ratio of average common equity to
average assets 4.59% 4.14% 4.59% 5.44% 6.18% 7.01% 6.89%
Ratio of nonperforming assets to
total assets 1.11% 2.17% 1.26% 4.34% 2.94% 3.05% 2.26%
Ratio of allowance for loan losses
to net loans and leases
outstanding at period end 2.98% 2.96% 2.13% 2.71% 2.02% 2.38% 1.54%
Ratio of allowance for loan losses
to nonperforming loans 107.54% 55.89% 63.30% 29.80% 33.91% 42.22% 44.33%
</TABLE>
(1) Per share amounts have been restated to reflect the 10% stock
dividend paid in September 1993.
STOCK PRICES AND DIVIDENDS ON RIO SALADO COMMON STOCK
Rio Salado's common stock is not listed with a national securities exchange
or quoted on any automated quotation system. The common stock occasionally
trades through private negotiated transactions between individuals and in
brokerage transactions in the over-the-counter market. As a result, no
established public trading market for Rio Salado's common stock presently
exists and the private market that has existed is thin and not necessarily
indicative of the value of Rio Salado Common Stock. For the year ended
December 31, 1993, the average number of shares traded quarterly was 4,700;
prior to 1993, little trading occurred in Rio Salado Common Stock. Since
November 18, 1993, the date the Plan of Reorganization was publicly announced,
there have been no trades in Rio Salado Common Stock. The following table
sets forth the high and low bids for Rio Salado Common Stock during the
calendar quarters shown below, through December 31, 1993, as reported by J.W.
Garrett and Co., Inc., stockbrokers in Phoenix, Arizona, who execute buy and
sell orders for Rio Salado Common Stock on a best efforts basis.
High Low
1992 First Quarter.........5 4 3/4
Second Quarter........5 4 1/2
Third Quarter.........5 4 3/4
Fourth Quarter........5 1/2 5
1993 First Quarter.........6 1/4 5
Second Quarter........7 1/4 6
Third Quarter.........7 6
Fourth Quarter........8 6 1/2
Due to the low volume of shares traded and the number of privately negotiated
transactions which occur without the knowledge of J.W. Garrett or Rio Salado,
the bid quotations set forth herein may not represent the actual value of
shares traded. The prices provided are not necessarily representative of the
market price for Rio Salado Common Stock during any particular period.
The holders of Rio Salado's common stock are entitled to receive dividends
when, as and if declared by the Board of Directors out of funds legally
available therefor. Rio Salado's ability to pay dividends is governed by
Arizona law. Generally, under Arizona law dividends may only be declared and
paid out of the unreserved and unrestricted earned surplus of a corporation or
out of the unreserved and unrestricted net earnings of a corporation's last
two fiscal years. Funds for the payment of dividends by Rio Salado are
primarily obtained from dividends paid by the Bank.
The Bank is subject to certain limitations on the amount of cash dividends
that it can pay. The prior approval of the Board of Governors of the Federal
Reserve System (herein, the "Board") is required if the total of all cash
dividends declared by a state-chartered member bank, such as the Bank, in any
calendar year will exceed the total of such bank's net profits (as defined by
statute) for that year combined with its retained net profits for the
preceding two calendar years less any required transfers to surplus. In
addition, the Board is authorized to determine under certain circumstances
relating to the financial condition of a state-chartered member bank that the
payment of dividends would be an unsafe and unsound practice and to prohibit
payment thereof.
Under FDICIA, all insured banks are generally prohibited from making any
capital distributions and from paying management fees to persons having
control of the bank where such payments would cause the bank to be
undercapitalized. Holding companies of undercapitalized banks may be required
to obtain the approval of the Federal Reserve Board before making capital
distributions to their shareholders. See "Supervision and Regulation --
Regulatory Capital Requirements -- Other Issues and Developments Relating to
Regulatory Capital."
Rio Salado paid a ten percent stock dividend on September 30, 1993. Rio
Salado has never paid a cash dividend.
On January 21, 1994, the record date for the Special Meeting, Rio Salado
had approximately 307 stockholders, based upon the number of stockholders of
record. At such date, 662,849 shares of Rio Salado Common Stock were
outstanding.
STOCKHOLDINGS OF DIRECTORS, OFFICERS AND CERTAIN OTHERS
Persons who were beneficial owners of 5% or more of the issued and
outstanding Rio Salado Common Stock at the record date are shown in the
following table.
Name of Beneficial Owner (1) Amount of Percent of
Beneficial Ownership(2) Common Stock
Elden G. Barmore 68,320 10.3
Nico Moric 66,715 10.1
Francis Keller 63,826 9.6
(1) The address of each named individual is that of Rio Salado.
(2) The table includes any shares owned jointly with a
spouse, although the person named may not have sole or
shared voting and investment power over those shares;
otherwise, each person named has the sole voting and
investment power of the shares shown. Figures also
include shares owned by trusts of which the beneficial
owner is trustee, with sole voting and investment power,
and any stock options exercisable within 60 days.
<PAGE>
As of the record date, directors and officers as a group were
beneficial owners of that number of shares of Common Stock shown
below. No percentage less than 1% is given.
<TABLE>
<CAPTION>
Name of Amount of Percent of
Beneficial Owner Beneficial Ownership(1) Common Stock
<S> <C> <C>
Elden G. Barmore 68,320 10.3%
Raymond C. Boles 11,444 1.7%
Robert O. Cummins 22,538 3.4%
Bruce T. Day 10,632 1.6%
Harold E. Fearon 12,159 1.8%
David G. Fischer 990 --
Richard O. Flynn 5,588 --
Glynn W. Gilcrease, Jr. 5,474 --
Francis D. Keller 63,826 9.6%
Lauren L. Kingery 1,613 --
John Moeur 28,039 4.2%
Nico Moric 66,715 10.1%
O.C. Roberts 28,039 4.2%
Lester M. Snyder, Jr. 28,039 4.2%
Jerry C. Vaughn 29,055 4.4%
Directors and Officers as a Group 382,471 57.7%
</TABLE>
(1) The table includes any shares owned
jointly with a spouse, although the
person named may not have sole or shared
voting and investment power over those
shares; otherwise, each person named has
the sole voting and investment power of
the shares shown. Figures also include
shares owned by trusts of which the
beneficial owner is trustee, with sole
voting and investment power, and
shares subject to any stock options
exercisable within 60 days.
<PAGE>
RIO SALADO FINANCIAL STATEMENTS
RIO SALADO BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
September 30, 1993 and 1992
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
ASSETS
Cash and due from banks $ 8,905 $ 6,342
Federal funds sold 1,600 3,375
Total cash and cash equivalents 10,505 9,717
Investment securities 50,007 42,680
Loans 44,601 39,275
Less allowance for loan losses 1,284 1,130
Net loans 43,317 38,145
Accrued interest receivable - -
Bank premises and equipment, net 714 674
Other real estate owned 72 636
Other assets 2,879 1,288
Total assets $107,494 $93,140
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest - bearing interest $ 26,576 $21,420
Interest - bearing 67,064 60,876
Total deposits 93,640 82,296
Federal funds purchased and security repurchase agreements 4,705 1,726
Accured liabilities 1,654 508
Long-term debt 2,425 4,475
Stockholders' equity 102,424 89,005
Preferred stock, no par value; authorized 10,000,000
shares; no shares issued and outstanding - -
Common stock, no par value; authorized 100,000,000
shares; issued and outstanding 643,049 and 582,596
shares
at September 30, 1993 and 1992, respectively 2,614 2,125
Retained earnings 2,456 2,010
Total stockholders' equity 5,070 4,135
Total liabilities and stockholders' equity $107,494 $93,140
</TABLE>
See accompanying notes to consolidated statements.
<PAGE>
RIO SALADO BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended September 30, 1993 and 1992
(Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Interest income:
Interest and fees on loans $3,030 $2,682
Interest on investment securities:
U.S. Treasury obligations 27 11
U.S. Government agency obligations 1,940 1,773
Municipal obligations 18 89
Other securities 7 9
Interest on federal funds sold 61 33
Total interest income 5,083 4,597
Interest expense on deposits 1,673 1,822
Net interest income before provision
for loan losses 3,410 2,775
Provision for loan losses 400 365
Net interest income after provision
for loan losses 3,010 2,410
Other income:
Net securities gains (losses) (5) 105
Service charges and other income 1,257 665
1,252 770
Other expenses:
Salaries and employee benefits 1,521 1,213
Occupancy expenses 438 398
Other operating expenses 1,013 872
2,972 2,483
Earnings before income taxes 1,290 697
Income tax expense 545 288
Net earnings $ 745 $ 409
Net earnings per common share equivalent $ 1.16 $ 0.64
Average common shares outstanding 641,725 641,049
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
RIO SALADO BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Nine Months Ended September 30, 1993 and 1992
(Unaudited)
<TABLE>
<CAPTION>
Common stock Treasury stock
Shares Retained Shares
issued Amount earnings issued Amount Total
(In Thousands)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1991 583 $ 2,165 $ 1,601 (6) $ (39) $ 3,727
Net earnings - - 409 - - 409
Balance at September 30, 1992 583 $ 2,165 $ 2,010 (6) $ (39) $ 4,136
Balance at December 31, 1992 583 $ 2,165 $ 2,187 (6) $ (39) $ 4,313
Common stock issued 2 12 - - - 12
Stock dividend 58 476 (476) - - -
Net earnings - - 745 - - 745
Balance at September 30, 1993 643 $ 2,653 $ 2,456 (6) $ (39) $ 5,070
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
RIO SALADO BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 1993 and 1992
(Unaudited)
<TABLE>
<CAPTION>
1993 1992
(Dollars in Thousands)
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 745 $ 409
Adjustments to reconcile net earnings to net cash
used in operating activities:
Provisions for loan losses 400 365
Increase in accrued interest receivable and
other assets (1,818) (1,017)
Depreciation and amortization 89 83
Loss on sales of other real estate owned 37 -
Loss on sales of securities 5 (105)
Increase (decrease) in other liabilities 507 (86)
Net cash used in operating activities (35) (351)
Cash flows used in investing activities:
Additions to investment securities (19,276) (40,970)
Disposals of investment securities 5,441 17,905
Maturities of investment securities 13,426 10,639
Net increase in loans (4,841) (4,566)
Increase in other real estate owned 193 470
Net additions to bank premises and equipment (146) (28)
Net cash used in investing activities (5,203) (16,550)
Cash flows provided by financing activities:
Net increase (decrease) in borrowed funds (3,201) 1,702
Net increase in deposits 5,833 19,934
Principal payments on notes payable (75) (100)
Proceeds from sale of common stock 12 -
Net cash provided by financing activities 2,569 21,536
Net increase (decrease) in cash and cash equivalents (2,669) 4,635
Cash and cash equivalents at beginning of period 13,174 5,082
Cash and cash equivalents at end of period $10,505 $ 9,717
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
RIO SALADO BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1993 and 1992
(Unaudited)
(1) The consolidated financial statements included herein have
been prepared without audit but, in the opinion of management, reflect
all adjustments necessary for a fair presentation of the information as
of and for the nine months ended September 30, 1993 and September 30,
1992. Such adjustments are of a normal, recurring nature. The results
of operations for the nine months ended September 30, 1993 are not
necessarily indicative of the results to be expected for the full year.
(2) The earnings per common share equivalent and the average
common shares outstanding as of and for the nine months ended September
30, 1993 and 1992 have been adjusted to reflect the 10% stock dividend
paid in September 1993.
<PAGE>
RIO SALADO BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL REPORT
DECEMBER 31, 1992 AND 1991
<PAGE>
C O N T E N T S
Page
INDEPENDENT AUDITOR'S REPORT
FINANCIAL STATEMENTS
Consolidated balance sheets
Consolidated statements of operations
Consolidated statements of stockholders' equity
Consolidated statements of cash flows
Notes to consolidated financial statements
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Rio Salado Bancorp, Inc.
Tempe, Arizona
We have audited the accompanying consolidated balance sheets of Rio
Salado Bancorp, Inc. and Subsidiary as of December 31, 1992 and
1991, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in
the period ending December 31, 1992. These financial statements
are the responsibility of the Company's 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 consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Rio Salado Bancorp, Inc. and Subsidiary as of December
31, 1992 and 1991, and the results of their operations and their
cash flows for each of the three years in the period ending
December 31, 1992 in conformity with generally accepted accounting
principles.
/s/ McGladrey & Pullen
McGLADREY & PULLEN
Phoenix, Arizona
January 22, 1993, except for Note 19 as to which the date is
September 30, 1993.
<PAGE>
RIO SALADO BANCORP, INC. and SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1992 and 1991
1992 1991
ASSETS
Cash and due from banks (Note 2) $9,423,712 $5,082,266
Federal funds sold 3,750,000 -
Cash and cash equivalents 13,173,712 5,082,266
Interest-bearing deposits in other
financial institutions 141,577 135,219
Securities, market value 1992 $49,807,251
1991 $31,041,303 (Notes 3 and 9) 49,460,928 30,013,669
Loans, net (Notes 4 and 17) 38,876,181 33,943,984
Premises and equipment, net (Note 5) 657,225 728,593
Accrued interest receivable 653,512 617,470
Other assets, net (Note 6) 708,961 759,579
$103,672,096 $71,280,780
See Accompanying Notes to Consolidated Statements
<PAGE>
1992 1991
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand $23,143,468 $11,796,409
NOW accounts 8,015,624 5,857,706
Savings and money market 28,038,453 15,651,321
Time certificates $100,000 and over
(Note 7) 10,423,678 12,015,610
Time certificates under $100,000 18,184,999 17,040,656
87,806,222 62,361,702
Note payable (Note 8) 2,500,000 1,575,000
Borrowed funds (Note 9) 8,758,421 3,179,063
Accrued interest payable and other
liabilities 294,656 263,144
Income taxes payable - 175,200
99,359,299 67,554,109
COMMITMENTS AND CONTINGENCIES (Notes 9, 10 and 15)
STOCKHOLDERS' EQUITY (Notes 11, 12, and 19):
Preferred stock, no par value; authorized
10,000,000 shares; issued none - -
Common stock, no par value; authorized
100,000,000 shares 2,164,495 2,164,495
Retained earnings 2,187,302 1,601,176
4,351,797 3,765,671
Less cost of shares acquired for the
treasury (39,000) (39,000)
4,312,797 3,726,671
$103,672,096 $71,280,780
<PAGE>
RIO SALADO BANCORP, INC. and SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1992, 1991 and 1990
<TABLE>
<CAPTION>
1992 1991 1990
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $3,642,119 $3,664,812 $3,655,314
Interest on securities:
United States Treasury securities 7,254 8,833 21,333
Obligations of other United States
government agencies 2,551,442 1,932,162 1,401,034
Municipal securities 20,272 - -
Interest on deposits in other financial
institutions 11,831 12,915 11,500
Interest on federal funds sold 41,242 135,639 203,657
6,274,160 5,754,361 5,292,838
Interest expense (Note 13) 2,432,023 2,766,160 2,783,942
Net interest income 3,842,137 2,988,201 2,508,896
Provision for possible loan and OREO
losses (Note 4) 750,000 680,000 385,200
Net interest income
after provision for
possible loan and OREO
losses 3,092,137 2,308,201 2,123,696
Other income:
Customer service fees 353,851 265,577 296,764
Mortgage banking fees 500,801 318,003 115,097
Gain on sale of securities (Note 3) 133,352 374,366 -
Gain (loss) on sale of other real
estate owned 70,220 (9,453) -
1,058,224 948,493 411,861
Operating expenses:
Salaries and wages 1,393,742 1,230,046 1,101,606
Employee benefits 223,142 169,080 149,793
Occupancy (Note 10) 378,758 362,450 398,916
Equipment 158,008 151,755 147,809
Other 997,485 852,564 789,968
3,151,135 2,765,895 2,588,092
Earnings (loss) before income taxes 999,226 490,799 (52,535)
Federal and state income taxes (Note 14) 413,100 169,550 -
Net earnings (loss) $ 586,126 $321,249 $(52,535)
Net earnings (loss) per share $ .91 $ .50 $ (.08)
Weighted average number of
common shares outstanding 641,049 641,049 641,049
</TABLE>
See Accompanying Notes to Consolidated Statements
<PAGE>
RIO SALADO BANCORP, INC. and SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1992, 1991 and 1990
<TABLE>
<CAPTION>
Common stock Treasury stock
Shares Retained
issued Amount earnings Shares Amount Total
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1989 587,196 $2,156,095 $1,332,462 (6,000) $(39,000) $3,449,557
Common stock issued through
exercise of incentive stock
options (Note 11) 1,400 8,400 - - - 8,400
Net loss - - (52,535) - - (52,535)
Balance, December 31, 1990 588,596 $2,164,495 $1,279,927 (6,000) $(39,000) $3,405,422
Net income - - 321,249 - - 321,249
Balance, December 31, 1991 588,596 $2,164,495 $1,601,176 (6,000) $(39,000) $3,726,671
Net income - - 586,126 - - 586,126
Balance, December 31, 1992 588,596 $2,164,495 $2,187,302 (6,000) $(39,000) $4,312,797
</TABLE>
See Accompanying Notes to Consolidated Statements
<PAGE>
RIO SALADO BANCORP, INC. and SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1992, 1991 and 1990
<TABLE>
<CAPTION>
1992 1991 1990
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received from:
Loans $ 3,656,905 $3,676,654 $3,732,908
Interest bearing deposits in other
financial institutions 14,321 7,589 -
Securities 2,361,344 1,879,569 1,167,465
Federal funds sold 41,242 135,639 203,657
Customer service fees 353,851 265,577 296,764
Mortgage banking fees 500,801 318,003 115,097
Interest paid to depositors (2,128,741) (2,556,699) (2,625,345)
Interest paid on notes payable and
borrowed funds (340,225) (213,831) (163,723)
Cash paid to suppliers and employees (3,047,483) (2,734,476) (2,507,815)
Income taxes paid (669,530) (305,558) (50)
Income tax refunds received - - 13,500
Net cash provided by operating
activities 742,485 472,467 232,458
CASH FLOWS FROM INVESTING ACTIVITIES
Interest-bearing deposits in other
financial institutions, net (6,358) (95,000) (82,711)
Proceeds from maturities of securities 4,480,576 250,000 184,422
Proceeds from sales of securities 19,787,690 15,324,594 4,461,734
Purchases of securities (43,417,868)(24,505,689)(11,000,000)
Loans, net (6,044,881) (4,164,417) (518,428)
Purchases of bank premises and equipment (37,566) (45,447) (14,224)
Proceeds from sale of other real estate
owned 638,490 91,248 -
Net cash used in investing
activities (24,599,917)(13,144,711) (6,969,207)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in borrowed funds 5,579,358 1,579,378 945,529
Net increase in deposits 25,444,520 7,883,343 5,060,966
Proceeds from notes payable 2,500,000 250,000 116,000
Principal payments on notes payable (1,575,000) (310,000) (60,000)
Proceeds from issuance of common stock - - 8,400
Net cash provided by financing
activities 31,948,878 9,402,721 6,070,895
Increase (decrease) in cash and cash
equivalents 8,091,446 (3,269,523) (665,854)
Cash and cash equivalents:
Beginning 5,082,266 8,351,789 9,017,643
Ending $13,173,712 $5,082,266 $8,351,789
</TABLE>
(Continued)
<PAGE>
RIO SALADO BANCORP, INC. and SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Years Ended December 31, 1992, 1991 and 1990
<TABLE>
<CAPTION>
1992 1991 1990
<S> <C> <C> <C>
RECONCILIATION OF NET EARNINGS (LOSS) TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
Net earnings (loss) $ 586,126 $321,249 $(52,535)
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 108,934 112,932 120,708
Provision for possible loan losses 590,000 525,000 57,754
Provision for possible losses on sale
of other real estate owned 160,000 155,000 327,446
Gain on sale of securities (133,352) (374,366) -
(Gain) loss on sale of other real
estate owned (70,220) 9,453 -
Accretion of discount, net (164,305) (302,314) (113,480)
Provision for deferred income taxes (6,150) (95,668) (62,256)
(Increase) decrease in accrued interest
receivable (36,042) 66,328 (68,735)
Increase in other assets (148,818) (91,616) (30,738)
Increase (decrease) in accrued interest
payable and other liabilities 31,512 (28,731) 54,294
Increase (decrease) in income taxes
payable (175,200) 175,200 -
Net cash provided by operating
activities $ 742,485 $472,467 $232,458
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Other real estate acquired in settlement
of loans $ 522,684 $ - $115,260
</TABLE>
See Accompanying Notes to Consolidated Statements
<PAGE>
RIO SALADO BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 1.
NATURE OF BANKING ACTIVITIES AND SIGNIFICANT
ACCOUNTING POLICIES
Nature of banking activities:
The Rio Salado Bancorp, Inc. and its wholly-owned subsidiary Rio Salado
Bank grant commercial, SBA, residential and consumer loans to customers
in the Phoenix, Arizona metropolitan area. In addition, the Bank
originates and sells residential mortgages on a non-recourse basis.
Principles of consolidation:
The consolidated financial statements include the accounts of Rio Salado
Bancorp, Inc. (the Bancorp) and its wholly-owned subsidiary Rio Salado
Bank (the Bank). All significant intercompany balances and transactions
have been eliminated in consolidation.
Earnings per share:
Earnings per share are computed using the weighted average method.
Cash and cash equivalents:
For purposes of reporting cash flows, cash and cash equivalents includes
cash on hand, amounts due from banks (including cash items in process of
clearing) and federal funds sold. Cash flows from loans originated,
deposits and federal funds purchased are reported net.
Securities:
Securities are those debt securities that the Bank has the ability to
hold to maturity and the intent to hold for the foreseeable future.
Such securities are generally sold only to meet unexpected liquidity
needs. Securities are carried at cost adjusted for amortization of
premium and accretion of discount, computed by the interest method over
their contractual lives. Gains and losses on sale of such securities
are determined by the specific identification method.
Loans:
Loans are stated at the amount of unpaid principal, reduced by net
unearned loan fees and an allowance for possible loan losses.
The allowance for possible loan losses is maintained at a level
considered adequate by management to provide for losses that can be
reasonably anticipated. The allowance is increased by provisions
charged to expense and reduced by net charge-offs. The Bank makes
continuous credit reviews of the loan portfolio and considers current
economic conditions, historical loan loss experience, review of specific
problem loans and other factors in determining the adequacy of the
allowance balance.
<PAGE>
RIO SALADO BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 1. (Continued)
NATURE OF BANKING ACTIVITIES AND SIGNIFICANT
ACCOUNTING POLICIES
Loans (continued):
Management believes that the allowance for possible loan losses is
adequate. While management used available information to recognize
losses on loans, future additions to the allowance may be necessary
based on changes in economic conditions. In addition, the federal and
state regulators, as an integral part of their examination process,
periodically review the allowance for possible loan losses. These
agencies may require additions to the allowance based on their judgment
using information available at the time of their examination.
Interest is accrued daily on the outstanding balances. Accrual of
interest is discontinued on a loan when management believes, after
considering collection efforts and other factors, that the borrower's
financial condition is such that collection of interest is doubtful.
Loan origination and commitment fees and certain direct loan origination
costs are being deferred and the net amount is being amortized as an
adjustment of the related loan's yield. The Bank is generally
amortizing these amounts over the contractual life. Commitment fees
based upon a percentage of a customer's unused line of credit and fees
related to standby letters of credit are recognized over the commitment
period.
Loan origination fees earned by the Bank's mortgage operation are
recognized as income when the loan is sold.
Premises and equipment:
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation and amortization is computed principally by the straight-
line method over the following estimated useful lives:
Years
Furniture and equipment 3-20
Automobiles 3
The estimated life of leasehold improvements are determined to be the
lesser of the respective life of the lease or the estimated useful life
of the improvement.
<PAGE>
RIO SALADO BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 1. (Continued)
NATURE OF BANKING ACTIVITIES AND SIGNIFICANT
ACCOUNTING POLICIES
Other real estate owned:
Included in other assets is other real estate owned (OREO) consisting of
property which has been acquired through foreclosure. The property is
carried at the lower of the recorded investment in the property or its
fair value. At acquisition, the value of the underlying loan is written
down to the fair market value of the real estate, if necessary, by a
credit to the allowance for possible OREO losses. Any subsequent write-
down is charged against operating expenses of such properties, net of
related income. Gains and losses on disposition are included in other
income.
Income taxes:
The Bancorp files its income tax return on a consolidated basis with the
Bank. The members of the consolidated group have elected to allocate
taxes among the members based upon the separate return method.
The provision for income taxes relates to all items of revenue and
expenses recognized for financial accounting purposes during the year.
The actual current tax benefit or liability may vary from the charge or
credit to earnings due to the effect of timing differences between
financial and tax accounting resulting in deferred income taxes.
Timing differences result from the use of the accelerated depreciation
methods for income tax reporting purposes and differing amounts of
provision for possible loan and OREO losses for income tax and financial
statement reporting purposes.
The Financial Accounting Standards Board has issued Statement No. 109,
Accounting for Income Taxes, which significantly changes the recognition
and measurement of deferred income tax assets and liabilities.
Statement 109 requires that deferred income taxes be recorded on a
liability method and adjusted when new rates are enacted. The Bancorp's
deferred tax balances are presently recorded using the rates in effect
when the transactions giving rise to the deferred tax occur, and
deferred tax balances are not adjusted when tax rates change. The
Bancorp is required to adopt Statement 109 beginning with its year
ending December 31, 1993, although earlier adoption is permitted. The
statement provides that the effect of its adoption may be recorded
entirely in the year of adoption or retroactively by restating one or
more prior years.
The Bancorp does not expect any significant adjustment as a result of
the adoption of Statement No. 109.
<PAGE>
RIO SALADO BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 1. (Continued)
NATURE OF BANKING ACTIVITIES AND SIGNIFICANT
ACCOUNTING POLICIES
Borrowed funds:
Included in borrowed funds are federal funds purchased, treasury, tax
and loan accounts, securities sold under repurchase agreements and an
FHLB advance. All borrowed funds have certain securities of the Bank as
collateral. See Notes 3 and 9.
Employee Benefit Plan:
During 1991 the Bank adopted a contributory, defined contribution plan,
for implementation January 1, 1992, covering all employees who meet
eligibility requirements.
Reclassification:
In order to provide more meaningful comparative financial statements,
certain 1991 balances have been reclassified to conform to 1992
presentation.
NOTE 2.
RESTRICTIONS ON CASH AND DUE FROM BANK
The Bank is required to maintain reserve balances in cash with Federal
Reserve banks. The total of those reserve balances were approximately
$300,000 and $155,000 at December 31, 1992 and 1991, respectively.
<PAGE>
RIO SALADO BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 3.
SECURITIES
Carrying amounts and approximate market values of securities are
as follows at December 31:
<TABLE>
<CAPTION>
1992
Gross Gross Approximate
Amortized unrealized unrealized market
cost gains losses value
<S> <C> <C> <C> <C>
Municipal securities $ 720,147 $ 13,936 $ - $ 734,083
Obligations of United States
government agencies 19,013,856 230,808 (69,986) 19,174,678
Federal Reserve Bank stock 115,850 - - 115,850
Federal Home Loan Bank Stock 300,600 - - 300,600
Mortgage-backed securities 29,310,475 275,004 (103,439) 29,482,040
$49,460,928 $ 519,748 $(173,425) $49,807,251
1991
Gross Gross Approximate
Amortized unrealized unrealized market
cost gains losses value
Obligations of United States
government agencies $ 9,049,735 $ 464,223 $ - $ 9,513,958
Federal Reserve Bank stock 115,850 - - 115,850
Federal Home Loan Bank Stock 122,515 - - 122,515
Mortgage-backed securities 20,725,569 563,411 - 21,288,980
$30,013,669 $1,027,634 $ - $31,041,303
</TABLE>
<PAGE>
RIO SALADO BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 3. (Continued)
SECURITIES
Gross realized gains and losses for the years ended December 31,
1992, 1991 and 1990 are as follows:
1992 1991 1990
Realized gains $ 174,256 $440,124 $ -
Realized losses (40,904) (65,758) -
$ 133,352 $374,366 $ -
Securities with a carrying amount of $27,800,000 and
$11,490,000 at December 31, 1992 and 1991, respectively, were
pledged as collateral on public deposits and for other
purposes as required or permitted by law.
The amortized cost and approximate market value of securities
with contractual maturity dates as of December 31, 1992 are
shown below. Specific maturities are not shown for mortgage-
backed securities because the mortgages underlying the
securities may be called or repaid without any penalties. The
estimated final maturities of the mortgage-backed securities
do not exceed ten years. Therefore, these securities are not
included in maturity categories in the following summary.
Amortized Approximate
cost market value
Due in one year or less $4,494,043 $4,574,278
Due after one year through five years 14,498,173 14,573,514
Due after five years through ten years 741,787 760,969
Mortgage-backed securities 29,310,475 29,482,040
$49,044,478 $49,390,801
<PAGE>
RIO SALADO BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 4.
LOANS
Loans consists of the following at December 31:
1992 1991
Commercial $14,946,202 $12,490,068
Real estate 20,733,576 19,811,727
Real estate - construction 2,650,297 1,443,826
Consumer 1,506,132 1,180,180
39,836,207 34,925,801
Deduct:
Allowance for possible loan losses 828,364 921,363
Net unearned loan fees 131,662 60,454
960,026 981,817
$38,876,181 $33,943,984
Included in loans at December 31, 1992 are amounts guaranteed by the
Small Business Administration or secured by deposits or pledged
securities totaling $6,800,000.
Changes in the allowances for possible loan and OREO losses are as
follows for the years ending December 31:
<TABLE>
<CAPTION>
1992 1991
Possible Possible Possible Possible
loan OREO loan OREO
losses losses Total losses losses Total
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning $ 921,363 $470,646 $1,392,009 $612,377 $327,446 $939,823
Provision charged
to expense 590,000 160,000 750,000 525,000 155,000 680,000
Recoveries of
amounts charged
off 170,283 - 170,283 60,954 - 60,954
1,681,646 630,646 2,312,292 1,198,331 482,446 1,680,777
Amounts charged
off 853,282 630,646 1,483,928 276,968 11,800 288,768
Balance, ending $ 828,364 $ - $828,364 $921,363 $470,646 $1,392,009
</TABLE>
<PAGE>
RIO SALADO BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 4. (Continued)
LOANS
Changes in the allowances for possible loan and OREO losses are as
follows for the years ending December 31:
1990
Possible Possible
loan OREO
losses losses Total
Balance, beginning $714,304 $ - $714,304
Provision charged
to expense 57,754 327,446 385,200
Recoveries of
amounts charged
off 223,459 - 223,459
995,517 327,446 1,322,963
Amounts charged
off 383,140 - 383,140
Balance, ending $612,377 $327,446 $939,823
Contractual loan maturities of the loan portfolio are as follows at
December 31, 1992:
One - After
Within five five
one year years years Total
Commercial $9,989,976 $4,573,479 $ 382,747 $14,946,202
Real estate 6,197,856 7,659,794 6,875,926 20,733,576
Real estate-construction 1,839,633 458,519 352,145 2,650,297
Consumer 890,881 370,299 244,952 1,506,132
$18,918,346 $13,062,091 $7,855,770 $39,836,207
Loans at variable
interest rates $24,964,327
Loans at fixed interest
rates 14,871,880
$39,836,207
<PAGE>
RIO SALADO BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 4. (Continued)
LOANS
Experience of the Bank has been that a portion of the loans will be paid off
prior to the contractual maturity date. Accordingly, the foregoing
tabulation is not to be regarded as a forecast of future cash collections.
Nonaccruing loans totaled approximately $1,006,000 and $2,584,000 at
December 31, 1992 and 1991, respectively, and had the effect of reducing
interest income by approximately $67,000, $209,000 and $84,000 for each
of the three years in the period ended December 31, 1992. During the
years ended December 31, 1992 and 1991, the Bank collected
approximately $8,000 and $76,000, respectively of interest income
from nonaccruing loans.
NOTE 5.
PREMISES AND EQUIPMENT
Premises and equipment consists of the following at December 31:
1992 1991
Leasehold improvements $509,773 $503,867
Furniture and equipment 932,517 900,857
Automobiles 46,296 46,296
1,488,586 1,451,020
Less accumulated depreciation and
amortization (831,361) (722,427)
$657,225 $728,593
<PAGE>
RIO SALADO BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 6.
OTHER ASSETS
Other assets consists of the following at December 31:
1992 1991
Other real estate owned, net of allowance for
possible losses 1992 $0; 1991 $470,646 $ 301,800 $ 507,386
Prepaid expenses 154,516 75,494
Other assets 75,792 81,031
Deferred income tax charges 101,818 95,668
Income tax receivable 75,035 -
$ 708,961 $ 759,579
Other real estate owned has been acquired through foreclosure.
NOTE 7.
TIME CERTIFICATES OF DEPOSIT
Aggregate maturities of time certificates of deposit $100,000 and over
consist of the following at December 31:
1992 1991
Three months or less $ 5,329,781 $7,658,204
Three through six months 3,868,330 2,938,045
Six through twelve months 557,291 1,179,644
Over twelve months 668,276 239,717
$10,423,678 $12,015,610
<PAGE>
RIO SALADO BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 8.
NOTE PAYABLE
The Bancorp's note payable represents borrowings under a $2,500,000 note
that bears interest at prime (6.0% at December 31, 1992) plus .5% and is
payable quarterly. The note is due January 1995, and is renewable at the
lending bank's discretion. At December 31, 1992 $2,500,000 is outstanding
under the note. At December 31, 1991, the Bancorp had $1,575,000
outstanding under two separate notes. Both notes were paid in full during
1992.
The note payable is secured by the common stock of the Bank held by the
Bancorp. The Bank is required to comply with certain loan covenants under
this note. Significant covenants include a minimum tier-one capital to
assets ratio of 5 percent; a minimum capital to risk assets ratio of 10
percent; a minimum tier-one capital to risk assets of 6 percent; and a
loan loss reserve of not less than 1.5% of outstanding loans, less cash
secured loans and SBA guaranteed portions of loans. Management believes
the Bank was in compliance with all loan covenants at December 31, 1992.
If the note is renewed subsequent to January 1995 by the lending bank,
principal payments will be as follows:
Years ending
December 31,
1993 $112,500
1994 168,750
1995 193,750
1996 218,750
1997 243,750
Thereafter 1,562,500
$2,500,000
<PAGE>
RIO SALADO BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 9.
BORROWED FUNDS
Borrowed funds consist of the following at December 31:
1992 1991
Federal funds purchased $1,800,000 $1,900,000
Securities sold under repurchase agreements 3,628,753 810,414
Treasury, tax and loan accounts 329,668 468,649
Federal Home Loan Bank advance agreement 3,000,000 -
$8,758,421 $3,179,063
In conjunction with the purchase of the Federal Home Loan Bank
stock, the Bank has entered into an advance agreement with the
Federal Home Loan Bank of San Francisco in the amount of
$3,000,000. Interest, accruing on the outstanding balance at
the rate of 5.07% per annum, is payable monthly. The advance
is secured by securities and is due July 1995.
Federal funds purchased and securities sold under repurchase
agreements generally mature within one to fourteen days from
the transaction date. Other borrowed funds consist of term
federal funds purchased and treasury tax and loan deposits and
generally mature within one to 120 days from the transaction
date.
NOTE 10.
COMMITMENTS
The Bancorp leases the office of the Bank under an operating lease
agreement expiring October, 2005. The lease agreement provides renewal
options for two five-year terms. The lease also calls for additional rent
escalations commencing November 1, 1995 and November 1, 2000 based upon
changes in the consumer price index, subject to certain limitations. At
December 31, 1992, future minimum base lease payments required under this
lease agreement are as follows:
Years ending
December 31,
1993 $275,000
1994 275,000
1995 281,000
1996 310,000
1997 310,000
Thereafter 2,573,000
$4,024,000
Rent expense for the years ended December 31, 1992, 1991 and 1990 was
approximately $344,000, $327,000 and $365,000, respectively.
<PAGE>
RIO SALADO BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 11.
STOCKHOLDERS' EQUITY
The Bancorp has an Incentive Stock Option Plan which is qualified under
Internal Revenue Code Section 422A for the issuance of stock options to
key employees of the Bancorp. A maximum of options to purchase 220,000
post stock split shares of the common stock of the Bancorp may be granted
within the twenty-year life of the Plan. These options must be exercised
within ten years and at a price that equals or exceeds the fair market
value of the stock on the date the option is granted. Any option granted
to a person owning ten percent of the voting power of all classes of the
Bancorp's stock must be exercised within five years of the date granted
and the price of such an option shall not be less than 110% of the fair
market value of the stock on the date the option is granted. The
following summarizes option activity under this Plan for the years ended
December 31, 1992 and 1991 (adjusted for the September 30, 1993, 10% stock
dividend):
Number
of
options Price
Outstanding December 31, 1990 40,700 $6.00 to $7.61
Exercised - -
Granted - -
Canceled - -
Outstanding December 31, 1991 40,700 $6.00 to $7.61
Exercised - -
Granted - -
Canceled (11,000) $7.19
Outstanding December 31, 1992 29,700 $6.00 to $7.37
<PAGE>
RIO SALADO BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 12.
REGULATORY MATTERS
Banking laws and regulations limit the amount of dividends that may be
paid without prior approval of the Bank's regulatory agency. In addition,
the Bank has entered into an agreement with the Federal Reserve Bank.
Under this agreement, the Bank has agreed to restrict dividend payments
without approval and maintain certain target ratios and meet certain other
conditions. It is management's opinion that the Bank is in compliance
with the provisions of the agreement at December 31, 1992.
Banking regulations also require the Bank to maintain certain minimum
capital levels in relation to Bank assets. At December 31, 1992,
regulations required a ratio of capital (tier-one) to risk-weighted assets
of 4 percent and total adjusted capital (tier-two) to risk-weighted assets
of 8 percent. The Bank's capital, as defined by these regulations, was
13.9 percent and 15.1 percent, respectively. In addition, banks are
expected to maintain a tier-one capital to total assets ratio (leverage)
of at least 4 percent. At December 31, 1992, the Bank's leverage ratio
was 6.2 percent.
NOTE 13.
INTEREST EXPENSE
The components of interest expense are as follows for the years ended
December 31:
1992 1991 1990
NOW accounts $ 152,025 $ 209,266 $ 214,237
Savings and money market deposits 609,898 627,913 554,431
Time certificates of deposit
$100,000 and over 510,980 611,022 706,476
Certificates under $100,000 840,655 1,114,435 1,055,904
Securities sold under repurchase
agreements 136,666 44,187 58,553
Notes payable to unaffiliated bank 99,045 130,831 163,722
Treasury, tax and loan accounts 12,704 28,130 30,001
Federal funds purchased 4,805 376 618
FHLB 65,245 - -
$2,432,023 $2,766,160 $2,783,942
<PAGE>
RIO SALADO BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 14.
INCOME TAXES
The components of income tax expense are as follows for the years ended
December 31:
1992 1991 1990
Currently payable $419,250 $265,218 $62,256
Deferred (6,150) (95,668) (62,256)
$ 413,100 $169,550 $ -
NOTE 15.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK,
CONCENTRATIONS OF CREDIT RISK AND CONTINGENCIES
Financial instruments with off-balance sheet risk:
The Bank is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend
credit and standby letters of credit. Those instruments involve, to
varying degrees, elements of credit risk in excess of the amount
recognized in the balance sheet.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit
and standby letters of credit is represented by the contractual amount
of those instruments. The Bank uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-sheet
instruments.
A summary of the Bank's commitment as of December 31, 1992 and 1991 is
as follows:
1992 1991
Commitments to extend credit $10,815,836 $9,788,828
Standby letters of credit 841,904 636,625
<PAGE>
RIO SALADO BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 15. (Continued)
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK,
CONCENTRATIONS OF CREDIT RISK AND CONTINGENCIES
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash
requirements. The Bank evaluates each customer's credit worthiness on a
case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Bank upon extension of credit, is based on management's
credit evaluation of the party. Collateral held varies, but may include
accounts receivable, inventory, property and equipment, and income-
producing commercial properties.
Standby letters of credit are conditional commitments issued by the Bank
to guarantee the performance of a customer to a third party. The credit
risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers. The Bank holds
stock, certificates of deposit, deposits in money market accounts,
accounts receivable, inventory and equipment as collateral supporting
those commitments for which collateral is deemed necessary.
Concentrations of risk credit:
All of the Bank's loans, commitments to extend credit,and standby
letters of credit have been granted to customers in the Bank's market
area. The concentrations of credit by type of loan are set forth in
Note 4.
The distribution of commitments to extend credit approximates the
distribution of loans outstanding. Standby letters of credit were
granted primarily to commercial borrowers. The Bank, as a matter of
policy, does not extend credit to any single borrower or group of
related borrowers in excess of its legal lending limit.
Contingencies:
In the normal course of business, the Bank is involved in various legal
proceedings, In the opinion of management, any liability resulting from
such proceedings would not have a material effect on the Bank's
financial statements.
<PAGE>
RIO SALADO BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 15. (Continued)
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK,
CONCENTRATIONS OF CREDIT RISK AND CONTINGENCIES
The Bancorp is covered under a directors' and officers' liability
insurance policy at December 31, 1992. However, in the event that any
person is made a party, or is threatened to be made a party, to any
proceeding by reason of the fact that such person is or was a director
of the Bancorp, the Bancorp has agreed to indemnify such person against
expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with such a proceeding, subject to any
limitations set forth in the laws of the State of Arizona.
NOTE 16.
EMPLOYEE BENEFIT PLAN
During 1991, the Bank adopted a contributory defined contribution plan
covering all employees who meet eligibility requirements. To be eligible,
a participant must be 21 years of age and have completed one year of
service.
Bank contributions are determined annually at the discretion of the Board
of Directors. Participant contributions are limited to ten percent of the
employees annual compensation.
A participant vests in his voluntary contribution immediately and such
contributions are not subject to forfeiture. A participant vests in
contributions made by the Bank in accordance with the following schedule:
Percentage
Years of service vested
3 20
4 40
5 60
6 80
7 100
Forfeitures of Bank contributions are allocated to remaining participants.
The Bank makes its contributions for each plan year within the time
prescribed by applicable law. The plan was implemented January 1, 1992.
Contributions for the years ended December 31, 1992, 1991 and 1990
amounted to approximately $27,000, $0 and $0, respectively.
<PAGE>
RIO SALADO BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 17.
TRANSACTIONS WITH RELATED PARTIES
The Bank has had, and may be expected to have in the future, banking
transactions in the ordinary course of business with directors, principal
officers, their immediate families and affiliated companies in which they
are principal stockholders (commonly referred to as related parties), all
of which have been, in the opinion of management, on the same terms,
including interest rates and collateral, as those prevailing at the time
for comparable transactions with others.
Aggregate loan transactions with related parties were as follows for the
years ended December 31:
1992 1991
Balance, beginning $ 2,389,000 $2,493,000
New loans 857,000 1,893,000
Repayments (919,000) (1,997,000)
Balance, ending $2,327,000 $2,389,000
Maximum balance during the year $2,408,000 $2,493,000
At December 31, 1992, the Bank has commitments to extend additional
credit to directors and officers totaling approximately $326,000.
<PAGE>
RIO SALADO BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 18.
PARENT ONLY FINANCIAL INFORMATION
The following are condensed unconsolidated financial statements of
Rio Salado Bancorp, Inc.
BALANCE SHEETS
December
1992 1991
Assets
Cash and due from bank $ 228,791 $ 40,214
Loans 115,000 280,000
Other assets 489 1,493
Investment in Rio Salado Bank 6,389,174 4,955,407
Receivable from Rio Salado Bank 88,030 135,400
$6,821,484 $5,412,514
Liabilities and Stockholders' Equity
Note payable $2,500,000 $1,575,000
Accrued liabilities 8,687 110,843
2,508,687 1,685,843
Stockholders' equity:
Common stock 2,164,495 2,164,495
Retained earnings 2,187,302 1,601,176
4,351,797 3,765,671
Less treasury stock (39,000) (39,000)
4,312,797 3,726,671
$6,821,484 $5,412,514
(Continued)
<PAGE>
RIO SALADO BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 18. (Continued)
PARENT ONLY FINANCIAL INFORMATION
STATEMENTS OF INCOME
Years Ended December 31
1992 1991 1990
Interest income $ 18,495 $ 19,317 $ 37,264
Interest expense 99,045 130,831 163,723
Net interest income (expense) (80,550) (111,514) (126,459)
Equity in earnings of Rio Salado Bank 633,767 394,970 31,630
Rental and other income 373,113 364,870 372,949
Rental and other expense (340,204) (327,077) (330,662)
Net income (loss) $ 586,126 $321,249 $(52,542)
STATEMENTS OF CASH FLOWS
Years Ended December 31
1992 1991 1990
Cash flows from operating activities:
Net income (loss) $ 586,126 $ 321,249 $(52,542)
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Equity in income of subsidiary (633,767) (394,970) (31,630)
(Increase) decrease in other assets 1,004 (1,493) 4,011
(Increase) decrease in receivable
from Rio Salado Bank 47,370 98,202 (33,088)
Increase (decrease) in accrued
liabilities (102,156) 34,667 4,450
Net cash provided by (used in)
operating activities (101,423) 57,655 (108,799)
Cash flows from investing activities:
Increase in investment in Rio Salado
Bank common stock (800,000) - -
Loans, net 165,000 (280,000) 324,370
Net cash provided by (used in)
investing activities (635,000) (280,000) 324,370
(Continued)
<PAGE>
RIO SALADO BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 18. (Continued)
RIO SALADO BANCORP, INC. ONLY FINANCIAL INFORMATION
STATEMENTS OF CASH FLOWS (Continued)
Years Ended December 31
1992 1991 1990
Cash flows from financing activities:
Proceeds from issuance of common
stock - - 8,400
Principal payments on note payable (1,575,000) (60,000) (60,000)
Proceeds from note payable 2,500,000 - 116,000
Net cash provided by (used in)
financing activities 925,000 (60,000) 64,400
Net increase (decrease) in cash 188,577 (282,345) 279,971
Cash and due from banks:
Beginning of year 40,214 322,559 42,588
End of year $ 228,791 $ 40,214 $322,559
NOTE 19.
COMMON STOCK DIVIDEND
On September 30, 1993, the Bancorp issued 58,453 shares of common stock
in payment of a 10 percent stock dividend. The per share data
for the years ended December 31, 1992, 1991, and 1990 have been
retroactively adjusted for this split as if it had occurred on
January 1, 1991.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE NINE
MONTH PERIOD ENDED SEPTEMBER 30, 1993; RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following analysis of Rio Salado's financial condition and
results of operations, as of and for the nine month period ending
September 30, 1993, should be read in conjunction with the Consolidated
Financial Statements of Rio Salado and statistical data presented
elsewhere herein.
Results of Operations
Net Income. Rio Salado's net income was $745,000 for the nine
months ended September 30, 1993, compared to $409,000 for the nine month
period ended September 30, 1992. This represented an 82.2% or $336,000
increase. The increase in net income was primarily due to 22.2% growth in
average earning assets as well as strong performance by the Bank's
Mortgage and Small Business Lending Divisions.
Net Interest Income. Total interest income increased from
$4,597,000 for the nine months ended September 30, 1992, to $5,083,000 for
the nine months ended September 30, 1993. This represents an increase of
10.6%. A 22.2% increase in average earning assets between the first nine
months of 1992 and the same period of 1993 was the primary cause for this
increase. By comparison, interest expense decreased by $149,000, or
8.2%, from $1,822,000 to $1,673,000 between the same two periods due
to falling interest rates and a shift from certificates of deposit to
lower cost funds.
Non-Interest Income. Non-interest income increased by $482,000, or
62.6% to $1,252,000 for the nine months ended September 30, 1993 compared
to $770,000 for the same nine-month period in 1992. This increase is due
primarily to increased fees generated by a higher volume of loans
originated and sold by the Mortgage Division of the Bank as well as the
sale by the Bank of the guaranteed portion of SBA loans by the Bank.
Non-Interest Expense. Non-interest expense for the nine months
ended September 30, 1993 increased by $489,000, or 19.7%, from $2,483,000
to $2,972,000 for the comparable period in 1992. This increase is
primarily due to additional salary expense, occupancy expenses, and
related costs caused by the Bank's growth, particularly in the areas of
mortgage origination and small business lending.
Income tax expense increased from $288,000 for the first nine months
of 1992 to $545,000 for the first nine months of 1993. This increase is
consistent with the increase in pretax income and an increase in the
Federal tax rate for 1993.
Financial Condition
Assets. At September 30, 1993, Rio Salado's total assets were
$107,494,000 compared to $103,672,000 at December 31, 1992. This is an
increase of 3.7%. This modest growth is significantly lower than the
30.7% increase from December 31, 1991 to September 30, 1992. During 1993,
Rio Salado decided to slow asset growth. This was done to maintain
adequate capital levels. Emphasis was shifted to lines of business which
would produce fee income without generating assets such as mortgage
originations, SBA lending, and annuity/mutual fund sales.
Loans. Total loans, net of reserves, increased 11.4% during the
first nine months of 1993 from $38,876,000 at December 31, 1992, to
$43,317,000 at September 30, 1993. An officer loan sales program, plus
new loan products such as swimming pool loans helped Rio Salado to achieve
this growth.
Non-performing assets, which consist of non-accrual loans and
accruing loans 90-days or more past due, totaled $1,122,000 at September
30, 1993, versus $1,006,000 at December 31, 1992, an increase of 11.5%.
An improving Arizona economy as well as aggressive credit collection
efforts have lowered this amount from $2,584,000 at year end 1991.
Deposits. Total deposits increased during the nine-month period by
$5,834,000 from $87,806,000 at December 31, 1992, to $93,640,000 at
September 30, 1993. This growth represents an increase of 6.6%. The
majority of this increase occurred in demand deposits and money market
accounts.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS FOR THREE-YEAR PERIOD ENDED DECEMBER 31, 1992
The following analysis of Rio Salado's financial condition and
results of operations as of and for the three year period ended December
31, 1992, should be read in conjunction with the Consolidated Financial
Statements of Rio Salado and statistical data presented elsewhere herein.
Overview
Rio Salado does not engage in any substantial business activity
other than as a bank holding company that holds all of the issued and
outstanding stock of Rio Salado Bank (herein, the "Bank"), its principal
asset. Unless otherwise noted, the following discussion relates to Rio
Salado and the Bank on a consolidated basis.
Results of Operations
Net Income. Net income for Rio Salado for 1992 was $586,126, an
increase of 82.5% or $264,877 over the $321,249 earned during 1991. This
increase is primarily due to a 33.8% increase in average earning assets
between years. An officer loan and deposit sales program, coupled with
an increase in customers gained from large bank competitors, also helped
to fuel the growth.
Rio Salado incurred a net loss of $52,535 in 1990. This was
attributable in large part to the ongoing effect of problem credits caused
primarily by the downturn in the Arizona economy, particularly in real
estate, during the late 1980's. Although many other banks failed or
merged during this difficult period, Rio Salado survived.
Net Interest Income. Net interest income is interest earned on
loans and the investment portfolio, less interest paid on customer
deposits and debt. Net interest income for 1992 was $3,842,137, an
increase of 28.6% or $853,936 over the $2,988,201 earned in 1991. Net
interest income for 1991 was $2,988,201, an increase of 19.1% or $479,305
over the $2,508,897 earned in 1990. These increases, particularly in 1992,
were attributable primarily to a higher level of earning asset growth
during which interest margins were enhanced.
Average interest-earning assets of Rio Salado were $77,342,855
during 1992, an increase of 33.9% or $19,586,128 compared to $57,756,727
for 1991. Average interest-earning assets in 1991 were $57,756,727,
compared to $49,249,567 for 1990, an increase of 17.3% or $8,507,160 over
1990. Rio Salado's interest rate spread was 4.37% for 1992, 4.28% in
1991, and 3.99% in 1990. "Interest rate spread" is the difference between
the rate of interest earned on interest-earning assets and the rate of
interest paid on interest-bearing liabilities. Rio Salado's net interest
margin was 4.95% in 1992, 5.15% in 1991, and 5.07% in 1990. "Net interest
margin" is the difference between interest income and interest expense
expressed as a percentage of average interest earning assets.
Non-Interest Income. Non-interest income was $1,058,224 in 1992, an
increase of 11.6% or $109,731 over the prior year figure of $948,493. Most
of the increase was attributable to an increase in mortgage banking fees.
Other factors included increased service charges on deposit accounts and
a gain on the sale other real estate owned.
Non-interest income was $948,493 in 1991, an increase of 130.3% or
$536,632 over the 1990 figure of $411,861. Increased mortgage banking fees
as well as a gain on the sale of investment securities contributed to the
increase.
Non-Interest Expense. Non-interest expense increased by $385,240, or
13.9%, to $3,151,135 for the year ended December 31, 1992 from $2,765,895
for the year ended December 31, 1991. This increase was due primarily to
increased personnel and related costs brought about by the Bank's growth.
For 1991, non-interest expense increased to $2,765,895 from $2,588,092,
an increase of $177,803, or 6.9%. This increase was also principally
due to increased personnel and related costs. The increase in 1992 was
substantially greater in comparison to the 1991 increase because average
assets grew by 33.8% in 1992 compared to 15.8% in 1991.
Financial Condition
Investment. Investment securities held by Rio Salado were
$49,460,928 at December 31, 1992, $30,013,669 at December 31, 1991, and
$20,406,113 at December 31, 1990. During 1993, Rio Salado shortened its
average maturity to less than a two-year average life to reduce its
exposure to potentially unfavorable interest rate changes. The
substantial increase in investments over the three-year period was due to
strong asset growth during a period of moderate loan demand. Rio Salado
does not maintain a "trading" portfolio.
Loans. For the year ended 1992, Rio Salado's loan portfolio grew to
$38,876,181, compared to $33,943,984 for the year ended December 31, 1991,
an increase of 14.5%, or $4,932,197. For the year-ended 1991, the
portfolio increased over year-end 1990 to $33,943,984 from $30,304,567, an
increase of 12.0% or $3,639,417. The composition of the loan portfolio has
not changed materially over the past several years. Commercial loans
encompass a broad range of industries, including wholesale, retail, and
manufacturing. Commercial loans comprised 37.5% of the Bank's portfolio
at year-end 1992. Such loans comprised 35.8% of the Bank's portfolio at
year-end 1991 and 37.3% at year-end 1990. Real estate loans primarily
consist of term loans secured by real estate with some construction loans
to individuals and contractors. Real estate loans comprised 58.7% of the
Bank's portfolio at year-end 1992 and 60.8% at year-end 1991 and 58.3% at
year-end 1990. Installment and other loans are comprised primarily of
automobile loans and home improvement loans. Such loans comprised 3.8% of
the Bank's portfolio at year-end 1992 and 3.4% at year-end 1991 and 4.4%
at year-end 1990. The Bank has no foreign or energy loans.
As of December 31, 1992, loans which were 90-days or more past due
or non-accrual constituted 2.59% of the net loan portfolio. At December
31, 1991, 6.85% of the loan portfolio was 90-days or more past due or non-
accrual, and at December 31, 1990, 3.48% of the loan portfolio was 90-days
past due or non-accrual. Management does not presently anticipate any
material changes in this percentage for the period ending December 31,
1993.
Rio Salado's allowance for loan losses at December 31, 1992, was
$828,364 compared to $921,363 at December 31, 1991, and $612,377 at
December 31, 1990. The allowance for loan losses is maintained at an
amount deemed necessary by Rio Salado's management, based on its frequent
and extensive review of the loan portfolio combined with trend and other
statistical analysis tools. The following are some of the more
significant items taken into consideration by management when evaluating
the adequacy of the allowance for loan losses:
1. Loan delinquency trends and loans on non-accrual;
2. Analysis of "graded" loans;
3. The mix of the loan portfolio including concentrations by
borrower type;
4. Analysis of allowance for loan loss reserve ratios for prior
periods;
5. Review of changes in lending policy for possible effect on the
allowance; and
6. Comparative analysis with other banks in the Bank's group.
Management considers Rio Salado's loan loss reserve to be adequate
based upon its method of evaluating loan portfolio risk, economic
conditions, and prior loan loss experience.
Deposits. Rio Salado deposits at December 31, 1992 were $87,806,222
compared to $62,361,702 at December 31, 1991, and $54,478,359 at December
31, 1990. Most deposit categories have consistently increased, except
certificates of deposit which decreased in 1992. The greatest growth has
occurred in core deposits such as demand and money market accounts. The
decline in certificates of deposit is due to lower interest rates. The
same decline has occurred industry-wide. The Bank had no brokered
deposits in 1992, 1991, or 1990.
Liquidity. Rio Salado and the Bank have maintained and continue to
maintain adequate liquidity. The Bank's investment portfolio has an
average life of less than two years in order to reduce interest rate
exposure. This development enhances the Bank's liquidity. The Bank's
loan-to-deposit ratio has consistently been below the 50% level. In
addition, the Bank has a substantial amount of unused collateralized
borrowing lines available through correspondent banks and the Federal Home
Loan Bank. The Bank has no brokered funds and maintains a strong base of
core deposits.
Inflation. Assets and liabilities of a financial institution are
principally monetary in nature. Accordingly, interest rates, which
generally move with the rate of inflation, have potentially the most
significant effect on Rio Salado's net interest income. Rio Salado and
the Bank attempt to limit the impact of inflation on rates and net
interest margins by attempting to match maturities of interest-bearing
liabilities and interest-bearing assets within determined guidelines.
Income Taxes. For 1992 and prior, Rio Salado computed its income
tax liability and expense based on Accounting Principles Board Opinion No.
11 and related modifications thereto, as required by generally accepted
accounting principles. Beginning in 1993, Rio Salado was required to
adopt a new method based on Statement of Financial Accounting Standards
No. 109 (FASB 109). Rio Salado financial statements for the interim
period of nine months ending September 30, 1993 have not been restated to
adopt FASB 109. End-of-year 1993 financial statements will reflect the
change. No material effect is expected to result from this change in
method.
CERTAIN REGULATORY DEVELOPMENTS
As of January 31, 1990, the Bank entered into a Memorandum of
Understanding with the Federal Reserve Bank of San Francisco (the "Reserve
Bank") and the Superintendent of Banks of the State of Arizona (the
"Superintendent") with respect to certain unfavorable factors identified
by the Reserve Bank which caused the overall condition of the Bank to be
less than satisfactory. The principal areas of concern included a high
volume of classified assets in relation to the Bank's total capital, poor
earnings, declining capital ratios, and increasing reliance on volatile
funds. Pursuant to the Memorandum of Understanding, the Bank agreed to
submit to the Reserve Bank and to the Superintendent a plan designed to
strengthen the Bank's position (through amortization, repayment,
liquidation, additional collateral and other means) on assets in excess of
$100,000 which were in default as to principal or interest or adversely
classified by examiners. The Bank also agreed to prepare an overall
improvement plan setting forth a timetable for reducing classified assets
and non-performing loans over the next 18 months and to review the Bank's
written loan policies and procedures to ensure adequate guidance for the
Bank's lending activities. In addition, the Bank agreed to continue to
maintain an adequate valuation reserve for loan losses at a level at least
equal to 1.3% of total loans outstanding. The Bank also agreed to submit
to the Reserve Bank and the Superintendent a written plan to improve
earnings and to maintain an adequate level of capital and to review its
written assets/liability management policies to provide for adequate
liquidity. The Bank has been advised by the Reserve Bank that based on an
examination conducted as of February 19, 1993, and a follow-up visitation
as of August 31, 1993, the Bank was found to have achieved and maintained
its satisfactory condition, complied with the Memorandum of Understanding,
and to have submitted an acceptable capital plan. The Reserve Bank has
advised the Bank that in view of its compliance with the Memorandum of
Understanding, the Reserve Bank was terminating the Memorandum of
Understanding effective as of December 10, 1993.
STATISTICAL INFORMATION AND ANALYSIS
The following tables present certain statistical information
regarding Rio Salado and should be read in connection with Rio Salado's
Consolidated Financial Statements and Notes set forth elsewhere in this
Proxy Statement/Prospectus.
<PAGE>
Rio Salado Bancorp, Inc.
Balance Sheets
Based on Average Balances
<TABLE>
<CAPTION>
Years Ended December 31,
1992 1991 1990
<S> <C> <C> <C>
Assets
Cash and due from banks $ 6,466,081 $ 4,060,643 $ 3,629,546
Federal funds sold 1,261,077 2,533,249 2,538,910
U.S. Treasury obligations 167,950 102,793 250,501
U.S. Government agency obligations 12,986,233 12,517,576 14,169,465
Municipal obligations 399,056 0 0
Other investments 26,300,423 10,689,591 2,352,420
Loans
Commercial loans 13,769,838 12,314,719 11,143,413
Real estate - construction 1,807,885 1,643,091 1,698,917
Real estate - Permanent 18,848,551 16,066,439 15,157,802
Consumer loans 2,952,014 2,705,403 4,827,961
Less: Deferred loan fees (95,522) (69,819) (64,568)
Allowance for loan losses (1,054,650) (746,315) (851,167)
Total loans 36,228,116 31,913,518 29,938,271
Bank premises & equipment, net 695,589 764,993 853,162
Accrued interest receivable 581,745 590,326 604,708
Other real estate owned 561,005 662,935 1,085,750
Other assets 373,801 433,635 60,765
$86,021,076 $64,269,259 $55,483,498
Liabilities and Stockholders' Equity
Deposits
Non-interest bearing demand $16,515,091 $11,282,681 $10,292,147
Interest bearing demand 6,976,579 5,297,723 4,845,474
Money market and savings 21,178,053 13,837,796 10,544,655
Certificates of deposit 29,732,374 26,933,154 23,133,728
Federal deposits 101,629 75,277 58,164
Total deposits 74,503,726 57,426,631 48,874,168
Other liabilities 7,571,581 3,344,041 3,178,721
Total liabilities 82,075,307 60,770,672 52,052,889
Stockholders' equity
Common Stock 2,125,555 2,125,495 2,124,759
Retained earnings 1,820,214 1,373,092 1,305,850
Total stockholders' equity 3,945,769 3,498,587 3,430,609
$86,021,076 $64,269,259 $55,483,498
/TABLE
<PAGE>
Rio Salado Bancorp, Inc.
Analysis of Net Interest Earnings
Years Ended December 31, 1990 - 1992
<TABLE>
<CAPTION>
Avg
Aver- Yield Net
Aver- age Int Avg Rate Pd Yield
Average Amt Interest age Rate Earning Int Earning On
Outstanding Earned Yield Paid Assets Liabilities Assets
1992
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Federal funds sold $ 1,261,077 $ 41,242 3.27%
U.S. Treasury obligations 167,950 7,254 4.32%
U.S. Government agency
obligations 12,986,233 886,425 6.83%
Municipal obligations 399,056 20,272 5.08%
Other investments 26,300,423 1,665,017 6.33%
Loans 36,228,116 3,641,744 10.05%
Total $77,342,855 $6,261,954 8.10% 4.95%
Liabilities:
Deposits
Interest bearing demand $ 6,976,579 $ 152,025 2.18%
Money market and savings 21,178,053 611,905 2.89%
Certificates of deposit 29,732,374 1,351,635 4.55%
Other liabilities 7,457,148 316,458 4.24%
Total $65,344,154 $2,432,023 3.72%
1991
Assets:
Federal funds sold $ 2,533,249 $ 135,639 5.35%
U.S. Treasury obligations 102,793 8,833 8.59%
U.S. Government agency
obligations 12,517,576 1,044,127 8.34%
Municipal obligations 0 0 0.00%
Other investments 10,689,591 888,035 8.31%
Loans 31,913,518 3,663,747 11.48%
Total $57,756,727 $5,740,381 9.94% 5.15%
Liabilities:
Deposits
Interest bearing demand $ 5,297,723 $ 209,266 3.95%
Money market and savings 13,837,796 634,498 4.59%
Certificates of deposit 26,933,154 1,725,458 6.41%
Other liabilities 2,823,800 196,938 6.97%
Total $48,892,473 $2,766,160 5.66%
<PAGE>
1990
Assets:
Federal funds sold $ 2,538,910 $ 203,657 8.02%
U.S. Treasury obligations 250,501 21,333 8.52%
U.S. Government agency
obligations 14,169,465 1,220,814 8.62%
Municipal obligations 0 0 0.00%
Other investments 2,352,420 180,220 7.66%
Loans 29,938,271 3,653,701 12.20%
Total $49,249,567 $5,279,725 10.72% 5.07%
Liabilities:
Deposits
Interest bearing demand $ 4,845,474 $ 214,237 4.42%
Money market and savings 10,544,655 557,742 5.29%
Certificates of deposit 23,133,728 1,762,380 7.62%
Other liabilities 2,848,853 249,583 8.76%
Total $41,372,710 $2,783,942 6.73%
</TABLE>
Non-accrual loans are included in the loan balances listed above. Their
effect on the above analysis is immaterial. Interest earned
on loans does not include loan fee income.
<PAGE>
Rio Salado Bancorp, Inc.
Analysis of Change in Interest
Years Ended December 31, 1990 - 1992
<TABLE>
<CAPTION>
Interest Change Interest Change Interest Change
Interest Change Due To Change Due To Change Due To Change
1991 - 1992 In Volume In Rates In Rate/Volume
<S> <C> <C> <C> <C>
Assets:
Federal funds sold $ (94,397) $ (68,117) $ (52,792) $ 26,512
U.S. Treasury obligations (1,579) 5,599 (4,393) (2,785)
U.S. Government agency
obligations (157,702) 39,092 (189,692) (7,102)
Municipal obligations 20,272 0 0 20,272
Other securities 776,982 1,296,866 (211,303) (308,581)
Loans (22,003) 495,326 (455,718) (61,611)
Total $ 521,573 $1,768,766 $(913,897) $(333,296)
Liabilities:
Deposits:
Interest bearing
demand $ (57,241) $ 66,317 $ (93,825) $ (29,733)
Money market & savings (22,593) 336,569 (234,678) (124,485)
Certificates of deposit (373,823) 179,331 (501,076) (52,078)
Other liabilities 119,520 323,140 (77,105) (126,515)
Total $(334,137) $ 905,356 $(906,683) $(332,811)
Interest Change Interest Change Interest Change
Interest Change Due To Change Due To Change Due To Change
1990 - 1991 In Volume In Rates In Rate/Volume
Assets:
Federal funds sold $ (68,018) $ (454) $ (67,715) $ 151
U.S. Treasury obligations (12,500) (12,579) 193 (114)
U.S. Government agency
obligations (176,687) (142,324) (38,898) 4,535
Municipal obligations 0 0 0 0
Other securities 707,815 638,715 15,207 53,894
Loans 10,046 241,061 (216,717) (14,298)
Total $ 460,656 $ 724,419 $(307,931) $ 44,168
Liabilities:
Deposits:
Interest bearing demand $ (4,971) $ 19,996 $ (22,835) $ (2,131)
Money market & savings 76,756 174,185 (74,243) (23,186)
Certificates of deposit (36,922) 289,449 (280,330) (46,041)
Other liabilities (52,645) (2,195) (50,898) 448
Total $ (17,782) $ 481,435 $(428,306) $(70,911)
</TABLE>
Interest earned on loans does not include loan fee income.
<PAGE>
Rio Salado Bancorp, Inc.
Investment Portfolio
As of December 31, 1990 - 1992
<TABLE>
<CAPTION>
1992 Book 1991 Book 1990 Book
Value Value Value
<S> <C> <C> <C>
U.S. Treasury obligations $ 109,947 $ 0 $ 250,223
U.S. Government sponsored agencies 46,533,260 29,775,304 20,040,040
Municipal obligations 720,147 0 0
Other investments 2,097,574 238,365 115,850
Total $49,460,928 $30,013,669 $20,406,113
</TABLE>
Investment Portfolio Maturity Schedule
As of December 31, 1992
<TABLE>
<CAPTION>
Within 1 - 5 6 - 10 After 10
1 Year Years Years Years Total
<S> <C> <C> <C> <C> <C>
U.S. Treasury obligations
Carrying amount $ 109,947 $ 0 $ 0 $ 0 $109,947
Weighted average yield 2.94% 0.00% 0.00% 0.00%
U.S. Government agency obligations
Carrying amount 2,734,835 35,812,431 3,036,514 4,949,480 46,533,260
Weighted average yield 8.17% 6.51% 5.87% 6.12%
Municipal obligations
Carrying amount 0 497,040 223,107 0 720,147
Weighted yield 0.00% 4.96% 5.22% 0.00%
Federal reserve/FHLB stock
Carrying amount 0 0 0 416,450 416,450
Weighted yield 0.00% 0.00% 0.00% 3.94%
Mutual Funds
Carrying amount 1,681,124 0 0 0 1,681,124
Weighted yield 3.02% 0.00% 0.00% 0.00%
Total Carrying Amount $4,525,906 $36,309,471 $3,259,621 $5,365,930 $49,460,928
</TABLE>
Yields on tax exempt obligations have not been computed on a tax
equivalent basis.
<PAGE>
Rio Salado Bancorp, Inc.
Loan Portfolio
As of December 31, 1988 - 1992
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C>
Commercial $14,946,202 $12,490,068 $11,558,807 $10,661,964 $ 9,819,342
Real estate - construction 2,650,297 1,443,826 1,623,758 1,852,345 3,008,853
Real estate - permanent 20,733,576 19,811,727 16,430,258 15,179,550 15,487,802
Consumer loans 1,506,132 1,180,180 1,364,400 3,041,589 3,457,369
Total $39,836,207 $34,925,801 $30,977,223 $30,735,448 $31,773,366
</TABLE>
Loan Portfolio Maturity Schedule
As of December 31, 1992
<TABLE>
<CAPTION>
Within 1 - 5 After 5
1 Year Years Years Total
<S> <C> <C> <C> <C>
Commercial
Fixed rate $ 2,539,452 $1,162,578 $ 97,294 $ 3,799,324
Adjustable rate 7,450,524 3,410,901 285,453 11,146,878
Real estate - construction
Fixed rate 833,170 207,663 159,486 1,200,319
Adjustable rate 1,006,463 250,856 192,659 1,449,978
Total $11,829,609 $5,031,998 $734,892 $17,596,499
/TABLE
<PAGE>
Rio Salado Bancorp, Inc.
Past Due and Nonaccrual Loans
As of December 31, 1988 - 1992
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C>
Past due 90 days or more
and still accruing $ 0 $ 0 $ 540 $ 21,325 $ 191,000
Nonaccrual loans 1,005,835 2,237,655 1,041,946 726,000 1,044,000
Total $1,005,835 $2,237,655 $1,042,486 $747,325 $1,235,000
</TABLE>
The policy of Rio Salado is to discontinue the accrual of
interest on loans when principal or interest
is considered to be doubtful of collection, including
loans on which payments are 90 days or more in
arrears. Interest income on nonaccrual loans is recognized
only to the extent payments are received.
Potential Problem Loans
As of December 31, 1992
Loans classified as doubtful
Commercial $133,183
Total $133,183
Loans with inherent weaknesses where collection or liquidation in full is
highly questionable are classified as doubtful. Weaknesses include cash
flow deficiencies which would make payment on the loan difficult or
insufficient collateral to cover the amount of the loan.
Nonaccrual Loan Detail
At December 31, 1992
1992 Interest 1992 Interest
Income Earned Income
If Accruing Recorded
$67,000 $0
<PAGE>
Rio Salado Bancorp, Inc.
Analysis of the Allowance for Loan Losses
Years Ended December 31, 1988 - 1992
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $921,363 $612,377 $714,304 $516,093 $442,982
Charge-offs:
Commercial 265,000 50,000 57,000 235,000 61,000
Real estate - permanent 580,000 200,000 319,000 332,000 379,000
Real estate - construction 0 0 0 0 0
Installment 8,282 26,968 7,140 12,734 15,137
Total 853,282 276,968 383,140 579,734 455,137
Recoveries:
Commercial 45,000 57,000 142,000 48,000 6,439
Real estate - permanent 122,000 2,000 80,000 2,000 0
Real estate - construction 0 0 0 0 0
Installment 3,283 1,954 1,459 2,945 0
Total 170,283 60,954 233,459 52,945 6,439
Net (charge-offs)/recoveries (682,999) (216,014) (159,681) (526,789) (488,698)
Additions charged to operations 590,000 525,000 57,754 725,000 521,809
Balance at end of period $828,364 $921,363 $612,377 $714,304 $ 516,093
Ratio of net charge-offs during
the period to average loans
outstanding during the period 1.89% 0.68% 0.53% 1.69% 1.58%
</TABLE>
<PAGE>
Rio Salado Bancorp, Inc.
Allocation of the Allowance for Loan Losses
As of December 31, 1988 - 1992
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988
% of Loans % of Loans % of Loans % of Loans % of Loans
Per Category Per Category Per Category Per Category Per Category
To Total To Total To Total To Total To Total
Amount Lns Amount Lns Amount Lns Amount Lns Amount Lns
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial $331,346 37.52% $368,545 35.76% $244,950 37.31% $285,722 34.69% $166,837 30.90%
Real estate -
construction 0 6.65% 0 4.13% 0 5.24% 0 6.03% 99,000 9.47%
Real estate -
permanent 487,018 52.05% 542,818 56.73% 357,427 47.95% 418,582 49.39% 240,256 48.74%
Consumer loans 10,000 3.78% 10,000 3.38% 10,000 9.50% 10,000 9.89% 10,000 10.89%
Total $828,364 100.00% $921,363 100.00% $612,377 100.00% $714,304 100.00% $516,093 100.00%
</TABLE>
<PAGE>
Rio Salado Bancorp, Inc.
Deposit Analysis
Based on Averages
Years Ended December 31, 1990 - 1992
<TABLE>
<CAPTION>
1992 1991 1990
Average Average Average Average Average Average
Amount Rate Paid Amount Rate Paid Amount Rate Paid
<S> <C> <C> <C> <C> <C> <C>
Noninterest bearing
demand deposits $16,616,720 0.00% $11,357,958 0.00% $10,350,311 0.00%
Interest bearing demand
deposits 6,976,579 2.18% 5,297,723 3.95% 4,845,474 4.42%
Savings deposits 21,178,053 2.89% 13,837,796 4.59% 10,544,655 5.29%
Certificates of deposit 29,732,374 4.55% 26,933,154 6.41% 23,133,728 7.62%
Total $74,503,726 2.84% $57,426,631 4.48% $48,874,168 4.05%
</TABLE>
Time Deposit Maturity Schedule
As of December 31, 1992
<TABLE>
<CAPTION>
3 Months 3 - 6 6 - 12 Over
Or Less Months Months One Year
<S> <C> <C> <C> <C>
$100,000 or more $5,329,781 $3,866,330 $557,291 $668,276
</TABLE>
<PAGE>
Rio Salado Bancorp, Inc.
Return on Equity and Assets
Years Ended December 31, 1990 - 1992
1992 1991 1990
Return on average assets 0.68% 0.50% (0.10)%
Return on average equity 14.85% 9.18% (1.53)%
Dividend payout ratio 0.00% 0.00% 0.00%
Average equity to average assets 4.59% 5.44% 6.18%
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Supplemental Consolidated Financial Statements
December 31, 1992 and 1991
(With Independent Auditors' Report Thereon)
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders
Zions Bancorporation:
We have audited the accompanying supplemental consolidated balance
sheets of Zions Bancorporation and subsidiaries as of December 31, 1992
and 1991, and the related supplemental consolidated statements of
income, retained earnings, and cash flows for each of the years in the
three-year period ended December 31, 1992. These supplemental
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these supplemental consolidated 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.
The supplemental consolidated financial statements give retroactive
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 as described in note 2 to the supplemental
consolidated financial statements. Generally accepted accounting
principles proscribe giving effect to a consummated business combination
accounted for by the pooling of interests method in financial statements
that do not include the date of consummation. These financial
statements do not extend through the date of consummation. However,
they will become the historical consolidated financial statements of
Zions Bancorporation and subsidiaries after financial statements
covering the date of consummation of the business combination are
issued.
In our opinion, the supplemental consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of Zions Bancorporation and subsidiaries as of
December 31, 1992 and 1991, and the results of their operations and
their cash flows for each of the years in the three-year period ended
December 31, 1992, in conformity with generally accepted accounting
principles applicable after financial statements are issued for a period
which includes the date of consummation of the business combination.
KPMG Peat Marwick
Salt Lake City, Utah
January 14, 1994
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1992 and 1991
(In thousands, except share amounts)
ASSETS 1992 1991
Cash and due from banks $ 323,932 261,699
Money market investments:
Interest-bearing deposits 205,848 345,029
Federal funds sold and security resell agreements 359,971 247,074
Other money market investments 50,361 122,135
Trading account securities 38,700 36,087
Investment securities at cost (approximate market 942,995 816,944
Loans:
Loans held for sale at cost, which approximates 229,465 153,782
Loans, leases, and other receivables 1,929,025 1,885,867
2,158,490 2,039,649
Less:
Unearned income and fees, net of related costs 24,780 28,836
Allowance for loan losses 59,807 58,238
2,073,903 1,952,575
Amounts paid in excess of net assets of acquired 12,321 12,722
Premises and equipment 63,522 51,151
Other real estate owned 6,245 10,257
Other assets 30,125 28,265
$ 4,107,923 3,883,938
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 707,710 590,502
Interest-bearing:
Under $100,000 2,238,196 2,091,119
Over $100,000:
Time 76,426 126, 092
Foreign 52,777 70,146
3,075,109 2,877,859
Federal funds purchased and security repurchase 422,897 442,610
Accrued liabilities 45,402 57,896
Federal Home Loan Bank advances and other
borrowings:
Less than one year 153,533 153,685
Over one year 51,689 50,000
Long-term debt 99,223 81,134
Total liabilities 3,847,853 3,663,184
<PAGE>
Shareholders' equity:
Capital stock:
Parity preferred stock, without par value;
authorized 300,000 shares; issued and
outstanding, none - -
Preferred stock, without par value; authorized
500,000 shares, issued and outstanding, none - -
Common stock, without par value; authorized
15,000,000 shares; issued and outstanding,
13,727,576 shares and 13,603,844 shares
(note 1) 62,078 60,383
Retained earnings 197,992 160,371
Total shareholders' equity 260,070 220,754
Commitments and contingent liabilities (notes
7, 8, 9, 10, 12, and 14)
$ 4,107,923 3,883,938
See accompanying notes to consolidated financial statements.<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 1992, 1991, and 1990
(In thousands, except per share amounts)
1992 1991 1990
Interest income:
Interest and fees on loans $ 170,789 81,034 187,947
Interest on loans held for sale 13,804 8,970 10,785
Interest on money market investments 21,689 43,438 46,539
Interest on securities:
Taxable 48,834 49,137 39,222
Nontaxable 7,591 5,828 6,281
Trading account 5,537 3,122 2,882
Lease financing 9,977 9,908 8,352
Total interest income 278,221 301,437 302,008
Interest expense:
Interest on savings deposits 52,101 62,727 66,206
Interest on time accounts 41,609 63,323 73,261
Interest on borrowed funds 27,233 35,522 34,427
Total interest expense 120,943 161,572 173,894
Net interest income 157,278 139,865 128,114
Provision for loan losses 10,929 25,561 20,084
Net interest income after provision
for loan losses 146,349 114,304 108,030
Other operating income:
Service charges on deposit accounts 19,485 17,736 15,723
Other service charges, commissions, and fees 23,666 18,656 18,970
Trust income 4,614 4,169 4,092
Investment securities gains (losses), net 327 716 (868)
Trading account income 4,437 1,359 1,521
Other 10,210 9,827 8,488
62,739 52,463 47,926
Other operating expenses:
Salaries and employee benefits 70,067 61,220 58,126
Occupancy, net 7,248 7,570 7,119
Furniture and equipment 7,681 6,773 6,636
Other real estate expense 2,559 3,318 3,913
Legal and professional services 3,616 3,931 5,087
Supplies 3,860 3,817 3,669
Postage 3,611 3,700 3,201
FDIC premiums 6,235 5,381 2,797
Amortization of intangible assets 4,530 3,882 3,757
Other 29,548 23,408 21,983
138,955 123,000 116,288
Income before income taxes 70,133 43,767 39,668
Income taxes 22,924 13,318 11,903
Net income $ 47,209 30,449 27,765
Weighted average common and common equivalent
shares outstanding during the year 13,790 13,634 13,430
Net income per common share (note 1) $ 3.42 2.23 2.07
See accompanying notes to consolidated financial statements.<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1992, 1991, and 1990
(In thousands)
<TABLE>
<CAPTION>
1992 1991 1990
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 47,209 30,449 27,765
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Provision for loan losses 10,929 25,561 20,084
Write-downs of other real estate owned 2,227 2,203 3,452
Depreciation of premises and equipment 6,140 5,582 5,615
Amortization of premium on core deposits and other 4,530 3,890 3,757
intangibles
Amortization of net premium/discount on investment 6,241 2,621 1,807
securities
Accretion of unearned income and fees, net of related (4,056) 398 9,071
costs
Proceeds from sales of trading account securities 3,112,879 3,568,236 2,519,195
Increase in trading account securities (3,115,980) (3,595,506) (2,507,492)
Net loss (gain) on sales of investment securities (327) (716) 868
Proceeds from loans held for sale 879,977 590,187 438,549
Increase in loans held for sale (953,930) (623,667) (421,510)
Net gain on sales of loans, leases and other assets (3,998) (4,444) (5,059)
Net loss (gain) on sales of other real estate owned 278 335 (1,091)
Change in accrued income taxes 6,369 (787) (5,710)
Change in accrued interest receivable 4,437 6,264 (2,290)
Change in accrued interest payable (5,267) (3,617) 1,405
Change in other assets (4,271) 1,704 18,336
Change in accrued liabilities (13,596) 7,549 (6,928)
Net cash provided by (used in) operating activities (19,721) 15,768 99,810
Cash flows from investing activities:
Net decrease (increase) in money market investments 98,058 116,848 (419,027)
Proceeds from sales of investment securities 33,446 43,033 106,392
Proceeds from maturities of investment securities 235,452 118,311 94,774
Purchases of investment securities (403,271) (353,102) (328,762)
Proceeds from sales of loans and leases 163,709 - 90,756
Net increase in loans and leases (228,973) (112,963) (344,298)
Principal collections on leveraged leases 1,215 2,101 4,869
Proceeds from sales of premises and equipment 88 660 840
Purchases of premises and equipment (18,569) (6,591) (6,515)
Proceeds from sales of other real estate owned 8,186 12,637 29,319
Proceeds from sales of mortgage servicing rights 1,435 1,046 584
Purchases of mortgage servicing rights (1,374) (797) (1,988)
Proceeds from sales of other assets 877 857 929
Purchases of other assets - (675) (1,135)
Net cash used in investing activities (109,726) (178,635) (773,257)
Cash flows from financing activities:
Net increase in deposits 197,250 193,034 280,676
Net change in short-term funds borrowed (16,781) (99,513) 374,406
Proceeds from FHLB advances over one year 1,745 50,000 -
Payments on FHLB advances over one year (56) - -
Payments on leveraged leases - (835) (2,487)
Proceeds from issuance of long-term debt 50,000 - -
Payments on long-term debt (32,585) (10,260) (2,898)
Proceeds from issuance of common stock 1,695 2,700 1,155
Dividends paid (9,588) (9,102) (8,939)
Net cash provided by financing activities 191,680 126,024 641,913
Net increase (decrease) in cash and due from banks 62,233 (36,843) (31,534)
Cash and due from banks at beginning of year 261,699 298,542 330,076
Cash and due from banks at end of year $ 323,932 261,699 298,542
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Consolidated Statements of Retained Earnings
Years ended December 31, 1992, 1991, and 1990
(In thousands)
1992 1991 1990
Balance at beginning of year $160,371 139,024 120,198
Net income 47,209 30,449 27,765
Cash dividends per common share of
$.75 in 1992, and $.72 in 1991
and 1990 (notes 1 and 2) (9,183) (8,698) (8,616)
Cash dividends of NBA prior to
merger (405) (404) (323)
Balance at end of year $ 197,992 160,371 139,024
See accompanying notes to consolidated financial statements.
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1992, 1991, and 1990
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business - Zions Bancorporation (the Parent) is a multibank holding
company organized under the laws of Utah in 1955, which provides a full
range of banking and related services through its subsidiaries located
primarily in Utah, Arizona, and Nevada.
Basis of Financial Statement Presentation - The consolidated financial
statements include the accounts of Zions Bancorporation and its
subsidiaries (Zions). All significant intercompany accounts and
transactions have been eliminated in consolidation. Certain amounts in
prior years' consolidated financial statements have been reclassified to
conform to the 1992 presentation.
The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles. In preparing the
consolidated financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and revenues and expenses
for the period. Actual results could differ from those estimates.
Trading Account Securities - Trading account securities are stated at
market value. Trading account profits and commissions include both
realized and unrealized gains and losses. The liability incurred on
short-sale transactions, representing the obligation to deliver
securities, is included in other borrowings at market value at the time of
occurrence.
Investment Securities - Investment securities are those securities that
Zions has the ability and intent to hold to maturity. Nonequity
investment securities are stated at cost, adjusted for amortization of
premium or accretion of discount over the term of the security. Equity
securities are stated at the lower of cost or market. The adjusted cost
of specific securities is used to compute gains or losses on the sale of
investment securities.
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Securities held for indefinite periods of time, including securities that
management intends to use as part of its asset/liability strategy, or that
may be sold in response to changes in interest rates, changes in
prepayment risk, the need to increase regulatory capital or other similar
factors, are classified as held for sale and are carried at the lower of
cost or market value. As of December 31, 1992 and 1991, securities held
for sale are not significant.
Loan Fees - Nonrefundable fees and related direct costs associated with
the origination of loans are deferred. The net deferred fees and costs
are recognized in interest income over the loan term using methods that
generally produce a level yield on the unpaid loan balance. Other
nonrefundable fees related to lending activities other than direct loan
origination are recognized as other operating income over the period the
related service is provided. Bankcard discounts and fees charged to
merchants for processing transactions through Zions are shown net of
interchange discounts and fees expense, and are included in other service
charges, commissions, and fees.
Allowance for Loan Losses - The allowance for loan losses is based on
management's periodic evaluation of the loan portfolio and reflects an
amount that, in management's opinion, is adequate to absorb losses in the
existing portfolio. In evaluating the portfolio, management takes into
consideration numerous factors, including current economic conditions,
prior loan loss experience, the composition of the loan portfolio, and
management's estimate of anticipated credit losses. Management believes
that the allowance for loan losses is adequate. While management uses
available information to recognize losses on loans, future additions to
the allowance may be necessary based on changes in economic conditions.
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review Zions' allowance for loan losses.
Such agencies may require Zions to recognize additions to the allowance
based on their judgments using information available to them at the time
of their examination.
Nonperforming Assets - Nonperforming assets are comprised of loans for
which the accrual of interest has been discontinued, loans for which the
terms have been renegotiated to less than market rates due to a weakening
of the borrower's financial condition (restructured loans), and other real
estate acquired primarily through foreclosure that is awaiting
disposition.
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Loans are generally placed on a nonaccrual status when principal or
interest is past due 90 days or more unless the loan is both well secured
and in the process of collection, or when in the opinion of management,
full collection of principal or interest is unlikely. Generally, consumer
loans are not placed on a nonaccrual status inasmuch as they are generally
charged off when they become 120 days past due.
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Other real estate owned is carried at the lower of cost or net realizable
value. Real estate may be considered to be in substance foreclosed and
included herein when specific criteria are met. When property is acquired
through foreclosure, or substantially foreclosed, any excess of the
related loan balance over net realizable value is charged to the allowance
for loan losses. Subsequent write-downs or losses upon sale, if any, are
charged to other real estate expense.
Mortgage Loan Servicing - Mortgage loan servicing fees are based on a
stipulated percentage of the outstanding loan principal balances being
serviced and are included in income as related loan payments from
mortgagors are collected. Costs associated with the acquisition of loan
servicing rights through the purchase of servicing contracts or bulk loan
purchases are deferred and amortized over the lives of loans being
serviced in proportion to the estimated net loan servicing income.
Premises and Equipment - Premises and equipment are stated at cost, net of
accumulated depreciation and amortization. Depreciation, computed on the
straight-line method, is charged to operations over the estimated useful
lives of the properties. Leasehold improvements are amortized over the
terms of respective leases or the estimated useful lives of the
improvements, whichever is shorter. As of December 31, 1992 and 1991,
accumulated depreciation and amortization totaled $52,495,000 and
$48,226,000, respectively.
Off-Balance Sheet Financial Instruments - In the ordinary course of
business, Zions has entered into off-balance sheet financial instruments
consisting of commitments to extend credit, commercial letters of credit,
and standby letters of credit. Such financial instruments are recorded in
the consolidated financial statements when they become payable.
The credit risk associated with these commitments is considered in
management's determination of the allowance for loan losses.
Interest Rate Exchange Contracts and Cap and Floor Agreements - Zions
enters into interest rate exchange contracts and cap and floor agreements
in the management of interest rate risk. The objective of these financial
instruments is to match estimated repricing periods of interest-sensitive
assets and liabilities in order to reduce interest rate exposure. These
instruments are used only to hedge asset and liability portfolios and are
not used for speculative purposes. Fees associated with these financial
instruments are accreted into interest income or amortized to interest
expense on a straight-line basis over the lives of the contracts and
agreements. The net interest received or paid on these contracts is
reflected in the interest expense or income related to the hedged
obligation or asset.
Statements of Cash Flows - For purposes of the statements of cash flows,
Zions considers cash and due from banks to be cash equivalents.
Zions paid interest of $125.4 million, $164.6 million, and $172.6 million,
respectively, and income taxes of $16.8 million, $14.1 million, and
$18.1 million, respectively, for the years ended December 31, 1992, 1991,
and 1990. Loans transferred to other real estate owned totaled
$2.0 million, $6.1 million, and $15.4 million, respectively, for the years
ended December 31, 1992, 1991, and 1990.
Income Taxes - Current income taxes are provided based on the filing of a
consolidated income tax return. Deferred income taxes are provided for
timing differences between income reported for income tax and financial
reporting purposes in accordance with Accounting Principles Board (APB)
Opinion 11. Investment tax credits are recorded as a reduction of the
provision for income taxes in the year realized.
In February 1992, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting
for Income Taxes." SFAS No. 109 requires a change from the deferred
method of accounting for income taxes of APB Opinion 11 to the asset and
liability method of accounting for income taxes. Under the asset and
liability method of SFAS No. 109, deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates in effect for
the year in which those temporary differences are expected to be recovered
or settled. Under SFAS No. 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Zions will adopt SFAS No. 109 as of January 1, 1993, and will report the
cumulative effect of the change in the method of accounting for income
taxes in the 1993 consolidated statement of income. The cumulative effect
of such change in accounting method is expected to increase net income by
approximately $7.5 million, including consideration of the effects of the
adoption of SFAS No. 106, as discussed in note 12.
Fair Value of Financial Instruments - SFAS No. 107, "Disclosures About
Fair Value of Financial Instruments" issued in December 1991, requires
that Zions disclose estimated fair values for its financial instruments.
Fair value estimates, methods and assumptions are set forth in the
respective sections of the notes to the consolidated financial statements.
The fair value estimates are made at a discrete point in time based on
relevant market information and information about the financial
instruments. Because no market exists for a portion of the Zions'
financial instruments, fair value estimates are based on judgments
regarding future expected loss experience, current economic conditions,
risk characteristics of various financial instruments, and such other
factors. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and therefore cannot be
determined with precision. Changes in assumptions could significantly
effect the estimates.
The carrying value for certain short-term financial instruments, that
reprice frequently at market rates, approximates their fair value. Such
financial instruments include: cash and due from banks, money market
investments, and federal funds purchased and security repurchase
agreements.
The fair value estimates are based on existing on and off-balance sheet
financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that
are not considered financial instruments. For example, Zions has a trust
department that contributes net fee income annually. The trust department
is not considered a financial instrument and its value has not been
incorporated into the fair value estimates. Other significant assets and
liabilities that are not considered financial assets or liabilities
include the mortgage banking operation, brokerage network, core deposits,
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
deferred tax liabilities, premises and equipment, and goodwill. In
addition, as described for investment securities, the tax ramifications
related to the realization of the unrealized gains and losses, can have a
significant effect on fair value estimates and have not been considered in
the estimates.
Retirement Plans - Zions has noncontributory trustee retirement plans
covering all qualified employees who have at least one year of service.
Trust Assets - Assets held by Zions in a fiduciary or agency capacity for
customers are not included in the consolidated financial statements as
such items are not assets of Zions.
Stock Options - Proceeds from the sale of stock issued under options are
credited to common stock. Zions makes no charges against earnings with
respect to stock options issued under its qualified stock option plan.
Zions charges income for the difference between the option price and
market value on the date of grant with respect to stock options issued
under its nonqualified stock option plan.
Net Income Per Common Share - Net income per common share is based on the
weighted average outstanding common shares during each year, including
common stock equivalents, if applicable.
Stock Split - On December 18, 1992, Zions Board of Directors approved a
two-for-one split of the common stock. This action is effective on
January 26, 1993 for shareholders of record as of January 5, 1993. A
total of 6,139,227 shares of common stock was issued and recorded in the
form of a stock dividend. All references to the number of common shares
and per common share amounts have been restated to reflect the split.
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
2. MERGER AND ACQUISITIONS
On January 14, 1994, National Bancorp of Arizona Inc. (NBA) was merged
into a newly-incorporated wholly owned subsidiary of Zions. Each
outstanding share of NBA common stock was converted into .45 shares of
Zions common stock. The consolidated financial statements of Zions give
effect to this merger, which has been accounted for as a pooling of
interests. Accordingly, financial statements for the current year and
prior periods have been restated to reflect the results of operations of
these companies on a combined basis from the earliest period presented,
except for dividends per share. Certain reclassifications of the
historical results of these companies have been made to conform to the
current presentation. There were no material intercompany transactions
and no material differences in accounting policies and procedures. Zions
consolidated financial data for the years ended December 31, 1992, 1991,
and 1990 have been restated as follows (in thousands, except per share
data):
<TABLE>
<CAPTION>
1992 1991 1990
Previously reported Restated Previously reported Restated Previously reported Restated
Zions NBA Zions NBA Zions NBA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest
income $144,032 13,246 157,278 131,467 8,398 139,865 128,184 6,930 128,114
Net income 43,402 3,807 47,209 29,124 1,325 30,449 26,640 1,125 27,765
Net income per
common share 3.52 1.17 3.42 2.39 .41 2.23 2.23 .35 2.07
</TABLE>
During the three years ended December 31, 1992, Zions acquired certain
assets and certain liabilities of three financial institutions. These
acquisitions have been treated as purchases for accounting purposes and,
accordingly, the results of operations of these companies have been
included in the consolidated financial statements for periods subsequent
to the effective dates of purchase. Pro forma information with respect to
these companies is not provided inasmuch as their operations prior to
acquisition are not significant to Zions.
<PAGE>
3. INVESTMENT SECURITIES
Investment securities are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1992
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
<S> <C> <C> <C> <C>
U.S. treasury securities $ 57,380 688 32 58,036
U.S. government agencies and
corporations:
Small business Administration
loan-backed securities 366,867 6,248 183 372,932
Other agency securities 101,949 1,025 164 102,810
States and political subdivisions 148,363 1,112 264 149,211
Other debt securities 10,000 - 25 9,975
684,559 9,073 668 692,964
Mortgage-backed securities 162,428 2,626 357 164,697
Equity securities:
Federal Home Loan Bank stock 62,536 - - 62,536
Other stock 33,472 278 - 33,750
$ 942,995 11,977 1,025 953,947
</TABLE>
<TABLE>
<CAPTION>
1991
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
<S> <C> <C> <C> <C>
U.S. treasury securities $ 66,525 1,235 - 67,760
U.S. government agencies and
corporations:
Small business Administration
loan-backed securities 300,398 5,431 166 305,663
Other agency securities 71,353 1,565 - 72,918
States and political subdivisions 129,054 856 210 129,700
567,330 9,087 376 576,041
Mortgage-backed securities 192,199 3,930 124 196,005
Equity securities:
Federal Home Loan Bank stock 55,526 - - 55,526
Other stock 1,889 85 20 1,954
$816,944 13,102 520 829,526
/TABLE
<PAGE>
The fair value of investment securities is estimated based on quoted
market prices where available. If quoted market prices are not
available, fair values are based on quoted market prices of comparable
instruments or using a discounted cash flow model based on established
market rates.
The amortized cost and estimated market value of investment securities
as of December 31, 1992, by contractual maturity, excluding mortgage-
backed and equity securities, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right
to call or repay obligations with or without call or prepayment
penalties (in thousands):
Estimated
Amortized market
cost value
Due in one year or less $ 116,177 117,413
Due after one year through five years 310,185 313,624
Due after five years through ten years 145,890 147,994
Due after ten years 112,307 113,933
$ 684,559 692,964
Gross gains of $438,000 and $1,044,000, and gross losses of $141,000 and
$328,000, were realized on sales of investment securities for the years
ended December 31, 1992 and 1991, respectively. Such amounts include
gains of $105,000 and $283,000, and losses of $17,000 and $290,000,
respectively, for sales of mortgage-backed securities.
As of December 31, 1992 and 1991, securities with an amortized cost of
$73,685,000 and $87,092,000, respectively, were pledged to secure public
and trust deposits, advances, and for other purposes as required by law.
In addition, the Federal Home Loan Bank stock is pledged as security on
the related advances (note 7).
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
4. LOANS AND ALLOWANCE FOR LOAN LOSSES
Loans are summarized as follows (in thousands):
1992 1991
Estimated
Carrying fair Carrying
amount value amount
Loans held for sale $ 229,465 229,892 153,782
Commercial, financial, and
agricultural 604,227 609,192 505,910
Real estate:
Construction 131,352 131,790 102,868
Other 575,788 579,019 578,331
Consumer 458,053 471,195 535,510
Lease financing 124,480 124,480 122,620
Other receivables 35,125 35,086 40,628
$ 2,158,490 2,180,654 2,039,649
As of December 31, 1992 and 1991, loans with a
carrying value of $212,181,000 and $189,171,000,
respectively, were pledged as security for
Federal Home Loan Bank advances (note 7).
Fair values are estimated for portfolios of
loans with similar characteristics. Loans are
segregated by type and interest rate terms
(fixed and variable). The fair value of fixed
rate loans is calculated by discounting
contractual cash flows using the London
Interbank Offered Rate (LIBOR) yield curve
adjusted by a factor which reflects the credit
and interest rate risk inherent in the loan.
Variable rate loans reprice with changes in
market rates. As such their carrying amount is
deemed to approximate fair value.
During 1992, 1991, and 1990, Zions purchased
mortgage servicing rights totaling $1.4 million,
$797 thousand, and $2.0 million, respectively.
Amortization of purchased mortgage servicing
rights totaled $2.6 million, $1.8 million, and
$1.3 million for the years ended December 31,
1992, 1991, and 1990, respectively.
During 1992 and 1990, consumer loan
securitizations totaled $159 million and
$91 million, respectively (there were no
securitizations in 1991). The securitizations
did not result in a significant gain or loss
during 1992 and 1990.<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
4. LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The allowance for loan losses is summarized as
follows (in thousands):
1992 1991 1990
Balance at beginning of year $58,238 60,947 62,001
Allowance for loan losses of companies sold - - (1,224)
Additions:
Provision for loan losses 10,929 25,561 20,083
Recoveries 9,571 8,311 7,601
Deduction, loan charge-offs (18,931) (36,581) (27,514)
Balance at end of year $ 59,807 58,238 60,947
Included in the allowance for loan losses is an allocation for unused
commitments and letters of credit (note 9) that as of December 31, 1992
and 1991, amounted to $3,708,000 and $5,567,000, respectively.
Nonperforming loans, leases, and related interest foregone are summarized
as follows (in thousands):
1992 1991 1990
Nonaccrual loans and leases $ 21,282 33,178 35,802
Restructured loans and leases 4,003 3,225 10,181
Total $ 25,285 36,403 45,983
Contractual interest due $ 2,384 4,098 6,473
Interest recognized 1,040 2,057 3,787
Net interest foregone $ 1,344 2,041 2,686
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
5. DEPOSITS
Deposits are summarized as follows (in thousands):
1992 1991
Estimated
Carrying fair Carrying
amount value amount
Noninterest-bearing $ 707,710 707,710 590,502
Interest-bearing:
Under $100,000:
Savings 523,103 523,103 625,956
Money market 1,120,440 1,120,440 742,563
Time 594,653 601,175 722,620
2,238,196 2,244,718 2,091,119
Over $100,000:
Time 76,426 80,498 126,092
Foreign 52,777 52,993 70,146
$ 3,075,109 3,085,919 2,877,859
Under SFAS No. 107, the fair value of deposits with no stated maturity, such
as noninterest-bearing deposits, savings, and money market accounts, is equal
to the amount payable on demand on December 31, 1992. The fair value of time
and foreign deposits is based on the discounted value of the contractual cash
flows using the LIBOR yield curve.
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Interest expense on deposits is summarized as follows (in thousands):
1992 1991 1990
Savings deposits:
Savings $ 17,051 25,793 22,445
Money market 35,050 36,934 43,761
$ 52,101 62,727 66,206
Time accounts:
Under $100,000 $ 33,555 51,692 59,862
Over $100,000 4,419 8,386 9,780
Foreign 3,635 3,245 3,619
$ 41,609 63,323 73,261
6. INCOME TAXES
Income taxes are summarized as follows (in thousands):
1992 1991 1990
Federal:
Current $ 19,992 9,140 9,563
Deferred (431) 2,443 125
State 3,363 1,735 2,215
$ 22,924 13,318 11,903
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Deferred income taxes are provided on timing differences as follows
(in thousands):
1992 1991 1990
Prepaid employee benefits $ (103) (303) (178)
Cash basis of accounting - - (1,641)
Securities value adjustment - - (57)
Provision for loan losses (505) 1,104 (1,669)
Operating method of accounting and
deferred investment credits on
leasing operations 440 (24) (441)
Interest rate exchange contract (267) (267) (266)
Loan fees (208) (130) (55)
Depreciation 25 24 (41)
Other real estate owned write-down
effects 466 1,550 710
FHLB stock dividends 2,383 1,763 117
Deferred tax assets unrecognized
(recognized) (1,148) (1,291) 2,764
Other, net (1,514) 17 882
$ (431) 2,443 125
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
A reconciliation between income tax expense computed using the statutory
federal income tax rate and actual income tax expense is as follows
(in thousands):
1992 1991 1990
Income tax expense at statutory
federal rate $ 23,840 14,833 13,465
State income tax, net 2,214 1,287 1,591
Nondeductible expenses 621 541 638
Nontaxable interest (2,606) (2,091) (2,304)
Investment tax credits - - (4,230)
Deferred tax assets unrecognized
(recognized) (1,148) (1,291) 2,764
Other items, net 3 39 (21)
Income tax expense $ 22,924 13,318 11,903
7. FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS
Federal Home Loan Bank advances and other borrowings include
$176,816,000 and $175,000,000, respectively, borrowed by Zions First
National Bank, a wholly owned subsidiary, (the Bank) under its line of
credit with the Federal Home Loan Bank of Seattle. The line of credit
provides for borrowing of amounts up to ten percent of total assets.
The line of credit is secured under a blanket pledge whereby the Bank
maintains unencumbered security with par value, which has been adjusted
using a pledge requirement percentage based upon the types of
securities pledged, equal to at least 100 percent of outstanding
advances, and, Federal Home Loan Bank stock. There are no withdrawal
and usage restrictions or compensating balance requirements.
Substantially all Federal Home Loan Bank advances reprice with changes
in market interest rates or have short terms to maturity. The carrying
value of such indebtedness is deemed to approximate market value.
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
7. FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS (CONTINUED)
Maturities of outstanding advances in excess of one year are as follows (in
thousands):
Amount
1993 $ 215
1994 50,215
1995 215
1996 162
1997 91
Thereafter 791
$ 51,689
8. LONG-TERM DEBT
Long-term debt is summarized as follows (in thousands):
1992 1991
Estimated
Carrying fair Carrying
amount value amount
Subordinated notes, 8-5/8% $ 50,000 50,000 -
Floating rate notes 37,450 37,917 42,950
Senior notes, 8-3/4% - - 9,600
Equity commitment notes, 9-1/4% - - 16,000
Industrial revenue bonds 6,765 6,765 7,490
Capitalized real property leases, 4,005 4,005 4,571
9-1/2 to 21%, payable in aggregate
monthly installments of
approximately $89,000
Mortgage notes, 8 to 9-1/2%, due
in varying amounts and 411 411 523
periods
Other notes payable 592 592 -
$ 99,223 99,690 81,134
The 8-5/8 percent subordinated notes mature in 2002 with interest payable
semiannually. The notes are not redeemable prior to maturity. A portion of
the proceeds from the issuance of the notes were used to retire the senior
notes and the equity commitment notes.
The floating rate unsecured notes mature in 1998 and are redeemable at Zions'
option at par, commencing in January 1990. The interest rate on the notes
is adjusted quarterly to 1/4 percent above the mean of LIBOR for three-month
United States dollar deposits, and is subject to a minimum of 5-1/4 percent.
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
8. LONG-TERM DEBT (CONTINUED)
The industrial revenue bonds require mandatory sinking fund redemption in
various principal amounts through 2001. Bonds aggregating $2,045,000 bear
interest at rates from 7.30 to 7.50 percent. Bonds aggregating $4,720,000
bear interest at a floating rate (6.00 percent at December 31, 1992) of
not less than six percent nor more than 15 percent, based on an adjusted
percentage of U.S. treasury bill rates. The bonds are secured by an
assignment of leases on banking facilities and a data processing center.
Maturities and sinking fund requirements on long-term debt for each of the
succeeding five years are as follows (in thousands):
Parent
Consolidated only
1993 $ 1,673 1,331
1994 2,039 1,686
1995 2,177 1,839
1996 1,382 1,145
1997 691 495
The fair value of the subordinated notes is based on the market price
at issuance (1992). The floating rate notes reprice with changes in
LIBOR, but are subject to a minimum interest rate. Therefore, the fair
value of the notes is based on the discounted value of the contractual
cash flows. The remaining long-term debt is not considered significant
to the consolidated financial statements. As such, carrying value is
deemed to approximate fair value.
9. COMMITMENTS AND CONTINGENT LIABILITIES
Zions is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its
customers and to reduce its own exposure to fluctuations in interest
rates. These financial instruments include commitments to extend
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
credit, standby letters of credit, interest rate caps and floors, and
interest rate exchange contracts. Those instruments involve, to
varying degrees, elements of credit and interest rate risk in excess of
the amount recognized in the balance sheets. Zions' exposure to credit
loss in the event of nonperformance by the other party to the financial
instrument for commitments to extend credit and standby letters of
credit is represented by the contractual notional amount of those
instruments. Zions uses the same credit policies in making commitments
and conditional obligations as it does for on balance sheet
instruments. For interest rate caps, floors, and exchange contract
transactions, the contract or notional amounts do not represent
exposure to credit loss.
Unless noted otherwise, Zions does not require collateral or other
security to support financial instruments with credit risk.
Notional values of financial instruments are summarized as follows:
Notional or
carrying
amount
1992 1991
Financial instruments whose contract amounts represent
credit risk (in thousands):
Unused commitments to extend credit $ 837,475 718,994
Standby letters of credit written:
Performance 67,019 76,630
Financial 9,755 21,509
Commercial letters of credit 2,071 1,654
Commitments to purchase securities 2,900 -
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee.
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
9. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
Commitments totaling $589,938,000 expire in 1993. Since many of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements.
Zions evaluates each customer's credit worthiness on a case-by-case basis.
The amount of collateral obtained, if deemed necessary by Zions upon
extension of credit, is based on management's credit evaluation of the
counter party. Collateral held varies but may include accounts
receivable, inventory, property, plant and equipment, and income-producing
commercial properties.
Standby letters of credit written are conditional commitments issued by
Zions to guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private borrowing
arrangements, including commercial paper, bond financing, and similar
transactions. Standby letters of credit include commitments in the amount
of $47,347,000 expiring in 1993 and $29,427,000 expiring thereafter
through 2005. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to
customers. Zions generally holds marketable securities and cash
equivalents as collateral supporting those commitments for which
collateral is deemed necessary.
Estimated fair values are not provided for commitments to extend credit,
standby letters of credit, and commercial letters of credit, as management
considers it impractical to do so. Furthermore, management believes that
the fair values of such instruments are not significant in relation to the
consolidated financial statements as a whole.
Zions enters into interest rate contracts, including interest rate caps,
floors, and interest rate exchange contract agreements in managing its
interest rate exposure. Interest rate caps and floors obligate one of the
parties to the contract to make payments to the other if an interest rate
index exceeds a specified upper "capped" level or if the index falls below
a specified "floor" level. Interest rate exchange contract agreements
involve the exchange of fixed and variable rate interest payments based
upon a notional amount and maturity. The fair value of interest rate
contracts are obtained from deal quotes, or discounted cash flow analyses.
The values represent the estimated amount Zions would receive or pay for
comparable contracts, taking into account current interest rates.
Notional and estimated fair values of interest rate contracts are
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
summarized as follows:
1992 1991
Estimated
Notional fair Notional
amount value amount
Interest rate contracts (in thousands):
Purchased $ 115,113 1,694 145,224
Written 294,613 785 102,723
Exchanged:
Fixed 40,000 (3,351) 40,000
Variable 25,000 1,021 50,000
The contract or notional amount of financial instruments indicates a level
of activity associated with a particular class of financial instrument and
is not a reflection of the actual level of risk. As of December 31, 1992
and 1991, the regulatory capital risk weighted amounts assigned to all
off-balance sheet financial instruments described herein totaled
$158,419,000 and $161,504,000, respectively. See note 4 for consideration
of financial instruments in managements determination of the allowance for
loan losses.
During 1988, a lawsuit was brought in the United States District Court,
Utah District, against the Bank in connection with its performance of
duties as an indenture trustee for certain investors in real estate and
other syndication projects. In September 1992, a motion was granted
allowing an amended complaint containing allegations that plaintiffs
intend to proceed as a class action to recover approximately $23 million,
prejudgment interest, attorneys' fees and additional amounts under certain
statutory provisions and common law. No motion to certify the classes has
been filed, and the Bank intends to vigorously oppose such motion and to
defend the entire action. Although no assurances can be given as to the
outcome, Zions continues to believe that it has meritorious defenses to
such lawsuit, and that there is insurance coverage for a substantial
portion of the amount claimed.
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
9. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
Zions is also the defendant in various other legal proceedings arising in
the normal course of business. Zions does not believe that the outcome of
any of such proceedings, including the lawsuit discussed in the preceding
paragraph, will have a material adverse effect on its consolidated
financial position.
In connection with loans sold to (or serviced for) others, Zions is not
subject to significant recourse obligations.
Zions has commitments for leasing premises and equipment under the terms
of noncancelable leases expiring from 1993 to 2014. Future aggregate
minimum rental payments under existing noncancelable leases at December
31, 1992 are as follows (in thousands):
Real
property
Real and
property equipment,
capitalized operating
1993 $ 359 2,104
1994 393 1,838
1995 443 1,544
1996 621 696
1997 285 536
Thereafter 1,820 3,500
$ 3,921 10,218
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Future aggregate minimum rental payments have been reduced by noncancelable
subleases as follows: 1993, $709,000; 1994, $675,000; 1995, $614,000; and
1996, $425,000. Aggregate rental expense on operating leases amounted to
$3,355,000, $2,872,000, and $3,144,000, for the years ended December 31,
1992, 1991, and 1990, respectively.
Zions owns an office complex in Arizona and leases office space to various
tenants within the complex. Future aggregate minimum rentals are as
follows: 1993, $1,053,000; 1994, $814,000; 1995, $463,000; 1996, $324,000;
1997, $214,000; thereafter, $343,000.
10. STOCK OPTIONS
Zions has a qualified stock option plan adopted in 1981, under which stock
options are granted to key employees; and a nonqualified plan under which
options are granted to certain key employees. Under the nonqualified plan,
options expire five to ten years from the date of grant. Under the qualified
plan, 1,012,000 shares of common stock were reserved. Qualified options are
granted at a price not less than 100 percent of the fair market value of
the stock at the date of grant. Options granted are generally exercisable
in increments from one to four years after the date of grant and expire
four years after the date of grant.
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
10. STOCK OPTIONS (CONTINUED)
Transactions and other information relating to stock options are
summarized as follows:
Option
Number price
of per
shares share
Options granted during:
1992 216,000 $10.00 to $24.13
1991 26,500 $9.47 to $18.13
1990 30,000 $9.47 to $15.25
Options exercised during:
1992 116,328 $10.50 to $24.13
1991 101,006 $11.50 to $15.25
1990 19,044 $10.50
Options canceled during:
1992 6,000 $13.25
1991 - -
1990 29,950 $10.50 to $20.00
Options expiring during:
1992 37,724 $13.25
1991 - -
1990 8,158 $21.37 to $23.75
Options outstanding at December 31:
1992 489,592 $9.47 to $24.13
1991 430,644 $9.47 to $18.50
1990 505,150 $9.47 to $18.50
As of December 31, 1992, there are 256,000 options exercisable at prices
from $9.47 to $24.13 per share. For the year ended December 31, 1992,
shares obtained through exercise of options had a cumulative average
market value of $3,206,000 at the date of exercise.
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
11. COMMON STOCK
Changes in common stock are summarized as follows (amount in thousands):
Common stock
Shares Amount
Balance at December 31, 1989 $13,355,536 $56,528
Stock options exercised 19,044 200
Dividend reinvestments 68,932 955
Balance at December 31, 1990 13,443,512 57,683
Stock options:
Redeemed and retired (41,810) -
Exercised 101,006 480
Employee stock ownership plan 74,262 1,602
Dividend reinvestments 28,314 618
Balance at December 31, 1991 13,605,284 60,383
Stock options:
Redeemed and retired (14,820) -
Exercised 116,328 1,221
Employee stock ownership plan 13,242 283
Dividend reinvestments 8,982 191
Balance at December 31, 1992 $13,729,016 62,078
12. RETIREMENT PLANS
Zions has a noncontributory defined benefit pension plan for eligible
employees. Plan benefits are based on years of service and
employees' compensation levels. Benefits vest under the plan upon
completion of five years of service. Plan assets consist principally
of corporate equity and debt securities, government fixed income
securities, and cash investments.
The components of the net pension cost for the years ended
December 31, 1992 and 1991, are as follows (in thousands):
1992 1991
Service cost - benefits earned during the period $ 1,474 1,399
Interest cost on projected benefit obligation 2,531 2,540
Actual return on assets (1,890) (4,232)
Net amortization and deferrals (1,560) 1,185
Net pension cost $ 555 892
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Primary actuarial assumptions used in determining the net pension
cost are as follows:
1992 1991
Assumed discount rate 8.00% 8.50%
Assumed rate of increase in compensation levels 5.50 6.00
Expected long-term rate of return on assets 9.50 9.50
The funded status of the plan as of December 31,
1992 and 1991, is as follows (in thousands):
1992 1991
Actuarial present value of benefit obligations:
Vested benefit obligation $ 27,424 23,461
Accumulated benefit obligation $ 30,721 26,689
Projected benefit obligation $ (33,738) (33,015)
Plan assets at fair value 31,676 31,696
Unfunded projected benefit obligation (2,062) (1,319)
Unrecognized net loss 7,285 5,707
Unrecognized prior service cost (1,211) 804
Unrecognized net transition asset (4,181) (4,806)
Prepaid (accrued) pension cost $ (169) 386
Primary actuarial assumptions (future periods):
Assumed discount rate 8.00% 8.00%
Assumed rate of increase in compensation levels 5.50 5.50
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In addition to providing pension benefits, Zions has made it a practice to
provide certain health care benefits for retired employees. Zions'
employees may become eligible for those benefits if they reach retirement
age while working for Zions. The cost of retiree health care benefits is
recognized as expense and funded as claims are paid. The level of
benefits to be paid to current and future retirees was modified in 1992 to
require greater contributions from the employee during retirement, and a
cap on the amount of retiree premiums that will be paid by the Company.
Furthermore, employees hired subsequent to December 31, 1991 are not
eligible for postretirement health care benefits.
The FASB issued SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions," in December 1990. Under SFAS No. 106, the
cost of postretirement benefits other than pensions must be recognized on
an accrual basis as employees perform services to earn the benefits. Many
of the provisions and concepts of SFAS No. 106 are similar to current
standards on accounting for pensions. Zions will adopt SFAS No. 106 as of
January 1, 1993 and will report the cumulative effect of the change in the
method of accounting for postretirement benefits other than pensions in
the 1993 consolidated statement of income. The cumulative effect
(transition obligation) of such change in accounting method is expected to
decrease pretax and after tax net income by approximately $5.8 million and
$3.6 million, respectively.
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
12. RETIREMENT PLANS (CONTINUED)
Zions has an Employee Stock Savings Plan and an Employee Investment
Savings Plan (formerly known as the Salary Reduction Arrangement Plan)
(PAYSHELTER). Under PAYSHELTER, employees select from a nontax-deferred
or tax-deferred plan and four investment alternatives. Employees can
contribute from 1 to 15 percent of compensation, which is matched
50 percent by Zions for contributions up to 5 percent and 25 percent for
contributions greater than 5 percent up to 10 percent. Contributions to
the plans amounted to $793,000, $636,000, and $563,000 for the years ended
December 31, 1992, 1991, and 1990, respectively.
During 1992, Zions formed an employee profit sharing plan. Contributions
to the plan are determined per a formula based on Zions' annual return on
equity (required minimum return of 15 percent). Zions accrued
contributions to the plan of $838,000 for the year ended December 31,
1992.
NBA established a qualified 401(k) plan effective January 1, 1989.
Company contributions to the plan amounted to $65,000, $51,000, and
$36,000 for the years ended December 31, 1992, 1991, and 1990,
respectively.
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
13. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Financial information by quarter for the three years ended December 31,
1992 is as follows (in thousands, except per share amounts):
Net
Provision Income income
Net for before per
interest loan income Net common
income losses taxes income share
1992:
First quarter $35,486 4,135 11,293 8,331 .61
Second quarter 38,105 3,181 15,977 10,282 .75
Third quarter 40,664 2,003 19,908 13,131 .95
Fourth quarter 43,023 1,610 22,954 15,465 1.11
$157,278 10,929 70,132 47,209 3.42
1991:
First quarter $ 34,434 8,398 9,872 6,507 .48
Second quarter 33,666 4,959 12,060 7,917 .59
Third quarter 35,533 6,631 11,534 7,539 .54
Fourth quarter 36,232 5,573 10,301 8,486 .62
$139,865 25,561 43,767 30,449 2.23
1990:
First quarter $ 29,319 5,205 8,358 6,254 .47
Second quarter 31,244 4,719 8,777 6,534 .49
Third quarter 32,533 4,405 10,785 7,415 .55
Fourth quarter 35,018 5,755 11,748 7,562 .56
$128,114 20,084 39,668 27,765 2.07
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
14. CONCENTRATIONS OF CREDIT RISK
Most of Zions' business activity is with customers located within the
states of Utah, Arizona and Nevada. The commercial loan portfolio is well
diversified, consisting of more than 15 industry classifications
groupings. As of December 31, 1992, the largest concentration of risk in
the commercial loan and leasing portfolio is represented by the retail
industry grouping, which comprises approximately 18 percent of the
portfolio. The retail industry grouping is also well diversified over
eight subcategories. Zions has minimal credit exposure from lending
transactions with highly leveraged entities and has no foreign loans.
15. DIVIDEND RESTRICTION AND CONDENSED PARENT ONLY FINANCIAL INFORMATION
Dividends declared by Zions' banking subsidiaries in any calendar year may
not, without the approval of the appropriate federal regulator, exceed
their net earnings for that year combined with their retained net earnings
for the preceding two years. At December 31, 1992, Zions' subsidiaries
had approximately $85 million available for the payment of dividends under
the foregoing restrictions. In addition, the banking subsidiaries must
meet various requirements and restrictions under the laws of the United
States and state laws, including requirements to maintain cash reserves
against deposits and limitations on loans and investments with affiliated
companies. During 1992, cash reserve balances held with the Federal
Reserve banks averaged approximately $48.5 million.
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Condensed financial information of Zions
Bancorporation (parent only) follows:
ZIONS BANCORPORATION
Condensed Balance Sheets
December 31, 1992 and 1991
(In thousands)
ASSETS 1992 1991
Cash and due from banks $ 1,138 1,164
Interest-bearing deposits 10,180 9,393
Investment securities 365 400
Loans, lease financing, and other receivables 5,551 5,396
Investments in subsidiaries:
Commercial banks 276,394 240,863
Other 9,500 8,785
Receivables from subsidiaries:
Commercial banks 29,190 7,362
Other 15,110 15,000
Real estate held for rental purposes, at cost,
less accumulated depreciation 7,469 8,056
Premises and equipment, at cost, less
accumulated depreciation 111 135
Other real estate owned 626 1,075
Other assets 8,161 7,584
$ 363,795 305,213
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued liabilities $ 6,954 5,423
Long-term debt 96,771 79,036
Total liabilities 103,725 84,459
Shareholders' equity:
Parity preferred stock - -
Preferred stock - -
Common stock 62,078 60,383
Retained earnings 197,992 160,371
Total shareholders' equity 260,070 220,724
$ 363,795 305,213
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
15. DIVIDEND RESTRICTION AND CONDENSED PARENT ONLY FINANCIAL INFORMATION
(CONTINUED)
<TABLE>
<CAPTION>
ZIONS BANCORPORATION
Condensed Statements of Income
Years ended December 31, 1992, 1991, and 1990
(In thousands)
1992 1991 1990
<S> <C> <C> <C>
Interest income - interest and fees on loans and securities $ 2,879 2,570 3,120
Interest expense - interest on borrowed funds 9,014 7,891 8,820
Net interest loss (6,135) (5,321) (5,700)
Other income:
Dividends from consolidated subsidiaries:
Commercial banks 13,982 14,007 11,876
Other 250 1,450 603
Other income 2,734 2,354 1,188
16,966 17,811 13,667
Expenses:
Salaries and employee benefits 3,532 2,887 2,558
Provision for loan losses - - 60
Operating expenses 181 (223) 574
3,713 2,664 3,192
Income before income tax benefit 7,118 9,826 4,775
Income tax benefit (2,815) (1,673) (1,898)
Income before equity in undistributed income (loss) of consolidated
subsidiaries 9,933 11,499 6,673
Equity in undistributed income (loss) of consolidated subsidiaries:
Commercial banks 36,299 18,990 21,860
Other 977 (40) (768)
37,276 18,950 21,092
Net income $47,209 30,449 27,765
</TABLE>
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
15. DIVIDEND RESTRICTION AND CONDENSED PARENT ONLY FINANCIAL INFORMATION
(CONTINUED)
ZIONS BANCORPORATION
Condensed Statements of Cash Flows
Years ended December 31, 1992, 1991, and 1990
(In thousands)
<TABLE>
<CAPTION>
1992 1991 1990
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 47,209 30,449 27,765
Adjustments to reconcile net income to net cash provided by
operating activities:
Undistributed net income of consolidated subsidiaries (37,276) (18,950) (21,092)
Depreciation of premises and equipment 692 725 732
Amortization of excess costs of acquired businesses 349 349 388
Other 889 1,858 (1,476)
Net cash provided by operating activities 11,863 14,431 6,317
Cash flows from investing activities:
Net decrease (increase) in interest-bearing deposits (787) (1,712) 2,279
Collection of advances to subsidiaries 148,466 80,234 100,266
Advances to subsidiaries (170,495) (79,853) (100,769)
Decrease (increase) of investment in subsidiaries (467) 2,538 (20)
Other 1,199 863 920
Net cash provided by (used in) investing activities (22,084) 2,070 2,676
Cash flows from financing activities:
Proceeds from issuance of long-term debt 50,000 - -
Payments on long-term debt (32,317) (9,764) (2,669)
Proceeds from issuance of common stock 1,695 2,700 1,155
Dividends paid (9,183) (8,698) (8,616)
Net cash provided by (used in) financing activities $ 10,195 (15,762) (10,130)
Net increase (decrease) in cash and due from banks $ (26) 739 (1,137)
Cash and due from banks at beginning of year 1,164 425 1,562
Cash and due from banks at end of year $ 1,138 1,164 425
</TABLE>
The Parent company paid interest of $7,940,000, $7,255,000, and $7,944,000
for the years ended December 31, 1992, 1991, and 1990, respectively.
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
ZIONS BANCORPORATION
Condensed Statements of Retained Earnings
Years ended December 31, 1992, 1991, and 1990
(In thousands)
1992 1991 1990
Balance at beginning of year $160,371 139,024 120,198
Net income 47,209 30,449 27,765
Cash dividends per common share (9,588) (9,102) (8,939)
Balance at end of year $ 197,992 160,371 139,024
COMPARISON OF ZIONS COMMON STOCK AND RIO SALADO COMMON STOCK
General
Upon consummation of the Reorganization, shareholders of Rio
Salado will become shareholders of Zions, a Utah corporation. Thus the
Utah Revised Business Corporation Act and Zions' Articles of
Incorporation ("Articles") and Bylaws will govern the rights of the Rio
Salado shareholders who become shareholders of Zions. Since the
Articles and Bylaws of Zions and Rio Salado are not the same, the
Reorganization will result in certain differences in the rights of the
holders of Rio Salado Common Stock. The following is a summary of
certain of the more significant differences.
Voting Rights
General. The holders of Zions Common Stock, like the holders of
Rio Salado Common Stock, are generally entitled to one vote for each
share held of record on all matters submitted to a shareholder vote.
The holders of Rio Salado Common Stock currently have cumulative voting
rights in the election of directors, meaning that in all elections for
directors every shareholder shall have the right to vote, in person or
by proxy, that number of votes equal to the number of directors to be
elected multiplied by the number of votes to which the shareholder's
shares are entitled and give one candidate that resulting amount or
distribute the shareholder's votes in the manner and among as many
candidates as the shareholder so determines. The directors who receive
the most votes are elected for the available directorships being voted
upon. The holders of Zions Common Stock do not have cumulative voting
rights. The absence of cumulative voting means that a nominee for
director must receive the votes of a plurality of the shares voted in
order to be elected.
Special Votes for Certain Transactions. The Articles of Zions
contain provisions requiring special shareholder votes to approve
certain types of transactions. In the absence of these provisions,
either the transactions would require approval by a majority of the
shares voted at a meeting or no shareholder vote would be required.
Zions' Articles require that certain "business transactions"
between Zions or a subsidiary and a "related person" be approved by the
affirmative votes of the holders of not less than 80% of the voting
<PAGE>
power of all outstanding voting stock of Zions. A "related person" is
generally defined by Zions' Articles to mean a person, corporation,
partnership, or group acting in concert that beneficially owns 10% or
more of the voting power of Zions' outstanding voting stock.
The "business transactions with a related person" subject to
Zions' special vote requirements include (1) a merger or consolidation
involving Zions or a subsidiary of Zions with a related person; (2) the
sale, lease, exchange, transfer or other disposition of all or any
substantial part of the assets of either Zions or a subsidiary of Zions
to, with or for the benefit of a related person; (3) the issuance, sale,
exchange or other disposition by Zions or a subsidiary of Zions to a
related person of securities of Zions or a subsidiary of Zions having an
aggregate fair market value of $5 million or more; (4) any liquidation,
spinoff, splitoff, splitup, or dissolution of Zions by or on behalf of a
related person; (5) any recapitalization or reclassification of the
securities of Zions or other transaction that would have the effect of
increasing the voting power of a related person or reducing the number
of shares of each class of voting securities outstanding; and (6) any
agreement, contract, or other arrangement providing for any of the
transactions set forth above.
Zions' special shareholder vote requirements for business
transactions with related persons do not apply to any transaction
approved by a majority of the "continuing directors" or if various
specified conditions are met. A continuing director is any member of
the Zions Board who is not a related person or an interested shareholder
or an affiliate or associate of a related person and who (1) was a
director on February 21, 1986 or (2) became a director subsequent to
that date and whose election or nomination for election by Zions'
shareholders was approved by a majority of the continuing directors then
on the Board.
Rio Salado's bylaws require Rio Salado's Board of Directors, when
evaluating certain transactions, including tender or exchange offers,
mergers or consolidations with another entity, or the sale of all or
substantially all of the assets of Rio Salado, in connection with the
exercise of its judgment in determining what is in the best interests of
Rio Salado and its shareholders, to give due consideration to all
relevant factors. Such factors include, without limitation, the social
and economic effects of acceptance of such offer on the customers and
employees of the Bank and Rio Salado and on the communities in which the
<PAGE>
Bank operates. Other factors include whether a more favorable offer
could be obtained for Rio Salado and the Bank, whether the offer is
acceptable based upon the historical operating results and financial
condition of Rio Salado and the Bank, the reputation and business
practices of the acquiring party as they would affect the employees and
customers of Rio Salado, the value of the acquiring party's stock, and
other legal and regulatory issues raised by the offer. Rio Salado's
Board of Directors carefully considered these factors in determining to
recommend approval of the Plan of Reorganization and Bank Merger by
shareholders. See "Plan of Reorganization -- Background of and Reasons
for the Reorganization."
Under Arizona law, Rio Salado may not merge or consolidate with
another entity or conduct a sale of substantially all of its assets
without the prior approval of a majority of its outstanding voting
stock. However, Rio Salado's bylaws require the affirmative vote of the
holders of two-thirds of the outstanding shares of the corporation to
approve a merger, consolidation, or sale of all or substantially all of
its assets. See "Plan of Reorganization -- Vote Required; Management
Recommendation."
Board of Directors
Director Liability. Rio Salado's articles of incorporation
contain a "director liability" provision. This provision generally
shields a director from liability to the corporation or its shareholders
for a breach of fiduciary duty as a director other than (i) a breach of
a director's duty of loyalty, (ii) acts or omissions not taken in good
faith or which involve intentional misconduct or a knowing violation of
law, (iii) authorizing the unlawful payment of dividends, (iv)
transactions in which a director receives an improper benefit, and (v)
any violation involving a conflict of interest described in Arizona
Revised Statutes (Sec.) 10-041. Zions has a similar provision in its
articles of incorporation.
Classified Board. The articles of incorporation of Zions and the
bylaws of Rio Salado divide the Board of Directors into three classes,
each consisting of one-third (or as near as may be) of the whole number
of the Board of Directors. One class of directors is elected at each
annual meeting of shareholders, and each class serves for a term of
three years.
<PAGE>
The number of directors which constitute Zions' full Board of
Directors may be increased or decreased only by amendment of the bylaws,
which requires the affirmative vote of two-thirds of the total number of
directors constituting the entire Board, or by the shareholders of Zions
at a regular or special meeting by the affirmative vote of two-thirds of
the outstanding and issued shares entitled by statute to vote. Except
as otherwise required by law, vacancies on Zions' Board of Directors,
including vacancies resulting from an increase in the size of the Board,
may be filled by the affirmative vote of a majority of the remaining
directors even though less than a quorum of the Board of Directors.
Zions' directors elected by the Board to fill vacancies serve for the
full remainder of the term of the class to which they have been elected.
Any directorship filled by reason of an increase in the number of
directors may be filled for a term of office continuing only until the
next election of directors by the shareholders.
Rio Salado's articles of incorporation provide for the number of
Directors to be fixed by the bylaws. The bylaws provide for the number of
directors to be no fewer than seven and no more than fifteen, as
determined by resolution of the Board of Directors. Rio Salado's bylaw
provisions governing vacancies are similar to Zions', with the exception
that any directors elected by the Board shall continue in office only
until their successor has been elected at the next annual election.
Removal of Directors. Zions' Articles provide that any
director (or the entire Board of Directors) may be removed from office
by shareholder vote only if such removal is approved by the holders of
two-thirds of the issued and outstanding shares then entitled to vote at
an election of directors.
Rio Salado's bylaws provide that, at a meeting of shareholders called
expressly for that purpose, any or all directors may be removed with or
without cause by a vote of the holders of a majority of the shares then
entitled to vote at an election of directors. However, no director may
be removed if the number of votes cast against his removal would be
enough to elect him if then cumulatively voted at an election of the
entire Board of Directors.
<PAGE>
Shareholder Meetings
Utah law provides that special meetings of a corporation's
shareholders may be called by the board of directors or such other
persons authorized by the bylaws to call a special meeting or by the
holders of at least one-tenth of all the votes entitled to be cast on
any issue proposed to be considered at the special meeting. Under
Zions' Bylaws, special meetings may be called by the president or by the
Board of Directors.
Under Rio Salado's bylaws, special meetings of shareholders may
be called by the president, the Board of Directors, or shareholders
entitled to cast at least one-fifth of the shares entitled to vote.
However, under Arizona law, shareholders owning one-tenth of all the
shares entitled to vote at a meeting may call a special meeting.
Amendment of Articles and Bylaws
Zions' Articles require the affirmative votes of the holders of
two-thirds of all outstanding voting stock of Zions to approve any
amendment to Zions' Articles, except that to repeal or amend the
provisions in the Article regarding business transactions with related
persons requires the affirmative vote of 80% of the issued and
outstanding stock entitled to vote. Zions' bylaws may be amended by an
affirmative vote of two-thirds of the total number of directors
constituting the entire Board or by the affirmative vote of two-thirds
of the issued and outstanding shares entitled to vote.
Under Arizona law, Rio Salado's articles of incorporation may be
amended at an annual or special shareholder meeting by an affirmative
majority vote of all holders of the shares entitled to vote. Rio
Salado's bylaws may be amended at an annual or special shareholder
meeting by an affirmative vote of the majority of all shares entitled to
vote, or, with respect to those matters which are not by statute
reserved exclusively to the shareholders, by an affirmative vote of a
majority of the Board of Directors at any Board meeting.
Dissenters' Rights
Zions is incorporated under the laws of Utah. Utah law provides
for dissenters' rights in a variety of transactions including: (i) any
plan of merger to which a corporation is a party (other than mergers or
<PAGE>
consolidations not requiring a shareholder vote); (ii) certain sales,
leases, exchanges or other dispositions of all or substantially all of
the assets of a corporation; and (iii) certain share exchanges.
However, shareholders of a Utah business corporation are not entitled to
dissenters' rights in any of the transactions mentioned above if their
stock is either listed on a national securities exchange or on the
National Market System of NASDAQ or held of record by 2,000 or more
shareholders. The aforementioned provisions do not apply if the
shareholder will receive for his shares anything except (a) shares of
the corporation surviving the consummation of the plan of merger or
share exchange, (b) shares of a corporation whose shares are listed on a
national securities exchange or the National Market System of NASDAQ or
held of record by not less than 2,000 holders, or (c) cash in lieu of
fractional shares. Zions Common Stock currently is listed for trading
in the National Market System of NASDAQ and has more than 2,000
shareholders of record.
Rio Salado is incorporated under the laws of Arizona. Arizona
law provides that any shareholder of a Arizona corporation shall have
the right to dissent from any of the following corporate actions:
(1) any plan of merger or consolidation to which the corporation is a
party; and (2) any sale or exchange of all, or substantially all, the
property and assets of the corporation not made in the usual and regular
course of business. However, shareholders of an Arizona corporation are
not entitled to dissent from any plan of merger or consolidation if the
shares held by the shareholders are part of a class or series of shares
registered on a national securities exchange or were held of record by
not less than 2,000 shareholders on the date fixed to determine the
shareholders entitled to vote on the plan of merger. Rio Salado's
common stock is held by fewer than 2,000 holders of record and is not
traded on a national securities exchange. As a result, shareholders of
Rio Salado will be entitled to exercise all applicable rights of
dissenting shareholders under Arizona law. See "Plan of Reorganization-
-Dissenters' Rights of Rio Salado Shareholders."
Preferred Stock
The Articles of Zions authorize the corporation to issue shares
of preferred stock. Zions' Articles authorize up to 3,000,000 shares of
Zions preferred stock.
The authorized shares of preferred stock are issuable in one or
<PAGE>
more series on the terms set by the resolution or resolutions of the
Board of Directors of Zions providing for the issuance thereof. Each
series of preferred stock would have such dividend rate, which might or
might not be cumulative, such voting rights, which might be general or
special, and such liquidation preferences, redemption and sinking funds
provisions, conversion rights or other rights and preferences, if any,
as the Board of Directors may determine. Except for such rights as may
be granted to the holders of any series of preferred stock in the
resolution establishing such series or as required by law, all of the
voting and other rights of the shareholders of Zions belong exclusively
to the holders of common stock.
Rio Salado's amended articles of incorporation authorize the
issuance of up to 10,000,000 shares of preferred stock, no par value.
Rio Salado's Board of Directors is authorized to issue preferred stock
in series and to fix and determine the voting powers, designations,
preferences and privileges of the shares of each such series. Rio
Salado's preferred stock, if issued, may rank prior to its common stock
as to dividend rights, liquidation preferences, or both, and may have
full or limited voting rights. No shareholder approval is required for
the issuance of such shares.
Dividend Rights
Utah law generally allows a corporation, subject to restrictions
in its certificate of incorporation, to declare and pay dividends in
cash or property, but only if the corporation is solvent and payment
would not render the corporation insolvent. Zions' Articles place no
further restrictions on distributions. Thus, the holders of Zions
Common Stock are entitled to dividends when, as and if declared by their
Board of Directors out of funds legally available therefor. However, if
Zions preferred stock is issued, the Board of Directors of the
corporation may grant preferential dividend rights to the holders of
such stock which would prohibit payment of dividends on the
corporation's common stock unless and until specified dividends on the
preferred stock had been paid.
Arizona law prohibits corporations from paying dividends when the
corporation is insolvent, when the payment would render the corporation
insolvent or when the payment would be contrary to restrictions in the
corporation's articles of incorporation. Arizona law generally permits
the declaration and payment of dividends only out of the unreserved and
<PAGE>
unrestricted earned surplus of the corporation, or out of the unreserved
and unrestricted net earnings of the current fiscal year and the next
preceding fiscal year taken as a single period. Rio Salado's articles
of incorporation place no further restrictions on dividends.
Liquidation Rights
Upon liquidation, dissolution or winding up of Zions, whether
voluntary or involuntary, the holders of Zions Common Stock are entitled
to share ratably in the assets of the corporation available for
distribution after all liabilities of the corporation have been
satisfied. However, if preferred stock is issued by Zions, the Board of
Directors of the corporation may grant preferential liquidation rights
to the holders of such stock which would entitle them to be paid out of
the assets of the corporation available for distribution before any
distribution is made to the holders of common stock.
The rights of the holders of Rio Salado Common Stock in the event
of a liquidation are substantially similar to those applicable to Zions
shareholders. Under Arizona law, upon dissolution or liquidation by a
court, after all liabilities and obligations of the corporation have
been satisfied, any remaining assets or proceeds shall be distributed
among its shareholders according to their respective rights and
interests. Although Rio Salado does not have any shares of preferred
stock outstanding, Rio Salado's Board of Directors, like that of Zions,
may issue shares of preferred stock with preferential liquidation rights
without shareholder approval.
Miscellaneous
There are no preemptive rights, sinking fund provisions,
conversion rights, or redemption provisions applicable to Zions Common
Stock or Rio Salado Common Stock. Holders of fully paid shares of Zions
Common Stock and Rio Salado Common Stock are not subject to any
liability for further calls or assessments.
LEGAL OPINIONS
Opinions with respect to certain legal matters in connection with
the Rio Salado Reorganization will be rendered by Metzger, Hollis,
Gordon & Mortimer, Washington, D.C., as counsel for Zions, and by Ryley,
Carlock & Applewhite, Phoenix, Arizona, as counsel for Rio Salado.
<PAGE>
EXPERTS
The consolidated financial statements, and the supplemental
consolidated financial statements, of Zions as of December 31,
1992 and 1991, and for each of the years in the three-year period ended
December 31, 1992, incorporated by reference herein/included herein
have been incorporated by reference herein/included herein in reliance
upon the report of KPMG Peat Marwick, independent certified public
accountants, incorporated by reference herein/included herein, and upon
the authority of such firm as experts in auditing and accounting.
The financial statements of Discount as of December 31, 1992 and
1991, and for each of the years in the three-year period ended December
31, 1992, incorporated by reference herein have been incorporated by
reference herein in reliance upon the report of KPMG Peat Marwick,
independent certified public accountants, incorporated by reference
herein, and upon the authority of such firm as experts in auditing and
accounting.
The consolidated financial statements of NBA as of December 31,
1992 and 1991, and for each of the years in the three-year period ended
December 31, 1992, incorporated by reference herein have been
incorporated by reference herein in reliance upon the report of KPMG
Peat Marwick, independent certified public accountants, incorporated by
reference herein, and upon their authority as experts in auditing and
accounting.
The consolidated financial statements of Rio Salado as of
December 31, 1992 and 1991, and for each of the years in the three-year
period ended December 31, 1992, included herein have been included
herein in reliance upon the report of McGladrey & Pullen, independent
certified public accountants, appearing elsewhere herein, and upon their
authority as experts in auditing and accounting.
OTHER MATTERS
The management of Rio Salado does not know of any other matters
intended to be presented for shareholder action at the Special Meeting.
If any other matter does properly come before the Special Meeting and is
put to a shareholder vote, the proxies solicited hereby will be voted in
accordance with the judgment of the proxyholders named thereon.
<PAGE>
APPENDIX A
(Sec.) 10-081. RIGHTS OF DISSENTING SHAREHOLDERS.--A. To be entitled
to compensation as a dissenting shareholder to a merger or
consolidation, a shareholder must:
1. File written objection to the proposed merger or
consolidation as provided herein.
2. Not vote in favor of the proposed merger or
consolidation as provided herein.
3. Make a demand for compensation as provided herein.
B. Any shareholder electing to exercise such right of
dissent shall file with the corporation, prior to the taking of the vote
at the meeting of shareholders at which such proposed merger or
consolidation is submitted to a vote, a written objection to such
proposed merger or consolidation stating the shares and certificate
numbers to which such objection applies. The corporation surviving or
resulting from any merger or consolidation shall within ten days after
such meeting notify each shareholder of any corporation so merging or
consolidating who objected thereto in writing and whose shares either
were not entitled to vote or were not voted in favor of the merger or
consolidation and who filed such written objection with the corporation
before the taking of the vote on the merger or consolidation, that the
merger or consolidation has been approved. Shareholders not entitled to
such notice shall be bound by such merger or consolidation and shall
continue to enjoy the rights of a shareholder as though written
objection was not filed. Such notice shall likewise be given to each
shareholder whose corporation approved of the merger or consolidation
pursuant to section 10-075, without a meeting of the shareholders, and
who either did not, or had no right to, consent in writing to such
merger or consolidation.
C. Such notices shall contain an offer by the corporation
to purchase the shares as to which the shareholder objected and shall be
accompanied by a balance sheet of the corporation, the shares of which
the dissenting shareholder holds, as of the latest available date and
not more than twelve months prior to such meeting of shareholders, and a
profit and loss statement of such corporation for the twelve months'
period ended on the date of such balance sheet.
<PAGE>
D. If within twenty days after the date of mailing by the
corporation surviving or resulting from the merger or consolidation of
the notice and offer, any such shareholder shall demand in writing
payment for his shares in accordance with the offer, the surviving or
resulting corporation shall, within thirty days after the expiration of
the period of twenty days, pay to him the consideration offered for his
shares upon surrender of the certificate or certificates representing
such shares.
E. To be entitled to compensation as a dissenting
shareholder to a sale or exchange of all or substantially all of the
property and assets of the corporation as defined in section 10-080, a
shareholder must:
1. File written objection to the proposed sale or exchange
as provided herein.
2. Not vote in favor of the proposed sale or exchange as
provided herein.
3. Make a demand for compensation as provided herein.
F. Any shareholder electing to exercise such right of
dissent shall file with the corporation, prior to the taking of the vote
at the meeting of shareholders at which such proposed sale or exchange
is submitted to a vote, a written objection to such proposed sale or
exchange stating the shares and certificate numbers to which such
objection applies. The corporation shall within ten days after such
meeting notify each shareholder who objected thereto in writing and
whose shares either were not entitled to vote or were not voted in favor
of the sale or exchange and who filed such written objection with the
corporation before the taking of the vote, that the sale or exchange has
been approved. Shareholders not entitled to such notice shall be bound
by such sale or exchange and shall continue to enjoy the rights of a
shareholder as though written objection was not filed. Such notices
shall also contain an offer by the corporation to purchase shares as to
which the shareholder objected and shall be accompanied by a balance
sheet of the corporation as of the latest available date and not more
than twelve months prior to the making of such offer, and a profit and
loss statement of such corporation for the twelve months' period ended
on the date of such balance sheet.
G. If within twenty days after the date of mailing by the
<PAGE>
corporation of the notice and offer, any such shareholder shall demand
in writing payment for his shares in accordance with the offer, the
corporation shall, within thirty days after the expiration of the period
of twenty days, pay to him the consideration offered for his shares upon
surrender of the certificate or certificates representing such shares.
H. If the demand of the shareholder exceeds the offer, the
corporation and the shareholder may negotiate the fair value during the
thirty days after the expiration of the twenty days and if agreement is
reached during that period the corporation shall pay the shareholder
within fifteen days after the surrender of the certificate or
certificates representing such shares.
I. Upon payment of the agreed value the dissenting
shareholders shall cease to have any interest in such shares. Any
shareholder entitled to, and given notice who fails to make demand
within the twenty day period shall be bound by the corporate action
taken at the shareholders' meeting and any corporate proceedings which
may have been taken during the interim and shall continue to be entitled
to enjoy the rights of a shareholder.
J. If during the period of thirty days following the period
of twenty days provided for herein the corporation and any such
shareholder fail to agree upon the fair value of such shares, any such
shareholder, or the corporation surviving or resulting from the merger
or consolidation or a corporation selling substantially all of its
assets, may commence an action, within four months after such thirty day
period, in the superior court in any county where known place of
business of the selling corporation or any corporation involved in such
merger or consolidation is or was located. If more than one such action
is commenced within the four months period they shall be consolidated.
There shall be no right to trial by jury in any action filed pursuant to
this section.
K. The fair value of a share shall be fixed as of the day
prior to that on which the shareholders' vote was taken, provided that
in no event shall the amount thereof exceed that specified in the demand
of the particular shareholder. There shall be excluded from the fair
value any increase or decrease attributable to the merger or
consolidation or sale or any prospects of the merger or consolidation or
sale prior thereto.
<PAGE>
L. The court shall determine which shareholders have
complied with the provisions of this section and have become entitled to
the valuation of and payment for their shares. The court may in its
discretion appoint a master to have such powers and authority as are
conferred upon masters by law by the rules of civil procedure for the
superior courts of Arizona or by the order of appointment. The master's
report shall be subject to exceptions to be heard before the court, both
upon the law and the facts. The court shall by its judgment determine
the value of the stock of the shareholders entitled to payment by the
surviving, selling or resulting corporation therefor and shall direct
the payment of such value together with interest, if any, at a rate and
from a date determined by the court in its discretion, to the
shareholder entitled thereto upon the transfer to such corporation of
the certificates representing such shares. Upon payment of the
judgment, the dissenting shareholder shall cease to have any interest in
such shares.
M. The costs of any such action shall be determined by the
court and shall be assessed as the court may deem equitable. The court,
in its discretion, may award to any party such party's expenses,
including reasonable attorney's fees and expenses for experts employed
by such party, in the event that the ultimate determination of fair
value varied materially from what had been offered or demanded by the
opposite party.
N. The court may require at any stage of the action, that
the shareholders who demanded payment of their shares submit their
certificates to the corporation for notation thereon of the pendency of
the action, and if any shareholder fails to comply with such direction,
the court may dismiss the proceedings as to such shareholder. If shares
represented by a certificate issued therefor shall bear similar
notation, together with the name of the original dissenting holder of
such shares, and a transferee of such shares shall acquire by such
transfer no rights in the corporation other than those which the
original dissenting shareholder had after making demand for payment of
the fair value thereof.
O. Any shareholder who has demanded payment for his shares
as herein provided shall not thereafter be entitled to vote such shares
for any purpose or be entitled to exercise any other rights of a
shareholder including, without limitation, the right to the payment of
dividends or other distribution on those shares, except dividends or
<PAGE>
other distribution payable to shareholders of record at a date which is
prior to that on which the shareholders' vote was taken, unless the
action to be filed in the superior court as provided for herein shall
not be filed within the time period provided, or the action be dismissed
as to such shareholder, or unless such shareholder shall with the
written approval of the corporation deliver to the corporation a written
withdrawal of his objections to and an acceptance of the merger or
consolidation. In any of which cases the right of such shareholder to
payment for his shares shall cease and he shall be bound by the
corporate action taken at shareholders' meeting and any corporate
proceedings which may have been taken in the interim.
P. Shares acquired by a corporation pursuant to payment of
the agreed value therefor or to payment of the judgment entered
therefor, as in this section provided, may be held and disposed of by
such corporation as in the case of other treasury shares, except that,
in the case of a merger or consolidation, they may be held and disposed
of as the plan of merger or consolidation may otherwise provide.
<PAGE>
APPENDIX B
January 11, 1994
The Board of Directors
Zions Bancorporation
1380 Kennecott Building
Salt Lake City, Utah 84133
Dear Board Members:
Zions Bancorporation ("Zions") has requested the opinion of KPMG Peat
Marwick regarding certain Federal income tax consequences of a plan of
statutory merger resulting in the acquisition of the Rio Salado Bancorp,
Inc. ("Bancorp") and its wholly-owned subsidiary, Rio Salado Bank
("Bank"), by Zions as more fully described below. To assist in
rendering this opinion, you have submitted for our consideration a
draft, dated December 27, 1993, of the Form S-4 Registration Statement
which includes the Proxy Statement/Prospectus related to this proposed
series of transactions. Together these are referred to as the
"Document." All section references herein are to the Internal Revenue
Code of 1986, as amended, unless stated otherwise.
The opinions contained herein are based solely upon the information
contained in the Document and the FACTS and REPRESENTATIONS as contained
herein. If any of the FACTS or REPRESENTATIONS are not correct or
complete, it is imperative that we be so informed immediately, in
writing, as such could cause us to change our opinions. In order to
facilitate a full and complete understanding of the basis for our
opinions, a draft of this opinion (dated January 11, 1994) was
circulated for your review and concurrence. We express no opinion on
any matter not expressly addressed herein, and no inference should be
drawn regarding any matter not expressly addressed.
FACTS
The Corporate Parties
Zions, a Utah corporation, is a bank holding company registered under
the Bank Holding Company Act of 1956, as amended. Zions has outstanding
shares of no par value, voting common stock ("Zions Common Stock").
ZAZMAC, Inc. ("ZAZMAC") is a newly-organized Utah corporation and is a
wholly-owned subsidiary of Zions. ZAZMAC was organized solely to
effectuate the transactions described herein.
National Bank of Arizona ("Zions Arizona"), is a national banking
association and a wholly-owned subsidiary of Zions (except for directors
qualifying shares). Zions Arizona recently changed its name as a result
<PAGE>
The Board of Directors
Zions Bancorporation
January 11, 1994
of an unrelated acquisition. Previously, its name was Zions First
National Bank of Arizona.
Bancorp, an Arizona corporation, is a bank holding company which owns
all the issued and outstanding stock of Bank. Bank is an Arizona
corporation licensed to conduct commercial banking business in the State
of Arizona. Bank has been a wholly-owned subsidiary of Bancorp since
1984.
The First Acquisition
STEP 1: As described in the Document, Bancorp will merge in a
statutory merger with and into ZAZMAC in accordance with the laws of
Arizona and Utah (the "Holding Company Merger"). In the Holding Company
Merger, ZAZMAC will be the surviving corporation and the separate
corporate existence of Bancorp will cease. ZAZMAC will succeed to and
acquire all of the assets and liabilities of Bancorp as of the effective
time of the Holding Company Merger.
STEP 2: Immediately following STEP 1, ZAZMAC will merge in a
statutory merger with and into Zions in accordance with the laws of
Utah. Zions will be the surviving corporation and the separate
corporate existence of ZAZMAC will cease. STEP 2, together with the
Holding Company Merger, are referred to as the First Acquisition.
Pursuant to the First Acquisition, the shareholders of Bancorp who do
not perfect their rights as dissenters shall be entitled to receive from
Zions solely shares of Zions Common Stock in exchange for their shares
of Bancorp stock. The number of shares of Zions Common Stock into which
each share of Bancorp stock will be converted will be based on a formula
set forth in the Plan of Reorganization (the "Formula"). In general,
the Formula provides that the aggregate value of the Zions Common Stock
issued pursuant to the First Acquisition, will be $12,500,000. Each
holder of Bancorp shares will be entitled to receive in exchange for
each share of Bancorp stock that number of shares of Zions Common Stock
calculated by dividing $12,500,000 by the Average Closing Price, and by
further dividing such quotient by the number of shares of Bancorp issued
and outstanding at the effective date of the Holding Company Merger.
The Average Closing Price is defined in the Plan of Reorganization and,
in general, is the average closing price of Zions Common Stock over a
twenty consecutive trading day period as reported in NASDAQ.
Zions will not issue any fractional shares of Zions Common Stock. If a
shareholder of Bancorp is entitled to receive a fractional share of
<PAGE>
The Board of Directors
Zions Bancorporation
January 11, 1994
Zions Common Stock as a result of the Formula, then Zions will pay such
shareholder cash equal in value to such fractional share instead.
The Second Acquisition
As described in the Document, following the First Acquisition, Bank will
merge in a statutory merger with and into Zions Arizona in accordance
with the laws of Arizona and the United States of America (the "Bank
Merger"). In the Bank Merger, Zions Arizona will be the surviving
corporation and the separate corporate existence of Bank will cease.
Zions Arizona will succeed to and acquire all of the assets and
liabilities of Bank as of the effective time of the Bank Merger.
REPRESENTATIONS
With respect to the First Acquisition and the Bank Merger, it is
represented as follows:
1. The fair market value of the Zions Common Stock to be
received by each shareholder of Bancorp will be
approximately equal to the fair market value of the
Bancorp stock surrendered in exchange therefor.
2. There is no known plan or intention for the
shareholders of Bancorp to sell or otherwise dispose
of a number of shares of Zions Common Stock to be
received in the proposed transaction that would reduce
their holdings of Zions Common Stock to a number of
shares having a value, as of the date of the Holding
Company Merger, of less than 50 percent of the value
of all of the formerly outstanding shares of Bancorp
stock as of the same date. For purposes of this
representation, shares of Bancorp stock surrendered by
dissenters or exchanged for cash in lieu of a
fractional share of Zions Common Stock will be
considered to have been exchanged for Zions Common
Stock which was then sold. In addition, shares of
Bancorp stock sold or disposed of prior to the Holding
Company Merger but in contemplation thereof, will be
considered to have been exchanged for Zions Common
Stock which was then sold.
3. ZAZMAC will acquire at least 90 percent of the fair
market value of the net assets and at lest 70 percent
<PAGE>
The Board of Directors
Zions Bancorporation
January 11, 1994
of the fair market value of the gross assets held by
Bancorp immediately prior to the Holding Company
Merger. For purposes of this representation, amounts
paid to dissenters from Bancorp's assets, amounts used
by Bancorp to pay its expenses in the transaction and
all redemptions and distributions (except for regular,
normal dividends) made by Bancorp immediately
preceding the Holding Company Merger will be included
as assets of Bancorp immediately prior to the Holding
Company Merger.
4. Zions has no plan or intention to reacquire any of the
Zions Common Stock issued in the Holding Company
Merger.
5. Other than as a result of STEP 2, described above,
neither Zions, ZAZMAC, nor Zions Arizona has any plan
or intention to sell or otherwise dispose of the
assets of Bancorp or Bank except in the ordinary
course of business.
6. The liabilities of Bancorp or Bank to be assumed by
ZAZMAC, Zions, and Zions Arizona, respectively, and
any liabilities to which the transferred assets are
subject, were incurred by Bancorp or Bank in the
ordinary course of its business.
7. Zions will continue to own all the outstanding stock
of Zions Arizona and Zions Arizona will continue to
conduct the business previously conducted by Bank.
8. Zions, ZAZMAC, Zions Arizona, Bank, Bancorp, and the
shareholders of Bancorp will each pay their own
expenses incurred in connection with these
transactions.
9. Zions, ZAZMAC, and Zions Arizona are neither a debtor
nor creditor with respect to any debt with Bancorp or
Bank that was issued, acquired, or will be settled at
a discount.
10. Neither Zions, Bancorp, Zions Arizona, nor Bank is an
investment company as defined in Sections
368(a)(2)(F)(iii) and (iv).
<PAGE>
The Board of Directors
Zions Bancorporation
January 11, 1994
11. Zions does not own and it has not owned within the
previous 5 years, any stock of Bancorp.
12. The fair market value of the assets of Bancorp, and
the fair market value and the adjusted tax basis of
the assets of Bank, to be acquired by ZAZMAC and Zions
Arizona, respectively, will, in each instance, equal
or exceed the sum of the liabilities to be assumed by
ZAZMAC or Zions Arizona plus the liabilities, if any,
to which the transferred assets are subject.
13. Neither Bancorp nor Bank is under the jurisdiction of
a court in a Title 11 or similar case as defined in
Section 368(a)(3)(A).
14. Funds used to pay Bancorp dissenters will come solely
from assets of Bancorp acquired in the transaction.
15. Pursuant to STEP 2, ZAZMAC will transfer to Zions, all
assets and liabilities acquired from Bancorp.
16. Zions Arizona will acquire at least 90 percent of the
fair market value of the net assets and at least 70
percent of the fair market value of the gross assets
held by Bank immediately prior to the Bank Merger.
For purposes of this representation, amounts used by
Bank to pay its expenses in the transaction and all
redemptions and distributions (except for regular,
normal dividends) made by Bank immediately preceding
the Bank Merger, will be included as assets of Bank
immediately prior to the Bank Merger.
17. Following the Bank Merger, Zions will be in control of
Zions Arizona as defined in Section 368(c) and there
is no plan for Zions Arizona to issue or dispose of
any shares of stock which would cause Zions to lose
control of Zions Arizona.
18. Zions has no plan or intention to liquidate Zions
Arizona, to merge it with any other corporation unless
Zions Arizona is the surviving corporation, to sell or
otherwise dispose of its stock, or to cause Zions
Arizona to dispose of any of the assets of Bank except
in the ordinary course of business.
<PAGE>
The Board of Directors
Zions Bancorporation
January 11, 1994
19. No stock of Zions Arizona will be issued in the
Holding Company Merger or the Bank Merger and there
will be no dissenters in the Bank Merger.
20. The payment of cash in lieu of a fractional share of
Zions Common Stock is solely to save the expense and
inconvenience of issuing and carrying fractional
shares and it is not separately-bargained for
consideration. The maximum cash that any one Bancorp
shareholder will receive in lieu of a fractional share
interest of Zions Common Stock will be less than the
value of one full share and the total cash paid in
lieu of fractional share interests will be less than 1
percent of the total consideration paid to the Bancorp
shareholders.
21. The former shareholders of Bancorp will own less than
50 percent of the value and voting power of Zions
after these transactions.
Based solely upon the information contained in the Document and the
FACTS and REPRESENTATIONS as stated herein, we render the following
opinions regarding the Federal income tax consequences of the First
Acquisition and the Bank Merger:
(A) For Federal income tax purposes, the formation of
ZAZMAC, the merger of Bancorp with and into ZAZMAC,
and the merger of ZAZMAC with and into Zions will be
ignored and such transactions will be treated as a
transfer by Bancorp of substantially all its assets to
Zions in exchange for solely shares of Zions Common
Stock and the assumption by Zions of the liabilities
of Bancorp. See Rev. Rul. 72-405, 1972-2 C.B. 217.
(B) The transfer by Bancorp of substantially all its
assets to Zions solely in exchange for Zions Common
Stock and the assumption by Zions of its liabilities
will qualify as a reorganization within the meaning of
Section 368(a)(1)(C). Bancorp and Zions will each be
"a party to a reorganization" within the meaning of
Section 368(b).
(C) No gain or loss will be recognized by Bancorp upon the
transfer of substantially all its assets to Zions in
<PAGE>
The Board of Directors
Zions Bancorporation
January 11, 1994
exchange for solely shares of Zions Common Stock and
the assumption by Zions of Bancorp's liabilities.
(D) No gain or loss will be recognized by Bancorp upon the
distribution to its shareholders of the shares of
Zions Common Stock.
(E) No gain or loss will be recognized by Zions upon the
acquisition of substantially all the assets of Bancorp
in exchange for Zions Common Stock and the assumption
of Bancorp's liabilities.
(F) The tax basis of each Bancorp asset in the hands of
Zions will be the same as the tax basis of such asset
in Bancorp's hands immediately before the Holding
Company Merger.
(G) The holding period of each Bancorp asset in the hands
of Zions will include the period during which Bancorp
held such asset.
(H) No gain or loss will be recognized to the shareholders
of Bancorp upon their exchange of Bancorp stock solely
for shares of Zions Common Stock (including any
fractional share interest to which they may be
entitled).
(I) The tax basis of the Zions Common Stock received by
the shareholders of Bancorp (including any fractional
share interest to which they may be entitled) will be
the same as the tax basis of the shares of Bancorp
stock surrendered in exchanged therefor.
(J) The holding period of the Zions Common Stock received
by the shareholders of Bancorp (including any
fractional share interest to which they may be
entitled) will include, in each instance, the period
during which the shareholder held the Bancorp stock
surrendered in exchanged therefor, provided the
Bancorp stock surrendered is held as a capital asset
at the time of the Holding Company Merger.
(K) The receipt of cash in lieu of a fractional share of
Zions Common Stock will be treated as if Zions
<PAGE>
The Board of Directors
Zions Bancorporation
January 11, 1994
actually issued the fractional shares and then
redeemed them for cash. Such cash will be treated as
having been received in exchange for the fractional
share interest within the meaning of Section 302(a).
Rev. Proc. 77-41, 1977-2 C.B. 575.
(L) The Bank Merger will qualify as a reorganization
within the meaning of Section 368(a)(1). Bank and
Zions Arizona will each be "a party to a
reorganization" within the meaning of Section 368(b).
(M) No gain or loss will be recognized by Bank, Zions
Arizona, Zions, or Bancorp as a result of the Bank
Merger.
(N) The tax basis of each Bank asset in the hands of Zions
Arizona will be the same as the tax basis of such
asset in Bank's hands immediately prior to the Bank
Merger.
(O) The holding period of each Bank asset in the hands of
Zions Arizona will include the period during which
Bank held such asset.
* * * * * *
The opinions contained herein are rendered only with respect to the
specific matters discussed herein and we express no opinion with
respect to any other legal, Federal, state, or local tax aspect of
these transactions. This opinion is not binding upon the Internal
Revenue Service, any state or local tax authority, or any court.
No assurance can be given that a position contrary to that
expressed herein will not be asserted by a tax authority.
In rendering our opinions, we are relying upon the relevant
provisions of the Internal Revenue Code of 1986, as amended, the
regulations thereunder, and the judicial and administrative
interpretations thereof, all as of the date of this letter.
<PAGE>
The Board of Directors
Zions Bancorporation
January 11, 1994
However, all of the foregoing authorities are subject to change or
modification which can be retroactive in effect, and therefore,
could also affect our opinions. We undertake no responsibility to
update our opinions for any subsequent change or modification.
KPMG PEAT MARWICK
<PAGE>
APPENDIX C
ALEX SHESHUNOFF & CO. INVESTMENT BANKING
November 15, 1993
Board of Directors
Rio Salado Bancorp, Inc.
1400 E. Southern
Tempe, Arizona 85282
Gentlemen:
You have requested our opinion, as an independent financial analyst
as to whether the terms of the proposed merger of Rio Salado
Bancorp, Inc., Tempe, Arizona ("Rio Salado") with and into Zions
Bancorporation, Salt Lake City, Utah ("Zions") are fair, from a
financial point of view, to the Rio Salado Common Shareholders.
Pursuant to the Agreement and Plan of Reorganization, each holder
of shares of Rio Salado Common Stock shall be entitled to receive,
in exchange for each share of Rio Salado Common Stock held of
record by such stockholder as of the Effective Date, that number of
shares of Zions stock calculated by dividing the $12,500,000
Purchase Price by the Average Closing Price, and by further
dividing the number so reached by the number of shares of Rio
Salado Common Stock that shall be issued and outstanding at the
Effective Date.
As part of its banking analysis business, Alex Sheshunoff & Co.
Investment Banking is continually engaged in the valuation of bank
and bank holding company securities in connection with mergers and
acquisitions nationwide. Prior to being retained for this
assignment, Alex Sheshunoff & Co. Investment Banking has provided
professional services and products to Rio Salado and Zions. The
revenues derived from such services and products are insignificant
when compared to the firm's total gross revenues.
In connection with this assignment, we reviewed (i) the Agreement
and Plan of Reorganization between Rio Salado and Zions; (ii) the
September 30, 1993 Report of Condition and Income for each
organization and the audited December 31, 1992 Balance Sheet and
Income Statements for each organization; (iii) Rio Salado's listing
of marketable securities showing rate, maturity and market value as
compared to book value; (iv) Rio Salado's internal loan
classification list; (v) a listing of other real estate owned for
Rio Salado; (vi) the 1993 and 1994 budgets for Rio Salado; (vii)
the listing and description of significant real properties for Rio
Salado; (viii) material leases on real and personal property of Rio
Salado; and (ix) market conditions and current trading levels of
outstanding equity securities of both organizations.
<PAGE>
The Board of Directors
Zions Bancorporation
January 11, 1994
We have also had discussions with the management of Rio Salado and
Zions regarding their respective financial results and have
analyzed the most current financial data available on Rio Salado
and Zions. We also considered such other information, financial
studies, analyses and investigations and economic and market
criteria which we deemed relevant. We have met with the management
of Rio Salado and Zions to discuss the foregoing information with
them.
We have considered certain financial data for Rio Salado and Zions,
and have compared that data with similar data for other banks and
bank holding companies which have recently merged or been acquired;
furthermore, we have considered the financial terms of these
business combinations involving said banks and bank holding
companies.
We have not independently verified any of the information reviewed
by us and have relied on its being complete and accurate in all
material respects. In addition, we have not made an independent
evaluation of the assets of Rio Salado or Zions.
In reaching our opinion we took into consideration the financial
benefits of the proposed transaction to all Rio Salado Common
Stockholders. Based on all factors that we deem relevant and
assuming the accuracy and completeness of the information and data
provided to us by Rio Salado and Zions, it is our opinion as of
November 15, 1993, that the proposed transaction is fair and
equitable to all Rio Salado Common Stockholders from a financial
point of view.
We hereby consent to the reference to our firm in the proxy
statement or prospectus related to the merger transaction and to
the inclusion of our opinion as an exhibit to the proxy statement
or prospectus related to the merger transaction.
Respectfully submitted,
ALEX SHESHUNOFF & CO. INVESTMENT BANKING
AUSTIN, TEXAS
/S/ Thomas R. Mecredy
Thomas R. Mecredy
Senior Vice President
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Utah law provides for indemnification of directors and officers as
follows:
16-10a-902 AUTHORITY TO INDEMNIFY DIRECTORS.
(1) Except as provided in Subsection (4), a corporation
may indemnify an individual made a party to a proceeding because he
is or was a director, against liability incurred in the proceeding
if:
(a) his conduct was in good faith; and
(b) he reasonably believed that his conduct was in, or
not opposed to, the corporation's best interests; and
(c) in the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful.
(2) A director's conduct with respect to any employee
benefit plan for a purpose he reasonably believed to be in or not
opposed to the interests of the participants in and beneficiaries
of the plan is conduct that satisfies the requirement of Subsection
(1)(b).
(3) The termination of a proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent is not, of itself, determinative that the director did
not meet the standard of conduct described in this section.
(4) A corporation may not indemnify a director under this
section:
(a) in connection with a proceeding by or in the right
of the corporation in which the director was adjudged
liable to the corporation; or
(b) in connection with any other proceeding charging
that the director derived an improper personal
benefit, whether or not involving action in his
official capacity, in which proceeding he was adjudged
liable on the basis that he derived an improper
personal benefit.
(5) Indemnification permitted under this section in
connection with a proceeding by or in the right of the corporation
is limited to reasonable expenses incurred in connection with the
proceeding.
<PAGE>
16-10a-903 MANDATORY INDEMNIFICATION OF DIRECTORS.
Unless limited by its articles of incorporation, a corporation shall
indemnify a director who was successful, on the merits or
otherwise, in the defense of any proceeding, or in the defense of
any claim, issue, or matter in the proceeding, to which he was a
party because he is or was a director of the corporation, against
reasonable expenses incurred by him in connection with the
proceeding or claim with respect to which he has been successful.
16-10a-907 INDEMNIFICATION OF OFFICERS, EMPLOYEES, FIDUCIARIES, AND AGENTS.
Unless a corporation's articles of incorporation provide otherwise:
(1) an officer of the corporation is entitled to
mandatory indemnification under Section 16-10a-903, and is entitled
to apply for court-ordered indemnification under Section 16-10a-
905, in each case to the same extent as a director;
(2) the corporation may indemnify and advance expenses to
an officer, employee, fiduciary, or agent of the corporation to the
same extent as to a director; and
(3) a corporation may also indemnify and advance expenses
to an officer, employee, fiduciary, or agent who is not a director
to a greater extent, if not inconsistent with public policy, and
if provided for by its articles of incorporation, bylaws, general
or specific action of its board of directors, or contract.
16-10a-908 INSURANCE.
A corporation may purchase and maintain liability insurance on behalf
of a person who is or was a director, officer, employee, fiduciary,
or agent of the corporation, or who, while serving as a director,
officer, employee, fiduciary, or agent of the corporation, is or
was serving at the request of the corporation as a director,
officer, partner, trustee, employee, fiduciary, or agent of another
foreign or domestic corporation or other person, or of an employee
benefit plan, against liability asserted against or incurred by him
in that capacity or arising from his status as a director, officer,
employee, fiduciary, or agent, whether or not the corporation would
have power to indemnify him against the same liability under
Sections 16-10a-902, 16-10a-903, or 16-10a-907. Insurance may be
procured from any insurance company designated by the board of
directors, whether the insurance company is formed under the laws
of this state or any other jurisdiction of the United States or
elsewhere, including any insurance company in which the corporation
has an equity or any other interest through stock ownership or
otherwise.
16-10a-909 LIMITATIONS OF INDEMNIFICATION OF DIRECTORS.
(1) A provision treating a corporation's indemnification
of, or advance for expenses to, directors that is contained in its
articles of incorporation or bylaws, in a resolution of its
shareholders or board of directors, or in a contract (except an
insurance policy) or otherwise, is valid only if and to the extent
the provision is not inconsistent with this part. If the articles
of incorporation limit indemnification or advance of expenses,
indemnification and advance of expenses are valid only to the
extent not inconsistent with the articles of incorporation.
(2) This part does not limit a corporation's power to pay
or reimburse expenses incurred by a director in connection with the
director's appearance as a witness in a proceeding at a time when
the director has not been made a named defendant or respondent to
the proceeding.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits. An Exhibit Index, containing a list of
all exhibits filed with this Registration Statement, is included
beginning on page II-7.
(b) Financial Statement Schedules. Not applicable.
(c) Report, Opinion or Appraisal. Not applicable.
Item 22. Undertakings.
The undersigned registrant hereby undertakes as
follows:
(1) that, for purposes of determining any liability
under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or Section l5(d) of the
Securities Exchange Act of l934 that is incorporated by reference
in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(2) to deliver or cause to be delivered with the
prospectus, to each person to whom the prospectus is sent or given,
the latest annual report to security holders that is incorporated
by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the
Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation S-X
is not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial
information.
(3) that prior to any public reoffering of the
securities registered hereunder through the use of a prospectus
which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule
145(c), such reoffering prospectus will contain the information
called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition
to the information called for by the other items of the applicable
form.
(4) that every prospectus (i) that is filed pursuant to
paragraph (3) immediately preceding, or (ii) that purports to meet
the requirements of Section 1O(a)(3) of the Securities Act of 1933,
as amended, and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(5) that insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the registrant
pursuant to the provisions described under Item 20 above, or
otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant
of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(6) to respond to requests for information that is
incorporated by reference into the Proxy Statement/Prospectus
pursuant to Items 4, 10(b), 11 or 13 of Form S-4, within one
business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed
subsequent to the Effective Date of the registration statement
through the date of responding to the request.
(7) to supply by means of a post-effective amendment
all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included
in the registration statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the registrant has duly caused this registration statement to
be signed on its behalf by the undersigned, thereunto duly
authorized, in Salt Lake City, Utah, on the 24th day of January,
1994.
Zions Bancorporation
By: /S/ Harris H. Simmons
Harris H. Simmons, President
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Harris H. Simmons,
Roy W. Simmons, and Gary L. Anderson, and each of them, his true
and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration
statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be
done, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or either of them, or their or his
substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of
1933, this registration statement has been signed by the following
persons in the capacities and on the dates indicated.
<PAGE>
<TABLE>
<CAPTION>
Signature Capacity Date
<S> <C> <C>
/s/ Harris H. Simmons President, Chief Executive January 24, 1994
Harris H. Simmons Officer and Director
/s/ Gary L. Anderson Secretary, Senior Vice January 24, 1994
Gary L. Anderson President and Chief
Financial Officer
/s/ Walter E. Kelly Controller January 24, 1994
Walter E. Kelly
/s/ Roy W. Simmons Chairman and Director January 24, 1994
Roy W. Simmons
Director __________, 199__
Jerry C. Atkin
Director __________, 199__
Robert N. Sears
/s/ R. D. Cash Director January 24, 1994
R. D. Cash
Director __________, 199__
L. E. Simmons
/s/ Grant R. Caldwell Director January 24, 1994
Grant R. Caldwell
/s/ I.J. Wagner Director January 24, 1994
I. J. Wagner
Director __________, 199__
Robert B. Porter
/s/ Dale W. Westergard Director January 24, 1994
Dale W. Westergard
/TABLE
<PAGE>
EXHIBIT INDEX
(Pursuant to Item 601 of Regulation S-K)
Page Number
in Sequential
Exhibit Numbering
No. Description and Method of Filing System
2.1 Agreement and Plan of Reorganization
dated as of November 18, 1993 between
Zions Bancorporation, Zions First
National Bank of Arizona, Rio Salado
Bancorp, Inc. and Rio Salado Bank (filed
herewith)
2.2 First Amendment to Agreement and Plan of
Reorganization between Zions
Bancorporation, National Bank of Arizona,
Rio Salado Bancorp, Inc. and Rio Salado
Bank, dated January 24, 1994 (filed
herewith)
3.1 Restated Articles of Incorporation of *
Zions Bancorporation dated November 8,
1993, and filed with the Department of
Business Regulation, Division of
Corporations of the State of Utah on
November 9, 1993 (incorporated by
reference to Exhibit 3.1 to the
Registrant's Form S-4 Registration
Statement, File No. 33-51145, filed on
November 22, 1993)
3.2 Restated Bylaws of Zions Bancorporation, *
dated November 8, 1993 (incorporated by
reference to Exhibit 3.2 to the
Registrant's Form S-4 Registration
Statement, File No. 33-51145, filed
November 22, 1993)
5 Opinion of Metzger, Hollis, Gordon &
Mortimer regarding the legality of the
shares of Common Stock being registered
(filed herewith)
8 Opinion of KPMG Peat Marwick regarding
tax matters (filed herewith as Appendix B
to the Proxy Statement/Prospectus)
9 Voting Trust Agreement, dated December *
31, 1991 (incorporated by reference to
Exhibit 9 of Zions Bancorporation's
Annual Report on Form 10-K for the year
ended December 31, 1991)
10.1 Zions Utah Bancorporation Pension Plan *
(incorporated by reference to Exhibit
10.2 of Zions Utah Bancorporation's
Quarterly Report on Form 10-Q for the
quarter ended September 30, 1985)
10.2 Amendment to Zions Bancorporation *
(formerly Zions Utah Bancorporation)
Pension Plan dated July 17, 1987
(incorporated by reference to Exhibit
10.2 of Zions Bancorporation's Annual
Report on Form 10-K for the year ended
December 31, 1987)
10.3 Zions Utah Bancorporation Supplemental *
Retirement Plan Form (incorporated by
reference to Exhibit 19.4 of Zions Utah
Bancorporation's Quarterly Report on Form
10-Q for the quarter ended September 30,
1985)
10.4 Amendment to Zions Bancorporation *
(formerly Zions Utah Bancorporation) Key
Employee Incentive Stock Option Plan
approved by the shareholders of the
Company on April 27, 1990 (incorporated
by reference to Exhibit 19 of Zions
Bancorporation's Quarterly Report on Form
10-Q for the quarter ended June 30, 1990)
10.5 Zions Bancorporation Deferred *
Compensation Plan for Directors, as
amended May 1, 1991 (incorporated by
reference to Exhibit 19 of Zions
Bancorporation's Annual Report on Form
10-K for the year ended December 31,
1991)
10.6 Zions Bancorporation Senior Management *
Value Sharing Plan, Award Period 1992-
1995 (incorporated by reference to
Exhibit 10.6 of Zions Bancorporation's
Annual Report on Form 10-K for the year
ended December 31, 1992)
10.7 Zions Bancorporation Senior Management *
Value Sharing Plan, Award Period 1991-
1994 (incorporated by reference to
Exhibit 19 of Zions Bancorporation's
Annual Report on Form 10-K for the year
ended December 31, 1992)
13 Zions Bancorporation Annual Report to *
Shareholders for the fiscal year ending
December 31, 1992 (incorporated by
reference to Exhibit 13 of Zions
Bancorporation's Annual Report on Form
10-K for the year ended December 31,
1992)
The registrant's 1992 Annual Report to
Shareholders, except for the portions
thereof incorporated by reference into
the registrant's Annual Report on Form
10-K for the year ended December 31, 1992
and incorporated herein by reference to
such Annual Report on Form 10-K, is
furnished for the information of the
Commission and is not to be considered a
part of this Registration Statement.
21 List of subsidiaries of Zions *
Bancorporation (incorporated by reference
to Exhibit 22 of Zions Bancorporation's
Annual Report on Form 10-K for the year
ended December 31, 1992).
23.1 Consent of KPMG Peat Marwick, independent
certified public accountants for Zions
Bancorporation (filed herewith)
23.2 Consent of KPMG Peat Marwick, independent
certified public accountants for Discount
Corporation of New York (filed herewith)
23.3 Consent of KPMG Peat Marwick, independent
certified public accountants for National
Bancorp of Arizona Inc. (filed herewith)
23.4 Consent of McGladrey & Pullen,
independent certified public accountants
for Rio Salado Bancorp, Inc. (filed
herewith)
23.5 Consent of Metzger, Hollis, Gordon &
Mortimer (contained in their opinion filed
as Exhibit 5)
23.6 Consent of KPMG Peat Marwick with respect
to certain tax matters (filed herewith)
23.7 Consent of Alex Sheshunoff & Co.
(contained in their opinion filed as
Appendix C)
24.1 Power of Attorney (set forth on Page II-5
of the Registration Statement)
99.1 Preliminary copy of letter to
shareholders of Rio Salado Bancorp, Inc.
(filed herewith)
99.2 Preliminary copy of Notice of Special
Meeting of Shareholders of Rio Salado
Bancorp, Inc. (filed herewith)
99.3 Preliminary copy of form of proxy for use
by shareholders of Rio Salado Bancorp,
Inc. (filed herewith)
99.4 Form of Agreement between Zions
Bancorporation and each director of Rio
Salado Bancorp, Inc. (filed herewith as
part of Agreement and Plan of
Reorganization, filed as Exhibit 2.1)
* incorporated by reference
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION made as of the 18th day of
November, 1993, between ZIONS BANCORPORATION ("Zions Bancorp"), a Utah
corporation having its principal office in Salt Lake City, Utah, ZIONS
FIRST NATIONAL BANK OF ARIZONA ("Zions Arizona"), a national banking
association having its head office in Mesa, Arizona, RIO SALADO BANCORP
(the "Company"), an Arizona corporation having its principal office in
Tempe, Arizona, and RIO SALADO BANK, an Arizona bank corporation having its
head office in Tempe, Arizona (the "Bank")
W I T N E S S E T H T H A T :
WHEREAS, Zions Bancorp is a bank holding company and Zions Arizona is
a national banking association and each of them desires to affiliate with
the Company and its wholly owned subsidiary, the Bank; and
WHEREAS, the Board of Directors of the Company has determined that it
would be in the best interests of the Company, its shareholders, its
customers, and the areas served by it to become affiliated with Zions
Bancorp and Zions Arizona;
WHEREAS, the Board of Directors of the Bank has determined that it
would be in the best interests of that Bank, its customers, and the areas
served by it to become affiliated with Zions Bancorp and Zions Arizona;
WHEREAS, the respective Boards of Directors of the Company and Zions
Bancorp have agreed to the merger (the "Holding Company Merger") of the
Company with and into a corporation to be organized by Zions Bancorp under
the laws of the State of Arizona ("ZAZMAC, Inc.") pursuant to the provi-
sions of section 10-071 et seq. of the Arizona Business Corporation Law;
WHEREAS, the respective Boards of Directors of the Bank and Zions
Arizona have agreed to the merger (the "Bank Merger") of the Bank with and
into Zions Arizona pursuant to the provisions of section 215a of the
National Bank Act (12 U.S.C. (Sec.) 215a) and section 6-212 of the Arizona
Revised Statutes; and
WHEREAS, the parties intend that the transactions contemplated by the
Holding Company Merger and the Bank Merger (collectively, the "Mergers")
qualify as one or more tax-free reorganizations under section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of these premises and the mutual
agreements hereinafter set forth, the parties agree as follows:
1. Combinations.
1.1. Form of Holding Company Combination. Promptly following the
execution of this Agreement by Zions Bancorp, Zions Arizona, the Company,
and the Bank, Zions Bancorp will cause ZAZMAC, Inc. to be organized. All
of the capital stock of ZAZMAC, Inc. shall be owned by Zions Bancorp.
ZAZMAC, Inc. and the Company will execute a merger agreement (the "Holding
Company Merger Agreement") substantially in the form of Exhibit I annexed
hereto. Subject to the provisions of the Holding Company Merger Agreement,
the Company will be merged with and into ZAZMAC, Inc. (the "Holding Company
Merger"), and ZAZMAC, Inc. shall be the surviving corporation. The shares
of common stock of the Company shall be canceled and immediately converted
into the right to receive, subject to the terms, conditions, and limita-
tions set forth herein, such consideration as is provided in section 1.2
hereof.
1.2. Consideration for Holding Company Merger.
(a) Definitions. For the purposes of this Agreement, the
following terms shall have the meanings set forth in this Subparagraph (a).
Additional terms may be defined elsewhere herein.
(i) Average Closing Price. The average (rounded to the
nearest penny) of each Daily Sales Price of Zions Bancorp Stock for the
twenty consecutive trading days ending on and including the fifth trading
day preceding the effective date of the Holding Company Merger (the
"Effective Date"). All prices per share under this Section 1.2(a)(i) shall
be appropriately adjusted to account for stock dividends, split-ups,
mergers, recapitalizations, combinations, conversions, exchanges of shares
or the like.
(ii) Daily Sales Price. For any trading day, the last
reported sale price or, if no such reported sale takes place, the mean
(unrounded) of the closing bid and asked prices of Zions Bancorp Stock in
the over-the-counter market as such prices are reported by the automated
quotation system of the National Association of Securities Dealers, Inc.,
or in the absence thereof by such other source upon which Zions Bancorp and
the Company shall mutually agree.
(iii) Dissenting Shares. The shares of Company Common Stock
held by those shareholders of the Company who have timely and properly
exercised their dissenters' rights in accordance with all applicable laws
(the "Appraisal Laws").
(iv) Purchase Price. Twelve Million Five Hundred Thousand
Dollars and No Cents ($12,500,000.00).
(v) Zions Bancorp Stock. The common stock of Zions
Bancorp, no par value.
(b) Form of Consideration. Subject to the terms, conditions and
limitations set forth herein, upon surrender of his certificate or certifi-
cates in accordance with Section 1.1 hereof, each holder of shares of
Company Common Stock shall be entitled to receive, in exchange for each
share of Company Common Stock held of record by such stockholder as of the
Effective Date, that number of shares of Zions Bancorp Stock calculated by
dividing the Purchase Price by the Average Closing Price, and by further
dividing the number so reached by the number of shares of Company Common
Stock that shall be issued and outstanding at the Effective Date.
1.3. No Fractional Shares. Zions Bancorp will not issue fractional
shares of Zions Bancorp Stock. In lieu of fractional shares of Zions
Bancorp Stock, if any, each shareholder of the Company who is entitled to a
fractional share of Zions Bancorp Stock shall receive an amount of cash
equal to the product of such fraction times the Average Closing Price.
Such fractional share interest shall not include the right to vote or to
receive dividends or any interest thereon.
1.4. Dissenting Shares. Notwithstanding anything to the contrary
herein, each Dissenting Share whose holder, as of the Effective Date, has
not effectively withdrawn or lost his dissent-ers' rights under the
Appraisal Laws, shall not be converted into or represent a right to receive
Zions Bancorp Stock, but the holder thereof shall be entitled only to such
rights as are granted by the Appraisal Laws. Each holder of Dissenting
Shares who becomes entitled to payment for his Company Common Stock
pursuant to the provisions of the Appraisal Laws shall receive payment
therefor from ZAZMAC, Inc. (but only after the amount thereof shall have
been agreed upon or finally determined pursuant to such provisions).
1.5. Dividends; Interest. No shareholder of the Company will be
entitled to receive dividends on his Zions Bancorp Stock until he exchanges
his certificates representing Company Common Stock for Zions Bancorp Stock.
Any dividends declared on Zions Bancorp Stock (which stock is to be
delivered pursuant to this Agreement) to holders of record on or after the
Effective Date shall be paid to the Exchange Agent (as designated in
Section 1.6 of this Agreement) and, upon receipt of the certificates
representing shares of Company Common Stock, the Exchange Agent shall
promptly forward to the former shareholders of the Company entitled to
receive Zions Bancorp Stock pursuant to the Holding Company Merger (i)
certificates representing their shares of Zions Bancorp Stock, (ii)
dividends declared thereon subsequent to the Effective Date (without
interest) and (iii) the cash value of any fractional shares determined in
accordance with Section 1.3 hereof.
1.6. Designation of Exchange Agent. The Company and Zions Bancorp
hereby designate Zions First National Bank, Salt Lake City, Utah ("Zions
Bank") as Exchange Agent to effect the exchange contemplated hereby in
accordance with an exchange agency agreement ("Exchange Agency Agreement")
substantially in the form of Exhibit II attached hereto. Zions Bancorp
will, promptly after the Effective Date, issue and deliver to Zions Bank
the share certificates representing shares of Zions Bancorp Stock and the
cash in lieu of fractional shares to be paid to holders of Company Common
Stock in accordance with this Agreement.
1.7. Notice of Exchange. Promptly after the Effective Date, Zions
Bank shall mail to each holder of one or more certificates formerly
representing Company Common Stock, except to such holders as shall have
waived the notice required by this Section 1.7, a notice specifying the
Effective Date and notifying such holder to surrender his certificate or
certificates to Zions Bank for exchange. Such notice shall be mailed to
holders by regular mail at their addresses on the records of the Company.
1.8. Treatment of Stock Options. Each stock option to purchase
Company Common Stock not exercised prior to the Effective Date shall
automatically be converted into an option to purchase, on the same terms as
the option to purchase Company Common Stock, that number of shares of Zions
Bancorp Stock equal to the number of shares of Company Common Stock
represented by the option times a fraction, the numerator of which is the
Purchase Price divided by the number of shares of Company Common Stock that
are outstanding at the Effective Date, and the denominator of which is the
Average Closing Price. The applicable per-share option price in effect
immediately prior to the Effective Date shall be adjusted to an amount
equal to the product obtained by dividing that option price by a fraction,
the numerator of which shall be the number of shares of Zions Bancorp Stock
to be issued in the Holding Company Merger, and the denominator of which is
the number of shares of Company Common Stock that are outstanding on the
Effective Date.
1.9. Form of Bank Combination. Zions Arizona and the Bank will
execute a merger agreement (the "Bank Merger Agreement") substantially in
the form of Exhibit III annexed hereto. Promptly following the effective-
ness of the Holding Company Merger, subject to the provisions of the Bank
Merger Agreement and of section 9.2 of this Agreement, the Bank will be
merged with and into Zions Arizona (the "Bank Merger"), under the charter
and title of Zions Arizona as they shall exist at the time of the effec-
tiveness of the Bank Merger. Zions Arizona shall be the surviving bank.
1.10. Voting Agreements. Simultaneously herewith, each person listed
on Schedule 1.10 hereof shall enter into an agreement with Zions Bancorp,
substantially in form and substance as that set forth as Exhibit V attached
hereto, in which he or she agrees to vote all shares of the Company which
may be voted, or whose vote may be directed, by him or her, in favor of the
transactions contemplated by this Agreement at the meeting of shareholders
at which such transaction shall be considered.
2. Effective Date.
The Effective Date shall be the date which is the latest of:
2.1. Shareholder Approval. The date following the day upon which the
shareholders of the Company approve, ratify, and confirm the transactions
contemplated by this Agreement; or
2.2. Federal Reserve Approval. The first to occur of (a) the date
thirty days following the date of the order of the Board of Governors of
the Federal Reserve System or the Federal Reserve Bank of San Francisco
acting pursuant to authority delegated to it by the Board of Governors of
the Federal Reserve System (collectively, the "Board of Governors")
approving the Holding Company Merger, or (b) the date ten days following
the date on which the Board of Governors indicates its waiver of jurisdic-
tion over the Holding Company Merger; or
2.3. Comptroller Approval. Thirty days following the date of the
order of the Comptroller of the Currency (the "Comptroller") approving the
Bank Merger; or
2.4. Superintendent Approval. Ten days following the date of the
order of the Superintendent of Banks of the State of Arizona (the "Superin-
tendent") approving the transactions contemplated by this Agreement; or
2.5. Other Regulatory Approvals. The date upon which any other
material order, approval or consent of a federal or state regulator of
financial institutions or financial institution holding companies authoriz-
ing consummation of the transactions contemplated by this Agreement is
obtained or any waiting period mandated by such order, approval or consent
has run; or
2.6. Expiration of Stays. Ten days after any stay of the approvals
of any of the Comptroller, the Board of Governors, or the Superintendent of
the transactions contemplated by this Agreement or any injunction against
closing of said transactions is lifted, discharged, or dismissed; or
2.7. Mutual Agreement. Such other date as shall be mutually agreed
to by Zions Bancorp and the Company.
3. Conditions Precedent to Performance of Obligations of the Parties.
The obligations of Zions Bancorp and the Company to consummate the
Holding Company Merger and the obligations of Zions Arizona and the Bank to
consummate the Bank Merger shall be subject to the conditions that on or
before the Effective Date:
3.1. Shareholder Approval. This Agreement and the reorganization
contemplated hereby shall have been duly and validly approved, ratified,
and confirmed at a meeting of shareholders duly and properly called for
such purpose, by the holders of not less than the requisite percentage of
the outstanding voting stock of each class of the Company, in accordance
with the applicable laws of the State of Arizona.
3.2. Regulatory Approvals. Orders, consents, and approvals, in form
and substance reasonably satisfactory to Zions Bancorp and the Company,
shall have been entered by the requisite governmental authorities, granting
the authority necessary for consummation of the transactions contemplated
by this Agreement and the operation by Zions Bancorp of the business of the
Company and by Zions Arizona of the business of the Bank and each of the
branches of the Bank as branches of Zions Arizona, pursuant to the provi-
sions of applicable law; and all other requirements prescribed by law or by
the rules and regulations of any other regulatory authority having juris-
diction over such transactions shall have been satisfied.
3.3. Absence of Litigation. No action, suit, or proceeding shall
have been instituted or shall have been threatened before any court or
other governmental body or by any public authority to restrain, enjoin, or
prohibit the Mergers contemplated by this Agreement, or which might
restrict the operation of the business of the Company or that of the Bank
or the exercise of any rights with respect thereto or to subject any of the
parties hereto or any of their directors or officers to any liability,
fine, forfeiture, divestiture, or penalty on the ground that the transac-
tions contemplated hereby, the parties hereto, or their directors or
officers have breached or will breach any applicable law or regulation or
have otherwise acted improperly in connection with the transactions
contemplated hereby and with respect to which the parties hereto have been
advised by counsel that, in the opinion of such counsel, such action, suit,
or proceeding raises substantial questions of law or fact which could
reasonably be decided adversely to any party hereto or its directors or
officers.
3.4. Accounting Treatment. It shall have been determined to the
satisfaction of Zions Bancorp that the reorganization contemplated by this
Agreement will be treated for accounting purposes as a "pooling of inter-
ests" in accordance with APB Opinion No. 16, and Zions Bancorp shall have
received a letter to the above effect from KPMG Peat Marwick, certified
public accountants.
3.5. Registration Statement.
(a) Effectiveness. The registration statement to be filed by
Zions Bancorp with the Securities and Exchange Commission (the "SEC")
pursuant to the Securities Act of 1933 (the "Securities Act") in connection
with the registration of the shares of Zions Bancorp Stock to be used as
consideration in connection with the Holding Company Merger (the "Registra-
tion Statement") shall have become effective under that Act, and Zions
Bancorp shall have received all required state securities laws or "blue
sky" permits and other required authorizations or confirmations of the
availability of exemptions from registration requirements necessary to
issue Zions Bancorp Stock in the Holding Company Merger.
(b) Absence of Stop-Order. Neither the Registration Statement
nor any such required permit, authorization or confirmation shall be
subject to a stop-order or threatened stop-order by the SEC or any state
securities authority.
3.6. Federal Income Taxation. No later than ten days following the
date of the order of the Comptroller approving the Bank Merger, Zions
Bancorp and the Company shall have received a written opinion of KPMG Peat
Marwick or of another firm mutually agreeable to Zions Bancorp and the
Company, applying existing law, that the reorganization contemplated by
this Agreement shall qualify as one or more tax-free reorganizations under
the Code and the regulations and rulings promulgated thereunder. Each of
Zions Bancorp and the Company agrees to use its best efforts to solicit
such opinion in good faith and in a timely manner.
3.7. Consent of Lending Institution. United New Mexico Bank at
Albuquerque ("United") shall have delivered to the Company and the Bank, in
form and substance reasonably acceptable to Zions Bancorp, the written
consent of United to the transactions contemplated by this Agreement, the
assumption or discharge by ZAZMAC, Inc. of the loan that is the subject of
that certain Loan Agreement dated as of December 11, 1992 among United, the
Company and the Bank, and the release of the shares of the stock of the
Bank which secures such loan. The parties to this Agreement agree to use
their best efforts to procure such consent in good faith and in a timely
manner.
4. Conditions Precedent to Performance of the Obligations of Zions
Bancorp and Zions Arizona.
The obligations of Zions Bancorp and Zions Arizona hereunder are
subject to the satisfaction, on or prior to the Effective Date, of all the
following conditions, compliance with which or the occurrence of which may
be waived in whole or in part by Zions Bancorp in writing:
4.1. Approval by the Company and the Bank.
(a) The directors and shareholders of the Company (the latter group
acting pursuant to a proxy statement in form and substance satisfactory to
Zions Bancorp and its counsel) shall have authorized and approved the
Holding Company Merger, and dissenters' rights of appraisal under the
Appraisal Laws shall have been effectively preserved as of the Effective
Date by owners of not more than 5 percent of the outstanding shares of
Company Common Stock.
(b) The directors and shareholders of the Bank shall have authorized
and approved the Bank Merger.
4.2. Representations and Warranties; Performance of Obligations.
All representations and warranties of the Company and the Bank
contained in this Agreement shall be true and correct in all material
respects as of the Effective Date with the same effect as if such represen-
tations and warranties had been made or given at and as of such date,
except that representatives and warranties of the Company and the Bank
contained in this Agreement which specifically relate to an earlier date
shall be true and correct in all material respects as of such earlier date.
All covenants and obligations to be performed or met by the Company or the
Bank on or prior to the Effective Date shall have been so performed or met.
On the Effective Date, the president and chief executive officer and the
chief financial officer of each of the Company and the Bank shall deliver
to Zions Bancorp a certificate to that effect. Such officers' certificate
may be limited to the extent of the best knowledge of its signataries. The
delivery of such officers' certificate shall in no way diminish the
warranties, representations, covenants, and obligations of the Company or
the Bank made in this Agreement.
4.3. Opinion of Company Counsel. Zions Bancorp and Zions Arizona
shall have received a favorable opinion from Ryley, Carlock & Applewhite,
Professional Association, dated the Effective Date, substantially in form
and substance as that set forth as Exhibit VI attached hereto.
4.4. Opinion of Company Litigation Counsel. Zions Bancorp and Zions
Arizona shall have received a favorable opinion dated the Effective Date,
in form and substance satisfactory to its counsel, from litigation counsel
to the Company and the Bank, whose identity shall be acceptable to Zions
Bancorp. Such opinion shall state that the litigation to which the Company
shall be or shall have become party at the Effective Date, would not have,
in the aggregate, a material adverse effect on the financial condition or
results of operations of the Company or the Bank.
4.5. Delivery of Branch Authorizations. The Bank shall have deliv-
ered to Zions Arizona originals or certified copies of all of its regulato-
ry authorizations entitling the Bank to operate each of its branch offices,
together with a certification by the president and chief executive officer
and the chief financial officer of the Bank dated the Effective Date,
certifying that such branch certificates have not been revoked or threat-
ened to be revoked and that such certificates are in full force and effect.
4.6. No Adverse Developments.
(a) During the period from September 30, 1993 to the Effective
Date, (i) there shall not have been any material adverse change in the
financial position or results of operations of the Company or the Bank
taken as a whole, nor shall the Company or the Bank have sustained any
material loss or damage to its properties, whether or not insured, which
materially affects its ability to conduct its business; (ii) neither the
Company nor the Bank shall have become a party to any litigation or been
threatened to be made a party to any litigation which, in the judgment of
Zions Bancorp, makes or would make either of the Mergers inadvisable or
impracticable to Zions Bancorp or Zions Arizona; and (iii) none of the
events described in clauses (a) through (f) of Section 6.16 of this
Agreement shall have occurred, and each of the practices and conditions
described in clauses (w) through (z) of that section shall have been
maintained.
(b) As of the Effective Date, except as adjusted to account for
issuances of Company Common Stock pursuant to the exercise of options
described in section 6.9 of this Agreement, the capital structure of the
Company shall be as stated in section 6.9.
(c) Zions Bancorp shall have received a certificate dated the
Effective Date signed by the president and chief executive officer and the
chief financial officer of each of the Company and the Bank to the forego-
ing effect and to the further effect that any liabilities of the Company or
the Bank at the Effective Date which were not reflected on the balance
sheet of the Company as of September 30, 1993 are only liabilities incurred
in the ordinary course of business subsequent to the date of said balance
sheet. Such officers' certificate may be limited to the extent of the best
knowledge of its signatories. The delivery of such officers' certificate
shall in no way diminish the warranties and representations of the Company
or the Bank made in this Agreement.
4.7. Absence of Misstatements and Omissions. There shall not be, as
of the Effective Date, any material error, misstatement, or omission in any
of the representations or warranties of the Company or the Bank or any
material failure to perform or satisfy any covenants of the Company or the
Bank contained herein.
4.8. Consolidated Net Worth. On and as of the Effective Date, the
consolidated net worth of the Company as determined in accordance with
generally accepted accounting principles shall not be less than the sum of
(a) the aggregate contributions to capital caused by the payments accompa-
nying the exercise of any stock options on or after September 30, 1993 and
(b) the consolidated net worth of the Company as of September 30, 1993, as
determined in accordance with generally accepted accounting principles.
4.9. Loan Loss Reserve Method. Prior to the Effective Date, to the
reasonable satisfaction of Zions Bancorp, (a) the Company and the Bank will
have conformed the loan loss reserve methodology of the Bank to the
methodology employed by Zions Bancorp and its bank subsidiaries, and (b)
the Bank will have implemented such methodology by making appropriate
provisions to its reserve for loan losses.
4.10. Adverse Legislation. No legislation shall have been enacted
and no regulation or other governmental requirement shall have been adopted
or imposed that has rendered or will render consummation of any of the
material transactions contemplated by this Agreement impossible, or that
would materially and adversely affect the economic assumptions of the
material transactions contemplated hereby or the business, operations,
financial condition, properties or assets of the combined enterprise of
Zions Bancorp and the Company or otherwise materially impair the value of
the Company to Zions Bancorp.
4.11. Employment and Competition Agreement. Elden G. Barmore shall
have entered into an employment and non-competition agreement with Zions
Arizona substantially in form and substance as that set forth as Exhibit IV
attached hereto.
5. Conditions Precedent to Performance of Obligations of the Company
and the Bank.
The obligations of the Company and the Bank hereunder are subject to
the satisfaction, on or prior to the Effective Date, of all the following
conditions, compliance with which or the occurrence of which may be waived
in whole or in part by the Company in writing:
5.1. Representations and Warranties; Performance of Obligations. All
representations and warranties of Zions Bancorp and Zions Arizona contained
in this Agreement shall be true and correct in all material respects as of
the Effective Date with the same effect as if such representations and
warranties had been made or given at and as of such date, except that
representations and warranties of Zions Bancorp and Zions Arizona contained
in this Agreement which specifically relate to an earlier date shall be
true and correct in all material respects as of such earlier date. All
covenants and obligations to be performed or met by Zions Bancorp and Zions
Arizona on or prior to the Effective Date shall have been so performed or
met. On the Effective Date, either the Chairman of the Board or the
President of each of Zions Bancorp and Zions Arizona shall deliver to the
Company a certificate to that effect. Such officer's certificate may be
limited to the extent of the best knowledge of its signatory. The delivery
of such officer's certificate shall in no way diminish the warranties,
representations, covenants, and obligations of Zions Bancorp or Zions
Arizona made in this Agreement.
5.2. Opinion of Zions Bancorp Counsel. The Company and the Bank
shall have received a favorable opinion of Metzger, Hollis, Gordon &
Mortimer, dated the Effective Date, substantially in form and substance as
that set forth as Exhibit VII attached hereto.
5.3. No Adverse Developments. During the period from September 30,
1993 to the Effective Date, there shall not have been any material adverse
change in the financial position or results of operations of Zions Bancorp
(considering the effect of pending and threatened litigation) nor shall
Zions Bancorp have sustained any material loss or damage to its properties,
whether or not insured, which materially affects its ability to conduct its
business; and the Company shall have received a certificate dated the
Effective Date signed by either the Chairman of the Board or the President
of Zions Bancorp to the foregoing effect. Such officer's certificate may
be limited to the extent of the best knowledge of its signatory. The
delivery of such officer's certificate shall in no way diminish the
warranties and representations of Zions Bancorp or those of Zions Arizona
made in this Agreement.
5.4. Absence of Misstatements and Omissions. There shall not be, as
of the Effective Date, any material error, misstatement, or omission in any
of the representations or warranties of Zions Bancorp or Zions Arizona or
any material failure to perform or satisfy any covenants of Zions Bancorp
or Zions Arizona contained herein.
5.5. Investment Banker's Opinion. The Company shall have received
from Alex Sheshunoff & Co. Investment Banking, or from another investment
banking or financial advisory firm nationally or regionally recognized in
the valuation of securities of financial institutions, a written opinion to
the effect that, as of the date of such opinion, the terms of the Holding
Company Merger are fair to the Company and its shareholders from a finan-
cial point of view.
5.6. Approval by ZAZMAC and Zions Arizona.
(a) The directors and shareholders of ZAZMAC shall have autho-
rized and approved the Holding Company Merger.
(b) The directors and shareholders of Zions Arizona shall have
authorized and approved the Bank Merger.
5.7. Status of Zions Bancorp Stock. Zions Bancorp stock shall be
quoted on the National Association of Securities Dealers' Automated
Quotation System (or else shall become listed on a national securities
exchange).
6. Representations and Warranties of the Company and the Bank.
The Company and the Bank (collectively the "Warrantors" and each
individually a "Warrantor") jointly and severally represent and warrant to
Zions Bancorp and Zions Arizona as follows:
6.1. Organization, Powers, and Qualification. The Warrantor is a
corporation which is duly organized, validly existing, and in good standing
under the laws of its jurisdiction of incorporation and has all requisite
corporate power and authority to own and operate its properties and assets,
to lease properties used in its business, and to carry on its business as
now conducted. The Warrantor owns or possesses in the operation of its
business all franchises, licenses, permits, branch certificates, consents,
approvals, waivers, and other authorizations, governmental or otherwise,
which are necessary for it to conduct its business as now conducted, except
for those where the failure of such ownership or possession would not
adversely affect the operation and properties of the Warrantor in any
material respect. The Warrantor is duly qualified and licensed to do
business and is in good standing in every jurisdiction in which such
qualification or license is required or with respect to which the failure
to be so qualified or licensed could result in material liability or
adversely affect the operation and properties of the Warrantor in any
material respect.
6.2. Execution and Performance of Agreement. The Warrantor has all
requisite corporate power and authority to execute and deliver this
Agreement and to perform its respective terms.
6.3. Absence of Violations.
(a) The Warrantor is not in violation of its respective charter
documents or bylaws, or of any applicable federal, state, or local law or
ordinance or any order, rule, or regulation of any federal, state, local,
or other governmental agency or body (including, without limitation, all
banking, securities, municipal securities, safety, health, environmental,
zoning, antidiscrimination, antitrust, and wage and hour laws, ordinances,
orders, rules, and regulations), in any material respect, or in default
with respect to any order, writ, injunction, or decree of any court, or in
default under any order, license, regulation, or demand of any governmental
agency, any of which violations or defaults might have a materially adverse
effect on the business, properties, liabilities, financial position,
results of operations, or prospects of the Warrantor; and the Warrantor has
not received any claim or notice of violation with respect thereto.
(b) Neither the Warrantor nor any member of its management is a
party to any assistance agreement, supervisory agreement, memorandum of
understanding, consent order, cease and desist order or condition of any
regulatory order or decree with or by the Board of Governors, the Federal
Deposit Insurance Corporation (the "FDIC"), any other banking or securities
authority of the United States or the State of Arizona, or any other
regulatory agency that relates to the conduct of the business of the
Warrantor or its assets, except for such agreements, memoranda, orders, or
decrees which are listed on Schedule 6.3 hereof. Except as previously
disclosed to Zions Bancorp in writing, no such agreement, memorandum,
order, condition, or decree is pending or threatened.
(c) The Warrantor has established policies and procedures to
provide reasonable assurance of compliance in a safe and sound manner with
the federal banking, credit, housing, consumer protection, and civil rights
laws and with all other laws applicable to the operations of the Warrantor
and the regulations adopted under each of those laws, so that transactions
are executed and assets are maintained in accordance with such laws and
regulations. The policies and practices of the Warrantor with respect to
all such laws and regulations reasonably limit noncompliance and detect and
report noncompliance to management of the Warrantor.
6.4. Compliance with Agreements. The Warrantor is not in violation
of any material term of any material security agreement, mortgage, inden-
ture, or any other contract, agreement, instrument, lease, or certificate.
The capital ratios of the Warrantor comply fully with all terms of all
currently outstanding supervisory and regulatory requirements and with the
conditions of all regulatory orders and decrees.
6.5. Binding Obligations; Due Authorization. Subject to the approval
of its shareholders, this Agreement constitutes valid, legal, and binding
obligations of the Warrantor, enforceable against it in accordance with its
terms, except as enforcement may be limited by applicable bankruptcy,
insolvency, moratorium or similar law, or by general principles of equity.
The execution, delivery, and performance of this Agreement and the transac-
tions contemplated thereby have been duly and validly authorized by the
board of directors of the Warrantor. Subject to approval by the sharehold-
ers of the Warrantor of this Agreement, no other corporate proceedings on
the part of the Warrantor are necessary to authorize this Agreement or the
carrying out of the transactions contemplated hereby.
6.6. Absence of Default. Subject to the matters set forth on
Schedule 6.6 hereof, none of the execution or the delivery of this Agree-
ment, the consummation of the transactions contemplated thereby, or the
compliance with or fulfillment of the terms thereof will conflict with, or
result in a breach of any of the terms, conditions, or provisions of, or
constitute a default under the organizational documents or bylaws of the
Warrantor. None of such execution, consummation, or fulfillment will (a)
conflict with, or result in a material breach of the terms, conditions, or
provisions of, or constitute a material violation, conflict, or default
under, or give rise to any right of termination, cancellation, or accelera-
tion with respect to, or result in the creation of any lien, charge, or
encumbrance upon, any property or assets of the Warrantor pursuant to any
material agreement or instrument under which the Warrantor is obligated or
by which any of its properties or assets may be bound, including without
limitation any material lease, contract, mortgage, promissory note, deed of
trust, loan, credit arrangement or other commitment or arrangement of the
Warrantor in respect of which it is an obligor; (b) if the Holding Company
Merger is approved by the Board of Governors under the Bank Holding Company
Act or if the Board of Governors waives jurisdiction under that act, and if
the Bank Merger is approved by the Comptroller, and if the transactions
contemplated by this Agreement are approved by the Superintendent, violate
any law, statute, rule, or regulation of any government or agency to which
the Warrantor is subject and which is material to its operations; or (c)
violate any judgment, order, writ, injunction, decree, or ruling to which
the Warrantor or any of its properties or assets is subject or bound. None
of the execution or delivery of this Agreement, the consummation of the
transactions contemplated thereby, or the compliance with or fulfillment of
the terms thereof will require any authorization, consent, approval, or
exemption by any person which has not been obtained, or any notice or
filing which has not been given or done, other than approval of or waiver
of jurisdiction over the transactions contemplated by this Agreement by the
Board of Governors, the Comptroller, and the Superintendent.
6.7. Corporate Structure. No corporation or other entity, other than
the Company, is registered or is required to be registered as a bank
holding company under the Bank Holding Company Act of 1956, as amended, by
virtue of its control over the Bank or over any company that directly or
indirectly has control over the Bank.
6.8. Subsidiaries.
(a) Other than (with respect to the Company) the Bank, which is
a direct, wholly owned subsidiary of the Company, and other than Rio Salado
Mortgage Company, Inc., and those inactive corporations that are listed on
Schedule 6.8 hereof, all of which are direct, wholly owned subsidiaries of
the Bank and which do not engage in any business activity or have more than
de minimis assets, liabilities, income or expense, neither of the Warran-
tors has any subsidiaries, since its incorporation has had any subsid-
iaries, directly or indirectly owns, controls, or holds with the power to
vote, and since its incorporation has directly or indirectly owned,
controlled, or held with the power to vote, any shares of the capital stock
of any company (except shares held by the Bank for the account of others in
a fiduciary or custodial capacity in the ordinary course of its business).
There are no outstanding subscriptions, options, warrants, convertible
securities, calls, commitments, or agreements calling for or requiring the
issuance, transfer, sale, or other disposition of any shares of the capital
stock of the Bank, or calling for or requiring the issuance of any securi-
ties or rights convertible into or exchangeable for shares of capital stock
of the Bank. There are no other direct or indirect subsidiaries of the
Company or the Bank which are required to be consolidated or accounted for
on the equity method in the consolidated financial statements of the
Company or the Bank prepared in accordance with generally accepted account-
ing principles.
(b) Except as specified in the previous subsection, neither the
Bank nor the Company has a direct or indirect equity or ownership interest
which represents 5 percent or more of the aggregate equity or ownership
interest of any entity (including, without limitation, corporations,
partnerships, and joint ventures).
6.9. Capital Structure. The authorized capital stock of the Company
consists of 100,000,000 shares of Company Common Stock, no par value, of
which, as of the date of this Agreement, 662,115 shares have been duly
issued and are validly outstanding, fully paid, and held by approximately
313 shareholders of record and 6,000 shares of Company Common Stock
have been duly issued and are held by the Company as treasury shares; and
(b) 10,000,000 shares of preferred stock, no par value, of which, as of the
date of this Agreement, no shares have been issued. The aforementioned
shares of Company Common Stock are the only voting securities of the
Company authorized, issued, or outstanding as of such date; and no sub-
scriptions, warrants, options, rights, convertible securities, or similar
arrangements or commitments in respect of securities of the Company or the
Bank are authorized, issued, or outstanding which would enable the holder
thereof to purchase or otherwise acquire shares of any class of capital
stock of the Company or the Bank, other than options to acquire 8,434
shares of Company Common Stock at a weighted exercise price of approximate-
ly $6.53, all of which are currently vested. No other voting securities or
subscriptions, warrants, options, rights, convertible securities, or
similar arrangements or commitments in respect of securities of either
Warrantor will be issued or outstanding. Except as provided herein or
described on Schedule 6.9 hereof, neither Warrantor is a party to, or is
obligated by, any commitment, plan, or arrangement to issue or to sell any
shares of capital stock or any other equity interest in that Warrantor.
None of the shares of Company Common Stock has been issued in violation of
the preemptive rights of any shareholder. None of the Company Common Stock
is subject to any restrictions upon the transfer thereof under the terms of
the corporate charter or bylaws of the Company. As of the date hereof, to
the best of the knowledge of the Company, and except for this Agreement and
Plan of Reorganization, there are no shareholder agreements, or other
agreements, understandings, or commitments relating to the right of any
holder or beneficial owner of more than 1 percent of the issued and
outstanding shares of any class of the capital stock of either Warrantor to
vote or to dispose of his or its shares of capital stock of that Warrantor.
6.10. Articles of Incorporation, Bylaws, and Minute Books. The
copies of the articles of incorporation and all amendments thereto and of
the bylaws, as amended, of the Warrantor that have been made available to
Zions Bancorp are true, correct, and complete copies thereof. The minute
books of the Warrantor which have been made or will, no later than ten
business days after the date hereof, be made available to Zions Bancorp for
its continuing inspection until the Effective Date, contain accurate
minutes of all meetings and accurate consents in lieu of meetings of the
board of directors (and any committee thereof) and of the shareholders of
the Warrantor since its inception. These minute books accurately reflect
all transactions referred to in such minutes and consents in lieu of
meetings and disclose all material corporate actions of the shareholders
and boards of directors of the Warrantor and all committees thereof.
Except as reflected in such minute books, there are no minutes of meetings
or consents in lieu of meetings of the board of directors (or any committee
thereof) or of shareholders of the Warrantor.
6.11. Books and Records. The books and records of the Warrantor
fairly reflect the transactions to which it is a party or by which its
properties are subject or bound. Such books and records have been properly
kept and maintained and are in compliance in all material respects with all
applicable legal and accounting requirements. The Warrantor follows
generally accepted accounting principles applied on a consistent basis in
the preparation and maintenance of its books of account and financial
statements, including but not limited to the application of the accrual
method of accounting for interest income on loans, leases, discounts, and
investments, interest expense on deposits and all other liabilities, and
all other items of income and expense. The Warrantor has made all accruals
in amounts which accurately report income and expense in the proper periods
in accordance with generally accepted accounting principles. The Warrantor
has filed all material reports and returns required by any law or regula-
tion to be filed by it.
6.12. Regulatory Approvals and Filings, Contracts, Commitments, etc.
The Company has made or will, no later than ten business days after the
date hereof, make available to Zions Bancorp or grant to Zions Bancorp
continuing access until the Effective Date to originals or copies of the
following documents relating to the Company and the Bank:
(a) All regulatory approvals received since January 1, 1988, of
the Company and the Bank relating to all bank and nonbank acquisitions or
the establishment of de novo operations;
(b) All employment contracts, election contracts, retention
contracts, deferred compensation, non-competition, bonus, stock option,
profit-sharing, pension, retirement, consultation after retirement,
incentive, insurance arrangements or plans (including medical, disability,
group life or other insurance plans), and any other remuneration or fringe
benefit arrangements applicable to employees, officers, or directors of the
Company or the Bank, accompanied by any agreements, including trust agree-
ments, embodying such contracts, plans, or arrangements, and all employee
manuals and memoranda relating to employment and benefit policies and
practices of any nature whatsoever (whether or not distributed to employees
or any of them), and any actuarial reports and audits relating to such
plans;
(c) All material contracts, agreements, leases, mortgages, and
commitments, except those entered into in the ordinary course of business,
to which the Company or the Bank is a party or may be bound; or, if any of
the same be oral, true, accurate, and complete written summaries of all
such oral contracts, agreements, leases, mortgages, and commitments;
(d) All material contracts, agreements, leases, mortgages, and
commitments, whether or not entered into in the ordinary course of busi-
ness, to which the Company or the Bank is a party or may be bound and which
require the consent or approval of third parties to the execution and
delivery of this Agreement or to the consummation or performance of any of
the transactions contemplated thereby, or, if any of the same be oral,
true, accurate, and complete written summaries of all such oral contracts,
agreements, leases, mortgages, and commitments;
(e) All deeds, leases, contracts, agreements, mortgages, and
commitments, whether or not entered into in the ordinary course of busi-
ness, to which the Company or the Bank is a party or may be bound and which
relate to land, buildings, fixtures, or other real property upon or within
which the Company or the Bank operates its businesses or is authorized to
operate its businesses, or with respect to which the Company or the Bank
has any application pending for authorization to operate its businesses;
(f) Any pending application, including any documents or materi-
als related thereto, which has been filed by the Company or the Bank with
any federal or state regulatory agency with respect to the establishment of
a new office or the acquisition or establishment of any additional banking
or nonbanking subsidiary; and
(g) All federal and state tax returns filed by the Company or
the Bank for the years 1984 through 1992, a copy of the most recent audit
examination of each of the Company and the Bank by the Internal Revenue
Service ("IRS"), if any, a copy of the most recent state revenue agency
examination, if any, of each of the Company and the Bank, and all tax
rulings with respect to the Company or the Bank received from the IRS since
January 1, 1984.
6.13. Financial Statements. The Company has furnished or will, no
later than ten business days after the date hereof, furnish to Zions
Bancorp its consolidated statement of condition as of each of December 31,
1990, December 31, 1991, December 31, 1992, and September 30, 1993, and its
related consolidated statement of income, consolidated statement of changes
in financial position, and consolidated statement of changes in stockhold-
ers' equity for each of the periods then ended, and the notes thereto
(collectively, the "Company Financial Statements"). All of the Company
Financial Statements, including the related notes, (a) were prepared in
accordance with generally accepted accounting principles applied in all
material respects and as to each category of assets and liabilities and
each category of income and expense on a consistent basis throughout the
periods involved, and (b) are in accordance with the books and records of
the Company which have been maintained in accordance with generally
accepted accounting principles or the requirements of financial institution
regulatory authorities, as the case may be, and (c) fairly reflect the
consolidated financial position of the Company as of such dates, and the
consolidated results of operations of the Company for the periods ended on
such dates, and do not fail to disclose any material extraordinary or
out-of-period items, and (d) reflect, in accordance with generally accepted
accounting principles applied in all material respects and as to each
category of assets and liabilities and each category of income and expense
on a consistent basis throughout the periods involved, adequate provision
for, or reserves against, the possible loan losses of the Company as of
such dates.
6.14. Call Reports; Bank Holding Company Reports.
(a) The Bank has furnished or will, no later than ten business
days after the date hereof, furnish to Zions Bancorp its Consolidated
Reports of Condition and Consolidated Reports of Income for the calendar
quarters dated March 31, 1992 and thereafter. All of such Consolidated
Reports of Condition and Consolidated Reports of Income, including the
related schedules and memorandum items, were prepared in accordance with
generally accepted accounting principles applied in all material respects
and as to each category of assets and liabilities and each category of
income and expense on a consistent basis throughout the periods involved
with the exceptions of certain depreciation estimates and other expense
estimates which are not material.
(b) No adjustments are required to be made to the equity capital
account of the Bank as reported on any of the Consolidated Reports of
Condition referred to in Subsection 6.14(a) hereof, in any material amount,
in order to conform such equity capital account to equity capital as would
be determined in accordance with generally accepted accounting principles.
(c) The Company has furnished or will, no later than ten
business days after the date hereof, furnish to Zions Bancorp the annual
report on Form FR Y-6 as filed with the Board of Governors as of December
31, 1992 on behalf of the Company.
6.15. Absence of Undisclosed Liabilities. At September 30, 1993, the
Company had no obligation or liability of any nature (whether absolute,
accrued, contingent, or otherwise, and whether due or to become due) which
was material, or that when combined with all similar obligations or
liabilities would have been material, to the Company, except (a) as
disclosed in the Company Financial Statements, or (b) as set forth on
Schedule 6.15 hereof, or (c) for unfunded loan commitments made by the
Company or the Bank in the ordinary course of its business consistent with
past practice; nor does there exist a set of circumstances resulting from
transactions effected or events occurring on or prior to September 30, 1993
or from any action omitted to be taken during such period that could
reasonably be expected to result in any such material obligation or
liability, except as disclosed or provided for in the Company Financial
Statements. The amounts set up as current liabilities for taxes in the
Company Financial Statements are sufficient for the payment of all taxes
(including, without limitation, federal, state, local, and foreign excise,
franchise, property, payroll, income, capital stock, and sales and use
taxes) accrued in accordance with generally accepted accounting principles
and unpaid at September 30, 1993. Since September 30, 1993, neither the
Company nor the Bank has incurred or paid any obligation or liability that
would be material (on a consolidated basis) to the Company, except (x) for
obligations incurred or paid in connection with transactions by it in the
ordinary course of its business consistent with past practices, or (y) as
set forth on Schedule 6.15 hereof, or (z) as expressly contemplated herein.
6.16. Absence of Certain Developments. Since September 30, 1993,
there has been (a) no material adverse change in the condition, financial
or otherwise, or, taken as a whole, to the assets, properties, liabilities,
or businesses of the Company or the Bank; (b) no deterioration in the
quality of the loan portfolio of the Bank or of any major component
thereof, and no increase in the level of nonperforming assets or non-accru-
al loans at the Bank or in the level of its provision for credit losses or
its reserve for possible credit losses any of which deterioration or
increase has resulted, or should reasonably have resulted, in a provision
or provisions to the consolidated reserve for possible loan and lease
losses of the Company in an amount exceeding $300,000 in the aggregate; (c)
no declaration, setting aside, or payment by the Company or the Bank of (i)
any regular dividend, other than customary cash dividends paid by the Bank
whose amounts have not exceeded past practice and the intervals between
which dividends have not been more frequent than past practice or (ii)
other than stock dividends declared and paid prior to the date hereof, any
special dividend or other distribution with respect to any class of capital
stock of the Company or the Bank; (d) no repurchase by the Company of any
of its capital stock; (e) no material loss, destruction, or damage to any
material property of the Company or the Bank, which loss, destruction, or
damage is not covered by insurance; and (f) no material acquisition or
disposition of any asset, nor any material contract outside the ordinary
course of business entered into by the Company or the Bank nor any substan-
tial amendment or termination of any material contract outside the ordinary
course of business to which the Company or the Bank is a party, nor any
other transaction by the Company or the Bank involving an amount in excess
of $50,000 other than for fair value in the ordinary course of its busi-
ness. Since September 30, 1993, (w) the Warrantor has conducted its
business only in the ordinary course of such business and consistent with
past practice; (x) the Company, on a consolidated basis, has maintained the
quality of its loan portfolio and that of each of its major components at
approximately the same level as existed at September 30, 1993; (y) the
Company, on a consolidated basis, has administered its investment portfolio
pursuant to essentially the same policies and procedures as existed during
1991 and 1992 and the first nine months of 1993; and (z) the Company, on a
consolidated basis, has not taken any action to change materially the
percentage which the aggregate consolidated investment portfolio of the
Company bears to the total consolidated assets of the Company or to
lengthen the average maturity of the investment portfolio, or of any
significant category thereof, to any material extent.
6.17. Reserve for Possible Credit Losses. The Company's consolidated
reserve for possible credit losses as of September 30, 1993 was adequate to
absorb reasonably anticipated losses in the consolidated loan and lease
portfolios of the Company, in view of the size and character of such
portfolios, current economic conditions, and other pertinent factors.
Management periodically reevaluates the adequacy of such reserve based on
portfolio performance, current economic conditions, and other factors. No
facts have subsequently come to the attention of management of the Company
or the Bank which would cause it to restate by more than $300,000 the level
of such reserve for possible credit losses.
6.18. Tax Matters.
(a) All federal, state, local, and foreign tax returns and
reports (including, without limitation, all income tax, unemployment
compensation, social security, payroll, sales and use, excise, privilege,
property, ad valorem, franchise, license, school, and any other tax under
laws of the United States or any state or municipal or political subdivi-
sion thereof) required to be filed by or on behalf of the Warrantor have
been timely filed with the appropriate governmental agencies in all
jurisdictions in which such returns and reports are required to be filed,
or requests for extensions have been timely filed, granted, and have not
expired for periods ending on or before December 31, 1992, and all returns
filed are complete and accurate to the best information and belief of the
management of the Warrantor and properly reflect the taxes of the Warrantor
for the periods covered thereby. All taxes shown on filed returns have
been paid. As of the date hereof, there is no audit examination, deficien-
cy, or refund litigation or tax claim or any notice of assessment or
proposed assessment by the IRS or any other taxing authority, or any other
matter in controversy with respect to any taxes that might result in a
determination adverse to the Warrantor, except as reserved against in the
Company Financial Statements. All federal, state, and local taxes,
assessments, interest, additions, deficiencies, fees, penalties, and other
governmental charges or impositions due with respect to completed and
settled examinations or concluded litigation have been properly accrued or
paid.
(b) The Warrantor has not executed an extension or waiver of any
statute of limitations on the assessment or collection of any tax due that
is currently in effect.
(c) To the extent any federal, state, local, or foreign taxes
are due from the Warrantor for the period or periods beginning January 1,
1993 or thereafter through and including the Effective Date, adequate
provision on an estimated basis has been or will be made for the payment of
such taxes by establishment of appropriate tax liability accounts on the
last monthly financial statements of the Company prepared before the
Effective Date.
(d) Deferred taxes of the Warrantor have been provided for in
accordance with generally accepted accounting principles as in effect on
December 31, 1992. The adjustment to deferred taxes mandated for the year
ended December 31, 1993 by Statement of Financial Accounting Standards No.
109 will not be material.
(e) The Bank's deduction for bad debts taken and the reserve for
loan losses for federal income tax purposes at September 30, 1993, were not
greater than the maximum amount permitted under the provisions of section
585 of the Code.
(f) Other than liens arising under the laws of the State of
Arizona with respect to taxes assessed and not yet due and payable, there
are no tax liens on any of the properties or assets of the Company or any
of its subsidiaries.
(g) The Company and the Bank have timely filed all information
returns required by sections 6041, 6041A, 6042, 6045, 6049, 6050H, and
6050J of the Code and have exercised due diligence in obtaining certified
taxpayer identification numbers as required pursuant to Treasury Regula-
tions (Sec.) 35a.9999.
(h) The taxable year end of the Company for federal income tax
purposes is, and since the inception of the Company has continuously been,
December 31.
6.19. Consolidated Net Worth. The consolidated net worth of the
Company on the date first above written, as determined in accordance with
generally accepted accounting principles, is not less than the consolidated
net worth of the Company as of September 30, 1993, as determined in
accordance with generally accepted accounting principles.
6.20. Examinations. To the extent consistent with law, the Warrantor
has heretofore disclosed or will, no later than ten business days after the
date hereof, disclose to Zions Bancorp relevant information contained in
the most recent Report of Examination issued by the Board of Governors.
Such information so disclosed consists or will consist of all material
information with respect to the financial condition of the Warrantor
included in such reports, and does not omit or will not omit any informa-
tion necessary to make the information disclosed not misleading.
6.21. Reports. Since January 1, 1990, the Warrantor has effected all
registrations and filed all reports and statements, together with any
amendments required to be made with respect thereto, which the Warrantor
was required to effect or file with (a) the Board of Governors, (b) the
FDIC, (c) the United States Department of the Treasury, (d) the Superinten-
dent, and (e) any other governmental or regulatory authority or agency
having jurisdiction over the operations of the Warrantor. Each of such
registrations, reports, and documents, including the financial statements,
exhibits, and schedules thereto, does not contain any statement which, at
the time and in the light of the circumstances under which it was made, is
false or misleading with respect to any material fact or which omits to
state any material fact necessary in order to make the statements contained
therein not false or misleading.
6.22. FIRA Compliance and Other Transactions with Affiliates. Except
as set forth on Schedule 6.22 hereof, none of the officers, directors, or
beneficial holders of 5 percent or more of the common stock of the Warran-
tor and no person "controlled" (as that term is defined in the Financial
Institutions Regulatory and Interest Rate Control Act of 1978) by the
Warrantor, has any ongoing material transaction with the Warrantor or any
other Warrantor on the date of this Agreement. None of such officers,
directors, holders, or other persons has any ownership interest in any
business, corporate or otherwise, which is a party to, or in any property
which is the subject of, business arrangements or relationships of any kind
with the Warrantor or any other Warrantor not in the ordinary course of
business. Any other extensions of credit by the Warrantor to such offi-
cers, directors, and other persons have heretofore been disclosed in
writing by the Warrantor to Zions Bancorp.
6.23. [reserved.]
6.24. Legal Proceedings. Except as disclosed in the Company Finan-
cial Statements, there is no claim, action, suit, arbitration, investiga-
tion, or other proceeding pending before any court, governmental agency,
authority or commission, arbitrator, or "impartial mediator" (of which the
Company or any of its subsidiaries has been served with process or other-
wise been given notice) or, to the knowledge of the Warrantor, threatened
or contemplated against or affecting it or its property, assets, interests,
or rights, or any basis therefor of which notice has been given, which, if
adversely determined, would have a material adverse effect (financial or
otherwise) on the business, operating results, or financial condition of
the Company or which otherwise could prevent, hinder, or delay consummation
of the transactions contemplated by this Agreement.
6.25. Absence of Governmental Proceedings. The Warrantor is not a
party defendant or respondent to any pending legal, equitable, or other
proceeding commenced by any governmental agency and, to the best of its
knowledge, no such proceeding is threatened.
6.26. Federal Deposit Insurance. The deposits held by the Bank are
insured within statutory limits by the Bank Insurance Fund of the FDIC
pursuant to the provisions of the Federal Deposit Insurance Act, as amended
(12 U.S.C. (Sec.) 1811 et seq.), and the Bank has paid all assessments and filed
all related reports and statements required under the Federal Deposit
Insurance Act. None of the deposits of the Bank are insured by the Savings
Association Insurance Fund of the FDIC.
6.27. Other Insurance. The Warrantor carries insurance with reputa-
ble insurers, including blanket bond coverage, in such amounts as are
reasonable to cover such risks as are customary in relation to the charac-
ter and location of its properties and the nature of its businesses. All
such policies of insurance are in full force and effect, and no notice of
cancellation has been received. All premiums to date have been paid in
full. The Warrantor is not in default with respect to any such policy
which is material to the Company.
6.28. Labor Matters. The Warrantor is not a party to or bound by any
collective bargaining contracts with respect to any employees of the
Warrantor. Since January 1, 1984, there has not been, nor to the knowledge
of the Warrantor was there or is there threatened, any strike, slowdown,
picketing, or work stoppage by any union or other group of employees
against the Warrantor or any of its premises, or any other labor trouble or
other occurrence, event, or condition of a similar character. As of the
date hereof, the Warrantor is not aware of any attempts to organize a
collective bargaining unit to represent any of its employee groups.
6.29. Employee Benefit Plans.
(a) The Company has previously made available or will, no later
than ten business days after the date hereof, make available to Zions
Bancorp for its continuing review until the Effective Date true, complete,
and accurate copies of all pension, retirement, stock purchase, stock
bonus, stock ownership, stock option, performance share, stock appreciation
right, phantom stock, savings, or profit-sharing plans, any employment,
deferred compensation, consultant, bonus, or collective bargaining agree-
ment, or group insurance contract or any other incentive, welfare, life
insurance, death or survivor's benefit, health insurance, sickness, dis-
ability, medical, surgical, hospital, severance, layoff or vacation plans,
contracts, and arrangements or employee benefit plans or agreements
sponsored, maintained, or contributed to by the Warrantor for the employees
or former employees of the Warrantor, together with (i) the most recent
actuarial and financial report prepared with respect to any such plans
which constitute "qualified plans" under section 401(a) of the Code, and
(ii) the most recent annual reports, if any, filed with any government
agency and all IRS rulings and determination letters and any open requests
for such rulings and letters that pertain to any such plan.
(b) Except as described on Schedule 6.29 hereof, except for
liabilities to the Pension Benefit Guaranty Corporation ("PBGC") pursuant
to section 4007 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), all of which have been fully paid, and except for
liabilities to the IRS under section 4971 of the Code, all of which have
been fully paid, the Warrantor has no liability with respect to any pension
plan qualified under section 401 of the Code. The Warrantor does not
sponsor or maintain any defined benefit plan and has never sponsored or
maintained any defined benefit plan.
(c) All "employee benefit plans," as defined in section 3(3) of
ERISA, that cover one or more employees employed by the Warrantor (each
individually a "Plan" and collectively the "Plans"), comply in all material
respects with ERISA and, where applicable for tax-qualified or tax-favored
treatment, with the Code. As of September 30, 1993, the Warrantor had no
material liability under any Plan which is not reflected on the Company
Financial Statements as of such date (other than such normally unrecorded
liabilities under the Plans for sick leave, holiday, education, bonus,
vacation, incentive compensation, and anniversary awards, provided that
such liabilities are not in any event material). Neither the Plans, the
Warrantor nor any trustee or administrator of the Plans has ever engaged in
a "prohibited transaction" with respect to the Plans within the meaning of
section 406 of ERISA or, where applicable, section 4975 of the Code for
which no exemption is applicable, nor have there been any "reportable
events" within section 4043 of ERISA for which the thirty-day notice
therefor has not been waived. The Warrantor has not incurred any liability
under section 4201 of ERISA for a complete or partial withdrawal from a
multi-employer plan.
(d) No action, claim, or demand of any kind has been brought or
threatened by any potential claimant or representative of such a claimant
under any plan, contract, or arrangement referred to in Subsection (a) of
this section, where the Warrantor may be either (i) liable directly on such
action, claim, or demand; or (ii) obligated to indemnify any person, group
of persons, or entity with respect to such action, claim, or demand which
is not fully covered by insurance maintained with reputable, responsible
financial insurers or by a self-insured plan.
6.30. Employee Relations. As of the date hereof, the Warrantor is,
to the best of its knowledge, in compliance in all material respects with
all federal and state laws, regulations, and orders respecting employment
and employment practices (including Title VII of the Civil Rights Act of
1964), terms and conditions of employment, and wages and hours; and the
Warrantor is not engaged in any unfair labor practice. As of the date
hereof, no dispute exists between the Warrantor, and any of its employee
groups regarding any employee organization, wages, hours, or conditions of
employment which would materially interfere with the business or operations
of the Warrantor.
6.31. Fiduciary Activities. The Bank is duly qualified and regis-
tered and in good standing in accordance with the laws of each jurisdiction
in which it is required to so qualify or register as a result of or in
connection with its fiduciary or custodial activities as conducted as of
the date hereof. The Bank is duly registered under and in compliance with
all requirements of the federal Investment Advisers Act of 1940 as amended,
or is exempt from registration thereunder and from compliance with the
requirements thereof. Since January 1, 1990, the Bank has conducted, and
currently is conducting, all fiduciary and custodial activities in all
material respects in accordance with all applicable law.
<PAGE>
6.32. Environmental Liability.
(a) The Warrantor is not in violation of any judgment, decree,
order, law, license, rule or regulation pertaining to environmental
matters, including those arising under the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), the Superfund Amendments and Reauthori-
zation Act of 1986, the Federal Water Pollution Control Act, the Federal
Clean Air Act, the Toxic Substances Control Act or any state or local
statute, regulation, ordinance, order or decree relating to health, safety
or the environment ("Environmental Laws").
(b) Neither the Warrantor nor, to the knowledge of the Warran-
tor, any borrower of the Warrantor has received notice that it has been
identified by the United States Environmental Protection Agency as a
potentially responsible party under CERCLA with respect to a site listed on
the National Priorities List, 40 C.F.R. Part 300 Appendix B, nor has the
Warrantor or, to the knowledge of the Warrantor, any borrower of the
Warrantor received any notification that any hazardous waste, as defined by
42 U.S.C. (Sec.) 6903(5), any hazardous substances, as defined by 42 U.S.C.
(Sec.) 9601(14), any "pollutant or contaminant," as defined by 42 U.S.C.
(Sec.) 9601(33), or any toxic substance, hazardous materials, oil, or other
chemicals or substances regulated by any Environmental Laws ("Hazardous
Substances") that it has disposed of has been found at any site at which a
federal or state agency is conducting a remedial investigation or other
action pursuant to any Environmental Law.
(c) No portion of any real property at any time owned or leased
by the Warrantor (collectively, the "Warrantor Real Estate") has been used
by the Warrantor for the handling, processing, storage or disposal of
Hazardous Substances in a manner which violates any Environmental Laws and,
to the knowledge of the Warrantor, no underground tank or other underground
storage receptacle for Hazardous Substances is located on any of the
Warrantor Real Estate. In the course of its activities, the Warrantor has
not generated and is not generating any hazardous waste on any of the
Warrantor Real Estate in a manner which violates any Environmental Laws.
There has been no past or present releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing or dumping (collectively, a "Release") of Hazardous Substances by
the Warrantor on, upon, or into any of the Warrantor Real Estate. In
addition, to the knowledge of the Warrantor, there have been no such
Releases on, upon, or into any real property in the vicinity of any of the
Warrantor Real Estate that, through soil or groundwater contamination, may
be located on any of such Warrantor Real Estate.
(d) With respect to any real property at any time held as
collateral for any outstanding loan by the Warrantor (collectively, the
"Collateral Real Estate"), the Warrantor has not at any time received
notice from any borrower thereof or third party and has no knowledge that
such borrower has generated or is generating any hazardous waste on any of
the Collateral Real Estate in a manner which violates any Environmental
Laws or that there has been any Release of Hazardous Substances by such
borrower on, upon, or into any of the Collateral Real Estate, or that there
has been any Release on, upon, or into any real property in the vicinity of
any of the Collateral Real Estate that, through soil or groundwater
contamination, may be located on any of such Collateral Real Estate.
(e) As used in this Section 6.32, the term "Warrantor" includes
the applicable Warrantor and any partnership or joint venture in which it
has an interest.
6.33. Intangible Property. To the best of its knowledge, the
Warrantor owns or possesses the right, free of the claims of any third
party, to use all material trademarks, service marks, trade names, copy-
rights, patents, and licenses currently used by it in the conduct of its
business. To the best of the knowledge of the Warrantor, no material
product or service offered and no material trademark, service mark, or
similar right used by the Warrantor infringes any rights of any other
person, and, as of the date hereof, the Warrantor has not received any
written or oral notice of any claim of such infringement.
6.34. Real and Personal Property. Except for property and assets
disposed of in the ordinary course of business, and except for property and
assets described in Schedule 6.34 hereof, the Warrantor possesses good and
marketable title to and owns, free and clear of any mortgage, pledge, lien,
charge, or other encumbrance or other third party interest of any nature
whatsoever which would materially interfere with the business or operations
of the Warrantor, its real and personal property and other assets, includ-
ing without limitation those properties and assets reflected in the Company
Financial Statements as of September 30, 1993, or acquired by the Warrantor
subsequent to the date thereof. The leases pursuant to which the Warrantor
leases real or personal property are valid and effective in accordance with
their respective terms; and there is not, under any such lease, any
material existing default or any event which, with the giving of notice or
lapse of time or otherwise, would constitute a default. To the actual
knowledge of the Warrantor, the real and personal property leased by the
Warrantor is free from any adverse claim which would materially interfere
with the business or operation of the Company taken as a whole. The
material properties and equipment owned or leased by the Warrantor are in
normal operating condition, free from any known defects, except such minor
defects as do not materially interfere with the continued use thereof in
the conduct of the normal operations of the Warrantor.
6.35. Loans, Leases, and Discounts. To the knowledge of the Warran-
tor, each loan, lease, and discount reflected as an asset of the Company in
the Company Financial Statements as of September 30, 1993, or acquired
since that date, is the legal, valid, and binding obligation of the obligor
named therein, enforceable in accordance with its terms; and no loan,
lease, or discount having an unpaid balance (principal and accrued inter-
est) in excess of $50,000 is subject to any asserted defense, offset, or
counterclaim known to the Warrantor.
6.36. Material Contracts. Neither the Warrantor nor any of the
assets, businesses, or operations of the Warrantor is as of the date hereof
a party to, or is bound or affected by, or receives benefits under any
material agreement, arrangement, or commitment not cancelable by it without
penalty, other than (a) the agreements set forth on Schedule 6.36 hereof,
and (b) agreements, arrangements, or commitments entered into in the
ordinary course of its business consistent with past practice, or, if there
has been no past practice, consistent with prudent banking practices.
6.37. Employment and Severance Arrangements. Except as and to the
extent set forth on Schedule 6.37 hereof,
(a) it is not the policy and has never been the practice of the
Warrantor to grant any of its officers, directors, consultants, or other
management officials or any officer, director, consultant, or management
official of any other Warrantor employment contracts providing for in-
creased or accelerated compensation in the event of a change of control
with respect to the Warrantor or any other event affecting the ownership,
control, or management of the Warrantor; and
(b) there are no employment or severance contracts, agreements,
or arrangements between the Warrantor or any other Warrantor and any
officer, director, consultant, or other management official.
6.38. Material Contract Defaults. All contracts, agreements, leases,
mortgages, or commitments referred to in Section 6.12(c) hereof are valid
and in full force and effect on the date hereof. The Warrantor is not in
default in any material respect under any material contract, agreement,
commitment, arrangement, lease, insurance policy, or other instrument to
which it is a party or by which its assets, business, or operations may be
bound or affected or under which it or its assets, business, or operations
receive benefits; and there has not occurred any event that with the lapse
of time or the giving of notice or both would constitute such a default.
6.39. Capital Expenditures. The Warrantor has no outstanding
commitments in the nature of capital expenditures which in the aggregate
exceed $25,000.
6.40. Repurchase Agreements. With respect to all agreements pursuant
to which the Warrantor has purchased securities subject to an agreement to
resell, the Warrantor has a valid, perfected first lien or security
interest in the securities securing the agreement, and the value of the
collateral securing each such agreement equals or exceeds the amount of the
debt secured by such collateral under such agreement.
6.41. Dividends. The Warrantor has not paid any dividend to its
shareholders which caused the regulatory capital of the Warrantor to be
less than the amount then required by applicable law, or which exceeded any
other limitation on the payment of dividends imposed by law, agreement, or
regulatory policy.
6.42. Brokers and Advisers. Except as set forth on Schedule 6.42
hereof, (a) there are no claims for brokerage commissions, finder's fees,
or similar compensation arising out of or due to any act of the Warrantor
in connection with the transactions contemplated by this Agreement or based
upon any agreement or arrangement made by or on behalf of the Warrantor or
any other Warrantor, and (b) the Warrantor has not entered into any
agreement or understanding with any party relating to financial advisory
services provided or to be provided with respect to the transactions
contemplated by this Agreement.
6.43. Disclosure. Except as set forth on Schedule 6.43 hereof, no
representation or warranty hereunder and no certificate, statement, or
other document delivered by the Warrantor hereunder or in connection with
this Agreement or any of the transactions contemplated thereunder contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein, in light of the
circumstances under which they were made, not misleading. There is no fact
known to the Warrantor which reasonably might materially adversely affect
the business, assets, liabilities, financial condition, results of opera-
tions, or prospects of the Warrantor which has not been disclosed in the
Company Financial Statements or a certificate delivered to Zions Bancorp by
the Warrantor. Copies of all documents referred to in this Agreement,
unless prepared solely by Zions Bancorp or Zions Arizona or solely by Zions
Bancorp and Zions Arizona and third parties hereto, are true, correct, and
complete copies thereof and include all amendments, supplements, and
modifications thereto and all waivers thereunder.
6.44. Regulatory and Other Approvals. As of the date hereof, the
Warrantor is not aware of any reason why all material consents and approv-
als shall not be procured from all regulatory agencies having jurisdiction
over the transactions contemplated by this Agreement, as shall be necessary
for (a) consummation of the transactions contemplated by this Agreement,
and (b) the continuation by the Warrantor after the Effective Date of the
business of the Warrantor as such business is carried on immediately prior
to the Effective Date, free of any conditions or requirements which, in the
reasonable opinion of the Warrantor, could have a material adverse effect
upon the business, operations, activities, earnings, or prospects of the
Company. As of the date hereof, the Warrantor is not aware of any reason
why all material consents and approvals shall not be procured from all
other persons and entities whose consent or approval shall be necessary for
(y) consummation of the transactions contemplated by this Agreement, or (z)
the continuation by the Warrantor after the Effective Date of the business
of the Warrantor as such business is carried on immediately prior to the
Effective Date.
7. Covenants of the Company and the Bank.
The Company and the Bank hereby jointly and severally covenant and
agree as follows:
7.1. Rights of Access. In addition and not in limitation of any
other rights of access provided to Zions Bancorp and Zions Arizona herein,
until the Effective Date the Company and the Bank will give to Zions
Bancorp and Zions Arizona and to their representatives, including their
certified public accountants, KPMG Peat Marwick, full access during normal
business hours to all of the property, documents, contracts, books, and
records of the Company and the Bank, and such information with respect to
their business affairs and properties as Zions Bancorp or Zions Arizona
from time to time may reasonably request.
7.2. Corporate Records, Contracts, etc.
(a) The Company and the Bank will make available to Zions
Bancorp and Zions Arizona copies of the articles of incorporation and
bylaws of the Company and the Bank, and will make available minute books of
the Company and the Bank, all of which shall be certified to be complete
and true copies.
(b) The Company and the Bank will make available copies of all
contracts or agreements involving amounts in excess of $25,000 to which the
Company or the Bank is a party (other than loan agreements where a Bank is
the lender and letters of credit) including but not limited to data
processing contracts, service contracts, contracts to purchase or lease
real property or equipment, guaranties, employment contracts, and insurance
contracts pertaining to fire, accident, indemnity, fidelity, health, life,
hospitalization, or other employee benefits.
(c) The Company and the Bank will furnish to Zions Bancorp and
Zions Arizona the following information with respect to properties owned by
the Company and the Bank: (i) a brief description and location of each
parcel of real property owned by the Company or the Bank and (ii) a brief
description of real and personal property covered by lease or other rental
arrangements to which the Company or the Bank is a party, including a copy
of the relevant leases.
7.3. Monthly and Quarterly Financial Statements; Minutes of Meetings
and Other Materials.
(a) Each of the Company and the Bank shall promptly provide
Zions Bancorp with copies of all of its monthly and quarterly financial
statements, and copies of all quarterly Consolidated Reports of Condition
and Consolidated Reports of Income of the Bank for the months and quarterly
periods, as the case may be, ending between the date of this Agreement and
the Effective Date. Such financial statements and reports shall be
verified by the chief financial officer of the reporting entity. All of
such financial statements and reports, including the related notes,
schedules, and memorandum items, will have been prepared in accordance with
generally accepted accounting principles applied in all material respects
and as to each category of assets and liabilities and each category of
income and expense on a consistent basis throughout the periods involved.
(b) No adjustments will be required to be made to the equity
capital account of the Bank as reported on any of the Consolidated Reports
of Condition referred to in Subsection 7.3(a) hereof, in any material
amount, in order to conform such equity capital account to equity capital
as would be determined in accordance with generally accepted accounting
principles.
(c) Each of the Company and the Bank shall promptly provide
Zions Bancorp with (i) copies of all of its periodic reports to directors
and to shareholders, whether or not such reports were prepared or distrib-
uted in connection with a meeting of the board of directors or a meeting of
the shareholders, prepared or distributed between the date of this Agree-
ment and the Effective Date, and (ii) complete copies of all minutes of
meetings of its board of directors and its shareholders which meetings take
place between the date of this Agreement and the Effective Date, certified
by the secretary or cashier or an assistant secretary or assistant cashier
of the Company or the Bank, as the case may be.
7.4. Extraordinary Transactions. Without the prior written consent
of Zions Bancorp, neither the Company nor the Bank shall, on or after the
date first above written: (a) declare or pay any cash dividends or
property dividends with respect to any class of its capital stock, with the
exception of customary periodic cash dividends paid by the Bank to holders
of its common stock at such intervals and in such amounts as are in every
case consistent with the amounts and intervals characteristic of the Bank;
(b) declare or distribute any stock dividend, authorize a stock split, or
authorize, issue or make any distribution of its capital stock or any other
securities, or grant any options to acquire such additional securities; (c)
merge into, consolidate with, or sell its assets to any other corporation
or person, or enter into any other transaction or agree to effect any other
transaction not in the ordinary course of its business except as explicitly
contemplated herein, or engage in any discussions concerning such a
possible transaction except as explicitly contemplated herein; (d) convert
the charter or form of entity of the Bank from that of an Arizona bank
corporation to any other charter or form of entity; (e) make any direct or
indirect redemption, purchase, or other acquisition of any of its capital
stock; (f) incur any liability or obligation, make any commitment or
disbursement, acquire or dispose of any property or asset, make any
contract or agreement, or engage in any transaction, except in the ordinary
course of its business; (g) other than in the ordinary course of business,
subject any of its properties or assets to any lien, claim, charge, option,
or encumbrance; (h) except for increases in the ordinary course of business
in accordance with past practices, not to exceed 5 percent per annum of the
aggregate payroll as of October 1, 1993, increase the rate of compensation
of any employee or enter into any agreement to increase the rate of
compensation of any employee; (i) create or modify any pension or profit
sharing plan, bonus, deferred compensation, death benefit, or retirement
plan, or the level of benefits under any such plan, nor increase or
decrease any severance or termination pay benefit or any other fringe
benefit; nor (j) enter into any employment or personal services contract
with any person or firm, including without limitation any contract,
agreement, or arrangement described in Section 6.37(a) hereof, except
directly to facilitate the transactions contemplated by this Agreement.
7.5. Preservation of Business. Each of the Company and the Bank (a)
will carry on its business and manage its assets and properties diligently
and substantially in the same manner as heretofore; (b) will maintain the
ratio of its loans to its deposits at approximately the same level as
existed at September 30, 1993, as adjusted to allow for seasonal fluctua-
tions of loans and deposits of a kind and amount experienced traditionally
by the Company and the Bank; (c) will manage its investment portfolio in
substantially the same manner and pursuant to substantially the same
investment policies as in 1991 and 1992 and the first nine months of 1993,
and will take no action to change the percentage which the aggregate
investment portfolio of the Company or the Bank bears to the total assets
of the Company or the Bank, as the case may be, or to lengthen the average
maturity of the investment portfolio, or of any significant category
thereof, to any material extent; (d) will continue in effect its present
insurance coverage on all properties, assets, business, and personnel; (e)
will use its best efforts to preserve its business organization intact, to
keep available its present employees, and to preserve its present relation-
ships with customers and others having business dealings with it; (f) will
not do anything nor will it fail to do anything which will cause a breach
of or default in any contract, agreement, commitment, or obligation to
which it is a party or by which it may be bound; and (g) will not amend its
articles of incorporation or bylaws or permit any of its subsidiaries to
amend its articles of incorporation or bylaws.
7.6 Comfort Letter. At the time of the effectiveness of the Regis-
tration Statement, but prior to the mailing of the proxy materials, and at
the Effective Date, the Company shall furnish Zions Bancorp with a letter
from McGladrey & Pullen, in form and substance acceptable to Zions Bancorp,
stating that (a) they are independent accountants with respect to the
Company within the meaning of the 1933 Act and the published rules and
regulations thereunder, (b) in their opinion the consolidated financial
statements of the Company included in the Registration Statement and
examined by them comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act and the published rules
and regulations thereunder, and (c) a reading of the Company's audited
consolidated financial statements and the latest available unaudited
consolidated financial statements of the Company and inquiries of certain
officials of the Company responsible for financial and accounting matters
as to transactions and events since December 31, 1992 did not cause them to
believe that (i) the Company's audited consolidated financial statements
and such latest available unaudited consolidated financial statements are
not stated on a basis consistent with that followed in the Company's
audited consolidated financial statements or (ii) except as disclosed in
the letter, at a specified date not more than five business days prior to
the date of such letter, there was any change in the Company's capital
stock or any change in consolidated long-term debt or any decrease in the
consolidated net assets of the Company as compared with the respective
amounts shown in the most recent Company audited consolidated financial
statements. The letter shall also cover such other matters pertaining to
the Company's financial data and statistical information included in the
Registration Statement as may reasonably be requested by Zions Bancorp.
7.7 Affiliates' Agreements. The Company will furnish to Zions
Bancorp a list of all persons known to the Company who at the date of the
Company's special meeting of shareholders to vote upon the transactions
contemplated by this Agreement may be deemed to be "affiliates" of the
Company within the meaning of Rule 145 under the 1933 Act and for purposes
of qualifying the Holding Company Merger for "pooling of interests"
accounting treatment. The Company will use its best efforts to cause each
such "affiliate" of the Company to deliver to Zions Bancorp not later than
thirty days prior to the Effective Date a written agreement providing that
such person will not sell, pledge, transfer or otherwise dispose of (a) the
shares of Zions Bancorp Stock to be received by such person in the Holding
Company Merger (the "Company Merger Shares") or any other shares of Zions
Bancorp Stock held by such person during the period commencing thirty days
prior to the Effective Date and ending at such time as financial results
covering at least thirty days of post-Holding Company Merger combined
operations have been published within the meaning of Section 201.01 of the
SEC's Codification of Financial Reporting Policies or (b) the Company
Merger Shares except in compliance with the applicable provisions of the
1933 Act and the rules and regulations thereunder.
7.8 Inconsistent Activities. Unless and until the Mergers have been
consummated or this Agreement has been terminated in accordance with its
terms, the Company and the Bank will not (a) solicit or encourage, directly
or indirectly, any inquiries or proposals to acquire more than 1 percent of
the Company Common Stock or any capital stock of the Bank or any signifi-
cant portion of its or the Bank's assets (whether by tender offer, merger,
purchase of assets or other transactions of any type); (b) afford any third
party which may be considering any such transaction access to its or the
Bank's properties, books or records except as required by mandatory
provisions of law; (c) enter into any discussions or negotiations for, or
enter into any agreement or understanding which provides for, any such
transaction, or (d) authorize or permit any of its directors, officers,
employees or agents to do or permit any of the foregoing. If the Company
or the Bank becomes aware of any offer or proposed offer to acquire any
shares of its capital stock or any significant portion of its assets
(regardless of the form of the proposed transaction) or of any other matter
which could adversely affect this Agreement or the Mergers or either of
them, the Company and the Bank shall immediately give notice thereof to
Zions Bancorp.
7.9. Dissolution of Inactive Subsidiaries. If so requested by Zions
Bancorp in a timely manner, the Bank will cause Rio Salado Mortgage
Company, Inc. and the corporations listed on Schedule 6.8 hereof, or any of
them, to be dissolved (or, at the option of the Company and the Bank
reasonably concurred in by Zions Bancorp, merged into the Company) prior to
the Effective Date.
8. Representations and Warranties of Zions Bancorp and Zions Arizona.
Zions Bancorp (with respect to itself and Zions Arizona) and Zions
Arizona (with respect to itself) represent and warrant to the Company and
the Bank as follows:
8.1. Organization, Powers, and Qualification. It is a corporation
which is duly organized, validly existing, and in good standing under the
laws of its jurisdiction of incorporation and has all requisite corporate
power and authority to own and operate its properties and assets, to lease
properties used in its business, and to carry on its business as now
conducted. It owns or possesses in the operation of its business all
franchises, licenses, permits, branch certificates, consents, approvals,
waivers, and other authorizations, governmental or otherwise, which are
necessary for it to conduct its business as now conducted, except for those
where the failure of such ownership or possession would not adversely
affect its operation and properties in any material respect. It is duly
qualified and licensed to do business and is in good standing in every
jurisdiction in which such qualification or license is required or with
respect to which the failure to be so qualified or licensed could result in
material liability or adversely affect its operation and properties in any
material respect.
8.2. Execution and Performance of Agreement. It has all requisite
corporate power and authority to execute and deliver this Agreement and to
perform its respective terms.
8.3. Binding Obligations; Due Authorization. This Agreement consti-
tutes its valid, legal, and binding obligations enforceable against it in
accordance with its terms, except as enforcement may be limited by applica-
ble bankruptcy, insolvency, moratorium or similar law, or by general
principles of equity. The execution, delivery, and performance of this
Agreement and the transactions contemplated thereby have been duly and
validly authorized by its board of directors or, in the case of Zions
Arizona, will be so authorized prior to its execution by Zions Arizona (and
Zions Bancorp will cause the board of directors of Zions Arizona to render
its authorization promptly). No other corporate proceedings on its part
are necessary to authorize this Agreement or the carrying out of the
transactions contemplated hereby.
8.4. Absence of Default. None of the execution or the delivery of
this Agreement, the consummation of the transactions contemplated thereby,
or the compliance with or fulfillment of the terms thereof will conflict
with, or result in a breach of any of the terms, conditions, or provisions
of, or constitute a default under its organizational documents or bylaws.
None of such execution, consummation, or fulfillment will (a) conflict
with, or result in a material breach of the terms, conditions, or provi-
sions of, or constitute a material violation, conflict, or default under,
or give rise to any right of termination, cancellation, or acceleration
with respect to, or result in the creation of any lien, charge, or encum-
brance upon, any of its property or assets pursuant to any material
agreement or instrument under which it is obligated or by which any of its
properties or assets may be bound, including without limitation any
material lease, contract, mortgage, promissory note, deed of trust, loan,
credit arrangement or other commitment or arrangement of it in respect of
which it is an obligor, or (b) if the Holding Company Merger is approved by
the Board of Governors under the Bank Holding Company Act or if the Board
of Governors waives jurisdiction under that Act, and if the Bank Merger is
approved by the Comptroller, and if the transactions contemplated by this
Agreement are approved by the Superintendent, violate any law, statute,
rule, or regulation of any government or agency to which it is subject and
which is material to its operations, or (c) violate any judgment, order,
writ, injunction, decree, or ruling to which it or any of its properties or
assets is subject or bound. None of the execution or delivery of this
Agreement, the consummation of the transactions contemplated thereby, or
the compliance with or fulfillment of the terms thereof will require any
authorization, consent, approval, or exemption by any person which has not
been obtained, or any notice or filing which has not been given or done,
other than approval of or waiver of jurisdiction over the transactions
contemplated by this Agreement by the Board of Governors, the Comptroller
and the Superintendent.
8.5. Brokers and Advisers. Except as set forth on Schedule 8.5
hereof, (a) there are no claims for brokerage commissions, finder's fees,
or similar compensation arising out of or due to any act of its in connec-
tion with the transactions contemplated by this Agreement or based upon any
agreement or arrangement made by or on behalf of it, and (b) it has not
entered into any agreement or understanding with any party relating to
financial advisory services provided or to be provided with respect to the
transactions contemplated by this Agreement.
8.6. Books and Records. Its books and records fairly reflect the
transactions to which it is a party or by which its properties are subject
or bound. Such books and records have been properly kept and maintained
and are in compliance in all material respects with all applicable legal
and accounting requirements. It follows generally accepted accounting
principles applied on a consistent basis in the preparation and maintenance
of its books of account and financial statements, including but not limited
to the application of the accrual method of accounting for interest income
on loans, leases, discounts, and investments, interest expense on deposits
and all other liabilities, and all other items of income and expense. It
has made all accruals in amounts which accurately report income and expense
in the proper periods in accordance with generally accepted accounting
principles. It has filed all material reports and returns required by any
law or regulation to be filed by it.
8.7. Financial Statements. Zions Bancorp has furnished or will, no
later than ten business days after the date hereof, furnish to the Company
its consolidated statement of condition as of each of December 31, 1990,
December 31, 1991, December 31, 1992, and September 30, 1993, and its
related consolidated statement of income, consolidated statement of changes
in financial position, and consolidated statement of changes in stockhold-
ers' equity for each of the periods then ended, and the notes thereto
(collectively, the "Zions Bancorp Financial Statements"). All of the Zions
Bancorp Financial Statements, including the related notes, (a) were
prepared in accordance with generally accepted accounting principles
applied in all material respects and as to each category of assets and
liabilities and each category of income and expense on a consistent basis
throughout the periods involved, and (b) are in accordance with the books
and records of Zions Bancorp which have been maintained in accordance with
generally accepted accounting principles, and (c) fairly reflect the
consolidated financial position of Zions Bancorp as of such dates, and the
consolidated results of operations of Zions Bancorp for the periods ended
on such dates, and do not fail to disclose any material extraordinary or
out-of-period items, and (d) reflect, in accordance with generally accepted
accounting principles applied in all material respects and as to each
category of assets and liabilities and each category of income and expense
on a consistent basis throughout the periods involved, adequate provision
for, or reserves against, the possible loan losses of Zions Bancorp as of
such dates.
8.8. Absence of Certain Developments. Since September 30, 1993,
there has been (a) no material adverse change in the condition, financial
or otherwise, assets, properties, liabilities, or businesses of Zions
Bancorp, and (b) no material deterioration in the quality of the loan
portfolio of Zions Bancorp or of any major component thereof, and no
material increase in the level of nonperforming assets or nonaccrual loans
at Zions Bancorp or in the level of its provision for credit losses or its
reserve for possible credit losses.
8.9. Disclosure. No representation or warranty hereunder and no
certificate, statement, or other document delivered by it hereunder or in
connection with this Agreement or any of the transactions contemplated
thereunder contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
herein, in light of the circumstances under which they were made, not
misleading. There is no fact known to it which might materially adversely
affect its business, assets, liabilities, financial condition, results of
operations, or prospects which has not been disclosed in the Zions Bancorp
Financial Statements or a certificate delivered by it to the Company or the
Bank. Copies of all documents referred to in this Agreement, unless
prepared solely by the Company or the Bank or solely by the Company and the
Bank and third parties hereto, are true, correct, and complete copies
thereof and include all amendments, supplements, and modifications thereto
and all waivers thereunder.
9. Closing.
9.1. Place and Time of Closing. Closing shall take place at the
offices of Zions Bancorp, 1380 Kennecott Building, Salt Lake City, Utah, or
such other place as the parties choose, commencing at 10:00 a.m., local
time, on the Effective Date, provided that all conditions precedent to the
obligations of the parties hereto to close have then been met or waived.
Any party may postpone Closing for a reasonable period (not to exceed five
days) if necessary to enable it to perform any obligations hereunder.
9.2. Events To Take Place at Closing. At the Closing, the following
actions will be taken:
(a) Such certificates and other documents as are required by
this Agreement to be executed and delivered on or prior to the Effective
Date and have not been so executed and delivered, and such other certifi-
cates and documents as are mutually deemed by Zions Bancorp and the Company
to be otherwise desirable for the effectuation of the Closing, will be so
executed and delivered; and then
(b) The Holding Company Merger and the issuance of shares
incident thereto shall be effected; provided, however, that the adminis-
trative and ministerial aspects of the issuance of shares incident to the
Holding Company Merger will be settled as soon thereafter as shall be
reasonable under the circumstances; and then
(c) ZAZMAC will be merged with and into Zions Bancorp, with
Zions Bancorp to be the surviving corporation; and then
(d) The Bank Merger shall be effected.
10. Termination, Damages for Breach, Waiver, and Amendment.
10.1. Termination by Reason of Lapse of Time. This Agreement may be
terminated by any party on or after September 30, 1994, by instrument duly
authorized and executed and delivered to the other parties, unless the
Effective Date shall have occurred on or before such date.
10.2. Grounds for Termination. This Agreement may be terminated by
written notice of termination at any time before the Effective Date
(whether before or after action by shareholders of the Company) only as
provided in Section 10.1 or as follows:
(a) by mutual consent of the parties hereto;
(b) by Zions Bancorp, upon written notice to the Company given
at any time if any of the representations and warranties of the Company or
the Bank contained in Section 6 hereof was materially incorrect when made;
(c) by the Company, upon written notice to Zions Bancorp given
at any time if any of the representations and warranties of Zions Bancorp
or Zions Arizona contained in Section 8 hereof was materially incorrect
when made; or
(d) by either Zions Bancorp or the Company upon written notice
given to the other if the board of directors of either Zions Bancorp or the
Company shall have determined in its sole judgment made in good faith,
after due consideration and consultation with counsel, that the Mergers
have become inadvisable or impracticable by reason of the institution of
litigation by the federal government or the government of either the State
of Arizona or the State of Utah to restrain or invalidate the transactions
contemplated by this Agreement.
10.3. Effect of Termination. In the event of the termination and
abandonment hereof pursuant to the provisions of Section 10.1 or Section
10.2, this Agreement shall become void and have no force or effect, without
any liability on the part of Zions Bancorp, Zions Arizona, the Company, or
the Bank or their respective directors or officers or shareholders in
respect of this Agreement. Notwithstanding the foregoing, (a) as provided
in Section 11.4 of this Agreement, the confidentiality agreement contained
in that section shall survive such termination, and (b) if such termination
is a result of any of the representations and warranties of a party being
materially incorrect when made or a result of the material breach by a
party of a covenant hereunder, such party whose representations and
warranties were materially incorrect or who materially breached its
covenant shall be liable to the other party or parties hereto solely to the
extent of the actual, reasonable out-of-pocket expenses, not to exceed
$250,000, incurred by the other party in connection with the negotiation
and preparation of this Agreement and the carrying out of the transactions
contemplated hereby.
10.4. Waiver of Terms or Conditions. Any of the terms or conditions
of this Agreement may be waived at any time prior to the Effective Date by
the party which is, or whose shareholders are, entitled to the benefit
thereof, by action taken by the board of directors of such party, or by its
chairman, or by its president and chief executive officer; provided,
however, that such waiver shall be in writing and shall be taken only if,
in the judgment of the board of directors or officer taking such action,
such waiver will not have a materially adverse effect on the benefits
intended hereunder to the shareholders of its or his corporation; and the
other parties hereto may rely on the delivery of such a waiver as conclu-
sive evidence of such judgment and the validity of the waiver.
10.5. Amendment.
(a) Anything herein or elsewhere to the contrary notwithstand-
ing, to the extent permitted by law, this Agreement and the exhibits hereto
may be amended, supplemented, or interpreted at any time prior to the
Effective Date by written instrument duly authorized and executed by each
of the parties hereto; provided, however, that this Agreement may not be
amended after the action by shareholders of the Company in any respect that
would prejudice the economic interests of such Company shareholders, or any
of them, except as specifically provided herein or by like action of such
shareholders.
(b) If Zions Bancorp and the Company should mutually determine
(following receipt of advice of legal or other counsel) that it has become
inadvisable or inexpedient to effectuate the transactions contemplated by
this Agreement through means of a sequence of mergers such as is contem-
plated herein, then the parties hereto agree to effect such change in the
form of transaction as described especially in Sections 1.1 and 9.2 of this
Agreement by written instrument in amendment of this Agreement.
11. General Provisions.
11.1. Costs and Expenses.
(a) Allocation of Expenses. Except as provided in Section 10.3
and this Section, each party hereto shall pay its own fees and expenses,
including without limitation the fees and expenses of its own counsel and
its own accountants and tax advisers, incurred in connection with this
Agreement and the transactions contemplated thereby. For purposes of this
Section, (i) the cost of printing and delivering the proxy statement and
other material to be transmitted to shareholders of the Company shall be
deemed to be incurred on behalf of the Company, and (ii) the cost of
registering such stock under federal and state securities laws shall be
deemed to be incurred on behalf of Zions Bancorp.
(b) Fees of Exchange Agent. The reasonable fees and expenses
charged by the Exchange Agent in the discharge of its responsibilities
hereunder shall be divided equally between Zions Bancorp and the Company.
11.2. Mutual Cooperation; Access.
(a) Subject to the terms and conditions herein provided, each
party shall use its best efforts, and shall cooperate fully with the other
party, in carrying out the provisions of this Agreement and in making all
filings and obtaining all necessary governmental approvals, and shall
execute and deliver, or cause to be executed and delivered, such governmen-
tal notifications and additional documents and instruments and do or cause
to be done all additional things necessary, proper, or advisable under
applicable law to consummate and make effective the transactions contem-
plated hereby.
(b) Each party acknowledges to the other its understanding that
further investigation of it by the other party may be necessary that such
other party may more fully evaluate the merits of the transactions contem-
plated by this Agreement. To permit such investigation, and not in lieu or
prejudice of any other right conferred hereunder, each of the parties shall
afford to the other, and to the accountants, counsel, and other representa-
tives of the other, full access during normal business hours, during the
period prior to the Effective Date, to all of its properties, books, con-
tracts, commitments and records and, during such period, each shall furnish
promptly, or make available, to the other all information concerning its
business, properties and personnel as the other party may reasonably
request.
11.3. Form of Public Disclosures. Zions Bancorp and the Company
shall mutually agree in advance upon the form and substance of all public
disclosures concerning this Agreement and the transactions contemplated
hereby.
11.4. Confidentiality. Zions Bancorp and its subsidiaries and the
Company and the Bank shall use all information that each obtains from the
other pursuant to this Agreement solely for the effectuation of the trans-
actions contemplated by this Agreement or for other purposes consistent
with the intent of this Agreement. Neither Zions Bancorp, nor its subsid-
iaries, nor the Company nor the Bank shall use any of such information for
any other purpose, including, without limitation, the competitive detriment
of any party. Each of Zions Bancorp and its subsidiaries and the Company
and the Bank shall maintain as strictly confidential all information it
learns from the other and shall, at any time, upon the request of the
other, return promptly to it all documentation provided by it or made
available to third parties. Each of the parties may disclose such informa-
tion to its respective affiliates, counsel, accountants, tax advisers, and
consultants. The confidentiality agreement contained in this Section 11.4
shall remain operative and in full force and effect, and shall survive the
termination of this Agreement.
11.5. Claims of Brokers.
(a) The Company and the Bank shall indemnify, defend, and hold
Zions Bancorp and Zions Arizona harmless for, from, and against any claim,
suit, liability, fees or expenses (including, without limitation, attorn-
eys' fees and costs of court) arising out of any claim for brokerage
commissions, finder's fees, or similar compensation arising out of or due
to any act of the Company or the Bank in connection with the transactions
contemplated by this Agreement or based upon any agreement or arrangement
made by or on behalf of the Company or the Bank with respect to Zions
Bancorp or Zions Arizona.
(b) Zions Bancorp and Zions Arizona shall indemnify, defend, and
hold the Company and the Bank harmless for, from, and against any claim,
suit, liability, fees or expenses (including, without limitation, attorn-
eys' fees and costs of court) arising out of any claim for brokerage
commissions, finder's fees, or similar compensation arising out of or due
to any act of Zions Bancorp or Zions Arizona in connection with any of the
transactions contemplated by this Agreement or based upon any agreement or
arrangement made by or on behalf of Zions Bancorp or Zions Arizona with
respect to the Company or the Bank.
11.6. Information for Applications and Registration Statement.
(a) Each party represents and warrants that all information
concerning it which is included in any statement and application (including
the Registration Statement) made to any governmental agency in connection
with the transactions contemplated by this Agreement shall not, with
respect to such party, omit any material fact required to be stated therein
or necessary to make the statements made, in light of the circumstances
under which they were made, not misleading. The party so representing and
warranting will indemnify, defend, and hold harmless the other, each of its
directors and officers, each underwriter and each person, if any, who
controls the other within the meaning of the Securities Act, for, from and
against any and all losses, claims, suits, damages, expenses, or liabili-
ties to which any of them may become subject under applicable laws (includ-
ing, but not limited to, the Securities Act and the Exchange Act) and rules
and regulations thereunder and will reimburse them for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any actions whether or not resulting in liability, insofar as
such losses, claims, damages, expenses, liabilities, or actions arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in any such application or statement or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary in order to make
the statements therein not misleading, but only insofar as any such
statement or omission was made in reliance upon and in conformity with
information furnished in writing by the representing and warranting party
expressly for use therein. Each party agrees at any time upon the request
of the other to furnish to the other a written letter or statement confirm-
ing the accuracy of the information contained in any proxy statement,
registration statement, report, or other application or statement, and
confirming that the information contained in such document was furnished
expressly for use therein or, if such is not the case, indicating the
inaccuracies contained in such document or draft or indicating the informa-
tion not furnished expressly for use therein. The indemnity agreement
contained in this Section 11.6(a) shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of the
other party, and shall survive the termination of this Agreement or the
consummation of the transactions contemplated thereby.
(b) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement contained in Section 11.6(a)
of this Agreement is for any reason held by a court of competent jurisdic-
tion to be unenforceable as to any or all parties, then the parties in such
circumstances shall contribute to the aggregate losses, claims, damages and
liabilities (including any investigation, legal and other expenses incurred
in connection with, and any amounts paid in settlement of, any action, suit
or proceeding or any claims asserted) to which any party may be subject in
such proportion as the court of law determines based on the relative fault
of the parties.
11.7. Standard of Materiality.
(a) For purposes of Sections 4, 6, and 7 of this Agreement,
the terms "material" and "materially," when used with reference to items
normally expressed in dollars, shall be deemed to refer to amounts individ-
ually and in the aggregate in excess of 3 percent of the shareholders'
equity of the Company as of September 30, 1993, as determined in accordance
with generally accepted accounting principles.
(b) For purposes of Sections 5 and 8 of this Agreement, the
terms "material" and "materially," when used with reference to items
normally expressed in dollars, shall be deemed to refer to amounts individ-
ually and in the aggregate in excess of 3 percent of the shareholders'
equity of Zions Bancorp as of September 30, 1993, as determined in accor-
dance with generally accepted accounting principles.
(c) For other purposes and, notwithstanding subsections (a)
and (b) of this section 11.7, when used anywhere in this Agreement with
explicit reference to any of the federal securities laws or to the Regis-
tration Statement, the terms "material" and "materially" shall be construed
and understood in accordance with standards of materiality as judicially
determined under the federal securities laws.
11.8. Covenant of Zions Bancorp. From the date hereof to the
Effective Date, except as otherwise contemplated by this Agreement, or
except with the prior written consent of the Company, which consent shall
not unreasonably be withheld, Zions Bancorp shall, contemporaneously with
the filing with the SEC of any current report on Form 8-K pursuant to
section 13 of the Securities Exchange Act of 1934, describing or relating
to any material adverse change in Zions Bancorp, deliver a copy of such
report to the Company.
11.9. Counterparts. This Agreement may be executed in two or more
counterparts each of which shall be deemed to constitute an original, but
such counterparts together shall be deemed to be one and the same instru-
ment and to become effective when one or more counterparts have been signed
by each of the parties hereto. It shall not be necessary in making proof
of this Agreement or any counterpart hereof to produce or account for the
other counterpart.
11.10. Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto with respect to their commitments to
each other and their undertakings vis-a-vis each other on the subject
matter hereof. Any previous agreements or understandings between the
parties regarding the subject matter hereof are merged into and superseded
by this Agreement. Nothing in this Agreement express or implied is
intended or shall be construed to confer upon or to give any person, other
than Zions Bancorp and Zions Arizona and the Company and the Bank and their
respective shareholders, any rights or remedies under or by reason of this
Agreement.
11.11. Survival of Representations, Warranties, and Covenants. The
respective representations, warranties, and covenants of each party to this
Agreement are hereby declared by the other parties to have been relied on
by such other parties and shall survive the Effective Date. Each party
shall be deemed to have relied upon each and every representation and
warranty of the other parties regardless of any investigation heretofore or
hereafter made by or on behalf of such party.
11.12. Section Headings. The section and subsection headings herein
have been inserted for convenience of reference only and shall in no way
modify or restrict any of the terms or provisions hereof. Any reference to
a "person" herein shall include an individual, firm, corporation, partner-
ship, trust, government or political subdivision or agency or instrumental-
ity thereof, association, unincorporated organization, or any other entity.
11.13. Notices. All notices, consents, waivers, or other communica-
tions which are required or permitted hereunder shall be in writing and
deemed to have been duly given if delivered personally or by messenger,
transmitted by telex or telegram, by express courier, or sent by registered
or certified mail, return receipt requested, postage prepaid. All communi-
cations shall be addressed to the appropriate address of each party as
follows:
If to Zions Bancorp or Zions Arizona:
Zions Bancorporation
1380 Kennecott Building
Salt Lake City, Utah 84133
Attention: Mr. Harris H. Simmons
President and Chief Executive Officer
With a required copy to:
Brian D. Alprin, Esq.
Metzger, Hollis, Gordon & Mortimer
1275 K Street, N.W., Suite 1000
Washington, D. C. 20005
<PAGE>
If to the Company or the Bank:
Rio Salado Bancorp
1400 E. Southern Avenue
Tempe, Arizona 85282
Attention: Mr. Elden G. Barmore
President and Chief Executive Officer
With a required copy to:
Sam P. Applewhite, III, Esq.
Ryley, Carlock & Applewhite, Professional Association
101 North First Avenue, Suite 2700
Phoenix, Arizona 85003-1973
All such notices shall be deemed to have been given on the
date delivered, transmitted, or mailed in the manner provided above.
11.14. Choice of Law and Venue. This Agreement shall be
governed by, construed, and enforced in accordance with the laws of the
State of Utah, without giving effect to the principles of conflict of law
thereof. The parties agree that any suit or action arising out of this
Agreement may be brought in Salt Lake County, Utah, and consent to personal
jurisdiction in such venue for such a proceeding. Nothing in this Section
11.14 shall impair the rights of a party to a proceeding in a court of the
State of Utah to remove the action to a federal court seated in Utah or to
initiate an action or suit in any other forum in which personal jurisdic-
tion and venue may lie.
11.15. Binding Agreement. This Agreement shall be binding
upon the parties and their respective successors and assigns. Without
limitation, the rights, responsibilities and obligations of the parties and
their respective successors and assigns shall survive the merger of
National Bank of Arizona, Tucson, Arizona, with and into Zions Arizona,
with the entity resulting from such merger to be considered the same party
as Zions Arizona.
[the remainder of this page is intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agree-
ment as of the date first above written.
[SEAL] ZIONS BANCORPORATION
Attest: GARY L. ANDERSON By: HARRIS H. SIMMONS
Gary L. Anderson Harris H. Simmons
Secretary President and Chief Executive
Officer
[SEAL]
ZIONS FIRST NATIONAL BANK OF
ARIZONA
Attest: GARY L. ANDERSON By: ROY W. SIMMONS
Roy W. Simmons
Chairman
[SEAL]
RIO SALADO BANCORP
Attest: DAVID G. FISCHER By: ELDEN G. BARMORE
[ ] Elden G. Barmore
Asst. Secretary President and Chief Executive
Officer
[SEAL]
RIO SALADO BANK
Attest: DAVID G. FISCHER By: ELDEN G. BARMORE
[ ] Elden G. Barmore
Asst. Secretary President and Chief Executive
Officer
[SEAL]<PAGE>
)
State of Arizona )
) ss.
County of Maricopa )
)
On this 18th Day of November, 1993, before me personally appeared
Harris H. Simmons, to me known to be the President and Chief Executive
Officer of Zions Bancorporation, and acknowledged said instrument to be the
free and voluntary act and deed of said corporation, for the uses and
purposes therein mentioned, and on oath stated that he was authorized to
execute said instrument and that the seal affixed is the corporate seal of
said corporation.
In Witness Whereof I have hereunto set my hand and affixed my official
seal the day and year first above written.
ANNA L. STEPH
Notary Public
<PAGE>
)
State of Utah )
) ss.
County of Salt Lake )
)
On this 22nd day of November, 1993, before me personally appeared
Roy W. Simmons, to me known to be the Chairman of Zions First National Bank
of Arizona, and acknowledged said instrument to be the free and voluntary
act and deed of said corporation, for the uses and purposes therein
mentioned, and on oath stated that he was authorized to execute said
instrument and that the seal affixed is the corporate seal of said corpora-
tion.
In Witness Whereof I have hereunto set my hand and affixed my official
seal the day and year first above written.
JODY L. BOWLES
Notary Public
<PAGE>
)
State of Arizona )
) ss.
County of Maricopa )
)
On this 18th day of November, 1993, before me personally appeared
Elden G. Barmore, to me known to be the President and Chief Executive
Officer of Rio Salado Bancorp, and acknowledged said instrument to be the
free and voluntary act and deed of said corporation, for the uses and
purposes therein mentioned, and on oath stated that he was authorized to
execute said instrument and that the seal affixed is the corporate seal of
said corporation.
In Witness Whereof I have hereunto set my hand and affixed my official
seal the day and year first above written.
ANNA L. STEPH
Notary Public
<PAGE>
)
State of Arizona )
) ss.
County of Maricopa )
)
On this 18th day of November, 1993, before me personally appeared
Elden G. Barmore, to me known to be the President and Chief Executive
Officer of Rio Salado Bank, and acknowledged said instrument to be the free
and voluntary act and deed of said corporation, for the uses and purposes
therein mentioned, and on oath stated that he was authorized to execute
said instrument and that the seal affixed is the corporate seal of said
corporation.
In Witness Whereof I have hereunto set my hand and affixed my official
seal the day and year first above written.
ANNA L. STEPH
Notary Public
<PAGE>
The undersigned members of the Board of Directors of RIO
SALADO BANCORP (the "Company"), acknowledging that Zions Bancorporation
("Zions Bancorp") has relied upon the action heretofore taken by the board
of directors in entering into the Agreement, and has required the same as a
prerequisite to Zions Bancorp's execution of the Agreement, do individually
and as a group agree, subject to their fiduciary duties to shareholders, to
support the Agreement and to recommend its adoption by the other sharehold-
ers of the Company.
The undersigned do hereby, individually and as a group, until
the Effective Date or termination of the Agreement, further agree to
refrain from soliciting or, subject to their fiduciary duties to sharehold-
ers, negotiating or accepting any offer of merger, consolidation, or
acquisition of any of the shares or all or substantially all of the assets
of the Company or the Bank.
JERRY C. VAUGHN ELDEN G. BARMORE
H. FEARON FRANCIS KELLER
R. O. FLYNN O. C. ROBERTS
RAYMOND C. BOLES GLYNN GILCREASE
NICO MORIC
ROBERT O. CUMMINS
<PAGE>
EXHIBIT 2.2
FIRST AMENDMENT TO
AGREEMENT AND PLAN OF REORGANIZATION
This FIRST AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION
("First Amendment") made as of the 24th day of January, 1994,
between ZIONS BANCORPORATION ("Zions Bancorp"), a Utah corpora-
tion having its principal office in Salt Lake City, Utah, NATION-
AL BANK OF ARIZONA ("Zions Arizona"), a national banking associa-
tion having its head office in Tucson, Arizona, and known until
January 14, 1994 as "Zions First National Bank of Arizona" with
its head office then located in Mesa, Arizona; RIO SALADO BANCORP
(the "Company"), an Arizona corporation having its principal
office in Tempe, Arizona, and RIO SALADO BANK, an Arizona bank
corporation having its head office in Tempe, Arizona (the "Bank")
W I T N E S S E T H T H A T :
WHEREAS, Zions Bancorp, Zions Arizona, the Company, and the
Bank (collectively, the "Parties") entered into an Agreement and
Plan of Reorganization dated as of November 18, 1993 (the "Reor-
ganization Agreement"), pursuant to which the Parties agreed to
the affiliation of the Company and the Bank with Zions Bancorp
and Zions Arizona; and
WHEREAS, the Reorganization Agreement contemplated the
merger (the "Holding Company Merger") of the Company with and
into a corporation to be organized by Zions Bancorp under the
laws of the State of Arizona ("ZAZMAC, Inc."), and the merger
(the "Intermediate Merger") of ZAZMAC, Inc. with and into Zions
Bancorp, and the merger (the "Bank Merger") of the Bank with and
into Zions Arizona, all in a transaction to be accounted for as a
pooling of interests (hereinafter the "Transaction"); and
WHEREAS, Zions Bancorp has concluded that the Transaction
cannot be accounted for as a pooling of interests; and
WHEREAS, the Parties have determined that they wish to
pursue the Transaction even if it is accounted for as a purchase;
NOW, THEREFORE, in consideration of these premises and the
mutual agreements hereinafter set forth and those set forth in
the Reorganization Agreement, the Parties agree to amend, and
accordingly do hereby amend, the Reorganization Agreement in the
manner set forth below:
<PAGE>
A. Section 3.4 of the Reorganization Agreement, "Account-
ing Treatment," is deleted and replaced by the following place
marker:
3.4. [reserved.]
B. Section 7.7 of the Reorganization Agreement, "Aff-
iliates' Agreements," is amended to read as follows:
7.7. Affiliates' Agreements. The Company will
furnish to Zions Bancorp a list of all persons known to
the Company who at the date of the Company's special
meeting of shareholders to vote upon the transactions
contemplated by this Agreement may be deemed to be
"affiliates" of the Company within the meaning of Rule
145 under the 1933 Act. The Company will use its best
efforts to cause each such "affiliate" of the Company
to deliver to Zions Bancorp not later than thirty days
prior to the Effective Date a written agreement provid-
ing that such person will not sell, pledge, transfer or
otherwise dispose of the Company Merger Shares except
in compliance with the applicable provisions of the
1933 Act and the rules and regulations thereunder.
C. This First Amendment may be executed in two or more
counterparts each of which shall be deemed to constitute an
original, but such counterparts together shall be deemed to be
one and the same instrument and to become effective when one or
more counterparts have been signed by each of the Parties. It
shall not be necessary in making proof of this First Amendment or
any counterpart hereof to produce or account for the other
counterpart.
D. This First Amendment shall be governed by, construed,
and enforced in accordance with the laws of the State of Utah,
without giving effect to the principles of conflict of law
thereof.
E. This First Amendment shall be binding upon the parties
and their respective successors and assigns.
[the remainder of this page is intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this First
Amendment as of the date first above written.
[SEAL] ZIONS BANCORPORATION
Attest: /s/Gary L. Anderson By: /s/Harris H. Simmons
Gary L. Anderson Harris H. Simmons
Secretary President and Chief Executive
Officer
[SEAL]
NATIONAL BANK OF ARIZONA
Attest: /s/Hugh M. Caldwell, Jr. By: /s/John J. Gisi
Hugh M. Caldwell, Jr. John J. Gisi
Secretary Chairman and Chief
Executive Officer
[SEAL]
RIO SALADO BANCORP
Attest: /s/David G. Fischer By: /s/Elden G. Barmore
David G. Fischer Elden G. Barmore
Assistant Secretary President and Chief Executive
Officer
[SEAL]
RIO SALADO BANK
Attest: /s/David G. Fischer By: /s/Elden G. Barmore
David G. Fischer Elden G. Barmore
Assistant Secretary President and Chief Executive
Officer
[SEAL]
<PAGE>
EXHIBIT 5
Metzger, Hollis, Gordon & Mortimer
1275 K Street, N.W., Suite 1000
Washington, D.C. 20005
(202) 842-1600
January 24, 1994
Zions Bancorporation
1380 Kennecott Building
Salt Lake City, Utah 84133
Gentlemen:
We have acted as counsel to Zions Bancorporation ("Zions") in
connection with the Agreement and Plan of Reorganization among Rio
Salado Bancorp, Inc. ("Rio Salado"), Rio Salado Bank (the "Bank"),
Zions, and Zions First National Bank of Arizona ("Zions Arizona"), dated
November 18, 1993 and a related Plan of Merger between Rio Salado and
ZAZMAC, Inc. ("ZAZMAC"), a wholly-owned subsidiary of Zions, and an
Agreement to Merge between the Bank and Zions Arizona (collectively, the
"Plan of Reorganization"), whereby Rio Salado will be merged into
ZAZMAC, with ZAZMAC being the surviving corporation, and whereby the
Bank will be merged into Zions Arizona (collectively, the "Rio Salado
Merger"). At the time the Rio Salado Merger becomes effective, all of
the issued and outstanding shares of common stock, no par value, of Rio
Salado ("Rio Salado Common Stock"), other than shares as to which the
holders exercise dissenters' rights, will be exchanged for shares of
common stock, no par value, of Zions ("Zions Common Stock").
We are also acting as counsel to Zions in connection with the
Registration Statement on Form S-4 (the "Registration Statement") to be
filed by Zions with the Securities and Exchange Commission for the
purpose of registering under the Securities Act of 1933, as amended, the
aggregate maximum of 400,000 shares of Zions Common Stock into which
outstanding Rio Salado Common Stock may be converted upon effectiveness
of the Rio Salado Merger. This opinion is being furnished for the
purpose of being filed as an exhibit to the Registration Statement.
In connection with this opinion, we have examined, among other
things:
(1) an executed copy of the Plan of Reorganization;
(2) a copy certified to our satisfaction of the Restated
Articles of Incorporation of Zions as in effect on the
date hereof;
<PAGE>
(3) copies certified to our satisfaction of resolutions
adopted by the Board of Directors of Zions on November 5,
1993, including resolutions approving the Plan of
Reorganization; and
(4) such other documents, corporate proceedings, and statutes
as we considered necessary to enable us to furnish this
opinion.
We have assumed for the purpose of this opinion that:
(1) the Plan of Reorganization has been duly and validly
authorized, executed, and delivered by Rio Salado; and
(2) the Rio Salado Merger will be consummated in accordance
with the terms of the Plan of Reorganization.
Based upon the foregoing, we are of the opinion that the
shares of Zions Common Stock into which the outstanding Rio Salado
Common Stock will be converted in the Rio Salado Merger will, at the
time such Merger becomes effective, be duly authorized, validly issued,
fully paid and nonassessable shares of Zions Common Stock.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to us under the
caption "Legal Opinions" in Proxy Statement/Prospectus forming a part of
the Registration Statement.
Very truly yours,
METZGER, HOLLIS, GORDON & MORTIMER
By /S/ Laurence S. Lese
Laurence S. Lese
LSL/sls
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Zions Bancorporation:
We consent to the use of our report dated January 25, 1993, with respect
to the consolidated financial statements, and to the use of our report
dated January 14, 1994, with respect to the supplemental consolidated
financial statements, of Zions Bancorporation as of December 31, 1992 and
1991, and for each of the years in the three-year period ended December 31,
1992 incorporated herein by reference/included herein, and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG PEAT MARWICK
KPMG PEAT MARWICK
Salt Lake City, Utah
January 24, 1994
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Zions Bancorporation:
We consent to the use of our report dated January 27, 1993, with respect
to the consolidated financial statements of Discount Corporation of New
York as of December 31, 1992 and 1991, and for each of the years in the
three-year period ended December 31, 1992 incorporated herein by
reference, and to the reference to our firm under the heading "Experts"
in the prospectus.
/s/ KPMG PEAT MARWICK
KPMG PEAT MARWICK
New York, New York
January 24, 1994
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
National Bancorp of Arizona Inc.:
We consent to the use of our report dated February 5, 1993, except for
Note 16 which is as of May 25, 1993, with respect to the consolidated
financial statements of National Bancorp of Arizona Inc. as of December
31, 1992 and 1991, and for each of the years in the three-year period
ended December 31, 1992 incorporated herein by reference, and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG PEAT MARWICK
KPMG PEAT MARWICK
Tucson, Arizona
January 24, 1994
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Rio Salado Bancorp, Inc.:
We consent to the use of our report dated January 22, 1993, with respect
to the consolidated financial statements of Rio Salado Bancorp, Inc. as
of December 31, 1992 and 1991, and for each of the years in the three-
year period ended December 31, 1992 included herein, and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ MCGLADREY & PULLEN
MCGLADREY & PULLEN
Phoenix, Arizona
January 24, 1994
<PAGE>
EXHIBIT 23.6
We hereby consent to the filing of our tax opinion as set
forth in Appendix B to the Proxy Statement/Prospectus forming a part of
the Registration Statement.
/s/ KPMG PEAT MARWICK
KPMG PEAT MARWICK
January 24, 1994
<PAGE>
EXHIBIT 99.1
February ___, 1994
Shareholders of Rio Salado
Dear Shareholder:
A Special Meeting of the Shareholders of Rio Salado
Bancorp ("Rio Salado") has been called for 10:00 a.m., Mountain Standard
Time, on March ___, 1994, at the offices of Rio Salado located at 1400
East Southern Avenue, Tempe, Arizona.
The purpose of the Special Meeting is to consider and act
upon an Agreement and Plan of Reorganization (the "Plan of
Reorganization") among Rio Salado, Zions Bancorporation ("Zions"), Zions
First National Bank of Arizona ("Zions Arizona") and Rio Salado Bank
(the "Bank").
If the Plan of Reorganization is approved, and all
conditions are met, the Plan of Reorganization will result in the merger
of Rio Salado into Zions and the merger of the Bank into Zions Arizona.
Upon consummation of the Plan of Reorganization, each holder of Rio
Salado's Common Stock will, upon surrender of the shareholder's stock
certificate, be entitled to receive in exchange for each share held as
of the effective date of the Plan of Reorganization, that number of
shares of Zions Common Stock calculated by dividing the $12,500,000
purchase price by the average closing price (as defined in the Plan of
Reorganization) of Zions Common Stock and by further dividing the number
so reached by the number of shares of Rio Salado Common Stock issued and
outstanding as of the effective date of the merger. No fractional
shares of Zions Common Stock will be issued. Instead, cash in an amount
equal to the fractional part of a share multiplied by the average
closing price of Zions Common Stock (as determined under the Plan of
Reorganization) will be paid to Rio Salado shareholders.
For example, if the Plan of Reorganization had been
consummated as of January 31, 1994, and the average closing price of
Zions Common Stock was $ _____, the merger would have resulted in an
exchange ratio of ___ shares of Zions Common Stock for each share of Rio
Salado Common Stock, or an equivalent consideration to holders of Rio
Salado's Common Stock of $ ____ per share.
The accompanying Proxy Statement details the terms of the
proposed Plan of Reorganization and merger and provides information
concerning Rio Salado, Zions, and the Plan of Reorganization. The Proxy
Statement contains important information necessary for you to make a
<PAGE>
decision about how to vote at the Special Meeting. Please read it
carefully.
The affirmative vote of the holders of a two-thirds
majority of the issued and outstanding shares of Rio Salado is required
for approval of the Plan of Reorganization. Therefore, it is important
that you vote. The failure to vote will have the same effect as a vote
against the merger. Consequently, please mark, sign, date and return
the enclosed proxy as soon as possible.
Any shareholder may attend the Special Meeting and vote
in person if he desires.
Consummation of the Plan of Reorganization and merger is
subject to approval by federal and state bank regulatory agencies and to
certain other conditions, including the maintenance of Rio Salado's
financial condition. If approved, the Plan of Reorganization will most
likely be consummated sometime in the second quarter of 1994, assuming
that all banking regulatory approvals are received timely.
A majority of the Board of Directors has approved the
Plan of Reorganization and determined that the merger is in the best
interests of Rio Salado, its shareholders, employees and the community
it serves. The Board of Directors of Rio Salado has also received the
opinion of Alex Sheshunoff & Co. Investment Banking, that the Plan of
Reorganization, as of November 15, 1993, is fair to shareholders of Rio
Salado from a financial point of view. A majority of the Board of
Directors recommends that you vote to approve to Plan of Reorganization.
If the Plan of Reorganization is approved by the
shareholders, on or shortly after the effective date of the Plan of
Reorganization, Zions will send you instructions describing the
procedure to be followed to exchange your Rio Salado stock certificate
for common stock of Zions. Please do not send your certificates to the
Rio Salado prior to receiving these instructions.
Sincerely,
Chairman of the Board
Enclosures
<PAGE>
EXHIBIT 99.2
RIO SALADO BANCORP
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
A Special Meeting of shareholders of Rio Salado Bancorp
("Rio Salado") will be held at 10:00 a.m., Mountain Standard Time, on
March , 1994, at Rio Salado's offices at 1400 East Southern Avenue,
Tempe, Arizona, to consider and act upon an Agreement and Plan of
Reorganization dated as of November 18, 1993 (the "Plan of
Reorganization"), between Zions Bancorporation ("Zions"), Zions First
National Bank of Arizona ("Zions Arizona"), Rio Salado and Rio Salado
Bank (the "Bank"), which agreement provides for the merger of Rio Salado
into ZAZMAC, Inc., a wholly- owned subsidiary of Zions (and the
subsequent merger of ZAZMAC into Zions) and the merger of the Bank into
Zions Arizona.
Upon the consummation of the Plan of Reorganization, each
holder of shares of Rio Salado Common Stock will be entitled to receive,
in exchange for each share held as of the effective date of the Plan of
Reorganization, that number of shares of Zions Common Stock calculated
by dividing the $12,500,000 purchase price by the average closing price
(as defined in the Plan of Reorganization) of Zions Common Stock and by
further dividing the number so reached by the number of shares of Rio
Salado Common Stock that are issued and outstanding as of the effective
date of the merger.
The Board of Directors has set January 21, 1994, as the
record date for determining shareholders entitled to notice of and to
vote at the Special Meeting.
By order of the Board of Directors
Dated: February ___, 1994.
David Fischer,
Senior Vice President
and Assistant Secretary
Please mark, sign and return the enclosed proxy in the
envelope provided.
The date of this Proxy Statement is February ___, 1994.
<PAGE>
EXHIBIT 99.3
PROXY
SPECIAL MEETING OF SHAREHOLDERS
OF RIO SALADO BANCORP
MARCH ___, 1994
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints ,
and , and each of them, as
proxies of the undersigned to vote as designated below all shares of the
common capital stock of Rio Salado Bancorp (the "Rio Salado Common
Stock") that the undersigned held of record on January 21, 1994, which
the undersigned is entitled to vote, at the special meeting of
shareholders to be held March ___, 1994, or at any adjournment thereof,
for the purpose of considering and acting on the proposal to approve the
Agreement and Plan of Reorganization dated November 18, 1993 (the "Plan
of Reorganization"), among Zions Bancorporation ("Zions"), Zions First
National Bank of Arizona ("Zions Arizona"), Rio Salado Bancorp ("Rio
Salado") and Rio Salado Bank (the "Bank") which provides for the merger
of Rio Salado into ZAZMAC, Inc., a wholly owned subsidiary of Zions (and
the subsequent merger of ZAZMAC into Zions), the merger of the Bank into
Zions Arizona, and the conversion of each outstanding share of Rio
Salado Common Stock into the right to receive that number of shares of
Zions Common Stock calculated by dividing $12,500,000 by the average
closing price of Zions (as defined in the Plan of Reorganization) and by
further dividing the number so reached by the total number of shares of
Rio Salado Common Stock issued and outstanding as of the Effective Date
of the Plan of Reorganization. Each Proxy shall have full power of
substitution. The act by a majority of the Proxies or their substitutes
present at the meeting shall control; however, if only one proxy be
present, that one shall have all powers hereunder.
The Directors recommend a vote FOR Proposal:
1. The proxies are instructed to vote the Rio Salado
Common Stock as follows with regard to the approval of the Plan of
Reorganization.
[] FOR [] AGAINST [] ABSTAIN
2. The Proxies, in their discretion, are authorized to
vote on such other business as may properly come before the meeting.
<PAGE>
When properly completed, this proxy will be voted in the
manner directed herein by the undersigned. If no direction is given,
this proxy will be voted FOR the approval of the Plan of Reorganization.
(Each person whose name is on the Rio
Salado Common Stock certificate
should sign below in the same manner
in which such person's name appears.
If signing as a fiduciary, give
title.)
Signature
Printed Name
Dated:
Please date, sign,
and return promptly
