<PAGE>
May 3, 1995
Shareholders of First Western Bancorporation
Dear Shareholder:
A Special Meeting of the Shareholders of First Western
Bancorporation ("First Western") has been called for 10:30 a.m., local time, on
June 5, 1995, at the offices of First Western located at Main and Third South
Streets, Moab, Utah.
The purpose of the Special Meeting is to consider and act upon
an Agreement and Plan of Reorganization (the "Plan of Reorganization") among
First Western, Zions Bancorporation ("Zions"), Zions First National Bank ("Zions
Bank") and First Western National 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 First Western
into Zions with Zions being the surviving entity and the subsequent merger of
the Bank into Zions Bank with Zions Bank being the surviving entity. Upon
consummation of the Plan of Reorganization, each holder of First Western 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 Holding Company Purchase Price (as defined in the Plan of
Reorganization) 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 First Western 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 will be paid to First Western shareholders.
For example, assuming that the Plan of Reorganization had been
consummated as of April 28, 1995, that the average closing price of Zions Common
Stock had been $42.625, that the net undistributed income of the Bank had been
$716,403, and that the book value of First Western's net assets had been
$650,226, the merger would have resulted in an exchange ratio of 5.8757 shares
of Zions Common Stock for each share of First Western Common Stock, or an
equivalent consideration to holders of First Western Common Stock of $250.45 per
share.
The accompanying Proxy Statement details the terms of the
proposed Plan of Reorganization and merger and provides information concerning
First Western, Zions, Zions Bank, and the Bank and the Plan of Reorganization.
The Proxy Statement contains important information necessary for you to make a
decision about how to vote at the Special Meeting. Please read it carefully.
The affirmative vote of the holders of two-thirds of the
issued and outstanding shares of First Western 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 desired.
Consummation of the Plan of Reorganization and merger is
subject to approval by federal and state bank regulatory agencies and to certain
other conditions. If approved, the Plan of Reorganization will most likely be
consummated during the second quarter of 1995, assuming that all banking
regulatory approvals are received timely.
The Board of Directors has unanimously approved the Plan of
Reorganization and determined that the merger is in the best interests of First
Western, its shareholders, employees and the community it serves and is fair to
shareholders of First Western from a financial point of view. The Board of
Directors unanimously recommends that you vote to approve the Plan of
Reorganization.
<PAGE>
If the Plan of Reorganization is approved by the shareholders,
Zions on or shortly after the effective date of the Plan of Reorganization will
send you instructions describing the procedure to be followed to exchange your
First Western stock certificate for common stock of Zions. Please do not send
your certificates to the Zions or Zions Bank prior to receiving these
instructions.
Sincerely,
/s/ I.D. Nightingale
I.D. Nightingale
Chairman of the Board
<PAGE>
May 3, 1995
Shareholders of First Western National Bank
Dear Shareholder:
A Special Meeting of the Shareholders of First Western
National Bank (the "Bank") has been called for 11:00 a.m., local time, on June
5, 1995, at the offices of the Bank located at Main and Third South Streets,
Moab, Utah.
The purpose of the Special Meeting is to consider and act upon
an Agreement and Plan of Reorganization (the "Plan of Reorganization") among
First Western Bancorporation ("First Western"), Zions Bancorporation ("Zions"),
Zions First National Bank ("Zions Bank") and the Bank.
If the Plan of Reorganization is approved and all conditions
are met, the Plan of Reorganization will result in the merger of the Bank into
Zions Bank with Zions Bank being the surviving entity and the merger of First
Western into Zions with Zions being the surviving entity. Upon consummation of
the Plan of Reorganization, each holder (other than Zions) of Bank 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 $9,300,000 purchase price plus certain accretions (as described in
the Plan of Reorganization) 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 Bank 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 will be paid
to Bank shareholders.
For example, assuming that the Plan of Reorganization had been
consummated as of April 28, 1995, that the average closing price of Zions Common
Stock had been $42.625, and that the net undistributed income of the Bank had
been $716,403, the merger would have resulted in an exchange ratio of 3.9165
shares of Zions Common Stock for each share of Bank Common Stock (other than
shares held by Zions), or an equivalent consideration to holders of Bank Common
Stock (other than Zions) of $166.94 per share.
The accompanying Proxy Statement details the terms of the
proposed Plan of Reorganization and merger and provides information concerning
the Bank, First Western, Zions Bank, and Zions, and the Plan of Reorganization.
The Proxy Statement contains important information necessary for you to make a
decision about how to vote at the Special Meeting. Please read it carefully.
The affirmative vote of the holders of two-thirds of the
issued and outstanding shares of the Bank 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 desired.
<PAGE>
Shareholders of First Western
National Bank
May 3, 1995
Page 2
Consummation of the Plan of Reorganization and merger is
subject to approval by federal and state bank regulatory agencies and to certain
other conditions. If approved, the Plan of Reorganization will most likely be
consummated during the second quarter of 1995, assuming that all banking
regulatory approvals are received timely.
The Board of Directors has unanimously approved the Plan of
Reorganization and determined that the merger is in the best interests of the
Bank, its shareholders, employees and the community it serves and is fair to
shareholders of the Bank from a financial point of view. The Board of Directors
unanimously recommends that you vote to approve the Plan of Reorganization.
If the Plan of Reorganization is approved by the shareholders,
Zions on or shortly after the effective date of the Plan of Reorganization will
send you instructions describing the procedure to be followed to exchange your
Bank stock certificate for common stock of Zions. Please do not send your
certificates to Zions or Zions Bank prior to receiving these instructions.
Sincerely,
/s/ I.D. Nightingale
I.D. Nightingale
Chairman of the Board
<PAGE>
FIRST WESTERN BANCORPORATION
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
A Special Meeting of shareholders of First Western
Bancorporation ("First Western") will be held at 10:30 a.m., local time, on June
5, 1995, at First Western's offices at Main and Third South Streets, Moab, Utah,
to consider and act upon an Agreement and Plan of Reorganization dated as of
October 24, 1994 as amended as of January 4, 1995 (the "Plan of
Reorganization"), among Zions Bancorporation ("Zions"), Zions First National
Bank ("Zions Bank"), First Western and First Western National Bank (the "Bank"),
which agreement provides for the merger of First Western into Zions with Zions
being the surviving entity, followed by the merger of the Bank into Zions Bank
with Zions Bank being the surviving entity.
Upon the consummation of the Plan of Reorganization, each
holder of shares of First Western 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 Holding Company Purchase Price (as defined in the Plan of
Reorganization) 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 First Western Common Stock that are issued
and outstanding as of the effective date of the merger.
The Board of Directors has set April 28, 1995, as the record
date for determining shareholders entitled to notice of and to vote at the
Special Meeting.
First Western shareholders are entitled to assert dissenters'
rights under Utah law. Pursuant to Section 16-10a-1301 et seq. of the Utah
Revised Business Corporation Act, dissenting shareholders are entitled to
payment in cash of the value of those shares for which dissenters' rights are
perfected in accordance with the procedures established by the Utah Revised
Business Corporation Act.
By order of the Board of Directors
Dated: May 3, 1995.
/s/ I.D. Nightingale
-----------------------------------------
I.D. Nightingale, Chairman of the Board
Please mark, sign and return the enclosed proxy in the
envelope provided.
<PAGE>
FIRST WESTERN NATIONAL BANK
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
A Special Meeting of shareholders of First Western National
Bank (the "Bank") will be held at 11:00 a.m., local time, on June 5, 1995, at
the Bank's offices at Main and Third South Streets, Moab, Utah, to consider and
act upon an Agreement and Plan of Reorganization dated as of October 24, 1994 as
amended as of January 4, 1995 (the "Plan of Reorganization"), among Zions
Bancorporation ("Zions"), Zions First National Bank ("Zions Bank"), First
Western Bancorporation ("First Western") and the Bank, which agreement provides
for the merger of the Bank into Zions Bank with Zions Bank being the surviving
entity and the merger of First Western into Zions with Zions being the surviving
entity.
Upon the consummation of the Plan of Reorganization, each
holder (other than Zions) of shares of Bank 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 $9,300,000 purchase price plus certain accretions (as described in
the Plan of Reorganization) 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 Bank Common Stock that are issued and
outstanding as of the effective date of the merger.
The Board of Directors has set April 28, 1995, as the record
date for determining shareholders entitled to notice of and to vote at the
Special Meeting.
Bank shareholders are entitled to assert dissenters' rights under
Federal law. Pursuant to the National Bank Act, 12 U.S.C. section 215a(b),
dissenting shareholders are entitled to payment in cash of the value of those
shares for which dissenters' rights are perfected in accordance with the
procedures established by the National Bank Act.
By order of the Board of Directors
Dated: May 3, 1995.
/s/ I.D. Nightingale
----------------------------------------
I.D. Nightingale, Chairman of the Board
Please mark, sign and return the enclosed proxy in the
envelope provided.
<PAGE>
Joint Proxy Statement/Prospectus
FIRST WESTERN BANCORPORATION,
FIRST WESTERN NATIONAL BANK
and
ZIONS BANCORPORATION
This Joint Proxy Statement/Prospectus is being furnished to the
shareholders of First Western Bancorporation ("First Western"), a Utah
corporation, and First Western National Bank (the "Bank"), a national banking
association, in connection with the solicitation of proxies by their respective
Boards of Directors for use at Special Meetings of Shareholders of First Western
and the Bank, each to be held on June 5, 1995 (each a "Special Meeting").
The purpose of the First Western Special Meeting is to consider a proposed
corporate reorganization (the "Holding Company Reorganization") whereby First
Western will be merged into Zions Bancorporation ("Zions") with Zions being the
surviving corporation. The purpose of the Bank Special Meeting is to consider a
proposed corporate reorganization (the "Bank Reorganization") whereby the Bank
will be merged into Zions First National Bank ("Zions Bank"), a wholly-owned
subsidiary (except for directors' qualifying shares) of Zions, with Zions Bank
being the surviving corporation. The Bank Reorganization will occur following
the Holding Company Reorganization. If either the Holding Company Reorganization
or the Bank Reorganization is not consummated for any reason, the other
Reorganization will not be consummated. First Western owns approximately 93.5%
of the issued and outstanding shares of Bank Common Stock, and I.D. Nightingale,
chairman and president of First Western and the Bank, and a partnership of which
he is a general partner own approximately 90.81% of the issued and outstanding
shares of First Western Common Stock. Consequently, approval of the Bank
Reorganization and the Holding Company Reorganization is assured.
Upon consummation of the Reorganizations, all outstanding shares of
First Western common stock (the "First Western Common Stock") will be cancelled
and will be converted into the right to receive that number of shares of Zions
common stock ("Zions Common Stock") calculated by dividing the Holding Company
Purchase Price, as defined, 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 First Western Common Stock immediately prior to the
effective date of the Reorganization; all outstanding shares of Bank common
stock ("Bank Common Stock"), except shares owned by Zions, will be cancelled and
will be converted into the right to receive that number of shares of Zions
Common Stock calculated by dividing the Bank Purchase Price, as defined, 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 Bank
Common Stock immediately prior to the effective date of the Reorganization.
Since the Holding Company Reorganization will precede the Bank Reorganization,
Zions at the time of closing of the Bank Reorganization will be the owner of all
Bank Common Stock previously owned by First Western; the Plan of Reorganization
provides that all Bank shareholders other than Zions will receive their pro rata
share of the Bank Purchase Price. At April 28, 1995, the closing price of Zions
Common Stock was $42.625 per share, First Western had issued and outstanding
39,988 shares of its Common Stock, and the Bank had issued and outstanding
60,000 shares of its Common Stock. If the Reorganizations had been consummated
as of that date and assuming that the Average Closing Price of Zions Common
Stock had been $42.625 and certain accretions had been $1,366,629, shareholders
of First Western would have received 5.8757 shares of Zions Common Stock for
each share of First Western Common Stock, and shareholders of the Bank (other
than Zions) would have received 3.9165 shares of Zions Common Stock for each
share of Bank Common Stock.
<PAGE>
The Zions Common Stock to be distributed to First Western and Bank
shareholders will be registered with the Securities and Exchange Commission and
for all shareholders, other than shareholders who are affiliates of First
Western or the Bank or who become affiliates of Zions, will be immediately
tradable. See "Plan of Reorganization--Conversion of First Western and Bank
Shares." Zions has filed this Joint 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 shares of Zions Common Stock, which
will be issued in the Reorganizations to the shareholders of First Western and
the Bank.
--------------------
FOR THE ACTIONS OF THE SHAREHOLDERS TO BE EFFECTIVE, HOLDERS OF
TWO-THIRDS OF THE ISSUED AND OUTSTANDING SHARES OF COMMON STOCK OF FIRST WESTERN
AND HOLDERS OF TWO-THIRDS OF THE ISSUED AND OUTSTANDING SHARES OF COMMON STOCK
OF THE BANK MUST VOTE IN FAVOR OF THE RESPECTIVE REORGANIZATION. CONSUMMATION OF
THE REORGANIZATIONS WILL REQUIRE APPROVAL OF EACH RESPECTIVE REORGANIZATION BY
THE RESPECTIVE SHAREHOLDERS OF FIRST WESTERN AND THE BANK BEFORE THE
REORGANIZATIONS WILL BE IMPLEMENTED. THE REORGANIZATIONS MUST ALSO BE APPROVED
BY FEDERAL AND STATE BANKING REGULATORS. REGULATORY APPROVALS HAVE BEEN
OBTAINED.
--------------------
THE SHARES OF ZIONS COMMON STOCK TO BE ISSUED IN THE REORGANIZATIONS
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 Joint Proxy Statement/Prospectus, and, if
given or made, any such information or representation should not be relied upon
as having been authorized by Zions, First Western or the Bank. This Joint 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 Joint 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 Joint Proxy Statement/Prospectus is April 25, 1995.
<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 Reorganizations. As permitted by the rules and regulations
of the SEC, this Joint Proxy Statement/Prospectus omits certain information,
exhibits and undertakings contained in the Registration Statement. The
statements contained in this Joint 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.; 1801 California Street, Suite 4800, Denver, Colorado; and 500
Key Bank Tower, Suite 500, 50 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. First Western and the Bank are
not subject to the Exchange Act and therefore make no filings with a
governmental agency pursuant to that Act.
This Joint Proxy Statement/Prospectus incorporates by reference certain
documents relating to Zions which are not presented herein or delivered
herewith. See "Zions Documents Incorporated by Reference." Copies of such
documents are available upon request and without charge to any person to whom
this Joint 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 May 26, 1995.
<PAGE>
FIRST WESTERN BANCORPORATION,
FIRST WESTERN NATIONAL BANK
and
ZIONS BANCORPORATION
---------------
JOINT PROXY STATEMENT/PROSPECTUS
---------------
TABLE OF CONTENTS
Page
SUMMARY .................................................................... 1
INTRODUCTION................................................................. 10
Record Date; Voting Rights.......................................... 19
Purpose of the Special Meetings..................................... 20
Voting and Revocation of Proxies.................................... 22
Solicitation of Proxies............................................. 22
PLAN OF REORGANIZATION....................................................... 23
The Reorganizations................................................. 23
Purchase Price...................................................... 24
Background of and Reasons for the Reorganizations................... 27
Voting Agreements................................................... 30
Required Vote; Management Recommendation............................ 31
Conversion of First Western and Bank Shares......................... 32
Tax Consequences.................................................... 35
Interests of Certain Persons in the Transactions.................... 38
Stock Options....................................................... 39
Inconsistent Activities............................................. 39
Conduct of Business Pending the Reorganizations..................... 40
Conditions to the Reorganizations................................... 41
Representations and Warranties...................................... 43
Amendment and Waiver................................................ 44
Authorized Termination and Damages for Breach....................... 45
Dissenters' Rights of First Western and Bank Shareholders........... 46
Restrictions on Resales by First Western and Bank Affiliates........ 52
Expenses ........................................................... 53
Government Approvals................................................ 53
Effective Date of the Reorganizations............................... 54
PRO FORMA COMBINED FINANCIAL INFORMATION..................................... 55
SUPERVISION AND REGULATION................................................... 56
Zions ........................................................... 56
Regulatory Capital Requirements..................................... 59
Other Regulations................................................... 67
Deposit Insurance Assessments....................................... 72
Interstate Banking.................................................. 74
Zions Bank.......................................................... 76
MONETARY POLICY.............................................................. 77
ZIONS BANCORPORATION SELECTED FINANCIAL DATA................................. 78
STOCK PRICES OF AND DIVIDENDS ON ZIONS COMMON STOCK.......................... 81
<PAGE>
PRINCIPAL HOLDERS OF ZIONS COMMON STOCK...................................... 82
ZIONS DOCUMENTS INCORPORATED BY REFERENCE.................................... 83
INFORMATION CONCERNING FIRST WESTERN AND THE BANK............................ 85
FIRST WESTERN BANCORPORATION SELECTED
CONSOLIDATED FINANCIAL DATA................................................ 85
STOCK PRICES OF AND DIVIDENDS ON FIRST WESTERN COMMON STOCK
AND BANK COMMON STOCK...................................................... 88
STOCKHOLDINGS OF PRINCIPAL OWNERS, DIRECTORS AND EXECUTIVE OFFICERS OF
FIRST WESTERN AND THE BANK................................................. 90
FIRST WESTERN BANCORPORATION CONSOLIDATED FINANCIAL STATEMENTS............... 93
Independent Auditors' Report........................................ 96
Consolidated Financial Statements:
Consolidated Balance Sheets at December 31, 1994 and 1993...... 97
Consolidated Statements of Income for the
Years Ended December 31, 1994, 1993 and 1992................ 99
Consolidated Statements of Changes in Stockholders' Equity
for the Years Ended December 31, 1994, 1993 and 1992........101
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1993 and 1992............................102
Notes to Consolidated Financial Statements.....................105
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THREE-YEAR PERIOD ENDED DECEMBER 31, 1994............125
STATISTICAL INFORMATION AND ANALYSIS.........................................132
COMPARISON OF ZIONS COMMON STOCK, FIRST WESTERN COMMON STOCK AND BANK
COMMON STOCK........................................................141
LEGAL OPINIONS...............................................................151
EXPERTS ....................................................................151
OTHER MATTERS................................................................151
APPENDICES:
A. Statutory Provisions Concerning Dissenters' Rights of First Western
Shareholders
B. Statutory Provisions Concerning Dissenters' Rights of Bank Shareholders
C. Opinion of Cohne, Rappaport & Segal, P.C. as to Tax Matters
<PAGE>
SUMMARY
The following is a brief summary of certain information which may also
be contained elsewhere in this Joint 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 Joint 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 (the "Bank Holding
Company Act"), is organized under the laws of Utah, and is 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 conducts its banking operations through
Zions First National Bank, Salt Lake City, Utah, Nevada State Bank, Las Vegas,
Nevada, and National Bank of Arizona, Tucson, Arizona ("Zions Arizona"). Nevada
State Bank, with 19 offices in Nevada, is the sixth largest bank in Nevada.
Zions Arizona currently has ten offices in the metropolitan Phoenix area, three
offices in Tucson, and one office in Flagstaff, Arizona. At December 31, 1994,
Zions had total consolidated assets of $4.93 billion, deposits of $3.71 billion,
and shareholders' equity of $366 million. See "Zions Bancorporation Selected
Consolidated Financial Data."
Zions First National Bank ("Zions Bank") is a commercial bank organized
under the laws of the United States of America, with its main office located at
1380 Kennecott Building, Salt Lake City, Utah 84133 (telephone 801/524-4787).
Zions Bank, founded in 1873, is a wholly-owned (except for directors' qualifying
shares) subsidiary of Zions and as of December 31, 1994 had 83 offices located
throughout the state of Utah, plus one foreign office, for a total of 84 banking
offices, including its main office. Zions Bank is the second largest commercial
banking organization headquartered in the state of Utah. In addition to
providing financial services for businesses, including commercial loans,
leasing, cash management, payroll processing, lockbox, and customized draft
processing, Zions Bank also makes mortgage loans within its service area and
provides a wide range of personal banking services for individual customers,
including bankcard, student and other installment loans, home equity credit line
loans, checking and savings accounts, time certificates, trust services, and
safe deposit facilities. As of December 31, 1994, Zions Bank had total assets of
$3.74 billion, deposits of $2.66 billion, loans of $1.82 billion, and
shareholders' equity of $271 million.
First Western Bancorporation ("First Western") is a bank holding
company organized under the laws of the State of Utah and registered under the
Bank Holding Company Act. First Western's principal executive offices are
located at Main and Third South Streets, Moab, Utah 84532 and its telephone
number is 801/259-5961. First Western is primarily engaged in the commercial
banking business through its majority-owned subsidiary, First Western National
Bank. As of December 31, 1994, First Western had total assets of $37,210,101
(including loans, net of allowances, of $20,068,772), deposits of $30,071,839,
and shareholders' equity of $4,971,875.
First Western National Bank (the "Bank") is the primary subsidiary of
First Western and is a national banking association. The Bank currently operates
one branch in Moab, Grand County, Utah and one branch each in Monticello and
Blanding, San Juan County, Utah. The Bank's main office is located at Main and
Third South Streets, Moab, Utah 84532. Its telephone number is 801/259-5961. The
Bank was founded in 1961. In 1977, pursuant to a plan of reorganization, the
Bank became a majority-owned subsidiary of First Western and a majority of the
shares of the Bank were converted into shares of First Western. First Western
owns approximately 93.5% of the issued and outstanding shares of Bank Common
Stock. 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 Meetings
The Special Meeting of Shareholders of First Western (the "First
Western Special Meeting") will be held at 10:30 a.m. local time, on June 5, 1995
at First Western's principal executive offices, Main and Third South Streets,
Moab, Utah. Only holders of record of First Western Common Stock, at the close
of business on April 28, 1995 will be entitled to vote at the First Western
Special Meeting. At that date, 39,988 shares of First Western Common Stock were
outstanding, each share being entitled to one vote. There are seven shareholders
of record of First Western Common Stock. See "Introduction."
The Special Meeting of Shareholders of the Bank (the "Bank Special
Meeting") will be held at 11:00 a.m. local time, on June 5, 1995 at the Bank's
principal executive officers, Main and Third South Streets, Moab, Utah. Only
holders of record of Bank Common Stock at the close of business on April 28,
1995 will be entitled to vote at the Bank Special Meeting. At that date, 60,000
shares of Bank Common Stock were outstanding, each share being entitled to one
vote per share. There are 31 shareholders of record of Bank Common Stock. See
"Introduction."
Proposed Reorganizations
At the respective Special Meetings of First Western and the Bank, the
shareholders of First Western and the Bank will be asked to consider and approve
an Agreement and Plan of Reorganization among Zions, Zions Bank, First Western,
and the Bank, an Agreement of Merger between Zions and First Western, and an
Agreement of Merger between Zions Bank and the Bank. The aforementioned
agreements will be hereinafter referred to collectively as the "Plan of
Reorganization." Consummation of the Plan of Reorganization is conditional upon
both the approval by the First Western shareholders of the Plan of
Reorganization and the Agreement of Merger between Zions and First Western and
the approval by the Bank shareholders of the Plan of Reorganization and the
Agreement of Merger between Zions Bank and the Bank (collectively, the
"Reorganizations"). Because I. D. Nightingale and a partnership of which he is a
general partner own approximately 90.81% of the issued and outstanding shares of
First Western Common Stock and have agreed to vote such shares in favor of the
Reorganization and because First Western owns approximately 93.5% of the issued
and outstanding shares of Bank Common Stock, approval of the Plan of
Reorganization is assured.
The Plan of Reorganization provides for the merger of First Western
into Zions (the "Holding Company Reorganization"), whereby Zions will be the
surviving corporation and for the subsequent merger of the Bank into Zions Bank
(the "Bank Reorganization"), whereby Zions Bank will be the surviving bank. See
"Plan of Reorganization," below. As a result of the Holding Company
Reorganization, each outstanding share of First Western 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. As a result of the Bank Reorganization,
each outstanding share of Bank Common Stock (except Bank Common Stock owned by
Zions) will be cancelled and will be converted into the right to receive shares
of Zions Common Stock, with cash to be paid in lieu of any fractional shares.
Upon consummation of the Holding Company Reorganization, shareholders of First
Western Common Stock will be entitled to receive, in exchange for each share of
First Western Common Stock that number of shares of Zions Common Stock
calculated by dividing the Holding Company Purchase Price, as defined, 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 First Western
Common Stock issued and outstanding on the Effective Date of the Holding Company
Reorganization. Upon consummation of the Bank Reorganization, shareholders of
Bank Common Stock (with the exception of Zions) will be entitled to receive, in
exchange for each share of Bank Common Stock, that number of shares of Zions
Common Stock calculated by dividing the Bank Purchase Price, as defined, 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 Bank Common
Stock issued and outstanding on the Effective Date of the Reorganization,
including shares held by Zions.
At April 28, 1995, the closing price of Zions Common Stock quoted on
NASDAQ was $42.625 per share and there were issued and outstanding 39,988 shares
of First Western Common Stock and 60,000 shares of Bank Common Stock. If the
Reorganizations had been consummated on that date and the Average Closing Price
had been $42.625 and had the certain accretions referred to below been
$1,366,629, each shareholder of First Western Common Stock would have received
5.8757 shares of Zions Common Stock for each share of First Western Common Stock
and each shareholder of Bank Common Stock (other than Zions) would have received
3.9165 shares of Zions Common Stock for each share of Bank Common Stock. These
exchanges would equate to a value of $250.45 for each share of First Western
Common Stock and $166.94 for each share of Bank Common Stock if the exchanges
had been consummated as of such date. The actual ratio for exchanging First
Western Common Stock and Bank Common Stock for Zions Common Stock will depend
upon certain accretions of the Bank's net undistributed income, the book value
of First Western's net assets, and the Average Closing Price on the Effective
Date.
Certain Definitions
In connection with the description of the Reorganizations in this Joint
Proxy Statement/Prospectus, shareholders of First Western and the Bank 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. Under certain circumstances as set forth in the Plan of
Reorganization, First Western can elect the Average Closing Price to be $37.00
and Zions can elect the Average Closing Price to be $41.00.
"Bank Purchase Price" means the sum of: (A) $9,300,000 and (B) the net
undistributed income of the Bank between the opening of business on September 1,
1994 and the close of business on the Effective Date, less any undistributed
income (but not net of any undistributed loss) derived from activities or
transactions which are not normal and recurring banking operations (such as,
without limitation, the sale of securities or loans, of capital assets, or of
lines of business), all of which shall be determined in accordance with
generally accepted accounting principles, it being understood that the amount so
calculated may be a negative number and that the effect of summing such a
negative number would be a reduction in the Bank Purchase Price.
"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, First Western and the Bank shall mutually
agree.
"Effective Date" means the date which is the latest of (a) the date
following the day upon which the First Western shareholders approve, ratify, and
confirm the transactions contemplated by the Plan of Reorganization; (b) the
date following the day upon which the Bank shareholders approve, ratify, and
confirm the transactions contemplated by the Plan of Reorganization; (c) the
first to occur of (i) the date thirty days following the date on which the Board
of Governors of the Federal Reserve System or the Federal Reserve Bank of San
Francisco pursuant to delegated authority (collectively, the "Federal Reserve
Board") authorizes consummation of the merger of First Western into Zions; or
(ii) if, pursuant to Section 321(a) of the Riegle Community Development and
Regulatory Improvement Act of 1994 (the "Riegle Act"), the Federal Reserve Board
shall have prescribed a shorter period of time with the concurrence of the
Attorney General of the United States (the "Attorney General"), the date on
which such shorter period of time shall elapse; or (iii) the date ten days
following the date on which the Federal Reserve Board indicates its waiver of
jurisdiction over the merger of First Western into Zions; (d) the first to occur
of (i) the date thirty days following the date on which the Comptroller of the
Currency (the "Comptroller") approves the merger of the Bank into Zions Bank or
(ii) if, pursuant to Section 321(b) of the Riegle Act, the Comptroller shall
have prescribed a shorter period of time with the concurrence of the Attorney
General, the date on which such shorter period of time shall elapse; (e) if such
an order shall be required by law, the date ten days following the date upon
which the Commissioner of Financial Institutions of the State of Utah (the
"Commissioner") approves the transactions contemplated by the Plan of
Reorganization; (f) 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; (g) ten days after any
stay of the approvals of the Comptroller, the Federal Reserve Board, or the
Commissioner of the transactions contemplated by the Plan of Reorganization, or
any injunction against closing of such transactions is lifted, discharged, or
dismissed; or (h) such other date as shall be mutually agreed upon by Zions and
First Western.
"Holding Company Purchase Price" means the sum of: (A) the product of
the Bank Purchase Price and a fraction, the numerator of which is the number of
shares of Bank Common Stock held of record by First Western on the Effective
Date, and the denominator of which is the total number of shares of Bank Common
Stock that shall be issued and outstanding on the Effective Date; and (B) the
book value of the net assets of First Western, determined in accordance with
generally accepted accounting principles as of the close of business on the last
day of the calendar month preceding the Effective Date, exclusive of (X) the
equity of First Western in the Bank on such date, or (Y) goodwill, core
intangibles, prepayments, and other similar intangible assets held by First
Western, it being understood that the amount so calculated may be a negative
number and that the effect of summing such a negative number would be a
reduction in the Holding Company Purchase Price.
Reasons for the Reorganizations
Management and the directors of First Western and the Bank believe that
the merger of First Western into Zions and the merger of the Bank into Zions
Bank and the exchange of First Western Common Stock and Bank Common Stock for
Zions Common Stock are in the best interests of the respective shareholders of
First Western and the Bank, employees, customers and the community served by the
Bank. In order 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. First Western's and the Bank's respective managements
foresee continued strong competition among banks and other providers of
financial services in Grand and San Juan Counties, Utah, and throughout Utah,
generally, and particularly from well-capitalized, large banks, and from such
providers as credit unions and savings associations and believe that the
proposed mergers with Zions and Zions Bank offer First Western's and the Bank's
respective shareholders the best possible method of realizing the value of their
investment in First Western and the Bank, and not only 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, but also offering an
enhanced aray of financial products and services. 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
Reorganizations" for a description of the factors considered by First Western's
and the Bank's respective boards of directors in determining to recommend the
Reorganizations to shareholders for their approval. First Western's and the
Bank's respective boards of directors believe that the mergers with Zions and
Zions Bank will realize substantial value for First Western's and the Bank's
respective shareholders and will allow them the option of realizing a
significant return on their original investment and continuing to participate in
the development of banking in Utah and in the West by holding the Zions Common
Stock they will receive in the Reorganizations.
For Zions, the Reorganizations will provide the opportunity to
continue to develop its franchise in Utah markets by expanding its operations to
areas not previously serviced by Zions, by extending its geographical base to
those markets, thereby allowing Zions to diversify further its Utah operations,
and by expanding the banking services it is able to provide. The combination of
the different skills, resources and services offered by the Bank and Zions Bank,
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 financial institutions. See "Plan of
Reorganization-Background of and Reasons for the Reorganizations."
Votes 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 First Western
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."
Approval of the Plan of Reorganization requires the affirmative vote of
the holders of at least two-thirds of the outstanding shares of Bank 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, 1994, the directors, executive officers, and holders
of 5% or more of the stock of First Western and of the Bank beneficially owned
an aggregate of approximately 98.93% of the outstanding First Western Common
Stock and approximately 94.33% of the Bank Common Stock, respectively. Mr. I.D.
and Frankie Nightingale and a partnership of which they are the general partners
own approximately 90.81% of the issued and outstanding shares of First Western
Common Stock and have agreed to vote all of such shares of First Western Common
Stock in favor of the Holding Company Reorganization. Consequently, approval of
the Holding Company Reorganization is assured. Additionally, First Western owned
an aggregate of 93.5% of the outstanding Bank Common Stock. First Western has
agreed to vote all shares of Bank Common Stock which may be voted, or whose vote
may be directed, by First Western in favor of the Bank Reorganization. As a
result, approval of the Bank Reorganization is assured. All of the shareholder
directors of First Western and the Bank, respectively, have entered into
agreements with Zions under which they have agreed, in their capacity as
shareholders, to vote their shares in favor of the respective Reorganization.
These agreements cover an aggregate of approximately 98.93% of the outstanding
shares of First Western Common Stock and approximately 95.66% of the outstanding
shares of Bank Common Stock. See "Plan of Reorganization--Voting Agreements."
Boards of Directors Recommendations
The Boards of Directors of First Western and the Bank believe that the
respective Reorganizations are in the best interests of the respective
shareholders of First Western and the Bank, and the employees and customers of
the Bank. The Boards unanimously recommend that the respective shareholders of
First Western and the Bank vote "FOR" approval of the Plan of Reorganization.
The Boards of Directors of First Western and of the Bank have not retained any
independent financial advisor to evaluate the Plan of Reorganization or to
render an opinion as to the fairness of the terms of the Reorganizations from a
financial point of view to the respective shareholders of First Western and the
Bank.
SHAREHOLDERS OF FIRST WESTERN AND THE BANK ARE REQUESTED TO COMPLETE,
DATE, AND SIGN THE ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
Interests of Certain Persons in the Transactions
Mr. I.D. Nightingale, chairman and president of First Western and the
Bank, is party to a severance agreement with the Bank whereby upon consummation
of the Reorganizations he will receive a payment of $1250 per month for a period
of ten years.
Tax Consequences
The Reorganizations 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 First Western or of
the Bank on the exchange of their shares for Zions Common Stock in the
Reorganizations, except with respect to cash received in lieu of fractional
shares and cash paid to shareholders who elect to exercise and who perfect their
dissenters' rights under Utah law and federal law. For a more complete
description of the federal income tax consequences of the Reorganizations, see
"Plan of Reorganization--Tax Consequences."
Dissenters' Rights
Record holders of First Western Common Stock and record holders of Bank
Common Stock who object to the respective Reorganization and comply with the
prescribed statutory procedures are entitled to have the fair value of their
shares determined in accordance with the Utah Revised Business Corporation Act
(Utah Revised Statutes section 16-10a-1101 et seq.) and in accordance with
section 215a(b) of the National Bank Act (12 U.S.C. section 215a(b)). Upon
perfection of their dissenters' rights, such dissenting shareholders are
entitled to have paid to them in cash in lieu of the shares of Zions Common
Stock they would otherwise be entitled to receive in the respective
Reorganization. A copy of the pertinent statutory provisions is attached to this
Joint Proxy Statement/Prospectus as Appendix A and Appendix B. 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 holders of more than 3% of First Western Stock or if holders
of more than 3% of Bank Common Stock exercise and perfect their respective
dissenters' rights. See "Plan of Reorganization--Dissenters' Rights of First
Western and Bank 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, First Western Common Stock and Bank Common
Stock."
Regulatory Approvals
A condition to the Reorganizations is approval of the Reorganizations
by the Federal Reserve Board, the Comptroller, and the Commissioner. The Federal
Reserve Board has waived application and approval requirements otherwise
applicable pursuant to section 3(a) of the Bank Holding Company Act. The
Comptroller has approved the merger of the Bank into Zions Bank pursuant to the
Bank Merger Act. The Commissioner has waived jurisdiction with respect to the
transactions contemplated by the Plan of Reorganization.
Conditions; Amendment; Termination
In addition to shareholder and regulatory approval, consummation of the
Reorganizations 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 Reorganizations." Notwithstanding prior shareholder approval,
the Plan of Reorganization may be amended at any time prior to the Effective
Date of the Reorganizations in any respect that would not prejudice the economic
interests of the First Western or Bank 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 the parties to the Plan or Reorganization;
(ii) unilaterally, by either party if any of the representations and warranties
of the other party was materially incorrect when made or in the event of a
material breach or material failure by the other party of any covenant or
agreement of that party contained in the Plan of Reorganization which has not
been, or cannot be, cured within 30 days after written notice of such breach or
failure has been given; (iii) by either party if the Reorganizations (or either
of them) have become inadvisable or impracticable by reason of federal or state
litigation to restrain or invalidate the Reorganizations (or either of them); or
(iv) by either party on or after July 31, 1995, if the Effective Date has not
occurred on or before that date. Additionally, the Board of Directors of First
Western may terminate the Plan of Reorganization, upon written notice to Zions,
if the Average Closing Price is greater than $41.00, unless Zions agrees to
elect an Average Closing Price of $41.00; and Zions may terminate the Plan of
Reorganization, upon written notice to First Western, if the Average Closing
Price is less than $37.00, unless First Western agrees to elect an Average
Closing Price of $37.00. See "Plan of Reorganization -- Authorized Termination
and Damages for Breach."
Effective Date of the Reorganizations
It is presently anticipated that if the Plan of Reorganization is
approved by the respective shareholders of First Western and the Bank, the
Reorganizations will become effective in the second quarter of 1995. However,
there can be no assurance that all conditions necessary to the consummation of
the Reorganizations will be satisfied or, if satisfied, that they will be
satisfied in time to permit the Reorganizations to become effective at the
anticipated time. See "Plan of Reorganization--Effective Date of the
Reorganizations."
Exchange of Certificates
Instructions on how to effect the exchange of First Western Common
Stock certificates and Bank Common Stock certificates for Zions Common Stock
certificates and Bank Common Stock certificates will be sent, as promptly as
practicable after the Reorganizations have become effective, to each shareholder
of record of First Western and of the Bank immediately prior to such
Reorganization. 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 First
Western Common Stock and Bank Common Stock for the respective Purchase Price by
delivering to the respective First Western and Bank respective shareholders
shares of Zions Common Stock with a value equal to the respective Purchase
Price. The closing sale price for Zions Common Stock on the NASDAQ National
Market System on October 31, 1994, the last trading day prior to the first
public announcement of the Reorganizations, was $37.625. An equivalent per share
price for First Western Common Stock and for Bank Common Stock computed by
reference to the method described above under "Proposed Reorganization" would
result in an exchange ratio of 5.8757 shares of Zions Common Stock for each
share of First Western Common Stock and 3.9165 shares of Zions Common Stock for
each share of Bank Common Stock (except for shares held by Zions) assuming that
the Average Closing Price was $42.625. On April 28, 1995, the closing sale price
for Zions Common Stock was $42.625. If the Average Closing Price equated to this
price and had the net undistributed income of the Bank as calculated under the
Plan of Reorganization been $716,403, and had the book value of First Western's
net assets as calculated under the Plan of Reorganization been $650,226, the
equivalent per share price (as calculated above) for First Western Common Stock
and for Bank Common Stock, assuming consummation of the Plan of Reorganization,
would have been $250.45 and $166.94, respectively.
First Western Common Stock and Bank Common Stock are not listed with a
national securities exchange or quoted on any automated quotation system. The
common stock of each company occasionally trades through private negotiated
transactions between individuals. As a result, no established public trading
market for First Western Common Stock or Bank Common Stock presently exists.
Reliable information concerning the prices at which First Western's and the
Bank's stock has traded in private, negotiated transactions is not publicly
available or generally known to First Western and the Bank. On occassion, First
Western and the Bank have become aware of the trading price of their common
stock in private transactions. Information concerning those trading prices has
been omitted based on First Western's and the Bank's beliefs that such prices
are not necessarily representative of the market price for their common stock
during any particular period. There have been no trades in First Western Common
Stock or in Bank Common Stock since the Plan of Reorganization was publicly
announced. See "Stock Prices of and Dividends on First Western Common Stock and
Bank Common Stock," below.
Selected Financial Information
The following table sets forth certain historical financial information
for Zions and First Western. With respect to pro forma combined financial
information for Zions giving effect to the Reorganization using the purchase
method of accounting, see "Pro Forma Combined Financial Data." This information
is based on the historical financial statements of Zions incorporated herein by
reference and the First Western financial statements appearing elsewhere herein,
and should be read in conjunction with such statements and information and the
related notes.
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C>
Zions
Earnings
Net interest income $ 198,606 $ 174,657 $ 157,282 $ 139,871 $ 128,121
Provision for loan
losses 2,181 2,993 10,929 25,561 20,083
Net income 63,827 58,205 47,209 30,449 27,765
Per Share
Net income $ 4.37 $ 4.08 $ 3.42 $ 2.23 $ 2.07
Dividends 1.16 .98 .75 .72 .72
Statement of Condition at
Period End
Assets $4,934,095 $4,801,054 $4,107,924 $3,883,938 $3,720,227
Deposits 3,705,976 3,432,289 3,075,110 2,877,860 2,684,826
Long-term debt 58,182 59,587 99,223 81,134 92,794
Shareholders' equity 365,770 312,592 260,070 220,753 196,706
First Western
Earnings
Net interest income $ 2,951 $ 3,126 $ 2,676
Provision for loan
losses 417 170 370
Net income 748 1,062 983
Per Share
Net income $ 18.70 $ 26.56 $ 24.58
Dividends -- -- 3.00
Statement of Condition at
Period End
Assets $37,210 $39,448 $36,941
Deposits 30,072 32,908 32,499
Long-term debt 1,291 1,500 --
Shareholders' equity 4,972 4,258 3,196
</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 First Western Common
Stock. The following data are based on the historical financial statements of
Zions incorporated herein by reference and of First Western appearing elsewhere
herein and should be read in conjunction with such financial statements and such
information and the related notes to each.
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992 1991 1990
--------- --------- --------- ---------- -------
<S> <C> <C> <C> <C> <C>
Net Income Per Common Share
Zions $ 4.37 $ 4.08 $ 3.42 $ 2.23 $ 2.07
First Western 18.70 26.56 24.58 N/A N/A
Book Value Per Common Stock
Zions $ 25.12 $ 22.01 $ 18.95 $ 16.23 $ 14.63
First Western 134.42 115.12 86.40 N/A N/A
Cash dividends Declared Per Common
Share
Zions(1) $ 1.16 $ .98 $ .75 $ .72 $ .72
First Western -- -- 3.00 N/A N/A
<FN>
(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.
</TABLE>
<PAGE>
FIRST WESTERN BANCORPORATION,
FIRST WESTERN NATIONAL BANK
and
ZIONS BANCORPORATION
--------------------
JOINT PROXY STATEMENT/PROSPECTUS
for
Special Meeting of Shareholders of
First Western Bancorporation
to be held on
June 5, 1995
and for
Special Meeting of Shareholders of First
Western National Bank to be held on
June 5, 1995
INTRODUCTION
This Joint Proxy Statement/Prospectus is furnished in connection with
the solicitation by the respective Boards of Directors of First Western
Bancorporation, ("First Western") and First Western National Bank (the "Bank")
of proxies to be voted at the Special Meetings of Shareholders of First Western
and the Bank, each to be held on June 5, 1995 and at any adjournment or
adjournments thereof. The Special Meetings will be held at 10:30 a.m. and 11:00
a.m., respectively, local time, at the executive offices of First Western and
the Bank, Main and Third South Streets, Moab, Utah. The approximate date on
which this Joint Proxy Statement/Prospectus will first be mailed to the
shareholders of First Western and the Bank is May 3, 1995.
Record Date; Voting Rights
The Boards of Directors of First Western and the Bank have fixed the
close of business on April 28, 1995 as the record date for determining the
shareholders of First Western and the Bank entitled to notice of and to vote at
the Special Meetings. On that date, 39,988 shares of Common Stock, $10.00 par
value, of First Western ("First Western Common Stock") were outstanding, held by
approximately seven shareholders of record and 60,000 shares of Common Stock,
$10.00 par value, of the Bank ("Bank Common Stock") were outstanding, held by
approximately thirty-one shareholders of record. Each such share of First
Western Common Stock and each such share of Bank Common Stock entitles its
respective 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
respective Special Meeting. First Western and the Bank have no other outstanding
class of capital stock.
Purpose of the Special Meetings
At the respective Special Meetings, the respective shareholders of
First Western and the Bank will be asked to consider and vote upon a proposal to
approve an Agreement and Plan of Reorganization dated as of October 24, 1994
among First Western, the Bank, Zions Bancorporation ("Zions"), and Zions First
National Bank ("Zions Bank"), as amended as of January 4, 1995, a related
Agreement of Merger between First Western and Zions (First Western shareholders
only) and an Agreement of Merger between the Bank, First Western's
majority-owned subsidiary, and Zions Bank, Zions' wholly-owned (except for
directors' qualifying shares) subsidiary (Bank shareholders only). The
above-referenced agreements are referred to herein collectively as the "Plan of
Reorganization." As more fully described below under "Plan of Reorganization,"
the Plan of Reorganization provides for the merger of First Western into Zions,
with Zions being the surviving corporation (the "Holding Company
Reorganization"), and the subsequent merger of the Bank into Zions Bank, with
Zions Bank being the surviving corporation (the "Bank Reorganization").
Hereinafter, the two mergers will sometimes be referred to collectively as the
"Reorganization" or "Reorganizations". Consummation of the Reorganization is
conditioned upon approval by the respective shareholders of First Western and
the Bank of the Reorganization. In the Reorganization, all outstanding shares of
First Western Common Stock and all shares of Bank Common Stock will be cancelled
and each outstanding share of First Western Common Stock and each outstanding
share of Bank Common Stock, other than shares owned by Zions (in each case 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 First Western Common Stock will be entitled to receive, in
exchange for each share of First Western Common Stock held by him, that number
of shares of Zions Common Stock calculated by dividing the Holding Company
Purchase Price by the Average Closing Price, and by further dividing the number
so reached by the total number of shares of First Western Common Stock issued
and outstanding on the Effective Date of the Reorganization. Upon the Effective
Date, each holder of Bank Common Stock (other than Zions) will be entitled to
receive, in exchange for each share of Bank Common Stock held by him, that
number of shares of Zions Common Stock calculated by dividing the Bank Purchase
Price by the Average Closing Price, and by further dividing the number so
reached by the total number of shares of Bank Common Stock (including shares
owned by Zions) issued and outstanding on the Effective Date of the
Reorganization. At April 28, 1995, the closing price of Zions Common Stock
quoted on NASDAQ was $42.625 per share and 39,988 shares of First Western Common
Stock and 60,000 shares of Bank Common Stock were issued and outstanding. If the
Reorganization had been consummated on that date, holders of First Western
Common Stock and holders of Bank Common Stock (other than Zions), would have
received 5.8757 and 3.9165 shares, respectively, of Zions Common Stock for each
share of First Western Common Stock and for each share of Bank Common Stock,
respectively, assuming that the Average Closing Price had been $42.625 This
exchange would equate to a value of $250.45 and $166.94 for each share of First
Western Common Stock and Bank Common Stock, respectively, if the exchange had
been consummated as of such date. The above-referenced exchange computations
assume that the book value of First Western's net assets on April 28, 1995
(exclusive of equity in the Bank and certain intangible assets) equalled
$650,226 and that the Bank's undistributed income between September 1, 1994 and
April 28, 1995 had been $716,403.
<PAGE>
THE BOARDS OF DIRECTORS OF FIRST WESTERN AND THE BANK UNANIMOUSLY
BELIEVE THAT THE REORGANIZATION IS IN THE BEST INTERESTS OF THE SHAREHOLDERS OF
FIRST WESTERN AND THE BANK AND RECOMMEND THAT FIRST WESTERN AND BANK
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 respective Special Meeting or any adjournments thereof in accordance with
the instructions thereon. First Western proxies and Bank 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 Meetings 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 First Western and
the Secretary of the Bank, as the case may be, written notice of such revocation
or a later dated proxy or by attending the Special Meeting and voting in person.
Attendance at the First Western or Bank 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 First Western and the Bank may solicit proxies from the shareholders of First
Western and the Bank 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. First Western and the Bank will bear their own expenses in connection
with the printing and solicitation of proxies for the Special Meetings. 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 Joint 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 Joint Proxy Statement/Prospectus by
reference to such filing and is available upon request. See "Available
Information" above.
The Reorganizations
The Plan of Reorganization provides for the merger of First Western
into Zions, in which Zions will be the surviving corporation, and for the
subsequent merger of the Bank with Zions Bank, in which Zions Bank will be the
surviving corporation. Upon consummation of the latter merger, Zions Bank will
continue as a direct wholly-owned (except for directors' qualifying shares)
subsidiary of Zions. Zions is a bank holding company incorporated in Utah. The
principal subsidiaries of Zions are Zions 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 fourteen offices in Arizona.
In the Reorganizations, the shareholders of First Western and the Bank
will become shareholders of Zions. The 39,988 outstanding shares of First
Western Common Stock and the 60,000 outstanding shares of Bank Common Stock,
other than shares owned by Zions (in each case 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 Holding Company Purchase Price and the
Bank Purchase Price, respectively, as determined on the Effective Date of the
Reorganizations. See "Conversion of First Western and Bank Shares" below.
Purchase Price
The purchase price to be paid to First Western and Bank shareholders by
Zions will be in the form of newly issued shares of Zions Common Stock, with a
market value equal to the Holding Company Purchase Price with respect to
outstanding shares of First Western Common Stock and, with respect to
outstanding shares of Bank Common Stock equal to the portion of the Bank
Purchase Price allocable to shares of Bank Common Stock not acquired by Zions in
the Holding Company Reorganization. The Plan of Reorganization has defined
"Holding Company Purchase Price" as the sum of (A) the product of the Bank
Purchase Price and a fraction, the numerator of which is the number of shares of
Bank Common Stock held of record by First Western on the Effective Date, and the
denominator of which is the total number of shares of Bank Common Stock that
shall be issued and outstanding on the Effective Date; and (B) the book value of
the net assets of First Western, determined in accordance with generally
accepted accounting principals as of the close of business on the last day of
the calendar month preceding the Effective Date, exclusive of (X) the equity of
the First Western in the Bank on such date, or (Y) goodwill, core intangibles,
prepayments, and other similar intangible assets held by First Western, it being
understood that the amount so calculated may be a negative number and that the
effect of summing such a negative number would be a reduction in the Holding
Company Purchase Price. The Plan of Reorganization has defined "Bank Purchase
Price" as the sum of (A) $9,300,000 and (B) the net undistributed income of the
Bank between the opening of business on September 1, 1994 and the close of
business on the Effective Date, less any undistributed income (but not net of
any undistributed loss) derived from activities or transactions which are not
normal and recurring banking operations (such as, without limitation, the sale
of securities or loans, or capital assets, or of lines of business), all of
which shall be determined in accordance with generally accepted accounting
principles. If the Holding Company Reorganization had taken place as of April
28, 1995, the total Holding Company Purchase Price would have been approximately
$10,015,062 or $250.45 per share of First Western Common Stock. If the Bank
Reorganization had taken place as of April 28, 1995, the portion of the total
Bank Purchase Price allocable to shares of Bank Common Stock not acquired by
Zions in the Holding Company Reorganization would have been approximately
$651,567 or $166.94 per share of Bank Common Stock.
The actual Purchase Price of each Reorganization will differ from that
as shown above, because the Bank Purchase Price will include net undistributed
income of the Bank from September 1, 1994, through the Effective Date and
because the Holding Company Purchase Price will include the book value of the
net assets of First Western (exclusive of equity in the Bank and certain
intangible assets) as of the Effective Date.
Subject to the "election" considerations discussed below, each share of
First Western Common Stock and each share of Bank Common Stock (other than
shares acquired by Zions in the Holding Company Reorganization) will be
converted into and exchanged for the right to receive that number of shares of
Zions Common Stock calculated by dividing the respective Purchase Price to be
paid by Zions by the Average Closing Price of Zions Common Stock during the
twenty-trading-day period ending five trading days prior to the Effective Date
of the Holding Company Reorganization, and by further dividing that number by
the number of outstanding shares of First Western Common Stock or Bank Common
Stock (as the case may be) as of the Effective Date of the Holding Company
Reorganization.
Because the number of shares of Zions Common Stock to be exchanged for
each share of First Western Common Stock and Bank Common Stock will be
determined by the Average Closing Price of Zions Common Stock, because the
Average Closing Price is based upon daily stock prices that are incapable of
prediction, and because, therefore, the number of shares issuable to First
Western and Bank shareholders is incapable of prediction, the parties to the
Plan of Reorganization determined that the Plan of Reorganization would provide
upper and lower "breakpoints" for the Average Closing Price beyond which the
particular party for whose benefit the particular breakpoint has been instituted
would be entitled to terminate the Plan of Reorganization, subject to the right
of the other party to elect to consummate the Reorganizations using a fixed
price as the Average Closing Price. The breakpoints established by the parties
occur when the Average Closing Price would exceed $41.00 or be less than $37.00.
If the Average Closing Price falls below $37.00, the lower breakpoint
established by the parties, the number of shares of Zions Common Stock that
would be issuable by Zions to First Western and Bank shareholders would increase
to a level at which Zions might conclude that consummation of the
Reorganizations is not in its best interests. Therefore, the Plan of
Reorganization provides that, if the Average Closing Price is below $37.00,
Zions has the option of terminating the Plan of Reorganization, subject to First
Western's right to elect to consummate the Reorganizations and to use $37.00 as
the Average Closing Price.
Conversely, if the Average Closing Price of Zions Common Stock exceeds
$41.00 per share, the upper breakpoint established by the parties, the number of
shares of Zions Common Stock that would be issuable by Zions to First Western
and Bank shareholders would decrease to a level at which First Western might
conclude that consummation of the Reorganizations is not in the best interests
of the First Western and Bank shareholders. Thus, the Plan of Reorganization
provides that, if the Average Closing Price of Zions Common Stock exceeds
$41.00, First Western has the option of terminating the Plan of Reorganization,
subject to Zions' right to elect to consummate the Reorganizations and to use
$41.00 as the Average Closing Price.
As soon as possible after consummation of the Reorganizations, Zions or
Zions Bank will mail instructions to each of First Western's and the Bank's
shareholders concerning the proper method of surrendering certificates formerly
representing First Western or Bank Common Stock in exchange for certificates
representing shares of Zions Common Stock.
After consummation of the Reorganizations, there will be no transfers
on the stock transfer books of First Western or the Bank of any shares of First
Western Common Stock or Bank Common Stock, and each outstanding certificate that
prior to such consummation represented outstanding shares will be deemed for all
purposes solely to represent the right of the holder thereof to receive the
applicable number of shares of Zions Common Stock in accordance with the terms
of the Reorganization.
SHAREHOLDERS SHOULD RETAIN THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE
THE LETTER OF TRANSMITTAL AND INSTRUCTIONS.
Background of and Reasons for the Reorganizations
First Western. First Western 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 First Western and
did not pursue them. In the fall of 1992, Zions approached the Bank with a
suggestion of merger. First Western's management did not pursue these
discussions because the proposed terms did not appear attractive and because the
Bank was engaged in efforts to increase the quality of its loan portfolio and
increase profitability.
Following Zions' acquisition in early 1994 of National Bancorp of
Arizona Inc. and Rio Salado Bancorp, Inc., discussions of a possible merger of
First Western and Zions were renewed. Both the management and Board of Directors
of First Western determined to pursue the merger discussions due to the Bank's
improved earnings. It is the judgment of First Western's management that a
merger would allow First Western to address the increased competition from
larger and better capitalized banks and financial institutions it will face in
the future.
In the opinion of the Board of Directors, consummation of the Plan of
Reorganization is in the best interests of the shareholders and employees of
First Western and the communities they serve.
The Board of Directors of First Western 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.
First Western's management believes that the changing economic
conditions throughout the state of Utah have generated a need to offer customers
additional services that the Bank presently does not provide or provides only on
a limited basis. For First Western and the Bank to serve this market and remain
competitive, significant changes would be required to support the growth of
deposits, loans, and personnel. First Western's management foresees continued
strong competition among banks in Grand and San Juan Counties and throughout
Utah, generally, particularly large, well-capitalized banks, as well as from
other financial services providers such as credit unions and savings
associations. First Western 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, credit unions and savings
associations, as well as from other investment alternatives which compete for
loans and deposits. Certain of those competitors have substantially greater
financial resources than First Western, which enables them to offer a broader
range of services. In recommending the Plan of Reorganization to the
shareholders, First Western's Board of Directors carefully considered the social
and economic effects of the Reorganization on depositors, borrowers and
employees of the Bank and on the communities which the Bank serves.
In the opinion of the Boards of Directors and management, the merger
with Zions will provide First Western and Bank 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 merger of First Western and Bank into Zions. The Boards of Directors
believe that the proposed merger with Zions offers First Western's and the
Bank'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 its customers will be provided with an enhanced array of
products and services, including, among others, expanded mortgage services,
extensive installment lending services, lease financing services, sweep
accounts, discount brokerage services, and bank-permissible insurance and
annuity products available from Zions Bank or through non-bank subsidiaries of
Zions. The Bank's customers will benefit from the substantial managerial and
financial resources of Zions. For example, the contemplated merger will result
in an institution with a higher lending limit, which will increase potential
credit availability to existing Bank customers and will attract customers with
larger lending needs than the Bank can presently service.
Zions. The Reorganization represent a means for Zions to establish
offices in Grand and San Juan Counties in eastern Utah -- markets in which Zions
currently has no offices. In view of the strong earnings and capital base of the
Bank, together with its seasoned customer base, the Reorganizations are also
calculated to enhance the earnings and capital of Zions and Zions Bank over both
the near and long terms. Expansion of Zions' and Zions Bank's business into
these markets will afford Zions and Zions Bank access to areas currently
enjoying economic growth and favorable demographic trends.
The general acquisition strategy of Zions relative to depository
institutions is to enhance its market position in Utah, Nevada, and Arizona --
where its depository institutions are located -- through in-market acquisitions
of smaller depository institutions. With the consummation of the
Reorganizations, Zions will continue to expand its full-service banking
operations in these states, each of which has an indigenous economy and its own
business traditions. By developing affiliates in these various states, Zions
will enjoy greater diversification which will help shield it against downturns
in specific economic sectors. Diversification will add strength and stability to
the Zions system and thus to each of its parts, including Zions Bank. Zions will
likely continue to seek affiliations with smaller insured depository
institutions in areas where it currently has little or no presence.
Voting Agreements
In connection with the Plan of Reorganization, all of the
shareholder-directors of First Western and of the Bank, whose common share
holdings aggregate approximately 98.93% of the outstanding First Western Common
Stock and approximately 95.66% of the outstanding Bank Common Stock, 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.
The shareholder-directors also agreed until the earlier of the consummation of
the Reorganizations 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 First Western or the Bank or to any person who does not agree to be
bound by similar restrictions. First Western, which owns approximately 93.5% of
the issued and outstanding shares of Bank Common Stock, has agreed to vote its
shares in favor of the Bank Reorganization.
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 First Western or the Bank. The
agreements also do not apply to any shares of First Western Common Stock or Bank
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 two-thirds of the outstanding shares of First Western Common
Stock and two-thirds of the outstanding shares of Bank Common Stock at the
respective Special Meetings by the holders of First Western Common Stock and
Bank Common Stock voting in person or by proxy. Because approval of each
Reorganization requires the affirmative vote of two-thirds of First Western's
outstanding shares and two-thirds of the Bank's 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. Although neither First Western nor the Bank has retained an
independent advisor to evaluate the terms of the Reorganization or to render an
opinion on the fairness of Zions' offer from a financial point of view, the
respective Boards of Directors of First Western and the Bank have studied the
offer from Zions and have examined the terms of Zions' offer and have concluded
that the terms of Zions' offer are fair to the shareholders of First Western and
the Bank from a financial point of view and further that the Reorganizations are
in the best interests of First Western and the Bank and their respective
shareholders. ACCORDINGLY, THE BOARDS OF DIRECTORS OF FIRST WESTERN AND THE BANK
UNANIMOUSLY RECOMMEND THAT FIRST WESTERN AND BANK SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE PLAN OF REORGANIZATION.
Conversion of First Western and Bank 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 First Western shareholder and by each Bank shareholder will not
be determined until the Effective Date of the Reorganizations. The number of
shares of Zions Common Stock to be received by each First Western shareholder
and by each Bank shareholder (other than Zions) 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 Reorganizations, all of the outstanding
shares of First Western Common Stock and all of the outstanding shares of Bank
Common Stock (except shares held by Zions) 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 the Holding Company Purchase Price and Bank Purchase
Price, respectively. Each holder of shares of First Western Common Stock and
each holder of shares of Bank Common Stock (other than Zions) will be entitled
to receive, in exchange for each respective share of First Western Common Stock
and Bank 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
Holding Company Purchase Price or the Bank Purchase Price, as the case may be,
by the Average Closing Price, and by further dividing the number so reached by
the number of shares of First Western Common Stock and Bank Common Stock
(including shares held by Zions), respectively, that shall be issued and
outstanding at the Effective Date.
On April 28, 1995, the closing sale price for Zions Common Stock
reported on the NASDAQ National Market System was $42.625. Assuming on that date
that a total of 39,988 shares of First Western Common Stock and 60,000 shares of
Bank Common Stock were outstanding, that the Bank's net undistributed income,
calculated in accordance with the Plan of Reorganization, equalled $716,403 as
of April 28, 1995, that the book value of First Western's net assets (exclusive
of equity in the Bank and certain intangible assets) equaled $650,226 as of
April 28, 1995, and further assuming that the Average Closing Price was $42.625,
then each share of First Western Common Stock would be exchangeable for 5.8757
shares of Zions Common Stock and each share of Bank Common Stock (excluding
shares held by Zions) would be exchangeable for 3.9165 shares of Zions Common
Stock, in each case excluding any shares for which dissenters' rights were
perfected. In view of the method of calculating the Average Closing Price as
well as the inability to state with certainty the Bank's net undistributed
income and the book value of First Western's net assets as of the Effective
Date, it is not possible at the date of this Joint Proxy Statement/Prospectus to
predict the respective rates of exchange at the Effective Date.
Surrender of Certificates. As promptly as practicable after the
Effective Date of the Reorganizations, Zions Bank, as the exchange agent
designated by First Western, the Bank, Zions Bank and Zions in the Plan of
Reorganization, will send to each respective shareholder of record of First
Western Common Stock and Bank Common Stock promptly after the Reorganizations a
letter of transmittal containing instructions as to how to effect the exchange
of First Western Common Stock and Bank Common Stock certificates for
certificates representing the shares of Zions Common Stock into which their
shares have been converted. First Western and Bank 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 Reorganizations will apply to all whole shares of Zions Common Stock into
which shares of First Western Common Stock and Bank Common Stock have been
converted in the Reorganizations. However, no former First Western or Bank
shareholder will be entitled to receive any such dividend (and will receive no
interest thereon) until such shareholder's First Western 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 Reorganizations. Instead, each First
Western or Bank shareholder who surrenders for exchange First Western Common
Stock or Bank 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 Reorganizations,
the stock transfer books of First Western and the Bank will be closed, and no
further transfers of First Western Common Stock or Bank Common Stock will be
made or recognized. Certificates for First Western Common Stock or Bank 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, the First Western Common Stock or the Bank Common Stock
which occurs prior to the Reorganizations. Nevertheless, the total purchase
price to be paid by Zions for all of the outstanding shares of First Western
Common Stock and for all of the outstanding shares of Bank Common Stock is fixed
at the Holding Company Purchase Price and the Bank Purchase Price, respectively,
and will not be adjusted. Neither Zions nor First Western nor the Bank
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 legal counsel to First Western and the Bank be
received by each party to the effect that:
(1) The Reorganizations 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, First Western
or the Bank by reason of the Reorganizations; and
(3) No gain or loss will be recognized by holders of First
Western Common Stock or Bank 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 First Western or the Bank on the exchange of their respective
shares for whole shares of Zions Common Stock. However, gain or loss may be
recognized by First Western or Bank 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 First Western Common Stock or Bank 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 First Western Common Stock or Bank 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 First Western Common Stock or Bank Common Stock
exchanged in the respective 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 Reorganizations will include the holding period for
the shares of First Western Common Stock or Bank 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 First Western or Bank shareholder exercises dissenters' rights and
receives cash in exchange for his First Western Common Stock or Bank Common
Stock, the cash will generally be treated as received by the shareholder as a
distribution in redemption of the First Western Common Stock or Bank Common
Stock subject to the provisions and limitations of Section 302 of the Code. Cash
received by a dissenting First Western or Bank shareholder will be taxed as if
the dissenter's shares had been sold to First Western or the Bank 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 First Western and Bank 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 Reorganizations 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 Reorganizations. 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 First Western Common Stock or Bank Common Stock pursuant to an
employee stock option or other special circumstances. Accordingly, it is
recommended that First Western and Bank 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 Reorganizations.
A copy of the tax opinion rendered by legal counsel to First Western
and the Bank as to the material federal income tax consequences relating to the
Reorganizations is set out in Appendix C hereto.
Interests of Certain Persons in the Transactions
In connection with the Plan of Reorganization, all of First Western's
shareholder-directors, whose common shareholdings aggregate approximately 98.93%
of the outstanding First Western Common Stock, and all of the Bank's
shareholders-directors, whose common shareholdings aggregate approximately
95.66% of the outstanding Bank Common Stock, have entered into agreements with
Zions under which they have agreed, in their capacity as shareholders, to vote
their respective 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. 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 First Western or the
Bank or to any person who does not agree to be bound by similar restrictions.
On September 11, 1974, the Bank entered into a severance agreement with
I.D. Nightingale, chairman and president of the Bank. Pursuant thereto, the Bank
and Mr. Nightingale agreed that, upon implementation of a merger or
reorganization pursuant to which the Bank would be acquired by another company
and as a result thereof Mr. Nightingale would not continue as the chairman and
president of the Bank or be retained in similar capacities with the company
acquiring the Bank, Mr. Nightingale would be entitled to receive $1,250 per
month for ten years as severance pay. Upon consummation of the Reorganization,
the provisions of the agreement will be activated.
Stock Options
There are no stock options outstanding to purchase any of the stock of
First Western or the Bank.
Inconsistent Activities
First Western and the Bank have agreed in the Plan of Reorganization
that unless and until the Reorganizations have been consummated or the Plan of
Reorganization has been terminated in accordance with its terms, First Western
and the Bank will not (i) solicit or encourage any inquiries or proposals by any
third person to acquire more than 1% of the First Western Common Stock, any
stock of the Bank or any significant portion of its or the Bank'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
the Bank'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,
First Western or the Bank 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 First Western's or the Bank's respective Board of Directors, after
consulting with counsel, determines that such actions should be taken or
permitted in the exercise of its fiduciary duties. If First Western or the Bank
becomes aware of any offer or proposed offer to acquire any shares of First
Western or the Bank or any significant portion of its assets, First Western or
the Bank, as the case may be, is required to give immediate notice thereof to
Zions.
Conduct of Business Pending the Reorganizations
The Plan of Reorganization contains covenants, representations and
warranties by First Western and the Bank as to matters which are typical in
transactions similar to the Reorganizations.
First Western and the Bank have agreed that First Western and the Bank,
respectively, will not, prior to the Effective Date, without Zions' prior
written consent: (i) declare or pay cash dividends or property dividends with
the exception of customary periodic cash dividends in a manner consistent with
past practice; (ii) except for the issuance of First Western 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 a national banking association 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 4% per
annum of the aggregate payroll as of July 1, 1994; (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.
First Western and the Bank have also agreed to carry on their
respective businesses and manage their respective assets and property diligently
in the same manner as they have previously done and to use their respective best
efforts to preserve their business organization. Pending completion of
Reorganizations or termination of the Plan of Reorganization, First Western and
the Bank have agreed to provide Zions with certain information and reports and
access to other information.
Conditions to the Reorganizations
The obligations of First Western, the Bank and Zions to consummate the
Reorganizations are subject to, among other things, the satisfaction of the
following conditions: (i) the respective shareholders of First Western and the
Bank shall have approved the Plan of Reorganization; (ii) First Western, the
Bank and Zions shall have received all relevant orders, consents and approvals
from all requisite governmental authorities for the completion of the
Reorganizations; (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 Reorganizations 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 Reorganizations, 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) First Western, the Bank and Zions shall have
determined that the Reorganizations shall qualify as tax free reorganizations
under the Code and the regulations and rulings promulgated thereunder; and (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 First Western or which would
otherwise materially impair the value of First Western to Zions.
The obligations of Zions and Zions Bank to consummate the
Reorganizations are subject to satisfaction or waiver of certain additional
conditions, including: (i) the respective shareholders of First Western and the
Bank shall have authorized the Plan of Reorganization, and dissenters' rights
shall have been exercised and perfected by owners of not more than 3% of the
respective outstanding shares of First Western Common Stock and the Bank Common
Stock; (ii) all representations and warranties made by First Western and the
Bank in the Plan of Reorganization shall be true in all material respects on the
Effective Date and First Western and the Bank shall have performed in all
material respects all its respective obligations under the Plan of
Reorganization; (iii) Cohne, Rappaport & Segal, P.C., special counsel to First
Western and the Bank, shall have rendered a legal opinion to Zions in form and
substance satisfactory to Zions; (iv) during the period from June 30, 1994 to
the Effective Date, there shall be no material adverse change in the financial
position or results of operations, properties, liabilities or businesses of
First Western or the Bank; (v) on the Effective Date the net worth of the Bank
shall not be less than $4.5 million; (vi) prior to the Effective Date of the
Reorganizations, the Bank will have conformed, to the reasonable satisfaction of
Zions, its loan loss reserve methodology to that employed by Zions Bank; the
Bank will have implemented such methodology by making appropriate provisions to
its reserve for loan losses; and the reserve for loan losses of the Bank as
determined in accordance with the foregoing shall not be less than $433,000.
The obligations of First Western and the Bank to consummate the
Reorganizations are subject to the satisfaction or waiver of certain additional
conditions, including: (i) the truth, in all material requests, of all
representations and warranties made by Zions and Zions Bank in the Plan of
Reorganization on the Effective Date and the performance, in all material
respects, by Zions and Zions Bank of all their obligations under the Plan of
Reorganization; (ii) receipt of a legal opinion of Metzger, Hollis, Gordon &
Mortimer, special counsel to Zions, satisfactory to First Western and the Bank;
(iii) the absence, during the period from June 30, 1994 to the Effective Date,
of any material adverse change in the financial position or results of
operations, properties, liabilities or business of Zions; (iv) the absence, as
of the Effective Date, of any material error, misstatement or omission in any of
the representations and warranties of Zions or Zions Bank or any material
failure to perform or satisfy any covenants of Zions or Zions Bank contained in
the Plan of Reorganization; and (v) the quoting of Zions Common Stock on NASDAQ
or the listing of Zions Common Stock on a national securities exchange.
Representations and Warranties
The representations and warranties of Zions, Zions Bank, First Western
and the Bank contained in the Plan of Reorganization relate, among other things,
to the organization and good standing of Zions, Zions Bank, First Western, and
the Bank; the capitalization of Zions, First Western and the Bank; the
authorization by Zions, Zions Bank, First Western and the Bank 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 June
30, 1994; the absence of undisclosed liabilities; and compliance with laws.
First Western and the Bank have additionally warranted that since June 30, 1994
there has been no material deterioration in the quality of the Bank's loan
portfolio or any major component thereof and no material 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. First
Western has also warranted that its reserve for possible credit losses as of
June 30, 1994, was adequate to absorb reasonably anticipated losses in the
consolidated loan and lease portfolios in view of the size and character of such
portfolios.
Zions has additionally warranted since June 30, 1994 that there have
been (a) no material adverse change in the condition, financial or otherwise,
assets, properties, liabilities, or businesses of Zions, and (b) no material
deterioration in the quality of the loan portfolio of Zions or of any major
component thereof, and no material increase in the level of nonperforming assets
or nonaccrual loans at Zions or in the level of its provision for credit losses
or its reserve for possible credit losses.
The representations and warranties contained in the Plan of
Reorganization will survive the consummation of the Reorganizations.
Amendment and Waiver
Notwithstanding prior approval by the shareholders of First Western and
the Bank, 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 First
Western or the Bank. The parties 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 First Western
and the Bank, governmental regulatory approvals required to consummate the
Reorganizations, and securities registration requirements incident to the
issuance of Zions Common Stock in the Reorganizations.
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
First Western and the Bank and without payment of damages by either party except
as provided below, as follows: (i) by mutual consent of the parties; (ii)
unilaterally, by either party if any of the representations and warranties of
the other party was materially incorrect when made or in the event of a material
breach or material failure by a party to the Plan of Reorganization contained in
the Plan of Reorganization which has not been, or cannot be, cured within 30
days after written notice of such breach or failure has been given to the other
party; (iii) by First Western if the Average Closing Price is greater than
$41.00 and First Western has provided Zions written notice before the close of
business on the fourth trading day preceding the Effective Date of its intention
to terminate based on price and Zions has not thereafter prior to the close of
business on the third trading day preceding the Effective Date given First
Western written notice of its intent to utilize $41.00 as the Average Closing
Price; (iv) by Zions if the Average Closing Price is greater than $37.00 and
Zions has provided First Western written notice before the close of business on
the fourth trading day preceding the Effective Date of its intention to
terminate based on price and First Western has not thereafter prior to the close
of business on the third trading day preceding the Effective Date given Zions
written notice of its intent to utilize $37.00 as the Average Closing Price; (v)
by either Zions or First Western if the Reorganizations have become inadvisable
or impracticable by reason of federal or state litigation to restrain or
invalidate the Reorganizations; or (v) by either party on or after July 31,
1995, 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 or material failure by a party of a
covenant or agreement 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 First Western and Bank Shareholders
First Western Shareholders. A holder of shares of First Western Common
Stock is entitled to exercise the rights of a dissenting shareholder under the
Utah Revised Business Corporation Act sections 16-10a-1301 et seq. to object to
the Plan of Reorganization and make written demand that First Western 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 Utah law and is qualified in its entirety by
reference to such statutory provisions, which are set forth in full as Appendix
A to this Joint Proxy Statement/Prospectus.
Utah law requires that First Western shareholders must follow certain
prescribed procedures in the exercise of their statutory right to dissent in
connection with the Reorganization. The failure to follow such procedures on a
timely basis, in the precise manner required by Utah law 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 First Western, prior to the taking of the vote at the Special Meeting
to be held on June 5, 1995, at 10:30 a.m., local time, at Main and Third South
Streets, Moab, Utah, his or her written notice of such shareholder's intent to
demand payment for the shares owned if the proposed action is effectuated. Such
notice may be delivered to Mrs. Frankie Nightingale, Corporate Secretary, Main
and Third South Streets, Moab, Utah 84532. Upon timely receipt of the demand
notice, First Western must no later than ten days after the effective date of
the corporate action notify any dissenting shareholder who is entitled to demand
payment for his shares that the merger has been approved and provide other
information to the shareholder (the "dissenters' notice"). Any shareholder who
has not timely notified First Western of the demand for payment will be bound by
the Reorganization and will have the same rights as if a written notice of
demand had not been filed. A shareholder who is given a dissenters' notice must,
in accordance with the dissenters' notice, cause First Western to receive a
demand payment for the value of such shareholder's shares of First Western
Common Stock and deposit the share certificates in accordance with the
dissenters' notice. A shareholder who does not demand payment and deposit share
certificates as required, by the date or dates set in the dissenters' notice, is
not entitled to payment for shares.
Upon the later of the Effective Date and receipt by First Western of
each payment demand from the dissenting shareholders, First Western will pay the
amount First Western estimates to be the fair value of the dissenters' shares,
plus interest. Each payment must be accompanied by (a) First Western's balance
sheet as of the end of its most recent fiscal year, (b) an income statement for
that year, (c) a statement of changes in shareholders' equity for that year and
a statement of cash flow for that year, if First Western customarily provides
such statements to its shareholders, (d) the latest available interim financial
statements, if any, (e) a statement of First Western's estimate of fair value of
the shares and the amount of interest payable on such shares, (f) a statement of
the dissenter's right to demand payment if the shareholder is dissatisfied with
First Western's payment or offer, and (g) a copy of the Utah dissenters' rights
provisions.
A dissenter who has not accepted First Western's offer may notify First
Western in writing of his own estimate of the fair value of his shares and
demand payment of the estimated amount, plus interest, less any payment
previously made by First Western if (a) the dissenter believes that the amount
paid by First Western is less than the fair value of the shares, or (b) First
Western fails to make payment within 60 days after the date set by First Western
as the date by which it must receive the payment demand. A dissenter waives the
right to demand payment as set forth in this paragraph unless he causes First
Western to receive the notice required in this paragraph within 30 days after
First Western made or offered payment for his shares.
If a demand for payment under the previous paragraph remain unresolved,
First Western will commence a proceeding within 60 days after receiving the
payment demand set forth in the previous paragraph and will petition the court
to determine the fair value of the shares and the amount of interest. If First
Western does not commence the proceeding within the 60-day period, it will pay
each dissenter whose demand remains unresolved the amount demanded. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value.
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.
Shareholders considering seeking appraisal by exercising their
dissenters' rights should be aware that the fair value of their First Western
Common Stock determined pursuant to Utah law could be more than, the same as, or
less than their pro rata share of the Holding Company Purchase Price that they
are entitled to receive pursuant to the Plan of Reorganization if they do not
seek appraisal of their First Western Common Stock.
Bank Shareholders. Under the National Bank Act, 12 U.S.C. section
215a(b), any Bank shareholder has the right to dissent from the Reorganization
and to receive fair value in cash for his or her Bank Common Stock. The shares
as to which dissenters' rights are exercised are referred to herein as
"Dissenting Shares." The express procedures of the National Bank Act must be
followed precisely; if they are note, shareholders may lose their right to
dissent.
The procedures discussed below apply only if the Reorganization is
approved by the Bank shareholders, approved by the Comptroller and consummated
as provided in the Plan of Reorganization.
In accordance with the dissenters' rights provisions of the National
Bank Act (see Appendix B), any shareholder of the Bank who votes against the
Plan of Reorganization at the Special Meeting or who gives written notice at or
prior to the Special Meeting to the presiding officer that he dissents from the
plan of merger shall be entitled to receive in cash the value of the shares held
by him as of the Effective Date if he makes written request therefor to the
surviving bank, Zions Bank, at any time before thirty days after the Effective
Date, accompanied by the surrender of his stock certificates. After making
demand for payment, the dissenting Bank shareholder will not be entitled to vote
or exercise any other rights of a Bank shareholder. Any shareholder who votes
against the Plan of Reorganization Agreement at the Special Meeting or who has
given the aforesaid written notice at or before the Special Meeting that he
dissents from the Plan of Reorganization will be notified in writing of the
Effective Date.
Failure to vote against the Plan of Reorganization will constitute a
waiver of a shareholder's appraisal rights unless he gives written notice prior
to or at the Special Meeting to the presiding officer at the Special Meeting
that he dissents form the Plan of Reorganization. However, simply because a
shareholder votes against the Plan of Reorganization at the Special Meeting or
gives such written notice prior to or at the Special Meeting does not mean that
he is then entitled to receive the value of his shares. Such a shareholder must
also make a written request to the surviving bank (Zions Bank) for the value of
his shares at any time before thirty days after the effective date and accompany
such request with a surrender of his stock certificates. Mere failure to vote or
merely voting against the Reorganization or merely filing a notice of dissent
will not satisfy the requirement for a written demand.
Unless the above procedure is followed, the Bank shareholder will be
presumed to have acquiesced in the approval of the Reorganization and waived his
or her dissenters' rights. If an executed proxy is received but no direction is
indicated as to how such proxy should be voted, the Bank Common Stock
represented by the proxy will be voted in favor of the Reorganization.
Accordingly, the submission of an unmarked proxy, unless revoked prior to its
being voted, will serve to waive the Bank shareholder's dissenters' rights. As
noted above, failure to vote against the Reorganization will not waive a
shareholder's dissenters' rights if the shareholder has filed a written notice
prior to or at the meeting and has not voted in favor of the Reorganization. If
a shareholder abstains from voting on the Reorganization, this will not waive
dissenters' rights so long as the appropriate written notice is properly and
timely filed. Mere notice filed after the Special Meeting, absent compliance
with the other specific requirements, will not be effective to preserve a
shareholder's dissenters' rights. In the event a shareholder abstains from
voting and does not timely file all required notices in order to perfect
dissenters' rights, such shareholder will lose his right to dissent but will
nonetheless be entitled to the same consideration as if he or she had voted in
favor of the transaction.
Any shareholder failing to make demand and surrender his or her stock
certificates within the 30-day period will be bound by the terms of the Plan of
Reorganization, including the requirement to exchange his or her shares of Bank
Common Stock for shares of Zions Common Stock.
The value of the shares of any dissenting shareholder will be
ascertained as of the Effective Date by an appraisal made by a committee of
three persons, composed of (1) one selected by a majority vote of the dissenting
shareholders, (2) one selected by the directors of the surviving bank (Zions
Bank), and (3) one selected by the two so chosen. The value agreed upon by any
two of the three so selected will govern. If this agreed-upon value is not
satisfactory to any dissenting shareholder who has requested payment as provided
by Section 215a(b), such shareholder may, within five days after being notified
of such appraised value of his shares, appeal to the Comptroller, who will cause
a reappraisal to be made which will be final and binding with respect to the
value of the appellant's shares.
If, within ninety (90) days after the Effective Date, for any reason
one or more of the three appraisers is not selected as provided by Section
215a(c), or the appraisers fail to determine the value of the shares as provided
above, the Comptroller will upon written request of any interested party cause
an appraisal to be made which will be final and binding on all parties. The
expenses incurred by the Comptroller in making any such appraisal or
reappraisal, as the case may be, will be paid by the surviving bank. The
surviving bank (Zions Bank) will promptly pay the ascertained value of the
shares to the dissenting shareholders.
Shareholders considering seeking appraisal by exercising their
dissenters' rights should be aware that the fair value of their Bank Common
Stock determined pursuant to the National Bank Act could be more than, the same
as, or less than their pro rata share of the Bank Purchase Price that they are
entitled to receive pursuant to the Plan of Reorganization if they do not seek
appraisal of their Bank Common Stock.
THE FOREGOING DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE
PROCEDURES TO BE FOLLOWED BY SHAREHOLDERS DESIRING TO EXERCISE APPRAISAL RIGHTS
AND, IN VIEW OF THE FACT THAT EXERCISE OF SUCH RIGHTS REQUIRES STRICT ADHERENCE
TO THE RELEVANT PROVISIONS OF THE NATIONAL BANK ACT, EACH SHAREHOLDER WHO MAY
DESIRE TO EXERCISE APPRAISAL RIGHTS IS ADVISED INDIVIDUALLY TO CONSULT THE LAW
(AS SET FORTH IN APPENDIX B TO THIS JOINT PROXY STATEMENT/PROSPECTUS) AND COMPLY
WITH THE PROVISIONS THEREOF.
FIRST WESTERN AND BANK 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 UTAH AND FEDERAL LAW.
Restrictions on Resales by First Western and Bank Affiliates
The shares of Zions Common Stock issuable in the Reorganizations have
been registered under the Securities Act, and such shares will generally be
freely tradable by the First Western and Bank shareholders who receive Zions
shares as a result of the Reorganizations. However, this registration does not
cover resales by First Western or the Bank shareholders who may be deemed to
control or be under common control with First Western, the Bank or Zions and who
therefore may be deemed "affiliates" of First Western, the Bank 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; or (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 First Western and the Bank will notify those persons who it
believes may be such affiliates.
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. First Western and the Bank will pay
the respective cost of printing and delivering this Joint Proxy
Statement/Prospectus to their respective shareholders and for soliciting proxies
for the respective Special Meeting. Zions will pay all costs attributable to
registering its stock issuable pursuant to this Joint Proxy Statement/Prospectus
under federal and state securities laws.
Government Approvals
Applications for approval (or requests for waiver of application
requirements) of the Reorganizations must be made to, and approvals and consents
or waivers must be obtained from, appropriate federal and Utah regulators,
including the Federal Reserve Board, the Comptroller, and the Commissioner. The
Federal Reserve Board has waived application and approval requirements otherwise
applicable pursuant to Section 3(a) of the Bank Holding Company Act. The
Comptroller has approved the merger of the Bank into Zions bank pursuant to the
Bank Merger Act. The Commissioner has waived jurisdication with respect to the
transactions contemplated by the Plan of Reorganization. Federal law prohibits
consummation of the Reorganizations until 30 days after the approvals of the
federal regulators have been obtained unless a shorter period has been
prescribed by the federal regulator with the concurrence of the Attorney General
pursuant to Section 321 of the Riegle Act.
Effective Date of the Reorganizations
It is presently anticipated that if the Plan of Reorganization is
approved by the shareholders of First Western and of the Bank, the
Reorganizations will become effective during the second quarter of 1995.
However, as noted above, consummation of the Reorganizations 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 Reorganizations will be satisfied
or, if satisfied, that they will be satisfied in time to permit the
Reorganizations to become effective during the second quarter of 1995. In
addition, as also noted above, Zions, First Western and the Bank 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
The following table, which shows comparative historical per Common
Share data for Zions and First Western (separately and pro forma combined), and
equivalent pro forma per share data for First Western, should be read in
conjunction with the financial information appearing elsewhere in this Joint
Proxy Statement/Prospectus or as incorporated herein by reference to other
documents. The pro forma data in the table, presented as of December 31, 1994,
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
period or as of the date for which the information in the table is presented:
<TABLE>
<CAPTION>
Historical Pro Forma
Zions and
First
Western First Western
First Pro-Forma Equivalent
Per Common Share Zions Western Combined(4) Pro-Forma(5)
<S> <C> <C> <C> <C>
NET INCOME(1)
For the year
ended December 31, 1994 $ 4.37 $ 18.70 $ 4.30 $ 28.82
CASH DIVIDENDS(2)
For the year
ended December 31, 1994 $ 1.16 -0- $ 1.16 $ 7.78
BOOK VALUE(3)
As of December 31, 1994 $ 25.12 $ 134.42 $ 25.31 $ 169.65
- --------------------
<FN>
(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 combined net income per share represents historical net
income of Zions and First Western adjusted for amortization of goodwill
resulting from purchase accounting computed using historical weighted
average common and common equivalent shares of Zions adjusted by
computed common and common equivalent shares to be issued in the
purchase. Pro forma combined book value per share represents historical
total shareholders' equity of Zions adjusted by the purchase price less
amortization of goodwill resulting from purchase accounting computed
using Zions' historical common shares outstanding adjusted by computed
common shares to be issued in the purchase.
(5) Pro forma equivalent amounts are computed by multiplying the pro forma
combined amounts by the estimated exchange ratio as of January 3, 1995.
</TABLE>
<PAGE>
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. Most states
have specifically authorized the acquisition of banks located in these states by
out of state companies, in many cases subject to various restrictions.
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 Riegle-Neal Interstate Branching and Efficiency Act of 1994
("Riegle-Neal Act") permits, beginning one year after enactment and subject to
approval by the Federal Reserve Board, bank holding companies to acquire either
control of, or substantial assets of, a bank located outside the bank holding
company's home state. These acquisitions are subject to limitations, including,
inter alia, adequate capitalization and management of the acquiring bank holding
company, existence of the acquired bank for up to five years before purchase
where required under state law, existence of state laws that condition
acquisitions on institutions making assets available to a "state-sponsored
housing entity," limitations on control by the acquiring bank holding company of
not more than 10% of the total amount of deposits in insured depository
institutions in the United States or not more than 30% of the deposits in
insured depository institutions within that state. States may impose lower
deposit concentration limits, so long as those limits apply to all bank holding
companies equally. The Riegle-Neal Act reaffirms the right of states to
segregate and tax separately incorporated subsidiaries of a bank or bank holding
company. The Riegle-Neal Act also affects interstate branching and merger. See
"Interstate Banking" below.
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
riskbased 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 December 31, 1994, Zions' Tier 1 and Total Capital
ratios were 11.81 and 14.96, 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; (vii) certain risks arising from nontraditional
activities; and (viii) management's overall ability to monitor and control other
financial and operating risks, including the risks presented by concentrations
of credit and nontraditional activities. 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.
The following table presents Zions' regulatory capital position at
December 31, 1994 under the risk-based capital guidelines and as adjusted to
give effect to the offering of its stock in the Reorganization.
Risk-Based Capital
Zions Pro Forma Combined
(Dollars in thousands)
Percent Percent
of Risk- of Risk-
Adjusted Adjusted
Amount Assets Amount Assets
Tier 1 Capital $ 327,687 11.81% $ 332,564 11.88%
Minimum Requirement 110,994 4.00 111,945 4.00
---------- ------ ---------- ------
Excess $ 216,693 7.81% $ 220,619 7.88%
========== ====== ========== ======
Total Capital $ 415,172 14.96% $ 420,348 15.02%
Minimum Requirement 221,987 8.00 223,890 8.00
---------- ------ ---------- ------
Excess $ 193,185 6.96% $ 196,458 7.02%
========== ====== ========== ======
Risk-Adjusted Assets,
Net of Goodwill and
Excess Allowance $2,774,841 100.00% $2,798,619 100.00%
========== ====== ========== ======
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
welldiversified 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 indices of capital strength in evaluating proposals for expansion or
new activities.
The Federal Reserve Board has adopted amendments to its capital
guidelines, effective as of December 31, 1994, under which bank holding
companies and state member banks must deduct from Tier 1 capital in calculating
risk-based capital and leverage ratios net unrealized holding losses on
available-for-sale equity securities (i.e., those securities a bank does not
have the positive interest and ability to hold to maturity, but which it has no
intent to trade as a part of a trading account). Zions does not expect that
implementation of this amendment to the Federal Reserve Board's capital
guidelines will result in a material increase in the capital requirements
applicable to it. The Federal Reserve Board has also adopted a final rule
amending its capital guidelines effective April 1, 1995, limiting the amount of
certain deferred tax assets that may be included by bank holding companies and
member banks in Tier 1 capital for calculation of risk-based capital and
leverage ratios. Zions does not anticipate that implementation of this amendment
to the Federal Reserve Board's capital guidelines will result in a material
increase in the capital requirements applicable to it. The Federal Reserve Board
has also recently (August 24, 1994) published proposed amendments to its
risk-based capital guidelines which, if adopted in their current form, would
generally increase the amount of capital required to be carried against certain
long term derivative contracts; the proposal also recognizes the effect of
certain bilateral netting arrangements in reducing potential future exposure
under these contracts. Until the proposed amendments are adopted in final form
by the Federal Reserve Board, Zions cannot predict their effect upon the capital
requirements applicable to it.
The following table presents Zions' leverage ratio at December 31, 1994
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 ............................... $ 327,687 6.24 $ 332,564 6.29
Minimum Requirement .......................... 157,604 3.00 158,721 3.00
---------- ------ ---------- ------
Excess ....................................... $ 170,083 3.24% $ 173,843 3.29%
========== ====== ========== ======
Average Assets, Net Goodwill.................... $5,253,465 100.00% $5,290,771 100.00%
========== ====== ========== ======
</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 their risk-based capital
guidelines to ensure that those standards take account of interest rate risk,
concentrations of credit and the risk of nontraditional activities, as well as
reflect the actual performance and risk of multifamily mortgages. Pursuant to
the Riegle Community Development and Regulatory Improvement Act of 1994 (the
"Riegle Act"), signed into law on September 23, 1994, such revisions by the
federal banking agencies to their risk-based capital guidelines must also take
account of the size and activities of insured institutions and not cause undue
reporting burdens to them. The manner of implementation by the FDIC of this
requirement mandated by FDICIA, as modified by the Riegle Act, is described
below.
(i) In 1993 and 1994, the Federal Reserve Board, the Comptroller and
the FDIC adopted rules which assigned a 50% risk weight for loans that are fully
secured by multifamily residential property and do not exceed 80% of the
property's value. To be eligible for the 50% risk weight, the property's annual
net operating income must be 120% of the amount of the annual debt service and
the loan must be amortized within 30 years. The principal and interest payments
must be made on a timely basis for one year before the 50% risk weight may be
applied and the loan must provide for principal repayment beginning within seven
years of the date of the loan. Zions does not anticipate that the implementation
of these rules will have a material adverse effect upon the capital requirements
applicable to it or upon those applicable to its bank subsidiaries.
(ii) The federal banking agencies have adopted rules, effective January
17, 1995, under which they will take account of risks from concentrations of
credit (in specific countries, regions, industries and loan types) and from
nontraditional activities in their analyses of capital adequacy of state
nonmember banks. Pursuant to the rule, in such institutions are required to
identify, monitor and control, significant exposures from concentrations of
credit and from nontraditional activities, and hold additional capital above the
regulatory minimums to reflect such risks. The level of such risks, as well as
an institution's ability to identify, monitor and control them, will be
considered by the federal banking agencies in determining the capital adequacy
of the institution. Zions does not anticipate that implementation of this rule
will result in an increase in the capital requirements applicable to it or upon
those applicable to its bank subsidiaries.
(iii) On September 14, 1993, the Federal Reserve Board, the Comptroller
and the FDIC 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. 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 interest rate risk factors in the risk-based capital rules of the
federal banking agencies will have upon capital requirements applicable to it or
its bank subsidiaries.
FDICIA amended Section 38 of the Federal Deposit Insurance Act
("FDICIA") 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 as well as to the mandatory appointment of a conservator or receiver
within 90 days of becoming critically undercapitalized unless periodic
determinations are made by the appropriate federal banking agency, with the
concurrence of the FDIC, that forbearance from such action would better protect
the affected deposit insurance fund. Unless appropriate findings and
certifications are made by the appropriate federal banking agency with the
concurrence of the FDIC, a critically undercapitalized institution must be
placed in receivership if its remains critically undercapitalized on average
during the calendar quarter beginning 270 days after the date it became
critically undercapitalized.
Other Regulations
FDICIA requires the federal banking agencies to adopt 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. The Riegle Act modified this provision of FDICIA to
authorize the federal banking agencies to prescribe safety and soundness
standards by regulation or by guidelines for all insured depository
institutions, afford the federal banking agencies flexibility to establish asset
quality, earnings and stock valuation standards that they determine to be
appropriate and eliminate the requirement that such standards apply to
depository institution holding companies. On February 2, 1995, the Federal
Reserve Board agreed to seek (and Zions believes the other federal banking
agencies will soon seek) public comment on proposed guidelines applicable to
state member banks setting forth asset quality, earnings and stock valuation
standards, final guidelines with respect to all other standards required under
FDICIA and a final rule establishing deadlines and procedures for submission and
review of safety and soundness compliance plans and issuance of compliance
orders. In the view of the Federal Reserve Board, the proposed and final
standards, respectively, do not represent a change in existing policies but,
instead, formalize fundamental standards already applied by the agencies. In
general, the standards establish objectives of proper operations and management
while leaving the specific methods for achieving those objectives to each
institution. The final rule 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. Zions does not believe that implementation of the final
guidelines and rule will have a material adverse effect upon the operations or
earnings of its bank subsidiaries. Until final guidelines prescribing asset
quality, earnings and stock valuation standards are adopted by the federal
banking agencies, Zions cannot predict the effect of their application to its
operations or earnings or the operations or earnings 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
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 earnings or capital position, or the earnings or capital position 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 does not currently expect that the implementation of these laws will have
a material adverse effect upon its earnings or capital position or the earnings
or capital position of its subsidiaries.
The Riegle Act, in addition to enacting measures intended to increase
credit available to businesses in distressed communities (by providing
incentives to lenders to provide credit in those communities), remove
impediments to the securitization of small business loans, improve the National
Flood Insurance Program and strengthen enforcement against money laundering,
mandates modifications to federal laws and regulations affecting banks and bank
holding companies in an attempt to reduce regulatory and administrative burdens
on these entities (including the modifications to requirements mandated by
FDICIA noted previously). These changes include, inter alia, requirements that
federal banking agencies consider the burden and benefits which may affect
insured depository institutions and their customers when establishing the
effective dates of certain new regulations or imposing certain new
administrative compliance requirements, that certain new federal regulations
affecting depository institutions and amendments to existing regulations take
effect on the first day of a calendar quarter and that federal banking agencies
streamline regulatory requirements and eliminate duplicative filings and
coordinate examinations of financial institutions. The Riegle Act also provides
for simplified bank holding company formation and bank and bank holding company
merger application procedures, modified insider lending rules and capital rules
applicable to assets transferred with recourse. Because all provisions of the
Riegle Act have not been implemented, Zions cannot predict the effect of these
changes upon its operations or upon those of its subsidiaries.
The nature of the banking and financial services industry, as well as
banking regulation, may be further affected by various legislative and
regulatory measures currently under consideration. Such measures include, inter
alia, legislation designed to permit increased affiliations between commercial
and financial firms (including securities firms) and federally-insured banks,
reduce regulatory burdens on financial institutions, impose a moratorium on the
application of federal regulations and establish standards for federal
supervision of derivatives activities of insured institutions. It is impossible
to predict whether or in what form these proposals may be adopted in the future
and, if adopted, what the effect of their adoption will be on the Zions or its
subsidiaries.
Deposit Insurance Assessments
The insured bank subsidiaries of Zions are required to pay quarterly
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 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.
The FDIC revised, effective October 1, 1993, its deposit insurance
regulation to establish a permanent risk-based assessment system. 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 flatrate 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 is authorized to increase assessment rates beyond
those currently in effect if, in the judgment of its Board of Directors, the
condition of the BIF so requires. The FDIC also possesses authority to impose
special assessments from time to time. Implementation of the permanent
risk-based deposit insurance assessment system has not had a material adverse
impact on the financial condition or results of operations of the Zions or upon
those of its bank subsidiaries.
Premiums paid to the FDIC have been an increasing burden on bank
earnings. In recognition of this trend, the FDIC may, when the BIF reaches a
target ratio of 1.25% of insured deposits, reduce insurance premiums. The Board
of Directors of the FDIC is currently considering a proposal under which the
assessment rate payable by the healthiest banks would be reduced from .23% to
.04% at such time as the target ratio is achieved; other assessment rates,
depending on an institution's supervisory risk group, would be .07%, .14%, .21%,
.28% and .31%. The proposal would also establish a procedure for adjusting
assessment rates semiannually within a range of up to five basis points without
seeking public comment. The FDIC is also considering whether the deposit
assessment base, against which the applicable assessment rate is multiplied in
determining the deposit insurance assessment to be paid by each insured
institution, should be redefined in light of the adoption of the risk-based
assessment system and certain statutory and other developments effecting insured
depository institutions. Currently, the assessment base is defined to include
the total domestic deposits of each insured institution as adjusted for certain
elements. Depending upon the nature of the changes, if any, made by the FDIC to
the definition of the assessment base, the aggregate liabilities of each insured
institution subject to assessment could increase or could be reduced, or an
assessment base consisting of other than bank liabilities could be adopted,
thereby potentially affecting the earnings of each institution. Until the nature
of the changes to be adopted by the FDIC to the assessment base definition are
known, Zions cannot predict their effect upon its overall financial condition or
results of operations or upon those of its bank subsidiaries.
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 have been prohibited by federal law.
Under Utah law, any out-of-state bank of bank holding company may
acquire a Utah bank or bank holding company upon approval of the state banking
supervisor. 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 based acquirers.
The Riegle-Neal Act dramatically affects interstate banking activities.
As discussed previously, the Riegle-Neal Act allows the Federal Reserve Board to
approve the acquisition by a bank holding company of control or substantial
assets of a bank located outside the bank holding company's home state as of
September 29, 1995. Beginning on June 1, 1997, and earlier if permitted by
applicable state law, an insured bank may apply to the appropriate federal
agency for permission to merge with an out-of-state bank and convert its offices
into branches of the resulting bank. States retain the option to prohibit
out-of-state mergers if they enact a statute specifically barring such mergers
before June 1, 1997 and such law applies equally to all out-of-state banks.
Interstate mergers authorized by the Riegle-Neal Act are subject to
conditions and requirements, including, inter alia, adequate capitalization and
management of the acquiring bank or bank holding company, existence of the
acquired bank for up to five years before purchase where required under state
law, and limitations on control by the acquiring bank holding company of not
more than 10% of the total amount of deposits in insured depository institutions
in the United States or not more than 30% of the deposits in insured depository
institutions within that state. States may impose lower deposit concentration
limits, so long as those limits apply to all bank holding companies equally.
Additional requirements placed on mergers include conformity with state law
branching requirements and compliance with "host state" merger filing
requirements to the extent that those requirements do not discriminate against
out-of-state banks or out-of-state bank holding companies.
The Riegle-Neal Act also permits banks to establish and operate a "de
novo branch" in any state that expressly permits all out-of-state banks to
establish de novo branches in such state, if the law applies equally to all
banks. (A "de novo branch" is a branch office of a national bank or state bank
that is originally established as a branch and does not become a branch as a
result of an acquisition, conversion, merger, or consolidation.) Utilization of
this authority is conditioned upon satisfaction of most of the conditions
applicable to interstate mergers under the Riegle-Neal Act, including, inter
alia, adequate capitalization and management of the branching institution,
satisfaction with certain filing and notice requirements imposed under state law
and receipt of federal regulatory approvals.
Because important components of the Riegle-Neal Act have not yet become
effective, Zions cannot predict the effects of the Act's implementation upon its
operations or earnings or upon those of its subsidiaries.
<PAGE>
Zions Bank
Zions Bank, 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 Bank's operations are subject to regulation. The
approval of the Comptroller is required for the establishment of additional
branch offices by Zions Bank, subject to applicable state law restrictions.
Zions Bank is a member of the Federal Reserve System, and the deposits
of Zions Bank are insured by the FDIC. Accordingly, Zions Bank 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 Bank 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 Bank
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 Bank is particularly
susceptible to being affected by federal and state legislation and regulations,
which may increase the cost of doing business.
MONETARY POLICY
The earnings of Zions, Zions Bank, First Western, 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 Bank, First Western,
and the Bank cannot be predicted.
ZIONS BANCORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
The following unaudited table of selected financial data should be read
in conjunction with the related notes included herein and Zions Bancorporation
consolidated financial statements and the related notes, incorporated by
reference.
<PAGE>
ZIONS BANCORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share and ratio data)
<TABLE>
<CAPTION>
As of, and for the
Year Ended December 31,
--------------------------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
EARNINGS SUMMARY
Taxable-equivalent net interest income $ 203,313 $ 178,636 $ 160,854 $ 142,614 $ 131,077
Net interest income 198,606 174,657 157,282 139,871 128,121
Noninterest income 73,202 79,880 62,849 52,456 47,919
Provision for loan losses 2,181 2,993 10,929 25,561 20,083
Noninterest expenses (1) 174,900 167,750 139,069 122,999 116,289
Income taxes 30,900 27,248 22,924 13,318 11,903
Income before cumulative effect of changes
in accounting principles 63,827 56,546 47,209 30,449 27,765
Cumulative effect of changes in
accounting principles (2) - 1,659 - - -
Net income 63,827 58,205 47,209 30,449 27,765
COMMON STOCK DATA Earnings per common share:
Income before cumulative effect of
changes in accounting principles $ 4.37 $ 3.96 $ 3.42 $ 2.23 $ 2.07
Net income 4.37 4.08 3.42 2.23 2.07
Dividends paid per share 1.16 .98 .75 .72 .72
Dividend payout ratio (%) 27.06% 21.81% 20.31% 29.89% 32.20%
Book value per share at year end 25.12 22.01 18.95 16.23 14.63
Market to book value at year end (%) 142.83% 168.11% 200.53% 132.47% 108.54%
Weighted average common and common
equivalent shares outstanding during the year 14,601,000 14,280,000 13,790,000 13,634,000 13,430,000
Common shares outstanding at year end 14,559,552 14,201,367 13,727,544 13,603,812 13,442,040
AVERAGE BALANCE SHEET DATA
Money market investments $ 869,709 $ 788,694 $ 469,062 $ 670,584 $ 550,192
Securities 1,545,704 1,209,165 927,976 702,027 529,737
Loan and leases, net 2,574,995 2,222,182 2,104,679 1,875,928 1,806,188
Total interest-earning assets 4,990,408 4,220,041 3,501,717 3,248,539 2,886,117
Total assets 5,456,613 4,643,918 3,807,832 3,536,809 3,208,963
Interest-bearing deposits 2,744,976 2,449,275 2,356,384 2,219,341 2,068,939
Total deposits 3,583,094 3,178,926 2,912,860 2,701,131 2,531,611
FHLB advances and other borrowings 151,164 195,097 128,856 154,564 36,935
Long-term debt 59,493 75,623 82,219 86,967 94,923
Total interest-bearing liabilities 4,197,865 3,556,746 2,962,079 2,792,239 2,498,239
Shareholders' equity 339,181 286,331 240,411 208,729 186,715
YEAR END BALANCE SHEET DATA
Money market investments $ 403,446 $ 597,680 $ 616,180 $ 714,238 $ 831,086
Securities 1,663,433 1,258,939 981,695 852,861 630,800
Loans and leases, net 2,391,278 2,486,346 2,107,433 1,979,726 1,868,199
Allowance for loan losses 67,018 68,461 59,807 58,238 60,948
Total assets 4,934,095 4,801,054 4,107,924 3,883,938 3,720,227
Total deposits 3,705,976 3,432,289 3,075,110 2,877,860 2,684,826
FHLB advances and other borrowings 127,319 288,249 205,222 203,685 289,986
Long-term debt 58,182 59,587 99,223 81,134 92,794
Shareholders' equity 365,770 312,592 260,070 220,753 196,706
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
As of, and for the
Year Ended December 31,
--------------------------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Nonperforming assets:
Nonaccrual loans $ 13,635 $ 23,364 $ 21,556 $ 33,497 $ 35,802
Restructured loans 567 4,006 4,003 3,225 10,181
Other real estate owned and other
nonperforming assets 4,741 3,267 5,971 9,938 17,434
Total nonperforming assets 18,943 30,637 31,530 46,660 63,417
Accruing loans past due 90 days or more 3,041 10,821 6,409 5,315 10,273
SELECTED RATIOS
Net interest margin (3) 4.07% 4.23% 4.59% 4.39% 4.54%
Return on average assets 1.17% 1.25% 1.24% .86% .87%
Return on average common equity 18.82% 20.33% 19.64% 14.59% 14.87%
Ratio of average common equity to average assets 6.22% 6.17% 6.31% 5.90% 5.82%
Tier I risk-based capital - year end 11.81% 10.85% 10.23% 8.40% 8.11%
Total risk-based capital - year end 14.96% 14.12% 15.13% 12.09% 12.49%
Leverage ratio - year end 6.24% 5.44% 6.21% 5.86% 5.72%
Ratio of nonperforming assets to total
assets - year end .38% .64% .77% 1.20% 1.70%
Ratio of nonperforming assets to net loans and
leases and other real estate owned and
other nonperforming assets at year end .79% 1.23% 1.49% 2.35% 3.36%
Ratio of net charge-offs (recoveries) to average
loans and leases .19% (.23)% .44% 1.51% 1.10%
Ratio of allowance for loan losses to net loans
and leases outstanding at year end 2.80% 2.75% 2.84% 2.94% 3.26%
Ratio of allowance for loan losses to
nonperforming loans at year end 471.89% 250.13% 234.00% 158.59% 132.54%
<FN>
(1) Noninterest expenses for the year ended December 31, 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 year ended
December 31, 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 $5,290,000 for the expected future tax consequences of
temporary differences between the carrying amounts and the tax bases of
other assets and liabilities.
(3) Net interest margin represents net interest income on a taxable-equivalent
basis as a percentage of average earning assets.
</TABLE>
<PAGE>
STOCK PRICES OF 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>
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 ............................... $ 39.75 $ 36.50 $ .28
Second Quarter .............................. 42.00 37.00 .28
Third Quarter ............................... 40.63 38.50 .30
Fourth Quarter .............................. 39.25 33.50 .30
-----
$ 1.16
1995
First Quarter ............................... $ 40.50 $ 35.50 $ .30
Second Quarter (through April 28, 1995)...... 42.63 38.13 --
</TABLE>
On October 31, 1994, the last NASDAQ trading day prior to the public
announcement of the Reorganization, the closing sale price for the Zions Common
Stock was $ 37.625. On April 28, 1995, the closing sale price for the Zions
Common Stock was $42.625. On April 28, 1995, there were approximately 14,605,126
shares of Zions Common Stock outstanding, held by approximately 3,934
shareholders of record.
<PAGE>
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.
PRINCIPAL HOLDERS OF ZIONS COMMON STOCK
The following table sets forth as of February 27, 1995, 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 1,135,226 7.80%
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 415,051 2.85%
One Main Street Beneficial(2) 635,804 4.37%
--------- ----
Salt Lake City, Utah 84133 1,050,855 7.22%
Corporation of the President of the Beneficial 776,445 5.33%
Church of Jesus Christ of
Latter-day Saints
47 East South Temple Street
Salt Lake City, Utah 84150
Zions First National Bank Record(3) 1,071,528 7.36%
One Main Street
Salt Lake City, Utah 84133
- ---------------------
<FN>
(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, 1000 Kennecott
Building, Salt Lake City, Utah; Harris H. Simmons, 1 South Main Street,
Salt Lake City, Utah; I.J. Wagner, 680 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 586,928
shares deposited with the voting trust referred to in note (1) above.
(3) These shares are owned of record as of February 27, 1995, by Zions Bank
in its capacity as fiduciary for various trust and advisory accounts.
Of the shares shown, Zions Bank has sole voting power with respect to a
total of 827,867 shares (5.69% of the class) it holds as trustee for
the Zions Bancorporation Employee Stock Savings Plan and the Zions
Bancorporation Employee Investment Savings Plan. Zions Bank also acts
as trustee for the Zions Bancorporation Dividend Reinvestment Plan,
which holds 243,661 shares (1.67% of the class) as to which Zions Bank
does not have or share voting power.
</TABLE>
As of February 27, 1995, all directors and executive officers of Zions
as a group beneficially owned 2,442,523 shares of Zions Common Stock, or 16.51%
of the outstanding shares of Zions Common Stock. Included in the
above-referenced amount are 1,135,226 shares held by the Zions Voting Trust.
ZIONS DOCUMENTS INCORPORATED BY REFERENCE
Zions' Annual Report on Form 10-K for the year ended December 31, 1994
("Zions Form 10-K"), previously filed by Zions with the SEC pursuant to the
Exchange Act, is hereby incorporated by reference in this Joint Proxy
Statement/Prospectus.
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 Joint Proxy
Statement/Prospectus and prior to the date of the Special Meetings shall be
deemed to be incorporated by reference in this Joint 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 Joint 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 Joint Proxy Statement/Prospectus.
For the convenience of First Western and Bank shareholders, copies of
Zions' 1994 Annual Report to Shareholders ("Zions Annual Report") and Zions'
Quarterly Report to Shareholders for the quarter ended March 31, 1995
("Quarterly Report") are being mailed to First Western and Bank shareholders
along with this Joint Proxy Statement/Prospectus. The Zions Annual Report and
the Quarterly Report are not part of this Joint Proxy Statement/Prospectus. The
Zions Annual Report and Quarterly Report do not contain all of the information
contained in the Zions Form 10-K. First Western or Bank shareholders who wish to
obtain copies of the Zions Form 10-K or other documents incorporated by
reference herein may do so by following the instructions under "Available
Information" above.
INFORMATION CONCERNING FIRST WESTERN AND THE BANK
First Western was organized in 1961 under federal law as Moab National
Bank. Pursuant to a plan of reorganization, the Bank in 1977 became a
majority-owned subsidiary of First Western (upon the organization under Utah law
of First Western) and certain shares of the Bank were converted into shares of
First Western. First Western, through the Bank, operates three branches, one in
Moab in Grand County, one in Monticello and one in Blanding in San Juan County.
The Bank provides a full range of commercial banking services, including, among
other things, consumer and commercial loans, residential real estate loans, and
construction and permanent mortgage loans. The Bank offers a variety of deposit
accounts, including, among other things, non-interest bearing demand accounts,
interest bearing checking accounts and savings accounts, and certificates of
deposit.
See "First Western Bancorporation Selected Consolidated Financial Data,"
"Management's Discussion and Analysis," and "First Western Bancorporation
Consolidated Financial Statements" for additional information concerning the
business and operations of First Western and the Bank.
FIRST WESTERN BANCORPORATION SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data should be read in conjunction
with First Western's consolidated financial statements and the related notes and
with First Western's management's discussion and analysis of financial condition
and results of operations, provided elsewhere herein. See "First Western
Bancorporation Consolidated Financial Data" below.
<PAGE>
First Western Bancorporation
Selected Consolidated Financial Data
As of, and for the years ended December 31,
1994 1993 1992
-------- -------- ------
(Dollars and outstanding shares in
thousands, except per share and
ratio data)
EARNINGS SUMMARY
Net interest income $ 2,951 $ 3,126 $ 2,676
Provision for loan losses 417 170 370
Other operating income 505 669 810
Other operating expense 1,794 1,856 1,499
Net income 748 1,062 983
COMMON STOCK DATA
Earnings per common share $ 18.70 $ 26.56 $ 24.58
Book value per share at period end 134.42 115.12 86.40
Weighted average common and common
equivalent shares outstanding
during the period 40 40 40
Common shares outstanding at period
end 37 37 37
AVERAGE BALANCE SHEET DATA
Securities $12,183 $12,602 $15,006
Loans and leases, net 22,595 20,815 18,397
Total interest-earning assets 34,778 33,417 33,403
Total assets 37,625 36,072 36,382
Interest-bearing deposits 25,211 25,866 27,433
Total deposits 30,879 31,043 32,409
Borrowed funds 1,603 445 247
Shareholders' equity 4,615 3,727 2,770
END OF PERIOD BALANCE SHEET DATA
Securities $10,438 $ 7,004 $12,942
Loans and leases, net 20,069 27,800 17,680
Allowance for loan losses 433 533 549
Total assets 37,210 39,448 36,941
Total deposits 30,072 32,908 32,499
Shareholders' equity 4,972 4,258 3,196
Non-performing assets
Nonaccrual loans $ 27 $ 117 $ 9
Other real estate owned 3 18 109
Total nonperforming assets 30 135 118
SELECTED RATIOS
Net interest margin 8.48% 9.36% 8.04%
Return on average assets 1.99% 2.94% 2.70%
Ratio of average common equity
to average assets 12.27% 10.33% 7.61%
Ratio of nonperforming assets
to total assets .08% .34% .32%
Ratio of allowance for loan
losses to net loans and leases
outstanding at period end 2.11% 1.88% 3.01%
Ratio of allowance for loan losses
to nonperforming loans 1443.33% 394.81% 465.25%
<PAGE>
STOCK PRICES OF AND DIVIDENDS ON FIRST WESTERN
COMMON STOCK AND BANK COMMON STOCK
First Western's common stock and the Bank's commons stock are 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. As a result, no established public trading
market for either First Western's common stock or the Bank's common stock
presently exists. Over the years little trading has occurred in either stock.
Reliable information concerning the prices at which First Western's and the
Bank's stock has traded in private, negotiated transactions is not publicly
available or generally known to First Western and the Bank. On occassion, First
Western and the Bank have become aware of the trading price of their common
stock in private transactions. information concerning those trading prices has
been omitted based on First Western's and the Bank's beliefs that such prices
are not necessarily representative of the market price for their common stock
during any particular period. Since October 31, 1994, the date the Plan of
Reorganization was publicly announced, there have been no trades in either
stock.
As of the date of this Joint Proxy Statement/Prospectus, there were
seven holders of First Western Common Stock and 31 holders (one of which is
First Western) of Bank Common Stock.
The holders of First Western's and the Bank's common stock are entitled
to receive dividends when, as and if declared by the Board of Directors out of
funds legally available therefor. First Western's ability to pay dividends is
governed by Utah law. Generally, Utah law provides that no distribution may be
made if, after giving effect to the distribution, (a) the corporation would not
be able to pay its debts as they become due in the usual course of business or
(b) the corporation's total assets would be less than the sum of its total
liabilities. Funds for the payment of dividends by First Western are primarily
obtained from dividends paid by the Bank.
Under the National Bank Act to which the Bank is subject, the directors
of a national banking association may, quarterly, semiannually, or annually,
declare a dividend of so much of the net profits of the association as they
judge expedient, except that until the surplus fund of such association shall
equal its common capital, no dividends shall be declared unless there has been
carried to the surplus fund not less than 10% of the association's net profits
of the preceding half year in the case of quarterly or semiannual dividends or
of the preceding two consecutive half-year periods in the case of annual
dividends. Moreover, the prior approval of the Comptroller is required for the
payment of any dividend if the total of all dividends declared by a national
bank in any calendar year will exceed such bank's net profits (as defined by
statute) for the year combined with its retained net profits of the preceding
two years, less any required transfers to surplus. No dividend may be paid by a
national bank, with or without the approval of the Comptroller, if the bank's
capital would be impaired following the payment except in the case of
liquidation. In addition, the Comptroller has authority under the Financial
Institutions Supervisory Act to initiate proceedings designed to prohibit a
national bank from engaging in what, in his opinion, constitutes an unsafe or an
unsound practice in conducting its business, and under certain circumstances
relating to the financial condition of a national bank, the Comptroller may
determine that the payment of dividends would be an unsafe or unsound practice.
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."
<PAGE>
STOCKHOLDINGS OF PRINCIPAL OWNERS, DIRECTORS
AND EXECUTIVE OFFICERS OF FIRST WESTERN AND THE BANK
First Western Bancorporation
Persons who were beneficial owners of 5% or more of the issued and
outstanding First Western Common Stock at the record date are shown in the
following table.
Name of Bene- Amount of Percent of
ficial Owner (1) Beneficial Ownership (2) Common Stock (3)
- ---------------- ------------------------ ----------------
SN, Ltd. (4) 10,893 27.24%
I.D. Nightingale 12,599(5) 31.51(5)
Frankie Nightingale 12,820(5) 32.06(5)
Gary and Jill Jacobson
P.O. Box 923
Moab, Utah 84532 3,180 7.95
(1) Except as otherwise indicated, the address of each named individual is
that of First Western.
(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.
(3) Assumes that 39,988 shares are outstanding.
(4) SN, Ltd. is a limited partnership whose general partners are I.D.
Nightingale and Frankie Nightingale, his wife.
(5) Does not include the shares of First Western Common Stock held by SN,
Ltd. Under the beneficial ownership rules of the SEC, I.D. Nightingale
and Frankie Nightingale may be deemed to be the beneficial owner of all
shares held by SN, Ltd.
As of the record date, directors and executive officers were
beneficial owners of that number of shares of First Western Common Stock shown
below.
<PAGE>
<TABLE>
<CAPTION>
Amount of Percent of
Name of Beneficial Owner Position Beneficial Ownership (1) Common Stock (2)
- ------------------------ -------- ------------------------ ------------
<S> <C> <C> <C>
Gary Jacobson Director 3,180 7.95%
Frankie Nightingale Secretary, Treasurer, 12,820(3) 32.06(3)
Director
I.D. Nightingale Chairman of the 12,599(3) 31.51(3)
Board, President
All executive officers 28,599(4) 71.52(4)
and directors as a
group
<FN>
(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.
(2) Assumes that 39,988 shares are outstanding.
(3) Does not include 10,893 shares owned by SN, Ltd., a Utah limited
partnership whose general partners are I.D. Nightingale and Frankie
Nightingale.
(4) If the shares owned by SN, Ltd. are added to those owned by I.D.
Nightingale, the total shares owned by all executive officers and
directors as a group would be 39,562 shares, which represent 98.93% of
the total outstanding shares.
</TABLE>
First Western National Bank
The only person who was beneficial owner of 5% of more of the issued
and outstanding Bank Common Stock at the record date is First Western
Bancorporation which owned 56,097 shares, which represented 93.5% of the issued
and outstanding shares of Bank Common Stock. As of the record date, directors
and executive officers were beneficial owners of that number of shares of Bank
Common Stock shown below.
<TABLE>
<CAPTION>
Amount of Percent of
Name of Beneficial Owner Position Beneficial Ownership (1) Common Stock (2)
- ------------------------ -------- ------------------------ ------------
<S> <C> <C> <C>
David Adams Director 300 *
David W. Allen Director 300 *
Gary L. Jacobson Executive Vice 100 *
President, Director
Charles R. Klepzig Director 100 *
Frankie Nightingale Vice President,
Cashier, Director 200(3) *(3)
I.D. Nightingale Chairman of the
Board, President 300(3) *(3)
All executive officers
and directors as a group 1,300(3) *(3)
<FN>
* - less than 1%
(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.
(2) Assumes that 60,000 shares are outstanding.
(3) Does not include 56,097 shares owned by First Western, which is
controlled by Frankie and I.D. Nightingale. See "First Western
Bancorporation," above.
</TABLE>
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
AND INDEPENDENT AUDITORS' REPORT
FIRST WESTERN BANCORPORATION
AND SUBSIDIARIES
December 31, 1994 and 1993
INDEPENDENT AUDITORS' REPORT
Board of Directors
First Western Bancorporation and Subsidiaries
Moab, Utah
We have audited the accompanying consolidated balance sheets of First
Western Bancorporation and Subsidiaries as of December 31, 1994 and 1993, and
the related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1994. 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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion the financial statements referred to above present
fairly in all material respects, the consolidated financial position of First
Western Bancorporation and Subsidiaries at December 31, 1994 and 1993, and the
consolidated results of their operations and cash flows for each of the three
years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As discussed in note A to the financial statements, the Company changed
its method of accounting for investments to adopt the provisions of Financial
Accounting Standard No. 115, "Accounting for Certain Investments in Debt and
Equity Securities", at January 1, 1994.
/s/ Fortner, Bayens, Levkulich and Co., P.C.
Denver, Colorado
February 23, 1995
<PAGE>
<TABLE>
<CAPTION>
First Western Bancorporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31,
1994 1993
----------- --------
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,460,025 $ 1,165,747
Interest-bearing deposits 100,000 -
Federal funds sold and overnight
deposits at Federal Home Loan Bank 3,745,194 2,077,193
Securities to be held to maturity
(market value of $7,109,443 in
1994 and $7,030,598 in 1993) 7,229,290 6,795,144
Securities available for sale 3,208,627 208,910
Loans, net (notes D, J, and L) 20,502,061 28,332,675
Less allowance for loan losses
(note E) (433,289) (533,085)
---------- ----------
20,068,772 27,799,590
Premises and equipment (note F) 398,014 460,246
Accrued interest receivable 378,970 297,856
Real estate acquired by foreclosure 3,087 18,087
Deferred tax asset (note G) 181,646 173,096
Other assets 436,476 452,181
---------- ----------
$37,210,101 $39,448,050
========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities
Deposits
Demand, non-interest bearing $ 5,423,993 $ 5,968,209
Demand, interest bearing 5,782,675 9,139,170
Savings 9,883,775 9,637,424
Time, $100,000 and over 958,769 881,612
Other time deposits 8,022,627 7,281,479
---------- ----------
Total deposits 30,071,839 32,907,894
Treasury, tax and loan notes 420,941 339,774
Accrued interest payable 48,951 42,554
Income taxes payable - 114,935
Other liabilities 150,748 34,788
Long-term debt (note I) 1,240,502 1,500,000
---------- ----------
Total liabilities 31,932,981 34,939,945
Commitments and contingencies (notes J, K, and N)
Minority interest in bank subsidiary 305,245 249,945
Stockholders' equity
Preferred stock - authorized, but
unissued, 50,000 shares $10 par
value
Common stock, authorized 150,000
shares of $10 par value; issued,
52,036 shares 520,360 520,360
Capital surplus 50,827 50,827
Retained earnings 4,802,513 4,054,698
Net unrealized loss on securities
available for sale, net of taxes (34,100) -
---------- ---------
5,339,600 4,625,885
Less 15,048 shares of common stock
in treasury - at cost (367,725) (367,725)
---------- ----------
4,971,875 4,258,160
---------- ----------
$37,210,101 $39,448,050
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
First Western Bancorporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,
1994 1993 1992
-------- --------- --------
<S> <C> <C> <C>
Interest income
Interest and fees on loans $3,102,246 $3,213,383 $2,893,096
Interest on investment securities
Taxable 465,267 520,033 686,491
Exempt from federal income tax 100,078 102,905 97,313
Other interest income 110,518 92,107 100,868
--------- --------- ---------
Total interest income 3,778,109 3,928,428 3,777,768
Interest expense
Demand deposits 156,387 189,876 298,812
Savings deposits 272,100 296,789 346,812
Time deposits - $100,000 and over 13,261 18,934 26,977
Time deposits - under $100,000 310,682 289,705 408,796
Borrowed funds 74,825 7,378 19,956
-------- --------- ---------
Total interest expense 827,255 802,682 1,101,353
--------- --------- ---------
Net interest income 2,950,854 3,125,746 2,676,415
Provision for loan losses (note E) 417,000 170,000 370,000
--------- --------- ---------
Net interest income after provision
for loan losses 2,533,854 2,955,746 2,306,415
Net interest income after provision
for loan losses $2,533,854 $2,955,746 $2,306,415
Other income
Service charges on deposit accounts 337,714 344,388 278,241
Gain on sale of investment
securities - 131,400 252,455
Other income 167,356 192,840 279,105
--------- --------- ---------
Total other income 505,070 668,628 809,801
Other expenses
Salaries and benefits 1,028,254 923,990 721,210
Occupancy expense 89,242 111,013 83,933
Equipment expense 121,927 141,210 123,120
Other expense 554,330 680,227 570,525
--------- --------- ---------
Total other expenses 1,793,753 1,856,440 1,498,788
--------- --------- ---------
Income before income taxes
and minority interest 1,245,171 1,767,934 1,617,428
Income tax expense (note G) 439,682 627,646 560,296
Minority interest in earnings
of bank subsidiary 57,674 78,064 74,337
--------- --------- ---------
NET INCOME $ 747,815 $1,062,224 $ 982,795
========= ========= =========
Net income per share $ 18.70 $ 26.56 $ 24.58
========= ========= ========
Weighted average number of common
shares outstanding 39,988 39,988 39,988
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
First Western Bancorporation and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
Net
unrealized
loss on
securities
available
Common Capital Retained for sale, Treasury
stock surplus earnings net of taxes stock Total
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1992 $ 520,360 $ 50,827 $ 2,120,643 -- $ (367,725) $ 2,324,105
Net income for the year -- -- 982,795 -- -- 982,795
Cash dividends paid,
$3 per share -- -- (110,964) -- -- (110,964)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1992 520,360 50,827 2,992,474 -- (367,725) 3,195,936
Net income for the year -- -- 1,062,224 -- -- 1,062,224
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1993 520,360 50,827 4,054,698 -- (367,725) 4,258,160
Net income for the year -- -- 747,815 -- -- 747,815
Net unrealized loss on
securities available
for sale, net of
taxes -- -- -- (34,100) -- (34,100)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1994 $ 520,360 $ 50,827 $ 4,802,513 $ (34,100) $ (367,725) $ 4,971,875
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
<TABLE>
<CAPTION>
First Western Bancorporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASHFLOWS
Years ended December 31,
1994 1993 1992
---------- ---------- --------
<S> <C> <C> <C>
Operating activities
Net income $ 747,815 $1,062,224 $ 982,795
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan losses 417,000 170,000 370,000
Depreciation and amortization 110,887 124,142 122,105
Gain on disposition of real estate
acquired by foreclosure (2,288) (3,908) (9,587)
Gain on sale of equipment - (6,063) (15,209)
Gain on sale of investment securities - (131,400) (252,455)
Minority interest in net income 57,674 78,064 74,337
Write down of real estate acquired by
foreclosure and other assets - - 20,000
Changes in deferrals and accruals
Interest receivable (81,114) 18,447 39,360
Interest payable 6,397 (8,668) (37,068)
Increase in cash surrender value of life
insurance (25,601) - (34,278)
Increase in deferred tax benefits 12,872 (18,549) (131,383)
Decrease in taxes payable (114,935) (427,453) 435,476
Other 153,039 10,023 (30,369)
--------- --------- ---------
Net cash provided by
operating activities 1,281,746 866,859 1,533,724
Investing activities
Net decrease (increase) in federal funds sold
and overnight deposits at Federal Home Loan
Bank (1,668,001) 1,101,001 (778,194)
Purchase of investment securities held to
maturity (4,590,073) (1,505,578) (8,036,379)
Purchase of securities available for sale (1,478,723) - -
Proceeds from sales of investment securities - 7,265,195 7,089,911
Proceeds from maturities of investment
securities held to maturity 974,764 279,958 3,442,000
Proceeds from maturities of securities
available for sale 1,600,000 - -
Net decrease (increase) in loans made to
customers 7,313,818 (10,301,559) (6,973,756)
Expenditures for equipment (42,155) (114,885) (49,496)
Proceeds from sale of real estate acquired
by foreclosure 17,288 106,891 360,209
Proceeds from sale of other assets - 9,500 120,000
Net increase in interest-bearing deposits
in other banks (100,000) - -
Purchase of building and land - (125,000) -
Acquisition of additional bank subsidiary stock - - (17,016)
--------- --------- ---------
Net cash provided by (used in)
investing activities 2,026,918 (3,284,477) (4,842,721)
Financing activities
Principal payment on long-term debt $ (259,498) $ (110,000) $ (50,000)
Net (decrease) increase in deposits (2,836,055) 409,085 3,785,669
Proceeds from long-term debt - 1,500,000 -
Net increase in treasury, tax and loan notes 81,167 30,348 167,363
Dividends paid - - (220,444)
--------- --------- ---------
Net cash provided by (used in)
financing activities (3,014,386) 1,829,433 3,682,588
--------- --------- ---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
First Western Bancorporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years ended December 31,
1994 1993 1992
---------- ---------- --------
<S> <C> <C> <C>
Net increase (decrease) increase in cash
and due from banks 294,278 (588,185) 373,591
Cash and due from banks at beginning of year 1,165,747 1,753,932 1,380,341
--------- --------- ---------
Cash and due from banks at end of year $1,460,025 $1,165,747 $1,753,932
========= ========= =========
Supplemental disclosures of cash flow information
- -------------------------------------------------
Cash paid during the year for:
Interest expense $ 820,858 $ 811,350 $1,138,421
Income taxes paid 555,473 1,073,648 259,250
Securities transferred from held to
maturity to available for sale on
January 1, 1994
U.S. Treasry securities 2,001,019 - -
U.S. government agency securities 998,996 - -
Municipal securities 165,368 - -
Supplemental noncash investing and financing activities
=======================================================
Loan balances were transferred to real estate acquired by foreclosure and
other assets in 1994, 1993 and 1992 in the amounts of $-0-, $29,092 and
$141,712, respectively.
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
First Western Bancorporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of First Western
Bancorporation and Subsidiaries is presented to assist in understanding the
Company's financial statements. The financial statements and notes are
representations of the Company's management, which is responsible for their
integrity and objectivity. These accounting policies conform to generally
accepted accounting principles and have been consistently applied in the
preparation of the financial statements. In preparing the 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.
Principles of Consolidation
The consolidated financial statements include the accounts of First
Western Bancorporation (the Company), its wholly-owned subsidiary, Moab
Land Company, and its 93.5% owned subsidiary First Western National Bank
(the Bank). All significant intercompany accounts and transactions have
been eliminated.
Accrual Basis of Accounting
Financial accounting records are generally maintained on an accrual
basis. Certain fee income, such as loan fees and insurance commissions,
are recognized as received. In all cases, the difference between the
accrual basis and the cash basis is not material.
Earnings per Share
Earnings per share are computed using the weighted average method.
Intangible Assets
The excess cost over the net assets of the Bank is recorded as
goodwill, which is amortized on a straight-line basis over 30 years. At
December 31, 1994 and 1993, unamortized goodwill included in other
assets in the accompanying financial statements totaled $95,412 and
$101,912, respectively.
Investment Securities
Effective January 1, 1994, the Company adopted Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities", (FAS 115). FAS 115 requires, among other things, that
securities designated as available for sale be revalued at each reporting
period with the unrealized gain or loss, net of tax effect recorded as an
element of stockholders' equity. Investments in debt securities and
related activity prior to 1994 have been classified as held to maturity
for reporting purposes.
The designation of a security as held to maturity or available for sale
is made at the time of acquisition. The held to maturity classification
includes debt securities that the Bank has the positive intent and
ability to hold to maturity which are carried at amortized cost. The
available for sale classification includes debt and equity securities
which are carried at fair value. Unrealized gains and losses on
securities available for sale are included as a separate component of
stockholders' equity, net of tax effect. Gains or losses on sales of
securities are recognized by the specific identification method.
<PAGE>
First Western Bancorporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loans
Loans are reported at the principal amount outstanding, net of the
allowance for loan losses. Interest on loans is calculated by using the
simple interest method on the daily balance of the principal amount
outstanding.
Loans on which the accrual of interest has been discontinued are
designated as non-accrual loans. Accrual of interest on loans is
discontinued when reasonable doubt exists as to the full, timely
collection of interest or principal. When a loan is placed on non-accrual
status, all interest previously accrued but not collected is reversed
against current period interest income. Income on such loans is then
recognized only to the extent that cash is received and where the future
collection of principal is probable. Interest accruals are resumed on
such loans only when they are brought fully current with respect to
interest and principal and when, in the judgment of management, the loans
are estimated to be fully collectible as to both principal and interest.
Renegotiated loans are those loans on which concessions in terms have
been granted because of a borrower's financial difficulty. Interest is
generally accrued on such loans in accordance with the new terms.
Allowance for Loan Losses
The allowance for loan losses for financial reporting purposes consists
of the amounts available to absorb future loan losses. The allowance is
an amount that management believes will be adequate to absorb possible
losses on existing loans that may become uncollectible, based on
evaluations of the collectibility of loans and prior loan loss
experience. The evaluations take into consideration such factors as
changes in the nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem loans and current
economic conditions that may affect a borrower's ability to pay.
Premises and Equipment
Premises and equipment are stated at cost. Depreciation and amortization,
computed principally on the straight-line basis, have been provided for in
amounts sufficient to relate the cost of the assets to operations over
their estimated service lives.
Real Estate Acquired by Foreclosure
Real estate acquired by foreclosure is recorded at the lower of cost or
estimated fair market value. Gains or losses upon disposition are
reflected in current operations.
Income Taxes
Provisions for income taxes are based on taxes payable or refundable for
the current year (after exclusion of non-taxable income such as interest
on state and municipal securities) and deferred taxes on temporary
differences between the amount of taxable income and pretax financial
income and between the tax bases of assets and liabilities and their
reported amounts in the financial statements. Deferred tax assets and
liabilities are included in the financial statements at currently enacted
income tax rates applicable to the period in which the deferred tax assets
and liabilities are expected to be realized or settled as prescribed in
FASB Statement No. 109, "Accounting for Income Taxes". As changes in tax
laws or rates are enacted, deferred tax assets and liabilities are
adjusted through the provision for income taxes.
<PAGE>
First Western Bancorporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Statement of Cash Flows
For purposes of the statement of cash flows, the Company has defined cash
equivalents as those amounts included in the balance sheet caption "Cash
and Due from Banks".
Current Accounting Developments
The Financial Accounting Standards Board has issued Statement No. 114,
"Accounting by Creditors for Impairment of a Loan", ("FAS 114") which
becomes effective in 1995. FAS 114 generally requires impaired loans to
be measured on the present value of expected future cash flows
discounted at the loan's effective interest rate, or as an expedient,
at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. A loan is impaired when
it is probable the creditor will be unable to collect all contractual
principal and interest payments due in accordance with the terms of the
loan agreement. The Company has not yet applied the provisions of FAS
114.
NOTE B - 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 was approximately
$265,000 and $190,000 at December 31, 1994 and 1993, respectively.
NOTE C - INVESTMENT SECURITIES
On January 1, 1994, the Company adopted Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities". The
following presents information related to the Company's portfolio of
securities held to maturity and available for sale.
<PAGE>
First Western Bancorporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE C - INVESTMENT SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
1994
-------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Securities to be held to maturity
U.S. Treasury securities $2,497,507 $ 2,039 $ 39,546 $2,460,000
U.S. government agency
obligations 3,006,998 157 66,765 2,940,390
Municipal securities 1,722,197 17,248 32,980 1,706,465
Mortgage-backed
securities 2,588 - - 2,588
--------- --------- --------- ---------
$7,229,290 $ 19,444 $ 139,291 $7,109,443
========= ========= ========= =========
Securities available for sale
U.S. Treasury securities $1,978,254 $ 14,837 $ 42,243 $1,950,848
U.S. government agency
obligations 1,000,116 - 31,501 968,615
Municipal securities 65,044 1,010 - 66,054
Equity securities 223,110 - - 223,110
--------- --------- --------- ---------
$3,266,524 $ 15,847 $ 73,744 $3,208,627
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
1993
--------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Securities to be held to maturity
U.S. Treasury securities $3,499,219 $ 133,619 $ 2,369 $3,630,469
U.S. government agency
obligations 998,684 14,441 - 1,013,125
Municipal securities 1,903,289 90,868 194 1,993,963
Mortgage-backed
securities 393,952 - 911 393,041
--------- --------- --------- ---------
$6,795,144 $ 238,928 $ 3,474 $7,030,598
========= ========= ========= =========
Securities available for sale
Equity securities $ 208,910 $ - $ - $ 208,910
========= ========= ========= =========
</TABLE>
<PAGE>
First Western Bancorporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE C - INVESTMENT SECURITIES (CONTINUED)
The amortized cost and estimated market value of investment securities at
December 31, 1994 by contractual maturity are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations without call or prepayment penalties.
<TABLE>
<CAPTION>
Securities to be Securities
held to maturity available for sale
Amortized Market Amortized Market
Cost Value Cost Value
<S> <C> <C> <C> <C>
Due in one year or less $ 200,000 $ 199,847 $1,043,555 $1,059,402
Due after one year through
five years 6,225,185 6,128,187 1,999,859 1,926,115
Due after five years through
ten years 681,601 663,895 - -
Due after ten years 119,916 114,926 - -
--------- --------- --------- --------
7,226,702 7,106,855 3,043,414 2,985,517
Collateralized mortgage
obligations 2,588 2,588 - -
Federal Home Loan Bank, Federal
Reserve Bank and other equity
securities - - 223,110 223,110
--------- --------- --------- ---------
$7,229,290 $7,109,443 $3,266,524 $3,208,627
========= ========= ========= =========
</TABLE>
Securities included in the accompanying balance sheet at December 31, 1994
and 1993 with a carrying value of $495,149 and $993,995, respectively, are
pledged as collateral with the Federal Reserve Bank for purposes as required
or permitted by law.
Gross gains and gross losses on sales of securities were:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- ------
<S> <C> <C> <C>
Gross realized gains $ - $131,400 $252,455
Gross realized losses - - -
------- ------- ------
$ - $131,400 $252,455
======= ======= =======
</TABLE>
<PAGE>
First Western Bancorporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE D - LOANS
Major classifications of loans and leases at December 31, are as follows:
<TABLE>
<CAPTION>
1994 1993
----------- -------
<S> <C> <C>
Commercial $ 4,593,298 $ 4,897,852
Real estate 10,070,123 11,225,806
Installment 6,391,731 13,295,652
Overdrafts 21,878 25,473
Leases 18,364 -
---------- ---------
21,095,394 29,444,783
Less unearned discount (593,333) (1,112,108)
---------- ----------
Loans and leases, net $20,502,061 $28,332,675
========== ==========
</TABLE>
The outstanding principal balance of loans having payments delinquent more
than sixty days at December 31, 1994 and 1993 amounted to approximately
$646,193 and $2,197,000, respectively. The amount for 1993 includes
approximately $1,897,000 from loan packages purchased from the FDIC during
the last two months of the year. Loans on which the accrual of interest has
been discontinued or reduced amounted to $27,447 and $116,551 at December
31, 1994 and 1993, respectively.
NOTE E - ALLOWANCE FOR POSSIBLE LOAN LOSSES
Transactions in the allowance for possible loan losses for the years ending
December 31, are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- --------- ------
<S> <C> <C> <C>
Balance at beginning of year $533,085 $549,464 $180,937
Provision for possible loan losses 417,000 170,000 370,000
Recoveries on loans previously
charged off 130,051 150,505 136,067
Loans charged off (646,847) (336,884) (137,540)
------- ------- -------
Balance at December 31, $433,289 $533,085 $549,464
======= ======= =======
</TABLE>
<PAGE>
First Western Bancorporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE F - PREMISES AND EQUIPMENT
At December 31, premises and equipment, less accumulated depreciation and
amortization, consisted of the following:
<TABLE>
<CAPTION>
1994
Accumulated
depreciation Net
Cost and amortization amount
<S> <C> <C> <C>
Land $ 71,741 $ - $ 71,741
Building 649,679 457,829 191,850
Furniture and equipment 599,023 464,600 134,423
--------- ------- -------
$1,320,443 $922,429 $398,014
========= ======= =======
</TABLE>
<TABLE>
<CAPTION>
1993
Accumulated
depreciation Net
Cost and amortization amount
<S> <C> <C> <C>
Land $ 71,741 $ - $ 71,741
Building 644,175 427,111 217,064
Furniture and equipment 572,885 401,444 171,441
--------- ------- -------
$1,288,801 $828,555 $460,246
========= ======= =======
</TABLE>
NOTE G - INCOME TAXES
The consolidated provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- ------
<S> <C> <C> <C>
Current $426,810 $646,195 $691,679
Deferred 12,872 (18,549) (131,383)
------- ------- -------
$439,682 $627,646 $560,296
======= ======= =======
</TABLE>
A deferred tax asset or liability is recognized for the tax consequences of
temporary differences in the recognition of revenue and expense for
financial reporting and tax purposes.
<PAGE>
First Western Bancorporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE G - INCOME TAXES (CONTINUED)
Listed below are the components of the net deferred tax asset as of December
31:
<TABLE>
<CAPTION>
1994 1993
-------- ------
<S> <C> <C>
Deferred tax assets
Allowance for loan losses $101,403 $160,566
Write downs of foreclosed
real estate 5,595 5,595
Depreciation 16,457 13,052
Deferred compensation 48,285 -
Unrealized loss on available
for sale securities 21,421 -
------- ------
Total deferred tax assets 193,161 179,213
Deferred tax liabilities
Stock dividends (11,515) (6,117)
------- -------
Net deferred tax asset $181,646 $173,096
======= =======
</TABLE>
The effective income tax rate varies from the statutory federal rate because of
several factors, the most significant being interest earned on tax-exempt
securities and state income taxes.
NOTE H - EMPLOYEE BENEFIT PLANS
Substantially all employees who meet a minimum service requirement are
eligible to participate in a tax-sheltered savings plan which provides a
mandatory matching of employee contributions up to a maximum of 2% of gross
annual wages. Full vesting occurs after seven years. Contributions to the
plan totaled $10,223, $18,885 and $11,057 in 1994, 1993, and 1992,
respectively.
NOTE I - LONG-TERM DEBT
Long-term debt consisted of the following at year end:
<TABLE>
<CAPTION>
1994 1993
---------- -------
<S> <C> <C>
4.3675% note payable to Federal
Home Loan Bank $ 337,814 $ 500,000
5.4624% note payable to Federal
Home Loan Bank 902,688 1,000,000
--------- ---------
$1,240,502 $1,500,000
========= =========
</TABLE>
The 4.3675% note is payable in equal monthly installments of $13,889 plus
interest through December 10, 1996. The 5.4624% note is payable in equal
monthly installments of $8,333 through December 10, 2003. Both of these
notes are collateralized by investment securities and loans and may be
prepaid with the payment of a prepayment fee.
<PAGE>
First Western Bancorporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE I - LONG-TERM DEBT (CONTINUED)
The following table summarizes the maturities of long-term debt:
Year
1995 $ 266,664
1996 271,142
1997 99,996
1998 99,996
1999 99,996
2000 and thereafter 402,708
---------
$1,240,502
NOTE J - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND
CONCENTRATION OF CREDIT RISK
The Company 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 stand-by letters of credit.
Those instruments involve, to a varying degree, elements of credit risk in
excess of the amount recognized in the statement of financial position. The
contract amounts of those instruments reflect the extent of involvement the
Company has in particular classes of financial instruments. The Company uses
the same credit policies in making commitments and conditional obligations
as it does for on-balance sheet instruments.
The Company's maximum exposure to credit loss for commitments to extend
credit and stand-by letters of credit at December 31, 1994 is as follows:
1994 1993
---------- -------
Financial instruments whose
contract amounts represent
credit risk
Commitments to extend credit $1,016,903 $ 583,168
Credit card arrangement 948,225 864,330
Stand-by letters of credit 55,000 105,000
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 Company evaluates
each customer's credit-worthiness on a case-by-case basis. The amount of
collateral obtained if deemed necessary by the Company upon extension of
credit is based on management's credit evaluation. Collateral held varies,
but may include accounts receivable, inventory, property, plant and
equipment and income-producing commercial properties.
<PAGE>
First Western Bancorporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE J - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND
CONCENTRATION OF CREDIT RISK (CONTINUED)
Stand-by letters of credit are conditional commitments issued by the Company
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 grants loans to various business and consumer customers in the
southeastern Utah area. The Bank has also acquired several loan portfolios
from the Resolution Trust Corporation and Federal Deposit Insurance
Corporation. At December 31, 1994, the largest portfolios consisted of
approximately $2,500,000 (net) in loans secured by vehicles in the
Dallas-Fort Worth, Texas, metropolitan area and $3,000,000 in loans secured
by residential and recreational real estate in the Phoenix, Arizona,
metropolitan area.
NOTE K - 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 Company's financial
statements.
NOTE L - RELATED PARTY TRANSACTIONS
In the ordinary course of business, certain directors and executive officers
of the Company and the Company's subsidiary bank were borrowers of the bank.
All loans were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable loans
with other persons and did not involve more than the normal risk of
collectibility.
Aggregate loan transactions with related parties were as follows for the
years ended December 31:
1994 1993
-------- ------
Balance beginning $747,400 $654,400
New loans 678,400 668,100
Repayments (784,000) (575,100)
------- -------
$641,800 $747,400
======= =======
Also, during 1994, the Company paid $50,000 in consulting fees to a party
related to the Company's executive officers and major shareholders.
During 1994 the Company recorded $129,450 as salary and benefit expense for
a deferred compensation agreement covering the Company's President and major
shareholder. The agreement requires the Company to pay 120 monthly payments
of $1,250, beginning with the President's termination of employment.
<PAGE>
First Western Bancorporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE M - REGULATORY MATTERS
Banking laws and regulations limit the amount of dividends that may be paid
without prior approval of the Bank's regulatory agency.
Banking regulations also require the Bank to maintain capital levels in
relation to Bank assets. At december 31, 1994, regulations required a ratio
of capital (tier-one) to risk-weighted assets of 4% and total adjusted
capital (tier-two) to risk-weighted assets of 8%. The bank's capital, as
defined by these regulations, was 19.8% and 21.1%, respectively. In
addition, banks are expected to maintain a tier-one capital to total assets
ratio (leverage) of at least 4%. At December 31, 1994, the Bank's leverage
ratio was 12.6%.
NOTE N - STOCK OPTION
In 1992, the Company granted an executive officer the option to purchase
3,000 shares of common stock at the price of $53.40 per share. The entire
option was exercised during January 1995.
NOTE O - PARENT COMPANY FINANCIAL INFORMATION
Summarized financial statements of the Company on a parent company only
basis as of December 31, are as follows:
Balance Sheets
<TABLE>
<CAPTION>
1994 1993
----------- --------
<S> <C> <C>
ASSETS
Cash $ 219,751 $ 372,604
Due from unconsolidated subsidiary
First Western National Bank 39,146 11,800
Notes receivable 127,612 51,000
Investment in unconsolidated
subsidiaries
Moab Land Company 136,305 138,933
First Western National Bank
Equity in net assets 4,383,394 3,589,468
Cost in excess of net assets,
less accumulated amortization 95,412 101,912
--------- ---------
4,478,806 3,691,380
--------- ---------
4,615,111 3,830,313
Equipment 42,672 42,672
Less accumulated depreciation (41,668) (39,088)
--------- ---------
1,004 3,584
Accrued interest receivable 1,184 2,792
--------- ---------
$5,003,808 $4,272,093
========= =========
</TABLE>
<PAGE>
First Western Bancorporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE O - PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)
Balance Sheets (Continued)
<TABLE>
<CAPTION>
1994 1993
----------- --------
LIABILITIES AND
STOCKHOLDERS' EQUITY
<S> <C> <C>
Liabilities
Accrued liabilities $ 18,000 $ -
Due to unconsolidated subsidiary
Moab Land Company 13,933 13,933
--------- ---------
Total liabilities 31,933 13,933
Stockholder's equity
Preferred stock - authorized, but
unissued, 50,000 shares $10 par
value
Common stock - authorized, 150,000 shares of $10 par value;
52,036 shares issued; 36,988 shares
outstanding 520,360 520,360
Paid-in-capital 50,827 50,827
Retained earnings 4,802,513 4,054,698
Net unrealized loss on securities
available for sale, net of taxes (34,100) -
--------- --------
5,339,600 4,625,885
Less common stock in treasury
at cost; 15,048 shares (367,725) (367,725)
--------- ---------
4,971,875 4,258,160
--------- ---------
$5,003,808 $4,272,093
========= =========
</TABLE>
<PAGE>
First Western Bancorporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE O - PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)
Statements of Income
Years ended December 31,
<TABLE>
<CAPTION>
1994 1993 1992
-------- ---------- ------
<S> <C> <C> <C>
Revenue
Dividends from unconsolidated
subsidiary $ - $ 378,655 $306,999
Insurance management fees 3,896 4,083 5,528
Interest income 5,944 2,646 2,924
Gain on sale of investment - - 19,998
------- ------- -------
9,840 385,384 335,449
Expenses
Salaries 18,000 - -
Interest expense - 232 8,472
Depreciation 2,580 2,580 2,580
Other 9,247 5,649 9,250
Rent 2,005 1,690 1,680
Professional services 76,438 28,076 10,942
------- --------- -------
108,270 38,227 32,924
------- --------- -------
Income (loss) before income taxes
and equity in undistributed
net earnings of unconsolidated
subsidiaries (98,430) 347,157 302,525
Income tax benefit 27,346 10,280 1,520
------- --------- -------
Income (loss) before equity in
undistributed net earnings
of unconsolidated subsidiaries (71,084) 357,437 304,045
Equity in undistributed net earnings
of unconsolidated subsidiaries 825,399 711,287 685,250
Amortization of cost in excess
of net assets of unconsolidated
bank subsidiary on a 30 year
straight-line basis (6,500) (6,500) (6,500)
------- --------- -------
NET INCOME $747,815 $1,062,224 $982,795
======= ========= =======
</TABLE>
<PAGE>
First Western Bancorporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE O - PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
Statements of Cash Flows
Years ended December 31,
1994 1993 1992
-------- ---------- ------
<S> <C> <C> <C>
Operating activities
Net income $747,815 $1,062,224 $982,795
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation 2,580 2,580 2,580
Amortization of goodwill 6,500 6,500 6,500
Gain on sale of investment - - (19,998)
Equity in undistributed net
income of unconsolidated
subsidiaries (825,399) (711,287) (685,250)
Changes in deferrals and accruals
Accrued interest receivable 1,608 (2,076) 1,315
Accrued interest payable - (1,736) (986)
Due from unconsolidated
subsidiaries (27,346) (10,280) 139,513
Accrued liabilities 18,000 - (1,527)
------- --------- -------
Net cash (used in)
provided by
operating activities (76,242) 345,925 424,942
Investing activities
Proceeds from sale of investment - - 49,995
Capital injection - Moab Land
Company - (125,000) -
Acquisition of First Western
National Bank common stock - (13,808) (17,016)
Funds advanced - notes receivable (141,219) (129,900) (97,000)
Payments received - notes receivable 64,608 102,900 128,908
------- --------- -------
Net cash provided by
(used in) investing
activities (76,611) (165,808) 64,887
Financing activities
Dividends paid $ - $ - $(186,050)
Principal payment on note payable - (110,000) (50,000)
------- --------- -------
Net cash used in
financing activities - (110,000) (236,050)
------- --------- -------
Net (decrease) increase in cash (152,853) 70,117 253,779
Cash at beginning of year 372,604 302,487 48,708
------- --------- -------
Cash at end of year $219,751 $ 372,604 $302,487
======= ========= =======
Supplemental Disclosure of Cash Flow
Information
Cash paid (received) during the year for:
Interest expense $ - $ 1,968 $ 9,458
Income taxes - - 1,527
</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of operations for Three-Year Period Ended
December 31, 1994
The following analysis of First Western's financial condition and
results of operations as of and for the three year period ended December 31,
1994, should be read in conjunction with the consolidated financial statements
of First Western and statistical data presented elsewhere herein.
Overview
First Western does not engage in any substantial business activity
other than as a bank holding company that holds 93.5% of the issued and
outstanding stock of First Western National Bank (herein, the "Bank"), its
principal asset. Unless otherwise noted, the following discussion relates to
First Western and the Bank on a consolidated basis.
Results of Operations
Net Income
Net income for First Western for 1994 was $747,815, a decrease of 29.6%
or $314,409 from the $1,062,224 earned in 1993. This decrease is primarily due
to a 245% increase (or $247,000) in the provision to the allowance for loan
losses. Also, net interest income decreased by 5.6% or $174,892.
Net income for 1993 of $1,062,224 represented an 8% or $79,429 increase
over the $982,795 earned in 1992. The increase is primarily attributable to a
$298,671 decrease in interest expense partially offset by an increase in salary
and benefits expense of $202,780.
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 1994 was $2,950,854; a decrease of 5.6% or $174,892 over the $3,125,746
earned in 1993. Net interest income for 1993 was $3,125,746; an increase of
16.8% or $449,331 over the $2,676,415 earned in 1992. The increase in 1992 is
attributable primarily to a decrease in interest expense of $298,671.
Average interest earning assets of First Western were $34,778,675
during 1994; an increase of 1% or $361,173 compared to $33,417,502 for 1993.
Average interest earning assets in 1993 were $33,417,502 compared to $33,402,544
for 1992; an increase of $14,958 over 1992. First Western's interest rate spread
was 7.77% in 1994, 8.72% in 1993 and 7.36% in 1992. "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. First Western's
net interest margin was 8.48% in 1994, 9.36% in 1993, and 8.04% in 1992. "Net
interest margin" is the difference between interest income and interest expense
expressed as a percentage of average interest earning assets.
<PAGE>
Non-interest Income
The following table presents a summary of non-interest income:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- ------
<S> <C> <C> <C>
Service charges $337,714 $344,388 $278,241
Net gains on sales of investments - 131,400 252,455
Other 167,356 192,840 279,105
------- ------- -------
$505,070 $668,628 $809,801
======= ======= =======
</TABLE>
Non-interest income was $505,070 in 1994, a decrease of 24.5% or
$163,558 over the prior year figure of $668,628. Most of this decrease was
attributable to a decrease in gains realized on investment securities.
Non-interest income was $668,628 in 1993, a decrease of 17.4% or $141,173 from
the $809,801 for 1992. Again, this decrease was primarily attributable to a
decrease in gains on the sale of investment securities.
Non-interest Expense
The following table presents a summary of non-interest expense:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- -------
<S> <C> <C> <C>
Salaries and benefits $1,028,254 $ 923,990 $ 721,210
Occupancy and equipment 211,169 252,223 207,053
Other expenses 554,330 680,227 570,525
--------- --------- ---------
$1,793,753 $1,856,440 $1,498,788
========= ========= =========
</TABLE>
Non-interest expense decreased by $62,687 or 3.4% to $1,793,753 for the
year ended December 31, 1994, from $1,856,440 for the year ended December 31,
1993. This decrease was due primarily to decreased expenses related to employee
education, travel, and facility repairs. For 1993, non-interest expense
increased to $1,856,440 from $1,498,788, an increase of $357,652 or 23.9%. This
increase was principally due to increased personnel and related costs.
Income Taxes
First Western's income tax provision for 1994 was $439,682 compared
with $627,646 in 1993 and $560,296 in 1992. The effective rates were 35.3% in
1994, 35.5% in 1993 and 34.6% in 1992. The effective tax rate differs from the
federal statutory rate primarily as a result of state income taxes.
<PAGE>
FINANCIAL CONDITION
Loans
The following table presents the balance of each major category of
loans at the dates indicated:
<TABLE>
<CAPTION>
1994 1993 1992
---------------------------- -------------------------- -------------------------
% of % of % of
Amount Loans Amount Loans Amount Loans
<S> <C> <C> <C> <C> <C> <C>
Loan Category
Commercial $ 4,593,298 21.77% $ 4,897,852 16.64% $ 4,292,035 22.58%
Real estate
Construction 873,964 4.14 954,829 3.24 991,810 5.22
Residential 7,425,065 35.20 7,828,947 26.59 8,424,463 44.31
Other 1,771,094 8.40 2,442,030 8.29 944,722 4.97
Leases 18,364 .09 - - 8,658 .05
Consumer/other 6,413,609 30.40 13,321,125 45.24 4,347,674 22.87
---------- ------ ---------- ------ ---------- ------
21,095,394 100.00% 29,444,783 100.00% 19,009,362 100.00%
====== ======= ======
Less
Discount 593,333 1,112,108 780,234
Allowance for
loan losses 433,289 533,085 549,464
---------- ---------- ----------
$20,068,772 $27,799,590 $17,679,664
========== ========== ==========
</TABLE>
During 1993 and 1992, First Western actively pursued the acquisition of
loan portfolios of failed financial institutions from the Resolution Trust
Corporation (RTC) and the Federal Deposit Insurance Corporation (FDIC). These
acquired loan portfolios were primarily in the western United States and
consisted of residential real estate and installment/consumer loans. The
breakdown of "regular" and acquired loans (net of discount) at December 31 is as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
------------- ------------- ---------
<S> <C> <C> <C>
Regular $12,622,050 $12,536,023 $ 9,997,551
Acquired 7,880,011 15,796,652 8,231,577
---------- ---------- ----------
$20,502,061 $28,332,675 $18,229,128
========== ========== ==========
</TABLE>
Certain non-performing assets of First Western are summarized for the years
ended December 31,
<TABLE>
<CAPTION>
1994 1993 1992
-------- ----------- ------
<S> <C> <C> <C>
Non-accrual loans $ 27,447 $ 116,551 $ 9,340
Restructured loans - - -
Loans past due 90 days or more 482,436 1,450,370 17,879
</TABLE>
The increased amount of past due loans at December 31, 1993, was caused
by the fourth quarter acquisition of a loan portfolio from the FDIC.
Managements' collection efforts and administration of this portfolio has
resulted in the significant decrease in past due loans at December 31, 1994.
<PAGE>
First Western's policy with regard to non-accrual loans is generally to
place loans on non-accrual status when loans are more than 90 days past due,
unless it is well collateralized and collection is being actively pursued.
The allowance for loan losses is maintained at an amount deemed
necessary by First Western'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:
* Loan delinquency trends and loans on non-accrual;
* Analysis of "graded" loans;
* The mix of the loan portfolio including concentrations by borrower
type; and
* Analysis of allowance for loan loss reserve ratios for prior periods.
The following table sets forth changes in First Western's loan loss
reserve as of the date indicated for the years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- -------
<S> <C> <C> <C>
Balance, beginning of year $533,085 $549,464 $180,937
Provision for loan losses 417,000 170,000 370,000
Charge offs
Commercial - - 25,301
Consumer 646,847 319,426 62,913
Real estate - 17,458 49,326
----------- ------- -------
Total charge offs 646,847 336,884 137,540
Recoveries
Commercial 15,068 100,475 118,719
Consumer 114,983 49,930 17,348
Real estate - 100 -
---------- ------- ---------
Total recoveries 130,051 150,505 136,067
------- ------- -------
Net charge offs 516,796 186,379 1,473
------- ------- --------
Balance, end of year $433,289 $533,085 $549,464
======= ======= =======
</TABLE>
The following table allocates the loan loss reserve based on
management's judgment of potential losses in the respective areas. While
management has allocated reserves to various portfolio segments for purposes of
this table, the reserve is general in nature and is available for the portfolio
in its entirety:
<TABLE>
<CAPTION>
Commercial Real Estate Consumer Unallocated Total
<S> <C> <C> <C> <C> <C>
1994
Allowance for loan losses $ 75,324 $ 62,312 $291,321 $ 4,332 $433,289
% to loans in category 1.64% .62% 4.54% 2.11%
1993
Allowance for loan losses $ 80,624 $ 63,234 $389,227 $ - $533,085
% to loans in category 1.65% .56% 2.92% 1.88%
1992
Allowance for loan losses $126,377 $313,194 $104,398 $ 5,495 $549,464
% to loans in category 2.94% 3.02% 2.40% 3.01%
</TABLE>
Investment Portfolio
The investment activities of First Western are designed to provide an
investment alternative for funds not presently required to meet loan demand;
assist the Bank in meeting potential liquidity requirements; assist in
maximizing income consistent with quality and liquidity requirements; supply
collateral to secure public funds; and provide consistent income and market
value throughout changing economic times.
<PAGE>
First Western's portfolio consists primarily of obligations of U.S.
government., U.S. government agency and corporate obligations, and state and
local governments, as well as agency collateralized obligation securities.
The following table sets forth the composition of First Western's
investment portfolio for the years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- --------
<S> <C> <C> <C>
U.S. Treasuries $ 4,448,355 $ 3,499,219 $ 7,614,512
Agencies 3,975,613 998,684 3,546,492
Municipal 1,788,251 1,903,289 1,129,208
Other 225,698 602,862 651,855
----------- ----------- -----------
$10,437,917 $7,004,054 $12,942,067
========== ========= ==========
</TABLE>
For the investment portfolio as of December 31, 1994, the following
table sets forth a summary of yields and maturities:
<TABLE>
<CAPTION>
One Year or Less 1 - 5 Years 5 - 10 years Over 10 years Total
--------------------- ---------------------- ------------------ ------------------- ----------------------
Weighted Weighted Weighted Weighted Weighted
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasuries $978,511 5.349% $3,497,250 7.599% $ - $ - $ 4,475,761 7.107%
Agencies - .0 4,007,114 7.508 - .0 - 4,007,114 7.508
Municipal 265,044 5.012 720,681 6.115 681,601 5.952% 119,916 6.053% 1,787,241 5.885
Other securities - - - - - - 225,698 7.599 225,698 7.599
---------- ------- ----------- ------ --------- ------ ------- -------- ---------- -------
Total 1,243,555 5.277% 8,225,045 7.425% 681,601 5.952% 345,614 7.063% 10,495,814 7.063%
===== ===== ===== ===== =======
Less unrealized
gain (loss) 15,847 (73,744) - - (57,897)
---------- ---------- --------- -------- ----------
Total $1,259,402 $8,151,301 $681,601 $345,614 $10,437,917
========= ========= ======= ======= ==========
</TABLE>
In May 1993 the FASB issued Statement of Financial Accounting Standards
No. 115 "FAS 115"), Accounting for Certain investments in Debt and Equity
Securities. This statement addresses the accounting and reporting for
investments that have readily determinable fair market values. Those investments
are to be classified in three categories and accounted for as follows:
1. Debt securities that the enterprise has the positive intent and
ability to hold to maturity are classified as held-to-maturity
securities and reported at amortized cost.
2. Debt and equity securities that are bought and held principally
for the purpose of selling them in the near term are classified
as trading securities and reported at fair market value, with
unrealized gains and losses included in earnings.
3. Debt and equity securities not classified as either
held-to-maturity securities or trading securities are classified
as available-for-sale securities and reported at fair market
value, with unrealized gains and losses excluded from earnings
and reported in a separate component of shareholders' equity.
<PAGE>
First Western implemented FAS 115 on January 1, 1994, by properly
classifying all securities into either held-to-maturity investment accounts or
the available-for-sale accounts. First Western does not maintain a trading
portfolio.
Deposits
The following table sets forth a summary of First Western's deposits as
of the years ended December 31, and the maturity of time deposits over $100,000:
<TABLE>
<CAPTION>
1994 1993 1992
---------------------------- --------------------------- ------------------------
Average Average Average Average Average Average
Amount Rate Paid Amount Rate Paid Amount Rate Paid
<S> <C> <C> <C> <C> <C> <C>
Non-interest
bearing $ 5,667,902 .00% $ 5,176,939 .00% $ 4,976,621 .00%
Interest bearing
NOW and
SuperNOW 6,064,635 1.83 6,739,604 2.13 7,755,228 3.07
Savings and
MMDA 10,598,965 3.00 11,141,541 3.08 11,130,913 3.66
Time deposits 8,547,317 3.79 7,984,441 3.84 8,546,599 5.10
---------- ---- ----------- ---- ----------- -----
$30,878,819 2.44% $31,042,525 2.56% $32,409,361 3.34%
========== ==== ========== ==== ========== ====
</TABLE>
Time Deposit Maturity Schedule
As of December 31, 1994
<TABLE>
<CAPTION>
Less than Greater than
3 months 3 - 6 months 6 - 12 months 12 months Total
-------- ------------ ------------- ----------- -------
<S> <C> <C> <C> <C> <C>
Time deposits
$100,000 and
over $211,252 $231,998 $214,070 $301,449 $958,769
======== ======== ======== ======== ========
</TABLE>
<PAGE>
Statistical Information and Analysis
The following tables present certain statistical information regarding
First Western and should be read in connection with First Western's consolidated
Financial Statements and notes set forth elsewhere herein.
First Western Bancorporation
Balance Sheets
Based on Average Balances
Years ended December 31,
<TABLE>
<CAPTION>
1994 1993 1992
------------- ------------- ---------
<S> <C> <C> <C>
ASSETS
Cash and due froms $ 1,588,160 $ 1,314,884 $ 1,431,795
Investments
Federal funds sold 2,909,110 3,271,777 2,838,626
U.S. Treasuries 4,348,207 5,004,772 6,569,703
U.S. agencies 2,579,720 1,912,529 3,534,753
Mortgage backed 201,288 500,923 172,542
Municipal obligations 1,909,647 1,755,156 1,758,866
Other investments 235,388 157,126 131,435
----------- ----------- -----------
Total investments 12,183,360 12,602,283 15,005,925
Loans
Commercial 4,721,096 5,019,917 4,432,026
Real estate 10,064,541 9,946,273 9,757,156
Consumer 8,241,984 6,359,753 4,627,851
Less allowance for loan losses (432,307) (510,724) (420,414)
----------- ----------- -----------
Total loans 22,595,314 20,815,219 18,396,619
Other assets
Bank premises and furniture, fixtures, and
equipment, net 435,530 401,203 462,964
Accrued interest receivable 329,606 345,228 378,906
Other real estate owned 65,514 74,795 234,005
Other assets 427,295 518,758 471,864
---------- ---------- ----------
Total other assets 1,257,945 1,339,984 1,547,739
---------- ---------- ----------
Total assets $37,624,779 $36,072,370 $36,382,078
========== ========== ==========
</TABLE>
<PAGE>
First Western Bancorporation
Balance Sheets
Based on Average Balances
Years ended December 31,
<TABLE>
<CAPTION>
1994 1993 1992
------------- ------------- ---------
LIABILITIES AND
STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
Deposits
Non-interest bearing $ 5,667,902 $ 5,176,939 $ 4,976,621
Interest bearing 6,064,635 6,739,604 7,755,228
MMDA and savings 10,598,965 11,141,541 11,130,913
Certificates of deposit 8,547,317 7,984,441 8,546,599
---------- ---------- ----------
Total deposits 30,878,819 31,042,525 32,409,361
Borrowed funds 1,603,375 444,768 247,297
Accrued interest payable 65,677 67,337 91,008
Other liabilities 111,883 272,309 451,047
---------- ---------- ----------
Total liabilities 32,659,754 31,826,939 33,198,713
Minority interests 350,008 518,383 413,460
Common stock 520,360 520,360 520,360
Surplus 50,827 50,827 50,827
Undivided profits 4,428,605 3,523,586 2,566,443
Unrealized loss on available for sale (17,050) - -
Treasury stock (367,725) (367,725) (367,725)
----------- ----------- -----------
Total equity 4,615,017 3,727,048 2,769,905
---------- ---------- ----------
Total liabilities and stockholders' equity $37,624,779 $36,072,370 $36,382,078
========== ========== ==========
</TABLE>
<PAGE>
First Western Bancorporation
Analysis of Net Interest Earnings
Years ended December 31, 1992 - 1994
<TABLE>
<CAPTION>
Average
Average rate paid
Average interest interest
amount Interest Average Average earning earning Net yield
outstanding earned yield (1) rate paid assets liabilities on assets
----------- ----------- --------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1994
Assets
Federal funds sold $ 2,909,110 $ 110,518 3.80%
U.S. Treasuries 4,348,207 268,836 6.18
U.S. agencies 2,579,720 167,341 6.49
Mortgage backed 201,288 6,789 3.37
Municipal obligations 1,909,647 112,172 5.87
Other investments 235,389 10,207 4.34
Loans 22,595,314 3,102,246 13.73
---------- ---------
Total $34,778,675 $3,778,109 10.86% 8.48%
========== =========
Liabilities
Deposits
Interest bearing demand $ 6,064,635 $ 110,880 1.83%
MMDA and savings 10,598,965 317,607 3.00
Certificates of deposit 8,547,317 323,943 3.79
Borrowed funds 1,603,375 74,825 4.67
---------- ----------
Total $26,814,292 $ 827,255 3.09%
========== =========
1993
Assets
Federal funds sold $ 3,271,777 $ 92,107 2.82%
U.S. Treasuries 5,004,772 299,199 5.98
U.S. agencies 1,912,529 141,027 7.37
Mortgage backed 500,923 36,749 7.34
Municipal obligations 1,755,156 126,933 7.23
Other investments 157,126 19,030 12.11
Loans 20,815,219 3,213,383 15.44
---------- ---------
Total $33,417,502 $3,928,428 11.76% 9.36%
========== =========
Liabilities
Deposits
Interest bearing demand $ 6,739,604 $ 143,890 2.13%
MMDA and savings 11,141,541 342,775 3.08
Certificates of deposit 7,984,441 306,971 3.84
Borrowed funds 444,768 7,146 1.61
----------- ----------
Total $26,310,354 $ 800,782 3.04%
========== =========
</TABLE>
<PAGE>
First Western Bancorporation
Analysis of Net Interest Earnings
Years ended December 31, 1992 - 1994
<TABLE>
<CAPTION> Average
Average rate paid
Average interest interest
amount Interest Average Average earning earning Net yield
outstanding earned yield (1) rate paid assets liabilities on assets
----------- ----------- --------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1992
Assets
Federal funds sold $ 2,838,626 $ 100,868 3.55%
U.S. Treasuries 6,569,703 360,490 5.49
U.S. agencies 3,534,753 269,742 7.63
Mortgage backed 172,542 17,862 10.35
Municipal obligations 1,758,866 123,771 7.04
Other investments 131,435 11,939 9.08
Loans 18,396,619 2,893,020 15.73
---------- ---------
Total $33,402,544 $3,777,692 11.31% 8.04%
========== =========
Liabilities
Deposits
Interest bearing demand $ 7,755,228 $ 238,306 3.07%
MMDA and savings 11,130,913 407,318 3.66
Certificates of deposit 8,546,599 435,774 5.10
Borrowed funds 248,510 11,484 4.62
----------- ---------
Total $27,681,250 $1,092,882 3.95%
========== =========
<FN>
(1) Yields on tax-exempt obligations are not computed on a tax-equivalent basis.
</TABLE>
<TABLE>
<CAPTION>
1994 compared to 1993 1993 compared to 1992
--------------------------------------- ------------------------------
Attributable to change Attributable to change
----------------------- ----------------------
Total Change in Volume in Rate Total Change in Volume in Rate
<S> <C> <C> <C> <C> <C> <C>
Interest income
Federal funds sold $ 18,411 $(10,210) $ 28,621 $ (8,761) $ 15,392 $(24,153)
U.S. Treasuries (30,363) (39,251) 8,888 (61,291) (85,870) 24,579
U.S. agencies 26,314 49,198 (22,884) (128,715) (123,794) (4,921)
Mortgage backed (29,960) (21,982) (7,978) 18,887 33,995 (15,108)
Municipal obligations (14,761) 11,173 (25,934) 3,162 (261) 3,423
Other investments (8,823) 9,479 (18,302) 7,091 2,334 4,757
Loans (111,137) 274,805 (385,942) 320,363 380,345 (59,982)
------- ------- ------- ------- ------- -------
Total (150,319) 273,212 (423,531) 150,736 222,141 (71,405)
Interest expense
Deposits
Interest bearing (33,010) (14,411) (18,599) (94,416) (31,209) (63,207)
MMDA and savings (25,168) (16,693) (8,475) (64,543) 389 (64,932)
Certificates of depsoit 16,972 21,640 (4,668) (128,803) (28,663) (100,140)
Borrowed funds 67,679 18,615 49,064 (4,338) 9,069 (13,407)
------- ------- ------- ------- ------- -------
Total 26,473 9,151 17,322 (292,100) (50,414) (241,686)
------- ------- ------- ------- ------- -------
$(176,792) $ 264,060 $(440,852) $442,836 $272,555 $170,281
======= ======== ======== ======= ======= =======
</TABLE>
<PAGE>
First Western Bancorporation
Analysis of Net Income
Years ended December 31,
1994 1993 1992
--------- ------- -------
Net income $747,815 $1,062,224 $982,795
Dividends paid - - 110,964
Return on average assets 1.99% 2.94% 2.70%
Return on average equity 16.20 28.50 35.48
Dividend payout ratio .00 .00 12.20
Equity to assets 12.27 10.33 7.61
<PAGE>
First Western Bancorporation
Loan Repricing or Maturing
As of December 31, 1994
<TABLE>
<CAPTION>
Less than
one year 1 - 5 years 5 - 10 years Total
------------ ------------ ------------ ---------
<S> <C> <C> <C> <C>
Loan Category
Commercial $2,099,606 $1,383,673 $1,110,019 $ 4,593,298
Real estate 4,774,547 2,853,906 2,441,670 10,070,123
Consumer and other 3,123,971 1,871,276 1,414,847 6,410,094
--------- --------- --------- ----------
$9 ,998,124 $6,108,855 $4,966,536 $21,073,515
========== ========= ========= ==========
Fixed interest rate loans $5,231,925 $6,108,855 $4,966,536 $16,307,316
Floating interest rate loans 4,766,199 - - 4,766,199
--------- -------------- -------------- ----------
$9,998,124 $6,108,855 $4,966,536 $21,073,515
========= ========= ========= ==========
</TABLE>
<PAGE>
First Western Bancorporation
Interest Rate Sensitivity
As of December 31, 1994
<TABLE>
<CAPTION>
One year
or less 1 - 5 years Over 5 years Total
--------------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
Rate Sensitive Assets
Loans $ 9,998,124 $ 6,108,855 $ 4,966,536 $21,073,515
Investment securities 1,259,402 8,151,300 801,517 10,212,219
Other interest-bearing assets 3,845,194 - - 3,845,194
---------- ------------- -------------- ----------
15,102,720 14,260,155 5,768,053 35,130,928
Rate Sensitive Liabilities
Savings and interest bearing checking 15,908,985 - - 15,908,985
Time deposits 6,333,740 2,647,656 - 8,981,396
Short-term borrowings 420,941 - - 420,941
Long-term borrowings 338,000 - 902,502 1,240,502
----------- -------------- ----------- ----------
23,001,666 2,647,656 902,502 26,551,824
---------- ---------- ----------- ----------
Rate sensitive gap $(7,898,946) $11,612,499 $4,865,551 $ 8,579,104
========== ========== ========= ==========
Cumulative rate sensitive gap $(7,898,946) $3,713,553 $8,579,104 $17,158,208
Rate sensitive gap percentage 65.66% 538.60% 639.12% 132.31%
Cumulative rate sensitive gap percentage 65.66% 114.48% 132.31% 132.31%
</TABLE>
<PAGE>
COMPARISON OF ZIONS COMMON STOCK, FIRST WESTERN COMMON STOCK
AND BANK COMMON STOCK
General
Upon consummation of the Reorganizations, shareholders of First Western
and of the Bank 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 First Western and Bank
shareholders who become shareholders of Zions. Since the articles and bylaws of
Zions, First Western and the Bank are not the same, the Reorganizations will
result in certain differences in the rights of the holders of First Western
Common Stock and Bank 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 First
Western Common Stock and Bank 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 Bank Common Stock currently have cumulative voting rights in the
election of directors, meaning that in all elections for directors every
shareholder will 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 and First Western 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.
<PAGE>
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 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.
The governing instruments of First Western and the Bank have no similar
provisions.
Under its bylaws, First Western may not merge or consolidate with
another entity or conduct a sale of substantially all of its assets without the
prior approval of the holders of two-thirds of its outstanding voting stock. The
National Bank Act, the Bank's governing law, requires 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. Zions'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,
and (iv) transactions in which a director receives an improper benefit. First
Western and the Bank have no similar provision in their articles of
incorporation or bylaws.
Both First Western's and the Bank's governing instruments provide,
subject to certain conditions, for indemnification or reimbursement by First
Western or the Bank, as the case may be, for reasonable expenses actually
incurred by a person in connection with any action, suit, or proceeding to which
he is made a party by reason of his being or having been a director, officer, or
employee of First Western or the Bank, as the case may be.
Classified Board. The articles of incorporation of Zions 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. The governing instruments of First Western and the Bank
make no provision for a classified board, the result of which is that the entire
board of First Western and of the Bank is elected at each annual meeting.
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.
<PAGE>
First Western's articles of incorporation and bylaws provide that the
number of directors of First Western is set at ten. The Bank's articles of
incorporation and bylaws provide that the number of directors of the Bank will
be not less than five nor more than twenty-five shareholders and that the
shareholders by a two-thirds vote may determine the number of directors to be
elected at the annual meeting of shareholders. First Western's bylaw provisions
governing vacancies are similar to Zions', with the exception that any directors
elected by the Board will continue in office only until their successor has been
elected at the next annual election. The Bank's bylaws provide that vacancies
will be filled in accordance with the requirements of the law of the United
States. The National Bank Act has provisions similar to those of First Western.
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.
First Western's bylaws adopt the provisions of Utah law for the removal
of directors. Utah law provides 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 shareholders 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.
The Bank's governing instruments and the National Bank Act are silent
with respect to the removal 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 First Western's bylaws, special meetings of shareholders may be
called by the president, a vice president, the Board of Directors, or
shareholders entitled to cast at least one-tenth of the shares entitled to vote.
The Bank's articles and bylaws provide that the Board of Directors or
three or more shareholders owning in the aggregate not less than 10% of the
Bank's stock 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.
First Western's articles are silent with respect to amendment of its
articles. Under Utah law, First Western's articles of incorporation may be
amended at an annual or special shareholder meeting by an affirmative two-thirds
<PAGE>
vote of all holders of the shares entitled to vote. First Western's bylaws may
be amended at an annual or special shareholder meeting by an affirmative vote of
two-thirds of all shares entitled to vote or by an affirmative vote of
two-thirds of the Board of Directors at a Board meeting called for that purpose.
The Bank's articles provide that the articles may be amended by the
shareholders by the affirmative vote of a majority of the outstanding stock. The
Bank's bylaws provide that the bylaws may be amended by the vote of a majority
of the Board of Directors at a meeting of the Board, provided ten days' notice
of the proposed amendment has been given to each member of the Board.
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 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 more 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.
<PAGE>
First Western is incorporated under the laws of Utah and is therefore
subject to the requirements set forth in the previous paragraph. First Western'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 First Western will
be entitled to exercise all applicable rights of dissenting shareholders under
Utah law.
The Bank is a national banking association and is therefore subject to
the National Bank Act. Under 12 U.S.C. section 215a(b), any Bank shareholder has
the right to dissent to a merger of a national banking association with another
national banking association. See "Plan of Reorganization--Dissenters' Rights of
First Western and Bank 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
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.
First Western's articles of incorporation authorize the issuance of up
to 50,000 shares of preferred stock, $10.00 par value. The articles provide that
the preferred stock when issued will be entitled to 7% cumulative annual
dividends, will have a preferential right (over the holders of the common stock)
to receive dividends, and will be redeemable at par without penalty by First
Western after three years from the date of issue. The articles forbid the
issuance of any class of stock in issues and provide that preferred stock will
have no voting rights. No shareholder approval is required for the issuance of
such shares.
The Bank's articles make no provision for preferred stock.
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 Zions 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.
First Western's articles place no restrictions on distributions, and therefore
any distributions by First Western are governed by the Utah provisions
summarized above.
Under the National Bank Act to which the Bank is subject, the directors
of a national banking association may, quarterly, semiannually, or annually,
declare a dividend of so much of the net profits of the association as they
judge expedient, except that until the surplus fund of such association shall
equal its common capital, no dividends shall be declared unless there has been
carried to the surplus fund not less than 10% of the association's net profits
of the preceding half year in the case of quarterly or semiannual dividends or
of the preceding two consecutive half-year periods in the case of annual
dividends. Moreover, the prior approval of the Comptroller is required for the
payment of any dividend if the total of all dividends declared by a national
bank in any calendar year will exceed such bank's net profits (as defined by
statute) for the year combined with its retained net profits of the preceding
two years, less any required transfers to surplus. No dividend may be paid by a
national bank, with or without the approval of the Comptroller, if the bank's
capital would be impaired following the payment, except in the case of
liquidation. In addition, the Comptroller has authority under the Financial
Institutions Supervisory Act to initiate proceedings designed to prohibit a
national bank from engaging in what, in his opinion, constitutes an unsafe or an
unsound practice in conducting its business, and under certain circumstances
relating to the financial condition of a national bank, the Comptroller may
determine that the payment of dividends would be an unsafe or unsound practice.
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 Zions may grant preferential
liquidation rights to the holders of such stock which would entitle them to be
paid out of the assets of Zions available for distribution before any
distribution is made to the holders of common stock.
As a Utah corporation, First Western is subject to the same
requirements regarding liquidation as are applicable to Zions, as summarized
above. Although First Western does not have any shares of preferred stock
outstanding, First Western's Board of Directors, like that of Zions, may issue
shares of preferred stock with preferential liquidation rights without
shareholder approval.
The rights of the holders of Bank Common Stock in the event of a
liquidation are substantially similar to those applicable to Zions and First
Western shareholders.
Miscellaneous
There are no preemptive rights (except as stated in the next sentence),
sinking fund provisions, conversion rights, or redemption provisions applicable
to Zions Common Stock, First Western Common Stock or Bank Common Stock. The
First Western articles provide that the holders of shares of First Western
Common Stock have preemptive rights, which allow existing First Western
shareholders to purchase additional shares of a new issue of First Western
Common Stock before other persons who are not First Western shareholders may
purchase shares of a new issue, in order for current First Western shareholders,
if they or any of them so choose, to maintain their proportionate share of the
ownership of First Western. Holders of fully paid shares of Zions Common Stock,
First Western Common Stock and Bank 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
Reorganizations will be rendered by Metzger, Hollis, Gordon & Mortimer,
Washington, D.C., as counsel for Zions, and by Cohne, Rappaport & Segal, P.C.,
as counsel for First Western and the Bank.
<PAGE>
EXPERTS
The consolidated financial statements and schedule of Zions
Bancorporation as of December 31, 1994 and 1993, and for each of the years in
the three-year period ended December 31, 1994, incorporated by reference herein,
have been incorporated by reference herein and in the registration statement in
reliance upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of such
firm as experts in auditing and accounting. The reports of KPMG Peat Marwick LLP
covering the December 31, 1994 and 1993 consolidated financial statements and
schedule refer to changes in accounting principles relating to the adoption of
the Financial Accounting Standards Board's Statements of Financial Accounting
Standards No. 106, Employers' Accounting for Postretirement Benefits Other Than
Pensions, No. 109 Accounting for Income Taxes, and No. 115, Accounting for
Certain Investments in Debt and Equity Securities.
The consolidated financial statements of First Western as of December
31, 1994 and 1993, and for each of the years in the three-year period ended
December 31, 1994, included herein have been included herein in reliance upon
the report of Fortner, Bayens, Levkulich and Co., P.C., independent certified
public accountants, appearing elsewhere herein, and upon their authority as
experts in auditing and accounting. The report of Fortner, Bayens, Levkulich and
Co., P.C. covering the December 31, 1994 and 1993, consolidated financial
statements refer to the change in accounting principles relating to the adoption
of the Financial Accounting Standards Board's Statements of Financial Accounting
Standards No. 115, Accounting for Certain Investments In Debt and Equity
Securities.
OTHER MATTERS
The respective managements of First Western and the Bank do not know of
any other matters intended to be presented for shareholder action at the Special
Meetings. If any other matter does properly come before either Special Meeting
and is put to a shareholder vote, the respective proxies solicited hereby will
be voted in accordance with the judgment of the proxyholders named thereon.
<PAGE>
APPENDIX A
Utah Business Corporation Act
Part 13. Dissenters' Rights
16-10a-1301 DEFINITIONS. -- For purposes of Part 13:
(1) "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Section 16-10a-1302 and who exercises that right when and
in the manner required by Sections 16-10a-1320 through 16-10a-1328.
(4) "Fair value" with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the statutory rate set forth in Section 15-
1-1, compounded annually.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
that are registered in the name of a nominee to the extent the beneficial owner
is recognized by the corporation as the shareholder as provided in Section
16-10-723.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
16-10a-1302 RIGHT TO DISSENT.--(1) A shareholder, whether or not
entitled to vote, is entitled to dissent from, and obtain payment of the fair
value of shares held by him in the event of, any of the following corporate
actions:
(a) consummation of a plan of merger to which the corporation is a
party if:
(i) shareholder approval is required for the merger by Section
16-10a-1103 or the articles of incorporation; or
<PAGE>
(ii) the corporation is a subsidiary that is merged with its parent
under Section 16-10a-1104;
(b) consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired;
(c) consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of the corporation for which a
shareholder vote is required under Subsection 16-10a-1202(1), but not including
a sale for cash pursuant to a plan by which all or substantially all of the net
proceeds of the sale will be distributed to the shareholders within one year
after the date of sale; and
(d) consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of an entity controlled by the
corporation if the shareholders of the corporation were entitled to vote upon
the consent of the corporation to the disposition pursuant to Subsection
16-10a-1202(2).
(2) A shareholder is entitled to dissent and obtain payment of the fair
value of his shares in the event of any other corporate action to the extent the
articles of incorporation, bylaws, or a resolution of the board of directors so
provides.
(3) Notwithstanding the other provisions of this part, except to the
extent otherwise provided in the articles of incorporation, bylaws, or a
resolution of the board of directors, and subject to the limitations set forth
in Subsection (4), a shareholder is not entitled to dissent and obtain payment
under Subsection (1) of the fair value of the shares of any class or series of
shares which either were listed on a national securities exchange registered
under the federal Securities Exchange Act of 1934, as amended, or on the
National Market System of the National Association of Securities Dealers
Automated Quotation System, or were held of record by more than 2,000
shareholders, at the time of:
(a) the record date fixed under Section 16-10a-707 to determine the
shareholders entitled to receive notice of the shareholders' meeting at which
the corporate action is submitted to a vote;
(b) the record date fixed under Section 16-10a-704 to determine
shareholders entitled to sign writings consenting to the proposed corporate
action; or
(c) the effective date of the corporate action if the corporate action
is authorized other than by a vote of shareholders.
<PAGE>
(4) The limitation set forth in Subsection (3) does not apply if the
shareholder will receive for his shares, pursuant to the corporate action,
anything except:
(a) shares of the corporation surviving the consummation of the plan of
merger or share exchange;
(b) shares of a corporation which at the effective date of the plan of
merger or share exchange either will be listed on a national securities exchange
registered under the federal Securities Exchange Act of 1934, as amended, or on
the National Market System of the National Association of Securities Dealers
Automated Quotation System, or will be held of record by more than 2,000
shareholders;
(c) cash in lieu of fractional shares; or
(d) any combination of the shares described in Subsection (4), or cash
in lieu of fractional shares.
(5) A shareholder entitled to dissent and obtain payment for his shares
under this part may not challenge the corporate action creating the entitlement
unless the action is unlawful or fraudulent with respect to him or to the
corporation.
16-10a-1303 DISSENT BY NOMINEES AND BENEFICIAL OWNERS. --(1) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if the shareholder dissents with respect to all
shares beneficially owned by any one person and causes the corporation to
receive written notice which states the dissent and the name and address of each
person on whose behalf dissenters' rights are being asserted. The rights of a
partial dissenter under this subsection are determined as if the shares as to
which the shareholder dissents and the other shares held of record by him were
registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(a) the beneficial shareholder causes the corporation to receive the
record shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(b) the beneficial shareholder dissents with respect to all shares of
which he is the beneficial shareholder.
(3) The corporation may require that, when a record shareholder
dissents with respect to the shares held by any one or more beneficial
shareholders, each beneficial shareholder must certify to the corporation that
both he and the record shareholders of all shares owned beneficially by him have
asserted, or will timely assert, dissenters' rights as to all the shares
unlimited on the ability to exercise dissenters' rights. The certification
requirement must be stated in the dissenters' notice given pursuant to Section
16-10a-1322.
16-10a-1320 NOTICE OF DISSENTERS' RIGHTS. --(1) If a proposed corporate
action creating dissenters' rights under Section 16-10a-1302 is submitted to a
vote at a shareholders' meeting, the meeting notice must be sent to all
shareholders of the corporation as of the applicable record date, whether or not
they are entitled to vote at the meeting. The notice shall state that
shareholders are or may be entitled to assert dissenters' rights under this
part. The notice must be accompanied by a copy of this part and the materials,
if any, that under this chapter are required to be given the shareholders
entitled to vote on the proposed action at the meeting. Failure to give notice
as required by this subsection does not affect any action taken at the
shareholders' meeting for which the notice was to have been given.
(2) If a proposed corporate action creating dissenters' rights under
Section 16-10a-1302 is authorized without a meeting of shareholders pursuant to
Section 16-10a-704, any written or oral solicitation of a shareholder to execute
a written consent to the action contemplated by Section 16-10a-704 must be
accompanied or preceded by a written notice stating that shareholders are or may
be entitled to assert dissenters' rights under this part, by a copy of this
part, and by the materials, if any, that under this chapter would have been
required to be given to shareholders entitled to vote on the proposed action if
the proposed action were submitted to a vote at a shareholders' meeting. Failure
to give written notice as provided by this subsection does not affect any action
taken pursuant to Section 16-10a-704 for which the notice was to have been
given.
16-10a-1321 DEMAND FOR PAYMENT -- ELIGIBILITY AND NOTICE OF
INTENT.--(1) If a proposed corporate action creating dissenters' rights under
Section 16-10a- 1302 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights:
(a) must cause the corporation to receive, before the vote is taken,
written notice of his intent to demand payment for shares if the proposed action
is effectuated; and
(b) may not vote any of his shares in favor of the proposed action.
(2) If a proposed corporate action creating dissenters' rights under
Section 16-10a-1302 is authorized without a meeting of shareholders pursuant to
Section 16-10a-704, a shareholder who wishes to assert dissenters' rights may
not execute a writing consenting to the proposed corporate action.
(3) In order to be entitled to payment for shares under this part,
unless otherwise provided in the articles of incorporation, bylaws, or a
resolution adopted by the board of directors, a shareholder must have been a
shareholder with respect to the shares for which payment is demanded as of the
date the proposed corporate action creating dissenters' rights under Section
16-10a-1302 is approved by the shareholders, if shareholder approval is
required, or as of the effective date of the corporate action if the corporate
action is authorized other than by a vote of shareholders.
(4) A shareholder who does not satisfy the requirements of Subsections
(1) through (3) is not entitled to payment for shares under this part.
16-10a-1322 DISSENTERS' NOTICE. --(1) If a proposed corporate action
creating dissenters' rights under Section 16-10a-1302 is authorized, the
corporation shall give a written dissenters' notice to all shareholders who are
entitled to demand payment for their shares under this part.
(2) The dissenters' notice required by Subsection (1) must be sent no
later than ten days after the effective date of the corporate action creating
dissenters' rights under Section 16-10a-1302, and shall:
(a) state that the corporate action was authorized and the effective
date or proposed effective date of the corporate action;
(b) state an address at which the corporation will receive payment
demands and an address at which certificates for certificated shares must be
deposited;
(c) inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(d) supply a form for demanding payment, which form requests a
dissenter to state an address to which payment is to be made;
(e) set a date by which the corporation must receive the payment demand
and by which certificates for certificated shares must be deposited at the
address indicated in the dissenters' notice, which dates may not be fewer than
30 nor more than 70 days after the date the dissenters' notice required by
Subsection (1) is given;
(f) state the requirement contemplated by Subsection 16-10a-1303(3), if
the requirement is imposed; and
(g) be accompanied by a copy of this part.
16-10a-1323 PROCEDURE TO DEMAND PAYMENT.--(1) A shareholder who is
given a dissenters' notice described in Section 16-10a-1322, who meets the
requirements of Section 15-10a-1321, and wishes to assert dissenters' rights
must, in accordance with the terms of the dissenters' notice:
(a) cause the corporation to receive a payment demand, which may be the
payment demand form contemplated in Subsection 16-10a-1322(2)(d), duly
completed, or may be stated in another writing;
(b) deposit certificates for his certificated shares in accordance with
the terms of the dissenters' notice; and
(c) if required by the corporation in the dissenters' notice described
in Section 16-10a-1322, as contemplated by Section 16-10a-1327, certify in
writing, in or with the payment demand, whether or not he or the person on whose
behalf he asserts dissenters' rights acquired beneficial ownership of the shares
before the date of the first announcement to news media or to shareholders of
the terms of the proposed corporate action creating dissenters' rights under
Section 16-10a-1302.
(2) A shareholder who demands payment in accordance with Subsection (1)
retains all rights of a shareholder except the right to transfer the shares
until the effective date of proposed corporate action giving rise to the
exercise of dissenters' rights and has only the right to receive payment for the
shares after the effective date of the corporate action.
(3) A shareholder who does not demand payment and deposit share
certificates as required, by the date or dates set in the dissenters' notice, is
not entitled to payment for shares under this part.
16-10a-1324 UNCERTIFICATED SHARES.--(1) Upon receipt of a demand for
payment under Section 16-10a-1326 from a shareholder holding uncertificated
shares, and in lieu of the deposit of certificates representing the shares, the
corporation may restrict the transfer of the shares until the proposed corporate
action is taken or the restrictions are released under Section 16-10a-1326.
(2) In all other respects, the provisions of Section 16-10a-1323 apply
to shareholders who own uncertificated shares.
16-10a-1325 PAYMENT. --(1) Except as provided in Section 16-10a-1327,
upon the later of the effective date of the corporate action creating
dissenters' rights under Section 16-10a-1302, and receipt by the corporation of
each payment demand pursuant to Section 16-10a-1323, the corporation shall pay
the amount the corporation estimates to be the fair value of the dissenters'
shares, plus interest to each dissenter who has complied with Section
16-10a-1323, and who meets the requirements of Section 16-10a-1321, and who has
not yet received payment.
(2) Each payment made pursuant to Subsection (1) must be accompanied
by:
(a)(i)(A) the corporation's balance sheet as of the end of its most
recent fiscal year, of if not available, a fiscal year ending not more than 16
months before the date of payment;
(B) an income statement for that year;
(C) a statement of changes in shareholders' equity for that year and a
statement of cash flow for that year, if the corporation customarily provides
such statements to shareholders; and
(D) the latest available interim financial statements, if any; (ii) the
balance sheet and statements referred to in Subsection (i) must
be audited if the corporation customarily provides audited financial statements
to shareholders;
(b) a statement of the corporation's estimate of the fair value of the
shares and the amount of interest payable with respect to the shares;
(c) a statement of the dissenters' right to demand payment under
Section 16-10a-1328; and
(d) a copy of this part.
16-10a-1326 FAILURE TO TAKE ACTION. --(1) If the effective date of the
corporate action creating dissenters' rights under Section 16-10a-1302 does not
occur within 60 days after the date set by the corporation as the date by which
the corporation must receive payment demands as provided in Section 16-10a-1322,
the corporation shall return all deposited certificates and release the transfer
restrictions imposed on uncertificated shares, and all shareholders who
submitted demand for payment pursuant to Section 16-10a-1323 shall thereafter
have all rights of a shareholder as if no demand for payment had been made.
(2) If the effective date of the corporate action creating dissenters'
rights under Section 16-10a-1302 occurs more than 60 days after the date set by
the corporation as the date by which the corporation must receive payment
demands as provided in Section 16-10a-1322, then the corporation shall send a
new dissenters' notice, as provided in Section 16-10a-1322, and the provisions
of Sections 16-10a-1323 through 16-10a-1328 shall again be applicable.
16-10a-1327 SPECIAL PROVISIONS RELATING TO SHARES ACQUIRED AFTER
ANNOUNCEMENT OF PROPOSED CORPORATE ACTION.--(1) A corporation may, with the
dissenters' notice given pursuant to Section 16-10a-1302, state the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action creating dissenters' rights under Section 16-10a-1302 and state
that a shareholder who asserts dissenters' rights must certify in writing, in or
with the payment demand, whether or not he or the person on whose behalf he
asserts dissenters' rights acquired beneficial ownership of the shares before
that date. With respect to any dissenter who does not certify in writing, in or
with the payment demand that he or the person on whose behalf the dissenters'
rights are being asserted, acquired beneficial ownership of the shares before
that date, the corporation may, in lieu of making the payment provided in
Section 16-10a-1325, offer to make payment if the dissenter agrees to accept it
in full satisfaction of the demand.
(2) An offer to make payment under Subsection (1) shall include or be
accompanied by the information required by Subsection 16-10a-1325(2).
16-10a-1328 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR
OFFER.--(1) A dissenter who has not accepted an offer made by a corporation
under Section 16-10a-1327 may notify the corporation in writing of his own
estimate of the fair value of his shares and demand payment of the estimated
amount, plus interest, less any payment made under Section 16-10a-1325, if:
(a) the dissenter believes that the amount paid under Section
16-10a-1325 or offered under Section 16-10a-1327 is less than the fair value of
the shares;
(b) the corporation fails to make payment under Section 16- 10a-1325
within 60 days after the date set by the corporation as the date by which it
must receive the payment demand; or
(c) the corporation, having failed to take the proposed corporate
action creating dissenters' rights, does not return the deposited certificates
or release the transfer restrictions imposed on uncertificated shares as
required by Section 16-10a-1326.
(2) A dissenter waives the right to demand payment under this section
unless he causes the corporation to receive the notice required by Subsection
(1) within 30 days after the corporation made or offered payment for his shares.
16-10a-1330 JUDICIAL APPRAISAL OF SHARES-COURT ACTION.--(1) If a demand
for payment under Section 16-10a-1328 remains unresolved, the corporation shall
commence a proceeding within 60 days after receiving the payment demand
contemplated by Section 16-10a-1328, and petition the court to determine the
fair value of the shares and the amount of interest. If the corporation does not
commence the proceeding within the 60-day period, it shall pay each dissenter
whose demand remains unresolved the amount demanded.
(2) The corporation shall commence the proceeding described in
Subsection (1) in the district court of the county in this state where the
corporation's principal office, or if it has no principal office in this state,
the county where its registered office is located. If the corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with, or whose shares were acquired by, the foreign
corporation was located.
(3) The corporation shall make all dissenters who have satisfied the
requirements of Sections 16-10a-1321, 16-10a-1323, and 16-10a-1328, whether or
not they are residents of this state whose demands remain unresolved, parties to
the proceeding commenced under Subsection (2) as an action against their shares.
All such dissenters who are named as parties must be served with a copy of the
petition. Service on each dissenter may be by registered or certified mail to
the address stated in his payment demand made pursuant to Section 16-10a-1328.
If no address is stated in the payment demand, service may be made at the
address stated in the payment demand given pursuant to Section 16-10a-1323. If
no address is stated in the payment demand, service may be made at the address
shown on the corporation's current record of shareholders for the record
shareholder holding the dissenter's shares. Service may also be made otherwise
as provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced
under Subsection (2) is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decision on the question
of fair value. The appraisers have the powers described in the order appointing
them, or in any amendment to it. The dissenters are entitled to the same
discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding commenced under
Subsection (2) is entitled to judgment:
(a) for the amount, if any, by which the court finds that the fair
value of his shares, plus interest, exceeds the amount paid by the corporation
pursuant to Section 16-10a-1325; or
(b) for the fair value, plus interest, of the dissenter's
after-acquired shares for which the corporation elected to withhold payment
under Section 16- 10a-1327.
16-10a-1331 COURT COSTS AND COUNSEL FEES.--(1) The court in an
appraisal proceeding commenced under Section 16-10a-1330 shall determine all
costs of the proceeding, including the reasonable compensation and expenses of
appraisers appointed by the court. The court shall assess the costs against the
corporation, except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the effect the court finds
that the dissenters acted arbitrarily, vexatiously, or not in good faith in
demanding payment under Section 16-10a-1328.
(2) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(a) against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Sections 16-10a-1320 through 16-10a-1328; or
(b) against either the corporation or one or more dissenters, in favor
of an other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this part.
(3) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to those counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
<PAGE>
APPENDIX B
The National Bank Act
12 U.S.C. section 215a(b)
section 215a. Merger of national banks or State banks into national banks
(b) Dissenting shareholders
If a merger shall be voted for at the called meetings by the necessary
majorities of the shareholders of each association or State bank participating
in the plan of merger, and thereafter the merger shall be approved by the
Comptroller, any shareholder of any association or State bank to be merged into
the receiving association who has voted against such merger at the meeting of
the association or bank of which he is a stockholder, or has given notice in
writing at or prior to such meeting to the presiding officer that he dissents
from the plan of merger, shall be entitled to receive the value of the shares so
held by him when such merger shall be approved by the Comptroller upon written
request made to the receiving association at any time before thirty days after
the date of consummation of the merger, accompanied by the surrender of his
stock certificates.
<PAGE>
APPENDIX C
April 24, 1995
First Western Bancorporation
P.O. Box 249
Moab, UT 84532
Zions Bancorporation
1380 Kennecott Building
Salt Lake City, UT 84133
Madams and Gentlemen:
We have acted as tax counsel to First Western Bancorporation, a Utah
corporation, and First Western National Bank in connection with an Agreement and
Plan of Reorganization dated October 24, 1994 and amended January 4, 1995
("Agreement"). The Agreement provides for, among other things, the merger (the
"Holding Company Merger") of First Western Bancorporation with and into Zions
Bancorporation a Utah corporation and the merger ("Bank Merger") of First
Western National Bank, a national banking association organized under the laws
of the United States, with and into Zions First National Bank ("Zions Bank"), a
national banking association. First Western Bank is a majority owned subsidiary
of First Western Bancorporation, and Zions Bank is a wholly owned subsidiary of
Zions Bancorporation. Unless stated otherwise, all capitalized terms herein
shall have the same meaning as specifically defined in the Agreement.
First Western Bancorporation is a one bank holding company that has
outstanding 39,988 shares of $10 par value common stock owned by approximately
nine shareholders. First Western Bancorporation owns 93.49% of the issued and
outstanding stock of First Western Bank with approximately 30 shareholders
owning the remaining stock. Zions Bancorporation is a Utah corporation
registered under the Bank Holding Company Act of 1956 and is engaged primarily
in commercial banking business through its banking subsidiaries. Zions
Bancorporation owns all of the issued and outstanding stock of Zions Bank which
is a full service commercial banking institution having 84 banking offices of
which 83 are located in the State of Utah plus one foreign office.
For valid business reasons, on the effective date of the Holding
Company and Bank Mergers, each shareholder of First Western Bancorporation will
receive that number of shares of common
<PAGE>
First Western Bancorporation
Zions Bancorporation
April 24, 1995
Page 2
stock of Zions Bancorporation calculated by dividing the Company Purchase Price
by the average closing price of Zions Bancorporation and by further dividing
that number by the number of shares of First Western Bancorporation that are
issued and outstanding as the effective date and multiplying it by the number of
shares of First Western Bancorporation held by that shareholder. Should the
average daily sales price of Zions Bancorporation's common stock preceding the
effective date of the Merger establish the average closing price at more than
$41 per share, First Western may, upon notice, terminate the Merger pursuant to
the Agreement subject to Zions Bancorporation's right to exercise the Fixed
Closing Price Election. Further, should the average daily sales price of Zions
Bancorporation preceding the effective date of the Merger establish the average
closing price at less than $37 per share, Zions Bancorporation may, upon notice,
terminate the Merger pursuant to the Agreement subject to First Western
Bancorporation's right to exercise the Fixed Closing Price Election. The Company
Purchase Price equals the share of the Bank Purchase Price equivalent to the
proportionate ownership of First Western Bancorporation in the stock of First
Western Bank, as adjusted to account for certain assets and certain liabilities
of First Western Bancorporation on the last day of the month preceding the
effective date. The Bank Purchase Price is defined in Article 1.2 of the
Agreement as $9,300,000.00 plus the net undistributed income of First Western
Bank between the opening of business on September 1, 1994 and the close of
business on the effective date as well as adjustments for various items set
forth in Section 1.2 of the Agreement. As a result of the Bank Merger, each
shareholder of First Western Bank, except First Western Bancorporation, will
receive shares of common stock of Zions Bancorporation based on his or her
proportionate share interest in the Bank Purchase Price. In both Reorganizations
cash in lieu of fractional shares will be issued.
The Agreement is subject to the approval of the shareholders of First
Western Bancorporation, First Western Bank and Zions Bank, the Comptroller of
the Currency, and the approval by or waiver of jurisdiction of the Board of
Governors of the Federal Reserve System.
As a result of the Bank Merger, Zions Bancorporation will hold
substantially all of its properties and substantially all of the properties of
First Western Bancorporation. In addition, Zions Bank will continue the historic
business or use significant portions of the historic assets of First Western
Bank in its business operations in Moab, Monticello, and Blanding, Utah.
The shareholders of First Western Bancorporation who do not vote their
shares in favor of the Agreement and Plan of Reorganization and who otherwise
perfect applicable dissenters rights will be entitled to receive the value of
their shares in accordance with the provisions of applicable state and national
laws.
Pursuant to letters and certificates dated March 23, 1995, managements
of First Western Bancorporation, First Western Bank, and Zions Bancorporation
and Zions Bank have made representations to us regarding the Holding Company and
Bank Mergers.
<PAGE>
First Western Bancorporation
Zions Bancorporation
April 24, 1995
Page 3
In rendering the opinions set forth herein, we have reviewed various
documents, corporate minutes, the Agreement and Plan of Reorganization dated
October 24, 1994 and amended January 4, 1995 and the attachments thereto, and
such other documents and records as we have deemed necessary and appropriate to
form a foundation for the opinions set forth herein. In addition, we have
investigated such questions of law as we have deemed necessary or appropriate.
For the purposes of this opinion, it has been assumed by us that all such
agreements and documents are currently valid, binding and represent legal
obligations of their respective parties and are consistent with sound banking
and business practices and have been maintained in the normal course. It is
further assumed that no material event has occurred or will occur which has not
been brought to our attention which would impact upon the opinions set forth
herein.
In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as original, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies, and the authenticity of the originals of such copies. We also have
assumed: (i) the valid authorization, execution, and delivery of the Agreement
together with the schedules attached thereto, (ii) that all resolutions adopted
by the parties and their Board of Directors are valid and binding resolutions
upon the respective corporations, (iii) that each party to the Agreement and
Plan of Reorganization, other than individuals, has been duly organized and was
on the date of execution, validly existing and in good standing in the
jurisdiction of its organization with the requisite corporate or other
organization power to perform its obligations thereunder, (iv) that all
representations and warranties by all parties as set forth in the Agreement and
Plan of Reorganization are true and accurate and Zions Bancorporation and First
Western Bancorporation will adhere to each of the covenants set forth therein.
Based upon the foregoing and based on the representations submitted to
us, we are of the opinion that:
1. The Holding Company Merger as defined and set forth in the
Agreement and Plan of Reorganization will, under current law, constitute a tax
free reorganization under Section 368(a)(1)(A) of the Internal Revenue Code of
1986, as amended.
2. The simultaneous Bank Merger as defined and set forth in
the Agreement and Plan of Reorganization will constitute a tax free
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended. Zions Bancorporation, Zions Bank, and First Western
Bancorporation and First Western Bank will each be "a party to a reorganization"
within the meaning and intent of Section 368(b) of the Internal Revenue Code of
1986, as amended to date.
3. No gain or loss will be recognized by any of the holders of
the common stock of First Western Bancorporation or First Western Bank as a
result of the exchange of such shares for shares of the Zions Bancorporation's
<PAGE>
First Western Bancorporation
Zions Bancorporation
April 24, 1995
Page 4
common stock pursuant to the Holding Company Merger and Bank Merger, except that
gain or loss will be recognized on the receipt of cash, if any, received in lieu
of fractional shares. Any cash received by a shareholder of First Western in
lieu of a fractional share will be treated as received in exchange for such
fractional share and not as a dividend, and any gain or loss recognized as a
result of the receipt of such cash will be equal to the difference between the
cash received and the portion of the shareholder's basis in Zions
Bancorporation's stock allocable to such fractional share interest.
4. The tax basis of the shares of Zions Bancorporation's
common stock received by each shareholder of First Western Bancorporation or
First Western Bank will equal the tax basis of such shareholder's shares of
First Western Bancorporation's or First Western Bank's common stock (reduced by
any amount allocable to a fractional share interest).
5. The holding period for the shares of Zions Bancorporation's
common stock received by each shareholder of First Western Bancorporation or
First Western Bank will include the holding period for the shares or First
Western Bancorporation's or First Western Bank's common stock surrendered in
exchange therefor, provided that the shares were held as capital assets on the
date of the exchange.
6. The shareholders, if any, who exercise and perfect their
dissenters rights will be treated as having received the cash as a distribution
in redemption of their First Western Bancorporation or First Western Bank common
stock subject to the provisions and limitations of Section 302 of the Internal
Revenue Code of 1986, as amended.
The opinion expressed herein is expressly limited to the laws and
regulations of the State of Utah and the applicable federal laws of the United
States of America, and we do not express any opinion herein concerning any other
laws or regulations.
The opinions expressed herein are based upon the laws and regulations
in effect on the date hereof, and we assume no obligation to revise or
supplement this opinion should any such law or regulation be changed by
legislative action, judicial decision or otherwise. No opinion is hereby
expressed regarding any other federal, state, local or other tax issues or on
any other matter not specifically mentioned herein. If any statement of facts,
assumptions or representations contained herein are subsequently determined to
be incorrect in whole or in part, such that they would have a material impact or
effect upon the tax treatment of the issues addressed herein, then no opinion is
expressed as to the tax treatment of the proposed transaction.
This opinion is being furnished solely to First Western Bancorporation
and First Western Bank, Zions Bancorporation and Zions Bank, their respective
shareholders and agents as required under the Agreement and may not be otherwise
<PAGE>
First Western Bancorporation
Zions Bancorporation
April 24, 1995
Page 5
used, quoted or relied upon by any other person or for any other purpose
without, in each instance, our prior written consent.
Very truly yours,
COHNE, RAPPAPORT & SEGAL P.C.
/s/ Bruce G. Cohne
<PAGE>
PROXY
SPECIAL MEETING OF SHAREHOLDERS
OF FIRST WESTERN BANCORPORATION
June 5, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints I.D. Nightingale and David
Atkinson, and each of them, as proxies of the undersigned to vote as designated
below all shares of the common capital stock of First Western Bancorporation
(the "First Western Common Stock") that the undersigned held of record on April
28, 1995, which the undersigned is entitled to vote, at the special meeting of
shareholders of First Western Bancorporation ("First Western") to be held June
5, 1995, or at any adjournment thereof, for the purpose of considering and
acting on the proposal to approve the Agreement and Plan of Reorganization dated
October 24, 1994, as amended as of January 4, 1995 (the "Plan of
Reorganization"), among Zions Bancorporation ("Zions"), Zions First National
Bank ("Zions Bank"), First Western, and First Western National Bank (the "Bank")
which provides for the merger of First Western into Zions and the subsequent
merger of the Bank into Zions Bank, and the conversion of each outstanding share
of First Western Common Stock into the right to receive that number of shares of
Zions Common Stock calculated by dividing the Holding Company Purchase Price (as
defined in the Plan of Reorganization) 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 total number of shares of First Western 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:
1. The Proxies are instructed to vote the First Western 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.
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 First Western 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
<PAGE>
PROXY
SPECIAL MEETING OF SHAREHOLDERS
OF FIRST WESTERN NATIONAL BANK
June 5, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints David Atkinson and Bruce G.
Cohne, and each of them, as proxies of the undersigned to vote as designated
below all shares of the common capital stock of First Western National Bank (the
"Bank Common Stock") that the undersigned held of record on April 28, 1995,
which the undersigned is entitled to vote, at the special meeting of
shareholders of First Western National Bank (the "Bank") to be held June 5,
1995, or at any adjournment thereof, for the purpose of considering and acting
on the proposal to approve the Agreement and Plan of Reorganization dated
October 24, 1994, as amended as of January 4, 1995 (the "Plan of
Reorganization"), among Zions Bancorporation ("Zions"), Zions First National
Bank ("Zions Bank"), First Western Bancorporation ("First Western") and the Bank
which provides for the merger of First Western into Zions and the subsequent
merger of the Bank into Zions Bank, and the conversion of each outstanding share
of Bank Common Stock (excluding shares of Bank Common Stock held by Zions) into
the right to receive that number of shares of Zions Common Stock calculated by
dividing the Bank Purchase Price of $9.3 million plus certain accretions (as
described in the Plan of Reorganization) 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 total number of shares of Bank 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:
1. The Proxies are instructed to vote the Bank 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 Bank 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
<PAGE>
