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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20459
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934
For the fiscal year ended December 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
COMMISSION FILE NUMBER 0-2610
ZIONS BANCORPORATION
(Exact name of Registrant as specified in its charter)
UTAH 87-0227400
(State of other jurisdiction of (Internal Revenue Service Employer
incorporation or organization) Identification Number)
1380 Kennecott Building
Salt Lake City, Utah 84133
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 524-4787
Securities registered pursuant to Section 12(b) of the act: None
Securities registered pursuant to Section 12(g) of the act:
Common Stock - without par value
- --------------------------------------------------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ____
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Aggregate Market Value of Common Stock Held by Nonaffiliates at
February 27, 1996 .............................................. $814,435,000
Number of Common Shares Outstanding at February 27, 1996 .......... 14,500,299 Shares
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Documents Incorporated by Reference:
Definitive Proxy Statement (See Part III, Item 10, Item 11, Item 12, and Item
13).
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ZIONS BANCORPORATION
ANNUAL REPORT FOR 1995 ON FORM 10-K
TABLE OF CONTENTS
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PAGE
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PART I
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Item 1. Business 1
Item 2. Properties 13
Item 3. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Executive Officers of the Registrant 14
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 15
Item 6. Selected Consolidated Financial Data 16
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 17
Item 8. Financial Statements and Supplementary Data 41
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 70
PART III
Item 10. Directors and Executive Officers of the Registrant 70
Item 11. Executive Compensation 70
Item 12. Security Ownership of Certain Beneficial Owners and Management 70
Item 13. Certain Relationships and Related Transactions 70
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 70
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PART I
ITEM 1. BUSINESS
Zions Bancorporation (the Parent) is a multibank holding company organized under
the laws of Utah in 1955, registered under the Bank Holding Company Act of 1956,
as amended. Zions Bancorporation and its subsidiaries (the Company), is the
second largest bank holding company headquartered in Utah and provides a full
range of banking and related services primarily in Utah, Nevada, and Arizona.
Its principal subsidiaries are banking subsidiaries which include Zions First
National Bank, the second largest commercial banking organization in the state
of Utah; Nevada State Bank, the fifth largest commercial bank in Nevada; and
National Bank of Arizona, the fifth largest commercial bank in Arizona.
The Company's business and the businesses of many of its larger borrowers are
primarily concentrated in the state of Utah. Consequently, the Company's results
of operations and financial condition are dependent upon general trends in the
Utah economy and real estate markets.
The Company has focused in recent years on maintaining strong liquidity,
risk-based capital and cash flow positions and on developing strong internal
controls. An increasing focus is currently being placed on strengthening the
Company's core businesses of retail banking, small- and medium-sized business
lending, residential mortgage and investment activities by maintaining a
competitive cost structure. In addition to these core businesses, the Company
has built specialized lines of business in institutional investments, public
finance, and provides financing to small businesses to improve revenue growth
and profitability while attempting to minimize risk. The Company's general
operating objectives include enhancing the Company's market position in Utah,
Nevada, and Arizona through in-market acquisitions of smaller depository
institutions, and through the continued development of the Company's present
lines of business by use of new technology to reduce cost and provide new and
innovative ways to reach and serve customers.
The Company is committed to improving the communities it serves now and in the
years to come. The Company engages in a variety of loan programs which benefit
low to moderate income individuals; ranging from housing and business loans to
automobile loans and credit card programs.
At December 31, 1995, the Company had assets of $5.6 billion, loans of $2.8
billion, deposits of $4.1 billion, and shareholders' equity of more than $.4
billion. A more detailed discussion concerning the Company's financial condition
is contained in Part II of this report.
THE BANKING SUBSIDIARIES
The banks provide a wide variety of commercial and retail banking and
mortgage-lending financial services. Commercial loans, lease financing, cash
management, lockbox, customized draft processing, and other special financial
services are provided for business and other commercial banking customers. A
wide range of personal banking services are provided to individuals, including
bankcard, student and other installment loans and home equity lines of credit,
checking accounts, savings accounts, time certificates of various types and
maturities, trust services and safe deposit facilities. In addition, direct
deposit of payroll, social security and various other government checks are
offered. Automated teller machines provide 24-hour access and availability to
customers' accounts and to many consumer banking services through statewide,
regional, and nationwide ATM networks. Customer transactions are processed
through the Company's ATMs, point-of-sale terminals, and ATMs operated by other
financial institutions.
Zions First National Bank in Utah has developed special packages of financial
services designed to meet the financial needs of particular market niches,
including the Premier Account for those 50 years and older and the Student
Account. The Bank has also established a Private Banking group to service the
financial needs of wealthy individuals; an Executive Banking program to service
the needs of corporate executives of commercial clients, and an Affinity program
which offers discounted financial services to employees of commercial accounts
on a group basis. Zions Bank has also developed a series of products geared to
the lower-income customer, including the Flex Loan (a low-income personal loan),
and several low-income housing programs.
Zions First National Bank offers "Electronic Bill Pay Service," an electronic
bill paying service activated through a touch tone telephone, and a home banking
product, under the name "PC Banker" which allows a retail customer to use a home
computer to access and transfer account balances, pay bills, and maintain and
reconcile accounts. Zions Bank also delivers electronically, as the contractor
for the State of Utah, a variety of state benefit payments to the state's
clients.
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Zions First National Bank is a primary dealer in obligations of the United
States government and several federal agencies, and is a major underwriter and
distributor of municipal securities, and specialized securities such as the
government-guaranteed portions of U. S. Small Business Administration (SBA)
loans. Through its new Zions Small Business Finance division, Zions Bank
provides SBA 7(a) loans to small businesses throughout the United States. And
Zions Bank's SBA 504 department works with Certified Development Companies and
correspondent banks throughout the country, providing the nation's largest
source of secondary market financing for this loan program. Zions First National
Bank's Small Business Investment Corporation provides early-stage capital,
primarily for technology companies located in the Intermountain West.
Zions First National Bank provides correspondent banking services such as cash
letter processing, wire services, federal funds facilities, and loan
participations. Zions Bank's International Banking Department issues letters of
credit and handles foreign exchange transactions for customers, but it does not
take a trading position in foreign exchange. Zions Bank's Grand Cayman branch
accepts Euordollar deposits from qualified customers, and places deposits with
foreign banks and foreign branches of other U.S. banks. Zions' banking
subsidiaries, however, do not engage in any foreign lending.
Both Zions First National Bank and Nevada State Bank have established trust
divisions which offer clients a variety of fiduciary services ranging from the
administration of estates and trusts to the management of funds held under
pension and profit sharing plans. They also offer custodian, portfolio, and
management services. The Trust Division of Zions First National Bank also acts
as fiscal and payment agent, transfer agent, registrar, and trustee under
corporate and trust indentures for corporations, governmental bodies, and public
authorities.
The Company's commercial banking operations generated net income of $83.6
million in 1995, a 27.4% increase from the net income of $65.7 million in 1994.
Income from commercial banking operations was favorably affected in 1995 by
increased net interest income resulting from higher average earning assets and a
larger spread between the prime lending rate and U.S. Treasury rates. The prime
lending rate is the primary basis used for pricing the Company's loans whereas
U.S. Treasury rates are the primary index used for pricing many of the Company's
interest-bearing deposit obligations. Operations were also favorably affected
through increased income resulting from loan sales and servicing in 1995, as
first mortgage loan originations and securitized loan servicing fees increased
by $9.7 million. Income was adversely affected in the first quarter of 1995
through a trading loss of approximately $3.1 million occurring in Discount
Corporation of New York division of Zions Bank. Operations of the division's New
York City office were terminated and selected operations were transferred to
Salt lake City under the name Zions Bank Capital Markets which resulted in a
restructuring charge of $1.3 million. Zions First National Bank remains a
primary reporting dealer in U.S. Treasury securities and a member of the
underwriting groups of selected U.S. agencies.
The Company has continued its efforts to reduce its cost structure and improve
efficiency in 1995 through the implementation of various programs and systems
and the establishment of benchmarks throughout its various departments to assist
in monitoring its progress. New technologies were employed during the year to
deliver banking services to our customers and to facilitate improved employee
productivity. The Company's efficiency ratio, influenced primarily by its
commercial banking subsidiaries, improved to 59.1% in 1995 as compared to 63.3%
in 1994. The Company also continued to expand its ATM network, as total ATMs in
service at year end reached 255, a 18.6% increase from the 215 in operation at
the end of 1994. With the growth in its branch system through acquisitions and
the expansion of its grocery store locations, the Company has achieved
significant geographical coverage in each of the three states in which it
conducts its commercial banking operations.
Average interest bearing deposits, federal funds sold and securities purchased
under agreements to resell increased 6.6% or $59.5 million. Average securities
held to maturity, available for sale and in the trading account increased 5.6%
or $85.9 million. Total average loans and lease receivables, net of unearned
discount, increased 1.0% or $25.0 million. Total average securitized loans
increased 65.9% or $312.8 million.
Average core deposits continued to experience growth of 6.4% or $216.4 million
in 1995. The components of this growth included an increase of $120.5 million or
5.9% in average savings and money market deposits and an increase of $98.0
million or 19.0% in average time deposits under $100,000. Average demand
deposits were essentially level in 1995 as compared to 1994. Total average
deposits increased $278.3 million or 7.7% to $3,873.7 million in 1995 as
compared to $3,595.4 million in 1994.
Average federal funds purchased and securities sold under agreements to
repurchase decreased $28.4 million or 2.6% to $1,056.8 million in 1995 while
average securities sold short declined $94.2 million or 51.1% to $90.2 million
in 1995. Federal Home Loan Bank advances and other borrowings declined $33.4
million or 23.2% to $110.7 million in 1995. Total average shareholder's equity
allocated to commercial banking operations increased $63.0 million or 18.1% to
$411.3 million in 1995.
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Utah
Zions First National Bank, founded in 1873, has 94 offices located throughout
the state of Utah, plus one foreign office, for a total of 95 banking offices.
Zions First National bank experienced strong growth in 1995 as net income
increased 36.3% to $65.7 million as compared to $48.2 million in 1994. The
increase was a result of a $20.6 million increase in net interest income and a
$10.9 million increase in noninterest income, partially offset by a $6.2 million
increase in noninterest expenses and a $7.8 million increase in income taxes.
Zions First National Bank's "efficiency ratio," or operating expenses as a
percentage of taxable-equivalent net revenues, improved to 57.8% in 1995 as
compared to 63.7% in 1994.
Staffing levels at Zions First National Bank increased 3% in 1995 while revenues
increased 15.4% and branches were expanded by 8 locations in its retail
operations, including 3 branches in southeastern Utah through the acquisition of
First Western National Bank in June 1995. Zions Bank also organized a new
division, Zions Small Business Finance, to focus on the origination of U.S.
Small Business Administration (SBA) guaranteed loans in major markets throughout
the country. This new division, which is headquartered in St. Louis, Missouri,
was established with experienced management, and currently has representatives
in eight states.
Several new initiatives were introduced in the Company's commercial banks, with
an emphasis on increasing customer convenience and access while reducing
redundancies in operations and functions which are transparent to the customer.
For example, Zions First National Bank expanded its "Reddi-Access"
customer-calling service and introduced customer service representatives on
extended hours to assist customers even at times when the branches are closed.
Zions First National Bank introduced "Zions Bank Electronic Bill Pay Service" in
March 1995, allowing customers to conveniently pay their monthly bills by
telephone. Zions First National Bank also introduced "PC Banker" in November
1995, a Visa(R) home banking product, which allows a retail customer to use a
home computer to access and conduct much of their banking business. Zions First
National Bank also contracted with the State of Utah to process its welfare
benefits payments electronically under a program known as "Utah Horizon." The
pilot program commenced in October 1995, with full introduction scheduled for
March 1996. This service allows recipients to access their benefits through the
use of an electronic card system.
Nevada
Nevada State Bank, a state-chartered Federal Deposit Insurance Corporation
("FDIC")-insured institution, with its main office in downtown Las Vegas, opened
three new grocery store banking centers and one new branch during 1995,
expanding its banking offices to 25 in Nevada. Nevada State Bank achieved a net
income of $5.9 million in 1995 as compared to $6.1 million in 1994, after
amortization of purchase premium. The decline was a result of a $2.9 million
increase in net revenues and a $.4 million decrease in the provision for loan
losses offset by a $3.5 million increase in noninterest expenses.
Nevada State Bank plans to open 5 additional banking locations in 1996. Nevada
State Bank has expanded its corporate lending department with a focus on
servicing the mid-range small business customer and is consolidating its
"back-office" operations and expanding its use of affiliate resources, such as
its cash management programs and its customer call centers to better service its
customers.
Arizona
National Bank of Arizona, with its main office in Tucson, opened a new branch
office in downtown Phoenix during 1995 expanding its banking offices to 11 in
Arizona. A loan production office was also opened in Prescott, Arizona, during
the year. Net income at National Bank of Arizona was $12.0 million in 1995 as
compared to $11.3 million in 1994. The increase resulted from a net revenues
increase of $8.5 million offset by a $1.0 million increase in the provision for
loan losses, a $4.4 million increase in noninterest expenses and a $2.4 million
increase in income taxes.
In January 1996, Zions Bancorporation announced an agreement to acquire Southern
Arizona Bancorp, Inc., and its banking subsidiary, Southern Arizona Bank with 5
branches located in the greater Yuma, Arizona, area. When this acquisition is
completed, National Bank of Arizona will be located in all of Arizona's major
market areas.
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OTHER SUBSIDIARIES
The Company conducts various other bank-related business activities through
subsidiaries owned by the Parent and wholly-owned subsidiaries of Zions First
National Bank. Zions Credit Corporation engages in lease origination and
servicing operations in Utah, Nevada, and Arizona. Zions Life Insurance Company
underwrites, as reinsurer, credit-related life and disability insurance. Zions
Insurance Agency, Inc., operates an insurance brokerage business which
administers various credit-related insurance programs in the Company's
subsidiaries and sells general lines of insurance. The Company's insurance
subsidiaries offer customers a full range of insurance products through licensed
agents. The products include credit life products, collateral protection
products, life policies, homeowners policies, property and casualty policies,
and commercial business owner type policies. Zions Data Service Company provides
data processing services to all subsidiaries of the Company. Zions Mortgage
Company, a subsidiary of Zions First National Bank, conducts a mortgage banking
operation in Utah, Nevada, and Arizona. Zions Investment Securities, Inc., also
a subsidiary of the Bank, provides discount investment brokerage services on a
nonadvisory basis to both commercial and consumer customers. Personal investment
officers employed by the discount brokerage subsidiary in many larger offices
provide customers with a wide range of investment products, including municipal
bonds, mutual funds and tax-deferred annuities.
Zions Credit Corporation generated $81.8 million in new volume in 1995, a 29.6%
increase over the 1994 volume. An additional $5.6 million in leases was brokered
to third parties. Average lease receivables and conditional sales contracts
serviced by Zions Credit Corporation decreased 1.8% to $124.4 million during
1995.
Zions Insurance Agency, Inc. and Zions Life Insurance Company produced combined
net income of $.8 million in 1995, a 24.9% decease compared to 1994. The
decrease in net income was largely attributable to a decrease related to credit
life insurance and an increase in expenses relative to expansion.
Zions Data Service Company engaged in a variety of significant projects in 1995,
including assistance in implementing the PC Banker and electronic benefits
products in Zions First National Bank. The Company also established a World Wide
Web site (http://www.zionsbank.com) which will provide a new means of
communicating with customers as the Internet becomes an increasingly important
channel for distributing banking services. The Company made significant
acquisitions of software to improve the commercial banks' customer delivery and
information systems, including new software relating to consumer lending,
deposit account reconciliation, cash management, construction lending and ATM
systems. These systems will be installed throughout 1996.
Zions Mortgage Company achieved a net income of $1.0 million as compared to a
loss of $.3 million in 1994. Inasmuch as Zions Mortgage Company is a direct
subsidiary of Zions First National Bank, its results of operations are included
in the commercial banking operations results.
Zions Mortgage Company experienced a reduction in mortgage originations as a
result of an adverse interest rate environment and competitive pressures in
1995. Total retail mortgage origination volume decreased 24.8% to $287.7 million
in 1995. In anticipation of the reduction in volume, Zions Mortgage Company
reduced its staffing 16.7% in 1995. Through staff reductions and increased
automation, the Company reduced salaries and benefits expenses by 6.1% and other
noninterest expenses by 13.2% in 1995.
During the first quarter of 1996, Zions Mortgage Company will introduce the
"Home Express" loan program which will allow mortgage applicants to receive loan
decisions at the time of application. This product will reduce closing time on a
mortgage loan from 30 days to just 5-10 days.
During 1995, Zions Investment Securities, Inc. contributed $.8 million in pretax
income, rent income and revenue sharing to the Company's banking operations. Net
income, which is included in the commercial banking operations results, was $.3
million, a 47.2% increase from 1994. Zions Investment Securities, Inc. has 30
registered investment advisors who offer a full range of brokerage services and
products.
1995 ECONOMIC TRENDS
Zions Bancorporation is fortunate in that its primary market area -- the states
of Utah, Nevada and Arizona -- constitutes the fastest growing region in the
country. Nevada and Utah continued to lead the nation in nonfarm job growth for
the twelve months ended October, 1995, with job growth rates of 5.8% and 5.3%,
respectively. Arizona's employment growth rate, while more modest at 3.4%, was
still nearly double the national average growth rate of 1.8%. Personal income
growth in the Intermountain area has also been very strong over the past five
years, with an average growth rate of 7.3% as compared to a national growth rate
of 5.3%.
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SUPERVISION AND REGULATION
Bank holding companies and banks are extensively regulated under both federal
and state law. The information contained in this section summarizes portions of
the applicable laws and regulations relating to the supervision and regulation
of Zions Bancorporation 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. Any change in applicable law or
regulation may have a material effect on the business and prospects of Zions
Bancorporation and its subsidiaries.
Bank Holding Company Regulation
Zions Bancorporation 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, activities of Zions Bancorporation, 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 the 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 Bancorporation, are required to file with
the Federal Reserve Board certain reports and information and are required to
obtain prior approval of the Board to engage in a new activity or to acquire
more than 5% of any class of voting stock of any company. Pursuant to the
Riegle-Neal Interstate Branching and Efficiency Act of 1994 ("Riegle-Neal
Act"), subject to approval by the Federal Reserve Board, bank holding companies
are authorized 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 which are mentioned in the discussion on "Interstate
Banking" which follows. 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 mergers.
The Federal Reserve Board has authorized the acquisition and control by bank
holding companies of savings and loan associations and certain other savings
institutions without regard to geographic restrictions applicable to acquisition
of shares of a bank.
The Federal Reserve Board is authorized to adopt regulations affecting various
aspects of bank holding companies. Pursuant to the general supervisory authority
of the Bank Holding Company Act and directives set forth in the International
Lending Supervision Act of 1983, the Federal Reserve Board has adopted capital
adequacy guidelines prescribing both risk-based capital and leverage ratios.
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Regulatory Capital Requirements
Risk-Based Capital Guidelines
The Federal Reserve Board established risk-based capital guidelines for bank
holding companies effective March 15, 1989. The guidelines define Tier I Capital
and Total Capital. Tier I 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 I Capital plus
qualifying mandatory convertible debt, perpetual debt, certain hybrid capital
instruments, certain preferred stock not qualifying as Tier I 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 I 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-weighted categories for bank
holding company assets -- 0%, 20%, 50%, and 100%. Zero percent risk-weighted
assets include, generally, 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, generally, 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, generally, 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 I Capital. At
December 31, 1995, the Company's Tier I and Total Capital ratios were 11.38% and
14.23%, 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.
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 I
Capital to total assets (the "leverage ratio"). The leverage ratio is used in
tandem with the final risk-based ratio of 8% that took effect at the end of
1992.
The Federal Reserve Board has emphasized that the leverage ratio constitutes a
minimum requirement for well-run banking organizations having well-diversified
risk, including no undue interest rate exposure, excellent asset quality, high
liquidity, good earnings, and a composite rating of 1 under the Interagency Bank
Rating System. Banking organizations experiencing or anticipating significant
growth, as well as those organizations which do not exhibit the characteristics
of a strong, well-run banking organization described above, will be required to
maintain strong capital positions substantially above the minimum supervisory
levels without significant reliance on intangible assets. Furthermore, the
Federal Reserve Board has indicated that it will consider a "tangible Tier I
Capital Leverage Ratio" (deducting all intangibles) and other indices of capital
strength in evaluating proposals for expansion or new activities. At December
31, 1995, the Company's Tier I leverage ratio was 6.28%.
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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 I 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). Implementation of this amendment to the Federal Reserve
Board's capital guidelines has not resulted in a material increase in the
capital requirement 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 I Capital for calculation of risk-based
capital and leverage ratios. Implementation of this amendment to the Federal
Reserve Board's capital guidelines has not resulted in a material increase in
the capital requirement applicable to it. The Federal Reserve Board has also
published amendments to its risk-based capital guidelines which would generally
increase the amount of capital required to be carried against certain long-term
derivative contracts; the amendments also recognized the effect of certain
bilateral netting arrangements in reducing potential future exposure under these
contracts. Zions Bancorporation does not anticipate that these amendments to the
Federal Reserve Board's capital guidelines will result in a material increase in
the capital requirements applicable to it.
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 Bancorporation's
banking subsidiaries, establish minimum risk-based and leverage ratios which are
substantially similar to those applicable to the Company. As of December 31,
1995, the risk-based and leverage ratios of each of Zions Bancorporation's
banking subsidiaries exceeded the minimum requirements.
By Federal Register notice dated August 2, 1995, the Federal Reserve Board, the
Comptroller and the FDIC sought public comment on a proposed policy statement
pursuant to which a bank's interest risk exposure would be measured utilizing a
supervisory model or approved internal bank model, but would also take into
account such factors as the quality of an institution's interest rate risk
management, internal controls and overall financial condition, including
earnings capacity, capital base and the level of other risks which may impair
future earnings or capital. Unless specifically exempted, banks would be
required to submit additional information to their primary federal regulator
regarding the maturity, repricing or price sensitivity of their various on- and
off-balance sheet instruments. The agencies expect that they will incorporate an
explicit minimum capital charge for interest rate risk (based in part on their
experience in applying the proposed policy statement) into their risk-based
capital standards. Zions Bancorporation does not anticipate that the adoption of
the proposed policy statement in its current form will result in a material
increase in the capital requirements applicable to it. However, until the final
terms of the proposed policy statement are known, Zions Bancorporation cannot
predict the effect of its implementation on the capital requirements applicable
to it.
On December 19, 1991, the Federal Deposit Insurance Corporation Improvement Act
of 1991 ("FDICIA") was signed into law. Among other changes to federal banking
law effected by the legislation, FDICIA amended Section 38 of the Federal
Deposit Insurance Act 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 actions 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.
7
<PAGE> 10
Under the regulations, a "well-capitalized" institution has a minimum total
capital to total risk-weighted assets ratio of at least 10 percent, a minimum
Tier I capital to total risk-weighted assets ratio of at least 6 percent, a
minimum leverage ratio of at least 5 percent, and is not subject to any written
order, agreement, or directive; an "adequately capitalized" institution has a
total capital to total risk-weighted assets ratio of at least 8 percent, a Tier
I capital to total risk-weighted assets ratio of at least 4 percent, and a
leverage ratio of at least 4 percent (3 percent if given the highest regulatory
rating and not experiencing significant growth), but does not qualify as "well-
capitalized." An "undercapitalized" institution fails to meet any one of the
three minimum capital requirements. A "significantly undercapitalized"
institution has a total capital to total risk-weighted assets ratio of less than
6 percent, a Tier I capital to total risk-weighted assets ratio of less than 3
percent or a Tier I leverage ratio of less than 3 percent. A "critically
undercapitalized" institution has a Tier I leverage ratio of 2 percent or less.
Under certain circumstances, a "well-capitalized," "adequately capitalized," or
"undercapitalized" institution may be required to comply with supervisory
actions as if the institution was in the next lowest capital category.
Failure to meet capital guidelines could subject a bank to a variety of
restrictions and enforcement remedies. Under FDICIA, all insured banks are
generally prohibited from making any capital distributions and from paying
management fees to persons having control of the bank where such payments would
cause the bank to be undercapitalized. Holding companies of significantly
undercapitalized, critically undercapitalized and certain undercapitalized banks
may be required to obtain the approval of the Federal Reserve Board before
paying capital distributions to their shareholders. Moreover, a bank that is not
well-capitalized is generally subject to various restrictions on "pass through"
insurance coverage for certain of its accounts and is generally prohibited from
accepting brokered deposits and offering interest rates on any deposits
significantly higher than the prevailing rate in its normal market area or
nationally (depending upon where the deposits are solicited). Such banks and
their holding companies are also required to obtain regulatory approval prior to
their retention of senior executive officers.
Banks which are classified undercapitalized, significantly undercapitalized or
critically undercapitalized are required to submit capital restoration plans
satisfactory to their federal banking regulator and guaranteed within stated
limits by companies having control of such banks (i.e., to the extent of the
lesser of five percent of the institution's total assets at the time it became
undercapitalized or the amount necessary to bring the institution into
compliance with all applicable capital standards as of the time the institution
fails to comply with its capital restoration plan, until the institution is
adequately capitalized on average during each of four consecutive calendar
quarters), and are subject to regulatory monitoring and various restrictions on
their operations and activities, including those upon asset growth,
acquisitions, branching and entry into new lines of business and may be required
to divest themselves of or liquidate subsidiaries under certain circumstances.
Holding companies of such institutions may be required to divest themselves of
such institutions or divest themselves of or liquidate nondepository affiliates
under certain circumstances. Critically undercapitalized institutions are also
prohibited from making payments of principal and interest on debt subordinated
to the claims of general creditors and are generally subject to the mandatory
appointment of a conservator or receiver.
Other Regulations
FDICIA requires the federal banking agencies to adopt 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 impose other operating restrictions. The Riegle Community Development
and Regulatory Improvement Act of 1994, signed into law on September 23, 1994
(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.
8
<PAGE> 11
On July 10, 1995, the federal banking agencies published proposed guidelines
setting forth standards for asset quality and earnings, final guidelines with
respect to other safety and soundness 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 banking agencies, neither the proposed nor the final
standards represents a change in existing policies but, instead, formalizes
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 also implements the requirements of FDICIA regarding the submission and
review of safety and soundness plans by institutions failing to meet the
prescribed standards and the issuance of orders where institutions have failed
to submit acceptable compliance plans or implement an accepted plan in any
material respect. Zions Bancorporation 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 and earnings standards are adopted by the federal
banking agencies, Zions Bancorporation 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 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.
The Community Reinvestment Act (CRA) requires banks to help serve the credit
needs in their communities, including credit to low and moderate income
individuals and geographies. Should the Company or its subsidiaries fail to
adequately serve the community, there are penalties which might be imposed.
Corporate applications to expand branches, relocate, add subsidiaries and
affiliates, and merge with or purchase other financial institutions could be
denied. Community groups are encouraged through the regulation to protest
applications for any bank subject to this regulation if they feel that the bank
is not serving the credit needs of the community in which it serves. The Company
and its subsidiaries have been deemed by regulators in the past to be adequately
serving its communities. Revisions by the regulators to CRA continue; therefore,
Zions Bancorporation cannot predict the effect that changes will have on its
operations and upon those of its subsidiaries.
9
<PAGE> 12
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. The most important of such measures
include legislation designed to permit increased affiliations between commercial
and financial firms (including securities firms) and federally-insured banks,
reduce regulatory burdens on financial institutions, limit the prerogative of
federal banking regulators to expand the range of permissible activities for
banks (particularly in the field of insurance), eliminate or revise the features
of the specialized savings association charter, and establish standards for
federal supervision of derivative 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 Zions
Bancorporation or its subsidiaries.
There are many other regulations requiring detailed compliance procedures which
increase costs and require additional time commitments of employees. Regulators
and the Congress continue to put in place rules and laws to protect consumers,
which have a cumulative additional impact on the cost of doing business. At this
point, management cannot completely assess how much earnings might be affected
from these consumer laws.
Deposit Insurance Assessments
The insured bank subsidiaries of Zions Bancorporation are required to pay
quarterly deposit insurance assessments to the Bank Insurance Fund ("BIF").
Pursuant to a directive in FDICIA, the FDIC revised its deposit insurance
regulation, effective October 1, 1993, to establish a permanent risk-based
assessment system. Under this 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."
Until May 31, 1995, the FDIC federal deposit insurance regulation established an
eight basis point spread between the assessment rate established for the highest
and lowest risk classification, so that banks classified as strongest by the
FDIC were subject to a rate of .23% of insured deposits (the same rate as under
the previous flat-rate assessment system) while those classified as weakest by
the FDIC are subject to a rate of .31% (with intermediate rates of .26%, .29%,
and .30%). On August 8, 1995, in recognition of the achievement by the BIF of
its target ratio of 1.25% of insured deposits, the FDIC adopted a new assessment
schedule, applied retroactively as of June 1, 1995, providing for an assessment
rate range of up to .31% (with intermediate rates of .07%, .14%, .21%, and .28%,
depending upon an institution's supervisory risk group). (The revised regulation
also established a procedure for adjusting assessment rates semiannually within
a range up to five basis points without seeking public comment.) The FDIC acted
on November 14, 1995 to further reduce BIF assessment rates, effective for the
semiannual period commencing on January 1, 1996 and ending on June 30, 1996. The
rate schedule adopted establishes an assessment rate range of 0% to .27% (with
intermediate rates of .03%, .10%, .17%, and .24%, depending upon an
institution's supervisory risk group) subject to a minimum assessment of $1,000
per semiannual period. 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 Zions Bancorporation or
upon those of its bank subsidiaries.
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
Bancorporation cannot predict their effect upon its overall financial condition
or results of operations or upon those of its bank subsidiaries.
10
<PAGE> 13
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 and the Congress have
enacted legislation intended to allow certain interstate banking combinations.
Under the laws of Utah, Nevada, an Arizona, respectively, any out-of-state bank
or bank holding company may acquire a Utah, Nevada, or Arizona bank or bank
holding company upon the approval of the bank supervisor of the state. There is
no requirement that the laws of the state in which the out-of-state bank or bank
holding company's operations are principally conducted afford reciprocal
privileges to Utah-, Nevada- or Arizona-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.
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, the most significant of which include 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 Bancorporation cannot predict the effects of the Act's
implementation upon its operations or earnings or upon those of its
subsidiaries.
The commercial banking subsidiaries are supervised and regularly examined by
various federal and state regulatory agencies. 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 operations are subject to regulation. In addition, numerous
federal, state, and local regulations 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. The various regulatory agencies, as an integral part of their
examination process, periodically review the banking subsidiaries' allowances
for loan losses. Such agencies may require the banking subsidiaries to recognize
additions to such allowances based on their judgments using information
available to them at the time of their examinations.
As a consequence of the extensive regulation of the commercial banking business,
the Company cannot yet assess the impact of these legislative and regulatory
mandates on the commercial banking industry which may increase the cost of doing
business that are not required of the industry's nonbank competitors.
Federal and state legislation affecting the banking industry have played, and
will continue to play, a significant role in shaping the nature of the financial
service industry. Various legislation, including proposals to overhaul the
banking regulatory system and to limit the investments that a depository
institution may make with insured funds, is from time to time introduced. The
Company cannot determine the ultimate effect that any potential legislation, if
enacted, would have upon its financial condition or operations.
11
<PAGE> 14
In addition, there are cases pending before federal and state courts that seek
to expand or restrict interpretations of existing laws and their accompanying
regulations affecting bank holding companies and their subsidiaries. It is not
possible to predict the extent to which Zions Bancorporation and its
subsidiaries may be affected by any of these initiatives.
GOVERNMENT MONETARY POLICIES AND ECONOMIC CONTROLS
The earnings and business of the Company are affected by general economic
conditions. In addition, fiscal or other policies that are adopted by various
regulatory authorities of the United States and by agencies can have important
consequences on the financial performance of the Company. The Company is
particularly affected by the policies of the Federal Reserve Board which
regulate the national supply of bank credit. The instruments of monetary policy
available to the Federal Reserve Board include open-market operations in United
States government securities; changing the discount rates of member bank
borrowings; imposing or changing reserve requirements against member bank
deposits; and imposing or changing reserve requirements against certain
borrowings by banks and their affiliates. These methods are used in varying
combinations to influence the overall growth of bank loans, investments and
deposits, and the interest rates charged on loans or paid for deposits.
In view of changing conditions in the economy and the effect of the credit
policies of monetary authorities, it is difficult to predict future changes in
loan demand, deposit levels and interest rates, or their effect on the business
and earnings of Zions Bancorporation and its subsidiaries. Federal Reserve Board
monetary policies have had a significant effect on the operating results of
commercial banks in the past and are expected to continue to do so in the
future.
COMPETITION
Zions Bancorporation and its subsidiaries operate in a highly competitive
environment. The banking subsidiaries compete with other banks, thrift
institutions, credit unions and money market, and other mutual funds for
deposits and other sources of funds. In addition, Zions Bancorporation and its
bank and nonbank subsidiaries face increased competition with respect to the
diverse financial services and products they offer. Competitors include not only
other banks, thrift institutions, and mutual funds, but also leasing companies,
finance companies, brokerage firms, investment banking companies, and a variety
of other financial services and advisory companies. Many of these competitors
are not subject to the same regulatory restrictions as are bank holding
companies and banks such as Zions Bancorporation and its banking subsidiaries.
The Company expects that competitive conditions will continue to intensify as a
result of technological advances. Technological advances have, for example, made
it possible for nondepository institutions to offer customers automatic transfer
systems and other automated-payment systems services that have been traditional
banking products.
EMPLOYEES
The Company employs approximately 3,075 full- and part-time people with
approximately 2,865 being employed by the banking subsidiaries. The Company had
2,855 full-time equivalent employees at December 31, 1995, compared to 2,695 at
December 31, 1994. Banking subsidiaries had 2,650 full-time equivalent employees
at the end of 1995, compared to 2,506 a year earlier. The Company believes that
it enjoys good employee relations. In addition to competitive salaries and
wages, Zions Bancorporation and its subsidiaries contribute to group medical
plans, group insurance plans, pension, stock ownership and profit sharing plans.
12
<PAGE> 15
SUPPLEMENTARY INFORMATION
The following supplementary information, which is required under Guide 3
(Statistical Disclosure by Bank Holding Companies), is found in this report on
the pages indicated below, and should be read in conjunction with the related
financial statements and notes thereto.
<TABLE>
<CAPTION>
Statistical Information Page
<S> <C>
I. Distribution of Assets, Liabilities and Shareholders' Equity,
Average Balance Sheets, Yields and Rates 18-20
Analysis of Interest Changes Due to Volume and Rates 21
II. Investment Securities Portfolio 28
Maturities and Average Yields of Investment Securities 29
III. Loan Portfolio 30
Loan Maturities and Sensitivity to Changes in Interest Rates 31
Loan Risk Elements 32-34
IV. Summary of Loan Loss Experience 35
V. Deposits 37
VI. Return on Equity and Assets 38
VII. Short-term Borrowings 38
VIII. Foreign Operations 40
</TABLE>
ITEM 2. PROPERTIES
In Utah, fifty-eight (58) of Zions First National Bank's ninety-four (94)
offices are located in buildings owned by the Company and the other thirty-six
(36) are on leased premises. In Nevada, four (4) of Nevada State Bank's
twenty-five (25) offices are located in buildings owned and the other
twenty-one (21) are on leased premises, and in Arizona, National Bank of
Arizona owns three (3) offices and leases eight (8) offices. The annual rentals
under long-term leases for such banking premises are determined under various
formulas and include as various factors, operating costs, maintenance and taxes.
Zions Bancorporation is lessee under a 25-year lease, of which 24 years have
expired, of a 14-story building in downtown Salt Lake City, Utah. The Company's
subsidiaries have leased the ground floor and two other floors. The J.C. Penney
Company, Inc., has subleased nine floors for offices. The remaining two floors
are sublet to various tenants.
The Company's subsidiaries conducting lease financing, insurance, mortgage
servicing, and discount brokerage activities operate from leased premises.
For information regarding rental payments, see note 10 of Notes to Consolidated
Financial Statements, which appears in Part II, Item 8, on page 59 of this
report.
13
<PAGE> 16
ITEM 3. LEGAL PROCEEDINGS
During 1988, a lawsuit was brought in the United States District Court, Utah
District, against Zions First National Bank in connection with its performance
of duties as an indenture trustee for certain investors in real estate and other
syndication projects. In September 1992, a motion was granted allowing an
amended complaint containing allegations that plaintiffs intend to proceed as a
class action to recover approximately $23 million, prejudgment interest,
attorneys' fees, and additional amounts under certain statutory provisions and
common law. A motion to certify the class was filed in March 1994 and opposition
to this motion was filed in April 1994. The Bank continues to vigorously defend
the entire action. Although no assurances can be given as to the outcome, the
Company continues to believe that it has meritorious defenses to such lawsuit,
and that there is insurance coverage for a substantial portion of the amount
claimed.
The Company is also the defendant in various other legal proceedings arising in
the normal course of business. The Company does not believe that the outcome of
any of such proceedings, including the lawsuit discussed in the preceding
paragraph, will have a material adverse effect on its consolidated earnings or
financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages, positions, and backgrounds of the Company's executive officers
as of February 27, 1996, are set forth as follows:
<TABLE>
<CAPTION>
Positions and Offices Held With Zions Officer
Name Age Bancorporation and Principal Subsidiaries since
- ---- --- ----------------------------------------- -----
<S> <C> <C> <C>
Roy W. Simmons 80 Chairman of the Company, and Chairman of the Board of 1961
Directors of Zions First National Bank
Harris H. Simmons 41 President & Chief Executive Officer of the Company; President, 1981
Chief Executive Officer, and Member of the Board of Directors
of Zions First National Bank
Gary L. Anderson 53 Senior Vice President, Chief Financial Officer and Secretary of 1988
the Company; Executive Vice President and Secretary of the
Board of Directors of Zions First National Bank
Danne L. Buchanan 38 Senior Vice President of the Company, and President of Zions 1995
Data Service Company. Prior to March 1995, Senior Vice
President and General Manager of Zions Data Service Company
Gerald J. Dent 54 Senior Vice President of the Company, and Executive Vice 1987
President of Zions First National Bank
John J. Gisi 50 Senior Vice President of the Company, and Chairman and Chief 1994
Executive Officer of National Bank of Arizona since 1987
Clark B. Hinckley 48 Senior Vice President of the Company. Prior to March 1994, 1994
President of a Company subsidiary, Zions First National Bank of
Arizona.
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
Positions and Offices Held With Zions Officer
Name Age Bancorporation and Principal Subsidiaries since
- ---- --- ----------------------------------------- -----
<S> <C> <C> <C>
George B. Hofmann III 46 Senior Vice President of the Company, and President and Chief 1995
Executive Officer of Nevada State Bank. Prior to April 1995,
Senior Vice President of Zions First National Bank
Walter E. Kelly 63 Controller of the Company 1980
Ronald L. Johnson 40 Vice President of the Company 1989
A. Scott Anderson 49 Executive Vice President of Zions First National Bank. Prior to 1990
December 1990, Vice President of Bank of America
John B. D'Arcy 53 Executive Vice President of Zions First National Bank 1989
Peter K. Ellison 53 Executive Vice President of Zions First National Bank 1968
W. David Hemingway 48 Executive Vice President of Zions First National Bank 1976
Nolan X. Bellon 47 Controller of Zions First National Bank 1987
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Principal market where common stock is traded:
Nasdaq National Market Symbol "ZION"
High and low bid quotations on a quarterly basis for the past three years:
<TABLE>
<CAPTION>
1995 1994 1993
---------------------- ---------------------- ----------------------
HIGH LOW HIGH LOW HIGH LOW
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1st Quarter $ 40.50 $ 35.50 $ 39.75 $ 36.50 $ 49.00 $ 41.50
2nd Quarter $ 50.00 $ 38.13 $ 42.00 $ 37.00 $ 48.75 $ 38.50
3rd Quarter $ 61.50 $ 49.50 $ 40.63 $ 38.50 $ 44.25 $ 38.50
4th Quarter $ 81.13 $ 60.88 $ 39.25 $ 33.50 $ 45.50 $ 36.00
</TABLE>
Number of common shareholders of record as of latest practicable date:
3,889 common shareholders as of February 27, 1996
Frequency and amount of dividends paid during three years:
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
QTR QTR QTR QTR
------- ------- ------- -------
<S> <C> <C> <C> <C>
1995 $ .30 $ .35 $ .35 $ .41
1994 $ .28 $ .28 $ .30 $ .30
1993 $ .21 $ .21 $ .28 $ .28
</TABLE>
Description of any restrictions on the issuer's present or future ability to pay
dividends:
Funds for the payment of dividends by Zions Bancorporation have been obtained
primarily from dividends paid by the commercial banking and other subsidiaries.
In addition to certain statutory limitations on the payment of dividends,
approval of federal and/or state banking regulators may be required in some
instances for any dividend to Zions Bancorporation by its banking subsidiaries.
The payment of future dividends therefore is dependent upon earnings and the
financial condition of the Company and its subsidiaries as well as other
factors.
15
<PAGE> 18
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data is derived from the audited
consolidated financial statements of the Company. It should be read in
conjunction with the Company's consolidated financial statements and the related
notes and with management's discussion and analysis of financial condition and
results of operations and other detailed information included elsewhere herein.
(Dollars in thousands, except per share and ratio data)
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
RESULTS OF OPERATIONS
<S> <C> <C> <C> <C> <C>
Interest income $ 430,483 $ 353,989 $ 293,616 $ 278,225 $ 301,443
Interest expense 203,389 155,383 118,959 120,943 161,572
----------- ----------- ----------- ----------- -----------
Net interest income 227,094 198,606 174,657 157,282 139,871
Provision for loan losses 2,800 2,181 2,993 10,929 25,561
----------- ----------- ----------- ----------- -----------
Net interest income after provision for loan losses 224,294 196,425 171,664 146,353 114,310
Noninterest income 86,714 73,202 79,880 62,849 52,456
Noninterest expense 188,730 174,900 167,750 139,069 122,999
----------- ----------- ----------- ----------- -----------
Income before income taxes and cumulative
effect of changes in accounting principles 122,278 97,727 83,794 70,133 43,767
Income taxes 40,950 30,900 27,248 22,924 13,318
----------- ----------- ----------- ----------- -----------
Income before cumulative effect of changes in
accounting principles 81,328 63,827 56,546 47,209 30,449
Cumulative effect of changes in accounting principles -- -- 1,659 -- --
----------- ----------- ----------- ----------- -----------
Net income $ 81,328 $ 63,827 $ 58,205 $ 47,209 $ 30,449
=========== =========== =========== =========== ===========
COMMON SHARE DATA
Income before cumulative effect of changes in
accounting principles $ 5.53 $ 4.37 $ 3.96 $ 3.42 $ 2.23
Net income 5.53 4.37 4.08 3.42 2.23
Dividends 1.41 1.16 .98 .75 .72
Book value - year end 29.44 25.12 22.01 18.95 16.23
YEAR END BALANCES
Total assets $ 5,620,646 $ 4,934,095 $ 4,801,054 $ 4,107,924 $ 3,883,938
Money market investments 687,251 403,446 597,680 616,180 714,238
Securities 1,540,489 1,663,433 1,258,939 981,695 852,861
Net loans and leases 2,806,956 2,391,278 2,486,346 2,107,433 1,979,726
Allowance for loan losses 67,555 67,018 68,461 59,807 58,238
Total deposits 4,097,114 3,705,976 3,432,289 3,075,110 2,877,860
Shareholders' equity 428,506 365,770 312,592 260,070 220,753
RATIOS
Return on average assets 1.44% 1.17% 1.25% 1.24% .86%
Return on average common equity 20.47% 18.82% 20.33% 19.64% 14.59%
Average equity to average assets 7.02% 6.22% 6.17% 6.31% 5.90%
Tier I risk-based capital - year end 11.38% 11.81% 10.85% 10.23% 8.40%
Total risk-based capital - year end 14.23% 14.96% 14.12% 15.13% 12.09%
Tier I leverage - year end 6.28% 6.24% 5.44% 6.21% 5.86%
Net interest margin 4.50% 4.07% 4.23% 4.59% 4.39%
Nonperforming assets to total assets - year end .17% .38% .64% .77% 1.20%
Nonperforming assets to net loans and leases,
other real estate owned and other nonperforming
assets at year end .33% .79% 1.23% 1.49% 2.35%
Net charge-offs (recoveries) to average loans and leases .10% .19% (.23)% .44% 1.51%
Allowance for loan losses to net loans and
leases outstanding at year end 2.41% 2.80% 2.75% 2.84% 2.94%
Allowance for loan losses to nonperforming loans at
year end 878.82% 471.89% 250.13% 234.00% 158.59%
</TABLE>
16
<PAGE> 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following analysis of the Company's financial condition and results of
operations as of and for the years ended December 31, 1995, 1994, and 1993
should be read in conjunction with the consolidated financial statements of the
Company and detailed information presented elsewhere herein.
OPERATING RESULTS
Zions Bancorporation's consolidated net income rose to $81.3 million in 1995 as
compared to net income of $63.8 million in 1994 and $58.2 million in 1993. Net
income per common share in 1995 was $5.53 as compared to $4.37 in 1994 and $4.08
in 1993. Earnings results for 1993 were positively affected in the net amount of
$1,659,000 or $.12 per share due to the cumulative effect of changes in
accounting principles implemented during the first quarter of the year. The
Company's earnings for the year ended December 31, 1993 were also negatively
affected by a one-time expense of $6,022,000 included in noninterest expenses
related to early extinguishment of certain long-term debt.
The earnings results for 1995 represent a historic high for income before income
taxes and net income. Some of the factors affecting the increase in earnings
were a $28.5 million (14.3%) increase in net interest income, a $4.3 million
(17.8%) increase in service charges on deposit accounts, a $2.2 million (9.8%)
increase in other service charges, commissions and fees, a $9.7 million (66.2%)
increase in loan sales and servicing income and a $3.5 million (45.9%) decrease
in FDIC premiums expense. These increased contributions to income were partially
offset by a $2.1 million (245.0%) decrease in trading account income, a $.6
million (28.4%) increase in the provision for loan losses, a $9.6 million
(10.3%) increase in salaries and employee benefits, a $1.9 million (16.8%)
increase in furniture and equipment expense, a $3.2 million (10.2%) increase in
all remaining noninterest expenses, and a $10.1 million (32.5%) increase in
income taxes.
EARNINGS PERFORMANCE
NET INTEREST INCOME, MARGIN, AND INTEREST RATE SPREADS
Net interest income is the difference between the total interest income
generated by earning assets and the total interest cost of the funds used to
finance assets. Net interest income is the largest component of the Company's
revenue. The Company's taxable-equivalent net interest income increased by 14.3%
to $232.4 million in 1995 compared to $203.3 million in 1994. The increased
level of taxable-equivalent net interest income was influenced primarily by the
increase in average earning assets and an increased spread between the prime
lending rate and the short-term U.S. Treasury rate. The prime lending rate is
the primary basis used for pricing the Company's loans and the short-term
Treasury rate is the index used for pricing many of the Company's deposits. The
Company attempts to minimize interest rate movement sensitivity through the
management of interest rate maturities, and to a lesser extent, the use of
off-balance sheet arrangements such as interest rate caps, floors and interest
rate exchange contract agreements. During 1995, the Company had income net of
expense of $741,000 from the use of such off-balance sheet arrangements compared
to $967,000 in 1994 and $291,000 in 1993. The Company intends to continue to use
such off-balance sheet arrangements to the extent necessary to minimize its
exposure to changes in prevailing interest rates.
Net interest margin is a measure of the Company's ability to generate net
interest income and is computed by expressing net interest income (stated on a
fully taxable-equivalent basis) as a percentage of earnings assets. The
Company's net interest margin was 4.50% for 1995 as compared to 4.07% in 1994.
The increase in the margin was due primarily to the prime lending
rate/short-term U.S. Treasury spread. The prime/90 day T-bill spread was 3.31%
at December 1995 as compared to 2.88% at December 1994. The Company is unable to
effectively and economically hedge this basis point risk through the use of
off-balance financial instruments. The increase in net interest margin was
partially offset by the continued securitized sales of loans. Securitized sales
of loans convert net interest income from loans to other operating income. The
security resell agreements are primarily in U.S. government and U.S. government
agency securities which offer low yields but represent low risk to the Company
and require no consolidated "risk-based" capital.
The spread on average interest-bearing funds is the difference between the yield
on earning assets and on the cost of interest-bearing funds. The Company's
spread on average interest-bearing funds was 3.72% for 1995 as compared to 3.49%
in 1994. The spread on average interest-bearing funds was positively affected by
the same factors that increased the net interest margin.
Consolidated average balances, the amount of interest earned or paid, the
applicable interest rate for the various categories of earning assets and
interest-bearing funds which represent the components of net interest income for
the year 1995 and the previous four years; and interest differentials on a
taxable-equivalent basis and the effect on net interest income of changes due to
volume and rates for the years 1995 and 1994, are shown in tables on pages which
follow. Income computed on a taxable-equivalent basis is income adjusted to make
income and earning yields on assets exempt from income taxes comparable to other
taxable income. The incremental tax rate used for calculating the
taxable-equivalent adjustment was 30% in 1995 and 1994; 32% in 1993 and each of
the years prior.
17
<PAGE> 20
DISTRIBUTION OF ASSETS, LIABILITIES, AND SHAREHOLDERS' EQUITY,
AVERAGE BALANCE SHEETS, YIELDS AND RATES
<TABLE>
<CAPTION>
1995 1994
------------------------------------ --------------------------------------
Amount Amount
(Amounts in thousands) Average of Average Average of Average
balance interest(1) rate(1) balance interest(1) rate(1)
----------- ----------- ------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Money market investments:
Interest-bearing deposits $ 26,539 $ 1,288 4.85% $ 24,389 $ 814 3.34%
Federal funds sold and security resell agreements 910,307 54,344 5.97% 845,320 34,231 4.05%
Other money market investments -- -- - % -- -- - %
----------- ----------- ----------- -----------
Total money market investments 936,846 55,632 5.94% 869,709 35,045 4.03%
----------- ----------- ----------- -----------
Securities:
Held to maturity:
Taxable 911,237 64,914 7.12% 726,925 41,269 5.68%
Nontaxable 210,758 17,714 8.40% 193,810 15,689 8.10%
Available for sale:
Taxable 362,953 23,966 6.60% 334,044 19,916 5.96%
Nontaxable 460 30 6.52% -- -- - %
Trading account 146,845 9,248 6.30% 290,925 16,516 5.68%
----------- ----------- ----------- -----------
Total securities 1,632,253 115,872 7.10% 1,545,704 93,390 6.04%
----------- ----------- ----------- -----------
Loans:
Loans held for sale 115,939 9,259 7.99% 187,506 12,303 6.56%
Net loans and leases(2) 2,483,132 255,043 10.27% 2,387,489 217,958 9.13%
----------- ----------- ----------- -----------
Total loans 2,599,071 264,302 10.17% 2,574,995 230,261 8.94%
----------- ----------- ----------- -----------
Total interest-earning assets $ 5,168,170 $ 435,806 8.43% $ 4,990,408 $ 358,696 7.19%
----------- -----------
Cash and due from banks 321,526 333,290
Allowance for loan losses (67,803) (68,248)
Other assets 236,797 201,163
----------- -----------
Total assets $ 5,658,690 $ 5,456,613
=========== ===========
Liabilities:
Interest-bearing deposits:
Savings deposits $ 719,590 $ 22,492 3.13% $ 740,339 $ 22,262 3.01%
Money market deposits 1,425,537 59,465 4.17% 1,284,697 39,938 3.11%
Time deposits under $100,000 614,858 32,016 5.21% 516,877 20,469 3.96%
Time deposits $100,000 or more 121,863 7,358 6.04% 94,680 3,845 4.06%
Foreign deposits 139,212 7,179 5.16% 108,383 4,444 4.10%
----------- ----------- ----------- -----------
Total interest-bearing deposits 3,021,060 128,510 4.25% 2,744,976 90,958 3.31%
----------- ----------- ----------- -----------
Borrowed funds:
Securities sold, not yet purchased 90,196 5,619 6.23% 184,405 10,976 5.95%
Federal funds purchased and security
repurchase agreements 1,037,197 56,645 5.46% 1,057,827 41,089 3.88%
FHLB advances and other borrowings:
Less than one year 20,441 1,406 6.88% 32,557 1,770 5.44%
Over one year 93,829 6,088 6.49% 118,607 5,831 4.92%
Long-term debt 57,506 5,121 8.91% 59,493 4,759 8.00%
----------- ----------- ----------- -----------
Total borrowed funds 1,299,169 74,879 5.76% 1,452,889 64,425 4.43%
----------- ----------- ----------- -----------
Total interest-bearing liabilities $ 4,320,229 $ 203,389 4.71% $ 4,197,865 $ 155,383 3.70%
----------- -----------
Noninterest-bearing deposits 837,211 838,118
Other liabilities 103,982 81,449
----------- -----------
Total liabilities 5,261,422 5,117,432
Total shareholders' equity 397,268 339,181
----------- -----------
Total liabilities and shareholders' equity $ 5,658,690 $ 5,456,613
=========== ===========
Spread on average interest-bearing funds 3.72% 3.49%
==== ====
Net interest income and net yield on interest-earning
assets
$ 232,417 4.50% $ 203,313 4.07%
=========== ==== =========== ====
</TABLE>
- --------------------------------------------
1 Taxable-equivalent rates used where applicable.
2 Net of unearned income and fees, net of related costs. Loans include
nonaccrual and restructured loans.
18
<PAGE> 21
DISTRIBUTION OF ASSETS, LIABILITIES, AND SHAREHOLDERS' EQUITY,
AVERAGE BALANCE SHEETS, YIELDS AND RATES
<TABLE>
<CAPTION>
1993 1992
--------------------------------- -----------------------------------
Amount Amount
(Amounts in thousands) Average of Average Average of Average
balance interest(1) rate(1) balance interest(1) rate(1)
---------- ---------- ------- ----------- ---------- -------
Assets:
Money market investments:
<S> <C> <C> <C> <C> <C> <C>
Interest-bearing deposits $ 103,982 $ 3,682 3.55% $ 184,142 $ 10,529 5.72%
Federal funds sold and security resell agreements 656,204 22,918 3.49% 245,866 9,730 3.96%
Other money market investments 28,508 827 2.90% 39,054 1,410 3.61%
---------- ---------- ----------- ---------
Total money market investments 788,694 27,427 3.48% 469,062 21,669 4.62%
---------- ---------- ----------- ---------
Securities:
Held to maturity:
Taxable 958,776 56,347 5.88% 766,002 48,854 6.38%
Nontaxable 147,549 12,434 8.43% 125,062 11,163 8.93%
Available for sale:
Taxable - - - % - - - %
Nontaxable - - - % - - - %
Trading account 102,840 7,555 7.35% 36,912 5,537 15.00%
---------- ---------- ----------- ---------
Total securities 1,209,165 76,336 6.31% 927,976 65,554 7.06%
---------- ---------- ----------- ---------
Loans:
Loans held for sale 185,899 11,273 6.06% 186,953 13,804 7.38%
Net loans and leases(2) 2,036,283 182,559 8.97% 1,917,726 180,770 9.43%
---------- ---------- ----------- ---------
Total loans 2,222,182 193,832 8.72% 2,104,679 194,574 9.24%
---------- ---------- ----------- ---------
Total interest-earning assets $4,220,041 $ 297,595 7.05% $ 3,501,717 $ 281,797 8.05%
---------- ---------
Cash and due from banks 315,577 236,116
Allowance for loan losses (64,911) (60,116)
Other assets 173,211 130,115
---------- -----------
Total assets $4,643,918 $ 3,807,832
========== ===========
Liabilities:
Interest-bearing deposits:
Savings deposits $ 648,178 $ 19,222 2.97% $ 494,113 $ 17,396 3.52%
Money market deposits 1,117,016 31,109 2.79% 1,029,499 34,705 3.37%
Time deposits under $100,000 548,816 23,501 4.28% 651,226 33,555 5.15%
Time deposits $100,000 or more 79,442 3,010 3.79% 95,067 4,419 4.65%
Foreign deposits 55,823 1,484 2.66% 86,479 3,635 4.20%
---------- ---------- ----------- ---------
Total interest-bearing deposits 2,449,275 78,326 3.20% 2,356,384 93,710 3.98%
---------- ---------- ----------- ---------
Borrowed funds:
Securities sold, not yet purchased 69,442 3,039 4.38% - - - %
Federal funds purchased and security
repurchase agreements 767,309 22,376 2.92% 394,620 12,681 3.21%
FHLB advances and other borrowings:
Less than one year 83,123 3,196 3.84% 78,406 3,218 4.10%
Over one year 111,974 4,599 4.11% 50,450 1,826 3.62%
Long-term debt 75,623 7,423 9.82% 82,219 9,508 11.56%
---------- ---------- ----------- ---------
Total borrowed funds 1,107,471 40,633 3.67% 605,695 27,233 4.50%
---------- ---------- ----------- ---------
Total interest-bearing liabilities $3,556,746 $ 118,959 3.34% $ 2,962,079 $ 120,943 4.08%
---------- ---------
Noninterest-bearing deposits 729,651 556,476
Other liabilities 71,190 48,866
---------- -----------
Total liabilities 4,357,587 3,567,421
Total shareholders' equity 286,331 240,411
---------- -----------
Total liabilities and shareholders' equity $4,643,918 $ 3,807,832
========== ===========
Spread on average interest-bearing funds 3.71% 3.97%
==== ====
Net interest income and net yield on
interest-earning assets $ 178,636 4.23% $ 160,854 4.59%
========== ==== ========= ====
</TABLE>
1 Taxable-equivalent rates used where applicable.
2 Net of unearned income and fees, net of related costs. Loans include
nonaccrual and restructured loans.
19
<PAGE> 22
DISTRIBUTION OF ASSETS, LIABILITIES, AND SHAREHOLDERS' EQUITY,
AVERAGE BALANCE SHEETS, YIELDS AND RATES
<TABLE>
<CAPTION>
1991
--------------------------------------
Amount
(Amounts in thousands) Average of Average
balance interest(1) rate(1)
---------- ----------- ---------
<S> <C> <C> <C>
Assets:
Money market investments:
Interest-bearing deposits $ 234,936 $ 15,210 6.47%
Federal funds sold and security resell agreements 355,666 23,290 6.55%
Other money market investments 79,982 4,910 6.14%
---------- ----------
Total money market investments 670,584 43,410 6.47%
---------- ----------
Securities:
Held to maturity:
Taxable 604,557 49,171 8.13%
Nontaxable 74,709 8,571 11.47%
Available for sale:
Taxable - - - %
Nontaxable - - - %
Trading account 22,761 3,122 13.72%
---------- ----------
Total securities 702,027 60,864 8.67%
---------- ----------
Loans:
Loans held for sale 106,028 8,970 8.46%
Net loans and leases(2) 1,769,900 190,942 10.79%
---------- ----------
Total loans 1,875,928 199,912 10.66%
---------- ----------
Total interest-earning assets $3,248,539 $ 304,186 9.36%
----------
Cash and due from banks 214,238
Allowance for loan losses (61,650)
Other assets 135,682
----------
Total assets $3,536,809
==========
Liabilities:
Interest-bearing deposits:
Savings deposits $ 535,634 $ 26,154 4.88%
Money market deposits 717,124 36,642 5.11%
Time deposits under $100,000 771,491 51,692 6.70%
Time deposits $100,000 or more 132,363 8,317 6.28%
Foreign deposits 62,729 3,245 5.17%
---------- ----------
Total interest-bearing deposits 2,219,341 126,050 5.68%
---------- ----------
Borrowed funds:
Securities sold, not yet purchased - - - %
Federal funds purchased and security repurchase
agreements 331,367 17,031 5.14%
FHLB advances and other borrowings:
Less than one year 119,222 8,213 6.89%
Over one year 35,342 1,943 5.50%
Long-term debt 86,967 8,335 9.58%
---------- ----------
Total borrowed funds 572,898 35,522 6.20%
---------- ----------
Total interest-bearing liabilities $2,792,239 $ 161,572 5.79%
----------
Noninterest-bearing deposits 481,790
Other liabilities 54,051
----------
Total liabilities 3,328,080
Total shareholders' equity 208,729
----------
Total liabilities and shareholders' equity $3,536,809
==========
Spread on average interest-bearing funds 3.57%
====
Net interest income and net yield on
interest-earning assets $ 142,614 4.39%
========== ====
</TABLE>
--------------------------------------------
1 Taxable-equivalent rates used where applicable.
2 Net of unearned income and fees, net of related costs. Loans include
nonaccrual and restructured loans.
20
<PAGE> 23
Analysis of Interest Changes Due to Volume and Rates
<TABLE>
<CAPTION>
1995 over 1994 1994 over 1993
------------------------------- --------------------------------
(In thousands) Changes due to Total Changes due to Total
-------------------- --------------------
Volume Rate(1) Changes Volume Rate(1) Changes
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Money market investments:
Interest-bearing deposits $ 77 $ 397 $ 474 $ (2,659) $ (209) $ (2,868)
Federal funds sold and security
resell agreements 2,809 17,304 20,113 7,272 4,041 11,313
Other money market investments -- -- -- (827) -- (827)
-------- -------- -------- -------- -------- --------
Total money market investments 2,886 17,701 20,587 3,786 3,832 7,618
-------- -------- -------- -------- -------- --------
Securities:
Held to maturity:
Taxable 11,823 11,822 23,645 (759) 7,976 7,217
Nontaxable 1,418 607 2,025 3,738 (483) 3,255
Available for sale:
Taxable 1,807 2,243 4,050 7,122 (9,501) (2,379)
Nontaxable 30 -- 30 -- -- --
Trading account (8,175) 907 (7,268) 10,675 (1,714) 8,961
-------- -------- -------- -------- -------- --------
Total securities 6,903 15,579 22,482 20,776 (3,722) 17,054
-------- -------- -------- -------- -------- --------
Loans:
Loans held for sale (4,697) 1,653 (3,044) 92 938 1,030
Net loans and leases(2) 9,019 28,066 37,085 32,002 3,397 35,399
-------- -------- -------- -------- -------- --------
Total loans 4,322 29,719 34,041 32,094 4,335 36,429
-------- -------- -------- -------- -------- --------
Total interest-earning assets $ 14,111 $ 62,999 $ 77,110 $ 56,656 $ 4,445 $ 61,101
-------- -------- -------- -------- -------- --------
Interest-bearing liabilities:
Deposits:
Savings deposits $ (602) $ 832 $ 230 $ 2,753 $ 287 $ 3,040
Money market deposits 4,761 14,766 19,527 4,997 3,832 8,829
Time deposits under $100,000 4,332 7,215 11,547 (1,264) (1,768) (3,032)
Time deposits $100,000 or more 1,302 2,211 3,513 609 226 835
Foreign deposits 973 1,762 2,735 1,879 1,081 2,960
-------- -------- -------- -------- -------- --------
Total interest-bearing deposits 10,766 26,786 37,552 8,974 3,658 12,632
-------- -------- -------- -------- -------- --------
Borrowed funds:
Securities sold, not yet purchased (5,609) 252 (5,357) 6,522 1,415 7,937
Federal funds purchased and security
repurchase agreements (846) 16,402 15,556 10,013 8,700 18,713
FHLB advances and other borrowings:
Less than one year (658) 294 (364) (1,946) 520 (1,426)
Over one year (1,215) 1,472 257 287 945 1,232
Long-term debt (159) 521 362 (1,291) (1,373) (2,664)
-------- -------- -------- -------- -------- --------
Total borrowed funds (8,487) 18,941 10,454 13,585 10,207 23,792
-------- -------- -------- -------- -------- --------
Total interest-bearing liabilities $ 2,279 $ 45,727 $ 48,006 $ 22,559 $ 13,865 $ 36,424
-------- -------- -------- -------- -------- --------
Change in net interest income $ 11,832 $ 17,272 $ 29,104 $ 34,097 $ (9,420) $ 24,677
======== ======== ======== ======== ======== ========
</TABLE>
--------------------------------------------
(1) Taxable-equivalent rates used where applicable.
(2) Net of unearned income and fees, net of related costs. Loans include
nonaccrual and restructured loans.
In the tables on the proceeding pages, the principal amounts of nonaccrual and
renegotiated loans have been included in the average loan balances used to
determine the rate earned on loans. Interest income on nonaccrual loans is
included in income only to the extent that cash payments have been received and
not applied to principal and is accrued on restructured loans at the reduced
rates. Certain restructured loan agreements call for additional interest to be
paid on a deferred or contingent basis. Such interest is taken into income only
as collected.
In the analysis of interest changes due to volume and rates, the changes due to
the volume/rate variance have been allocated to volume with the following
exceptions: when volume and rate have both increased, the variance has been
allocated proportionately to both volume and rate; when the rate has increased
and volume has decreased, the variance has been allocated to rate.
21
<PAGE> 24
PROVISION FOR LOAN LOSSES
The provision for loan losses in 1995 increased by 28.4% to $2,800,000 as
compared to $2,181,000 in 1994 and $2,993,000 in 1993. The increase in the loan
loss provision resulted from net larger provisions in the Company's banking
subsidiaries in Arizona and Nevada. While the increase in the provision is large
as a percentage increase, the total provision remains at a low level, reflecting
continued improvement in credit risk management and a continuing healthy economy
which have produced decreases in nonperforming assets.
NONINTEREST INCOME
The Company's noninterest income increased by 18.5% to $86.7 million as compared
to $73.2 million in 1994 and $79.9 million in 1993. Service charges on deposits
increased by 17.8% in 1995 to $28.3 million, primarily as a result of price
increases and higher volumes in 1995. Other service charges, commissions and
fees increased by 9.8% in 1995 to $24.2 million, primarily as a result of
increased fees relating to commercial loan originations. Such increased fees
were partially offset by a decline in fees generated from sales of investment
products through the Company's discount brokerage operations and personal
investment officers, as well as fees from mortgage loan originations during
1995. Trading account income decreased by 245.0% to $(1.2) million in 1995 as
compared to $.9 million in 1994, due primarily to a $3.1 million trading loss
during the first quarter of 1995, which resulted in the transfer of Zions First
National Bank's capital markets operation in New York City to the bank's
headquarters in Salt Lake City. Loan sales and servicing income increased 66.2%
to $24.3 million primarily as a result of increased income on real estate loans
sold in 1995 and higher servicing fees during 1995 on securitized loans sold.
The Company does not recognize an initial gain on the sale of loans but
recognizes the income over the servicing life of the sale. Other income
decreased by 8.6% in 1995 to $7.0 million, primarily as a result of a smaller
gain on the sale of mortgage-servicing rights reported in 1995. The smaller gain
was partially offset by interest income received on a state income tax refund.
The following table presents the components of noninterest income for the years
indicated and a year-to-year comparison expressed in terms of percent changes.
NONINTEREST INCOME
<TABLE>
<CAPTION>
Percent Percent Percent Percent
(Amounts in thousands) 1995 change 1994 change 1993 change 1992 change 1991
---- ------ ---- ------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Service charges on deposit
accounts $ 28,347 17.8% $ 24,058 5.2% $22,875 17.4% $ 19,484 9.9% $17,736
Other service charges,
commissions, and fees 24,169 9.8 22,008 2.9 21,392 13.4 18,871 35.7 13,907
Trust income 4,355 .5 4,334 (6.2) 4,622 .2 4,614 10.7 4,169
Investment securities gains
(losses), net (148) 50.5 (299) (1,658.8) (17) (105.2) 327 (54.3) 715
Trading account income
(loss) (1,247) (245.0) 860 (63.4) 2,350 (47.0) 4,437 226.5 1,359
Loan sales and servicing income 24,254 66.2 14,596 (32.0) 21,471 226.7 6,573 (16.5) 7,875
Other income 6,984 (8.6) 7,645 6.4 7,187 (15.9) 8,543 27.6 6,695
--------- -------- ------- -------- -------
Total $ 86,714 18.5% $ 73,202 (8.4)% $79,880 27.1% $ 62,849 19.8% $52,456
========= ==== ======== ==== ======= ==== ======== ==== =======
</TABLE>
NONINTEREST EXPENSES
Noninterest expenses increased by 7.9% in 1995 to $188.7 million as compared to
$174.9 million in 1994 and $167.8 million in 1993. Salaries and employee
benefits increased by 10.3% in 1995 to $103.0 million, primarily as a result of
increased staffing of branch offices opened and acquired and SBA loan
origination activities, as well as general salary increases, bonuses,
commissions and profit-sharing costs related to increased profitability.
Furniture and equipment expense increased 16.8% in 1995 to $13.2 million,
resulting primarily from the addition of branch facilities, the further
expansion of the ATM network, and the installation of personal computers and
local area networks.
22
<PAGE> 25
The Company benefited by a decrease in F.D.I.C. premiums of 45.9% in 1995 to
$4.1 million as compared to $7.5 million in 1994 due to lower assessment rates.
Telecommunication costs increased 24.8% to $4.7 million as a result of
acquisitions and the expansion of ATM and other networks. All other expenses
increased 8.2% to $29.9 million in 1995 as compared to $27.6 million in 1994,
primarily due to increased ATM network service costs, amortization of
investments in community development companies and investment activity expenses.
The Company recognized a loss on early extinguishment of debt in the amount of
$6.0 million during 1993. This expense consisted of marking to market an
interest rate exchange agreement entered into several years ago in conjunction
with the issuance of long-term floating rate notes, and writing off deferred
costs associated with the notes and industrial revenue bonds redeemed.
The following table presents the components of noninterest expenses for the
years indicated and a year-to-year comparison expressed in terms of percent
changes.
NONINTEREST EXPENSES
<TABLE>
<CAPTION>
Percent Percent Percent Percent
(Amounts in thousands) 1995 change 1994 change 1993 change 1992 change 1991
---- ------ ---- ------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries and employee
benefits $ 102,951 10.3% $ 93,331 9.1% $ 85,549 21.8% $ 70,242 14.7% $ 61,220
Occupancy, net 10,398 7.8 9,647 18.1 8,168 12.7 7,248 (4.3) 7,570
Furniture and equipment 13,174 16.8 11,276 21.3 9,294 21.0 7,681 13.4 6,773
Other real estate expense 81 192.0 (88) (119.6) 450 (82.4) 2,559 (22.9) 3,318
Legal and professional
services 4,285 (16.7) 5,142 .1 5,136 42.0 3,616 (8.0) 3,931
Supplies 5,231 8.5 4,819 6.2 4,537 17.5 3,860 1.1 3,817
Postage 5,125 8.5 4,723 9.0 4,334 20.0 3,611 (2.4) 3,700
Advertising 5,221 51.5 3,447 (1.9) 3,515 8.6 3,236 43.3 2,258
F.D.I.C. premiums 4,084 (49.5) 7,547 4.0 7,257 16.4 6,235 15.9 5,381
Amortization of intangible
assets 3,621 (1.9) 3,692 (16.7) 4,432 (2.2) 4,530 16.7 3,882
Loss on early extinguishment of
debt - - - (100.0) 6,022 100.0 - - -
Other expenses:
Telecommunications 4,701 24.8 3,767 25.4 3,005 26.6 2,373 19.4 1,987
All other expenses 29,858 8.2 27,597 5.9 26,051 9.1 23,878 24.6 19,162
--------- --------- --------- --------- ---------
Total other expenses 34,559 10.2 31,364 7.9 29,056 10.7 26,251 24.1 21,149
--------- --------- --------- --------- ---------
Total $ 188,730 7.9% $ 174,900 4.3% $ 167,750 20.6% $ 139,069 13.1% $ 122,999
========= ===== ========= ====== ========= ===== ========= ===== =========
</TABLE>
The following table presents full-time equivalent employees and banking offices
at December 31, for the years indicated:
FULL-TIME EQUIVALENT EMPLOYEES
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Commercial banking 2,650 2,506 2,573 2,098 2,008
Other 205 189 188 395 341
----- ----- ----- ----- -----
Total 2,855 2,695 2,761 2,493 2,349
===== ===== ===== ===== =====
Commercial banking offices 131 118 114 106 103
</TABLE>
INCOME TAXES
The Company's income taxes increased 32.5% to $41.0 million in 1995 compared to
$30.9 million in 1994 and $27.2 million in 1993 due to the increase in income
before income taxes and an increase in the Company's effective tax rate to 33.5%
in 1995 as compared to 32.6% in 1994.
23
<PAGE> 26
QUARTERLY SUMMARY
The following table presents a summary of earnings and end-of-period balances by
quarter for the years ended December 31, 1995, 1994, and 1993:
SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Provi- Income
Gross Net Non- sion for Non- before
(In thousands) interest interest interest loan interest income Net
income income income losses expenses taxes income
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Quarter:
1995:
First $ 97,779 $ 53,201 $ 16,041 $ 600 $ 44,818 $ 23,824 $ 16,001
Second 105,436 55,897 22,105 850 45,882 31,270 20,521
Third 113,579 57,923 23,936 800 47,015 34,044 22,291
Fourth 113,689 60,073 24,632 550 51,015 33,140 22,515
-------- -------- -------- -------- -------- -------- --------
Total $430,483 $227,094 $ 86,714 $ 2,800 $188,730 $122,278 $ 81,328
======== ======== ======== ======== ======== ======== ========
1994:
First $ 77,213 $ 44,801 $ 16,396 $ 290 $ 42,491 $ 18,416 $ 12,438
Second 86,772 48,741 18,465 467 41,996 24,743 16,418
Third 94,939 51,859 20,109 440 44,739 26,789 17,665
Fourth 95,065 53,205 18,232 984 45,674 24,779 17,306
-------- -------- -------- -------- -------- -------- --------
Total $353,989 $198,606 $ 73,202 $ 2,181 $174,900 $ 94,727 $ 63,827
======== ======== ======== ======== ======== ======== ========
1993:
First $ 67,591 $ 41,092 $ 15,766 $ 1,365 $ 42,065 $ 13,428 $ 10,746
Second 71,091 44,813 19,371 408 39,047 24,729 16,636
Third 76,033 43,795 22,689 482 43,318 22,684 15,397
Fourth 78,901 44,957 22,054 738 43,320 22,953 15,426
-------- -------- -------- -------- -------- -------- --------
Total $293,616 $174,657 $ 79,880 $ 2,993 $167,750 $ 83,794 $ 58,205
======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Money Net Allow-
market loans ances for Share-
Total invest- and loan Total holders'
assets ments Securities leases losses deposits equity
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
End of Quarter:
1995:
First $5,105,608 $ 639,101 $1,555,577 $2,474,801 $ 67,372 $3,786,428 $ 380,975
Second 5,664,339 927,646 1,594,203 2,651,732 67,753 3,890,180 392,285
Third 5,667,670 759,498 1,716,350 2,679,485 68,309 4,095,014 409,966
Fourth 5,620,646 687,251 1,540,489 2,806,956 67,555 4,097,114 428,506
1994:
First $5,232,172 $ 677,125 $1,626,260 $2,531,806 $ 67,984 $3,493,502 $ 318,708
Second 5,452,447 830,288 1,552,256 2,665,104 68,981 3,599,176 341,818
Third 5,228,382 667,013 1,532,726 2,574,644 66,847 3,628,273 354,330
Fourth 4,934,095 403,446 1,663,433 2,391,278 67,018 3,705,976 365,770
1993:
First $4,334,905 $ 733,496 $1,148,227 $2,112,865 $ 61,042 $3,152,960 $ 273,736
Second 4,420,841 599,091 1,187,784 2,197,102 67,602 3,347,915 287,985
Third 4,467,194 463,552 1,225,784 2,395,834 68,334 3,370,553 300,298
Fourth 4,801,054 597,680 1,258,939 2,486,346 68,461 3,432,289 312,592
</TABLE>
24
<PAGE> 27
ANALYSIS OF FINANCIAL CONDITION
LIQUIDITY
The Company manages its liquidity to provide adequate funds to meet its
financial obligations, including withdrawals by depositors, debt service
requirements and operating needs. Liquidity is primarily provided by the
regularly scheduled maturities of the Company's investment and loan portfolios.
In addition, the Company's liquidity is enhanced by the fact that cash, money
market securities, and liquid investments, net of short-term or "purchased"
liabilities and wholesale deposits, totaled $1,428.2 million or 37.3% of core
deposits at December 31, 1995.
The Company's core deposits, consisting of demand, savings, and money market
deposits, and small certificates of deposit, constituted 93.5% of total deposits
at December 31, 1995, as compared to 93.0% at December 31, 1994.
Maturing balances in loan portfolios provide flexibility in managing cash flows.
Maturity management of those funds is an important source of medium- to
long-term liquidity. The Company's ability to raise funds in the capital markets
through the "securitization" process and by debt issuances allows the Company to
take advantage of market opportunities to meet funding needs at a reasonable
cost.
The parent company's cash requirements consist primarily of principal and
interest payments on its borrowings, dividend payments to shareholders, and cash
operating expenses. The parent company's cash needs are routinely satisfied
through payments by subsidiaries of dividends, proportionate shares of current
income taxes, management and other fees, and principal and interest payments on
subsidiary borrowings from the parent company.
INTEREST RATE SENSITIVITY
Interest rate sensitivity measures the Company's financial exposure to changes
in interest rates. Interest rate sensitivity is, like liquidity, affected by
maturities of assets and liabilities. Interest rate sensitivity is measured in
terms of "gaps," defined as the difference between volumes of assets and
liabilities whose interest rates are subject to reset within specified periods
of time, and "duration," a measure of the weighted average expected lives of the
cash flows from assets and liabilities.
The Company, through the management of interest rate "maturities" and the use of
off-balance sheet arrangements such as interest rate caps, floors, futures,
options, and interest rate exchange agreements, attempts to minimize the effect
on net income of changes in interest rates. The Company's management exercises
its best judgment in making assumptions with respect to prepayments, early
withdrawals and other noncontrollable events in managing the Company's exposure
to changes in interest rates.
Information as to the Company's interest rate sensitivity is presented in a
table that follows. The interest rate gaps reported in the table arise when
assets are funded with liabilities having different repricing intervals, after
considering the effect of off-balance sheet hedging financial instruments. Since
these gaps are actively managed and change daily as the interest rate
environment changes, positions at the end of any period may not be reflective of
the Company's interest rate position in subsequent periods.
25
<PAGE> 28
The following table presents information as to the Company's interest rate
sensitivity at December 31, 1995:
MATURITIES AND INTEREST RATE SENSITIVITY
AT DECEMBER 31, 1995
<TABLE>
<CAPTION>
Rate sensitive
------------------------------------------------
After After
three one
months year
but but
Within within within After
three one five five Not rate
(In millions) months year years years sensitive Total
---------- -------- -------- -------- ---------- ----------
Uses of Funds
- -------------
<S> <C> <C> <C> <C> <C> <C>
Earning assets:
Interest-bearing deposits $ 34.1 $ .2 $ .3 $ 34.6
Federal funds sold 50.4 50.4
Security resell agreements 590.1 12.1 602.2
Securities:
Held to maturity 641.4 122.5 213.4 $ 101.3 1,078.6
Available for sale 184.5 29.9 94.2 89.6 398.2
Trading account 63.7 63.7
Loans and leases 1,844.3 252.5 601.1 109.1 2,807.0
Nonearning assets $ 585.9 585.9
---------- -------- -------- -------- ---------- ----------
Total uses of funds $ 3,408.5 $ 417.2 $ 909.0 $ 300.0 $ 585.9 $ 5,620.6
---------- -------- -------- -------- ---------- ==========
Sources of Funds
- ----------------
Interest-bearing deposits and liabilities:
Savings and money market deposits $ 1,273.5 $ 169.1 $ 648.5 $ 73.2 $ 2,164.3
Time deposits under $100,000 203.3 287.8 176.4 1.7 669.2
Time deposits over $100,000 36.7 83.9 38.1 .2 158.9
Foreign 106.1 106.1
Securities sold, not yet purchased 117.0 117.0
Federal funds purchased 134.0 134.0
Security repurchase agreements 612.2 2.1 614.3
FHLB advances and other borrowings:
Less than one year 14.9 14.9
Over one year 65.0 1.7 8.0 11.5 86.2
Long-term debt .5 .5 4.5 50.7 56.2
Noninterest-bearing deposits 414.3 21.6 86.2 58.4 $ 418.1 998.6
Other liabilities 72.4 72.3
Shareholders' equity 428.5 428.5
---------- -------- -------- -------- ---------- ----------
Total sources of funds $ 2,977.5 $ 566.7 $ 961.7 $ 195.7 $ 919.0 $ 5,620.6
---------- -------- -------- -------- ---------- ==========
Off-balance sheet items affecting interest
rate sensitivity $ (230.0) $ 20.0 $ 210.0
Interest rate sensitivity gap $ 201.0 $ (129.5) $ 157.3 $ 104.3 $ (333.1)
Percent of total assets 3.6% (2.3)% 2.8% 1.8% (5.9)%
Cumulative interest rate sensitivity gap $ 201.0 $ 71.5 $ 228.8 $ 333.1
Cumulative as a % of total assets 3.6% 1.3% 4.1% 5.9%
</TABLE>
26
<PAGE> 29
EARNING ASSETS
Average earning assets increased 3.6% to $5,168.2 million in 1995 as compared to
the 1994 level of $4,990.4 million and the 1993 level of $4,220.1 million.
Earning assets comprised 91.3% of total average assets in 1995 compared with
91.5% in 1994, with average loans representing 50.3% of earning assets in 1995
compared to 51.6% in 1994.
The volume of liquid money market investments increased 7.7% to $936.8 million
in 1995 from $869.7 million in 1994. Average securities increased 5.6% to
$1,632.3 million in 1995 from $1,545.7 million in 1994. Average loan volume
increased .9% to $2,599.1 million in 1995 as compared to $2,575.0 million in
1994.
The following table sets forth the composition of average earning assets for the
years indicated:
AVERAGE EARNING ASSETS
<TABLE>
<CAPTION>
(In millions) 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Money market investments:
Interest-bearing deposits $ 26.5 $ 24.4 $ 104.0 $ 184.1 $ 234.9
Federal funds sold and security resell agreements 910.3 845.3 656.2 245.9 355.7
Other money market investments -- -- 28.5 39.0 80.0
---------- ---------- ---------- ---------- ----------
Total money market investments 936.8 869.7 788.7 469.0 670.6
---------- ---------- ---------- ---------- ----------
Securities:
Held to maturity:
Taxable 911.2 726.9 958.8 766.0 604.5
Nontaxable 210.8 193.8 147.6 125.1 74.7
Available for sale:
Taxable 363.0 334.1 -- -- --
Nontaxable .5 -- -- -- --
Trading account 146.8 290.9 102.8 36.9 22.8
---------- ---------- ---------- ---------- ----------
Total securities 1,632.3 1,545.7 1,209.2 928.0 702.0
---------- ---------- ---------- ---------- ----------
Loans:
Loans held for sale 116.0 187.5 185.9 187.0 106.0
Net loans and leases 2,483.1 2,387.5 2,036.3 1,917.7 1,769.9
---------- ---------- ---------- ---------- ----------
Total loans 2,599.1 2,575.0 2,222.2 2,104.7 1,875.9
---------- ---------- ---------- ---------- ----------
Total earning assets $ 5,168.2 $ 4,990.4 $ 4,220.1 $ 3,501.7 $ 3,248.5
========== ========== ========== ========== ==========
</TABLE>
27
<PAGE> 30
INVESTMENT SECURITIES PORTFOLIO
Investment securities prior to December 31, 1993 were held to maturity and
carried at amortized cost. At December 31, 1993 the Company adopted SFAS No.
115, "Accounting for Certain Investments in Debt and Equity Securities," and
segregated the portfolio for securities held to maturity carried at amortized
cost, and securities available for sale carried at market. The following table
presents the Company's year-end investment securities portfolio.
INVESTMENT SECURITIES PORTFOLIO
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------------------
1995 1994 1993
------------------------- ------------------------- --------------------------
(In thousands) Amortized Market Amortized Market Amortized Market
cost value cost Value Cost Value
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Held to maturity
- ----------------
U.S. government agencies and corporations:
Small Business Administration
loan-backed securities $ 529,376 $ 541,014 $ 460,163 $ 459,313 $ 399,603 $ 411,846
Other agency securities 265,430 263,522 271,440 262,144 157,098 157,544
States and political subdivisions 225,231 230,149 243,225 242,754 196,241 198,664
---------- ---------- ---------- ---------- ---------- ----------
1,020,037 1,034,685 974,828 964,211 752,942 768,054
Mortgage-backed securities 58,546 59,249 56,079 54,587 60,318 62,033
---------- ---------- ---------- ---------- ---------- ----------
1,078,583 1,093,934 1,030,907 1,018,798 813,260 830,087
---------- ---------- ---------- ---------- ---------- ----------
Available for sale
- ------------------
U.S. Treasury securities 17,691 17,728 48,269 47,177 70,263 70,512
U.S. government agencies 71,038 70,952 33,304 33,304 61,107 61,077
States and political subdivisions 40,153 42,084 -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
128,882 130,764 81,573 80,481 131,370 131,589
---------- ---------- ---------- ---------- ---------- ----------
Mortgage-backed securities 69,469 69,333 55,560 54,334 49,493 49,363
---------- ---------- ---------- ---------- ---------- ----------
Equity securities:
Mutual funds:
Accessor Funds, Inc. 118,899 119,971 118,983 111,529 90,736 91,245
Other 564 564 534 534 515 515
Stock:
Federal Home Loan Bank 71,988 71,988 65,861 65,861 72,376 72,376
Other 5,386 5,580 2,785 2,839 2,194 2,258
---------- ---------- ---------- ---------- ---------- ----------
196,837 198,103 187,983 180,763 165,821 166,394
---------- ---------- ---------- ---------- ---------- ----------
395,188 398,200 325,116 315,578 346,684 347,346
---------- ---------- ---------- ---------- ---------- ----------
Total $1,473,771 $1,492,134 $1,356,023 $1,334,376 $1,159,944 $1,177,433
========== ========== ========== ========== ========== ==========
</TABLE>
28
<PAGE> 31
MATURITIES AND AVERAGE YIELDS OF INVESTMENT SECURITIES
The following table presents by maturity range and type of security, the average
yield of the investment portfolio at December 31, 1995. The average yield is
based on effective rates on amortized cost at the end of the year.
MATURITIES AND AVERAGE YIELDS OF INVESTMENT SECURITIES
AT DECEMBER 31, 1995
<TABLE>
<CAPTION>
After one After five
Total Within one but within but within After ten
securities year five years ten years years
----------------- --------------- ------------- -------------- ---------------
(Millions of Dollars) Amt. Yield* Amt. Yield* Amt. Yield* Amt. Yield* Amt. Yield
- -------------------- --------- ----- ------- ------ ------ ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Held to maturity
- ----------------
U.S. government agencies and corporations:
Small Business Administration
loan-backed securities $ 529.4 7.4% $ 48.5 7.4% $ 157.7 7.4% $ 137.2 7.4% $ 186.0 7.4%
Other agency securities 265.4 5.7% 79.8 4.8% 147.1 5.9% 35.8 7.0% 2.7 8.1%
States and political subdivisions 225.2 8.0% 32.3 7.9% 101.0 8.0% 76.7 8.3% 15.2 7.6%
---------- -------- -------- -------- --------
1,020.0 7.1% 160.6 6.2% 405.8 7.0% 249.7 7.6% 203.9 7.4%
Mortgage-backed securities 58.6 6.8% 8.2 6.8% 23.0 6.8% 15.0 6.8% 12.4 6.7%
---------- -------- -------- -------- --------
1,078.6 7.1% 168.8 6.2% 428.8 7.0% 264.7 7.6% 216.3 7.4%
---------- -------- -------- -------- --------
Available for sale
- ------------------
U.S. Treasury securities 17.7 4.7% 14.5 4.5% 3.0 5.6% .2 8.3% -- -%
U.S. government agencies 71.0 10.4% 52.9 11.5% .7 8.0% 17.4 7.2% -- -%
States and political subdivisions 40.2 8.0% 6.4 7.7% 13.9 8.1% 16.3 8.4% 3.6 6.8%
---------- -------- -------- -------- --------
128.9 8.9% 73.8 9.8% 17.6 7.7% 33.9 7.8% 3.6 6.8%
---------- -------- -------- -------- --------
Mortgage-backed securities 69.5 6.6% 7.0 6.6% 22.2 6.6% 17.9 6.6% 22.4 6.5%
---------- -------- -------- -------- --------
Equity securities:
Mutual funds:
Accessor Funds, Inc. 118.9 11.7% 118.9 11.7%
Other .5 5.5% .5 5.5%
Stock:
Federal Home Loan Bank 72.0 7.2% 72.0 7.2%
Other 5.4 3.3% 5.4 3.3%
---------- --------
196.8 9.8% 196.8 9.8%
---------- -------- -------- -------- --------
395.2 8.9% 80.8 9.5% 39.8 7.1% 51.8 7.4% 222.8 9.4%
---------- -------- -------- -------- --------
Total $ 1,473.8 7.6% $ 249.6 7.3% $ 468.6 7.0% $ 316.5 7.6% $ 439.1 8.4%
========== === ======== === ======== === ======== === ======== ====
</TABLE>
* An effective tax rate of 30% was used to adjust tax-exempt securities yields
to rates comparable to those on fully taxable securities.
At December 31, 1995, the value of the Accessor Funds Inc. and the Federal Home
Loan Bank of Seattle stock each exceeded ten percent of shareholders' equity.
29
<PAGE> 32
LOAN PORTFOLIO
During 1995, the Company consummated securitized loan sales of home equity
loans, credit card receivables and automobile loans totaling approximately
$615.1 million, leading to a $44.9 million net increase in securitized
receivables outstanding, excluding long-term residential mortgages. After these
sales, loans and leases at December 31, 1995 totaled $2,837.9 million, an
increase of 17.5% compared to $2,416.1 million at December 31, 1994. Loans held
for sale; commercial, financial and agriculture loans; real estate and lease
financing increased 16.1%, 38.9%, 20.4%, and 2.3%, respectively, while consumer
loans and other receivables declined 12.8% and 2.9%, respectively.
The table below sets forth the amount of loans outstanding by type at December
31 for the years indicated:
LOAN PORTFOLIO
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------------
(In thousands) 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Loans held for sale $ 126,124 $ 108,649 $ 238,206 $ 229,465 $ 153,782
---------- ---------- ---------- ---------- ----------
Commercial, financial and agricultural 688,466 495,647 511,982 593,248 495,883
---------- ---------- ---------- ---------- ----------
Real estate:
Construction 268,812 218,244 213,114 118,185 100,922
Other:
Home equity credit line 90,730 40,007 159,998 148,245 96,059
1-4 family residential 420,523 452,131 367,001 155,831 164,606
Other real estate-secured 761,380 570,285 495,889 299,769 332,967
---------- ---------- ---------- ---------- ----------
1,541,445 1,280,667 1,236,002 722,030 694,554
---------- ---------- ---------- ---------- ----------
Consumer:
Bankcard 52,252 41,035 27,522 24,293 73,789
Other 288,898 349,998 351,157 430,123 458,712
---------- ---------- ---------- ---------- ----------
341,150 391,033 378,679 454,416 532,501
---------- ---------- ---------- ---------- ----------
Lease financing 132,520 129,547 130,450 124,480 122,620
---------- ---------- ---------- ---------- ----------
Other receivables 8,203 10,509 12,857 8,574 9,222
---------- ---------- ---------- ---------- ----------
Total loans $2,837,908 $2,416,052 $2,508,176 $2,132,213 $2,008,562
========== ========== ========== ========== ==========
</TABLE>
The Company has no foreign loans in its loan portfolio.
LOANS SERVICED
In recent years, many banks and other financial institutions have had an
increasing tendency to "securitize" loans by pooling and selling them to
investors, with the servicing responsibilities and residual income in excess of
financing costs, servicing expenses, and loan losses accruing to the originating
institution. The securitization of receivables can assist an institution in
effectively utilizing its capital and enhancing its liquidity while a the same
time limiting its exposure to loss. The Company's participation in the
securitization process, as well as its participation in originating and selling
mortgage loans, SBA loans and student loans, has increased in recent years.
During 1995 the Company securitized and sold home equity credit line receivables
totaling $195.5 million, credit card receivables totaling $155.6 million, and
automobile loans totaling $264.0 million. Securitized loans serviced for
investors at December 31, 1995 totaled $831.5 million compared to $786.6 million
at December 31, 1994, and $464.2 million at December 31, 1993. At December 31,
1995, real estate loans serviced for others amounted to $1,540.5 million
compared to $1,760.1 million at December 31, 1994, and $1,650.4 million at
December 31, 1993.
30
<PAGE> 33
LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
The following table shows maturity distribution and sensitivity to changes in
interest rates of the loan portfolio at December 31, 1995:
LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
<TABLE>
<CAPTION>
Maturities
-------------------------------------------------------------------
One One year Over
year or through five
(In thousands) less five years years Total
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Loans held for sale $ 126,124 $ -- $ -- $ 126,124
---------- ---------- ---------- ----------
Commercial, financial and agricultural 383,241 223,184 82,041 688,466
---------- ---------- ---------- ----------
Real estate:
Construction 211,617 57,195 -- 268,812
Other:
Home equity credit line 2,715 5,670 82,345 90,730
1-4 family residential 27,522 99,858 293,143 420,523
Other real estate-secured 84,919 201,494 474,967 761,380
---------- ---------- ---------- ----------
326,773 364,217 850,455 1,541,445
---------- ---------- ---------- ----------
Consumer:
Bankcard -- 52,252 -- 52,252
Other 65,329 160,827 62,742 288,898
---------- ---------- ---------- ----------
65,329 213,079 62,742 341,150
---------- ---------- ---------- ----------
Lease financing 13,603 102,158 16,759 132,520
---------- ---------- ---------- ----------
Other receivables 8,203 -- -- 8,203
---------- ---------- ---------- ----------
Total $ 923,273 $ 902,638 $1,011,997 $2,837,908
========== ========== ========== ==========
Loans maturing in more than one year:
With fixed interest rates $ 424,015 $ 495,254 $ 919,269
With variable interest rates 478,623 516,743 995,366
---------- ---------- ----------
Total $ 902,638 $1,011,997 $1,914,635
========== ========== ==========
</TABLE>
CREDIT RISK MANAGEMENT
Management of credit risk is a primary objective in maintaining a safe and sound
institution. To accomplish this task, the Company has written and placed in
effect loan policies to govern each of its loan portfolios. Loan policies assist
the Company in providing a framework for consistency in the acceptance of credit
and a basis for sound credit decisions. Generally, the Company makes its credit
decisions based upon debtor cash flow and available collateral. The Company has
structured its organization to separate the lending function from the credit
administration function to strengthen the control and independent evaluation of
credit activities. In addition, the Company has well-defined standards for
grading its loan portfolio, and maintains an internal Credit Examination
Department which periodically conducts examinations of the quality,
documentation, and administration of the Company's lending departments, and
submits reports thereon to a committee of the Board of Directors. Emphasis is
placed on early detection of potential problem credits so that action plans can
be developed on a timely basis to mitigate losses.
Another aspect of the Company's credit risk management strategy is the
diversification of the loan portfolio. At year-end, the Company had 5% of its
portfolio in loans held for sale, 24% in commercial loans, 54% in real estate
loans, 12% in consumer loans, and 5% in lease financing and other receivables.
The Company's real estate portfolio is also diversified. Of the total real
estate portfolio, 17% is in real estate construction loans, 6% is in home equity
credit lines, 27% is in 1-4 family residential loans and 50% is in commercial
loans secured by real estate. In addition, the Company attempts to avoid the
risk of an undue concentration of credits in a particular industry or trade
group, as indicated by the commercial loan and lease portfolio being allocated
over more than 17 major industry classifications. At year-end, the larger
concentrations in the commercial loan and leasing portfolios were in the
manufacturing, real estate, business service, and retail industry groupings,
which each comprised approximately 15% of the portfolio. The manufacturing group
was also well diversified over several subcategories. Agricultural and mining
loans comprise less than 6% of total commercial loans. The Company has no
significant exposure to highly leveraged transactions and has no foreign credits
in its loan portfolio.
31
<PAGE> 34
LOAN RISK ELEMENTS
The following table shows the principal amounts of nonaccrual, past due 90 days
or more, restructured loans, and potential problem loans at December 31 for each
year indicated:
<TABLE>
<CAPTION>
December 31,
----------------------------------------------
(In thousands) 1995 1994 1993 1992 1991
------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $7,438 $ 13,635 $ 23,364 $ 21,556 $ 33,497
Loans contractually past due 90 days or more (not included in nonaccrual
loans above) 5,232 3,041 10,821 6,409 5,315
Restructured loans (not included in nonaccrual loans or loans
contractually past due 90 days or more) 249 567 4,006 4,003 3,225
Potential problem loans (loans presently current by their terms, but about
which management has serious doubt as to the future ability of the
borrower to comply with present repayment terms) -- -- 1,114 6,263 5,042
</TABLE>
Includes loans held for sale.
Impact of Nonperforming Loans on Interest Income
- ------------------------------------------------
The following table presents the gross interest income on nonaccrual and
restructured loans that would have been recorded if these loans had been current
in accordance with their original terms (interest at original rates), and the
amount of interest income on these loans that was included in income for each
year indicated:
<TABLE>
<CAPTION>
1995 1994 1993
------------------------ ----------------------- -------------------------
Re- Re- Re-
Non- struc- Non- struc- Non- struc-
(In thousands) accrual tured Total accrual tured Total accrual tured Total
------- ------ ------ ------- ------ ------ ------- ------ ------
Gross amount of interest that would have been
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
recorded at original rate $1,041 $ 27 $1,068 $1,713 $ 53 $1,766 $2,858 $ 193 $3,051
Interest that was included
in income 449 25 474 371 45 416 668 152 820
------ ------ ------ ------ ------ ------ ------ ------ ------
Net impact on interest income $ 592 $ 2 $ 594 $1,342 $ 8 $1,350 $2,190 $ 41 $2,231
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
Potential problem loans consist primarily of commercial loans and commercial
real estate loans of $1 million. Management reviews loans graded "special
mention" and monitors the status of such loans for becoming potential problem
loans and their likelihood of becoming nonperforming loans. Management
considered no loans as potential problem loans at December 31, 1995 and 1994,
compared to two loans totaling $1,114,000, at December 31, 1993. Management
believes that for the near future, potential problem loans should remain at a
relatively low level.
The Company's total recorded investment in impaired loans, in accordance with
Financial Accounting Standard statements, amounted to $3,388,000 as of December
31, 1995. The Company considers a loan to be impaired when the accrual of
interest has been discontinued and meets other criteria under the statements.
The amount of the impairment is measured based on the present value of expected
cash flows, the observable market price of the loan, or the fair value of the
collateral. Impairment losses are included in the allowance for loan losses
through a provision for loan losses. The required allowance for loan losses
allocated to impaired loans as of December 31, 1995 amount to $22,000, which is
related to $884,000 of the total recorded investment.
32
<PAGE> 35
NONPERFORMING ASSETS
Nonperforming assets include nonaccrual loans, restructured loans, and other
real estate owned. Loans are generally placed on nonaccrual status when the loan
is 90 days or more past due as to principal or interest, unless the loan is in
the process of collection and well-secured. Consumer loans are not placed on a
nonaccrual status inasmuch as they are generally charged off when they become
120 days past due. Loans are occasionally restructured to provide a reduction or
deferral of interest or principal payments when the financial condition of the
borrower deteriorates and requires that the borrower be given temporary or
permanent relief from the contractual terms of the credit. Other real estate
owned is primarily acquired through or in lieu of foreclosure on credits that
are secured by real estate.
Nonperforming assets totaled $9.3 million as of December 31, 1995, a decrease of
50.9% from 18.9 million as of December 31, 1994. Nonperforming assets totaled
$30.6 million at December 31, 1993. Nonperforming assets represented .33% of net
loans and leases, other real estate owned and other nonperforming assets as
December 31, 1995, as compared to .79% and 1.23% at December 31, 1994 and 1993,
respectively. Nonperforming assets as a percentage of net loans and leases,
other real estate owned, and other nonperforming assets at December 31, 1995 are
at their lowest levels since at least 1985, the period during which records have
been maintained using the present definitions.
Accruing loans past due 90 days or more totaled $5.2 million as of December 31,
1995, as compared to $3.0 million at December 31, 1994 and $10.8 million at
December 31, 1993. These loans equal .19% of net loans and leases at December
31, 1995, as compared to .13% and .44% at December 31, 1994 and 1993,
respectively.
Continuous efforts have been made to reduce nonperforming loans and to liquidate
real estate owned properties in such a manner as to recover the greatest value
possible. Significant steps have been taken during the last few years to
strengthen the Company's credit culture by implementing a number of initiatives
designed to increase internal controls and improve early detection and
resolution of problem loans.
The following table sets forth the composition of nonperforming assets at
December 31 for the years indicated:
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993 1992 1991
------- ------- ------- ------- -------
Nonaccrual loans:
<S> <C> <C> <C> <C> <C>
Commercial, financial and agricultural $ 2,293 $ 5,736 $ 6,969 $ 2,981 $13,983
Real estate 2,754 5,290 12,277 13,973 12,343
Consumer 866 862 607 1,377 2,198
Lease financing 1,395 1,747 3,511 3,225 4,973
Other 130 -- -- -- --
------- ------- ------- ------- -------
Total 7,438 13,635 23,364 21,556 33,497
------- ------- ------- ------- -------
Restructured loans:
Commercial, financial and agricultural -- -- 8 1,204 480
Real estate 249 567 3,998 2,799 2,745
------- ------- ------- ------- -------
Total 249 567 4,006 4,003 3,225
------- ------- ------- ------- -------
Other real estate owned:
Commercial, financial and agricultural:
Improved 425 415 844 3,099 4,200
Unimproved 200 1,018 904 1,844 3,053
Residential:
1-4 family 439 63 1,182 681 874
Multi-family -- -- -- -- 96
Lots 6 6 163 45 540
Recreation property 9 42 110 238 445
Other 13 18 64 64 730
------- ------- ------- ------- -------
Total 1,092 1,562 3,267 5,971 9,938
Other nonperforming assets 517 3,179 -- -- --
------- ------- ------- ------- -------
Total 1,609 4,741 3,267 5,971 9,938
------- ------- ------- ------- -------
Total $ 9,296 $18,943 $30,637 $31,530 $46,660
======= ======= ======= ======= =======
% of net loans* and leases, other real estate owned and
other nonperforming assets .33% .79% 1.23% 1.49% 2.35%
</TABLE>
33
<PAGE> 36
NONPERFORMING ASSETS (continued)
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Accruing loans past due 90 days or more:
Commercial, financial and agricultural $ 705 $ 431 $ 1,612 $ 2,893 $ 1,886
Real estate 3,480 1,975 8,881 3,044 2,259
Consumer 1,041 631 327 451 1,123
Lease financing 6 4 1 21 47
------- ------- ------- ------- -------
Total $ 5,232 $ 3,041 $10,821 $ 6,409 $ 5,315
======= ======= ======= ======= =======
% of net loans* and leases .19% .13% .44% .30% .27%
</TABLE>
*Includes loans held for sale.
ALLOWANCE FOR LOAN LOSSES
The Company's allowance for loan losses was 2.41% of net loans and leases at
December 31, 1995, as compared to 2.80% as of December 31, 1994 and 2.75% as of
December 31, 1993. Loan charge-offs decreased 28.2% and recoveries decreased
12.9% in 1995 as compared to 1994, which resulted in a ratio of net charge-offs
to average loans and leases of .10% in 1995, compared to .19% in 1994, and
(.23%) in 1993. The allowance for loan and lease losses relative to problem
loans continued to strengthen in 1995. The allowance, as a percentage of
noncurrent loans, was 533.2% in 1995 as compared to 401.9% in 1994, and 200.3%
in 1993. Noncurrent loans are defined as loans on which interest is not accrued,
plus loans ninety days or more past due on which interest continues to accrue.
In analyzing the adequacy of the allowance for loan and lease losses, management
utilizes a comprehensive loan grading system to determine risk potential in the
portfolio, and considers the results of independent internal and external credit
reviews, historical charge-off experience, and changes in the composition and
volume of the portfolio. Other factors, such as general economic conditions and
collateral values, are also considered. Larger problem credits are individually
evaluated to determine appropriate reserve allocations. Additions to the
allowance are based upon the resulting risk profile of the portfolio developed
through the evaluation of the above factors.
34
<PAGE> 37
SUMMARY OF LOAN LOSS EXPERIENCE
The following table shows the changes in the allowance for losses for each year
indicated.
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Loans* and leases outstanding at December 31
(net of unearned income) $ 2,806,956 $ 2,391,278 $ 2,486,346 $ 2,107,433 $ 1,979,726
=========== =========== =========== =========== ===========
Average loans* and leases outstanding (net
of unearned income) $ 2,599,071 $ 2,574,995 $ 2,222,182 $ 2,104,679 $ 1,875,928
=========== =========== =========== =========== ===========
Allowance for possible losses:
Balance at beginning of year $ 67,018 $ 68,461 $ 59,807 $ 58,238 $ 60,948
Allowance of companies acquired 249 1,308 546 -- --
Loans and leases charged-off:
Loans held for sale -- -- -- -- --
Commercial, financial, and agricultural (997) (5,158) (1,804) (6,224) (17,298)
Real estate (548) (573) (1,179) (2,544) (4,363)
Consumer (6,786) (4,756) (5,461) (9,559) (14,073)
Lease financing (41) (1,174) (360) (604) (847)
Other receivables -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total (8,372) (11,661) (8,804) (18,931) (36,581)
----------- ----------- ----------- ----------- -----------
Recoveries:
Loans held for sale -- -- -- -- --
Commercial, financial, and agricultural 2,580 2,180 10,117 5,197 3,456
Real estate 464 676 611 477 829
Consumer 2,540 3,732 3,043 3,794 3,704
Lease financing 276 141 148 103 321
Other receivables -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total 5,860 6,729 13,919 9,571 8,310
----------- ----------- ----------- ----------- -----------
Net loan and lease (charge-offs) recoveries (2,512) (4,932) 5,115 (9,360) (28,271)
Provision charged against earnings 2,800 2,181 2,993 10,929 25,561
----------- ----------- ----------- ----------- -----------
Balance at end of year $ 67,555 $ 67,018 $ 68,461 $ 59,807 $ 58,238
=========== =========== =========== =========== ===========
Ratio of net charge-offs (recoveries) to average
loans and leases .10% .19% (.23)% .44% 1.51%
Ratio of allowance for possible losses to loans
and leases outstanding at December 31 2.41% 2.80% 2.75% 2.84% 2.94%
Ratio of allowance for possible losses to
nonperforming loans at December 31 878.82% 471.89% 250.13% 234.00% 158.59%
Ratio of allowance for possible losses to nonaccrual
loans and accruing loans past due 90 days or
more at December 31 533.19% 401.88% 200.27% 213.86% 150.05%
</TABLE>
*Includes loans held for sale.
35
<PAGE> 38
Review of nonperforming loans and evaluation of the quality of the loan
portfolio, as previously mentioned, results in the identification of certain
loans with risk characteristics which warrant specific reserve allocations in
the determination of the amount of the allowance for loan losses. The allowance
is not allocated among all loan categories, and amounts allocated to specific
categories are not necessarily indicative of future charge-offs. An amount in
the allowance not specifically allocated by loan category is necessary in view
of the fact that, while no loans were made with the expectation of loss, some
loan losses inevitably occur. The following is a categorization of the allowance
for loan losses for each year indicated:
<TABLE>
<CAPTION>
1995 1994
------------------- -------------------
Alloca- Alloca-
% of tion of % of tion of
(In thousands) total allow- total allow-
loans ance loans ance
-------- -------- -------- --------
Type of loan
- ------------
<S> <C> <C> <C> <C>
Loans held for sale 4.4% $ - 4.5% $ -
Commercial, financial and agricultural 24.3 711 20.5 2,920
Real estate 54.3 2,397 53.0 1,594
Consumer 12.0 32 16.2 946
Lease financing 4.7 425 5.4 981
Other receivables .3 - .4 -
----- -----
Total loans 100.0% 100.0%
===== =====
Off-balance sheet unused commitments
and standby letters of credit 7,516 3,674
------- -------
Allocated 11,081 10,115
Unallocated 56,474 56,903
------- -------
Total allowance for loan losses $67,555 $67,018
======= =======
</TABLE>
<TABLE>
<CAPTION>
1993 1992 1991
------------------- ------------------- -------------------
Alloca- Alloca- Alloca-
% of tion of % of tion of % of tion of
(In thousands) total allow- total allow- total allow-
loans ance loans ance loans ance
Type of loan -------- -------- -------- -------- -------- --------
- ------------
<S> <C> <C> <C> <C> <C> <C>
Loans held for sale 9.5% $ - 10.8% $ - 7.6% $ -
Commercial, financial and agricultural 20.4 3,094 27.8 4,619 24.7 8,419
Real estate 49.3 4,032 33.9 4,240 34.6 6,884
Consumer 15.1 2,366 21.3 2,711 26.5 3,684
Lease financing 5.2 1,043 5.8 1,818 6.1 2,279
Other receivables .5 - .4 - .5 -
----- ----- -----
Total loans 100.0% 100.0% 100.0%
===== ===== =====
Off-balance sheet unused commitments and
standby letters of credit 1,972 3,710 5,567
------- ------- -------
Allocated 12,507 17,098 26,833
Unallocated 55,954 42,709 31,405
------- ------- -------
Total allowance for loan losses $68,461 $59,807 $58,238
======= ======= =======
</TABLE>
36
<PAGE> 39
DEPOSITS
Total average deposits increased 7.7% to $3,858.3 million in 1995 from $3,583.1
million in 1994. Total deposits increased 10.6% to $4,097.1 million at December
31, 1995 compared to $3,706.0 million at December 31, 1994. The Company's demand
deposits increased 12.7%, savings and money market accounts increased 5.6% and
certificates of deposit under $100,000 increased 30.2%, comparing December 31,
1995 to December 31, 1994. Domestic deposits over $100,000 increased 28.7% to
$158.9 million, while foreign deposits decreased 20.9% to $106.1 million at
December 31, 1995.
The following table presents the average amount and the average rate paid on
each of the following categories for each year indicated:
AVERAGE DEPOSIT AMOUNTS AND AVERAGE RATES
<TABLE>
<CAPTION>
(In millions) 1995 1994 1993
-------- -------- --------
Average amounts:
<S> <C> <C> <C>
Noninterest-bearing demand deposits $ 837.2 $ 838.1 $ 729.7
Savings deposits 719.6 740.3 648.2
Money market deposits 1,425.5 1,284.7 1,117.0
Time deposits of less than $100,000 614.9 516.9 548.8
Time deposits $100,000 or more 121.9 94.7 79.4
Foreign deposits 139.2 108.4 55.8
-------- -------- --------
Total average amounts $3,858.3 $3,583.1 $3,178.9
======== ======== ========
Average rates:
Noninterest-bearing demand deposits -% -% -%
Savings deposits 3.13% 3.01% 2.97%
Money market deposits 4.17% 3.11% 2.79%
Time deposits under $100,000 5.21% 3.96% 4.28%
Time deposits $100,000 or more 6.04% 4.06% 3.79%
Foreign deposits 5.16% 4.10% 2.66%
Total 4.25% 3.31% 3.20%
Maturities of time deposits $100,000 or more at December 31, 1995 (In millions):
Under three months $ 36.7
Over three months and less than six months 40.2
Over six months and less than twelve months 43.7
Over twelve months 38.3
--------
Total time deposits $100,000 or more $ 158.9
========
</TABLE>
Most foreign deposits are in denominations of $100,000 or more.
37
<PAGE> 40
SHORT-TERM BORROWINGS
The following table sets forth data pertaining to the Company's short-term
borrowings for each year indicated:
(In thousands, except rates)
At December 31,
- ---------------
<TABLE>
<CAPTION>
Weighted
Maximum Average average
Weighted month balance rate
Category of aggregate average -end during during
short-term borrowings Balance rate balance the year the year
- --------------------- --------- ---------- ----------- ---------- ----------
Securities sold, not yet purchased
<S> <C> <C> <C> <C> <C> <C>
1995 $117,005 6.58% $ 241,219 $ 90,196 6.23%
1994 $ 81,437 5.33% $ 464,133 $ 184,405 5.95%
1993 $ 46,640 4.96% $ 278,351 $ 69,442 4.38%
Federal funds purchased(a)
1995 $134,048 5.38% $ 354,565 $ 134,683 5.90%
1994 $ 56,087 5.09% $ 274,526 $ 158,937 4.42%
1993 $100,625 2.75% $ 100,625 $ 180,602 3.01%
Security repurchase agreements(b)
1995 $614,284 5.07% $ 1,530,887 $ 902,514 5.40%
1994 $468,451 5.56% $ 1,024,095 $ 898,890 3.79%
1993 $494,575 2.88% $ 494,575 $ 586,707 2.89%
Federal Home Loan Bank advances and other borrowings less than
one year(c)
1995 $ 14,910 6.00% $ 25,972 $ 20,441 6.88%
1994 $ 25,748 7.70% $ 73,461 $ 32,557 5.44%
1993 $136,140 3.36% $ 136,140 $ 83,123 3.84%
</TABLE>
(a) Federal funds purchased are on an overnight or demand basis. Rates on
overnight and demand funds reflect current market rates.
(b) Security repurchase agreements are primarily on an overnight or demand
basis. Rates on overnight and demand funds reflect current market rates.
Rates on fixed-maturity borrowings are set at the time of the borrowings.
(c) Federal Home Loan Bank advances less than one year are overnight and
reflect current market rates or reprice monthly based on one-month LIBOR
as set by the Federal Home Loan Bank of Seattle. Other borrowings are
primarily variable rate and reprice based on changes in the prime rate
which reflect current market.
RETURN ON EQUITY AND ASSETS
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Return on average assets 1.44% 1.17% 1.25%
Return on average common shareholders' equity 20.47% 18.82% 20.33%
Common dividend payout ratio 25.27% 27.06% 21.81%
Average equity to average assets ratio 7.02% 6.22% 6.17%
</TABLE>
38
<PAGE> 41
CAPITAL RESOURCES
At year end, there were two measures of capital adequacy in use for commercial
banks and bank holding companies, as follows:
1. Risk-based Capital
Risk-based capital guidelines require varying amounts of capital to be
maintained against different categories of assets, depending on the general
level of risk inherent in the assets. A capital allocation is also required for
off-balance sheet exposures such as letters of credit, loan commitment, and
interest rate contracts. The Company's total risk-based capital ratio was 14.23%
at December 31, 1995, 14.96% at December 31, 1994 and 14.12% at December 31,
1993. The minimum regulatory requirement is an 8% total risk-based capital ratio
of which 4% must be comprised of core capital. The minimum risk-based capital
ratio for a bank to be considered "well-capitalized" under the regulatory
definitions is 10%.
2. Tier I Leverage
Under the risk-based capital guidelines, a bank holding company could, in
theory, significantly leverage its capital by investing in assets with little or
no credit risk. The guidelines place a limit on such leverage through the
establishment of a minimum level of tangible equity as a percentage of average
total assets. The Company's Tier I leverage ratio was 6.28% at December 31,
1995, 6.24% at December 31, 1994 and 5.44% at December 31, 1993, compared to the
minimum regulatory requirement of 3%.
The following table presents the regulatory risk-based capital at December 31
for the years indicated:
REGULATORY RISK-BASED CAPITAL AT DECEMBER 31
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
----------- ----------- -----------
CAPITAL COMPONENTS:
<S> <C> <C> <C>
Qualifying shareholders' equity $ 396,177 $ 345,919 $ 300,175
Add:
Minority interest in subsidiary 500 500 500
Deduct:
Goodwill (21,738) (18,732) (11,920)
Excess deferred tax assets (4,008) -- --
Nonqualifying amount of purchased mortgage servicing -- -- (280)
----------- ----------- -----------
Tier I capital: Core capital 370,931 327,687 288,475
----------- ----------- -----------
Allowance for loan losses* 41,062 35,085 33,657
Qualifying unsecured long-term debt** 51,600 52,400 53,200
----------- ----------- -----------
Tier II capital: Supplementary capital 92,662 87,485 86,857
----------- ----------- -----------
Total risk-based capital $ 463,593 $ 415,172 $ 375,332
=========== =========== ===========
RISK-WEIGHTED ASSETS:
Balance sheet $ 3,092,340 $ 2,629,427 $ 2,558,260
Off-balance sheet 196,649 177,347 134,315
----------- ----------- -----------
Gross risk-weighted assets 3,288,989 2,806,774 2,692,575
Deduct: Excess deferred tax assets (4,008) -- --
----------- ----------- -----------
3,284,981 2,806,774 2,692,575
Deduct: Excess allowance for loan losses (26,493) (31,933) (34,804)
----------- ----------- -----------
Total adjusted risk-weighted assets $ 3,258,488 $ 2,774,841 $ 2,657,771
=========== =========== ===========
Capital ratios:
Tier I capital: Core capital 11.38% 11.81% 10.85%
Tier II capital: Supplementary capital 2.85% 3.15% 3.27%
----------- ----------- -----------
Total risk-based capital 14.23% 14.96% 14.12%
=========== =========== ===========
</TABLE>
* Limited to 1.25% of risk-weighted assets.
** Limited to 50% of core capital and reduced by 20% per year during an
instrument's last five years before maturity.
39
<PAGE> 42
DIVIDENDS
The Company's quarterly dividend rate was $.41 per share for the fourth quarter
of 1995, $.35 per share for the second and third quarters of 1995, $.30 per
share for the first quarter of 1995, and for the third and fourth quarters of
1994, $.28 per share for the first and second quarters of 1994 and the third and
fourth quarters of 1993, and $.21 for the first and second quarters of 1993. The
annual dividend rate was $1.41 for 1995, $1.16 for 1994, and $.98 for 1993.
During the years 1991 through 1995 there was no preferred stock outstanding.
The following table sets forth dividends paid by the Company of each year
indicated:
DIVIDENDS PAID
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993 1992 1991
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net income $81,328 $63,827 $58,205 $47,209 $30,449
Common dividends paid 20,554 17,271 12,692 9,587 9,102
Payout/net income 25.3% 27.1% 21.8% 20.3% 29.9%
</TABLE>
FOREIGN OPERATIONS
Zions First National Bank opened a foreign office located in Grand Cayman, Grand
Cayman Islands, B.W.I. in 1980. This office has no foreign loans outstanding.
The office accepts Eurodollar deposits from qualified customers of the Bank and
places deposits with foreign banks and foreign branches of other U.S. banks.
Foreign deposits at December 31, totaled $106,090,000 in 1995, $134,132,000 in
1994, and $68,563,000 in 1993; and averaged $139,212,000 for 1995, $108,383,000
for 1994, and $55,823,000 for 1993.
40
<PAGE> 43
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Independent Auditors' Report
The Board of Directors and Shareholders
Zions Bancorporation:
We have audited the accompanying consolidated balance sheets of Zions
Bancorporation and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, retained earnings, and cash flows for
each of the years in the three-year period ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Zions Bancorporation
and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in notes 1 and 4 to the consolidated financial statements, the
Company changed its method of accounting for impairment of loans receivable to
adopt the provisions of the Financial Accounting Standards Board's Statement of
Financial Accounting Standards (Statement) No. 114, Accounting by Creditors for
Impairment of a Loan, as amended by Statement No. 118, Accounting by Creditors
for Impairment of a Loan-Income Recognition and Disclosures, on January 1, 1995.
As discussed in notes 1 and 13, the Company changed its method of accounting for
postretirement benefits other than pensions in 1993 to adopt the provisions of
Statement No. 106, Employers' Accounting for Postretirement Benefits Other than
Pensions. As discussed in notes 1 and 7, the Company also changed its method of
accounting for income taxes in 1993 to adopt the provisions of Statement No.
109, Accounting for Income Taxes. As discussed in notes 1 and 3, the Company
also changed its method of accounting for investments to adopt the provisions of
Statement No. 115, Accounting for Certain Investments in Debt and Equity
Securities, on December 31, 1993.
KPMG Peat Marwick LLP
Salt Lake City, Utah
January 22, 1996
41
<PAGE> 44
ZIONS BANCORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1995 and 1994
(In thousands, except share amounts)
<TABLE>
<CAPTION>
ASSETS 1995 1994
---------- ----------
<S> <C> <C>
Cash and due from banks $ 418,067 316,943
Money market investments:
Interest-bearing deposits 34,580 19,704
Federal funds sold 50,467 170,920
Security resell agreements 602,204 212,822
Investment securities:
Held to maturity, at cost (approximate market value $1,093,934 and $1,018,798) 1,078,583 1,030,907
Available for sale, at market 398,200 315,578
Trading account 63,706 316,948
Loans:
Loans held for sale at cost, which approximates market 126,124 108,649
Loans, leases, and other receivables 2,711,784 2,307,403
---------- ----------
2,837,908 2,416,052
Less:
Unearned income and fees, net of related costs 30,952 24,774
Allowance for loan losses 67,555 67,018
---------- ----------
2,739,401 2,324,260
Premises and equipment 81,613 74,673
Amounts paid in excess of net assets of acquired businesses 21,738 18,732
Other real estate owned 1,092 1,562
Other assets 130,995 131,046
---------- ----------
$5,620,646 4,934,095
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 998,560 885,833
Interest-bearing:
Savings and money market 2,164,344 2,048,715
Time:
Under $100,000 669,196 513,841
Over $100,000 158,924 123,455
Foreign 106,090 134,132
---------- ----------
4,097,114 3,705,976
Securities sold, not yet purchased 117,005 81,437
Federal funds purchased 134,048 56,087
Security repurchase agreements 614,284 468,451
Accrued liabilities 72,376 70,873
Federal Home Loan Bank advances and other borrowings:
Less than one year 14,910 25,748
Over one year 86,174 101,571
Long-term debt 56,229 58,182
---------- ----------
Total liabilities 5,192,140 4,568,325
---------- ----------
Shareholders' equity:
Capital stock:
Preferred stock, without par value; authorized 3,000,000 shares;
issued and outstanding, none - -
Common stock, without par value; authorized 30,000,000 shares;
issued and outstanding, 14,555,920 shares
and 14,559,552 shares 73,477 79,193
Net unrealized holding gains and losses on securities available for sale 1,850 (5,866)
Retained earnings 353,179 292,443
---------- ----------
Total shareholders' equity 428,506 365,770
---------- ----------
$5,620,646 4,934,095
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
42
<PAGE> 45
ZIONS BANCORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 1995, 1994, and 1993
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $245,052 208,414 172,920
Interest on loans held for sale 9,259 12,303 11,273
Interest on money market investments 55,632 35,045 27,427
Interest on securities:
Held to maturity:
Taxable 64,914 41,269 56,347
Nontaxable 12,400 10,982 8,455
Available for sale:
Taxable 23,966 19,916 -
Nontaxable 21 - -
Trading account 9,248 16,516 7,555
Lease financing 9,991 9,544 9,639
-------- -------- --------
Total interest income 430,483 353,989 293,616
-------- -------- --------
Interest expense:
Interest on savings and money market deposits 81,957 62,200 50,331
Interest on time deposits 46,553 28,758 27,995
Interest on borrowed funds 74,879 64,425 40,633
-------- -------- --------
Total interest expense 203,389 155,383 118,959
-------- -------- --------
Net interest income 227,094 198,606 174,657
Provision for loan losses 2,800 2,181 2,993
-------- -------- --------
Net interest income after provision for loan losses 224,294 196,425 171,664
-------- -------- --------
Noninterest income:
Service charges on deposit accounts 28,347 24,058 22,875
Other service charges, commissions, and fees 24,169 22,008 21,392
Trust income 4,355 4,334 4,622
Investment securities losses, net (148) (299) (17)
Trading account income (loss) (1,247) 860 2,350
Loan sales and servicing income 24,254 14,596 21,471
Other 6,984 7,645 7,187
-------- -------- --------
86,714 73,202 79,880
-------- -------- --------
Noninterest expenses:
Salaries and employee benefits 102,951 93,331 85,549
Occupancy, net 10,398 9,647 8,168
Furniture and equipment 13,174 11,276 9,294
Other real estate expense 81 (88) 450
Legal and professional services 4,285 5,142 5,136
Supplies 5,231 4,819 4,537
Postage 5,125 4,723 4,334
Advertising 5,221 3,447 3,515
FDIC premiums 4,084 7,547 7,257
Amortization of intangible assets 3,621 3,692 4,432
Loss on early extinguishment of debt - - 6,022
Other 34,559 31,364 29,056
-------- -------- --------
188,730 174,900 167,750
-------- -------- --------
Income before income taxes and cumulative effect of changes in accounting principles 122,278 94,727 83,794
Income taxes 40,950 30,900 27,248
-------- -------- --------
Income before cumulative effect of changes in accounting principles 81,328 63,827 56,546
Cumulative effect of changes in accounting principles - - 1,659
-------- -------- --------
Net income $ 81,328 63,827 58,205
======== ======== ========
Weighted-average common and common-equivalent shares outstanding during the year 14,717 14,601 14,280
======== ======== ========
Earnings per common share:
Income before cumulative effect of changes in accounting principles $ 5.53 4.37 3.96
Cumulative effect of changes in accounting principles - - .12
-------- -------- --------
Net income per common share $ 5.53 4.37 4.08
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
43
<PAGE> 46
ZIONS BANCORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1995, 1994, and 1993
(In thousands)
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 81,328 63,827 58,205
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Provision for loan losses 2,800 2,181 2,993
Write-downs of other real estate owned 71 179 704
Depreciation of premises and equipment 10,649 9,186 7,605
Amortization of premium on core deposits and other intangibles 3,621 3,692 4,432
Amortization of net premium/discount on investment securities 3,832 4,817 6,089
Accretion of unearned income and fees, net of related costs 6,085 2,770 (2,950)
Proceeds from sales of trading account securities 112,293,128 160,090,330 36,468,421
Increase in trading account securities (112,157,509) (160,308,945) (36,383,168)
Net loss (gain) on sales of investment securities 148 299 17
Proceeds from loans held for sale 440,245 769,284 1,088,996
Increase in loans held for sale (454,532) (663,379) (1,088,996)
Net gain on sales of loans, leases, and other assets (16,164) (8,968) (16,810)
Net gain on sales of other real estate owned (169) (328) (182)
Change in accrued income taxes (7,187) 1,628 1,870
Change in accrued interest receivable (2,489) (8,669) 2,794
Change in accrued interest payable 798 1,368 (1,428)
Change in other assets (2,797) (16,790) (20,738)
Change in accrued liabilities 8,295 19 (4,074)
------------- ------------ -----------
Net cash provided by (used in) operating activities 210,153 (57,499) 123,780
------------- ------------ -----------
Cash flows from investing activities:
Net (increase) decrease in money market investments (281,328) 196,086 567,251
Proceeds from sales of investment securities held to maturity 6,950 - 74,587
Proceeds from maturities of investment securities held to maturity 285,572 242,478 258,463
Purchases of investment securities held to maturity (303,224) (441,397) (554,632)
Proceeds from sales of investment securities available for sale 192,071 137,128 -
Proceeds from maturities of investment securities available for sale 287,427 107,745 -
Purchases of investment securities available for sale (462,079) (205,452) -
Proceeds from sales of loans and leases 625,984 707,914 614,112
Net increase in loans and leases (1,003,653) (671,665) (923,884)
Principal collections on leveraged leases 38 111 1,375
Proceeds from sales of premises and equipment 693 691 169
Purchases of premises and equipment (17,526) (12,389) (15,356)
Proceeds from sales of other real estate owned 1,899 5,608 3,542
Proceeds from sales of mortgage-servicing rights 1,547 2,864 608
Purchases of mortgage-servicing rights (423) (590) (1,731)
Proceeds from sales of other assets 479 830 1,486
Purchase of other assets (218) - -
Cash paid for acquisition, net of cash received 1,568 9,851 (59,833)
------------- ------------ -----------
Net cash provided by (used in) investing activities (664,223) 79,813 (33,843)
------------- ------------ -----------
Cash flows from financing activities:
Net increase in deposits 360,000 177,916 296,144
Net change in short-term funds borrowed 251,475 (153,285) (419,992)
Proceeds from FHLB advances over one year - 15,340 204,567
Payments on FHLB advances over one year (16,504) (65,878) (104,147)
Payments on leveraged leases - (42) -
Proceeds from issuance of long-term debt - 332 4,000
Payments on long-term debt (1,953) (1,737) (43,659)
Proceeds from issuance of common stock 1,291 317 893
Payments to redeem common stock (18,523) - -
Dividends paid (20,592) (17,304) (12,705)
------------- ------------ -----------
Net cash provided by (used in) financing activities 555,194 (44,341) (74,899)
------------- ------------ -----------
Net increase (decrease) in cash and due from banks 101,124 (22,027) 15,038
Cash and due from banks at beginning of year 316,943 338,970 323,932
------------- ------------ -----------
Cash and due from banks at end of year $ 418,067 316,943 338,970
============= ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements
44
<PAGE> 47
ZIONS BANCORPORATION AND SUBSIDIARIES
Consolidated Statements of Retained Earnings
Years ended December 31, 1995, 1994, and 1993
(In thousands)
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
Balance at beginning of year $292,443 245,920 197,992
Retained earnings of acquired company - - 2,428
Net income 81,328 63,827 58,205
Cash dividends:
Preferred, paid by subsidiary to minority shareholder (38) (33) (13)
Common, per share of $1.41 in 1995, $1.16 in 1994, and $.98 in 1993 (20,554) (16,786) (12,207)
Dividends of NBA prior to merger - (485) (485)
-------- -------- --------
Balance at end of year $353,179 292,443 245,920
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
45
<PAGE> 48
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1995, 1994, and 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS - Zions Bancorporation (the Parent) is a multibank holding company
organized under the laws of Utah in 1955, which provides a full range of banking
and related services through its subsidiaries located primarily in Utah, Nevada,
and Arizona.
BASIS OF FINANCIAL STATEMENT PRESENTATION - The consolidated financial
statements include the accounts of Zions Bancorporation and its subsidiaries
(the Company). All significant intercompany accounts and transactions have been
eliminated in consolidation. Certain amounts in prior years' consolidated
financial statements have been reclassified to conform to the 1995 presentation.
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles. In preparing the consolidated
financial statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the date of the
balance sheet and revenues and expenses for the period. Actual results could
differ from those estimates.
SECURITY RESELL AGREEMENTS - Security resell agreements represent overnight and
term agreements, the majority maturing within 30 days. Either the Company, or in
some instances third parties on behalf of the Company take possession of
underlying securities. The market value of such securities is monitored
throughout the contract term to ensure that asset value remains sufficient to
protect against counter party default.
INVESTMENT SECURITIES - The Company adopted the provisions of Statement of
Financial Accounting Standards (Statement) No. 115, Accounting for Certain
Investments in Debt and Equity Securities on December 31, 1993. Under Statement
No. 115, the Company classifies its investment securities in one of three
categories: trading, available for sale, or held to maturity. Trading securities
are bought and held principally for the purpose of selling them in the near
term. Held to maturity securities are those securities which the Company has the
ability and intent to hold until maturity. All other securities not included in
trading or held to maturity are classified as available for sale.
Trading securities (including futures and options used to hedge trading
positions against interest rate risk) and available for sale securities are
recorded at fair value. Held to maturity securities are recorded at amortized
cost, adjusted for the amortization or accretion of premiums or discounts.
Unrealized holding gains and losses on trading securities are included in
earnings. Unrealized holding gains and losses, net of related tax effect, on
available for sale securities are excluded from earnings and are reported as a
separate component of shareholders' equity until realized. Transfers of
securities between categories are recorded at fair value at the date of
transfer. Unrealized holding gains and losses are recognized in earnings for
transfers into trading securities. Unrealized holding gains or losses associated
with transfers of securities from held to maturity to available for sale are
recorded as a separate component of shareholders' equity. The unrealized holding
gains or losses included in the separate component of equity for securities
transferred from available for sale to held to maturity are maintained and
amortized into earnings over the remaining life of the security as an adjustment
to yield in a manner consistent with the amortization or accretion of premium or
discount on the associated security.
A decline in the market value of any available for sale or held to maturity
security below cost that is deemed other than temporary is charged to earnings
resulting in the establishment of a new cost basis for the security.
Premiums and discounts are amortized or accreted over the life of the related
held to maturity security as an adjustment to yield using the effective-interest
method. Dividend and interest income are recognized when earned. Realized gains
and losses for securities classified as available for sale and held to maturity
are included in earnings and are derived using the specific-identification
method of determining the cost of securities sold.
LOAN FEES - Nonrefundable fees and related direct costs associated with the
origination of loans are deferred. The net deferred fees and costs are
recognized in interest income over the loan term using methods that generally
produce a level yield on the unpaid loan balance. Other nonrefundable fees
related to lending activities other than direct loan origination are recognized
as other operating income over the period the related service is provided.
Bankcard discounts and fees charged to merchants for processing transactions
through the Company are shown net of interchange discounts and fees expense, and
are included in other service charges, commissions, and fees.
46
<PAGE> 49
ZIONS BANCORPORATION
Notes to Consolidated Financial Statements
MORTGAGE LOAN SERVICING - Mortgage loan servicing fees are based on a stipulated
percentage of the outstanding loan principal balances being serviced and are
included in income as related loan payments are collected from mortgagors. Costs
associated with the acquisition of loan servicing rights through the purchase of
servicing contracts or bulk loan purchases are deferred and amortized over the
lives of loans being serviced in proportion to the estimated net loan servicing
income.
ALLOWANCE FOR LOAN LOSSES - The allowance for loan losses is based on
management's periodic evaluation of the loan portfolio and reflects an amount
that, in management's opinion, is adequate to absorb losses in the existing
portfolio. In evaluating the portfolio, management takes into consideration
numerous factors, including current economic conditions, prior loan loss
experience, the composition of the loan portfolio, and management's estimate of
anticipated credit losses. Management believes that the allowance for loan
losses is adequate. While management uses available information to recognize
losses on loans, future additions to the allowance may be necessary based on
changes in economic conditions. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the Company's
allowance for loan losses. Such agencies may require the Company to recognize
additions to the allowance based on their judgments using information available
to them at the time of their examination.
IMPAIRED LOANS - The Company adopted the provisions of Statement of Financial
Accounting Standards (Statement) No. 114, Accounting by Creditors for Impairment
of a Loan, as amended by Statement No. 118, Accounting by Creditors for
Impairment of a Loan-Income Recognition and Disclosure, on January 1, 1995. The
Company considers a loan to be impaired when the accrual of interest has been
discontinued. The amount of the impairment is measured based on the present
value of expected cash flows, the observable market price of the loan, or the
fair value of the collateral. Impairment losses are included in the allowance
for loan losses through a provision for loan losses. The Company primarily uses
a cost recovery accounting method to recognize interest income on impaired
loans.
PREMISES AND EQUIPMENT - Premises and equipment are stated at cost, net of
accumulated depreciation and amortization. Depreciation, computed on the
straight-line method, is charged to operations over the estimated useful lives
of the properties. Leasehold improvements are amortized over the terms of
respective leases or the estimated useful lives of the improvements, whichever
is shorter. As of December 31, 1995 and 1994, accumulated depreciation and
amortization totaled $77,400,000 and $70,520,000, respectively.
NONPERFORMING ASSETS - Nonperforming assets are comprised of loans for which the
accrual of interest has been discontinued, loans for which the terms have been
renegotiated to less than market rates due to a weakening of the borrower's
financial condition (restructured loans), and other real estate acquired
primarily through foreclosure that is awaiting disposition.
Loans are generally placed on a nonaccrual status when principal or interest is
past due 90 days or more unless the loan is both well secured and in the process
of collection, or when in the opinion of management, full collection of
principal or interest is unlikely. Generally, consumer loans are not placed on a
nonaccrual status, inasmuch as they are generally charged off when they become
120 days past due.
Other real estate owned is carried at the lower of cost or net realizable value.
Real estate may be considered to be in-substance foreclosed and included herein
when specific criteria are met. When property is acquired through foreclosure,
or substantially foreclosed, any excess of the related loan balance over net
realizable value is charged to the allowance for loan losses. Subsequent write
downs or losses upon sale, if any, are charged to other real estate expense.
AMOUNTS PAID IN EXCESS OF NET ASSETS OF ACQUIRED BUSINESSES (GOODWILL) - The
Company assesses the recoverability of this intangible asset by determining
whether the amortization of the goodwill balance over its remaining life can be
recovered through undiscounted future operating cash flows of the acquired
operation. The amount of goodwill impairment, if any, is measured based on
projected discounted future operating cash flows using a discount rate
reflecting the Company's average cost of funds.
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS - In the ordinary course of business,
the Company has entered into off-balance sheet financial instruments consisting
of commitments to extend credit, commercial letters of credit, and standby
letters of credit. Such financial instruments are recorded in the consolidated
financial statements when they become payable.
47
<PAGE> 50
ZIONS BANCORPORATION
Notes to Consolidated Financial Statements
The credit risk associated with these commitments is considered in management's
determination of the allowance for loan losses.
INTEREST RATE EXCHANGE CONTRACTS AND CAP AND FLOOR AGREEMENTS - The Company
enters into interest rate exchange contracts (swaps) and cap and floor
agreements in the management of interest rate risk. The objective of these
financial instruments is to match estimated repricing periods of
interest-sensitive assets and liabilities in order to reduce interest rate
exposure. These instruments are used only to hedge asset and liability
portfolios and are not used for speculative purposes. Therefore, these
instruments are not marked to market. Fees associated with these financial
instruments are accreted into interest income or amortized to interest expense
on a straight-line basis over the lives of the contracts and agreements. Gains
or losses on early termination of a swap are amortized on the remaining term of
the contract when the underlying assets or liabilities still exist. Otherwise,
such gains or losses are fully expensed or recorded as income at the termination
of the contract. The net interest received or paid on these contracts is
reflected on a current basis in the interest expense or income related to the
hedged obligation or asset.
STATEMENTS OF CASH FLOWS - For purposes of the statements of cash flows, the
Company considers due from banks to be cash equivalents.
The Company paid interest of $203.0 million, $156.1 million, and $120.8 million,
respectively, and income taxes of $44.4 million, $27.9 million, and $26.3
million, respectively, for the years ended December 31, 1995, 1994, and 1993.
Loans transferred to other real estate owned totaled $.9 million, $3.3 million,
and $1.2 million, respectively, for the years ended December 31, 1995, 1994, and
1993.
The exercise of stock options under the Company's non-qualified stock option
plan, during 1995 and 1994, resulted in tax benefits reducing the Company's
current income tax payable and increasing common stock in the amounts of $.8
million and $.1 million in 1995 and 1994, respectively.
INCOME TAXES - Effective January 1, 1993, the Company adopted the provisions of
Statement No. 109, Accounting for Income Taxes, and has reported the cumulative
effect of that change in the method of accounting for income taxes in the 1993
consolidated statement of income. Under the asset and liability method of
Statement No. 109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement No. 109, the effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
PENSION AND OTHER POSTRETIREMENT PLANS - The Company has a defined benefit
pension plan covering substantially all of its employees. The benefits are based
on years of service and employees' compensation levels. The cost of this program
is being funded currently. The Company has other trustee retirement plans
covering all qualified employees who have at least one year of service (see note
13).
The Company sponsors a defined benefit health care plan for substantially all
retirees and employees. Effective January 1, 1993, the Company adopted Statement
No. 106, Employers' Accounting for Postretirement Benefits Other than Pensions,
which establishes a new accounting principle for the cost of retiree health care
and other postretirement benefits (see note 13). Prior to 1993, the Company
recognized these benefits on the pay-as-you-go method (i.e., cash basis). The
cumulative effect of the change in method of accounting for postretirement
benefits other than pensions is reported in the 1993 consolidated statement of
income.
TRUST ASSETS - Assets held by the Company in a fiduciary or agency capacity for
customers are not included in the consolidated financial statements as such
items are not assets of the Company.
STOCK OPTIONS - Proceeds from the sale of stock issued under options are
credited to common stock. The Company makes no charges against earnings with
respect to stock options issued under its qualified stock option plan. The
Company charges income for the difference between the option price and market
value on the date of grant with respect to stock options issued under its
nonqualified stock option plan.
48
<PAGE> 51
ZIONS BANCORPORATION
Notes to Consolidated Financial Statements
NET INCOME PER COMMON SHARE - Net income per common share is based on the
weighted average outstanding common shares during each year, including common
stock equivalents, if applicable.
ACCOUNTING STANDARDS NOT ADOPTED - In May 1995, the Financial Accounting
Standards Board issued Statement No. 122, Accounting for Mortgage Servicing
Rights which amends Statement No. 65, Accounting for Certain Mortgage Banking
Activities, to require that a company recognize as separate assets rights to
service mortgage loans for others, however those servicing rights are acquired.
When a company acquires mortgage servicing rights through either the purchase or
origination of mortgage loans and sells or securitizes those loans with
servicing rights retained, it is required to allocate the total cost of the
mortgage loans to the mortgage servicing rights and the loans based on their
relative fair values.
This Statement further requires that a company assess its capitalized mortgage
servicing rights for impairment based on the fair value of those rights, and
requires that rights to service mortgage loans for others be recognized as a
separate asset. Statement No. 122 is effective for fiscal years beginning after
December 15, 1995. Management does not expect its adoption to have a significant
impact on the Company's financial position or results of operations.
In October 1995, the Financial Accounting Standards Board issued Statement No.
123, Accounting for Stock-Based Compensation. Statement No. 123 defines a fair
value-based method of accounting for an employee stock option. Fair value of the
stock option is determined considering factors such as the exercise price, the
expected life of the option, the current price of the underlying stock and its
volatility, expected dividends on the stock, and the risk-free interest rate for
the expected term of the option. Under the fair value-based method, compensation
cost is measured at the grant date based on the fair value of the award and is
recognized over the service period. A company may elect to adopt Statement No.
123 or elect to continue accounting for its stock option or similar equity
awards using the intrinsic method, where compensation cost is measured at the
date of grant based on the excess of the market value of the underlying stock
over the exercise price. If a company elects not to adopt Statement No. 123, it
must provide pro forma disclosure of net income and earnings per share, as if
the fair value-based method had been applied.
Statement No. 123 is effective for transactions entered into for fiscal years
that begin after December 15, 1995. Pro forma disclosures for entities that
elect to continue to measure compensation cost under the old method must include
the effects of all awards granted in fiscal years that begin after December 15,
1994. It is currently anticipated that the Company will continue to account for
stock-based compensation plans under the intrinsic method and therefore, the
adoption of Statement No. 123 will have no effect on the Company's consolidated
financial statements.
2. MERGERS AND ACQUISITIONS
On June 5, 1995, the Company acquired First Western Bancorporation (First
Western) in Moab, Utah for 261,611 shares of common stock. This acquisition was
not material to the Company's consolidated financial position and was accounted
for as a purchase. The difference between the purchase price and the net book
value of First Western of $4.4 million is included in goodwill.
On January 14, 1994, the Company and National Bancorp of Arizona Inc. (NBA)
consummated their agreement and plan of reorganization whereby the Company
issued 1,456,408 shares of its common stock for 100 percent of the outstanding
common stock of NBA. The consolidated financial statements of the Company give
effect to the merger, which has been accounted for as a pooling of interests.
Accordingly, the accounts of NBA have been combined with those of the Company
for all periods presented. Separate results of operations of the combining
entities for 1993 are as follows (in thousands):
<TABLE>
<CAPTION>
Historical
---------------------
Company NBA Combined
------- ----- --------
<S> <C> <C> <C>
Net interest income $156,817 17,840 174,657
Net income 53,039 5,166 58,205
Net income per common share 4.15 1.57 4.08
</TABLE>
Also during 1994, the Company acquired Rio Salado Bancorp (Rio) for 328,000
shares of common stock. This acquisition was not material to the Company's
consolidated financial position and was accounted for as a purchase. The
difference between the purchase price and the net book value of Rio of $7.6
million is included in goodwill.
49
<PAGE> 52
ZIONS BANCORPORATION
Notes to Consolidated Financial Statements
On October 29, 1993, Wasatch Bancorp (Wasatch) was merged into the Company. The
Company issued 373,335 shares of its common stock for 100 percent of the
outstanding common stock of Wasatch. The acquisition has been accounted for as a
pooling of interests. The consolidated financial statements of the Company for
1993 and 1992 have not been restated inasmuch as the historical operations of
Wasatch are not significant to the Company.
On January 17, 1996, the Company entered into an agreement to acquire Southern
Arizona Bancorp, Inc. (SAB) of Yuma, Arizona, which has assets of approximately
$125 million. In return for 100 percent of SAB's outstanding common stock, the
Company will issue approximately 360,000 shares of its common stock, subject to
adjustment under certain conditions. This acquisition is expected to be
accounted for as a purchase. The Company currently expects consummation of this
acquisition in the first half of 1996, subject to regulatory approvals and other
conditions of closing.
3. INVESTMENT SECURITIES
Investment securities as of December 31, 1995, are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Held to maturity
----------------------------------------------
Gross Gross Esti-
Amort- unreal- unreal- mated
ized ized ized market
cost gains losses value
---------- ------ --------- ---------
<S> <C> <C> <C> <C>
U.S. government agencies and corporations:
Small Business Administration loan-backed
securities $ 529,376 11,741 103 541,014
Other agency securities 265,430 1,192 3,100 263,522
States and political subdivisions 225,231 5,082 164 230,149
---------- ------ --------- ---------
1,020,037 18,015 3,367 1,034,685
Mortgage-backed securities 58,546 904 201 59,249
---------- ------ --------- ---------
$1,078,583 18,919 3,568 1,093,934
========== ====== ========= =========
</TABLE>
<TABLE>
<CAPTION>
Available for sale
--------------------------------------------
Gross Gross Esti-
Amort- unreal- unreal- mated
ized ized ized market
cost gains losses value
-------- ----- ------- -------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 17,691 54 17 17,728
U.S. government agencies 71,038 454 540 70,952
State and political subdivisions 40,153 1,951 20 42,084
-------- ----- ------- -------
128,882 2,459 577 130,764
Mortgage-backed securities 69,469 542 678 69,333
Equity securities:
Mutual funds: Accessor Funds, Inc. 118,899 1,072 - 119,971
Other 564 - - 564
Federal Home Loan Bank stock 71,988 - - 71,988
Other stock 5,386 223 29 5,580
-------- ----- ------- -------
$395,188 4,296 1,284 398,200
======== ===== ======= =======
</TABLE>
50
<PAGE> 53
ZIONS BANCORPORATION
Notes to Consolidated Financial Statements
Investment securities as of December 31, 1994, are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Held to maturity
---------------------------------------------
Gross Gross Esti
Amort- unreal- unreal- -mated
ized ized ized market
cost gains losses value
---------- ------ --------- ---------
<S> <C> <C> <C> <C>
U.S. government agencies and corporations:
Small Business Administration loan-backed
securities $ 460,163 2,479 3,329 459,313
Other agency securities 271,440 73 9,369 262,144
States and political subdivisions 243,225 1,763 2,234 242,754
---------- ------ --------- ---------
974,828 4,315 14,932 964,211
Mortgage-backed securities 56,079 22 1,514 54,587
---------- ------ --------- ---------
$1,030,907 4,337 16,446 1,018,798
========== ====== ========= =========
</TABLE>
<TABLE>
<CAPTION>
Available for sale
-------------------------------------------
Gross Gross Esti-
Amort- unreal- unreal- mated
ized ized ized market
cost gains losses value
-------- ----- ------- -------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 48,269 51 1,143 47,177
U.S. government agencies 33,304 - - 33,304
State and political subdivisions - - - -
-------- ----- ------- -------
81,573 51 1,143 80,481
Mortgage-backed securities 55,560 9 1,235 54,334
Equity securities:
Mutual funds: Accessor Funds, Inc. 118,803 - 7,274 111,529
Other 534 - - 534
Federal Home Loan Bank stock 65,861 - - 65,861
Other stock 2,785 76 22 2,839
-------- ----- ------- -------
$325,116 136 9,674 315,578
======== ===== ======= =======
</TABLE>
The Company adopted Statement No. 115, Accounting for Certain Investments in
Debt and Equity Securities on December 31, 1993. The change in net unrealized
holding gains (losses) on securities available for sale for the years ended
December 31, 1995, 1994, and 1993 were $7,716,000, ($6,281,000), and $415,000,
respectively, after related tax effect. These gains (losses) are collectively
reported as a separate component of shareholders' equity with December 31, 1995
and 1994 balances of $1,850,000 and ($5,866,000), respectively, after related
tax effect.
During December 1995 the Company, in accordance with the provisions of "A Guide
to Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities" issued by the Financial Accounting Standards Board
elected to make a one-time reassessment of its classification of investment
securities. In connection therewith the Company transferred securities having an
amortized cost of $40.2 million and a market value of $41.5 million from the
held to maturity category to the available for sale category. The net unrealized
holding gain of $1.3 million recognized with this transfer is included in the
balance of net unrealized holding gains on securities available for sale
reported as a separate component of shareholders' equity.
In 1995, the Company sold securities from its held to maturity portfolio. This
was in response to the deterioration of the issuer's credit worthiness and
continued downgrading in the issuer's published credit rating. The amortized
cost of the sold securities totaled $6,602,000 and the related realized gain
amounted to $200,000.
51
<PAGE> 54
ZIONS BANCORPORATION
Notes to Consolidated Financial Statements
The amortized cost and estimated market value of investment securities as of
December 31, 1995, by contractual maturity, excluding mortgage-backed and equity
securities, are shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or repay obligations
with or without call or prepayment penalties (in thousands):
<TABLE>
<CAPTION>
Held to maturity
--------------------------
Amort- Estimated
ized market
cost value
---------- ---------
<S> <C> <C>
Due in one year or less $ 160,625 161,699
Due after one year through five years 405,800 409,512
Due after five years through ten years 249,704 255,351
Due after ten years 203,908 208,123
---------- ---------
$1,020,037 1,034,685
========== =========
</TABLE>
<TABLE>
<CAPTION>
Available for sale
----------------------
Amort- Estimated
ized market
cost value
-------- ---------
<S> <C> <C>
Due in one year or less $ 80,829 80,455
Due after one year through five years 39,751 40,383
Due after five years through ten years 51,783 53,209
Due after ten years 25,988 26,050
-------- -------
$198,351 200,097
======== =======
</TABLE>
Gross gains of $1,129,000, $367,000, and $104,000 and gross losses of
$1,277,000, $666,000, and $121,000 were realized on sales of investment
securities for the years ended December 31, 1995, 1994, and 1993, respectively.
Such amounts include gains of $14,000, $102,000, and $10,000, and losses of
$61,000, $66,000, and $32,000, respectively, for sales of mortgage-backed
securities.
As of December 31, 1995 and 1994, securities with an amortized cost of
$226,068,000 and $210,149,000, respectively, were pledged to secure public and
trust deposits, advances, and for other purposes as required by law. In
addition, the Federal Home Loan Bank stock is pledged as security on the related
advances (note 8).
4. LOANS AND ALLOWANCE FOR LOAN LOSSES
Loans are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
---------- ---------
<S> <C> <C>
Loans held for sale $ 126,124 108,649
Commercial, financial, and agricultural 688,466 495,647
Real estate:
Construction 268,812 218,244
Other 1,272,633 1,062,423
Consumer 341,150 391,033
Lease financing 132,520 129,547
Other receivables 8,203 10,509
---------- ---------
$2,837,908 2,416,052
========== =========
</TABLE>
As of December 31, 1995 and 1994, loans with a carrying value of $103,409,000
and $121,886,000, respectively, were pledged as security for Federal Home Loan
Bank advances (note 8).
52
<PAGE> 55
ZIONS BANCORPORATION
Notes to Consolidated Financial Statements
During 1995, 1994, and 1993, the Company purchased mortgage servicing rights
totaling $.4 million, $.6 million, and $1.7 million, respectively. Amortization
of purchased mortgage servicing rights totaled $1.2 million, $1.7 million, and
$2.6 million for the years ended December 31, 1995, 1994, and 1993,
respectively.
During 1995, 1994, and 1993, consumer and other loan securitization sales
totaled $615 million, $703 million, and $609 million, respectively. Loan sales
income related thereto is recognized on the basis of cash flows received from
the securitized assets. Loan sales income, excluding servicing, amounted to
$18.4 million in 1995, $11.7 million in 1994, and $14.7 million in 1993.
The allowance for loan losses is summarized as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Balance at beginning of year $67,018 68,461 59,807
Allowance for loan losses of companies acquired 249 1,308 546
Additions:
Provision for loan losses 2,800 2,181 2,993
Recoveries 5,860 6,729 13,919
Deduction, loan charge-offs (8,372) (11,661) (8,804)
------- ------- -------
Balance at end of year $67,555 67,018 68,461
======= ======= =======
</TABLE>
Included in the allowance for loan losses is an allocation for unused
commitments and letters of credit in the amounts of $7,516,000 and $3,674,000 at
December 31, 1995 and 1994, respectively.
Nonperforming loans, leases, and related interest foregone are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Nonaccrual loans and leases $7,438 13,635 23,364
Restructured loans and leases 249 567 4,006
------ ------ ------
Total $7,687 14,202 27,370
====== ====== ======
Contractual interest due $1,068 1,766 3,051
Interest recognized 474 416 820
------ ------ ------
Net interest foregone $ 594 1,350 2,231
====== ====== ======
</TABLE>
The Company adopted Statement No. 114, Accounting by Creditors for Impairment of
a Loan, as amended by Statement No. 118, Accounting by Creditors for Impairment
of a Loan - Income Recognition and Disclosure, on January 1, 1995. The Company's
total recorded investment in impaired loans, in accordance with these
Statements, amounted to $3,388,000 as of December 31, 1995. The required
allowance for loan losses allocated to impaired loans as of December 31, 1995
amounted to $22,000, which is related to $884,000 of the total recorded
investment.
5. DEPOSITS
Deposits are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
---------- ---------
<S> <C> <C>
Noninterest-bearing $ 998,560 885,833
Interest-bearing:
Savings 690,730 756,196
Money market 1,473,614 1,292,519
Time under $100,000 669,196 513,841
Time over $100,000 158,924 123,455
Foreign 106,090 134,132
---------- ---------
$4,097,114 3,705,976
========== =========
</TABLE>
53
<PAGE> 56
ZIONS BANCORPORATION
Notes to Consolidated Financial Statements
Interest expense on deposits is summarized as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------ ------
<S> <C> <C> <C>
Savings and money market deposits:
Savings $22,492 22,262 19,222
Money market 59,465 39,938 31,109
------- ------ ------
$81,957 62,200 50,331
======= ====== ======
Time deposits:
Under $100,000 $32,016 20,469 23,501
Over $100,000 7,358 3,845 3,010
Foreign 7,179 4,444 1,484
------- ------ ------
$46,553 28,758 27,995
======= ====== ======
</TABLE>
6. SECURITY REPURCHASE AGREEMENTS
Security repurchase agreements represent funds borrowed on a short-term basis
through the sale of securities to counterparties under agreements to repurchase
the same securities. The Company participates in overnight and term repurchase
agreements. Most of the overnight agreements are performed with sweep accounts
in conjunction with a master repurchase agreement. In this case, securities are
pledged for and interest is paid on the collected balance of the customers'
accounts. The average interest rates pertaining to outstanding repurchase
agreements at December 31, 1995 were 5.8 percent, 5.2 percent, and 4.9 percent
for U.S. Treasuries, U.S. government agencies, and Small Business Administration
pools, respectively.
Repurchase agreements are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Market
value of
Carrying Accrued Total underlying
amount interest liability assets
-------- -------- --------- -------
<S> <C> <C> <C> <C>
U.S. Treasuries:
Over night $ 72,200 35 72,235 73,126
On demand 36,000 17 36,017 35,569
Up to 30 days 11,710 9 11,719 11,677
-------- ------- ------- -------
119,910 61 119,971 120,372
U.S. government agencies - on demand 1,982 134 2,116 2,830
SBA pools:
Over night 483,562 172 483,734 486,624
On demand 2,312 141 2,453 2,975
Up to 30 days 4,385 3 4,388 4,518
Over 90 days 2,133 13 2,146 2,191
-------- ------- ------- -------
492,392 329 492,721 496,308
-------- ------- ------- -------
Total $614,284 524 614,808 619,510
======== ======= ======= =======
</TABLE>
7. INCOME TAXES
The Company adopted Statement No. 109, Accounting for Income Taxes, as of
January 1, 1993. The cumulative effect of this adoption was an increase in net
income of $7,419,000, as reported in 1993.
54
<PAGE> 57
ZIONS BANCORPORATION
Notes to Consolidated Financial Statements
Income taxes are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------ -------
<S> <C> <C> <C>
Federal:
Current $32,220 23,448 25,144
Deferred (benefit) 3,044 3,486 (1,832)
State 5,686 3,966 3,936
------- ------ -------
$40,950 30,900 27,248
======= ====== =======
</TABLE>
A reconciliation between income tax expense computed using the statutory federal
income tax rate (35 percent in 1995, 1994, and 1993), and actual income tax
expense is as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- --------
<S> <C> <C> <C>
Income tax expense at statutory federal rate $42,624 33,154 29,328
State income tax, net 3,696 2,578 2,414
Nondeductible expenses 1,159 882 174
Nontaxable interest (4,317) (3,900) (2,741)
Tax credits (1,446) (885) (586)
Deferred tax assets realized (766) (972) (1,137)
Other items - 43 (204)
------- ------- -------
Income tax expense $40,950 30,900 27,248
======= ======= =======
</TABLE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities as of December 31, 1995
and 1994, are presented below (in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- -------
<S> <C> <C>
Gross deferred tax assets:
Book loan loss deduction in excess of tax $ 25,966 25,741
Postretirement benefits 2,295 2,377
Deferred compensation 2,754 3,619
Deferred loan sales 1,792 1,424
Present value of interest rate exchange contract - 226
Capital leases 538 700
Acquired net operating losses 5,258 7,977
Other 4,946 2,769
-------- -------
Total deferred tax assets 43,549 44,833
-------- -------
Gross deferred tax liabilities:
Premises and equipment, due to differences in depreciation (4,719) (4,647)
FHLB stock dividends (10,437) (8,713)
Leasing operations (10,231) (10,614)
Prepaid pension reserves (2,328) -
Other (1,414) (1,957)
-------- -------
Total deferred tax liabilities (29,129) (25,931)
-------- -------
Statement No. 115 market equity adjustment (1,162) 3,672
-------- -------
Net deferred tax assets $ 13,258 22,574
======== =======
</TABLE>
55
<PAGE> 58
ZIONS BANCORPORATION
Notes to Consolidated Financial Statements
Pursuant to Statement No. 109, the Company has determined that it is not
required to establish a valuation reserve for the deferred tax asset since it is
"more likely than not" that it will be principally realized through future
taxable income and tax planning strategies. The Company's conclusion that it is
"more likely than not" that the deferred tax asset will be realized is based on
history of growth in earnings and the prospects for continued growth and
profitability.
The Company has net operating loss carryforwards totaling $23,965,000 that
expire in the years 2006 and 2007.
8. FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS
Federal Home Loan Bank advances and other borrowings as of December 31, 1995 and
1994, include $86,174,000 and $101,571,000, respectively, borrowed by Zions
First National Bank, a wholly owned subsidiary, (the Bank) under its line of
credit with the Federal Home Loan Bank of Seattle. The line of credit provides
for borrowing of amounts up to ten percent of total assets. The line of credit
is secured under a blanket pledge whereby the Bank maintains unencumbered
security with par value, which has been adjusted using a pledge requirement
percentage based upon the types of securities pledged, equal to at least 100
percent of outstanding advances, and, Federal Home Loan Bank stock. There are no
withdrawal and usage restrictions or compensating balance requirements.
Substantially all Federal Home Loan Bank advances reprice with changes in market
interest rates or have short terms to maturity. The carrying value of such
indebtedness is deemed to approximate market value (note 16).
Maturities of outstanding advances at December 31, 1995 in excess of one year
are as follows (in thousands):
<TABLE>
<S> <C>
1996 $16,573
1997 16,335
1998 16,338
1999 16,342
2000 9,107
Thereafter 11,479
-------
$86,174
=======
</TABLE>
9. LONG-TERM DEBT
Long-term debt is summarized as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
------- ------
<S> <C> <C>
Subordinated notes $54,000 54,000
Industrial revenue bonds - 800
Capitalized real property leases,
9-1/2% to 21%, payable in aggregate monthly installments
of approximately $95,000 1,906 2,682
Mortgage notes, 7-1/2% to 9%, due in varying amounts and
periods 111 185
Other notes payable 212 515
------- ------
$56,229 58,182
======= ======
</TABLE>
Subordinated notes includes $50,000,000 of 8-5/8 percent notes that mature in
2002. These notes are not redeemable prior to maturity. In addition, the Company
has $4,000,000 of 9-percent subordinated notes that mature in full on November
1, 1998 and may be called, at the option of the Company, on or after November 1,
1996 at par. The subordinated notes are unsecured and require semiannual
interest payments.
56
<PAGE> 59
ZIONS BANCORPORATION
Notes to Consolidated Financial Statements
Maturities and sinking fund requirements on long-term debt at December 31, 1995
for each of the succeeding five years are as follows (in thousands):
<TABLE>
<CAPTION>
Consoli- Parent
dated only
------- ------
<S> <C> <C>
1996 $ 966 715
1997 216 5
1998 4,134 4,000
1999 94 -
2000 98 -
Thereafter 50,721 50,000
------- ------
$56,229 54,720
======= ======
</TABLE>
10. COMMITMENTS AND CONTINGENT LIABILITIES
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 and
to reduce its own exposure to fluctuations in interest rates. These financial
instruments include commitments to extend credit, standby letters of credit,
interest rate caps and floors, interest rate exchange contracts, and commitments
to purchase and sell securities. Those instruments involve, to varying degrees,
elements of credit, market, and interest rate risk in excess of the amount
recognized in the balance sheets. The Company's exposure to credit loss in the
event of nonperformance by the other party to the financial instrument for
commitments to extend credit and standby letters of credit is represented by the
contractual notional amount of those instruments. The Company uses the same
credit policies in making commitments and conditional obligations as it does for
on-balance sheet instruments. For interest rate caps, floors, and exchange
contract transactions, the contract or notional amounts do not represent
exposure to credit loss. The Company controls the credit risk of these
transactions through credit approvals, limits, and monitoring procedures.
Unless noted otherwise, the Company does not require collateral or other
security to support financial instruments with credit risk.
Notional values of financial instruments are summarized as follows:
<TABLE>
<CAPTION>
Notional or
carrying amount
-----------------------
1995 1994
---------- ----------
<S> <C> <C>
Financial instruments whose contract amounts represent credit
risk (in thousands):
Unused commitments to extend credit $1,552,507 1,152,351
Standby letters of credit written:
Performance 39,868 55,951
Financial 11,056 19,621
Commercial letters of credit 7,079 3,233
Commitments to purchase securities 493,006 1,124,745
Commitments to sell securities 370,156 1,275,025
</TABLE>
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.
Commitments totaling $1,219,700,000 expire in 1996. 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 of the counter party.
Collateral held varies but may include accounts receivable, inventory, property,
plant and equipment, and income-producing commercial properties.
57
<PAGE> 60
ZIONS BANCORPORATION
Notes to Consolidated Financial Statements
Standby letters of credit written are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private borrowing
arrangements, including commercial paper, bond financing, and similar
transactions. Standby letters of credit include commitments in the amount of
$49,684,000 expiring in 1996 and $1,240,000 expiring thereafter through 2005.
The credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers. The Company generally
holds marketable securities and cash equivalents as collateral supporting those
commitments for which collateral is deemed necessary.
The Company enters into interest rate contracts, including interest rate caps,
floors, futures, options, and interest rate exchange contract agreements in
managing its interest rate exposure. Interest rate caps and floors obligate one
of the parties to the contract to make payments to the other if an interest rate
index exceeds a specified upper "capped" level or if the index falls below a
specified "floor" level. A futures contract is an agreement to buy or sell a
quantity of a financial instrument or commodity at a predetermined future date
and rate or price. An option contract is an agreement that conveys to the
purchaser the right, but not the obligation, to buy or sell a quantity of a
financial instrument or commodity at a predetermined rate or price at a time in
the future. Interest rate exchange contract agreements involve the exchange of
fixed and variable rate interest payments based upon a notional amount and
maturity. Interest rate caps and exchange contracts to which the Company is a
party at December 31, 1995, have remaining terms of 1 to 19 years and 8 to 33
months, respectively. The fair value of interest rate contracts are obtained
from deal quotes, or discounted cash flow analyses. The values represent the
estimated amount the Company would receive or pay for comparable contracts,
taking into account current interest rates. Notional values of interest rate
contracts are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- -------
<S> <C> <C>
Interest rate contracts:
Swaps - fixed $230,000 330,000
Futures - 1,100
Options 1,000 145,000
Caps:
Purchased 25,000 25,000
Written 825,000 785,000
</TABLE>
The contract or notional amount of financial instruments indicates a level of
activity associated with a particular class of financial instrument and is not a
reflection of the actual level of risk. As of December 31, 1995 and 1994, the
regulatory risk-weighted values assigned to all off-balance sheet financial
instruments described herein totaled $166,382,000 and $177,347,000,
respectively. See note 4 for consideration of financial instruments in
management's determination of the allowance for loan losses.
During 1988, a lawsuit was brought in the United States District Court, Utah
District, against Zions First National Bank in connection with its performance
of duties as an indenture trustee for certain investors in real estate and other
syndication projects. In September 1992, a motion was granted allowing an
amended complaint containing allegations that plaintiffs intend to proceed as a
class action to recover approximately $23 million, prejudgment interest,
attorneys' fees, and additional amounts under certain statutory provisions and
common law. A motion to certify the class was filed in March 1994 and opposition
to this motion was filed in April 1994. The Company continues to vigorously
defend the entire action. Although no assurances can be given as to the outcome,
the Company continues to believe that it has meritorious defenses to such
lawsuit, and that there is insurance coverage for a substantial portion of the
amount claimed.
The Company is also the defendant in various other legal proceedings arising in
the normal course of business. The Company does not believe that the outcome of
any of such proceedings, including the lawsuit discussed in the preceding
paragraph, will have a material adverse effect on its consolidated financial
position.
In connection with loans sold to (or serviced for) others, the Company is
subject to recourse obligations on approximately $50 million as of December 31,
1995.
58
<PAGE> 61
ZIONS BANCORPORATION
Notes to Consolidated Financial Statements
The Company has commitments for leasing premises and equipment under the terms
of noncancelable leases expiring from 1996 to 2005. Future aggregate minimum
rental payments under existing noncancelable leases at December 31, 1995 are as
follows (in thousands):
<TABLE>
<CAPTION>
Real
Real property
property, and equip-
capital- ment,
ized operating
--------- ----------
<S> <C> <C>
1996 $ 518 4,181
1997 279 3,613
1998 217 3,094
1999 171 2,503
2000 171 1,946
Thereafter 1,164 7,241
------ ------
$2,520 22,578
====== ======
</TABLE>
Future aggregate minimum rental payments have been reduced by noncancelable
subleases as follows: 1996, $538,000; 1997, $8,000; and 1998, $-0-. Aggregate
rental expense on operating leases amounted to $6,500,000, $4,841,000, and
$3,946,000 for the years ended December 31, 1995, 1994, and 1993, respectively.
11. STOCK OPTIONS
The Company has a qualified stock option plan adopted in 1981, under which stock
options are granted to key employees; and a nonqualified plan under which
options are granted to certain key employees. Under the nonqualified plan,
options expire five to ten years from the date of grant. Under the qualified
plan, 806,000 shares of common stock were reserved. Qualified options are
granted at a price not less than 100 percent of the fair market value of the
stock at the date of grant. Options granted are generally exercisable in
increments from one to six years after the date of grant and expire six years
after the date of grant.
Transactions and other information relating to stock options are summarized as
follows:
<TABLE>
<CAPTION>
Number of Option price per
shares share
--------- ----------------
<S> <C> <C>
Options granted during:
1995 69,425 $42.63
1994 104,250 $38.50 to $39.75
1993 2,000 $47.25
Options exercised during:
1995 131,382 $9.47 to $39.75
1994 45,450 $15.00 to $24.13
1993 124,491 $10.00 to $24.13
Options canceled during:
1995 8,315 $24.13 to $39.75
1994 6,418 $18.33 to $39.75
1993 2,912 $10.00 to $24.13
Options expiring during:
1995 - -
1994 - -
1993 22,750 $12.50 to $14.75
Options outstanding at December 31:
1995 323,549 $9.47 to $47.25
1994 393,821 $9.47 to $47.25
1993 341,439 $9.47 to $47.25
</TABLE>
59
<PAGE> 62
ZIONS BANCORPORATION
Notes to Consolidated Financial Statements
As of December 31, 1995, there are 125,000 options exercisable at prices from
$9.47 to $47.25 per share. For the year ended December 31, 1995, shares obtained
through exercise of options had a cumulative average market value of $6,843,000
at the date of exercise.
12. COMMON STOCK
Changes in common stock are summarized as follows (amount in thousands, except
share amounts):
<TABLE>
<CAPTION>
Common stock
----------------------
Shares Amount
---------- --------
<S> <C> <C>
Balance at December 31, 1992 13,727,544 $ 62,078
Stock options:
Redeemed and retired (24,003) -
Exercised 124,491 893
Acquisition 373,335 3,286
---------- --------
Balance at December 31, 1993 14,201,367 66,257
Stock options:
Redeemed and retired (15,265) -
Exercised 45,450 443
Acquisition 328,000 12,493
---------- --------
Balance at December 31, 1994 14,559,552 79,193
Stock redeemed and retired (375,040) (18,523)
Stock options:
Redeemed and retired (21,585) -
Exercised 131,382 2,081
Acquisition 261,611 10,726
---------- --------
Balance at December 31, 1995 14,555,920 $ 73,477
========== ========
</TABLE>
13. RETIREMENT PLANS
The Company has a noncontributory defined benefit pension plan for eligible
employees. Plan benefits are based on years of service and employees'
compensation levels. Benefits vest under the plan upon completion of five years
of service. Plan assets consist principally of corporate equity and debt
securities, government fixed income securities, and cash investments.
The components of the net pension cost for the years ended December 31, 1995 and
1994, are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
------- ------
<S> <C> <C>
Service cost - benefits earned during the period $ 2,151 2,385
Interest cost on projected benefit obligation 3,261 2,908
Actual return on assets (8,580) (794)
Net amortization and deferrals 5,072 (2,640)
------- ------
Net pension cost $ 1,904 1,859
======= ======
</TABLE>
60
<PAGE> 63
ZIONS BANCORPORATION
Notes to Consolidated Financial Statements
Primary actuarial assumptions used in determining the net pension cost are as
follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Assumed discount rate 8.75% 7.50
Assumed rate of increase in compensation levels 5.00 5.00
Expected long-term rate of return on assets 9.00 9.50
</TABLE>
The funded status of the plan as of December 31, 1995 and 1994, is as follows
(in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- -------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $(42,054) (31,092)
======== =======
Accumulated benefit obligation $(47,821) (33,972)
======== =======
Projected benefit obligation $(53,606) (38,269)
Plan assets at fair value 48,360 36,208
-------- -------
Unfunded projected benefit obligation (5,246) (2,061)
Unrecognized net loss 15,032 8,391
Unrecognized prior service cost (1,175) (1,290)
Unrecognized net transition asset (2,306) (2,931)
-------- -------
Prepaid pension cost $ 6,305 2,109
======== =======
Primary actuarial assumptions (future periods):
Assumed discount rate 7.00% 8.75%
Assumed rate of increase in compensation levels 5.00 5.00
</TABLE>
In addition to the Company's defined benefit pension plan, the Company sponsors
a defined benefit health care plan that provides postretirement medical benefits
to full-time employees hired before January 1, 1993, who meet minimum age and
service requirements. The plan is contributory, with retiree contributions
adjusted annually, and contains other cost-sharing features such as deductibles
and coinsurance. Plan coverage is provided by self-funding or health maintenance
organizations (HMOs) options. The accounting for the plan anticipates future
cost-sharing changes to the written plan, including the Company's expressed
intent to increase the retiree contribution rate annually from 30 percent and 40
percent in 1993 for normal and early retirees, respectively, to 50 percent for
both in 1996. The Company's retiree premium contribution rate is frozen at 50
percent of 1996 dollar amounts. The Company's policy is to fund the cost of
medical benefits in amounts determined at the discretion of management.
The Company adopted Statement No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions, as of January 1, 1993. The cumulative effect of
this adoption was an after-tax decrease in net income of $5,760,000, as reported
in 1993.
61
<PAGE> 64
ZIONS BANCORPORATION
Notes to Consolidated Financial Statements
The following table presents the plan's funded status reconciled with amounts
recognized in the Company's consolidated balance sheets at December 31, 1995 and
1994, as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
------- ------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $(4,855) (2,693)
Fully eligible active plan participants (523) (1,779)
Other active plan participants (792) (705)
------- ------
(6,170) (5,177)
Plan assets at fair value - -
------- ------
Accumulated postretirement benefit obligation in excess of plan
assets (6,170) (5,177)
Unrecognized net (gain) loss 116 (1,039)
------- ------
Accrued postretirement benefit cost included in other liabilities $(6,054) (6,216)
======= ======
</TABLE>
Net periodic postretirement benefit cost for 1995 and 1994 includes the
following components ( in thousands):
<TABLE>
<CAPTION>
1995 1994
----- ----
<S> <C> <C>
Service cost $ 93 164
Interest cost 380 372
Net amortization (351) (224)
------ ----
Net periodic postretirement benefit cost $ 122 312
====== ====
</TABLE>
For measurement purposes, an annual rate of increase in the per capita cost of
covered benefits (i.e., health care cost trend rate) of 6.5 percent and 5.0
percent were assumed for the self-funded and HMOs options, respectively, for
1995. The health care cost trend rate assumption does not have a significant
effect on amounts reported because the Company has capped its retiree premium
contribution rates.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.0 and 8.75 percent, respectively, at
December 31, 1995 and 1994.
The Company has an Employee Stock Savings Plan and an Employee Investment
Savings Plan (formerly known as the Salary Reduction Arrangement Plan)
(PAYSHELTER). Under PAYSHELTER, employees select from a nontax-deferred or
tax-deferred plan and four investment alternatives. Employees can contribute
from 1 to 15 percent of compensation, which is matched 50 percent by the Company
for contributions up to 5 percent and 25 percent for contributions greater than
5 percent up to 10 percent. Contributions to the plans amounted to $1,404,000,
$1,319,000, and $1,176,000 for the years ended December 31, 1995, 1994, and
1993, respectively.
The Company has an employee profit-sharing plan. Contributions to the plan are
determined per a formula based on the Company's annual return on equity
(required minimum return of 14 percent). Accrued contributions to the plan
amounted to $2,022,000, $1,096,000, and $948,000 for the years ended December
31, 1995, 1994, and 1993, respectively.
62
<PAGE> 65
ZIONS BANCORPORATION
Notes to Consolidated Financial Statements
14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Financial information by quarter for the three years ended December 31, 1995 is
as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Net
Provi- Income income
Net sion for before per
interest loan income Net common
income losses taxes income share
-------- -------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
1995:
First quarter $ 53,201 600 23,824 16,001 1.09
Second quarter 55,897 850 31,270 20,521 1.39
Third quarter 57,923 800 34,044 22,291 1.52
Fourth quarter 60,073 550 33,140 22,515 1.53
-------- ----- ------- ------ ----
$227,094 2,800 122,278 81,328 5.53
======== ===== ======= ====== ====
1994:
First quarter $ 44,801 290 18,416 12,438 .87
Second quarter 48,741 467 24,743 16,418 1.12
Third quarter 51,859 440 26,789 17,665 1.20
Fourth quarter 53,205 984 24,779 17,306 1.18
-------- ----- ------- ------ ----
$198,606 2,181 94,727 63,827 4.37
======== ===== ======= ====== ====
1993:
First quarter $ 41,092 1,365 13,428 10,746 .75
Second quarter 44,813 408 24,729 16,636 1.17
Third quarter 43,795 482 22,684 15,397 1.08
Fourth quarter 44,957 738 22,953 15,426 1.08
-------- ----- ------- ------ ----
$174,657 2,993 83,794 58,205 4.08
======== ===== ======= ====== ====
</TABLE>
15. CONCENTRATIONS OF CREDIT RISK
Credit risk represents the accounting loss that would be recognized at the
reporting date if counterparties failed completely to perform as contracted.
Concentration of credit risk (whether on or off balance sheet) that arise from
financial instruments exists for groups of customers or counterparties when they
have similar economic characteristics that would cause their ability to meet
contractual obligations to be similarly affected by changes in economic or other
conditions. The Company does not have significant exposure to any individual
customer or counterparty.
Most of the Company's business activity is with customers located within the
states of Utah, Nevada, and Arizona. The commercial loan portfolio is well
diversified, consisting of more than 17 industry classifications groupings. As
of December 31, 1995, the larger concentrations of risk in the commercial loan
and leasing portfolio are represented by the manufacturing, real estate,
business service, and retail industry groupings, which each comprise
approximately 15 percent of the portfolio. The Company has minimal credit
exposure from lending transactions with highly leveraged entities and has no
foreign loans.
63
<PAGE> 66
ZIONS BANCORPORATION
Notes to Consolidated Financial Statements
16. FAIR VALUE OF FINANCIAL INSTRUMENTS
Carrying value and estimated fair value of principal financial instruments as of
December 31, 1995 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Carrying Estimated
value fair value
---------- ----------
<S> <C> <C>
Financial assets:
Cash and due from banks $ 418,067 418,067
Money market investments 687,251 687,251
Investment securities 1,540,489 1,555,347
Loans, net 2,739,401 2,758,244
---------- ---------
Total financial assets $5,385,208 5,418,909
========== =========
Financial liabilities:
Demand, savings, and money market deposits $3,162,904 3,162,904
Time deposits 828,120 834,460
Foreign deposits 106,090 106,090
Securities sold, not yet purchased 117,005 117,005
Federal funds purchased and security repurchase agreements 748,332 748,332
FHLB advances and other borrowings 101,084 101,084
Long-term debt 56,229 61,507
---------- ---------
Total financial liabilities $5,119,764 5,131,382
========== =========
</TABLE>
Financial assets and financial liabilities other than investment securities of
the Company are not traded in active markets. The above estimates of fair value
require subjective judgments, and are approximate. Changes in the following
methodologies and assumptions could significantly affect the estimates.
FINANCIAL ASSETS - The estimated fair value approximates the carrying value of
cash and due from banks and money market investments. For securities, the fair
value is based on quoted market prices where available. If quoted market prices
are not available, fair values are based on quoted market prices of comparable
instruments or using a discounted cash flow model based on established market
rates. The fair value of fixed-rate loans is estimated by discounting future
cash flows using the London Interbank Offered Rate (LIBOR) yield curve adjusted
by a factor which reflects the credit and interest rate risk inherent in the
loan. Variable-rate loans reprice with changes in market rates. As such their
carrying amounts are deemed to approximate fair value. The fair value of the
allowance for loan losses of $67,555,000 is the present value of estimated net
charge-offs.
FINANCIAL LIABILITIES - The estimated fair value of demand and savings deposits,
securities sold not yet purchased, and federal funds purchased and security
repurchase agreements approximates the carrying value. The fair value of time
and foreign deposits is estimated by discounting future cash flows using the
LIBOR yield curve. Substantially all FHLB advances reprice with changes in
market interest rates or have short terms to maturity. The carrying value of
such indebtedness is deemed to approximate market value. Other borrowings are
not significant. The estimated fair value of the subordinated notes is based on
a quoted market price. The remaining long-term debt is not significant.
64
<PAGE> 67
ZIONS BANCORPORATION
Notes to Consolidated Financial Statements
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS - The carrying and fair values of
off-balance sheet financial instruments represented by interest rate exchange
contracts (swaps) and caps as of December 31, 1995 is as follows (in thousands):
<TABLE>
<CAPTION>
Carrying value Fair value
-------------- ----------
asset positive
(liability) (negative)
-------------- ----------
<S> <C> <C>
Swaps $ - 4,936
Caps:
Purchased 174 3
Written (8,863) (4,691)
</TABLE>
The fair value of the swaps and caps reflects the estimated amounts that the
Company would receive or pay to terminate the contracts at the reporting date
based upon pricing or valuation models applied to current market information,
thereby taking into account the current unrealized gains or losses of open
contracts.
The fair value of commitments to extend credit and letters of credit, based on
fees currently charged for similar commitments, is not significant. See note 10
to the consolidated financial statements.
17. DIVIDEND RESTRICTION AND CONDENSED PARENT-ONLY FINANCIAL INFORMATION
Dividends declared by the Company's banking subsidiaries in any calendar year
may not, without the approval of the appropriate federal regulator, exceed their
net earnings for that year combined with their retained net earnings for the
preceding two years. At December 31, 1995, the Company's subsidiaries had
approximately $130.1 million available for the payment of dividends under the
foregoing restrictions. In addition, the banking subsidiaries must meet various
requirements and restrictions under the laws of the United States and state
laws, including requirements to maintain cash reserves against deposits and
limitations on loans and investments with affiliated companies. During 1995,
cash reserve balances held with the Federal Reserve banks averaged approximately
$54.9 million.
65
<PAGE> 68
Condensed financial information of Zions
Bancorporation (parent only) follows:
ZIONS BANCORPORATION
Condensed Balance Sheets
December 31, 1995 and 1994
(In thousands)
<TABLE>
<CAPTION>
ASSETS 1995 1994
-------- -------
<S> <C> <C>
Cash and due from banks $ 2,955 1,574
Interest-bearing deposits 16,503 2,826
Investment securities 2,521 270
Loans, lease financing, and other receivables 1,108 2,373
Investments in subsidiaries:
Commercial banks 458,647 386,853
Other 5,478 4,601
Receivables from subsidiaries:
Commercial banks 100 27,094
Other 574 563
Real estate held for rental purposes, at cost, less accumulated depreciation 1,667 6,169
Premises and equipment, at cost, less accumulated depreciation 187 132
Other real estate owned 58 134
Other assets 10,024 7,618
-------- -------
$499,822 440,207
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued liabilities $ 16,596 10,247
Short-term borrowings - 8,001
Long-term debt 54,720 56,189
-------- -------
Total liabilities 71,316 74,437
-------- -------
Shareholders' equity:
Preferred stock - -
Common stock 73,477 79,193
Net unrealized holding gains and losses on securities available for sale 1,850 (5,866)
Retained earnings 353,179 292,443
-------- -------
Total shareholders' equity 428,506 365,770
-------- -------
$499,822 440,207
======== =======
</TABLE>
66
<PAGE> 69
ZIONS BANCORPORATION
Condensed Statements of Income
Years ended December 31, 1995, 1994, and 1993
(In thousands)
<TABLE>
<CAPTION>
1995 1994 1993
------- ------ ------
<S> <C> <C> <C>
Interest income - interest and fees on loans and securities $ 2,417 3,035 4,278
Interest expense - interest on borrowed funds 5,095 4,798 7,622
------- ------ ------
Net interest loss (2,678) (1,763) (3,344)
------- ------ ------
Other income:
Dividends from consolidated subsidiaries:
Commercial banks 29,400 21,528 17,766
Other - - 3,224
Other income 3,131 2,985 2,542
------- ------ ------
32,531 24,513 23,532
------- ------ ------
Expenses:
Salaries and employee benefits 5,262 4,913 3,989
Loss on early extinguishment of debt - - 6,022
Operating expenses 463 1,165 933
------- ------ ------
5,725 6,078 10,944
------- ------ ------
Income before income tax benefit and cumulative effect of changes in accounting principles 24,128 16,672 9,244
Income tax benefit (2,052) (1,939) (4,448)
------- ------ ------
Income before cumulative effect of changes in accounting principles 26,180 18,611 13,692
Cumulative effect of changes in accounting principles - - (378)
------- ------ ------
Income before equity in undistributed income of consolidated subsidiaries 26,180 18,611 13,314
------- ------ ------
Equity in undistributed income (loss) of consolidated subsidiaries:
Commercial banks 54,245 44,133 47,716
Other 903 1,083 (2,825)
------- ------ ------
55,148 45,216 44,891
------- ------ ------
Net income $81,328 63,827 58,205
======= ====== ======
</TABLE>
67
<PAGE> 70
ZIONS BANCORPORATION
Condensed Statements of Cash Flows
Years ended December 31, 1995, 1994, and 1993
(In thousands)
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 81,328 63,827 58,205
Adjustments to reconcile net income to net cash provided by operating activities:
Undistributed net income of consolidated subsidiaries (55,148) (45,216) (44,891)
Depreciation of premises and equipment 678 675 688
Amortization of excess costs of acquired businesses 588 492 349
Other 4,646 (3) 3,845
-------- ------- --------
Net cash provided by operating activities 32,092 19,775 18,196
-------- ------- --------
Cash flows from investing activities:
Net decrease (increase) in interest-bearing deposits (13,677) (2,381) 9,735
Collection of advances to subsidiaries 34,548 4,939 154,272
Advances to subsidiaries (7,565) (3,575) (138,993)
Decrease (increase) of investment in subsidiaries (386) 274 (2,625)
Other 3,625 1,908 2,060
-------- ------- --------
Net cash provided by investing activities 16,545 1,165 24,449
-------- ------- --------
Cash flows from financing activities:
Net change in short-term funds borrowed (8,001) (3,305) 9,000
Proceeds from issuance of long-term debt - - 4,000
Payments on long-term debt (1,469) (1,358) (43,224)
Proceeds from issuance of common stock 1,291 317 893
Payments to redeem common stock (18,523) - -
Dividends paid (20,554) (17,271) (12,692)
-------- ------- --------
Net cash (used in) financing activities (47,256) (21,617) (42,023)
-------- ------- --------
Net increase (decrease) in cash and due from banks 1,381 (677) 622
Cash and due from banks at beginning of year 1,574 2,251 1,629
-------- ------- --------
Cash and due from banks at end of year $ 2,955 1,574 2,251
======== ======= ========
</TABLE>
The parent company paid interest of $6,180,000, $7,245,000, and $8,577,000 for
the years ended December 31, 1995, 1994, and 1993, respectively.
68
<PAGE> 71
ZIONS BANCORPORATION
Condensed Statements of Retained Earnings
Years ended December 31, 1995, 1994, and 1993
(In thousands)
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Balance at beginning of year $292,443 245,920 197,992
Retained earnings of acquired company - - 2,428
Net income 81,328 63,827 58,205
Cash dividends:
Preferred, paid by subsidiary to minority shareholder (38) (33) (13)
Common (20,554) (16,786) (12,207)
Dividends of NBA prior to merger - (485) (485)
-------- ------- -------
Balance at end of year $353,179 292,443 245,920
======== ======= =======
</TABLE>
69
<PAGE> 72
The selected quarterly financial data information required by this item appears
on pages 24 and 63 under the caption "QUARTERLY FINANCIAL INFORMATION
(UNAUDITED)."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item, to the extent not included under the
caption "Executive officers of the registrant" in Part I of this report, will
appear on pages 2 through 6 of the definitive Proxy Statement. Information
relating to the directors and executive officers on pages 2 through 6, and
information required by Item 405 of Regulation S-K as set forth beginning in the
last paragraph on page 7 of the definitive Proxy Statement relating to the 1996
Annual Meeting of Shareholders to be held April 26, 1996, is incorporated herein
by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item appearing on pages 8 through 19 of the
definitive Proxy Statement relating to the 1996 Annual Meeting of Shareholders
to be held April 26, 1996, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item appearing on pages 6 and 7 of the
definitive Proxy Statement relating to the 1996 Annual Meeting of Shareholders
to be held April 26, 1996, is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item appearing on page 20 of the definitive
Proxy Statement relating to the 1996 Annual Meeting of Shareholders to be held
April 26, 1996, is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are part of this report and appear on the pages
indicated:
<TABLE>
<CAPTION>
Page
<S> <C>
(1) Financial Statements:
Independent Auditors' Report 41
Consolidated Balance Sheets - December 31, 1995 and 1994 42
Consolidated Statements of Income - Years ended December 31, 1995, 1994, and 1993 43
Consolidated Statements of Cash Flows - Years ended December 31, 1995, 1994, and 1993 44
Consolidated Statements of Retained Earnings Years ended December 31, 1995, 1994, and 1993 45
Notes to Consolidated Financial Statements 46
</TABLE>
(2) Financial Statement Schedules:
Schedules are omitted because the information is either not required,
not applicable, or is included in Part II, Items 6-8 of this report.
70
<PAGE> 73
(3) Exhibits:
The exhibits listed on the Exhibit Index on pages 73 and 74 of this
report are filed or are incorporated herein by reference.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended December
31, 1995.
For the purposes of complying with the amendments to the rules governing Form
S-8 (effective July 13, 1990) under the Securities Act of 1993, the undersigned
Registrant hereby undertakes as follows, which undertaking shall be incorporated
by reference into Registrant's Registration Statements on Form S-8 Nos. 33-58845
(filed on April 26, 1995) and 33-58855 (filed on April 26, 1995).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
71
<PAGE> 74
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
March 8, 1996 ZIONS BANCORPORATION
By /s/ Harris H. Simmons
-------------------------------------
HARRIS H. SIMMONS, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
March 8, 1996
<TABLE>
<S> <C>
/s/ Harris H. Simmons /s/ Gary L. Anderson
- --------------------------------------------------------- -------------------------------------------------------
HARRIS H. SIMMONS, President, Chief Executive Officer and GARY L. ANDERSON, Secretary, Senior Vice President, and
Director Chief Financial Officer
/s/ Roy W. Simmons /s/ Walter E. Kelly
- --------------------------------------------------------- -------------------------------------------------------
ROY W. SIMMONS, Chairman and Director WALTER E. KELLY, Controller
/s/ Jerry C. Atkin /s/ Robert G. Sarver
- --------------------------------------------------------- -------------------------------------------------------
JERRY C. ATKIN, Director ROBERT G. SARVER, Director
/s/ Grant R. Caldwell /s/ L. E. Simmons
- --------------------------------------------------------- -------------------------------------------------------
GRANT R. CALDWELL, Director L.E. SIMMONS, Director
/s/ R. D. Cash /s/ I. J. Wagner
- --------------------------------------------------------- -------------------------------------------------------
R. D. CASH, Director I. J. WAGNER, Director
/s/ Richard H. Madsen /s/ Dale W. Westergard
- --------------------------------------------------------- -------------------------------------------------------
RICHARD H. MADSEN, Director DALE W. WESTERGARD, Director
/s/ Roger B. Porter
- ---------------------------------------------------------
ROGER B. PORTER, Director
</TABLE>
72
<PAGE> 75
EXHIBIT INDEX
FILED AS PART OF THIS REPORT ON FORM 10-K
(Pursuant to Item 601 of Regulations S-K)
<TABLE>
<CAPTION>
Exhibit
no. Description and method of filing
- ------------- --------------------------------------------------------------------------------------------
<S> <C> <C>
3.1 Restated Articles of Incorporation of Zions Bancorporation dated November 8, 1993, and
filed with the Department of Business Regulation, Division of Corporations of the State of
Utah on November 9, 1993 (incorporated by reference to Exhibit 3.1 to the Registrant's
Form S-4 Registration Statement, File No. 33-51145, filed on November 22, 1993)
*
3.2 Restated Bylaws of Zions Bancorporation, dated November 8, 1993 (incorporated by
reference to Exhibit 3.2 to the Registrant's Form S-4 Registration Statement, File No. 33-
51145, filed November 22, 1993) *
9 Voting Trust Agreement, dated December 31, 1991 (incorporated by reference to Exhibit
9 of Zions Bancorporation's Annual Report on Form 10-K for the year ended December
31, 1991) *
10.1 Amended and Restated Zions Bancorporation Pension Plan (incorporated by reference to
Exhibit 10.1 of Zions Bancorporation's Annual Report on Form 10-K for the year ended
December 31, 1994) *
10.2 Amendment to Zions Bancorporation Pension Plan effective December 1, 1994
(incorporated by reference to Exhibit 10.2 of Zions Bancorporation's Annual Report on
Form 10-K for the year ended December 31, 1994) *
10.3 Zions Utah Bancorporation Supplemental Retirement Plan Form (incorporated by
reference to Exhibit 19.4 of Zions Utah Bancorporation's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1985) *
10.4 Zions Utah Bancorporation Key Employee Incentive Stock Option Plan approved by the
shareholders of the Company on April 28, 1982 (incorporated by reference to Exhibit
10.1 of Zions Bancorporation's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995) *
10.5 Amendment No. 1 to Zions Bancorporation (formerly Zions Utah Bancorporation) Key
Employee Incentive Stock Option Plan approved by the shareholders of the Company on
April 27, 1990 (incorporated by reference to Exhibit 10.2 of Zions Bancorporation's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995)
*
10.6 Amendment No. 2 to Zions Bancorporation (formerly Zions Utah Bancorporation) Key
Employee Incentive Stock Option Plan approved by the shareholders of the Company on
April 28, 1995 (incorporated by reference to Exhibit 10.3 of Zions Bancorporation's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995)
*
10.7 Zions Bancorporation Deferred Compensation Plan for Directors, as amended May 1,
1991 (incorporated by reference to Exhibit 19 of Zions Bancorporation's Annual Report
on Form 10-K for the year ended December 31, 1991) *
</TABLE>
73
<PAGE> 76
EXHIBIT INDEX
FILED AS PART OF THIS REPORT ON FORM 10-K (continued)
(Pursuant to Item 601 of Regulations S-K)
<TABLE>
<CAPTION>
Exhibit
no. Description and method of filing
- ------------- --------------------------------------------------------------------------------------------
<S> <C> <C>
10.8 Zions Bancorporation Senior Management Value Sharing Plan, Award Period 1991-1994
(incorporated by reference to Exhibit 19 of Zions Bancorporation's Annual Report on
Form 10-K for the year end December 31, 1992)
*
10.9 Zions Bancorporation Senior Management Value Sharing Plan, Award Period 1992-1995
(incorporated by reference to Exhibit 10.6 of Zions Bancorporation's Annual Report on
Form 10-K for the year end December 31, 1992)
10.10 Zions Bancorporation Senior Management Value Sharing Plan, Award Period 1993-1996
(incorporated by reference to Exhibit 10.8 of Zions Bancorporation's Annual Report on
Form 10-K for the year end December 31, 1993)
*
10.11 Zions Bancorporation Senior Management Value Sharing Plan, Award Period 1994-1997
(incorporated by reference to Exhibit 10.9 of Zions Bancorporation's Annual Report on
Form 10-K for the year end December 31, 1994)
*
10.12 Zions Bancorporation Executive Management Pension Plan (incorporated by reference to
Exhibit 10.10 of Zions Bancorporation's Annual Report on Form 10-K for the year end
December 31, 1994)
*
10.13 Employment Agreement with Mr. John J. Gisi (filed)
10.14 Zions Bancorporation Senior Management Value Sharing Plan, Award Period 1995-1998
(filed)
21 List of subsidiaries of Zions Bancorporation (filed)
23 Consent of KPMG Peat Marwick, LLP independent certified public accountants (filed)
27 Article 9 Financial Data Schedule for Form 10-K (filed)
99.1 Form 11-K Annual Report of Zions Bancorporation Employee Stock Savings Plan (filed)
99.2 Form 11-K Annual Report of Zions Bancorporation Employee Investment Savings Plan
(filed)
</TABLE>
* incorporated by reference.
74
<PAGE> 1
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), made and entered into
this 20th day of September, 1993, by and among JOHN J. GISI ("Gisi"), ZIONS
BANCORPORATION, a Utah corporation, having its principal office in Salt Lake
City, Utah ("Zions Bancorp"), and ZIONS FIRST NATIONAL BANK OF ARIZONA, a
national banking association organized under the laws of the United States,
having its principal office in Mesa, Arizona ("Zions Arizona").
WITNESSETH THAT:
WHEREAS, the Agreement and Plan of Reorganization (the
"Agreement and Plan of Reorganization") dated as of September 20, 1993, by and
among Zions Bancorp, Zions Arizona, National Bancorp of Arizona Inc. (the
"Company") and National Bank of Arizona (the "Bank") provides that the Company
will be merged with and into ZMAZ, Inc. ("ZMAZ"), a wholly-owned subsidiary of
Zions Bancorp, with ZMAZ to be the entity resulting therefrom, and that the Bank
will be merged with and into Zions Arizona, with Zions Arizona to be the entity
resulting therefrom;
WHEREAS, Gisi is the Chairman of the Board of Directors and
Chief Executive Officer of each of the Company and the Bank;
WHEREAS, Zions Bancorp and Zions Arizona desire to secure the
employment of Gisi upon consummation of the transactions contemplated in the
Agreement and Plan of Reorganization;
WHEREAS, Gisi is desirous of entering into the Agreement for
such periods and upon the terms and conditions set forth herein; and
WHEREAS, Section 4.10 of the Agreement and Plan of
Reorganization contemplates that Gisi will enter into an employment and
non-competition agreement as a condition to the consummation of the transactions
described therein.
NOW, THEREFORE, in consideration of the premises and mutual
covenants and agreements hereinafter set forth, the parties agree as follows:
1. Employment; Responsibilities and Duties.
(a) The Company hereby agrees to employ Gisi, and Gisi hereby
agrees to serve, as a Senior Vice President of Zions Bancorp during the Term of
Employment as defined in Section 2 hereof, with such duties, responsibilities
and authority as shall be set forth in the Bylaws of Zions Bancorp or as may
otherwise be determined by Zions Bancorp;
(b) Zions Bancorp hereby agrees to cause the election of Gisi
to each of the Board of Directors of Zions Arizona, the Board of Directors of
Zions Mortgage Company and the Board of Directors of Zions Investment
Securities, Inc. (each, a "Board" and collectively, the "Boards") at the first
regular meeting of each Board during the Term of Employment and thereafter to
cause his re-election to each Board throughout the Term of Employment, and Gisi
hereby agrees to serve as a member of each Board upon his election and
re-election thereto during the Term of Employment.
(c) Zions Bancorp hereby agrees to appoint Gisi, and Gisi
hereby agrees to serve, upon the Executive Management Committee of Zions Bancorp
during the Term of Employment.
(d) Zions Arizona hereby agrees to employ Gisi, and Gisi
hereby agrees to serve, as Chairman of the Board of Directors and Chief
Executive Officer of Zions Arizona during the Term of Employment, with such
duties, responsibilities and authority as shall be set forth in the Bylaws of
Zions Arizona or as may otherwise be determined by Zions Arizona.
<PAGE> 2
(e) Gisi shall devote his full working time and best efforts
to the performance of his responsibilities and duties hereunder. During the Term
of Employment, Gisi shall not without the prior written consent of the
respective Boards of Directors of Zions Bancorp and Zions Arizona, render
services as an employee, independent contractor or otherwise, whether or not
compensated, to any person or entity other than Zions Bancorp and Zions Arizona
to which Gisi is not rendering such services as of the date hereof and which
person or entity is not set forth in Schedule A hereof; provided, however, that
Gisi may, where involvement in such activities do not individually or in the
aggregate significantly interfere with the performance by Gisi of his duties or
violate the provisions of Section 5 hereof, (i) render services to charitable
organizations or manage his personal investments or, (ii) with the prior
permission of the respective Boards of Directors of Zions Bancorp and Zions
Arizona, hold other directorships or part-time academic appointments or have
other business affiliations which would otherwise be prohibited under this
Section 1.
2. Term of Employment.
(a) The term of this Agreement ("Term of Employment") shall be
the period commencing on and as of the date hereof (the "Commencement Date") and
continuing until the Termination Date, which shall mean the earliest to occur
of:
(i) the third anniversary of the Commencement Date,
unless the Term of Employment shall be extended by mutual written agreement of
Gisi, Zions Bancorp and Zions Arizona in accordance with paragraph (b) below;
(ii) the death of Gisi;
(iii) Gisi's inability to perform his duties
hereunder, as a result of physical or mental disability, for a period of at
least 180 consecutive days or for at least 180 days during any period of 12
consecutive months during the Term of Employment; or
(iv) the discharge of Gisi by either Zions Bancorp
or Zions Arizona "for cause," which shall mean one or more of the following (it
being understood that Gisi's employment with Zions Bancorp shall terminate
immediately if his employment with Zions Arizona is terminated for cause and his
employment with Zions Arizona shall terminate immediately if his employment with
Zions Bancorp is terminated for cause):
(A) any willful or gross misconduct by Gisi
with respect to the business and affairs of Zions Bancorp or
Zions Arizona;
(B) the conviction of Gisi of a felony
(after the earlier of the expiration of any applicable appeal
period without perfection of an appeal by Gisi or the denial
of any appeal as to which no further appeal or review is
available to Gisi) whether or not committed in the course of
his employment by Zions Bancorp or Zions Arizona;
(C) Gisi's willful neglect, failure or
refusal to carry out his duties hereunder; or
(D) the breach by Gisi of any
representation, warranty or agreement contained herein, which
breach is material and adverse to Zions Bancorp or Zions
Arizona; or
(v) Gisi's resignation from his position as
Chairman of the Board of Directors and Chief Executive Officer of Zions Arizona
or as a member of the Board of Directors of Zions Arizona for any reason not set
forth in Section 2(a)(vii) hereof;
(vi) the termination of Gisi's employment by
Zions Bancorp and Zions Arizona, acting jointly, for any reason other than those
set forth in Subsections (i), (ii), (iii) or (iv) of this Section 2(a), at any
time, upon the 30th day following notice to Gisi;
<PAGE> 3
(vii) Gisi's resignation from his position as
Chairman of the Board of Directors and Chief Executive Officer of Zions Arizona
or as a member of the Board of Directors of Zions Arizona upon the occurrence of
any of the following events:
(A) any reduction in the salary payable to
Gisi pursuant to Section 3(a)(i) hereof, or in any bonus to
which Gisi is entitled pursuant to Section 3(a)(ii) hereof, to
which Gisi has not agreed and which has not resulted from a
termination pursuant to Section 2(a)(iv) hereof;
(B) any material reduction in the level of
responsibility, position (including status or title),
authority or duties of Gisi as set forth in Section 2 hereof
to which Gisi has not agreed and which has not resulted from a
termination of employment pursuant to Section 2(a)(iv) hereof;
(C) any relocation of Gisi's personal
residence to a place more than 50 miles from his personal
residence as of June 30, 1993 which is required by Zions
Bancorp or Zions Arizona, to which Gisi has not agreed and
which has not resulted from a termination of employment
pursuant to Section 2(a)(iv) hereof; or
(D) any receipt by Gisi of a direction or
instruction by, or ratified by, the Board of Directors of
Zions Arizona or the senior management or Board of Directors
of Zions Bancorp, to take or omit to take any action which in
the reasonable opinion of Gisi, would, if complied with,
result in the commission by Gisi, Zions Arizona or Zions
Bancorp of a violation of law, regulatory order or agreement
or a breach of his fiduciary duties, followed by the (x)
receipt by each of Zions Arizona and Zions Bancorp of written
notice by Gisi setting forth Gisi's decision to resign from
his position as Chairman of the Board of Directors and Chief
Executive Officer of Zions Arizona or as a member of the Board
of Directors of Zions Arizona and his grounds for such
decision (the "Resignation Notice"), (y) expiration of a
period of 30 days commencing on the date of receipt by Zions
Arizona and Zions Bancorp of the Resignation Notice (the "Cure
Period") during which period neither Zions Arizona nor Zions
Bancorp has, in the reasonable opinion of Gisi, modified,
rescinded or reversed the direction or instruction giving rise
to Gisi's grounds for resignation, set forth in the
Resignation Notice, and (z) receipt by Zions Arizona and Zions
Bancorp from Gisi, within a period of 30 days commencing upon
the date of termination of the Cure Period, of an opinion of
legal counsel possessing requisite legal expertise in such
matters which concurs in Gisi's opinion that the direction or
instruction giving rise to Gisi's grounds for resignation set
forth in the Resignation Notice, would, if implemented (or if
already implemented, not modified, rescinded or reversed),
result in the commission by Gisi, Zions Arizona or Zions
Bancorp, of a violation of law, regulatory order or agreement
or a breach of his fiduciary duties, and that any modification
thereto, rescission or reversal thereof by Zions Arizona or
Zions Bancorp made during the Cure Period would not be (or is
not) sufficient to render such instruction or direction, upon
its implementation, not a violation of law, regulatory order
or agreement or a breach of his fiduciary duties.
(b) During the 60-day period prior to each anniversary of the
Commencement Date, Zions Bancorp and Zions Arizona and Gisi may, by mutual
agreement, which shall be in writing, extend the Term of Employment for an
additional one-year period. Any failure of Zions Bancorp and Zions Arizona and
Gisi to so extend the Term of Employment shall not be deemed a termination of
the Term of Employment under Section 2(d) of this Agreement.
(c) In the event that the Term of Employment shall be
terminated for any of the reasons set forth in Section 2(a)(i), (iv) or (v),
Gisi (or his estate, as the case may be) shall be entitled to receive, upon the
occurrence of any such event:
(i) any salary (as hereinafter defined) as payable
pursuant to Section 3(a)(i) hereof which shall have accrued as of the
Termination Date; and
<PAGE> 4
(ii) such rights as Gisi shall have accrued as of
the Termination Date under the terms of any plans or arrangements in which he
participates pursuant to Sections 3(b) or (c) hereof, any right to
reimbursement for expenses accrued as of the Termination Date payable pursuant
to Section 3(b) hereof, and the right to receive the cash equivalent of paid
annual leave and sick leave accrued as of the Termination Date pursuant to
Section 3(e) hereof.
(d) In the event that the Term of Employment shall be
terminated for any reason other than those set forth in Section 2(a)(i), (iv) or
(v), Gisi shall be entitled to receive:
(i) promptly following the Termination Date, a lump
sum equal to all salary payable pursuant to Section 3(a)(i) hereof for the
period of two years commencing on the Termination Date; and
(ii) such rights as Gisi may have accrued as of the
Termination Date under the terms of any plans or arrangements in which he
participates pursuant to Sections 3(b) or (c) hereof, any right to reimbursement
for expenses accrued as of the Termination Date payable pursuant to Section 3(b)
hereof, and the right to receive the cash equivalent of paid annual leave and
sick leave accrued as of the Termination Date pursuant to Section 3(e) hereof.
(e) In the event that Gisi resigns his position as Chairman of
the Board of Directors and Chief Executive Officers of Zions Arizona or as a
member of the Board of Directors of Zions Arizona, he shall be deemed to have
resigned from all positions set forth in Section 1 hereof.
3. Compensation.
For the services to be performed by Gisi for Zions Bancorp and
Zions Arizona under this Agreement, Gisi shall be compensated in the following
manner:
(a) Salary and Bonus.
(i) Salary. During the Term of Employment, Zions
Arizona shall pay Gisi an initial base salary of $200,000 per annum. The amount
of the salary hereunder shall be reviewed at least annually by the Executive
Compensation Committee of the Board of Directors of Zions Bancorp and changes
thereto may be made in accordance with the compensation policies of Zions
Bancorp. Salary shall be payable in accordance with Zions Arizona's normal
payroll practices with respect to executive personnel as in effect from time to
time.
(ii) Bonus. During the Term of Employment and
beginning with the calendar year ending as of December 31, 1994, for each
calendar year in which the Operating Income (as defined below) of Zions Arizona
is not less than the Operating Income of the Bank for the calendar year ended
December 31, 1993, Gisi shall be entitled to a bonus payment by Zions Arizona in
the amount of $53,000. Any bonus payable hereunder by Zions Arizona for any
calendar year shall be paid during the first calendar quarter of the succeeding
calendar year. For the purposes of this Section 3(a)(ii), Operating Income shall
have the meaning ascribed to it under generally accepted accounting principles
but shall not (x) with respect to the Bank and Zions Arizona during any calendar
year include any non-recurring gain or loss or any non-recurring income or
expense, (y) with respect to the Bank or Zions Arizona for any calendar year, be
reduced by the amount of performance bonus payments to management of the Bank
owed for services rendered in the calendar year ending as of December 31, 1993
as described in Section 7.4(i) of the Agreement and Plan of Reorganization, or
(z) with respect to the Bank or Zions Arizona in any calendar year be reduced by
extraordinary expenses incurred in connection with the transaction contemplated
in the Agreement and Plan of Reorganization (including, without limitation, any
additions to the loan loss reserves required by Zions Bancorp pursuant to
Section 4.9 of the Agreement and Plan of Reorganization or any professional fees
or expenses). The amount of bonus herewith shall be reviewed at least annually
by the Executive Compensation Committee of the Board of Directors of Zions
Bancorp and changes thereto may be made in accordance with the compensation
policies of Zions Bancorp.
<PAGE> 5
(b) Value-Sharing Plan and Executive Stock Option Plan. During
the Term of Employment, Gisi shall be entitled to participate in the executive
value-sharing plan and the executive stock option plan of Zions Bancorp as in
effect as of the Commencement Date or as may be modified or added to by Zions
Bancorp from time to time, under such terms as may be applicable to officers of
Zions Bancorp or Zions Arizona of Gisi's rank.
(c) Employee Benefit Plans or Arrangements. During the Term of
Employment, Gisi shall be entitled to participate immediately in all employee
benefit plans of Zions Bancorp or Zions Arizona, as presently in effect or as
they may be modified or added to by Zions Bancorp or Zions Arizona from time to
time under such terms as may be applicable to officers of Zions Bancorp or Zions
Arizona of Gisi's rank, including, without limitation, plans providing
retirement benefits, medical insurance, life insurance, disability insurance,
and accidental death or dismemberment insurance.
(d) Automobile. During the Term of Employment, Zions Arizona
will pay directly, or reimburse Gisi, for lease payments and reasonable,
documented expenses of insurance, maintenance, garage and other out-of-pocket
expenses (collectively, the "Automobile Expenses"), related to Gisi's continued
use of such automobile as is provided, or whose expenses are paid for, by the
Company or the Bank as of June 30, 1993 and shall, at the expiration of any
applicable lease of such automobile during the Term of Employment, provide for
the balance of the Terms of Employment, at its expense (including all applicable
Automobile Expenses), a similar automobile, through, in its discretion, lease or
otherwise.
(e) Vacation and Sick Leave. During the Term of Employment,
Gisi shall be entitled to paid annual vacation periods and sick leave in
accordance with the policies of Zions Bancorp or Zions Arizona as in effect as
of the Commencement Date or as may be modified by Zions Bancorp or Zions Arizona
from time to time as may be applicable to officers of Zions Bancorp or Zions
Arizona of Gisi's rank.
(f) Country Club. During the Term of Employment, Zions Arizona
shall pay for Gisi's continued membership in such country clubs whose membership
fees are paid by the Company or the Bank as of June 30, 1993.
(g) Withholding. All compensation to be paid to Gisi hereunder
shall be subject to required withholding and other taxes.
(h) Expenses. During the Term of Employment, Gisi shall be
reimbursed for reasonable travel and other expenses incurred or paid by Gisi in
connection with the performance of his services under this Agreement, upon
presentation of expense statements or vouchers or such other supporting
information as may from time to time be requested, in accordance with such
policies of Zions Bancorp or Zions Arizona as are in effect as of the
Commencement Date and as may be modified by Zions Bancorp or Zions Arizona under
such terms as may be applicable to officers of Zions Bancorp or Zions Arizona of
Gisi's rank.
4. Continued Vesting of Certain Stock Option Rights.
During the Term of Employment, any options to acquire Company
Common Stock (as that term is defined in the Agreement and Plan of
Reorganization) conferred upon Gisi by the Company which are set forth as
Schedule B hereof (the "Company Stock Options") shall be deemed to continue to
vest at the times and in the amounts, and be exercisable during the periods of
time, set forth in Schedule B for the purpose of determining the convertibility
of the Company Stock Options into Zions Bancorp Stock (as that term is defined
in the Agreement and Plan of Reorganization) pursuant to Sections 1.8 of the
Agreement and Plan of Reorganization); provided that:
(a) in the event that the Term of Employment is terminated for
any of the reasons set forth in Section 2(a) hereof, the vesting of the Company
Stock Options shall cease as of the Termination Date and Gisi (or his estate, as
the case may be) shall be entitled to exercise such Company Stock Options which,
in accordance with Schedule B hereof, are exercisable (but are as yet
unexercised) on or before the Termination Date, at any time on or prior to the
date of expiration of such Common Stock Options, in the manner permitted under
Section 1.8 of the Agreement and Plan of Reorganization; and
<PAGE> 6
(b) in the event that a change of control (as defined below)
occurs with respect to Zions Bancorp, Zions Bancorp will use its best efforts to
obtain for Gisi treatment of the Company Stock Options by any acquirer of Zions
Bancorp which is comparable to that received by other members of executive
management of Zions Bancorp from such acquirer with respect to any options for
Zions Bancorp Stock to which they would be entitled under any plan or agreement.
For purposes of this Section 4, the term "change of control" with respect to
Zions Bancorp shall mean the occurrence of any of the following events:
(i) a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A as in effect on the date hereof pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"); provided that, without limitation, such a
change in control shall be deemed to have occurred at such time as any person
hereafter becomes a "beneficial owner" (as defined in Rule 13d-3 under Exchange
Act), directly or indirectly, of 25 percent or more of the combined voting power
of Zions Bancorp's securities ordinarily having the right to vote at elections
of directors (the "Voting Securities");
(ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of Zions Bancorp cease for any reason to constitute at least a
majority thereof for any reason other than retirement or resignation based
solely upon personal circumstances;
(iii)there shall be consummated (x) any consolidation
or merger of Zions Bancorp in which Zions Bancorp is not the continuing or
surviving corporation or pursuant to which Voting Securities thereof would be
converted into cash, securities, or other property, other than a merger of Zions
Bancorp in which the holders of Voting Securities immediately prior to the
merger have the same proportionate ownership of common stock of the surviving
corporation immediately after the merger, or (y) any sale, lease, exchange, or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of Zions Bancorp, provided that any such
consolidation, merger, sale, lease, exchange or other transfer consummated at
the insistence of an appropriate banking regulatory agency shall not constitute
a change in control; or
(iv) approval by the shareholders of Zions Bancorp of
any plan or proposal for the liquidation or dissolution of Zions Bancorp.
5. Confidential Business Information; Non-Competition.
(a) Gisi acknowledges that certain business methods of Zions
Bancorp and Zions Arizona, their creative techniques, customer lists, vendors,
consultants and other persons who render service or provide material to Zions
Bancorp or Zions Arizona, as well as certain other materials including marketing
plans and the like are deemed by Zions Bancorp and Zions Arizona to be and are
in fact confidential business information either of Zions Bancorp or Zions
Arizona or are entrusted to Zions Bancorp or Zions Arizona by third parties.
Accordingly, Gisi agrees that he shall not disclose or divulge to any third
party, except as may be required by his duties hereunder, by law, regulation or
order of a court or government authority or as directed by Zions Bancorp or
Zions Arizona, nor shall he use to the detriment of Zions Bancorp or Zions
Arizona or use in any business or on behalf of any business competitive with or
substantially similar to any business of Zions Bancorp or Zions Arizona, any
confidential business information obtained during the course of his employment
by Zions Bancorp or Zions Arizona. The foregoing shall not be construed as
restricting Gisi from disclosing such information to the employees of Zions
Bancorp or Zions Arizona.
<PAGE> 7
Such confidential information includes but is not limited to
procedures, methods, sales relationships developed while in Zions Bancorp's or
Zions Arizona's service, customers and their requirements, marketing plans, and
compositions, ideas, plans and methods belonging to or related to the affairs of
Zions Bancorp or Zions Arizona. In this regard, Zions Bancorp and Zions Arizona
assert proprietary rights in all of their business information except for such
information as is clearly in the public domain. Notwithstanding the foregoing,
the parties hereto agree that information which would be generally known or
available to persons skilled in Zions Bancorp's and Zions Arizona's fields shall
be considered to be "clearly in the public domain" for the purposes of the
preceding sentence.
(b) Gisi hereby agrees that during the Term of Employment and
for a period of two years commencing on the Termination Date following the
termination of Gisi's employment pursuant to Sections 2(a)(i), (iv) or (v)
hereof, Gisi will not (i) engage in the banking business other than on behalf of
Zions Bancorp or Zions Arizona, within the Market Area (as hereinafter defined),
(ii) directly or indirectly own, manage, operate, control, be employed by or
provide management or consulting services in any capacity to any firm,
corporation, or other entity (other than Zions Bancorp and Zions Arizona)
engaged in the banking business in the Market Area or (iii) directly or
indirectly solicit or otherwise intentionally cause any employee, officer or
member of the Board of Directors of Zions Bancorp or Zions Arizona to engage in
any action prohibited under (i) or (ii) of this Section 5(b); provided, that the
ownership by Gisi as an investor of not more than five percent of the
outstanding shares of stock of any corporation whose stock is listed for trading
on any securities exchange or is traded in the over-the-counter market (or the
shares of any investment company as defined in Section 3 of the Investment
Company Act of 1940, as amended), shall not in itself constitute a violation of
Gisi's obligations under this Section 5(b). As used herein, "Market Area" shall
mean Maricopa County and Pima County in Arizona and any county or metropolitan
area in which Zions Arizona operates a branch or other facility for the
transaction of business. The Market Area as of any date subsequent to the Term
of Employment shall be determined as of the last day of the Term of Employment.
(c) Gisi recognizes that irreparable injury shall result to
Zions Bancorp and Zions Arizona in the event of a breach of any of the
provisions of this Section 5 (the "Designated Provisions") and that Zions
Bancorp and Zions Arizona will have no adequate remedy at law with respect
thereto. Accordingly, in the event of a material breach of any Designated
Provision, and in addition to any other legal or equitable remedy Zions Bancorp
and Zions Arizona may have, Zions Bancorp and Zions Arizona shall be entitled to
injunctive relief (including, without limitation, specific performance) to
restrain the violation or breach thereof by Gisi or any affiliates, agents or
any other persons acting for or with Gisi in any capacity whatsoever.
(d) It is the desire and intent of the parties that the
provisions of this Section 5 shall be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any particular provision of this Section
5 shall be adjudicated to be invalid or unenforceable, such provision shall be
deemed amended to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, such deletion to apply only with respect to the operation of such
provision in the particular jurisdiction in which such adjudication is made. In
addition, should any court determine that the provisions of this Section 5 shall
be unenforceable with respect to scope, duration or geographic area, such court
shall be empowered to substitute, to the extent enforceable, provisions similar
hereto or other provisions so as to provide to Zions Bancorp and Zions Arizona,
the fullest extent permitted by applicable law, the benefits intended by this
Section 5.
6. Life Insurance. Zions Bancorp or Zions Arizona in its
discretion, may apply for and procure as owner and for its own benefit,
insurance on the life of Gisi, in such amount and in such form as Zions Bancorp
or Zions Arizona may choose. Gisi shall have no interest whatsoever in any such
policy or policies but, at the request of Zions Bancorp or Zions Arizona, shall
submit to medical examinations and supply such information and execute such
documents as may reasonably be required by the insurance company or companies to
which Zions Bancorp or Zions Arizona has applied for insurance.
<PAGE> 8
7. Representation and Warranty. Gisi represents and warrants
to Zions Bancorp and Zions Arizona that the execution, delivery and performance
of this Agreement by Gisi will not result in or constitute a breach of or
conflict with any term, covenant, condition or provision of any commitment,
contract or other agreement or instrument, including, without limitation, any
other employment agreement, to which Gisi is or has been a party.
8. Notices. All notices, consents, waivers, or other
communications which are required or permitted hereunder shall be in writing and
deemed to have been duly given if delivered personally or by messenger,
transmitted by telex or telegram, by express courier, or sent by registered or
certified mail, return receipt requested, postage prepaid. All communications
shall be addressed to the appropriate address of each party as follows:
If to Zions Bancorp or Zions Arizona:
Zions Bancorporation
1380 Kennecott Building
Salt Lake City, Utah 84133
Attention: Mr. Harris H. Simmons
President and Chief Executive Officer
With a required copy to:
Brian D. Alprin, Esq.
Metzger, Hollis, Gordon & Mortimer
1275 K Street, N.W., Suite 1000
Washington, D.C. 20005
If to Gisi:
7101 North Mercer Springs
Tucson, Arizona 85718
All such notices shall be deemed to have been given on the
date delivered, transmitted, or mailed in the manner provided above.
9. Assignment. No party may assign this Agreement or any
rights or obligations hereunder without the consent of the other parties hereto.
10. Governing Law. This Agreement shall be construed and
governed in all respects by the law applicable to contracts made and to be
performed in the State of Arizona.
11. Entire Agreement. This Agreement constitutes the entire
understanding between Zions Bancorp, Zions Arizona and Gisi relating to the
subject matter hereof. Any previous agreements or understandings between the
parties hereto regarding the subject matter hereof are merged into and
superseded by this Agreement. Neither this Agreement nor any provisions hereof
can be modified, changed, discharged or terminated except by an instrument in
writing signed by the party against whom any waiver, change, discharge or
termination is sought.
12. Severability. If any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable for any reason
whatsoever:
(a) the validity, legality and enforceability of the remaining
provisions of this Agreement (including, without limitation, each portion of any
section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable) shall not in any way be affected or impaired thereby;
and
<PAGE> 9
(b) to the fullest extent possible, the provisions of this
Agreement (including, without limitation, each portion of any section of this
Agreement containing any such provisions held to be invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
13. Costs of Litigation. In the event litigation is commenced
to enforce any of the provisions hereof, or to obtain declaratory relief in
connection with any of the provisions hereof, the prevailing party shall be
entitled to recover reasonable attorney's fees. In the event this Agreement is
asserted in any litigation as a defense to any liability, claim, demand, action,
cause of action or right asserted in such litigation, the party prevailing on
the issue of that defense shall be entitled to recovery of reasonable attorney's
fees.
14. Headings. All headings are for convenience only and shall
not limit or define the text hereof.
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto executed or caused this
Agreement to be executed as of the day and year first above written.
[The remainder of this page is intentionally left blank.]
<PAGE> 11
ZIONS BANCORPORATION
Attest:
/s/ Gary L. Anderson By: /s/ Harris H. Simmons
- ----------------------------------- ---------------------------------------
Gary L. Anderson Harris H. Simmons
Secretary President and
Chief Executive Officer
ZIONS FIRST NATIONAL BANK OF ARIZONA
By: /s/ Roy W. Simmons
- ----------------------------------- ---------------------------------------
[ ] Roy W. Simmons
[ ] Chairman
/s/ John J. Gisi
- ----------------------------------- ---------------------------------------
John J. Gisi
<PAGE> 12
SCHEDULE A
SCHEDULE OF AFFILIATIONS
Person or Entity Capacity
- ---------------- --------
American Southwest Mortgage Investment Corporation Director
Tucson Country Club Director
<PAGE> 13
SCHEDULE B
SCHEDULE OF COMPANY STOCK OPTIONS
<TABLE>
<CAPTION>
Number of
Date First Date of Company
Exercisable Expiration Shares Price
- --------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
11-26-89 11-26-99 8,000 $ 4.26
11-26-90 11-26-99 8,000 4.26
11-26-91 11-26-99 8,000 4.26
11-26-92 11-26-99 8,000 4.26
11-26-93 11-26-99 8,000 4.26
11-26-94 11-26-99 8,000 4.26
11-26-95 11-26-99 8,000 4.26
11-26-96 11-26-99 8,000 4.26
11-26-97 11-26-99 8,000 4.26
11-26-98 11-26-99 8,000 4.26
----------------------
80,000
6-6-92 6-6-97 4,000 $ 4.50
6-6-93 6-6-97 4,000 4.50
6-6-94 6-6-97 4,000 4.50
6-6-95 6-6-97 4,000 4.50
6-6-96 6-6-97 4,000 4.50
----------------------
20,000
----------------------
Total 100,000
======================
</TABLE>
<PAGE> 1
EXHIBIT 10.14
Zions Bancorporation
Senior Management Value Sharing Plan
Award Period: 1995-1998
Objective:
To provide an ongoing multi-year incentive for the senior managers of
Zions Bancorporation and its subsidiaries which:
A. Focuses managers' attention on the creation of long-term shareholder
value;
B. Creates an incentive that promotes teamwork across departments and
subsidiaries, and which encourages managers to balance profit center
accountability with Company-wide goals; and,
C. Complements the short-range annual bonuses which reflect the
achievement of annual objectives and the Company's short-term profitability.
Eligibility:
Participants in the Plan shall consist of the senior management group
(and certain other key managers) of the Company and its major subsidiaries.
Participants for each Award Period shall be specifically identified by the
Company's Board of Directors (the "Board") or its Executive Compensation
Committee (the "Committee").
Allocation of Awards:
It is anticipated that during the first quarter of each year in which
the Plan operates, the Board of Directors shall approve the establishment of a
pool of Award Funds to be generated during the Award Period, according to the
general formula outlined below. Participants shall be designated by the Board or
the Committee. Claims against the pool of Award Funds for each Award Period
shall be represented by Participation Units ("PU's"), and each participant shall
be allocated a specific number of PU's by the Committee. The PU's shall
represent a pro-rata claim, in proportion to the total PU's designated for that
Award Period, on any Award Funds generated by the Plan during the Award Period.
Term:
Each Award Period shall consist of a continuous four-calendar-year
period. The Plan is intended to constitute a "moving four-year-average"
incentive plan, with the anticipation that a new Award Period would be
designated each year, with multiple Award Periods overlapping one another.
Nevertheless, the establishment of a new Award Period each year is subject to
the Board's discretion.
Determination of Award Funds:
The amount of Award Funds in the pool for each Award Period shall be a
function of the mathematical average return on shareholders' equity ("AROE") for
each of the four years in the Award Period, together with the aggregate earnings
per share ("AEPS") during the Award Period.
Each year, the Committee shall establish minimum targets for AROE and
AEPS for the Award Period. These minimum targets would both be required to be
reached in order for any award Funds to be earned. Additionally, the Committee
may designate Award Fund allocation amounts based upon the achievement of higher
levels of AROE, with upward adjustments possible if higher levels of AEPS are
achieved. The Committee may also designate other conditions and adjustment
factors to ensure the Plan's integrity and consistency with shareholder and
depositor interests.
<PAGE> 2
The 1995-1998 Award Period formula for the determination of total Award
Funds is as follows:
* Minimum AROE: 14.00%
* Minimum AEPS: $20.76
Funding of 1995-1998 Award Fund Pool:
<TABLE>
<CAPTION>
Cumulative
AROE Award Funds
- ----------- ----------------------
<S> <C>
14% $ 0
15% 325,000
16% 785,000
17% 1,289,000
18% 1,787,000
19% 2,515,000
20% 3,044,000
21% 3,759,000
22% 4,616,000
</TABLE>
Interim amounts shall be calculated by interpolation.
The basic Award Fund amount would be further modified by multiplying
the cumulative Award Funds by 1+[(AEPS - $20.76)/17], with a maximum AEPS figure
of $26.37 (resulting in a 33% maximum upward adjustment in the Award Funds.
For the 1995-1998 Award Period, the following parameters shall be
established, and adjustments made to the Company's earnings calculations, for
purposes of determining Award Funds available under the Plan:
1). The Plan is intended to create an incentive for increasing
shareholder value. However, this is not to be accomplished by reducing capital
levels or assuming extraordinary or unwarranted risks. Accordingly, it is
expected that total risk-based capital levels shall be maintained at a level at
least 125% of regulatory requirements.
2). The Company's reserve levels are to be conservatively maintained.
To the extent that the consolidated Allowance for Loan and Lease Losses is less
than 110% of the peer group level, as expressed in terms of reserves/non-current
loans as reported in the most current Uniform Bank Performance Report available
at January 31, 1998, an appropriate adjustment shall be made to after-tax
earnings (for purposes of calculating Award Funds only) to compensate for any
deficit relative to the 110% minimum target level. Actual reserve levels are, of
course, subject to Board and/or regulatory decisions. No upward adjustments
shall be made in "pro forma" earnings in the event actual reserve levels exceed
110% of the peer group target.
3). Unless determined otherwise by the Board, in the event of any
merger involving an acquisition by Zions for the exchange of Zions' shares in a
pooling-of-interests transaction, earnings per share prior to the acquisition
date shall, for the purpose of calculating AEPS during the Award Period, be
determined using Zions' un-restated numbers.
Other Terms and Conditions:
The Plan is to be governed and interpreted by the Committee, whose
decisions shall be final. The terms of the Plan are subject to change or
termination at their sole discretion.
<PAGE> 3
The Company shall retain the right to withhold payment of Award Funds
to participants in the event of a significant deterioration in the Company's
financial condition, or if so required by regulatory authorities, or for any
other reason considered valid by the Board in its sole discretion.
Participants shall not vest in any benefits available under the Plan
until the conclusion of each Award Period. Nevertheless, upon death, permanent
disability, or normal or early retirement (unless upon early retirement the
participant becomes employed by an entity which competes with Zions
Bancorporation), participants (or their estates) shall be eligible to receive a
proportionate share of Award Funds based upon the number of PU's granted, and
the number of full calendar quarters the participant was engaged as an officer
of the Company or its subsidiaries prior to death, disability, or retirement.
The PU's shall not be transferable without the express approval of the
Committee.
In the event of the merger or acquisition of the Company, the Plan
shall be terminated as of the end of the fiscal quarter preceding the first full
quarter before the transaction is consummated. The Board may make any reasonable
estimates or adjustments necessary in calculating Award Funds for any Award
Period. The Board may also, at its sole discretion, alter the terms of the Plan
at any time during an Award Period.
This document is intended to provide a guideline for the creation and
distribution of incentive compensation. Nothing herein creates a contractual
obligation binding on the Board, and no Participant shall have any legal rights
with respect to an Award until such Award is distributed.
Earnings per share calculations shall be adjusted to reflect any stock
splits, stock dividends, or other such changes in capitalization, at the
discretion of the Committee.
The award of PU's to any participant shall not confer any right with
respect to continuance of employment by the Company or its subsidiaries, nor
limit in any way the right of the Company to terminate his or her employment at
any time, with or without cause.
<PAGE> 4
APPENDIX
ZIONS BANCORPORATION VALUE-SHARING PLAN: 1995-98
Calculation of Participation Unit Value
Average Annual ROE ("AROE")
If the AROE is:
<TABLE>
<CAPTION>
Over - But not over - The basic value of a Participation Unit is -
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
14.00% 14.99% $0 + $.0271 per basis point of the amount over 14.00%
15.00% 15.99% $2.71 + $.0384 per basis point of the amount over 15.00%
16.00% 16.99% $6.54 + $.0419 per basis point of the amount over 16.00%
17.00% 17.99% $10.74 + $.0416 per basis point of the amount over 17.00%
18.00% 18.99% $14.89 +$.0607 per basis point of the amount over 18.00%
19.00% 19.99% $20.95 + $.0441 per basis point of the amount over 19.00%
20.00% 20.99% $25.37 + $.0596 per basis point of the amount over 20.00%
21.00% 21.99% $31.33 + $.0714 per basis point of the amount over 21.00%
22.00% $38.47
</TABLE>
Aggregate E. P. S. ("AEPS") Modifier:
The basic Participation Unit value determined above shall be adjusted
as follows:
If AEPS for 1995-98 is equal to or less than $20.76, the Participation
Units shall have no value.
If AEPS is greater than $20.76, the basic amount determined based on
AROE shall be multiplied by a factor of:
1+[(AEPS-$20.76)/17] (with a maximum factor of 1.33)
to arrive at a final total value of each Participation Unit.
* * * * * * *
Example: If AROE is 18.16% and AEPS is $24.03, each Participation Unit would be
worth $18.91.
<PAGE> 1
EXHIBIT 21
ZIONS BANCORPORATION AND SUBSIDIARIES
AT DECEMBER 31, 1995
<TABLE>
<CAPTION>
SUBSIDIARY STATE
---------- -----
<S> <C>
Zions First National Bank Federally chartered doing business in Utah
Nevada State Bank Nevada
National Bank of Arizona Federally chartered doing business in Arizona
Lockhart Realty Company Utah
Great Western Financial Corporation Utah
Zions Credit Corporation Utah
Zions Data Service Company Utah
Zions Insurance Agency, Inc. Utah
Zions Life Insurance Company Arizona
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
Zions Bancorporation:
We consent to the incorporation by reference in Zions Bancorporation's (i)
Registration Statement (Form S-3 No. 33-58801) and related Prospectus pertaining
to the Zions Bancorporation Dividend Reinvestment and Common Stock Purchase
Plan, (ii) Registration Statement (Form S-8 No. 33-58845) and related Prospectus
pertaining to Zions Bancorporation Employee Stock Savings Plan, and (iii)
Registration Statement (Form S-8 No. 33-58855) and related Prospectus pertaining
to Zions Bancorporation Employee Investment Savings Plan, of our report dated
January 22, 1996, relating to the consolidated balance sheets of Zions
Bancorporation and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, retained earnings, and cash flows for
each of the years in the three-year period ended December 31, 1995, which report
appears in this annual report on Form 10-K for the year ended December 31,
1995. Our report refers to changes in accounting principles relating to the
adoption of the Financial Accounting Standards Board's Statements of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a
Loan," as amended by Statement No. 118, "Accounting by Creditors for Impairment
of a Loan-Income Recognition and Disclosures," 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 audit referred to in the above-mentioned report also included the related
financial schedule entitled Short-term Borrowings, for each of the years in the
three-year period ended December 31, 1995, included in Part II, Item 7 on page
38. In our opinion, such financial schedule presents fairly the information
required to be set forth therein for each of the years in the three-year period
ended December 31, 1995.
We also consent to the incorporation by reference in Zions Bancorporation's
Registration Statement (Form S-8 No. 33-58845) of Zions Bancorporation Employee
Stock Savings Plan of our report dated March 8, 1996, relating to the statements
of net assets available for benefits of Zions Bancorporation Employee Stock
Savings Plan as of December 31, 1995 and 1994, and the related statements of
changes in net assets available for benefits for each of the years in the
three-year period ended December 31, 1995, which report appears in this annual
report on Form 11-K for the year ended December 31, 1995.
We also consent to the incorporation by reference in Zions Bancorporation's
Registration Statement (Form S-8 No. 33-58855) of Zions Bancorporation Employee
Investment Savings Plan of our report dated March 8, 1996, relating to the
statements of net assets available for benefits of Zions Bancorporation Employee
Investment Savings Plan as of December 31, 1995 and 1994, and the related
statements of changes in net assets available for benefits for each of the years
in the three-year period ended December 31, 1995, which report appears in this
annual report on Form 11-K for the year ended December 31, 1995.
KPMG Peat Marwick LLP
Salt Lake City, Utah
March 18, 1996
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1995 AND RELATED CONSOLIDATED
STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1995 INCLUDED IN THE
COMPANY'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 418067
<INT-BEARING-DEPOSITS> 34580
<FED-FUNDS-SOLD> 652671
<TRADING-ASSETS> 63706
<INVESTMENTS-HELD-FOR-SALE> 398200
<INVESTMENTS-CARRYING> 1078583
<INVESTMENTS-MARKET> 1093934
<LOANS> 2806956
<ALLOWANCE> 67555
<TOTAL-ASSETS> 5620646
<DEPOSITS> 4097114
<SHORT-TERM> 880247
<LIABILITIES-OTHER> 72376
<LONG-TERM> 142403
0
0
<COMMON> 73477
<OTHER-SE> 355029
<TOTAL-LIABILITIES-AND-EQUITY> 5620646
<INTEREST-LOAN> 264302
<INTEREST-INVEST> 166181
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 430483
<INTEREST-DEPOSIT> 128510
<INTEREST-EXPENSE> 203389
<INTEREST-INCOME-NET> 227094
<LOAN-LOSSES> 2800
<SECURITIES-GAINS> (148)
<EXPENSE-OTHER> 188730
<INCOME-PRETAX> 122278
<INCOME-PRE-EXTRAORDINARY> 81328
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 81328
<EPS-PRIMARY> 5.53
<EPS-DILUTED> 5.53
<YIELD-ACTUAL> 4.39
<LOANS-NON> 7438
<LOANS-PAST> 5232
<LOANS-TROUBLED> 249
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 67018
<CHARGE-OFFS> 8372
<RECOVERIES> 5860
<ALLOWANCE-CLOSE> 67555
<ALLOWANCE-DOMESTIC> 11081
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 56474
</TABLE>
<PAGE> 1
EXHIBIT 99.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) Of The
Securities Exchange Act of 1934
For the Year Ended December 31, 1995
ZIONS BANCORPORATION
EMPLOYEE STOCK SAVINGS PLAN
ZIONS BANCORPORATION
1380 Kennecott Building
Salt Lake City, Utah 84133
<PAGE> 2
ITEM 1. CHANGES IN THE PLAN
The Plan was completely amended and restated as of October 1, 1992, with certain
provisions retroactively effective as of January 1, 1989. In 1994, the Plan was
amended for the purpose of maintaining its qualification under the Internal
Revenue Code pursuant to the Tax Reform Act of 1986 and, in order to conform the
Plan to the requirements of the Unemployment Compensation Act of 1992 and the
Omnibus Budget Reconciliation Act of 1993. No changes were made in the Plan
during the year 1995.
ITEM 2. CHANGES IN INVESTMENT POLICY
No material changes were made during the fiscal year in the policy with respect
to the kind of securities and other investments in which funds held under the
plan may be invested.
ITEM 3. CONTRIBUTIONS UNDER THE PLAN
The Company's contributions are measured by reference to employee contributions
and are not discretionary.
ITEM 4. PARTICIPATING EMPLOYEES
There were 1,676 participating employees in the Plan on December 31, 1995.
ITEM 5. ADMINISTRATION OF THE PLAN
(a) Zions Bancorporation is the Plan administrator. The Company's Board of
Directors has appointed an Administrative Committee consisting of seven
persons. The Committee has full power and authority to administer the
Plan and to interpret its provisions. The present members of the
Committee and their positions held are:
<TABLE>
<CAPTION>
Member Position - Company
- --------------------------------- ----------------------------------------------------------------------
<S> <C>
Clark B. Hinckley, Chairman Senior Vice President of Zions Bancorporation
Harris H. Simmons President and Chief Executive Officer of Zions Bancorporation
Gary L. Anderson Senior Vice President of Zions Bancorporation
Peter K. Ellison Executive Vice President of Zions First National Bank
W. David Hemingway Executive Vice President of Zions First National Bank
Richard G. Crandall Vice President of Zions First National Bank
Russell W. Miller President of Zions Insurance Agency, Inc.
</TABLE>
The address of each fiduciary listed above is 1380 Kennecott Building,
Salt Lake City, Utah 84133.
(b) No compensation is paid to the Committee members by the Plan. All
expenses of the Plan and its administration are paid by the Company.
<PAGE> 3
ITEM 6. CUSTODIAN OF INVESTMENTS
(a) Zions First National Bank, One South Main Street, Salt Lake City, Utah
84133 is the custodian and trustee.
(b) The custodian and trustee receive no compensation from the Plan.
ITEM 7. REPORTS TO PARTICIPATING EMPLOYEES
Participating employees are furnished an annual statement reflecting the status
of their accounts as of the end of the fiscal year.
ITEM 8. INVESTMENT OF FUNDS
Substantially all of the assets of the Plan are invested in securities of the
Company.
ITEM 9. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Report of Independent Auditors
Statements of Net Assets Available for Benefits - December 31, 1995
and 1994
Statements of Changes in Net Assets Available for Benefits -
Years ended December 31, 1995, 1994, and 1993
Notes to Financial Statements
Schedules - Schedules I, II, and III have been omitted for the reasons
that they are not required or are not applicable, or the required
information is shown in the financial statements or notes thereto.
(b) Exhibits - None
<PAGE> 4
Independent Auditors' Report
The Trust Committee
Zions Bancorporation
Employee Stock Savings Plan:
We have audited the accompanying statements of net assets available for benefits
of Zions Bancorporation Employee Stock Savings Plan as of December 31, 1995 and
1994, and the related statements of changes in net assets available for benefits
for each of the years in the three-year period ended December 31, 1995. These
financial statements are the responsibility of the plan administrator. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
plan administrator, 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 net assets available for benefits of Zions
Bancorporation Employee Stock Savings Plan as of December 31, 1995 and 1994, and
the changes in net assets available for benefits for each of the years in the
three-year period ended December 31, 1995, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of Assets Held
for Investment Purposes and Reportable Transactions for the year ended December
31, 1995, are presented for the purpose of additional analysis and are not a
required part of the basic financial statements but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The supplemental schedules have been subjected to the auditing procedures
applied in the audit of the basic 1995 financial statements and, in our opinion,
are fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
KPMG Peat Marwick LLP
March 8, 1996
<PAGE> 5
ZIONS BANCORPORATION
EMPLOYEE STOCK SAVINGS PLAN
Statements of Net Assets Available for Benefits
December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Assets:
Cash $ 8,206 --
Investments, at market value:
Zions Bancorporation common stock (approximate cost of $10,229,000 in 1995 and
$8,035,000 in 1994) 24,271,693 9,994,955
Short-term investments 20,783 17,032
----------- -----------
24,300,682 10,011,987
Contributions receivable:
Employees 79,972 88,524
Zions Bancorporation 39,986 44,262
Dividends receivable 124,005 83,582
Interest receivable 379 349
----------- -----------
Total assets 24,545,024 10,228,704
----------- -----------
Liabilities:
Accounts payable -- 669
Excess contribution refunds 68,272 15,816
----------- -----------
Total liabilities 68,272 16,485
----------- -----------
Net assets available for benefits $24,476,752 10,212,219
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 6
ZIONS BANCORPORATION
EMPLOYEE STOCK SAVINGS PLAN
Statements of Changes in Net Assets Available for Benefits
Years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Additions (deductions) to net assets attributed to:
Net appreciation (depreciation) in market value of investment in Zions
Bancorporation common stock $ 13,215,084 (410,576) (516,233)
Dividends 410,080 294,770 200,330
Interest 5,239 3,343 1,543
------------ ------------ ------------
13,630,403 (112,463) (314,360)
------------ ------------ ------------
Contributions:
Employees 2,191,527 1,964,913 1,806,956
Zions Bancorporation 1,062,640 982,463 903,477
------------ ------------ ------------
3,254,167 2,947,376 2,710,433
------------ ------------ ------------
Total additions 16,884,570 2,834,913 2,396,073
Deductions from net assets attributed to benefits paid directly to participants 2,620,037 845,885 525,906
------------ ------------ ------------
Net increase 14,264,533 1,989,028 1,870,167
Net assets available for benefits:
Beginning of year 10,212,219 8,223,191 6,353,024
------------ ------------ ------------
End of year $ 24,476,752 10,212,219 8,223,191
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 7
ZIONS BANCORPORATION
EMPLOYEE STOCK SAVINGS PLAN
Notes to Financial Statements
December 31, 1995, 1994, and 1993
(1) Description of the Plan
Zions Bancorporation Employee Stock Savings Plan (the Plan) is a single
employer contributory plan that is designed to provide retirement
benefits for eligible employees under an after tax salary reduction
arrangement by offering employees an opportunity to acquire stock
ownership in Zions Bancorporation (the Company). The Plan is subject to
the provisions of the Employee Retirement Income Security Act of 1974
(ERISA).
(2) Summary of Significant Accounting Policies
The following is a summary of significant accounting policies followed
by the Plan in the preparation of its financial statements:
(a) Basis of Presentation
The Plan's financial statements are presented on the accrual
basis of accounting.
(b) Investments
The investment in common stock of the Company is carried at
market value in the accompanying financial statements. The
investment in the short-term investment fund represents a cash
equivalent. Purchases and sales of investments are recorded on a
settlement-date basis which does not materially differ from
using the trade-date basis required by generally accepted
accounting principles.
(c) Costs of Administration
All costs of administration are absorbed by the Company.
(3) Eligibility
Participation in the Plan is voluntary. An employee is eligible to
participate on January 1, or July 1, whichever coincides with, or
immediately follows, the latter of the date on which the employee
completes at least 1,000 hours of service during 12 continuous months
and attains the age of 21. As of December 31, 1995 and 1994, there were
1,676 participants and 1,700 participants, respectively, in the Plan.
(4) Employee and Company Contributions
Each eligible employee who elects to participate makes contributions
ranging from one to five percent of their total compensation. Company
contributions are equal to 50 percent of the amount contributed by the
employee. The maximum amount a participant may contribute to the Plan
in a calendar year, in conjunction with the Employee Investment Savings
Plan, is $9,240 for 1995.
(5) Allocation of Income or Loss
Net appreciation (depreciation) in market value of investments,
dividends, and interest income are allocated to each participant's
account in proportion to the investment shares held in that
participant's account to the total of investment shares held in the
Plan.
<PAGE> 8
2
ZIONS BANCORPORATION
EMPLOYEE STOCK SAVINGS PLAN
Notes to Financial Statements
(6) Vesting and Payment of Benefits
Employee contributions and the employees' share of the Company
contributions are 100 percent vested at all times. Benefits are paid
upon death, disability, retirement, or earlier subject to certain
restrictions. Benefits are paid in shares of stock.
(7) Income Taxes
The Plan obtained its latest determination letter on November 5, 1985,
in which the Internal Revenue Service (IRS) stated that the Plan, as
then designed, was in compliance with the applicable requirements of
the Internal Revenue Code. The Plan has been amended since receiving
the determination letter. The Company is in the process of obtaining a
new letter for the Plan. The application for approval of the amendments
was filed with the IRS in March 1995. The plan administrator and the
Plan's tax counsel believe that the Plan is currently designed and
being operated in compliance with the applicable requirements of the
Internal Revenue Code. Therefore, they believe that the Plan was
qualified and the related trust was tax-exempt as of the financial
statement date.
(8) Investment
At December 31, 1995 and 1994, investment in common stock of the
Company consisted of 302,451 and 278,605 shares, respectively.
(9) Plan Amendments
The Plan became effective on January 1, 1978, and has been amended and
restated at various times thereafter. The Plan was completely amended
and restated as of October 1, 1992. In addition, the Plan was amended
in 1994 to include employees from recently acquired National Bank of
Arizona and Rio Salado Bancorp. The following summarizes the Plan's
amended areas:
(a) Participant Contributions
Participants can elect either a pre-tax or post-tax salary
reduction of from one to a maximum of five percent of total
compensation as a participant contribution.
(b) Company Contributions
Matching contributions are made by the Company on behalf of each
participant in the amount of fifty percent of the participant's
contributions.
<PAGE> 9
ZIONS BANCORPORATION
EMPLOYEE STOCK SAVINGS PLAN
Notes to Financial Statements
Item 27a - Schedule of Assets Held for Investment Purposes
December 31, 1995
<TABLE>
<CAPTION>
Approxi- Market
Units held Description mate cost value
- ------------------ -------------------------------------------------------------------- ----------------- --------------
<S> <C> <C> <C>
302,451 Zions Bancorporation common stock $ 10,229,000 24,271,693
20,783 Short-term investments 20,783 20,783
</TABLE>
Item 27d - Schedule of Reportable Transactions
Year ended December 31, 1995
<TABLE>
<CAPTION>
Shares
purchased Cost
--------------- ---------------
<S> <C> <C>
Purchase of investments:
Description:
Zions Bancorporation 76,008 $ 3,684,087
Shares Market
distributed value
--------------- ---------------
Distributions of investments:
Description:
Zions Bancorporation 51,880 $ 2,620,037
</TABLE>
<PAGE> 1
EXHIBIT 99.2
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) Of The
Securities Exchange Act of 1934
For the Year Ended December 31, 1995
ZIONS BANCORPORATION
EMPLOYEE INVESTMENT SAVINGS PLAN
ZIONS BANCORPORATION
1380 Kennecott Building
Salt Lake City, Utah 84133
<PAGE> 2
ITEM 1. CHANGES IN THE PLAN
The Plan was completely amended and restated as of October 1, 1992, with certain
provisions retroactively effective as of January 1, 1989. In 1994, the Plan was
amended for the purpose of maintaining its qualification under Internal Revenue
Code pursuant to the Tax Reform Act of 1986 and, in order to conform the Plan to
the requirements of the Unemployment Compensation Act of 1992 and the Omnibus
Budget Reconciliation Act of 1993 and to facilitate the merger of the National
Bank of Arizona Savings and Retirement Plan and the Rio Salado Bancorp. Inc.
Retirement Plan into the Plan. No changes were made in the Plan during the year
1995.
ITEM 2. CHANGES IN INVESTMENT POLICY
The Plan maintains four separate types of investment funds: (i) company
securities, which consists of Company stock and short-term investments pending
the acquisition of Company securities; (ii) Fidelity mutual fund, which invests
primarily in a diversified portfolio of U.S. common stocks, which are invested
to track closely with the Standard and Poors 500 index; (iii) money market fund,
which consists of, but is not limited to, certificates of deposit, commercial
paper, and U.S. treasury bills; and (iv) fixed income fund, which invests
primarily in government, mortgage, and corporate bonds. No material changes were
made during the year 1995 in the policy with respect to the kind of securities
and other investments in which funds held under the Plan may be invested.
ITEM 3. CONTRIBUTIONS UNDER THE PLAN
The Company's contributions are measured by reference to employee contributions
and are not discretionary.
ITEM 4. PARTICIPATING EMPLOYEES
There were 1,687 participating employees in the Plan on December 31, 1995.
ITEM 5. ADMINISTRATION OF THE PLAN
(a) Zions Bancorporation is the Plan administrator. The Company's Board of
Directors has appointed an Administrative Committee consisting of six
persons. The Committee has full power and authority to administer the
Plan and to interpret its provisions. The present members of the
Committee and their positions held are:
<TABLE>
<CAPTION>
Member Position - Company
- --------------------------------- ---------------------------------------------------------------
<S> <C>
Clark B. Hinckley, Chairman Senior Vice President of Zions Bancorporation
Harris H. Simmons President and Chief Executive Officer of Zions Bancorporation
Gary L. Anderson Senior Vice President of Zions Bancorporation
Peter K. Ellison Executive Vice President of Zions First National Bank
W. David Hemingway Executive Vice President of Zions First National Bank
Richard G. Crandall Vice President of Zions First National Bank
Russell W. Miller President of Zions Insurance Agency, Inc.
</TABLE>
The address of each fiduciary listed above is 1380 Kennecott Building,
Salt Lake City, Utah 84133.
(b) No compensation is paid to the Committee members by the Plan. All
expenses of the Plan and its administration are paid by the Company.
<PAGE> 3
ITEM 6. CUSTODIAN OF INVESTMENTS
(a) Zions First National Bank, One South Main Street, Salt Lake City, Utah
84133 is the custodian and trustee.
(b) The custodian and trustee receive no compensation from the Plan.
ITEM 7. REPORTS TO PARTICIPATING EMPLOYEES
Participating employees are furnished an annual statement reflecting the status
of their accounts as of the end of the fiscal year.
ITEM 8. INVESTMENT OF FUNDS
As elected by participants, approximately seventy-six percent of the assets of
the Plan are invested in securities of the Company, approximately thirteen
percent in the Fidelity mutual fund, approximately nine percent in the money
market fund, approximately two percent invested in the fixed income fund, and
approximately one percent in the short-term investment fund.
ITEM 9. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Report of Independent Auditors
Statements of Net Assets Available for Benefits - December 31, 1995
and 1994
Statements of Changes in Net Assets Available for Benefits -
Years ended December 31, 1995, 1994, and 1993
Notes to Financial Statements
Schedules - Schedules I, II, and III have been omitted for the reasons
that they are not required or are not applicable, or the required
information is shown in the financial statements or notes thereto.
(b) Exhibits - None
<PAGE> 4
Independent Auditors' Report
The Trust Committee
Zions Bancorporation Employee
Investment Savings Plan:
We have audited the accompanying statements of net assets available for benefits
of Zions Bancorporation Employee Investment Savings Plan as of December 31, 1995
and 1994, and the related statements of changes in net assets available for
benefits for each of the years in the three-year period ended December 31, 1995.
These financial statements are the responsibility of the plan administrator. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
plan administrator, 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 net assets available for benefits of Zions
Bancorporation Employee Investment Savings Plan as of December 31, 1995 and
1994, and the changes in net assets available for benefits for each of the years
in the three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of Assets Held
For Investment Purposes and Reportable Transactions for the year ended December
31, 1995, are presented for the purpose of additional analysis and are not a
required part of the basic financial statements but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The supplemental schedules have been subjected to the auditing procedures
applied in the audit of the basic 1995 financial statements and, in our opinion,
are fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
KPMG Peat Marwick LLP
March 8, 1996
<PAGE> 5
ZIONS BANCORPORATION
EMPLOYEE INVESTMENT SAVINGS PLAN
Statements of Net Assets Available for Benefits
December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Assets:
Cash $ 4,141 27,876
Investments, at market value:
Zions Bancorporation common stock (approximate cost $11,002,757
in 1995 and $10,769,000 in 1994) 37,962,263 18,361,112
Fidelity mutual fund (approximate cost of $6,069,309 in 1995 and
$4,192,000 in 1994) 6,699,731 4,374,929
Money market fund 4,348,941 3,605,624
Fixed income fund (approximate cost of $1,092,604 in 1995 and $689,000 in 1994) 1,099,843 611,682
Short-term investments 15,875 94,017
----------- -----------
50,130,794 27,075,240
Contributions receivable:
Employees 57,845 73,114
Zions Bancorporation 12,172 14,954
Participant loans receivable 1,357,794 1,426,014
Dividends receivable 193,950 154,242
Interest receivable 18,357 16,902
Due from (to) Zions Bancorporation 2,439 (3,677)
----------- -----------
Total assets 51,773,351 28,756,789
Liabilities:
Accounts payable 1,118 2,058
Excess contribution refunds 140,969 53,374
----------- -----------
Total liabilities 142,087 55,432
----------- -----------
Net assets available for benefits $51,631,264 28,701,357
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 6
ZIONS BANCORPORATION
EMPLOYEE INVESTMENT SAVINGS PLAN
Statements of Changes in Net Assets Available for Benefits
Years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
Additions to net assets attributed to:
Investment income:
<S> <C> <C> <C>
Net appreciation (depreciation) in market value of investments $22,676,536 (718,781) (118,055)
Dividends 826,171 692,270 564,557
Capital gain distributions 645,849 121,543 198,053
Interest 312,332 244,470 169,448
----------- ----------- -----------
24,460,888 339,502 814,003
----------- ----------- -----------
Contributions:
Employees 1,639,255 1,614,117 1,326,267
Zions Bancorporation 341,868 336,444 271,519
Plan rollovers 1,050,327 368,721 196,725
----------- ----------- -----------
3,031,450 2,319,282 1,794,511
----------- ----------- -----------
Total additions 27,492,338 2,658,784 2,608,514
Deductions from net assets -
benefits paid directly to participants 4,562,431 1,802,449 1,447,853
----------- ----------- -----------
Net increase 22,929,907 856,335 1,160,661
Net assets available for benefits:
Beginning of year 28,701,357 27,845,022 26,684,361
----------- ----------- -----------
End of year $51,631,264 28,701,357 27,845,022
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 7
ZIONS BANCORPORATION
EMPLOYEE INVESTMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 1995, 1994, and 1993
(1) Description of the Plan
Zions Bancorporation Employee Investment Savings Plan (the Plan) is a
single employer contributory plan that is designed to provide
retirement benefits for eligible employees under a pretax salary
reduction (deferral) arrangement and, if employees so elect, an
opportunity to acquire stock ownership in Zions Bancorporation (the
Company). The Plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA).
(2) Summary of Significant Accounting Policies
The following is a summary of significant accounting policies followed
by the Plan in the preparation of its financial statements:
(a) Basis of Presentation
The Plan's financial statements are presented on the accrual
basis of accounting.
(b) Investments
Investments in common stock of Zions Bancorporation, Fidelity
mutual fund, and fixed income fund shares are carried at market
value in the accompanying financial statements. The investments
in the money market fund and short-term investments represent
cash equivalents. Purchases and sales of investments are
recorded on a settlement-date basis which does not materially
differ from using the trade-date basis required by generally
accepted accounting principles.
(c) Cost of Administration
All costs of administration are absorbed by the Company.
(3) Eligibility
Participation in the Plan is voluntary. An employee is eligible to
become a participant on January 1 or July 1, whichever coincides with,
or immediately follows, the latter of the date on which the employee
completes at least 1,000 hours of service during 12 continuous months
and attains the age of 21. At December 31, 1995 and 1994, there were
1,687 participants and 1,155 participants, respectively, in the Plan.
<PAGE> 8
2
ZIONS BANCORPORATION
EMPLOYEE INVESTMENT SAVINGS PLAN
Notes to Financial Statements
(4) Employee and Company Contributions
Participants may elect to contribute one to fifteen percent of their
compensation to the Employee Investment Savings Plan, limited by
participant contributions made to Zions Bancorporation Employee Stock
Savings Plan. The contributions are invested in one or more of the
following investment options: (i) the Company's stock, (ii) the
Fidelity mutual fund, (iii) a money market fund, and (iv) a fixed
income fund. The Company contributes an amount equal to 25 percent of
the contribution made by each participant up to ten percent of their
compensation with no match made on contributions in excess thereof. The
maximum amount a participant may contribute to the Plan in a calendar
year is the lesser of fifteen percent of their compensation, or $9,240
for 1995.
(5) Allocation of Income or Loss
Net appreciation (depreciation) in market value of investments,
dividends, interest income, and capital gains are allocated to each
participant's account in proportion to the investment shares held in
that participant's account to the total investment shares held in the
Plan.
(6) Vesting and Payment of Benefits
Employee contributions and the employees' share of the Company
contributions are 100 percent vested at all times. Benefits are paid
upon death, disability, retirement, or earlier, subject to certain
restrictions. Benefits are paid in shares of stock and/or cash pursuant
to the nature of the investment vehicle selected by the participant.
(7) Income Taxes
The Plan obtained its latest determination letter on November 5, 1985,
in which the Internal Revenue Service (IRS) stated that the Plan, as
then designed, was in compliance with the applicable requirements of
the Internal Revenue Code. The Plan has been amended since receiving
the determination letter. The Company is in the process of obtaining a
new letter for the Plan. The application for approval of the amendments
was filed with the IRS in March 1995. The plan administrator and the
Plan's tax counsel believe that the Plan is currently designed and
being operated in compliance with the applicable requirements of the
Internal Revenue Code. Therefore, they believe that the Plan was
qualified and the related trust was tax-exempt as of the financial
statement date.
<PAGE> 9
3
ZIONS BANCORPORATION
EMPLOYEE INVESTMENT SAVINGS PLAN
Notes to Financial Statements
(8) Investments
The investments in common stock of the Company and the Fidelity mutual
fund, consist of 473,050 and 511,808 shares, and 324,599 and 243,864
shares, respectively, at December 31, 1995 and 1994. The investment in
the fixed income fund consists of 50,942 and 31,224 shares at December
31, 1995 and 1994, respectively.
The net unrealized appreciation (depreciation) in market value for each
of the years in the three-year period ended December 31, 1995, in
comparison to the market value at the beginning of each year is as
follows:
<TABLE>
<CAPTION>
Investment 1995 1994 1993
---------- ----------- ----------- -----------
<S> <C> <C> <C>
Zions Bancorporation common stock $21,983,923 (601,351) (222,329)
Fidelity mutual fund 625,633 (56,687) 122,428
Fixed income fund 66,980 (60,743) (18,154)
----------- ----------- -----------
Net appreciation (depreciation) in
market value $22,676,536 (718,781) (118,055)
=========== =========== ===========
</TABLE>
(9) Plan Amendments
The Plan became effective on January 1, 1984, and has been amended and
restated at various times thereafter. The Plan was completely amended
and restated as of October 1, 1992. In addition, the Plan was amended
in 1994 to include employees from recently acquired National Bank of
Arizona and Rio Salado Bancorp. Amendment provisions include the
following:
(a) Participant Contributions
Participants can elect a pretax reduction from one percent to a
maximum of fifteen percent of total compensation as a
participant contribution, depending in part on the extent to
which the participant contributes to the Zions Bancorporation
Employee Stock Savings Plan.
(b) Company Contributions
Matching contributions are made by the Company on behalf of each
participant in the amount of twenty-five percent of participant
contributions (note 4), but not in excess of ten percent of
compensation.
(c) Participant Elections
Participants may change quarterly investment elections for funds
already invested in their accounts.
<PAGE> 10
4
ZIONS BANCORPORATION
EMPLOYEE INVESTMENT SAVINGS PLAN
Notes to Financial Statements
(d) Investment Options
The Plan maintains four separate types of investment funds: (i)
company securities, which consists of Company stock and
short-term investments pending the acquisition of Company stock;
(ii) Fidelity mutual fund, which invests primarily in a
diversified portfolio of U.S. common stocks, which are invested
to track closely with the Standard and Poors 500 index; (iii)
money market fund, which consists of, but is not limited to,
certificates of deposit, commercial paper, and U.S. treasury
bills; and (iv) fixed income fund, which invests primarily in
government, mortgage, and corporate bonds.
(e) Participant Loans
Beginning October 1, 1992, a participant who is an active
employee may apply for and obtain a loan of up to fifty percent
of the eligible amounts in their account. Loan terms may not
exceed five years and must be secured by the participant's
account. Loan repayment is made through payroll deduction.
(10) Financial Information by Fund Type
Financial information by fund type as of, and for the years ended
December 31, 1995 and 1994, are as follows:
Statement of Net Assets Available for Benefits by Fund Type
December 31, 1995
<TABLE>
<CAPTION>
Zions
Bancorp-
oration Fidelity Partici-
common mutual Money Fixed pant
stock fund market income loans Total
----------- ----------- ----------- ----------- ----------- -----------
Assets:
<S> <C> <C> <C> <C> <C> <C>
Cash $ 1,110 1,785 1,246 -- -- 4,141
Investments, at market value:
Zions Bancorporation
common stock 37,962,263 -- -- -- -- 37,962,263
Fidelity mutual fund -- 6,699,731 -- -- -- 6,699,731
Money market fund -- -- 4,348,941 -- -- 4,348,941
Fixed income fund -- -- -- 1,099,843 -- 1,099,843
Short-term investments 15,875 -- -- -- -- 15,875
----------- ----------- ----------- ----------- ----------- -----------
37,979,248 6,701,516 4,350,187 1,099,843 -- 50,130,794
</TABLE>
<PAGE> 11
5
ZIONS BANCORPORATION
EMPLOYEE INVESTMENT SAVINGS PLAN
Notes to Financial Statements
(10) Financial Information by Fund Type (continued)
<TABLE>
<CAPTION>
Zions
Bancorp-
oration Fidelity Partici-
common mutual Money Fixed pant
stock fund market income loans Total
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Contributions receivable:
Employees $ 22,448 25,300 7,244 2,853 -- 57,845
Zions Bancorporation 4,619 5,356 1,647 550 -- 12,172
Participant loans receivable 16,960 2,634 4,451 1,238 1,332,511 1,357,794
Dividends receivable 193,950 -- -- -- -- 193,950
Interest receivable 126 45 18,164 22 -- 18,357
Due from Zions
Bancorporation -- -- -- 2,439 -- 2,439
----------- ----------- ----------- ----------- ----------- -----------
Total assets 38,217,351 6,734,851 4,381,693 1,106,945 1,332,511 51,773,351
Liabilities:
Accounts payable -- -- -- 1,118 -- 1,118
Excess contribution refunds 50,567 67,562 11,975 10,865 -- 140,969
----------- ----------- ----------- ----------- ----------- -----------
Total liabilities 50,567 67,562 11,975 11,983 -- 142,087
----------- ----------- ----------- ----------- ----------- -----------
Net assets available for benefits $38,166,784 6,667,289 4,369,718 1,094,962 1,332,511 51,631,264
=========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE> 12
6
ZIONS BANCORPORATION
EMPLOYEE INVESTMENT SAVINGS PLAN
Notes to Financial Statements
(10) Financial Information by Fund Type (continued)
Statement of Net Assets Available for Benefits by Fund Type
December 31, 1994
<TABLE>
<CAPTION>
Zions
Bancorp-
oration Fidelity Partici-
common mutual Money Fixed pant
stock fund market income loans Total
----------- ----------- ----------- ----------- ----------- -----------
Assets:
<S> <C> <C> <C> <C> <C> <C>
Cash $ 27,242 -- 634 -- -- 27,876
Investments, at market value:
Zions Bancorporation
common stock 18,361,112 -- -- -- -- 18,361,112
Fidelity mutual fund -- 4,374,929 -- -- -- 4,374,929
Money market fund -- -- 3,605,624 -- -- 3,605,624
Fixed income fund -- -- -- 611,682 -- 611,682
Short-term investments 88,082 5,641 -- 294 -- 94,017
----------- ----------- ----------- ----------- ----------- -----------
18,476,436 4,380,570 3,606,258 611,976 -- 27,075,240
Contributions receivable:
Employees 26,360 31,450 11,906 3,398 -- 73,114
Zions Bancorporation 5,039 6,609 2,601 705 -- 14,954
Participant loans receivable -- -- -- -- 1,426,014 1,426,014
Dividends receivable 154,242 -- -- -- -- 154,242
Interest receivable 267 31 16,594 10 -- 16,902
Due from (to) Zions
Bancorporation -- (5,070) -- 1,393 -- (3,677)
----------- ----------- ----------- ----------- ----------- -----------
Total assets 18,662,344 4,413,590 3,637,359 617,482 1,426,014 28,756,789
Liabilities:
Accounts payable 122 -- -- 1,936 -- 2,058
Excess contribution refunds 18,390 25,351 4,024 5,609 -- 53,374
----------- ----------- ----------- ----------- ----------- -----------
Total liabilities 18,512 25,351 4,024 7,545 -- 55,432
----------- ----------- ----------- ----------- ----------- -----------
Net assets available for benefits $18,643,832 4,388,239 3,633,335 609,937 1,426,014 28,701,357
=========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE> 13
7
ZIONS BANCORPORATION
EMPLOYEE INVESTMENT SAVINGS PLAN
Notes to Financial Statements
(10) Financial Information by Fund Type (continued)
Statement of Changes in Net Assets Available for Benefits by Fund Type
Year ended December 31, 1995
<TABLE>
<CAPTION>
Zions
Bancorp-
oration Fidelity Partici-
common mutual Money Fixed pant
stock fund market income loans Total
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Additions to net assets
attributed to:
Investment income:
Net appreciation in
market value of
investments $ 21,983,923 625,633 -- 66,980 -- 22,676,536
Dividends 690,743 83,833 -- 51,595 -- 826,171
Capital gain
distributions -- 645,183 -- 666 -- 645,849
Interest 70,994 12,278 226,088 2,972 -- 312,332
------------ ------------ ------------ ------------ ------------ ------------
22,745,660 1,366,927 226,088 122,213 -- 24,460,888
------------ ------------ ------------ ------------ ------------ ------------
Contributions:
Employees 630,280 698,809 231,990 78,176 -- 1,639,255
Zions Bancorporation 126,185 148,775 54,166 12,742 -- 341,868
Plan rollovers 598,919 164,479 260,825 26,104 -- 1,050,327
------------ ------------ ------------ ------------ ------------ ------------
1,355,384 1,012,063 546,981 117,022 -- 3,031,450
------------ ------------ ------------ ------------ ------------ ------------
Principal loan payments 527,843 60,499 96,658 10,522 (695,522) --
------------ ------------ ------------ ------------ ------------ ------------
Total additions 24,628,887 2,439,489 869,727 249,757 (695,522) 27,492,338
Deductions from net assets
attributed to:
Benefits paid directly to
participants (2,793,647) (787,468) (846,207) (135,107) -- (4,562,431)
Loans disbursed (327,740) (135,212) (126,318) (12,750) 602,020 --
------------ ------------ ------------ ------------ ------------ ------------
Total deductions $ (3,121,387) (922,680) (972,525) (147,857) 602,020 (4,562,431)
------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
<PAGE> 14
8
ZIONS BANCORPORATION
EMPLOYEE INVESTMENT SAVINGS PLAN
Notes to Financial Statements
(10) Financial Information by Fund Type (continued)
<TABLE>
<CAPTION>
Zions
Bancorp-
oration Fidelity Partici-
common mutual Money Fixed pant
stock fund market income loans Total
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Quarterly transfers $ (1,984,548) 762,242 839,181 383,125 -- --
------------ ------------ ------------ ------------ ------------ ------------
Net increase
(decrease) 19,522,952 2,279,051 736,383 485,025 (93,502) 22,929,907
Net assets available for benefits:
Beginning of year 18,643,830 4,388,239 3,633,335 609,937 1,426,014 28,701,357
------------ ------------ ------------ ------------ ------------ ------------
End of year $ 38,166,782 6,667,290 4,369,718 1,094,962 1,332,512 51,631,264
============ ============ ============ ============ ============ ============
</TABLE>
<PAGE> 15
9
ZIONS BANCORPORATION
EMPLOYEE INVESTMENT SAVINGS PLAN
Notes to Financial Statements
(10) Financial Information by Fund Type (continued)
Statement of Changes in Net Assets Available for Benefits by Fund Type
Year ended December 31, 1994
<TABLE>
<CAPTION>
Zions
Bancorp-
oration Fidelity Partici-
common mutual Money Fixed pant
stock fund market income loans Total
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Additions to net assets
attributed to:
Investment income:
Net depreciation in
market value of
investments $ (601,351) (56,643) -- (60,787) -- (718,781)
Dividends 593,018 57,136 -- 42,116 -- 692,270
Capital gain
distributions -- 120,212 -- 1,331 -- 121,543
Interest 68,982 9,197 164,795 1,496 -- 244,470
----------- ----------- ----------- ----------- ----------- -----------
60,649 129,902 164,795 (15,844) -- 339,502
----------- ----------- ----------- ----------- ----------- -----------
Contributions:
Employees 593,429 680,345 270,190 70,153 -- 1,614,117
Zions Bancorporation 115,064 147,082 62,914 11,384 -- 336,444
Plan rollovers 175,680 66,006 103,216 23,819 -- 368,721
----------- ----------- ----------- ----------- ----------- -----------
884,173 893,433 436,320 105,356 -- 2,319,282
----------- ----------- ----------- ----------- ----------- -----------
Principal loan payments 313,442 34,364 65,872 2,042 (415,720) --
----------- ----------- ----------- ----------- ----------- -----------
Total additions 1,258,264 1,057,699 666,987 91,554 (415,720) 2,658,784
Deductions from net assets
attributed to:
Benefits paid directly to
participants (1,139,005) (276,006) (341,951) (45,487) -- (1,802,449)
Loans disbursed (335,345) (20,480) (112,062) (32,624) 500,511 --
----------- ----------- ----------- ----------- ----------- -----------
Total deductions $(1,474,350) (296,486) (454,013) (78,111) 500,511 (1,802,449)
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
<PAGE> 16
10
ZIONS BANCORPORATION
EMPLOYEE INVESTMENT SAVINGS PLAN
Notes to Financial Statements
(10) Financial Information by Fund Type (continued)
<TABLE>
<CAPTION>
Zions
Bancorp-
oration Fidelity Partici-
common mutual Money Fixed pant
stock fund market income loans Total
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Quarterly transfers $ (108,654) 101,433 (64,079) 71,300 -- --
------------ ------------ ------------ ------------ ------------ ------------
Net increase
(decrease) (324,740) 862,646 148,895 84,743 84,791 856,335
Net assets available for benefits:
Beginning of year 18,968,572 3,525,593 3,484,440 525,194 1,341,223 27,845,022
------------ ------------ ------------ ------------ ------------ ------------
End of year $ 18,643,832 4,388,239 3,633,335 609,937 1,426,014 28,701,357
============ ============ ============ ============ ============ ============
</TABLE>
<PAGE> 17
11
ZIONS BANCORPORATION
EMPLOYEE INVESTMENT SAVINGS PLAN
Notes to Financial Statements
(10) Financial Information by Fund Type (continued)
Statement of Changes in Net Assets Available for Benefits by Fund Type
Year ended December 31, 1993
<TABLE>
<CAPTION>
Zions
Bancorp-
oration Fidelity
common mutual Money Fixed
stock fund market income Loans Total
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Additions to net assets
attributed to:
Investment income:
Net appreciation
(depreciation) in
market value of
investments $ (222,329) 122,428 -- (18,154) -- (118,055)
Dividends 500,811 36,822 -- 26,924 -- 564,557
Capital gain
distributions -- 184,807 -- 13,246 -- 198,053
Interest 62,156 8,654 98,475 163 -- 169,448
----------- ----------- ----------- ----------- ----------- -----------
340,638 352,711 98,475 22,179 -- 814,003
----------- ----------- ----------- ----------- ----------- -----------
Contributions:
Employees 444,853 535,485 303,659 42,270 -- 1,326,267
Zions Bancorporation 73,559 120,059 71,756 6,145 -- 271,519
Plan rollovers 97,314 23,002 61,671 14,738 -- 196,725
----------- ----------- ----------- ----------- ----------- -----------
615,726 678,546 437,086 63,153 -- 1,794,511
----------- ----------- ----------- ----------- ----------- -----------
Principal loan payments 181,877 23,474 24,383 480 (230,214) --
----------- ----------- ----------- ----------- ----------- -----------
Total additions 1,138,241 1,054,731 559,944 85,812 (230,214) 2,608,514
Deductions from net assets
attributed to:
Benefits paid directly to
participants (954,245) (127,202) (351,331) (28) (15,047) (1,447,853)
Loans disbursed (583,465) (81,030) (143,291) (3,460) 811,246 --
----------- ----------- ----------- ----------- ----------- -----------
Total deductions $(1,537,710) (208,232) (494,622) (3,488) 796,199 (1,447,853)
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
<PAGE> 18
12
ZIONS BANCORPORATION
EMPLOYEE INVESTMENT SAVINGS PLAN
Notes to Financial Statements
(10) Financial Information by Fund Type (continued)
<TABLE>
<CAPTION>
Zions
Bancorp-
oration Fidelity
common mutual Money Fixed
stock fund market income Loans Total
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Quarterly transfers $ (3,504,699) 1,251,016 1,810,813 442,870 -- --
------------ ------------ ------------ ------------ ------------ ------------
Net increase
(decrease) (3,904,168) 2,097,515 1,876,135 525,194 565,985 1,160,661
Net assets available for benefits:
Beginning of year 22,872,740 1,428,078 1,608,305 -- 775,238 26,684,361
------------ ------------ ------------ ------------ ------------ ------------
End of year $ 18,968,572 3,525,593 3,484,440 525,194 1,341,223 27,845,022
============ ============ ============ ============ ============ ============
</TABLE>
<PAGE> 19
ZIONS BANCORPORATION
EMPLOYEE INVESTMENT SAVINGS PLAN
Item 27a - Schedule of Assets Held for Investment Purposes
December 31, 1995
<TABLE>
<CAPTION>
Approx- Market
Description imate cost value
------------------------------------------------ --------------- --------------
Units held
- -----------------
<S> <C> <C> <C>
473,050 Zions Bancorporation Common Stock $ 11,002,757 37,962,263
324,599 Fidelity Mutual Fund 6,069,309 6,699,731
50,942 Fixed Income Fund 1,092,604 1,099,843
--------------- --------------
Total 18,164,670 45,761,837
--------------- --------------
</TABLE>
<TABLE>
<CAPTION>
Face value
- ----------
<S> <C> <C> <C>
4,348,941 Money Market Fund 4,348,941 4,348,941
15,875 Short-term investments 15,875 15,875
--------------- --------------
4,364,816 4,364,816
--------------- --------------
Total investments $ 22,529,486 50,126,653
=============== ==============
</TABLE>
<PAGE> 20
ZIONS BANCORPORATION
EMPLOYEE INVESTMENT SAVINGS PLAN
Item 27d - Schedule of Reportable Transactions
December 31, 1995
<TABLE>
<CAPTION>
Shares/units
purchased Cost
---------------- --------------
Purchase of investments:
Description:
<S> <C> <C>
Zions Bancorporation 56,507 $ 2,587,823
</TABLE>
<TABLE>
<CAPTION>
Shares Gain/
sold Cost (loss)
-------------- -------------- --------------
Sale of investments:
Description:
<S> <C> <C> <C>
Zions Bancorporation 40,507 $ 1,029,743 911,265
</TABLE>
<TABLE>
<CAPTION>
Shares Market
distributed value
-------------- --------------
Distributions of investments:
Description:
<S> <C> <C>
Zions Bancorporation 58,894 $ 2,619,171
</TABLE>
