<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
- ---
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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 or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
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
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirement for
the past 90 days. Yes X No
-- --
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, without par value, outstanding at April 30, 1996
14,483,997 shares
1
<PAGE> 2
ZIONS BANCORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (unaudited)
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Consolidated Statements of Retained Earnings 6
Notes to Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis 8
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 20
</TABLE>
2
<PAGE> 3
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31, March 31,
(In thousands) 1996 1995 1995
---------- ---------- -----------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 394,495 $ 418,067 $ 279,264
Money market investments:
Interest-bearing deposits 37,002 34,580 21,720
Federal funds sold 198,069 50,467 156,388
Security resell agreements 802,754 602,204 460,993
Securities:
Held to maturity at cost (approximate market value
$1,157,977, $1,093,934 and $1,116,005):
Taxable 943,561 881,172 923,697
Nontaxable 200,740 197,411 203,839
Available for sale at market:
Taxable 354,211 356,116 344,673
Nontaxable 40,521 42,084 --
Trading account at market 81,888 63,706 83,368
---------- ---------- -----------
1,620,921 1,540,489 1,555,577
Loans:
Loans held for sale at cost, which approximates market 153,589 126,124 104,788
Loans, leases and other receivables 2,850,530 2,711,784 2,394,600
---------- ---------- -----------
3,004,119 2,837,908 2,499,388
Less:
Unearned income and fees, net of related costs 33,086 30,952 24,587
Allowance for loan losses 67,625 67,555 67,372
---------- ---------- -----------
2,903,408 2,739,401 2,407,429
Premises and equipment, at cost, less accumulated depreciation 82,799 81,613 75,814
Amounts paid in excess of net assets of acquired businesses 21,335 21,738 18,438
Other real estate owned 788 1,092 1,024
Other assets 141,112 130,995 128,961
---------- ---------- -----------
Total assets $6,202,683 $5,620,646 $ 5,105,608
========== ========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 936,262 $ 998,560 $ 816,330
Interest-bearing:
Savings and money market 2,295,557 2,164,344 2,128,989
Time under $100,000 646,782 669,196 580,612
Time over $100,000 181,488 158,924 102,730
Foreign 110,907 106,090 157,767
---------- ---------- -----------
4,170,996 4,097,114 3,786,428
Securities sold, not yet purchased 56,962 117,005 77,924
Federal funds purchased 173,667 134,048 48,597
Security repurchase agreements 1,126,039 614,284 569,061
Accrued liabilities 79,662 72,376 70,426
Federal Home Loan Bank advances and other borrowings:
Less than one year 18,414 14,910 16,902
Over one year 82,313 86,174 97,480
Long-term debt 56,008 56,229 57,815
---------- ---------- -----------
Total liabilities 5,764,061 5,192,140 4,724,633
---------- ---------- -----------
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, 14,528,191,
14,555,920 and 14,600,125 shares 67,569 73,477 79,993
Net unrealized holding gains and losses on securities
available for sale 173 1,850 (3,072)
Retained earnings 370,880 353,179 304,054
---------- ---------- -----------
Total shareholders' equity 438,622 428,506 380,975
---------- ---------- -----------
Total liabilities and shareholders' equity $6,202,683 $5,620,646 $ 5,105,608
========== ========== ===========
</TABLE>
3
<PAGE> 4
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
(In thousands, except share amounts) 1996 1995
--------- --------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 65,241 $ 55,484
Interest on loans held for sale 2,740 2,128
Interest on money market investments 15,380 9,995
Interest on securities:
Held to maturity:
Taxable 15,687 15,504
Nontaxable 3,190 3,006
Available for sale:
Taxable 5,662 5,643
Nontaxable 562 --
Trading account 2,404 3,625
Lease financing 2,642 2,394
--------- --------
Total interest income 113,508 97,779
--------- --------
Interest expense:
Interest on savings and money market deposits 19,877 19,505
Interest on time deposits under $100,000 8,897 6,085
Interest on time deposits over $100,000 2,580 1,278
Interest on foreign deposits 1,157 2,001
Interest on securities sold, not yet purchased 990 2,276
Interest on borrowed funds 20,058 13,433
--------- --------
Total interest expense 53,559 44,578
--------- --------
Net interest income 59,949 53,201
Provision for loan losses 600 600
--------- --------
Net interest income after provision for loan losses 59,349 52,601
--------- --------
Noninterest income:
Service charges on deposit accounts 7,707 6,932
Other service charges, commissions and fees 6,841 5,400
Trust income 1,282 1,080
Investment securities gains (losses), net 2 (105)
Trading account income (loss) 873 (2,937)
Loan sales and servicing income 7,110 5,359
Other income 2,262 1,612
--------- --------
Total noninterest income 26,077 17,341
--------- --------
Noninterest expenses:
Salaries and employee benefits 26,995 23,507
Occupancy, net 2,784 2,156
Furniture and equipment 3,606 3,485
Other real estate expense (283) 80
Legal and professional services 739 1,335
Supplies 1,522 1,251
Postage 1,356 1,247
Advertising 1,482 1,060
FDIC premiums 5 1,954
Amortization of intangible assets 764 813
Other expenses 10,782 9,230
--------- --------
Total noninterest expenses 49,752 46,118
--------- --------
Income before income taxes 35,674 23,824
Income taxes 12,003 7,823
--------- --------
Net income $ 23,671 $ 16,001
========= ========
Weighted average common and common-equivalent shares outstanding 14,679 14,702
Net income per common share $ 1.61 $ 1.09
</TABLE>
4
<PAGE> 5
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
(In thousands) 1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 23,671 $ 16,001
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Provision for loan losses 600 600
Write-downs of other real estate owned -- 8
Depreciation of premises and equipment 2,985 2,465
Amortization of premium on core deposits and
other intangibles 764 813
Amortization of net premium/discount on
investment securities 1,576 978
Accretion of unearned income and fees, net of
related costs 2,133 (187)
Proceeds from sales of trading account securities 14,759,949 39,448,567
Increase in trading account securities (14,778,130) (39,332,609)
Net (gain) loss on sales of investment securities (2) 105
Proceeds from loans held for sale 152,783 81,698
Increase in loans held for sale (179,272) (77,182)
Net gain on sales of loans, leases and other assets (5,380) (3,265)
Net gain on sales of other real estate owned (281) (70)
Change in accrued income taxes 12,051 5,227
Change in accrued interest receivable (1,535) (705)
Change in other assets (5,778) 545
Change in accrued interest payable 1,668 80
Change in accrued liabilities (6,096) (5,414)
------------ ------------
Net cash provided by (used in) operating
activities (18,294) 137,655
------------ ------------
Cash flows from investing activities:
Net (increase) in money market investments (350,574) (235,655)
Proceeds from maturities of investment securities
held to maturity 62,932 17,188
Purchases of investment securities held to maturity (130,474) (39,009)
Proceeds from sales of investment securities
available for sale 739 27,787
Proceeds from maturities of investment securities
available for sale 69,282 6,017
Purchases of investment securities available for sale (69,286) (16,928)
Proceeds from sales of loans and leases 141,261 111,092
Net increase in loans and leases (269,416) (196,371)
Purchases of assets to be leased (8,514) --
Principal collections on leveraged leases -- 38
Proceeds from sales of premises and equipment 60 126
Purchases of premises and equipment (4,222) (3,719)
Proceeds from sales of other real estate owned 876 600
Proceeds from sales of mortgage servicing rights 623 210
Purchases of mortgage servicing rights (1,441) (24)
Proceeds from sales of other assets 195 184
------------ ------------
Net cash (used in) investing activities
activities (557,959) (328,464)
------------ ------------
</TABLE>
5
<PAGE> 6
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
(In thousands) 1996 1995
--------- ---------
<S> <C> <C>
Cash flows from financing activities:
Net increase in deposits 73,882 80,452
Net change in short-term funds borrowed 495,096 81,066
Payments on FHLB advances over one year (3,861) (4,091)
Payments on long-term debt (221) (367)
Proceeds from issuance of common stock 854 460
Payments to redeem common stock (7,099) --
Dividends paid (5,970) (4,390)
--------- ---------
Net cash provided by
financing activities 552,681 153,130
--------- ---------
Net (decrease) in cash and due from banks (23,572) (37,679)
Cash and due from banks at beginning of period 418,067 316,943
--------- ---------
Cash and due from banks at end of period $ 394,495 $ 279,264
========= =========
</TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------
(In thousands) 1996 1995
---- ----
<S> <C> <C>
Cash paid (received) for:
Interest $ 51,870 $44,730
Income taxes (369) 1,496
Loans transferred to other real estate owned 291 --
</TABLE>
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
March 31, December 31,
---------------------- ---------
(In thousands) 1996 1995 1995
--------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of period $ 353,179 $ 292,443 $ 292,443
Add:
Net income 23,671 16,001 81,328
--------- --------- ---------
376,850 308,444 373,771
Deduct cash dividends:
Preferred, paid by subsidiary to minority shareholder (10) (10) (38)
Common, per share $ .41 in 1996 and
and $ .30 and $1.41 in 1995 (5,960) (4,380) (20,554)
--------- --------- ---------
Balance at end of period $ 370,880 $ 304,054 $ 353,179
========= ========= =========
</TABLE>
6
<PAGE> 7
ZIONS BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Basis of Presentation
The unaudited consolidated financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Certain amounts in the 1995 consolidated financial statements have been
reclassified to conform to the 1996 presentation. Operating results for the
three months ended March 31, 1996 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1996. For further
information, refer to the consolidated financial statements and footnotes
thereto included in Zions Bancorporation's Annual Report to Shareholders on Form
10-K for the year ended December 31, 1995.
The Company elected not to adopt the fair value based method of accounting for
its employee stock based Compensation plans established by Statement of
Financial Accounting Standards (Statement) No. 123, "Accounting for Stock-Based
Compensation." Accordingly, the Company will continue its current accounting for
employee stock-based compensation plans in accordance with Accounting Principles
Board Opinion No. 25, as permitted under Statement No. 123, and, if material,
will disclose the pro forma effect of the fair value accounting method in the
notes to its December 31, 1996 consolidated financial statements.
7
<PAGE> 8
ZIONS BANCORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------
(In thousands, except per share and ratio data) 1996 1995 % Change
---- ---- --------
<S> <C> <C> <C>
EARNINGS
Net income $ 23,671 $ 16,001 47.9%
PER COMMON SHARE
Net income 1.61 1.09 47.7%
Dividends .41 .30 36.7%
Book value at March 31 30.19 26.09 15.7%
Market value at March 31 70.75 37.75 87.4%
Weighted average common and common-
equivalent shares outstanding 14,679,000 14,702,000
Common shares outstanding at March 31 14,528,191 14,600,125
BALANCES AT PERIOD END
Total assets $6,202,683 $5,105,608 21.5%
Money market investments 1,037,825 639,101 62.4%
Securities 1,620,921 1,555,577 4.2%
Net loans and leases 2,971,033 2,474,801 20.1%
Allowance for loan losses 67,625 67,372 .4%
Total deposits 4,170,996 3,786,428 10.2%
Shareholders' equity 438,622 380,975 15.1%
Nonperforming assets 9,393 14,510 - 35.3%
Loans past due 90 days or more 6,669 2,121 214.4%
PERFORMANCE RATIOS
Net interest margin 4.36% 4.66%
Return on average assets 1.54% 1.25%
Return on average common equity 21.96% 17.38%
Common dividend payout 25.18% 27.37%
Nonperforming assets to net loans and leases,
other real estate owned and other
nonperforming assets at March 31 .32% .59%
CAPITAL RATIOS
Average equity to average assets 7.02% 7.16%
Leverage ratio at March 31 6.20% 6.59%
Tier I risk-based capital at March 31 11.13% 12.14%
Total risk-based capital at March 31 13.89% 15.27%
</TABLE>
8
<PAGE> 9
ZIONS BANCORPORATION AND SUBSIDIARIES
OPERATING RESULTS
Consolidated net income for the first quarter of 1996 reached $23,671,000, a
47.9% increase over the $16,001,000 earned in the same quarter a year ago.
Earnings per share increased 47.7% to $1.61 in the first quarter of 1996 from
$1.09 in the same quarter of last year. Earnings during the first quarter of
1995 were adversely affected by a trading loss and restructuring charge totaling
$4,390,000 or approximately $2,948,000 ($.20 per share) after tax. When adjusted
for those charges, the increase in first-quarter 1996 net income was 24.9%, and
the increase in earnings per share was 24.8%.
The Company's first-quarter earnings relative to the same period a year ago,
excluding the effect of the trading loss and restructuring charge, reflect a
$6,748,000 (12.7%) increase in net interest income, a $5,646,000 (27.6%)
increase in noninterest income, partially offset by a $4,934,000 (11.0%)
increase in noninterest expenses and a $2,738,000 (29.6%) increase in income tax
expense.
The annualized return on average assets for the first quarter of 1996 was 1.54%,
resulting in a return on average common shareholders' equity of 21.96%, compared
to 1.25% and 17.38%, respectively, reported in the first quarter of 1995.
NET INTEREST INCOME AND INTEREST RATE SPREADS
Net interest income for the first quarter of 1996, adjusted to a fully
taxable-equivalent basis, increased 13.0% to $61,557,000 compared to $54,488,000
for the first quarter of 1995. Net interest margin was 4.36%, as compared to
4.66% for the first quarter of 1995.
The yield on average earning assets decreased 32 basis points during the first
quarter of 1996 as compared to the first quarter of 1995, and the average rate
paid this quarter on interest-bearing funds decreased 5 basis points from the
first quarter of 1995. The spread on average interest-bearing funds for the
first quarter of 1996 was 3.63%, down from the 3.90% for the first quarter of
1995.
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 caps, floors and interest rate exchange
contract agreements. The Company had income of $453,000 from the use of such
off-balance sheet arrangements for the first quarter of 1996 compared to net
expense of $119,000 for the first quarter of 1995.
The increased level of taxable-equivalent net interest income in the first
quarter of 1996, compared to the same period in 1995, resulted primarily from
the increase in average loans and leases; and the decrease in net interest
margin resulted primarily from the effect of a decrease in rates on earning
assets, an increase in rates paid on interest-bearing time deposits, and
increased activity in security resell arrangements.
9
<PAGE> 10
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1996
--------------------------------
Average Amount of Average
(In thousands) Balance Interest(1) Rate
--------- ----------- --------
<S> <C> <C> <C>
ASSETS
Money market investments:
Interest-bearing deposits $ 35,926 $ 438 4.90%
Federal funds sold and security
resell agreements 1,065,657 14,942 5.64%
----------- ----------
Total money market investments 1,101,583 15,380 5.62%
----------- ----------
Securities:
Held to maturity:
Taxable 935,696 15,687 6.74%
Nontaxable 196,478 4,557 9.33%
Available for sale:
Taxable 353,261 5,662 6.45%
Nontaxable 41,230 803 7.83%
Trading account 174,362 2,404 5.55%
----------- ----------
Total securities 1,701,027 29,113 6.88%
----------- ----------
Loans:
Loans held for sale 149,428 2,740 7.37%
Net loans and leases(2) 2,725,830 67,883 10.02%
----------- ----------
Total loans 2,875,258 70,623 9.88%
----------- ----------
Total interest-earning assets $5,677,868 $115,116 8.15%
----------
Cash and due from banks 322,950
Allowance for loan losses (67,451)
Other assets 244,949
---------
Total assets $6,178,316
=========
LIABILITIES
Interest-bearing deposits:
Savings and NOW deposits $ 637,053 $ 4,903 3.10%
Money market super NOW deposits 1,595,439 14,974 3.77%
Time deposits under $100,000 663,867 8,897 5.39%
Time deposits $100,000 or more 163,483 2,580 6.35%
Foreign deposits 106,534 1,157 4.37%
----------- ----------
Total interest-bearing deposits 3,166,376 32,511 4.13%
----------- ----------
Borrowed funds:
Securities sold, not yet purchased 71,995 990 5.53%
Federal funds purchased and security
repurchase agreements 1,362,078 17,131 5.06%
FHLB advances and other borrowings:
Less than one year 22,300 360 6.49%
Over one year 84,332 1,309 6.24%
Long-term debt 56,141 1,258 9.01%
----------- ----------
Total borrowed funds 1,596,846 21,048 5.30%
----------- ----------
Total interest-bearing liabilities $4,763,222 $ 53,559 4.52%
----------
Noninterest-bearing deposits 872,058
Other liabilities 109,472
-----------
Total liabilities 5,744,752
Total shareholders' equity 433,564
-----------
Total liabilities and shareholders' equity $6,178,316
===========
Spread on average interest-bearing funds 3.63%
Net interest income and net yield on ====
interest-earning assets $ 61,557 4.36%
======== ====
</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.
10
<PAGE> 11
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1995
------------------------------------
Average Amount of Average
(In thousands) Balance Interest(1) Rate
--------- ----------- --------
<S> <C> <C> <C>
ASSETS
Money market investments:
Interest-bearing deposits $ 20,531 $ 228 4.50%
Federal funds sold and security
resell agreements 685,020 9,767 5.78%
----------- -------
Total money market investments 705,551 9,995 5.75%
----------- -------
Securities:
Held to maturity:
Taxable 886,103 15,504 7.10%
Nontaxable 202,877 4,294 8.58%
Available for sale:
Taxable 336,138 5,643 6.81%
Nontaxable -- -- - %
Trading account 196,138 3,625 7.50%
----------- -------
Total securities 1,621,256 29,066 7.27%
----------- -------
Loans:
Loans held for sale 103,664 2,128 8.33%
Net loans and leases(2) 2,314,168 57,877 10.14%
----------- -------
Total loans 2,417,832 60,005 10.06%
----------- -------
Total interest-earning assets $ 4,744,639 $99,066 8.47%
-------
Cash and due from banks 310,367
Allowance for loan losses (67,234)
Other assets 223,419
-----------
Total assets $ 5,211,191
===========
LIABILITIES
Interest-bearing deposits:
Savings and NOW deposits $ 750,105 $ 5,769 3.12%
Money market and super NOW deposits 1,340,616 13,736 4.16%
Time deposits under $100,000 540,126 6,085 4.57%
Time deposits $100,000 or more 102,226 1,278 5.07%
Foreign deposits 151,853 2,001 5.34%
----------- -------
Total interest-bearing deposits 2,884,926 28,869 4.06%
----------- -------
Borrowed funds:
Securities sold, not yet purchased 133,715 2,276 6.90%
Federal funds purchased and security
repurchase agreements 761,427 10,183 5.42%
FHLB advances and other borrowings:
Less than one year 20,233 322 6.45%
Over one year 99,390 1,600 6.53%
Long-term debt 57,984 1,328 9.29%
----------- -------
Total borrowed funds 1,072,749 15,709 5.94%
----------- -------
Total interest-bearing liabilities $ 3,957,675 $44,578 4.57%
-------
Noninterest-bearing deposits 787,503
Other liabilities 92,641
-----------
Total liabilities 4,837,819
Total shareholders' equity 373,372
-----------
Total liabilities and shareholders' equity $ 5,211,191
===========
Spread on average interest-bearing funds 3.90%
====
Net interest income and net yield on
interest-earning assets $54,488 4.66%
======= ====
</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.
11
<PAGE> 12
ZIONS BANCORPORATION AND SUBSIDIARIES
PROVISION FOR LOAN LOSSES
The provision for loan losses for the first quarter of 1996 was $600,000--the
same as the first quarter of 1995. Net charge-offs during the first quarter
totaled $530,000, or .07% of average net loans and leases, as compared to
$246,000 or .04% of average net loans and leases for the first quarter of 1995.
NONINTEREST INCOME
Noninterest income for the first quarter of 1996 totaled $26,077,000 as compared
to $17,341,000 for the first quarter of 1995, an increase of 27.6% after
adjusting for the $3,090,000 trading loss recorded in the first quarter of 1995.
Comparing the segments of noninterest income for the first quarter of 1996 with
the first quarter of 1995, service charges on deposit accounts; other service
charges, commissions and fees; and trust income increased 11.2%, 26.7% and
18.7%, respectively, while loan sales and servicing income increased 32.7% and
other income increased 40.3%. The increase in other income was primarily an
increase in income from mortgage servicing released premiums on the sale of
first mortgage loans. Net gains of $2,000 on the sale of investment securities
was realized during the first quarter of 1996 compared to $105,000 of net losses
during the first quarter of 1995, and trading account income during the first
quarter 1996 increased $720,000 over the adjusted trading account loss reported
in the first quarter of 1995.
NONINTEREST EXPENSES
Noninterest expenses for the first quarter of 1996 totaled $49,752,000 as
compared to $46,118,000 for the first quarter of 1995, an increase of 11.0%
after adjusting for the $1,300,000 restructuring charge recorded in the first
quarter of 1995. Comparing the noninterest expense segments for the first
quarter of 1996 and the first quarter of 1995, salaries and employee benefits
increased 14.8%, occupancy, furniture and equipment expenses increased 13.3%,
advertising increased 39.8%, FDIC premiums decreased 99.7% and the total of all
other expenses increased 17.6%. Salaries and employee benefits increased
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. The occupancy, furniture and equipment expense increase resulted
primarily from the addition of branch facilities, the further expansion of the
ATM network, and the installation of personal computers and local area networks.
The increase in all other expenses resulted primarily from increases in
supplies, postage, and telecommunication expenses related to acquisition and
expansion. The Company's "efficiency ratio," or noninterest expenses as a
percentage of total taxable-equivalent net revenues, improved to 56.8% for the
first quarter of 1996 from 64.2% for the first quarter of 1995.
12
<PAGE> 13
ZIONS BANCORPORATION AND SUBSIDIARIES
INCOME TAXES
The Company's income taxes for the first quarter of 1996 were $12,003,000 as
compared to $7,823,000 for the first quarter of 1995, an increase of 29.6% after
adjusting $1,442,000 for estimated income taxes related to the 1995 trading loss
and restructuring charge. The increase in the Company's income taxes for the
first quarter of 1996, as compared to the first quarter of 1995, was due to the
increase in income before income taxes and an increase in the Company's
effective tax rate to 33.6% from 32.8%.
ANALYSIS OF FINANCIAL CONDITION
EARNING ASSETS
Average earning assets increased 19.7% to $5,677.9 million in the three months
ended March 31, 1996, as compared to $4,744.6 million in the three months ended
March 31, 1995. Earning assets comprised 91.9% of total average assets for the
first three months of 1996, compared with 91.0% for the first three months of
1995.
Average money market investments, consisting of interest-bearing deposits, and
federal funds sold and security resell agreements increased 56.1% to $1,101.6
million as compared to $705.6 million in the first three months of 1995.
During the first three months of 1996, average securities increased 4.9% to
$1,701.0 million as compared to $1,621.3 million in the first three months of
1995. Average held to maturity securities increased 4.0%, available for sale
securities increased 17.4%, and average trading account securities decreased
11.1%, as compared with the same period in 1995.
Average net loans and leases increased 18.9% to $2,875.3 million for the first
three months of 1996 as compared to $2,417.8 million in the first three months
of 1995, representing 50.6% of earning assets in the first quarter of 1996 as
compared to 51.0% in the first quarter of 1995. Average net loans and leases
were 71.2% of average total deposits for the three months ended March 31, 1996,
as compared to 65.8% for the three months ended March 31, 1995.
13
<PAGE> 14
ZIONS BANCORPORATION AND SUBSIDIARIES
INVESTMENT SECURITIES
The following table presents the Company's investment securities at March 31,
1996, December 31, 1995 and March 31, 1995.
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1996 1995 1995
--------------------- --------------------- --------------------
Amortized Market Amortized Market Amortized Market
(In thousands) 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 $ 510,875 $ 523,172 $ 529,376 $ 541,014 $ 466,506 $ 463,424
Other agency securities 347,556 343,719 265,430 263,522 351,060 343,663
States and political subdivisions 228,230 232,895 225,231 230,149 257,743 256,657
----------- --------- ----------- ----------- --------- ----------
1,086,661 1,099,786 1,020,037 1,034,685 1,075,309 1,063,744
Mortgage-backed securities 57,640 58,191 58,546 59,249 52,227 52,261
----------- --------- ----------- ----------- --------- ----------
$1,144,301 $1,157,977 $1,078,583 $1,093,934 $1,127,536 $1.116,005
----------- --------- ----------- ----------- --------- ----------
Available for sale
U.S. Treasury securities $ 14,162 $ 14,185 $ 17,691 $ 17,728 $ 35,160 $ 34,684
U.S. government agencies 83,035 82,567 71,038 70,952 69,878 70,252
States and political subdivisions 39,014 40,521 40,153 42,084 - -
----------- --------- ----------- ----------- --------- ----------
136,211 137,273 128,882 130,764 105,038 104,936
----------- --------- ----------- ----------- --------- ----------
Mortgage-backed securities 68,299 67,926 69,469 69,333 54,171 53,584
----------- --------- ----------- ----------- --------- ----------
Equity securities:
Mutual funds:
Accessor Funds, Inc. 108,939 108,141 118,899 119,971 118,847 114,474
Other 571 571 564 564 527 527
Stock:
Federal Home Loan Bank 73,598 73,598 71,988 71,988 68,292 68,292
Other 6,823 7,223 5,386 5,580 2,792 2,860
----------- --------- ----------- ----------- --------- ----------
189,931 189,533 196,837 198,103 190,458 186,153
----------- --------- ----------- ----------- --------- ----------
$ 394,441 $ 394,732 $ 395,188 $ 398,200 $ 349,667 $ 344,673
----------- --------- ----------- ----------- --------- ----------
Total $1,538,742 $1,552,709 $1,473,771 $1,492,134 $1,477,203 $1,460,678
========== ========== ========== ========== ========== ==========
</TABLE>
14
<PAGE> 15
ZIONS BANCORPORATION AND SUBSIDIARIES
LOANS
The Company has structured its organization to separate the lending function
from the credit administration function to strengthen the control and
independent evaluation of credit activities. Loan policies and procedures
provide the Company with a framework for consistent underwriting and a basis for
sound credit decisions. In addition, the Company has well-defined standards for
grading its loan portfolio, and management utilizes the comprehensive loan
grading system to determine risk potential in the portfolio. Another aspect of
the Company's credit risk management strategy is the diversification of the loan
portfolio. The Company has a well-diversified loan portfolio with no significant
exposure to highly leveraged transactions and has no foreign credits in its loan
portfolio.
The table below sets forth the amount of loans outstanding by type at March 31,
1996, December 31, 1995 and March 31, 1995.
<TABLE>
<CAPTION>
(In thousands)
March 31, December 31, March 31,
Types 1996 1995 1995
---------- ---------- ----------
<S> <C> <C> <C>
Loans held for sale $ 153,589 $ 126,124 $ 104,788
Commercial, financial, and agricultural 696,027 688,466 608,621
Real estate:
Construction 322,023 268,812 193,592
Other 1,327,025 1,272,633 1,069,601
Consumer 327,912 341,150 374,683
Lease financing 144,609 132,520 125,717
Other receivables 32,934 8,203 22,386
---------- ---------- ----------
Total loans $3,004,119 $2,837,908 $2,499,388
========== ========== ==========
</TABLE>
Loans held for sale at March 31, 1996 increased 21.8% from year-end 1995. All
other loans, net of unearned income and fees increased 5.1% to $2,817.4 million
at March 31, 1996, compared to $2,680.8 million at December 31, 1995. Commercial
loans, construction loans, other real estate-secured loans, lease financing and
other receivables increased from year end 1.1%, 19.8%, 4.3%, 9.1% and 301.5%,
respectively, as consumer loans decreased 3.9%. Within the other real
estate-secured loan portfolio, home equity credit line loans decreased 6.2%, 1-4
family residential loans decreased .1% and all other real estate loans increased
8.0% from year end. During the first quarter of 1996, the Company securitized
and sold home equity credit line receivables totaling $47.6 million, credit card
receivables totaling $39.6 million, and automobile loans totaling $51.3 million.
15
<PAGE> 16
ZIONS BANCORPORATION AND SUBSIDIARIES
RISK ELEMENTS
The Company's nonperforming assets, which include nonaccruing loans,
restructured loans, other real estate owned and other nonperforming assets, were
$9,393,000 at March 31, 1996, up 1.0% from $9,296,000 at December 31, 1995, but
down 35.3% from $14,510,000 at March 31, 1995. Such nonperforming assets as a
percentage of net loans and leases, other real estate owned and other
nonperforming assets were .32%, .33% and .59% at March 31, 1996, December 31,
1995, and March 31, 1995, respectively.
Accruing loans past due 90 days or more totaled $6,669,000 at March 31, 1996, up
from $5,232,000 at December 31, 1995, and up from $2,121,000 at March 31, 1995.
These loans equaled .22% of net loans and leases at March 31, 1996, as compared
to .19% at December 31, 1995 and .09% at March 31, 1995.
No loans were considered potential problem loans at March 31, 1996, December 31,
1995 or March 31, 1995. Potential problem loans are defined as loans presently
current by their terms, but about which management has serious doubt as to the
future ability of the borrower to comply with present repayment terms and which
may result in the reporting of the loans as nonperforming assets.
The Company's total recorded investment in impaired loans, in accordance with
Financial Accounting Standard statements, amounted to $4,754,000 at March 31,
1996, as compared to $3,388,000 as of December 31, 1995, and $6,141,000 at March
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 March 31, 1996, December 31, 1995, and March
31, 1995 amounts to $365,000, $22,000 and $43,000, respectively.
The following table sets forth the nonperforming assets at March 31, 1996,
December 31, 1995, and March 31, 1995.
<TABLE>
<CAPTION>
March 31, December 31, March 31,
(In thousands) 1996 1995 1995
---- ---- ----
<S> <C> <C> <C>
Nonaccrual loans $8,360 $7,438 $10,276
Restructured loans 245 249 561
Other real estate owned and other
nonperforming assets 788 1,609 3,673
------ ------ -------
Total $9,393 $9,296 $14,510
====== ====== =======
% of net loans and leases*, other real estate
owned and other nonperforming assets .32% .33% .59%
Accruing loans past due 90 days or more $6,669 $5,232 $ 2,121
====== ====== =======
% of net loans and leases* .22% .19% .09%
</TABLE>
* Includes loans held for sale
16
<PAGE> 17
ZIONS BANCORPORATION AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES
In analyzing the adequacy of the allowance for loan and lease losses, management
utilizes a comprehensive loan grading system to determine risk potential in the
portfolio, and considers the results of independent internal and external credit
review, historical charge-off experience, and changes in the composition and
volume of the portfolio. Other factors, such as general economic conditions and
collateral values, are also considered. Larger problem credits are individually
evaluated to determine appropriate reserve allocations. Additions to the
allowance are based upon the resulting risk profile of the portfolio developed
through the evaluation of the above factors.
The following table shows the changes in the allowance for loan losses and a
summary of loan loss experience.
<TABLE>
<CAPTION>
Twelve Months
Three Months Ended Ended
(In thousands) March 31, December 31,
-------------------------- ------------
1996 1995 1995
---- ---- ----
<S> <C> <C> <C>
Average loans* and leases outstanding
(net of unearned income) $ 2,875,258 $ 2,417,832 $ 2,599,071
=========== =========== ===========
Allowance for possible losses:
Balance at beginning of the period $ 67,555 $ 67,018 $ 67,018
Allowance of companies acquired -- -- 249
Loans and leases charged-off:
Loans held for sale -- -- --
Commercial, financial and agricultural (317) (52) (997)
Real estate (242) (55) (548)
Consumer (1,883) (1,418) (6,786)
Lease financing -- (2) (41)
Other receivables -- -- --
----------- ----------- -----------
Total (2,442) (1,527) (8,372)
----------- ----------- -----------
Recoveries:
Loans held for sale -- -- --
Commercial, financial and agricultural 637 454 2,580
Real estate 194 89 464
Consumer 690 646 2,540
Lease financing 391 92 276
Other receivables -- -- --
----------- ----------- -----------
Total 1,912 1,281 5,860
----------- ----------- -----------
Net loan and lease charge-offs (530) (246) (2,512)
Provision charged against earnings 600 600 2,800
----------- ----------- -----------
Balance at end of the period $ 67,625 $ 67,372 $ 67,555
=========== =========== ===========
*Includes loans held for sale
Ratio of net charge-offs to
average loans and leases .07% .04% .10%
</TABLE>
17
<PAGE> 18
ZIONS BANCORPORATION AND SUBSIDIARIES
The allowance for loan losses as a percentage of net loans and leases was 2.28%
at March 31, 1996, compared to 2.41% at December 31, 1995, and 2.72% at March
31, 1995. The allowance, as a percentage of nonaccrual loans and accruing loans
past due 90 days or more was 450.0% at March 31, 1996, compared to 533.2% at
December 31, 1995, and 543.5% at March 31, 1995. The allowance, as a percentage
of nonaccrual loans and restructured loans was 785.9% at March 31, 1996,
compared to 878.8% at December 31, 1995, and 621.7% at March 31, 1995.
Included in the allowance for loan losses is an amount for unused loan
commitments and standby letters of credit which at March 31, 1996, December 31,
1995, and March 31, 1995, amounted to $6,624,000, $7,516,000 and $5,209,000,
respectively. Unused loan commitments and standby letters of credit at March 31,
1996, December 31, 1995, and March 31, 1995, amounted to $1,631 million, $1,611
million and $1,339 million, respectively.
DEPOSITS
Average total deposits of $4,038.4 million for the first three months of 1996
increased 10.0% over the $3,672.4 million for the first three months of 1995,
with average demand deposits increasing 10.7%. Average money market and super
NOW deposits, time deposits under $100,000 and time deposits over $100,000 for
the first three months of 1996 increased 19.0%, 22.9% and 59.9% respectively,
from the first three months of 1995. Average savings and NOW deposits decreased
15.1% and foreign deposits decreased 29.8% during the first three months of
1996, as compared with the same period one year earlier.
Total deposits increased 1.8% to $4,171.0 million at March 31, 1996, as compared
to $4,097.4 million at December 31, 1995. Comparing March 31, 1996 to December
31, 1995, savings and money market deposits, time deposits over $100,000 and
foreign deposits increased 6.1%, 14.2% and 4.5%, respectively, while demand
deposits decreased 6.2% and time deposits under $100,000 decreased 3.3%.
LIQUIDITY AND INTEREST RATE SENSITIVITY
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 $1,306.1 million or 33.7% of core
deposits at March 31, 1996, as compared to $1,428.2 million or 37.3% of core
deposits at December 31, 1995, and $1,430.5 million or 40.6% of core deposits at
March 31 1995.
The Company's core deposits, consisting of demand, savings and money market
deposits and time deposits under $100,000, constituted 93.0% of total deposits
at March 31, 1996 as compared to 93.5% at December 31, 1995 and 93.1% at March
31, 1995.
Maturing balances in loan portfolios provide flexibility in managing cash flows.
Maturity management of those funds is an important source of medium- to
long-term liquidity. The Company's ability to raise funds in the capital markets
through the "securitization" process and by debt issuances allows the Company to
take advantage of market opportunities to meet funding needs at reasonable cost.
18
<PAGE> 19
ZIONS BANCORPORATION AND SUBSIDIARIES
The parent company's cash requirements consist primarily of principal and
interest payments on its borrowings, dividend payments to shareholders, and cash
operating expenses and income taxes. The parent company's cash needs are
routinely satisfied through payments by subsidiaries of dividends, management
and other fees, principal and interest payments on subsidiary borrowings from
the parent company and proportionate shares of current income taxes.
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. Gaps are actively managed and change daily as the
interest rate environment changes; therefore, positions at the end of any period
may not be reflective of the Company's interest rate position in subsequent
periods. 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, however, is unable to effectively
and economically hedge the prime/90-day T-bill spread risk through the use of
off-balance sheet financial instruments.
CAPITAL RESOURCES AND DIVIDENDS
Total shareholders' equity at March 31, 1996 was $438.6 million, an increase of
2.4% over the $428.5 million at December 31, 1995, and an increase of 15.1% over
the $381.0 million at March 31 1995. The ratio of average equity to average
assets for the first three months of 1996 was 7.02%, as compared to 7.16% for
the same period in 1995. At March 31, 1996, the Company's Tier I risk-based
capital ratio was 11.13%, as compared to 11.38% at December 31, 1995 and 12.14%
at March 31, 1995. At March 31, 1996 the Company's total risk-based capital
ratio was 13.89%, as compared to 14.23% at December 31, 1995 and 15.27% at March
31, 1995. The Company's leverage ratio as of March 31, 1996 was 6.20%, as
compared to 6.28% at December 31, 1995 and 6.59% at March 31, 1995.
Dividends declared per common share for the first quarter of 1996 of $.41
increased 36.7%, as compared to $.30 for the first quarter of 1995. The common
cash dividend payout of net income for the first three months of 1996 was 25.2%,
as compared to 27.4% for the first three months of 1995.
MERGERS AND ACQUISITIONS
During the first quarter of 1996, Zions Bancorporation's subsidiary, Zions First
National Bank, acquired 32.53% of the Class A voting stock (comprising 20.34% of
the total voting stock) of Federal Agricultural Mortgage Corporation, a U.S.
government-sponsored enterprise dedicated to increasing the availability of
credit to rural communities and agricultural borrowers through the establishment
of a viable secondary market for certain types of loans originated in those
communities. This investment will strengthen Zions Bancorporation's ability to
serve the needs of rural communities.
19
<PAGE> 20
ZIONS BANCORPORATION AND SUBSIDIARIES
Zions Bancorporation has received regulatory approvals and now awaits
shareholders approval to acquire Southern Arizona Bancorp, Inc. and it's banking
subsidiary, Southern Arizona Bank, in a purchase transaction to be paid through
the exchange of Zions Bancorporation common stock for Southern Arizona Bancorp,
Inc. stock. The transaction is expected to be consummated during the second
quarter of 1996, and will enable the Company to merge Southern Arizona Bank into
Zions Bancorporation's subsidiary, National Bank of Arizona, and to provide
expanded banking services in Yuma, Arizona.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibit 27 Article 9 Financial Schedules for Form 10-Q
b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter
ending March 31, 1996.
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ZIONS BANCORPORATION
/s/ Harris H. Simmons
------------------------------
Harris H. Simmons, President and
Chief Executive Officer
/s/ Gary L. Anderson
------------------------------
Gary L. Anderson, Senior Vice President
and Chief Financial Officer
Dated: May 13, 1996
20
<PAGE> 21
Exhibit Index
Exhibit No.
- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1996 AND THE RELATED
UNAUDITED CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31,
1996 INCLUDED IN THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 394,495
<INT-BEARING-DEPOSITS> 37,002
<FED-FUNDS-SOLD> 1,000,823
<TRADING-ASSETS> 81,888
<INVESTMENTS-HELD-FOR-SALE> 394,732
<INVESTMENTS-CARRYING> 1,144,301
<INVESTMENTS-MARKET> 1,157,977
<LOANS> 2,971,033
<ALLOWANCE> 67,625
<TOTAL-ASSETS> 6,202,683
<DEPOSITS> 4,170,996
<SHORT-TERM> 1,375,082
<LIABILITIES-OTHER> 79,662
<LONG-TERM> 138,321
0
0
<COMMON> 67,569
<OTHER-SE> 371,053
<TOTAL-LIABILITIES-AND-EQUITY> 6,202,683
<INTEREST-LOAN> 70,623
<INTEREST-INVEST> 42,885
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 113,508
<INTEREST-DEPOSIT> 32,511
<INTEREST-EXPENSE> 53,559
<INTEREST-INCOME-NET> 59,949
<LOAN-LOSSES> 600
<SECURITIES-GAINS> 2
<EXPENSE-OTHER> 49,752
<INCOME-PRETAX> 35,674
<INCOME-PRE-EXTRAORDINARY> 23,671
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,671
<EPS-PRIMARY> 1.61
<EPS-DILUTED> 1.61
<YIELD-ACTUAL> 4.25
<LOANS-NON> 8,360
<LOANS-PAST> 6,669
<LOANS-TROUBLED> 245
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 67,555
<CHARGE-OFFS> 2,442
<RECOVERIES> 1,912
<ALLOWANCE-CLOSE> 67,625
<ALLOWANCE-DOMESTIC> 11,537
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 56,088
</TABLE>
