SKY VALLEY BANK CORP.
Proxy Statement
For
Special Meeting of Shareholders
To be Held on January 22, 1998
and
ZIONS BANCORPORATION
Prospectus
Up to 572,836 Shares of
Common Stock
This Proxy Statement/Prospectus is being furnished to the shareholders
of Sky Valley Bank Corp., a Colorado corporation ("the Company"), in connection
with the solicitation of proxies by its Board of Directors for use at a Special
Meeting of Shareholders of the Company to be held on January 22, 1998 (the
"Special Meeting") and at any adjournments or postponements thereof. This Proxy
Statement/Prospectus and accompanying form of proxy ("Proxy") are first being
mailed to the shareholders of the Company of record as of December 18, 1997 (the
"Record Date") on or about December 19, 1997.
At the Special Meeting, the holders of Company common stock, par value
$.01 per share ("Company Common Stock") will consider and vote upon a proposal
to approve and adopt the Agreement and Plan of Reorganization dated as of July
25, 1997, as amended on September 8, 1997, among the Company, The First National
Bank in Alamosa, the Company's wholly-owned subsidiary, a national banking
association organized under the laws of the United States (the "Bank"), Ralph H.
Outcalt ("Outcalt") and Donald J. Wuckert ("Wuckert"), both shareholders of the
Company, Zions Bancorporation, a Utah corporation ("Zions"), Zions' wholly-owned
subsidiary, Val Cor Bancorporation, Inc., a Colorado corporation ("Val Cor"),
and Val Cor's 99.7% owned subsidiary, Valley National Bank of Cortez, a national
banking association organized under the laws of the United States ("Valley"), an
accompanying Agreement of Merger between the Company and Val Cor, and an
Agreement of Merger between the Bank and Valley (collectively the "Plan of
Reorganization"). Pursuant to the Plan of Reorganization, the Company will merge
with and into Val Cor with Val Cor being the surviving corporation (the "Holding
Company Merger") and Valley will merge with and into the Bank, with the Bank
being the surviving banking corporation (the "Bank Merger"; collectively the
"Reorganization").
Upon consummation of the Reorganization, the holders of each
outstanding share of Company Common Stock will receive, in exchange for each
share of Company Common Stock, shares of Zions common stock, no par value
("Zions Common Stock"). At the Effective Date (as defined) of the
Reorganization, the shares of Company Common Stock will be canceled and
immediately converted into the right for holders of Company Common Stock to
receive, in exchange for each share of Company Common Stock, that number of
shares of Zions Common Stock calculated by dividing the Merger Consideration (as
defined) of 572,836 shares of Zions Common Stock by the total number of shares
of Company Common Stock issued and outstanding as of the Effective Date of the
Reorganization. In accordance with this formula, the shareholders of the Company
will receive approximately 260.38 shares of Zions Common Stock for each share of
Company Common Stock. Zions will not issue
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fractional shares of its common stock in the Reorganization. In lieu of
fractional shares of Zions Common Stock, if any, each shareholder of the Company
who is entitled to a fractional share of Zions Common Stock will receive an
amount of cash equal to the product of such fraction times $33.50. Such
fractional share interest shall not include the right to vote or to receive
dividends or any interest thereon.
On December 15, 1997, the closing price of Zions Common Stock was
$44.25 per share. On that date the Company had 2,200 shares of its Common Stock
issued and outstanding. Assuming that the Reorganization had been consummated as
of December 15, 1997 and the closing price of Zions Common Stock had been $44.25
per share on that date, shareholders of the Company under such circumstances
would have received 260.38 shares of Zions Common Stock for each share of
Company Common Stock, or an equivalent value of $11,521.82 per share of Company
Common Stock.
The Zions Common Stock to be distributed to Company shareholders will
be registered with the Securities and Exchange Commission and for all
shareholders, other than shareholders who are affiliates of the Company or who
become affiliates of Zions, will be immediately tradable. See "Plan of
Reorganization--Restrictions on Resales by Company Affiliates." Zions has filed
this Proxy Statement/Prospectus with the Securities and Exchange Commission as
part of a Registration Statement under the Securities Act of 1933, as amended,
with respect to the shares of Zions Common Stock which may be issued in the
Reorganization to the shareholders of the Company. This Proxy
Statement/Prospectus also constitutes the prospectus of Zions filed as part of
the Registration Statement.
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FOR THE ACTION OF THE SHAREHOLDERS TO BE EFFECTIVE, HOLDERS OF A
MAJORITY OF THE ISSUED AND OUTSTANDING SHARES OF COMMON STOCK OF THE COMPANY
MUST VOTE IN FAVOR OF THE REORGANIZATION. ALL REGULATORY APPROVALS HAVE BEEN
OBTAINED.
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THE SHARES OF ZIONS COMMON STOCK TO BE ISSUED IN THE REORGANIZATION
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE SHARES OF ZIONS COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
No person has been authorized to give any information or to make any
representation not contained in this Proxy Statement/Prospectus, and, if given
or made, any such information or representation should not be relied upon as
having been authorized by Zions or the Company. This Proxy Statement/Prospectus
does not constitute an offer or solicitation by any person in any state in which
such offer or solicitation is not authorized by the laws thereof or in which the
person making such offer or solicitation is not qualified to make the same.
Neither the delivery of this Proxy Statement/Prospectus at any time nor the
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distribution of Zions Common Stock hereunder shall imply that the information
contained herein is correct as of any time subsequent to its date.
The information contained in this Proxy Statement/Prospectus with
respect to Zions has been supplied by Zions. The information contained in this
Proxy Statement/Prospectus with respect to the Company has been supplied by the
Company. Neither Zions nor the Company warrants the accuracy or completeness of
information relating to the other.
Forward-looking Statements
Certain statements contained herein are not based on historical facts,
but are forward-looking statements that are based upon numerous assumptions
about future conditions that could prove not to be accurate. Actual events,
transactions and results may materially differ from the anticipated events,
transactions or results described in such statements. Zions' ability to
consummate such transactions and achieve such events or results is subject to
certain risks and uncertainties. Such risks and uncertainties include, but are
not limited to, the existence of demand for and acceptance of Zions' products
and services, regulatory approvals and developments, economic conditions, the
impact of competition and pricing, results of financing efforts and other
factors affecting Zions' business that are beyond Zions' control. Factors that
could cause future results to vary from current management expectations include,
but are not limited to, general economic conditions, legislative and regulatory
changes, monetary and fiscal policies of the federal government, changes in tax
policies, rates and regulations of federal and local tax authorities, changes in
interest rates, deposit flows, the cost of funds, demand for loan products,
demand for financial services, competition, changes in the quality or
composition of Zions' loan and investment portfolios, changes in accounting
principles, policies or guidelines, and other economic, competitive,
governmental and technological factors affecting Zions' operations, markets,
products, services and prices.
The date of this Proxy Statement/Prospectus is December 16, 1997.
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AVAILABLE INFORMATION
Zions has filed with the Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933 (the "Securities Act") a Registration Statement
on Form S-4 (the "Registration Statement") covering the shares of Zions Common
Stock issuable in the Reorganization. As permitted by the rules and regulations
of the SEC, this Proxy Statement/Prospectus omits certain information, exhibits
and undertakings contained in the Registration Statement. The statements
contained in this Proxy Statement/Prospectus as to the contents of any contract
or other document filed as an exhibit to the Registration Statement are of
necessity brief descriptions and are not necessarily complete. Each such
statement is qualified in its entirety by reference to the copy of such contract
or document filed as an exhibit to the Registration Statement. The Registration
Statement and the exhibits thereto can be inspected at the public reference
facilities of the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C.,
and copies of such material can be obtained at prescribed rates by mail
addressed to the SEC, Public Reference Section, Washington, D.C. 20549.
Zions is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy statements and other information with the SEC. Such reports,
proxy statements and other information can be inspected and copied at the public
reference facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C.; and at the following regional offices of the SEC: 7 World
Trade Center, Suite 1300, New York, New York 10048; and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material can also be obtained at prescribed rates by mail addressed to the SEC,
Public Reference Section, Washington, D.C. 20549. Zions Common Stock is quoted
on the NASDAQ National Market System (hereinafter, the "NASDAQ-NMS"), and such
reports, proxy statements and other information can also be inspected at the
offices of NASDAQ Operations, 1735 K Street, N.W., Washington, D.C. The SEC
maintains a Web site that contains reports, proxy and information statements,
and other information regarding registrants that file electronically with the
SEC (http://www.sec.gov).
This Proxy Statement/Prospectus incorporates by reference certain
documents relating to Zions which are not presented herein or delivered
herewith, including the Plan of Reorganization (as described herein). See
"Information Concerning Zions--Zions Documents Incorporated by Reference."
Copies of such documents are available upon request and without charge to any
person to whom this Proxy Statement/Prospectus has been delivered. Requests for
the Plan of Reorganization or Zions documents should be directed to Zions
Bancorporation, One South Main, Suite 1380, Salt Lake City, Utah 84111,
Attention: Dale M. Gibbons, Senior Vice President, (telephone: 801/524-4787). In
order to ensure timely delivery of the Plan of Reorganization or Zions
documents, any request should be made not later than January 15, 1998.
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TABLE OF CONTENTS
Page
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SUMMARY ...................................................................1
INTRODUCTION...............................................................15
Record Date; Voting Rights........................................15
Purpose of the Special Meeting....................................15
Voting and Revocation of Proxies..................................16
Solicitation of Proxies...........................................16
PLAN OF REORGANIZATION.....................................................17
The Reorganization................................................17
Background of and Reasons for the Reorganization..................19
Voting Agreements.................................................20
Required Vote; Management Recommendation..........................21
No Opinion of a Financial Advisor.................................21
Conversion of Company Shares......................................21
Federal Income Tax Consequences of the Reorganization.............23
Rights of Dissenting Shareholders.................................24
Interests of Certain Persons in the Transaction...................26
Inconsistent Activities...........................................27
Conduct of Business Pending the Reorganization....................28
Conditions to the Reorganization..................................29
Representations and Warranties....................................30
Amendment and Waiver..............................................31
Authorized Termination and Damages for Breach.....................31
Restrictions on Resales by Company Affiliates.....................31
Expenses .........................................................32
Government Approvals..............................................32
Effective Date of the Reorganization..............................32
Accounting Treatment..............................................32
Relationship Between Zions and the Company........................33
Unaudited Pro Forma Combined Financial Information................33
SUPERVISION AND REGULATION.................................................34
Zions .........................................................34
Regulatory Capital Requirements...................................35
Other Regulatory and Supervisory Issues...........................39
Deposit Insurance and Other Assessments...........................40
Interstate Banking................................................41
MONETARY POLICY............................................................42
INFORMATION CONCERNING ZIONS BANCORPORATION................................43
Selected Financial Data...........................................43
Stock Prices and Dividends on Zions Common Stock..................46
Principal Holders of Zions Common Stock...........................46
Zions Documents Incorporated By Reference.........................48
INFORMATION CONCERNING SKY VALLEY BANK CORP................................49
General .........................................................49
Business of the Bank..............................................49
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Lending .........................................................50
Investment Portfolio..............................................52
Deposits .........................................................55
Property .........................................................55
Competition.......................................................55
Legal Proceedings.................................................56
Employees.........................................................56
Regulatory Matters................................................56
Selected Financial Data...........................................56
Stock Prices and Dividends on Company Common Stock................58
Stockholdings of Directors, Officers and Certain Others...........58
Certain Transactions of the Company...............................59
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF SKY VALLEY BANK CORP.................59
COMPARISON OF THE RIGHTS OF SHAREHOLDERS
OF ZIONS AND THE COMPANY..........................................67
LEGAL OPINIONS.............................................................73
EXPERTS ..................................................................73
OTHER MATTERS..............................................................73
CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY...........................74
Appendix A - Form of Opinion of Duane Morris & Heckscher LLP as to Tax Matters
Appendix B - Rights of Dissenters under ss.ss. 7-113-201 to 701-113-302 of the
Colorado Business Corporation Act
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SUMMARY
The following is a brief summary of certain information which may also
be contained elsewhere in this Proxy Statement/Prospectus. This summary is
provided for convenience and should not be considered complete. It is qualified
in its entirety by the more detailed information contained in this Proxy
Statement/Prospectus and in the Appendices hereto.
The Parties
Zions Bancorporation ("Zions") is a bank holding company registered
under the Bank Holding Company Act of 1956, as amended (the "Bank Holding
Company Act"), and organized under the laws of Utah, engaged primarily in the
commercial banking business through its banking subsidiaries. Zions' principal
executive offices are at One South Main, Suite 1380, Salt Lake City, Utah 84111
(telephone: 801/524-4787). Zions is the second largest bank holding company
headquartered in Utah. Zions First National Bank, Salt Lake City, Utah ("ZFNB"),
founded in 1873, is a wholly-owned subsidiary of Zions (except for directors'
qualifying shares) and currently has 112 offices located throughout the state of
Utah as well as fifteen offices in various communities in Idaho, plus one
foreign office, for a total of 128 banking offices, including its Head Office.
ZFNB is the second largest banking organization in the state of Utah. Zions also
owns Nevada State Bank, Las Vegas, Nevada, and National Bank of Arizona, Tucson,
Arizona ("NBA"). NBA currently has 28 offices in Arizona and is the fifth
largest banking organization in Arizona. On May 16, 1997, Zions acquired Aspen
Bancshares, Inc. ("Aspen"), a bank holding company headquartered in Aspen,
Colorado. The operations acquired in the Aspen merger are conducted through 12
offices/branches in western Colorado and one branch in northeastern New Mexico.
As of December 31, 1996, Aspen had total consolidated assets of $451 million,
deposits of $399 million, and shareholders' equity of $31 million. On July 11,
1997, Zions also acquired Zions Bank (formerly Tri-State Bank) in Montpelier,
Idaho. Subsequent to the acquisition by Zions of Zions Bank, Zions Bank acquired
10 branches from Wells Fargo Bank, N.A., located in Idaho, and opened two de
novo branches in Idaho. On July 19, 1997, Zions completed its acquisition of 27
former branches of Wells Fargo Bank in Arizona (11 branches), Idaho (10
branches), Nevada (5 branches), and Utah (1 branch). The acquisition included
$378 million in deposit accounts and the branch offices. On September 20, 1997,
Zions Bank completed its acquisition of four additional branches from Wells
Fargo in Utah. The acquisition included $56 million in deposit accounts and the
branch offices. On August 15, 1997, Zions Bank merged with ZFNB. As a result,
ZFNB now operates 15 branches in Idaho. On October 17, 1997, Zions acquired Sun
State Capital Corporation ("Sun State"), a Nevada bank holding company and
parent company of Sun State Bank. In the transaction, Sun State merged with and
into Zions, and Sun State Bank merged with and into Nevada State Bank. As a
result of the acquisition, Nevada State Bank added four offices in the Las Vegas
and one office in the Reno, Nevada areas to its franchise. As of September 30,
1997, Sun State had total assets of $171.1 million, deposits of $151.0 million,
and shareholders' equity of $13.9 million. Nevada State Bank currently has 37
offices. On November 14, 1997, Zions and GB Bancorporation ("Grossmont"), the
parent company of Grossmont Bank, completed their merger whereby Grossmont
merged with and into Zions. Grossmont Bank had approximately $720 million in
assets and 14 offices in San Diego County, California. On September 24, 1997,
Zions, Vectra Banking Corporation ("Vectra"), and Tri-State Finance Corporation
("Tri-State") announced that definitive agreements had been signed under which
Vectra will merge with and into Zions and Tri-State with and into a subsidiary
of Zions, each
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in exchange for common shares of Zions. At August 31, 1997, Vectra had assets of
$660 million and Tri-State had assets of $130 million. The mergers are
unrelated, are not conditional on each other, and are subject to approval by
banking regulators and the shareholders of Vectra and Tri-State, respectively.
See "Summary--Recent Developments," below. These acquisitions are pending. As of
December 31, 1996 Zions had total consolidated assets of $6.49 billion, deposits
of $4.55 billion, and shareholders' equity of $507.5 million; as of September
30, 1997, Zions had total consolidated assets of $9.06 billion, deposits of
$5.67 billion, and shareholders' equity of $581.1 million. See "Information
Concerning Zions Bancorporation."
Val Cor Bancorporation, Inc. ("Val Cor"), a Colorado corporation, is a
registered bank holding company under the Bank Holding Company Act of 1956, as
amended. Zions acquired Val Cor as part of the Aspen acquisition in May 1997.
Val Cor's principal asset consists of its ownership interest in over 99% of the
common stock of Valley Bank. Val Cor's main office is located at 350 W.
Montezuma, Cortez, Colorado, and its telephone number is (970) 565-4411.
Valley National Bank of Cortez ("Valley Bank") is a national banking
association organized in 1979. Valley Bank offers traditional banking services
to customers in its primary market area of Montezuma County, Colorado. Valley
Bank also conducts business through its two branch offices located in Cortez and
Dolores, Colorado. At December 31, 1996, Valley Bank had total assets of $80.2
million, total deposits of $68.8 million, and shareholders' equity of $11.2
million. At September 30, 1997, Valley Bank had total assets of $95.1 million,
total deposits of $70.6 million, and shareholders' equity of $23.6 million.
Valley Bank's main office is located at 350 W. Montezuma, Cortez, Colorado, and
its telephone number is 970-565-4411.
Sky Valley Bank Corp. (the "Company") is a bank holding company
organized under the laws of the State of Colorado in September, 1991. The
Company is registered as a bank holding company with the Board of Governors of
the Federal Reserve System. The Company has one subsidiary, The First National
Bank in Alamosa (the "Bank"). The Company's primary business is the ownership
and management of the Bank.
On September 30, 1997, the Company had outstanding 2,200 shares of
Common Stock which are held of record by 42 shareholders. As of September 30,
1997, Ralph H. Outcalt and Donald J. Wuckert owned in the aggregate
approximately 63.64% of the outstanding shares of the Company stock.
For the first full year of the operations of the Company ended on
December 31, 1992, the Company's net income was $909,000 and total assets were
$70,681,000. For the year ended December 31, 1996, the Company's net income was
$1,466,000, and total assets were $120,437,000. For the nine months ended
September 30, 1997, the Company's net income was $1,206,000 and total assets
were $122,872,000.
The First National Bank in Alamosa (the "Bank") was originally
organized on September 6, 1905 as The American National Bank of Alamosa, a
national banking association and commenced operations in September, 1905. On
January 11, 1955, the name of the Bank was changed to The First National Bank in
Alamosa. Deposits are insured by the Federal Deposit Insurance Corporation
(FDIC). The Bank is examined and regulated by the Office of the Comptroller of
the Currency.
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The Bank currently operates through a main office located at 720 Main
Street, Alamosa, Colorado and two branch offices located in Center, Colorado
(the "Center Branch") and Saguache, Colorado (the "Saguache Branch").
The Bank offers traditional banking services, including checking,
savings, money market accounts, certificates of deposit, IRAs and safe deposit
services. The Bank also offers banking by phone services and direct deposit EFT
services. The Bank offers automatic teller machine (ATM) services at 12
locations through the San Luis Valley of Colorado. The Bank offers a variety of
loan products, including commercial, agricultural, real estate, consumer
mortgage and consumer loans, and equity lines of credit. The Bank also offers a
MasterCard program to its customers.
The Bank concentrates its lending activities generally in the
classifications of commercial, agricultural, and consumer loans. Commercial
loans consist of commercial real estate loans, real estate construction loans,
and land development loans. Commercial loans may also involve furniture,
fixtures, and inventory financing. Agricultural loans consist of loans secured
by agricultural properties, equipment, machinery, livestock, and agricultural
products. Consumer loans consist of residential mortgage loans, motor vehicle
loans, installment loans, personal loans, and the MasterCard program of the
Bank. The substantial majority of the loans of the Bank are generated in the San
Luis Valley area of Colorado.
The Special Meeting; Purpose
The Special Meeting of Shareholders of the Company (the "Special
Meeting") will be held at 9:00 a.m., local time, on January 22, 1998 at the
offices of the Company, 720 Main Street, Alamosa, Colorado.
The purpose of the Special Meeting is to consider and vote upon a
proposal to approve the Plan of Reorganization. Only holders of record of Common
Stock, $.01 par value, of the Company ("Company Common Stock") at the close of
business on December 18, 1997, the record date, will be entitled to vote at the
Special Meeting. At that date, 2,200 shares of Company Common Stock were
outstanding, each share being entitled to one vote. See "Introduction."
Vote Required for Approval
Approval of the Plan of Reorganization requires the affirmative vote of
a majority of the outstanding shares of Company Common Stock entitled to vote. A
failure to vote, an abstention, or a failure by a broker to vote shares held in
street name will have the same legal effect as a vote against approval of the
Plan of Reorganization. See "Plan of Reorganization--Required Vote; Management
Recommendation."
As of December 19, 1997, Messrs. Outcalt and Wuckert beneficially owned
an aggregate of approximately 63.64% of the outstanding Company Common Stock. As
an inducement to Zions to enter into the Plan of Reorganization, Messrs.
Outcalt, Wuckert and three other shareholder-directors of the Company have
entered into agreements with Zions under which they have agreed, in their
capacity as shareholders, to vote their shares in favor of the Reorganization.
These agreements cover an aggregate of approximately 73.18% of the outstanding
Company Common Stock. See "Plan of Reorganization--Voting Agreements;
Information
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Concerning Sky Valley Bank Corporation--Stockholdings of Directors, Officers and
Certain Others." Such a vote will be sufficient to approve the Plan of
Reorganization. If each of these individuals votes his shares in favor of the
Plan of Reorganization as each has agreed, the Plan of Reorganization will be
approved by the Company's shareholders notwithstanding the vote of other
shareholders of the Company.
Proposed Reorganization
At the Special Meeting, the holders of Company Common Stock will be
asked to consider and approve an Agreement and Plan of Reorganization among
Zions, Val Cor, Valley, the Company, the Bank, Messrs. Outcalt and Wuckert, an
Agreement of Merger between the Company and Zions and an Agreement of Merger
between the Bank and Valley (collectively, the "Plan of Reorganization"). The
Plan of Reorganization provides for the merger of the Company into Val Cor,
whereby Val Cor will be the surviving corporation (the "Holding Company
Merger"), and for the merger of Valley into the Bank, with the Bank being the
surviving entity (the "Bank Merger"). See "Plan of Reorganization."
Upon consummation of the Reorganization, the holders of each
outstanding share of Company Common Stock will receive, in exchange for each
share of Company Common Stock, shares of Zions common stock, no par value
("Zions Common Stock"). At the Effective Date of the Reorganization, the shares
of Company Common Stock will be canceled and immediately converted into the
right for holders of Company Common Stock to receive, in exchange for each share
of Company Common Stock, that number of shares of Zions Common Stock calculated
by dividing the Merger Consideration of 572,836 shares of Zions Common Stock by
the total number of shares of Company Common Stock issued and outstanding as of
the Effective Date. In accordance with this formula, the shareholders of the
Company will receive approximately 260.38 shares of Zions Common Stock for each
share of Company Common Stock. Zions will not issue fractional shares of its
common stock in the Reorganization. In lieu of fractional shares of Zions Common
Stock, if any, each shareholder of the Company who is entitled to a fractional
share of Zions Common Stock will receive an amount of cash equal to the product
of such fraction times $33.50. Such fractional share interest will not include
the right to vote or to receive dividends or any interest thereon.
Upon consummation of the Bank Merger, the shares of common stock of
Valley, $5.00 par value ("Valley Common Stock") will be canceled and immediately
converted into the right for holders of Valley Common Stock other than Val Cor
to receive, in exchange for each share of Valley Common Stock held of record by
such stockholder as of the Effective Date, $47.25 in cash. It is anticipated
that Zions, which owns 2,233 shares of Valley Common Stock, will contribute its
Valley Common Stock to Val Cor prior to the Val Cor special meeting. Valley will
call a special meeting of its shareholders to consider and approve the Bank
Merger. Val Cor, a wholly-owned subsidiary of Zions owns approximately 99.7% of
the issued and outstanding shares of Valley Common Stock. Val Cor has indicated
that it will vote all of its shares of Valley Common Stock in favor of and to
approve the Bank Merger. Such vote is sufficient to approve the Bank Merger. If
Val Cor votes its shares in favor of the Bank Merger, approval of the Bank
Merger by the Valley shareholders is assured, notwithstanding the vote of any
other Valley shareholder. Receipt of approval of the Bank Merger by the Office
of the Comptroller of the Currency (the "Comptroller") is a required condition
to consummation of the Bank Merger. The
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Comptroller has approved the Bank Merger. It is anticipated that the Bank Merger
will occur during the first quarter of 1998 and that the Holding Company Merger
will precede the Bank Merger by a very brief period of time, both mergers taking
place on the same day.
On December 15, 1997, the closing price of Zions Common Stock was
$44.25 per share and the Company had issued and outstanding 2,200 shares of its
Common Stock. Assuming that the Reorganization had been consummated as of
December 15, 1997 and the closing price of Zions Common Stock had been $44.25
per share, shareholders of the Company under such circumstances would have
received 260.38 shares of Zions Common Stock for each share of Company Common
Stock, or an equivalent value of $11,521.82 per share of Company Common Stock.
Certain Definitions
In connection with the description of the Reorganization in this Proxy
Statement/Prospectus, shareholders of the Company should be aware of the
following terms. The following definitions may not be complete. For a complete
definition of each term, please refer to the Plan of Reorganization.
"Bank Merger" means the merger of the Valley with and into the Bank,
with the Bank being the surviving entity.
"Effective Date" means the date which is the latest of (a) the date
following the day upon which the Company shareholders approve, ratify, and
confirm the transactions contemplated by the Plan of Reorganization; (b) the
date following the day upon which the shareholders of Valley approve, ratify,
and confirm the Bank Merger, as defined herein; (c) the first to occur of (i)
the date thirty days following the date on which the Board of Governors of the
Federal Reserve System or the Federal Reserve Bank of San Francisco acting
pursuant to delegated authority (collectively, the "Board of Governors")
authorizes consummation of the Holding Company Merger, as defined herein; or
(ii) if, pursuant to section 321(a) of the Riegle Community Development and
Regulatory Improvement Act of 1994 (the "Riegle Act"), the Board of Governors
shall have prescribed a shorter period of time with the concurrence of the
Attorney General of the United States, the date on which such shorter period of
time shall elapse; or (iii) the date ten days following the date on which the
Board of Governors indicates its waiver of jurisdiction over the Holding Company
Merger; (d) the first to occur of (1) the date thirty days following the date of
the order of the Comptroller authorizes the Bank Merger, or (2) if, pursuant to
section 321(a) of the Riegle Act, the Comptroller shall have prescribed a
shorter period of time with the concurrence of the Attorney General of the
United States, the date on which such shorter period of time shall elapse; (e)
if such an order shall be required by law, the date ten days following the date
of the order of the Commissioner of Financial Institutions of the State of Utah
(the "Commissioner") approving the transactions contemplated by the Plan of
Reorganization; (f) the date ten days following the date of the order of the
Colorado State Banking Board (the "Board") approving the transactions
contemplated by the Plan of Reorganization; (g) the date upon which any other
material order, approval, or consent of a federal or state regulator of
financial institutions or financial institution holding companies authorizing
consummation of the transactions contemplated by the Plan of Reorganization is
obtained or any waiting period mandated by such order, approval, or consent has
run; (h) ten days after any stay of the approvals of the Board of Governors, the
Comptroller, the Commissioner,
-5-
<PAGE>
or the Board of the transactions contemplated by the Plan of Reorganization,
or any injunction against closing of such transactions is lifted, discharged, or
dismissed; or (i) such other date as shall be mutually agreed upon by Zions and
the Company.
"Holding Company Merger" means the merger of the Company with and into
Val Cor, with Val Cor being the surviving corporation.
"Merger Consideration" means the aggregate of 572,836 shares of Zions
Common Stock to be issued to the holders of Company Common Stock upon
consummation of the Holding Company Merger.
Reasons for the Reorganization
Management and the directors of the Company believe that it is in the
best interest of the Company and its shareholders for the Company to merge with
a larger financial institution in a tax-free reorganization (with respect to the
receipt by the Company shareholders of shares of Zions Common Stock). Management
and the directors of the Company believe that the proposed merger with Zions in
an exchange whereby the Company shareholders will receive Zions Common Stock in
exchange for their Company Common Stock provides the Company's shareholders with
the greatest available monetary value based upon Zions' offer as compared to
previous inquiries received as well as increased liquidity for their investment,
prospects for greater yield of their investment through increased dividends and
prospects for growth in their investment due to the prospects for Zions
generally. In addition, management and the directors of the Company believe the
combined institution will be more competitive in the Company's market area due
to Zions' greater resources. See "Plan of Reorganization--Background of and
Reasons for the Reorganization" for a description of the factors considered by
the Company's board of directors in determining to recommend the Reorganization
to shareholders for their approval. The Company's board of directors believes
that the merger with Zions will realize substantial value for the Company's
shareholders and provides them the option of realizing a significant return on
their original investment and continuing to participate in the development of
banking in Colorado by holding the Zions Common Stock they will receive in the
Reorganization.
For Zions, the Reorganization will provide the opportunity to expand
its franchise into the south-central Colorado market, wherein Zions has not
previously had a presence. Zions proposes to broaden its geographical base in
the Colorado market and thereby diversify its banking operations, and expand the
banking services it is able to provide. The combination of the different skills,
resources and services offered by the Company and Zions, together with the
additional skills and resources available in the broader Zions organization,
will make the resulting banking group better able to effectively compete in its
markets with other full-service financial institutions. See "Plan of
Reorganization--Background of and Reasons for the Reorganization."
Board of Directors Recommendation
The Board of Directors of the Company unanimously believes that the
Reorganization is in the best interests of the shareholders, employees, and
customers of the Company and recommends that the shareholders of the Company
vote
-6-
<PAGE>
"FOR" approval of the Plan of Reorganization. See "Plan of Reorganization--
Background of and Reasons for the Reorganization."
SHAREHOLDERS OF THE COMPANY ARE REQUESTED TO COMPLETE, DATE, AND SIGN
THE ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
Interests of Certain Persons in the Transaction
The Plan of Reorganization provides that, following the Reorganization,
David E. Broyles, currently President and Chief Executive Officer of the Bank,
will become an executive officer of the Bank. Mr. Broyles will enter into an
Employment Agreement with the Bank effective as of the Effective Date. The
Company Board of Directors was aware of these interests when it considered and
approved the Plan of Reorganization. See "Plan of Reorganization--Interests of
Certain Persons in the Transaction."
The Plan of Reorganization further provides that, following the
Reorganization, Ralph H. Outcalt, currently Chairman of the Board of the Bank,
and Donald J. Wuckert, currently Vice Chairman of the Board of the Bank, will
both become advisors to the Bank. Mr. Outcalt and Mr. Wuckert will each enter
into an Advisory Agreement with the Bank effective as of the Effective Date and
pursuant to these agreements, Messrs. Outcalt and Wuckert will provide advice
and counsel to the management and Board of Directors of the Bank. The Company
Board of Directors was aware of these interests when it considered and approved
the Plan of Reorganization. As referenced above under "Vote Required for
Approval," Messrs. Outcalt and Wuckert and three other shareholder-directors of
the Company have entered into agreements with Zions whereby they agreed in their
capacity as shareholders of the Company to vote all of their shares of Company
Common Stock in favor of the Plan of Reorganization. These five individuals own
approximately 73.18% of the issued and outstanding shares of Company Common
Stock. Such vote will be sufficient to approve the Plan of Reorganization.
Assuming these individuals vote their shares in accordance with the voting
agreements, approval by the Company shareholders of the Plan of Reorganization
is assured, notwithstanding the vote of any other Company shareholder.
Tax Consequences
The Company will receive an opinion from Duane, Morris & Heckscher LLP,
legal counsel to Zions (the "Duane Opinion") that, based upon the facts,
representations, and assumptions set forth or referred to in such opinion, the
Holding Company Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code. As a result,
the Company shareholders, who receive Zions Common Stock, will recognize no gain
or loss upon the exchange of their shares of Company Common Stock for Zions
Common Stock in the Holding Company Merger (except with respect to cash received
by such shareholders in lieu of fractional shares). For further discussion, see
"Plan of Reorganization--Federal Income Tax Consequences of the Reorganization."
A form of the Duane Opinion to be rendered at closing is attached as Appendix A
to this Proxy Statement/Prospectus.
-7-
<PAGE>
Dissenters' Rights
Under Colorado law, shareholders of the Company will be entitled to
dissenters' rights. The Colorado Business Corporation Act (ss.ss. 7-113-101 et
seq.) permits a shareholder to dissent to a merger and to receive the fair value
for such shares in accordance with procedures established by Colorado law.
Company shareholders will be entitled under Colorado law to exercise their
dissenters' rights with respect to the Plan of Reorganization. Since exercise
and preservation of dissenters' rights are conditioned on strict observance of
the applicable section of the Colorado Business Corporation Act, each Company
shareholder who might exercise dissenters' rights should consult and strictly
observe the statute, a copy of which is attached as Appendix B to this Proxy
Statement/Prospectus. Failure to follow the statutory provisions precisely may
result in loss of such shareholder's dissenters' rights under Colorado law. See
"Plan of Reorganization--Dissenters' Rights," "Comparison of Zions Common Stock
and Company Common Stock--Dissenters' Rights" and Appendix B to this Proxy
Statement/Prospectus.
Conditions; Regulatory Approval
Consummation of the Reorganization is subject to satisfaction of a
number of conditions, including (i) obtaining requisite approval from the
Company shareholders, (ii) obtaining regulatory approvals from the Board of
Governors, the Comptroller, the Commissioner, and the Division, (iii) the
receipt of an opinion of counsel with respect to certain tax aspects of the
Reorganization, (iv) the absence of any material adverse change with respect to
the Company, and (v) the satisfaction of other customary closing conditions. See
"Plan of Reorganization--Conditions to the Reorganization." All regulatory
approvals have been obtained.
Amendment; Termination
Notwithstanding prior shareholder approval, the Plan of Reorganization
may be amended at any time prior to the Effective Date of the Reorganization in
any respect that would not prejudice the economic interests of the Company
shareholders.
The Plan of Reorganization may be terminated and abandoned at any time
prior to the Effective Date, notwithstanding approval of the shareholders, as
follows: (i) by mutual consent of the parties to the Plan of Reorganization;
(ii) unilaterally, by Zions if any of the representations and warranties of the
Company, the Bank, or Messrs. Outcalt or Wuckert was materially incorrect when
made or in the event of a material breach or material failure by the other party
to the Plan of Reorganization of any covenant or agreement contained in the Plan
of Reorganization which has not been, or cannot be, cured within thirty days
after written notice has been given; (iii) unilaterally, by the Company if any
of the representations and warranties of Zions, Val Cor or Valley was materially
incorrect when made or in the event of a material breach or material failure by
the other party to the Plan of Reorganization of any covenant or agreement
contained in the Plan of Reorganization which has not been, or cannot be, cured
within thirty days after written notice has been given; (iv) by either Zions or
the Company if the Reorganization has become inadvisable or impracticable by
reason of federal or state litigation to restrain or invalidate the
-8-
<PAGE>
Reorganization; or (v) by either party on or after March 13, 1998, if the
Effective Date has not occurred on or before that date.
Effective Date of the Reorganization
It is presently anticipated that if the Plan of Reorganization is
approved by the shareholders of the Company, the Reorganization will become
effective in the first quarter of 1998. However, there can be no assurance that
all conditions necessary to the consummation of the Reorganization will be
satisfied or, if satisfied, that they will be satisfied in time to permit the
Reorganization to become effective at the anticipated time. See "Plan of
Reorganization--Effective Date of the Reorganization."
Accounting Treatment
It is intended that the Reorganization will be treated for accounting
purposes as a "pooling of interests" in accordance with ABP Opinion No. 16. See
"Plan of Reorganization--Accounting Treatment."
Comparison of Shareholders' Rights
See "Comparison of Zions Common Stock and Company Common Stock" for a
summary of the material differences between the rights of holders of shares of
Company Common Stock and holders of shares of Zions Common Stock.
"Anti-Takeover" Provisions
The Articles of Incorporation and Bylaws of Zions contain provisions
which may be considered to be anti-takeover in nature, including staggered terms
of office for directors, absence of cumulative voting and special shareholder
vote requirements for certain types of extraordinary corporate transactions.
Additionally, Zions has adopted a shareholders' rights plan which will have the
effect of encouraging entities interested in acquiring Zions to negotiate any
such transactions with Zions' management and of deterring or discouraging
unfriendly takeovers by making any such takeover substantially more expensive to
the entity sponsoring the unfriendly takeover. See "Comparison of Zions Common
Stock and Company Common Stock."
Exchange of Certificates
Instructions on how to effect the exchange of Company Common Stock
certificates for Zions Common Stock certificates or for cash in lieu of
fractional shares of Zions Common Stock will be sent, as promptly as practicable
after the Reorganization becomes effective, to each shareholder of record of the
Company. Shareholders should not send in stock certificates until they receive
written instructions to do so.
Trading Markets; Pre-Announcement Prices
The outstanding shares of Zions Common Stock currently are traded on
the Nasdaq National Market ("NASDAQ-NMS") under the symbol "ZION." The shares of
Zions Common Stock to be issued in the Reorganization will be listed on NASDAQ-
NMS, subject to official notice of issuance. The closing sale price for Zions
-9-
<PAGE>
Common Stock on the NASDAQ-NMS on July 24, 1997, the last trading day prior to
the first public announcement of the Reorganization, was $35.50.
The outstanding shares of Company Common Stock are not listed or traded
on any market or stock exchange. Such shares when traded are traded infrequently
in privately-negotiated transactions. The Company has no reliable information as
to the prices at which the shares have traded. See "Information Concerning Sky
Valley Bank Corp.--Stock Prices and Dividends on Company Common Stock."
Selected Financial Information
The following table sets forth certain historical financial information
for Zions and the Company. With respect to pro forma combined financial
information for Zions giving effect to the Reorganization using the pooling of
interests method of accounting, see "Plan of Reorganization--Unaudited Pro Forma
Combined Financial Information." This information is based on the respective
historical financial statements of Zions incorporated herein by reference and of
the Company which are included in this Proxy Statement/Prospectus and should be
read in conjunction with such statements and information and the related notes.
-10-
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
-------------------- -----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(Unaudited) (In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Zions
Earnings
Net interest income........... $ 225,404 $ 189,207 $ 260,473 $ 227,094 $ 198,606 $ 174,657 $ 157,282
Provision for loan losses..... 2,905 2,200 3,540 2,800 2,181 2,993 10,929
Net income.................... 84,121 74,495 101,350 81,328 63,827 58,205 47,209
Per Share
Net income ................... $ 1.41 $ 1.26 $ 1.71 $ 1.38 $ 1.09 $ 1.02 $ .86
Cash Dividends................ .35 .32 .43 .35 .29 .25 .19
Statement of Condition at Period
End
Assets........................ $ 9,059,721 $ 6,783,341 $ 6,484,964 $ 5,620,646 $4,934,095 $4,801,054 $4,107,924
Deposits...................... 5,666,336 4,572,555 4,552,017 4,097,114 3,705,976 3,432,289 3,075,110
Long-term debt................ 251,134 55,702 251,620 56,229 58,182 59,587 99,223
Shareholders' equity.......... 581,129 490,485 507,452 428,506 365,770 312,592 260,070
Sky Valley (Unaudited for the
1997-1995 periods)
Earnings
Net interest income........... $ 3,808 $ 3,593 $ 4,831 $ 4,108 $ 3,628 $ 2,779 $ 2,456
Provision for loan losses..... 108 101 131 142 110 107 44
Net income.................... 1,206 1,042 1,465 1,062 912 699 909
Per Share
Net income ................... $ 548.10 $ 473.42 $ 666.14 $ 482.72 $ 414.58 $ 332.86 $ 454.50
Cash Dividends................ 120.00 112.50 150.00 140.00 132.50 140.95 112.50
Statement of Condition at Period
End
Assets........................ $ 122,872 $ 120,180 $ 120,437 $ 114,863 $ 89,641 $ 80,104 $ 70,681
Deposits...................... 108,609 106,961 106,466 102,302 78,152 71,782 65,502
Long-term debt................ 573 600 593 620 644 293 0
Shareholders' equity.......... 8,082 6,807 7,163 6,294 5,272 4,998 4,048
</TABLE>
Comparative Per Share Data
The following table sets forth for the periods indicated historical
earnings, book values and dividends per share for Zions and Company Common
Stock. The following data are based on the respective historical financial
statements of Zions incorporated herein by reference and of the Company included
herein and should be read in conjunction with such financial statements and such
information and the related notes to each.
-11-
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
---------------- ----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net Income Per Common Share
Zions......................... $ 1.41 $ 1.26 $ 1.71 $ 1.38 $ 1.09 $ 1.02 $ .86
Sky Valley.................... 548.10 473.42 666.14 482.72 414.58 332.86 454.50
Book Value Per Common Share
Zions......................... $ 9.78 $ 8.30 $ 8.61 $ 7.36 $ 6.28 $ 5.50 $ 4.74
Sky Valley.................... 3,673.70 3,105.38 3,256.04 2,861.10 2,396.23 2,271.92 2,023.77
Cash Dividends Declared Per Common
Share
Zions(1)...................... $ .35 $ .32 $ .43 $ .35 $ .29 $ .25 $ .19
Sky Valley.................... 120.00 112.50 150.00 140.00 132.50 140.95 112.50
</TABLE>
- ----------------------
(1) While Zions is not obligated to pay cash dividends, the Board of Directors
presently intends to continue its policy of paying quarterly cash
dividends. Future dividends will depend, in part, upon the earnings and
financial condition of Zions.
Unaudited Pro Forma Combined Financial Information
The following unaudited pro forma combined financial information
reflects the application of the pooling of interests method of accounting. The
following tables, which show comparative historical per Common Share data for
Zions and the Company (separately and pro forma combined) and equivalent pro
forma per share data for the Company, should be read in conjunction with the
financial information as incorporated herein by reference to other documents and
as included herein. The pro forma data in the table, presented as of and for
each of the years ended December 31, 1996 as of and for the nine months ended
September 30, 1997, are presented for comparative and illustrative purposes only
and are not necessarily indicative of the combined financial position or results
of operations in the future or what the combined financial position or results
of operations would have been had the Reorganization been consummated during the
period or as of the date for which the information in the table is presented:
-12-
<PAGE>
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------ ----------------------------------
Zions and
Sky Valley Sky Valley
Pro-Forma Equivalent
Per Common Share Zions Sky Valley Combined(4) Pro-Forma(5)
- ---------------- ----- ---------- ----------- ------------
<S> <C> <C> <C> <C>
NET INCOME(1)
For the years ended
December 31, 1996 $ 1.71 $ 666.14 $ 1.72 $ 447.85
December 31, 1995 1.38 482.72 1.39 361.93
December 31, 1994 1.09 414.58 1.10 286.42
For the nine months
ended September 30, 1997 1.41 548.10 1.41 367.14
CASH DIVIDENDS(2)
For the years ended
December 31, 1996 $ .43 $ 150.00 $ .43 $ 111.96
December 31, 1995 .35 140.00 .35 91.13
December 31, 1994 .29 132.50 .29 75.51
For the nine months
ended September 30, 1997 .35 120.00 .35 91.13
BOOK VALUE:(3)
As of December 31, 1996 $ 8.61 $3,256.04 $ 8.65 $2,252.29
As of December 31, 1995 7.36 2,861.10 7.39 1,924.21
As of December 31, 1994 6.28 2,396.23 6.31 1,643.00
As of September 30, 1997 9.78 3,673.70 9.82 2,556.93
</TABLE>
- ----------------------
(1) Net Income per share is based on weighted average common and common
equivalent shares outstanding.
(2) Pro forma cash dividends represent historical cash dividends of Zions.
(3) Book value per common share is based on total period-end of shareholders'
equity.
(4) Pro-forma combined net income per share represents historical net income of
Zions and the Company computed using historical weighted average common and
common equivalent shares of Zions adjusted by computed common and common
equivalent shares to be issued in the transaction. Pro-forma combined book
value per share represents historical total shareholders' equity of Zions
computed using Zions' historical common shares outstanding adjusted by
computed common shares to be issued in the transaction.
(5) Pro forma equivalent amounts are computed by multiplying the pro forma
combined amounts by the exchange ratio of 260.38 shares of Zions Common
Stock for each share of Company Common Stock.
-13-
<PAGE>
Recent Developments
On November 14, 1997, GB Bancorporation ("Grossmont"), the parent
company of Grossmont Bank, merged with and into Zions, with Grossmont
shareholders receiving common shares of Zions. Grossmont Bank had approximately
$780 million in assets and 14 offices in San Diego County, California. It is
both the largest and oldest independent bank in the San Diego area. The merger
is structured to be tax-free and was accounted for as a pooling-of-interests.
Zions owned approximately 4.5% of Grossmont since October 1995. Zions has
exchanged 4.7 million shares of Zions Common Stock for the remaining 95.5% of
Grossmont common stock that it did not own. Zions will incur approximately $2
million ($0.03 per share) in merger related charges in conjunction with this
transaction.
On September 24, 1997, Zions, Vectra Banking Corporation ("Vectra"),
and Tri-State Finance Corporation ("Tri-State") announced that definitive
agreements have been signed under which Vectra will merge with and into Zions
and Tri-State with and into a subsidiary of Zions, both in exchange for common
shares of Zions. At August 31, 1997 Vectra had assets of $660 million and
Tri-State had assets of $130 million. The mergers, which are unrelated and not
conditional on each other, are subject to the approval of banking regulators and
the shareholders of Vectra and Tri-State, respectively. The transactions are
expected to close in early 1998. The mergers are structured to be tax-free and
are intended to be accounted for as poolings-of-interests. The agreement with
Vectra provides for the exchange of each common share of Vectra for 0.685 common
shares of Zions and each preferred share of Vectra for approximately 7.75 common
shares of Zions. The merger is subject to a floor arrangement which would be
triggered if Zions' stock price both declines and results in a price at closing
which has decreased more than 18% relative to the KBW 50 index. Vectra has given
Zions an option to acquire up to 19.9% of Vectra's common stock which is
exercisable in certain circumstances related generally to the acquisition of
Vectra by a third party. The agreement with Tri-State provides for the exchange
of 710,000 common shares of Zions for all of the outstanding stock of Tri-State,
which is privately held. Based upon Zions' stock price of $41 per share, in
aggregate the transactions are valued at approximately $200 million, which is
3.8 times the combined book value or 18.5 times their estimated 1998 earnings.
Vectra has 18 offices in Colorado and Tri-State has three offices in Colorado.
The mergers are expected to be immediately accretive to Zions' earnings per
share. Zions will incur $1.2 million in merger-related charges in the first
quarter of 1998 in conjunction with closing these transactions.
-14-
<PAGE>
SKY VALLEY BANK CORP.
Proxy Statement
for
Special Meeting of Shareholders
of Sky Valley Bank Corp.
to be held on
January 22, 1998
and
ZIONS BANCORPORATION
Prospectus
Up to 572,836 Shares of
Common Stock
INTRODUCTION
This Proxy Statement/Prospectus is furnished in connection with the
solicitation by the Board of Directors of Sky Valley Bank Corp. (the "Company")
of proxies to be voted at the Special Meeting of Shareholders of the Company to
be held on January 22, 1998 and at any postponements or adjournments thereof.
The Special Meeting will be held at 9:00 a.m., local time, at the offices of the
Company, 720 Main Street, Alamosa, Colorado. The approximate date on which this
Proxy Statement/Prospectus will first be mailed to the shareholders of the
Company is December 19, 1997.
Record Date; Voting Rights
The Board of Directors of the Company has fixed the close of business
on December 18, 1997 as the record date for determining the shareholders of the
Company entitled to notice of and to vote at the Special Meeting or any
postponements or adjournments thereof. At that date, 2,200 shares of Common
Stock, $.01 par value, of the Company ("Company Common Stock") were outstanding,
held by approximately 42 shareholders of record. Each such share of Company
Common Stock entitles its holder of record at the close of business on the
record date to one vote on each matter properly submitted to the shareholders
for action at the Special Meeting. See "Plan of Reorganization -- Required Vote;
Management Recommendation."
Purpose of the Special Meeting
At the Special Meeting, the holders of Company Common Stock will be
asked to consider and vote upon a proposal to approve an Agreement and Plan of
Reorganization dated as of July 25, 1997, as amended on September 8, 1997, among
the Company, the Company's wholly-owned subsidiary, The First National Bank in
Alamosa, a national banking association organized under the laws of the United
States (the "Bank"), Ralph H. Outcalt ("Outcalt") and Donald J. Wuckert
("Wuckert"), both shareholders of the Company, Zions Bancorporation, a Utah
corporation ("Zions"), Zions' wholly-owned subsidiary, Val Cor Bancorporation,
Inc., a Colorado corporation ("Val Cor"), and Val Cor's 99.7% owned subsidiary,
Valley National Bank of Cortez, a national banking association organized under
the laws of the United States ("Valley"), and accompanying Agreement of Merger
between the Company and Val Cor, and an Agreement of Merger between the Bank and
-15-
<PAGE>
Valley (collectively the "Plan of Reorganization"). As more fully described
below under "Plan of Reorganization," the Plan of Reorganization provides that
the Company will merge with and into Val Cor, with Val Cor being the surviving
corporation (the "Holding Company Merger") and Valley will merge with and into
the Bank, with the Bank being the surviving banking corporation (the "Bank
Merger"; collectively the "Reorganization"). Upon consummation of the
Reorganization, the holders of each outstanding share of Company common stock
will receive, in exchange for each share of Company common stock, their pro rata
share of the Merger Consideration, consisting of shares of Zions Common Stock,
no par value ("Zions Common Stock"). Upon consummation of the Reorganization,
the shares of Company Common Stock shall be canceled and immediately converted
into the right for holders of Company Common Stock to receive, in exchange for
each share of Company Common Stock, that number of shares of Zions Common Stock
calculated by dividing the Merger Consideration of 572,836 shares of Zions
Common Stock by the total number of share of Company Common Stock issued and
outstanding as of the Effective Date (as defined in "Summary" above) of the
Reorganization. In accordance with this formula, the shareholders of the Company
will receive approximately 260.38 shares of Zions Common Stock for each share of
Company Common Stock.
On December 15, 1997, the closing price of Zions Common Stock was
$44.25 per share. On that date the Company had issued and outstanding 2,200
shares of its Common Stock. Assuming that the Reorganization had been
consummated as of December 15, 1997 and the closing price of Zions Common Stock
had been $44.25 per share on that date, shareholders of the Company under such
circumstances would have received 260.38 shares of Zions Common Stock for each
share of Company Common Stock, or an equivalent value of $11,521.82 per share of
Company Common Stock.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY BELIEVES THAT THE
REORGANIZATION IS IN THE BEST INTERESTS OF THE SHAREHOLDERS OF THE COMPANY AND
RECOMMENDS THAT THE COMPANY SHAREHOLDERS VOTE TO APPROVE THE PLAN OF
REORGANIZATION.
Voting and Revocation of Proxies
All properly executed proxies not theretofore revoked will be voted at
the Special Meeting or any postponements or adjournments thereof in accordance
with the instructions thereon. Company proxies which have been properly executed
but which contain no voting instructions will be voted in favor of approval of
the Plan of Reorganization. As to any other matter brought before the Special
Meeting and submitted to a shareholder vote, proxies will be voted in accordance
with the judgment of the proxyholders named thereon.
A shareholder who has executed and returned a proxy may revoke it at
any time before it is voted by filing with the Secretary of the Company written
notice of such revocation or a later dated proxy or by attending the Special
Meeting and voting in person. Attendance at the Special Meeting will not, of
itself, constitute a revocation of a proxy.
Solicitation of Proxies
In addition to solicitation by mail, directors, officers and employees
of the Company may solicit proxies from the shareholders of the Company in
person
-16-
<PAGE>
or by telephone or otherwise for no additional compensation. Brokerage houses,
nominees, fiduciaries and other custodians will be requested to forward proxy
soliciting materials to beneficial owners of shares held of record by them and
will be reimbursed for their reasonable expenses. The Company will pay all
expenses in connection with the printing and solicitation of proxies for the
Special Meeting. Zions will pay for all costs attributable to registering the
Zions Common Stock under applicable federal and state law. See "Plan of
Reorganization--Expenses."
PLAN OF REORGANIZATION
This section of the Proxy Statement/Prospectus describes certain
important aspects of the Plan of Reorganization. The following description does
not purport to be complete and is qualified in its entirety by reference to the
Plan of Reorganization. The Plan of Reorganization has been filed with the SEC
as an exhibit to the Registration Statement. The Plan of Reorganization is
incorporated into this Proxy Statement/Prospectus by reference to such filing
and is available upon request to Dale M. Gibbons, Senior Vice President, Zions
Bancorporation. See "Available Information."
The Reorganization
The Plan of Reorganization provides for the merger of the Company into
Val Cor, with Val Cor being the surviving corporation (the "Holding Company
Merger"), and for the merger of Valley into the Bank, with the Bank being the
surviving entity (the "Bank Merger"). Val Cor is a bank holding company
incorporated in Colorado. Val Cor is a wholly-owned subsidiary of Zions. The
principal subsidiaries of Zions are Zions First National Bank with 112 offices
located throughout the state of Utah, as well as 15 offices in various
communities in Idaho and one foreign office, Nevada State Bank with 37 offices
in Nevada, and National Bank of Arizona with 28 offices in Arizona.
Additionally, in May 1997, Zions acquired Aspen Bancshares, Inc., whose
operations are conducted through 12 offices/branches in western Colorado and one
branch in northeastern New Mexico; on July 11, 1997, Zions also acquired Zions
Bank (formerly Tri-State Bank) in Montpelier, Idaho. Subsequent to the
acquisition by Zions of Zions Bank, Zions Bank acquired 10 branches from Wells
Fargo Bank, N.A., located in Idaho, and opened two de novo branches in Idaho;
Zions Bank currently operates 15 branches in Idaho; and in July 1997, Zions
completed its purchase of 27 former branches of Wells Fargo Bank in Arizona (11
branches), Idaho (10 branches), Nevada (5 branches), and Utah (1 branch). On
September 20, 1997, Zions Bank completed its acquisition of four additional
branches from Wells Fargo in Utah.
Val Cor, a Colorado corporation, is a registered bank holding company
under the Bank Holding Company Act of 1956, as amended. Zions acquired Val Cor
in May 1997 as a part of the Aspen acquisition. Val Cor's principal asset
consists of its ownership interest in over 99% of the common stock of Valley
Bank.
Valley is a national banking association organized in 1979. Valley Bank
offers traditional banking services to customers in its primary market area of
Montezuma County, Colorado. Valley Bank also conducts business through its two
branch offices located in Cortez and Dolores, Colorado.
The Company is a bank holding company incorporated in Colorado. The
Company operates through its wholly-owned subsidiary, The First National Bank in
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Alamosa (the "Bank"). The Bank offers traditional community banking services in
the San Luis Valley area of Colorado through three branches in Colorado, the
main office located at 720 Main Street, Alamosa, Colorado, and two branch
offices located in Center, Colorado (the "Center Branch") and in Saguache,
Colorado (the "Saguache Branch").
Upon consummation of the Reorganization, the holders of each
outstanding share of Company Common Stock will receive, in exchange for each
share of Company Common Stock, their pro rata share of the Merger Consideration,
consisting of 572,836 shares of Zions Common Stock. The shares of Company Common
Stock will be canceled and immediately converted into the right for holders of
Company Common Stock to receive, in exchange for each share of Company Common
Stock, that number of shares of Zions Common Stock calculated by dividing the
Merger Consideration of 572,836 shares of Zions Common Stock by the total number
of shares of Company Common Stock issued and outstanding as of the Effective
Date of the Reorganization or approximately 260.38 shares of Zions Common Stock
for each share of Company Common Stock. Zions will not issue fractional shares
of its Common Stock in the Reorganization. In lieu of fractional shares of Zions
Common Stock, if any, each shareholder of the Company who is entitled to a
fractional share of Zions Common Stock will receive an amount of cash equal to
the product of such fraction times $33.50. Such fractional share of interest
will not include the right to vote or to receive dividends or any interest
thereon.
On December 15, 1997, the closing price of Zions Common Stock was
$44.25 per share. On that date the Company had issued and outstanding 2,200
shares of its Common Stock. Assuming that the Reorganization had been
consummated as of December 15, 1997 and the closing price of Zions Common Stock
had been $44.25 on that date, shareholders of the Company under such
circumstances would have received 260.38 shares of Zions Common Stock for each
share of Company Common Stock, or an equivalent value of $11,521.82 per share of
Company Common Stock.
The Board of Directors of Valley has called a special meeting of Valley
shareholders to be held on December 29, 1997. At the Valley special meeting, the
Valley shareholders will consider and vote upon an agreement to merge whereby
Valley will be merged with and into the Bank, with the Bank being the surviving
entity (the "Bank Merger"). The Valley shareholders will also be asked to
consider and approve an amendment (the "Amendment") to Valley's articles of
association to change the name of Valley to Bank Colorado, National Association.
Val Cor owns approximately 99.7% of the issued and outstanding shares of common
stock of Valley and has indicated that it will vote all of its shares of Valley
Common Stock in favor of the Bank Merger and the Amendment. Such vote will be
sufficient to approve the Bank Merger and the Amendment. Assuming that Val Cor
votes all of its shares in favor of the Bank Merger and the Amendment, approval
of the Bank Merger and the Amendment by the Valley shareholders is assured,
notwithstanding the vote of other Valley shareholders. Consummation of the Bank
Merger is conditioned upon its receiving approval by the Comptroller, which has
been received. The Bank Merger is anticipated to close during the first quarter
of 1998. The parties plan to close the Holding Company Merger immediately prior
to closing of the Bank Merger. Consummation of the Bank Merger is conditioned
upon consummation of the Holding Company Merger. Upon consummation of the Bank
Merger, the shares of Valley Common Stock will be canceled and immediately
converted into the right for
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holders of Valley Common Stock, other than Val Cor, to receive in exchange for
each share of Valley Common Stock held of record by such shareholder as of the
Effective Date (as defined) $47.25 in cash. It is anticipated that Zions, which
owns 2,233 shares of Valley Common Stock, will contribute its Valley Common
Stock to Val Cor prior to the Valley special meeting.
Background of and Reasons for the Reorganization
Sky Valley.
Background. During the past two years, the Company received a few
inquiries from various large regional financial institutions which expressed an
interest in acquiring the Company. On each of those occasions, the inquiries did
not proceed because the Board determined that the Company should continue to
operate as an independent firm. In May 1997, Donald J. Wuckert was contacted by
Harris H. Simmons, president of Zions, who expressed on behalf of Zions an
interest in acquiring the Company if the Board of Directors of the Company ever
determined it was in the best interest of the Company to merge with or sell to a
larger banking institution. Mr. Wuckert informed the Board of Directors of the
Company of this contact which led to various Company board discussions as to the
desirability of remaining independent or merging with a larger bank holding
company. At meetings in July 1997, the Company Board considered its strategic
options, the bank acquisition market in Colorado, the competitive banking
environment in Colorado, and the prospects for remaining independent. After
considering the terms of the offer of Zions, the Company Board determined to
continue discussions with Zions with the goal of negotiating a definitive merger
agreement. On July 25, 1997, the Company entered into the Plan of Reorganization
with Zions.
The Company Board's Reasons for the Reorganization. The Company Board
believes that the Reorganization is fair to, and in the best interests of, the
Company and its shareholders. Accordingly, the Board unanimously approved the
Plan of Reorganization and recommends that the Company shareholders vote FOR the
approval and adoption of the Plan of Reorganization.
In reaching its determination that the Reorganization is fair to, and
in the best interests of, the Company and its shareholders, the Board considered
a number of factors including, without limitation, the following:
o the current condition and growth prospects of the Company and
the Bank, their historical results of operations and their
prospective results of operations were the Company to remain
independent;
o the economic, business and competitive climate for banking and
financial institutions in Colorado, with special consideration
given to recent transactions that have increased the
competitive environment in the financial services and banking
industry, including the adoption by Congress of interstate
branch banking;
o the monetary value of the stock offered to the Company
shareholders by Zions (i) in absolute terms, (ii) as compared
to the value of other inquiries received by the Company by
qualified and informed
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potential acquirers, whose offers were each less than Zions'
offer, and (iii) as compared to recent mergers and
acquisitions involving other banking and financial
institutions in Colorado;
o the potential market value, liquidity and dividend yield of Company
Common Stock if the Company were to remain independent;
o the historically greater liquidity and dividend yield represented
by the Zions Common Stock to be received in the Reorganization;
o the greater financial and management resources and customer
product offerings of Zions which could increase the
competitiveness of the combined institution in the Company's
market area and its ability to serve the depositors, customers
and communities currently served by the Company;
o the historical results of operations and financial condition of
Zions and the future prospects for Zions, including anticipated
benefits of the Reorganization;
o the future growth prospects of Zions following the Reorganization;
and
o the fact that the Reorganization will be a tax-free
reorganization to the Company shareholders for federal income
tax purposes with respect to shareholders of the Company who
receive shares of Zions Common Stock in the Reorganization
(but not with respect to any cash received in the
Reorganization).
THE COMPANY BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
APPROVAL OF THE PLAN OF REORGANIZATION.
Zions. For Zions, the Reorganization will provide the opportunity to
continue its recent expansion. In acquiring the Company, Zions will be expanding
its presence in the south-central Colorado market in the Alamosa County region.
The expansion will be evidenced by Zions' both broadening its geographical base
into this market and expanding the banking services it is able to provide.
Additionally, the Zions' expansion in the Alamosa County, Colorado region will
allow Zions further to diversify its banking operations.
The acquisition by Zions of the Company will bring together the
different skills and resources of the two organizations and, together with the
additional skills and resources available in the broader Zions organization,
will result in the ability to make a wider spectrum of banking services
available to consumers, businesses and professionals in the Company's geographic
area.
Voting Agreements
In connection with the Plan of Reorganization, Messrs. Outcalt, Wuckert
and three other shareholder-directors of the Company, whose common share
holdings aggregate approximately 73.18% of the outstanding Company Common Stock
as of December 19, 1997, have entered into agreements with Zions under which
they have agreed, in their capacity as shareholders, to vote their shares in
favor of the Plan of Reorganization and to support the Plan of Reorganization
and to recommend
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its adoption by the other shareholders of the Company. Such vote will be
sufficient to approve the Plan of Reorganization. If these individuals vote
their shares of Company Common Stock in accordance with the requirements of the
voting agreements, approval of the Reorganization by the Company shareholders is
assured, notwithstanding the vote of other Company shareholders.
The voting agreements are applicable to the shareholders only in their
capacities as shareholders and do not legally affect the exercise of their
responsibilities if a member of the Board of Directors of the Company. The
shareholder-directors also agreed in their capacity as directors, until the
earlier of consummation of the Reorganization or termination of the Plan of
Reorganization, to refrain from soliciting or, subject to their fiduciary duties
to shareholders, negotiating or accepting any offer of merger, consolidation, or
acquisition of any of the shares or all or substantially all of the assets of
the Company or any of its subsidiaries.
The form of the voting agreements has been filed with the SEC as an
exhibit to the Registration Statement and is incorporated herein by reference.
The foregoing summary of the agreements is qualified in its entirety by
reference to such filing.
Required Vote; Management Recommendation
Approval of the Plan of Reorganization requires the affirmative vote of
the holders of a majority of the outstanding shares of Company Common Stock
entitled to vote at the Special Meeting. Because approval requires the
affirmative votes of a majority of all outstanding shares of Company Common
Stock, a failure to vote, an abstention, or a broker's failure to vote shares
held in street name will have the same legal effect as a vote against approval
of the Plan of Reorganization. See "Voting Agreements" immediately above for a
discussion of the ownership of Company Common Stock by the five
shareholder-directors of the Company. THE BOARD OF DIRECTORS OF THE COMPANY
UNANIMOUSLY RECOMMENDS THAT THE COMPANY SHAREHOLDERS VOTE "FOR" APPROVAL OF THE
PLAN OF REORGANIZATION.
The Board of Directors of Zions has approved the Plan of
Reorganization: In addition, Zions, as the sole shareholder of Val Cor, has
approved the merger of Val Cor with the Company (the "Holding Company Merger").
Under the Utah Business Corporation Act no approval of the Plan of
Reorganization by the shareholders of Zions is required.
No Opinion of a Financial Advisor
The Company's Board of Directors has not retained an independent
financial advisor to evaluate the Merger Consideration offered to the Company
shareholders by Zions. However, management and the directors of the Company
believe that the Merger Consideration to be paid pursuant to the Plan of
Reorganization is fair to the shareholders of the Company from a financial point
of view. See "Plan of Reorganization--Background of and Reasons for the
Reorganization."
Conversion of Company Shares
Under the Plan of Reorganization, holders of shares of Company Common
Stock will receive shares of Zions Common Stock. Upon consummation of the
Reorganization, the shares of Company Common Stock will be canceled and
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immediately converted into the right for holders of Company Common Stock to
receive, in exchange for each share of Company Common Stock, that number of
shares of Zions Common Stock calculated by dividing the Merger Consideration of
572,836 shares of Zions Common Stock by the total number of shares of Company
Common Stock issued and outstanding as of the Effective Date of the
Reorganization. In accordance with this formula, the shareholders of the Company
will receive approximately 260.38 shares of Zions Common Stock for each share of
Company Common Stock. Zions will not issue fractional shares of its common stock
in the Reorganization. In lieu of fractional shares of Zions Common Stock, if
any, each shareholder of the Company who is entitled to a fractional share of
Zions Common Stock will receive an amount of cash equal to the product of such
fraction times $33.50. Such fractional share interest will not include the right
to vote or to receive dividends or any interest thereon.
On December 15, 1997, the closing price of Zions Common Stock was
$44.25 per share. On that date the Company had issued and outstanding 2,200
shares of its Common Stock. Assuming that the Reorganization had been
consummated as of December 15, 1997 and the closing price of Zions Common Stock
had been $44.25 per share on that date, shareholders of the Company under such
circumstances would have received 260.38 shares of Zions Common Stock for each
share of Company Common Stock, or an equivalent value of $11,521.82 per share of
Company Common Stock.
Exchange of Stock Certificates. Zions First National Bank, a national
banking association with its head office located in Salt Lake City, Utah and a
subsidiary of Zions ("Zions Bank"), the exchange agent designated by the parties
in the Plan of Reorganization (the "Exchange Agent"), will, promptly after the
Effective Date, mail to each holder of one or more stock certificates formerly
representing shares of Company Common Stock except to such holders who shall
have waived the notice of exchange, a notice specifying the Effective Date and
notifying such holder to surrender his or her certificate or certificates to
Zions Bank for exchange. Such notice will be mailed to holders by regular mail
at their addresses on the records of the Company. Company shareholders should
not send in their certificates until they receive such written instructions.
However, certificates should be surrendered promptly after instructions to do so
are received.
Any dividends declared on Zions Common Stock after the Effective Date
of the Reorganization will apply to all whole shares of Zions Common Stock into
which shares of Company Common Stock will have been converted in the
Reorganization. However, no former Company shareholder will be entitled to
receive any such dividend until such shareholder's Company Common Stock
certificates have been surrendered for exchange as provided in the letter of
transmittal sent by the Exchange Agent. Upon such surrender, the shareholder
will be entitled to receive all such dividends payable on the whole shares of
Zions Common Stock represented by the surrendered certificate(s) (without
interest thereon and less the amount of taxes, if any, which may have in fact
been imposed or paid thereon).
Payment for Fractional Shares. No fractional shares of Zions Common
Stock will be issued in connection with the Reorganization. Instead, each
Company shareholder who surrenders for exchange Company Common Stock
certificates representing a fraction of a share of Zions Common Stock will
receive, in addition to a certificate for the whole shares of Zions Common Stock
represented
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by the surrendered certificates, cash in an amount equal to the product of such
fraction times $33.50. Such fractional share interest will not include the right
to vote or to receive dividends or any interest thereon.
Unexchanged Certificates. On the Effective Date of the Reorganization,
the stock transfer books of the Company will be closed, and no further transfers
of Company Common Stock will be made or recognized. Certificates for Company
Common Stock not surrendered for exchange will entitle the holder to receive,
upon surrender as provided in the letter of transmittal, a certificate for whole
shares of Zions Common Stock, plus payment of any amount for a fractional share
or dividends to which such holder is entitled as outlined above, and without any
interest thereon.
Federal Income Tax Consequences of the Reorganization
The following discussion is a summary of the material federal income
tax consequences of the merger of the Company with and into Val Cor (herein, the
"Merger") to the Company and to the existing shareholders of the Company, but
does not purport to be a complete analysis of all the potential tax effects of
the Merger. The discussion is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury Regulations, Internal Revenue Service ("IRS")
rulings and judicial decisions now in effect, all of which are subject to change
at any time by legislative, judicial, or administrative action. Any such change
may be applied retroactively. No information is provided herein with respect to
foreign, state or local tax laws or estate and gift tax considerations.
Shareholders of the Company are urged to consult their own tax advisors as to
specific tax consequences to them of the Merger.
The Company will receive an opinion from Duane, Morris & Heckscher LLP,
legal counsel to Zions (the "Duane Opinion") that, based upon the facts and
representations set forth or referred to in such opinion, the Merger will be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code. No ruling will be requested from the IRS with
respect to the federal income tax consequences of the Merger. An opinion of
counsel only represents counsel's best judgment and is not binding on the IRS or
the courts. Accordingly, no assurance can be given that the IRS will agree with
counsel's conclusions, that the IRS will not challenge the tax treatment of the
Merger, or that such a challenge, if made, will not be successful.
Based upon the facts and representations which will be set forth or
referred to in the Duane Opinion, such opinion will provide, among other things,
(i) the Merger will qualify as a "reorganization" under Section 368(a)(1) of the
Code and Zions, Val Cor and the Company will each be a "party to the
reorganization" within the meaning of Section 368(b) of the Code; (ii) the
Company will recognize no gain or loss upon the transfer of substantially all of
its assets to Val Cor in exchange for Zions Common Stock and Val Cor's
assumption of the liabilities of the Company; (iii) no gain or loss will be
recognized by either Zions or Val Cor upon the acquisition by Val Cor of
substantially all of the assets of the Company in exchange for Zions Common
Stock, and the assumption of the liabilities of the Company; (iv) the basis of
the Company's assets in the hands of Val Cor will be the same as the basis of
those assets in the hands of the Company immediately prior to the Merger; (v)
the holding period of the Company's assets received by Val Cor will include the
period during which such assets were held by the Company immediately prior to
the Merger; (vi) no gain or loss will be recognized by a shareholder of the
Company upon the receipt of Zions Common Stock solely in exchange for his or her
Company Common Stock; (vii) the basis of the Zions Common Stock received by a
shareholder of the Company pursuant to the Merger (including any fractional
share interest to which that shareholder may be entitled) will be the same as
the basis of the Company Common Stock exchanged therefor; (viii) the holding
period of the Zions Common Stock received by a shareholder of the Company
pursuant to the Merger (including any fractional share interest to which that
shareholder may be entitled) will include the holding period of the Company
Common Stock exchanged therefor, provided the Company Common Stock is held as a
capital asset by the shareholder on the Effective Date; (ix) a shareholder of
the Company who receives cash in lieu of a fractional share of Zions Common
Stock will recognize gain or loss equal to the difference between the cash
received and the shareholder's basis in that fractional share, and that gain or
loss will be capital gain or loss if the fractional share would have been a
capital asset in the hands of the shareholder; and (x) cash received by a
shareholder of the Company who has perfected dissenters' rights under the
provisions of sections 7-113-101 et seq. of the Colorado Business Corporation
Act as to his or her Company Common Stock will be treated as a distribution in
redemption of such shares, subject to the provisions and limitations of Section
302 of the Code.
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The foregoing is intended only as a summary of certain federal income
tax consequences of the Reorganization under existing law and regulations, as
presently interpreted by judicial decisions and administrative rulings, all of
which are subject to change without notice, and any such change might be
retroactively applied to the Reorganization. Among other things, the summary
does not address state income tax consequences, local taxes, or the federal or
state income tax considerations that may affect the treatment of a shareholder
who acquired his Company Common Stock pursuant to an employee stock option or
other special circumstances. Accordingly, it is recommended that Company
shareholders consult their own tax advisors for specific advice concerning their
own tax situations, potential changes in the applicable tax law and all federal,
state and local tax matters in connection with the Reorganization.
A form of the Duane Opinion to be rendered at closing as to the
material federal income tax consequences relating to the Reorganization is
attached and set forth in Appendix A of the Proxy Statement/Prospectus.
Rights of Dissenting Shareholders
A holder of shares of Company Common Stock is entitled to exercise the
rights of a dissenting shareholder under the Colorado Business Corporation Act,
ss.ss. 7-113-101 et seq., to object to the Plan of Reorganization and make
written demand that the Company pay in cash the fair value of the shares of
Company Common Stock held as determined in accordance with such statutory
provisions. The following summary does not purport to be a complete statement of
the provisions of Colorado law and is qualified in its entirety by reference to
such statutory provisions, which are set forth in full as Appendix B to this
Proxy Statement/Prospectus.
Colorado law requires that holders of Company Common Stock follow
certain prescribed procedures in the exercise of their statutory right to
dissent in connection with the Reorganization. The failure by a shareholder to
follow such procedures on a timely basis and in the precise manner required by
Colorado law may result in a loss of that shareholder's dissenters' rights.
Overview. Holders of Company Common Stock have the right under the
Colorado Business Corporation Act to dissent from the Reorganization and obtain
payment of the fair value of their shares. Fair value means the value of the
shares immediately before the Effective Date, excluding any appreciation or
depreciation in anticipation of the corporate action except to the extent
exclusion would be inequitable. If Val Cor and a shareholder who has exercised
his or her right to dissent (a "Dissenting Shareholder") are not able to agree
on a fair value, Val Cor must petition a court in Alamosa County, Colorado for a
determination of fair value.
Procedure for Dissenting. A shareholder wishing to dissent from the
Reorganization must deliver to the Company, before the Special Meeting, written
notice of his or her intent to demand payment for his or her shares if the
Reorganization is consummated. The written notice should be sent to the Company
at 720 Main Street, Alamosa, Colorado 81101 long enough before the Special
Meeting so that the Company receives it before the Special Meeting. A
shareholder wishing to dissent must also not vote in favor of the
Reorganization. If a shareholder's written notice of intent to demand payment is
not received by the Company before the Special Meeting, or if the shareholder
votes in favor of
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the Reorganization, such shareholder will not have the right to dissent and will
be required to participate in the Reorganization.
Within 10 days after the Effective Date, Val Cor will deliver to each
Dissenting Shareholder a written notice instructing the Dissenting Shareholder
to demand payment and send his or her Company Common Stock certificates to Val
Cor. The notice will include a form for demanding payment and will show the
deadline for submitting the payment demand form and the Company Common Stock
certificates. The form will also show the date that the Reorganization was first
announced to the news media or the shareholders, and the Dissenting Shareholder
will be required to state whether or not he or she acquired his or her shares
before that date.
The Dissenting Shareholder must then properly complete and sign the
payment demand form, and submit it to Val Cor along with his or her Company
Common Stock certificates by the deadline shown in the notice from Val Cor. If
the payment demand form and the Company Common Stock certificates are not
submitted by the deadline, the shareholder will no longer be a Dissenting
Shareholder and will not be entitled to receive payment of the fair value of his
or her shares under the dissenters' rights provisions of Colorado law. Such a
shareholder will be required to participate in the Reorganization. The payment
demand form and Company Common Stock certificates should be sent to Val Cor at
350 W. Montezuma, Cortez, Colorado 81321.
Payment for Shares. Within 30 days after receiving a Dissenting
Shareholder's payment demand form and Company Common Stock certificates, Val Cor
will pay such Dissenting Shareholder Val Cor's estimate of the fair value of the
Company Common Stock for which certificates were submitted, plus accrued
interest. Accompanying the payment will be financial information for the Company
as of December 31, 1996 and for the year then ended, as well as the latest
available interim financial information. Also accompanying the payment will be a
statement of Val Cor's estimate of the fair value of the shares, an explanation
of how the interest was calculated, a statement of the Dissenting Shareholder's
rights if such shareholder is dissatisfied with Val Cor's payment, and a copy of
the relevant Colorado statute.
If a Dissenting Shareholder estimates the fair value of his or her
shares and the amount of accrued interest to be higher than the amount paid by
Val Cor, the Dissenting Shareholder may send a notice to Val Cor demanding
payment of the difference between the Dissenting Shareholder's estimate and the
amount paid by Val Cor. The Dissenting Shareholder may reject the offer and
demand payment of the Dissenting Shareholder's estimate of the fair value of his
or her shares and accrued interest. If a Dissenting Shareholder does not send a
notice demanding payment within 30 days after Val Cor has made its payment or
offer, the Dissenting Shareholder will not have the right to receive any amount
in excess of the fair value plus interest already paid or offered by Val Cor.
Court Proceeding to Determine Fair Value. If a demand for payment
remains unsettled for 60 days following Val Cor's receipt of the demand, Val Cor
may petition a court in Alamosa County to determine the fair value of the shares
and accrued interest. Court costs will be paid by Val Cor unless the court finds
that one or more Dissenting Shareholders acted arbitrarily, vexatiously or not
in good faith in demanding payment, in which case some or all court costs may be
allocated to such Dissenting Shareholder or Shareholders. Attorneys' and
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experts' fees may be assessed against Val Cor if the court finds that Val Cor
did not comply with the applicable statute or acted arbitrarily, vexatiously or
not in good faith, or such fees may be assessed against one or more Dissenting
Shareholders if the same acted arbitrarily, vexatiously or not in good faith.
Holders of Company Common Stock considering seeking appraisal by
exercising their dissenters' rights should be aware that the fair value of their
Company Common Stock determined pursuant to Colorado law could be more than, the
same as, or less than their pro rata share of the Merger Consideration that they
are entitled to receive pursuant to the Plan of Reorganization if they do not
seek appraisal of their Company Common Stock.
THE FOREGOING DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE
PROCEDURES TO BE FOLLOWED BY HOLDERS OF COMPANY COMMON STOCK DESIRING TO
EXERCISE APPRAISAL RIGHTS AND, IN VIEW OF THE FACT THAT EXERCISE OF SUCH RIGHTS
REQUIRES STRICT ADHERENCE TO THE RELEVANT PROVISIONS OF THE COLORADO BUSINESS
CORPORATION ACT, EACH SHAREHOLDER WHO MAY DESIRE TO EXERCISE APPRAISAL RIGHTS IS
ADVISED INDIVIDUALLY TO CONSULT THE LAW (AS SET FORTH IN APPENDIX B TO THIS
PROXY STATEMENT/PROSPECTUS) AND COMPLY WITH THE PROVISIONS THEREOF.
HOLDERS OF COMPANY COMMON STOCK WISHING TO EXERCISE DISSENTERS' RIGHTS
ARE ADVISED TO CONSULT THEIR OWN COUNSEL TO ENSURE THAT THEY FULLY AND PROPERLY
COMPLY WITH THE REQUIREMENTS OF COLORADO LAW.
Interests of Certain Persons in the Transaction
The Plan of Reorganization provides that after the Reorganization
becomes effective, David E. Broyles, currently president and chief executive
officer of the Bank, will become an executive officer of the Bank. Mr. Broyles
will enter into an Employment Agreement with the Bank effective as of the
Effective Date. The Board of Directors of the Company was aware of these
interests when it considered and approved the Plan of Reorganization. The terms
of the agreement will continue until the third anniversary of the commencement
of the agreement. The agreement provides that Mr. Broyles will receive an
initial annual salary not less than the aggregate salary paid to Mr. Broyles by
the Bank as of December 31, 1996. Mr. Broyles will be considered annually for a
discretionary bonus based upon his performance, and will be entitled to other
benefits normally afforded executive employees, including employee benefit and
stock option plans participation, retirement and life insurance policies, and
consideration for periodic raises or bonuses, based upon performance and
responsibility.
The employment agreement provides for severance benefits for Mr.
Broyles upon the termination of his employment agreement for reasons other than
his death or disability or "for cause" (as defined in his employment agreement).
In the event of termination for reasons other than set forth in the preceding
sentence, Mr. Broyles will receive salary (as defined in the employment
agreement) payable at the rate established in his employment agreement for the
year in which termination occurs, until the third anniversary of the
commencement of the agreement. Mr. Broyles will also receive such rights as he
will have accrued as of the termination date of his employment under the terms
of any plans or arrangements in which he participates, reimbursement for
expenses accrued as of such termination date, and the cash equivalent of paid
annual leave and sick leave accrued as of such termination date.
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Under his employment agreement, Mr. Broyles has agreed that he will not
during the term of five years commencing with his employment by the Bank
pursuant to the employment agreement (i) engage in the banking business other
than on behalf of the Bank or its affiliates within a prescribed market area;
(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 the Bank or its affiliates) engaged in
the banking business in such market area, or (iii) directly or indirectly
solicit or otherwise intentionally cause any employee, officer, or member of the
respective Boards of Directors of Zions or the Bank or any of their affiliates
to engage in any action prohibited under (i) or (ii) above. The employment
agreement has described the prescribed market area as Alamosa County, Colorado.
The Plan of Reorganization further provides that after the
Reorganization becomes effective, Mr. Outcalt, currently chairman of the board
of the Bank, and Mr. Wuckert, currently vice chairman of the board of the Bank,
will both become advisors to the Bank. Messrs. Outcalt and Wuckert will each
enter into an advisory agreement with the Bank effective as of the Effective
Date. The Company Board of Directors was aware of these interests when it
considered and approved the Plan of Reorganization. The terms of each agreement
will continue until the third anniversary of the commencement of each respective
agreement. The advisory agreements provide that Messrs. Outcalt and Wuckert will
each receive an annual salary in the amount of $45,000. Messrs. Outcalt and
Wuckert will each be entitled to use an office to be equipped with a telephone
at the Bank's offices in Alamosa, Colorado, to be available to them at any time
during business hours and to receive normal and reasonable secretarial
assistance. Messrs. Outcalt and Wuckert will also be entitled to health, vision
and dental insurance coverage and the premiums of such insurance shall be paid
by the Bank.
The advisory agreements provide for severance benefits for Messrs.
Outcalt and Wuckert upon the termination of their advisory agreements for
reasons other than death or disability or "for cause" (as defined in the
advisory agreements). In the event of termination for reasons other than set
forth in the preceding sentence, each of Messrs. Outcalt and Wuckert will
receive compensation (as defined in the advisory agreements) due him under his
agreement for the full term of the agreement.
Under the advisory agreements, Messrs. Outcalt and Wuckert have agreed
that they will not during the term of three years commencing with their
employment by the Bank (i) engage in the banking business other than on behalf
of the Bank or its affiliates within a prescribed market area; (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 the Bank or its affiliates) engaged in the banking business in such
market area, or (iii) directly or indirectly solicit or otherwise intentionally
cause any employee, officer, or member of the respective Boards of Directors of
Zions or the Bank or any of their affiliates to engage in any action prohibited
under (i) or (ii) above. The advisory agreements have described the prescribed
market area as Alamosa County, Colorado.
Inconsistent Activities
The Company has agreed in the Plan of Reorganization that unless and
until the Reorganization has been consummated or the Plan of Reorganization has
been
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terminated in accordance with its terms, neither the Company nor the Bank will
(i) solicit or encourage any inquiries or proposals by any third person to
acquire more than 1% of the Company Common Stock or any capital stock of the
Bank or any significant portion of the Company's or the Bank's assets (whether
by tender offer, merger, purchase of assets or otherwise), (ii) afford any third
party which may be considering any such transaction access to its properties,
books or records except as required by law, (iii) enter into any discussions,
negotiations, agreement or understanding with respect to any such transaction or
(iv) authorize or permit any of its directors, officers, employees or agents to
do any of the foregoing. If the Company or the Bank becomes aware of any offer
or proposed offer to acquire any of its shares or any significant portion of its
assets or of any other matter which could adversely affect the Plan of
Reorganization, the Holding Company Merger, or the Bank Merger, the Company and
the Bank are required to give immediate notice thereof to Zions and to keep
Zions informed of the matter.
Conduct of Business Pending the Reorganization
The Plan of Reorganization contains covenants, representations and
warranties by the Company and the Bank as to matters which are typical in
transactions similar to the Reorganization.
Prior to the Effective Date, the Company and the Bank have each agreed
that neither will without Zions' prior written consent: (i) declare or pay cash
dividends or property dividends with the exception of customary periodic cash
dividends paid by the Company or the Bank in a manner consistent with past
practice;(ii) declare or distribute any stock dividend, authorize any stock
split, authorize, issue or make any distribution of its capital stock or other
securities except for the issuance of Company Common Stock already subscribed
for or upon exercise of existing stock options, or grant any options to acquire
such securities; (iii) except as contemplated by the Plan of Reorganization,
merge into, consolidate with or sell its assets to any other person, or enter
into any other transaction or agree to effect any other transaction not in the
ordinary course of its business or engage in any discussions concerning such a
possible transaction; (iv) convert the charter or form of entity of the Bank to
any other charter or form of entity; (v) make any direct or indirect redemption,
purchase or other acquisition of any of its capital stock; (vi) incur any
liability or obligation, make any commitment or disbursement, acquire or dispose
of any property or asset, make any agreement or engage in any transaction,
except in the ordinary course of its business; (vii) subject any of its
properties or assets to any lien, claim, charge, option or encumbrance, except
in the ordinary course of its business; (viii) institute or agree to any
increase in the compensation of any employee, except for ordinary increases in
accordance with past practices not to exceed (when aggregated with all other
such increases) 4.5% per annum of the aggregate payroll as of April 1, 1997;
(ix) create or modify any pension or profit-sharing plan, bonus, deferred
compensation, death benefit or retirement plan, or the level of benefits under
any such plan, or increase or decrease any severance or termination pay benefit
or any other fringe benefit; (x) except to directly facilitate the
Reorganization, enter into any employment or personal services contract with any
person; (xi) purchase any loans or loan-participation interests from, or
participate in any loan originated by any person other than the Company or the
Bank.
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<PAGE>
The Company and the Bank have also agreed to carry on their businesses
and manage their assets and property diligently in the same manner as they have
previously done and to use their best efforts to preserve their business
organization. Pending completion of Reorganization or termination of the Plan of
Reorganization, the Company and the Bank have agreed to provide Zions with
certain information and reports and access to other information.
Conditions to the Reorganization
The obligations of the Company, the Bank, Zions, Val Cor and Valley to
consummate the Reorganization are subject to, among other things, the
satisfaction of the following conditions: (i) the parties shall have received
all orders, consents and approvals from all requisite governmental authorities
for the completion of the Reorganization; (ii) certain litigation, as specified
in the Plan of Reorganization, shall not have been instituted or threatened;
(iii) Zions shall have determined to its satisfaction that the Reorganization
contemplated by the Plan of Reorganization will be treated for accounting
purposes as a "pooling of interests" in accordance with APB Opinion No. 16; (iv)
the registration statement to be filed by Zions pursuant to the Securities Act
in connection with the registration of the shares of Zions Common Stock to be
used as consideration in connection with the Reorganization shall have become
effective under the Securities Act, and Zions shall have received all required
state securities law permits and other required authorizations or confirmations
of the availability of exemption from registration requirements necessary to
issue Zions Common Stock in the Reorganization, and neither the registration
statement nor any such required permit, authorization or confirmation shall be
subject to a stop-order or threatened stop-order by the SEC or any state
securities authority; (v) the Company and Zions shall have determined that the
Reorganization shall qualify as a tax free reorganization under the Code and the
regulations and rulings promulgated thereunder; and (vi) there shall be no
adverse legislation or government regulation which would make the transaction
contemplated impossible.
The obligations of Zions, Val Cor and Valley to consummate the
Reorganization are subject to satisfaction or waiver of certain additional
conditions, including: (i) the shareholders of the Company and the Bank shall
have authorized the Holding Company Merger and Bank Merger, respectively; (ii)
all representations and warranties made by the Company, the Bank, and Messrs.
Outcalt and Wuckert in the Plan of Reorganization shall be true and correct in
all material respects on the Effective Date and the Company, the Bank, and
Messrs. Outcalt and Wuckert shall have performed in all material respects all of
their respective obligations under the Plan of Reorganization on or prior to the
Effective Date; (iii) Kettelkamp, Young & Kettelkamp, P.C., special counsel to
the Company, shall have rendered a legal opinion to Zions in form and substance
as set forth in the Plan of Reorganization; (iv) Zions, Val Cor and Valley shall
have received a favorable opinion from litigation counsel for the Company and
the Bank substantially in form and substance as set forth in the Plan of
Reorganization; (v) the Company shall have delivered to Zions all regulatory
authorizations entitling the Bank to operate its branches; (vi) during the
period from March 31, 1997 to the Effective Date, there shall have been no
material adverse change in the financial position or results of operations of
the Company or the Bank nor shall the Company or the Bank have sustained any
material loss or damage to its properties which materially affects its ability
to conduct its business; (vii) on and as of the Effective Date the consolidated
net worth of the
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Company as determined in accordance with generally accepted accounting
principles shall not be less than the sum of (a) $7,478,526, and (b) the
aggregate contributions to capital caused by the payments accompanying the
exercise of any stock options on or after March 31, 1997; (viii) on and as of
the Effective Date, the aggregate reserve for loan losses of the Bank as
determined in accordance with generally accepted accounting principles shall not
be less than $849,545; (ix) the CRA rating of the Bank shall be no lower than
"satisfactory"; (x) Mr. Broyles shall have entered into an employment agreement
with the Bank in the form set forth in the Plan of Reorganization; and (xi)
Messrs. Outcalt and Wuckert shall have each entered into an advisory agreement
with the Bank in the form set forth in the Plan of Reorganization.
The obligations of the Company and the Bank to consummate the
Reorganization are subject to the satisfaction or waiver of certain additional
conditions, including: (i) the shareholders of Valley shall have authorized the
Bank Merger; (ii) all representations and warranties made by Zions, Val Cor and
Valley in the Plan of Reorganization shall be true and correct in all material
respects on the Effective Date and Zions, Val Cor and Valley shall have
performed all of their respective obligations under the Plan of Reorganization
on or prior to the Effective Date; (iii) receipt of a legal opinion of Duane,
Morris & Heckscher LLP, special counsel to Zions, in form and substance as set
forth in the Plan of Reorganization; (iv) during the period from March 31, 1997
to the Effective Date, there shall be no material adverse change in the
financial position or results of operations of Zions nor shall Zions have
sustained any material loss or damage to its properties which materially affects
its ability to conduct its business; and (v) Zions Common Stock shall be quoted
on NASDAQ or shall be listed on a national securities exchange.
Representations and Warranties
The representations and warranties of Zions, Val Cor, Valley, the
Company, the Bank, and Messrs. Outcalt and Wuckert contained in the Plan of
Reorganization relate, among other things, to the organization and good standing
of the parties; the capitalization of the parties; the authorization by the
parties of the Plan of Reorganization and the absence of conflict with laws or
other agreements; the accuracy and completeness of the financial statements and
other information furnished to the other party; the absence of material adverse
changes since March 31, 1997 with respect to Zions, the Company and the Bank;
the absence of undisclosed liabilities; and compliance with laws. The Company
has additionally warranted that there has been since March 31, 1997 no material
deterioration in the quality of its consolidated loan portfolio and no material
increase in the consolidated level of its nonperforming assets or non-accrual
loans or in the level of its consolidated provision for credit losses or its
consolidated reserve for possible credit losses. The Company has also warranted
that its consolidated reserve for possible credit losses is adequate to absorb
reasonably anticipated losses in the consolidated loan and lease portfolios of
the Company in view of the size and character of such portfolios, current
economic conditions, and other factors.
Zions and the Company have additionally warranted that there are no
facts known to them respectively which reasonably might materially adversely
affect their respective business, assets, liabilities, financial condition,
results of operations or prospects which have not been disclosed in their
respective financial statements or a certificate delivered to the other party.
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<PAGE>
Amendment and Waiver
Notwithstanding prior approval by the shareholders of the Company or
Valley, the Plan of Reorganization may be amended in any respect by written
agreement between the parties, except that after such shareholder approval no
amendment may prejudice the economic interests of the shareholders of the
Company or Valley unless shareholder approval of the amendment is procured.
Zions or the Company may also, at any time prior to the Effective Date, waive
any condition or term of the Plan of Reorganization provided that any such
waiver must be in writing signed by the party entitled to the benefit thereof
and will be permitted only if it will not have a materially adverse effect on
the benefits intended under the Plan of Reorganization to the shareholders of
its or his corporation.
Authorized Termination and Damages for Breach
The Plan of Reorganization may be terminated and abandoned at any time
prior to the Effective Date, notwithstanding approval of the shareholders of the
Company and Valley, as follows: (i) by mutual consent of the parties to the Plan
of Reorganization; (ii) unilaterally, by Zions if any of the representations and
warranties by the Company, the Bank, or Messrs. Outcalt or Wuckert was
materially incorrect when made or in the event of a material breach or material
failure by the other party of any covenant or agreement which has not been, or
cannot be, cured within thirty days after written notice has been given; (iii)
unilaterally, by the Company if any of the representations and warranties of
Zions, Val Cor or Valley was materially incorrect when made or in the event of a
material breach or material failure by the other party to the Plan of
Reorganization of any covenant or agreement contained in the Plan of
Reorganization which has not been, or cannot be, cured within thirty days after
written notice has been given; (iv) by either the Company or Zions if the
Reorganization has become inadvisable or impracticable by reason of federal or
state litigation to restrain or invalidate the transactions contemplated by the
Plan of Reorganization; or (v) by any party on or after March 13, 1998, if the
Effective Date has not occurred on or before that date.
If either party terminates the Plan of Reorganization because any of
the representations and warranties of a party was materially incorrect when
made, or because of a material breach or material failure by a party of a
covenant or agreement made under the Plan of Reorganization, then such party
whose representations and warranties were materially incorrect or who materially
breached or failed to perform its covenant or agreement shall be liable to the
other party or parties to the Plan of Reorganization not affiliated with it in
the amount of $250,000.
Restrictions on Resales by Company Affiliates
The shares of Zions Common Stock issuable in the Reorganization have
been registered under the Securities Act, and such shares will generally be
freely tradable by Company shareholders who receive Zions shares as a result of
the Reorganization. However, the registration does not cover resales by Company
shareholders who may be deemed to control, controlled by, or be under common
control with the Company or Zions and who therefore may be deemed "affiliates"
of the Company or Zions as that term is defined in Rule 144 under the Securities
Act. Such affiliates are not permitted to sell their shares of Zions Common
Stock acquired in the Reorganization except pursuant to (i) an effective
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<PAGE>
registration statement under the Securities Act covering the shares to be sold;
(ii) the conditions contemplated by Rules 144 and 145 under the Securities Act;
or (iii) another applicable exemption from the registration requirements of the
Securities Act. The management of the Company will notify those persons who it
believes may be such affiliates.
Expenses
Each party to the Plan of Reorganization will pay its own expenses,
including those of its own counsel, accountants, and tax advisors, incurred in
connection with the Plan of Reorganization. The Company will pay the cost of
printing and delivering this Proxy Statement/Prospectus and other material to
the Company shareholders. Valley will pay the cost of printing and delivering
this Proxy Statement/Prospectus and other material to the Valley shareholders.
Zions will pay the costs attributable to registering its stock issuable pursuant
to this Proxy Statement/Prospectus under federal and state securities laws. The
cost of the Duane Opinion has been apportioned between Zions and the
shareholders of the Company by a reduction of the number of shares to be issued
in the Reorganization in the amount of 299 shares of Zions Common Stock which,
based on the valuation of $33.50 per share of Zions Common Stock used by the
parties to the Plan of Reorganization for other purposes, have a value of
approximately $10,000 or one-half of the cost of the Duane Opinion. All of the
information in this Proxy Statement/Prospectus is set forth net of this
reduction.
Government Approvals
Applications for approval (or requests for waiver of application
requirements) of the Reorganization must be made to, and approvals and consents
must be obtained from, appropriate federal, Utah, and Colorado regulators,
including the Board of Governors, the Comptroller, the Commissioner, and the
Board. Submissions have been made to each of these regulatory authorities.
Federal law prohibits consummation of the Reorganization until thirty days after
the approvals of the federal regulators have been obtained, except that this
period may be shortened with the concurrence of the Attorney General of the
United States. All regulatory approvals have been obtained.
Effective Date of the Reorganization
It is presently anticipated that if the Plan of Reorganization is
approved by the shareholders of the Company, the Reorganization will become
effective in the first quarter of 1998. However, as noted above, consummation of
the Reorganization is subject to the satisfaction of a number of conditions,
some of which cannot be waived. There can be no assurance that all conditions to
the Reorganization will be satisfied or, if satisfied, that they will be
satisfied in time to permit the Reorganization to become effective in the first
quarter of 1998. In addition, as also noted above, Zions and the Company retain
the power to abandon the Reorganization or to extend the time for performance of
conditions or obligations necessary to its consummation, notwithstanding prior
shareholder approval.
Accounting Treatment
The Reorganization will be treated for accounting purposes as a
"pooling of interests" in accordance with ABP Opinion No. 16. A condition to
consummation
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of the Plan of Reorganization is that Zions shall have received a letter to the
above effect from KPMG Peat Marwick, LLP, certified public accountants. This
method of accounting views the Reorganization as a uniting of the separate
ownership interests through an exchange of shares. As such, the pro forma
financial information represents the combined historical financial data of Zions
and the Company, subject only to certain adjustments described in the notes to
the data presented.
Relationship Between Zions and the Company
Neither Zions nor the Company is aware of any material relationship
between Zions, its directors or officers or their affiliates, and the Company,
its directors or executive officers or their affiliates, except as contemplated
by the Plan of Reorganization or as described herein.
Unaudited Pro Forma Combined Financial Information
The following unaudited pro forma combined financial information
reflects the application of the pooling of interests method of accounting. The
following tables, which show comparative historical per Common Share data for
Zions and the Company (separately and pro-forma combined) and equivalent
pro-forma per share data for the Company, should be read in conjunction with the
financial information included herein or incorporated herein by reference to
other documents. The pro-forma data in the table, presented as of and for the
year ended December 31, 1996, and as of and for the nine months ended September
30, 1997, are presented for comparative and illustrative purposes only and are
not necessarily indicative of the combined financial position or results of
operations in the future or what the combined financial position or results of
operations would have been had the Reorganization been consummated during the
periods or as of the dates for which the information in the table is presented.
Historical Pro Forma
-------------------- ------------------------
Zions and
Sky Valley Sky Valley
Pro-Forma Equivalent
Per Common Share Zions Sky Valley Combined(4) Pro-Forma(5)
- ---------------- ----- ---------- ----------- ------------
NET INCOME(1)
For the years ended
December 31, 1996 $ 1.71 $ 666.14 $ 1.72 $ 447.85
December 31, 1995 1.38 482.72 1.39 361.93
December 31, 1994 1.09 414.58 1.10 286.42
For the nine months
ended September 30, 1997 1.41 548.10 1.41 367.14
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Historical Pro Forma
-------------------- ------------------------
Zions and
Sky Valley Sky Valley
Pro-Forma Equivalent
Per Common Share Zions Sky Valley Combined(4) Pro-Forma(5)
- ---------------- ----- ---------- ----------- ------------
CASH DIVIDENDS(2)
For the years ended
December 31, 1996 $ .43 $ 150.00 $ .43 $ 111.96
December 31, 1995 .35 140.00 .35 91.13
December 31, 1994 .29 132.50 .29 75.51
For the nine months
ended September 30, 1997 .35 120.00 .35 91.13
BOOK VALUE:(3)
As of December 31, 1996 $ 8.61 $3,256.04 $ 8.65 $2,252.29
As of December 31, 1995 7.36 2,861.10 7.39 1,924.21
As of December 31, 1994 6.28 2,396.23 6.31 1,643.00
As of September 30, 1997 9.78 3,673.70 9.82 2,556.93
- ---------------
(1) Net Income per share is based on weighted average common and common
equivalent shares outstanding.
(2) Pro forma cash dividends represent historical cash dividends of Zions.
(3) Book value per common share is based on total period-end of shareholders'
equity.
(4) Pro forma combined net income per share represents historical net income of
Zions and the Company computed using historical weighted average common and
common equivalent shares of Zions adjusted by computed common and common
equivalent shares to be issued in the transaction. Pro forma combined book
value per share represents historical total shareholders' equity of Zions
computed using Zions' historical common shares outstanding adjusted by
computed common shares to be issued in the transaction.
(5) Pro forma equivalent amounts are computed by multiplying the pro forma
combined amounts by the exchange ratio of 260.38 shares of Zions Common
Stock for each share of Company Common Stock.
SUPERVISION AND REGULATION
The information contained in this section summarizes portions of the
applicable laws and regulations relating to the supervision and regulation of
Zions and its subsidiaries. These summaries do not purport to be complete, and
they are qualified in their entirety by reference to the particular statutes and
regulations described.
Zions
Zions is a bank holding company within the meaning of the Bank Holding
Company Act and is registered as such with the Board of Governors. Under the
current terms of that Act, Zions' activities, and those of companies which it
controls or in which it holds more than 5% of the voting stock, are limited to
banking or managing or controlling banks or furnishing services to or performing
services for its subsidiaries, or any other activity which the Board of
Governors 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 Board of Governors is required to consider whether the
performance of such activities by a bank holding company or its subsidiaries can
reasonably be expected to produce benefits to the public such as greater
convenience, increased competition or gains in efficiency that outweigh possible
adverse effects, such as undue
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concentration of resources, decreased or unfair competition, conflicts of
interest or unsound banking practices.
Bank holding companies, such as Zions, are required to obtain prior
approval of the Board of Governors to engage in any 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, as amended
("Riegle-Neal Act"), subject to approval by the Board of Governors, 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, the most significant of which include
adequate capitalization and management of the acquiring bank holding company,
existence of the acquired bank for up to five years before purchase where
required under state law, existence of state laws that condition acquisitions on
institutions making assets available to a "state-sponsored housing entity," 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 more stringent deposit
concentration limits, so long as those limits apply to all bank holding
companies equally. The Riegle-Neal Act reaffirms the right of states to
segregate and tax separately incorporated subsidiaries of a bank or bank holding
company. The Riegle-Neal Act also affects interstate branching and mergers. See
"Interstate Banking" below.
The Board of Governors 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 Board of Governors has
adopted capital adequacy guidelines prescribing both risk-based capital and
leverage ratios.
Regulatory Capital Requirements
Risk-Based Capital Guidelines. The Board of Governors has established
risk-based capital guidelines for bank holding companies. The guidelines define
Tier 1 Capital and Total Capital. Tier 1 Capital consists of common and
qualifying preferred shareholders' equity and minority interests in equity
accounts of consolidated subsidiaries, less goodwill and 50% (and in some cases
up to 100%) of investment in unconsolidated subsidiaries. Total Capital consists
of Tier 1 Capital plus qualifying mandatory convertible debt, perpetual debt,
certain hybrid capital instruments, certain preferred stock not qualifying as
Tier 1 Capital, subordinated and other qualifying term debt up to specified
limits, and a portion of the allowance for credit losses, less investments in
unconsolidated subsidiaries and in other designated subsidiaries or other
associated companies at the discretion of the Board of Governors, certain
intangible assets, a portion of limited-life capital instruments approaching
maturity and reciprocal holdings of banking organizations' capital instruments.
The Tier 1 component must constitute at least 50% of qualifying Total Capital.
Risk-based capital ratios are calculated with reference to
risk-weighted assets, which include both on-balance sheet and off-balance sheet
exposures. The risk-based capital framework contains four risk weight categories
for bank holding company assets -- 0%, 20%, 50% and 100%. Zero percent
risk-weighted assets include, generally, cash and balances due from federal
reserve banks and obligations unconditionally guaranteed by the U.S. government
or its agencies.
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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 1 Capital. At
December 31, 1996, Zions' Tier 1 and Total Capital ratios were 14.38% and
18.31%, 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) quality and level of earnings; (iii)
investment or loan portfolio concentrations; (iv) quality of loans and
investments; (v) the effectiveness of loan and investment policies; (vi) certain
risks arising from nontraditional activities; and (vii) 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. Market risk of a
banking organization -- risk of loss stemming from movements in market prices --
is not evaluated under the current risk-based capital ratio analysis (and is
therefore analyzed by the bank regulators through a general assessment of an
organization's capital adequacy) unless trading activities constitute 10 percent
or $1 billion or more of the assets of such organization. Such an organization
(unless exempted by the banking regulators) and certain other banking
organizations designated by the banking regulators must, beginning on or before
January 1, 1998, include in its risk-based capital ratio analysis charges for,
and hold capital against, general market risk of all positions held in its
trading account and of foreign exchange and commodity positions wherever
located, as well as against specific risk of debt and equity positions located
in its trading account. Currently, Zions does not calculate a risk-based capital
charge for its market risk.
The following table presents Zions' regulatory capital position at
September 30, 1997 under the risk-based capital guidelines.
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Risk-Based Capital
(Dollars in thousands)
Percent
of Risk-
Adjusted
Amount Assets
------ ------
Tier 1 Capital............................. $ 596,625 12.45%
Minimum Requirement........................ 191,706 4.00
--------- -------
Excess................................... $ 404,919 8.45%
========= =======
Total Capital.............................. $ 725,036 15.13%
Minimum Requirement........................ 383,412 8.00
--------- -------
Excess................................... $ 341,624 7.13%
========= =======
Risk-Adjusted Assets,
net of goodwill, excess deferred
tax assets and excess allowance.......... $4,792,652 100.00%
========== =======
Minimum Leverage Ratio. The Board of Governors has adopted capital standards and
leverage capital guidelines that include a minimum leverage ratio of 3% Tier 1
Capital to total assets (the "leverage ratio"). The leverage ratio is used in
tandem with a risk-based ratio of 8% that took effect at the end of 1992. At
September 30, 1997, Zions' leverage ratio was 6.96%.
The Board of Governors 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 Board of Governors has indicated that it will consider
a "tangible Tier I Capital Leverage Ratio" (deducting all intangibles) and other
indices of capital strength in evaluating proposals for expansion or new
activities.
The following table presents Zions' leverage ratio at September 30,
1997. A leverage ratio of 3% will be the minimum required for the most highly
rated banking organizations, and according to the Board of Governors, other
banking organizations would be expected to maintain capital at higher levels.
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<PAGE>
(Dollars in thousands)
------------------------
Percent
of Average
Assets, Net
Amount of Goodwill
------ -----------
Tier 1 Capital............................. $ 596,625 6.96%
Minimum Requirement........................ 257,122 3.00
---------- --------
Excess..................................... $ 339,503 3.96%
========== =========
Average Assets, net of goodwill and
deferred tax assets...................... $8,570,738 100.00%
========== =========
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 Board of Governors
have issued regulations establishing the capital requirements for banks under
federal law. The regulations, which apply to Zions' banking subsidiaries,
establish minimum risk-based and leverage ratios which are substantially similar
to those applicable to Zions.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") requires 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 define the
capital categories for banks which will determine the necessity for prompt
corrective action by the federal banking agencies. A bank may be placed in a
capitalization category that is lower than is indicated by its capital position
if it receives an unsatisfactory examination rating with respect to certain
matters except that it may not be categorized as critically undercapitalized
unless actually indicated by its capital position.
Failure to meet capital guidelines could subject a bank to a variety of
restrictions and enforcement remedies. 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 critically undercapitalized,
significantly undercapitalized and certain undercapitalized banks are required
to obtain the approval of the Board of Governors 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.
-38-
<PAGE>
Banks which are classified undercapitalized, significantly
undercapitalized or critically undercapitalized are required to submit capital
restoration plans satisfactory to their federal banking regulator and guaranteed
within stated limits by companies having control of such banks (i.e., to the
extent of the lesser of five percent of the institution's total assets at the
time it became undercapitalized or the amount necessary to bring the institution
into compliance with all applicable capital standards as of the time the
institution fails to comply with its capital restoration plan, until the
institution is adequately capitalized on average during each of four consecutive
calendar quarters), and are subject to regulatory monitoring and various
restrictions on their operations and activities, including those upon asset
growth, acquisitions, branching and entry into new lines of business and may be
required to divest themselves of or liquidate subsidiaries under certain
circumstances. Holding companies of such institutions may be required to divest
themselves of such institutions or divest themselves of or liquidate
nondepository affiliates under certain circumstances. Critically
undercapitalized institutions are also prohibited from making payments of
principal and interest on debt subordinated to the claims of general creditors
as well as to the mandatory appointment of a conservator or receiver within 90
days of becoming critically undercapitalized unless periodic determinations are
made by the appropriate federal banking agency, with the concurrence of the
FDIC, that forbearance from such action would better protect the affected
deposit insurance fund. Unless appropriate findings and certifications are made
by the appropriate federal banking agency with the concurrence of the FDIC, a
critically undercapitalized institution must be placed in receivership if it
remains critically undercapitalized on average during the calendar quarter
beginning 270 days after the date it became critically undercapitalized.
Other Regulatory and Supervisory Issues
Pursuant to FDICIA, the federal banking agencies have adopted
regulations or guidelines prescribing standards for safety and soundness of
insured banks and in some instances 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 and earnings, 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 or increase its ratio of tangible equity to assets, or imposing
other operating restrictions.
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 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
-39-
<PAGE>
services, deposit account-related disclosures and advertising as well as to
impose restrictions on federal reserve discount window advances for certain
institutions and to require that insured depository institutions generally be
examined on-site by federal or state personnel at least once every 12 months.
In connection with an institutional failure or FDIC rescue of a
financial institution, the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 ("FIRREA") grants to the FDIC the right, in many
situations, to charge its actual or anticipated losses against commonly
controlled depository institution affiliates of the failed or rescued
institution (although not against a bank holding company itself).
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 and
eliminate or revise the features of the specialized savings association charter.
It is impossible to predict whether or in what form these proposals may be
adopted in the future and, if adopted, what the effect of their adoption will be
on the Zions or its subsidiaries.
Deposit Insurance and Other Assessments
Insured banks (including the bank subsidiaries of Zions) are required
to make quarterly deposit insurance assessment payments to the Bank Insurance
Fund (the "BIF"), and most savings associations to the Savings Association
Insurance Fund (the "SAIF"), under a risk-based assessment system established by
the FDIC. (In addition, certain banks must also pay deposit insurance
assessments to the SAIF and certain savings associations, to the BIF alone or to
both funds.) Under this system, each institution'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 institution in one of nine risk
assessment classifications based upon its level of capital and supervisory
evaluations by its regulators: "well capitalized," "adequately capitalized" or
"less than adequately capitalized" institutions, with each category of
institution divided into subcategories of institutions which are either
"healthy," of "supervisory concern" or of "substantial supervisory concern."
Those institutions deemed weakest by the FDIC are subject to the highest
assessment rates; those deemed strongest are subject to the lowest assessment
rates. The FDIC establishes semi-annual assessment rates with the objective of
enabling the affected insurance fund to achieve or maintain a
statutorily-mandated target reserve ratio of 1.25% of insured deposits. In
establishing assessment rates, the FDIC Board of Directors is required to
consider (i) expected operating expenses, case resolution expenditures and
income of the FDIC; (ii) the effect of assessments upon members' earnings and
capital; and (iii) any other factors deemed appropriate by it.
Until December 31, 1997, both BIF- and SAIF-assessable deposits will be
subject to an assessment schedule providing for an assessment range of 0% to
.27% (with intermediate rates of .03%, .10%, .17% and .24%, depending upon an
institution's supervisory risk group). Both BIF and SAIF assessment rates are
subject to semi-annual adjustment by the FDIC Board of Directors within a range
-40-
<PAGE>
of up to five basis points without public comment. The FDIC Board of Directors
also possesses authority to impose special assessments from time to time.
In addition to the payment of deposit insurance assessments, depository
institutions are required to make quarterly assessment payments to the FDIC on
both their BIF and SAIF assessable deposits which will be paid to the Financing
Corporation to enable it to pay interest and certain other expenses on bonds
which it issued pursuant to FIRREA to facilitate the resolution of failed
savings associations. Pursuant to the Federal Home Loan Bank Act, the Financing
Corporation, with the approval of the FDIC Board of Directors, establishes
assessment rates based upon estimates of (i) expected operating expenses, case
resolution expenditures and income of the Financing Corporation; (ii) the effect
of assessments upon members' earnings and capital; and (iii) any other factors
deemed appropriate by it. Additionally, the Financing Corporation is required to
assess BIF-assessable deposits at a rate one-fifth the rate applicable to
SAIF-assessable deposits until the first to occur of the merger of the BIF and
SAIF funds or January 1, 2000. Assessment rates for the second semi-annual
period of 1997 have been set at .63 basis points annually for BIF-assessable
deposits and 3.15 basis points annually for SAIF-assessable deposits, subject to
quarterly review and adjustment.
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.
The Riegle-Neal Act dramatically affects interstate banking activities.
As discussed previously, the Riegle-Neal Act allows the Board of Governors 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. Since
June 1, 1997, and earlier where permitted by applicable state law, an insured
bank has been authorized to apply to the appropriate federal agency for
permission to merge with an out-of-state bank and convert the branch offices of
the out-of-state bank to those of its own or, alternatively, convert its branch
offices to those of the out-of-state bank, unless its home state or the home
state of the out-of-state bank had adopted qualifying legislation barring this
form of interstate expansion by June 1, 1997.
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
more stringent 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
-41-
<PAGE>
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 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.
Pursuant to FIRREA, bank holding companies may acquire savings
associations (including savings and loan associations and federal savings banks)
without geographic restriction under the Bank Holding Company Act.
Bank holding companies whose home state is Utah are authorized to
acquire control of depository institutions and depository institution holding
companies located in other states. Colorado law authorizes an out-of-state bank
holding company, with the prior approval of the Board, to acquire a Colorado
bank holding company whose operations are principally conducted within the state
irrespective of the number of years the depository institution subsidiaries of
the Colorado bank holding company have been in operation provided that at the
time of acquisition, the out-of-state bank holding company will not control more
than 25 percent of the aggregate deposits made in federally-insured banks,
savings and loan associations, federal savings banks, industrial banks, bank
holding companies, thrift holding companies and industrial bank holding
companies located in the state.
MONETARY POLICY
The earnings of Zions and the Company are directly affected by the
monetary and fiscal policies of the federal government and governmental
agencies. The Board of Governors has broad powers to expand and constrict the
supply of money and credit and to regulate the reserves which its member banks
must maintain based on deposits. These broad powers are used to influence the
growth of bank loans, investments and deposits, and may affect the interest
rates which will prevail in the market for loans and investments and deposits.
Governmental and Federal Reserve Board monetary policies have had a significant
effect on the operating results of commercial banks in the past and are expected
to do so in the future. The future impact of such policies and practices on the
growth or profitability of Zions and the Company cannot be predicted.
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<PAGE>
INFORMATION CONCERNING ZIONS BANCORPORATION
Selected Financial Data
The following unaudited table of selected financial data should be read
in conjunction with the related notes included herein and Zions' consolidated
financial statements and the related notes thereto incorporated by reference
herein. The per share information presented reflects Zions' May 9, 1997 stock
split. See "Zions Documents Incorporated by Reference."
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<PAGE>
ZIONS BANCORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share and ratio data)
<TABLE>
<CAPTION>
As of, and for the Nine As of, and for the
Months Ended September 30, Year Ended December 31,
-------------------------- ---------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS SUMMARY
- ----------------
Taxable-equivalent net interest income $ 230,406 $ 194,081 $ 267,583 $ 232,417 $ 203,313 $ 178,636 $ 160,854
Net interest income 225,404 189,207 260,473 227,094 198,606 174,657 157,282
Noninterest income 100,309 81,596 110,891 88,014 73,202 79,880 62,849
Provision for loan losses 2,905 2,200 3,540 2,800 2,181 2,993 10,929
Noninterest expense(1) 193,861 155,578 214,332 190,030 174,900 167,750 139,069
Income taxes 44,826 38,530 52,142 40,950 30,900 27,248 22,924
Income before cumulative effect of
changes in accounting principles 84,121 74,495 101,350 81,328 63,827 56,546 47,209
Cumulative effect of changes in
accounting principles(2) - - - - - 1,659 -
Net income 84,121 74,495 101,350 81,328 63,827 58,205 47,209
COMMON STOCK DATA
- -----------------
Earnings per common share:
Income before cumulative effect of
changes in accounting principles $ 1.41 $ 1.26 $ 1.71 $ 1.38 $ 1.09 $ .99 $ .86
Net income 1.41 1.26 1.71 1.38 1.09 1.02 .86
Dividends paid per share .35 .32 .43 .35 .29 .25 .19
Dividend payout ratio (%) 24.63% 24.86% 24.66% 25.27% 27.06% 21.81% 20.31%
Book value per share at period end 9.78 8.30 8.61 7.36 6.28 5.50 4.74
Market to book value at period end (%) 383.44% 266.49% 301.89% 272.59% 142.83% 168.11% 200.53%
Weighted average common and common
equivalent shares outstanding
during the period 59,792,000 59,072,000 59,228,000 58,868,000 58,404,000 57,120,000 55,160,000
Common shares outstanding
at period end 59,426,300 59,068,860 58,918,880 58,223,680 58,238,208 56,805,468 54,910,176
AVERAGE BALANCE SHEET DATA
- --------------------------
Money market investments $ 1,545,892 $ 926,035 $ 909,470 $ 936,846 $ 869,709 $ 788,694 $ 469,062
Securities 2,282,914 1,807,806 1,827,300 1,632,253 1,545,704 1,209,165 927,976
Loan and leases, net 3,773,847 3,055,062 3,126,899 2,599,071 2,574,995 2,222,182 2,104,679
Total interest-earning assets 7,602,653 5,788,903 5,863,669 5,168,170 4,990,408 4,220,041 3,501,717
Total assets 8,259,593 6,297,615 6,377,695 5,658,690 5,456,613 4,643,918 3,807,832
Interest-bearing deposits 3,795,194 3,289,330 3,324,536 3,021,060 2,744,976 2,449,275 2,356,384
Total deposits 4,899,591 4,203,711 4,258,270 3,858,271 3,583,094 3,178,926 2,912,860
FHLB advances and other borrowings 136,204 98,781 96,496 114,270 151,164 195,097 128,856
Long-term debt 251,199 55,938 58,466 57,506 59,493 75,623 82,219
Total interest-bearing liabilities 6,476,829 4,821,129 4,872,070 4,320,229 4,197,865 3,556,746 2,962,079
Shareholders' equity 543,606 455,492 468,573 397,268 339,181 286,331 240,411
PERIOD END BALANCE SHEET DATA
- -----------------------------
Money market investments $ 1,407,200 $ 992,846 $ 613,429 $ 687,251 $ 403,446 $ 597,680 $ 616,180
Securities 2,584,089 1,886,533 1,809,688 1,540,489 1,663,433 1,258,939 981,695
Loans and leases, net 4,190,664 3,313,932 3,452,543 2,806,956 2,391,278 2,486,346 2,107,433
Allowance for loan losses 70,290 69,337 69,954 67,555 67,018 68,461 59,807
Total assets 9,059,721 6,783,341 6,484,964 5,620,646 4,934,095 4,801,054 4,107,924
Total deposits 5,666,336 4,572,555 4,552,017 4,097,114 3,705,976 3,432,289 3,075,110
FHLB advances and other borrowings 266,750 90,997 87,194 101,084 127,319 288,249 205,222
Long-term debt 251,134 55,702 251,620 56,229 58,182 59,587 99,223
Shareholders' equity 581,129 490,485 507,452 428,506 365,770 312,592 260,070
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
As of, and for the
Nine Months Ended As of, and for the
September 30, Year Ended December 31,
------------------ ---------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Nonperforming assets:
Nonaccrual loans $10,617 $10,139 $11,526 $ 7,438 $13,635 $23,364 $21,556
Restructured loans 693 204 857 249 567 4,006 4,003
Other real estate owned and other
nonperforming assets 4,734 256 138 1,609 4,741 3,267 5,971
Total nonperforming assets 16,044 10,599 12,521 9,296 18,943 30,637 31,530
Accruing loans past due 90 days or more 7,997 8,740 3,553 5,232 3,041 10,821 6,409
SELECTED RATIOS
- ---------------
Net interest margin(3) 4.05% 4.48% 4.56% 4.50% 4.07% 4.23% 4.59%
Return on average assets 1.36% 1.58% 1.59% 1.44% 1.17% 1.25% 1.24%
Return on average common equity 20.69% 21.85% 21.63% 20.47% 18.82% 20.33% 19.64%
Ratio of average common equity to
average assets 6.58% 7.23% 7.35% 7.02% 6.22% 6.17% 6.31%
Tier I risk-based capital - period end 12.45% 11.05% 14.38% 11.38% 11.81% 10.85% 10.23%
Total risk-based capital - period end 15.13% 13.67% 18.31% 14.23% 14.96% 14.12% 15.13%
Leverage ratio - period end 6.96% 6.47% 8.77% 6.28% 6.24% 5.44% 6.21%
Ratio of nonperforming assets to total
assets - period end .18% .16% .19% .17% .38% .64% .77%
Ratio of nonperforming assets to net
loans and leases and other real estate
owned and other nonperforming assets
at period end .38% .32% .36% .33% .79% 1.23% 1.49%
Ratio of net charge-offs (recoveries)
to average loans and leases .22% .13% .12% .10% .19% (.23)% .44%
Ratio of allowance for loan losses
to net loans and leases outstanding
at period end 1.68% 2.09% 2.03% 2.41% 2.80% 2.75% 2.84%
Ratio of allowance for loan losses to
nonperforming loans at period end 621.49% 670.38% 564.92% 878.82% 471.89% 250.13% 234.00%
</TABLE>
- ----------
(1) Noninterest expenses for the year ended December 31, 1993 included a
one-time expense of $6,022,000 in the first quarter of 1993, related to the
early extinguishment of debt which was necessitated by the decision in
March 1993, to notify holders of floating rate notes totaling $37,450,000
and industrial revenue bonds totaling $4,720,000 that the debt would be
redeemed during the second quarter of 1993. The expense consisted of
marking to market an interest rate exchange agreement entered into several
years ago in conjunction with the issuance of the floating rate notes and
writing off deferred costs associated with the notes and bonds. Early
redemption of the bonds and notes in the second quarter of 1993, allowed
Zions to avail itself of lower cost funding.
(2) Cumulative effect of changes in accounting principles for the year ended
December 31, 1993 resulted from the cumulative effect of changes in
accounting principles in the first quarter of 1993, arising from the
adoption as of January 1, 1993, of Statement of Financial Accounting
Standards (SFAS) No. 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions," and SFAS No. 109, "Accounting for Income
Taxes." The election of immediate recognition of the cumulative effect
(transition obligation) of such change in accounting method for
postretirement benefit other than pensions of SFAS No. 106 decreased pretax
and after-tax net income by $5,760,000 and $3,631,000, respectively. In
addition to the $2,129,000 deferred tax benefit resulting from the adoption
of SFAS No. 106 the election to apply SFAS No. 109 prospectively and not
restate prior years resulted in net deferred tax benefits of $5,290,000 for
the expected future tax consequences of temporary differences between the
carrying amounts and the tax bases of other assets and liabilities.
(3) Net interest margin represents net interest income on a taxable-equivalent
basis as a percentage of average earning assets.
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<PAGE>
Stock Prices and Dividends on Zions Common Stock
Zions Common Stock is traded in the over-the-counter market under the
symbol "ZION" and is listed in the NASDAQ National Market System. The following
table has been adjusted to reflect Zions' May 9, 1997 stock split and sets forth
the high and low daily sales prices for Zions Common Stock for the periods
indicated, in each case as reported by NASDAQ, and the cash dividends per share
declared on Zions Common Stock for such periods.
Cash
Dividends
High Low Declared
---- --- --------
1995
First Quarter .................... $10.13 $ 8.88 $ .075
Second Quarter ................... 12.50 9.53 .0875
Third Quarter .................... 15.38 12.38 .0875
Fourth Quarter ................... 20.28 15.22 .1025
--------
$ .3525
1996
First Quarter .................... $19.81 $16.69 $ .1025
Second Quarter ................... 19.75 17.00 .1025
Third Quarter .................... 22.44 18.00 .11
Fourth Quarter ................... 26.00 21.69 .11
---------
$ .425
=========
1997
First Quarter .................... $33.25 $25.69 $ .11
Second Quarter ................... 37.63 28.38 .12
Third Quarter .................... 41.13 34.69 .12
Fourth Quarter (through
December 15, 1997).. ........... 45.63 37.63 --
On July 24, 1997, the last NASDAQ-NMS trading day prior to the public
announcement of the Reorganization, the closing sale price for the Zions Common
Stock was $35.50. On December 15, 1997, the last trading date before this Proxy
Statement/Prospectus was sent to the printers, the closing sale price for the
Zions Common Stock was $44.25. On December 15, 1997, there were 64,062,020
shares of Zions Common Stock outstanding, held by approximately 4,965
shareholders of record.
While Zions is not obligated to pay cash dividends, Zions' Board of
Directors presently intends to continue the policy of paying quarterly cash
dividends. Future dividends will depend, in part, upon the earnings and
financial condition of Zions.
Principal Holders of Zions Common Stock
The following table sets forth as of September 30, 1997, the record and
beneficial ownership of Zions Common Stock by the principal common shareholders
of Zions.
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<PAGE>
No. of % of
Name and Address Type of Ownership Shares Class
- ---------------- ----------------- ------ -----
Roy W. Simmons Record and Beneficial 2,291,911 3.82%
One South Main Beneficial(1) 1,991,376 3.32%
Salt Lake City, Utah 84111 --------- ----
4,283,287 7.14%
Zions First National Bank Record(2) 4,581,822 7.60%
One South Main
Salt Lake City, Utah 84111
- ----------
(1) Represents Roy W. Simmons' ownership interest in 1,991,376 shares held by a
company in which Mr. Simmons serves as a director.
(2) These shares are owned of record as of September 30, 1997, by Zions First
National Bank, a subsidiary of Zions, in its capacity as fiduciary for
various trust and advisory accounts. Of the shares shown, Zions First
National Bank has sole voting power with respect to a total of 3,286,821
shares (5.45% of the class) it holds as trustee for the Zions
Bancorporation Employee Stock Savings Plan, the Zions Bancorporation
Employee Investment Savings Plan, and the Zions Bancorporation Profit
Sharing Plan. Zions First National Bank also acts as trustee for the Zions
Bancorporation Dividend Reinvestment Plan, which holds 998,864 shares
(1.66% of the class) and the Zions Bancorporation PAYSOP Plan, which holds
296,137 shares (.49% of the class) as to which Zions First National Bank
does not have or share voting power.
Set forth below is the beneficial ownership, as of September 30, 1997,
of Zions' common stock by each of Zions' directors, and all directors and
officers as a group.
No. of Shares % of
Directors Beneficially Owned Class
- --------- ------------------ -----
Jerry C. Atkin 8,800 * (1)
R.D. Cash 26,000 * (1)
Grant R. Caldwell 6,000 * (1)
Richard H. Madsen 197,372 * (1)
Roger B. Porter 2,000 * (1)
Robert G. Sarver 300,194 * (1)
Harris H. Simmons 2,400,179(2) 4.00
L. E. Simmons 2,219,837(2) 3.70
Roy W. Simmons 4,283,287(2) 7.14
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<PAGE>
I. J. Wagner 284,000(2) * (1)
Dale W. Westergard 163,022 * (1)
All directors and officers
as a group (31 persons) 7,243,523 12.02
- ----------
(1) Immaterial percentage of ownership.
(2) Totals include 1,991,376 shares attributed to each individual through
serving as a director in a company holding such shares in Zions. Of such
1,991,376 shares attributed to Harris H. Simmons, Mr. Simmons holds an
option to acquire 186,792 shares, all of which are vested and presently
exercisable.
Zions Documents Incorporated By Reference
The following documents previously filed by Zions with the SEC pursuant
to the Exchange Act are hereby incorporated by reference in this Proxy
Statement/Prospectus:
1. Zions' Annual Report on Form 10-K for the year ended December 31,
1996 ("Zions Form 10-K");
2. Zions' Quarterly Reports on Form 10-Q for the quarters ended March
31, 1997, June 30, 1997 and September 30, 1997;
3. Zions' Current Reports on Form 8-K filed by Zions on March 11,
1997, July 9, 1997, and October 3, 1997; and
4. Zions' Form 8-A Registration Statement dated October 10, 1996.
For the convenience of the Company shareholders, a copy of Zions' 1996
Annual Report to Shareholders ("Zions Annual Report") and Zions' press release
relating to the quarter ended September 30, 1997 ("Press Release") are being
mailed to the Company shareholders along with this Proxy Statement/Prospectus.
The Zions Annual Report and the Press Release are not part of this Proxy
Statement/Prospectus. The Zions Annual Report does not contain all of the
information contained in the Zions Form 10-K. The Company shareholders who wish
to obtain copies of any Zions document incorporated by reference herein may do
so by following the instructions under "Available Information" above.
All documents filed by Zions with the SEC pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy
Statement/Prospectus and prior to the Effective Date shall be deemed to be
incorporated by reference in this Proxy Statement/Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained herein
or in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any statement so
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<PAGE>
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Proxy Statement/Prospectus.
INFORMATION CONCERNING SKY VALLEY BANK CORP.
General
Sky Valley Bank Corp. (the "Company") is a bank holding company
organized under the laws of the State of Colorado in September, 1991. The
Company is registered as a bank holding company under the Bank Holding Company
Act. The Company has one subsidiary, The First National Bank in Alamosa (the
"Bank"). The Company's primary business is the ownership and management of the
Bank.
On September 30, 1997, the Company had outstanding 2,200 shares of
Common Stock which are held of record by 42 shareholders. As of September 30,
1997, Ralph H. Outcalt and Donald J. Wuckert owned in the aggregate
approximately 63.64% of the outstanding shares of the Company stock.
On a consolidated basis, for the first full year of the operations of
the Company ended on December 31, 1992, the Company's net income was $909,000
and total assets were $70,681,000. For the year ended December 31, 1996, the
Company's net income was $1,466,000, and total assets were $120,437,000. For the
nine months ended September 30, 1997, the Company's net income was $1,206,000
and total assets were $122,872,000.
The Company owns the Branch office building in Center, Colorado located
at 2060 East Highway 112. The building has 4 offices, 1 conference room, 1 vault
with safe deposit boxes, 6 teller windows, and a 4-lane drive-up facility,
walk-up window, and an ATM facility with 24-hour access. On September 1, 1994,
the Company leased to the Bank the office building and improvements under a
20-year lease with monthly rental payments.
Business of the Bank
The First National Bank in Alamosa (the "Bank") was originally
organized on September 6, 1905 as The American National Bank of Alamosa, a
national banking association and commenced operations in September, 1905. On
January 11, 1955, the name of the Bank was changed to The First National Bank in
Alamosa. Deposits are insured by the Federal Deposit Insurance Corporation
(FDIC). The Bank is examined and regulated by the office of the Comptroller of
Currency.
The Bank currently operates through a main office located at 720 Main
Street, Alamosa, Colorado and two branch offices located in Center, Colorado
(the "Center Branch") and Saguache, Colorado (the "Saguache Branch").
The Bank owns a two-story office building located at 720 Main Street in
Alamosa, Colorado and a branch office building located at 400 4th Street in
Saguache, Colorado. The 720 Main Street building has 12 teller windows, a 6-lane
drive-up facility, 14 individual offices, 2 conference rooms, 1 Board room and 1
ATM facility with 24-hour access. The Saguache Branch has 3 teller windows, a
vault, and safe deposit boxes. The Bank operates through a branch office
facility in Center, Colorado located at 2060 East Highway 112 owned by the
Company. The Center Branch has 4 offices, 1 conference room, 1 vault with safe
deposit boxes, 6 teller windows, a 4-lane drive-up facility, walk-up window, and
an ATM facility with 24-hour access.
-49-
<PAGE>
The Bank offers traditional banking services, including checking,
savings, money market accounts, certificates of deposit, IRAs and safe deposit
services. The Bank also offers banking by phone services and direct deposit EFT
services. The Bank offers automatic teller machine (ATM) services at 12
locations through the San Luis Valley of Colorado. The Bank offers a variety of
loan products, including commercial, agricultural, real estate, consumer
mortgage and consumer loans, and equity lines of credit. The Bank also offers a
MasterCard program to its customers.
Assets in the last 10 years has grown from $34 million as of December
31, 1986 to $120 million as of December 31, 1996. As of September 30, 1997,
total assets were $122.4 million. The year ending December 31, 1996 the Bank's
net income after taxes was $1,477,000 compared to a year earlier of net income
as of December 31, 1995 of $1,090,000. For the nine months ending September 30,
1997 net income was $1,234,000 compared to the nine months ending September 30,
1996 of $1,050,000. Net interest income for the nine months ending September 30,
1997 was $3,847,000 compared to the nine months ending September 30, 1996 of
$3,626,000.
Lending
The Bank concentrates its lending activities generally in the
categories of commercial, agricultural, and consumer loans. Commercial loans
consist of commercial real estate loans, real estate construction loans, and
land development loans. Commercial loans may also involve furniture, fixtures,
and inventory financing. Agricultural loans consist of loans secured by
agricultural properties, equipment, machinery, livestock, and agricultural
products. Consumer loans consist of residential mortgage loans, motor vehicle
loans, installment loans, personal loans, and the MasterCard program of the
Bank.
The substantial majority of the loans of the Bank are generated in the
San Luis Valley area of Colorado. The following table sets forth the amounts of
loans outstanding by category as of the dates included:
-50-
<PAGE>
OUTSTANDING LOANS
(IN THOUSANDS)
<TABLE>
<CAPTION>
09/30/97 % TOTAL 09/30/96 % TOTAL 12/31/96 % TOTAL 12/31/95 % TOTAL
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
COMMERCIAL $26,224 34.88% $24,592 37.16% $25,426 37.76% $21,884 35.99%
CML RE $19,372 25.76% $16,820 25.42% $16,735 24.85% $14,583 23.99%
CML OTHER $6,852 9.11% $7,772 11.74% $8,691 12.91% $7,301 12.01%
AGRICULTURE $32,701 43.49% $27,992 42.30% $27,867 41.39% $25,566 42.05%
AG RE $15,089 20.07% $12,751 19.27% $12,659 18.80% $12,717 20.92%
AG OTHER $17,612 23.42% $15,241 23.03% $15,208 22.59% $12,849 21.13%
CONSUMER $16,267 21.63% $13,591 20.54% $14,040 20.85% $13,348 21.95%
PERSONAL $9,149 12.17% $8,601 13.00% $8,477 12.59% $8,543 14.05%
MASTERCARD $667 0.89% $605 0.91% $649 0.96% $625 1.03%
MORTGAGE $6,451 8.58% $4,385 6.63% $4,914 7.30% $4,180 6.88%
GROSS LOANS $75,192 $66,175 $67,333 $60,798
LOAN LOSS ALLOW $878 $800 $850 $764
NET LOANS $74,314 $65,375 $66,483 $60,034
CHANGE $8,939 13.62% $5,341 8.90% $6,449 10.74% $14,505 31.86%
</TABLE>
<TABLE>
<CAPTION>
12/31/94 % TOTAL 12/31/93 % TOTAL 12/31/92 % TOTAL
===================================================================================================
<S> <C> <C> <C> <C> <C> <C>
COMMERCIAL
CML RE $17,416 37.72% $13,163 37.72% $10,628 38.91%
CML OTHER $10,203 22.10% $7,666 21.97% $5,305 15.39%
AGRICULTURE $7,213 15.62% $5,497 15.75% $6,535 23.52%
AG RE $19,524 42.29% $14,590 41.81% $10,611 38.84%
AG OTHER $10,587 22,93% $7,150 20.49% $3,306 12.10%
CONSUMER $8,937 19.36% $7,440 21.32% $7,305 26.74%
PERSONAL $9,228 19.99% $7,141 20.46% $6,078 22.25%
MASTERCARD $6,273 13.59% $5,460 15.65% $5,681 20.80%
MORTGAGE $633 1.37% $615 1.76% $397 1.45%
GROSS LOANS $2,322 5.03% $1,066 3.05% $0 0.00%
LOAN LOSS ALLOW $46,168 $34,894 $27,317
NET LOANS $639 $526 $501
CHANGE $45,529 $34,368 $26,816
$11,161 32.47% $7,550 28.15%
</TABLE>
-51-
<PAGE>
The total loan balance increased $6,449,000 in 1996 over 1995 and
$14,505,000 in 1995 over 1994. The 1996 ending year total loan balance of
$66,488,000 was 10.75% higher than the balance of $60,034,000 on the same date
in 1995. The 1995 ending year balance was 31.86% higher than the balance of
$45,528,000 for the same date in 1994. On December 31, 1996, the loan-to-deposit
ratio was 62.32% compared with 58.55% on December 31, 1995 and 58.12% on
December 31, 1994. These changes resulted from increased loan growth. The total
loan balance for the nine months ended September 30, 1997 reflected an increase
of $7,831,000, or a 11.78% increase from December 31, 1996. The loan-to-deposit
ratio also increased to 68.46% as of September 30, 1997.
The Bank relies substantially on local promotional activities and
personal service to compete with other financial institutions. The Bank makes
loans to borrowers whose applications include a sound purpose, a viable
repayment source and plan, and generally secured by collateral. The Bank has
established a written loan policy for each of its categories of loans which is
reviewed periodically by the Board of Directors. The loan portfolio is reviewed
periodically by the Loan Committee of the Bank to maximize collections of past
due loans and to undertake other actions necessary to maintain a good quality
loan portfolio.
As of September 30, 1997, 34.88% of the total loan portfolio involved
commercial loans. Of the commercial loans, 73.88% of the commercial loan
portfolio was secured by real estate. Commercial loan-to-value ratios are
generally 50% to 75%.
As of September 30, 1997, approximately 37.16% of the total loan
portfolio involved agricultural loans. Of the agricultural loans, 46.15% of the
agricultural loan portfolio was secured by real estate. Agricultural
loan-to-value ratios are generally 50% to 75%.
As of September 30, 1997, approximately 21.63% of the total loan
portfolio involved consumer loans. Of the consumer loans, 39.66% of the consumer
loans involved owner-occupied one- to four-family residential loans. Consumer
loan-to-value ratios are generally 50% to 90%.
The Bank uses only state licensed or certified appraisers in connection
with its appraisal reports on real estate related transactions. In general, an
independent appraisal is required on all loans secured by real estate that are
in excess of $250,000 unless the transaction meets one of the exemptions
contained in Part 323 of the FDIC's Rules and Regulations. Appraisers are
selected based upon their qualifications, with emphasis on their education and
experience related to the competency provisions of the Uniform Standards of
Professional Appraisal Practice.
Investment Portfolio
The Bank's investment portfolio consists primarily of U.S. agency
securities. Government regulations limit the type and quality of investments in
which the Bank may invest its funds.
The Bank has established a written investment policy that is reviewed
by the Board of Directors at least annually and was last approved on March 19,
1997.
-52-
<PAGE>
The policy identifies investment criteria and states specific objections in
terms of risk, interest rate sensitivity and liquidity.
The Bank has established an Executive Committee that is comprised of
Ralph H. Outcalt, Donald J. Wuckert, and David E. Broyles. The Executive
Committee monitors the Bank's investment portfolio to ensure compliance with
guidelines.
Investment securities held to maturity are carried at cost, adjusted
for the accretion of discounts and amortization of premiums using the interest
method. Amortization and accretion are recognized as adjustments to interest
income.
The following tables present the mix of the investment portfolio along
with the book and market values of those components as of September 30, 1997 and
September 30, 1996 and as of December 31, 1996 and December 31, 1995.
-53-
<PAGE>
THE FIRST NATIONAL BANK IN ALAMOSA
<TABLE>
<CAPTION>
September 30, 1997 September 30, 1996 December 31, 1996
------------------ ------------------ -----------------
Amortized Market Amortized Market Amortized Market
Cost Cost Cost Cost Cost Cost
---------- ------- ---------- ------- ---------- -------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Securities held to maturity
U.S. Treasury 0 0 0 0 0 0
U.S. Agencies 500 475 20,264 19,514 0 0
States and Political Subdivisions 0 0 580 586 0 0
Other 0 0 0 0 0 0
Total Securities Held to Maturity 500 475 20,844 20,100 0 0
Securities Available for Sale
U.S. Treasury 4,247 4,240 4,742 4,692 4,744 4,715
U.S. Agencies 28,246 27,668 12,889 12,702 33,074 32,548
States and Political Subdivisions 335 340 0 0 365 372
Other 418 400 812 777 813 787
Total Securities Available for Sale 33,246 32,648 18,443 18,171 38,996 38,422
Total Securities 33,746 33,123 39,287 38,271 38,996 38,22
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
----------------- -----------------
Amortized Market Amortized Market
Cost Cost Cost Cost
---------- ------- ---------- ------
(Amounts in thousands)
<S> <C> <C> <C> <C>
Securities held to maturity 0 0 2,750 2,555
U.S. Treasury 17,006 16,518 20,620 19,280
U.S. Agencies 686 696 777 756
States and Political Subdivisions 0 0 0 0
Other
17,692 17,214 24,147 22,591
Total Securities Held to Maturity
Securities Available for Sale 7,710 7,333 1,734 1,629
U.S. Treasury 7,701 7,701 4,342 4,171
U.S. Agencies 0 0 253 251
States and Political Subdivisions 1,312 1,304 1,312 1,189
Other
16,723 16,738 7,641 7,240
Total Securities Available for Sale
34,415 33,952 31,788 29,831
Total Securities
</TABLE>
-54-
<PAGE>
Deposits
Growth in deposits is the primary source of funds used by the Bank for
lending and other general business purposes. The Bank may derive additional
funds from principal repayments on loans, the sale of loans and investment
securities and borrowings from correspondent banks. The level of deposit
liabilities can vary significantly and is influenced by prevailing interest
rates, money market conditions, general economic conditions and competition.
The Bank offers a full range of depository accounts including checking,
savings, money market accounts, certificates of deposit and Individual
Retirement Accounts. Management believes that the customers provide a strong and
relatively stable core deposit base.
Average deposits were 22.8% higher in 1996 than in 1995 and were 15.73%
higher in 1995 than in 1994. Total deposits at year-end 1996 were $106,466,000,
4.07% higher than year-end 1995 total deposits of $102,302,000, which were 30.9%
higher than the year-end 1994 deposit totals of $78,152,000. Average deposits
during the first three-quarters of 1997 reflect an increase of $3,617,000 or
3.50% increase over the 1996 average deposits. The average deposit mix remained
relatively consistent during the first three-quarters of 1996 and the first
three-quarters of 1997. However, the interest-bearing demand accounts decreased
from 29.34% to 26.50% of total deposits.
Property
The Bank operates in three locations with the main office located at
720 Main Street, Alamosa, Colorado, and two branch offices located in Center,
Colorado (the "Center Branch") and Saguache, Colorado (the "Saguache Branch").
The following are descriptions of the three locations:
Location Sq. Ft. Owned/Leased Conveniences
- -------- ------- ------------ ------------
First National Bank
in Alamosa 13,764 Owned by Bank Handicap Access
720 Main Street 6 Drive-up lanes
Alamosa, CO 81101 1 ATM facility
Center Branch 3,354 Owned by Company Handicap Access
2060 East Highway 112 4 Drive-up lanes
Center, CO 81125 1 ATM facility
Saguache Branch 2,200 Owned by Bank
400 4th Street
Saguache, CO 81149
Competition
The Bank has competition within the San Luis Valley from established
non-bank institutions and a variety of small community banks. In addition to the
competition from other community bank institutions, competition is from savings
and loan companies, credit unions, Farm Credit Services, Production Credit
Associations, and other types of financial service companies.
-55-
<PAGE>
The primary factors affecting competition for deposits are interest
rates, cost of services, the quality and range of financial products offered,
and the convenience of locations and office hours. The primary factors in
competing for loans are interest rates, loan origination fees and the quality
and range of lending products offered. Other factors which affect competition
include the general availability and reliability of lendable funds, general and
local economic conditions and the quality of service and loan approval
turn-around provided to customers.
The Bank operates a traditional community bank and relies substantially
on its local promotional activities, personal contact by its officers,
directors, employees and shareholders, personal service, convenience, courier
service, and its reputation with customers and communities that the Bank serves.
Legal Proceedings
The Bank is not presently involved in any legal proceedings that the
management of the Bank believes to be material to its financial condition or
results of operations. Since the nature of the business of the Bank involves
granting loans and providing financial services, the Bank is involved in various
legal proceedings that may be considered as arising in the ordinary course of
the business of the Bank that includes the collection of loans, foreclosure on
security and as a creditor in bankruptcy proceedings.
Employees
As of September 30, 1997, the Bank employed 49 persons on a full time
basis and 3 persons on a part time basis. Customers of the Bank at the three
branches are served by 39 full time employees and 3 part time employees at the
Alamosa Branch, 8 full time employees at the Center Branch, and 2 full time
employees at the Saguache Branch. The employees of the Bank are not parties to
any collective bargaining agreement. The Bank provides a variety of employee
benefits and believes employee relations are good.
Regulatory Matters
As a registered bank holding company under the Bank Holding Company
Act, the Company is subject to regulations and supervision of the Board of
Governors. The Bank Holding Company Act requires the Company to file reports
with the Board of Governors and provide any additional information requested by
the Board of Governors.
The Bank is a national banking association organized under the laws of
the United States. The Bank is a member of the Federal Reserve System and its
deposits are insured by the FDIC. The Bank is subject to regulation, supervision
and regular examination by the Office of the Comptroller of the Currency.
Selected Financial Data
The following selected financial information should be read in
conjunction with the Company's consolidated financial statements and the related
notes and with management of the Bank's discussion and analysis of financial
condition and results of operations, which are included in this Proxy
Statement/Prospectus. The following financial information presented for the
1997, 1996, and 1995 periods is derived from unaudited financial information
which is included herein. Such information has not been audited because it would
be impractical to do so. The following financial information presented for the
1994, 1993, and 1992 periods is derived from audited financial information which
is not included herein.
-56-
<PAGE>
SKY VALLEY BANK CORP.
SELECTED CONSOLIDATED FINANCIAL DATA
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of, and for the Nine As of, and for the
Months Ended Sept. 30, Year Ended December 31,
---------------------- --------------------------------------------------------
(Dollars and outstanding shares in thousands, 1997 1996 1996 1995 1994 1993 1992
except per share and ratio data) ---------- ---------- ---------- ---------- ---------- --------- --------
(Unaudited) (Unaudited) (Unaudited)
EARNINGS SUMMARY
- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income $ 3,808 $ 3,593 $ 4,831 $ 4,108 $ 3,628 $ 2,779 $ 2,456
Provision for loan losses 108 101 131 142 110 107 44
Noninterest income 576 553 738 818 610 786 1,092
Noninterest expense 2,327 2,301 3,923 3,658 3,216 2,759 2,595
Net income 1,206 1,042 1,465 1,062 912 699 909
COMMON STOCK DATA
- -----------------
Earnings per common share 548.10 473.42 666.14 490.03 414.58 332.86 454.50
Book value per share at period end 3,673.70 3,105.38 3,256.04 2,861.10 2,396.23 2,271.92 2,023.77
Weighted average common shares
outstanding during the period 2,200 2,200 2,200 2,200 2,200 2,200 2,000
AVERAGE BALANCE SHEET DATA
- --------------------------
Securities 37,371 37,939 38,180 33,334 33,336 34,220 29,794
Loans and leases, net 70,728 60,965 62,381 51,391 40,310 29,482 25,507
Total interest-earning assets 111,985 105,211 106,011 87,718 74,821 65,785 58,513
Total assets 121,669 116,051 116,375 96,502 82,776 73,530 65,322
Interest-bearing deposits 95,093 90,742 91,229 70,816 62,766 59,427 53,589
Total deposits 107,044 102,807 103,427 82,172 73,084 67,282 60,409
END OF PERIOD BALANCE SHEET DATA
- --------------------------------
Securities 33,890 39,429 38,422 34,882 31,942 34,184 34,535
Loans and leases, net 75,228 66,238 66,521 60,076 45,550 34,373 26,824
Allowance for loan losses 878 823 845 764 639 501
Total assets 122,872 120,180 120,437 114,863 89,641 80,104 70,681
Total deposits 108,609 106,961 106,466 102,302 78,152 71,782 65,502
Shareholders' equity 8,082 6,807 7,163 6,294 5,272 4,998 4,048
Nonperforming assets:
Nonaccrual loans and loans past due 90
days or more 794 258 83 661 112 227 360
Other real estate owned 0 0 0 17 112 75 79
Total nonperforming assets 794 258 83 678 224 302 439
SELECTED RATIOS
- ---------------
Net interest margin 4.583 4.573 4.5767 4.6757 4.8588 4.2299 4.5811
Return on average assets 1.36% 1.20% 1.26 1.11 1.12 .99 1.89
Ratio of ending equity to ending assets 6.578 5.664 5.94 5.47 5.88 6.24 5.72
Ratio of nonperforming assets to total assets .65% .22% .07% .59% .25% .37% .62%
Ratio of allowance for loan losses to
net loans and leases outstanding at
period end 1.16% 1.24% 1.27% 1.27% 1.40% 1.53% 1.86%
Ratio of allowance for loan losses to
nonperforming loans 111% 319% 1018% 112% 285% 174% 114%
</TABLE>
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<PAGE>
Stock Prices and Dividends on Company Common Stock
The Company's Common Stock is not listed with a national securities
exchange or quoted on any automated quotation system. The Common Stock
occasionally trades through private negotiated transactions between individuals.
As a result, no established public trading market for Company Common Stock
presently exists. Over the years little trading has occurred in the stock.
Reliable information concerning the prices at which the Company's stock has
traded in private, negotiated transactions is not publicly available or
generally known to the Company. On occasion, the Company has become aware of the
trading price of its stock in private transactions. Information concerning those
trading prices has been omitted based on the Company's belief that such prices
are not necessarily representative of the market price for the Common Stock
during any particular period. Since July 25, 1997, the date the Plan of
Reorganization was publicly announced, there have been no known trades in the
Company's stock.
In 1995 the Company paid cash dividends totaling $140.00 per share
($35.00 per quarter) of Company Common Stock, while in 1996 the Company paid
cash dividends of $147.50 per share ($37.50 per quarter) of Company Common
Stock. During the first nine months of 1997, the Company has paid $117.50 cash
dividends on the Company Common Stock.
As of the date of this Proxy Statement/Prospectus, there were 42 record
holders of Company Common Stock.
Stockholdings of Directors, Officers and Certain Others
On December 18, 1997, there were 2,200 shares of the Company's common
stock outstanding. Only shareholders of record as of December 18, 1997, will be
entitled to vote at the Special Meeting and each share is entitled to one vote.
As of December 18, 1997, Messrs. Outcalt and Wuckert in the aggregate owned
approximately 63.64% of the outstanding shares of the Company Common Stock.
Messrs. Outcalt and Wuckert have agreed to vote their shares in favor of the
Plan of Reorganization.
The following table sets forth information with respect to the
beneficial ownership of the common stock of the Company as of December 18, 1997,
by (i) each person known by the Company to own beneficially more than 5% of the
outstanding common stock, (ii) each current director of the Company, and (iii)
all executive officers and directors of the Company as a group. Except as
otherwise indicated, each of the persons named below has sole voting and
investment power with respect to the common stock owned by them.
Name (and address of 5% Percent
Beneficial Owners) Number of Shares of Class
------------------ ---------------- --------
Ralph H. Outcalt 700 31.82%
P.O. Box 1277
Alamosa, CO 81101
Donald J. Wuckert 700 31.82%
8 Bellwood
Alamosa, CO 81101
-58-
<PAGE>
Charley Hayashida 220 10%
P.O. Box 8
Alamosa, CO 81101
Clyde R. Jones 182 8.27%
120 North Broadway
Monte Vista, CO 81144
David Broyles 17 0.77%
George Woodard 11 0.50%
All executive officers and
directors as a group (5 persons) 1,610 73.18%
Certain Transactions of the Company
The Bank has had banking transactions in the ordinary course of its
business with directors, officers, principal shareholders and their associates
on the same terms, including interest rates and collateral on loans, as those
prevailing at the same time for comparable transactions with unaffiliated
parties. To the extent that such transactions consisted of extensions of credit,
they did not, in the opinion of management, involve more than a normal risk of
collectibility or present other unfavorable features. As of September 30, 1997,
the Company's directors, executive officers, employees and their affiliates were
indebted to the Bank in the aggregate amount of $900,598, none of which such
loans were delinquent.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
SKY VALLEY BANK CORP.
The following analysis of the Company's financial condition and results
of operations for the nine months ended September 30, 1997, and 1996 and for the
years ended December 31, 1996, 1995 and 1994 should be read in conjunction with
the unaudited Consolidated Financial Statements of the Company and notes
thereto, and information presented elsewhere herein. Average balance sheet data
are based on monthly averages, except that average non-interest-bearing demand
deposit accounts for September 30, 1997 are averages of period-ending balances
for December of 1996 and March and June of 1997.
Financial Condition
For the nine months ended September 30, 1997, the Bank's net income
after taxes was $1,234,000 compared to September 30, 1996 of $1,050,000 for an
increase of 17.45%. Net Interest Margin was $3,847,000 and $3,626,000,
respectively. Return on Assets was 1.36% for the nine months ended September 30,
1997 and 1.20% for the nine months ended September 30, 1996. Return on Equity
was 21% for the
-59-
<PAGE>
nine months ended September 30, 1997 and 20% for the nine months ended September
30, 1996.
For the year ended December 31, 1996, the Bank's net income after taxes
was $1,477,000 compared to the year ended December 31, 1995 of $1,089,000, for a
35.6% increase. Net Interest Margin grew from $4,108,000 in 1995 to $4,875,000
in 1996, or an increase of 18.7%. Return on Assets was 1.26% for the year ended
December 31, 1996 and 1.11% for the year ended December 31, 1995. Return on
Equity was 22.3% and 18.9%, respectively.
The Bank's equity was $7,981,000 at September 30, 1997 and $6,794,000
at September 30, 1996. This is an increase in equity of $1,188,000, or 17.5%. At
year end 1996, the Bank's equity was $7,128,000 compared to year end 1995 of
$6,257,000. This was an increase in equity of $871,000, or 14%.
Gross loans at September 30, 1997 were $75,228,000 compared to your
earlier of $66,238,000. This is an increase of $8.9 million, or 13.5%. Gross
loans at December 31, 1996 were $67,366,000 compared to December 31, 1995 of
$60,840,000 for an increase of $6,526,000, or 10%.
Capital Ratios meet the minimum guidelines for a "well capitalized
bank" as defined by the Federal Deposit Insurance Corporation (FDIC) as of
September 30, 1997.
<TABLE>
<CAPTION>
(IN $000)
At September 30, At December 31,
---------------- ---------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Interest Margin $3,846 $3,626 $4,875 $4,108 $3,628
Net Income $1,234 $1,050 $1,477 $1,089 $929
Non-Interest Income $499 $482 $688 $769 $593
Total Securities $37,720 $42,229 $38,422 $34,881 $31,941
Total Loans $75,228 $66,237 $67,366 $60,840 $46,189
Total Assets $122,422 $119,798 $120,058 $114,460 $89,210
Total Equity $7,981 $6,794 $7,128 $6,257 $5,220
Capital Ratios
- --------------
Risked Based 10.88% 10.08% 10.41% 9.73% 10.42%
Tier 1 Capital 9.79% 8.97% 9.28% 8.62% 9.32%
Leverage Ratio 7.14% 6.16% 6.47% 5.86% 6.30%
Tangible Equity 6.47% 5.52% 5.82% 5.23% 5.85%
</TABLE>
The following tables provide condensed average balance sheets together
with analyses of the Company's net interest income, net interest spread, net
interest rate margin and net interest margin for the periods included.
-60-
<PAGE>
<TABLE>
<CAPTION>
September 30, 1997 September 30, 1996
------------------------------- -------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ----
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning Assets
Securities--taxable $ 37,296 $1,795 6.417% $ 37,189 $1,912 6.855%
Securities--non-taxable 699 38 7.248% 1,307 51 5.203%
Money market instruments 0 0 0.000% 0 0 0.000%
Federal funds sold 4,747 194 5.449% 7,102 293 5.501%
Loans 70,728 5,153 9.714% 60,965 4,534 9.916%
Less allowance for loan losses 862 795
Less unrealized loss on securities
available for sale [623] [557]
Net interest-earning assets 111,985 105,211
Noninterest-earning assets 9,234 10,458
Total assets 121,219 115,669
Liabilities
Interest-bearing DDA 28,363 508 2.388% 30,166 545 2.409%
MMDA 15,976 494 4.123% 15,116 446 3.934%
Saving accounts 7,468 191 3.410% 6,968 164 3.138%
Time deposits $100,000 and over 18,308 822 5.986% 19,050 834 5.837%
Other time deposits 24,978 1,104 5.893% 19,442 853 5.850%
Total interest-bearing liabilities 95,093 90,742
Noninterest-bearing DDA 11,952 12,065
Total deposits 107,045 102,807
Net interest income 3,808 3,626
Interest rate spread
Net interest rate margin 4.142 4.219
Net interest margin 4.583 4.574
</TABLE>
- ----------
* Net interest margin and the average ratios are annualized.
-61-
<PAGE>
Sky Valley Balance Sheet Items
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
-------------------------------- ---------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ----
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning Assets
Securities--taxable 36,960 2,561 6.92 32,054 2,217 6.92
Securities--non-taxable 1,220 72 5.90 1,290 70 5.43
Money market instrument 0 0 0 0 0
Federal funds sold 6,256 343 5.48 3,685 211 5.73
Loans 62,381 6,167 9.89 51,391 5,207 10.13
Less allowance for loan losses [806] N/A N/A [702] N/A N/A
Net interest-earning assets 106,011 87,718
Noninterest-earning assets 10,364 8,784
Total Assets 116,375 96,502
Liabilities
Interest-bearing DDA 29,860 718 2.40 21,786 705 3.24
MMDA 15,051 597 3.97 12,766 511 4.00
Saving accounts 7,019 224 3.19 5,324 190 3.57
Time deposits $100,000 and over 19,513 1,145 5.87 12,304 744 6.05
Other time deposits 19,786 1,152 5.82 18,636 1,079 5.79
Short-term debt 5,152 320 6.21 5,028 314 6.25
Total interest-bearing
liabilities 91,469 71,067
Noninterest-bearing DDa 12,198 11,356
Total deposits and short-term
debt 103,667 82,423
Net interest income 4,831 4,108
Interest rate spread
Net interest rate margin
Net interest margin 4.5767 4.6757
</TABLE>
December 31, 1994
----------------------------------
Average Average
Balance Interest Rate
------- -------- ----
(Amounts in thousands)
Interest-earning Assets
Securities--taxable 31,708 1,914 6.03
Securities--non-taxable 1,628 50 3.07
Money market instrument 0 0 0
Federal funds sold 1,761 68 3.86
Loans 40,310 3,831 9.50
Less allowance for loan losses [586] N/A N/A
Net interest-earning assets 74,821
Noninterest-earning assets 7,955
Total Assets 82,776
Liabilities
Interest-bearing DDA 21,700 493 2.27
MMDA 10,750 354 3.29
Saving accounts 4,367 127 2.91
Time deposits $100,000 and over 8,325 363 4.36
Other time deposits 17,624 776 4.40
Short-term debt 3,601 207 5.75
Total interest-bearing
liabilities 63,028
Noninterest-bearing DDa 10,318
Total deposits and short-term
debt 73,346
Net interest income 3,628
Interest rate spread
Net interest rate margin
Net interest margin 4.8588
-62-
<PAGE>
Allowance and Provision for Loan Losses; Non-Performing Loans.
The following tables provide analyses of the Company's
allowance for loan losses, including allocations of the allowance among
types of loans, as of the dates indicated:
-63-
<PAGE>
CHARGEOFF/RECOVERY SUMMARY
<TABLE>
<CAPTION>
SEPT. 30, DECEMBER 31,
--------------- -----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
BEGINNING BALANCE 850 764 764 639 526 501 500
LOANS CHARGED OFF
COMMERCIAL
CM RE 0 11 10 8 0 41 2
CML OTHER 11 0 7 0 0 19 25
ARGICULTURE
AG RE 0 0 0 0 0 40 8
AG OTHER 0 0 0 0 1 0
CONSUMER
PERSONAL 74 23 22 12 13 25 25
MASTERCARD 11 9 11 12 4 0 0
MORTGAGE 0 0 0 0 0 0 0
TOTAL CHARGE OFFS 96 43 50 32 18 125 60
RECOVERIES
COMMERCIAL
CM RE 0 0 0 2 5 7 10
CML OTHER 0 0 0 4 10 2 0
AGRICULTURE
AG RE 0 0 0 0 0 34 0
AG OTHER 12 0 1 0 0 0 0
CONSUMER
PERSONAL 4 1 2 8 6 0 6
MASTERCARD 0 0 1 1 0 0 0
MORTGAGE 0 0 0 0 0 0 0
TOTAL RECOVERIES 16 1 4 15 21 43 16
NET CHARGE OFF 80 42 46 17 -3 82 44
ADD'L PROVISIONS 108 101 136 142 110 107 45
BALANCE 878 823 854 764 639 526 501
RATIO OF NET C/O 0.1145% 0.0698% 0.737% 0.0331% -0.0074% 0.2736% 0.1694%
TO AVG LN
AVG LN $69,866 $60,170 $62,375 $51,382 $40,280 $29,970 $25,980
</TABLE>
-64-
<PAGE>
The First National Bank in Alamosa
Allocation of the Allowance for Loan Losses
September 30
------------
1997 1996
---- ----
COMMERCIAL
CML-RE 170 19.36% 169 20.53%
CML-OTHER 92 10.48% 110 13.37%
AGRICULTURAL
AG-RE 192 21.87% 100 12.15%
AG-OTHER 276 31.44% 201 24.42%
CONSUMER
PERSONAL 76 8.66% 109 13.24%
MASTERCARD 32 3.64% 34 4.13%
MORTGAGE 40 4.56% 40 4.86%
UNALLOCATED 0 0.00% 60 7.29%
TOTAL 878 823
<TABLE>
<CAPTION>
December 31
-----------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMMERCIAL 170 20.00% 174 22.77% 180 28.17% 0 0.00% 0 0.00%
CML-RE 110 12.94% 108 14.14% 61 9.55% 0 0.00% 0 0.00%
CML-OTHER
AGRICULTURAL 150 17.65% 92 12.04% 72 11.27% 0 0.00% 0 0.00%
AG-RE 225 26.47% 183 23.95% 158 24.73% 0 0.00% 0 0.00%
AG-OTHER
CONSUMER 106 12.47% 109 14.27% 113 17.68% 0 0.00% 0 0.00%
PERSONAL 45 5.29% 7 0.92% 18 2.82% 0 0.00% 0 0.00%
MASTERCARD 40 4.71% 20 2.62% 15 2.35% 0 0.00% 0 0.00%
MORTGAGE 4 0.47% 71 9.29% 22 3.44% 526 100.00% 501 100.00%
UNALLOCATED 850 764 639 526 501
TOTAL
</TABLE>
-65-
<PAGE>
COMPARISON OF THE RIGHTS OF SHAREHOLDERS
OF ZIONS AND THE COMPANY
General
Upon consummation of the Reorganization, shareholders of the Company, a
Colorado corporation, will become shareholders of Zions, a Utah corporation.
Thus, the Utah Revised Business Corporation Act and Zions' Articles of
Incorporation ("Articles") and Bylaws will govern the rights of the Company
shareholders who become Zions shareholders. In addition, since the Articles and
Bylaws of Zions and the Company are not the same, the Reorganization will result
in certain differences in the rights of the holders of Company Common Stock.
Following is a summary of certain significant differences.
General. Each holder of Company Common Stock is entitled to one vote
for each share held and for each fractional share held a corresponding
fractional vote on all matters submitted to the shareholders for a vote. Holders
of a majority of the voting power of the Company constitute a quorum for the
transaction of business. Each holder of Zions Common Stock is generally entitled
to one vote for each share held of record on all matters submitted to a
shareholder vote, and holders of a majority of the outstanding shares of Zions
Common Stock constitute a quorum for the transaction of business.
Cumulative Voting. Neither Company shareholders nor Zions shareholders
have cumulative voting rights in the election of directors.
Special Votes for Certain Transactions. The Articles of Zions contain
provisions requiring special shareholder votes to approve certain types of
transactions. In the absence of these provisions, either the transactions would
require approval by a majority of the shares voted at a meeting or no
shareholder vote would be required.
Zions' Articles require that certain "business transactions" between
Zions or a subsidiary and a "related person" be approved by the affirmative
votes of the holders of not less than 80 percent of the voting power of all
outstanding voting stock of Zions. A "related person" is generally defined by
Zions' Articles to mean a person, corporation, partnership, or group acting in
concert that beneficially owns 10 percent or more of the voting power of Zions'
outstanding voting stock.
The "business transactions" with a "related person" which are subject
to Zions' special vote requirements include (1) a merger or consolidation
involving Zions or a subsidiary of Zions with a related person; (2) the sale,
lease, exchange, transfer or other disposition of all or any substantial part of
the assets of either Zions or a subsidiary of Zions to, with or for the benefit
of a related person; (3) the issuance, sale, exchange or other disposition by
Zions or a subsidiary of Zions to a related person of securities of Zions or a
subsidiary of Zions having an aggregate fair market value of $5 million or more;
(4) any liquidation, spinoff, splitoff, splitup, or dissolution of Zions by or
on behalf of a related person; (5) any recapitalization or reclassification of
the securities of Zions or other transaction that would have the effect of
increasing the voting power of a related person or reducing the number of shares
of each class of voting securities outstanding; and (6) any agreement, contract,
or other arrangement providing for any of the transactions set forth above.
-66-
<PAGE>
Zions' special shareholder vote requirements for business transactions
with related persons do not apply to any transaction approved by a majority of
the continuing directors, or if various specified conditions are met. A
continuing director is any member of the Zions Board who is not a related person
or an interested shareholder or an affiliate or associate of a related person
and who (1) was a director on February 21, 1986 or (2) became a director
subsequent to that date and whose election or nomination for election by Zions'
shareholders was approved by a majority of the continuing directors then on the
Board.
The Company's Articles and Bylaws have no similar provision.
Shareholder Rights Plan
The Board of Directors of Zions in September 1996 adopted a Shareholder
Protection Rights Plan and declared a dividend of one Right on each outstanding
share of Zions Common Stock. The Rights Plan was not adopted in response to any
specific effort to acquire control of Zions. Rather, it was adopted to deter
abusive takeover tactics that can be used to deprive shareholders of the full
value of their investment.
Until it is announced that a person or group has acquired 10 percent or
more of Zions Common Stock (an "Acquiring Person") or commences a tender offer
that will result in such person or group owning 10 percent or more of Zions
Common Stock, the Rights will be evidenced by the Common Stock certificates,
will automatically trade with the Common Stock and will not be exercisable.
Thereafter, separate Rights certificates will be distributed and each Right will
entitle its holder to purchase Participating Preferred Stock having economic and
voting terms similar to those of Zions Common Stock for an exercise price of
$90.00.
Upon announcement that any person or group has become an Acquiring
Person, then 10 days thereafter (or such earlier or later date as the Board may
decide) (the "Flip-in Date") each Right (other than Rights beneficially owned by
any Acquiring Person or transferees thereof, which Rights become void) will
entitle its holder to purchase, for the exercise price, a number of shares of
Zions Common Stock or Participating Preferred Stock having a market value of
twice the exercise price.
Also, if after an Acquiring Person controls Zions' Board of Directors
Zions is involved in a merger or sells more than 50 percent of its assets or
earning power (or has entered an agreement to do any of the foregoing) and, in
the case of a merger, the Acquiring Person will receive different treatment than
all other shareholders or the person with whom the merger occurs is the
Acquiring Person or a person affiliated or associated with the Acquiring Person,
each Right will entitle its holder to purchase, for the exercise price, a number
of shares of common stock of the Acquiring Person having a market value of twice
the exercise price. If any person or group acquires between 10 percent and 50
percent of the Zions Common Stock, Zions' Board of Directors may, at its option,
exchange one share of Zions Common Stock for each Right.
The Rights may be redeemed by the Board of Directors for $0.01 per
Right prior to the Flip-in Date.
The Company has no shareholder rights plan.
-67-
<PAGE>
Board of Directors
Director Liability and Indemnification. Zions' Articles contain a
"director liability" provision. The provision generally shields a director from
monetary damages to Zions or its shareholders for a breach of fiduciary duty as
a director other than (i) a breach of a director's duty of loyalty, (ii) acts or
omissions not taken in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) authorizing the unlawful payment of dividends,
and (iv) transactions in which a director receives an improper benefit.
The Company's Articles contain a director liability provision. This
provision protects a director from personal liability to the Company and its
shareholders for damages for breach of fiduciary duty as a director. As with
Zions' Articles, there is no elimination or limitation of liability for any
breach of the director's duty of loyalty to the Company or its shareholders,
acts or omissions not in good faith, or which involve intentional misconduct, or
a knowing violation of law, or the payment of dividends in violation of law, or
any transaction from which a director derived an improper personal benefit.
The Company's Articles and Bylaws provide that the Company may
indemnify a director against the liability incurred in any proceeding if he
meets certain standards of conduct: that he conducted himself in good faith;
reasonably believed that his conduct was in the Company's best interests or at
least not opposed to the Company's best interests; and in the case of any
criminal proceeding, had no reasonable cause to believe his conduct was
unlawful. However, the Company may not indemnify a director in connection with a
proceeding in which the director was adjudged liable to the Company; or in
connection with any proceeding charging improper personal benefit to the
director in which he was adjudged liable on the basis that he improperly
received personal benefit. The Company is required to indemnify directors and
officers who were wholly successful, on the merits or otherwise, in defense of
any proceeding to which they were parties, against reasonable expenses incurred
in connection with the proceeding. A director or officer of the Company who is
or was a party to a proceeding may also apply for indemnification to the court
conducting the proceeding or another court of competent jurisdiction.
Classified Board. Zions' Articles divide the Board of Directors into
three classes, each consisting of one-third (or as near as may be) of the whole
number of directors. Utah law requires that each class contain as equal a number
of directors as possible. One class of directors is elected at each annual
meeting of shareholders, and each class serves for a term of three years.
The number of directors which constitute Zions' full Board of Directors
may be increased or decreased only by amendment of the Bylaws, which requires
the affirmative vote of two-thirds of the total number of directors constituting
the entire Board, or by the shareholders of Zions at a regular or special
meeting by the affirmative vote of two-thirds of the outstanding and issued
shares entitled by statute to vote. Except as otherwise required by law,
vacancies on Zions' Board of Directors, including vacancies resulting from an
increase in the size of the Board, may be filled by the affirmative vote of a
majority of the remaining directors even though less than a quorum of the Board
of Directors. Zions' directors elected by the Board to fill vacancies serve for
the full remainder of the term of the class to which they have been elected. Any
directorship filled by reason of an increase in the number of directors may be
-68-
<PAGE>
filled for a term of office continuing only until the next election of directors
by the shareholders.
The Company's Articles and Bylaws do not provide for a classified Board
of Directors. Instead, the Company's Articles and Bylaws provide for a Board of
Directors consisting of not less than three individuals, who are to be elected
by the shareholders annually. The current number of directors is five, which may
be changed at the annual meeting of shareholders. Any vacancy occurring in the
Company's Board may be filled by the affirmative vote of a majority of the
remaining directors though less than a quorum of the Board.
Removal of Directors. Zions' Articles provide that any director (or the
entire Board of Directors) may be removed from office by shareholder vote only
if such removal is approved by the holders of two-thirds of the issued and
outstanding shares then entitled to vote at an election of directors.
The Company's Articles and Bylaws do not expressly provide for the
power to remove directors. However, the Colorado Business Corporation Act
provides that the shareholders may remove one or more directors with or without
cause. A director may be removed by the shareholders only at a meeting called
for the purpose of removing such director, and the meeting notice shall state
that the purpose, or one of the purposes of the meeting, is the removal of the
director.
Special Shareholders' Meetings
Utah law provides that special meetings of a corporation's shareholders
may be called by the board of directors or such other persons authorized by the
bylaws to call a special meeting or by the holders of at least 10 percent of all
the votes entitled to be cast on any issue proposed to be considered at the
special meeting. Under Zions' Bylaws, special meetings may be called by the
president or by the Board of Directors.
The Company's Bylaws permit special meetings to be called by the Board
of Directors, the president, a vice president, or by the holders of shares
entitled to cast not less than 10 percent of the votes at such meeting. The
Company's Bylaws also permit special meetings to be called by the shareholders
for the purpose of filling a vacancy in the Board of Directors.
Amendment of Articles and Bylaws
Zions' Articles require the affirmative votes of the holders of
two-thirds of all outstanding voting stock of Zions to approve any amendment to
Zions' Articles, except that to repeal or amend the provisions in the Articles
regarding business transactions with related persons requires the affirmative
vote of 80% of the issued and outstanding stock entitled to vote. Zions' Bylaws
may be amended by an affirmative vote of two-thirds of the total number of
directors constituting the entire Board or by the affirmative vote of two-thirds
of the issued and outstanding shares entitled to vote.
The Company's Bylaws may be amended by the affirmative vote of a
majority of the Board of Directors at a meeting called for that purpose or by
consent.
-69-
<PAGE>
Dissenters' Rights
Zions is incorporated under the laws of Utah. Utah law provides for
dissenters' rights in a variety of transactions including: (i) any plan of
merger to which a corporation is a party (other than mergers or consolidations
not requiring a shareholder vote); (ii) certain sales, leases, exchanges or
other dispositions of all or substantially all of the assets of a corporation;
and (iii) certain share exchanges. However, shareholders of a Utah business
corporation are not entitled to dissenters' rights in any of the transactions
mentioned above if their stock is either listed on a national securities
exchange or on the National Market System of NASDAQ or held of record by 2,000
or more shareholders. The aforementioned provisions do not apply if the
shareholder will receive for his shares anything except (a) shares of the
corporation surviving the consummation of the plan of merger or share exchange,
(b) shares of a corporation whose shares are listed on a national securities
exchange or the National Market System of NASDAQ or held of record by not less
than 2,000 holders, or (c) cash in lieu of fractional shares. Zions Common Stock
currently is listed for trading in the National Market System of NASDAQ and has
more than 2,000 shareholders of record.
The Company is incorporated under Colorado law. Colorado law provides
for dissenters' rights to any shareholder of a Colorado corporation in the event
of any of the following corporate actions: (i) a merger to which the corporation
is a party if approval by the shareholders is required for the merger and the
shareholder is entitled to vote on the merger; (ii) a plan of exchange where the
corporation is a party as the corporation whose subject owner's interests will
be acquired, if the shareholder is entitled to vote on the plan of exchange; and
(iii) any corporate action taken pursuant to a vote of the shareholders where
the bylaws or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent.
Preemptive Rights
Holders of Zions Common Stock do not have the preemptive right to
purchase unissued or treasury shares of Zions Common Stock or any other
securities of Zions in the event of an issuance of Zions Common Stock or such
other securities.
Holders of Company Common Stock have the preemptive right to acquire
additional shares of Company Common Stock in proportion to the number of shares
owned at the time the increase is authorized by the shareholders, unless another
time is specified by a resolution of the shareholders.
Preferred Stock
Zions' Articles authorize Zions to issue up to 3,000,000 shares of
Zions preferred stock, no par value.
The authorized shares of preferred stock are issuable in one or more
series on the terms set by the resolution or resolutions of the Board of
Directors of Zions providing for the issuance thereof. Each series of preferred
stock would have such dividend rate, which might or might not be cumulative,
such voting rights, which might be general or special, and such liquidation
preferences, redemption and sinking funds provisions, conversion rights or other
rights and preferences, if any, as the Board of Directors may determine. Except
for such
-70-
<PAGE>
rights as may be granted to the holders of any series of preferred stock in the
resolution establishing such series or as required by law, all of the voting and
other rights of the shareholders of Zions belong exclusively to the holders of
common stock.
Zions has reserved 160,000 shares of Participating Preferred Stock for
issuance upon exercise of the Rights under Zions' Shareholder Rights Plan.
The Company's Articles do not authorize the Company to issue any shares
of preferred stock.
Dividend Rights
Utah law generally allows a corporation, subject to restrictions in its
articles of incorporation, to declare and pay dividends in cash or property, but
only if the corporation is solvent and payment would not render the corporation
insolvent. Zions' Articles place no further restrictions on distributions. Thus,
the holders of Zions Common Stock are entitled to dividends when, as and if
declared by the Board of Directors out of funds legally available therefor.
However, if Zions preferred stock is issued, the Board of Directors of Zions may
grant preferential dividend rights to the holders of such stock which would
prohibit payment of dividends on Zions Common Stock unless and until specified
dividends on the preferred stock had been paid.
Colorado law generally allows a corporation to make distributions to
its shareholders in cash, property or its own shares. However, no distribution
may be made if, after giving it effect: (i) the corporation would not be able to
pay its debts as they become due in the usual course of business; or (ii) except
as otherwise specifically allowed by the corporation's articles of
incorporation, the corporation's total assets would be less than the sum of its
total liabilities plus the amount that would be needed, if the corporation were
to be dissolved at the time of distribution, to satisfy the preferential rights
upon dissolution of shareholders whose preferential rights are superior to those
receiving the distribution. The Company's Articles do not contain any other
specific allowance. Thus, holders of Company Common Stock are entitled to
distributions when, as and if declared by the Board of Directors out of funds
legally available therefor.
Liquidation Rights
Upon liquidation, dissolution or winding up of Zions, whether voluntary
or involuntary, the holders of Zions Common Stock are entitled to share ratably
in the assets of the corporation available for distribution after all
liabilities of the corporation have been satisfied. However, if preferred stock
is issued by Zions, the Board of Directors may grant preferential liquidation
rights to the holders of such stock which would entitle them to be paid out of
the assets of Zions available for distribution before any distribution is made
to the holders of Zions Common Stock.
Upon liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, the holders of Company Common Stock are entitled to
share ratably in the assets of the corporation available for distribution after
all liabilities of the corporation have been satisfied.
-71-
<PAGE>
Miscellaneous
There are no sinking fund provisions, conversion rights, or redemption
provisions applicable to Zions Common Stock. Company Common Stock shall be
redeemed upon payment of 130% of the book value of each share to be redeemed,
plus any accrued and unpaid dividends. Holders of fully paid shares of Zions
Common Stock and Company Common Stock are not subject to any liability for
further calls or assessments.
LEGAL OPINIONS
An opinion with respect to certain legal matters in connection with the
Reorganization will be rendered by Duane, Morris & Heckscher LLP, Washington,
D.C., as counsel for Zions.
EXPERTS
The consolidated financial statements of Zions as of December 31, 1996
and 1995, and for each of the years in the three-year period ended December 31,
1996, incorporated by reference herein have been incorporated by reference
herein in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of such firm as experts in auditing and accounting.
OTHER MATTERS
The management of the Company does not know of any other matters
intended to be presented for shareholder action at the Special Meeting. If any
other matter does properly come before the Special Meeting and is put to a
shareholder vote, the proxies solicited hereby will be voted in accordance with
the judgment of the proxyholders named thereon.
-72-
<PAGE>
SKY VALLEY FINANCIAL STATEMENTS
The following financial statements have not been audited; to audit such
statements would be impractical.
SKY VALLEY BANK CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
September 30, September 30, December 31, December 31,
1997 1996 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
ASSETS
Cash and Due from Banks $ 5,731,326 $ 7,274,520 $ 6,440,729 $ 6,644,081
Federal Funds Sold 3,830,000 2,800,000 3,200,000 8,200,000
Investments
Available for Sale 33,389,928 18,171,028 38,422,087 17,343,618
Held Until Maturity 500,305 21,257,891 17,538,488
Loans and Other Receivables 75,228,424 66,237,552 67,366,325 60,839,651
Less: Allowance for Loan Losses (878,153) (823,017) (845,493) (763,791)
-------- -------- -------- --------
Net Loans 74,350,271 65,414,535 66,520,832 60,075,860
Premises and Equipment 1,995,028 2,098,058 2,055,666 2,209,135
Accrued Interest Receivable 2,084,883 1,875,596 1,924,200 1,919,863
Other Real Estate Owned, Net 700 17,100
Deferred Tax Asset 423,916 402,003 409,234 240,316
Other Assets 565,904 887,377 1,463,901 674,169
------- ------- --------- -------
TOTAL ASSETS $ 122,871,561 $ 120,181,008 $ 120,437,349 $ 114,862,630
============= ============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand 11,814,365 13,688,636 $ 12,278,793 $ 13,862,406
NOW and Super NOW 27,890,289 30,869,500 29,794,170 29,465,678
Savings 23,343,386 20,821,625 7,263,235 6,823,634
Time 45,560,898 41,581,227 57,129,495 52,150,677
---------- ---------- ---------- ----------
Total Deposits 108,608,938 106,960,988 106,465,693 102,302,395
Accrued Interest Payable 267,509 308,038 314,425 207,584
Taxes Payable 14,125 19,447 43,433 0
Note Payable 573,224 600,644 593,836 620,143
Advances from Federal Home Loan Bank 4,947,509 5,050,000 5,500,000 4,850,000
Dividends Payable 88,000 92,400 82,500 77,000
Deferred Taxes Payable 105,969 114,434 105,969 192,306
Other Liabilities 184,137 227,206 168,210 318,771
------- ------- ------- -------
TOTAL LIABILITIES 114,789,411 113,373,157 113,274,066 6,265,804
Stockholders' Equity:
Common Stock, $.01 par value. 10,000
shares authorized, 2,200 shares issued
and outstanding 22 22 22 22
Surplus 4,436,716 4,439,716 4,436,716 4,436,716
Unrealized Loss on Securities
Available for Sale (373,280) (340,246) (350,316) (83,641)
Undivided Profits 4,018,692 2,708,359 3,076,861 1,941,334
--------- --------- --------- ---------
TOTAL STOCKHOLDERS' EQUITY 8,082,150 6,807,851 7,163,283 6,294,431
--------- --------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 122,871,561 $ 120,181,008 $ 120,437,349 $ 114,862,630
============= ============= ============= =============
</TABLE>
See accountants' report.
-1-
<PAGE>
SKY VALLEY BANK CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30, December 31, December 31,
1997 1996 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest Income:
Interest and Fees on Loans $5,329,274 $4,703,652 $6,385,968 $5,398,698
Tax-exempt 12,878 7,323 14,354 1,941
Interest on Investment Securities:
Taxable 1,597,694 1,612,723 2,178,137 1,925,077
Tax-exempt 41,686 57,097 64,024 104,073
Interest on Federal Funds Sold 193,581 293,248 346,656 223,181
------- ------- ------- -------
Total Interest Income 7,175,113 6,674,043 8,989,139 7,652,970
--------- --------- --------- ---------
Interest Expense:
Interest on Deposits 3,118,748 2,840,991 3,837,316 3,229,930
Interest on Federal Funds Purchased - - 61 506
Interest on Federal Home Loan Bank Advances 247,527 240,108 320,382 314,301
------- ------- ------- -------
Total Interest Expense 3,366,275 3,081,099 4,157,759 3,544,737
--------- --------- --------- ---------
Net Interest Income Before Provision for
Loan Losses 3,808,838 3,592,944 4,831,380 4,108,233
--------- --------- --------- ---------
Provision for Losses:
Loans (108,000) (101,491) (131,491) (141,695)
--------- --------- --------- ---------
Net Interest Income After Provision for
Loan Losses 3,700,838 3,491,453 4,699,889 3,966,538
--------- --------- --------- ---------
Other Income:
Service Fees 345,591 364,280 494,066 472,533
Net Investment Securities (Losses) Gains 31,489 (350) 14,619 46,159
Other 198,995 188,846 230,141 299,838
------- ------- ------- -------
Total Other Income 576,075 552,776 738,826 818,530
------- ------- ------- -------
Other Expenses:
Salaries 825,850 790,313 1,193,450 1,033,306
Employee Benefits 215,130 194,167 256,349 262,548
Occupancy Expenses 227,724 230,826 301,427 286,590
Depreciation Expense 167,379 184,839 231,662 267,324
Data Processing Fees and Supplies 108,552 107,723 125,143 146,254
FDIC Insurance 27,564 8,572 16,249 88,260
Advertising 75,201 74,538 99,606 86,573
Other 704,603 734,718 1,014,542 986,918
------- ------- --------- -------
Total Other Expenses 2,352,003 2,325,696 3,238,428 3,157,773
--------- --------- --------- ---------
NET INCOME BEFORE INCOME TAXES 1,924,910 1,718,533 2,200,287 1,627,295
Income Taxes 719,079 677,008 734,760 565,522
------- ------- ------- -------
NET INCOME $1,205,831 $1,041,525 $1,465,527 $1,061,773
========== ========== ========== ==========
</TABLE>
See accountants' report.
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<PAGE>
SKY VALLEY BANK CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited)
<TABLE>
<CAPTION>
COMMON STOCK
--------------- UNDIVIDED UNREALIZED
SHARES AMOUNT SURPLUS PROFITS GAIN/LOSS TOTAL
------ ------ ------- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Balances,
December 31, 1994 2,200 $ 22 $4,436,716 $1,187,561 $(352,603) $5,271,696
Net Earnings - - - 1,061,773 - 1,061,773
Dividends - - - (308,000) - (308,000)
Net unrealized loss on
Securities Available
for Sale - - - - 268,962 268,962
----- ------- --------- ---------- -------- ---------
Balances,
December 31, 1995 2,200 22 4,436,716 1,941,334 (83,641) 6,294,431
Net Earnings - - - 1,465,527 - 1,465,527
Dividends - - - (330,000) - (330,000)
Change in net
unrealized loss on
Securities Available
for Sale - - - - (266,675) (266,675)
----- -------- --------- ---------- -------- ---------
Balances,
December 31, 1996 2,200 22 4,436,716 3,076,861 (350,316) 7,163,283
Net Earnings for nine
months ended
September 30, 1997 - - - 1,205,831 - 1,205,831
Dividends - - - (264,000) - (264,000)
Change in net
unrealized loss on
Securities Available
for Sale - - - - ( 22,964) ( 22,964)
----- -------- --------- ---------- -------- ---------
Balances,
September 30, 1997 2,200 $ 22 $4,436,716 $4,018,692 $(373,280) $8.082.150
===== ========= ========== ========== ========= ==========
</TABLE>
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<PAGE>
APPENDIX A
[AN OPINION SUBSTANTIALLY IN THE FORM BELOW WILL BE DELIVERED
AT CLOSING OF THE TRANSACTION DESCRIBED HEREIN, ASSUMING NO
MATERIAL CHANGE IN THE FACTS OR LAW UPON WHICH SUCH OPINION IS
BASED]
DUANE, MORRIS & HECKSCHER LLP
1667 K Street, N.W., Suite 700
Washington, D.C. 20006-1608
(202) 776-7800
[DATE]
Board of Directors
Zions Bancorporation
One South Main Street, Suite 1380
Salt Lake City, Utah 84111
Board of Directors
Sky Valley Bank Corp.
720 Main Street
Alamosa, Colorado 81101
Re: Proposed Merger of Sky Valley Bank Corp. with and into
Val Cor Bancorporation, Inc.
Ladies and Gentlemen:
We have acted as counsel to Zions Bancorporation, a Utah corporation
("Zions Bancorp") in connection with the Agreement and Plan of Reorganization
dated as of July 25, 1997 as amended on September 8, 1997 (the "Agreement"),
among Sky Valley Bank Corp., a Colorado corporation (the "Company"), The First
National Bank in Alamosa, a national banking association organized under the
laws of the United States (the "Bank"), Ralph H. Outcalt, an adult resident of
the State of Colorado ("Outcalt"), Donald J. Wuckert, an adult resident of the
State of Colorado ("Wuckert"), Zions Bancorp, Val Cor Bancorporation, Inc., a
Colorado corporation ("Val Cor"), and Valley National Bank of Cortez, a national
banking association organized under the laws of the United States ("Valley"), a
related Plan of Merger between the Company and Val Cor, and a related Plan of
Merger between the Bank and Valley (collectively, the "Plan of
Reorganizations"), whereby the Company will be merged with and into Val Cor,
with Val Cor being the surviving corporation (the "Holding Company Merger") and
Valley will be merged with and into the Bank, with the Bank being the surviving
entity (the "Bank Merger"; collectively the "Reorganizations"). Zions Bancorp
owns all the issued and outstanding capital stock of Val Cor. Val Cor owns 99.7
percent of the issued and outstanding capital stock of Valley; unrelated parties
own the remaining .3 percent. The Company owns all of the issued and outstanding
capital stock of the Bank.
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<PAGE>
The Board of Directors
___________, 1997
Page 2
In accordance with section 3.5 of the Agreement, this opinion addresses
certain federal income tax consequences of the Reorganizations.
Except as otherwise defined herein, all terms defined in the Agreement
shall have the same meaning when used in this opinion.
The elements of the Reorganizations are as follows:
(1) Pursuant to the Plan of Reorganizations, the Agreement and the
provisions of section 7-111-101 et seq. of the Colorado Business Corporation
Act, the Company will merge with and into Val Cor, with Val Cor being the
surviving corporation and, upon the Effective Date, each holder of shares of
outstanding Company Common Stock will receive, in exchange for each share of
Company Common Stock, shares of Zions Bancorp Stock, that number of shares of
Zions Bancorp Stock calculated by dividing 572,836 by the total number of shares
of Company Common Stock issued and outstanding as of the Effective Date. Zions
Bancorp will not issue fractional shares of its stock. In lieu of fractional
shares of Zions Bancorp Stock, if any, each shareholder of the Company who is
entitled to a fractional share of Zions Bancorp Stock will receive an amount of
cash equal to the product of such fraction multiplied by $33.50. Such fractional
share interest will not include the right to vote or to receive dividends or any
interest thereon.
(2) Pursuant to the Plan of Reorganizations, the Agreement and the
provisions of section 215a of the National Bank Act (12 U.S.C. ss. 215a), Valley
will merge with and into the Bank, with the Bank being the surviving corporation
and, upon the Effective Date, each holder of shares of outstanding Company
Common Stock other than Val Cor will receive, in exchange for each share of
Valley, $47.25 in cash.
*******
In rendering our opinion, we have examined and relied upon but
have not independently verified the accuracy and completeness of the facts,
information, covenants and representations contained in the Agreement, the Plan
of Reorganizations and such other documents as we have deemed necessary or
appropriate as a basis for our opinion. In addition, we have relied upon certain
representation letters furnished to us by Zions Bancorp, Val Cor, Valley and the
Company. A copy of these letters is attached. Where such statements and
representations are made to the best knowledge and belief of the person making
such statement or representation, we have assumed the facts to be as so stated
and represented. We have also assumed that the Reorganizations will be
consummated in accordance with the Agreement and the Registration Statement,
including the Proxy Statement/Prospectus, as filed with the Securities and
Exchange Commission on Form S-4. Our opinion is conditioned on the initial and
continuing accuracy of such facts, information, covenants, representations,
statements and assumptions. In addition, we have assumed the authenticity of all
documents submitted to us as originals, the genuineness of all signatures, the
legal capacity of natural persons, and the conformity to the originals of all
documents submitted to us as copies.
-2-
<PAGE>
The Board of Directors
___________, 1997
Page 3
In rendering our opinion, we have considered the applicable
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury Regulations promulgated thereunder, pertinent judicial authorities, and
interpretive rulings as we have considered relevant. Statutes, regulations,
judicial decisions and administrative interpretations are subject to change at
any time and, in some circumstances, with retroactive effect. A material change
in the authorities upon which our opinion is based could affect our conclusions.
*******
Based solely upon the foregoing, we are of the opinion that
under current law for federal income tax purposes:
(i) The Holding Company Merger will qualify as a "reorganization" under
Section 368(a)(1) of the Code. Zions Bancorp, Val Cor and the Company will each
be a "party to the reorganization" within the meaning of Section 368(b) of the
Code;
(ii) The Bank Merger will qualify as a "reorganization" under Section
368(a)(1) of the Code. Valley and the Bank will each be a "party to the
reorganization" within the meaning of Section 368(b) of the Code;
(iii) The Company will recognize no gain or loss upon the transfer of
substantially all of its assets to Val Cor in exchange for Zions Bancorp Stock
and Val Cor's assumption of the liabilities of the Company (sections 361(b) and
357(a));
(iv) No gain or loss will be recognized by either Zions or Val Cor upon
the acquisition by Val Cor of substantially all of the assets of the Company in
exchange for Zions Bancorp Stock, and the assumption of the liabilities of the
Company (Reg. Sec. 1.1032-2(b));
(v) The basis of the Company's assets in the hands of Val Cor will be
the same as the basis of those assets in the hands of the Company immediately
prior to the Holding Company Merger (section 362(b));
(vi) The holding period of the Company's assets received by Val Cor
will include the period during which such assets were held by the Company
immediately prior to the Holding Company Merger (section 1223(2));
(vii) No gain or loss will be recognized by a shareholder of the
Company upon the receipt of Zions Bancorp Stock solely in exchange for his or
her Company Common Stock (section 354(a)(1));
(viii) The basis of the Zions Bancorp Stock received by a shareholder
of the Company pursuant to the Holding Company Merger (including any fractional
share interest to which that shareholder may be entitled) will be the same as
the basis of the Company Common Stock exchanged therefor (section 358(a)(1));
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<PAGE>
The Board of Directors
___________, 1997
Page 4
(ix) The holding period of the Zions Bancorp Stock received by a
shareholder of the Company pursuant to the Holding Company Merger (including any
fractional share interest to which that shareholder may be entitled) will
include the holding period of the Company Common Stock exchanged therefor,
provided the Company Common Stock is held as a capital asset by the shareholder
on the Effective Date (section 1223(1));
(x) A shareholder of the Company who receives cash in lieu of a
fractional share of Zions Bancorp Stock will recognize gain or loss equal to the
difference between the cash received and the shareholder's basis in that
fractional share, and that gain or loss will be capital gain or loss if the
fractional share would have been a capital asset in the hands of the shareholder
(Rev. Rul. 66-365, 1966-2 C.B. 116; Rev. Proc. 77-41, 1977-2 C.B. 574); and
(xi) Cash received by a shareholder of the Company who has perfected
dissenters' rights under the provisions of sections 7-113-101 et seq. of the
Colorado Business Corporation Act as to his or her Company Common Stock will be
treated as a distribution in redemption of such shares, subject to the
provisions and limitations of Section 302 of the Code.
*******
Except as set forth above, we express no opinion as to the
federal, state, local or foreign tax consequences of the Holding Company Merger
or of any transactions related thereto. This opinion is solely for your benefit
and is not to be used, quoted, circulated or otherwise referred to without our
express written permission.
Very truly yours,
-4-
<PAGE>
APPENDIX B
COLORADO BUSINESS CORPORATION ACT
Rights of Dissenting Owners
7-113-201 NOTICE OF DISSENTERS' RIGHTS.--1. If a proposed corporate
action creating dissenters' rights under section 7-113-102 is submitted to a
vote at a shareholders' meeting, the notice of the meeting shall be given to all
shareholders, whether or not entitled to vote. The notice shall state that
shareholders are or may be entitled to assert dissenters' rights under this
article and shall be accompanied by a copy of this article and the materials, if
any, that, under articles 101 to 117 of this title, are required to be given to
shareholders entitled to vote on the proposed action at the meeting. Failure to
give notice as provided by this subsection (1) shall not affect any action taken
at the shareholders' meeting for which the notice was to have been given, but
any shareholder who was entitled to dissent but who was not given such notice
shall not be precluded from demanding payment for the shareholder's shares under
this article by reason of the shareholder's failure to comply with the
provisions of section 7-113-202(1).
2. If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104, any written or oral solicitation of a shareholder to execute
a writing consenting to such action contemplated in section 7-107-104 shall be
accompanied or preceded by a written notice stating that shareholders are or may
be entitled to assert dissenters' rights under this article, by a copy of this
article, and by the materials, if any, that, under articles 101 to 117 of this
title, would have been required to be given to shareholders entitled to vote on
the proposed action if the proposed action were submitted to a vote at a
shareholders' meeting. Failure to give notice as provided by this subsection (2)
shall not affect any action taken pursuant to section 7-107-104 for which the
notice was to have been given, but any shareholder who was entitled to dissent
but who was not given such notice shall not be precluded from demanding payment
for the shareholder's shares under this article by reason of the shareholder's
failure to comply with the provisions of section 7-113-202(2).
7-113-202 NOTICE OF INTENT TO DEMAND PAYMENT.--1. If a proposed
corporate action creating dissenters' rights under section 7-113-102 is
submitted to a vote at a shareholders' meeting and if notice of dissenters'
rights has been given to such shareholder in connection with the action pursuant
to section 7-113-201(1), a shareholder who wishes to assert dissenters' rights
shall:
(a) Cause the corporation to receive, before the vote is taken, written
notice of the shareholder's intention to demand payment for the shareholder's
shares if the proposed corporate action is effectuated; and
(b) Not vote the shares in favor of the proposed corporate action.
2. If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104 and if notice of dissenters' rights has been given to such
shareholder in connection with the action pursuant to section 7-113-201(2) a
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<PAGE>
shareholder who wishes to assert dissenters' rights shall not execute a writing
consenting to the proposed corporate action.
3. A shareholder who does not satisfy the requirements of subsection
(1) or (2) of this section is not entitled to demand payment for the
shareholder's shares under this article.
7-113-203 DISSENTERS' NOTICE.--1. If a proposed corporate action
creating dissenters' rights under section 7-113-102 is authorized, the
corporation shall give a written dissenters' notice to all shareholders who are
entitled to demand payment for their shares under this article.
2. The dissenters' notice required by subsection (1) of this section
shall be given no later than ten days after the effective date of the corporate
action creating dissenters' rights under section 7-113-102 and shall:
(a) State that the corporate action was authorized and state the
effective date or proposed effective date of the corporate action;
(b) State an address at which the corporation will receive payment
demands and the address of a place where certificates for certificated shares
must be deposited;
(c) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(d) Supply a form for demanding payment, which form shall request a
dissenter to state an address to which payment is to be made;
(e) Set the date by which the corporation must receive the payment
demand and certificates for certificated shares, which date shall not be less
than thirty days after the date the notice required by subsection (1) of this
section is given;
(f) State the requirement contemplated in section 7-113-103(3), if such
requirement is imposed; and
(g) Be accompanied by a copy of this article.
7-113-204 PROCEDURE TO DEMAND PAYMENT.--1. A shareholder who is given a
dissenters' notice pursuant to section 7-113-203 and who wishes to assert
dissenters' rights shall, in accordance with the terms of the dissenters'
notice:
(a) Cause the corporation to receive a payment demand, which may be the
payment demand form contemplated in section 7-113-203(2)(d), duly completed, or
may be stated in another writing; and
(b) Deposit the shareholder's certificates for certificated shares.
2. A shareholder who demands payment in accordance with subsection (1)
of this section retains all rights of a shareholder, except the right to
transfer the shares, until the effective date of the proposed corporate action
giving rise to the shareholder's exercise of dissenters' rights and has only the
right to receive payment for the shares after the effective date of such
corporate action.
-2-
<PAGE>
3. Except as provided in section 7-113-207 or 7-113-209(1)(b), the
demand for payment and deposit of certificates are irrevocable.
4. A shareholder who does not demand payment and deposit the
shareholder's share certificates as required by the date or dates set in the
dissenters' notice is not entitled to payment for the shares under this article.
7-113-205 UNCERTIFICATED SHARES.--1. Upon receipt of a demand for
payment under section 7-113-204 from a shareholder holding uncertificated
shares, and in lieu of the deposit of certificates representing the shares, the
corporation may restrict the transfer thereof.
2. In all other respects, the provisions of section 7-113-204 shall be
applicable to shareholders who own uncertificated shares.
7-113-206 PAYMENT.--1. Except as provided in section 7-113-208, upon
the effective date of the corporate action creating dissenters' rights under
section 7-113-102 or upon receipt of a payment demand pursuant to section
7-113-204, whichever is later, the corporation shall pay each dissenter who
complied with section 7-113-204, at the address stated in the payment demand, or
if no such address is stated in the payment demand, at the address shown on the
corporation's current record of shareholders for the record shareholder holding
the dissenter's shares, the amount the corporation estimates to be the fair
value of the dissenter's shares, plus accrued interest.
2. The payment made pursuant to subsection (1) of this section shall be
accompanied by:
(a) The corporation's balance sheet as of the end of its most recent
fiscal year or, if that is not available, the corporation's balance sheet as of
the end of a fiscal year ending not more than sixteen months before the date of
payment, an income statement for that year, and, if the corporation customarily
provides such statements to shareholders, a statement of changes in
shareholders' equity for that year and a statement of cash flow for that year,
which balance sheet and statements shall have been audited if the corporation
customarily provides audited financial statements to shareholders, as well as
the latest available financial statements, if any, for the interim or full-year
period, which financial statements need not be audited;
(b) A statement of the corporation's estimate of the fair value of the
shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under
section 7-113-209; and
(e) A copy of this article.
7-113-207 FAILURE TO TAKE ACTION.--1. If the effective date of the
corporate action creating dissenters' rights under section 7-113-102 does not
occur within sixty days after the date set by the corporation by which the
corporation must receive the payment demand as provided in section 7-113-203,
the
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<PAGE>
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
2. If the effective date of the corporate action creating dissenters'
rights under section 7-113-102 occurs more than sixty days after the date set by
the corporation by which the corporation must receive the payment demand as
provided in section 7-113-203, then the corporation shall send a new dissenters'
notice, as provided in section 7-113-203, and the provisions of sections 7-113-
204 to 7-113-209 shall again be applicable.
7-113-208 SPECIAL PROVISIONS RELATING TO SHARES ACQUIRED AFTER
ANNOUNCEMENT OF PROPOSED CORPORATE ACTION.--1. The corporation may, in or with
the dissenters' notice given pursuant to section 7-113-203, state the date of
the first announcement to news media or to shareholders of the terms of the
proposed corporate action creating dissenters' rights under section 7-113-102
and state that the dissenter shall certify in writing, in or with the
dissenter's payment demand under section 7-113-204, whether or not the dissenter
(or the person on whose behalf dissenters' rights are asserted) acquired
beneficial ownership of the shares before that date. With respect to any
dissenter who does not so certify in writing, in or with the payment demand,
that the dissenter or the person on whose behalf the dissenter asserts
dissenters' rights acquired beneficial ownership of the shares before such date,
the corporation may, in lieu of making the payment provided in section
7-113-206, offer to make such payment if the dissenter agrees to accept it in
full satisfaction of the demand.
2. An offer to make payment under subsection (1) of this section shall
include or be accompanied by the information required by section 7-113-206(2).
7-113-209 PROCEDURE IF DISSENTER IS DISSATISFIED WITH PAYMENT OR
OFFER.--1. A dissenter may give notice to the corporation in writing of the
dissenter's estimate of the fair value of the dissenter's shares and of the
amount of interest due and may demand payment of such estimate, less any payment
made under section 7-113-206, or reject the corporation's offer under section
7-113-208 and demand payment of the fair value of the shares and interest due,
if:
(a) The dissenter believes that the amount paid under section 7-113-206
or offered under section 7-113-208 is less than the fair value of the shares or
that the interest due was incorrectly calculated;
(b) The corporation fails to make payment under section 7-113-206
within sixty days after the date set by the corporation by which the corporation
must receive the payment demand; or
(c) The corporation does not return the deposited certificates or
release the transfer restrictions imposed on uncertificated shares as required
by section 7-113-207(1).
2. A dissenter waives the right to demand payment under this section
unless the dissenter causes the corporation to receive the notice required by
subsection (1) of this section within thirty days after the corporation made or
offered payment for the dissenter's shares.
-4-
<PAGE>
7-113-301 COURT ACTION.--1. If a demand for payment under section
7-113-209 remains unresolved, the corporation may, within sixty days after
receiving the payment demand, commence a proceeding and petition the court to
determine the fair value of the shares and accrued interest. If the corporation
does not commence the proceeding within the sixty-day period, it shall pay to
each dissenter whose demand remains unresolved the amount demanded.
2. The corporation shall commence the proceeding described in
subsection (1) of this section in the district court of the county in this state
where the corporation's principal office is located or, if the corporation has
no principal office in this state, in the district court of the county in which
its registered office is located. If the corporation is a foreign corporation
without a registered office, it shall commence the proceeding in the county
where the registered office of the domestic corporation merged into, or whose
shares were acquired by, the foreign corporation was located.
3. The corporation shall make all dissenters, whether or not residents
of this state, whose demands remain unresolved parties to the proceeding
commenced under subsection (2) of this section as in an action against their
shares, and all parties shall be served with a copy of the petition. Service on
each dissenter shall be by registered or certified mail, to the address stated
in such dissenter's payment demand, or if no such address is stated in the
payment demand, at the address shown on the corporation's current record of
shareholders for the record shareholder holding the dissenter's shares, or as
provided by law.
4. The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend a
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to such order. The parties to
the proceeding are entitled to the same discovery rights as parties in other
civil proceedings.
5. Each dissenter made a party to the proceeding commenced under
subsection (2) of this section is entitled to judgment for the amount, if any,
by which the court finds the fair value of the dissenter's shares, plus
interest, exceeds the amount paid by the corporation, or for the fair value,
plus interest, of the dissenter's shares for which the corporation elected to
withhold payment under section 7-113-208.
7-113-302 COURT COSTS AND COUNSEL FEES.--1. The court in an appraisal
proceeding commenced under Section 7-113-301 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation; except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court finds
the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding
payment under section 7-113-209.
2. The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
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<PAGE>
(a) Against the corporation and in favor of any dissenters if the court
finds the corporation did not substantially comply with the requirements of part
2 of this article; or
(b) Against either the corporation or one of more dissenters, in favor
of any other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this article.
3. If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to said counsel reasonable fees to be paid out of the amounts
awarded to the dissenters who were benefitted.
-6-
Shareholders of Sky Valley Bank Corp.
_______________, 1997
Page 1
EXHIBIT 99.1
[Letterhead of Sky Valley]
December 19, 1997
Shareholders of Sky Valley Bank Corp.
Dear Shareholder:
A Special Meeting of the shareholders of Sky Valley Bank Corp. ("the
Company") has been called for 9:00 a.m., Colorado time, on January 22, 1998, at
the Company's offices at 720 Main Street, Alamosa, Colorado.
The purpose of the Special Meeting is to consider and vote upon an
Agreement and Plan of Reorganization dated July 25, 1997 and amended on
September 8, 1997 among the Company, The First National Bank in Alamosa (the
"Bank"), Ralph H. Outcalt ("Outcalt"), Donald J. Wuckert ("Wuckert"), Zions
Bancorporation ("Zions"), Val Cor Bancorporation, Inc. ("Val Cor"), a
wholly-owned subsidiary of Zions, and Valley National Bank of Cortez ("Valley"),
Val Cor's 99.7% owned subsidiary, which includes an Agreement to Merge between
the Company and Val Cor and an Agreement to Merge between the Bank and Valley
(collectively, the "Plan of Reorganization"). If the Plan of Reorganization is
approved, and all conditions are met, the Plan of Reorganization will result in
the merger of the Company into Val Cor, with Val Cor being the surviving
corporation and the merger of Valley into the Bank, with the Bank being the
surviving entity.
Upon consummation of the Plan of Reorganization, each holder of Company
Common Stock will receive shares of Zions Common Stock in exchange for each
share of Company Common Stock. The terms and conditions of the Plan of
Reorganization are summarized in the accompanying Proxy Statement/Prospectus.
See "Summary--Certain Definitions" in the Proxy Statement/Prospectus.
At the Effective Date (as defined), the shares of Company Common Stock
will be canceled and immediately converted into the right for holders of Company
Common Stock to receive, in exchange for each share of Company Common Stock,
that number of shares of Zions Common Stock calculated by dividing the Merger
Consideration (as defined) of 572,836 shares of Zions Common Stock by the total
number of shares of Company Common Stock issued and outstanding as of the
Effective Date of the Reorganization. Zions will not issue fractional shares of
its common stock in the Reorganization. In lieu of fractional shares of Zions
Common Stock, if any, each shareholder of the Company who is entitled to a
fractional share of Zions Common Stock will receive an amount of cash equal to
<PAGE>
Shareholders of Sky Valley Bank Corp.
December 19, 1997
Page 2
the product of such fraction times $33.50. Such fractional share interest will
not include the right to vote or to receive dividends or any interest thereon.
On December 15, 1997, the closing price of Zions Common Stock was
$44.25 per share. On that date the Company had 2,200 shares of its Common Stock
issued and outstanding. Assuming that the Reorganization had been consummated as
of December 15, 1997 and the closing price of Zions Common Stock had been $44.25
per share on that date, shareholders of the Company under such circumstances
would have received 260.38 shares of Zions Common Stock for each share of
Company Common Stock, or an equivalent value of $11,521.82 per share of Company
Common Stock.
The accompanying Proxy Statement/Prospectus details the terms of the
proposed Plan of Reorganization and provides information concerning the Company,
the Bank, Messrs. Outcalt and Wuckert, Zions, Val Cor and Valley as well as the
Plan of Reorganization. The Proxy Statement/Prospectus contains important
information necessary for the shareholders to make a decision about how to vote
at the Special Meeting. Please read it carefully.
The affirmative vote of a majority of the issued and outstanding shares
of Company Common Stock is required for approval of the Plan of Reorganization.
Failure to vote will have the same effect as a vote against the Reorganization.
Consequently, please mark, sign, date and return the enclosed proxy as soon as
possible.
Any holder of Company Common Stock may attend the Special Meeting and
vote in person if he or she desires, even if he or she has already submitted a
proxy.
Consummation of the Plan of Reorganization is subject to approval by
federal and state bank regulatory agencies which approvals have been received
and to certain other conditions, including the maintenance of the Company's
financial condition. If approved, the Plan of Reorganization will most likely be
consummated sometime in first quarter of 1998.
The Board of Directors has unanimously approved the Plan of
Reorganization and determined that the Reorganization is in the best interests
of the Company, its shareholders, employees and the community it serves. The
Board of Directors unanimously recommends that the shareholders vote to approve
the Plan of Reorganization.
Instructions describing the procedure to be followed to receive shares
of Zions Common Stock are included with the accompanying Proxy
Statement/Prospectus. If the Plan of Reorganization is approved by the
shareholders, on or shortly after the effective date of the Plan of
Reorganization, Zions will send you instructions describing the procedure to be
followed to exchange your Sky Valley Bank Corp. stock certificate for the
selected Reorganization consideration.
<PAGE>
Shareholders of Sky Valley Bank Corp.
December 19, 1997
Page 3
Please do not send your certificates to the Company prior to receiving these
instructions.
Sincerely,
Ralph H. Outcalt
Chairman of the Board
Exhibit 99.2
SKY VALLEY BANK CORP.
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
A Special Meeting of shareholders of Sky Valley Bank Corp. (the
"Company") will be held at 9:00 a.m., Colorado time, on January 22, 1998, at the
Company's offices at 720 Main Street, Alamosa, Colorado, to consider and vote
upon an Agreement and Plan of Reorganization dated as of July 25, 1997 as
amended on September 8, 1997, among the Company, The First National Bank in
Alamosa (the "Bank"), Ralph H. Outcalt, Donald J. Wuckert, Zions Bancorporation
("Zions"), Val Cor Bancorporation, Inc. ("Val Cor"), a wholly-owned subsidiary
of Zions, and Valley National Bank of Cortez ("Valley"), Val Cor's 99.7% owned
subsidiary, an Agreement to Merge between the Company and Val Cor and an
Agreement to Merge between Valley and the Bank (collectively, the "Plan of
Reorganization"). The Plan of Reorganization provides for the merger of the
Company into Val Cor, with Val Cor being the surviving corporation and for the
merger of Valley into the Bank with the Bank being the surviving entity (the
aforementioned mergers being referred to herein collectively as the
"Reorganization").
Upon the consummation of the Plan of Reorganization, each
holder of shares of Company Common Stock will receive shares of Zions Common
Stock in exchange for each share of Company Common Stock held as of the
effective date of the Plan of Reorganization. The terms and conditions of the
Reorganization are set forth in the accompanying Proxy Statement/Prospectus.
The Board of Directors has set December 18, 1997, as the record date
for determining shareholders entitled to notice of and to vote at the Special
Meeting.
Holders of Company Common Stock are entitled to assert
dissenters' rights under Colorado law.
By order of the Board of Directors
Dated: December 19, 1997.
Ralph H. Outcalt
Chairman of the Board
Please mark, sign and return the enclosed proxy in the envelope
provided.
Exhibit 99.3
EXHIBIT 99.3
PROXY
SPECIAL MEETING OF SHAREHOLDERS
OF SKY VALLEY BANK CORP.
January 22, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Ralph H. Outcalt and Donald J. Wuckert,
and either of them, as proxies of the undersigned to vote as designated below on
behalf of the undersigned as a holder of the common stock of Sky Valley Bank
Corp. ("Company Common Stock") and to vote as designated below all shares of
Company Common Stock that the undersigned held of record on December 18, 1997,
which the undersigned is entitled to vote, at the special meeting of
shareholders of Sky Valley Bank Corp. (the "Company") to be held January 22,
1998, or at any postponement or adjournment thereof, for the purpose of
considering and acting on the proposal to approve the Agreement and Plan of
Reorganization dated July 25, 1997 as amended on September 8, 1997, among the
Company, The First National Bank in Alamosa (the "Bank"), Ralph H. Outcalt,
Donald J. Wuckert, Zions Bancorporation ("Zions"), Val Cor Bancorporation, Inc.
("Val Cor"), a wholly-owned subsidiary of Zions, and Valley National Bank of
Cortez ("Valley"), Val Cor's 99.7% owned subsidiary, an Agreement to Merge
between the Company and Val Cor and an Agreement to Merge between Valley and the
Bank (collectively, the "Plan of Reorganization"), whereby the Company will
merge into Val Cor with Val Cor being the surviving corporation and Valley will
merge into the Bank with the Bank being the surviving entity (the aforementioned
mergers being referred to collectively as the "Reorganization"). Pursuant to the
Plan of Reorganization, the holders of shares of Company Common Stock will
receive shares of Zions Common Stock in exchange for each share of Company
Common Stock. The terms and conditions of the Plan of Reorganization are set
forth in the accompanying Proxy Statement/Prospectus. Each Proxy shall have full
power of substitution. Approval of the Plan of Reorganization requires the
affirmative vote of a majority of the outstanding shares of Company Common
Stock. The act by a majority of the Proxies or their substitutes present at the
meeting shall control; however, if only one proxy be present, that one shall
have all powers hereunder.
The Directors recommend a vote FOR Proposal 1.
1. Approval of the Plan of Reorganization and the Reorganization.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. The Proxies, in their discretion, are authorized to vote on such other
business as may properly come before the meeting.
-1-
<PAGE>
When properly completed, this proxy will be voted in the manner directed
herein by the undersigned. If no direction is given, this proxy will be voted
FOR the approval of the Plan of Reorganization and the Reorganization.
(Each person whose name is on the Company Common
Stock certificate should sign below in the same
manner in which such person's name appears. If
signing as a fiduciary, give title.)
----------------------------------
Signature
----------------------------------
Printed Name
Dated:
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Please date, sign,
and return promptly
