UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NUMBER 0-2610
ZIONS BANCORPORATION
(Exact name of Registrant as specified in its charter)
UTAH 87-0227400
- --------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
ONE SOUTH MAIN, SUITE 1380
SALT LAKE CITY, UTAH 84111
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 524-4787
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirement for
the past 90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, without par value,
outstanding at November 10, 1998 78,195,837 shares
1
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. Financial Statements (unaudited)
Consolidated Balance Sheets .............................. 3
Consolidated Statements of Income ........................ 4
Consolidated Statements of Cash Flows .................... 5
Consolidated Statements of Changes in Shareholders' Equity 7
Notes to Consolidated Financial Statements ............... 8
ITEM 2. Management's Discussion and Analysis ..................... 9
PART II. OTHER INFORMATION
-----------------
ITEM 5. Other Information ...................................... 26
ITEM 6. Exhibits and Reports on Form 8-K ....................... 26
SIGNATURES ............................................................... 26
- ----------
2
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31, September 30,
(In thousands, except share amounts) 1998 1997 1997
------------ ------------ ------------
ASSETS
<S> <C> <C> <C>
Cash and due from banks ................................................... $ 618,651 $ 710,171 $ 667,454
Money market investments:
Interest-bearing deposits ............................................ 25,572 62,001 59,667
Federal funds sold ................................................... 360,038 442,179 237,316
Security resell agreements ........................................... 880,499 349,338 1,150,551
Securities:
Held to maturity at cost (approximate market value $2,228,210, $2,220,179
and $2,194,506):
Taxable ......................................................... 1,951,668 1,967,858 1,950,732
Nontaxable ...................................................... 256,597 231,697 223,477
Available for sale at market:
Taxable ......................................................... 542,588 775,086 712,857
Nontaxable ...................................................... 11,451 32,187 35,107
Trading account securities at market ................................. 203,871 83,681 223,561
------------ ------------ ------------
2,966,175 3,090,509 3,145,734
Loans:
Loans held for sale at cost, which approximates market ............... 192,042 178,642 176,747
Loans, leases and other receivables .................................. 6,614,719 5,534,324 5,309,256
------------ ------------ ------------
6,806,761 5,712,966 5,486,003
Less:
Unearned income and fees, net of related costs ................... 43,554 44,064 43,614
Allowance for loan losses ........................................ 100,440 91,571 89,998
------------ ------------ ------------
6,662,767 5,577,331 5,352,391
Premises and equipment, at cost, less accumulated depreciation ............ 178,894 155,648 147,343
Goodwill and core deposit intangibles ..................................... 168,869 174,433 151,375
Other real estate owned ................................................... 4,047 5,738 7,464
Other assets .............................................................. 519,922 301,856 222,494
------------ ------------ ------------
Total assets .................................................... $ 12,385,434 $ 10,869,204 $ 11,141,789
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand ........................................... $ 2,306,876 $ 2,084,153 $ 1,873,494
Interest-bearing:
Savings and money market ........................................ 4,470,996 3,978,009 3,751,412
Time under $100,000 ............................................. 1,273,949 1,164,342 1,158,534
Time over $100,000 .............................................. 684,719 546,686 469,540
Foreign ......................................................... 195,482 183,044 134,840
------------ ------------ ------------
8,932,022 7,956,234 7,387,820
Securities sold, not yet purchased ........................................ 200,730 45,067 212,617
Federal funds purchased ................................................... 400,221 350,109 273,741
Security repurchase agreements ............................................ 1,045,462 1,042,156 1,803,727
Accrued liabilities ....................................................... 230,942 173,331 123,115
Commercial paper .......................................................... 74,630 -- --
Federal Home Loan Bank advances and other borrowings:
Less than one year ................................................... 26,154 68,933 143,438
Over one year ........................................................ 113,199 210,681 197,904
Long-term debt ............................................................ 384,806 280,641 280,709
------------ ------------ ------------
Total liabilities ............................................... 11,408,166 10,127,152 10,423,071
------------ ------------ ------------
Shareholders' equity:
Capital stock:
Preferred stock, without par value; authorized 3,000,000
shares; issued and outstanding, none ....................... -- -- --
Common stock, without par value; authorized, 200,000,000,
100,000,000, and 100,000,000 shares; issued and outstanding,
77,594,651, 71,366,159 and 70,358,916 shares ................ 318,792 190,039 195,678
Accumulated other comprehensive income (loss) ........................ (2,424) 1,902 (3,125)
Retained earnings .................................................... 660,900 550,111 526,165
------------ ------------ ------------
Total shareholders' equity ...................................... 977,268 742,052 718,718
------------ ------------ ------------
Total liabilities and shareholders' equity ...................... $ 12,385,434 $ 10,869,204 $ 11,141,789
============ ============ ============
</TABLE>
3
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------------------------
(In thousands, except per share amounts) 1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans ................................ $ 153,752 $ 123,640 $ 430,027 $ 343,762
Interest on loans held for sale ........................... 3,436 3,019 10,652 8,970
Lease financing ........................................... 2,990 3,281 9,201 10,001
Interest on money market investments ...................... 21,303 21,523 68,983 66,215
Interest on securities:
Held to maturity:
Taxable ......................................... 36,832 31,420 95,380 79,669
Nontaxable ...................................... 3,334 3,306 10,141 8,886
Available for sale:
Taxable ......................................... 6,806 12,136 24,603 35,648
Nontaxable ...................................... 184 546 689 1,720
Trading account ...................................... 5,880 4,396 18,126 12,531
--------- --------- --------- ---------
Total interest income ................................ 234,517 203,267 667,802 567,402
--------- --------- --------- ---------
Interest expense:
Interest on savings and money market deposits ............. 38,616 32,848 111,065 90,316
Interest on time deposits under $100,000 .................. 18,191 14,858 51,038 37,315
Interest on time deposits over $100,000 ................... 8,751 6,621 25,257 16,515
Interest on foreign deposits .............................. 2,196 1,616 5,970 4,647
Interest on securities sold, not yet purchased ............ 2,838 1,371 7,444 4,029
Interest on borrowed funds ................................ 33,176 38,475 97,983 115,898
--------- --------- --------- ---------
Total interest expense ............................... 103,768 95,789 298,757 268,720
--------- --------- --------- ---------
Net interest income .................................. 130,749 107,478 369,045 298,682
Provision for loan losses ...................................... 2,485 2,091 9,304 5,951
--------- --------- --------- ---------
Net interest income after provision for loan losses .. 128,264 105,387 359,741 292,731
--------- --------- --------- ---------
Noninterest income:
Service charges on deposit accounts ....................... 14,343 12,823 40,709 35,192
Other service charges, commissions and fees ............... 13,727 11,452 38,073 29,812
Trust income .............................................. 2,222 1,582 5,863 4,377
Investment securities gains (losses), net ................. (845) 188 2,181 631
Trading account income .................................... 1,450 2,033 5,582 4,201
Loan sales and servicing income ........................... 14,635 9,690 38,040 29,747
Other income .............................................. 4,075 2,225 11,717 6,431
--------- --------- --------- ---------
Total noninterest income ............................. 49,607 39,993 142,165 110,391
--------- --------- --------- ---------
Noninterest expense:
Salaries and employee benefits ............................ 60,320 48,494 167,616 133,064
Occupancy, net ............................................ 6,950 5,176 18,959 14,304
Furniture and equipment ................................... 9,281 7,404 25,692 19,080
Other real estate expense ................................. 218 116 170 341
Legal and professional services ........................... 2,890 2,385 9,882 6,075
Supplies .................................................. 2,580 2,431 7,778 6,586
Postage ................................................... 2,441 1,916 6,690 5,368
Advertising ............................................... 2,810 1,677 7,928 6,046
FDIC premiums ............................................. 297 172 975 593
Merger expense ............................................ 3,059 -- 17,063 --
Amortization of goodwill and core deposit intangibles ..... 2,391 1,991 7,168 4,307
Amortization of mortgage servicing assets ................. 1,287 611 3,708 1,380
Other expenses ............................................ 18,316 18,134 57,380 47,631
--------- --------- --------- ---------
Total noninterest expense ............................ 112,840 90,507 331,009 244,775
--------- --------- --------- ---------
Income before income taxes ..................................... 65,031 54,873 170,897 158,347
Income taxes ................................................... 22,292 19,169 56,178 55,870
--------- --------- --------- ---------
Net income ..................................................... $ 42,739 $ 35,704 $ 114,719 $ 102,477
========= ========= ========= =========
Weighted average common shares outstanding ..................... 77,758 70,914 74,989 70,261
Weighted average common and common-equivalent shares outstanding 79,007 73,687 76,238 72,941
Basic net income per common share .............................. $ 0.55 $ 0.50 $ 1.53 $ 1.44
Diluted net income per common share ............................ $ 0.54 $ 0.49 $ 1.50 $ 1.40
</TABLE>
4
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
(In thousands) 1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income ..................................................... $ 42,739 $ 35,704 $ 114,719 $ 102,477
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Provision for loan losses ................................. 2,485 2,091 9,304 5,951
Write-downs of other real estate owned .................... 128 185 285 346
Depreciation of premises and equipment .................... 6,934 5,248 19,216 14,787
Amortization of premium core deposits and other intangibles 3,678 2,602 10,876 5,687
Amortization of net premium/discount on
investment securities ................................ 1,635 1,441 4,761 4,148
Accretion of unearned income and fees, net of
related costs ........................................ 1,256 1,359 (913) 763
Proceeds from sales of trading account securities ......... 48,315,077 28,676,658 125,841,328 82,771,230
Increase in trading account securities .................... (48,117,034) (28,462,225) (125,961,518) (82,960,715)
Net gain on sales of investment securities ................ 845 (188) (2,181) (631)
Proceeds from loans held for sale ......................... 316,702 177,284 929,768 497,476
Increase in loans held for sale ........................... (305,837) (195,412) (933,270) (518,278)
Net gain on sales of loans, leases and other assets ....... (14,173) (6,539) (33,156) (21,056)
Net (gain) loss on sales of other real estate owned ....... 43 (99) (76) (169)
Change in accrued income taxes ............................ 5,940 (685) 13,665 2,617
Change in accrued interest receivable ..................... (20,755) (8,438) (14,619) (19,773)
Change in other assets .................................... (131,160) 9,478 (187,142) (20,492)
Change in accrued interest payable ........................ 1,893 2,815 2,930 5,551
Change in accrued liabilities ............................. (156,116) 20,598 38,042 17,299
------------- ------------- ------------- -------------
Net cash provided by (used in) operating
activities ...................................... (45,720) 261,877 (147,981) (112,782)
------------- ------------- ------------- -------------
Cash flows from investing activities:
Net decrease (increase) in money market investments ............ 32,872 (591,280) (356,745) (809,307)
Proceeds from maturities of investment securities
held to maturity .......................................... 519,474 290,478 1,917,014 500,853
Purchases of investment securities held to maturity ............ (478,167) (605,635) (1,644,229) (1,141,325)
Proceeds from sales of investment securities
available for sale ........................................ 100,100 256,581 240,070 471,209
Proceeds from maturities of investment securities
available for sale ........................................ 63,571 21,492 281,260 114,848
Purchases of investment securities available for sale .......... (114,702) (239,116) (441,121) (499,832)
Proceeds from sales of loans and leases ........................ 218,275 143,497 637,805 693,583
Net increase in loans and leases ............................... (550,223) (406,082) (1,293,971) (1,228,093)
Principal collections on leveraged leases ...................... 2,773 8,085 3,840 8,085
Proceeds from sales of premises and equipment .................. 1,969 1,013 4,354 1,717
Purchases of premises and equipment ............................ (14,024) (12,387) (36,605) (28,762)
Proceeds from sales of other real estate owned ................. 1,688 1,216 5,188 2,952
Proceeds from sales of mortgage servicing rights ............... 1,527 216 2,136 590
Purchases of mortgage servicing rights ......................... (874) (2,330) (2,337) (2,503)
Proceeds from sales of other assets ............................ 254 12 849 282
Cash paid for acquisitions, net of cash received ............... 6,565 (38,607) 33,560 (23,890)
------------- ------------- ------------- -------------
Net cash used in investing
activities ...................................... (208,922) (1,172,847) (648,932) (1,939,593)
------------- ------------- ------------- -------------
</TABLE>
5
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
(In thousands) 1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Cash flows from financing activities:
Net increase in deposits ....................................... 202,539 574,373 393,435 891,415
Net change in short-term funds borrowed ........................ 6,485 430,826 235,784 1,289,149
Proceeds from FHLB advances over one year ...................... -- 90,000 -- 130,000
Payments on FHLB advances over one year ........................ (6,718) (2,228) (104,338) (18,971)
Payments on leveraged leases ................................... (2,773) (8,085) (3,840) (8,085)
Proceeds from issuance of long-term debt ....................... -- -- 110,000 24,001
Payments on long-term debt ..................................... (1,437) (139) (4,444) (486)
Proceeds from issuance of common stock ......................... 680 1,667 134,661 3,347
Payments to redeem common stock ................................ (11,879) (41,103) (25,281) (96,125)
Dividends paid ................................................. (10,869) (7,343) (30,584) (22,475)
------------- ------------- ------------- -------------
Net cash provided by
financing activities ........................... 176,028 1,037,968 705,393 2,191,770
------------- ------------- ------------- -------------
Net increase (decrease) in cash and due from banks ............... (78,614) 126,998 (91,520) 139,395
Cash and due from banks at beginning of period ................... 697,265 540,456 710,171 528,059
------------- ------------- ------------- -------------
Cash and due from banks at end of period ......................... $ 618,651 $ 667,454 $ 618,651 $ 667,454
============= ============= ============= =============
</TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
(In thousands) 1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash paid for:
Interest .............................. $101,476 $ 93,447 $293,990 $262,334
Income taxes .......................... 12,715 17,390 35,216 49,855
Loans transferred to other real estate owned 2,285 4,623 3,473 7,921
</TABLE>
6
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1998
---------------------------------------------------------------------------------
Accumulated
Other Total
Common Comprehensive Comprehensive Retained Shareholders'
(In thousands) Stock Income Income (Loss) Earnings Equity
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1998 .................. $ 190,039 $ 1,902 $ 550,111 $ 742,052
Net income for the period ................. $ 114,719 114,719 114,719
Other comprehensive income, net of tax
Unrealized holding loss on
securities available for sale net of
reclassification adjustment ........ (4,426) (4,426) (4,426)
-------------
Total comprehensive income ............ $ 110,293
=============
Cash dividends:
Preferred, paid by subsidiaries to
minority shareholders .............. (38) (38)
Common, $.40 per share ................ (29,660) (29,660)
Dividends of acquired companies prior
to merger .......................... (886) (886)
Net proceeds from stock offering .......... 129,832 129,832
Issuance of common shares for acquisitions 13,633 100 26,654 40,387
Conversion of acquired company
convertible debt prior to acquisition .. 4,546 4,546
Exercise of acquired company
warrants prior to acquisition .......... 1,852 1,852
Stock redeemed and retired ................ (25,281) (25,281)
Stock options exercised ................... 4,171 4,171
------------- ------------- ------------- -------------
Balance, September 30, 1998 ............... $ 318,792 $ (2,424) $ 660,900 $ 977,268
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1997
---------------------------------------------------------------------------------
Accumulated
Other Total
Common Comprehensive Comprehensive Retained Shareholders'
(In thousands) Stock Income Income (Loss) Earnings Equity
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997 .................. $ 192,714 $ (5,604) $ 446,163 $ 633,273
Net income for the period ................. $ 102,477 102,477 102,477
Other comprehensive income, net of tax
Unrealized holding gain on
securities available for sale net of
reclassification adjustment ........ 2,479 2,479 2,479
-------------
Total comprehensive income ............ $ 104,956
=============
Cash dividends:
Preferred, paid by subsidiaries to
minority shareholders .............. (27) (27)
Common, $.35 per share ................ (20,716) (20,716)
Dividends of acquired companies prior
to merger .......................... (1,732) (1,732)
Issuance of common shares for acquisitions 94,770 94,770
Stock redeemed and retired ................ (96,125) (96,125)
Stock options exercised ................... 4,319 4,319
------------- ------------- ------------- -------------
Balance, September 30, 1997 ............... $ 195,678 $ (3,125) $ 526,165 $ 718,718
============= ============= ============= =============
</TABLE>
Comprehensive income for the three months ended September 30, 1998 and 1997 was
$40,422 and $35,373 respectively.
7
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Basis of Presentation
The unaudited consolidated financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. On
January 6, 1998 the Company acquired Vectra Banking Corporation and its banking
subsidiary Vectra Bank. On May 22, 1998 the Company acquired FP Bancorp, Inc.
and its banking subsidiary First Pacific National Bank. On September 8, 1998 the
Company acquired The Commerce Bancorporation and its banking subsidiary The
Commerce Bank of Washington, N.A. All three acquisitions were accounted for as
pooling of interests and were considered significant. Accordingly, prior period
amounts have been restated. Certain amounts in the 1997 consolidated financial
statements have also been reclassified to conform to the 1998 presentation.
Operating results for the nine months ended September 30, 1998 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1998. For further information, refer to the consolidated financial
statements and footnotes thereto included in Zions Bancorporation's Annual
Report to Shareholders on Form 10-K for the year ended December 31, 1997.
The Company adopted Statement of Financial Accounting Standards No. 130
(Statement 130), "Reporting Comprehensive Income", effective January 1, 1998.
Statement 130 establishes standards for reporting and displaying comprehensive
earnings and its components in financial statements. Prior interim periods have
been reclassified to conform for comparative presentation.
In June 1997, the Financial Accounting Standards Board issued Statement No. 131,
Disclosures about Segments of an Enterprise and Related Information. The
provisions of this statement require disclosure of financial reports issued to
shareholders. This statement is effective for fiscal years beginning after
December 15, 1997; however, it is not required to be applied for interim
reporting in the initial year of application.
In February 1998, the Financial Accounting Standards Board issued Statement No.
132, Employers' Disclosures about Pensions and Other Postretirement Benefits.
This statement standardizes the disclosure requirements for pensions and other
postretirement benefits to the extent practicable, requires additional
information on changes in the benefit obligations and fair values of plan assets
that will facilitate financial analysis, and eliminates certain previously
required disclosures. It does not change the measurement or recognition of those
plans. This Statement is effective for fiscal years beginning after December 15,
1997.
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities. This statement
addresses the accounting for derivative instruments including certain derivative
instruments embedded in other contracts and hedging activities. This statement
is effective for fiscal quarters of all fiscal years beginning after June 15,
1999. The Company is currently studying the statement to determine its future
effects.
8
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL HIGHLIGHTS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-----------------------------------------------------------------
(In thousands, except per share 1998 1997 % Change 1998 1997 % Change
and ratio data) -------- -------- ----- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
EARNINGS
Taxable-equivalent net interest income $132,968 $109,942 20.94 % $375,420 $304,127 23.44 %
Net interest income .................. 130,749 107,478 21.65 % 369,045 298,682 23.56 %
Noninterest income ................... 49,607 39,993 24.04 % 142,165 110,391 28.78 %
Provision for loan losses ............ 2,485 2,091 18.84 % 9,304 5,951 56.34 %
Noninterest expense .................. 112,840 90,507 24.68 % 331,009 244,775 35.23 %
Income before income taxes ........... 65,031 54,873 18.51 % 170,897 158,347 7.93 %
Income taxes ......................... 22,292 19,169 16.29 % 56,178 55,870 0.55 %
Net income ........................... 42,739 35,704 19.70 % 114,719 102,477 11.95 %
PER COMMON SHARE
Net income (diluted) ................. 0.54 0.49 10.20 % 1.50 1.40 7.14 %
Dividends ............................ 0.14 0.12 16.67 % 0.40 0.35 14.29 %
Book value ........................... 12.59 10.22 23.19 %
SELECTED RATIOS
Return on average assets ............. 1.37% 1.32% 1.29% 1.35%
Return on average common equity ...... 17.38% 19.60% 17.90% 20.09%
Efficiency ratio ..................... 61.80% 60.36% 63.95% 59.05%
Net interest margin .................. 4.73% 4.47% 4.62% 4.38%
OPERATING CASH EARNINGS*
Taxable-equivalent net interest income $132,968 $109,942 20.94 % $375,420 $304,127 23.44 %
Net interest income .................. 130,749 107,478 21.65 % 369,045 298,682 23.56 %
Noninterest income ................... 49,607 39,993 24.04 % 142,165 110,391 28.78 %
Provision for loan losses ............ 2,485 2,091 18.84 % 9,304 5,951 56.34 %
Noninterest expense .................. 107,390 88,516 21.32 % 306,778 240,468 27.58 %
Income before income taxes ........... 70,481 56,864 23.95 % 195,128 162,654 19.97 %
Income taxes ......................... 23,547 19,412 21.30 % 61,451 56,147 9.45 %
Net income ........................... 46,934 37,452 25.32 % 133,677 106,507 25.51 %
PER COMMON SHARE
Net income (diluted) ................. 0.59 0.51 15.69 % 1.75 1.45 20.69 %
Dividends ............................ 0.14 0.12 16.67 % 0.40 0.35 14.29 %
Book value ........................... 10.42 8.06 29.28 %
SELECTED RATIOS
Return on average assets ............. 1.53% 1.40% 1.52% 1.42%
Return on average common equity ...... 23.08% 25.41% 26.06% 24.35%
Efficiency ratio ..................... 58.82% 59.04% 59.27% 58.01%
Net interest margin .................. 4.73% 4.47% 4.62% 4.38%
</TABLE>
* Before amortization of goodwill and core deposit intangible assets and merger
charges.
9
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------------- ---------------------------------------
(In thousands, except per share and ratio data) 1998 1997 % Change 1998 1997 % Change
---------- ---------- ------ ---------- ---------- ------
AVERAGE BALANCES
<S> <C> <C> <C> <C> <C> <C>
Total assets ................................ $12,352,632 $10,756,697 14.84% $11,934,762 $10,131,543 17.80 %
Securities .................................. 3,320,877 3,112,875 6.68% 3,112,055 2,794,463 11.37 %
Net loans and leases ........................ 6,367,862 5,190,736 22.68% 6,111,670 4,915,828 24.33 %
Goodwill and core deposit intangibles ....... 168,897 138,144 22.26% 171,073 97,068 76.24 %
Total deposits .............................. 8,541,182 7,081,649 20.61% 8,307,012 6,453,075 28.73 %
Shareholders' equity ........................ 975,796 722,790 35.00% 856,848 681,900 25.66 %
Weighted average common and common-
equivalent shares outstanding .......... 79,007,000 73,687,000 7.22% 76,238,000 72,941,000 4.52 %
AT PERIOD END
Total assets ................................ $12,385,434 $11,141,789 11.16 %
Securities .................................. 2,966,175 3,145,734 (5.71)%
Net loans and leases ........................ 6,763,207 5,442,389 24.27 %
Allowance for loan losses ................... 100,440 89,998 11.60 %
Goodwill and core deposit intangibles ....... 168,869 151,375 11.56 %
Total deposits .............................. 8,932,022 7,387,820 20.90 %
Shareholders' equity ........................ 977,268 718,718 35.97 %
Common shares outstanding ................... 77,594,651 70,358,916 10.28 %
Average equity to average assets ............ 7.90% 6.72% 7.18% 6.73%
Common dividend payout ...................... 25.41% 20.01% 25.85% 20.22%
Nonperforming assets ........................ 35,793 22,002 62.68 %
Loans past due 90 days or more .............. 12,432 9,167 35.62 %
Nonperforming assets to net loans and leases,
other real estate owned and other
nonperforming assets at September 30 ... .53% .40%
</TABLE>
10
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
OPERATING RESULTS
Zions Bancorporation achieved record earnings for the quarter and nine months
ended September 30, 1998. Consolidated net income for the third quarter of 1998
was $42.7 million or $0.54 per diluted share, an increase of 19.7% and 10.2%,
respectively, over the restated $35.7 million or $0.49 earned in the third
quarter of 1997. Consolidated net income for the third quarter of 1998 increased
29.4% and 22.7%, respectively, from the restated $33.0 million or $0.44 per
diluted share for the second quarter of 1998. The quarterly dividend per share
increased 16.7% to $0.14 from $0.12 in the third quarter of 1997 and remained
the same as the second quarter of 1998.
Consolidated net income was $114.7 million or $1.50 per diluted share for the
first nine months of 1998, compared to $102.5 million or $1.40 per diluted share
for the first nine months of 1997, which constituted increases of 12.0% and 7.1%
respectively.
The annualized return on average assets for the third quarter and for the first
nine months of 1998 was 1.37% and 1.29% compared to 1.32% and 1.35%,
respectively, in 1997. The annualized return on average common shareholders'
equity was 17.38% and 17.90% for the third quarter and for the first nine months
of 1998, compared to 19.60% and 20.09% for the same periods of 1997. The
Company's "efficiency ratio," or noninterest expenses as a percentage of total
taxable-equivalent net revenues for the third quarter and for the first nine
months of 1998 was 61.8% and 63.95%, respectively, compared to 60.36% and 59.05%
for the same periods of 1997.
OPERATING CASH EARNINGS RESULTS
The Company is also providing its earnings performance on an operating cash
basis since it believes that its cash performance is a better reflection of its
financial position and shareholder value creation as well as its ability to
support growth, pay dividends, and repurchase stock than reported net income.
The use of purchase accounting results in increased levels of goodwill and core
deposit intangible assets recognized and amortized. Operating cash earnings are
earnings before amortization of goodwill and core deposit intangible assets and
merger expenses. Operating cash performance ratios are determined as if goodwill
and core deposit intangible assets and their associated amortization and merger
expenses have not been recognized on the financial statements.
Operating cash earnings for the quarter were $46.9 million or $0.59 per diluted
share, an increase of 25.3% and 15.7%, respectively, over the $37.5 million or
$0.51 per diluted share earned in the third quarter of 1997. Operating cash
earnings for the third quarter of 1998 increased 6.9% over the $43.9 million
earned during the second quarter of 1998. Operating cash earnings per diluted
share for the third quarter of 1998 were $.59 compared to $.58 for the second
quarter of 1998. Year-to-date operating cash earnings were $133.7 million or
$1.75 per diluted share, an increase of 25.5% and 20.7%, respectively, over the
$106.5 million or $1.45 per diluted share earned in the first nine months of
1997.
The operating cash annualized return on average assets for the third quarter and
for the first nine months of 1998 was 1.53% and 1.52% compared to 1.40% and
1.42%, respectively, in 1997. Operating cash annualized return on average common
shareholders' equity was 23.08% and 26.06% for the third quarter and for the
first nine months of 1998, compared to 25.41% and 24.35% for the same periods of
1997. The Company's cash efficiency ratio for the third quarter and for the
first nine months of 1998 was 58.82% and 59.27%, respectively, compared to
59.04% and 58.01% for the same periods of 1997.
11
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
The Company's third-quarter $7.0 million (19.7%) increase in earnings relative
to the same period a year ago reflects a $23.3 million (21.7%) increase in net
interest income, a $9.6 million (24.0%) increase in noninterest income,
partially offset by a $.4 million (18.8%) increase in the provision for loan
losses, a $22.3 million (24.7%) increase in noninterest expenses and a $3.1
million (16.3%) increase in income tax expense.
The Company's $12.2 million (12.0%) increase in net income for the nine-month
period ended September 30, 1998 compared to the similar period in 1997, reflects
a $70.4 million (23.6%) increase in net interest income, a $31.8 million (28.8%)
increase in noninterest income, partially offset by a $3.4 million (56.3%)
increase in the provision for loan losses, a $86.2 million (35.2%) increase in
noninterest expenses and a $ .3 million (.6%) increase in income tax expense.
NET INTEREST INCOME AND INTEREST RATE SPREADS
Net interest income for the third quarter of 1998, adjusted to a fully
taxable-equivalent basis, increased 20.9% to $133.0 million compared to $109.9
million for the third quarter of 1997 and increased 7.4% from $123.8 million for
the second quarter of 1998. Net interest margin was 4.73%, compared to 4.47% for
the third quarter of 1997 and 4.58% for the second quarter of 1998. Nine-month
net interest income, on a fully taxable-equivalent basis, was $375.4 million in
1998, an increase of 23.44% compared to $304.1 million for the first nine months
of 1997. Net interest margin for the first nine months of 1998 was 4.62%,
compared to 4.38% for the first nine months of 1997.
The yield on average earning assets increased 6 basis points during the third
quarter of 1998 as compared to the third quarter of 1997, and increased 24 basis
points from the second quarter of 1998. The average rate paid this quarter on
interest-bearing funds decreased 12 basis points from the third quarter of 1997
and increased 13 basis points from the second quarter of 1998. Comparing the
first nine months of 1998 with 1997, the yield on average earning assets
increased 6 basis points, while the cost of interest-bearing funds decreased by
13 basis points.
The spread on average interest-bearing funds for the third quarter of 1998 was
3.89%, up from the 3.71% for the third quarter of 1997 and up from the 3.77% for
the second quarter of 1998. The spread on average interest-bearing funds for the
first nine months of 1998 was 3.81% compared with 3.62% for the same period in
1997.
12
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1998 September 30, 1997
---------------------------------------- ----------------------------------------
Average Amount of Average Average Amount of Average
(In thousands) Balance Interest(1) Rate Balance Interest(1) Rate
------------ ------------ -------- ------------ ------------ -------
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Money market investments:
Interest-bearing deposits ........... $ 44,993 $ 558 4.92% $ 59,616 $ 981 6.53%
Federal funds sold and security
resell agreements .............. 1,415,393 20,745 5.81% 1,397,692 20,542 5.83%
------------ ------------ ------------ ------------
Total money market investments . 1,460,386 21,303 5.79% 1,457,308 21,523 5.86%
------------ ------------ ------------ ------------
Securities:
Held to maturity:
Taxable ........................ 2,143,323 36,832 6.82% 1,837,079 31,420 6.79%
Nontaxable ..................... 242,265 4,763 7.80% 207,887 4,723 9.01%
Available for sale:
Taxable ........................ 565,223 6,806 4.78% 728,516 12,136 6.61%
Nontaxable ..................... 13,885 263 7.51% 41,904 780 7.38%
Trading account ..................... 356,181 5,880 6.55% 297,489 4,396 5.86%
------------ ------------ ------------ ------------
Total securities ............... 3,320,877 54,544 6.52% 3,112,875 53,455 6.81%
------------ ------------ ------------ ------------
Loans:
Loans held for sale ................. 179,870 3,436 7.58% 159,698 3,019 7.50%
Net loans and leases(2).............. 6,187,992 157,453 10.09% 5,031,038 127,734 10.07%
------------ ------------ ------------ ------------
Total loans .................... 6,367,862 160,889 10.02% 5,190,736 130,753 9.99%
------------ ------------ ------------ ------------
Total interest-earning assets ............ $ 11,149,125 $ 236,736 8.42% $ 9,760,919 $ 205,731 8.36%
------------ ------------
Cash and due from banks .................. 671,410 552,500
Allowance for loan losses ................ (97,805) (89,582)
Goodwill and core deposit intangibles .... 168,897 138,144
Other assets ............................. 461,005 394,716
------------ ------------
Total assets ............................. $ 12,352,632 $ 10,756,697
============ ============
LIABILITIES
Interest-bearing deposits:
Savings and NOW deposits ............ $ 1,371,319 $ 11,095 3.21% $ 940,883 $ 7,356 3.10%
Money market super NOW deposits ..... 2,958,613 27,521 3.69% 2,742,652 25,492 3.69%
Time deposits under $100,000 ........ 1,326,955 18,191 5.44% 1,105,227 14,858 5.33%
Time deposits $100,000 or more ...... 595,363 8,751 5.83% 447,039 6,621 5.88%
Foreign deposits .................... 200,549 2,196 4.34% 144,710 1,616 4.43%
------------ ------------ ------------ ------------
Total interest-bearing deposits 6,452,799 67,754 4.17% 5,380,511 55,943 4.13%
------------ ------------ ------------ ------------
Borrowed funds:
Securities sold, not yet purchased .. 218,373 2,838 5.16% 93,864 1,371 5.79%
Federal funds purchased and security
repurchase agreements .......... 1,839,249 22,730 4.90% 2,104,550 28,061 5.29%
Commercial paper ..................... 37,371 510 5.41% -- --
FHLB advances and other borrowings:
Less than one year ............. 18,195 294 6.41% 131,723 1,885 5.68%
Over one year .................. 102,296 1,697 6.58% 169,087 2,522 5.92%
Long-term debt ...................... 403,900 7,945 7.80% 280,755 6,007 8.49%
------------ ------------ ------------ ------------
Total borrowed funds ........... 2,619,384 36,014 5.45% 2,779,979 39,846 5.69%
------------ ------------ ------------ ------------
Total interest-bearing liabilities ....... $ 9,072,183 $ 103,768 4.54% $ 8,160,490 $ 95,789 4.66%
------------ ------------
Noninterest-bearing deposits ............. 2,088,383 1,701,138
Other liabilities ........................ 216,270 172,279
------------ ------------
Total liabilities ........................ 11,376,836 10,033,907
Total shareholders' equity ............... 975,796 722,790
------------ ------------
Total liabilities and shareholders' equity $ 12,352,632 $ 10,756,697
============ ============
Spread on average interest-bearing funds 3.89% 3.71%
===== =====
Net interest income and net yield on
interest-earning assets ............. $ 132,968 4.73% $ 109,942 4.47%
============ ===== ============ =====
1 Taxable-equivalent rates used where applicable.
2 Net of unearned income and fees, net of related costs. Loans include nonaccrual and restructured loans.
</TABLE>
13
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, 1998 September 30, 1997
---------------------------------------- ----------------------------------------
Average Amount of Average Average Amount of Average
(In thousands) Balance Interest(1) Rate Balance Interest(1) Rate
------------ ------------ -------- ------------ ------------ -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Money market investments:
Interest-bearing deposits ........... $ 56,451 $ 2,188 5.18% $ 53,888 $ 2,261 5.61%
Federal funds sold and security
resell agreements .............. 1,572,595 66,795 5.68% 1,520,678 63,954 5.62%
------------ ------------ ------------ ------------
Total money market investments . 1,629,046 68,983 5.66% 1,574,566 66,215 5.62%
------------ ------------ ------------ ------------
Securities:
Held to maturity:
Taxable ........................ 1,862,319 95,380 6.85% 1,543,371 79,669 6.90%
Nontaxable ..................... 242,403 14,487 7.99% 209,047 12,694 8.12%
Available for sale:
Taxable ........................ 578,653 24,603 5.68% 716,250 35,648 6.65%
Nontaxable ..................... 17,087 984 7.70% 42,536 2,457 7.72%
Trading account ..................... 411,593 18,126 5.89% 283,259 12,531 5.91%
------------ ------------ ------------ ------------
Total securities ............... 3,112,055 153,580 6.60% 2,794,463 142,999 6.84%
------------ ------------ ------------ ------------
Loans:
Loans held for sale ................. 196,270 10,652 7.26% 159,434 8,970 7.52%
Net loans and leases(2).............. 5,915,400 440,962 9.97% 4,756,394 354,663 9.97%
------------ ------------ ------------ ------------
Total loans .................... 6,111,670 451,614 9.88% 4,915,828 363,633 9.89%
------------ ------------ ------------ ------------
Total interest-earning assets ............ $ 10,852,771 $ 674,177 8.31% $ 9,284,857 $ 572,847 8.25%
------------ ------------
Cash and due from banks .................. 591,300 486,386
Allowance for loan losses ................ (97,575) (88,152)
Goodwill and core deposit intangibles .... 171,073 97,068
Other assets ............................. 417,193 351,384
------------ ------------
Total assets ............................. $ 11,934,762 $ 10,131,543
============ ============
LIABILITIES
Interest-bearing deposits:
Savings and NOW deposits ............ $ 1,150,577 $ 26,603 3.09% $ 888,195 $ 20,435 3.08%
Money market super NOW deposits ..... 3,084,133 84,462 3.66% 2,537,916 69,881 3.68%
Time deposits under $100,000 ........ 1,268,701 51,038 5.38% 961,923 37,315 5.19%
Time deposits $100,000 or more ...... 589,615 25,257 5.73% 387,573 16,515 5.70%
Foreign deposits .................... 176,197 5,970 4.53% 139,326 4,647 4.46%
------------ ------------ ------------ ------------
Total interest-bearing deposits 6,269,223 193,330 4.12% 4,914,933 148,793 4.05%
------------ ------------ ------------ ------------
Borrowed funds:
Securities sold, not yet purchased .. 194,815 7,444 5.11% 91,626 4,029 5.88%
Federal funds purchased and security
repurchase agreements .......... 1,878,863 68,285 4.86% 2,288,932 89,194 5.21%
Commercial paper ..................... 12,545 514 5.48% -- --
FHLB advances and other borrowings:
Less than one year ............. 61,291 2,899 6.32% 88,335 3,958 5.99%
Over one year .................. 131,310 5,598 5.70% 106,711 4,814 6.03%
Long-term debt ...................... 319,598 20,687 8.65% 271,845 17,932 8.82%
------------ ------------ ------------ ------------
Total borrowed funds ........... 2,598,422 105,427 5.42% 2,847,449 119,927 5.63%
------------ ------------ ------------ ------------
Total interest-bearing liabilities ....... $ 8,867,645 $ 298,757 4.50% $ 7,762,382 $ 268,720 4.63%
------------ ------------
Noninterest-bearing deposits ............. 2,037,789 1,538,142
Other liabilities ........................ 172,480 149,119
------------ ------------
Total liabilities ........................ 11,077,914 9,449,643
Total shareholders' equity ............... 856,848 681,900
------------ ------------
Total liabilities and shareholders' equity $ 11,934,762 $ 10,131,543
============ ============
Spread on average interest-bearing funds 3.81% 3.62%
===== =====
Net interest income and net yield on
interest-earning assets ............. $ 375,420 4.62% $ 304,127 4.38%
============ ===== ============ =====
1 Taxable-equivalent rates used where applicable.
2 Net of unearned income and fees, net of related costs. Loans include nonaccrual and restructured loans.
</TABLE>
14
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
The Company manages its earnings sensitivity to interest rate movements, in
part, by matching the repricing characteristics of its assets and liabilities
and through the use of off-balance sheet arrangements such as caps, floors and
interest rate exchange contracts. Net interest income from the use of such
off-balance sheet arrangements for the first nine months of 1998 was $4.5
million compared to $1.8 million for the first nine months of 1997.
PROVISION FOR LOAN LOSSES
The provision for loan losses increased 18.8% to $2.5 million for the third
quarter of 1998, as compared with $2.1 million for the third quarter of 1997,
and decreased 24.2% from the $3.3 million for the second quarter of 1998. The
provision for loan losses for the first nine months of 1998 totaled $9.3
million, 56.34% more than the $6.0 million provision for the first nine months
of 1997. Annualized, it is .20% of average loans for 1998 compared to .16% for
1997.
NONINTEREST INCOME
Noninterest income for the third quarter of 1998 was $49.6 million, an increase
of 24.0% from the $40.0 million for the third quarter of 1997 and an increase of
3.8% over the $47.8 million for the second quarter of 1998. Primary contributors
to the increase in noninterest income were service charges on deposit accounts;
other service charges, commissions and fees; trust income; and loan sales and
servicing income. Comparing the segments of noninterest income for the third
quarter of 1998 and the third quarter of 1997 service charges on deposit
accounts; other service charges, commissions and fees; trust income; loan sales
and servicing income; and other income increased 11.8%, 19.8%, 40.4%, 51.0%, and
83.1%, respectively, while trading account income decreased 28.6%. Net losses of
$.85 million on the sale of investment securities were realized during the third
quarter of 1998 compared to net gains of $.19 million during the third quarter
of 1997.
Noninterest income for the nine months ending September 30, 1998 was $142.1
million, an increase of 28.8% over $110.4 million for the first nine months of
1997. Comparing the segments of noninterest income for the first nine months of
1998 and the first nine months of 1997, service charges on deposit accounts;
other service charges, commissions and fees; trust income; trading account
income; loan sales and servicing income; and other income increased 15.7%,
27.7%, 34.0%, 32.9%, 27.9%, and 82.2%, respectively. Net gains of $2.2 million
on the sale of investment securities was realized during the first nine months
of 1998 compared to $.6 million during the first nine months of 1997.
15
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Noninterest expense for the third quarter of 1998 was $112.8 million, an
increase of 24.7% over $90.5 million for the third quarter of 1997, and a
decrease of 3.9% from the $117.4 million for the second quarter of 1998.
Comparing significant noninterest expense components for the third quarter of
1998 and the third quarter of 1997, salaries and employee benefits increased
24.4%, occupancy increased 34.3%, furniture and equipment expense increased
25.3% and the total of all other noninterest expense components increased 23.3%
which included significant increases in legal and professional services, merger
expenses, amortization of intangible assets and other expenses.
Noninterest expense for the nine months ending September 30, 1998 was $331.0
million, an increase of 35.2% over $244.8 million for the first nine months of
1997. Comparing significant noninterest expense components for the first nine
months of 1998 and the first nine months of 1997, salaries and employee benefits
increased 26.0%, occupancy increased 32.5%, furniture and equipment expenses
increased 34.7%, and the total of all other noninterest expense components
increased 51.6% which included significant increases for legal and professional
services, merger expenses, amortization of intangible assets and other expenses.
The increase in noninterest expense in 1998 resulted primarily from
acquisitions, expansion of business lines and investment in personnel in
selected areas to enhance future revenue growth. At September 30, 1998, the
Company had 5,278 full-time equivalent employees, 280 offices and 395 ATMs
compared to 5,060 full time equivalent employees, 233 offices and 507 ATMs at
September 30, 1997.
INCOME TAXES
The Company's income taxes increased 16.3% to $22.3 million for the third
quarter of 1998 compared to $19.2 million for the third quarter of 1997 and
increased 41.4% from the $15.8 million for the second quarter of 1998. The
Company's income taxes were $56.2 million for the first nine months of 1998 as
compared to $55.9 million for the first nine months of 1997. The Company's
effective income tax rate was 32.9% for the first nine months of 1998, down from
35.3% for the first nine months of 1997. The decreased effective tax rate
results primarily from the Company's efforts to restructure its balance sheet
and changes in estimates of tax benefits from net operating loss and refund
claims.
ANALYSIS OF FINANCIAL CONDITION
EARNING ASSETS
Average earning assets increased 16.9% to $10,852.8 million for the nine months
ended September 30, 1998, compared to $9,284.9 million for the nine months ended
September 30, 1997. Earning assets comprised 90.9% of total average assets for
the first nine months of 1998, compared with 91.6% for the first nine months of
1997.
Average money market investments, consisting of interest-bearing deposits,
federal funds sold and security resell agreements increased 3.5% to $1,629
million in the first nine months of 1998 as compared to $1,574.6 million in the
first nine months of 1997.
During the first nine months of 1998, average securities increased 11.4% to
$3,112.1 million compared to $2,794.5 million in the first nine months of 1997.
Average held to maturity securities increased 20.1%, available for sale
securities decreased 21.5%, and trading account securities increased 45.3%
compared with the first nine months of 1997.
16
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Average net loans and leases increased 24.3% to $6,111.7 million for the first
nine months of 1998 compared to $4,915.8 million in the first nine months of
1997, representing 56.3% of earning assets in the first nine months of 1998
compared to 52.9% in the first nine months of 1997. Average net loans and leases
were 73.6% of average total deposits for the nine months ended September 30,
1998, as compared to 76.2% for the nine months ended September 30, 1997.
INVESTMENT SECURITIES
The following table presents the Company's investment securities on September
30, 1998, December 31, 1997 and September 30, 1997.
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1998 1997 1997
Amortized Market Amortized Market Amortized Market
(In thousands) cost value cost value cost value
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Held to maturity
U.S. Treasury Securities ........ $ 2,997 $ 3,088 $ 4,004 $ 4,048 $ 7,392 $ 7,564
U.S. government agencies and
corporations:
Small Business
Administration loan-
backed securities ....... 391,924 391,700 440,615 448,867 454,084 462,064
Other agency securities ...... 1,423,078 1,434,022 1,425,656 1,431,593 1,386,553 1,393,002
States and political subdivisions 281,416 289,319 240,217 245,382 231,501 235,645
Mortgage-backed securities ...... 108,850 110,081 89,063 90,289 94,679 96,231
---------- ---------- ---------- ---------- ---------- ----------
2,208,265 2,228,210 2,199,555 2,220,179 2,174,209 2,194,506
---------- ---------- ---------- ---------- ---------- ----------
Available for sale
U.S. Treasury securities ........ 32,183 33,110 37,332 37,746 32,027 32,222
U.S. government agencies ........ 205,702 195,288 421,511 419,162 265,094 260,658
States and political subdivisions 11,165 11,471 31,029 32,187 34,385 35,505
Mortgage and other
asset-backed securities ...... 37,658 38,217 82,764 83,744 206,832 203,638
---------- ---------- ---------- ---------- ---------- ----------
286,708 278,086 572,636 572,839 538,338 532,023
---------- ---------- ---------- ---------- ---------- ----------
Equity securities:
Mutual funds:
Accessor Funds, Inc. .... 134,435 137,234 109,530 110,958 109,405 110,370
Stock:
Federal Home Loan Bank .. 103,568 103,568 97,711 97,711 95,222 95,222
Other ................... 33,424 35,151 24,338 25,765 10,024 10,349
---------- ---------- ---------- ---------- ---------- ----------
271,427 275,953 231,579 234,434 214,651 215,941
---------- ---------- ---------- ---------- ---------- ----------
558,135 554,039 804,215 807,273 752,989 747,964
---------- ---------- ---------- ---------- ---------- ----------
Trading
U.S. Treasury Securities ........ 30,142 30,142 346 346 2,536 2,536
U.S. government agencies and
corporations:
Small Business Administration
loan-backed securities .. -- -- 14 14 -- --
Other agency securities ...... 155,255 155,255 44,493 44,493 218,157 218,157
States and political subdivisions 11,417 11,417 8,498 8,498 2,640 2,640
Mortgage-backed securities ...... -- -- 630 630 228 228
Certificates of Deposit ......... 7,057 7,057 29,700 29,700 -- --
---------- ---------- ---------- ---------- ---------- ----------
203,871 203,871 83,681 83,681 223,561 223,561
---------- ---------- ---------- ---------- ---------- ----------
Total ............................... $2,968,030 $2,986,120 $3,087,451 $3,111,133 $3,150,759 $3,166,031
========== ========== ========== ========== ========== ==========
</TABLE>
17
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
LOANS
The Company has structured its organization to separate the lending function
from the credit administration function to strengthen the control and
independent evaluation of credit activities. Loan policies and procedures
provide the Company with a framework for consistent underwriting and a basis for
sound credit decisions. In addition, the Company has well-defined standards for
grading its loan portfolio, and management utilizes the comprehensive loan
grading system to determine risk potential in the portfolio. Another aspect of
the Company's credit risk management strategy is the diversification of the loan
portfolio. The Company has a well-diversified loan portfolio with no significant
exposure to highly leveraged transactions and has no foreign credits in its loan
portfolio.
The table below sets forth the amount of loans outstanding by type on September
30, 1998, December 31, 1997 and September 30, 1997.
(In thousands)
September 30, December 31, September 30,
Types 1998 1997 1997
- ----- ---------- ---------- ----------
Loans held for sale ................... $ 192,042 $ 178,642 $ 176,747
Commercial, financial, and agricultural 1,765,165 1,445,417 1,382,120
Real estate:
Construction ................... 709,265 566,844 510,893
Other real estate-secured:
Home equity credit line 175,329 179,325 222,712
1-4 family residential . 1,114,875 817,926 857,550
Other .................. 2,129,560 1,725,921 1,564,839
---------- ---------- ----------
3,419,764 2,723,172 2,645,101
---------- ---------- ----------
4,129,029 3,290,016 3,155,994
Consumer:
Bankcard ....................... 58,901 66,930 143,399
Other .......................... 409,628 457,964 395,141
---------- ---------- ----------
468,529 524,894 538,540
Lease financing ....................... 184,227 176,514 165,501
Other receivables ..................... 67,769 97,483 67,101
---------- ---------- ----------
Total loans .................... $6,806,761 $5,712,966 $5,486,003
========== ========== ==========
Loans held for sale on September 30, 1998 increased 7.50% from year-end 1997.
All other loans, net of unearned income and fees increased 19.7% to $6,571
million on September 30, 1998 compared to $5,490 million on December 31, 1997.
Commercial loans, construction loans, other real estate-secured loans and lease
financing increased from year end 22.1%, 25.1%, 25.6 and 4.4%, respectively, as
consumer loans and other receivables decreased 10.7% and 30.5%, respectively.
Within the other real estate-secured loan portfolio, home equity credit line
loans decreased 2.2%, 1-4 family residential loans increased 36.3% and all other
real estate loans increased 23.4% from year end.
18
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
On September 30, 1998, long-term first mortgage real estate loans serviced for
others totaled $1,812.8 million and consumer and other loan securitizations,
which relate primarily to loans sold under revolving securitization structures,
totaled $1,026.0 million. During the first nine months of 1998, the Company sold
$939.8 million of loans classified in held for sale, and securitized and sold
SBA 504 loans, home equity credit line loans, credit card receivables and
automobile loans totaling $621.4 million. During the first nine months of 1998,
total loans sold were $1,561.2 million.
RISK ELEMENTS
The Company's nonperforming assets, which include nonaccruing loans,
restructured loans, other real estate owned and other nonperforming assets, were
$35.8 million on September 30, 1998, up from $23.5 million on December 31, 1997,
and up from $22.0 million on September 30, 1997. Such nonperforming assets as a
percentage of net loans and leases, other real estate owned and other
nonperforming assets were .53%, .41% and .40% on September 30, 1998, December
31, 1997, and September 30, 1997, respectively.
Accruing loans past due 90 days or more totaled $12.4 million on September 30,
1998, up from $10.6 million on December 31, 1997, and up from $9.2 million on
September 30, 1997. These loans equaled .18% of net loans and leases on
September 30, 1998, as compared to .19% on December 31, 1997 and .17% on
September 30, 1997.
No loans to borrowers were considered potential problems at September 30, 1998,
December 31, 1997, or September 30, 1997. Potential problem loans are defined as
loans presently on accrual, not contractually past due 90 days or more and not
restructured, but about which management has serious doubt as to the future
ability of the borrower to comply with present repayment terms and which may
result in the reporting of the loans as nonperforming assets.
The Company's total recorded investment in impaired loans included in nonaccrual
loans and leases, amounted to $16.1 million on September 30, 1998, as compared
to $7.1 million on December 31, 1997, and $5.1 million on September 30, 1997.
The Company considers a loan to be impaired when the accrual of interest has
been discontinued and it meets other criteria under the statements. The amount
of the impairment is measured based on the present value of expected cash flows,
the observable market price of the loan, or the fair value of the collateral.
Impairment losses are included in the allowance for loan losses through a
provision for loan losses. Included in the allowance for loan losses on
September 30, 1998, December 31, 1997, and September 30, 1997, is a required
allowance of $1.3 million, $46 thousand and $187 thousand respectively, on $5.2
million, $.3 million and $.8 million, respectively, of the recorded investment
in impaired loans.
19
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
The following table sets forth the nonperforming assets on September 30, 1998,
December 31, 1997, and September 30, 1997.
<TABLE>
<CAPTION>
September 30, December 31, September 30,
(In thousands) 1998 1997 1997
------------- ------------- -------------
<S> <C> <C> <C>
Nonaccrual loans ............................ $ 30,765 $ 16,299 $ 13,845
Restructured loans .......................... 981 1,510 693
Other real estate owned and other
nonperforming assets ................... 4,047 5,738 7,464
------------- ------------- -------------
Total .................................. $ 35,793 $ 23,547 $ 22,002
============= ============= =============
% of net loans and leases*, other real estate
owned and other nonperforming assets ... .53% .41% .40%
Accruing loans past due 90 days or more ..... $ 12,432 $ 10,616 $ 9,167
============= ============= =============
% of net loans and leases* .................. .18% .19% .17%
*Includes loans held for sale ...............
</TABLE>
ALLOWANCE FOR LOAN LOSSES
The Company's allowance for loan losses was 1.49% of net loans and leases on
September 30, 1998, compared to 1.62% on December 31, 1997, and 1.65% on
September 30, 1997. Net charge-offs during the third quarter of 1998 were $2.9
million, or .18% of average net loans and leases, compared to $3.2 million, or
.24% of average net loans and leases for the third quarter of 1997. Net
charge-offs for the first nine months of 1998 were $6.6 million, or .14% of
average net loans and leases, compared to $7.4 million or .20% of average net
loans and leases for the first nine months of 1997.
The allowance, as a percentage of nonaccrual loans and restructured loans, was
316.4% on September 30, 1998, compared to 514.2% on December 31, 1997, and
619.1% on September 30, 1997. The allowance, as a percentage of nonaccrual loans
and accruing loans past due 90 days or more was 232.5% on September 30, 1998,
compared to 340.2% on December 31, 1997 and 391.1% on September 30, 1997.
On September 30, 1998, December 31, 1997, and September 30, 1997, the allowance
for loan losses includes an allocation of $12.0 million, $8.9 million and $9.0
million, respectively, related to commitments to extend credit on loans and
standby letters of credit. Commitments to extend credit on loans and standby
letters of credit on September 30, 1998, December 31, 1997 and September 30,
1997, totaled $3,420.4 million, $2,796.8 million and $2,571.5 million,
respectively.
20
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
In analyzing the adequacy of the allowance for loan and lease losses, management
utilizes a comprehensive loan grading system to determine risk potential in the
portfolio, and considers the results of independent internal and external credit
review, historical charge-off experience, and changes in the composition and
volume of the portfolio. Other factors, such as general economic conditions and
collateral values, are also considered. Larger problem credits are individually
evaluated to determine appropriate reserve allocations. Additions to the
allowance are based upon the resulting risk profile of the portfolio developed
through the evaluation of the above factors.
The following table shows the changes in the allowance for loan losses and a
summary of loan loss experience.
<TABLE>
<CAPTION>
Nine Months Twelve Months Nine Months
Ended Ended Ended
(In thousands) September 30, December 31, September 30,
1998 1997 1997
----------- ----------- -----------
<S> <C> <C> <C>
Average loans* and leases outstanding
(net of unearned income) ............. $ 6,111,670 $ 5,115,963 $ 4,915,828
=========== =========== ===========
Allowance for possible losses:
Balance at beginning of the period ........ $ 91,571 $ 86,249 $ 86,249
Allowance of companies acquired ........... 6,185 7,063 5,187
Provision charged against earnings ........ 9,304 7,758 5,951
Loans and leases charged-off:
Loans held for sale .................. -- -- --
Commercial, financial and agricultural (3,904) (6,165) (4,928)
Real estate .......................... (884) (1,148) (737)
Consumer ............................. (6,546) (8,949) (5,734)
Lease financing ...................... (12) (279) (163)
Other receivables .................... (289) -- --
----------- ----------- -----------
Total ........................... (11,635) (16,541) (11,562)
----------- ----------- -----------
Recoveries:
Loans held for sale .................. -- -- --
Commercial, financial and agricultural 2,006 2,540 1,798
Real estate .......................... 874 1,906 505
Consumer ............................. 2,068 2,450 1,848
Lease financing ...................... 55 146 22
Other receivables .................... 12 -- --
----------- ----------- -----------
Total ........................... 5,015 7,042 4,173
----------- ----------- -----------
Net loan and lease charge-offs ............ (6,620) (9,499) (7,389)
----------- ----------- -----------
Balance at end of the period .............. $ 100,440 $ 91,571 $ 89,998
=========== =========== ===========
*Includes loans held for sale
Ratio of net charge-offs to
average loans and leases ............. .14% .19% .20%
</TABLE>
21
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
DEPOSITS
Average total deposits of $8,307.0 million for the first nine months of 1998
increased 28.7% over the $6,453.1 million for the first nine months of 1997,
with average demand deposits increasing 32.5%. Average money market and super
NOW deposits, time deposits under $100,000, time deposits over $100,000 and
foreign deposits for the first nine months of 1998 increased 21.5%, 31.9%, 52.1%
and 26.5% respectively, from the first nine months of 1997. Average savings and
NOW deposits increased 29.5% during the first nine months of 1998, compared with
the same period one year earlier.
Total deposits increased 12.3% to $8,932.0 million on September 30, 1998 as
compared to $7,956.2 million on December 31, 1997. Comparing September 30, 1998
to December 31, 1997, demand deposits, savings and money market deposits, time
deposits under $100,000, time deposits over $100,000 and foreign deposits
increased 10.7%, 12.4%, 9.4%, 25.3% and 6.8%, respectively.
LIQUIDITY AND INTEREST RATE SENSITIVITY
The Company manages its liquidity to provide adequate funds to meet its
financial obligations, including withdrawals by depositors and debt service
requirements, as well as to fund customers' demand for credit. Liquidity is
primarily provided by the regularly scheduled maturities of the Company's
investment and loan portfolios. The Company's liquidity is enhanced by the fact
that cash, money market securities and liquid investments, net of short-term or
"purchased" liabilities and wholesale deposits, totaled $1,992.6 million or
24.8% of core deposits on September 30, 1998.
The Company's core deposits, consisting of demand, savings and money market
deposits and time deposits under $100,000, constituted 90.1% of total deposits
on September 30, 1998 as compared to 90.8% on December 31, 1997 and 91.8% on
September 30, 1997.
Maturing balances in loan portfolios provide flexibility in managing cash flows.
Maturity management of those funds is an important source of medium- to
long-term liquidity. The Company's ability to raise funds in the capital markets
through the securitization process and by debt issuance allows the Company to
take advantage of market opportunities to meet funding needs at reasonable cost.
The parent company's cash requirements consist primarily of debt service,
dividends to shareholders, operating expenses, income taxes, and share
repurchases. The parent company's cash needs are routinely satisfied through
payments by subsidiaries of dividends, management and other fees, principal and
interest payments on subsidiary borrowings from the parent company.
On June 15, 1998, the Company issued $110 million of subordinated debentures.
The capital qualifying securities are subordinate to the claims of depositors.
With the approval of banking regulators, the ten year securities are callable in
five years at par. The debentures bear interest at 70 basis points over 90-day
Libor for the first five years and 120 basis points over 90-day Libor for the
last five years and require quarterly interest payments.
Interest rate risk is the most significant market risk regularly undertaken by
Company. The Company believes there have been no significant changes in market
risk compared to the disclosures in Zions Bancorporation's Annual Report to
Shareholders on Form 10-K for the year ended December 31, 1997.
22
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Interest rate sensitivity measures the Company's financial exposure to changes
in interest rates. Interest rate sensitivity is, like liquidity, affected by
maturities of assets and liabilities. The Company assesses its interest rate
sensitivity using duration, simulation, and gap analysis. Duration is a measure
of the weighted average expected lives of the discounted cash flows from assets
and liabilities. Simulation is used to estimate net interest income over time
using alternative interest rate scenarios. Gap analysis compares the volumes of
assets and liabilities whose interest rates are subject to reset within
specified periods.
The Company, through the management of maturities and repricing of its assets
and liabilities and the use of off-balance sheet arrangements such as interest
rate caps, floors, futures, options, and interest rate exchange agreements,
attempts to minimize the effect on net income of changes in interest rates. The
Company's management exercises its best judgment in making assumptions with
respect to loan and security prepayments, early deposit withdrawals and other
noncontrollable events in managing the Company's exposure to changes in interest
rates. The interest rate risk position is actively managed and changes daily as
the interest rate environment changes; therefore, positions at the end of any
period may not be reflective of the Company's interest rate position in
subsequent periods. The prime lending rate is the primary basis used for pricing
the Company's loans and the short-term Treasury rate is the index used for
pricing many of the Company's deposits. The Company, however, is unable to
economically hedge the prime/91-day T-bill spread risk through the use of
off-balance sheet financial instruments.
CAPITAL RESOURCES AND DIVIDENDS
Total shareholders' equity on September 30, 1998 was $977.3 million, an increase
of 31.7% over the $742.1 million on December 31, 1997, and an increase of 36.0%
over the $718.7 million on September 30, 1997. The ratio of average equity to
average assets for the first nine months of 1998 was 7.18% as compared to 6.73%
for the same period in 1997. On September 30, 1998, the Company's Tier I
risk-based capital ratio was 12.88%, as compared to 11.55% on December 31, 1997
and 11.89% on September 30, 1997. On September 30, 1998 the Company's total
risk-based capital ratio was 16.01%, as compared to 13.42% on December 31, 1997
and 14.28% on September 30, 1997. The Company's leverage ratio on September 30,
1998 was 8.51%, as compared to 6.83% on December 31, 1997 and 7.01% on September
30, 1997.
Dividends declared per common share for the third quarter of 1998 of $.14
increased 16.7%, as compared to $.12 for the third quarter of 1997 and remained
the same as the second quarter of 1998. The common cash dividend payout of net
income for the first nine months of 1998 was 25.85%, as compared to 20.22% for
the first nine months of 1997.
On June 10 1998, the Company completed a public offering of 2,760,000 shares of
its common stock. Net proceeds from the offering were $129.8 million. The
Company used the proceeds for the Sumitomo acquisition, which was completed on
October 1, 1998.
During the first nine months of 1998, the Company repurchased and retired
576,980 shares of its common stock at a cost of $25.3 million.
23
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
MERGERS AND ACQUISITIONS
On August 28, 1998 and August 31, 1998, respectively, the Company acquired
Kersey Bancorp, N.A., and its banking subsidiary Independent Bank of Kersey,
Colorado, and Eagle Holding Company, and its banking subsidiary Eagle Bank of
Broomfield, Colorado. Zions exchanged 620,073 shares of its common stock for all
the shares of Kersey Bancorp, N.A., and 229,998 shares of its common stock for
all the shares of Eagle Holding Company. The acquisitions were not significant
to the consolidated financial statements and were accounted for as
poolings-of-interests.
On September 8, 1998, the Company acquired The Commerce Bancorporation and its
banking subsidiary The Commerce Bank of Washington, N.A. Zions exchanged
1,938,590 shares of its common stock for all the common shares of The Commerce
Bancorporation. The transaction was accounted for as a pooling-of interests. The
acquisition was considered significant and prior year amounts have been
restated.
On May 15, 1998, the Company and Mountain Financial Holding Company, the parent
company of Mountain National Bank, in Woodland Park, Colorado, announced a
definitive agreement to merge Mountain Financial Holding Company with and into a
subsidiary of Zions Bancorporation in exchange for common shares of Zions
Bancorporation. As of June 30, 1998, Mountain Financial Holding Company had
total assets of $91 million and 2 banking offices in Woodland Park and Cripple
Creek, Colorado. The transaction is intended to be accounted for as a
pooling-of-interests. The merger will close in the fourth quarter of 1998.
On August 14, 1998, the Company announced a definitive agreement to merge with
Citizens Banco, Inc., the parent company of Citizens Bank, in exchange for
common shares of Zions. Citizens Bank has approximately $50 million in assets
and two banking locations. The merger is intended to be accounted for as a
pooling-of-interests, and is expected to close in the fourth quarter of 1998,
subject to the approval of banking regulators and the shareholders of Citizens
Banco, Inc.
In September 1998, the Company received final regulatory approval to acquire The
Sumitomo Bank of California. As of September 30, 1998, The Sumitomo Bank of
California had total assets of approximately $4.5 billion. The transaction was
completed on October 1, 1998 and the acquisition was accounted for as a
purchase. The name of the Company's existing California bank, Grossmont Bank,
was changed to California Bank & Trust, and Sumitomo was merged into the bank.
The combined bank is the fifth largest commercial bank in California.
YEAR 2000
A number of electronic systems utilize a two-digit field for year references,
e.g., 98 for 1998. Such systems may compute that the year 2000, if represented
as 00, to be 98 years ago rather than two years hence. If these systems are not
corrected prior to December 31, 1999, many processing failures could result.
This section describes the status of the Company's efforts to correct these
system deficiencies.
State of Readiness. The Company is well underway with its Year 2000 Program
efforts. The organizational awareness phase was substantially completed in the
second quarter of 1998, but is considered ongoing through 1999. The assessment
and detailed planning phase was substantially complete by the end of third
quarter 1998. The renovation phase for mission critical components will be
substantially complete by December 31, 1998, except for the conversion of
recently acquired small Colorado banks, the last of which is scheduled to be
converted to Zions systems by July 31, 1999. Renovation for non-mission critical
24
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
components is expected to be complete during the first quarter of 1999. The
validation phase for mission critical components will be completed in first
quarter 1999 and for non-critical components by the end of second quarter 1999.
The Company uses third party servicers for some of its information and data
processing needs and it is monitoring the progress of these entities in
addressing the Year 2000 issue. It expects that all of these companies will be
compliant by March 31, 1999. Validation of these third-party provided systems is
expected to be completed during the second quarter of 1999. The Company is also
assessing the operability of other devices after 1999, including vaults, fax
machines, stand-alone personal computers, security systems and elevators.
Although the Company does not believe that the failure of these systems would
have a material adverse effect on the financial condition of the enterprise, it
is addressing deficiencies in these systems and expects compliance to be
achieved next year.
Costs. In order to achieve and confirm Year 2000 readiness, significant costs
are being incurred to test and modify or replace computer software and hardware,
as well as a variety of other items, e.g., ATMs. The Company believes that its
remediation costs have been mitigated since it has replaced the large
preponderance of its core banking systems during the past five years with Year
2000 compliant software in the ordinary course of business. However, the
considerable effort required to implement new software and sufficiently test its
compliance is consuming a substantial portion of the Company's internal
information technology resources. This diversion of resources to the Year 2000
project has resulted in delays in implementing enhancements to a number of the
Company's systems and products. The Company does not believe, however, that
these delays will have a significant effect on its revenue or expense growth.
The aggregate increase in operating expense to achieve Year 2000 readiness is
estimated to be $3 million of which $1.8 million has been incurred through
September 30, 1998. In addition, a significant portion of the Company's ATM's
and personal computers are expected to be replaced to achieve Year 2000
compliance. The capital outlay to replace these assets is estimated to be
between $2 to $4 million, a portion of which would have been incurred in the
ordinary course of business without regard to Year 2000 issues.
Risks. If the Company's mission-critical applications are not compliant by 2000,
it may not be able to correctly process transactions in a reasonable period of
time. This scenario could result in a wide variety of claims against the Company
for improper handling of its assets and deposits and other borrowings from its
customers. The Company is also at risk if the credit worthiness of a few of its
large borrowers, or a significant number of its small borrowers, were to
deteriorate quickly and severely as a result of their inability to conduct
business operations after December 31, 1999, for whatever reason. The Company
has surveyed and is presently reviewing the Year 2000 plans of a number of its
credit customers to ascertain the sufficiency of their remediation efforts and
the implications of their actions on their credit worthiness. The Company
explicitly disclaims, however, any obligation or liability for the completeness,
or lack thereof, of its customers' Year 2000 remediation plans or actions.
Contingency Plans. The Company is in the process of developing business
resumption plans for each significant business unit in the event that the
remediation plan is not completed in time or fails for reasons that are not
presently foreseen. In the event of such a failure, these plans will outline the
steps that will be taken to deal with the situation to minimize the effect on
customers and losses to the Company. These plans are expected to be complete by
December 31, 1998.
FORWARD-LOOKING INFORMATION
Statements in Management's Discussion and Analysis that are not based on
historical data are forward-looking, including, for example, the projected
performance of Zions and its operations. These statements constitute
forward-looking information within the meaning of the Private Securities
Litigation Reform Act of 1995. Actual results may differ materially from the
projections discussed in Management's Discussion and
25
<PAGE>
ZIONS BANCORPORATION AND SUBSIDIARIES
Analysis since such projections involve significant risks and uncertainties.
Factors that might cause such differences include, but are not limited to: the
timing of closing proposed acquisitions being delayed or such acquisitions being
prohibited, competitive pressures among financial institutions increasing
significantly, economic conditions, either nationally or locally in areas in
which Zions conducts its operations, being less favorable than expected,
legislation or regulatory changes which adversely affect the ability of the
Company to conduct, or the accounting for, business combinations or share
repurchases, or the cost and effort required to correct Year 2000 processing
deficiencies being more difficult than expected due to the difficulty attracting
and retaining qualified systems personnel or vendor-supplied software releases
being delayed or not functioning properly. Zions disclaims any obligation to
update any such factors or to publicly announce the result of any revisions to
any of the forward-looking statements included herein to reflect future events
or developments.
PART II. OTHER INFORMATION
-----------------
ITEM 5. OTHER INFORMATION
On September 18, 1998, the Company amended its Bylaws to include an
advance notice provision whereby, any shareholder proposals or
nominations for election of directors brought to any annual or special
shareholder meeting will only be considered if written notice is received
by the Company not less than 120 days prior to the date of that meeting.
The aforementioned description of the amended Bylaws is qualified by
reference to the full text of the Amendment filed as Exhibit 3 hereto.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibit 3 Articles of Amendment to the
Bylaws of the Company
b) Reports on Form 8-K
There were no form 8-K reports filed during the quarter ended September 30,
1998.
S I G N A T U R E S
-------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ZIONS BANCORPORATION
/s/Harris H. Simmons
--------------------
Harris H. Simmons, President and
Chief Executive Officer
/s/Dale M. Gibbons
------------------
Dale M. Gibbons, Executive Vice
President and Chief Financial Officer
Dated November 12, 1998
26
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited consolidated balance sheet as of September 30, 1998 and the related
unaudited consolidated statement of income for the nine months ended September
30, 1998 included in the company's form 10-Q for the period ended September 30,
1998 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000109380
<NAME> Zions Bancorporation /UT/
<MULTIPLIER> 1,000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jul-01-1998
<PERIOD-END> Sep-30-1998
<EXCHANGE-RATE> 1
<CASH> 618,651
<INT-BEARING-DEPOSITS> 25,572
<FED-FUNDS-SOLD> 1,240,537
<TRADING-ASSETS> 203,871
<INVESTMENTS-HELD-FOR-SALE> 554,039
<INVESTMENTS-CARRYING> 2,208,265
<INVESTMENTS-MARKET> 2,228,210
<LOANS> 6,763,207
<ALLOWANCE> 100,440
<TOTAL-ASSETS> 12,385,434
<DEPOSITS> 8,932,022
<SHORT-TERM> 1,747,197
<LIABILITIES-OTHER> 230,942
<LONG-TERM> 498,005
0
0
<COMMON> 318,792
<OTHER-SE> 658,476
<TOTAL-LIABILITIES-AND-EQUITY> 12,385,434
<INTEREST-LOAN> 449,880
<INTEREST-INVEST> 217,922
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 667,802
<INTEREST-DEPOSIT> 193,330
<INTEREST-EXPENSE> 298,757
<INTEREST-INCOME-NET> 369,045
<LOAN-LOSSES> 9,304
<SECURITIES-GAINS> 2,181
<EXPENSE-OTHER> 331,009
<INCOME-PRETAX> 170,897
<INCOME-PRE-EXTRAORDINARY> 114,719
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 114,719
<EPS-PRIMARY> 1.53
<EPS-DILUTED> 1.50
<YIELD-ACTUAL> 4.55
<LOANS-NON> 30,765
<LOANS-PAST> 12,432
<LOANS-TROUBLED> 981
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 91,571
<CHARGE-OFFS> 11,635
<RECOVERIES> 5,015
<ALLOWANCE-CLOSE> 100,440
<ALLOWANCE-DOMESTIC> 24,675
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 75,765
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This restated schedule contains summary financial information extracted from the
unaudited consolidated balance sheet as of September 30, 1997 and the related
unaudited consolidated statement of income for the nine months ended September
30, 1997 which has been restated as a result of pooling of interests and
included in the company's form 10-Q for the period ended September 30, 1998 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000109380
<NAME> Zions Bancorporation /UT/
<MULTIPLIER> 1,000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jul-01-1997
<PERIOD-END> Sep-30-1997
<EXCHANGE-RATE> 1
<CASH> 667,454
<INT-BEARING-DEPOSITS> 59,667
<FED-FUNDS-SOLD> 1,387,867
<TRADING-ASSETS> 223,561
<INVESTMENTS-HELD-FOR-SALE> 747,964
<INVESTMENTS-CARRYING> 2,174,209
<INVESTMENTS-MARKET> 2,194,506
<LOANS> 5,442,389
<ALLOWANCE> 89,998
<TOTAL-ASSETS> 11,141,789
<DEPOSITS> 7,387,820
<SHORT-TERM> 2,433,523
<LIABILITIES-OTHER> 123,115
<LONG-TERM> 478,613
0
0
<COMMON> 195,678
<OTHER-SE> 523,040
<TOTAL-LIABILITIES-AND-EQUITY> 11,141,789
<INTEREST-LOAN> 362,733
<INTEREST-INVEST> 204,669
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 567,402
<INTEREST-DEPOSIT> 148,793
<INTEREST-EXPENSE> 268,720
<INTEREST-INCOME-NET> 298,682
<LOAN-LOSSES> 5,951
<SECURITIES-GAINS> 631
<EXPENSE-OTHER> 244,775
<INCOME-PRETAX> 158,347
<INCOME-PRE-EXTRAORDINARY> 102,477
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 102,477
<EPS-PRIMARY> 1.44
<EPS-DILUTED> 1.40
<YIELD-ACTUAL> 4.30
<LOANS-NON> 13,845
<LOANS-PAST> 9,167
<LOANS-TROUBLED> 693
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 86,249
<CHARGE-OFFS> 11,562
<RECOVERIES> 4,173
<ALLOWANCE-CLOSE> 89,998
<ALLOWANCE-DOMESTIC> 16,902
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 73,096
</TABLE>
EXHIBIT 3
Amendment
to the
Restated Bylaws
of
Zions Bancorporation
September 18, 1998
The following amendment to the Restated Bylaws of the Company was adopted
today during the meeting of the Company's Board of Directors, by an affirmative
vote of two-thirds of the total number of directors constituting the Board of
Directors, pursuant to the provisions of Article XI of the Restated Bylaws:
Article II. Shareholders
Section 10. Advance Notice of Shareholder Proposals. At any
-------------------------------------------
annual or special meeting of shareholders, proposals by shareholders
and persons nominated for election as directors by shareholders shall
be considered only if advance notice thereof has been timely given as
provided herein and such proposals or nominations are otherwise proper
for consideration under applicable law and the articles of
incorporation and by-laws of the corporation. Notice of any proposal
to be presented by any shareholder or of the name of any person to be
nominated by any shareholder for election as a director of the
corporation at any meeting of shareholders shall be delivered to the
secretary of the corporation at its principal office not less than 120
days prior to the date of the meeting. Any shareholder who gives
notice of any such proposal shall deliver therewith the text of the
proposal to be presented and a brief written statement of the reasons
why such shareholder favors the proposal and setting forth such
shareholder's name and address, the number and class of all shares of
each class of stock of the corporation beneficially owned by such
shareholder and any material interest of such shareholder in the
proposal (other than as a shareholder). Any shareholder desiring to
nominate any person for election as a director of the corporation
shall deliver with such notice a statement in writing setting forth
the name of the person to be nominated, the number and class of all
shares of each class of stock of the Corporation beneficially owned by
such person, the information regarding such person required by
paragraphs (a), (e) and (f) of Item 401 of Regulation S-K adopted by
the Securities and Exchange Commission (or the corresponding
provisions of any regulation subsequently adopted by the Securities
and Exchange Commission applicable to the Corporation), such person's
signed consent to serve as a director of the corporation if elected,
such shareholder's name and address and the number and class of all
shares of each class of stock of the corporation beneficially owned by
such shareholder. As used herein, shares "beneficially owned" shall
mean all shares as to which such person, together with such person's
affiliates and associates (as defined in Rule 12b-2 under the
Securities Exchange Act of 1934), may be deemed to beneficially own
pursuant to Rules 13d-3 and 13d-5 under the Securities Exchange Act of
1934, as well as all shares as to which such person, together with
such person's affiliates and associates, has the right to become the
beneficial owner pursuant to any agreement or understanding, or upon
the exercise of warrants, options or rights to convert or exchange
(whether such rights are exercisable immediately or only after
<PAGE>
the passage of time or the occurrence of conditions). The person
presiding at the meeting, in addition to making any other
determinations that may be appropriate to the conduct of the
meeting, shall determine whether such notice has been duly given
and shall direct that proposals and nominees not be considered if
such notice has not been given.
/s/ Dale M. Gibbons
-------------------
Dale M. Gibbons
Secretary
