UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended Commission File Number
December 31, 1993 1-6906
_____________________________________
FIRST SECURITY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 87-6118148
(State of incorporation) (I.R.S. Employer
Identification No.)
79 South Main, P.O. Box 30006
Salt Lake City, Utah 84130-0006
(Address of principal executive offices) (Zip Code)
Securities registered pursuant to Section 12(b) of the Act:
Floating Rate Notes Due 1999, listed on the New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Common Stock - $1.25 par value.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of First Security Corporation voting stock
held by nonaffiliates as of February 28, 1994 was $1,316,135,000.
As of February 28, 1994, First Security Corporation had outstanding
48,191,149 shares of Common Stock-Par $1.25 (net of 668,683 treasury
shares). They were held by 8,626 stockholders of record.
The Registrant's definitive Proxy Statement dated March 15, 1994 in
connection with the its Annual Meeting of Shareholders to be held April
25, 1994 is incorporated by reference into Parts I and III of this Form
10-K.
<PAGE>
FORM 10-K CROSS-REFERENCE INDEX
The Registrant's Annual Report and Form 10-K incorporate into a single
document the requirements of the accounting profession and the Securities
and Exchange Commission, including a comprehensive explanation of 1993
results. Page numbers shown below refer to Registrant's 1993 Annual Report
to Shareholders.
Annual
Report
Item Caption Page
Part I
1 Business 36
1(a) General Development of Business 36
1(b) Industry Segments None
1(c) Narrative Description of Business 36
Competitive Position 68
Employment 33
Executive Officers of the Registrant (A) 103
1(d) Financial Information About Foreign and Domestic Operations 29
Distribution of Assets, Liabilities and Stockholders' Equity;
Interest Rates and Interest Differential 58
Analysis of Interest Changes Due to Volume and Changes in Rates 60
Investment Portfolio 45
Loan Portfolio
A. Types of Loans 36,47
B. Maturities and Sensitivities to Changes in Interest Rates 54
C. Risk Elements 49
D. Other Interest-Bearing Assets None
Summary of Loan Loss Experience 51
Deposits 37,54,56,58
Return on Equity, and Return on Assets 33
Short-Term Borrowings 56
2 Properties 82
3 Legal Proceedings 69
4 Submission of Matters to a Vote of Security Holders None
Part II
5 Market for Registrant's Common Stock and Related
Security Holder Matters 32,44,70,108
6 Selected Financial Data 32
7 Management's Discussion and Analysis of
Financial Condition and Results of Operations 29
8 Financial Statements and Supplementary Data 70,72
9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures None
Part III
10 Directors and Executive Officers (A)
11 Management Remuneration and Transactions (A)
12 Security Ownership of Certain Beneficial Owners and Management (A)
13 Certain Relationships and Related Transactions (A)
(A) Incorporated by reference from the Registrant's Proxy Statement
dated March 15, 1994.
Part IV
14(a) Exhibits and Financial Statement Schedules:
1. Report of Independent Certified Public Accountants 98
Consolidated Balance Sheets, December 31, 1993 and 1992 72
Consolidated Statements of Income for the Years Ended
December 31, 1993, 1992, and 1991 73
Consolidated Statement of Stockholders' Equity for the
Years Ended December 31, 1991, 1992, and 1993 74
Consolidated Statement of Cash Flows for the
Years Ended December 31, 1993, 1992, and 1991 75
Notes to Consolidated Financial Statements 77
2. Supplemental Schedules:
Other schedules required by Rule 9.07 of Regulation S-X are
omitted because the information required therein is
included elsewhere in the financial statements and related
notes or such schedules are not applicable.
3. Exhibit Index
Ex. 3(1). Certificate of incorporation, as amended.
(Exhibit 3(1) to FSC's Registration Statement on Form
S-4, Registration No. 33-30045, as filed on July 24,
1990, hereby incorporated by reference.)
Ex. 3(2). Bylaws of FSC, as amended. (Exhibit 2 to FSC's
Registration Statement on Form S-7, Registration No.
2-61892, as filed on June 16, 1978, and Exhibit 3(2) to
FSC's Registration Statement on Form S-4, Registration
No. 33-30045, as filed on July 24, 1990, hereby
incorporated by reference.)
Ex. 4(1). No instruments defining the rights of holders of
long-term debt of FSC and its subsidiaries have been
included as exhibits because the total amount of
indebtedness authorized under any such instrument does
not exceed 10% of the total assets of FSC and its
subsidiaries on a consolidated basis.
Ex. 4(2). Rights Agreement dated as of August 28, 1990,
between FSC and First Security Bank of Utah, N.A., which
includes the form of Rights Certificate (together with
the Form of Election of Exercise) as Exhibit A; the form
of Certificate of Designation of the series of Junior
Series B Preferred Stock, no par value per share, of FSC
as Exhibit B; and the Summary of Rights as Exhibit C.
(Filed as Exhibit 4 to FSC's Current Report on Form 8-K
dated August 28, 1990, as filed with the Commission on
September 1, 1990, [File No. 1-6906] and hereby
incorporated by reference.)
Ex. 4(3). Amendment Agreement dated as of September 26,
1990, by and between FSC and First Security Bank of Utah,
N.A., amending the Rights Agreement dated as of August
28, 1990, between the same parties. (Filed as Exhibit 1
to Amendment No. 1 on Form 8, dated October 10, 1990, as
filed with the Commission on October 16, 1990, amending
FSC's Current Report on Form 8-K dated August 28, 1990,
as filed with the Commission on September 1, 1990, [File
No. 1-6906] and hereby incorporated by reference.)
Ex. 10. Material Contracts: Executive Compensation Plans
and Arrangements:
Ex. 10(1). First Security Corporation Comprehensive
Management Incentive Plan. (Exhibit A to Prospectus in
Registration Statement No. 33-21556 on Form S-8 filed
April 29, 1989, hereby incorporated by reference.)
Ex. 10(2), 10(3), 10(4), 10(5), 10(6). Employment
Agreements between FSC and Spencer F. Eccles, Morgan J.
Evans, L. Scott Nelson, T. Eugene King, and J. Patrick
McMurray. (Exhibits to FSC's Quarterly Report on Form
10-Q for the quarter ended September 30, 1991, hereby
incorporated by reference [File No. 1-6906].)
Ex. 10(7). Employment Agreement between FSC and Scott C.
Ulbrich. (Exhibit to FSC's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1992, hereby
incorporated by reference. [File No. 1-6906].)
Ex. 11. Computation of per share earnings Attached
Ex. 21. Subsidiaries Attached
Ex. 23. Consents of Independent Certified Public
Accountants Attached
14(b) Reports on Form 8-K:
On November 19, 1993, FSC reported on Form 8-K the acquisition,
in a pooling-of interests merger, of First National Financial
Corporation and its wholly owned subsidiary First National Bank
in Albuquerque.
On January 24, 1994, FSC reported on Form 8-K a press release
relating to its Fourth Quarter 1993 earnings.
14(c) Exhibits required by Item 601 of Regulation S-K Attached
Signatures Attached
<PAGE>
CORPORATE INFORMATION
FIRST SECURITY CORPORATION
CORPORATE OFFICES
79 South Main Street
Salt Lake City, Utah 84lll
ANNUAL STOCKHOLDERS' MEETING
Monday, April 25, 1994, 3 p.m.
Utah Power & Light Co., Auditorium
40 East First South
Salt Lake City, Utah 84111
INDEPENDENT ACCOUNTANTS
Deloitte & Touche
50 South Main Street
Salt Lake City, Utah 84144
GENERAL LEGAL COUNSEL
Ray, Quinney & Nebeker
400 Deseret Building
Salt Lake City, Utah 84111
FORM 10-K EXHIBITS
Stockholders can obtain a copy of any exhibits filed with
the Corporation's report on Form l0-K upon written request to:
Financial Division
First Security Corporation
P.O. Box 30006
Salt Lake City, Utah 84130-0006
DIVIDEND REINVESTMENT PLAN
Shareholders can reinvest their cash dividends in additional
shares of our common stock at the market price. Shareholders,
as well as brokers and custodians, can obtain a prospectus of
the plan by writing to:
First Security Bank of Utah, N.A.
Plan Agent, First Security Corporation
Dividend Reinvestment Plan
P.O. Box 30007
Salt Lake City, Utah 84l30-0007
(80l) 246-5289.
RATINGS
Thomson Standard Moody's
BankWatch & Poors Investors
Service
- - - -----------------------------------------------------------
Overall B - -
Senior Debt - BBB+ A3
Subordinated Debt - BBB Baa1
STOCK INFORMATION
First Security Corporation's shares are traded in the
NASDAQ National Market System under the NASDAQ symbol: FSCO.
NASDAQ Market Makers:
Bear, Stearns & Co., Inc.
Dain, Bosworth, Inc.
Dean Witter Reynolds, Inc.
Dillon, Read & Co., Inc.
C. S. First Boston Corporation
Fox-Pitt, Kelton, Inc.
Herzog, Heine, Geduld, Inc.
Jefferies and Company, Inc.
Keefe, Bruyette & Woods, Inc.
Kemper Securities Group, Inc.
Kidder Peabody & Co., Inc.
Merrill Lynch, Pierce, Fenner & Smith
Montgomery Securities, Inc.
Morgan Stanley & Co., Inc.
J. P. Morgan Securities, Inc.
Pacific Crest Securities
Piper, Jaffray & Hopwood, Inc.
Prudential Securities
M. A. Schapiro & Co., Inc.
Shearson Lehman Hutton
Sherwood Securities Corporation
Smith Barney Shearson, Inc.
Stearn, Agee & Leach, Inc.
Troster Singer Corporation
The Transfer Agent and Registrar for First Security
Corporation is:
Stock Transfer Services
Trust Group
First Security Bank of Utah, N.A.
P. O. Box 30007
Salt Lake City, Utah 84130-0007
FINANCIAL INFORMATION
Analysts, investors and others seeking financial information
about the Corporation should contact:
Scott C. Ulbrich
Executive Vice President and
Chief Financial Officer
Financial Division
(80l) 246-5706
Leslie R. Nelson
Investor Relations Director
(801) 246-5266
GENERAL INFORMATION
News media representatives and others seeking general
information should contact:
Phillip F. Hudson
Executive Vice President and Manager,
Retail Banking and Marketing Group
(801) 246-5258
Printed on Recycled Paper
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION & SUBSIDIARIES
FINANCIAL REVIEW
The following pages contain "Management's Discussion and Analysis" of First Security Corporation's 1993 financial
conditions and results of operations, including comparisons with prior years' results and identification of possible
risks and trends.
RESTATEMENT OF FINANCIAL STATEMENTS. As required by applicable accounting rules, all historical amounts in this report
have been restated to reflect the effects of the pooling-of-interests merger with First National Financial Corporation
("FNFC", located in Albuquerque, New Mexico), and the adoption of Statement of Financial Accounting Standard No. 109,
"Accounting for Income Taxes", which was applied retroactively. In 1992, historical per share data were restated where
appropriate to reflect three-for-two stock splits made in the form of 50% stock dividends paid in May 1992 and June 1991.
dividends paid in May 1992 and June 1991.
It should be noted that the five-year compound growth rates shown on tables throughout this discussion may not represent
actual trends due to recent acquisitions and certain nonrecurring events.
The consolidated financial statements beginning on page 72 of First Security Corporation's 1993 Annual Report to
Shareholders should be read in conjunction with this review.
<CAPTION>
Annual Annual
Report Report
Table of Contents: Page Tables: Page
<S> <C> <S> <C>
- - - ------------------------------------------------- ----- ------------------------------------------------- -----
Financial Review Table 1: Five-Year Summary -
Glossary 30 Financial Highlights 32
Summary of Earnings and Financial Condition 34 Table 2: Five-Year Summary - Condensed
Business Lines 36 Consolidated Income Statements 35
Mergers and Acquisitions 42 Table 3: Five-Year Summary - Condensed
Stockholders' Equity and Capital Adequacy 43 Consolidated Balance Sheets 36
Interest-Earning Assets and Asset Quality: 46 Table 4: Mergers and Acquisitions 42
Investment Securities 46 Table 5: Capital Ratios 43
Loans 48 Table 6: Investment Security Maturities, Yields
Problem Assets 50 and Market Values 45
Reserve for Loan Losses 50 Table 7: Loans Outstanding 47
Asset/Liability Management 53 Table 8: Problem Assets 49
Liquidity 56 Table 9: Reconciliation of the Reserve
Income Statement Analysis: for Loan Losses 51
Net Interest Income 60 Table 10: Allocation of the Reserve
Noninterest Income 62 for Loan Losses 52
Noninterest Expenses 64 Table 11: Maturities and Interest Rate Sensitivity 54
Provision for Taxes 66 Table 12: Maturities and Interest Rate Sensi-
Off-Balance Sheet Items 66 tivities of Selected Loan Categories 54
Inflation Accounting and Capital Commitments 66 Table 13: Maturities of Time Certificates of
Economy 67 Deposit of $100,000 or More 54
Competitive Position 68 Table 14: Short-Term Borrowings 56
Legal Proceedings 69 Table 15: Long-Term Debt 57
Table 16: Average Balance Sheets, Yields and Rates 58
Consolidated Financial Statements Table 17: Analysis of Interest Changes Due to
Consolidated Balance Sheets 72 Volume and Rates 60
Consolidated Statements of Income 73 Table 18: Quarterly Financial Summary 70
Consolidated Statements of Stockholders' Equity 74
Consolidated Statements of Cash Flows 75
Notes to Consolidated Financial Statements 77
Auditor's Report 98
Management's Report on Internal Controls 99
Form 10-K 100
</TABLE>
GLOSSARY
ALCOs: Asset/liability management committees comprised of senior officers who
represent the major divisions of each FSC subsidiary. ALCOs review and
evaluate strategies in the context of economic forecasts, customer needs,
competition, and overall strategic direction.
ATM: Automated teller machine.
Average balance: The sum of the daily balances at the end of each day divided
by the number of days in the period.
Book value per share: Total common stockholders' equity divided by the number
of common shares outstanding.
Basis point: One one-hundredth of one percent (0.01%).
Capital adequacy: Sufficient equity to support strategic plans while
providing an attractive rate of return for stockholders. Often measured by
risk-based capital ratios.
Core deposits: Total deposits, excluding time deposits of $100,000 or more
and foreign deposits.
CRE: Commercial real estate.
CRE owner-occupied loans: Loans where the owner occupies at least 50% of the
commercial property.
Credit risk: The risk that a borrower cannot repay a loan.
Deposit-based intangibles: The value assigned to deposit relationships in
purchase acquisitions.
Dividend payout ratio: The ratio of dividends paid per common share to
primary (undiluted) earnings per common share.
Efficiency ratio: The ratio of noninterest expenses to the sum of net
interest income FTE plus noninterest income.
FASB: Financial Accounting Standards Board, the promulgator of generally-
accepted accounting principles.
FSC: First Security Corporation.
FTE: Fully-taxable equivalent. An adjustment made to interest income to
facilitate comparison of interest income earned on tax-exempt or tax-favored
loans, leases, and securities with interest earned subject to full taxation.
Gap: An asset/liability management term. Gap assigns each interest-earning
asset and interest-bearing liability to a time frame reflecting its next
repricing or maturity date. The difference between total interest-sensitive
assets and liabilities at each time interval represents the interest
sensitivity "gap" for that interval. A positive gap generally indicates that
rising interest rates during a given interval will increase net interest
income, as more assets than liabilities will reprice. A negative gap
generally indicates that rising interest rates during a given interval will
decrease net interest income, as more liabilities than assets will reprice.
Because all interest rates do not adjust at exactly the same time or by the
same magnitude, and because the gap report does not reflect any future changes
in balance sheet structure, gap can only be analyzed as a static or general
indication of interest rate sensitivity.
Goodwill: Excess of the purchase price over the net asset value received in a
purchase acquisition.
Intangible assets: Goodwill, deposit-based intangibles, insurance
intangibles, and purchased mortgage loan servicing rights.
Interest rate risk: The risk that changes in interest rates will impact net
interest income.
Leverage ratio: The ratio of Tier 1 capital divided by total assets minus
nonqualifying intangibles.
Liquidity: The ability to meet cash flow requirements at reasonable cost.
Loans: Includes both loans and leases, except when used in specifically
identified loan categories.
Market capitalization: The market (bid) price of a share of common stock
multiplied by the number of shares of common stock outstanding, i.e. the total
market value of all outstanding shares.
NASDAQ/NMS: The National Association of Securities Dealers Automated
Quotation National Market System.
Net interest income: Interest income plus loan fees, minus interest expense,
frequently adjusted to an FTE basis for analytical purposes.
Net interest margin: FTE net interest income divided by average interest-
earning assets.
Net interest spread: The arithmetic difference between the FTE yield on
interest-earning assets and the rate paid on interest-bearing funds.
Nonaccruing loans: Loans on which interest is not being accrued for income
statement purposes. Interest received on nonaccruing loans is reported on a
cash basis.
Nonperforming assets: Nonaccruing loans plus renegotiated loans plus ORE.
ORE: Other real estate owned plus other foreclosed assets.
Potential problem loans: As defined by the SEC, performing loans that have
characteristics that cause management to have serious doubts about the
borrower's ability to comply with the present loan repayment terms and which
may result in reporting these loans as problem assets in the future. These
loans are less than 90 days past due, are accruing interest, and are well-
secured or are in the process of collection and are not classified as
nonperforming assets.
Problem assets: Nonperforming assets plus accruing loans past due 90 days or
more.
Productivity ratio: The ratio of noninterest expenses to average total
assets.
Provision for loan losses: A charge against income made to adjust the reserve
for loan losses to a desired level to cover potential future loan losses.
Renegotiated loans: As defined by bank regulators, loans where modifications
of terms are made to protect the bank's investment by making the terms more
favorable than might be otherwise offered to the debtor.
Reserve for loan losses: An adjustment made to loans to recognize possible
future loan chargeoffs. All loan losses are charged against this reserve as
they become probable and subject to reasonable estimation. Recoveries of
amounts previously charged off are credited to the reserve. It is adjusted by
means of the provision for loan losses.
Residential loans: Loans made for and secured by one-to-four family housing
units.
Risk-adjusted assets: Total assets plus reserves and off-balance sheet
commitments and obligations, excluding goodwill and deposit-based intangibles,
adjusted for credit risk.
Risk-based capital ratios: Equity measurements used by regulatory agencies to
assess a bank's capital adequacy. These ratios are: Tier 1 Capital divided by
risk-adjusted assets; and Total Capital (Tier 1 plus Tier 2 capital) divided
by risk-adjusted assets.
ROAA: Return on average assets. A profitability measure calculated by
dividing net income by average total assets.
ROAE: Return on average equity. A profitability measure calculated by
dividing net income by average total stockholders' equity.
SEC: The Securities and Exchange Commission.
SFAS: Statement of Financial Accounting Standards. Accounting pronouncements
issued by FASB.
Tangible common equity: Common stockholders' equity minus intangible assets.
Tangible common equity ratio: Tangible common equity divided by the total of
assets minus intangible assets.
Tier 1 Capital: Stockholders' equity plus minority equity in subsidiaries
minus goodwill and deposit-based intangibles.
Tier 2 Capital: Reserves for loan losses up to 1.25% of risk-adjusted assets
plus qualifying subordinated debt.
Total Capital: The sum of Tier 1 Capital plus Tier 2 Capital.
<TABLE>
TABLE 1: FIVE YEAR SUMMARY - FINANCIAL HIGHLIGHTS
<CAPTION>
(in thousands, except per share data) 5-Year
1993/92 Compound
1993 1992 1991 1990 1989 % Chg Growth Rate
<S> <C> <C> <C> <C> <C> <C> <C>
=============================================== =========== =========== =========== =========== =========== ========= ===========
Common Stock Data:
Earnings per common share:
Primary $2.38 $2.17 $1.44 $0.73 $1.42 9.7 20.7
Fully-diluted 2.38 2.16 1.36 0.67 1.32 10.2 22.7
Dividends paid per share 0.88 0.68 0.60 0.57 0.55 29.4 12.0
Book value at December 31 17.24 15.81 14.44 13.74 13.59 9.0 6.3
Market price (bid) at December 31 25.75 27.25 19.00 10.78 14.11 (5.5) 18.5
High for the year 30.25 27.50 19.00 14.67 14.78 10.0 21.0
Low for the year 24.00 18.17 10.00 8.00 11.00 32.1 20.8
Market capitalization 1,247,253 1,243,745 834,803 427,201 552,902 0.3 23.9
Market to book value at December 31 149.36 172.36 131.58 78.46 103.83
Dividend payout per share 36.92 31.55 41.56 77.69 38.69
Dividend yield (based on market price
and dividend rate at December 31) 3.57 2.79 3.23 5.28 4.03
Price/earnings ratio (based on
December 31 stock price) 10.80 12.58 13.16 14.72 9.91
Common shares outstanding 48,437 45,642 43,937 39,629 39,182 6.1 4.5
Average common shares:primary 47,852 46,330 41,155 39,607 39,270 3.3 4.2
Average common shares:fully-diluted 48,020 46,520 43,715 42,996 42,364 3.2 2.5
Common stockholders of record
(Not rounded to thousands) 8,748 7,976 6,911 6,720 7,002 9.7 3.2
Preferred stockholders of record
(Not rounded to thousands) 671 742 813 872 930 (9.6) (8.0)
=============================================== =========== =========== =========== =========== =========== ========= ===========
Income:
Net interest income $403,938 $375,949 $322,809 $302,140 $282,872 7.4 9.3
FTE adjustment 7,633 9,621 10,419 11,322 10,257 (20.7) (12.0)
Net interest income, FTE 411,571 385,570 333,228 313,462 293,129 6.7 8.5
Provision for loan losses 11,684 30,277 66,393 94,899 45,949 (61.4) (21.1)
Noninterest income 167,159 144,036 137,822 115,823 94,968 16.1 13.6
Noninterest expenses 386,146 339,456 306,504 285,095 252,289 13.8 9.1
Net income 114,056 100,343 59,412 29,001 55,941 13.7 25.8
=============================================== =========== =========== =========== =========== =========== ========= ===========
Average Balance Sheet:
Investment securities $1,792,591 $1,708,038 $1,433,406 $1,385,158 $1,133,765 5.0 12.5
Loans, net of unearned income 5,917,816 5,463,283 5,352,308 5,248,155 4,803,458 8.3 5.2
Reserve for loan losses 128,801 130,548 125,198 86,342 72,390 (1.3) 11.9
Total interest-earning assets 8,319,615 7,680,167 7,261,560 7,073,226 6,353,475 8.3 7.0
Total assets 9,214,260 8,490,487 8,045,754 7,896,145 7,084,695 8.5 6.8
Interest-bearing deposits 5,527,474 5,353,698 5,163,236 4,777,451 4,315,351 3.2 5.9
Short-term borrowings 1,121,250 982,448 1,013,532 1,297,477 1,086,873 14.1 5.7
Long-term debt 204,129 103,659 104,300 143,747 152,244 96.9 4.2
Total interest-bearing liabilities 6,852,853 6,439,805 6,281,068 6,218,675 5,554,468 6.4 5.8
Total deposits 6,956,114 6,567,776 6,205,821 5,751,292 5,186,499 5.9 6.9
Stockholders' equity 784,658 686,159 578,920 551,901 517,998 14.4 10.1
=============================================== =========== =========== =========== =========== =========== ========= ===========
End Of Period Balance Sheet:
Investment securities $1,762,783 $1,750,180 $1,547,088 $1,376,827 $1,308,612 0.7 10.3
Loans, net of unearned income 6,561,021 5,616,624 5,432,951 5,425,190 5,091,075 16.8 7.2
Reserve for loan losses 134,848 127,847 126,887 117,192 78,694 5.5 13.8
Total interest-earning assets 9,329,273 8,054,059 7,452,158 7,058,609 6,816,974 15.8 9.0
Total assets 10,211,689 8,895,673 8,290,168 7,893,903 7,553,831 14.8 8.4
Interest-bearing deposits 5,806,020 5,439,139 5,270,453 5,071,252 4,412,442 6.7 6.6
Short-term borrowings 1,486,905 995,790 899,294 918,566 1,314,265 49.3 11.4
Long-term debt 224,836 127,203 87,516 98,851 147,331 76.8 7.3
Total interest-bearing liabilities 7,517,761 6,562,132 6,257,263 6,088,669 5,874,038 14.6 7.5
Total deposits 7,503,707 6,868,453 6,514,692 6,188,735 5,413,165 9.2 7.8
Stockholders' equity 835,731 722,447 635,173 545,295 533,330 15.7 11.0
Nonperforming assets 52,819 107,455 150,699 150,485 121,345 (50.8) (14.5)
Accruing loans past due 90 days 7,155 11,766 17,200 16,643 18,611 (39.2) (22.1)
Total problem assets 59,974 119,221 167,899 167,128 139,956 (49.7) (15.6)
=============================================== =========== =========== =========== =========== =========== ========= ===========
</TABLE>
<TABLE>
TABLE 1: FIVE YEAR SUMMARY - FINANCIAL HIGHLIGHTS (continued)
<CAPTION>
5-Year
1993/92 Compound
1993 1992 1991 1990 1989 % Chg Growth Rate
<S> <C> <C> <C> <C> <C> <C> <C>
=============================================== =========== =========== =========== =========== =========== ========= ===========
Other December 31 Data (not rounded to thousands):
Full-time equivalent employees 6,318 5,891 5,667 5,616 5,262 7.2 4.1
Number of banking offices 245 230 229 224 207 6.5 4.4
Number of automated teller machines (A) 324 230 220 207 180 40.9 17.0
=============================================== =========== =========== =========== =========== =========== ========= ===========
Selected Ratios:
Return on average assets 1.24 1.18 0.74 0.37 0.79
Return on average stockholders' equity 14.54 14.62 10.26 5.25 10.80
Net interest margin, FTE 4.95 5.02 4.59 4.43 4.61
Net interest spread, FTE 4.33 4.31 3.75 3.56 3.66
Efficiency ratio:
(noninterest expenses/FTE net interest
income plus noninterest income) 66.72 64.10 65.07 66.41 65.01
Productivity ratio:
(noninterest expense/average assets) 4.19 4.00 3.81 3.61 3.56
Stockholders' equity to assets 8.18 8.12 7.66 6.91 7.06
Average stockholders' equity to average assets 8.52 8.08 7.20 6.99 7.31
Risk-based capital ratios (B):
Tier 1 (minimum: 4.0%) 11.82 11.32 10.61 9.32
Tier 1 + Tier 2 (minimum: 8.0%) 14.15 13.78 11.84 11.27
Leverage (minimum: 4.0%-5.0%) 8.08 7.99 7.53 6.75
Tangible common equity ratio 8.07 7.96 7.51 6.71
Loans to deposits 87.44 81.77 83.40 87.66 94.05
Loans to assets 64.25 63.14 65.53 68.73 67.40
Reserve for loan losses at December 31 to:
Total loans 2.06 2.28 2.34 2.16 1.55
Nonaccruing and renegotiated loans 370.93 159.87 112.91 118.09 131.85
Nonaccruing and renegotiated loans and
accruing loans past due 90 days or more 309.93 139.37 97.92 101.13 100.51
Nonaccruing and renegotiated loans to
total loans 0.55 1.42 2.07 1.83 1.17
Nonaccruing, renegotiated and accruing loans
past due 90 days to total loans 0.66 1.63 2.39 2.14 1.54
Nonperforming assets at December 31 to:
Total loans and other real estate 0.80 1.90 2.75 2.75 2.35
Total assets 0.52 1.21 1.82 1.91 1.61
Total equity 6.32 14.87 23.73 27.60 22.75
Total equity plus reserve for loan losses 5.44 12.64 19.78 22.72 19.83
Total problem assets at December 31 to:
Loans and other real estate 0.91 2.11 3.07 3.05 2.72
Total assets 0.59 1.34 2.03 2.12 1.85
Total equity 7.18 16.50 26.43 30.65 26.24
Total equity plus reserve for loan losses 6.18 14.02 22.03 25.23 22.87
Net loans charged off to average loans 0.20 0.60 1.09 1.11 0.80
=============================================== =========== =========== =========== =========== =========== ========= ===========
<FN>
NM = Not meaningful.
(A) Member of Star and Plus (R) System Networks.
(B) Risk-based capital ratios were not required prior to 1990. Ratios shown were calculated based on 1992 requirements.
</TABLE>
SUMMARY OF EARNINGS AND FINANCIAL CONDITION
In 1993, First Security Corporation ("FSC" or "the Corporation")
achieved the most profitable year in its 65-year history, with net income
earned totaling $114.06 million, up $13.71 million (13.7%) from 1992.
(See Table 1: Five-Year Summary - Financial Highlights, and Table 2:
Five Year Summary - Condensed Consolidated Income Statements). By
comparison, net income earned in 1992, the previous most profitable year,
totaled $100.34 million, up $40.93 million (68.9%) over $59.41 million in
1991.
Earnings per share for 1993 were $2.38, up $0.21 (9.7%) from 1992,
while for 1992, earnings per share were $2.17, up $0.73 (50.7%) over the
$1.44 earned in 1991.
FSC's net income generated a 1.24% return on average assets (ROAA) for
1993, up from 1.18% in 1992 and 0.74% in 1991, and a 14.54% return on
average equity (ROAE), compared with 14.62% in 1992 and 10.26% in 1991.
These results compared favorably with FSC's long-standing minimum targets
of a 1.00% ROAA and a 15.00% ROAE.
During 1993, FSC incurred one-time merger-related charges of $11.12
million after tax ($17.11 million pre-tax) associated with the
acquisition of FNFC. Net income for 1993, excluding the FNFC merger
charges, would have been $125.18 million, up $24.83 million (24.7%) from
the $100.34 million earned in 1992. Fully-diluted net income per share
for 1993, excluding the FNFC merger charges, would have been $2.61, up
$0.45 (20.8%) from $2.16 for 1992. Net income for 1993, excluding the
FNFC merger charges, would have generated a 1.36% ROAA and a 15.95% ROAE,
compared with a 1.18% ROAA and a 14.62% ROAE for 1992.
FSC's total assets at December 31, 1993, were a record $10.21 billion,
up $1.32 billion (14.8%) from year-end 1992, while at December 31, 1992,
total assets were $8.90 billion, up $605.51 million (7.3%) from $8.29
billion at year-end 1991 (See Table 1: Five-Year Summary - Financial
Highlights, and Table 3: Five-Year Summary - Condensed Consolidated
Balance Sheets). Total stockholders' equity at December 31, 1993, was
$835.73 million, up $113.28 million (15.7%) from year-end 1992, while
total stockholders' equity at December 31, 1992, was $722.45 million, up
$87.27 million (13.7%) from $635.17 million at year-end 1991.
The Corporation's risk-based capital ratios at December 31, 1993,
were: Tier 1 at 11.82%, up from 11.32% and 10.61% for year-ends 1992 and
1991, respectively; and Total Capital (Tier 1 plus Tier 2) at 14.15%, up
from 13.78% and 11.84% for year-ends 1992 and 1991, respectively (See
Table 1: Five-Year Summary - Financial Highlights, and Table 5: Capital
Ratios). The leverage ratio at December 31, 1993, was 8.08%, up from
7.99% and 7.53% at year-ends 1992 and 1991, respectively. Each of these
ratios was well above its respective regulatory minimum.
Total problem assets at December 31, 1993, were $59.97 million, down
$59.25 million (49.7%) from year-end 1992, while at December 31, 1992,
total problem assets were $119.22 million, down $48.68 million (29.0%)
from $167.90 million at year-end 1991 (See Table 8: Problem Assets).
Total problem assets included nonperforming assets and accruing loans
past due 90 days or more. Nonperforming assets at December 31, 1993,
were $52.82 million, down $54.64 million (50.8%) from year-end 1992,
while at December 31, 1992, nonperforming assets were $107.46 million,
down $43.24 million (28.7%) from $150.70 million at year-end 1991.
Nonperforming assets equaled 0.80% of loans and ORE at December 31, 1993,
decreasing from 1.90% at year-end 1992, and 2.75% at year-end 1991.
Accruing loans past due 90 days or more at December 31, 1993, were $7.16
million, down $4.61 million (39.2%) from year-end 1992, while at December
31, 1992, accruing loans past due 90 days or more were $11.77 million,
down $5.43 million (31.6%) from $17.20 million at year-end 1991.
The reserve for loan losses at December 31, 1993, was $134.85 million,
up $7.00 million (5.5%) from year-end 1992, while at December 31, 1992,
the reserve for loan losses was $127.85 million, up $960 thousand (0.8%)
from $126.89 million at year-end 1991 (See Table 3: Five-Year Summary -
Condensed Consolidated Balance Sheets and Table 9: Reconciliation of the
Reserve For Loan Losses). Merger transactions added $7.18 million in
reserves in 1993 and $3.51 million in 1992. At December 31, 1993, the
reserve equaled 2.06% of total loans and 370.93% of nonaccruing and
renegotiated loans, compared with corresponding ratios of 2.28% and
159.87% at year-end 1992, and 2.34% and 112.91% at year 1991.
Management, in determining the reserve for loan losses, has undertaken
extensive analytical analysis of the assets and has made considered
judgments on relevant factors such as the state of the economy, loan
portfolio mix and concentrations, new lending activities/lines of
business/markets, and negative trends or uncertainties, if any, in
determining the level of an appropriate reserve.
During 1993, FSC continued its efforts to strengthen its capital
position, its reserve for loan losses, its asset quality, and its sources
of liquidity, and expanded into new markets while strengthening its
presence in existing markets. FSC has generally had a philosophy of
maintaining a conservatively stated balance sheet capable of coping with
opportunities or challenges over the longer term. Building on this
philosophy in 1993, the Corporation positioned itself to seize future
opportunities as they occur.
<TABLE>
TABLE 2: FIVE YEAR SUMMARY - CONDENSED CONSOLIDATED INCOME STATEMENTS
<CAPTION>
(in thousands) 5-Year
1993/92 Compound
For the years ended December 31, 1993 1992 1991 1990 1989 % Chg Growth Rate
<S> <C> <C> <C> <C> <C> <C> <C>
=============================================== =========== =========== =========== =========== =========== ========= ===========
Interest income $644,732 $656,448 $710,831 $749,701 $703,962 (1.8) 1.2
Plus FTE adjustment 7,633 9,621 10,419 11,322 10,257 (20.7) (12.0)
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Interest income, FTE 652,365 666,069 721,250 761,023 714,219 (2.1) 1.0
Interest expense 240,794 280,499 388,022 447,561 421,090 (14.2) (7.1)
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Net interest income, FTE 411,571 385,570 333,228 313,462 293,129 6.7 8.5
Less provision for loan losses 11,684 30,277 66,393 94,899 45,949 (61.4) (21.1)
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Net interest income, (FTE) after
provision for loan losses 399,887 355,293 266,835 218,563 247,180 12.6 11.2
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Noninterest income:
Service charges on deposit accounts 55,865 51,505 46,137 39,007 34,735 8.5 10.6
Other service charges, collections,
commissions, and fees 41,767 33,011 24,548 15,242 13,712 26.5 30.3
Commissions and fees from fiduciary activities 18,980 18,176 16,793 14,955 13,056 4.4 10.4
Bankcard service fees 33,083 27,411 24,175 21,867 19,439 20.7 15.1
Insurance commissions and fees 9,953 8,719 7,017 6,515 5,877 14.2 14.1
Service fees on loans sold 6,566 6,074 5,365 3,136 2,281 8.1 45.6
Other noninterest income 215 (1,719) 10,845 14,556 5,555 (112.5) (53.0)
Investment securities gains 730 859 2,942 545 313 (15.0) NM
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Total noninterest income 167,159 144,036 137,822 115,823 94,968 16.1 13.6
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Total income, FTE 567,046 499,329 404,657 334,386 342,148 13.6 11.9
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Noninterest expenses:
Salaries and employee benefits 175,696 160,982 147,795 135,438 125,636 9.1 8.5
Net occupancy 24,224 19,373 18,316 18,132 16,825 25.0 8.0
Furniture and equipment 27,858 26,549 22,656 19,445 20,147 4.9 6.6
Insurance 19,697 18,868 14,678 9,472 7,159 4.4 23.2
Stationery and supplies 15,956 12,865 10,754 10,600 8,912 24.0 14.3
Bankcard interbank discount & interchange fees 13,983 11,245 10,121 8,456 7,119 24.3 14.7
Advertising 9,187 6,363 4,990 3,721 3,998 44.4 10.2
Telephone 8,610 7,344 6,583 6,284 6,001 17.2 7.0
Provision for loss on ORE 7,448 6,903 (479) 10,226 5,672 7.9 2.5
Postage 7,428 7,243 6,684 5,551 5,035 2.6 9.0
Loan costs 7,102 6,082 5,061 2,920 2,334 16.8 6.2
Consulting services 6,423 3,450 2,292 1,965 1,679 86.2 34.0
Legal 4,706 4,913 6,545 13,870 6,017 (4.2) (13.1)
Other real estate expense, net 1,191 4,207 6,978 239 4,851 (71.7) (27.0)
Other 56,637 43,069 43,530 38,776 30,904 31.5 14.8
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Total noninterest expenses 386,146 339,456 306,504 285,095 252,289 13.8 9.1
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Income before taxes, FTE 180,900 159,873 98,153 49,291 89,859 13.2 25.8
Less FTE adjustment 7,633 9,621 10,419 11,322 10,257 (20.7) (12.0)
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Income before income taxes 173,267 150,252 87,734 37,969 79,602 15.3 30.7
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Provision for income taxes 59,211 49,909 28,322 8,968 23,661 18.6 26.4
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
NET INCOME $114,056 $100,343 $59,412 $29,001 $55,941 13.7 25.8
=============================================== =========== =========== =========== =========== =========== ========= ===========
<FN>
NM = Not meaningful.
</TABLE>
<TABLE>
TABLE 3: FIVE YEAR SUMMARY - CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
(in thousands) 5-Year
1993/92 Compound
For the years ended December 31, 1993 1992 1991 1990 1989 % Chg Growth Rate
<S> <C> <C> <C> <C> <C> <C> <C>
=============================================== =========== =========== =========== =========== =========== ========= ===========
Assets:
Cash and due from banks $673,877 $616,121 $648,760 $609,433 $518,291 9.4 4.9
Interest-bearing deposits in other banks 16,461 10,036 11,175 50,637 34,494 64.0 (24.4)
Federal funds sold and securities purchased
under resale agreements 381,154 288,258 147,014 51,004 189,448 32.2 7.1
Trading account securities 607,854 388,961 313,930 154,951 193,345 56.3 97.0
Investment securities:
U.S. Treasury and Other U.S. Govt.
agencies and corporations 1,327,319 1,267,688 1,207,474 1,006,923 911,020 4.7 11.1
Obligations of states and
political subdivisions 180,129 199,692 162,480 211,023 199,343 (9.8) (1.0)
Other securities 255,335 282,800 177,134 158,881 198,249 (9.7) 18.9
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Total investment securities 1,762,783 1,750,180 1,547,088 1,376,827 1,308,612 0.7 10.3
Memo: Market values 1,794,647 1,781,913 1,591,633 1,392,318 1,315,310 0.7 11.0
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Loans:
Commercial 1,573,133 1,384,253 1,459,593 1,455,220 1,479,075 13.6 0.6
Real estate: term 2,311,401 2,096,136 2,062,649 2,123,550 1,988,222 10.3 5.7
Real estate: construction 245,106 162,945 209,729 255,788 229,206 50.4 1.3
Consumer: instalment 1,892,243 1,435,258 1,186,241 1,084,391 941,621 31.8 19.0
Consumer: credit cards 275,467 292,983 299,706 301,173 283,054 (6.0) 0.1
Direct lease financing 275,853 258,910 231,642 226,194 191,055 6.5 26.3
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Total loans 6,573,203 5,630,485 5,449,560 5,446,316 5,112,233 16.7 7.1
Less: Unearned income 12,182 13,861 16,609 23,179 21,158 (12.1) (11.2)
Reserve for loan losses 134,848 127,847 126,887 117,192 78,694 5.5 13.8
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Total loans, net 6,426,173 5,488,777 5,306,064 5,305,945 5,012,381 17.1 7.0
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Other real estate and other foreclosed assets 16,465 27,487 38,322 51,247 61,662 (40.1) (21.4)
Intangible assets 11,833 14,867 14,243 15,970 980 (20.4) 118.6
Other assets 315,089 310,986 263,572 277,889 234,618 1.3 8.1
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
TOTAL ASSETS $10,211,689 $8,895,673 $8,290,168 $7,893,903 $7,553,831 14.8 8.4
=============================================== =========== =========== =========== =========== =========== ========= ===========
<FN>
(continued)
</TABLE>
<TABLE>
TABLE 3: FIVE YEAR SUMMARY - CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
(in thousands)(continued) 5-Year
1993/92 Compound
For the years ended December 31, 1993 1992 1991 1990 1989 % Chg Growth Rate
<S> <C> <C> <C> <C> <C> <C> <C>
=============================================== =========== =========== =========== =========== =========== ========= ===========
Liabilities:
Deposits:
Noninterest-bearing deposits $1,697,687 $1,429,314 $1,244,239 $1,117,483 $1,000,723 18.8 12.7
Interest-bearing deposits:
Interest-bearing demand 1,041,770 945,508 783,237 703,436 610,455 10.2 10.7
Money market accounts 1,103,855 1,019,946 935,036 723,659 630,194 8.2 9.8
Savings 1,331,495 1,022,994 623,259 445,997 383,628 30.2 26.3
Time certificates less than $100,000 1,946,054 2,108,658 2,459,788 2,656,373 2,108,554 (7.7) 1.3
Time certificates of $100,000 or more 382,846 342,033 469,133 541,787 658,442 11.9 (9.4)
Foreign 0 0 0 0 21,169 NM
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Total interest-bearing deposits 5,806,020 5,439,139 5,270,453 5,071,252 4,412,442 6.7 6.6
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Total deposits 7,503,707 6,868,453 6,514,692 6,188,735 5,413,165 9.2 7.8
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Federal funds purchased and securities sold
under repurchase agreements 1,387,109 944,385 811,636 781,426 1,239,398 46.9 11.5
Other short-term borrowings 99,796 51,405 87,658 137,140 74,867 94.1 9.1
Long-term debt 224,836 127,203 87,516 98,851 147,331 76.8 7.3
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Total borrowed funds 1,711,741 1,122,993 986,810 1,017,417 1,461,596 52.4 10.7
Other liabilities 160,510 181,780 153,493 142,456 145,740 (11.7) 3.8
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
TOTAL LIABILITIES 9,375,958 8,173,226 7,654,995 7,348,608 7,020,501 14.7 8.2
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Stockholders' Equity:
Common stockholders' equity 835,028 721,664 634,324 544,369 532,340 15.7 11.0
Preferred stock 703 783 849 926 990 (10.2) (8.3)
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
TOTAL STOCKHOLDERS' EQUITY 835,731 722,447 635,173 545,295 533,330 15.7 11.0
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $10,211,689 $8,895,673 $8,290,168 $7,893,903 $7,553,831 14.8 8.4
=============================================== =========== =========== =========== =========== =========== ========= ===========
<FN>
NM=Not meaningful
</TABLE>
BUSINESS LINES
FSC was incorporated in 1928 and is the oldest multistate bank holding
company in the United States. The Corporation's full-service banking
business is conducted through six subsidiary Banks in six western states
- - - - Utah, Idaho, New Mexico, Oregon, Nevada, and Wyoming. Other FSC
subsidiaries are engaged in full-service leasing, operational and
processing services, insurance services, nonperforming asset liquidation
and management, small business investment, asset management, and
securities brokerage. The contribution of FSC's subsidiaries to the
Corporation's consolidated 1993 results are discussed below.
FIRST SECURITY BANK OF UTAH, N.A. (FSB Utah) is the largest bank in
Utah. At December 31, 1993, FSB Utah operated 113 full-service domestic
branches and 143 ATMs, plus one branch on Grand Cayman Island in the
British West Indies.
In 1993, FSB Utah earned a record $58.66 million, up $12.90 million
(28.2%) from $45.76 million earned in 1992. The major components of this
increase included: an $8.68 million (5.2%) growth in net interest income;
an $18.56 million (96.5%) reduction of the provision for loan losses; a
$13.34 million (17.5%) rise in noninterest income; and a $17.69 million
(11.5%) increase in noninterest expenses. FSB Utah's 1993 earnings
generated a 1.37% ROAA and a 19.72% ROAE, compared with 1.17% and 16.79%,
respectively, for 1992.
At December 31, 1993, FSB Utah's total assets were $4.81 billion, up
$552.76 million (13.0%) from year-end 1992, while total stockholders'
equity was $310.11 million, up $35.07 million (12.8%). A $669 thousand
provision for loan losses, consisting of $1.17 million in net loans
charged off partially offset by a $500 thousand reserve reduction,
brought FSB Utah's reserve for loan losses to $53.51 million, or 1.86% of
total loans. Total nonperforming assets of $17.77 million were 0.62% of
loans and ORE, while the ratio of the reserve for loan losses to
nonaccruing loans was 395.22%.
On April 1, 1993, FSB Utah acquired Dixie State Bank (headquartered in
St. George, Utah), with five branches and $72.91 million in deposits (See
Section on Mergers and Acquisitions, and Table 4: Mergers and
Acquisitions). On August 2, 1993, FSB Utah purchased $6.75 million in
deposits from two branches of Bank of America Arizona (located in Salt
Lake City and Kearns, Utah). On September 30, 1993, FSB Utah purchased
$5.77 million in deposits from two branches of Bank One of Utah (formerly
Valley Bank & Trust Company, located in Brigham City and Delta, Utah).
On November 30, 1993, FSB Utah purchased core banking assets and deposits
of approximately $7 million from First Professional Bank (located in Salt
Lake City, Utah).
FSB Utah has announced a pending acquisition of Community First Bank
(headquartered in Clearfield, Utah) with five branches and $67.26 million
in deposits. This acquisition is expected to be completed in the first
half of 1994.
FIRST SECURITY BANK OF IDAHO, N.A. (FSB Idaho) is the second largest
bank in Idaho. At December 31, 1993, FSB Idaho operated 86 full-service
domestic branches and 70 ATMs.
In 1993, FSB Idaho earned a record $38.77 million, up $4.09 million
(11.8%) from $34.68 million earned in 1992. The major components of this
increase included: a $13.08 million (10.5%) growth in net interest
income; an $87 thousand (1.1%) increase in the provision for loan losses;
a $5.17 million (14.3%) rise in noninterest income; and a $9.75 million
(9.9%) increase in noninterest expenses. FSB Idaho's 1993 earnings
generated a 1.25% ROAA and a 18.46% ROAE, compared with 1.25% and 18.19%,
respectively, for 1992.
At December 31, 1993, FSB Idaho's total assets were $3.32 billion, up
$427.76 million (14.8%) from year-end 1992, while total stockholders'
equity was $217.33 million, up $20.56 million (10.4%). A $7.79 million
provision for loan losses, consisting of $4.79 million in net loan
chargeoffs plus a $3.00 million reserve addition, brought FSB Idaho's
reserve for loan losses to $31.31 million or 1.25% of total loans. Total
nonperforming assets of $6.03 million were 0.24% of loans and ORE, while
the ratio of the reserve for loan losses to nonaccruing loans was 601.27%
at December 31, 1993.
FSB Idaho has announced a pending purchase of American Bank of
Commerce (headquartered in Boise, Idaho) with four branches and $55.40
million in deposits (See Section on Mergers and Acquisitions, and Table
4: Mergers and Acquisitions). This acquisition is expected to be
completed in the first half of 1994.
FIRST SECURITY BANK OF NEW MEXICO, N.A. (FSB New Mexico - formerly
First National Bank in Albuquerque, the wholly owned bank subsidiary of
FNFC) is the second largest bank in New Mexico. On November 19, 1993,
FSC acquired FNFC and its subsidiary, and as required by applicable
accounting rules, all historical amounts in this report have been
restated to reflect the effects of the pooling-of-interests merger with
FNFC (See Section on Mergers and Acquisitions, and Table 4: Mergers and
Acquisitions). At December 31, 1993, FSB New Mexico operated 26 full-
service domestic branches and 92 ATMs. Certain reclassifications and
adjustments have been made to the historical amounts reported by FNFC to
conform to FSC practices and policies.
In 1993, FSB New Mexico earned $7.16 million, down $6.71 million
(48.4%) from $13.87 million earned in 1992. The major components of this
decrease included: a $620 thousand (1.1%) reduction of net interest
income; a $1.90 million (443.5%) increase in the provision for loan
losses; a $2.28 million (10.1%) rise in noninterest income; and a $10.61
million (17.4%) increase in noninterest expenses. Included in these
results were one-time merger-related charges of $11.12 million after tax
($17.11 pre-tax). FSB New Mexico's 1993 earnings generated a 0.55% ROAA
and a 7.66% ROAE, compared with 1.07% and 17.33%, respectively, for 1992.
At December 31, 1993, FSB New Mexico's total assets were $1.31
billion, up $7.00 million (0.5%) from year-end 1992, while total
stockholders' equity was $91.77 million, up $4.65 million (5.3%). A
$2.32 million provision for loan losses, consisting of $4.38 million in
net loan chargeoffs offset by a $2.06 million reserve reduction, brought
FSB New Mexico's reserve for loan losses to $22.01 million or 3.95% of
total loans. Total nonperforming assets of $6.25 million were 1.12% of
loans and ORE, while the ratio of the reserve for loan losses to
nonaccruing and renegotiated loans was 366.94%.
FIRST SECURITY BANK OF OREGON (FSB Oregon). At December 31, 1993, FSB
Oregon operated 13 full-service domestic branches and 15 ATMs.
In 1993, FSB Oregon earned a record $7.57 million, up $3.60 million
(90.8%) from $3.97 million earned in 1992. The major components of this
increase included: a $3.25 million (20.7%) growth in net interest income;
a $1.37 million (85.0%) reduction in the provision for loan losses; a
$512 thousand (16.6%) rise in noninterest income; and a $2.29 million
(23.0%) increase in noninterest expenses. FSB Oregon's 1993 earnings
generated a 2.27% ROAA and a 24.84% ROAE, compared with 1.39% and 15.71%,
respectively, for 1992.
At December 31, 1993, FSB Oregon's total assets were $343.54 million,
up $47.49 million (16.0%) from year-end 1992, while total stockholders'
equity was $33.29 million, up $6.97 million (26.5%). A $242 thousand
provision for loan losses, consisting of $3 thousand in net loan
recoveries offset by a $245 thousand reserve addition, brought FSB
Oregon's reserve for loan losses to $4.29 million or 1.60% of total
loans. Total nonperforming assets of $7.07 million were 2.59% of total
loans and ORE, while the ratio of the reserve for loan losses to
nonaccruing loans was 270.40%.
On May 1, 1993, FSB Oregon acquired Benton County Bank (located in
Corvallis, Oregon) with two branches and $31.99 million in deposits (See
Section on Mergers and Acquisitions, and Table 4: Mergers and
Acquisitions).
FIRST SECURITY BANK OF NEVADA (FSB Nevada). On August 26, 1993, FSC
acquired Nevada Community Bank (located in Las Vegas, Nevada), with one
branch and $43.24 million in deposits (See Section on Mergers and
Acquisitions, and Table 4: Mergers and Acquisitions). On November 19,
1993, FSC acquired Continental National Bank (located in Las Vegas,
Nevada), with four branches and deposits of $198.16 million. At December
31, 1993, the two Nevada banks operated 5 full-service domestic branches
and 2 ATMs. On February 4, 1994, these two banks were merged and renamed
First Security Bank of Nevada, a Nevada state-chartered bank.
For the months of 1993 in which the two Nevada banks were FSC
subsidiaries, they earned a combined $520 thousand.
At December 31, 1993, the two Nevada banks had combined total assets
of $288.85 million, while total stockholders' equity was $20.40 million.
The two banks' combined reserve for loan losses was $4.50 million or
2.51% of total loans. Total nonperforming assets of $2.35 million were
1.30% of loans and ORE, while the ratio of the reserve for loan losses to
nonaccruing and renegotiated loans was 268.43%.
FIRST SECURITY BANK OF WYOMING (FSB Wyoming, formerly First Security
Bank of Rock Springs). At December 31, 1993, FSB Wyoming operated 2
full-service domestic branches and 2 ATMs.
In 1993, FSB Wyoming earned $943 thousand, down $72 thousand (7.1%)
from $1.02 million earned in 1992. The major components of this decrease
included: a $268 thousand (9.3%) growth in net interest income; an $8
thousand (32.5%) increase in the provision for loan losses; a $35
thousand (7.4%) rise in noninterest income; and a $411 thousand (22.7%)
increase in noninterest expenses. FSB Wyoming's 1993 earnings generated
a 1.27% ROAA and a 11.37% ROAE, compared with 1.49% and 14.22%,
respectively, for 1992.
At December 31, 1993, FSB Wyoming's total assets were $103.02 million,
up $31.61 million (44.3%) from year-end 1992, while total stockholders'
equity was $12.82 million, up $5.82 million (83.1%). A $33 thousand
provision for loan losses, consisting of $33 thousand in net loan
chargeoffs, brought FSB Wyoming's reserve for loan losses to $815
thousand or 1.93% of total loans. Total nonperforming assets of $173
thousand, consisting only of ORE, were 0.41% of loans and ORE.
On October 28, 1993, FSB Wyoming acquired the State Bank of Green
River (located in Green River, Wyoming) with one branch and $27.96
million in deposits (See Section on Mergers and Acquisitions, and Table
4: Mergers and Acquisitions). On February 18, 1994, FSB Wyoming
acquired the Evanston and Bridger Valley, Wyoming branches of Equality
State Bank (headquartered in Cheyenne, Wyoming) with $30.54 million in
deposits in those two branches.
FSB Wyoming has announced a pending purchase of Star Valley State Bank
(located in Afton, Wyoming) with one branch and $56.58 million in
deposits. This acquisition is expected to be completed in the first half
of 1994.
FIRST SECURITY MORTGAGE COMPANY (FSMC) is FSC's special purpose
subsidiary, whose functions include holding and liquidating nonperforming
assets and managing other problem assets. In 1993, FSMC lost $1.56
million, an improvement of $345 thousand (18.1%) from a $1.90 million
loss incurred in 1992.
At December 31, 1993, FSMC's total assets were $16.98 million, down
$2.20 million (11.5%) from year-end 1992, while total stockholders'
equity was $836 thousand, down $523 thousand (38.5%). During the year,
FSB New Mexico sold to FSMC $9.88 million in assets, consisting of $6.69
million in loans, net of reserves of $5.14 million, plus $3.16 million in
ORE. A $1.50 million negative provision for loan losses consisted of
$1.11 million in net loan recoveries plus a $391 thousand reserve
reduction. At year end, FSMC's reserve for loan losses was $11.53
million or 61.65% of total loans. Total nonperforming assets of $12.69
million were 54.21% of total loans and ORE, while the ratio of the
reserve for loan losses to nonaccruing loans was 144.40%.
FIRST SECURITY LEASING COMPANY (FSLC) is a full-service leasing
company which originates and manages leases for both its own portfolio
and the lease portfolios of the Corporation's subsidiary Banks. Leases
are carried by the Corporation's subsidiaries primarily to generate
income, although significant deferred tax benefits have been, and
continue to be, generated by the lease portfolios.
In 1993, FSLC earned $2.85 million, up $1.04 million (57.5%) from
$1.81 million earned in 1992. The major components of this increase
included: a $642 thousand (8.1%) growth in net interest income; an
improvement in the quality of the portfolio which allowed a $1.23 million
(37.4%) reduction in the provision for loan losses; a $164 thousand
(14.2%) increase in noninterest income; and a $933 thousand (19.4%)
increase in noninterest expenses. FSLC's 1993 earnings generated a 1.81%
ROAA and a 12.73% ROAE, compared with 1.03% and 8.80%, respectively, for
1992.
At December 31, 1993, FSLC's total assets were $155.37 million, down
$13.49 million (8.0%), while total stockholders' equity was $23.68
million, up $3.02 million (14.6%). A $2.06 million provision for loan
losses, consisting of $2.06 million in net loan chargeoffs, brought
FSLC's reserve for loan losses to $6.89 million or 4.30% of total loans.
Total nonperforming assets of $477 thousand were 0.30% of loans and ORE.
FIRST SECURITY INSURANCE, INC. (FSI) provides full-service insurance
agency services offering various insurance products to customers in the
FSC market region. In 1993, FSI earned $796 thousand, up $189 thousand
(31.2%) from $607 thousand earned in 1992. Additionally, FSI paid
commissions of $1.00 million (pre-tax) to other FSC subsidiaries in 1993,
compared with $1.38 million in 1992.
On March 1, 1993, FSI acquired certain assets of the Fenton Insurance
Agency, located in Salt Lake City, Utah (See Section on Mergers and
Acquisitions, and Table 4: Mergers and Acquisitions). On September 2,
1993, FSI acquired the Kennevick Insurance Agency located in Boise,
Idaho.
FIRST SECURITY LIFE INSURANCE COMPANY OF ARIZONA (FSLIA) reinsures
credit life and disability insurance for borrowers from other FSC
subsidiaries. In 1993, FSLIA earned $952 thousand, up $34 thousand
(3.7%) from $918 thousand earned in 1992.
FIRST SECURITY BUSINESS INVESTMENT CORPORATION (FSBIC), organized in
1993, is FSC's small-business investment company, created to originate
investments in small, successful businesses and provide alternative
financing sources for small companies whose financing needs are not being
met by conventional lending sources. Investments to be made by FSBIC
will include taking both equity and debt positions. At December 31,
1993, FSBIC had no investments.
FIRST SECURITY INVESTMENT SERVICES, INC. has two operating
subsidiaries:
* FIRST SECURITY INVESTOR SERVICES (FSIS) provides a full spectrum of
securities products and brokerage services, including discount brokerage
and investment advice, to the public.
* FIRST SECURITY INVESTMENT MANAGEMENT, INC. (FSIM) provides
investment management and advisory services to the Trust Groups of FSC's
subsidiary Banks and to other clients.
FIRST SECURITY SERVICE COMPANY (FSSC) provides specialized services to
FSC's subsidiaries. These services include loan servicing, systems and
operations, accounting, security, consumer compliance, human resources,
planning and training, marketing, advertising and purchasing.
FIRST SECURITY INFORMATION TECHNOLOGY, INC. (FSIT) provides
specialized services including computer processing, telecommunications,
and personal computer support to FSC subsidiaries. In 1992, substantial
computer operations were transferred from FSSC to FSIT.
FIRST SECURITY PROCESSING SERVICES, INC. (FSPS, formerly a division of
FSSC) was organized in 1993 to handle FSC's processing of bankcard
transactions and products for other financial institutions, including
other banks, credit unions, and savings associations. FSC has been
processing transactions for other financial institutions since 1978, and
at December 31, 1993, was processing bankcard transactions for 318 other
financial institutions located in 37 states and the District of Columbia.
# # #
FSC owns 100% of the stock of all its subsidiaries except FSB Utah
(99.9% owned), and FSB Wyoming (99.9% owned). FSC employs no double
leverage (parent company debt invested as equity in a subsidiary) in the
capitalization of its subsidiaries. Products and services rendered by
any FSC subsidiary to another FSC subsidiary are charged to the receiving
subsidiary at rates based on written agreements between the subsidiaries.
In 1993, FSC used a proportional allocation process to assign many of
these costs, but in 1994, the Corporation switched to a calculated per
item charge to assign costs based on actual usage of the products and
services.
<TABLE>
TABLE 4: MERGERS & ACQUISITIONS
<CAPTION>
Deposits at
Bank Offices Acquisition
Date of Type of ----------------- -----------
Acquisition Acquisition Acquired Institution: Home Office: Acquired Retained $000
<C> <S> <S> <S> <C> <C> <C>
- - - ------------ ----------------- ------------------------------------ ---------------------- -------- -------- -----------
1992:
24-Jan Pool-of-interests First National Bank of North Idaho Coeur D' Alene, ID 10 9 $148,593
01-Apr Purchase Bank of Willamette Valley Dallas, OR 1 1 23,648
01-Oct Purchase First Interstate Bank of Utah 5 branches only, UT 5 3 51,840
1993:
01-Mar Purchase Fenton Insurance Company Salt Lake City, UT - - -
01-Apr Pool-of-interests First Bancshares, Inc. St. George, UT 5 5 72,910
01-May Pool-of-interests Benton County Bank Corvallis, OR 2 2 31,987
02-Aug Purchase Bank of America Arizona Deposits only, UT - - 6,753
26-Aug Pool-of-interests Desert SouthWest Community Bancorp Las Vegas, NV 1 1 43,242
02-Sep Pool-of-interests Kennevick Insurance Agency Boise, ID - - -
30-Sep Purchase Bank One of Utah Deposits only, UT - - 5,772
28-Oct Pool-of-interests State Bank of Green River Green River, WY 1 1 27,957
19-Nov Pool-of-interests First National Financial Corporation Albuquerque, NM 26 26 1,127,302
19-Nov Pool-of-interests Continental Bancorporation Las Vegas, NV 4 4 198,157
30-Nov Purchase First Professional Bank Core deposits only, UT - - 6,020
1994:
18-Feb Purchase Equality State Bank 2 branches only, WY 2 2 30,544
TBA Pool-of-interests Community First Bank Clearfield, UT 5 5 67,263
TBA Purchase American BanCorporation Boise, ID 4 4 55,400
TBA Purchase Star Valley State Bank Afton, WY 1 1 56,582
- - - ------------ ----------------- ------------------------------------ ---------------------- -------- -------- -----------
TOTALS 67 64 $1,953,970
============ ================= ==================================== ====================== ======== ======== ===========
<FN>
TBA: To Be Announced.
</TABLE>
MERGERS AND ACQUISITIONS
FSC's merger and acquisition activity reflects management's strategy
of diversifying and enhancing the Corporation's financial services
delivery system through the expansion and geographical diversification of
its bank branch network and nonbank activities in new as well as existing
markets. Management believes that long-term returns on the stockholders'
investment will benefit from these acquisitions. Management will
continue its strategy of acquiring solid, well-managed financial services
companies when suitable opportunities arise.
During 1993, FSC completed 9 bank acquisitions, expanding its existing
bank operations in Utah, Oregon, and Wyoming, and acquiring new bank
subsidiaries in New Mexico and Nevada (See Table 4: Mergers and
Acquisitions). These acquisitions added a total of 39 branches and $1.52
billion in deposits to FSC's consolidated operations. In addition, FSC,
through its insurance subsidiary FSI, also completed two insurance agency
acquisitions during the year. Only the pooling-of-interests merger with
First National Financial Corporation was material to the Corporation's
consolidated operations, so historical amounts have been restated only
for that acquisition.
Thus far in 1994, FSC has completed 1 bank acquisition. On February
18, 1994, FSB Wyoming purchased the Evanston and Bridger Valley, Wyoming
branches of Equality State Bank (headquartered in Cheyenne, Wyoming) with
approximately $30.54 million in deposits in those two branches.
FSC has announced three pending acquisitions for 1994, expanding its
existing bank operations in Utah, Idaho, and Wyoming. These acquisitions
are subject to regulatory approval and the approval of the stockholders
of both the acquiring FSC subsidiary and the entity being acquired. They
are described below:
1. FSB Utah has announced a pending purchase of Community First Bank
(headquartered in Clearfield, Utah) with approximately $67.26 million in
deposits in five branches. This acquisition is expected to be completed
in the first half of 1994.
2. FSB Idaho has announced a pending purchase of American Ban
Corporation and its wholly owned subsidiary American Bank of Commerce
(with approximately $55.40 million in deposits and four branches located
in Boise, Idaho). This acquisition is expected to be completed in the
first half of 1994.
3. FSB Wyoming has announced a pending purchase of Star Valley State
Bank (located in Afton, Wyoming) with one branch and approximately $56.58
million in deposits. This acquisition is expected to be completed in the
first half of 1994.
<TABLE>
TABLE 5: CAPITAL RATIOS (1992 guidelines)
<CAPTION>
First Security First Security Bank First Security Bank First Security Bank
Consolidated of Utah, N.A. of Idaho, N.A. of New Mexico, N.A. Regulatory
As of December 31: 1993 1992 1993 1992 1993 1992 1993 1992 Minimums
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- - - --------------------------------- ------------------- ------------------- ------------------- ------------------- -----------
Risk-based capital ratios:
Tier 1 capital to
risk-adjusted assets 11.82 11.32 9.72 8.85 8.38 8.81 14.04 13.06 4.0
Tier 1 + Tier 2 capital to
risk-adjusted assets 14.15 13.78 11.46 10.10 10.79 10.52 15.32 14.35 8.0
Leverage 8.08 7.99 6.35 6.27 6.40 6.63 7.01 6.64 4.0-5.0
Tangible common equity to total
assets less intangible assets 8.07 7.96 6.36 6.33 6.41 6.63 7.01 6.63
Total equity to total assets 8.18 8.12 6.44 6.45 6.54 6.80 7.01 6.69
Average equity to average assets 8.52 8.08 6.95 6.94 6.76 6.86 7.24 6.16
================================= ==================== ==================== ==================== ==================== ===========
<FN>
(A) Federal Reserve Board guidelines provide that all bank holding companies (other than those that meet certain criteria)
maintain a minimum leverage ratio of 3%, plus an additional cushion of 100 to 200 basis points. The guidelines also
state that banking organizations experiencing internal growth or making acquisitions will be expected to maintain
"strong capital positions" substantially above the minimum supervisory levels without significant reliance on intangible
assets.
</TABLE>
STOCKHOLDERS' EQUITY AND CAPITAL ADEQUACY
Maintaining a strong equity position has been and continues to be a
high priority for FSC. As a result, total stockholders' equity at
December 31, 1993, was increased to $835.73 million, up $113.28 million
(15.7%) from year-end 1992, while total stockholders' equity at December
31, 1992, was $722.45 million, up $87.27 million (13.7%) from $635.17
million at year-end 1991. Growth in both years was due to retention of
record earnings, combined with the effects of pooling-of-interests
acquisitions. The ratio of stockholders' equity to total assets was
8.18% at December 31, 1993, up from 8.12% at year-end 1992 and 7.66% at
year-end 1991 (See Table 1: Five-Year Summary - Financial Highlights).
For the same periods, the ratio of tangible common equity to tangible
total assets was 8.07%, up from 7.96% and 7.51%, respectively.
The Federal Reserve Board has adopted risk-based capital guidelines to
help assess and regulate the capital adequacy of bank holding companies
such as FSC (See Table 1: Five-Year Summary - Financial Highlights, and
Table 5: Capital Ratios). At December 31, 1993, FSC's Tier 1 ratio was
11.82%, up from 11.32% and 10.61% for year-ends 1992 and 1991,
respectively. For the same periods, FSC's Total Capital ratio was
14.15%, up from 13.78% and 11.84% for year-ends 1992 and 1991,
respectively. In addition, each of the Corporation's six subsidiary
Banks is subject to similar capital requirements adopted by its primary
regulator. All of FSC's equity-related ratios exceeded the regulatory
minimums, reflecting the Corporation's long-standing emphasis on
maintaining a strong capital position. FSC and its subsidiary Banks are
classified as "well-capitalized institutions" according to the regulatory
definition for risk-based capital ratios. With its strong equity and
regulatory ratios, FSC is well-positioned to selectively invest in
profitable business opportunities, while maintaining capital ratios at
levels determined to be prudent and conservative by management.
At December 31, 1993, there were 8,748 stockholders of record holding
48.44 million shares of FSC's Common Stock ($1.25 par, 150 million shares
authorized), compared with 7,976 stockholders and 45.64 million shares at
year-end 1992, and 6,911 stockholders and 43.94 million shares at year-
end 1991. FSC's Common Stock is traded on the NASDAQ/NMS under the
symbol "FSCO ". FSC's Common Stock is included in the Standard & Poors'
"MidCap 400" Index, and the Keefe, Bruyette & Woods, Inc. "KBW 50 Index".
In 1993, cash dividends of $38.60 million were paid on common stock,
which amounted to 33.85% of net income. During the year, FSC raised its
quarterly dividend paid per share of common stock from $0.19 for the
first quarter, to $0.23 per share for the second, third, and fourth
quarters. This totaled $0.88 paid per share in 1993, up $0.20 per share
(29.4%) from 1992, while for 1992, the total was $0.68 paid per share, up
$0.08 per share (13.3%) from $0.60 paid per share in 1991. The 1993
dividends marked the 59th consecutive year in which the Corporation has
paid cash dividends. National and state banking and insurance
regulations impose restrictions on the ability of FSC's bank and
insurance subsidiaries to transfer funds to the Corporation in the form
of loans or dividends. Such restrictions have not had, nor are they
expected to have, any effect on FSC's current dividend policy. The
Corporation's current and past record of dividend payments should not be
construed as a guarantee of similar dividend payments in the future.
On January 24, 1994, FSC announced an increase in the Corporation's
regular quarterly cash dividend to $0.26 a share, up $0.03 per share
(13.0%) from the previous $0.23 per share. The increased quarterly cash
dividend, payable March 7, 1994 to shareholders of record on February 18,
1994, equals an indicated annualized dividend rate of $1.04 per share, up
$0.12 per share (13.0%) from the previous $0.92 per year. At the market
closing price of $26.50 per share on Friday, January 21, the annual
dividend yield on FSC's common stock was 3.92%, using the new annual
dividend rate of $1.04 per share.
On January 24, 1994, FSC announced a program to repurchase
approximately 1.5 million shares of its common stock, purchasing the
shares at prevailing prices in the open market as permitted by applicable
rules. Shares repurchased will be used to complete the purchase
acquisitions of Star Valley State Bank (See also Section on Mergers and
Acquisitions, and Table 4: Mergers and Acquisitions), grant stock
options and support employee benefit programs. These purchases are in
addition to ongoing periodic share repurchases over the last several
years for use in ongoing stock option and employee benefit plans.
The bid price of FSC common stock was $25.75 per share at December 31,
1993, versus a book value of $17.24 per share, resulting in a market-to-
book ratio of 149.36%. In comparison, the year-end 1992 per share
figures were $27.25 bid, versus a $15.81 book value, for a market-to-book
ratio of 172.36%, while the year-end 1991 per share figures were $19.00
bid, versus a $14.44 book value, for a market-to-book ratio of 131.58%.
At December 31, 1993, FSC's market capitalization reached $1.25 billion,
representing a five-year compound growth rate of 23.9%.
At the end of 1993, 671 stockholders of record owned 13,396 shares of
Series A $3.15 Cumulative Convertible Preferred Stock, for which there is
no active trading market. At year-end 1992, 742 stockholders owned
14,919 preferred shares, while at year-end 1991, 813 stockholders owned
16,178 preferred shares. Each share of FSC's preferred stock is
convertible into 12.15 shares of FSC common stock.
INTEREST EARNING ASSETS and ASSET QUALITY
FSC has policies and procedures designed to mitigate credit risk and
to maintain the quality of the Corporation's loan and investment
securities portfolios. These include underwriting standards for new
credits and the continuous monitoring and reporting of asset quality and
adequacy of the reserve for loan losses. The components of FSC's
interest earning assets and asset quality are discussed in the following
sections: Investment Securities, Loans, Problem Assets, and Reserve for
Loan Losses.
<TABLE>
TABLE 6: INVESTMENT SECURITY MATURITIES, YIELDS AND MARKET VALUES (in thousands)
<CAPTION>
Balance Yield % (A) Market Value
-------------------------------- -------------------- --------------------------------
As of December 31, 1993 1992 1991 1993 1992 1991 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- - - -------------------------------------- ---------- ---------- ---------- ------ ------ ------ ---------- ---------- ----------
Securities Issued By The U.S.
Treasury & Other U.S. Govt.
agencies & Corporations:
Under one year $344,090 $357,320 $290,718 5.65 6.35 8.60 $346,928 $360,712 $295,047
One to five years 342,762 309,747 299,413 6.06 6.75 7.80 349,490 319,749 313,915
Five to ten years 161,297 121,853 31,800 6.52 6.25 8.20 161,561 122,936 32,456
Over ten years 479,170 478,768 585,543 5.34 7.80 8.05 483,563 486,157 602,868
Total 1,327,319 1,267,688 1,207,474 5.75 6.99 8.12 1,341,542 1,289,554 1,244,286
- - - -------------------------------------- ---------- ---------- ---------- ------ ------ ------ ---------- ---------- ----------
Securities Issued By States &
Political Subdivisions:
Under one year $46,682 $62,215 $23,119 4.21 4.92 6.68 $46,867 $62,425 $22,704
One to five years 71,987 73,649 74,280 6.18 6.98 7.65 74,494 75,422 75,589
Five to ten years 41,625 47,981 47,732 7.06 8.28 7.34 44,106 50,387 49,690
Over ten years 19,835 15,847 17,349 6.21 7.87 7.76 20,856 16,115 16,761
Total 180,129 199,692 162,480 5.88 6.72 7.44 186,323 204,349 164,744
- - - -------------------------------------- ---------- ---------- ---------- ------ ------ ------ ---------- ---------- ----------
Corporate Debt Securities:
Under one year $8,365 $16,438 $3,208 8.84 5.98 8.37 $8,542 $16,676 $3,214
One to five years 62,557 61,305 54,501 5.30 8.11 8.64 63,239 62,552 56,238
Five to ten years 37,045 39,974 27,144 4.77 3.79 6.87 37,043 40,102 27,784
Over ten years 109,593 131,276 72,287 4.85 5.15 7.61 110,897 132,022 73,439
Total 217,560 248,993 157,140 5.12 5.71 7.86 219,721 251,352 160,675
- - - -------------------------------------- ---------- ---------- ---------- ------ ------ ------ ---------- ---------- ----------
Equity Securities (B):
Under one year $4,537 $4,597 $4,769 6.12 6.93 8.62 $12,855 $6,621 $5,960
Over ten years 33,238 29,210 15,225 11.17 8.23 7.24 34,206 30,037 15,968
Total 37,775 33,807 19,994 10.56 8.07 7.57 47,061 36,658 21,928
- - - -------------------------------------- ---------- ---------- ---------- ------ ------ ------ ---------- ---------- ----------
Total Investment Securities:
Under one year $403,674 $440,570 $321,814 5.55 6.14 8.46 $415,192 $446,434 $326,925
One to five years 477,306 444,701 428,194 5.98 6.98 7.88 487,223 457,723 445,742
Five to ten years 239,967 209,808 106,676 6.35 6.25 7.48 242,710 213,425 109,930
Over ten years 641,836 655,101 690,404 5.59 7.29 7.98 649,522 664,331 709,036
Total 1,762,783 1,750,180 1,547,088 5.79 6.80 8.02 1,794,647 1,781,913 1,591,633
====================================== ================================ ====== ====== ====== ================================
Unrealized Gains & Losses: Unrealized Gains Unrealized Losses Net Unrealized Gains/Losses
-------------------------------- -------------------- --------------------------------
As of December 31, 1993 1992 1991 1993 1992 1991 1993 1992 1991
- - - -------------------------------------- ---------- ---------- ---------- ------ ------ ------ ---------- ---------- ----------
Securities Issued By The U.S.
Treasury & other U.S. Govt.
agencies & corporations $17,170 $22,609 $37,162 $2,947 $743 $350 $14,223 $21,866 $36,812
Securities issued by states
& political subdivisions 6,288 4,866 2,874 94 209 610 6,194 4,657 2,264
Corporate debt securities 2,470 2,878 3,633 309 519 98 2,161 2,359 3,535
Equity securities (B) 9,311 2,874 1,979 25 23 45 9,286 2,851 1,934
- - - -------------------------------------- ---------- ---------- ---------- ------ ------ ------ ---------- ---------- ----------
Total Investment Securities $35,239 $33,227 $45,648 $3,375 $1,494 $1,103 $31,864 $31,733 $44,545
====================================== ================================ ====== ====== ====== ================================
Pledged at December 31 $1,659,133 $1,041,994 $940,307
====================================== ================================ ====== ====== ====== ================================
<FN>
(A) Average yields have been calculated using coupon rates, not adjusted to a fully taxable equivalent basis.
(B) "Equity Securities" include common and preferred stocks, stock in the Federal Reserve and Federal Home Loan Bank.
Marketable equity securities have been reported as maturing in "Under one year", unless ownership is a condition for
participation in specific programs, such as stock in the Federal Reserve and FHLB, FNMA stock, etc., in which case
they are reported as maturing in "Over ten years".
</TABLE>
INVESTMENT SECURITIES. The investment portfolio at December 31, 1993,
totaled $1.76 billion, up $12.60 million (0.7%) from year-end 1992, while
at December 31, 1992 the investment portfolio totaled $1.75 billion, up
$203.09 million (13.1%) from $1.55 billion at year-end 1991 (See Table 3:
Five-Year Summary - Condensed Consolidated Balance Sheets, and Table 6:
Investment Security Maturities, Yields and Market Values). FSC manages
its investment portfolios within policies which seek to achieve desired
liquidity levels, manage interest rate sensitivity risk, meet earnings
objectives, and fulfill requirements for collateral to support deposit
and/or repurchase agreement activities. FSC had no concentrations of
investment securities from any single issuer, excluding the U.S.
Government and U.S. Government-sponsored agencies, that constituted 10%
or more of stockholders' equity at year-end 1993.
It has been FSC's policy to hold investment securities to maturity.
The Corporation's policy has not permitted "gains trading" (selling
investment securities before their scheduled maturities in order to
recognize market appreciation, while continuing to hold securities with
unrealized market losses) in the investment portfolios. However,
asset/liability management policies have allowed limited sales of short-
term investment securities in the year of their maturity. Securities
purchased for trading purposes are carried in separately identified
trading accounts which are monitored daily and marked-to-market monthly.
During 1993, FSC's Bank subsidiaries had no sales of investment
portfolio securities. There were $17.15 million of municipal securities
called prior to scheduled maturity dates that were not held in trading
accounts. In addition to securities called in FSC's Banks, its nonbank
subsidiaries sold $2.31 million of securities in order to improve
portfolio quality. All of these transactions resulted in gross realized
securities gains of $731 thousand and gross realized securities losses of
$1 thousand, for a net gain of $730 thousand.
At December 31, 1993, FSC's investment portfolio carried total
unrealized gains of $35.24 million and unrealized losses of $3.38
million. For 1992 and 1991 respectively, unrealized gains were $33.23
million and $45.65 million while unrealized losses were $1.49 million and
$1.10 million.
Effective January 1, 1994, FSC adopted Statement of Financial
Accounting Standards No. 115 (SFAS 115), "Accounting for Certain
Investments in Debt and Equity Securities". SFAS 115 requires the
Corporation to classify its investment portfolio securities as either
held to maturity, available for sale, or trading. Held to maturity
securities are accounted for at amortized cost; available for sale
securities are marked to fair value with the tax-effected unrealized
gain/loss reported as a net amount in a separate component of
stockholders' equity; and trading securities are marked to fair value
with unrealized gains/losses included in earnings. Under applicable
accounting rules, FSC previously carried all investment portfolio
securities at amortized cost based on management's intent and ability to
hold securities on a long-term basis. Implementation of SFAS 115 will
result in additions to or deductions from total stockholders' equity as
the result of fluctuations in fair value. The adoption of SFAS 115 on
January 1, 1994, resulted in an increase in the carrying value of
investment securities of approximately $13.98 million, with corresponding
increases in stockholders' equity and deferred income tax liabilities of
approximately $8.89 million and $5.10 million, respectively.
<TABLE>
TABLE 7: LOANS OUTSTANDING (in thousands)
<CAPTION>
1993 1992
----------------- -----------------
% of % of
Total Total Balance
As of December 31, Balance Loans Balance Loans % Change
<S> <C> <C> <C> <C> <C>
- - - ----------------------------------------------- ----------- ----- ----------- ----- -----------
Commercial Loans:
Commercial / Industrial $1,166,568 17.7 $1,010,833 18.0 15.4
Agricultural 255,122 3.9 240,818 4.3 5.9
Other Commercial 151,443 2.3 132,602 2.4 14.2
- - - ----------------------------------------------- ----------- ----- ----------- ----- -----------
TOTAL COMMERCIAL LOANS 1,573,133 23.9 1,384,253 24.6 13.6
- - - ----------------------------------------------- ----------- ----- ----------- ----- -----------
Real Estate Secured Loans:
Residential Real Estate Loans:
Term 1,251,403 19.0 1,087,394 19.3 15.1
Home equity 280,776 4.3 225,906 4.0 24.3
Construction 148,545 2.3 78,303 1.4 89.7
Construction Land 13,187 0.2 13,198 0.2 (0.1)
- - - ----------------------------------------------- ----------- ----- ----------- ----- -----------
Total Residential Real Estate Loans 1,693,911 25.8 1,404,801 24.9 20.6
- - - ----------------------------------------------- ----------- ----- ----------- ----- -----------
Commercial Real Estate (CRE) Loans:
Term: owner occupied 319,542 4.9 363,186 6.5 (12.0)
Term: nonowner occupied 391,851 6.0 368,958 6.6 6.2
Construction: owner occupied 42,249 0.6 17,041 0.3 147.9
Construction: nonowner occupied 37,480 0.6 50,659 0.9 (26.0)
- - - ----------------------------------------------- ----------- ----- ----------- ----- -----------
Subtotal: CRE Owner Occupied 361,791 5.5 380,227 6.8 (4.8)
Subtotal: CRE Nonowner Occupied 429,331 6.5 419,617 7.5 2.3
- - - ----------------------------------------------- ----------- ----- ----------- ----- -----------
Commercial Land 54,197 0.8 32,703 0.6 65.7
- - - ----------------------------------------------- ----------- ----- ----------- ----- -----------
Total Commercial Real Estate Loans 845,319 12.9 832,547 14.8 1.5
- - - ----------------------------------------------- ----------- ----- ----------- ----- -----------
Farm Land 17,277 0.3 21,733 0.4 (20.5)
- - - ----------------------------------------------- ----------- ----- ----------- ----- -----------
TOTAL REAL ESTATE SECURED LOANS 2,556,507 38.9 2,259,081 40.1 13.2
Memo: Total RE Term Loans 2,311,401 35.2 2,096,136 37.2 10.3
Memo: Total RE Construction Loans 245,106 3.7 162,945 2.9 50.4
- - - ----------------------------------------------- ----------- ----- ----------- ----- -----------
Consumer Loans:
Auto 1,540,213 23.4 1,130,743 20.1 36.2
Student 110,231 1.7 95,780 1.7 15.1
Credit Card Receivables 275,467 4.2 292,983 5.2 (6.0)
Other Consumer 241,799 3.7 208,735 3.7 15.8
- - - ----------------------------------------------- ----------- ----- ----------- ----- -----------
TOTAL CONSUMER LOANS 2,167,710 33.0 1,728,241 30.7 25.4
- - - ----------------------------------------------- ----------- ----- ----------- ----- -----------
Direct Lease Financing:
TOTAL DIRECT LEASE FINANCING 275,853 4.2 258,910 4.6 6.5
- - - ----------------------------------------------- ----------- ----- ----------- ----- -----------
TOTAL LOANS 6,573,203 100.0 5,630,485 100.0 16.7
Unearned Income (12,182) (13,861) (12.1)
- - - ----------------------------------------------- ----------- ----- ----------- ----- -----------
Loans, Net of Unearned Income 6,561,021 5,616,624 16.8
Reserve for Loan Losses (134,848) (127,847) 5.5
- - - ----------------------------------------------- ----------- ----- ----------- ----- -----------
TOTAL LOANS, NET $6,426,173 $5,488,777 17.1
=============================================== =========== ===== =========== ===== ===========
</TABLE>
LOANS. FSC has a portfolio of loans made to borrowers located
primarily in the states where the Corporation has its subsidiary Bank
offices (Utah, Idaho, New Mexico, Oregon, Nevada, and Wyoming) and
contiguous market areas. At December 31, 1993, FSC's total loans net of
unearned income totaled $6.56 billion, up $944.40 million (16.8%) from
year-end 1992, while for 1992, total loans were $5.62 billion, up $183.67
million (3.4%) from $5.43 billion at year-end 1991 (See Table 1: Five-
Year Summary - Financial Highlights, Table 3: Five-Year Summary -
Condensed Consolidated Balance Sheets, and Table 7: Loans Outstanding).
For both years, the increase was due primarily to a combination of
corporate growth plus the effects of acquisitions. The ratio of total
loans to total assets was 64.25% at December 31, 1993, up from 63.14% at
year-end 1992, but down from 65.53% at year-end 1991. The components of
FSC's loan portfolio are discussed below.
Commercial Loans: FSC's commercial loans are primarily loans to small
and medium-sized businesses and agricultural loans. At December 31,
1993, commercial loans were $1.57 billion or 23.9% of total loans, up
$188.88 million (13.6%) from year-end 1992 due to acquisitions and
corporate growth. For year-end 1992, commercial loans were $1.38 billion
or 24.6% of total loans, down $75.34 million (5.2%) from $1.46 billion at
year-end 1991.
Real Estate Secured Loans: At December 31, 1993, real estate secured
loans were $2.56 billion or 38.9% of total loans, up $297.43 million
(13.2%) from year-end 1992 due to acquisitions and corporate growth. For
year-end 1992, real-estate secured loans were $2.26 billion or 40.1% of
total loans, essentially unchanged from $2.27 billion at year-end 1991.
For balance sheet and interest rate risk management purposes in 1993, FSC
did not retain all newly-originated fixed-rate mortgage loans but passed
some through to secondary markets while retaining the majority of the
loan servicing. During 1993, the Corporation, excluding its New Mexico
and Nevada banks, originated $2.09 billion in real estate secured loans,
passing through $927 million into secondary markets, while retaining most
of the servicing. At December 31, 1993, the components of total real
estate secured loans included:
* Residential Real Estate Loans were $1.69 billion or 25.8% of total
loans, up $289.11 million (20.6%) from $1.40 billion or 24.9% of total
loans in 1992. This increase was due to acquisitions and management's
decision to carry an increased level of residential real estate loans
supported by Federal Home Loan Bank funds. Residential real estate loans
comprised 66.3% of total real estate secured loans at year-end 1993,
compared with 62.2% at year-end 1992.
* Commercial Real Estate (CRE) loans were $845.32 million or 12.9% of
total loans, up $12.77 million (1.5%) from $832.55 million or 14.8% of
total loans in 1992. CRE loans comprised 33.1% of total real estate
secured loans at year-end 1993, compared with 36.9% at year-end 1992.
The percentage of CRE owner-occupied loans to the total CRE portfolio was
42.8% at year-end 1993 compared with 45.7% at year-end 1992.
* Farmland Loans were $17.28 million or 0.3% of total loans, down
$4.46 million (20.5%) from $21.73 million or 0.4% of total loans in 1992.
Farmland loans comprised 0.7% of total real estate secured loans at year-
end 1993, compared with 1.0% at year-end 1992.
Consumer Loans: At December 31, 1993, consumer loans were $2.17
billion or 33.0% of total loans, up $439.47 million (25.4%) from year-end
1992. For year-end 1992, consumer loans were $1.73 billion or 30.7% of
total loans, up $242.29 million (16.3%) from $1.49 billion at year-end
1991. For both years, this was due to acquisitions, corporate growth,
and FSC's success in booking a large volume of dealer originated auto
loans which contributed significantly to the increase in consumer loans.
The asset quality in this portfolio remained strong in 1993.
Leases: At December 31, 1993, leases were $275.85 million or 4.2% of
total loans, up $16.94 million (6.5%) from year-end 1992. For year-end
1992, leases were $258.91 million or 4.6% of total loans, up $27.27
million (11.8%) from $231.64 million at year-end 1991. For both years,
this was due to acquisitions and corporate growth. Leases are originated
by FSC as a source of interest income, although significant deferred tax
benefits are also generated.
<TABLE>
TABLE 8: PROBLEM ASSETS (in thousands)
<CAPTION>
5-Year
1993/92 Compound
As of December 31, 1993 1992 1991 1990 1989 % Chg Growth Rate
<S> <C> <C> <C> <C> <C> <C> <C>
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Nonaccruing loans:
Commercial $9,408 $17,165 $17,627 $23,092 $14,701 (45.2) (10.3)
Real estate 23,817 61,805 92,577 66,687 28,427 (61.5) (9.0)
Consumer 546 853 1,223 971 2,567 (36.0) (27.9)
Direct lease financing 1,484 145 423 3,760 4,255 923.4 (13.7)
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Total nonaccruing loans 35,255 79,968 111,850 94,510 49,950 (55.9) (10.1)
Renegotiated loans 1,099 0 527 4,728 9,733 NM 27.4
ORE and other foreclosed assets 16,465 27,487 38,322 51,247 61,662 (40.1) (21.4)
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
TOTAL NONPERFORMING ASSETS 52,819 107,455 150,699 150,485 121,345 (50.8) (14.5)
Accruing loans past due 90 days or more 7,155 11,766 17,200 16,643 18,611 (39.2) (22.1)
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
TOTAL PROBLEM ASSETS $59,974 $119,221 $167,899 $167,128 $139,956 (49.7) (15.6)
=============================================== =========== =========== =========== =========== =========== ========= ===========
Breakdown by subsidiary:
Banks $46,595 $107,359 $145,957 $123,741 $76,470 (56.6) (13.7)
Nonbanks 13,379 11,862 21,942 43,387 63,486 12.8 (20.8)
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
TOTAL PROBLEM ASSETS $59,974 $119,221 $167,899 $167,128 $139,956 (49.7) (15.6)
=============================================== =========== =========== =========== =========== =========== ========= ===========
Interest that would have been recorded if the
loans and other real estate had been current
in accordance with their stated terms:
Nonaccruing loans $2,333 $6,450 $8,466 $8,016 $5,134 (63.8) (14.7)
Renegotiated loans 111 0 77 613 648 NM 0.5
Other real estate 2,323 3,528 4,227 8,579 6,867 (34.2) (20.5)
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Total interest per original terms $4,767 $9,978 $12,770 $17,208 $12,649 (52.2) (17.7)
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Interest actually recognized:
Nonaccruing loans 679 1,016 905 1,701 1,695 (33.2) (5.8)
Renegotiated loans 87 0 100 431 452 NM 19.3
Other real estate 32 48 56 428 607 (33.3) (40.4)
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Total interest actually recognized 798 1,064 1,061 2,560 2,754 (25.0) (10.3)
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Interest lost for the year $3,969 $8,914 $11,709 $14,648 $9,895 (55.5) (18.8)
=============================================== =========== =========== =========== =========== =========== ========= ===========
Approximate Percentage Of Nonperforming Assets Over $500,000 By Location:
Utah 26 43 49 50 50
California 18 7 6 6 2
Nevada 0 0 6 0 0
Washington & Oregon 13 6 2 1 4
Idaho 5 8 4 11 1
Texas 0 0 0 1 3
New Mexico 35 33 30 27 29
Arizona 0 3 3 4 8
All other 3 0 0 0 3
=============================================== =========== =========== =========== =========== ===========
Approximate Percentage of Nonperforming Assets Over $500,000 By Type Of Security (A):
Office buildings 5 6 25 20 16
Shopping centers 28 19 8 14 24
Recreational properties 0 0 0 0 1
Condominium properties 0 0 2 2 8
Multiple Housing 11 8 1 3 7
Land 36 22 21 18 21
Single family dwellings 4 2 1 1 5
Other real estate secured 3 23 31 21 6
All other 13 20 11 21 12
=============================================== =========== =========== =========== =========== ===========
<FN>
(A) Table for percentage of NPA by type of security does not include the New Mexico bank prior to 1993.
</TABLE>
PROBLEM ASSETS. The reduction of problem assets (See Table 8:
Problem Assets) continued to be a major FSC objective. At December 31,
1993, FSC had reduced its total problem assets by nearly one-half to
$59.97 million, down $59.25 million (49.7%) from year-end 1992, while at
December 31, 1992, problem assets were $119.22 million, down $48.68
million (29.0%) from $167.90 million at year-end 1991. For both years,
this decrease was due to good underwriting standards and a healthy
regional market. Despite a general downward trend in problem assets over
the past two years, it has been FSC's experience that, as a result of
economic and loan-specific events beyond its control, increases in
problem assets can and do occur. This has led the Corporation to take a
conservative approach to analysis of the reserve for loan losses. The
components of FSC's current problem assets are discussed below.
Nonaccruing and Renegotiated Loans: Nonaccruing and renegotiated
loans at December 31, 1993, were reduced by more than half to $36.35
million, down $43.62 million (54.5%) from year-end 1992, while at
December 31, 1992, nonaccruing and renegotiated loans were $79.97
million, down $32.41 million (28.8%) from $112.38 million at year-end
1991. For both years, this decrease was due to good underwriting
standards and a healthy regional market.
ORE and Other Foreclosed Assets: Other real estate owned and other
foreclosed assets at December 31, 1993, were reduced to $16.47 million at
year-end 1993, down $11.02 million (40.1%) from year-end 1992, while at
December 31, 1992, ORE and other foreclosed assets were $27.49 million,
down $10.84 million (28.3%) from $38.32 million at year-end 1991. For
both years, this increase was due to good underwriting standards and a
healthy regional market. FSC sold $16.52 million of ORE during 1993, and
$27.57 million during 1992.
Accruing Loans Past Due 90 Days or More: Accruing loans past due 90
days or more at December 31, 1993, were reduced to $7.16 million at the
end of 1993, down $4.61 million (39.2%) from 1992, while at December 31,
1992, accruing loans past due 90 days or more were $11.77 million, down
$5.43 million (31.6%) from $17.20 million at year-end 1991. For both
years, this was again due to good underwriting standards and a healthy
regional market.
Potential Problem Loans: In identifying potential problem loans, FSC
considers the repayment source, the value of the collateral, and the
borrower's ability and willingness to repay the loan. At December 31,
1993, FSC identified $23.63 million in loans that were classified as
potential problem loans. Comparisons with prior years are not possible
because FSB New Mexico, formerly First National Bank in Albuquerque, did
not identify potential problem loans.
<TABLE>
TABLE 9: RECONCILIATION OF THE RESERVE FOR LOAN LOSSES (in thousands)
<CAPTION>
5-Year
1993/92 Compound
For the years ended December 31, 1993 1992 1991 1990 1989 % Chg Growth Rate
<S> <C> <C> <C> <C> <C> <C> <C>
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Balance as of January 1 $127,847 $126,887 $117,192 $78,694 $70,608 0.8 11.6
Loans charged off:
Commercial 9,698 18,119 37,343 37,125 19,014 (46.5) (13.9)
Real estate:term 7,038 11,471 12,707 7,368 3,188 (38.6) 1.4
Real estate:construction 542 261 501 3,873 2,412 107.7 (28.1)
Consumer 21,723 22,121 23,468 22,332 25,352 (1.8) (1.2)
Direct lease financing 1,466 426 1,944 3,485 2,958 244.1 (12.4)
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Total loans charged off 40,467 52,398 75,963 74,183 52,924 (22.8) (6.2)
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Recoveries on loans charged off:
Commercial 11,789 8,900 6,262 5,176 5,984 32.5 17.0
Real estate:term 3,294 2,460 3,456 1,635 940 33.9 32.6
Real estate:construction 3,151 336 447 494 495 837.8 65.6
Consumer 10,255 7,823 7,034 7,357 6,769 31.1 10.4
Direct lease financing 113 48 55 1,067 484 135.4 (35.7)
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Total recoveries of loans charged off 28,602 19,567 17,254 15,729 14,672 46.2 15.8
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Net loans charged off:
Commercial (2,091) 9,219 31,081 31,949 13,030 (122.7) NM
Real estate:term 3,744 9,011 9,251 5,733 2,248 (58.5) (8.3)
Real estate:construction (2,609) (75) 54 3,379 1,917 NM NM
Consumer 11,468 14,298 16,434 14,975 18,583 (19.8) (7.4)
Direct lease financing 1,353 378 1,889 2,418 2,474 257.9 (5.7)
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Net loans charged off 11,865 32,831 58,709 58,454 38,252 (63.9) (22.4)
Provision for loan losses 11,684 30,277 66,393 94,899 45,949 (61.4) (21.1)
Reserves acquired in merger transactions 7,182 3,514 2,011 2,053 389 104.4 71.8
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
BALANCE AS OF DECEMBER 31 $134,848 $127,847 $126,887 $117,192 $78,694 5.5 13.8
=============================================== =========== =========== =========== =========== =========== ========= ===========
<FN>
NM = Not meaningful.
</TABLE>
<TABLE>
TABLE 10: ALLOCATION OF THE RESERVE FOR LOAN LOSSES (in thousands)
<CAPTION>
As of December 31, 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- - - ----------------------------- ----------------- ----------------- ----------------- ----------------- -----------------
Allocated % of Allocated % of Allocated % of Allocated % of Allocated % of
Reserve Loans Reserve Loans Reserve Loans Reserve Loans Reserve Loans
- - - ----------------------------- ----------- ----- ----------- ----- ----------- ----- ----------- ----- ----------- -----
Commercial $36,498 23.9 $43,413 24.6 $56,064 26.8 $65,116 26.7 $26,656 28.9
Real estate:term 14,205 35.2 17,948 37.2 18,068 37.8 12,262 39.0 10,262 38.9
Real estate:construction 4,619 3.7 1,691 2.9 4,439 3.8 3,494 4.7 8,353 4.5
Consumer 32,624 33.0 24,764 30.7 20,641 27.3 18,888 25.4 17,916 24.0
Direct lease financing 9,652 4.2 8,722 4.6 4,647 4.3 3,733 4.2 4,655 3.7
Unallocated reserve 37,250 31,309 23,028 13,699 10,852
- - - ----------------------------- ----------- ----- ----------- ----- ----------- ----- ----------- ----- ----------- -----
TOTALS $134,848 100.0 $127,847 100.0 $126,887 100.0 $117,192 100.0 $78,694 100.0
============================= =========== ===== =========== ===== =========== ===== =========== ===== =========== =====
</TABLE>
RESERVE FOR LOAN LOSSES. In keeping with its philosophy of
maintaining a conservative balance sheet, FSC maintained a carefully
reviewed and conservative reserve for loan losses. At December 31, 1993,
the detailed analysis of reserve adequacy (described below) resulted in a
determination of an appropriate total reserve for loan losses of $134.85
million, up $7.00 million (5.5%) from year-end 1992, while at December
31, 1992, the total reserve for loan losses was $127.85 million, up $960
thousand (0.8%) from $126.89 million at year-end 1991 (See Table 3:
Five-Year Summary - Condensed Consolidated Balance Sheets and Table 9:
Reconciliation of the Reserve For Loan Losses).
FSC's ongoing and continuous process of determining the adequacy and
appropriate level of its reserve for loan losses involves a comprehensive
review of all loans taken in conjunction with levels of problem assets,
potential problem loans, and historical loss experience. Subjective
judgments on relevant factors such as the state of the economy, loan
portfolio mix and concentrations, new lending activities/lines of
business/markets, and negative trends or uncertainties are also
incorporated into the analysis of reserve adequacy.
FSC grades the credit risk of each loan in its portfolio as part of
the process of determining an adequate reserve for loan losses. These
risk grades are: "pass" (essentially no problem); "special mention"
(potentially weak); "substandard"; "doubtful"; and "loss". The
definitions of these risk grades are consistent with guideline
definitions used by regulators of banks and bank holding companies. Risk
grades are assigned by lending officers and are reviewed for accuracy and
consistency of application by each Bank's loan committees, management, by
an internal loan review department that is independent of the lending
function, and periodically, by bank regulatory agencies. All loans,
including those disclosed in this report as problem assets or potential
problem loans, are included in this grading process.
The process of determining the adequacy of the reserve for loan losses
involves four main analytical methods:
* Specific Reserves: Substandard, doubtful, and loss graded loans
with balances in excess of $100,000 are individually reviewed to
determine if specific reserves for loan losses should be established.
* Migration Studies: For all commercial, real estate construction,
and commercial real estate loans not reserved for specifically, FSC
examines a running two-year loss history on a loan-by-loan basis to
determine actual losses generated in each risk grade, including those
from loans graded as "pass". These historical loss percentages are then
applied to the current levels of each risk grade of loans to determine
required reserves for the loan portfolio.
* Historical/Expected Trends: For consumer instalment loans, credit
card loans, or loans secured by residential property, historical and
expected loss trends and ratios are developed on a total portfolio basis
and used to establish reserve levels.
* Subjective Judgment: FSC's management uses its subjective judgment
to adjust the reserve to account for factors such as local, national and
international economic conditions, risk associated with ORE, outstanding
letters of credit, past due loans (not yet 90 days delinquent), industry
concentrations, new markets and products, lending policies, unfunded
commitments, and perceived trends or uncertainties in the portfolio.
At December 31, 1993, the detailed analysis of reserve adequacy (See
Table 10: Allocation of the Reserve for Loan Losses) resulted in a total
reserve for loan losses of $134.85 million, of which $97.60 million was
allocated to the various loan categories. The remaining difference of
$37.25 million was "unallocated" reserve resulting from management's
judgment of inherent and ongoing risks in the loan portfolio and in the
general economy. While reserve adequacy and allocation are measured
using the criteria explained above, the reserve for loan losses is
available for use by the entire portfolio, as needed, regardless of
allocation.
Management also uses the reserve-to-nonaccruing-and-renegotiated-loan
ratio to gauge the adequacy of its reserve levels in comparison to its
peers in the financial industry. This ratio was 370.93% on December 31,
1993, up from 159.87% at year-end 1992 and 112.91% at year-end 1991.
This coverage ratio for nonaccruing and renegotiated loans reflects FSC's
maintenance of a conservative reserve posture and significant reductions
in problem assets in 1993.
If the ongoing analysis of reserve adequacy suggests that
replenishment of, or additions to, the reserve for loan losses is
appropriate, an adjustment is made to the existing reserve by means of
the provision for loan losses in the income statement. In 1993, the
provision for loan losses totaled $11.68 million, down $18.59 million
(61.4%) from 1992, while for 1992, the provision totaled $30.28 million,
down $36.12 million (54.4%) from $66.39 million in 1991.
FSC charges loan losses against the reserve for loan losses when such
losses become probable and subject to reasonable estimation. Losses
generally arise from appraisal writedowns, officer evaluations, and
collateral sales. FSC reviews its appraisals of loan collateral for
major classified loans at least annually, and obtains new appraisals when
it believes that values have deteriorated.
Net losses charged to reserves totaled $11.87 million in 1993, down
$20.97 million (63.9%) from 1992 (See Table 9: Reconciliation of the
Reserve for Loan Losses). This was due to general improvement in the
quality of the loan portfolio plus unusually strong loan loss recoveries
of $28.60 million, up $9.04 million (46.2%) from 1992. This level of
recoveries may not continue in 1994. For 1992, net losses charged to
reserves totaled $32.83 million, down $25.88 million (44.1%) from $58.71
million in 1991 primarily due to improved asset quality and higher
recoveries in commercial loans.
For 1993, components of net losses included: commercial loan net
recoveries of $2.09 million, an improvement of $11.31 million (122.7%)
from 1992; real estate term loan net losses of $3.74 million, reduced
$5.27 million (58.5%) from 1992; real estate construction loan net
recoveries of $2.61 million, an improvement of $2.53 million; consumer
loan net losses of $11.47 million, reduced $2.83 million (19.8%) from
1992; and direct lease net losses of $1.35 million, up $975 thousand
(257.9%) from 1992.
Reserves for loan losses allocated for commercial loans were $36.50
million, down $6.92 million (15.9%) due to the improved credit quality of
the commercial portfolio. Reserves allocated for real estate term loans
were $14.21 million, down $3.74 million (20.9%) as a result of the
improved real estate market. Reserves allocated for real estate
construction loans were $4.62 million, up $2.93 million (173.2%) due to
growth in construction loans plus differences in accounting methodology
of acquisitions. Reserves allocated for consumer loans were $32.62
million, up $7.86 million (31.7%) due to substantial growth in the
portfolio. Reserves allocated for direct leases were $9.65 million, up
$930 thousand (10.7%) due to normal growth in the portfolio.
Based on the results of the analysis of reserve adequacy described
above, FSC's management considered the reserve for loan losses to be
adequate to cover potential losses at December 31, 1993, so the provision
for loan losses for 1993 was about equal to net loan chargeoffs.
<TABLE>
TABLE 11: MATURITIES AND INTEREST RATE SENSITIVITY (in thousands)
<CAPTION>
1-30 31-90 91-365 Over
As of December 31, 1993 Days Days Days 1 Year Total
<S> <C> <C> <C> <C> <C>
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- -----------
Interest-earning assets:
Interest-bearing deposits $7,651 $8,810 $16,461
Federal funds sold and securities purchased
under resale agreements $381,154 381,154
Trading account securities 607,854 607,854
Investment securities 182,715 119,829 502,954 $957,285 1,762,783
Loans, net of unearned income 2,819,265 252,518 1,014,735 2,474,503 6,561,021
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- -----------
Total interest-earning assets 3,990,988 379,998 1,526,499 3,431,788 9,329,273
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- -----------
Interest-bearing liabilities:
NOW and savings accounts 68,542 2,304,723 2,373,265
Money market deposits 1,103,855 1,103,855
Other certificates of deposit 375,628 347,568 839,383 766,321 2,328,900
Federal funds purchased and securities sold
under repurchase agreements 1,387,109 1,387,109
Other short-term borrowings 49,272 14,066 36,458 99,796
Long-term debt 476 8,862 3,402 212,096 224,836
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- -----------
Total interest-bearing liabilities 2,984,882 370,496 879,243 3,283,140 7,517,761
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- -----------
Interest rate swaps and financial futures, net 195,776 45,020 4,805 (245,601)
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- -----------
Gap $810,330 ($35,518) $642,451 $394,249 $1,811,512
=============================================== =========== =========== =========== =========== ===========
Gap as percent of earning assets 8.69 -0.38 6.89 4.23
=============================================== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
TABLE 12: MATURITIES AND INTEREST RATE SENSITIVITIES OF SELECTED LOAN CATEGORIES (in thousands)
<CAPTION>
1 Year 1 Year to Over
As of December 31, 1993 or Less 5 Years 5 Years Total
<S> <C> <C> <C> <C>
- - - ----------------------------------------------- ----------- ----------- ----------- -----------
Remaining maturity:
Commercial loans $1,020,876 $457,372 $94,885 $1,573,133
Real estate: construction loans 219,889 24,129 1,088 245,106
- - - ----------------------------------------------- ----------- ----------- ----------- -----------
Totals $1,240,765 $481,501 $95,973 $1,818,239
- - - ----------------------------------------------- ----------- ----------- ----------- -----------
Interest rate sensitivities of loans included
above maturing in more than one year:
With fixed rate $127,044 $14,920 $141,964
With floating rate 354,457 81,053 435,510
- - - ----------------------------------------------- ----------- ----------- ----------- -----------
Totals $481,501 $95,973 $577,474
=============================================== =========== =========== =========== ===========
</TABLE>
<TABLE>
TABLE 13: MATURITIES OF TIME CERTIFICATES OF $100,000 OR MORE (in thousands)
<CAPTION>
5-Year
1993/92 Compound
As of December 31, 1993 1992 1991 1990 1989 % Chg Growth Rate
<S> <C> <C> <C> <C> <C> <C> <C>
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Maturing within 3 months $162,746 $177,240 $249,331 $276,897 $369,263 (8.2) (14.5)
After 3 months but within 6 months 68,505 58,703 100,931 135,942 164,093 16.7 (11.0)
After 6 months but within 12 months 75,520 48,267 71,962 96,007 90,008 56.5 (4.9)
After 12 months 76,075 57,823 46,909 32,941 56,247 31.6 (0.7)
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Total $382,846 $342,033 $469,133 $541,787 $679,611 11.9 (10.2)
=============================================== =========== =========== =========== =========== =========== ========= ===========
</TABLE>
ASSET/LIABILITY MANAGEMENT
FSC views the objective of Asset/Liability Management to be the
optimization of the frequently competing objectives of meeting customer
needs, maximizing net interest income, and managing risks prudently.
These risks include liquidity risk, maintenance of capital adequacy, and
interest rate risk. Positioning the Corporation to assume manageable
levels of risk can enhance earnings, while eliminating risks may reduce
the potential for profit. Through the asset/liability management
process, FSC attempts to insure that decisions affecting its risk profile
are based upon a complete understanding of the level of risk involved,
that systems are in place to monitor risks continually, and that the
Corporation is well compensated for the risks it assumes.
FSC employs a variety of techniques to measure its interest rate risk,
among them simulation modeling using multiple economic and interest rate
scenarios, duration analysis to monitor long-term risk, and interest
sensitivity gap analysis to provide a general overview of the risk
profile. As of December 31, 1993, FSC's cumulative interest sensitivity
gap through one year was $1.42 billion, or 15.20% of earning assets (See
Table 11: Maturities and Interest Rate Sensitivity). The gap over one
year was only $394.25 million, or 4.23% of earning assets. This risk
posture leaves the Corporation in a position to potentially benefit from
rising or continued flat interest rates.
FSC's balance sheet structure remained conservative and healthy
throughout 1993. Strong loan production, particularly in consumer loans
and residential mortgages, was accompanied by growth in deposits. Total
assets grew by 14.8% during the year, while high levels of earnings
allowed equity to increase at a rate of 15.7% for the year. Total
stockholders' equity to assets was 8.18% at December 31, 1993, up from
8.12% at year-end 1992. Risk-based capital ratios demonstrated a more
pronounced increase, as the December 31, 1993, Tier I capital ratio was
11.82%, up from 11.32% at year-end 1992, while the corresponding year-end
Total Risk-Based capital ratio was 14.15%, up from 13.78% at year-end
1992. These high levels of capital afford the Corporation protection
against possible adverse earnings impacts, and are indicative of the
continuing emphasis FSC places on a conservative balance sheet.
Continuing low interest rates posed challenges as well as
opportunities in 1993. Low long-term rates spurred record levels of
mortgage production, but also prompted commercial and residential
customers to refinance fixed-rate loans. High fee income resulted, as
did a significant decrease in yield on the loan portfolio. Prepayments
also negatively affected the investment securities portfolio, as
mortgage-based securities matured earlier than expected, and reinvestment
occurred at lower yields. FSC elected to offset some of the negative
effects of prepayments by retaining a portion of fixed rate mortgage
production which ordinarily would have been sold. In order to mitigate
the interest rate risk inherent in such loans, the subsidiary Banks
involved financed these loans with a combination of long-term fixed rate
advances from the Federal Home Loan Bank of Seattle and other shorter-
term sources of funding.
Off-balance sheet derivative products have proven useful tools in
managing interest rate risk in 1993. During the first quarter, $300
million interest rate swap positions were negotiated which created
synthetic fixed rate assets of intermediate term. Concerned that the
abnormally wide spread between prime-based assets and sources of funding
could narrow were rates to rise rapidly, FSC entered into several
transactions ($410 million, combined) which protect the spread realized
on these assets.
At a time when some banks were losing much of their deposit base to
nonbank competitors, FSC's subsidiary Banks have been successful in
retaining their core deposit customers. Recognizing customers'
reluctance to tie up their funds in fixed-rate certificates of deposit at
1993's low rates, FSC developed alternative deposit products which offer
both an attractive return and the liquidity customers want. The result
has been a stable and growing customer base supported by flexible product
offerings.
Off-Balance Sheet Derivatives Used in the ALCO Process. FSC has used
off-balance sheet derivative products for many years in managing the
interest rate risk of the Corporation. Interest rate swaps, caps and
floors, and futures contracts have all served as tools to increase FSC's
flexibility in positioning itself to take advantage of, or protect
against the possible adverse effects of, interest rate movements. It
should be noted that FSC does not act as a dealer in these transactions,
but as an end-user of off-balance sheet derivative products. The Asset
Liability Management Committees (ALCOs) within the Corporation have
established policies and procedures which govern the use of such
products. The ALCO members regularly review all off-balance sheet
positions used in the asset/liability management process in terms of
effectiveness, market risk, and counterparty credit exposure.
As of December 31, 1993, FSC had a total of $988 million (exclusive of
trading accounts) notional amount off-balance sheet derivative products
in place. These derivatives fell into four functional categories: those
designed as synthetic fixed-rate assets ($400 million notional interest
rate swaps, all maturing before mid-year 1996); those entered into to
offset intermediate-term asset repricing gaps ($100 million notional
interest rate swaps); those which protect the spread between prime-based
assets and short-term funding sources ($210 million notional basis swaps,
$200 million notional interest rate floor/cap combinations); and those
whose function is to facilitate on-balance sheet transactions with FSC's
corporate customers ($78 million notional, combination of swaps and
caps). There were no financial futures or options contracts in place for
ALCO purposes at year-end 1993.
Derivative Products Carried in the Trading Account. Off-balance sheet
derivative products may also be carried in the trading accounts of FSC's
subsidiary Banks. Financial futures and options contracts are traded for
profit in the same way that on-balance sheet securities are purchased and
sold and are subject to all applicable policies and loss control limits.
At December 31, 1993, financial futures and options contracts in the
trading accounts totaled $6.36 billion, compared to $2.38 billion at
year-end 1992, and $6.60 billion at year-end 1991. This position
consisted of short-term Federal funds, LIBOR, Eurodollar, and U.S.
Treasury Bill contracts. The net risk position of the trading accounts
(including futures, options and on-balance sheet securities) at the end
of 1993 was $27,035 per 0.01% change in yield. For comparative purposes,
this risk equates to that of FSC purchasing a $65 million position in
five-year U.S. Treasury Notes.
<TABLE>
TABLE 14: SHORT-TERM BORROWINGS (in thousands)
<CAPTION>
5-Year
1993/92 Compound
As of December 31, 1993 1992 1991 1990 1989 % Chg Growth Rate
<S> <C> <C> <C> <C> <C> <C> <C>
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
End Of Period Balance:
Federal funds purchased & securities
sold under repurchase agreements $1,387,109 $944,385 $811,636 $781,426 $1,239,398 46.9 11.5
Other short-term borrowings 99,796 51,405 87,658 137,140 74,867 94.1 9.1
=============================================== =========== =========== =========== =========== =========== ========= ===========
Weighted Average Rate:
Federal funds purchased & securities
sold under repurchase agreements 2.93 3.07 3.99 6.60 8.51 NM NM
Other short-term borrowings 3.38 4.29 4.22 10.02 9.05 NM NM
=============================================== =========== =========== =========== =========== =========== ========= ===========
Average Outstandings For The Year:
Federal funds purchased & securities
sold under repurchase agreements $1,065,495 $929,123 $907,724 $1,229,759 $1,031,092 14.7 6.1
Other short-term borrowings 55,755 53,325 105,808 67,718 55,781 4.6 0.9
=============================================== =========== =========== =========== =========== =========== ========= ===========
Weighted Average Rate For The Year:
Federal funds purchased & securities
sold under repurchase agreements 2.97 2.99 5.52 7.72 8.64 NM NM
Other short-term borrowings 4.20 4.27 9.29 9.98 9.71 NM NM
=============================================== =========== =========== =========== =========== =========== ========= ===========
Highest Month-end Balance For The Year:
Federal funds purchased & securities
sold under repurchase agreements $1,387,109 $1,213,701 $1,159,899 $1,499,002 $1,382,142 14.3 6.4
Other short-term borrowings 99,796 90,490 147,558 137,636 73,409 10.3 5.8
=============================================== =========== =========== =========== =========== =========== ========= ===========
<FN>
NM = not meaningful
</TABLE>
<TABLE>
TABLE 15: LONG-TERM DEBT (in thousands)
<CAPTION>
5-Year
1993/92 Compound
As of December 31, 1993 1992 1991 1990 1989 % Chg Growth Rate
<S> <C> <C> <C> <C> <C> <C> <C>
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Parent company:
Variable rate note due 1991 $3,125 $10,938 NM NM
12.50% notes due 1991 $50 48,500 48,500 NM NM
Medium term notes due 1994-1998 $31,250 $31,250 31,250 NM
8.50% notes due 1997 29,500 34,000 38,500 NM NM
Floating rate notes due 1999 7,910 8,354 9,051 10,208 10,667 (5.3) (7.7)
9.50% convertible subordinated
debentures due 2006 39,750 39,950 NM NM
7.5% Subordinated Notes due 2002 75,000 75,000 NM
Subsidiaries:
Other long-term notes:
Banks 137,221 16,108 22,045 20,334 9,189 751.9 79.5
Nonbanks 1,155 1,291 1,870 1,559 1,237 (10.5) (2.6)
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Total debt with an original maturity
over one year 252,536 132,003 93,766 157,476 158,981 91.3 8.3
Less: Maturities under one year
included in short-term borrowings 27,700 4,800 6,250 58,625 11,650 477.1 20.8
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- --------- -----------
TOTAL LONG-TERM DEBT $224,836 $127,203 $87,516 $98,851 $147,331 76.8 7.3
=============================================== =========== =========== =========== =========== =========== ========= ===========
<FN>
NM = not meaningful.
</TABLE>
LIQUIDITY
The ALCOs at FSC have established specific policies and operating
procedures governing the Corporation's liquidity levels and have
developed plans to address future liquidity needs.
FSC maintains a favorable liquidity position in large part through
stable core deposits generated from its extensive branch network and from
a high quality investment portfolio. Core deposits represent a stable,
low-cost source of funds, which on average amounted to 71.80% of average
assets in 1993, compared with 72.71% in 1992 and 70.28% in 1991. At
December 31, 1993, core deposits totaled $7.12 billion, up $594.44
million (9.1%) from year-end 1992, while for year-end 1992, core deposits
totaled $6.53 billion, up $480.86 million (8.0%) from $6.05 billion at
year-end 1991. Components of the change at December 31, 1993, compared
with December 31, 1992, included:
Noninterest-bearing deposits of $1.70 billion, up $268.37 million
(18.8%) from $1.43 billion due to both acquisitions and growth.
NOW and Savings accounts of $3.48 billion, up $488.67 million (16.4%)
from $2.99 billion. The increase was due to a combination of
acquisitions, corporate growth, and the effect of lower interest rates on
consumers who became less inclined to invest in fixed rate certificates
of deposit. As a result, FSC experienced a shift in the deposit mix from
TCDs into NOW and savings accounts.
Time certificates of deposits (TCDs) less than $100,000 of $1.95
billion, down $162.60 million (7.7%) from $2.11 billion (See NOW and
Savings accounts above) due to the effect of lower interest rates on
consumers who became less inclined to invest in fixed rate certificates
of deposit.
At the same time, time certificates of deposit of $100,000 or more,
which are not a component of core deposits, increased at year-end 1993 to
$382.85 million, up $40.81 million (11.9%) from $342.03 million.
FSC is also able to raise short-term funds in national and
international finance markets in order to capitalize upon unique
opportunities for short periods of time; however, the Corporation does
not rely upon these funds to conduct its daily business. The investment
portfolio is of high credit quality and of relatively short maturity,
providing a constant stream of maturing and reinvestable assets, which
can be converted into cash without loss of value should the need arise.
Maturing balances in the large loan portfolios also provide flexibility
in managing cash flows. The ability to redeploy these funds is an
important source of medium-to-long-term liquidity.
In 1991, FSC registered with the SEC $150 million of unspecified debt
securities for sale on a delayed basis. From the 1991 shelf
registration, FSC sold $31.25 million in senior medium term notes in
1991, $75 million in subordinated notes due 2002 in 1992, and $28.75
million in senior medium term notes in February 1994, leaving some $15.00
million in debt securities remaining under this shelf registration. In
the first quarter of 1994, FSC filed a new registration statement
covering $300 million of additional unspecified securities, including
equity securities and debt securities, to be offered or sold on a delayed
basis at such times as FSC deems prudent.
Backup sources of liquidity were provided by credit lines available to
FSC and by Federal funds lines carried in the subsidiary Banks.
Additional liquidity could be generated through borrowings from the
Federal Reserve Banks, of which FSB Utah, FSB Idaho, FSB New Mexico, and
FSB Nevada are members. Liquidity and matched funding could also be
obtained from the Federal Home Loan Bank, of which FSB Utah, FSB Idaho,
and FSB Oregon are members.
<TABLE>
TABLE 16: AVERAGE BALANCE SHEETS, YIELDS AND RATES (in thousands) (A)
<CAPTION>
For the years ended December 31, 1993 1992
<S> <C> <C> <C> <C> <C> <C>
- - - ----------------------------------------------- ------------------------------- -------------------------------
Tax Average Tax Average
Average Equivalent Rate/ Average Equivalent Rate/
Balance Interest Yield% Balance Interest Yield%
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Assets:
Interest-earning assets:
Interest-bearing deposits in other banks $15,454 $456 2.95 $16,210 $690 4.26
Federal funds sold and securities
purchased under resale agreements 302,412 9,191 3.04 186,938 6,416 3.43
Trading account securities 424,091 20,841 4.91 430,025 27,169 6.32
Taxable investment securities 1,617,951 90,070 5.57 1,520,497 102,819 6.76
Tax-exempt investment securities 174,640 16,125 9.23 187,541 18,322 9.77
Loans, net of unearned income
and deferred taxes on leases (B) 5,785,067 515,682 8.91 5,338,956 510,653 9.56
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Total interest-earning assets 8,319,615 652,365 7.84 7,680,167 666,069 8.67
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Cash and due from banks 547,758 482,445
Premises and equipment 137,649 122,432
ORE and other foreclosed assets 26,506 35,849
Deferred taxes on leases 132,749 124,327
Reserve for loan losses (128,801) (130,548)
Other assets 178,784 175,815
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Total Assets $9,214,260 $8,490,487
=============================================== =========== ========== ======== =========== ========== ========
Liabilities:
Interest-bearing liabilities:
Deposits:
NOW accounts $962,411 18,239 1.90 $865,945 23,094 2.67
Savings accounts 2,220,848 68,275 3.07 1,840,670 68,544 3.72
Time deposits of $100,000 or more 340,714 14,124 4.15 394,368 20,216 5.13
Other time deposits 2,003,501 92,354 4.61 2,252,715 126,281 5.61
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Total interest-bearing deposits 5,527,474 192,992 3.49 5,353,698 238,135 4.45
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Federal funds purchased and securities
sold under repurchase agreements 1,065,495 31,639 2.97 929,123 31,799 3.42
Other short-term borrowings 55,755 2,340 4.20 53,325 2,218 4.16
Long-term debt 204,129 13,823 6.77 103,659 8,347 8.05
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Total interest-bearing liabilities 6,852,853 240,794 3.51 6,439,805 280,499 4.36
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Noninterest-bearing deposits 1,428,640 1,214,078
Other liabilities 148,109 150,445
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Total Liabilities 8,429,602 7,804,328
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Stockholders' Equity:
Common stockholders' equity 783,930 685,339
Preferred stockholders' equity 728 820
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Total Stockholders' Equity 784,658 686,159
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Total Liabilities & Stockholders' Equity $9,214,260 $8,490,487
=============================================== =========== ========== ======== =========== ========== ========
Interest income/earning assets 7.84 8.67
Interest expense/earning assets 2.89 3.65
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Net interest income/earning assets 411,571 4.95 385,570 5.02
Less FTE adjustments 7,633 9,621
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Net interest income, per Consolidated
Statements of Income $403,938 $375,949
=============================================== =========== ========== ======== =========== ========== ========
Loan fees included in interest income $13,708 $12,736
=============================================== =========== ========== ======== =========== ========== ========
<FN>
(A) Interest is presented on a fully taxable equivalent basis, calculated on federal and state taxes
applicable to the subsidiary carrying the assets. The combined tax rate was approximately 38% for
1988-1992 and 39% for 1993.
(B) Loans include nonaccruing loans.
</TABLE>
<TABLE>
TABLE 16: AVERAGE BALANCE SHEETS, YIELDS AND RATES (in thousands) (A) (continued)
<CAPTION>
For the years ended December 31, 1991 1990
<S> <C> <C> <C> <C> <C> <C>
- - - ----------------------------------------------- ------------------------------- -------------------------------
Tax Average Tax Average
Average Equivalent Rate/ Average Equivalent Rate/
Balance Interest Yield% Balance Interest Yield%
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Assets:
Interest-earning assets:
Interest-bearing deposits in other banks $32,292 $2,367 7.33 $31,640 $2,651 8.38
Federal funds sold and securities
purchased under resale agreements 172,109 9,553 5.55 305,675 24,874 8.14
Trading account securities 382,608 26,376 6.89 201,472 16,923 8.40
Taxable investment securities 1,239,060 102,197 8.25 1,166,465 101,810 8.73
Tax-exempt investment securities 194,346 20,117 10.35 218,693 23,013 10.52
Loans, net of unearned income
and deferred taxes on leases (B) 5,241,145 560,640 10.70 5,149,281 591,752 11.49
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Total interest-earning assets 7,261,560 721,250 9.93 7,073,226 761,023 10.76
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Cash and due from banks 456,106 489,365
Premises and equipment 114,841 105,964
ORE and other foreclosed assets 55,181 64,566
Deferred taxes on leases 111,163 98,874
Reserve for loan losses (125,198) (86,342)
Other assets 172,101 150,492
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Total Assets $8,045,754 $7,896,145
=============================================== =========== ========== ======== =========== ========== ========
Liabilities:
Interest-bearing liabilities:
Deposits:
NOW accounts $739,615 30,634 4.14 $664,550 29,799 4.48
Savings accounts 1,290,863 67,248 5.21 1,106,599 62,196 5.62
Time deposits of $100,000 or more 551,631 38,496 6.98 658,735 53,018 8.05
Other time deposits 2,581,127 183,338 7.10 2,347,567 186,741 7.95
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Total interest-bearing deposits 5,163,236 319,716 6.19 4,777,451 331,754 6.94
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Federal funds purchased and securities
sold under repurchase agreements 907,725 50,089 5.52 1,229,759 94,899 7.72
Other short-term borrowings 105,807 9,827 9.29 67,718 6,504 9.60
Long-term debt 104,300 8,390 8.04 143,747 14,404 10.02
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Total interest-bearing liabilities 6,281,068 388,022 6.18 6,218,675 447,561 7.20
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Noninterest-bearing deposits 1,042,585 973,841
Other liabilities 143,181 151,728
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Total Liabilities 7,466,834 7,344,244
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Stockholders' Equity:
Common stockholders' equity 578,037 550,944
Preferred stockholders' equity 883 957
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Total Stockholders' Equity 578,920 551,901
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Total Liabilities & Stockholders' Equity $8,045,754 $7,896,145
=============================================== =========== ========== ======== =========== ========== ========
Interest income/earning assets 9.93 10.76
Interest expense/earning assets 5.34 6.33
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Net interest income/earning assets 333,228 4.59 313,462 4.43
Less FTE adjustments 10,419 11,322
- - - ----------------------------------------------- ----------- ---------- -------- ----------- ---------- --------
Net interest income, per Consolidated
Statements of Income $322,809 $302,140
=============================================== =========== ========== ======== =========== ========== ========
Loan fees included in interest income $11,351 $12,294
=============================================== =========== ========== ======== =========== ========== ========
<FN>
(A) Interest is presented on a fully taxable equivalent basis, calculated on federal and state taxes
applicable to the subsidiary carrying the assets. The combined tax rate was approximately 38% for
1988-1992 and 39% for 1993.
(B) Loans include nonaccruing loans.
</TABLE>
<TABLE>
TABLE 16: AVERAGE BALANCE SHEETS, YIELDS AND RATES (in thousands) (A) (continued)
<CAPTION>
For the years ended December 31, 1989
<S> <C> <C> <C>
- - - ----------------------------------------------- -------------------------------
Tax Average
Average Equivalent Rate/
Balance Interest Yield%
- - - ----------------------------------------------- ----------- ---------- --------
Assets:
Interest-earning assets:
Interest-bearing deposits in other banks $52,223 $5,002 9.58
Federal funds sold and securities
purchased under resale agreements 361,488 33,147 9.17
Trading account securities 97,098 8,125 8.37
Taxable investment securities 938,586 81,654 8.70
Tax-exempt investment securities 195,179 20,962 10.74
Loans, net of unearned income
and deferred taxes on leases (B) 4,708,901 565,329 12.01
- - - ----------------------------------------------- ----------- ---------- --------
Total interest-earning assets 6,353,475 714,219 11.24
- - - ----------------------------------------------- ----------- ---------- --------
Cash and due from banks 431,971
Premises and equipment 95,467
ORE and other foreclosed assets 66,341
Deferred taxes on leases 94,557
Reserve for loan losses (72,390)
Other assets 115,274
- - - ----------------------------------------------- ----------- ---------- --------
Total Assets $7,084,695
=============================================== =========== ========== ========
Liabilities:
Interest-bearing liabilities:
Deposits:
NOW accounts $626,509 28,466 4.54
Savings accounts 988,634 56,307 5.70
Time deposits of $100,000 or more 657,409 58,781 8.94
Other time deposits 2,042,799 166,642 8.16
- - - ----------------------------------------------- ----------- ---------- --------
Total interest-bearing deposits 4,315,351 310,196 7.19
- - - ----------------------------------------------- ----------- ---------- --------
Federal funds purchased and securities
sold under repurchase agreements 1,031,092 89,052 8.64
Other short-term borrowings 55,781 5,286 9.48
Long-term debt 152,244 16,556 10.87
- - - ----------------------------------------------- ----------- ---------- --------
Total interest-bearing liabilities 5,554,468 421,090 7.58
- - - ----------------------------------------------- ----------- ---------- --------
Noninterest-bearing deposits 871,148
Other liabilities 141,081
- - - ----------------------------------------------- ----------- ---------- --------
Total Liabilities 6,566,697
- - - ----------------------------------------------- ----------- ---------- --------
Stockholders' Equity:
Common stockholders' equity 516,976
Preferred stockholders' equity 1,022
- - - ----------------------------------------------- ----------- ---------- --------
Total Stockholders' Equity 517,998
- - - ----------------------------------------------- ----------- ---------- --------
Total Liabilities & Stockholders' Equity $7,084,695
=============================================== =========== ========== ========
Interest income/earning assets 11.24
Interest expense/earning assets 6.63
- - - ----------------------------------------------- ----------- ---------- --------
Net interest income/earning assets 293,129 4.61
Less FTE adjustments 10,257
- - - ----------------------------------------------- ----------- ---------- --------
Net interest income, per Consolidated
Statements of Income $282,872
=============================================== =========== ========== ========
Loan fees included in interest income $11,074
=============================================== =========== ========== ========
<FN>
(A) Interest is presented on a fully taxable equivalent basis, calculated on federal and state taxes
applicable to the subsidiary carrying the assets. The combined tax rate was approximately 38% for
1988-1992 and 39% for 1993.
(B) Loans include nonaccruing loans.
</TABLE>
<TABLE>
TABLE 17: ANALYSIS OF INTEREST CHANGES DUE TO VOLUME AND RATES (in thousands) (A)
<CAPTION>
1993 over 1992 1992 over 1991
<S> <C> <C> <C> <C> <C> <C>
- - - ----------------------------------------------- ----------------------------------- -----------------------------------
Changes Due to Total Changes Due to Total
Volume Rate Changes Volume Rate Changes
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Interest-earning Assets:
Interest-bearing deposits in other banks ($32) ($202) ($234) ($1,179) ($498) ($1,677)
Federal funds sold and securities purchased
under resale agreements 3,963 (1,188) 2,775 823 (3,960) (3,137)
Trading account securities (375) (5,953) (6,328) 3,269 (2,476) 793
Taxable investment securities 6,590 (19,339) (12,749) 23,213 (22,591) 622
Tax-exempt investment securities (1,260) (937) (2,197) (704) (1,091) (1,795)
Loans, net of unearned income
and deferred taxes on leases (B,C) 42,669 (37,640) 5,029 10,463 (60,450) (49,987)
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Total Interest-earning Assets 51,555 (65,259) (13,704) 35,885 (91,066) (55,181)
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Interest-bearing Liabilities:
Deposits:
NOW accounts 2,573 (7,428) (4,855) 5,232 (12,772) (7,540)
Savings accounts 14,157 (14,426) (269) 28,642 (27,346) 1,296
Time deposits of $100,000 or more (2,750) (3,342) (6,092) (10,975) (7,305) (18,280)
Other time deposits (13,970) (19,957) (33,927) (23,327) (33,730) (57,057)
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Total interest-bearing deposits 10 (45,153) (45,143) (428) (81,153) (81,581)
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Federal funds purchased and securities
sold under repurchase agreements 4,667 (4,827) (160) 1,181 (19,471) (18,290)
Other short-term borrowings 101 21 122 (4,874) (2,735) (7,609)
Long-term debt 8,090 (2,614) 5,476 (52) 9 (43)
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Total Interest-bearing Liabilities 12,868 (52,573) (39,705) (4,173) (103,350) (107,523)
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
CHANGE IN NET INTEREST INCOME $38,687 ($12,686) $26,001 $40,058 $12,284 $52,342
=============================================== =========== =========== =========== =========== =========== ===========
<FN>
(A) Changes not due entirely to changes in volume or rate have been allocated to rate.
Interest is presented on a fully taxable equivalent basis, calculated on federal and state taxes applicable
to the subsidiary carrying the asset.
The combined tax rate was approximately 38% for 1988-1992, and 39% in 1993.
(B) Loans include nonaccruing loans.
(C) Loan fees included in interest income: 1993: $13,708; 1992: $12,736; and 1991: $11,351
</TABLE>
<TABLE>
TABLE 17: ANALYSIS OF INTEREST CHANGES DUE TO VOLUME AND RATES (in thousands) (A) (continued)
<CAPTION>
1991 over 1990 1990 over 1989
<S> <C> <C> <C> <C> <C> <C>
- - - ----------------------------------------------- ----------------------------------- -----------------------------------
Changes Due to Total Changes Due to Total
Volume Rate Changes Volume Rate Changes
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Interest-earning Assets:
Interest-bearing deposits in other banks $55 ($339) ($284) ($1,971) ($380) ($2,351)
Federal funds sold and securities purchased
under resale agreements (10,869) (4,452) (15,321) (5,118) (3,155) (8,273)
Trading account securities 15,215 (5,762) 9,453 8,734 64 8,798
Taxable investment securities 6,336 (5,949) 387 19,825 331 20,156
Tax-exempt investment securities (2,562) (334) (2,896) 2,525 (474) 2,051
Loans, net of unearned income
and deferred taxes on leases (B,C) 10,557 (41,669) (31,112) 52,870 (26,447) 26,423
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Total Interest-earning Assets 18,732 (58,505) (39,773) 76,865 (30,061) 46,804
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Interest-bearing Liabilities:
Deposits:
NOW accounts 3,366 (2,531) 835 1,728 (395) 1,333
Savings accounts 10,356 (5,304) 5,052 6,719 (830) 5,889
Time deposits of $100,000 or more (8,620) (5,902) (14,522) 119 (5,882) (5,763)
Other time deposits 18,579 (21,982) (3,403) 24,862 (4,763) 20,099
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Total interest-bearing deposits 23,681 (35,719) (12,038) 33,428 (11,870) 21,558
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Federal funds purchased and securities
sold under repurchase agreements (24,851) (19,959) (44,810) 17,158 (11,311) 5,847
Other short-term borrowings 3,658 (335) 3,323 1,131 87 1,218
Long-term debt (3,953) (2,061) (6,014) (924) (1,228) (2,152)
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Total Interest-bearing Liabilities (1,465) (58,074) (59,539) 50,793 (24,322) 26,471
- - - ----------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
CHANGE IN NET INTEREST INCOME $20,197 ($431) $19,766 $26,072 ($5,739) $20,333
=============================================== =========== =========== =========== =========== =========== ===========
<FN>
(A) Changes not due entirely to changes in volume or rate have been allocated to rate.
Interest is presented on a fully taxable equivalent basis, calculated on federal and state taxes applicable
to the subsidiary carrying the asset.
The combined tax rate was approximately 38% for 1988-1992, and 39% in 1993.
(B) Loans include nonaccruing loans.
(C) Loan fees included in interest income: 1991: $11,351; 1990: $12,294; and 1989: $11,074
</TABLE>
<TABLE>
TABLE 17: ANALYSIS OF INTEREST CHANGES DUE TO VOLUME AND RATES (in thousands) (A) (continued)
<CAPTION>
1989 over 1988
<S> <C> <C> <C>
- - - ----------------------------------------------- -----------------------------------
Changes Due to Total
Volume Rate Changes
- - - ----------------------------------------------- ----------- ----------- -----------
Interest-earning Assets:
Interest-bearing deposits in other banks ($2,816) $1,016 ($1,800)
Federal funds sold and securities purchased
under resale agreements 5,871 6,112 11,983
Trading account securities 2,612 598 3,210
Taxable investment securities 10,540 10,012 20,552
Tax-exempt investment securities 142 164 306
Loans, net of unearned income
and deferred taxes on leases (B,C) 23,958 34,328 58,286
- - - ----------------------------------------------- ----------- ----------- -----------
Total Interest-earning Assets 40,307 52,230 92,537
- - - ----------------------------------------------- ----------- ----------- -----------
Interest-bearing Liabilities:
Deposits:
NOW accounts 791 (1,057) (266)
Savings accounts (8,060) 3,445 (4,615)
Time deposits of $100,000 or more (39) 4,581 4,542
Other time deposits 22,099 18,500 40,599
- - - ----------------------------------------------- ----------- ----------- -----------
Total interest-bearing deposits 14,791 25,469 40,260
- - - ----------------------------------------------- ----------- ----------- -----------
Federal funds purchased and securities
sold under repurchase agreements 17,430 14,134 31,564
Other short-term borrowings (140) 1,077 937
Long-term debt (1,421) 1,297 (124)
- - - ----------------------------------------------- ----------- ----------- -----------
Total Interest-bearing Liabilities 30,660 41,977 72,637
- - - ----------------------------------------------- ----------- ----------- -----------
CHANGE IN NET INTEREST INCOME $9,647 $10,253 $19,900
=============================================== =========== =========== ===========
<FN>
(A) Changes not due entirely to changes in volume or rate have been allocated to rate.
Interest is presented on a fully taxable equivalent basis, calculated on federal and state taxes applicable
to the subsidiary carrying the asset.
The combined tax rate was approximately 38% for 1988-1992, and 39% in 1993.
(B) Loans include nonaccruing loans.
(C) Loan fees included in interest income: 1989: $11,074; and 1988: $10,565.
</TABLE>
INCOME STATEMENT ANALYSIS
NET INTEREST INCOME. The largest component of FSC's operating income
is net interest income. For purposes of this discussion, interest income
earned on tax-exempt or tax-favored loans, leases, and securities is
adjusted to a fully tax equivalent (FTE) basis to facilitate comparison
with interest earned which is subject to statutory taxation. During
1993, a one basis point move in FSC's net interest margin equaled
approximately $832 thousand of net interest income.
Changes in net interest income generally occur due to fluctuations in
the balances and/or mixes of earning assets and interest-bearing
liabilities, and changes in their corresponding interest yields and
costs. Changes in nonperforming assets, together with interest lost and
recovered on those assets, also impact comparisons of net interest
income.
Net interest income FTE for 1993 totaled $411.57 million, up $26.00
million (6.7%) from $385.57 million in 1992 (See Table 2: Five-Year
Summary - Condensed Consolidated Income Statements, Table 16: Average
Balance Sheets, Yields and Rates, and Table 17: Analysis of Interest
Changes Due To Volume and Rates). This increase was primarily due to
growth in interest-earning assets, which grew at a faster rate than did
interest-bearing liabilities, combined with changes in the mix of
interest-bearing liabilities. Specifically, average interest-earning
assets grew to $8.32 billion in 1993, up $639.45 million (8.3%) from
$7.68 billion in 1992, exceeding the growth of average interest-bearing
liabilities which increased to $6.85 billion, up $413.05 million (6.4%)
from $6.44 billion in 1992. In addition, a favorable shift in the mix of
interest-bearing liabilities out of certificates of deposits into lower
cost deposits and noninterest-bearing demand deposits also had a
favorable impact on net interest income.
The net interest margin for 1993 was 4.95%, compared with 5.02% for
1992. This performance was the result of several trends which have been
apparent over the past several years. Falling interest rates have
lowered both yields and cost of funds. However, a combination of balance
sheet structure, pricing strategies and yield curve changes have allowed
FSC's funding costs to fall more rapidly than its asset yields. Another
factor which has contributed to the strong performance in 1993 and 1992
was the relatively wide spread which has existed between the prime rate
and the costs of short-term sources of funds. This spread widened during
1992 and has remained wide throughout 1993. As rates fell and consumers
became less inclined to invest in fixed rate certificates of deposit, FSC
experienced a positive shift in deposit mix into more liquid and less
expensive deposits. Finally, strong growth in consumer loans over the
past several years has had a positive effect on the yield on loans, as
these loans carry relatively higher yields than most other loan types.
This mix change has allowed the yield on loans to fall more slowly than
yields on other interest-earning assets or the costs of funding sources.
The result of these trends was a net interest margin which remained
essentially unchanged from 1992 to 1993, and which has improved over a
six year period. Looking forward with the expectation of rising interest
rates, FSC looks to its large portfolio of prime-based assets, to
effective deposit pricing strategies, and to a conservative balance sheet
mix to allow the Corporation to benefit from rising interest rates in the
near term.
By comparison, net interest income FTE for 1992 totaled $385.57
million, up $52.34 million (15.7%) from $333.23 million in 1991. This
increase was also primarily due to growth in average interest-earning
assets, combined with changes in the mix of interest-bearing liabilities.
Average interest-earning assets grew to $7.68 billion in 1992, up $418.61
million (5.8%) from $7.26 billion in 1991, exceeding the growth of
average interest-bearing liabilities which increased to $6.44 billion, up
$158.74 million (2.5%) from $6.28 billion in 1991. As in 1993, a
favorable shift in the mix of interest-bearing liabilities out of
certificates of deposits into lower cost deposits also had a positive
impact on net interest income. The net interest margin was 5.02% for
1992, up from 4.59% for 1991. This occurred during a period of falling
interest rates as FSC's balance sheet structure, pricing strategies, and
yield curve changes allowed the Corporation's funding costs to fall more
rapidly than its asset yields. Additional factors during the year
included a widening of the spread between the prime rate and the costs of
short-term sources of funds and strong growth in consumer loans.
Over the past seven years, the growth of FSC's net interest income has
largely been due to sustained growth in average earning assets. The net
interest margin has generally reflected increased competition, balance
sheet restructuring, and the impact of changes in the yield curve.
Effective asset/liability management, however, has moderated the impact
of these external forces on net interest income.
In 1993, FSC reclassified its bankcard merchant discount income for
all years shown in this report, moving it from interest and fees on loans
in interest income to bankcard interbank discount and interchange fees in
noninterest income. This amounted to $13.38 million for 1993, $10.61
million for 1992, $8.89 million for 1991, $7.90 million for 1990, and
$6.56 million for 1989. This reduced the interest and fees on loans,
total interest income, and net interest income, and increased the
respective bankcard service fees and noninterest income by the respective
amount for each year. The net interest margin, including the bankcard
merchant discount income, would have been 5.15% for 1993, 5.20% for 1992,
4.75% for 1991, 4.58% for 1990, and 4.76% for 1989 before the
reclassification.
NONINTEREST INCOME. Noninterest income for 1993 totaled $167.16
million, up $23.12 million (16.1%) from 1992, while for 1992, noninterest
income totaled $144.04 million, up $6.21 million (4.5%) from $137.82
million in 1991 (See Table 2: Five-Year Summary - Condensed Consolidated
Income Statements). For both years, the primary factors behind these
increases were acquisitions and internal corporate growth. In 1993, FSC
generated revenue growth for the 10th straight year in both its service
charges on deposit accounts and fiduciary activities. Components of
noninterest income for 1993 as compared to 1992, and for 1992 as compared
to 1991 included:
* Service charges on deposit accounts for 1993 were $55.87 million, up
$4.36 million (8.5%) from 1992, while for 1992, service charges on
deposit accounts were $51.51 million, up $5.37 million (11.6%) from
$46.14 million in 1991. For both years, the increase was due to
acquisitions and corporate growth, plus higher volumes in interest- and
noninterest-bearing deposits as customers moved funds from certificates
of deposits into these accounts.
* Other service charges, collections, commissions and fees for 1993
were $41.77 million, up $8.76 million (26.5%) from 1992, while for 1992,
other service charges, collections, commissions and fees were $33.01
million, up $8.46 million (34.5%) from $24.55 million in 1991. For both
years, the increase was due to acquisitions and corporate growth, plus
record mortgage loan production.
* Commissions and fees from fiduciary activities for 1993 were $18.98
million, up $804 thousand (4.4%) from 1992, while for 1992, commissions
and fees from fiduciary activities were $18.18 million, up $1.38 million
(8.2%) from $16.79 million in 1991. For both years, the growth was due
to increased account valuations and new business generated.
* Bankcard service fees for 1993 were $33.08 million, up $5.67 million
(20.7%) from 1992, while for 1992, bankcard service fees were $27.41
million, up $3.24 million (13.4%) from $24.17 million in 1991. For both
years, the increase was due to growth in the volume of transactions
processed for third-party bankcard clients.
* Insurance commissions and fees for 1993 were $9.95 million, up $1.23
million (14.2%) from 1992, while for 1992, insurance commissions and fees
were $8.72 million, up $1.70 million (24.3%) from $7.02 million in 1991.
For both years, the increase was due to growth in insurance volumes
produced by FSC's insurance subsidiaries.
* Service fees on loans sold for 1993 were $6.57 million, up $492
thousand (8.1%) from 1992, while for 1992, service fees on loans sold
were $6.07 million, up $709 thousand (13.2%) from $5.37 million in 1991.
For both years, the increase was due to acquisitions, corporate growth,
and the positive impact of the low interest-rate environment on mortgage
and consumer loans.
* Trading account net gains/losses are included in other noninterest
income. For 1993, noninterest income from trading activities showed a
net loss of $4.84 million, an improvement of $2.38 million (32.9%) from
the loss in 1992. For 1992, the net loss was $7.21 million, down $8.89
million (529.4%) from a gain of $1.68 million in 1991.
Because of required accounting treatment of trading account assets,
the gain/loss figures do not give a complete representation of actual
results. The overall value of FSC's trading activities must be judged
after taking into account the interest income generated on trading
account positions. Interest income from trading activities for 1993,
1992, and 1991, was $20.81 million, $27.11 million, and $26.34 million,
respectively. Total revenues from all of FSC's trading activities were
$15.97 million, $19.89 million, and $27.96 million, respectively.
* Investment securities gains for 1993 were $730 thousand, down $129
thousand (15.0%) from 1992, while for 1992, investment securities gains
were $859 thousand, down $2.08 million (70.8%) from $2.94 million in
1991. For both years, the decrease was due to the lower volume of
securities called prior to maturity or sold for credit quality purposes.
NONINTEREST EXPENSES. Noninterest expenses for 1993 totaled $386.15
million, up $46.69 million (13.8%) from $339.46 million in 1992 (See
Table 2: Five-Year Summary - Condensed Consolidated Income Statements).
The rise in noninterest expenses resulted from FSC's acquisitions and
ongoing operations, plus numerous one-time events including: merger-
related charges of $11.12 million after tax ($17.11 million pre-tax)
associated with the acquisition of FNFC; the cost of other acquisitions
and the related restructuring charges; and the installation of a new ATM
system and the write-off of the old system. By comparison, noninterest
expenses for 1992 totaled $339.46 million, up $32.95 million (10.8%) from
$306.50 million in 1991, due to corporate growth and acquisitions.
Components of noninterest expenses for 1993 as compared to 1992, and for
1992 as compared to 1991 included:
* Salaries and benefits expense for 1993 were $175.70 million, up
$14.71 million (9.1%) from 1992. This included: salaries, bonuses and
commissions expense of $142.66 million, up $10.37 million (7.8%)
primarily due to normal salary growth, plus acquisitions and record
performance in nearly all areas; and benefits expense of $33.03 million,
up $4.34 million (15.1%) with the higher salaries, bonuses and
commissions, plus increased retirement and pension expense. For 1992,
salaries and benefits expense was $160.98 million, up $13.19 million
(8.9%) from $147.80 million in 1991. This included: salaries, bonuses
and commissions expense of $132.29 million, up $8.92 million (7.2%),
primarily due to normal salary growth, plus acquisitions and record
performance; and benefits expense of $28.69 million, up $4.27 million
(17.5%) with the higher salaries, bonuses and commissions, and an
adjustment of FSC's self-funded group insurance program.
* Net occupancy expense for 1993 was $24.22 million, up $4.85 million
(25.0%) from 1992, while for 1992, net occupancy expense was $19.37
million, up $1.06 million (5.8%) from $18.32 million in 1991. For both
years, the increase was primarily due to the various acquisitions and the
related impact on building depreciation and land rent, and the adjustment
of those entities' depreciation methodology to match that of FSC.
* Furniture and equipment expense for 1993 was $27.86 million, up
$1.31 million (4.9%) from 1992 and included: depreciation expense related
to acquisitions, acquisition-related adjustments, the new ATM network,
and the write-off of the old network; plus maintenance and repairs
expense involving the installation of the new ATM network. For 1992,
furniture and equipment expense was $26.55 million, up $3.89 million
(17.2%) from $22.66 million in 1991, and included: rented equipment
expense for the leasing of a new computer mainframe; maintenance and
repairs expense for the service contract on the new computer mainframe;
and depreciation expense from normal growth and the acquisition of the
First National Bank of North Idaho.
* Insurance expense for 1993 was $19.70 million, up $829 thousand
(4.4%) from 1992, while for 1992, insurance expense was $18.87 million,
up $4.19 million (28.5%) from $14.68 million in 1991. For both years,
the increase was primarily due to increases in FDIC insurance that was
the result of growth in deposit balances.
* Stationery and supplies expense for 1993 was $15.96 million, up
$3.09 million (24.0%) from 1992, while for 1992, stationery and supplies
expense was $12.86 million, up $2.11 million (19.6%) from $10.75 million
in 1991. For both years, the increase was due to a combination of
acquisitions and corporate growth, plus an increase in FSC's fixed asset
capitalization threshold.
* Bankcard interbank discount and interchange expense for 1993 was
$13.98 million, up $2.74 million (24.3%) from 1992, while for 1992,
bankcard interbank discount and interchange expense was $11.24 million,
up $1.12 million (11.1%) from $10.12 million in 1991. For both years,
the increase was due to growth in the volume of merchant deposits.
* Advertising expense for 1993 was $9.19 million, up $2.82 million
(44.4%) from 1992, while for 1992, advertising expense was $6.36 million,
up $1.37 million (27.5%) from $4.99 million in 1991. For both years,
this was due to advertising campaigns and costs associated with
acquisitions and corporate growth.
* Telephone expense for 1993 was $8.61 million, up $1.27 million
(17.2%) from 1992, while for 1992, telephone expense was $7.34 million,
up $761 thousand (11.6%) from $6.58 million in 1991. For both years, the
increase was related primarily to acquisitions.
* The provision for ORE losses for 1993 was $7.45 million, up $545
thousand (7.9%) from 1992 and included: ORE losses of $4.89 million, down
$1.41 million (22.3%) due to specific revaluation of FSB New Mexico's ORE
to conform with FSC practices and policies; ORE recoveries of $1.88
million, up $614 thousand (24.7%) from increased sales of ORE; and
unallocated ORE market valuation adjustments of $4.43 million, up $1.34
million (43.3%). For 1992, the provision for ORE losses was $6.90
million, up $7.38 million from a negative provision of $479 thousand in
1991, and included: ORE losses, up $1.13 million (21.9%) from the
writedown of loans and increased sales of ORE; ORE recoveries, down $2.44
million (49.5%) from increased sales of ORE and the absence of the
unusual recoveries experienced in 1991; and ORE market valuation
adjustments, up $3.81 million (528.6%).
* Other real estate expense, net, for 1993 was $1.19 million, down
$3.02 million (71.7%) from 1992, while for 1992, other real estate
expense, net, was $4.21 million, down $2.77 million (39.7%) from $6.98
million in 1991. For both years, this reflected the reduction in the
outstanding ORE balance.
* Other noninterest expenses for 1993 were $56.64 million, up $13.57
million (31.5%), while for 1992, other noninterest expenses were $43.07
million, down $461 thousand (1.1%) from $43.53 million in 1991.
One measurement of FSC's effectiveness and ongoing efforts to control
its noninterest expenses is the efficiency ratio. In 1993, the
efficiency ratio was 66.72%, compared with 64.10% in 1992, and 65.07% in
1991. Excluding the one-time FNFC merger-related charges of $17.11
million pre-tax, FSC's efficiency ratio would have been 63.77% or 295
basis points lower for 1993, and would have been the third year of
improvement in this indicator.
Effective January 1, 1993, FSC adopted Statement of Financial
Accounting Standards No. 106 (SFAS 106), "Employers' Accounting for
Postretirement Benefits Other Than Pensions". SFAS 106 requires the
Corporation to accrue the estimated cost of retiree benefit payments
during the years the employee provided services. FSC previously expensed
the cost of these benefits, which are principally health care, as claims
were incurred. SFAS 106 allows recognition of the cumulative effect of
the liability in the year of adoption or the amortization of the
obligation over a period of up to 20 years. The Corporation has elected
to recognize this obligation of approximately $3.50 million over a period
of 20 years. FSC's cash flows are not affected by implementation of this
Statement, but implementation decreased income before income tax
provision for the year ended December 31, 1993, by $538 thousand.
In November 1993, FASB issued SFAS No. 112, "Employers' Accounting for
Postemployment Benefits". The Statement requires an accrual of benefits
to be provided to former or inactive employees after employment but
before retirement, such as salary continuation, severance pay, or health
care benefits. The Statement is effective for fiscal years beginning
after December 15, 1993. This Statement will have virtually no effect on
FSC.
PROVISION FOR INCOME TAXES. FSC employs various strategies to
permanently reduce or defer payment of income taxes. Due to the
permanent reductions, the Corporation's tax provisions have historically
been lower than the statutory tax rates. Deferred tax reserves resulting
from the deferrals have constituted an important source of interest-free
long-term funding. These strategies include investment in securities and
loans yielding tax-exempt interest, investments in leveraged leases, and
the recognition of investment tax credits (ITC) on leases using the
deferral method. In 1993, FSC continued to employ these tax planning
strategies.
The 1993 tax provision was $59.21 million, up $9.30 million (18.6%)
from 1992, resulting in an effective tax rate of 34.17% on income before
taxes of $173.27 million, compared with a statutory Federal tax rate of
35% (See Table 2: Five-Year Summary - Condensed Consolidated Income
Statements; and Note 8. To Consolidated Financial Statements - Income
Taxes and Note 15. - Effect of Recently Issued Financial Accounting
Standards). Tax-exempt bond and loan interest and tax credits from the
lease portfolio reduced the effective tax rate by 2.20% in 1993, compared
with reductions of 3.28% in 1992 and 5.97% in 1991. State taxes
increased the effective tax rate by 2.96% in 1993, compared with
increases of 2.60% in 1992 and 2.55% in 1991. All other factors
decreased the effective tax rate by 0.74% in 1993, compared with a
decrease of 0.10% in 1992, and an increase of 1.70% in 1991. The 1992
provision was $49.91 million, up $21.59 million (76.2%) from 1991, for an
effective tax rate of 33.22%, while the 1991 tax provision was $28.32
million for an effective tax rate of 32.28%.
In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 109 (SFAS 109),
"Accounting for Income Taxes". SFAS 109 requires an asset and liability
approach to financial reporting of income taxes which differs from the
method previously required by generally accepted accounting principles.
SFAS 109 requires the Corporation to compute deferred income taxes based
on the difference between the financial statement and tax bases of assets
and liabilities using enacted tax rates in effect in the years in which
the differences are expected to reverse.
FSC adopted this Statement effective January 1, 1993, by restating its
financial statements for years 1989 through 1992. The effect of SFAS 109
on the consolidated financial statements of the Corporation and its
subsidiaries was a $7.09 million reduction of 1989 beginning retained
earnings. The cumulative effect of SFAS 109 on FSC's consolidated
retained earnings through 1992 was a total reduction of $6.19 million, or
1.07% of 1992's retained earnings including the FNFC restatement but
excluding the SFAS 109 restatement. Restated retained earnings at
December 31, 1992 and 1991 are $573.43 million and $481.00 million,
respectively.
The tax effects of the items comprising FSC's net deferred tax
liability at December 31, 1992 (as restated) and 1993 in the
Corporation's Consolidated Balance Sheet are disclosed in Note 8. to
Consolidated Financial Statements - Income Taxes.
The increase in the Federal corporate tax rate has had a significant
impact on FSC's earnings. Under the accounting rules employed by the
Corporation during 1993, the 100 basis point increase in the corporate
tax rate, enacted effective January 1, 1993, resulted in a net increase
to the 1993 tax provision of $1.55 million (2.7%), which included the
restatement of deferred taxes in accordance with SFAS 109. Looking
forward, it is expected that the tax rate increase will increase the
Corporation's future tax provisions by about 2.9%.
OFF-BALANCE SHEET ITEMS
At December 31, 1993, FSC had off-balance sheet commitments consisting
primarily of loan commitments to customers of $2.57 billion, compared
with commitments of $2.57 billion and $2.31 billion at year-ends 1992 and
1991, respectively. These commitments are discussed in greater detail in
Note 10. to Consolidated Financial Statements - Commitments and
Contingent Liabilities.
INFLATION ACCOUNTING AND CAPITAL COMMITMENTS
After reviewing the effects of changing prices on financial data,
management has concluded that those effects were not significant to
operating results for the years 1993, 1992, or 1991. No material capital
commitments existed at year-ends 1993, 1992, or 1991.
ECONOMY
FSC's businesses are significantly influenced by both the financial
strength and economic stability of the regional economies in which they
operate, and by interest rate levels and other conditions prevailing in
regional, national, and international financial markets. Interest rates
in 1993 declined to their lowest levels in more than 20 years. Partially
in response to these favorable financing conditions, sales and loan
demand in the mortgage and automobile sectors were very strong. The pace
of national economic growth accelerated throughout 1993, but with
inflation continuing below 3 percent, interest rates remained generally
stable.
The Intermountain region, which encompasses a significant portion of
FSC's primary market area, was the fastest growing regional economy in
the United States in 1993. Furthermore, Utah, Idaho, New Mexico, and
Nevada were the top four states in 1993 employment growth. Preliminary
year-to-year job gains as of December 1993 were: Utah 6.1%; New Mexico
4.3%; Nevada 3.5%; Idaho 3.2%; Oregon 2.4%; and Wyoming 1.8%. The
December unemployment rates were: New Mexico 7.0%; Nevada 6.7%; Oregon
6.6%; Idaho 5.9%; Wyoming 5.1%; and Utah 3.7%.
The basic rapid-growth formula evident to a significant degree in each
of the six states noted above was as follows:
* Rapid population growth fueled by substantial net in-migration;
* Expanding employment opportunities to absorb the new labor force
entrants;
* Job gains, combined with very low mortgage rates, producing a
residential construction boom and huge increases in mortgage refinancing.
* In numerous instances, reduced monthly mortgage debt payments were
utilized to purchase a new automobile.
Generally, this formula appears likely to continue in 1994. While
interest rates, including mortgage rates, may begin to edge higher, the
magnitude of the expected change should not disrupt either the demand
for, or the supply of, credit.
The construction sector was the fastest growing industry in most urban
areas throughout the regional economy. Single-family residential
construction provided much of the economic momentum in 1993. This seems
likely to persist in 1994, but it will be aided by increased production
of multi-family units and also expanded commercial construction. Vacancy
rates in office, industrial, and retail buildings declined markedly in
1993 in many of FSC's urban markets.
While the 1994 outlook remains generally favorable, the following
factors could adversely impact regional economic activity:
* Unexpected sharp increase in both short- and long-term interest
rates;
* Possible closures of defense installations in FSC's market areas and
the accompanying lost employment;
* Reduced, or even eliminated, access to Federal lands for timber,
mining, and livestock industries;
* International competitive pressures in the computer industry
possibly slowing or even reducing employment levels;
* Uncertainty over the proposed health care reform conceivably
resulting in slower job growth in small businesses.
COMPETITIVE POSITION
FSC is the largest bank holding company headquartered in the
Intermountain area. Incorporated in 1928, the Corporation is the oldest
multistate bank holding company in the United States.
FSB Utah is the largest bank in the state of Utah. At September 30,
1993, the most recent date for which comparative data were available, FSB
Utah had deposits totaling $3.3 billion and 113 full-service domestic
branches. Zion's First National Bank was the second largest bank with
deposits totaling $2.4 billion and approximately 75 branches, while Key
Bank was the third largest with deposits totaling $936 million and
approximately 37 branches. These three banks are all units of bank
holding companies with bank operations in other western states. Thirty-
six other banks in Utah had deposits totaling approximately $3.5 billion
and approximately 213 branches. There are no statewide savings & loan
organizations (S&Ls) in Utah, but there are several regional S&Ls. At
September 30, 1993, there were four S&Ls operating in Utah with deposits
of approximately $722 million and approximately 25 branch locations. At
the same time, Utah also had 157 credit unions with deposits of
approximately $3.0 billion.
FSB Idaho is the second largest bank in the state of Idaho. At
September 30, 1993, the most recent date for which comparative data were
available, FSB Idaho had deposits totaling $2.2 billion and 86 full-
service branches. West One Bank was the largest bank with deposits
totaling $2.7 billion and approximately 80 branches, while Key Bank was
the third largest with deposits totaling $994 million and approximately
46 branches. These three banks are all units of bank holding companies
with bank operations in other western states. Sixteen other banks in
Idaho had deposits totaling approximately $2.0 billion and approximately
97 branches. There are no statewide S&Ls in Idaho, but there are several
regional S&Ls. At September 30, 1993, there were three S&Ls operating in
Idaho with deposits of approximately $440 million and approximately 42
branches. At the same time, Idaho also had 88 credit unions with
deposits in excess of $900 million.
FSB New Mexico is the second largest bank in the state of New Mexico.
At September, 1993, the most recent date for which comparative data were
available, FSB New Mexico had deposits totaling $1.1 billion and 26 full-
service branches. Boatmen's Sunwest, Inc. was the largest bank with
deposits totaling $1.6 billion and approximately 68 branches, while
United New Mexico Financial Corporation was the third largest with
deposits totaling $880 million and approximately 28 branches. These
three largest banks are all units of bank holding companies with bank
operations in other western states. Seventy-eight other banks in New
Mexico had deposits totaling approximately $7.4 billion and approximately
295 branches. At September 30, 1993, there were 12 S&Ls operating in New
Mexico with deposits of approximately $1.1 billion and approximately 31
branches. At the same time, New Mexico also had 64 credit unions with
deposits of approximately $1.5 billion.
FSC experiences substantial competition in attracting deposits and
originating loans. The primary factors in competing for deposits are
interest rates, the range and quality of services offered, the
convenience of bank facilities and automated teller machines, and hours
of operation. Competition for deposits comes principally from other
commercial banks, S&Ls, and credit unions. Additional competition comes
from money market funds, and various types of corporate and government
lenders. The primary factors in competing for loans are interest rates,
loan fees, and the quality and range of lending services offered.
Competition for the origination of instalment and commercial loans comes
from commercial banks and finance companies, while competition for the
origination of mortgage loans comes from S&Ls, credit unions, mortgage
banking firms, insurance companies, and other commercial banks.
FSC, along with the rest of the banking industry, has felt the effects
of added competition as nonbank financial service companies enter what
were already highly competitive markets. Notwithstanding the increased
competition, banks still have only limited entry into nonbank financial
markets. In spite of the inequities of the present financial services
market, FSC has succeeded in maintaining its position as a major
participant in the financial services market in the Intermountain area by
being innovative and creative in providing new products and services to
its customers within the narrow constraints of current banking
regulations.
LEGAL PROCEEDINGS
FSC and its subsidiaries are subject from time to time to various
claims and legal actions filed or threatened by customers and others
arising in connection with the Corporation's regular business activities.
In all litigation filed against it, FSC vigorously defends itself against
unfounded claims, with a concomitant cost in legal fees and expenses.
Some legal actions filed against the Corporation seek inflated damage
amounts, often in an effort to force compromise of a troubled loan
transaction, and are disclosed from time to time in filings with the SEC
as required by applicable rules. Since the filing of FSC's Annual Report
on Form 10-K for fiscal year 1992, there have been no material
developments in connection with pending legal proceedings not already
disclosed in previous filings with the SEC.
<TABLE>
TABLE 18: QUARTERLY FINANCIAL SUMMARY (in thousands, except per share data and ratios)
<CAPTION>
1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- - - --------------------------------------- ------------------------------------------- -------------------------------------------
4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
- - - --------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Common Stock Data:
Earnings per common share:
Primary $0.43 $0.68 $0.62 $0.65 $0.58 $0.60 $0.53 $0.46
Fully-diluted $0.43 0.68 0.62 0.65 0.58 0.59 0.53 0.46
Dividends paid per share 0.23 0.23 0.23 0.19 0.19 0.17 0.17 0.15
Book value at period end 17.24 17.12 16.64 16.31 15.81 15.40 14.96 14.56
Market price (bid) 25.75 28.00 28.25 28.50 27.25 22.25 23.75 22.83
High for the quarter 30.00 28.50 30.00 30.25 27.50 26.25 25.25 23.33
Low for the quarter 24.00 26.50 25.50 25.50 22.00 21.50 20.17 18.17
Common shares outstanding 48,437 47,243 46,617 45,792 45,642 45,437 45,297 45,237
Average shares: primary 48,805 47,981 47,660 46,937 46,691 46,518 46,313 45,792
Average shares: fully-diluted 48,969 48,147 47,829 47,112 46,874 46,706 46,506 45,987
======================================= ========== ========== ========== ========== ========== ========== ========== ==========
Income:
Net interest income $105,863 $103,343 $98,879 $95,853 $95,586 $95,856 $94,381 $90,126
FTE adjustment 2,922 (1,092) 2,221 3,582 2,554 2,152 2,397 2,518
Net interest income, FTE 108,785 102,251 101,100 99,435 98,140 98,008 96,778 92,644
Provision for loan losses 4,647 5,139 (78) 1,976 4,936 6,449 10,175 8,717
Noninterest income 46,446 43,107 36,739 40,867 38,573 37,629 33,961 33,873
Noninterest expenses 116,015 94,824 90,081 85,226 88,910 85,533 81,221 83,792
Net income 21,064 32,587 29,693 30,712 27,112 27,615 24,496 21,120
======================================= ========== ========== ========== ========== ========== ========== ========== ==========
Average Balance Sheet:
Investment securities $1,713,775 $1,768,370 $1,932,218 $1,756,738 $1,732,045 $1,734,061 $1,730,744 $1,634,755
Loans, net of unearned income 6,314,632 6,037,540 5,745,825 5,563,702 5,491,578 5,457,843 5,474,914 5,489,110
Reserve for loan losses 130,881 127,787 128,874 127,736 131,232 130,112 130,974 129,873
Total interest-earning assets 8,683,703 8,384,769 8,304,335 7,896,287 7,772,115 7,720,404 7,755,600 7,460,223
Total assets 9,638,743 9,301,245 9,180,421 8,725,616 8,645,395 8,530,587 8,526,141 8,257,681
Interest-bearing deposits 5,667,076 5,510,779 5,506,463 5,423,080 5,419,487 5,339,119 5,327,218 5,328,405
Short-term borrowed funds 1,172,030 1,125,109 1,151,294 1,035,021 899,870 1,000,356 1,122,907 907,371
Long-term debt 225,701 235,474 232,054 121,801 129,208 111,388 86,346 87,329
Total interest-bearing liabilities 7,064,807 6,871,362 6,889,811 6,579,902 6,448,565 6,450,863 6,536,471 6,323,105
Total deposits 7,265,005 6,985,568 6,889,948 6,677,149 6,747,491 6,566,792 6,494,987 6,459,869
Stockholders' equity 830,817 798,433 769,074 739,149 715,724 695,047 674,196 659,247
======================================= ========== ========== ========== ========== ========== ========== ========== ==========
End of Period Balance Sheet:
Investment securities $1,762,783 $1,760,168 $1,862,131 $1,970,338 $1,750,180 $1,776,717 $1,774,212 $1,722,281
Loans, net of unearned income 6,561,021 6,185,830 5,946,520 5,596,166 5,616,707 5,481,623 5,475,967 5,469,536
Reserve for loan losses 134,848 130,726 126,896 127,329 127,847 131,782 130,186 132,348
Total interest-earning assets 9,329,273 8,797,725 8,524,631 8,447,960 8,054,059 7,994,249 7,913,874 7,797,763
Total assets 10,211,689 9,725,657 9,490,282 9,158,974 8,895,673 8,735,892 8,610,593 8,518,684
Interest-bearing deposits 5,806,020 5,523,565 5,453,683 5,460,770 5,439,139 5,347,960 5,321,310 5,345,778
Short-term borrowed funds 1,486,905 1,289,505 1,181,217 1,245,394 995,790 1,033,682 1,131,879 1,057,817
Long-term debt 224,836 226,505 237,895 119,062 127,203 156,238 85,312 86,890
Total interest-bearing liabilities 7,517,761 7,039,575 6,872,795 6,825,226 6,562,132 6,537,880 6,538,501 6,490,485
Total deposits 7,503,707 7,061,649 6,978,451 6,744,977 6,868,453 6,650,615 6,582,289 6,580,346
Stockholders' equity 835,731 809,677 776,494 747,379 722,447 700,414 678,305 659,454
Nonperforming assets 52,819 76,759 91,701 98,655 107,455 125,901 135,405 151,977
Accruing loans past due 90 days or more 7,155 8,310 9,150 10,309 11,766 13,376 13,360 18,048
Total problem assets 59,974 85,069 100,851 108,964 119,221 139,277 148,765 170,025
======================================= ========== ========== ========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
TABLE 18: QUARTERLY FINANCIAL SUMMARY (continued)
<CAPTION>
1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- - - --------------------------------------- ------------------------------------------- -------------------------------------------
4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
- - - --------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Selected Ratios:
Reserve for loan losses to:
Total loans 2.06% 2.11% 2.13% 2.28% 2.28% 2.40% 2.38% 2.42%
Nonaccruing and renegotiated loans 370.93 243.41 196.68 189.16 159.87 145.80 128.92 117.73
Nonaccruing and renegotiated loans
plus accruing loans past due 90
days or more 309.93 210.79 172.25 164.04 139.37 127.00 113.86 101.44
Nonaccruing and renegotiated loans
to total loans 0.55 0.87 1.09 1.20 1.42 1.65 1.84 2.06
Nonaccruing and renegotiated loans
plus accruing loans past due 90
days or more to total loans 0.66 1.00 1.24 1.39 1.63 1.89 2.09 2.39
Nonperforming assets to:
Total loans and ORE 0.80 1.24 1.54 1.75 1.90 2.28 2.46 2.76
Total assets 0.52 0.79 0.97 1.08 1.21 1.44 1.57 1.78
Equity 6.32 9.48 11.81 13.20 14.87 17.98 19.96 23.05
Equity and reserve for loan losses 5.44 8.16 10.15 11.28 12.64 15.13 16.75 19.19
Total problem assets to:
Total loans and ORE 0.91 1.37 1.69 1.94 2.11 2.52 2.70 3.09
Total assets 0.59 0.87 1.06 1.19 1.34 1.59 1.73 2.00
Equity 7.18 10.51 12.99 14.58 16.50 19.88 21.93 25.78
Equity and reserve for loan losses 6.18 9.05 11.16 12.46 14.02 16.74 18.40 21.47
Net loans charged off to average loans 0.30 0.16 0.15 0.18 0.64 0.35 0.92 0.48
======================================= ========== ========== ========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
First Security Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31, 1993 and 1992 1993 1992
(in thousands) (Notes 1,14)
<S> <C> <C>
- - - -------------------------------------------------------- ----------- -----------
ASSETS:
Cash and due from banks (Note 2) $673,877 $616,121
Interest-bearing deposits in other banks 16,461 10,036
Federal funds sold and securities purchased
under resale agreements (Note 1) 381,154 288,258
Trading account securities (Notes 1, 3) 607,854 388,961
- - - -------------------------------------------------------- ----------- -----------
Investment securities (Notes 1, 3, 15)
(market value $1,794,647 and $1,781,913, respectively):
U.S. Treasury and other U.S. Government
agencies and corporations 1,327,319 1,267,688
Obligations of states and political subdivisions 180,129 199,692
Other 255,335 282,800
- - - -------------------------------------------------------- ----------- -----------
TOTAL INVESTMENT SECURITIES 1,762,783 1,750,180
- - - -------------------------------------------------------- ----------- -----------
Loans (Notes 1, 4, 15) 6,573,203 5,630,485
Less:
Unearned income 12,182 13,861
Reserve for loan losses 134,848 127,847
- - - -------------------------------------------------------- ----------- -----------
TOTAL LOANS, NET 6,426,173 5,488,777
- - - -------------------------------------------------------- ----------- -----------
Premises and equipment, net (Notes 1, 5) 145,718 129,393
Accrued income receivable 52,654 56,483
Other real estate and other foreclosed assets (Note 1) 16,465 27,487
Other assets (Note 12) 128,550 139,977
- - - -------------------------------------------------------- ----------- -----------
TOTAL ASSETS $10,211,689 $8,895,673
======================================================== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits (Note 6):
Noninterest-bearing $1,697,687 $1,429,314
Interest-bearing 5,806,020 5,439,139
- - - -------------------------------------------------------- ----------- -----------
TOTAL DEPOSITS 7,503,707 6,868,453
- - - -------------------------------------------------------- ----------- -----------
Securities sold under repurchase agreements (Note 1) 1,188,569 848,512
Federal funds purchased 198,540 95,873
U.S. Treasury demand notes 43,645 36,409
Other short-term borrowings (Notes 7, 9) 56,151 14,996
Accrued income taxes (Notes 1, 8, 15) 85,837 81,110
Accrued interest 17,429 18,030
Other liabilities 57,244 82,640
Long-term debt (Note 9) 224,836 127,203
- - - -------------------------------------------------------- ----------- -----------
TOTAL LIABILITIES 9,375,958 8,173,226
- - - -------------------------------------------------------- ----------- -----------
Commitments and contingent liabilities
(Notes 3, 4, 5, 10, 16)
Stockholders' equity
(Notes 1, 11, 12, 13, 14, 15, 16):
Preferred stock: Series "A", $3.15 cumulative convertible 703 783
- - - -------------------------------------------------------- ----------- -----------
Common stockholders' equity:
Common stock
(48,787 and 46,163 shares issued, respectively) 60,983 57,704
Paid-in surplus 122,549 98,722
Retained earnings 657,446 572,845
- - - -------------------------------------------------------- ----------- -----------
Subtotal 840,978 729,271
Less common treasury stock, at cost
(350 and 521 shares, respectively) (5,950) (7,607)
- - - -------------------------------------------------------- ----------- -----------
Total common stockholders' equity 835,028 721,664
- - - -------------------------------------------------------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY 835,731 722,447
- - - -------------------------------------------------------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $10,211,689 $8,895,673
======================================================== =========== ===========
<FN>
See notes to consolidated financial statements.
</TABLE>
<TABLE>
First Security Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
For the years ended December 31, 1993, 1992, and 1991 1993 1992 1991
(in thousands, except for per share amounts) (Notes1,14) (Notes1,14)
<S> <C> <C> <C>
- - - -------------------------------------------------------- ----------- ----------- -----------
INTEREST INCOME:
Interest and fees on loans (Note 1) $513,810 $507,491 $557,167
Interest and dividends on investment securities:
U.S. Treasury securities and other U.S. Government
agencies and corporations 72,175 87,585 89,305
Obligations of states and political subdivisions 10,844 12,486 13,926
Other 17,445 14,671 12,170
Federal funds sold and securities purchased
under resale agreements 9,191 6,416 9,553
Interest-bearing deposits in other banks 456 691 2,367
Trading account interest 20,811 27,108 26,343
- - - -------------------------------------------------------- ----------- ----------- -----------
TOTAL INTEREST INCOME 644,732 656,448 710,831
- - - -------------------------------------------------------- ----------- ----------- -----------
INTEREST EXPENSE:
Interest on deposits 192,992 238,135 319,716
Interest on short-term borrowings 33,979 34,017 59,916
Interest on long-term debt 13,823 8,347 8,390
- - - -------------------------------------------------------- ----------- ----------- -----------
TOTAL INTEREST EXPENSE 240,794 280,499 388,022
- - - -------------------------------------------------------- ----------- ----------- -----------
NET INTEREST INCOME:
Net interest income 403,938 375,949 322,809
Provision for loan losses (Notes 1, 4) 11,684 30,277 66,393
- - - -------------------------------------------------------- ----------- ----------- -----------
Net interest income after provision for loan losses 392,254 345,672 256,416
- - - -------------------------------------------------------- ----------- ----------- -----------
NONINTEREST INCOME:
Service charges on deposit accounts 55,865 51,505 46,137
Other service charges, collections, commissions, and fees 48,333 39,085 29,913
Commissions and fees from fiduciary activities 18,980 18,176 16,793
Bankcard service fees 33,083 27,411 24,175
Insurance commissions 9,953 8,719 7,017
Investment securities gains (Notes 1, 3) 730 859 2,942
Other 215 (1,719) 10,845
- - - -------------------------------------------------------- ----------- ----------- -----------
TOTAL NONINTEREST INCOME 167,159 144,036 137,822
- - - -------------------------------------------------------- ----------- ----------- -----------
TOTAL INCOME 559,413 489,708 394,238
- - - -------------------------------------------------------- ----------- ----------- -----------
NONINTEREST EXPENSES:
Salaries and employee benefits (Notes 12, 15) 175,696 160,982 147,795
Net occupancy (Note 5) 24,224 19,373 18,316
Furniture and equipment 27,858 26,549 22,656
Stationery and supplies 15,956 12,865 10,754
Advertising 9,187 6,363 4,990
Telephone 8,610 7,344 6,583
Provision for (recovery of) loss on
other real estate (Note 1) 7,448 6,903 (479)
Other real estate expense, net 1,191 4,207 6,978
Insurance 19,697 18,868 14,678
Bankcard interbank exchange 13,983 11,245 10,121
Other 82,296 64,757 64,112
- - - -------------------------------------------------------- ----------- ----------- -----------
TOTAL NONINTEREST EXPENSES 386,146 339,456 306,504
- - - -------------------------------------------------------- ----------- ----------- -----------
Income before income tax provision 173,267 150,252 87,734
Provision for income taxes (including tax effect
of investment securities transactions of
$274, $187, and $612) (Notes 1, 8) 59,211 49,909 28,322
- - - -------------------------------------------------------- ----------- ----------- -----------
NET INCOME:
Net income 114,056 100,343 59,412
Dividend requirement of preferred stock (Note 1) 43 48 52
- - - -------------------------------------------------------- ----------- ----------- -----------
Net income applicable to common stock $114,013 $100,295 $59,360
======================================================== =========== =========== ===========
Weighted average number common shares outstanding (Note 1) 47,852 46,330 41,155
======================================================== =========== =========== ===========
Earnings per common share (Note 1) $2.38 $2.17 $1.44
======================================================== =========== =========== ===========
<FN>
See notes to consolidated financial statements.
</TABLE>
<TABLE>
First Security Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Common
For the years ended December 31, 1991, 1992, and 1993 Preferred Common Paid-in Retained Treasury
(in thousands, except for per share amounts) Total Stock Stock Surplus Earnings Stock
<S> <C> <C> <C> <C> <C> <C>
- - - ----------------------------------------------------------- -------- -------- -------- -------- -------- --------
BALANCE, JANUARY 1, 1991:
As previously reported $479,168 $926 $41,887 $32,075 $415,160 ($10,880)
Applicable to company merged in pooling-of-interests
transaction (Notes 1, 14) 73,413 9,183 12,692 51,538
Applicable to change in accounting principle (Notes 1, 8) (7,286) (7,286)
- - - ----------------------------------------------------------- -------- -------- -------- -------- -------- --------
As restated 545,295 926 51,070 44,767 459,412 (10,880)
- - - ----------------------------------------------------------- -------- -------- -------- -------- -------- --------
Net income for the year 59,412 59,412
Sale of common stock through dividend reinvestment
and common stock purchase plan (Note 11) 1,119 92 1,027
Sale of stock to employee benefit plans 3,147 521 2,626
Common stock issued for acquisition (Note 14) 6,915 981 5,934
Conversion of long-term debt to common stock 39,750 3,957 35,793
Cash dividends:
Preferred stock - $3.15 per share (52) (52)
Common stock - $.60 per share (Note 1) (20,017) (20,017)
Conversion of preferred stock to common (1) (77) 18 58
Purchase of treasury stock (288) 3 (291)
Other (107) (17) (90)
- - - ----------------------------------------------------------- -------- -------- -------- -------- -------- --------
BALANCE, DECEMBER 31, 1991 635,173 849 56,118 88,086 498,665 (8,545)
- - - ----------------------------------------------------------- -------- -------- -------- -------- -------- --------
Net income for the year 100,343 100,343
Sale of common stock through dividend reinvestment
and common stock purchase plan (Note 11) 1,293 72 1,221
Sale of stock to employee benefit plans 11,260 3,703 7,557
Common stock issued for acquisitions (Note 14) 6,547 1,498 5,075 (26)
Cash dividends:
Preferred stock - $3.15 per share (48) (48)
Common stock - $.68 per share (Note 1) (26,000) (26,000)
Conversion of preferred stock to common (1) (66) 19 46
Purchase of treasury stock (6,593) (6,593)
Other 473 (3) 591 (115)
- - - ----------------------------------------------------------- -------- -------- -------- -------- -------- --------
BALANCE, DECEMBER 31, 1992 722,447 783 57,704 98,722 572,845 (7,607)
- - - ----------------------------------------------------------- -------- -------- -------- -------- -------- --------
Net income for the year 114,056 114,056
Sale of common stock through dividend reinvestment
and common stock purchase plan (Note 11) 1,815 83 1,732
Sale of stock to employee benefit plans 7,306 293 3,152 3,861
Common stock issued for acquisitions (Note 14) 27,869 2,818 15,779 9,358 (86)
Cash dividends:
Preferred stock - $3.15 per share (43) (43)
Common stock - $.88 per share (Note 1) (38,595) (38,595)
Conversion of preferred stock to common (1) (80) 23 56
Purchase of treasury stock (2,118) (2,118)
Other 2,995 62 3,108 (175)
- - - ----------------------------------------------------------- -------- -------- -------- -------- -------- --------
BALANCE, DECEMBER 31, 1993 $835,731 $703 $60,983 $122,549 $657,446 ($5,950)
=========================================================== ======== ======== ======== ======== ======== ========
<FN>
See notes to consolidated financial statements.
</TABLE>
<TABLE>
First Security Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For the years ended December 31, 1993, 1992, and 1991 1992 1991
(in thousands, except for number of shares) 1993 (Notes 1,14) (Notes 1,14)
<S> <C> <C> <C>
- - - -------------------------------------------------------- ----------- ----------- -----------
Cash Flows From Operating Activities:
Net income $114,056 $100,343 $59,412
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Provision for loan losses 11,684 30,277 66,393
Provision for (recovery of) loss on other real estate 7,448 6,903 (479)
Provision for depreciation and amortization 26,281 19,531 18,455
Provision for deferred income taxes 7,116 15,401 10,730
Net change in deferred loan origination fees and costs (3,875) (3,900) (1,707)
Net amortization of investment security discounts
and premiums 3,598 1,936 (2,185)
Investment securities gains (730) (859) (2,942)
Net realized gains on sold loans (19,145) (12,813) (9,597)
Increase in trading account securities (218,893) (75,031) (158,979)
Decrease in accrued income receivable 3,829 3,661 3,912
Decrease in accrued interest (601) (8,231) (6,007)
Increase (decrease) in accrued income taxes (7,596) 1,203 (2,670)
Other operating activities (22,265) (21,955) 45,739
- - - -------------------------------------------------------- ----------- ----------- -----------
Net cash provided by (used in) operating activities (99,093) 56,466 20,075
- - - -------------------------------------------------------- ----------- ----------- -----------
Cash Flows From Investing Activities:
Proceeds from sales of investment securities 2,310 43,290 470,547
Redemption of matured investment securities 1,489,247 960,718 275,327
Purchases of investment securities (1,404,115) (1,135,988) (885,071)
Net (increase) decrease in interest-bearing deposits
in other banks (6,425) 2,140 39,462
Net (increase) decrease in credit card receivables 18,768 (6,723) (1,467)
Net increase in loans (1,677,414) (928,255) (671,157)
Proceeds from sale of loans 976,999 828,787 528,282
Purchase of premises and equipment (15,662) (27,039) (20,618)
Purchase of leased equipment (57,837) (38,387) (537)
Proceeds from sales of other real estate 7,373 24,848 38,830
Payments to improve other real estate (2,213) (1,097) (751)
Cash from acquisitions, net of cash paid (Note 14) 54,108 47,319 27,294
- - - -------------------------------------------------------- ----------- ----------- -----------
Net cash used in investing activities (614,861) (230,387) (199,859)
- - - -------------------------------------------------------- ----------- ----------- -----------
Cash Flows From Financing Activities:
Net increase in deposits 267,813 128,823 237,414
Net increase in Federal funds purchased, securities sold
under repurchase agreements, U.S. Treasury demand notes 448,747 126,044 32,572
Proceeds from issuance of nonrecourse debt on
leveraged leases 70,244 66,882 96,037
Payments on nonrecourse debt on leveraged leases (29,350) (26,747) (22,511)
Proceeds from issuance of long-term debt and
short-term borrowings 140,190 107,211 75,605
Payments on long-term debt and short-term borrowings (1,403) (99,599) (87,905)
Proceeds from issuance of common stock and
sales of treasury stock 9,121 12,553 4,266
Purchases of treasury stock (2,118) (6,593) (288)
Dividends paid (38,638) (26,048) (20,069)
- - - -------------------------------------------------------- ----------- ----------- -----------
Net cash provided by financing activities 864,606 282,526 315,121
- - - -------------------------------------------------------- ----------- ----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS (Note 1) 150,652 108,605 135,337
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 904,379 795,774 660,437
- - - -------------------------------------------------------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $1,055,031 $904,379 $795,774
======================================================== =========== =========== ===========
<FN>
(Continued)
</TABLE>
<PAGE>
<TABLE>
First Security Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For the years ended December 31, 1993, 1992, and 1991 1992 1991
(in thousands, except for number of shares) (CONTINUED) 1993 (Notes 1,14) (Notes 1,14)
<S> <C> <C> <C>
- - - -------------------------------------------------------- ----------- ----------- -----------
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest $241,395 $290,552 $396,213
Income taxes $47,878 $35,059 $14,958
======================================================== =========== =========== ===========
Supplemental Schedule of Noncash Investing
and Financing Activities:
Conversion of 1,523, 1,259, and 1,457 shares of
convertible preferred stock into 18,483, 15,297,
and 17,682 shares of common stock, respectively $80 $66 $77
======================================================== =========== =========== ===========
Transfer of loans to other real estate $11,085 $28,002 $26,194
======================================================== =========== =========== ===========
Transfers of loans to investment securities upon
formation of mortgage-backed securities None None $46,021
======================================================== =========== =========== ===========
<FN>
In 1993, 2,255,000 shares of common stock were issued for the
acquisitions of Dixie State Bank, Benton County Bank, Nevada
Community Bank, State Bank of Green River, and Continental
Bancorporation. The Corporation acquired assets of approximately
$404,062,000 and assumed liabilities of approximately $376,344,000
(Note 14).
In 1992, 1,199,000 shares of common stock were issued for the
acquisition of First National Bank of North Idaho (FNBNI). The
Corporation acquired FNBNI assets of approximately $167,500,000 and
assumed liabilities of approximately $161,065,000 (Note 14). The
Bank of Willamette Valley (BWV) was acquired for cash of $5,481,000.
The Corporation acquired BWV's assets of approximately $27,319,000
and assumed liabilities of approximately $24,515,000.
In 1991, $39,750,000 of long-term debt was converted into 3,165,801
shares of common stock.
In 1991, 784,662 shares of common stock were issued for the
acquisition of UB&T Bancorp and its subsidiary. The Corporation
acquired assets of approximately $71,274,000 and assumed liabilities
of approximately $64,359,000 (Note 14).
See notes to consolidated financial statements.
</TABLE>
<PAGE>
First Security Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
First Security Corporation (the Corporation), a bank holding company,
provides a full range of financial services to individual and corporate
customers through its bank and nonbank subsidiaries and their branches in
Utah, Idaho, New Mexico, Oregon, Nevada, and Wyoming. The Corporation
and its subsidiaries are subject to competition from other financial
institutions and to the regulations of certain Federal agencies and
undergo periodic examinations by those agencies.
Basis of Financial Statement Presentation: The consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles and with general practice within the banking
industry. In preparing such financial statements, management is required
to make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the balance sheet and revenues
and expenses for the period. Actual results could differ significantly
from those estimates. Material estimates that are particularly
susceptible to significant change relate to the determination of the
reserve for loan losses and the valuation of real estate acquired in
connection with foreclosures or in satisfaction of loans. In connection
with the determination of the reserve for loan losses and the valuation
of real estate owned, management obtains independent appraisals for
significant properties.
Consolidation: The consolidated financial statements include the
accounts of the Corporation and its subsidiaries. All significant
intercompany accounts and transactions are eliminated in consolidation.
The accompanying 1992 and 1991 consolidated financial statements and
related footnote disclosures have been restated to include the accounts
of First National Financial Corporation which was merged in 1993 and
accounted for as a pooling of interests (see Note 14). Results of
operations of companies which were acquired and subject to purchase
accounting are included from the dates of acquisition. In accordance
with the purchase method of accounting, the assets and liabilities of
purchased companies are stated at estimated fair values at the date of
acquisition, and the excess of cost over fair value of net assets
acquired is amortized on the straight-line basis over 5 to 15 years.
Federal Funds Sold and Securities Purchased Under Resale Agreements:
Federal funds sold are unsecured short-term investments entered into with
other financial institutions. Securities purchased under resale
agreements are short-term investments. The Corporation's subsidiaries
generally hold the securities as collateral during the term of the
investment.
Securities (See Notes 3 and 15): Trading account securities are carried
at market. Investment securities are carried at cost, plus discount
accreted or less premium amortized, based on management's intent and the
Corporation's and its subsidiaries' ability to hold such securities on a
long-term basis. The ability and intent are based on management's
evaluation of liquidity requirements and asset/liability structure.
Gains and losses are determined on the specific identification method.
Direct Lease Financing (See Note 4): Certain of the Corporation's
subsidiaries lease various types of equipment to customers under both
leveraged and nonleveraged arrangements. For leveraged leases, a
significant part of the cost of the equipment is financed by other
institutional lenders who depend on the related lease and equipment as
collateral for their loans, with no recourse to the subsidiaries. The
investment in direct lease financing consists principally of rentals
receivable and estimated residual values, less related unearned income.
Unearned income is amortized into income so as to produce a constant
periodic rate of return on the unrecovered investment. Investment tax
credits on lease financing equipment are deferred and amortized to income
over the investment recovery period.
Reserve for Loan Losses (See Note 4): Loan losses are accounted for
under the reserve method. Losses and recoveries are charged or credited
directly to the reserve. The provision for loan losses charged to
expense is an amount which, in management's judgment, is sufficient to
maintain the balance in the reserve at an adequate level. While
management uses the best information available on which to base
estimates, future adjustments to the reserve may be necessary if economic
conditions, particularly in the Corporation's markets, differ
substantially from the assumptions used by management.
Premises and Equipment (See Note 5): Premises and equipment are stated
at cost less accumulated depreciation and amortization. Depreciation and
amortization included in noninterest expenses are computed using
accelerated and straight-line methods over the estimated useful lives of
the related assets.
Other Real Estate and Other Foreclosed Assets: Other real estate and
other foreclosed assets are carried at the lower of cost or fair value
less estimated selling costs.
Securities Sold Under Repurchase Agreements: Securities sold under
agreements to repurchase are accounted for as financing transactions and
are recorded at the amount at which the securities will be reacquired,
including accrued interest. Collateralization limits, based on market
values, generally range from 100% to 105%, depending on maturity.
Interest Rate Swaps (See Note 4): The Corporation and its subsidiaries
use interest rate swap contracts to manage interest rate exposure.
Income or expense associated with interest rate swap transactions is
accrued over the life of the contract.
Income Taxes (See Notes 8 and 15): During 1993, the Corporation adopted
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting
for Income Taxes", the effects of which have been applied retroactively.
As a result of the adoption of SFAS No. 109, retained earnings at
January 1, 1991 was decreased by $7,286,000, and income tax expense
decreased by $601,000 and $496,000 in 1992 and 1991, respectively, from
the amounts originally reported. Prior to 1993, the Corporation
accounted for income taxes under the Accounting Principles Board's
Opinion No. 11.
The Corporation has recorded in its consolidated balance sheets net
deferred tax liabilities for the expected future tax consequences of
events that have been recognized in different periods for financial
statement purposes than for income tax purposes. The effect on deferred
taxes of a change in rates is recognized in income in the period that
includes the enactment date.
Interest and Fees on Loans: Accrual of interest on a loan is
discontinued when the borrower has defaulted for a period of 90 days or
more in the payment of principal or interest, or both, unless the loan is
well-secured and in the process of collection. Loan origination fees and
certain loan origination costs are deferred and recognized over the lives
of the related loans as an adjustment of the yield.
Statements of Consolidated Cash Flows: For purposes of reporting cash
flows, cash and cash equivalents include cash and due from banks as well
as Federal funds sold and securities purchased under resale agreements.
Earnings Per Common Share: Earnings per common share are based on the
weighted average number of shares outstanding, net income after deducting
the dividend requirement on preferred stock, and the effect, if dilutive,
of stock options outstanding using the treasury stock method.
Reclassifications: Certain reclassifications to the 1992 and 1991
amounts have been made to conform to the 1993 classifications.
2. CASH AND DUE FROM BANKS
The Federal Reserve requires the Corporation's national banking
subsidiaries to maintain certain average reserve balances with the
Federal Reserve or through approved correspondent banks. For the years
ended December 31, 1993 and 1992, the required average reserve balances
were approximately $105,630,000 and $95,101,000, respectively.
3. INVESTMENT SECURITIES
The amortized cost and estimated market value of securities were as
follows (in thousands) (see Note 15):
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
- - - -------------------------------------------------------- ----------- ----------- ----------- -----------
As of December 31, 1993:
U.S. Treasury and other U.S. Government
agencies and corporations $1,327,319 $17,170 ($2,947) $1,341,542
Obligations of states and political subdivisions 180,129 6,288 (94) 186,323
Corporate debt securities 217,560 2,470 (309) 219,721
Equity securities 37,775 9,311 (25) 47,061
- - - -------------------------------------------------------- ----------- ----------- ----------- -----------
Totals $1,762,783 $35,239 ($3,375) $1,794,647
======================================================== =========== =========== =========== ===========
As of December 31, 1992:
U.S. Treasury and other U.S. Government
agencies and corporations $1,267,688 $22,609 ($743) $1,289,554
Obligations of states and political subdivisions 199,692 4,866 (209) 204,349
Corporate debt securities 248,993 2,878 (519) 251,352
Equity securities 33,807 2,874 (23) 36,658
- - - -------------------------------------------------------- ----------- ----------- ----------- -----------
Totals $1,750,180 $33,227 ($1,494) $1,781,913
======================================================== =========== =========== =========== ===========
</TABLE>
The amortized cost and estimated market value of investment securities at
December 31, 1993 by contractual maturity are shown below (in thousands).
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Market
Cost Value
<S> <C> <C>
- - - -------------------------------------------------------- ----------- -----------
Due in one year or less $399,137 $402,337
Due after one year through five years 477,306 487,223
Due after five years through ten years 239,967 242,710
Due after ten years 608,598 615,316
- - - -------------------------------------------------------- ----------- -----------
Total debt securities 1,725,008 1,747,586
Equity securities 37,775 47,061
- - - -------------------------------------------------------- ----------- -----------
Totals $1,762,783 $1,794,647
======================================================== =========== ===========
</TABLE>
Proceeds, gross gains, and gross losses from sales of investment
securities were as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
- - - -------------------------------------------------------- ----------- ----------- -----------
Proceeds $2,310 $43,290 $470,547
======================================================== =========== =========== ===========
Gross gains $731 $912 $3,082
Gross losses (1) (53) (140)
- - - -------------------------------------------------------- ----------- ----------- -----------
Net gains $730 $859 $2,942
======================================================== =========== =========== ===========
</TABLE>
In addition, during 1993 approximately $17,150,000 of municipal
securities were called by the issuers prior to their schedule maturity
dates.
At December 31, 1993 and 1992, investment securities carried at
$1,659,133,000 and $1,041,944,000, respectively, were pledged for various
purposes. In addition, at December 31, 1993 and 1992, trading account
securities totaling $337,656,000 and $118,603,000, respectively, were
also pledged.
At December 31, 1993 and 1992, the Corporation and its subsidiaries had
approximately $6,363,000,000 and $2,378,000,000, respectively, of
nonhedged futures contracts for various investments. These nonhedged
futures were primarily short-term contracts for Federal funds, LIBOR,
Eurodollar, and Treasury Bill contracts. The Corporation uses such
contracts to maintain positions in the U.S. Government cash market,
substitute for cash securities in the U.S. Government market, and to take
advantage of arbitrage opportunities that arise in the futures markets.
The net risk position at December 31, 1993 and 1992 was $27,035 and
$8,237, respectively, per basis point, or the equivalent of a long
position of $65,000,000 and $19,000,000, respectively, of five-year U.S.
Treasury Notes. Changes in the market value of such future contracts are
recorded as gains or losses in the period in which the change in market
value occurs.
4. LOANS
Loans consisted of the following (in thousands):
<TABLE>
<CAPTION>
As of December 31, 1993 1992
<S> <C> <C>
- - - -------------------------------------------------------- ----------- -----------
Commercial, financial, and agricultural $1,573,133 $1,384,253
Real estate:
Term 2,311,401 2,096,136
Construction 245,106 162,945
Consumer 2,167,710 1,728,241
Direct lease financing 275,853 258,910
- - - -------------------------------------------------------- ----------- -----------
Total $6,573,203 $5,630,485
======================================================== =========== ===========
</TABLE>
A substantial portion of the real estate loans is collateralized by real
estate located primarily in the Western United States, and, accordingly,
their ultimate collectibility is particularly susceptible to changes in
market conditions in such area.
At December 31, 1993 and 1992, mortgage loans carried at approximately
$138,212,000 and $158,609,000, respectively, were pledged for various
purposes.
During 1990, the Corporation's subsidiaries sold approximately
$115,000,000 of home equity installment loans to the First Security
1990-A Home Equity Loan Trust (the 1990 Trust) in an asset-securitization
transaction. The Corporation's subsidiaries serviced the loans for the
1990 Trust. At December 31, 1993, the balance of the loans sold which
were being serviced for the Trust was insignificant. At December 31,
1992, such balance was approximately $49,469,000. The Trust was
dissolved in January 1994.
During 1988, the Corporation's subsidiaries sold approximately
$102,279,000 of installment loans to the First Security 1988-A Grantor
Trust (the 1988 Trust) in an asset-securitization transaction. The
Corporation's subsidiaries serviced the loans for the 1988 Trust. At
December 31, 1992, the balance of the loans being serviced for the 1988
Trust was approximately $4,742,000. The Trust was dissolved during the
year ended December 31, 1993.
As of December 31, 1993 and 1992, the Corporation's subsidiaries had
approximately $988,603,000 and $269,299,000, respectively, of notional
amounts related to interest rate swaps as part of their asset/liability
management program. The swaps outstanding at December 31, 1993 mature in
1994 through 2002. The income from these swaps totaled approximately
$528,000, $738,000, and $1,398,000 for the years ended December 31, 1993,
1992, and 1991, respectively.
Included in loans were loans to directors and executive officers as
follows (in thousands):
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
- - - -------------------------------------------------------- ----------- -----------
Balance, January 1 $9,161 $27,047
New loans 110 313
Repayments (2,089) (18,199)
- - - -------------------------------------------------------- ----------- -----------
Balance, December 31 $7,182 $9,161
======================================================== =========== ===========
</TABLE>
None of the above loans to directors and executive officers as of
December 31, 1993 and 1992 were nonaccruing, were past due, or had been
restructured.
Direct lease financing consisted of the following (in thousands):
<TABLE>
<CAPTION>
As of December 31, 1993 1992
<S> <C> <C>
- - - -------------------------------------------------------- ----------- -----------
Leveraged leases $192,883 $211,680
Non leveraged leases 82,230 35,810
Assets held for sale or lease 740 11,420
- - - -------------------------------------------------------- ----------- -----------
Total $275,853 $258,910
======================================================== =========== ===========
</TABLE>
Changes in the reserve for loan losses were as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
- - - -------------------------------------------------------- ----------- ----------- -----------
Balance, January 1 $127,847 $126,887 $117,192
Provision charged to expense 11,684 30,277 66,393
Reserves acquired through acquisitions (Note 14) 7,182 3,514 2,011
Loans charged off, net of recoveries of
$28,602, $19,567, and $17,254, respectively (11,865) (32,831) (58,709)
- - - -------------------------------------------------------- ----------- ----------- -----------
Balance, December 31 $134,848 $127,847 $126,887
======================================================== =========== =========== ===========
</TABLE>
Loans at December 31, 1993 and 1992 included $35,255,000 and $79,968,000,
respectively, of loans on which interest was not being accrued and
$1,099,000 of loans which had been renegotiated at December 31, 1993.
The effect on interest income of such nonperforming loans was as follows
(in thousands):
<TABLE>
<CAPTION>
For the years ended December 31, 1993 1992 1991
<S> <C> <C> <C>
- - - -------------------------------------------------------- ----------- ----------- -----------
Interest that would have been recorded if the loans had
been current in accordance with their stated terms:
Nonaccruing loans $2,333 $6,450 $8,466
Renegotiated loans 111 None 77
Interest actually recognized:
Nonaccruing loans 679 1,016 905
Renegotiated loans 87 None 100
- - - -------------------------------------------------------- ----------- ----------- -----------
</TABLE>
At December 31, 1993 and 1992, the Corporation's subsidiaries were
servicing mortgage loans for others which totaled approximately
$1,862,488,000 and $1,585,097,000, respectively.
5. PREMISES AND EQUIPMENT
Premises and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
As of December 31, 1993 1992
<S> <C> <C>
- - - -------------------------------------------------------- ----------- -----------
Land $25,790 $22,773
Buildings and improvements 117,331 109,527
Equipment 160,062 142,188
Leasehold improvements 12,283 11,192
Construction in progress 2,051 731
- - - -------------------------------------------------------- ----------- -----------
Total 317,517 286,411
Accumulated depreciation and amortization (171,799) (157,018)
- - - -------------------------------------------------------- ----------- -----------
Net $145,718 $129,393
======================================================== =========== ===========
</TABLE>
The executive offices of the Corporation are located in an owned facility
at 79 South Main Street in Salt Lake City, Utah. In addition, office
buildings are owned in Salt Lake City, Utah, Boise, Idaho, and
Albuquerque, New Mexico.
At December 31, 1993, a total of 155 bank offices are in owned buildings,
with the remaining 90 bank offices located in facilities leased under
operating leases with terms ranging from 1 to 31 years and renewal
options ranging from 1 to 30 years. Offices of the nonbank subsidiaries
are almost all located in owned quarters.
At December 31, 1993, future minimum lease payments by year related to
operating leases for premises and equipment were as follows (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
- - - -------------------------------------------------------- -----------
1994 $10,920
1995 10,067
1996 8,994
1997 5,428
1998 4,280
Thereafter 18,984
- - - -------------------------------------------------------- -----------
Total $58,673
======================================================== ===========
</TABLE>
Total rent expense under all operating leases for 1993, 1992, and 1991
approximated $11,836,000, $12,075,000, and $9,023,000, respectively.
6. DEPOSITS
Deposits consisted of the following (in thousands):
<TABLE>
<CAPTION>
As of December 31, 1993 1992
<S> <C> <C>
- - - -------------------------------------------------------- ----------- -----------
Noninterest-bearing demand deposit accounts $1,697,687 $1,429,314
Savings and NOW accounts 2,373,265 1,968,502
Money market accounts 1,103,855 1,019,946
Time certificates of deposit less than $100,000 1,946,054 2,108,658
Time certificates of deposit of $100,000 or more 382,846 342,033
- - - -------------------------------------------------------- ----------- -----------
Total $7,503,707 $6,868,453
======================================================== =========== ===========
</TABLE>
7. LINES OF CREDIT
The Corporation had $100,000,000 in lines of credit at both December 31,
1993 and 1992. At December 31, 1993, $90,000,000 of the lines expire at
various dates through 1994 and $10,000,000 has no set expiration date.
The lines were unsecured and bore interest generally at various
calculated rates or at the prime rates of the lending institutions. There
were no borrowings under the lines of credit during 1993 or 1992.
8. INCOME TAXES
As discussed in Note 1, the Corporation adopted SFAS No. 109, "Accounting
for Income Taxes", during the year ended December 31, 1993.
Accrued income taxes consisted of the following (in thousands):
<TABLE>
<CAPTION>
As of December 31, 1993 1992
<S> <C> <C>
- - - -------------------------------------------------------- ----------- -----------
Current $2,778 $5,167
Deferred 83,059 75,943
- - - -------------------------------------------------------- ----------- -----------
Totals $85,837 $81,110
======================================================== =========== ===========
</TABLE>
The income tax provisions consisted of the following components (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
- - - -------------------------------------------------------- ----------- ----------- -----------
Current:
Federal $46,525 $30,389 $15,995
State 5,570 4,119 1,597
- - - -------------------------------------------------------- ----------- ----------- -----------
Total 52,095 34,508 17,592
- - - -------------------------------------------------------- ----------- ----------- -----------
Deferred:
Federal 4,774 14,376 9,435
State 2,342 1,025 1,295
- - - -------------------------------------------------------- ----------- ----------- -----------
Total 7,116 15,401 10,730
- - - -------------------------------------------------------- ----------- ----------- -----------
Totals $59,211 $49,909 $28,322
======================================================== =========== =========== ===========
</TABLE>
The tax provisions were at effective rates as follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
- - - -------------------------------------------------------- ----------- ----------- -----------
U.S. Federal income tax rate 35.0% 34.0% 34.0%
Change in rate resulting from:
Tax-exempt state and municipal bond income (2.2) (2.9) (5.1)
Investment tax credit amortization on leases (0.4) (0.9)
State income taxes, net of U.S. Federal
income tax benefit 3.0 2.6 2.6
Miscellaneous items (1.6) (0.1) 1.7
- - - -------------------------------------------------------- ----------- ----------- -----------
Effective tax rates 34.2% 33.2% 32.3%
======================================================== =========== =========== ===========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities are as follows
(in thousands):
<TABLE>
<CAPTION>
As of December 31, 1993 1992
<S> <C> <C>
- - - -------------------------------------------------------- ----------- -----------
Assets:
Loan loss reserve $49,809 $45,337
Other real estate 5,091 6,007
Other reserves 2,760 425
Deferred loan fees 1,918 1,873
Deferred income 1,298 1,097
Nonaccrual interest 799 1,385
Gain on sale of loans 400 360
Safe harbor leases 553 621
Operating loss carryforward 132 436
Energy credit carryforward 503 767
Other 722 1,864
- - - -------------------------------------------------------- ----------- -----------
Total Deferred Tax Assets 63,985 60,172
- - - -------------------------------------------------------- ----------- -----------
Liabilities:
Leasing operations 138,158 123,597
Depreciation 4,873 5,384
Asset securitization 1,512
Pension plan contributions 1,529 1,876
FHLB stock dividends 1,994 882
Other 490 2,864
- - - -------------------------------------------------------- ----------- -----------
Total Deferred Tax Liabilities 147,044 136,115
- - - -------------------------------------------------------- ----------- -----------
Net Deferred Tax Liability $83,059 $75,943
======================================================== =========== ===========
</TABLE>
During 1993, the Omnibus Budget Reconciliation Act of 1993 increased the
federal corporate income tax rate to 35%. The total provision for 1993
includes $1,552,000 related to the effect of the tax rate increase on net
deferred tax liabilities at December 31, 1992.
9. LONG-TERM DEBT
The details of long-term debt, including related short-term maturities,
were as follows (in thousands):
<TABLE>
<CAPTION>
As of December 31, 1993 1992
<S> <C> <C>
- - - -------------------------------------------------------- ----------- -----------
Parent company:
Floating rate notes due 1999 $7,910 $8,354
Medium term notes due 1994-1998 31,250 31,250
7.50% notes due 2002 75,000 75,000
Subsidiaries:
Bank 137,221 16,108
Nonbank 1,155 1,291
- - - -------------------------------------------------------- ----------- -----------
Totals 252,536 132,003
Less current maturities included in
other short-term borrowings (27,700) (4,800)
- - - -------------------------------------------------------- ----------- -----------
Long-term portion $224,836 $127,203
======================================================= =========== ===========
</TABLE>
Floating Rate Notes Due 1999: The interest rate of these notes is the
higher of 1.25% above the defined Treasury Bill rate or a rate as
determined by the Corporation. Interest rates during the three years
ended December 31, 1993 have ranged from 8.8% to 4.2% and at December 31,
1993 was 4.3%.
The notes are redeemable at the option of the holder at par on any March
l or September l and are subject to redemption at any time by the
Corporation at par.
Medium Term Notes Due 1994-1998: During 1991, the Corporation filed a
$150,000,000 debt shelf registration statement and issued $31,250,000 of
Senior Medium Term notes under the shelf registration statement. The
notes are unsecured and bear interest at fixed rates ranging from 7.98%
to 9.07% with a weighted average coupon of 8.52%. The notes mature from
1994 to 1998 with interest payable semi-annually at the stated rate on
February 19 and August 19 of each year commencing February 19, 1992.
Terms of the notes restrict, among other things, the ability of the
Corporation to reduce its ownership in any of its major constituent
banks.
7.50% Notes Due 2002: During 1992, the Corporation issued $75,000,000 of
subordinated notes under the 1991 shelf registration statement. The
notes are unsecured, with interest payable semi-annually at the stated
rate on February 15 and August 15 of each year commencing February 15,
1993. The notes are payable at maturity on September 2002 and are not
subject to prepayment.
Subsidiaries: Long-term debt of the subsidiaries consisted principally
of advances from the Federal Home Loan Bank which are collateralized
primarily by mortgage loans, bear interest at rates generally ranging
from 3.00% to 6.16%, and payable principally through April 2000.
Scheduled maturities of long-term debt by year were as follows as of
December 31, 1993 (in thousands):
<TABLE>
<CAPTION>
Parent
Company Consolidated
<S> <C> <C>
- - - -------------------------------------------------------- ----------- -----------
1994 $10,000 $27,700
1995 774
1996 17,250 17,868
1997 1,773
1998 4,000 4,147
Thereafter 82,910 200,274
- - - -------------------------------------------------------- ----------- -----------
Totals $114,160 $252,536
======================================================= =========== ===========
</TABLE>
During February 1994, the Corporation sold $28,750,000 of medium term
notes under the 1991 shelf registration statement. The notes bear
interest at rates ranging from 5.71% to 6.40% and mature in years 1999
through 2003.
10. COMMITMENTS AND CONTINGENT LIABILITIES
The Corporation and its subsidiaries are parties to financial instruments
with off-balance-sheet risk in the normal course of business. These
financial instruments include commitments to extend credit, standby
letters of credit, interest rate swaps, and futures contracts. Those
instruments involve, to varying degrees, elements of credit and interest
rate risk in excess of the amounts recognized in the consolidated balance
sheets.
At December 31, 1993 and 1992, such commitments include the following (in
thousands):
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
- - - -------------------------------------------------------- ----------- -----------
Standby letters of credit $226,520 $164,334
Undisbursed construction loans 184,123 115,816
Credit card lines 617,957 599,408
Other loan commitments to customers 1,541,420 1,419,204
- - - -------------------------------------------------------- ----------- -----------
</TABLE>
The Corporation and its subsidiaries' obligations regarding futures
contracts and interest rate swaps are described in Notes 3 and 4.
The Corporation and its subsidiaries' exposure to credit loss in the
event of nonperformance by the other party to the financial instrument
for commitments to extend credit and standby letters of credit is
represented by the contractual amount of those instruments. The
Corporation and its subsidiaries use the same credit policies in making
commitments and conditional obligations as they do for on-balance-sheet
instruments. For interest rate swap transactions and futures contracts,
the contract or notional amounts do not represent exposure to credit
loss. Risks arise from the possible inability of counterparties to meet
the terms of their contracts and from movements in securities values and
interest rates. The Corporation and its subsidiaries control the risks
of its interest rate swap agreements through credit approvals, limits,
and monitoring procedures.
As described in Note 14, through February 25, 1994, the Corporation had
agreements of merger pending with Community First Bank, American Bank of
Commerce, and Star Valley State Bank. The Corporation also had an
agreement to purchase certain branch operations from a financial
institution which was pending at December 31, 1993 and was completed in
February 1994.
At December 31, 1993 and 1992, the Corporation and its subsidiaries were
involved in various claims and litigation occurring in the ordinary
course of business. In the opinion of management or of management and
its legal counsel, potential liabilities arising from these claims, if
any, will not have a material effect on the consolidated financial
statements of the Corporation and its subsidiaries.
11. PREFERRED AND COMMON STOCK
A summary of the changes in shares during the three years ended December
31, 1993 follows (in thousands):
<TABLE>
<CAPTION>
Common Stock - Preferred
Par Value $1.25 Stock
<S> <C> <C> <C>
- - - -------------------------------------------------------- -------------------------- -----------
Series "A"
$3.15
Cumulative
Held In Convertible
Issued Treasury No Par
- - - -------------------------------------------------------- ----------- ----------- -----------
Balance, January 1, 1991 as previously reported 33,509 1,226 18
Applicable to company merged in 1993 pooling of
interests transaction (Note 14) 7,346
- - - -------------------------------------------------------- ----------- ----------- -----------
As restated 40,855 1,226 18
Sale of common stock through dividend reinvestment
and stock purchase plan 73
Purchase of treasury stock 22
Conversion of preferred stock to common 17 (2)
Sale of treasury stock to employee benefit plans (291)
Conversion of long-term debt to common stock (Note 9) 3,165
Common stock issued for acquisition (Note 14) 784
- - - -------------------------------------------------------- ----------- ----------- -----------
Balance, December 31, 1991 44,894 957 16
- - - -------------------------------------------------------- ----------- ----------- -----------
Sale of common stock through dividend reinvestment
and stock purchase plan 55
Purchase of treasury stock 254
Conversion of preferred stock to common 15 (1)
Common stock issued for acquisition (Note 14) 1,199
Sale of treasury stock to employee benefit plans (690)
- - - -------------------------------------------------------- ----------- ----------- -----------
Balance, December 31, 1992 46,163 521 15
- - - -------------------------------------------------------- ----------- ----------- -----------
Sale of common stock through dividend reinvestment
and stock purchase plan 66
Purchase of treasury stock 76
Conversion of preferred stock to common 19 (2)
Common stock issued for acquisitions (Note 14) 2,255
Sale of treasury stock to employee benefit plans 234 (247)
Other 50
- - - -------------------------------------------------------- ----------- ----------- -----------
Balance, December 31, 1993 48,787 350 13
======================================================== =========== =========== ===========
Shares authorized, December 31, 1993 150,000 18
======================================================== =========== ===========
Shares authorized, December 31, 1992 65,000 18
======================================================== =========== ===========
</TABLE>
The liquidating preference of Series "A", $3.15 cumulative convertible
preferred stock is $52.50 a share. At the option of the Corporation's
Board of Directors, this stock is redeemable at $52.50 a share. Series
"A" preferred stock is convertible at any time into 12.15 shares of
common stock.
One or more additional series of preferred stock, with a combined maximum
of 400,000 shares, may be issued with the terms thereof determinable by
the Board.
A dividend reinvestment and common stock purchase plan for 1,000,000
shares was established in 1978 to provide common shareholders a means of
investing cash dividends together with optional cash payments. Through
December 31, 1993, a total of 647,237 shares were issued pursuant to the
Plan.
Conversion of all preferred stock outstanding at December 31, 1993 would
require 162,761 shares of common stock.
During 1989, the Corporation's Board of Directors approved issuance of a
Stockholder Right to all common stockholders which entitles each
stockholder to buy one one-thousandth of a share of a new class of
preferred stock at an exercise price of $100 in the event a group
acquires or announces a tender offer which would result in ownership of
15% or more of the Corporation's common stock by such group.
12. EMPLOYEE BENEFIT PLANS
Retirement Plan: The Corporation and its subsidiaries have a retirement
plan (the Plan) which covers generally all employees with one year or
more of service of at least 1,000 hours who are at least 21 years of age.
The retirement benefits are based on years of service and the average of
the employee's highest three consecutive years of base salary with 100%
vesting at 5 years of service. The Corporation's policy is to fund the
actuarially computed retirement cost accrued. Contributions are intended
to provide not only for benefits attributed to service to date but also
for those expected to be earned in the future.
The following table sets forth the Plan's funded status and amounts
recognized in the consolidated balance sheet at December 31, 1993 and
1992 (in thousands):
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
- - - -------------------------------------------------------- ----------- -----------
Actuarially computed present value of benefit obligations -
accumulated benefit obligation, including vested benefits
of $60,709 and $51,878 at December 31, 1993 and 1992,
respectively $62,823 $52,508
======================================================== =========== ===========
Plan assets at fair value, primarily common stocks and
U. S. Government debt securities $65,742 $65,901
Actuarially computed present value of benefit obligations -
projected benefit obligation for service rendered to date (86,965) (75,005)
Unrecognized prior service cost 13,433 12,605
Unrecognized net loss from past experience different from
that assumed and effects of changes in assumptions 14,964 6,240
Unrecognized net asset at January 1, 1986 being recognized
over 15 years (3,702) (4,175)
- - - -------------------------------------------------------- ----------- -----------
Prepaid pension cost included in other assets $3,472 $5,566
======================================================== =========== ===========
</TABLE>
Assumptions used in determining the projected benefit obligation as of
December 31, 1993 and 1992 were:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
- - - -------------------------------------------------------- ----------- -----------
Discount rate 7.5% 8.0%
Rate of increase in compensation levels 6.0 6.5
- - - -------------------------------------------------------- ----------- -----------
</TABLE>
The net pension expense included the following components (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
- - - -------------------------------------------------------- ----------- ----------- -----------
Service cost for benefits earned during the period $4,290 $3,676 $3,019
Interest cost on projected benefit obligation 5,986 5,236 4,453
Actual return on plan assets (982) (3,496) (10,744)
Net amortization and deferral (4,801) (3,121) 5,181
- - - -------------------------------------------------------- ----------- ----------- -----------
Net pension expense $4,493 $2,295 $1,909
======================================================== =========== =========== -----------
</TABLE>
Assumptions used in determining the net pension expense were:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
- - - -------------------------------------------------------- ----------- ----------- -----------
Discount rate 8.0% 8.5% 8.5%
Rate of increase in compensation levels 6.0 6.5 6.5
Expected long-term rate of return on assets 9.75 10.5 10.5
- - - -------------------------------------------------------- ----------- ----------- -----------
</TABLE>
401(k) Savings Plans: The Corporation and its subsidiaries have several
section 401(k) contributory savings plans (the Savings Plans) in which
participation is limited to employees age 21 or older with one year of
service. Under provisions of the Savings Plans, participants may
contribute up to 17% of their pre-tax base salary subject to the "excess
contribution" limitations imposed by the tax law. An additional amount,
equal to 50% of the first 6% of the participants' compensation
contributed, is contributed by the employer. Employer contributions to
the Savings Plans were approximately $2,461,000, $1,958,000, and
$1,628,000 in 1993, 1992, and 1991, respectively.
Comprehensive Management Incentive Plan: During 1988, the Corporation
and its subsidiaries adopted a Comprehensive Management Incentive Plan
(the Management Plan) which amends, supersedes, and incorporates the
Corporation's previous Restricted Stock Bonus Plan and its Nonstatutory
Stock Option and Stock Appreciation Rights Plan. The Management Plan
provides for the issuance of up to a total of 3,937,500 shares of the
Corporation's common stock for all incentive awards under the Management
Plan which may consist of restricted awards of common stock, nonstatutory
stock options, stock appreciation rights, and incentive stock options.
However, only 787,500 shares of the Corporation's common stock may be
issued for restricted awards and performance awards as defined by the
Management Plan.
Nonstatutory stock options outstanding generally become exercisable in
25% annual increments on each January 15, beginning with the first
January 15 following the grant date, and expire after 10 years. Certain
nonstatutory stock options issued to management are exercisable at six
months following the grant date and expire after 10 years. A summary of
these options follows:
<TABLE>
<CAPTION>
Shares Price Range Per Share
<S> <C> <C> <C>
- - - -------------------------------------------------------- ----------- ----------- -----------
1993:
Granted 402,176 $24.63
Canceled None
Exercised 361,764 8.89 - 25.75
Outstanding at December 31 2,544,340 8.89 - 25.75
Excercisable at December 31 1,600,969 8.89 - 25.75
- - - -------------------------------------------------------- ----------- ----------- -----------
1992:
Granted 282,112 $25.75
Canceled None
Exercised 463,576 8.89 - 14.00
Outstanding at December 31 2,503,928 8.89 - 25.75
Excercisable at December 31 2,008,287 8.89 - 14.00
- - - -------------------------------------------------------- ----------- ----------- -----------
1991:
Granted 505,485 $17.63
Canceled 22,496 8.89 - 14.00
Exercised 277,771 8.89 - 14.00
Outstanding at December 31 2,685,392 8.89 - 17.63
Excercisable at December 31 1,692,033 8.89 - 14.00
- - - -------------------------------------------------------- ----------- ----------- -----------
</TABLE>
Other: Certain employees of a merged subsidiary have options to purchase
1,116 shares of the Corporation's common stock under an incentive plan at
prices ranging from $4.39 to $6.27 at December 31, 1993, which expire
from 1997 to 1999. During the years ended December 31, 1993 and 1992,
respectively, 637 and 2,297 shares were purchased under the plan at $6.27
per share.
During 1993, the Corporation adopted Statement of Financial Accounting
Standards (SFAS) No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions". The Statement requires an accrual of
postretirement benefits (such as health care benefits) during the years
an employee provides services. The cost of these benefits was previously
expensed on a pay-as-you-go basis. The Corporation has elected to
recognize its obligation of approximately $3,500,000 over 20 years.
Accordingly, the adoption of SFAS No. 106 did not have a significant
effect on the financial statements of the Corporation.
13. RESTRICTIONS ON THE TRANSFER OF FUNDS
National and state banking and insurance regulations impose restrictions
on the ability of the Corporation's banking and insurance subsidiaries to
transfer funds to the Corporation in the form of loans or dividends. At
December 31, 1993 and 1992, the Corporation's equity in all of its
subsidiaries was $741,185,000 and $640,795,000, respectively, of which
$592,775,000 and $527,165,000 were restricted and $148,410,000 and
$113,630,000 were unrestricted by such regulations.
14. MERGERS AND ACQUISITIONS
On December 27, 1991, the Corporation issued 784,662 shares of its common
stock in exchange for all of the outstanding common stock of UB&T Bancorp
and its subsidiary, Utah Bank and Trust (collectively UB&T). The assets
and liabilities of UB&T at the date of the merger were approximately
$71,274,000 and $64,359,000, respectively. The acquisition of UB&T was
accounted for as a pooling of interests. However, because such amounts
were not significant to the operations of the Corporation and its
subsidiaries, the 1991 results of operations of UB&T have been included
in the accompanying consolidated financial statements from the date of
the merger forward.
During 1991, the Corporation acquired certain assets and assumed certain
liabilities of several banking operations with total assets and
liabilities at the dates of the acquisitions of approximately $27,209,000
and $27,056,000, respectively, in exchange for approximately $598,000 in
cash. The acquisitions were accounted for using the purchase method of
accounting and the excess of the cost over the fair value of assets
acquired of $445,000 is being amortized over 5 to 15 years. The 1991
results of operations of the acquisitions were not material in relation
to the 1991 consolidated results of operations of the Corporation and its
subsidiaries. The 1991 results of operations of the acquisitions have
been included in the accompanying consolidated financial statements from
the dates of acquisition.
On January 24, 1992, the Corporation issued approximately 1,125,000
shares of its common stock in exchange for all of the outstanding common
stock of First National Bank of North Idaho (FNBNI). The assets and
liabilities of FNBNI at the date of merger were approximately
$167,500,000 and $161,065,000, respectively. The acquisition was
accounted for as a pooling of interests. However, because such amounts
were not significant to the Corporation and its subsidiaries, the results
of operations of FNBNI have been included in the consolidated financial
statements of the Corporation from the date of merger forward and prior
periods' consolidated financial statements have not been restated.
On April 1, 1992, the Corporation acquired the Bank of Willamette Valley
(Willamette), a one-branch bank located in Dallas, Oregon, with assets
and liabilities of approximately $27,319,000 and $24,515,000,
respectively, for approximately $5,481,000 in cash. The acquisition was
accounted for using the purchase method of accounting. The results of
operations of Willamette were not material and have been included on the
1992 consolidated financial statements from the date of acquisition.
On November 19, 1993, the Corporation issued approximately 7,346,000
shares of its common stock in exchange for all of the outstanding common
stock of First National Financial Corporation and its subsidiary, First
National Bank in Albuquerque (collectively FNFC), a 26-branch banking
operation located in Albuquerque, New Mexico. At the date of merger,
assets and liabilities of FNFC were approximately $1,242,880,000 and
$1,155,094,000, respectively. Total interest income, net interest
income, and net income of FNFC from January 1, 1993 to the date of merger
were approximately $77,058,000, $50,066,000, and $3,851,000,
respectively. The merger with FNFC was accounted for as a pooling of
interests. The accompanying consolidated financial statements for 1992
and 1991 have been restated as if the Corporation and FNFC had been
combined at January 1, 1991. There were no significant intercompany
transactions between the Corporation and FNFC prior to the merger.
Consolidated interest income, net interest income, net income, and
earnings per share for 1992 and 1991 as previously reported and as
restated are as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
As Reclassifications
Previously &
1992 Reported FNFC Adjustments As Restated
<S> <C> <C> <C> <C>
- - - -------------------------------------------------------- ----------- ----------- ----------- -----------
Interest income $568,886 $98,603 ($11,041) $656,448
Net interest income 329,605 57,384 (11,040) 375,949
Net income 86,605 13,137 601 100,343
- - - -------------------------------------------------------- ----------- ----------- ----------- -----------
1991
- - - -------------------------------------------------------- ----------- ----------- ----------- -----------
Interest income 601,888 118,054 (9,111) 710,831
Net interest income 274,327 57,593 (9,111) 322,809
Net income 59,551 (635) 496 59,412
- - - -------------------------------------------------------- ----------- ----------- ----------- -----------
</TABLE>
The reclassifications and adjustments include the effects of adopting
SFAS No. 109 on a retroactive basis in 1993 as described in Note 1, and
certain reclassifications made to the 1992 and 1991 financial statements
of the Corporation and FNFC to conform to classifications adopted in
1993.
During 1993, the Corporation also acquired Dixie State Bank (St. George,
Utah), Benton County Bank (Corvallis, Oregon), Nevada Community Bank and
Continental National Bank (Las Vegas, Nevada), and State Bank of Green
River (Green River, Wyoming) in separate pooling-of-interests mergers by
issuing a total of 2,255,000 shares of its common stock. The combined
assets and liabilities of these entities at the time of the mergers
totaled $404,062,000 and $376,344,000, respectively. Because such
amounts were not significant to the Corporation and its subsidiaries, the
results of operations of these entities have been included in the
consolidated financial statements of the Corporation from the date of
merger forward and prior periods' consolidated financial statements have
not been restated.
During 1993, the Corporation acquired assets of $18,996,000 and assumed
liabilities of $18,579,000 of certain branch operations from various
financial institutions for $417,000 in cash.
The Corporation has entered into agreements of merger with Community
First Bank (Clearfield, Utah), American Bank of Commerce (Boise, Idaho),
and Star Valley State Bank (Afton, Wyoming). The Corporation has also
agreed to purchase certain branch operations in Evanston and Bridger
Valley, Wyoming. The unaudited combined assets and liabilities of these
banking operations at December 31, 1993 were approximately $215,355,000
and $187,590,000, respectively. These transactions are expected to be
completed in 1994.
15. EFFECT OF RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In November 1992, the Financial Accounting Standards Board issued SFAS
No. 112, "Employers' Accounting for Postemployment Benefits". SFAS No.
112 requires an accrual of benefits to be provided to former or inactive
employees after employment but before retirement, such as salary
continuation, severance pay, or health care benefits. SFAS No. 112 is
effective for fiscal years beginning after December 15, 1993. The impact
of SFAS No. 112 on the Corporation and its subsidiaries has not yet been
determined, although the effects are not expected to be material in
relation to the consolidated financial statements.
In May 1993, the Financial Accounting Standards Board issued SFAS No.
114, "Accounting by Creditors for Impairment of a Loan". SFAS No. 114
requires that impaired loans be valued based on the present value of
expected future cash flows or fair value of the collateral if the loan is
collateral dependent. SFAS No. 114 is effective for fiscal years
beginning after December 15, 1994. The impact of SFAS No. 114 on the
Corporation and its subsidiaries is not expected to be material in
relation to the consolidated financial statements.
In May 1993, the Financial Accounting Standards Board issued SFAS No.
115, "Accounting for Certain Investments in Debt and Equity Securities".
SFAS No. 115 requires the classification of investment securities as
either held-to-maturity securities, trading securities, or available-for-
sale securities. The accounting for unrealized gains and losses differs
for each of these categories. The Corporation adopted SFAS No. 115
effective on January 1, 1994, and $1,417,217,000 of investment securities
were reclassified as available for sale at that time to reflect the
Corporation's holding strategy under such statement. Accordingly, the
Corporation began accounting for such securities at fair value, with
unrealized gains and losses recorded as a separate component of
stockholders' equity. The adoption of SFAS No. 115 on January 1, 1994
resulted in an increase in the carrying value of investment securities of
approximately $13,984,000, with corresponding increases in stockholders'
equity and deferred income tax liabilities of approximately $8,887,000
and $5,097,000, respectively.
16. CAPITAL REQUIREMENTS
Bank holding companies are currently subject to certain risk-based
capital calculation guidelines. The guidelines require an institution to
maintain "Tier 1" capital, intended to be composed of tangible equity, at
a minimum of 4.0% of total assets as adjusted for risk characteristics.
Tangible equity is generally defined as the total of common and preferred
equity reduced by goodwill, deposit-based intangibles, and purchased loan
servicing rights, subject to some limitations. Risk-adjusted assets
reflect the sum of all asset categories and types, each weighted from 0%
to 100% depending upon relative credit risk, plus off-balance sheet
commitments and obligations, also weighted from 0% to 100% to reflect
relative credit risk.
Total "Tier 1" capital plus additional "Tier 2" components (primarily
reserves for loan losses and qualifying subordinated debt) must be at a
minimum of 8.0% of risk-adjusted assets. The "leverage ratio" ("Tier 1"
capital to non-risk-adjusted assets) must be equal to or greater than
3.0%, depending on each institution's particular regulatory rating.
Beginning on December 31, 1992, the leverage ratio was increased by 100
to 200 basis points for all but the highest rated banks.
At December 31, 1993, the Corporation and its subsidiaries' risk-adjusted
"Tier 1" capital ratio was 11.82%, the total risk-adjusted "Tier 1 plus
Tier 2" ratio was 14.15%, and the leverage ratio was 8.08%. At December
31, 1992, the "Tier 1" ratio was 11.32%, the "Tier 1 plus Tier 2" ratio
was 13.78%, and the leverage ratio was 7.99%.
17. ESTIMATED FAIR VALUE
In December 1991, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments". The Statement requires all
entities to disclose the estimated fair value of financial instruments
which include certain assets and liabilities recognized and not
recognized in the statement of financial position, for which it is
practicable to estimate fair value.
The estimated fair value of a financial instrument is the amount at which
the instrument could be exchanged in a current transaction between
willing parties, other than in a forced or liquidation sale. In the case
of cash and short-term investments, the carrying amount is considered a
reasonable estimate of fair value. For investment securities, the quoted
market price is used to estimate fair value. Trading account assets are
marked to market, therefore the carrying amount is considered a
reasonable estimate of fair value. The fair value of the remainder of
on-balance sheet instruments such as loans, deposits, and short-term
borrowings is estimated by using a discounted cash flow approach. The
Corporation employs a modeling tool which discounts estimated future cash
flows through the projected maturity using market discount rates that
approximately reflect the credit risk, operating cost, and interest rate
risk potentially inherent in the instrument.
The estimated fair value of interest rate swap agreements are obtained
from market quotes representing the estimated amount the Corporation
would receive or pay to terminate the contracts or agreements, taking
into account current interest rates. The estimated fair value of
commitments to extend credit and letters of credit are estimated using
the maximum fees currently charged to enter into similar agreements,
taking into account the remaining terms of the agreements, the present
creditworthiness of the counterparties, and the difference between
current levels of interest rates and the committed rates.
Fair value estimates are made as of a specific point in time. Because no
market exists for a significant portion of the Corporation's financial
instruments, fair value estimates are based on judgments regarding future
expected loss experience, current economic conditions, risk
characteristics of various financial instruments, interest rate levels
and other factors. These estimates are subjective in nature and involve
uncertainties and matters of judgment and therefore cannot be determined
or relied on with any degree of certainty. Changes in assumptions could
significantly affect the estimates.
A summary of the estimated fair values for the Corporation was as follows
(in thousands):
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C> <C> <C>
- - - -------------------------------------------------------- -------------------------- --------------------------
As of December 31, Carrying Estimated Carrying Estimated
(in thousands) Amount Fair Value Amount Fair Value
- - - -------------------------------------------------------- ----------- ----------- ----------- -----------
FINANCIAL ASSETS:
Cash and short-term investments $1,071,492 $1,071,492 $914,415 $914,415
Trading account securities 607,854 607,854 388,961 388,961
Investment securities 1,762,783 1,794,647 1,750,180 1,781,913
Net loans (excluding leases) 6,159,972 6,291,435 5,238,589 5,371,575
- - - -------------------------------------------------------- ----------- ----------- ----------- -----------
Total financial assets $9,602,101 $9,765,428 $8,292,145 $8,456,864
======================================================== =========== =========== =========== ===========
FINANCIAL LIABILITIES:
Total deposits, excluding certificates $5,174,807 $5,174,807 $4,417,762 $4,417,762
Certificates of deposit 2,328,900 2,347,473 2,450,691 2,483,960
Short-term borrowings 298,336 296,434 147,279 147,279
Securities sold under repurchase agreements 1,188,569 1,188,569 848,512 848,512
Long-term debt 224,836 207,339 127,203 135,470
- - - -------------------------------------------------------- ----------- ----------- ----------- -----------
Total financial liabilities $9,215,448 $9,214,622 $7,991,447 $8,032,983
======================================================== =========== =========== =========== ===========
UNRECOGNIZED (OFF-BALANCE SHEET) FINANCIAL INSTRUMENTS:
Interest rate swaps ($2,994) ($4,895)
Letters of credit & other commitments to extend credit (11,512) (9,700)
- - - -------------------------------------------------------- ----------- ----------- ----------- -----------
Total unrecognized financial instruments ($14,506) ($14,595)
======================================================== =========== =========== =========== ===========
</TABLE>
18. CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY ONLY
<TABLE>
Condensed Balance Sheets:
<CAPTION>
December 31, 1993 and 1992 1993 1992
(in thousands) (Notes 1,14)
<S> <C> <C>
- - - -------------------------------------------------------- ----------- -----------
Assets:
Cash on deposit and repurchase agreement
with subsidiary bank $41,026 $23,601
Commercial loans receivable from subsidiaries:
Banks 108,038 104,583
Nonbanks 60,879 69,632
Investments in subsidiaries:
Banks 685,029 590,941
Nonbanks 56,156 49,854
Other assets 2,008 1,513
- - - -------------------------------------------------------- ----------- -----------
TOTAL ASSETS $953,136 $840,124
======================================================== =========== ===========
Liabilities and Stockholders' Equity:
Accrued interest, taxes, and dividends payable $3,245 $3,072
Short-term borrowings 10,000
Long-term debt 104,160 114,605
- - - -------------------------------------------------------- ----------- -----------
Total liabilities 117,405 117,677
- - - -------------------------------------------------------- ----------- -----------
Stockholders' equity:
Preferred stock - Series "A", $3.15 cumulative convertible 703 783
----------- -----------
Common stock (48,787 and 46,163 shares issued, respectively) 60,983 57,704
Paid-in surplus 122,549 98,722
Retained earnings 657,446 572,845
----------- -----------
Subtotal 840,978 729,271
Less common treasury stock, at cost (5,950) (7,607)
----------- -----------
Total common stockholders' equity 835,028 721,664
- - - -------------------------------------------------------- ----------- -----------
Total stockholders' equity 835,731 722,447
- - - -------------------------------------------------------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $953,136 $840,124
======================================================== =========== ===========
</TABLE>
<TABLE>
Condensed Statements of Income:
<CAPTION>
For the years ended December 31, 1993, 1992, and 1991 1993 1992 1991
(in thousands) (Notes 1,14) (Notes 1,14)
<S> <C> <C> <C>
- - - -------------------------------------------------------- ----------- ----------- -----------
Income:
Cash dividends from subsidiaries:
Banks $53,655 $52,856 $34,587
Nonbanks 2,600
Interest (principally from subsidiaries) 9,132 7,764 11,749
- - - -------------------------------------------------------- ----------- ----------- -----------
Total income 62,787 60,620 48,936
Interest expense 9,132 7,764 11,863
- - - -------------------------------------------------------- ----------- ----------- -----------
Income before equity in undistributed earnings (losses)
of subsidiaries 53,655 52,856 37,073
Equity in undistributed earnings (losses) of subsidiaries:
Banks 59,898 46,396 33,534
Nonbanks 503 1,091 (11,195)
- - - -------------------------------------------------------- ----------- ----------- -----------
NET INCOME $114,056 $100,343 $59,412
======================================================== =========== =========== ===========
</TABLE>
<TABLE>
Condensed Statements of Cash Flows:
<CAPTION>
For the years ended December 31, 1993, 1992, and 1991 1993 1992 1991
(in thousands) (Notes 1,14) (Notes 1,14)
<S> <C> <C> <C>
- - - -------------------------------------------------------- ----------- ----------- -----------
Cash Flows From Operating Activities:
Net income $114,056 $100,343 $59,412
Adjustments to reconcile net income to
net cash provided by operating activities (59,036) (47,670) (22,083)
- - - -------------------------------------------------------- ----------- ----------- -----------
Net cash provided by operating activities 55,020 52,673 37,329
- - - -------------------------------------------------------- ----------- ----------- -----------
Cash Flows From Investing Activities:
Loans and capital contributions made to subsidiaries (154,251) (179,666) (136,368)
Principal collected on loans to subsidiaries 152,111 96,506 175,031
- - - -------------------------------------------------------- ----------- ----------- -----------
Net cash provided (used) by investing activities (2,140) (83,160) 38,663
- - - -------------------------------------------------------- ----------- ----------- -----------
Cash Flows From Financing Activities:
Proceeds from short-term borrowings 5,000
Proceeds from long-term debt 75,000 31,250
Payments on long-term debt and short-term borrowings (3,820) (30,548) (72,235)
Proceeds from issuance of common stock 1,815 1,293 1,119
Purchase of treasury stock (2,118) (6,593) (288)
Proceeds from sale of treasury stock 7,306 11,260 3,147
Dividends paid (38,638) (26,048) (20,069)
- - - -------------------------------------------------------- ----------- ----------- -----------
Net cash provided (used) by financing activities (35,455) 24,364 (52,076)
- - - -------------------------------------------------------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 17,425 (6,123) 23,916
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 23,601 29,724 5,808
- - - -------------------------------------------------------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $41,026 $23,601 $29,724
======================================================== =========== =========== ===========
Supplemental Disclosures of Cash Flow Information:
- - - -------------------------------------------------------- ----------- ----------- -----------
Cash paid during the year for:
Interest $9,033 $5,211 $12,189
Income taxes ($366) ($1) ($144)
======================================================== =========== =========== ===========
</TABLE>
Supplemental Schedule of Non Cash Investing and Financing Activities:
In 1993, 2,255,000 shares of common stock were issued for the
acquisitions of Dixie State Bank, Benton County Bank, Nevada Community
Bank, State Bank of Green River, and Continental Bancorporation. The
Corporation acquired assets of approximately $404,062,000 and assumed
liabilities of approximately $376,344,000 (Note 14).
In 1992, 1,199,000 shares of common stock were issued for the acquisition
of First National Bank of North Idaho. The Corporation acquired assets
of approximately $167,500,000 and assumed liabilities of approximately
$161,065,000 (Note 14). The Bank of Willamette Valley (Willamette) was
acquired for cash of $5,481,000. The Corporation acquired Willamette's
assets of approximately $27,319,000 and assumed liabilities of
approximately $24,515,000.
In 1991, $39,750,000 of long-term debt was converted into 3,165,801
shares of common stock.
In 1991, 784,662 shares of common stock were issued for the acquisition
of UB&T Bancorp and its subsidiary. The Corporation acquired assets of
approximately $71,274,000 and assumed liabilities of approximately
$64,359,000 (Note 14)
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
First Security Corporation:
We have audited the accompanying consolidated balance sheets of First
Security Corporation and subsidiaries as of December 31, 1993 and 1992,
and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
1993. These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on
these financial statements based on our audits. The consolidated
financial statements give retroactive effect to the merger of First
Security Corporation and First National Financial Corporation, which has
been accounted for as a pooling of interests as described in Note 14 to
the consolidated financial statements. We did not audit the consolidated
balance sheet of First National Financial Corporation as of December 31,
1992, or the related consolidated statements of income, stockholders'
equity, and cash flows of First National Financial Corporation for the
years ended December 31, 1992 and 1991, which statements reflect total
assets of $1,296,897,000 as of December 31, 1992, and interest income of
$98,603,000 and $118,054,000 for the years ended December 31, 1992 and
1991, respectively. Those statements, prior to any restatement, were
audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to the amounts included for First National
Financial Corporation for 1992 and 1991, is based solely on the report of
such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors,
the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of First Security
Corporation and subsidiaries at December 31, 1993 and 1992, and the
results of their operations and their cash flows for each of the three
years in the period ended December 31, 1993 in conformity with generally
accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, in 1993
the Corporation changed its method of accounting for income taxes to
conform with Statement of Financial Accounting Standards No. 109 and,
retroactively, restated the 1992 and 1991 consolidated financial statements
for the change.
DELOITTE & TOUCHE
Salt Lake City, Utah
February 25, 1994
<PAGE>
Independent Auditors' Report - KPMG Peat Marwick
Independent Auditors' Report
The Board of Directors
First National Financial Corporation
We have audited the consolidated balance sheet of First National
Financial Corporation (Corporation) and subsidiary as of December 31,
1992, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the years in the two-
year period ended December 31, 1992 (before restatement for the change
in method of accounting for income taxes)(not presented separately
herein). These consolidated financial statements are the responsibility
of the Corporation's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
First National Financial Corporation and subsidiary at December 31,
1992, and the results of their operations and their cash flows for each
of the years in the two-year period ended December 31, 1992, in
conformity with generally accepted accounting principles.
As discussed in Note 16 to the consolidated financial statements, the
Board of Directors of the Corporation, on behalf of the Corporation, has
entered into a Memorandum of Understanding with the Federal Reserve Bank
of Kansas City (Reserve Bank). In addition, the Board of Directors of
First National Bank in Albuquerque (Bank), the subsidiary of the
Corporation, on behalf of the Bank, has entered into a Formal Agreement
with the Office of the Comptroller of the Currency (OCC). Although the
Corporation and the Bank have been subjected to regulatory on-site
examinations which indicate substantial compliance with both agreements,
if the Corporation and the Bank are unable to comply totally with the
terms of the respective agreements, the Reserve Bank and the OCC could,
among other things, take additional administrative actions.
[SIGNED]
KPMG Peat Marwick
Albuquerque, New Mexico
February 5, 1993
<PAGE>
MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS
February 25, 1994
To the Stockholders:
Financial Statements:
The management of First Security Corporation ("the Corporation") is
responsible for the preparation, integrity, and fair presentation of its
published financial statements and all other information presented in
this annual report. The financial statements have been prepared in
accordance with generally accepted accounting principles, and, as such,
include amounts based on informed judgments and estimates made by
management.
Internal Control:
Management is responsible for establishing and maintaining an effective
internal control structure over financial reporting presented in
conformity with generally accepted accounting principles. The structure
contains monitoring mechanisms, and actions are taken to correct
deficiencies identified.
There are inherent limitations in the effectiveness of any structure of
internal control, including the possibility of human error and the
circumvention or overriding of controls. Accordingly, even an effective
internal control structure can provide only reasonable assurance with
respect to financial statement preparation. Further, because of changes
in conditions, the effectiveness of an internal control structure may
vary over time.
Management assessed the Corporation's internal control structure over
financial reporting presented in conformity with generally accepted
accounting principles as of December 31, 1993. This assessment was based
on criteria for effective internal control over financial reporting
described in INTERNAL CONTROL-INTEGRATED FRAMEWORK issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based
on this assessment, management believes that the Corporation maintained
an effective internal control structure over financial reporting
presented in conformity with general accepted accounting principles, as
of December 31, 1993.
The Audit Committee of the Board of Directors is comprised entirely of
outside directors who are independent of the Corporation's management; it
includes members with banking or related management experience, has
access to its own outside counsel, and does not include any large
customers of the Corporation. The Audit Committee is responsible for
recommending to the Board of Directors the selection of independent
auditors. It meets periodically with management, the independent
auditors, and the internal auditors to ensure that they are carrying out
their responsibilities. The Committee is also responsible for performing
an oversight role by reviewing and monitoring the financial, accounting,
and auditing procedures of the Corporation in addition to reviewing the
Corporation's financial reports. The independent auditors and the
internal auditors have full and free access to the Audit Committee, with
or without the presence of management, to discuss the adequacy of the
internal control structure for financial reporting and any other matters
which they believe should be brought to the attention of the Committee.
Compliance with Laws and Regulations:
Management is also responsible for ensuring compliance with the federal
laws and regulations concerning loans to insiders and the federal and
state laws and regulations concerning dividend restrictions, both of
which are designated by the FDIC as safety and soundness laws and
regulations.
Management assessed its compliance with the designated safety and
soundness laws and regulations and has maintained records of its
determinations and assessments as required by the FDIC. Based on this
assessment, Management believes that the Corporation has complied, in all
material respects, with the designated safety and soundness laws and
regulations for the year ended December 31, 1993.
[SIGNED]
- - - -----------------
Morgan J. Evans
President and Chief Operating Officer
[SIGNED]
- - - -----------------
Scott C. Ulbrich
Executive Vice President
and Chief Financial Officer
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FIRST SECURITY CORPORATION
Registrant
[SIGNED] March 15, 1994
- - - ----------------------- ----------------
Scott C. Ulbrich Date
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
[SIGNED] March 15, 1994
- - - ----------------------- ----------------
Spencer F. Eccles Date
Chairman and Chief Executive Officer
[SIGNED] March 15, 1994
- - - ----------------------- ----------------
Morgan J. Evans Date
President and Chief Operating Officer
Director
SIGNATURES
FIRST SECURITY CORPORATION
Registrant
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
[SIGNED] March 15, 1994
- - - ----------------------- ----------------
James C. Beardall Date
Director
[SIGNED] March 15, 1994
- - - ----------------------- ----------------
Rodney H. Brady Date
Director
[SIGNED] March 15, 1994
- - - ----------------------- ----------------
James E. Bruce Date
Director
[SIGNED] March 9, 1994
- - - ----------------------- ----------------
Thomas D. Dee, II Date
Director
[SIGNED] March 2, 1994
- - - ----------------------- ----------------
Dr. David P. Gardner Date
Director
[SIGNED] March 15, 1994
- - - ----------------------- ----------------
Kendall D. Garff Date
Director
[SIGNED] March 14, 1994
- - - ----------------------- ----------------
U. Edwin Garrison Date
Director
[SIGNED] March 3, 1994
- - - ----------------------- ----------------
David B. Haight Date
Director
[SIGNED] March 15, 1994
- - - ----------------------- ----------------
Jay Dee Harris Date
Director
[SIGNED] March 15, 1994
- - - ----------------------- ----------------
Robert T. Heiner Date
Director
[SIGNED] March 15, 1994
- - - ----------------------- ----------------
Howard W. Hunter Date
Director
[SIGNED] March 3, 1994
- - - ----------------------- ----------------
Karen H. Huntsman Date
Director
[SIGNED] March 15, 1994
- - - ----------------------- ----------------
G. Frank Joklik Date
Director
[SIGNED] March 9, 1994
- - - ----------------------- ----------------
B. Z. Kastler Date
Director
[SIGNED] March 9, 1994
- - - ----------------------- ----------------
Joseph G. Maloof Date
Director
[SIGNED] March 15, 1994
- - - ----------------------- ----------------
Scott S. Parker Date
Director
[SIGNED] March 15, 1994
- - - ----------------------- ----------------
Dr. Arthur K. Smith Date
Director
[SIGNED] March 8, 1994
- - - ----------------------- ----------------
James L. Sorenson Date
Director
[SIGNED] March 9, 1994
- - - ----------------------- ----------------
Harold J. Steele Date
Director
<PAGE>
<TABLE>
Exhibit 11. Computation of Earnings Per Share For The Twelve Month Periods
Ended December 31, 1993, 1992, and 1991
FIRST SECURITY CORPORATION & SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
(in thousands, except for per share amounts)
For the years ended December 31, 1993 1992 1991
<S> <C> <C> <C>
- - - ----------------------------------------------- ----------- ----------- -----------
Net Income:
Per statement of consolidated income-original $114,056 $86,605 $59,551
FAS109 restatements 601 496
First National Financial Corporation 13,137 (635)
- - - ----------------------------------------------- ----------- ----------- -----------
Per statement of consolidated income-restated 114,056 100,343 59,412
Deduct dividend requirements of
preferred stock 43 48 52
- - - ----------------------------------------------- ----------- ----------- -----------
Net income applicable to common stock 114,013 100,295 59,360
Add dividend requirments of preferred stock 43 48 52
Add interest on convertible debentures,
net of tax effect 1,387
- - - ----------------------------------------------- ----------- ----------- -----------
Net income assuming full dilution $114,056 $100,343 $60,799
=============================================== =========== =========== ===========
Net Income Per Share:
Assuming no dilution $2.38 $2.17 $1.44
Assuming full dilution 2.38 2.16 1.39
=============================================== =========== =========== ===========
Average Outstanding Common Shares:
Assuming no dilution-originally reported 40,506 38,984 33,811
First National Financial Corp. 7,346 7,346 7,346
- - - ----------------------------------------------- ----------- ----------- -----------
Assuming no dilution-restated 47,852 46,330 41,157
Issuable assuming conversion of:
Preferred stock 168 190 204
9.5% convertible debentures 2,356
- - - ----------------------------------------------- ----------- ----------- -----------
Assuming full dilution 48,020 46,520 43,717
=============================================== =========== =========== ===========
<FN>
Note: Shares have been restated to reflect three-for-two stock splits in the form of 50% stock
dividends paid in May 1992 and June 1991 and the pooling-of-interests merger with First
National Financial Corporation.
Per share amounts assuming full dilution are computed assuming all outstanding preferred stock
and 9.5% convertible debentures due 2006 are converted into common shares on the basis of 12.15
shares of common for each share of preferred and at the debentures' conversion price of $12.5556
per common share, with the elimination of dividends on the preferred stock and of interest net
of tax effect on the debentures.
As of September 30, 1991, the convertible debentures were all converted into common shares.
</TABLE>
<PAGE>
<TABLE>
Exhibit 21: Subsidiaries
FIRST SECURITY CORPORATION
<CAPTION>
For the year ended December 31, 1993 Percentage
of Voting
Organized Securities
Under Owned by
Name of Subsidiary (*) Laws of FSC
<S> <C> <C>
- - - ----------------------------------------------------------- ----------- -----------
First Security Bank of Utah, N.A.* U.S.A. 99.92
2nd Tier Subsidiary:
Foreign Exchange, Ltd. California -----
First Security Bank of Idaho, N.A. U.S.A. 100.00
First Security Bank of New Mexico, N.A. U.S.A. 100.00
First Security Bank of Oregon Oregon 100.00
Salem, Oregon
2nd Tier Subsidiary:
First Insurance Agency Oregon -----
Nevada Community Bank Nevada 100.00
Las Vegas, Nevada
Continental National Bank Nevada 100.00
Las Vegas, Nevada
(Note: Nevada Community Bank and Continental National Bank
were merged in February 1994 into a combined entity
named First Security Bank of Nevada)
First Security Bank of Wyoming Wyoming 99.91
Rock Springs, Wyoming
(formerly First Security Bank of Rock Springs)
First Security Service Company Utah 100.00
Salt Lake City, Utah
First Security Information Technology, Inc. Utah 100.00
Salt Lake City, Utah
First Security Processing Services, Inc. Utah 100.00
Salt Lake City, Utah
First Security Business Investment, Inc. Utah 100.00
Salt Lake City, Utah
First Security Leasing Company* Utah 100.00
Salt Lake City, Utah
2nd Tier Subsidiary:
First Security Leasing Company of Nevada Nevada -----
First Security Mortgage Company* Utah 100.00
Salt Lake City, Utah
2nd Tier Subsidiary:
Asset Recovery, Inc. (Inactive) Utah -----
- - - ----------------------------------------------------------- ----------- -----------
</TABLE>
<TABLE>
Exhibit 21: Subsidiaries (continued)
<CAPTION>
Percentage
of Voting
Organized Securities
Under Owned by
Name of Subsidiary (*) Laws of FSC
<S> <C> <C>
- - - ----------------------------------------------------------- ----------- -----------
First Security Insurance, Inc.* Utah 100.00
Salt Lake City, Utah
2nd Tier Subsidiaries:
Intermountain Insurance Agency, Inc. (Inactive) Oregon -----
First Security Insurance of Idaho, Inc. Idaho -----
First Security Life Insurance Company of Arizona Arizona 100.00
Phoenix, Arizona
First Security Investment Services, Inc.* Utah 100.00
Salt Lake City, Utah
2nd Tier Subsidiaries:
First Security Investor Services Utah -----
First Security Investment Mangement, Inc. Utah -----
Continental Trust Company Nevada 100.00
Las Vegas, Nevada
(Note: Continental Trust Company was renamed First Security
Trust Company of Nevada in 1994)
CNB Services, Inc. Nevada 100.00
Las Vegas, Nevada
(Note: CNB Services, Inc. was renamed First Security
Services of Nevada, Inc. in 1994)
- - - ----------------------------------------------------------- ----------- -----------
<FN>
(*) All subsidiaries are included in consolidated financial statements.
</TABLE>
<PAGE>
Exhibit 23 (A) Consent of Independent Auditors (Deloitte & Touche)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
No. 33-52609 on Form S-3, in Pre-Effective Amendment No. 1 to
Registration Statement No. 33-52263 on Form S-4, in Pre-Effective
Amendment No. 1 to Registration Statement No. 33-52205 on Form S-3, in
Post-Effective Amendment No. 1 to Registration Statement No. 2-62919 on
Form S-3, in Registration Statement Nos. 33-9501 and 33-21556 on Form S-
8, and in Post-Effective Amendment No. 3 to Registration Statement No. 2-
84801 on Form S-8 of First Security Corporation of our report dated
February 25, 1994, incorporated by reference in this Annual Report on
Form 10-K of First Security Corporation for the year ended December 31,
1993.
[SIGNED]
DELOITTE & TOUCHE
Salt Lake City, Utah
March 22, 1994
Exhibit 23 (B) Consent of Independent Auditors (KPMG Peat Marwick)
Independent Auditors' Consent
The Board of Directors
First National Financial Corporation:
We consent to incorporation by reference into each registration
statement listed below of our report dated February 5, 1993, relating to
the consolidated balance sheet of First National Financial Corporation
(Corporation) and subsidiary as of December 31, 1992 and the related
consolidated statements of operations, changes in stockholders' equity,
and cash flows for each of the years in the two-year period ended
December 31, 1992 (before restatement for the change in method of
accounting for income taxes), which report appears as an exhibit to the
December 31, 1993 annual report on Form 10-K of First Security
Corporation.
Our report dated February 5, 1993 contains an explanatory paragraph that
states that the Board of Directors of the Corporation, on behalf of the
Corporation, has entered into a Memorandum of Understanding with the
Federal Reserve Bank of Kansas City (Reserve Bank). In addition, the
Board of Directors of First National Bank in Albuquerque (Bank), the
subsidiary of the Corporation, on behalf of the Bank, has entered into a
Formal Agreement with the Office of the Comptroller of the Currency
(OCC). Although the Corporation and the Bank have been subjected to
regulatory on-site examinations which indicate substantial compliance
with both agreements, if the Corporation and the Bank are unable to
comply totally with the terms of the respective agreements, the Reserve
Bank and the OCC could, among other things, take additional
administrative actions.
Form No.
S-3 33-52205 Pre-Effective Amendment No. l Maloof Shelf
Registration
S-3 2-62919 Dividend Reinvestment & Common Stock Purchase Plan
(#1)
S-3 33-52609 $300,000,000 Universal Shelf
S-4 33-52263 Pre-Effective Amendment No. 1 Community First Bank
S-8 33-9501 Employee Stock Purchase Plan (Unamended)
S-8 33-21556 Employee Stock Purchase Plan (Unamended)
S-8 2-84801 Comprehensive Management Incentive Plan (#3)
[SIGNED]
KPMG Peat Marwick
Albuquerque, New Mexico
March 22, 1994
