SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended
March 31, 1994
Commission File Number
1-6906
_____________________________________
FIRST SECURITY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State of incorporation)
87-6118148
(I.R.S. Employer
Identification No.)
79 South Main, P.O. Box 30006
Salt Lake City, Utah
(Address of principal executive offices)
84130-0006
(Zip Code)
(801) 246-5706
(Registrant's telephone number, including area code)
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
As of April 29, 1994, outstanding shares of common stock were:
Common Stock, par value $1.25 - 48,252,338
(net of 680,973 treasury shares)
FIRST SECURITY CORPORATION
INDEX
Part I. Financial Information
Item 1. Financial Statements:
Condensed Consolidated Statements of Income -
Three Months Ended March 31, 1994 and 1993
Condensed Consolidated Balance Sheets -
March 31, 1994, December 31, 1993, and March 31, 1993
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1994 and 1993
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations:
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Supplemental Tables:
Financial Highlights, Risk-Based Capital Ratios
Mergers and Acquisitions
Loans Outstanding
Rate/Volume Analysis
Part II. Other Information
Item 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signatures
Exhibit 11. Computation of Earnings Per Share
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
FIRST SECURITY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Periods Ended March 31, 1994 and 1993
<CAPTION>
Three Months
(in thousands, except per share data; unaudited) 1994 1993 %Chg
<S> <C> <C> <C>
- ----------------------------------------------------------- ---------- ---------- ------
Interest Income:
Interest and fees on loans................................ $136,003 $122,716 10.8
Interest and dividends on investment securities:
Available for sale...................................... 22,672 NA NA
Held to maturity........................................ 3,500 NA NA
- ----------------------------------------------------------- ---------- ---------- ------
Total interest and dividends on investment securities 26,172 25,659 2.0
Trading account interest.................................. 9,526 5,377 77.2
Federal funds sold and securities purchased............... 707 1,745 -59.5
Interest-bearing deposits in other banks.................. 30 51 -41.2
- ----------------------------------------------------------- ---------- ---------- ------
TOTAL INTEREST INCOME 172,438 155,548 10.9
- ----------------------------------------------------------- ---------- ---------- ------
Interest Expense:
Interest on deposits...................................... 47,193 49,674 -5.0
Interest on short-term borrowings......................... 10,666 7,726 38.1
Interest on long-term debt................................ 4,312 2,295 87.9
- ----------------------------------------------------------- ---------- ---------- ------
TOTAL INTEREST EXPENSE 62,171 59,695 4.1
- ----------------------------------------------------------- ---------- ---------- ------
Net Interest Income:
NET INTEREST INCOME 110,267 95,853 15.0
Provision for (recovery of) loan losses................... (172) 1,976 -108.7
- ----------------------------------------------------------- ---------- ---------- ------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 110,439 93,877 17.6
- ----------------------------------------------------------- ---------- ---------- ------
Noninterest Income:
Service charges on deposit accounts....................... 14,860 13,371 11.1
Other service charges, collections, commissions and fees.. 12,977 8,952 45.0
Commissions and fees from fiduciary activities............ 4,853 4,308 12.7
Bankcard service fees..................................... 8,711 7,391 17.9
Insurance commissions and fees............................ 2,601 2,626 -1.0
Investment securities gains............................... 249 184 35.3
Other..................................................... (1,596) 4,035 -139.6
- ----------------------------------------------------------- ---------- ---------- ------
TOTAL NONINTEREST INCOME 42,655 40,867 4.4
- ----------------------------------------------------------- ---------- ---------- ------
TOTAL INCOME 153,094 134,744 13.6
- ----------------------------------------------------------- ---------- ---------- ------
Noninterest Expenses:
Salaries and employee benefits............................ 49,311 43,541 13.3
Net occupancy............................................. 5,751 5,473 5.1
Furniture and equipment................................... 6,674 6,283 6.2
Insurance................................................. 5,346 4,857 10.1
Stationery and supplies................................... 4,003 2,767 44.7
Bankcard interbank discount and interchange fees.......... 3,671 2,812 30.5
Advertising............................................... 1,344 1,370 -1.9
Telephone................................................. 2,450 1,929 27.0
Other real estate expense and loss provision.............. 28 957 -97.1
Legal..................................................... 712 1,119 -36.4
Other..................................................... 22,078 14,118 56.4
- ----------------------------------------------------------- ---------- ---------- ------
TOTAL NONINTEREST EXPENSES 101,368 85,226 18.9
- ----------------------------------------------------------- ---------- ---------- ------
INCOME BEFORE INCOME TAX PROVISION 51,726 49,518 4.5
- ----------------------------------------------------------- ---------- ---------- ------
Provision for Income Taxes:
Operating income.......................................... 18,473 18,741 -1.4
Securities transactions................................... 91 65 40.0
- ----------------------------------------------------------- ---------- ---------- ------
TOTAL PROVISION FOR INCOME TAXES 18,564 18,806 -1.3
- ----------------------------------------------------------- ---------- ---------- ------
Net Income:
NET INCOME................................................ $33,162 $30,712 8.0
Dividend requirement of preferred stock................... 10 11 -9.1
- ----------------------------------------------------------- ---------- ---------- ------
NET INCOME APPLICABLE TO COMMON STOCK $33,152 $30,701 8.0
=========================================================== ========== ========== ======
Earnings Per Common Share:
EARNINGS PER COMMON SHARE................................... $0.67 $0.65 3.1
=========================================================== ========== ========== ======
Cash Dividends Paid or Accrued Per Share:
Preferred Stock ($3.15 annual rate)....................... $0.79 $0.79
Common stock.............................................. $0.26 $0.19 36.8
=========================================================== ========== ========== ======
<FN>
see Notes to Condensed Consolidated Financial Statements.
</TABLE>
<TABLE>
FIRST SECURITY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31 December 31 March 31 Mar/Mar
(in thousands; unaudited) 1994 1993 1993 % Change
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------- ------------ ------------ ------------ ---------
Assets:
Cash and due from banks............................................... $622,042 $673,877 $504,030 23.4
Interest-bearing deposits in other banks.............................. 1,842 16,461 3,539 (48.0)
Federal funds sold, securities purchased under resale agreements...... 112,997 381,154 275,525 (59.0)
Trading account securities............................................ 797,254 607,854 602,392 32.3
Investment securites: available for sale.............................. 1,960,075 NA NA NA
Investment securities: held to maturity............................... 270,039 NA NA NA
- ----------------------------------------------------------------------- ------------ ------------ ------------ ---------
Total investment securities 2,230,114 1,762,783 1,970,338 13.2
(Market values: $2,234,021; $1,794,647; $2,008,788; respectively)
- ----------------------------------------------------------------------- ------------ ------------ ------------ ---------
Loans, net of unearned income......................................... 6,674,067 6,561,021 5,596,166 19.3
(Unearned income: $10,964; $12,182; $13,177; respectively)
Reserve for loan losses............................................... (134,216) (134,848) (127,329) 5.4
- ----------------------------------------------------------------------- ------------ ------------ ------------ ---------
Total loans, net 6,539,851 6,426,173 5,468,837 19.6
- ----------------------------------------------------------------------- ------------ ------------ ------------ ---------
Premises and equipment, net........................................... 151,099 145,718 131,488 14.9
Accrued income receivable............................................. 57,942 52,654 53,252 8.8
Other real estate and other foreclosed assets......................... 14,842 16,465 31,343 (52.6)
Intangible assets..................................................... 12,698 11,833 14,553 (12.7)
Other assets.......................................................... 204,602 116,717 103,677 97.3
- ----------------------------------------------------------------------- ------------ ------------ ------------ ---------
TOTAL ASSETS $10,745,283 $10,211,689 $9,158,974 17.3
======================================================================= ============ ============ ============ =========
Liabilities:
Deposits:
Noninterest-bearing................................................. $1,556,498 $1,697,687 $1,284,207 21.2
Interest-bearing.................................................... 5,953,168 5,806,020 5,460,770 9.0
- ----------------------------------------------------------------------- ------------ ------------ ------------ ---------
Total deposits 7,509,666 7,503,707 6,744,977 11.3
- ----------------------------------------------------------------------- ------------ ------------ ------------ ---------
Federal funds purchased, securities sold under repurchase agreements.. 1,804,986 1,387,109 1,187,772 52.0
U.S. Treasury demand notes............................................ 22,467 43,645 31,656 (29.0)
Other short-term borrowings........................................... 20,647 56,151 25,966 (20.5)
Accrued income taxes.................................................. 96,680 85,837 97,360 (0.7)
Accrued interest...................................................... 15,105 17,429 15,983 (5.5)
Other liabilities..................................................... 136,547 57,244 188,819 (27.7)
Long-term debt........................................................ 297,538 224,836 119,062 149.9
- ----------------------------------------------------------------------- ------------ ------------ ------------ ---------
TOTAL LIABILITIES 9,903,636 9,375,958 8,411,595 17.7
- ----------------------------------------------------------------------- ------------ ------------ ------------ ---------
Stockholders' Equity:
Preferred stock: Series "A", $3.15 cumulative convertible
(13; 13; 14; shares, respectively).................................. 685 703 733 (6.5)
- ----------------------------------------------------------------------- ------------ ------------ ------------ ---------
Common Stockholders' Equity:
Common stock: par value $1.25
(48,896; 48,787; 46,187; shares, respectively).................... 61,120 60,983 57,733 5.9
Paid-in surplus..................................................... 125,044 122,549 98,489 27.0
Retained earnings................................................... 677,954 657,446 596,259 13.7
Net unrealized gain (loss) on securities available for sale......... (8,001) NA NA NA
- ----------------------------------------------------------------------- ------------ ------------ ------------ ---------
Subtotal 856,117 840,978 752,481 13.8
- ----------------------------------------------------------------------- ------------ ------------ ------------ ---------
Common treasury stock, at cost
(680; 350; 395; shares, respectively)............................. (15,155) (5,950) (5,835) 159.7
- ----------------------------------------------------------------------- ------------ ------------ ------------ ---------
TOTAL COMMON STOCKHOLDERS' EQUITY 840,962 835,028 746,646 12.6
- ----------------------------------------------------------------------- ------------ ------------ ------------ ---------
TOTAL STOCKHOLDERS' EQUITY 841,647 835,731 747,379 12.6
- ----------------------------------------------------------------------- ------------ ------------ ------------ ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $10,745,283 $10,211,689 $9,158,974 17.3
======================================================================= ============ ============ ============ =========
<FN>
see Notes to Condensed Consolidated Financial Statements.
</TABLE>
<TABLE>
FIRST SECURITY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1994 and 1993
<CAPTION>
Three Months
(in thousands; unaudited) 1994 1993
<S> <C> <C>
- ----------------------------------------------------------------------- ----------- -----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES ($154,760) ($27,534)
- ----------------------------------------------------------------------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment securities: available for sale........ 286,068 (3,767)
Proceeds from matured investment securities: available for sale......... 205,901 NA
Proceeds from matured investment securities: held to maturity........... 23,018 NA
Total proceeds from matured investment securities 228,919 186,237
Purchases of investment securities: available for sale.................. (962,547) NA
Purchases of investment securities: held to maturity.................... (19,688) NA
Total purchases of investment securities (982,235) (407,296)
Net (increase) decrease in interest-bearing deposits in other banks..... 14,619 6,497
Net (increase) decrease in credit card receivables...................... 1,297 32,816
Net (increase) decrease in loans ....................................... (285,332) (111,597)
Proceeds from sales of loans............................................ 299,933 159,551
Purchases of premises and equipment..................................... (13,210) (7,214)
Purchases of assets to be leased........................................ (97,219) (51,820)
Proceeds from sales of other real estate................................ 6,282 523
Payments to improve other real estate................................... (593) (547)
Purchases of subsidiaries, net of cash acquired......................... 1,869 0
- ----------------------------------------------------------------------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (539,602) (196,617)
- ----------------------------------------------------------------------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in deposits......................................... (24,586) (123,476)
Increase (decrease) in Federal funds purchased, securities sold under
repurchase agreements, and U.S. Treasury demand notes................. 396,699 238,634
Net change in short-term borrowings and long-term debt.................. 21,416 (9,961)
Sales of treasury and common stock...................................... 3,119 2,129
Purchases of treasury stock............................................. (9,704) (30)
Cash dividends.......................................................... (12,574) (7,969)
- ----------------------------------------------------------------------- ----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 374,370 99,327
- ----------------------------------------------------------------------- ----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS (319,992) (124,824)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,055,031 904,379
- ----------------------------------------------------------------------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $735,039 $779,555
======================================================================= =========== ===========
<FN>
see Notes to Condensed Consolidated Financial Statements.
</TABLE>
<TABLE>
FIRST SECURITY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
For the Three Months Ended March 31, 1994 and 1993
<CAPTION>
Three Months
(in thousands, except share amounts; unaudited) 1994 1993
<S> <C> <C>
- ----------------------------------------------------------------------- ----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid (received) for:
Interest.............................................................. $65,909 $61,742
Income taxes.......................................................... 2,281 235
======================================================================= =========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Conversion of preferred shares to common shares:
Preferred shares converted............................................ 346 952
Common shares issued.................................................. 3,277 11,559
Conversion value...................................................... $18 $50
Loans transferred to other real estate.................................. $3,777 $4,066
Securities transferred from held to maturity to available for sale
in conjunction with adoption of Statement of Financial Accounting
Standards No. 115..................................................... $1,417,217 NA
Net unrealized gain (loss) on securities available for sale (included
in equity)............................................................ ($8,001) NA
Pooling-of-interests acquisitions:
Assets acquired....................................................... $0 $0
Liabilities assumed................................................... 0 0
FSC shares issued..................................................... 0 0
Purchase acquisitions:
Fair value of assets acquired......................................... $29,363 $0
Liabilities assumed................................................... 30,596 0
Cash paid for the capital stock....................................... 1,233 0
======================================================================= =========== ===========
<FN>
see Notes to Condensed Consolidated Financial Statements.
</TABLE>
FIRST SECURITY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of
normal recurring accruals) necessary to present fairly: the results of
operations for the three months in the periods ended March 31, 1994 and
1993; the financial position of First Security Corporation (FSC) as of
March 31, 1994, December 31, 1993, and March 31, 1993; and cash flows
for the three months in the periods ended March 31, 1994 and 1993.
2. The results of operations for the three month periods ended March
31, 1994 and 1993 are not necessarily indicative of the results to be
expected for the full year.
3. As required by applicable accounting rules, all historical amounts
in this report have been restated to reflect the effects of the November
19, 1993 pooling-of-interests merger with First National Financial
Corporation (FNFC; located in Albuquerque, New Mexico).
Financial statements and commentary incorporate fair market
valuations for balances added, as well as earnings since the
acquisition, from 11 financial institutions acquired in 1993, and one
financial institution acquired in the first quarter of 1994. Under
applicable accounting rules, those acquisitions acquired as pooling-of-
interests mergers, except FNFC, were not material to FSC's consolidated
operations, so historical amounts were not restated.
On February 18, 1994, First Security Bank of 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. This acquisition was accounted for
using the purchase method of accounting.
On April 29, 1994, First Security Bank of Utah, N.A. (FSB Utah)
purchased CrossLand Mortgage Acquisition Corporation (CrossLand), the
parent company of CrossLand Mortgage Corp. (not affiliated with
CrossLand Savings Bank), a 1 to 4 family residential mortgage loan
originator and servicer which has 60 offices in 18 states across the
country. This acquisition was accounted for using the purchase method
of accounting.
4. For the periods ended March 31, 1994 and 1993, per share amounts
assuming full dilution were not separately disclosed because they did
not differ significantly from primary earnings per share.
5. For purposes of reporting cash flows, cash and cash equivalents
included cash and due from banks, as well as Federal funds sold and
securities purchased under resale agreements.
6. Information as to preferred and common shares (in thousands):
March 31 December 31 March 31
1994 1993 1993
Preferred Stock Outstanding 13 13 14
Common Stock Issued 48,896 48,787 46,187
Common Treasury Stock 680 350 395
7. On January 1, 1994, FSC adopted Statement of Financial Accounting
Standards No. 112 (SFAS 112), "Employers' Accounting for Postemployment
Benefits". SFAS 112 requires the Corporation to accrue 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 impact of SFAS 112 on FSC is not material in relation to
the consolidated financial statements.
8. On 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
accounted for at 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 accounted for at fair value with
unrealized gains/losses included in earnings. The adoption of SFAS 115
on January 1, 1994 resulted in the reclassification of $1.42 billion of
investment securities as available for sale to reflect FSC's investment
holding strategy under the new statement, and an increase in the
carrying value of such investments 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. At March 31, 1994, the fair value and the amortized cost
basis of the available for sale category were $1.96 billion and $1.97
billion, respectively, which included gross unrealized holding gains and
losses of $14.92 million and $27.63 million, respectively, that were
recognized on a tax-effected basis as an $8.00 million net unrealized
loss on securities available for sale in stockholders' equity. The fair
value and the amortized cost basis of the held to maturity investments
were $273.95 million and $270.04 million, respectively, including gross
unrealized holding gains and losses of $5.69 million and $1.78 million,
respectively. Implementation of SFAS 115 will result in additions to or
deductions from total stockholders' equity as the result of fluctuations
in fair value.
# # #
PART 1. FINANCIAL INFORMATION
Item 2: Management's Discussion and Analysis of Results of Operations
and Financial Condition
ANALYSIS OF RESULTS OF OPERATIONS
First Security Corporation (FSC) earned net income of $33.16 million
for the first quarter of 1994, up $2.45 million (8.0%) from the $30.71
million earned in the first quarter of 1994 (see Financial Statements:
Condensed Consolidated Statements of Income). This was the highest
quarterly net income ever earned by FSC, following the previous records
of $32.59 million and $30.71 million earned in the third and first
quarters of 1993, respectively. The rise in net income over the same
quarter last year was due primarily to a 15.6% growth in average
interest-earning assets, plus a significant reduction in the provision
for loan losses combined with a lower overall average funding cost and
higher noninterest income.
Net income for the first quarter of 1994 generated a 1.34% return on
average assets (ROAA) and a 15.74% return on average stockholders'
equity (ROAE), compared with a 1.43% ROAA and a 16.85% ROAE for the
year-ago quarter. The quarter's net income per share was $0.67, up
$0.02 (3.1%) from $0.65 one year ago.
FSC's financial statements have been restated to reflect the November
19, 1993 pooling-of-interests merger with First National Financial
Corporation (FNFC) and its wholly-owned subsidiary First National Bank
in Albuquerque (now First Security Bank of New Mexico, with $1.13
billion in deposits and 26 branches, headquartered in Albuquerque, New
Mexico).
Net interest income, on a fully taxable equivalent (FTE) basis, was
$112.23 million for the first quarter of 1994, up $12.79 million (12.9%)
from the first quarter of 1993 (see Supplemental Table: Rate / Volume
Analysis). This increase was due to volume growth in interest-earning
assets, particularly in consumer and residential mortgage loans, coupled
with growth in transaction accounts and noninterest-bearing deposits,
and the positive effects of recent acquisitions. These positive factors
more than offset the negative impact of the lower average interest rate
earned by the loan portfolio resulting from much of the loan portfolio
repricing to lower rates since the year-ago quarter. As a result, the
net interest margin FTE for the quarter was 4.92%, down slightly from
5.04% for the year-ago quarter.
FSC had a net recovery of loan losses in the first quarter of 1994,
compared with a provision of $1.98 million for the year-ago quarter (see
Section: Asset Quality - Reserve For Loan Losses; see also Supplemental
Table: Financial Highlights - Reconciliation of the Reserve For Loan
Losses). Net loans charged off for the quarter were $666 thousand, down
$1.83 million (73.3%) from one year ago. For the quarter, net losses
were reduced in commercial loans (resulting in a net recovery of $3.10
million), and real estate loans (resulting in a net recovery of $83
thousand). Net loan chargeoffs were 0.04% of average total loans
outstanding for the quarter, down from 0.18% for the year-ago quarter.
The Corporation acquired reserves for loan losses through its merger
transactions of $206 thousand during the quarter and $7.39 million
during the 12-month period.
Noninterest income was $42.66 million for the first quarter of 1994,
up $1.79 million (4.4%) from one year ago. This increase resulted
largely from volume growth in service charges on accounts, real estate
loan service fees, bankcard fees, and trust activities.
Noninterest expenses were $101.37 million for the first quarter of
1994, up $16.14 million (18.9%) from the first quarter of 1993. FSC's
efficiency ratio (the ratio of noninterest expenses to the sum of net
interest income FTE and noninterest income) was 65.45% for the quarter,
up from 60.74% for the year-ago quarter. The increase in noninterest
expense was primarily due to the impact of acquisitions, including 10
acquisitions completed after March 31, 1993 that did not require
restatement, plus one-time acquisition-related charges of $1.20 million
pre-tax associated with the announced acquisition of CrossLand Mortgage
Acquisition Corporation (CrossLand), the parent company of CrossLand
Mortgage Corp. (see Section: Mergers and Acquisitions). Acquisitions
and corporate growth were the primary reasons for the higher costs in
nearly every expense category: salaries and employee benefits, where the
number of full-time equivalent employees increased 8.6% while bonuses
and commissions rose with corporate performance; net occupancy;
furniture and equipment; insurance; stationery and supplies; and
telephone expense. The combined other real estate (ORE) expense and
loss provision decreased for the quarter due to the 52.6% drop in the
outstanding ORE balance from one year ago.
The provision for income taxes for the first quarter of 1994 was
$18.56 million on pre-tax income of $51.73 million, resulting in an
effective tax rate of 35.9% compared with 38.0% one year ago.
ANALYSIS OF FINANCIAL CONDITION
As described in this and following sections, FSC continued to
increase its interest-earning assets, strengthen its asset quality, and
increase its capital position during the first quarter of 1994, as
compared to both December 31, 1993, and March 31, 1993.
FSC's total assets were a record $10.75 billion at March 31, 1994, up
$1.59 billion (17.3%) from March 31, 1993 and up $533.59 million (5.2%)
from December 31, 1993 (see Financial Statements: Condensed Consolidated
Balance Sheets). Total interest-earning assets were $9.82 billion at
quarter end, up $1.37 billion (16.2%) from one year ago and up $487.00
million (5.2%) from the year end (see Section: Interest-Earning Assets
and Asset Quality). This was due primarily to growth in the loan
portfolio, plus the positive impact of recent acquisitions, and planned
corporate growth. Loans were $6.67 billion at quarter end, up $1.08
billion (19.3%) from one year ago, with increases in every loan
category, particularly in consumer loans, real estate secured loans, and
commercial loans.
The combined balance of interest-bearing deposits in other banks,
Federal funds sold and securities purchased under resale agreements, and
trading account securities was $912.09 million at March 31, 1994, up
$30.64 million (3.5%) from March 31, 1993, but down $93.38 million
(9.3%) from December 31, 1993. Historically, these balances have
fluctuated significantly in response to both market conditions and the
Corporation's need for funds. Fluctuations in other assets and other
liabilities are due to accounts receivable and accounts payable related
to unsettled transactions arising from the purchase and sale of
securities.
Total deposits were a record $7.51 billion at March 31, 1994, up
$764.69 million (11.3%) from March 31, 1993, and up $5.96 million (0.1%)
from December 31, 1993. As with total assets, the increase from one
year ago was due to the positive impact of recent acquisitions and
planned corporate growth. At quarter end, total deposits consisted of:
interest-bearing deposits of $5.95 billion, up $492.40 million (9.0%)
from one year ago and up $147.15 million (2.5%) from year-end; and
noninterest-bearing deposits of $1.56 billion, up $272.29 million
(21.2%) from one year ago but down $141.19 million (8.3%) from year end.
The relatively high percentage of noninterest-bearing deposits to total
deposits has helped to reduce FSC's cost of supporting its interest-
earning assets, and was 20.72% at March 31, 1994, compared with 19.04%
one year ago and 22.62% at year end.
In addition to deposits, FSC supported the growth in its interest-
earning assets with borrowed funds and equity. Borrowed funds totaled
$2.15 billion at March 31, 1994, up $781.18 million (57.3%) from March
31, 1993, and up $433.90 million (25.3%) from December 31, 1993. These
increases occurred in: Federal funds purchased and securities sold under
repurchase agreements, which were $1.80 billion at quarter end, up
$617.21 million (52.0%) from one year ago and up $417.88 million (30.1%)
from the year end; and long-term debt of $297.54 million, up $178.48
million (149.9%) from one year ago and up $72.70 million (32.3%) from
the year end, due to advances from the Federal Home Loan Bank to support
increased retention of mortgage loans originated by the Corporation.
Maintaining a strong equity position has been and continues to be a
high priority for FSC (see Section: Capital Adequacy). As a result,
total stockholders' equity was increased to a record $841.65 million at
March 31, 1994, up $94.27 million (12.6%) from March 31, 1993, and up
$5.92 million (0.7%) from December 31, 1993. This growth was due
primarily to earnings combined with the effects of acquisitions.
INTEREST-EARNING ASSETS and ASSET QUALITY
FSC borrowers reside principally in those states where the
Corporation has its banking offices (Utah, Idaho, New Mexico, Oregon,
Nevada, and Wyoming) as well as in contiguous market areas. 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.
Loans:
FSC's loan portfolio, net of unearned income but before the reserve
for loan losses, totaled a record $6.67 billion at March 31, 1994, up
$1.08 billion (19.3%) from March 31, 1993 and up $113.05 million (1.7%)
from December 31, 1993. In comparing the various components of the
Corporation's loan portfolio at March 31, 1994, with December 31, 1993,
the following points should be noted (see Supplemental Table: Loans
Outstanding):
1. Commercial loans totaled $1.54 billion, up $203.84 million (15.3%)
from the year-ago quarter, but essentially unchanged from year end 1993.
This was due primarily to increases in loans made to FSC's middle-market
customers.
2. Real estate secured loans totaled $2.56 billion, up $332.51
million (14.9%) from the year-ago quarter and essentially unchanged from
year-end 1993. For balance sheet management purposes, 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. For the 1994 year-to-date period, the Corporation originated
$527.14 million in real estate secured loans, passing through $288.70
million into secondary markets while retaining most of the servicing.
Term loans held in portfolio were $2.30 billion, up $232.33 million
(11.2%) from the year-ago quarter. FSC's acquisition of CrossLand will
allow FSC to expand its real estate lending activities (see Section:
Mergers and Acquisitions).
3. Consumer loans totaled $2.31 billion, up $511.08 million (28.5%)
from year-end 1993. This was due primarily to growth in indirect auto
loans.
Problem Assets:
The reduction of problem assets, consisting of nonaccruing loans,
other real estate owned (ORE), and accruing loans past due 90 days or
more, continued to be a major FSC objective (see Supplemental Table:
Financial Highlights - Problem Assets and Financial Highlights -
Selected Ratios). Problem assets were reduced to $52.93 million at
March 31, 1994, down $56.04 million (51.4%) from March 31, 1993, and
down $7.05 million (11.7%) from December 31, 1993. The ratio of total
problem assets to total loans and ORE was 0.79% at quarter end, down
from 1.94% one year ago and 0.91% at year end. This decrease was due to
a healthy regional economy and high loan underwriting standards.
Despite a general downward trend in problem assets over the past two
years, it has been FSC's experience that economic cycles and loan-
specific events beyond its control cause cyclical fluctuations in
problem assets, sometimes with little or no warning. This has led the
Corporation to take a conservative approach in its analysis of the
reserve for loan losses. As discussed below, significant reductions
were achieved in nearly all categories of problem assets in the first
quarter of 1994.
Nonaccruing loans were $27.77 million at March 31, 1994, down $39.54
million (58.7%) from March 31, 1993, and down $8.59 million (23.6%) from
December 31, 1993. Nonaccruing loans equaled 0.42% of the loan
portfolio at quarter end, down from 1.20% one year ago and 0.55% at year
end.
ORE and other foreclosed assets were $14.84 million at March 31,
1994, down $16.50 million (52.6%) from March 31, 1993, and down $1.62
million (9.9%) from December 31, 1993. ORE property values are reviewed
on at least an annual basis, and the portfolio is adjusted to the lower
of cost or fair value less estimated selling costs.
Accruing loans past due 90 days or more were $10.32 million at
quarter end, essentially unchanged from one year ago but up $3.16
million (44.2%) from year end.
Potential problem loans are defined by the Securities and Exchange
Commission as 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. In identifiying potential
problem loans, FSC considers the repayment source, the value of the
collateral, and the borrower's ability and willingness to repay the
loan. Potential problem loans identified by FSC were $19.46 million at
March 31, 1994, down $4.17 million (17.6%) from year-end 1993.
Potential problem loans consisted primarily of commercial real estate
loans and commercial loans. These loans are less than 90 days
delinquent and are accruing. All significant additions to problem
assets had been previously identified as potential problem loans.
Meaningful comparisons of the current quarter with periods prior to
December 31, 1993 are not possible because FNFC did not identify
potential problem loans; potential problem loans excluding FSB New
Mexico and FSB Nevada were $18.74 million at March 31, 1993.
Reserve for Loan Losses:
In keeping with its philosophy of maintaining a conservative balance
sheet, particularly in the face of uncertainties in the national/global
economy and the strong economic expansion it its primary markets, FSC
maintains a carefully reviewed and conservative reserve for loan losses.
The Corporation's philosophy regarding the adequacy and use of its
reserve was discussed in detail on pages 50 through 53 of its combined
1993 Annual Report and Form 10-K. The detailed analysis of reserve
adequacy resulted in a determination of an appropriate total reserve for
loan losses of $134.22 million at March 31, 1994, up $6.89 million
(5.4%) from March 31, 1993, but down $632 thousand (0.5%) from December
31, 1993 (see Supplemental Table: Financial Highlights - Reconciliation
of the Reserve for Loan Losses).
FSC's reserve was carefully positioned so as to remain conservative
in the face of the 19.3% growth in the loan portfolio since March 31,
1993, while reflecting the 58.7% reduction of nonaccruing loans over the
same period. As a result, growth in the reserve was below growth in
loans so that the reserve for loan losses to total loans ratio was 2.01%
at quarter end, down from 2.28% one year ago and 2.06% at year end. At
the same time, the "coverage" ratio (the ratio of the reserve for loan
losses to nonaccruing loans) was 483.35% on March 31, 1994, up from
189.16% one year ago and 370.93% at year end. The funding of this
increase in the reserve was accomplished through merger transactions
which added $206 thousand in reserves during the quarter and $7.39
million during the 12-month period.
FSC charges loan losses against the reserve for loan losses when such
losses become probable and subject to reasonable estimation. Net loans
charged off against the reserve were reduced to $666 thousand for the
first quarter of 1994, down $1.83 million (73.3%) from the year-ago
quarter, reflecting FSC's excellent asset quality (see Supplemental
Table: Financial Highlights - Reconciliation of the Reserve for Loan
Losses). For the quarter, net losses were reduced in commercial loans
(resulting in a net recovery of $3.10 million), and real estate loans
(resulting in a net recovery of $83 thousand). Net loan chargeoffs as a
percent of average total loans outstanding were 0.04% for the quarter,
down from 0.18% for the year-ago quarter.
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 was
increased to $841.65 million at March 31, 1994, up $94.27 million
(12.6%) from March 31, 1993, and up $5.92 million (0.7%) from December
31, 1993. This was due primarily to record earnings combined with
effects of acquisitions. The ratio of stockholders' equity to total
assets was 7.83% at March 31, 1994, compared with 8.16% one year ago and
8.18% at year end. For the same periods, the ratio of tangible common
equity to tangible total assets was 7.72%, compared with 8.01% one year
ago and 8.07% at year-end 1993 (see Supplemental Table: Financial
Highlights - Selected Ratios). FSC's risk-based capital ratios at March
31, 1994, were: Tier 1 at 11.51%, compared with 11.82% at year end, and
Total Capital at 13.79%, compared with 14.15% at year end (see
Supplemental Table: Financial Highlights - Risk-Based Capital Ratios).
All of FSC's equity-related ratios exceeded the regulatory minimums,
reflecting the Corporation's long-standing emphasis on a strong capital
position. FSC and its subsidiary banks are classed as "well-capitalized
institutions" according to the regulatory definition for risk-based
capital ratios.
On April 25, 1993, FSC increased its quarterly cash dividend paid per
share of common stock from $0.19 for the first quarter of 1993, up $0.04
per share (21.1%) to $0.23 per share for the second, third, and fourth
quarters of 1993. On January 24, 1994, FSC increased the quarterly cash
dividend to $0.26 a share, up $0.03 per share (13.0%) from the previous
$0.23 per share. This increased quarterly cash dividend, paid March 7,
1994 to shareholders of record on February 18, 1994, equals an 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.
The 1994 dividend marked the 60th 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 1, 1994, FSC adopted Statement of Financial Accounting
Standard No. 115 (SFAS 115) "Accounting for Certain Investments in Debt
and Equity Securities"; per the new accounting requirements, detailed
comparisons with prior periods are not permitted. SFAS 115 requires the
Corporation to classify its investment portfolio 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. Implementation of SFAS 115 will result in
additions to or deductions from total stockholders' equity as the result
of fluctuations in fair value. At March 31, 1994, SFAS 115 resulted in
a $8.00 million decrease in total stockholders' equity.
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 Section on Mergers and
Acquisitions, and Supplemental Table: Mergers and Acquisitions), grant
stock options and support employee benefit programs. These share
repurchases are in addition to ongoing periodic share repurchases
disclosed over the last several years for use in ongoing stock option and
employee benefit plans.
MERGERS AND ACQUISITIONS
FSC's merger and acquisition activity (See Supplemental Table: Mergers
and Acquisitions) 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 and existing markets. Management believes
that long-term returns on the stockholders' investment will benefit from
these acquisitions, and will continue its strategy of acquiring solid,
well-managed financial services companies when suitable opportunities
arise.
During the first quarter of 1994, FSC completed one bank acquisition.
On February 18, 1994, First Security Bank of 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.
On April 29, 1994, First Security Bank of Utah, N.A. (FSB Utah)
purchased CrossLand Mortgage Acquisition Corporation (CrossLand), the
parent company of CrossLand Mortgage Corp. (not affiliated with CrossLand
Savings Bank), a 1 to 4 family residential mortgage loan originator and
servicer which has 60 offices in 19 states across the country.
Currently, FSC has announced three pending bank acquisitions expected
to close during 1994, expanding its 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. On May 19, 1994, FSB Utah expects to complete the pending merger
with Community First Bank (headquartered in Clearfield, Utah) with
approximately $67.26 million in deposits in five branches.
2. First Security Bank of Idaho, N.A. 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 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
1994.
NATIONAL & REGIONAL ECONOMY
National financial markets experienced significant volatility in the
first quarter of 1994. In early February, in mid-March, and again in
mid-April, the Federal Reserve edged short-term interest rates higher as
a preemptive move to avoid future higher inflation. The bond market
reaction during that three-month period was very different from the
expected and desired outcome. A combination of technical factors
involving highly-leveraged hedge funds, a strengthening U. S. economy,
and future inflationary worries pushed intermediate and long-term bond
rates more than one percentage point higher.
With the abrupt sell-off in the bond market and its direct impact on
mortgage rates, the pace of economic growth nationwide may ease in the
second half of 1994. A careful analysis of potential inflation
continues to suggest only minor concerns. Accordingly, less volatility
in interest rates appears probable during the remainder of 1994.
Economic growth in the six-state area directly served by FSC remained
very strong in the first quarter of 1994. The current highly impressive
job gains come on top of upward revisions for 1993. The construction
industry continued to record sharp gains in the first quarter. The
higher mortgage rates may narrow those growth rates through 1994, but
residential construction activity should remain vigorous and exceed
1993's production volume. Consumer confidence is high, and automobile
sales, along with total retail sales, have maintained double-digit gains
in the large urban markets.
# # #
PART 1. FINANCIAL INFORMATION
Item 2. Supplemental Tables
<TABLE>
FIRST SECURITY CORPORATION
FINANCIAL HIGHLIGHTS
(restated, in thousands, except per share data and ratios; unaudited)
<CAPTION>
1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr Three Months
1994 1993 1993 1993 1993 1994 1993 %Chg
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------
Common Stock Data:
Earnings per common share....................... 0.67 0.43 0.68 0.62 0.65 0.67 0.65 3.1
Dividends paid per common share................. 0.26 0.23 0.23 0.23 0.19 0.26 0.19 36.8
Book value EOP.................................. 17.44 17.24 17.12 16.64 16.31 17.44 16.31 7.0
Market price (bid) EOP.......................... 27.75 25.75 28.00 28.25 28.50 27.75 28.50 -2.6
High bid for the period....................... 29.00 30.00 28.50 30.00 30.25 29.00 30.25 -4.1
Low bid for the period........................ 25.75 24.00 26.50 25.50 25.50 25.75 25.50 1.0
Market capitalization EOP: mktprice x #comshrs.. 1,337,994 1,247,253 1,322,804 1,316,930 1,305,072 1,337,994 1,305,072 2.5
Market price EOP / book value EOP............(%) 159.12 149.36 163.55 169.76 174.79 159.12 174.79
Dividend payout ratio: dividend / EPS........(%) 38.81 53.49 33.82 37.10 29.23 38.81 29.23
Dividend yield: dividend / market price......(%) 3.75 3.57 3.29 3.26 2.67 3.75 2.67
Price / earnings ratio: mkt price / 4 qtrs earn. 11.6 10.8 10.7 14.6 12.1 11.6 12.1
Common shares outstanding: EOP.................. 48,216 48,437 47,243 46,617 45,792 48,216 45,792 5.3
Common shares outstanding: average.............. 49,478 48,969 48,147 47,829 47,112 49,478 47,112 5.0
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------
Income:
Net interest income............................. 110,267 105,863 103,343 98,879 95,853 110,267 95,853 15.0
Fully-taxable equivalent (FTE) adjustment....... 1,963 2,922 (1,092) 2,221 3,582 1,963 3,582 -45.2
Net interest income, FTE........................ 112,230 108,785 102,251 101,100 99,435 112,230 99,435 12.9
Provision for loan losses....................... (172) 4,647 5,139 (78) 1,976 (172) 1,976 -108.7
Noninterest income.............................. 42,655 46,446 43,107 36,739 40,867 42,655 40,867 4.4
Noninterest expenses............................ 101,368 116,015 94,824 90,081 85,226 101,368 85,226 18.9
Net income...................................... 33,162 21,064 32,587 29,693 30,712 33,162 30,712 8.0
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------
Average Balance Sheet:
Investment securities........................... 2,066,065 1,713,775 1,768,370 1,932,218 1,756,738 2,066,065 1,756,738 17.6
Loans, net of unearned income................... 6,547,493 6,314,632 6,037,540 5,745,825 5,563,702 6,547,493 5,563,702 17.7
Reserve for loan losses......................... (135,122) (130,881) (127,787) (128,874) (127,636) (135,122) (127,636) 5.9
Total interest-earning assets................... 9,131,644 8,683,703 8,384,769 8,304,335 7,896,287 9,131,644 7,896,287 15.6
Total assets....................................10,060,915 9,638,743 9,301,245 9,180,421 8,725,616 10,060,915 8,725,616 15.3
Interest-bearing deposits....................... 5,859,165 5,667,076 5,510,779 5,506,463 5,423,080 5,859,165 5,423,080 8.0
Short-term borrowed funds....................... 1,360,105 1,172,030 1,125,109 1,151,294 1,035,021 1,360,105 1,035,021 31.4
Long-term debt.................................. 276,130 225,701 235,474 232,054 121,801 276,130 121,801 126.7
Total interest-bearing liabilities.............. 7,495,400 7,064,807 6,871,362 6,889,811 6,579,902 7,495,400 6,579,902 13.9
Total deposits.................................. 7,381,661 7,265,005 6,985,568 6,889,948 6,677,149 7,381,661 6,677,149 10.6
Stockholders' equity............................ 854,677 830,817 798,433 769,074 739,149 854,677 739,149 15.6
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------
End of Period Balance Sheet:
Investment securities........................... 2,230,114 1,762,783 1,760,168 1,862,131 1,970,338 2,230,114 1,970,338 13.2
Loans, net of unearned income................... 6,674,067 6,561,021 6,185,830 5,946,520 5,596,166 6,674,067 5,596,166 19.3
Reserve for loan losses......................... (134,216) (134,848) (130,726) (126,896) (127,329) (134,216) (127,329) 5.4
Total interest-earning assets................... 9,816,274 9,329,273 8,797,725 8,524,631 8,447,960 9,816,274 8,447,960 16.2
Total assets....................................10,745,283 10,211,689 9,725,657 9,490,282 9,158,974 10,745,283 9,158,974 17.3
Interest-bearing deposits....................... 5,953,168 5,806,020 5,523,565 5,453,683 5,460,770 5,953,168 5,460,770 9.0
Short-term borrowed funds....................... 1,848,100 1,486,905 1,289,505 1,181,217 1,245,394 1,848,100 1,245,394 48.4
Long-term debt.................................. 297,538 224,836 226,505 237,895 119,062 297,538 119,062 149.9
Total interest-bearing liabilities.............. 8,098,806 7,517,761 7,039,575 6,872,795 6,825,226 8,098,806 6,825,226 18.7
Total deposits.................................. 7,509,666 7,503,707 7,061,649 6,978,451 6,744,977 7,509,666 6,744,977 11.3
Stockholders' equity............................ 841,647 835,731 809,677 776,494 747,379 841,647 747,379 12.6
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------
End of Period Problem Assets:
Nonaccruing loans:
Commercial.................................... $8,874 $9,408 $13,143 $12,565 $11,634 $8,874 $11,634 -23.7
Real estate................................... 16,603 23,817 39,181 50,584 54,379 16,603 54,379 -69.5
Consumer...................................... 139 546 294 281 313 139 313 -55.6
Direct lease financing........................ 895 1,484 151 300 194 895 194 361.3
Renegotiated.................................. 1,257 1,099 938 790 792 1,257 792 NA
Total nonaccruing loans......................... 27,768 36,354 53,707 64,520 67,312 27,768 67,312 -58.7
ORE and other foreclosed assets................. 14,842 16,465 23,052 27,181 31,343 14,842 31,343 -52.6
Total nonperforming assets...................... 42,610 52,819 76,759 91,701 98,655 42,610 98,655 -56.8
Accruing loans past due 90 days or more......... 10,318 7,155 8,310 9,150 10,309 10,318 10,309 0.1
Total problem assets............................ 52,928 59,974 85,069 100,851 108,964 52,928 108,964 -51.4
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------
End of Period Other Data (not rounded to thousands):
Full-time equivalent employees.................. 6,420 6,318 6,259 6,059 5,911 6,420 5,911 8.6
Total domestic bank offices..................... 249 245 239 236 236 249 236 5.5
=============================================== ========== ========== ========== ========== ========== ========== ========== ======
<FN>
see Notes to Condensed Consolidated Financial Statements.
EOP: End of period.
</TABLE>
<TABLE>
FIRST SECURITY CORPORATION
FINANCIAL HIGHLIGHTS - Continued
(in thousands, except per share data and ratios; unaudited)
<CAPTION>
1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr Three Months
1994 1993 1993 1993 1993 1994 1993 %Chg
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------
Reconciliation of the Reserve for Loan Losses:
Balance, beginning of period.................... 134,848 130,726 126,896 127,329 127,847 134,848 127,847 5.5
Loans charged off:
Commercial.................................... 887 4,653 2,690 1,659 696 887 696 27.4
Real estate................................... 1,030 4,809 704 1,014 1,053 1,030 1,053 -2.2
Consumer...................................... 6,637 6,029 4,834 5,190 5,670 6,637 5,670 17.1
Direct lease financing........................ 37 1,310 51 30 75 37 75 -50.7
Total loans charged off......................... 8,591 16,801 8,279 7,893 7,494 8,591 7,494 14.6
Recoveries on loans charged off:
Commercial.................................... (3,988) (5,279) (2,150) (2,116) (2,244) (3,988) (2,244) 77.7
Real estate................................... (1,113) (4,214) (1,069) (764) (398) (1,113) (398) 179.6
Consumer...................................... (2,817) (2,504) (2,649) (2,777) (2,325) (2,817) (2,325) 21.2
Direct lease financing........................ (7) (29) (27) (24) (33) (7) (33) -78.8
Total recoveries of loans charged off........... (7,925) (12,026) (5,895) (5,681) (5,000) (7,925) (5,000) 58.5
Net loans charged off (recovered)............... 666 4,775 2,384 2,212 2,494 666 2,494 -73.3
Provision for loan losses....................... (172) 4,647 5,139 (78) 1,976 (172) 1,976 -108.7
Reserves acquired in merger transactions........ 206 4,250 1,075 1,857 0 206 0
Balance, end of period.......................... 134,216 134,848 130,726 126,896 127,329 134,216 127,329 5.4
Net loans charged off:
Commercial.................................... (3,101) (626) 540 (457) (1,548) (3,101) (1,548) 100.3
Real estate................................... (83) 595 (365) 250 655 (83) 655 -112.7
Consumer...................................... 3,820 3,525 2,185 2,413 3,345 3,820 3,345 14.2
Direct lease financing........................ 30 1,281 24 6 42 30 42 -28.6
Net loans charged off........................... 666 4,775 2,384 2,212 2,494 666 2,494 -73.3
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------
Selected Ratios (%):
Return on average assets........................ 1.34 0.87 1.39 1.30 1.43 1.34 1.43
Return on average stockholders' equity.......... 15.74 10.06 16.19 15.49 16.85 15.74 16.85
Net interest margin, FTE........................ 4.92 5.01 4.88 4.87 5.04 4.92 5.04
Net interest spread, FTE........................ 4.32 4.37 4.25 4.27 4.43 4.32 4.43
Efficiency ratio:
(nonint exp / (net int inc FTE + nonint inc)). 65.45 74.74 65.23 65.35 60.74 65.45 60.74
Productivity ratio:
(nonint exp / average assets)................. 4.09 4.78 4.04 3.94 3.96 4.09 3.96
Stockholders' equity / assets................... 7.83 8.18 8.33 8.18 8.16 7.83 8.16
Tangible common equity / tangible assets........ 7.72 8.07 8.32 8.17 8.01 7.72 8.01
Loans / deposits................................ 88.87 87.44 87.60 85.21 82.97 88.87 82.97
Loans / assets.................................. 62.11 64.25 63.60 62.66 61.10 62.11 61.10
Reserve for loan losses at quarter end to:
Total loans................................... 2.01 2.06 2.11 2.13 2.28 2.01 2.28
Nonaccruing loans............................. 483.35 370.93 243.41 196.68 189.16 483.35 189.16
Nonaccruing + accruing loans past due 90 days. 352.40 309.93 210.79 172.25 164.04 352.40 164.04
Nonaccruing loans / total loans................. 0.42 0.55 0.87 1.09 1.20 0.42 1.20
Nonaccruing + accruing loans past due 90 days
/ total loans................................. 0.57 0.66 1.00 1.24 1.39 0.57 1.39
Nonperforming assets to:
Total loans + ORE............................. 0.64 0.80 1.24 1.54 1.75 0.64 1.75
Total assets.................................. 0.40 0.52 0.79 0.97 1.08 0.40 1.08
Total equity.................................. 5.06 6.32 9.48 11.81 13.20 5.06 13.20
Total equity + reserve for loan losses........ 4.37 5.44 8.16 10.15 11.28 4.37 11.28
Problem assets to:
Total loans + ORE............................. 0.79 0.91 1.37 1.69 1.94 0.79 1.94
Total assets.................................. 0.49 0.59 0.87 1.06 1.19 0.49 1.19
Total equity.................................. 6.29 7.18 10.51 12.99 14.58 6.29 14.58
Total equity + reserve for loan losses........ 5.42 6.18 9.05 11.16 12.46 5.42 12.46
Net loans charged off / average loans........... 0.04 0.30 0.16 0.15 0.18 0.04 0.18
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------
Risk-Based Capital Ratios (%): Well-
As of March 31, 1994: FSC FSB FSB FSB CapitalizedRegulatory
Consol. Utah Idaho New Mexico Institution Minimum
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------
Tier 1.......................................... 11.51 9.56 8.42 14.24 6.00 4.00
Total Capital (Tier 1 + 2)...................... 13.79 11.27 10.76 15.52 10.00 8.00
Leverage Ratio.................................. 7.81 6.37 6.40 6.30 6.00-7.00 4.00-5.00
=============================================== ========== ========== ========== ========== ========== ========== ========== ======
<FN>
see Notes to Condensed Consolidated Financial Statements.
EOP: End of period.
</TABLE>
<TABLE>
FIRST SECURITY CORPORATION
MERGERS AND ACQUISITIONS
<CAPTION>
(unaudited)
Acquisition # Bank Offices Deposits
Date: Type: Acquired Institution: Home Office: Acquire: Retain: $ 000
<S> <C> <C> <C> <C> <C> <C>
- ------ ----------------- ------------------------------------ ---------------------- -------- -------- -----------
1993:
01-Mar Purchase Fenton Insurance Agency Salt Lake City, UT - - -
01-Apr Pool-of-interests First Bancshares 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
29-Apr Purchase CrossLand Mortgage Acquisition Corp. Salt Lake City, UT - - -
19-May Pool-of-interests Community First Bank Clearfield, UT 5 5 67,263
TBA Purchase American Ban Corporation Boise, ID 4 4 55,400
TBA Purchase Star Valley State Bank Afton, WY 1 1 56,582
- ------ ----------------- ------------------------------------ ---------------------- -------- -------- -----------
TOTALS 51 51 $1,729,889
====== ================= ==================================== ====================== ======== ======== ===========
<FN>
TBA: To Be Announced.
</TABLE>
<TABLE>
FIRST SECURITY CORPORATION
LOANS OUTSTANDING
<CAPTION>
March 31, 1994 December 31, 1993 March 31, 1993
%Total %Total %Total Mar/Mar
(in thousands; unaudited) Balance Loans Balance Loans Balance(A) Loans %Chg
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
Commercial Loans:
Commercial / Industrial................. $1,184,987 17.7 $1,166,568 17.7 NA NA NA
Agricultural............................ 231,355 3.5 255,122 3.9 NA NA NA
Other Commercial........................ 121,306 1.8 151,443 2.3 NA NA NA
- ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
TOTAL COMMERCIAL LOANS 1,537,648 23.0 1,573,133 23.9 $1,333,811 23.8 15.3
- ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
Real Estate Secured Loans:
Residential Real Estate Loans:
Term.................................. 1,164,512 17.3 1,251,403 19.0 NA NA NA
Home equity........................... 288,735 4.3 280,776 4.3 NA NA NA
Construction.......................... 153,963 2.3 148,545 2.3 NA NA NA
Construction Land..................... 8,523 0.1 13,187 0.2 NA NA NA
- ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
Total Residential Real Estate Loans 1,615,733 24.2 1,693,911 25.8 NA NA NA
- ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
Commercial Real Estate (CRE) Loans:
Term: owner occupied.................. 367,781 5.5 319,542 4.9 NA NA NA
Term: nonowner occupied............... 420,848 6.3 391,851 6.0 NA NA NA
Construction: owner occupied.......... 42,816 0.5 42,249 0.6 NA NA NA
Construction: nonowner occupied....... 48,860 0.7 37,480 0.6 NA NA NA
- ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
Subtotal: CRE Owner Occupied 410,597 6.0 361,791 5.5 NA NA NA
Subtotal: CRE Nonowner Occupied 469,708 7.0 429,331 6.5 NA NA NA
- ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
Commercial Land....................... 55,075 0.8 54,197 0.8 NA NA NA
- ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
Total Commercial Real Estate Loans 935,380 14.0 845,319 12.9 NA NA NA
- ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
Farm Land............................... 13,117 0.2 17,277 0.3 NA NA NA
- ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
TOTAL REAL ESTATE SECURED LOANS 2,564,230 38.4 2,556,507 38.9 2,231,717 39.8 14.9
Memo: Total RE Term Loans............... 2,303,859 34.5 2,311,401 35.2 2,071,526 36.9 11.2
Memo: Total RE Construction Loans....... 260,371 3.8 245,106 3.7 160,191 2.9 62.5
- ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
Consumer Loans:
Auto.................................... 1,660,977 24.8 1,540,213 23.4 NA NA NA
Student................................. 115,935 1.7 110,231 1.7 NA NA NA
Credit Card Receivables................. 274,054 4.1 275,467 4.2 NA NA NA
Other Consumer.......................... 254,060 3.8 241,799 3.7 NA NA NA
- ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
TOTAL CONSUMER LOANS 2,305,026 34.5 2,167,710 33.0 1,793,948 32.0 28.5
- ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
Direct Lease Financing:
TOTAL DIRECT LEASE FINANCING.............. 278,127 4.2 275,853 4.2 249,867 4.4 11.3
- ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
TOTAL LOANS 6,685,031 100.0 6,573,203 100.0 5,609,343 100.0 19.2
Unearned Income......................... (10,964) (12,182) (13,177) -16.8
- ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
Loans, Net of Unearned Income 6,674,067 6,561,021 5,596,166 19.3
Reserve for Loan Losses................. (134,216) (134,848) (127,329) 5.4
- ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
TOTAL LOANS, NET $6,539,851 $6,426,173 $5,468,837 19.6
========================================= =========== ====== =========== ====== =========== ====== ========
<FN>
(A) March 31, 1993 figures have been restated to reflect the November 19, 1993 pooling-of-interests merger
with First National Financial Corp. (FNFC). Meaningful comparisons of individual loan categories with
periods prior to December 31, 1993 are not possible because FNFC's loan detail did not permit
restatement; only the subtotals and totals shown for the year-ago quarter have been restated to include
FNFC.
</TABLE>
<TABLE>
FIRST SECURITY CORPORATION
RATE / VOLUME ANALYSIS
For the Three Months Ended March 31, 1994 and 1993
(Fully Taxable Equivalent; in thousands; unaudited) (A)
<CAPTION>
Avg Balance Avg Balance Yield/Rate % Interest Inc/Exp(B) Change Changes Due To:
1994 1993 1994 1993 1994 1993 1994-93 Volume Rate(C)
<C> <C> <C> <C> <S> <C> <C> <C> <C> <C>
- ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
INTEREST-EARNING ASSETS/INCOME:
Loans, net of unearned income and
$6,409,485 $5,428,151 8.54 9.19 deferred taxes on leases (D) $136,774 $124,746 $12,028 $22,552 ($10,524)
1,763,348 NA 5.23 NA Investment securities: available for sale (E) 23,054 NA NA NA NA
302,717 NA 4.68 NA Investment securities: hold to maturity (E) 4,296 NA NA NA NA
2,066,065 1,756,738 5.07 6.19 Total investment securities (E) 26,173 27,205 (1,032) 4,790 (5,822)
563,039 474,257 6.78 4.54 Trading account securities 9,540 5,383 4,157 1,008 3,149
89,728 231,225 3.15 3.02 Federal funds sold & RP's purchased 707 1,745 (1,038) (1,068) 30
3,327 5,916 3.61 3.45 Interest-bearing deposits other banks 30 51 (21) (22) 1
- ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
$9,131,644 $7,896,287 7.64 8.06 TOTAL INTEREST-EARNING ASSETS 174,401 159,130 15,271 27,260 (11,989)
- ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
INTEREST-BEARING LIABILITIES/EXPENSE:
Interest-bearing deposits:
$1,055,537 $919,779 1.70 2.04 NOW accounts 4,483 4,686 (203) 692 (895)
2,484,118 2,087,510 2.91 3.18 Savings accounts 18,102 16,608 1,494 3,155 (1,661)
383,411 333,794 4.07 4.16 Time deposits $100,000 & over 3,903 3,474 429 516 (87)
1,936,099 2,081,997 4.28 4.79 Other time deposits 20,705 24,906 (4,201) (1,745) (2,456)
- ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
5,859,165 5,423,080 3.22 3.66 TOTAL INTEREST-BEARING DEPOSITS 47,193 49,674 (2,481) 2,618 (5,099)
- ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
1,310,034 981,129 3.08 2.94 Federal funds purchased & RP's sold 10,074 7,218 2,856 2,420 436
50,071 53,892 4.73 3.77 Other short-term borrowings 592 508 84 (36) 120
276,130 121,801 6.25 7.54 Long-term debt 4,312 2,295 2,017 2,908 (891)
- ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
$7,495,400 $6,579,902 3.32 3.63 TOTAL INTEREST-BEARING LIABILITIES 62,171 59,695 2,476 7,910 (5,434)
- ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
7.64 8.06 Interest income/earning assets
2.72 3.02 Interest expense/earning assets
- ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
4.92 5.04 Net interest income/earning assets 112,230 99,435 12,795 $19,350 ($6,555)
Less fully taxable equivalent adjust 1,963 3,582 (1,619)
- ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
NET INTEREST INCOME, PER CONSOLIDATED
STATEMENT OF INCOME $110,267 $95,853 $14,414
=========== =========== ====== ====== ============================================ ========= ========= ======== ======== ========
<FN>
(A): Figures have been restated where applicable to reflect the November 19, 1993 pooling-of-interests merger with First National
Financial Corp..
(B): Interest and rates are 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 39% in 1993 and 1994.
(C): Changes not due entirely to changes in volume or rate have been allocated to rate.
(D): Loans include nonaccruing and renegotiated loans. Interest on loans includes fees of $4,055 and $2,571 for the 1994 and 1993
quarters, respectively.
(E): SFAS 115 "Accounting for Certain Investments in Debt and Equity Securities" was adopted January 1, 1994; per the new
accounting requirements, detailed comparisons with prior periods are not available (NA).
</TABLE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
First Security Corporation (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 1993 Annual Report and Form 10-K,
there have been no material developments in connection with pending
legal proceedings not already disclosed in previous filings with the
SEC.
Item 4. Submission of Matters to a Vote of Security Holders
At the regularly scheduled annual meeting of shareholders held on
April 25, 1994, there were 40,821,150 voting shares, or 84.4% of all
voting shares outstanding, represented at the meeting. All current
members of the Board of Directors were nominated for re-election by
Management, and all nominees listed in the proxy statement were elected
by the margins noted:
Votes Votes
Nominee: For: Against: %
James C. Beardall 40,498,712 322,439 99.2
Rodney H. Brady 40,516,736 304,414 99.2
James E. Bruce 40,507,977 313,173 99.2
Thomas D. Dee, II 40,503,571 317,580 99.2
Spencer F. Eccles 40,499,083 322,067 99.2
Morgan J. Evans 40,521,100 300,050 99.3
David P. Gardner 40,477,636 373,515 99.1
Kendall D. Garff 40,437,696 383,454 99.0
U. Edwin Garrison 40,519,366 301,785 99.3
David B. Haight 40,373,009 447,788 98.9
Jay Dee Harris 40,458,438 362,712 99.1
Robert T. Heiner 40,452,287 368,864 99.1
Howard W. Hunter 40,340,146 481,004 98.8
Karen H. Huntsman 40,439,619 381,179 99.0
G. Frank Joklik 40,381,485 439,402 98.9
B. Z. Kastler 40,383,610 437,540 98.9
Joseph G. Maloof 40,386,342 434,809 98.9
Scott S. Parker 40,468,411 352,739 99.1
Arthur K. Smith 40,447,916 372,881 99.1
James L. Sorenson 40,291,159 529,538 98.7
Harold J. Steele 40,378,401 442,396 98.9
In addition to the election of the Board of Directors, a vote was
taken on Shareholder Proposal No. 2: "Proposed Increase in the Number of
Shares Available Under the First Security Corporation Comprehensive
Management Incentive Plan to 6,437,500 Shares, and Cap on Number of
Shares that May Be Awarded to Any Single Person Under the Plan". The
Proposal was approved as follows:
Votes Votes
Proposal: For: Against: %
Shareholder Proposal # 2 32,298,629 5,689,109 85.0
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K:
On January 24, 1994, FSC reported on Form 8-K a press release
relating to its Fourth Quarter 1993 earnings.
# # #
SIGNATURES
Pursuant to the requirements of the Security 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
Date May 10, 1994 BY___[SIGNED]_______________________________
Scott C. Ulbrich
Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
# # #
<TABLE>
EXHIBIT 11. Computation of Earnings Per Share
FIRST SECURITY CORPORATION
COMPUTATION OF EARNINGS PER SHARE
For the Three Month Periods Ended March 31, 1994 and 1993
(in thousands, except for per share amounts; unaudited)
<CAPTION>
Three Months Ended
1994 1993
<S> <C> <C>
- ------------------------------------------------- ---------- ----------
Net Income:
Per statement of consolidated income............ $33,162 $30,712
Deduct dividend requirements of preferred stock. 10 11
- ------------------------------------------------- ---------- ----------
Net income applicable to common stock............. 33,152 30,701
Add dividend requirements of preferred stock.... 10 11
- ------------------------------------------------- ---------- ----------
Net income assuming full dilution................. $33,162 $30,712
================================================= ========== ==========
Net Income Per Share:
Assuming no dilution............................ $0.67 $0.65
Assuming full dilution.......................... $0.67 $0.65
================================================= ========== ==========
Average common shares outstanding:
Average common shares outstanding............... 48,842 46,174
Common stock equivalents (options).............. 1,020 1,201
Treasury shares................................... (546) (437)
- ------------------------------------------------- ---------- ----------
Assuming no dilution ........................... 49,316 46,938
Issuable assuming conversion of preferred stock. 162 174
- ------------------------------------------------- ---------- ----------
Assuming full dilution.......................... 49,478 47,112
================================================= ========== ==========
<FN>
Note: Per share amounts assuming full dilution were computed assuming all outstanding
shares preferred stock were converted into common shares on the basis of 12.15 shares
of common for each share of preferred, with the elimination of dividends on the preferred
stock. Common stock equivalents are common stock options outstanding accounted for on
the treasury stock method for purposes of these calculations.
</TABLE>
