<PAGE>
UNITED STATES
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 the quarterly period ended March 31, 1997
Commission File Number 1-6906
FIRST SECURITY CORPORATION
(Exact name of registrant as specified in its charter)
State of incorporation Delaware
I.R.S. Employer Identification No. 87-6118148
Address of principal executive offices 79 South Main, P.O. Box 30006
Salt Lake City, Utah
Zip Code 84130-0006
Registrant's telephone number, including area code (801) 246-5706
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 30, 1997, outstanding shares of Common Stock, par value $1.25,
were 112,123,183 (net of 2,709,038 treasury shares).
FIRST SECURITY CORPORATION - INDEX
Part I. Financial Information
Item 1. Financial Statements:
Consolidated Statements of Income
Three Months Ended March 31, 1997 and 1996
Consolidated Balance Sheets
March 31, 1997, December 31, 1996, and March 31, 1996
Consolidated Statements of Cash Flows
Year-To-Date Three Months Ended March 31, 1997, and 1996
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition:
Highlights
Analysis of Statements of Income
Summary
Net Interest Income and Margin
Provision For Loan Losses
Noninterest Income
Noninterest Expenses
Analysis of Balance Sheets
Summary
Interest-Earning Assets and Asset Quality
Trading Account Securities and Other Interest-Earning Assets
Investment Securities
Loans
Problem Assets and Potential Problem Assets
Reserve For Loan Losses
Provision For Loan Losses
Asset/Liability Management
Liquidity
Interest Rate Risk
Stockholders' Equity and Capital Adequacy
Common Stock
Mergers And Acquisitions
National and Regional Economy
Supplemental Tables:
Financial Highlights, Risk-Based Capital Ratios
Rate/Volume Analysis
Loans
Part II. Other Information
Item 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signatures
Exhibit 11. Computation of Earnings Per Share
Exhibit 27. Financial Data Schedule
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
FIRST SECURITY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except per share data; unaudited)
<CAPTION>
Three Months
For the Periods Ended March 31, 1997 and 1996 1997 1996 $Chg %Chg
<S> <C> <C> <C> <C>
- - ------------------------------------------------------- --------- --------- --------- -------
INTEREST INCOME:
Interest & fees on loans 205,501 185,672 19,829 10.7
Federal funds sold & securities purchased 652 1,833 (1,181) (64.4)
Interest-bearing deposits in other banks 56 197 (141) (71.6)
Trading account securities 2,398 4,538 (2,140) (47.2)
Securities available for sale 51,574 40,872 10,702 26.2
- - ------------------------------------------------------- --------- --------- --------- -------
TOTAL INTEREST INCOME 260,181 233,112 27,069 11.6
- - ------------------------------------------------------- --------- --------- --------- -------
INTEREST EXPENSE:
Deposits 77,804 77,484 320 0.4
Short-term borrowings 31,276 24,349 6,927 28.4
Long-term debt 16,882 11,503 5,379 46.8
- - ------------------------------------------------------- --------- --------- --------- -------
TOTAL INTEREST EXPENSE 125,962 113,336 12,626 11.1
- - ------------------------------------------------------- --------- --------- --------- -------
NET INTEREST INCOME 134,219 119,776 14,443 12.1
Provision for loan losses 13,899 8,738 5,161 59.1
- - ------------------------------------------------------- --------- --------- --------- -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 120,320 111,038 9,282 8.4
- - ------------------------------------------------------- --------- --------- --------- -------
NONINTEREST INCOME:
Service charges on deposit accounts 20,394 17,439 2,955 16.9
Other service charges, collections, commissions, & fees 11,286 10,730 556 5.2
Bankcard servicing fees & third-party processing fees 8,008 6,497 1,511 23.3
Insurance commissions & fees 4,550 3,484 1,066 30.6
Mortgage banking activities 22,793 21,716 1,077 5.0
Mortgage banking activities MSR amortization (3,864) (2,812) (1,052) (37.4)
Trust (fiduciary) commissions & fees 5,744 5,179 565 10.9
Trading account securities gains (losses) 777 812 (35) (4.3)
Securities available for sale gains (losses) 605 0 605 NM
Other 8,423 3,516 4,907 139.6
- - ------------------------------------------------------- --------- --------- --------- -------
TOTAL NONINTEREST INCOME 78,716 66,561 12,155 18.3
- - ------------------------------------------------------- --------- --------- --------- -------
TOTAL INCOME 199,036 177,599 21,437 12.1
- - ------------------------------------------------------- --------- --------- --------- -------
NONINTEREST EXPENSES:
Salaries & employee benefits 65,083 68,029 (2,946) (4.3)
Advertising 2,673 1,500 1,173 78.2
Amortization of intangibles 1,973 1,961 12 0.6
Bankcard interbank interchange 7,212 4,417 2,795 63.3
Furniture & equipment 9,649 8,699 950 10.9
Insurance 1,264 1,764 (500) (28.3)
Occupancy, net 7,725 7,347 378 5.1
Other real estate expense & loss provision (recovery) 736 (235) 971 413.2
Postage 2,696 3,417 (721) (21.1)
Stationery & supplies 4,019 4,741 (722) (15.2)
Telephone 4,114 3,142 972 30.9
Other 17,511 16,070 1,441 9.0
- - ------------------------------------------------------- --------- --------- --------- -------
TOTAL NONINTEREST EXPENSES 124,655 120,852 3,803 3.1
- - ------------------------------------------------------- --------- --------- --------- -------
INCOME BEFORE PROVISION FOR INCOME TAXES 74,381 56,747 17,634 31.1
- - ------------------------------------------------------- --------- --------- --------- -------
PROVISION FOR INCOME TAXES:
Operating earnings 26,166 20,457 5,709 27.9
Securities available for sale gains (losses) 230 0 230 NM
- - ------------------------------------------------------- --------- --------- --------- -------
TOTAL PROVISION FOR INCOME TAXES 26,396 20,457 5,939 29.0
- - ------------------------------------------------------- --------- --------- --------- -------
NET INCOME 47,985 36,290 11,695 32.2
======================================================= ========= ========= ========= =======
Dividend requirement of preferred stock 8 8 0 0.0
- - ------------------------------------------------------- --------- --------- --------- -------
Net Income Applicable To Common Stock 47,977 36,282 11,695 32.2
======================================================= ========= ========= ========= =======
Common stock dividend 17,246 15,803 1,443 9.1
======================================================= ========= ========= ========= =======
EARNINGS PER COMMON SHARE:
Earnings per common share: primary 0.41 0.31 0.10 32.3
Earnings per common share: fully diluted 0.41 0.31 0.10 32.3
Common shares: primary [Avg] 116,168 115,746 422 0.4
Common shares: fully diluted [Avg] 116,447 116,040 407 0.4
======================================================= ========= ========= ========= =======
CASH DIVIDENDS PAID OR ACCRUED PER SHARE:
Preferred stock dividend ($3.15 annual rate) 0.79 0.79 0.00 0.0
Common stock dividend 0.15 0.14 0.01 9.5
======================================================= ========= ========= ========= =======
<FN>
Notes:
See "Notes to Condensed Consolidated Financial Statements".
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
CONSOLIDATED BALANCE SHEETS
($ in thousands; unaudited)
<CAPTION>
March 31 December 31 March 31 Mar/Mar Mar/Mar
1997 1996 1996 $ Chg % Chg
<S> <C> <C> <C> <C> <C>
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
ASSETS:
Cash & due from banks 936,107 937,144 714,026 222,081 31.1
Federal funds sold & securities purchased under resale agreements 20,498 223,235 113,838 (93,340) (82.0)
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Total Cash & Cash Equivalents 956,605 1,160,379 827,864 128,741 15.6
Interest-bearing deposits in other banks 500 31,617 31,365 (30,865) (98.4)
Trading account securities 388,264 447,486 272,443 115,821 42.5
Securities available for sale, at fair value 3,316,927 3,150,276 2,693,820 623,107 23.1
(Amortized cost: $3,345,907; $3,148,622; and $2,697,868; respectively)
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Loans, net of unearned income 9,069,267 9,262,482 8,375,060 694,207 8.3
(Unearned income: $80,897; $67,396; and $32,416; respectively)
Reserve for loan losses (135,928) (134,428) (130,653) (5,275) 4.0
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Total Loans, Net 8,933,339 9,128,054 8,244,407 688,932 8.4
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Premises & equipment, net 236,582 233,497 212,741 23,841 11.2
Accrued income receivable 86,784 89,595 82,172 4,612 5.6
Other real estate 3,968 4,855 5,209 (1,241) (23.8)
Other assets 322,650 292,486 226,007 96,643 42.8
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Goodwill 87,294 89,142 93,297 (6,003) (6.4)
Mortgage servicing rights 81,776 78,586 60,075 21,701 36.1
Other intangible assets 1,939 2,051 2,372 (433) (18.3)
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Total Intangible Assets 171,009 169,779 155,744 15,265 9.8
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
TOTAL ASSETS 14,416,628 14,708,024 12,751,772 1,664,856 13.1
=========================================================================== =========== =========== =========== =========== =======
LIABILITIES:
Deposits: noninterest-bearing 2,021,116 2,198,348 1,787,827 233,289 13.0
Deposits: interest-bearing 7,288,766 7,240,915 7,069,406 219,360 3.1
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Total Deposits 9,309,882 9,439,263 8,857,233 452,649 5.1
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Federal funds purchased & securities sold under repurchase agreements 2,302,151 2,542,592 1,503,899 798,252 53.1
U.S. Treasury demand notes 20,244 8,885 31,686 (11,442) (36.1)
Other short-term borrowings 240,383 279,156 276,633 (36,250) (13.1)
Accrued income taxes 201,156 187,638 141,315 59,841 42.3
Accrued interest payable 39,807 41,442 38,148 1,659 4.3
Other liabilities 196,084 124,003 190,303 5,781 3.0
Long-term debt 986,417 944,055 675,460 310,957 46.0
Minority equity in subsidiaries 337 342 315 22 7.0
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
TOTAL LIABILITIES 13,296,461 13,567,376 11,714,992 1,581,469 13.5
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
STOCKHOLDERS' EQUITY:
Preferred stock: Series "A" $3.15 cumulative convertible 532 540 563 (31) (5.5)
(Shares issued: 10; 10; and 11; respectively)
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Common Stockholders' Equity:
Common stock: par value $1.25 143,483 143,007 142,439 1,044 0.7
(Shares issued: 114,786; 114,405; and 113,951; respectively)
Paid-in surplus 84,988 82,729 75,431 9,557 12.7
Retained earnings 954,098 923,375 830,766 123,332 14.8
Net unrealized gain (loss) on securities available for sale (net of taxes) (18,358) 877 (2,681) (15,677) 584.7
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Subtotal 1,164,211 1,149,988 1,045,955 118,256 11.3
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Common treasury stock, at cost (44,576) (9,880) (9,738) (34,838) 357.8
(Shares: 2,389; 846; and 869; respectively)
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Total Common Stockholders' Equity 1,119,635 1,140,108 1,036,217 83,418 8.1
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
TOTAL STOCKHOLDERS' EQUITY 1,120,167 1,140,648 1,036,780 83,387 8.0
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 14,416,628 14,708,024 12,751,772 1,664,856 13.1
=========================================================================== =========== =========== =========== =========== =======
<FN>
Notes:
See "Notes to Condensed Consolidated Financial Statements".
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands; unaudited)
<CAPTION>
For the Three Months Ended March 31, 1997 and 1996 1997 1996
<S> <C> <C>
- - --------------------------------------------------------------------------------- -------------- --------------
NET CASH PROVIDED BY (USED IN) BY OPERATING ACTIVITIES 329,008 480,857
- - --------------------------------------------------------------------------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale 119,015 0
Redemption of matured securities available for sale 225,968 241,974
Redemption of matured securities held to maturity 0 0
Purchases of securities available for sale (541,961) (339,645)
Purchases of securities held to maturity 0 0
Net (increase) decrease in interest-bearing deposits in other banks 31,117 (9,802)
Net (increase) decrease in loans 41,726 (127,920)
Proceeds from sales of auto loans 0 0
Purchases of premises and equipment (4,680) (7,268)
Proceeds from sales of other real estate 1,272 1,736
Payments to improve other real estate (420) (714)
Net cash (paid for) received from acquisitions (5) (41)
- - --------------------------------------------------------------------------------- -------------- --------------
NET CASH USED IN INVESTING ACTIVITIES (127,968) (241,680)
- - --------------------------------------------------------------------------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits (129,381) 83,590
Net increase (decrease) in Federal funds purchased, securities sold
under repurchase agreements, and U.S. Treasury demand notes (229,082) (435,768)
Proceeds (payments) on nonrecourse debt on leveraged leases (713) (17,601)
Proceeds from issuance of long-term debt and short-term borrowings 50,791 58,381
Payments on long-term debt and short-term borrowings (47,202) (54,144)
Proceeds from issuance of common stock and sales of treasury stock 2,724 4,019
Purchases of treasury stock (34,697) (541)
Dividends paid (17,254) (15,982)
- - --------------------------------------------------------------------------------- -------------- --------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (404,814) (378,046)
- - --------------------------------------------------------------------------------- -------------- --------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (203,774) (138,869)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,160,379 966,733
- - --------------------------------------------------------------------------------- -------------- --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD 956,605 827,864
================================================================================= ============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
- - --------------------------------------------------------------------------------- -------------- --------------
CASH PAID (RECEIVED) FOR:
Interest 127,596 123,925
Income taxes 664 (222)
================================================================================= ============== ==============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of preferred shares to common shares:
Preferred shares converted (not rounded) 137 140
Common shares issued (not rounded) 2,493 1,773
Conversion value 7 7
Transfer of loans to other real estate 0 1,782
Net unrealized gain (loss) on securities available for sale
included in stockholders' equity (19,234) (17,228)
Pooling-of-interests acquisitions:
Assets acquired 3 0
Liabilities assumed 0 0
FSCO shares issued (not rounded) 52,000 0
================================================================================= ============== ==============
<FN>
See "Notes to Consolidated Financial Statements".
</TABLE>
<PAGE>
FIRST SECURITY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited consolidated
financial statements of First Security Corporation (FSCO) contain all
adjustments (consisting of normal recurring accruals) necessary to present
fairly the following: FSCO's results of operations for the three months in the
periods ended March 31, 1997 and 1996; FSCO's financial position as of March
31, 1997, December 31, 1996, and March 31, 1996; and cash flows for the year-
to-date three months in the periods ended March 31, 1997 and 1996.
2. The results of operations for the three months ended March 31, 1997 and
1996 are not necessarily indicative of the results to be expected for the full
year.
3. ALL COMMON STOCK AND EARNINGS PER SHARE DATA IN THIS REPORT HAVE BEEN
RESTATED TO REFLECT A 3-FOR-2 COMMON STOCK SPLIT IN THE FORM OF A 50% STOCK
DIVIDEND PAYABLE MAY 15, 1997, TO SHAREHOLDERS OF RECORD MAY 12, 1997.
4. In February, 1997, the Financial Accounting Standards Board issued SFAS
No. 128 "Earnings Per Share" which establishes standards for computing and
presenting earnings per share (EPS). SFAS No. 128 simplifies the standards
for computing earnings per share previously found in APB Opinion No. 15
"Earnings Per Share" and makes them comparable to international EPS standards.
It replaces the presentation of primary EPS with a presentation of basic EPS.
It also requires dual presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital structures and requires
a reconciliation of the numerator and denominator of the basic EPS computation
to the numerator and denominator of the diluted EPS computation.
FSCO's pro-forma basic earnings per share, restated for the 3-for-2
common stock split, were $0.43 for the first quarter of 1997, up $0.11 or
34.4% from $0.32 for the year-ago quarter.
# # #
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 2: Management's Discussion and Analysis of
Results of Operations and Financial Condition (MDA)
FIRST QUARTER 1997 HIGHLIGHTS:
* FSCO declared a 3-for-2 common stock split in the form of a 50% stock
dividend payable May 15, 1997, to shareholders of record May 12, 1997 (all
common stock and earnings per share data in this report have been restated
for this split).
* FSCO increased its quarterly common stock dividend, restated for the 3-for-2
common stock split, to $0.17 per share, up $0.01667 per share or 11.0%.
* Net income of $48.0 million, up $11.7 million or 32.2% from year-ago
quarter.
* Fully diluted earnings per share, restated for the 3-for-2 common stock
split, were $0.41, up $0.10 or 32.3% from year-ago quarter.
* Net interest income FTE was $136.2 million, up $14.1 million or 11.6% from
year-ago quarter.
* Consolidated operating expense ratio of 57.99%, improved from 64.05% for
year-ago quarter.
ANALYSIS OF STATEMENTS OF INCOME
SUMMARY
[NOTE: ALL COMMON STOCK AND EARNINGS PER SHARE DATA IN THIS REPORT HAVE BEEN
RESTATED TO REFLECT A 3-FOR-2 COMMON STOCK SPLIT IN THE FORM OF A 50% STOCK
DIVIDEND PAYABLE MAY 15, 1997, TO SHAREHOLDERS OF RECORD MAY 12, 1997.]
First Security Corporation (FSCO) earned net income of $48.0 million for
the first quarter of 1997, up $11.7 million or 32.2% from $36.3 million earned
in the first quarter of 1996 (see: Financial Statements "Consolidated Income
Statements"; and MDA Supplemental Tables "Financial Highlights"). This net
income generated a 1.39% return on average assets (ROAA) and a 17.02% return
on average equity (ROAE) for the quarter, up from a 1.17% ROAA and a 13.97%
ROAE for the year-ago quarter. Fully diluted earnings per share were $0.41
for the quarter, up $0.10 or 32.3% from $0.31 for the year-ago quarter. The
tangible ROAA was 1.53%, the tangible ROAE was 21.81%, and tangible fully
diluted earnings per share were $0.45 for the first quarter of 1997, up from a
1.30% tangible ROAA, a 17.94% tangible ROAE, and tangible fully diluted
earnings per share of $0.34 for the year-ago quarter.
NET INTEREST INCOME AND MARGIN
FSCO's net interest income on a fully taxable equivalent (FTE) basis was
$136.2 million for the first quarter of 1997, up $14.1 million or 11.6% from
the year-ago quarter (see: MDA Supplemental Tables "Financial Highlights" and
"Volume/Rate Analysis"). This increase was due primarily to volume growth of
interest-earning assets, inclusive of the impact of the securitization and
sale of $300 million of direct and indirect auto loans during the first
quarter of 1997.
FSCO's net interest margin was 4.38% for the first quarter of 1997,
remaining unchanged from the year-ago quarter. On a linked-quarter basis, the
net interest margin for the first quarter of 1997 decreased from 4.55% for the
fourth quarter of 1996 due to the full quarter impact of combined interest
expense on $150 million of 6.875% Senior Notes issued November 21, 1996, and
$150 million of 8.41% Capital Income Securities issued December 23, 1996, as
FSCO took advantage of a low point in long-term interest rates to extend
maturities and balance funding needs. Excluding this interest expense, the
net interest margin would have been 4.57% for the first quarter of 1997.
PROVISION FOR LOAN LOSSES
FSCO's provision for loan losses was $13.9 million for the first quarter of
1997, up $5.2 million or 59.1% from the year-ago quarter (see: MDA "Interest-
Earning Assets and Asset Quality: Provision For Loan Losses").
NONINTEREST INCOME
FSCO's noninterest income was $78.7 million for the first quarter of 1997,
up $12.2 million or 18.3% from the year-ago quarter (see: Financial Statements
"Consolidated Income Statements"). This increase was the result of FSCO's
continued emphasis on increasing and diversifying sources of noninterest
income from service charges on accounts, bankcard servicing income, insurance
commissions and fees, and gains on the ongoing sales of selected loans and
loan servicing. During the quarter, noninterest income included a $6.0
million gain on the securitization and sale of $300 million of auto loans, and
a $2.5 million gain on the sale of servicing rights for $500 million of real
estate loans.
$500 million of mortgage loan servicing rights.
NONINTEREST EXPENSES
FSCO's noninterest expenses were $124.7 million for the first quarter of
1997, up $3.8 million or 3.1% from the year-ago quarter (see: Financial
Statements "Consolidated Income Statements"). This increase was due to volume
growth in bankcard interbank interchange fees and increases in advertising,
depreciation on furniture and equipment, other real estate, and telephone
expenses, partially offset by a $2.9 million or 4.3% decrease in salaries and
employee benefits, plus reductions in insurance, postage, and stationary and
supplies expenses. On a linked quarter basis, noninterest expenses for the
first quarter of 1997 decreased $6.0 million or 4.6% from the fourth quarter
of 1996, with salary and employee benefits down $1.6 million or 2.4%.
FSCO's operating expense ratio (the ratio of noninterest expenses to the
sum of net interest income FTE and noninterest income) was reduced to 57.99%
for the first quarter of 1997, a significant improvement of 606 basis points
from 64.05% for the first quarter of 1996.
CrossLand Mortgage has a higher operating expense ratio than other FSCO
subsidiaries because it originates, sells and services mortgage loans.
Excluding the impact of CrossLand Mortgage, FSCO's "core" efficiency ratio was
55.10% for the first quarter of 1997, improved 607 basis points from 61.17%
for the year-ago quarter.
ANALYSIS OF BALANCE SHEETS
SUMMARY
FSCO's assets totaled $14.4 billion at March 31, 1997, up $1.7 billion or
13.1% from March 31, 1996, but down $291 million or 2.0% from December 31,
1996. Interest-earning assets were $12.8 billion at quarter end, up $1.3
billion or 11.4% from one year ago, but down $320 million or 2.4% from year
end (see: MDA "Interest-Earning Assets and Asset Quality").
FSCO's liabilities totaled $13.3 billion at March 31, 1997, up $1.6 billion
or 13.5% from one year ago, but down $271 million or 2.0% from year end.
Total interest-bearing liabilities were $10.8 billion at quarter end, up $1.3
billion or 13.4% from one year ago, but down $178 million or 1.6% from year
end (see: MDA "Liquidity").
At March 31, 1997, FSCO considered its interest-earning asset quality to
remain excellent, and its reserve for loan losses and its liquidity position
to be adequate for the foreseeable future.
Intangible assets were $171 million at quarter end, up nominally from one
year ago and year-end 1996 due to increased originated mortgage servicing
rights from higher loan production and recent acquisitions. Fluctuations in
other assets and other liabilities were in part due to the effect of timing
differences on cash, accounts receivable, and accounts payable resulting from
unsettled transactions in the purchase and sale of securities.
FSCO's stockholders' equity was $1.1 billion at March 31, 1997, up $83
million or 8.0% from one year ago, but down $20 million or 1.8% from year end
(see: MDA "Stockholders' Equity and Capital Adequacy").
FSCO's financial condition is discussed in greater detail in the following
MDA sections: "Interest-Earning Assets and Asset Quality"; "Asset/Liability
Management"; and "Stockholders' Equity and Capital Adequacy".
INTEREST-EARNING ASSETS AND ASSET QUALITY:
TRADING ACCOUNT SECURITIES AND OTHER INTEREST EARNING ASSETS
FSCO's trading account securities portfolio was $388 million at March 31,
1997, up $116 million or 42.5% from one year ago, but down $59 million or
13.2% from year end. Fluctuations in volumes of trading account securities
routinely occur as trading opportunities change with the dynamics of the
markets.
Fluctuations in Federal funds sold and interest-bearing deposits held in
other banks occur in response to changing yield opportunities and liquidity.
INTEREST-EARNING ASSETS AND ASSET QUALITY:
INVESTMENT SECURITIES
Since December 1995, FSCO has managed its investment securities portfolio
under the "securities available for sale" classification.
FSCO's investment securities were $3.3 billion at March 31, 1997, up $623
million or 23.1% from one year ago, and up $167 million or 5.3% from year end,
due to increased leveraging of capital to improve earnings. Volatility in the
SFAS No. 115 net unrealized gain (loss) on securities available for sale
responds inversely to changes in interest rates. The recent decrease in gains
was due to a 35 basis point rise in interest rates since year end.
INTEREST-EARNING ASSETS AND ASSET QUALITY:
LOANS
FSCO's loan portfolio, net of unearned income but before the reserve for
loan losses, was $9.1 billion at March 31, 1997, up $694 million or 8.3% from
one year ago as a result of loan demand, but down $193 million or 2.1% from
year end as the securitization and sale of loans more than offset growth (see:
MDA Supplemental Tables "Loans" and "Financial Highlights"). The ratio of
total loans to total assets was 62.91% at quarter end, down from 65.68% one
year ago but essentially unchanged from year end. The components of FSCO's
loan portfolio at March 31, 1997, compared with March 31, 1996, and December
31, 1996, respectively, are discussed below.
* Commercial loans were $2.3 billion, up $324 million or 16.8% from one
year ago, and up $102 million or 4.7% from year end. These increases were due
primarily to a continued broad-based business expansion in FSCO's market
areas. Commercial loans consist primarily of loans to small and medium-sized
businesses and agricultural loans.
* Real estate secured loans were $3.3 billion, down $72 million or 2.1%
from one year ago, and down $70 million or 2.1% from year end. These
decreases were due to an increase in ongoing mortgage loan sales and a slight
decrease in loan volumes. For balance sheet management purposes, FSCO does
not retain all newly originated mortgage loans but regularly sells a portion
in the secondary markets. At March 31, 1997, $264 million of these loans were
held for sale, down $146 million or 35.5% from one year ago, and down $66
million or 19.9% from year end. During the quarter, FSCO sold servicing
rights for $500 million of real estate loans.
* Consumer loans were $2.7 billion, up $80 million or 3.1% from one year
ago primarily due to growth in auto lending, but down $316 million or 10.6%
from year end as FSCO securitized and sold $300 million of auto loans during
the first quarter of 1997. FSCO remains the leading consumer lender in its
primary market area. Because FSCO is significantly involved in consumer
lending, it uses loan securitization as a tool to manage the size of its
consumer loan portfolio.
* Leases were $843 million, up $363 million or 75.5% from one year ago, and
up $90 million or 12.0% from year end. These increases were due primarily to
FSCO's growth in the auto and equipment leasing markets.
INTEREST-EARNING ASSETS AND ASSET QUALITY:
PROBLEM ASSETS AND POTENTIAL PROBLEM ASSETS
Strong asset quality continues to be a primary objective for FSCO.
However, it has been FSCO's experience that economic cycles and loan-specific
events cause fluctuations in problem assets, sometimes with little or no
warning.
FSCO's interest-earning asset quality remained excellent at March 31, 1997,
as the ratio of total problem assets to total loans and ORE was 0.60%, up from
0.53% one year ago, but down slightly from 0.62% at year end. The ratio of
nonperforming assets to total loans and ORE was 0.38% at quarter end,
essentially unchanged from one year ago, and down from 0.41% at year end.
Problem assets totaled $54.9 million at March 31, 1997, up $10.8 million or
24.4% from one year ago, but down $2.6 million or 4.5% from year end (see: MDA
Supplemental Tables "Financial Highlights - Problem Assets, - Selected
Ratios"). The components of FSCO's problem assets at March 31, 1997, compared
with March 31, 1996, and December 31, 1996, are discussed below.
* Nonaccruing loans were $30.5 million, up $5.1 million or 20.0% from one
year ago, but down $2.8 million or 8.4% from year end. The increase from one
year ago included nonaccruing loans in the real estate sector and
miscellaneous commercial credits, while the decrease from year end was due to
a reduction in the real estate sector. The majority of nonaccruing real
estate loans were 1 to 4 family residential mortgage term and construction
loans, which generally have a much lower rate of actual losses than other
types of nonaccruing loans, and come from the repurchase of loans originated
and sold by CrossLand Mortgage. Typically, these repurchased assets remain on
FSCO's books for an average of six months and generally result in minimal
losses. The level of these repurchased assets has moderated somewhat as
investors have become less aggressive in requesting repurchases. The ratio of
nonaccruing loans to total loans was 0.34%, compared to 0.30% for one year ago
and 0.36% for year end. On a linked quarter basis, both the ratio of
nonaccruing loans to total loans and the dollar amount of nonaccruing loans
have decreased for the second quarter in a row.
* Other real estate was $4.0 million, down $1.2 million or 23.8% from one
year ago, and down $887 thousand or 18.3% from year end. These decreases were
due to property sales and a decrease in the ORE valuation adjustment. ORE
property values are reviewed at least annually, 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 $20.4 million, up $6.9
million or 51.3% from one year ago, and up $1.1 million or 5.7% from year end.
These increases were due in part to one large commercial credit, which was
subsequently brought current, and the consolidation of FSCO's consumer
collection activities into one new center located in Salt Lake City which
temporarily disrupted collection activities. FSCO anticipates that as this
consolidation is assimilated, the upward trend in loans past due will
stabilize. The ratio of accruing loans past due 90 days or more to total
loans was 0.23%, up from 0.16% one year ago and 0.21% at year end.
Potential problem loans identified by FSCO were $12.4 million, up $4.9
million or 63.9% from one year ago, and up $4.2 million or 50.5% from year
end. These increases were primarily in agricultural and commercial loans.
Potential problem loans consisted primarily of commercial loans.
INTEREST-EARNING ASSETS AND ASSET QUALITY:
RESERVE FOR LOAN LOSSES
The adequacy of FSCO's reserve for loan losses is evaluated quarterly based
on policies established by the board of directors of its subsidiary banks, by
regulatory and accounting guidelines, and industry practices. Most
specifically, FSCO follows the Comptroller of the Currency's regulations and
guidelines for determining the appropriate level of the reserve for loan
losses.
The reserve for loan losses was increased to $135.9 million at March 31,
1997, up $5.3 million or 4.0% from one year ago, and up $1.5 million or 1.1%
from year end (see: MDA Supplemental Tables "Financial Highlights -
Reconciliation of the Reserve For Loan Losses"). The reserve was increased as
FSCO built the reserve in response to loan growth.
Based on its analysis of reserve adequacy, FSCO considered the reserve for
loan losses at March 31, 1997, to be adequate to absorb estimated potential
loan losses in the foreseeable future. The coverage ratio of the reserve to
nonaccruing loans was 445.91% at March 31, 1997, down from 514.18% one year
ago, but up from 403.98% at year end (see: MDA Supplemental Tables "Financial
Highlights - Selected Ratios"). The ratio of the reserve to total loans was
1.50% at March 31, 1997, down from 1.56% one year ago, but up from 1.45% at
year end.
Net loans charged off were $12.4 million for the first quarter of 1997, up
$4.3 million or 53.7% from the year ago quarter (see: MDA Supplemental Tables
"Financial Highlights - Reconciliation of the Reserve For Loan Losses"). This
increase was primarily due to higher consumer loan losses following national
trends. The ratio of net loans charged off to average loans was 0.55% for the
first quarter of 1997, up from 0.39% for the year ago quarter and 0.41% for
all of 1996.
FSCO uses the provision for loan losses to adjust the reserve for loan
losses when it considers a replenishment of, or addition to, the reserve is
appropriate.
INTEREST-EARNING ASSETS AND ASSET QUALITY:
PROVISION FOR LOAN LOSSES
The provision for loan losses was $13.9 million for the first quarter of
1997, up $5.2 million or 59.1% from the year-ago quarter (see: Financial
Statements "Consolidated Income Statements"; MDA "Reserve For Loan Losses";
and MDA Supplemental Tables "Financial Highlights - Reconciliation of the
Reserve For Loan Losses"). This increase included an addition to the reserve
for loan losses of $1.5 million over and above net loans charged off during
the quarter.
ASSET/LIABILITY MANAGEMENT
FSCO's asset/liability management committee (ALCO) process is responsible
for the identification, assessment, and management of interest rate risk,
liquidity, and capital adequacy (see: MDA "Stockholders' Equity and Capital
Adequacy") for FSCO and its subsidiaries. Formal policies and procedures
govern the ALCO process. This process, structured by FSCO's senior management
and approved by its board of directors, guides FSCO and each subsidiary bank
continuously through changing economic and market events.
ASSET/LIABILITY MANAGEMENT:
LIQUIDITY
FSCO maintains an adequate liquidity position in large part through stable
deposits generated from its wide-spread branch network, the prudent usage of
debt, and from a high quality investment securities portfolio (see: MDA
"Interest-Earning Assets and Asset Quality"). Maturing balances in the large
loan portfolios provide flexibility in managing cash flows. Assets may also
be sold or securitized in order to provide funding. The ability to redeploy
these funds is an important source of medium to long term liquidity.
Backup sources of liquidity are provided by: credit lines to FSCO; Federal
funds lines carried by FSCO's subsidiary banks; borrowings from the Federal
Home Loan Bank; bank note issuances by FSCO's subsidiary banks; and borrowings
from the Federal Reserve System.
Deposits were $9.3 billion at March 31, 1997, up $453 million or 5.1% from
one year ago, but down $129 million or 1.4% from year end (see: Financial
Statements "Consolidated Balance Sheets"; and MDA Supplemental Tables
"Volume/Rate Analysis"). The increase from one year ago was due to FSCO's
continued emphasis on its deposit gathering functions and the success of
several deposit programs oriented to customers' needs. The ratio of loans to
deposits was 97.42% at quarter end, up from 94.56% one year ago, but down from
98.13% at year end. These and other loan and liquidity ratios vary with
changes in economic cycles and are monitored closely through FSCO's ALCO
process to ensure that the proper balance is maintained between risk and
economic opportunities.
Debt, which included short-term borrowings and long-term debt, totaled $3.5
billion at March 31, 1997, up $1.1 billion or 42.7% from one year ago, but
down $225 million or 6.0% from year end (see: Financial Statements
"Consolidated Balance Sheets"). The components of FSCO's debt at March 31,
1997, compared with March 31, 1996, and December 31, 1996, are discussed
below.
* Federal funds purchased and securities sold under repurchase agreements
were $2.3 billion, up $798 million or 53.1% from one year ago, but down $240
million or 9.5% from year end. The increase from one year ago occurred as
FSCO funded approximately $100 million of loan growth generated by business-
cycle opportunities in its market areas, and funded approximately $500 million
of growth in investment securities through repurchase agreements. The
decrease from year end was due to a temporary decrease in the trading account
and investment securities portfolios.
* All other short-term borrowed funds were $261 million, down $48 million
or 15.5% from one year ago, and down $27 million or 9.5% from year end. These
decreases were due to maturing issues replaced with long-term debt.
* Long-term debt was $986 million, up $311 million or 46.0% from one year
ago, and up $42 million or 4.5% from year end. These increases included: the
November 21, 1996 issuance of $150 million of 6.875% Senior Notes due in 2006;
the December 23, 1996, issuance of $150 million of 8.41% Capital Income
Securities (see "Stockholders' Equity and Capital Adequacy"); and new Federal
Home Loan Bank borrowings. These increases were mostly offset by the ongoing
maturing of existing long-term debt.
ASSET/LIABILITY MANAGEMENT:
INTEREST RATE RISK
During the 12 months ended March 31, 1997, FSCO continued to maintain a
relatively neutral interest rate risk position and a conservative balance
sheet.
During the 12-month period, a strong regional economy resulted in loan
growth of $694 million, while successful deposit promotions helped to generate
deposit growth of $453 million which was a healthy increase but not sufficient
to entirely fund the loan growth. FSCO utilized external funding sources to
support a portion of its asset growth, including the issuance of $150 million
of 6.875% Senior Notes and the issuance of $150 million of 8.41% Capital
Income Securities (see: MDA "Asset/Liability Management - Liquidity").
Additionally, maturing FHLB debt was replaced with new 2- to 3-year FHLB
funding.
FSCO took advantage of its strong capital ratios and further leveraged the
balance sheet in 1996 and 1997 through an increase in the investment
securities portfolio of $623 million. This increase was primarily funded
through the use of repurchase agreements.
FSCO exhibits a slight asset sensitivity at the one-year time frame and
minimal overall interest rate risk.
As of March 31, 1997, off-balance sheet instruments used for interest rate
risk management activities, including interest rate swaps, caps, and
corridors, were $336 million notional amount, compared with $618 million
notional amount at year end. Also at March 31, 1997, financial futures and
options contracts related to FSCO's trading account securities totaled $16.6
billion notional amount, compared with $10.1 billion notional amount at year
end.
STOCKHOLDERS' EQUITY and CAPITAL ADEQUACY
Stockholders' equity in FSCO was $1.1 billion at March 31, 1997, up $83
million or 8.0% from one year ago, but down $20 million or 1.8% from year end
(see: Financial Statements "Consolidated Balance Sheets"). These changes were
due to earnings retained, partially offset by volatility in the SFAS 115 net
unrealized gain (loss) on securities available for sale and FSCO's first
quarter 1997 repurchase of 1.8 million shares of its common stock, restated
for the 3-for-2 common stock split. The ratio of stockholders' equity to
total assets was 7.77% at March 31, 1997, down from 8.13% one year ago, but
essentially unchanged from year end (see: MDA Supplemental Tables "Financial
Highlights - Selected Ratios"). The ratio of tangible common equity to
tangible assets was 6.66% at March 31, 1997, down from 6.99% one year ago, but
essentially unchanged from year end.
Application of SFAS 115 has resulted in, and will continue to result in,
additions to or deductions from FSCO's total stockholders' equity as the
result of fluctuations in the fair value of investment securities. These
fluctuations are shown in the "Net unrealized gain (loss) on securities
available for sale" component of equity.
During the fourth quarter of 1996, FSCO issued $150 million of 8.41%
Capital Income Securities. Although included in "Long-Term Debt" rather than
"Stockholders' Equity" on FSCO's financial statements, regulations permit the
Capital Income Securities to be included in Tier 1 Capital for purposes of
calculating the Tier 1 Leverage ratio and FSCO's risk-based capital ratios.
FSCO's risk-based capital ratios remained strong at March 31, 1997 due to
earnings retained and the Capital Income Securities (see: MDA Supplemental
Tables "Financial Highlights - Risk-Based Capital Ratios"). FSCO's risk-based
capital ratios at March 31, 1997, March 31, 1996, and December 31, 1996,
respectively, were: Tier 1 at 11.45%, up from 10.49% and 11.34%; and Total
Capital at 14.62%, up from 13.96% and 14.50%. At the same time periods, the
leverage ratio was 8.31%, up from 7.46% and 8.16%.
FSCO and its subsidiary banks have exceeded regulatory requirements for
"well capitalized" status every year since these requirements were
established. It is FSCO's policy to maintain the "well capitalized" status at
both the consolidated and subsidiary bank levels.
With its strong equity and risk-based capital ratios, FSCO is well
positioned to selectively invest in profitable business opportunities, while
maintaining capital ratios at levels determined to be prudent and conservative
by management.
COMMON AND PREFERRED STOCK
FSCO's common stock is traded on Nasdaq under the symbol FSCO, and is
included in the Standard & Poors' "MidCap 400 Index", and the Keefe, Bruyette
& Woods, Inc. "KBW 50 Index".
On April 21, 1997, FSCO declared a 3-for-2 common stock split in the form
of a 50% stock dividend payable on May 15, 1997, to shareholders of record as
of May 12, 1997. As a result of the split, shareholders will receive one
additional share of FSCO common stock for every two shares held. All common
stock and earnings per share data in this report have been restated to reflect
this stock split.
On April 21, 1997, FSCO increased its quarterly common stock dividend,
restated for the 3-for-2 common stock split, to $0.17 per share, up $0.01667
per share or 11.0% from the previous $0.15333 per share (see: MDA Supplemental
Tables "Financial Highlights"). This dividend is payable on June 2, 1997, to
shareholders of record on May 16, 1997, and equates to an annual dividend rate
of $0.68 per share. Since year-end 1995, FSCO has increased its dividend
three times or 36.6%.
These dividends marked the 62nd consecutive year in which FSCO has paid
cash dividends on its common stock. National and state banking and insurance
regulations impose restrictions on the ability of FSCO's bank and insurance
subsidiaries to transfer funds to FSCO in the form of loans or dividends.
Such restrictions have not had, nor are they expected to have, any effect on
FSCO's current ability to pay dividends. FSCO's current and past record of
dividend payments should not be construed as a guarantee of similar dividend
payments in the future.
The bid price of FSCO common stock, restated for the 3-for-2 common stock
split, was $21.42 per share at the close of the market on March 31, 1997,
versus a restated book value of $9.96 per share. This resulted in a market-
to-book ratio of 215.03%, compared to 201.82% one year ago and 226.59% at year
end. At March 31, 1997, FSCO's common stock market capitalization was $2.4
billion, up 15.1% from one year ago, but down 6.8% from year end.
FSCO's preferred stock is convertible into FSCO common stock at the
conversion rate, restated for the stock split, of one share of preferred stock
for 27.3375 shares of common stock. There is no active trading market for
FSCO's preferred stock.
MERGERS AND ACQUISITIONS
FSCO's merger and acquisition activity reflects management's strategy of
diversifying and enhancing FSCO's financial services delivery system through
the expansion and geographical diversification of its bank branch network and
nonbank activities. 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 in new and existing markets.
Effective January 1, 1997, FS Insurance acquired Olson & Haig Employee
Benefits Inc./SKI-MED, a developer of specialty benefit, group health, and
incentive programs.
On March 31, 1997, CrossLand Mortgage purchased the wholesale loan
production branch operations of Harbourton Mortgage Co., L.P., with 15 offices
located in 11 states and which originated $2.7 billion in mortgage loans
during 1996. Harbourton Mortgage was previously a subsidiary of Harbourton
Financial Services, L.P. (NYSE: HBT).
On April 2, 1997, FSCO announced the pending merger of American Bancorp of
Nevada (ABCN), and its wholly owned subsidiary American Bank of Commerce,
located in Las Vegas, Nevada, with 5 branches and total assets of $318
million. This merger is subject to the approval of regulatory agencies as
well as the shareholders of ABCN. It is anticipated that shareholder approval
will be obtained late in the second quarter of 1997 with the transaction being
consummated soon thereafter.
Approval has been received from bank regulatory authorities to merge First
Security Bank of Oregon into First Security Bank, N.A. The decision to
combine the charters of these two banks was originally announced in 1995 and
is part of FSCO's goal of becoming a "virtual bank" in which all of FSCO's
banks will be managed as a single entity. This merger is expected to be
completed before the end of the second quarter of 1997.
NATIONAL & REGIONAL ECONOMY
Near the end of the first quarter of 1997, the Federal Reserve hiked short-
term interest rates by 0.25%, citing continued strong economic growth in a
fully employed economy and mounting evidence of intensifying wage pressures.
Fueled by accelerated consumer buying and accumulated inventories, first
quarter 1997 economic growth jumped 5.6% following the 3.8% fourth quarter
1996 increase. The nation's jobless rate dropped to 4.9% in April, and
average hourly earnings were 3.6% above last year. Despite ongoing
productivity gains and limited pricing power at the retail level, additional
Federal Reserve tightenings may occur in the months ahead. Because yields on
Treasury securities are higher than 1996 fourth-quarter averages, it is hoped
that the bond market's reaction will be muted when or if such monetary action
develops.
The Federal Reserve's preemptive monetary policy action hopefully will
actually avoid the development of an inflationary problem. The stronger U.S.-
dollar exchange rate, declining stock prices and narrowing corporate profits,
along with the higher interest rates, should slow U.S. economic growth by the
second half of 1997.
The Intermountain regional economy continued to exhibit solid consumer-
spending gains during the first quarter of 1997. Employment expansion in most
of these states remains among the national leaders, but the increases have
narrowed modestly from a year ago. Across the region, existing home sales are
less brisk, and the pace of real-estate sales-price appreciation has
decelerated. Delinquency rates on consumer debt seem to be stabilizing.
FORWARD-LOOKING STATEMENTS
Except for the historical information in this document, the matters
described herein are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. FSCO cautions readers not
to place undue reliance on any forward-looking statements, which speak only as
of the date made.
FSCO advises readers that various risks and uncertainties could affect
FSCO's financial performance and could cause FSCO's actual results for future
periods to differ materially from those anticipated or projected. These risks
and uncertainties include, but are not limited to, those related to: the
economic environment, particularly in the regions where FSCO operates;
competitive products and pricing; changes in prevailing interest rates; credit
and other risks of lending and investment activities; fiscal and monetary
policies of the U.S. and other governments; regulations affecting financial
institutions; acquisitions and the integration of acquired businesses; and
other risks and uncertainties affecting FSCO's operations and personnel.
FSCO specifically disclaims any obligation to update any forward-looking
statements to reflect occurrences or unanticipated events or circumstances
after the date of such statements.
# # #
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. Continued: Supplemental Tables
<TABLE>
FIRST SECURITY CORPORATION
FINANCIAL HIGHLIGHTS
(in thousands, except per share data and ratios; unaudited)
<CAPTION>
1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr Year-To-Date Three Months
1997 1996 1996 1996 1996 1997 1996 %Chg
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Common & Preferred Stock Data (A):
Earnings per common share: primary 0.41 0.44 0.41 0.37 0.31 0.41 0.31 32.3
Earnings per common share: fully diluted 0.41 0.44 0.41 0.37 0.31 0.41 0.31 32.3
Tangible EPCS: fully diluted 0.45 0.46 0.44 0.41 0.34 0.45 0.34 32.4
Dividends paid per common share 0.15 0.15 0.14 0.14 0.14 0.15 0.14 9.5
Book value [EOP] 9.96 10.04 9.64 9.31 9.16 9.96 9.16 8.7
Tangible book value [EOP] 8.44 8.54 8.22 7.92 7.79 8.44 7.79 8.4
Market price (bid) [EOP] 21.42 22.75 18.25 16.00 18.50 21.42 18.50 15.8
High bid for the period 24.83 22.75 18.75 18.42 18.50 24.83 18.50 34.2
Low bid for the period 21.33 18.75 15.83 15.25 15.44 21.33 15.45 38.1
Market capitalization (mktprice x #shrs) [EOP] 2,407,161 2,583,467 2,069,468 1,811,184 2,092,017 2,407,161 2,092,017 15.1
Market price / book value [EOP] % 215.03 226.59 189.32 171.80 201.82 215.03 201.82
Dividend payout ratio (DPCS / EPCS) % 37.40 34.85 34.43 37.50 44.68 37.40 45.16
Dividend yield (DPCS / mktprice) [EOP] % 2.86 2.70 3.07 3.50 3.03 2.86 3.03
Price / earnings ratio (mktprice / 4 qtrs EPCS) 13.1x 14.8x 15.6x 14.5x 17.7x 13.1x 17.7x
Common shares [EOP] 112,397 113,559 113,396 113,199 113,082 112,397 113,082 (0.6)
Common shares: primary [Avg] 116,168 116,625 116,061 115,824 115,746 116,168 115,746 0.4
Common shares: fully diluted [Avg] 116,447 116,909 116,348 116,114 116,040 116,447 116,040 0.4
Preferred shares [EOP] 10 10 10 11 11 10 11 (9.1)
- - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Income Statement:
Interest income 260,181 263,397 251,876 239,423 233,112 260,181 233,112 11.6
Interest expense 125,962 125,499 118,874 113,523 113,336 125,962 113,336 11.1
Net interest income 134,219 137,898 133,002 125,900 119,776 134,219 119,776 12.1
Fully taxable equivalent (FTE) adjustment 2,007 2,409 1,764 1,178 2,333 2,007 2,333 (14.0)
Net interest income, FTE 136,226 140,307 134,766 127,078 122,109 136,226 122,109 11.6
Provision for loan losses 13,899 11,549 9,508 10,505 8,738 13,899 8,738 59.1
Noninterest income 78,716 84,099 72,312 75,714 66,561 78,716 66,561 18.3
Noninterest expenses 124,655 130,678 121,251 124,586 120,852 124,655 120,852 3.1
Provision for income taxes 26,396 28,541 27,159 23,595 20,457 26,396 20,457 29.0
Net income 47,985 51,229 47,396 42,928 36,290 47,985 36,290 32.2
Preferred stock dividend requirement 8 8 9 8 8 8 8 0.0
Common stock dividend 17,246 17,396 15,848 15,846 15,803 17,246 15,803 9.1
- - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Balance Sheet - End of Period:
Trading account securities 388,264 447,486 171,910 150,529 272,443 388,264 272,443 42.5
Securities available for sale (AFS) 3,316,927 3,150,276 3,166,608 2,715,770 2,693,820 3,316,927 2,693,820 23.1
Memo: fair value adjustment securities AFS (28,980) 1,654 (12,506) (20,001) (4,048) (28,980) (4,048) 615.9
Loans, net of unearned income 9,069,267 9,262,482 8,948,196 8,716,400 8,375,060 9,069,267 8,375,060 8.3
Reserve for loan losses (135,928) (134,428) (133,853) (133,678) (130,653) (135,928) (130,653) 4.0
Total interest-earning assets 12,795,456 13,115,096 12,417,202 11,674,994 11,486,526 12,795,456 11,486,526 11.4
Intangible assets 171,009 169,779 160,823 157,582 155,744 171,009 155,744 9.8
Total assets 14,416,628 14,708,024 13,739,324 13,036,598 12,751,772 14,416,628 12,751,772 13.1
Noninterest-bearing deposits 2,021,116 2,198,348 1,946,454 1,857,593 1,787,827 2,021,116 1,787,827 13.0
Interest-bearing deposits 7,288,766 7,240,915 7,141,950 7,027,120 7,069,406 7,288,766 7,069,406 3.1
Total deposits 9,309,882 9,439,263 9,088,404 8,884,713 8,857,233 9,309,882 8,857,233 5.1
Short-term borrowed funds 2,562,778 2,830,633 2,399,209 2,049,074 1,812,218 2,562,778 1,812,218 41.4
Long-term debt 986,417 944,055 821,932 723,728 675,460 986,417 675,460 46.0
Total interest-bearing liabilities 10,837,961 11,015,603 10,363,091 9,799,922 9,557,084 10,837,961 9,557,084 13.4
Minority equity in subsidiaries 337 342 329 319 315 337 315 7.0
Preferred stockholders' equity 532 540 549 553 563 532 563 (5.5)
Common stockholders' equity 1,119,635 1,140,108 1,092,782 1,053,973 1,036,217 1,119,635 1,036,217 8.1
Parent company investment in subsidiaries 1,216,236 1,206,037 1,155,998 1,117,599 1,090,036 1,216,236 1,090,036 11.6
- - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Problem Assets & Potential Problem Assets - End of Period:
Nonaccruing loans:
Commercial 14,139 13,904 13,244 10,171 11,670 14,139 11,670 21.2
Real estate term 14,225 15,078 18,681 12,965 11,703 14,225 11,703 21.6
Real estate construction 1,738 3,935 875 1,556 1,609 1,738 1,609 8.0
Consumer 102 108 70 144 95 102 95 7.4
Leases 279 251 531 322 333 279 333 (16.2)
Total nonaccruing loans 30,483 33,276 33,401 25,158 25,410 30,483 25,410 20.0
Other real estate 3,968 4,855 5,003 5,663 5,209 3,968 5,209 (23.8)
Total nonperforming assets 34,451 38,131 38,404 30,821 30,619 34,451 30,619 12.5
Accruing loans past due 90 days or more 20,430 19,326 15,728 16,656 13,501 20,430 13,501 51.3
Total problem assets 54,881 57,457 54,132 47,477 44,120 54,881 44,120 24.4
Potential problem assets 12,450 8,271 12,283 23,513 7,595 12,450 7,595 63.9
- - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Other Data - End of Period (not rounded):
Full-time equivalent employees 6,987 7,017 7,089 7,003 7,088 6,987 7,088 (1.4)
Domestic bank offices (B):
First Security Bank (FSB Utah + FSB Idaho) 211 211 208 209 218 211 218 (3.2)
FSB New Mexico 28 28 28 28 26 28 26 7.7
FSB Oregon 13 13 13 13 13 13 13 0.0
FSB Nevada 8 7 7 7 8 8 8 0.0
FSB Wyoming 7 7 6 6 6 7 6 16.7
Total domestic bank offices 267 266 262 263 271 267 271 (1.5)
============================================== ========== ========== ========== ========== ========== ========== ========== =======
<FN>
Notes:
See "Notes to Condensed Consolidated Financial Statements".
EOP: End Of Period. EPCS: Earnings Per Common Share. DPCS: Dividends Per Common Share. AFS: Available For Sale. NM: Not Meaningful.
(A) Figures have been restated where appropriate to reflect a 3-for-2 stock split in the form of a 50% stock dividend paid in
May 1997.
(B) On June 21, 1996, FSB Utah and FSB Idaho merged to become First Security Bank, N.A.
</TABLE>
<PAGE>
<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 Year-To-Date Three Months
1997 1996 1996 1996 1996 1997 1996 %Chg
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Balance Sheet - Average:
Trading account securities 168,094 130,319 159,258 172,737 328,072 168,094 328,072 (48.8)
Securities available for sale (AFS) 3,183,395 3,162,599 2,930,670 2,725,110 2,609,266 3,183,395 2,609,266 22.0
Memo: fair value adjustment securities AFS 3,284 6,446 (22,927) (15,977) 20,226 3,284 20,226
Loans, net of unearned income 9,205,427 9,125,014 8,800,072 8,534,146 8,254,010 9,205,427 8,254,010 11.5
Reserve for loan losses (134,272) (133,885) (133,706) (130,816) (130,063) (134,272) (130,063) 3.2
Deferred taxes on leases (183,598) (177,841) (172,614) (166,840) (164,953) (183,598) (164,953) 11.3
Total interest-earning assets, excl. fair value
adjust securities AFS & defer taxes on leases12,427,261 12,339,265 11,807,137 11,375,936 11,154,064 12,427,261 11,154,064 11.4
Intangible assets 170,857 163,470 158,718 157,979 150,022 170,857 150,022 13.9
Total assets 14,009,082 13,825,829 13,153,786 12,718,595 12,474,704 14,009,082 12,474,704 12.3
Noninterest-bearing deposits 1,895,233 1,912,222 1,780,120 1,755,868 1,708,154 1,895,233 1,708,154 11.0
Interest-bearing deposits 7,264,138 7,260,035 7,158,996 7,019,739 6,938,872 7,264,138 6,938,872 4.7
Total deposits 9,159,371 9,172,257 8,939,116 8,775,607 8,647,026 9,159,371 8,647,026 5.9
Short-term borrowed funds 2,412,952 2,388,089 2,073,144 1,918,772 1,817,625 2,412,952 1,817,625 32.8
Long-term debt 950,850 831,910 771,128 691,766 691,535 950,850 691,535 37.5
Total interest-bearing liabilities 10,627,940 10,480,034 10,003,268 9,630,277 9,448,032 10,627,940 9,448,032 12.5
Minority equity in subsidiaries 341 332 319 312 311 341 311 9.6
Preferred stockholders' equity 535 543 550 557 566 535 566 (5.5)
Common stockholders' equity 1,142,557 1,105,649 1,073,952 1,044,724 1,044,601 1,142,557 1,044,601 9.4
- - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Reconciliation of the Reserve for Loan Losses:
Reserve for loan losses, beginning 134,428 133,853 133,678 130,653 129,982 134,428 129,982 3.4
Loans (charged off):
Commercial (1,470) (761) (1,918) (1,989) (1,139) (1,470) (1,139) 29.1
Real estate term (455) (415) (315) (186) (145) (455) (145) 213.8
Real estate construction (76) (138) (157) (19) 0 (76) 0 NM
Consumer credit card & related (3,343) (3,613) (3,641) (3,054) (2,992) (3,343) (2,992) 11.7
Consumer auto & other (14,686) (13,422) (9,406) (8,658) (10,053) (14,686) (10,053) 46.1
Leases 0 0 (91) 285 (796) 0 (796) (100.0)
Total loans (charged off) (20,030) (18,349) (15,528) (13,621) (15,125) (20,030) (15,125) 32.4
Recoveries on loans charged off:
Commercial 1,387 2,372 1,592 930 1,641 1,387 1,641 (15.5)
Real estate term 269 (373) 21 511 709 269 709 (62.1)
Real estate construction 4 698 134 8 7 4 7 (42.9)
Consumer credit card & related 617 717 497 526 535 617 535 15.3
Consumer auto & other 5,354 3,964 3,791 4,040 4,133 5,354 4,133 29.5
Leases 0 (3) 160 126 33 0 33 (100.0)
Total recoveries of loans charged off 7,631 7,375 6,195 6,141 7,058 7,631 7,058 8.1
Net loans (charged off) recovered (12,399) (10,974) (9,333) (7,480) (8,067) (12,399) (8,067) 53.7
Provision for loan losses 13,899 11,549 9,508 10,505 8,738 13,899 8,738 59.1
Reserve for loan losses, ending 135,928 134,428 133,853 133,678 130,653 135,928 130,653 4.0
- - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Selected Ratios (%):
Return on average assets (ROAA) 1.39 1.47 1.43 1.36 1.17 1.39 1.17
Tangible ROAA 1.53 1.58 1.60 1.51 1.30 1.53 1.30
Return on average stockholders' equity (ROAE) 17.02 18.42 17.55 16.52 13.97 17.02 13.97
Tangible ROAE 21.81 22.84 22.67 21.43 17.94 21.81 17.94
Net interest margin, FTE 4.38 4.55 4.57 4.47 4.38 4.38 4.38
Net interest spread, FTE 3.70 3.83 3.86 3.75 3.63 3.70 3.63
Operating expense ratio
(nonint exp / (net int inc FTE + nonint inc)) 57.99 58.23 58.55 61.44 64.05 57.99 64.05
Productivity ratio (nonint exp / avg assets) 3.61 3.76 3.67 3.94 3.90 3.61 3.90
Stockholders' equity / assets [EOP] 7.77 7.76 7.96 8.09 8.13 7.77 8.13
Stockholders' equity / assets [Avg] 8.16 8.00 8.17 8.22 8.38 8.16 8.38
Tangible common equity / tangible assets [EOP] 6.66 6.67 6.86 6.96 6.99 6.66 6.99
Loans / deposits [EOP] 97.42 98.13 98.46 98.11 94.56 97.42 94.56
Loans / assets [EOP] 62.91 62.98 65.13 66.86 65.68 62.91 65.68
Reserve for loan losses [EOP] /:
Total loans 1.50 1.45 1.50 1.53 1.56 1.50 1.56
Nonaccruing loans 445.91 403.98 400.75 531.35 514.18 445.91 514.18
Nonaccruing + accruing loans past due 90 days 266.98 255.56 272.45 319.70 335.77 266.98 335.77
Nonaccruing loans / total loans 0.34 0.36 0.37 0.29 0.30 0.34 0.30
Nonaccruing + accr loans past due / total loans 0.56 0.57 0.55 0.48 0.46 0.56 0.46
Nonperforming assets /:
Total loans + other real estate 0.38 0.41 0.43 0.35 0.37 0.38 0.37
Total assets 0.24 0.26 0.28 0.24 0.24 0.24 0.24
Total equity 3.08 3.34 3.51 2.92 2.95 3.08 2.95
Total equity + reserve for loan losses 2.74 2.99 3.13 2.59 2.62 2.74 2.62
Problem assets /:
Total loans + other real estate 0.60 0.62 0.60 0.54 0.53 0.60 0.53
Total assets 0.38 0.39 0.39 0.36 0.35 0.38 0.35
Total equity 4.90 5.04 4.95 4.50 4.26 4.90 4.26
Total equity + reserve for loan losses 4.37 4.51 4.41 4.00 3.78 4.37 3.78
Net loans charged off / average loans 0.55 0.48 0.42 0.35 0.39 0.55 0.39
============================================== ========== ========== ========== ========== ========== ========== ========== =======
Capital Ratios & Risk-Based Capital Ratios (%): FSC FS FSB FSB FSB FSB
As of March 31, 1997 Consol Bank (A) NewMexico Oregon Nevada Wyoming
- - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Leverage ratio 8.31 7.58 6.17 10.35 6.72 9.46
Tier 1 risk-based capital ratio 11.45 10.06 13.24 11.96 11.06 13.60
Total (Tier 1 + 2) risk-based capital ratio 14.62 11.67 14.50 13.22 12.31 14.85
Tier 1 risk-based capital ($) 1,191,756 857,694 116,509 45,982 33,107 19,216
Total (Tier 1 + 2) risk-based capital ($) 1,521,973 994,842 127,606 50,791 36,874 20,995
Total risk-based assets - loan loss reserve ($)10,411,667 8,521,903 880,243 384,334 299,435 141,336
============================================== ========== ========== ========== ========== ========== ========== ========== =======
<FN>
Notes:
See "Notes to Condensed Consolidated Financial Statements".
EOP: End Of Period. EPCS: Earnings Per Common Share. DPCS: Dividends Per Common Share. AFS: Available For Sale. NM: Not Meaningful.
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
VOLUME / RATE ANALYSIS
(in thousands; fully taxable equivalent; unaudited) (A)
<CAPTION>
For the Three Months Ended March 31, 1997 and 1996
Average Balance Yield/Rate % Interest Inc/Exp Change Changes Due To:
1997 1996 1997 1996 1997 1996 1997-96 Volume Rate
<C> <C> <C> <C> <S> <C> <C> <C> <C> <C>
- - ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
INTEREST-EARNING ASSETS / INCOME:
52,977 136,194 4.92 5.38 Federal funds sold & securities purchased 652 1,833 (1,181) (1,120) (61)
4,250 11,701 5.27 6.73 Interest-bearing deposits in other banks 56 197 (141) (125) (16)
168,094 328,072 5.75 5.54 Trading account securities 2,415 4,546 (2,131) (2,217) 86
3,180,111 2,589,040 6.67 6.48 Securities AFS - amortized cost 53,009 41,945 11,064 9,576 1,488
Loans, net of unearned income &
9,021,829 8,089,057 9.14 9.24 deferred taxes on leases (B) 206,056 186,924 19,132 21,555 (2,423)
- - ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
12,427,261 11,154,064 8.44 8.44 TOTAL INTEREST-EARNING ASSETS / INCOME 262,188 235,445 26,743 27,669 (926)
- - ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
INTEREST-BEARING LIABILITIES / EXPENSE:
Interest-Bearing Deposits:
648,210 1,088,096 2.84 1.82 Interest-bearing demand accounts 4,600 4,957 (357) (2,004) 1,647
2,958,162 2,471,752 3.05 3.70 Savings & money market accounts 22,541 22,884 (343) 4,503 (4,846)
776,641 679,424 5.48 5.85 Time deposits of $100,000 or more 10,647 9,940 707 1,422 (715)
2,881,125 2,699,600 5.56 5.88 Other time deposits 40,016 39,703 313 2,670 (2,357)
- - ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
7,264,138 6,938,872 4.28 4.47 TOTAL INTEREST-BEARING DEPOSITS 77,804 77,484 320 6,591 (6,271)
- - ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
2,133,464 1,539,823 5.03 5.06 Federal funds purchased & securities sold 26,807 19,472 7,335 7,507 (172)
279,488 277,802 6.40 7.02 Other short-term borrowings 4,469 4,877 (408) 30 (438)
950,850 691,535 7.10 6.65 Long-term debt 16,882 11,503 5,379 4,313 1,066
- - ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
10,627,940 9,448,032 4.74 4.80 TOTAL INTEREST-BEARING LIABILITIES / EXPENSE 125,962 113,336 12,626 18,441 (5,815)
- - ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
8.44 8.44 Interest income / earning assets
4.06 4.06 Interest expense / earning assets
------ ------ --------------------------------------------
4.38 4.38 Net interest income / earning assets 136,226 122,109 14,117 9,228 4,889
Less fully taxable equivalent adjustment 2,007 2,333 (326)
------ ------ -------------------------------------------- --------- --------- -------- -------- --------
NET INTEREST INCOME, PER CONSOLIDATED
STATEMENTS OF INCOME 134,219 119,776 14,443
=========== =========== ====== ====== ============================================ ========= ========= ======== ======== ========
<FN>
Notes:
See "Notes to Condensed Consolidated Financial Statements".
(A) Changes not due entirely to changes in volume or rate have been allocated to rate.
Interest is presented on a fully taxable equivalent (FTE) basis, calculated on Federal and state taxes
applicable to the subsidiary carrying the asset. The combined tax rate was approximately 39% for 1997 and 1996.
(B) Loans include nonaccruing and renegotiated loans.
Interest on loans includes fees of $7,705 and $5,014 for the 1997 and 1996 quarters, respectively.
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
LOANS (in thousands; unaudited)
<CAPTION>
March 31 %Total December 31 %Total March 31 %Total Mar/Mar
1997 Loans 1996 Loans 1996 Loans %Chg
<S> <C> <C> <C> <C> <C> <C> <C>
- - ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
COMMERCIAL LOANS:
Commercial & industrial 1,859,287 20.5 1,654,239 17.9 1,599,420 19.1 16.2
Agricultural 271,611 3.0 312,402 3.4 230,907 2.8 17.6
Other commercial 123,636 1.4 185,973 2.0 100,529 1.2 23.0
- - ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
TOTAL COMMERCIAL LOANS 2,254,534 24.9 2,152,614 23.2 1,930,856 23.1 16.8
- - ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
REAL ESTATE SECURED LOANS:
1 to 4 family residential term 1,400,072 15.4 1,459,534 15.8 1,489,226 17.8 (6.0)
1 to 4 family residential home equity 460,086 5.1 471,109 5.1 454,402 5.4 1.3
1 to 4 family residential construction 361,700 4.0 349,771 3.8 257,159 3.1 40.7
Commercial & other term 885,503 9.7 904,135 9.8 953,505 11.4 (7.1)
Commercial & other construction 197,916 2.2 190,791 2.1 223,406 2.6 (11.4)
- - ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
TOTAL REAL ESTATE SECURED LOANS 3,305,277 36.4 3,375,340 36.4 3,377,698 40.3 (2.1)
Memo: Total real estate term 2,745,661 30.3 2,834,778 30.6 2,897,133 34.6 (5.2)
Memo: Loans held for sale
included in total real estate term 264,267 2.9 330,032 3.6 409,948 4.9 (35.5)
Memo: Total real estate construction 559,616 6.1 540,562 5.8 480,565 5.7 16.4
- - ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
CONSUMER LOANS:
Credit card & related 292,610 3.2 307,622 3.3 288,701 3.5 1.4
Auto & other consumer 2,373,788 26.2 2,674,283 28.9 2,297,506 27.4 3.3
- - ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
TOTAL CONSUMER LOANS 2,666,398 29.4 2,981,905 32.2 2,586,207 30.9 3.1
- - ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
TOTAL LEASES 843,058 9.3 752,623 8.1 480,299 5.7 75.5
- - ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
LOANS, NET OF UNEARNED INCOME 9,069,267 100.0 9,262,482 100.0 8,375,060 100.0 8.3
Memo: Unearned income (80,897) (67,396) (32,416) 149.6
Reserve for loan losses (135,928) (134,428) (130,653) 4.0
- - ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
TOTAL LOANS, NET 8,933,339 9,128,054 8,244,407 8.4
========================================= =========== ====== =========== ====== =========== ====== ========
<FN>
</TABLE>
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, FSCO and its subsidiaries are subject to claims and
legal actions filed or threatened by customers and others in the ordinary
course of FSCO's business activities. Some legal actions filed against FSCO
seek inflated damages, often in an effort to force compromise of a troubled
loan transaction. Others recently have been filed as class actions alleging
technical violations of arcane Federal statutes with modest individual
damages, but potentially large class damage amounts. These are disclosed in
filings with the SEC as required by applicable rules. FSCO endeavors at all
times to conduct its business in a lawful manner, and will always vigorously
defend itself against unfounded claims, with a concomitant cost in legal fees
and expenses. Since the filing of FSCO's 1996 Form 10-K Annual Report, there
have been no material developments in connection with pending legal
proceedings not already disclosed in previous filings with the S.E.C..
Based on advice of legal counsel, and its own analysis, FSCO management
continues to believe that no reasonably foreseeable ultimate outcome of any or
all of the cases previously reported will have a material adverse impact on
the business or assets of FSCO.
Item 4. Submission of Matters to a Vote of Security Holders
FSCO held its Annual Shareholders' Meeting on April 21, 1997. After
restating for the 3-for-2 common stock split, the shares voted (by proxy and
in person) and shares outstanding were as follows:
Shares: Voted Voted % Outstanding
Preferred stock 5,717 56.2808% 10,158
Common stock 93,587,283 83.2477% 112,420,203
Total 93,593,000 83.2453% 112,430,361
Votes were taken on the following Shareholder Proposals, described in
FSCO's Proxy Statement dated March 15, 1997:
* Shareholder Proposal #1 "To elect a Board of Directors to serve for the
ensuing year". All current members of the Board of Directors, except Elder
David B. Haight who retired from the Board, and Dr. Arthur K. Smith who did
not stand for re-election but who has no disagreement with management over any
issue, were nominated for re-election by Management. After restating for the
3-for-2 common stock split, the results of this vote were as follows:
Votes Votes Votes Votes For /
Nominee: For: Against: Abstain: Total Voted:
JAMES C. BEARDALL 93,297,286 52,734 242,980 99.6840
RODNEY H. BRADY 93,275,933 89,810 227,257 99.6612
JAMES E. BRUCE 93,270,043 64,245 258,712 99.6549
THOMAS D. DEE II 93,256,618 66,349 270,034 99.6406
SPENCER F. ECCLES 93,303,856 62,970 226,174 99.6911
MORGAN J. EVANS 93,324,070 38,220 230,710 99.7127
DR. DAVID P. GARDNER 93,211,972 110,510 270,518 99.5929
ROBERT H. GARFF 93,246,912 102,121 243,967 99.6302
JAY DEE HARRIS 93,195,713 122,186 275,101 99.5755
ROBERT T. HEINER 92,992,793 361,341 238,866 99.3587
KAREN H. HUNTSMAN 93,267,081 69,719 256,200 99.6518
G. FRANK JOKLIK 93,219,983 102,137 270,880 99.6014
B. Z. KASTLER 93,176,987 136,244 279,769 99.5555
JOSEPH G. MALOOF 93,315,704 44,835 232,461 99.7037
SCOTT S. PARKER 93,293,693 58,089 241,218 99.6802
JAMES L. SORENSON 93,119,826 159,563 313,611 99.4944
HAROLD J STEELE 93,245,807 84,956 262,237 99.6290
JAMES R. WILSON 93,325,080 45,065 222,855 99.7137
* Shareholder Proposal #2 "To review and approve the Comprehensive
Management Incentive Plan as required under Section 162(m) of the Internal
Revenue Code". The results of this vote were as follows:
Votes Votes Votes Votes For /
For: Against: Abstain: Total Voted:
SHAREHOLDER PROPOSAL #2 86,362,302 6,793,909 436,789 92.2743
Item 6. Exhibits, and Reports on Form 8-K
(a). Exhibits:
Exhibit 11. Computation of Earnings Per Share
Exhibit 27. Financial Data Schedule
(b). Reports on Form 8-K:
1. On March 25, 1997, FSCO filed a report on Form 8-K disclosing an
underwriting agreement and a pooling and servicing agreement relating
to the sale and securitization of $300 million of auto loans
originated by FSCO bank subsidiaries.
2. On May 5, 1997, FSCO filed a report on Form 8-K, reporting that "on
April 21, 1997, First Security Corporation issued a press release
announcing a 3-for-2 common stock split and an increase in the
quarterly cash dividend".
# # #
<PAGE>
SIGNATURES
FIRST SECURITY CORPORATION
Registrant
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIRST SECURITY CORPORATION
by
[SIGNED] May 9, 1997
_______________________________________________________ ____________________
Scott C. Ulbrich (Date)
Executive Vice President, Finance and Capital Markets
and Chief Financial Officer
(Principal Financial and Accounting Officer)
# # #
EXHIBIT 11. COMPUTATION OF EARNINGS PER SHARE
<TABLE>
FIRST SECURITY CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share amounts; unaudited)
<CAPTION>
Three Months
For the Years Ended December 31, 1997 1996
<S> <C> <C>
- - ----------------------------------------------------------- ---------- ----------
NET INCOME:
Net income per consolidated income statements 47,985 36,290
Subtract dividend requirement of preferred stock 8 8
- - ----------------------------------------------------------- ---------- ----------
NET INCOME APPLICABLE TO COMMON STOCK (PRIMARY) 47,977 36,282
Add dividend requirement of preferred stock 8 8
- - ----------------------------------------------------------- ---------- ----------
NET INCOME FULLY DILUTED 47,985 36,290
=========================================================== ========== ==========
EARNINGS PER COMMON SHARE: PRIMARY 0.41 0.31
EARNINGS PER COMMON SHARE: FULLY DILUTED 0.41 0.31
=========================================================== ========== ==========
SHARES OUTSTANDING (AVERAGE):
Common shares 114,621 113,766
Common equivalents (options) 3,312 2,811
Treasury shares (1,765) (831)
- - ----------------------------------------------------------- ---------- ----------
COMMON SHARES: PRIMARY (AVG) 116,168 115,746
Preferred shares: common equivalents 279 294
- - ----------------------------------------------------------- ---------- ----------
COMMON SHARES: FULLY DILUTED (AVG) 116,447 116,040
=========================================================== ========== ==========
<FN>
Notes:
Figures have been restated where appropriate to reflect a 3-for-2 stock split
in the form of a 50% stock dividend paid in May 1997.
Earnings Per Common Share Fully Diluted were computed assuming that all
outstanding shares of preferred stock were converted into common stock on the basis
of 27.3375 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
computations.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<PERIOD-TYPE> 3-MOS
<CASH> 936,107
<INT-BEARING-DEPOSITS> 500
<FED-FUNDS-SOLD> 20,498
<TRADING-ASSETS> 388,264
<INVESTMENTS-HELD-FOR-SALE> 3,316,927
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 9,069,267
<ALLOWANCE> (135,928)
<TOTAL-ASSETS> 14,416,628
<DEPOSITS> 9,309,882
<SHORT-TERM> 2,562,778
<LIABILITIES-OTHER> 437,384
<LONG-TERM> 986,417
0
532
<COMMON> 1,119,635
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 14,416,628
<INTEREST-LOAN> 205,501
<INTEREST-INVEST> 51,574
<INTEREST-OTHER> 3,106
<INTEREST-TOTAL> 260,181
<INTEREST-DEPOSIT> 77,804
<INTEREST-EXPENSE> 125,962
<INTEREST-INCOME-NET> 134,219
<LOAN-LOSSES> 13,899
<SECURITIES-GAINS> 605
<EXPENSE-OTHER> 124,655
<INCOME-PRETAX> 74,381
<INCOME-PRE-EXTRAORDINARY> 74,381
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,985
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0.41
<YIELD-ACTUAL> 4.38
<LOANS-NON> 30,483
<LOANS-PAST> 20,430
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 54,881
<ALLOWANCE-OPEN> 134,428
<CHARGE-OFFS> (20,030)
<RECOVERIES> 7,631
<ALLOWANCE-CLOSE> 135,928
<ALLOWANCE-DOMESTIC> 135,928
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
