<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 June 30, 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 July 31, 1997, outstanding shares of Common Stock, par value $1.25,
were 115,862,383 (net of 2,822,469 treasury shares).
FIRST SECURITY CORPORATION - INDEX
Part I. Financial Information
Item 1. Financial Statements:
Consolidated Statements of Income
Three Months and Year-To-Date Six Months Ended June 30, 1997 and 1996
Consolidated Balance Sheets
June 30, 1997, December 31, 1996, and June 30, 1996
Condensed Consolidated Statements of Cash Flows
Year-To-Date Six Months Ended June 30, 1997 and 1996
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition:
Highlights
Analysis of Statements of Income
Summary
Net Interest Income and Margin
Provision For Loan Losses
Noninterest Income
Noninterest Expenses
Analysis of Balance Sheets
Summary
Interest-Earning Assets and Asset Quality
Trading Account Securities and Other Interest-Earning Assets
Investment Securities
Loans
Problem Assets and Potential Problem Assets
Reserve For Loan Losses
Provision For Loan Losses
Asset/Liability Management
Liquidity
Interest Rate Risk
Stockholders' Equity and Capital Adequacy
Common Stock
Mergers And Acquisitions
Corporate Structure
National and Regional Economy
Supplemental Tables:
Financial Highlights, Risk-Based Capital Ratios
Volume/Rate Analysis
Loans
Part II. Other Information
Item 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signatures
Exhibit 11. Computation of Earnings Per Share
Exhibit 27. Financial Data Schedule
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
FIRST SECURITY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except per share data; unaudited)
<CAPTION>
Three Months Year-To-Date Six Months
For the Periods Ended June 30, 1997 and 1996 1997 1996 $Chg %Chg 1997 1996 $Chg %Chg
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- - ------------------------------------------------------- --------- --------- --------- ------- --------- --------- --------- -------
INTEREST INCOME:
Interest & fees on loans 218,884 193,035 25,849 13.4 424,385 378,707 45,678 12.1
Federal funds sold & securities purchased 550 1,070 (520) (48.6) 1,202 2,903 (1,701) (58.6)
Interest-bearing deposits in other banks 11 147 (136) (92.5) 67 344 (277) (80.5)
Trading account securities 5,361 2,010 3,351 166.7 7,759 6,548 1,211 18.5
Securities available for sale 54,833 43,161 11,672 27.0 106,407 84,033 22,374 26.6
- - ------------------------------------------------------- --------- --------- --------- ------- --------- --------- --------- -------
TOTAL INTEREST INCOME 279,639 239,423 40,216 16.8 539,820 472,535 67,285 14.2
- - ------------------------------------------------------- --------- --------- --------- ------- --------- --------- --------- -------
INTEREST EXPENSE:
Deposits 80,845 76,809 4,036 5.3 158,649 154,293 4,356 2.8
Short-term borrowings 39,973 24,573 15,400 62.7 71,249 48,922 22,327 45.6
Long-term debt 17,209 12,141 5,068 41.7 34,091 23,644 10,447 44.2
- - ------------------------------------------------------- --------- --------- --------- ------- --------- --------- --------- -------
TOTAL INTEREST EXPENSE 138,027 113,523 24,504 21.6 263,989 226,859 37,130 16.4
- - ------------------------------------------------------- --------- --------- --------- ------- --------- --------- --------- -------
NET INTEREST INCOME 141,612 125,900 15,712 12.5 275,831 245,676 30,155 12.3
Provision for loan losses 13,924 10,505 3,419 32.5 27,823 19,243 8,580 44.6
- - ------------------------------------------------------- --------- --------- --------- ------- --------- --------- --------- -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 127,688 115,395 12,293 10.7 248,008 226,433 21,575 9.5
- - ------------------------------------------------------- --------- --------- --------- ------- --------- --------- --------- -------
NONINTEREST INCOME:
Service charges on deposit accounts 21,985 19,628 2,357 12.0 42,379 37,067 5,312 14.3
Other service charges, collections, commissions, & fees 11,644 12,408 (764) (6.2) 22,930 23,138 (208) (0.9)
Bankcard servicing fees & third-party processing fees 7,726 7,277 449 6.2 15,734 13,774 1,960 14.2
Insurance commissions & fees 4,056 3,806 250 6.6 8,606 7,290 1,316 18.1
Mortgage banking activities 26,556 27,476 (920) (3.3) 49,349 49,192 157 0.3
Mortgage banking activities MSR amortization (4,227) (3,775) (452) (12.0) (8,091) (6,587) (1,504) (22.8)
Trust (fiduciary) commissions & fees 6,293 6,027 266 4.4 12,037 11,206 831 7.4
Trading account securities gains (losses) 157 751 (594) (79.1) 934 1,563 (629) (40.2)
Securities available for sale gains (losses) 2,259 764 1,495 195.7 2,864 764 2,100 274.9
Other 3,728 1,352 2,376 175.7 12,151 4,868 7,283 149.6
- - ------------------------------------------------------- --------- --------- --------- ------- --------- --------- --------- -------
TOTAL NONINTEREST INCOME 80,177 75,714 4,463 5.9 158,893 142,275 16,618 11.7
- - ------------------------------------------------------- --------- --------- --------- ------- --------- --------- --------- -------
TOTAL INCOME 207,865 191,109 16,756 8.8 406,901 368,708 38,193 10.4
- - ------------------------------------------------------- --------- --------- --------- ------- --------- --------- --------- -------
NONINTEREST EXPENSES:
Salaries & employee benefits 69,542 63,889 5,653 8.8 134,625 131,918 2,707 2.1
Advertising 1,512 3,245 (1,733) (53.4) 4,185 4,745 (560) (11.8)
Amortization of intangibles 2,110 2,066 44 2.1 4,083 4,027 56 1.4
Bankcard interbank interchange 7,374 6,100 1,274 20.9 14,586 10,517 4,069 38.7
Furniture & equipment 11,052 10,170 882 8.7 20,701 18,869 1,832 9.7
Insurance 1,730 1,678 52 3.1 2,994 3,442 (448) (13.0)
Occupancy, net 8,344 7,165 1,179 16.5 16,069 14,512 1,557 10.7
Other real estate expense & loss provision (recovery) 158 (33) 191 578.8 894 (268) 1,162 433.6
Postage 2,508 2,881 (373) (12.9) 5,204 6,298 (1,094) (17.4)
Stationery & supplies 4,007 4,628 (621) (13.4) 8,026 9,369 (1,343) (14.3)
Telephone 3,810 3,506 304 8.7 7,924 6,648 1,276 19.2
Other 19,620 19,291 329 1.7 37,131 35,361 1,770 5.0
- - ------------------------------------------------------- --------- --------- --------- ------- --------- --------- --------- -------
TOTAL NONINTEREST EXPENSES 131,767 124,586 7,181 5.8 256,422 245,438 10,984 4.5
- - ------------------------------------------------------- --------- --------- --------- ------- --------- --------- --------- -------
INCOME BEFORE PROVISION FOR INCOME TAXES 76,098 66,523 9,575 14.4 150,479 123,270 27,209 22.1
- - ------------------------------------------------------- --------- --------- --------- ------- --------- --------- --------- -------
PROVISION FOR INCOME TAXES:
Operating earnings 26,223 23,315 2,908 12.5 52,389 43,772 8,617 19.7
Securities available for sale gains (losses) 894 280 614 219.3 1,124 280 844 301.4
- - ------------------------------------------------------- --------- --------- --------- ------- --------- --------- --------- -------
TOTAL PROVISION FOR INCOME TAXES 27,117 23,595 3,522 14.9 53,513 44,052 9,461 21.5
- - ------------------------------------------------------- --------- --------- --------- ------- --------- --------- --------- -------
NET INCOME 48,981 42,928 6,053 14.1 96,966 79,218 17,748 22.4
======================================================= ========= ========= ========= ======= ========= ========= ========= =======
Dividend requirement of preferred stock 8 8 0 0.0 16 16 0 0.0
- - ------------------------------------------------------- --------- --------- --------- ------- --------- --------- --------- -------
Net Income Applicable To Common Stock 48,973 42,920 6,053 14.1 96,950 79,202 17,748 22.4
======================================================= ========= ========= ========= ======= ========= ========= ========= =======
Common stock dividend 19,055 16,021 3,034 18.9 36,301 31,995 4,306 13.5
======================================================= ========= ========= ========= ======= ========= ========= ========= =======
EARNINGS PER COMMON SHARE:
Earnings per common share: primary 0.42 0.37 0.05 13.5 0.84 0.68 0.16 23.5
Earnings per common share: fully diluted 0.42 0.37 0.05 13.5 0.83 0.68 0.15 22.1
Common shares: primary [Avg] 115,638 115,824 (186) (0.2) 115,902 115,785 117 0.1
Common shares: fully diluted [Avg] 115,915 116,114 (199) (0.2) 116,179 116,077 102 0.1
======================================================= ========= ========= ========= ======= ========= ========= ========= =======
CASH DIVIDENDS PAID OR ACCRUED PER SHARE:
Preferred stock dividend ($3.15 annual rate) 0.79 0.79 0.00 0.0 1.58 1.58 0.00 0.0
Common stock dividend 0.17 0.14 0.03 21.4 0.32 0.28 0.04 15.5
======================================================= ========= ========= ========= ======= ========= ========= ========= =======
<FN>
See "Notes to Consolidated Financial Statements".
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
CONSOLIDATED BALANCE SHEETS
($ in thousands; unaudited)
<CAPTION>
June 30 December 31 June 30 Jun/Jun Jun/Jun
1997 1996 1996 $ Chg % Chg
<S> <C> <C> <C> <C> <C>
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
ASSETS:
Cash & due from banks 841,097 937,144 781,634 59,463 7.6
Federal funds sold & securities purchased under resale agreements 240,558 223,235 86,029 154,529 179.6
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Total Cash & Cash Equivalents 1,081,655 1,160,379 867,663 213,992 24.7
Interest-bearing deposits in other banks 600 31,617 6,266 (5,666) (90.4)
Trading account securities 274,014 447,486 150,529 123,485 82.0
Securities available for sale, at fair value 3,457,692 3,150,276 2,715,770 741,922 27.3
(Amortized cost: $3,456,117; $3,148,622; and $2,735,771; respectively)
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Loans, net of unearned income 10,093,820 9,262,482 8,716,400 1,377,420 15.8
(Unearned income: $96,826; $67,396; and $45,357; respectively)
Reserve for loan losses (141,637) (134,428) (133,678) (7,959) 6.0
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Total Loans, Net 9,952,183 9,128,054 8,582,722 1,369,461 16.0
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Premises & equipment, net 263,305 233,497 221,165 42,140 19.1
Accrued income receivable 90,993 89,595 81,071 9,922 12.2
Other real estate 4,768 4,855 5,663 (895) (15.8)
Other assets 299,708 292,486 248,167 51,541 20.8
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Goodwill 156,403 89,142 92,821 63,582 68.5
Mortgage servicing rights 88,438 78,586 62,518 25,920 41.5
Other intangible assets 1,787 2,051 2,243 (456) (20.3)
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Total Intangible Assets 246,628 169,779 157,582 89,046 56.5
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
TOTAL ASSETS 15,671,546 14,708,024 13,036,598 2,634,948 20.2
=========================================================================== =========== =========== =========== =========== =======
LIABILITIES:
Deposits: noninterest-bearing 2,217,107 2,198,348 1,857,593 359,514 19.4
Deposits: interest-bearing 7,602,574 7,240,915 7,027,120 575,454 8.2
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Total Deposits 9,819,681 9,439,263 8,884,713 934,968 10.5
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Federal funds purchased & securities sold under repurchase agreements 2,974,381 2,542,592 1,796,266 1,178,115 65.6
U.S. Treasury demand notes 20,002 8,885 34,321 (14,319) (41.7)
Other short-term borrowings 288,939 279,156 218,487 70,452 32.2
Accrued income taxes 217,933 187,638 145,269 72,664 50.0
Accrued interest payable 37,455 41,442 45,136 (7,681) (17.0)
Other liabilities 91,248 124,003 133,833 (42,585) (31.8)
Long-term debt 959,897 944,055 723,728 236,169 32.6
Minority equity in subsidiaries 0 342 319 (319) (100.0)
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
TOTAL LIABILITIES 14,409,536 13,567,376 11,982,072 2,427,464 20.3
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
STOCKHOLDERS' EQUITY:
Preferred stock: Series "A" $3.15 cumulative convertible 531 540 553 (22) (4.0)
(Shares issued: 10; 10; and 11; respectively)
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Common Stockholders' Equity:
Common stock: par value $1.25 148,156 143,007 142,640 5,516 3.9
(Shares issued: 118,525; 114,405; and 114,112; respectively)
Paid-in surplus 179,057 82,729 76,849 102,208 133.0
Retained earnings 984,016 923,375 857,665 126,351 14.7
Net unrealized gain (loss) on securities available for sale (net of taxes) 1,236 877 (12,638) 13,874 (109.8)
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Subtotal 1,312,465 1,149,988 1,064,516 247,949 23.3
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Common treasury stock, at cost (50,986) (9,880) (10,543) (40,443) 383.6
(Shares: 2,662; 846; and 912; respectively)
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Total Common Stockholders' Equity 1,261,479 1,140,108 1,053,973 207,506 19.7
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
TOTAL STOCKHOLDERS' EQUITY 1,262,010 1,140,648 1,054,526 207,484 19.7
- - --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 15,671,546 14,708,024 13,036,598 2,634,948 20.2
=========================================================================== =========== =========== =========== =========== =======
<FN>
See "Notes to Consolidated Financial Statements".
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands; unaudited)
<CAPTION>
For the Six Months Ended June 30, 1997 1996
<S> <C> <C>
- - --------------------------------------------------------------------------------- -------------- --------------
NET CASH PROVIDED BY (USED IN) BY OPERATING ACTIVITIES 263,194 652,855
- - --------------------------------------------------------------------------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment securities available for sale 279,978 35,021
Redemption of matured investment securities available for sale 382,134 524,183
Purchases of investment securities available for sale (852,505) (693,835)
Net (increase) decrease in interest-bearing deposits in other banks 31,117 15,297
Net (increase) decrease in loans (710,943) (530,801)
Purchases of premises and equipment (13,280) (15,361)
Proceeds from sales of other real estate 2,708 2,106
Payments to improve other real estate (1,030) (1,957)
Net cash (paid for) received from acquisitions 32,298 0
- - --------------------------------------------------------------------------------- -------------- --------------
NET CASH USED IN INVESTING ACTIVITIES (849,523) (665,347)
- - --------------------------------------------------------------------------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 146,165 111,071
Net increase (decrease) in Federal funds purchased, securities sold
under repurchase agreements, and U.S. Treasury demand notes 403,636 (140,766)
Proceeds from issuance of nonrecourse debt on leveraged leases 17,190 0
Proceeds (payments) on nonrecourse debt on leveraged leases (11,664) (23,470)
Proceeds from issuance of long-term debt and short-term borrowings 74,313 107,149
Payments on long-term debt and short-term borrowings (48,688) (112,791)
Proceeds from issuance of common stock and sales of treasury stock 5,858 6,006
Purchases of treasury stock (42,888) (1,765)
Dividends paid (36,317) (32,012)
- - --------------------------------------------------------------------------------- -------------- --------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 507,605 (86,578)
- - --------------------------------------------------------------------------------- -------------- --------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (78,724) (99,070)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,160,379 966,733
- - --------------------------------------------------------------------------------- -------------- --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD 1,081,655 867,663
================================================================================= ============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
- - --------------------------------------------------------------------------------- -------------- --------------
CASH PAID (RECEIVED) FOR:
Interest 267,976 230,460
Income taxes 19,972 12,342
================================================================================= ============== ==============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of preferred shares to common shares:
Preferred shares converted (not rounded) 151 338
Common shares issued (not rounded) 4,120 8,061
Conversion value 8 18
Transfer of loans to other real estate 2,062 1,318
Net unrealized gain (loss) on securities available for sale
included in stockholders' equity 359 (27,185)
Acquisitions:
Assets acquired 369,829 0
Liabilities assumed 272,768 0
FSCO shares issued (not rounded) 3,574,159 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, in all material respects, FSCO's: results of operations for the three
months and the year-to-date six months in the periods ended June 30, 1997 and
1996; financial position as of June 30, 1997, December 31, 1996, and June 30,
1996; and cash flows for the year-to-date six months in the periods ended June
30, 1997 and 1996.
2. FSCO's results of operations for the three months and the year-to-date
six month periods ended June 30, 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 REFLECT A
3-FOR-2 COMMON STOCK SPLIT IN THE FORM OF A 50% STOCK DIVIDEND PAID IN MAY
1997.
4. 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.
5. FSCO's financial statements and commentary incorporate fair market
values for balances added from purchase transactions and historical values for
balances added from pooling-of-interests mergers, as well as earnings since
their acquisition, from 3 acquisitions completed in year-to-date 1997 (see:
MDA "Mergers and Acquisitions").
* 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 June 30, 1997, American Bancorp of Nevada (ABN), headquartered in Las
Vegas, Nevada, was acquired and merged into FSCO, and its wholly owned
subsidiary American Bank of Commerce, with 5 branches, total assets of $304
million, total loans of $146 million, and total deposits of $234 million, was
merged into FSCO's First Security Bank of Nevada (FSB Nevada).
Pro forma results of operations for 1997 and 1996, as if the above
companies purchased had combined at the beginning of the periods, are not
presented because the effect was not material.
6. In February 1997, the Financial Accounting Standards Board (FASB)
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.
SFAS No. 128 is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods; earlier application
is not permitted. It requires restatement of all prior period EPS data
presented. The adoption of SFAS No. 128 is not expected to have a material
impact on FSCO.
FSCO's pro-forma basic EPS, reflecting the 3-for-2 common stock split, were
$0.86 for the first six months of 1997, up $0.16 or 22.9% from $0.70 for the
year-ago period, and were $0.44 for the second quarter of 1997, up $0.06 or
15.8% from $0.38 for the year-ago quarter.
7. In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive
Income" which establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains, and losses) in a full
set of general-purpose financial statements. SFAS No. 130 requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements. It does
not require a specific format for that financial statement but requires that
an enterprise display an amount representing total comprehensive income for
the period in that financial statement.
SFAS No. 130 is effective for fiscal years beginning after December 15,
1997. Reclassification of financial statements for earlier periods provided
for comparative purposes is required. The impact on FSCO of the adoption of
SFAS No. 130 has not yet been fully determined.
8. In June 1997, the FASB issued SFAS No. 131 "Disclosures About Segments
of an Enterprise and Related Information" which establishes standards for the
way that public businesses report information about operating segments in
annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports
issued to shareholders. SFAS No. 131 also establishes standards for related
disclosures about products and services, geographical areas, and major
customers. It supersedes SFAS No. 14 but retains the requirement to report
information about major customers. It amends SFAS No. 94 to remove the
special disclosure requirements for previously unconsolidated subsidiaries.
SFAS No. 131 is effective for financial statements for periods beginning
after December 15, 1997. In the initial year of application, comparative
information for earlier years is to be restated. It need not be applied to
interim financial statements in the initial year of its application, but
comparative information for interim periods in the initial year of application
is to be reported in financial statements for interim periods in the second
year of application. The adoption of SFAS No. 131 will result in additional
disclosures but is not expected to have a material impact on FSCO's results of
operations or financial condition.
9. On January 31, 1997, the Securities and Exchange Commission (SEC) issued
final rules to clarify and expand existing disclosure requirements for
derivative financial instruments, other financial instruments, etc. Included
is Rule 210.4-08(n) of Regulation S-X "Accounting policies for certain
derivative instruments" which is effective, and disclosures under that rule
are required, for filings with the SEC that include financial statements for
fiscal periods ending after June 15, 1997.
Derivative products used by FSCO include financial futures, option
contracts, interest rate swaps, caps, floors, and interest rate corridors.
Financial futures are accounted for by daily recording the net change in
the futures contract value. This value is settled daily in cash. Net gains
or losses resulting from FSCO's daily settlements are included with the
trading account securities gains (losses) in the consolidated statements of
income.
Options contracts are marked to market monthly with net gains or losses
recognized currently in trading securities gains (losses) in the consolidated
statements of income. Cash is exchanged with the counterparties on the option
contracts' settlement date.
Interest rate swaps, caps, floors, and corridors are used in FSCO's
interest rate risk management activities and are classified as hedges or
matched transactions, i.e. these derivative products can be identified as
hedging a specific asset or liability and, therefore, are accounted for using
settlement or hedge accounting. FSCO has established policies and procedures
which govern the use of these derivative products. In addition, FSCO
regularly reviews these derivatives for effectiveness, market risk, and
counterparty credit exposure. These derivative agreements are designated with
the principal balance and term of specific debt obligations or loan balances.
Net income / expense is recognized in net interest income in the consolidated
statements of income. Gains and losses on termination of these derivative
agreements are deferred as an adjustment to the carrying amount of the
outstanding assets or liabilities and amortized as an adjustment to interest
expense or income over the remaining term of the original contract life of the
terminated derivative agreement. In the event of the early extinguishment of
a designated asset or debt obligation, any realized or unrealized gain or loss
from the derivative agreement would be recognized in income coincident with
the extinguishment. FSCO's policies regarding its use of settlement or hedge
accounting were discussed in greater detail in FSCO's 1996 Form 10-K (hereby
incorporated by reference).
# # #
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (MDA)
HIGHLIGHTS
Highlights for First Security Corporation (FSCO) for the first six months and
the second quarter of 1997, compared to corresponding periods in 1996,
included:
RESULTS OF OPERATIONS
* Net income of $97.0 million for the year to date, up $17.7 million or 22.4%,
and $49.0 million for the quarter, up $6.1 million or 14.1%.
* Fully diluted earnings per share of $0.83 for the year to date, up $0.15 or
22.1%, and $0.42 for the quarter, up $0.05 or 13.5%.
* Net interest income FTE of $279.7 million for the year to date, up $30.5
million or 12.2%, and $143.5 million for the quarter, up $16.4 million or
12.9%.
* Consolidated operating expense ratio was 58.47% for the year to date and
58.92% for the quarter.
FINANCIAL CONDITION AT JUNE 30, 1997
* Record total assets of $15.7 billion, up $2.6 billion or 20.2%.
* Record interest-earning assets of $14.1 billion, up $2.4 billion or 20.5%.
* Stockholders' equity of $1.3 billion, up $207 million or 19.7%.
* Asset quality: ratio of total problem assets to total loans & ORE at 0.60%.
* Ratio of reserve to total loans at 1.40%.
* Ratio of reserve to nonaccruing loans at 399.54%.
* All equity and risk-based capital ratios continue to exceed regulatory
requirements for "well capitalized" status.
OTHER HIGHLIGHTS
* FSCO declared a 3-for-2 common stock split in the form of a 50% stock
dividend paid May 15, 1997, to shareholders of record May 12, 1997 (all
common stock and earnings per share data in this report reflect this split).
* First Security Bank of Oregon was merged into First Security Bank, N.A.
* American Bancorp of Nevada was acquired and merged into FSCO.
ANALYSIS OF STATEMENTS OF INCOME
SUMMARY
[NOTE: ALL COMMON STOCK AND EARNINGS PER SHARE DATA REFLECT A 3-FOR-2 COMMON
STOCK SPLIT IN THE FORM OF A 50% STOCK DIVIDEND PAID IN MAY 1997.]
FSCO's net income totaled $97.0 million for year-to-date 1997, up $17.7
million or 22.4% from $79.2 million earned in the corresponding year-to-date
1996 period (see: Financial Statements "Consolidated Income Statements"; and
MDA Supplemental Tables "Financial Highlights"). This net income generated a
1.36% return on average assets (ROAA) and a 17.16% return on average equity
(ROAE) for year-to-date 1997, up from a 1.26% ROAA and a 15.24% ROAE for the
1996 period. Fully diluted earnings per share were $0.83 for year-to-date
1997, up $0.15 or 22.1% from $0.68 for the year-ago period. The tangible ROAA
was 1.51%, the tangible ROAE was 22.15%, and tangible fully diluted earnings
per share were $0.91 for year to date 1997, compared with a 1.41% tangible
ROAA, a 19.68% tangible ROAE, and tangible fully diluted earnings per share of
$0.75 for the year-ago period.
Net income was $49.0 million for the second quarter of 1997, up $6.1
million or 14.1% from $42.9 million earned in the second quarter of 1996.
This net income generated a 1.34% ROAA and a 17.30% ROAE for the quarter,
compared with a 1.36% ROAA and a 16.52% ROAE for the year-ago quarter. Fully
diluted earnings per share were $0.42 for the quarter, up $0.05 or 13.5% from
$0.37 for the year-ago quarter. The tangible ROAA was 1.48%, the tangible
ROAE was 22.48%, and tangible fully diluted earnings per share were $0.46 for
the second quarter of 1997, compared with a 1.51% tangible ROAA, a 21.43%
tangible ROAE, and tangible fully diluted earnings per share of $0.41 for the
year-ago quarter.
NET INTEREST INCOME AND MARGIN
FSCO's net interest income on a fully taxable equivalent (FTE) basis
totaled $279.7 million for year-to-date 1997, up $30.5 million or 12.2% from
the year-ago period, and was $143.5 million for the second quarter of 1997, up
$16.4 million or 12.9% from the year-ago quarter (see: MDA Supplemental Tables
"Financial Highlights" and "Volume/Rate Analysis"). These increases were due
primarily to volume growth of loans and other 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 and the sale
of $99 million of mortgage loans in the second quarter of 1997, partially
offset by volume growth of average interest-bearing liabilities.
The net interest margin was 4.38% for year-to-date 1997, down 4 basis
points from the year-ago period, and was 4.37% for the second quarter of 1997,
down 10 basis points from the year-ago quarter. These decreases were due to
the combined impact of: volume growth on interest-bearing deposits; increased
short term borrowed funds; and $300 million of long-term debt issued in the
fourth quarter of 1996 to take advantage of relatively low long-term interest
rates. On a linked-quarter basis, the net interest margin for the second
quarter of 1997 remained essentially unchanged from the first quarter of 1997.
PROVISION FOR LOAN LOSSES
FSCO's provision for loan losses totaled $27.8 million for year-to-date
1997, up $8.6 million or 44.6% from the year-ago period, and was $13.9 million
for the second quarter of 1997, up $3.4 million or 32.5% from the year-ago
quarter (see: MDA "Interest-Earning Assets and Asset Quality: Provision For
Loan Losses").
NONINTEREST INCOME
FSCO's noninterest income totaled $158.9 million for year-to-date 1997, up
$16.6 million or 11.7% from the year-ago period, and was $80.2 million for the
second quarter of 1997, up $4.5 million or 5.9% from the year-ago quarter
(see: Financial Statements "Consolidated Income Statements"). These increases
were the result of FSCO's continued emphasis on increasing and diversifying
sources of noninterest income from service charges on accounts, bankcard
servicing income, insurance income, trust income, and gains on the ongoing
sale of loans and loan servicing. These gains 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 in
the first quarter of 1997, and a $1.6 million gain on the sale of $99 million
of mortgage loans in the second quarter of 1997.
NONINTEREST EXPENSES
FSCO's noninterest expenses totaled $256.4 million for year-to-date 1997,
up $11.0 million or 4.5% from the year-ago period, and were $131.8 million for
the second quarter of 1997, up $7.2 million or 5.8% from the year-ago quarter
(see: Financial Statements "Consolidated Income Statements"). These increases
were due to: higher salaries and employee benefits expense resulting from
additions to loan production personnel in order to meet very strong loan
demand; volume growth in bankcard interbank expense; increased depreciation
and rent on furniture, equipment, and occupancy expenses; and increases in
other real estate, telephone, and other expenses. These increases were
partially offset by material reductions in advertising, insurance, postage,
and stationary and supplies expenses.
FSCO's operating expense ratio (the ratio of noninterest expenses to the
sum of net interest income FTE and noninterest income) was reduced to 58.47%
for year-to-date 1997, an improvement of 423 basis points from the year-ago
period, and was 58.92% for the second quarter of 1997, which was 252 basis
points better than the year-ago quarter.
CrossLand Mortgage has a higher operating expense ratio than FSCO's bank
subsidiaries, due to its labor intensive business of originating, selling, and
servicing mortgage loans. Excluding the impact of CrossLand Mortgage, FSCO's
"core" efficiency ratio was 55.64% for year-to-date 1997, an improvement of
491 basis points from the year-ago period, and was 56.18% for the second
quarter of 1997, which was 379 basis points better than the year-ago quarter.
ANALYSIS OF BALANCE SHEETS
SUMMARY
FSCO's assets totaled $15.7 billion at June 30, 1997, up $2.6 billion or
20.2% from June 30, 1996, and up $1.0 billion or 6.6% from December 31, 1996.
Interest-earning assets were $14.1 billion at quarter end, up $2.4 billion or
20.5% from one year ago, and up $952 million or 7.3% from year-end 1996 (see:
MDA "Interest-Earning Assets and Asset Quality").
At June 30, 1997, FSCO considered its interest-earning asset quality to
remain good, and its reserve for loan losses and its liquidity position to be
adequate for the foreseeable future.
Intangible assets were $247 million at quarter end, up from one year ago
and year-end 1996 due to increased originated mortgage servicing rights from
higher loan production and goodwill associated with 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 liabilities totaled $14.4 billion at June 30, 1997, up $2.4 billion
or 20.3% from one year ago, and up $842 million or 6.2% from year end. Total
interest-bearing liabilities were $11.8 billion at quarter end, up $2.0
billion or 20.9% from one year ago, and up $830 million or 7.5% from year end
(see: MDA "Liquidity").
Stockholders' equity in FSCO was $1.3 billion at June 30, 1997, up $207
million or 19.7% from one year ago, and up $121 million or 10.6% from year-end
1996 (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 $274 million at June 30,
1997, up $123 million or 82.0% from one year ago, but down $173 million or
38.8% from year end. Fluctuations in volumes of trading account securities
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 entire investment securities
portfolio under the "securities available for sale" classification.
FSCO's investment securities were $3.5 billion at June 30, 1997, up $742
million or 27.3% from one year ago, and up $307 million or 9.8% from year end,
due to increased holdings of securities funded by repurchase agreements.
Volatility in the SFAS No. 115 net unrealized gain (loss) on securities
available for sale generally responds inversely to changes in interest rates.
The recent increase in gains was due to a combination of new purchases and
market value improvements.
INTEREST-EARNING ASSETS and ASSET QUALITY:
LOANS
FSCO's loan portfolio, net of unearned income but before the reserve for
loan losses, was $10.1 billion at June 30, 1997, up $1.4 billion or 15.8% from
one year ago, and up $831 million or 9.0% from year end (see: MDA Supplemental
Tables "Loans" and "Financial Highlights"). This growth was the result of
very strong loan demand, combined with $284 million in real estate loans added
with the acquisition of Harbourton Mortgage Co., L.P. (Harbourton) and $146
million in total loans added with the acquisition of American Bancorp of
Nevada (ABN), that were only slightly offset by loan securitizations and sales
(see: "Notes to Consolidated Financial Statements" and MDA "Mergers and
Acquisitions"). The ratio of total loans to total assets was 64.41% at
quarter end, down from 66.86% one year ago, but up from 62.98% at year end.
The components of FSCO's loan portfolio at June 30, 1997, compared with June
30, 1996, and December 31, 1996, respectively, are discussed below.
* Commercial loans were $2.5 billion, up $465 million or 22.7% from one
year ago, and up $358 million or 16.6% 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 $3.8 billion, up $357 million or 10.5%
from one year ago, and up $398 million or 11.8% from year end. These
increases were due primarily to loans added with the Harbourton and ABN
acquisitions. Increases in loan production generated by seasonal factors and
lower interest rates were mostly offset by higher ongoing mortgage loan sales.
For balance sheet management purposes, FSCO does not retain all newly
originated mortgage loans but regularly sells a portion in secondary markets.
At June 30, 1997, $665 million of these loans were held for sale, up $237
million or 55.5% from one year ago, and up $335 million or 101.4% from year
end.
* Consumer loans were $2.9 billion, up $236 million or 8.9% from one year
ago primarily due to growth in auto lending, but down $92 million or 3.1% from
year end as loan growth was partially offset by the securitization and sale of
$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 $920 million, up $320 million or 53.2% from one year ago, and
up $167 million or 22.2% 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, economic cycles and loan-specific events can cause periodic
fluctuations in problem assets.
FSCO considered its interest-earning asset quality to remain good, as the
ratio of problem assets to total loans and other real estate (ORE) was 0.60%
at June 30, 1997, up slightly from 0.54% one year ago, but down slightly from
0.62% at year-end 1996, and essentially unchanged for the third quarter in a
row. Problem assets totaled $60.8 million at June 30, 1997, up $13.3 million
or 28.0% from one year ago, and up $3.3 million or 5.7% from year end (see:
MDA Supplemental Tables "Financial Highlights - Problem Assets, - Selected
Ratios"). The components of FSCO's problem assets at June 30, 1997, compared
with June 30, 1996, and December 31, 1996, are discussed below.
* Nonaccruing loans were $35.5 million, up $10.3 million or 40.9% from one
year ago, and up $2.2 million or 6.5% from year end. The increase from one
year ago included nonaccruing loans in the real estate sector and
miscellaneous commercial credits, while the increase from year end was due to
two agricultural credits and two residential construction projects. 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. The ratio of
nonaccruing loans to total loans was 0.35%, compared to 0.29% for one year ago
and 0.36% for year end.
* Other real estate was $4.8 million, down $895 thousand or 15.8% from one
year ago, and down $87 thousand or 1.8% from year end. These decreases were
due to property sales. 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 $20.5 million, up $3.9
million or 23.3% from one year ago, and up $1.2 million or 6.3% from year end.
The increase from one year ago included instalment, commercial real estate,
and residential term real estate loans. The ratio of accruing loans past due
90 days or more to total loans was 0.20%, essentially unchanged from 0.19% one
year ago and 0.21% at year end.
FSCO's asset quality indicators remained at favorable levels in comparison
to that of its peer group as reported in the March 31, 1997 Bank Holding
Company Performance Report (BHCPR). As of March 31, 1997, FSCO's ratio of
nonaccruing loans to total loans was 0.34%, which compared favorably with the
0.63% reported for FSCO's peer group in the BHCPR, while FSCO's ratio of
accruing loans past due 90 days or more to total loans was 0.23%, which
compared favorably with the 0.27% reported for FSCO's peer group in the BHCPR.
Potential problem loans identified by FSCO were $9.7 million, down $13.8
million or 58.6% from one year ago, but up $1.5 million or 17.8% from year
end. The decrease from one year ago was due to two large commercial credits
which have improved, while the increase from year end occurred primarily in
commercial and agricultural 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.
FSCO's reserve for loan losses was increased to $141.6 million at June 30,
1997, up $8.0 million or 6.0% from one year ago, and up $7.2 million or 5.4%
from year end 1996 (see: MDA Supplemental Tables "Financial Highlights -
Reconciliation of the Reserve For Loan Losses"). These increases included:
$3.5 million in additions to the reserve over the last 12 months as FSCO
responded primarily to loan growth; and $4.5 million in reserves added with
the ABN acquisition (see: MDA "Mergers and Acquisitions"). FSCO will continue
to build reserves as needed.
Based on its analysis of reserve adequacy, FSCO considered its reserve for
loan losses at June 30, 1997 to be adequate to absorb estimated loan losses in
the current loan portfolios. The coverage ratio of the reserve to nonaccruing
loans was 399.54% at June 30, 1997, down from 531.35% one year ago, but
essentially unchanged from 403.98% at year end (see: MDA Supplemental Tables
"Financial Highlights - Selected Ratios"). The ratio of the reserve to total
loans was 1.40% at June 30, 1997, down from 1.53% one year ago and 1.45% at
year end.
Net loans charged off were $25.1 million for year-to-date 1997, up $9.5
million or 61.3% from the year ago period, and were $12.7 million for the
second quarter of 1997, up $5.2 million or 69.4% from the year ago quarter
(see: MDA Supplemental Tables "Financial Highlights - Reconciliation of the
Reserve For Loan Losses"). These increases were due to higher consumer and
credit card losses following national trends and an increase in the charge off
of various smaller commercial credits. The annualized ratio of net loans
charged off to average loans was 0.54% for 1997, up from 0.37% for the year-
ago period and 0.41% for all of 1996, and was 0.53% for the second quarter of
1997, up from 0.35% for the year ago quarter.
FSCO uses the provision for loan losses to adjust the reserve when a
replenishment or addition is appropriate.
INTEREST-EARNING ASSETS AND ASSET QUALITY:
PROVISION FOR LOAN LOSSES
FSCO's provision for loan losses totaled $27.8 million for year-to-date
1997, up $8.6 million or 44.6% from the year-ago period, and was $13.9 million
for the second quarter of 1997, up $3.4 million or 32.5% 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"). These increases included
previously mentioned additions to the reserve totaling $3.5 million over and
above net loans charged off.
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 use 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 $9.8 billion at June 30, 1997, up $935 million or 10.5% from
one year ago, and up $380 million or 4.0% from year end (see: Financial
Statements "Consolidated Balance Sheets"; and MDA Supplemental Tables
"Volume/Rate Analysis"). These increases were due to $234 million in deposits
added with the ABN acquisition (see: MDA "Mergers and Acquisitions") combined
with 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 102.79% at quarter end, up from 98.11% one year ago,
and up 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 $4.2
billion at June 30, 1997, up $1.5 billion or 53.0% from one year ago, and up
$469 million or 12.4% from year end (see: Financial Statements "Consolidated
Balance Sheets"). The components of FSCO's debt at June 30, 1997, compared
with June 30, 1996, and December 31, 1996, are discussed below.
Federal funds purchased and securities sold under repurchase agreements
were $3.0 billion, up $1.2 billion or 65.6% from one year ago, and up $432
million or 17.0% from year end. These increases occurred as FSCO funded
approximately $500 million of loan growth generated by business-cycle
opportunities in its market areas, and funded approximately $700 million of
growth in investment securities through repurchase agreements.
* All other short-term borrowed funds were $309 million, up $56 million or
22.2% from one year ago, and up $21 million or 7.3% from year end. These
increases were due to maturing issues formerly classified as long-term debt.
* Long-term debt was $960 million, up $236 million or 32.6% from one year
ago, and up $16 million or 1.7% 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 due in 2026 (see "Stockholders' Equity and Capital Adequacy"); and
new Federal Home Loan Bank borrowings. These increases were partially offset
by the ongoing maturity of existing long-term debt.
ASSET/LIABILITY MANAGEMENT:
INTEREST RATE RISK
During the 12 months ended June 30, 1997, FSCO continued to maintain a
relatively neutral interest rate risk position and a conservative balance
sheet. As of June 30, 1997, FSCO exhibited a slight asset sensitivity at the
one-year time frame and minimal overall interest rate risk.
During the 12-month period, a strong regional economy resulted in loan
growth of $1.4 billion, while successful deposit promotions helped to generate
deposit growth of $935 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 $742 million. This increase was primarily funded
through the use of repurchase agreements. As of June 30, 1997, off-balance
sheet instruments used for interest rate risk management activities, including
interest rate swaps, caps, and corridors, were $381 million notional amount,
compared with $618 million notional amount at year end. Also at June 30,
1997, financial futures and options contracts related to FSCO's trading
account securities totaled $1.5 billion notional amount, down from $10.1
billion notional amount at year end due to decreased trading activity as a
result of the lack of volatility in the fixed income markets.
STOCKHOLDERS' EQUITY and CAPITAL ADEQUACY
FSCO's stockholders' equity was $1.3 billion at June 30, 1997, up $207
million or 19.7% from one year ago, and up $121 million or 10.6% from year-end
1996 (see: Financial Statements "Consolidated Balance Sheets"). This growth
was due to earnings retained, the issuance of 3.6 million shares of new common
stock for the ABN acquisition, and the impact of the SFAS 115 net unrealized
gain (loss) on securities available for sale. These increases were partially
offset by the repurchase of 1.8 million shares of common stock in the public
markets in the first quarter of 1997. The ratio of stockholders' equity to
total assets was 8.05% at June 30, 1997, essentially unchanged from 8.09% one
year ago but up from 7.76% at year end (see: MDA Supplemental Tables
"Financial Highlights - Selected Ratios"). The ratio of tangible common
equity to tangible assets was 6.58% at June 30, 1997, down from 6.96% one year
ago and 6.67% at year end, reflecting the goodwill recognized with the ABC
merger.
Application of SFAS 115 has resulted in, and will continue to result in,
additions to or deductions from FSCO's total stockholders' equity due to
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 due in 2026. Although included in "Long-Term Debt"
rather than "Stockholders' Equity" on FSCO's financial statements, regulations
permit these 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 June 30, 1997 due to
earnings retained, the above-mentioned issuance of Capital Income Securities,
and the impact of the SFAS 115 net unrealized gain (loss) on securities
available for sale (see: MDA Supplemental Tables "Financial Highlights - Risk-
Based Capital Ratios"). FSCO's risk-based capital ratios at June 30, 1997,
June 30, 1996, and December 31, 1996, respectively, were: Tier 1 at 10.98%,
compared with 10.29% and 11.34%; and Total Capital at 14.00%, compared with
13.65% and 14.50%. At the same time periods, the leverage ratio was 8.02%,
compared with 7.50% 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 paid on May 15, 1997, to shareholders of record on May
12, 1997. As a result of the split, shareholders received one additional
share of FSCO common stock for every two shares held. All common stock and
earnings per share data in this report 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 was paid on June 2, 1997, to
shareholders of record on May 16, 1997, and equated to an annual dividend rate
of $0.68 per share. Since year-end 1995, FSCO has increased its dividend
three times or 36.6%.
On July 28, 1997, FSCO also declared a regular quarterly common stock
dividend of $0.17 per share. This dividend is payable on September 2, 1997,
to shareholders of record on August 8, 1997, and equates to an annual dividend
rate of $0.68 per share. At the market closing price of $26.88 per share on
Monday, July 28, 1997 (before the announcement of the dividend), the annual
dividend yield on FSCO common stock would have been approximately 2.53%.
The September 2, 1997 dividend is the 170th common stock dividend declared
by FSCO, and marks the 63rd 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 was $27.31 per share at the close of the
market on June 30, 1997, versus a book value of $10.89 per share. This
resulted in a market-to-book ratio of 250.80%, compared to 171.80% one year
ago and 226.59% at year end. At June 30, 1997, FSCO's common stock market
capitalization was $3.2 billion, up 74.7% from one year ago, and up 22.5% 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.
On June 30, 1997, American Bancorp of Nevada (ABN), headquartered in Las
Vegas, Nevada, was acquired and merged into FSCO, and its wholly owned
subsidiary American Bank of Commerce was merged into FSCO's First Security
Bank of Nevada (FSB Nevada). This merger made FSB Nevada the fourth largest
bank in Nevada, with combined assets of $850 million, loans of $370 million,
deposits of $680 million, and 13 branches.
CORPORATE STRUCTURE
On May 23, 1997, FSCO merged First Security Bank of Oregon into First
Security Bank, N.A., resulting in combined assets of $12.7 billion, loans of
$8.7 billion, deposits of $7.8 billion, and 224 branches. Combining the
charters of these two banks was originally announced in 1995 as part of
Project VISION, FSCO's restructuring project.
NATIONAL & REGIONAL ECONOMY
Despite a tightening in Federal Reserve monetary policy at the inception of
the second quarter of 1997, the trend in interest rates was downward over much
of the next three months. The financial market's rally reflected a more
subdued pace of economic growth, but there was almost no evidence or concern
of a deepening or prolonged slowdown. Furthermore, even with developing wage
pressures in labor markets, most measures of inflation actually decelerated
during the quarter. Accordingly, real interest rates remain high by
historical standards. Potential reasons for higher interest rates in the
second half of 1997 now appear less likely. Productivity gains and ongoing
cost containment pressures should continue to offset much of the wage-based
inflationary pressures.
Business conditions in the Intermountain Region's economy at midyear remain
favorable, but aggregate growth rates have generally narrowed somewhat from a
year ago. Unemployment rates continue to be relatively low and stable,
indicating that the narrowing pace of job gains may partially reflect a
limited supply of labor. Residential construction in the first half of 1997
was, in general, slightly below year-earlier totals, but this tends to match
the modest dip in real estate sales. With lower mortgage rates, the
construction industry may nearly duplicate year-ago levels in the months
ahead.
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>
2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr Year-To-Date Six Months
1997 1997 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 0.42 0.41 0.44 0.41 0.37 0.84 0.68 23.5
Earnings per common share: fully diluted 0.42 0.41 0.44 0.41 0.37 0.83 0.68 22.1
Tangible EPCS: fully diluted 0.46 0.45 0.46 0.44 0.41 0.91 0.75 21.3
Dividends paid per common share 0.17 0.15 0.15 0.14 0.14 0.32 0.28 15.5
Book value [EOP] 10.89 9.96 10.04 9.64 9.31 10.89 9.31 16.9
Tangible book value [EOP] 8.76 8.44 8.54 8.22 7.92 8.76 7.92 10.6
Market price (bid) [EOP] 27.31 21.42 22.75 18.25 16.00 27.31 16.00 70.7
High bid for the period 28.50 24.83 22.75 18.75 18.42 28.50 18.50 54.1
Low bid for the period 21.67 21.33 18.75 15.83 15.25 21.33 15.25 39.9
Market capitalization (mktprice x #shrs) [EOP] 3,164,508 2,407,161 2,583,467 2,069,468 1,811,184 3,164,508 1,811,184 74.7
Market price / book value [EOP] % 250.80 215.03 226.59 189.32 171.80 250.80 171.80
Dividend payout ratio (DPCS / EPCS) % 40.48 37.40 34.85 34.43 37.50 38.49 41.18
Dividend yield (DPCS / mktprice) [EOP] % 2.49 2.86 2.70 3.07 3.50 2.49 3.50
Price / earnings ratio (mktprice / 4 qtrs EPCS) 16.3x 13.1x 14.8x 15.6x 14.5x 16.3x 14.5x
Common shares [EOP] 115,863 112,397 113,559 113,396 113,199 115,863 113,199 2.4
Common shares: primary [Avg] 115,638 116,168 116,625 116,061 115,824 115,902 115,785 0.1
Common shares: fully diluted [Avg] 115,915 116,447 116,909 116,348 116,114 116,179 116,077 0.1
Preferred shares [EOP] 10 10 10 10 11 10 11 (9.1)
- - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Income Statement:
Interest income 279,639 260,181 263,397 251,876 239,423 539,820 472,535 14.2
Interest expense 138,027 125,962 125,499 118,874 113,523 263,989 226,859 16.4
Net interest income 141,612 134,219 137,898 133,002 125,900 275,831 245,676 12.3
Fully taxable equivalent (FTE) adjustment 1,851 2,007 2,409 1,764 1,178 3,858 3,511 9.9
Net interest income, FTE 143,463 136,226 140,307 134,766 127,078 279,689 249,187 12.2
Provision for loan losses 13,924 13,899 11,549 9,508 10,505 27,823 19,243 44.6
Noninterest income 80,177 78,716 84,099 72,312 75,714 158,893 142,275 11.7
Noninterest expenses 131,767 124,655 130,678 121,251 124,586 256,422 245,438 4.5
Provision for income taxes 27,117 26,396 28,541 27,159 23,595 53,513 44,052 21.5
Net income 48,981 47,985 51,229 47,396 42,928 96,966 79,218 22.4
Preferred stock dividend requirement 8 8 8 9 8 16 16 0.0
Common stock dividend 19,055 17,246 17,396 15,848 15,846 36,301 31,995 13.5
- - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Balance Sheet - End of Period:
Trading account securities 274,014 388,264 447,486 171,910 150,529 274,014 150,529 82.0
Securities available for sale (AFS) 3,457,692 3,316,927 3,150,276 3,166,608 2,715,770 3,457,692 2,715,770 27.3
Memo: fair value adjustment securities AFS 1,575 (28,980) 1,654 (12,506) (20,001) 1,575 (20,001) (107.9)
Loans, net of unearned income 10,093,820 9,069,267 9,262,482 8,948,196 8,716,400 10,093,820 8,716,400 15.8
Reserve for loan losses (141,637) (135,928) (134,428) (133,853) (133,678) (141,637) (133,678) 6.0
Total interest-earning assets 14,066,684 12,795,456 13,115,096 12,417,202 11,674,994 14,066,684 11,674,994 20.5
Intangible assets 246,628 171,009 169,779 160,823 157,582 246,628 157,582 56.5
Total assets 15,671,546 14,416,628 14,708,024 13,739,324 13,036,598 15,671,546 13,036,598 20.2
Noninterest-bearing deposits 2,217,107 2,021,116 2,198,348 1,946,454 1,857,593 2,217,107 1,857,593 19.4
Interest-bearing deposits 7,602,574 7,288,766 7,240,915 7,141,950 7,027,120 7,602,574 7,027,120 8.2
Total deposits 9,819,681 9,309,882 9,439,263 9,088,404 8,884,713 9,819,681 8,884,713 10.5
Short-term borrowed funds 3,283,322 2,562,778 2,830,633 2,399,209 2,049,074 3,283,322 2,049,074 60.2
Long-term debt 959,897 986,417 944,055 821,932 723,728 959,897 723,728 32.6
Total interest-bearing liabilities 11,845,793 10,837,961 11,015,603 10,363,091 9,799,922 11,845,793 9,799,922 20.9
Minority equity in subsidiaries 0 337 342 329 319 0 319 (100.0)
Preferred stockholders' equity 531 532 540 549 553 531 553 (4.0)
Common stockholders' equity 1,261,479 1,119,635 1,140,108 1,092,782 1,053,973 1,261,479 1,053,973 19.7
Parent company investment in subsidiaries 1,369,329 1,216,236 1,206,037 1,155,998 1,117,599 1,369,329 1,117,599 22.5
- - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Problem Assets & Potential Problem Assets - End of Period:
Nonaccruing loans:
Commercial 17,094 14,139 13,904 13,244 10,171 17,094 10,171 68.1
Real estate term 12,848 14,225 15,078 18,681 12,965 12,848 12,965 (0.9)
Real estate construction 4,859 1,738 3,935 875 1,556 4,859 1,556 212.3
Consumer 32 102 108 70 144 32 144 (77.8)
Leases 617 279 251 531 322 617 322 91.6
Total nonaccruing loans 35,450 30,483 33,276 33,401 25,158 35,450 25,158 40.9
Other real estate 4,768 3,968 4,855 5,003 5,663 4,768 5,663 (15.8)
Total nonperforming assets 40,218 34,451 38,131 38,404 30,821 40,218 30,821 30.5
Accruing loans past due 90 days or more 20,537 20,430 19,326 15,728 16,656 20,537 16,656 23.3
Total problem assets 60,755 54,881 57,457 54,132 47,477 60,755 47,477 28.0
Potential problem assets 9,742 12,450 8,271 12,283 23,513 9,742 23,513 (58.6)
- - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Other Data - End of Period (not rounded):
Full-time equivalent employees 7,329 6,987 7,017 7,089 7,003 7,329 7,003 4.7
Domestic bank offices:
First Security Bank (Utah, Idaho, Oregon) (B) 224 224 224 221 222 224 222 0.9
FSB New Mexico 29 28 28 28 28 29 28 3.6
FSB Nevada (C) 13 8 7 7 7 13 7 85.7
FSB Wyoming 7 7 7 6 6 7 6 16.7
Total domestic bank offices 273 267 266 262 263 273 263 3.8
============================================== ========== ========== ========== ========== ========== ========== ========== =======
<FN>
Notes:
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 3-for-2 stock split in the form of a 50% stock dividend paid May 1997.
(B) On June 21, 1996, FSB Utah and FSB Idaho merged to become FS Bank. On May 23, 1997, FSB Oregon was merged into FS Bank.
(C) On June 30, 1997, American Bank of Commerce was merged into FSB Nevada.
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
FINANCIAL HIGHLIGHTS - Continued
(in thousands, except per share data and ratios; unaudited)
<CAPTION>
2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr Year-To-Date Six Months
1997 1997 1996 1996 1996 1997 1996 %Chg
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Balance Sheet - Average:
Trading account securities 360,339 168,094 130,319 159,258 172,737 264,748 250,405 5.7
Securities available for sale (AFS) 3,334,641 3,183,395 3,162,599 2,930,670 2,725,110 3,259,436 2,667,188 22.2
Memo: fair value adjustment securities AFS (16,834) 3,284 6,446 (22,927) (15,977) (6,831) 2,125 (421.5)
Loans, net of unearned income 9,573,919 9,205,427 9,125,014 8,800,072 8,534,146 9,390,691 8,394,078 11.9
Reserve for loan losses (135,991) (134,272) (133,885) (133,706) (130,816) (135,136) (130,440) 3.6
Deferred taxes on leases (187,553) (183,598) (177,841) (172,614) (166,840) (185,586) (165,896) 11.9
Total interest-earning assets, excl. fair value
adjust securities AFS & defer tax on leases 13,140,234 12,427,261 12,339,265 11,807,137 11,375,936 12,785,718 11,265,000 13.5
Intangible assets 178,320 170,857 163,470 158,718 157,979 174,609 154,001 13.4
Total assets 14,687,847 14,009,082 13,825,829 13,153,786 12,718,595 14,350,339 12,596,649 13.9
Noninterest-bearing deposits 1,995,783 1,895,233 1,912,222 1,780,120 1,755,868 1,945,786 1,732,011 12.3
Interest-bearing deposits 7,339,642 7,264,138 7,260,035 7,158,996 7,019,739 7,302,098 6,979,306 4.6
Total deposits 9,335,425 9,159,371 9,172,257 8,939,116 8,775,607 9,247,884 8,711,317 6.2
Short-term borrowed funds 2,887,346 2,412,952 2,388,089 2,073,144 1,918,772 2,651,459 1,868,199 41.9
Long-term debt 989,408 950,850 831,910 771,128 691,766 970,236 691,651 40.3
Total interest-bearing liabilities 11,216,396 10,627,940 10,480,034 10,003,268 9,630,277 10,923,793 9,539,156 14.5
Minority equity in subsidiaries 187 341 332 319 312 264 311 (15.1)
Preferred stockholders' equity 532 535 543 550 557 533 562 (5.2)
Common stockholders' equity 1,134,894 1,142,557 1,105,649 1,073,952 1,044,724 1,138,704 1,044,662 9.0
- - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Reconciliation of the Reserve for Loan Losses:
Reserve for loan losses, beginning 135,928 134,428 133,853 133,678 130,653 134,428 129,982 3.4
Loans (charged off):
Commercial (3,484) (1,470) (761) (1,918) (1,989) (4,954) (3,128) 58.4
Real estate term (967) (455) (415) (315) (186) (1,422) (331) 329.6
Real estate construction 0 (76) (138) (157) (19) (76) (19) 300.0
Consumer credit card & related (3,426) (3,343) (3,613) (3,641) (3,054) (6,769) (6,046) 12.0
Consumer auto & other (14,554) (14,686) (13,422) (9,406) (8,658) (29,240) (18,711) 56.3
Leases 0 0 0 (91) 285 0 (511) (100.0)
Total loans (charged off) (22,431) (20,030) (18,349) (15,528) (13,621) (42,461) (28,746) 47.7
Recoveries on loans charged off:
Commercial 1,671 1,387 2,372 1,592 930 3,058 2,571 18.9
Real estate term 385 269 (373) 21 511 654 1,220 (46.4)
Real estate construction 1 4 698 134 8 5 15 (66.7)
Consumer credit card & related 646 617 717 497 526 1,263 1,061 19.0
Consumer auto & other 7,054 5,354 3,964 3,791 4,040 12,408 8,173 51.8
Leases 0 0 (3) 160 126 0 159 (100.0)
Total recoveries of loans charged off 9,757 7,631 7,375 6,195 6,141 17,388 13,199 31.7
Net loans (charged off) recovered (12,674) (12,399) (10,974) (9,333) (7,480) (25,073) (15,547) 61.3
Provision for loan losses 13,924 13,899 11,549 9,508 10,505 27,823 19,243 44.6
Acquisitions & reclassifications (C) 4,459 0 0 0 0 4,459 0 NM
Reserve for loan losses, ending 141,637 135,928 134,428 133,853 133,678 141,637 133,678 6.0
- - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Selected Ratios (%):
Return on average assets (ROAA) 1.34 1.39 1.47 1.43 1.36 1.36 1.26
Tangible ROAA 1.48 1.53 1.58 1.60 1.51 1.51 1.41
Return on average stockholders' equity (ROAE) 17.30 17.02 18.42 17.55 16.52 17.16 15.24
Tangible ROAE 22.48 21.81 22.84 22.67 21.43 22.15 19.68
Net interest margin, FTE 4.37 4.38 4.55 4.57 4.47 4.38 4.42
Net interest spread, FTE 3.65 3.70 3.83 3.86 3.75 3.67 3.69
Operating expense ratio
(nonint exp / (net int inc FTE + nonint inc)) 58.92 57.99 58.23 58.55 61.44 58.47 62.70
Productivity ratio (nonint exp / avg assets) 3.60 3.61 3.76 3.67 3.94 3.60 3.92
Stockholders' equity / assets [EOP] 8.05 7.77 7.76 7.96 8.09 8.05 8.09
Stockholders' equity / assets [Avg] 7.73 8.16 8.00 8.17 8.22 7.94 8.30
Tangible common equity / tangible assets [EOP] 6.58 6.66 6.67 6.86 6.96 6.58 6.96
Loans / deposits [EOP] 102.79 97.42 98.13 98.46 98.11 102.79 98.11
Loans / assets [EOP] 64.41 62.91 62.98 65.13 66.86 64.41 66.86
Reserve for loan losses [EOP] /:
Total loans 1.40 1.50 1.45 1.50 1.53 1.40 1.53
Nonaccruing loans 399.54 445.91 403.98 400.75 531.35 399.54 531.35
Nonaccruing + accruing loans past due 90 days 252.98 266.98 255.56 272.45 319.70 252.98 319.70
Nonaccruing loans / total loans 0.35 0.34 0.36 0.37 0.29 0.35 0.29
Nonaccruing + accr loans past due / total loans 0.55 0.56 0.57 0.55 0.48 0.55 0.48
Nonperforming assets /:
Total loans + other real estate 0.40 0.38 0.41 0.43 0.35 0.40 0.35
Total assets 0.26 0.24 0.26 0.28 0.24 0.26 0.24
Total equity 3.19 3.08 3.34 3.51 2.92 3.19 2.92
Total equity + reserve for loan losses 2.87 2.74 2.99 3.13 2.59 2.87 2.59
Problem assets /:
Total loans + other real estate 0.60 0.60 0.62 0.60 0.54 0.60 0.54
Total assets 0.39 0.38 0.39 0.39 0.36 0.39 0.36
Total equity 4.81 4.90 5.04 4.95 4.50 4.81 4.50
Total equity + reserve for loan losses 4.33 4.37 4.51 4.41 4.00 4.33 4.00
Net loans charged off / average loans 0.53 0.55 0.48 0.42 0.35 0.54 0.37
============================================== ========== ========== ========== ========== ========== ========== ========== =======
Capital Ratios & Risk-Based Capital Ratios (%): FSCO FS Bank FSB FSB FSB
As of June 30, 1997 Consol.(UT,ID,OR)(B)NewMexico Nevada Wyoming
- - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Leverage ratio 8.02 7.34 6.36 7.84 9.65
Tier 1 risk-based capital ratio 10.98 9.68 13.17 12.69 14.33
Total (Tier 1 + 2) risk-based capital ratio 14.00 11.19 14.43 13.95 15.59
Tier 1 risk-based capital ($) 1,243,992 925,058 119,244 66,158 20,020
Total (Tier 1 + 2) risk-based capital ($) 1,585,602 1,068,641 130,653 72,717 21,778
Total risk-based assets - loan loss reserve ($)11,328,731 9,553,121 905,585 521,156 139,662
============================================== ========== ========== ========== ========== ========== ========== ========== =======
<FN>
Notes:
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 3-for-2 stock split in the form of a 50% stock dividend paid May 1997.
(B) On June 21, 1996, FSB Utah and FSB Idaho merged to become FS Bank. On May 23, 1997, FSB Oregon was merged into FS Bank.
(C) On June 30, 1997, American Bank of Commerce was merged into FSB Nevada.
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
VOLUME / RATE ANALYSIS
(in thousands; fully taxable equivalent; unaudited) (A)
<CAPTION>
For the Three Months Ended June 30, 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:
41,553 84,693 5.29 5.05 Federal funds sold & securities purchased 550 1,070 (520) (545) 25
501 10,113 8.78 5.81 Interest-bearing deposits in other banks 11 147 (136) (140) 4
360,339 172,737 5.95 4.68 Trading account securities 5,356 2,022 3,334 2,196 1,138
3,351,475 2,741,087 6.73 6.46 Securities AFS - amortized cost 56,421 44,294 12,127 9,863 2,264
Loans, net of unearned income &
9,386,366 8,367,306 9.34 9.23 deferred taxes on leases (B) 219,152 193,068 26,084 23,514 2,570
- - ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
13,140,234 11,375,936 8.57 8.46 TOTAL INTEREST-EARNING ASSETS / INCOME 281,490 240,601 40,889 34,888 6,001
- - ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
INTEREST-BEARING LIABILITIES / EXPENSE:
Interest-Bearing Deposits:
512,237 1,045,674 1.76 1.91 Interest-bearing demand accounts 2,256 4,991 (2,735) (2,546) (189)
3,067,710 2,582,513 3.25 3.58 Savings & money market accounts 24,951 23,102 1,849 4,340 (2,491)
782,114 702,279 5.76 5.64 Time deposits of $100,000 or more 11,271 9,897 1,374 1,125 249
2,977,581 2,689,273 5.69 5.77 Other time deposits 42,367 38,819 3,548 4,162 (614)
- - ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
7,339,642 7,019,739 4.41 4.38 TOTAL INTEREST-BEARING DEPOSITS 80,845 76,809 4,036 7,081 (3,045)
- - ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
2,608,268 1,644,295 5.38 4.94 Federal funds purchased & securities sold 35,104 20,299 14,805 11,900 2,905
279,078 274,477 6.98 6.23 Other short-term borrowings 4,869 4,274 595 72 523
989,408 691,766 6.96 7.02 Long-term debt 17,209 12,141 5,068 5,224 (156)
- - ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
11,216,396 9,630,277 4.92 4.72 TOTAL INTEREST-BEARING LIABILITIES / EXPENSE 138,027 113,523 24,504 24,277 227
- - ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
8.57 8.46 Interest income / earning assets
4.20 3.99 Interest expense / earning assets
------ ------ --------------------------------------------
4.37 4.47 Net interest income / earning assets 143,463 127,078 16,385 10,611 5,774
Less fully taxable equivalent adjustment 1,851 1,178 673
------ ------ -------------------------------------------- --------- --------- -------- -------- --------
NET INTEREST INCOME, PER CONSOLIDATED
STATEMENTS OF INCOME 141,612 125,900 15,712
=========== =========== ====== ====== ============================================ ========= ========= ======== ======== ========
<CAPTION>
For the Six Months Ended June 30, 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:
47,233 110,443 5.09 5.26 Federal funds sold & securities purchased 1,202 2,903 (1,701) (1,661) (40)
2,365 10,907 5.67 6.31 Interest-bearing deposits in other banks 67 344 (277) (269) (8)
264,748 250,405 5.87 5.25 Trading account securities 7,771 6,568 1,203 376 827
3,266,267 2,665,063 6.70 6.47 Securities AFS - amortized cost 109,430 86,239 23,191 19,454 3,737
Loans, net of unearned income &
9,205,105 8,228,182 9.24 9.24 deferred taxes on leases (B) 425,208 379,992 45,216 45,116 100
- - ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
12,785,718 11,265,000 8.50 8.45 TOTAL INTEREST-EARNING ASSETS / INCOME 543,678 476,046 67,632 63,016 4,616
- - ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
INTEREST-BEARING LIABILITIES / EXPENSE:
Interest-Bearing Deposits:
579,848 1,066,884 2.36 1.86 Interest-bearing demand accounts 6,856 9,948 (3,092) (4,541) 1,449
3,013,238 2,527,133 3.15 3.64 Savings & money market accounts 47,492 45,986 1,506 8,846 (7,340)
779,393 690,852 5.62 5.74 Time deposits of $100,000 or more 21,918 19,837 2,081 2,542 (461)
2,929,619 2,694,437 5.62 5.83 Other time deposits 82,383 78,522 3,861 6,854 (2,993)
- - ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
7,302,098 6,979,306 4.35 4.42 TOTAL INTEREST-BEARING DEPOSITS 158,649 154,293 4,356 13,701 (9,345)
- - ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
2,372,177 1,592,059 5.22 5.00 Federal funds purchased & securities sold 61,911 39,771 22,140 19,488 2,652
279,282 276,140 6.69 6.63 Other short-term borrowings 9,338 9,151 187 104 83
970,236 691,651 7.03 6.84 Long-term debt 34,091 23,644 10,447 9,523 924
- - ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
10,923,793 9,539,156 4.83 4.76 TOTAL INTEREST-BEARING LIABILITIES / EXPENSE 263,989 226,859 37,130 42,816 (5,686)
- - ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
8.50 8.45 Interest income / earning assets
4.12 4.03 Interest expense / earning assets
------ ------ --------------------------------------------
4.38 4.42 Net interest income / earning assets 279,689 249,187 30,502 20,200 10,302
Less fully taxable equivalent adjustment 3,858 3,511 347
------ ------ -------------------------------------------- --------- --------- -------- -------- --------
NET INTEREST INCOME, PER CONSOLIDATED
STATEMENTS OF INCOME 275,831 245,676 30,155
=========== =========== ====== ====== ============================================ ========= ========= ======== ======== ========
<FN>
Notes:
(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 $8,846 and $7,082 for the 1997 and 1996 quarters, respectively.
Interest on loans includes fees of $16,551 and $12,095 for the 1997 and 1996 year-to-date periods, respectively.
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
LOANS (in thousands; unaudited)
<CAPTION>
June 30 %Total December 31 %Total June 30 %Total Jun/Jun
1997 Loans 1996 Loans 1996 Loans %Chg
<S> <C> <C> <C> <C> <C> <C> <C>
- - ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
COMMERCIAL LOANS:
Commercial & industrial 2,014,528 20.0 1,654,239 17.9 1,634,451 18.8 23.3
Agricultural 333,924 3.3 312,402 3.4 290,950 3.3 14.8
Other commercial 162,414 1.6 185,973 2.0 120,343 1.4 35.0
- - ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
TOTAL COMMERCIAL LOANS 2,510,866 24.9 2,152,614 23.2 2,045,744 23.5 22.7
- - ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
REAL ESTATE SECURED LOANS:
1 to 4 family residential term 1,703,628 16.9 1,459,534 15.8 1,507,387 17.3 13.0
1 to 4 family residential home equity 479,140 4.7 471,109 5.1 466,849 5.4 2.6
1 to 4 family residential construction 415,288 4.1 349,771 3.8 230,269 2.6 80.3
Commercial & other term 933,667 9.3 904,135 9.8 948,094 10.9 (1.5)
Commercial & other construction 241,731 2.4 190,791 2.1 263,609 3.0 (8.3)
- - ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
TOTAL REAL ESTATE SECURED LOANS 3,773,454 37.4 3,375,340 36.4 3,416,208 39.2 10.5
Memo: Total real estate term 3,116,435 30.9 2,834,778 30.6 2,922,330 33.5 6.6
Memo: Loans held for sale
included in total real estate term 664,591 6.6 330,032 3.6 427,414 4.9 55.5
Memo: Total real estate construction 657,019 6.5 540,562 5.8 493,878 5.7 33.0
- - ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
CONSUMER LOANS:
Credit card & related 292,943 2.9 307,622 3.3 292,897 3.4 0.0
Auto & other consumer 2,596,710 25.7 2,674,283 28.9 2,361,238 27.1 10.0
- - ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
TOTAL CONSUMER LOANS 2,889,653 28.6 2,981,905 32.2 2,654,135 30.4 8.9
- - ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
TOTAL LEASES 919,847 9.1 752,623 8.1 600,313 6.9 53.2
- - ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
LOANS, NET OF UNEARNED INCOME 10,093,820 100.0 9,262,482 100.0 8,716,400 100.0 15.8
Memo: Unearned income (96,826) (67,396) (45,357) 113.5
Reserve for loan losses (141,637) (134,428) (133,678) 6.0
- - ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
TOTAL LOANS, NET 9,952,183 9,128,054 8,582,722 16.0
========================================= =========== ====== =========== ====== =========== ====== ========
<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 Securities and Exchange Commission (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 SEC, except as discussed below.
In the Illinois action "Romaker v. CrossLand Mortgage Corporation", Case
No. 94 C 3328, Northern District of Illinois, Eastern Division (filed June 3,
1994), last reported on in FSCO's Annual Report on Form 10-K for the year
ended December 31, 1996, a settlement obligating FSCO to pay $220,000 was
approved by the Court on June 7, 1997. Distribution of the settlement fund to
the class members and to class counsel will take place forthwith, whereupon
this case will be dismissed. FSCO anticipates that this will be the last
report on this matter in its filings with the SEC.
In the Florida litigation "Hilton v. CrossLand Mortgage Corp.", Case No.
948437 CIV RYSKAMP, Southern District of Florida Northern Division (filed
August 4, 1994), last reported on in FSCO's Annual Report on Form 10-K for the
year ended December 31, 1996, a settlement obligating FSCO to pay $22,000 was
approved by the Court during the second quarter of 1997. Distribution of the
settlement fund has already taken place and the case has been dismissed. FSCO
anticipates that this will be the last report on this matter in its filings
with the SEC.
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 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] August 12, 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 Year-To-Date Six Months
For the Periods Ended June 30, 1997 and 1996 1997 1996 1997 1996
<S> <C> <C> <C> <C>
- - ----------------------------------------------------------- ---------- ---------- ---------- ----------
NET INCOME:
Net income per consolidated income statements 48,981 42,928 96,966 79,218
Subtract dividend requirement of preferred stock 8 8 16 16
- - ----------------------------------------------------------- ---------- ---------- ---------- ----------
NET INCOME APPLICABLE TO COMMON STOCK (PRIMARY) 48,973 42,920 96,950 79,202
Add dividend requirement of preferred stock 8 8 16 16
- - ----------------------------------------------------------- ---------- ---------- ---------- ----------
NET INCOME FULLY DILUTED 48,981 42,928 96,966 79,218
=========================================================== ========== ========== ========== ==========
EARNINGS PER COMMON SHARE: PRIMARY 0.42 0.37 0.84 0.68
EARNINGS PER COMMON SHARE: FULLY DILUTED 0.42 0.37 0.83 0.68
=========================================================== ========== ========== ========== ==========
SHARES OUTSTANDING (AVERAGE):
Common shares 114,903 114,019 114,763 113,892
Common equivalents (options) 3,394 2,703 3,353 2,757
Treasury shares (2,659) (898) (2,214) (864)
- - ----------------------------------------------------------- ---------- ---------- ---------- ----------
COMMON SHARES: PRIMARY (AVG) 115,638 115,824 115,902 115,785
Preferred shares: common equivalents 277 290 277 292
- - ----------------------------------------------------------- ---------- ---------- ---------- ----------
COMMON SHARES: FULLY DILUTED (AVG) 115,915 116,114 116,179 116,077
=========================================================== ========== ========== ========== ==========
<FN>
Note: 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
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM FIRST SECURITY CORPORATION'S FORM 10-Q
FOR THE QUARTER ENDED June 30, 1997, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 841,097
<INT-BEARING-DEPOSITS> 600
<FED-FUNDS-SOLD> 240,558
<TRADING-ASSETS> 274,014
<INVESTMENTS-HELD-FOR-SALE> 3,457,692
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 10,093,820
<ALLOWANCE> (141,637)
<TOTAL-ASSETS> 15,671,546
<DEPOSITS> 9,819,681
<SHORT-TERM> 3,283,322
<LIABILITIES-OTHER> 346,636
<LONG-TERM> 959,897
<COMMON> 1,261,479
0
531
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 15,671,546
<INTEREST-LOAN> 424,385
<INTEREST-INVEST> 106,407
<INTEREST-OTHER> 9,028
<INTEREST-TOTAL> 539,820
<INTEREST-DEPOSIT> 158,649
<INTEREST-EXPENSE> 263,989
<INTEREST-INCOME-NET> 275,831
<LOAN-LOSSES> 27,823
<SECURITIES-GAINS> 2,864
<EXPENSE-OTHER> 256,422
<INCOME-PRETAX> 150,479
<INCOME-PRE-EXTRAORDINARY> 150,479
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 96,966
<EPS-PRIMARY> 0.84
<EPS-DILUTED> 0.83
<YIELD-ACTUAL> 4.38
<LOANS-NON> 35,450
<LOANS-PAST> 20,537
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 60,755
<ALLOWANCE-OPEN> 134,428
<CHARGE-OFFS> (42,461)
<RECOVERIES> 17,388
<ALLOWANCE-CLOSE> 141,637
<ALLOWANCE-DOMESTIC> 141,637
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
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. Prior financial data schedules have not
been restated for this stock split.
</TABLE>
