<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, 1998
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, 1998, outstanding shares of Common Stock, par value $1.25,
were 187,949,267 (net of 1,238,174 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, 1998 and 1997
Consolidated Balance Sheets
June 30, 1998, December 31, 1997, and June 30, 1997
Condensed Consolidated Statements of Cash Flows
Year To Date Six Months Ended June 30, 1998 and 1997
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition:
Forward-Looking Statements
Highlights
Analysis of Statements of Income
Earnings Summary
Total Revenues
Net Interest Income and Net Interest Margin
Provision For Loan Losses
Noninterest Income
Noninterest Expenses
Analysis of Balance Sheets
Summary
Interest-Earning Assets: Trading Account Securities and Other Money
Market Investments
Interest-Earning Assets: Available for Sale Securities
Interest-Earning Assets: Loans
Asset Quality: Problem Assets and Potential Problem Assets
Asset Quality: Reserve for Loan Losses
Asset Quality: Provision for Loan Losses
Asset / Liability Management: Liquidity
Asset / Liability Management: Market Risk
Asset / Liability Management: Interest Rate Risk - Other Than Trading
Account Securities
Asset / Liability Management: Market Risk - Trading Account Securities
Other Assets and Liabilities
Stockholders' Equity and Capital Adequacy
Common and Preferred Stock
Mergers And Acquisitions
Corporate Structure
National and Regional Economy
Factors That May Affect Future Results of Operations and Financial
Condition: Technological Change and Year 2000 Computer Issue
Supplemental Financial 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) (A)
<CAPTION>
Three Months Year-To-Date Six Months
For the Periods Ended June 30, 1998 and 1997 1998 1997 $Chg %Chg 1998 1997 $Chg %Chg
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------- ---------- -------- -------- ------- ---------- -------- -------- -------
INTEREST INCOME:
Interest & fees on loans 274,737 230,188 44,549 19.4 534,192 446,474 87,718 19.6
Federal funds sold & securities purchased 1,897 887 1,010 113.9 2,865 2,213 652 29.5
Interest-bearing deposits in other banks 11 11 0 0.0 42 67 (25) (37.3)
Trading account securities 1,823 5,360 (3,537) (66.0) 6,049 7,758 (1,709) (22.0)
Available for sale securities 72,482 57,809 14,673 25.4 141,903 112,218 29,685 26.5
- ------------------------------------------------------- ---------- -------- -------- ------- ---------- -------- -------- -------
TOTAL INTEREST INCOME 350,950 294,255 56,695 19.3 685,051 568,730 116,321 20.5
- ------------------------------------------------------- ---------- -------- -------- ------- ---------- -------- -------- -------
INTEREST EXPENSE:
Deposits 102,016 84,575 17,441 20.6 202,525 166,304 36,221 21.8
Short-term borrowings 52,157 40,067 12,090 30.2 99,484 71,360 28,124 39.4
Long-term debt 23,839 17,133 6,706 39.1 45,813 34,015 11,798 34.7
- ------------------------------------------------------- ---------- -------- -------- ------- ---------- -------- -------- -------
TOTAL INTEREST EXPENSE 178,012 141,775 36,237 25.6 347,822 271,679 76,143 28.0
- ------------------------------------------------------- ---------- -------- -------- ------- ---------- -------- -------- -------
NET INTEREST INCOME 172,938 152,480 20,458 13.4 337,229 297,051 40,178 13.5
Provision for loan losses 18,396 14,074 4,322 30.7 30,994 28,222 2,772 9.8
- ------------------------------------------------------- ---------- -------- -------- ------- ---------- -------- -------- -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 154,542 138,406 16,136 11.7 306,235 268,829 37,406 13.9
- ------------------------------------------------------- ---------- -------- -------- ------- ---------- -------- -------- -------
NONINTEREST INCOME:
Service charges on deposit accounts 22,612 22,730 (118) (0.5) 44,986 43,924 1,062 2.4
Other service charges, collections, commissions & fees 18,355 12,086 6,269 51.9 33,909 23,773 10,136 42.6
Asset securitization gains 13,901 1,864 12,037 645.8 16,449 7,816 8,633 110.5
Bankcard servicing fees & third-party processing fees 8,764 8,204 560 6.8 17,476 16,687 789 4.7
Insurance commissions & fees 4,088 4,056 32 0.8 8,009 8,606 (597) (6.9)
Mortgage banking activities 51,448 26,475 24,973 94.3 95,657 49,189 46,468 94.5
Mortgage banking activities MSR amortization (10,184) (4,227) (5,957) (140.9) (17,588) (8,091) (9,497) (117.4)
Trust (fiduciary) commissions & fees 7,163 6,293 870 13.8 13,747 12,037 1,710 14.2
Trading account securities gains (losses) 416 157 259 165.0 245 934 (689) (73.8)
Available for sale securities gains (losses) 1,603 2,276 (673) (29.6) 3,312 2,913 399 13.7
Other 368 2,092 (1,724) (82.4) 10,848 4,951 5,897 119.1
- ------------------------------------------------------- ---------- -------- -------- ------- ---------- -------- -------- -------
TOTAL NONINTEREST INCOME 118,534 82,006 36,528 44.5 227,050 162,739 64,311 39.5
- ------------------------------------------------------- ---------- -------- -------- ------- ---------- -------- -------- -------
NONINTEREST EXPENSES:
Salaries & employee benefits 95,557 73,673 21,884 29.7 184,923 143,114 41,809 29.2
Amortization of intangibles 2,882 2,487 395 15.9 5,502 4,836 666 13.8
Armored & messenger 1,658 1,465 193 13.2 3,280 2,998 282 9.4
Bankcard interbank interchange & fees 8,252 8,383 (131) (1.6) 17,387 16,539 848 5.1
Credit, appraisal & repossessions 7,711 2,075 5,636 271.6 12,644 5,676 6,968 122.8
Fees 3,400 3,222 178 5.5 5,879 5,221 658 12.6
Furniture & equipment 15,085 11,722 3,363 28.7 27,584 22,078 5,506 24.9
Insurance 2,329 1,805 524 29.0 4,109 3,145 964 30.7
Marketing 3,857 2,968 889 30.0 7,454 6,070 1,384 22.8
Occupancy, net 9,604 9,396 208 2.2 18,744 17,932 812 4.5
Other real estate expense & loss provision (recovery) 111 383 (272) (71.0) 392 1,143 (751) (65.7)
Postage 3,422 2,614 808 30.9 6,672 5,397 1,275 23.6
Professional 6,499 3,253 3,246 99.8 11,289 6,218 5,071 81.6
Stationery & supplies 5,449 4,144 1,305 31.5 10,800 8,278 2,522 30.5
Telephone 3,415 3,939 (524) (13.3) 7,724 8,179 (455) (5.6)
Travel 3,059 2,532 527 20.8 5,605 4,544 1,061 23.3
Other 11,987 6,597 5,390 81.7 20,095 12,762 7,333 57.5
- ------------------------------------------------------- ---------- -------- -------- ------- ---------- -------- -------- -------
TOTAL NONINTEREST EXPENSES 184,277 140,658 43,619 31.0 350,083 274,130 75,953 27.7
- ------------------------------------------------------- ---------- -------- -------- ------- ---------- -------- -------- -------
INCOME BEFORE PROVISION FOR INCOME TAXES 88,799 79,754 9,045 11.3 183,202 157,438 25,764 16.4
Provision for income taxes 32,892 28,550 4,342 15.2 65,926 56,231 9,695 17.2
- ------------------------------------------------------- ---------- -------- -------- ------- ---------- -------- -------- -------
NET INCOME 55,907 51,204 4,703 9.2 117,276 101,207 16,069 15.9
======================================================= ========== ======== ======== ======= ========== ======== ======== =======
Dividend requirement of preferred stock 7 8 (1) (12.5) 14 16 (2) (12.5)
- ------------------------------------------------------- ---------- -------- -------- ------- ---------- -------- -------- -------
NET INCOME APPLICABLE TO COMMON STOCK 55,900 51,196 4,704 9.2 117,262 101,191 16,071 15.9
======================================================= ========== ======== ======== ======= ========== ======== ======== =======
Common stock dividend 22,943 19,569 3,374 17.2 46,529 37,329 9,200 24.6
======================================================= ========== ======== ======== ======= ========== ======== ======== =======
EARNINGS PER COMMON SHARE:
Earnings per common share basic 0.30 0.29 0.01 3.4 0.63 0.56 0.07 12.5
Earnings per common share diluted 0.29 0.28 0.01 3.6 0.60 0.54 0.06 11.1
Common shares basic [Avg] 187,623 179,359 8,264 4.6 186,983 179,789 7,194 4.0
Common shares diluted [Avg] 194,471 185,609 8,862 4.8 193,993 185,964 8,029 4.3
======================================================= ========== ======== ======== ======= ========== ======== ======== =======
CASH DIVIDENDS PAID OR ACCRUED PER SHARE:
Preferred stock dividend ($3.15 annual rate) 0.79 0.79 0.00 0.0 1.58 1.58 0.00 0.0
Common stock dividend 0.130 0.113 0.02 15.0 0.260 0.215 0.05 20.9
======================================================= ========== ======== ======== ======= ========== ======== ======== =======
<FN>
See "Notes to Consolidated Financial Statements".
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
CONSOLIDATED BALANCE SHEETS
($ in thousands; unaudited) (A)
<CAPTION>
June 30 December 31 June 30 Jun/Jun Jun/Jun
1998 1997 1997 $ Chg % Chg
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
ASSETS:
Cash & due from banks 908,605 1,219,435 872,726 35,879 4.1
Federal funds sold & securities purchased under resale agreements 26,323 206,266 283,959 (257,636) (90.7)
- --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Total Cash & Cash Equivalents 934,928 1,425,701 1,156,685 (221,757) (19.2)
Interest-bearing deposits in other banks 605 600 600 5 0.8
Trading account securities 53,343 255,320 274,014 (220,671) (80.5)
Available for sale securities, at fair value 4,806,559 4,351,525 3,642,437 1,164,122 32.0
(Amortized cost: $4,767,405; $4,313,847; and $3,640,356; respectively)
- --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Loans, net of unearned income 12,530,360 11,230,766 10,528,449 2,001,911 19.0
(Unearned income: $105,407; $106,369; and $98,888; respectively)
Reserve for loan losses (166,658) (157,525) (150,170) (16,488) 11.0
- --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Total Loans, Net 12,363,702 11,073,241 10,378,279 1,985,423 19.1
- --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Premises & equipment, net 316,999 288,433 280,582 36,417 13.0
Accrued income receivable 112,510 106,974 95,361 17,149 18.0
Other real estate 3,908 7,981 8,449 (4,541) (53.7)
Other assets 415,905 356,852 313,592 102,313 32.6
- --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Goodwill 208,657 174,928 173,298 35,359 20.4
Mortgage servicing rights 138,699 108,630 88,438 50,261 56.8
Other intangible assets 4,191 1,598 1,787 2,404 134.5
- --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Total Intangible Assets 351,547 285,156 263,523 88,024 33.4
- --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
TOTAL ASSETS 19,360,006 18,151,783 16,413,522 2,946,484 18.0
=========================================================================== =========== =========== =========== =========== =======
LIABILITIES:
Deposits: noninterest-bearing 2,402,497 2,431,006 2,435,479 (32,982) (1.4)
Deposits: interest-bearing 9,514,706 8,986,628 8,039,087 1,475,619 18.4
- --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Total Deposits 11,917,203 11,417,634 10,474,566 1,442,637 13.8
- --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Federal funds purchased & securities sold under repurchase agreements 3,480,902 3,252,259 2,975,864 505,038 17.0
U.S. Treasury demand notes 37,562 21,050 20,440 17,122 83.8
Other short-term borrowings 386,786 331,890 288,939 97,847 33.9
Accrued income taxes 303,779 255,062 212,456 91,323 43.0
Accrued interest payable 46,147 51,928 38,600 7,547 19.6
Other liabilities 131,713 116,651 99,550 32,163 32.3
Long-term debt 1,513,044 1,304,463 959,897 553,147 57.6
- --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
TOTAL LIABILITIES 17,817,136 16,750,937 15,070,312 2,746,824 18.2
- --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
STOCKHOLDERS' EQUITY:
Preferred stock: Series "A" $3.15 cumulative convertible 493 501 532 (39) (7.3)
(Shares issued: 9; 10; and 10; respectively)
- --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Common Stockholders' Equity:
Common stock: par value $1.25 236,416 232,595 236,010 406 0.2
(Shares issued: 189,133; 186,076; and 188,808; respectively)
Paid-in surplus 154,359 115,855 140,945 13,414 9.5
Retained earnings 1,151,927 1,081,195 1,015,180 136,747 13.5
Accumulated other comprehensive income 24,552 23,568 1,529 23,023 1505.8
- --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Subtotal 1,567,254 1,453,213 1,393,664 173,590 12.5
- --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Common treasury stock, at cost (24,877) (52,868) (50,986) 26,109 (51.2)
(Shares: 1,238; 1,654; and 3,993; respectively)
- --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
Total Common Stockholders' Equity 1,542,377 1,400,345 1,342,678 199,699 14.9
- --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
TOTAL STOCKHOLDERS' EQUITY 1,542,870 1,400,846 1,343,210 199,660 14.9
- --------------------------------------------------------------------------- ----------- ----------- ----------- ----------- -------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 19,360,006 18,151,783 16,413,522 2,946,484 18.0
=========================================================================== =========== =========== =========== =========== =======
<FN>
See "Notes to Consolidated Financial Statements".
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except number of shares; unaudited)
<CAPTION>
Year-To-Date Six Months
For the Periods Ended June 30, 1998 and 1997 1998 1997
<S> <C> <C>
- --------------------------------------------------------------------- ----------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 421,759 262,294
- --------------------------------------------------------------------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of available for sale securities 7,232 295,570
Redemption of matured available for sale securities 816,620 409,743
Purchases of available for sale securities (1,173,316) (905,837)
Net (increase) decrease in interest-bearing deposits in other banks (5) 31,117
Net (increase) decrease in loans (1,178,670) (710,636)
Purchases of premises and equipment (16,328) (13,583)
Proceeds from sales of other real estate 4,374 5,983
Payments to improve other real estate (1,754) (1,483)
Net cash (paid for) received from acquisitions 45,002 32,298
- --------------------------------------------------------------------- ----------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (1,496,845) (856,828)
- --------------------------------------------------------------------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 156,215 143,173
Net increase (decrease) in Federal funds purchased, securities sold
under repurchase agreements, and U.S. Treasury demand notes 244,355 402,384
Proceeds (payments) on nonrecourse debt on leveraged leases 1,244 5,526
Proceeds from issuance of long-term debt and short-term borrowings 250,810 74,313
Payments on long-term debt and short-term borrowings (6,662) (48,688)
Proceeds from issuance of common stock and sales of treasury stock 8,356 6,377
Purchases of treasury stock (23,469) (42,888)
Dividends paid (46,536) (37,340)
- --------------------------------------------------------------------- ----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 584,313 502,857
- --------------------------------------------------------------------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (490,773) (91,677)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,425,701 1,248,362
- --------------------------------------------------------------------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD 934,928 1,156,685
===================================================================== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
- --------------------------------------------------------------------- ----------- -----------
CASH PAID (RECEIVED) FOR:
Interest 353,603 275,738
Income taxes 21,073 23,822
===================================================================== =========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of preferred shares to common shares:
Number of preferred shares converted 157 151
Number of common shares issued 5,986 4,120
Conversion value 8 8
Transfer of loans to other real estate 1,186 2,062
Net unrealized gain (loss) on available for sale securities
included in stockholders' equity 984 633
Acquisitions:
Assets acquired 1,317,988 369,829
Liabilities assumed 1,147,242 272,768
Number of FSCO shares issued 13,295,044 3,574,159
===================================================================== =========== ===========
<FN>
See "Notes to Consolidated Financial Statements".
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ in thousands; unaudited) (A, B)
<CAPTION>
Three Months Year-To-Date Six Months
For the Periods Ended June 30, 1998 and 1997 1998 1997 $Chg %Chg 1998 1997 $Chg %Chg
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------- ---------- ----------------- ------- ---------- ----------------- -------
NET INCOME 55,907 51,204 4,703 9.2 117,276 101,207 16,069 15.9
- ------------------------------------------------------- ---------- ----------------- ------- ---------- ----------------- -------
OTHER COMPREHENSIVE INCOME, AFTER TAX 2,719 20,472 (17,753) (86.7) 984 653 331 50.7
- ------------------------------------------------------- ---------- ----------------- ------- ---------- ----------------- -------
COMPREHENSIVE INCOME 58,626 71,676 (13,050) (18.2) 118,260 101,860 16,400 16.1
======================================================= ========== ================= ======= ========== ================= =======
<FN>
See "Notes to Consolidated Financial Statements".
</TABLE>
<PAGE>
FIRST SECURITY CORPORATION (FSCO)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited consolidated
financial statements of 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 year to date six months
ended June 30, 1998 and 1997; financial position as of June 30, 1998, December
31, 1997, and June 30, 1997; and cash flows for the year to date six months
ended June 30, 1998 and 1997.
2. FSCO's results of operations for the three months and year to date six
months ended June 30, 1998 and 1997 are not necessarily indicative of the
results to be expected for the full year.
3. All FSCO financial statements have been restated for:
* two separate 3-for-2 common stock splits in the form of 50% stock
dividends, paid in May 1997 and February 1998.
* the May 30, 1998, acquisition of California State Bank (CSTB) in a
pooling-of-interests merger. For this merger, FSCO issued approximately
11,383,000 shares of its common stock in exchange for all of the outstanding
shares of CSTB common stock, and incurred one-time acquisition charges
totaling $7.2 million or $0.037 per share after tax. There were no material
intercompany transactions between FSCO and CSTB prior to the merger. Certain
reclassifications / adjustments have been made to amounts previously reported
by CSTB to conform to FSCO accounting practices and policies. Results of
operations previously reported and restated are as follows (in thousands):
Previously Reported: Reclass/ FSCO
FSCO CSTB Adjust Restated
- ------------------------------------- --------- --------- --------- ---------
Quarter ended March 31, 1998:
Net interest income $153,223 11,041 28 164,292
Noninterest income 106,683 2,121 (288) 108,516
Extraordinary items 0 0 0 0
Net income 58,811 2,558 0 61,369
Other changes in stockholders' equity (1,905) 170 0 (1,735)
- ------------------------------------- --------- --------- --------- ---------
Six months ended June 30, 1997:
Net interest income 275,831 21,189 31 297,051
Noninterest income 158,893 3,793 53 162,739
Extraordinary items 0 0 0 0
Net income 96,966 4,241 0 101,207
Other changes in stockholders' equity 359 294 0 653
- ------------------------------------- --------- --------- --------- ---------
4. 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 the following purchase accounting acquisitions
completed in 1997 and year-to-date 1998.
* On March 31, 1997, FSCO's subsidiary CrossLand Mortgage purchased the
wholesale loan production branch operations of Harbourton Mortgage Co., L.P..
* On June 30, 1997, FSCO acquired American Bancorp of Nevada, and its
wholly owned subsidiary American Bank of Commerce was merged into FSCO's
subsidiary First Security Bank of Nevada.
* On February 2, 1998, FSCO acquired Rio Grande Bancshares, Inc. (RGB) and
its two bank subsidiaries First National Bank of Dona Ana County and First
National Bank of Chaves County. On July 1, 1998, FSCO merged and renamed
these subsidiaries as First Security Bank of Southern New Mexico.
Pro forma results of operations for 1998 and 1997, as if the above
companies purchased had combined at the beginning of the periods, are not
presented because the effect was not material.
5. For purposes of reporting cash flows, cash and cash equivalents
included cash and due from banks, and Federal funds sold and securities
purchased under resale agreements.
6. In accordance with SFAS No. 125, FSCO's capitalized mortgage servicing
rights for the year to date six months ended June 30, 1998 included $47.7
million originated and $17.6 million amortized during the period.
7. 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 business enterprises 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. SFAS No. 131 supersedes SFAS No. 14, "Financial Reporting for
Segments of a Business Enterprise", but retains the requirement to report
information about major customers. It amends SFAS No. 94, "Consolidation of
All Majority-Owned Subsidiaries", 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. SFAS No. 131 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
regarding segments, beginning with FSCO's 1998 Annual Report on Form 10-K.
8. In accordance with Securities and Exchange Commission (SEC) Rule 210.4-
08(n) of Regulation S-X "Accounting policies for certain derivative
instruments", FSCO's accounting policies for derivative instruments were
discussed in detail in its 1997 Annual Report on Form 10-K (hereby
incorporated by reference). Since the filing of that report, there have been
no material changes in FSCO's accounting policies for derivative instruments.
9. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which supercedes SFAS No. 80, "Accounting
for Futures Contracts", FSAS No. 105, "Disclosure of Information About
Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments
with Concentration of Credit Risk", and SFAS No. 119, "Disclosures About
Derivative Financial Instruments and Fair Value of Financial Instruments", and
also amends certain aspects of other SFAS's previously issued. This statement
establishes accounting and reporting standards for derivative instruments and
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and
measure those instruments at fair value.
SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999.
FSCO management is currently evaluating the effects of this change in its
accounting for derivatives and hedging activities.
# # #
<PAGE>
FIRST SECURITY CORPORATION (FSCO)
PART 1. FINANCIAL INFORMATION
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
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;
technology and associated risks; and other risks and uncertainties affecting
FSCO's operations and personnel.
Be advised that FSCO, as part of its ongoing business, regularly evaluates
the potential acquisition of, and holds discussions with, prospective
acquisition candidates, which candidates may conduct any type of businesses
permissible for a bank holding company and its affiliates. FSCO's discussions
in this document are subject to the changes that may result if any such
acquisition transaction is completed. FSCO restates its guiding principle
that it will not comment on or publicly announce any such acquisition until
after a binding and definitive acquisition agreement has been reached.
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.
NOTES:
ALL FSCO FINANCIAL STATEMENTS HAVE BEEN RESTATED FOR:
* THE MAY 30, 1998, ACQUISITION OF CALIFORNIA STATE BANK (CSTB) IN A
POOLING-OF-INTERESTS MERGER (FSCO INCURRED ONE-TIME ACQUISITION CHARGES
FOR THIS MERGER TOTALING $7.2 MILLION OR $0.037 PER SHARE AFTER TAX).
* TWO SEPARATE 3-FOR-2 COMMON STOCK SPLITS IN THE FORM OF 50% STOCK
DIVIDENDS, PAID IN MAY 1997 AND FEBRUARY 1998.
HIGHLIGHTS
RESULTS OF OPERATIONS (first six months of 1998 compared with year ago
period):
* Net income of $117.3 million, up $16.1 million or 15.9%, and $124.5 million
before acquisition charges of $7.2 million, up $23.3 million or 23.0%.
* Earnings per share diluted of $0.60, up $0.06 or 11.1%, and $0.64 before
acquisition charges of $0.037 per share, up $0.10 or 18.5%.
* Total revenues of $564.3 million, up $104.5 million or 22.7%.
* Noninterest income of $227.1 million, up $64.3 million or 39.5%.
FINANCIAL CONDITION (June 30, 1998 compared with one year ago):
* Total assets of $19.4 billion, up $2.9 billion or 18.0%.
* Loans of $12.5 billion, up $2.0 billion or 19.0%.
* Stockholders' equity of $1.5 billion, up $0.2 billion or 14.9%.
* Ratio of total problem assets to total loans & ORE at 0.53%, down from
0.65%.
* Ratio of reserve to total loans at 1.33%, down from 1.43%.
* Ratio of reserve to nonaccruing loans at 419.66%, up from 386.75%.
* All equity and risk-based capital ratios continued to exceed regulatory
requirements for "well capitalized" status.
OTHER HIGHLIGHTS
* On May 30, 1998, FSCO acquired California State Bank (Nasdaq: CSTB) in a
pooling-of-interests merger.
ANALYSIS OF STATEMENTS OF INCOME
EARNINGS SUMMARY
FSCO's net income was $117.3 million for the first six months of 1998, up
$16.1 million or 15.9% from the corresponding 1997 period. This net income
represented a 1.28% return on average assets (ROAA) and a 16.13% return on
average equity (ROAE) for the year to date, compared with a 1.35% ROAA and a
16.75% ROAE for the year-ago period. Earnings per share diluted were $0.60
for year-to-date 1998, up $0.06 or 11.1% from the year-ago period. The
tangible ROAA was 1.48%, the tangible ROAE was 23.65%, and tangible earnings
per share diluted were $0.69 for the year to date, compared with a 1.48%
tangible ROAA, a 21.51% tangible ROAE, and tangible earnings per share diluted
of $0.59 for the year-ago period.
FSCO's net income was $55.9 million for the second quarter of 1998, up $4.7
million or 9.2% from the second quarter of 1997. This net income represented
a 1.18% ROAA and a 14.75% ROAE for the quarter, compared with a 1.33% ROAA and
a 16.91% ROAE for the year-ago quarter. Earnings per share diluted were $0.29
for the second quarter of 1998, up $0.01 or 3.6% from the year-ago quarter.
The tangible ROAA was 1.40%, the tangible ROAE was 22.26%, and tangible
earnings per share diluted were $0.33 for the quarter, compared with a 1.46%
tangible ROAA, a 21.83% tangible ROAE, and tangible earnings per share diluted
of $0.30 for the year-ago quarter.
Before one-time CSTB acquisition charges totaling $7.2 million after tax,
FSCO's net income was $124.5 million for year-to-date 1998, up $23.3 million
or 23.0% from the year-ago period, and was $63.1 million for the second
quarter of 1998, up $11.9 million or 23.3% from the second quarter of 1997.
Earnings per share diluted were $0.64 for the year to date, up $0.10 or 18.5%
from the year-ago period, and were $0.32 for the second quarter, up $0.04 or
14.3% from the year-ago quarter.
TOTAL REVENUES
FSCO's total revenues (the sum of net interest income and noninterest
income) were $564.3 million for year-to-date 1998, up $104.5 million or 22.7%
from the year-ago period, and were $291.5 million for the second quarter of
1998, up $57.0 million or 24.3% from the year-ago quarter. On a linked
quarter basis, FSCO's total revenues for the second quarter of 1998 increased
$18.7 million or 6.8% over the first quarter of 1998. The components of
FSCO's total revenues are discussed below in the "Net Interest Income And Net
Interest Margin" and "Noninterest Income" sections.
NET INTEREST INCOME AND NET INTEREST MARGIN
FSCO's net interest income on a fully taxable equivalent (FTE) basis was
$342.6 million for year-to-date 1998, up $41.7 million or 13.9% from the year-
ago period, and was $175.8 million for the second quarter of 1998, up $21.4
million or 13.9% from the year-ago quarter. These increases were due to a
combination of continued strong demand for loans, growth in the securities
portfolios, and the positive impact of the purchase accounting acquisitions of
Harbourton Mortgage Co., L.P. (HMC), American Bancorp of Nevada (ABN), and Rio
Grande Bancshares, Inc. (RGB). These factors were partially offset by growth
of average interest-bearing liabilities. On a linked quarter basis, FSCO's
net interest income FTE for the second quarter of 1998 increased $8.9 million
or 5.3% over the first quarter of 1998.
FSCO's net interest margins for the year-to-date and second quarter of 1998
were identical at 4.15%, and each was down 33 basis points from 4.48% for the
year-to-date and second quarter of 1997. These decreases were due to a
combination of the following factors: strong volume growth in loans,
especially refinanced mortgages, which were originated at lower rates but
funded by additional short term borrowed funds and deposits at relatively
constant rates; and a small shift in the deposit mix from transaction accounts
to time deposits with higher rates. On a linked quarter basis from the first
quarter of 1998 to the second quarter of 1998, FSCO's net interest margin
remained unchanged while net interest income was increased through its
mortgage and lending activities. FSCO expects its full year 1998 net interest
margin to range in a band from approximately 4.00% to 4.25%.
PROVISION FOR LOAN LOSSES
FSCO's provision for loan losses was $31.0 million for year-to-date 1998,
up $2.8 million or 9.8% from the year-ago period, and was $18.4 million for
the second quarter of 1998, up $4.3 million or 30.7% from the year-ago quarter
(see: "Asset Quality: Provision For Loan Losses").
NONINTEREST INCOME
FSCO's noninterest income was $227.1 million for year-to-date 1998, up
$64.3 million or 39.5% from the year-ago period, and was $118.5 million for
the second quarter of 1998, up $36.5 million or 44.5% from the year-ago
quarter. These increases were due to several factors including: strong growth
in net mortgage banking activities generated by lower interest rates plus the
March 31, 1997 purchase of HMC; gains from ongoing asset securitizations /
sales; and FSCO's continued emphasis on improving its value pricing of all
fee-based services and on increasing and diversifying its sources of
noninterest income. FSCO's noninterest income amounted to 40.24% of total
revenues for year-to-date 1998, up from 35.39% for the year-ago period, and
was 40.67% of total revenues for the quarter, up from 34.97% for the year-ago
quarter. On a linked quarter basis, FSCO's noninterest income for the second
quarter of 1998 increased $10.0 million or 9.2% from the first quarter of
1998.
NONINTEREST EXPENSES
FSCO's noninterest expenses were $350.1 million for year-to-date 1998, up
$76.0 million or 27.7% from the year-ago period, and were $184.3 million for
the second quarter of 1998, up $43.6 million or 31.0% from the year-ago
quarter. These increases were primarily due to the following: the impact of
the three purchase accounting acquisitions on ongoing operations; additions of
revenue-generating personnel; ongoing volume growth; the cost of necessary
technological advances and upgrades including "Year 2000" expenditures; and
one-time costs associated with the creation of a "Section 20" full-service
securities broker / dealer subsidiary. FSCO continued to strengthen its
control of ongoing noninterest expenses while expending funds required to
support strong growth, multiple acquisitions, and investments in technology
appropriate for a high performance financial services company. The components
of FSCO's noninterest expenses are discussed below.
* FSCO's salaries and benefits expense were $184.9 million for year-to-date
1998, up $41.8 million or 29.2% from the year-ago period, and were $95.6
million for the second quarter of 1998, up $21.9 million or 29.7% from the
year-ago quarter.
* FSCO's nonpersonnel expenses were $165.2 million for year-to-date 1998,
up $34.1 million or 26.1% from the year-ago period, and were $88.7 million for
the second quarter of 1998, up $21.7 million or 32.4% from the year-ago
quarter.
FSCO's operating expense ratio (the ratio of noninterest expenses to the
sum of net interest income FTE and noninterest income) was 61.45% for year-to-
date 1998, up 233 basis points from the year-ago period, and was 62.62% for
the second quarter of 1998, up 310 basis from the year-ago quarter. FSCO's
tangible operating expense ratio was 58.67% for the year to date, up 158 basis
points from the year-ago period, and was 59.57% for the quarter, up 213 basis
from the year-ago quarter. These increases were due to the noninterest
expense and net interest margin factors described above.
FSCO's subsidiary, 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 efficiency ratio was 57.59% for year-to-date 1998,
up 221 basis points from the year-ago period, and was 58.92% for the second
quarter of 1998, up 337 basis from the year-ago quarter.
Before one-time CSTB acquisition noninterest expenses of $6.9 million,
FSCO's noninterest expenses were $343.1 million for year-to-date 1998, up
$69.0 million or 25.2% from the year-ago period, and were $177.3 million for
the second quarter of 1998, up $36.7 million or 26.1% from the year-ago
quarter. FSCO's operating expense ratio before CSTB acquisition expenses was
60.23% for year-to-date 1998, up 111 basis points from the year-ago period,
and was 60.26% for the second quarter of 1998, up 74 basis from the year-ago
quarter. Excluding both CrossLand Mortgage and CSTB acquisition expenses,
FSCO's efficiency ratio was 56.16% for year-to-date 1998, up 78 basis points
from the year-ago period, and was 56.13% for the second quarter of 1998, up 58
basis points from the year-ago quarter.
ANALYSIS OF BALANCE SHEETS
SUMMARY
FSCO's assets totaled $19.4 billion at June 30, 1998, up $1.2 billion or
6.7% from year-end 1997, and up $2.9 billion or 18.0% from one year ago.
Interest-earning assets were $17.4 billion at quarter end, up $1.4 billion or
8.6% from year end, and up $2.7 billion or 18.2% from one year ago.
At June 30, 1998, 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.
FSCO's liabilities totaled $17.8 billion at June 30, 1998, up $1.1 billion
or 6.4% from year end, and up $2.7 billion or 18.2% from one year ago. Total
interest-bearing liabilities were $14.9 billion at quarter end, up $1.0
billion or 7.5% from year end, and up $2.6 billion or 21.6% from one year ago.
FSCO's stockholders' equity was increased to $1.5 billion at June 30, 1998,
up $0.1 billion or 10.1% from year end, and up $0.2 billion or 14.9% from one
year ago.
INTEREST-EARNING ASSETS:
TRADING ACCOUNT SECURITIES AND OTHER MONEY MARKET INVESTMENTS
FSCO's trading account securities were $53.3 million at June 30, 1998, down
$202.0 million or 79.1% from year end, and down $220.7 million or 80.5% from
one year ago. Fluctuations in trading opportunities have decreased over the
past year due to the lack of volatility in interest rates.
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:
AVAILABLE FOR SALE SECURITIES
FSCO's available for sale (AFS) securities were $4.8 billion at June 30,
1998, up $0.5 billion or 10.5% from year end, and up $1.2 billion or 32.0%
from one year ago. These increases were due to a combination of growth
consistent with overall balance sheet growth, acquisitions of banks, and
spread opportunities in the markets.
INTEREST-EARNING ASSETS:
LOANS
FSCO's loans, net of unearned income but before the reserve for loan
losses, were $12.5 billion at June 30, 1998, up $1.3 billion or 11.6% from
year end, and up $2.0 billion or 19.0% from one year ago. This growth was a
result of continued strong loan demand, loans added with the RGB acquisition,
and loans held temporarily for securitization or sale, partially offset by
asset securitizations and sales. The ratio of total loans to total assets was
64.72% at quarter end, up from 61.87% at year end, and up from 64.14% one year
ago. The components of FSCO's loan portfolio at June 30, 1998, compared with
December 31, 1997, and June 30, 1997, respectively, are discussed below.
* Commercial loans were $3.1 billion, up $0.3 billion or 10.7% from year
end, and up $0.4 billion or 16.6% from one year ago. These increases were
primarily due to a continued broad-based business expansion in FSCO's market
areas. Commercial loans consist primarily of loans to small and middle-market
businesses and agricultural-related businesses.
* Real estate secured loans were $5.2 billion, up $0.7 billion or 15.5%
from year end, and up $1.2 billion or 28.5% from one year ago. These
increases were primarily due to record loan originations generated by
increased demand and lower interest rates, with 1 to 4 family residential term
loan originations of $6.9 billion in the last 6 months, and $10.9 billion in
the last 12 months. However, loan originations were, and will be, mostly
offset by mortgage loan sales. For balance sheet management purposes, FSCO
does not retain all newly originated mortgage loans but regularly sells most
loans in the secondary markets on an ongoing flow-through basis. At quarter
end, $1.7 billion of real estate secured loans were held for sale, up $0.6
billion or 51.4% from year end, and up $1.0 billion or 151.4% from one year
ago.
* Consumer loans were $3.1 billion, up $0.2 billion or 7.8% from year end,
and up $0.2 billion or 7.5% from one year ago. These increases were primarily
due to growth in auto lending, with indirect vehicle loan originations of $1.1
billion in the last 6 months, and $2.3 billion in the last 12 months.
However, this growth was partially offset by a combination of maturing loans
and indirect vehicle loan securitizations and sales, with $0.5 billion sold in
November 1997 and another $0.5 billion sold on April 13, 1998. FSCO remained
the leading consumer lender in its primary market area.
* Leases were $1.1 billion, up $0.1 billion or 7.4% from year end, and up
$0.2 billion or 20.3% from one year ago. These increases were primarily due
to FSCO's growth in the auto and equipment leasing markets, partially offset
by sales of $23 million of leases in the third quarter of 1997 and $32 million
in the first quarter of 1998.
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 continued to maintain good asset quality, as its ratio of total
problem assets to total loans and real estate was 0.53% at June 30, 1998, down
from 0.57% at year end, and down from 0.65% one year ago. The ratio of
nonperforming assets to total loans and ORE was 0.35% at June 30, 1998, down
from 0.38% at year end, and down from 0.45% one year ago.
Problem assets totaled $66.5 million at June 30, 1998, up $2.7 million or
4.2% from year end, but down $1.6 million or 2.3% from one year ago. The
components of FSCO's problem assets at June 30, 1998, compared with December
31, 1997, and June 30, 1997, respectively, are discussed below.
* Nonaccruing loans were $39.7 million, up $4.8 million or 13.6% from year
end, and up $0.9 million or 2.3% from one year ago. The increase from year
end occurred in commercial loans and real estate term loans, while the
increase from one year ago occurred in real estate term loans. The ratio of
nonaccruing loans to total loans was 0.32%, essentially unchanged from 0.31%
at year end, but down from 0.37% one year ago.
* Other real estate was $3.9 million, down $4.1 million or 51.0% from year
end, and down $4.5 million or 53.7% from one year ago. These reductions were
the result of sales of several properties located throughout FSCO's market
areas. ORE property values are reviewed at least annually, and the ORE
portfolio is adjusted to the lower of cost or fair value less estimated
selling costs.
* Accruing loans past due 90 days or more were $22.8 million, up $2.0
million or 9.6% from year end, and up $2.1 million or 10.2% from one year ago.
The ratio of accruing loans past due 90 days or more to total loans was 0.18%,
down from 0.19% at year end, and down from 0.20% one year ago.
Potential problem loans identified by FSCO amounted to $37.2 million at
June 30, 1998, up $29.8 million or 401.5% from year end, and up $27.5 million
or 282.1% from one year ago. These increases were primarily due to one large
commercial loan. Potential problem loans consisted of commercial loans and
residential real estate.
ASSET QUALITY:
RESERVE FOR LOAN LOSSES
FSCO's reserve for loan losses was increased to $166.7 million at June 30,
1998, up $9.1 million or 5.8% from year end, and up $16.5 million or 11.0%
from one year ago. These increases were due to additions to the reserve in
response to strong growth in average loans, and reserves added with the RGB
acquisition.
Based on its analysis of reserve adequacy, FSCO considered its reserve for
loan losses at June 30, 1998 to be adequate to absorb estimated loan losses in
the current loan portfolio. FSCO's coverage ratio of the reserve to
nonaccruing loans was 419.66% at June 30, 1998, down from 450.59% at year end,
but up from 386.75% one year ago. The ratio of the reserve to total loans was
1.33% at quarter end, down from 1.40% at year end and 1.43% one year ago, due
in large part to the strong volume growth in loans. FSCO relies on the
methodology for analysis of reserve adequacy outlined in its 1997 Annual
Report on Form 10-K (hereby incorporated by reference) and not on any specific
reserve ratio comparison.
Net loans charged off against the reserve were $24.8 million for year-to-
date 1998, down $0.4 million or 1.7% from the year-ago period, and were $15.0
million for the second quarter of 1998, up $2.4 million or 19.1% from the
year-ago quarter. The year-to-date decrease was primarily due to improvements
in real estate term loan charge-offs and recoveries, while the quarterly
increase was primarily due to increased net loans charged off in commercial
loans and consumer vehicle and other loans. The annualized ratio of net loans
charged off to average loans was 0.42% for year-to-date 1998, down from 0.52%
for the year-ago period, and was 0.49% for the quarter, essentially unchanged
from 0.50% for the year-ago quarter.
While reserve adequacy and allocation are measured using the above
criteria, FSCO's reserve for loan losses is available for use by its entire
loan portfolio, as needed, regardless of allocation.
ASSET QUALITY:
PROVISION FOR LOAN LOSSES
FSCO's provision for loan losses was $31.0 million for year-to-date 1998,
up $2.8 million or 9.8% from the year-ago period, and was $18.4 million for
the second quarter of 1998, up $4.3 million or 30.7% from the year-ago
quarter. These increases included $13.6 million in additions to the reserve,
over and above net loans charged off, in the last 12 months as FSCO responded
to loan growth during the period, plus $2.9 million in reserves added with the
RGB acquisition.
ASSET / LIABILITY MANAGEMENT:
LIQUIDITY
FSCO's deposits totaled $11.9 billion at June 30, 1998, up $0.5 billion or
4.4% from year end, and up $1.4 billion or 13.8% from one year ago, due to
FSCO's continued emphasis on its deposit gathering functions, and the success
of several deposit programs. The ratio of loans to deposits was 105.15% at
quarter end, up from 98.36% at year end, and up from 100.51% one year ago.
These increases were due to continued strong loan demand, loans added with
acquisitions, significant increases in mortgage loans due to refinance
activity and loans held temporarily for securitization or sale. This ratio,
as well as other loan and liquidity ratios, varies with changes in economic
cycles and is monitored closely through FSCO's ALCO process to ensure that the
proper balance is maintained between risk and economic opportunities.
FSCO's debt, which included short-term borrowings and long-term debt,
totaled $5.4 billion at June 30, 1998, up $0.5 billion or 10.4% from year end,
and up $1.2 billion or 27.6% from one year ago. The components of FSCO's debt
at June 30, 1998, compared with December 31, 1997, and June 30, 1997,
respectively, are discussed below.
* Federal funds purchased and securities sold under repurchase agreements
were $3.5 billion, up $0.2 billion or 7.0% from year end, and up $0.5 billion
or 17.0% from one year ago. These increases occurred as FSCO funded, on an
interim basis, the loan and mortgage refinance growth generated by business-
cycle opportunities in its market areas, and funded growth in AFS securities
through repurchase agreements.
* All other short-term borrowed funds were $0.4 billion, up $0.1 billion or
20.2% from year end, and up $0.1 billion or 37.2% from one year ago, primarily
due to maturing issues formerly classified as long-term debt.
* Long-term debt was $1.5 billion, up $0.2 billion or 16.0% from year end,
and up $0.6 billion or 57.6% from one year ago. These increases were due to
new Federal Home Loan Bank borrowings and the October 1997 issuance of $300
million of Floating Rate European Medium Term Notes, partially offset by the
ongoing maturity of existing long-term debt.
ASSET / LIABILITY MANAGEMENT:
MARKET RISK
FSCO's market risk is composed primarily of interest rate risk throughout
FSCO's balance sheet, and to a lesser extent, market price risk in trading
account securities. FSCO has no material foreign currency exchange rate risk,
commodity price risk, or equity price risk.
ASSET / LIABILITY MANAGEMENT:
INTEREST RATE RISK - OTHER THAN TRADING ACCOUNT SECURITIES
FSCO continued to maintain a relatively neutral interest rate risk position
and a conservative balance sheet for year-to-date 1998. At June 30, 1998,
FSCO exhibited slight liability sensitivity for the one-year time horizon and
minimal overall interest rate risk. FSCO's net interest income was adversely
affected as a result of the significant growth in mortgage refinance activity
which generated a large volume of lower rate assets while liability rates
exhibited minimal changes during the same period.
FSCO's average loans for year-to-date 1998 grew $2.2 billion or 22.3% from
the year-ago period due to a strong regional economy and resulting loan demand
and mortgage refinance activity. Average deposits grew $1.6 billion or 16.4%
during the same period due to FSCO's successful deposit promotions, which was
a healthy increase but not sufficient to entirely fund the loan growth. FSCO
utilized securitizations and external funding sources to support a portion of
its asset growth, including the previously-mentioned new Federal Home Loan
Bank borrowings. FSCO remained well positioned to support continued strong
loan growth through growth of regular deposit programs, the sale or runoff of
securities, additional securitizations, and access to external sources of
funding.
FSCO took advantage of its strong capital ratios and further leveraged the
balance sheet through an increase in the average AFS securities for year-to-
date 1998, up $1.0 billion or 28.3% from the year-ago period. This increase
was primarily funded through the use of repurchase agreements.
Off-balance sheet derivatives used to manage FSCO's interest rate risk,
including interest rate swaps, caps, corridors, floors, and forwards, totaled
$2.2 billion notional amount at June 30, 1998, up from $1.5 billion at year
end. This increase was due to additional derivatives negotiated in connection
with the increased mortgage refinance activity, partially offset by maturities
of existing derivatives during the period.
ASSET / LIABILITY MANAGMENT:
MARKET RISK - TRADING ACCOUNT SECURITIES
Financial futures and options contracts related to FSCO's trading account
securities totaled $8.5 billion notional par value at June 30, 1998, down from
$12.6 billion notional par value at year end, and down from $16.6 billion
notional amount one year ago. Fluctuations in these derivative positions are
common as FSCO's traders take advantage of opportunities in the short term
futures and options markets.
OTHER ASSETS AND LIABILITIES
FSCO's intangible assets were $352 million at June 30, 1998, up from year
end and one year ago due to goodwill associated with recent acquisitions and
increased originated mortgage servicing rights from higher loan production.
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.
STOCKHOLDERS' EQUITY AND CAPITAL ADEQUACY
FSCO's stockholders' equity was increased to $1.5 billion at June 30, 1998,
up $0.1 billion or 10.1% from year-end 1997, and up $0.2 billion or 14.9% from
one year ago. This growth was due to earnings retained, issuances of new FSCO
common stock shares for acquisitions, and the impact of the SFAS 115 net
unrealized gain on available for sale securities, partially offset by
repurchases of common stock in the public markets in 1997 and early 1998.
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 AFS securities. These fluctuations are
included in the "Accumulated other comprehensive income" component of equity.
FSCO's ratio of stockholders' equity to total assets was 7.97% at June 30,
1998, compared with 7.72% at year-end 1997 and 8.18% one year ago. The ratio
of tangible common equity to tangible assets was 6.26% at quarter end,
compared with 6.24% at year end and 6.68% one year ago, reflecting the
goodwill recognized with the RGB acquisition and the ongoing origination of
mortgage servicing rights.
FSCO's risk-based capital ratios remained strong at June 30, 1998 due to
earnings retained and FSCO's Guaranteed Preferred Beneficial Interest - 8.41%
Subordinated Capital Income Securities due 2026. Regulations permit these
Capital Income Securities to be included in Tier 1 Capital for purposes of
calculating the Tier 1 Leverage ratio and risk-based capital ratios. As of
June 30, 1998, FSCO's Tier 1 risk-based capital ratio was 14.32%, its' Total
Capital risk-based capital ratio was 15.58%, and its' leverage ratio was
7.41%.
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 July 27, 1998, the directors of FSCO declared a regular quarterly common
stock cash dividend of $0.130 per share. This dividend is payable on
September 7, 1998 to shareholders of record on August 14, 1998, and is equal
to an annual dividend rate of $0.520 per share. At the market closing price
of $22.375 per share on Friday, July 24, 1998 (before the announcement of the
dividend), the annual dividend yield on FSCO common stock would have been
approximately 2.3%.
The July 27, 1998 dividend was the 174th common stock dividend declared by
FSCO, and marked the 64th 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 $21.375 per share at the close of
the market on June 30, 1998, versus a book value of $8.21 per share, resulting
in a market-to-book ratio of 260.35%. In comparison, the bid price of FSCO
common stock was $18.209 per share at the close of the market on June 30,
1997, versus a book value of $7.26 per share, resulting in a market-to-book
ratio of 250.81%. At June 30, 1998, FSCO's common stock market capitalization
was $4.0 billion, up $0.7 billion or 19.3% from one year ago.
FSCO's preferred stock is convertible into FSCO common stock at the
conversion rate of one share of preferred stock for 41.00625 shares of common
stock. There is no active trading market for FSCO's preferred stock.
MERGERS AND ACQUISITIONS
FSCO's merger and acquisition strategies, opportunities, and activities
were discussed in detail in its 1997 Annual Report on Form 10-K (hereby
incorporated by reference). Mergers and acquisitions of the last twelve
months, some previously reported, are discussed below.
* On March 31, 1997, FSCO's subsidiary CrossLand Mortgage purchased the
wholesale loan production branch operations of Harbourton Mortgage Co., L.P.
(HMC).
* On June 30, 1997, FSCO acquired American Bancorp of Nevada (ABN), and
ABN's wholly owned subsidiary American Bank of Commerce was merged into FSCO's
First Security Bank of Nevada.
* On February 2, 1998, FSCO acquired Rio Grande Bancshares, Inc. (RGB) and
its two bank subsidiaries First National Bank of Dona Ana County and First
National Bank of Chaves County. On July 1, 1998, FSCO merged and renamed
these subsidiaries as First Security Bank of Southern New Mexico.
* On May 30, 1998, FSCO acquired California State Bank, headquartered in
West Covina, California. At March 31, 1998, CSTB had assets of $863.5 million
and 17 branches serving small- and middle-market business customers and retail
banking clients in the San Gabriel Valley, as well as Orange, Riverside, and
San Bernardino counties of Southern California. This transaction was
accounted for as a pooling-of-interests merger, requiring the restatement of
all prior period FSCO financial statements. FSCO incurred one-time
acquisition charges for this transaction totaling $7.2 million or $0.037 per
share after tax.
NATIONAL & REGIONAL ECONOMY
While consumer spending and other areas of financial demand remained solid
in the second quarter, evidences of Asia-related weaknesses in commodity
prices and in the manufacturing sector were clearly observable. Aided by the
low interest rates, housing and automobile sales were sustained at high
levels. With inflation near 1.5%, real incomes were pushed higher and
declining import prices provided incentives for aggressive buying. Job gains
were steady in the second quarter, but in June, the nation's jobless rate
edged slightly higher to 4.5%.
By midyear, it had become evident that the Asian financial crisis was a
huge difficulty that would persist for an extended period of time. More than
just a recession, Asia (including Japan) is facing broad-based debt deflation,
with the banking sector burdened with a tremendous volume of bad loans.
Accordingly, the Japanese yen has weakened against the dollar, and the U.S.
international trade deficit has widened and will continue to do so. In the
second half of 1998, commodity prices likely will remain under pressure, and
corporate profit margins are expected to narrow. In this slower-growth
environment, it seems more probable that the Federal Reserve may lower rather
than increase interest rates.
Economic activity in the western United States recorded sustained growth in
the second quarter. Rates of expansion are somewhat below last year, but most
states' labor markets continue at or near full employment. The lower mortgage
and other lending rates have aided the residential and automobile sales
climate.
FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS AND FINANCIAL CONDITION:
TECHNOLOGICAL CHANGE AND YEAR 2000 COMPUTER ISSUE
Factors that may affect FSCO's future results of operations and financial
condition, including technological changes and the year 2000 (Y2K) computer
issue, were discussed in detail in its 1997 Annual Report on Form 10-K (hereby
incorporated by reference).
All businesses and industries worldwide must address the fact that some
computer hardware and software may not properly process dates beyond 1999 in
their calculations.
FSCO has made preparing for the Y2K problem a top corporate priority.
FSCO's Y2K project requires that its systems be checked for any potential
date-handling problems, reprogrammed or replaced as needed, and tested both
separately and in operation with other systems. This project includes all of
FSCO's mainframe, midrange, and desktop computers, data / voice systems,
facilities control, security, and other systems. FSCO will also seek to
ascertain the readiness of major customers, suppliers, and other organizations
with which FSCO shares data.
As of June 30, 1998, FSCO is on schedule to have its systems operationally
ready by June 30, 1999. In addition, resources are in place to have the
majority of systems, including critical systems, ready by December 31, 1998.
FSCO's expenditures for its Y2K project are estimated to total $20.9
million, including $2.6 million accrued and spent in 1997, plus expenditures
of approximately $9.7 million in 1998, $7.6 million in 1999, and $1.0 million
in 2000.
# # #
<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) (A)
<CAPTION>
2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr Year-To-Date Six Months
1998 1998 1997 1997 1997 1998 1997 %Chg
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Common & Preferred Stock Data (A):
Earnings per common share basic 0.30 0.33 0.31 0.30 0.29 0.63 0.56 12.5
Earnings per common share diluted 0.29 0.32 0.30 0.29 0.28 0.60 0.54 11.1
Tangible EPCS diluted 0.33 0.35 0.31 0.33 0.30 0.69 0.59 16.9
Dividends paid per common share 0.130 0.130 0.113 0.113 0.113 0.260 0.215 20.9
Book value per common share [EOP] 8.21 8.02 7.59 7.48 7.26 8.21 7.26 13.1
Tangible book value per common share [EOP] 6.34 6.21 6.05 6.04 5.84 6.34 5.84 8.6
Market price (bid) [EOP] 21.375 23.813 27.917 19.833 18.209 21.375 18.209 17.4
High bid for the period 24.750 26.167 27.917 21.333 19.000 26.167 19.000 37.7
Low bid for the period 21.000 21.833 19.083 17.583 14.445 21.000 14.222 47.7
Market capitalization (mktprice x #shrs) [EOP] 4,016,256 4,457,936 5,148,509 3,664,543 3,365,296 4,016,256 3,365,296 19.3
Market price / book value per com share [EOP] % 260.35 296.92 367.81 265.15 250.81 260.35 250.81
Dividend payout ratio (DPCS / EPCS basic) % 43.33 39.39 36.45 37.67 38.97 41.27 38.39
Dividend yield (DPCS / mktprice) [EOP] % 2.43 2.18 1.62 2.28 2.48 2.43 2.48
Price / earnings ratio(mktprice/4qtrsEPCSbasic) 17.2x 19.4x 23.7x 17.0x 16.0x 17.2x 16.0x
Common shares basic [EOP] 187,895 187,206 184,422 184,770 184,815 187,895 184,815 1.7
Common shares basic [Avg] 187,623 186,336 184,583 184,717 179,359 186,983 179,789 4.0
Common shares diluted [Avg] 194,471 193,510 191,671 191,268 185,609 193,993 185,964 4.3
Preferred shares [EOP] 9 10 10 10 10 9 10 (10.0)
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Income Statement:
Interest income 350,950 334,101 328,965 315,683 294,255 685,051 568,730 20.5
Interest expense 178,012 169,810 163,388 152,372 141,775 347,822 271,679 28.0
Net interest income 172,938 164,291 165,577 163,310 152,480 337,229 297,051 13.5
Fully taxable equivalent (FTE) adjustment 2,827 2,579 4,176 2,336 1,851 5,406 3,858 40.1
Net interest income, FTE 175,765 166,870 169,753 165,646 154,331 342,635 300,909 13.9
Provision for loan losses 18,396 12,598 21,243 13,921 14,074 30,994 28,222 9.8
Noninterest income 118,534 108,516 106,876 87,543 82,006 227,050 162,739 39.5
Noninterest expenses 184,277 165,806 164,944 149,830 140,658 350,083 274,130 27.7
Provision for income taxes 32,892 33,034 28,235 31,066 28,550 65,926 56,231 17.2
Net income 55,907 61,369 58,031 56,036 51,204 117,276 101,207 15.9
Preferred stock dividend requirement 7 7 7 7 8 14 16 (12.5)
Common stock dividend 22,943 23,586 20,308 20,318 19,569 46,529 37,329 24.6
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Balance Sheet - End of Period:
Trading account securities 53,343 318,224 255,320 87,154 274,014 53,343 274,014 (80.5)
Available for sale (AFS) securities 4,806,559 4,386,629 4,351,525 4,109,176 3,642,437 4,806,559 3,642,437 32.0
Memo: fair value adjustment AFS securities 39,154 34,640 37,678 19,196 2,081 39,154 2,081 1781.5
Loans, net of unearned income 12,530,360 12,436,407 11,230,766 11,159,090 10,528,449 12,530,360 10,528,449 19.0
Reserve for loan losses (166,658) (163,256) (157,525) (152,951) (150,170) (166,658) (150,170) 11.0
Total interest-earning assets 17,417,190 17,219,384 16,044,477 15,374,616 14,729,459 17,417,190 14,729,459 18.2
Intangible assets 351,547 338,844 285,156 265,492 263,523 351,547 263,523 33.4
Total assets 19,360,006 19,132,896 18,151,783 17,145,647 16,413,522 19,360,006 16,413,522 18.0
Noninterest-bearing deposits 2,402,497 2,339,665 2,431,006 2,391,563 2,435,479 2,402,497 2,435,479 (1.4)
Interest-bearing deposits 9,514,706 9,483,289 8,986,628 8,531,915 8,039,087 9,514,706 8,039,087 18.4
Total deposits 11,917,203 11,822,954 11,417,634 10,923,478 10,474,566 11,917,203 10,474,566 13.8
Short-term borrowed funds 3,905,250 3,986,966 3,605,199 3,399,509 3,285,243 3,905,250 3,285,243 18.9
Long-term debt 1,513,044 1,339,892 1,304,463 954,463 959,897 1,513,044 959,897 57.6
Total interest-bearing liabilities 14,933,000 14,810,147 13,896,290 12,885,887 12,284,227 14,933,000 12,284,227 21.6
Preferred stockholders' equity 493 501 501 511 532 493 532 (7.3)
Common stockholders' equity 1,542,377 1,500,734 1,400,345 1,381,980 1,342,678 1,542,377 1,342,678 14.9
Parent company investment in subsidiaries 1,719,975 1,678,122 1,555,112 1,503,053 1,450,529 1,719,975 1,450,529 18.6
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Problem Assets & Potential Problem Assets - End of Period:
Nonaccruing loans:
Commercial 16,463 16,055 13,670 16,094 17,413 16,463 17,413 (5.5)
Real estate term 17,982 15,826 16,288 17,861 15,908 17,982 15,908 13.0
Real estate construction 4,752 4,171 4,669 3,787 4,859 4,752 4,859 (2.2)
Consumer 82 140 2 30 32 82 32 156.3
Leases 434 361 331 316 617 434 617 (29.7)
Total nonaccruing loans 39,713 36,553 34,960 38,088 38,829 39,713 38,829 2.3
Other real estate 3,908 4,342 7,981 6,789 8,449 3,908 8,449 (53.7)
Total nonperforming assets 43,621 40,895 42,941 44,877 47,278 43,621 47,278 (7.7)
Accruing loans past due 90 days or more 22,833 19,693 20,841 20,109 20,727 22,833 20,727 10.2
Total problem assets 66,454 60,588 63,782 64,986 68,005 66,454 68,005 (2.3)
Potential problem assets 37,229 11,493 7,423 11,654 9,742 37,229 9,742 282.1
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Other Data - End of Period (not rounded):
Full-time equivalent employees 8,659 8,214 7,996 7,826 7,665 8,659 7,665 13.0
Domestic bank offices:
FS Bank: Utah (B) 132 130 129 127 124 132 124 6.5
FS Bank: Idaho (B) 88 88 88 87 87 88 87 1.1
FS Bank: Oregon (B) 14 13 13 13 13 14 13 7.7
FS Bank: Wyoming (B) 8 8 8 7 7 8 7 14.3
FSB New Mexico 31 31 31 29 29 31 29 6.9
FSB Southern New Mexico (C) 11 0 0 0 11 0 NM
FSB Nevada 14 14 14 14 13 14 13 7.7
California State Bank (A) 17 17 17 18 18 17 18 (5.6)
Total domestic bank offices 315 312 300 295 291 315 291 8.2
============================================== ========== ========== ========== ========== ========== ========== ========== =======
<FN>
Notes:
EOP: End Of Period. EPCS: Earnings Per Common Share. DPCS: Dividends Per Common Share. AFS: Available For Sale. NM: Not Meaningful.
(A) All FSCO financial statements have been restated to reflect the following:
- the May 29, 1998 acquisition of California State Bank in a pooling-of-interests merger.
FSCO incurred one-time acquisition charges of $7.2 million or $0.037 per share after tax.
- two separate 3-for-2 stock splits in the form of 50% stock dividends paid in May 1997 and February 1998.
(B) FSCO created FS Bank from these mergers: FSB Utah and FSB Idaho (June 1996); FSB Oregon (May 1997); FSB Wyoming (November 1997).
(C) FSCO purchased Rio Grande Bancshares, Inc. and its two bank subsidiaries in February 1998, and merged and renamed them in July
1998.
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
FINANCIAL HIGHLIGHTS - Continued
(in thousands, except per share data and ratios; unaudited) (A)
<CAPTION>
2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr Year-To-Date Six Months
1998 1998 1997 1997 1997 1998 1997 %Chg
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Balance Sheet - Average:
Trading account securities 138,157 295,414 163,330 178,070 360,339 216,351 264,748 (18.3)
Available for sale (AFS) securities 4,524,500 4,310,715 4,190,292 3,728,035 3,521,411 4,418,198 3,443,416 28.3
Memo: fair value adjustment AFS securities 33,956 41,342 28,511 13,808 (17,755) 37,629 (7,272) (617.5)
Loans, net of unearned income 12,374,882 11,656,881 11,214,784 10,829,751 10,006,397 12,017,865 9,823,971 22.3
Reserve for loan losses (164,256) (160,269) (153,922) (151,204) (144,385) (162,274) (143,472) 13.1
Deferred taxes on leases (198,673) (196,556) (192,903) (186,212) (187,553) (197,620) (185,586) 6.5
Total interest-earning assets, excluding
fair value adjustment AFS securities
& deferred taxes on leases 16,939,894 16,091,448 15,415,241 14,612,051 13,785,315 16,518,015 13,442,052 22.9
Intangible assets 349,850 308,452 271,770 262,789 195,413 329,266 191,890 71.6
Total assets 18,998,533 18,085,153 17,295,476 16,394,898 15,433,778 18,544,366 15,108,031 22.7
Noninterest-bearing deposits 2,252,282 2,181,985 2,231,130 2,260,560 2,215,276 2,217,328 2,159,506 2.7
Interest-bearing deposits 9,459,908 9,207,647 8,658,839 8,223,536 7,781,168 9,334,474 7,761,142 20.3
Total deposits 11,712,190 11,389,632 10,889,970 10,484,096 9,996,444 11,551,802 9,920,648 16.4
Short-term borrowed funds 3,851,257 3,522,497 3,350,840 3,210,660 2,889,451 3,687,785 2,653,587 39.0
Long-term debt 1,433,195 1,314,965 1,246,482 971,356 989,408 1,374,407 970,236 41.7
Total interest-bearing liabilities 14,744,360 14,045,109 13,256,161 12,405,553 11,660,027 14,396,666 11,384,965 26.5
Preferred stockholders' equity 497 501 506 524 532 499 534 (6.6)
Common stockholders' equity 1,519,335 1,411,739 1,384,287 1,362,645 1,214,361 1,465,834 1,217,636 20.4
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Reconciliation of the Reserve for Loan Losses:
Reserve for loan losses, beginning 163,256 157,525 152,951 150,170 144,225 157,525 142,693 10.4
Loans (charged off):
Commercial (3,725) (1,932) (5,122) (2,158) (3,491) (5,657) (5,033) 12.4
Real estate term (607) (383) (761) (781) (967) (990) (1,525) (35.1)
Real estate construction 0 0 0 (33) 0 0 (76) (100.0)
Consumer credit card & related (3,441) (3,445) (3,955) (3,348) (3,490) (6,886) (6,919) (0.5)
Consumer vehicle & other (15,238) (13,122) (14,520) (12,650) (14,572) (28,360) (29,301) (3.2)
Leases 0 (3) (5) (6) 0 (3) 0 NM
Total loans charged off (23,011) (18,885) (24,363) (18,976) (22,520) (41,896) (42,854) (2.2)
Recoveries on loans charged off:
Commercial 1,173 1,955 1,117 1,089 1,686 3,128 3,110 0.6
Real estate term 400 731 724 448 409 1,131 678 66.8
Real estate construction 18 3 3 2 3 21 7 200.0
Consumer credit card & related 622 728 621 578 649 1,350 1,278 5.6
Consumer vehicle & other 5,801 5,673 5,227 5,718 7,182 11,474 12,564 (8.7)
Leases 3 1 2 1 3 4 13 (69.2)
Total recoveries of loans charged off 8,017 9,091 7,694 7,836 9,932 17,108 17,650 (3.1)
Net loans (charged off) recovered (14,994) (9,794) (16,669) (11,140) (12,588) (24,788) (25,204) (1.7)
Provision for loan losses 18,396 12,598 21,243 13,921 14,074 30,994 28,222 9.8
Acquisitions 0 2,927 0 0 4,459 2,927 (34.4)
Reserve for loan losses, ending 166,658 163,256 157,525 152,951 150,170 166,658 150,170 11.0
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Selected Ratios (%):
Return on average assets (ROAA) 1.18 1.38 1.33 1.36 1.33 1.28 1.35
Tangible ROAA 1.40 1.56 1.39 1.56 1.46 1.48 1.48
Return on average stockholders' equity (ROAE) 14.75 17.62 16.63 16.31 16.91 16.13 16.75
Tangible ROAE 22.26 25.14 21.31 22.85 21.83 23.65 21.51
Net interest margin, FTE 4.15 4.15 4.40 4.53 4.48 4.15 4.48
Net interest spread, FTE 3.52 3.53 3.71 3.79 3.73 3.53 3.75
Operating expense ratio
(nonint exp / (net int inc FTE + nonint inc)) 62.62 60.21 59.63 59.18 59.52 61.45 59.12
Tangible operating expense ratio 59.57 57.71 59.04 56.91 57.44 58.67 57.09
Productivity ratio (nonint exp / avg assets) 3.89 3.72 3.78 3.63 3.66 3.81 3.66
Stockholders' equity / assets [EOP] 7.97 7.85 7.72 8.06 8.18 7.97 8.18
Stockholders' equity / assets [Avg] 8.00 7.81 8.01 8.31 7.87 7.91 8.06
Tangible common equity / tangible assets [EOP] 6.26 6.18 6.24 6.61 6.68 6.26 6.68
Loans / deposits [EOP] 105.15 105.19 98.36 102.16 100.51 105.15 100.51
Loans / assets [EOP] 64.72 65.00 61.87 65.08 64.14 64.72 64.14
Reserve for loan losses [EOP] /:
Total loans 1.33 1.31 1.40 1.37 1.43 1.33 1.43
Nonaccruing loans 419.66 446.63 450.59 401.57 386.75 419.66 386.75
Nonaccruing + accruing loans past due 90 days 266.46 290.25 282.30 262.82 252.15 266.46 252.15
Nonaccruing loans / total loans 0.32 0.29 0.31 0.34 0.37 0.32 0.37
Accruing loans past due 90 days / total loans 0.18 0.16 0.19 0.18 0.20 0.18 0.20
Nonaccruing + accr loans past due / total loans 0.50 0.45 0.50 0.52 0.57 0.50 0.57
Nonperforming assets /:
Total loans + other real estate 0.35 0.33 0.38 0.40 0.45 0.35 0.45
Total assets 0.23 0.21 0.24 0.26 0.29 0.23 0.29
Total equity 2.83 2.72 3.07 3.25 3.52 2.83 3.52
Total equity + reserve for loan losses 2.55 2.46 2.76 2.92 3.17 2.55 3.17
Problem assets /:
Total loans + other real estate 0.53 0.49 0.57 0.58 0.65 0.53 0.65
Total assets 0.34 0.32 0.35 0.38 0.41 0.34 0.41
Total equity 4.31 4.04 4.55 4.70 5.06 4.31 5.06
Total equity + reserve for loan losses 3.89 3.64 4.09 4.23 4.55 3.89 4.55
Net loans charged off / average loans 0.49 0.34 0.59 0.41 0.50 0.42 0.52
============================================== ========== ========== ========== ========== ========== ========== ========== =======
Capital Ratios & Risk-Based Capital Ratios (%) - as of June 30, 1998:
FSCO FS Bank(C) FSB NewMex FSB Nevada FSBSNewMex CalStBank
---------- ---------- ---------- ---------- ---------- ----------
Leverage ratio 7.62 7.07 6.44 7.41 11.12 7.84
Tier 1 risk-based capital ratio 10.45 9.25 13.33 14.32 17.73 11.39
Total (Tier 1 + 2) risk-based capital ratio 12.97 10.55 14.59 15.58 18.87 12.64
Tier 1 risk-based capital ($) 1,455,253 1,055,990 128,888 78,367 45,511 67,016
Total (Tier 1 + 2) risk-based capital ($) 1,806,911 1,203,614 141,051 85,247 48,438 74,398
Total risk-based assets - loan loss reserve ($)13,928,003 11,413,316 966,628 547,096 256,704 588,517
============================================== ========== ========== ========== ========== ========== ========== ========== =======
<FN>
Notes:
EOP: End Of Period. EPCS: Earnings Per Common Share. DPCS: Dividends Per Common Share. AFS: Available For Sale. NM: Not Meaningful.
(A) All FSCO financial statements have been restated to reflect the following:
- the May 29, 1998 acquisition of California State Bank in a pooling-of-interests merger.
FSCO incurred one-time acquisition charges of $7.2 million or $0.037 per share after tax.
- two separate 3-for-2 stock splits in the form of 50% stock dividends paid in May 1997 and February 1998.
(B) FSCO created FS Bank from these mergers: FSB Utah and FSB Idaho (June 1996); FSB Oregon (May 1997); FSB Wyoming (November 1997).
(C) FSCO purchased Rio Grande Bancshares, Inc. and its two bank subsidiaries in February 1998, and merged and renamed them in July
1998.
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
VOLUME / RATE ANALYSIS
(in thousands; fully taxable equivalent; unaudited) (A, B)
<CAPTION>
For the Three Months Ended June 30, 1998 and 1997
Average Balance Yield/Rate % Interest Inc/Exp Change Changes Due To:
1998 1997 1998 1997 1998 1997 1998-97 Volume Rate
<C> <C> <C> <C> <S> <C> <C> <C> <C> <C>
- ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
INTEREST-EARNING ASSETS / INCOME:
133,868 66,465 5.67 5.34 Federal funds sold & securities purchased 1,897 887 1,010 900 110
1,116 501 3.94 8.78 Interest-bearing deposits in other banks 11 11 0 14 (14)
138,157 360,339 5.28 5.94 Trading account securities 1,822 5,355 (3,533) (3,302) (231)
4,490,544 3,539,166 6.62 6.71 Available for sale securities, amortized cost 74,351 59,397 14,954 15,967 (1,013)
Loans, net of unearned income &
12,176,209 9,818,844 9.06 9.39 deferred taxes on leases (C) 275,696 230,456 45,240 55,329 (10,089)
- ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
16,939,894 13,785,315 8.35 8.59 TOTAL INTEREST-EARNING ASSETS / INCOME 353,777 296,106 57,671 68,908 (11,237)
- ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
INTEREST-BEARING LIABILITIES / EXPENSE:
Interest-Bearing Deposits:
339,386 582,317 1.69 1.69 Interest-bearing demand accounts 1,437 2,454 (1,017) (1,024) 7
4,245,292 3,297,333 2.93 3.23 Savings & money market accounts 31,114 26,654 4,460 7,663 (3,203)
1,373,212 867,652 5.74 5.73 Time deposits of $100,000 or more 19,716 12,436 7,280 7,246 34
3,502,018 3,033,866 5.68 5.67 Other time deposits 49,749 43,031 6,718 6,640 78
- ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
9,459,908 7,781,168 4.31 4.35 TOTAL INTEREST-BEARING DEPOSITS 102,016 84,575 17,441 20,525 (3,084)
- ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
3,406,527 2,609,783 5.37 5.38 Federal funds purchased & securities sold 45,710 35,122 10,588 10,722 (134)
444,730 279,668 5.80 7.07 Other short-term borrowings 6,447 4,945 1,502 2,919 (1,417)
1,433,195 989,408 6.65 6.93 Long-term debt 23,839 17,133 6,706 7,685 (979)
- ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
14,744,360 11,660,027 4.83 4.86 TOTAL INTEREST-BEARING LIABILITIES / EXPENSE 178,012 141,775 36,237 41,851 (5,614)
- ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
8.35 8.59 Interest income / earning assets
4.20 4.11 Interest expense / earning assets
------ ------ --------------------------------------------
4.15 4.48 Net interest income / earning assets 175,765 154,331 21,434 27,057 (5,623)
Less fully taxable equivalent adjustment 2,827 1,851 976
------ ------ -------------------------------------------- --------- --------- -------- -------- --------
NET INTEREST INCOME, PER CONSOLIDATED
STATEMENTS OF INCOME 172,938 152,480 20,458
=========== =========== ====== ====== ============================================ ========= ========= ======== ======== ========
<CAPTION>
For the Six Months Ended June 30, 1998 and 1997
Average Balance Yield/Rate % Interest Inc/Exp Change Changes Due To:
1998 1997 1998 1997 1998 1997 1998-97 Volume Rate
<C> <C> <C> <C> <S> <C> <C> <C> <C> <C>
- ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
INTEREST-EARNING ASSETS / INCOME:
99,502 85,866 5.76 5.15 Federal funds sold & securities purchased 2,865 2,213 652 351 301
1,348 2,365 6.23 5.67 Interest-bearing deposits in other banks 42 67 (25) (29) 4
216,351 264,748 5.60 5.87 Trading account securities 6,060 7,770 (1,710) (1,420) (290)
4,380,569 3,450,688 6.65 6.68 Available for sale securities, amortized cost 145,707 115,241 30,466 31,055 (589)
Loans, net of unearned income &
11,820,245 9,638,385 9.07 9.28 deferred taxes on leases (C) 535,783 447,297 88,486 101,255 (12,769)
- ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
16,518,015 13,442,052 8.36 8.52 TOTAL INTEREST-EARNING ASSETS / INCOME 690,457 572,588 117,869 131,212 (13,343)
- ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
INTEREST-BEARING LIABILITIES / EXPENSE:
Interest-Bearing Deposits:
323,932 649,441 1.73 2.23 Interest-bearing demand accounts 2,800 7,247 (4,447) (3,632) (815)
4,151,106 3,260,814 2.95 3.14 Savings & money market accounts 61,307 51,132 10,175 13,960 (3,785)
1,366,514 864,969 5.80 5.60 Time deposits of $100,000 or more 39,628 24,223 15,405 14,046 1,359
3,492,922 2,985,918 5.66 5.61 Other time deposits 98,790 83,702 15,088 14,212 876
- ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
9,334,474 7,761,142 4.34 4.29 TOTAL INTEREST-BEARING DEPOSITS 202,525 166,304 36,221 38,586 (2,365)
- ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
3,270,058 2,373,688 5.34 5.22 Federal funds purchased & securities sold 87,304 61,946 25,358 23,393 1,965
417,727 279,899 5.83 6.73 Other short-term borrowings 12,180 9,414 2,766 4,636 (1,870)
1,374,407 970,236 6.67 7.01 Long-term debt 45,813 34,015 11,798 14,170 (2,372)
- ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
14,396,666 11,384,965 4.83 4.77 TOTAL INTEREST-BEARING LIABILITIES / EXPENSE 347,822 271,679 76,143 80,785 (4,642)
- ----------- ----------- ------ ------ -------------------------------------------- --------- --------- -------- -------- --------
8.36 8.52 Interest income / earning assets
4.21 4.04 Interest expense / earning assets
------ ------ --------------------------------------------
4.15 4.48 Net interest income / earning assets 342,635 300,909 41,726 50,427 (8,701)
Less fully taxable equivalent adjustment 5,406 3,858 1,548
------ ------ -------------------------------------------- --------- --------- -------- -------- --------
NET INTEREST INCOME, PER CONSOLIDATED
STATEMENTS OF INCOME 337,229 297,051 40,178
=========== =========== ====== ====== ============================================ ========= ========= ======== ======== ========
<FN>
Notes:
(A) All FSCO financial statements have been restated to reflect the following:
- the May 29, 1998 acquisition of California State Bank in a pooling-of-interests merger.
- two separate 3-for-2 stock splits in the form of 50% stock dividends paid in May 1997 and February 1998.
(B) 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 1998 and 1997.
(C) Loans include nonaccruing loans.
Interest on loans includes fees of $11,300 and $9,544 for the 1998 and 1997 quarters, respectively.
Interest on loans includes fees of $21,155 and $17,649 for the 1998 and 1997 year-to-date periods, respectively.
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
LOANS (in thousands; unaudited) (A)
<CAPTION>
June 30 %Total December 31 %Total June 30 %Total Jun/Jun
1998 Loans 1997 Loans 1997 Loans %Chg
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
COMMERCIAL LOANS:
Commercial & industrial 2,460,080 19.6 2,251,179 20.0 2,097,863 19.9 17.3
Agricultural 411,855 3.3 362,820 3.2 358,087 3.4 15.0
Other commercial 181,280 1.4 144,866 1.3 162,989 1.5 11.2
- ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
TOTAL COMMERCIAL LOANS 3,053,215 24.4 2,758,865 24.6 2,618,939 24.9 16.6
- ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
REAL ESTATE SECURED LOANS:
1 to 4 family residential term 2,838,179 22.7 2,177,415 19.4 1,718,857 16.3 65.1
1 to 4 family residential home equity 466,598 3.7 506,999 4.5 503,285 4.8 (7.3)
1 to 4 family residential construction 485,704 3.9 425,343 3.8 415,288 3.9 17.0
Commercial & other term 1,176,676 9.4 1,112,042 9.9 1,174,627 11.2 0.2
Commercial & other construction 271,010 2.2 313,686 2.8 263,710 2.5 2.8
- ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
TOTAL REAL ESTATE SECURED LOANS 5,238,167 41.8 4,535,485 40.4 4,075,767 38.7 28.5
Memo: Total real estate term 4,481,453 35.8 3,796,456 33.8 3,396,769 32.3 31.9
Memo: Loans held for sale included
included in total real estate term 1,704,036 13.6 1,125,616 10.0 677,734 6.4 151.4
Memo: Total real estate construction 756,714 6.0 739,029 6.6 678,998 6.4 11.4
- ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
CONSUMER LOANS:
Credit card & related 313,292 2.5 320,656 2.9 297,610 2.8 5.3
Vehicle & other consumer 2,818,938 22.5 2,585,139 23.0 2,615,956 24.8 7.8
- ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
TOTAL CONSUMER LOANS 3,132,230 25.0 2,905,795 25.9 2,913,566 27.7 7.5
- ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
TOTAL LEASES 1,106,748 8.8 1,030,621 9.2 920,177 8.7 20.3
- ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
LOANS, NET OF UNEARNED INCOME 12,530,360 100.0 11,230,766 100.0 10,528,449 100.0 19.0
Memo: Unearned income (105,407) (106,369) (98,888) 6.6
Reserve for loan losses (166,658) (157,525) (150,170) 11.0
- ----------------------------------------- ----------- ------ ----------- ------ ----------- ------ --------
TOTAL LOANS, NET 12,363,702 11,073,241 10,378,279 19.1
========================================= =========== ====== =========== ====== =========== ====== ========
<FN>
Notes:
(A) All FSCO financial statements have been restated to reflect
the May 29, 1998, acquisition of California State Bank in a pooling-of-interests merger.
</TABLE>
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, FSCO and its subsidiaries are subject to claims and
legal actions filed or threatened by customers and others in the ordinary
course of FSCO's business activities. Some legal actions filed against FSCO
seek inflated damages, often in an effort to force compromise of a troubled
loan transaction. Others recently have been filed as class actions alleging
technical violations of arcane Federal statutes with modest individual
damages, but potentially large class damage amounts. These are disclosed in
filings with the SEC as required by applicable rules. FSCO endeavors at all
times to conduct its business in a lawful manner, and will always vigorously
defend itself against unfounded claims, with a concomitant cost in legal fees
and expenses. Since the filing of FSCO's 1997 Annual Report on Form 10-K,
there have been no material developments in connection with pending legal
proceedings not already disclosed in previous 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 discussed 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 27, 1998. Shares voted
(by proxy and in person) and total shares entitled to vote were as follows:
Votes # Votes % Entitled to Vote #
Shares 138,469,806.000 78.676 175,999,052.000
Votes were taken on the following Shareholder Proposals, described in
FSCO's Proxy Statement dated March 18, 1998:
* SHAREHOLDER PROPOSAL #1 "To elect a Board of Directors to serve for the
ensuing year". Management nominated all current members of the Board of
Directors for re-election. The results of this vote were as follows:
Votes Votes Votes For
Nominee: For # Withheld # / Cast %
JAMES C. BEARDALL 137,055,059.000 1,414,747.000 98.978
RODNEY H. BRADY 137,033,527.000 1,436,279.000 98.963
JAMES E. BRUCE 136,897,098.000 1,572,708.000 98.864
THOMAS D. DEE, II 136,945,967.000 1,523,839.000 98.900
SPENCER F. ECCLES 136,987,998.000 1,481,808.000 98.930
MORGAN J. EVANS 137,057,908.000 1,411,898.000 98.980
DR. DAVID P. GARDNER 136,989,080.000 1,480,726.000 98.931
ROBERT H. GARFF 136,981,464.000 1,488,342.000 98.925
JAY DEE HARRIS 136,902,458.000 1,567,348.000 98.868
ROBERT T. HEINER 136,523,170.000 1,946,636.000 98.594
KAREN H. HUNTSMAN 137,055,089.000 1,414,717.000 98.978
G. FRANK JOKLIK 136,729,994.000 1,739,812.000 98.744
B.Z. KASTLER 136,912,667.000 1,557,139.000 98.875
JOSEPH G. MALOOF 124,524,876.000 13,944,930.000 89.929
MICHELE PAPEN-DANIEL, PH.D 137,053,387.000 1,416,419.000 98.977
DR. J. BERNARD MACHEN 136,724,067.000 1,745,739.000 98.739
SCOTT S. PARKER 136,954,335.000 1,515,471.000 98.906
JAMES L. SORENSON 136,895,452.000 1,574,354.000 98.863
HAROLD J. STEELE 136,865,965.000 1,603,841.000 98.842
JAMES R. WILSON 137,005,130.000 1,464,676.000 98.942
* SHAREHOLDER PROPOSAL #2 "To consider and vote on the proposed increase in
the number of authorized shares of common stock that can be issued by the
company, from the present 300,000,000 shares to a new level of 600,000,000
shares". The results of this vote were as follows:
Votes Votes Votes For
Nominee: For # Withheld # / Cast %
SHAREHOLDER PROPOSAL #2 123,694,430.000 14,769,939.000 89.333
ITEM 6. EXHIBITS, AND REPORTS ON FORM 8-K
(a) Exhibit 11: Computation of Earnings Per Share (attached).
Exhibit 27: Financial Data Schedule (attached).
(b) Reports on Form 8-K:
* On July 20, 1998, FSCO filed a report on Form 8-K reporting that it had
issued a press release announcing its earnings and other financial data
for the first six months of 1998.
# # #
<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, 1998
_______________________________________________________ ____________________
Scott C. Ulbrich (Date)
Executive Vice President and Chief Financial Officer
Finance and Capital Markets
(Principal Financial and Accounting Officer)
# # #
EXHIBIT 11. COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
FIRST SECURITY CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (in thousands, except per share amounts; unaudited) (A,B)
<CAPTION>
Three Months YTD Six Months
For the Periods Ended June 30, 1998 and 1997 1998 1997 1998 1997
<S> <C> <C> <C> <C>
- ----------------------------------------------------------- ---------- ---------- ---------- ----------
NET INCOME:
Net income per consolidated income statements 55,907 51,204 117,276 101,207
Subtract dividend requirement of preferred stock 7 8 14 16
- ----------------------------------------------------------- ---------- ---------- ---------- ----------
NET INCOME APPLICABLE TO COMMON STOCK (BASIC) 55,900 51,196 117,262 101,191
Add dividend requirement of preferred stock 7 8 14 16
- ----------------------------------------------------------- ---------- ---------- ---------- ----------
NET INCOME DILUTED 55,907 51,204 117,276 101,207
=========================================================== ========== ========== ========== ==========
EARNINGS PER COMMON SHARE BASIC 0.30 0.29 0.63 0.56
EARNINGS PER COMMON SHARE DILUTED 0.29 0.28 0.60 0.54
=========================================================== ========== ========== ========== ==========
SHARES OUTSTANDING (AVERAGE):
Common shares 188,867 183,348 188,716 183,111
Treasury shares (1,244) (3,989) (1,733) (3,322)
- ----------------------------------------------------------- ---------- ---------- ---------- ----------
COMMON SHARES BASIC (AVG) 187,623 179,359 186,983 179,789
Common share equivalents for options 6,459 5,834 6,620 5,758
Preferred share equivalents 389 416 390 417
- ----------------------------------------------------------- ---------- ---------- ---------- ----------
COMMON SHARES DILUTED (AVG) 194,471 185,609 193,993 185,964
=========================================================== ========== ========== ========== ==========
<FN>
Notes:
(A) All FSCO financial statements have been restated to reflect the following:
- the May 29, 1998, acquisition of California State Bank in a pooling-of-interests merger.
- two separate 3-for-2 stock splits in the form of 50% stock dividends paid in May 1997 and February 1998.
(B) Earnings Per Common Share Diluted were computed assuming that all outstanding shares of preferred stock
were converted into common stock on the basis of 41.00625 shares of common for each share of preferred,
with the elimination of dividends on the preferred stock. Common stock equivalents are common stock
options outstanding accounted for on the treasury stock method for purposes of these computations.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 908,605
<INT-BEARING-DEPOSITS> 605
<FED-FUNDS-SOLD> 26,323
<TRADING-ASSETS> 53,343
<INVESTMENTS-HELD-FOR-SALE> 4,806,559
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 12,530,360
<ALLOWANCE> (166,658)
<TOTAL-ASSETS> 19,360,006
<DEPOSITS> 11,917,203
<SHORT-TERM> 3,905,250
<LIABILITIES-OTHER> 481,639
<LONG-TERM> 1,513,044
<COMMON> 1,542,377
0
493
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 19,360,006
<INTEREST-LOAN> 534,192
<INTEREST-INVEST> 141,903
<INTEREST-OTHER> 8,956
<INTEREST-TOTAL> 685,051
<INTEREST-DEPOSIT> 202,525
<INTEREST-EXPENSE> 347,822
<INTEREST-INCOME-NET> 337,229
<LOAN-LOSSES> 30,994
<SECURITIES-GAINS> 3,312
<EXPENSE-OTHER> 350,083
<INCOME-PRETAX> 183,202
<INCOME-PRE-EXTRAORDINARY> 183,202
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 117,276
<EPS-PRIMARY> 0.630
<EPS-DILUTED> 0.600
<YIELD-ACTUAL> 4.15
<LOANS-NON> 39,713
<LOANS-PAST> 22,833
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 66,454
<ALLOWANCE-OPEN> 157,525
<CHARGE-OFFS> (41,896)
<RECOVERIES> 17,108
<ALLOWANCE-CLOSE> 166,658
<ALLOWANCE-DOMESTIC> 166,658
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
* As required by SFAS No. 128, "Earnings Per Share":
- "Earnings Per Common Share Primary" has been replaced with
"Earnings Per Common Share Basic"; and
- "Earnings Per Common Share Fully Diluted" has been replaced
with "Earnings Per Common Share Diluted".
* However, the EDGAR Tags used on this Financial Data Schedule
do not comply with SFAS No. 128, so that:
- "EPS-Primary" is actually "Earnings Per Common Share Basic"; and
- "EPS-Diluted" is actually "Earnings Per Common Share Diluted".
</TABLE>
