November 12, 1999
To Whom It May Concern:
Attached is First Security Corporation's (FSCO) Form 10-Q Quarterly Report
for the quarter ended September 30, 1999, as filed via EDGAR with the S.E.C.
on Friday, November 12, 1999.
<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 September 30, 1999
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) 246-5976
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 October 31, 1999, outstanding shares of Common Stock, par value
$1.25, were 195,756,393 (net of 1,638,328 treasury shares).
FIRST SECURITY CORPORATION - INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statements of Income
Three Months and Year-To-Date Nine Months Ended September 30, 1999 and 1998
Consolidated Balance Sheets
September 30, 1999, December 31, 1998, and September 30, 1998
Condensed Consolidated Statements of Cash Flows
Year-To-Date Nine Months Ended September 30, 1999 and 1998
Condensed Consolidated Statements of Comprehensive Income
Three Months and Year-To-Date Nine Months Ended September 30, 1999 and 1998
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition:
Important Notices
Forward-Looking Statements
Highlights
Line of Business Segments
Analysis of Statements of Income
Earnings Summary
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
Asset/Liability Management: Liquidity
Asset/Liability Management: Market Risk Management
Asset/Liability Management: Interest Rate Risk (Excluding Trading Account
Securities
Asset/Liability Management: Market Risk - Trading Account Securities
Other Assets and Liabilities
Common and Preferred Stock
Stockholders' Equity and Capital Adequacy
Mergers And Acquisitions
National and Regional Economy
Factors That May Affect Future Results of Operations and Financial Condition
Year 2000 Issues: FSCO'S Year 2000 Readiness Disclosure
Year 2000 Issues: FSCO's Year 2000 Forward-Looking Statements
Supplemental Financial Tables:
Financial Highlights, Risk-Based Capital Ratios
Volume/Rate Analysis
Loans
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 10. Material Contracts:
* Exhibit 10.1: First Security Corporation Comprehensive Management
Incentive Plan (as Amended and Restated), dated 21 April, 1998
(attached).
* Exhibit 10.2: Agreement and Plan of Merger, dated as of June 6, 1999 by
and among Zions Bancorporation and First Security Corporation (Ex. 99.1
to FSCO's Report on Form 13D, filed June 16, 1999, incorporated by
reference; also Ex. 99.1 to FSCO's Report on Form 13D, filed June 18,
1999, incorporated by reference).
* Exhibit 10.3: Stock Option Agreement, dated as of June 8, 1999, by and
between Zions Bancorporation and First Security Corporation (Ex. 99.2
to FSCO's Report on Form 13D, filed June 16, 1999, incorporated by
reference).
* Exhibit 10.4: Stock Option Agreement, dated as of June 8, 1999, by and
between First Security Corporation and Zions Bancorporation (Ex. 99.2
to FSCO's Report on Form 13D, filed June 18, 1999, incorporated by
reference).
Exhibit 11: Computation of Earnings Per Share (attached).
Exhibit 27: Financial Data Schedule (attached).
(b) Reports on Form 8-K:
* August 30, 1999, Item 5. Other Events.
SIGNATURES
EXHIBITS
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
FIRST SECURITY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except per share data; unaudited)
<CAPTION>
For the Periods Ended September 30, 1999 and 1998 Three Months Year-To-Date Nine Months
1999 1998 $Chg %Chg 1999 1998 $Chg %Chg
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------ --------- --------- -------- ------- ---------- ---------- -------- -------
INTEREST INCOME:
Interest & fees on loans 301,261 288,031 13,230 4.6 862,336 822,223 40,113 4.9
Federal funds sold & securities purchased 5,899 1,160 4,739 408.5 9,455 4,025 5,430 134.9
Interest-bearing deposits in other banks & other money 328 23 305 1326.1 981 65 916 1409.2
Trading account securities 3,837 881 2,956 335.5 14,117 6,930 7,187 103.7
Available for sale securities 98,296 76,321 21,975 28.8 270,440 218,224 52,216 23.9
- ------------------------------------------------------ --------- --------- -------- ------- ---------- ---------- -------- -------
TOTAL INTEREST INCOME 409,621 366,416 43,205 11.8 1,157,329 1,051,467 105,862 10.1
- ------------------------------------------------------ --------- --------- -------- ------- ---------- ---------- -------- -------
INTEREST EXPENSE:
Deposits 103,171 103,178 (7) (0.0) 300,026 305,703 (5,677) (1.9)
Short-term borrowings 64,427 57,478 6,949 12.1 167,594 156,962 10,632 6.8
Long-term debt 38,375 26,005 12,370 47.6 115,738 71,818 43,920 61.2
- ------------------------------------------------------ --------- --------- -------- ------- ---------- ---------- -------- -------
TOTAL INTEREST EXPENSE 205,973 186,661 19,312 10.3 583,358 534,483 48,875 9.1
- ------------------------------------------------------ --------- --------- -------- ------- ---------- ---------- -------- -------
NET INTEREST INCOME 203,648 179,755 23,893 13.3 573,971 516,984 56,987 11.0
Provision for loan losses 12,778 18,068 (5,290) (29.3) 40,251 49,062 (8,811) (18.0)
- ------------------------------------------------------ --------- --------- -------- ------- ---------- ---------- -------- -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSS 190,870 161,687 29,183 18.0 533,720 467,922 65,798 14.1
- ------------------------------------------------------ --------- --------- -------- ------- ---------- ---------- -------- -------
NONINTEREST INCOME:
Service charges on deposit accounts 22,651 22,760 (109) (0.5) 65,822 67,746 (1,924) (2.8)
Other service charges, collections, commissions & fees 17,720 13,906 3,814 27.4 49,804 39,078 10,726 27.4
Asset sale / securitization gains 6,258 1,260 4,998 396.7 40,249 17,709 22,540 127.3
Bankcard servicing fees & third-party processing fees 1,032 9,652 (8,620) (89.3) 4,020 27,128 (23,108) (85.2)
Commissions & fees: insurance 4,828 4,617 211 4.6 15,112 12,626 2,486 19.7
Commissions & fees: securities 18,898 4,587 14,311 312.0 50,436 13,324 37,112 278.5
Mortgage banking & loan servicing activities 63,052 60,781 2,271 3.7 172,091 156,438 15,653 10.0
Loan servicing rights amortization (14,513) (10,653) (3,860) (36.2) (43,240) (28,241) (14,999) (53.1)
Trust (fiduciary) commissions & fees 8,488 7,549 939 12.4 24,646 21,296 3,350 15.7
Trading account securities gains (losses) (1,260) 173 (1,433) (828.3) 3,785 418 3,367 805.5
Available for sale securities gains (losses) 349 (2) 351 17550.0 14,827 3,310 11,517 347.9
Other 4,156 266 3,890 1462.4 2,102 11,114 (9,012) (81.1)
- ------------------------------------------------------ --------- --------- -------- ------- ---------- ---------- -------- -------
TOTAL NONINTEREST INCOME 131,659 114,896 16,763 14.6 399,654 341,946 57,708 16.9
- ------------------------------------------------------ --------- --------- -------- ------- ---------- ---------- -------- -------
NONINTEREST EXPENSES:
Salaries & employee benefits 117,971 99,774 18,197 18.2 355,302 284,697 70,605 24.8
Amortization of intangibles 4,991 2,845 2,146 75.4 13,038 8,347 4,691 56.2
Armored & messenger 2,043 1,545 498 32.2 5,829 4,825 1,004 20.8
Bankcard interbank interchange & fees 5,723 9,174 (3,451) (37.6) 12,259 26,561 (14,302) (53.8)
Credit, appraisal & repossessions 8,520 6,963 1,557 22.4 24,443 19,607 4,836 24.7
Fees 2,247 3,316 (1,069) (32.2) 9,374 11,331 (1,957) (17.3)
Furniture & equipment 18,865 13,880 4,985 35.9 51,575 41,464 10,111 24.4
Insurance 1,145 1,199 (54) (4.5) 3,217 3,402 (185) (5.4)
Marketing 2,920 2,877 43 1.5 11,707 10,331 1,376 13.3
Occupancy, net 11,769 9,450 2,319 24.5 34,785 28,194 6,591 23.4
Other real estate expense & loss provision (recovery), (884) 112 (996) (889.3) (937) 504 (1,441) (285.9)
Postage 4,036 3,257 779 23.9 11,809 9,929 1,880 18.9
Professional 4,462 3,570 892 25.0 13,539 14,859 (1,320) (8.9)
Stationery & supplies 4,924 4,760 164 3.4 17,616 15,560 2,056 13.2
Telephone 6,662 4,310 2,352 54.6 18,663 12,034 6,629 55.1
Travel 2,610 3,214 (604) (18.8) 9,547 8,819 728 8.3
Other 12,231 9,270 2,961 31.9 28,247 29,135 (888) (3.0)
- ------------------------------------------------------ --------- --------- -------- ------- ---------- ---------- -------- -------
TOTAL NONINTEREST EXPENSES 210,235 179,516 30,719 17.1 620,013 529,599 90,414 17.1
- ------------------------------------------------------ --------- --------- -------- ------- ---------- ---------- -------- -------
INCOME BEFORE PROVISION FOR INCOME TAXES 112,294 97,067 15,227 15.7 313,361 280,269 33,092 11.8
Provision for income taxes 38,979 33,976 5,003 14.7 106,325 99,902 6,423 6.4
- ------------------------------------------------------ --------- --------- -------- ------- ---------- ---------- -------- -------
NET INCOME 73,315 63,091 10,224 16.2 207,036 180,367 26,669 14.8
====================================================== ========= ========= ======== ======= ========== ========== ======== =======
Dividend requirement of preferred stock 7 7 0 0.0 21 21 0 0.0
- ------------------------------------------------------ --------- --------- -------- ------- ---------- ---------- -------- -------
NET INCOME APPLICABLE TO COMMON STOCK 73,308 63,084 10,224 16.2 207,015 180,346 26,669 14.8
====================================================== ========= ========= ======== ======= ========== ========== ======== =======
Common stock dividend 27,411 24,472 2,939 12.0 80,538 71,001 9,537 13.4
====================================================== ========= ========= ======== ======= ========== ========== ======== =======
EARNINGS PER COMMON SHARE:
Earnings per common share basic 0.38 0.34 0.04 11.8 1.08 0.96 0.12 12.5
Earnings per common share diluted 0.37 0.33 0.04 12.1 1.05 0.93 0.12 12.9
Common shares basic [Avg] 195,428 187,931 7,497 4.0 191,691 187,303 4,388 2.3
Common shares diluted [Avg] 200,788 193,621 7,167 3.7 196,891 193,868 3,023 1.6
====================================================== ========= ========= ======== ======= ========== ========== ======== =======
CASH DIVIDENDS PAID OR ACCRUED PER SHARE:
Preferred stock dividend ($3.15 annual rate) 0.79 0.79 0.00 0.0 2.36 2.36 0.00 0.0
Common stock dividend 0.14 0.13 0.01 7.7 0.42 0.39 0.03 7.7
====================================================== ========= ========= ======== ======= ========== ========== ======== =======
<FN>
See "Notes to Consolidated Financial Statements".
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
CONSOLIDATED BALANCE SHEETS
($ in thousands; unaudited)
<CAPTION>
As of September 30 December 31 September 30 Sep/Sep Sep/Sep
1999 1998 1998 $Chg %Chg
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
ASSETS:
Cash & due from banks 964,076 1,026,335 828,015 136,061 16.4
Federal funds sold & securities purchased under resale agreements 532,573 230,210 39,171 493,402 1259.6
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
Total Cash & Cash Equivalents 1,496,649 1,256,545 867,186 629,463 72.6
Interest-bearing deposits in other banks & other money market 14,805 605 2,631 12,174 462.7
Trading account securities 89,867 329,109 73,067 16,800 23.0
Available for sale securities, at fair value 6,146,907 4,764,127 4,912,396 1,234,511 25.1
(Amortized cost: $6,298,526; $4,715,876; and $4,833,246; respectively)
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
Loans, net of unearned income 13,817,241 14,013,417 12,926,926 890,315 6.9
(Unearned income: $165,370; $127,593; and $110,943; respectively)
Reserve for loan losses (174,443) (173,350) (169,058) (5,385) 3.2
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
Total Loans, Net 13,642,798 13,840,067 12,757,868 884,930 6.9
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
Premises & equipment, net 434,659 378,032 327,671 106,988 32.7
Accrued income receivable 126,603 113,399 119,422 7,181 6.0
Other real estate 8,054 3,617 2,798 5,256 187.8
Other assets 819,383 594,220 438,802 380,581 86.7
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
Goodwill 356,609 224,802 205,915 150,694 73.2
Loan servicing rights 190,082 174,196 147,445 42,637 28.9
Other intangible assets 20,201 10,369 4,099 16,102 392.8
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
Total Intangible Assets 566,892 409,367 357,459 209,433 58.6
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
TOTAL ASSETS 23,346,617 21,689,088 19,859,300 3,487,317 17.6
===================================================================== ============ ============ ============ ============ =======
LIABILITIES:
Deposits: noninterest-bearing 2,567,762 2,752,009 2,431,637 136,125 5.6
Deposits: interest-bearing 10,645,203 9,906,565 9,511,979 1,133,224 11.9
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
Total Deposits 13,212,965 12,658,574 11,943,616 1,269,349 10.6
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
Federal funds purchased & securities sold under repurchase agreements 4,508,377 3,747,084 3,680,396 827,981 22.5
U.S. Treasury demand notes 32,493 25,081 39,091 (6,598) (16.9)
Other short-term borrowings 608,862 493,424 307,432 301,430 98.0
Accrued income taxes 364,266 333,881 341,952 22,314 6.5
Accrued interest payable 70,647 58,778 56,468 14,179 25.1
Other liabilities 252,479 167,213 130,861 121,618 92.9
Long-term debt 2,536,949 2,609,558 1,749,478 787,471 45.0
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
TOTAL LIABILITIES 21,587,038 20,093,593 18,249,294 3,337,744 18.3
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
STOCKHOLDERS' EQUITY:
Preferred stock: Series "A" $3.15 cumulative convertible 456 484 491 (35) (7.1)
(Shares issued: 9; 9; and 9; respectively)
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
Common Stockholders' Equity:
Common stock: par value $1.25 246,726 238,760 237,099 9,627 4.1
(Shares issued: 197,381; 191,008; and 189,679; respectively)
Paid-in surplus 286,663 181,906 157,164 129,499 82.4
Retained earnings 1,359,742 1,233,264 1,190,538 169,204 14.2
Accumulated other comprehensive income (93,641) 30,377 49,595 (143,236) (288.8)
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
Subtotal 1,799,490 1,684,307 1,634,396 165,094 10.1
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
Common treasury stock, at cost (40,367) (89,296) (24,881) (15,486) 62.2
(Shares: 1,636; 4,296; and 1,238; respectively)
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
Total Common Stockholders' Equity 1,759,123 1,595,011 1,609,515 149,608 9.3
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
TOTAL STOCKHOLDERS' EQUITY 1,759,579 1,595,495 1,610,006 149,573 9.3
- ---------------------------------------------------------------------------------- ------------ ------------ ------------ -------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 23,346,617 21,689,088 19,859,300 3,487,317 17.6
===================================================================== ============ ============ ============ ============ =======
<FN>
See "Notes to Consolidated Financial Statements".
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands, except number of shares; unaudited)
<CAPTION>
For the Year-To-Date Nine Months Ended September 30, 1999 and 1998 1999 1998
<S> <C> <C>
- --------------------------------------------------------------------- ----------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 2,063,876 879,165
- --------------------------------------------------------------------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of available for sale securities 569,715 7,232
Redemption of matured available for sale securities 1,131,652 1,285,996
Purchases of available for sale securities (3,217,666) (1,708,858)
Net (increase) decrease in interest-bearing deposits in other banks (13,929) (2,031)
Net (increase) decrease in loans (3,435,130) (2,064,283)
Proceeds from sales of auto loans 2,040,498 0
Purchases of premises and equipment (41,504) (29,715)
Proceeds from sales of other real estate 7,306 8,972
Payments to improve other real estate (2,393) (2,218)
Net cash (paid for) received from acquisitions 17,443 45,007
- --------------------------------------------------------------------- ----------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (2,944,008) (2,459,898)
- --------------------------------------------------------------------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 258,720 182,628
Net increase (decrease) in Federal funds purchased, securities sold
under repurchase agreements, and U.S. Treasury demand notes 768,705 445,378
Proceeds (payments) on nonrecourse debt on leveraged leases 140,293 75,635
Proceeds from issuance of long-term debt and short-term borrowings 450,685 487,277
Payments on long-term debt and short-term borrowings (407,856) (86,050)
Proceeds from issuance of common stock and sales of treasury stock 8,667 11,864
Purchases of treasury stock (18,419) (23,491)
Dividends paid (80,559) (71,023)
- --------------------------------------------------------------------- ----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,120,236 1,022,218
- --------------------------------------------------------------------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 240,104 (558,515)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,256,545 1,425,701
- --------------------------------------------------------------------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD 1,496,649 867,186
===================================================================== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID (RECEIVED) FOR:
Interest 571,489 529,943
Income taxes 5,345 30,299
===================================================================== =========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of preferred shares to common shares:
Number of preferred shares converted 517 180
Number of common shares issued 21,197 6,929
Conversion value 41 10
Transfer of loans to other real estate 5,334 1,779
Net unrealized gain (loss) on available for sale securities
included in stockholders' equity (124,018) 26,027
Acquisitions:
Assets acquired 489,130 1,317,988
Liabilities assumed 309,298 1,147,242
Number of FSCO shares issued 8,456,368 15,347,609
===================================================================== =========== ===========
<FN>
See "Notes to Consolidated Financial Statements".
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ in thousands; unaudited)
<CAPTION>
For the Periods Ended September 30, 1999 and 1998 Three Months Year-To-Date Nine Months
1999 1998 $Chg %Chg 1999 1998 $Chg %Chg
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------ --------- --------- -------- ------- ---------- ---------- -------- -------
NET INCOME 73,315 63,091 10,224 16.2 207,036 180,367 26,669 14.8
- ------------------------------------------------------ --------- --------- -------- ------- ---------- ---------- -------- -------
OTHER COMPREHENSIVE INCOME, AFTER TAX (26,907) 25,043 (51,950) (207.4) (124,018) 26,027 (150,045) (576.5)
- ------------------------------------------------------ --------- --------- -------- ------- ---------- ---------- -------- -------
COMPREHENSIVE INCOME 46,408 88,134 (41,726) (47.3) 83,018 206,394 (123,376) (59.8)
====================================================== ========= ========= ======== ======= ========== ========== ======== =======
<FN>
See "Notes to Consolidated Financial Statements".
</TABLE>
<PAGE>
FIRST SECURITY CORPORATION (FSCO)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of FSCO's 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
nine months ended September 30, 1999 and 1998; financial position as of
September 30, 1999, December 31, 1998, and September 30, 1998; and cash flows
for the year-to-date nine months ended September 30, 1999 and 1998.
2. FSCO's results of operations for the three months and year-to-date nine
months ended September 30, 1999 and 1998 are not necessarily indicative of the
results to be expected for the full year.
3. All FSCO financial data have been previously restated for the May 30,
1998 pooling-of-interests merger with California State Bank (CSB; see:
"Mergers and Acquisitions"). For this merger, FSCO issued approximately
11,383,000 shares of its common stock in exchange for all of the outstanding
shares of CSB common stock, and incurred one-time merger charges totaling $8.9
million pre-tax (including $6.9 million of noninterest expenses) and $7.2
million or $0.037 per share after tax recorded in the second quarter of 1998.
There were no material intercompany transactions between FSCO and CSB prior to
the merger.
Certain reclassifications of 1998 amounts have been made to conform to 1999
classifications.
4. FSCO's financial statements and commentary incorporate fair market
values for balances added and earnings since their acquisition from the
following purchase acquisitions completed in 1998 and year-to-date 1999:
* On December 21, 1998, FSCO acquired Marine National Bank (MNB), located
in Irvine, California. At December 20, 1998, MNB had assets of $259 million,
loans of $114 million, deposits of $200 million, and three branches. MNB and
CSB were merged and renamed as First Security Bank of California.
* On February 12, 1999, FSCO acquired Van Kasper & Company in a purchase
acquisition and renamed it First Security Van Kasper (FS Van Kasper,
headquartered in San Francisco, California). FS Van Kasper is FSCO's full-
service investment banking and brokerage subsidiary.
* On June 1, 1999, FSCO acquired Comstock Bancorp (CB) and its Comstock
Bank subsidiary in a purchase transaction. At March 31, 1999, CB had assets
of $217 million, loans of $152 million, deposits of $188 million, five
offices, and two lending centers.
* On June 14, 1999, FSCO acquired XEON Financial Corporation and its Nevada
Banking Company subsidiary (NBC) in a purchase transaction. At March 31,
1999, NBC had assets of $128 million, loans of $85 million, deposits of $117
million, three offices, and one executive loan center.
Pro forma results of operations for 1999 and 1998, as if the above acquired
companies 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 loan servicing
rights for the year-to-date nine months ended September 30, 1999 included
$59.1 million originated and $43.2 million amortized during the period.
7. Effective January 1, 1998, FSCO adopted SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information," which requires
disclosures of certain information about FSCO's reportable operating segments.
FSCO has the following reportable line of business segments: Community Banking
Services; Retail Lending Services; Business Banking Services; Capital Markets,
Treasury, & Investment Management; and Parent & Other.
Interest income and expense as well as the total average assets and total
average deposits are reported following the same accounting policies described
in Note 1 to the financial statements in FSCO's 1998 Annual Report on Form 10-
K (hereby incorporated by reference). Intersegment interest income and
expense are derived by modeling loans and deposits to determine duration-based
funds transfer pricing rates. Such rates are applied to loans and deposits to
determine intersegment interest income and expense. In addition, certain
operating, general and administrative expenses are allocated between and among
the business segments to derive net income.
FSCO advises readers that its line of business segment data for periods
prior to 1999 has undergone material changes in the alignment of products and
business units within the lines of business, and in internal reporting and
cost allocation systems. As a result, data for those periods was either
unavailable, or if shown, may not be comparable with 1999. In addition, FSCO
further advises readers that its actual results for future periods could
differ materially from those anticipated or projected.
<TABLE>
LINE OF BUSINESS SEGMENTS - SELECTED DATA (in thousands; unaudited) (A)
<CAPTION>
Capital
Markets,
Community Retail Business Treasury &
Banking Lending Banking Investment Parent Total
Services Services Services Management & Other FSCO
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
For the Year-To-Date Nine Months Ended September 30, 1999
Total assets (Avg) 655,557 8,656,815 3,996,159 5,740,674 3,098,413 22,147,618
Total deposits (Avg) 9,012,581 221,830 790,099 336,348 2,331,355 12,692,213
Interest income 7,052 543,782 231,119 270,336 105,040 1,157,329
Interest expense 267,485 13 19,221 165,583 131,056 583,358
Intersegment interest income (expense) net 405,834 (329,644) (105,927) (74,717) 104,454 0
Provision for income taxes 19,849 40,950 23,164 9,172 13,190 106,325
Net income 31,386 65,414 38,750 14,651 56,835 207,036
- ----------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
For the Year-To-Date Nine Months Ended September 30, 1998
Total assets (Avg) 772,914 9,466,411 3,604,509 4,514,138 559,841 18,917,813
Total deposits (Avg) 8,539,310 199,458 620,389 374,528 1,913,210 11,646,895
Interest income 5,502 531,352 222,923 214,490 77,200 1,051,467
Interest expense 281,000 4,629 16,357 144,170 88,327 534,483
Intersegment interest income (expense) net 412,777 (322,663) (107,925) (63,265) 81,076 0
Provision for income taxes 21,372 38,449 19,689 490 19,902 99,902
Net income 33,183 61,419 36,118 783 48,864 180,367
========================================= ============ ============ ============ ============ ============ ============
<FN>
(A) For the periods reported, FSCO:
* reported intersegment interest income and interest expenses on a net basis;
* had no material revenues from foreign countries;
* did not rely on any single major customer for 10% or more of external revenues;
* had no material unusual items, extraordinary items, and/or significant noncash items.
</TABLE>
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 1998 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. Effective January 1, 1999, FSCO adopted SFAS No. 134, "Accounting for
Mortgage Backed Securities Retained after the Securitization of Mortgage Loans
for Sale by a Mortgage Banking Enterprise", which allows an entity engaged in
mortgage banking activities to classify the resulting mortgage-backed security
or other retained interest based on its ability and intent to sell or hold
those investments. The adoption of SFAS No. 134 did not have a material
effect on FSCO's consolidated financial statements.
10. On July 7, 1999, the FASB issued SFAS No. 137 "Accounting for
Derivative Instruments and Hedging Activities-Deferral of the Effective Date
of FASB Statement No. 133", an amendment of FASB Statement No. 133 which
establishes accounting and reporting standards for derivative instruments and
hedging activities and 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 supercedes: SFAS No.
80, "Accounting for Futures Contracts"; SFAS 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. SFAS No. 133, as amended by SFAS No. 137, is effective for
all quarterly and annual financial statements of fiscal years beginning after
June 15, 2000. FSCO management is currently evaluating the effects of this
change in its accounting for derivatives and hedging activities and does not
plan to implement SFAS No. 133 early.
# # #
<PAGE>
FIRST SECURITY CORPORATION (FSCO)
PART 1. FINANCIAL INFORMATION
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS (MDA) OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
IMPORTANT NOTICES:
THIS MDA SHOULD BE READ IN CONJUNCTION WITH FSCO'S CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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: "Year
2000" issues; 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; mergers and acquisitions and the integration of
merged/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 core 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 acquisition until after a binding and
definitive acquisition agreement has been reached.
The discussion of FSCO's "Year 2000 Issues" constitutes a Year 2000
Readiness Disclosure pursuant to the provisions of the Year 2000 Information
Readiness and Disclosure Act and includes forward-looking statements that
involve inherent risks and uncertainties. A number of important factors could
cause the actual impact of Year 2000 issues to change significantly from what
is described in these forward-looking statements. Those factors include, but
are not limited to, ineffective remediation of computer code and the inability
of FSCO's suppliers and vendors to successfully resolve their individual Year
2000 issues.
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.
HIGHLIGHTS
Highlights of FSCO's performance in 1999, and comparisons to corresponding
1998 periods, included:
RESULTS OF OPERATIONS - YEAR-TO-DATE 1999:
* Net income: $207.0 million, up $26.7 million or 14.8%; and up $19.4 million
or 10.4% excluding 1998 one-time California State Bank (CSB) acquisition
charges of $7.2 million after tax.
* Earnings per share diluted: $1.05, up $0.12 or 12.9%; and up $0.08 or 8.2%
excluding 1998 CSB acquisition charges.
* Noninterest income: $399.7 million, up $57.7 million or 16.9%.
RESULTS OF OPERATIONS - THIRD QUARTER OF 1999:
* Net income: $73.3 million, up $10.2 million or 16.2%.
* Earnings per share diluted: $0.37, up $0.04 or 12.1%.
* Noninterest income: $131.7 million, up $16.8 million or 14.6%.
FINANCIAL CONDITION AT SEPTEMBER 30, 1999, COMPARED WITH YEAR-END 1998:
* Total assets: $23.3 billion, up $1.7 billion or 7.6%.
* Interest-earning assets: $20.6 billion, up $1.3 billion or 6.5%.
* Stockholders' equity: $1.8 billion, up $0.2 billion or 10.3%.
* Asset quality: ratio of total problem assets to total loans and ORE of
0.64%, up from 0.52%.
* All equity and risk-based capital ratios exceeded regulatory requirements
for "well capitalized" status.
MERGERS AND ACQUISITIONS:
* FSCO's merger with Zions Bancorporation is proceeding appropriately; a
closing date is anticipated in the fourth quarter of 1999, pending
shareholder and regulatory approvals.
LINE OF BUSINESS SEGMENTS
FSCO's organizational management structure consisted of the following five
"Line of Business" segments (see: MDA Supplemental Tables "Line of Business
Segments"):
* Community Banking Services provides transaction, deposit, electronic
banking, and customer services. This segment was restructured during the
first quarter of 1999 with all personal investment, private banking, personal
trust, and insurance functions moved to the new Capital Markets, Treasury, and
Investment Management segment.
* Retail Lending Services provides a full range of credit products to
retail and small-business customers including consumer loans (direct and
indirect vehicle, credit cards, student loans, and other), residential real
estate loans (mortgage, home equity, and construction), and commercial loans
under $100,000. Retail Lending Services also makes loans (new and used car
flooring, capital loans, and real estate loans) to selected types of
businesses, including automobile dealers, residential lot developers, and home
builders (for construction of single family residential homes).
* Business Banking Services provides a full range of products to business
customers, including commercial loans over $100,000, commercial real estate
loans (term and construction), leases, and banking, trust, and financial
services for businesses.
* Capital Markets, Treasury, and Investment Management provides capital
markets, treasury, personal investment, private banking, personal trust,
insurance, investment management functions, and FS Van Kasper. This line of
business segment was restructured during the first quarter of 1999 by
combining the Finance and Capital Markets segment with all personal
investment, private banking, personal trust, and insurance functions from the
Community Banking Services segment.
* Parent and Other combines corporate administration, technology and
processing services, acquired banks that have not been converted to FSCO's
systems, and intersegment eliminations. This line of business segment was
restructured during the first quarter of 1999 by moving the accounting, tax,
and purchasing functions from the Finance and Capital Markets segment to this
segment.
FSCO advises readers that its line of business segment data for 1998 has
been restated so far as was practicable. In addition, FSCO further advises
readers that its actual results for future periods could differ materially
from those anticipated or projected, due to potential changes resulting from
FSCO's anticipated merger with Zions Bancorporation.
ANALYSIS OF STATEMENTS OF INCOME
EARNINGS SUMMARY
FSCO's net income was $207.0 million for the first nine months of 1999, up
$26.7 million or 14.8% from the corresponding year-ago 1998 period. This net
income generated earnings per share (EPS) diluted of $1.05 for the year to
date, up $0.12 or 12.9% from the year-ago period, and a 1.25% return on
average assets (ROAA) and a 16.65% return on average equity (ROAE) for year-
to-date 1999, compared with a 1.27% ROAA and a 16.11% ROAE for the year-ago
period. Tangible EPS diluted were $1.25, tangible ROAA was 1.52%, and
tangible ROAE was 28.5% for the year to date, compared with $1.06, 1.48%, and
23.70%, respectively, for the year-ago period.
For year-to-date 1999 compared to 1998 excluding one-time CSB acquisition
charges of $7.2 million after tax, FSCO's net income was up $19.4 million or
10.4% while EPS diluted were up $0.08 or 8.2.
FSCO's net income was $73.3 million for the third quarter of 1999, up $10.2
million or 16.2% from the third quarter of 1998. This net income generated
EPS diluted of $0.37 for the quarter, up $0.04 or 12.1% from the year-ago
quarter, and a 1.26% ROAA and a 16.76% ROAE for the quarter, compared with a
1.27% ROAA and a 16.07% ROAE for the year-ago quarter. Tangible EPS diluted
were $0.43, tangible ROAA was 1.54%, and tangible ROAE was 29.92% for the
quarter, compared with $0.37, 1.49%, and 23.81%, respectively, for the year-
ago quarter.
REVENUES
FSCO's revenues (net interest income plus noninterest income) were $973.6
million for year-to-date 1999, up $114.7 million or 13.4% from the year-ago
period, and were $335.3 million for the third quarter of 1999, up $40.7
million or 13.8% from the year-ago quarter. The components of FSCO's 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
$581.3 million for year-to-date 1999, up $56.7 million or 10.8% from the year-
ago period, and was $205.7 million for the third quarter of 1999, up $23.7
million or 13.0% from the year-ago quarter. These increases were due to a
combination of continued strong growth in loans net of loan sales and
securitizations, growth in the securities portfolios, and the positive impact
of recent acquisitions accounted for as purchases.
FSCO's net interest margin was 3.97% for year-to-date 1999, down 18 basis
points from the year-ago period, and was 4.05% for the third quarter of 1999,
down 9 basis points from the year-ago quarter. These decreases were due to
several factors including: strong volume growth in loans and growth in the
securities portfolio financed by higher marginal funding costs; sales of
higher-yielding earning assets through securitizations; and refinancing of
mortgages at lower rates. In addition, FSCO's long-term component of funding
costs rose during the year to date due to a strategic decision to prefund
longer term debt over the year in order to take advantage of historically low
rates and to avoid any potential negative market conditions, including Year
2000 concerns, in the latter part of 1999. On a linked quarter basis, FSCO's
net interest margin improved for the second quarter in a row.
FSCO expects its net interest margin to remain stable and to average
between 3.90% and 4.00% for the full 1999 year.
PROVISION FOR LOAN LOSSES
FSCO's provision for loan losses was $40.3 million for year-to-date 1999,
down $8.8 million or 18.0% from the year-ago period, and was $12.8 million for
the quarter, down $5.3 million or 29.3% from the year-ago quarter (see: "Asset
Quality: Provision For Loan Losses").
NONINTEREST INCOME
FSCO's noninterest income was $399.7 million for year-to-date 1999, up
$57.7 million or 16.9% from the year-ago period, and was $131.7 million for
the third quarter of 1999, up $16.8 million or 14.6% from the year-ago
quarter. These increases reflected FSCO's continued emphasis on increasing
and diversifying its sources of noninterest income and included the following:
growth in commissions and fees from securities and insurance transactions;
gains from two separate $1.0 billion loan securitizations during the first and
second quarters of 1999; growth in other service charges, collections,
commissions, and fees; securities gains; and growth in trust income. These
increases were partially offset by decreased bankcard servicing & third-party
processing fees, reflecting a joint venture in a merchant servicing business
that FSCO entered into in the first quarter of 1998, and decreased service
charges on accounts. FSCO's ratio of noninterest income to total revenue was
41.05% for year-to-date 1999, up from 39.81% for the year-ago period, and was
39.27% for the quarter, up from 38.99% for the year-ago quarter.
NONINTEREST EXPENSES
FSCO's noninterest expenses were $620.0 million for year-to-date 1999, up
$90.4 million or 17.1% from the year-ago period, and were $210.2 million for
the third quarter of 1999, up $30.7 million or 17.1% from the year-ago
quarter. These increases were primarily due to the following: additions of
revenue-generating personnel; additional personnel and operating expenses of
recent purchase acquisitions; and the cost of strategic technological
investments and upgrades, including Year 2000 expenditures. These increases
reflected FSCO's continued absorption of the impact of several major
investments in support of strong growth, multiple acquisitions, and strategic
expenditures in technology. FSCO expects that these investments will be
significant contributors to its success after its merger with Zions (see:
"Mergers And Acquisitions: Zions Bancorporation And First Security Corporation
Merger"). FSCO remained committed to effectively managing its ongoing
noninterest expenses, balanced against the need to make strategic investments
and meet growth requirements. The components of FSCO's noninterest expenses
are discussed below.
* FSCO's salaries and benefits expense were $355.3 million for the year to
date, up $70.6 million or 24.8% from the year-ago period, and were $118.0
million for the quarter, up $18.2 million or 18.2% from the year-ago quarter.
* FSCO's nonpersonnel expenses were $264.7 million for the year to date, up
$19.8 million or 8.1% from the year-ago period, and were $92.3 million for the
quarter, up $12.5 million or 15.7% 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 63.20% for year-to-
date 1999, up 209 basis points from the year-ago period, and was 62.31% for
the third quarter of 1999, up 185 basis points from the year-ago quarter.
CrossLand Mortgage Corp., FSCO's mortgage banking subsidiary, and FS Van
Kasper, FSCO's full-service investment banking and brokerage subsidiary, have
higher inherent operating expense ratios than FSCO's bank subsidiaries.
Excluding CrossLand Mortgage and FS Van Kasper, FSCO's operating expense ratio
was 57.63% for year-to-date 1999, up 96 basis points from the year-ago period,
and was 54.37% for the third quarter of 1999, down 187 basis points from the
year-ago quarter.
Excluding the 1998 noninterest expense acquisition charges, FSCO's year-to-
date 1999 noninterest expenses increased $97.4 million or 18.6% and the
operating expense ratio increased 289 basis points. Excluding CrossLand
Mortgage, FS Van Kasper, and the 1998 acquisition charges, FSCO's operating
expense ratio of 57.63% for year-to-date 1999 was up 195 basis points from the
year-ago period.
ANALYSIS OF BALANCE SHEETS
SUMMARY
As of September 30, 1999, FSCO increased its total assets and equity to
record levels. At period end, FSCO considered its interest-earning asset
quality to be good, its reserve for loan losses to be adequate, and its
liquidity position to be strong for the foreseeable future (see: "Factors That
May Affect Future Results of Operations And Financial Condition").
FSCO's total assets were $23.3 billion at September 30, 1999, up $1.7
billion or 7.6% from year-end 1998 and up $3.5 billion or 17.6% from one year
ago. Interest-earning assets were $20.6 billion at period end, up $1.3
billion or 6.5% from year end and up $2.6 billion or 14.7% from one year ago.
FSCO's total liabilities were $21.6 billion at September 30, 1999, up $1.5
billion or 7.4% from year end and up $3.3 billion or 18.3% from one year ago.
Total interest-bearing liabilities were $18.3 billion at period end, up $1.6
billion or 9.2% from year end and up $3.0 billion or 19.9% from one year ago.
FSCO's stockholders' equity increased to $1.8 billion at September 30,
1999, up $0.2 billion or 10.3% from year end and up $0.1 billion or 9.3% from
one year ago.
INTEREST-EARNING ASSETS:
TRADING ACCOUNT SECURITIES AND OTHER MONEY MARKET INVESTMENTS
FSCO's trading account securities were $0.1 billion at September 30, 1999,
down $0.2 billion or 72.7% from year end but up 23.0% from one year ago.
Fluctuations in trading opportunities, reflected in the level of securities
held, are a normal part of this function.
Fluctuations in Federal funds sold and interest-bearing deposits held in
other banks occur in response to changing yield opportunities and liquidity
requirements.
INTEREST-EARNING ASSETS:
AVAILABLE FOR SALE SECURITIES
FSCO's available for sale (AFS) securities were $6.1 billion at September
30, 1999, up $1.4 billion or 29.0% from year end and up $1.2 billion or 25.1%
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 $13.8 billion at September 30, 1999, down $0.2 billion or 1.4%
from year end but up $0.9 billion or 6.9% from one year ago. The decrease
from year end was due to two separate $1.0 billion vehicle loan
securitizations during the first and second quarters of 1999, ongoing sales of
1-to-4 family residential term loans into secondary markets, and a slowing in
mortgage loan production. The ratio of total loans to total assets was 59.18%
at period end, down from 64.61% at year end and 65.09% one year ago. The
components of FSCO's loan portfolio at September 30, 1999, compared with
December 31, 1998 and September 30, 1998, respectively, are discussed below.
* Commercial loans were $3.2 billion, essentially unchanged from year end
and up $0.2 billion or 8.3% from one year ago. The increase from one year ago
was primarily due to a continued broad-based business expansion in FSCO's
market areas. Commercial loans consisted primarily of loans to small and
middle-market businesses and agricultural-related businesses.
* Real estate secured loans were $5.7 billion, down $0.4 billion or 6.7%
from year end but up $0.6 billion or 11.0% from one year ago. Fluctuations in
these loan balances occurred as loan originations, generated by strong demand
and low interest rates during the periods, were offset by loan sales,
particularly in the first half of 1999. For balance sheet management
purposes, FSCO does not retain all newly originated mortgage loans but
regularly securitizes and sells most loans in the secondary markets on an
ongoing flow-through basis. For 1-to-4 family residential term loans year to
date, FSCO originated $11.8 billion, up $1.6 billion or 15.2% from the year-
ago period, and sold $11.9 billion, up $2.2 billion or 22.5% from the year-ago
period. At quarter end, $0.9 billion of real estate secured loans were held
for sale, down $1.4 billion or 60.5% from year end, and down $0.7 billion or
42.2% from one year ago.
* Consumer loans were $3.4 billion, down $0.1 billion or 1.7% from year end
and down $0.3 billion or 7.5% from one year ago. These decreases occurred as
vehicle loan originations were more than offset by vehicle loan
securitizations and maturing loans. For balance sheet management purposes,
FSCO does not retain all newly originated indirect vehicle loans but regularly
pools and securitizes such loans in the secondary markets. For indirect
vehicle loans year to date, FSCO originated $2.7 billion, up $0.6 billion or
29.0% from the year-ago period, and sold $2.0 billion, up $1.6 billion or
446.6% from the year-ago period. FSCO is a leading consumer lender in its
primary market area.
* Leases were $1.6 billion, up $0.2 billion or 18.8% from year end and up
$0.4 billion or 30.1% from one year ago. These increases were primarily due
to FSCO's growth in the vehicle and equipment leasing markets.
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 strong asset quality, as its ratio of total
problem assets to total loans and other real estate was 0.57% at September 30,
1999, up from 0.52% at year end and 0.50% one year ago. The ratio of
nonperforming assets to total loans and ORE was 0.41% at period end, up from
0.35% at year end and 0.34% one year ago.
Problem assets were $78.5 million at September 30, 1999, up $5.3 million or
7.3% from year end and up $14.2 million or 22.0% from one year ago. The
components of FSCO's problem assets at September 30, 1999, compared with
December 31, 1998 and September 30, 1998, respectively, are discussed below.
* Nonaccruing loans were $49.2 million, up $3.4 million or 7.4% from year
end and up $8.0 million or 19.5% from one year ago. The ratio of nonaccruing
loans to total loans was 0.36%, up from 0.33% at year end and 0.32% one year
ago.
* Other real estate was $8.1 million, up $4.4 million or 122.7% from year
end and up $5.3 million or 187.8% from one year ago. 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 $21.3 million, down $2.5
million or 10.4% from year end but up $0.9 million or 4.5% from one year ago.
The ratio of accruing loans past due 90 days or more to total loans was 0.15%,
down from 0.17% at year end and 0.16% one year ago.
A comparison of FSCO to its Bank Holding Company Performance Report (BHCPR)
peer group as of June 30, 1999 showed that: FSCO's ratio of nonaccruing loans
to total loans was 0.38%, which compared favorably with the peer group average
of 0.59%; and FSCO's ratio of accruing loans past due 90 days or more to total
loans was 0.17%, which compared favorably with the peer group average of
0.22%.
Potential problem loans identified by FSCO amounted to $45.9 million at
September 30, 1999, down $1.4 million or 3.0% from year end and down $9.3
million or 16.8% from one year ago. Potential problem loans consisted
primarily of commercial and agricultural related loans.
ASSET QUALITY:
RESERVE FOR LOAN LOSSES
FSCO relies on the methodology for analysis of reserve adequacy outlined in
its 1998 Annual Report on Form 10-K (hereby incorporated by reference) and not
on any specific reserve ratio comparison.
FSCO's reserve for loan losses was $174.4 million at September 30, 1999, up
$1.1 million or 0.6% from year-end 1998 and up $5.4 million or 3.2% from one
year ago. The increase from one year ago was due to reserves added with the
various purchase acquisitions during the period.
Based on its analysis of reserve adequacy, FSCO considered its reserve for
loan losses at September 30, 1999 to be adequate to absorb estimated loan
losses in the current loan portfolio. FSCO's coverage ratio of the reserve to
nonaccruing loans was 354.57% at period end, down from 378.39% at year end and
410.48% one year ago. The ratio of the reserve to total loans was 1.26% at
period end, compared with 1.24% at year end and 1.31% one year ago.
Net loans charged off against the reserve were $47.6 million for year-to-
date 1999, up $7.1 million or 17.6% from the year-ago period, and were $12.8
million for the third quarter of 1999, down $2.9 million or 18.4% from the
year-ago quarter. The year-to-date increase was primarily due to higher net
loans charged off on commercial loans and consumer vehicle loans, while the
quarterly decrease was primarily due to lower net loans charged off on
consumer vehicle loans. The annualized ratio of net loans charged off to
average loans was 0.47% for year-to-date 1999, compared with 0.44% for the
year-ago period and 0.49% for all of 1998, and was 0.37% for the third quarter
of 1999, down from 0.48% for the year-ago quarter.
A comparison of FSCO to its BHCPR peer group as of June 30, 1999 showed
that: FSCO's coverage ratio of the reserve to nonaccruing loans was 346.10%,
which compared favorably with the peer group average of 325.27%; its ratio of
the reserve to total loans was 1.31%, compared with the peer group average of
1.53%; and its annualized ratio of net loans charged off to average loans was
0.54% for the period, compared with the peer group average of 0.38%.
ASSET QUALITY:
PROVISION FOR LOAN LOSSES
FSCO uses the provision for loan losses to adjust the reserve when a
replenishment or addition is appropriate.
FSCO's provision for loan losses was $40.3 million for year-to-date 1999,
down $8.8 million or 18.0% from the year-ago period, and was $12.8 million for
the quarter, down $5.3 million or 29.3% from the year-ago quarter. The year-
to-date decrease was offset by $8.4 million in reserves added with the various
purchase acquisitions during the period.
ASSET/LIABILITY MANAGEMENT
FSCO's asset/liability management committee (ALCO) process is responsible
for the identification, assessment, and management of liquidity, interest rate
risk, and capital adequacy for FSCO and its subsidiaries. FSCO's ALCO process
was discussed in its 1998 Annual Report on Form 10-K (hereby incorporated by
reference). The components of FSCO's ALCO process are discussed below.
ASSET/LIABILITY MANAGEMENT:
LIQUIDITY
FSCO's total deposits were $13.2 billion at September 30, 1999, up $0.6
billion or 4.4% from year end and up $1.3 billion or 10.6% from one year ago.
These increases were due to FSCO's continued emphasis on its deposit gathering
functions and the acquisition of banks with strong deposit characteristics.
The ratio of loans to deposits was 104.57% at period end, down from 110.70% at
year end and 108.23% one year ago primarily due to increased deposit levels,
two separate $1.0 billion loan securitizations during the first and second
quarters of 1999, and ongoing sales of 1-to-4 family residential term loans.
The ratio of loans to assets was 59.18% at period end, down from 64.61% at
year end and 65.09% one year ago. These ratios, as well as other loan and
liquidity ratios, vary with changes in economic cycles and are monitored
closely through FSCO's ALCO process to ensure that the proper balance is
maintained between risk, customer borrowing needs, and economic opportunities.
FSCO's debt, which included short-term borrowings and long-term debt, was
$7.7 billion at September 30, 1999, up $0.8 billion or 11.8% from year end and
up $1.9 billion or 33.1% from one year ago. The components of FSCO's debt at
September 30, 1999, compared with December 31, 1998 and September 30, 1998,
respectively, are discussed below.
* Federal funds purchased and securities sold under repurchase agreements
were $4.5 billion, up $0.8 billion or 20.3% from year end and up $0.8 billion
or 22.5% 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, loans held for sale or
securitization, and growth in AFS securities funded by repurchase agreements.
* All other short-term borrowed funds were $0.6 billion, up $0.1 billion or
23.7% from year end and up $0.3 billion or 85.1% from one year ago. These
increases were due primarily to current maturities of long-term debt and
additional borrowings from the Federal Home Loan Banks.
* Long-term debt was $2.5 billion, essentially unchanged from year end but
up $0.8 billion or 45.0% from one year ago. The increase from one year ago
was due to a strategic decision to prefund longer term debt in order to take
advantage of historically low rates and to avoid any potential negative market
conditions, including Year 2000 concerns, in the latter part of 1999. These
long-term debt instruments also provided favorable asset/liability rate risk
management opportunities during the year.
ASSET/LIABILITY MANAGEMENT:
MARKET RISK MANAGEMENT
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 (EXCLUDING TRADING ACCOUNT SECURITIES)
At September 30, 1999, FSCO exhibited slight liability sensitivity and
minimal overall interest rate risk.
During the 12 month period, a strong regional economy resulted in net
average loan growth of $0.9 billion or 6.7%, while successful deposit
promotions helped to generate average deposit growth of $1.3 billion or 10.7%.
FSCO also utilized loan sales and securitizations and external funding sources
to support asset growth.
FSCO took advantage of its strong capital ratios and further leveraged the
balance sheet resulting in an increase in the average AFS securities of $1.3
billion or 26.2% during the 12 month period. This increase was primarily
funded through the use of repurchase agreements and other short-term
borrowings.
FSCO is well positioned to support continued strong loan growth through
growth of regular deposit programs, the sale or maturity of securities,
additional asset sales and securitizations, and access to external sources of
funding.
Off-balance sheet derivatives used to manage FSCO's interest rate risk,
including interest rate swaps, caps, corridors, floors, forwards, futures, and
options totaled $2.3 billion notional amount at September 30, 1999, down from
$2.8 billion at year end and $2.6 billion one year ago. These changes were
primarily associated with hedging mortgage loan servicing rights.
ASSET/LIABILITY MANAGEMENT:
MARKET RISK - TRADING ACCOUNT SECURITIES
Financial futures and options contracts related to FSCO's trading account
securities totaled $2.6 billion notional par value at September 30, 1999, up
from $1.2 billion notional value at year end but down from $10.3 billion
notional amount one year ago. This position consisted of futures and options
contracts on short-term Federal funds, one month LIBOR, and three month
Eurodollars.
OTHER ASSETS AND LIABILITIES
FSCO's intangible assets were $0.6 billion at September 30, 1999, up $0.2
billion or 38.5% from year end and up $0.2 billion or 58.6% from one year ago,
due to goodwill associated with recent acquisitions and increased loan
servicing rights from strong loan production and sales. Fluctuations in other
assets and other liabilities were due in part to the effect of acquisitions
and timing differences from unsettled transactions in the purchase and sale of
securities.
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 October 25, 1999, the directors of FSCO declared a regular quarterly
common stock cash dividend of $0.14 per share. This dividend is payable on
December 6, 1999 to shareholders of record on November 12, 1999 and is equal
to an annual dividend rate of $0.56 per share. At the market closing price of
$24.875 per share on Friday, October 22, 1999 (before the announcement of the
dividend), the annual dividend yield on FSCO common stock would have been
2.25%. This dividend is the 179th common stock dividend declared by FSCO and
marks the 65th 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 $23.75 per share at the close of the
market on September 30, 1999, versus a book value of $8.99 per share,
resulting in a market-to-book ratio of 264.18%. In comparison, the bid price
of FSCO common stock was $16.688 per share at the close of the market on
September 30, 1998, versus a book value of $8.54 per share, resulting in a
market-to-book ratio of 195.41%. At September 30, 1999, FSCO's common stock
market capitalization was $4.6 billion, up $0.3 billion or 6.8% from year-end
1998 and up $1.5 billion or 47.8% 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.
STOCKHOLDERS' EQUITY AND CAPITAL ADEQUACY
FSCO's total stockholders' equity increased to $1.8 billion at September
30, 1999, up $0.2 billion or 10.3% from year-end 1998 and up $0.1 billion or
9.3% from one year ago. This growth was due to earnings retained and
issuances of new FSCO common stock shares for acquisitions, partially offset
by a decrease in accumulated other comprehensive income, consisting of
unrealized net losses in the fair value of AFS securities, and by repurchases
of common stock in the public markets in 1998 and early 1999.
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 7.54% at September
30, 1999, up from 7.36% at year-end but down from 8.11% one year ago. The
ratio of tangible common equity to tangible assets was 5.23% at quarter end,
down from 5.57% at year end and 6.42% one year ago, reflecting changes in the
fair value of AFS securities, repurchases of common stock, balance sheet
growth, goodwill recognized with various mergers, and the ongoing origination
of loan servicing rights.
A comparison of FSCO to its BHCPR peer group as of June 30, 1999 showed
that: FSCO's ratio of stockholders' equity to total assets was 7.84%, compared
with the peer group average of 7.87%; and its ratio of tangible common equity
to tangible assets was 5.37%, compared with the peer group average of 5.66%.
Regulations permit FSCO's $150 million of Guaranteed Preferred Beneficial
Interest - 8.41% Subordinated Capital Income Securities due 2026, issued in
1997, to be included in Tier 1 Capital for purposes of calculating the Tier 1
Leverage ratio and FSCO's risk-based capital ratios.
FSCO's risk-based capital ratios remained strong at September 30, 1999 due
to earnings retained and the above-mentioned Capital Income Securities.
FSCO's leverage and risk-based capital ratios were as follows:
Sept. 30 Dec. 31 Sept. 30
1999 1998 1998
-------- -------- --------
Leverage ratio 6.96% 6.90% 7.67%
Tier 1 risk-based capital ratio 8.74 9.10 10.19
Total (Tier 1 + 2) risk-based capital ratio 10.70 11.31 12.60
FSCO and its subsidiary banks continued to be classified as "well
capitalized" according to the regulatory requirements of their respective
primary regulatory authorities. 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.
MERGERS AND ACQUISITIONS
ZIONS BANCORPORATION AND FIRST SECURITY CORPORATION MERGER
FSCO's merger with Zions Bancorporation (Zions; Nasdaq: ZION) is proceeding
appropriately and a closing date is anticipated in the fourth quarter of 1999,
pending shareholder and regulatory approvals. Dates for shareholder meetings
to vote on the proposed merger have been postponed due to a slowing of the
closing schedule and new dates have not yet been determined. Application for
permission to merge was filed with the Federal Reserve Bank of San Francisco
on September 17, 1999, and a response is expected by mid-November. A ruling
on divestiture requirements from the Department of Justice (DOJ) was delayed
by its request for additional details, which it has received, and a final
response is expected imminently to enable a later fourth quarter closing.
Certain merger actions and decisions are dependent on DOJ's ruling and are
also delayed as a result. A lawsuit titled "Noyes v. Zions Bancorporation",
Case No. CIV 2:99CV0749B, District of Utah, has been filed in United States
District Court challenging the proposed merger on anti-competitive grounds.
This matter has been stayed by the parties pending regulatory approval of the
proposed merger. Zions, the named defendant in the suit, will vigorously
defend against any claims set forth in this proceeding. The new organization
will be known as First Security Corporation, headquartered in Salt Lake City,
and is expected to be approximately the nation's 25th largest bank holding
company with assets of approximately $40 billion.
In connection with this planned merger, FSCO's Board of Directors has taken
action under FSCO's Comprehensive Management Incentive Plan (CMIP) to require
that all accelerated and vested stock options be settled in shares of common
stock and not in cash. This action was taken to preserve pooling of interests
accounting treatment for the planned merger. The anticipated financial
statement effect of the accelerated and vested stock options under the CMIP as
a result of the planned merger was discussed in FSCO's Form 8-K filing on
August 30, 1999 (hereby incorporated by reference).
OTHER MERGERS AND ACQUISITIONS
FSCO's merger and acquisition strategies, opportunities, and activities
were discussed in detail in its 1998 Annual Report on Form 10-K (hereby
incorporated by reference). Mergers and acquisitions for the periods covered
by this report, are discussed below.
On July 1, 1999, FSCO merged three existing FSCO business divisions into
its First Security Van Kasper subsidiary (FS Van Kasper, located in Utah,
California, Idaho, Nevada, Oregon, New Mexico, and Wyoming) to create a single
company with a wide array of financial products and services, organized as
follows:
* the Van Kasper division provides investment banking, private client and
institutional securities brokerage;
* the First Security division deals in fixed income securities including
corporate debt, preferred stock, and tax exempt/ U.S. Treasury/agency
securities.
* the Investor Services division provides full service securities
brokerage, investment advisory, discount brokerage services, and makes
available First Security's Achievement Funds, a family of proprietary mutual
funds;
* the Insurance division is a full service insurance agency.
NATIONAL & REGIONAL ECONOMY
U.S. economic growth was sharply higher in the 1999 third quarter,
signaling the likelihood of a healthy business environment continuing into
next year. Over the next several quarters, national economic growth is
expected to moderate slightly to near a 3% growth track. Despite the current
rapid pace of economic expansion, instances of rising inflation remain
generally absent. Certainly, the U.S. business sector is confronted with
higher costs including energy, wage, medical and interest. Because of the
intense competitive climate and excess capacity, few companies have any
appreciable pricing power to pass those higher costs on in rising retail
prices. Fortunately, productivity gains remain robust, thus enabling many
businesses to offset much of those rising costs. Should that not occur,
however, individual businesses may face narrowing profit margins.
Economic growth throughout many western states tended to stabilize in 1999
after narrowing in the prior two years. The pace of business expansion
achieved during the year will likely be generally sustained in 2000. In those
states experiencing reduced net in-migration and slower job growth, the pace
of residential construction next year may slip below current levels.
Conversely, the prospect of rising exports to Asia will augment sales growth
for various businesses.
FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Factors that may affect FSCO's future results of operations and financial
condition, including competition, economic conditions, and technology, were
discussed in detail in its 1998 Annual Report on Form 10-K (hereby
incorporated by reference). In addition, the pending merger with Zions is
expected to have a significant impact on FSCO's future results of operations
and financial condition.
YEAR 2000 ISSUES:
FSCO'S YEAR 2000 READINESS DISCLOSURE
As previously announced, FSCO's year 2000 readiness effort was officially
completed June 30, 1999. FSCO will continue to monitor all systems to ensure
performance through the date change and beyond. In addition, FSCO maintains
contingency plans to allow for business resumption should something unforeseen
happen. These plans were tested in preparation for the Year 2000. FSCO's
plan is to be thoroughly prepared so contingency plans won't be necessary.
If, however, situations generally outside of FSCO's control dictate the use of
these plans, the goal is to provide services with a minimum of inconvenience
to customers and resume normal operations as quickly as possible.
FSCO's Year 2000 project expenditures totaled $38.9 million from 1996
through to its completion on June 30, 1999. This amount included: $2.6
million accrued and spent in 1997; $23.7 million accrued and spent in 1998;
and $12.6 million accrued and spent in 1999. These expenditures were funded
through operating cash flows. Of the $38.9 million total expenditures, $11.9
million was capitalized, including approximately $0.4 million capitalized in
1999, and the remainder reported as expense.
FSCO's Year 2000 Project, Risks, and Contingency Plans were also previously
discussed in detail in its 1998 Annual Report on Form 10-K, its Quarterly
Report on Form 10-Q/A (amended) for the first quarter of 1999, and its
Quarterly Report on Form 10-Q for the second quarter of 1999 (all hereby
incorporated by reference).
YEAR 2000 ISSUES:
FSCO'S YEAR 2000 FORWARD-LOOKING STATEMENTS
The preceding discussions of FSCO's "Year 2000 Issues" constitutes a Year
2000 Readiness Disclosure pursuant to the provisions of the Year 2000
Information Readiness and Disclosure Act and includes forward-looking
statements that involve inherent risks and uncertainties. A number of
important factors could cause the actual impact of Year 2000 issues to change
significantly from what is described in these forward-looking statements.
Those factors include, but are not limited to, ineffective remediation of
computer code and the inability of FSCO's suppliers and vendors to
successfully resolve their individual Year 2000 issues.
# # #
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. Continued: Supplemental Tables
<TABLE>
FIRST SECURITY CORPORATION
FINANCIAL HIGHLIGHTS
($ in thousands, except per share data and ratios; unaudited) (A)
<CAPTION>
3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr Year-To-Date Nine Months
1999 1999 1999 1998 1998 1999 1998 %Chg
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
COMMON & PREFERRED STOCK DATA:
Earnings per common share basic 0.38 0.36 0.34 0.36 0.34 1.08 0.96 12.5
Earnings per common share diluted 0.37 0.35 0.34 0.35 0.33 1.05 0.93 12.9
Tangible EPS diluted 0.43 0.42 0.40 0.41 0.37 1.25 1.06 17.9
Dividends paid per common share 0.14 0.14 0.14 0.13 0.13 0.42 0.39 7.7
Book value per common share [EOP] 8.99 8.90 8.77 8.54 8.54 8.99 8.54 5.3
Tangible book value per common share [EOP] 6.09 5.93 6.29 6.35 6.64 6.09 6.64 (8.3)
Market price (bid) [EOP] 23.750 27.188 19.250 23.313 16.688 23.750 16.688 42.3
Market price: high bid for the period 27.375 27.188 23.750 23.313 23.938 27.375 26.167 4.6
Market price: low bid for the period 21.375 17.875 17.563 15.938 15.500 17.563 15.500 13.3
Market capitalization (mktprice x #shrs) [EOP] 4,648,944 5,303,971 3,654,285 4,352,817 3,144,703 4,648,944 3,144,703 47.8
Market price / book value per com share [EOP] % 264.18 305.48 219.50 272.99 195.41 264.18 195.41
Dividend payout ratio (DPS / EPS basic) % 36.84 38.89 41.18 36.11 38.24 38.89 40.63
Dividend yield (DPS / mktprice) [EOP] % 2.36 2.06 2.91 2.23 3.12 2.36 3.12
Price / earnings ratio(mktprice/4qtrsEPSbasic) 16.5x 19.4x 14.4x 17.5x 13.0x 16.5x 13.0x
Common shares basic [EOP] 195,745 195,085 189,833 186,712 188,441 195,745 188,441 3.9
Common shares basic [Avg] 195,428 191,323 188,242 188,370 187,931 191,691 187,303 2.3
Common shares diluted [Avg] 200,788 196,402 193,403 193,756 193,621 196,891 193,868 1.6
Preferred shares [EOP] 9 9 9 9 9 9 9 0.0
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
INCOME STATEMENT:
Interest income 409,621 377,872 369,836 369,193 366,416 1,157,329 1,051,467 10.1
Interest expense 205,973 190,131 187,254 182,478 186,661 583,358 534,483 9.1
Net interest income 203,648 187,741 182,582 186,715 179,755 573,971 516,984 11.0
Fully taxable equivalent (FTE) adjustment 2,097 2,611 2,660 2,716 2,259 7,368 7,665 (3.9)
Net interest income, FTE 205,745 190,352 185,242 189,431 182,014 581,339 524,649 10.8
Provision for loan losses 12,778 10,596 16,877 22,861 18,068 40,251 49,062 (18.0)
Noninterest income 131,659 144,636 123,359 132,444 114,896 399,654 341,946 16.9
Noninterest expenses 210,235 217,363 192,415 193,489 179,516 620,013 529,599 17.1
Provision for income taxes 38,979 35,575 31,771 35,496 33,976 106,325 99,902 6.4
Net income 73,315 68,843 64,878 67,313 63,091 207,036 180,367 14.8
Preferred stock dividend requirement 7 7 7 7 7 21 21 0.0
Common stock dividend 27,411 26,544 26,583 24,580 24,472 80,538 71,001 13.4
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
BALANCE SHEET - END OF PERIOD:
Trading account securities 89,867 147,951 396,563 329,109 73,067 89,867 73,067 23.0
Available for sale (AFS) securities 6,146,907 5,923,169 5,825,155 4,764,127 4,912,396 6,146,907 4,912,396 25.1
Memo: fair value adjustment AFS securities (151,619) (107,952) 12,507 48,251 79,150 (151,619) 79,150 (291.6)
Loans, net of unearned income 13,817,241 13,309,843 13,160,919 14,013,417 12,926,926 13,817,241 12,926,926 6.9
Reserve for loan losses (174,443) (174,443) (173,350) (173,350) (169,058) (174,443) (169,058) 3.2
Total interest-earning assets 20,601,393 19,550,618 19,404,947 19,337,468 17,954,191 20,601,393 17,954,191 14.7
Intangible assets 566,892 578,033 472,066 409,367 357,459 566,892 357,459 58.6
Total assets 23,346,617 22,134,994 21,959,222 21,689,088 19,859,300 23,346,617 19,859,300 17.6
Noninterest-bearing deposits 2,567,762 2,621,559 2,489,976 2,752,009 2,431,637 2,567,762 2,431,637 5.6
Interest-bearing deposits 10,645,203 10,361,391 10,083,997 9,906,565 9,511,979 10,645,203 9,511,979 11.9
Total deposits 13,212,965 12,982,950 12,573,973 12,658,574 11,943,616 13,212,965 11,943,616 10.6
Short-term borrowed funds 5,149,732 4,134,494 4,236,283 4,265,589 4,026,919 5,149,732 4,026,919 27.9
Long-term debt 2,536,949 2,582,370 2,706,320 2,609,558 1,749,478 2,536,949 1,749,478 45.0
Total interest-bearing liabilities 18,331,884 17,078,255 17,026,600 16,781,712 15,288,376 18,331,884 15,288,376 19.9
Preferred stockholders' equity 456 472 476 484 491 456 491 (7.1)
Common stockholders' equity 1,759,123 1,735,590 1,665,303 1,595,011 1,609,515 1,759,123 1,609,515 9.3
Parent company investment in subsidiaries 2,171,810 2,147,444 2,068,992 1,945,390 1,788,947 2,171,810 1,788,947 21.4
============================================== ========== ========== ========== ========== ========== ========== ========== =======
<FN>
EOP: End Of Period. Avg: Average. EPS: Earnings Per Common Share. DPS: Dividends Per Common Share.
(A) Certain reclassifications of 1998 amounts have been made to conform to 1999 classifications.
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
FINANCIAL HIGHLIGHTS (continued)
($ in thousands, except per share data and ratios; unaudited) (A)
<CAPTION>
3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr Year-To-Date Nine Months
1999 1999 1999 1998 1998 1999 1998 %Chg
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
PROBLEM ASSETS & POTENTIAL PROBLEM ASSETS - END OF PERIOD:
Nonaccruing loans:
Commercial 20,644 20,459 22,741 19,562 17,042 20,644 17,042 21.1
Real estate term 22,664 24,006 18,770 18,670 18,309 22,664 18,309 23.8
Real estate construction 3,267 3,603 6,389 6,213 4,756 3,267 4,756 (31.3)
Consumer 238 87 146 137 305 238 305 (22.0)
Leases 2,385 2,247 945 1,230 773 2,385 773 208.5
Total nonaccruing loans 49,198 50,402 48,991 45,812 41,185 49,198 41,185 19.5
Other real estate 8,054 5,301 3,404 3,617 2,798 8,054 2,798 187.8
Total nonperforming assets 57,252 55,703 52,395 49,429 43,983 57,252 43,983 30.2
Accruing loans past due 90 days or more 21,282 23,567 26,949 23,758 20,369 21,282 20,369 4.5
Total problem assets 78,534 79,270 79,344 73,187 64,352 78,534 64,352 22.0
Potential problem assets 45,888 28,031 36,552 47,319 55,150 45,888 55,150 (16.8)
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
RECONCILIATION OF THE RESERVE FOR LOAN LOSSES:
Reserve for loan losses, beginning 174,443 173,350 173,350 169,058 166,658 173,350 157,525 10.0
Loans (charged off):
Commercial (2,679) (6,770) (1,186) (3,259) (1,105) (10,635) (6,762) 57.3
Real estate term (309) (533) (671) (877) (1,388) (1,513) (2,378) (36.4)
Real estate construction (188) (137) 0 (164) 0 (325) 0 0.0
Consumer credit card & related (3,520) (4,116) (4,042) (3,633) (3,568) (11,678) (10,454) 11.7
Consumer vehicle & other (14,914) (15,988) (22,441) (21,428) (17,004) (53,343) (45,364) 17.6
Leases (1) (12) (33) (147) (321) (46) (324) (85.8)
Total loans charged off (21,611) (27,556) (28,373) (29,508) (23,386) (77,540) (65,282) 18.8
Recoveries on loans charged off:
Commercial 698 921 1,186 1,552 614 2,805 3,742 (25.0)
Real estate term 103 39 381 291 403 523 1,534 (65.9)
Real estate construction 63 214 2 1 1 279 22 1168.2
Consumer credit card & related 1,012 677 669 728 657 2,358 2,007 17.5
Consumer vehicle & other 6,956 7,777 9,256 6,491 6,032 23,989 17,506 37.0
Leases 1 2 2 0 11 5 15 (66.7)
Total recoveries of loans charged off 8,833 9,630 11,496 9,063 7,718 29,959 24,826 20.7
Net loans (charged off) recovered (12,778) (17,926) (16,877) (20,445) (15,668) (47,581) (40,456) 17.6
Provision for loan losses 12,778 10,596 16,877 22,861 18,068 40,251 49,062 (18.0)
Acquisitions 0 8,423 0 1,876 0 8,423 2,927 187.8
Reserve for loan losses, ending 174,443 174,443 173,350 173,350 169,058 174,443 169,058 3.2
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
BALANCE SHEET - AVERAGE:
Trading account securities 131,292 250,743 274,855 139,293 64,310 218,438 165,114 32.3
Available for sale (AFS) securities 6,087,635 5,862,259 5,043,922 4,870,349 4,824,517 5,668,428 4,555,126 24.4
Memo: fair value adjustment AFS securities (153,354) (19,704) 37,590 62,380 41,719 (45,855) 39,007 (217.6)
Loans, net of unearned income 13,711,047 13,307,887 13,675,678 13,310,822 12,844,942 13,565,000 12,296,586 10.3
Reserve for loan losses (174,443) (174,686) (174,556) (170,129) (167,555) (174,561) (164,053) 6.4
Deferred taxes on leases (244,353) (228,400) (218,334) (200,571) (193,572) (230,458) (196,256) 17.4
Total interest-earning assets, excluding
fair value adjustment AFS securities
& deferred taxes on leases 20,298,429 19,354,022 18,916,172 18,175,389 17,580,579 19,527,937 16,876,095 15.7
Intangible assets 580,978 497,914 442,252 371,371 351,880 507,556 336,887 50.7
Total assets 23,017,626 21,972,307 21,435,536 20,438,133 19,652,528 22,147,618 18,917,813 17.1
Noninterest-bearing deposits 2,556,921 2,454,808 2,474,540 2,510,491 2,302,410 2,495,725 2,246,000 11.1
Interest-bearing deposits 10,544,685 10,140,998 9,896,659 9,587,111 9,531,570 10,196,488 9,400,895 8.5
Total deposits 13,101,606 12,595,806 12,371,199 12,097,602 11,833,980 12,692,213 11,646,895 9.0
Short-term borrowed funds 4,923,639 4,348,443 4,165,438 3,779,161 4,146,642 4,481,951 3,842,418 16.6
Long-term debt 2,591,434 2,657,803 2,653,130 2,350,927 1,611,966 2,633,896 1,454,463 81.1
Total interest-bearing liabilities 18,059,758 17,147,244 16,715,227 15,717,199 15,290,178 17,312,335 14,697,776 17.8
Preferred stockholders' equity 461 472 477 487 492 470 497 (5.4)
Common stockholders' equity 1,734,772 1,671,059 1,579,645 1,617,608 1,557,403 1,662,394 1,496,692 11.1
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
<FN>
EOP: End Of Period. Avg: Average.
(A) Certain reclassifications of 1998 amounts have been made to conform to 1999 classifications.
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
FINANCIAL HIGHLIGHTS (continued)
($ in thousands, except per share data and ratios; unaudited) (A)
<CAPTION>
3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr Year-To-Date Nine Months
1999 1999 1999 1998 1998 1999 1998 %Chg
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
OTHER DATA - END OF PERIOD (not rounded):
Full-time equivalent employees 9,941 10,101 10,030 9,424 9,229 9,941 9,229 7.7
Domestic bank offices:
FS Bank (Utah offices) 139 139 138 134 133 139 133 4.5
FS Bank (Idaho offices) 88 88 88 88 88 88 88 0.0
FS Bank (Oregon offices) 14 14 14 14 14 14 14 0.0
FS Bank (Wyoming offices) 8 8 8 8 8 8 8 0.0
FSB New Mexico 34 34 34 34 32 34 32 6.3
FSB Southern New Mexico 12 11 11 11 11 12 11 9.1
FSB Nevada 23 23 15 15 14 23 14 64.3
FSB California 16 16 16 18 17 16 17 (5.9)
Total domestic bank offices 334 333 324 322 317 334 317 5.4
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
SELECTED RATIOS (%):
Return on average assets (ROAA) 1.26 1.26 1.23 1.31 1.27 1.25 1.27
Tangible ROAA 1.54 1.53 1.49 1.56 1.49 1.52 1.48
Return on average stockholders' equity (ROAE) 16.76 16.52 16.65 16.50 16.07 16.65 16.11
Tangible ROAE 29.92 28.08 27.44 25.08 23.81 28.50 23.70
Net interest margin, FTE 4.05 3.93 3.92 4.17 4.14 3.97 4.15
Net interest spread, FTE 3.55 3.42 3.40 3.54 3.51 3.46 3.52
Noninterest income / total revenue 39.27 43.52 40.32 41.50 38.99 41.05 39.81
Operating expense ratio
(nonint exp / (net int inc FTE + nonint inc)) 62.31 64.89 62.35 60.11 60.46 63.20 61.11
Productivity ratio (nonint exp / avg assets) 3.62 3.97 3.64 3.76 3.62 3.74 3.74
Stockholders' equity / assets [EOP] 7.54 7.84 7.59 7.36 8.11 7.54 8.11
Stockholders' equity / assets [Avg] 7.54 7.61 7.37 7.92 7.93 7.51 7.91
Tangible common equity / tangible assets [EOP] 5.23 5.37 5.55 5.57 6.42 5.23 6.42
Loans / deposits [EOP] 104.57 102.52 104.67 110.70 108.23 104.57 108.23
Loans / assets [EOP] 59.18 60.13 59.93 64.61 65.09 59.18 65.09
Reserve for loan losses [EOP] /:
Total loans 1.26 1.31 1.32 1.24 1.31 1.26 1.31
Nonaccruing loans 354.57 346.10 353.84 378.39 410.48 354.57 410.48
Nonaccruing + accruing loans past due 90 days 247.51 235.83 228.27 249.17 274.65 247.51 274.65
Nonaccruing loans / total loans 0.36 0.38 0.37 0.33 0.32 0.36 0.32
Accruing loans past due 90 days / total loans 0.15 0.18 0.20 0.17 0.16 0.15 0.16
Nonaccruing + accr loans past due / total loans 0.51 0.56 0.58 0.50 0.48 0.51 0.48
Nonperforming assets [EOP] /:
Total loans + other real estate 0.41 0.42 0.40 0.35 0.34 0.41 0.34
Total assets 0.25 0.25 0.24 0.23 0.22 0.25 0.22
Total equity 3.25 3.21 3.15 3.10 2.73 3.25 2.73
Total equity + reserve for loan losses 2.96 2.92 2.85 2.79 2.47 2.96 2.47
Problem assets [EOP] /:
Total loans + other real estate 0.57 0.60 0.60 0.52 0.50 0.57 0.50
Total assets 0.34 0.36 0.36 0.34 0.32 0.34 0.32
Total equity 4.46 4.57 4.76 4.59 4.00 4.46 4.00
Total equity + reserve for loan losses 4.06 4.15 4.31 4.14 3.62 4.06 3.62
Net loans charged off / average loans 0.37 0.54 0.50 0.61 0.48 0.47 0.44
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
CAPITAL RATIOS & RISK-BASED CAPITAL RATIOS (%) - AS OF SEPTEMBER 30, 1999:
FSCO FS Bank FSB NM FSB SNM FSB Nev. FSB Cal.
---------- ---------- ---------- ---------- ---------- ----------
Leverage ratio 6.96 7.70 5.74 12.47 7.66 7.54
Tier 1 risk-based capital ratio 8.74 9.29 9.85 22.36 12.73 10.85
Total (Tier 1 + 2) risk-based capital ratio 10.70 10.22 11.06 23.61 13.99 12.10
Tier 1 risk-based capital $ 1,606,968 1,355,197 149,783 51,096 108,136 92,511
Total (Tier 1 + 2) risk-based capital $ 1,967,236 1,490,925 168,251 53,954 118,795 103,181
Total risk-based assets - loan loss reserve $ 18,383,925 14,581,933 1,521,300 228,534 849,372 852,949
============================================== ========== ========== ========== ========== ========== ========== ========== =======
<FN>
EOP: End Of Period. Avg: Average.
(A) Certain reclassifications of 1998 amounts have been made to conform to 1999 classifications.
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
VOLUME / RATE ANALYSIS
(in thousands; fully taxable equivalent; unaudited) (A, B)
<CAPTION>
For the Three Months Ended September 30, 1999 and 1998
Average Balance Yield/Rate % Interest Inc/Exp Change Changes Due To:
1999 1998 1999 1998 1999 1998 1999-98 Volume Rate
<C> <C> <C> <C> <S> <C> <C> <C> <C> <C>
- ----------- ----------- ------ ------ -------------------------------------------- ---------- ---------- -------- -------- --------
INTEREST-EARNING ASSETS / INCOME:
445,941 81,144 5.29 5.72 Federal funds sold & securities purchased 5,899 1,160 4,739 5,215 (476)
13,513 957 9.71 9.61 Int-bear deposits oth banks & oth money marke 328 23 305 302 3
131,292 64,310 11.69 5.48 Trading account securities 3,837 881 2,956 918 2,038
6,240,989 4,782,798 6.41 6.54 Available for sale securities, amortized cost 99,941 78,197 21,744 23,841 (2,097)
Loans, net of unearned income &
13,466,694 12,651,370 8.96 9.12 deferred taxes on leases (C) 301,713 288,414 13,299 18,587 (5,288)
- ----------- ----------- ------ ------ -------------------------------------------- ---------- ---------- -------- -------- --------
20,298,429 17,580,579 8.11 8.39 TOTAL INTEREST-EARNING ASSETS / INCOME 411,718 368,675 43,043 48,863 (5,820)
- ----------- ----------- ------ ------ -------------------------------------------- ---------- ---------- -------- -------- --------
INTEREST-BEARING LIABILITIES / EXPENSE:
Interest-Bearing Deposits:
393,229 341,443 1.23 1.63 Interest-bearing demand accounts 1,213 1,391 (178) 211 (389)
4,883,184 4,382,843 2.54 2.97 Savings & money market accounts 30,957 32,494 (1,537) 3,709 (5,246)
1,573,826 1,313,262 5.43 5.85 Time deposits of $100,000 or more 21,376 19,199 2,177 3,809 (1,632)
3,694,446 3,494,022 5.37 5.73 Other time deposits 49,625 50,094 (469) 2,873 (3,342)
- ----------- ----------- ------ ------ -------------------------------------------- ---------- ---------- -------- -------- --------
10,544,685 9,531,570 3.91 4.33 TOTAL INTEREST-BEARING DEPOSITS 103,171 103,178 (7) 10,602 (10,609)
- ----------- ----------- ------ ------ -------------------------------------------- ---------- ---------- -------- -------- --------
4,431,290 3,793,737 5.07 5.48 Federal funds purchased & securities sold 56,161 51,929 4,232 8,727 (4,495)
492,349 352,905 6.72 6.29 Other short-term borrowings 8,266 5,549 2,717 2,193 524
2,591,434 1,611,966 5.92 6.45 Long-term debt 38,375 26,005 12,370 15,801 (3,431)
- ----------- ----------- ------ ------ -------------------------------------------- ---------- ---------- -------- -------- --------
18,059,758 15,290,178 4.56 4.88 TOTAL INTEREST-BEAR LIABILITIES / EXPENSE 205,973 186,661 19,312 37,323 (18,011)
- ----------- ----------- ------ ------ -------------------------------------------- ---------- ---------- -------- -------- --------
8.11 8.39 Interest income FTE / earning assets
4.06 4.25 Interest expense / earning assets
------ ------ --------------------------------------------
4.05 4.14 Net interest income FTE / earning assets 205,745 182,014 23,731 11,540 12,191
Less fully taxable equivalent adjustment 2,097 2,259 (162)
------ ------ -------------------------------------------- ---------- ---------- -------- -------- --------
NET INTEREST INCOME 203,648 179,755 23,893
=========== =========== ====== ====== ============================================ ========== ========== ======== ======== ========
<CAPTION>
For the Year-To-Date Nine Months Ended September 30, 1999 and 1998
Average Balance Yield/Rate % Interest Inc/Exp Change Changes Due To:
1999 1998 1999 1998 1999 1998 1999-98 Volume Rate
<C> <C> <C> <C> <S> <C> <C> <C> <C> <C>
- ----------- ----------- ------ ------ -------------------------------------------- ---------- ---------- -------- -------- --------
INTEREST-EARNING ASSETS / INCOME:
251,110 93,315 5.02 5.75 Federal funds sold & securities purchased 9,455 4,025 5,430 6,806 (1,376)
9,564 1,217 13.68 7.12 Int-bear deposits oth banks & oth money marke 981 65 916 446 470
218,438 165,114 8.62 5.61 Trading account securities 14,117 6,941 7,176 2,242 4,934
5,714,283 4,516,119 6.43 6.61 Available for sale securities, amortized cost 275,749 223,904 51,845 59,404 (7,559)
Loans, net of unearned income &
13,334,542 12,100,330 8.64 9.08 deferred taxes on leases (C) 864,395 824,197 40,198 84,067 (43,869)
- ----------- ----------- ------ ------ -------------------------------------------- ---------- ---------- -------- -------- --------
19,527,937 16,876,095 7.95 8.37 TOTAL INTEREST-EARNING ASSETS / INCOME 1,164,697 1,059,132 105,565 152,965 (47,400)
- ----------- ----------- ------ ------ -------------------------------------------- ---------- ---------- -------- -------- --------
INTEREST-BEARING LIABILITIES / EXPENSE:
Interest-Bearing Deposits:
375,947 329,833 1.32 1.69 Interest-bearing demand accounts 3,723 4,191 (468) 586 (1,054)
4,736,681 4,229,201 2.58 2.96 Savings & money market accounts 91,694 93,801 (2,107) 11,256 (13,363)
1,457,529 1,348,568 5.40 5.82 Time deposits of $100,000 or more 59,022 58,827 195 4,753 (4,558)
3,626,331 3,493,293 5.35 5.68 Other time deposits 145,587 148,884 (3,297) 5,670 (8,967)
- ----------- ----------- ------ ------ -------------------------------------------- ---------- ---------- -------- -------- --------
10,196,488 9,400,895 3.92 4.34 TOTAL INTEREST-BEARING DEPOSITS 300,026 305,703 (5,677) 22,265 (27,942)
- ----------- ----------- ------ ------ -------------------------------------------- ---------- ---------- -------- -------- --------
4,063,084 3,446,536 4.81 5.39 Federal funds purchased & securities sold 146,639 139,233 7,406 24,907 (17,501)
418,867 395,882 6.67 5.97 Other short-term borrowings 20,955 17,729 3,226 1,029 2,197
2,633,896 1,454,463 5.86 6.58 Long-term debt 115,738 71,818 43,920 58,238 (14,318)
- ----------- ----------- ------ ------ -------------------------------------------- ---------- ---------- -------- -------- --------
17,312,335 14,697,776 4.49 4.85 TOTAL INTEREST-BEAR LIABILITIES / EXPENSE 583,358 534,483 48,875 106,439 (57,564)
- ----------- ----------- ------ ------ -------------------------------------------- ---------- ---------- -------- -------- --------
7.95 8.37 Interest income FTE / earning assets
3.98 4.22 Interest expense / earning assets
------ ------ --------------------------------------------
3.97 4.15 Net interest income FTE / earning assets 581,339 524,649 56,690 46,526 10,164
Less fully taxable equivalent adjustment 7,368 7,665 (297)
------ ------ -------------------------------------------- ---------- ---------- -------- -------- --------
NET INTEREST INCOME 573,971 516,984 56,987
=========== =========== ====== ====== ============================================ ========== ========== ======== ======== ========
<FN>
(A) Certain reclassifications of 1998 amounts have been made to conform to 1999 classifications.
(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 1999 and 1998.
(C) Loans include nonaccruing loans.
Interest on loans includes fees of $15,654 and $11,571 for the 1999 and 1998 quarters, respectively.
Interest on loans includes fees of $44,921 and $32,726 for the 1999 and 1998 year-to-date periods, respectively.
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
LOANS (in thousands; unaudited) (A)
<CAPTION>
As of Sep. 30 %Total Dec. 31 %Total Sep. 30 %Total Sep/Sep
1999 Loans 1998 Loans 1998 Loans %Chg
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------ ------------ -------- ------------ -------- ------------ -------- --------
COMMERCIAL LOANS:
Commercial & industrial 2,700,570 19.5 2,562,274 18.3 2,348,573 18.2 15.0
Agricultural 326,585 2.4 404,038 2.9 405,705 3.1 (19.5)
Other commercial 167,257 1.2 198,673 1.4 196,297 1.5 (14.8)
- ------------------------------------------------ ------------ -------- ------------ -------- ------------ -------- --------
TOTAL COMMERCIAL LOANS 3,194,412 23.1 3,164,985 22.6 2,950,575 22.8 8.3
- ------------------------------------------------ ------------ -------- ------------ -------- ------------ -------- --------
REAL ESTATE SECURED LOANS:
1 to 4 family residential term 2,371,609 17.2 3,505,920 25.0 2,625,904 20.3 (9.7)
1 to 4 family residential home equity 392,864 2.8 424,102 3.0 460,526 3.6 (14.7)
1 to 4 family residential construction 820,801 5.9 577,940 4.1 512,805 4.0 60.1
Commercial & other term 1,550,030 11.2 1,325,071 9.5 1,226,218 9.5 26.4
Commercial & other construction 552,238 4.0 265,879 1.9 298,253 2.3 85.2
- ------------------------------------------------ ------------ -------- ------------ -------- ------------ -------- --------
TOTAL REAL ESTATE SECURED LOANS 5,687,542 41.2 6,098,912 43.5 5,123,706 39.6 11.0
Memo: Total real estate term 4,314,503 31.2 5,255,093 37.5 4,312,648 33.4 0.0
Memo: Loans held for sale included
in total real estate term 944,653 6.8 2,391,508 17.1 1,635,678 12.7 (42.2)
Memo: Total real estate construction 1,373,039 9.9 843,819 6.0 811,058 6.3 69.3
- ------------------------------------------------ ------------ -------- ------------ -------- ------------ -------- --------
CONSUMER LOANS:
Credit card & related 319,558 2.3 328,853 2.3 316,504 2.4 1.0
Vehicle & other consumer 3,064,433 22.2 3,114,506 22.2 3,343,482 25.9 (8.3)
- ------------------------------------------------ ------------ -------- ------------ -------- ------------ -------- --------
TOTAL CONSUMER LOANS 3,383,991 24.5 3,443,359 24.6 3,659,986 28.3 (7.5)
- ------------------------------------------------ ------------ -------- ------------ -------- ------------ -------- --------
TOTAL LEASES 1,551,296 11.2 1,306,161 9.3 1,192,659 9.2 30.1
- ------------------------------------------------ ------------ -------- ------------ -------- ------------ -------- --------
LOANS, NET OF UNEARNED INCOME 13,817,241 100.0 14,013,417 100.0 12,926,926 100.0 6.9
Memo: Unearned income (165,370) (127,593) (110,943) 49.1
Reserve for loan losses (174,443) (173,350) (169,058) 3.2
- ------------------------------------------------ ------------ -------- ------------ -------- ------------ -------- --------
TOTAL LOANS, NET 13,642,798 13,840,067 12,757,868 6.9
================================================ ============ ======== ============ ======== ============ ======== ========
<FN>
(A) Certain reclassifications of 1998 amounts have been made to conform to 1999 classifications.
</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 corresponding cost in legal
fees and expenses. Since the filing of FSCO's Second Quarter 1999 Quarterly
Report on Form 10-Q, there have been no material litigation or changes in
existing litigation, as defined under SEC regulations, involving FSCO and/or
one or more of its subsidiaries.
ITEM 5. OTHER INFORMATION
Shareholder proposals for action at FSCO's 2000 Annual Meeting that are not
requested to be included in its 2000 Proxy Statement must be received by FSCO
in the same way and within the same time periods as all other shareholder
proposals. A special bylaw provision requires all shareholder proposals to be
received by FSCO not later than the close of business on the 90th day nor
earlier than the close of business on the 120th day prior to the first
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is more than 30 days before or
more than 60 days after such anniversary date, notice by the stockholder to be
timely must be so delivered not earlier than the close of business on the
120th day prior to such annual meeting and not later than the close of
business on the later of: (1) the 90th day prior to such annual meeting; or
(2) the 10th day following the day on which public announcement of the date of
such meeting is first made by FSCO.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 10. Material Contracts:
* Exhibit 10.1: First Security Corporation Comprehensive Management
Incentive Plan (as Amended and Restated), dated 21 April, 1998
(attached).
* Exhibit 10.2: Agreement and Plan of Merger, dated as of June 6, 1999 by
and among Zions Bancorporation and First Security Corporation (Ex. 99.1
to FSCO's Report on Form SC 13D, filed June 16, 1999, incorporated by
reference; also Ex. 99.1 to FSCO's Report on Form SC 13D, filed June 18,
1999, incorporated by reference).
* Exhibit 10.3: Stock Option Agreement, dated as of June 8, 1999, by and
between Zions Bancorporation and First Security Corporation (Ex. 99.2
to FSCO's Report on Form SC 13D, filed June 16, 1999, incorporated by
reference).
* Exhibit 10.4: Stock Option Agreement, dated as of June 8, 1999, by and
between First Security Corporation and Zions Bancorporation (Ex. 99.2
to FSCO's Report on Form SC 13D, filed June 18, 1999, incorporated by
reference).
Exhibit 11: Computation of Earnings Per Share (attached).
Exhibit 27: Financial Data Schedule (attached).
(b) Reports on Form 8-K:
* August 30, 1999, Item 5. Other Events. FSCO issued a press release
announcing that approval by FSCO stockholders of the proposed merger
with Zions will result in accelerated vesting and the activation of
limited stock appreciation rights in the FSCO Comprehensive Management
Incentive Plan.
# # #
<PAGE>
SIGNATURES
FORM 10-Q for the quarterly period ended September 30, 1999
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
/s/ Brad D. Hardy November 12, 1999
- ---------------------------------------- ------------------
Brad D. Hardy Date
Executive Vice President Corporate Services,
General Counsel,
Chief Financial Officer, and
Secretary of First Security Corporation
(Principal Financial and Accounting Officer)
# # #
EXHIBIT 10.1:
FIRST SECURITY CORPORATION
COMPREHENSIVE MANAGEMENT INCENTIVE PLAN (AS AMENDED AND RESTATED)
Most recently adopted and amended by the Executive Committee on April 21,
1998. (The material provisions of this plan were approved by the Shareholders
in April 1994.) the minor clarifications and revisions made in 1998 were not
material so as to require Shareholder approval).
SECTION CONTENTS PAGE
1. Purpose: Definitions 1
2. Administration 4
3. Stock Subject to Plan 5
4. Eligibility 6
5. Stock Options 6
6. Stock Appreciation Rights 11
7. Restricted Stock 12
8. Long-Term Performance Awards 14
9. Change-in-Control Provisions 15
10. Amendments and Termination 18
11. Unfunded Status of Plan 19
12. General Provisions 19
13. Effective Date of Plan 21
14. Term of Plan 21
15. Indemnification of Committee 21
16. Financing 21
SECTION 1. Purpose: Relationship to Other Plans of the Company:
Definitions.
The name of this plan is the First Security Corporation Comprehensive
Management Incentive Plan (the "Plan").
The purposes of the Plan are to promote the best interests of the
Corporation and its Shareholders by strengthening the Corporation's ability to
attract and retain skilled and competent managerial and technical employees
and contractors, and to provide a means to encourage stock ownership and
proprietary interest in the Corporation and its future success by executive
and other officers, key consultants and contractors, and key employees upon
all of whose judgment, initiative and efforts the financial success and growth
of the Corporation largely depend, and to align the interests of such persons
directly with the interests of the Shareholders of the Corporation.
Specifically the Plan will enable key employees and Eligible Independent
Contractors (as hereinafter defined) of First Security Corporation ("the
Company") to (I) own shares of stock in the Company. (ii) participate in the
shareholder value which has been created, (iii) have a mutuality of interest
with other shareholders and (iv) enable the Company to attract, retain and
motivate key employees, non-employee directors, and independent contractors of
particular merit.
It is intended that eligibility under this Plan be restricted to a
select group of management or highly compensated employees as defined by the
Employee Retirement Income Security Act of 1974. All provisions of this Plan
shall be construed to effectuate such purposes.
This Plan is an amendment of, and supersedes and incorporates, the First
Security Restricted Stock Bonus Plan and the First Security Corporation
Nonstatutory Stock Option and Stock Appreciation Rights Plan ("Prior Plans").
All Bonus Awards, Options and Stock Appreciation Rights under the Prior Plans
are deemed to have been issued under this Plan, and are to be governed by this
Plan. Any difference between the terms of the Prior Plans and the terms of
this Plan will be resolved by reference to the terms of this Plan, which will
govern in all respects.
For the purposes of the Plan, the following terms shall be defined as
set forth below:
(i) "Board" means the Board of Directors of the Company.
(ii) "Cause" means a felony conviction of a Participant or the failure
of a Participant to contest prosecution for a felony, or a Participant's
willful misconduct or dishonesty, any of which is directly and materially
harmful to the business or reputation of the Company.
(iii) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
(iv) "Committee" means the Administrative Committee referred to in
Section 2 of the Plan. If at any time no Committee shall be duly elected and
serving as a result of Board action or resignations of the Committee or
otherwise, then the functions of the Committee specified in the Plan shall be
exercised by the Board.
(v) "Company" means First Security Corporation, a corporation
organized under the laws of the State of Delaware and its subsidiaries or any
successor organization.
(vi) "Disability" shall have the same meaning as under the First
Security Retirement Plan, as amended from time to time.
(vii) "Disinterested Person" shall mean a Director of the Company
meeting the requirements for a "disinterested person" set forth in Rule 16b-3
as promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
(viii) "Early Retirement" means retirement, with consent of the
Committee at the time of retirement, from active employment with the Company
prior to normal retirement age under provisions of the Company's pension plan,
if such a plan is in effect at the time; or pursuant to the Company's profit-
sharing plan if no pension plan is then in effect; or retirement prior to age
65 if neither a pension plan nor a profit sharing plan are then in place.
(ix) "Eligible Independent Contractor" means an independent contractor
hired by the Company to provide consulting services on a regular basis for the
Company at or after the time the Plan is initially approved by the
shareholders.
(x) "Fair Market Value" means, as of any given date, the last sale
price of the Stock as furnished by the National Association of Securities
Dealers Inc.'s Automated Quotation National Market System (NASDAQ-NMS") on the
day before, or, if either no such sale is reported by NASDAQ-NMS on such date
or the Stock is not publicly traded on or as of such date, the fair market
value of the Stock as determined by the Committee in good faith based on the
best available facts and circumstances at the time.
(xi) "Incentive Stock Option" means any Stock Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section 422A
of the Code.
(xii) "Insider" means a Participant who is subject to the requirements
of the Rules (as defined below).
(xiii) "Long-Term Performance Award" or "Long-Term Award" means an
award made pursuant to Section 8 below that is payable in cash and/or Stock
(including Restricted Stock) in accordance with the terms of the grant, based
on Company, business unit and/or individual performance over a period of at
least two years.
(xiv) "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(xv) "Normal Retirement" means retirement from active employment with
the Company and any Affiliate (as defined in Section 9) pursuant to the normal
retirement provisions of the Company's pension plan, if such a plan is in
effect at the time; or pursuant to the Company's profit-sharing plan if no
pension plan is then in effect; or retirement at or after age 65 if neither a
pension plan nor a profit sharing plan are then in place.
(xvi) "Participant" means an employee, or Eligible Independent
Contractor to whom an Award is granted pursuant to the Plan.
(xvii) "Restricted Stock" means an award of shares of Stock that is
subject to restrictions pursuant to Section 7 below.
(xviii) "Retirement" shall contemplate either normal or early
retirement under existing Company retirement plans and/or policies.
(xix) "Rules means the regulations promulgated under Section 16 of the
Exchange Act.
(xx) "Securities Broker" means the registered securities broker
acceptable to the Company who agrees to effect the cashless exercise of an
Option pursuant to Section 5(m) hereof.
(xxi) "Stock" means the Common Stock, $1.25 par value per share, of the
Company.
(xxii) "Stock Appreciation Right" means the right, pursuant to an
award granted under Section 6 below, to surrender to the Company all (or a
portion) of a Stock Option in exchange for an amount equal to the difference
between (i) the Fair Market Value, as of the date such Stock Option (or such
portion thereof is surrendered, of the shares of Stock covered by such Stock
Option (or such portion thereof), and (ii) the aggregate exercise price of
such Stock Option (or such portion thereof).
(xxiii) "Stock Option" or "Option" means any option to purchase
shares of Stock (including Restricted Stock, if the Committee so determines)
granted pursuant to Section 5 below.
In addition, the terms "Change-in-Control," "Potential Change-in-
Control" and "Change-in-Control Price" shall have the meanings set forth,
respectively, in Sections 9(b), (c) and (d) below.
SECTION 2. Administration; Duty of Insiders.
The Plan shall be administered by an Administrative Committee of not
less than three Disinterested Persons, who shall be appointed by the Board of
Directors of the Company and who shall serve at the pleasure of the Board.
The Committee shall have the authority to grant pursuant to the terms of
the Plan: (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted
Stock and/or (iv) Long-Term Performance Awards to key employees and officers
of the Company; (i) Stock Options and/or (ii) Stock Appreciation Rights to
Eligible Independent Contractors.
In particular, the Committee shall have the authority:
(i) to select the officers and other key employees of the Company to
whom Stock Options, Stock Appreciation Rights, Restricted Stock and Long-Term
Performance Awards may from time to time be granted hereunder and Eligible
Independent Contractors to whom Stock Options and Stock Appreciation Rights
may from time to time be granted hereunder;
(ii) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock and
Long-Term Performance Awards, or any combination thereof, are to be granted
hereunder;
(iii) to determine the number of shares of Stock to be covered by each
such award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder; including, but not limited
to, the share price and any restriction or limitation, or any vesting
acceleration or forfeiture waiver regarding any Stock Option or other award
and/or the shares of Stock relating thereto, based on such factors as the
Committee shall determine, in its sole discretion;
(v) to determine whether and under what circumstances a Stock Option
may be settled in cash or stock, including Restricted Stock under Section
5(1);
(vi) to determine whether and under what circumstances a Stock Option
may be exercised without a payment of cash under Section 5(m); and
(vii) to determine whether, to what extent and under what circumstances Stock
or cash distributable or payable with respect to an award under this Plan
shall be deferred either automatically or at the election of the Participant.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of
the Plan and any award issued under the Plan (and any agreements relating
thereto); and to otherwise supervise the administration of the Plan.
All decisions made by the Committee pursuant to the provisions of the
Plan shall be final and binding on all persons, including the Company and Plan
Participants.
It shall be a condition of participation in this Plan by an Insider that
such Participant individually assume full responsibility to comply with all
federal, state or other applicable securities laws in connection with their
Awards and award exercise decisions under the Plan, and that such Insider
retain competent counsel or other advisors to ensure compliance with all such
applicable laws.
SECTION 3. Stock Subject to the Plan.
(i) Stock Subject to Plan. Awards of Stock under the Plan shall be
made from Stock which is either authorized and unissued or held in the
treasury of the Company. The maximum number of shares of Stock authorized for
issuance under the Plan with respect to the grant of awards while the Plan is
in effect, subject to adjustment in accordance with paragraph 3(d) below,
shall be up to 6,437,500 shares in the aggregate, or such other number of
shares as are subsequently approved by the Company's Shareholders.
(ii) Computation of Stock Available for the Plan. For the purpose of
computing the total number of shares of Stock available for distribution at
any time in each calendar year during which the Plan is in effect in
connection with the exercise of options awarded under the Plan, there shall be
debited against the total number of shares determined to be available pursuant
to paragraphs (i), and (iii) of this Section 3 the maximum number of shares of
Stock subject to issuance upon exercise of options or other stock based awards
made under the Plan.
(iii) Unused, Forfeited and Reacquired Shares. Any unused portion of
the shares annually available for award shall be carried forward and shall be
made available for Plan awards in succeeding calendar years. The shares
related to the unexercised or undistributed portion of any terminated, expired
or forfeited award for which no material benefit was received by a Participant
(i.e. dividends) also shall be made available for distribution in connection
with future awards under the Plan to the extent permitted to receive exemptive
relief pursuant to the Rules.
(iv) Other Adjustments. In the event of any merger, reorganization,
consolidation, recapitalization, stock dividend, or other change in corporate
structure affecting the Stock, such substitution or adjustment shall be made
in the aggregate number of shares reserved for issuance under the Plan, and in
the number and option price of shares subject to outstanding Options granted
under the Plan, as may be determined to be appropriate by the Committee in its
sole discretion, provided that the number of shares subject to any award shall
always be a whole number. Such adjusted option price shall also be used to
determine the amount payable by the Company upon the exercise of any Stock
Appreciation Right associated with any Stock Option.
SECTION 4. Eligibility; Limit on Awards to Certain Persons.
Officers of the Company, other key employees of the Company, and
Eligible Independent Contractors, who are responsible for or contribute to the
management, growth and/or profitability of the business of the Company are
eligible to be granted awards under the Plan as determined in the sole
discretion of the Committee.
Section 162(m) of the Internal Revenue Code places a limit of $1 million
on the tax-deductibility of compensation paid to individuals listed in the
proxy statements of publicly held corporations. Compensation for the
individual executives listed in company proxy statements which exceeds $1
million on an individual basis may not be tax-deductible unless it meets
certain requirements with respect to being performance-based.
To ensure that its executive compensation program is in full compliance
with the provisions regarding performance-based compensation, the number of
Awards (calculated as a number of Shares granted to an individual under the
Plan may not exceed, in total over the life of that individual, 20% of the
shares authorized and approved for grants under the Plan.
SECTION 5. Stock Options.
Stock Options may be granted alone, in addition to or in tandem with
other awards granted under the Plan, consistent with the requirement of
Section 12(vi), below. Any Stock Option granted under the Plan shall be in
such form as the Committee may from time to time approve.
Stock Options granted under the Plan may be of two types: (i) Incentive
Stock Options and (ii) Non-Qualified Stock Options.
The Committee shall have the authority to grant Incentive Stock Options,
Non-Qualified Stock Options, or both types of Stock Options (in each case with
or without Stock Appreciation Rights). To the extent that any Stock Option
does not qualify as an Incentive Stock Option, it shall constitute a separate
Non-Qualified Stock Option.
Anything in the Plan to the contrary notwithstanding, no term of this
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify the Plan under Section 422A of the Code, or,
without the consent of the optionee(s) affected, to disqualify any Incentive
Stock Option under Section 422A.
In the discretion of the Committee, Non-Qualified Stock Options may be
issued to an employee in consideration of the waiver of a portion of such
Employee's salary, compensation or fees, with the spread between the exercise
price of such Stock Options and the then Fair Market Value of the Stock
subject to such Stock Options being equal to the salary, compensation or fees
waived or such other terms and provisions as the Committee may in its
discretion provide.
Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions,
not inconsistent with the terms of the Plan, as the Committee shall deem
appropriate:
(i) Option Price. The option price per share of Stock purchasable
under a Stock Option shall be determined by the Committee at the time of grant
but shall be not less than 100% of the Fair Market Value of the Stock at the
time of grant for Incentive Stock Options and 85% of the Fair Market Value of
the Stock at the time of grant for Non-Qualified Options; provided, however
that Non-Qualified Options issued in exchange for options held by employees of
an acquired company or a division or subsidiary thereof may, at the
Committee's discretion, be issued at not less than 50% of the Fair Market
Value of the Stock at the time of grant.
Any Incentive Stock Option granted to any optionee who, at the time the
option is granted, owns more than 10% of the voting power of all classes of
stock of the Company or of a Parent or Subsidiary corporation, shall have an
exercise price no less than 110% of Fair Market Value per share on date of the
grant.
(ii) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the Option is granted and no Non-Qualified Stock Option
shall be exercisable more than ten years and one day after the date the Option
is granted. However, any option granted to any optionee who, at the time the
option is granted owns more than 10% of the voting power of all classes of
Stock of the Company or of a Parent or Subsidiary corporation may not have a
term of more than five years. No option may be exercised by any person after
expiration of the term of the option.
(iii) Exercisability. Stock Options shall be exercisable at such time
or times and subject to such terms and conditions as shall be determined by
the Committee at or after grant, provided, however, that, except as provided
in Section 5(vii) and Section 9, unless otherwise determined by the Committee
at or after grant, no Stock Option shall be exercisable during the six months
following the date of the granting of the Option. If the Committee provides,
in its discretion, that any Stock Option is exercisable only in installments,
the Committee may waive such installment exercise provisions at any time at or
after grant in whole or in part, based on such factors as the Committee shall
determine, in its sole discretion.
No shares of Stock shall be issued until full payment therefor has been
made. An optionee shall generally have the rights to dividends or other
rights of a shareholder with respect to shares subject to the Option when the
optionee has given written notice of exercise, has paid in full for such
shares, and, if requested, has given the representation described in Section
12(i).
(iv) Methods of Exercise.
(a) Stock Options may be exercised in whole or in part by giving
written notice of exercise to the Company specifying the number of shares of
Stock to be purchased. Such notice shall be accompanied by payment in full of
the purchase price, either by certified or bank check, or such other
instrument as the Committee may accept.
(b) As determined by the Committee, in its sole discretion, at
or after grant, payment in full or in part may also be made in the form of
unrestricted shares of Stock already owned by the optionee based on the Fair
Market Value of the Stock on the date the option is exercised, as determined
by the Committee), provided, however, that, in the case of an Incentive Stock
Option, the right to make a payment in the form of already owned shares may be
authorized only at the time the option is granted.
If payment of the option exercise price of a Non-Qualified Stock Option
is made in whole or in part in the form of Restricted Stock, such Restricted
Stock (and any replacement shares relating thereto) shall remain (or be)
restricted in accordance with the original terms of the Restricted Stock award
in question, and any additional Stock received upon the exercise shall be
subject to the same forfeiture restrictions, unless otherwise determined by
the Committee, in its sole discretion, at or after grant.
If payment of the Option exercise price of a Non-Qualified Option is
made in whole or in part in the form of unrestricted stock already owned by
the Participant, the Company may require that the stock has been owned by the
Participant for a period of time so that such payment would not result in a
charge to the Company's earnings as a result of the exercise. Such provision
may be used by the Company to prevent a pyramid exercise.
(c) On receipt of written notice to exercise, the Committee
may, in its sole discretion, elect to cash out all or part of the portion of
the option(s) to be exercised by paying the optionee an amount, in cash or
Stock, equal to the excess of the Fair Market Value of the Stock over the
option price (the "Spread Value") on the effective date of such cash-out.
In addition, if the option agreement so provides at grant or is amended
after grant and prior to exercise to so provide (with the optionee's consent),
the Committee may require that all or part of the shares to be issued with
respect to the Spread Value of an exercised option take the form of Restricted
Stock, which shall be valued on the date of exercise on the basis of the Fair
Market Value of such Restricted Stock determined without regard to the
forfeiture restrictions involved.
(d) To the extent permitted under the applicable laws and
regulations, at the request of the Participant, and with the consent of the
Committee, the Company agrees to cooperate in a "cashless exercise" of an
Option. The cashless exercise shall be effected by the Participant delivering
to a Securities Broker instructions to sell a sufficient number of shares of
Common Stock to cover the costs and expenses associated therewith.
(v) Withholding taxes. The Company shall withhold the number of
shares of Common Stock obtainable on the exercise of an Option which, when
valued at Fair Market Value (determined as of the day preceding the date of
exercise), is equivalent to the required withholding taxes due.
(vi) Replacement Options. If an Option granted pursuant to the Plan
may be exercised by an optionee by means of a stock-for-stock swap method of
exercise as provided above, then the Committee may, in its sole discretion and
at the time of the original option grant, authorize the Participant to
automatically receive a replacement Option pursuant to this part of the Plan.
This replacement option shall cover a number of shares determined by the
Committee, but in no event more than the number of shares equal to the
difference between the number of shares of the original option exercised and
the net shares received by the Participant from such exercise. The exercise
price of the replacement option shall equal the then current Fair Market
Value, and with a term extending to the expiration date of the original
Option.
The Committee shall have the right, in its sole discretion and at any
time, to discontinue the automatic grant of replacement options if it
determines the continuance of such grants to no longer be in the best interest
of the Company.
(vii) Non-transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee.
(viii) Termination of Participant's Employment by Reason of Death.
Subject to Section 5(xi), if an optionee's employment by the Company
terminates by reason of death, any Stock Option then held by optionee may
thereafter be exercised, to the extent then exercisable or on such accelerated
basis as the Committee may determine at or after grant, by the legal
representative of the estate or by the legatee of the optionee under the will
of the optionee, for a period of five (5) years (or such shorter period as the
Committee may specify at grant) from the date of such death or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter. In the event of termination of employment by reason of Death, if an
Incentive Stock Option is exercised after the expiration of the exercise
periods that apply for purposes of Section 422A of the Code, such Stock Option
will thereafter be treated as a Non-Qualified Stock Option.
(ix) Termination of Participant's Employment by Reason of Disability.
Subject to Section 5(xi), if an optionee's employment by the Company
terminates by reason of Disability, any Stock Option held by such optionee may
thereafter be exercised by the optionee, to the extent it was exercisable at
the time of termination, or on such accelerated basis as the Committee may
determine at or after grant, for a period of five years (or such shorter
period as the Committee may specify at grant) from the date of such
termination of employment or until the expiration of the stated term of such
Stock Option, whichever period is the shorter; provided, however, that if the
optionee dies within such five-year period (or such shorter period as the
Committee shall specify at grant), any unexercised Stock Option held by such
optionee shall thereafter be exercisable to the extent to which it was
exercisable at the time of death for a period of twelve months from the date
of such death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter. In the event of termination of employment by
reason of Disability, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of Section 422A of
the Code, such Stock Option will thereafter be treated as a Non-Qualified
Stock Option.
(x) Termination of Participant's Employment by Reason of Retirement.
Subject to Section 5(xi), if an optionee's employment by the Company
terminates by reason of Normal or Early Retirement, any Stock Option held by
such optionee may thereafter be exercised by the optionee, to the extent it
was exercisable at the time of such Retirement or on such accelerated basis as
the Committee may determine at or after grant, for a period of five years (or
such shorter period as Committee may specify at grant) from the date of such
termination of employment or the expiration of the stated term of such Stock
Option, whichever period is the shorter; provided, however, that if the
optionee dies within such three-year period, any unexercised Stock Option held
by such optionee shall thereafter be exercisable, to the extent to which it
was exercisable at the time of death, for a period of twelve months from the
date of such death or until the expiration of the stated term of such Stock
Option, whichever period is the shorter. In the event of termination of
employment by reason of Retirement, if an Incentive Stock Option is exercised
after the expiration of the exercise periods that apply for purposes of
Section 422A of the Code, the option will thereafter be treated as a Non-
Qualified Stock Option.
(xi) Other Terminations of Employment of a Participant. Unless
otherwise determined by the Committee at or after grant, if an optionee's
employment by the Company terminates for any reason other than death,
Disability or Normal or Early Retirement, the Stock Option shall thereupon
terminate, except that such Stock Option may be exercised for the lesser of
three months or the balance of such Stock Option's term if the optionee is
involuntarily terminated by the Company without Cause to the extent it was
exercisable at the time of such termination or on such accelerated basis as
the Committee may determine at or after grant.
(xii) Special Incentive Stock Option Limitations. To the extent
required for "incentive stock option" status under Section 422A of the Code,
the aggregate Fair Market Value (determined as of the time of grant) of the
Stock with respect to which Incentive Stock Options granted after 1986 are
exercisable for the first time by the optionee during any calendar year under
the Plan and/or any other stock option plan of the company (within the meaning
of Section 425 of the Code) after 1986 shall not exceed $100,000.
To the extent (if any) permitted under Section 422A of the Code, if (i)
a Participant's employment with the Company is terminated by reason of death,
Disability or Retirement and (ii) the portion of any Incentive Stock Option
that is otherwise exercisable during the post-termination period specified
under Section 5(g), (h) or (i), applied without regard to this Section 5(k),
is greater than the portion of such option that is exercisable as an
"incentive stock option" during such post-termination period under Section
422A, such post-termination period shall automatically be extended (but not
beyond the original option term) to the extent necessary to permit the
optionee to exercise such Incentive Stock Option. The Committee is also
authorized to provide at grant for a similar extension of the post-termination
exercise period in the event of a Change-in-Control.
SECTION 6. Stock Appreciation Rights.
(i) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan,
complying at all times with the requirement of Section 12(vi), below. In the
case of a Non-Qualified Stock Option, such rights may be granted either at or
after the time of the grant of such Stock Option. In the case of an Incentive
Stock Option, such rights may be granted only at the time of the grant of such
Stock Option.
A Stock Appreciation Right or applicable portion thereof granted with
respect to a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option, except that,
unless otherwise determined by the Committee, in its sole discretion, at the
time of grant, a Stock Appreciation Right granted with the respect to less
than the full number of shares covered by a related Stock Option shall not be
reduced until the number of shares covered by an exercise or termination of
the related Stock Option exceeds the number of shares not covered by the Stock
Appreciation Right.
A Stock Appreciation Right may be exercised by an optionee, in
accordance with Section 6(ii), by surrendering the applicable portion of the
related Stock Option. Upon such exercise and surrender, the optionee shall be
entitled to receive an amount determined in the manner prescribed in Section
6(b). Stock Options which have been so surrendered, in whole or in part,
shall no longer be exercisable to the extent the related Stock Appreciation
Rights have been exercised.
(ii) Terms and Conditions. Stock Appreciation Rights shall be subject
to such terms and conditions, not inconsistent with the provisions of the
Plan, as shall be determined from time to time by the Committee, including the
following:
(a) Stock Appreciation Rights shall be exercisable only at such
time or times and to the extent that the Stock Options to which they relate,
if any, shall be exercisable in accordance with the provisions of Section 5
and this Section 6 of the Plan; provided, however, that any Stock Appreciation
Right granted subsequent to the grant of the related Stock Option shall not be
exercisable during the first six months of its term, except that this special
limitation shall not apply in the event of death or Disability of the optionee
prior to the expiration of the six-month period.
(b) Upon the exercise of a Stock Appreciation Right, an optionee
shall be entitled to receive up to, but not more than, an amount in cash
and/or shares of Stock equal in value to the excess of the Fair Market Value
of one share of Stock over the option price per share specified in the related
Stock Option, multiplied by the number of shares in respect of which the Stock
Appreciation Right shall have been exercised, with the Committee having the
right to determine the form of payment.
(c) Stock Appreciation Rights shall be transferable only when
and to the extent that the underlying Stock Option would be transferable under
Section 5(f) of the Plan.
(d) Upon the exercise of a Stock Appreciation Right, the Stock
Option or part thereof to which such Stock Appreciation Right is related shall
be deemed to have been exercised for the purpose of the limitation set forth
in Section 3 of the Plan on the number of shares of Stock to be issued under
the Plan, but only to the extent of the number of shares issued under the
Stock Appreciation Right at the time of exercise based on the value of the
Stock Appreciation Right at such time.
(e) A Stock Appreciation Right granted in connection with an
Incentive Stock Option may be exercised only if and when the market price of
the Stock subject to the Incentive Stock Option exceeds the exercise price of
such Stock Option.
(f) In its sole discretion, the Committee may provide, at the
time of grant of a Stock Appreciation Right under this Section 6, that such
Stock Appreciation Right can be exercised only in the event of a Change-in-
Control and/or a Potential Change-in-Control, subject to such terms and
conditions as the Committee may specify at grant.
(g) The Committee, in its sole discretion, may also provide
that, in the event of a Change-in Control and/or a Potential Change-in-
Control, the amount to be paid upon the exercise of a Stock Appreciation Right
shall be based on the Change-in-Control Price, subject to such terms and
conditions as the Committee may specify at grant.
SECTION 7. Restricted Stock.
(i) Administration. Shares of Restricted Stock may be issued either
alone or in addition to other awards granted under the Plan, complying at all
times with the requirement of Section 12(vi), below. The Committee shall
determine the number of shares to be awarded, the price (if any) to be paid by
the recipient of Restricted Stock (subject to Section 7(ii)), the time or
times within which such awards may be subject to vesting and/or forfeiture,
and all other conditions of the awards.
The Committee may condition the grant of Restricted Stock upon the
attainment of specified performance goals or such other factors as the
Committee may determine, in its sole discretion.
The provisions of Restricted Stock awards need not be the same with
respect to each recipient.
(ii) Awards and Certificates. The grantee of a Restricted Stock award
shall not have any rights with respect to such award, unless and until such
recipient has executed an agreement evidencing the award and has delivered a
fully executed copy thereof to the Company, and has otherwise complied with
the applicable terms and conditions of such award.
(a) The purchase price for shares of Restricted Stock shall be
equal to or less than their par value and may be zero.
(b) Awards of Restricted Stock must be accepted within a period
of 60 days (or such shorter period as the Committee may specify at grant)
after the award date, by executing a Restricted Stock Award Agreement and
paying whatever price (if any) is required under Section 7(ii)(a).
(c) Each Participant receiving a Restricted Stock award shall be
issued a stock certificate in respect of such shares of Restricted Stock.
Such certificate shall be registered in the name of such Participant, and
shall bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to such award, substantially in the following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the First Security Corporation Comprehensive Management
Incentive Plan and an Agreement entered into between the registered owner and
First Security Corporation. Copies of such Plan and Agreement are on file at
the offices of First Security Corporation, 200 Deseret Building, 79 South Main
Street, Salt Lake City, Utah 84111".
(d) The Committee shall require that the stock certificates
evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed, and that, as a condition of any
Restricted Stock award, the Participant shall have delivered a stock power,
endorsed in blank, relating to the Stock covered by such award.
(iii) Restrictions and Conditions. The shares of Restricted Stock
awarded pursuant to this Section 7 shall be subject to the following
restrictions and conditions:
(a) Subject to the provisions of this Plan and the award
Agreement, during a period set by the Committee commencing with the date of
such award (the "Restriction Period"), the Participant shall not be permitted
to sell, transfer, pledge, assign or otherwise encumber shares of Restricted
Stock awarded under the Plan. Within these limits, the Committee, in its sole
discretion, may provide for the lapse of such restrictions in installments and
may accelerate or waive such restrictions in whole or in part, based on
service, performance and/or such other factors or criteria as the Committee
may determine, in its sole discretion.
(b) Except as provided in this paragraph (b) and Section
7(iii)(a), the Participant shall have, with respect to the shares of
Restricted Stock, all of the rights of a Shareholder of the Company, including
the right to vote the shares, and the right to receive any cash dividends.
The Committee, in its sole discretion, as determined at the time of award, may
permit or require the payment of cash dividends to be deferred and, if the
Committee so determines, reinvested in additional Restricted Stock to the
extent shares are available under Section 3.
(c) Subject to the applicable provisions of the award Agreement
and this Section 7, upon termination of a Participant's employment with the
Company for any reason during the Restriction Period, all shares still subject
to restriction shall be forfeited by the Participant.
(d) In the event of hardship or other special circumstances of a
Participant whose employment with the Company is involuntarily terminated
(other than for Cause), the Committee may, in its sole discretion, waive in
whole or in part any or all remaining restrictions with respect to such
Participant's shares of Restricted Stock, based on such factors as the
Committee may deem appropriate.
(e) If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction Period, the
certificates for such shares shall be delivered to the Participant promptly.
SECTION 8. Long Term Performance Awards.
(i) Awards and Administration. Long Term Performance Awards may be
awarded either alone or in addition to other awards granted under the Plan,
complying at all times with the requirement of Section 12 (vi), below. The
Committee shall determine the nature, length and starting date of the
performance period (the "Performance Period") for each Long Term Performance
Award, which shall be at least two years (subject to Section 9 below), and
shall determine the performance objectives to be used in valuing Long Term
Performance Awards and determining the extent to which such Long Term
Performance Awards have been earned. Performance objectives may vary from
Participant to Participant and between groups of Participants and shall be
based upon such Company, business unit and/or individual performance factors
and criteria as the Committee may deem appropriate, including, but not limited
to, earnings per share or return on equity. Performance Periods may overlap
and Participants may participate simultaneously with respect to Long Term
Performance Awards that are subject to different Performance Periods and/or
different performance factors and criteria.
At the beginning of each Performance Period, the Committee shall
determine for each Long Term Performance Award subject to such Performance
Period the range of dollar values or number of shares of Stock to be awarded
to the participant at the end of the Performance Period if and to the extent
that the relevant measure(s) of performance for such Long Term Performance
award is (are) met. Such dollar values or number of shares of Stock may be
fixed or may vary in accordance with such performance and/or other criteria as
may be specified by the Committee, in its sole discretion.
(ii) Adjustment of Awards. In the event of special or unusual events
or circumstances affecting the application of one or more performance
objectives to a Long Term Performance Award, the Committee may revise the
performance objectives and/or underlying factors and criteria applicable to
the Long Term Performance Awards affected, to the extent deemed appropriate by
the Committee, in its sole discretion, to avoid unintended windfalls or
hardship.
(iii) Termination of Employment. Subject to Section 9 below and unless
otherwise provided in the applicable award agreement(s), if a Participant
terminates employment with the Company during a Performance Period because of
death, Disability or Retirement, such Participant shall be entitled to a
payment with respect to each outstanding Long Term Performance Award at the
end of the applicable Performance Period:
(a) based, to the extent relevant under the terms of the award,
upon the Participant's performance for the portion of such Performance Period
ending on the date of termination and the performance of the applicable
business unit(s) for the entire Performance Period, and
(b) prorated, where deemed appropriate by the Committee, for the portion of
the Performance Period during which the Participant was employed by the
Company, all as determined by the Committee, in its sole discretion.
However, the Committee may provide for an earlier payment in settlement
of such award in such amount and under such terms and conditions as the
Committee deems appropriate.
Subject to Section 9 below, if a Participant terminates employment with
the Company during a Performance Period for any other reason, then such
Participant shall not be entitled to any payment with respect to the Long Term
Performance Awards subject to such Performance Period, unless the Committee
shall otherwise determine, in its sole discretion.
(iv) Form of Payment. The earned portion of a Long Term Performance
Award may be paid currently or on a deferred basis with such interest or
earnings equivalent as may be determined by the Committee, in its sole
discretion. Payment shall be made in the form of cash or whole shares of
Stock, including Restricted Stock, either in a lump sum payment or in annual
installments commencing as soon as practicable after the end of the relevant
Performance Period, all as the Committee shall determine at or after grant.
If and to the extent a Long Term Performance Award is payable in Stock and the
full amount of such value is not paid in Stock, then the shares of Stock
representing the portion of the value of the Long Term Performance Award not
paid in Stock shall again become available for award under the Plan.
SECTION 9. Change in Control Provisions.
(i) For the purpose of this Plan, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (herein referred to as a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (x) the then outstanding shares of
Stock (the "Outstanding Company Common Stock") or (y) the combined voting
power of the then outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of Control:
(1) any acquisition directly from the Company;
(2) any acquisition by the Company;
(3) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company; or
(4) any acquisition pursuant to a transaction which complies
with clauses (1), (2) and (3) of subsection (c) of this Section 9;
or
(b) Individuals who, as of April 30, 1998, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a Director of the
Company subsequent to April 30, 1998 whose election, or nomination for
election by the Company's shareholders was approved by a vote of at least a
majority of the Directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of Directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board;
or
(c) the approval by the shareholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the acquisition of assets of
another entity (a "Business Combination"), in each case, unless, following
such Business Combination,
(1) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination will beneficially own, directly or indirectly, more than
60% of, respectively, the shares of outstanding common stock and the combined
voting power of the outstanding voting securities entitled to vote generally
in the election of directors, as the case may be, of the Company resulting
from such Business Combination (including, without limitation, a corporation
which as a result of such transaction owns the Company or all or substantially
all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may be;
(2) no Person (excluding any employee benefit plan (or related
trust) of the Company or such corporation resulting from such Business
Combination will beneficially own, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to the extent
that such ownership existed prior to the Business Combination; and
(3) at least a majority of the members of the board of directors
of the corporation resulting from such Business Combination will were members
of the Incumbent Board at the time of the execution of the initial agreement,
or of the action of the action of the Board, providing for such Business
Combination.
or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(ii) Notwithstanding any other provision of the Plan to the contrary,
in the event of a Change in Control,
(a) Any Stock Options and/or Stock Appreciation Rights outstanding as
of the date such Change in Control is determined to have occurred, and which
are not then exercisable and vested, shall become fully exercisable and vested
to the full extent of the original grant.
(b) The restrictions and deferral limitations applicable to any
Restricted Stock shall lapse, and such Restricted Stock shall become free of
all restrictions and become fully vested and transferable to the full extent
of the original grant.
(c) All Long-Term Performance Awards shall be considered to be earned
and payable in full, and any deferral or other restriction shall lapse and
such Long-Term Performance Awards shall be settled in cash as promptly as is
practicable.
(iii) Notwithstanding any other provision of the Plan, during the 60-
day period, from and after a Change in Control (the "Exercise Period"), unless
the Committee shall determine otherwise at the time of grant, an optionee
shall have the right, whether or not the Stock Option is fully exercisable and
in lieu of the payment of the exercise price for the shares of Stock being
purchased under the Stock Option and by giving notice to the Company, to elect
(within the Exercise Period) to surrender all or part of the Stock Option to
the Company and to receive cash, within 30 days of such notice, in an amount
equal to the amount by which the Change in Control Price per share of Stock on
the date of such election shall exceed the exercise price per share of the
Stock Option (the "Spread") multiplied by the number of shares of Stock
granted under the Stock Option as to which the right granted under this
Section 9(iii) shall have been exercised.
Notwithstanding the foregoing, if any right granted pursuant to this
sub-Section 9(iii) would make a Change in Control transaction ineligible for
pooling-of-interests accounting under APB No. 16 that but for the nature of
such grant would otherwise be eligible for such accounting treatment, the
Committee shall have the ability to substitute for the cash payable pursuant
to such right shares of Stock with a Fair Market Value equal to the cash that
would otherwise be payable here-under.
(iv) For purposes of this Section 9, "Change in Control Price" means
the higher of
(a) the highest reported sales price, regular way, of a share of Stock
in any transaction reported on the NASDAQ National Market or any other
national system or exchange on which shares of Stock are traded during the 60-
day period prior to and including the date of a Change in Control; or
(b) if the Change in Control is the result of a tender or exchange
offer or a Business Combination, the highest price per share of Stock paid in
such tender or exchange offer or Business Combination;
provided, however, that in the case of Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options, the Change in Control
Price shall be in all cases the Fair Market Value of the Stock on the date
such Incentive Stock Option or Stock Appreciation Right is exercised. To the
extent that the consideration paid in any such transaction described above
consists all or in part of securities or other noncash consideration, the
value of such securities or other noncash consideration shall he determined in
the sole discretion of the Board."
SECTION 10. Amendments and Termination.
The Board may amend, alter, or discontinue the Plan at any time and from time
to time, but no amendment, alteration, or discontinuation shall be made which
would impair the rights of an optionee or Participant under a Stock Option,
Stock Appreciation Right, Restricted Stock or Long Term Performance Award
theretofore granted, without the optionee's or Participant's consent, or
which, without the approval of the Company's stockholders, would:
(i) except as expressly provided in this Plan, increase the total
number of shares reserved for the purpose of the Plan;
(ii) decrease the option price of (i) any Stock Option to less than
100% of the Fair Market Value on the date of grant, or (ii) change the pricing
terms of Section 9(i);
(iii) change the employees or class of employees eligible to participate
in the Plan, or
(iv) extend the maximum option period under Section 5(ii) of the Plan.
The Committee may amend the terms of any Stock Option or other award
theretofore granted, prospectively or retroactively, but, subject to Section 3
above, no such amendment shall impair the rights of any Award holder without
the holder's consent. The Committee may also substitute new Stock Options for
previously granted Stock Options, including previously granted Stock Options
having higher option prices.
Subject to the above provisions, the Board shall have broad authority to
amend the Plan to take into account changes in applicable tax laws and
accounting rules, as well as other developments.
SECTION 11. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
Participant or optionee by the Company, nothing contained herein shall give
any such Participant or optionee any rights that are greater than those of a
general creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Stock or payments in lieu of or with respect
to awards hereunder, provided, however, that, unless the Committee otherwise
determines with the consent of the affected Participant, the existence of such
trusts or other arrangements is consistent with the "unfunded" status of the
Plan.
SECTION 12. General Provisions.
(i) The Committee may require each person purchasing shares pursuant
to a Stock Option under the Plan to represent to and agree with the Company in
writing that the optionee or Participant is acquiring the shares without a
view to distribution thereof. The Certificates for such shares may include
any legend which the Committee deems appropriate to reflect any restrictions
on transfer.
All certificates for shares of Stock or other securities delivered under
the Plan shall be subject to such stock-transfer orders and other restrictions
as the Committee may deem advisable under the rules, regulations, and other
requirements of the Exchange Act, any stock exchange upon which the Stock is
then listed, and any applicable Federal or state securities law, and the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.
(ii) Nothing contained in this Plan shall prevent the Board of
Directors from adopting other or additional compensation arrangements, subject
to stockholder approval if such approval is required; and such arrangements
may be either generally applicable or applicable only in specific cases.
(iii) The adoption of the Plan shall not confer upon any Participant any
right to continued employment with the Company, as the case may be, nor shall
it interfere in any way with the right of the Company to terminate the
employment of any of its employees, directors, or independent contractors at
any time.
(iv) No later than the date of which an amount first becomes includable
in the gross income of the Participant for Federal income tax purposes with
respect to any award under the Plan, the Participant who is an officer or key
employee of the Company, shall pay to the Company, or make arrangements
satisfactory to the Committee regarding the payment of, any Federal, state or
local taxes of any kind required by law to be withheld with respect to such
amount. Unless otherwise determined by the Committee, the minimum required
withholding obligations will be settled with Stock that is part of the award
that gives rise to the withholding requirement. If the particular Award is
not payable in Stock, the obligation of the Company under the Plan shall be
conditional on such withholding tax payment or arrangements and the Company
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the Participant.
(v) At the time of grant, the Committee may provide in connection with any
grant made under this Plan that the shares of Stock received as a result of
such grant shall be subject to a right of first refusal, pursuant to which the
Participant shall be required to offer to the Company any shares that the
Participant wishes to sell, with the price being the then Fair Market Value of
the Stock, subject to such other terms and conditions as the Committee specify
at the time of grant.
(vi) Any grant made under this Plan shall be represented by a WRITTEN
AGREEMENT between the Company and the Participant receiving the grant setting
forth the material terms of the grant, and incorporating the terms of this
Plan (specifically as well as generally by reference) into each such
Agreement.
(vii) The Committee shall establish such procedures as it deems
appropriate for a Participant to designate a beneficiary to whom any amounts
payable in the event of the Participant's death are to be paid.
(viii) In the event any Section or paragraph in this Plan or any
Agreement or writing relating to the Plan is found to be illegal or invalid
for any reason, such illegality or invalidity shall not affect the remaining
provisions of the Plan and the Plan shall be construed and enforced as if such
illegal and invalid provision had never been set forth in the Plan; provided,
that the Committee may conclude that the purposes of the Plan have been
materially frustrated by such a finding, and may thereupon terminate the Plan.
(ix) Where applicable, the masculine includes feminine and neuter and
vice versa. Where applicable, the singular includes the plural and vice
versa. Where a word or phrase is defined in one place in the Plan and appears
in capitalized form in another paragraph of the Plan, such word or phrase
shall have the meaning first set forth unless the context clearly requires
otherwise. A word or phrase in noncapitalized form shall retain its plain
meaning taken in the context in which it appears, regardless of whether said
word or phrase is defined in the Plan.
(x) The headings are for reference only. In the event of a conflict
between a heading and the content of an Article or paragraph, the content of
the Article or paragraph shall control.
(xi) The Plan and all awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of
Delaware.
SECTION 13. Effective Date of Plan.
The Plan, as amended and restated, shall be effective on the date it is
approved by the Company's Executive Committee or Board of Directors, subject
to a condition subsequent that the Shareholders of the Company also approve
the Plan, as amended and restated, at a meeting duly noticed and called for
that purpose by the vote of holders of a majority of the total outstanding
Stock within 12 months of such date.
SECTION 14. Term of Plan.
No Stock Option, Stock Appreciation Right, Restricted Stock or Long Term
Performance Award shall be granted pursuant to the Plan on or after the tenth
anniversary of the date of stockholder approval, but awards granted prior to
such tenth anniversary may extend beyond that date.
SECTION 15. Indemnification of Committee.
In addition to such other rights of indemnification as they may have as
Directors of the Company, the members of the Committee shall be indemnified by
the Corporation against the reasonable expenses, including attorneys' fees
actually and necessarily incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, to which
they or any of them may be a party by reason of any action taken or failure to
act under or in connection with the Plan or any Incentive Award granted
thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel, selected
by the Company) or paid by them in satisfaction of a judgment in any such
action, suit or proceeding, except in relation to matters as to which it shall
be adjudged in such action, suit or proceeding that such Committee member is
liable for gross negligence or willful misconduct in the performance of his
duties; such indemnification shall result provided that within sixty (60) days
after institution of any above action, suit or proceeding, a member of such
Committee shall in writing offer the Company the opportunity, at its own
expense, to handle and defend the same. Notwithstanding anything herein to
the contrary, a condition of such indemnification shall be the cooperation of
the Committee member with the Company in the defense of any such action, suit
or proceeding.
SECTION 16. Financing.
The Committee may arrange for and offer loans to a Participant under the
Plan to pay for the exercise of any Stock Option or other Award if applicable,
provided that no Participant shall have a right or entitlement to such a loan,
and loans may be determined on a basis of individual selection in the sole and
absolute discretion of the Committee governed at all times by Regulation G or
successor provisions of the Federal Reserve Board. It is contemplated but not
required that if any loans are made under the Plan, the loans will be made by
First Security Service Company, provided that the foregoing provision shall
not be construed to require that loans be made available to any Participant at
any time by First Security Service Company or the Company.
IN WITNESS WHEREOF, verifying that the required approvals of the
shareholders and the Directors have been obtained for the foregoing Plan as of
the 21st day of April, 1998.
/s/ Brad D. Hardy
Brad D. Hardy
Executive Vice President and General Counsel
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)
<CAPTION>
For the Periods Ended September 30, 1999 and 1998 Three Months YTD Nine Months
1999 1998 1999 1998
<S> <C> <C> <C> <C>
- ----------------------------------------------------------- ---------- ---------- ---------- ----------
NET INCOME:
Net income per consolidated income statements 73,315 63,091 207,036 180,367
Subtract dividend requirement of preferred stock 7 7 21 21
- ----------------------------------------------------------- ---------- ---------- ---------- ----------
NET INCOME APPLICABLE TO COMMON STOCK (BASIC) 73,308 63,084 207,015 180,346
Add dividend requirement of preferred stock 7 7 21 21
- ----------------------------------------------------------- ---------- ---------- ---------- ----------
NET INCOME DILUTED 73,315 63,091 207,036 180,367
=========================================================== ========== ========== ========== ==========
EARNINGS PER COMMON SHARE BASIC 0.38 0.34 1.08 0.96
EARNINGS PER COMMON SHARE DILUTED 0.37 0.33 1.05 0.93
=========================================================== ========== ========== ========== ==========
SHARES OUTSTANDING (AVERAGE):
Common shares 197,054 189,169 193,975 188,869
Treasury shares (1,626) (1,238) (2,284) (1,566)
- ----------------------------------------------------------- ---------- ---------- ---------- ----------
COMMON SHARES BASIC (AVG) 195,428 187,931 191,691 187,303
Common share equivalents for options 5,000 5,306 4,834 6,177
Preferred share equivalents 360 384 366 388
- ----------------------------------------------------------- ---------- ---------- ---------- ----------
COMMON SHARES DILUTED (AVG) 200,788 193,621 196,891 193,868
=========================================================== ========== ========== ========== ==========
<FN>
(A) 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1999
<CASH> 964,076
<INT-BEARING-DEPOSITS> 14,805
<FED-FUNDS-SOLD> 532,573
<TRADING-ASSETS> 89,867
<INVESTMENTS-HELD-FOR-SALE> 6,146,907
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 13,817,241
<ALLOWANCE> (174,443)
<TOTAL-ASSETS> 23,346,617
<DEPOSITS> 13,212,965
<SHORT-TERM> 5,149,732
<LIABILITIES-OTHER> 687,392
<LONG-TERM> 2,536,949
<COMMON> 1,759,123
0
456
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 23,346,617
<INTEREST-LOAN> 862,336
<INTEREST-INVEST> 270,440
<INTEREST-OTHER> 24,553
<INTEREST-TOTAL> 1,157,329
<INTEREST-DEPOSIT> 300,026
<INTEREST-EXPENSE> 583,358
<INTEREST-INCOME-NET> 573,971
<LOAN-LOSSES> 40,251
<SECURITIES-GAINS> 14,827
<EXPENSE-OTHER> 620,013
<INCOME-PRETAX> 313,361
<INCOME-PRE-EXTRAORDINARY> 313,361
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 207,036
<EPS-BASIC> 1.080
<EPS-DILUTED> 1.050
<YIELD-ACTUAL> 3.97
<LOANS-NON> 49,198
<LOANS-PAST> 21,282
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 78,534
<ALLOWANCE-OPEN> 173,350
<CHARGE-OFFS> (77,540)
<RECOVERIES> 29,959
<ALLOWANCE-CLOSE> 174,443
<ALLOWANCE-DOMESTIC> 174,443
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
