<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 April 30, 1999, outstanding shares of Common Stock, par value $1.25,
were 189,855,391 (net of 1,595,469 treasury shares).
<PAGE>
FIRST SECURITY CORPORATION - INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statements of Income
Three Months Ended March 31, 1999 and 1998
Consolidated Balance Sheets
March 31, 1999, December 31, 1998, and March 31, 1998
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 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 Project
Year 2000 Issues: FSCO's Year 2000 Risks
Year 2000 Issues: FSCO's Year 2000 Contingency Plans
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 4. Submission Of Matters To A Vote Of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
EXHIBITS
Exhibit 11. Computation of Earnings Per Share
Exhibit 27. Financial Data Schedule
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
FIRST SECURITY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except per share data; unaudited)
<CAPTION>
Three Months
For the Periods Ended March 31, 1999 and 1998 1999 1998 $Chg %Chg
<S> <C> <C> <C> <C>
- ------------------------------------------------------ --------- --------- -------- -------
INTEREST INCOME:
Interest & fees on loans 282,442 259,455 22,987 8.9
Federal funds sold & securities purchased 1,918 968 950 98.1
Interest-bearing deposits in other banks 239 31 208 671.0
Trading account securities 4,975 4,226 749 17.7
Available for sale securities 80,262 69,421 10,841 15.6
- ------------------------------------------------------ --------- --------- -------- -------
TOTAL INTEREST INCOME 369,836 334,101 35,735 10.7
- ------------------------------------------------------ --------- --------- -------- -------
INTEREST EXPENSE:
Deposits 98,063 100,509 (2,446) (2.4)
Short-term borrowings 50,277 47,327 2,950 6.2
Long-term debt 38,914 21,974 16,940 77.1
- ------------------------------------------------------ --------- --------- -------- -------
TOTAL INTEREST EXPENSE 187,254 169,810 17,444 10.3
- ------------------------------------------------------ --------- --------- -------- -------
NET INTEREST INCOME 182,582 164,291 18,291 11.1
Provision for loan losses 16,877 12,598 4,279 34.0
- ------------------------------------------------------ --------- --------- -------- -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSS 165,705 151,693 14,012 9.2
- ------------------------------------------------------ --------- --------- -------- -------
NONINTEREST INCOME:
Service charges on deposit accounts 21,254 22,374 (1,120) (5.0)
Other service charges, collections, commissions & fees 16,520 11,577 4,943 42.7
Asset sale / securitization gains 22,130 2,548 19,582 768.5
Bankcard servicing fees & third-party processing fees 1,529 8,712 (7,183) (82.4)
Commissions & fees: insurance 5,340 3,921 1,419 36.2
Commissions & fees: securities 12,636 3,977 8,659 217.7
Mortgage banking & loan servicing activities 43,787 44,209 (422) (1.0)
Loan servicing rights amortization (13,797) (7,404) (6,393) (86.3)
Trust (fiduciary) commissions & fees 7,792 6,584 1,208 18.3
Trading account securities gains (losses) 929 (171) 1,100 643.3
Available for sale securities gains (losses) 8,983 1,709 7,274 425.6
Other (3,744) 10,480 (14,224) (135.7)
- ------------------------------------------------------ --------- --------- -------- -------
TOTAL NONINTEREST INCOME 123,359 108,516 14,843 13.7
- ------------------------------------------------------ --------- --------- -------- -------
NONINTEREST EXPENSES:
Salaries & employee benefits 114,562 89,366 25,196 28.2
Amortization of intangibles 3,757 2,620 1,137 43.4
Armored & messenger 1,890 1,622 268 16.5
Bankcard interbank interchange & fees 3,093 9,135 (6,042) (66.1)
Credit, appraisal & repossessions 7,055 4,934 2,121 43.0
Fees 4,509 3,286 1,223 37.2
Furniture & equipment 17,052 12,500 4,552 36.4
Insurance 1,049 991 58 5.9
Marketing 4,021 3,597 424 11.8
Occupancy, net 11,123 9,140 1,983 21.7
Other real estate expense & loss provision (recovery), (72) 281 (353) (125.6)
Postage 3,636 3,251 385 11.8
Professional 3,786 4,790 (1,004) (21.0)
Stationery & supplies 5,231 5,351 (120) (2.2)
Telephone 5,330 4,309 1,021 23.7
Travel 3,023 2,546 477 18.7
Other 3,370 8,087 (4,717) (58.3)
- ------------------------------------------------------ --------- --------- -------- -------
TOTAL NONINTEREST EXPENSES 192,415 165,806 26,609 16.0
- ------------------------------------------------------ --------- --------- -------- -------
INCOME BEFORE PROVISION FOR INCOME TAXES 96,649 94,403 2,246 2.4
Provision for income taxes 31,771 33,034 (1,263) (3.8)
- ------------------------------------------------------ --------- --------- -------- -------
NET INCOME 64,878 61,369 3,509 5.7
====================================================== ========= ========= ======== =======
Dividend requirement of preferred stock 7 7 0 0.0
- ------------------------------------------------------ --------- --------- -------- -------
NET INCOME APPLICABLE TO COMMON STOCK 64,871 61,362 3,509 5.7
====================================================== ========= ========= ======== =======
Common stock dividend 26,583 23,586 2,997 12.7
====================================================== ========= ========= ======== =======
EARNINGS PER COMMON SHARE:
Earnings per common share basic 0.34 0.33 0.01 3.0
Earnings per common share diluted 0.34 0.32 0.02 6.3
Common shares basic [Avg] 188,242 186,336 1,906 1.0
Common shares diluted [Avg] 193,403 193,510 (107) (0.1)
====================================================== ========= ========= ======== =======
CASH DIVIDENDS PAID OR ACCRUED PER SHARE:
Preferred stock dividend ($3.15 annual rate) 0.79 0.79 0.00 0.0
Common stock dividend 0.14 0.13 0.01 7.7
====================================================== ========= ========= ======== =======
<FN>
See "Notes to Consolidated Financial Statements".
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
CONSOLIDATED BALANCE SHEETS
($ in thousands; unaudited)
<CAPTION>
March 31 December 31 March 31 Mar/Mar Mar/Mar
1999 1998 1998 $Chg %Chg
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
ASSETS:
Cash & due from banks 1,058,830 1,026,335 901,904 156,926 17.4
Federal funds sold & securities purchased under resale agreements 15,000 230,210 76,020 (61,020) (80.3)
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
Total Cash & Cash Equivalents 1,073,830 1,256,545 977,924 95,906 9.8
Interest-bearing deposits in other banks 7,310 605 2,104 5,206 247.4
Trading account securities 396,563 329,109 318,224 78,339 24.6
Available for sale securities, at fair value 5,825,155 4,764,127 4,386,629 1,438,526 32.8
(Amortized cost: $5,812,648; $4,715,876; and $4,351,989; respectively)
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
Loans, net of unearned income 13,160,919 14,013,417 12,436,407 724,512 5.8
(Unearned income: $130,658; $127,593; and $103,968; respectively)
Reserve for loan losses (173,350) (173,350) (163,256) (10,094) 6.2
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
Total Loans, Net 12,987,569 13,840,067 12,273,151 714,418 5.8
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
Premises & equipment, net 397,223 378,032 307,192 90,031 29.3
Accrued income receivable 119,011 113,399 106,070 12,941 12.2
Other real estate 3,404 3,617 4,342 (938) (21.6)
Other assets 677,091 594,220 418,416 258,675 61.8
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
Goodwill 290,379 224,802 211,747 78,632 37.1
Loan servicing rights 169,140 174,196 125,572 43,568 34.7
Other intangible assets 12,547 10,369 1,525 11,022 722.8
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
Total Intangible Assets 472,066 409,367 338,844 133,222 39.3
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
TOTAL ASSETS 21,959,222 21,689,088 19,132,896 2,826,326 14.8
===================================================================== ============ ============ ============ ============ =======
LIABILITIES:
Deposits: noninterest-bearing 2,489,976 2,752,009 2,339,665 150,311 6.4
Deposits: interest-bearing 10,083,997 9,906,565 9,483,289 600,708 6.3
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
Total Deposits 12,573,973 12,658,574 11,822,954 751,019 6.4
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
Federal funds purchased & securities sold under repurchase agreements 3,937,858 3,747,084 3,554,204 383,654 10.8
U.S. Treasury demand notes 35,407 25,081 20,945 14,462 69.0
Other short-term borrowings 263,018 493,424 411,817 (148,799) (36.1)
Accrued income taxes 355,020 333,881 291,436 63,584 21.8
Accrued interest payable 60,706 58,778 53,426 7,280 13.6
Other liabilities 361,141 167,213 136,987 224,154 163.6
Long-term debt 2,706,320 2,609,558 1,339,892 1,366,428 102.0
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
TOTAL LIABILITIES 20,293,443 20,093,593 17,631,661 2,661,782 15.1
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
STOCKHOLDERS' EQUITY:
Preferred stock: Series "A" $3.15 cumulative convertible 476 484 501 (25) (5.0)
(Shares issued: 9; 9; and 10; respectively)
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
Common Stockholders' Equity:
Common stock: par value $1.25 239,282 238,760 235,566 3,716 1.6
(Shares issued: 191,425; 191,008; and 188,453; respectively)
Paid-in surplus 185,456 181,906 149,200 36,256 24.3
Retained earnings 1,271,552 1,233,264 1,118,970 152,582 13.6
Accumulated other comprehensive income 8,359 30,377 21,834 (13,475) (61.7)
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
Subtotal 1,704,649 1,684,307 1,525,570 179,079 11.7
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
Common treasury stock, at cost (39,346) (89,296) (24,836) (14,510) 58.4
(Shares: 1,592; 4,296; and 1,247; respectively)
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
Total Common Stockholders' Equity 1,665,303 1,595,011 1,500,734 164,569 11.0
- --------------------------------------------------------------------- ------------ ------------ ------------ ------------ -------
TOTAL STOCKHOLDERS' EQUITY 1,665,779 1,595,495 1,501,235 164,544 11.0
- ---------------------------------------------------------------------------------- ------------ ------------ ------------ -------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 21,959,222 21,689,088 19,132,896 2,826,326 14.8
===================================================================== ============ ============ ============ ============ =======
<FN>
See "Notes to Consolidated Financial Statements".
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands, except number of shares; unaudited)
<CAPTION>
Year-To-Date Three Months
For the Periods Ended March 31, 1999 and 1998 1999 1998
<S> <C> <C>
- --------------------------------------------------------------------- ----------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 1,256,724 (335,723)
- --------------------------------------------------------------------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of available for sale securities 172,032 10,186
Redemption of matured available for sale securities 514,118 346,416
Purchases of available for sale securities (1,772,894) (292,309)
Net (increase) decrease in interest-bearing deposits in other banks (6,706) (1,505)
Net (increase) decrease in loans (1,208,277) (616,745)
Proceeds from sales of auto loans 1,007,721 0
Purchases of premises and equipment (13,432) (3,777)
Proceeds from sales of other real estate 2,564 2,996
Payments to improve other real estate (1,391) (829)
Net cash (paid for) received from acquisitions (87,979) 47,241
- --------------------------------------------------------------------- ----------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (1,394,244) (508,326)
- --------------------------------------------------------------------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits (84,600) 61,729
Net increase (decrease) in Federal funds purchased, securities sold
under repurchase agreements, and U.S. Treasury demand notes 201,101 301,871
Proceeds (payments) on nonrecourse debt on leveraged leases 13,570 (21,018)
Proceeds from issuance of long-term debt and short-term borrowings 98,167 102,659
Payments on long-term debt and short-term borrowings (231,812) (6,631)
Proceeds from issuance of common stock and sales of treasury stock 2,365 4,686
Purchases of treasury stock (17,396) (23,446)
Dividends paid (26,590) (23,578)
- --------------------------------------------------------------------- ----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (45,195) 396,272
- --------------------------------------------------------------------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (182,715) (447,777)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,256,545 1,425,701
- --------------------------------------------------------------------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD 1,073,830 977,924
===================================================================== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
- --------------------------------------------------------------------- ----------- -----------
CASH PAID (RECEIVED) FOR:
Interest 714,833 168,312
Income taxes 206 120
===================================================================== =========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of preferred shares to common shares:
Number of preferred shares converted 145 0
Number of common shares issued 5,945 0
Conversion value 8 0
Transfer of loans to other real estate 493 2,312
Net unrealized gain (loss) on available for sale securities
included in stockholders' equity (22,018) (1,734)
Acquisitions:
Assets acquired 17,612 448,996
Liabilities assumed 3,960 367,072
Number of FSCO shares issued 3,418,824 4,350,000
===================================================================== =========== ===========
<FN>
See "Notes to Consolidated Financial Statements".
</TABLE>
<TABLE>
FIRST SECURITY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ in thousands; unaudited)
<CAPTION>
Three Months
For the Periods Ended March 31, 1999 and 1998 1999 1998 $Chg %Chg
<S> <C> <C> <C> <C>
- ------------------------------------------------------ --------- --------- -------- -------
NET INCOME 64,878 61,369 3,509 5.7
- ------------------------------------------------------ --------- --------- -------- -------
OTHER COMPREHENSIVE INCOME, AFTER TAX (22,018) (1,734) (20,284)(1169.8)
- ------------------------------------------------------ --------- --------- -------- -------
COMPREHENSIVE INCOME 42,860 59,635 (16,775) (28.1)
====================================================== ========= ========= ======== =======
<FN>
See "Notes to Consolidated Financial Statements".
</TABLE>
<PAGE>
FIRST SECURITY CORPORATION (FSCO)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited consolidated
financial statements of FSCO contain all adjustments (consisting of normal
recurring accruals) necessary to present fairly, in all material respects,
FSCO's: results of operations for the three months ended March 31, 1999 and
1998; financial position as of March 31, 1999, December 31, 1998, and March 31,
1998; and cash flows for the three months ended March 31, 1999 and 1998.
2. FSCO's results of operations for the three months ended March 31, 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 from purchase acquisitions, and historical values for
balances added from pooling-of-interests mergers, as well as earnings since
their acquisition from the following purchase acquisitions completed in 1998
and year-to-date 1999:
* On February 2, 1998, FSCO acquired Rio Grande Bancshares, Inc. (RGB) and
its subsidiaries, First National Bank of Dona Ana County and First National
Bank of Chaves County, located in New Mexico. At January 31, 1998, RGB had
assets of $415 million, loans of $252 million, deposits of $343 million, and 11
branches. On July 1, 1998, FSCO merged and renamed RGB's subsidiaries as First
Security Bank of Southern New Mexico, N.A. (FSB So. New Mexico).
* On December 21, 1998, FSCO acquired Marine National Bank (MNB), located in
Irvine, California. MNB was a wholly owned subsidiary of Shinhan Bank of
Seoul, Korea. At December 20, 1998, MNB had assets of $259 million, loans of
$114 million, deposits of $200 million, and 3 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.
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 three months ended March 31, 1999 included $8.7
million originated and $13.8 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 segments: Community Banking Services; Retail Lending
Services; Business Banking Services; Capital Markets, Treasury, and Investment
Management; and Parent and Other.
<TABLE>
LINE OF BUSINESS SEGMENTS - SELECTED DATA (in thousands) (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 Three Month Period Ended March 31, 1999
Total assets (Avg) 628,457 8,944,386 3,882,368 5,072,145 2,908,180 21,435,536
Total deposits (Avg) 8,875,035 221,509 739,333 347,863 2,187,459 12,371,199
Interest income 1,863 183,804 72,180 79,298 32,691 369,836
Interest expense 88,741 0 5,841 50,365 42,307 187,254
Intersegment interest income (expense), net 130,169 (111,149) (35,129) (18,755) 34,864 0
Provision for income taxes 3,894 15,415 5,318 3,115 4,029 31,771
Net income 5,936 24,717 10,284 5,021 18,920 64,878
- ------------------------------------------------------ ------------ ------------ ------------ ------------ ------------
For the Year-To-Date Three Month Period Ended March 31, 1998
Total assets (Avg) 716,787 8,721,708 3,419,106 4,408,944 818,608 18,085,153
Total deposits (Avg) 8,231,395 150,055 489,378 400,156 2,118,648 11,389,632
Interest income 1,688 166,094 72,315 70,549 23,455 334,101
Interest expense 92,566 1,419 4,827 44,209 26,789 169,810
Intersegment interest income (expense), net 145,946 (104,246) (34,133) (17,679) 10,112 0
Provision for income taxes 13,005 8,404 7,268 1,813 2,544 33,034
Net income 20,904 14,266 13,047 2,944 10,208 61,369
====================================================== ============ ============ ============ ============ ============
<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 depreciation, depletion, and/or amortization expenses;
* had no material unusual items, extraordinary items, and/or significant noncash items.
</TABLE>
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.
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 impact of SFAS No. 134 has not been material in
relation to FSCO's consolidated financial statements.
10. In June 1998, the FASB issued: SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which supercedes SFAS No. 80, "Accounting
for Futures Contracts"; 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. This statement
establishes accounting and reporting standards for derivative instruments and
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. SFAS No. 133 is effective for all fiscal
quarters of fiscal years beginning after June 15, 1999. FSCO management is
currently evaluating the effects of this change in its accounting for
derivatives and hedging activities and does not plan to implement this standard
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:
1. THIS MDA SHOULD BE READ IN CONJUNCTION WITH FSCO'S CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2. ALL FSCO FINANCIAL DATA HAVE BEEN PREVIOUSLY RESTATED FOR THE MAY 30,
1998 POOLING-OF-INTERESTS MERGER WITH CALIFORNIA STATE BANK (CSB).
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; acquisitions and the integration of acquired
businesses; technology and associated risks; and other risks and uncertainties
affecting FSCO's operations and personnel.
Be advised that FSCO, as part of its 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 "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 cost of FSCO's Year 2000 project and the impact of Year 2000 issues
to increase significantly from what is described in these forward-looking
statements. Those factors include, but are not limited to the availability and
cost of programmers and other systems personnel, changes to FSCO's original
Year 2000 project assessments, ineffective remediation of computer code, and
the ability of FSCO and/or other parties 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
* Net income: $64.9 million for first quarter, up 5.7%.
* Earnings per share diluted: $0.34 for first quarter, up 6.3%.
* Noninterest income: $123.4 million for first quarter, up 13.7%.
FINANCIAL CONDITION AT MARCH 31, 1999
* Total assets: $22.0 billion, up $2.8 billion or 14.8%.
* Interest-earning assets: $19.4 billion, up $2.2 billion or 12.7%.
* Stockholders' equity: $1.7 billion, up $0.2 billion or 11.0%.
* Quarterly common stock dividend: increased to 14 cents, up 7.7%.
* Asset quality: ratio of total problem assets to total loans and ORE of 0.60%,
up from 0.49%.
* All equity and risk-based capital ratios exceeded regulatory requirements for
"well capitalized" status.
OTHER HIGHLIGHTS
* February 12, 1999, FSCO acquired Van Kasper & Company.
* December 30, 1998, FSCO signed definitive agreement to acquire XEON Financial
Corporation.
* January 13, 1999, FSCO signed definitive agreement to acquire Comstock
Bancorp.
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 has undergone
material changes in internal reporting and cost allocation systems and that it
is not practicable to restate segment data for periods prior to 1999. As a
result, data for those periods may not be comparable with 1999. It is the
opinion of management that this information results in no meaningful
information useful in interpreting FSCO's results of operations and financial
position. In addition, FSCO further advises readers that its actual results
for future periods could differ materially from those anticipated or projected.
ANALYSIS OF STATEMENTS OF INCOME
EARNINGS SUMMARY
FSCO's net income was a record $64.9 million for the first quarter of 1999,
up $3.5 million or 5.7% from the first quarter of 1998. This net income
generated earnings per share (EPS) diluted of $0.34 for the quarter, up $0.02
or 6.3% from the year-ago quarter, and a 1.23% return on average assets (ROAA)
and a 16.65% return on average equity (ROAE) for the quarter, compared with a
1.38% ROAA and a 17.62% ROAE for the year-ago quarter. Tangible EPS diluted
were $0.40, tangible ROAA was 1.49%, and tangible ROAE was 27.44% for the
quarter, compared with $0.35, 1.56%, and 25.14%, respectively, for the year-ago
quarter.
REVENUES
FSCO's revenues (net interest income plus noninterest income) were $305.9
million for the first quarter of 1999, up $33.1 million or 12.1% 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
$185.2 million for the first quarter of 1999, up $18.4 million or 11.0% from
the year-ago quarter. This increase was due to a combination of continued
strong demand for loans net of loan sales and securitizations, growth in the
securities portfolios, and the positive impact of recent acquisitions accounted
for on a purchase basis.
FSCO's net interest margin was 3.92% for the first quarter of 1999, down 23
basis points from the year-ago quarter. This decrease was due to several
factors, including strong volume growth in loans, refinancing of mortgages at
lower rates, and relatively stable overall funding costs. In addition, FSCO's
long-term component of funding costs rose during the first quarter due to a
strategic decision to prefund longer term debt over the last six months 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
the year. FSCO expects its net interest margin to remain stable and to average
between 3.90% and 4.00% in 1999.
PROVISION FOR LOAN LOSSES
FSCO's provision for loan losses was $16.9 million for the quarter, up $4.3
million or 34.0% from the year-ago quarter (see: "Asset Quality: Provision For
Loan Losses").
NONINTEREST INCOME
FSCO's noninterest income was $123.4 million for the first quarter of 1999,
up $14.8 million or 13.7% from the year-ago quarter. This increase reflected
FSCO's continued emphasis on increasing and diversifying its sources of
noninterest income and included the following: continued strong mortgage
banking fees and servicing revenue; gains from $1.0 billion in ongoing loan
securitizations and sales; the addition of FS Van Kasper and its commissions
and fees from securities transactions; growth in consumer loans and resulting
service fees; and growth in insurance and trust income, reflecting FSCO's
increased investment in these areas; partially offset by decreased bankcard
servicing & third-party processing fees reflective of FSCO's entering into a
joint venture with respect to its merchant servicing business in the first
quarter of 1998. FSCO's ratio of noninterest income to revenues was 40.32% for
the quarter, up from 39.78% for the year-ago quarter.
NONINTEREST EXPENSES
FSCO's noninterest expenses were $192.4 million for the first quarter of
1999, up $26.6 million or 16.0% from the year-ago quarter. This increase was
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, which were at peak levels during the quarter. These
increases reflected FSCO's absorption of the impact of several major
investments in support of strong growth, multiple acquisitions, and strategic
investments in technology appropriate for building a high performance financial
services company with a long-term perspective. For 1999 and future years, FSCO
will benefit from these investments which will increase and diversify revenues
and improve technology, providing more functionality and efficiencies. FSCO
remained committed to effectively managing its ongoing noninterest expenses,
balanced against the need to make strategic investments. The components of
FSCO's noninterest expenses are discussed below.
* FSCO's salaries and benefits expense were $114.6 million for the quarter,
up $25.2 million or 28.2% from the year-ago quarter.
* FSCO's nonpersonnel expenses were $77.9 million for the quarter, up only
$1.4 million or 1.8% 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 62.35% for the first
quarter of 1999, up 214 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 59.10% for the first quarter of 1999, up 291 basis points from the year-ago
quarter.
ANALYSIS OF BALANCE SHEETS
SUMMARY
As of March 31, 1999, FSCO increased its total assets and equity to record
levels. At quarter end, FSCO considered its interest-earning asset quality to
be good, and its reserve for loan losses and its liquidity position to be
adequate for the foreseeable future (see: "Factors That May Affect Future
Results of Operations And Financial Condition").
FSCO's total assets were $22.0 billion at March 31, 1999, up $0.3 billion or
1.2% from year-end 1998 and up $2.8 billion or 14.8% from one year ago.
Interest-earning assets were $19.4 billion at quarter end, up $0.1 billion or
0.3% from year end and up $2.2 billion or 12.7% from one year ago.
FSCO's total liabilities were $20.3 billion at March 31, 1999, up $0.2
billion or 1.0% from year end and up $2.7 billion or 15.1% from one year ago.
Total interest-bearing liabilities were $17.0 billion at quarter end, up $0.2
billion or 1.5% from year end and up $2.2 billion or 15.0% from one year ago.
FSCO's stockholders' equity was increased to $1.7 billion at March 31, 1999,
up $0.1 billion or 4.4% from year end and up $0.2 billion or 11.0% from one
year ago.
INTEREST-EARNING ASSETS:
TRADING ACCOUNT SECURITIES AND OTHER MONEY MARKET INVESTMENTS
FSCO's trading account securities were $0.4 billion at March 31, 1999, up
$0.1 billion or 20.5% from year end and up $0.1 billion or 24.6% from one year
ago. Fluctuations in trading opportunities are a normal part of this function.
Market conditions at quarter end were conducive with traders increasing their
level of securities held in position.
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 $5.8 billion at March 31,
1999, up $1.1 billion or 22.3% from year end and up $1.4 billion or 32.8% 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 $13.2 billion at quarter end, down $0.9 billion or 6.1% from year end due
to the ongoing sale of 1-to-4 family residential term loans into secondary
markets and a $1.0 billion securitization of vehicle loans during the quarter,
but up $0.7 billion or 5.8% from one year ago in spite of $2.3 billion of
vehicle loan securitizations during the past 12 months. The ratio of total
loans to total assets was 59.93% at quarter end, down from 64.61% at year end
and 65.00% one year ago. The components of FSCO's loan portfolio at March 31,
1999, compared with December 31, 1998 and March 31, 1998, respectively, are
discussed below.
* Commercial loans were $3.1 billion, essentially unchanged from year end
and up $0.3 billion or 11.8% from one year ago. The increase 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 $5.5 billion, down $0.6 billion or 9.7%
from year end but up $0.2 billion or 3.0% from one year ago. Fluctuations in
these loan balances occurred as loan originations, generated by strong demand
and lower interest rates during the periods, were offset by loan sales,
particularly in the first quarter 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 its 1-to-4 family residential term loans, FSCO
originated $4.2 billion for year-to-date 1999, up $0.9 billion or 27.5% from
the 1998 period, offset by sales of $4.8 billion for the year to date, up $2.3
billion or 94.6% from the 1998 period. At quarter end, $1.6 billion of real
estate secured loans were held for sale, down $0.8 billion or 31.5% from year
end, but essentially unchanged from one year ago.
* Consumer loans were $3.1 billion, down $0.3 billion or 8.7% from year end
and down $0.1 billion or 3.3% 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 its indirect
vehicle loans, FSCO originated $1.0 billion for year-to-date 1999, up $0.4
billion or 71.5% from the 1998 period, offset by sales of $1.0 billion for the
year to date, up $1.0 billion as there were no securitizations in the 1998
period. FSCO remained the leading consumer lender in its primary market area.
* Leases were $1.4 billion, up $0.1 billion or 5.3% from year end and up
$0.3 billion or 32.8% from one year ago. These increases were primarily due to
FSCO's growth in the vehicle and equipment leasing markets, partially offset by
sales during the year.
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 0.60% at March 31,
1999, up from 0.52% at year end and 0.49% one year ago. The ratio of
nonperforming assets to total loans and ORE was 0.40% at quarter end, up from
0.35% at year end and 0.33% one year ago.
Problem assets were $79.3 million at March 31, 1999, up $6.2 million or 8.4%
from year end and up $18.8 million or 31.0% from one year ago. The components
of FSCO's problem assets at March 31, 1999, compared with December 31, 1998 and
March 31, 1998, respectively, are discussed below.
* Nonaccruing loans were $49.0 million, up $3.2 million or 6.9% from year
end, and up $12.4 million or 34.0% from one year ago. The ratio of nonaccruing
loans to total loans was 0.37%, up from 0.33% at year end and 0.29% one year
ago.
* Other real estate was $3.4 million, down $0.2 million or 5.9% from year
end and down $0.9 million or 21.6% 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 $26.9 million, up $3.2
million or 13.4% from year end and up $7.3 million or 36.8% from one year ago.
The ratio of accruing loans past due 90 days or more to total loans was 0.20%,
up 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 December 31, 1998 showed that: FSCO's ratio of nonaccruing
loans to total loans was 0.33%, which compared favorably with the peer group
average of 0.60%; 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 0.23%.
Potential problem loans identified by FSCO amounted to $36.6 million at
March 31, 1999, down $10.8 million or 22.8% from year end but up $25.1 million
or 218.0% from one year ago. The increase from one year ago was primarily
caused by one large secured loan to a Utah-based commercial borrower that
experienced product problems in its operations. FSCO's exposure to this credit
has been materially reduced, resulting in the reduction from year end.
Potential problem loans consisted primarily of commercial and agricultural
related loans.
ASSET QUALITY:
RESERVE FOR LOAN LOSSES
FSCO's reserve for loan losses was $173.4 million at March 31, 1999,
unchanged from year-end 1998 but up $10.1 million or 6.2% from one year ago.
The increase included $8.2 million in net additions to the reserve and $1.9
million in reserves added with the Marine National Bank (MNB) acquisition.
Based on its analysis of reserve adequacy, FSCO considered its reserve for
loan losses at March 31, 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 353.84% at quarter end, down from 378.39% at year end and
446.63% one year ago. The ratio of the reserve to total loans was 1.32% at
quarter end, up from 1.24% at year end and 1.31% one year ago due to lower loan
totals resulting from loan securitizations. 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.
Net loans charged off against the reserve were $16.9 million for the first
quarter of 1999, up $7.1 million or 72.3% from the year-ago quarter. This
increase was primarily due to increased net loans charged off for consumer
vehicle and other loans. The annualized ratio of net loans charged off to
average loans was 0.50% for the quarter, up from 0.34% for the year-ago
quarter.
A comparison of FSCO to its BHCPR peer group as of December 31, 1998 showed
that: FSCO's coverage ratio of the reserve to nonaccruing loans was 378.39%,
which compared favorably with the peer group average of 341.98%; its ratio of
the reserve to total loans was 1.24%, compared with the peer group average of
1.57%; and its annualized ratio of net loans charged off to average loans was
0.49% for the period, compared with the peer group average of 0.46%. While
comparisons with the BHCPR peer group are instructive, FSCO relies on the
methodology for analysis of reserve adequacy discussed in its 1998 Annual
Report on Form 10-K (hereby incorporated by reference) and not on any specific
reserve ratio comparison.
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 $16.9 million for the first quarter of
1999, up $4.3 million or 34.0% from the year-ago quarter. This increase
reflected a $7.1 million or 72.3% increase in net loans charged off and an
increase in the reserve of $2.8 million in the first quarter of 1998.
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 $12.6 billion at March 31, 1999, essentially
unchanged from year end but up $0.8 billion or 6.4% from one year ago 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 104.67% at quarter end, down from 110.70% at year end and
105.19% one year ago primarily due to a $1.0 billion securitization of vehicle
loans during the quarter. The ratio of loans to assets was 59.93% at quarter
end, down from 64.61% at year end and 65.00% 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 and economic opportunities.
FSCO's debt, which included short-term borrowings and long-term debt, was
$6.9 billion at March 31, 1999, up $0.1 billion or 1.0% from year end and up
$1.6 billion or 30.3% from one year ago. The components of FSCO's debt at
March 31, 1999, compared with December 31, 1998 and March 31, 1998,
respectively, are discussed below.
* Federal funds purchased and securities sold under repurchase agreements
were $3.9 billion, up $0.2 billion or 5.1% from year end and up $0.4 billion or
10.8% 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 through repurchase agreements.
* All other short-term borrowed funds were $0.3 billion, down $0.2 billion
or 42.4% from year end and down $0.1 billion or 31.0% from one year ago,
primarily due to maturing issues and the strategic use of long-term debt.
* Long-term debt was $2.7 billion, up $0.1 billion or 3.7% from year end and
up $1.4 billion or 102.0% from one year ago. These increases were due to
enhanced use of diverse funding sources, strategic growth opportunities to
support asset growth opportunities in primary markets served, and improved
utilization of collateral funding at attractive interest rates, partially
offset by the ongoing maturity of existing long-term debt. 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 March 31, 1999, FSCO exhibited slight asset sensitivity for the one-year
time horizon and minimal overall interest rate risk.
During the 12 month period, a strong regional economy resulted in net
average loan growth of $2.0 billion or 17.3%, while successful deposit
promotions helped to generate average deposit growth of $1.0 billion or 8.6%,
which was a healthy increase but not sufficient to entirely fund the loan
growth. FSCO utilized loan sales and securitizations and external funding
sources to support the remainder of its 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 $0.7
billion or 17.0% 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 $2.6 billion notional amount at March 31, 1999, down from $2.8
billion at year end and down from $3.4 billion one year ago. These decreases
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 $1.3 billion notional par value at March 31, 1999, up from
$1.2 billion notional value at year end but down from $6.3 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 $0.5 billion at March 31, 1999, up $0.1
billion or 15.3% from year end and up $0.1 billion or 39.3% from one year ago,
due to goodwill associated with recent acquisitions and increased loan
servicing rights from higher 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 April 26, 1999, the directors of FSCO declared a regular quarterly common
stock cash dividend of $0.14 per share. This dividend is payable on June 7,
1999 to shareholders of record on May 14, 1999 and is equal to an annual
dividend rate of $0.56 per share. At the market closing price of $18.75 per
share on Friday, April 23, 1999 (before the announcement of the dividend), the
annual dividend yield on FSCO common stock would have been 2.99%. This
dividend was the 177th common stock dividend declared by FSCO and marked the
65th consecutive year in which FSCO has paid cash dividends on its common
stock.
On January 25, 1999, FSCO increased its quarterly common stock dividend to
$0.14 per share, up $0.01 per share or 7.7% from the previous $0.13 per share.
This dividend was paid March 1, 1999 to shareholders of record on February 16,
1999, and equaled an annual dividend rate of $0.56. This was the fifth
dividend increase since year-end 1995.
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 $19.25 per share at the close of the
market on March 31, 1999, versus a book value of $8.77 per share, resulting in
a market-to-book ratio of 219.50%. In comparison, the bid price of FSCO common
stock was $23.813 per share at the close of the market on March 31, 1998,
versus a book value of $8.02 per share, resulting in a market-to-book ratio of
296.92%. At March 31, 1999, FSCO's common stock market capitalization was $3.7
billion, down $0.7 billion or 16.0% from year-end 1998 and down $0.8 billion or
18.0% 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 $1.7 billion at March 31,
1999, up $0.1 billion or 4.4% from year-end 1998 and up $0.2 billion or 11.0%
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 gains
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 7.59% at March 31,
1999, up from 7.36% at year-end but down from 7.85% one year ago. The ratio of
tangible common equity to tangible assets was 5.55% at quarter end, down from
5.57% at year end and 6.18% one year ago, reflecting 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 December 31, 1998 showed
that: FSCO's ratio of stockholders' equity to total assets was 7.36%, compared
with the peer group average of 8.07%; and its ratio of tangible common equity
to tangible assets was 5.57%, compared with the peer group average of 5.90%.
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 March 31, 1999 due to
earnings retained and the above-mentioned Capital Income Securities. FSCO's
risk-based capital ratios and leverage ratios were as follows:
March 31 Dec. 31 March 31
1999 1998 1998
Tier 1 risk-based capital ratio 10.94% 9.10% 10.40%
Total (Tier 1 + 2) risk-based capital ratio 13.10 11.31 13.07
Leverage ratio 8.29 6.90 7.50
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
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, some previously reported, are discussed below.
* 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 December 30, 1998, FSCO and its FSB Nevada subsidiary announced the
signing of a definitive agreement to acquire XEON Financial Corporation (XEON,
located in Stateline, Nevada) and its subsidiary Nevada Banking Company. At
December 31, 1998, XEON had assets of $106 million, loans of $72 million,
deposits of $94 million, and 3 branches. This merger is expected to close mid-
year 1999, pending regulatory and shareholder approvals.
* On January 13, 1999, FSCO and its FSB Nevada subsidiary announced the
signing of a definitive agreement to acquire Comstock Bancorp (Comstock,
located in Reno, Nevada) and its subsidiary Comstock Bank. At December 31,
1998, Comstock had assets of $225 million, loans of $142 million, deposits of
$196 million, and 4 branches. This merger has been approved by Comstock
shareholders and is expected to close mid-year 1999, pending regulatory
approvals.
NATIONAL & REGIONAL ECONOMY
The U.S. economic expansion continued impressively strong in the first
quarter of 1999. Consumer spending was particularly robust, sustained by full
employment, ongoing aggressive borrowing, and the wealth effect from
appreciating equity prices. A widening international trade deficit moderately
narrowed the overall first-quarter growth pace relative to the 6% gain achieved
in the fourth quarter of 1998. During the first quarter of 1999, crude oil
prices jumped above $17.00 per barrel, which, when passed on to retail gasoline
prices, will increase the rate of measured inflation. The net effect on the
economy, however, may more closely resemble a foreign-imposed tax and could
actually restrain the non-energy segments of consumer spending. Monetary
policy was unchanged in the first quarter. With the jump in energy prices and
some improved growth prospects internationally, longer term interest rates have
edged modestly higher.
While the regional economies of the Mountain and Pacific states remain solid
and generally vigorous, the pace of expansion has slowed in many states. The
unemployment rates are mainly low, but net in-migration and employment gains
have diminished. The construction industry, both for residential and
commercial building, continued strong in the first quarter. With favorable
mortgage financing conditions available, real-estate sales on the whole were
strong.
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).
YEAR 2000 ISSUES:
FSCO'S YEAR 2000 PROJECT
All businesses and industries worldwide face a "Year 2000" problem in which
some computer hardware, software, and other systems and equipment may not
properly process date calculations before, during, or after the year 2000. In
1996, FSCO initiated a Year 2000 project which involves identifying and
remediating date recognition problems in its systems and applications. FSCO
has made the successful resolution of its Year 2000 issues its highest
corporate priority.
FSCO's Year 2000 project encompasses all internal operations and systems,
including computer hardware and software, data/voice systems, facilities
control, security, and other non-information technology systems and equipment
to resolve any potential date-handling problems. In addition, FSCO's year 2000
project includes interactions with "other parties" such as deposit and loan
customers, business partners, vendors and suppliers, other financial
institutions, regulatory agencies, utilities, service providers, and others.
FSCO's Year 2000 project strategy is to implement, where possible, the most
recent versions of currently used software that are Year 2000 compliant. This
strategy will enable FSCO to become Year 2000 ready, add functionality
supportive of new products and services, become more efficient, reduce
maintenance costs and, in many cases, improve customer service. In the
strategic sense, this approach has enabled FSCO to derive the most benefit from
the dollars spent.
FSCO's total Year 2000 project expenditure is estimated at $40 to $45
million including $2.6 million accrued and spent in 1997; $23.7 million accrued
and spent in 1998; $13 to $18 million planned in 1999; and $1 million planned
in 2000. These expenditures are being funded through operating cash flows. Of
the $40 to $45 million total Year 2000 project expenditure, it is expected that
$12.5 million will be capitalized, including approximately $1.0 million
capitalized in 1999, and the remainder reported as expense.
As of March 31, 1999, FSCO remains on schedule to have all critical computer
systems Year 2000 ready by June 30, 1999 and is in the final stretch of its
Year 2000 readiness efforts. To date, all testing has been successful. FSCO
will continually test its systems during 1999 to assure that they function
properly. FSCO is confident that there will be no unusual disruptions in its
systems and services in January 2000 or beyond.
YEAR 2000 ISSUES:
FSCO'S YEAR 2000 RISKS
FSCO'S YEAR 2000 CONTINGENCY PLANS
FSCO's Year 2000 Risks and Year 2000 Contingency Plans were discussed in
detail in its 1998 Annual Report on Form 10-K (hereby incorporated by
reference).
YEAR 2000 ISSUES:
FSCO'S YEAR 2000 FORWARD-LOOKING STATEMENTS
The preceding discussion of "Year 2000 Issues" constitutes a Year 2000
Readiness Disclosure pursuant to the provisions of the Year 2000 Information
Readiness and Disclosure Act and includes forward-looking statements that
involve inherent risks and uncertainties. A number of important factors could
cause the actual cost of FSCO's Year 2000 project and the impact of Year 2000
issues to increase significantly from what is described in these forward-
looking statements. Those factors include, but are not limited to the
availability and cost of programmers and other systems personnel, changes to
FSCO's original Year 2000 project assessments, ineffective remediation of
computer code, and the ability of FSCO and/or other parties to successfully
resolve their individual Year 2000 issues.
# # #
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. Continued: Supplemental Tables
<TABLE>
FIRST SECURITY CORPORATION
FINANCIAL HIGHLIGHTS
($ in thousands, except per share data and ratios; unaudited)
<CAPTION>
1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr Year-To-Date Three Months
1999 1998 1998 1998 1998 1999 1998 %Chg
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Common & Preferred Stock Data:
Earnings per common share basic 0.34 0.36 0.34 0.30 0.33 0.34 0.33 3.0
Earnings per common share diluted 0.34 0.35 0.33 0.29 0.32 0.34 0.32 6.3
Tangible EPS diluted 0.40 0.41 0.37 0.33 0.35 0.40 0.35 14.3
Dividends paid per common share 0.14 0.13 0.13 0.13 0.13 0.14 0.13 7.7
Book value per common share [EOP] 8.77 8.54 8.54 8.21 8.02 8.77 8.02 9.4
Tangible book value per common share [EOP] 6.29 6.35 6.64 6.34 6.21 6.29 6.21 1.3
Market price (bid) [EOP] 19.250 23.313 16.688 21.375 23.813 19.250 23.813 (19.2)
High bid for the period 23.750 23.313 23.938 24.750 26.167 23.750 26.167 (9.2)
Low bid for the period 17.563 15.938 15.500 21.000 21.833 17.563 21.833 (19.6)
Market capitalization (mktprice x #shrs) [EOP] 3,654,285 4,352,817 3,144,703 4,016,256 4,457,936 3,654,285 4,457,936 (18.0)
Market price / book value per com share [EOP] % 219.50 272.99 195.41 260.35 296.92 219.50 296.92
Dividend payout ratio (DPS / EPS basic) % 41.18 36.11 38.24 43.33 39.39 41.18 39.39
Dividend yield (DPS / mktprice) [EOP] % 2.91 2.23 3.12 2.43 2.18 2.91 2.18
Price / earnings ratio(mktprice/4qtrsEPSbasic) 14.4x 17.5x 13.0x 17.2x 19.4x 14.4x 19.4x
Common shares basic [EOP] 189,833 186,712 188,441 187,895 187,206 189,833 187,206 1.4
Common shares basic [Avg] 188,242 188,370 187,931 187,623 186,336 188,242 186,336 1.0
Common shares diluted [Avg] 193,403 193,756 193,621 194,471 193,510 193,403 193,510 (0.1)
Preferred shares [EOP] 9 9 9 9 10 9 10 (10.0)
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Income Statement:
Interest income 369,836 369,193 366,416 350,950 334,101 369,836 334,101 10.7
Interest expense 187,254 182,478 186,661 178,012 169,810 187,254 169,810 10.3
Net interest income 182,582 186,715 179,755 172,938 164,291 182,582 164,291 11.1
Fully taxable equivalent (FTE) adjustment 2,660 2,716 2,259 2,827 2,579 2,660 2,579 3.1
Net interest income, FTE 185,242 189,431 182,014 175,765 166,870 185,242 166,870 11.0
Provision for loan losses 16,877 22,861 18,068 18,396 12,598 16,877 12,598 34.0
Noninterest income 123,359 132,444 114,896 118,534 108,516 123,359 108,516 13.7
Noninterest expenses 192,415 193,489 179,516 184,277 165,806 192,415 165,806 16.0
Provision for income taxes 31,771 35,496 33,976 32,892 33,034 31,771 33,034 (3.8)
Net income 64,878 67,313 63,091 55,907 61,369 64,878 61,369 5.7
Preferred stock dividend requirement 7 7 7 7 7 7 7 0.0
Common stock dividend 26,583 24,580 24,472 22,943 23,586 26,583 23,586 12.7
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Balance Sheet - End of Period:
Trading account securities 396,563 329,109 73,067 53,343 318,224 396,563 318,224 24.6
Available for sale (AFS) securities 5,825,155 4,764,127 4,912,396 4,806,559 4,386,629 5,825,155 4,386,629 32.8
Memo: fair value adjustment AFS securities 12,507 48,251 79,150 39,154 34,640 12,507 34,640 (63.9)
Loans, net of unearned income 13,160,919 14,013,417 12,926,926 12,530,360 12,436,407 13,160,919 12,436,407 5.8
Reserve for loan losses (173,350) (173,350) (169,058) (166,658) (163,256) (173,350) (163,256) 6.2
Total interest-earning assets 19,404,947 19,337,468 17,954,191 17,417,190 17,219,384 19,404,947 17,219,384 12.7
Intangible assets 472,066 409,367 357,459 351,547 338,844 472,066 338,844 39.3
Total assets 21,959,222 21,689,088 19,859,300 19,360,006 19,132,896 21,959,222 19,132,896 14.8
Noninterest-bearing deposits 2,489,976 2,752,009 2,431,637 2,402,497 2,339,665 2,489,976 2,339,665 6.4
Interest-bearing deposits 10,083,997 9,906,565 9,511,979 9,514,706 9,483,289 10,083,997 9,483,289 6.3
Total deposits 12,573,973 12,658,574 11,943,616 11,917,203 11,822,954 12,573,973 11,822,954 6.4
Short-term borrowed funds 4,236,283 4,265,589 4,026,919 3,905,250 3,986,966 4,236,283 3,986,966 6.3
Long-term debt 2,706,320 2,609,558 1,749,478 1,513,044 1,339,892 2,706,320 1,339,892 102.0
Total interest-bearing liabilities 17,026,600 16,781,712 15,288,376 14,933,000 14,810,147 17,026,600 14,810,147 15.0
Preferred stockholders' equity 476 484 491 493 501 476 501 (5.0)
Common stockholders' equity 1,665,303 1,595,011 1,609,515 1,542,377 1,500,734 1,665,303 1,500,734 11.0
Parent company investment in subsidiaries 2,068,992 1,945,390 1,788,947 1,719,975 1,678,122 2,068,992 1,678,122 23.3
============================================== ========== ========== ========== ========== ========== ========== ========== =======
<FN>
See "Notes to Condensed Consolidated Financial Statements".
EOP: End Of Period. Avg: Average. EPS: Earnings Per Common Share. DPS: Dividends Per Common Share. NM: Not Meaningful.
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
FINANCIAL HIGHLIGHTS - Continued
($ in thousands, except per share data and ratios; unaudited)
<CAPTION>
1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr Year-To-Date Three Months
1999 1998 1998 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 22,741 19,562 17,042 16,463 16,055 22,741 16,055 41.6
Real estate term 18,770 18,670 18,309 17,982 15,826 18,770 15,826 18.6
Real estate construction 6,389 6,213 4,756 4,752 4,171 6,389 4,171 53.2
Consumer 146 137 305 82 140 146 140 4.3
Leases 945 1,230 773 434 361 945 361 161.8
Total nonaccruing loans 48,991 45,812 41,185 39,713 36,553 48,991 36,553 34.0
Other real estate 3,404 3,617 2,798 3,908 4,342 3,404 4,342 (21.6)
Total nonperforming assets 52,395 49,429 43,983 43,621 40,895 52,395 40,895 28.1
Accruing loans past due 90 days or more 26,949 23,758 20,369 22,833 19,693 26,949 19,693 36.8
Total problem assets 79,344 73,187 64,352 66,454 60,588 79,344 60,588 31.0
Potential problem assets 36,552 47,319 55,150 37,229 11,493 36,552 11,493 218.0
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Reconciliation of the Reserve for Loan Losses:
Reserve for loan losses, beginning 173,350 169,058 166,658 163,256 157,525 173,350 157,525 10.0
Loans (charged off):
Commercial (1,186) (3,259) (1,105) (3,725) (1,932) (1,186) (1,932) (38.6)
Real estate term (671) (877) (1,388) (607) (383) (671) (383) 75.2
Real estate construction 0 (164) 0 0 0 0 0 NM
Consumer credit card & related (4,042) (3,633) (3,568) (3,441) (3,445) (4,042) (3,445) 17.3
Consumer vehicle & other (22,441) (21,428) (17,004) (15,238) (13,122) (22,441) (13,122) 71.0
Leases (33) (147) (321) 0 (3) (33) (3) 1000.0
Total loans charged off (28,373) (29,508) (23,386) (23,011) (18,885) (28,373) (18,885) 50.2
Recoveries on loans charged off:
Commercial 1,186 1,552 614 1,173 1,955 1,186 1,955 (39.3)
Real estate term 381 291 403 400 731 381 731 (47.9)
Real estate construction 2 1 1 18 3 2 3 (33.3)
Consumer credit card & related 669 728 657 622 728 669 728 (8.1)
Consumer vehicle & other 9,256 6,491 6,032 5,801 5,673 9,256 5,673 63.2
Leases 2 0 11 3 1 2 1 100.0
Total recoveries of loans charged off 11,496 9,063 7,718 8,017 9,091 11,496 9,091 26.5
Net loans (charged off) recovered (16,877) (20,445) (15,668) (14,994) (9,794) (16,877) (9,794) 72.3
Provision for loan losses 16,877 22,861 18,068 18,396 12,598 16,877 12,598 34.0
Acquisitions 0 1,876 0 0 2,927 0 2,927 (100.0)
Reserve for loan losses, ending 173,350 173,350 169,058 166,658 163,256 173,350 163,256 6.2
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
Balance Sheet - Average:
Trading account securities 274,855 139,293 64,310 138,157 295,414 274,855 295,414 (7.0)
Available for sale (AFS) securities 5,043,922 4,870,349 4,824,517 4,524,500 4,310,715 5,043,922 4,310,715 17.0
Memo: fair value adjustment AFS securities 37,590 62,380 41,719 33,956 41,342 37,590 41,342 (9.1)
Loans, net of unearned income 13,675,678 13,310,822 12,844,942 12,374,882 11,656,881 13,675,678 11,656,881 17.3
Reserve for loan losses (174,556) (170,129) (167,555) (164,256) (160,269) (174,556) (160,269) 8.9
Deferred taxes on leases (218,334) (200,571) (193,572) (198,673) (196,556) (218,334) (196,556) 11.1
Total interest-earning assets, excluding
fair value adjustment AFS securities
& deferred taxes on leases 18,916,172 18,175,389 17,580,579 16,939,894 16,091,448 18,916,172 16,091,448 17.6
Intangible assets 442,252 371,371 351,880 349,850 308,452 442,252 308,452 43.4
Total assets 21,435,536 20,438,133 19,652,528 18,998,533 18,085,153 21,435,536 18,085,153 18.5
Noninterest-bearing deposits 2,474,540 2,510,491 2,302,410 2,252,282 2,181,985 2,474,540 2,181,985 13.4
Interest-bearing deposits 9,896,659 9,587,111 9,531,570 9,459,908 9,207,647 9,896,659 9,207,647 7.5
Total deposits 12,371,199 12,097,602 11,833,980 11,712,190 11,389,632 12,371,199 11,389,632 8.6
Short-term borrowed funds 4,165,438 3,779,161 4,146,642 3,851,257 3,522,497 4,165,438 3,522,497 18.3
Long-term debt 2,653,130 2,350,927 1,611,966 1,433,195 1,314,965 2,653,130 1,314,965 101.8
Total interest-bearing liabilities 16,715,227 15,717,199 15,290,178 14,744,360 14,045,109 16,715,227 14,045,109 19.0
Preferred stockholders' equity 477 487 492 497 501 477 501 (4.8)
Common stockholders' equity 1,579,645 1,617,608 1,557,403 1,519,335 1,411,739 1,579,645 1,411,739 11.9
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------
<FN>
See "Notes to Condensed Consolidated Financial Statements".
EOP: End Of Period. Avg: Average. NM: Not Meaningful.
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
FINANCIAL HIGHLIGHTS - Continued
($ in thousands, except per share data and ratios; unaudited)
<CAPTION>
1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr Year-To-Date Three Months
1999 1998 1998 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 10,030 9,424 9,229 8,854 8,472 10,030 8,472 18.4
Domestic bank offices:
FS Bank (Utah offices) 138 134 133 132 130 138 130 6.2
FS Bank (Idaho offices) 88 88 88 88 88 88 88 0.0
FS Bank (Oregon offices) 14 14 14 14 13 14 13 7.7
FS Bank (Wyoming offices) 8 8 8 8 8 8 8 0.0
FSB New Mexico 34 34 32 31 31 34 31 9.7
FSB Southern New Mexico 11 11 11 11 11 11 11 0.0
FSB Nevada 15 15 14 14 14 15 14 7.1
FSB California 16 18 17 17 17 16 17 (5.9)
Total domestic bank offices 324 322 317 315 312 324 312 3.8
============================================== ========== ========== ========== ========== ========== ========== ========== =======
Selected Ratios (%):
Return on average assets (ROAA) 1.23 1.31 1.27 1.18 1.38 1.23 1.38
Tangible ROAA 1.49 1.56 1.49 1.40 1.56 1.49 1.56
Return on average stockholders' equity (ROAE) 16.65 16.50 16.07 14.75 17.62 16.65 17.62
Tangible ROAE 27.44 25.08 23.81 22.26 25.14 27.44 25.14
Net interest margin, FTE 3.92 4.17 4.14 4.15 4.15 3.92 4.15
Net interest spread, FTE 3.40 3.54 3.51 3.52 3.53 3.40 3.53
Operating expense ratio
(nonint exp / (net int inc FTE + nonint inc)) 62.35 60.11 60.46 62.62 60.21 62.35 60.21
Productivity ratio (nonint exp / avg assets) 3.64 3.76 3.62 3.89 3.72 3.64 3.72
Stockholders' equity / assets [EOP] 7.59 7.36 8.11 7.97 7.85 7.59 7.85
Stockholders' equity / assets [Avg] 7.37 7.92 7.93 8.00 7.81 7.37 7.81
Tangible common equity / tangible assets [EOP] 5.55 5.57 6.42 6.26 6.18 5.55 6.18
Loans / deposits [EOP] 104.67 110.70 108.23 105.15 105.19 104.67 105.19
Loans / assets [EOP] 59.93 64.61 65.09 64.72 65.00 59.93 65.00
Reserve for loan losses [EOP] /:
Total loans 1.32 1.24 1.31 1.33 1.31 1.32 1.31
Nonaccruing loans 353.84 378.39 410.48 419.66 446.63 353.84 446.63
Nonaccruing + accruing loans past due 90 days 228.27 249.17 274.65 266.46 290.25 228.27 290.25
Nonaccruing loans / total loans 0.37 0.33 0.32 0.32 0.29 0.37 0.29
Nonaccruing + accr loans past due / total loans 0.58 0.50 0.48 0.50 0.45 0.58 0.45
Nonperforming assets /:
Total loans + other real estate 0.40 0.35 0.34 0.35 0.33 0.40 0.33
Total assets 0.24 0.23 0.22 0.23 0.21 0.24 0.21
Total equity 3.15 3.10 2.73 2.83 2.72 3.15 2.72
Total equity + reserve for loan losses 2.85 2.79 2.47 2.55 2.46 2.85 2.46
Problem assets /:
Total loans + other real estate 0.60 0.52 0.50 0.53 0.49 0.60 0.49
Total assets 0.36 0.34 0.32 0.34 0.32 0.36 0.32
Total equity 4.76 4.59 4.00 4.31 4.04 4.76 4.04
Total equity + reserve for loan losses 4.31 4.14 3.62 3.89 3.64 4.31 3.64
Net loans charged off / average loans 0.50 0.61 0.48 0.49 0.34 0.50 0.34
============================================== ========== ========== ========== ========== ========== ========== ========== =======
Capital Ratios & Risk-Based Capital Ratios (%) - as of March 31, 1999:
FSCO FS Bank FSB NM FSB SNM FSB Nev. FSB Cal.
---------- ---------- ---------- ---------- ---------- ----------
Leverage ratio 8.29 7.37 5.75 11.47 8.04 7.01
Tier 1 risk-based capital ratio 10.94 9.48 10.84 20.98 14.37 9.77
Total (Tier 1 + 2) risk-based capital ratio 13.10 10.59 12.10 22.23 15.63 11.02
Tier 1 risk-based capital $ 1,821,408 1,252,047 137,164 47,350 85,330 80,824
Total (Tier 1 + 2) risk-based capital $ 2,179,994 1,398,690 153,214 50,172 92,786 91,180
Total risk-based assets - loan loss reserve $ 16,644,764 13,207,077 1,265,733 225,659 593,776 827,517
============================================== ========== ========== ========== ========== ========== ========== ========== =======
<FN>
See "Notes to Condensed Consolidated Financial Statements".
EOP: End Of Period. Avg: Average. NM: Not Meaningful.
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
VOLUME / RATE ANALYSIS
(in thousands; fully taxable equivalent; unaudited) (A, B)
<CAPTION>
For the Three Months Ended March 31, 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:
168,410 64,753 4.56 5.98 Federal funds sold & securities purchased 1,918 968 950 1,550 (600)
9,231 1,583 10.36 7.83 Interest-bearing deposits in other banks 239 31 208 150 58
274,855 295,414 7.24 5.74 Trading account securities 4,975 4,238 737 (295) 1,032
5,006,332 4,269,373 6.57 6.69 Available for sale securities, amortized cost 82,237 71,356 10,881 12,317 (1,436)
Loans, net of unearned income &
13,457,344 11,460,325 8.42 9.08 deferred taxes on leases (C) 283,127 260,087 23,040 45,321 (22,281)
- ----------- ----------- ------ ------ -------------------------------------------- ---------- ---------- -------- -------- --------
18,916,172 16,091,448 7.88 8.37 TOTAL INTEREST-EARNING ASSETS / INCOME 372,496 336,680 35,816 59,043 (23,227)
- ----------- ----------- ------ ------ -------------------------------------------- ---------- ---------- -------- -------- --------
INTEREST-BEARING LIABILITIES / EXPENSE:
Interest-Bearing Deposits:
367,041 308,308 1.40 1.77 Interest-bearing demand accounts 1,282 1,363 (81) 260 (341)
4,603,616 4,055,873 2.66 2.98 Savings & money market accounts 30,620 30,193 427 4,078 (3,651)
1,386,358 1,359,742 5.37 5.86 Time deposits of $100,000 or more 18,595 19,912 (1,317) 390 (1,707)
3,539,644 3,483,724 5.38 5.63 Other time deposits 47,566 49,041 (1,475) 787 (2,262)
- ----------- ----------- ------ ------ -------------------------------------------- ---------- ---------- -------- -------- --------
9,896,659 9,207,647 3.96 4.37 TOTAL INTEREST-BEARING DEPOSITS 98,063 100,509 (2,446) 5,515 (7,961)
- ----------- ----------- ------ ------ -------------------------------------------- ---------- ---------- -------- -------- --------
3,721,928 3,132,072 4.68 5.31 Federal funds purchased & securities sold 43,526 41,594 1,932 7,833 (5,901)
443,510 390,425 6.09 5.87 Other short-term borrowings 6,751 5,733 1,018 780 238
2,653,130 1,314,965 5.87 6.68 Long-term debt 38,914 21,974 16,940 22,362 (5,422)
- ----------- ----------- ------ ------ -------------------------------------------- ---------- ---------- -------- -------- --------
16,715,227 14,045,109 4.48 4.84 TOTAL INTEREST-BEAR LIABILITIES / EXPENSE 187,254 169,810 17,444 36,490 (19,046)
- ----------- ----------- ------ ------ -------------------------------------------- ---------- ---------- -------- -------- --------
7.88 8.37 Interest income FTE / earning assets
3.96 4.22 Interest expense / earning assets
------ ------ --------------------------------------------
3.92 4.15 Net interest income FTE / earning assets 185,242 166,870 18,372 22,553 (4,181)
Less fully taxable equivalent adjustment 2,660 2,579 81
------ ------ -------------------------------------------- ---------- ---------- -------- -------- --------
NET INTEREST INCOME 182,582 164,291 18,291
=========== =========== ====== ====== ============================================ ========== ========== ======== ======== ========
<FN>
(A) All FSCO financial data have been previously restated for the May 30, 1998 pooling-of-interests merger with FSB California.
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 $12,904 and $9,855 for the 1999 and 1998 quarters, respectively.
</TABLE>
<PAGE>
<TABLE>
FIRST SECURITY CORPORATION
LOANS (in thousands; unaudited) (A)
<CAPTION>
March 31 %Total December 31 %Total March 31 %Total Mar/Mar
1999 Loans 1998 Loans 1998 Loans %Chg
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------ ------------ -------- ------------ -------- ------------ -------- --------
COMMERCIAL LOANS:
Commercial & industrial 2,545,964 19.3 2,562,274 18.3 2,199,722 17.7 15.7
Agricultural 328,576 2.5 404,038 2.9 315,686 2.5 4.1
Other commercial 258,810 2.0 198,673 1.4 287,300 2.3 (9.9)
- ------------------------------------------------ ------------ -------- ------------ -------- ------------ -------- --------
TOTAL COMMERCIAL LOANS 3,133,350 23.8 3,164,985 22.6 2,802,708 22.5 11.8
- ------------------------------------------------ ------------ -------- ------------ -------- ------------ -------- --------
REAL ESTATE SECURED LOANS:
1 to 4 family residential term 2,780,440 21.1 3,505,920 25.0 2,954,854 23.8 (5.9)
1 to 4 family residential home equity 394,807 3.0 424,102 3.0 480,041 3.9 (17.8)
1 to 4 family residential construction 623,891 4.7 577,940 4.1 451,700 3.6 38.1
Commercial & other term 1,344,653 10.2 1,325,071 9.5 1,141,738 9.2 17.8
Commercial & other construction 364,722 2.8 265,879 1.9 317,760 2.6 14.8
- ------------------------------------------------ ------------ -------- ------------ -------- ------------ -------- --------
TOTAL REAL ESTATE SECURED LOANS 5,508,513 41.9 6,098,912 43.5 5,346,093 43.0 3.0
Memo: Total real estate term 4,519,900 34.3 5,255,093 37.5 4,576,633 36.8 (1.2)
Memo: Loans held for sale included
in total real estate term 1,637,532 12.4 2,391,508 17.1 1,629,832 13.1 0.5
Memo: Total real estate construction 988,613 7.5 843,819 6.0 769,460 6.2 28.5
- ------------------------------------------------ ------------ -------- ------------ -------- ------------ -------- --------
CONSUMER LOANS:
Credit card & related 312,495 2.4 328,853 2.3 312,424 2.5 0.0
Vehicle & other consumer 2,830,786 21.5 3,114,506 22.2 2,938,838 23.6 (3.7)
- ------------------------------------------------ ------------ -------- ------------ -------- ------------ -------- --------
TOTAL CONSUMER LOANS 3,143,281 23.9 3,443,359 24.6 3,251,262 26.1 (3.3)
- ------------------------------------------------ ------------ -------- ------------ -------- ------------ -------- --------
TOTAL LEASES 1,375,775 10.5 1,306,161 9.3 1,036,344 8.3 32.8
- ------------------------------------------------ ------------ -------- ------------ -------- ------------ -------- --------
LOANS, NET OF UNEARNED INCOME 13,160,919 100.0 14,013,417 100.0 12,436,407 100.0 5.8
Memo: Unearned income (130,658) (127,593) (103,968) 25.7
Reserve for loan losses (173,350) (173,350) (163,256) 6.2
- ------------------------------------------------ ------------ -------- ------------ -------- ------------ -------- --------
TOTAL LOANS, NET 12,987,569 13,840,067 12,273,151 5.8
================================================ ============ ======== ============ ======== ============ ======== ========
<FN>
(A) All FSCO financial data have been previously restated for the May 30, 1998 pooling-of-interests merger with FSB California.
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 1998 Annual Report on Form 10-K, 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,
except as discussed below.
The New Mexico case of "Brown, et al. v. First Security Bank of New Mexico,
N.A., et al.," Case No. CV 99-02904, Second Judicial District Court, County of
Bernalillo, State of New Mexico (filed March 25, 1999) was recently filed as a
class action in New Mexico state court alleging breach of contract, breach of
state unfair practices act and breach of implied covenant of good faith in
connection with the practices of FSB New Mexico (and other FSCO entities) of
processing items against checking accounts and assessing insufficient funds
fees. Appropriate answers and motions to dismiss are anticipated.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
FSCO held its Annual Shareholders' Meeting on April 26, 1999. There were
194,631,275.000 total equivalent shares outstanding (entitled to vote) of which
161,829,765.000 or 83.147% shares were actually voted (by proxy and in person).
Votes were taken on the following Proposals For Shareholder Action,
described in FSCO's Proxy Statement dated March 22, 1999:
* Item No. 1 "Election of Directors". The Nominating Committee of FSCO's
board of directors nominated all twenty current Directors, named below, to
serve as Directors until the next Annual Meeting or until their successors are
elected and qualified. The results of this vote were as follows:
VOTES VOTES VOTES
NOMINEE: FOR # WITHHELD # FOR %
JAMES C. BEARDALL 159,943,300.000 1,886,465.000 98.834
RODNEY H. BRADY 159,925,510.000 1,904,255.000 98.823
JAMES E. BRUCE 159,810,848.000 2,018,917.000 98.752
THOMAS D. DEE, II 159,819,502.000 2,010,263.000 98.758
SPENCER F. ECCLES 159,732,409.000 2,097,356.000 98.704
MORGAN J. EVANS 159,897,029.000 1,932,736.000 98.806
DR. DAVID P. GARDNER 159,858,778.000 1,970,987.000 98.782
ROBERT H. GARFF 159,813,258.000 2,016,507.000 98.754
JAY DEE HARRIS 159,717,183.000 2,112,582.000 98.695
ROBERT T. HEINER 159,878,133.000 1,951,632.000 98.794
KAREN H. HUNTSMAN 158,743,536.000 3,086,229.000 98.093
G. FRANK JOKLIK 159,344,308.000 2,485,457.000 98.464
B. Z. KASTLER 159,769,947.000 2,059,818.000 98.727
DR. J. BERNARD MACHEN 159,427,596.000 2,402,169.000 98.516
JOSEPH G. MALOOF 159,133,500.000 2,696,265.000 98.334
MICHELE PAPEN-DANIEL 159,917,088.000 1,912,677.000 98.818
SCOTT S. PARKER 159,910,625.000 1,919,140.000 98.814
JAMES L. SORENSON 159,766,120.000 2,063,645.000 98.725
HAROLD J. STEELE 159,726,438.000 2,103,327.000 98.700
JAMES R. WILSON 159,870,638.000 1,959,127.000 98.789
* Item No. 2: "Proposed increase in the number of shares available under
First Security's Comprehensive Management Incentive Plan" from the current
21,726,563 shares to 27,726,563 shares. The results of this vote were as
follows:
VOTES FOR VOTES AGAINST VOTES WITHHELD
# % # % # %
134,549,012.000 83.142 22,066,418.000 13.636 5,214,335.000 3.222
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 11: Computation of Earnings Per Share (attached).
Exhibit 27: Financial Data Schedule (attached).
(b) Reports on Form 8-K (all are Item 5 Other Information):
* Jan. 25, 1999 report of a Jan. 21, 1999 press release announcing FSCO's
earnings and other financial data for the year and quarter ended Dec. 31,
1998.
* Feb. 1, 1999 report of a change to previously announced approximate
conversion ratios for shares to be issued by FSCO to acquire Van Kasper &
Company.
* Feb. 9, 1999 report of disclosures relating to certain litigation
associated with the Van Kasper & Company acquisition.
# # #
<PAGE>
SIGNATURES
FIRST SECURITY CORPORATION
Registrant
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
First Security Corporation, by
/s/ Brad D. Hardy May 13, 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 11. COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
FIRST SECURITY CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (in thousands, except per share amounts; unaudited) (A,B)
<CAPTION>
Three Months
For the Periods Ended March 31, 1999 and 1998 1999 1998
<S> <C> <C>
- ----------------------------------------------------------- ---------- ----------
NET INCOME:
Net income per consolidated income statements 64,878 61,369
Subtract dividend requirement of preferred stock 7 7
- ----------------------------------------------------------- ---------- ----------
NET INCOME APPLICABLE TO COMMON STOCK (BASIC) 64,871 61,362
Add dividend requirement of preferred stock 7 7
- ----------------------------------------------------------- ---------- ----------
NET INCOME DILUTED 64,878 61,369
=========================================================== ========== ==========
EARNINGS PER COMMON SHARE BASIC 0.34 0.33
EARNINGS PER COMMON SHARE DILUTED 0.34 0.32
=========================================================== ========== ==========
SHARES OUTSTANDING (AVERAGE):
Common shares 191,894 188,563
Treasury shares (3,652) (2,227)
- ----------------------------------------------------------- ---------- ----------
COMMON SHARES BASIC (AVG) 188,242 186,336
Common share equivalents for options 4,788 6,783
Preferred share equivalents 373 391
- ----------------------------------------------------------- ---------- ----------
COMMON SHARES DILUTED (AVG) 193,403 193,510
=========================================================== ========== ==========
<FN>
(A) All FSCO financial data have been previously restated for the May 30, 1998 pooling-of-interests merger with FSB California.
Certain reclassifications of 1998 amounts have been made to conform to 1999 classifications.
(B) Earnings per common share diluted were computed assuming that all outstanding shares of preferred stock
were converted into common stock on the basis of 41.00625 shares of common for each share of preferred,
with the elimination of dividends on the preferred stock. Common stock equivalents are common stock
options outstanding accounted for on the treasury stock method for purposes of these computations.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1999
<CASH> 1,058,830
<INT-BEARING-DEPOSITS> 7,310
<FED-FUNDS-SOLD> 15,000
<TRADING-ASSETS> 396,563
<INVESTMENTS-HELD-FOR-SALE> 5,825,155
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 13,160,919
<ALLOWANCE> (173,350)
<TOTAL-ASSETS> 21,959,222
<DEPOSITS> 12,573,973
<SHORT-TERM> 4,236,283
<LIABILITIES-OTHER> 776,867
<LONG-TERM> 2,706,320
<COMMON> 1,665,303
0
476
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 21,959,222
<INTEREST-LOAN> 282,442
<INTEREST-INVEST> 80,262
<INTEREST-OTHER> 7,132
<INTEREST-TOTAL> 369,836
<INTEREST-DEPOSIT> 98,063
<INTEREST-EXPENSE> 187,254
<INTEREST-INCOME-NET> 182,582
<LOAN-LOSSES> 16,877
<SECURITIES-GAINS> 8,983
<EXPENSE-OTHER> 192,415
<INCOME-PRETAX> 96,649
<INCOME-PRE-EXTRAORDINARY> 96,649
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64,878
<EPS-PRIMARY> 0.340
<EPS-DILUTED> 0.340
<YIELD-ACTUAL> 3.92
<LOANS-NON> 48,991
<LOANS-PAST> 26,949
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 79,344
<ALLOWANCE-OPEN> 173,350
<CHARGE-OFFS> (28,373)
<RECOVERIES> 11,496
<ALLOWANCE-CLOSE> 173,350
<ALLOWANCE-DOMESTIC> 173,350
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
EDGAR Tags used on this Financial Data Schedule do not comply with SFAS No. 128, so that:
"EPS-Primary" is actually earnings per common share basic; and
"EPS-Diluted" is actually earnings per common share diluted.
</TABLE>
