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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report February 11, 2000
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
Item 5. Other Information
On January 19, 2000, First Security Corporation (FSCO) issued a press release
(a copy of which is attached to this report as Exhibit A) announcing its
earnings and results of operations for 1999.
SIGNATURES
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
(Registrant)
/s/ Brad D. Hardy February 11, 2000
__________________________________________________________ __________________
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)
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EXHIBIT A
FOR IMMEDIATE RELEASE Contact: Brad D. Hardy
January 19, 2000 (801) 246-5976
FIRST SECURITY EARNS RECORD $273.3 MILLION OR $1.38 PER SHARE FOR 1999
1999 Highlights:
*Net income: $273.3 million for the year to date, up 10.4%; $66.3 million for
fourth quarter.
*Earnings per share diluted: $1.38 for the year to date, up 7.8%; $0.33 for
fourth quarter.
* Noninterest income: $533.0 million for the year to date, up 12.3%.
* Total assets: $23.0 billion at year end, up 6.0%.
* Stockholders' equity: $1.8 billion at year end, up 10.9%.
SALT LAKE CITY -- First Security Corporation (Nasdaq: FSCO) earned record
net income of $273.3 million for 1999, up $25.7 million or 10.4% from $247.7
million for 1998. This net income generated earnings per share (EPS) diluted
of $1.38 for 1999, up $0.10 or 7.8% from $1.28 EPS for 1998, and a 1.22%
return on average assets (ROAA) and a 16.18% return on average equity (ROAE)
for the year, compared with a 1.28% ROAA and a 16.21% ROAE for 1998.
Tangible EPS diluted were $1.63, tangible ROAA was 1.48%, and tangible ROAE
was 27.70% for the year, compared with $1.47, 1.50%, and 24.07%,
respectively, for 1998.
FSCO's net income was $66.3 million for the fourth quarter of 1999, down
$1.0 million or 1.5% from the fourth quarter of 1998. This net income
generated EPS diluted of $0.33 for the quarter, down $0.02 or 5.7% from the
year-ago quarter, and a 1.13% ROAA and a 14.87% ROAE for the quarter, compared
with a 1.31% ROAA and a 16.50% ROAE for the year-ago quarter. These decreases
in net income and EPS were primarily due to merger related actions and expenses
and certain non-recurring items which had a combined impact on EPS of
approximately $0.04 during the quarter. Tangible EPS diluted were $0.38,
tangible ROAA was 1.35%, and tangible ROAE was 25.46% for the fourth quarter,
compared with $0.41, 1.56%, and 25.08%, respectively, for the year-ago quarter.
Spencer F. Eccles, FSCO chairman and chief executive officer, said, "First
Security is pleased to report record earnings for 1999. First Security has
been very busy in the second half of the year preparing for our merger of
equals with Zions Bancorporation, and we are proud that through the hard work
of our committed employees we achieved record earnings for the year driven by
a 14.9% growth in average earning assets and a 12.3% increase in noninterest
income during the year."
Revenues
FSCO's revenues (net interest income plus noninterest income) were $1.3
billion for 1999, up $141.3 million or 12.0% from one year ago, and were
$345.8 million for the fourth quarter of 1999, up $26.6 million or
8.3% from the year-ago quarter.
FSCO's net interest income on a fully taxable equivalent (FTE) basis was
$796.4 million for 1999, up $82.3 million or 11.5% from 1998, and was $219.2
million for the fourth quarter of 1999, up $29.7 million or 15.7% from the
year-ago quarter. These increases were due to a combination of continued
strong growth in loans, net of loan sales and securitizations, and in
available for sale (AFS) securities.
FSCO's net interest margin was 4.03% for 1999, down 12 basis points from
1998, and was 4.28% for the fourth quarter of 1999, up 11 basis points from
the year-ago quarter. The decrease for the year was due to several factors
including: strong volume growth in loans and growth in AFS securities
financed by higher marginal funding costs; sales of higher-yielding earning
assets through securitizations; and refinancing of mortgages at lower rates.
FSCO's noninterest income was $533.0 million for 1999, up $58.6 million or
12.3% from 1998, and was $129.2 million for the fourth quarter of 1999, down
$3.2 million or 2.4% from the year-ago quarter. The increase for the year
was due to: growth in commissions and fees from securities and insurance
transactions; growth in other service charges, collections, commissions, and
fees; securities gains; and growth in trust income; and was partially offset
by decreased bankcard servicing & third-party processing fees, reflecting a
joint venture in a merchant servicing business that FSCO entered into in the
first quarter of 1998, and increased loan servicing rights amortization.
The decrease in the fourth quarter was due to declines in asset
securitization gains and mortgage banking activities, and a loss on AFS
securities. FSCO's ratio of noninterest income to total revenue was 40.39%
for 1999, up from 40.27% for 1998, and was 37.36% for the quarter, down
from 41.50% for the year-ago quarter.
Noninterest Expenses
FSCO's noninterest expenses were $844.4 million for 1999, up $121.4 million
or 16.8% from 1998, and were $224.4 million for the fourth quarter of 1999,
up $30.9 million or 16.0% from the year-ago quarter. These increases were
primarily due to the following: additions of revenue-generating personnel;
additional personnel and operating expenses of recent purchase acquisitions;
and the cost of strategic technological investments and upgrades, including
Year 2000 expenditures. Additionally in the fourth quarter, merger related
actions and expenses impacted EPS by approximately $0.02, while one time
expenses for FDIC insurance premiums and other expenses, including legal,
resulted in another impact on EPS of approximately $0.02. Mr. Eccles
commented, "We continued our focus on managing expenses through this time of
transition, during which we have grown revenues while also planning the
merger of equals implementation. We are proud that First Security is in a
position to be an efficient provider of financial services in the post-
merger environment."
FSCO's operating expense ratio (the ratio of noninterest expenses to the
sum of net interest income FTE and noninterest income) was 63.52% for 1999,
up 268 basis points from 1998, and was 64.42% for the fourth quarter of 1999,
up 431 basis points from the year-ago quarter, reflective of the merger and
other one-time expenses.
CrossLand Mortgage Corp., FSCO's mortgage banking subsidiary, and First
Security Van Kasper, FSCO's full-service investment banking and brokerage
subsidiary, have higher inherent operating expense ratios than FSCO's bank
subsidiaries. Excluding CrossLand Mortgage and FS Van Kasper, FSCO's
operating expense ratio was 57.23% for 1999, up 110 basis points from one
year ago, and was 56.11% for the fourth quarter of 1999, up 147 basis points
from the year-ago quarter.
Assets, Interest-Earning Assets and Asset Quality
FSCO's total assets were $23.0 billion at December 31, 1999, up $1.3 billion
or 6.0% from year-end 1998. Loans, net of unearned income but before the
reserve for loan losses, were $14.6 billion at year end, up $0.6 billion or
4.0% from one year ago in spite of $2.0 billion in vehicle loan
securitizations in the first half of 1999 and $14.4 billion in ongoing
mortgage loan sales during the year. AFS securities were $5.5 billion at year
end, up $0.8 billion or 16.0% from one year ago.
FSCO's asset quality remained strong in 1999. The ratio of nonperforming
assets to total loans and other real estate was 0.46% at December 31, 1999,
up from 0.35% at year-end 1998. Nonperforming assets were $67.3 million at
year end, up $17.8 million or 36.1% from one year ago, due primarily to one
large loan secured by timberland and several smaller secured loans in
different industries. While year end peer data is not yet available, FSCO's
nonperforming assets have historically been well below its peer group and it
is expected that FSCO's asset quality will remain strong despite the reported
increase.
FSCO's reserve for loan losses was $174.4 million at December 31, 1999, up
$1.1 million or 0.6% from year-end 1998. Based on its analysis of reserve
adequacy, FSCO considered its reserve for loan losses at year end to be
adequate to absorb estimated loan losses in the current loan portfolio.
FSCO's coverage ratio of the reserve to nonaccruing loans was 294.57% at year
end, down from 378.39% one year ago. The ratio of the reserve to total loans
was 1.20% at year end, down from 1.24% one year ago.
Net loans charged off against the reserve were $66.8 million for 1999, up
$5.9 million or 9.6% from one year ago, and were $19.2 million for the fourth
quarter of 1999, down $1.2 million or 6.1% from the year-ago quarter. The
annualized ratio of net loans charged off to average loans was 0.49% for 1999,
unchanged from 1998, and was 0.53% for the fourth quarter of 1999, down from
0.61% for the year-ago quarter. FSCO's provision for loan losses was $59.4
million for 1999, down $12.5 million or 17.3% from one year ago, and was
$19.2 million for the quarter, down $3.7 million or 16.0% from the year-ago
quarter.
Stockholders' Equity and Common Stock
FSCO's total stockholders' equity increased to $1.8 billion at December 31,
1999, up $0.2 billion or 10.9% 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 and losses in the
fair value of AFS securities, and by repurchases of common stock in the public
markets in 1998 and 1999. FSCO's ratio of stockholders' equity to total
assets was 7.70% at year end, up from 7.36% one year ago. The ratio of
tangible common equity to tangible assets was 5.39% at year end, down from
5.57% one year ago, reflecting repurchases of common stock, balance sheet
growth, goodwill recognized with various mergers, and the ongoing origination
of loan servicing rights.
Zions Bancorporation and First Security Corporation Merger Of Equals
On June 6, 1999, FSCO and Zions Bancorporation (Zions; Nasdaq: ZION)
announced the signing of a definitive merger of equals agreement, subject to
regulatory and shareholder approvals.
On December 8, 1999, in connection with the pending merger of equals, FSCO
and Zions announced that they had reached an agreement with the Department of
Justice (DOJ) to divest a combined total of 68 branches, consisting of 60
branches in Utah and 8 branches in Idaho, approximately $2.1 billion in
combined deposits, and approximately $660 million in combined loans. The
sale of certain branches is required by the DOJ in selected geographic areas
to ensure the merger of equals of FSCO and Zions will not have any anti-
competitive effect in any market that is to be served by the new FSCO.
On December 13, 1999, FSCO and Zions received approval on their merger of
equals application from the Federal Reserve Board.
On December 23, 1999, FSCO announced that it was delaying the shareholder
meeting scheduled for December 28, 1999 in connection with its pending merger
of equals agreement with Zions. The need for such delay was the result of
Zions being required to restate its historical financial statements to
reclassify certain of its acquisitions that were previously accounted for as
"pooling-of-interest" transactions to "purchase" transactions. FSCO is
advised that Zions will complete the restatement of its financial statements
by the end of January 2000, enabling FSCO and Zions to complete the approval
process including the holding of stockholder meetings in March and to close
the merger before the end of the first quarter of 2000. Spencer F. Eccles,
FSCO chairman and chief executive officer, stated, "First Security remains
supportive of the plans to bring this exciting merger of equals to completion.
Our employees are fully engaged in planning the implementation of this merger
of equals and will be ready for a closing in March."
On January 18, 2000, FSCO and Zions announced that BancWest Corporation
(NYSE: BWE) will acquire the 68 Zions and FSCO branches and associated
deposits and loans in Utah and Idaho as required by the divestiture agreement
with the DOJ.
National and Regional Economy
The U.S. economy is being propelled by a technology-driven productivity
boom that shows little strain and no sign of ending. The 1990s were the
strongest capital spending cycle in at least 50 years. Current jobless rates
have fallen to levels not experienced in more than 30 years. Since 1982, the
U.S. economy has experienced only 8 months of recession. Perhaps the best
news of all is that we are just scratching the surface of the so-called
"internet economy."
In 1999, the expected intensity of the international financial contagion
turned out to be a blip, not a trend. The expected global financial meltdown
was replaced in 1999 with an emerging international recovery. A surge in U.S.
1998 fourth-quarter exports, combined with aggressive monetary easing and
sharply lower interest rates, helped push real growth higher. In the second
half of 1999, the Federal Reserve reversed all three of the prior monetary
policy easings, and interest rates throughout much of 1999 varied 0.50% to
0.75% above earlier expectations.
For the year 2000, an overriding issue is the Federal Reserve's ability to
help bring the economy in for a soft landing. Predicting precisely how the
Fed will do this is not easy, given the Fed's desire to act before a problem
actually develops combined with the long and variable lag times in which
monetary policy changes impact economic activity.
It is expected that business conditions in 2000 will remain highly
favorable. Nevertheless, in the intensely competitive environment, investors
and the marketplace will be very unforgiving of mediocre performance. As in
any contest, the gold will be claimed by those who provide the best customer
service with the most efficient cost structure.
FSCO's Year 2000 Issues: Year 2000 Completion Disclosure
As of January 19, 2000, FSCO had encountered essentially no problems in any
of its operations in connection with the year 2000 date change. FSCO will
continue to monitor all systems to ensure performance beyond the date change,
and maintain its fully-tested contingency plans to allow for business
resumption should something unforeseen happen, including any problems from 3rd
parties.
The preceding discussion of "FSCO's Year 2000 Issues" constitutes a Year
2000 Readiness Disclosure pursuant to the provisions of the Year 2000
Information Readiness and Disclosure Act and includes forward-looking
statements that involve inherent risks and uncertainties. A number of
important factors could cause the actual impact of Year 2000 issues to
change significantly from what is described in these forward-looking
statements. Those factors include, but are not limited to, ineffective
remediation of computer code and the inability of FSCO's suppliers and
vendors to successfully resolve their individual Year 2000 issues.
Business
First Security Corporation is the West's second largest independent bank
holding company, and is the nation's oldest multistate bank holding company,
having been incorporated on June 15, 1928. At December 31, 1999, FSCO's
banks operated 333 full service domestic bank offices in Utah, Idaho, Oregon,
Wyoming, New Mexico, Nevada, and California.
Internet Address: news, financial updates and information about products
and services can be found on FSCO's web site at www.firstsecuritybank.com.
Forward-Looking Statements
Except for the historical information in this document, the matters
described herein are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. FSCO cautions readers not
to place undue reliance on any forward-looking statements, which speak only
as of the date made.
FSCO advises readers that various risks and uncertainties could affect
FSCO's financial performance and could cause FSCO's actual results for future
periods to differ materially from those anticipated or projected. These risks
and uncertainties include, but are not limited to, those related to: the
economic environment, particularly in the regions where FSCO operates;
competitive products and pricing; changes in prevailing interest rates; credit
and other risks of lending and investment activities; fiscal and monetary
policies of the U.S. and other governments; regulations affecting financial
institutions; acquisitions and the integration of acquired businesses;
technology and associated risks; and other risks and uncertainties affecting
FSCO's operations and personnel.
Be advised that FSCO, as part of its 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.
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.
# # #
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<CAPTION>
FIRST SECURITY CORPORATION
SUMMARY FINANCIAL HIGHLIGHTS
($ in thousands, except per share data and ratios; unaudited) (A)
4th Qtr 4th Qtr Year-To-Date Twelve Months
1999 1998 %Chg 1999 1998 %Chg
<S> <C> <C> <C> <C> <C> <C>
COMMON & PREFERRED STOCK DATA:
Earnings per common share diluted 0.33 0.35 (5.7) 1.38 1.28 7.8
Tangible EPS diluted 0.38 0.41 (7.3) 1.63 1.47 10.9
Dividends paid per common share 0.14 0.13 7.7 0.42 0.39 7.7
Book value per common share [EOP] 9.03 8.54 5.7 9.03 8.54 5.7
Market price (bid) [EOP] 25.500 23.313 9.4 25.500 23.313 9.4
Market price: high bid for the period 29.750 23.313 27.6 29.750 26.167 13.7
Market price: low bid for the period 23.000 15.938 44.3 17.563 15.500 13.3
Market capitalization (mktprice x #shrs) [EOP] 4,997,261 4,352,817 14.8 4,997,261 4,352,817 14.8
Market price / book value per com share [EOP] % 282.39 272.99 282.39 272.99
Dividend payout ratio (DPS / EPS basic) % 41.18 36.11 29.58 29.55
Dividend yield (DPS / mktprice) [EOP] % 2.20 2.23 2.20 2.23
Price / earnings ratio(mktprice/4qtrsEPSbasic) 18.0x 17.5x 18.0x 17.5x
Common shares basic [EOP] 195,971 186,712 5.0 195,971 186,712 5.0
Common shares diluted [Avg] 201,426 193,756 4.0 198,034 193,840 2.2
INCOME STATEMENT:
Net interest income 216,592 186,715 16.0 786,447 703,699 11.8
Net interest income, FTE 219,180 189,431 15.7 796,403 714,080 11.5
Provision for loan losses 19,196 22,861 (16.0) 59,447 71,923 (17.3)
Noninterest income 129,205 132,444 (2.4) 532,975 474,390 12.3
Noninterest expenses 224,432 193,489 16.0 844,445 723,088 16.8
Net income 66,306 67,313 (1.5) 273,342 247,680 10.4
BALANCE SHEET - END OF PERIOD:
Available for sale (AFS) securities 5,528,269 4,764,127 16.0 5,528,269 4,764,127 16.0
Loans, net of unearned income 14,578,537 14,013,417 4.0 14,578,537 14,013,417 4.0
Reserve for loan losses (174,443) (173,350) 0.6 (174,443) (173,350) 0.6
Intangible assets 560,722 409,367 37.0 560,722 409,367 37.0
Total assets 22,992,927 21,689,088 6.0 22,992,927 21,689,088 6.0
Total deposits 13,210,416 12,658,574 4.4 13,210,416 12,658,574 4.4
Total stockholders' equity 1,769,900 1,595,495 10.9 1,769,900 1,595,495 10.9
PROBLEM ASSETS & POTENTIAL PROBLEM ASSETS - END OF PERIOD:
Total nonaccruing loans 59,220 45,812 29.3 59,220 45,812 29.3
Other real estate 8,055 3,617 122.7 8,055 3,617 122.7
Total nonperforming assets 67,275 49,429 36.1 67,275 49,429 36.1
Accruing loans past due 90 days or more 31,948 23,758 34.5 31,948 23,758 34.5
Total problem assets 99,223 73,187 35.6 99,223 73,187 35.6
RECONCILIATION OF THE RESERVE FOR LOAN LOSSES:
Reserve for loan losses, beginning 174,443 169,058 3.2 173,350 157,525 10.0
Total loans charged off (26,106) (29,508) (11.5) (103,646) (94,790) 9.3
Total recoveries of loans charged off 6,910 9,063 (23.8) 36,869 33,889 8.8
Net loans (charged off) recovered (19,196) (20,445) (6.1) (66,777) (60,901) 9.6
Provision for loan losses 19,196 22,861 (16.0) 59,447 71,923 (17.3)
Acquisitions 0 1,876 (100.0) 8,423 4,803 75.4
Reserve for loan losses, ending 174,443 173,350 0.6 174,443 173,350 0.6
BALANCE SHEET - AVERAGE:
Available for sale (AFS) securities 5,803,593 4,870,349 19.2 5,702,497 4,634,580 23.0
Loans, net of unearned income 14,258,274 13,310,822 7.1 13,739,743 12,552,230 9.5
Reserve for loan losses (174,443) (170,129) 2.5 (174,531) (165,585) 5.4
Intangible assets 561,739 371,371 51.3 521,213 345,578 50.8
Total assets 23,326,624 20,438,133 14.1 22,444,792 19,301,016 16.3
Total deposits 13,467,482 12,097,602 11.3 12,887,623 11,760,498 9.6
Total stockholders' equity 1,768,910 1,618,095 9.3 1,689,593 1,527,664 10.6
SELECTED RATIOS (%):
Return on average assets (ROAA) 1.13 1.31 1.22 1.28
Tangible ROAA 1.35 1.56 1.48 1.50
Return on average stockholders' equity (ROAE) 14.87 16.50 16.18 16.21
Tangible ROAE 25.46 25.08 27.70 24.07
Net interest margin, FTE 4.28 4.17 4.03 4.15
Noninterest income / total revenue 37.36 41.50 40.39 40.27
Operating expense ratio 64.42 60.11 63.52 60.84
Stockholders' equity / assets [EOP] 7.70 7.36 7.70 7.36
Stockholders' equity / assets [Avg] 7.58 7.92 7.53 7.91
Tangible common equity / tangible assets [EOP] 5.39 5.57 5.39 5.57
Loans / deposits [EOP] 110.36 110.70 110.36 110.70
Loans / assets [EOP] 63.40 64.61 63.40 64.61
Reserve for loan losses [EOP] /:
Total loans 1.20 1.24 1.20 1.24
Nonaccruing loans 294.57 378.39 294.57 378.39
Nonperforming assets / total loans + other real 0.46 0.35 0.46 0.35
Net loans charged off / average loans 0.53 0.61 0.49 0.49
<FN>
EOP: End Of Period. Avg: Average. EPS: Earnings Per Common Share. DPS: Dividends Per Common Share.
(A) Certain reclassifications of 1998 amounts have been made to conform to 1999 classifications.
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