<PAGE> 1
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ---------- to---------
Commission File number: 1-3750
BOATMEN'S BANCSHARES, INC.
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(Exact name of Registrant as specified in its charter)
Missouri 43-0672260
- ------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
One Boatmen's Plaza, 800 Market Street, St. Louis, Missouri 63101
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(Address of principal executive offices) (Zip Code)
3l4-466-6000
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the Registrant (l) 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
---- ----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Number of Shares Outstanding
Class of Common Stock as of July 31, 1994
- --------------------- ----------------------------
$1 Par Value 104,739,985
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The consolidated financial statements for the three months and six months
ended June 30, 1994 and 1993 which appear on pages 14 through 16 in the
accompanying June 30, 1994 interim report to stockholders (Exhibit 19 of this
report) are incorporated in this Form 10-Q Quarterly Report to be read in
conjunction with the consolidated statement of cash flows on page 3 of this
report. The consolidated financial statements include the accounts of the
Corporation and its subsidiaries after elimination of all material
intercompany transactions. In the opinion of management, all necessary
adjustments, consisting of normal recurring adjustments, have been included
to present fairly the results of operations for the interim periods presented
herein. The results of operations for the three months and six months ended
June 30, 1994 are not necessarily indicative of the results which may be
expected for any other interim period or for the entire year.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Information appearing under "Financial Commentary" on pages 2 through 10 and
the information appearing under "Consolidated Quarterly Earnings Trend" on
page 11 and "Consolidated Average Balance Sheet and Net Interest
Margin" on pages 12 and 13 of the June 30, 1994 interim report to
stockholders are incorporated by reference herein.
2
<PAGE> 3
<TABLE>
BOATMEN'S BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
Six Months Ended
June 30
-------------------------
(In Thousands) 1994 1993
- -------------- ---- ----
<S> <C> <C>
Net cash provided by operating activities $ 332,370 $ 178,616
----------- -----------
Investing Activities:
Net decrease in Federal funds sold and
securities purchased under resale agreements 19,252 1,020,740
Net increase in loans (870,024) (251,854)
Proceeds from the sales of foreclosed property 19,548 40,555
Proceeds from the maturity of held to maturity
securities 293,202 917,246
Proceeds from sales of held to maturity securities 33,600
Purchases of held to maturity securities (1,053,790) (1,738,064)
Proceeds from the maturity of available for sale
securities 849,166 16,444
Proceeds from sales of available for sale
securities 53,490
Purchases of available for sale securities (287,366) (61,199)
Net (increase) decrease in short-term investments (53,795) 47,896
Net increase in property and equipment (65,756) (35,377)
Net cash received from purchase acquisitions 468,011
----------- -----------
Net cash provided (used) by investing activities (1,096,073) 457,998
----------- -----------
Financing Activities:
Net increase in Federal funds purchased and
securities sold under repurchase agreements 1,269,682 147,203
Net decrease in deposits (722,744) (1,048,380)
Net increase in short-term borrowings 251,993 41,793
Payments on long-term debt (613) (8,364)
Proceeds from the issuance of long-term debt 28,850 99,313
Payments on capital lease obligation (433) (394)
Cash dividends paid (64,564) (54,406)
Common stock issued pursuant to various employee
and shareholder stock issuance plans 2,419 10,205
Decrease in redeemable preferred stock (13) (4)
----------- -----------
Net cash provided (used) by financing activities 764,577 (813,034)
----------- -----------
Increase (decrease) in cash and due from banks 874 (176,420)
Cash and due from banks at beginning of year 1,608,051 1,771,021
----------- -----------
Cash and due from banks at June 30 $ 1,608,925 $ l,594,601
=========== ===========
</TABLE>
For the six months ended June 30, 1994 and 1993, interest paid totaled $333
million and $319 million, respectively. Income taxes paid totaled $99.0
million for the first six months of 1994 and $82.7 million for the same period
in 1993. Additional common stock was issued upon conversion of $228 thousand
of the Corporation's convertible debt for the six months ended June 30, 1994
and $13.4 million for the same period in 1993. Loans transferred to
foreclosed property totaled $12.1 million for the six months ended June 30,
1994, and $17.8 million for the same period in 1993. In 1993, assets and
liabilities of acquired subsidiaries at dates of acquisition included
securities of $78 million, loans of $885 million, cash of $480 million, other
assets of $434 million, deposits of $1.9 billion and other liabilities of $14
million.
3
<PAGE> 4
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Registrant's Annual Meeting of Shareholders was held on April 26,
1994. Proxies for the meeting were solicited pursuant to Regulation
14A of the Securities Exchange Act of 1934, as amended.
At this annual meeting, the shareholders (1) elected management's
five director nominees and (2) approved an amendment to Registrant's
Restated Articles of Incorporation increasing the authorized shares
of common stock from 125,000,000 to 150,000,000. The amendment in-
creasing the authorized shares has no effect on the rights of the
holders of common stock. There was no solicitation in opposition to
management's director nominees.
<TABLE>
Following is a tabulation of the voting for directors:
<CAPTION>
Voting Cast
-----------------------
Nominee For Withheld
------- --- --------
<S> <C> <C>
B.A. Bridgewater, Jr. 82,337,997 1,895,515
John E. Hayes, Jr. 82,415,266 1,843,531
Samuel B. Hayes, III 82,354,510 1,890,549
Jerry E. Ritter 83,136,939 1,792,435
William P. Stiritz 82,066,105 2,115,233
</TABLE>
With respect to the amendment to the Restated Articles of
Incorporation, there were 78,836,683 shares voted "For" and
4,516,553 shares voted "Against", with 772,578 shares
abstaining and 0 broker non-votes.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10. Boatmen's Supplemental Retirement Plan Participation
Agreement dated June 22, 1994, between the Corporation
and Samuel B. Hayes, III.
19. Boatmen's Bancshares, Inc. Report for the
Period Ending June 30, 1994.
(b) Registrant did not file any reports on Form 8-K during
quarter ended June 30, 1994.
4
<PAGE> 5
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.
BOATMEN'S BANCSHARES, INC.
--------------------------
(Registrant)
Date: August 9, 1994 /s/ JAMES W. KIENKER
-------------- -------------------------------------
James W. Kienker, Executive Vice
President and Chief Financial Officer
(On behalf of the Registrant and as
Principal Financial and Accounting
Officer)
<PAGE> 1
BOATMEN'S SUPPLEMENTAL RETIREMENT PLAN
PARTICIPATION AGREEMENT
THIS AGREEMENT is made as of June 22, 1994, between Boatmen's
Bancshares, Inc. ("Corporation") and Samuel B. Hayes, III ("Participant").
The Corporation and the Participant mutually agree as follows:
1. The Participant has received a copy of the Boatmen's Supplemental
Retirement Plan ("Plan") and has read and understands the Plan.
2. By completion of the Agreement, the Participant agrees to comply
with the terms of the Plan in all respects.
3. All provisions of the Plan are hereby made a part of the agreement.
4. The following special provisions are applicable the participant's
participation in the plan: For purposes of Section 3.1(i), the participant
shall receive the greater of:
a) thirty (30.00) years of credited service at age 65; or
b) the actual number of years of credited service accrued using an
employment commencement date of November 1, 1971.
BOATMEN'S BANCSHARES, INC.
By: /s/ ARTHUR J. FLEISCHER 6/30/94
---------------------------------
Date
/s/ SAMUEL B. HAYES, III 6/30/94
---------------------------------
Participant Date
<PAGE> 1
FINANCIAL COMMENTARY
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ACQUISITION OVERVIEW
Over the last several years the Corporation has made numerous sizeable
acquisitions establishing dominant positions in Missouri and New Mexico,
and significant presences in southern Illinois, western Tennessee,
Oklahoma, Arkansas and northern Texas. In 1993 and through the six months
of 1994 the Corporation completed seven acquisitions in four states
aggregating $2.9 billion in total assets. The Corporation's operations
currently span nine states, with services delivered from over 400 branch
locations and approximately 420 off-premise ATM's. A summary of the
acquisitions consummated in 1993 and 1994 is provided below.
Oklahoma and Arkansas Acquisitions
On May 26, 1993, the Corporation, through its Oklahoma and Arkansas
subsidiaries, acquired 20 branches of the former Cimarron Federal Savings
Association (Cimarron), in an RTC assisted transaction for $13.1 million
in cash. Assets purchased, consisting primarily of cash and investment
securities, and deposits assumed totaled approximately $430 million. Two
locations, with deposits of approximately $60 million, became branches of
the Corporation's Oklahoma bank, and the other 18 locations, primarily
located in eastern Oklahoma, became branches of the Corporation's
Arkansas thrift subsidiary, Superior Federal Bank (Superior), which is
headquartered in Fort Smith, Arkansas. Superior, with assets of $1.2
billion, is the third largest financial institution in the state,
providing services from 57 locations in two states, 39 of which are
located in central and northwestern Arkansas and 18 locations in eastern
Oklahoma.
On March 31, 1994, the Corporation acquired Woodland Bancorp, Inc.
(Woodland), a retail banking organization with assets of approximately $65
million, in a pooling transaction resulting in the issuance of .4 million
shares of common stock. Woodland is located in Tulsa, Oklahoma and was merged
into the Corporation's Oklahoma bank with total assets now approximating $1.6
billion with services provided from 19 locations primarily within the Oklahoma
City and Tulsa metropolitan areas.
Texas Acquisitions
On March 5, 1993, the Corporation, through its subsidiary bank, Sunwest
Bank of El Paso, acquired First City's former bank in El Paso under an
FDIC assisted transaction for $14 million in cash. This bank, with assets
of approximately $340 million, was merged into the Sunwest Bank of El
Paso providing intramarket operating efficiencies. As a result of this
transaction, the Corporation's El Paso bank increased its asset size to
approximately $510 million and has attained a significant market share in
the El Paso metropolitan area.
On November 30, 1993, the Corporation acquired First Amarillo
Bancorporation, Inc. (Amarillo), in a transaction accounted for as a
pooling of interests. Under terms of the agreement, the Corporation
exchanged .912 shares of its common stock for each share of Amarillo,
resulting in the issuance of approximately 5.9 million shares of common
stock. Amarillo, with assets at June 30, 1994 of approximately $1.0
billion, is located in Amarillo, Texas and has the leading market share
in this north Texas market.
On May 6, 1994, the Corporation completed the acquisition of Eagle
Management and Trust Company (Eagle), an investment advisory firm located in
Houston. Eagle, with $1.4 billion in trust assets, will not have a material
impact on near-term financial results.
On May 19, 1994, the Corporation announced a definitive agreement to
acquire Dalhart Bancshares, Inc. (Dalhart), in a transaction involving
the issuance of approximately .7 million shares of Boatmen's common stock
for all of the shares of Dalhart. Dalhart, with assets of approximately
$140 million, is located in north Texas, and will be merged with the
Corporation's Amarillo subsidiary, further enhancing the Corporation's
leading market share in this north Texas market. This acquisition, which
is subject to approval by Dalhart shareholders and regulatory agencies,
is expected to be completed in the fourth quarter of this year.
Missouri Acquisition
On April 23, 1993, the Corporation, through its Kansas City bank,
acquired Missouri Bridge Bank, N.A., the former Metro North State Bank
and Merchants Bank under an assisted transaction with the FDIC. Boatmen's
First National Bank of Kansas City acquired $1.1 billion of certain
assets and assumed the same amount of deposit liabilities for a premium
of $15.8 million. As a result of this transaction, the Corporation
increased its assets in the Kansas City metropolitan area to
$3.9 billion, further solidifying its leading position in this market.
Assets purchased included loans of approximately $960 million and other
assets totaling $180 million, consisting primarily of investment
securities, cash and short-term investments. The
<TABLE>
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<CAPTION>
Table 1: Acquisitions-1994 and 1993 Accounting
Date State Assets Price Shares issued method
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<S> <C> <C> <C> <C> <C> <C>
COMPLETED
FDIC assisted-First City-El Paso 3/93 Texas $ .3 billion $ 14 million cash - Purchase
FDIC assisted-Missouri Bridge Bank 4/93 Missouri 1.1 billion 16 million cash - Purchase
RTC assisted-Cimarron Federal Savings 5/93 Oklahoma .4 billion 13 million cash - Purchase
FCB Bancshares, Inc. 8/93 Kansas .2 billion 25 million cash - Purchase
First Amarillo Bancorporation, Inc. 11/93 Texas .8 billion 192 million stock 5.9 million Pooling
Woodland Bancorp, Inc. 3/94 Oklahoma .1 billion 12 million stock .4 million Pooling
Eagle Management and Trust Company 5/94 Texas - 3 million cash - Purchase
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets of completed transactions $2.9 billion
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PENDING
Dalhart Bancshares, Inc. Texas $ .1 billion 23 million stock .7 million Pooling
National Mortgage Company Tennessee .4 billion 153 million stock 5.0 million Pooling
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets of pending transactions $ .5 billion
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</TABLE>
2 Boatmen's Bancshares, Inc.
<PAGE> 2
FINANCIAL COMMENTARY
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Corporation retained eight of the bank's 15 branches and purchased the premises
and equipment at fair market value.
As part of the transaction, the Corporation entered into a five-year
loss-sharing arrangement with the FDIC with respect to approximately $950
million in multi-family residential, commercial real estate, construction
and commercial and industrial loans. For a more complete description of
the loss-sharing arrangement, refer to the Segregated Assets section of
this report.
Kansas Acquisition
On August 2, 1993, the Corporation consummated the acquisition of FCB
Bancshares, Inc., a one-bank holding company located in Overland Park,
Kansas with assets of approximately $185 million, for $25 million in
cash. This acquisition represents the Corporation's initial entry into
Kansas and is a natural extension of the Corporation's Kansas City
franchise.
Tennessee Acquisition
On May 6, 1994, the Corporation announced an agreement to acquire
National Mortgage Company (National Mortgage), headquartered in Memphis,
Tennessee, in a transaction to be accounted for as a pooling of
interests. Under terms of the agreement, the Corporation will exchange
not more than 5.0 million shares of its common stock for all of the stock
of National Mortgage. At the date of announcement, the transaction had a
value of approximately $153 million, which represented 1.2% of
NationalMortgage's mortgage servicing portfolio. National Mortgage is a
privately-owned, full-service mortgage banking company which originates
home loans through 10 company-operated offices as well as through a
network of over 300 correspondents located in the Southern and Midwestern
United States, and presently services mortgage loans totaling
approximately $13.5 billion. When combined with the
<TABLE>
- ----------------------------------------------------------------
Table 2: Asset Distribution
<CAPTION>
June 30, 1994 (in billions) Assets % of total
- ----------------------------------------------------------------
<S> <C> <C>
Missouri $17.0 61.6%
New Mexico 3.1 11.2
Oklahoma 1.9 6.9
Texas 1.5 5.4
Iowa 1.2 4.4
Illinois 1.0 3.6
Arkansas .9 3.3
Tennessee .8 2.9
Kansas .2 .7
- ----------------------------------------------------------------
Total $27.6 100.0%
- ----------------------------------------------------------------
</TABLE>
Corporation's existing servicing portfolio, Boatmen's will rank among the
30 largest mortgage servicers in the country. The acquisition, which is subject
to approval by National Mortgage shareholders and regulatory agencies, is
expected to be completed in the fourth quarter of this year.
A summary of the Corporation's asset distribution by state is provided in
Table 2.
EARNINGS OVERVIEW
Net income for the second quarter of 1994 increased to $88.0 million, up
10.4% from the same period of last year and net income per share was
$.84, an increase of 9.1%. For the six months, net income increased 9.2%
to $173.6 million, and net income per share was $1.66 compared to $1.54
per share a year ago, an increase of 7.8%. The earnings growth was
attributable to higher net interest income and noninterest income, as
well as a lower provision for loan losses, which was offset in part by
higher noninterest expense. Five purchase acquisitions were consummated
during the period from March 1, 1993, through June 30, 1994; therefore,
the results of operations of these companies are included in the
consolidated financial statements only subsequent to the dates of
acquisition and must be considered when reviewing the trended financial
information. In addition, the results of operations of Woodland, which
qualified as a pooling of interests, are not included in the consolidated
financial statements prior to January l, 1994, due to the immaterial
effect on the Corporation's financial results.
For the second quarter, the return on average assets was 1.28% and the
return on equity was 16.30%, compared to 1.29% and 16.26%, respectively,
for the same period last year. For the six months, the return on average
assets was 1.29% and the return on equity was 16.11%, compared to 1.31%
and 16.50%, respectively, in 1993. The returns in 1993 reflect a one-time
$6.0 million gain in the first quarter of 1993 from an income tax accounting
change at the Corporation's Amarillo subsidiary, which was acquired in the
fourth quarter of 1993. Excluding the accounting change, the year-to-date
return on assets and return on equity in 1993 would have been 1.26% and 15.90%,
respectively.
Net interest income, on a fully-taxable equivalent basis, increased 4.5%
over the second quarter of 1993 and 5.1% for the six months principally
due to an increase in average earning assets, which was partially offset
by a decrease in the net interest margin. The net interest margin was
4.33% for both the second quarter and six months of 1994, a decline of
approximately 25 basis points from the same periods last year.
Noninterest income increased 4.9% over the second quarter of 1993 and
10.8% for the six months. Excluding acquisitions, year-to-date
noninterest income increased 5.7% as most categories of noninterest
income increased from the prior year level.
Noninterest expense was up 5.0% from the second quarter of last year and
8.7% for the six months. Excluding purchase acquisitions, noninterest
expense increased 3.5% for the quarter and 5.0% for the six months.
The provision for loan losses for the second quarter totaled $7.4
million, representing a decrease of 53.7% from the second quarter of last
year, but was up $1.7 million or 30.6% from the first quarter. For the
six months, the provision for loan losses totaled $13.0 million, a
decrease of 63.1%
<TABLE>
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Table 3: Earnings Per Share Analysis
<CAPTION>
2ND QTR. '94 2nd Qtr. '94 YTD '94
Per share VS. 2ND QTR. '93 vs. 1st Qtr. '94 vs. YTD '93
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income prior period $.77 $.82 $1.54
- --------------------------------------------------------------------------------------
Net interest income .11 .08 .25
Provision for loan losses .08 (.02) .22
Noninterest income .06 .24
Noninterest expense (.11) (.02) (.38)
Income tax expense (.06) (.02) (.19)
Impact of additional shares of
common stock (.01) (.02)
- --------------------------------------------------------------------------------------
Net increase .07 .02 .12
- --------------------------------------------------------------------------------------
Net income current period $.84 $.84 $1.66
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</TABLE>
1994 Quarterly Report 3
<PAGE> 3
FINANCIAL COMMENTARY
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from the same period of last year. The lower loan loss provision reflected
continued improvement in asset quality as evidenced by lower levels of actual
loan losses and further declines in nonperforming and criticized loans. For the
six months, net loan charge-offs totaled $11.1 million, a decrease of $3.4
million or 23.4% from the same period last year. Net charge-offs in the second
quarter totaled $8.7 million and included $6.0 million pertaining to one
credit. Net charge-offs as a percentage of average loans dropped to .15%
compared to .21% for the six months of last year and .24% for all of 1993.
Presented in Table 3 is an income statement analysis expressed on a per
share basis for the three month and six month periods ended June 30,
1994, compared to the same periods last year and the three months ended
March 31, 1994. A more detailed discussion and analysis of the major
factors impacting the comparability between periods is provided
throughout this report.
NET INTEREST INCOME
Measured on a fully-taxable equivalent basis, net interest income
increased 4.5% over the second quarter of 1993 and 5.1% for the six
months. These increases were primarily due to growth in average earning
assets which was partially offset by a lower net interest margin. Average
earning assets increased 11.0% over the second quarter of last year and
11.1% for the six months primarily due to increased internal loan
production and expansion of the securities portfolio, supplemented by
growth through acquisitions.
Loans, the highest yielding earning asset, increased 11.1% over the second
quarter of 1993 and 12.5% for the six months. Loans represented 63.2% of
average earning assets for the six months of 1994, compared to 62.4% for
the same period last year. Held to maturity and available for sale
securities increased 14.6% for the six months, representing 35.4% of
average earning assets, up from 34.3% for the same period last year. This
increase reflects redeployment of short-term money market instruments and
funds received from regulatory assisted transactions to the securities
portfolio, coupled with a planned expansion of the portfolio at the
Corporation's Amarillo subsidiary which was acquired in the fourth quarter
of 1993.
After several periods of steady improvement, the Corporation experienced
an anticipated contraction in the net interest margin over the second half
of 1993 which continued into the first quarter of 1994. The margin
stabilized in the second quarter at 4.33%, basically unchanged from the
first quarter, but was down 27 basis points from the second quarter of
last year when the margin was 4.60%. A similar decline also occurred for
the six-month period, primarily due to a reduction in the yield earned on
mortgage-related assets. The anticipated decline in yields on these assets
was accelerated by historically high levels of prepayment activity and
subsequent reinvestment into securities with lower yields.
<TABLE>
- -----------------------------------------------------------------------------------------------------------
Table 4: Summary of Net Interest Income
<CAPTION>
Second Quarter Ended June 30 Six Months Ended June 30
- -----------------------------------------------------------------------------------------------------------
(in millions) 1994 1993 % change 1994 1993 % change
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Average loans $15,506.7 $13,958.8 11.1% $15,233.0 $13,545.7 12.5%
Average earning assets 24,502.1 22,080.5 11.0 24,098.4 21,695.9 11.1
Average core deposits 17,985.0 17,551.9 2.5 18,029.4 17,119.2 5.3
Average purchased funds 4,774.0 2,866.2 66.6 4,305.7 2,910.7 47.9
Net interest income (FTE) 265.0 253.7 4.5 522.0 496.8 5.1
Net interest margin 4.33% 4.60% 4.33% 4.58%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Prepayments slowed substantially in the second quarter and, based on the
current interest rate environment, the Corporation anticipates stability in the
net interest margin in the near term. The average yield on earning assets
for the six months of 1994 declined 36 basis points from the same period
last year compared to a 27 basis point decline in the rate paid on
deposits. During this same period, lending spreads narrowed as the surface
spread between the prime rate and Federal funds dropped from 300 basis
points to 290 basis points.
The impact of the narrower spreads was offset to some extent by an
increased contribution from the interest rate swap portfolio. An integral
component of the Corporation's overall asset/liability management
strategies is the management of interest rate risk through the prudent use
of interest rate swaps. Interest rate swaps are an effective mechanism to
hedge cash market instruments due to the inherent advantages related to
flexibility in product structure and size, liquidity and capital. The swap
portfolio is currently being used to alter the interest rate sensitivity
of a portion of the Corporation's prime-based loan portfolio and to modify
the interest rate sensitivity of subordinated debt. In 1994, the
Corporation added new swap transactions with a notional amount of $1.0
billion and $550 million of swaps matured, such that at June 30, 1994,
interest rate swaps totaled $2.2 billion. The swap portfolio increased net
interest income by approximately $13.9 million for the six months of 1994,
adding 12 basis points to the net interest margin, compared to $9.6
million or 9 basis points in the same period last year. The average rate
received at June 30,1994 was 5.43% compared to an average rate paid of
4.64%, and the average remaining maturity of the total portfolio was less
than two years. The estimated fair value of the swap portfolio was $(109)
million at June 30, 1994, based on discounted cash flow models. Given that
these swaps are valued using interest rates at quarter end, the estimated
fair value is not necessarily indicative of the future net interest
potential of the portfolio over its remaining life. Approximately 90% of
the portfolio is comprised of indexed amortizing swaps; accordingly, the
maturity distribution could modestly lengthen if interest rates were to
increase significantly from current levels. Any future utilization of off-
balance sheet financial instruments will be determined based upon the
Corporation's overall interest rate sensitivity position and
asset/liability management strategies, which are designed to limit
interest rate risk exposure to no more than 5% of projected annual net
income.
While the Corporation is primarily an end-user of derivative instruments,
it does serve in a limited capacity as an intermediary to meet the
financial needs of its customers. The notional value of the customer swap
portfolio at June 30,1994 totaled approximately $300 million. Interest
rate risk associated with maintaining this portfolio is controlled by
entering into offsetting positions with third parties.
4 Boatmen's Bancshares, Inc.
<PAGE> 4
FINANCIAL COMMENTARY
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NONINTEREST INCOME
Noninterest income increased 4.9% over the second quarter of 1993 and
10.8% for the six months, primarily due to growth in trust fees, service
charge income, and credit card fees which was partially offset by a
decline in mortgage banking revenues. Excluding the effect of
acquisitions, noninterest income increased 5.7% over the six months of
last year. Recent strategic initiatives have emphasized the expansion of
fee-based services as a means to stabilize the earnings stream and reduce
the Corporation's exposure to interest rate and credit risk. As such, the
Corporation has focused on increasing noninterest revenues, principally
through expansion of its trust and retail lines of business. Noninterest
income as a percentage of operating revenues was 33.2% for the six months
of 1994, compared to 32.1% for the same period of 1993.
Trust fees increased 1.9% over the second quarter of 1993 and 6.7% for
the six months primarily due to new business volume within the personal
and pension/institutional lines. Trust fees were down slightly from the
first quarter of 1994 as new business volume was more than offset by
narrower spreads on securities lending activity and declines in market
value of trust assets on which some fees are based. Trust assets under
management totaled $34.2 billion at June 30, 1994, compared to $34.3
billion at June 30, 1993 and $34.1 billion at December 31, 1993. Trust
assets under management at June 30, 1994, include the second quarter
acquisition of Eagle Management and Trust Company, which was partially
offset by the impact of declining stock market values.
<TABLE>
- ------------------------------------------------------------------------------------------------
Table 5: Summary of Noninterest Income
<CAPTION>
Second Quarter Ended June 30 Six Months Ended June 30
- ------------------------------------------------------------------------------------------------
(in millions) 1994 1993 % change 1994 1993 % change
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Trust fees $ 38.7 $ 38.0 1.9% $ 77.9 $ 73.0 6.7%
Service charges 40.7 37.8 7.8 80.8 72.8 11.0
Credit card 15.9 13.3 19.7 30.9 24.9 24.3
Investment banking
profits and fees 8.8 8.9 (1.1) 16.7 17.4 (3.9)
Securities gains, net .7 .7 3.3 .8 305.3
Mortgage banking operations 1.3 3.8 (65.8) 4.2 6.8 (38.2)
Other 24.0 21.5 11.6 46.1 38.9 18.5
- ------------------------------------------------------------------------------------------------
Total noninterest income $130.1 $124.0 4.9% $259.9 $234.6 10.8%
- ------------------------------------------------------------------------------------------------
As % of operating income 32.9% 32.8% 33.2% 32.1%
- ------------------------------------------------------------------------------------------------
Revenue per full-time
equivalent employee
(in thousands) $109.8 $108.9 $108.8 $107.6
- ------------------------------------------------------------------------------------------------
</TABLE>
Service charge income increased 7.8% over the second quarter of 1993 and
11.0% for the six months. These increases reflect growth through recent
purchase acquisitions, increased penetration of the retail market and
higher fees on corporate customer accounts. Excluding acquisitions,
service charge income increased 5.6% over the second quarter of 1993 and
7.3% for the six months. Investment banking profits and fees decreased
1.1% from the second quarter of 1993 and 3.9% for the six months as
current financial market conditions have had a negative impact on foreign
exchange, bond trading and retail brokerage business.
Credit card income totaled $15.9 million in the second quarter of 1994
and $30.9 million for the six months, increases of 19.7% and 24.3%,
respectively, over the prior year periods. Most of this increase reflects
growth in transaction volume of merchant business, which is also
reflected in the increase in credit card expense and is in large measure
a function of retail sales. Income from mortgage banking operations
totaled $1.3 million for the second quarter of 1994 and $4.2 million for
the six months, decreases of 65.8% and 38.2%, respectively, from the
prior year periods, reflecting the impact of rising interest rates which
decreased market gains on mortgage loans sold as well as mortgage loan
originations and refinancings.
For the six months of 1994, securities gains of $3.3 million were
recognized from the sale of approximately $53.5 million of available for
sale securities, most of which occurred in the first quarter. Other
noninterest income increased $2.5 million or 11.6% over the second
quarter of 1993 and $7.2 million or 18.5% for the six months. Other
noninterest income in 1994 includes segregated asset income totaling $6.7
million.
NONINTEREST EXPENSE
Noninterest expense increased 5.0% from the second quarter of 1993 and
8.7% for the six months. Excluding the effect of acquisitions, noninterest
expense increased 3.5% from the second quarter of 1993 and 5.0% for the
six months, due primarily to increased staff expense, higher depreciation
expense on equipment enhancements and increased credit card expense. The
efficiency ratio was 62.3% for the six months of 1994, compared to 61.3%
for the same period of last year, but in the most recent quarter improved
to 61.9%. The year-to-year increase reflects the impact of acquisitions
and expansion in the retail line of business, coupled with lower growth in
net interest income.
<TABLE>
- ------------------------------------------------------------------------------------------------------------
Table 6: Summary of Noninterest Income and Noninterest Expense
Excluding Effect of Acquisitions
<CAPTION>
Second Quarter Ended June 30 Six Months Ended June 30
- ------------------------------------------------------------------------------------------------------------
(in millions) 1994 1993 % change 1994 1993 % change
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Noninterest income:
Trust fees $ 37.3 $ 37.3 -% $ 75.5 $ 72.3 4.4%
Service charges 39.3 37.2 5.6 76.9 71.7 7.3
Other 47.0 48.3 (2.7) 93.8 88.9 5.5
- ------------------------------------------------------------------------------------------------------------
Total noninterest income $123.6 $122.8 .7% $246.2 $232.9 5.7%
- ------------------------------------------------------------------------------------------------------------
Noninterest expense:
Staff $119.8 $113.7 5.4% $238.6 $224.4 6.3%
Occupancy and equipment 36.7 34.8 5.5 72.0 68.9 4.5
Other 78.5 78.6 (.1) 151.4 146.5 3.3
- ------------------------------------------------------------------------------------------------------------
Total noninterest expense $235.0 $227.1 3.5% $462.0 $439.8 5.0%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Staff expense, the largest component of noninterest expense, increased
7.0% from the second quarter of 1993, and 8.8% for the six months. The
number of full-time
1994 Quarterly Report 5
<PAGE> 5
FINANCIAL COMMENTARY
- --------------------------------------------------------------------------------
equivalent employees (FTE's) increased from 14,213 at
June 30, 1993 to 14,485 at June 30, 1994, principally due to acquisitions.
Excluding the effect of acquisitions, staff expense increased 5.4% for the
second quarter of 1994 and 6.3% for the six months, reflecting a planned
expansion of the retail sales force, normal merit adjustments and
increased costs of incentive and other employee benefit programs. While
additional FTE's were added as a result of the retail expansion,
compensation expense for a large portion of these positions bears a direct
relationship to revenue volume.
Equipment expense increased 11.9% over the second quarter of 1993 and
11.3% for the six months, primarily due to the acquisitions and higher
depreciation expense associated with investments in capital expenditures
for upgraded computer systems and software mainly to support trust and
retail business expansion.
Foreclosed property costs reflected gains on sales of foreclosed property
of $4.8 million and $7.6 million for the six months of 1994 and 1993,
respectively; which more than offset operating expenses and writedowns to
other parcels of foreclosed property. Much of the gains during both
periods were recognized at the Corporation's New
<TABLE>
- ------------------------------------------------------------------------------------------------------------
Table 7: Summary of Noninterest Expense
<CAPTION>
Second Quarter Ended June 30 Six Months Ended June 30
- ------------------------------------------------------------------------------------------------------------
(in millions) 1994 1993 % change 1994 1993 % change
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Staff expense $123.9 $115.8 7.0% $247.0 $227.0 8.8%
Occupancy 16.8 16.9 (.9) 33.4 33.2 .5
Equipment 20.8 18.6 11.9 40.8 36.7 11.3
FDIC insurance 11.4 10.8 6.0 22.9 21.8 5.2
Credit card 10.1 8.7 16.3 19.2 15.8 21.0
Printing, postage, paper 9.5 9.1 4.4 19.0 17.9 6.1
Intangible amortization 8.3 7.4 12.2 16.6 12.4 33.9
Professional fees 3.7 4.4 (15.9) 9.3 9.6 (3.1)
Federal Reserve
processing charges 2.4 2.5 (4.0) 4.6 5.0 (8.0)
Advertising 7.1 6.7 6.0 13.2 11.4 15.8
Communications 5.1 4.5 13.3 10.0 8.6 16.3
Foreclosed property costs, net (1.6) (2.0) 21.0 (2.7) (3.6) 24.9
Other 27.1 29.5 (8.1) 53.8 52.5 2.5
- ------------------------------------------------------------------------------------------------------------
Total noninterest expense $244.6 $232.9 5.0% $487.1 $448.3 8.7%
- ------------------------------------------------------------------------------------------------------------
Efficiency ratio 61.9% 61.7% 62.3% 61.3%
- ------------------------------------------------------------------------------------------------------------
Number of full-time
equivalent employees 14,485 14,213
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Mexico subsidiary.
Goodwill and core deposit premium amortization totaled $8.3 million for
the second quarter of 1994 and $16.6 million for the six months, increases
of 12.2% and 33.9%, respectively, over the prior year periods, reflective
of the aforementioned purchase acquisitions consummated subsequent to
March 1, 1993.
A summary of noninterest income and expense categories excluding the
impact of purchase acquisitions is provided in Table 6.
TAXES
The Corporation's effective tax rate rose to 34.4% for the six months of
1994, compared to 31.1% for the same period of last year. The effective
tax rate in 1993 was unusually low due to a one-time, $6.0 million reduction in
income tax expense from adoption of SFAS 109, "Accounting for Income Taxes" at
the Corporation's Amarillo, Texas subsidiary, which was acquired in November
1993. On a prospective basis, the effective tax rate should continue to
approximate the statutory rate, adjusted for normal operating items such as
tax-exempt interest, goodwill amortization and other nondeductible expenses.
PROVISION FOR LOAN LOSSES
The provision for loan losses totaled $7.4 million in the second quarter
of 1994, a decrease of 53.7% from the second quarter of last year when the
provision totaled $15.9 million, but increased $1.7 million or 30.6% from
the first quarter. For the six months, the provision for loan losses
totaled $13.0 million, a decline of $22.3 million or 63.1% from the same
period last year. These declines reflect continued improvement in asset
quality as evidenced by lower levels of actual loan losses, further
declines in nonperforming loans and a continued downward trend in
criticized loans identified through the Corporation's internal risk rating
system. At June 30, 1994, the reserve for loan losses represented 240% of
nonperforming loans compared to 195% at December 31, 1993, and 173% at June 30,
1993. The reserve for loan losses as a percentage of net loans was 2.19%
compared to 2.32% at June 30, 1993, and 2.30% at year-end 1993. Consistent with
the decrease in nonperforming and criticized loans, year-to-date net loan
charge-offs declined to $11.1 million, a decrease of $3.4 million or 23.4% from
the same period of 1993. Net charge-offs in the second quarter of 1994 totaled
$8.7 million, and included $6.0 million pertaining to one credit. Annualized
net charge-offs as a percentage of average loans dropped to .15% compared to
.21% for the same period of last year and .24% for all of 1993.
<TABLE>
- ------------------------------------------------------
Table 8: Summary of Reserve
for Loan Losses
<CAPTION>
June 30 (in millions) 1994 1993
- ------------------------------------------------------
<S> <C> <C>
Balance, beginning
of year $341.1 $302.0
- ------------------------------------------------------
Loans charged off (35.0) (33.8)
Recoveries on loans
previously charged off 23.9 19.3
- ------------------------------------------------------
Net charge-offs (11.1) (14.5)
Provision charged
to expense 13.0 35.3
Reserves of acquired
subsidiaries .9 7.6
- ------------------------------------------------------
Balance, end of period $343.9 $330.4
- ------------------------------------------------------
Reserve at end of period:
Loan reserve as %
of net loans 2.19% 2.32%
Loan reserve as %
of nonperforming
loans 239.84 173.37
Net charge-offs as
% of average loans .15 .21
- ------------------------------------------------------
</TABLE>
6 Boatmen's Bancshares, Inc.
<PAGE> 6
FINANCIAL COMMENTARY
- -------------------------------------------------------------------------------
NONPERFORMING ASSETS
Nonperforming assets, which include nonperforming loans and foreclosed
property, declined $79.6 million or 24.2% from June 30, 1993, and $35.6
million or 12.5% from year-end 1993. As a percent of total loans and foreclosed
property, nonperforming assets declined to 1.58% compared to 2.28% at June 30,
1993, and 1.90% at December 31, 1993. The decline in nonperforming asset levels
over the last several quarterly periods reflects a stronger economy and the
effectiveness of the Corporation's comprehensive loan administration and
workout procedures which has slowed the inflow of new problem loans. As a
percentage of total assets, nonperforming assets fell below the 1.0% level to
.91%. Nonperforming loans at June 30, 1994, declined to $143.4 million or .91%
of total loans, the lowest level in several years, compared to 1.17% at
December 31, 1993, and 1.33% at June 30, 1993. Table 11 summarizes the
nonperforming assets by major banking unit/geographic location and illustrates
the broad-based improvement achieved.
As part of management's overall portfolio analysis, ongoing credit
quality reviews are performed to evaluate risk inherent in the portfolio
and potential risk that may develop in the future. A critical element in
assessing portfolio risk is the level of criticized loans. The
Corporation's internal risk rating system designates specific credits as
criticized loans, which include all nonperforming loans and other loans
which contain features presenting more than the normal risk of
collectibility. Criticized and classified assets from regulatory
examinations are an integral component of the risk rating system. As
displayed in Table 10, criticized loans totaled $649.5 million or 4.12%
of loans at June 30, 1994, a decline of over $150 million from June 30,
1993, when criticized loans were 5.60% of loans. Management carefully
analyzes changes and trends in both nonperforming and criticized loans in
assessing the risk characteris-
<TABLE>
- ------------------------------------------------------------------------------------------------------------
Table 9:Summary of Nonperforming Assets
<CAPTION>
(in millions) JUNE 30, 1994 December 31, 1993 June 30, 1993
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nonaccrual $117.8 $142.9 $161.5
Restructured 7.2 14.8 12.4
Past due 90 days or more 18.4 17.2 16.7
- ------------------------------------------------------------------------------------------------------------
Total nonperforming loans 143.4 174.9 190.6
- ------------------------------------------------------------------------------------------------------------
Foreclosed property 106.5 110.6 138.9
- ------------------------------------------------------------------------------------------------------------
Total nonperforming assets $249.9 $285.5 $329.5
- ------------------------------------------------------------------------------------------------------------
Nonperforming loans as % of total loans .91% 1.17% 1.33%
Nonperforming assets as % of total loans
and foreclosed property 1.58 1.90 2.28
Nonperforming assets as % of total assets .91 1.07 1.29
Loan reserve as % of nonperforming loans 239.84 195.03 173.37
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------
Table 10: Loans Designated as Criticized Loans by Internal Risk Rating System
<CAPTION>
Criticized Loans
- ------------------------------------------------------------------------------------------------------------
(in millions) Nonperforming Performing Total
- ------------------------------------------------------------------------------------------------------------
1993
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
March 31 $226.5 $653.6 $880.1
June 30 190.6 610.2 800.8
September 30 187.2 608.2 795.4
December 31 174.9 587.7 762.6
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
1994
- ------------------------------------------------------------------------------------------------------------
March 31 $143.9 $534.4 $678.3
June 30 143.4 506.1 649.5
- ------------------------------------------------------------------------------------------------------------
As % of loans at June 30, 1994 .91% 3.17% 4.12%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
tics of the loan portfolio. Given the
current risk characteristics of the loan portfolio, the Corporation does
not expect any significant change in criticized loans in the near term.
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 114 (SFAS No. 114), "Accounting by
Creditors for Impairment of a Loan." This statement will require that
certain impaired loans be measured based on either the present value of
expected future cash flows discounted at the loan's effective rate, the
market price of the loan, or fair value of the underlying collateral if
the loan is collateral dependent. Adoption of this pronouncement is
required in 1995 and, at present, is not
<TABLE>
- --------------------------------------------------------------
Table 11: Nonperforming Assets
by Banking Unit
<CAPTION>
JUNE December June
(in millions) 30, 1994 31, 1993 30, 1993
- --------------------------------------------------------------
<S> <C> <C> <C>
Missouri $152.9 $171.4 $201.6
New Mexico 43.0 53.4 68.7
Oklahoma 15.3 14.3 14.4
Texas 9.0 13.7 18.7
Iowa 5.9 7.2 9.2
Illinois 7.1 7.1 9.0
Arkansas 4.0 4.0 4.0
Tennessee 5.0 6.8 3.9
Kansas 7.7 7.6
- --------------------------------------------------------------
Total $249.9 $285.5 $329.5
- --------------------------------------------------------------
</TABLE>
expected to have a material effect on the Corporation's reported financial
results.
SEGREGATED ASSETS
As part of the regulatory-assisted acquisition of Missouri Bridge Bank,
N.A. on April 23, 1993, the Corporation entered into a five-year loss-
sharing arrangement with the FDIC with respect to approximately $950
million in multi-family residential, commercial real estate, construction,
and commercial and industrial loans. During the five-year period, the FDIC will
reimburse the Corporation for 80 percent of the first $92.0 million of net
charge-offs on these loans, after which the FDIC will increase its
reimbursement coverage to 95 percent of additional charge-offs. During this
period and for two years thereafter, the Corporation is obligated to pay the
FDIC 80 percent of all recoveries on charged off loans.
The Corporation has designated certain loans covered under the loss-
sharing arrangement which possess more than the normal risk of collectibility
as segregated assets. At June 30, 1994, segregated assets, which are classified
as other assets for
1994 Quarterly Report 7
<PAGE> 7
FINANCIAL COMMENTARY
- --------------------------------------------------------------------------------
reporting purposes, totaled $211.6 million, net of a $17.5 million credit
valuation allowance, compared to $257.6 million at June 30, 1993. At June 30,
1994, segregated assets consisted primarily of $49.5 million of commercial
loans, $26.9 million of industrial revenue bond loans and $144.9 million of
commercial real estate-related loans. All other loans covered under the
loss-sharing arrangement are included in the loan portfolio and totaled $364.1
million at June 30, 1994, compared to $636.0 million at June 30, 1993. The
decline from June 30, 1993 was primarily due to scheduled paydowns and
maturities. Net charge-offs of $.8 million, representing the Corporation's
share of losses on the segregated asset pool, were recognized in the six months
of 1994. The valuation allowance represents the Corporation's share of
estimated losses upon ultimate liquidation of the portfolio. The Corporation's
<TABLE>
- -----------------------------------------------------------------------------------------------------------
Table 12: Segregated Assets
<CAPTION>
Principal Allowance Principal
June 30, 1994 (in millions) balance for losses balance, net
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year $266.6 $18.4 $248.2
Charge-offs (6.6) (1.4)
Recoveries 2.4 .5
Transfers to segregated assets 12.3
Payments on segregated assets (45.6)
- -----------------------------------------------------------------------------------------------------------
Segregated assets, end of period $229.1 $17.5 $211.6
- -----------------------------------------------------------------------------------------------------------
</TABLE>
primary purpose in managing a portfolio of this nature is to provide ongoing
collection and control activities on behalf of the FDIC. Accordingly, these
assets do not represent loans made in the ordinary course of business and, due
to the underlying nature of this liquidating asset pool, are excluded from the
Corporation's nonperforming asset statistics. At June 30, 1994, $201.4 million
of segregated assets were accorded classification treatment consistent with
nonaccrual reporting, $7.8 million represented foreclosed property, and the
balance of $19.9 million was past due 90 days or more. The Corporation's
operating results and cash flow position are not expected to be materially
affected by the ongoing collection activities associated with managing the
loans subject to the loss-sharing arrangement. Segregated assets income totaled
$6.7 million for the six months of 1994.
A summary of activity regarding segregated assets is provided in Table 12.
LOAN PORTFOLIO
The majority of the Corporation's loans are made within its natural trade
territory, and the portfolio is highly diversified. There are no concentrations
of credit to any borrower or industry in excess of 5% of total loans, and the
portfolio is well balanced between wholesale and consumer lending.
At June 30, 1994, loans totaled $15.7 billion, an increase of 10.5% over
the same period of last year. Based on average balances, loans increased
11.1% for the quarter and 12.5% for the six months, primarily due to
internal loan growth within the consumer and middle-market commercial
portfolios which was supplemented by growth through acquisition. Excluding
acquisitions, loans increased 9.8% from June 30, 1993, and were led by a
26.1% increase in consumer loans coupled with an increase of 5.7% in
commercial loans. Consumer loan growth stepped up over the second half of
last year, largely the result of increased retail penetration of consumer
products, primarily auto loans and credit cards. The increase in
commercial loans was primarily due to middle-market loan growth.
The portfolio mix has undergone a favorable shift in that business
development efforts have focused on expanding the middle-market commercial
and consumer sec-
<TABLE>
- -----------------------------------------------------------------------------------------------------------
Table 13: Summary of Loan Portfolio
<CAPTION>
(in millions) JUNE 30, 1994 December 31, 1993 June 30, 1993
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial $ 7,872.0 $ 7,490.7 $ 7,541.6
Real estate mortgage 2,961.7 2,988.5 2,784.3
Real estate construction 591.7 558.0 502.7
Consumer 4,222.3 3,742.8 3,379.4
Lease financing 90.2 95.2 67.1
- -----------------------------------------------------------------------------------------------------------
Total domestic loans 15,737.9 14,875.2 14,275.1
Foreign loans 17.5 18.0 17.7
- -----------------------------------------------------------------------------------------------------------
Total loans, before deduction of
unearned income 15,755.4 14,893.2 14,292.8
Less unearned income 54.0 67.3 77.7
- -----------------------------------------------------------------------------------------------------------
Total loans, net of unearned income $15,701.4 $14,825.9 $14,215.1
- -----------------------------------------------------------------------------------------------------------
</TABLE>
tors, which has been complemented by acquisitions of retail-oriented
institutions. At June 30, 1994, middle-market commercial and consumer loans
represented approximately 49.1% of the loan portfolio compared to 46.4% at June
30, 1993. Commercial real estate and real estate construction loans represented
20.5% of total loans at June 30, 1994, compared to 22.2% at June 30, 1993. The
Corporation closely monitors the composition and quality of the real estate
portfolio through established credit review procedures to ensure that
significant credit concentrations do not exist within this portfolio. The
portfolio is geographically dispersed, primarily in areas where the Corporation
has a direct banking presence, and is widely diversified between residential
construction, office and retail properties, and land acquisition and
development loans.
The Corporation has limited foreign loan exposure and its portfolio of
highly leveraged transaction loans (HLT's) is minimal, at .4% of total
loans at June 30, 1994.
Table 13 displays the components of the loan portfolio under standard
financial reporting definitions. Management also reviews the
diversification of the portfolio using internally developed standards and
definitions as summarized in Table 14.
8 Boatmen's Bancshares, Inc.
<PAGE> 8
FINANCIAL COMMENTARY
- --------------------------------------------------------------------------------
FINANCIAL POSITION
AND LIQUIDITY
The basic financial structure of the Corporation's average and period-end
balance sheet changed only moderately from the fourth quarter and second
quarter of last year primarily due to higher levels of purchased funds.
At June 30, 1994, assets totaled $27.6 billion compared to $25.5 billion
at June 30, 1993, and $26.7 billion at December 31, 1993. The increase in
assets from June 30, 1993 was primarily due to internal loan growth and
an expansion of the securities portfolio.
Liquidity represents the availability of funding to meet the obligations
to depositors, borrowers, and creditors at a reasonable cost without
adverse consequences. Accordingly, the Corporation's liquidity position
is influenced by its funding base and asset mix. Core deposits, which
consist of investable checking account deposits and certain interest-
bearing accounts, represent the Corporation's largest and most important
funding source, as these deposits represent a more stable, lower cost
source of funds.
The core deposit base is supplemented by the Corporation's wholesale and
correspondent banking activities which provide a natural access to short-
term purchased funds, such as negotiable certificates of deposit, bank
notes and overnight surplus funds. These funds are acquired when needed,
principally from existing customers within the Corporation's natural
trade territory and through access to national money markets.
Average core deposits totaled $18.0 billion for the second quarter of
1994, an increase of $.4 billion or 2.5% from the same period last year.
Average earning asset growth during this period exceeded core deposit
growth by approximately $2.0 billion; accordingly, the additional earning
asset volume has been funded by higher levels of purchased funds. Average
core deposits supported 73.4% of earning assets for the second quarter of
1994, compared to 79.5% during the same period last year. Core deposit
growth in recent periods has been impacted to some extent by a shift in
customer preference to other investment alternatives. Purchased funds,
which increased approximately $1.9 billion from the prior year, supported
19.5% of average earn-
<TABLE>
- ------------------------------------------------------------------------------------------------------
Table 14: Composition of Loan Portfolio
<CAPTION>
JUNE 30, 1994 December 31, 1993 June 30, 1993
- ------------------------------------------------------------------------------------------------------
% OF % Of % Of
TOTAL Total Total
(in millions) AMOUNT LOANS Amount Loans Amount Loans
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Real estate:
1-4 family residential $ 2,991.7 19.0% $ 2,970.6 20.0% $ 2,776.1 19.4%
Land acquisition 151.6 .9 168.8 1.1 115.0 .8
Residential construction 207.0 1.3 181.2 1.2 140.0 1.0
Commercial construction 233.1 1.5 208.0 1.4 247.7 1.7
Commercial real estate(1) 2,532.5 16.1 2,446.6 16.4 2,550.6 17.8
Mini-perms 112.4 .7 107.2 .7 123.3 .9
- ------------------------------------------------------------------------------------------------------
Total real estate 6,228.3 39.5 6,082.4 40.8 5,952.7 41.6
Commercial loans to Fortune
1,000 companies and other
large corporate borrowers 789.1 5.0 662.5 4.5 769.9 5.4
Middle-market commercial 3,514.5 22.3 3,359.9 22.6 3,241.2 22.7
Highly leveraged
transactions (HLTs) 61.3 .4 91.0 .6 88.9 .6
Bank stock loans 214.1 1.4 226.4 1.5 233.0 1.6
Agriculture 618.1 3.9 615.0 4.1 542.9 3.8
Consumer:
Home equity 390.3 2.5 363.1 2.4 367.0 2.6
Credit card 486.1 3.1 457.3 3.1 369.2 2.6
Installment 3,345.9 21.2 2,922.4 19.6 2,643.2 18.5
- ------------------------------------------------------------------------------------------------------
Total consumer 4,222.3 26.8 3,742.8 25.1 3,379.4 23.7
Lease financing 90.2 .6 95.2 .7 67.1 .5
Foreign 17.5 .1 18.0 .1 17.7 .1
- ------------------------------------------------------------------------------------------------------
Total loans $15,755.4 100.0% $14,893.2 100.0% $14,292.8 100.0%
- ------------------------------------------------------------------------------------------------------
<FN>
(1) Includes approximately $225 million, $240 million and $500 million of
commercial real estate loans covered by the FDIC loss-sharing agreement
related to the acquisition of Missouri Bridge Bank, N.A. at June 30, 1994,
December 31, 1993, and June 30, 1993, respectively.
</TABLE>
ing assets compared to 13.0% for the second quarter of last year. Purchased
funds at June 30, 1994, included $600 million of short-term bank notes which
were issued during the second quarter of this year. The Corporation expects
earning asset growth will continue to exceed core deposit growth in the near
term resulting in a continued use of bank notes or other purchased funds at or
slightly above the present levels.
The Corporation also manages its liquidity position by maintaining
adequate levels of liquid assets such as money market investments and
available for sale securities. At June 30, 1994, the available for sale
portfolio totaled $4.4 billion compared to $5.2 billion at December 31,
1993. These securities, comprised mainly of adjustable-rate mortgage-
backed securities, U.S. Treasury securities, pass-through mortgage-backed
securities, and short-term CMO's, may be sold to meet liquidity needs or
in response to significant changes in interest rates or prepayment risks.
At June 30, 1994, net unrealized depreciation in the available for sale
portfolio was approximately $58 million compared to net unrealized
appreciation of $69 million at December 31, 1993. The decline in market
value from year-end was primarily due to the recent increase in market
rates.
Maintaining favorable debt ratings is also critical to liquidity because
it can affect the availability and cost of funds to the Corporation. The
Parent Company's ability to access the capital markets on a cost-
effective basis is reflected by its debt ratings, summarized on page 16.
There were no commitments for capital expenditures at June 30, 1994,
which would materially impact the Corporation's liquidity position.
CAPITAL STRUCTURE
The Corporation continues to rank among the most strongly capitalized bank
holding companies in the country. This strong capital position and overall
financial strength provide a good base for future expansion when profitable
investment opportunities arise. The cornerstone of the Corporation's capital
structure is its common equity, totaling $2.2 billion or approximately 81% of
total capitalization at June 30, 1994, an increase of 9.3% from June 30, 1993.
The equity to asset ratio was 7.88% at June 30, 1994, compared to 7.80% at June
30, 1993, and 8.00% at December 31, 1993. The equity base has been strengthened
in recent years through
1994 Quarterly Report 9
<PAGE> 9
FINANCIAL COMMENTARY
- --------------------------------------------------------------------------------
earnings retention, the conversion of debt to equity and the issuance of common
stock through various employee and stockholder investment plans. On April
14, 1994, the Corporation filed a shelf registration statement with the
Securities and Exchange Commission providing for the issuance of up to
$500 million of debt, preferred stock or common stock. This represents the
only outstanding shelf filing and there are no plans to issue securities
pursuant to this filing in the near term. In the first quarter of 1993,
the Corporation issued $100 million of 6.75% subordinated notes due March
15, 2003, under the final tranche of a $200 million debt registration. The
Corporation also exercised its option to prepay approximately $14 million
of convertible subordinated debt at its Iowa subsidiary during the first
quarter of last year, resulting in the issuance of approximately 1.0
million shares of common stock as noteholders elected to convert debt to
equity prior to the prepayment date.
An important measure of capital adequacy of a banking institution is its
risk-based capital ratios, which represent the primary capital standard
for regulatory purposes. The Corporation's risk-based capital ratios of
10.53% for Tier I and 14.07% for total capital substantially exceed the
regulatory required minimums. An additional measure of capital, referred
to as the Tier I leverage ratio, places a constraint on the degree to
which a banking institution can leverage its equity capital base. At June
30, 1994, the Corporation's Tier I leverage ratio was 7.14%, well in
excess of the required minimums.
The Federal Deposit Insurance Corporation Improvement Act of 1991
(FDICIA), established rating categories for all FDIC-insured institutions
ranging from "well capitalized" to "critically undercapitalized." The
ratings combine capital measures in addition to the level of regulatory
supervision received by an individual financial institution. At June 30,
1994, all of the Corporation's banking subsidiaries met the capital
criteria required by the well capitalized definition which require a Tier
I leverage ratio of 5%, a Tier I capital ratio of 6% and a total capital
ratio of 10%. FDICIA mandated other changes to risk-based capital rules
that may become effective in 1994, notably the requirement to incorporate
interest rate risk into the risk-based capital computation. As proposed,
this change is not expected to have a material effect on the Corporation's
capital requirements. The Federal Reserve Board and other regulatory
agencies are proposing
<TABLE>
- ------------------------------------------------------------------------------------------------------------
Table 15: Capital Structure
<CAPTION>
(in millions) JUNE 30, 1994 December 31, 1993 June 30, 1993
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Long-term debt $ 514.3 $ 486.3 $ 471.4
Stockholders' equity 2,173.0 2,133.3 1,988.6
- ------------------------------------------------------------------------------------------------------------
Total capitalization $2,687.3 $2,619.6 $2,460.0
- ------------------------------------------------------------------------------------------------------------
Tangible equity $1,911.9 $1,858.0 $1,710.0
- ------------------------------------------------------------------------------------------------------------
Ratios
- ------------------------------------------------------------------------------------------------------------
Equity/assets 7.88% 8.00% 7.80%
Tangible equity/assets 7.00 7.04 6.78
Long-term debt as % of total capitalization 19.14 18.56 19.16
Double leverage 108.87 110.37 112.36
Dividends paid
(for the period, in thousands):
Preferred $ 40 $ 86 $ 44
Common 64,524 112,129 54,362
Total dividends as % of net income 37.2% 35.4% 34.2%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------
Table 16: Intangible Assets
<CAPTION>
(in millions) JUNE 30, 1994 December 31, 1993 June 30, 1993
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Goodwill-Parent Company $ 92.6 $ 95.3 $ 98.1
- ------------------------------------------------------------------------------------------------------------
Subsidiaries:
Goodwill 97.6 101.1 101.5
Core deposit premium 63.0 70.5 72.6
Credit card premium 3.3 3.5 1.3
Purchased mortgage servicing rights 4.6 4.9 5.1
- ------------------------------------------------------------------------------------------------------------
168.5 180.0 180.5
- ------------------------------------------------------------------------------------------------------------
Total intangible assets $261.1 $275.3 $278.6
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------
Table 17: Risk-Based Capital
<CAPTION>
(in millions) JUNE 30, 1994 December 31, 1993 June 30, 1993
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tier I capital:
Stockholders' equity $ 2,173.0 $ 2,133.3 $ 1,988.6
Unrealized net (appreciation) depreciation,
available for sale securities 35.5 (42.3)
- ------------------------------------------------------------------------------------------------------------
Stockholders' equity, net 2,208.5 2,091.0 1,988.6
Minority interest .7 .7 1.0
Intangible assets:
Goodwill (190.2) (196.4) (199.6)
Core deposit premium (63.0) (70.5) (72.6)
- ------------------------------------------------------------------------------------------------------------
Total Tier I 1,956.0 1,824.8 1,717.4
- ------------------------------------------------------------------------------------------------------------
Tier II capital:
Allowable reserve for loan losses 233.6 215.3 206.7
Qualifying long-term debt 425.0 425.2 435.1
- ------------------------------------------------------------------------------------------------------------
Total Tier II 658.6 640.5 641.8
- ------------------------------------------------------------------------------------------------------------
Total capital $ 2,614.6 $ 2,465.3 $ 2,359.2
- ------------------------------------------------------------------------------------------------------------
Risk-adjusted assets $18,580.9 $17,098.0 $16,404.8
- ------------------------------------------------------------------------------------------------------------
Risk-based capital ratios:
Tier I 10.53% 10.67% 10.47%
- ------------------------------------------------------------------------------------------------------------
Total 14.07% 14.42% 14.38%
- ------------------------------------------------------------------------------------------------------------
Tier I Leverage ratio 7.14% 6.93% 6.81%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
other amendments to existing risk-based capital
guidelines to include the unrealized appreciation/depreciation on
available for sale securities in Tier I capital. The Corporation believes
it would be more appropriate to exclude the unrealized
appreciation/depreciation from Tier I as inclusion could introduce
volatility in capital levels which is inconsistent with the managerial
concept of longer-term capital planning.
10 Boatmen's Bancshares, Inc.
<PAGE> 10
<TABLE>
CONSOLIDATED QUARTERLY EARNINGS TREND
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1994 1993
- ------------------------------------------------------------------------------------------------------------------------
(in thousands) SECOND First Fourth Third Second First
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest income
Interest and fees on loans $308,872 $289,634 $287,592 $287,251 $279,297 $265,662
Interest on short-term investments 1,071 560 257 405 509 826
Interest on Federal funds sold and securities
purchased under resale agreements 1,995 1,593 2,380 1,936 3,161 5,884
Interest on held to maturity securities
Taxable 45,674 41,025 92,383 96,537 97,569 94,789
Tax-exempt 13,447 13,744 13,907 14,366 14,745 15,363
- ------------------------------------------------------------------------------------------------------------------------
Total interest on held to maturity securities 59,121 54,769 106,290 110,903 112,314 110,152
Interest on available for sale securities 61,149 59,091 7,169 7,258 7,360 7,270
Interest on trading securities 926 840 1,063 429 493 585
- ------------------------------------------------------------------------------------------------------------------------
Total interest income 433,134 406,487 404,751 408,182 403,134 390,379
- ------------------------------------------------------------------------------------------------------------------------
Interest expense
Interest on deposits 127,611 124,050 128,331 133,406 135,096 132,011
Interest on Federal funds purchased
and other short-term borrowings 37,908 23,135 19,126 16,014 12,688 14,539
Interest on capital lease obligation 945 945 965 964 965 964
Interest on long-term debt 10,176 9,714 9,704 9,542 9,391 8,268
- ------------------------------------------------------------------------------------------------------------------------
Total interest expense 176,640 157,844 158,126 159,926 158,140 155,782
- ------------------------------------------------------------------------------------------------------------------------
Net interest income 256,494 248,643 246,625 248,256 244,994 234,597
Provision for loan losses 7,366 5,640 11,853 13,040 15,918 19,373
- ------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for
loan losses 249,128 243,003 234,772 235,216 229,076 215,224
- ------------------------------------------------------------------------------------------------------------------------
Noninterest income
Trust fees 38,690 39,190 37,895 38,723 37,952 35,010
Service charges 40,715 40,047 41,250 39,173 37,770 35,008
Credit card 15,890 15,045 14,934 14,561 13,276 11,618
Investment banking profits and fees 8,799 7,926 8,657 9,546 8,895 8,502
Securities gains, net 705 2,554 1,753 250 736 68
Other 25,335 24,961 29,481 29,540 25,416 20,345
- ------------------------------------------------------------------------------------------------------------------------
Total noninterest income 130,134 129,723 133,970 131,793 124,045 110,551
- ------------------------------------------------------------------------------------------------------------------------
Noninterest expense
Staff 123,853 123,097 119,147 120,336 115,763 111,234
Net occupancy 16,763 16,608 17,140 19,072 16,913 16,304
Equipment 20,809 20,038 21,132 19,704 18,589 18,102
FDIC insurance 11,448 11,462 11,381 11,232 10,803 10,969
Credit card 10,121 9,031 9,981 9,400 8,700 7,124
Foreclosed property costs, net (1,618) (1,114) (1,235) 83 (2,048) (1,590)
Other 63,216 63,403 76,255 68,475 64,185 53,270
- ------------------------------------------------------------------------------------------------------------------------
Total noninterest expense 244,592 242,525 253,801 248,302 232,905 215,413
- ------------------------------------------------------------------------------------------------------------------------
Income before income tax expense 134,670 130,201 114,941 118,707 120,216 110,362
Income tax expense 46,628 44,617 37,819 37,379 40,493 31,116
- ------------------------------------------------------------------------------------------------------------------------
Net income $ 88,042 $ 85,584 $ 77,122 $ 81,328 $ 79,723 $ 79,246
- ------------------------------------------------------------------------------------------------------------------------
Net income per share $.84 $.82 $.75 $.78 $.77 $.77
- ------------------------------------------------------------------------------------------------------------------------
Dividends declared per share $.31 $.31 $.31 $.31 $.28 $.28
- ------------------------------------------------------------------------------------------------------------------------
Returns
Return on assets 1.28% 1.29% 1.18% 1.27% 1.29% 1.34%
Return on equity 16.30 15.92 14.91 16.15 16.26 16.75
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
1994 Quarterly Report 11
<PAGE> 11
<TABLE>
CONSOLIDATED AVERAGE BALANCE SHEET AND NET INTEREST MARGIN
- ------------------------------------------------------------------------------------------------------------------------------------
(dollars in millions) 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
SECOND QUARTER First Quarter Fourth Quarter
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME/ YIELDS/ Income/ Yields/ Income/ Yields/
Assets BALANCE EXPENSE RATES Balance Expense Rates Balance Expense Rates
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans, net of unearned income $15,506.7 $310.4 8.01% $14,956.3 $291.0 7.78% $14,666.2 $289.5 7.90%
Short-term investments 109.0 1.1 3.93 60.0 .6 3.73 31.2 .2 3.29
Federal funds sold and securities purchased
under resale agreements 193.7 2.0 4.12 193.2 1.6 3.30 297.9 2.4 3.20
Held to maturity securities:
Taxable 3,280.0 45.7 5.57 2,890.3 34.1 4.72 6,799.5 92.4 5.43
Tax-exempt 790.2 20.4 10.35 808.4 20.7 10.22 841.0 21.0 10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Total held to maturity securities 4,070.2 66.1 6.50 3,698.7 54.8 5.92 7,640.5 113.4 5.94
Available for sale securities 4,558.3 61.1 5.37 4,712.6 66.0 5.60 469.2 7.2 6.11
Trading securities 64.2 1.0 6.03 69.5 .8 4.94 85.7 1.1 5.13
- ------------------------------------------------------------------------------------------------------------------------------------
Total earning assets 24,502.1 441.7 7.21 23,690.3 414.8 7.00 23,190.7 413.8 7.14
Less reserve for loan losses (348.6) (346.0) (344.9)
Cash and due from banks 1,690.1 1,661.2 1,720.4
All other assets 1,596.6 1,587.0 1,554.5
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $27,440.2 $26,592.5 $26,120.7
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
- ------------------------------------------------------------------------------------------------------------------------------------
Retail savings deposits and
interest-bearing transaction accounts $ 8,743.5 $ 52.5 2.40% $ 8,803.2 $ 50.1 2.28% $ 8,601.0 $ 51.3 2.38%
Time deposits 7,350.3 75.1 4.09 7,330.2 74.0 4.04 7,538.8 77.0 4.09
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 16,093.8 127.6 3.17 16,133.4 124.1 3.08 16,139.8 128.3 3.18
Federal funds purchased and
other short-term borrowings 3,866.5 37.9 3.92 3,008.5 23.1 3.08 2,579.6 19.1 2.97
Capital lease obligation 38.9 1.0 9.72 39.1 .9 9.72 39.3 1.0 9.72
Long-term debt 514.6 10.2 7.91 514.0 9.7 7.56 487.8 9.7 7.96
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 20,513.8 176.7 3.44 19,695.0 157.8 3.21 19,246.5 158.1 3.29
Demand deposits 4,488.8 4,425.8 4,560.9
All other liabilities 276.4 320.7 242.5
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 25,279.0 24,441.5 24,049.9
Redeemable preferred stock 1.2 1.2 1.2
Total stockholders' equity 2,160.0 2,149.8 2,069.6
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders'
equity $27,440.2 $26,592.5 $26,120.7
- ------------------------------------------------------------------------------------------------------------------------------------
Interest rate spread 3.77% 3.79% 3.85%
Effect of noninterest-bearing funds .56 .55 .56
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income/margin $265.0 4.33% $257.0 4.34% $255.7 4.41%
- ------------------------------------------------------------------------------------------------------------------------------------
Nonaccrual loans are included in aver-
age balances and income on such loans
is recognized on a cash basis. Interest
income and yields are presented on a
fully-taxable equivalent basis using
the Federal statutory income tax rate,
net of nondeductible interest expense.
Such adjustments by earning
asset category are as follows:
Loans $1.5 $1.4 $1.9
Tax-exempt held to maturity securities 7.0 6.9 7.1
Trading securities .1 .1
- ------------------------------------------------------------------------------------------------------------------------------------
Total $8.6 $8.3 $9.1
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
12 Boatmen's Bancshares, Inc.
<PAGE> 12
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1993
- ------------------------------------------------------------------------------------------------------------------------------------
Third Quarter Second Quarter First Quarter
- ------------------------------------------------------------------------------------------------------------------------------------
Income/ Yields/ Income/ Yields/ Income/ Yields/
Assets Balance Expense Rates Balance Expense Rates Balance Expense Rates
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans, net of unearned income $14,373.7 $288.6 8.03% $13,958.8 $280.8 8.05% $13,127.9 $266.8 8.13%
Short-term investments 48.7 .4 3.33 60.7 .5 3.36 100.4 .8 3.29
Federal funds sold and securities purchased
under resale agreements 245.3 1.9 3.16 407.6 3.2 3.10 776.1 5.9 3.03
Held to maturity securities:
Taxable 6,652.5 96.5 5.80 6,256.2 97.6 6.24 5,865.4 94.8 6.46
Tax-exempt 844.5 22.3 10.55 865.0 21.8 10.10 890.7 22.7 10.20
- ------------------------------------------------------------------------------------------------------------------------------------
Total held to maturity securities 7,497.0 118.8 6.34 7,121.2 119.4 6.71 6,756.1 117.5 6.96
Available for sale securities 479.9 7.3 6.05 489.3 7.3 6.02 497.0 7.3 5.85
Trading securities 35.9 .5 5.30 42.9 .6 5.03 49.4 .6 5.09
- ------------------------------------------------------------------------------------------------------------------------------------
Total earning assets 22,680.5 417.5 7.36 22,080.5 411.8 7.46 21,306.9 398.9 7.49
Less reserve for loan losses (339.3) (329.2) (310.0)
Cash and due from banks 1,619.6 1,613.5 1,547.3
All other assets 1,587.5 1,416.6 1,167.4
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $25,548.3 $24,781.4 $23,711.6
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
- ------------------------------------------------------------------------------------------------------------------------------------
Retail savings deposits and
interest-bearing transaction accounts $ 8,470.3 $ 52.3 2.47% $ 8,226.1 $ 50.9 2.48% $ 7,808.2 $ 49.7 2.55%
Time deposits 7,827.3 81.1 4.15 7,922.8 84.2 4.25 7,550.9 82.3 4.36
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 16,297.6 133.4 3.27 16,148.9 135.1 3.35 15,359.1 132.0 3.44
Federal funds purchased and
other short-term borrowings 2,148.3 16.0 2.98 1,740.7 12.7 2.92 1,902.0 14.5 3.06
Capital lease obligation 39.5 1.0 9.72 39.7 .9 9.72 39.9 1.0 9.72
Long-term debt 471.4 9.5 8.10 475.2 9.4 7.90 389.9 8.3 8.48
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 18,956.8 159.9 3.37 18,404.5 158.1 3.44 17,690.9 155.8 3.52
Demand deposits 4,298.5 4,142.0 3,923.7
All other liabilities 277.9 272.1 203.5
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 23,533.2 22,818.6 21,818.1
Redeemable preferred stock 1.2 1.2 1.2
Total stockholders' equity 2,013.9 1,961.6 1,892.3
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders'
equity $25,548.3 $24,781.4 $23,711.6
- ------------------------------------------------------------------------------------------------------------------------------------
Interest rate spread 3.99% 4.02% 3.97%
Effect of noninterest-bearing funds .55 .58 .59
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income/margin $257.6 4.54% $253.7 4.60% $243.1 4.56%
- ------------------------------------------------------------------------------------------------------------------------------------
Nonaccrual loans are included in aver-
age balances and income on such loans
is recognized on a cash basis. Interest
income and yields are presented on a
fully-taxable equivalent basis using
the Federal statutory income tax rate,
net of nondeductible interest expense.
Such adjustments by earning
asset category are as follows:
Loans $1.4 $1.5 $1.1
Tax-exempt held to maturity securities 7.9 7.1 7.4
Trading securities .1
- ------------------------------------------------------------------------------------------------------------------------------------
Total $9.3 $8.7 $8.5
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1994 Quarterly Report 13
<PAGE> 13
<TABLE>
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
Six Months Ended June 30
- ---------------------------------------------------------------------------------------------------------------
1994 1993
- ---------------------------------------------------------------------------------------------------------------
INCOME/ YIELDS/ Income/ Yields/
Assets BALANCE EXPENSE RATES Balance Expense Rates
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans, net of unearned income $15,233.0 $601.4 7.90% $13,545.7 $547.6 8.08%
Short-term investments 84.7 1.6 3.85 80.4 1.3 3.32
Federal funds sold and securities purchased
under resale agreements 193.4 3.6 3.71 590.8 9.1 3.06
Held to maturity securities:
Taxable 3,086.2 79.8 5.17 6,061.9 192.4 6.35
Tax-exempt 799.3 41.1 10.29 877.8 44.5 10.15
- ---------------------------------------------------------------------------------------------------------------
Total held to maturity securities 3,885.5 120.9 6.22 6,939.7 236.9 6.83
Available for sale securities 4,635.0 127.2 5.49 493.1 14.6 5.93
Trading securities 66.8 1.8 5.46 46.2 1.2 5.07
- ---------------------------------------------------------------------------------------------------------------
Total earning assets 24,098.4 856.5 7.11 21,695.9 810.7 7.47
Less reserve for loan losses (347.3) (319.7)
Cash and due from banks 1,675.8 1,580.5
All other assets 1,591.8 1,292.7
- ---------------------------------------------------------------------------------------------------------------
Total assets $27,018.7 $24,249.4
- ---------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
- ---------------------------------------------------------------------------------------------------------------
Retail savings deposits and
interest-bearing transaction accounts $ 8,773.2 $102.6 2.34% $ 8,018.3 $100.6 2.51%
Time deposits 7,340.3 149.1 4.06 7,737.9 166.5 4.30
- ---------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 16,113.5 251.7 3.12 15,756.2 267.1 3.39
Federal funds purchased and
other short-term borrowings 3,439.9 61.0 3.55 1,820.8 27.2 2.99
Capital lease obligation 39.0 1.9 9.72 39.8 1.9 9.72
Long-term debt 514.3 19.9 7.73 432.8 17.7 8.16
- ---------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 20,106.7 334.5 3.33 18,049.6 313.9 3.48
Demand deposits 4,457.5 4,033.5
All other liabilities 298.4 238.0
- ---------------------------------------------------------------------------------------------------------------
Total liabilities 24,862.6 22,321.1
Redeemable preferred stock 1.2 1.2
Total stockholders' equity 2,154.9 1,927.1
- ---------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders'
equity $27,018.7 $24,249.4
- ---------------------------------------------------------------------------------------------------------------
Interest rate spread 3.78% 3.99%
Effect of noninterest-bearing funds .55 .59
- ---------------------------------------------------------------------------------------------------------------
Net interest income/margin $522.0 4.33% $496.8 4.58%
- ---------------------------------------------------------------------------------------------------------------
Nonaccrual loans are included in aver-
age balances and income on such loans
is recognized on a cash basis. Interest
income and yields are presented on a
fully-taxable equivalent basis using
the Federal statutory income tax rate,
net of nondeductible interest expense.
Such adjustments by earning
asset category are as follows:
Loans $ 2.9 $ 2.6
Tax-exempt held to maturity securities 13.9 14.5
Trading securities .1 .1
- ---------------------------------------------------------------------------------------------------------------
Total $16.9 $17.2
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
1994 Quarterly Report 13
<PAGE> 14
<TABLE>
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
(dollars in thousands) JUNE 30, 1994 June 30, 1993 December 31, 1993
- --------------------------------------------------------------------------------------------------------------------------
Assets
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash and due from banks $ 1,608,925 $ 1,594,601 $ 1,608,051
Short-term investments 78,543 96,768 24,748
Securities:
Held to maturity 4,107,369 7,530,780 3,324,847
Available for sale 4,424,239 493,827 5,176,966
Trading 25,026 77,025 48,081
Federal funds sold and securities purchased under resale agreements 392,865 249,628 407,672
Loans 15,701,434 14,215,119 14,825,922
Less reserve for loan losses 343,918 330,424 341,099
- --------------------------------------------------------------------------------------------------------------------------
Loans, net 15,357,516 13,884,695 14,484,823
- --------------------------------------------------------------------------------------------------------------------------
Property and equipment 516,165 445,452 480,586
Other assets 1,072,844 1,129,424 1,098,275
- --------------------------------------------------------------------------------------------------------------------------
Total assets $27,583,492 $25,502,200 $26,654,049
- --------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
- --------------------------------------------------------------------------------------------------------------------------
Liabilities:
Demand deposits $ 4,345,609 $ 4,217,850 $ 4,769,947
Retail savings deposits and interest-bearing transaction accounts 8,579,389 8,287,136 8,773,058
Time deposits 7,317,684 7,982,470 7,365,997
- --------------------------------------------------------------------------------------------------------------------------
Total deposits 20,242,682 20,487,456 20,909,002
- --------------------------------------------------------------------------------------------------------------------------
Federal funds purchased and securities sold under repurchase agreements 3,265,704 1,815,841 1,996,022
Short-term borrowings 1,067,964 440,624 815,971
Capital lease obligation 38,791 39,618 39,224
Long-term debt 514,262 471,396 486,253
Other liabilities 279,941 257,422 273,168
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities 25,409,344 23,512,357 24,519,640
- --------------------------------------------------------------------------------------------------------------------------
Redeemable preferred stock 1,142 1,244 1,155
- --------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Common stock ($1 par value; 150,000,000 shares authorized) 104,722 51,837 104,126
Surplus 794,966 832,415 786,840
Retained earnings 1,308,862 1,104,347 1,200,036
Unrealized net appreciation (depreciation), available for sale securities (35,544) 42,252
- --------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 2,173,006 1,988,599 2,133,254
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $27,583,492 $25,502,200 $26,654,049
- --------------------------------------------------------------------------------------------------------------------------
Held to maturity securities, market value $ 4,020,533 $ 7,694,487 $ 3,408,119
Available for sale securities, market value 4,424,239 515,543 5,176,966
Common stock, shares outstanding 104,722,204 51,837,033 104,125,546
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
14 Boatmen's Bancshares, Inc.
<PAGE> 15
<TABLE>
CONSOLIDATED STATEMENT OF INCOME
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
(in thousands) Second Quarter Ended June 30 Six Months Ended June 30
- -----------------------------------------------------------------------------------------------------------------------
1994 1993 1994 1993
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $308,872 $279,297 $598,506 $544,959
Interest on short-term investments 1,071 509 1,631 1,335
Interest on Federal funds sold and securities purchased
under resale agreements 1,995 3,161 3,588 9,045
Interest on held to maturity securities
Taxable 45,674 97,569 79,799 192,358
Tax-exempt 13,447 14,745 27,191 30,108
- -----------------------------------------------------------------------------------------------------------------------
Total interest on held to maturity securities 59,121 112,314 106,990 222,466
- -----------------------------------------------------------------------------------------------------------------------
Interest on available for sale securities 61,149 7,360 127,140 14,630
Interest on trading securities 926 493 1,766 1,078
- -----------------------------------------------------------------------------------------------------------------------
Total interest income 433,134 403,134 839,621 793,513
- -----------------------------------------------------------------------------------------------------------------------
Interest expense
Interest on deposits 127,611 135,096 251,661 267,107
Interest on Federal funds purchased
and other short-term borrowings 37,908 12,688 61,043 27,227
Interest on capital lease obligation 945 965 1,890 1,929
Interest on long-term debt 10,176 9,391 19,890 17,659
- -----------------------------------------------------------------------------------------------------------------------
Total interest expense 176,640 158,140 334,484 313,922
- -----------------------------------------------------------------------------------------------------------------------
Net interest income 256,494 244,994 505,137 479,591
Provision for loan losses 7,366 15,918 13,006 35,291
- -----------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 249,128 229,076 492,131 444,300
- -----------------------------------------------------------------------------------------------------------------------
Noninterest income
Trust fees 38,690 37,952 77,880 72,962
Service charges 40,715 37,770 80,762 72,778
Credit card 15,890 13,276 30,935 24,894
Investment banking profits and fees 8,799 8,895 16,725 17,397
Securities gains, net 705 736 3,259 804
Other 25,335 25,416 50,296 45,761
- -----------------------------------------------------------------------------------------------------------------------
Total noninterest income 130,134 124,045 259,857 234,596
- -----------------------------------------------------------------------------------------------------------------------
Noninterest expense
Staff 123,853 115,763 246,950 226,997
Net occupancy 16,763 16,913 33,371 33,217
Equipment 20,809 18,589 40,847 36,691
FDIC insurance 11,448 10,803 22,910 21,772
Credit card 10,121 8,700 19,152 15,824
Foreclosed property costs, net (1,618) (2,048) (2,732) (3,638)
Other 63,216 64,185 126,619 117,455
- -----------------------------------------------------------------------------------------------------------------------
Total noninterest expense 244,592 232,905 487,117 448,318
- -----------------------------------------------------------------------------------------------------------------------
Income before income tax expense 134,670 120,216 264,871 230,578
Income tax expense 46,628 40,493 91,245 71,609
- -----------------------------------------------------------------------------------------------------------------------
Net income $ 88,042 $ 79,723 $173,626 $158,969
- -----------------------------------------------------------------------------------------------------------------------
Net income per share $.84 $.77 $1.66 $1.54
- -----------------------------------------------------------------------------------------------------------------------
Dividends declared per share $.31 $.28 $ .62 $ .56
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Earnings per share amounts are based on weighted average shares
outstanding after adjusting net income for dividends on preferred stock.
For the six months, average shares outstanding were 104,631,272 in 1994
and 103,281,844 in 1993. Preferred dividends declared totaled $40 in 1994
and $44 in 1993.
1994 Quarterly Report 15
<PAGE> 16
<TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unrealized Net
Appreciation
Common Stock (Depreciation),
----------------- Retained Available for
(in thousands) Shares Amount Surplus Earnings Sale Securities Total
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993 51,131 $ 51,131 $809,923 $1,000,166 - $1,861,220
Net income - - - 158,969 - 158,969
Cash dividends declared:
Common ($.56 per share)(1) - - - (54,747) - (54,747)
Redeemable preferred - - - (44) - (44)
Common stock issued pursuant to various
employee and shareholder stock issuance plans 230 230 9,975 - - 10,205
Common stock issued upon conversion
of convertible subordinated debt 476 476 12,517 - - 12,993
Adjustment of investments in
equity securities to market value - - - 3 - 3
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1993 51,837 $ 51,837 $832,415 $1,104,347 - $1,988,599
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE, JANUARY 1, 1994 104,126 $104,126 $786,840 $1,200,036 $ 42,252 $2,133,254
Net income - - - 173,626 - 173,626
Cash dividends declared:
Common ($.62 per share) - - - (64,760) - (64,760)
Redeemable preferred - - - (40) - (40)
Common stock issued pursuant to various
employee and shareholder stock issuance plans 171 171 2,248 - - 2,419
Common stock issued upon acquisition of
subsidiary 411 411 5,700 - - 6,111
Common stock issued upon conversion
of convertible subordinated debt 14 14 205 - - 219
Adjustment of available for sale securities
to market value - - - - (77,796) (77,796)
Other, net - - (27) - - (27)
- -------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1994 104,722 $104,722 $794,966 $1,308,862 $(35,544) $2,173,006
- -------------------------------------------------------------------------------------------------------------------------------
<FN>
(1)Amount adjusted for the two-for-one stock split which was declared on
August 10, 1993 and paid on October 1, 1993.
</TABLE>
<TABLE>
CORPORATE INFORMATION
- -------------------------------------------------------------------------------------------
<CAPTION>
Standard Thomson
Agency Ratings Moody's & Poor's Bankwatch
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Boatmen's Bancshares, Inc.: B
6-3/4% Subordinated notes due 2003 A3 A- A
7-5/8% Subordinated notes due 2004 A3 A- A
8-5/8% Subordinated notes due 2003 A3 A- A
9-1/4% Subordinated notes due 2001 A3 A- A
6-1/4% Convertible subordinated debentures due 2011 A3 A- A
Commercial paper P1 A-1 TBW-1
The Boatmen's National Bank of St. Louis: B
Long-term/short-term deposits and bank notes Aa3/P1 A+/A-1 TBW-1
Boatmen's First National Bank of Kansas City: B
Long-term/short-term deposits A+/A-1 TBW-1
Multi-bank note program (7 Boatmen's subsidiary banks) A1/P1 A+/A-1
- -------------------------------------------------------------------------------------------
</TABLE>
A Dividend Reinvestment and Stock Purchase Plan is available to
shareholders of the Corporation. The key features of this Plan are:
* Dividends on common stock may be automatically reinvested;
* Option to invest up to $10,000 cash per quarter;
* No brokerage commissions or service charges on reinvested dividends or
cash investments.
A Direct Deposit of Dividends program is also available to shareholders
of the Corporation. This program, which is offered at no charge, provides
for the deposit of quarterly dividends directly to a checking or savings
account.
Please direct inquiries regarding these programs and requests for the
Reinvestment Plan Prospectus and Direct Deposit Authorization Form to:
Boatmen's Trust Company,
P.O. Box 14768, St. Louis, MO 63178, (314) 466-1357 or (800) 456-9852.
Corporate Headquarters
One Boatmen's Plaza
800 Market Street
St. Louis, MO 63101
Stock Listing
NASDAQ-NM symbol:BOAT
CBOE symbol:BTQ
Transfer Agent
Boatmen's Trust Company
510 Locust Street
St. Louis, MO 63101
(314) 466-1357 or (800) 456-9852
Investor Relations Contact
Kevin R. Stitt
Director of Investor Relations
(314) 466-7662
(314) 466-5645 (FAX)
16 Boatmen's Bancshares, Inc.
