<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: September 30, 1995
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
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(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)
314-466-6000
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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 October 31, 1995
- ------------------------------------------------------------------------------
$1 Par Value 129,371,825
- 1 -
<PAGE> 2
<TABLE>
INDEX
PART I - FINANCIAL INFORMATION
------------------------------
<CAPTION>
PAGE NO.
<S> <C>
Item 1 - Financial Statements 3
Consolidated Balance Sheet
September 30, 1995 and 1994 and December 31, 1994 4
Consolidated Statement of Income
Three months and nine months ended September 30, 1995 and 1994 5
Consolidated Statement of Changes in Stockholders' Equity
Nine months ended September 30, 1995 and 1994 6
Consolidated Statement of Cash Flows
Nine months ended September 30, 1995 and 1994 7
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 8-28
<CAPTION>
PART II - OTHER INFORMATION
---------------------------
<S> <C>
Item 1 - Legal Proceedings None
Item 2 - Changes in Securities None
Item 3 - Defaults Upon Senior Securities None
Item 4 - Submission of Matters to a Vote of Security Holders None
Item 5 - Other Information None
Item 6 - Exhibits and Reports on Form 8-K 29
SIGNATURE 29
</TABLE>
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<PAGE> 3
PART I. FINANCIAL INFORMATION
-----------------------------
ITEM 1. FINANCIAL STATEMENTS
The consolidated financial statements for the three months and nine
months ended September 30, 1995 and 1994 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 nine months ended
September 30, 1995 are not necessarily indicative of the results which may be
expected for any other interim period or for the entire year.
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<PAGE> 4
<TABLE>
BOATMEN'S BANCSHARES, INC.
CONSOLIDATED BALANCE SHEET
<CAPTION>
(dollars in thousands) September 30, 1995 September 30, 1994 December 31, 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Cash and due from banks $ 1,808,462 $ 1,945,730 $ 2,119,579
Short-term investments 60,159 46,877 44,717
Securities:
Held to maturity 5,028,382 5,287,221 5,216,968
Available for sale 3,988,383 4,406,551 4,172,964
Trading 26,977 25,600 31,674
Federal funds sold and securities purchased
under resale agreements 686,822 859,543 1,111,720
Loans, net of unearned income 19,780,535 18,212,402 18,655,511
Less reserve for loan losses 390,344 382,233 376,618
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Loans, net 19,390,191 17,830,169 18,278,893
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Property and equipment 640,533 633,434 637,500
Other assets 1,311,710 1,228,836 1,264,015
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Total assets $32,941,619 $32,263,961 $32,878,030
===============================================================================================================================
<CAPTION>
Liabilities and Stockholders' Equity
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Liabilities:
Demand deposits $ 5,471,376 $ 4,946,893 $ 5,256,494
Retail savings deposits and interest-bearing
transaction accounts 10,166,253 10,043,105 10,142,719
Time deposits 8,956,562 8,712,272 9,984,860
- -------------------------------------------------------------------------------------------------------------------------------
Total deposits 24,594,191 23,702,270 25,384,073
- -------------------------------------------------------------------------------------------------------------------------------
Federal funds purchased and securities sold
under repurchase agreements 2,544,449 2,540,135 2,053,609
Short-term borrowings 1,970,946 2,483,500 1,903,182
Capital lease obligations 39,209 40,369 40,098
Long-term debt 524,283 593,968 592,041
Other liabilities 458,489 342,832 342,512
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Total liabilities 30,131,567 29,703,074 30,315,515
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Redeemable preferred stock 1,007 1,142 1,142
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Stockholders' Equity:
Common stock ($1 par value; 200,000,000 shares authorized) 129,924 128,823 128,873
Surplus 988,637 964,500 964,900
Retained earnings 1,761,286 1,527,928 1,593,911
Treasury stock (1,648,866 and 508,698 shares at cost, respectively) (59,205) (14,516)
Unrealized net depreciation, available for sale securities (11,597) (61,506) (111,795)
- -------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 2,809,045 2,559,745 2,561,373
- -------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $32,941,619 $32,263,961 $32,878,030
===============================================================================================================================
Held to maturity securities, market value $ 5,026,184 $ 5,140,513 $ 4,965,930
Available for sale securities, amortized cost 4,007,397 4,506,316 4,354,715
Common stock, shares outstanding 128,274,641 128,822,685 128,364,624
===============================================================================================================================
</TABLE>
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<PAGE> 5
<TABLE>
BOATMEN'S BANCSHARES, INC.
CONSOLIDATED STATEMENT OF INCOME
<CAPTION>
Third quarter ended September 30 Nine months ended September 30
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(in thousands) 1995 1994 1995 1994
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<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $439,027 $367,691 $1,275,818 $1,051,759
Interest on short-term investments 1,124 932 3,006 2,586
Interest on Federal funds sold and securities purchased
under resale agreements 8,410 3,994 23,795 9,334
Interest on held to maturity securities
Taxable 64,781 62,323 195,890 169,857
Tax-exempt 13,915 15,678 41,783 45,779
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Total interest on held to maturity securities 78,696 78,001 237,673 215,636
Interest on available for sale securities 60,747 64,855 190,331 201,037
Interest on trading securities 521 381 1,280 2,147
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Total interest income 588,525 515,854 1,731,903 1,482,499
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Interest expense
Interest on deposits 204,315 153,659 589,643 441,015
Interest on Federal funds purchased and other
short-term borrowings 67,020 49,884 202,709 115,883
Interest on capital lease obligations 968 1,000 2,908 2,990
Interest on long-term debt 11,334 12,052 34,841 34,528
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Total interest expense 283,637 216,595 830,101 594,416
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Net interest income 304,888 299,259 901,802 888,083
Provision for loan losses 11,130 6,855 30,011 20,441
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Net interest income after provision for loan losses 293,758 292,404 871,791 867,642
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Noninterest income
Trust fees 44,624 39,777 131,389 122,190
Service charges 48,121 47,188 141,415 139,839
Credit card 13,084 11,074 36,668 30,581
Investment banking revenues 8,849 8,660 26,519 28,973
Mortgage banking operations 19,680 13,509 58,875 45,277
Securities gains, net 843 1,533 3,704 4,789
Other 32,535 27,760 96,819 85,415
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Total noninterest income 167,736 149,501 495,389 457,064
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Noninterest expense
Staff 150,662 146,732 445,575 444,316
Net occupancy 20,820 21,172 60,407 62,397
Equipment 23,128 24,113 69,983 69,710
FDIC insurance 773 13,195 27,399 39,914
Intangible amortization 8,215 8,842 24,150 26,436
Advertising 8,055 8,452 24,225 23,122
Other 79,871 63,778 244,494 194,532
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Total noninterest expense 291,524 286,284 896,233 860,427
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Income before income tax expense 169,970 155,621 470,947 464,279
Income tax expense 59,332 53,632 165,803 160,686
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Net income $110,638 $101,989 $ 305,144 $ 303,593
===================================================================================================================================
Net income per share $.86 $.79 $2.37 $2.36
===================================================================================================================================
Dividends declared per share $.37 $.34 $1.05 $ .96
===================================================================================================================================
Earnings per share amounts are based on weighted average shares outstanding
after adjusting net income for dividends on preferred stock. For the nine
months, average shares outstanding were 128,984,964 in 1995 and 128,690,369 in
1994. Preferred dividends declared totaled $58 in 1995 and $60 in 1994.
</TABLE>
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<PAGE> 6
<TABLE>
BOATMEN'S BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<CAPTION>
Unrealized Net
Appreciation,
Common Stock Treasury Stock (Depreciation)
------------------ Retained ------------------ Available for
(in thousands) Shares Amount Surplus Earnings Shares Amount Sale Securities Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 128,127 $128,127 $955,324 $1,334,244 -- -- $ 42,252 $2,459,947
Net income -- -- -- 303,593 -- -- -- 303,593
Cash dividends declared:
Common ($.96 per share) -- -- -- (100,385) -- -- -- (100,385)
Redeemable preferred -- -- -- (60) -- -- -- (60)
By pooled company prior
to merger--common -- -- -- (9,464) -- -- -- (9,464)
Common stock issued pursuant to
various employee and shareholder
stock issuance plans 273 273 3,389 -- -- -- -- 3,662
Common stock issued upon
acquisition of subsidiary 411 411 5,700 -- -- -- -- 6,111
Adjustment for treasury stock
activity--pooled company (4) (4) (126) -- -- -- -- (130)
Common stock issued upon
conversion of convertible
subordinated debentures 16 16 240 -- -- -- -- 256
Adjustment of available for sale
securities to market value -- -- -- -- -- -- (103,758) (103,758)
Other, net -- -- (27) -- -- -- -- (27)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1994 128,823 128,823 964,500 1,527,928 -- -- (61,506) 2,559,745
===================================================================================================================================
BALANCE, JANUARY 1, 1995 128,873 128,873 964,900 1,593,911 (509) (14,516) (111,795) 2,561,373
Net income -- -- -- 305,144 -- -- -- 305,144
Cash dividends declared:
Common ($1.05 per share) -- -- -- (135,144) -- -- -- (135,144)
Redeemable preferred -- -- -- (58) -- -- -- (58)
By pooled company prior
to merger--common -- -- -- (2,565) -- -- -- (2,565)
Acquisition of Treasury stock -- -- -- -- (1,962) (68,965) -- (68,965)
Common stock issued pursuant to
various employee and shareholder
stock issuance plans 468 468 6,779 -- 532 16,234 -- 23,481
Common stock issued upon purchase
acquisition of subsidiaries 578 578 16,912 -- 289 8,008 -- 25,498
Common stock issued upon conversion
of convertible subordinated
debentures 5 5 65 -- 1 34 -- 104
Adjustment of available for sale
securities to market value -- -- -- -- -- -- 100,198 100,198
Other, net -- -- (19) (2) -- -- -- (21)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1995 129,924 $129,924 $988,637 $1,761,286 (1,649) $(59,205) $ (11,597) $2,809,045
===================================================================================================================================
</TABLE>
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<PAGE> 7
<TABLE>
BOATMEN'S BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
Nine months ended September 30 (in thousands) 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net cash provided by operating activities $ 412,092 $ 526,333
Investing Activities:
Net (increase) decrease in Federal funds sold and securities purchased under resale agreements 426,573 (360,688)
Net increase in loans (1,077,990) (1,223,835)
Proceeds from the sales of foreclosed property 27,287 33,727
Proceeds from the maturity of held to maturity securities 582,496 807,677
Purchases of held to maturity securities (376,033) (1,511,127)
Proceeds from the maturity of available for sale securities 696,906 1,314,371
Proceeds from the sales of available for sale securities 138,292 64,069
Purchases of available for sale securities (465,829) (411,494)
Net increase in short-term investments (15,442) (20,866)
Net increase in property and equipment (59,545) (87,615)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities (123,285) (1,395,781)
==================================================================================================================================
Financing Activities:
Net increase in Federal funds purchased and
securities sold under repurchase agreements 490,840 416,133
Net decrease in deposits (918,717) (592,993)
Net increase in short-term borrowings 67,539 1,321,629
Payments on long-term debt (70,141) (6,348)
Proceeds from the issuance of long-term debt 30,350
Payments on capital lease obligations (889) (806)
Cash dividends paid (122,937) (104,642)
Acquisition of treasury stock (68,965)
Common stock issued pursuant to various employee and
shareholder stock issuance plans 23,481 3,662
Decrease in redeemable preferred stock (135) (13)
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Net cash provided (used) by financing activities (599,924) 1,066,972
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Increase (decrease) in cash and due from banks (311,117) 197,524
Cash and due from banks at beginning of year 2,119,579 1,748,206
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and due from banks at September 30 $ 1,808,462 $ 1,945,730
==================================================================================================================================
For the nine months ended September 30, 1995 and 1994, interest paid totaled
$814 million and $575 million, respectively, and income taxes paid totaled
$146 million and $164 million. Additional common stock was issued upon the
conversion of $108 thousand of the Corporation's convertible debt for the
nine months ended September 30, 1995, and $190 thousand for the same period
a year ago. Loans transferred to foreclosed property totaled $7.4 million in
1995, and $16.2 million in 1994. In 1995, assets and liabilities of
purchased subsidiaries at dates of acquisition included investment securities
of $57 million, loans of $74 million, other assets of $36 million, deposits
of $129 million and other liabilities of $1 million.
</TABLE>
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<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
<TABLE>
Table 1: Summary of Selected Financial Information
<CAPTION>
Third quarter ended September 30 Nine months ended September 30
- ---------------------------------------------------------------------------------------------------------------------------
(in millions except per share data) 1995 1994 % change 1995 1994 % change
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Share Data
Net income $.86 $.79 8.9% $ 2.37 $ 2.36 .4%
Net income before nonrecurring merger expenses 2.53 2.36 7.2
Dividends declared .37 .34 8.8 1.05 .96 9.4
Book value at period end 21.90 19.87 10.2
Tangible book value at period end 19.36 17.38 11.4
Common shares:
Average outstanding for the period 129.0 128.7 .2
Outstanding at period end 128.3 128.8 (.4)
- ---------------------------------------------------------------------------------------------------------------------------
For the Period
Net interest income $304.9 $299.3 1.9% $901.8 $888.1 1.5%
Provision for loan losses 11.1 6.9 62.4 30.0 20.4 46.8
Noninterest income 167.7 149.5 12.2 495.4 457.1 8.4
Noninterest expense 291.5 286.3 1.8 896.2<F1> 860.4 4.2
Net income 110.6 102.0 8.5 305.1 303.6 .5
Net income before nonrecurring merger expenses 325.1 303.6 7.1
- ---------------------------------------------------------------------------------------------------------------------------
Financial Position at Period End
Total assets $32,941.6 $32,264.0 2.1%
Loans 19,780.5 18,212.4 8.6
Securities 9,016.8 9,693.8 (7.0)
Deposits 24,594.2 23,702.3 3.8
Long-term debt 524.3 594.0 (11.7)
Stockholders' equity 2,809.0 2,559.7 9.7
- ---------------------------------------------------------------------------------------------------------------------------
Selected Financial Ratios
Return on assets 1.34% 1.29% 1.24% 1.29%
Return on assets before nonrecurring merger expenses 1.33 1.29
Return on equity 15.77 16.03 14.92 16.11
Return on equity before nonrecurring merger expenses 15.90 16.11
Net interest margin 4.21 4.33 4.24 4.37
Noninterest income/operating income 34.9 32.6 34.8 33.3
Efficiency ratio 60.6 62.5 63.0 62.7
Efficiency ratio before nonrecurring merger expenses 61.1 62.7
Capital ratios:
Equity to assets 8.53 7.93
Risk-based capital:
Tier I capital 11.05 10.95
Total capital 14.09 14.19
Tier I leverage ratio 7.85 7.32
- ---------------------------------------------------------------------------------------------------------------------------
Asset Quality
Nonperforming loans $131.0 $167.0 (21.6)%
Nonperforming assets 176.4 272.3 (35.2)
Nonperforming loans to total loans .66% .91%
Nonperforming assets to total loans and foreclosed
property .89 1.48
Loan reserve to nonperforming loans 298.00 228.86
Loan reserve to net loans 1.97 2.10
Annualized net charge-offs to average loans .14 .12
===========================================================================================================================
<FN>
<F1> Includes nonrecurring merger expenses of $26 million.
</TABLE>
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<PAGE> 9
ACQUISITION OVERVIEW
Over the last several years the Corporation has made numerous
acquisitions establishing significant market positions in Missouri, Arkansas
and New Mexico, and sizable presences in Iowa, Illinois, Tennessee, Oklahoma
and Texas. The acquisition program has three objectives: geographic
diversification, growth in retail market share, and additional earnings
generation capacity. The Corporation's geographic profile provides
significant credit and economic risk diversification in that the operation is
not significantly dependent on any major market. All of the Corporation's
major markets are currently experiencing favorable economic conditions. In
1994 and through the nine months of 1995, the Corporation completed eight
acquisitions in five states aggregating $4.3 billion in total assets. The
Corporation continues to expand its franchise as opportunities arise and, at
September 30, 1995, had 3 acquisitions pending aggregating approximately $7.8
billion in assets. The Corporation's operations currently span nine states,
with services delivered from over 500 branch locations and approximately 550
off-premise ATM's. A summary of the acquisitions consummated in 1994 and
1995, and those pending at September 30, 1995, follows.
<TABLE>
Table 2: Acquisitions--1995 and 1994
<CAPTION>
Accounting
Date State Assets Price Shares issued method
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Completed
Woodland Bancorporation, Inc. 3/94 Oklahoma $ .1 billion $ 12 million stock .4 million Pooling
Eagle Management and Trust Company 5/94 Texas -- 3 million cash -- Purchase
Dalhart Bancshares, Inc. 1/95 Texas .1 billion 23 million stock .7 million Pooling
National Mortgage Company 1/95 Tennessee .2 billion 153 million stock 5.0 million Pooling
Worthen Banking Corporation 2/95 Arkansas 3.5 billion 595 million stock 17.1 million Pooling
Salem Community Bancorp, Inc. 2/95 Illinois .1 billion 8 million stock .3 million Purchase
West Side Bancshares, Inc. 4/95 Texas .1 billion 18 million stock .6 million Purchase
First National Bank in Pampa 5/95 Texas .2 billion 42 million stock 1.4 million Pooling
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets of completed transactions $4.3 billion
====================================================================================================================================
Pending at September 30, 1995
Citizens Bancshares Corporation<F1> Arkansas $ .2 billion $ 38 million stock 1.1 million Purchase
Tom Green National Bank Texas .1 billion 9 million stock .2 million Purchase
Fourth Financial Corporation Kansas 7.5 billion 1.2 billion stock 31.0 million Pooling
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets of pending transactions $7.8 billion
====================================================================================================================================
<FN>
<F1> Completed on October 27, 1995.
</TABLE>
<TABLE>
Table 3: Asset Distribution
<CAPTION>
September 30, 1995 (dollars in billions) Assets % of total Locations
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Missouri $17.8 54.1% 169
Arkansas 4.3 13.1 141
New Mexico 3.3 10.0 66
Texas 2.2 6.7 35
Oklahoma 1.9 5.8 37
Iowa 1.2 3.7 33
Illinois 1.1 3.3 21
Tennessee .9 2.7 15
Kansas .2 .6 3
- ---------------------------------------------------------------------------------------------------------------------------------
Total $32.9 100.0% 520
=================================================================================================================================
</TABLE>
Arkansas Acquisitions
On February 28, 1995, the Corporation acquired Worthen Banking
Corporation (Worthen), headquartered in Little Rock, Arkansas, in a
transaction accounted for as a pooling of interests. Under terms of the
agreement the Corporation exchanged one share of its common stock for each
Worthen share, resulting in the issuance of approximately 17.1 million
shares. Worthen, subsequently renamed Boatmen's Arkansas, Inc., was the
second largest banking organization in Arkansas, with approximately $3.5
billion in assets, operating 101 retail banking offices throughout Arkansas
and six offices in the Austin, Texas area. The acquisition of Worthen
increased the Corporation's asset base in Arkansas to approximately $4.3
billion, making the Corporation the market leader in Arkansas.
On October 27, 1995, the Corporation acquired Citizens Bancshares
Corporation (Citizens), located in Jonesboro, Arkansas, in a stock
transaction accounted for as a purchase. The acquisition of Citizens, with
assets of approximately $225 million, resulted in the issuance of
approximately 1.1 million shares of common stock from treasury stock acquired
in the open market.
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<PAGE> 10
Mortgage Banking Acquisition
On January 31, 1995, the Corporation acquired National Mortgage Company
and certain affiliates (National Mortgage), headquartered in Memphis,
Tennessee, in a transaction accounted for as a pooling of interests. Under
terms of the agreement, the Corporation exchanged approximately 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 National Mortgage's mortgage servicing
portfolio. National Mortgage is a full-service mortgage banking company which
originates home loans through 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
$21.0 billion.
Texas Acquisitions
On August 30, 1995, the Corporation announced a definitive agreement to
acquire Tom Green National Bank, located in San Angelo, Texas, in a stock
transaction to be accounted for as a purchase. The acquisition of Tom Green
National Bank, with assets of approximately $80 million, will result in the
issuance of approximately .2 million shares of common stock from treasury
stock acquired in the open market. This transaction, which is subject to
regulatory and shareholder approval, is expected to be completed in the first
quarter of 1996.
On January 31, 1995, the Corporation acquired Dalhart Bancshares, Inc.
(Dalhart), a one bank holding company located in Dalhart, Texas, with assets
of approximately $140 million, in a pooling transaction involving the
issuance of approximately .7 million shares of common stock for all of the
shares of Dalhart.
On April 1, 1995, the Corporation acquired West Side Bancshares, Inc.
(West Side), a one bank holding company located in San Angelo, Texas, in a
stock transaction accounted for as a purchase. The acquisition of West Side,
with assets of approximately $142 million, resulted in the issuance of
approximately .6 million shares of common stock.
On May 31, 1995, the Corporation acquired First National Bank in Pampa
(Pampa), with assets of approximately $166 million, in a pooling transaction
involving the issuance of approximately 1.35 million shares of common stock
for all of the shares of Pampa.
On May 6, 1994, the Corporation completed the acquisition of Eagle
Management and Trust Company (Eagle), an investment advisory firm located in
Houston, Texas. Eagle, with $1.3 billion in trust assets, is managed by the
Corporation's trust subsidiary.
Illinois Acquisition
On February 28, 1995, the Corporation acquired Salem Community Bancorp,
Inc. (Salem), a one bank holding company located in Salem, Illinois, in a
stock transaction accounted for as a purchase, resulting in the issuance of
.3 million shares of common stock. Salem has two locations and approximately
$80 million in assets.
Oklahoma Acquisition
On March 31, 1994, the Corporation acquired Woodland Bancorp, Inc.
(Woodland), a retail banking organization located in Tulsa, Oklahoma, with
assets of approximately $65 million, in a pooling transaction resulting in
the issuance of .4 million shares of common stock.
Kansas Acquisition
On August 25, 1995, the Corporation announced a definitive agreement to
acquire Fourth Financial Corporation (Fourth Financial), headquartered in
Wichita, Kansas, in a transaction to be accounted for as a pooling of
interests. Under terms of the agreement, the Corporation will exchange one
share of its common stock for each Fourth Financial share, resulting in the
issuance of approximately 31.0 million shares, assuming conversion of
preferred stock and exercise of stock options. Fourth Financial is the
largest banking company in Kansas, with approximately $7.5 billion in assets,
operating 87 retail banking offices in Kansas, 56 in Oklahoma and four in
Missouri. The acquisition of Fourth Financial will give the Corporation the
leading deposit market share in Kansas and Oklahoma. The acquisition, which
is subject to approval by the Corporation's and Fourth Financial's
shareholders and regulatory agencies, is expected to be completed in the
first quarter of 1996.
Nonrecurring Merger Expenses
The acquisitions of Worthen, National Mortgage, Dalhart and Pampa
resulted in recognition of pre-tax nonrecurring merger expenses totaling
$26.0 million, consisting primarily of investment banking, legal and other
professional fees, severance and retention costs, obsolete equipment
write-offs and estimated costs to close duplicate branches. The major
components of the merger expenses are quantified in Table 4.
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<PAGE> 11
<TABLE>
Table 4: Nonrecurring Merger Expenses
<CAPTION>
(in millions)
- ---------------------------------------------------------------------
<S> <C>
Investment banking, legal, and other professional fees $ 9.7
Equipment and software write-offs, and branch closings 6.4
Compensation costs 4.6
Other 5.3
- ---------------------------------------------------------------------
Total $26.0
=====================================================================
</TABLE>
EARNINGS OVERVIEW
Net income for the third quarter of 1995 increased to $110.6 million,
up 8.5% from the same period of last year, and net income per share was $.86,
an increase of 8.9%. For the nine months, net income, before the impact of
nonrecurring merger expenses, increased 7.1% to $325.1 million, and net
income per share was $2.53, compared to $2.36 a year ago. The earnings growth
reflected higher net interest income and noninterest income, offset in part
by a higher provision for loan losses and higher noninterest expense. Net
income in 1995 was reduced by after-tax merger expenses totaling $20.0
million or $.16 per share. Including merger expenses, net income for the nine
months of 1995 was $305.1 million or $2.37 per share. Previously reported
financial statements of prior periods have been restated to reflect the
pooling-of-interests acquisitions which were completed in the nine months of
1995. Purchase acquisitions completed during the period had no material
impact on results of operations.
For the third quarter, the return on average assets was 1.34% and the
return on equity was 15.77%, compared to 1.29% and 16.03%, respectively, for
the same period last year. For the nine months, the return on average assets
before nonrecurring merger expenses was 1.33% and the return on equity was
15.90%, compared to 1.29% and 16.11%, respectively, in 1994. Including merger
expenses, the return on assets for the nine months of 1995 was 1.24% and the
return on equity was 14.92%.
Net interest income, on a fully-taxable equivalent basis, increased
1.5% over the third quarter of 1994 and 1.3% for the nine months due to
moderate average earning asset growth, which was partially offset by an
anticipated contraction in the net interest margin. The net interest margin
was 4.21% for the third quarter of 1995 and 4.24% for the nine months,
decreases of 12 and 13 basis points from the prior year periods,
respectively.
Noninterest income increased 12.2% over the third quarter of 1994 and
8.4% for the nine months primarily due to growth in trust fees, mortgage
banking revenues and credit card income.
Noninterest expense, excluding nonrecurring merger expenses, increased
1.8% from the third quarter of 1994 and 1.1% for the nine months, reflective
of ongoing initiatives to control operating costs. Noninterest expense in the
third quarter of 1995 included the favorable impact of an $11 million refund
from the FDIC as the Bank Insurance Fund reached its targeted
recapitalization limit, which was partially offset by higher levels of yield
maintenance and fund support related to the short-term money market fund of
the Corporation's trust subsidiary, higher compensation expense and an
increase in reserves for litigation. Including nonrecurring merger expenses,
noninterest expense for the nine months was $896.2 million.
The provision for loan losses for the third quarter of 1995 was $11.1
million, up from $6.9 million for the same period of last year. For the nine
months, the provision for loan losses totaled $30.0 million, compared to
$20.4 million in 1994. For the nine months, net loan charge-offs were $20.0
million, compared to $15.4 million in 1994, and annualized net charge-offs as
a percentage of average loans were .14% in 1995 and .12% in 1994.
Presented in Table 5 is an income statement analysis expressed on a per
share basis for the three months and nine months ended September 30, 1995,
compared to the same periods last year and the three months ended June 30,
1995. A more detailed discussion and analysis of the major factors impacting
the comparability between periods is provided throughout this report.
<TABLE>
Table 5: Earnings Per Share Analysis
<CAPTION>
3rd Qtr. '95 3rd Qtr. '95 YTD '95
Per share vs. 3rd Qtr. '94 vs. 2nd Qtr. '95 vs. YTD '94
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income per share prior period $.79 $.84 $2.36
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income .04 .03 .11
Provision for loan losses (.03) (.01) (.08)
Noninterest income .14 .02 .30
Noninterest expense (.04) .01 (.12)
Nonrecurring merger expenses (.16)
Income tax expense (.04) (.03) (.04)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase .07 .02 .01
- ----------------------------------------------------------------------------------------------------------------------------------
Net income per share current period $.86 $.86 $2.37
==================================================================================================================================
</TABLE>
- 11 -
<PAGE> 12
NET INTEREST INCOME AND INTEREST RATE RISK MANAGEMENT
<TABLE>
Table 6: Summary of Net Interest Income
<CAPTION>
Third quarter ended September 30 Nine months ended September 30
- ---------------------------------------------------------------------------------------------------------------------------------
(in millions) 1995 1994 % change 1995 1994 % change
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Average loans $19,817.3 $17,993.9 10.1% $19,426.6 $17,556.5 10.7%
Average earning assets 29,518.1 28,294.4 4.3 29,277.3 28,002.6 4.6
Average core deposits 21,588.6 20,700.0 4.3 21,221.4 20,843.2 1.8
Average purchased funds 5,747.4 5,558.4 3.4 5,908.7 5,165.1 14.4
Net interest income (FTE) 313.2 308.7 1.5 927.8 915.9 1.3
Net interest margin 4.21% 4.33% 4.24% 4.37%
=================================================================================================================================
</TABLE>
Net interest income, on a fully-taxable equivalent basis, increased
1.5% over the third quarter of 1994 and 1.3% for the nine months as growth in
average earning assets more than offset an anticipated contraction in the net
interest margin.
Average earning assets increased 4.3% over the third quarter and 4.6%
for the nine months, primarily due to strong loan growth. Loans, the highest
yielding earning asset, increased 10.1% over the third quarter of 1994 and
10.7% for the nine months. Loans represented 66.4% of average earning assets
for the nine months of 1995 compared to 62.7% for the same period last year.
Held to maturity and available for sale securities decreased 7.9% for the
nine months, and represented 31.5% of average earning assets, down from 35.7%
for the nine months of 1994. The decline in the securities portfolio reflects
redeployment of proceeds from maturing securities to the loan portfolio.
The net interest margin for the third quarter of 1995 was 4.21%
compared to 4.33% for the same period last year. A similar decline occurred
for the nine month period, primarily due to rising short-term interest rates
and an inverted yield curve which restricted the net interest margin due to
the Corporation's modest liability sensitive position. The average yield on
earning assets for the nine months of 1995 increased 82 basis points from the
same period last year; however, during this same period the average rate paid
on interest-bearing liabilities increased 116 basis points as the average
rate paid on interest-bearing deposits increased 96 basis points. The funding
cost also reflects a shift in deposit mix from lower-cost savings deposits to
higher-cost money market deposit accounts.
Interest rate risk is the extent to which net interest income may be
affected by changes in market driven interest rates, and the Corporation
assumes varying degrees of interest rate risk as part of its normal banking
operations. It is the role of the asset/liability management committee to
manage and control the level of interest rate risk contained in the balance
sheet as well as off-balance sheet financial instruments. The Corporation's
interest rate risk policy is to maintain a stable level of net interest
income while also enhancing earnings potential through limited risk
positioning based on the forecast of future interest rates. Interest rate
risk exposure (earnings at risk exposure) is currently limited, by policy, to
5% of projected annual net income. Adherence to these risk limits is
controlled and monitored through simulation modeling techniques that consider
the impact that alternative interest rate scenarios will have on the
Corporation's financial results. In its simulations, the Corporation
estimates the impact on net interest income and net income resulting from
various changes in market interest rates. Utilization of the simulation
modeling results enables management to develop strategies to control the
Corporation's overall interest rate risk exposure and to monitor specific
risks associated with on-balance sheet financial instruments, and off-balance
sheet instruments such as interest rate swaps. The assumptions used in the
model are intentionally designed to be conservative in that the balance sheet
is held static for the entire 12 month simulation horizon; therefore, the
model is not intended to represent an income forecast. Based on the current
interest rate sensitivity position, the simulation model indicates that the
earnings at risk exposure over the next 12 months is approximately 2%,
assuming a gradual 160 basis point increase in interest rates, and no active
management of the balance sheet components in response to the interest rate
rise.
An effective asset/liability management function is required to address
the interest rate risk inherent in the Corporation's core banking activities.
If no other management action is taken, these core banking activities, which
include lending and deposit products, result in an asset-sensitive position.
Accordingly, the Corporation utilizes a variety of discretionary on- and
off-balance sheet strategies to prudently manage the overall interest rate
sensitivity position. One such example of a recently employed off-balance
sheet strategy is the use of an auto-loan securitization program. In the
third quarter of this year, The Boatmen's National Bank of St. Louis filed a
shelf registration statement with the Securities and Exchange Commission
providing for the offering of up to $600 million of asset-backed certificates
under an auto-loan securitization program. During the third quarter, $300
million of such certificates were sold, resulting in the elimination of
interest rate risk associated with holding fixed-rate loans. Another
off-balance sheet strategy used by the Corporation in managing its overall
interest rate sensitivity position is the use of interest rate swaps to alter
the rate sensitivity characteristics of various assets and liabilities. Asset
securitizations and interest rate swaps are effective mechanisms to manage
interest rate risk due to the inherent advantages related to flexibility in
product structure, size, liquidity, capital and market timing. The
contribution of interest rate swaps over time will expand or contract with
movements in market rates; however, this risk cannot be viewed in isolation
and is controlled and monitored within the overall context of the
aforementioned asset/liability management policies.
- 12 -
<PAGE> 13
In 1995, $850 million of new swaps were added and $274 million matured
such that at September 30, 1995, interest rate swaps totaled $2.9 billion.
The most recent swaps were executed as a means to convert a portion of the
Corporation's variable rate bank notes to fixed rate instruments. Interest
rate swaps executed in prior years were undertaken to modify the interest
rate sensitivity of subordinated debt as well as alter the interest rate
sensitivity of the Corporation's prime-based loan portfolio. The
Corporation's remaining swap position from prior years includes $1.7 billion
of swaps that are used to convert prime-based loans to fixed rate
instruments, $.1 billion of swaps that are used to alter the pricing basis on
a small portion of the prime-based loan portfolio, and $.2 billion of swaps
that convert fixed rate debt to a floating rate instrument. The prime-based
loan portfolio (approximately $6.0 billion) is the primary cause of the large
asset sensitivity position of the core banking activity as it is primarily
funded by deposit liabilities that are less sensitive to movements in market
interest rates. As a means to alter the interest rate sensitivity of the
prime-based portfolio, the Corporation has used interest rate swaps to
convert a portion of these loans to fixed rate instruments. Additionally, for
differing maturities, the Corporation has utilized swaps to convert a portion
of its long-term fixed rate debt to a floating rate basis and to convert a
portion of its short-term floating rate bank notes to a fixed rate
instrument. Periodic correlation assessments are performed to ensure that the
swap instruments are effectively modifying the interest rate characteristics
of the respective balance sheet items. The interest rate swaps are not
leveraged in that they reset in step with rate movements in the underlying
index. The interest rate swap programs are consistent with management's
objective of balancing the interest rate sensitivity of the core banking
activity.
As summarized in Table 7, the swap portfolio is primarily comprised of
contracts wherein the Corporation receives a fixed rate of interest while
paying a variable rate. The average rate received at September 30, 1995, was
5.69% compared to an average rate paid of 6.14%, and the average remaining
maturity of the total portfolio was approximately one year. The variable rate
component of the interest rate swaps is based on LIBOR as of the most recent
re-set date and will adjust with future movements in this index. Table 8
provides information related to weighted average rates paid and received,
maturity profile, and fair values of the major swap programs in place at
September 30, 1995, and September 30, 1994. The estimated fair value of the
swap portfolio was a negative $25.4 million at September 30, 1995, based on
discounted cash flow models. In that these swaps are valued using anticipated
forward 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.
<TABLE>
Table 7: Interest Rate Swap Portfolio Activity
<CAPTION>
(in millions) Receive Fixed Pay Fixed Basis Swaps Total
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Notional amount, December 31, 1994 $2,000 $ 31 $ 250 $2,281
Additions 850 850
Maturities (149) (2) (123) (274)
- ---------------------------------------------------------------------------------------------------
Notional amount, September 30, 1995 $1,851 $879 $ 127 $2,857
===================================================================================================
Average remaining maturity (years) 1.0 .7 .5 .9
Weighted average rate received 5.52% 5.94% 6.50% 5.69%
Weighted average rate paid 6.07 6.29 6.05 6.14
===================================================================================================
</TABLE>
<TABLE>
Table 8: Interest Rate Swap Portfolio
<CAPTION>
Weighted Estimated
Average Rate -----------------------
September 30, 1995 Notional ----------------------- Maturity Fair
(in millions) Amount Receive Pay (years) Value
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Prime loan swaps:
Receive fixed $1,651 5.60% 6.08% 1.1 $(22.8)
Basis swaps 127 6.50 6.05 .5 .5
- ------------------------------------------------------------------------------------------------------------------
Total 1,778 5.66 6.07 1.0 (22.3)
Long-term debt swaps 200 4.87 5.99 .7 (.3)
Bank note liability swaps 850 5.93 6.21 .7 (2.1)
Other 29 6.11 8.81 .6 (.7)
- ------------------------------------------------------------------------------------------------------------------
Total $2,857 5.69% 6.14% .9 $(25.4)
==================================================================================================================
</TABLE>
- 13 -
<PAGE> 14
<TABLE>
<CAPTION>
Weighted Estimated
Average Rate -----------------------
September 30, 1994 Notional ----------------------- Maturity Fair
(in millions) Amount Receive Pay (years) Value
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Prime loan swaps:
Receive fixed $1,800 5.59% 5.11% 1.8 $(116.2)
Basis swaps 200 5.08 4.93 .3 (1.5)
- ------------------------------------------------------------------------------------------------------------------
Total 2,000 5.54 5.09 1.7 (117.7)
Long-term debt swaps 200 4.87 5.13 1.7 (4.5)
Other 81 5.03 6.46 1.1 (1.1)
- ------------------------------------------------------------------------------------------------------------------
Total $2,281 5.46% 5.14% 1.6 $(123.3)
==================================================================================================================
</TABLE>
Viewed in isolation, the swap portfolio decreased net interest income
by approximately $3.1 million in the third quarter of 1995 and $11.0 million
for the nine months, resulting in a reduction in the net interest margin of
approximately 5 basis points in each period. In 1994, the swap portfolio
increased net interest income by $16.3 million for the nine months adding
approximately 7 basis points to the margin. The results from the simulation
model indicate that in a rising rate environment the net interest
contribution from the swap portfolio will lessen as the variable component
resets upward. Based on interest rates at September 30, 1995, it is
anticipated that the swap portfolio will reduce net interest income by
approximately $14 million in 1995. However, it is anticipated that this will
be offset by a higher contribution from core banking activities.
Approximately 62% of the portfolio is comprised of indexed amortizing
swaps, whereby the maturity distribution could lengthen if interest rates
increase from current levels. Assuming interest rates were to increase 200
basis points from their current levels, the average maturity distribution of
the swap portfolio would extend by approximately 1.3 years. 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.
While the Corporation is primarily an end-user of derivative
instruments, it also acts as an intermediary to meet the financial needs of
its customers. The notional amount of the customer swap portfolio at
September 30, 1995, totaled approximately $479 million. Interest rate risk
associated with this portfolio is controlled by entering into offsetting
positions with third parties.
NONINTEREST INCOME
<TABLE>
Table 9: Summary of Noninterest Income
<CAPTION>
Third quarter ended September 30 Nine months ended September 30
- ---------------------------------------------------------------------------------------------------------------------------------
(in millions) 1995 1994 % change 1995 1994 % change
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Trust fees $ 44.6 $ 39.8 12.2% $131.4 $122.2 7.5%
Service charges 48.1 47.2 2.0 141.4 139.8 1.1
Credit card 13.1 11.1 18.2 36.7 30.6 19.9
Investment banking revenues 8.9 8.7 2.2 26.5 29.0 (8.5)
Mortgage banking operations 19.7 13.5 45.7 58.9 45.3 30.0
Securities gains, net .8 1.5 (45.0) 3.7 4.8 (22.7)
Other 32.5 27.7 17.2 96.8 85.4 13.4
- ---------------------------------------------------------------------------------------------------------------------------------
Total noninterest income $167.7 $149.5 12.2% $495.4 $457.1 8.4%
=================================================================================================================================
As % of operating income 34.9% 32.6% 34.8% 33.3%
- ---------------------------------------------------------------------------------------------------------------------------------
Revenue per full-time equivalent employee
(in thousands) $113.8 $105.0 $112.3 $104.2
=================================================================================================================================
</TABLE>
- 14 -
<PAGE> 15
<TABLE>
Table 10: Summary of Mortgage Banking Operations
<CAPTION>
Third quarter ended September 30 Nine months ended September 30
- ---------------------------------------------------------------------------------------------------------------------------------
(in millions) 1995 1994 % change 1995 1994 % change
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Servicing fees <F1> $13.8 $14.0 (1.4)% $40.4 $40.8 (1.0)%
Origination fees 2.8 .5 460.0 4.7 5.5 (14.5)
Late fees 2.6 2.2 18.2 7.4 7.1 4.2
Gains (losses) on sales of loans .5 (3.2) 115.6 (1.5) (8.1) 81.5
Gain on sale of mortgage servicing rights 7.9
- ---------------------------------------------------------------------------------------------------------------------------------
Total mortgage banking operations $19.7 $13.5 45.7% $58.9 $45.3 30.0%
=================================================================================================================================
<FN>
<F1> Net of mortgage servicing rights amortization.
</TABLE>
Noninterest income increased 12.2% over the third quarter of 1994 and
8.4% for the nine months, primarily due to growth in trust fees, mortgage
banking revenues and credit card income. Noninterest income as a percentage
of operating revenues improved to 34.8% for the nine months of 1995 from
33.3% for the same period of last year.
Trust fees increased 12.2% over the third quarter of 1994 and 7.5% for
the nine months, due to new business within the pension/institutional and
personal trust lines of business, and an increase in market values of trust
assets on which some fees are based. Trust assets under management totaled
$47.6 billion at September 30, 1995, compared to $36.5 billion at September
30, 1994, and $37.4 billion at December 31, 1994.
Service charge income totaled $48.1 million in the third quarter of
1995 and $141.4 million for the nine months, increases of 2.0% and 1.1% over
the prior year periods, respectively. Service charges in 1995 included growth
in retail fees which were offset by lower analysis fees on corporate customer
accounts. The lower level of corporate analysis fees is primarily a function
of corporate customers paying for services in the form of deposit balance
maintenance in lieu of fees. Credit card income increased 18.2% over the
third quarter of 1994, and 19.9% for the nine months, primarily due to growth
in cardholder revenues. Investment banking revenues increased 2.2% over the
third quarter of 1994 primarily due to higher levels of foreign exchange
income, but were down 8.5% for the nine months due primarily to a reduction
in the sales volume of various retail brokerage products.
Income from mortgage banking operations totaled $19.7 million in the
third quarter of 1995, and $58.9 million for the nine months, increases of
45.7% and 30.0%, respectively, over the prior year periods. Mortgage banking
revenues in 1995 include a $7.9 million gain recognized in the first quarter
on the sale of approximately $700 million of mortgage servicing rights. In
the second quarter of 1995, the Corporation adopted Statement of Financial
Accounting Standards No. 122 (SFAS 122), "Accounting for Mortgage Servicing
Rights." SFAS 122 requires capitalization of purchased mortgage servicing
rights as well as internally originated mortgage servicing rights. Since
adoption, the Corporation has capitalized approximately $2 million of
internally generated mortgage servicing rights which are being amortized over
the estimated servicing period of the related loans. At September 30, 1995,
mortgage servicing rights totaled $56.8 million, with a fair value of
approximately $80.6 million. Mortgage servicing rights are stratified into
pools of Government, conventional, and adjustable-rate mortgages and
evaluated for impairment measurement. Through the first nine months of 1995,
no impairment valuation writedowns were required. Table 10 summarizes the
components of mortgage banking revenues.
Other noninterest income increased $11.4 million or 13.4% over the nine
months of 1994 primarily due to a $4.9 million gain on the sale of an
ownership interest in a regional electronic funds transfer network and a $1.2
million divestiture gain on the sale of an Arkansas branch which was required
to be sold under regulatory conditions of the Worthen acquisition agreement.
Other noninterest income in 1995 was also supplemented by higher gains on
sales of student loans and other assets, investment appreciation in
bank-owned life insurance, and increased revenue from debit cards and
syndication fees. Other noninterest income in 1994 included a $4 million gain
from the sale of a building owned by Worthen.
- 15 -
<PAGE> 16
NONINTEREST EXPENSE
<TABLE>
Table 11: Summary of Noninterest Expense
<CAPTION>
Third quarter ended September 30 Nine months ended September 30
- ---------------------------------------------------------------------------------------------------------------------------------
(in millions) 1995 1994 % change 1995 1994 % change
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Staff expense $150.7 $146.7 2.7% $445.6 $444.3 .3%
Occupancy 20.8 21.2 (1.7) 60.4 62.4 (3.2)
Equipment 23.1 24.1 (4.1) 70.0 69.7 .4
FDIC insurance .8 13.2 (94.1) 27.4 39.9 (31.4)
Credit card 4.1 4.2 (2.4) 10.5 11.5 (8.7)
Printing, postage, paper 12.3 11.6 6.0 36.2 35.4 2.3
Intangible amortization 8.2 8.8 (7.1) 24.2 26.4 (8.6)
Professional fees 5.5 5.4 1.9 15.6 18.5 (15.7)
Federal Reserve processing charges 2.3 2.7 (14.8) 7.2 8.1 (11.1)
Advertising 8.1 8.5 (4.7) 24.2 23.1 4.8
Communications 7.0 6.1 14.8 20.0 18.6 7.5
Other 48.6 33.8 43.8 154.9 102.5 51.1
- ---------------------------------------------------------------------------------------------------------------------------------
Total noninterest expense $291.5 $286.3 1.8% $896.2 $860.4 4.2%
=================================================================================================================================
Efficiency ratio 60.6% 62.5% 63.0% 62.7%
Efficiency ratio excluding nonrecurring
merger expenses 61.1 62.7
Number of full-time equivalent employees 16,823 17,319
=================================================================================================================================
</TABLE>
Noninterest expense totaled $291.5 million for the third quarter of
1995 and $896.2 million for the nine months, increases of 1.8% and 4.2% from
the prior year periods, respectively. Noninterest expense levels in 1995
included nonrecurring merger expenses totaling approximately $26 million
consisting of investment banking and other professional fees, severance
costs, obsolete equipment write-offs and estimated costs to close duplicate
branches. Excluding merger expenses, noninterest expense was held to an
increase of 1.1% for the nine months, reflective of ongoing initiatives to
control operating expenses. The efficiency ratio improved to 60.6% for the
third quarter of 1995 compared to 62.5% for the same period of last year. For
the nine months, the efficiency ratio before merger expenses improved to
61.1% from 62.7% in 1994. Including merger expenses, the efficiency ratio for
the nine months of 1995 was 63.0%.
Staff expense, which represents approximately 50% of total noninterest
expense, increased 2.7% from the third quarter of 1994 and .3% for the nine
months. Full-time equivalent employees (FTE's) decreased from 17,319 at
September 30, 1994 to 16,823 at September 30, 1995.
FDIC insurance expense totaled $.8 million for the third quarter of
1995 and $27.4 million for the nine months, decreases of 94.1% and 31.4% from
the prior year periods, respectively. In the third quarter of 1995, the
Corporation's subsidiary banks received reimbursements from the FDIC totaling
approximately $11 million, representing overpayments to the Bank Insurance
Fund as the fund reached the targeted recapitalization limit in May of this
year. FDIC assessments in the fourth quarter of 1995 will largely be based on
the reduced rate of 4 cents per $100 of insured deposits and are expected to
approximate $4.0 million.
Other noninterest expense increased $14.8 million from the third
quarter of last year and $52.4 million for the nine months. These increases
were primarily attributable to the aforementioned nonrecurring merger
expenses recognized in the first half of 1995, higher levels of uninsured
losses, increased foreclosed property costs, higher reserves for litigation
and yield maintenance and fund support provided to the trust subsidiary's
short-term money market fund. In 1994 and through the first nine months of
1995, the Corporation's trust subsidiary waived a portion of its investment
management fees on its short-term money market fund, provided yield
maintenance to provide competitive yields to investors; and established a
reserve for fund support to ensure the fund will continue to be maintained at
the required par value. Management will consider, on an ongoing basis, the
need for additional fund support, particularly in the event of a rapid
increase in short-term interest rates.
TAXES
The Corporation's effective tax rate was 35.2% for the nine months of
1995 compared to 34.6% for the same period of last year. The increase in the
Corporation's effective tax rate resulted from nondeductible merger expenses
associated with the pooling-of-interests acquisitions completed in the first
half of 1995, and a continued decline in the amount of tax-exempt income as a
percentage of operating income. Excluding the impact of the nondeductible
merger expenses, the effective tax rate was 34.6%. On a prospective basis,
the effective tax rate should approximate the statutory rate, adjusted for
normal operating items such as tax-exempt interest, goodwill amortization and
other nondeductible expenses.
- 16 -
<PAGE> 17
PROVISION FOR LOAN LOSSES AND ASSET QUALITY
<TABLE>
Table 12: Summary of Reserve for Loan Losses
<CAPTION>
September 30 (in millions) 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of year $376.6 $376.3
- ---------------------------------------------------------------------------------------------------------------------------------
Loans charged off (51.3) (52.7)
Recoveries on loans previously charged off 31.3 37.3
- ---------------------------------------------------------------------------------------------------------------------------------
Net charge-offs (20.0) (15.4)
Provision charged to expense 30.0 20.4
Loan reserve from acquisitions 3.7 .9
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, end of period $390.3 $382.2
=================================================================================================================================
At end of period:
Loan reserve as % of net loans 1.97% 2.10%
Loan reserve as % of nonperforming loans 298.00 228.86
Net charge-offs as % of average loans .14 .12
=================================================================================================================================
</TABLE>
<TABLE>
Table 13: Summary of Nonperforming Assets
<CAPTION>
(in millions) September 30, 1995 December 31, 1994 September 30, 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nonaccrual $ 97.4 $111.9 $119.9
Restructured 6.6 7.1 7.1
Past due 90 days or more 27.0 17.0 40.0
- ---------------------------------------------------------------------------------------------------------------------------------
Total nonperforming loans 131.0 136.0 167.0
- ---------------------------------------------------------------------------------------------------------------------------------
Foreclosed property 45.4 62.4 105.3
=================================================================================================================================
Total nonperforming assets $176.4 $198.4 $272.3
=================================================================================================================================
Nonperforming loans as % of total loans .66% .73% .91%
Nonperforming assets as % of total loans and foreclosed property .89 1.06 1.48
Nonperforming assets as % of total assets .54 .60 .84
Loan reserve as % of nonperforming loans 298.00 277.06 228.86
=================================================================================================================================
</TABLE>
The provision for loan losses totaled $11.1 million in the third
quarter of 1995, an increase of 62.4% from the third quarter of last year,
when the provision totaled $6.9 million. For the nine months, the provision
for loan losses totaled $30.0 million, compared to $20.4 million in 1994. The
provision for loan losses was increased to maintain loan reserve coverage at
acceptable levels during a period of strong loan growth.
The reserve for loan losses represented 298% of nonperforming loans at
September 30, 1995 compared to 277% at December 31, 1994, and 229% at
September 30, 1994. The reserve for loan losses as a percentage of net loans
was 1.97% compared to 2.10% at September 30, 1994, and 2.02% at year-end
1994. Net loan charge-offs for the nine months of 1995 totaled $20.0 million,
compared to $15.4 million for the same period of 1994. Annualized net
charge-offs as a percentage of average loans were .14% for the nine months of
1995, compared to .12% for the same period last year, and .15% for all of
1994. Nonperforming assets, which include nonperforming loans and foreclosed
property, declined $95.9 million or 35.2% from September 30, 1994, and $22.0
million or 11.1% from year-end 1994. As a percent of total loans and
foreclosed property, nonperforming assets declined to .89% compared to 1.48%
at September 30, 1994, and 1.06% at December 31, 1994. The decline in
nonperforming asset levels largely resulted from an improved economy and the
effectiveness of the Corporation's comprehensive loan administration and
workout procedures. As a percentage of total assets, nonperforming assets
were .54% at September 30, 1995, compared to .84% at September 30, 1994, and
.60% at December 31, 1994. Nonperforming loans at September 30, 1995,
declined to $131.0 million or .66% of total loans, compared to .73% at
December 31, 1994, and .91% at September 30, 1994. Table 15 summarizes the
trends in nonperforming assets by major banking unit/geographic location.
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 14, criticized loans totaled
$664.4 million or 3.35% of loans at September 30, 1995. Management carefully
analyzes changes and trends in both nonperforming and criticized loans in
assessing the risk characteristics of the loan portfolio.
- 17 -
<PAGE> 18
<TABLE>
Table 14: Loans Designated as Criticized Loans by Internal Risk Rating System
<CAPTION>
Criticized Loans
- ---------------------------------------------------------------------------------------------------------------------------------
(in millions) Nonperforming Performing Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1994
March 31 $162.0 $601.2 $763.2
June 30 159.3 565.3 724.6
September 30 167.0 492.8 659.8
December 31 136.0 498.4 634.4
=================================================================================================================================
1995
March 31 $128.6 $486.2 $614.8
June 30 132.2 512.0 644.2
September 30 131.0 533.4 664.4
=================================================================================================================================
As % of loans at September 30, 1995 .66% 2.69% 3.35%
=================================================================================================================================
</TABLE>
<TABLE>
Table 15: Nonperforming Assets by Banking Unit
<CAPTION>
(in millions) September 30, 1995 December 31, 1994 September 30, 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Missouri $ 79.3 $103.2 $170.8
New Mexico 34.2 34.9 37.1
Arkansas 19.2 18.1 17.1
Oklahoma 15.3 11.1 12.4
Texas 9.7 9.5 9.9
Iowa 5.5 5.5 6.4
Illinois 4.6 5.0 5.3
Tennessee 3.7 5.0 5.4
Kansas 4.9 6.1 7.9
- ---------------------------------------------------------------------------------------------------------------------------------
Total $176.4 $198.4 $272.3
=================================================================================================================================
</TABLE>
On January 1, 1995, the Corporation adopted Financial Accounting
Standards No. 114 (SFAS 114), "Accounting by Creditors for Impairment of a
Loan" and No. 118 (SFAS 118), "Accounting by Creditors for Impairment of a
Loan - Income Recognition and Disclosures." These statements 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 the fair value of the underlying collateral if
the loan is collateral dependent. The statements further require that
specific reserves be established for any impaired loan for which the recorded
investment exceeds the measured value of the loan. SFAS 114 and SFAS 118 do
not apply to smaller balance, homogenous loans, which the Corporation has
identified as consumer loans, such as home equity, credit card, installment
and 1-4 family residential loans. At September 30, 1995, the recorded
investment in loans that are considered to be impaired under SFAS 114 and
SFAS 118 totaled approximately $86 million and consisted of nonaccrual and
restructured commercial, commercial real estate, and real estate construction
loans. At September 30, 1995, the reserve for loan losses included
approximately $2 million allocated to $10 million of impaired loans. The
Corporation's policy for income recognition was not impacted by adoption of
SFAS 114 and SFAS 118. It is the Corporation's policy to discontinue the
accrual of interest on loans when the full collectibility of principal or
interest is doubtful. Nonaccrual loans are reduced by the direct application
of interest receipts to loan principal, for accounting purposes only. If the
principal amount of the loan is well collateralized, interest income on such
loans may be recognized in the periods in which payments are received. For
the nine months of 1995, impaired loans averaged $82 million and cash basis
interest recognition on these loans totaled less than $1 million.
- 18 -
<PAGE> 19
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. These loans have the same
characteristics as nonaccrual loans and foreclosed properties. At September
30, 1995, segregated assets totaled $118.7 million, net of a $13.1 million
credit valuation allowance, and are classified as other assets for reporting
purposes. At September 30, 1995, segregated assets consisted of $28.6 million
of commercial loans, $15.4 million of industrial revenue bond loans, $83.4
million of commercial real estate related loans and $4.4 million of
foreclosed property. All other loans covered under the loss-sharing
arrangement are included in the loan portfolio and totaled $248.6 million at
September 30, 1995. Net charge-offs of $3.6 million, representing the
Corporation's share of losses on the segregated asset pool, were recognized
in the nine months of 1995. The valuation allowance represents the
Corporation's share of estimated losses upon ultimate liquidation of the
portfolio. The Corporation's 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 September 30, 1995, $125.4 million of segregated assets
were accorded classification treatment consistent with nonaccrual reporting,
$4.4 million represented foreclosed property, and the balance of $2.0 million
were 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 $8.7 million for
the nine months of 1995 and $9.9 million in the same period of 1994.
A summary of activity regarding segregated assets is provided in Table
16.
<TABLE>
Table 16: Segregated Assets
<CAPTION>
September 30, 1995 (in millions) Principal balance Allowance for losses Principal balance, net
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year $193.9 $16.7 $177.2
Charge-offs (24.7) (4.9)
Recoveries 1.3
Net transfers (18.2)
Payments on segregated assets (19.2)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 1995 $131.8 $13.1 $118.7
=================================================================================================================================
</TABLE>
LOAN PORTFOLIO
<TABLE>
Table 17: Summary of Loan Portfolio
<CAPTION>
(in millions) September 30, 1995 December 31, 1994 September 30, 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial $ 9,770.0 $ 8,767.1 $ 8,819.4
Real estate mortgage 3,814.3 3,629.0 3,495.2
Real estate construction 884.2 868.3 816.9
Consumer 5,191.5 5,302.1 5,026.5
Lease financing 162.4 136.8 87.4
- ---------------------------------------------------------------------------------------------------------------------------------
Total domestic loans 19,822.4 18,703.3 18,245.4
Foreign loans 26.1 19.1 17.2
- ---------------------------------------------------------------------------------------------------------------------------------
Total loans, before deduction of unearned income 19,848.5 18,722.4 18,262.6
Less unearned income 68.0 66.9 50.2
- ---------------------------------------------------------------------------------------------------------------------------------
Total loans, net of unearned income $19,780.5 $18,655.5 $18,212.4
=================================================================================================================================
</TABLE>
- 19 -
<PAGE> 20
<TABLE>
Table 18: Composition of Loan Portfolio
<CAPTION>
September 30, 1995 December 31, 1994 September 30, 1994
- ---------------------------------------------------------------------------------------------------------------------------------
% 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 $ 3,814.3 19.2% $ 3,629.0 19.4% $ 3,495.2 19.1%
Land acquisition 200.2 1.0 246.8 1.3 236.6 1.3
Residential construction 300.2 1.5 274.9 1.5 265.6 1.5
Commercial construction 383.8 1.9 346.6 1.8 314.7 1.7
Commercial real estate 2,975.5 15.0 2,996.9 16.0 2,957.4 16.2
Mini-perms 98.7 .5 75.5 .4 101.7 .6
- ---------------------------------------------------------------------------------------------------------------------------------
Total real estate 7,772.7 39.1 7,569.7 40.4 7,371.2 40.4
Commercial loans to Fortune 1,000 companies
and other large corporate borrowers 1,173.2 5.9 816.3 4.4 889.2 4.9
Middle market commercial 4,537.0 22.9 4,003.0 21.4 3,938.4 21.5
Bank stock loans 214.2 1.1 218.4 1.2 224.4 1.2
Agriculture 771.4 3.9 657.0 3.5 708.3 3.9
Consumer:
Home equity 476.1 2.4 423.2 2.3 405.7 2.2
Credit card 538.0 2.7 546.1 2.9 517.0 2.8
Indirect installment 2,674.4 13.5 2,711.5 14.5 2,608.8 14.3
Installment 1,503.0 7.6 1,621.3 8.6 1,495.0 8.2
- ---------------------------------------------------------------------------------------------------------------------------------
Total consumer 5,191.5 26.2 5,302.1 28.3 5,026.5 27.5
Lease financing 162.4 .8 136.8 .7 87.4 .5
Foreign 26.1 .1 19.1 .1 17.2 .1
- ---------------------------------------------------------------------------------------------------------------------------------
Total loans $19,848.5 100.0% $18,722.4 100.0% $18,262.6 100.0%
=================================================================================================================================
</TABLE>
The majority of the Corporation's loans are made within its natural
trade territory. The portfolio is highly diversified in that the
Corporation's banking operations span a nine state area with over 500 branch
locations. The Corporation's objective is to control credit risk through
geographic diversification and adherence to stringent credit administration
policies that limit industry concentrations and establish lending authority
and borrower limits. The Corporation's geographic profile provides
significant credit and economic risk diversification in that the Corporation
is not solely dependent on any major market. All of the Corporation's major
markets are currently experiencing favorable economic conditions, and
unemployment rates within these markets are in line with national averages.
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.
<TABLE>
Table 19: Loan Portfolio Distribution
<CAPTION>
September 30, 1995 December 31, 1994 September 30, 1994
- ---------------------------------------------------------------------------------------------------------------------------------
% Of % Of % Of
Total Total Total
(in millions) Amount<F1> Loans Amount<F1> Loans Amount<F1> Loans
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Missouri $10,646.0 53.8% $ 9,908.4 53.1% $ 9,681.0 53.2%
Arkansas 2,598.0 13.1 2,430.2 13.0 2,329.2 12.8
New Mexico 1,468.5 7.4 1,430.2 7.7 1,434.1 7.9
Texas 1,061.7 5.4 964.4 5.2 952.7 5.2
Oklahoma 1,028.0 5.2 1,062.3 5.7 1,066.9 5.9
Illinois 799.5 4.1 715.4 3.8 695.1 3.8
Tennessee 773.1 3.9 754.8 4.1 720.8 4.0
Iowa 749.7 3.8 729.3 3.9 701.1 3.8
Kansas 118.0 .6 114.4 .6 114.5 .6
Credit card 538.0 2.7 546.1 2.9 517.0 2.8
- ---------------------------------------------------------------------------------------------------------------------------------
Total $19,780.5 100.0% $18,655.5 100.0% $18,212.4 100.0%
=================================================================================================================================
<FN>
<F1>Net of unearned income.
</TABLE>
- 20 -
<PAGE> 21
At September 30, 1995, loans totaled $19.8 billion, an increase of 8.6%
over the same period of last year, and were up 6.0% from December 31, 1994.
Loan growth from December 31, 1994, was primarily due to an 11.4% increase in
commercial loans and reflected middle-market loan growth, as well as
increases in loans to Fortune 1,000 companies, partially offset by the sale
of approximately $300 million in consumer loans through an auto-loan
securitization sale completed in the third quarter of 1995. Excluding the
impact of the aforementioned auto-loan securitization, consumer loans
increased approximately 4% from December 31, 1994. Loan growth from September
30, 1994 was primarily due to increases in both the commercial and consumer
loan portfolios.
At September 30, 1995, middle market commercial loans represented
approximately 22.9% of the total loan portfolio, compared to 21.5% at
September 30, 1994 and 21.4% at December 31, 1994. As a percentage of total
loans, consumer loans represented approximately 26.2% of the total portfolio,
compared to 27.5% at September 30, 1994 and 28.3% at December 31, 1994.
Commercial real estate and real estate construction loans represented 19.9%
of total loans at September 30, 1995, compared to 21.3% at September 30,
1994. 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. Real estate loans are generally secured by the
underlying property at a 75% to 80% loan to value ratio and are generally
supported by guarantees from project developers. Additional collateral is
required on a project-by-project basis depending on management's evaluation
of the borrower. Approximately 30% of the commercial real estate portfolio is
comprised of owner occupied properties for which the primary source of
repayment is not entirely dependent on the real estate market. At September
30, 1995, the Corporation had unfunded commercial real estate and
construction commitments totaling $426 million. The amount of collateral, if
any, obtained for other loans is based on general industry practice and the
credit worthiness of the borrower.
Table 17 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 18.
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
third quarter of last year. At September 30, 1995, assets totaled $32.9
billion compared to $32.3 billion at September 30, 1994, and $32.9 billion at
December 31, 1994.
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 greatly 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 and
overnight surplus funds. These funds can be acquired when needed, principally
from existing customers within the Corporation's natural trade territory and
through access to national money markets. Additionally, the Corporation's
auto-loan securitization and bank note programs represent other sources of
liquidity.
Average core deposits totaled $21.6 billion for the third quarter of
1995, an increase of $.9 billion or 4.3% from the same period last year. The
core deposit base mix has been altered somewhat in recent periods as
customers have redirected balances from traditionally lower-cost savings
deposits to higher-rate money market savings accounts and retail certificates
of deposit. This is a reversal of the trend from recent years when the
spreads between savings rates and rates on other retail deposits were at
historical lows. Average earning assets increased approximately $1.2 billion
or 4.3% from the third quarter of last year, the majority of which has been
funded by growth in core deposits. Average core deposits supported 73.1% of
earning assets for the third quarter of 1995 compared to 73.2% during the
same period last year. Purchased funds supported 19.5% of average earning
assets compared to 19.6% for the third quarter of last year. Purchased funds
at September 30, 1995, and September 30, 1994, included medium-term bank
notes which were issued by several of the Corporation's banking subsidiaries
totaling $1.3 billion and $1.7 billion, respectively. In the most recent
quarter, the Corporation's need for purchased funds was reduced due to
proceeds received from the $300 million auto-loan securitization. In the near
term, the Corporation expects earning asset growth to modestly exceed core
deposit growth resulting in use of purchased funds at or slightly above the
present levels.
The Corporation's liquidity position is also managed by maintaining
adequate levels of liquid assets such as money market investments and
available for sale securities. At September 30, 1995, the available for sale
portfolio totaled $4.0 billion compared to $4.4 billion at September 30,
1994. The decline from the year ago period was primarily due to redeployment
of proceeds from maturing securities to the loan portfolio. Given the current
outlook for continued loan growth, the securities portfolio balances are
expected to show year-to-year declines throughout 1995. 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 September 30, 1995, unrealized
depreciation in the available for sale portfolio was approximately $19.0
million compared to $181.8 million at December 31, 1994. The increase in
market value from year end was primarily due to the decline in Treasury
yields. The Corporation's mortgage-backed securities portfolio totaled
approximately $5.7 billion at September 30, 1995, of which approximately 88%
represented government agency-
- 21 -
<PAGE> 22
backed issues and the remainder of the portfolio was comprised of private-
issue mortgage-backed securities with credit ratings of AA or better. As a
means to control interest rate and prepayment risk, each security undergoes a
thorough analysis prior to purchase and periodically thereafter to examine
the investment performance using a wide range of interest rate scenarios and
prepayment speeds. This ongoing process insures that the mortgage-backed
securities portfolio meets the Corporation's investment strategies and
internal risk guidelines.
The variety of funding options available and strong cash flow provide
the Corporation flexibility in selecting funding alternatives most
appropriate in the circumstances, thereby avoiding the necessity to access
capital markets at inopportune times. Maintaining favorable debt ratings is
also critical to liquidity because it can affect the availability and cost of
funds to the Corporation. The Corporation's ability to access the capital
markets on a cost-effective basis is reflected by its debt ratings,
summarized in Table 20. The Corporation currently has a shelf registration
statement filed with the Securities and Exchange Commission providing for the
issuance of up to $500 million of debt, preferred stock or common stock.
There were no commitments for capital expenditures, at September 30, 1995,
which would materially impact the Corporation's liquidity position.
<TABLE>
Table 20: Agency Ratings
<CAPTION>
Agency Ratings Moody's Standard & Poor's Thomson 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 and bank notes A1/P1 A+/A-1 TBW-1
Multi-bank note program
(8 Boatmen's subsidiary banks) A1/P1 A+/A-1
=================================================================================================================================
</TABLE>
CAPITAL STRUCTURE
<TABLE>
Table 21: Capital Structure
<CAPTION>
(in millions) September 30, 1995 December 31, 1994 September 30, 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Long-term debt $ 524.3 $ 592.0 $ 594.0
Stockholders' equity 2,809.0 2,561.4 2,559.7
- ---------------------------------------------------------------------------------------------------------------------------------
Total capitalization $3,333.3 $3,153.4 3,153.7
=================================================================================================================================
Tangible equity $2,483.7 $2,252.3 $2,239.3
=================================================================================================================================
<CAPTION>
Ratios
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity/assets 8.53% 7.79% 7.93%
Tangible equity/assets 7.62 6.92 7.01
Long-term debt as % of total capitalization 15.73 18.77 18.83
Double leverage 108.58 107.24 107.44
Dividends paid
(for the period, in thousands):
Preferred $ 60 $ 80 $ 60
Common 122,877 142,822 104,642
Total dividends as % of net income 40.3% 35.0% 34.5%
=================================================================================================================================
</TABLE>
- 22 -
<PAGE> 23
<TABLE>
Table 22: Intangible Assets
<CAPTION>
(in millions) September 30, 1995 December 31, 1994 September 30, 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Goodwill - Parent Company $ 85.8 $ 89.9 $ 91.2
- ---------------------------------------------------------------------------------------------------------------------------------
Subsidiaries:
Goodwill 104.7 103.1 105.8
Core deposit premium 64.1 74.7 79.7
Credit card premium 13.9 3.0 3.1
Mortgage servicing rights 56.8 38.4 40.6
- ---------------------------------------------------------------------------------------------------------------------------------
Total subsidiaries 239.5 219.2 229.2
- ---------------------------------------------------------------------------------------------------------------------------------
Total intangible assets $325.3 $309.1 $320.4
=================================================================================================================================
</TABLE>
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 $2.8 billion
or approximately 84.3% of total capitalization at September 30, 1995, an
increase of 9.7% from September 30, 1994. The equity to asset ratio was 8.53%
at September 30, 1995, compared to 7.93% at September 30, 1994, and 7.79% at
December 31, 1994. The equity base has been strengthened in recent years
through earnings retention, the conversion of debt to equity and the issuance
of common stock through various employee and stockholder investment plans. In
the first quarter of 1995, the Corporation announced a common stock
repurchase program authorizing the repurchase of up to 5 million shares, or
approximately 4% of the Corporation's shares outstanding. At September 30,
1995, the Corporation held approximately 1,648,866 common shares in Treasury
at a cost of $59.2 million. The repurchased shares will be used to meet
periodic stock requirements of benefit plans and pending purchase
acquisitions.
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
11.05% for Tier I and 14.09% for total capital substantially exceed the
regulatory required minimums. At September 30, 1995, the Corporation's Tier I
leverage ratio was 7.85%, well in excess of required minimums. At September
30, 1995, all of the Corporation's banking subsidiaries were considered "well
capitalized" based on the regulatory defined minimums of a Tier I leverage
ratio of 5%, a Tier I capital ratio of 6% and a total capital ratio of 10%.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA)
mandated a requirement to incorporate interest rate risk into the risk-based
capital computation which may become effective in 1996. As proposed, this
change is not expected to have a material effect on the Corporation's capital
requirements.
<TABLE>
Table 23: Risk-Based Capital
<CAPTION>
(in millions) September 30, 1995 December 31, 1994 September 30, 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tier I capital:
Stockholders' equity $ 2,809.0 $ 2,561.4 $ 2,559.7
Unrealized net depreciation,
available for sale securities 11.6 111.8 61.5
- ---------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity, net 2,820.6 2,673.2 2,621.2
Minority interest .7 .7 .7
Intangible assets:
Goodwill (190.5) (193.0) (197.0)
Core deposit premium (64.1) (74.7) (79.7)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Tier I 2,566.7 2,406.2 2,345.2
- ---------------------------------------------------------------------------------------------------------------------------------
Tier II capital:
Allowable reserve for loan losses 291.5 276.0 267.9
Qualifying long-term debt 415.0 415.0 425.0
- ---------------------------------------------------------------------------------------------------------------------------------
Total Tier II 706.5 691.0 692.9
- ---------------------------------------------------------------------------------------------------------------------------------
Total capital $ 3,273.2 $ 3,097.2 $ 3,038.1
- ---------------------------------------------------------------------------------------------------------------------------------
Risk-adjusted assets $23,223.3 $22,070.4 $21,410.1
- ---------------------------------------------------------------------------------------------------------------------------------
Risk-based capital ratios:
Tier I 11.05% 10.90% 10.95%
=================================================================================================================================
Total 14.09% 14.03% 14.19%
=================================================================================================================================
Tier I leverage ratio 7.85% 7.35% 7.32%
=================================================================================================================================
</TABLE>
- 23 -
<PAGE> 24
<TABLE>
BOATMEN'S BANCSHARES, INC.
CONSOLIDATED QUARTERLY EARNINGS TREND
<CAPTION>
1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
(in thousands) Third Second First Fourth Third Second First
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $439,027 $430,829 $405,962 $387,749 $367,691 $353,870 $330,198
Interest on short-term investments 1,124 983 899 886 932 1,082 572
Interest on Federal funds sold and securities
purchased under resale agreements 8,410 7,539 7,846 7,802 3,994 2,760 2,580
Interest on held to maturity securities
Taxable 64,781 66,317 64,792 62,509 62,323 58,900 48,634
Tax-exempt 13,915 13,903 13,965 14,709 15,678 14,903 15,198
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest on held to maturity securities 78,696 80,220 78,757 77,218 78,001 73,803 63,832
Interest on available for sale securities 60,747 64,731 64,853 65,324 64,855 66,335 69,847
Interest on trading securities 521 338 421 378 381 926 840
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest income 588,525 584,640 558,738 539,357 515,854 498,776 467,869
Interest expense:
Interest on deposits 204,315 200,577 184,751 168,601 153,659 145,692 141,664
Interest on Federal funds purchased
and other short-term borrowings 67,020 70,335 65,354 57,361 49,884 40,522 25,477
Interest on capital lease obligations 968 970 970 993 1,000 997 993
Interest on long-term debt 11,334 11,492 12,015 12,197 12,052 11,468 11,008
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest expense 283,637 283,374 263,090 239,152 216,595 198,679 179,142
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income 304,888 301,266 295,648 300,205 299,259 300,097 288,727
Provision for loan losses 11,130 9,171 9,710 4,899 6,855 7,740 5,846
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 293,758 292,095 285,938 295,306 292,404 292,357 282,881
- ----------------------------------------------------------------------------------------------------------------------------------
Noninterest income:
Trust fees 44,624 46,345 40,420 42,746 39,777 40,930 41,483
Service charges 48,121 47,595 45,699 46,947 47,188 46,811 45,840
Credit card 13,084 11,728 11,856 14,047 11,074 9,841 9,666
Investment banking revenues 8,849 8,880 8,790 8,795 8,660 10,584 9,729
Mortgage banking operations 19,680 16,291 22,904 15,418 13,509 12,723 19,045
Securities gains, net 843 2,815 46 1,411 1,533 702 2,554
Other 32,535 31,887 32,397 28,716 27,760 31,863 25,792
- ----------------------------------------------------------------------------------------------------------------------------------
Total noninterest income 167,736 165,541 162,112 158,080 149,501 153,454 154,109
- ----------------------------------------------------------------------------------------------------------------------------------
Noninterest expense:
Staff 150,662 146,654 148,259 146,382 146,732 149,092 148,492
Net occupancy 20,820 19,277 20,310 20,588 21,172 20,580 20,645
Equipment 23,128 23,483 23,372 23,662 24,113 23,579 22,018
FDIC insurance 773 13,310 13,316 13,033 13,195 13,271 13,448
Intangible amortization 8,215 8,052 7,883 8,716 8,842 8,808 8,786
Advertising 8,055 8,674 7,496 10,369 8,452 7,849 6,821
Other 79,871 73,876 90,747 73,561 63,778 64,407 66,347
- ----------------------------------------------------------------------------------------------------------------------------------
Total noninterest expense 291,524 293,326 311,383 296,311 286,284 287,586 286,557
- ----------------------------------------------------------------------------------------------------------------------------------
Income before income tax expense 169,970 164,310 136,667 157,075 155,621 158,225 150,433
Income tax expense 59,332 55,613 50,858 52,866 53,632 55,244 51,810
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $110,638 $108,697 $ 85,809 $104,209 $101,989 $102,981 $ 98,623
==================================================================================================================================
Net income per share $.86 $.84 $.67 $.81 $.79 $.80 $.77
==================================================================================================================================
Dividends declared per share $.37 $.34 $.34 $.34 $.34 $.31 $.31
==================================================================================================================================
Returns:
Return on assets 1.34% 1.33% 1.06% 1.30% 1.29% 1.31% 1.28%
Return on equity 15.77 15.85 13.06 16.25 16.03 16.45 15.84
==================================================================================================================================
</TABLE>
- 24 -
<PAGE> 25
<TABLE>
BOATMEN'S BANCSHARES, INC.
CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEET AND NET INTEREST MARGIN
<CAPTION>
1995
- -----------------------------------------------------------------------------------------------------------------------------------
Average balances (in millions) 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 $19,817.3 $440.3 8.82% $19,528.4 $432.4 8.88% $18,924.4 $407.8 8.74%
Short-term investments 75.0 1.1 5.95 67.6 1.0 5.83 65.4 .9 5.57
Federal funds sold and securities
purchased under resale agreements 571.0 8.4 5.84 492.8 7.5 6.14 531.5 7.9 5.99
Held to maturity securities:
Taxable 4,222.6 64.8 6.09 4,403.6 66.3 6.04 4,351.8 64.8 6.04
Tax-exempt 862.5 20.8 9.58 856.3 20.9 9.78 846.2 21.0 10.06
- -----------------------------------------------------------------------------------------------------------------------------------
Total held to maturity securities 5,085.1 85.6 6.68 5,259.9 87.2 6.65 5,198.0 85.8 6.69
Available for sale securities 3,938.9 60.8 6.13 4,073.5 64.8 6.38 4,116.5 65.0 6.40
Trading securities 30.8 .6 7.21 20.6 .4 6.96 27.9 .4 6.40
- -----------------------------------------------------------------------------------------------------------------------------------
Total earning assets 29,518.1 596.8 8.02 29,442.8 593.3 8.08 28,863.7 567.8 7.98
Less reserve for loan losses (389.1) (386.3) (380.0)
Cash and due from banks 1,885.0 1,825.5 1,871.9
All other assets 2,033.7 1,905.9 1,923.4
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $33,047.7 $32,787.9 $32,279.0
===================================================================================================================================
<CAPTION>
Liabilities and Stockholders' Equity
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Retail savings deposits and interest-
bearing transaction accounts $10,232.9 $ 80.1 3.10% $10,103.8 $ 79.2 3.14% $10,108.4 $ 74.8 3.00%
Time deposits 8,986.5 124.2 5.49 9,109.5 121.4 5.34 8,999.1 110.0 4.96
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 19,219.4 204.3 4.22 19,213.3 200.6 4.19 19,107.5 184.8 3.92
Federal funds purchased and
other short-term borrowings 4,592.4 67.0 5.79 4,682.4 70.3 6.03 4,544.7 65.3 5.83
Capital lease obligations 39.2 1.0 9.81 39.6 1.0 9.81 40.0 1.0 9.85
Long-term debt 522.5 11.3 8.61 528.9 11.5 8.71 568.2 12.0 8.58
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 24,373.5 283.6 4.62 24,464.2 283.4 4.65 24,260.4 263.1 4.40
Demand deposits 5,409.2 5,198.5 4,999.0
All other liabilities 457.8 381.0 391.0
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 30,240.5 30,043.7 29,650.4
Redeemable preferred stock 1.1 1.1 1.1
Total stockholders' equity 2,806.1 2,743.1 2,627.5
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $33,047.7 $32,787.9 $32,279.0
===================================================================================================================================
Interest rate spread 3.40% 3.43% 3.58%
Effect of noninterest-bearing funds .81 .79 .70
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest margin $313.2 4.21% $309.9 4.22% $304.7 4.28%
===================================================================================================================================
Nonaccrual loans are included in
average balances and interest
payments on such loans are recognized
as income on a cash basis when
appropriate. 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 $1.3 $1.6 $1.9
Held to maturity securities 6.9 7.0 7.0
Available for sale securities .1 .1 .1
Trading securities
- -----------------------------------------------------------------------------------------------------------------------------------
Total $8.3 $8.7 $9.0
===================================================================================================================================
- 25 -
<PAGE> 26
BOATMEN'S BANCSHARES, INC.
CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEET AND NET INTEREST MARGIN
<CAPTION>
1994
- -----------------------------------------------------------------------------------------------------------------------------------
Average balances (in millions) Fourth Quarter Third Quarter
- -----------------------------------------------------------------------------------------------------------------------------------
Income/ Yields/ Income/ Yields/
Assets Balance Expense Rates Balance Expense Rates
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans, net of unearned income $18,402.5 $390.0 8.41% $17,993.9 $369.2 8.14%
Short-term investments 68.6 .9 5.13 83.8 .9 4.41
Federal funds sold and securities
purchased under resale agreements 579.4 7.8 5.34 333.5 4.0 4.75
Held to maturity securities:
Taxable 4,353.1 62.5 5.70 4,385.0 62.3 5.64
Tax-exempt 897.5 21.8 9.62 891.7 23.5 10.44
- -----------------------------------------------------------------------------------------------------------------------------------
Total held to maturity securities 5,250.6 84.3 6.37 5,276.7 85.8 6.45
Available for sale securities 4,291.3 65.4 6.05 4,578.1 64.9 5.63
Trading securities 26.1 .4 6.29 28.4 .4 5.56
- -----------------------------------------------------------------------------------------------------------------------------------
Total earning assets 28,618.5 548.8 7.61 28,294.4 525.2 7.37
Less reserve for loan losses (383.3) (384.0)
Cash and due from banks 1,903.3 1,873.6
All other assets 1,874.4 1,845.9
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $32,012.9 $31,629.9
===================================================================================================================================
<CAPTION>
Liabilities and Stockholders' Equity
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Retail savings deposits and interest-
bearing transaction accounts $10,078.2 $ 68.2 2.68% $10,068.7 $ 62.8 2.48%
Time deposits 8,809.6 100.4 4.52 8,576.7 90.8 4.20
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 18,887.8 168.6 3.54 18,645.4 153.6 3.27
Federal funds purchased and
other short-term borrowings 4,475.3 57.4 5.09 4,445.3 49.9 4.45
Capital lease obligations 40.2 1.0 9.79 40.5 1.0 9.80
Long-term debt 598.2 12.2 8.09 592.0 12.0 8.08
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 24,001.5 239.2 3.95 23,723.2 216.5 3.62
Demand deposits 5,081.2 5,041.3
All other liabilities 363.3 319.0
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 29,446.0 29,083.5
Redeemable preferred stock 1.1 1.1
Total stockholders' equity 2,565.8 2,545.3
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $32,012.9 $31,629.9
===================================================================================================================================
Interest rate spread 3.66% 3.75%
Effect of noninterest-bearing funds .63 .58
- ---------------------------------------------------------------------------------------------------------------------------------
Net interest margin $309.6 4.29% $308.7 4.33%
===================================================================================================================================
Nonaccrual loans are included in
average balances and interest
payments on such loans are recognized
as income on a cash basis when
appropriate. 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 $2.2 $1.5
Held to maturity securities 7.1 7.8
Available for sale securities .1 .1
Trading securities
- -----------------------------------------------------------------------------------------------------------------------------------
Total $9.4 $9.4
===================================================================================================================================
- 26 -
<PAGE> 27
BOATMEN'S BANCSHARES, INC.
CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEET AND NET INTEREST MARGIN
<CAPTION>
1994
- -----------------------------------------------------------------------------------------------------------------------------------
Average balances (in millions) Second Quarter First Quarter
- -----------------------------------------------------------------------------------------------------------------------------------
Income/ Yields/ Income/ Yields/
Assets Balance Expense Rates Balance Expense Rates
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans, net of unearned income $17,596.5 $355.5 8.10% $17,068.8 $331.8 7.88%
Short-term investments 110.0 1.1 3.95 61.0 .6 3.80
Federal funds sold and securities
purchased under resale agreements 262.7 2.8 4.21 295.8 2.6 3.54
Held to maturity securities:
Taxable 4,385.4 58.9 5.39 4,056.7 48.6 4.86
Tax-exempt 904.8 22.3 9.88 923.9 22.8 10.01
- -----------------------------------------------------------------------------------------------------------------------------------
Total held to maturity securities 5,290.2 81.2 6.16 4,980.6 71.4 5.82
Available for sale securities 4,891.9 66.4 5.45 5,013.5 69.9 5.66
Trading securities 64.2 1.0 6.04 69.5 .8 5.01
- -----------------------------------------------------------------------------------------------------------------------------------
Total earning assets 28,215.5 508.0 7.22 27,489.2 477.1 7.04
Less reserve for loan losses (384.4) (381.5)
Cash and due from banks 1,851.2 1,816.5
All other assets 1,855.3 1,856.2
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $31,537.6 $30,780.4
===================================================================================================================================
<CAPTION>
Liabilities and Stockholders' Equity
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Retail savings deposits and interest-
bearing transaction accounts $10,175.8 $ 59.8 2.36% $10,232.4 $ 56.9 2.26%
Time deposits 8,582.4 85.9 4.01 8,581.3 84.7 4.00
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 18,758.2 145.7 3.12 18,813.7 141.6 3.05
Federal funds purchased and
other short-term borrowings 4,239.3 40.5 3.83 3,446.8 25.5 3.00
Capital lease obligations 40.8 1.0 9.81 41.0 1.0 9.81
Long-term debt 587.9 11.5 7.82 588.2 11.0 7.59
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 23,626.2 198.7 3.37 22,889.7 179.1 3.17
Demand deposits 5,110.3 5,057.4
All other liabilities 296.4 341.3
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 29,032.9 28,288.4
Redeemable preferred stock 1.1 1.2
Total stockholders' equity 2,503.6 2,490.8
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $31,537.6 $30,780.4
===================================================================================================================================
Interest rate spread 3.85% 3.87%
Effect of noninterest-bearing funds .55 .53
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest margin $309.3 4.40% $298.0 4.40%
===================================================================================================================================
Nonaccrual loans are included in
average balances and interest
payments on such loans are recognized
as income on a cash basis when
appropriate. 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 $1.6 $1.6
Held to maturity securities 7.4 7.6
Available for sale securities .1 .1
Trading securities .1
- -----------------------------------------------------------------------------------------------------------------------------------
Total $9.2 $9.3
===================================================================================================================================
- 27 -
<PAGE> 28
BOATMEN'S BANCSHARES, INC.
CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEET AND NET INTEREST MARGIN
<CAPTION>
Nine Months Ended September 30
- -----------------------------------------------------------------------------------------------------------------------------------
Average balances (in millions) 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
Income/ Yields/ Income/ Yields/
Assets Balance Expense Rates Balance Expense Rates
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans, net of unearned income $19,426.6 $1,280.5 8.81% $17,556.5 $1,056.5 8.05%
Short-term investments 69.4 3.0 5.79 85.0 2.6 4.07
Federal funds sold and securities
purchased under resale agreements 531.9 23.8 5.98 297.4 9.3 4.20
Held to maturity securities:
Taxable 4,325.6 195.9 6.05 4,276.9 169.8 5.31
Tax-exempt 855.0 62.7 9.81 906.7 68.6 10.11
- -----------------------------------------------------------------------------------------------------------------------------------
Total held to maturity securities 5,180.6 258.6 6.67 5,183.6 238.4 6.15
Available for sale securities 4,042.4 190.6 6.30 4,826.2 201.3 5.58
Trading securities 26.4 1.4 6.86 53.9 2.2 5.52
- -----------------------------------------------------------------------------------------------------------------------------------
Total earning assets 29,277.3 1,757.9 8.03 28,002.6 1,510.3 7.21
Less reserve for loan losses (385.2) (383.3)
Cash and due from banks 1,860.9 1,847.3
All other assets 1,954.7 1,852.5
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $32,707.7 $31,319.1
===================================================================================================================================
<CAPTION>
Liabilities and Stockholders' Equity
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Retail savings deposits and interest-
bearing transaction accounts $10,148.8 $ 234.1 3.08% $10,158.3 $ 179.5 2.36%
Time deposits 9,031.7 355.6 5.26 8,580.1 261.5 4.07
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 19,180.5 589.7 4.11 18,738.4 441.0 3.15
Federal funds purchased and
other short-term borrowings 4,606.7 202.7 5.88 4,047.5 115.9 3.83
Capital lease obligations 39.6 2.9 9.82 40.8 3.0 9.80
Long-term debt 539.7 34.8 8.63 589.4 34.5 7.83
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 24,366.5 830.1 4.55 23,416.1 594.4 3.39
Demand deposits 5,203.7 5,069.6
All other liabilities 410.2 318.8
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 29,980.4 28,804.5
Redeemable preferred stock 1.1 1.1
Total stockholders' equity 2,726.2 2,513.5
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $32,707.7 $31,319.1
===================================================================================================================================
Interest rate spread 3.48% 3.82%
Effect of noninterest-bearing funds .76 .55
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest margin $927.8 4.24% $915.9 4.37%
===================================================================================================================================
Nonaccrual loans are included in
average balances and interest
payments on such loans are recognized
as income on a cash basis when
appropriate. 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 $ 4.8 $ 4.7
Held to maturity securities 20.9 22.8
Available for sale securities .3 .3
Trading securities .1
- -----------------------------------------------------------------------------------------------------------------------------------
Total $26.0 $27.9
===================================================================================================================================
</TABLE>
- 28 -
<PAGE> 29
PART II. OTHER INFORMATION
--------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
27. Boatmen's Bancshares, Inc. Financial Data
Schedule for the Period Ended September 30, 1995.
(b) Registrant filed a current report on Form 8-K dated August 29, 1995,
covering Item 5 - Other Events and Item 7 - Financial Statements
and Exhibits.
SIGNATURE
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: November 13, 1995
-----------------
/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)
- 29 -
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,808,462
<INT-BEARING-DEPOSITS> 60,159
<FED-FUNDS-SOLD> 686,822
<TRADING-ASSETS> 26,977
<INVESTMENTS-HELD-FOR-SALE> 3,988,383
<INVESTMENTS-CARRYING> 5,028,382
<INVESTMENTS-MARKET> 5,026,184
<LOANS> 19,780,535
<ALLOWANCE> 390,344
<TOTAL-ASSETS> 32,941,619
<DEPOSITS> 24,594,191
<SHORT-TERM> 4,515,395
<LIABILITIES-OTHER> 497,698
<LONG-TERM> 524,283
1,007
0
<COMMON> 129,924
<OTHER-SE> 2,679,121
<TOTAL-LIABILITIES-AND-EQUITY> 32,941,619
<INTEREST-LOAN> 1,275,818
<INTEREST-INVEST> 428,004
<INTEREST-OTHER> 28,081
<INTEREST-TOTAL> 1,731,903
<INTEREST-DEPOSIT> 589,643
<INTEREST-EXPENSE> 830,101
<INTEREST-INCOME-NET> 901,802
<LOAN-LOSSES> 30,011
<SECURITIES-GAINS> 3,704
<EXPENSE-OTHER> 896,233
<INCOME-PRETAX> 470,947
<INCOME-PRE-EXTRAORDINARY> 305,144
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 305,144
<EPS-PRIMARY> 2.37
<EPS-DILUTED> 2.37
<YIELD-ACTUAL> 4.24
<LOANS-NON> 97,372
<LOANS-PAST> 26,960
<LOANS-TROUBLED> 6,654
<LOANS-PROBLEM> 533,400
<ALLOWANCE-OPEN> 376,618
<CHARGE-OFFS> 51,283
<RECOVERIES> 31,328
<ALLOWANCE-CLOSE> 390,344
<ALLOWANCE-DOMESTIC> 390,344
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
