<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: March 31, 1996
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.
- -------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Missouri 43-0672260
- -------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
One Boatmen's Plaza, 800 Market Street, St. Louis, Missouri 63101
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
3l4-466-6000
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
-------- ------
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 April 30, 1996
- -------------------------------------------------------------------------------
$1 Par Value 157,203,256
<PAGE> 2
<TABLE>
INDEX
<CAPTION>
PART I - FINANCIAL INFORMATION
------------------------------
PAGE NO.
<S> <C>
Item 1 - Financial Statements 3
Consolidated Balance Sheet
March 31, 1996 and 1995 and December 31, 1995 4
Consolidated Statement of Income
Three months ended March 31, 1996 and 1995 5
Consolidated Statement of Changes in Stockholders' Equity
Three months ended March 31, 1996 and 1995 6
Consolidated Statement of Cash Flows
Three months ended March 31, 1996 and 1995 7
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations 8-29
<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 30
SIGNATURE 30
</TABLE>
- 2 -
<PAGE> 3
PART I. FINANCIAL INFORMATION
-----------------------------
ITEM 1. FINANCIAL STATEMENTS
The consolidated financial statements for the three months ended March
31, 1996 and 1995 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 ended March 31, 1996 are not necessarily
indicative of the results which may be expected for any other interim period
or for the entire year.
- 3 -
<PAGE> 4
<TABLE>
BOATMEN'S BANCSHARES, INC.
CONSOLIDATED BALANCE SHEET
<CAPTION>
(dollars in thousands) March 31, 1996 March 31, 1995 December 31, 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Cash and due from banks $ 2,087,480 $ 2,239,252 $ 2,611,765
Short-term investments 68,011 57,009 83,166
Securities:
Held to maturity 1,027,335 7,195,696 923,130
Available for sale 10,627,510 4,740,083 10,347,172
Trading 33,714 19,795 58,361
Federal funds sold and securities purchased
under resale agreements 363,308 419,839 1,225,671
Loans, net of unearned income 24,252,074 23,554,666 24,050,903
Less reserve for loan losses 463,733 454,732 452,560
- ------------------------------------------------------------------------------------------------------------------------
Loans, net 23,788,341 23,099,934 23,598,343
- ------------------------------------------------------------------------------------------------------------------------
Property and equipment 802,603 802,124 800,502
Other assets 1,500,899 1,481,419 1,475,379
- ------------------------------------------------------------------------------------------------------------------------
Total assets $40,299,201 $40,055,151 $41,123,489
========================================================================================================================
<CAPTION>
Liabilities and Stockholders' Equity
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Liabilities:
Demand deposits $ 6,445,618 $ 5,881,973 $ 6,894,649
Retail savings deposits and interest-bearing
transaction accounts 13,313,889 12,306,852 13,510,720
Time deposits 11,365,074 11,655,863 11,572,768
- ------------------------------------------------------------------------------------------------------------------------
Total deposits 31,124,581 29,844,688 31,978,137
- ------------------------------------------------------------------------------------------------------------------------
Federal funds purchased and securities sold
under repurchase agreements 2,938,425 3,216,314 2,902,973
Short-term borrowings 1,335,138 2,604,281 1,474,991
Capital lease obligations 38,752 40,074 39,076
Long-term debt 616,413 557,704 615,129
Other liabilities 648,571 474,758 512,436
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities 36,701,880 36,737,819 37,522,742
- ------------------------------------------------------------------------------------------------------------------------
Redeemable preferred stock 961 1,142 961
- ------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Preferred stock 99,091 99,969 99,324
Common stock ($1 par value; 200,000,000 shares authorized) 158,401 156,559 158,068
Surplus 1,214,408 1,181,482 1,212,838
Retained earnings 2,188,020 1,921,564 2,137,176
Treasury stock, at cost (29,183) (2,151) (18,096)
Unrealized net appreciation (depreciation),
available for sale securities (34,377) (41,233) 10,476
- ------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 3,596,360 3,316,190 3,599,786
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $40,299,201 $40,055,151 $41,123,489
========================================================================================================================
Held to maturity securities, market value $ 1,065,980 $ 7,004,728 $ 973,801
Available for sale securities, amortized cost 10,688,942 4,804,137 10,330,233
Common stock, shares outstanding 157,644,169 156,481,513 157,591,239
Treasury shares outstanding 757,087 76,992 476,519
========================================================================================================================
</TABLE>
- 4 -
<PAGE> 5
<TABLE>
BOATMEN'S BANCSHARES, INC.
CONSOLIDATED STATEMENT OF INCOME
<CAPTION>
Three months ended March 31 (in thousands except share data) 1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest income
Interest and fees on loans $528,584 $498,751
Interest on short-term investments 1,913 964
Interest on Federal funds sold and securities purchased
under resale agreements 11,631 8,801
Interest on held to maturity securities
Taxable 404 96,057
Tax-exempt 15,077 13,965
- ------------------------------------------------------------------------------------------------
Total interest on held to maturity securities 15,481 110,022
Interest on available for sale securities 160,188 76,298
Interest on trading securities 764 435
- ------------------------------------------------------------------------------------------------
Total interest income 718,561 695,271
- ------------------------------------------------------------------------------------------------
Interest expense
Interest on deposits 257,282 238,124
Interest on Federal funds purchased and other
short-term borrowings 58,709 80,846
Interest on capital lease obligations 946 978
Interest on long-term debt 12,450 12,129
- ------------------------------------------------------------------------------------------------
Total interest expense 329,387 332,077
- ------------------------------------------------------------------------------------------------
Net interest income 389,174 363,194
Provision for loan losses 26,217 10,743
- ------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 362,957 352,451
- ------------------------------------------------------------------------------------------------
Noninterest income
Trust fees 52,807 45,670
Service charges 60,351 55,234
Mortgage banking revenues 21,639 23,248
Credit card 15,553 14,695
Investment banking revenues 12,469 10,248
Securities gains (losses), net 477 (22,017)
Other 49,284 37,581
- ------------------------------------------------------------------------------------------------
Total noninterest income 212,580 164,659
- ------------------------------------------------------------------------------------------------
Noninterest expense
Staff 191,360 179,235
Net occupancy 25,418 25,127
Equipment 30,232 28,726
FDIC insurance 2,735 16,594
Intangible amortization 10,272 10,610
Advertising 9,894 9,914
Merger expense 42,414 25,267
Other 87,166 79,026
- ------------------------------------------------------------------------------------------------
Total noninterest expense 399,491 374,499
- ------------------------------------------------------------------------------------------------
Income before income tax expense 176,046 142,611
Income tax expense 64,922 52,347
- ------------------------------------------------------------------------------------------------
Net income $111,124 $ 90,264
================================================================================================
Net income available to common shareholders $109,374 $ 88,495
================================================================================================
Net income per share $.69 $.57
================================================================================================
Dividends declared per share $.37 $.34
================================================================================================
Earnings per share amounts are based on weighted average shares outstanding after adjusting net
income for dividends on preferred stock. For the first quarter, average shares outstanding were
157,727,497 in 1996 and 156,231,878 in 1995. Preferred dividends declared totaled $1.8 million
in both 1996 and 1995.
</TABLE>
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<PAGE> 6
<TABLE>
BOATMEN'S BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<CAPTION>
Unrealized Net
Appreciation,
Preferred Stock Common Stock Treasury Stock (Depreciation)
--------------- ---------------- Retained -------------- Available for
(in thousands) Shares Amount Shares Amount Surplus Earnings Shares Amount Sale Securities Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995 250 $100,000 156,084 $156,084 $1,171,184 $1,886,199 (509) $(14,516) $(134,521) $3,164,430
Net income -- -- -- -- -- 90,264 -- -- -- 90,264
Cash dividends declared:
Common ($.34 per share) -- -- -- -- -- (43,387) -- -- -- (43,387)
Redeemable preferred -- -- -- -- -- (20) -- -- -- (20)
By pooled company prior
to merger--common -- -- -- -- -- (9,743) -- -- -- (9,743)
By pooled company prior
to merger--preferred -- -- -- -- -- (1,749) -- -- (1,749)
Common stock issued
pursuant to various
employee and shareholder
stock issuance plans -- -- 164 164 1,709 -- 143 4,357 -- 6,230
Common stock issued upon
acquisition of subsidiaries -- -- 369 369 10,285 -- 289 8,008 -- 18,662
Adjustment for purchase of
treasury stock--pooled
companies -- -- (62) (62) (2,000) -- -- -- -- (2,062)
Common stock issued upon
conversion of preferred
stock -- (31) 1 1 30 -- -- -- -- --
Common stock issued upon
conversion of convertible
subordinated debentures -- -- 3 3 43 -- -- -- -- 46
Adjustment of available for
sale securities to
market value -- -- -- -- -- -- -- -- 93,288 93,288
Other, net -- -- -- -- 231 -- -- -- -- 231
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, MARCH 31, 1995 250 $ 99,969 156,559 $156,559 $1,181,482 $1,921,564 (77) $ (2,151) $ (41,233) $3,316,190
====================================================================================================================================
BALANCE, JANUARY 1, 1996 248 $ 99,324 158,068 $158,068 $1,212,838 $2,137,176 (477) $(18,096) $ 10,476 $3,599,786
Net income -- -- -- -- -- 111,124 -- -- -- 111,124
Cash dividends declared:
Common ($.37 per share) -- -- -- -- -- (58,530) -- -- -- (58,530)
Preferred -- -- -- -- -- (17) -- -- -- (17)
Redeemable preferred -- -- -- -- -- (1,733) -- -- -- (1,733)
Acquisition of treasury stock -- -- -- -- -- -- (990) (38,859) -- (38,859)
Common stock issued
pursuant to various
employee and shareholder
stock issuance plans -- -- 325 325 2,840 -- 473 18,140 -- 21,305
Common stock issued upon
acquisition of subsidiaries -- -- -- -- (839) -- 240 9,739 -- 8,900
Common stock issued upon
conversion of preferred
stock -- (233) 8 8 225 -- -- -- -- --
Common stock issued upon
conversion of convertible
subordinated debentures -- -- -- -- (29) -- 1 51 -- 22
Adjustment of available for
sale securities to
market value -- -- -- -- -- -- -- -- (44,853) (44,853)
Other, net -- -- -- -- (627) -- (4) (158) -- (785)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, MARCH 31, 1996 248 $ 99,091 158,401 $158,401 $1,214,408 $2,188,020 (757) $(29,183) $ (34,377) $3,596,360
====================================================================================================================================
</TABLE>
- 6 -
<PAGE> 7
<TABLE>
BOATMEN'S BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
Three months ended March 31 (in thousands) 1996 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net cash provided by operating activities $ 327,396 $ 231,434
Investing Activities:
Net decrease in Federal funds sold and securities purchased under resale agreements 866,888 700,351
Net increase in loans (178,985) (756,297)
Proceeds from the sales of foreclosed property 8,393 5,215
Proceeds from the maturity of held to maturity securities 35,340 137,770
Purchases of held to maturity securities (22,900) (169,002)
Proceeds from the maturity of available for sale securities 796,406 206,821
Proceeds from the sales of available for sale securities 78,700 434,774
Purchases of available for sale securities (1,336,343) (37,553)
Net (increase) decrease in short-term investments 15,155 (11,793)
Net increase in property and equipment (24,296) (29,068)
Net cash (paid) received from purchase acquisitions 3,096 (4,091)
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by investing activities 241,454 477,127
========================================================================================================================
Financing Activities:
Net increase in Federal funds purchased and
securities sold under repurchase agreements 35,452 228,999
Net decrease in deposits (922,452) (1,393,479)
Net increase (decrease) in short-term borrowings (139,853) 217,001
Payments on long-term debt (557) (41,741)
Proceeds from the issuance of long-term debt 1,863
Payments on capital lease obligations (324) (334)
Cash dividends paid (49,710) (44,494)
Acquisition of treasury stock (38,859)
Common stock issued pursuant to various employee and
shareholder stock issuance plans 21,305 6,230
- ------------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities (1,093,135) (1,027,818)
- ------------------------------------------------------------------------------------------------------------------------
Decrease in cash and due from banks (524,285) (319,257)
Cash and due from banks at beginning of year 2,611,765 2,558,509
- ------------------------------------------------------------------------------------------------------------------------
Cash and due from banks at March 31 $2,087,480 $2,239,252
========================================================================================================================
For the three months ended March 31, 1996 and 1995, interest paid totaled
$334 million and $307 million, respectively, and income taxes paid totaled
$6 million and $1 million. Loans transferred to foreclosed property totaled
$4 million in 1996, and $3 million in 1995. Available for sale securities
transferred to held to maturity totaled $95 million for the three months
ended March 31, 1996.
</TABLE>
- 7 -
<PAGE> 8
<TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Table 1: Summary of Selected Financial Information
<CAPTION>
Three months ended March 31
- ----------------------------------------------------------------------------------------------------------------------------
(in millions except per share data) 1996 1995 % change
- ----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
Common Share Data
Net income $ .69 $ .57 21.1%
Net income before merger expenses and
securities restructuring charge .88 .78 12.8
Dividends declared .37 .34 8.8
Book value at period end 22.18 20.55 7.9
Tangible book value at period end 19.46 18.00 8.1
Shares outstanding at period end 157.6 156.5 .7
Average shares outstanding 157.7 156.2 1.0
- ----------------------------------------------------------------------------------------------------------------------------
For the Period
Net interest income $389.2 $363.2 7.2%
Provision for loan losses 26.2 10.7 144.0
Noninterest income 212.6 164.7<F1> 29.1
Noninterest expense 399.5<F2> 374.5<F2> 6.7
Net income 111.1 90.3 23.1
Net income before merger expenses and
securities restructuring charge 140.5 123.2 14.1
- ----------------------------------------------------------------------------------------------------------------------------
Financial Position at Period End
Total assets $40,299.2 $40,055.2 .6%
Loans 24,252.1 23,554.7 3.0
Securities 11,654.8 11,935.8 (2.4)
Deposits 31,124.6 29,844.7 4.3
Long-term debt 616.4 557.7 10.5
Stockholders' equity 3,596.4 3,316.2 8.4
- ----------------------------------------------------------------------------------------------------------------------------
Selected Financial Ratios
Before merger expenses and securities restructuring charge:
Return on assets 1.39% 1.23%
Return on total equity 15.36 15.19
Return on common equity 15.60 15.45
Noninterest income/operating income 34.8 33.3
Efficiency ratio 58.4 62.3
After merger expenses and securities restructuring charge:
Return on assets 1.10 .90
Return on total equity 12.15 11.13
Return on common equity 12.30 11.26
Net interest margin 4.40 4.23
Noninterest income/operating income 34.8 30.6
Efficiency ratio 65.3 69.5
Capital ratios:
Equity to assets 8.92 8.28
Risk-based capital:
Tier I capital 11.37 10.96
Total capital 14.04 13.72
Tier I leverage ratio 8.22 7.56
- ----------------------------------------------------------------------------------------------------------------------------
Asset Quality
Nonperforming loans to total loans .93% .72%
Nonperforming assets to total loans and foreclosed property 1.07 1.00
Loan reserve to nonperforming loans 204.36 266.30
Loan reserve to net loans 1.91 1.93
Annualized net charge-offs to average loans .26 .14
============================================================================================================================
<FN>
<F1>Includes a securities restructuring charge of $22.0 million.
<F2>Includes merger expenses of $42.4 million in 1996 and $25.3 million in 1995.
</TABLE>
- 8 -
<PAGE> 9
ACQUISITION OVERVIEW
Over the last several years the Corporation has made numerous
acquisitions establishing leading market positions in Missouri, Arkansas,
Kansas, New Mexico and Oklahoma, and sizable presences in southern Illinois,
Iowa, western Tennessee and northern 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 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 satisfactory economic conditions. In
1995 and through the first quarter of 1996, the Corporation completed nine
acquisitions in five states aggregating $12.0 billion in total assets. The
Corporation's operations currently span nine states, with services delivered
from over 660 branch locations and over 1,400 ATM's. A summary of the
acquisitions consummated in 1996 and 1995, and those pending at March 31,
1996, follows.
<TABLE>
Table 2: Acquisitions--1996 and 1995
<CAPTION>
Common Accounting
Date State Assets Price shares issued method
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Completed
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
Citizens Bancshares Corporation 10/95 Arkansas .2 billion 41 million stock 1.1 million Purchase
Fourth Financial Corporation 1/96 Kansas 7.5 billion 1.2 billion stock 28.5 million Pooling
Tom Green National Bank 3/96 Texas .1 billion 9 million stock .2 million Purchase
- ----------------------------------------------------------------------------------------------------------------------------
Total assets of completed transactions $12.0 billion
============================================================================================================================
Pending at March 31, 1996
Canadian Bancshares, Inc. Texas $ .1 billion $ 8 million stock .2 million Purchase
============================================================================================================================
</TABLE>
<TABLE>
Table 3: Asset Distribution
<CAPTION>
March 31, 1996 (dollars in billions) Assets % of total Locations
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Missouri $16.9 41.9% 168
Kansas 5.1 12.7 69
Arkansas 4.6 11.4 149
Oklahoma 4.4 10.9 114
New Mexico 3.4 8.5 66
Texas 2.3 5.7 38
Iowa 1.2 3.0 27
Illinois 1.0 2.5 21
Tennessee .9 2.2 15
Credit card .5 1.2
- ---------------------------------------------------------------------------------
Total $40.3 100.0% 667
=================================================================================
</TABLE>
Kansas Acquisition
On January 31, 1996, the Corporation acquired Fourth Financial
Corporation (Fourth Financial), headquartered in Wichita, Kansas, 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
Fourth Financial common share, resulting in the issuance of approximately 28.5
million shares of common stock. In addition, the Corporation effectively
assumed Fourth Financial's $100 million convertible preferred stock by
issuance of an identical new security. Fourth Financial, subsequently renamed
BBI Kansas, Inc., was the largest banking company in Kansas, with
approximately $7.5 billion in assets, operating 87 retail banking offices in
Kansas and 56 in Oklahoma. The acquisition of Fourth Financial gave the
Corporation the leading deposit market share in Kansas and Oklahoma.
Arkansas Acquisition
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, subse-
- 9 -
<PAGE> 10
quently 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 such offices in the
Austin, Texas area. The acquisition of Worthen increased the Corporation's
asset base in Arkansas to over $4 billion, making the Corporation the market
leader in Arkansas.
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.
Other Acquisitions
In 1995, the Corporation completed acquisitions of five other financial
institutions aggregating $.7 billion in assets to strengthen its retail
presence within existing markets in Texas, Arkansas and Illinois. More
specific information regarding these acquisitions is provided in Table 2.
On January 31, 1996, the Corporation announced a definitive agreement
to acquire Canadian Bancshares, Inc. (Canadian), located in Canadian, Texas,
in a stock transaction to be accounted for as a purchase. The acquisition of
Canadian, with assets of approximately $40 million, will result in the
issuance of approximately .2 million shares of common stock from treasury
stock. This transaction, which is subject to regulatory and shareholder
approval, is expected to be completed in mid-1996.
On February 28, 1996, the Corporation acquired Tom Green National Bank,
located in San Angelo, Texas, in a stock transaction accounted for as a
purchase. The acquisition of Tom Green National Bank, with assets of
approximately $80 million, resulted in the issuance of approximately .2
million shares of common stock from treasury stock acquired in the open
market.
The acquisitions of Fourth Financial in the first quarter of 1996 and
Worthen and National Mortgage in the first quarter of 1995, resulted in
recognition of pre-tax merger expenses, consisting primarily of obsolete
equipment write-offs and estimated costs to close duplicate branches,
severance and retention costs, and investment banking, legal and other
professional fees. The major components of the merger expenses are quantified
in Table 4.
<TABLE>
Table 4: Merger Expense
<CAPTION>
- ------------------------------------------------------------------------------------
Three months ended March 31 (in millions) 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C>
Equipment and software write-offs, and branch closings $17.9 $ 6.3
Compensation costs 11.1 4.6
Investment banking, legal, and other professional fees 5.9 9.4
Other 7.5 5.0
- ------------------------------------------------------------------------------------
Total $42.4 $25.3
====================================================================================
</TABLE>
EARNINGS OVERVIEW
Net income in the first quarter of 1996 and 1995 was impacted by merger
expenses stemming from the aforementioned pooling acquisitions and a
securities restructuring charge recognized by Fourth Financial in the first
quarter of last year. Net income before the impact of the merger expenses and
the securities restructuring charge increased to $140.5 million, up 14.1%
from the same period of last year, and net income per share was $.88, an
increase of 12.8%. 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 the first quarter of 1996 was
reduced by after-tax merger expenses totaling $29.4 million or $.19 per
share. Net income in 1995 was reduced by after-tax merger expenses totaling
$19.5 million or $.13 per share and an after-tax securities restructuring
charge of $13.4 million or $.08 per share. Previously reported financial
statements of prior periods have been restated to reflect the
pooling-of-interests acquisition of Fourth Financial which was completed in
the first quarter of 1996. The purchase acquisitions completed in 1995 and
1996 had no material impact on results of operations.
For the first quarter, the return on average assets was 1.39% and the
return on common equity was 15.60%, compared to 1.23% and 15.45%,
respectively, for the same period last year. Including merger expenses and
the securities restructuring charge, the return on assets and return on
common equity were 1.10% and 12.30%, respectively, in 1996, and .90% and
11.26%, respectively, in 1995.
Net interest income, on a fully-taxable equivalent basis, increased
6.6% over the first quarter of 1995, primarily due to growth in earning
assets and an improvement in the net interest margin. The net interest margin
was 4.40% for the first quarter of
- 10 -
<PAGE> 11
1996, an increase of 17 basis points over the first quarter of last year, and 9
basis points over the fourth quarter of 1995.
Noninterest income before the impact of the aforementioned securities
restructuring charge, increased 13.9% over the first quarter of 1995,
primarily due to growth in trust fees, service charges and investment banking
revenues. Noninterest income in the first quarter of 1996 also included a
$12.0 million gain from the consummation of a credit card joint venture,
whereas noninterest income in the first quarter of 1995 included gains of
$7.9 million from the sale of mortgage loan servicing and $4.9 million from
the sale of an ownership interest in a regional electronic funds transfer
network.
Noninterest expense, excluding merger expenses, increased 2.2% from the
first quarter of 1995. Including merger expenses, noninterest expense was
$399.5 million in 1996 and $374.5 million in 1995.
The provision for loan losses for the first quarter of 1996 totaled
$26.2 million, up from $10.7 million for the same period of last year. The
provision for loan losses exceeded net charge-offs by $10.2 million,
primarily due to an additional provision to conform Fourth Financial to the
Corporation's loan reserve policies. For the first quarter, net loan
charge-offs were $16.0 million, compared to $8.1 million in the same period
last year. Annualized net charge-offs as a percentage of average loans were
.26% in the first quarter of 1996, compared to .14% in the same period last
year and .27% for the full year 1995.
Presented in Table 5 is an income statement analysis expressed on a per
share basis for the quarter ended March 31, 1996, compared to the same period
last year and the three months ended December 31, 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>
1st Qtr. '96 1st Qtr. '96
Per share vs. 1st Qtr. '95 vs. 4th Qtr. '95
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Net income per share prior period $.57 $.81
- -------------------------------------------------------------------------------------------
Net interest income .16 .03
Provision for loan losses (.10)
Noninterest income .31 .02
Noninterest expense (.05) .08
Merger expense (.11) (.27)
Income tax expense (.08) .03
Impact of additional shares of common stock (.01) (.01)
- -------------------------------------------------------------------------------------------
Net increase (decrease) .12 (.12)
- -------------------------------------------------------------------------------------------
Net income per share current period $.69 $.69
===========================================================================================
</TABLE>
NET INTEREST INCOME AND INTEREST RATE RISK MANAGEMENT
<TABLE>
Table 6: Summary of Net Interest Income
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Three months ended March 31 (in millions) 1996 1995 % change
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Average loans $24,130.6 $23,102.3 4.5%
Average earning assets 36,424.8 35,887.6 1.5
Average core deposits 27,522.6 25,909.7 6.2
Average purchased funds 5,868.3 7,545.5 (22.2)
Net interest income (FTE) 398.9 374.3 6.6
Net interest margin 4.40% 4.23%
===================================================================================================================
</TABLE>
Net interest income, on a fully-taxable equivalent basis, increased
6.6% over the first quarter of 1995, primarily due to growth in average
earning assets and an improvement in the net interest margin.
Average earning assets increased 1.5% over the prior year, due to loan
growth which was offset somewhat by a decline in the securities portfolio.
Loans, the highest yielding earning asset, increased 4.5% over the first
quarter of 1995 and as a percentage of average earning assets were 66.2%,
compared to 64.4% for the same period last year. Held to maturity and
available for sale securities decreased 6.7%, and represented 31.0% of
average earning assets, down from 33.7% for the first quarter of 1995. The
decline in the securities portfolio reflects redeployment of proceeds from
maturing securities to the loan portfolio and the sale of approximately $425
million of fixed-rate securities by Fourth Financial in the first quarter of
last year as a means to realign its balance sheet to reduce interest rate
sensitivity.
The net interest margin for the first quarter of 1996 was 4.40% compared
to 4.23% for the same period last year and 4.31% for the fourth quarter of 1995.
The increase in the net interest margin from the first quarter of 1995 was
primarily due to a higher contribution from noninterest-bearing fund sources,
which increased the net interest margin by 13 basis points. The increased
contribution from noninterest-bearing fund sources reflects growth in escrow
balances related to the mortgage servicing portfolio and
- 11 -
<PAGE> 12
lower deposit reserve positions maintained on certain classes of deposit
liabilities. The average yield on earning assets increased 6 basis points from
the first quarter of last year; while the average rate paid on interest-bearing
liabilities increased 2 basis points. The increase in the net interest margin
from the fourth quarter of last year was attributable to an overall decline in
funding costs as rates paid on interest-bearing deposits decreased by 10 basis
points.
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; however, 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 less than 1%, assuming a gradual 200
basis point decrease in interest rates, and no active management of the
balance sheet components in response to the interest rate decrease.
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 manage the overall interest rate sensitivity
position. One such example of an off-balance sheet strategy was the use of an
auto-loan securitization sale in the third quarter of last year, thereby
eliminating the interest rate risk associated with holding $300 million of
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.
In the first quarter of 1996, no new swaps were added and $498 million
matured such that at March 31, 1996, interest rate swaps totaled $2.3
billion. The most recent swaps were executed in 1995 as a means to convert a
portion of the Corporation's variable rate bank notes to fixed rate
instruments. Interest rate swaps executed in years prior to 1995 were
undertaken to modify the interest rate sensitivity of the Corporation's
prime-based loan portfolio, converting a portion of these loans to fixed rate
instruments. Additionally, the Corporation has utilized swaps to convert a
portion of its long-term fixed rate debt to a floating rate basis. Periodic
correlation assessments are performed to ensure that the swap instruments are
effectively modifying the interest rate characteristics of the respective
balance sheet items.
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. As such, the contribution from the swap portfolio
will decrease in a rising rate environment and increase in a falling rate
environment. The average rate received at March 31, 1996, was 5.54% compared
to an average rate paid of 5.76%, and the average remaining maturity of the
total portfolio was less than one year. The variable rate component of the
interest rate swaps is based on LIBOR as of the most recent reset date. The
interest rate swaps are not leveraged in that they reset in step with rate
movements in the underlying index.
The swap portfolio had minimal impact on the Corporation's operating
results in the first quarter of 1996, reducing net interest income by
approximately $1.3 million, resulting in a reduction in the net interest
margin of approximately 1 basis point. In the first quarter of 1995, the swap
portfolio decreased net interest income by $3.0 million, reducing the margin
by approximately 3 basis points. Based on interest rates at March 31, 1996,
it is anticipated that the existing swap portfolio will reduce net interest
income by approximately $3 million in 1996.
Table 8 provides information related to weighted average rates received
and paid, maturity profile, and fair values of the major swap programs in
place at March 31, 1996, and March 31, 1995. The estimated fair value of the
swap portfolio, based on dealer quotes, was an unrealized loss of $9.8
million at March 31, 1996, compared to an unrealized loss of $103.5 million
at March 31, 1995. The Corporation's operating and liquidity position is not
expected to be materially impacted by the unrealized loss inherent in the
swap portfolio.
- 12 -
<PAGE> 13
<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, 1995 $1,828 $879 $97 $2,804
Additions --
Maturities (437) (10) (51) (498)
- ------------------------------------------------------------------------------------------------------------------
Notional amount, March 31, 1996 $1,391 $869 $46 $2,306
==================================================================================================================
Average remaining maturity (years) .8 .2 .2 .6
Weighted average rate received 5.57% 5.44% 6.47% 5.54%
Weighted average rate paid 5.45 6.27 5.70 5.76
==================================================================================================================
</TABLE>
<TABLE>
Table 8: Interest Rate Swap Portfolio
<CAPTION>
Weighted Estimated
Average Rate -------------------------
March 31, 1996 Notional ----------------------- Maturity Fair
(in millions) Amount Receive Pay (years) Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Prime loan swaps:
Receive fixed $1,168 5.55% 5.43% .8 $(8.4)
Basis swaps 46 6.47 5.70 .2 .1
- ---------------------------------------------------------------------------------------------------------------------
Total 1,214 5.58 5.44 .7 (8.3)
Long-term debt swaps 100 5.18 5.72 .5 1.3
Bank note liability swaps 850 5.43 6.21 .2 (1.7)
Other 142 6.09 5.83 1.1 (1.1)
- ---------------------------------------------------------------------------------------------------------------------
Total $2,306 5.54% 5.76% .6 $(9.8)
=====================================================================================================================
<CAPTION>
Weighted Estimated
Average Rate -------------------------
March 31, 1996 Notional ----------------------- Maturity Fair
(in millions) Amount Receive Pay (years) Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Prime loan swaps:
Receive fixed $1,786 5.59% 6.50% 1.6 $ (94.4)
Basis swaps 181 5.84 6.51 .9 (.8)
- ---------------------------------------------------------------------------------------------------------------------
Total 1,967 5.61 6.50 1.6 (95.2)
Long-term debt swaps 200 4.87 6.46 1.2 (3.3)
Bank note liability swaps 350 6.34 6.84 1.2 (.3)
Other 332 6.24 5.91 1.2 (4.7)
- ---------------------------------------------------------------------------------------------------------------------
Total $2,849 5.72% 6.47% 1.5 $(103.5)
=====================================================================================================================
</TABLE>
Approximately 55% 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 one year, but in no event
would any component of the swap portfolio extend beyond four years. The
specific indexed amortizing swaps used by the Corporation have a minimum term
which can potentially lengthen to a specified final maturity depending on the
level of movement in interest rates. While the underlying characteristics of
on-balance sheet mortgage-backed securities, prepayment and other risk
factors are more predictable due to the structural features inherent in the
swaps. 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. Interest rate risk associated with this portfolio is
controlled by entering into offsetting positions with third parties.
Including these offsetting positions, the notional amount of the customer
swap portfolio at March 31, 1996, totaled approximately $.9 billion.
- 13 -
<PAGE> 14
NONINTEREST INCOME
<TABLE>
Table 9: Summary of Noninterest Income
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Three months ended March 31 (in millions) 1996 1995 % change
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Trust fees $ 52.8 $ 45.7 15.6%
Service charges 60.3 55.2 9.3
Mortgage banking revenues 21.6 23.3 (6.9)
Credit card 15.6 14.7 5.8
Investment banking revenues 12.5 10.2 21.7
Securities gains (losses), net .5 (22.0) (102.2)
Other 49.3 37.6 31.1
- ------------------------------------------------------------------------------------------------------------
Total noninterest income $212.6 $164.7 29.1%
============================================================================================================
As % of operating income 34.8% 30.6%
As % of operating income before securities restructuring charge 34.8 33.3
- ------------------------------------------------------------------------------------------------------------
Revenue per full-time equivalent employee
(in thousands) $118.6 $105.1
============================================================================================================
</TABLE>
Noninterest income before the impact of the securities restructuring
charge in the first quarter of 1995, increased 13.9% primarily due to growth
in trust fees, service charges and investment banking revenues, coupled with
a $12.0 million gain from the sale of credit card merchant contracts upon
formation of a joint venture with a third party processor. Noninterest income
in the first quarter of 1995 included gains of $7.9 million from the sale of
mortgage loan servicing and $4.9 million from the sale of an ownership
interest in a regional electronic funds transfer network. Noninterest income
as a percentage of operating revenues improved to 34.8% for the first quarter
of 1996, from 33.3% for the same period of last year, before the impact of
the aforementioned securities restructuring charge.
Trust fees increased 15.6% over the first quarter of 1995, primarily
due to a 19.2% increase in pension/institutional fees and a 10.1% increase in
the personal trust line of business. This growth was due to new customer
accounts and favorable bond and equity financial markets resulting in an
increase in market values of trust assets on which some fees are based. Trust
assets under management totaled $43.9 billion at March 31, 1996, compared to
$42.9 billion at March 31, 1995, and $45.9 billion at December 31, 1995.
<TABLE>
Table 10: Trust Fees by Component
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Three months ended March 31 (in millions) 1996 1995 % change
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Personal trust $31.5 $28.6 10.1%
Pension and institutional 15.5 13.0 19.2
Corporate trust 3.5 3.0 16.7
Mutual funds 2.3 1.1
- ------------------------------------------------------------------------------------------------------------
Total $52.8 $45.7 15.6%
============================================================================================================
</TABLE>
Service charge income totaled $60.3 million in the first quarter of
1996, an increase of 9.3% over the prior year period. This growth reflected
increases in fees from both retail and corporate customers. Investment
banking revenues increased $2.3 million over the first quarter of 1995,
primarily due to increased sales volume within the retail and institutional
sectors.
Mortgage banking revenues totaled $21.6 million in the first quarter of
1996, a decrease of 6.9% from the same period last year when mortgage banking
revenues included a $7.9 million gain on the sale of approximately $700
million of mortgage servicing. Excluding this gain, mortgage banking revenues
increased 41.0%, primarily due to increased loan originations and gains on
sales of loans. The gains on sales of loans reflect the impact of Statement
of Accounting Standards No. 122, "Accounting for Mortgage Servicing Rights,"
which the Corporation adopted in the second quarter of 1995. The servicing
portfolio totaled $20.9 billion at March 31, 1996, from $17.4 billion at March
31, 1995, primarily due to acquisitions of no-cost contract servicing
agreements, supplemented by internal growth. Retail and correspondent loan
originations totaled approximately $520 million in the first quarter of 1996,
compared to $220 million the prior year. At March 31, 1996, mortgage servicing
rights totaled $69.2 million, with a fair value of approximately $95.1 million.
Mortgage servicing rights are stratified by loan type and interest rate for
purposes of impairment measurement. An impairment loss is recognized to the
extent the unamortized mortgage servicing rights for each stratum exceed the
current market value. During 1995 and through the first three months of 1996,
no impairment valuation writedowns were required. Table 11 summarizes the
components of mortgage banking revenues.
- 14 -
<PAGE> 15
<TABLE>
Table 11: Summary of Mortgage Banking Revenues
<CAPTION>
- ------------------------------------------------------------------------------------------
Three months ended March 31 (in millions) 1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Servicing fees<F1> $13.5 $13.5
Late fees 3.2 2.5
Gains (losses) on sales of loans 2.1 (1.0)
Origination fees 2.8 .4
Gain on sale of mortgage servicing rights 7.9
- ------------------------------------------------------------------------------------------
Total mortgage banking revenues $21.6 $23.3
==========================================================================================
<FN>
<F1> Net of mortgage servicing rights amortization.
</TABLE>
Securities gains totaled $.5 million in the first quarter of 1996,
compared to securities losses of $22.0 million in the first quarter of last
year when Fourth Financial sold approximately $425 million of fixed rate
securities as a means to realign its balance sheet to reduce interest rate
sensitivity.
Other noninterest income increased $11.7 million or 31.1% over the
first quarter of 1996 primarily due to the aforementioned $12.0 million gain
from the sale of credit card merchant contracts. Other noninterest income in
1996 was also supplemented by increased revenues from debit cards, investment
appreciation in bank owned life insurance, higher syndication fees and
servicing income from securitized loans. Other noninterest income in the
first quarter of last year included the aforementioned $4.9 million gain from
the sale of an ownership interest in a regional electronic funds transfer
network.
NONINTEREST EXPENSE
<TABLE>
Table 12: Summary of Noninterest Expense
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Three months ended March 31 (in millions) 1996 1995 % change
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Staff expense $191.4 $179.2 6.8%
Occupancy 25.4 25.1 1.2
Equipment 30.2 28.7 5.2
FDIC insurance 2.7 16.6 (83.5)
Credit card 4.6 3.9 17.9
Printing, postage, paper 16.2 14.5 11.7
Intangible amortization 10.3 10.6 (3.2)
Professional fees 7.4 6.2 19.4
Federal Reserve processing charges 2.7 3.1 (12.9)
Advertising 9.9 9.9
Communications 9.1 7.3 24.7
Merger expense 42.4 25.3 67.6
Other 47.2 44.1 7.0
- ------------------------------------------------------------------------------------------------------------
Total noninterest expense $399.5 $374.5 6.7%
============================================================================================================
Efficiency ratio excluding merger expenses
and securities restructuring charge 58.4% 62.3%
Number of full-time equivalent employees 20,644 20,459
============================================================================================================
</TABLE>
Noninterest expense, excluding merger expenses, increased 2.2% from the
first quarter of 1995. Noninterest expense in 1996 includes merger expenses
totaling approximately $42.4 million resulting from the first quarter
acquisition of Fourth Financial, and the prior year period included $25.3
million of such expenses related to the acquisitions of Worthen and National
Mortgage. Including merger expenses, noninterest expense was $399.5 million
in 1996 and $374.5 million in 1995, an increase of 6.7%. The efficiency ratio
before merger expenses and the securities restructuring charge in 1995
improved to 58.4% compared to 62.3% for the first quarter of 1995.
Staff expense, which represents approximately 48% of total noninterest
expense, increased 6.8% from the first quarter of 1995, primarily due to
normal merit increases, additional staff from purchase acquisitions and
higher costs associated with employee benefit plans. Excluding purchase
acquisitions, staff expense increased less than 6%. The number of full-time
equivalent employees (FTE's) was 20,644 at March 31, 1996 and 20,459 at March
31, 1995. Staffing levels are expected to decline from existing levels
through consolidation and integration of duplicate functions at Fourth
Financial over the balance of the year and into the first half of 1997.
- 15 -
<PAGE> 16
FDIC insurance expense totaled $2.7 million for the first quarter of
1996, a decrease of $13.9 million from the prior year period. The FDIC
reduced the rate paid by most financial institutions from 23 cents per $100
of insured deposits to a $2,000 minimum per bank. Deposits acquired from
thrift institutions continue to be assessed at 23 cents per $100 of insured
deposits.
Financial Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets to be Disposed Of," became effective January 1, 1996.
This statement requires that long-lived assets and certain identifiable
intangibles to be held and used by a company be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. If such conditions exist, companies must
estimate the future cash flows from use of the asset and, if the sum of the
undiscounted estimated future cash flows is less than the carrying amount of
the asset, an impairment would be recognized. Adoption of this pronouncement
had no material effect on the Corporation's financial results.
TAXES
The Corporation's effective tax rate was 36.9% for the first quarter of
1996 compared to 36.7% for the same period of last year. The Corporation's
effective tax rate reflects nondeductible merger expenses associated with
pooling-of-interests acquisitions, 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 35.7% in
1996 and 34.6% in 1995. 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.
PROVISION FOR LOAN LOSSES AND ASSET QUALITY
<TABLE>
Table 13: Summary of Reserve for Loan Losses
<CAPTION>
March 31 (in millions) 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of year $452.6 $449.5
Loans charged off:
Commercial (7.6) (3.7)
Real estate:
Commercial real estate (1.1) (.7)
Construction (.4) (.1)
1-4 family residential (.6) (.5)
Consumer:
Credit card (7.7) (6.5)
Other (13.8) (8.2)
- ------------------------------------------------------------------------------------
Total charge-offs (31.2) (19.7)
- ------------------------------------------------------------------------------------
Recoveries on loans previously charged off:
Commercial 6.0 5.0
Real estate:
Commercial real estate 2.6 1.0
Construction .2 .3
1-4 family residential .7 .6
Consumer:
Credit card .8 1.0
Other 4.9 3.7
- ------------------------------------------------------------------------------------
Total recoveries 15.2 11.6
- ------------------------------------------------------------------------------------
Net charge-offs (16.0) (8.1)
- ------------------------------------------------------------------------------------
Provision for loan losses 26.2 10.7
Loan reserve from acquisitions .9 2.6
- ------------------------------------------------------------------------------------
Balance, end of period $463.7 $454.7
====================================================================================
At end of period:
Loan reserve as % of net loans 1.91% 1.93%
Loan reserve as % of nonperforming loans 204.36 266.30
Annualized net charge-offs as % of average loans .26 .14
====================================================================================
</TABLE>
- 16 -
<PAGE> 17
<TABLE>
Table 14: Summary of Nonperforming Assets
<CAPTION>
(in millions) March 31, 1996 December 31, 1995 March 31, 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nonaccrual $183.5 $165.4 $138.6
Restructured 6.0 8.0 7.1
Past due 90 days or more 37.4 37.4 25.0
- ------------------------------------------------------------------------------------------------------------------
Total nonperforming loans 226.9 210.8 170.7
- ------------------------------------------------------------------------------------------------------------------
Foreclosed property 33.6 35.1 65.9
==================================================================================================================
Total nonperforming assets $260.5 $245.9 $236.6
==================================================================================================================
Nonperforming loans as % of total loans .93% .87% .72%
Nonperforming assets as % of total loans and foreclosed property 1.07 1.02 1.00
Nonperforming assets as % of total assets .65 .60 .59
Loan reserve as % of nonperforming loans 204.36 214.70 266.30
==================================================================================================================
</TABLE>
The provision for loan losses totaled $26.2 million in the first
quarter of 1996, compared to $10.7 million in the same period last year. The
provision for loan losses exceeded net charge-offs by $10.2 million,
primarily due to recognition of an additional provision to conform Fourth
Financial to the Corporation's loan reserve policies.
The reserve for loan losses represented 204% of nonperforming loans at
March 31, 1996, compared to 215% at December 31, 1995, and 266% at March 31,
1995. The reserve for loan losses as a percentage of net loans was 1.91%,
compared to 1.93% at March 31, 1995, and 1.88% at year-end 1995. Net loan
charge-offs for the first quarter of 1996 totaled $16.0 million, compared to
$8.1 million for the same period of 1995. Annualized net charge-offs as a
percentage of average loans were .26% compared to .14% for the same period
last year, and .27% for all of 1995. Nonperforming assets, which include
nonperforming loans and foreclosed property, increased $23.9 million or 10.1%
from March 31, 1995, and $14.6 million or 5.9% from year-end 1995. Much of
the increase from December 31, 1995 resulted from conforming Fourth Financial
to the Corporation's nonaccrual policies. The increase from March 31, 1995,
reflects this conforming adjustment and a large corporate borrower who filed
for bankruptcy in the fourth quarter of 1995. As a percent of total loans and
foreclosed property, nonperforming assets were 1.07% compared to 1.00% at
March 31, 1995, and 1.02% at December 31, 1995. As a percentage of total
assets, nonperforming assets were .65% at March 31, 1996, compared to .59% at
March 31, 1995, and .60% at December 31, 1995. Nonperforming loans at March
31, 1996, were $226.9 million or .93% of total loans, compared to .87% at
December 31, 1995, and .72% at March 31, 1995. Table 15 summarizes the trends
in nonperforming assets by major banking unit/geographic location.
<TABLE>
Table 15: Nonperforming Assets by Banking Unit
<CAPTION>
(in millions) March 31, 1996 December 31, 1995 March 31, 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Missouri $ 99.3 $100.7 $101.0
Oklahoma 54.0 41.7 40.1
New Mexico 31.9 25.9 30.7
Kansas 24.6 23.4 22.5
Arkansas 21.4 22.9 18.5
Iowa 13.1 12.9 5.0
Texas 6.5 8.6 9.8
Illinois 5.2 4.9 5.4
Tennessee 4.5 4.9 3.6
- ------------------------------------------------------------------------------------------
Total $260.5 $245.9 $236.6
==========================================================================================
</TABLE>
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 16, criticized loans totaled
$968.4 million or 3.98% of loans at March 31, 1996. The increase from
December 31, 1995 primarily reflects application of the Corporation's credit
administration classification criteria to Fourth Financial's loan portfolio.
Management carefully analyzes changes and trends in both nonperforming and
criticized loans in assessing the risk characteristics of the loan portfolio.
Delinquency trends are another tracking mechanism used by management to
assess portfolio risk. As illustrated in Table 17, consumer loan
- 17 -
<PAGE> 18
delinquencies gradually trended upward through 1995 as the industry
experienced some moderate deterioration in consumer credit. The decline in
credit card delinquencies at March 31, 1996 reflects the sale of a private
label credit card portfolio and general improvement in delinquencies. Credit
risk associated with the consumer loan portfolio, which is primarily
comprised of credit card, home equity and direct/indirect installment loans,
is controlled through the use of standardized credit scoring techniques and
consistent adherence to standard underwriting policies throughout the
Corporation's nine state region. Annualized net loan losses from the consumer
loan portfolio expressed as a percentage of the related average loan balances
were 1.01% in the first quarter of 1996 and .65% in the same period of last
year, and included credit card losses of 4.40% and 3.43%, respectively.
<TABLE>
Table 16: Loans Designated as Criticized Loans by Internal Risk Rating System
<CAPTION>
Criticized Loans
- ------------------------------------------------------------------------------------------------------------
(in millions) Nonperforming Performing Total
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1995
March 31 $170.7 $598.7 $769.4
June 30 169.8 646.2 816.0
September 30 170.0 693.9 863.9
December 31 210.8 658.1 868.9
============================================================================================================
1996
March 31 $226.9 $741.5 $968.4
============================================================================================================
As % of loans at March 31, 1996 .93% 3.05% 3.98%
============================================================================================================
</TABLE>
<TABLE>
Table 17: Consumer Loan Delinquency Trend
<CAPTION>
Past Due 30 Days or More Past Due 90 Days or More
- ------------------------------------------------------------------------------------------------------------
As a % of outstandings Credit Card Loans Installment Loans Residential Loans
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1995
March 31 3.08% .92% .36%
June 30 3.45 1.12 .41
September 30 3.72 1.42 .44
December 31 3.75 1.68 .44
1996
March 31 3.34% 1.21% .50%
============================================================================================================
</TABLE>
At March 31, 1996, the recorded investment in loans that are considered
to be impaired under Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for the Impairment of a Loan," totaled approximately
$172 million and consisted of nonaccrual and restructured commercial,
commercial real estate, and real estate construction loans. At March 31,
1996, the reserve for loan losses included approximately $10.1 million allocated
to $48.3 million of impaired loans. 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. Interest income recognized on impaired loans in the first quarter
of 1996 was 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 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 first five years, 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 March 31,
1996, segregated assets totaled $91.4 million, net of a $12.7 million credit
valuation allowance, and are classified as other assets for reporting
purposes. At March 31, 1996, segregated assets consisted of $22.3 million of
commercial loans, $12.6 million of industrial revenue bond loans, $64.4
million of commercial real estate related loans and $4.8 million of
foreclosed property. All other loans covered under the loss-sharing
arrangement are included in the loan portfolio and totaled $169.3 million at
March 31, 1996. Net charge-offs of $.6 million, representing the
Corporation's share of losses on the segregated asset pool, were recognized
in the first quarter of 1996. 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 March 31, 1996, $96.8 million of segregated assets were
accorded classification treatment consistent with nonaccrual reporting, $4.8
million represented foreclosed property, and the balance of $2.5 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 $1.8 million in the first
quarter of 1996 and $3.5 million in the same period of 1995.
A summary of activity regarding segregated assets is provided in Table
18.
<TABLE>
Table 18: Segregated Assets
<CAPTION>
March 31, 1996 (in millions) Principal balance Allowance for losses Principal balance, net
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year $116.6 $13.3 $103.3
Charge-offs (4.3) (.8)
Recoveries 1.0 .2
Net transfers 2.7
Payments on segregated assets (11.9)
- ----------------------------------------------------------------------------------------------------------
Balance, March 31, 1996 $104.1 $12.7 $ 91.4
==========================================================================================================
</TABLE>
- 19 -
<PAGE> 20
LOAN PORTFOLIO
<TABLE>
Table 19: Summary of Loan Portfolio
<CAPTION>
(in millions) March 31, 1996 December 31, 1995 March 31, 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial $12,033.9 $11,834.5 $11,612.0
Real estate mortgage 4,490.7 4,565.3 4,618.8
Real estate construction 1,111.6 1,107.7 955.2
Consumer 6,341.7 6,284.1 6,172.2
Lease financing 324.9 325.4 261.4
- -------------------------------------------------------------------------------------------------------------
Total domestic loans 24,302.8 24,117.0 23,619.6
Foreign loans 20.9 20.9 23.8
- -------------------------------------------------------------------------------------------------------------
Total loans, before deduction of unearned income 24,323.7 24,137.9 23,643.4
Less unearned income 71.6 87.0 88.7
- -------------------------------------------------------------------------------------------------------------
Total loans, net of unearned income $24,252.1 $24,050.9 $23,554.7
=============================================================================================================
</TABLE>
<TABLE>
Table 20: Composition of Loan Portfolio
<CAPTION>
March 31, 1996 December 31, 1995 March 31, 1995
- ----------------------------------------------------------------------------------------------------------------------
% 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 $ 4,490.7 18.5% $ 4,565.3 18.9% $ 4,618.8 19.5%
Land acquisition 257.5 1.0 215.4 .9 189.1 .8
Residential construction 317.1 1.3 380.2 1.6 371.6 1.6
Commercial construction 537.0 2.2 512.1 2.1 394.5 1.7
Commercial real estate 3,839.8 15.8 3,822.5 15.8 3,925.6 16.6
- ----------------------------------------------------------------------------------------------------------------------
Total real estate 9,442.1 38.8 9,495.5 39.3 9,499.6 40.2
Commercial loans to Fortune 1,000 companies
and other large corporate borrowers 1,240.6 5.1 1,127.0 4.7 1,050.7 4.4
Middle market commercial 5,725.8 23.5 5,675.5 23.5 5,426.8 23.0
Bank stock loans 232.5 1.0 204.8 .9 237.3 1.0
Agriculture 995.2 4.1 1,004.7 4.2 971.6 4.1
Consumer:
Home equity 663.6 2.7 642.8 2.7 500.7 2.1
Credit card 600.9 2.5 674.6 2.8 628.6 2.7
Indirect installment 3,047.0 12.5 2,929.3 12.1 2,967.6 12.5
Installment 2,030.2 8.4 2,037.4 8.4 2,075.3 8.8
- ----------------------------------------------------------------------------------------------------------------------
Total consumer 6,341.7 26.1 6,284.1 26.0 6,172.2 26.1
Lease financing 324.9 1.3 325.4 1.3 261.4 1.1
Foreign 20.9 .1 20.9 .1 23.8 .1
- ----------------------------------------------------------------------------------------------------------------------
Total loans $24,323.7 100.0% $24,137.9 100.0% $23,643.4 100.0%
======================================================================================================================
</TABLE>
At March 31, 1996, loans totaled $24.3 billion, an increase of 3.0%
over the same period of last year, and were up .8% from December 31, 1995.
Based on average balances, loans increased 4.5% over the first quarter of
1995. Loan growth from March 31, 1995, was primarily due to an increase in
commercial loans, reflecting 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 8.0% from March 31, 1995. The decline in the credit
card portfolio from December 31, 1995, reflects the sale of a small private
label credit card portfolio and seasonal fluctuations.
The majority of the Corporation's loans are made within its natural
trade territory. The portfolio is highly diversified with originations
stemming from the Corporation's nine state area, and the portfolio is well
balanced between wholesale and consumer lending. 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 satisfactory economic
conditions and unemployment rates. Table 21 summarizes the loan portfolio by
banking location and Table 20 presents the major
- 20 -
<PAGE> 21
loan classifications based upon Management's internal classification criteria.
In addition, Table 15 summarizes the nonperforming asset trends experienced
throughout the Corporation's regions.
<TABLE>
Table 21: Loan Portfolio Distribution
<CAPTION>
March 31, 1996 December 31, 1995 March 31, 1995
- ----------------------------------------------------------------------------------------------------------------------
% 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 $10,960.0 45.2% $10,524.2 43.7% $10,545.9 44.8%
Arkansas 2,657.5 10.9 2,745.8 11.4 2,452.6 10.4
Kansas 2,637.1 10.9 2,683.2 11.2 2,637.6 11.2
Oklahoma 2,553.3 10.5 2,597.6 10.8 2,641.5 11.2
New Mexico 1,430.8 5.9 1,447.3 6.0 1,446.0 6.1
Texas 1,092.3 4.5 1,087.6 4.5 975.8 4.1
Tennessee 842.0 3.5 784.1 3.3 767.9 3.3
Illinois 771.8 3.2 788.4 3.3 717.5 3.0
Iowa 706.4 2.9 718.1 3.0 741.3 3.2
Credit card 600.9 2.5 674.6 2.8 628.6 2.7
- ----------------------------------------------------------------------------------------------------------------------
Total $24,252.1 100.0% $24,050.9 100.0% $23,554.7 100.0%
======================================================================================================================
<FN>
<F1>Net of unearned income.
</TABLE>
The section that follows addresses specific risk elements and credit
administration practices related to the major components of the loan
portfolio.
COMMERCIAL LOANS
The Corporation's commercial loan portfolio, excluding commercial real
estate, totaled $8.2 billion at March 31, 1996, representing approximately
33.7% of the total portfolio, compared to 32.5% at March 31, 1995. The
Corporation's objective is to control credit risk within the commercial loan
portfolio through geographic diversification and adherence to credit
administration policies that limit industry concentrations and establish
lending authority and borrower limits. Within the commercial loan portfolio
there are no concentrations of credits to any borrower or industry in excess
of 5% of total loans, and the portfolio is primarily comprised of middle
market loans to customers within the Corporation's nine state operating
region. At March 31, 1996, middle-market commercial loans represented 23.5%
of the total loan portfolio and loans to Fortune 1000 companies comprised
5.1% of total loans. Loans to middle-market companies, as a general rule, are
made on a secured basis, with personal guarantees and loan covenants
appropriate to the individual credit. These loans are to a diversified group
of borrowers conducting business in the Corporation's immediate market area,
predominately in the manufacturing, wholesale distribution and services
industries. Loans to Fortune 1000 companies and other large corporate
borrowers are made on a secured and unsecured basis depending on the risk
assessment of the specific borrowers. The composition of the commercial loan
portfolio and level of industry concentrations is reflected in Table 22. The
Corporation's legal lending limit to any individual borrower is in excess of
$400 million. However, at March 31, 1996, of the Corporation's ten largest
borrowers, there were only three relationships with aggregate outstandings in
the $50-$75 million range and seven borrowers with aggregate outstandings in
the $40-$49 million range.
Credit risk associated with the commercial portfolio is primarily
influenced by economic conditions and the level of underwriting risk the
Corporation is willing to assume. A primary focus in managing risk when
extending credit is to adequately assess the borrower's capacity to repay and
to follow proper collateral protection policies.
- 21 -
<PAGE> 22
<TABLE>
Table 22: Commercial Industry Concentration
<CAPTION>
% of Total % of
March 31, 1996 Commercial Loans<F1> Total Loans
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Manufacturing:
Metal, machinery and fabrication 5.3% 1.8%
Food products 2.6 .9
Chemical, rubber and petroleum 1.8 .6
Printing and paper 2.0 .7
All other manufacturing 5.6 1.9
Services:
Health care 3.9 1.3
Amusement/recreation 1.3 .5
All other services 10.2 3.4
Finance, insurance, real estate 11.3 3.8
Retail trade:
Retail (non-auto) 8.5 2.8
Retail (auto) 1.8 .6
Agriculture, forestry and fishing 12.1 4.1
Wholesale trade--durable goods 6.8 2.3
Wholesale trade--non-durable goods 4.5 1.5
Individual personal loans 7.8 2.6
Transportation 3.5 1.2
Construction 3.0 1.0
Communication 2.3 .8
Public administration and other 1.9 .6
Other 3.8 1.3
- ----------------------------------------------------------------------------------------
Total 100.0% 33.7%
========================================================================================
<FN>
<F1> Excluding commercial real estate
</TABLE>
COMMERCIAL REAL ESTATE
This lending category consists primarily of commercial real estate,
residential construction, commercial construction and land acquisition loans.
At March 31, 1996, commercial real estate loans totaled $5.0 billion,
representing approximately 20.3% of total loans, compared to 20.7% at March
31, 1995. Table 23 displays the composition of the real estate portfolio by
property type and carrying status. The Corporation closely monitors the
composition and quality of the commercial 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
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 one third of the commercial real estate portfolio is
comprised of owner occupied properties--such as manufacturing facilities for
middle market borrowers--for which the primary source of repayment is not
entirely dependent on the real estate market.
- 22 -
<PAGE> 23
<TABLE>
Table 23: Construction and Mortgage Loans
<CAPTION>
Nonperforming
March 31, 1996 (in millions) Performing Nonperforming Total as % of Total
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial real estate:
Multi-family $ 526.1 $ 2.8 $ 528.9 .53%
Office/showroom 969.8 11.5 981.3 1.17
Industrial/warehouse 511.3 6.1 517.4 1.18
Retail strip 336.2 7.0 343.2 2.04
Retail, other 483.4 11.8 495.2 2.38
Lodging 624.2 6.6 630.8 1.05
Land 323.6 8.9 332.5 2.68
Residential construction 310.7 5.2 315.9 1.65
Other 797.2 9.0 806.2 1.12
- -----------------------------------------------------------------------------------------
Total commercial real estate 4,882.5 68.9 4,951.4 1.39
1-4 family residential 4,461.4 29.3 4,490.7 .65
- -----------------------------------------------------------------------------------------
Total real estate $9,343.9 $98.2 $9,442.1 1.04%
=========================================================================================
</TABLE>
CONSUMER LOANS
The consumer loan category consists primarily of direct and indirect
installment, credit card, and home equity lending. At March 31, 1996,
consumer loans totaled $6.3 billion, representing approximately 26.1% of
total loans. Credit risk in each of these lending categories is controlled
through automated credit scoring techniques and consistent adherence to
conservative underwriting standards that consider debt to income levels and,
where applicable, loan to value ratios. In the home equity category, loan to
value ratios generally are limited to 80% of collateral value. In certain
markets, higher loan to value ratios are permitted; however, in these
situations the Corporation obtains additional credit protection from third
party insurance providers. Installment loans, both indirect and direct, are
subject to similar underwriting standards. Approximately 60% of the
installment category is comprised of indirect paper of which over 90% are
automobile loans. The remainder of the indirect installment category is
primarily limited to marine and home improvement paper.
Growth in installment lending has occurred through direct originations
made available through the Corporation's extensive branch banking network and
through expansion of the indirect lending program. A primary source for the
indirect automobile loan production is a referral program negotiated with a
major insurance carrier whose customer base has a good credit scoring
profile, resulting in lower delinquencies and charge-offs than that typically
experienced from traditional indirect sources.
Credit card outstandings totaled $600.9 million at March 31, 1996,
representing approximately 2.5% of total loans. The Corporation is not a
participant in pre-approved nationwide mass marketing programs; rather,
marketing efforts target further penetration of its existing customer base.
1-4 FAMILY RESIDENTIAL LOANS
The 1-4 family residential loan portfolio totaled $4.5 billion at March
31, 1996, and represented 18.5% of the total loan portfolio compared to 19.5%
at March 31, 1995. Risk exposure in this area is minimized through
underwriting policies that specify conservative loan to value ratios, coupled
with a diversified geographic base that naturally protects the Corporation
from excessive concentrations in any given market. In addition, the majority
of the fixed-rate, long-term production is sold in the secondary market
through the Corporation's mortgage banking subsidiary.
FINANCIAL POSITION AND LIQUIDITY
The basic financial structure of the Corporation's average and
period-end balance sheet changed only moderately from March 31, 1995, and the
fourth quarter of 1995. At March 31, 1996, assets totaled $40.3 billion
compared to $40.1 billion at March 31, 1995, and $41.1 billion at December
31, 1995.
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. The Corporation's auto-loan
securitization and bank note programs represent additional sources of
liquidity.
Average core deposits totaled $27.5 billion for the first quarter of
1996, an increase of $1.6 billion or 6.2% from the same
- 23 -
<PAGE> 24
period last year. Much of the core deposit growth has occurred within the retail
money market deposit accounts through increased penetration of the retail
customer base. In addition, the core deposit base mix has been altered somewhat
in recent periods as customers have redirected balances from traditionally
lower-cost savings deposits to the higher-rate retail money market accounts. The
deposit growth during this period has exceeded earning asset growth;
accordingly, the excess liquidity has been used to reduce purchased funds.
Average core deposits supported 75.6% of earning assets for the first quarter of
1996 compared to 72.2% during the same period last year. Purchased funds
supported 16.1% of average earning assets compared to 21.0% for the first
quarter of last year. Purchased funds at March 31, 1996, and March 31, 1995,
included short-term bank notes which were issued by several of the Corporation's
banking subsidiaries totaling $1.0 billion and $1.9 billion, respectively.
The Corporation's need for purchased funds was also reduced due to proceeds
received from the $300 million auto-loan securitization completed in the
third quarter of last year.
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 March 31, 1996, the available for sale
portfolio totaled $10.6 billion, compared to $4.7 billion at March 31, 1995.
In the fourth quarter of 1995, the Corporation reclassified approximately
$5.7 billion of securities from held to maturity to available for sale in
accordance with the one-time reclassification permitted under Financial
Accounting Standards Board Special Report, "A Guide to Implementation of
Statement 115 on Accounting for Certain Investments in Debt and Equity
Securities." These securities, representing approximately 90% of the total
securities portfolio, may be sold to meet liquidity needs or in response to
significant changes in interest rates or prepayment risks. At March 31, 1996,
unrealized depreciation in the available for sale portfolio was approximately
$61.4 million, compared to appreciation of $16.9 million at December 31,
1995. The decrease in market value from year end was primarily due to the
increase in interest rates, particularly as measured by the U.S. Treasury
yield curve. Approximately 32% of the available for sale portfolio is
comprised of adjustable-rate mortgage-backed securities, including floating
rate CMOs. The remainder of the portfolio is comprised of Treasury notes,
Agency notes, fixed rate mortgage pass throughs and CMO tranches. The
Corporation's mortgage-backed securities portfolio totaled approximately $7.5
billion at March 31, 1996, of which approximately 87% represented government
agency-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 generally 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 24. 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 March 31, 1996, which
would materially impact the Corporation's liquidity position.
<TABLE>
Table 24: Agency Ratings
<CAPTION>
Agency Ratings Moody's Standard & Poor's Thomson Bankwatch
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Boatmen's Bancshares, Inc.: A/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: A/B
Long-term/short-term deposits and bank notes Aa3/P1 A+/A-1 TBW-1
Boatmen's First National Bank of Kansas City: A/B
Long-term/short-term deposits and bank notes A1/P1 A+/A-1 TBWD1
Multi-bank note program
(8 Boatmen's subsidiary banks) A1/P1 A+/A-1
========================================================================================================================
</TABLE>
- 24 -
<PAGE> 25
CAPITAL STRUCTURE
<TABLE>
Table 25: Capital Structure
<CAPTION>
(in millions) March 31, 1996 December 31, 1995 March 31, 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Long-term debt $ 616.4 $ 615.1 $ 557.7
Stockholders' equity:
Preferred equity 99.1 99.3 100.0
Common equity 3,497.3 3,500.5 3,216.2
- ------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 3,596.4 3,599.8 3,316.2
- ------------------------------------------------------------------------------------------------------------------
Total capitalization $4,212.8 $4,214.9 $3,873.9
==================================================================================================================
Tangible equity $3,166.2 $3,164.2 $2,917.1
==================================================================================================================
<CAPTION>
Ratios
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity/assets 8.92% 8.75% 8.28%
Tangible equity/assets 7.94 7.78 7.36
Long-term debt as % of total capitalization 14.63 14.59 14.40
Double leverage 106.85 106.35 106.36
Dividends paid (for the period, in thousands):
Preferred<F1> $ 1,750 $ 7,049 $ 1,769
Common<F1> 47,960 206,692 42,725
Total dividends as % of net income 44.7% 44.5% 49.3%
==================================================================================================================
<FN>
<F1> Includes dividends of pooled companies.
</TABLE>
<TABLE>
Table 26: Intangible Assets
<CAPTION>
(in millions) March 31, 1996 December 31, 1995 March 31, 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Goodwill--Parent Company $ 83.0 $ 84.4 $ 88.5
- ------------------------------------------------------------------------------------------------------------------
Subsidiaries:
Goodwill 194.2 193.6 180.9
Core deposit premium 65.6 69.5 82.4
Mortgage servicing rights 69.2 67.5 36.6
Credit card premium 18.2 20.6 10.7
- ------------------------------------------------------------------------------------------------------------------
Total subsidiaries 347.2 351.2 310.6
- ------------------------------------------------------------------------------------------------------------------
Total intangible assets $430.2 $435.6 $399.1
==================================================================================================================
</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 $3.5 billion
or approximately 83.0% of total capitalization at March 31, 1996, an increase
of 8.7% from March 31, 1995. The equity to asset ratio was 8.92% at March 31,
1996, compared to 8.28% at March 31, 1995, and 8.75% at December 31, 1995. At
March 31, 1996, the Corporation held 757,087 common shares in Treasury at a
cost of $29.2 million. The repurchased shares will be used to meet periodic
stock requirements of benefit plans and for the pending purchase acquisition.
The preferred stock (Series A) pays a 7% dividend and is callable by the
Corporation, at par, on March 1, 1997. Assuming full conversion, the issuance
of 3.4 million common shares will be required.
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
11.37% for Tier I and 14.04% for total capital substantially exceed the
regulatory required minimums. At March 31, 1996, the Corporation's Tier I
leverage ratio was 8.22%, well in excess of required minimums. At March 31,
1996, 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%.
- 25 -
<PAGE> 26
<TABLE>
Table 27: Risk-Based Capital
<CAPTION>
(in millions) March 31, 1996 December 31, 1995 March 31, 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tier I capital:
Stockholders' equity $ 3,596.4 $ 3,599.8 $ 3,316.2
Unrealized net (appreciation) depreciation,
available for sale securities 34.4 (10.5) 41.2
- ------------------------------------------------------------------------------------------------------------------
Stockholders' equity, net 3,630.8 3,589.3 3,357.4
Minority interest .7 .7 .7
Intangible assets:
Goodwill (277.2) (278.0) (269.4)
Core deposit premium (65.6) (69.5) (82.4)
- ------------------------------------------------------------------------------------------------------------------
Total Tier I 3,288.7 3,242.5 3,006.3
- ------------------------------------------------------------------------------------------------------------------
Tier II capital:
Allowable reserve for loan losses 362.8 360.1 344.6
Qualifying long-term debt 410.0 410.0 415.0
- ------------------------------------------------------------------------------------------------------------------
Total Tier II 772.8 770.1 759.6
- ------------------------------------------------------------------------------------------------------------------
Total capital $ 4,061.5 $ 4,012.6 $ 3,765.9
==================================================================================================================
Risk-adjusted assets $28,926.2 $28,721.2 $27,441.7
==================================================================================================================
Risk-based capital ratios:
Tier I 11.37% 11.29% 10.96%
==================================================================================================================
Total 14.04% 13.97% 13.72%
==================================================================================================================
Tier I leverage ratio 8.22% 7.95% 7.56%
==================================================================================================================
</TABLE>
- 26 -
<PAGE> 27
<TABLE>
BOATMEN'S BANCSHARES, INC.
CONSOLIDATED QUARTERLY EARNINGS TREND
<CAPTION>
1996 1995
- ------------------------------------------------------------------------------------------------------------------------
(in thousands) First Fourth Third Second First
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $528,584 $538,382 $540,212 $530,404 $498,751
Interest on short-term investments 1,913 1,540 1,146 1,137 964
Interest on Federal funds sold and securities
purchased under resale agreements 11,631 11,645 10,218 9,364 8,801
Interest on held to maturity securities
Taxable 404 72,064 93,539 96,093 96,057
Tax-exempt 15,077 14,325 13,915 13,903 13,965
- ------------------------------------------------------------------------------------------------------------------------
Total interest on held to maturity securities 15,481 86,389 107,454 109,996 110,022
Interest on available for sale securities 160,188 87,712 68,367 72,439 76,298
Interest on trading securities 764 706 547 361 435
- ------------------------------------------------------------------------------------------------------------------------
Total interest income 718,561 726,374 727,944 723,701 695,271
Interest expense:
Interest on deposits 257,282 265,050 262,652 259,633 238,124
Interest on Federal funds purchased
and other short-term borrowings 58,709 63,921 77,862 81,880 80,846
Interest on capital lease obligations 946 971 972 975 978
Interest on long-term debt 12,450 12,498 11,334 11,493 12,129
- ------------------------------------------------------------------------------------------------------------------------
Total interest expense 329,387 342,440 352,820 353,981 332,077
- ------------------------------------------------------------------------------------------------------------------------
Net interest income 389,174 383,934 375,124 369,720 363,194
Provision for loan losses 26,217 26,451 12,391 10,171 10,743
- ------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 362,957 357,483 362,733 359,549 352,451
- ------------------------------------------------------------------------------------------------------------------------
Noninterest income:
Trust fees 52,807 52,226 50,444 51,902 45,670
Service charges 60,351 59,760 58,822 57,832 55,234
Mortgage banking revenues 21,639 20,421 20,344 16,689 23,248
Credit card 15,553 16,184 16,200 14,404 14,695
Investment banking revenues 12,469 10,832 10,588 10,490 10,248
Securities gains (losses), net 477 11,034 938 3,005 (22,017)
Other 49,284 38,331 38,091 36,434 37,581
- ------------------------------------------------------------------------------------------------------------------------
Total noninterest income 212,580 208,788 195,427 190,756 164,659
- ------------------------------------------------------------------------------------------------------------------------
Noninterest expense:
Staff 191,360 186,596 182,726 177,915 179,235
Net occupancy 25,418 24,368 25,617 23,665 25,127
Equipment 30,232 31,123 28,335 28,520 28,726
FDIC insurance 2,735 4,945 1,156 16,593 16,594
Intangible amortization 10,272 11,268 11,121 10,756 10,610
Advertising 9,894 11,705 9,752 11,495 9,914
Merger expense 42,414 711 25,267
Other 87,166 98,776 92,778 86,405 79,026
- ------------------------------------------------------------------------------------------------------------------------
Total noninterest expense 399,491 368,781 351,485 356,060 374,499
- ------------------------------------------------------------------------------------------------------------------------
Income before income tax expense 176,046 197,490 206,675 194,245 142,611
Income tax expense 64,922 69,229 72,994 66,440 52,347
- ------------------------------------------------------------------------------------------------------------------------
Net income $111,124 $128,261 $133,681 $127,805 $ 90,264
========================================================================================================================
Net income available to common shareholders $109,374 $126,407 $131,923 $126,043 $ 88,495
========================================================================================================================
Net income per share $.69 $.81 $.84 $.80 $.57
========================================================================================================================
Dividends declared per share $.37 $.37 $.37 $.34 $.34
========================================================================================================================
Returns:
Return on assets 1.10% 1.27% 1.32% 1.27% .90%
Return on total equity 12.15 14.49 15.49 15.14 11.13
Return on common equity 12.30 14.69 15.74 15.39 11.26
========================================================================================================================
</TABLE>
- 27 -
<PAGE> 28
<TABLE>
BOATMEN'S BANCSHARES, INC.
CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEET AND NET INTEREST MARGIN
<CAPTION>
1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
Average balances (in millions) First Quarter Fourth Quarter Third 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 $24,130.6 $530.3 8.84% $24,184.4 $540.1 8.86% $24,207.4 $541.8 8.88%
Short-term investments 121.1 1.9 6.36 92.4 1.5 6.61 76.1 1.1 5.97
Federal funds sold and securities
purchased under resale agreements 845.2 11.7 5.53 796.9 11.6 5.80 695.2 10.2 5.83
Held to maturity securities:
Taxable 16.6 .4 9.76 4,584.8 72.1 6.24 6,040.5 93.5 6.14
Tax-exempt 900.9 21.9 9.79 891.4 21.4 9.52 862.5 20.8 9.58
- -----------------------------------------------------------------------------------------------------------------------------------
Total held to maturity securities 917.5 22.3 9.79 5,476.2 93.5 6.77 6,903.0 114.3 6.57
Available for sale securities 10,358.9 161.3 6.26 5,697.6 89.0 6.19 4,418.3 70.0 6.28
Trading securities 51.5 .8 6.55 49.2 .7 6.01 32.8 .6 7.08
- -----------------------------------------------------------------------------------------------------------------------------------
Total earning assets 36,424.8 728.3 8.04 36,296.7 736.4 8.05 36,332.8 738.0 8.06
Less reserve for loan losses (454.0) (463.9) (461.9)
Cash and due from banks 2,093.5 2,142.2 2,274.4
All other assets 2,287.9 2,323.3 2,378.0
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $40,352.2 $40,298.3 $40,523.3
===================================================================================================================================
Liabilities and Stockholders' Equity
- -----------------------------------------------------------------------------------------------------------------------------------
Retail savings deposits and interest-
bearing transaction accounts $13,247.8 $100.9 3.06% $12,995.1 $103.5 3.16% $12,636.3 $100.4 3.15%
Time deposits 11,486.5 156.4 5.47 11,574.1 161.5 5.54 11,641.1 162.2 5.53
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 24,734.3 257.3 4.18 24,569.2 265.0 4.28 24,277.4 262.6 4.29
Federal funds purchased and
other short-term borrowings 4,354.2 58.7 5.42 4,449.4 63.9 5.70 5,353.3 77.9 5.77
Capital lease obligations 38.9 1.0 9.77 39.2 1.0 9.82 39.3 1.0 9.81
Long-term debt 616.2 12.4 8.13 599.4 12.5 8.27 522.5 11.3 8.61
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 29,743.6 329.4 4.45 29,657.2 342.4 4.58 30,192.5 352.8 4.64
Demand deposits 6,395.8 6,544.7 6,365.0
All other liabilities 554.9 555.0 512.5
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 36,694.3 36,756.9 37,070.0
Redeemable preferred stock 1.0 1.0 1.1
Total stockholders' equity 3,656.9 3,540.4 3,452.2
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $40,352.2 $40,298.3 $40,523.3
===================================================================================================================================
Interest rate spread 3.59% 3.47% 3.42%
Effect of noninterest-bearing funds .81 .84 .79
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest margin $398.9 4.40% $394.0 4.31% $385.2 4.21%
===================================================================================================================================
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 $1.7 $ 1.7 $ 1.5
Held to maturity securities 6.8 7.1 6.9
Available for sale securities 1.1 1.2 1.6
Trading securities .1 .1
- -----------------------------------------------------------------------------------------------------------------------------------
Total $9.7 $10.0 $10.1
===================================================================================================================================
</TABLE>
- 28 -
<PAGE> 29
<TABLE>
BOATMEN'S BANCSHARES, INC.
CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEET AND NET INTEREST MARGIN
<CAPTION>
1995
- --------------------------------------------------------------------------------------------------
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 $23,859.1 $532.2 8.95% $23,102.3 $500.8 8.79%
Short-term investments 77.5 1.1 5.88 69.9 1.0 5.60
Federal funds sold and securities
purchased under resale agreements 611.6 9.4 6.14 595.3 8.8 6.00
Held to maturity securities:
Taxable 6,297.8 96.1 6.12 6,396.5 96.1 6.09
Tax-exempt 856.3 20.9 9.78 846.2 21.0 10.06
- --------------------------------------------------------------------------------------------------
Total held to maturity securities 7,154.1 117.0 6.56 7,242.7 117.1 6.55
Available for sale securities 4,606.9 74.2 6.46 4,848.2 78.3 6.55
Trading securities 22.2 .4 6.87 29.2 .4 6.31
- --------------------------------------------------------------------------------------------------
Total earning assets 36,331.4 734.3 8.11 35,887.6 706.4 7.98
Less reserve for loan losses (460.1) (453.6)
Cash and due from banks 2,213.9 2,251.6
All other assets 2,250.7 2,308.7
- --------------------------------------------------------------------------------------------------
Total assets $40,335.9 $39,994.3
==================================================================================================
Liabilities and Stockholders' Equity
- --------------------------------------------------------------------------------------------------
Retail savings deposits and interest-
bearing transaction accounts $12,431.4 $ 99.0 3.20% $12,331.8 $ 91.9 3.02%
Time deposits 11,916.2 160.6 5.40 11,809.0 146.2 5.02
- --------------------------------------------------------------------------------------------------
Total interest-bearing deposits 24,347.6 259.6 4.28 24,140.8 238.1 4.00
Federal funds purchased and
other short-term borrowings 5,483.9 81.9 5.99 5,632.7 80.9 5.82
Capital lease obligations 39.9 1.0 9.81 40.2 1.0 9.86
Long-term debt 529.0 11.5 8.71 572.6 12.1 8.59
- --------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 30,400.4 354.0 4.67 30,386.3 332.1 4.43
Demand deposits 6,139.3 5,933.4
All other liabilities 419.0 430.1
- --------------------------------------------------------------------------------------------------
Total liabilities 36,958.7 36,749.8
Redeemable preferred stock 1.1 1.1
Total stockholders' equity 3,376.1 3,243.4
- --------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $40,335.9 $39,994.3
==================================================================================================
Interest rate spread 3.44% 3.55%
Effect of noninterest-bearing funds .76 .68
- --------------------------------------------------------------------------------------------------
Net interest margin $380.3 4.20% $374.3 4.23%
==================================================================================================
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 $ 1.8 $ 2.1
Held to maturity securities 7.0 7.0
Available for sale securities 1.8 2.0
Trading securities
- --------------------------------------------------------------------------------------------------
Total $10.6 $11.1
==================================================================================================
</TABLE>
- 29 -
<PAGE> 30
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 March 31, 1996.
(b) Registrant filed current reports on Form 8-K dated February 2,
1996 and March 29, 1996, 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: May 14, 1996
------------
/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)
- 30 -
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,087,480
<INT-BEARING-DEPOSITS> 68,011
<FED-FUNDS-SOLD> 363,308
<TRADING-ASSETS> 33,714
<INVESTMENTS-HELD-FOR-SALE> 10,627,510
<INVESTMENTS-CARRYING> 1,027,335
<INVESTMENTS-MARKET> 1,065,980
<LOANS> 24,252,074
<ALLOWANCE> 463,733
<TOTAL-ASSETS> 40,299,201
<DEPOSITS> 31,124,581
<SHORT-TERM> 4,273,563
<LIABILITIES-OTHER> 687,323
<LONG-TERM> 616,413
961
99,091
<COMMON> 158,401
<OTHER-SE> 3,338,868
<TOTAL-LIABILITIES-AND-EQUITY> 40,299,201
<INTEREST-LOAN> 528,584
<INTEREST-INVEST> 175,669
<INTEREST-OTHER> 14,308
<INTEREST-TOTAL> 718,561
<INTEREST-DEPOSIT> 257,282
<INTEREST-EXPENSE> 329,387
<INTEREST-INCOME-NET> 389,174
<LOAN-LOSSES> 26,217
<SECURITIES-GAINS> 477
<EXPENSE-OTHER> 399,491
<INCOME-PRETAX> 176,046
<INCOME-PRE-EXTRAORDINARY> 111,124
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 111,124
<EPS-PRIMARY> 0.69
<EPS-DILUTED> 0.69
<YIELD-ACTUAL> 4.40
<LOANS-NON> 183,532
<LOANS-PAST> 37,361
<LOANS-TROUBLED> 6,029
<LOANS-PROBLEM> 741,500
<ALLOWANCE-OPEN> 452,560
<CHARGE-OFFS> 31,156
<RECOVERIES> 15,221
<ALLOWANCE-CLOSE> 463,733
<ALLOWANCE-DOMESTIC> 463,733
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
