SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Date of Report (Date of Earliest Event Reported): January 7, 1997
NATIONSBANK CORPORATION
-----------------------
(Exact Name of Registrant as Specified in its Charter)
North Carolina 1-6523 56-0906609
-------------- ------ ----------
(State of Incorporation) (Commission (IRS Employer
File Number) Identification No.)
NationsBank Corporate Center, Charlotte, North Carolina 28255
-------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(704) 386-5000
--------------
(Registrant's Telephone Number, including Area Code)
ITEM 5. OTHER EVENTS
(a) Financial Statements of businesses acquired.
The following consolidated financial statements of Boatmen's Bancshares,
Inc. ("Boatmen's") and its subsidiaries are incorporated herein by
reference to Exhibit 99.1 filed herewith:
1. Consolidated Balance Sheets as of December 31, 1996 and 1995.
2. Consolidated Statements of Income for the years ended December 31,
1996, 1995 and 1994.
3. Consolidated Statement of Changes in Stockholders' Equity for the
years ended December 31, 1996, 1995 and 1994.
4. Consolidated Statement of Cash Flows for the years ended December 31,
1996, 1995 and 1994.
5. Notes to the Consolidated Financial Statements.
The information presented in Exhibit 99.1 with respect to the year ended
December 31, 1994 is not incorporated herein.
The report of Ernst & Young LLP, independent accountants, on the
consolidated financial statements of Boatmen's Bancshares, Inc. as of
December 31, 1996 and 1995 and for the three years in the period ended
December 31, 1996, is filed herewith as Exhibit 99.1 and the related
consent is filed herewith as Exhibit 99.2. Both the opinion and consent
are incorporated herein by reference.
(b) Pro forma financial information.
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
The following unaudited Pro Forma Condensed Financial Information and
explanatory notes are presented to show the impact on the historical financial
position and results of operations of NationsBank Corporation ("NationsBank")
of the acquisition of Boatmen's effective January 7, 1997, (the "Merger").
In accordance with the merger agreement, each share of Boatmen's Common Stock
outstanding at the Effective Time of the merger (the "Effective Time") was
converted in the Merger into the right to receive 1.305 shares of NationsBank
common stock (adjusted for 2-for-1 stock split on February 27, 1997) or, at
the election of each of the holders of Boatmen's Common Stock, $63.11 in cash
(such cash consideration in the aggregate not to exceed 40% of the aggregate
consideration paid by NationsBank for Boatmen's Common Stock), and each share
of Boatmen's preferred stock was converted into new shares of NationsBank
preferred stock having substantially similar terms.
The unaudited Pro Forma Condensed Financial Information reflects the Merger
using the purchase method of accounting. The cash component of the purchase
price is assumed to equal 40% of the purchase price in the unaudited Pro Forma
Condensed Financial Information; the cash component of the purchase price was
funded by NationsBank through the issuance of additional debt securities
included in the NationsBank historical balance sheet. The actual cash election
made by the holders of Boatmen's common stock was approximately 4%. However,
NationsBank currently expects to and has previously disclosed its intent to
repurchase shares of NationsBank common stock from time to time so that the
pro forma impact of the Boatmen's acquisition will be the issuance of
approximately 60% of the aggregate consideration in NationsBank common stock
and 40% of the aggregate consideration in cash.
The unaudited Pro Forma Condensed Balance Sheet assumes that the Merger was
consummated on December 31, 1996. The unaudited Pro Forma Condensed Statement
of Income reflects the consolidation of the results of operation of NationsBank
and Boatmen's for the year ended December 31, 1996.
The unaudited Pro Forma Condensed Financial Information reflects preliminary
purchase accounting adjustments. Estimates relating to fair value of certain
assets, liabilities and other items have been made as more fully described in
the Notes to the Pro Forma Condensed Financial Information. Actual adjustments,
which may include adjustments to additional assets, liabilities and other items,
will be made on the basis of appraisals and evaluations as of the Effective Time
and, therefore, will differ from those reflected in the unaudited Pro Forma
Condensed Financial Information.
The combined company expects to achieve substantial merger benefits including
operating cost savings and revenue enhancements. The pro forma earnings, which
do not reflect any potential savings or revenue enhancements which are expected
to result from the consolidation of operations of NationsBank and Boatmen's, are
not indicative of the results of future operations. No assurances can be given
with respect to the ultimate level of expense savings and revenue enhancements
to be realized.
The unaudited Pro Forma Condensed Financial Information and explanatory notes
presented also show the impact on the historical financial position and results
of operations of NationsBank of the acquisitions of Bank South Corporation
("Bank South"), completed January 10, 1996, TAC Bancshares, Inc. and its
subsidiary, Chase Federal Bank FSB ("Chase Federal"), completed August 13, 1996,
and CSF Holdings, Inc. ("CSF") completed January 10, 1996 (collectively, the
"Other Acquisitions"). The Other Acquisitions are reflected net of pro forma
adjustments in the Pro Forma Condensed Financial Information and explanatory
notes.
The Other Acquisitions were all closed prior to December 31, 1996 and are
reflected in the December 31, 1996 NationsBank historical balance
sheet. The unaudited Pro Forma Condensed Statement of Income reflects the
results of operation of the Other Acquisitions for the year ended December 31,
1996 as if the Other Acquisitions had occurred on January 1, 1996. Chase
Federal and CFS are reflected in the unaudited Pro Forma Condensed Financial
Information using the purchase method of accounting and Bank South is
reflected as a pooling of interests. The Other Acquisitions pro forma earnings
do not reflect any potential savings or revenue enhancements that may result
from the consolidation of operations of the Other Acquisitions and therefore
are not indicative of the results of future operations.
<TABLE>
PRO FORMA BALANCE SHEET
(Dollars in Millions)
(Unaudited)
<CAPTION>
At December 31, 1996
-----------------------------------------------------------
NationsBank
Boatmen's Pro Forma Boatmen's
NationsBank Bancshares Adjustments Combined
----------- ----------- --------------- -----------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents............ $ 8,933 $ 2,733 $ (3,926) (1) $ 7,740
Time deposits placed................. 1,843 72 1,915
Investment securities................ 14,387 11,522 41 (1) 19,950
(6,000) (2)
Federal funds sold and securities
purchased under agreements to resell. 6,959 446 7,405
Trading account assets............... 19,288 28 19,316
Loans, leases and factored accounts
receivable, net of unearned income.. 122,630 24,605 147,235
Allowance for credit losses.......... (2,315) (458) (2,773)
Premmises, equipment and lease
rights, net......................... 2,712 776 3,488
Customers' acceptance liability...... 858 - 858
Other assets......................... 10,499 1,476 6,477 (1) 18,549
97 (1)
---------- ---------- ---------- ----------
Total assets....................... $ 185,794 $ 41,200 $ (3,311) $ 223,683
========== ========== ========== ==========
LIABILITIES
Deposits............................. $ 106,498 $ 31,954 $ $ 138,452
Borrowed funds....................... 24,001 4,311 (6,000) (2) 22,312
Trading account liabilities.......... 11,752 - 11,752
Acceptances outstanding.............. 858 - 858
Accrued expenses and other
liabilities......................... 5,026 618 390 (1) 6,034
Long-term debt....................... 23,950 646 24,596
---------- ---------- ---------- ----------
Total liabilities.................. 172,085 37,529 (5,610) 204,004
---------- ---------- ---------- ----------
SHAREHOLDERS' EQUITY
Preferred stock...................... 171 82 253
Common stock......................... 3,855 158 (158) (1) 9,743
5,888 (1)
Surplus.............................. - 1,200 (1,200) (1) -
Retained earnings.................... 9,673 2,405 (2,405) (1) 9,673
Less: Treasury stock................. - (168) 168 (1) -
Other including loan to ESOP trust... 10 (6) 6 (1) 10
---------- ---------- ---------- ----------
Total shareholders' equity......... 13,709 3,671 2,299 19,679
---------- ---------- ---------- ----------
Total liabilities and
shareholders' equity.............. $ 185,794 $ 41,200 $ (3,311) $ 223,683
========== ========== ========== ==========
See accompanying notes to the pro forma balance sheet.
</TABLE>
<TABLE>
PRO FORMA CONDENSED STATEMENT OF INCOME
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)
<CAPTION>
For the Year Ended December 31, 1996
----------------------------------------------------------------------------
NationsBank
Boatmen's Pro Forma Boatmen's Other Pro Forma
NationsBank Bancshares Adjustments Combined Acquisitions Combined
----------- ---------- ----------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Income from Earning Assets
Interest and fees on loans and leases.. $ 10,440 $ 2,110 $ $ 12,550 $ 55 $ 12,605
Interest and dividends on securities... 1,306 737 (4) (3) 1,645 45 1,690
(394) (5)
Interest on federal funds sold and
securities purchased under
agreements to resell................. 666 24 690 - 690
Trading account securities............ 1,225 4 1,229 - 1,229
Other................................. 159 6 165 - 165
----------- ---------- ----------- --------- ------------ ---------
Total income from earning assets.... 13,796 2,881 (398) 16,279 100 16,379
Interest Expense
Deposits.............................. 3,322 994 4,316 45 4,361
Borrowed funds........................ 2,155 249 (364) (5) 2,040 9 2,049
Long-term debt........................ 1,337 53 307 (4) 1,697 21 1,718
Other................................. 653 - 653 - 653
----------- ---------- ----------- --------- ------------ ---------
Total interest expense.............. 7,467 1,296 (57) 8,706 75 8,781
----------- ---------- ----------- --------- ------------ ---------
Net interest income..................... 6,329 1,585 (341) 7,573 25 7,598
Provision for credit losses............. 605 85 690 6 696
----------- ---------- ----------- --------- ------------ ---------
Net credit income................... 5,724 1,500 (341) 6,883 19 6,902
Gains on sales of securities............ 67 2 69 2 71
Noninterest income...................... 3,646 839 (6) (3) 4,479 3 4,482
Merger-related charge................... 118 70 188 - 188
Noninterest expense..................... 5,685 1,453 297 (3) 7,435 25 7,460
----------- ---------- ----------- --------- ------------ ---------
Income before taxes..................... 3,634 818 (644) 3,808 (1) 3,807
Income taxes............................ 1,259 295 (125) (7) 1,429 - 1,429
----------- ---------- ----------- --------- ------------ ---------
Net income.............................. 2,375 523 (519) 2,379 (1) 2,378
Preferred dividends..................... 15 7 22 - 22
----------- ---------- ----------- --------- ------------ ---------
Net income available to common
shareholders.......................... $ 2,360 $ 516 $ (519) $ 2,357 $ (1) $ 2,356
=========== ========== =========== ========= ============ =========
Primary earnings per common share....... $ 4.00 $ 3.30 $ 3.30
=========== ========= =========
Fully diluted earnings per common share. $ 3.92 $ 3.25 $ 3.25
=========== ========= =========
Average Common Shares - Primary......... 590,214 714,318 714,318
=========== ========= =========
Average Common Shares - Fully Diluted... 603,528 727,632 727,632
=========== ========= =========
</TABLE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
(Amounts in Millions, Shares in Thousands, Per-Share Amounts Actuals)
The unaudited Pro Forma Condensed Financial Information is based upon the
following adjustments and related assumptions; the actual purchase accounting
adjustments will be made on the basis of appraisals and evaluations as of the
date of consummation of the transaction and, therefore, will differ from those
reflected in the unaudited Pro Forma Condensed Financial Information.
Note 1
The purchase accounting adjustments to record the Merger used in the preparation
of the unaudited Pro Forma Condensed Balance Sheet are summarized below:
Shares of Boatmen's Common Stock outstanding..................... 155,501 (A)
Exchange ratio................................................... 1.305
-------
NationsBank common share equivalents............................. 202,929
Consideration to be paid in NationsBank Common Stock........ 60% (B)
-------
NationsBank Common Stock assumed issued..................... 121,757
Assumed NationsBank Share Price............................. $48.3625 (C)
--------
Assumed additional shareholders' equity..................... $5,888
------
Consideration to be paid in cash............................ 40% (B)
-------
NationsBank Common Stock assumed issued..................... 81,172
Assumed NationsBank Share Price............................. $48.3625 (C)
--------
Assumed cash consideration.................................. $3,926
------
Purchase price of acquisition (from above)....................... $9,814
Historical net assets acquired................................... $3,671
Less: Boatmen's preferred stock.................................. (82)
-------
3,589
-------
Premium to allocate.............................................. $6,225
-------
Adjustments to fair value of net assets acquired:
Investment Securities....................................... 41 (D)
Deferred Income Taxes....................................... 97 (E)
Other Accrued Expenses...................................... (390)(G)
Intangibles................................................. 6,477 (F)
-------
$6,225
-------
(A) Represents the number of shares of Boatmen's Common Stock outstanding at
the Effective Time.
(B) Each share of Boatmen's Common Stock outstanding at the Effective Time was
converted in the Merger into the right to receive 1.305 shares of
NationsBank common stock or, at the election of each of the holders of
Boatmen's Common Stock, an amount in cash in respect of each share of
Boatmen's Common Stock that is equal to the Exchange Ratio times the market
value of the NationsBank Common Stock during the 10 consecutive trading day
period during which the shares of NationsBank Common Stock were traded on
the New York Stock Exchange ending on the tenth calendar day immediately
prior to the Effective Time (such cash consideration in the aggregate not
to exceed 40% of the aggregate consideration paid by NationsBank for
Boatmen's Common Stock). An assumed cash election of 40% has been used in
the pro forma computations. The unaudited Pro Forma Condensed Financial
Information reflects funding of the cash component of the purchase price
from issuance of additional debt securities. As indicated above, the
actual cash election was approximately 4%. However, NationsBank currently
expects to repurchase shares of NationsBank common staock from time to time
so that the pro forma impact of the Boatmen's acquisition will be the
issuance of approximately 60% of the aggregate consideration in NationsBank
common stock and 40% of the aggregate consideration in cash.
(C) NationsBank Common Stock price average over the ten consecutive trading day
period from December 13, 1996 through December 27, 1996 as explained in (B)
above, adjusted to reflect the 2-for-1 stock split on February 27, 1997.
(D) Reflects the net appreciation in the securities portfolio at December 31,
1996.
(E) Represents the amount of deferred tax associated with adjustments to the
carrying value of investments securities, mortgage servicing rights and
certain identifiable intangible assets.
(F) Includes identifiable intangibles, estimated fair value in excess of
carrying value of mortgage servicing rights at December 31, 1996, and
goodwill.
(G) Includes personnel related items, write-offs of premises and equipment,
transition costs and other merger-related expenses.
Note 2
Reflects the planned reduction of discretionary investment securities and
related paydown of borrowed funds.
Note 3
The purchase accounting adjustments related to the Merger reflected in the
unaudited Pro Forma Condensed Statement of Income are summarized as follows:
Year Ended
December 31,
1996
------------
Interest income
Amortization of securities fair value adjustment....... $4
Noninterest income
Amortization of mortgage servicing rights ............. $6
Noninterest expense
Amortization of intangibles fair value adjustment......$297
Note 4
Purchase accounting adjustments related to NationsBank's funding of the Merger
have been reflected in the unaudited Pro Forma Condensed Statement of Income as
follows:
Year Ended
December 31,
1996
------------
Interest expense
Increase in interest expense on debt securities
to fund the cash component of the Common Stock
Consideration....................................... $307
Note 5
Foregone interest income on discretionary investment security portfolio
reduction and related reduction in funding cost.
Year Ended
December 31,
1996
------------
Interest income................................. $394
Interest expense................................ $364
----
$ 30
Note 6
The following assumptions were used in establishing the purchase accounting
adjustments related to the Merger in the unaudited Pro Forma Condensed Statement
of Income.
Securities
Amortize the premium into interest income on a straight-line method over the
estimated maturities of the affected securities, 3 years.
Mortgage Servicing Rights
Amortize the excess of fair value over carrying value on a straight-line method
over the estimated maturities of the underlying mortgages of 7 years.
Intangibles
Amortize the identifiable intangible value as noninterest expense over 10 years
and goodwill on a straight-line basis over 25 years.
Note 7
Income tax expense on pro forma adjustments is reflected using a 36% tax rate.
ITEM 7. EXHIBITS
The following Exhibits are filed herewith:
Exhibit No. Description of Exhibit
- ----------- ----------------------
99.1 Consolidated financial statements of
Boatmen's Bancshares, Inc. and
Report of Ernst & Young LLP.
99.2 Consent of Ernst & Young LLP.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
NATIONSBANK CORPORATION
By: /s/ Marc D. Oken
--------------------
Marc D. Oken
Chief Accounting Officer
Dated: March 28, 1997
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ----------------------
99.1 Consolidated financial statements of
Boatmen's Bancshares, Inc. and Report of
Ernst & Young LLP.
99.2 Consent of Ernst & Young LLP.
Exhibit 99.1
BOATMEN'S BANCSHARES, INC. 1996 FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
<TABLE>
Consolidated Balance Sheet
<CAPTION>
December 31 (dollars in thousands)
1996 1995
- -------------------------------------------------------------------------------
- ------------------------------------------
<S>
<C> <C>
Assets
Cash and due from banks
$ 2,733,213 $ 2,611,765
Short-term investments
72,091 83,166
Securities:
Held to maturity (market value $1,039,622 and $973,801, respectively)
1,003,415 923,130
Available for sale (amortized cost $10,533,815 and $10,330,233, respectively)
10,518,740 10,347,172
Trading
28,364 58,361
Federal funds sold and securities purchased under resale agreements
446,276 1,225,671
Loans (net of unearned income of $78,069, and $86,981, respectively)
24,604,681 24,050,903
Less reserve for loan losses
458,090 452,560
- -------------------------------------------------------------------------------
- ------------------------------------------
Loans, net
24,146,591 23,598,343
- -------------------------------------------------------------------------------
- ------------------------------------------
Property and equipment
775,587 800,502
Other assets
1,476,160 1,475,379
- -------------------------------------------------------------------------------
- ------------------------------------------
Total assets
$41,200,437 $41,123,489
===============================================================================
==========================================
Liabilities and Stockholders' Equity
Liabilities:
Demand deposits
$ 7,354,523 $ 6,894,649
Retail savings deposits and interest-bearing transaction accounts
13,450,215 13,510,720
Time deposits
11,149,258 11,572,768
- -------------------------------------------------------------------------------
- ------------------------------------------
Total deposits
31,953,996 31,978,137
- -------------------------------------------------------------------------------
- ------------------------------------------
Federal funds purchased and securities sold under repurchase agreements
3,021,109 2,902,973
Short-term borrowings
1,289,404 1,474,991
Capital lease obligations
36,607 39,076
Long-term debt
609,070 615,129
Other liabilities
617,682 512,436
- -------------------------------------------------------------------------------
- ------------------------------------------
Total liabilities
37,527,868 37,522,742
- -------------------------------------------------------------------------------
- ------------------------------------------
Redeemable preferred stock
934 961
- -------------------------------------------------------------------------------
- ------------------------------------------
Stockholders' Equity:
Preferred stock
82,147 99,324
Common stock ($1 par value; 250,000,000 shares authorized;
158,400,356 and 158,067,758 shares issued, respectively)
158,400 158,068
Surplus
1,199,692 1,212,838
Retained earnings
2,405,658 2,137,176
Treasury stock (3,075,610 and 476,519 shares at cost, respectively)
(168,131) (18,096)
Unrealized net appreciation (depreciation), available for sale securities
(6,131) 10,476
- -------------------------------------------------------------------------------
- ------------------------------------------
Total stockholders' equity
3,671,635 3,599,786
- -------------------------------------------------------------------------------
- ------------------------------------------
Total liabilities and stockholders' equity
$41,200,437 $41,123,489
===============================================================================
==========================================
See accompanying notes to the consolidated financial statements.
</TABLE>
<TABLE>
Consolidated Statement of Income
<CAPTION>
Year ended December 31 (in thousands)
1996 1995 1994
- -------------------------------------------------------------------------------
- ----------------------------------------
<S>
<C> <C> <C>
Interest income
Interest and fees on loans
$2,109,806 $2,107,749 $1,748,732
Interest on short-term investments
5,692 4,787 3,569
Interest on Federal funds sold and securities purchased
under resale agreements
24,316 40,028 18,047
Interest on held to maturity securities
Taxable
357,753 348,264
Tax-exempt
63,471 56,108 60,488
- -------------------------------------------------------------------------------
- ----------------------------------------
Total interest on held to maturity securities
63,471 413,861 408,752
Interest on available for sale securities
673,800 304,816 329,391
Interest on trading securities
3,628 2,049 2,629
- -------------------------------------------------------------------------------
- ----------------------------------------
Total interest income
2,880,713 2,873,290 2,511,120
- -------------------------------------------------------------------------------
- ----------------------------------------
Interest expense
Interest on deposits
994,142 1,025,459 768,995
Interest on Federal funds purchased and other short-term borrowings
249,173 304,509 202,506
Interest on capital lease obligations
3,754 3,896 4,016
Interest on long-term debt
49,015 47,454 66,660
- -------------------------------------------------------------------------------
- ----------------------------------------
Total interest expense
1,296,084 1,381,318 1,042,177
- -------------------------------------------------------------------------------
- ----------------------------------------
Net interest income
1,584,629 1,491,972 1,468,943
Provision for loan losses
84,517 59,756 26,176
- -------------------------------------------------------------------------------
- ----------------------------------------
Net interest income after provision for loan losses
1,500,112 1,432,216 1,442,767
- -------------------------------------------------------------------------------
- ----------------------------------------
Noninterest income
Trust fees
214,929 200,242 186,081
Service charges
249,931 231,648 225,479
Mortgage banking revenues
86,758 80,702 63,349
Credit card
50,044 61,483 55,499
Investment banking revenues
48,982 42,158 42,318
Securities gains (losses), net
1,994 (7,040) 9,832
Other
188,071 150,437 131,100
- -------------------------------------------------------------------------------
- ----------------------------------------
Total noninterest income
840,709 759,630 713,658
- -------------------------------------------------------------------------------
- ----------------------------------------
Noninterest expense
Staff
767,073 726,472 718,592
Net occupancy
101,943 98,777 100,909
Equipment
121,914 116,704 116,187
FDIC insurance
32,613 39,288 65,723
Intangible amortization
40,147 43,755 45,306
Advertising
45,124 42,866 43,005
Merger expense
69,617 25,978
Other
344,007 356,985 321,359
- -------------------------------------------------------------------------------
- ----------------------------------------
Total noninterest expense
1,522,438 1,450,825 1,411,081
- -------------------------------------------------------------------------------
- ----------------------------------------
Income before income tax expense
818,383 741,021 745,344
Income tax expense
295,615 261,010 254,418
- -------------------------------------------------------------------------------
- ----------------------------------------
Net income $
522,768 $ 480,011 $ 490,926
===============================================================================
========================================
Net income per share
$3.29 $3.02 $3.10
===============================================================================
========================================
Dividends declared per share
$1.58 $1.42 $1.30
===============================================================================
========================================
See accompanying notes to the consolidated financial statements.
</TABLE>
<TABLE>
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>
December 31, 1993 250 $100,000 155,496 $155,496 $1,166,797
$1,578,377 -- -- $ 67,400 $3,068,070
Net income -- -- -- -- --
490,926 -- -- -- 490,926
Cash dividends declared:
Common ($1.30 per share) -- -- -- -- --
(135,920) -- -- -- (135,920)
Redeemable preferred -- -- -- -- --
(80) -- -- -- (80)
By pooled companies prior to
merger--common -- -- -- -- --
(40,187) -- -- -- (40,187)
By pooled companies prior to
merger--preferred -- -- -- -- --
(7,000) -- -- -- (7,000)
Acquisition of treasury stock -- -- -- -- --
- -- (538) (15,406) -- (15,406)
Common stock issued pursuant to
employee and shareholder stock
issuance plans -- -- 446 446 6,364
- -- 29 890 -- 7,700
Common stock issued upon acquisition
of subsidiaries -- -- 481 481 7,712
- -- -- -- -- 8,193
Adjustment for purchase of treasury
stock--pooled companies -- -- (358) (358) (9,758)
- -- -- -- -- (10,116)
Common stock issued upon conversion
of convertible subordinated
debentures -- -- 19 19 280
- -- -- -- -- 299
Adjustment of available for sale
securities to market value -- -- -- -- --
- -- -- -- (201,921) (201,921)
Other, net -- -- -- -- (211)
83 -- -- -- (128)
- -------------------------------------------------------------------------------
- ----------------------------------------------------
December 31, 1994 250 100,000 156,084 156,084 1,171,184
1,886,199 (509) (14,516) (134,521) 3,164,430
Net income -- -- -- -- --
480,011 -- -- -- 480,011
Cash dividends declared:
Common ($1.42 per share) -- -- -- -- --
(183,063) -- -- -- (183,063)
Redeemable preferred -- -- -- -- --
(75) -- -- -- (75)
By pooled companies prior to
merger--common -- -- -- -- --
(38,808) -- -- -- (38,808)
By pooled companies prior to
merger--preferred -- -- -- -- --
(6,970) -- -- -- (6,970)
Acquisition of treasury stock -- -- -- -- --
- --(2,152) (76,479) -- (76,479)
Common stock issued pursuant to
employee and shareholder stock
issuance plans -- -- 1,150 1,150 22,315
- -- 769 24,270 -- 47,735
Common stock issued upon acquisition
of subsidiaries -- -- 947 947 24,579
- -- 1,413 48,574 -- 74,100
Adjustment for purchase of treasury
stock--pooled companies -- -- (125) (125) (3,921)
- -- -- -- -- (4,046)
Retirement of preferred stock (1) (500) -- -- 15
(98) -- -- -- (583)
Common stock issued upon conversion
of preferred stock (1) (176) 6 6 170
- -- -- -- -- --
Common stock issued upon conversion
of convertible subordinated
debentures -- -- 6 6 52
- -- 2 55 -- 113
Adjustment of available for sale
securities to market value -- -- -- -- --
- -- -- -- 144,997 144,997
Other, net -- -- -- -- (1,556)
(20) -- -- -- (1,576)
- -------------------------------------------------------------------------------
- ----------------------------------------------------
December 31, 1995 248 99,324 158,068 158,068 1,212,838
2,137,176 (477) (18,096) 10,476 3,599,786
Net income -- -- -- -- --
522,768 -- -- -- 522,768
Cash dividends declared:
Common ($1.58 per share) -- -- -- -- --
(247,425) -- -- -- (247,425)
Redeemable preferred -- -- -- -- --
(67) -- -- -- (67)
Preferred -- -- -- -- --
(6,740) -- -- -- (6,740)
Acquisition of treasury stock -- -- -- -- --
- --(5,476) (262,380) -- (262,380)
Common stock issued pursuant to
employee and shareholder stock
issuance plans -- -- 325 325 (6,727)
- -- 1,865 72,172 -- 65,770
Common stock issued upon acquisition
of subsidiaries -- -- -- -- (465)
- -- 431 17,076 -- 16,611
Common stock issued upon conversion
of preferred stock (43) (17,177) 8 8 (5,946)
- -- 584 23,115 -- --
Common stock issued upon conversion
of convertible subordinated
debentures -- -- -- -- (197)
- -- 9 333 -- 136
Adjustment of available for sale
securities to market value -- -- -- -- --
- -- -- -- (16,607) (16,607)
Other, net -- -- (1) (1) 189
(54) (12) (351) -- (217)
- -------------------------------------------------------------------------------
- ----------------------------------------------------
December 31, 1996 205 $ 82,147 158,400 $158,400 $1,199,692
$2,405,658(3,076)$(168,131) $ (6,131) $3,671,635
===============================================================================
====================================================
See accompanying notes to the consolidated financial statements.
</TABLE>
<TABLE>
Consolidated Statement of Cash Flows
<CAPTION>
Year ended December 31 (in thousands)
1996 1995 1994
- -------------------------------------------------------------------------------
- --------------------------------------------
<S>
<C> <C> <C>
Operating Activities:
Net income
$ 522,768 $ 480,011 $ 490,926
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses
84,517 59,756 26,176
Depreciation, amortization and accretion
167,153 174,616 193,533
Decrease in deferred loan fees
(1,549) (6,256) (1,080)
Realized securities (gains) losses
(1,994) 7,040 (9,832)
Net (increase) decrease in trading securities
29,997 (25,968) 16,162
(Increase) decrease in interest receivable
18,054 (16,432) (24,528)
Increase (decrease) in interest payable
(16,803) 23,199 15,889
Increase (decrease) in tax liability
(9,894) 57,802 (66,746)
Net gain on sales and writedowns of foreclosed property
(6,337) (2,629) (9,093)
Other, net
76,395 (34,070) 85,969
- -------------------------------------------------------------------------------
- --------------------------------------------
Net cash provided by operating activities
862,307 717,069 717,376
- -------------------------------------------------------------------------------
- --------------------------------------------
Investing Activities:
Net (increase) decrease in Federal funds sold and
securities purchased under resale agreements
783,920 (76,381) (607,147)
Net increase in loans
(608,118) (1,301,371) (2,058,258)
Proceeds from the maturity of held to maturity securities
137,253 1,101,936 1,569,503
Purchases of held to maturity securities
(100,859) (556,268) (2,265,283)
Proceeds from the maturity of available for sale securities
2,448,573 1,233,862 1,716,558
Proceeds from the sales of available for sale securities
418,759 706,693 680,318
Purchases of available for sale securities
(3,190,539) (876,761) (1,006,994)
Net increase (decrease) in short-term investments
11,075 (37,718) (15,821)
Increase in property and equipment
(73,234) (95,530) (140,214)
Proceeds from the sale of foreclosed property
30,679 48,439 87,697
Net cash received from (paid for)purchase acquisitions
4,376 12,720 (87,818)
- -------------------------------------------------------------------------------
- --------------------------------------------
Net cash provided (used) by investing activities
(138,115) 159,621 (2,127,459)
- -------------------------------------------------------------------------------
- --------------------------------------------
Financing Activities:
Net increase (decrease) in Federal funds purchased and
securities sold under repurchase agreements
118,136 (88,707) 370,569
Net increase (decrease) in deposits
(93,037) 409,105 762,453
Net increase (decrease) in short-term borrowings
(195,587) (912,514) 877,102
Payments on long-term debt
(2,097) (78,024) (20,964)
Proceeds from the issuance of long-term debt
6,180 91,287 30,350
Payments on capital lease obligations
(2,469) (1,332) (1,101)
Decrease in redeemable preferred stock
(27) (181) (13)
Decrease in preferred stock
(583)
Cash dividends paid
(237,233) (213,741) (179,877)
Common stock issued pursuant to various employee and
shareholder stock issuance plans
65,770 47,735 7,700
Acquisition of treasury stock
(262,380) (76,479) (15,406)
- -------------------------------------------------------------------------------
- --------------------------------------------
Net cash provided (used) by financing activities
(602,744) (823,434) 1,830,813
- -------------------------------------------------------------------------------
- --------------------------------------------
Increase in cash and due from banks
121,448 53,256 420,730
Cash and due from banks at beginning of year
2,611,765 2,558,509 2,137,779
- -------------------------------------------------------------------------------
- --------------------------------------------
Cash and due from banks at end of year
$2,733,213 $2,611,765 $2,558,509
===============================================================================
============================================
See accompanying notes to the consolidated financial statements.
For the years ended December 31, 1996, 1995 and 1994, interest
paid totaled $1,312,887, $1,359,404, and $1,020,492, respectively.
Income taxes paid totaled $284,559 in 1996, $222,849 in 1995, and
$250,456 in 1994. Available for sale securities transferred to held
to maturity totaled $95 million in 1996. Securities transferred to
available for sale securities totaled approximately $5.7 billion in
1995. Loans transferred to foreclosed property totaled $19 million
in 1996, $14 million in 1995, and $23 million in 1994. In 1995,
assets and liabilities of purchased subsidiaries at dates of
acquisition included investment securities of $185 million, loans
of $262 million, other assets of $86 million, deposits of $460
million and other liabilities of $9 million. In 1994, assets and
liabilities of purchased subsidiaries at dates of acquisition
included investment securities of $269 million, loans of $291 million,
other assets of $102 million, deposits of $548 million and other
liabilities of $113 million.
</TABLE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(amounts in thousands except per share data and when otherwise indicated)
1 SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
BUSINESS Boatmen's Bancshares Inc. ("Corporation"), is a multi-bank holding
company, headquartered in St. Louis, Missouri. At December 31, 1996, the
Corporation owned substantially all of the capital stock of 54 subsidiary
banks, including a federal savings bank, and provides commercial, retail and
correspondent banking services from over 650 banking offices and over 1,500
ATM's in Missouri, Arkansas, Illinois, Iowa, Kansas, New Mexico, Oklahoma,
Tennessee and Texas. At December 31, 1996, the Corporation had consolidated
assets of $41.2 billion. The Corporation's largest banking subsidiary,
The Boatmen's National Bank of St. Louis, had total assets of $11.3 billion
at December 31, 1996. The Corporation's other businesses include a trust
company, a mortgage banking company, a credit life insurance company, a
credit card bank and an insurance agency. The Corporation, through its
subsidiary, Boatmen's Trust Company, is among the twenty largest providers of
personal trust services in the nation, providing personal trust services
within its banks' market areas and institutional and pension related trust
services on a national scale. The Corporation's mortgage banking activities
are conducted through Boatmen's National Mortgage, Inc., 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 mid-western United States. Boatmen's National Mortgage, Inc.
presently services mortgage loans totaling approximately $26 billion. The
traditional banking line of business represents the primary source of
earnings for the Corporation, followed by the trust and mortgage banking
activities.
BASIS OF PRESENTATION The accounting and reporting policies of the
Corporation and its subsidiaries conform to generally accepted accounting
principles. The preparation of financial statements requires management of
the Corporation to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. While the
financial statements reflect management's best estimates and judgment, actual
results could differ from estimates. The following is a description of the
Corporation's more significant policies.
The consolidated financial statements include the accounts of the
Corporation and its subsidiaries after elimination of all material
intercompany balances and transactions. Certain amounts for 1995 and 1994 were
reclassified to conform with statement presentation for 1996. The
reclassifications have no effect on stockholders' equity or net income as
previously reported. Prior period financial statements are also restated to
include the accounts of companies which are acquired and accounted for as
poolings of interests. Results of operations of companies which are acquired
and subject to purchase accounting are included from the dates of acquisition.
In accordance with the purchase method of accounting, the assets and
liabilities of purchased companies are stated at estimated fair values at the
date of acquisition, and the excess of cost over fair value of net assets
acquired is being amortized on a straight-line basis over periods benefitted.
HELD TO MATURITY SECURITIES These securities are purchased with the original
intent to hold to maturity and events which may be reasonably anticipated are
considered when determining the Corporation's intent and ability to hold to
maturity. Securities meeting such criteria at date of purchase and as of the
balance sheet date are carried at cost, adjusted for amortization of premiums
and accretion of discounts. Gains or losses on the disposition of held to
maturity securities, if any, are based on the adjusted book value of the
specific security.
AVAILABLE FOR SALE SECURITIES Debt and equity securities to be held for
indefinite periods of time and not intended to be held to maturity are
classified as available for sale and carried at market value with net
unrealized gains and losses, net of tax, reflected as a component of
stockholders' equity until realized. Securities held for indefinite periods
of time include securities that may be sold to meet liquidity needs or in
response to significant changes in interest rates or prepayment risks as part
of the Corporation's overall asset/liability management strategy.
TRADING SECURITIES Trading securities, which primarily consist of debt
securities, are held for resale within a short period of time and are stated
at market value. These securities are held in inventory for sale to
institutional and retail customers. Investment banking revenues, a component
of noninterest income, include the net realized gain or loss and market value
adjustments of the trading securities and commissions on bond dealer and
retail brokerage operations.
INTEREST AND FEES ON LOANS Interest on loans is accrued based upon the
principal amount outstanding. It is the Corporation's policy to discontinue
the accrual of interest when full collectibility of principal or interest on
any loan is doubtful.
Interest income on such loans is subsequently recognized only in the
period in which payments are received, and such payments are applied to reduce
principal when loans are unsecured or collateral values are deficient.
Nonrefundable loan fees are deferred and recognized as income over the life
of the loan as an adjustment of the yield. Direct costs associated with
originating loans are deferred and amortized as a yield adjustment over the
life of the loan. Commitment fees are deferred and recognized as noninterest
income over the commitment period.
RESERVE FOR LOAN LOSSES The reserve for loan losses represents provisions
charged to expense less net loan charge-offs. The provision is based upon
economic conditions, historical loss and collection experience, risk
characteristics of the portfolio, underlying collateral values, credit
concentrations, industry risk, degree of off-balance sheet risk and other
factors which, in management's judgment, deserve current recognition.
Specific reserves are established for any impaired commercial, commercial
real estate, and real estate construction loan for which the recorded
investment in the loan exceeds the measured value of the loan. Loans subject
to impairment valuation are defined as nonaccrual loans, exclusive of smaller
balance homogenous loans such as home equity, credit card, installment and
1-4 family residential loans. The values of loans subject to impairment
valuation are determined based on the present value of expected future cash
flows, the market price of the loans, or the fair values of the underlying
collateral if the loan is collateral dependent.
The charge-off policy of the Corporation varies with respect to the
category of, and specific circumstances surrounding, each loan under
consideration. The Corporation's policy with respect to consumer loans is
generally to charge off all such loans when deemed to be uncollectible or 120
days past due, whichever comes first. With respect to commercial, real estate,
and other loans, charge-offs are made on the basis of management's ongoing
evaluation of nonperforming and criticized loans.
FORECLOSED PROPERTY The maximum carrying value for real estate acquired
through foreclosure is the lower of the recorded investment in the loan for
which the property previously served as collateral or the current appraised
value of the foreclosed property, net of the estimated selling costs. Any
writedowns required prior to actual foreclosure are charged to the reserve
for loan losses. Subsequent to foreclosure, losses on the periodic
revaluation of the property are charged to current period earnings as
noninterest expense. Gains and losses resulting from the sale of foreclosed
property are recognized in current period earnings. Costs of maintaining and
operating foreclosed property are expensed as incurred and revenues related
to foreclosed property are recorded as an offset to operating expense.
Expenditures to complete or improve foreclosed properties are capitalized if
the expenditures are expected to be recovered upon ultimate sale of the
property.
MORTGAGE BANKING REVENUES Mortgage loans held for sale are valued at the
lower of cost or aggregate market value. Gains and losses on sales of
mortgage loans are recognized at settlement dates and are determined by the
difference between sales proceeds and the carrying value of the loans. The
Corporation generally sells mortgage loans without recourse.
Income from the servicing of mortgage loans is recognized in mortgage
banking revenues, a component of noninterest income, concurrent with the
receipt of the related mortgage payments on the loans serviced. Prior to 1995,
capitalization of mortgage servicing rights was limited to servicing purchased
from third parties. Effective with the Corporation's adoption of Statement of
Financial Accounting Standards No. 122, "Accounting for Mortgage Servicing
Rights" in 1995, the value of purchased and originated mortgage servicing
rights is capitalized and amortized in proportion to, and over the period of
estimated net servicing income as a reduction of mortgage banking revenues.
The value of mortgage servicing rights is determined based on the present
value of estimated expected future cash flows, using assumptions as to current
market discount rate, prepayment speeds and servicing costs per loan. Mortgage
servicing rights are stratified by loan type and interest rate for purposes of
impairment measurement. Loan types include government, conventional, private,
and adjustable-rate mortgage loans. Impairment losses are recognized to the
extent the unamortized mortgage servicing right for each stratum exceeds the
current market value, as reductions in the carrying value of the asset,
through the use of a valuation allowance, with a corresponding reduction to
mortgage banking revenues. The Corporation recognizes gains or losses on the
sales of mortgage servicing rights when all risks and rewards have been
irrevocably passed to the purchaser.
TRUST ASSETS AND FEES The Corporation's trust function manages assets in a
fiduciary or agent capacity; accordingly, such assets are not included in the
consolidated balance sheet of the Corporation. Fee income derived from
managing trust assets is recognized on an accrual basis.
SEGREGATED ASSETS Segregated assets represent loans acquired in an
FDIC assisted transaction that are covered under a loss sharing arrangement
with the FDIC and possess more than the normal risk of collectibility. These
assets consist of loans that at acquisition were or have since become
classified as nonperforming loans or foreclosed property and are segregated
from other performing assets covered under the loss sharing arrangement.
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. Income
from the segregated asset pool is generally recognized on a cash basis as a
component of noninterest income. If collection of the unguaranteed portion of
the segregated asset is doubtful, income payments are applied to reduce the
principal balance to the extent of the government guarantee.
INTEREST RATE CONTRACTS Interest rate contracts are utilized as part of
the Corporation's overall asset/liability management strategy to alter the
rate sensitivity characteristics of various assets and liabilities. Although
the notional amounts of these transactions are not reflected in the financial
statements, the interest differentials are recognized on an accrual basis
over the terms of the agreements as an adjustment to interest income or
interest expense of the related asset or liability. To qualify for accrual
accounting, the contracts must be designated to interest-bearing assets or
liabilities and alter their interest rate characteristics over the term of
the agreements. If an interest rate contract is terminated prior to maturity,
any realized gains and losses are deferred and amortized over the remaining
life of the contract. In the event the designated asset or liability is sold or
extinguished prior to maturity, fair value recognition is required and any
gains or losses are recognized in income. Premiums paid to enter into contracts
such as interest rate floors are deferred and amortized over the life of the
contract as an adjustment to interest income or interest expense of the related
asset or liability.
Interest rate contracts entered into for trading purposes on the behalf of
customers are accounted for on a mark to market basis. Accordingly, realized
and unrealized gains and losses associated with this activity are reflected
as investment banking revenues, a component of noninterest income.
FOREIGN EXCHANGE CONTRACTS The Corporation's banking subsidiaries trade
foreign currencies on behalf of their customers and for their own account
and, by policy, do not maintain significant open positions. Foreign exchange
contracts are valued at the current prevailing rates of exchange and any
profit or loss resulting from such valuation is included in current
operations as a component of investment banking revenues.
PROPERTY AND EQUIPMENT Property and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation and amortization are
recognized principally by the straight-line method applied over the estimated
useful lives of the assets, which are 10 to 50 years for buildings and 3 to
25 years for fixtures and equipment. Leasehold improvements are generally
amortized over the lease term, not to exceed 10 years.
INTANGIBLE ASSETS Goodwill arising from acquisitions consummated subsequent
to 1985 is being amortized on a straight-line basis over the periods
benefitted, ranging from 4-20 years. For acquisitions consummated in 1983 and
1985, goodwill is being amortized on a straight-line basis over 25 years, and
goodwill related to acquisitions prior to 1983 is being amortized on a
straight-line basis over 40 years. Core deposit intangibles and credit card
premiums are amortized over their useful economic lives on an accelerated
basis, not to exceed 10 years.
INCOME TAXES The Corporation accounts for income taxes under the asset and
liability method. Income tax expense is reported as the total of current income
taxes payable and the net change in deferred income taxes provided for
temporary differences between the carrying values of assets and liabilities for
financial reporting purposes and the values used for income tax purposes.
Deferred income taxes are recorded at the statutory Federal and state tax rates
in effect at the time that the temporary differences are expected to reverse.
The Corporation files a consolidated Federal income tax return which
includes all its subsidiaries except for the credit life insurance company.
Income tax expense is allocated among the parent company and its subsidiaries
as if each had filed a separate tax return.
NET INCOME PER SHARE Net income per share is calculated by dividing net
income (after deducting dividends on preferred stock) by the weighted
average number of common shares outstanding. Common stock equivalents
have no material dilutive effect.
The net income per share calculation for 1996, 1995 and 1994 is
summarized as follows:
<TABLE>
<CAPTION>
===============================================================================
==============================
(in thousands except share data) 1996
1995 1994
- -------------------------------------------------------------------------------
- -----------------------------
<S> <C> <C>
<C>
Net income $522,768
$480,011 $490,926
Less preferred dividends declared 6,807
7,143 7,080
- -------------------------------------------------------------------------------
- -----------------------------
Net income available to
common shareholders $515,961
$472,868 $483,846
===============================================================================
==============================
Average shares outstanding 156,673,502
156,663,791 155,881,515
- -------------------------------------------------------------------------------
- -----------------------------
Net income per share $3.29
$3.02 $3.10
===============================================================================
==============================
</TABLE>
2 CHANGES IN ACCOUNTING POLICIES
On January 1, 1996 the Corporation adopted Financial Accounting Standard
No. 121 (SFAS No. 121), "Accounting for the Impairment of Long-Lived
Assets to be Disposed Of." 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 loss would be recognized. Adoption
of this standard had no material effect on the Corporation's financial results.
On January 1, 1995, The Corporation adopted Financial Accounting Standards
No. 114 (SFAS No. 114), "Accounting by Creditors for Impairment of a Loan"
and No. 118 (SFAS No. 118), "Accounting by Creditors for Impairment of a
Loan--Income Recognition and Disclosures." These statements require that
certain impaired loans be measured based on either the present value of
expected future cash flows discounted at the loan's effective rate, the
market price of the loan, or the fair value of the underlying collateral if
the loan is collateral dependent. The statements further require that
specific reserves be established for any impaired loan for which the recorded
investment exceeds the measured value of the loan. SFAS No. 114 and SFAS No.
118 do not apply to smaller balance, homogenous loans, which the Corporation
has identified as consumer loans, such as home equity, credit card,
installment and 1-4 family residential loans. Adoption of these standards had
no material impact on the Corporation's loan quality statistics or reserve
levels and had no effect on 1995 earnings.
In the second quarter of 1995, the Corporation adopted Statement of
Financial Accounting Standards No. 122 (SFAS No. 122), "Accounting for
Mortgage Servicing Rights." SFAS No. 122 requires capitalization of purchased
mortgage servicing rights as well as internally originated mortgage servicing
rights. These mortgage servicing rights are amortized in proportion to, and
over the period of estimated net servicing income. Adoption of SFAS No. 122
increased mortgage banking revenues in 1995 by approximately $5.8 million, net
of amortization, and increased net income by approximately $3.6 million.
3 ACQUISITIONS
PURCHASE ACQUISITIONS Results of operations of companies which are acquired
and subject to purchase accounting treatment are included from dates of
acquisition.
Purchase acquisitions consummated in 1996, 1995 and 1994 were
insignificant
to the Corporation's operations. Disclosure of pro forma condensed results of
operations as if these acquisitions were consummated as of the beginning of the
period have been omitted due to the immaterial effect on operations.
Information regarding purchase acquisitions is summarized as
follows:
<TABLE>
<CAPTION>
===============================================================================
=============================
Core
Acquired Company Acquisition Purchase
Deposit
(amounts in millions) Date Price
Assets Goodwill Intangible
- -------------------------------------------------------------------------------
- -----------------------------
<S> <C> <C> <C>
<C> <C>
1996
Tom Green National Bank 3/1/96 $ 9.0 $
73.6 $ 4.2
Canadian Bancshares, Inc. 7/1/96 7.8
35.6 3.2
- -------------------------------------------------------------------------------
- -----------------------------
Total $16.8 $
109.2 $ 7.4
===============================================================================
=============================
1995
Salem Community
Bancorp, Inc. 2/28/95 $ 8.4 $
79.2 $ 4.0 $ .8
West Side Bancshares,
Inc. 4/1/95 17.5
142.4 4.5 1.3
Citizens Bancshares
Corporation 10/27/95 41.0
224.1 19.5
- -------------------------------------------------------------------------------
- -----------------------------
Total $ 66.9 $
445.7 $28.0 $ 2.1
===============================================================================
=============================
1994
Eagle Management and
Trust Company 5/6/94 $ 3.4 $
3.8 $ 2.3
===============================================================================
=============================
</TABLE>
POOLING ACQUISITIONS When material, results of operations of companies which
are acquired and subject to pooling of interests accounting are reflected on
a combined basis from the earliest period presented.
On January 31, 1996, the Corporation
consummated the acquisition of Fourth
Financial Corporation (Fourth Financial),
headquartered in
Wichita, Kansas, resulting in the issuance
of approximately 28.5 million shares of
common stock. In addition, the Corporation
effectively replaced Fourth Financial's $100
million convertible preferred stock by
issuance of an identical new security,
resulting in the issuance of approximately
248,000 shares of preferred stock. The
preferred stock is convertible into
approximately 3.4 million shares of common
stock. Fourth Financial is the largest
banking company in Kansas, with
approximately $7.5 billion in assets,
operating 87 retail banking offices in
Kansas and 56 in Oklahoma. Nonrecurring
after-tax merger expenses related to this
acquisition totaled $29.3 million or $.19
per share, comprised primarily of investment
banking and other professional fees,
severance costs, obsolete equipment write-
offs and estimated costs to close duplicate
branches, and were recognized in the first
quarter of 1996.
On January 31, 1995, the Corporation consummated the acquisition of
National Mortgage Company and certain affiliates (National Mortgage),
resulting in the issuance of approximately 5.0 million shares of common stock.
National Mortgage, subsequently renamed Boatmen's National Mortgage, Inc.,
headquartered in Memphis, Tennessee, is a full-service mortgage banking
company and presently services mortgage loans totaling approximately $26
billion. Nonrecurring after-tax merger expenses related to this acquisition
totaled $7.0 million or $.04 per share, comprised primarily of investment
banking and other professional fees, severance costs and abandonment of
equipment and software, and were recognized in the first quarter of 1995.
On January 31, 1995, the Corporation consummated the acquisition of
Dalhart Bancshares, Inc. (Dalhart), resulting in the issuance of approximately
.7 million shares of common stock. Dalhart, with assets of approximately $140
million, is located in north Texas and was merged into the Corporation's
Amarillo subsidiary.
On February 28, 1995, the Corporation consummated the acquisition of
Worthen Banking Corporation (Worthen), headquartered in Little Rock, Arkansas,
resulting in the issuance of approximately 17.1 million shares of common
stock. Worthen, subsequently renamed Boatmen's Arkansas, Inc., was the second
largest banking organization in Arkansas, with approximately $3.5 billion in
assets. Nonrecurring after-tax merger expenses related to this acquisition
totaled $12.3 million or $.08 per share, comprised primarily of investment
banking and other professional fees, severance costs, obsolete equipment
write-offs and estimated costs to close duplicate branches, and were
recognized in the first quarter of 1995.
On May 31, 1995, the Corporation consummated the acquisition of First
National Bank in Pampa (Pampa), resulting in the issuance of approximately
1.35 million shares of common stock. At acquisition, Pampa had approximately
$166 million in assets and was merged into the Corporation's Amarillo
subsidiary.
4 HELD TO MATURITY SECURITIES
The amortized cost and approximate market value of held to maturity
securities are summarized as follows:
<TABLE>
<CAPTION>
===============================================================================
===============================
Unrealized
December 31, 1996 Amortized --------------
- --------------- Market
(in thousands) Cost Gains
Losses Value
- -------------------------------------------------------------------------------
- -------------------------------
<S> <C> <C>
<C> <C>
State and municipal $ 994,920 $37,983
$(2,035) $1,030,868
Other debt securities 8,495 259
8,754
- -------------------------------------------------------------------------------
- -------------------------------
Total held to maturity
securities $1,003,415 $38,242
$(2,035) $1,039,622
===============================================================================
===============================
<CAPTION>
Unrealized
December 31, 1995 Amortized --------------
- --------------- Market
(in thousands) Cost Gains
Losses Value
- -------------------------------------------------------------------------------
- -------------------------------
<S> <C> <C>
<C> <C>
State and municipal $912,348 $51,606
$(949) $963,005
Other debt securities 10,782 21
(7) 10,796
- -------------------------------------------------------------------------------
- -------------------------------
Total held to maturity
securities $923,130 $51,627
$(956) $973,801
===============================================================================
===============================
</TABLE>
Effective December 15, 1995, the Corporation transferred approximately
$5.7 billion of held to maturity securities to available for sale as permitted
under the Statement of Financial Accounting Standards Board Special Report,
"A Guide to Implementation of Statement 115 on Accounting for Certain
Investments
in Debt and Equity Securities," issued in November 1995. The amortized cost of
such
securities exceeded fair value by approximately $16.8 million, resulting in an
after-tax decrease to stockholders' equity of $10.4 million. The transfer had
no effect on 1995 earnings.
The maturity distribution of held to maturity securities at December 31,
1996 is summarized as follows:
<TABLE>
<CAPTION>
===============================================================================
==
(in thousands) Amortized Cost Market Value
- -------------------------------------------------------------------------------
- --
<S> <C> <C>
Due in one year or less $ 57,548 $ 58,214
Due after one year through five years 216,872 219,964
Due after five years through ten years 419,368 443,370
Due after ten years 309,627 318,074
- -------------------------------------------------------------------------------
- --
Total held to maturity securities $1,003,415 $1,039,622
===============================================================================
==
</TABLE>
5 AVAILABLE FOR SALE SECURITIES
The amortized cost and approximate market value of available for sale
securities are summarized as follows:
<TABLE>
<CAPTION>
===============================================================================
========
Unrealized
December 31, 1996 Amortized -----------------------
Market
(in thousands) Cost Gains Losses
Value
- -------------------------------------------------------------------------------
- --------
<S> <C> <C> <C> <C>
U.S. treasury $ 1,365,142 $ 8,912 $ (1,703) $
1,372,351
Federal agencies:
Mortgage-backed:
Collateralized mortgage
obligations 2,547,802 8,347 (33,313)
2,522,836
Adjustable-rate mortgages 2,764,646 19,582 (18,537)
2,765,691
Fixed rate pass-through 1,179,926 11,844 (9,489)
1,182,281
- -------------------------------------------------------------------------------
- --------
Total mortgage-backed 6,492,374 39,773 (61,339)
6,470,808
Other agencies 1,311,621 4,082 (6,967)
1,308,736
- -------------------------------------------------------------------------------
- --------
Total U.S. treasury
and agencies 9,169,137 52,767 (70,009)
9,151,895
Other debt securities 1,196,499 5,360 (13,302)
1,188,557
- -------------------------------------------------------------------------------
- --------
Total debt securities 10,365,636 58,127 (83,311)
10,340,452
Equity securities 168,179 10,197 (88)
178,288
- -------------------------------------------------------------------------------
- --------
Total available for sale
securities $10,533,815 $68,324 $(83,399)
$10,518,740
===============================================================================
========
<CAPTION>
Unrealized
December 31, 1995 Amortized -----------------------
Market
(in thousands) Cost Gains Losses
Value
- -------------------------------------------------------------------------------
- --------
<S> <C> <C> <C> <C>
U.S. treasury $ 1,504,451 $16,640 $ (2,688) $
1,518,403
Federal agencies:
Mortgage-backed:
Collateralized mortgage
obligations 2,533,134 8,684 (31,971)
2,509,847
Adjustable-rate mortgages 3,101,001 14,498 (17,287)
3,098,212
Fixed rate pass-through 822,447 12,748 (2,715)
832,480
- -------------------------------------------------------------------------------
- --------
Total mortgage-backed 6,456,582 35,930 (51,973)
6,440,539
Other agencies 1,282,320 10,889 (1,707)
1,291,502
- -------------------------------------------------------------------------------
- --------
Total U.S. treasury
and agencies 9,243,353 63,459 (56,368)
9,250,444
State and municipal 98,472 6,224 (97)
104,599
Other debt securities 841,497 7,162 (6,143)
842,516
- -------------------------------------------------------------------------------
- --------
Total debt securities 10,183,322 76,845 (62,608)
10,197,559
Equity securities 146,911 3,314 (612)
149,613
- -------------------------------------------------------------------------------
- --------
Total available for sale
securities $10,330,233 $80,159 $(63,220)
$10,347,172
===============================================================================
========
</TABLE>
The maturity distribution of available for sale securities at December 31,
1996 is summarized as follows:
<TABLE>
<CAPTION>
===============================================================================
=======
(in thousands) Amortized Cost Market
Value
- -------------------------------------------------------------------------------
- -------
<S> <C> <C>
Due in one year or less $ 682,590 $
684,413
Due after one year through five years 1,767,356
1,772,617
Due after five years through ten years 381,836
379,614
Due after ten years 578
573
Mortgage-backed securities 7,533,275
7,503,235
- -------------------------------------------------------------------------------
- -------
Total debt securities 10,365,635
10,340,452
Equity securities 168,180
178,288
- -------------------------------------------------------------------------------
- -------
Total available for sale securities $10,533,815
$10,518,740
===============================================================================
=======
</TABLE>
Available for sale securities at December 31, 1996 include mortgage-backed
government guaranteed agency securities of $6.5 billion and private issue
mortgage-backed securities totaling $1.0 billion.
Sales and redemptions of available for sale securities resulted in
realized gains and losses as follows:
<TABLE>
<CAPTION>
==========================================================================
Year ended December 31 (in thousands) 1996 1995
- --------------------------------------------------------------------------
<S> <C> <C>
Debt securities:
Realized gains $2,432 $ 7,968
Realized losses (655) (23,338)
- --------------------------------------------------------------------------
Net realized gains (losses) $1,777 $(15,370)
==========================================================================
Equity securities:
Realized gains $ 155 $ 8,052
Realized losses (10)
- --------------------------------------------------------------------------
Net realized gains $ 155 $ 8,042
==========================================================================
</TABLE>
Held to maturity and available for sale securities with book values
totaling $5,707,197 and $5,699,399 at December 31, 1996 and 1995,
respectively, were pledged to secure public deposits, trust deposits, and
for other purposes required by law.
6 LOANS
A summary of loan categories is as follows:
<TABLE>
<CAPTION>
==========================================================================
December 31 (in thousands) 1996 1995
- --------------------------------------------------------------------------
<S> <C> <C>
Domestic:
Commercial $11,845,221 $11,834,507
Real estate-mortgage 4,361,125 4,565,326
Real estate-construction 1,098,535 1,107,692
Consumer 6,965,306 6,284,103
Lease financing 395,029 325,380
- --------------------------------------------------------------------------
Total domestic 24,665,216 24,117,008
Foreign loans 17,534 20,876
- --------------------------------------------------------------------------
Total loans 24,682,750 24,137,884
Less unearned income 78,069 86,981
- --------------------------------------------------------------------------
Total loans, net $24,604,681 $24,050,903
==========================================================================
</TABLE>
Nonperforming assets, consisting of nonperforming loans and foreclosed
property, are summarized as follows:
<TABLE>
<CAPTION>
==========================================================================
December 31 (in thousands) 1996 1995
- --------------------------------------------------------------------------
<S> <C> <C>
Nonaccrual $156,226 $165,440
Restructured 2,355 7,996
Past due 90 days or more 37,224 37,349
- --------------------------------------------------------------------------
Total nonperforming loans 195,805 210,785
Foreclosed property 28,936 35,149
- --------------------------------------------------------------------------
Total nonperforming assets $224,741 $245,934
==========================================================================
</TABLE>
Gross interest income which would have been recorded, if all nonaccrual
and restructured loans at year end had been current in accordance with
original terms, amounted to $14.3 million in 1996, $14.6 million in 1995, and
$15.3 million in 1994. Actual interest recorded amounted to $4.2 million in
1996, $5.7 million in 1995 and $4.0 million in 1994.
The recorded investment in loans that are considered to be impaired under
SFAS No. 114 and SFAS No. 118 totaled approximately $127.6 million at December
31, 1996 and $138.2 million at December 31, 1995. The reserve for loan losses
included approximately $4.5 million allocated to $25.0 million of impaired
loans
at December 31, 1996, and $7.1 million allocated to $20.9 million of impaired
loans at December 31, 1995. Impaired loans averaged $149.9 million in 1996 and
$109.7 million in 1995. Cash basis interest recognition on these loans, during
the time that they were impaired, totaled less than $1 million in each year.
Following is a summary of activity for 1996 regarding loans extended to
directors and executive officers of the Corporation and its largest
subsidiaries or to enterprises in which said individuals had beneficial
interests. Such loans were made in the normal course of business on
substantially the same terms, including interest rates and collateral, as
those prevailing at the same time for comparable transactions with other
persons.
<TABLE>
<CAPTION>
===============================================================================
==========================================
(in thousands)
- -------------------------------------------------------------------------------
- ------------------------------------------
Outstanding Net change from
changes Outstanding
at 12/31/95 Additions Repayments in
director status at 12/31/96
- -------------------------------------------------------------------------------
- ------------------------------------------
<S> <C> <C>
<C> <C>
$234,830 $105,102 $(139,547)
$(107,239) $93,146
===============================================================================
==========================================
</TABLE>
The following summarizes activity in the reserve for loan losses:
<TABLE>
<CAPTION>
===============================================================================
===========================================
December 31 (in thousands) 1996
1995 1994
- -------------------------------------------------------------------------------
- -------------------------------------------
<S> <C>
<C> <C>
Balance, beginning of year $ 452,560
$ 449,485 $ 444,492
Loans charged off (138,121)
(118,639) (86,899)
Recoveries on loans
previously charged off 57,640
54,152 59,394
- -------------------------------------------------------------------------------
- -------------------------------------------
Net charge-offs (80,481)
(64,487) (27,505)
Provision for loan losses 84,517
59,756 26,176
Loan reserve from acquisitions 1,494
7,806 6,322
- -------------------------------------------------------------------------------
- -------------------------------------------
Balance, end of year $ 458,090
$ 452,560 $ 449,485
===============================================================================
===========================================
</TABLE>
7 PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
===============================================================================
=======
December 31 (in thousands) 1996
1995
- -------------------------------------------------------------------------------
- -------
<S> <C> <C>
Land $ 115,759 $
114,935
Buildings 626,118
625,534
Buildings under capital leases 45,382
48,666
Furniture, fixtures and equipment 678,027
683,545
Leasehold improvements 105,611
103,768
Construction in progress 13,036
13,903
- -------------------------------------------------------------------------------
- -------
Total 1,583,933
1,590,351
Less accumulated depreciation/amortization 808,346
789,849
- -------------------------------------------------------------------------------
- -------
Net property and equipment $ 775,587 $
800,502
===============================================================================
=======
</TABLE>
Depreciation and amortization charged to expense in 1996, 1995 and 1994
amounted to $100,497, $97,340, and $92,481, respectively. Property taxes,
insurance, and maintenance expense related to property under lease are
principally paid by the Corporation. Total rental expense for all operating
leases amounted to $31,073, $33,610, and $35,616 in 1996, 1995, and 1994,
respectively.
8 INTANGIBLE ASSETS
Intangible assets, net of accumulated amortization are summarized as
follows:
<TABLE>
<CAPTION>
===============================================================================
=======
December 31 (in thousands) 1996
1995
- -------------------------------------------------------------------------------
- -------
<S> <C> <C>
Goodwill $261,414
$277,983
Core deposit premium 52,681
69,552
Mortgage servicing rights 89,253
67,461
Credit card premium 16,634
20,601
- -------------------------------------------------------------------------------
- -------
Total intangible assets, net $419,982
$435,597
===============================================================================
=======
</TABLE>
Intangible assets amortization charged to noninterest expense in 1996,
1995, and 1994 amounted to $40,147, $43,755, and $45,306, respectively.
Amortization of mortgage servicing rights charged to mortgage banking
revenues in 1996, 1995, and 1994 totaled $12,820, $9,839, and $17,166,
respectively. In 1996 and 1995, the Corporation capitalized mortgage servicing
rights of approximately $35 million and $40 million, respectively. The fair
value of mortgage servicing rights was approximately $111.5 million at
December 31 1996 and $87.1 million at December 31, 1995. No impairment
writedowns were required in 1996 or 1995 as the fair value of the mortgage
servicing rights exceeded carrying value.
9 SEGREGATED ASSETS
Included in other assets at December 31, 1996 are segregated assets
totaling $53.8 million net of a valuation allowance of $13.4 million. As part
of the regulatory assisted acquisition of Missouri Bridge Bank, N.A. (Bridge
Bank), 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
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.
Segregated assets are those loans acquired from the Bridge Bank and
covered under the loss-sharing arrangement with the FDIC that possess more
than the normal risk of collectibility. These assets consist of loans that at
acquisition were or have since become classified as nonperforming loans or
foreclosed property.
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.
A summary of activity regarding the segregated asset pool for the years
ended December 31, 1996 and 1995, is provided below.
<TABLE>
<CAPTION>
===============================================================================
==============================
Principal
Allowance Principal
(in millions) balance for
losses balance, net
- -------------------------------------------------------------------------------
- ------------------------------
<S> <C>
<C> <C>
Balance at December 31, 1994 $193.9
$16.7 $177.2
Charge-offs (27.7)
(5.5)
Recoveries
2.1
Net transfers (17.2)
Payments on segregated assets (32.4)
- -------------------------------------------------------------------------------
- ------------------------------
Balance at December 31, 1995 116.6
13.3 103.3
Charge-offs (6.0)
(1.1)
Recoveries 6.1
1.2
Net transfers (14.0)
Payments on segregated assets (35.5)
- -------------------------------------------------------------------------------
- ------------------------------
Balance at December 31, 1996 $ 67.2
$13.4 $ 53.8
===============================================================================
==============================
</TABLE>
10 DEPOSITS
Deposits are summarized as follows:
<TABLE>
<CAPTION>
===============================================================================
=======
December 31 (in thousands) 1996
1995
- -------------------------------------------------------------------------------
- -------
<S> <C> <C>
Demand deposits $ 7,354,523 $
6,894,649
Savings deposits 1,718,417
1,906,996
Interest-bearing transaction accounts 11,731,798
11,603,724
Time deposits $100,000 and over 2,409,003
1,819,633
Retail time deposits 8,740,255
9,753,135
- -------------------------------------------------------------------------------
- -------
Total deposits $31,953,996
$31,978,137
===============================================================================
=======
</TABLE>
11 RESERVES ON DEPOSITS
Required reserves on deposits, included in the caption "Cash and due from
banks," were $447,321 and $487,835 at December 31, 1996 and 1995,
respectively.
12 FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
Federal funds purchased and securities sold under repurchase agreements
generally represent borrowings with overnight maturities. Information
relating to these borrowings is summarized as follows:
<TABLE>
<CAPTION>
===============================================================================
===================
(in thousands) 1996 1995
1994
- -------------------------------------------------------------------------------
- -------------------
<S> <C> <C>
<C>
Balance:
Average $3,404,028 $2,912,944
$3,497,345
Year end 3,021,109 2,902,973
2,987,315
Maximum month-end
balance during year 3,954,828 3,315,915
4,427,373
===============================================================================
===================
Interest rate:
Average 5.10% 5.58%
4.32%
===============================================================================
===================
Year end 5.50% 5.31%
5.44%
===============================================================================
===================
</TABLE>
13 SHORT-TERM BORROWINGS
Short-term borrowings are summarized as follows:
<TABLE>
<CAPTION>
===============================================================================
=======
December 31 (in thousands) 1996
1995
- -------------------------------------------------------------------------------
- -------
<S> <C> <C>
Short-term bank notes $1,000,000
$1,265,000
Commercial paper 47,656
49,497
Other 241,748
160,494
- -------------------------------------------------------------------------------
- -------
Total $1,289,404
$1,474,991
===============================================================================
=======
</TABLE>
Information relating to short-term bank notes is summarized as follows:
<TABLE>
<CAPTION>
===============================================================================
=======
(in thousands) 1996
1995
- -------------------------------------------------------------------------------
- -------
<S> <C> <C>
Average balance $ 927,637
$1,648,178
Maximum month-end
balance during year 1,225,000
2,015,000
===============================================================================
=======
Interest rate:
Average 5.85%
6.29%
===============================================================================
=======
Year end 5.37%
6.10%
===============================================================================
=======
</TABLE>
In 1995, approximately $.9 million of the short-term bank notes were
converted to fixed rate debt through the use of interest rate swaps, which
matured in the third quarter of 1996.
Commercial paper is issued by the parent company in maturities not to
exceed nine months. The short-term bank notes are issued by the Corporation's
banking subsidiaries generally with maturities of less than one year. Other
short-term funds consisted principally of treasury, tax and loan accounts.
14 LONG-TERM DEBT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
===============================================================================
=======
December 31 (in thousands) 1996
1995
- -------------------------------------------------------------------------------
- -------
<S> <C> <C>
Parent Company:
7-5/8% notes due 2004 $100,000
$100,000
6-3/4% notes due 2003 100,000
100,000
8-5/8% notes due 2003 50,000
50,000
9-1/4% notes due 2001 150,000
150,000
6-1/4% convertible subordinated
debentures due 2011 630
772
12% note due 1998 25,000
25,000
- -------------------------------------------------------------------------------
- -------
Total Parent Company 425,630
425,772
- -------------------------------------------------------------------------------
- -------
Subsidiaries:
Senior notes due 1998-2000 43,000
43,000
Federal Home Loan Bank notes
due through 2016 115,290
119,867
6.55% mortgage note due through 2009 25,096
26,430
Other 54
60
- -------------------------------------------------------------------------------
- -------
Total subsidiaries 183,440
189,357
- -------------------------------------------------------------------------------
- -------
Total long-term debt $609,070
$615,129
===============================================================================
=======
</TABLE>
The 7-5/8% subordinated notes and the 6-3/4% subordinated notes were
effectively converted to variable rate debt for a portion of the term through
the use of interest rate swaps. In 1996, the interest rate swaps designated
to the subordinated notes matured. The average interest rates paid on these
notes in 1996 and 1995 were 7.48% and 8.53%, respectively. These notes, and
the 8-5/8% and 9-1/4% subordinated notes, are not redeemable by the holders
or the Corporation prior to maturity.
The 6-1/4% convertible subordinated debentures are redeemable at the
option
of the holder without payment of premium by the Corporation. Redemption rights
are subject to an annual noncumulative principal limitation of $25 thousand
per holder and $1.2 million in the aggregate. Prepayments in whole or in part
may be made at the option of the Corporation with payment of premium. The
debentures are convertible into common stock of the Corporation at a
conversion price of $16.71 per share, subject to adjustments under certain
circumstances. During 1996, 1995 and 1994, $.1 million, $.1 million and $.3
million of the debentures, respectively, were converted into common stock.
The 12% note due in 1998 may not be prepaid at the option of the
Corporation.
The senior notes due 1998-2000 are unsecured and provide for payment of
interest semi-annually with principal payable at maturity. Maturities are $10
million due in 1998 priced to yield 7.21%, $10 million due in 1999 priced to
yield 7.56%, and $23 million due in 2000 priced to yield 7.81%.
The Federal Home Loan Bank notes may be prepaid at the option of the
Corporation with payment of premium.
The 6.55% mortgage note requires monthly principal and interest payments
of $252 thousand. The Corporation may prepay the note without payment of
premium.
Several of the note agreements contain various financial covenants
pertaining to minimum levels of net worth, limitations on additional
indebtedness, and limitations on repurchases of common stock and dividend
payments. The Corporation was in compliance with all such covenants at
December 31, 1996.
Obligations of the parent company included above are unsecured, and to a
large extent are subordinated in right of payment to any other indebtedness of
the Corporation. The indebtedness of the banking subsidiaries is subordinated
to rights of depositors.
Scheduled principal payments on total long-term debt in each of the five
years subsequent to December 31, 1996 are as follows:
<TABLE>
<CAPTION>
=================================================
(in thousands)
- -------------------------------------------------
Year Parent Company Consolidated
- -------------------------------------------------
<S> <C> <C>
1997 $ 630 $ 3,139
1998 25,000 52,637
1999 42,773
2000 55,890
2001 150,000 182,711
=================================================
</TABLE>
15 PREFERRED STOCK
At December 31, 1996 and December 31, 1995, there were outstanding 9,341
shares and 9,609 shares, respectively, of 7% Cumulative Redeemable Preferred
Stock, Series B, $100 per share stated value. Dividends are payable quarterly.
The stock is redeemable at the stated value at the option of the holders and
has equal voting rights with each share of common stock.
At December 31, 1996 and December 31,
1995, there were outstanding 205,524 shares
and 248,310 shares, respectively, of
nonvoting Class A Cumulative Convertible
Preferred Stock. This preferred stock was
issued in the form of 4,000,000 depositary
shares, each representing a 1/16 interest in
a share of preferred stock. Dividends are
payable quarterly at an annual rate of $1.75
per depositary share. The depositary shares
are not redeemable by the Corporation prior
to March 1, 1997. However, they may be
converted at the election of shareholders
into shares of the Corporation's common stock
at a conversion price of $29 per common
share, based on a liquidation preference of
$25 per depositary share. At December 31,
1996, there were 3,288,384 depositary shares
outstanding which could be converted into
2,834,814 shares of the Corporation's common
stock. At December 31, 1995, there were
3,972,960 depositary shares outstanding which
could be converted into 3,424,972 shares of
the Corporation's common stock.
16 COMMON STOCK
The Corporation maintains various stock option plans which provide
for the issuance of stock to certain key employees of the Corporation.
Under certain plans, stock appreciation rights may be granted. The option
price under these plans is equivalent to the fair market value of the
common stock at the date of grant. Each plan provides for accelerated
exercise rights for holders of options in the event of a change in control,
which occurred on January 7, 1997 upon the acquisition of the Corporation by
NationsBank Corporation.
The Corporation has elected to
account for its employee stock options
under the accounting guidance set forth in
Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to
Employees" (APB No. 25) and related
Interpretations. Under APB No. 25, because
the exercise price of the Company's
employee stock options equals the market
price of the underlying stock on the date
of grant, no compensation expense is
recognized. The pro forma net earnings and
earnings per share disclosure requirements
set forth under FASB Statement No. 123,
"Accounting for Stock-Based Compensation,"
has been omitted due to the immaterial
impact on reported earnings.
The following table summarizes the status of the various plans. Options
may no longer be granted under the plans.
<TABLE>
<CAPTION>
===============================================================================
========================================
1996
1995
- -------------------------------------------------------------------------------
- ----------------------------------------
Weighted-
average Weighted-average
Exercise
Price Exercise Price
Shares Per
Share Shares Per Share
- -------------------------------------------------------------------------------
- ----------------------------------------
<S> <C> <C>
<C> <C>
Options granted 1,118,300
$41.871 1,849,932 $30.910
Options exercised 1,716,106
23.866 1,314,635 22.934
Stock appreciation
rights exercised 265,509
19.737 24,726 20.581
Options lapsed 106,556
34.098 313,598 26.959
Options outstanding 4,716,106
29.188 5,685,977 24.564
Options exercisable 2,553,613
23.435 3,795,653 21.861
Weighted-average fair value
of options granted during
the year $9.09
$8.05
===============================================================================
========================================
</TABLE>
Exercise prices for options outstanding as of December 31, 1996 ranged
from $5.76 to $41.88. The weighted-average remaining contractual life of
those options is 6.8 years.
A summary of the Corporation's common stock related plans is provided
below. Compensation expense related to the common stock plans totaled $19.9
million in 1996, $18.2 million in 1995, and
$15.0 million in 1994.
1990 Stock Purchase Plan for Employees This
Plan was terminated on November 15, 1996. It
provided eligible employees of the
Corporation and its subsidiaries with the
opportunity to purchase, at market value,
with the Corporation providing a one-third
matching contribution, common stock of the
Corporation through regular payroll
deductions.
Dividend Reinvestment and Stock Purchase Plan
This plan was terminated on December 31,
1996. 1,600,000 shares of the Corporation's
common stock had been reserved for sale, at
market value, pursuant to this plan, to
holders of record of shares of common stock
who elected to use quarterly dividends or
optional cash contributions to purchase
additional shares.
Thrift Incentive 401(k) Plan This is a
savings plan for the benefit of
employees of the Corporation and its
subsidiaries. Participation by eligible
employees is voluntary, and participants may
contribute at least 2% and up to
12% of their salary, up to certain limits, by
regular payroll deductions. All
participants' contributions are invested by
the trustee, as directed by the
participant, in various investment funds, one
of which consists solely of the
Corporation's common stock. The Corporation
matches the contribution made by
the employee, in full, up to 3%, which is
invested in a separate fund
consisting solely of the Corporation's common
stock.
Shareholder Rights Plan In 1990, the Board
of Directors of the Corporation
declared a dividend of one preferred share
purchase right (a "Right") for each
outstanding share of common stock. The Rights
trade automatically with shares
of common stock and become exercisable only
under certain circumstances. The
Rights are designed to protect the interests
of the Corporation and its
shareholders against coercive takeover
tactics. The purpose of the Rights is
to encourage potential acquirers to negotiate
with the Corporation's Board of
Directors prior to attempting a takeover and
to give the Board leverage in
negotiating on behalf of all shareholders the
terms of any proposed takeover. This plan was
amended on August 29, 1996 such that the
acquisition of the Corporation by NationsBank
Corporation would not result in the Rights
becoming exercisable.
17 REGULATORY CAPITAL
The Corporation and its banking
subsidiaries are subject to various
regulatory capital requirements administered
by the Federal Reserve Board,
(FRB)the Office of the Comptroller of the
Currency (OCC) and the Federal
Deposit Insurance Corporation (FDIC).
Failure to meet minimum capital
requirements can initiate certain mandatory,
and possibly additional
discretionary, actions by regulators that, if
undertaken, could have a
direct material effect on the Corporation's
financial statements. Under
capital adequacy guidelines and the
regulatory framework for prompt
corrective action, the Corporation and its
banking subsidiaries must meet
specific capital guidelines that involve
quantitative measures of the
Corporation's and its banking subsidiaries'
assets, liabilities, and
certain off-balance sheet items as calculated
under regulatory accounting
practices. The Corporation's and its banking
subsidiaries' capital amounts
and classification are also subject to
qualitative judgments by the
regulators about components, risk weightings,
and other factors.
Quantitative measures established by
regulation to ensure capital
adequacy require the Corporation and its
banking subsidiaries to maintain
minimum amounts and ratios of total and Tier
I capital (as defined in the
regulations) to risk-weighted assets (as
defined) and of Tier I capital
(as defined) to average assets (as defined).
In order to be considered
adequately capitalized, an institution must
maintain a ratio of Tier I
capital to risk-weighted assets of four
percent, a ratio of total capital
to risk-weighted assets of eight percent and
a ratio of Tier I capital to
average assets of four percent. To be
considered well capitalized, an
institution must maintain a ratio of Tier I
capital to risk-weighted
assets of six percent, a ratio of total
capital to risk weighted assets of
ten percent and a ratio of Tier I capital to
average assets of five percent.
At December 31, 1996, the Corporation and its
banking subsidiaries met all capital adequacy
requirements to which they are subject.
As of December 31, 1996 the most recent
notification from the FRB and
the OCC categorized the Corporation and its
banking subsidiaries,
respectively, as well capitalized. There are
no conditions or events since that
notification that management believes have
changed either the Corporation's or its
banking subsidiaries' categories.
The following table presents the actual capital ratios and amounts and
minimum required capital amounts for the Corporation and its significant
banking subsidiaries (dollars in millions).
<TABLE>
<CAPTION>
===============================================================================
=============================
Amount Required
Capital
for Minimum
Ratio Amount
Capital Adequacy
- -------------------------------------------------------------------------------
- -----------------------------
<S> <C> <C>
<C>
December 31, 1996
Tier I capital
Boatmen's Bancshares, Inc. 11.35% $3,364
$1,188
The Boatmen's National Bank of St. Louis 8.99 806
359
Boatmen's Kansas, Inc. 10.95 1,068
390
Boatmen's Sunwest Financial Services, Inc. 16.72 348
83
Total capital
Boatmen's Bancshares, Inc. 13.87 4,111
2,375
The Boatmen's National Bank of St. Louis 10.24 918
717
Boatmen's Kansas, Inc. 12.20 1,190
780
Boatmen's Sunwest Financial Services, Inc. 17.98 374
166
Leverage capital
Boatmen's Bancshares, Inc. 8.23 3,364
1,635
The Boatmen's National Bank of St. Louis 7.18 806
449
Boatmen's Kansas, Inc. 8.13 1,068
525
Boatmen's Sunwest Financial Services, Inc. 8.74 348
159
- -------------------------------------------------------------------------------
- -----------------------------
December 31, 1995
Tier I capital
Boatmen's Bancshares, Inc. 11.29% $3,243
$1,149
The Boatmen's National Bank of St. Louis 9.79 818
334
Boatmen's Kansas, Inc. 10.52 1,036
394
Boatmen's Sunwest Financial Services, Inc. 16.02 340
85
Total capital
Boatmen's Bancshares, Inc. 13.97 4,013
2,298
The Boatmen's National Bank of St. Louis 11.04 922
668
Boatmen's Kansas, Inc. 11.77 1,160
789
Boatmen's Sunwest Financial Services, Inc. 17.29 368
170
Leverage capital
Boatmen's Bancshares, Inc. 7.95 3,243
1,632
The Boatmen's National Bank of St. Louis 7.43 818
440
Boatmen's Kansas, Inc. 7.82 1,036
530
Boatmen's Sunwest Financial Services, Inc. 8.57 340
85
===============================================================================
=============================
</TABLE>
18 RETIREMENT BENEFITS
Substantially all employees of the Corporation and its subsidiaries are
covered by the Boatmen's Bancshares, Inc. Retirement Plan for Employees, a
noncontributory defined benefit plan. Pension benefits are based upon
the employee's length of service and compensation during the final years of
employment. Normal service costs are funded currently using the projected
unit credit method.
An amendment was made to the Plan as of December 31, 1995 to standardize
credited service, which had the effect of increasing the projected benefit
obligation by approximately $22.8 million.
Contributions to the Plan totaled $23.7 million in 1996, $7.9 million in
1995, and $8.0 million in 1994.
Net pension expense for 1996, 1995 and 1994 was comprised of the
following:
<TABLE>
<CAPTION>
===============================================================================
==================
Year ended December 31 (in thousands) 1996 1995
1994
- -------------------------------------------------------------------------------
- ------------------
<S> <C> <C>
<C>
Service cost $22,819 $17,219
$16,413
Interest cost on projected
benefit obligation 25,349 20,787
19,656
(Return) loss on plan assets (39,388) (61,712)
1,022
Net amortization and deferral 14,161 37,376
(24,319)
- -------------------------------------------------------------------------------
- ------------------
Net pension expense $22,941 $13,670
$12,772
===============================================================================
==================
</TABLE>
The following table sets forth the retirement plan's funded status and
amounts recognized in the Corporation's consolidated financial statements:
<TABLE>
<CAPTION>
December 31 (in thousands) 1996
1995
- -------------------------------------------------------------------------------
- ------
<S> <C> <C>
Plan assets at fair value, primarily listed
stocks and bonds $356,454
$315,572
- -------------------------------------------------------------------------------
- ------
Actuarial present value of benefit obligation:
Vested benefits 238,467
239,324
Non-vested benefits 17,836
16,292
- -------------------------------------------------------------------------------
- ------
Accumulated benefit obligation 256,303
255,616
Effect of projected future salary increases 48,871
77,896
- -------------------------------------------------------------------------------
- ------
Projected benefit obligation 305,174
335,512
- -------------------------------------------------------------------------------
- ------
Plan assets in excess of (lower than)
projected benefit obligation $ 51,280
$(17,940)
===============================================================================
======
Comprised of:
Unrecognized net asset being amortized
over 17 years $ 11,406 $
13,757
Unrecognized net gain (loss) from past
experience different from that assumed
and effects of changes in assumptions 66,160
(3,025)
Unrecognized prior service loss (19,231)
(20,706)
Prepaid pension liability (7,055)
(7,966)
- -------------------------------------------------------------------------------
- ------
$ 51,280
$(17,940)
===============================================================================
======
</TABLE>
Assumptions used in computing pension expense were:
<TABLE>
<CAPTION>
===============================================================================
================================
1996
1995 1994
- -------------------------------------------------------------------------------
- --------------------------------
<S> <C> <C>
<C>
Weighted average discount rate 7-1/4%
8-8-1/2% 7-7-1/2%
Rate of increase in future
compensation levels 5 % 4-
3/4-5-1/2% 4-3/4-5%
Expected long-term rate of
return on assets 8-3/4%
8-3/4% 8-3/4%
===============================================================================
================================
</TABLE>
The weighted average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 8.00% and 4.00%, respectively, at
December 31, 1996 and 7.25% and 4.70%-5.00%, respectively, at December
31, 1995.
The Corporation provides postemployment life and contributory medical
benefits to retired employees. The liability for such benefits is unfunded and
costs of such benefits are accrued in a manner similar to actual pension
costs.
The following table presents the status of the plans:
<TABLE>
<CAPTION>
===============================================================================
=======
December 31 (in thousands) 1996
1995
- -------------------------------------------------------------------------------
- -------
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $50,384
$52,371
Fully eligible active plan participants 14,558
13,962
Other active plan participants 18,829
19,492
- -------------------------------------------------------------------------------
- -------
Total accumulated postretirement
benefit obligation 83,771
85,825
- -------------------------------------------------------------------------------
- -------
Unrecognized net gain 13,260
21,867
Unrecognized transition obligation 38,726
38,289
- -------------------------------------------------------------------------------
- -------
Accrued postretirement
benefit cost $31,785
$25,669
===============================================================================
=======
</TABLE>
Net postretirement benefit cost included the following components:
<TABLE>
<CAPTION>
Year ended December 31 (in thousands) 1996
1995 1994
- -------------------------------------------------------------------------------
- ------------------------
<S> <C> <C>
<C>
Service cost $ 1,593 $
1,230 $ 1,460
Interest cost 6,214
6,049 4,924
Amortization of transition
obligation over 20 years 3,686
2,906 4,338
- -------------------------------------------------------------------------------
- ------------------------
Net postretirement benefit cost $11,493
$10,185 $10,722
===============================================================================
========================
</TABLE>
The weighted-average annual assumed rates of increase in the per capita
cost of covered benefits for the medical plan are 6.50% for pre-65 benefits
and 5.25% for post-65 benefits for 1997 (compared to 9.00% assumed for 1996).
The health care cost trend rate assumption has a significant effect on the
amounts reported. For example, increasing the assumed health care trend rates
by one percentage point in each year would increase the accumulated
postretirement benefit obligation for the medical plan as of December 31,
1996 by $7.0 million, and the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for 1996 by $.7 million.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 8.00% at December 31, 1996 and 7.25%
at December 31, 1995.
19 INCOME TAXES
Income tax expense is summarized as follows:
<TABLE>
<CAPTION>
===============================================================================
======================
Year ended December 31 (in thousands) 1996
1995 1994
- -------------------------------------------------------------------------------
- ----------------------
<S> <C> <C>
<C>
Current:
Federal $262,258
$221,860 $211,920
State 37,393
36,299 34,806
- -------------------------------------------------------------------------------
- ----------------------
Total current 299,651
258,159 246,726
- -------------------------------------------------------------------------------
- ----------------------
Deferred:
Federal (5,733)
3,970 10,778
State 1,697
(1,119) (3,086)
- -------------------------------------------------------------------------------
- ----------------------
Total deferred (4,036)
2,851 7,692
- -------------------------------------------------------------------------------
- ----------------------
Income tax expense $295,615
$261,010 $254,418
===============================================================================
======================
</TABLE>
A reconciliation of the statutory Federal income tax rate with the
effective tax rate is as follows:
<TABLE>
<CAPTION>
===============================================================================
=======================
Percent of
pre-tax income
- -------------------------------------------------------------------------------
- -----------------------
Year ended December 31 1996
1995 1994
- -------------------------------------------------------------------------------
- -----------------------
<S> <C>
<C> <C>
Statutory rate 35.0%
35.0% 35.0%
Tax-exempt securities interest
and other income (3.4)
(4.0) (4.1)
State taxes, net of Federal benefit 3.1
2.9 2.8
Other, net 1.4
1.3 .4
- -------------------------------------------------------------------------------
- -----------------------
Effective rate 36.1%
35.2% 34.1%
===============================================================================
=======================
</TABLE>
The Corporation's deferred tax asset account was comprised of the
following:
<TABLE>
<CAPTION>
===============================================================================
====
Year ended December 31 (in thousands) 1996
1995
- -------------------------------------------------------------------------------
- ----
<S> <C> <C>
Deferred tax liabilities:
Lease financing $ (76,878) $
(49,793)
Depreciation (36,024)
(36,767)
Purchase accounting adjustment (13,041)
(15,111)
Other (16,652)
(42,546)
- -------------------------------------------------------------------------------
- ----
Total deferred tax liabilities (142,595)
(144,217)
- -------------------------------------------------------------------------------
- ----
Deferred tax assets:
Provision for loan loss 188,044
182,620
Deferred compensation arrangements 16,572
15,313
Intangibles 8,540
18,697
Net operating loss carryforwards 17,976
22,976
Other 67,934
46,207
- -------------------------------------------------------------------------------
- ----
Total deferred tax assets 299,066
285,813
- -------------------------------------------------------------------------------
- ----
Net deferred tax asset $ 156,471 $
141,596
===============================================================================
====
</TABLE>
At December 31, 1996, the Corporation had net operating loss carryforwards
of $43,962, all of which relate to net operating losses of acquired companies.
Net operating loss carryforwards expire in years 1999 through 2007.
The Corporation has determined that it is not required to establish a
valuation allowance for the deferred tax asset since it is more likely than
not that the deferred asset will be realized through either carryback
to taxable income in prior years, future reversals of existing taxable
temporary differences or, to a lesser extent, future taxable income.
20 FAIR VALUE OF FINANCIAL INSTRUMENTS
The reported fair values of financial instruments are based on a variety
of factors. Where possible, fair values represent quoted market prices for
identical or comparable instruments. In other cases, fair values have been
estimated based on assumptions concerning the amount and timing of estimated
future cash flows and assumed discount rates reflecting varying degrees of
risk. Intangible values assigned to customer relationships are not reflected
in the reported fair values. Accordingly, the fair values may not represent
actual values of the financial instruments that could have been realized as of
year end or that will be realized in the future.
The carrying amounts reported in the balance sheet for cash and due from
banks, short-term investments, Federal funds sold and securities purchased
under resale agreements approximate fair value.
Fair values for held to maturity securities, available for sale
securities, and trading securities are based on quoted market prices or dealer
quotes. If quoted prices are not available for the specific security, fair
values are based on quoted market prices of comparable instruments.
The fair values of 1-4 family residential loans, home equity and other
homogeneous categories of consumer loans are estimated using quoted market
prices for similar traded loans or securities backed by such loans, adjusted
for differences between the quoted instruments and the instrument being
valued. The fair values for other loans are estimated using a discounted cash
flow analysis, based on interest rates currently offered for loans with
similar terms to borrowers of similar credit quality or in some situations,
due to the variable rate nature of the instrument, carrying value and fair
value are considered one and the same.
Fair values for nonperforming loans are estimated using assumptions
regarding current assessments of collectibility and historical loss
experience.
By definition fair values of deposits with no stated maturities, such as
demand deposits, savings and NOW accounts and money market deposit accounts,
are equal to the amounts payable on demand at the reporting date. The fair
values of all other fixed rate deposits are based on discounted cash flows
using rates currently offered for deposits of similar remaining maturities.
The carrying amounts of variable rate deposits approximate fair value at the
reporting date.
The carrying amounts of Federal funds purchased and other short-term
borrowings approximate their fair values as of the reporting date.
The fair value of long-term debt is based on quoted market prices for
similar issues, or current rates offered to the Corporation for debt of the
same remaining maturity.
The fair values of interest rate swaps and foreign exchange contracts are
estimated using dealer quotes. These values represent the costs to replace all
outstanding contracts at current market rates, taking into consideration the
current credit worthiness of the counterparties. The fair values of loan
commitments, commercial letters of credit and standby letters of credit are
determined using estimated fees currently charged to enter into similar
agreements. The fair value of loan commitments totaled approximately $2.9
million and $1.9 million at December 31, 1996 and 1995, respectively. The fair
value of commercial and standby letters of credit totaled approximately $1.6
million and $1.5 million at December 31, 1996 and 1995, respectively.
The estimated fair values of the Corporation's financial instruments were
as follows:
<TABLE>
<CAPTION>
===============================================================================
=======
December 31, 1996 (in millions) Carrying amount Fair
value
- -------------------------------------------------------------------------------
- -------
<S> <C> <C>
Financial assets:
Cash and due from banks and
short-term investments $ 3,251.6 $
3,251.6
Held to maturity securities 1,003.4
1,039.6
Available for sale securities 10,518.7
10,518.7
Trading securities 28.4
28.4
Loans 24,146.6
24,303.4
Financial liabilities:
Deposits 31,954.0
32,019.5
Short-term borrowings 1,289.4
1,289.4
Long-term debt 609.1
616.3
Off-balance sheet financial instruments:
Interest rate contracts:
Asset/liability management 4.6
3.8
Customer contracts held in trading portfolio 2.5
2.5
Foreign exchange contracts held in
trading portfolio .1
.1
===============================================================================
=======
<CAPTION>
December 31, 1995 (in millions) Carrying amount Fair
value
- -------------------------------------------------------------------------------
- -------
<S> <C> <C>
Financial assets:
Cash and due from banks and
short-term investments $ 3,920.6 $
3,920.6
Held to maturity securities 923.1
973.8
Available for sale securities 10,347.2
10,347.2
Trading securities 58.4
58.4
Loans 23,598.3
23,939.7
Financial liabilities:
Deposits 31,978.1
32,065.2
Short-term borrowings 4,378.0
4,378.0
Long-term debt 615.1
660.5
Off-balance sheet financial instruments:
Interest rate contracts:
Asset/liability management (1.1)
(5.2)
Customer swaps held in trading portfolio 1.6
1.6
Foreign exchange contracts held in
trading portfolio .5
.5
===============================================================================
=======
</TABLE>
21 FINANCIAL INSTRUMENTS
WITH OFF-BALANCE SHEET RISK
In the normal course of business, the Corporation utilizes a variety of
off-balance sheet financial instruments to service the financial needs of
customers and to manage the Corporation's overall asset/liability position.
This activity includes commitments to extend credit, standby and commercial
letters of credit, securities lending, interest rate contracts and foreign
exchange contracts. Each of these instruments involve varying degrees of risk.
As such, the contract or notional amounts of these instruments may or may not
be an appropriate indicator of the credit or market risk associated with these
instruments.
Generally accepted accounting principles recognize these instruments as
contingent obligations or off-balance sheet items and accordingly, the
contract or notional amounts are not reflected in the consolidated financial
statements.
A summary of the Corporation's off-balance sheet financial instruments at
December 31, 1996 and 1995 is presented as follows.
<TABLE>
<CAPTION>
===============================================================================
=======
Financial instruments held for other than trading purposes
whose credit risk is represented by contract amounts
- -------------------------------------------------------------------------------
- -------
December 31 (in millions) 1996
1995
- -------------------------------------------------------------------------------
- -------
<S> <C> <C>
Commitments to extend credit $10,715.1
$10,742.6
Standby letters of credit 1,239.5
1,162.1
Commercial letters of credit 109.5
111.1
Forward commitments 234.6
86.6
Securities lent 3,797.4
2,719.4
- -------------------------------------------------------------------------------
- -------
Total $16,096.1
$14,821.8
===============================================================================
=======
<CAPTION>
Financial instruments whose credit risk is represented by
other than notional or contract amounts
- -------------------------------------------------------------------------------
- -------
December 31 (in millions) 1996
1995
- -------------------------------------------------------------------------------
- -------
<S> <C> <C>
Foreign exchange contracts held
in trading portfolio:
Commitments to purchase $ 554.8 $
344.3
Commitments to sell 672.6
426.9
Interest rate contracts:
Asset/liability management 2,593.0
2,803.6
Customer contracts held in trading portfolio 1,259.8
1,280.7
- -------------------------------------------------------------------------------
- -------
Total $5,080.2
$4,855.5
===============================================================================
=======
</TABLE>
A loan commitment represents a contractual agreement to lend up to a
specified amount, over a stated period of time as long as there is no
violation of any condition established in the contract, and generally requires
the payment of a fee. Standby letters of credit are issued to improve a
customer's credit standing with third parties, whereby the Corporation agrees
to honor a financial commitment by issuing a guarantee to third parties in the
event the Corporation's customer fails to perform. Since loan commitment
amounts generally exceed actual funding requirements and virtually all of the
standby letters of credit are expected to expire unfunded, the total
commitment amounts do not represent future cash requirements. The
Corporation's exposure to credit loss from loan commitments, standby letters
of credit and commercial letters of credit is measured by the contract amount
of these instruments. This credit risk is minimized by subjecting these
off-balance sheet instruments to the same credit policies and underwriting
standards used when making loans. The Corporation evaluates each customer's
credit worthiness on a case-by-case basis. The amount of collateral obtained,
if deemed necessary, is based on such evaluations. Acceptable collateral
includes cash or cash equivalents, marketable securities, deeds of trust,
receivables, inventory, fixed assets and financial guarantees. Interest rates,
in the event funding of the aforementioned commitments are required, are
predominantly based on floating rates or prevailing market rates at the time
such commitments are funded. Substantially all of these commitments expire in
1-2 years unless renewed by the Corporation. Commercial letters of credit are
short-term commitments issued for trade purposes, primarily to finance the
movement of goods between a buyer and seller dealing in international markets.
The Corporation, through its mortgage banking subsidiary, obtains mandatory
forward commitments of up to 120 days to sell mortgage backed securities to
hedge the market risk associated with a substantial portion of the mortgage
loan commitments that are expected to close (mortgage loan pipeline), and all
mortgage loans held for sale. The Company's risk management function closely
monitors the mortgage loan pipeline to determine appropriate forward
commitment coverage on a daily basis in order to manage the risk inherent in
these off-balance-sheet financial instruments.
The Corporation, through its trust subsidiary, is involved in off-balance
sheet securities lending. In this capacity, the Corporation, acting as agent,
lends securities on behalf of its customers to third party borrowers. The
Corporation indemnifies its customers against losses in the event of
counterparty default, and minimizes this risk through collateral requirements
and limiting transactions to pre-approved borrowers. Collateral policies
require each borrower to initially deliver cash or securities equal to or
exceeding 102% of the market value of the securities lent. Additional
collateral is required through the term of the lending agreement to ensure
that the value of collateral exceeds the market value of the securities lent.
Interest rate risk associated with securities lending activities arises from
rate movements affecting the spread between the rebate rate paid to the
borrower on his collateral and the rate earned on that collateral. This risk
is controlled through policies that limit the level of interest rate risk
which can be undertaken.
The Corporation enters into interest rate contracts primarily as part
of its asset/liability management strategy to manage interest-rate risk.
These transactions involve the exchange of interest payments based on a
notional amount. The notional amounts of interest rate contracts express the
volume of transactions and are not an appropriate indicator of the off-balance
sheet market risk or credit risk. The credit risk associated with interest
rate contracts arises from the counterparties' failure to meet the terms of the
agreements and is limited to the fair value of contracts in a gain (favorable)
position. The Corporation manages this risk by maintaining a well-diversified
portfolio of highly-rated counterparties in addition to imposing limits as to
types, amounts and degree of risk the portfolio can undertake. The limits are
approved by senior management and positions are monitored to ensure compliance
with such limits. The credit risk exposure at December 31, 1996 is minimal as
virtually all contracts were in an unfavorable position.
An effective asset/liability management function is required to address
the interest rate risk inherent in the Corporation's core banking activities.
If no other management action is taken, these core banking activities, which
include lending and deposit products, result in an asset-sensitive position.
Accordingly, the Corporation utilizes a variety of discretionary on- and
off-balance sheet strategies to prudently manage the overall interest rate
sensitivity position. The Corporation's interest rate 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 alternative interest rate scenarios will
have on the Corporation's financial results.
In 1996, $1.5 billion of interest rate floors were added and $1.7 billion
of interest rate swaps matured such that at December 31, 1996, the notional
value of interest rate derivative contracts totaled $2.6 billion. The interest
rate floors added in 1996 were purchased as a means to offset the potential
impact of an implicit floor in the Corporation's administered-rate retail
deposits in a low rate environment. The Corporation will receive interest
payments on the floor contracts if the 3 year U.S. Treasury rate falls below
5.40%. The contracts are effective from April 1997 until April 1999. Interest
rate swaps added in 1995 were executed as a means to convert a portion of the
Corporation's variable rate bank notes to fixed rate instruments. Interest
rate swaps executed in 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 derivative instruments are effectively modifying
the interest rate characteristics of the respective balance sheet items.
As summarized in the following table, 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 income contribution from
the swap portfolio will decrease in a rising rate environment and increase in
a falling rate environment. The average rate received at December 31, 1996,
was 5.55% compared to an average rate paid of 5.59%, 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.
A summary of the interest rate contracts for the years ended December
31, 1996 and December 31, 1995 is provided below.
<TABLE>
<CAPTION>
===============================================================================
=========================================
Derivative Portfolio Activity
Interest Rate Swaps
-----------------------------------------------
Receive Pay Basis
(in millions) Fixed Fixed Swaps Total
Floors Total
- -------------------------------------------------------------------------------
- -----------------------------------------
<S> <C> <C> <C> <C>
<C> <C>
Notional amount,
December 31, 1994 $2,151 $131 $250 $2,532
$2,532
Additions 850 850
850
Maturities (323) (102) (153)
(578) (578)
- -------------------------------------------------------------------------------
- -----------------------------------------
Notional amount,
December 31, 1995 1,828 879 97 2,804
2,804
Additions
1,500 1,500
Maturities (744) (879) (88)
(1,711) (1,711)
- -------------------------------------------------------------------------------
- -----------------------------------------
Notional amount,
December 31, 1996 $1,084 $ - $ 9 $1,093
$1,500 $2,593
===============================================================================
=========================================
At December 31, 1996:
Average remaining
maturity (years) .2 .1 .2
2.3 1.4
Weighted average rate received 5.54% 6.31%
5.55%
Weighted average rate paid 5.59 5.54 5.59
===============================================================================
=========================================
At December 31, 1995:
Average remaining
maturity (years) .9 .5 .2 .7
Weighted average rate received 5.58% 5.88% 6.76%
5.71%
Weighted average rate paid 5.99 6.29 6.06 6.09
===============================================================================
=========================================
</TABLE>
Summarized below is the unrealized gain (loss) associated with the
interest rate contract portfolio at December 31, 1996 and 1995.
<TABLE>
<CAPTION>
===============================================================================
=========================================
December 31, 1996
December 31, 1995
- -------------------------------------------------------------------------------
- -----------------------------------------
Asset/Liability Management Contracts Notional
Unrealized Notional Unrealized
(in millions) Amount Gain
(loss) Amount Gain (loss)
- -------------------------------------------------------------------------------
- -----------------------------------------
<S> <C>
<C> <C> <C>
Interest rate swaps:
Prime loan swaps:
Receive fixed $1,083
$(.6) $1,505 $(2.0)
Basis swaps 9
- - 97 .2
- -------------------------------------------------------------------------------
- -----------------------------------------
Total prime loan swaps 1,092
(.6) 1,602 (1.8)
Long-term debt swaps
200 (.7)
Bank note liability swaps
850 (2.5)
Other 1
- - 152 (.2)
- -------------------------------------------------------------------------------
- -----------------------------------------
Total interest rate swaps 1,093
(.6) 2,804 (5.2)
Interest rate floors 1,500
(.3)
- -------------------------------------------------------------------------------
- -----------------------------------------
Total $2,593
$(.9) $2,804 $(5.2)
===============================================================================
=========================================
</TABLE>
Interest income and expense on interest rate contracts used to manage the
Corporation's overall interest rate sensitivity position is recorded on an
accrual basis as an adjustment of the yield of the related asset or liability
over the periods covered by the contracts.
The derivative portfolio decreased net interest income by approximately $4
million in 1996 and $13 million in 1995, resulting in reductions in the net
interest margin of approximately 1 basis point and 4 basis points,
respectively.
Based on interest rates at December 31, 1996, it is anticipated that the
derivative portfolio will reduce net interest income by approximately $2
million
in 1997 and 1998. The estimated fair value of the derivative portfolio, based
on
dealer quotes, was an unrealized loss of $.9 million at December 31, 1996,
compared to an unrealized loss of $5.2 million at December 31, 1995. The
Corporation's operating and liquidity position is not expected to be materially
impacted by the unrealized loss inherent in the derivative portfolio.
Approximately 97% of the interest rate swap 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 two years,
but in no event would any component of the swap portfolio extend beyond three
years. The decision to use indexed amortizing swaps rather than some other
financial instrument is analogous to choices made between using on-balance
sheet instruments such as mortgage-backed securities and Treasury securities.
While both instruments can be effective at reducing the risk associated with
the asset sensitive profile of the core banking activities, the Corporation
frequently chooses to assume some modest extension/contraction characteristics
associated with investing in a mortgage-backed security. Indexed amortizing
swaps and mortgage-backed securities are similar in nature in that the
notional or principal values decline over time and changes in market rates
impact the degree to which the underlying instrument amortizes. 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 the
specific indexed amortizing swaps used by the Corporation are similar to
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.
The Corporation has not terminated any of its interest rate contract
positions. Accordingly, there have been no deferred gains/losses associated
with this activity.
While the Corporation is primarily an end-user of derivative instruments,
it does act as an intermediary to meet the financial needs of its customers.
In this capacity, the Corporation executes foreign exchange transactions and
interest rate contracts to provide customers with capital markets products to
meet their financial objectives. All positions are reported at fair value and
changes in fair values are reflected in investment banking revenues, a
component
of noninterest income, as they occur. Interest rate risk associated with the
customer derivative portfolio is controlled by entering into offsetting
positions with third parties. Including these offsetting positions, the
notional
amount of the customer interest rate contract portfolio at December 31, 1996
totaled approximately $1.3 billion. Credit risk associated with this activity
is minimized by limiting transactions to highly rated counterparties and
through collateral agreements. Collateral is required to be delivered when the
credit risk exceeds acceptable thresholds, for certain counterparties.
Collateral thresholds are established based on the creditworthiness of the
counterparty and are bilateral. Acceptable collateral is primarily limited to
U.S. Treasury and Federal agency securities. Foreign exchange activity, which
is marked to market based on prevailing rates of exchange, can expose the
Corporation to market risk, particularly when open positions exist, and, to a
lesser extent, credit risk associated with counterparties and their ability to
meet the terms of the foreign exchange contracts. The Corporation minimizes
market risk associated with foreign exchange activity by establishing limits
which prohibit traders from maintaining significant open positions on a daily
basis. The Corporation's exposure to credit risk on foreign exchange contracts
and customer swap contracts is measured as the cost of replacing the contract
in the event of default by the counterparty which is limited to the market
value of all contracts in a gain position. The Corporation controls this
credit risk by maintaining a well diversified portfolio of highly rated
counterparties and imposing counterparty limits and collateral protection
which is monitored by a credit committee for compliance. In addition,
counterparty credit risk for all derivative activity is managed by subjecting
these transactions to credit policies and underwriting standards consistent
with that used when making commitments to extend credit. At December 31, 1996,
the Corporation's credit exposure from these interest rate and foreign
exchange contracts totaled $10.8 million and $21.5 million, respectively. The
following summarizes the fair value at period end and the average fair value
for the years ended December 31, 1996 and 1995 for derivatives held or issued
for trading purposes.
<TABLE>
<CAPTION>
===============================================================================
=======================================
Derivatives Held or Issued for Trading Purposes--Fair Value
1996
1995
- -------------------------------------------------------------------------------
- ---------------------------------------
(in millions) Period end
Average Period end Average
- -------------------------------------------------------------------------------
- ---------------------------------------
<S> <C> <C>
<C> <C>
Interest-rate derivative contracts:
Assets $10.8 $
9.1 $ 8.4 $ 4.9
Liabilities (8.3)
(6.8) (6.8) (3.9)
Foreign exchange contracts:
Assets 21.5
15.7 10.7 19.4
Liabilities (21.4)
(15.5) (10.2) (18.2)
===============================================================================
=======================================
</TABLE>
Net trading gains recognized in earnings on interest rate contracts
outstanding totaled $2.9 million in 1996, $1.3 million in 1995 and $.2 million
in 1994. Net trading gains from foreign exchange contracts totaled $6.9
million in 1996, $6.9 million in 1995 and $5.9 million in 1994.
22 PARENT COMPANY CONDENSED
FINANCIAL STATEMENTS
Following are the condensed financial statements of Boatmen's Bancshares,
Inc. (Parent Company only) for the periods indicated:
<TABLE>
<CAPTION>
Balance Sheet
===============================================================================
========
December 31 (in thousands) 1996
1995
- -------------------------------------------------------------------------------
- --------
<S> <C> <C>
Assets:
Cash $ 922 $
834
Short-term investments 1,718
2,398
Investment in subsidiaries:
Banks and bank holding companies 3,514,311
3,504,291
Nonbanks 326,604
239,750
- -------------------------------------------------------------------------------
- --------
Total investment in subsidiaries 3,840,915
3,744,041
- -------------------------------------------------------------------------------
- --------
Advances to subsidiaries:
Banks 274,112
257,901
Nonbanks 56,884
57,163
- -------------------------------------------------------------------------------
- --------
Total advances to subsidiaries 330,996
315,064
- -------------------------------------------------------------------------------
- --------
Goodwill 78,953
84,413
Other assets 71,785
55,544
- -------------------------------------------------------------------------------
- --------
Total assets 4,325,289
$4,202,294
===============================================================================
========
Liabilities:
Accounts payable and accrued liabilities $ 113,920 $
78,342
Dividends payable 65,514
47,936
Short-term borrowings 47,656
49,497
Long-term debt 425,630
425,772
- -------------------------------------------------------------------------------
- --------
Total liabilities 652,720
601,547
- -------------------------------------------------------------------------------
- --------
Redeemable preferred stock 934
961
- -------------------------------------------------------------------------------
- --------
Stockholders' equity:
Preferred stock 82,147
99,324
Common stock 158,400
158,068
Surplus 1,199,692
1,212,838
Unrealized net appreciation (depreciation),
available for sale securities (6,131)
10,476
Retained earnings 2,405,658
2,137,176
Treasury stock (168,131)
(18,096)
- -------------------------------------------------------------------------------
- --------
Total stockholders' equity 3,671,635
3,599,786
- -------------------------------------------------------------------------------
- --------
Total liabilities and stockholders' equity 4,325,289
$4,202,294
===============================================================================
========
</TABLE>
<TABLE>
<CAPTION>
Statement of Income
===============================================================================
==========================
Year ended December 31 (in thousands) 1996
1995 1994
- -------------------------------------------------------------------------------
- --------------------------
<S> <C> <C>
<C>
Income:
Dividends from subsidiaries:
Banks and bank holding companies $575,638
$276,654 $219,676
Nonbanks 29,398
18,118 26,019
- -------------------------------------------------------------------------------
- --------------------------
Total dividends from subsidiaries 605,036
294,772 245,695
- -------------------------------------------------------------------------------
- --------------------------
Fees from subsidiaries 16,419
14,436 15,177
Interest on short-term investments 85
146 829
Interest on advances to subsidiaries 13,142
16,114 11,545
Other 3,319
5,912 760
- -------------------------------------------------------------------------------
- --------------------------
Total income 638,001
331,380 274,006
- -------------------------------------------------------------------------------
- --------------------------
Expense:
Interest expense 39,046
41,116 35,924
Staff expense 48,157
40,523 29,691
Other 65,584
34,143 23,971
- -------------------------------------------------------------------------------
- --------------------------
Total expense 152,787
115,782 89,586
- -------------------------------------------------------------------------------
- --------------------------
Income before income tax benefit
and equity in undistributed
income of subsidiaries 485,214
215,598 184,420
Income tax benefit 37,382
23,499 18,465
- -------------------------------------------------------------------------------
- --------------------------
Income before equity in undistributed
income of subsidiaries 522,596
239,097 202,885
Equity in undistributed income
of subsidiaries 172
240,914 288,041
- -------------------------------------------------------------------------------
- --------------------------
Net income $522,768
$480,011 $490,926
===============================================================================
==========================
</TABLE>
Retained earnings include $1,887,481 and $1,887,309 of equity in
undistributed income of subsidiaries at year-end 1996 and 1995, respectively.
Annual dividend distributions to the Corporation from its banking
subsidiaries are subject to certain limitations by applicable banking
regulatory authorities. In the aggregate, the statutory maximum available
dividends which may be paid to the Corporation without prior regulatory
approval is $678,245, resulting in $3,137,294 or 82.2% of the total equity of
the subsidiaries being potentially restricted as of December 31, 1996.
<TABLE>
<CAPTION>
Statement of Cash Flows
===============================================================================
==========================
Year ended December 31 (in thousands) 1996
1995 1994
- -------------------------------------------------------------------------------
- --------------------------
<S> <C> <C>
<C>
Cash flows from operating activities:
Net income $ 552,768 $
480,011 $ 490,926
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 4,167
4,458 4,435
Equity in undistributed income
of subsidiaries (172)
(240,914) (288,041)
(Gain) loss on sale of assets 474
(5,049) 30
Increase (decrease) in taxes
payable (10,545)
(5,311) (3,435)
Other, net 31,005
26,374 14,452
- -------------------------------------------------------------------------------
- --------------------------
Net cash provided by
operating activities 547,697
259,569 218,367
- -------------------------------------------------------------------------------
- --------------------------
Cash flows from investment activities:
Purchase of net assets and increase in
investment in subsidiaries (90,191)
(57,985) (26,524)
Net change in advances to subsidiaries (15,932)
9,641 (54,903)
Net change in short-term investments 680
1,665 12,340
Net change in property and equipment (68)
(183) 50
- -------------------------------------------------------------------------------
- --------------------------
Net cash used for
investing activities (105,511)
(46,862) (69,037)
- -------------------------------------------------------------------------------
- --------------------------
Cash flows from financing activities:
Net change in short-term borrowings (1,841)
5,966 (6,103)
Repayments of long-term debt
(14) (1)
Cash dividends paid (236,613)
(170,757) (132,690)
Common stock issued pursuant to
various employee and shareholder
stock issuance plans 58,763
29,561 4,530
Acquisition of treasury stock (262,380)
(76,479) (15,406)
Decrease in redeemable preferred stock (27)
(183) (13)
- -------------------------------------------------------------------------------
- --------------------------
Net cash used for
financing activities (442,098)
(211,906) (149,683)
- -------------------------------------------------------------------------------
- --------------------------
Increase (decrease) in cash 88
801 (353)
Cash at beginning of year 834
33 386
- -------------------------------------------------------------------------------
- --------------------------
Cash at end of year $ 922 $
834 $ 33
===============================================================================
==========================
</TABLE>
23 LEGAL PROCEEDINGS
Various claims and lawsuits, incidental to the ordinary course of
business, are pending against the Corporation and its subsidiaries. In the
opinion of management, after consultation with legal counsel, resolution of
these matters is not expected to have a material effect on the consolidated
financial statements.
24 QUARTERLY INFORMATION (Unaudited)
<TABLE>
<CAPTION>
Summary of Fourth Quarter Earnings
===============================================================================
==========================
Quarter ended December 31 (in thousands) 1996
1995
- -------------------------------------------------------------------------------
- --------------------------
<S> <C> <C>
Net interest income $400,321
$383,934
Provision for loan losses 19,675
26,451
- -------------------------------------------------------------------------------
- --------------------------
Net interest income after
provision for loan losses 380,646
357,483
- -------------------------------------------------------------------------------
- --------------------------
Noninterest income 203,497
208,788
Noninterest expense 367,873
368,781
- -------------------------------------------------------------------------------
- --------------------------
Income before income tax expense 216,270
197,490
- -------------------------------------------------------------------------------
- --------------------------
Income tax expense 76,023
69,229
- -------------------------------------------------------------------------------
- --------------------------
Net income $140,247
$128,261
===============================================================================
==========================
Net income per common share $.89
$.81
===============================================================================
==========================
Dividends declared per share $.42
$.37
===============================================================================
==========================
</TABLE>
25 SUBSEQUENT EVENT
On January 7, 1997 the Corporation merged into NationsBank Corporation
(NationsBank). Under the terms of the agreement, each outstanding share of the
Corporation's common stock was converted into the right to receive .6525 shares
of NationsBank common stock, or, at the election of the Corporation's
common shareholder, an equivalent amount of cash.
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
NB Holdings Corporation (successor to Boatmen's Bancshares, Inc.)
We have audited the accompanying
consolidated balance sheet of Boatmen's
Bancshares, Inc. as of December 31, 1996 and
1995, and the related consolidated
statements of income, changes in
stockholders' equity and cash flows for each
of the three years in the period ended
December 31, 1996. These financial
statements are the responsibility of the
management of Boatmen's Bancshares, Inc. Our
responsibility is to express an opinion on
these financial statements based on our
audits.
We conducted our audits in accordance
with generally accepted auditing
standards. Those standards require that we
plan and perform the audit to
obtain reasonable assurance about whether
the financial statements are free of
material misstatement. An audit includes
examining, on a test basis, evidence
supporting the amounts and disclosures in
the financial statements. An audit also
includes assessing the accounting principles
used and significant estimates made by
management, as well as evaluating the
overall financial statement presentation. We
believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial
statements referred to above present fairly,
in all material respects, the consolidated
financial position of Boatmen's Bancshares,
Inc. at December 31, 1996 and 1995, and the
consolidated results of its operations and
its cash flows for each of the three years
in the period ended December 31, 1996, in
conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
St. Louis, Missouri
January 13, 1997
Exhibit 99.2
Consent of Ernst & Young LLP
We consent to the incorporation by reference in the Registration Statements and
in the related Prospectuses listed below of NationsBank Corporation of our
report dated January 13, 1997, with respect to the consolidated financial
statements of Boatmen's Bancshares, Inc. included in this Current Report on Form
8-K for the year ended December 31, 1996.
Form Registration Number
S-3 33-44826
S-3 33-57533
S-3 33-63097
S-3 333-7229
S-3 333-13811
S-3 333-15375
S-3 333-18273
S-8 2-91958
S-8 2-73761
S-8 2-80406
S-8 33-45279
S-8 33-48883
S-8 33-60695
S-8 333-02875
S-8 333-07105
S-8 Post Effective Amendment No. 1 33-43125
S-8 Post Effective Amendment No. 1 33-55145
S-8 Post Effective Amendment No. 1 33-63351
S-8 Post Effective Amendment No. 1 33-62069
S-8 Post Effective Amendment No. 1 33-62208
S-8 Post Effective Amendment No. 1 333-16189
St. Louis, Missouri /s/ Ernst & Young LLP
March 27, 1997
