SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[FEE REQUIRED]
For the fiscal year ended: December 31, 1994
-----------------
OR
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[NO FEE REQUIRED]
For the transition period from to
----------------- ----------------
Commission file Number 0-12709
LIBERTY BANCORP, INC.
(Exact Name of Registrant as specified in its charter)
Oklahoma 73-1218204
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
100 North Broadway
Oklahoma City, OK 73102
(Address of principal executive offices)
(Zip Code)
(405) 231-6000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No .
------------------ ----------------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
or Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K [ ]
As of March 29, 1995, Registrant had 9,473,569 shares of Common Stock
outstanding.
As of March 29, 1995, the aggregate market value of the Registrant's
Common Stock held by nonaffiliates, was approximately $141.9 million.
DOCUMENTS INCORPORATED BY REFERENCE
Information required by Part III of this Form is incorporated by reference
from Registrant's Definitive Proxy Statement for its 1994 Annual Meeting of
Shareholders.
LIBERTY BANCORP, INC.
FORM 10-K
For the Fiscal Year Ended December 31, 1994
CROSS-REFERENCE INDEX
Reference Page(s)
Annual Report on
Form 10-K
PART I ITEM
ITEM 1 BUSINESS
ITEM 2 PROPERTIES
ITEM 3 LEGAL PROCEEDINGS
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS NONE
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON STOCK
AND RELATED SECURITYHOLDER MATTERS
ITEM 6 SELECTED FINANCIAL DATA
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERA-
TIONS (FINANCIAL REVIEW)
Guide 3 - Statistical Information
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Liberty Bancorp, Inc. and Subsidiaries (consolidated)
Report of Independent Public Accountants
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Shareholders' Investment
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statement
Reports of Other Independent Auditors Applicable
to Certain Subsidiaries (of which separate financial
statements are not required)
Liberty Mortgage Company
Liberty Real Estate Company
Selected Quarterly Financial Data
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
PART III (1)
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11 EXECUTIVE COMPENSATION
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
SIGNATURES
(1) The information required by Part III is incorporated by reference from the
Registrant's Proxy Statement, to be filed pursuant to Regulation 14A,
relating to the Annual Meeting of Shareholders of the Registrant pursuant
to General Instruction G to Form 10-K.
<TABLE>
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FINANCIAL HIGHLIGHTS Liberty Bancorp, Inc.
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<CAPTION>
December 31,(In thousands, except per share data) 1994 1993 1992 1991 1990
------------------------------------------------ ------------- ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
For the Year
Total revenues $ 200,401 $ 185,117 $ 172,762 $ 188,445 $ 194,298
Net interest income 77,680 74,568 63,903 55,123 52,515
Provision for loan losses _ (7,363) 1,793 2,252 (3,367)
Trust fees 15,582 15,508 15,523 14,789 13,984
Mortgage banking income 6,242 7,449 7,391 5,771 3,962
Other noninterest income 37,237 33,759 25,742 23,340 21,093
Noninterest expense 111,771 118,728 92,551 90,887 92,579
Income before provision (benefit) for
income taxes 24,970 19,919 18,215 5,884 2,342
Provision (benefit) for income taxes (906) (2,358) 4,737 925 198
Income before cumulative effect of change in
accounting principle and extraordinary item 25,876 22,277 13,478 4,959 2,144
Cumulative effect of change in accounting
principle _ 14,255 _ _ _
Extraordinary item - use of net operating loss
carryforwards _ _ 4,640 832 60
Net income 25,876 36,532 18,118 5,791 2,204
Per share data _ primary and fully-diluted
Income before cumulative effect of change in
accounting principle 2.64 2.28 1.49 .57 .25
Net income 2.64 3.74 2.01 .66 .25
Cash dividends declared .60 .30 _ _ _
------------------------------------------------ ------------- ------------ ------------ ------------ ----------
At December 31
Loans $1,179,779 $ 930,941 $ 677,053 $ 845,591 $ 779,434
Earning assets 2,345,663 2,208,523 2,035,562 2,015,319 1,916,373
Assets 2,883,699 2,659,776 2,428,160 2,489,541 2,451,585
Deposits 2,374,187 2,125,144 1,929,079 1,909,264 1,849,664
Total shareholders' investment 234,380 227,245 178,841 159,776 153,425
Book value per common share 24.74 23.98 20.29 18.21 17.55
------------------------------------------------ ------------- ------------ ------------ ------------ ----------
Average Balances
Earning assets $2,187,667 $2,044,814 $1,813,871 $1,782,527 $1,702,380
Assets 2,579,841 2,431,458 2,171,767 2,164,222 2,107,380
Deposits 2,100,895 1,957,313 1,740,590 1,676,001 1,638,876
Total shareholders' investment 229,394 208,137 170,846 158,363 151,652
------------------------------------------------ ------------- ------------ ------------ ------------ ----------
Ratios
Capital ratios
Leverage 8.67% 7.87% 7.97% 6.96% 7.16%
Risk-based 15.43 15.37 18.23 14.42 14.26
Average shareholders' investment as a % of
average total assets 8.89 8.56 7.87 7.32 7.20
Average earning assets as a % of average
total assets 84.80 84.10 83.52 82.36 80.78
Rate of return, before cumulative effect of
change in accounting principle and
extraordinary item, on
Average earning assets 1.18 1.09 .74 .28 .13
Average total assets 1.00 .92 .62 .23 .10
Average total shareholders' investment 11.28 10.70 7.89 3.13 1.41
Rate of return on
Average earning assets 1.18 1.79 1.00 .32 .13
Average total assets 1.00 1.50 .83 .27 .10
Average total shareholders' investment 11.28 17.55 10.60 3.66 1.45
Dividend payout ratio 22.73 8.02 _ _ _
Operating efficiency ratio 81.12 90.73 80.36 88.98 97.74
Provision for loan losses as a %
of average loans _ (.94) .26 .30 (.45)
</TABLE>
An Overview of the Company's
Operations
Liberty Bancorp, Inc. ("Liberty") is incorporated under the laws of the
State of Oklahoma and is registered as a bank holding company under the Bank
Holding Company Act of 1956. As such, it holds all of the shares of its two
major banking subsidiaries, Liberty Bank and Trust Company of Oklahoma City,
N.A. ("Liberty Oklahoma City") and Liberty Bank and Trust Company of Tulsa,
N.A. ("Liberty Tulsa"), as well as several other subsidiaries.
Liberty coordinates the financial resources of the consolidated enterprise
and also makes investments in and advances funds to its subsidiaries to provide
portions of their capital and credit requirements. In addition, it supplies
various managerial and support services to the subsidiaries and coordinates
their general policies and activities.
Both Liberty Oklahoma City and Liberty Tulsa provide a broad range of
financial services to individuals, business enterprises, financial institutions
and governmental authorities. Liberty Oklahoma City, which has twenty banking
centers in Oklahoma City and the surrounding communities of Choctaw, Edmond,
Harrah, Midwest City and Norman, is Liberty's largest subsidiary having assets
of $1.9 billion and deposits of $1.6 billion at December 31, 1994. Liberty
Tulsa has eleven banking centers in Tulsa and the surrounding communities of
Broken Arrow and Jenks, and is the second largest subsidiary of Liberty with
assets of $964 million and deposits of $779 million at December 31, 1994.
Liberty Mortgage Company, a subsidiary of Liberty Oklahoma City, engages
in mortgage banking activities. Liberty Real Estate Company, a nonbank
subsidiary of Liberty, owns and operates Liberty Tower, in which Liberty and
Liberty Oklahoma City maintain principal offices. Other subsidiaries are in-
volved in insurance activities.
Capital Market Services
The capital markets group of each bank provides investment and money
market services to individuals, trust accounts, corporations and correspondent
banks. The capital markets groups are responsible for portfolio management,
investment banking activities and the coordination of Liberty's funding and
asset/liability management. The capital markets groups also serve as
broker/dealer in eligible investment securities and make available a wide
variety of investments to both retail and institutional customers. In
addition, some 200 financial organizations utilize all or a portion of
Liberty's institutional products including safekeeping, investment portfolio
accounting, asset/liability consulting, and advanced portfolio strategies.
Commercial Banking Services
Liberty Oklahoma City and Liberty Tulsa deliver comprehensive,
competitively priced commercial banking services to commercial customers
located in Oklahoma and contiguous states. Commercial customers use many
commercial banking services including credit, depository and cash management
services. The commercial loan portfolio grew to $488.4 million at December 31,
1994 compared to $376.5 million at year end 1993. The commercial portfolio
comprises approximately 41% of Liberty's loan portfolio. Liberty's statewide
presence strengthens its ability to serve corporate, institutional, and
individual financial requirements. In addition, Liberty's experienced lending
staff coordinate their customer's use of other Liberty services including group
plan banking services provided to customer's employees. Commercial banking
services encompass real estate financing, correspondent and international
banking activities.
Real Estate Financing
Liberty Oklahoma City and Liberty Tulsa actively provide construction,
development and intermediate term loan products along with related real estate
services. Real estate mortgage loans totaled $269.2 million at December 31,
1994 and accounted for 23% of total loans. Other real estate loans, including
construction and development loans, were $97.3 million at December 31, 1994 and
comprised 8% of total loans. This compares to real estate mortgage loans of
$199.1 million (21% of total loans) and other real estate loans of $85.6 mil-
lion (9% of total loans) one year ago.
Correspondent Banking Activities
Liberty Oklahoma City and Liberty Tulsa provide financial services to over
300 banks in Oklahoma and other parts of the Midwest. Both banks work closely
with community and country banks, assisting them in satisfying the loan demands
of their customers by participating in their lending activities. In addition,
correspondents are provided with lending, investment, operations and other
financial and advisory services. At December 31, 1994, correspondent and
regional loans totaled $19.3 million or 2% of total loans. This compares to
$17.3 million, or 2% of total loans at December 31, 1993.
International Banking Activities
Liberty Oklahoma City and Liberty Tulsa provide international trade
finance and trade services to customers across Oklahoma and to banks within
Oklahoma and in surrounding states. Liberty's broad network enhances the
capabilities of trade service representatives, foreign exchange traders and
international tellers in providing wire and draft services, documentary
collections, retail foreign currency products, foreign exchange contracts and
letters of credit. At December 31, 1994, Liberty Oklahoma City's and Liberty
Tulsa's outstanding international standby and commercial letters of credit
totaled $5.2 million compared to $44.1 million at the end of 1993.
Designated as a Priority Lender by the Export-Import Bank of the United
States, Liberty works with exporters and local banks in providing government-
backed financing for export sales. The trade finance officers work together
with trade services to provide full service for Liberty customers requiring
international financial expertise and service.
Fiduciary Services
The principal activities of the trust departments of both banks include
administration and investment management of personal trusts and estates,
private and public employee benefit plans, including IRA's, corporate trusts
and agencies for individuals, corporations, foundations and political entities.
Trust assets under management at December 31, 1994 totaled $3.7 billion. As-
sets held in trust totaled $6.6 billion. These assets include fixed income and
equity securities, residential, commercial and agricultural properties, mineral
interests (mainly oil and gas) and private businesses throughout Oklahoma and
the Southwest. In addition, Liberty Oklahoma City's Trust Department provides
stock transfer, registration, dividend disbursing and dividend reinvestment
services for corporations.
Mortgage Banking Services
Liberty Mortgage Company's ("LMC") residential mortgage operations are
carried out through the main Liberty Oklahoma City location and two banking
centers, one in Oklahoma City and one in Tulsa. Commercial mortgage operations
are available at the main bank locations of Liberty Oklahoma City and the LMC
branch in Tulsa. A major service provided by mortgage companies is the
servicing of the loans marketed to investors through individual loan sales or
by creating mortgage-backed pass-through securities. As of year-end 1994, LMC
was servicing approximately $1.3 billion in mortgage loans.
Personal Banking Services
Liberty Oklahoma City and Liberty Tulsa provide an extensive array of
retail banking products and services. Through aggressive expansion efforts,
Liberty Oklahoma City now has 20 banking centers throughout Oklahoma City,
Edmond, Norman, Midwest City, Choctaw and Harrah. Liberty Tulsa has eleven
banking centers in Tulsa, Jenks and Broken Arrow. All banking centers offer
individual and small business lines of credit, automobile loans, boat and
recreational vehicle loans, home improvement and second mortgage loans.
Depository products offered include checking, savings, certificates of deposit,
money market investments, IRA's, Keogh qualified retirement plan accounts, and
safe deposit services.
Financial Review
Management's discussion and analysis of the 1994 financial results,
important events and trends should be read in conjunction with the consolidated
financial statements, notes to the consolidated financial statements and the
supplemental statistical and financial data presented elsewhere in this report.
Performance Summary
Liberty reported net income of $25.9 million for 1994. This compares to
net income of $36.5 million for 1993 and $18.1 million for 1992. Net income per
share for 1994 was $2.64, compared to $3.74 in 1993 and $2.01 in 1992. Income
for the fourth quarter of 1994 was $5.2 million or $.53 per share. This com-
pares with income of $6.3 million or $.64 per share for the fourth quarter of
1993. The decrease in net income in 1994 was due primarily to the benefit of
$14.3 million recorded in 1993 for the cumulative effect of a change in
accounting for income taxes. Income for 1993 also included negative provisions
for loan losses of $7.4 million. The negative provisions were made to reduce
the reserves to a level considered appropriate for the inherent risk in the
loan portfolio.
Net Interest Income
A volume/rate analysis of the changes in net interest income on a fully
tax-equivalent basis is shown below. The volume/rate analysis reflects the
changes in net interest income from both changes in asset and liability volumes
and changes in interest rates. Because of numerous simultaneous balance and
rate changes, it is not possible to allocate precisely such changes between
balances and rates. For purposes of this table, changes which are not due
solely to balance changes or solely to rate changes are allocated to such
categories based on the respective percentage changes in average daily balances
and average rates.
<TABLE>
Volume/Rate Analysis
<CAPTION>
------------------------------------------------------------------------------------------
(In thousands) 1994 vs 1993 1993 vs 1992
------------------------------------------------------------------------------------------
Increase (Decrease) Due to Average Average Average Average
Change in Balance Rate Total Balance Rate Total
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<S> <C> <C> <C> <C> <C> <C>
Earning Assets
Loans $43,829 ($24,381) $19,448 $ 7,153 ($ 180) $ 6,973
Investment securities
Taxable (4,502) (1,683) (6,185) 15,920 (13,796) 2,124
Nontaxable 139 56 195 (170) (267) ( 437)
Trading _ 14 14 (161) (39) ( 200)
other (1,649) 1,012 (637) (3,681) (782) (4,463)
--------------------------- --------- ----------- ---------- --------- ----------- --------
Total earning assets 37,817 (24,982) 12,835 19,061 (15,064) 3,997
--------------------------- --------- ----------- ---------- --------- ----------- --------
Interest-bearing
Liabilities
Deposits
Savings and money
market accounts 2,400 815 3,215 3,415 (3,529) ( 114)
Other time deposits 2,348 2,516 4,864 1,746 (7,316) (5,570)
Federal funds purchased
and other 384 1,604 1,988 63 (544) ( 481)
Other borrowings (591) 943 352 131 (228) ( 97)
Long-term notes (592) _ ( 592) ( 113) 5 ( 108)
--------------------------- --------- ----------- ---------- --------- ----------- --------
Total interest-bearing
liabilities 3,949 5,878 9,827 5,242 (11,612) (6,370)
--------------------------- --------- ----------- ---------- --------- ----------- --------
Change in net interest
(tax-equivalent) $33,868 ($30,860) $3,008 $13,819 ($ 3,452) $10,367
=========================== ========= =========== ========== ========= =========== ========
</TABLE>
On a tax-equivalent basis, net interest income increased $3.0 million or
3.9% in 1994 to $79.9 million compared to $76.9 million in 1993 and $66.5
million in 1992. Liberty's tax-equivalent interest margin has decreased to
3.65% for 1994 from 3.76% in 1993. The increase in net interest income between
1994 and 1993 is due principally to the increased levels of average loans,
partially offset by lower average loan yields and higher cost of funds.
Further discussion of Liberty's management of net interest income can be found
in "Interest Rate Sensitivity."
Tax-equivalent interest income increased $12.8 million to $143.6 million
in 1994. The increase is due to higher average loan levels which increased
$265.4 million. Funding for the increased loan levels was provided by paydowns
and maturities of investment securities and increased deposit levels. Net
decreases occurred in both securities balances ($78.9 million) and yields (15
basis points) as a result of significant sales, maturities and early pay downs
reinvested at lower rates. Although the national prime interest rate
increased by 250 basis points beginning in the first quarter of 1994, Liberty's
average yield on loans declined from 7.99% to 7.83%, principally due to the
refinancing and repricing of a large portfolio of fixed-rate real estate loans
coupled with competitive pricing of loans at rates sometimes below national
prime. As a result of the significant increase in loans and other yield and
volume mix changes, the yield on average earning assets increased from 6.39% in
1993 to 6.56% in 1994.
Total interest expense increased $9.8 million to $63.7 million in 1994
compared to $53.8 million in 1993. This increase was attributable to the
$142.6 million in higher average interest-bearing deposits and higher interest
rates on all fund sources. Market rates, in general, reversed direction in the
first quarter of 1994 when the Federal Reserve Bank raised the bank borrowing
discount rate for the first time since mid-1992 and raised it several more
times during 1994. The most significant rate increases occurred in the large
deposit liabilities and other borrowings, especially where some maturities have
been extended. As a result, Liberty's cost of funds increased from 3.40% in
1993 to 3.73% in 1994.
Noninterest Income
Noninterest income for the previous three years is shown below. The
primary changes were in service charges on deposits, mortgage banking income,
net securities gains and other noninterest income.
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(In thousands) 1994 1993 1992
----------------------------------------------------------------------------
Trust fees $15,582 $15,508 $15,523
Service charges on deposits 14,603 12,925 10,900
Mortgage banking income 6,242 7,449 7,391
Trading account profits and commissions 4,176 4,591 3,713
Loan fees 2,047 1,992 2,053
Credit card fees 2,041 1,402 1,286
Net securities gains 1,174 2,750 11
Other 13,196 10,099 7,779
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Total $59,061 $56,716 $48,656
============================================================================
Service charges on deposits increased $1.7 million or 13.0% during 1994.
Of this amount, $751 thousand is attributable to service charges on deposits of
banks acquired during 1993 with the remainder due to service fee schedule
increases. Net security gains decreased $1.6 million or 57.3% due to sales in
1993 as part of Liberty's tax planning strategies. Net securities gains for
1994 included a $1.4 million gain on the sale of majority-owned stock of a bank
acquired in settlement of previously contracted debt in 1989. Mortgage banking
income declined $1.2 million or 16.2% as a result of a smaller portfolio due to
sales of mortgage servicing during 1994 and 1993. Sales of mortgage servicing
in 1994 resulted in a gain of $1.1 million which was recorded in other
noninterest income. Other noninterest income also included gains on sales of
other assets totaling $1.9 million in 1994.
Noninterest Expenses
Noninterest expenses, excluding income from the operation of other real
estate and assets owned ("OREO") which are discussed separately in "Provisions
for Loan Losses and Net Income From Other Real Estate and Assets Owned,"
decreased in 1994 by 5.9%. The following table shows the significant
noninterest expense categories.
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(In thousands) 1994 1993 1992
-------------------------------------------------------------------------------
Salaries $ 43,542 $ 44,701 $ 37,643
Employee benefits 9,725 9,088 6,281
Equipment 9,408 8,094 6,785
Occupancy, net 9,065 8,806 7,336
Professional and other services 8,581 10,001 8,543
Data processing 6,498 5,901 5,866
Printing, postage and supplies 5,257 5,789 4,757
Deposit insurance assessment 4,387 4,564 3,814
Advertising and business development 3,535 4,382 3,119
Amortization of intangibles, including
purchased mortgage servicing rights 2,429 6,741 3,528
Other 12,569 14,069 10,861
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Total $114,996 $122,136 $98,533
===============================================================================
Salaries and employee benefits decreased $522 thousand during 1994.
Expenses in 1993 included $1.4 million accrued for severance and other costs to
reduce noninterest expenses. Other than base salary increases, 1994 included
$991 thousand in salary and benefits for employees of new banking locations.
As a result of management's expense reduction efforts, the employee count was
reduced by 5% during 1994 to 1,364 employees at year-end.
The amortization of intangibles decreased $4.3 million or 64.0%, as a
result of accelerated write offs in 1993 of the intangibles associated with
purchased mortgage servicing rights. This decrease is partially offset by the
amortization of bank acquisition premiums which increased $567 thousand in
1994.
Professional and other services decreased $1.4 million due to reductions
in outside services, most notably a $500 thousand accrual in 1993 for an
outside consultant to aid in the reduction of noninterest expenses and due to
reductions in the use of temporary employee services. Equipment expense
increased $1.3 million or 16.2% primarily due to increased depreciation on new
data processing and other equipment.
Other noninterest expense decreased $1.5 million or 10.7% during 1994 as a
result of numerous items, none of which were individually significant. Both
1994 and 1993 included provisions of $1.8 million for other corporate risk
reserves or losses on mortgage receivables in process of foreclosure.
The Federal Deposit Insurance Corporation ("FDIC") has proposed a
reduction of deposit insurance assessment rates, which, if enacted, will reduce
deposit insurance costs. The specific amount of this reduction is not possible
to predict.
Liberty's operating efficiency ratio for 1994 was 81.1% compared to 90.7%
in 1993. The operating efficiency ratio is defined as noninterest expense as a
percent of net interest income on a tax equivalent basis plus noninterest
income less security gains or losses.
Provision for Loan Losses and Net Income from the Operation of Other Real
Estate and Assets Owned
The provision for loan losses and losses on OREO amounted to a negative
$450 thousand during 1994 compared to a negative $8.6 million during 1993 and a
negative $548 thousand in 1992.
No provisions were made to the reserve for loan losses in 1994. During
1993 negative provisions were made to this reserve totaling $7.4 million.
Charges of $1.8 million were made during 1992. Liberty reviews the adequacy of
its reserve for loan losses on a quarterly basis. The reserve is based on a
financial model which estimates the range of inherent loss in Liberty's loan
portfolio. The model incorporates various factors required by guidelines of
the Comptroller of the Currency, including trends and results in collecting
loans, loss experience, evaluation of underlying collateral values,
identification and review of specific problem loans, size of the loan portfolio
and anticipated increases or declines in size, overall quality of the portfolio
and business and economic conditions and trends. Variations in any or all of
these factors may cause variations in quarterly provisions or annual provisions
to the reserve. A similar analysis is conducted in connection with the reserve
for losses on OREO.
As a result of continuing improvement in asset quality trends and low
levels of net charge-offs, the amount of the reserve was maintained at
substantially the same level as year-end 1993. The level of reserves is also
influenced by the overall size of Liberty's loan portfolio. Since the volume
of Liberty's loans has increased during 1994, the overall level of the reserve
for loan losses may require adjustments to take into consideration any
additional aggregate loan risk. These adjustments might offset, in whole or in
part, the effects of any improving asset quality trends. Because reserve
adequacy is based on a future evaluation of various factors, Liberty is unable
to predict the specific level of provisions (or negative provisions) that may
be appropriate in future periods.
Net income from the operation of OREO is comprised of the following:
-------------------------------------------------------------------------------
Net Income from OREO
-------------------------------------------------------------------------------
(In thousands) 1994 1993 1992
-------------------------------------------------------------------------------
Provisions $ 450 $1,207 $2,341
Expenses (501) (856) (1,676)
Income 283 792 1,524
Gains on sales 2,993 2,265 3,793
-------------------------------------------------------------------------------
Net income from OREO $3,225 $3,408 $5,982
===============================================================================
Income Taxes
Liberty recorded a net income tax benefit of $906 thousand for 1994
compared with a benefit of $2.4 million during 1993. The net income tax
benefit in 1994 resulted from Liberty's determination that it would generate
sufficient taxable income in future periods to use a significant portion of its
net operating loss carryforwards which had been impaired in 1993. The benefit
in 1994 from this determination was approximately $8.8 million. During 1993,
Liberty generated taxable income sufficient to utilize $18.8 million of net
operating loss carryforwards for which a valuation allowance had previously
been provided. Liberty recorded $97 thousand in net alternative minimum tax
expense in 1992. At December 31, 1994, Liberty had net operating loss
carryforwards totaling $25 million which can be used to reduce its future
income tax liabilities.
Balance Sheet
Earning Assets
Average earning assets increased 7.0% during 1994. The increase is
attributable to Liberty's loan growth. During 1994, average earning assets
comprised approximately 85% of average total assets compared to 84% in 1993 and
1992. Liberty's percentage of earning assets to total assets is lower than its
peer group (which is in the 90% range) partially because of the significant
amount of public funds processing done by Liberty. This activity, in which
Liberty generates fee income, increases demand deposits and items in process
in Liberty's consolidated balance sheet.
The following table shows the major classifications of Liberty's average
earning assets and their percent of total average earning assets for the last
three years.
-------------------------------------------------------------------------------
Average Earning Assets
-------------------------------------------------------------------------------
(In thousands) 1994 1993 1992
-------------------------------------------------------------------------------
Loans $1,051,694 48.1% $ 786,275 38.5 $ 698,162 38.5
Investment securities 1,076,669 49.2 1,155,574 56.5 894,407 49.3
Trading account
securities 3,831 .2 3,833 .2 6,444 .4
Federal funds sold
and other 55,473 2.5 99,132 4.8 214,858 11.8
-------------------------------------------------------------------------------
Total $2,187,667 $2,044,814 $1,813,871
===============================================================================
Investment and Trading Account Securities
Liberty adopted Statement of Financial Accounting Standards ("SFAS") No.
115, "Accounting for Certain Investments in Debt and Equity Securities," ("SFAS
No. 115") on December 31, 1993. The statement requires securities to be
classified into three categories: "securities held to maturity" reported at
amortized cost; "trading securities" reported at fair value with unrealized
gains and losses included in earnings; and "securities available for sale"
reported at fair value with unrealized gains and losses excluded from earnings
and reported as a separate component of shareholders' investment. As a result
of applying SFAS No. 115 shareholders' investment was reduced by $6.9 million
at year-end 1994 compared to an increase in shareholders' investment at the end
of 1993 of $6.2 million.
The following table shows the recorded amounts for Liberty's investment
securities, which do not include trading account securities, as of the end of
the previous three years.
Investment Securities
-------------------------------------------------------------------------------
(In thousands) 1994 1993 1992
-------------------------------------------------------------------------------
Available for sale
U.S. Treasury $ 599,272 $ 605,586 $ 49,137
U.S. Government agencies
Mortgage-backed 23,639 226 _
Other 9,546 108,550 _
State and political 490 9,393 _
Corporate debt and other 23,188 43,072 _
-------------------------------------------------------------------------------
Total available for sale 656,135 766,827 49,137
-------------------------------------------------------------------------------
Held to maturity
U.S. Treasury 53,793 54,478 380,583
U.S. Government Agencies
Mortgage-backed 218,942 216,519 370,326
Other _ 51,467 122,656
State and political 71,945 63,346 70,668
Corporate debt and other 71,404 77,274 6,515
-------------------------------------------------------------------------------
Total held to maturity 416,084 463,084 950,748
-------------------------------------------------------------------------------
Equity securities 18,455 18,628 12,875
-------------------------------------------------------------------------------
Total investment securities $1,090,674 $1,248,539 $1,012,760
===============================================================================
The market value of Liberty's investment securities portfolio was
approximately 98.9% of book value at December 31, 1994. Gross unrealized gains
included in the investment portfolio amounted to $6.6 million and are primarily
related to equity securities, U.S. government agencies and other corporate
bonds and debentures. Gross unrealized losses in the securities portfolio
amounted to $28.8 million, with $17.6 million of the unrealized losses related
to Liberty's U.S. Treasury securities portfolio and the balance falling
throughout each of the other categories.
The following tables show the maturities of Liberty's investment
securities. The tables do not include Federal Reserve Bank stock, Federal Home
Loan Bank stock and other corporate stock of $18.5 million. The weighted
average yields are calculated on the basis of cost, adjusted for accretion and
amortization. Weighted average yields on the tax-exempt obligations have been
computed on a fully tax-equivalent basis at the statutory rate.
-------------------------------------------------------------------------------
Maturity of Held to Maturity Investment Securities
-------------------------------------------------------------------------------
After One After Five
Within But Within But Within After Ten
(In thousands) One Year Five Years Ten Years Years
-------------------------------------------------------------------------------
Amount Yield Amount Yield Amount Yield Amount Yield
-------------------------------------------------------------------------------
U.S. Treasury $ 75 3.9% $ _ _ % $ _ _ % $ 53,718 6.5%
U.S. Government
Agencies
Mortgage-backed 1,942 9.7 25,109 7.6 63,049 6.7 128,842 6.6
State and politica 13,830 5.7 16,218 6.7 11,442 8.1 30,455 8.4
Corporate debt
and other 14,292 4.9 55,472 5.2 1,640 5.6 _ _
-------------------------------------------------------------------------------
Total $30,139 5.6% $96,799 5.8% $76,131 6.9% $213,015 6.8%
===============================================================================
-------------------------------------------------------------------------------
Maturity of Available for Sale Investment Securities
-------------------------------------------------------------------------------
After One After Five
Within But Within But Within After Ten
(In thousands) One Year Five Years Ten Years Years
-------------------------------------------------------------------------------
Amount Yield Amount Yield Amount Yield Amount Yield
-------------------------------------------------------------------------------
U.S. Treasury $354,643 5.1% $229,501 5.8% $15,128 7.4% $ _ _
U.S. Government
Agencies
Mortgage-backed 12,718 4.9 10,070 6.8 _ _ 851 9.4
Other 8,095 7.8 1,451 5.2 _ _ _ _
State and political _ _ 490 7.7 _ _ _ _
Corporate debt
and other 6,255 4.8 16,703 5.3 _ _ 230 6.6
-------------------------------------------------------------------------------
Total $381,711 5.1% $258,215 5.8% $15,128 7.4% $1,081 8.8%
===============================================================================
Loans
Loan concentrations are an important factor in the assessment of risk in
the loan portfolio. The composition of the loan portfolio at year-end for the
past five years is presented below.
-------------------------------------------------------------------------------
Loan Portfolio
-------------------------------------------------------------------------------
(In thousands) 1994 1993 1992 1991 1990
-------------------------------------------------------------------------------
Commercial and other (1) $ 488,400 $376,454 $262,837 $388,493 $324,650
Energy 71,883 57,089 68,576 60,668 57,852
Real estate _ construction 97,344 85,566 67,417 89,704 84,388
Real estate _ mortgage 269,232 199,104 154,410 172,693 171,169
Correspondent and regional 19,266 17,336 16,855 29,063 36,364
Personal 233,654 195,392 106,958 104,970 105,011
-------------------------------------------------------------------------------
Total $1,179,779 $930,941 $677,053 $845,591 $779,434
===============================================================================
(1) Includes term federal funds of $115.0 million in 1991 and $35.5 million in
1990. Liberty had no term federal funds at the end of 1994, 1993 or 1992.
Liberty's loan portfolio reflects significant sensitivity to the movement
of interest rates because of its relatively short-term nature and variable
pricing. Scheduled maturities of Liberty's loan portfolio (excluding real
estate _ mortgage and personal loans) at December 31, 1994 are summarized
below:
-------------------------------------------------------------------------------
After One
Within But Within After
(In thousands) One Year Five Years Five Years Total
-------------------------------------------------------------------------------
Commercial,
correspondent and other $208,164 $250,368 $49,134 $507,666
Energy 50,947 20,789 147 71,883
Real estate _ construction 59,086 32,906 5,352 97,344
-------------------------------------------------------------------------------
Total $318,197 $304,063 $54,633 $676,893
===============================================================================
The loans shown above include both loans with an adjustable or floating
rate as well as those with a fixed, predetermined rate. The adjustable or
floating rate is tied to the national prime rate, Liberty's base rate or other
market rates of interest. The total amount of these loans due after one year
which have predetermined or floating or adjustable rates is summarized in the
following table.
-----------------------------------------------------------
(In thousands)
-----------------------------------------------------------
Predetermined rate $139,485
Floating or adjustable rate 219,211
-----------------------------------------------------------
Total $358,696
===========================================================
Liberty's loans have increased $248.8 million or 26.7% during 1994. This
growth is a result of continued emphasis on growing the loan portfolio.
Liberty also commenced credit card issuances during 1993. Credit card loans
increased from $31 thousand at the end of 1992 to $1.2 million at the end of
1993 to $4.2 million at the end of 1994.
Liberty's practices in granting commitments and establishing lines of
credit are typical of industry practices and standards. Terms, particularly
rates and commitment fees, are subject to individual negotiations, with most
commitments extended for a one year period. Liberty's credit standards and
review practices with respect to loans are also used in granting commitments
and establishing lines of credit. At December 31, 1994, the bank subsidiaries
had legally binding loan commitments outstanding amounting to $500.7 million.
Liberty does not expect a significant portion of these commitments to be
exercised during the near-term. Management is of the opinion that no firm,
unfunded commitments of material amounts which represent unusual risks are
outstanding, except to the extent included in potential problem loans and/or
allocated for in the reserve for loan losses.
Nonperforming Loans
Liberty's nonperforming loans consist of nonaccrual, 90 days or more past
due and restructured loans. Liberty's consolidated financial statements are
prepared on the accrual basis of accounting, including recognition of interest
income on its loan portfolio. However, when the full collectibility of interest
or principal on any loan becomes uncertain or is collectible only after an
extended period of time, that loan is placed on nonaccrual status. Any accrued
yet uncollected interest is usually reversed. Thereafter, interest is
recognized as income only as it is collected in cash and only to the extent
that the collectibility of the principal is not in doubt. Restructured loans
include those loans earning interest at rates less than originally contracted
due to a troubled debtor situation. Interest on such loans is included in
income only to the extent of the reduced rate if it is deemed collectible.
Past due loans, while not performing contractually, do not meet the criteria to
become nonaccrual. Interest is accrued and payments are divided between income
and principal based on the loan contract.
Nonperforming loans decreased 14.1% or $1.9 million to $11.6 million at
year-end 1994 from $13.5 million at year-end 1993. This decrease reflects
Liberty's effort in reducing nonperforming loans since their year-end peak of
$147.7 million in 1987. Of the nonperforming loans at December 31, 1994,
approximately 52% were real estate-related.
Nonaccrual loans totaled $7.8 million at December 31, 1994. Of these
loans, $2.5 million or 32% were contractually current with a total of $4.1
million or 53% representing loans that have met at least 85% of their con-
tractual payments during 1994. The contractual balance on total nonaccrual
loans was $10.6 million at year-end 1994 with $4.0 million or 37.5% of these
loans contractually current and a total of $6.3 million or 60% rated 85%
current or better.
-------------------------------------------------------------------------------
Nonperforming Loans
-------------------------------------------------------------------------------
(In thousands) 1994 1993 1992 1991 1990
-------------------------------------------------------------------------------
Nonaccrual $ 7,808 $10,138 $19,244 $37,026 $27,307
Restructured _ _ _ _ _
Past due 90 days or more 3,748 3,313 487 750 1,058
-------------------------------------------------------------------------------
Total nonperforming loans $11,556 $13,451 $19,731 $37,776 $28,365
===============================================================================
Nonperforming Loans as %
of Total Loans .98% 1.44% 2.91% 4.47% 3.64%
===============================================================================
-------------------------------------------------------------------------------
Analysis of Nonperforming Loans by Type
-------------------------------------------------------------------------------
(In thousands) 1994 1993 1992 1991 1990
-------------------------------------------------------------------------------
Commercial and other $ 3,119 $ 3,604 $ 6,436 $ 8,999 $ 6,101
Energy 321 632 706 1,685 1,496
Real estate _ construction 2,021 3,236 3,826 7,921 1,197
Real estate _ mortgage 3,938 5,135 8,126 13,378 12,041
Correspondent and regional _ _ _ 4,547 6,387
Personal 2,157 844 637 1,246 1,143
-------------------------------------------------------------------------------
Total $11,556 $13,451 $19,731 $37,776 $28,365
===============================================================================
The gross interest income from nonaccrual loans outstanding at December
31, 1994, had they been performing in accordance with their original terms,
would have been approximately $932 thousand for 1994. The amount of interest
from nonaccrual loans included in interest income for 1994 was approximately
$133 thousand. Foregone interest income from nonaccrual and restructured loans
for the past five years beginning with 1994 was approximately $799 thousand,
$1.1 million, $1.5 million, $3.0 million and $1.6 million, respectively.
In May 1993, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 114, "Accounting by Creditors for Impairment of a Loan" ("SFAS No. 114"),
and in October 1994, the FASB issued SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan _ Income Recognition and Disclosures." Both SFAS No. 114
and SFAS No. 118 are effective for fiscal years beginning after December 15,
1994. SFAS No. 114 addresses the accounting by creditors for impairment of a
loan by specifying how reserves for losses related to impaired loans, as
defined, shall be determined. A discounted cash flow analysis using the
original contractual interest rate as the discount rate or use of the fair
value of the collateral for collateral dependent loans is required for loans
meeting the definition of impaired. If the discounted value is less than the
contractual balance, the difference must be provided for through the reserve
for loan losses. SFAS No. 118 amends SFAS No. 114 to require information about
the recorded investment in certain impaired loans as well as how interest
income related to those impaired loans is recognized. This adoption will not
have a material adverse effect on Liberty's financial position when adopted in
1995, based on impaired loans, as defined, at December 31, 1994.
Potential Problem Loans
"Potential problem loans" are those loans which, although currently
performing, have credit weaknesses such that management has serious doubts as
to the borrowers' future ability to comply with present terms, and thus may
result in a change to nonperforming status. Management has identified, through
internal credit ratings, certain performing loans which demonstrate some dete-
rioration in credit quality and, accordingly, are scrutinized more carefully.
At December 31, 1994, these loans totaled $177 thousand compared to $17.0
million and $5.1 million at December 31, 1993 and 1992, respectively. Of these
amounts, approximately $98 thousand and $415 thousand represented letters of
credit and unfunded loan commitments at December 31, 1993 and 1992,
respectively. There were no unfunded balances at the end of 1994. The
decrease at year-end 1994 was primarily attributable to the repayment of one
large problem loan relationship during 1994. Exposure to loss of principal on
such loans and commitments has been considered in the establishment of the
reserve for loan losses.
Reserve for Loan Losses
Liberty allocates the reserve for loan losses according to the amount
deemed by management to be reasonably necessary to provide for inherent losses
within the categories of loans set forth in the following table. It should be
recognized that such allocations are not precise and are not necessarily
indicative of future loan losses. Although the loan loss reserve has been
allocated among loan categories, all of such reserve is available to absorb all
losses on loans from any category. Known loan losses and recoveries are charged
to the loan loss reserve on a monthly basis.
-------------------------------------------------------------------------------
Allocation of Reserve for Loan Losses
-------------------------------------------------------------------------------
(Dollars In thousands) 1994 1993 1992 1991 1990
-------------------------------------------------------------------------------
Commercial and other
Reserve amount $1,592 $1,151 $2,382 $2,518 $3,610
Loans as a percent of
total loans 41.40% 40.76% 39.55% 46.26% 41.93%
Energy
Reserve amount 57 3,305 2,603 635 939
Loans as a percent of
total loans 6.09% 6.10% 10.00% 7.13% 7.38%
Real estate _ construction
Reserve amount 872 999 2,533 4,611 3,605
Loans as a percent of
total loans 8.25% 9.14% 9.84% 10.55% 10.77%
Real estate _ mortgage
Reserve amount 389 452 2,533 1,041 1,187
Loans as a percent of
total loans 22.82% 21.27% 22.54% 20.30% 21.88%
Correspondent and regional
Reserve amount 134 183 545 3,490 3,756
Loans as a percent of
total loans 1.63% 1.85% 2.46% 3.42% 4.64%
Personal
Reserve amount 2,683 1,834 1,232 1,191 1,676
Loans as a percent of
total loans 19.81% 20.88% 15.61% 12.34% 13.40%
Unallocated reserve 13,354 12,062 13,753 12,502 10,057
-------------------------------------------------------------------------------
Total reserve $19,081 $19,986 $25,581 $25,988 $24,830
===============================================================================
Reserve for loan losses as a
% of total loans 1.62% 2.14% 3.73% 3.06% 3.17%
Reserve for loan losses as a
% of nonperforming loans 165.12% 148.58% 129.65% 68.80% 87.54%
The following table summarizes: average loan balances, changes in the reserve
for loan losses arising from loans charged off and recoveries on loans pre-
viously charged off by loan category, and additions to the reserve which have
been charged to operating expense.
-------------------------------------------------------------------------------
Analysis of Reserve for Loan Losses
-------------------------------------------------------------------------------
(Dollars in thousands) 1994 1993 1992 1991 1990
-------------------------------------------------------------------------------
Balance at beginning
of year $ 19,986 $ 25,581 $ 25,988 $ 24,830 $ 32,145
-------------------------------------------------------------------------------
Charge-offs
Commercial and other 481 258 1,369 1,901 1,653
Energy _ _ 22 81 957
Real estate _ construction 4 378 1,511 190 3,749
Real estate _ mortgage 3 61 435 224 890
Correspondent and regional _ 22 433 22 _
Personal 1,698 1,154 835 779 1,111
-------------------------------------------------------------------------------
Total charge-offs 2,186 1,873 4,605 3,197 8,360
-------------------------------------------------------------------------------
Recoveries
Commercial and other 485 680 520 863 818
Energy 174 106 100 338 1,542
Real estate _ construction 180 679 620 377 962
Real estate _ mortgage 29 264 562 55 166
Correspondent and regional 25 1 173 56 339
Personal 388 670 360 414 585
-------------------------------------------------------------------------------
Total recoveries 1,281 2,400 2,335 2,103 4,412
-------------------------------------------------------------------------------
Net charge-offs 905 (527) 2,270 1,094 3,948
Provisions for loan losses _ (7,363) 1,793 2,252 (3,367)
Reserves from acquired banks _ 1,241 70 _ _
-------------------------------------------------------------------------------
Balance at end of year $ 19,081 $ 19,986 $ 25,581 $ 25,988 $ 24,830
===============================================================================
Average loans outstanding $1,051,694 $786,275 $698,162 $757,411 $749,585
===============================================================================
Ratio of net charge-offs
(recoveries) to average
loans outstanding .09% (.07%) .32% .14% .53%
===============================================================================
Other Real Estate and Assets Owned
OREO (net of reserves) decreased $5.5 million during 1994. The following
tables show OREO and the reserve for OREO for the past five years.
-------------------------------------------------------------------------------
Other Real Estate and Assets Owned
-------------------------------------------------------------------------------
(In thousands) 1994 1993 1992 1991 1990
-------------------------------------------------------------------------------
Land $4,522 $ 8,791 $14,516 $21,773 $38,200
Commercial _ office
buildings and motels 792 2,487 2,481 7,541 20,639
Commercial _ shopping centers _ 200 660 8,429 17,125
Residential _ single-family 1,031 1,631 1,122 1,754 2,087
Residential _ multi-family _ _ 57 3,756 4,427
Oil and gas properties _ _ 306 523 765
Other 25 256 1,520 3,851 4,321
-------------------------------------------------------------------------------
Total other real estate
and assets owned $6,370 $13,365 $20,662 $47,627 $87,564
Less reserve for losses (1,042) (2,521) (5,001) (11,447) (22,078)
-------------------------------------------------------------------------------
Other real estate and
assets owned, net $5,328 $10,844 $15,661 $36,180 $65,486
===============================================================================
-------------------------------------------------------------------------------
Reserve for Losses on Other Real Estate and Assets Owned
-------------------------------------------------------------------------------
(In thousands) 1994 1993 1992 1991 1990
-------------------------------------------------------------------------------
Balance at beginning of year $2,521 $5,001 $11,447 $22,078 $26,516
Charge-offs (1,029) (1,515) (4,105) (10,791) (16,652)
Provisions for losses (450) (1,207) (2,341) 160 12,214
Reserves from acquired banks _ 242 _ _ _
-------------------------------------------------------------------------------
Balance at end of year $1,042 $2,521 $ 5,001 $11,447 $22,078
===============================================================================
Reserve for losses on other
real estate and assets owned
as % of total other real estate
and assets owned 16.36% 18.86% 24.20% 24.03% 25.21%
===============================================================================
Charge-offs include losses on sales and market writedowns. The reserves
are in addition to recording foreclosed real estate at or below current ap-
praisal values.
Capital Funds
Year-end shareholders' investment as a percentage of total assets amounted
to 8.1% for 1994, compared to 8.5% for 1993 and 7.4% for 1992.
Capital adequacy is currently measured by banking regulators using various
capital criteria and ratios under the heading of risk-based capital. Tier 1
capital for bank holding companies includes common equity and perpetual
preferred stock (subject to certain limitations) minus intangible assets. The
adjustment to shareholders' investment for unrealized gains and losses for
securities available for sale as required by SFAS 115 is disregarded in this
calculation. There are also limitations on the amount of deferred tax assets
that may be included in Tier 1 capital. Tier 2 capital includes supplementary
elements such as limited amounts of reserve for loan losses, perpetual pre-
ferred stock (in excess of Tier 1 limits), subordinated debt and other items.
The leverage ratio, defined as Tier 1 capital divided by average adjusted total
assets, limits the amount of leverage a bank can undertake because of the
ratio's emphasis on equity or core capital.
All but the most highly-rated banks are required to carry a minimum
leverage ratio of 3% plus a cushion of 1 to 2%. The risk-based capital ratio,
defined as total capital (Tier 1 plus Tier 2) divided by risk-weighted assets,
is the regulators' other primary determinant of capital adequacy and was de-
signed principally as a measure of credit risk. Banking organizations have
been given a risk-based capital ratio requirement of 8%. The FDIC assesses
insurance premiums based in part on the level of capital, with banks which are
"well capitalized" paying assessments at lower rates. Liberty's and its
subsidiary banks' capital ratios are significantly higher than the current
guidelines and the subsidiary banks are "well capitalized" for deposit
insurance purposes.
-------------------------------------------------------------------------------
Risk-based Capital
-------------------------------------------------------------------------------
(In thousands) 1994 1993
-------------------------------------------------------------------------------
Tier 1 Capital
Shareholders' investment $ 234,380 $ 227,245
Unrealized (gains) losses on available for sale
securities disallowed 6,854 (6,184)
Deferred tax asset disallowed (5,537) (12,586)
Intangible assets disallowed (9,312) (10,650)
Total Tier 1 Capital 226,385 197,825
Tier 2 Capital
Reserve for loan losses (1) 19,081 17,519
-------------------------------------------------------------------------------
Total capital 245,466 215,344
===============================================================================
Risk-weighted Assets $1,590,539 $1,401,496
===============================================================================
Leverage Ratio 8.67% 7.87%
Risk-based Ratio 15.43 15.37
(1) Limited to 1.25% of risk-weighted assets.
Liberty Oklahoma City had a risk-based capital ratio of 13.83% and Liberty
Tulsa had a risk-based capital ratio of 15.24%. Liberty and its subsidiary
banks exceed required ratios for 1994 and plan to do so in the future.
Deposits
Deposits represent the principal source of funds for Liberty. Average
deposit levels totaled approximately 81% of total average assets in 1994.
Levels of deposits increased in 1994 and 1993 due to bank acquisitions and
product marketing.
-------------------------------------------------------------------------------
Average Deposits
-------------------------------------------------------------------------------
(In thousands) 1994 1993 1992
-------------------------------------------------------------------------------
Noninterest-bearing demand deposits $ 616,552 $ 615,567 $ 551,121
Interest-bearing demand deposits 564,142 481,595 408,474
Savings 147,716 142,174 98,196
Time deposits 772,485 717,977 682,799
-------------------------------------------------------------------------------
Total $2,100,895 $1,957,313 $1,740,590
===============================================================================
The previous table includes average deposits with the branches of Liberty
Oklahoma City and Liberty Tulsa in Nassau, The Bahamas of $29.4 million, $33.0
million and $39.5 million for the years 1994, 1993 and 1992, respectively.
As of December 31, 1994, time certificates of deposit and other time
deposits issued in amounts of $100,000 or more mature as follows:
-------------------------------------------------------------------------------
(In thousands)
-------------------------------------------------------------------------------
Within three months $173,377
After three but within six months 122,682
After six but within twelve months 34,654
After twelve months 93,292
-------------------------------------------------------------------------------
Total $424,005
===============================================================================
Both Liberty Oklahoma City and Liberty Tulsa continue to be primarily
funded in the local market place. In management's opinion, funding and
liquidity at Liberty's bank subsidiaries are adequate to meet current and
projected financial commitments.
Other Borrowings
The details of the major sources of short-term borrowings are included in
the following tables. The general terms of these borrowings are consistent
with industry standards.
-------------------------------------------------------------------------------
Federal Funds Purchased and Securities Sold Under Agreements
to Repurchase
-------------------------------------------------------------------------------
(In thousands) 1994 1993 1992
-------------------------------------------------------------------------------
Borrowings outstanding
At year-end $139,700 $116,486 $144,400
Average for the year 134,444 122,103 120,173
Maximum month-end balance 219,662 167,608 144,400
Interest rates
Average for the year 4.1% 2.9% 3.3%
Average at end of year 4.9 2.9 2.5
-------------------------------------------------------------------------------
Treasury, Tax and Loan Deposits and Other Borrowings
-------------------------------------------------------------------------------
(In thousands) 1994 1993 1992
-------------------------------------------------------------------------------
Borrowings outstanding
At year-end $ 90,452 $161,626 $140,693
Average for the year 89,893 110,847 106,944
Maximum month-end balance 191,704 241,434 281,423
Interest rates
Average for the year 4.4% 3.2% 3.4%
Average at end of year 5.3 2.9 2.7
International Exposure
Liberty has little direct exposure to foreign credits. Cross-border
outstandings include loans, acceptances, interest-bearing deposits with other
banks and interest-bearing investments or other monetary assets denominated in
nonlocal currencies of foreign banks (including domestic branches of foreign
banks). At December 31, 1994, Liberty had $2.2 million in cross-border
outstandings (none of which was with domestic branches of foreign banks),
compared to $1.2 million at December 31, 1993 and $35.9 million at December 31,
1992. There were no cross-border outstandings of foreign countries exceeding
1% of total assets at December 31, 1994 or 1993. Cross-border outstandings of
foreign countries exceeding 1% of total assets at December 31, 1992 included
$25.0 million with Japan.
Asset and Liability Management
A senior management committee, the Investment/Asset/Liability Committee,
has the responsibility for monitoring and coordinating the asset and liability
positions, interest rate sensitivity, liquidity and other resource planning
strategies of Liberty on an ongoing basis. This committee monitors interest
rate moves from 50 to 400 basis points and the anticipated effects of these
interest rate changes on both earnings and market value of capital. In
addition, the committee has recommended policies which the Board of Directors
has adopted setting limits within which the asset/liability risk positions are
to be maintained.
As a result of increased holdings of loans and continued high levels of
marketable investment securities, Liberty was a net purchaser of federal funds
averaging $80.9 million for 1994 compared to $28.5 million in 1993 and a net
seller of federal funds averaging $91.7 million in 1992.
Liquidity is the ability to meet financial obligations for the payment of
funds. Some of the sources of funds to provide liquidity include core
deposits, large certificates of deposit, federal funds purchased from both
upstream and downstream banks, sale of securities under agreements to
repurchase, Treasury Tax and Loan accounts, investment securities held in the
available for sale account which can be sold or pledged for borrowing at the
Federal Reserve discount window or the Federal Home Loan Bank and the
availability of loans and investment securities held in the held-to-maturity
account which can be pledged for borrowing at the Federal Reserve discount
window or the Federal Home Loan Bank.
Interest Rate Sensitivity
Liberty's long-standing policy is to maintain as balanced a position in
interest-sensitive assets and liabilities as possible with a goal to achieve
consistent interest margins in all interest rate environments. Liberty is
liability sensitive largely due to the short-term nature of its deposits,
especially savings and money market accounts, and short-term borrowings. Be-
cause of this liability sensitivity, Liberty's net interest margin may be
vulnerable to upward trends in interest rates.
The net interest margin of Liberty has been impacted by an increase in
interest rates, as experienced in the past year. Because Liberty is liability
sensitive, its liabilities reprice at the higher rates sooner than its assets.
As such, the net interest margin is narrowed as liabilities are repriced or
mature. However, the increase in liability rates, particularly in a increasing
rate environment, may not increase as much as asset rates because of the
lagging increase in consumer deposit rates. Liberty monitors its interest-sen-
sitivity posture on a continuing basis to ensure that interest rate changes do
not create a material adverse impact. Liberty also adjusts its asset and li-
ability structures, to the extent possible, to allow for projected rate
changes.
A table showing the repricing of Liberty's earning assets and interest-bearing
liabilities at December 31, 1994 is outlined below. Deposits without
maturities, such as savings, now accounts and money market accounts, are
classified as less than 90 days.
<TABLE>
------------------------------------------------------------------------------------
Interest Rate Sensitivity
------------------------------------------------------------------------------------
<CAPTION>
0-90 91-365 One to After
(In thousands) Days Days Five Years Five Years Total
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Earning assets
Loans $ 597,590 $ 52,113 $342,784 $187,292 $1,179,779
Securities 300,865 309,989 351,139 128,681 1,090,674
Other earning assets 75,210 _ _ _ 75,210
-------------------------- -------------- ----------- ---------- -------- -----------
Total earning assets 973,665 362,102 693,923 315,973 2,345,663
-------------------------- -------------- ----------- ---------- -------- -----------
Interest-bearing liabilities
Deposits 1,085,677 306,605 210,980 42,685 1,645,947
Other borrowings 193,567 17,000 19,585 _ 230,152
-------------------------- -------------- ----------- ---------- -------- -----------
Total Interest-bearing
liabilities 1,279,244 323,605 230,565 42,685 1,876,099
-------------------------- -------------- ----------- ---------- -------- -----------
Net position (305,579) 38,497 463,358 273,288 469,564
========================== ============== =========== ========== ======== ===========
Cumulative net position ($ 305,579) ($267,082) $196,276 $469,564 $ 469,564
========================== ============== =========== ========== ======== ===========
% of earning assets (13.0%) (11.4%) 8.4% 20.0% 20.0%
========================== ============== =========== ========== ======== ===========
</TABLE>
Parent Company Funding Sources and Dividends
At December 31, 1994 and 1993 the parent company had cash, including
interest-bearing deposits, of $6.2 million. Liberty's ability to fund various
operating expenses and dividends is generally dependent on parent-only
earnings, cash reserves and funds derived from its subsidiaries, principally
Liberty Oklahoma City and Liberty Tulsa. These funds historically have been
provided primarily by intercompany dividends and management fees. Management
fees are generally limited to reimbursement of actual expenses. It is
anticipated that Liberty's recurring cash sources will continue to include
dividends and management fees from subsidiaries, proceeds from the sale of
other assets (principally other real estate and assets owned) and retained
rights to any gains from the sales of mortgage servicing or other assets.
Dividends may be paid by subsidiary banks from time to time to support
Liberty's acquisition activities or to provide funds for other purposes, such
as dividends on Liberty common stock. Liberty Oklahoma City and Liberty Tulsa
are limited in their ability to pay dividends based on applicable provisions of
the National Bank Act pertaining to earnings and undivided profits. As of
January 1, 1995 the ability of Liberty Oklahoma City and Liberty Tulsa to pay
dividends without regulatory approval was limited to $29.9 million and $13.4
million, respectively.
Liberty Real Estate Company, a wholly-owned subsidiary, is dependent upon
Liberty for financial support to cover deficits in operating cash flows result-
ing from operating costs, debt service, capital expenditures and other needs.
These costs are primarily intercompany and insignificant to Liberty as a whole.
It is anticipated that Liberty will continue to provide such support.
Liberty paid four quarterly cash dividends of $.15 per common share in
1994, totaling $5.7 million. During 1993, Liberty paid three quarterly cash
dividends of $.10 per common share, totaling $2.7 million. It is expected that
such cash dividends, at levels to be determined by the Board of Directors from
time to time, will continue if justified by Liberty's earnings, capital
adequacy and financial condition. In January, 1995 the Board of Directors
approved an increase in the quarterly dividend rate to $.20 per common share.
In management's opinion, Liberty's current liquidity and cash sources are
anticipated to be adequate to meet its obligations in the near-term.
-------------------------------------------------------------------------------
SELECTED QUARTERLY INFORMATION Liberty Bancorp, Inc.
-------------------------------------------------------------------------------
Consolidated Summary of Quarterly Financial Information
(In thousands, except per share data)
-------------------------------------------------------------------------------
1994 Fourth Third Second First
-------------------------------------------------------------------------------
Interest income $38,796 $35,957 $34,129 $32,458
Interest income (tax equivalent) 39,353 36,412 34,703 33,088
Interest expense 19,002 16,417 15,019 13,222
Net interest income 19,794 19,540 19,110 19,236
Provision for loan losses _ _ _ _
Trust fees 3,641 3,771 4,010 4,160
Mortgage banking income 1,418 1,434 1,625 1,765
Other noninterest income 11,135 7,902 9,318 8,882
Noninterest expense 28,212 27,330 28,004 28,225
Net income 5,159 10,608 5,157 4,952
Net income per share .53 1.08 .53 .51
At Quarter End
Shares of Common Stock, net of treasury stock
Outstanding 9,474 9,484 9,484 9,478
Fully-diluted 9,803 9,836 9,825 9,780
-------------------------------------------------------------------------------
1993 Fourth Third Second First
-------------------------------------------------------------------------------
Interest income $34,015 $31,143 $31,152 $32,091
Interest income (tax equivalent) 34,603 31,702 31,722 32,694
Interest expense 13,453 13,166 13,342 13,872
Net interest income 20,562 17,977 17,810 18,219
Provision for loan losses 206 85 (2,737) (4,917)
Trust fees 3,715 3,975 3,846 3,972
Mortgage banking income 1,913 1,871 1,987 1,678
Other noninterest income 10,178 7,560 7,920 8,101
Noninterest expense 36,410 26,828 27,097 28,393
Net income 6,262 3,428 5,144 21,698
Income per share
Income before cumulative effect of change
in accounting principle .64 .35 .53 .77
Net income .64 .35 .53 2.25
At Quarter End
Shares of Common Stock, net of treasury stock
Outstanding 9,478 9,478 9,477 9,470
Fully-diluted 9,775 9,782 9,774 9,760
<TABLE>
---------------------------------------------------------------------------------------------------------------------------------
Average Balances/Net Interest Margin/Rates (1)
---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
For the Year 1994 1993 1992
---------------------------------------------------------------------------------------------------------------------------------
Average Average Average Average Average Average
(In thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate
------------------------------------ ----------- --------- -------- ------------ --------- -------- ----------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Loans (2) $1,051,694 $ 82,305 7.83% $ 786,275 $ 62,857 7.99% $ 698,162 $ 55,884 8.00 %
Investment securities (3)
Taxable 1,022,535 54,076 5.29 1,103,154 60,261 5.46 839,979 58,137 6.92
Nontaxable 54,134 4,484 8.28 52,420 4,289 8.18 54,428 4,726 8.68
Trading account securities 3,831 245 6.40 3,833 231 6.03 6,444 431 6.69
------------------------------------ ----------- --------- -------- ------------ --------- -------- ----------- --------- -------
Total securities 1,080,500 58,805 5.44 1,159,407 64,781 5.59 900,851 63,294 7.03
------------------------------------ ----------- --------- -------- ------------ --------- -------- ----------- --------- -------
Federal funds sold and securities
purchased under agreements to
resell and other 55,473 2,446 4.41 99,132 3,083 3.11 214,858 7,546 3.51
------------------------------------ ----------- --------- -------- ------------ --------- -------- ----------- --------- -------
Total earning assets 2,187,667 143,556 6.56 2,044,814 130,721 6.39 1,813,871 126,724 6.99
Cash and due from banks-
noninterest-bearing 258,007 259,603 252,950
Reserve for loan losses (19,829) (21,675) (25,238)
Other assets 153,996 148,716 130,184
---------- ---------- ----------
Total assets $2,579,841 $2,431,458 $2,171,767
========== ========== ==========
Liabilities and Shareholders'
Investment
Interest-bearing deposits
Savings and money market
accounts $ 711,858 $ 19,618 2.76% $ 623,769 $ 16,403 2.63% $ 506,670 $ 16,517 3.26%
Other time deposits 772,485 34,623 4.48 717,977 29,759 4.14 682,799 35,329 5.17
------------------------------------ ----------- --------- -------- ------------ --------- -------- ----------- --------- -------
Total interest-bearing deposits 1,484,343 54,241 3.65 1,341,746 46,162 3.44 1,189,469 51,846 4.36
------------------------------------ ----------- --------- -------- ------------ --------- -------- ----------- --------- -------
Federal funds purchased and
securities sold under agreements
to repurchase 134,444 5,502 4.09 122,103 3,514 2.88 120,173 3,995 3.32
Other borrowings 89,893 3,917 4.36 110,847 3,565 3.22 106,944 3,662 3.42
Long-term debt _ _ _ 6,997 592 8.46 8,327 700 8.41
------------------------------------ ----------- --------- -------- ------------ --------- -------- ----------- --------- -------
Total interest-bearing liabilities 1,708,680 63,660 3.73 1,581,693 53,833 3.40 1,424,913 60,203 4.23
------------------------------------ ----------- --------- -------- ------------ --------- -------- ----------- --------- -------
Demand deposits 616,552 615,567 551,121
Other liabilities 25,215 26,061 24,887
Shareholders' investment 229,394 208,137 170,846
---------- ---------- ----------
Total liabilities and shareholders'
investment $2,579,841 $2,431,458 $2,171,767
========== ========== ==========
Interest income/earning assets $143,556 6.56% $130,721 6.39% $126,724 6.99%
Interest expense/earning assets 63,660 2.91 53,833 2.63 60,203 3.32
--------- ---- ------- ---- ------- ----
Net interest margin $ 79,896 3.65% $ 76,888 3.76% $ 66,521 3.67%
========= ==== ======= ==== ======= ====
<FN>
(1) Income and rates shown on a tax-equivalent basis have been computed based on the statutory rate of 35% for 1994 and 1993 and
34% for the years 1992, 1991 and 1990.
(2) Includes nonaccrual loans.
(3) Includes available for sale securities at amortized cost for all years presented.
</TABLE>
<TABLE>
------------------------------------------------------------------------------------------------
Average Balances/Net Interest Margin/Rates (1)
------------------------------------------------------------------------------------------------
<CAPTION>
For the Year 1991 1990
------------------------------------------------------------------------------------------------
Average Average Average Average
(In thousands) Balance Interest Rate Balance Interest Rate
----------------------------------- ------------ --------- ------- ------------ ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Assets
Loans (2) $ 757,411 $ 70,071 9.25% $ 749,585 $ 77,647 10.36%
Investment securities (3)
Taxable 695,851 56,897 8.18 577,629 50,513 8.74
Nontaxable 56,989 4,798 8.42 59,680 5,039 8.44
Trading account securities 7,373 516 7.00 6,851 577 8.42
----------------------------------- ------------ --------- ------- ------------ ---------- -----
Total securities 760,213 62,211 8.18 644,160 56,129 8.71
----------------------------------- ------------ --------- ------- ------------ ---------- -----
Federal funds sold and securities
purchased under agreements to
resell and other 264,903 15,256 5.76 308,635 25,016 8.11
----------------------------------- ------------ --------- ------- ------------ ---------- -----
Total earning assets 1,782,527 147,538 8.28 1,702,380 158,792 9.33
----------------------------------- ------------ --------- ------- ------------ ---------- -----
Cash and due from banks-
noninterest-bearing 253,855 269,404
Reserve for loan losses (24,470) (29,569)
Other assets 152,310 165,165
--------- ---------
Total assets $2,164,222 $2,107,380
========= =========
Liabilities and Shareholders'
Investment
Interest-bearing deposits
Savings and money market
accounts $ 436,162 $22,097 5.07% $ 391,565 $21,572 5.51%
Other time deposits 718,295 50,528 7.03 726,888 58,547 8.05
----------------------------------- ------------ --------- ------- ------------ ---------- -----
Total interest-bearing deposits 1,154,457 72,625 6.29 1,118,453 80,119 7.16
----------------------------------- ------------ --------- ------- ------------ ---------- -----
Federal funds purchased and
securities sold under agreements
to repurchase 170,608 9,352 5.48 204,766 15,781 7.71
Other borrowings 121,719 6,468 5.31 72,736 5,750 7.91
Long-term debt 10,547 977 9.26 11,624 1,094 9.41
----------------------------------- ------------ --------- ------- ------------ ---------- -----
Total interest-bearing
liabilities 1,457,331 89,422 6.14 1,407,579 102,744 7.30
----------------------------------- ------------ --------- ------- ------------ ---------- -----
Demand deposits 521,544 520,423
Other liabilities 26,984 27,726
Shareholders' investment 158,363 151,652
----------------------------------- ------------ --------- ------- ------------ ---------- -----
Total liabilities and
shareholders' investment $2,164,222 $2,107,380
========= =========
Interest income/earning assets $147,538 8.28% $158,792 9.33%
Interest expense/earning assets 89,422 5.02 102,744 6.04
------- ---- ------- ----
Net interest margin $ 58,116 3.26% $ 56,048 3.29%
======= ==== ======= ====
<FN>
(1) Income and rates shown on a tax-equivalent basis have been computed based on the statutory rate
of 35% for 1994 and 1993 and 34% for the years 1992, 1991 and 1990.
(2) Includes nonaccrual loans.
(3) Includes available for sale securities at amortized cost for all years presented.
</TABLE>
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET Liberty Bancorp, Inc.
--------------------------------------------------------------------------------
December 31,(In thousands, except share data) 1994 1993
--------------------------------------------------------------------------------
Assets
Cash and due from banks
Noninterest-bearing $ 361,953 $ 310,127
Interest-bearing 1,103 2,587
Federal funds sold and securities purchased under
agreements to resell 52,900 24,565
--------------------------------------------------------------------------------
Total cash and cash equivalents 415,956 337,279
--------------------------------------------------------------------------------
Trading securities 21,207 1,891
Investment securities
Available for sale 656,135 766,827
Held to maturity 416,084 463,084
Equity 18,455 18,628
--------------------------------------------------------------------------------
Total investment securities 1,090,674 1,248,539
--------------------------------------------------------------------------------
Loans 1,179,779 930,941
Less: Reserve for loan losses (19,081) (19,986)
--------------------------------------------------------------------------------
Loans, net 1,160,698 910,955
--------------------------------------------------------------------------------
Property and equipment, net 68,471 64,152
Accounts receivable 25,642 17,639
Accrued income receivable 25,354 23,675
Deferred tax asset, net 21,661 13,584
Other real estate and assets owned, net 5,328 10,844
Other assets 48,708 31,218
--------------------------------------------------------------------------------
Total assets $2,883,699 $2,659,776
================================================================================
Liabilities and Shareholders' Investment
Deposits
Noninterest-bearing $ 728,240 $ 689,227
Interest-bearing 1,645,947 1,435,917
--------------------------------------------------------------------------------
Total deposits 2,374,187 2,125,144
--------------------------------------------------------------------------------
Other borrowings
Federal funds purchased and securities sold under
agreements to repurchase 139,700 116,486
Other 90,452 161,626
Accrued interest, expenses and taxes 17,606 15,503
Accounts payable 26,339 11,621
Other liabilities 1,035 2,151
--------------------------------------------------------------------------------
Total liabilities 2,649,319 2,432,531
--------------------------------------------------------------------------------
Shareholders' Investment
Common stock ($.01 par value; 50,000,000 shares
authorized) 95 95
1994 1993
---------------------------------------------
Shares issued 9,488,428 9,477,870
Shares outstanding 9,474,413 9,477,819
Capital surplus 211,733 211,708
Retained earnings 31,972 11,785
Treasury stock, at cost _ 14,015 shares at December 31,
1994 and 51 shares at December 31, 1993 (435) (1)
Unrealized security gains (losses), net of tax (6,854) 6,184
Deferred compensation (2,131) (2,526)
--------------------------------------------------------------------------------
Total shareholders' investment 234,380 227,245
--------------------------------------------------------------------------------
Total liabilities and shareholders' investment $2,883,699 $2,659,776
================================================================================
The accompanying notes are an integral part of these consolidated
financial statements.
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF INCOME Liberty Bancorp, Inc.
--------------------------------------------------------------------------------
For the year (In thousands, except per share data) 1994 1993 1992
--------------------------------------------------------------------------------
Interest Income
Loans $ 81,698 $ 62,093 $ 54,982
Investments
Taxable 54,076 60,261 58,137
Nontaxable 2,899 2,765 3,058
Trading 221 199 383
Federal funds sold and other 2,446 3,083 7,546
--------------------------------------------------------------------------------
Total interest income 141,340 128,401 124,106
--------------------------------------------------------------------------------
Interest Expense
Deposits 54,241 46,162 51,846
Other borrowings 9,419 7,079 7,657
Long-term notes _ 592 700
--------------------------------------------------------------------------------
Total interest expense 63,660 53,833 60,203
--------------------------------------------------------------------------------
Net Interest Income 77,680 74,568 63,903
--------------------------------------------------------------------------------
Provision for loan losses _ (7,363) 1,793
--------------------------------------------------------------------------------
Net Interest Income After Provision for
Loan Losses 77,680 81,931 62,110
--------------------------------------------------------------------------------
Noninterest Income
Trust fees 15,582 15,508 15,523
Service charges on deposits 14,603 12,925 10,900
Mortgage banking income 6,242 7,449 7,391
Trading account profits and commissions 4,176 4,591 3,713
Loan fees 2,047 1,992 2,053
Credit card fees 2,041 1,402 1,286
Net securities gains 1,174 2,750 11
Other 13,196 10,099 7,779
--------------------------------------------------------------------------------
Total noninterest income 59,061 56,716 48,656
--------------------------------------------------------------------------------
Noninterest Expense
Salaries 43,542 44,701 37,643
Employee benefits 9,725 9,088 6,281
Equipment 9,408 8,094 6,785
Occupancy, net 9,065 8,806 7,336
Professional and other services 8,581 10,001 8,543
Data processing 6,498 5,901 5,866
Printing, postage and supplies 5,257 5,789 4,757
Deposit insurance assessments 4,387 4,564 3,814
Advertising and business development 3,535 4,382 3,119
Amortization of intangibles, including
purchased mortgage servicing rights 2,429 6,741 3,528
Net income from operation of other real
estate and assets owned (3,225) (3,408) (5,982)
Other 12,569 14,069 10,861
--------------------------------------------------------------------------------
Total noninterest expense 111,771 118,728 92,551
--------------------------------------------------------------------------------
Income Before Provision (Benefit) for
Income Taxes 24,970 19,919 18,215
Provision (benefit) for income taxes (906) (2,358) 4,737
--------------------------------------------------------------------------------
Income Before Cumulative Effect of Change in
Accounting Principle and Extraordinary Item 25,876 22,277 13,478
Cumulative effect of change in accounting
principle _ 14,255 _
Extraordinary item-use of net operating loss
carryforwards _ _ 4,640
--------------------------------------------------------------------------------
Net Income $25,876 $36,532 $18,118
================================================================================
Income Per Share (Primary and Fully-Diluted)
Income before cumulative effect of change in
accounting principle $2.64 $2.28 $1.49
and extraordinary item
Cumulative effect of change in accounting
principle _ 1.46 _
Extraordinary item - use of net operating loss
carryforwards _ _ .52
--------------------------------------------------------------------------------
Net Income - Primary and Fully-Diluted $2.64 $3.74 $2.01
================================================================================
The accompanying notes are an integral part of these consolidated
financial statements.
<TABLE>
----------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF SHAREHOLDERS' INVESTMENT Liberty Bancorp, Inc.
----------------------------------------------------------------------------------------------
<CAPTION>
Unrealized
Retained Security Total
Common Capital Earnings Treasury Gains Deferred Shareholders'
(Dollars in thousands) Stock Surplus (Deficit) Stock (Losses) Compensation Investment
----------------------------------------- ------ ---------- ------------- --------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1991 $877 $202,781 ($40,705) ($ 1) $ _ ($3,176) $159,776
Net income _ _ 18,118 _ _ _ 18,118
Par value change (1) (790) 790 _ _ _ _ _
Amortization of deferred compensation _ _ _ _ _ 352 352
Common stock issued (43,182
common shares) 1 594 _ _ _ _ 595
----------------------------------------- ------ ---------- ------------- --------- ---------- ------------- -----------
Balance December 31, 1992 88 204,165 (22,587) (1) _ (2,824) 178,841
Common stock issued in
acquisitions (637,312 shares) 6 6,850 542 _ _ _ 7,398
Net income _ _ 36,532 _ _ _ 36,532
Dividends paid ($.30 per share) _ _ (2,702) _ _ _ (2,702)
Amortization of deferred compensation _ _ _ _ _ 483 483
Unrealized gains on available for sale
securities, net of tax _ _ _ _ 6,184 _ 6,184
Purchase of treasury stock
(16,106 shares) _ _ _ (440) _ _ (440)
Common and treasury stock issued
(25,108 common and 16,106
treasury shares) 1 693 _ 440 _ (185) 949
----------------------------------------- ------ ---------- ------------- _-------- ---------- ------------- -----------
Balance December 31, 1993 95 211,708 11,785 (1) 6,184 (2,526) 227,245
Net income _ _ 25,876 _ _ _ 25,876
Dividends paid ($.60 per share) _ _ (5,689) _ _ _ (5,689)
Amortization of deferred compensation _ _ _ _ _ 505 505
Change in unrealized gains (losses) on
available for sale securities,
net of tax _ _ _ _ (13,038) _ (13,038)
Purchase of treasury stock
(41,894 shares) _ _ _ (1,257) _ _ (1,257)
Common and treasury stock issued
(10,558 common and 27,930
treasury shares) _ 25 _ 823 _ (110) 738
----------------------------------------- ------ ---------- ------------- --------- ---------- ------------- -----------
Balance December 31, 1994 $ 95 $211,733 $31,972 ($ 435) ($6,854) ($2,131) $234,380
========================================= ====== ========== ============= ========= ========== ============= ===========
<FN>
(1) In conjunction with Liberty's reincorporation under Oklahoma law, effective May 26, 1992, the par value of common
stock was changed from $.10 to $.01 per share. Additionally, the number of common shares authorized was
reduced from 125,000,000 to 50,000,000.
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
-------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS Liberty Bancorp, Inc.
-------------------------------------------------------------------------------
For the year (In thousands) 1994 1993 1992
-------------------------------------------------------------------------------
Cash provided (absorbed) by operating activities
Net income $ 25,876 $ 36,532 $ 18,118
Adjustments to reconcile net income to net cash
provided (absorbed) by operating activities:
Provisions for losses 1,400 (7,335) 407
Cumulative effect of change in accounting
principle _ (14,255) _
Extraordinary item - use of net operating
loss carryforwards _ _ (4,640)
Provision (benefit) for income taxes (906) (2,358) 4,737
Depreciation and amortization 9,322 12,833 8,018
Net amortization (accretion) of investment
securities 12,460 12,125 (340)
Gain on sale of assets (9,346) (9,418) (7,267)
Change in trading account securities (14,586) 5,265 6,582
Loans made for purposes of resale (148,102) (143,722) (121,993)
Proceeds from sale of loans held for resale 70,113 116,748 124,955
Change in accrued interest, expenses and
taxes, accounts payable and other
liabilities (78) (3,423) (19,882)
Change in accrued income receivable,
accounts receivable and other assets (15,368) (11,752) 36,135
-------------------------------------------------------------------------------
Net cash provided (absorbed) by
operating activities (69,215) (8,760) 44,830
-------------------------------------------------------------------------------
Cash provided (absorbed) by investing activities
Proceeds from maturities and paydowns on
Available for sale securities 124,299 68,031 _
Held to maturity securities 71,634 330,992 265,814
Proceeds from sales of
Available for sale securities 749,596 301,240 86,933
Held to maturity securities _ 199,668 123,843
Equity securities 1,455 7,063 14,252
Purchases of
Available for sale securities (788,831) (495,540) (134,861)
Held to maturity securities (30,348) (531,370) (493,042)
Equity securities (641) (11,262) (15,422)
Change in net loans made by bank subsidiaries (167,911) (109,283) 168,550
Principal payments received on loans made by
parent company and nonbank subsidiaries 5,730 1,545 2,226
Loans made to customers by nonbank subsidiaries (6,659) (2,370) (212)
Expenditures for property and equipment (11,549) (16,111) (5,777)
Proceeds from sale of property and equipment 44 487 164
Sale proceeds and collections from other real
estate and assets acquired in settlement of
loans 9,052 9,938 27,489
Cash and cash equivalents received in financial
institution acquisitons, net of consideration _ (1,552) 5,814
Proceeds from sales of mortgage servicing
contracts 1,301 _ _
Purchases of mortgage servicing contracts (4,155) (191) (3,176)
-------------------------------------------------------------------------------
Net cash provided (absorbed) by investing
activities (46,983) (248,715) 42,595
-------------------------------------------------------------------------------
Cash provided (absorbed) by financing activities
Change in savings and demand deposits 111,065 50,264 28,880
Change in time deposits 137,978 (73,734) (41,891)
Change in short-term borrowings (47,960) (7,709) (79,094)
Payment on long-term notes _ (7,627) (2,377)
Proceeds from issuance of common and treasury
stock 738 949 595
Purchase of treasury stock (1,257) (440) _
Dividends paid on common stock (5,689) (2,702) _
-------------------------------------------------------------------------------
Net cash provided (absorbed) by financing
activities 194,875 (40,999) (93,887)
-------------------------------------------------------------------------------
Net change in cash and cash equivalents 78,677 (298,474) (6,462)
Cash and cash equivalents at beginning of year 337,279 635,753 642,215
-------------------------------------------------------------------------------
Cash and cash equivalents at end of year $415,956 $337,279 $635,753
===============================================================================
The accompanying notes are an integral part of these consolidated
financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Liberty Bancorp, Inc.
Note 1 Accounting Policies
The accounting and reporting policies of Liberty Bancorp, Inc. ("Liberty")
reflect industry practices and are in accordance with generally accepted
accounting principles. Certain reclassifications have been made to provide con-
sistent financial statement classifications in the periods presented herein.
Such reclassifications had no effect on net income or total assets. The more
significant accounting policies are described below.
Consolidation - The consolidated financial statements include the accounts
of the parent company and all significant subsidiaries including Liberty Bank
and Trust Company of Oklahoma City, N.A. ("Liberty Oklahoma City") and Liberty
Bank and Trust Company of Tulsa, N.A. ("Liberty Tulsa"). All significant
intercompany accounts and transactions have been eliminated in the accompanying
consolidated financial statements.
Investment and Trading Account Securities - Securities purchased for
trading purposes are held in the trading portfolio at estimated market value,
with unrealized gains and losses reported in earnings. Securities that are
being held for indefinite periods of time, including securities that management
intends to use as part of its asset/liability management strategy, or that may
be sold in response to changes in interest rates, changes in prepayment risk,
the need to increase regulatory capital or other situations are classified as
available for sale and are carried at estimated market value with unrealized
gains and losses reported as a separate component of shareholders' investment,
net of income tax. Other debt securities that management has the ability and
intent to hold to maturity are classified as held to maturity and are carried
at cost, adjusted for amortization of premiums and accretion of discounts.
Equity securities which do not have a readily determinable market value are
carried at cost. Gains and losses on the sale of investment securities are
reported as of the trade date and are included as a component of noninterest
income. Applicable income taxes are included in the provision for income taxes
in the accompanying consolidated statement of income. Gains and losses are
determined by the use of the specific cost identification method.
Loans - Loans are placed on nonaccrual status when they become 90 days
past due unless their collateral position or other conditions warrant continued
accrual status. Previously accrued but uncollected interest on these loans is
usually reversed. Interest on nonaccrual loans is recognized only as it is re-
ceived and only to the extent that the collectibility of the principal is not
in doubt. Loan fees are deferred and recognized over the commitment and/or loan
period. Fees that are an adjustment of yield are included in interest income
and all other fees are included in noninterest income. Costs associated with
the origination of loans are expensed as incurred rather than capitalized and
amortized, as the amount is not considered material. Loans which Liberty does
not intend or does not expect to hold until maturity are identified as held for
sale. These loans are carried at the lower of cost or estimated market value.
Gains and losses on the sale of loans held for sale are determined by the use
of the specific identification method and are reflected as a component of
noninterest income.
Reserve for Loan Losses - The reserve for loan losses is established by
charges to income. The reserve is an amount which management believes will be
adequate to absorb losses on existing loans that become uncollectible. The
level of the reserve is based on a number of factors, including the collection
of loans and the evaluation of underlying collateral values, loss experience,
identification and review of specific problem loans, overall quality of the
portfolios, and current business and economic conditions. The adequacy of the
reserve is periodically reviewed and approved by the Board of Directors. Ul-
timate losses, however, may differ from the current estimates. To the extent
that adjustments to increase or decrease the reserve for loan losses become
necessary, they are reported in earnings in the periods in which they become
known. It is Liberty's policy to charge off any loan or portion thereof when it
is deemed uncollectible in the ordinary course of business. Loan losses and
recoveries are charged or credited directly to the reserve for loan losses.
Other Real Estate and Assets Owned - Other real estate and assets owned
are carried at the lower of loan carrying amount or fair value, net of
estimated selling costs. Write-downs at the time of acquisition are accounted
for as loan losses. The reserve for losses on other real estate and assets
owned is established by charges to income. The reserve is an amount which
management believes will be adequate to absorb inherent losses from the dispo-
sition and/or decreases in fair value of those properties. Losses and
subsequent writedowns are charged to the reserve for other real estate and
assets owned. Operating income received and gains from the subsequent disposi-
tion of these assets are included as a component of net income from operation
of other real estate and assets owned.
Property and Equipment - Property and equipment are stated at cost, less
accumulated depreciation and amortization. Depreciation is computed on a
straight-line basis over the estimated useful lives of the assets. Leasehold
improvements are amortized over the estimated useful lives of the assets or the
terms of the leases, whichever is shorter. Maintenance and repairs are charged
to expense as incurred.
Intangible Assets - Intangible assets consist primarily of premiums paid
as a result of branch and bank acquisitions and purchased mortgage servicing
rights. These assets are included as a component of other assets and amounted
to $12,403,000 and $13,892,000, net of accumulated amortization totaling
$14,847,000 and $17,233,000, at December 31, 1994 and 1993, respectively. The
intangible assets, other than purchased mortgage servicing rights, are being
amortized over their estimated lives (ranging from 10 to 18 years) by either
the straight-line or interest methods. Purchased mortgage servicing rights,
which totaled $3,397,000 and $3,728,000 at the end of 1994 and 1993,
respectively, are being amortized over the estimated servicing lives of the
loans to which they relate in proportion to net servicing income.
Income Taxes - Effective January 1, 1993, deferred income taxes are
provided to reflect the future tax consequences of differences between the tax
bases of assets and liabilities and their reported amounts in the consolidated
balance sheet. Prior to January 1, 1993 deferred taxes, if any, were provided
for timing differences between items of income or expense reported for
financial statement purposes and those reported for income tax purposes.
Transactions with Related Parties - In the ordinary course of business,
directors of Liberty, members of the advisory board, executive officers and
principal shareholders of Liberty and their associates engage in business
transactions with Liberty. These transactions are conducted on substantially
the same terms as those prevailing at the time for comparable transactions with
other persons and, in management's opinion, do not involve more than normal
risk or present other unfavorable features.
Earnings per Share - Earnings per share is calculated using Liberty's
weighted average common and common-equivalent shares (primarily stock options)
outstanding during the periods. The weighted average number of shares used to
compute primary and fully-diluted earnings per share are presented as follows:
-------------------------------------------------------------------------------
(In thousands) 1994 1993 1992
-------------------------------------------------------------------------------
Weighted average shares outstanding
Primary 9,801 9,765 8,995
Fully-diluted 9,801 9,765 9,061
Statement of Cash Flows - For purposes of reporting cash flows, cash and cash-
equivalents represent cash and due from banks, including interest-bearing
deposits with original maturities less than 90 days, federal funds sold and
securities purchased under agreements to resell. Supplemental cash flow
information includes the following:
-------------------------------------------------------------------------------
(In thousands) 1994 1993 1992
-------------------------------------------------------------------------------
Cash paid for
Interest $60,464 $54,899 $64,979
Income taxes 2,079 762 100
Noncash items included in investing activities
Loans transferred to other real estate and
assets owned _ 1,559 1,203
Loans made to finance the sale of other real
estate and assets owned 1,980 630 10,156
Receipt of preferred stock as partial proceeds
for sale of other assets 700 _ _
Note 2 Acquisitions
Purchase Transactions _ On August 1, and October 1, 1993, Liberty acquired
the First Oklahoma Bank and Trust Co. of Edmond and The First National Bank of
Edmond, respectively, for a total cash purchase price of $20,148,000. The
transactions were accounted for as purchases. Total assets acquired amounted
to approximately $142,155,000. For each of these acquisitions, the
consolidated statement of income includes only the income and expense of the
acquired banks since acquisition. The purchase price was allocated to the net
assets acquired based on their estimated fair values with the excess allocated
to cost in excess of net assets acquired. The effect on Liberty's results of
operations for 1993, had these transactions occurred at the beginning of the
year, was not significant. There were no significant purchases in either 1994
or 1992.
Poolings-of-Interest _ The following table presents the business
combinations which occurred during 1993 accounted for as poolings-of-interests.
A total of 637,312 shares of common stock were issued in connection with these
business combinations. The consolidated statement of income for 1992 has not
been restated due to the immateriality of each business combination.
Adjustments to conform the acquired banks' accounting policies to those of
Liberty were not material.
-------------------------------------------------------------------------------
Assets
(In thousands) Acquired
-------------------------------------------------------------------------------
First National Bank of Jenks $ 33,408
Midwest National Bank 38,581
Bank of Tulsa 62,820
-------------------------------------------------------------------------------
Total $134,809
===============================================================================
The following table shows the effect of the three banks' 1993 results of
operations prior to combination.
-------------------------------------------------------------------------------
Pooled
(In thousands) Liberty Banks Combined
-------------------------------------------------------------------------------
Interest income $121,285 $7,116 $128,401
Net interest income 70,074 4,494 74,568
Cumulative effect of change in accounting
principle 14,412 (157) 14,255
Net income (loss) 36,643 (111) 36,532
There were no poolings-of-interest in either 1994 or 1992.
Note 3 Cash and Due from Banks
As members of the Federal Reserve System, Liberty's subsidiary banks are
required to maintain certain cumulative reserve balances based on deposits.
Actual reserve balances amounted to $31,465,000 and $29,877,000, respectively,
at December 31, 1994 and 1993, and averaged $34,237,000 and $26,603,000 for
1994 and 1993, respectively. These reserve balances are included in cash and
due from banks in the accompanying consolidated balance sheet. This balance
sheet category also includes checks in process of collection, and cash balances
maintained at correspondent banks for services rendered.
Note 4 Investment and Trading Securities
As of December 31, 1993, Liberty changed its method of accounting for
certain investment securities as allowed by Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS No. 115"). This standard recognizes unrealized gains and
losses on available for sale securities, net of income taxes, as a component of
shareholders' investment. At December 31, 1994 this component for losses
totaled $6,854,000 compared to a gain position at December 31, 1993 of
$6,184,000.
The following table is a summary of investment securities at December 31,
1994 and 1993.
<TABLE>
<CAPTION>
---------------------- ------------- ------- ------------ ----------- ------------ ---------- -------- --------
1994 1993
---------------------- ------------- ------- ------------ ----------- ------------ ---------- -------- --------
Gross Gross Extimated Gross Gross Estimated
Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market
(In thousands) Cost Gains Losses Value Cost Gains Losses Value
---------------------- ------------- ------- ------------ ----------- ------------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Available for Sale
U.S. Treasury $ 608,673 $ 223 ($ 9,624) $ 599,272 $ 597,269 $8,375 ($ 58) $ 605,586
U.S. Government
agencies
Mortgage-backed 24,105 11 (477) 23,639 225 1 _ 226
Other 9,577 49 (80) 9,546 107,448 1,165 (63) 108,550
State and political 499 _ (9) 490 9,369 25 (1) 9,393
Corporate debt
and other 23,827 _ (639) 23,188 43,004 158 (90) 43,072
---------------------- ------------- ------- ------------ ----------- ------------ ---------- -------- ----------
Total $ 666,681 $ 283 ($10,829) $ 656,135 $ 757,315 $9,724 ($212) $ 766,827
====================== ============= ======= ============ =========== ============ ========== ======== ==========
Held to Maturity
U.S. Treasury $ 53,793 $ 19 ($ 8,022) $ 45,790 $ 54,478 $ 173 ($732) $ 53,919
U.S. Government
agencies
Mortgage-backed 218,942 1,921 (2,997) 217,866 216,519 4,442 (508) 220,453
Other _ _ _ _ 51,467 1,337 _ 52,804
State and political 71,945 161 (3,372) 68,734 63,346 2,363 (313) 65,396
Corporate debt
and other 71,404 _ (3,579) 67,825 77,274 20 (1,033) 76,261
---------------------- ------------- ------- ------------ ----------- ------------ ---------- -------- ----------
Total $ 416,084 $2,101 ($17,970) $ 400,215 $ 463,084 $ 8,335 ($2,586) $ 468,833
====================== ============= ======= ============ =========== ============ ========== ======== ==========
Equity $ 18,455 $4,178 $ _ $ 22,633 $ 18,628 $ 2,688 $ _ $ 21,316
====================== ============= ======= ============ =========== ============ ========== ======== ==========
Total Securities $1,101,220 $6,562 ($28,799) $1,078,983 $1,239,027 $20,747 ($2,798) $1,256,976
====================== ============= ======= ============ =========== ============ ========== ======== ==========
</TABLE>
The following table is a summary of trading securities at December 31, 1994 and
1993.
<TABLE>
<CAPTION>
---------------------- ------------- ------- ------------ ----------- ------------ ---------- -------- --------
1994 1993
---------------------- ------------- ------- ------------ ----------- ------------ ---------- -------- --------
Gross Gross Extimated Gross Gross Estimated
Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market
(In thousands) Cost Gains Losses Value Cost Gains Losses Value
---------------------- ------------- ------- ------------ ----------- ------------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Trading securities
U.S. Treasury $19,440 _ _ $19,440 $ 195 _ _ $ 195
U.S. Government
Agencies
Mortgage-backed 522 _ _ 522 _ _ _ _
Other _ _ _ _ 660 _ _ 660
State and political 1,245 _ _ 1,245 1,036 _ _ 1,036
---------------------- ------------- ------- ------------ ----------- ------------ ---------- -------- --------
Total $21,207 _ _ $21,207 $1,891 _ _ $1,891
====================== ============= ======= ============ =========== ============ ========== ======== ========
</TABLE>
The estimated market values of investment and trading securities are based
upon available market data and estimates, which often reflect transactions of
relatively small size and are not necessarily indicative of the price at which
large amounts of particular issues could be readily sold.
The carrying value and estimated market value of debt securities at
December 31, 1994 are shown below by contractual maturity. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or repay obligations with or without call or prepayment penalties.
------------------------------------------------------------------------------
Estimated
Amortized Market
(In thousands) Cost Value
------------------------------------------------------------------------------
Available for sale
Due within one year $371,316 $368,995
Due after one but within five years 255,312 247,963
Due after five but within ten years 15,528 15,128
Due after ten years 82 81
Mortgage-backed 24,443 23,968
------------------------------------------------------------------------------
Total $666,681 $656,135
==============================================================================
Held to maturity
Due within one year $ 28,196 $ 28,002
Due after one but within five years 71,691 68,066
Due after five but within ten years 13,082 12,635
Due after ten years 84,173 73,646
Mortgage-backed 218,942 217,866
------------------------------------------------------------------------------
Total $416,084 $400,215
==============================================================================
Proceeds from sales of investment securities during 1994 were $751,334,000
compared to $507,971,000 and $225,028,000 in 1993 and 1992, respectively.
Gross gains on sales amounted to $1,951,000, $3,114,000 and $137,000 along with
gross losses of $777,000, $364,000 and $126,000 for the respective years 1994,
1993 and 1992.
Dividends on investments totaled $1,638,000 for 1994 compared to
$1,863,000 for 1993 and $1,153,000 for 1992.
Securities with carrying values of approximately $903,911,000 at December
31, 1994 were pledged to secure public and trust deposits and for other
purposes as required or permitted by law.
In October 1994, the FASB issued SFAS No. 119, "Disclosure About
Derivative Financial Instruments and Fair Value of Financial Instruments."
SFAS No. 119 is effective for fiscal years ending after December 15, 1994.
SFAS No. 119 requires disclosures about off-balance sheet derivative financial
instruments such as futures, forwards, swaps, option contracts and other off-
balance sheet financial instruments with similar characteristics. Liberty does
not engage in these types of transactions; therefore, the adoption of SFAS No.
119 had no impact on Liberty's consolidated financial statements.
Note 5 Loans
The composition of the loan portfolio is shown below.
-------------------------------------------------------------------------------
Loans
-------------------------------------------------------------------------------
(In thousands) 1994 1993
-------------------------------------------------------------------------------
Commercial and other $ 488,400 $376,454
Energy 71,883 57,089
Real estate _ construction 97,344 85,566
Real estate _ mortgage 244,809 172,652
Correspondent and regional 19,266 17,336
Personal 233,654 195,392
Mortgage loans held for sale 24,423 26,452
-------------------------------------------------------------------------------
Total (1) $1,179,779 $930,941
===============================================================================
(1) Includes unearned income of $2,638,000 and $3,525,000 at December 31, 1994
and 1993, respectively.
Loans to executive officers and directors (or their associates) of Liberty
and its principal subsidiaries and loans guaranteed by such persons are con-
sidered related-party loans. The aggregate amount of such loans is presented in
the following table.
-------------------------------------------------------------------------------
Related Party Loans
-------------------------------------------------------------------------------
(In thousands)
-------------------------------------------------------------------------------
Balance at beginning of year $16,571
Advances 848
Payments (7,452)
-------------------------------------------------------------------------------
Balance at end of year $ 9,967
===============================================================================
The following table summarizes the components of nonperforming loans.
-------------------------------------------------------------------------------
Nonperforming Loans
-------------------------------------------------------------------------------
(In thousands) 1994 1993 1992
-------------------------------------------------------------------------------
Nonaccrual $ 7,808 $10,138 $19,244
Past due 90 days or more 3,748 3,313 487
-------------------------------------------------------------------------------
Total $11,556 $13,451 $19,731
===============================================================================
Generally, the largest concentrations of nonperforming loans for 1994,
1993 and 1992 were in the real estate and commercial categories.
The gross interest income from nonaccrual loans outstanding at year-end,
had they been performing in accordance with their original terms, would have
been approximately $932,000 for 1994, $1,109,000 for 1993 and $1,493,000 for
1992. The amount of interest included in interest income from these loans was
approximately $133,000 in 1994, $64,000 in 1993, and $37,000 in 1992.
In addition, Liberty had certain loans which, although currently
performing, have credit weaknesses such that doubts exist as to the borrowers'
future ability to comply with present terms. At December 31, 1994, these po-
tential problem loans totaled $177,000 compared to $16,979,000 at December 31,
1993 and $5,147,000 at December 31, 1992. The decrease at year-end 1994 was
primarily attributable to the repayment of one large problem loan relationship
during 1994. The balances at December 31, 1993 and 1992 included approximately
$98,000 and $415,000, respectively, in letters of credit and unfunded loan com-
mitments. There were no unfunded balances in potential problem loans at the end
of 1994. The principal portion of these loans and commitments exposed to loss
has been considered in the establishment of the reserve for loan losses.
The following is an analysis of the reserve for loan losses.
-------------------------------------------------------------------------------
Reserve for Loan Losses
-------------------------------------------------------------------------------
(In thousands) 1994 1993 1992
-------------------------------------------------------------------------------
Balance at beginning of year $19,986 $25,581 $25,988
Additions
Recoveries 1,281 2,400 2,335
Provisions _ (7,363) 1,793
Reserves of acquired banks _ 1,241 70
Less _ Charge-offs (2,186) (1,873) (4,605)
-------------------------------------------------------------------------------
Balance at end of year $19,081 $19,986 $25,581
===============================================================================
In May 1993, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 114, "Accounting by Creditors for Impairment of a Loan" ("SFAS No. 114"),
and in October 1994, the FASB issued SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan _ Income Recognition and Disclosures." Both SFAS No. 114
and SFAS No. 118 are effective for fiscal years beginning after December 15,
1994. SFAS No. 114 addresses the accounting by creditors for impairment of a
loan by specifying how reserves for losses related to impaired loans, as
defined, shall be determined. A discounted cash flow analysis using the
original contractual interest rate as the discount rate or use of the fair
value of the collateral for collateral dependent loans is required for loans
meeting the definition of impaired. If the discounted value is less than the
contractual balance, the difference must be provided for through the reserve
for loan losses. SFAS No. 118 amends SFAS No. 114 to require information about
the recorded investment in certain impaired loans as well as how interest
income related to those impaired loans is recognized. This adoption will not
have a material adverse effect on Liberty's financial position when adopted in
1995, based on impaired loans, as defined, at December 31, 1994.
.
Note 6 Property and Equipment
Property and equipment is stated at cost as follows.
-------------------------------------------------------------------------------
Extimated
Useful
(In thousands) 1994 1993 Lives
-------------------------------------------------------------------------------
Land $ 10,433 $ 9,745 N/A
Buildings and other bank premises 64,116 59,649 3-40 Years
Leasehold improvements 7,497 8,264 5-40 Years
Equipment, furniture and fixtures and other 43,500 37,071 3-10 Years
-------------------------------------------------------------------------------
Total property and equipment 125,546 114,729
Less _ Accumulated depreciation and
amortization (57,075) (50,577)
-------------------------------------------------------------------------------
Property and equipment, net $ 68,471 $ 64,152
===============================================================================
Depreciation and amortization expense for the years 1994, 1993 and 1992
was approximately $7,097,000, $5,365,000 and $4,577,000, respectively.
Note 7 Other Real Estate and Assets Owned
The following table summarizes the components of other real estate and
assets owned.
-------------------------------------------------------------------------------
Other Real Estate and Assets Owned
-------------------------------------------------------------------------------
(In thousands) 1994 1993 1992
-------------------------------------------------------------------------------
Land $4,522 $ 8,791 $14,516
Residential _ single-family 1,031 1,631 1,122
Commercial _ office buildings and motels 792 2,487 2,481
Other 25 456 2,543
-------------------------------------------------------------------------------
Total other real estate and assets owned 6,370 13,365 20,662
Less reserve for losses (1,042) (2,521) (5,001)
-------------------------------------------------------------------------------
Other real estate and assets owned, net $5,328 $10,844 $15,661
===============================================================================
An analysis of the reserve for losses on other real estate and assets
owned is presented below.
-------------------------------------------------------------------------------
Reserve for Losses on Other Real Estate and Assets Owned
-------------------------------------------------------------------------------
(In thousands) 1994 1993 1992
-------------------------------------------------------------------------------
Balance at beginning of year $2,521 $5,001 $11,447
Charge-offs (1,029) (1,515) (4,105)
Provisions for losses (450) (1,207) (2,341)
Reserve from acquired banks _ 242 _
-------------------------------------------------------------------------------
Balance at end of year $1,042 $2,521 $5,001
===============================================================================
Note 8 Interest-Bearing Deposits
The components of interest-bearing deposits are presented in the following
table.
-------------------------------------------------------------------------------
(In thousands) 1994 1993
-------------------------------------------------------------------------------
Savings and money market accounts $ 794,531 $ 722,479
Time _ $100 or more 206,720 131,829
Public funds 217,285 181,990
Other time deposits 427,411 399,619
-------------------------------------------------------------------------------
Balance at end of year $1,645,947 $1,435,917
===============================================================================
Time deposits over $100,000 include brokered deposits which totaled
$87,015,000 at December 31, 1994 compared to $5,100,000 at December 31, 1993.
Time deposits over $100,000 also include international deposits with the
branches of Liberty Oklahoma City and Liberty Tulsa in Nassau, The Bahamas of
$32,805,000 and $24,981,000 at December 31, 1994 and 1993, respectively.
Note 9 Other Borrowings
The components of other borrowings are presented below.
-------------------------------------------------------------------------------
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase
-------------------------------------------------------------------------------
(In thousands) 1994 1993 1992
-------------------------------------------------------------------------------
Borrowings outstanding
At year-end $139,700 $116,486 $144,400
Average for the year 134,444 122,103 120,173
Maximum month-end balance 219,662 167,608 144,400
Interest rates
Average for the year 4.1% 2.9% 3.3%
Average at end of year 4.9 2.9 2.5
-------------------------------------------------------------------------------
Treasury, Tax and Loan Deposits and Other Borrowings
-------------------------------------------------------------------------------
(In thousands) 1994 1993 1992
-------------------------------------------------------------------------------
Borrowings outstanding
At year-end $ 90,452 $161,626 $140,693
Average for the year 89,893 110,847 106,944
Maximum month-end balance 191,704 241,434 281,423
Interest rates
Average for the year 4.4% 3.2% 3.4%
Average at end of year 5.3 2.9 2.7
Federal funds purchased and securities sold under agreements to repurchase
are generally issued on an overnight or demand basis. Treasury, tax and loan
deposits and other borrowings generally have maturities of three years or
less. The fair value of these borrowings has been estimated to approximate
their carrying value.
Note 10 Income Taxes
Effective January 1, 1993, Liberty adopted SFAS No. 109, "Accounting for
Income Taxes." This standard requires, among other things, recognition of
future tax benefits, measured at enacted tax rates, attributable to deductible
temporary differences between financial statement and income tax bases of
assets and liabilities and to tax net operating loss carryforwards, to the
extent the realization of such benefits is more likely than not. Similarly,
future tax liabilities are also required to be recognized. The adoption of
SFAS No. 109 resulted in a net deferred asset and related benefit of $14.3
million or $1.46 per share on January 1, 1993. This change is reflected in the
consolidated statement of income as a cumulative effect of change in accounting
principle. The 1992 consolidated statement of income has not been restated.
The total provision (benefit) for income taxes has been allocated as
follows:
-------------------------------------------------------------------------------
(In thousands) 1994 1993 1992
-------------------------------------------------------------------------------
Income from continuing operations ($ 906) ($2,358) $4,737
Shareholders' investment (7,052) 3,362 _
-------------------------------------------------------------------------------
Total ($7,958) $1,004 $4,737
===============================================================================
The provision (benefit) for income taxes on income from continuing
operations before cumulative effect of change in accounting principle and
extraordinary item is summarized below:
-------------------------------------------------------------------------------
Provision (Benefit) for Income Taxes
-------------------------------------------------------------------------------
(In thousands) 1994 1993 1992
-------------------------------------------------------------------------------
Current expense $ _ $ 330 $ 97
Deferred expense (benefit) (906) (2,688) 4,640
-------------------------------------------------------------------------------
Total provision (benefit) for income taxes ($906) ($2,358) $4,737
===============================================================================
Deferred tax assets are composed of the following at December 31, 1994 and
1993.
-------------------------------------------------------------------------------
(In thousands) 1994 1993
-------------------------------------------------------------------------------
Deferred tax assets _
Net operating loss carryforwards $ 8,643 $12,913
Reserve for loan losses 6,678 6,807
Reserve for losses and writedowns on other real estate
and assets owned 4,107 6,061
Unrealized losses on investment securities for financial
reporting purposes 3,690 _
Other reserves for uninsured risk 2,901 3,039
Accelerated amortization of purchased mortgage servicing
rights 1,993 2,232
Tax credit carryforwards 1,975 1,975
Alternative minimum tax credit carryforward 1,012 359
Accrued compensation and benefits 806 984
Unrealized gains on investment securities for income tax
purposes _ 3,801
Other 1,353 1,147
-------------------------------------------------------------------------------
33,158 39,318
-------------------------------------------------------------------------------
Deferred tax liabilities _
Accelerated depreciation of property and equipment (6,987) (6,413)
Unrealized losses on investment securities for income tax
purposes (2,490) _
Unrealized gains on investment securities for financial
reporting purposes _ (3,362)
Income reported on the cash basis for income tax purposes _ (1,071)
-------------------------------------------------------------------------------
(9,477) (10,846)
-------------------------------------------------------------------------------
Net deferred tax asset 23,681 28,472
Valuation allowance (2,020) (14,888)
-------------------------------------------------------------------------------
Deferred tax asset, net $21,661 $13,584
===============================================================================
The effective income tax rates differ from the statutory federal income
tax rate of 35% in 1994 and 1993 and 34% in 1992. A reconciliation of the
provision (benefit) for income taxes based on the statutory rates with the
effective rates follows.
-------------------------------------------------------------------------------
(In thousands) 1994 1993 1992
-------------------------------------------------------------------------------
Income tax at statutory rate $8,739 $6,971 $6,193
Change in valuation allowance (8,363) (6,901) _
Nontaxable interest and dividend income (1,671) (1,805) (1,766)
Amortization of costs related to branch and other
bank acquisitions 306 137 204
Interest expense related to funding tax-exempt assets 98 53 99
Current year statutory rate change _ (406) _
Other, net (15) (407) 7
-------------------------------------------------------------------------------
Total provision (benefit) for income taxes ($ 906) ($2,358) $4,737
===============================================================================
At December 31, 1994, Liberty had net operating loss carryforwards
approximating $25,000,000. Approximately $1,000,000 of the net operating loss
carryforwards can be used to offset future taxable income through 2000. The
remaining net operating loss carryforwards can be used through 2009. Liberty
also has approximately $2,000,000 in investment tax credit carryforwards which
will expire through 2000. At December 31, 1994 Liberty also had approximately
$1,000,000 in alternative minimum tax credit carryforwards with no expiration.
Management had previously provided a valuation allowance for the expected
future tax benefit of all of Liberty's available net operating loss
carryforwards and investment tax credit carryforwards until a record of proven
taxable income had been established. During 1994, management determined that
these positive trends had been established and that based on Liberty's recent
history of earnings and its expectations for the future, it is more likely than
not that Liberty will receive benefit from its net operating loss
carryforwards. As a result, the valuation allowance at December 31, 1993 was
reduced by $8.4 million to give effect for this expected benefit. The
remaining change in the valuation allowance during 1994 of $4.5 million
represents the expiration of net operating loss carryforwards totaling
approximately $13.0 million.
Liberty's federal and state income tax returns have been examined by
and/or settled with the Internal Revenue Service ("IRS") through 1990. There
are currently no significant issues outstanding in this regard with either the
IRS or the Oklahoma Tax Commission.
Note 11 Shareholders' Investment
Liberty's cash dividends declared during 1994 totaled $.60 per share
compared with $.30 per share for 1993. Total dividends paid during 1994 were
$5,689,000 compared to $2,702,000 in 1993. Liberty Oklahoma City and Liberty
Tulsa are limited in their ability to pay dividends based on applicable
provisions of the National Bank Act pertaining to earnings and undivided
profits. As of January 1, 1994 the amount of retained earnings of Liberty
Oklahoma City and Liberty Tulsa available for the payment of dividends without
regulatory approval was approximately $29,893,000 and $13,425,000,
respectively.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") contains "prompt corrective action" provisions in which banks are
classified into one of five categories based primarily upon capital adequacy,
ranging from "well capitalized" to "critically undercapitalized" and which
require, subject to certain exceptions, the appropriate federal banking agency
to take prompt corrective action with respect to an institution which becomes
"undercapitalized" and to take additional actions if the institution becomes
"significantly undercapitalized" or "critically undercapitalized." At December
31, 1994, the regulatory capital ratios of Liberty's subsidiary banks were in
excess of those necessary to be considered "well capitalized."
Note 12 Stock Options
A summary of Liberty's stock options are as follows.
-------------------------------------------------------------------------------
Shares Price Range
-------------------------------------------------------------------------------
December 31, 1991 600,694 $ 9.50-$12.40
Options granted 217,200 14.75- 28.89
Options exercised (4,800) 12.40
Options canceled (3,200) 12.40
-------------------------------------------------------------------------------
December 31, 1992 809,894 9.50- 12.40
Options exercised (2,664) 12.40
-------------------------------------------------------------------------------
December 31, 1993 807,230 9.50- 28.89
Options exercised (14,912) 12.40
Options canceled (2,000) 12.40
-------------------------------------------------------------------------------
December 31, 1994 790,318 9.50- 28.89
-------------------------------------------------------------------------------
Exercisable 580,158 9.50- 28.89
Available for grant 2,000
Pursuant to an employment agreement with Liberty's former Chairman and
Chief Executive Officer, options to purchase 289,694 shares of common stock
were granted. An option covering 144,847 shares was granted on June 28, 1988 at
an option price of $11.25 per share and an option on an additional 144,847
shares was granted on June 28, 1989 at a price of $9.50 per share, each price
representing the fair market value at the date of grant. Each option is im-
mediately exercisable and expires ten years from the date of grant.
The Liberty Stock Option Plan, adopted in 1990, reserved 400,000 shares
of common stock for granting options and was increased to 525,000 shares in
1992. Options may be granted to employees of Liberty and its subsidiaries who
are executive, administrative, professional or technical personnel and who have
principal responsibility for the management and direction of the financial
success of Liberty. An employee owning more than 5% of the total combined
voting power or value of all classes of stock of Liberty will not be eligible
to receive options under the plan. Options terminate and are no longer exer-
cisable after ten years from the date of the grant or three months from
termination of the employment of an optionee for any reason other than death,
or twelve months after the date of death of an optionee.
Note 13 Employee Benefits
Liberty sponsors the Liberty Bancorp, Inc. Profit Sharing, Salary Deferral
and Employee Stock Ownership Plan (the "Plan"). Eligible participants may
contribute from 1% to 10% of their regular monthly earnings. Liberty matches
from 50% to 125% of employee contributions not exceeding 6% of regular monthly
earnings. Vesting ranges from 20% after two years of service to 100% after six
years of service. Employee contributions can be invested in a variety of funds
while the matching contributions are invested in Liberty's common stock. As
part of Liberty's 1988 restructuring, the Plan borrowed $4,105,000 from Liberty
to purchase stock for funding in future periods. The loan is serviced from
annual plan contributions made by Liberty. The loan is included in deferred
compensation in the accompanying consolidated statement of shareholders'
investment and had a remaining balance of $2,017,000 at December 31, 1994. In
addition to the contributions required to service the loan, the Board of Di-
rectors may make discretionary contributions to the Plan. Expense accrued for
contributions to the Plan amounted to $1,449,000 for 1994, $1,182,000 for 1993
and $1,224,000 for 1992. Dividends paid on Liberty stock, mentioned previously
as held by the plan for future funding, are also contributed to plan
participants.
Liberty also sponsors several incentive bonus plans and awards for the
purpose of rewarding persons serving in key management positions throughout
Liberty. These bonuses and awards are tied primarily to the achievement of
both corporate and personal goals. Expenses accrued under these bonus plans
and awards totaled $1,338,000 in 1994, $1,148,000 in 1993 and $1,150,000 in
1992 and are included in salaries in the accompanying consolidated statement of
income.
These accrued expenses include the cost of stock awards available from
certain of the bonus plans. Total shares initially approved as available for
such awards totaled 75,000 shares. Shares awarded during 1994, 1993 and 1992
under this portion of the bonus plans totaled 918, 4,078 and 6,495 shares,
respectively. Shares remaining for award at December 31, 1994 totaled 63,507.
Shares awarded in 1992 vest at 20% per year. The cost of these shares not
vested at December 31, 1994 totaled $114,000 and is included in deferred
compensation in the accompanying statement of shareholders' investment. Shares
awarded subsequent to December 31, 1992 vest 100% one year after their award
date. Related expenses are recorded in the year the award is granted.
The Stock Appreciation Rights Plan (the "SAR Plan"), adopted in 1990,
reserved 50,000 rights to be used as an incentive to employees of Liberty and
its subsidiaries. Persons receiving a right pursuant to the SAR Plan will not
be in any way construed to be a stockholder of Liberty or have any right to
receive shares of common stock. Each right becomes exercisable at the rate of
20% per year, beginning one year following the date of grant. Expenses
accrued under this plan, based on the fair market value of Liberty's common
stock, totaled $145,000 in 1994, $95,000 in 1993 and $473,000 in 1992 and are
included as salaries in the accompanying consolidated statement of income.
The following table summarizes this plan for the past three years.
-------------------------------------------------------------------------------
Rights Price Range
-------------------------------------------------------------------------------
December 31, 1991 23,500 $10.00
Rights granted or reissued 28,000 14.75
Rights exercised or made available for reissue (1,930) 10.00
-------------------------------------------------------------------------------
December 31, 1992 49,570 10.00 - 14.75
Rights exercised or made available for reissue (6,265) 10.00 - 14.75
-------------------------------------------------------------------------------
December 31, 1993 43,305 10.00 - 14.75
Rights exercised or made available for reissue (14,750) 10.00 - 14.75
-------------------------------------------------------------------------------
December 31, 1994 28,555 10.00 - 14.75
-------------------------------------------------------------------------------
Exercisable 10,030 10.00 - 14.75
During 1993, Liberty adopted the Supplemental Executive Retirement Plan.
The plan is intended to be an unfunded nonqualified deferred compensation
arrangement for a select group of management employees. Liberty will
contribute annually to a trust for each participant an amount equal to 7% of
the participant's base compensation plus an amount, if any, necessary to fund
the participant's trust account such that the balance would approximate a
projected benefit as defined in the plan. A participant's benefit vests at a
rate of 20% per year based upon number of years of participation service. A
participant shall also become fully vested upon death, disability or on a
change in control. Charges to expense under the plan totaled $150,000 and
$141,000 in 1994 and 1993, respectively.
Liberty provides certain health care benefits and life and disability
insurance benefits to employees subject to beneficiary-paid premiums, co-
payment provisions and deductibles. Expenses relating to these benefits
provided to current employees totaled $2,659,000 in 1994, $2,181,000 in 1993
and $1,551,000 in 1992.
Note 14 Postretirement Benefits
Employees of Liberty over the age of 55 with fifteen years of service or
over the age of 65 with ten years of service are entitled to postretirement
health care and life insurance benefits subject to retiree-paid premiums, co-
payment provisions and deductibles.
Liberty adopted SFAS No. 106, Accounting for Postretirement Benefits Other
Than Pensions ("SFAS No. 106") effective January 1, 1993. This standard re-
quires a current charge to expense for anticipated postretirement benefits.
Prior to 1993 these benefits were expensed as paid by Liberty and totaled
$535,000 in 1992.
At the date of the adoption of this standard, Liberty's estimate of this
obligation totaled approximately $10.8 million based on actuarial evaluations.
The obligation at adoption represents benefits earned by current and retired
employees through that date and is termed the "transition obligation." As
allowed by the standard, Liberty is recognizing the liability related to the
transition obligation through charges to earnings over a 20 year period.
An actuarial evaluation of the present value of the total postretirement
benefit obligation, which includes the transition obligation, is performed
annually. Estimates of the obligation are based on various assumptions,
including health care costs, employee contributions, work force demographics,
interest rates and plan changes and may be different from actual expenses
incurred.
Liberty's policy is to fund claims from the liability established as they
arise; therefore, no plan assets were available to offset the retirement
benefit obligation as of December 31, 1994 and 1993. The following table
reflects the postretirement obligation by participant type as well as the
amount of the obligation reflected as a liability in the accompanying
consolidated balance sheets as of December 31, 1994 and 1993:
-------------------------------------------------------------------------------
(In thousands) 1994 1993
-------------------------------------------------------------------------------
Accumulated postretirement benefit obligation
Current retirees ($ 8,440) ($ 9,001)
Active plan participants (1,671) (1,484)
Other fully eligible participants (1,182) (725)
-------------------------------------------------------------------------------
Total estimated present value of benefit obligation (11,293) (11,210)
-------------------------------------------------------------------------------
Unamortized transition obligation 9,762 10,304
Unrecognized net gain due to assumption changes (645) _
-------------------------------------------------------------------------------
Total obligation included in other liabilities ($ 2,176) ($ 906)
===============================================================================
Amounts included as expense within employee benefits represent the
following for the years ending December 31, 1994 and 1993:
-------------------------------------------------------------------------------
(In thousands) 1994 1993
-------------------------------------------------------------------------------
Interest cost $ 768 $ 869
Service cost 199 150
Prior service cost (11) _
Amortization of unrecognized obligation 542 542
-------------------------------------------------------------------------------
Net periodic postretirement benefit cost $1,498 $1,561
===============================================================================
The trend assumptions for medical, dental, vision and hearing cost
components of the retirement benefit obligation as of December 31, 1994 and
1993 were as follows.
-------------------------------------------------------------------------------
Benefit Trend
Assumptions Reduced to For Fiscal
-------------------------------------------------------------------------------
1994 1993 1994 1993 1994 1993
-------------------------------------------------------------------------------
Medical benefits
for persons
under age 65 10.5% 12.0% 6.0% 6.0% 2004 over 2003 2003 over 2002
Medical benefits
for persons
over age 65 8.5 10.5 5.0 6.0 2002 over 2001 2003 over 2002
Dental, vision
and hearing
for all ages 8.5 8.5 5.0 5.0 2002 over 2001 2005 over 2004
Life insurance benefit trend assumptions for 1994 and 1993 were based on
final pay of each eligible retiring employee adjusted for an assumed
compensation rate increase of 4.0%. The initial estimated benefit was then
subject to a 10% annual reduction but increased for each eligible retiring
employee with age. For purposes of evaluating the benefit obligation an
assumed discount rate of 7.5% and 8.3% were utilized during 1994 and 1993,
respectively.
A 1% increase in the assumed health care cost trend rates for each future
year would increase the accumulated postretirement benefit obligation to
approximately $12.1 million, an increase of 7%. Additionally, the aggregate of
the service and interest cost components of net periodic postretirement benefit
cost would increase to approximately $1.0 million, an increase of 3%.
Note 15 Fair Value of Financial Instruments
Liberty discloses certain information regarding the fair value of its
financial instruments. A financial instrument is defined as cash, evidence of
ownership interest in an entity or a contractual arrangement that involves cash
or another financial instrument. Market prices are the best evidence of the
fair value of financial instruments. If quoted market prices are not
available, a best estimate is made based on quoted market prices of a financial
instrument with similar characteristics or on valuation techniques. Although
the fair value of financial instruments with quoted market prices are generally
indicative of the amount at which an instrument could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation
sale, the fair value of financial instruments without an available quoted
market price can vary greatly depending on the method and assumptions used in
the valuation techniques.
The process of determining the best estimate of the fair value of
financial instruments is complex and requires significant judgments to be made
by management. Computation of fair values for these financial instruments
without an available quoted market price is based upon the computation of the
present value of estimated future cash flows, utilizing a discount rate com-
mensurate with the risks associated with the various financial instruments.
The discount rate is based upon the U.S. Treasury yield curve with adjustments
determined by management for consideration of, among others, credit risk, pre-
payment risk and operational costs.
The fair value of a given financial instrument may change substantially
over time as a result of, among other things, changes in scheduled or fore-
casted cash flows, movement of the U.S. Treasury yield curve, and changes in
management's estimates of the related credit risk or operational costs. Conse-
quently, significant revisions to fair value estimates may occur during future
periods. Management believes it has taken reasonable efforts to ensure that
fair value estimates presented are accurate. However, adjustments to fair value
estimates may occur in the future and actual amounts realized from financial
instruments may differ from the amounts presented herein.
The fair values presented apply only to financial instruments and, as
such, do not include such items as fixed assets, other real estate and assets
owned, other assets and liabilities as well as other intangibles which have
resulted over the course of business. As a result, the aggregation of the fair
value estimates presented herein do not represent, and should not be construed
to represent, the underlying value of Liberty.
-------------------------------------------------------------------------------
1994 1993
-------------------------------------------------------------------------------
Carrying Fair Carrying Fair
(In thousands) Value Value Value Value
-------------------------------------------------------------------------------
Financial assets
Cash and cash-equivalents $ 415,956 $ 415,956 $ 337,279 $ 337,279
Trading account securities 21,207 21,207 1,891 1,891
Investment securities 1,090,674 1,078,983 1,248,539 1,256,976
Loans 1,179,779 1,147,615 930,941 914,000
Less: reserve for loan losses (19,081) _ (19,986) _
Financial liabilities
Noninterest-bearing deposits 728,240 728,240 689,227 689,227
Interest-bearing deposits 1,645,947 1,649,313 1,435,917 1,442,000
Other borrowings 230,152 230,152 278,112 278,112
The estimated fair value of cash and cash-equivalents, noninterest-bearing
deposits and other borrowings approximates the carrying value of these
instruments. The estimated fair value of trading securities, investment
securities and loans held for sale are based upon available market data and
estimates. Trading securities and investment securities available for sale are
carried at their estimated fair value.
Variable rate loans whose rates are tied to Liberty's base rate have been
valued at their respective carrying values. Loans with a fixed rate of inter-
est have been estimated using a discounted cash flow analysis. Discount rates
used ranged from 9.2% to 11.0% in 1994 and 5.4% to 7.0% in 1993. Future cash
flows are projected based on contractual rates then discounted at an estimated
current market rate. The entire portfolio is adjusted to allow for estimated
future losses of principal and interest.
The estimated fair value of savings and money market accounts approximates
the carrying value as shown. The fair value of the remaining classes of time
deposits were estimated using a discounted cash flow analysis based on the
market rate of interest being paid for similar deposits at December 31, 1994
and 1993. Discount rates used ranged from 5.3% to 6.0% in 1994 and 3.6% to
4.0% in 1993.
Note 16 Commitments and Contingencies
In the normal course of business, Liberty is a party to commitments to
extend credit, letters of credit and foreign exchange contracts . These
instruments expose Liberty to varying degrees of credit and/or market risk in
excess of the amount recognized in the accompanying consolidated balance sheet.
To manage this risk, Liberty uses the same credit and trading risk management
processes for financial instruments with off-balance sheet risk as it does for
financial instruments whose risk is reflected on the consolidated balance
sheet. The fair value of loan commitments and letters of credit, whether that
value is an asset or liability, is considered negligible. Interest-rate forward
and foreign exchange contracts used in trading activities are carried at their
market value. Standby letters of credit and other commitments, including
legally binding loan commitments, primarily variable rate in nature, were
outstanding in the total amount of $500,654,000 at December 31, 1994 and
$558,844,000 at December 31, 1993. Liberty does not expect a significant
portion of these commitments to be exercised during the near-term.
Liberty's bank subsidiaries have sold to the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation certain residential
mortgage loans with recourse. Approximately $6,888,000 and $9,559,000 of loans
subject to this condition remained outstanding at December 31, 1994 and 1993,
respectively. For financial reporting purposes these loans have been treated as
sales and therefore are not included in total loans. Liberty does not
anticipate any significant adverse impact on its consolidated financial
position or results of future operations as a result of the "with recourse"
feature of these loans. Management believes Liberty has no other significant
off-balance sheet exposure.
At December 31, 1994, Liberty was committed to make future payments under
several long-term lease agreements and a data processing agreement. The minimum
payments required by these agreements are summarized below:
-------------------------------------------------------------------------------
Equipment
Bank Data and
(In thousands) Premises Processing Other Total
-------------------------------------------------------------------------------
1995 $ 3,155 $ 5,050 $ 616 $ 8,821
1996 3,013 5,145 555 8,713
1997 2,198 5,242 484 7,924
1998 2,096 5,340 476 7,912
1999 2,087 3,174 476 5,737
Remainder 6,416 _ 238 6,654
-------------------------------------------------------------------------------
Total $18,965 $23,951 $2,845 $45,761
===============================================================================
Lease rentals included in Liberty's operating expenses for the years ended
December 31, 1994, 1993 and 1992 amounted to $5,695,000, $5,631,000 and
$5,043,000, respectively. Contingent rentals amounted to $541,000 in 1994,
$324,000 in 1993 and $910,000 for 1992. Occupancy expense has been reduced by
rental income from premises leased to third parties of $2,346,000, $2,282,000
and $2,108,000 for 1994, 1993 and 1992, respectively.
In August 1992, an agreement with a facilities manager to manage Liberty's
data processing operation was renewed for a seven year term. Under certain
conditions the agreement may be terminated after August 1, 1995 by Liberty
paying a fee that decreases from $4.8 million in 1995 to $1.2 million in 1998.
Under the agreement, data processing fees paid are increased semi-annually for
the effects of inflation. The 1994 inflation adjustment of 1.88% has been
assumed to remain constant in determining the data processing minimum payments.
These fees totaled $5,429,000, $5,043,000 and $5,378,000 for 1994, 1993 and
1992, respectively, and are included in total data processing expense in the
accompanying consolidated statement of income.
In the ordinary course of business, Liberty and its subsidiaries are
subject to legal actions and complaints. Management, after consultation with
legal counsel, and based upon available facts and proceedings to date, which
are in preliminary stages in some instances, believes that the ultimate
liability, if any, arising from such legal actions or complaints, will not have
a material adverse effect on the financial position or results of future
operations of Liberty or its subsidiaries.
Many financial services companies, including Liberty, have been unable, or
have chosen not to, obtain insurance for various risks. Consequently, Liberty
is to some degree self-insured for various risks, including those associated
with lender and fiduciary liability. Liberty has recorded estimated liabili-
ties for uninsured risks to the extent permitted by generally accepted ac-
counting principles.
Note 17 Parent Company
Summarized financial information for Liberty Bancorp, Inc. (parent company
only) is presented in the following statements:
-------------------------------------------------------------------------------
Condensed Balance Sheet
-------------------------------------------------------------------------------
December 31 (In thousands) 1994 1993
-------------------------------------------------------------------------------
Assets
Cash in subsidiary banks $ 6,220 $ 6,228
Investment securities 1,716 1,400
Advances to subsidiary 24,405 22,530
Loans 691 847
Less _ Reserve for loan losses (38) (38)
-------------------------------------------------------------------------------
Net loans 653 809
-------------------------------------------------------------------------------
Investment in subsidiaries
Liberty Oklahoma City 130,843 129,227
Liberty Tulsa 88,088 90,377
Other subsidiaries (15,636) (19,225)
-------------------------------------------------------------------------------
Total investment in subsidiaries 203,295 200,379
-------------------------------------------------------------------------------
Other real estate and assets owned, net 28 673
Other assets 4,259 4,336
-------------------------------------------------------------------------------
Total assets $240,576 $236,355
===============================================================================
Liabilities
Accrued interest and other expenses $ 3,242 $ 3,168
Advances from subsidiary 1,605 1,605
Other payables to subsidiaries 1,349 4,337
-------------------------------------------------------------------------------
Total liabilities 6,196 9,110
Shareholders' investment 234,380 227,245
-------------------------------------------------------------------------------
Total liabilities and shareholders' investment $240,576 $236,355
===============================================================================
-------------------------------------------------------------------------------
Condensed Statement of Income
-------------------------------------------------------------------------------
For the year (In thousands) 1994 1993 1992
-------------------------------------------------------------------------------
Dividends received from subsidiaries
Cash dividends received from bank subsidiaries $ 7,500 $12,000 $ _
Noncash dividends received from subsidiaries _ _ 77
Interest income
Loans to subsidiaries _ 29 29
Commercial and real estate loans 61 52 22
Interest-bearing deposits with subsidiary banks 133 152 302
Dividends on investments 644 1,017 258
Management fees and expense reimbursements
Bank subsidiaries 16,190 15,473 14,119
Nonbank subsidiaries 239 262 117
Other income (a) 2,540 81 (33)
-------------------------------------------------------------------------------
Total income 27,307 29,066 14,891
-------------------------------------------------------------------------------
Interest expense 59 212 135
Salaries and employee benefits 4,684 3,818 2,828
Data processing 5,727 5,094 5,318
Equipment 2,378 2,394 1,904
Occupancy 667 597 629
Professional and other services 1,064 1,659 1,416
Net income from operation of other real estate
and assets owned (185) (246) (630)
Other expenses 2,266 2,972 2,446
-------------------------------------------------------------------------------
Total expenses 16,660 16,500 14,046
Income before provision (benefit) for income taxes 10,647 12,566 845
Provision (benefit) for income taxes 725 (1,249) (216)
-------------------------------------------------------------------------------
Income before cumulative effect of change in
accounting principle and equity in undistributed
income of subsidiaries 9,922 13,815 1,061
Cumulative effect of change in accounting principle _ 533 _
Equity in undistributed income of subsidiaries 15,954 22,184 17,057
-------------------------------------------------------------------------------
Net income $25,876 $36,532 $18,118
===============================================================================
(a) Includes net securities gains of $351,000 in 1994 and losses of $60,000
in 1992. There were no securities gains or losses in 1993.
-------------------------------------------------------------------------------
Condensed Statement of Cash Flows
-------------------------------------------------------------------------------
For the year (In thousands) 1994 1993 1992
-------------------------------------------------------------------------------
Cash provided (absorbed) by operating activities
Net income $25,876 $36,532 $18,118
Adjustments to reconcile net income to net cash
provided (absorbed by) operating activities
Provisions for losses on loans and other
real estate and assets owned (80) (85) 35
Cumulative effect of change in accounting
principle _ (533) _
Deferred income taxes 725 (1,249) (216)
Depreciation and amortization 601 607 376
Noncash dividend and equity in undistributed
income of subsidiaries (15,954) (22,184) (17,134)
Gain on sale of assets (442) (147) (492)
Change in accrued income and accounts
receivable 379 (218) (346)
Change in other assets 321 529 (199)
Change in accrued interest, accounts payable
and other liabilities (1,714) (992) 328
Change in other payables to subsidiaries (2,988) 3,300 724
-------------------------------------------------------------------------------
Net cash provided by operating activities 6,724 15,560 1,194
-------------------------------------------------------------------------------
Cash provided (absorbed) by investing activities
Sales of investment securities 200 _ _
Principal payments received on loans 336 36 304
Advances on loans _ (162) (145)
Advances to subsidiaries (1,875) (11,524) (2,826)
Expenditures for property and equipment (80) (50) (31)
Proceeds from sale of other real estate and
other assets acquired in settlement of loans 895 882 2,167
Consideration, including cash and cash equivalents
received or paid in bank acquisition and merger
of nonbank subsidiary _ (3,593) (375)
-------------------------------------------------------------------------------
Net cash absorbed by investing activities ( 524) (14,411) ( 906)
-------------------------------------------------------------------------------
Cash provided (absorbed) by financing activities
Payments on long-term notes _ _ (1,769)
Advances from subsidiary 1,605 1,605 1,605
Repayments of advances from subsidiary (1,605) (1,605) (1,605)
Proceeds from issuance of common stock and
treasury stock 738 949 595
Purchase of treasury stock (1,257) (440) _
Dividends paid (5,689) (2,702) _
-------------------------------------------------------------------------------
Net cash absorbed by financing activities (6,208) (2,193) (1,174)
-------------------------------------------------------------------------------
Net change in cash and cash-equivalents (8) (1,044) (886)
Cash and cash-equivalents at beginning of year 6,228 7,272 8,158
-------------------------------------------------------------------------------
Cash and cash-equivalents at end of year $ 6,220 $ 6,228 $ 7,272
===============================================================================
Supplemental disclosure of cash flow information:
Income taxes paid $2,079 $ 762 $100
Interest paid 56 57 170
Supplemental disclosure of noncash investing
activities:
Transfer of advances to investment in nonbank
subsidiary _ 4,807 _
Contribution of stock of acquired banks to
subsidiary banks _ 10,919 _
Receipt of preferred stock as partial proceeds
for sale of other assets 700 _ _
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS Liberty Bancorp, Inc.
TO LIBERTY BANCORP, INC:
We have audited the accompanying consolidated balance sheets of Liberty
Bancorp, Inc. (an Oklahoma corporation) and subsidiaries as of December 31,
1994 and 1993, and the related consolidated statements of income, shareholders'
investment and cash flows for each of the three years in the period ended De-
cember 31, 1994. These financial statements are the responsibility of
Liberty's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statements of certain consolidated subsidiaries, which statements reflect
assets constituting approximately 2% of the related December 31, 1994 and 1993
consolidated totals, and revenues of approximately 5%, 6% and 8% of
consolidated revenues for 1994, 1993 and 1992, respectively. Those statements
were audited by other auditors whose reports have been furnished to us and our
opinion, insofar as it relates to the amounts included for such subsidiaries,
is based solely upon the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 esti-
mates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits and the reports of other auditors
provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all ma-
terial respects, the financial position of Liberty Bancorp, Inc. and sub-
sidiaries as of December 31, 1994 and 1993, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1994, in conformity with generally accepted accounting principles.
As explained in Note 4 to the consolidated financial statements, effective
December 31, 1993, Liberty changed its method of accounting for certain
investment securities. Additionally, as explained in Notes 10 and 14,
respectively, to the consolidated financial statements, effective January 1,
1993, Liberty changed its methods of accounting for income taxes and
postretirement benefits other than pensions.
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma,
January 20, 1995
MANAGEMENT REPORT ON RESPONSIBILITY
FOR FINANCIAL REPORTING Liberty Bancorp, Inc.
The management of Liberty Bancorp, Inc. has the responsibility for
preparing the accompanying consolidated financial statements and for their
integrity and objectivity. The statements were prepared in accordance with
generally accepted accounting principles. The statements include amounts that
are based on management's best estimates and judgment, where necessary.
Management believes that all representations made to our external auditors
during their audit of the financial statements were valid and appropriate.
To meet its responsibility, management has established and maintained a
comprehensive system of internal control that provides reasonable assurance as
to the integrity and reliability of the financial statements, that assets are
safeguarded, and that transactions are properly executed and reported. This
system can provide only reasonable, not absolute, assurance that errors and
irregularities can be prevented or detected. The concept of reasonable assur-
ance is based on the recognition that the cost of a system of internal control
must be related to the benefits derived. The system of internal control is
subject to close scrutiny by management and is revised as considered necessary.
The accounting policies and system of internal control are under the
general oversight of the Liberty Bancorp, Inc. Board of Directors, acting
through its Audit Committee, which is comprised entirely of outside directors
who are not officers or employees of Liberty Bancorp, Inc. Liberty's General
Auditor, who reports directly to the Audit Committee, conducts an extensive
program of operational, financial and special audits to ensure the system of
control is adequate and operating as intended. In addition, Arthur Andersen
LLP, independent public accountants, has been engaged to conduct an audit and
to express an opinion as to the fairness of the presentation of the
consolidated financial statements.
Liberty Bancorp, Inc. is also examined periodically by the examiners from
the Federal Reserve Board and other regulatory agencies. The Board of Directors
and management appropriately consider and comply with all reports that arise
from such examinations.
Management maintains and enforces a strong code of corporate conduct
designed to foster a strong ethical climate so that the affairs of the
corporation are conducted according to the highest standards of personal and
corporate conduct. This code of conduct is furnished to and signed by all
employees annually and is periodically audited to ensure compliance.
OTHER BUSINESS MATTERS Liberty Bancorp, Inc.
Personnel
On December 31, 1994, Liberty and its subsidiaries employed 1,364 full-
time persons, compared with 1,435 on December 31, 1993. The decrease is due to
efforts in 1994 to reduce the number of employees to lower noninterest
expenses.
Competition
The Oklahoma market is highly competitive, especially in the area of
competition for loans and deposits. Liberty also competes with money center
and regional banks, money market funds, consumer finance companies and mortgage
banks, mutual fund sponsors, brokerage firms, insurance companies and various
other entities in connection with the banking and related services provided by
its subsidiaries. The market for such services is highly competitive.
Supervision and Regulation
Bank holding companies and banks are extensively regulated under both
federal and state law. To the extent that the following information describes
statutory or regulatory provisions, it is qualified in its entirety by ref-
erence to the particular statutory and regulatory provisions described. Any
change in applicable law or regulation may have a material effect on the
business and prospects of Liberty, Liberty Oklahoma City or Liberty Tulsa.
Various bills relating to the banking and financial service industry are
under consideration in the United States Congress and the Oklahoma legislature
which could have a material effect on the banking industry and Liberty, or
result in additional regulations. It cannot be predicted whether new
legislation or regulations will be adopted and, if so, how they would affect
Liberty and its subsidiaries.
Bank Holding Companies
Liberty is registered as a "bank holding company" under the Bank holding
Company Act of 1956, as amended (the "Act"). As a bank holding company, Liberty
is subject to regulation by the Federal Reserve Board. Registered bank holding
companies are required to file certain reports and information with the Federal
Reserve Board and are subject to examination by the Federal Reserve Board.
The Act requires the prior approval of the Federal Reserve Board in any
case where a bank holding company proposes to acquire direct or indirect
ownership or control of more than 5% of the voting shares of any bank which is
not already majority owned by it or to merge or consolidate with any other bank
holding company. The Act further provides that the Federal Reserve Board shall
not approve any such acquisition, merger or consolidation which would result in
a monopoly or would be in furtherance of any combination or conspiracy to
monopolize or attempt to monopolize the business of banking in any part of the
United States, or the effect of which may be to substantially lessen
competition or to tend to create a monopoly in any section of the country, or
which in any other manner would be in restraint of trade, unless the anti-
competitive effects of the proposed transaction are clearly outweighed in the
public interest by the probable effect of the transaction in meeting the
convenience and needs of the community to be served.
Prior to September 29, 1995 the Act prohibits the Federal Reserve Board
from approving an application from a bank holding company to acquire shares of
a bank located outside the state in which the operations of the holding com-
pany's banking subsidiaries are principally conducted, unless such an
acquisition is specifically authorized by statute of the state in which the
bank whose shares are to be acquired is located. After September 29, 1995,
under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
("Riegle-Neal Act"), this prohibition is eliminated subject to certain
limitations and, accordingly, after such date a bank holding company will be
legally permitted to acquire banks or bank holding companies in any state.
The Act also prohibits a bank holding company, with certain exceptions,
from acquiring more than 5% of the voting shares of any company which is not a
bank and from engaging in any business other than banking or managing or
controlling banks. Under the Act, the Federal Reserve Board is authorized to
approve the ownership of shares by a bank holding company in any company whose
activities the Federal Reserve Board has determined to be so closely related to
banking or to managing or to controlling banks as to be a proper incident
thereto. In making such determinations, the Federal Reserve Board is required
to weigh the expected benefits to the public, such as greater convenience,
increased competition or gains in efficiency, against the possible adverse
effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest or unsound banking practices.
The Federal Reserve Board has by regulation determined that certain
activities are closely related to banking within the meaning of the Act. These
activities include operating a savings association, mortgage company, finance
company, credit card company or loan company, providing certain data processing
operations, providing investment financial advice, acting as insurance agent or
serving as underwriter for certain types of credit-related insurance, leasing
personal property on a full-payout nonoperating basis, providing management
consulting advice to nonaffiliated banks, operating a discount brokerage firm
and certain other activities. Under the Act, a bank holding company and its
subsidiaries are prohibited from engaging in certain tie-in arrangements in
connection with extensions of credit or provisions of property or services.
The Oklahoma Banking Code permits a bank holding company to own or control
more than one bank, subject to a limitation that a bank holding company may not
acquire a bank if the acquisition would result in such bank holding company
controlling banks whose deposits exceeded 11% of total deposits of insured
banks, savings associations and credit unions in Oklahoma, as reported in the
most recent reports of such institutions available at the time of any
acquisition. At the end of 1994, 11% of Oklahoma's total insured deposits
amounted to approximately $3.0 billion.
Oklahoma also has enacted an interstate banking law. Under the law, out-
of-state bank holding companies are permitted to acquire any Oklahoma bank or
bank holding company; however, further expansion by the acquiring holding
company within Oklahoma is prohibited for a four-year period from the date of
any acquisition unless its principal place of business is in a state which has
enacted reciprocal legislation authorizing Oklahoma bank holding companies to
acquire banks or bank holding companies in such state. These limitations will
be eliminated on September 29, 1995 under the provisions of the Riegle-Neal
Act.
Banks
National banking associations, such as Liberty Oklahoma City and Liberty
Tulsa, are subject to the supervision of, and are regularly examined by, the
Office of the Comptroller of the Currency ("Comptroller"). Each of these banks
is a member of the Federal Reserve System and is therefore subject to
applicable provisions of the Federal Reserve Act which restricts the ability of
any such bank to extend credit to or purchase assets from its parent holding
company or any of the parent's subsidiaries or to invest in the stock or
securities thereof, or to take such stock or securities as collateral for loans
to any borrower, and which require that the terms of any such transactions
between a bank and its parent holding company or other subsidiaries meet
certain fairness standards. Affiliates of national banks are also subject to
certain restrictions concerning engaging in certain securities activities.
Certain restrictions are placed on the banks' abilities to pay dividends
by the National Banking Act and regulations of the Comptroller. Without the
approval of the Comptroller, total dividends declared by a national bank of
common stock in any calendar year may not exceed its net profits (as defined)
for that year combined with its retained net profits (as defined) of the
preceding two years, less any required transfers to surplus or a fund for the
retirement of any preferred stock. Further, a national bank may not pay any
dividends on common stock if it does not have undivided profits available.
Under these provisions, Liberty Oklahoma City and Liberty Tulsa could pay
dividends of no more than $29.9 million and $13.4 million, respectively, as of
January 1, 1995. The Comptroller also has authority to prohibit a national
bank from engaging in unsafe or unsound practices in the conduct of its
business. Depending upon the financial condition of a national bank, the pay-
ment of dividends could be deemed to constitute such an unsafe or unsound
practice. It is anticipated that the banks will pay common dividends to the
parent in 1995.
The Comptroller has the authority to take various administrative actions
concerning national banks when such actions are deemed necessary by the
Comptroller. These actions include imposing civil monetary penalties against a
bank or its directors and officers, removing directors or officers, entering
cease and desist orders, requiring formal or informal agreements between the
Comptroller and the bank, and various other actions.
National banks are required by the National Banking Act to adhere to
branch banking laws applicable to state banks in the states in which they are
located. Under current Oklahoma law, a state or national bank located in
Oklahoma may establish and maintain up to two branches (i) located within the
same city as the main bank; or (ii) located within 25 miles of the main bank if
located in a city or town which has no state or national bank. In addition, a
state or national bank located in Oklahoma may acquire, maintain and operate as
branches an unlimited number of banks, so long as such acquisitions do not
result in a bank having direct or indirect ownership or control of more than
eleven percent (11%) of the aggregate deposits of all financial institutions
located in Oklahoma which have insured deposits. Certain exceptions to the
deposit limitation exist in connection with the acquisition of stock of a bank
which is acquired (i) in a good faith fiduciary capacity; (ii) in the regular
course of securing or collecting a debt previously contracted in good faith; or
(iii) at the request of or in connection with the exercise of regulatory
authority in order to prevent imminent failure of a bank or to protect the
depositors of a bank. Under the Riegle-Neal Act, interstate branching will be
permitted beginning June 1, 1997 unless an individual state by legislation
before June 1, 1997 elects to prohibit interstate mergers involving out-of-
state banks. Individual states may also elect to permit interstate bank
mergers earlier than June 1, 1997 and may also elect to permit "de novo"
branching by out-of-state banks.
Insured depository institutions are liable for any losses incurred by the
Federal Deposit Insurance Corporation in connection with the closing of another
insured depository institution under common control. These "cross-guarantee"
provisions may have an effect on the ability of multi-bank holding companies,
such as Liberty, and their subsidiary banks to raise capital and borrow funds
because of the increased risk of loss.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") provided for the recapitalization of the Bank Insurance Fund (which
resulted in an increase in deposit insurance costs). FDICIA also made many
far-reaching changes in the regulatory environment for insured banks and
savings associations, many of which have a significant impact on the operations
of banks and bank holding companies. These changes include: major revisions in
the supervision, examination and audit processes; new requirements for
corrective actions for undercapitalized institutions; required adoption of
uniform safety and soundness standards; increases in disclosure requirements
for deposit accounts; substantial new reporting requirements; changes in terms
of insurance coverage for certain deposits; and a number of other changes.
Most of the requirements of FDICIA are being implemented through regulations
which have been and will continue to be promulgated by the appropriate regula-
tory authority. FDICIA has resulted in increased regulatory compliance costs
but does not affect Liberty to any materially greater extent than other
comparable institutions.
Government Policies
The earnings of Liberty are affected not only by general economic
conditions, both domestic and foreign, but also by legislative and
administrative changes which, among other things, affect maximum lending rates,
and by the monetary and fiscal policies of the U.S. Government and its
agencies, including the Federal Reserve Board. An important function of the
Federal Reserve Board is to regulate the national supply of bank credit. Among
the instruments of monetary policy used by the Federal Reserve Board are open
market operations in U.S. Government securities, changes in the discount rate
on member bank borrowings, changes in reserve requirements against member bank
deposits and limitations on interest rates which member banks may pay on time
and savings deposits. These means are used in varying combinations to influence
overall growth of bank loans, investments and deposits, and may also affect
interest rates charged on loans or paid for deposits. The monetary policies of
the Federal Reserve Board have had a significant effect on the operating
results of commercial banks in the past and are expected to continue to have
such an effect in the future.
In view of the changing conditions in the national economy and in the
money markets and the effect of actions by monetary and fiscal authorities, as
well as other federal agencies and authorities, no prediction can be made as to
possible future changes in interest rates, deposit levels, loan demand or the
impact on the business and earnings of Liberty or its subsidiaries.
Properties
The principal business operations of Liberty and its Oklahoma City
subsidiaries are conducted from Liberty Tower, located at 100 North Broadway,
Oklahoma City, Oklahoma. Liberty owns this 36-story structure of approximately
512,000 square feet through a wholly-owned subsidiary. Approximately 44% of the
property is leased to Liberty.
Liberty Tulsa maintains its offices in the 40-story First Place Tower and
adjoining 20-story First Place Midrise Building, located in the central
business district of Tulsa, Oklahoma. Liberty Tulsa leases approximately
213,000 square fee of the combined buildings and has an option to lease an
additional 37,000 square feet. The original lease dated December 14, 1977,
providing for a 25-year primary lease term, was amended April 7, 1994 to
provide a ten-year extension of the original term. The replacement indenture
of lease also provides an option to terminate approximately 45,000 square feet
with certain conditions and timing. A first amendment to replacement indenture
of lease was signed March 24, 1995, allowing Liberty Tulsa to terminate at the
bank's request approximately 19,000 to 24,000 square feet from the lease. The
terminations are anticipated to be effective during the second quarter of 1995.
The remaining square footage subject to options to terminate continue under
certain conditions.
Corporate Responsibility
Liberty strives to serve its communities in a variety of ways. Reports
regarding Liberty's community investment activities, The Community Reinvestment
Act performance evaluation, certain related Home Mortgage Disclosure Act data
and Liberty's philanthropic programs are available to interest shareholders
upon request to Community Reinvestment, P.O. Box 25848, Oklahoma City, OK
73125.
Legal Proceedings
In 1988 Cadijah Helmerich Patterson filed a civil action in the state
District Court of Tulsa County, Oklahoma against Liberty Tulsa claiming
breaches of fiduciary duty by Liberty Tulsa as trustee of a 1939 trust of which
Ms. Patterson is a contingent beneficiary. The lawsuit also named other
beneficiaries as defendants because of their beneficial interest in the trust,
including Ms. Patterson's mother, Cadijah C. Helmerich, and her brother, Walter
H. Helmerich, III, a director of Liberty and Liberty Tulsa. The plaintiff
alleges that Liberty Tulsa breached its duty of prudence by failing to
diversify properly trust investments, breached its duty of loyalty by investing
in securities of First Tulsa Bancorporation, Inc., Liberty and Helmerich &
Payne, Inc. and breached its duty to keep the plaintiff informed of the status
of the trusts. Plaintiff seeks compensatory damages of $21.5 million, and $5.0
million in punitive damages. The litigation is in a relatively preliminary
stage despite its filing date. Limited document discovery has been conducted.
Liberty Tulsa intends to vigorously contest this action and management of
Liberty believes, based upon the facts available at this time and after
consultation with legal counsel, that it will not have any material adverse
effect on the financial position of Liberty.
In the ordinary course of business, Liberty and its subsidiaries are
subject to other legal actions and complaints. Management believes, after
consultation with legal counsel, based upon available facts and proceedings to
date, which are in preliminary stages in some instances, that the ultimate
liability, if any, arising from such legal actions or complaints, will not have
a material adverse effect on the financial position or result of future
operations of Liberty or its subsidiaries.
Changes in Accountants
Since 1971, Ernst & Young LLP, independent public accountants, served as
the independent auditors of certain subsidiaries, principally Liberty Mortgage
Company ("LMC") and subsidiaries, of Liberty. LMC is an operating subsidiary
of Liberty Bank and Trust Company of Oklahoma City, N.A. On March 6, 1995 that
firm's appointment as independent auditor of LMC terminated and Arthur Andersen
LLP, Liberty's principal accountant since 1971, was engaged as independent
auditor for LMC. In its reports on the consolidated financial statements of the
Company, Arthur Andersen LLP expressed reliance on the reports of Ernst & Young
LLP. The decision to change accountants was approved by the audit committee of
the board of directors.
In connection with the audits of the consolidated financial statements of
LMC for the two years ended December 31, 1994, and in the subsequent interim
period, there were no disagreements with Ernst & Young LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedures, which disagreements if not resolved to their satisfaction
would have caused them to make reference to the subject matter of the
disagreement in connection with their opinion or reports.
The audit reports of Ernst & Young LLP on the consolidated financial
statements of LMC as of and for the years ended December 31, 1994 and 1993 did
not contain any adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope, or accounting principles.
REPORT OF OTHER INDEPENDENT AUDITORS APPLICABLE TO SUBSIDIARY
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Liberty Mortgage Company
We have audited the consolidated balance sheets of Liberty Mortgage
Company as of December 31, 1994 and 1993, and the related consolidated
statements of operations and retained earnings and cash flows for each of the
three years in the period ended December 31, 1994 (not presented separately
herein). These financial statements are the responsibility of the Company's
management. 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 reason-
able basis for our opinion.
Liberty Mortgage Company is one of several affiliated members of Liberty
Bancorp, Inc. and a substantial portion of its activities is with or is ar-
ranged by members of the affiliated group.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Liberty Mort-
gage Company at December 31, 1994 and 1993, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1994 in conformity with generally accepted accounting principles.
Liberty Mortgage Company changed its method of accounting for income taxes
and postretirement benefits other than pensions as more fully described in the
notes to the consolidated financial statements (not presented separately
herein).
ERNST & YOUNG LLP
Oklahoma City, Oklahoma,
January 18, 1995
-------------------------------------------------------------------------------
STATEMENT OF CONDITION (Unaudited)
Liberty Bank and Trust Company of Oklahoma City, N.A. and Subsidiaries
-------------------------------------------------------------------------------
December 31 (In thousands) 1994 1993
-------------------------------------------------------------------------------
Assets
Cash and due from banks $ 258,132 $ 245,364
Federal funds sold and other 64,299 17,964
Trading account securities 15,490 205
Investment securities 703,480 721,703
Loans 776,848 649,536
Less: Reserve for loan losses (13,253) (13,498)
-------------------------------------------------------------------------------
Loans, net 763,595 636,038
-------------------------------------------------------------------------------
Property and equipment, net 28,790 25,625
Other real estate and assets owned, net 4,569 7,823
Deferred tax asset, net 12,781 10,416
Other assets 79,940 49,189
-------------------------------------------------------------------------------
Total assets $1,931,076 $1,714,327
===============================================================================
Liabilities and Shareholders' Investment
Deposits
Noninterest-bearing $ 504,779 $ 480,662
Interest-bearing 1,098,805 946,495
-------------------------------------------------------------------------------
Total deposits 1,603,584 1,427,157
-------------------------------------------------------------------------------
Short-term borrowings 166,756 140,626
Other liabilities 29,893 17,317
-------------------------------------------------------------------------------
Total Liabilities 1,800,233 1,585,100
Total shareholders' investment 130,843 129,227
-------------------------------------------------------------------------------
Total Liabilities and Shareholders' Investment $1,931,076 $1,714,327
===============================================================================
Liberty Bank and Trust Company of Oklahoma City, N.A. provides banking services
at the following locations:
Oklahoma City Norman Edmond
100 N. Broadway 116 S. Peters 18 E. 15th
320 N. Broadway 3600 W. Robinson 24 E. 1st
1112 N.W. 23rd 320 E. Comanche 300 S. Bryant
12324 N. May Avenue Midwest City 2307 W. Edmond Road
12200 N. Rockwell Avenue 301 N. Midwest Blvd. Choctaw
9350 S. Western Avenue 10100 S.E. 15th 14483 N.E. 23rd
1200 N.W. 63rd 2201 N. Douglas Harrah
200 N. Air Depot 19625 N.E. 23rd
-------------------------------------------------------------------------------
STATEMENT OF CONDITION (Unaudited)
-------------------------------------------------------------------------------
Liberty Bank and Trust Company of Tulsa, N.A. and Subsidiaries
-------------------------------------------------------------------------------
December 31 (In thousands) 1994 1993
-------------------------------------------------------------------------------
Assets
Cash and due from banks $105,183 $ 73,274
Federal funds sold and other 5,601 8,601
Trading account securities 5,717 1,687
Investment securities 385,403 525,361
Loans 424,799 308,369
Less: Reserve for loan losses (5,789) (6,450)
-------------------------------------------------------------------------------
Loans, net 419,010 301,919
-------------------------------------------------------------------------------
Property and equipment, net 11,349 10,108
Other real estate and assets owned, net 786 2,392
Deferred tax asset, net 7,183 4,942
Other assets 24,082 21,347
-------------------------------------------------------------------------------
Total assets $964,314 $949,631
===============================================================================
Liabilities and Shareholders' Investment
Deposits
Noninterest-bearing $225,400 $216,047
Interest-bearing 553,360 495,322
-------------------------------------------------------------------------------
Total deposits 778,760 711,369
-------------------------------------------------------------------------------
Short-term borrowings 80,396 139,485
Other liabilities 18,075 9,404
-------------------------------------------------------------------------------
Total Liabilities 877,231 860,258
Total shareholders' investment 87,083 89,373
-------------------------------------------------------------------------------
Total Liabilities and Shareholders' Investment $964,314 $949,631
===============================================================================
Liberty Bank and Trust Company of Tulsa, N.A. provides banking services at the
following locations:
Tulsa Broken Arrow
15 E. Fifth Street 701 W. New Orleans
615 S. Boston Avenue Jenks
6660 S. Sheridan Road 700 W. Main
6985 S. Lewis
815 E. 71st Street
2070 Utica Square
5307 E. 41st Street
601 E. Apache
575 N. Gilcrease Museum Road
SHAREHOLDER INFORMATION Liberty Bancorp, Inc.
Executive Offices Stock Transfer Agent and Registrar
Liberty Bancorp, Inc. Liberty Bank and Trust Company of Oklahoma City, N.A.
Liberty Tower 100 North Broadway
100 North Broadway P.O. Box 25848
Oklahoma City, OK 73102 Oklahoma City, OK 73125
(405) 231-6000
If you receive duplicate copies of this report, this indicates that you
hold stock in more than one account name. By reviewing the mailing label on
each report, you can determine the account listing for your holdings of Liberty
Bancorp, Inc.'s stock. Consolidating your accounts decreases the cost of our
stockholder relations activity. If you wish to consolidate any of your
accounts, you can do so by writing to the stock transfer agent.
Contact our stock transfer agent at the above address for assistance regarding:
* Change of address
* Transfer of stock certificates
* Replacement of lost, stolen or destroyed certificates
* Elimination of duplicate mailings
Stock Prices
The Common Stock of Liberty is traded over-the-counter on the NASDAQ
National Market System under the symbol LBNA. As of December 31, 1994 there
were 2,615 shareholders of record.
The following sets forth the range of closing prices of Common Stock and
cash dividends declared for the periods indicated. These quotations represent
inter-dealer prices, do not include mark-up, mark-down or commissions and do
not necessarily represent actual transactions.
-------------------------------------------------------------------------------
Dividends
Per Share High Low
-------------------------------------------------------------------------------
1993
First Quarter $ _ $33.75 $31.25
Second Quarter .10 34.25 28.75
Third Quarter .10 35.50 32.50
Fourth Quarter .10 34.00 28.00
1994
First Quarter .15 $28.25 $26.50
Second Quarter .15 33.50 27.25
Third Quarter .15 33.50 30.75
Fourth Quarter .15 33.50 27.75
Liberty's annual report on Form 10-K for the fiscal year ended December
31, 1994 (other than the exhibits thereto) is available upon written request
without charge. Requests for such copies should be directed to the attention
of Corporate Secretary, Liberty Bancorp, Inc., P.O. Box 25848, Oklahoma City,
OK 73125. Your comments, questions or suggestions on any aspect of our
business are welcome.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
(a) Financial Statements and Schedules
1. Financial Statements
2. Financial Statements Schedules. All schedules have been
omitted because they are not applicable or not required.
(b) Reports on Form 8-K
No reports 8-K were filed during the last quarter of the period
covered by this report.
(c) Exhibits. The following Exhibits (unless incorporated by reference
to another report) are filed with this report and are identified by the numbers
indicated. References to Liberty are to Liberty National Corporation, File No.
0-4547.
Exhibit No. Description
------------------------------------------------------------------------------
3.1 Certificate of Incorporation of Liberty Bancorp, Inc. (incorporated
by reference to Exhibit 3.1 to Registrant's Form 8-B dated May 26,
1992)
3.2 By-laws of Liberty Bancorp, Inc. (incorporated by reference to
Exhibit 3.2 to Registrant's form 8-B dated May 26, 1992)
10.1 Copy of Lease Agreement between Liberty Bank and Trust Company of
Oklahoma City, N.A. and Mid-America Plaza, Ltd. (incorporated by
reference to Exhibit 9.75 to Liberty's Form 10-K for the year
ended December 31, 1979)
10.2 Liberty Bancorp, Inc., 1990 Stock Option Plan, as amended
(incorporated by reference to Exhibit 10.1 to Registrant's Form
8-B dated May 26, 1992)
10.3 Copy of documents relating to Liberty Bancorp, Inc. Executive
Mortgage Assistance Plan (incorporated by reference to Exhibit
10.21 to Amendment No. 1 to Liberty's Registration Statement on
Form S-14, Registration No. 2-87751)
10.4 Copy of Memorandum of Lease entered into December 14, 1977, between
First Place Corporation and Liberty Tulsa (incorporated by
reference to Exhibit 10.4 to Registrant's Form 10-K for the year
ended December 31, 1990)
10.7 Option to Purchase Common Stock between Registrant and Frank X.
Henke, III (incorporated by reference to Exhibit 10.16 to Amend-
ment No. 1 to Registrant's Registration Statement on Form S-1,
Registration No. 33-17239)
10.8 Management Incentive Bonus Plan (incorporated by reference to
Exhibit 10.8 to Registrant's Form 10-K for the year ended December
31, 1992)
10.9 Supplemental Executive Retirement Plan and Trust (incorporated by
reference to Exhibit 10.9 to Registrant's Form 10-K for the year
ended December 31, 1994)
10.10 Executive Severance Plan, as amended
21 Subsidiaries of Registrant
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Ernst & Young LLP
24 Powers of Attorney
------------------------------------------------------------------------------
Liberty Bancorp, Inc. will furnish to any shareholder a copy of any of the
above exhibits upon the payment of $.25 per page. Any request should be sent
to Corporate Secretary, Liberty Bancorp, Inc., P.O. Box 25848, Oklahoma City,
Oklahoma 73125.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, this 29th day of
March, 1995.
Liberty Bancorp, Inc.
(Registrant)
/s/Mischa Gorkuscha
--------------------------
By Mischa Gorkuscha, Senior Vice President and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated, this 29th day of
March, 1995.
/s/Charles E. Nelson
--------------------------
Charles E. Nelson Chairman and Chief Executive Officer
(Principal Executive Officer)
/s/Mischa Gorkuscha
--------------------------
Mischa Gorkuscha Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/Rodney L. Lee
--------------------------
Rodney L. Lee Senior Vice President and Controller
(Principal Accounting Officer)
Donald L. Brawner, M.D.* Director
Robert S. Ellis, M.D.* Director
William J. Fisher, Jr.* Director
C.W. Flint, Jr.* Director
James L. Hall, Jr.* Director
Raymond H. Hefner, Jr.* Director
Walter H. Helmerich, III* Director
Joseph S. Jankowsky* Director
John E. Kirkpatrick* Director
Judy Z. Kishner* Director
David L. Kyle* Director
Edward C. Lawson, Jr.* Director
Herb Mee, Jr.* Director
William G. Paul* Director
V. Lee Powell* Director
Jon R. Stuart* Director
John S. Zink* Director
/s/Kenneth R. Brown
--------------------------
*By Kenneth R. Brown, Attorney-in-fact
EXHIBITS TO FORM 10-K
*********************
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
(a) Financial Statements and Schedules
1. Financial Statements
2. Financial Statements Schedules. All schedules have been
omitted because they are not applicable or not required.
(b) Reports on Form 8-K
No reports 8-K were filed during the last quarter of the period
covered by this report.
(c) Exhibits. The following Exhibits (unless incorporated by reference
to another report) are filed with this report and are identified by the numbers
indicated. References to Liberty are to Liberty National Corporation, File No.
0-4547.
Exhibit No. Description
------------------------------------------------------------------------------
3.1 Certificate of Incorporation of Liberty Bancorp, Inc. (incorporated
by reference to Exhibit 3.1 to Registrant's Form 8-B dated May 26,
1992)
3.2 By-laws of Liberty Bancorp, Inc. (incorporated by reference to
Exhibit 3.2 to Registrant's form 8-B dated May 26, 1992)
10.1 Copy of Lease Agreement between Liberty Bank and Trust Company of
Oklahoma City, N.A. and Mid-America Plaza, Ltd. (incorporated by
reference to Exhibit 9.75 to Liberty's Form 10-K for the year
ended December 31, 1979)
10.2 Liberty Bancorp, Inc., 1990 Stock Option Plan, as amended
(incorporated by reference to Exhibit 10.1 to Registrant's Form
8-B dated May 26, 1992)
10.3 Copy of documents relating to Liberty Bancorp, Inc. Executive
Mortgage Assistance Plan (incorporated by reference to Exhibit
10.21 to Amendment No. 1 to Liberty's Registration Statement on
Form S-14, Registration No. 2-87751)
10.4 Copy of Memorandum of Lease entered into December 14, 1977, between
First Place Corporation and Liberty Tulsa (incorporated by
reference to Exhibit 10.4 to Registrant's Form 10-K for the year
ended December 31, 1990)
10.7 Option to Purchase Common Stock between Registrant and Frank X.
Henke, III (incorporated by reference to Exhibit 10.16 to Amend-
ment No. 1 to Registrant's Registration Statement on Form S-1,
Registration No. 33-17239)
10.8 Management Incentive Bonus Plan (incorporated by reference to
Exhibit 10.8 to Registrant's Form 10-K for the year ended December
31, 1992)
10.9 Supplemental Executive Retirement Plan and Trust (incorporated by
reference to Exhibit 10.9 to Registrant's Form 10-K for the year
ended December 31, 1994)
10.10 Executive Severance Plan, as amended
21 Subsidiaries of Registrant
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Ernst & Young LLP
24 Powers of Attorney
------------------------------------------------------------------------------
Liberty Bancorp, Inc. will furnish to any shareholder a copy of any of the
above exhibits upon the payment of $.25 per page. Any request should be sent
to Corporate Secretary, Liberty Bancorp, Inc., P.O. Box 25848, Oklahoma City,
Oklahoma 73125.
EXHIBIT 10.10
LIBERTY BANCORP, INC.
SEVERANCE COMPENSATION PLAN
This Liberty Bancorp, Inc. Severance Compensation Plan (the "Plan")
is made and entered into by Liberty Bancorp, Inc. (the "Company"), for the
benefit of certain officers, key management and highly compensated employees.
The purpose of the Plan is to protect and retain certain qualified employees in
the event of a Change in Control and to reward those qualified employees for
loyal service to the Company by providing for severance compensation to them
upon their involuntary termination of employment after a Change in Control of
the Company.
ARTICLE I
DEFINITIONS
The terms defined in this Article shall have the meaning given below:
1.1 Average Annual Earnings means the average of the Participant's total
Earnings for the two (2) consecutive years ending on the last day of the month
immediately preceding the Participant's Qualifying Termination of Service.
1.2 Board means the Board of Directors of the Company.
1.3 Change in Control means:
(i) the date any entity or person, including a group as defined in
Section 13(d)(iii) of the Securities Exchange Act of 1934 shall become the
beneficial owner of, or shall have obtained voting control over, 25 percent or
more of the outstanding common shares of the Company;
(ii) the date the shareholders of the Company approve a definitive
agreement (a) to merge or consolidate the Company with or into another
corporation, in which the Company is not the continuing or surviving
corporation or pursuant to which any common shares of the Company would be
converted into cash, securities or other property of another corporation, other
than a merger of the Company in which holders of common shares immediately
prior to the merger have the same proportionate interest of common stock of the
surviving corporation immediately after the merger as immediately before, or
(b) to sell or otherwise dispose of substantially all of the assets of the
Company; or
(iii) the date there shall have been change in a majority of the Board
of the Company within a 12 month period unless the nomination of each new
director was approved by the vote of two-thirds (2/3) of directors then still
in office who were in office at the beginning of the 12 month period.
1.4 Code means the Internal Revenue Code of 1986, as amended.
1.5 Company means Liberty Bancorp, Inc., an Oklahoma corporation, and any
successor corporation.
1.6 Compensation Committee means the Human Resources and Compensation
Committee of the Board. Any function exercisable by such Committee may also be
exercised by the Board or such other committee as the Board may designate.
1.7 Earnings means all of the compensation paid to the Participant by the
Company or any subsidiary, including, but not limited to, salary and bonuses
paid under the Management Incentive Bonus Plan and any other bonus plan
(including any amounts thereunder paid in the form of restricted stock), but
shall not include any other non-cash amounts (including amounts attributable to
stock options) which are required to be included in compensation. Earnings
shall not be reduced by amounts excluded from gross income under Sections 125,
402(a)(8) or 402(h) or limited as provided under Section 401(a)(17) of the
Internal Revenue Code of 1986, as amended ("Code").
1.8 Effective Date means January 20, 1993, the date of the approval of the
Plan by the Board.
1.9 Good Reason shall mean (i) a reduction in Participant's base salary in
effect immediately prior to a Change in Control or as increased thereafter;
(ii) the assignment of Participant without Participant's consent, to a location
other than Oklahoma City or Tulsa, Oklahoma; (iii) the failure by the Company
or its successor to maintain Participant in a position of comparable authority
and responsibility with the Company or its successor or affiliates; or (iv) a
material reduction in the level of incentive compensation or benefits of a
Participant from those in effect immediately prior to a Change in Control
except such reductions as are applicable to all employees or key executives
generally and which do not have a disproportionate effect on Participant.
1.10 Participant means the executive officer of the Company or its
subsidiaries selected for participation in the Plan by the Board or
Compensation Committee.
1.11 Plan means the Liberty Bancorp, Inc. Severance Compensation Plan and
amendments thereto.
1.12 Qualifying Termination of Service means either (a) a Participant's
involuntary termination of employment with the Company and its subsidiaries or
their successors or (b) a Participant's voluntary termination of employment
with the Company and its subsidiaries for Good Reason, in either case within
two (2) years following the first Change in Control occurring after the
Effective Date, provided such Change in Control occurs within six (6) years
following the Effective Date. Qualifying Termination of Service does not
include any change in the Participant's employment status due to disability or
death or a Termination for Cause.
1.13 Supplemental Retirement Plan means the Liberty Bancorp, Inc. Supplemental
Executive Retirement Plan.
1.14 Termination for Cause means a Participant's termination of employment
with the Company and its subsidiaries or their successors because of:
(a) the continued failure by the Participant to devote reasonable time
and effort to the performance of Participant's duties (other than a failure
resulting from the Participant's incapacity due to physical or mental illness)
after written demand for improved performance has been delivered to the
employee by the Company which specifically identifies how the Participant has
not devoted reasonable time and effort to the performance of Participant's
duties; or
(b) the willful engaging by Participant in misconduct which is
materially injurious to the Company, monetarily or otherwise; or
(c) the Participant's ineligibility for coverage under the Company's
banker's blanket bond policy.
A Termination for Cause shall not include a termination attributable to
any of the following unless such acts caused the Participant to be ineligible
for coverage under the Company's banker's blanket bond policy:
(i) bad judgment or negligence on the part of the Participant other
than habitual negligence; or
(ii) an act or omission believed by the Participant in good faith to
have been in or not opposed to the best interests of the Company and reasonably
believed by the Participant to be lawful; or
(iii) the good faith conduct of a Participant in connection with a
Change in Control (including Participant's opposition to or support of the
Change in Control).
ARTICLE II
BENEFITS
2.1 Designation of Participants. The Participants shall be those executive
officers or key employees of the Company or its subsidiaries or affiliates
listed on Exhibit A and others designated by the Board or the Compensation
Committee from time to time as Participants in the Plan.
2.2 Severance Compensation. Upon the Qualifying Termination of Service of
any Participant, the terminated Participant shall be entitled to severance
compensation equal to (i) two (2) times Participant's Average Annual Earnings
less (ii) the Participant's vested benefit under the Supplemental Retirement
Plan, but in no event greater than the amount which would be deductible by the
Company under Code Section 280(G), after taking into consideration all payments
to such Participant covered by such section. The severance compensation shall
be paid to the Participant by the Company in a single, lump sum payment
promptly after Participant's Qualifying Termination of Service. All payments
of severance benefits shall be reduced by the amount of applicable Federal,
State and local withholding taxes, and FICA and FUTA taxes.
2.3 Funding of Payments. All compensation due a Participant under this
Plan is unfunded and unsecured and is payable out of general funds of the
Company.
2.4 Timing of Payments. If the severance compensation is not paid within
thirty (30) days of the Qualifying Termination of Service, there shall be paid
in addition to such amount, interest on the amount due at a rate of 5% in
excess of the prime rate as published in the Wall Street Journal, Southwest
Edition from time to time (or at the highest of such rates if a range is
published) from the date which is thirty (30) days following the Qualifying
Termination of Service to the date of payment.
ARTICLE III
MISCELLANEOUS PROVISIONS
3.1 Plan Administration. The general administration of this Plan shall be
the responsibility of the Compensation Committee which is hereby authorized, in
its discretion, to delegate said responsibilities to an administrator or
administrative committee. The good faith determination of the Compensation
Committee with respect to the administration of this Plan shall be final and
conclusive.
3.2 No Guarantee of Employment. Nothing contained herein shall be
construed as a contract of employment or deemed to give any Participant the
right to be retained in the employ of the Company or any subsidiary, or to
interfere with the rights of any such employer to discharge any individual at
any time, with or without cause. No severance compensation shall be payable
hereunder as a result of any termination of employment occurring prior to a
Change in Control.
3.3 Amendment and Termination. The Board may at any time, or from time to
time, amend this Plan in any respect or terminate this Plan without restriction
and without consent of any Participant or beneficiary, provided, that any such
amendment or termination shall not impair the rights of any Participant
hereunder without the consent of such Participant. Once a Participant has been
selected by the Board, this Plan shall constitute a contract between the
Participant and the Company.
3.4 Non-Alienation of Benefits. No benefit payable hereunder may be
assigned, pledged, mortgaged or hypothecated and, except to the extent required
by applicable law, no such benefit shall be subject to legal process or
attachment for the payment of any claims or a creditor of a Participant.
3.5 Payment to Representatives. If any Participant dies after a Qualifying
Termination of Service and before receipt of payment hereunder, the severance
compensation otherwise due to such Participant shall be payable to
Participant's estate. If any individual entitled to receive any benefits
hereunder is determined by the Compensation Committee or is adjudged to be
legally incapable of giving valid receipt and discharge for such benefits, they
shall be paid to the duly appointed and acting guardian, if any, and if no such
guardian is appointed and acting, to such persons as the Compensation Committee
may designate. Such payment shall, to the extent made, be deemed a complete
discharge for such payments under this Plan.
3.6 Governing Law. The provisions of this Plan shall be construed under
Federal law except to the extent that the laws of the State of Oklahoma would
be applicable.
3.7 Titles and Headings. The titles to articles and headings of sections
of this Plan are for convenience of reference and in case of any conflict the
text of the Plan, rather than such titles and headings, shall control.
3.8 Legality. The Company shall have no obligation to make any payments
under this plan if such payments would be in violation of Section 18(k)(i) of
the Federal Deposit Insurance Corporation Act or any other applicable law or
regulation applicable to banks or bank holding companies.
3.9 Resolution of Disputes. Any dispute between a Participant and the
Company, or any successor, shall be first submitted to mediation under the
Commercial Mediation Rules of the American Arbitration Association, which may
be initiated by a written request by Participant or Company. If such dispute
is not resolved within sixty (60) days of the written request for mediation, it
shall be submitted to arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association and judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. In connection with such mediation and arbitration, the following
rules shall apply:
(i) Any mediation or arbitration shall be held in the city in which
the Participant resides at the time of submission to mediation;
(ii) Any mediation or arbitration shall be conducted by a single person
who shall serve as both mediator and arbitrator;
(iii) The costs of any mediation and arbitration shall be borne by the
Company.
EXHIBIT 21
Direct Subsidiaries of Liberty Bancorp, Inc.
-------------------------------------------------------------------------------
Jurisdiction of
Name Incorporation
Liberty Bank and Trust Company of Oklahoma City, N.A. National Bank
Liberty Bank and Trust Company of Tulsa, N.A. National Bank
Liberty Real Estate Company Oklahoma
Mid-America Credit Life Assurance Company Oklahoma
Mid-America Insurance Agency, Inc. Oklahoma
Liberty Trust Company Oklahoma
Subsidiaries of Liberty Bank and Trust
Company of Oklahoma City, N.A.
-------------------------------------------------------------------------------
Liberty Property Management Company Oklahoma
Liberty Mortgage Company Delaware
Subsidiaries of Liberty Mortgage Company
-------------------------------------------------------------------------------
Liberty Mortgage Company of New Mexico New Mexico
EXHIBIT 23.1
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation
of our report dated January 20, 1995, included in this Form 10-K for the year
ended December 31, 1994, into Liberty Bancorp, Inc.'s previously filed
registration statements No. 33-28760, Profit Sharing, Salary Deferral and
Employee Stock Ownership Plan and Trust Agreement; No. 33-48170, 1990 Stock
Option Plan of Liberty Bancorp, Inc. and No. 33-62814, Form S-3.
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma,
March 23, 1994
EXHIBIT 23.2
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-3, No. 33-62814) of Liberty Bancorp, Inc. and in the related Prospectus
and the Registration Statements pertaining to the Liberty Bancorp, Inc. Profit
Sharing, Salary Deferral and Employee Stock Ownership Plan and Trust Agreement
(Form S-8 No. 33-28760) and to the 1990 Stock Option Plan of Liberty Bancorp,
Inc. (Form S-8 No. 33-48170) of our report dated January 18, 1995 with respect
to the consolidated financial statements of Liberty Mortgage Company (not
presented separately herein) included in the Annual Report (Form 10-K) of
Liberty Bancorp, Inc. for the year ended December 31, 1994.
ERNST & YOUNG LLP
Oklahoma City, Oklahoma
March 29, 1995
EXHIBIT 24
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Mischa
Gorkuscha and Kenneth R. Brown, and both of them, with full power to act alone,
as attorney-in-fact to execute and fill in the name of and on behalf of Liberty
Bancorp, Inc. ("Corporation"), and the person whose signature appears below,
both individually and in the capacities indicated, the Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 required under
Section 13 of the Securities Exchange Act of 1934, and any and all amendments
thereto.
Dated this 15th day of March, 1995.
Signature Title
/S/ Donald L. Brawner, M.D.
-------------------------------- Director
Donald L. Brawner, M.D.
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Mischa
Gorkuscha and Kenneth R. Brown, and both of them, with full power to act alone,
as attorney-in-fact to execute and fill in the name of and on behalf of Liberty
Bancorp, Inc. ("Corporation"), and the person whose signature appears below,
both individually and in the capacities indicated, the Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 required under
Section 13 of the Securities Exchange Act of 1934, and any and all amendments
thereto.
Dated this 15th day of March, 1995.
Signature Title
/S/ Robert S. Ellis, M.D.
-------------------------------- Director
Robert S. Ellis, M.D.
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Mischa
Gorkuscha and Kenneth R. Brown, and both of them, with full power to act alone,
as attorney-in-fact to execute and fill in the name of and on behalf of Liberty
Bancorp, Inc. ("Corporation"), and the person whose signature appears below,
both individually and in the capacities indicated, the Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 required under
Section 13 of the Securities Exchange Act of 1934, and any and all amendments
thereto.
Dated this 15th day of March, 1995.
Signature Title
/S/ William J. Fisher, Jr.
-------------------------------- Director
William J. Fisher, Jr.
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Mischa
Gorkuscha and Kenneth R. Brown, and both of them, with full power to act alone,
as attorney-in-fact to execute and fill in the name of and on behalf of Liberty
Bancorp, Inc. ("Corporation"), and the person whose signature appears below,
both individually and in the capacities indicated, the Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 required under
Section 13 of the Securities Exchange Act of 1934, and any and all amendments
thereto.
Dated this 15th day of March, 1995.
Signature Title
/S/ C. W. Flint, Jr.
-------------------------------- Director
C. W. Flint, Jr.
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Mischa
Gorkuscha and Kenneth R. Brown, and both of them, with full power to act alone,
as attorney-in-fact to execute and fill in the name of and on behalf of Liberty
Bancorp, Inc. ("Corporation"), and the person whose signature appears below,
both individually and in the capacities indicated, the Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 required under
Section 13 of the Securities Exchange Act of 1934, and any and all amendments
thereto.
Dated this 15th day of March, 1995.
Signature Title
/S/ James L. Hall, Jr.
-------------------------------- Director
James L. Hall, Jr.
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Mischa
Gorkuscha and Kenneth R. Brown, and both of them, with full power to act alone,
as attorney-in-fact to execute and fill in the name of and on behalf of Liberty
Bancorp, Inc. ("Corporation"), and the person whose signature appears below,
both individually and in the capacities indicated, the Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 required under
Section 13 of the Securities Exchange Act of 1934, and any and all amendments
thereto.
Dated this 15th day of March, 1995.
Signature Title
/S/ Raymond H. Hefner, Jr.
-------------------------------- Director
Raymond H. Hefner, Jr.
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Mischa
Gorkuscha and Kenneth R. Brown, and both of them, with full power to act alone,
as attorney-in-fact to execute and fill in the name of and on behalf of Liberty
Bancorp, Inc. ("Corporation"), and the person whose signature appears below,
both individually and in the capacities indicated, the Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 required under
Section 13 of the Securities Exchange Act of 1934, and any and all amendments
thereto.
Dated this 15th day of March, 1995.
Signature Title
/S/ Walter H. Helmerich, III
-------------------------------- Director
Walter H. Helmerich, III
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Mischa
Gorkuscha and Kenneth R. Brown, and both of them, with full power to act alone,
as attorney-in-fact to execute and fill in the name of and on behalf of Liberty
Bancorp, Inc. ("Corporation"), and the person whose signature appears below,
both individually and in the capacities indicated, the Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 required under
Section 13 of the Securities Exchange Act of 1934, and any and all amendments
thereto.
Dated this 15th day of March, 1995.
Signature Title
/S/ Joseph S. Jankowsky
-------------------------------- Director
Joseph S. Jankowsky
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Mischa
Gorkuscha and Kenneth R. Brown, and both of them, with full power to act alone,
as attorney-in-fact to execute and fill in the name of and on behalf of Liberty
Bancorp, Inc. ("Corporation"), and the person whose signature appears below,
both individually and in the capacities indicated, the Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 required under
Section 13 of the Securities Exchange Act of 1934, and any and all amendments
thereto.
Dated this 15th day of March, 1995.
Signature Title
/S/ John E. Kirkpatrick
-------------------------------- Director
John E. Kirkpatrick
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Mischa
Gorkuscha and Kenneth R. Brown, and both of them, with full power to act alone,
as attorney-in-fact to execute and fill in the name of and on behalf of Liberty
Bancorp, Inc. ("Corporation"), and the person whose signature appears below,
both individually and in the capacities indicated, the Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 required under
Section 13 of the Securities Exchange Act of 1934, and any and all amendments
thereto.
Dated this 15th day of March, 1995.
Signature Title
/S/ Judy Z. Kishner
-------------------------------- Director
Judy Z. Kishner
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Mischa
Gorkuscha and Kenneth R. Brown, and both of them, with full power to act alone,
as attorney-in-fact to execute and fill in the name of and on behalf of Liberty
Bancorp, Inc. ("Corporation"), and the person whose signature appears below,
both individually and in the capacities indicated, the Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 required under
Section 13 of the Securities Exchange Act of 1934, and any and all amendments
thereto.
Dated this 15th day of March, 1995.
Signature Title
/S/ David L. Kyle
-------------------------------- Director
David L. Kyle
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Mischa
Gorkuscha and Kenneth R. Brown, and both of them, with full power to act alone,
as attorney-in-fact to execute and fill in the name of and on behalf of Liberty
Bancorp, Inc. ("Corporation"), and the person whose signature appears below,
both individually and in the capacities indicated, the Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 required under
Section 13 of the Securities Exchange Act of 1934, and any and all amendments
thereto.
Dated this 15th day of March, 1995.
Signature Title
/S/ Edward C. Lawson, Jr.
-------------------------------- Director
Edward C. Lawson, Jr.
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Mischa
Gorkuscha and Kenneth R. Brown, and both of them, with full power to act alone,
as attorney-in-fact to execute and fill in the name of and on behalf of Liberty
Bancorp, Inc. ("Corporation"), and the person whose signature appears below,
both individually and in the capacities indicated, the Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 required under
Section 13 of the Securities Exchange Act of 1934, and any and all amendments
thereto.
Dated this 15th day of March, 1995.
Signature Title
/S/ Herb Mee, Jr.
-------------------------------- Director
Herb Mee, Jr.
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Mischa
Gorkuscha and Kenneth R. Brown, and both of them, with full power to act alone,
as attorney-in-fact to execute and fill in the name of and on behalf of Liberty
Bancorp, Inc. ("Corporation"), and the person whose signature appears below,
both individually and in the capacities indicated, the Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 required under
Section 13 of the Securities Exchange Act of 1934, and any and all amendments
thereto.
Dated this 15th day of March, 1995.
Signature Title
/S/ William G. Paul
-------------------------------- Director
William G. Paul
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Mischa
Gorkuscha and Kenneth R. Brown, and both of them, with full power to act alone,
as attorney-in-fact to execute and fill in the name of and on behalf of Liberty
Bancorp, Inc. ("Corporation"), and the person whose signature appears below,
both individually and in the capacities indicated, the Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 required under
Section 13 of the Securities Exchange Act of 1934, and any and all amendments
thereto.
Dated this 15th day of March, 1995.
Signature Title
/S/ V. Lee Powell
-------------------------------- Director
V. Lee Powell
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Mischa
Gorkuscha and Kenneth R. Brown, and both of them, with full power to act alone,
as attorney-in-fact to execute and fill in the name of and on behalf of Liberty
Bancorp, Inc. ("Corporation"), and the person whose signature appears below,
both individually and in the capacities indicated, the Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 required under
Section 13 of the Securities Exchange Act of 1934, and any and all amendments
thereto.
Dated this 15th day of March, 1995.
Signature Title
/S/ Jon R. Stuart
-------------------------------- Director
Jon R. Stuart
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Mischa
Gorkuscha and Kenneth R. Brown, and both of them, with full power to act alone,
as attorney-in-fact to execute and fill in the name of and on behalf of Liberty
Bancorp, Inc. ("Corporation"), and the person whose signature appears below,
both individually and in the capacities indicated, the Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 required under
Section 13 of the Securities Exchange Act of 1934, and any and all amendments
thereto.
Dated this 15th day of March, 1995.
Signature Title
/S/ John S. Zink
-------------------------------- Director
John S. Zink
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET OF LIBERTY BANCORP, INC. AS OF DECEMBER 31, 1994 AND THE STATEMENT OF
INCOME FOR THE YEAR ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 361,953,000
<INT-BEARING-DEPOSITS> 1,103,000
<FED-FUNDS-SOLD> 52,900,000
<TRADING-ASSETS> 21,207,000
<INVESTMENTS-HELD-FOR-SALE> 656,135,000
<INVESTMENTS-CARRYING> 1,090,674,000
<INVESTMENTS-MARKET> 1,078,983,000
<LOANS> 1,179,779,000
<ALLOWANCE> 19,081,000
<TOTAL-ASSETS> 2,883,699,000
<DEPOSITS> 2,374,187,000
<SHORT-TERM> 139,700,000
<LIABILITIES-OTHER> 135,432,000
<LONG-TERM> 0
<COMMON> 95,000
0
0
<OTHER-SE> 234,285,000
<TOTAL-LIABILITIES-AND-EQUITY> 2,883,699,000
<INTEREST-LOAN> 81,698,000
<INTEREST-INVEST> 56,975,000
<INTEREST-OTHER> 2,667,000
<INTEREST-TOTAL> 141,340,000
<INTEREST-DEPOSIT> 54,241,000
<INTEREST-EXPENSE> 63,660,000
<INTEREST-INCOME-NET> 77,680,000
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 1,174,000
<EXPENSE-OTHER> 111,771,000
<INCOME-PRETAX> 24,970,000
<INCOME-PRE-EXTRAORDINARY> 24,970,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,876,000
<EPS-PRIMARY> 2.64
<EPS-DILUTED> 2.64
<YIELD-ACTUAL> 3.65
<LOANS-NON> 7,808,000
<LOANS-PAST> 3,748,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 177,000
<ALLOWANCE-OPEN> 19,986,000
<CHARGE-OFFS> 2,186,000
<RECOVERIES> 1,281,000
<ALLOWANCE-CLOSE> 19,081,000
<ALLOWANCE-DOMESTIC> 19,081,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
