<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): July 14, 1997
Community First Bankshares, Inc.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 0-19368 46-0391436
----------------------------- ----------------- -------------------
(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
520 Main Avenue
Fargo, North Dakota 58124-0001
-------------------------------------------- --------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (701) 298-5600
<PAGE>
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Pursuant to Item 7(a)(4) of Item 8-K, the following financial
statements of KeyBank National Association (Wyoming)
("KeyBank Wyoming") are supplied with this report:
FINANCIAL STATEMENTS OF KEYBANK WYOMING
Statement of Financial Condition - December 31, 1996. . . . . F-1
Statement of Income - Year Ended December 31, 1996. . . . . . F-2
Statement of Shareholder's Equity - Year Ended
December 31, 1996 . . . . . . . . . . . . . . . . . . . . . F-3
Statement of Cash Flows - Year Ended December 31, 1996. . . . F-4
Notes to Financial Statements . . . . . . . . . . . . . . . . F-5
Report of Independent Accountants . . . . . . . . . . . . . . F-15
Quarterly Results of Operations (Unaudited) . . . . . . . . . F-16
UNAUDITED CONDENSED FINANCIAL STATEMENTS OF KEYBANK WYOMING
Condensed Statement of Financial Condition -
June 30, 1997 . . . . . . . . . . . . . . . . . . . . . . . F-17
Condensed Statement of Income -
Six Months Ended June 30, 1997. . . . . . . . . . . . . . . F-18
Condensed Statement of Cash Flows -
Six Months Ended June 30, 1997. . . . . . . . . . . . . . . F-19
(b) PRO FORMA COMBINED FINANCIAL INFORMATION:
Pro Forma Condensed Combined Balance
Sheet as of June 30, 1997 (Unaudited). . . . . . . . . . . . . . . F-20
Pro Forma Condensed Combined Statement of
Income for the Six Months Ended June 30, 1997 (Unaudited). . . . . F-22
2
<PAGE>
(c) EXHIBITS.
23.1 Consent of Ernst & Young LLP.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COMMUNITY FIRST BANKSHARES, INC.
By /s/ Mark A. Anderson
------------------------------------------
Mark A. Anderson, Executive Vice President
and Chief Financial Officer
Dated: September 19, 1997
3
<PAGE>
KEYBANK NATIONAL ASSOCIATION (Wyoming)
STATEMENT OF FINANCIAL CONDITION
December 31, 1996
(Dollars in thousands, except per share data)
ASSETS
Cash and due from banks. . . . . . . . . . . . . . . . . . $ 56,513
Federal funds sold and securities purchased under agreements
to resell. . . . . . . . . . . . . . . . . . . . . . . 4,955
Interest-bearing deposits. . . . . . . . . . . . . . . . . 98
Available-for-sale securities. . . . . . . . . . . . . . . 216,275
Held-to-maturity securities
(Fair Value: $48,904). . . . . . . . . . . . . . . . . 48,230
Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . 851,753
Less: Allowance for Loan Losses . . . . . . . . . . (14,875)
- ----------------------------------------------------------------------------
Net Loans. . . . . . . . . . . . . . . . . . . . . . . . . 836,878
Bank premises and equipment, net . . . . . . . . . . . . . 19,356
Accrued interest receivable. . . . . . . . . . . . . . . . 8,805
Intangibles. . . . . . . . . . . . . . . . . . . . . . . . 811
Other Assets . . . . . . . . . . . . . . . . . . . . . . . 35,855
- ----------------------------------------------------------------------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . $1,227,776
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDER'S EQUITY
Deposits:
Noninterest-bearing. . . . . . . . . . . . . . . . . . 154,135
Interest-bearing:
Savings and NOW accounts. . . . . . . . . . . . . 367,654
Time accounts over $10,000. . . . . . . . . . . . 163,134
Other Time Accounts . . . . . . . . . . . . . . . 310,565
- ----------------------------------------------------------------------------
Total deposits . . . . . . . . . . . . . . . . . . . . . . 995,488
Federal funds purchased and securities sold under agreements
to repurchase. . . . . . . . . . . . . . . . . . . . . 57,958
Other short-term borrowings. . . . . . . . . . . . . . . . 52,472
Long-term debt . . . . . . . . . . . . . . . . . . . . . . 712
Accrued interest payable . . . . . . . . . . . . . . . . . 2,845
Other Liabilities. . . . . . . . . . . . . . . . . . . . . 4,859
- ----------------------------------------------------------------------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . 1,114,334
Shareholder's equity:
Common stock, par value $100 per share:
Authorized Shares - 5,000
Issued Shares - 5,000 . . . . . . . . . . . . . . 500
Capital surplus . . . . . . . . . . . . . . . . . 62,666
Retained earnings. . . . . . . . . . . . . . . . . . . 49,734
Unrealized gain on available-for-sale
Securities, Net of Tax. . . . . . . . . . . . . . . 542
- ----------------------------------------------------------------------------
Total Shareholder's Equity . . . . . . . . . . . . . . . . 113,442
- ----------------------------------------------------------------------------
Total liabilities and shareholder's equity . . . . . . . . $ 1,227,776
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
SEE ACCOMPANYING NOTES.
F-1
<PAGE>
KEYBANK NATIONAL ASSOCIATION (Wyoming)
STATEMENT OF INCOME
Year ended December 31, 1996
(Dollars in thousands, except per share data)
INTEREST INCOME:
Loans. . . . . . . . . . . . . . . . . . . . . . . . . $ 81,044
Investment securities. . . . . . . . . . . . . . . . . 16,629
Interest-bearing deposits. . . . . . . . . . . . . . . 5
Federal Funds Sold and Resale Agreements . . . . . . . 478
- ----------------------------------------------------------------------------
Total interest income. . . . . . . . . . . . . . . . . . . 98,156
INTEREST EXPENSE:
Deposits . . . . . . . . . . . . . . . . . . . . . . . 35,640
Short-term and other borrowings. . . . . . . . . . . . 5,934
Long-term Debt . . . . . . . . . . . . . . . . . . . . 85
- ----------------------------------------------------------------------------
Total Interest Expense . . . . . . . . . . . . . . . . . . 41,659
- ----------------------------------------------------------------------------
Net interest income. . . . . . . . . . . . . . . . . . . . 56,497
Provision for Loan Losses. . . . . . . . . . . . . . . . . 9,258
- ----------------------------------------------------------------------------
Net interest income after provision for loan losses. . . . 47,239
NONINTEREST INCOME:
Service charges on deposit accounts. . . . . . . . . . 6,191
Insurance commissions. . . . . . . . . . . . . . . . . 586
Net gains on sales of securities . . . . . . . . . . . 18
Other. . . . . . . . . . . . . . . . . . . . . . . . . 4,023
- ----------------------------------------------------------------------------
Total noninterest income . . . . . . . . . . . . . . . . . 10,818
NONINTEREST EXPENSE:
Salaries and employee benefits . . . . . . . . . . . . 13,845
Net occupancy. . . . . . . . . . . . . . . . . . . . . 5,234
FDIC insurance . . . . . . . . . . . . . . . . . . . . 937
Legal and accounting . . . . . . . . . . . . . . . . . 399
Other professional service . . . . . . . . . . . . . . 3,834
Data processing. . . . . . . . . . . . . . . . . . . . 10,049
Amortization of intangibles. . . . . . . . . . . . . . 749
Other. . . . . . . . . . . . . . . . . . . . . . . . . 8,119
- ----------------------------------------------------------------------------
Total Noninterest Expense. . . . . . . . . . . . . . . . . 43,166
- ----------------------------------------------------------------------------
Income before income taxes . . . . . . . . . . . . . . . . 14,891
Provision for Income Taxes . . . . . . . . . . . . . . . . 3,967
- ----------------------------------------------------------------------------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $ 10,924
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Earnings per common and common equivalent share: $2,184.80
Average common and common equivalent shares outstanding: 5,000
SEE ACCOMPANYING NOTES.
F-2
<PAGE>
KEYBANK NATIONAL ASSOCIATION (Wyoming)
STATEMENT OF SHAREHOLDER'S EQUITY
Year ended December 31, 1996
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Common Stock
--------------------- Capital Retained Unrealized
Shares Amount Surplus Earnings Gain(Loss) Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 . . . 5,000 $500 $62,666 $38,810 $1,324 $103,300
Net income . . . . . . . . . . . . 10,924 10,924
Change in unrealized loss on
available-for-sale securities,
net of income tax
benefit of $421 . . . . . . . -- -- -- -- (782) (782)
- -----------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 . . . 5,000 $500 $62,666 $49,734 $ 542 $113,442
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-3
<PAGE>
KEYBANK NATIONAL ASSOCIATION (Wyoming)
STATEMENT OF CASH FLOWS
Year ended December 31, 1996
(In thousands)
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 10,924
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses . . . . . . . . . . . . 9,258
Depreciation. . . . . . . . . . . . . . . . . . . 1,614
Amortization of intangibles . . . . . . . . . . . 749
Net amortization of premiums and discounts on
securities. . . . . . . . . . . . . . . . . . . (175)
Deferred income tax benefit . . . . . . . . . . . (1,518)
Decrease in interest receivable . . . . . . . . . 3,493
Decrease in interest payable. . . . . . . . . . . (1,049)
Increase in Company-owned life insurance. . . . . (20,599)
Other, Net. . . . . . . . . . . . . . . . . . . . (5,481)
- --------------------------------------------------------------------------------
Net cash used in operating activities. . . . . . . . . . . (2,784)
CASH FLOWS FROM INVESTING ACTIVITIES
Net Purchases of available-for-sale securities . . . . . . (1,617)
Net Maturities of held-to-maturity securities. . . . . . . 3,635
Net decrease in loans. . . . . . . . . . . . . . . . . . . 41,604
- --------------------------------------------------------------------------------
Net cash provided by investing activities. . . . . . . . . 43,622
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in demand deposits, NOW
accounts and savings accounts. . . . . . . . . . . . . (45,802)
Net decrease in time accounts . . . . . . . . . . . . . . (3,290)
Net decrease in short-term and other
Borrowings . . . . . . . . . . . . . . . . . . . . . . (2,907)
- --------------------------------------------------------------------------------
Net Cash used in Financing Activities. . . . . . . . . . . (51,999)
- --------------------------------------------------------------------------------
Net Decrease in Cash and Cash Equivalents. . . . . . . . . (11,161)
Cash and Cash Equivalents at Beginning of Year . . . . . . 72,629
- --------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year . . . . . . . . . $ 61,468
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES.
F-4
<PAGE>
KEYBANK NATIONAL ASSOCIATION (Wyoming)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
KeyBank National Association (Wyoming) (the "Company"), formerly known as
KeyBank of Wyoming, serves 24 communities in Wyoming. The Company's
community banking offices provide a full range of banking services, primarily
in small and medium-sized communities and the surrounding communities. In
addition to its primary emphasis on commercial and consumer banking services,
the Company offers nondeposit investment products and services. The Company
is a wholly owned subsidiary of KeyBank of the Rocky Mountains, Inc., which
is a wholly owned subsidiary of KeyCorp.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
HELD-TO-MATURITY AND AVAILABLE-FOR-SALE SECURITIES
Management determines the classification of debt securities at the time of
purchase. Debt securities are classified as held-to-maturity when the
Company has the positive intent and ability to hold the securities to
maturity. Held-to-maturity securities are stated at amortized cost.
Debt securities not classified as held-to-maturity are classified as
available-for-sale. Available-for-sale securities are stated at fair value,
with the unrealized gains and losses, net of tax, reported as a component of
retained earnings in shareholder's equity.
The amortized cost of debt securities classified as held-to-maturity or
available-for-sale is adjusted for amortization of premiums and accretion of
discounts to maturity or, in the case of mortgage-backed securities, over the
estimated life of the security. Such amortization and accretion is included as
an adjustment to interest income from investment securities. Realized gains
and losses and declines in value judged to be other-than-temporary are included
in net securities gains (losses). The cost of securities sold is based on the
specific identification method.
LOANS
Loans are carried at the principal amount outstanding, net of unearned income,
including net deferred loan fees and costs. Certain nonrefundable loan
origination and commitment fees and the direct costs associated with originating
or acquiring the loans are deferred. The net deferred amount is amortized as an
adjustment to the yield over the estimated lives of the related loans.
F-5
<PAGE>
IMPAIRED AND OTHER NONACCRUAL LOANS
The accrual of interest on loans is discontinued generally when payment is 90
days or more past due, unless the loan is well secured and in the process of
collection. When accrual of interest is discontinued on a loan, the interest
accrued but not collected is charged against the allowance for loan losses.
Thereafter, payments received are generally applied to principal. However,
based on management's assessment of the ultimate collectibility of a nonaccrual
loan interest income may be recognized on a cash basis.
Effective January 1, 1995, the Company adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan" and SFAS No. 118, "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosure". In accordance
with SFAS No. 114, the Company excludes smaller-balance, homogeneous from its
impairment evaluation. All other loans with payments 90 days or more past due
and on nonaccrual status are considered to be impaired. Impaired loans and
other nonaccrual loans (smaller-balance, homogeneous loans) are returned to
accrual status when management determines that the circumstances have improved
to the extent that there has been a sustained period (generally at least six
months) of repayment performance and both principal and interest are deemed to
be collectible.
Impaired loans are evaluated individually. Where collateral exists, the extent
of impairment is determined based on the estimated fair value of the underlying
collateral. If collateral does not exist, or is insufficient to support the
carrying amount of the loan, management looks to other means of collection.
Where the estimated fair value of the collateral and the present value of the
estimated future cash flows from other means of collection do not support the
carrying amount of the loan, management charges off that portion of the loan
balance which it believes will not ultimately be collected. In instances where
collateral or other sources of repayment are sufficient, yet uncertainty exists
regarding the ultimate repayment, an allowance is specifically allocated for in
the allowance for loan losses.
For all other nonaccrual loans (smaller-balances, homogeneous loans) management
applies historical loss experience rates, adjusted based on management's
assessment of emerging credit trends and other factors. The resulting loss
estimates are specifically allocated for by loan type in the allowance for loan
losses. In general, such loans are charged off when payment is 120-180 days
past due.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained through charges to expense at an
amount that will provide for estimated loan losses. These estimates are based
principally on a continual review of the loan portfolio, loan charge-off
experience, economic conditions and industry guidelines. Ultimate losses may
vary from current estimates, and as adjustments become necessary, the allowance
for loan losses is adjusted in the periods in which such losses become known or
fail to occur. Actual loan charge-offs and subsequent recoveries are deducted
from and added to the allowance, respectively.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are stated at cost less accumulated depreciation.
Depreciation for financial reporting purposes is provided on the straight-line
method over the estimated lives of the assets and includes amortization of
assets recorded under capital leases. Estimated lives range from three to
twenty and twenty-five to forty years for equipment and premises, respectively.
F-6
<PAGE>
INTANGIBLE ASSETS
Goodwill, the excess cost over net assets acquired is amortized over a period
not exceeding 25 years. At December 31, 1996, goodwill totaled $319,000 net of
accumulated amortization of $1,137,000. Other intangible assets totaled
$492,000 net of accumulated amortization of $8,610,000 and are amortized over
their estimated useful lives ranging from three to twenty-five years.
INCOME TAXES
Income taxes have been provided using the liability method in accordance with
SFAS No. 109 "Accounting for Income Taxes". The provision for income taxes has
been calculated based on statutory rates applicable had the Company filed a
separate return.
EARNINGS PER SHARE
Earnings per common share is calculated by dividing net income by the sum of the
weighted average number of shares of common stock outstanding.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents is defined as cash and due from banks, federal funds
sold and securities purchased under agreements to resell.
2. ACCOUNTING CHANGES
Effective January 1, 1996, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of," which requires that long-lived
assets and certain identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
is not recoverable. The Company's adoption of SFAS No. 121 did not have a
material impact on the Company's financial position.
SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities," addresses whether the transfer of financial
assets should be accounted for as a sale and removed from the balance sheet, or
as a financing recognized as a borrowing. SFAS No. 125 uses a "financial
components" approach to determine the accounting results of the transfers of
financial assets and focuses on control to determine whether assets have been
sold. If the entity has surrendered control over the transferred assets, the
transaction is considered a sale. Control is considered surrendered only if the
seller has no legal right to the assets, even in bankruptcy; the buyer has the
right to pledge or exchange the assets; and the seller does not maintain
effective control over the assets through an agreement to repurchase or redeem
them. SFAS No. 125 is effective on a prospective basis for all transactions
occurring after December 31, 1996. The Company regularly uses participations of
loans to manage its asset/liability mix. The accounting for such transactions
is included in SFAS No. 125. However, the adoption of SFAS No. 125 is not
expected to have a material effect on the Company's operations or financial
position.
F-7
<PAGE>
3. SECURITIES
The following is a summary of available-for-sale securities and held-to-maturity
securities at December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
Available-for-Sale Securities
- ----------------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
United States Treasury . . . . . . . . $ 24,625 $ 344 - $ 24,969
Mortgage-backed securities . . . . . . 86,728 1,151 - 87,879
Collateralized mortgage
obligations. . . . . . . . . . . . 104,048 - 661 103,387
Other Securities . . . . . . . . . . . 40 - - 40
- ----------------------------------------------------------------------------------------------------
Total. . . . . . . . . . . . . . . . . $ 215,441 $ 1,495 $ 661 $ 216,275
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
<CAPTION>
Held-to-Maturity Securities
- ----------------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
State and political securities . . . . $ 48,230 851 177 48,904
- ----------------------------------------------------------------------------------------------------
Total. . . . . . . . . . . . . . . . . $ 48,230 851 177 48,904
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
The amortized cost and estimated fair value of debt securities at December 31,
1996, by contractual maturity, are shown below. Expected maturities may differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
Estimated
Amortized Fair
Available-for-sale Cost Value
- ----------------------------------------------------------------------
(IN THOUSANDS)
Due in one year or less. . . . . . . . . . . $7,469 7,640
Due after one year through five years. . . . 71,512 72,314
Due after five years through ten years . . . 113,182 113,389
Due after Ten Years. . . . . . . . . . . . . 23,278 22,932
- ----------------------------------------------------------------------
Total. . . . . . . . . . . . . . . . . . . . $215,441 216,275
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Estimated
Amortized Fair
Held-to-Maturity Cost Value
- ----------------------------------------------------------------------
(IN THOUSANDS)
Due in one year or less. . . . . . . . . . . $6,754 6,806
Due after one year through five years. . . . 29,863 30,192
Due after five years through ten years . . . 11,190 11,480
Due after Ten Years. . . . . . . . . . . . . 423 426
- ----------------------------------------------------------------------
Total. . . . . . . . . . . . . . . . . . . . $48,230 48,904
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
F-8
<PAGE>
Available-for-sale and held-to-maturity securities carried at $241,150,000 at
December 31, 1996, was pledged to secure borrowings, public and trust deposits
and for other purposes required by law. Securities sold under agreement to
repurchase were collateralized by available-for-sale and held-to-maturity
securities with an aggregate carrying value of $2,929,000 at December 31, 1996.
4. LOANS
The composition of the loan portfolio at December 31 was as follows (in
thousands):
1996
- ----------------------------------------------------------------------------
Real estate. . . . . . . . . . . . . . . . . . . . . $433,567
Commercial . . . . . . . . . . . . . . . . . . . . . 108,923
Consumer and other . . . . . . . . . . . . . . . . . 205,747
Agriculture. . . . . . . . . . . . . . . . . . . . . 103,516
- ----------------------------------------------------------------------------
851,753
Less allowance for loan losses . . . . . . . . . . . (14,875)
- ----------------------------------------------------------------------------
Net Loans. . . . . . . . . . . . . . . . . . . . . . 836,878
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
5. ALLOWANCE FOR LOAN LOSSES
Activity in the allowance was as follows (in thousands):
1996
- ----------------------------------------------------------------------------
Balance at beginning of year . . . . . . . . . . . . $ 11,194
Provision charged to operating expense . . . . . . . 9,258
Loans charged off. . . . . . . . . . . . . . . . . . (8,475)
RECOVERIES OF LOANS CHARGED OFF. . . . . . . . . . . 2,898
- ----------------------------------------------------------------------------
Balance at end of year . . . . . . . . . . . . . . . $ 14,875
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Nonaccrual loans totaled $16,408,000 at December 31, 1996. The Company includes
all loans considered impaired under SFAS No. 114 in nonaccrual loans. The
amount of impaired loans was not material at December 31, 1996. Interest income
of $421,000 on nonaccrual loans would have been recorded during 1996 if the
loans had been current in accordance with their original terms. During 1996,
the Company recorded interest income of $176,000 related to loans that were on
nonaccrual status as of December 31, 1996.
F-9
<PAGE>
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments at December 31
are shown in the table below (in thousands):
1996
- -------------------------------------------------------------
Carrying Fair
Amount Value
- -----------------------------------------------------------------
Financial assets:
Cash and due from banks (1). . . . . . . $ 56,513 56,513
Federal funds sold and resale
agreements (1). . . . . . . . . . . 4,955 4,955
Interest-bearing deposits (1). . . . . . 98 98
Available-for-sale securities (2). . . . 216,275 216,275
Held-to-maturity securities (2). . . . . 48,230 48,904
Loans, net of allowance (3). . . . . . . 836,878 846,124
Financial liabilities:
Deposits (4) . . . . . . . . . . . . . . $995,488 $995,674
Federal funds purchased and
repurchase agreements (1) . . . . . 57,958 57,958
Other short-term borrowings (1). . . . . 52,472 52,472
Long-term debt (5) . . . . . . . . . . . 712 764
(1) Fair value equals or approximates carrying amount.
(2) Fair values of securities available for sale and investment securities
generally were based on quoted market prices. Where quoted market prices
were not available, fair values were based on quoted market prices of
similar instruments.
(3) Fair values of loans were generally estimated using discounted cash flow
models.
(4) Fair values of certificates of deposit were estimated based on discounted
cash flows. For all other deposits, carrying amounts were used as a
reasonable approximation of fair values.
(5) Fair values of long-term debt were estimated based on discounted cash
flows.
7. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND CONCENTRATIONS OF
CREDIT RISK
In the normal course of business, the Company is party to financial instruments
with off-balance-sheet risk. These transactions enable customers to meet their
financing needs and enable the Company to manage its interest rate risk. These
financial instruments include commitments to extend credit and letters of
credit. The contract or notional amounts of these financial instruments at
December 31, 1996 are as follows (in thousands):
1996
- --------------------------------------------
Commitments to extend credit $ 148,038
Standby letters of credit 3,017
Commitments to extend credit are legally binding and have fixed expiration dates
or other termination clauses. The Company's exposure to credit loss on
commitments to extend credit, in the event of nonperformance by the
counterparty, is represented by the contractual amounts of the commitments. The
Company monitors its credit risk for commitments to extend credit by applying
the same credit policies in making commitments as it does for loans and by
obtaining collateral to secure commitments based on management's credit
assessment of the counterparty. Collateral held varies, but may include
marketable securities, receivables, inventory, agricultural commodities,
equipment and real estate. Because many of the commitments are expected to
expire without being drawn upon, total commitment amounts do not necessarily
represent the Company's future liquidity requirements. In addition, the Company
also offers various consumer credit line products to its customers that are
cancelable upon notification by the Company, which are included above in
commitments to extend credit.
F-10
<PAGE>
Standby letters of credit are conditional commitments issued by the Company to
guarantee the financial performance of a customer to a third party. Those
guarantees are primarily issued to support public and private borrowing
arrangements.
The amount of collateral obtained to support letters of credit is based on a
credit assessment of the counterparty. Collateral held may include marketable
securities, receivables, inventory, agricultural commodities, equipment and real
estate. Because the conditions under which the Company is required to fund
letters of credit may not materialize, the liquidity requirements of letters of
credit are expected to be less than the total outstanding commitments.
The Company grants real estate, agricultural, commercial, consumer and other
loans and commitments and letters of credit to customers throughout Wyoming.
Although the Company has a diversified loan portfolio, the ability of a
significant portion of its debtors to honor their contracts is dependent upon
the agricultural economic sector. The maximum exposure to accounting loss that
could occur, if the borrowers fail to perform according to the loan agreements
and the underlying collateral proved to be of no value, is the total loan
portfolio balances and commitments and letters of credit.
8. BANK PREMISES AND EQUIPMENT
Bank premises and equipment at December 31 consisted of the following (in
thousands):
1996
- -----------------------------------------------
Land. . . . . . . . . . . . . . . . . $ 4,576
Buildings . . . . . . . . . . . . . . 22,165
Furniture, fixtures and equipment . . 17,915
Leased property under capital lease
Obligations . . . . . . . . . . . 2,200
- -----------------------------------------------
46,856
Less accumulated depreciation . . . . (27,500)
- -----------------------------------------------
$ 19,356
- -----------------------------------------------
- -----------------------------------------------
9. SHORT-TERM BORROWINGS
As of December 31, 1996, the weighted average interest rate on short-term
borrowings was 5.02%.
10. SHAREHOLDER'S EQUITY
F-11
<PAGE>
CAPITAL REQUIREMENTS
The Company is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory, and possibly additional discretionary, actions
by regulators that, if undertaken, could have a direct material effect on the
Company's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Company must meet
specific capital guidelines that involve quantitative measures of the Company's
assets, liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Company's capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company to maintain minimum amounts and ratios of total and Tier I
capital to risk-weighted assets, and of Tier I capital to average assets.
As of December 31, 1996, the Company is considered well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Company must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the following table.
<TABLE>
<CAPTION>
At December 31, 1996
------------------------------------------------------------
(Dollars in thousands)
Tier I Total Risk- Total Risk-
REGULATORY CAPITAL REQUIREMENTS: Capital Based Capital Leverage Based Assets
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Minimum 4.00% 8.00% 3.00% N/A
Well-Capitalized 6.00% 10.00% 5.00% N/A
- --------------------------------------------------------------------------------------------------------
KeyBank Wyoming 11.93% 13.18% 9.07% $939,564
</TABLE>
11. EMPLOYEE BENEFIT PLANS
Employees of the Company participate in the pension plan of KeyCorp. Separate
actuarial information and asset valuation for the company are not available.
Contributions by the Company to the KeyCorp pension plan totaled $316,000 in
1996.
The Company also provides certain healthcare and life insurance benefits for
retired employees. The Company expensed $200,000 during 1996. Separate
actuarial information for the Company is not available.
12. RESTRICTIONS ON CASH AND DUE FROM BANKS
Bank subsidiaries are required to maintain average reserve balances with the
Federal Reserve Bank. Balances of $7,274,000 at December 31, 1996 exceeded
required amounts.
F-12
<PAGE>
13. INCOME TAXES
The components of the provision for income taxes were (in thousands):
1996
- --------------------------------------------------
Federal:
Current. . . . . . . . . . . . . . $ 5,442
Deferred . . . . . . . . . . . . . (1,518)
- --------------------------------------------------
3,924
State:
Current. . . . . . . . . . . . . . 43
Deferred . . . . . . . . . . . . . --
- --------------------------------------------------
Provision for income taxes . . . . . . $ 3,967
- --------------------------------------------------
- --------------------------------------------------
The reconciliation between the provision for income taxes and the amount
computed by applying the statutory federal income tax rate was as follows (in
thousands):
1996
- --------------------------------------------------
Tax at Statutory rate (35%). . . . . . $ 5,212
Tax-exempt interest. . . . . . . . . . (1,286)
Other. . . . . . . . . . . . . . . . . 41
- --------------------------------------------------
Provision for income taxes . . . . . . $ 3,967
- --------------------------------------------------
- --------------------------------------------------
Deferred income tax assets and liabilities reflect the net tax effect of
temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax reporting purposes.
As of December 31, 1996, the Company had a net deferred tax asset of $4,826,000.
The significant components of the deferred taxes are the allowance for loan
losses, unrealized gains on available for sale securities, intangibles and
depreciation.
The Company realized its deferred tax assets in connection with the sale of
the Company described in Note 17.
14. COMMITMENTS AND CONTINGENT LIABILITIES
Total rent expense was $1,122,000 in 1996. Future minimum payments, by year and
in the aggregate, under noncancelable leases with initial or remaining terms of
one year or more, consisted of the following at December 31, 1996:
(In thousands) Operating
- ----------------------------------------
1997 . . . . . . . . . . . . $ 935
1998 . . . . . . . . . . . . 1,929
1999 . . . . . . . . . . . . 1,019
2000 . . . . . . . . . . . . 892
2001 . . . . . . . . . . . . 892
---
$ 5,667
In the normal course of business, there are various outstanding legal
proceedings, claims, commitments and contingent liabilities. In the opinion of
management, the Company and its subsidiaries will not be materially affected by
the outcome of such matters.
15.RELATED PARTY TRANSACTIONS
F-13
<PAGE>
Certain directors and executive officers of the Company and its subsidiaries,
including their immediate families, companies in which they are principal owners
and trusts in which they are involved, are loan customers of the bank
subsidiaries. The aggregate dollar amounts of these loans were $6,929,000 at
December 31, 1996. During 1996, net loans loan repayments totaled $1,111,000.
16. SUPPLEMENTAL DISCLOSURES TO CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended
December 31
1996
- ----------------------------------------------------------------------------
(IN THOUSANDS)
Unrealized gain on available-for-sale securities . . . . . . . $ 1,265
Interest paid. . . . . . . . . . . . . . . . . . . . . . . . . 42,708
Income taxes paid. . . . . . . . . . . . . . . . . . . . . . . 4,752
17. SUBSEQUENT EVENTS
On July 14, 1997, KeyCorp sold the Company to Community First Bankshares, Inc.
In connection with this sale, approximately $350 million of loans included on
the balance sheet as of December 31, 1996 were retained by KeyCorp. In
addition, a dividend of approximately $46 million was paid by the Company to
KeyCorp. prior to the sale.
F-14
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
Report of Independent Auditors
The Board of Directors and Shareholders
Community First Bankshares, Inc.
We have audited the accompanying statement of condition of KeyBank National
Association (Wyoming) as of December 31, 1996, and the related statements of
income, shareholder's equity, and cash flows for the year then ended. 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 audit.
We conducted our audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of KeyBank National
Association (Wyoming), at December 31, 1996, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
September 19, 1997
F-15
<PAGE>
KEYBANK NATIONAL ASSOCIATION (Wyoming)
QUARTERLY RESULTS OF OPERATIONS (unaudited)
The following is a summary of the quarterly results of operations for the year
ended December 31, 1996 (in thousands, except per share and per share data):
First Second Third Fourth
Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996
Interest income $24,988 $23,977 $24,741 $24,450
Interest Expense 10,693 10,039 10,658 10,269
- ---------------------------------------------------------------------------
Net interest income 14,295 13,938 14,083 14,181
Provision for Loan Losses 2,500 1,000 2,358 3,400
- ---------------------------------------------------------------------------
Net interest income after provision
for loan losses 11,795 12,938 11,725 10,781
Net gains on sales of securities -- 18 -- --
Noninterest income 2,488 2,644 2,839 2,829
Noninterest Expense 10,785 10,779 11,554 10,048
- ---------------------------------------------------------------------------
Income before income taxes 3,498 4,821 3,010 3,562
Provision for Income Taxes 914 1,416 738 899
- ---------------------------------------------------------------------------
Net income $ 2,584 $ 3,405 $ 2,272 $ 2,663
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Earnings per common share: $516.80 $681.00 $454.40 $532.60
Average common shares outstanding: 5,000 5,000 5,000 5,000
F-16
<PAGE>
KEYBANK NATIONAL ASSOCIATION (WYOMING)
CONDENSED STATEMENT OF FINANCIAL CONDITION
June 30, 1997
(Dollars in thousands, except per share data)
(Unaudited)
ASSETS
Cash and due from banks. . . . . . . . . . . . . . . . . . . . $ 80,432
Federal funds sold and securities purchased under agreements
to resell . . . . . . . . . . . . . . . . . . . . . . . . . 172,000
Interest-bearing deposits. . . . . . . . . . . . . . . . . . . 0
Available-for-sale securities. . . . . . . . . . . . . . . . . 245,010
Held-to-maturity securities
(Fair Value: 1996 - $48,904). . . . . . . . . . . . . . . . 43,819
Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 508,263
Less: Allowance for Loan Losses. . . . . . . . . . . . . . (7,508)
--------
Net Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . 500,755
Bank premises and equipment, net . . . . . . . . . . . . . . . 18,387
Accrued interest receivable. . . . . . . . . . . . . . . . . . 4,677
Intangibles. . . . . . . . . . . . . . . . . . . . . . . . . . 443
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . 10,333
--------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,075,856
------------
------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing. . . . . . . . . . . . . . . . . . . . . $ 153,459
Interest-bearing:
Savings and NOW accounts . . . . . . . . . . . . . . . . 362,260
Time accounts over $100,000. . . . . . . . . . . . . . . 134,404
Other time accounts. . . . . . . . . . . . . . . . . . . 281,752
--------
Total deposits. . . . . . . . . . . . . . . . . . . . . . . . . 931,875
Federal funds purchased and securities sold under agreements
to repurchase. . . . . . . . . . . . . . . . . . . . . . . . 14,087
Other short-term borrowings . . . . . . . . . . . . . . . . . . 2,023
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . 605
Accrued interest payable. . . . . . . . . . . . . . . . . . . . 2,681
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . 3,495
--------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 954,766
Shareholders' equity:
Common stock, par value $100 per share:
Authorized Shares - 5,000
Issued Shares - 5,000. . . . . . . . . . . . . . . . . . 500
Capital surplus. . . . . . . . . . . . . . . . . . . . . . . 62,665
Retained earnings. . . . . . . . . . . . . . . . . . . . . . 57,713
Unrealized gain on available-for-sale
securities, net of tax . . . . . . . . . . . . . . . . . 212
-------
Total shareholders' equity. . . . . . . . . . . . . . . . . . . 121,090
-------
Total liabilities and shareholders' equity. . . . . . . . . . . $ 1,075,856
------------
------------
SEE ACCOMPANYING NOTES.
F-17
<PAGE>
KEYBANK NATIONAL ASSOCIATION (WYOMING)
CONDENSED STATEMENT OF INCOME
Six Months Ended June 30, 1997
(Dollars in thousands, except per share data)
(Unaudited)
INTEREST INCOME:
Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,222
Investment securities. . . . . . . . . . . . . . . . . . . . 8,713
Interest-bearing deposits. . . . . . . . . . . . . . . . . . 1
Federal funds sold and resale agreements . . . . . . . . . . 893
-------
Total interest income . . . . . . . . . . . . . . . . . . . . . 44,829
INTEREST EXPENSE:
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 16,398
Short-term and other borrowings. . . . . . . . . . . . . . . 2,026
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . 29
-------
Total interest expense. . . . . . . . . . . . . . . . . . . . . 18,453
-------
Net interest income . . . . . . . . . . . . . . . . . . . . . . 26,376
Provision for loan losses . . . . . . . . . . . . . . . . . . . 1,976
-------
Net interest income after provision for loan losses . . . . . . 24,400
NONINTEREST INCOME:
Service charges on deposit accounts. . . . . . . . . . . . . 2,996
Insurance commissions. . . . . . . . . . . . . . . . . . . . 14
Net gains on sales of securities . . . . . . . . . . . . . . 0
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,283
-------
Total noninterest income. . . . . . . . . . . . . . . . . . . . 5,293
NONINTEREST EXPENSE:
Salaries and employee benefits . . . . . . . . . . . . . . . 5,329
Net occupancy. . . . . . . . . . . . . . . . . . . . . . . . 2,571
FDIC insurance . . . . . . . . . . . . . . . . . . . . . . . 12
Legal and accounting . . . . . . . . . . . . . . . . . . . . 143
Other professional service . . . . . . . . . . . . . . . . . 174
Data processing. . . . . . . . . . . . . . . . . . . . . . . 4,778
Amortization of intangibles. . . . . . . . . . . . . . . . . 368
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,082
-------
Total noninterest expense . . . . . . . . . . . . . . . . . . . 18,457
-------
Income before income taxes. . . . . . . . . . . . . . . . . . . 11,236
Provision for income taxes. . . . . . . . . . . . . . . . . . . 3,257
-------
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . $7,979
-------
-------
Earnings per common and common equivalent share:. . . . . . . . $1,595.80
Average common and common equivalent shares outstanding:. . . . 5,000
SEE ACCOMPANYING NOTES.
F-18
<PAGE>
KEYBANK NATIONAL ASSOCIATION (WYOMING)
CONDENSED STATEMENT OF CASH FLOWS
Six Months ended June 30, 1997
(Unaudited)
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,979
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses. . . . . . . . . . . . . . . . 1,976
Depreciation . . . . . . . . . . . . . . . . . . . . . . 811
Amortization of intangibles. . . . . . . . . . . . . . . 368
Net amortization of premiums and discounts on
securities. . . . . . . . . . . . . . . . . . . . . . (83)
Decrease in interest receivable . . . . . . . . . . . . 4,128
Decrease in interest payable . . . . . . . . . . . . . . (164)
Other, net . . . . . . . . . . . . . . . . . . . . . . . 24,558
-------
Net cash provided by operating activities . . . . . . . . . . . 39,573
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in interest bearing deposits . . . . . . . . . . . 98
Net Purchases of available-for-sale securities. . . . . . . . . (29,490)
Net Maturities of held-to-maturity securities . . . . . . . . . 4,411
Net decrease in loans . . . . . . . . . . . . . . . . . . . . . 334,147
Net decrease in bank premises and equipment . . . . . . . . . . 158
-------
Net cash provided by investing activities . . . . . . . . . . . 309,324
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits, NOW accounts
and savings accounts . . . . . . . . . . . . . . . . . . . . 28,824
Net decrease in time accounts . . . . . . . . . . . . . . . . . (92,437)
Net decrease in short-term and other borrowings . . . . . . . . (94,320)
-------
Net cash used in financing activities . . . . . . . . . . . . . (157,933)
--------
Net increase in cash and cash equivalents . . . . . . . . . . . 190,964
Cash and cash equivalents at beginning of year. . . . . . . . . 61,468
--------
Cash and cash equivalents at end of period. . . . . . . . . . . $ 252,432
--------
--------
SEE ACCOMPANYING NOTES.
F-19
<PAGE>
COMMUNITY FIRST BANKSHARES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET
June 30, 1997
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Eliminations and
Adjustments
KeyBank ------------------------ Pro Forma
The Company Wyoming Debit Credit Combined
----------- ------- ---------- --------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Cash and due from banks. . . . . . . . . . . . . . . $ 124,364 $ 80,432 $ 30,000(1) $ 122,000(4) $ 112,796
Federal funds sold and securities purchased
under agreement to resell. . . . . . . . . . . . . 705 172,000 74,368(3) 46,090(2) 200,983
Interest-bearing deposits. . . . . . . . . . . . . . 14,898 0 13,000(4) 1,898
Available-for-sale securities. . . . . . . . . . . . 481,500 245,010 726,510
Held-to-maturity securities. . . . . . . . . . . . . 229,857 43,819 273,676
Loans. . . . . . . . . . . . . . . . . . . . . . . . 2,175,593 508,263 69,883(3) 2,613,973
Less: Allowance for loan losses. . . . . . . . . . (30,137) (7,508) 8(3) (37,637)
----------- ----------- -----------
Net loans. . . . . . . . . . . . . . . . . . . . . 2,145,456 500,755 2,576,336
Bank premises and equipment. . . . . . . . . . . . . 67,501 18,387 1,500(5) 84,388
Other assets . . . . . . . . . . . . . . . . . . . . 100,618 15,453 60,000(4) 4,493(3) 172,878
. . . . . . . . . . . . . . . . . . . . . . . . . 1,300(5)
----------- ----------- -----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . $3,164,899 $1,075,856 $ 4,149,465
----------- ----------- -----------
----------- ----------- -----------
Deposits . . . . . . . . . . . . . . . . . . . . . . $2,470,691 $ 931,875 $3,402,566
Federal funds purchased and securities sold
under agreements to repurchase . . . . . . . . . . 70,502 14,087 84,589
Other short-term borrowings. . . . . . . . . . . . . 189,151 2,023 191,174
Long-term debt . . . . . . . . . . . . . . . . . . . 78,566 605 $ 30,000(1) 109,171
Other liabilities. . . . . . . . . . . . . . . . . . 34,604 6,176 700(5) 500(5) 40,580
----------- ----------- -----------
TOTAL LIABILITIES. . . . . . . . . . . . . . . . . 2,843,514 954,766 3,828,080
Company-obligated mandatorily redeemable
preferred securities of CFB Capital I . . . . . . . 60,000 0 60,000
Minority interest. . . . . . . . . . . . . . . . . . 0 0 0
Shareholders' equity:
Preferred stock. . . . . . . . . . . . . . . . . . 0 0 0
Common Stock . . . . . . . . . . . . . . . . . . . 187 500 500(4) 187
Capital surplus. . . . . . . . . . . . . . . . . . . 101,017 62,665 62,665(4) 101,017
Retained earnings. . . . . . . . . . . . . . . . . . 160,304 57,925 46,090(2) 160,304
. . . . . . . . . . . . . . . . . . . . . . . . . 11,835(4)
Treasury stock . . . . . . . . . . . . . . . . . . . (123) 0 (123)
----------- ----------- -----------
TOTAL SHAREHOLDERS' EQUITY . . . . . . . . . . . . 261,385 121,090 261,385
----------- ----------- ---------- ---------- -----------
TOTAL LIABILITIES AND SHARE-
HOLDERS' EQUITY. . . . . . . . . . . . . . . . . $3,164,899 $1,075,856 $ 287,466 $ 287,466 $4,149,465
----------- ----------- ---------- ---------- -----------
----------- ----------- ---------- ---------- -----------
</TABLE>
F-20
<PAGE>
- -------------------------
(1) To reflect the issuance of additional long term debt of $30,000,000 (through
an acquisition line of credit from Norwest Bank Minnesota, National
Association and Harris Trust).
(2) To reflect the effect of the payment of a special dividend of approximately
$46,090,000 by KeyBank Wyoming to attain a shareholders' equity level as
defined in the Purchase Agreement of $75,000,000.
(3) To reflect the retention of certain loans and other assets pursuant to the
purchase agreement by KeyCorp. KeyCorp will retain loans of $69,883,000 and
other assets of $4,493,000 (with loans retained net of associated reserves
of $8,000,000) and will replace the loans with short term investment funds
of $74,638,000.
(4) To reflect the purchase price of KeyBank Wyoming of $135,000,000 (of which
$13,000,000 was paid prior to closing in the form of an earnest money
deposit). KeyBank Wyoming had equity of approximately $75,000,000 at the
time of purchase, resulting in recognition of approximately $60 million of
goodwill.
(5) To reflect the application of APB No. 16, "Business Combinations," related
to the purchase of KeyBank Wyoming, certain assets and liabilities have
been revalued with an effect of increasing intangible assets by $1,300,000.
F-21
<PAGE>
COMMUNITY FIRST BANKSHARES, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
Six Months Ended June 30, 1997
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Eliminations and
Adjustments
KeyBank -------------------------- Pro Forma
The Company Wyoming Debit Credit Combined
----------- ---------- ---------- ----------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Interest income. . . . . . . . . . . . . . . . . $ 126,903 $ 44,829 $ 10,134(2) $ 161,598
Interest expense . . . . . . . . . . . . . . . . 51,089 18,453 $ 1,428(3) 68,114
------------ ---------- ----------
Net interest income. . . . . . . . . . . . . . . 75,814 26,376 93,484
Provision for loan losses. . . . . . . . . . . . 5,032 1,976 2,000(4) 5,008
------------ ---------- ----------
Net interest income after provision for
loan losses. . . . . . . . . . . . . . . . . . 70,782 24,400 88,476
Net gains on sales of investment
securities . . . . . . . . . . . . . . . . . . 61 0 61
Other noninterest income . . . . . . . . . . . . 19,907 5,293 25,200
Noninterest expense. . . . . . . . . . . . . . . 57,716 18,457 2,000(1) 300(5) 77,873
------------ ---------- ----------
Income before income taxes and
extraordinary item . . . . . . . . . . . . . . 33,034 11,236 35,864
Provision for income taxes . . . . . . . . . . . 11,102 3,257 2,942(6) 11,417
------------ ---------- ----------
Income before extraordinary item . . . . . . . . 21,932 7,979 24,447
Extraordinary item . . . . . . . . . . . . . . . (265) 0 (265)
------------ ---------- ----------
Net income . . . . . . . . . . . . . . . . . . . 21,667 7,979 24,182
Dividends on preferred stock . . . . . . . . . . 0 0 0
------------ ---------- ----------
Net income applicable to common equity . . . . . $ 21,667 $ 7,979 $ 24,182
------------ ---------- ----------
------------ ---------- ----------
Earnings per common and common
equivalent share:
Primary earnings per share before
extraordinary item . . . . . . . . . . . . $ 1.20 $ 1.33
Extraordinary item . . . . . . . . . . . . . . $ (0.02) $ (0.01)
Primary earnings per share . . . . . . . . . . $ 1.18 $ 1.32
Fully diluted earnings per share before
extraordinary item. . . . . . . . . . . . . $ 1.17 $ 1.30
Extraordinary item . . . . . . . . . . . . . . $ (0.02) $ (0.01)
Fully diluted earnings per share . . . . . . . $ 1.15 $ 1.29
Average common and common equivalent
shares outstanding:
Primary . . . . . . . . . . . . . . . . . 18,343,078 5,000 18,343,078
Fully Diluted . . . . . . . . . . . . . . 18,773,723 5,000 18,773,723
</TABLE>
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(1) Amortization of goodwill relative to the purchase transaction.
(2) Reflects (a) a $3,376,000 reduction in interest income as a result of a
$100,000,000 decrease in short term investments related to the repayment of
short term borrowings in order to reduce leverage at KeyBank Wyoming, (b) a
net reduction in interest income of $5,538,000 resulting from higher
yielding loans replaced with lower yielding investment assets as a
F-22
<PAGE>
result of assets retained by KeyCorp and (c) a $1,220,000 reduction in
interest income as a result of a $50,000,000 reduction of short term
investments, the proceeds of which were used to repay $50,000,000 of debt
of KeyBank Wyoming that matured in February 1997.
(3) Reflects additional interest expense of (a) $1,126,000 related to the
$30,000,000 acquisition line of credit, (b) $445,000 related to the
$60,000,000 Capital Securities issue, and (c) $2,190,000 related to the
issuance of $60,000,000 in 7.30% Notes, offset by a reduction in interest
expense of (x) $3,712,000 related to a $100,000,000 decrease in short term
borrowings resulting from the reduction in leverage at KeyBank Wyoming and
a $35,000,000 decrease in short term borrowings which funded certain
KeyBank Wyoming assets by KeyCorp, (y) $1,032,000 resulting from the
repayment of $50,000,000 of debt of KeyBank Wyoming that matured in
February 1997, and (z) $445,000 related to the redemption of the
$23,000,000 of 7.75% Subordinated Notes.
(4) Effect on provision for loan losses as a result of loans retained by
KeyCorp.
(5) Reflects the effect on noninterest expense resulting from the change in the
organizational structure after consummation of the transaction, including
an additional $1,250,000 in personnel costs and a reduction of $1,550,000
in other noninterest expenses, including data processing, management fees
and office services.
(6) Tax effect of pro forma adjustments.
F-23
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8, No. 33-44921) and in the related Prospectus pertaining to the
Community First Bankshares, Inc. 1987 Stock Option Plan and in the Registration
Statement (Form S-8, No. 33-48160) and in the related Prospectus pertaining to
the Community First Bankshares, Inc. 401(k) Retirement Plan of our report dated
September 19, 1997, with respect to the financial statements of KeyBank
National Association (Wyoming), included herein.
Minneapolis, Minnesota Ernst & Young LLP
September 19, 1997
