<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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 (Commission File Number) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation)
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 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 14, 1997, Community First Bankshares, Inc. (the "Company")
purchased KeyBank National Association, Cheyenne, Wyoming, (the "Wyoming
Bank"), from KeyCorp, its parent corporation, for a purchase price of $135
million. The Wyoming Bank has been renamed "Community First National Bank."
As of March 31, 1997, the Wyoming Bank had total assets of approximately
$1.0 billion and banking offices in 24 communities in Wyoming, including
Cheyenne, Laramie, Casper, Sheridan and Jackson. The Wyoming Bank provides
a full range of commercial and consumer banking services throughout the state
of Wyoming.
The purchase was made pursuant to a purchase agreement dated February 18,
1997 between the Company and KeyCorp (the "Purchase Agreement"). Pursuant to
the Purchase Agreement, KeyCorp retained from the Wyoming Bank loans of
approximately $354 million (net of associated reserves of approximately $7.1
million) and other assets of approximately $22.5 million. These assets were
replaced with short term investment funds estimated at approximately $334
million (after the retirement of $35 million of the Wyoming Bank's federal
funds borrowed). Immediately before the closing, the Wyoming Bank paid a
special dividend of approximately $41 million to KeyCorp to reduce shareholders
equity.
The transaction is expected to be accounted for using the purchase method
of accounting and will result in the recognition of goodwill by the Company
of approximately $60 million. The purchase price was funded through a
combination of a portion of the proceeds from the February 1997 issuance of
$60 million of a 8 7/8% Cumulative Capital Securities by CFB Capital I, a
business trust subsidiary of the Company; the net proceeds of the June 1997
issuance of $60 million of 7.30% Subordinated Notes; and $40 million in
borrowings under bank lines of credit in July 1997; and net cash flow of the
Company prior to closing.
Following the acquisition, the Company believes it is the largest banking
network in Wyoming, with approximately $1.1 billion of assets and $1.0 billion
in deposits, and banking offices serving 24 markets throughout Wyoming. If the
acquisition had been completed on March 31, 1997, the Wyoming operations would
have comprised more than 28% of the Company's assets and deposits on such date.
Because the Company does not have any current operations in Wyoming, the Company
plans to maintain or increase the Wyoming Bank's current staff level of 350
employees in Wyoming. The Wyoming Bank's operations have been highly
centralized in the KeyCorp organization. The Company will organize management
for the Wyoming Bank offices to decentralize the operations to a large
degree in order to implement the Company's policy of granting substantial
autonomy to managers of the Company's Banks, thereby enhancing the ability of
the Banks to make lending decisions and provide products, services and marketing
on a local basis to the extent required within the Company's organization.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(b) UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION:
Pro Forma Condensed Combined Balance Sheet -
March 31, 1997 (Unaudited).........................................F-1
Pro Forma Condensed Combined Statement of Income
for the Three Months Ended March 31, 1997 (Unaudited)..............F-3
Pro Forma Condensed Combined Statement of Income
for the Year Ended December 31, 1996 (Unaudited)...................F-5
2
<PAGE>
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: July 29, 1997
3
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial information
and explanatory notes are presented to show the impact on the Company's
historical financial position and results of operations of the acquisition of
the Wyoming Bank, which is expected to be accounted for under the purchase
method of accounting.
The unaudited pro forma condensed combined balance sheet information
assumes that the acquisition was consummated on the last day of each period
presented, and the unaudited pro forma condensed combined income statement
information assumes that the acquisition was consummated at the beginning of
each period presented. The unaudited pro forma condensed combined income
statement information also assumes that the following events occurred at the
beginning of each period presented: (i) the $60 million offering of 87/8%
Cumulative Capital Securities completed in February 1997, (ii) the redemption on
March 31, 1997 of the Company's 7.75% Subordinated Notes due 2000 in the
principal amount of $23 million, and the conversion during March 1997 of
substantially all of the Company's 7% Cumulative Convertible Preferred Stock,
(iv) the issuance in June 1997 of $60 million of 7.30% Subordinated Notes due
2004, and (v) the borrowing of $40 million from bank lenders in July 1997 under
an acquisition line of credit.
The pro forma information should be read in conjunction with the historical
consolidated financial statements (including the related notes thereto) of the
Company incorporated herein by reference. The pro forma information is not
necessarily indicative of the financial condition of the Company that would have
resulted had the acquisition and other assumed events been consummated on the
last day of each period presented, or of the results of operations that would
have resulted had the acquisition been consummated at the beginning of the
periods for which information is presented, nor is it necessarily indicative of
the results of operations of future periods or future combined financial
position.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
March 31, 1997
(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. . . . . . . . . . . $ 123,430 $ 40,271 $ 59,135(1) $ 122,000(5) $ 140,986
40,000(1)
Federal funds sold and securities purchased
under agreement to resell . . . . . . . . . 100 10,000 334,047(3) 100,000(4) 203,110
41,037(2)
Interest-bearing deposits. . . . . . . . . . 9,953 98 10,051
Available-for-sale securities. . . . . . . . 508,837 207,818 716,655
Held-to-maturity securities. . . . . . . . . 223,768 50,083 273,851
Loans. . . . . . . . . . . . . . . . . . . . 2,081,912 803,811 2,531,792
353,931(3)
Less: Allowance for loan losses . . . . . . (27,580) (14,865) 7,130(3) (35,315)
----------- ----------- -----------
Net loans . . . . . . . . . . . . . . . . . 2,054,332 788,946 2,496,477
Bank premises and equipment. . . . . . . . . 66,206 18,848 17(3) 83,537
1,500(6)
Other assets . . . . . . . . . . . . . . . . 108,439 43,910 60,000(5) 22,466(3) 178,898
1,300(6) 13,000(5)
865(1)
----------- ----------- ----------- ----------- -----------
TOTAL ASSETS . . . . . . . . . . . . . . . $ 3,095,065 $ 1,159,974 $ 502,477 $ 653,951 $ 4,103,565
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Eliminations and
F-1
<PAGE>
<CAPTION>
Adjustments
KeyBank ------------------------ Pro Forma
The Company Wyoming Debit Credit Combined
----------- ------- --------- ---------- ---------
(In thousands)
Deposits . . . . . . . . . . . . . . . . . . $ 2,493,500 $ 947,964 $ 3,441,464
Federal funds purchased and securities sold
under agreements to repurchase . . . . . . 85,387 84,414 $100,000(4) 34,801
35,000(3)
Other short-term borrowings. . . . . . . . . 155,332 2,520 157,852
Long-term debt . . . . . . . . . . . . . . . 18,644 659 $60,000(1) 119,303
40,000(1)
Other liabilities. . . . . . . . . . . . . . 33,444 8,380 237(3) 500(6) 41,387
700(6)
TOTAL LIABILITIES. . . . . . . . . . . . . 2,786,307 1,043,937 3,794,807
Company-obligated mandatorily redeemable
preferred securities of CFB Capital I . . . 60,000 -- 60,000
Minority interest. . . . . . . . . . . . . . 19 -- 19
Shareholders' equity:
Preferred stock. . . . . . . . . . . . . . -- -- --
Common Stock . . . . . . . . . . . . . . . 187 500 500(5) 187
Capital surplus. . . . . . . . . . . . . . . 101,017 62,666 62,666(5) 101,017
Retained earnings. . . . . . . . . . . . . . 148,031 52,871 41,037(2) 148,031
11,292(5)
542(5)
Treasury stock . . . . . . . . . . . . . . . (496) -- (496)
----------- ----------- -----------
TOTAL SHAREHOLDERS' EQUITY. . . . . . . . . 248,739 116,037 248,739
----------- ----------- ----------- ----------- -----------
TOTAL LIABILITIES AND SHARE-
HOLDERS' EQUITY . . . . . . . . . . . . . $ 3,095,065 $ 1,159,974 $ 251,974 $ 100,500 $ 4,103,565
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
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(1) To reflect the issuance of the $60,000,000 of 7.30% Notes in June 1997
(net of issuance costs of approximately $865,000) and the issuance of
additional long term debt of $40,000,000 (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 $41,000,000 by the Wyoming Bank 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 retained loans of
$353,931,000 and other assets of $22,483,000 (with loans retained net of
associated reserves of $7,130,000) and replaced the loans with short term
investment funds of $334,047,000 (after the retirement of $35,000,000 of
the Wyoming Bank's federal funds borrowed), after deducting $237,000 in
other liabilities not assumed by the Company.
(4) To reflect the reduction of leverage through the repayment of short term
borrowings from the proceeds of the sale of a portion of the investment
funds held by the Wyoming Bank. KeyCorp increased the investment funds
of the Wyoming Bank prior to closing to replace loans and other assets
retained by KeyCorp.
(5) To reflect the purchase price of the Wyoming Bank of $135,000,000 (of
which $13,000,000 was paid prior to closing in the form of an earnest
money deposit). The Wyoming Bank had equity of approximately
$75,000,000 at the time of purchase, resulting in recognition of
approximately $60 million of goodwill.
(6) To reflect the application of APB No. 16, "Business Combinations,"
related to the purchase of the Wyoming Bank, certain assets and
liabilities have been revalued with an effect of increasing intangible
assets by $1,300,000.
F-2
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
For the Three Months Ended March 31, 1997
(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. . . . . . . . . . . . . . . $ 62,125 $ 23,258 $ 4,864(2) $ 80,519
Interest expense . . . . . . . . . . . . . . 25,117 9,648 $ 325(3) 34,440
---------- ---------- ----------
Net interest income. . . . . . . . . . . . . 37,008 13,610 46,079
Provision for loan losses. . . . . . . . . . 1,761 800 250(4) 2,311
---------- ---------- ----------
Net interest income after provision for
loan losses. . . . . . . . . . . . . . . . 35,247 12,810 43,768
Net gains on sales of investment
securities . . . . . . . . . . . . . . . . (3) -- (3)
Other noninterest income . . . . . . . . . . 8,186 2,675 10,861
Noninterest expense. . . . . . . . . . . . . 27,060 9,252 1,000(1) 150(5) 37,162
---------- ---------- ----------
Income before income taxes and
extraordinary item . . . . . . . . . . . . 16,370 6,233 17,464
Provision for income taxes . . . . . . . . . 5,573 1,851 1,799(6) 5,625
---------- ---------- ----------
Income before extraordinary item . . . . . . 10,797 4,382 11,839
Extraordinary item . . . . . . . . . . . . . (265) -- (265)
---------- ---------- ----------
Net income . . . . . . . . . . . . . . . . . 10,532 4,382 11,574
Dividends on preferred stock . . . . . . . . -- -- --
---------- ---------- ----------
Net income applicable to common equity . . . $ 10,532 $ 4,382 $ 11,574
---------- ---------- ----------
---------- ---------- ----------
Earnings per common and common
equivalent share:
Primary earnings per share before
extraordinary item. . . . . . . . . . . . $ 0.61 $ 0.62
Extraordinary item. . . . . . . . . . . . . $ (0.02) $ (0.01)
Primary earnings per share. . . . . . . . . $ 0.59 $ 0.61
Fully diluted earnings per share before
extraordinary item. . . . . . . . . . . . $ 0.57 $ 0.62
Extraordinary item. . . . . . . . . . . . . $ (0.01) $ (0.01)
Fully diluted earnings per share. . . . . . $ 0.56 $ 0.61
Average common and common equivalent
shares outstanding:
Primary . . . . . . . . . . . . . . . . . . 17,734,076 5,000 1,129,832(7) 18,863,908
Diluted . . . . . . . . . . . . . . . . . . 18,900,647 5,000 18,900,647
</TABLE>
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(1) Amortization of goodwill relative to the purchase transaction.
(2) Reflects (a) a $1,688,000 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 the Wyoming
Bank, (b) a net reduction in interest income of $2,769,000 resulting
from higher yielding loans replaced with lower yielding investment assets
as a result of assets retained by KeyCorp and (c) a $407,000 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 The Wyoming Bank that matured in February 1997.
F-3
<PAGE>
(3) Reflects additional interest expense of (a) $750,000 related to the
$40,000,000 acquisition line of credit, (b) $445,000 related to the
$60,000,000 Capital Securities issue, and (c) $1,125,000 related to the
issuance of $60,000,000 in 7.30% Notes, offset by a reduction in interest
expense of (x) $1,856,000 related to a $100,000,000 decrease in short
term borrowings resulting from the reduction in leverage at the "Wyoming
Bank" and a $35,000,000 decrease in short term borrowings which funded
certain the Wyoming Bank assets by KeyCorp, (y) $344,000 resulting from
the repayment of $50,000,000 of debt of the Wyoming Bank 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 $625,000 in personnel costs and a reduction of
$775,000 in other noninterest expenses, including data processing,
management fees and office services.
(6) Tax effect of pro forma adjustments.
(7) Reflects the effect of the conversion of 919,500 depositary shares into
1,443,695 shares of common stock.
F-4
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
For the Year Ended December 31, 1996
(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. . . . . . . . . . . . . . . $ 229,426 $ 98,156 $ 21,075(2) $ 306,507
Interest expense . . . . . . . . . . . . . . 95,234 41,659 867(3) 137,760
---------- ---------- ----------
134,192 56,497 168,747
Provision for loan losses. . . . . . . . . . 6,757 9,258 $7,000(4) 9,015
---------- ---------- ----------
Net interest income after provision
for loan losses . . . . . . . . . . . . . . 127,435 47,239 159,732
Net gains on sales of investment
securities. . . . . . . . . . . . . . . . . 93 18 111
Other noninterest income . . . . . . . . . . 27,277 10,800 38,077
Noninterest expense. . . . . . . . . . . . . 104,288 43,166 4,000(1) 4,100(5) 147,354
---------- ---------- ----------
Income before income taxes . . . . . . . . . 50,517 14,891 50,566
Provision for income taxes . . . . . . . . . 18,007 3,967 5,194(6) 16,780
---------- ---------- ----------
Net income . . . . . . . . . . . . . . . . . 32,510 10,924 33,786
Dividends on preferred stock . . . . . . . . 1,610 -- 1,610(7) --
---------- ---------- ----------
Net income applicable to common equity . . . $ 30,900 $10,924 $ 33,786
---------- ---------- ----------
---------- ---------- ----------
Earnings per common share:
Primary. . . . . . . . . . . . . . . . . . $ 1.85 $ 1.86
Fully diluted. . . . . . . . . . . . . . . $ 1.79 $ 1.86
Average common shares outstanding:
Primary. . . . . . . . . . . . . . . . . . 16,699,021 5,000 1,442,695(7) 18,141,716
Fully Diluted. . . . . . . . . . . . . . . 18,154,966 5,000 18,154,966
</TABLE>
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(1) Amortization of goodwill relative to the purchase transaction.
(2) Reflects a $10,000,000 reduction in interest income as a result of a
$150,000,000 decrease in short term investments and a net reduction in
interest income of $11,075,000 resulting from higher yielding loans
replaced with lower yielding investment assets as a result of assets
retained by KeyCorp.
(3) Reflects additional interest expense of (a) $3,000,000 related to the
$40,000,000 acquisition line of credit, (b) $5,325,000 related to the
$60,000,000 Capital Securities issue, and (c) $4,500,000 related to the
issuance of $60,000,000 in 7.30% Notes, offset by a reduction in interest
expense of (x) $10,175,000 related to a $100,000,000 decrease in short
term borrowings resulting from the reduction in leverage at the "Wyoming
Bank", a $35,000,000 decrease in short term borrowings which funded
certain the Wyoming Bank assets by KeyCorp and the repayment of
$50,000,000 of debt of the Wyoming Bank that matured in February 1997,
and (y) $1,783,000 related to the redemption of the 7.75% Subordinated
Notes due August 15, 2000.
(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 $2,500,000 in personnel costs and a reduction of
$6,600,000 in other noninterest expense, including data processing,
management fees and office services.
(6) Tax effect of pro forma adjustments.
(7) Reflects the effect of the conversion of 919,500 depositary shares into
1,443,695 shares of common stock.
F-5
