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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1 TO FORM 10-K
(MARK ONE)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
/X/ SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
/ / TRANSITION 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 NO. 0-19368
COMMUNITY FIRST BANKSHARES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 46-0391436
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
520 MAIN AVENUE
FARGO, ND 58124-0001
(Address of principal executive offices and zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (701) 298-5600
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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
PREFERRED STOCK PURCHASE RIGHTS
8-7/8% CUMULATIVE CAPITAL SECURITIES, $25
LIQUIDATION AMOUNT(1)
8.20% CUMULATIVE CAPITAL SECURITIES, $25
LIQUIDATION AMOUNT(2)
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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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of 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 6, 1998, assuming as market value the price of $52.75 per share, the
average between the high and low sale prices on the Nasdaq National Market, the
aggregate market value of shares held by nonaffiliates was approximately $958
million.
As of March 6, 1998, the Company had outstanding 20,324,732 shares of Common
Stock, $.01 par value, net of treasury shares.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1997 Annual Report to Shareholders and the Proxy Statement for
the Company's Annual Meeting of Shareholders to be held April 28, 1998, are
incorporated by reference into Parts II and III, respectively, of this Form
10-K, to the extent described in such Parts.
(1) The 8-7/8% Cumulative Capital Securities (the "CFB I Capital Securities")
were issued by CFB Capital I ("CFB Capital I"), a wholly owned Delaware business
trust subsidiary of the Company. The Company has also fully and unconditionally
guaranteed all of CFB Capital I's obligations under the CFB I Capital
Securities.
(2) The 8.20% Cumulative Capital Securities (the "CFB II Capital Securities")
were issued by CFB Capital II ("CFB Capital II"), a wholly owned Delaware
business trust subsidiary of the Company. The Company has also fully and
unconditionally guaranteed all of CFB Capital II's obligations under the CFB II
Capital Securities.
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Part I, Item 1 is hereby amended to read as follows:
PART I
ITEM 1. BUSINESS
COMMUNITIES SERVED
The Banks, as of December 31, 1997, were located in communities with
populations ranging from approximately 200 to 50,000, except for Fargo, North
Dakota; Denver and Englewood (a Denver suburb), Colorado; and Phoenix, Arizona.
Each of the Banks serves a market area with greater population because, in many
cases, there are few or no other financial institutions within a reasonable
distance from the community in which the Bank is located. The economies of the
Banks' smaller communities, especially those in Nebraska, North Dakota and South
Dakota, depend primarily on farming, farm service and agricultural supply
businesses. Agriculture in these communities is affected by many factors beyond
the control of the Banks, including weather, governmental policies, fluctuating
commodity prices, demand and production and natural disasters. As with other
small, nonmetropolitan communities in the Upper Midwest, many of the communities
in which the Banks presently operate have experienced and are expected to
experience no growth or a decline in population. The Company has operated
profitably in these communities and has continued to acquire institutions in
larger markets. However, if reductions in population or adverse economic
trends in specific communities result in decreased profitability in the Banks or
offices located in those communities, the Company may consider selling such
Banks or offices or reducing the level of services provided in such communities.
ACQUISITION STRATEGY
The Company intends to continue its growth by making acquisitions of
community banks and other financial institutions in selected communities in the
Acquisition Area. The Company believes it is well-positioned to acquire and
profitably operate community banks because of its experience in operating
community banks, its ability to provide centralized management to those banks
and its access to capital. The Company believes many owners of community banks
are seeking to sell their banks for a variety of reasons, including lack of
shareholder liquidity, management succession problems, the difficulty of
compliance with current multiple-layered bank regulations and increasing
competition from non-bank organizations. The Company believes there are over
4,500 community banks that are possible acquisition candidates in the
Acquisition Area.
The Company competes with individuals and institutions, including major
regional bank holding companies, for suitable acquisition candidates within the
Acquisition Area. Acquisition competitors of the Company in the Acquisition
Area range from regional bank holding companies to individual bank owners who
own or control banks in the Acquisition Area. The process of industry
consolidation is likely to accelerate as a result of the adoption of the
Interstate Banking and Branching Efficiency Act of 1994 ("IBBEA"). The IBBEA
largely eliminated restrictions on interstate banking and since June 1, 1997,
has permitted interstate branching, subject to special "opt-in" and "opt-out"
provisions which states were able to enact by law. Most states have adopted
implementing legislation. Certain aspects of the IBBEA were clarified and
amended in 1997 with the passage of the Riegle-Neal Clarification Act. The
Economics and Growth Regulatory Paperwork Reduction Act of 1996 ("EGRPRA")
streamlined application processes and eased regulations in several areas
facilitating acquisitions and expansion of nonbanking activities. The effect of
this legislation is
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likely to both facilitate the Company's acquisitions and to increase the
number of potential acquirers of banks in the Acquisition Area.
The Company has established a due diligence review process to evaluate
acquisition targets and has established acquisition parameters for target
acquisitions relating to market factors, financial performance and certain
nonfinancial factors. Market factors considered by the Company include the
size and long-term viability of the community and market area served by the
target bank, the dominance of the acquisition target (which should be the
largest or second largest financial institution in the market) and the proximity
of other existing Banks owned by the Company. In exploring markets in regions
not currently served by the Company, management looks for similarities between
the new market areas and the Company's existing market areas in terms of culture
and economic bases. Financial analyses performed by the Company in evaluating
acquisition prospects include review of historical performance, comparison to
peers and the Company's Banks in terms of key operating performance ratios
(including earnings, staffing and loan quality) and target ratios. The Company
determines the price it is willing to pay for an institution based on, among
other factors, cash flow and return on equity valuation models and an analysis
of accretion/dilution on a marginal and a pro forma basis. Nonfinancial
considerations in evaluating an acquisition prospect include the quality of the
management team's skill and the demand on management resources to integrate the
target institution. Finally, each target acquisition must undergo an extensive
review of loan asset quality, operating procedures and deposit structure before
the Company commits to a purchase. The Company's level of future acquisitions
will depend, in part, on its ability to attract and retain management level
employees capable of performing efficient review of credit quality standards of
proposed acquisition candidates. Acquisition opportunities presented to the
Company that have not met the requirements described above have not been
pursued.
Because of limited growth opportunities in many of the existing markets
served by the Company, management believes future growth in the earnings of
the Company will largely depend on successful execution of the Company's
strategies. In addition to Company-wide efforts to increase non-interest
income through sales of investment products, trust services and insurance,
the future growth of the Company will depend upon consummation of
acquisitions consistent with the Company's acquisition strategy, and the
future growth of recent and expected acquisitions in higher growth markets.
Successful completion of acquisitions by the Company depends upon such
factors as the availability of suitable acquisition candidates, necessary
regulatory approvals and necessary approvals of holders of the Company's and
other providers of credit, compliance with applicable capital requirements
and, in the case of expansion into new states, the availability of additional
management resources required to operate banks in widely dispersed
geographical areas.
PENDING ACQUISITIONS
The Company routinely solicits and reviews acquisition opportunities and,
at any given time, may have bids outstanding or may be involved in negotiations
with the owners of financial institutions or other parties relative to a
particular financial institution, its branches or its deposit accounts.
On January 12, 1998, the Company signed a definitive merger agreement with
FNB, Inc. ("FNB"), a two-bank holding company headquartered in Greeley,
Colorado. At December 31, 1997, FNB had total assets of $118 million and
offices in Greeley and Fort Collins, Colorado. To facilitate completion of the
transaction, which is expected to be accounted for using the pooling of
interests method of accounting, the Company will issue approximately 570,000
shares of common stock to holders of FNB common stock. The transaction is
subject to regulatory approval and is expected to close during the second
quarter of 1998.
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On January 8, 1998, the Company signed a definitive merger agreement with
Community Bancorp, Inc. ("CBI"), a one-bank holding company headquartered in
Thornton, Colorado. At December 31, 1997, CBI had total assets of $78 million
and offices in Thornton and Arvada, Colorado. To facilitate completion of the
transaction, which is expected to be accounted for using the pooling of
interests method of accounting, the Company will issue approximately 452,000
shares of common stock to holders of CBI common stock. The transaction is
subject to regulatory approval and is expected to close during the second
quarter of 1998.
On November 7, 1997, the Company entered into an agreement to acquire
Pioneer Bank of Longmont, Longmont, Colorado ("Pioneer"). At December 31, 1997,
Pioneer had total assets of $130 million and five banking offices in four
Colorado communities. On completion of the merger and subject to adjustments
set forth in the acquisition agreement, the Company expects to issue
approximately 700,000 shares of its common stock to the holders of Pioneer
common stock. Completion of the acquisition is subject to regulatory approvals,
approval by the Pioneer shareholders and other conditions. The transaction is
anticipated to be completed during the second quarter of 1998 and is expected to
be accounted for as a pooling of interests.
RECENT SIGNIFICANT ACQUISITIONS
On January 23, 1998, the Company acquired 37 banking offices located in
Arizona, Colorado and Utah (the "Bank One Branches") from three subsidiary banks
of Banc One Corporation (the "Bank One Banks"). At closing, the Bank One
Branches had total deposits of approximately $730 million and loans of
approximately $61 million. The Company paid a purchase price premium of
approximately $43.8 million, equal to 6% of the deposits of the Bank One
Branches at closing. The acquisition was accounted for as an acquisition of
assets and assumption of liabilities and resulted in the recognition by the
Company of deposit-based intangibles in an amount equal to the purchase price
premium of approximately $43.8 million. Following the closing, the 25 Arizona
offices and four Utah offices acquired from the Bank One Banks were merged into
the Republic bank in Phoenix, Arizona that was recently acquired by the Company.
The eight acquired Colorado offices were merged into the Company's existing
Colorado affiliate bank. In January 1998, the Company signed an agreement to
sell one of the former Bank One Branches located in Colorado.
On December 1, 1997, the Company acquired First National Summit Bankshares,
Inc., Gunnison, Colorado ("Summit"), a bank holding company that owned and
operated a national bank with banking facilities in five Colorado communities.
At closing, Summit had total assets of approximately $90 million, total deposits
of approximately $82 million and total stockholders' equity of approximately $7
million. Upon completion of the merger, which was accounted for as a pooling of
interests, the Company issued approximately 314,800 shares of common stock to
the former holders of Summit common stock and paid approximately $1 million in
cash to holders of Summit preferred stock cancelled in the merger. The value of
the Company's common stock issued in the merger was approximately $15 million,
based upon the trading value of the Company's common stock determined pursuant
to the merger agreement.
On November 24, 1997, the Company acquired Republic National Bancorp, Inc.,
Phoenix, Arizona ("Republic"), a bank holding company that owned and operated a
national bank in Phoenix, Arizona. At closing, Republic had total assets of
approximately $54 million, total deposits of approximately $49 million and total
stockholders' equity of approximately $4 million. Upon completion of the
merger, which was accounted for as a pooling of interests, the Company issued
approximately 368,000 shares of common stock to the former holders of Republic
common stock. The value of the Company's common stock issued in the merger was
approximately $17.4 million, based upon the trading value of the Company's
common stock determined pursuant to the merger agreement.
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On July 14, 1997, the Company purchased KeyBank National Association,
Cheyenne, Wyoming ("KeyBank Wyoming"), from KeyCorp, its parent corporation,
("KeyCorp"), for a purchase price of $135 million. KeyBank Wyoming has been
renamed "Community First National Bank." At closing, KeyBank Wyoming had total
assets of approximately $1.1 billion and 28 banking offices located in 24
communities in Wyoming, including Cheyenne, Laramie, Casper, Sheridan and
Jackson. The Company believes its Wyoming banking network is the largest in
Wyoming, providing a full range of commercial and consumer banking services
throughout the state. The transaction was accounted for as a business
combination using the purchase method of accounting and resulted in the
recognition of goodwill by the Company of approximately $60 million.
On December 18, 1996, the Company acquired Mountain Parks Financial Corp.
("Mountain Parks"), a bank holding company that operated a state chartered bank
with full service commercial banking facilities in 17 Colorado communities. At
closing, Mountain Parks had total assets of approximately $600.0 million and
total stockholders' equity of approximately $60.9 million. Upon completion of
the merger, which was accounted for as a pooling of interest, the Company issued
approximately 5.2 million shares of common stock to the former holders of
Mountain Parks common stock. The market value of the Company's common stock
issued in the merger was approximately $142.2 million, based on the closing
price of the Company's common stock on the Nasdaq National Market on December
18, 1996. The Mountain Parks banking offices are located in winter ski and
summer recreational areas in the Colorado mountains and in the greater
Denver/Boulder metropolitan area. Pursuant to commitments made with the Federal
Reserve to address resulting concentrations in certain Colorado banking markets,
on April 4, 1997, the Company sold Mountain Parks banking offices in two
Colorado communities.
ADMINISTRATION OF BANKS
The Company provides policy and management direction and specialized staff
support in general areas while relying on Bank managers for day-to-day
operations, customer service decisions and community relations. The Company is
responsible for policy-related functions, such as supervisory credit review,
audits, personnel policies and internal examination activities. Resource
allocations for administrative support by the Company are balanced to provide
adequate support services for the Banks' operations, while carefully controlling
service costs charged to the Banks. The major areas of administration are as
follows:
CREDIT. The Company's lending activities are guided by the general loan
policy established by the Board of Directors. The Senior Credit Committee of
the Company has established loan approval limits for each region of the Company
and each subsidiary Bank. Amounts in excess of the individual Bank lending
authority are presented to the Regional Credit Officers. Loans above $1,500,000
per nonclassified borrower and $250,000 per classified borrower are presented to
the Senior Credit Committee for approval. The Company's credit policy
establishes guidelines for approval of all credits, including local loans and
purchased loans and loan participations. The credits of the Banks are subject
to internal review by Bank officers every 12 months. The loan portfolios of the
Banks are subject to examination by the Company's credit examination staff every
12 to 24 months, the frequency of which is based on a variety of factors,
including the credit quality of the institution. The credit examination staff
is also responsible for credit review with respect to the assets of banks to be
acquired by the Company.
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FINANCE. The Board of Directors of the Company has established policies in
the areas of asset/liability management, investments, capital expenditures,
accounting procedures and capital and dividend management. Policies are
implemented and monitored for compliance by the Chief Financial Officer and the
Asset/Liability Committee of the Company.
OPERATIONS. Community First Service Corporation ("CFSC"), a subsidiary of
the Company, provides data processing and operations support services to the
Banks by contract. CFSC's system is designed to provide for all Bank and
customer data processing needs at the lowest possible cost and can be expanded
to accommodate future growth and additional service applications. The Company
believes CFSC has sufficient capacity to provide services to the banks the
Company has agreed to acquire. In addition to its own office facilities in
Fargo, North Dakota, CFSC also has a data processing facility in Golden,
Colorado. Additional expenditures for equipment, consistent with the increased
data processing volumes, would likely be necessary if additional significant
acquisitions occur during 1998.
OTHER SERVICES. The Company provides other services for the benefit of the
Banks, such as outside professional services, central human resources services,
benefits administration, marketing guidance and centralized purchasing of
supplies.
INSURANCE AGENCIES
The Company currently owns and operates insurance agencies located in 32
communities served by the Banks through its subsidiaries, Community Insurance,
Inc. ("CII"), and Community First Insurance Agencies, Inc. ("CFIA"). These
agencies are primarily engaged in the sale of property and casualty insurance
and make some sales of other types of insurance, such as life, accident and crop
hail insurance. The Company had commission revenue of $5.4 million in 1997.
OTHER ACTIVITIES
The Company has steadily consolidated Banks located in each state into
single legal charters with multiple locations. As of December 31, 1997, the
Company had 10 separately chartered subsidiary Banks and 6 nonbank
subsidiaries. The subsidiary Banks of the Company in seven locations maintain
trust departments, but their services are more broadly available and the Company
may expand its trust activities in the future. Trust services are made available
to customers in several locations through local trust officers or by appointment
with members of the trust department. Most of the Banks also sell annuities.
Federal bank regulation permits bank holding companies to engage in other
limited activities, such as the distribution of certain types of securities, and
future changes in such regulation may further expand the types of activities in
which the Company may engage. Although the Company intends to maintain its
focus on the banking business in its targeted market areas, the Company will
consider other permitted business activities as opportunities arise.
COMPETITION
Commercial banking is highly competitive. In the conduct of certain
aspects of their business, the Banks compete with other commercial banks,
savings and loan institutions, issuers of fixed income investments, finance
corporations, credit unions and money market funds, among other types of
institutions. The Banks compete with these institutions in such areas as
obtaining new deposits, offering new types of services and setting loan rates
and interest rates on various types of deposits, as well as other aspects of the
banking
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business. Management believes community residents and businesses prefer to
deal with local banks and the Banks have generally been able to compete
successfully in their respective communities because of the Company's
emphasis on local ownership and the autonomy of Bank management in community
relations. At the same time, the Company provides the Banks with the
advantages of centralized sophisticated administration and the opportunity to
make larger loans and diversify their lending activity through Bank group
participations. Further, because most of the Banks have a significant market
share in the communities they serve, the Company believes the Banks can, to a
degree, influence deposit and loan pricing in their markets and are subject
to less competition based on deposit and loan pricing than would be the case
in larger metropolitan markets with more competitors. However, the Banks
have experienced increased price competition from credit unions in certain
market areas in recent periods. Recent changes in government regulation of
banking, particularly the legislation which removes restrictions on
interstate banking and permits interstate branching, or legislation in
certain states to permit statewide branching, may increase competition by
both out-of-state and in-state banking organizations and by other financial
institutions. See "Supervision and Regulation," below. The Banks compete
with other financial institutions, including government lending agencies, for
high quality loans in the Banks' market areas and for purchases of loan
assets and investment assets. While management believes the Banks will
continue to compete successfully in their communities, there is no assurance
that future competition will not adversely affect the Banks' earnings.
EMPLOYEES
The Company had 2,241 employees at December 31, 1997, including 1,681
full-time employees and 560 part-time employees. Of these individuals, 128 were
employed at the holding company level, 1,841 (including 1,381 full-time
employees) were employed at the Bank level, 200 were employed by CFSC and 72
were employed by CII and CFIA.
SUPERVISION AND REGULATION
GENERAL. In addition to a variety of generally applicable state and
federal laws governing businesses and employers, the Company and the Banks are
extensively regulated by federal and state laws applicable only to financial
institutions. Virtually all aspects of the Company's operations are subject to
specific requirements or restrictions and general regulatory oversight from laws
regulating consumer finance transactions, such as Truth In Lending Act, Home
Mortgage Disclosure Act and Equal Credit Opportunity Act, to laws regulating
collections and confidentiality, such as Fair Debt Collections Practices Act,
Fair Credit Reporting Act and Right to Financial Privacy Act. With few
exceptions, state and federal banking laws have as their principal objective
either the maintenance of the safety and soundness of the Federal Deposit
Insurance System or the protection of consumers or classes of consumers, rather
than the specific protection of security holders of the Company.
With the enactment of the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA"), the FDIC Improvement Act of 1991 ("FDICIA")
and the Interstate Banking and Branching Efficiency Act of 1994 ("IBBEA"),
Congress enacted comprehensive legislation affecting the commercial banking and
thrift industries. FIRREA, among other things, abolished the Federal Savings
and Loan Insurance Corporation and established two new insurance funds under the
jurisdiction of the FDIC: the Bank Insurance Fund ("BIF"), which insures most
commercial banks, including the Banks, and the Savings Association Insurance
Fund, which insures most thrift institutions. In addition to effecting
far-reaching restructuring of the financial industry, FIRREA provided a
phased-in increase in the rate of annual insurance assessments paid by insured
depository institutions. FDICIA increased funding for the BIF and expanded
regulation of
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depository institutions and their affiliates, including parent holding
companies. FDICIA further provided authority for special assessments against
insured deposits and for the development of a system of assessing deposit
insurance premiums based upon the institutions's risk.
IBBEA generally liberalized multi-state expansion. Effective September 29,
1995, IBBEA significantly eased restrictions on interstate acquisition of banks
by bank holding companies. Beginning June 1, 1997, banks located in different
states may merge and operate the resulting institution as a single charter with
interstate branches. However, the legislation includes special "opt-out" and
"opt-in" provisions that individual states may adopt prior to the effective date
of interstate branching. IBBEA does NOT affect the branching laws within a
state, and imposes concentration limits limiting the resulting organization's
market share to 30% of state deposits and 10% of total United States deposits.
Congress continues to consider wide-ranging proposals for altering the
structure, regulation and competitive relationships of the nation's financial
institutions. It cannot be predicted whether or in what form any of these
proposals will be adopted or the extent to which the business of the Company may
be affected thereby.
BANK HOLDING COMPANY REGULATION. The Company is a bank holding company
within the meaning of the Bank Holding Company Act of 1956, as amended (the "BHC
Act"). As a result, the Company's activities are subject to certain limitations
under the BHC Act, and transactions between the Company and the Banks and other
affiliates are subject to certain restrictions. As a registered bank holding
company, the Company is required to file semiannual reports with the Federal
Reserve Board ("FRB") and such other information as the FRB may require, and is
subject to examination by the FRB. The FRB has the authority to issue cease and
desist orders against the Company and its nonbank subsidiaries if the FRB
determines that actions by the Company are unsafe, unsound or violate the law.
Under certain circumstances, redemptions, dividends or distributions by the
Company with respect to its equity securities may be considered unsafe or
unsound practices.
As a bank holding company, the acquisition of "control" of the Company by
an individual or a "company" is subject to the prior approval of the FRB. The
term "company" is broadly defined to include any corporation, partnership,
association or trust or similar organization, while the definition or control
for these purposes may be met by (i) the ownership, control or power to vote 10%
or more of the outstanding shares of any class of voting stock of the Company,
directly or indirectly, (ii) control over the election priority of Directors of
the Company, or (iii) the power to exercise, directly or indirectly, controlling
influence over the management or policies of the Company.
Under the BHC Act, a bank holding company must obtain prior FRB approval
before it acquires direct or indirect ownership or control of any voting shares
of any bank or other bank holding company if, after such acquisition, it will
own or control directly or indirectly more than 5% of the voting stock of the
target, unless it already owns a majority of the voting stock of the target. A
bank holding company also must obtain prior FRB approval before it acquires all
or substantially all of the assets of a bank or merges or consolidates with
another bank holding company.
A bank holding company is, with limited exceptions, prohibited from
acquiring direct or indirect ownership or control of a company that is not a
bank or a bank holding company, and must engage in the business of banking or
managing or controlling banks or furnishing services to or performing services
for its subsidiary banks. The FRB, by order or regulation, may authorize a bank
holding company to engage in or acquire stock
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in a company engaged in activities so closely related to banking or managing
or controlling banks as to be a proper incident thereto. Some of the
activities the FRB has determined by regulation to be incidental to the
business of banking are: making and servicing loans or certain types of
leases, engaging in discount brokerage activities, performing certain data
processing services and providing insurance brokerage services under certain
conditions and subject to certain limitations.
In reviewing any application or proposal by a bank holding company, the FRB
is required to consider the financial and managerial resources and future
prospects of the bank holding company and the banks concerned, the convenience
and needs of the community to be served, as well as the probable effect of the
transaction upon competition. Recent decisions by the FRB under the BHC Act
have underscored the importance placed by the FRB upon the record of the
applicant and its subsidiary banks in meeting the credit needs of its community
in accordance with the Community Reinvestment Act of 1977.
BANK REGULATION. The Banks are subject to detailed federal and state laws
and regulations. National bank subsidiaries of the Company are primarily
supervised by the Office of the Comptroller of the Currency (the "OCC"), a
bureau of the United States Department of Treasury. The OCC regularly examines
national banks in such areas as reserves, loans, investments, trust services,
management practices, Community Reinvestment Act compliance and other aspects of
bank operations. These examinations are designed for the protection of the
deposit insurance system and the enforcement of federal and state laws and
regulations, and not for the shareholders of the Company. In addition to
undergoing these regular examinations, national banks must furnish reports
containing detailed and accurate financial statements and schedules to the OCC
quarterly.
Bank subsidiaries of the Company that are chartered under state law are
regulated and supervised by the respective state's banking agency. In addition,
state-chartered banks, as members of the FDIC, are regulated and supervised by
the FDIC. Each of these agencies conducts regular examinations of each Bank,
generally on an alternate basis, reviewing the adequacy of the reserves, quality
of the loans and investments, propriety of management practices, compliance with
laws and regulations, including the Community Reinvestment Act, trust, and other
aspects of Bank operations. These examinations are designed for the protection
of the deposit insurance system and the enforcement of federal and state laws
and regulations, and are not conducted for the benefit of the shareholders of
the Company.
Federal and state banking laws and regulations govern, among other things,
the scope of a bank's business, investments a bank may make, reserves a bank
must maintain, loans a bank makes and collateral it takes, the activities of a
bank with respect to mergers and consolidations and the establishment of
branches. The OCC, in the case of national banks, and the FDIC, in the case of
state-chartered, nonmember banks, are the respective primary regulatory
authorities under the Financial Institution Supervisory Act, and are thereby
provided authority under that Act to impose penalties, initiate civil and
administrative actions and take other steps intended to prevent a bank from
engaging in an unsafe or an unsound practice in the conduct of its business. In
extreme cases, the FDIC has authority to revoke deposit insurance, and may
assess civil money penalties and impose cease and desist orders against the bank
and affiliated individuals, including the bank's attorneys and accountants.
Under FDICIA, federal banking authorities are also authorized to establish
safety and soundness standards for banks, thrifts and their parent holding
companies covering a wide range of operational and managerial matters, including
asset quality, earnings, stock valuation and employee compensation.
Under current law, national and state bank subsidiaries of the Company are
subject to state law restrictions in branching, including restrictions on the
number, location and characteristics of branches. The laws vary from liberal
branching states, like North Dakota and Wisconsin, which allow banks to branch
freely, subject
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only to application and approval, to states like Iowa and Nebraska, which
severely restrict branching, although they allow banks to combine and retain
preexisting locations.
In June 1993, the FDIC adopted a risk-based premium schedule that increases
the assessment rates for depository institutions. Under the new schedule, which
took effect for the assessment period beginning January 1, 1994, each financial
institution is assigned to one of three capital groups: well capitalized,
adequately capitalized or undercapitalized, as defined in the regulations
implementing the prompt corrective action provisions of the FDICIA; and further
assigned to one of three subgroups within a capital group, on the basis of
supervisory evaluations by the institution's primary federal and, if applicable,
state supervisors and other information relevant to the institution's financial
condition and the risk posed to the applicable insurance fund. The actual
assessment rate applicable to a particular institution depends upon the risk
assessment classification so assigned to the institution by the FDIC. Because
the BIF has reached its required reserve level of 1.25% of insured deposits,
banks in the lowest risk classification pay no deposit insurance premiums
currently. Each of the Banks currently qualifies for the lowest level of
deposit insurance.
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Donald R. Mengedoth 53 President, Chief Executive Officer and
Chairman of the Board
Mark A. Anderson 40 Executive Vice President, Chief Financial
Officer, Chief Information Officer, Secretary
and Treasurer
Ronald K. Strand 51 Executive Vice President - Banking Group
David E. Groshong 49 Executive Vice President - Financial
Services
Thomas R. Anderson 42 Senior Vice President - Treasury
Randall L. Dancliff 50 Senior Vice President and Wyoming Region
Manager
Cynithia U. Davis 45 Senior Vice President and Arizona/Utah Region
Manager
Keith A. Dickelman 43 Senior Vice President and Eastern Colorado
Region Manager
Thomas E. Hansen 45 Senior Vice President and Central Region
Manager
Bruce A. Heysse 46 Senior Vice President - Acquisitions
Thomas A. Hilt 55 Senior Vice President - Operations and
Administration
</TABLE>
11
<PAGE>
<TABLE>
<S> <C> <C>
Gary A. Knutson 50 Senior Vice President and Integration Manager
David A. Lee 54 Senior Vice President and Eastern Region
Manager
Charles A. Mausbach 46 Senior Vice President and Western Colorado
Region Manager
Harriette S. McCaul 47 Senior Vice President - Human Resources
Patricia J. Staples 42 Senior Vice President - Marketing
Craig A. Weiss 36 Senior Vice President - Finance
</TABLE>
Donald R. Mengedoth has been President, Chief Executive Officer, Chairman
of the Board and a director of the Company since its organization in 1986. He
was Senior Vice President of First Bank System, Inc. ("FBS") from 1982 to 1987
and has worked in the banking business since 1966, including management
positions in retail banking operations, human resources and commercial lending.
From 1984 to 1987, Mr. Mengedoth was Regional Managing Director of FBS. From
1979 to 1982, Mr. Mengedoth was Vice President - Operations for FBS. Prior to
that time, he was Senior Vice President of First Bank Milwaukee.
Mark A. Anderson has been Executive Vice President, Chief Financial
Officer, Secretary and Treasurer of the Company since its organization in 1986
and Chief Information Officer since February 1998. He was Vice President and
Regional Controller for FBS from 1984 to 1987. From 1979 to 1984, he held
various positions with FBS-affiliated banks in the finance and credit analysis
areas. Mr. Anderson is a Chartered Financial Analyst and a Certified Management
Accountant.
Ronald K. Strand has been Executive Vice President - Banking Group since
February 1993. He was previously Senior Vice President and Regional Manager for
South Dakota and North Dakota for the Company from January 1991 to February
1993. Previously, Mr. Strand had been Vice President and Regional Manager for
the Company and President, Chief Executive Officer and a director of the
Company's affiliate bank in Wahpeton, North Dakota since 1988. Prior to his
affiliation with the Company, he served as President and Chief Executive Officer
of Norwest Bank of North Dakota, N.A., Wahpeton, from 1985 until 1988. He was
employed by Norwest for a total of 15 years, having previously worked in Norwest
banks in Jamestown, North Dakota, and Moorhead, Minnesota.
David E. Groshong has been Executive Vice President - Financial Services
since May 1996. He was previously Chairman and Chief Executive Officer of the
Company's affiliate bank in Alliance, Nebraska from May 1995 to May 1996.
Previously, Mr. Groshong had been President and Chief Executive of the Company's
affiliate bank in Fergus Falls, Minnesota since 1992 and as Senior Vice
President and Senior Loan Officer of the Fargo Bank since 1985. He was employed
by Norwest Bank of Minnesota, N.A. for a total of eight years and prior to that
worked in the consumer finance industry.
Thomas R. Anderson has been Senior Vice President - Treasury since February
1998. He was previously Vice President/Funds Manager of the Company from 1988
to 1997 and Funds Management Officer from 1987 to 1988. Prior to 1987, he was
employed by Norwest Corporation for seven years, most recently as a Senior
Financial Analyst.
12
<PAGE>
Randall L. Dancliff has been Senior Vice President and Wyoming Region
Manager since July 1997. He was President and Chief Executive Officer of
KeyBank Wyoming since April 1995 until the acquisition of KeyBank Wyoming by the
Company in July 1997. Prior to that, he served as President, Chief Operating
Officer and Chief Financial Officer of KeyBank Wyoming from 1992 to April 1995,
and as Regional Vice President of KeyBank Cheyenne from 1985 to 1991. From 1973
through 1985, he served in a variety of capacities with First Wyoming Bank, the
predecessor to KeyBank Wyoming.
Cynthia U. Davis has been Senior Vice President and Arizona/Utah Region
Manager since October 1997. From October 1987 to October 1997, she held various
positions for Banc One Corporation, including positions as Vice President,
Retail Delivery for Banc One Corporation and Vice President Region Manager for
36 Bank One banking centers in Northern Arizona. She has a total of 23 years of
banking experience in Arizona, Idaho and California.
Keith A. Dickelman has been Senior Vice President and Eastern Colorado
Region Manager since January, 1998. He was previously President of Community
First National Bank, Fergus Falls, Minnesota from 1995 to 1997 and from 1992 to
1995 served as a Senior Loan Officer and Senior Vice President of Community
First National Bank, Fargo, North Dakota.
Thomas E. Hansen has been Senior Vice President and Central Region Manager
since April 1993. He also served as President, Chief Executive Officer and a
director of the Company's affiliate bank in Fargo, North Dakota from April 1993
to December 1996. Previously, he was employed by Norwest Bank Fargo for 19
years, most recently as President.
Bruce A. Heysse has been Senior Vice President - Acquisitions since July
1996. He was Senior Vice President and Integration Manager of the Company from
November 1995 to June 1996. He was Vice President and Senior Credit Officer of
the Company from 1987 to November 1995. He began his banking career at the
Company's affiliate bank in Wahpeton, North Dakota, and had a total of 11 years
of banking experience prior to joining the Company.
Thomas A. Hilt has been Senior Vice President - Operations and
Administration of the Company since 1987 and President of Community First
Service Corporation, the Company's data processing subsidiary, since 1988. He
was Vice President and Manager - Operations Support for the Regional Division of
FBS from 1984 to 1987. Prior to 1984, he held various positions with FBS since
1967, including responsibility for systems development, programming, audit and
examination functions.
Gary A. Knutson has been Senior Vice President and Integration Manager
since July, 1996 and previously was Senior Vice President and Western Region
Manager of the Company since September 1993. He was President, Chief Executive
Officer and director of the Company's affiliate bank in Wahpeton, North Dakota
from January 1991 to September 1993. He began his banking career at the
Company's affiliate bank in Lidgerwood, North Dakota, and had a total of 14
years of banking experience prior to joining the Company.
David A. Lee has been Senior Vice President and Eastern Region Manager of
the Company since January 1991. He had been a Region Manager of the Company
since 1988. He was President and Chief Executive Officer and a director of the
Company's affiliate bank in Little Falls from 1987 to January 1991. Mr. Lee
held various positions with FBS from 1966 to 1987.
13
<PAGE>
Charles A. Mausbach has been Senior Vice President and Western Colorado
Region Manager since March 1998. He was President of Community First National
Bank, Worthington, Minnesota from October 1992 to February 1998.
Harriette S. McCaul, Ph.D., has been Senior Vice President of Human
Resources since February 1997. Previously, she was the Dean of the College of
Business Administration at North Dakota State University in Fargo, North Dakota.
She joined NDSU in 1983 and held various teaching and administrative positions
in the Business Department and human resources area. Prior to that time, she
was an instructor at Moorhead State University, Moorhead, Minnesota, and the
director of faculty and staff benefits at the University of Kansas.
Patricia J. Staples has been Senior Vice President - Marketing since July
1994. Previously, Ms. Staples was employed as the public relations manager with
MeritCare Health System for 10 years.
Craig A. Weiss has been Senior Vice President - Finance since February
1998. He was previously Vice President Finance of the Company from 1988 to
1997 and Finance and Accounting Manager from 1987 to 1998. Prior to 1987, he
was employed by First Bank System, most recently as a Regional Financial
Analyst. Mr. Weiss is a certified public accountant.
ELECTION. The Company's officers are elected by the Board of Directors.
The officers serve until their successors are elected or until their earlier
resignation, removal or death.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(c) EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
2.1 Master Agreement dated July 22, 1994, between the Registrant and Bank
of Colorado Holding Company, including as Exhibit A the form of
Purchase and Assumption Agreement executed by Colorado Community First
State Bank of Steamboat Springs and Vail Bank (incorporated by
reference to Exhibit 2.13 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1994 [the "1994 Form 10-K"]).
2.2 Agreement and Plan of Merger dated as of August 12, 1994, between the
Registrant and Minowa Bancshares, Inc. (incorporated by reference to
Exhibit 2.1 to the Registrant's Registration Statement on Form S-4
[File No. 33-84746], as declared effective by the Securities and
Exchange Commission (the "Commission") on January 23, 1995).
2.3 Agreement and Plan of Merger dated as of November 28, 1994, between
the Registrant and Abbott Bank Group, Inc. (incorporated by reference
to Exhibit 10.2 to the Form 8-K report of the Registrant dated January
20, 1995).
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
2.4 Restated Agreement and Plan of Merger dated as of December 6, 1994,
among the Registrant, Colorado Acquisition Corporation and First
Community Bankshares, Inc. (incorporated by reference to Exhibit 10.1
to the Form 8-K report of the Registrant dated January 20, 1995).
2.5 Stock Purchase Agreement dated as of June 7, 1995 by and among
BNCCORP, Inc., Gregory Cleveland and Tracy Scott, and the Registrant
relating to Farmers & Merchants Bank of Beach (incorporated by
reference to Exhibit 2.12 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1995 [the "1995 Form 10-K"]).
2.6 Agreement and Plan of Merger dated as of March 8, 1996 among the
Registrant, Trinidad Acquisition Corporation and Financial Bancorp,
Inc. (the holding company for Trinidad National Bank) (incorporated by
reference to Exhibit 2.1 to the Registrant's Registration Statement on
Form S-4 [File No. 333-6239], as declared effective by the Commission
on August 9, 1996).
2.7 Agreement and Plan of Reorganization dated as of June 25, 1996 between
the Registrant and Mountain Parks Financial Corp. (incorporated by
reference to the Appendix to the Registrant's Joint Proxy Statement
with Mountain Parks Financial Corp. included in the Registration
Statement on Form S-4 [File No. 333-14439], as declared effective by
the Commission on November 7, 1996).
2.8 Stock Purchase Agreement dated as of February 18, 1997 by and among
the Registrant, KeyCorp and Key Bank of the Rocky Mountains, Inc.
(incorporated by reference to Exhibit 2.8 to the Registrant's
Amendment No. 1 to its Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, filed with the Commission as of May 8, 1997
[the "1996 Form 10-K"]).
2.9 Restated Agreement and Plan of Merger dated as of August 22, 1997,
including Agreement and First Amendment to Agreement dated as of the
same date, between the Registrant and First National Summit
Bankshares, Inc.(incorporated by reference to Appendices A and B to
the Proxy Statement-Prospectus contained in the Registrant's
Registration Statement on Form S-4 [File No. 333-38997] filed with the
Commission on October 29, 1997).
2.10 Restated Agreement and Plan of Merger dated as of August 28, 1997
between the Registrant and Republic National Bancorp, Inc.
(incorporated by reference to Appendix A to the Proxy
Statement-Prospectus contained in Registrant's Registration Statement
on Form S-4 [File No. 333-38225] filed with the Commission on October
20, 1997).
2.11 Office Purchase and Assumption Agreement dated as of the 10th day of
September, 1997 by and between Bank One, Arizona, National
Association, Bank One, Colorado, National Association, Bank One, Utah,
National Association and the Registrant, (incorporated by reference to
Exhibit 2.6 to the Registrant's Registration Statement on Form S-4
[File No. 333-36091], filed with the Commission on September 22,
1997).
2.12 Agreement and Plan of Merger dated as of November 6, 1997 among the
Registrant, Community First National Bank and Pioneer Bank of Longmont
(incorporated by reference to Exhibit 2.7 to the
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
Registrant's Registration Statement on Form S-4 [File No. 333-37527],
filed with the Commission on November 21, 1997).
2.13 First Amendment to Agreement and Plan of Merger dated as of the 19th
day of December, 1997 by and among the Registrant, Community First
National Bank and Pioneer Bank of Longmont.*
3.1 Restated Certificate of Incorporation of the Registrant (incorporated
by reference to Exhibit 3.1 to the 1996 Form 10-K).
3.2 Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to
the Registrant's Registration Statement on Form S-1 [File No.
33-41246], as declared effective by the Commission on August 13, 1991
[the "1991 S-1"]).
4.1 Certificate of Designations, Preferences and Rights of Series A Junior
Participating Preferred Stock of the Registrant (incorporated by
reference to Exhibit A to Exhibit 1 to the Registrant's Registration
Statement on Form 8-A, filed with the Commission on January 9, 1995
[the "Form 8-A"]).
4.2 Form of Rights Agreement dated as of January 5, 1995, between the
Registrant, and Norwest Bank Minnesota, National Association, which
includes as Exhibit B thereto the form of Rights Certificate
(incorporated by reference to Exhibit 1 to the Form 8-A.)
4.3 Subordinated Indenture dated February 5, 1997, between the Registrant
and Wilmington Trust Company, as Indenture Trustee, including form of
Junior Subordinated Indenture (incorporated by reference to Exhibit
4.1 to the Registrant's Registration Statement on Form S-3 [File No.
333-19921] filed with the Commission as of January 30, 1997 [the "1997
CFB Capital I Form S-3"]).
4.4 Amended and Restated Trust Agreement of CFB Capital I dated February
5, 1997, including Form of Capital Security Certificate of CFB Capital
I (incorporated by reference to Exhibit 4.5 to the 1997 CFB Capital I
Form S-3).
4.5 Capital Securities Guarantee Agreement dated as of February 5, 1997,
between the Registrant and Wilmington Trust Company as Trustee
(incorporated by reference to Exhibit 4.7 to the 1997 CFB Capital I
Form S-3).
4.6 Indenture dated June 24, 1997 relating to the Registrant's 7.30%
Subordinated Notes Due 2004 (the "New Notes") between the Registrant
and Norwest Bank Minnesota, National Association, as trustee
(incorporated by reference to Exhibit 4.1 to the Registrant's
Registration Statement on Form S-4 [File No. 333-36091] as declared
effective by the Commission on November 10, 1997 [the "1997
Subordinated Note Form S-4"]).
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
4.7 Registration Rights Agreement dated as of June 24, 1997, among the
Registrant, Piper Jaffray Inc. and Keefe, Bruyette & Woods, Inc.
(incorporated by reference to Exhibit 4.2 to the 1997 Subordinated
Note Form S-4).
4.8 Subordinated Indenture dated December 10, 1997, between the
Registrant and Wilmington Trust Company, as Indenture Trustee,
including form of Junior Subordinated Indenture (incorporated by
reference to Exhibit 4.1 to the Registrant's Registration Statement on
Form S-3 [File No. 333-37521] as declared effective by the Commission
on December 4, 1997 [the "1997 CFB Capital II Form S-3"]).
4.9 Amended and Restated Trust Agreement of CFB Capital I dated December
10, 1997, including Form of Capital Security Certificate of CFB
Capital II (incorporated by reference to Exhibit 4.5 to the 1997 CFB
Capital II Form S-3).
4.10 Capital Securities Guarantee Agreement dated as of December 10, 1997,
between the Registrant and Wilmington Trust Company as Trustee
(incorporated by reference to Exhibit 4.7 to the 1997 CFB Capital II
Form S-3).
10.1 1997 Annual Incentive Plan for Holding Company Management.* , **
10.2 Restated 1987 Stock Option Plan (incorporated by reference to Exhibit
10.7 to the Registrant's Registration Statement on Form S-8 [File No.
33-46744], as declared effective by the Commission on May 6, 1992).**
10.3 Form of Tax Sharing Agreement between the Registrant and each of its
subsidiary Banks (incorporated by reference to Exhibit 10.3 to the
1995 Form 10-K).
10.4 Form of Service Agreement for Data Processing between Community First
Service Corporation and each of the subsidiary Banks of the Registrant
(incorporated by reference to Exhibit 10.4 to the 1995 Form 10-K).
10.5 Form of Bank Services Agreement between the Registrant and each of its
subsidiary Banks (incorporated by reference to Exhibit 10.5 to the
1995 Form 10-K).
10.6 Form of Agency Agreement between the Registrant and each of its
subsidiary Banks, and Assignment of Agency Agreement and Second
Assignment of Agency Agreement, which assign the Registrant's interest
in the Agency Agreement to Community First Financial, Inc. (relating
to the Registrant's subsidiary Banks) (incorporated by reference to
Exhibit 10.6 to the 1995 Form 10-K).
10.7 Lease dated April 27, 1993, between Community First Properties, Inc.
(formerly Fargo Tower Partners) and the Registrant (incorporated by
reference to Exhibit 10.11 to the 1994 10-K).
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
10.8 Promissory Note dated July 14, 1997 (Term Note) in the principal
amount of $30,000,000, issued to Norwest Bank Minnesota, National
Association ("Norwest"), as Agent, on behalf of Harris Trust and
Savings Bank ("Harris"), Band of America National Trust and Savings
Association ("Bank of America") and Norwest.*
10.9 Promissory Notes dated July 14, 1997 (Current Notes), each in the
principal amount of $8,333,333.33, issued to each of Harris, Bank of
America, and Norwest.*
10.10 Credit Agreement dated July 14, 1997 among the Company, Harris, Bank
of America, Norwest as a lender, and Norwest as Agent.*
10.11 Form of Indemnification Agreement entered into by and between the
Registrant and the Registrant's officers and directors (incorporated
by reference to Exhibit 10.33 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1992 [the "1993 Form 10-K']).
10.12 1996 Stock Option Plan, as approved by the Board of Directors on
February 6, 1996 (incorporated by reference to Exhibit 10.15 to the
1995 Form 10-K).*
10.13 Supplemental Executive Retirement Plan, effective as of August 1,
1995.*, **
13.1 Annual Report to Shareholders.*
21.1 Subsidiaries of the Registrant.*
23.1 Consent of Ernst & Young LLP.
27.1 Financial Data Schedule relating to Financial Statements at December
31, 1997.
27.2 Financial Data Schedule relating to Financial Statements at June 30,
1996, September 30, 1996 and December 31, 1996.
27.3 Financial Data Schedule relating to Financial Statements at March 31,
1997, June 30, 1997 and September 30, 1997.
99.1 Historical Financial Statements of KeyBank National Association
(Wyoming) ("KeyBank Wyoming") for the year ended December 31, 1996 and
unaudited Historical Financial Information for the Six Months Ended
June 30, 1997.
</TABLE>
- ----------------
*Previously filed.
**Executive compensation plans and arrangements.
18
<PAGE>
SIGNATURE
Pursuant to the requirements of section 13 or 15(d) 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.
("Registrant")
Dated: March 26, 1998 By /s/ Mark A. Anderson
----------------------
Mark A. Anderson
Executive Vice President, Chief
Financial Officer, Chief
Information Officer, Secretary
and Treasurer (Principal Financial
and Accounting Officer)
19
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated January 22, 1998, incorporated by
reference in the Annual Report on Form 10-K of Community First Bankshares, Inc.
for the year ended December 31, 1997, with respect to the consolidated financial
statements, incorporated by reference in this Form 10-K/A No. 1
We also consent to the use of our report dated September 19, 1997, with respect
to the financial statements of KeyBank National Association (Wyoming), included
in this Form 10-K/A No. 1.
/s/ Ernst & Young LLP
Ernst & Young LLP
Minneapolis MN
March 25, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S ANNUAL REPORT IN FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 222,088
<INT-BEARING-DEPOSITS> 1,287
<FED-FUNDS-SOLD> 12,690
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,498,877
<INVESTMENTS-CARRYING> 180,512
<INVESTMENTS-MARKET> 182,335
<LOANS> 2,637,057
<ALLOWANCE> 36,194
<TOTAL-ASSETS> 4,855,526
<DEPOSITS> 3,619,334
<SHORT-TERM> 230,571
<LIABILITIES-OTHER> 429,851
<LONG-TERM> 116,476
120,000
0
<COMMON> 204
<OTHER-SE> 339,090
<TOTAL-LIABILITIES-AND-EQUITY> 4,855,526
<INTEREST-LOAN> 218,588
<INTEREST-INVEST> 59,103
<INTEREST-OTHER> 906
<INTEREST-TOTAL> 278,597
<INTEREST-DEPOSIT> 102,632
<INTEREST-EXPENSE> 117,253
<INTEREST-INCOME-NET> 161,344
<LOAN-LOSSES> 5,352
<SECURITIES-GAINS> 463
<EXPENSE-OTHER> 125,190
<INCOME-PRETAX> 67,366
<INCOME-PRE-EXTRAORDINARY> 45,850
<EXTRAORDINARY> 702
<CHANGES> 0
<NET-INCOME> 46,552
<EPS-PRIMARY> 2.52
<EPS-DILUTED> 2.44
<YIELD-ACTUAL> 0
<LOANS-NON> 12,507
<LOANS-PAST> 3,616
<LOANS-TROUBLED> 140
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 26,215
<CHARGE-OFFS> 7,857
<RECOVERIES> 2,419
<ALLOWANCE-CLOSE> 36,194
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S ANNUAL REPORT IN FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 1996 AND UNAUDITED FINANCIAL STATEMENTS CONTAINED IN
THE COMPANY'S QUARTERLY REPORTS IN FORM 10-Q FOR QUARTERS ENDED JUNE 30, 1996
AND SEPT. 30, 1996.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1996 JAN-01-1996 JAN-01-1996
<PERIOD-END> DEC-31-1996 JUN-30-1996 SEP-30-1996
<CASH> 175,732 112,363 138,085
<INT-BEARING-DEPOSITS> 3,598 1,683 2,488
<FED-FUNDS-SOLD> 3,600 860 310
<TRADING-ASSETS> 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 506,888 494,444 499,035
<INVESTMENTS-CARRYING> 222,348 228,769 237,235
<INVESTMENTS-MARKET> 223,200 226,120 235,790
<LOANS> 2,064,108 1,851,429 1,976,592
<ALLOWANCE> 26,215 23,995 25,771
<TOTAL-ASSETS> 3,116,398 2,818,818 2,999,736
<DEPOSITS> 2,537,440 2,322,394 2,424,315
<SHORT-TERM> 169,265 105,593 153,056
<LIABILITIES-OTHER> 117,061 136,510 155,440
<LONG-TERM> 46,750 39,086 38,898
0 0 0
22,988 23,000 22,997
<COMMON> 172 163 165
<OTHER-SE> 244,399 213,836 226,614
<TOTAL-LIABILITIES-AND-EQUITY> 3,116,398 2,818,818 2,999,736
<INTEREST-LOAN> 183,530 44,223 47,255
<INTEREST-INVEST> 44,936 11,088 11,367
<INTEREST-OTHER> 960 226 89
<INTEREST-TOTAL> 229,426 55,537 58,711
<INTEREST-DEPOSIT> 81,655 19,743 20,214
<INTEREST-EXPENSE> 95,234 22,871 24,002
<INTEREST-INCOME-NET> 134,192 32,666 34,709
<LOAN-LOSSES> 6,757 1,416 2,241
<SECURITIES-GAINS> 93 (1) (8)
<EXPENSE-OTHER> 104,288 23,789 25,834
<INCOME-PRETAX> 50,517 14,137 13,149
<INCOME-PRE-EXTRAORDINARY> 32,510 9,288 8,593
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 32,510 9,288 8,593
<EPS-PRIMARY> 1.87 .55 .50
<EPS-DILUTED> 1.79 .52 .47
<YIELD-ACTUAL> 0 0 0
<LOANS-NON> 12,796 4,368 5,897
<LOANS-PAST> 1,956 2,393 2,774
<LOANS-TROUBLED> 267 642 298
<LOANS-PROBLEM> 0 0 0
<ALLOWANCE-OPEN> 22,712 22,712 22,712
<CHARGE-OFFS> 4,971 1,574 2,717
<RECOVERIES> 933 482 660
<ALLOWANCE-CLOSE> 26,215 23,995 25,771
<ALLOWANCE-DOMESTIC> 0 0 0
<ALLOWANCE-FOREIGN> 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S QUARTERLY REPORTS IN FORM 10-Q
FOR QUARTERS ENDED MARCH 31, 1997, JUNE 30, 1997 AND SEPTEMBER 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 JAN-01-1997 JAN-01-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997
<CASH> 123,430 124,364 209,498
<INT-BEARING-DEPOSITS> 9,953 14,898 12,782
<FED-FUNDS-SOLD> 100 705 260
<TRADING-ASSETS> 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 508,837 481,500 920,835
<INVESTMENTS-CARRYING> 223,768 229,857 227,234
<INVESTMENTS-MARKET> 222,665 230,204 228,545
<LOANS> 2,081,912 2,175,593 2,617,085
<ALLOWANCE> 27,580 30,137 37,522
<TOTAL-ASSETS> 3,095,065 3,164,899 4,248,258
<DEPOSITS> 2,493,500 2,470,691 3,457,537
<SHORT-TERM> 155,332 189,151 215,345
<LIABILITIES-OTHER> 118,831 105,106 122,961
<LONG-TERM> 18,644 78,566 120,988
0 0 0
0 0 0
<COMMON> 187 187 187
<OTHER-SE> 248,552 261,198 271,240
<TOTAL-LIABILITIES-AND-EQUITY> 2,341,228 3,164,899 4,248,258
<INTEREST-LOAN> 50,615 53,124 65,825
<INTEREST-INVEST> 11,465 11,330 16,697
<INTEREST-OTHER> 45 324 281
<INTEREST-TOTAL> 62,125 64,778 82,803
<INTEREST-DEPOSIT> 21,166 21,369 29,292
<INTEREST-EXPENSE> 25,117 25,972 35,132
<INTEREST-INCOME-NET> 37,008 38,806 47,671
<LOAN-LOSSES> 1,761 3,271 2,785
<SECURITIES-GAINS> 0 64 62
<EXPENSE-OTHER> 27,060 30,656 37,894
<INCOME-PRETAX> 16,370 16,664 17,873
<INCOME-PRE-EXTRAORDINARY> 10,797 11,135 12,299
<EXTRAORDINARY> (265) 0 0
<CHANGES> 0 0 0
<NET-INCOME> 10,532 11,135 12,299
<EPS-PRIMARY> .60 .60 .66
<EPS-DILUTED> .56 .58 .65
<YIELD-ACTUAL> 0 0 0
<LOANS-NON> 14,886 14,642 17,185
<LOANS-PAST> 2,028 2,077 6,411
<LOANS-TROUBLED> 251 195 156
<LOANS-PROBLEM> 0 0 0
<ALLOWANCE-OPEN> 26,215 26,215 26,215
<CHARGE-OFFS> 1,786 3,486 7,553
<RECOVERIES> 607 1,266 2,228
<ALLOWANCE-CLOSE> 27,580 30,137 37,522
<ALLOWANCE-DOMESTIC> 0 0 0
<ALLOWANCE-FOREIGN> 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0
</TABLE>
<PAGE>
EXHIBIT 99.1
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
<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
