<PAGE> 1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number 1-7850
SOUTHWEST GAS CORPORATION
(Exact name of registrant as specified in its charter)
California 88-0085720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5241 Spring Mountain Road
Post Office Box 98510
Las Vegas, Nevada 89193-8510
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (702) 876-7237
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Common Stock, $1 Par Value 23,581,568 shares as of May 10, 1995
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1<PAGE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The condensed consolidated financial statements included herein have been
prepared by Southwest Gas Corporation (the Company), without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission. In
the opinion of management, all adjustments, consisting of normal recurring
items necessary for a fair presentation of the results for the interim
periods, have been made. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. It is suggested that these condensed
consolidated financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's 1994 Annual Report
on Form 10-K.
2<PAGE>
<PAGE>
<TABLE>
SOUTHWEST GAS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Thousands of dollars)
(Unaudited)
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
------------ ------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 151,378 $ 129,998
Debt securities available for sale 511,570 529,400
Debt securities held to maturity (fair value of $97,661 and $99,403) 99,772 101,880
Loans receivable, net of allowance for estimated losses of
$18,105 and $17,659 980,348 936,037
Loans receivable held for sale (fair value of $1,733 and $2,135) 1,711 2,114
Receivables, less reserves for uncollectibles 71,872 105,438
Gas utility property, net of accumulated depreciation 1,053,556 1,035,916
Other property, net of accumulated depreciation 36,670 35,605
Excess of cost over net assets acquired 64,675 65,640
Other assets 123,865 147,965
------------ ------------
$ 3,095,417 $ 3,089,993
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
Deposits $ 1,255,993 $ 1,239,949
Securities sold under agreements to repurchase 214,674 281,935
Deferred income taxes and tax credits, net 128,599 133,531
Accounts payable and other accrued liabilities 217,749 208,691
Short-term debt 70,000 92,000
Long-term debt, including current maturities 844,821 790,798
------------ ------------
2,731,836 2,746,904
------------ ------------
Preferred stock, including current maturities 4,000 4,000
------------ ------------
Common stock
Authorized - 30,000,000 shares
Issued and outstanding - 21,527,834 shares and 21,281,717 shares 23,158 22,912
Additional paid-in capital 276,576 273,217
Unrealized loss, net of tax, on debt securities available for sale (2,703) (9,467)
Retained earnings 62,550 52,427
------------ ------------
359,581 339,089
------------ ------------
$ 3,095,417 $ 3,089,993
============ ============
The accompanying notes are an integral part of these statements.
</TABLE>
3<PAGE>
<PAGE>
<TABLE>
SOUTHWEST GAS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
MARCH 31, MARCH 31,
--------------------------- ---------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operating revenues:
Gas operating revenues $ 203,521 $ 207,369 $ 595,492 $ 564,025
Financial services interest income 33,211 28,045 123,600 124,373
Other 2,156 3,741 8,597 20,037
------------ ------------ ------------ ------------
238,888 239,155 727,689 708,435
------------ ------------ ------------ ------------
Operating expenses:
Net cost of gas purchased 98,906 96,996 251,833 222,547
Financial services interest expense, net 18,429 14,049 64,170 66,885
Operating expense 43,568 41,231 172,118 165,626
Maintenance expense 7,892 6,739 31,351 28,448
Provision for estimated credit losses 1,710 1,848 7,255 7,709
Depreciation, depletion and amortization 17,064 16,062 66,032 63,895
Taxes other than income taxes 6,887 6,495 26,138 24,795
Other 4,491 4,281 17,615 25,435
------------ ------------ ------------ ------------
198,947 187,701 636,512 605,340
------------ ------------ ------------ ------------
Operating income 39,941 51,454 91,177 103,095
------------ ------------ ------------ ------------
Other income and (expenses):
Net interest deductions (15,731) (13,615) (59,451) (51,226)
Other income (deductions), net 147 (218) (966) (14,569)
------------ ------------ ------------ ------------
(15,584) (13,833) (60,417) (65,795)
------------ ------------ ------------ ------------
Income before income taxes 24,357 37,621 30,760 37,300
Income taxes 9,712 14,911 12,523 16,310
------------ ------------ ------------ ------------
Net income 14,645 22,710 18,237 20,990
Preferred/preference stock
dividend requirements 95 139 467 674
------------ ------------ ------------ ------------
Net income applicable to common stock $ 14,550 $ 22,571 $ 17,770 $ 20,316
============ ============ ============ ============
Earnings per share of common stock $ 0.68 $ 1.07 $ 0.84 $ 0.98
============ ============ ============ ============
Dividends paid per share of common stock $ 0.205 $ 0.195 $ 0.81 $ 0.76
============ ============ ============ ============
Average number of common
shares outstanding 21,396 21,023 21,170 20,833
============ ============ ============ ============
The accompanying notes are an integral part of these statements.
</TABLE>
4<PAGE>
<PAGE>
<TABLE>
SOUTHWEST GAS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
MARCH 31, MARCH 31,
--------------------------- ---------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 14,645 $ 22,710 $ 18,237 $ 20,990
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 17,064 16,062 66,032 63,895
Provision for estimated losses 1,710 1,848 7,255 7,709
Change in unrecovered purchased gas costs 21,432 (1,425) 31,871 (26,232)
Change in deferred income taxes (8,577) 444 (17,233) 11,607
Change in deferred charges and credits 3,342 (2,155) 4,525 9,000
Change in noncash working capital 39,660 40,773 12,040 2,465
Other (713) (1,715) 2,226 9,852
------------ ------------ ------------ ------------
Net cash provided by operating activities 88,563 76,542 124,953 99,286
------------ ------------ ------------ ------------
CASH FLOW FROM INVESTING ACTIVITIES:
Construction expenditures (34,829) (30,866) (148,552) (121,570)
Loan originations, net of repayments (47,078) (61,567) (140,535) (220,985)
Sales of loans and loan servicing rights 3,850 17,921 32,019 78,367
Purchases of debt securities -- (50,987) (245,362) (96,875)
Proceeds from sales of debt securities -- 3,559 1,515 352,347
Maturities and repayments of debt securities 29,893 71,905 249,735 298,857
Proceeds from sales of real estate acquired through foreclosure 2,860 19 6,889 22,460
Proceeds from sale of Arizona assets and services -- -- -- 6,718
Other (1,615) (1,766) 3,484 (10,010)
------------ ------------ ------------ ------------
Net cash provided by (used in) investing activities (46,919) (51,782) (240,807) 309,309
------------ ------------ ------------ ------------
CASH FLOW FROM FINANCING ACTIVITIES:
Issuance of common stock 3,605 511 7,867 7,301
Dividends paid (4,478) (4,239) (17,649) (16,567)
Issuance of long-term debt 57,000 11,000 150,900 97,909
Retirement of long-term debt (2,977) (1,167) (8,777) (46,484)
Issuance (repayment) of short-term debt (22,000) (43,000) 27,000 43,000
Change in deposit accounts 16,044 26,738 21,403 (73,521)
Sale and assumption of Arizona deposit liabilities -- -- -- (320,902)
Proceeds from repos/other borrowings 340,817 259,041 363,109 1,107,108
Repayment of repos/other borrowings (408,078) (278,135) (388,382) (1,183,279)
Other (197) (155) (4,935) (8,246)
------------ ------------ ------------ ------------
Net cash provided by (used in) financing activities (20,264) (29,406) 150,536 (393,681)
------------ ------------ ------------ ------------
Net change in cash and cash equivalents 21,380 (4,646) 34,682 14,914
Balance at beginning of period 129,998 121,342 116,696 101,782
------------ ------------ ------------ ------------
Balance at end of period $ 151,378 $ 116,696 $ 151,378 $ 116,696
============ ============ ============ ============
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest, net of amounts capitalized $ 24,545 $ 26,441 $ 67,792 $ 71,768
Income taxes, net of refunds 5,179 (3,650) 10,961 (1,293)
The accompanying notes are an integral part of these statements.
</TABLE>
5<PAGE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summarized Consolidated Financial Statement Data
Summarized consolidated financial statement data for PriMerit Bank is presented
below:
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Thousands of dollars)
(Unaudited)
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
------------ ------------
ASSETS
<S> <C> <C>
Cash and due from banks $ 33,991 $ 35,262
Cash equivalents 87,289 88,660
Debt securities available for sale 511,570 529,400
Debt securities held to maturity (fair value of $97,661 and $99,403) 99,772 101,880
Loans receivable, net of allowance for estimated credit losses
of $18,105 and $17,659 980,348 936,037
Loans receivable held for sale (fair value of $1,733 and $2,135) 1,711 2,114
Real estate acquired through foreclosure 3,724 7,631
Real estate held for sale or development, net of allowance for
estimated losses of $799 and $476 369 771
FHLB stock, at cost 17,525 17,277
Excess of cost over net assets acquired 64,675 65,640
Other assets 28,115 31,649
------------ ------------
$ 1,829,089 $ 1,816,321
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Deposits $ 1,255,993 $ 1,239,949
Securities sold under agreements to repurchase 214,674 281,935
Advances from FHLB 149,400 99,400
Notes payable 8,135 8,135
Other liabilities 26,058 20,514
------------ ------------
1,654,260 1,649,933
------------ ------------
Stockholder's equity:
Common stock 57 57
Additional paid-in capital 160,442 160,442
Unrealized loss, net of tax, on debt securities available for sale (2,703) (9,467)
Retained earnings 17,033 15,356
------------ ------------
174,829 166,388
------------ ------------
$ 1,829,089 $ 1,816,321
============ ============
</TABLE>
6<PAGE>
<PAGE>
Note 1 - Summarized Consolidated Financial Statement Data (Continued)
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Thousands of dollars)
(Unaudited)
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
MARCH 31, MARCH 31,
--------------------------- ---------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest income $ 33,211 $ 28,045 $ 123,600 $ 124,373
Interest expense 18,429 14,049 64,170 66,885
------------ ------------ ------------ ------------
Net interest income 14,782 13,996 59,430 57,488
Provision for estimated credit losses (1,364) (1,434) (7,160) (6,523)
------------ ------------ ------------ ------------
Net interest income after provision
for credit losses 13,418 12,562 52,270 50,965
------------ ------------ ------------ ------------
Net loss from real estate operations (433) (485) (560) (1,232)
------------ ------------ ------------ ------------
Gain on sale of loans 72 248 422 1,528
Loss on sale of loans -- (156) (195) (213)
Net gain on sale of debt securities -- 33 1 7,830
Gain (loss) on secondary marketing
hedging activity (4) 131 254 (246)
Loan-related fees 317 237 1,245 978
Deposit-related fees 1,850 1,495 7,143 6,480
Gain (loss) on sale of credit cards -- 1,690 (1) 1,690
Loss on sale - Arizona branches -- -- -- (6,262)
Other income 8 134 193 2,036
------------ ------------ ------------ ------------
Total noninterest income 2,243 3,812 9,062 13,821
------------ ------------ ------------ ------------
General and administrative expenses 11,151 10,988 43,672 47,295
Amortization of cost in excess of net
assets acquired 965 966 3,860 3,911
------------ ------------ ------------ ------------
Total noninterest expense 12,116 11,954 47,532 51,206
------------ ------------ ------------ ------------
Income before income taxes 3,112 3,935 13,240 12,348
Income tax expense 1,434 1,746 6,079 7,217
------------ ------------ ------------ ------------
Net income $ 1,678 $ 2,189 $ 7,161 $ 5,131
============ ============ ============ ============
Contribution to consolidated net
income (a) $ 196 $ 976 $ 1,997 $ 198
============ ============ ============ ============
</TABLE>
(a) Includes after-tax allocation of costs from parent.
7<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company is comprised of two business segments; natural gas operations and
financial services. The gas segment purchases, transports and distributes
natural gas to residential, commercial and industrial customers in
geographically diverse portions of Arizona, Nevada and California. The
financial services segment consists of PriMerit Bank (the Bank), a wholly
owned subsidiary, which is engaged in retail and commercial banking. The
Bank's principal business is to attract deposits from the general public and
make consumer and commercial loans secured by real estate and other
collateral. For the twelve months ended March 31, 1995, the natural gas
operations segment contributed $16.2 million and the financial services
segment contributed $2 million, resulting in consolidated net income of
$18.2 million.
CONSOLIDATED CAPITAL RESOURCES AND LIQUIDITY
The capital requirements and resources of the Company generally are determined
independently for the natural gas operations and financial services segments.
Each segment is generally responsible for securing its own financing sources.
The Company's unsecured debt is rated Baa3 by Moody's Investors Service, BBB-
by Standard and Poor's Ratings Group and BB+ by Duff and Phelps Credit Rating
Company.
See separate discussions of the capital resources and liquidity for each
segment.
RESULTS OF CONSOLIDATED OPERATIONS
Quarterly Analysis
- ------------------
Contribution to Consolidated Net Income
Three Months Ended March 31,
---------------------------------------
(Thousands of dollars)
1995 1994
---------- ----------
Natural gas operations segment $ 14,449 $ 21,734
Financial services segment 196 976
---------- ----------
Consolidated net income $ 14,645 $ 22,710
========== ==========
See separate discussions of each business segment for an analysis of these
changes.
Twelve Month Analysis
- ---------------------
Contribution to Consolidated Net Income
Twelve Months Ended March 31,
---------------------------------------
(Thousands of dollars)
1995 1994
---------- ----------
Natural gas operations segment $ 16,240 $ 20,792
Financial services segment 1,997 198
---------- ----------
Consolidated net income $ 18,237 $ 20,990
========== ==========
See separate discussions of each business segment for an analysis of these
changes.
8<PAGE>
<PAGE>
NATURAL GAS OPERATIONS SEGMENT
The Company is engaged in the business of purchasing, transporting, and
distributing natural gas in portions of Arizona, Nevada and California. Its
service areas are geographically as well as economically diverse. The Company
is the largest distributor in Arizona, selling and transporting natural gas in
most of southern, central, and northwestern Arizona, including the Phoenix and
Tucson metropolitan areas. The Company is also the largest distributor and
transporter of natural gas in Nevada, and serves the Las Vegas metropolitan
area and northern Nevada. In addition, the Company distributes and transports
natural gas in portions of California, including the Lake Tahoe area in
northern California and high desert and mountain areas in San Bernardino
County.
The Company purchases, transports and distributes natural gas to approximately
989,000 residential, commercial and industrial customers within its three-
state service territory, of which 59 percent are in Arizona, 30 percent are
in Nevada, and 11 percent are in California. During the twelve months ended
March 31, 1995, the Company earned 59 percent of operating margin from
residential customers, 24 percent from commercial customers, and 17 percent
from industrial and other customers. During this same period, the Company
earned 58 percent of operating margin in Arizona, 31 percent in Nevada and
11 percent in California. This pattern is consistent with prior years and is
expected to continue.
For the twelve months ended March 31, 1995, the Company's natural gas
construction expenditures totaled $145 million, a 21 percent increase when
compared to $120 million of additions for the same period ended a year ago.
The increase is attributed to the investment in new transmission and
distribution plant in Arizona, Nevada, and California to meet the demand from
the Company's growing customer base.
CAPITAL RESOURCES AND LIQUIDITY
The Company currently estimates that construction expenditures for the
three-year period ending December 31, 1997 will be approximately $410 million,
and that debt maturities and repayments and other cash requirements are
expected to approximate $15 million. It is currently estimated that cash flow
from operating activities (net of dividends) will generate approximately
one-half of the gas segment's total financing requirements during the
three-year period ending December 31, 1997. A portion of the remaining funding
requirements will be provided by $83 million of funds held in trust, at
December 31, 1994, from the issuance of 1993 Clark County, Nevada, Series A and
1993 City of Big Bear Lake, California, Series A industrial development revenue
bonds (IDRB).
In May 1995, the Company completed an offering of 2 million primary shares of
common stock. The net proceeds from this offering, before exercise of
underwriter options to purchase up to 300,000 additional shares, are estimated
at $26.7 million after deducting underwriting discounts, commissions, and
expenses. The proceeds will be used to repay a portion of short-term
borrowings incurred to finance utility construction, and to finance
construction, completion, extension or improvement of the Company's facilities
located in and around the communities it serves.
The remaining cash requirements are expected to be provided by external
financing sources. The timing, types, and amounts of these additional
external financings will be dependent on a number of factors, including
conditions in the capital markets, timing and amounts of rate relief, and
growth factors in the Company's service areas. These external financings may
include the issuance of both debt and equity securities, bank and other
short-term borrowings, and other forms of financing.
9<PAGE>
<PAGE>
RESULTS OF NATURAL GAS OPERATIONS
Quarterly Analysis
- ------------------
Three Months Ended
March 31,
------------------------
(Thousands of dollars)
1995 1994
---------- ----------
Gas operating revenues $ 203,521 $ 207,369
Net cost of gas 98,906 96,996
---------- ----------
Operating margin 104,615 110,373
Operations and maintenance expense 45,867 42,435
Depreciation and amortization 15,137 14,048
Taxes other than income taxes 6,782 6,371
---------- ----------
Operating income 36,829 47,519
Other income (expense), net 147 (218)
---------- ----------
Income before interest and income taxes 36,976 47,301
Net interest deductions 15,731 13,615
Income tax expense 8,278 13,165
---------- ----------
Net income before allocation to the Bank 12,967 20,521
Carrying costs allocated to the Bank, net of tax 1,482 1,213
---------- ----------
Contribution to consolidated net income $ 14,449 $ 21,734
========== ==========
Contribution to consolidated net income decreased $7.3 million, compared to
the first quarter of 1994. The decrease was principally the result of lower
operating margin directly attributable to significantly warmer weather
throughout the Company's service territories when compared to the same period
in 1994. In addition, higher operating expenses and net interest deductions
were incurred as a result of the continued expansion and upgrading of the gas
system to accommodate the Company's customer growth.
Operating margin declined five percent in the first quarter of 1995 when
compared to the first quarter of 1994. Unseasonably warm weather in the
Company's three largest operating areas, Phoenix, Las Vegas, and Tucson,
resulted in weather-sensitive customers purchasing approximately 14 percent
less gas than anticipated. On a weather-normalized basis, first quarter 1995
operating margin would have been approximately $14.6 million, or 14 percent,
greater than actually reported, while first quarter 1994 operating margin
would have been approximately $3.6 million, or 3 percent greater than actual,
resulting in a weather-related decrease between periods of $11 million.
The negative impact of warmer weather on operating margin was mitigated
partially by record customer growth. During the first quarter of 1995, the
Company billed an average of 48,000 more customers per month than in the first
quarter of 1994, resulting in approximately $5.3 million of additional
operating margin.
Operations and maintenance expenses increased $3.4 million, or eight percent,
reflecting increases in labor and maintenance costs along with incremental
operating expenses associated with meeting the needs of the Company's growing
customer base.
Depreciation expense increased $1.1 million, or eight percent, as a result of
additional plant in service. Average gas plant in service increased
$110 million, or eight percent, as compared to the first quarter of 1994. The
increase reflects ongoing capital expenditures for the upgrade of existing
operating facilities and the expansion of the system to accommodate continued
customer growth.
10<PAGE>
<PAGE>
Net interest deductions increased $2.1 million, or 15 percent, over the prior
period. Average debt outstanding during the current quarter increased
14 percent compared to the first quarter of 1994, and consisted of a $68 million
increase in average long-term debt, net of funds held in trust, and a
$25 million increase in average short-term debt. The increase in debt is
attributed primarily to borrowings for construction expenditures and operating
activities as well as the drawdown of IDRB funds previously held in trust.
Higher interest rates on variable-rate debt also contributed to the increase
in net interest deductions.
Twelve Month Analysis
- ---------------------
Twelve Months Ended
March 31,
------------------------
(Thousands of dollars)
1995 1994
---------- ----------
Gas operating revenues $ 595,492 $ 564,025
Net cost of gas 251,833 222,547
---------- ----------
Operating margin 343,659 341,478
Operations and maintenance expense 181,631 170,916
Depreciation and amortization 58,340 55,611
Taxes other than income taxes 25,751 24,204
---------- ----------
Operating income 77,937 90,747
Other income (expense), net (966) (14,570)
---------- ----------
Income before interest and income taxes 76,971 76,177
Net interest deductions 59,451 51,226
Income tax expense 6,444 9,092
---------- ----------
Net income before allocation to the Bank 11,076 15,859
Carrying costs allocated to the Bank, net of tax 5,164 4,933
---------- ----------
Contribution to consolidated net income $ 16,240 $ 20,792
========== ==========
Contribution to consolidated net income decreased $4.6 million, or 22 percent,
as compared to the corresponding twelve-month period of the prior year.
Increased operating margin was offset by increased operations and maintenance
expense, depreciation expense, general taxes, and net interest deductions.
The recognition of the Arizona pipe replacement program disallowances had a
significant negative impact on net income for the twelve months ended
March 31, 1994 (see discussion below).
Operating margin increased $2.2 million due to continued customer growth in
the Company's service areas, combined with rate relief in the Company's
Arizona and California rate jurisdictions, offset by differences in heating
demand between periods. The Company added approximately 48,000 customers, an
increase of five percent, during the twelve-month period.
Operations and maintenance expenses increased $10.7 million, or six percent,
primarily a result of general cost increases in labor and materials over the
same period a year ago. These increases reflect the incremental cost of
providing service to the Company's steadily growing customer base.
Depreciation expense and general taxes increased $4.3 million, or five percent,
as a result of additional plant in service. Average gas plant in service for
the current twelve-month period increased $87 million, or seven percent,
compared to the corresponding period a year ago. This was attributable to the
upgrade of existing operating facilities and the expansion of the system to
accommodate the number of new customers being added to the system.
Other expenses for the twelve months ended March 31, 1994, includes a
$15.9 million write-off in gross plant related to the central and southern
Arizona pipe replacement programs, the result of a regulatory mandate. The
11<PAGE>
<PAGE>
impact of these disallowances, net of accumulated depreciation, tax benefits and
other related items, was a noncash reduction to net income of $9.3 million.
Net interest deductions increased $8.2 million, or 16 percent, during the
twelve months ended March 1995 over the comparative period of the prior year.
Average total debt outstanding during the period increased 12 percent compared
to the corresponding period of the prior year, and consisted of a $47 million
increase in average long-term debt, net of funds held in trust, and a
$31 million increase in average short-term debt. The increase in debt is
attributed primarily to borrowings for construction expenditures and operating
activities as well as the drawdown of IDRB funds previously held in trust.
Higher interest rates on variable-rate debt also contributed to the increase
in net interest deductions.
FINANCIAL SERVICES SEGMENT
PriMerit Bank (the Bank) is a federally chartered stock savings bank
conducting business through branch offices in Nevada. The Bank's deposit
accounts are insured to the maximum extent permitted by law by the Federal
Deposit Insurance Corporation (FDIC) through the Savings Association Insurance
Fund (SAIF). The Bank is regulated by the Office of Thrift Supervision (OTS)
and the FDIC, and is a member of the Federal Home Loan Bank (FHLB) system.
The Bank's principal business is to attract deposits from the general public
and make loans secured by real estate and other collateral to enable borrowers
to purchase, refinance, construct or improve such property. Revenues are
derived from interest on real estate loans and debt securities and, to a
lesser extent, from interest on nonmortgage loans, gains on sales of loans and
debt securities, and fees received in connection with loans and deposits. The
Bank's major expense is the interest paid on savings deposits and borrowings.
CAPITAL RESOURCES AND LIQUIDITY
In accordance with OTS regulations, the Bank is required to maintain an
average daily balance of liquid assets equal to at least five percent of its
liquidity base (as defined in the OTS regulations) during the preceding
calendar month. The liquidity ratio was 14 percent for the month of March
1995. The Bank maintains a ratio substantially higher than the requirement
due to its increased level of transaction accounts relative to a traditional
thrift. Management considers the Bank's liquidity position to be adequate.
At March 31, 1995, the Bank maintained in excess of $324 million of
unencumbered assets which could be borrowed against or sold to increase
liquidity levels.
The Bank's deposits increased $16 million during the quarter primarily due to
an increase in money market transaction accounts. During the first quarter,
the Bank borrowed $50 million in the form of FHLB advances. The proceeds were
used to pay down long-term reverse repurchase agreements.
FINANCIAL AND REGULATORY CAPITAL
The Bank exceeded all three adequately capitalized FDIC Improvement Act of
1991 (FDICIA) required ratios applicable at March 31, 1995, and all three
fully phased-in FDICIA capital requirements which will be applicable at
July 1, 1996 under current FDICIA capital standards. As required by the OTS,
effective January 1995, all supervisory goodwill was excluded from regulatory
capital, resulting in a decline in all three of the Bank's regulatory capital
ratios. This decline was offset partially by the Bank's year-to-date net
income and goodwill amortization. The Bank continues to be classified as
"well capitalized" under FDICIA.
12<PAGE>
<PAGE>
A reconciliation of stockholder's equity to the three FDICIA regulatory
capital standards and the Bank's resulting ratios are set forth in the table
below (thousands of dollars):
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
-------------------------------------- --------------------------------------
Total Tier 1 Tier 1 Total Tier 1 Tier 1
Risk-Based Risk-Based Leverage Risk-Based Risk-Based Leverage
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Stockholder's equity $ 174,829 $ 174,829 $ 174,829 $ 166,388 $ 166,388 $ 166,388
Capital adjustments:
Nonsupervisory goodwill (39,853) (39,853) (39,853) (40,376) (40,376) (40,376)
Supervisory goodwill (24,822) (24,822) (24,822) (18,661) (18,661) (18,661)
Real estate investments (724) -- -- (1,325) (194) (194)
Unrealized loss, net of tax, on
debt securities available for sale 2,703 2,703 2,703 9,467 9,467 9,467
General loan loss reserves 11,872 -- -- 11,512 -- --
---------- ---------- ---------- ---------- ---------- ----------
Regulatory capital $ 124,005 $ 112,857 $ 112,857 $ 127,005 $ 116,624 $ 116,624
========== ========== ========== ========== ========== ==========
Regulatory capital ratio 13.12% 11.94% 6.38% 13.88% 12.75% 6.62%
Adequately capitalized required ratio 8.00 4.00 4.00 8.00 4.00 4.00
---------- ---------- ---------- ---------- ---------- ----------
Excess 5.12% 7.94% 2.38% 5.88% 8.75% 2.62%
========== ========== ========== ========== ========== ==========
Asset base $ 945,093 $ 945,093 $1,767,912 $ 914,812 $ 914,812 $1,760,801
========== ========== ========== ========== ========== ==========
</TABLE>
At March 31, 1995 under fully phased-in FDICIA capital rules applicable at
July 1, 1996, the Bank would have exceeded its fully phased-in adequately
capitalized total risk-based, tier 1 risk-based, and tier 1 leverage capital
requirements by $47.9 million, $74.7 million and $42 million, respectively.
The OTS has indefinitely delayed the implementation of its regulation
regarding the interest rate risk (IRR) component for risk-based capital.
Based on the Bank's internal model of IRR exposure as of March 31, 1995, no
capital deduction would be required if the OTS regulation had been implemented.
The Bank enters into various interest rate swaps in managing its IRR. In
these swaps, the Bank agrees with other parties to exchange, at specified
intervals, the difference between fixed-rate and floating-rate interest amounts
calculated on an agreed-upon notional principal amount. Because the Bank's
interest-earning assets tend to be long-term fixed-rate instruments while the
Bank's interest-bearing liabilities tend to be shorter term or floating-rate
obligations, interest rate swaps reduce the impact of market fluctuations on
the Bank's net interest income.
The Bank only enters into interest rate swaps to hedge specific assets or
liabilities, and not for speculative or trading purposes. Therefore, the Bank
accounts for the swaps by accruing for the cash flows which are contractually
receivable and payable under the agreements. These net costs are included as
cost of hedging activities in the consolidated statements of income.
The Bank mitigates the credit risk associated with interest rate swaps by
limiting itself to transactions with counterparties who are U.S. Government
Securities dealers registered with the Securities and Exchange Commission (SEC)
and are in full compliance with the SEC's Net Capital Rule for Brokers and
Dealers. Additionally, the Bank's policy limits the maximum notional amount
outstanding per dealer and in total.
13<PAGE>
<PAGE>
The following table summarizes the terms of the Bank's outstanding interest
rate swaps as of the dates indicated (thousands of dollars):
March 31, December 31,
1995 1994
--------- ---------
Notional principal $ 72,450 $ 72,450
Weighted average remaining term (months) 56 59
Weighted average fixed-rate payable 6.95% 6.95%
Weighted average variable-rate receivable 6.45% 5.66%
Unrealized gains $ 955 $ 2,991
Unrealized losses $ (140) $ (5)
RESULTS OF FINANCIAL SERVICES OPERATIONS
Quarterly Analysis
- ------------------
The Bank recorded net income of $1.7 million for the three months ended
March 31, 1995 compared to net income of $2.2 million for the same period in
1994. After-tax components of the Bank's 1995 first quarter net income were
comprised of $3 million from core banking operations offset partially by
$281,000 in real estate losses and $965,000 in goodwill amortization expense.
After-tax components of the Bank's 1994 first quarter net income were
comprised of income of $2.4 million from core banking operations, a $1.1 million
gain on the sale of the Bank's credit card receivables, partially offset by a
$319,000 loss from real estate, and $966,000 in goodwill amortization expense.
The following table sets forth information with respect to interest rate
spread for the periods shown (thousands of dollars):
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------------------------------------------------------
1995 1994
-------------------------------------- --------------------------------------
Average Average Average Average
Balance Interest Yield Balance Interest Yield
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Cash equivalents $ 83,144 $ 1,258 6.05% $ 69,656 $ 553 3.18%
Debt securities held to maturity 100,619 1,823 7.25 67,776 1,101 6.50
Debt securities available for sale 516,000 8,658 6.71 587,984 8,424 5.73
Loans receivable 956,954 21,247 8.88 855,184 17,815 8.33
FHLB stock 17,458 225 5.16 16,621 152 3.66
---------- ---------- ---------- ---------- ---------- ----------
Total interest-earning assets $1,674,175 33,211 7.93 $1,597,221 28,045 7.02
========== ---------- ---------- ========== ---------- ----------
Interest-bearing liabilities:
Deposits $1,239,028 12,404 4.06 $1,207,023 10,333 3.47
Securities sold under
agreements to repurchase 261,243 4,033 6.26 256,547 2,710 4.28
Advances from FHLB 112,332 1,623 5.86 71,000 822 4.70
Notes payable 8,135 171 8.52 8,265 154 7.56
---------- ---------- ---------- ---------- ---------- ----------
Total interest-bearing liabilities $1,620,738 18,231 4.56 $1,542,835 14,019 3.69
========== ==========
Cost of hedging activities 198 0.05 37 0.01
---------- ---------- ---------- ----------
Cost of funds 18,429 4.61 14,056 3.70
---------- ---------- ---------- ----------
Capitalized and
transferred interest -- -- (7) --
---------- ---------- ---------- ----------
Net interest income $ 14,782 3.32% $ 13,996 3.32%
========== ========== ========== ==========
Net yield on interest-
earning assets 3.53% 3.51%
========== ==========
</TABLE>
14<PAGE>
<PAGE>
Despite an increasing interest rate environment between periods, the Bank's
net interest margin remained strong due to the repricing of the Bank's
adjustable-rate assets and the Bank's ability to lag increasing rates paid on
deposits relative to the increasing general interest rate environment. The
increase in the average loan yield is due to originations between the periods
at higher rates and adjustable-rate loans repricing at higher rates. The
increased yield on interest-earning assets was partially offset by a 198 basis
point increase in the average wholesale borrowing rate on securities sold
under agreements to repurchase, along with an increased level of long-term
FHLB advances which carried a higher rate of interest than the short-term
borrowings paid down.
Noninterest income declined $1.6 million in the first quarter of 1995 compared
to 1994, principally due to the one time $1.7 million gain on the sale of
credit card receivables recorded in 1994. The $355,000 increase in deposit-
related fees during 1995 was due primarily to increases in the fees charged on
these accounts. The $188,000 decrease in net gains on sale of loans and
securities from secondary marketing activities resulted from lower levels of
30-year fixed-rate loan originations in the first quarter of 1995 compared to
the same period in 1994.
General and administrative expenses increased slightly in the first quarter of
1995 compared to the same period in 1994, due primarily to increased marketing
expenditures.
Twelve Month Analysis
- ---------------------
The Bank recorded net income of $7.2 million for the twelve months ended
March 31, 1995 compared to net income of $5.1 million for the twelve months
ended March 31, 1994. After-tax components of the Bank's net income for the
twelve months ended March 31, 1995 were comprised of $11.9 million from core
banking operations, a gain of $166,000 from real estate operations, offset
partially by $498,000 from adjustments and charge-offs related to the
January 1994 sale of the Bank's credit card receivables, $527,000 of real estate
litigation costs, and $3.9 million of goodwill amortization expense. After-tax
components of the Bank's net income for the twelve months ended March 31, 1994
were comprised of $8.6 million from core banking operations, a $400,000
benefit recorded as a result of the 1993 change in federal income tax rates, a
gain of $1.1 million on the sale of the Bank's credit card receivables, and a
$780,000 gain from a legal settlement, offset by a $789,000 loss from real
estate operations, a net $1.1 million loss resulting from the May 1993 sale of
the Bank's Arizona branch operations and related transactions, and $3.9 million
of goodwill amortization expense.
15<PAGE>
<PAGE>
The following table sets forth information with respect to interest rate
spread for the periods shown (thousands of dollars):
<TABLE>
<CAPTION>
Twelve Months Ended March 31,
--------------------------------------------------------------------------------
1995 1994
-------------------------------------- --------------------------------------
Average Average Average Average
Balance Interest Yield Balance Interest Yield
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Cash equivalents $ 59,752 $ 3,137 5.25% $ 48,504 $ 1,481 3.05%
Debt securities held to maturity 81,731 5,641 6.90 148,358 10,841 7.31
Debt securities available for sale 538,784 34,399 6.38 689,260 38,819 5.63
Loans receivable 912,144 79,512 8.72 815,546 72,570 8.90
FHLB stock 17,126 911 5.32 16,452 662 4.02
---------- ---------- ---------- ---------- ---------- ----------
Total interest-earning assets $1,609,537 123,600 7.68 $1,718,120 124,373 7.24
========== ---------- ---------- ========== ---------- ----------
Interest-bearing liabilities:
Deposits $1,237,516 46,187 3.73 $1,344,872 50,701 3.77
Securities sold under
agreements to repurchase 223,794 12,347 5.52 279,953 12,062 4.31
Advances from FHLB 83,843 4,344 5.18 52,647 2,620 4.98
Notes payable 8,171 652 7.98 11,635 931 8.00
Unsecured senior notes -- -- -- 7,527 551 7.32
---------- ---------- ---------- ---------- ---------- ----------
Total interest-bearing liabilities $1,553,324 63,530 4.09 $1,696,634 66,865 3.94
========== ==========
Cost of hedging activities 646 0.04 61 --
---------- ---------- ---------- ----------
Cost of funds 64,176 4.13 66,926 3.94
---------- ---------- ---------- ----------
Capitalized and
transferred interest (6) -- (41) --
---------- ---------- ---------- ----------
Net interest income $ 59,430 3.55% $ 57,488 3.30%
========== ========== ========== ==========
Net yield on interest-
earning assets 3.69% 3.35%
========== ==========
</TABLE>
The net decrease in total debt securities was due primarily to the sale of
$334 million of MBS during August 1993 to fund the sale of the Arizona-based
deposit liabilities. Average deposits also declined as a result of the sale
of the Arizona-based deposit liabilities.
The net loss from real estate operations of $560,000 for the twelve months
ended March 31, 1995 was primarily due to litigation costs on a real estate
apartment complex which the Bank built and sold in 1989. The net loss from
real estate operations for the comparable period ended March 31, 1994 included
$1.2 million in provisions for estimated losses on the Bank's real estate
investments.
The decrease in net gains on sale of loans resulted from lower levels of
30-year fixed-rate loan originations during the twelve-month period ended
March 31, 1995 compared to the same period a year ago.
Deposit-related fees increased by $663,000 due to a higher deposit fee
structure and an increased level of transaction accounts subject to fee
assessment. Other income for the twelve months ended March 31, 1994 included
the receipt of a legal settlement.
General and administrative expenses declined $3.6 million, or eight percent,
for the twelve months ended March 31, 1995 compared to the same period in 1994
due principally to the Arizona sale.
ASSET QUALITY
Loan Impairment. On January 1, 1995, the Bank adopted Statement of Financial
Accounting Standards (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 Disclosures." SFAS No. 114 requires the
measurement of loan impairment to be based on the present value of expected
16<PAGE>
<PAGE>
future cash flows discounted at the loan's effective interest rate or the fair
value of the underlying collateral on collateral-dependent loans. SFAS No. 118
allows a creditor to use existing methods for recognizing interest income on
impaired loans.
Upon adoption of SFAS No. 114, $2.9 million of in-substance foreclosed assets
were reclassified on the Bank's consolidated balance sheet from real estate
acquired through foreclosure to loans receivable as SFAS No. 114 eliminated the
in-substance designation. No other financial statement impact resulted from
the Bank's adoption of SFAS No. 114.
In general, under SFAS No. 114, interest income on impaired loans will
continue to be recognized by the Bank on the accrual basis of accounting
unless the loan is greater than 90 days delinquent with respect to principal
or interest, or the loan has been partially or fully charged-off. Interest on
loans greater than 90 days delinquent is generally recognized on a cash basis.
Interest income on loans which have been fully or partially charged off is
generally recognized on a cost-recovery basis; that is, all proceeds from the
loan payments are first applied as a reduction to principal before any income
is recorded.
Interest income recognized on impaired loans during the quarter ended
March 31, 1995, consisted of $625,000 using an accrual basis of accounting and
$1,000 using a cash basis of accounting. The average balance outstanding of
impaired loans for the quarter was $23.8 million, while at March 31, 1995, the
outstanding impaired loan balance was $23.2 million.
Nonperforming Assets. Nonperforming assets are comprised of nonaccrual
assets, restructured loans and real estate acquired through foreclosure.
Nonaccrual assets are those on which management believes the timely collection
of interest or principal is doubtful. Assets are transferred to nonaccrual
status when payments of interest or principal are 90 days past due or if, in
management's opinion, the accrual of interest should be ceased sooner. There
were no assets on accrual status which were over 90 days delinquent or past
maturity as of March 31, 1995.
The following table summarizes nonperforming assets as of the dates indicated
(thousands of dollars):
March 31, December 31,
1995 1994
---------- -----------
Nonaccrual loans past due 90 days or more:
Mortgage loans:
Construction and land $ 1,586 $ 576
Permanent single-family residences 4,984 5,517
Other mortgage loans 5,538 5,696
---------- ----------
12,108 11,789
Nonmortgage loans 1,280 904
Restructured loans 17,292 16,768
---------- ----------
Total nonperforming loans 30,680 29,461
Real estate acquired through foreclosure 3,724 7,631
---------- ----------
Total nonperforming assets $ 34,404 $ 37,092
========== ==========
Allowance for estimated credit losses $ 18,105 $ 17,659
========== ==========
Allowance for estimated credit losses as a
percentage of nonperforming loans 59.01% 59.94%
========== ==========
Allowance for estimated credit losses as a
percentage of nonperforming assets 52.62% 47.61%
========== ==========
Restructured loans include $13.5 million of single-family residential loan
modifications made to borrowers with earthquake-related damage in California.
Federal agencies encouraged financial institutions to modify loan terms for
certain borrowers who were affected by the earthquake which occurred in
January 1994. The terms of these modifications were generally three- to
17<PAGE>
<PAGE>
six-month payment extensions with no negative credit reporting regarding the
borrower. All loans classified as restructured are performing in accordance
with the terms of the restructuring.
Classified Assets. OTS regulations require the Bank to classify certain
assets and establish prudent valuation allowances. Classified assets are
categorized as "substandard," "doubtful" and "loss." In addition, the Bank
can designate an asset as "special mention." The Bank designated $31.9 million
and $32.2 million of its assets as "special mention" at March 31, 1995 and
December 31, 1994, respectively. Impaired loans, as defined by SFAS No. 114,
are included in substandard assets.
The following table sets forth the amounts of the Bank's classified assets and
ratio of classified assets to total assets, net of allowances and charge-offs,
as of the dates indicated (thousands of dollars):
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
-------------------------- --------------------------
% of Total % of Total
Balance Assets Balance Assets
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Substandard assets:
Loans:
Single-family residential $ 6,006 0.33% $ 6,882 0.38%
Consumer 1,591 0.09 1,297 0.07
Commercial and multi-family mortgage 20,602 1.13 20,797 1.14
Construction and land 1,561 0.09 615 0.03
Foreclosed real estate (net) 3,724 0.20 7,631 0.42
Real estate held for investment 1,168 0.06 1,191 0.07
Investment 20,534 1.12 21,972 1.21
Doubtful assets -- -- -- --
Loss assets -- -- -- --
---------- ---------- ---------- ----------
Total $ 55,186 3.02% $ 60,385 3.32%
========== ========== ========== ==========
</TABLE>
Classified assets decreased $5.2 million from December 31, 1994 to March 31,
1995, primarily as a result of repayments of $1.4 million in the investment
security, paydowns of $1.3 million in construction and land loans, sales of
$1.1 million in foreclosed commercial real estate and $500,000 of commercial
loan paydowns. Foreclosed real estate also decreased and substandard loans
increased as a result of the January 1995 implementation of SFAS No. 114,
whereby $2.9 million of in-substance foreclosures were reclassified from
foreclosed real estate to substandard loans.
The investment classified as substandard represents a privately issued MBS
collateralized by apartments, office buildings, town homes, shopping centers
and day care centers located in various states along the southeastern seaboard
which is supported by a credit enhancement feature. The single A credit
rating of this security was withdrawn in January 1993 due to the delinquency
of a large number of loans underlying the security. Based on extensive credit
reviews, the Bank determined that only a portion of the underlying loans met
the criteria for substandard classification. However, the entire investment
is classified as substandard because the OTS does not have a policy allowing
the "split rating" of a security. The Bank receives monthly payments of
principal and interest on this security.
The largest substandard loan at March 31, 1995 was an $8.2 million
multi-family real estate loan in Nevada. The Bank had three additional
substandard loans in excess of $1 million at March 31, 1995: two hotel loans
and one multi-family loan, all located in Nevada. The largest foreclosed real
estate asset held by the Bank at March 31, 1995 was a $1.4 million parcel of
partially developed land in California. The Bank's largest investment in real
estate classified as substandard was a former Bank branch in Arizona with a
current book value of $838,000.
The geographic concentration of the Bank's classified assets at March 31, 1995
was 46 percent in Nevada, 37 percent in the southeastern seaboard states,
13 percent in California and 4 percent in Arizona.
18<PAGE>
<PAGE>
It is the Bank's practice to charge off all assets or portions thereof which it
considers to be "loss." As a result, none of the Bank's assets, net of
charge-offs, were classified as "loss" at March 31, 1995.
The following tables set forth the Bank's charge-off experience for loans
receivable and real estate acquired through foreclosure by loan type
(thousands of dollars):
<TABLE>
<CAPTION>
Net
Charge-Offs Recoveries Charge-Offs
------------ ------------ ------------
Three Months Ended March 31, 1995:
- ----------------------------------
<S> <C> <C> <C>
Single-family residential $ 329 $ (173) $ 156
Commercial and multi-family mortgage 86 -- 86
Construction/land 102 (35) 67
Nonmortgage 849 (240) 609
------------ ------------ ------------
Total net charge-offs $ 1,366 $ (448) $ 918
============ ============ ============
Three Months Ended March 31, 1994:
- ----------------------------------
Single-family residential $ 404 $ (68) $ 336
Commercial and multi-family mortgage 539 (3) 536
Construction/land 665 (6) 659
Nonmortgage 753 (162) 591
------------ ------------ ------------
Total net charge-offs $ 2,361 $ (239) $ 2,122
============ ============ ============
</TABLE>
Provisions and Allowances for Loan and Real Estate Losses. On a regular
basis, management evaluates the adequacy of the allowances for estimated
losses on loans, investments, and real estate and establishes additions to the
allowances through provisions to expense. The Bank utilizes a comprehensive
internal asset review system and general valuation allowance methodology.
General valuation allowances are established for each of the loan, investment,
and real estate portfolios for unforeseen losses. Factors taken into account
in determining the adequacy of allowances include review of existing risks in
the portfolios, prevailing and anticipated economic conditions, actual loss
experience and delinquencies. Regular reviews of the quality of the Bank's
loan, investment, and real estate portfolios by the Risk Management Committee,
and examinations by regulatory authorities, are performed periodically.
Charge-offs are recorded on particular assets when it is determined that the
present value of expected cash flows or fair value of the underlying
collateral of an asset is below its carrying value. When a loan is
foreclosed, the asset is written down to fair value based on a current
appraisal of the subject property.
19<PAGE>
<PAGE>
Activity in the allowances for losses on loans and investments in real estate is
summarized as follows (thousands of dollars):
<TABLE>
<CAPTION>
Foreclosed
Real Estate and Investments
Impaired Nonimpaired in
Loans Loans Real Estate Total
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1994* $ 3,038 $ 14,621 $ 476 $ 18,135
Provisions (reductions in allowance)
for estimated losses (239) 1,603 346 1,710
Charge-offs, net of recoveries (45) (873) (23) (941)
----------- ----------- ----------- -----------
Balance at March 31, 1995 $ 2,754 $ 15,351 $ 799 $ 18,904
=========== =========== =========== ===========
Total Loans and Investments
Impaired Foreclosed in
Loans Real Estate Real Estate Total
----------- ----------- ----------- -----------
Balance at December 31, 1993 $ N/A $ 16,251 $ 935 $ 17,186
Provisions for estimated losses N/A 1,434 414 1,848
Charge-offs, net of recoveries N/A (2,122) (808) (2,930)
----------- ----------- ----------- -----------
Balance at March 31, 1994 $ N/A $ 15,563 $ 541 $ 16,104
=========== =========== =========== ===========
</TABLE>
* Balances for impaired loans and foreclosed real estate and nonimpaired loans
at December 31, 1994, have been reclassified to reflect adoption of
SFAS No. 114.
The loan and foreclosed real estate charge-offs for the quarter were primarily
attributable to various consumer loan and single-family residential loan
charge-offs. The Bank's quarterly analysis of the adequacy in the allowance
for estimated credit losses at March 31, 1995 reflected no significant total
change from the December 31, 1994 level.
PART II - OTHER INFORMATION
Items 1-5 None
Item 6 Exhibits and Reports on Form 8-K
(a) The following document is filed as part of this report on
Form 10-Q:
Exhibit 27--Financial Data Schedule (filed electronically only)
(b) Reports on Form 8-K
The Company filed a Form 8-K, dated April 17, 1995, reporting
summary financial information for the quarter ended
March 31, 1995.
The Company filed a Form 8-K, dated May 3, 1995, containing
exhibits relating to its 2 million share common stock offering.
20<PAGE>
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Southwest Gas Corporation
-----------------------------------
(Registrant)
Date: May 15, 1995
/s/ Edward A. Janov
-----------------------------------
Controller/Chief Accounting Officer
21
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SOUTHWEST
GAS CORPORATION'S FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 33,991<F1>
<INT-BEARING-DEPOSITS> 87,289<F1>
<FED-FUNDS-SOLD> 0<F1>
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 511,570<F1>
<INVESTMENTS-CARRYING> 99,772<F1>
<INVESTMENTS-MARKET> 97,661<F1>
<LOANS> 1,000,164<F1>
<ALLOWANCE> 18,105<F1>
<TOTAL-ASSETS> 3,095,417<F2><F3>
<DEPOSITS> 1,255,993<F1>
<SHORT-TERM> 214,674<F1>
<LIABILITIES-OTHER> 346,348<F4>
<LONG-TERM> 844,821<F2>
<COMMON> 23,158<F2>
4,000<F2>
0
<OTHER-SE> 366,423<F2>
<TOTAL-LIABILITIES-AND-EQUITY> 3,095,417<F2>
<INTEREST-LOAN> 21,247<F1>
<INTEREST-INVEST> 10,481<F1>
<INTEREST-OTHER> 1,483<F1>
<INTEREST-TOTAL> 33,211<F1>
<INTEREST-DEPOSIT> 12,404<F1>
<INTEREST-EXPENSE> 18,429<F1>
<INTEREST-INCOME-NET> 14,782<F1>
<LOAN-LOSSES> 1,364<F1>
<SECURITIES-GAINS> 72<F1>
<EXPENSE-OTHER> 12,549<F5>
<INCOME-PRETAX> 24,357<F2>
<INCOME-PRE-EXTRAORDINARY> 14,645<F2>
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,645<F2>
<EPS-PRIMARY> 0.68<F2>
<EPS-DILUTED> 0.68<F2>
<YIELD-ACTUAL> 3.53<F1>
<LOANS-NON> 13,388<F1>
<LOANS-PAST> 0<F1>
<LOANS-TROUBLED> 17,292<F1>
<LOANS-PROBLEM> 31,900<F1>
<ALLOWANCE-OPEN> 17,659<F1>
<CHARGE-OFFS> 1,366<F1>
<RECOVERIES> 448<F1>
<ALLOWANCE-CLOSE> 18,105<F1>
<ALLOWANCE-DOMESTIC> 18,105<F1>
<ALLOWANCE-FOREIGN> 0<F1>
<ALLOWANCE-UNALLOCATED> 0<F1>
<FN>
<F1>Balance specific to financial services segment
<F2>Consolidated financial statement balance
<F3>Includes gas plant in service, net $1,053,556
<F4>Balance includes consolidated deferred income taxes, accounts payable and
other accrued liabilities
<F5>Bank specific items including general and administrative expense, goodwill
amortization and loss from real estate operations
</FN>
