-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, eSp/aUYIQ5KL1VyaT17FZGcDDF5qct8N57DdHaztKqyHnDSmbM0rXfbgaOiT9lyJ dTSSuVbrw/sLy/n5FmcZWA== 0000950114-94-000089.txt : 19940810 0000950114-94-000089.hdr.sgml : 19940810 ACCESSION NUMBER: 0000950114-94-000089 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940809 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOATMENS BANCSHARES INC /MO CENTRAL INDEX KEY: 0000040454 STANDARD INDUSTRIAL CLASSIFICATION: 6021 IRS NUMBER: 430672260 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03750 FILM NUMBER: 94542497 BUSINESS ADDRESS: STREET 1: 800 MARKET ST STREET 2: 1 BOATMENS PLZ CITY: ST LOUIS STATE: MO ZIP: 63101 BUSINESS PHONE: 3144666000 MAIL ADDRESS: STREET 1: 800 MARKET ST STREET 2: 1 BOATMENS PLAZA CITY: ST LOUIS STATE: MO ZIP: 63101 FORMER COMPANY: FORMER CONFORMED NAME: GENERAL BANCSHARES CORP DATE OF NAME CHANGE: 19860414 FORMER COMPANY: FORMER CONFORMED NAME: GENERAL CONTRACT CORP DATE OF NAME CHANGE: 19691215 10-Q 1 BOATMEN'S BANCSHARES, INC. 10-Q 1 Form 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 1994 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: 1-3750 BOATMEN'S BANCSHARES, INC. - -------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Missouri 43-0672260 - ------------------------------- ------------------------------------ (State or other jurisdiction of (IRS Employer Identification Number) incorporation or organization) One Boatmen's Plaza, 800 Market Street, St. Louis, Missouri 63101 - -------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) 3l4-466-6000 - -------------------------------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the Registrant (l) 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: Number of Shares Outstanding Class of Common Stock as of July 31, 1994 - --------------------- ---------------------------- $1 Par Value 104,739,985 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements The consolidated financial statements for the three months and six months ended June 30, 1994 and 1993 which appear on pages 14 through 16 in the accompanying June 30, 1994 interim report to stockholders (Exhibit 19 of this report) are incorporated in this Form 10-Q Quarterly Report to be read in conjunction with the consolidated statement of cash flows on page 3 of this report. The consolidated financial statements include the accounts of the Corporation and its subsidiaries after elimination of all material intercompany transactions. In the opinion of management, all necessary adjustments, consisting of normal recurring adjustments, have been included to present fairly the results of operations for the interim periods presented herein. The results of operations for the three months and six months ended June 30, 1994 are not necessarily indicative of the results which may be expected for any other interim period or for the entire year. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Information appearing under "Financial Commentary" on pages 2 through 10 and the information appearing under "Consolidated Quarterly Earnings Trend" on page 11 and "Consolidated Average Balance Sheet and Net Interest Margin" on pages 12 and 13 of the June 30, 1994 interim report to stockholders are incorporated by reference herein. 2 3 BOATMEN'S BANCSHARES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended June 30 ------------------------- (In Thousands) 1994 1993 - -------------- ---- ---- Net cash provided by operating activities $ 332,370 $ 178,616 ----------- ----------- Investing Activities: Net decrease in Federal funds sold and securities purchased under resale agreements 19,252 1,020,740 Net increase in loans (870,024) (251,854) Proceeds from the sales of foreclosed property 19,548 40,555 Proceeds from the maturity of held to maturity securities 293,202 917,246 Proceeds from sales of held to maturity securities 33,600 Purchases of held to maturity securities (1,053,790) (1,738,064) Proceeds from the maturity of available for sale securities 849,166 16,444 Proceeds from sales of available for sale securities 53,490 Purchases of available for sale securities (287,366) (61,199) Net (increase) decrease in short-term investments (53,795) 47,896 Net increase in property and equipment (65,756) (35,377) Net cash received from purchase acquisitions 468,011 ----------- ----------- Net cash provided (used) by investing activities (1,096,073) 457,998 ----------- ----------- Financing Activities: Net increase in Federal funds purchased and securities sold under repurchase agreements 1,269,682 147,203 Net decrease in deposits (722,744) (1,048,380) Net increase in short-term borrowings 251,993 41,793 Payments on long-term debt (613) (8,364) Proceeds from the issuance of long-term debt 28,850 99,313 Payments on capital lease obligation (433) (394) Cash dividends paid (64,564) (54,406) Common stock issued pursuant to various employee and shareholder stock issuance plans 2,419 10,205 Decrease in redeemable preferred stock (13) (4) ----------- ----------- Net cash provided (used) by financing activities 764,577 (813,034) ----------- ----------- Increase (decrease) in cash and due from banks 874 (176,420) Cash and due from banks at beginning of year 1,608,051 1,771,021 ----------- ----------- Cash and due from banks at June 30 $ 1,608,925 $ l,594,601 =========== ===========
For the six months ended June 30, 1994 and 1993, interest paid totaled $333 million and $319 million, respectively. Income taxes paid totaled $99.0 million for the first six months of 1994 and $82.7 million for the same period in 1993. Additional common stock was issued upon conversion of $228 thousand of the Corporation's convertible debt for the six months ended June 30, 1994 and $13.4 million for the same period in 1993. Loans transferred to foreclosed property totaled $12.1 million for the six months ended June 30, 1994, and $17.8 million for the same period in 1993. In 1993, assets and liabilities of acquired subsidiaries at dates of acquisition included securities of $78 million, loans of $885 million, cash of $480 million, other assets of $434 million, deposits of $1.9 billion and other liabilities of $14 million. 3 4 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders Registrant's Annual Meeting of Shareholders was held on April 26, 1994. Proxies for the meeting were solicited pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended. At this annual meeting, the shareholders (1) elected management's five director nominees and (2) approved an amendment to Registrant's Restated Articles of Incorporation increasing the authorized shares of common stock from 125,000,000 to 150,000,000. The amendment in- creasing the authorized shares has no effect on the rights of the holders of common stock. There was no solicitation in opposition to management's director nominees. Following is a tabulation of the voting for directors:
Voting Cast ----------------------- Nominee For Withheld ------- --- -------- B.A. Bridgewater, Jr. 82,337,997 1,895,515 John E. Hayes, Jr. 82,415,266 1,843,531 Samuel B. Hayes, III 82,354,510 1,890,549 Jerry E. Ritter 83,136,939 1,792,435 William P. Stiritz 82,066,105 2,115,233
With respect to the amendment to the Restated Articles of Incorporation, there were 78,836,683 shares voted "For" and 4,516,553 shares voted "Against", with 772,578 shares abstaining and 0 broker non-votes. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits 10. Boatmen's Supplemental Retirement Plan Participation Agreement dated June 22, 1994, between the Corporation and Samuel B. Hayes, III. 19. Boatmen's Bancshares, Inc. Report for the Period Ending June 30, 1994. (b) Registrant did not file any reports on Form 8-K during quarter ended June 30, 1994. 4 5 SIGNATURES ---------- 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. BOATMEN'S BANCSHARES, INC. -------------------------- (Registrant) Date: August 9, 1994 /s/ JAMES W. KIENKER -------------- ------------------------------------- James W. Kienker, Executive Vice President and Chief Financial Officer (On behalf of the Registrant and as Principal Financial and Accounting Officer) EX-10 2 SUPPLEMENTAL RETIREMENT PLAN PARTICIPATION AGREEMENT 1 BOATMEN'S SUPPLEMENTAL RETIREMENT PLAN PARTICIPATION AGREEMENT THIS AGREEMENT is made as of June 22, 1994, between Boatmen's Bancshares, Inc. ("Corporation") and Samuel B. Hayes, III ("Participant"). The Corporation and the Participant mutually agree as follows: 1. The Participant has received a copy of the Boatmen's Supplemental Retirement Plan ("Plan") and has read and understands the Plan. 2. By completion of the Agreement, the Participant agrees to comply with the terms of the Plan in all respects. 3. All provisions of the Plan are hereby made a part of the agreement. 4. The following special provisions are applicable the participant's participation in the plan: For purposes of Section 3.1(i), the participant shall receive the greater of: a) thirty (30.00) years of credited service at age 65; or b) the actual number of years of credited service accrued using an employment commencement date of November 1, 1971. BOATMEN'S BANCSHARES, INC. By: /s/ ARTHUR J. FLEISCHER 6/30/94 --------------------------------- Date /s/ SAMUEL B. HAYES, III 6/30/94 --------------------------------- Participant Date EX-19 3 QUARTERLY REPORT TO SHAREHOLDERS 1 FINANCIAL COMMENTARY - ------------------------------------------------------------------------------- ACQUISITION OVERVIEW Over the last several years the Corporation has made numerous sizeable acquisitions establishing dominant positions in Missouri and New Mexico, and significant presences in southern Illinois, western Tennessee, Oklahoma, Arkansas and northern Texas. In 1993 and through the six months of 1994 the Corporation completed seven acquisitions in four states aggregating $2.9 billion in total assets. The Corporation's operations currently span nine states, with services delivered from over 400 branch locations and approximately 420 off-premise ATM's. A summary of the acquisitions consummated in 1993 and 1994 is provided below. Oklahoma and Arkansas Acquisitions On May 26, 1993, the Corporation, through its Oklahoma and Arkansas subsidiaries, acquired 20 branches of the former Cimarron Federal Savings Association (Cimarron), in an RTC assisted transaction for $13.1 million in cash. Assets purchased, consisting primarily of cash and investment securities, and deposits assumed totaled approximately $430 million. Two locations, with deposits of approximately $60 million, became branches of the Corporation's Oklahoma bank, and the other 18 locations, primarily located in eastern Oklahoma, became branches of the Corporation's Arkansas thrift subsidiary, Superior Federal Bank (Superior), which is headquartered in Fort Smith, Arkansas. Superior, with assets of $1.2 billion, is the third largest financial institution in the state, providing services from 57 locations in two states, 39 of which are located in central and northwestern Arkansas and 18 locations in eastern Oklahoma. On March 31, 1994, the Corporation acquired Woodland Bancorp, Inc. (Woodland), a retail banking organization with assets of approximately $65 million, in a pooling transaction resulting in the issuance of .4 million shares of common stock. Woodland is located in Tulsa, Oklahoma and was merged into the Corporation's Oklahoma bank with total assets now approximating $1.6 billion with services provided from 19 locations primarily within the Oklahoma City and Tulsa metropolitan areas. Texas Acquisitions On March 5, 1993, the Corporation, through its subsidiary bank, Sunwest Bank of El Paso, acquired First City's former bank in El Paso under an FDIC assisted transaction for $14 million in cash. This bank, with assets of approximately $340 million, was merged into the Sunwest Bank of El Paso providing intramarket operating efficiencies. As a result of this transaction, the Corporation's El Paso bank increased its asset size to approximately $510 million and has attained a significant market share in the El Paso metropolitan area. On November 30, 1993, the Corporation acquired First Amarillo Bancorporation, Inc. (Amarillo), in a transaction accounted for as a pooling of interests. Under terms of the agreement, the Corporation exchanged .912 shares of its common stock for each share of Amarillo, resulting in the issuance of approximately 5.9 million shares of common stock. Amarillo, with assets at June 30, 1994 of approximately $1.0 billion, is located in Amarillo, Texas and has the leading market share in this north Texas market. On May 6, 1994, the Corporation completed the acquisition of Eagle Management and Trust Company (Eagle), an investment advisory firm located in Houston. Eagle, with $1.4 billion in trust assets, will not have a material impact on near-term financial results. On May 19, 1994, the Corporation announced a definitive agreement to acquire Dalhart Bancshares, Inc. (Dalhart), in a transaction involving the issuance of approximately .7 million shares of Boatmen's common stock for all of the shares of Dalhart. Dalhart, with assets of approximately $140 million, is located in north Texas, and will be merged with the Corporation's Amarillo subsidiary, further enhancing the Corporation's leading market share in this north Texas market. This acquisition, which is subject to approval by Dalhart shareholders and regulatory agencies, is expected to be completed in the fourth quarter of this year. Missouri Acquisition On April 23, 1993, the Corporation, through its Kansas City bank, acquired Missouri Bridge Bank, N.A., the former Metro North State Bank and Merchants Bank under an assisted transaction with the FDIC. Boatmen's First National Bank of Kansas City acquired $1.1 billion of certain assets and assumed the same amount of deposit liabilities for a premium of $15.8 million. As a result of this transaction, the Corporation increased its assets in the Kansas City metropolitan area to $3.9 billion, further solidifying its leading position in this market. Assets purchased included loans of approximately $960 million and other assets totaling $180 million, consisting primarily of investment securities, cash and short-term investments. The - ----------------------------------------------------------------------------------------------------------------------------------
Table 1: Acquisitions-1994 and 1993 Accounting Date State Assets Price Shares issued method - ---------------------------------------------------------------------------------------------------------------------------------- COMPLETED FDIC assisted-First City-El Paso 3/93 Texas $ .3 billion $ 14 million cash - Purchase FDIC assisted-Missouri Bridge Bank 4/93 Missouri 1.1 billion 16 million cash - Purchase RTC assisted-Cimarron Federal Savings 5/93 Oklahoma .4 billion 13 million cash - Purchase FCB Bancshares, Inc. 8/93 Kansas .2 billion 25 million cash - Purchase First Amarillo Bancorporation, Inc. 11/93 Texas .8 billion 192 million stock 5.9 million Pooling Woodland Bancorp, Inc. 3/94 Oklahoma .1 billion 12 million stock .4 million Pooling Eagle Management and Trust Company 5/94 Texas - 3 million cash - Purchase - ---------------------------------------------------------------------------------------------------------------------------------- Total assets of completed transactions $2.9 billion - ---------------------------------------------------------------------------------------------------------------------------------- PENDING Dalhart Bancshares, Inc. Texas $ .1 billion 23 million stock .7 million Pooling National Mortgage Company Tennessee .4 billion 153 million stock 5.0 million Pooling - ---------------------------------------------------------------------------------------------------------------------------------- Total assets of pending transactions $ .5 billion - ----------------------------------------------------------------------------------------------------------------------------------
2 Boatmen's Bancshares, Inc. 2 FINANCIAL COMMENTARY - ------------------------------------------------------------------------------- Corporation retained eight of the bank's 15 branches and purchased the premises and equipment at fair market value. As part of the transaction, the Corporation entered into a five-year loss-sharing arrangement with the FDIC with respect to approximately $950 million in multi-family residential, commercial real estate, construction and commercial and industrial loans. For a more complete description of the loss-sharing arrangement, refer to the Segregated Assets section of this report. Kansas Acquisition On August 2, 1993, the Corporation consummated the acquisition of FCB Bancshares, Inc., a one-bank holding company located in Overland Park, Kansas with assets of approximately $185 million, for $25 million in cash. This acquisition represents the Corporation's initial entry into Kansas and is a natural extension of the Corporation's Kansas City franchise. Tennessee Acquisition On May 6, 1994, the Corporation announced an agreement to acquire National Mortgage Company (National Mortgage), headquartered in Memphis, Tennessee, in a transaction to be accounted for as a pooling of interests. Under terms of the agreement, the Corporation will exchange not more than 5.0 million shares of its common stock for all of the stock of National Mortgage. At the date of announcement, the transaction had a value of approximately $153 million, which represented 1.2% of NationalMortgage's mortgage servicing portfolio. National Mortgage is a privately-owned, full-service mortgage banking company which originates home loans through 10 company-operated offices as well as through a network of over 300 correspondents located in the Southern and Midwestern United States, and presently services mortgage loans totaling approximately $13.5 billion. When combined with the - ---------------------------------------------------------------- Table 2: Asset Distribution
June 30, 1994 (in billions) Assets % of total - ---------------------------------------------------------------- Missouri $17.0 61.6% New Mexico 3.1 11.2 Oklahoma 1.9 6.9 Texas 1.5 5.4 Iowa 1.2 4.4 Illinois 1.0 3.6 Arkansas .9 3.3 Tennessee .8 2.9 Kansas .2 .7 - ---------------------------------------------------------------- Total $27.6 100.0% - ----------------------------------------------------------------
Corporation's existing servicing portfolio, Boatmen's will rank among the 30 largest mortgage servicers in the country. The acquisition, which is subject to approval by National Mortgage shareholders and regulatory agencies, is expected to be completed in the fourth quarter of this year. A summary of the Corporation's asset distribution by state is provided in Table 2. EARNINGS OVERVIEW Net income for the second quarter of 1994 increased to $88.0 million, up 10.4% from the same period of last year and net income per share was $.84, an increase of 9.1%. For the six months, net income increased 9.2% to $173.6 million, and net income per share was $1.66 compared to $1.54 per share a year ago, an increase of 7.8%. The earnings growth was attributable to higher net interest income and noninterest income, as well as a lower provision for loan losses, which was offset in part by higher noninterest expense. Five purchase acquisitions were consummated during the period from March 1, 1993, through June 30, 1994; therefore, the results of operations of these companies are included in the consolidated financial statements only subsequent to the dates of acquisition and must be considered when reviewing the trended financial information. In addition, the results of operations of Woodland, which qualified as a pooling of interests, are not included in the consolidated financial statements prior to January l, 1994, due to the immaterial effect on the Corporation's financial results. For the second quarter, the return on average assets was 1.28% and the return on equity was 16.30%, compared to 1.29% and 16.26%, respectively, for the same period last year. For the six months, the return on average assets was 1.29% and the return on equity was 16.11%, compared to 1.31% and 16.50%, respectively, in 1993. The returns in 1993 reflect a one-time $6.0 million gain in the first quarter of 1993 from an income tax accounting change at the Corporation's Amarillo subsidiary, which was acquired in the fourth quarter of 1993. Excluding the accounting change, the year-to-date return on assets and return on equity in 1993 would have been 1.26% and 15.90%, respectively. Net interest income, on a fully-taxable equivalent basis, increased 4.5% over the second quarter of 1993 and 5.1% for the six months principally due to an increase in average earning assets, which was partially offset by a decrease in the net interest margin. The net interest margin was 4.33% for both the second quarter and six months of 1994, a decline of approximately 25 basis points from the same periods last year. Noninterest income increased 4.9% over the second quarter of 1993 and 10.8% for the six months. Excluding acquisitions, year-to-date noninterest income increased 5.7% as most categories of noninterest income increased from the prior year level. Noninterest expense was up 5.0% from the second quarter of last year and 8.7% for the six months. Excluding purchase acquisitions, noninterest expense increased 3.5% for the quarter and 5.0% for the six months. The provision for loan losses for the second quarter totaled $7.4 million, representing a decrease of 53.7% from the second quarter of last year, but was up $1.7 million or 30.6% from the first quarter. For the six months, the provision for loan losses totaled $13.0 million, a decrease of 63.1% - -------------------------------------------------------------------------------------- Table 3: Earnings Per Share Analysis
2ND QTR. '94 2nd Qtr. '94 YTD '94 Per share VS. 2ND QTR. '93 vs. 1st Qtr. '94 vs. YTD '93 - -------------------------------------------------------------------------------------- Net income prior period $.77 $.82 $1.54 - -------------------------------------------------------------------------------------- Net interest income .11 .08 .25 Provision for loan losses .08 (.02) .22 Noninterest income .06 .24 Noninterest expense (.11) (.02) (.38) Income tax expense (.06) (.02) (.19) Impact of additional shares of common stock (.01) (.02) - -------------------------------------------------------------------------------------- Net increase .07 .02 .12 - -------------------------------------------------------------------------------------- Net income current period $.84 $.84 $1.66 - --------------------------------------------------------------------------------------
1994 Quarterly Report 3 3 FINANCIAL COMMENTARY - -------------------------------------------------------------------------------- from the same period of last year. The lower loan loss provision reflected continued improvement in asset quality as evidenced by lower levels of actual loan losses and further declines in nonperforming and criticized loans. For the six months, net loan charge-offs totaled $11.1 million, a decrease of $3.4 million or 23.4% from the same period last year. Net charge-offs in the second quarter totaled $8.7 million and included $6.0 million pertaining to one credit. Net charge-offs as a percentage of average loans dropped to .15% compared to .21% for the six months of last year and .24% for all of 1993. Presented in Table 3 is an income statement analysis expressed on a per share basis for the three month and six month periods ended June 30, 1994, compared to the same periods last year and the three months ended March 31, 1994. A more detailed discussion and analysis of the major factors impacting the comparability between periods is provided throughout this report. NET INTEREST INCOME Measured on a fully-taxable equivalent basis, net interest income increased 4.5% over the second quarter of 1993 and 5.1% for the six months. These increases were primarily due to growth in average earning assets which was partially offset by a lower net interest margin. Average earning assets increased 11.0% over the second quarter of last year and 11.1% for the six months primarily due to increased internal loan production and expansion of the securities portfolio, supplemented by growth through acquisitions. Loans, the highest yielding earning asset, increased 11.1% over the second quarter of 1993 and 12.5% for the six months. Loans represented 63.2% of average earning assets for the six months of 1994, compared to 62.4% for the same period last year. Held to maturity and available for sale securities increased 14.6% for the six months, representing 35.4% of average earning assets, up from 34.3% for the same period last year. This increase reflects redeployment of short-term money market instruments and funds received from regulatory assisted transactions to the securities portfolio, coupled with a planned expansion of the portfolio at the Corporation's Amarillo subsidiary which was acquired in the fourth quarter of 1993. After several periods of steady improvement, the Corporation experienced an anticipated contraction in the net interest margin over the second half of 1993 which continued into the first quarter of 1994. The margin stabilized in the second quarter at 4.33%, basically unchanged from the first quarter, but was down 27 basis points from the second quarter of last year when the margin was 4.60%. A similar decline also occurred for the six-month period, primarily due to a reduction in the yield earned on mortgage-related assets. The anticipated decline in yields on these assets was accelerated by historically high levels of prepayment activity and subsequent reinvestment into securities with lower yields. - ----------------------------------------------------------------------------------------------------------- Table 4: Summary of Net Interest Income
Second Quarter Ended June 30 Six Months Ended June 30 - ----------------------------------------------------------------------------------------------------------- (in millions) 1994 1993 % change 1994 1993 % change - ----------------------------------------------------------------------------------------------------------- Average loans $15,506.7 $13,958.8 11.1% $15,233.0 $13,545.7 12.5% Average earning assets 24,502.1 22,080.5 11.0 24,098.4 21,695.9 11.1 Average core deposits 17,985.0 17,551.9 2.5 18,029.4 17,119.2 5.3 Average purchased funds 4,774.0 2,866.2 66.6 4,305.7 2,910.7 47.9 Net interest income (FTE) 265.0 253.7 4.5 522.0 496.8 5.1 Net interest margin 4.33% 4.60% 4.33% 4.58% - -----------------------------------------------------------------------------------------------------------
Prepayments slowed substantially in the second quarter and, based on the current interest rate environment, the Corporation anticipates stability in the net interest margin in the near term. The average yield on earning assets for the six months of 1994 declined 36 basis points from the same period last year compared to a 27 basis point decline in the rate paid on deposits. During this same period, lending spreads narrowed as the surface spread between the prime rate and Federal funds dropped from 300 basis points to 290 basis points. The impact of the narrower spreads was offset to some extent by an increased contribution from the interest rate swap portfolio. An integral component of the Corporation's overall asset/liability management strategies is the management of interest rate risk through the prudent use of interest rate swaps. Interest rate swaps are an effective mechanism to hedge cash market instruments due to the inherent advantages related to flexibility in product structure and size, liquidity and capital. The swap portfolio is currently being used to alter the interest rate sensitivity of a portion of the Corporation's prime-based loan portfolio and to modify the interest rate sensitivity of subordinated debt. In 1994, the Corporation added new swap transactions with a notional amount of $1.0 billion and $550 million of swaps matured, such that at June 30, 1994, interest rate swaps totaled $2.2 billion. The swap portfolio increased net interest income by approximately $13.9 million for the six months of 1994, adding 12 basis points to the net interest margin, compared to $9.6 million or 9 basis points in the same period last year. The average rate received at June 30,1994 was 5.43% compared to an average rate paid of 4.64%, and the average remaining maturity of the total portfolio was less than two years. The estimated fair value of the swap portfolio was $(109) million at June 30, 1994, based on discounted cash flow models. Given that these swaps are valued using interest rates at quarter end, the estimated fair value is not necessarily indicative of the future net interest potential of the portfolio over its remaining life. Approximately 90% of the portfolio is comprised of indexed amortizing swaps; accordingly, the maturity distribution could modestly lengthen if interest rates were to increase significantly from current levels. Any future utilization of off- balance sheet financial instruments will be determined based upon the Corporation's overall interest rate sensitivity position and asset/liability management strategies, which are designed to limit interest rate risk exposure to no more than 5% of projected annual net income. While the Corporation is primarily an end-user of derivative instruments, it does serve in a limited capacity as an intermediary to meet the financial needs of its customers. The notional value of the customer swap portfolio at June 30,1994 totaled approximately $300 million. Interest rate risk associated with maintaining this portfolio is controlled by entering into offsetting positions with third parties. 4 Boatmen's Bancshares, Inc. 4 FINANCIAL COMMENTARY - -------------------------------------------------------------------------------- NONINTEREST INCOME Noninterest income increased 4.9% over the second quarter of 1993 and 10.8% for the six months, primarily due to growth in trust fees, service charge income, and credit card fees which was partially offset by a decline in mortgage banking revenues. Excluding the effect of acquisitions, noninterest income increased 5.7% over the six months of last year. Recent strategic initiatives have emphasized the expansion of fee-based services as a means to stabilize the earnings stream and reduce the Corporation's exposure to interest rate and credit risk. As such, the Corporation has focused on increasing noninterest revenues, principally through expansion of its trust and retail lines of business. Noninterest income as a percentage of operating revenues was 33.2% for the six months of 1994, compared to 32.1% for the same period of 1993. Trust fees increased 1.9% over the second quarter of 1993 and 6.7% for the six months primarily due to new business volume within the personal and pension/institutional lines. Trust fees were down slightly from the first quarter of 1994 as new business volume was more than offset by narrower spreads on securities lending activity and declines in market value of trust assets on which some fees are based. Trust assets under management totaled $34.2 billion at June 30, 1994, compared to $34.3 billion at June 30, 1993 and $34.1 billion at December 31, 1993. Trust assets under management at June 30, 1994, include the second quarter acquisition of Eagle Management and Trust Company, which was partially offset by the impact of declining stock market values. - ------------------------------------------------------------------------------------------------ Table 5: Summary of Noninterest Income
Second Quarter Ended June 30 Six Months Ended June 30 - ------------------------------------------------------------------------------------------------ (in millions) 1994 1993 % change 1994 1993 % change - ------------------------------------------------------------------------------------------------ Trust fees $ 38.7 $ 38.0 1.9% $ 77.9 $ 73.0 6.7% Service charges 40.7 37.8 7.8 80.8 72.8 11.0 Credit card 15.9 13.3 19.7 30.9 24.9 24.3 Investment banking profits and fees 8.8 8.9 (1.1) 16.7 17.4 (3.9) Securities gains, net .7 .7 3.3 .8 305.3 Mortgage banking operations 1.3 3.8 (65.8) 4.2 6.8 (38.2) Other 24.0 21.5 11.6 46.1 38.9 18.5 - ------------------------------------------------------------------------------------------------ Total noninterest income $130.1 $124.0 4.9% $259.9 $234.6 10.8% - ------------------------------------------------------------------------------------------------ As % of operating income 32.9% 32.8% 33.2% 32.1% - ------------------------------------------------------------------------------------------------ Revenue per full-time equivalent employee (in thousands) $109.8 $108.9 $108.8 $107.6 - ------------------------------------------------------------------------------------------------
Service charge income increased 7.8% over the second quarter of 1993 and 11.0% for the six months. These increases reflect growth through recent purchase acquisitions, increased penetration of the retail market and higher fees on corporate customer accounts. Excluding acquisitions, service charge income increased 5.6% over the second quarter of 1993 and 7.3% for the six months. Investment banking profits and fees decreased 1.1% from the second quarter of 1993 and 3.9% for the six months as current financial market conditions have had a negative impact on foreign exchange, bond trading and retail brokerage business. Credit card income totaled $15.9 million in the second quarter of 1994 and $30.9 million for the six months, increases of 19.7% and 24.3%, respectively, over the prior year periods. Most of this increase reflects growth in transaction volume of merchant business, which is also reflected in the increase in credit card expense and is in large measure a function of retail sales. Income from mortgage banking operations totaled $1.3 million for the second quarter of 1994 and $4.2 million for the six months, decreases of 65.8% and 38.2%, respectively, from the prior year periods, reflecting the impact of rising interest rates which decreased market gains on mortgage loans sold as well as mortgage loan originations and refinancings. For the six months of 1994, securities gains of $3.3 million were recognized from the sale of approximately $53.5 million of available for sale securities, most of which occurred in the first quarter. Other noninterest income increased $2.5 million or 11.6% over the second quarter of 1993 and $7.2 million or 18.5% for the six months. Other noninterest income in 1994 includes segregated asset income totaling $6.7 million. NONINTEREST EXPENSE Noninterest expense increased 5.0% from the second quarter of 1993 and 8.7% for the six months. Excluding the effect of acquisitions, noninterest expense increased 3.5% from the second quarter of 1993 and 5.0% for the six months, due primarily to increased staff expense, higher depreciation expense on equipment enhancements and increased credit card expense. The efficiency ratio was 62.3% for the six months of 1994, compared to 61.3% for the same period of last year, but in the most recent quarter improved to 61.9%. The year-to-year increase reflects the impact of acquisitions and expansion in the retail line of business, coupled with lower growth in net interest income. - ------------------------------------------------------------------------------------------------------------ Table 6: Summary of Noninterest Income and Noninterest Expense Excluding Effect of Acquisitions
Second Quarter Ended June 30 Six Months Ended June 30 - ------------------------------------------------------------------------------------------------------------ (in millions) 1994 1993 % change 1994 1993 % change - ------------------------------------------------------------------------------------------------------------ Noninterest income: Trust fees $ 37.3 $ 37.3 -% $ 75.5 $ 72.3 4.4% Service charges 39.3 37.2 5.6 76.9 71.7 7.3 Other 47.0 48.3 (2.7) 93.8 88.9 5.5 - ------------------------------------------------------------------------------------------------------------ Total noninterest income $123.6 $122.8 .7% $246.2 $232.9 5.7% - ------------------------------------------------------------------------------------------------------------ Noninterest expense: Staff $119.8 $113.7 5.4% $238.6 $224.4 6.3% Occupancy and equipment 36.7 34.8 5.5 72.0 68.9 4.5 Other 78.5 78.6 (.1) 151.4 146.5 3.3 - ------------------------------------------------------------------------------------------------------------ Total noninterest expense $235.0 $227.1 3.5% $462.0 $439.8 5.0% - ------------------------------------------------------------------------------------------------------------
Staff expense, the largest component of noninterest expense, increased 7.0% from the second quarter of 1993, and 8.8% for the six months. The number of full-time 1994 Quarterly Report 5 5 FINANCIAL COMMENTARY - -------------------------------------------------------------------------------- equivalent employees (FTE's) increased from 14,213 at June 30, 1993 to 14,485 at June 30, 1994, principally due to acquisitions. Excluding the effect of acquisitions, staff expense increased 5.4% for the second quarter of 1994 and 6.3% for the six months, reflecting a planned expansion of the retail sales force, normal merit adjustments and increased costs of incentive and other employee benefit programs. While additional FTE's were added as a result of the retail expansion, compensation expense for a large portion of these positions bears a direct relationship to revenue volume. Equipment expense increased 11.9% over the second quarter of 1993 and 11.3% for the six months, primarily due to the acquisitions and higher depreciation expense associated with investments in capital expenditures for upgraded computer systems and software mainly to support trust and retail business expansion. Foreclosed property costs reflected gains on sales of foreclosed property of $4.8 million and $7.6 million for the six months of 1994 and 1993, respectively; which more than offset operating expenses and writedowns to other parcels of foreclosed property. Much of the gains during both periods were recognized at the Corporation's New - ------------------------------------------------------------------------------------------------------------ Table 7: Summary of Noninterest Expense
Second Quarter Ended June 30 Six Months Ended June 30 - ------------------------------------------------------------------------------------------------------------ (in millions) 1994 1993 % change 1994 1993 % change - ------------------------------------------------------------------------------------------------------------ Staff expense $123.9 $115.8 7.0% $247.0 $227.0 8.8% Occupancy 16.8 16.9 (.9) 33.4 33.2 .5 Equipment 20.8 18.6 11.9 40.8 36.7 11.3 FDIC insurance 11.4 10.8 6.0 22.9 21.8 5.2 Credit card 10.1 8.7 16.3 19.2 15.8 21.0 Printing, postage, paper 9.5 9.1 4.4 19.0 17.9 6.1 Intangible amortization 8.3 7.4 12.2 16.6 12.4 33.9 Professional fees 3.7 4.4 (15.9) 9.3 9.6 (3.1) Federal Reserve processing charges 2.4 2.5 (4.0) 4.6 5.0 (8.0) Advertising 7.1 6.7 6.0 13.2 11.4 15.8 Communications 5.1 4.5 13.3 10.0 8.6 16.3 Foreclosed property costs, net (1.6) (2.0) 21.0 (2.7) (3.6) 24.9 Other 27.1 29.5 (8.1) 53.8 52.5 2.5 - ------------------------------------------------------------------------------------------------------------ Total noninterest expense $244.6 $232.9 5.0% $487.1 $448.3 8.7% - ------------------------------------------------------------------------------------------------------------ Efficiency ratio 61.9% 61.7% 62.3% 61.3% - ------------------------------------------------------------------------------------------------------------ Number of full-time equivalent employees 14,485 14,213 - ------------------------------------------------------------------------------------------------------------
Mexico subsidiary. Goodwill and core deposit premium amortization totaled $8.3 million for the second quarter of 1994 and $16.6 million for the six months, increases of 12.2% and 33.9%, respectively, over the prior year periods, reflective of the aforementioned purchase acquisitions consummated subsequent to March 1, 1993. A summary of noninterest income and expense categories excluding the impact of purchase acquisitions is provided in Table 6. TAXES The Corporation's effective tax rate rose to 34.4% for the six months of 1994, compared to 31.1% for the same period of last year. The effective tax rate in 1993 was unusually low due to a one-time, $6.0 million reduction in income tax expense from adoption of SFAS 109, "Accounting for Income Taxes" at the Corporation's Amarillo, Texas subsidiary, which was acquired in November 1993. On a prospective basis, the effective tax rate should continue to approximate the statutory rate, adjusted for normal operating items such as tax-exempt interest, goodwill amortization and other nondeductible expenses. PROVISION FOR LOAN LOSSES The provision for loan losses totaled $7.4 million in the second quarter of 1994, a decrease of 53.7% from the second quarter of last year when the provision totaled $15.9 million, but increased $1.7 million or 30.6% from the first quarter. For the six months, the provision for loan losses totaled $13.0 million, a decline of $22.3 million or 63.1% from the same period last year. These declines reflect continued improvement in asset quality as evidenced by lower levels of actual loan losses, further declines in nonperforming loans and a continued downward trend in criticized loans identified through the Corporation's internal risk rating system. At June 30, 1994, the reserve for loan losses represented 240% of nonperforming loans compared to 195% at December 31, 1993, and 173% at June 30, 1993. The reserve for loan losses as a percentage of net loans was 2.19% compared to 2.32% at June 30, 1993, and 2.30% at year-end 1993. Consistent with the decrease in nonperforming and criticized loans, year-to-date net loan charge-offs declined to $11.1 million, a decrease of $3.4 million or 23.4% from the same period of 1993. Net charge-offs in the second quarter of 1994 totaled $8.7 million, and included $6.0 million pertaining to one credit. Annualized net charge-offs as a percentage of average loans dropped to .15% compared to .21% for the same period of last year and .24% for all of 1993. - ------------------------------------------------------ Table 8: Summary of Reserve for Loan Losses
June 30 (in millions) 1994 1993 - ------------------------------------------------------ Balance, beginning of year $341.1 $302.0 - ------------------------------------------------------ Loans charged off (35.0) (33.8) Recoveries on loans previously charged off 23.9 19.3 - ------------------------------------------------------ Net charge-offs (11.1) (14.5) Provision charged to expense 13.0 35.3 Reserves of acquired subsidiaries .9 7.6 - ------------------------------------------------------ Balance, end of period $343.9 $330.4 - ------------------------------------------------------ Reserve at end of period: Loan reserve as % of net loans 2.19% 2.32% Loan reserve as % of nonperforming loans 239.84 173.37 Net charge-offs as % of average loans .15 .21 - ------------------------------------------------------
6 Boatmen's Bancshares, Inc. 6 FINANCIAL COMMENTARY - ------------------------------------------------------------------------------- NONPERFORMING ASSETS Nonperforming assets, which include nonperforming loans and foreclosed property, declined $79.6 million or 24.2% from June 30, 1993, and $35.6 million or 12.5% from year-end 1993. As a percent of total loans and foreclosed property, nonperforming assets declined to 1.58% compared to 2.28% at June 30, 1993, and 1.90% at December 31, 1993. The decline in nonperforming asset levels over the last several quarterly periods reflects a stronger economy and the effectiveness of the Corporation's comprehensive loan administration and workout procedures which has slowed the inflow of new problem loans. As a percentage of total assets, nonperforming assets fell below the 1.0% level to .91%. Nonperforming loans at June 30, 1994, declined to $143.4 million or .91% of total loans, the lowest level in several years, compared to 1.17% at December 31, 1993, and 1.33% at June 30, 1993. Table 11 summarizes the nonperforming assets by major banking unit/geographic location and illustrates the broad-based improvement achieved. As part of management's overall portfolio analysis, ongoing credit quality reviews are performed to evaluate risk inherent in the portfolio and potential risk that may develop in the future. A critical element in assessing portfolio risk is the level of criticized loans. The Corporation's internal risk rating system designates specific credits as criticized loans, which include all nonperforming loans and other loans which contain features presenting more than the normal risk of collectibility. Criticized and classified assets from regulatory examinations are an integral component of the risk rating system. As displayed in Table 10, criticized loans totaled $649.5 million or 4.12% of loans at June 30, 1994, a decline of over $150 million from June 30, 1993, when criticized loans were 5.60% of loans. Management carefully analyzes changes and trends in both nonperforming and criticized loans in assessing the risk characteris- - ------------------------------------------------------------------------------------------------------------ Table 9:Summary of Nonperforming Assets
(in millions) JUNE 30, 1994 December 31, 1993 June 30, 1993 - ------------------------------------------------------------------------------------------------------------ Nonaccrual $117.8 $142.9 $161.5 Restructured 7.2 14.8 12.4 Past due 90 days or more 18.4 17.2 16.7 - ------------------------------------------------------------------------------------------------------------ Total nonperforming loans 143.4 174.9 190.6 - ------------------------------------------------------------------------------------------------------------ Foreclosed property 106.5 110.6 138.9 - ------------------------------------------------------------------------------------------------------------ Total nonperforming assets $249.9 $285.5 $329.5 - ------------------------------------------------------------------------------------------------------------ Nonperforming loans as % of total loans .91% 1.17% 1.33% Nonperforming assets as % of total loans and foreclosed property 1.58 1.90 2.28 Nonperforming assets as % of total assets .91 1.07 1.29 Loan reserve as % of nonperforming loans 239.84 195.03 173.37 - ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------ Table 10: Loans Designated as Criticized Loans by Internal Risk Rating System
Criticized Loans - ------------------------------------------------------------------------------------------------------------ (in millions) Nonperforming Performing Total - ------------------------------------------------------------------------------------------------------------ 1993 - ------------------------------------------------------------------------------------------------------------ March 31 $226.5 $653.6 $880.1 June 30 190.6 610.2 800.8 September 30 187.2 608.2 795.4 December 31 174.9 587.7 762.6 - ------------------------------------------------------------------------------------------------------------ 1994 - ------------------------------------------------------------------------------------------------------------ March 31 $143.9 $534.4 $678.3 June 30 143.4 506.1 649.5 - ------------------------------------------------------------------------------------------------------------ As % of loans at June 30, 1994 .91% 3.17% 4.12% - ------------------------------------------------------------------------------------------------------------
tics of the loan portfolio. Given the current risk characteristics of the loan portfolio, the Corporation does not expect any significant change in criticized loans in the near term. In May 1993, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 114 (SFAS No. 114), "Accounting by Creditors for Impairment of a Loan." This statement will require that certain impaired loans be measured based on either the present value of expected future cash flows discounted at the loan's effective rate, the market price of the loan, or fair value of the underlying collateral if the loan is collateral dependent. Adoption of this pronouncement is required in 1995 and, at present, is not - -------------------------------------------------------------- Table 11: Nonperforming Assets by Banking Unit
JUNE December June (in millions) 30, 1994 31, 1993 30, 1993 - -------------------------------------------------------------- Missouri $152.9 $171.4 $201.6 New Mexico 43.0 53.4 68.7 Oklahoma 15.3 14.3 14.4 Texas 9.0 13.7 18.7 Iowa 5.9 7.2 9.2 Illinois 7.1 7.1 9.0 Arkansas 4.0 4.0 4.0 Tennessee 5.0 6.8 3.9 Kansas 7.7 7.6 - -------------------------------------------------------------- Total $249.9 $285.5 $329.5 - --------------------------------------------------------------
expected to have a material effect on the Corporation's reported financial results. SEGREGATED ASSETS As part of the regulatory-assisted acquisition of Missouri Bridge Bank, N.A. on April 23, 1993, the Corporation entered into a five-year loss- sharing arrangement with the FDIC with respect to approximately $950 million in multi-family residential, commercial real estate, construction, and commercial and industrial loans. During the five-year period, the FDIC will reimburse the Corporation for 80 percent of the first $92.0 million of net charge-offs on these loans, after which the FDIC will increase its reimbursement coverage to 95 percent of additional charge-offs. During this period and for two years thereafter, the Corporation is obligated to pay the FDIC 80 percent of all recoveries on charged off loans. The Corporation has designated certain loans covered under the loss- sharing arrangement which possess more than the normal risk of collectibility as segregated assets. At June 30, 1994, segregated assets, which are classified as other assets for 1994 Quarterly Report 7 7 FINANCIAL COMMENTARY - -------------------------------------------------------------------------------- reporting purposes, totaled $211.6 million, net of a $17.5 million credit valuation allowance, compared to $257.6 million at June 30, 1993. At June 30, 1994, segregated assets consisted primarily of $49.5 million of commercial loans, $26.9 million of industrial revenue bond loans and $144.9 million of commercial real estate-related loans. All other loans covered under the loss-sharing arrangement are included in the loan portfolio and totaled $364.1 million at June 30, 1994, compared to $636.0 million at June 30, 1993. The decline from June 30, 1993 was primarily due to scheduled paydowns and maturities. Net charge-offs of $.8 million, representing the Corporation's share of losses on the segregated asset pool, were recognized in the six months of 1994. The valuation allowance represents the Corporation's share of estimated losses upon ultimate liquidation of the portfolio. The Corporation's - ----------------------------------------------------------------------------------------------------------- Table 12: Segregated Assets
Principal Allowance Principal June 30, 1994 (in millions) balance for losses balance, net - ----------------------------------------------------------------------------------------------------------- Balance, beginning of year $266.6 $18.4 $248.2 Charge-offs (6.6) (1.4) Recoveries 2.4 .5 Transfers to segregated assets 12.3 Payments on segregated assets (45.6) - ----------------------------------------------------------------------------------------------------------- Segregated assets, end of period $229.1 $17.5 $211.6 - -----------------------------------------------------------------------------------------------------------
primary purpose in managing a portfolio of this nature is to provide ongoing collection and control activities on behalf of the FDIC. Accordingly, these assets do not represent loans made in the ordinary course of business and, due to the underlying nature of this liquidating asset pool, are excluded from the Corporation's nonperforming asset statistics. At June 30, 1994, $201.4 million of segregated assets were accorded classification treatment consistent with nonaccrual reporting, $7.8 million represented foreclosed property, and the balance of $19.9 million was past due 90 days or more. The Corporation's operating results and cash flow position are not expected to be materially affected by the ongoing collection activities associated with managing the loans subject to the loss-sharing arrangement. Segregated assets income totaled $6.7 million for the six months of 1994. A summary of activity regarding segregated assets is provided in Table 12. LOAN PORTFOLIO The majority of the Corporation's loans are made within its natural trade territory, and the portfolio is highly diversified. There are no concentrations of credit to any borrower or industry in excess of 5% of total loans, and the portfolio is well balanced between wholesale and consumer lending. At June 30, 1994, loans totaled $15.7 billion, an increase of 10.5% over the same period of last year. Based on average balances, loans increased 11.1% for the quarter and 12.5% for the six months, primarily due to internal loan growth within the consumer and middle-market commercial portfolios which was supplemented by growth through acquisition. Excluding acquisitions, loans increased 9.8% from June 30, 1993, and were led by a 26.1% increase in consumer loans coupled with an increase of 5.7% in commercial loans. Consumer loan growth stepped up over the second half of last year, largely the result of increased retail penetration of consumer products, primarily auto loans and credit cards. The increase in commercial loans was primarily due to middle-market loan growth. The portfolio mix has undergone a favorable shift in that business development efforts have focused on expanding the middle-market commercial and consumer sec- - ----------------------------------------------------------------------------------------------------------- Table 13: Summary of Loan Portfolio
(in millions) JUNE 30, 1994 December 31, 1993 June 30, 1993 - ----------------------------------------------------------------------------------------------------------- Commercial $ 7,872.0 $ 7,490.7 $ 7,541.6 Real estate mortgage 2,961.7 2,988.5 2,784.3 Real estate construction 591.7 558.0 502.7 Consumer 4,222.3 3,742.8 3,379.4 Lease financing 90.2 95.2 67.1 - ----------------------------------------------------------------------------------------------------------- Total domestic loans 15,737.9 14,875.2 14,275.1 Foreign loans 17.5 18.0 17.7 - ----------------------------------------------------------------------------------------------------------- Total loans, before deduction of unearned income 15,755.4 14,893.2 14,292.8 Less unearned income 54.0 67.3 77.7 - ----------------------------------------------------------------------------------------------------------- Total loans, net of unearned income $15,701.4 $14,825.9 $14,215.1 - -----------------------------------------------------------------------------------------------------------
tors, which has been complemented by acquisitions of retail-oriented institutions. At June 30, 1994, middle-market commercial and consumer loans represented approximately 49.1% of the loan portfolio compared to 46.4% at June 30, 1993. Commercial real estate and real estate construction loans represented 20.5% of total loans at June 30, 1994, compared to 22.2% at June 30, 1993. The Corporation closely monitors the composition and quality of the real estate portfolio through established credit review procedures to ensure that significant credit concentrations do not exist within this portfolio. The portfolio is geographically dispersed, primarily in areas where the Corporation has a direct banking presence, and is widely diversified between residential construction, office and retail properties, and land acquisition and development loans. The Corporation has limited foreign loan exposure and its portfolio of highly leveraged transaction loans (HLT's) is minimal, at .4% of total loans at June 30, 1994. Table 13 displays the components of the loan portfolio under standard financial reporting definitions. Management also reviews the diversification of the portfolio using internally developed standards and definitions as summarized in Table 14. 8 Boatmen's Bancshares, Inc. 8 FINANCIAL COMMENTARY - -------------------------------------------------------------------------------- FINANCIAL POSITION AND LIQUIDITY The basic financial structure of the Corporation's average and period-end balance sheet changed only moderately from the fourth quarter and second quarter of last year primarily due to higher levels of purchased funds. At June 30, 1994, assets totaled $27.6 billion compared to $25.5 billion at June 30, 1993, and $26.7 billion at December 31, 1993. The increase in assets from June 30, 1993 was primarily due to internal loan growth and an expansion of the securities portfolio. Liquidity represents the availability of funding to meet the obligations to depositors, borrowers, and creditors at a reasonable cost without adverse consequences. Accordingly, the Corporation's liquidity position is influenced by its funding base and asset mix. Core deposits, which consist of investable checking account deposits and certain interest- bearing accounts, represent the Corporation's largest and most important funding source, as these deposits represent a more stable, lower cost source of funds. The core deposit base is supplemented by the Corporation's wholesale and correspondent banking activities which provide a natural access to short- term purchased funds, such as negotiable certificates of deposit, bank notes and overnight surplus funds. These funds are acquired when needed, principally from existing customers within the Corporation's natural trade territory and through access to national money markets. Average core deposits totaled $18.0 billion for the second quarter of 1994, an increase of $.4 billion or 2.5% from the same period last year. Average earning asset growth during this period exceeded core deposit growth by approximately $2.0 billion; accordingly, the additional earning asset volume has been funded by higher levels of purchased funds. Average core deposits supported 73.4% of earning assets for the second quarter of 1994, compared to 79.5% during the same period last year. Core deposit growth in recent periods has been impacted to some extent by a shift in customer preference to other investment alternatives. Purchased funds, which increased approximately $1.9 billion from the prior year, supported 19.5% of average earn- - ------------------------------------------------------------------------------------------------------ Table 14: Composition of Loan Portfolio
JUNE 30, 1994 December 31, 1993 June 30, 1993 - ------------------------------------------------------------------------------------------------------ % OF % Of % Of TOTAL Total Total (in millions) AMOUNT LOANS Amount Loans Amount Loans - ------------------------------------------------------------------------------------------------------ Real estate: 1-4 family residential $ 2,991.7 19.0% $ 2,970.6 20.0% $ 2,776.1 19.4% Land acquisition 151.6 .9 168.8 1.1 115.0 .8 Residential construction 207.0 1.3 181.2 1.2 140.0 1.0 Commercial construction 233.1 1.5 208.0 1.4 247.7 1.7 Commercial real estate(1) 2,532.5 16.1 2,446.6 16.4 2,550.6 17.8 Mini-perms 112.4 .7 107.2 .7 123.3 .9 - ------------------------------------------------------------------------------------------------------ Total real estate 6,228.3 39.5 6,082.4 40.8 5,952.7 41.6 Commercial loans to Fortune 1,000 companies and other large corporate borrowers 789.1 5.0 662.5 4.5 769.9 5.4 Middle-market commercial 3,514.5 22.3 3,359.9 22.6 3,241.2 22.7 Highly leveraged transactions (HLTs) 61.3 .4 91.0 .6 88.9 .6 Bank stock loans 214.1 1.4 226.4 1.5 233.0 1.6 Agriculture 618.1 3.9 615.0 4.1 542.9 3.8 Consumer: Home equity 390.3 2.5 363.1 2.4 367.0 2.6 Credit card 486.1 3.1 457.3 3.1 369.2 2.6 Installment 3,345.9 21.2 2,922.4 19.6 2,643.2 18.5 - ------------------------------------------------------------------------------------------------------ Total consumer 4,222.3 26.8 3,742.8 25.1 3,379.4 23.7 Lease financing 90.2 .6 95.2 .7 67.1 .5 Foreign 17.5 .1 18.0 .1 17.7 .1 - ------------------------------------------------------------------------------------------------------ Total loans $15,755.4 100.0% $14,893.2 100.0% $14,292.8 100.0% - ------------------------------------------------------------------------------------------------------ (1) Includes approximately $225 million, $240 million and $500 million of commercial real estate loans covered by the FDIC loss-sharing agreement related to the acquisition of Missouri Bridge Bank, N.A. at June 30, 1994, December 31, 1993, and June 30, 1993, respectively.
ing assets compared to 13.0% for the second quarter of last year. Purchased funds at June 30, 1994, included $600 million of short-term bank notes which were issued during the second quarter of this year. The Corporation expects earning asset growth will continue to exceed core deposit growth in the near term resulting in a continued use of bank notes or other purchased funds at or slightly above the present levels. The Corporation also manages its liquidity position by maintaining adequate levels of liquid assets such as money market investments and available for sale securities. At June 30, 1994, the available for sale portfolio totaled $4.4 billion compared to $5.2 billion at December 31, 1993. These securities, comprised mainly of adjustable-rate mortgage- backed securities, U.S. Treasury securities, pass-through mortgage-backed securities, and short-term CMO's, may be sold to meet liquidity needs or in response to significant changes in interest rates or prepayment risks. At June 30, 1994, net unrealized depreciation in the available for sale portfolio was approximately $58 million compared to net unrealized appreciation of $69 million at December 31, 1993. The decline in market value from year-end was primarily due to the recent increase in market rates. Maintaining favorable debt ratings is also critical to liquidity because it can affect the availability and cost of funds to the Corporation. The Parent Company's ability to access the capital markets on a cost- effective basis is reflected by its debt ratings, summarized on page 16. There were no commitments for capital expenditures at June 30, 1994, which would materially impact the Corporation's liquidity position. CAPITAL STRUCTURE The Corporation continues to rank among the most strongly capitalized bank holding companies in the country. This strong capital position and overall financial strength provide a good base for future expansion when profitable investment opportunities arise. The cornerstone of the Corporation's capital structure is its common equity, totaling $2.2 billion or approximately 81% of total capitalization at June 30, 1994, an increase of 9.3% from June 30, 1993. The equity to asset ratio was 7.88% at June 30, 1994, compared to 7.80% at June 30, 1993, and 8.00% at December 31, 1993. The equity base has been strengthened in recent years through 1994 Quarterly Report 9 9 FINANCIAL COMMENTARY - -------------------------------------------------------------------------------- earnings retention, the conversion of debt to equity and the issuance of common stock through various employee and stockholder investment plans. On April 14, 1994, the Corporation filed a shelf registration statement with the Securities and Exchange Commission providing for the issuance of up to $500 million of debt, preferred stock or common stock. This represents the only outstanding shelf filing and there are no plans to issue securities pursuant to this filing in the near term. In the first quarter of 1993, the Corporation issued $100 million of 6.75% subordinated notes due March 15, 2003, under the final tranche of a $200 million debt registration. The Corporation also exercised its option to prepay approximately $14 million of convertible subordinated debt at its Iowa subsidiary during the first quarter of last year, resulting in the issuance of approximately 1.0 million shares of common stock as noteholders elected to convert debt to equity prior to the prepayment date. An important measure of capital adequacy of a banking institution is its risk-based capital ratios, which represent the primary capital standard for regulatory purposes. The Corporation's risk-based capital ratios of 10.53% for Tier I and 14.07% for total capital substantially exceed the regulatory required minimums. An additional measure of capital, referred to as the Tier I leverage ratio, places a constraint on the degree to which a banking institution can leverage its equity capital base. At June 30, 1994, the Corporation's Tier I leverage ratio was 7.14%, well in excess of the required minimums. The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA), established rating categories for all FDIC-insured institutions ranging from "well capitalized" to "critically undercapitalized." The ratings combine capital measures in addition to the level of regulatory supervision received by an individual financial institution. At June 30, 1994, all of the Corporation's banking subsidiaries met the capital criteria required by the well capitalized definition which require a Tier I leverage ratio of 5%, a Tier I capital ratio of 6% and a total capital ratio of 10%. FDICIA mandated other changes to risk-based capital rules that may become effective in 1994, notably the requirement to incorporate interest rate risk into the risk-based capital computation. As proposed, this change is not expected to have a material effect on the Corporation's capital requirements. The Federal Reserve Board and other regulatory agencies are proposing - ------------------------------------------------------------------------------------------------------------ Table 15: Capital Structure
(in millions) JUNE 30, 1994 December 31, 1993 June 30, 1993 - ------------------------------------------------------------------------------------------------------------ Long-term debt $ 514.3 $ 486.3 $ 471.4 Stockholders' equity 2,173.0 2,133.3 1,988.6 - ------------------------------------------------------------------------------------------------------------ Total capitalization $2,687.3 $2,619.6 $2,460.0 - ------------------------------------------------------------------------------------------------------------ Tangible equity $1,911.9 $1,858.0 $1,710.0 - ------------------------------------------------------------------------------------------------------------ Ratios - ------------------------------------------------------------------------------------------------------------ Equity/assets 7.88% 8.00% 7.80% Tangible equity/assets 7.00 7.04 6.78 Long-term debt as % of total capitalization 19.14 18.56 19.16 Double leverage 108.87 110.37 112.36 Dividends paid (for the period, in thousands): Preferred $ 40 $ 86 $ 44 Common 64,524 112,129 54,362 Total dividends as % of net income 37.2% 35.4% 34.2% - ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------ Table 16: Intangible Assets
(in millions) JUNE 30, 1994 December 31, 1993 June 30, 1993 - ------------------------------------------------------------------------------------------------------------ Goodwill-Parent Company $ 92.6 $ 95.3 $ 98.1 - ------------------------------------------------------------------------------------------------------------ Subsidiaries: Goodwill 97.6 101.1 101.5 Core deposit premium 63.0 70.5 72.6 Credit card premium 3.3 3.5 1.3 Purchased mortgage servicing rights 4.6 4.9 5.1 - ------------------------------------------------------------------------------------------------------------ 168.5 180.0 180.5 - ------------------------------------------------------------------------------------------------------------ Total intangible assets $261.1 $275.3 $278.6 - ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------ Table 17: Risk-Based Capital
(in millions) JUNE 30, 1994 December 31, 1993 June 30, 1993 - ------------------------------------------------------------------------------------------------------------ Tier I capital: Stockholders' equity $ 2,173.0 $ 2,133.3 $ 1,988.6 Unrealized net (appreciation) depreciation, available for sale securities 35.5 (42.3) - ------------------------------------------------------------------------------------------------------------ Stockholders' equity, net 2,208.5 2,091.0 1,988.6 Minority interest .7 .7 1.0 Intangible assets: Goodwill (190.2) (196.4) (199.6) Core deposit premium (63.0) (70.5) (72.6) - ------------------------------------------------------------------------------------------------------------ Total Tier I 1,956.0 1,824.8 1,717.4 - ------------------------------------------------------------------------------------------------------------ Tier II capital: Allowable reserve for loan losses 233.6 215.3 206.7 Qualifying long-term debt 425.0 425.2 435.1 - ------------------------------------------------------------------------------------------------------------ Total Tier II 658.6 640.5 641.8 - ------------------------------------------------------------------------------------------------------------ Total capital $ 2,614.6 $ 2,465.3 $ 2,359.2 - ------------------------------------------------------------------------------------------------------------ Risk-adjusted assets $18,580.9 $17,098.0 $16,404.8 - ------------------------------------------------------------------------------------------------------------ Risk-based capital ratios: Tier I 10.53% 10.67% 10.47% - ------------------------------------------------------------------------------------------------------------ Total 14.07% 14.42% 14.38% - ------------------------------------------------------------------------------------------------------------ Tier I Leverage ratio 7.14% 6.93% 6.81% - ------------------------------------------------------------------------------------------------------------
other amendments to existing risk-based capital guidelines to include the unrealized appreciation/depreciation on available for sale securities in Tier I capital. The Corporation believes it would be more appropriate to exclude the unrealized appreciation/depreciation from Tier I as inclusion could introduce volatility in capital levels which is inconsistent with the managerial concept of longer-term capital planning. 10 Boatmen's Bancshares, Inc. 10 CONSOLIDATED QUARTERLY EARNINGS TREND - ------------------------------------------------------------------------------------------------------------------------
1994 1993 - ------------------------------------------------------------------------------------------------------------------------ (in thousands) SECOND First Fourth Third Second First - ------------------------------------------------------------------------------------------------------------------------ Interest income Interest and fees on loans $308,872 $289,634 $287,592 $287,251 $279,297 $265,662 Interest on short-term investments 1,071 560 257 405 509 826 Interest on Federal funds sold and securities purchased under resale agreements 1,995 1,593 2,380 1,936 3,161 5,884 Interest on held to maturity securities Taxable 45,674 41,025 92,383 96,537 97,569 94,789 Tax-exempt 13,447 13,744 13,907 14,366 14,745 15,363 - ------------------------------------------------------------------------------------------------------------------------ Total interest on held to maturity securities 59,121 54,769 106,290 110,903 112,314 110,152 Interest on available for sale securities 61,149 59,091 7,169 7,258 7,360 7,270 Interest on trading securities 926 840 1,063 429 493 585 - ------------------------------------------------------------------------------------------------------------------------ Total interest income 433,134 406,487 404,751 408,182 403,134 390,379 - ------------------------------------------------------------------------------------------------------------------------ Interest expense Interest on deposits 127,611 124,050 128,331 133,406 135,096 132,011 Interest on Federal funds purchased and other short-term borrowings 37,908 23,135 19,126 16,014 12,688 14,539 Interest on capital lease obligation 945 945 965 964 965 964 Interest on long-term debt 10,176 9,714 9,704 9,542 9,391 8,268 - ------------------------------------------------------------------------------------------------------------------------ Total interest expense 176,640 157,844 158,126 159,926 158,140 155,782 - ------------------------------------------------------------------------------------------------------------------------ Net interest income 256,494 248,643 246,625 248,256 244,994 234,597 Provision for loan losses 7,366 5,640 11,853 13,040 15,918 19,373 - ------------------------------------------------------------------------------------------------------------------------ Net interest income after provision for loan losses 249,128 243,003 234,772 235,216 229,076 215,224 - ------------------------------------------------------------------------------------------------------------------------ Noninterest income Trust fees 38,690 39,190 37,895 38,723 37,952 35,010 Service charges 40,715 40,047 41,250 39,173 37,770 35,008 Credit card 15,890 15,045 14,934 14,561 13,276 11,618 Investment banking profits and fees 8,799 7,926 8,657 9,546 8,895 8,502 Securities gains, net 705 2,554 1,753 250 736 68 Other 25,335 24,961 29,481 29,540 25,416 20,345 - ------------------------------------------------------------------------------------------------------------------------ Total noninterest income 130,134 129,723 133,970 131,793 124,045 110,551 - ------------------------------------------------------------------------------------------------------------------------ Noninterest expense Staff 123,853 123,097 119,147 120,336 115,763 111,234 Net occupancy 16,763 16,608 17,140 19,072 16,913 16,304 Equipment 20,809 20,038 21,132 19,704 18,589 18,102 FDIC insurance 11,448 11,462 11,381 11,232 10,803 10,969 Credit card 10,121 9,031 9,981 9,400 8,700 7,124 Foreclosed property costs, net (1,618) (1,114) (1,235) 83 (2,048) (1,590) Other 63,216 63,403 76,255 68,475 64,185 53,270 - ------------------------------------------------------------------------------------------------------------------------ Total noninterest expense 244,592 242,525 253,801 248,302 232,905 215,413 - ------------------------------------------------------------------------------------------------------------------------ Income before income tax expense 134,670 130,201 114,941 118,707 120,216 110,362 Income tax expense 46,628 44,617 37,819 37,379 40,493 31,116 - ------------------------------------------------------------------------------------------------------------------------ Net income $ 88,042 $ 85,584 $ 77,122 $ 81,328 $ 79,723 $ 79,246 - ------------------------------------------------------------------------------------------------------------------------ Net income per share $.84 $.82 $.75 $.78 $.77 $.77 - ------------------------------------------------------------------------------------------------------------------------ Dividends declared per share $.31 $.31 $.31 $.31 $.28 $.28 - ------------------------------------------------------------------------------------------------------------------------ Returns Return on assets 1.28% 1.29% 1.18% 1.27% 1.29% 1.34% Return on equity 16.30 15.92 14.91 16.15 16.26 16.75 - ------------------------------------------------------------------------------------------------------------------------
1994 Quarterly Report 11 11 CONSOLIDATED AVERAGE BALANCE SHEET AND NET INTEREST MARGIN - ------------------------------------------------------------------------------------------------------------------------------------ (dollars in millions) 1994 1993 - ------------------------------------------------------------------------------------------------------------------------------------ SECOND QUARTER First Quarter Fourth Quarter - ------------------------------------------------------------------------------------------------------------------------------------ INCOME/ YIELDS/ Income/ Yields/ Income/ Yields/ Assets BALANCE EXPENSE RATES Balance Expense Rates Balance Expense Rates - ------------------------------------------------------------------------------------------------------------------------------------ Loans, net of unearned income $15,506.7 $310.4 8.01% $14,956.3 $291.0 7.78% $14,666.2 $289.5 7.90% Short-term investments 109.0 1.1 3.93 60.0 .6 3.73 31.2 .2 3.29 Federal funds sold and securities purchased under resale agreements 193.7 2.0 4.12 193.2 1.6 3.30 297.9 2.4 3.20 Held to maturity securities: Taxable 3,280.0 45.7 5.57 2,890.3 34.1 4.72 6,799.5 92.4 5.43 Tax-exempt 790.2 20.4 10.35 808.4 20.7 10.22 841.0 21.0 10.00 - ------------------------------------------------------------------------------------------------------------------------------------ Total held to maturity securities 4,070.2 66.1 6.50 3,698.7 54.8 5.92 7,640.5 113.4 5.94 Available for sale securities 4,558.3 61.1 5.37 4,712.6 66.0 5.60 469.2 7.2 6.11 Trading securities 64.2 1.0 6.03 69.5 .8 4.94 85.7 1.1 5.13 - ------------------------------------------------------------------------------------------------------------------------------------ Total earning assets 24,502.1 441.7 7.21 23,690.3 414.8 7.00 23,190.7 413.8 7.14 Less reserve for loan losses (348.6) (346.0) (344.9) Cash and due from banks 1,690.1 1,661.2 1,720.4 All other assets 1,596.6 1,587.0 1,554.5 - ------------------------------------------------------------------------------------------------------------------------------------ Total assets $27,440.2 $26,592.5 $26,120.7 - ------------------------------------------------------------------------------------------------------------------------------------ Liabilities and Stockholders' Equity - ------------------------------------------------------------------------------------------------------------------------------------ Retail savings deposits and interest-bearing transaction accounts $ 8,743.5 $ 52.5 2.40% $ 8,803.2 $ 50.1 2.28% $ 8,601.0 $ 51.3 2.38% Time deposits 7,350.3 75.1 4.09 7,330.2 74.0 4.04 7,538.8 77.0 4.09 - ------------------------------------------------------------------------------------------------------------------------------------ Total interest-bearing deposits 16,093.8 127.6 3.17 16,133.4 124.1 3.08 16,139.8 128.3 3.18 Federal funds purchased and other short-term borrowings 3,866.5 37.9 3.92 3,008.5 23.1 3.08 2,579.6 19.1 2.97 Capital lease obligation 38.9 1.0 9.72 39.1 .9 9.72 39.3 1.0 9.72 Long-term debt 514.6 10.2 7.91 514.0 9.7 7.56 487.8 9.7 7.96 - ------------------------------------------------------------------------------------------------------------------------------------ Total interest-bearing liabilities 20,513.8 176.7 3.44 19,695.0 157.8 3.21 19,246.5 158.1 3.29 Demand deposits 4,488.8 4,425.8 4,560.9 All other liabilities 276.4 320.7 242.5 - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 25,279.0 24,441.5 24,049.9 Redeemable preferred stock 1.2 1.2 1.2 Total stockholders' equity 2,160.0 2,149.8 2,069.6 - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities and stockholders' equity $27,440.2 $26,592.5 $26,120.7 - ------------------------------------------------------------------------------------------------------------------------------------ Interest rate spread 3.77% 3.79% 3.85% Effect of noninterest-bearing funds .56 .55 .56 - ------------------------------------------------------------------------------------------------------------------------------------ Net interest income/margin $265.0 4.33% $257.0 4.34% $255.7 4.41% - ------------------------------------------------------------------------------------------------------------------------------------ Nonaccrual loans are included in aver- age balances and income on such loans is recognized on a cash basis. Interest income and yields are presented on a fully-taxable equivalent basis using the Federal statutory income tax rate, net of nondeductible interest expense. Such adjustments by earning asset category are as follows: Loans $1.5 $1.4 $1.9 Tax-exempt held to maturity securities 7.0 6.9 7.1 Trading securities .1 .1 - ------------------------------------------------------------------------------------------------------------------------------------ Total $8.6 $8.3 $9.1 - ------------------------------------------------------------------------------------------------------------------------------------
12 Boatmen's Bancshares, Inc. 12 - ------------------------------------------------------------------------------------------------------------------------------------
1993 - ------------------------------------------------------------------------------------------------------------------------------------ Third Quarter Second Quarter First Quarter - ------------------------------------------------------------------------------------------------------------------------------------ Income/ Yields/ Income/ Yields/ Income/ Yields/ Assets Balance Expense Rates Balance Expense Rates Balance Expense Rates - ------------------------------------------------------------------------------------------------------------------------------------ Loans, net of unearned income $14,373.7 $288.6 8.03% $13,958.8 $280.8 8.05% $13,127.9 $266.8 8.13% Short-term investments 48.7 .4 3.33 60.7 .5 3.36 100.4 .8 3.29 Federal funds sold and securities purchased under resale agreements 245.3 1.9 3.16 407.6 3.2 3.10 776.1 5.9 3.03 Held to maturity securities: Taxable 6,652.5 96.5 5.80 6,256.2 97.6 6.24 5,865.4 94.8 6.46 Tax-exempt 844.5 22.3 10.55 865.0 21.8 10.10 890.7 22.7 10.20 - ------------------------------------------------------------------------------------------------------------------------------------ Total held to maturity securities 7,497.0 118.8 6.34 7,121.2 119.4 6.71 6,756.1 117.5 6.96 Available for sale securities 479.9 7.3 6.05 489.3 7.3 6.02 497.0 7.3 5.85 Trading securities 35.9 .5 5.30 42.9 .6 5.03 49.4 .6 5.09 - ------------------------------------------------------------------------------------------------------------------------------------ Total earning assets 22,680.5 417.5 7.36 22,080.5 411.8 7.46 21,306.9 398.9 7.49 Less reserve for loan losses (339.3) (329.2) (310.0) Cash and due from banks 1,619.6 1,613.5 1,547.3 All other assets 1,587.5 1,416.6 1,167.4 - ------------------------------------------------------------------------------------------------------------------------------------ Total assets $25,548.3 $24,781.4 $23,711.6 - ------------------------------------------------------------------------------------------------------------------------------------ Liabilities and Stockholders' Equity - ------------------------------------------------------------------------------------------------------------------------------------ Retail savings deposits and interest-bearing transaction accounts $ 8,470.3 $ 52.3 2.47% $ 8,226.1 $ 50.9 2.48% $ 7,808.2 $ 49.7 2.55% Time deposits 7,827.3 81.1 4.15 7,922.8 84.2 4.25 7,550.9 82.3 4.36 - ------------------------------------------------------------------------------------------------------------------------------------ Total interest-bearing deposits 16,297.6 133.4 3.27 16,148.9 135.1 3.35 15,359.1 132.0 3.44 Federal funds purchased and other short-term borrowings 2,148.3 16.0 2.98 1,740.7 12.7 2.92 1,902.0 14.5 3.06 Capital lease obligation 39.5 1.0 9.72 39.7 .9 9.72 39.9 1.0 9.72 Long-term debt 471.4 9.5 8.10 475.2 9.4 7.90 389.9 8.3 8.48 - ------------------------------------------------------------------------------------------------------------------------------------ Total interest-bearing liabilities 18,956.8 159.9 3.37 18,404.5 158.1 3.44 17,690.9 155.8 3.52 Demand deposits 4,298.5 4,142.0 3,923.7 All other liabilities 277.9 272.1 203.5 - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 23,533.2 22,818.6 21,818.1 Redeemable preferred stock 1.2 1.2 1.2 Total stockholders' equity 2,013.9 1,961.6 1,892.3 - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities and stockholders' equity $25,548.3 $24,781.4 $23,711.6 - ------------------------------------------------------------------------------------------------------------------------------------ Interest rate spread 3.99% 4.02% 3.97% Effect of noninterest-bearing funds .55 .58 .59 - ------------------------------------------------------------------------------------------------------------------------------------ Net interest income/margin $257.6 4.54% $253.7 4.60% $243.1 4.56% - ------------------------------------------------------------------------------------------------------------------------------------ Nonaccrual loans are included in aver- age balances and income on such loans is recognized on a cash basis. Interest income and yields are presented on a fully-taxable equivalent basis using the Federal statutory income tax rate, net of nondeductible interest expense. Such adjustments by earning asset category are as follows: Loans $1.4 $1.5 $1.1 Tax-exempt held to maturity securities 7.9 7.1 7.4 Trading securities .1 - ------------------------------------------------------------------------------------------------------------------------------------ Total $9.3 $8.7 $8.5 - ------------------------------------------------------------------------------------------------------------------------------------
1994 Quarterly Report 13 13 - ---------------------------------------------------------------------------------------------------------------
Six Months Ended June 30 - --------------------------------------------------------------------------------------------------------------- 1994 1993 - --------------------------------------------------------------------------------------------------------------- INCOME/ YIELDS/ Income/ Yields/ Assets BALANCE EXPENSE RATES Balance Expense Rates - --------------------------------------------------------------------------------------------------------------- Loans, net of unearned income $15,233.0 $601.4 7.90% $13,545.7 $547.6 8.08% Short-term investments 84.7 1.6 3.85 80.4 1.3 3.32 Federal funds sold and securities purchased under resale agreements 193.4 3.6 3.71 590.8 9.1 3.06 Held to maturity securities: Taxable 3,086.2 79.8 5.17 6,061.9 192.4 6.35 Tax-exempt 799.3 41.1 10.29 877.8 44.5 10.15 - --------------------------------------------------------------------------------------------------------------- Total held to maturity securities 3,885.5 120.9 6.22 6,939.7 236.9 6.83 Available for sale securities 4,635.0 127.2 5.49 493.1 14.6 5.93 Trading securities 66.8 1.8 5.46 46.2 1.2 5.07 - --------------------------------------------------------------------------------------------------------------- Total earning assets 24,098.4 856.5 7.11 21,695.9 810.7 7.47 Less reserve for loan losses (347.3) (319.7) Cash and due from banks 1,675.8 1,580.5 All other assets 1,591.8 1,292.7 - --------------------------------------------------------------------------------------------------------------- Total assets $27,018.7 $24,249.4 - --------------------------------------------------------------------------------------------------------------- Liabilities and Stockholders' Equity - --------------------------------------------------------------------------------------------------------------- Retail savings deposits and interest-bearing transaction accounts $ 8,773.2 $102.6 2.34% $ 8,018.3 $100.6 2.51% Time deposits 7,340.3 149.1 4.06 7,737.9 166.5 4.30 - --------------------------------------------------------------------------------------------------------------- Total interest-bearing deposits 16,113.5 251.7 3.12 15,756.2 267.1 3.39 Federal funds purchased and other short-term borrowings 3,439.9 61.0 3.55 1,820.8 27.2 2.99 Capital lease obligation 39.0 1.9 9.72 39.8 1.9 9.72 Long-term debt 514.3 19.9 7.73 432.8 17.7 8.16 - --------------------------------------------------------------------------------------------------------------- Total interest-bearing liabilities 20,106.7 334.5 3.33 18,049.6 313.9 3.48 Demand deposits 4,457.5 4,033.5 All other liabilities 298.4 238.0 - --------------------------------------------------------------------------------------------------------------- Total liabilities 24,862.6 22,321.1 Redeemable preferred stock 1.2 1.2 Total stockholders' equity 2,154.9 1,927.1 - --------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $27,018.7 $24,249.4 - --------------------------------------------------------------------------------------------------------------- Interest rate spread 3.78% 3.99% Effect of noninterest-bearing funds .55 .59 - --------------------------------------------------------------------------------------------------------------- Net interest income/margin $522.0 4.33% $496.8 4.58% - --------------------------------------------------------------------------------------------------------------- Nonaccrual loans are included in aver- age balances and income on such loans is recognized on a cash basis. Interest income and yields are presented on a fully-taxable equivalent basis using the Federal statutory income tax rate, net of nondeductible interest expense. Such adjustments by earning asset category are as follows: Loans $ 2.9 $ 2.6 Tax-exempt held to maturity securities 13.9 14.5 Trading securities .1 .1 - --------------------------------------------------------------------------------------------------------------- Total $16.9 $17.2 - ---------------------------------------------------------------------------------------------------------------
1994 Quarterly Report 13 14 CONSOLIDATED BALANCE SHEET - --------------------------------------------------------------------------------------------------------------------------
(dollars in thousands) JUNE 30, 1994 June 30, 1993 December 31, 1993 - -------------------------------------------------------------------------------------------------------------------------- Assets - -------------------------------------------------------------------------------------------------------------------------- Cash and due from banks $ 1,608,925 $ 1,594,601 $ 1,608,051 Short-term investments 78,543 96,768 24,748 Securities: Held to maturity 4,107,369 7,530,780 3,324,847 Available for sale 4,424,239 493,827 5,176,966 Trading 25,026 77,025 48,081 Federal funds sold and securities purchased under resale agreements 392,865 249,628 407,672 Loans 15,701,434 14,215,119 14,825,922 Less reserve for loan losses 343,918 330,424 341,099 - -------------------------------------------------------------------------------------------------------------------------- Loans, net 15,357,516 13,884,695 14,484,823 - -------------------------------------------------------------------------------------------------------------------------- Property and equipment 516,165 445,452 480,586 Other assets 1,072,844 1,129,424 1,098,275 - -------------------------------------------------------------------------------------------------------------------------- Total assets $27,583,492 $25,502,200 $26,654,049 - -------------------------------------------------------------------------------------------------------------------------- Liabilities and Stockholders' Equity - -------------------------------------------------------------------------------------------------------------------------- Liabilities: Demand deposits $ 4,345,609 $ 4,217,850 $ 4,769,947 Retail savings deposits and interest-bearing transaction accounts 8,579,389 8,287,136 8,773,058 Time deposits 7,317,684 7,982,470 7,365,997 - -------------------------------------------------------------------------------------------------------------------------- Total deposits 20,242,682 20,487,456 20,909,002 - -------------------------------------------------------------------------------------------------------------------------- Federal funds purchased and securities sold under repurchase agreements 3,265,704 1,815,841 1,996,022 Short-term borrowings 1,067,964 440,624 815,971 Capital lease obligation 38,791 39,618 39,224 Long-term debt 514,262 471,396 486,253 Other liabilities 279,941 257,422 273,168 - -------------------------------------------------------------------------------------------------------------------------- Total liabilities 25,409,344 23,512,357 24,519,640 - -------------------------------------------------------------------------------------------------------------------------- Redeemable preferred stock 1,142 1,244 1,155 - -------------------------------------------------------------------------------------------------------------------------- Stockholders' Equity: Common stock ($1 par value; 150,000,000 shares authorized) 104,722 51,837 104,126 Surplus 794,966 832,415 786,840 Retained earnings 1,308,862 1,104,347 1,200,036 Unrealized net appreciation (depreciation), available for sale securities (35,544) 42,252 - -------------------------------------------------------------------------------------------------------------------------- Total stockholders' equity 2,173,006 1,988,599 2,133,254 - -------------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $27,583,492 $25,502,200 $26,654,049 - -------------------------------------------------------------------------------------------------------------------------- Held to maturity securities, market value $ 4,020,533 $ 7,694,487 $ 3,408,119 Available for sale securities, market value 4,424,239 515,543 5,176,966 Common stock, shares outstanding 104,722,204 51,837,033 104,125,546 - --------------------------------------------------------------------------------------------------------------------------
14 Boatmen's Bancshares, Inc. 15 CONSOLIDATED STATEMENT OF INCOME - -----------------------------------------------------------------------------------------------------------------------
(in thousands) Second Quarter Ended June 30 Six Months Ended June 30 - ----------------------------------------------------------------------------------------------------------------------- 1994 1993 1994 1993 - ----------------------------------------------------------------------------------------------------------------------- Interest income Interest and fees on loans $308,872 $279,297 $598,506 $544,959 Interest on short-term investments 1,071 509 1,631 1,335 Interest on Federal funds sold and securities purchased under resale agreements 1,995 3,161 3,588 9,045 Interest on held to maturity securities Taxable 45,674 97,569 79,799 192,358 Tax-exempt 13,447 14,745 27,191 30,108 - ----------------------------------------------------------------------------------------------------------------------- Total interest on held to maturity securities 59,121 112,314 106,990 222,466 - ----------------------------------------------------------------------------------------------------------------------- Interest on available for sale securities 61,149 7,360 127,140 14,630 Interest on trading securities 926 493 1,766 1,078 - ----------------------------------------------------------------------------------------------------------------------- Total interest income 433,134 403,134 839,621 793,513 - ----------------------------------------------------------------------------------------------------------------------- Interest expense Interest on deposits 127,611 135,096 251,661 267,107 Interest on Federal funds purchased and other short-term borrowings 37,908 12,688 61,043 27,227 Interest on capital lease obligation 945 965 1,890 1,929 Interest on long-term debt 10,176 9,391 19,890 17,659 - ----------------------------------------------------------------------------------------------------------------------- Total interest expense 176,640 158,140 334,484 313,922 - ----------------------------------------------------------------------------------------------------------------------- Net interest income 256,494 244,994 505,137 479,591 Provision for loan losses 7,366 15,918 13,006 35,291 - ----------------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 249,128 229,076 492,131 444,300 - ----------------------------------------------------------------------------------------------------------------------- Noninterest income Trust fees 38,690 37,952 77,880 72,962 Service charges 40,715 37,770 80,762 72,778 Credit card 15,890 13,276 30,935 24,894 Investment banking profits and fees 8,799 8,895 16,725 17,397 Securities gains, net 705 736 3,259 804 Other 25,335 25,416 50,296 45,761 - ----------------------------------------------------------------------------------------------------------------------- Total noninterest income 130,134 124,045 259,857 234,596 - ----------------------------------------------------------------------------------------------------------------------- Noninterest expense Staff 123,853 115,763 246,950 226,997 Net occupancy 16,763 16,913 33,371 33,217 Equipment 20,809 18,589 40,847 36,691 FDIC insurance 11,448 10,803 22,910 21,772 Credit card 10,121 8,700 19,152 15,824 Foreclosed property costs, net (1,618) (2,048) (2,732) (3,638) Other 63,216 64,185 126,619 117,455 - ----------------------------------------------------------------------------------------------------------------------- Total noninterest expense 244,592 232,905 487,117 448,318 - ----------------------------------------------------------------------------------------------------------------------- Income before income tax expense 134,670 120,216 264,871 230,578 Income tax expense 46,628 40,493 91,245 71,609 - ----------------------------------------------------------------------------------------------------------------------- Net income $ 88,042 $ 79,723 $173,626 $158,969 - ----------------------------------------------------------------------------------------------------------------------- Net income per share $.84 $.77 $1.66 $1.54 - ----------------------------------------------------------------------------------------------------------------------- Dividends declared per share $.31 $.28 $ .62 $ .56 - -----------------------------------------------------------------------------------------------------------------------
Earnings per share amounts are based on weighted average shares outstanding after adjusting net income for dividends on preferred stock. For the six months, average shares outstanding were 104,631,272 in 1994 and 103,281,844 in 1993. Preferred dividends declared totaled $40 in 1994 and $44 in 1993. 1994 Quarterly Report 15 16 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - -------------------------------------------------------------------------------------------------------------------------------
Unrealized Net Appreciation Common Stock (Depreciation), ----------------- Retained Available for (in thousands) Shares Amount Surplus Earnings Sale Securities Total - ------------------------------------------------------------------------------------------------------------------------------- BALANCE, JANUARY 1, 1993 51,131 $ 51,131 $809,923 $1,000,166 - $1,861,220 Net income - - - 158,969 - 158,969 Cash dividends declared: Common ($.56 per share)(1) - - - (54,747) - (54,747) Redeemable preferred - - - (44) - (44) Common stock issued pursuant to various employee and shareholder stock issuance plans 230 230 9,975 - - 10,205 Common stock issued upon conversion of convertible subordinated debt 476 476 12,517 - - 12,993 Adjustment of investments in equity securities to market value - - - 3 - 3 - ------------------------------------------------------------------------------------------------------------------------------- BALANCE, JUNE 30, 1993 51,837 $ 51,837 $832,415 $1,104,347 - $1,988,599 - ------------------------------------------------------------------------------------------------------------------------------- BALANCE, JANUARY 1, 1994 104,126 $104,126 $786,840 $1,200,036 $ 42,252 $2,133,254 Net income - - - 173,626 - 173,626 Cash dividends declared: Common ($.62 per share) - - - (64,760) - (64,760) Redeemable preferred - - - (40) - (40) Common stock issued pursuant to various employee and shareholder stock issuance plans 171 171 2,248 - - 2,419 Common stock issued upon acquisition of subsidiary 411 411 5,700 - - 6,111 Common stock issued upon conversion of convertible subordinated debt 14 14 205 - - 219 Adjustment of available for sale securities to market value - - - - (77,796) (77,796) Other, net - - (27) - - (27) - ------------------------------------------------------------------------------------------------------------------------------- Balance, June 30, 1994 104,722 $104,722 $794,966 $1,308,862 $(35,544) $2,173,006 - ------------------------------------------------------------------------------------------------------------------------------- (1)Amount adjusted for the two-for-one stock split which was declared on August 10, 1993 and paid on October 1, 1993.
CORPORATE INFORMATION - -------------------------------------------------------------------------------------------
Standard Thomson Agency Ratings Moody's & Poor's Bankwatch - ------------------------------------------------------------------------------------------- Boatmen's Bancshares, Inc.: B 6-3/4% Subordinated notes due 2003 A3 A- A 7-5/8% Subordinated notes due 2004 A3 A- A 8-5/8% Subordinated notes due 2003 A3 A- A 9-1/4% Subordinated notes due 2001 A3 A- A 6-1/4% Convertible subordinated debentures due 2011 A3 A- A Commercial paper P1 A-1 TBW-1 The Boatmen's National Bank of St. Louis: B Long-term/short-term deposits and bank notes Aa3/P1 A+/A-1 TBW-1 Boatmen's First National Bank of Kansas City: B Long-term/short-term deposits A+/A-1 TBW-1 Multi-bank note program (7 Boatmen's subsidiary banks) A1/P1 A+/A-1 - -------------------------------------------------------------------------------------------
A Dividend Reinvestment and Stock Purchase Plan is available to shareholders of the Corporation. The key features of this Plan are: * Dividends on common stock may be automatically reinvested; * Option to invest up to $10,000 cash per quarter; * No brokerage commissions or service charges on reinvested dividends or cash investments. A Direct Deposit of Dividends program is also available to shareholders of the Corporation. This program, which is offered at no charge, provides for the deposit of quarterly dividends directly to a checking or savings account. Please direct inquiries regarding these programs and requests for the Reinvestment Plan Prospectus and Direct Deposit Authorization Form to: Boatmen's Trust Company, P.O. Box 14768, St. Louis, MO 63178, (314) 466-1357 or (800) 456-9852. Corporate Headquarters One Boatmen's Plaza 800 Market Street St. Louis, MO 63101 Stock Listing NASDAQ-NM symbol:BOAT CBOE symbol:BTQ Transfer Agent Boatmen's Trust Company 510 Locust Street St. Louis, MO 63101 (314) 466-1357 or (800) 456-9852 Investor Relations Contact Kevin R. Stitt Director of Investor Relations (314) 466-7662 (314) 466-5645 (FAX) 16 Boatmen's Bancshares, Inc. -----END PRIVACY-ENHANCED MESSAGE-----