-----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, IqKlQeLqHcJQEqaYaDfwl1mXPPhX/32ceZkV9rRJxYisRuonyfz7lyFrjxjM4NOX iV+stDSj0nGVrq+lHiXHqA== 0000950114-94-000116.txt : 19941111 0000950114-94-000116.hdr.sgml : 19941111 ACCESSION NUMBER: 0000950114-94-000116 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941110 SROS: NASD 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: 94558606 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: September 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 October 31, 1994 - --------------------- --------------------------------- $1 Par Value 104,801,689 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements The consolidated financial statements for the three months and nine months ended September 30, 1994 and 1993 which appear on pages 14 through 16 in the accompanying September 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 nine months ended September 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 September 30, 1994 interim report to stockholders are incorporated by reference herein. 2 3 BOATMEN'S BANCSHARES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended September 30 ------------------------- (In Thousands) 1994 1993 - -------------- ---- ---- Net cash provided by operating activities $ 476,728 $ 278,660 ---------- ---------- Investing Activities: Net (increase) decrease in Federal funds sold and securities purchased under resale agreements (363,176) 728,744 Net increase in loans (1,278,678) (572,605) Proceeds from the sales of foreclosed property 27,708 60,933 Proceeds from the maturity of held to maturity securities 385,752 1,551,128 Proceeds from sales of held to maturity securities 35,832 Purchases of held to maturity securities (1,240,592) (2,300,259) Proceeds from the maturity of available for sale securities 1,186,657 25,532 Proceeds from sales of available for sale securities 64,060 Purchases of available for sale securities (356,853) (61,199) Net (increase) decrease in short-term investments (20,856) 69,623 Net increase in property and equipment (85,783) (61,664) Net cash received from purchase acquisitions 444,540 ---------- ---------- Net cash used by investing activities (1,681,761) (79,395) ---------- ---------- Financing Activities: Net increase in Federal funds purchased and securities sold under repurchase agreements 390,155 314,691 Net decrease in deposits (481,110) (1,156,033) Net increase in short-term borrowings 1,520,050 410,178 Payments on long-term debt (985) (8,345) Proceeds from the issuance of long-term debt 30,350 99,313 Payments on capital lease obligation (649) (591) Cash dividends paid (97,045) (81,830) Common stock issued pursuant to various employee and shareholder stock issuance plans 3,259 14,400 Acquisition of treasury stock (3,102) Decrease in redeemable preferred stock (13) (84) ---------- ---------- Net cash provided (used) by financing activities 1,364,012 (411,403) ---------- ---------- Increase (decrease) in cash and due from banks 158,979 (212,138) Cash and due from banks at beginning of year 1,608,051 1,771,021 ---------- ---------- Cash and due from banks at September 30 $1,767,030 $1,558,883 ========== ==========
For the nine months ended September 30, 1994 and 1993, interest paid totaled $517 million and $478 million, respectively. Income taxes paid totaled $144.6 million for the first nine months of 1994 and $121.8 million for the same period in 1993. Additional common stock was issued upon conversion of $190 thousand of the Corporation's convertible debt for the nine months ended September 30, 1994 and $13.4 million for the same period in 1993. Loans transferred to foreclosed property totaled $14.6 million for the nine months ended September 30, 1994, and $16.9 million for the same period in 1993. In 1993, assets and liabilities of acquired subsidiaries at dates of acquisition included securities of $160 million, loans of $954 million, cash of $483 million, other assets of $465 million, deposits of $2.0 billion and other liabilities of $20 million. 3 4 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits 2. Agreement and Plan of Merger, dated August 18, 1994, by and among Worthen Banking Corpora- tion, Boatmen's Bancshares, Inc. and BBI AcquisitionCo, Inc., is incorporated herein by reference from the Boatmen's Bancshares, Inc. Current Report on Form 8-K, dated September 2, 1994. 19. Boatmen's Bancshares, Inc. Report for the Period Ended September 30, 1994. 27. Boatmen's Bancshares, Inc. Financial Data Schedule for the Period Ended September 30, 1994. (b) Registrant filed current reports on Form 8-K dated September 2, 1994, covering Item 5 - Other Events and Item 7 - Financial Statements and Exhibits. 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: November 10, 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-19 2 QUARTERLY REPORT TO SHAREHOLDERS 1 FINANCIAL COMMENTARY - ------------------------------------------------------------------------------ ACQUISITION OVERVIEW Over the last several years the Corporation has made numerous sizeable acquisitions establishing dominant market positions in Missouri and New Mexico, and significant presences in southern Illinois, western Tennessee, Oklahoma, Arkansas and northern Texas. In 1993 and through the nine months of 1994, the Corporation completed seven acquisitions in four states aggregating $2.9 billion in total assets. The Corporation continues to expand its franchise as opportunities arise and currently has 4 acquisitions pending aggregating approximately $4.1 billion in assets, which are scheduled for consummation in late 1994 or early 1995. 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 subsequent to September 30, 1993 and those currently pending follows. Oklahoma Acquisition 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 providing services from 19 locations primarily within the Oklahoma City and Tulsa metropolitan areas. Arkansas Acquisition On August 18, 1994, the Corporation announced an agreement to acquire Worthen Banking Corporation (Worthen), headquartered in Little Rock, Arkansas, in a transaction to be accounted for as a pooling of interests. Under terms of the agreement the Corporation will exchange one share of its common stock for each Worthen share, resulting in the issuance of approximately 17.3 million shares. Worthen is the second largest banking organization in Arkansas, with approximately $3.5 billion in assets, operating 112 retail banking offices throughout Arkansas and six offices in the Austin, Texas area. The acquisition of Worthen will increase the Corporation's asset base in Arkansas to approximately $4.4 billion, solidifying its market position in that state, as well as enhancing the Corporation's presence in Texas. The acquisition, which is subject to approval by Worthen shareholders and regulatory agencies, is expected to be completed in the first quarter of 1995. Texas Acquisitions 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 September 30, 1994 of approximately $1.1 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, Texas. 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. Mortgage Banking Acquisition On May 6, 1994, the Corporation announced an agreement to acquire National Mortgage Company and certain affiliates (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 approxi- ================================================================================================================================== 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 Worthen Banking Corporation Arkansas 3.5 billion 595 million stock 17.3 million Pooling Salem Community Bancorp, Inc. Illinois .1 billion 9 million stock .3 million Purchase - ---------------------------------------------------------------------------------------------------------------------------------- Total assets of pending transactions $4.1 billion ==================================================================================================================================
2 Boatmen's Bancshares, Inc. 2 FINANCIAL COMMENTARY - ------------------------------------------------------------------------------ mately $153 million, which represented 1.2% of National Mortgage'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 $13.1 billion. When the National Mortgage portfolio is combined with the 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 late 1994 or early 1995. Illinois Acquisition On September 27, 1994, the Corporation announced an agreement to acquire Salem Community Bancorp, Inc. (Salem) in a stock and cash transaction which will be accounted for as a purchase. Salem has two locations with approximately $80 million in assets and will be merged into the existing Boatmen's Bank of South Central Illinois. The acquisition is expected to be completed in the first quarter of 1995, subject to approval by regulatory agencies. =========================================================== Table 2: Asset Distribution
September 30, 1994 (in billions) Assets % of total - ----------------------------------------------------------- Missouri $17.4 61.5% New Mexico 3.2 11.3 Oklahoma 2.0 7.1 Texas 1.6 5.7 Iowa 1.2 4.2 Illinois 1.0 3.5 Arkansas .9 3.2 Tennessee .8 2.8 Kansas .2 .7 - ----------------------------------------------------------- Total $28.3 100.0% ===========================================================
EARNINGS OVERVIEW Net income for the third quarter of 1994 increased to $89.7 million, up 10.3% from the same period of last year, and net income per share was $.86, an increase of 10.3%. For the nine months, net income increased 9.6% to $263.3 million, and net income per share was $2.52 compared to $2.32 per share a year ago, an increase of 8.6%. The earnings growth for the third quarter was primarily due to an increase in net interest income, lower noninterest expense and a decline in the provision for loan losses. The year-to-date earnings improvement 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 September 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 1, 1994, due to the immaterial effect on the Corporation's financial results. For the third quarter, the return on average assets was 1.30% and the return on equity was 16.35%, compared to 1.27% and 16.15%, respectively, for the same period last year. For the nine months, the return on average assets was 1.29% and the return on equity was 16.19%, compared to 1.30% and 16.38%, respectively, in 1993. The returns in 1993 reflect a one-time $6.0 million gain in the first quarter 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 1.27% and 15.97%, respectively. Net interest income, on a fully-taxable equivalent basis, increased 3.8% over the third quarter of 1993 and 4.6% for the nine 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 third quarter and nine months of 1994, a decline of 21 and 24 basis points, respectively, from the same periods last year. Noninterest income increased 6.6% over the nine months of 1993, but declined .8% from the third quarter of last year. Excluding acquisitions, year-to-date noninterest income increased 3.0%. Noninterest expense decreased 1.3% from the third quarter of 1993, reflective of initiatives to control costs. For the nine months, noninterest expense increased 5.1% and, excluding acquisitions, was held to an increase of 2.6%. The provision for loan losses for the third quarter totaled $6.9 million, representing a decrease of 47.1% from the third quarter of last year, and was down 6.3% from the second quarter of 1994. For the nine months, the provision for loan losses decreased 58.8%, reflecting continued improvement in asset quality. Net charge-offs as a percentage of average loans dropped to .13% compared to .21% for the nine 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, compared to the same periods last year and the three months ended June 30, 1994. ============================================================================================= Table 3: Earnings Per Share Analysis
3rd Qtr. '94 3rd Qtr. '94 YTD '94 Per share vs. 3rd Qtr. '93 vs. 2nd Qtr. '94 vs. YTD '93 - --------------------------------------------------------------------------------------------- Net income prior period $.78 $.84 $2.32 - --------------------------------------------------------------------------------------------- Net interest income .10 .02 .35 Provision for loan losses .06 .01 .27 Noninterest income (.01) .01 .23 Noninterest expense .03 (.01) (.34) Income tax expense (.10) (.01) (.29) Impact of additional shares of common stock (.02) - --------------------------------------------------------------------------------------------- Net increase .08 .02 .20 - --------------------------------------------------------------------------------------------- Net income current period $.86 $.86 $2.52 =============================================================================================
1994 Quarterly Report 3 3 FINANCIAL COMMENTARY - ------------------------------------------------------------------------------ NET INTEREST INCOME Measured on a fully-taxable equivalent basis, net interest income increased 3.8% over the third quarter of 1993 and 4.6% for the nine months. These increases were primarily due to growth in average earning assets, partially offset by a lower net interest margin. Average earning assets increased 9.0% over the third quarter of last year and 10.3% for the nine months primarily due to loan growth and expansion of the securities portfolio. Loans, the highest yielding earning asset, increased 10.7% over the third quarter of 1993 and 11.8% for the nine months. Loans represented 63.6% of average earning assets for the nine months of 1994, compared to 62.8% for the same period last year. Held to maturity and available for sale securities increased 11.4% for the nine months, representing 34.9% of average earning assets, up from 34.6% for the same period last year. Much of the increase in the securities portfolio reflects the redeployment of short-term money market instruments and funds received from regulatory assisted transactions in 1993, coupled with a planned expansion of selected components of the portfolio. 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 at 4.33% in both the second and third quarters of this year, but was down 21 basis points from the third quarter of last year when the margin was 4.54%. A similar decline also occurred in the nine-month period, primarily due to narrower spreads earned on fixed rate assets. The anticipated decline in earning asset yields was accelerated by historically high levels of prepayment activity on mortgage-backed securities and subsequent reinvestment into securities with lower yields during the first quarter of this year. Based on the current interest rate environment and the asset/liability repricing structure, the Corporation anticipates relative stability in the net interest margin in the near term. The average yield on earning assets for the nine months of 1994 declined 20 basis points from the same period last year compared to a 3 basis point increase in the rate paid on interest-bearing liabilities. During this period, purchased funds were the principal funding source for the loan growth and increased $1.6 billion or 52.0%. ============================================================================================================================== Table 4: Summary of Net Interest Income
Third Quarter Ended September 30 Nine Months Ended September 30 - ----------------------------------------------------------------------------------------------------------------------------- (in millions) 1994 1993 % change 1994 1993 % change - ----------------------------------------------------------------------------------------------------------------------------- Average loans $15,911.9 $14,373.7 10.7% $15,461.8 $13,824.7 11.8% Average earning assets 24,715.1 22,680.5 9.0 24,306.3 22,027.7 10.3 Average core deposits 17,881.4 17,965.0 (.5) 17,979.6 17,404.3 3.3 Average purchased funds 5,038.6 3,159.8 59.5 4,552.7 2,994.6 52.0 Net interest income (FTE) 267.3 257.6 3.8 789.3 754.4 4.6 Net interest margin 4.33% 4.54% 4.33% 4.57% =============================================================================================================================
============================================================================================================================= Table 5: Interest Rate Swap Summary
September 30, 1994 (in millions) Receive Fixed Pay Fixed Basis Swaps Total - ----------------------------------------------------------------------------------------------------------------------------- Notional amount, beginning of year $1,450 $31 $300 $1,781 Additions 1,000 50 1,050 Maturities (450) (100) (550) - ----------------------------------------------------------------------------------------------------------------------------- Notional amount, end of period $2,000 $31 $250 $2,281 ============================================================================================================================= Average remaining maturity (years) 1.7 1.6 0.6 1.6 =============================================================================================================================
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 $1.1 billion and $.6 billion of swaps matured, such that at September 30, 1994, interest rate swaps totaled $2.3 billion. The swap portfolio increased net interest income by approximately $16.3 million for the nine months of 1994, adding 9 basis points to the net interest margin, compared to $14.0 million or 9 basis points in the same period last year. As summarized in Table 5, the swap portfolio is primarily comprised of contracts wherein the Corporation receives a fixed rate of interest while paying a variable rate. The average rate received at September 30, 1994 was 5.46% compared to an average rate paid of 5.14%, and the average remaining maturity of the total portfolio was less than two years. The estimated fair value of the swap portfolio was a negative $123 million at September 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 from current levels. In addition, in a rising rate environment the net interest contribution from the swap portfolio will lessen as the variable component resets upward, but should be substantially offset by a higher contribution from on-balance sheet assets. 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 (earnings at risk position) to no more than 5% of projected annual net income. Adherence to this risk limit is controlled and monitored through monthly simulation modeling techniques that consider the interest rate risk and prepayment risk associated with dynamic balance sheet management. In its simulations, the Corporation estimates the impact on net interest income and net income from a gradual, as well as an immediate, change in market interest rates. Based on the current interest rate sensitivity position, and assuming both an immediate and gradual 100 basis point increase in interest rates over the next 12 months, the simulation model results indicate that the Corpora- 4 Boatmen's Bancshares, Inc. 4 FINANCIAL COMMENTARY - ------------------------------------------------------------------------------ tion's earnings at risk position is within established limits. 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 September 30, 1994 totaled approximately $169 million. Interest rate risk associated with maintaining this portfolio is controlled by entering into offsetting positions with third parties. NONINTEREST INCOME Noninterest income increased 6.6% for the nine months of 1994, primarily due to growth in trust fees, service charge income, credit card fees and securities gains, which was partially offset by a decline in mortgage banking revenues and investment banking profits and fees. Excluding the effect of acquisitions, noninterest income increased 3.0% over the nine months of last year. For the third quarter, noninterest income decreased .8% as increases in service charges and credit card fees were more than offset by declines in mortgage banking revenues, investment banking profits and fees, and trust fees, which were attributable in part to stock market volatility and rising interest rates. Noninterest income as a percentage of operating revenues was 33.1% for the nine months of 1994, compared to 32.7% for the same period of 1993. The future growth in fee-based business will be enhanced upon the acquisition of National Mortgage Company, a Tennessee based full-service mortgage banking company that presently services mortgage loans totaling approximately $13.1 billion. Trust fees increased 3.7% for the nine months, reflective of growth experienced within the personal and pension/institutional lines, but declined 1.9% from both the second quarter of 1994 and the third quarter of last year as revenues from new business volume were more than offset by narrower spreads on securities lending activity. Trust assets under management totaled $35.5 billion at September 30, 1994, including the second quarter acquisition of Eagle Management and Trust Company, compared to $34.7 billion at September 30, 1993 and $34.1 billion at December 31, 1993. ============================================================================================================================= Table 6: Summary of Noninterest Income
Third Quarter Ended September 30 Nine Months Ended September 30 - ----------------------------------------------------------------------------------------------------------------------------- (in millions) 1994 1993 % change 1994 1993 % change - ----------------------------------------------------------------------------------------------------------------------------- Trust fees $ 38.0 $ 38.7 (1.9)% $115.9 $111.7 3.7% Service charges 41.3 39.2 5.4 122.0 112.0 9.0 Credit card 17.7 14.6 21.5 48.6 39.5 23.2 Investment banking profits and fees 6.8 9.5 (28.3) 23.6 26.9 (12.5) Securities gains, net 1.5 .3 513.2 4.8 1.1 354.6 Mortgage banking operations 1.8 4.4 (59.1) 6.1 11.2 (45.5) Other 23.6 25.1 (6.0) 69.5 64.0 8.6 - ----------------------------------------------------------------------------------------------------------------------------- Total noninterest income $130.7 $131.8 (.8)% $390.5 $366.4 6.6% ============================================================================================================================= As % of operating income 32.8% 33.8% 33.1% 32.7% - ----------------------------------------------------------------------------------------------------------------------------- Revenue per full-time equivalent employee (in thousands) $110.6 $108.6 $109.4 $107.9 =============================================================================================================================
Service charge income increased 5.4% over the third quarter of 1993 and 9.0% for the nine months. These increases reflect growth through increased penetration of the retail market and higher fees on corporate customer accounts. Excluding acquisitions, service charge income increased 6.5% for the nine months. Investment banking profits and fees decreased 28.3% from the third quarter of 1993 and 12.5% for the nine months as current financial market conditions have had a negative impact on foreign exchange, bond trading and retail brokerage business. Credit card income totaled $17.7 million in the third quarter of 1994 and $48.6 million for the nine months, increases of 21.5% and 23.2%, 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 $1.8 million for the third quarter of 1994 and $6.1 million for the nine months, decreases of 59.1% and 45.5%, 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 nine months of 1994, securities gains of $4.8 million were recognized from the sale of approximately $65 million of available for sale securities, most of which occurred in the first quarter. Other noninterest income increased $5.5 million or 8.6% for the nine months and included segregated asset income totaling $9.9 million compared to $3.4 million for the nine months of 1993. NONINTEREST EXPENSE Noninterest expense decreased 1.3% from the third quarter of 1993 and, for the nine months, noninterest expense increased 5.1%. Excluding the effect of acquisitions, year-to-date noninterest expense was held to an increase of 2.6%. This increase was due primarily to increased staff expense, higher depreciation expense on equipment enhancements and increased credit card expense. In addition, noninterest expense in the third quarter of last year included higher occupancy charges related to accelerated amortization on certain leased facilities. The efficiency ratio was 62.1% for the nine months of 1994, compared to 62.2% for the same period of last year, but in the most recent quarter improved to 61.6%. Staff expense, the largest component of noninterest expense, increased 1.7% from the third quarter of 1993, and 6.3% for the nine months. Excluding the effect of acquisitions, staff expense increased 1.0% over the third quarter of 1993 and 4.4% for the nine months, reflective of efforts to control staffing levels. Equipment expense increased 8.0% over the third quarter of 1993 and 10.2% for the nine months, primarily due to higher depreciation expense associated with capital expenditures for upgraded computer systems and 1994 Quarterly Report 5 5 FINANCIAL COMMENTARY - ------------------------------------------------------------------------------ software mainly to support trust and retail business expansion. Occupancy expense decreased 10.5% from the third quarter of 1993 and 3.5% for the nine months due to the aforementioned accelerated leasehold amortization on certain facilities in 1993. Foreclosed property costs reflected gains on sales of foreclosed property of $6.9 million and $9.6 million for the nine months of 1994 and 1993, respectively; which more than offset operating expenses and write-downs to other parcels of foreclosed property. Much of the gains during both periods were recognized at the Corporation's New Mexico subsidiary. Goodwill and core deposit premium amortization totaled $25.0 million for the nine months of 1994, an increase of 19.0% over the prior year period, resulting from the aforementioned purchase acquisitions consummated subsequent to March 1, 1993. ============================================================================================================================= Table 7: Summary of Noninterest Expense
Third Quarter Ended September 30 Nine Months Ended September 30 - ----------------------------------------------------------------------------------------------------------------------------- (in millions) 1994 1993 % change 1994 1993 % change - ----------------------------------------------------------------------------------------------------------------------------- Staff expense $122.4 $120.3 1.7% $369.3 $347.3 6.3% Occupancy 17.1 19.1 (10.5) 50.4 52.3 (3.5) Equipment 21.3 19.7 8.0 62.1 56.4 10.2 FDIC insurance 11.2 11.2 34.2 33.0 3.5 Credit card 11.0 9.4 17.2 30.2 25.2 19.6 Printing, postage, paper 9.2 9.9 (7.1) 28.2 27.8 1.4 Intangible amortization 8.4 8.6 (2.3) 25.0 21.0 19.0 Professional fees 4.1 4.6 (10.9) 13.4 14.2 (5.6) Federal Reserve processing charges 2.2 2.6 (15.4) 6.9 7.5 (8.0) Advertising 7.6 7.9 (3.8) 20.8 19.2 8.3 Communications 5.0 4.6 8.7 15.0 13.2 13.6 Foreclosed property costs, net (1.2) .1 (4.0) (3.6) (11.5) Other 26.9 30.3 (11.2) 80.8 83.1 (2.8) - ----------------------------------------------------------------------------------------------------------------------------- Total noninterest expense $245.2 $248.3 (1.3)% $732.3 $696.6 5.1% ============================================================================================================================= Efficiency ratio 61.6% 63.8% 62.1% 62.2% - ----------------------------------------------------------------------------------------------------------------------------- Number of full-time equivalent employees 14,256 14,314 =============================================================================================================================
PROVISION FOR LOAN LOSSES The provision for loan losses totaled $6.9 million in the third quarter of 1994, a decrease of 47.1% from the third quarter of last year when the provision totaled $13.0 million. For the nine months, the provision for loan losses totaled $19.9 million, a decline of $28.4 million or 58.8% 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 assets and a continued downward trend in criticized loans identified through the Corporation's internal risk rating system. At September 30, 1994, the reserve for loan losses represented 224% of nonperforming loans compared to 195% at December 31, 1993, and 183% at September 30, 1993. The reserve for loan losses as a percentage of net loans was 2.16% compared to 2.34% at September 30, 1993, and 2.30% at year- end 1993. For the nine months, net loan charge-offs declined to $14.8 million, a decrease of $6.6 million or 30.8% from the same period of 1993, and for the third quarter, net charge-offs totaled $3.8 million compared to $6.9 million in the prior year. For the nine months, annualized net charge- offs as a percentage of average loans dropped to a record low to .13% compared to .21% for the same period of last year and .24% for all of 1993. TAXES The Corporation's effective tax rate rose to 34.5% for the nine months of 1994, compared to 31.2% 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. ========================================================== Table 8: Summary of Reserve for Loan Losses
September 30 (in millions) 1994 1993 - ---------------------------------------------------------- Balance, beginning of year $341.1 $302.0 - ---------------------------------------------------------- Loans charged off (48.1) (49.7) Recoveries on loans previously charged off 33.3 28.3 - ---------------------------------------------------------- Net charge-offs (14.8) (21.4) Provision charged to expense 19.9 48.3 Reserves of acquired subsidiaries .9 12.9 - ---------------------------------------------------------- Balance, end of period $347.1 $341.8 ========================================================== Reserve at end of period: Loan reserve as % of net loans 2.16% 2.34% Loan reserve as % of nonperforming loans 224.07 182.60 Net charge-offs as % of average loans .13 .21 ==========================================================
NONPERFORMING ASSETS Nonperforming assets, which include nonperforming loans and foreclosed property, declined $56.7 million or 18.1% from September 30, 1993, and $28.3 million or 9.9% from year-end 1993. Nonperforming assets at September 30, 1994 were slightly above the level at June 30, 1994, as declines in nonaccrual loans and foreclosed property were more than offset by a single credit that was 90 days past due at quarter end. This credit is expected to return to performing status early in the fourth quarter. As a percent of total loans and foreclosed property, nonperforming assets declined to 1.58% compared to 2.12% at September 30, 1993, and 1.90% at December 31, 1993. The decline in nonperforming assets from the prior year periods reflects a stronger economy and the effectiveness of the Corporation's comprehensive loan administration and workout procedures. As a percentage of total assets, nonperforming assets remained below the 1.0% level at .91%. Nonperforming loans at September 30, 1994 declined to $154.9 million or .96% of total 6 Boatmen's Banchshares, Inc. 6 FINANCIAL COMMENTARY - ------------------------------------------------------------------------------ loans, compared to 1.17% at December 31, 1993, and 1.28% at September 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 $594.3 million or 3.68% of loans at September 30, 1994, a decline of over $200 million from September 30, 1993, when criticized loans were 5.42% of loans. Management carefully analyzes changes and trends in both nonperforming and criticized loans in assessing the risk characteristics of the loan portfolio. 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 expected to have a material effect on the Corporation's reported financial results. ============================================================================================================== Table 9: Summary of Nonperforming Assets
(in millions) SEPTEMBER 30, 1994 December 31, 1993 September 30, 1993 - -------------------------------------------------------------------------------------------------------------- Nonaccrual $109.8 $142.9 $154.5 Restructured 7.1 14.8 13.4 Past due 90 days or more 38.0 17.2 19.3 - -------------------------------------------------------------------------------------------------------------- Total nonperforming loans 154.9 174.9 187.2 - -------------------------------------------------------------------------------------------------------------- Foreclosed property 102.3 110.6 126.7 - -------------------------------------------------------------------------------------------------------------- Total nonperforming assets $257.2 $285.5 $313.9 =============================================================================================================== Nonperforming loans as % of total loans .96% 1.17% 1.28% Nonperforming assets as % of total loans and foreclosed property 1.58 1.90 2.12 Nonperforming assets as % of total assets .91 1.07 1.20 Loan reserve as % of nonperforming loans 224.07 195.03 182.60 ==============================================================================================================
============================================================================================================== 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 September 30 154.9 439.4 594.3 - -------------------------------------------------------------------------------------------------------------- As % of loans at September 30, 1994 .96% 2.72% 3.68% ==============================================================================================================
========================================================================= Table 11: Nonperforming Assets by Banking Unit
SEPTEMBER December September (in millions) 30, 1994 31, 1993 30, 1993 - ------------------------------------------------------------------------- Missouri $170.8 $171.4 $187.9 New Mexico 37.1 53.4 60.3 Oklahoma 12.4 14.3 13.7 Texas 8.3 13.7 16.1 Iowa 6.4 7.2 8.4 Illinois 5.3 7.1 7.7 Arkansas 3.6 4.0 3.7 Tennessee 5.4 6.8 8.0 Kansas 7.9 7.6 8.1 - ------------------------------------------------------------------------- Total $257.2 $285.5 $313.9 =========================================================================
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. These loans have the same risk characteristics as nonaccrual loans and foreclosed properties. At September 30, 1994, segregated assets, which are classified as other assets for reporting purposes, totaled $184.9 million, net of a $16.7 million credit valuation allowance, compared to $266.8 million at September 30, 1993. At September 30, 1994, segregated assets consisted primarily of $39.7 million of commercial loans, $31.3 million of industrial revenue bond loans and $124.7 million of commercial real estate-related loans. All other loans covered under the loss-sharing arrangement are included in the loan portfolio and totaled $313.8 million at September 30, 1994, compared to $537.1 million at September 30, 1993. The decline from September 30, 1993, was primarily due to scheduled paydowns and maturities. Net charge-offs of $1.7 million, representing the Corporation's share of losses on the segregated asset pool, were recognized in the nine months of 1994. The valuation allowance represents the Corporation's share of estimated losses upon 1994 Quarterly Report 7 7 FINANCIAL COMMENTARY - ------------------------------------------------------------------------------ ultimate liquidation of the portfolio. The Corporation's 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 September 30, 1994, $180.2 million of segregated assets were accorded classification treatment consistent with nonaccrual reporting, $6.0 million represented foreclosed property, and the balance of $15.4 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 $9.9 million for the nine months of 1994 compared to $3.4 million in the same period last year. A summary of activity regarding segregated assets is provided in Table 12. ========================================================================================== Table 12: Segregated Assets
Principal Allowance Principal September 30, 1994 (in millions) balance for losses balance, net - ------------------------------------------------------------------------------------------ Balance, beginning of year $266.6 $18.4 $248.2 Net charge-offs (11.1) (1.7) Transfers to segregated assets 16.4 Payments on segregated assets (70.3) - ------------------------------------------------------------------------------------------ Segregated assets, end of period $201.6 $16.7 $184.9 ==========================================================================================
================================================================================================================== Table 13: Summary of Loan Portfolio
(in millions) SEPTEMBER 30, 1994 December 31, 1993 September 30, 1993 - ------------------------------------------------------------------------------------------------------------------ Commercial $ 7,892.9 $ 7,490.7 $ 7,722.4 Real estate mortgage 3,045.1 2,988.5 2,734.0 Real estate construction 638.1 558.0 530.5 Consumer 4,474.0 3,742.8 3,571.4 Lease financing 86.4 95.2 99.1 - ------------------------------------------------------------------------------------------------------------------ Total domestic loans 16,136.5 14,875.2 14,657.4 Foreign loans 17.1 18.0 19.3 - ------------------------------------------------------------------------------------------------------------------ Total loans, before deduction of unearned income 16,153.6 14,893.2 14,676.7 Less unearned income 48.9 67.3 77.1 - ------------------------------------------------------------------------------------------------------------------ Total loans, net of unearned income $16,104.7 $14,825.9 $14,599.6 ==================================================================================================================
================================================================================================================== Table 14: Loan Portfolio Distribution (excluding credit card)
SEPTEMBER 30, 1994 December 31, 1993 September 30, 1993 - -------------------------------------------------------------------------------------------------------------------------------- % OF % Of % Of TOTAL Total Total (in millions) AMOUNT LOANS Amount Loans Amount Loans - -------------------------------------------------------------------------------------------------------------------------------- Missouri $ 9,569.5 61.4% $ 8,935.4 62.2% $ 8,878.9 62.7% New Mexico 1,434.1 9.2 1,375.9 9.6 1,409.7 9.9 Oklahoma 1,067.0 6.8 946.9 6.6 922.9 6.5 Texas 799.4 5.1 772.9 5.4 768.9 5.4 Iowa 701.1 4.5 639.8 4.4 622.0 4.4 Tennessee 720.8 4.6 611.8 4.2 590.9 4.2 Illinois 695.1 4.5 613.9 4.3 599.9 4.2 Arkansas 500.5 3.2 396.4 2.8 306.8 2.2 Kansas 114.5 .7 75.6 .5 69.3 .5 - -------------------------------------------------------------------------------------------------------------------------------- Total $15,602.0 100.0% $14,368.6 100.0% $14,169.3 100.0% ================================================================================================================================
LOAN PORTFOLIIO The majority of the Corporation's loans are made within its natural trade territory. The portfolio is highly diversified in that the Corporation's banking operations span a nine state area with over 400 branch locations. This geographic profile provides significant credit and economic risk diversification in that the Corporation is not solely dependent on any major market. Table 14 summarizes the diversification of the loan portfolio by banking location. 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 September 30, 1994, loans totaled $16.1 billion, an increase of 10.3% over the same period of last year. Based on average balances, loans increased 10.7% for the quarter and 11.8% for the nine months, primarily due to internal loan growth within the consumer and middle-market commercial portfolios. This increase was led by a 24.2% increase in consumer loans coupled with an increase of 9.6% 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 indirect 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 consumer and middle-market commercial sectors, which has been complemented by acquisitions of retail-oriented institutions. At September 30, 1994, middle-market commercial and consumer loans represented approximately 49.2% of the loan portfolio compared to 47.9% at September 30, 1993. Commercial real estate and real estate construction loans represented 20.1% of total loans at September 30, 1994, compared to 21.4% at September 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 with 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. Real estate loans are generally secured by the underlying property at a 75% to 80% loan to value ratio and are generally supported by guarantees from project developers. Additional collateral is required on a 8 Boatmen's Bancshares, Inc. 8 FINANCIAL COMMENTARY - ------------------------------------------------------------------------------ project-by-project basis depending on management's evaluation of the borrower. Approximately 30% of the commercial real estate portfolio is comprised of owner occupied properties for which the primary source of repayment is not entirely dependent on the real estate market. 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 15. ================================================================================================================================ Table 15: Composition of Loan Portfolio
SEPTEMBER 30, 1994 December 31, 1993 September 30, 1993 - -------------------------------------------------------------------------------------------------------------------------------- % OF % Of % Of TOTAL Total Total (in millions) AMOUNT LOANS Amount Loans Amount Loans - -------------------------------------------------------------------------------------------------------------------------------- Real estate: 1-4 family residential $ 3,091.0 19.2% $ 2,970.6 20.0% $ 2,781.4 18.9% Land acquisition 165.4 1.0 168.8 1.1 128.8 .9 Residential construction 227.1 1.4 181.2 1.2 155.3 1.1 Commercial construction 245.6 1.5 208.0 1.4 246.4 1.7 Commercial real estate 2,517.1 15.6 2,446.6 16.4 2,476.1 16.9 Mini-perms 101.7 .6 107.2 .7 123.9 .8 - -------------------------------------------------------------------------------------------------------------------------------- Total real estate 6,347.9 39.3 6,082.4 40.8 5,911.9 40.3 Commercial loans to Fortune 1,000 companies and other large corporate borrowers 854.4 5.3 662.5 4.5 723.1 4.9 Middle-market commercial 3,469.9 21.5 3,359.9 22.6 3,461.1 23.6 Highly leveraged transactions (HLTs) 61.5 .4 91.0 .6 88.1 .6 Bank stock loans 218.8 1.3 226.4 1.5 228.9 1.6 Agriculture 623.6 3.9 615.0 4.1 573.8 3.9 Consumer: Home equity 407.1 2.5 363.1 2.4 364.9 2.5 Credit card 502.7 3.1 457.3 3.1 430.3 2.9 Indirect installment 2,369.2 14.7 1,793.4 12.0 1,737.3 11.8 Other installment 1,195.0 7.4 1,129.0 7.6 1,038.9 7.1 - -------------------------------------------------------------------------------------------------------------------------------- Total consumer 4,474.0 27.7 3,742.8 25.1 3,571.4 24.3 Lease financing 86.4 .5 95.2 .7 99.1 .7 Foreign 17.1 .1 18.0 .1 19.3 .1 - -------------------------------------------------------------------------------------------------------------------------------- Total loans $16,153.6 100.0% $14,893.2 100.0% $14,676.7 100.0% ================================================================================================================================
FINANCIAL POSITION AND LIQUIDITY The basic financial structure of the Corporation's average and period-end balance sheet changed moderately from the fourth quarter and third quarter of last year primarily due to higher levels of purchased funds. At September 30, 1994, assets totaled $28.3 billion compared to $26.2 billion at September 30, 1993, and $26.7 billion at December 31, 1993. The increase in assets from September 30, 1993, was primarily due to 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 $17.9 billion for the third quarter of 1994, essentially unchanged from the same period last year. Average earning asset growth during this period exceeded core deposit growth by approximately $2.1 billion; accordingly, the additional earning asset volume has been funded by higher levels of short-term purchased funds. Average core deposits supported 72.4% of earning assets for the third quarter of 1994, compared to 79.2% 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 20.4% of average earning assets compared to 13.9% for the third quarter of last year. Purchased funds at September 30, 1994, included $1.7 billion of short-term bank notes which were issued by various bank subsidiaries during the second and third quarters of this year. 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 September 30, 1994, the available for sale portfolio totaled $4.1 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. The Corporation's mortgage-backed securities portfolio totaled $5.7 billion at September 30, 1994, of which approximately 90% represented government agency-backed issues which imply the full faith and credit of the U.S. Government. The remainder of the portfolio was comprised of private issue mortgage-backed securities with credit ratings of AA or higher. Each mortgage-backed security undergoes a thorough analysis prior to purchase and continuously thereafter to examine the investment performance using a wide range of interest rate scenarios and prepayment speeds. This ongoing process insures that the mortgage-backed securities meet the Corporation's investment strategies and internal risk guidelines. At September 30, 1994, net unrealized depreciation in the available for sale portfolio was approximately $92 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 1994 Quarterly Report 9 9 FINANCIAL COMMENTARY - ------------------------------------------------------------------------------ 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 effected by its debt ratings, summarized on page 16. There were no commitments for capital expenditures at September 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 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 September 30, 1994, an increase of 8.1% from September 30, 1993. The equity to asset ratio was 7.80% at both September 30, 1994, and September 30, 1993, and 8.00% at December 31, 1993. The equity base has been strengthened in recent years through 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 at September 30, 1994 of 10.54% for Tier I and 14.03% for total capital substantially exceed the regulatory required minimums. At September 30, 1994 the Corporation's Tier I leverage ratio was 7.15%, well in excess of the required minimums. ================================================================================================================== Table 16: Capital Structure
(in millions) SEPTEMBER 30, 1994 December 31, 1993 September 30, 1993 - ------------------------------------------------------------------------------------------------------------------ Long-term debt $ 515.4 $ 486.3 $ 471.4 Stockholders' equity 2,206.8 2,133.3 2,040.5 - ------------------------------------------------------------------------------------------------------------------ Total capitalization $2,722.2 $2,619.6 $2,511.9 ================================================================================================================== Tangible equity $1,946.4 $1,858.0 $1,754.5 ================================================================================================================== Ratios - ------------------------------------------------------------------------------------------------------------------ Equity/assets 7.80% 8.00% 7.80% Tangible equity/assets 6.94 7.04 6.78 Long-term debt as % of total capitalization 18.93 18.56 18.77 Double leverage 108.63 110.37 112.38 Dividends paid (for the period, in thousands): Preferred $ 60 $ 86 $ 65 Common 96,985 112,129 81,765 Total dividends as % of net income 36.9% 35.4% 34.1% ==================================================================================================================
================================================================================================================== Table 17: Intangible Assets
(in millions) SEPTEMBER 30, 1994 December 31, 1993 September 30, 1993 - ------------------------------------------------------------------------------------------------------------------ Goodwill -- Parent Company $ 91.2 $ 95.3 $ 96.7 Subsidiaries: Goodwill 82.9 86.3 92.8 Core deposit premium 78.9 85.3 87.9 Credit card premium 3.1 3.5 3.7 Purchased mortgage servicing rights 4.3 4.9 4.9 - ------------------------------------------------------------------------------------------------------------------ 169.2 180.0 189.3 - ------------------------------------------------------------------------------------------------------------------ Total intangible assets $260.4 $275.3 $286.0 ==================================================================================================================
================================================================================================================== Table 18: Risk-Based Capital
(in millions) SEPTEMBER 30, 1994 December 31, 1993 September 30, 1993 - ------------------------------------------------------------------------------------------------------------------ Tier I capital: Stockholders' equity $ 2,206.8 $ 2,133.3 $ 2,040.5 Unrealized net (appreciation) depreci- ation, available for sale securities 56.7 (42.3) - ------------------------------------------------------------------------------------------------------------------ Stockholders' equity, net 2,263.5 2,091.0 2,040.5 Minority interest .7 7 .7 Intangible assets: Goodwill (174.1) (181.6) (189.5) Core deposit premium (78.9) (85.3) (87.9) - ------------------------------------------------------------------------------------------------------------------ Total Tier I 2,011.2 1,824.8 1,763.8 - ------------------------------------------------------------------------------------------------------------------ Tier II capital: Allowable reserve for loan losses 239.8 215.3 211.4 Qualifying long-term debt 425.0 425.2 435.1 - ------------------------------------------------------------------------------------------------------------------ Total Tier II 664.8 640.5 646.5 - ------------------------------------------------------------------------------------------------------------------ Total capital $ 2,676.0 $ 2,465.3 $ 2,410.3 ================================================================================================================== Risk-adjusted assets $19,079.4 $17,098.0 $16,785.1 ================================================================================================================== Risk-based capital ratios: Tier I 10.54% 10.67% 10.51% ================================================================================================================== Total 14.03% 14.42% 14.36% ================================================================================================================== Tier I Leverage ratio 7.15% 6.93% 6.81% ==================================================================================================================
At September 30, 1994, all of the Corporation's banking subsidiaries met the regulatory defined 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%. 10 Boatmen's Bancshares, Inc. 10 CONSOLIDATED QUARTERLY EARNINGS TREND ================================================================================================================
1994 1993 - ---------------------------------------------------------------------------------------------------------------- (in thousands) THIRD Second First Fourth Third Second First - ---------------------------------------------------------------------------------------------------------------- Interest income Interest and fees on loans $324,218 $308,872 $289,634 $287,592 $287,251 $279,297 $265,662 Interest on short-term investments 919 1,071 560 257 405 509 826 Interest on Federal funds sold and securities purchased under resale agreements 3,245 1,995 1,593 2,380 1,936 3,161 5,884 Interest on held to maturity securities Taxable 49,051 45,674 34,125 92,383 96,537 97,569 94,789 Tax-exempt 14,242 13,447 13,744 13,907 14,366 14,745 15,363 - ---------------------------------------------------------------------------------------------------------------- Total interest on held to maturity securities 63,293 59,121 47,869 106,290 110,903 112,314 110,152 Interest on available for sale securities 60,438 61,149 65,991 7,169 7,258 7,360 7,270 Interest on trading securities 381 926 840 1,063 429 493 585 - ---------------------------------------------------------------------------------------------------------------- Total interest income 452,494 433,134 406,487 404,751 408,182 403,134 390,379 - ---------------------------------------------------------------------------------------------------------------- Interest expense Interest on deposits 134,442 127,611 124,050 128,331 133,406 135,096 132,011 Interest on Federal funds purchased and other short-term borrowings 47,841 37,908 23,135 19,126 16,014 12,688 14,539 Interest on capital lease obligation 945 945 945 965 964 965 964 Interest on long-term debt 10,651 10,176 9,714 9,704 9,542 9,391 8,268 - ---------------------------------------------------------------------------------------------------------------- Total interest expense 193,879 176,640 157,844 158,126 159,926 158,140 155,782 - ---------------------------------------------------------------------------------------------------------------- Net interest income 258,615 256,494 248,643 246,625 248,256 244,994 234,597 Provision for loan losses 6,900 7,366 5,640 11,853 13,040 15,918 19,373 - ---------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 251,715 249,128 243,003 234,772 235,216 229,076 215,224 - ---------------------------------------------------------------------------------------------------------------- Noninterest income Trust fees 37,974 38,690 39,190 37,895 38,723 37,952 35,010 Service charges 41,286 40,715 40,047 41,250 39,173 37,770 35,008 Credit card 17,690 15,890 15,045 14,934 14,561 13,276 11,618 Investment banking profits and fees 6,847 8,799 7,926 8,657 9,546 8,895 8,502 Securities gains, net 1,533 705 2,554 1,753 250 736 68 Other 25,348 25,335 24,961 29,481 29,540 25,416 20,345 - ---------------------------------------------------------------------------------------------------------------- Total noninterest income 130,678 130,134 129,723 133,970 131,793 124,045 110,551 - ---------------------------------------------------------------------------------------------------------------- Noninterest expense Staff 122,365 123,853 123,097 119,147 120,336 115,763 111,234 Net occupancy 17,071 16,763 16,608 17,140 19,072 16,913 16,304 Equipment 21,274 20,809 20,038 21,132 19,704 18,589 18,102 FDIC insurance 11,246 11,448 11,462 11,381 11,232 10,803 10,969 Credit card 11,016 10,121 9,031 9,981 9,400 8,700 7,124 Foreclosed property costs, net (1,233) (1,618) (1,114) (1,235) 83 (2,048) (1,590) Other 63,426 63,216 63,403 76,255 68,475 64,185 53,270 - ---------------------------------------------------------------------------------------------------------------- Total noninterest expense 245,165 244,592 242,525 253,801 248,302 232,905 215,413 - ---------------------------------------------------------------------------------------------------------------- Income before income tax expense 137,228 134,670 130,201 114,941 118,707 120,216 110,362 Income tax expense 47,530 46,628 44,617 37,819 37,379 40,493 31,116 - ---------------------------------------------------------------------------------------------------------------- Net income $ 89,698 $ 88,042 $ 85,584 $ 77,122 $ 81,328 $ 79,723 $ 79,246 ================================================================================================================ Net income per share $.86 $.84 $.82 $.75 $.78 $.77 $.77 ================================================================================================================ Dividends declared per share $.34 $.31 $.31 $.31 $.31 $.28 $.28 ================================================================================================================ Returns Return on assets 1.30% 1.28% 1.29% 1.18% 1.27% 1.29% 1.34% Return on equity 16.35 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 - -------------------------------------------------------------------------------------------------------------------------------- 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 $15,911.9 $325.6 8.19% $15,506.7 $310.4 8.01% $14,956.3 $291.0 7.78% Short-term investments 82.7 1.0 4.45 109.0 1.1 3.93 60.0 .6 3.73 Federal funds sold and securities purchased under resale agreements 270.2 3.2 4.80 193.7 2.0 4.12 193.2 1.6 3.30 Held to maturity securities: Taxable 3,379.0 49.1 5.81 3,280.0 45.7 5.57 2,890.3 34.1 4.72 Tax-exempt 777.6 21.5 11.06 790.2 20.4 10.35 808.4 20.7 10.22 - -------------------------------------------------------------------------------------------------------------------------------- Total held to maturity securities 4,156.6 70.6 6.79 4,070.2 66.1 6.50 3,698.7 54.8 5.92 Available for sale securities 4,265.3 60.4 5.67 4,558.3 61.1 5.37 4,712.6 66.0 5.60 Trading securities 28.4 .4 5.61 64.2 1.0 6.03 69.5 .8 4.94 - -------------------------------------------------------------------------------------------------------------------------------- Total earning assets 24,715.1 461.2 7.46 24,502.1 441.7 7.21 23,690.3 414.8 7.00 Less reserve for loan losses (348.0) (348.6) (346.0) Cash and due from banks 1,691.7 1,690.1 1,661.2 All other assets 1,596.7 1,596.6 1,587.0 - -------------------------------------------------------------------------------------------------------------------------------- Total assets $27,655.5 $27,440.2 $26,592.5 ================================================================================================================================ Liabilities and Stockholders' Equity - -------------------------------------------------------------------------------------------------------------------------------- Retail savings deposits and interest-bearing transaction accounts $ 8,667.4 $ 55.2 2.55% $ 8,743.5 $ 52.5 2.40% $ 8,803.2 $ 50.1 2.28% Time deposits 7,366.6 79.2 4.30 7,350.3 75.1 4.09 7,330.2 74.0 4.04 - -------------------------------------------------------------------------------------------------------------------------------- Total interest-bearing deposits 16,034.0 134.4 3.35 16,093.8 127.6 3.17 16,133.4 124.1 3.08 Federal funds purchased and other short-term borrowings 4,159.5 47.8 4.60 3,866.5 37.9 3.92 3,008.5 23.1 3.08 Capital lease obligation 38.7 1.0 9.72 38.9 1.0 9.72 39.1 .9 9.72 Long-term debt 514.5 10.7 8.28 514.6 10.2 7.91 514.0 9.7 7.56 - -------------------------------------------------------------------------------------------------------------------------------- Total interest-bearing liabilities 20,746.7 193.9 3.74 20,513.8 176.7 3.44 19,695.0 157.8 3.21 Demand deposits 4,418.3 4,488.8 4,425.8 All other liabilities 295.2 276.4 320.7 - -------------------------------------------------------------------------------------------------------------------------------- Total liabilities 25,460.2 25,279.0 24,441.5 Redeemable preferred stock 1.1 1.2 1.2 Total stockholders' equity 2,194.2 2,160.0 2,149.8 - -------------------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $27,655.5 $27,440.2 $26,592.5 ================================================================================================================================ Interest rate spread 3.72% 3.77% 3.79% Effect of noninterest- bearing funds .61 .56 .55 - -------------------------------------------------------------------------------------------------------------------------------- Net interest income/margin $267.3 4.33% $265.0 4.33% $257.0 4.34% ================================================================================================================================ Nonaccrual loans are included in average 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 $1.4 Tax-exempt held to maturity securities 7.3 7.0 6.9 Trading securities .1 - -------------------------------------------------------------------------------------------------------------------------------- Total $8.7 $8.6 $8.3 ================================================================================================================================
12 Boatmen's Bancshares, Inc. 12 CONSOLIDATED AVERAGE BALANCE SHEET AND NET INTEREST MARGIN ================================================================================================================================
(dollars in millions) 1993 - -------------------------------------------------------------------------------------------------------------------------------- Fourth Quarter Third Quarter Second Quarter - -------------------------------------------------------------------------------------------------------------------------------- Income/ Yields/ Income/ Yields/ Income/ Yields/ Assets Balance Expense Rates Balance Expense Rates Balance Expense Rates - -------------------------------------------------------------------------------------------------------------------------------- Loans, net of unearned income $14,666.2 $289.5 7.90% $14,373.7 $288.6 8.03% $13,958.8 $280.8 8.05% Short-term investments 31.2 .2 3.29 48.7 .4 3.33 60.7 .5 3.36 Federal funds sold and securities purchased under resale agreements 297.9 2.4 3.20 245.3 1.9 3.16 407.6 3.2 3.10 Held to maturity securities: Taxable 6,799.5 92.4 5.43 6,652.5 96.5 5.80 6,256.2 97.6 6.24 Tax-exempt 841.0 21.0 10.00 844.5 22.3 10.55 865.0 21.8 10.10 - -------------------------------------------------------------------------------------------------------------------------------- Total held to maturity securities 7,640.5 113.4 5.94 7,497.0 118.8 6.34 7,121.2 119.4 6.71 Available for sale securities 469.2 7.2 6.11 479.9 7.3 6.05 489.3 7.3 6.02 Trading securities 85.7 1.1 5.13 35.9 .5 5.30 42.9 .6 5.03 - -------------------------------------------------------------------------------------------------------------------------------- Total earning assets 23,190.7 413.8 7.14 22,680.5 417.5 7.36 22,080.5 411.8 7.46 Less reserve for loan losses (344.9) (339.3) (329.2) Cash and due from banks 1,720.4 1,619.6 1,613.5 All other assets 1,554.5 1,587.5 1,416.6 - -------------------------------------------------------------------------------------------------------------------------------- Total assets $26,120.7 $25,548.3 $24,781.4 ================================================================================================================================ Liabilities and Stockholders' Equity - -------------------------------------------------------------------------------------------------------------------------------- Retail savings deposits and interest-bearing transaction accounts $ 8,601.0 $ 51.3 2.38% $ 8,470.3 $ 52.3 2.47% $ 8,226.1 $ 50.9 2.48% Time deposits 7,538.8 77.0 4.09 7,827.3 81.1 4.15 7,922.8 84.2 4.25 - -------------------------------------------------------------------------------------------------------------------------------- Total interest-bearing deposits 16,139.8 128.3 3.18 16,297.6 133.4 3.27 16,148.9 135.1 3.35 Federal funds purchased and other short-term borrowings 2,579.6 19.1 2.97 2,148.3 16.0 2.98 1,740.7 12.7 2.92 Capital lease obligation 39.3 1.0 9.72 39.5 1.0 9.72 39.7 .9 9.72 Long-term debt 487.8 9.7 7.96 471.4 9.5 8.10 475.2 9.4 7.90 - -------------------------------------------------------------------------------------------------------------------------------- Total interest-bearing liabilities 19,246.5 158.1 3.29 18,956.8 159.9 3.37 18,404.5 158.1 3.44 Demand deposits 4,560.9 4,298.5 4,142.0 All other liabilities 242.5 277.9 272.1 - -------------------------------------------------------------------------------------------------------------------------------- Total liabilities 24,049.9 23,533.2 22,818.6 Redeemable preferred stock 1.2 1.2 1.2 Total stockholders' equity 2,069.6 2,013.9 1,961.6 - -------------------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $26,120.7 $25,548.3 $24,781.4 ================================================================================================================================ Interest rate spread 3.85% 3.99% 4.02% Effect of noninterest- bearing funds .56 .55 .58 - -------------------------------------------------------------------------------------------------------------------------------- Net interest income/margin $255.7 4.41% $257.6 4.54% $253.7 4.60% ================================================================================================================================ Nonaccrual loans are included in average 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 $1.9 $1.4 $1.5 Tax-exempt held to maturity securities 7.1 7.9 7.1 Trading securities .1 .1 - -------------------------------------------------------------------------------------------------------------------------------- Total $9.1 $9.3 $8.7 ================================================================================================================================
CONSOLIDATED AVERAGE BALANCE SHEET AND NET INTEREST MARGIN ================================================================================================================================
(dollars in millions) 1993 Nine Months Ended September 30 - -------------------------------------------------------------------------------------------------------------------------------- First Quarter 1994 1993 - -------------------------------------------------------------------------------------------------------------------------------- Income/ Yields/ INCOME/ YIELDS/ Income/ Yields/ Assets Balance Expense Rates BALANCE EXPENSE RATES Balance Expense Rates - -------------------------------------------------------------------------------------------------------------------------------- Loans, net of unearned income $13,127.9 $266.8 8.13% $15,461.8 $927.0 7.99% $13,824.7 $836.2 8.06% Short-term investments 100.4 .8 3.29 84.0 2.6 4.05 69.7 1.7 3.33 Federal funds sold and securities purchased under resale agreements 776.1 5.9 3.03 219.3 6.8 4.15 474.4 11.0 3.09 Held to maturity securities: Taxable 5,865.4 94.8 6.46 3,184.9 128.9 5.39 6,260.9 288.9 6.15 Tax-exempt 890.7 22.7 10.20 792.0 62.6 10.54 866.6 66.8 10.28 - -------------------------------------------------------------------------------------------------------------------------------- Total held to maturity securities 6,756.1 117.5 6.96 3,976.9 191.5 6.42 7,127.5 355.7 6.65 Available for sale securities 497.0 7.3 5.85 4,510.4 187.6 5.55 488.7 21.9 5.97 Trading securities 49.4 .6 5.09 53.9 2.2 5.50 42.7 1.7 5.14 - -------------------------------------------------------------------------------------------------------------------------------- Total earning assets 21,306.9 398.9 7.49 24,306.3 1,317.7 7.23 22,027.7 1,228.2 7.43 Less reserve for loan losses (310.0) (347.5) (326.3) Cash and due from banks 1,547.3 1,681.1 1,593.7 All other assets 1,167.4 1,593.4 1,392.1 - -------------------------------------------------------------------------------------------------------------------------------- Total assets $23,711.6 $27,233.3 $24,687.2 ================================================================================================================================ Liabilities and Stockholders' Equity - -------------------------------------------------------------------------------------------------------------------------------- Retail savings deposits and interest-bearing transaction accounts $ 7,808.2 $ 49.7 2.55% $ 8,737.6 $157.8 2.41% $ 8,170.6 $152.9 2.50% Time deposits 7,550.9 82.3 4.36 7,349.1 228.3 4.14 7,768.0 247.6 4.25 - -------------------------------------------------------------------------------------------------------------------------------- Total interest-bearing deposits 15,359.1 132.0 3.44 16,086.7 386.1 3.20 15,938.6 400.5 3.35 Federal funds purchased and other short-term borrowings 1,902.0 14.5 3.06 3,682.4 108.9 3.94 1,931.2 43.2 2.99 Capital lease obligation 39.9 1.0 9.72 38.9 2.8 9.72 39.7 2.9 9.72 Long-term debt 389.9 8.3 8.48 514.4 30.6 7.92 445.8 27.2 8.14 - -------------------------------------------------------------------------------------------------------------------------------- Total interest-bearing liabilities 17,690.9 155.8 3.52 20,322.4 528.4 3.47 18.355.3 473.8 3.44 Demand deposits 3,923.7 4,444.3 4,122.8 All other liabilities 203.5 297.3 251.5 - -------------------------------------------------------------------------------------------------------------------------------- Total liabilities 21,818.1 25,064.0 22,729.6 Redeemable preferred stock 1.2 1.1 1.2 Total stockholders' equity 1,892.3 2,168.2 1,956.4 - -------------------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $23,711.6 $27,233.3 $24,687.2 ================================================================================================================================ Interest rate spread 3.97% 3.76% 3.99% Effect of noninterest- bearing funds .59 .57 .58 - -------------------------------------------------------------------------------------------------------------------------------- Net interest income/margin $243.1 4.56% $789.3 4.33% $754.4 4.57% ================================================================================================================================ Nonaccrual loans are included in average 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 $1.1 $ 4.3 $ 4.0 Tax-exempt held to maturity securities 7.4 21.2 22.4 Trading securities .1 .1 - -------------------------------------------------------------------------------------------------------------------------------- Total $8.5 $25.6 $26.5 ================================================================================================================================
1994 Quarterly Report 13 13 CONSOLIDATED BALANCE SHEET ===================================================================================================================
(dollars in thousands) SEPTEMBER 30, 1994 September 30, 1993 December 31, 1993 - ------------------------------------------------------------------------------------------------------------------- Assets - ------------------------------------------------------------------------------------------------------------------- Cash and due from banks $ 1,767,030 $ 1,558,883 $ 1,608,051 Short-term investments 45,604 75,041 24,748 Securities: Held to maturity 4,200,436 7,540,465 3,324,847 Available for sale 4,107,319 482,960 5,176,966 Trading 25,600 26,726 48,081 Federal funds sold and securities purchased under resale agreements 775,293 553,174 407,672 Loans 16,104,659 14,599,589 14,825,922 Less reserve for loan losses 347,060 341,779 341,099 - ------------------------------------------------------------------------------------------------------------------- Loans, net 15,757,599 14,257,810 14,484,823 - ------------------------------------------------------------------------------------------------------------------- Property and equipment 519,609 458,268 480,586 Other assets 1,093,507 1,215,433 1,098,275 - ------------------------------------------------------------------------------------------------------------------- Total assets $28,291,997 $26,168,760 $26,654,049 =================================================================================================================== Liabilities and Stockholders' Equity - ------------------------------------------------------------------------------------------------------------------- Liabilities: Demand deposits $ 4,318,661 $ 4,459,177 $ 4,769,947 Retail savings deposits and interest-bearing transaction accounts 8,661,614 8,401,257 8,773,058 Time deposits 7,504,041 7,672,717 7,365,997 - ------------------------------------------------------------------------------------------------------------------- Total deposits 20,484,316 20,533,151 20,909,002 - ------------------------------------------------------------------------------------------------------------------- Federal funds purchased and securities sold under repurchase agreements 2,386,177 1,987,249 1,996,022 Short-term borrowings 2,336,021 809,009 815,971 Capital lease obligation 38,575 39,421 39,224 Long-term debt 515,428 471,376 486,253 Other liabilities 323,503 286,850 273,168 - ------------------------------------------------------------------------------------------------------------------- Total liabilities 26,084,020 24,127,056 24,519,640 - ------------------------------------------------------------------------------------------------------------------- Redeemable preferred stock 1,142 1,164 1,155 - ------------------------------------------------------------------------------------------------------------------- Stockholders' Equity: Common stock ($1 par value; 150,000,000 shares authorized) 104,789 103,819 104,126 Surplus 795,776 783,161 786,840 Retained earnings 1,362,914 1,155,160 1,200,036 Treasury stock (1,600) Unrealized net appreciation (depreciation), available for sale securities (56,644) 42,252 - ------------------------------------------------------------------------------------------------------------------- Total stockholders' equity 2,206,835 2,040,540 2,133,254 - ------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $28,291,997 $26,168,760 $26,654,049 =================================================================================================================== Held to maturity securities, market value $ 4,071,490 $ 7,715,298 $ 3,408,119 Available for sale securities, market value 4,107,319 507,629 5,176,966 Common stock, shares outstanding 104,789,055 103,792,502 104,125,546 ===================================================================================================================
14 Boatmen's Bancshares, Inc. 14 CONSOLIDATED STATEMENT OF INCOME =============================================================================================================================
(in thousands) Third Quarter Ended September 30 Nine Months Ended September 30 - ----------------------------------------------------------------------------------------------------------------------------- 1994 1993 1994 1993 - ----------------------------------------------------------------------------------------------------------------------------- Interest income Interest and fees on loans $324,218 $287,251 $922,724 $832,210 Interest on short-term investments 919 405 2,550 1,740 Interest on Federal funds sold and securities purchased under resale agreements 3,245 1,936 6,833 10,981 Interest on held to maturity securities Taxable 49,051 96,537 128,850 288,895 Tax-exempt 14,242 14,366 41,433 44,474 - ----------------------------------------------------------------------------------------------------------------------------- Total interest on held to maturity securities 63,293 110,903 170,283 333,369 Interest on available for sale securities 60,438 7,258 187,578 21,888 Interest on trading securities 381 429 2,147 1,507 - ----------------------------------------------------------------------------------------------------------------------------- Total interest income 452,494 408,182 1,292,115 1,201,695 - ----------------------------------------------------------------------------------------------------------------------------- Interest expense Interest on deposits 134,442 133,406 386,103 400,513 Interest on Federal funds purchased and other short-term borrowings 47,841 16,014 108,884 43,241 Interest on capital lease obligation 945 964 2,835 2,893 Interest on long-term debt 10,651 9,542 30,541 27,201 - ----------------------------------------------------------------------------------------------------------------------------- Total interest expense 193,879 159,926 528,363 473,848 - ----------------------------------------------------------------------------------------------------------------------------- Net interest income 258,615 248,256 763,752 727,847 Provision for loan losses 6,900 13,040 19,906 48,331 - ----------------------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 251,715 235,216 743,846 679,516 - ----------------------------------------------------------------------------------------------------------------------------- Noninterest income Trust fees 37,974 38,723 115,854 111,685 Service charges 41,286 39,173 122,048 111,951 Credit card 17,690 14,561 48,625 39,455 Investment banking profits and fees 6,847 9,546 23,572 26,943 Securities gains, net 1,533 250 4,792 1,054 Other 25,348 29,540 75,644 75,301 - ----------------------------------------------------------------------------------------------------------------------------- Total noninterest income 130,678 131,793 390,535 366,389 - ----------------------------------------------------------------------------------------------------------------------------- Noninterest expense Staff 122,365 120,336 369,315 347,333 Net occupancy 17,071 19,072 50,442 52,289 Equipment 21,274 19,704 62,121 56,395 FDIC insurance 11,246 11,232 34,156 33,004 Credit card 11,016 9,400 30,168 25,224 Foreclosed property costs, net (1,233) 83 (3,965) (3,555) Other 63,426 68,475 190,045 185,930 - ----------------------------------------------------------------------------------------------------------------------------- Total noninterest expense 245,165 248,302 732,282 696,620 - ----------------------------------------------------------------------------------------------------------------------------- Income before income tax expense 137,228 118,707 402,099 349,285 Income tax expense 47,530 37,379 138,775 108,988 - ----------------------------------------------------------------------------------------------------------------------------- Net income $ 89,698 $ 81,328 $263,324 $240,297 ============================================================================================================================= Net income per share $.86 $.78 $2.52 $2.32 ============================================================================================================================= Dividends declared per share $.34 $.31 $ .96 $ .87 =============================================================================================================================
Earnings per share amounts are based on weighted average shares outstanding after adjusting net income for dividends on preferred stock. For the nine months, average shares outstanding were 104,673,460 in 1994 and 103,415,280 in 1993. Preferred dividends declared totaled $60 in 1994 and $64 in 1993. 1994 Quarterly Report 15 15 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY ==================================================================================================================================
Unrealized Net Appreciation Common Stock (Depreciation), ------------------- Retained Treasury Available for (in thousands) Shares Amount Surplus Earnings Stock Sale Securities Total - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE, JANUARY 1, 1993 51,131 $ 51,131 $809,923 $1,000,166 -- -- $1,861,220 Net income -- -- -- 240,297 -- -- 240,297 Cash dividends declared: Common ($.87 per share) -- -- -- (85,109) -- -- (85,109) Redeemable preferred -- -- -- (64) -- -- (64) Acquisition of treasury stock -- -- -- -- (3,102) -- (3,102) Common stock issued pursuant to various employee and shareholder stock issuance plans 306 306 12,592 -- 1,502 -- 14,400 Common stock issued upon conversion of convertible subordinated debt 476 476 12,552 -- -- -- 13,028 Common stock issued upon 2-for-1 stock split 51,906 51,906 (51,906) -- -- -- Adjustment of investments in equity securities to market value -- -- -- 2 -- -- 2 Other, net -- -- -- (132) -- -- (132) - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE, SEPTEMBER 30, 1993 103,819 $103,819 $783,161 $1,155,160 $(1,600) -- $2,040,540 ================================================================================================================================== BALANCE, JANUARY 1, 1994 104,126 $104,126 $786,840 $1,200,036 -- $42,252 $2,133,254 Net income -- -- -- 263,324 -- -- 263,324 Cash dividends declared: Common ($.96 per share) -- -- -- (100,385) -- -- (100,385) Redeemable preferred -- -- -- (60) -- -- (60) Common stock issued pursuant to various employee and shareholder stock issuance plans 236 236 3,023 -- -- -- 3,259 Common stock issued upon acquisition of subsidiary 411 411 5,700 -- -- -- 6,111 Common stock issued upon conversion of convertible subordinated debt 16 16 240 -- -- -- 256 Adjustment of available for sale securities to market value -- -- -- -- -- (98,896) (98,896) Other, net -- -- (27) (1) -- -- (28) - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE, SEPTEMBER 30, 1994 104,789 $104,789 $795,776 $1,362,914 -- $(56,644) $2,206,835 ==================================================================================================================================
CORPORATE INFORMATION ==================================================================================================================================
Standard Thomson Agency Ratings Moody's & Poor's Bankwatch - --------------------------------------------------------------------------------------- Boatmen's Bancshares, Inc.: B Corporate Headquarters 6-3/4% Subordinated notes due 2003 A3 A- A One Boatmen's Plaza 7-5/8% Subordinated notes due 2004 A3 A- A 800 Market Street 8-5/8% Subordinated notes due 2003 A3 A- A St. Louis, MO 63101 9-1/4% Subordinated notes due 2001 A3 A- A 6-1/4% Convertible subordinated debentures due 2011 A3 A- Stock Listing Commercial paper P1 A-1 TBW-1 NASDAQ-NM symbol: BOAT The Boatmen's National Bank of St. Louis: B CBOE symbol: BTQ Long-term/short-term deposits and bank notes Aa3/P1 A+/A-1 TBW-1 Boatmen's First National Bank of Kansas City: B Transfer Agent Long-term/short-term deposits A+/A-1 TBW-1 Boatmen's Trust Company Multi-bank note program (7 Boatmen's subsidiary banks) A1/P1 A+/A-1 510 Locust Street - --------------------------------------------------------------------------------------- St. Louis, MO 63101 A Dividend Reinvestment and Stock Purchase Plan is available to shareholders of the (314) 466-1357 or (800) 456-9852 Corporation. The key features of this Plan are: . Dividends on common stock may be automatically reinvested; Investor Relations Contact . Option to invest up to $10,000 cash per quarter; Kevin R. Stitt . No brokerage commissions or service charges on reinvested dividends or Director of Investor Relations cash investments. (314) 466-7662 (314) 466-5645 (FAX)
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. 16 Boatmen's Bancshares, Inc. EX-27 3 ARTICLE 9 FDS FOR 10-Q
9 1,000 9-MOS DEC-31-1994 JAN-01-1994 SEP-30-1994 1,767,030 45,604 775,293 25,600 4,107,319 4,200,436 4,071,490 16,104,659 347,060 28,291,997 20,484,316 4,722,198 362,078 515,428 1,142 0 104,789 2,102,046 28,291,997 922,724 357,861 11,530 1,292,115 386,103 528,363 763,752 19,906 4,792 732,282 402,099 263,324 0 0 263,324 2.52 2.52 4.33 109,783 37,962 7,143 439,400 341,099 48,137 33,319 347,060 347,060 0 0
-----END PRIVACY-ENHANCED MESSAGE-----