-----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, lOD7TEWkyA6UHmlMUy36p+GMKbc7TgnRLQkGX94vpOpDT7qki49i8pcnHd2gfSaD ijWqR9P6bsI2+KlIdVaYbw== 0000351155-94-000003.txt : 19940331 0000351155-94-000003.hdr.sgml : 19940331 ACCESSION NUMBER: 0000351155-94-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940325 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEST ONE BANCORP CENTRAL INDEX KEY: 0000351155 STANDARD INDUSTRIAL CLASSIFICATION: 6021 IRS NUMBER: 820362647 STATE OF INCORPORATION: ID FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 000-09876 FILM NUMBER: 94518098 BUSINESS ADDRESS: STREET 1: 101 S CAPITOL BLVD STREET 2: P O BOX 8247 CITY: BOISE STATE: ID ZIP: 83733 BUSINESS PHONE: 2083837000 FORMER COMPANY: FORMER CONFORMED NAME: MOORE FINANCIAL GROUP INC DATE OF NAME CHANGE: 19890509 10-K 1 DECEMBER 31, 1993 FORM 10K FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1993 Commission file number: 0-9876 WEST ONE BANCORP (Exact name of Registrant as specified in its charter) Idaho 82-0362647 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 101 S. Capitol Boulevard, P.O. Box 8247, Boise, Idaho 83733 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (208) 383-7000 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $1.00 Par Value Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filing pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] The aggregate market value of the voting stock held by nonaffiliates of the Registrant was $930,090,433 at February 28, 1994, based on the closing price of such stock in the over-the-counter market as reported by NASDAQ(NMS). As of February 28, 1994, 34,932,974 shares of the Registrant's common stock, $1.00 par value, were outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Annual Report to Shareholders for the year ended December 31, 1993 (1993 Annual Report to Shareholders), are incorporated by reference in Part I and Part II hereof. Portions of the definitive proxy statement dated March 8, 1994, for the 1994 annual meeting of shareholders of the Registrant (Proxy Statement) are incorporated by reference in Part III hereof. EXHIBIT INDEX IS LOCATED ON PAGE 19 -1- INDEX Page of This Report PART I Item 1 - Business 3 Item 2 - Properties 11 Item 3 - Legal Proceedings 11 Item 4 - Submission of Matters to a Vote of Security Holders 11 - Executive Officers of the Registrant 12 PART II Item 5 - Market for Registrant's Common Equity and Related Stockholder Matters 14 Item 6 - Selected Financial Data 14 Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations 14 Item 8 - Financial Statements and Supplementary Data 14 Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 14 PART III Item 10 - Directors and Executive Officers of the Registrant 15 Item 11 - Executive Compensation 15 Item 12 - Security Ownership of Certain Beneficial Owners and Management 15 Item 13 - Certain Relationships and Related Transactions 15 PART IV Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K 15 SIGNATURES 16
-2- PART I ITEM 1 - BUSINESS West One Bancorp, (the Registrant) is an Idaho corporation formed in 1981 as a bank holding company subject to regulation under the Bank Holding Company Act of 1956, as amended, and is registered with the Board of Governors of the Federal Reserve System (Federal Reserve Board). The Registrant's principal subsidiary is West One Bank, Idaho in Boise, Idaho. Other subsidiaries include West One Bank, Washington in Seattle, Washington; West One Bank, Utah in Salt Lake City, Utah; West One Bank, Oregon in Portland, Oregon; West One Bank, Oregon, S.B. in Hillsboro, Oregon; Idaho First Bank in Boise, Idaho; West One Financial Services, Inc. in Boise, Idaho; West One Trust Company in Salt Lake City, Utah; West One Trust Company, Washington in Bellevue, Washington; and West One Life Insurance Company in Boise, Idaho. The Registrant, through its subsidiaries, provides a wide variety of financial services to corporate and institutional customers, governments, individuals, and other financial institutions. Such services include domestic commercial banking, investment and funds management, personal banking, trust operations, corporate services, mortgage banking and credit life insurance. As of December 31, 1993, the Registrant and its subsidiaries employed approximately 4,477 full-time equivalent employees. WEST ONE BANK, IDAHO West One Bank, Idaho (West One, Idaho) was founded in 1867 in Boise, Idaho, and was the second national bank to be established west of the Rocky Mountains. When branch banking was authorized in 1933, West One, Idaho acquired three affiliated banks, thus beginning the development of its present statewide banking organization in Idaho. West One, Idaho is an Idaho-chartered bank supervised and regulated at the state level by the Director of the Idaho Department of Finance and at the federal level by the Federal Reserve Board. West One, Idaho is insured by the Bank Insurance Fund (BIF) and is therefore also subject to regulations issued by the FDIC. (See "Supervision and Regulation - Other Regulations.") On January 21, 1994, West One, Idaho acquired Idaho State Bank with assets of $48 million in exchange for 133,332 shares of the Registrant's common stock. The transaction is a pooling of interests in 1994. Idaho State Bank's financial position and results of operations are not material to West One's financial position and results of operations. Idaho is the primary market area of West One, Idaho. West One, Idaho offers a full range of commercial and personal banking and trust services. Its corporate banking department provides a broad range of customized credit products and services to middle market and large corporate borrowers. The principal industries in Idaho include agriculture, forest products, services, tourism, mining and manufacturing. The banking business in Idaho is highly competitive. West One, Idaho competes for deposits, loans, and trust accounts with other banks and financial institutions. At December 31, 1993, West One had $3.9 billion in assets and 79 branches. Based on assets of $3.8 billion at September 30, 1993, West One, Idaho is the largest bank in Idaho. In 1993, approximately 20 banks with approximately 306 branches were actively engaged in banking in Idaho. -3- WEST ONE BANK, WASHINGTON West One Bank, Washington, (West One, Washington), a full-service commercial bank, has 53 branches principally in the Puget Sound region, Yakima, Spokane and the Tri-Cities, with assets of $1.9 billion at December 31, 1993. West One, Washington is regulated by the State of Washington, and deposits are insured by the FDIC. On December 31, 1993, West One, Washington and West One Bank, Eastern Washington (formerly Yakima Valley Bank and Ben Franklin National Bank) merged under the name West One, Washington. West One, Washington now includes the operations of the former Community Bank of Renton, First Security Bank of Tacoma, Bank of Tacoma, First Western Bank, West One Bank, Spokane, Yakima Valley Bank and Ben Franklin National Bank. At September 30, 1993, West One, Washington and West One Bank, Eastern Washington had combined assets of $1.9 billion making it the sixth largest bank in Washington. In 1993, approximately 103 banks with approximately 1,052 branches were actively engaged in banking in Washington. In May 1993, Ben Franklin National Bank with assets of $37 million was acquired in exchange for 206,254 shares of the Registrant's common stock. The transaction was accounted for as a pooling of interests. Ben Franklin National Bank's financial position and results of operations were not material to the Registrant's financial position and results of operations, and prior year financial statements have not been restated. WEST ONE BANCORP, WASHINGTON West One Bancorp, Washington, a bank holding company purchased in 1988, was merged into the Registrant on April 30, 1993. WEST ONE BANK, UTAH West One Bank, Utah, (West One, Utah), chartered in 1909 and acquired in November 1985, is a state-chartered, full-service commercial bank based in Salt Lake City, Utah. As of December 31, 1993, West One, Utah had 23 branches and $703 million in total assets. West One, Utah is regulated by the Federal Reserve Board, and deposits are insured by the FDIC. At September 30, 1993, West One, Utah had $689 million in total assets making it the sixth largest bank in Utah. In 1993, approximately 50 banks with approximately 424 offices were actively engaged in banking in Utah. WEST ONE BANK, OREGON West One Bank, Oregon, (West One, Oregon), acquired in 1983, operates as a state-chartered, full-service commercial bank with operations concentrated in the western Oregon market area. As of December 31, 1993, West One, Oregon had 21 branches and $602 million in total assets. West One, Oregon is regulated by the State of Oregon, and deposits are insured by the FDIC. WEST ONE BANK, OREGON, S.B. West One Bank, Oregon, S.B., acquired in 1991, is a state-chartered, full-service savings bank based in Hillsboro, Oregon. As of December 31, 1993, West One Bank, Oregon, S.B. had 14 branches and $428 million in total assets. West One Bank, Oregon, S.B. is regulated by the State of Oregon, and deposits are insured by the FDIC. -4- West One, Oregon and West One Bank, Oregon, S.B. combined had total assets of $1.0 billion as of September 30, 1993, making it the fifth largest bank in Oregon. IDAHO FIRST BANK Idaho First Bank was formed by the Registrant in 1989. Idaho First Bank is an Idaho-chartered bank supervised and regulated at the state level by the Director of the Idaho Department of Finance and at the federal level by the Federal Reserve Board. Idaho First Bank, which is insured by the BIF, offers electronic banking services to the Registrant's cardholders through the affiliates' automated teller machine (ATM) network (AWARD); Cirrus/Mastercard, STAR System, and Exchange NW (Oregon and Washington) ATM; and ACCEL and Explore on-line debit point-of-sale networks; VISA and Mastercard credit cards; merchant bankcard and VISA Check Card Services. As of December 31, 1993, Idaho First Bank had $216 million in total assets. As of December 31, 1993, the ATM network totaled 189 branch and retail ATMs, including 74 in Idaho, 58 in Washington, 29 in Oregon, and 5 in Nevada. WEST ONE FINANCIAL SERVICES, INC. West One Financial Services, Inc. services residential and commercial mortgage portfolios for long-term investors. Total loans serviced, including loans serviced for the Registrant's affiliates, were $2.2 billion as of December 31, 1993. WEST ONE TRUST COMPANY West One Trust Company, acquired by the Registrant in 1982, operates offices in Salt Lake City, Utah and Portland, Oregon. West One Trust Company provides fiduciary, investment management and related services for corporate, institutional and individual clients. WEST ONE TRUST COMPANY, WASHINGTON West One Trust Company, Washington, formed by the Registrant in 1991, is a state-chartered trust company based in Bellevue, Washington. West One Trust Company, Washington provides fiduciary, investment management and related services for corporate, institutional and individual clients. WEST ONE LIFE INSURANCE COMPANY West One Life Insurance Company underwrites credit life and credit disability policies for borrowers of West One Bancorp affiliates. WEST ONE BANCORP, THE PARENT COMPANY The Parent Company provides a variety of services to affiliates. Through its Data Processing Center in Boise, the Registrant processes demand deposit accounts, savings accounts, installment credit loans, commercial loans and real estate loans for a majority of its subsidiaries. Most branches have on-line teller terminals which provide direct access to the centralized computer system and permit faster processing of customer transactions. SUPERVISION AND REGULATION The Registrant's banking subsidiaries are affected by the policies of regulatory authorities, including the monetary policy of the Federal Reserve Board. In order to mitigate recessionary and inflationary pressures, the Federal Reserve Board uses a variety of money supply management techniques, including engaging in open market operations in United States Government securities, changing the discount rate on member bank borrowings, and changing reserve requirements against member bank deposits. The impact of current economic conditions on the policies of the Federal Reserve Board and other -5- regulatory authorities and their effect on the future business and earnins of the Registrant cannnot be predicted with assurance. The Registrant is subject to regulation under the Bank Holding Company Act of 1956, as amended. Under that Act, the Registrant is required to obtain the approval of the Federal Reserve Board before it may acquire all or substantially all of the assets of any bank or ownership or control of any voting securities of any bank not already majority owned if, after giving effect to the acquisition, the Registrant would own or control more than five percent of the voting shares of such bank. The Bank Holding Company Act of 1956 generally does not permit the Federal Reserve Board to approve an acquisition by a bank holding company of voting shares or assets of a bank located outside the state in which the operations of its banking subsidiaries are principally conducted unless the acquisition is specifically authorized by the statutes of the states in which the banks are located. Each of the states in the Registrant's marketing area have adopted legislation that permits bank acquisition by out-of-state bank holding companies, with certain restrictions. The Bank Holding Company Act of 1956 also prohibits, with certain exceptions, the Registrant from engaging in or acquiring direct or indirect control of more than five percent of the voting shares of any company engaged in nonbanking activities. One of the principal exceptions to this prohibition applies to activities found by the Federal Reserve Board to be so closely related to banking as to be a proper incident thereto. Some of the activities which the Federal Reserve Board has determined by regulation to be closely related to banking are: mortgage banking, certain data processing operations, personal property leasing on a full payout basis and operation of a consumer finance business. The Registrant is not subject to territorial restrictions on the operations of nonbank subsidiaries. The Registrant and its subsidiaries are prohibited from engaging in certain "tie-in" arrangements in connection with extensions of credit or provision of any property or service. Also, the Registrant's banking subsidiaries are subject to restrictions on loans to the Registrant or its subsidiaries, investments in stock or other securities of the Registrant or its subsidiaries, or advances to any borrower collateralized by such stock or other securities. In December 1991, Congress enacted the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), which substantially revises the bank regulatory and funding provisions of the Federal Deposit Insurance Act and makes revisions to several other federal banking statutes. In addition to establishing minimum capital requirements, FDICIA directs that each federal banking agency prescribe standards for depository institutions and depository institution holding companies relating to internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, a maximum ratio of classified assets to capital and such other standards as the agency deems appropriate. FDICIA also contains a variety of other provisions that may affect the operations of the Registrant including new reporting requirements, revised regulatory standards for real estate lending, "truth in savings" provisions, and the requirement that a depository institution give 90 days' notice to customers and regulatory authorities before closing any branch. -6- STATISTICAL INFORMATION The statistical information is included herein or is incorporated by reference from the following pages of the Registrant's 1993 Annual Report to Shareholders.
Page Number Annual Report Disclosure to Shareholders Form 10-K I. Distribution of Assets, Liabilities and Shareholders' Equity; Interest Rates and Interest Differential 18-19 II. Investment Portfolio 37 8 III.Loan Portfolio 20-21 9-10 IV .Summary of Loan Loss Experience 23-25 10 and 38 V. Deposits 22-23 11 VI. Return on Equity and Assets 14 VII.Short-Term Borrowings 40
-7- II. INVESTMENT PORTFOLIO
The book value of securities at December 31 follows: Book Value (Dollars in thousands) 1993 1992 1991 Available for sale: United States Treasury securities $ 292,078 $ 18,373 $ - United States Government agencies 261,487 31,061 - Mortgage-backed securities 298,695 68,750 - Other 208,390 42,805 - Total available for sale $1,060,650 $ 160,989 $ - Held to maturity: United States Treasury securities $ - $ 287,732 $ 245,525 United States Government agencies - 281,852 292,826 State and municipal bonds 565,165 362,110 209,548 Mortgage-backed securities - 343,236 292,875 Other - 221,550 179,097 Total held to maturity 565,165 1,496,480 1,219,871 Total securities $1,625,815 $1,657,469 $1,219,871
-8- III. LOAN PORTFOLIO
Total loans, net of unearned income, at December 31 follow: (Dollars in thousands) 1993 1992 1991 1990 1989 Real estate $2,150,835 $1,734,076 $1,179,101 $1,083,381 $ 954,487 Commercial, financial and agricultural 1,996,865 1,787,451 1,379,891 1,292,733 1,166,383 Consumer 1,038,678 875,203 797,076 797,877 718,927 Leases 168,119 135,183 141,383 118,226 95,173 Total $5,354,497 $4,531,913 $3,497,451 $3,292,217 $2,934,970
Loans outstanding at December 31, 1993, (other than consumer and mortgage loans, and leases which are ordinarily on a term basis with installment repayment requirements) segregated by maturity ranges follow:
Commercial, Financial and Agricultural Maturity of loans One year or less $1,337,517 Over one year but less than five years 555,395 Over five years 103,953 Total $1,996,865 Sensitivity of loans to changes in interest rates - loans due after one year Fixed rate $ 242,344 Floating rate 417,004 Total $ 659,348
-9- A loan or lease is placed on nonaccrual status when timely collection of interest becomes doubtful. Interest payments received on nonaccrual loans and leases are applied to principal if collection of principal is doubtful or reflected as interest income on a cash basis. Loans and leases are removed from nonaccrual status when they are current and collectibility of principal and interest is no longer doubtful. Income foregone on nonaccrual and restructured loans, net of tax, was $1,086,000, $1,650,000 and $3,662,000 for the years ended December 31, 1993, 1992 and 1991, respectively. United States dollar denominated, interest bearing short-term investments located in foreign banks including United States branches of foreign banks, exceeding .75% of total assets follows: (Dollars in thousands)
COUNTRY 1993 1992 1991 Japan $ - $ - $72,000 Canada - 85,000 - United Kingdom - 57,400 -
IV. SUMMARY OF LOAN LOSS EXPERIENCE The allowance for credit losses by category and the percentage of gross loans by category to total loans for the past five years follow:
(Dollars in thousands) Commercial, Financial and Real Estate Agricultural Consumer Leases Unallocated Total 1993 Amount $30,100 $27,900 $14,500 $2,400 $23 $74,923 Percent 40.18% 37.24% 19.35% 3.20% .03% 100% 1992 Amount $26,100 $26,900 $13,200 $2,000 $43 $68,243 Percent 38.25% 39.42% 19.34% 2.93% .06% 100% 1991 Amount $17,900 $20,900 $12,100 $2,100 $48 $53,048 Percent 33.74% 39.40% 22.81% 3.96% .09% 100% 1990 Amount $15,700 $18,800 $11,600 $1,700 $23 $47,823 Percent 32.83% 39.31% 24.26% 3.55% .05% 100% 1989 Amount $16,200 $19,700 $12,200 $1,600 $55 $49,755 Percent 32.56% 39.59% 24.52% 3.22% .11% 100%
-10- V. DEPOSITS Time certificates of deposits $100,000 and over as of December 31, 1993, segregated by maturity ranges follow:
(Dollars in thousands) Within Three Six to Over Three To Six Twelve Twelve Months Months Months Months Total Time certificates $100,000 and over $201,040 $ 88,532 $ 75,844 $105,127 $470,543
ITEM 2 - PROPERTIES The Registrant's main office, owned by West One, Idaho, is located in a 19-story building in downtown Boise, Idaho. The building, completed in 1978, contains approximately 285,000 square feet of which approximately 172,000 square feet are utilized by the Registrant and the remainder is leased or available for lease to others. In addition, the Registrant owns 73 of 77 branch buildings in Idaho, 16 of 22 branch buildings in Utah, 16 of 33 branch buildings in Oregon, 35 of 51 branch buildings in Washington, and 8 of 28 support service buildings. Remaining facilities are leased from others for terms expiring between 1994 and 2017. ITEM 3 - LEGAL PROCEEDINGS Various legal proceedings arising in the normal course of business are pending against subsidiaries of the Registrant. In the opinion of management, the resulting liability, if any, from these proceedings will not have a material impact on the Registrant's financial position or results of operations. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders of the Registrant during the quarter ended December 31, 1993. -11- EXECUTIVE OFFICERS OF THE REGISTRANT The names, positions, ages and background of the executive officers of the Registrant, as of January 1, 1994, are set forth below:
Name Position Age Daniel R. Nelson Chairman of the Board of Directors 56 and Chief Executive Officer of the Registrant D. Michael Jones President and Director of the Registrant 51 Robert J. Lane Executive Vice President of the Registrant 48 and President and Chief Executive Officer of West One, Idaho Scott M. Hayes Executive Vice President and Chief 46 Financial Officer of the Registrant Terrance J. Dobson Executive Vice President of the Registrant 53 Dwight V. Board Senior Vice President, Secretary and General 49 Counsel of the Registrant Jim A. Peterson Senior Vice President, Controller and Principal 38 Accounting Officer of the Registrant
-12- Mr. Nelson joined the Registrant in 1984. He was named an Executive Vice President of the Registrant in 1984 and elected President and Chief Operating Officer of the Registrant in 1985. In August, 1986, he was elected Chairman and Chief Executive Officer of West One, Idaho. In January, 1987, Mr. Nelson was elected Chairman of the Board and Chief Executive Officer of the Registrant. Mr. Nelson serves as a Chairman of the Board of West One, Idaho and a Director of the Registrant; West One, Idaho; and West One, Washington; and also as an officer of the Registrant and West One, Idaho. Mr. Jones joined the Registrant in 1987. He was elected President of the Registrant in 1987. Mr. Jones serves as Chairman of the Board of West One, Washington and a Director of the Registrant; West One, Utah; West One, Oregon; and West One, Washington. Mr. Lane joined West One, Idaho in 1983 as Vice President and Senior Credit Officer. In 1985, he was elected President of West One Financial Services. Later that same year, he was elected President and Chief Operating Officer of West One, Idaho and also became a Director of West One, Idaho. In 1987, he was named President and Chief Executive Officer of West One, Idaho. Mr. Lane was elected Executive Vice President of the Registrant in January 1991. Mr. Hayes joined West One, Idaho in 1981 as Vice President of Money Desk operations. In 1985, he was elected Vice President of the Registrant, and in 1986 he was elected a Senior Vice President of the Registrant. In 1987, he was named Executive Vice President and Chief Financial Officer of the Registrant. Mr. Dobson joined the Registrant in 1990 as Executive Vice President of the Capital Management Group. From 1987 through 1990, Mr. Dobson was with U.S. Bancorp as Senior Vice President of Corporate Development and then Executive Vice President of the Investment Services Group. Mr. Board joined West One, Idaho in 1971 as Legal Counsel. In 1981, he was elected Vice President, Secretary and General Counsel of the Registrant. He was elected Senior Vice President of the Registrant in 1990. Mr. Peterson joined the Registrant in 1982. In January, 1987, he was elected Vice President of the Registrant. In 1990, he was elected Vice President and Controller. He was elected Senior Vice President and Controller in January 1993, and serves as principal accounting officer of the Registrant. The executive officers of the Registrant also serve as officers and/or Directors of several other affiliated companies. -13- PART II ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Items relating to market price for the Registrant's common equity and related stockholder matters included in the 1993 Annual Report to Shareholders at the pages indicated, are herein incorporated by reference. Page of 1993 Annual Report to Shareholders Shareholders' Equity and Capital Adequacy 15 Quarterly Common Stock Statistics 16 Shareholders' Equity, Note 9 43 Regulatory Requirements and Restrictions, Note 14 50 ITEM 6 - SELECTED FINANCIAL DATA Selected Financial Data of the Registrant on page 12 of the 1993 Annual Report to Shareholders is incorporated herein by reference. ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis of Financial Condition and Results of Operations set forth on pages 13-26 of the 1993 Annual Report to Shareholders is incorporated herein by reference. ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements and Report of Independent Public Accountants listed in the Index to Financial Statements and Schedules on page 15 of this Annual Report on Form 10-K and included in the 1993 Annual Report to Shareholders are incorporated herein by reference. Quarterly Financial Data on page 27 of the 1993 Annual Report to Shareholders is incorporated herein by reference. ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There were no changes in accountants within the last 24 months, nor were there reportable disagreements with the Registrant's independent public accountants on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. -14- PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information on pages 2-4 in the March 8, 1994 Proxy Statement is incorporated herein by reference. Reference is made to "Executive Officers of the Registrant" in Part I of this Annual Report on Form 10-K for additional information regarding the executive and management officers of the Registrant. There are no family relationships among the directors or the executive and management officers. ITEM 11 - EXECUTIVE COMPENSATION The information on pages 6-10 in the March 8, 1994 Proxy Statement is incorporated herein by reference. ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information regarding security ownership of certain beneficial owners and management included in the March 8, 1994 Proxy Statement on pages 4-5 is incorporated herein by reference. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information in the sixth paragraph on page 5 in the March 8, 1994, Proxy Statement is incorporated herein by reference. PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)(1) Financial Statements: The consolidated financial statements incorporated by reference in this Annual Report on Form 10-K are listed in the Index to Financial Statements and Schedules on page 18 herein. (2) Financial Statement Schedules: See the Index to Financial Statements and Schedules on page 18. (3) The exhibits filed herewith are listed in the Exhibit Index on pages 19 and 20 herein. (b) There were no current reports on Form 8-K filed by the Registrant during the last quarter of the year ended December 31, 1993. (c) Each management contract compensation plan and arrangement required to be filed is an exhibit to this report as listed in item 10, Executive Compensation Plans and Arrangements and Other Management Contracts, in the Exhibit Index on page 19 herein. -15- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: 3/24/94 WEST ONE BANCORP Registrant By /s/ Scott M. Hayes Scott M. Hayes Executive Vice President and Chief Financial Officer By /s/ Jim A. Peterson Jim A. Peterson Senior Vice President and Controller Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities on the dates indicated.
Signature Title Date */s/ Daniel R. Nelson Chairman and Chief Executive 3/24/94 Daniel R. Nelson Officer and Director (Principal Executive Officer) President & Director D. Michael Jones /s/ Scott M. Hayes Executive Vice President and 3/24/94 Scott M. Hayes Chief Financial Officer (Principal Financial Officer) /s/ Jim A. Peterson Senior Vice President and 3/24/94 Jim A. Peterson Controller (Principal Accounting Officer) */s/ Harry Bettis Director 3/24/94 Harry Bettis Director Norma Cugini */s/ William J. Deasy Director 3/24/94 William J. Deasy */s/ John B. Fery Director 3/24/94 John B. Fery -16- SIGNATURES (continued) */s/ Stuart A. Hall Director 3/24/94 Stuart A. Hall */s/ Jack B. Little Director 3/24/94 Jack B. Little */s/ Warren E. McCain Director 3/24/94 Warren E. McCain */s/ Douglas W. McCallum Director 3/24/94 Douglas W. McCallum */s/ Allen T. Noble Director 3/24/94 Allen T. Noble Director Philip B. Soulen *By /s/ Dwight V. Board 3/24/94 Dwight V. Board, Attorney-in-fact
Manually signed Power of Attorney authorizing Dwight V. Board to sign the Annual Report on Form 10-K for the fiscal year ended December 31, 1993, as Attorney-in-fact for certain directors and officers of the Registrant is included herein as Exhibit 24. -17- INDEX TO FINANCIAL STATEMENTS AND SCHEDULES FINANCIAL STATEMENTS The following consolidated financial statements and Report of Independent Public Accountants included in the 1993 Annual Report to Shareholders at the pages indicated, are incorporated herein by reference.
Page of 1993 Annual Report to Shareholders West One Bancorp and Subsidiaries - Consolidated Balance Sheets at December 31, 1993 and 1992 28-29 Consolidated Statements of Income for the years ended December 31, 1993, 1992 and 1991 30 Consolidated Statements of Shareholders' Equity for the years ended December 31, 1993, 1992 and 1991 31 Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991 32-33 Notes to Consolidated Financial Statements 34-52 Report of Independent Public Accountants 53
Financial Statement Schedules All schedules have been omitted because the information is either not required, not applicable, not present in amounts sufficient to require submission of the schedule, or is included in the financial statements or notes thereto. -18- EXHIBIT INDEX Exhibit Number Description 3-A Amended Articles of Incorporation of the Registrant 3-B Bylaw Amendment and Amended Bylaws of the Registrant Incorporated by reference to Exhibit 3-B to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1991. 4 Shareholder Rights Plan. Incorporated by reference to Exhibit 4-B to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1989 as amended by Form 8-A dated October 15, 1992. Registrant agrees to furnish copies of instruments relating to its long-term notes payable, the total amount of which does not exceed 10% of the total Consolidated Assets of the Registrant and its subsidiaries, to the Commission upon request. 10 Executive Compensation Plans and Arrangements and Other Management Contracts: 10-A Executive Compensation Program 10-B The Executive Incentive Program of the Registrant, as amended. Incorporated by reference to Exhibit 10-B to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1990. 10-C Registrant's Executive Deferred Compensation Plan, as amended. Incorporated by reference to Exhibit 10-C to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1990. 10-D Form of Employment Agreements between Registrant and certain key employees. Incorporated by reference to Exhibit 10-E to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987. 10-E Form of Indemnification Agreement dated June 16, 1988, entered into by the Registrant with each of its Directors. Incorporated by reference to Exhibit 19 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1988. 10-F The 1991 Performance and Equity Incentive Plan of the Registrant. Incorporated by reference to Exhibit 10-F to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1990. 10-G Deferred Compensation Plan for Outside Directors of the Registrant. Incorporated by reference to Exhibit 10-G to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1990. -19- EXHIBIT INDEX (continued) Exhibit Number Description 11 Statement regarding computation of per share earnings. 13 Portions of the Registrant's 1993 Annual Report to Shareholders. 21 List of subsidiaries of the Registrant. 23 Consent of independent public accountants. 24 Power of Attorney of Certain Officers and Directors of Registrant. -20- EX-3.(I) 2 EXHIBIT 3A, ARTICLES OF INCORPORATION EXHIBIT 3A ARTICLES OF INCORPORATION OF WEST ONE BANCORP The undersigned, acting as incorporator under the Idaho Business Corporation Act, adopts the following Articles of Incorporation: ARTICLE I The name of the corporation is West One Bancorp and its duration shall be perpetual. ARTICLE II The purpose or purposes for which the corporation is organized are: a. To engage in the business of acquiring, holding and disposing of shares of, and controlling and managing, financial institutions including, without limitation, banks, trust companies, mortgage companies, insurance companies, savings and loan associations and finance companies. b. To engage in the transaction of any or all lawful business for which corporations may be organized under the Idaho Business Corporation Act. ARTICLE III The aggregate number of shares which the corporation shall have authority to issue is 80,000,000, of which 5,000,000 shares shall be Cumulative Preferred Stock, $1 par value, issuable in series, and 75,000,000 shares shall be Common Stock, $1 par value. The preferences, limitations and relative rights of each class of such shares shall be as follows: Section A. Cumulative Preferred Stock This Section A sets forth a description of the Cumulative Preferred Stock and a statement of certain of the preferences, limitations and relative rights in respect of the shares of the Cumulative Preferred Stock, together with a statement of the authority vested in the board of directors of the corporation to divide the Cumulative Preferred Stock into series, and to fix and determine the relative rights and preferences of the shares of any series insofar as they are not fixed herein. Subsection 1. Dividends on Cumulative Preferred Stock and Junior Stock The holders of the Cumulative Preferred Stock shall be entitled to receive, when and as declared by the board of directors out of assets of the corporation legally available for dividends, cumulative cash dividends at, but not exceeding, the annual rate fixed for each particular series, payable quarterly on the fifteenth day of January, April, July and October in each year. Such dividends on the Cumulative Preferred Stock shall be payable before any dividend on any junior stock (which term shall mean the Common Stock of the corporation and any other class of stock of the corporation hereafter authorized ranking junior to the Cumulative Preferred Stock as to dividends or assets) shall be paid or set apart for payment. Dividends on each series of the Cumulative Preferred Stock shall be cumulative from such date as may be fixed for such series prior to the issue thereof. Arrearages in the payment of dividends shall not bear interest. In case dividends are not paid in full, the shares of all series of the Cumulative Preferred Stock shall share ratably in the payment of dividends, including accruals, if any, in proportion to the sums which would be payable on said shares if all dividends were declared and paid in full. As long as any of the Cumulative Preferred Stock remains outstanding, no dividend whatever shall be paid or declared on any junior stock, nor shall any distribution be made on any junior stock, other than a dividend payable in junior stock, nor shall any shares of any junior stock be acquired for a consideration by the corporation unless: a. All dividends on the Cumulative Preferred Stock of all series for all past quarterly dividend periods shall have been paid and the full dividends thereon for the then current quarterly dividend period shall have been paid or shall have been declared and a sum sufficient for the payment thereof set apart; and b. All amounts, if any, then or theretofore required to be paid or set apart for the redemption or purchase of the Cumulative Preferred Stock of all series (pursuant to any applicable sinking fund or redemption provision or otherwise) shall have been paid or set apart. Subject to the foregoing provisions, and not otherwise, such dividends (payable in cash, stock or otherwise) as may be determined by the board of directors may be declared and paid on any junior stock from time to time out of the remaining funds of the corporation legally available for the payment of dividends, and the Cumulative Preferred Stock shall not be entitled to participate in any such dividends, whether payable in cash, stock or otherwise. Subsection 2. Redemption Subject to the provisions of each particular series respecting redemption of such series, the corporation, at the option of the board of directors, may redeem the whole or any part of the Cumulative Preferred Stock at any time outstanding, or the whole or any part of any series thereof, at any time or from time to time at the applicable redemption price or prices, together with an amount equal to the dividends accrued thereon to the date of redemption. In case of redemption of a part only of any series of the Cumulative Preferred Stock at the time outstanding, the redemption may be either pro rata or by lot. The board of directors shall have full power and authority to prescribe the manner in which the drawings by lot or the pro rata redemption shall be conducted and, subject to the provisions herein contained, the terms and conditions upon which the Cumulative Preferred Stock shall be redeemed from time to time. Notice of any redemption of Cumulative Preferred Stock shall be given by the corporation by mailing a copy of such notice at least 30 days prior to the date fixed for such redemption to the holders of record of the Cumulative Preferred Stock to be redeemed at their respective addresses appearing on the books of the corporation, and the time of mailing such notice shall be deemed to be the time of delivery thereof. At any time after notice of redemption has been so given, the corporation may, on a date specified in the notice of redemption, deposit with a bank or trust company, named in such notice, doing business in Boise, Idaho, or in New York, New York, and having capital, surplus and undivided profits of at least $5,000,000, a sum sufficient to redeem the shares to be redeemed with irrevocable instruction and authority to pay the redemption price to the holders of such shares upon surrender of certificates therefor. Upon such deposit, or, if no such deposit is made, upon the date of redemption (unless the corporation shall default in payment of the moneys necessary for such redemption), all shares with respect to which such notice of redemption was given shall cease to be outstanding for any purpose, whether or not the certificates for such shares shall have been surrendered for cancellation, and all rights with respect to such shares shall thereupon cease and terminate, except the right of the holders of the certificates for such shares to receive the amount payable upon the redemption thereof, without interest, from said bank or trust company, or from the corporation, if no such deposit is made, and the right to exercise, on or before the date of redemption, any unexpired privilege of conversion. Any funds so deposited by the corporation which shall not be required for such redemption because of the exercise of any privilege of conversion subsequent to the time of such deposit shall be returned to the corporation forthwith. Any interest on funds so deposited shall belong to the corporation and shall be paid to it from time to time. Subsection 3. Amounts Payable on Liquidation or Dissolution In the event of any liquidation, dissolution or winding up of the corporation, whether voluntary or involuntary, the holders of the Cumulative Preferred Stock of each series then outstanding shall be entitled to receive in cash out of the assets of the corporation, before any distribution or payment shall be made to the holders of any junior stock, the full preferential amount or amounts fixed for such series, plus in respect of each such share an amount equal to the dividends accrued thereon to the date fixed for such payment; provided that, if such assets available for the holders of the Cumulative Preferred Stock of each series then outstanding shall be less than the total amount all such holders would be so entitled to receive if all such preferential amount or amounts and dividends were paid in full, then the corporation shall, in lieu of making such payments in full to the holders of the Cumulative Preferred Stock of each series then outstanding, make payments to the holders of the Cumulative Preferred Stock of each series then outstanding (in proportion to the respective amounts which would be payable on account of such liquidation dissolution or winding up if all such payments were paid in full) of an aggregate amount equal to such assets so available. If such payment shall have been made in full to the holders of the Cumulative Preferred Stock on voluntary or involuntary liquidation, dissolution or winding up (or deposited to their accounts in a bank or trust company doing business in Boise, Idaho, or New York, New York, and having capital, surplus and undivided profits of at least $5,000,000 so as to be, and continue to be, available for such holders), the remaining assets of the corporation shall be distributed among the holders of junior stock, according to their respective rights and preferences and in accordance with their respective holdings. For the purposes of this Subsection 3, a consolidation or merger of the corporation with any other corporation shall not be deemed, as such, to constitute a liquidation, dissolution or winding up of the corporation, but any reorga- nization of the corporation required by any court or administrative body in order to comply with any provision of law shall be deemed to be an involuntary liquidation, dissolution or winding up of the corporation unless the preferences, limitations and relative rights in respect of the Cumulative Preferred Stock are not adversely affected by such reorganization. Subsection 4. Restrictions on Corporate Action The consent of the holders of at least a majority of the Cumulative Preferred Stock at the time outstanding, given in person or by proxy, either in writing or at a meeting at which the Cumulative Preferred Stock shall vote separately as a class, regardless of series, shall be necessary to effect or validate any one or more of the following: a. The authorization of any class of stock of the corporation ranking prior to or on a parity with the Cumulative Preferred Stock as to dividends or in liquidation, or any increase in the authorized amount of the Cumulative Preferred Stock, or b. The amendment, alteration or repeal of any of the provisions hereof which have reference to the Cumulative Preferred Stock so as to materially and adversely affect the rights or preferences of the Cumulative Preferred Stock; provided, however, that no such consent shall be required in connection with any reduction of the authorized amount of Cumulative Preferred Stock resulting from a redemption, purchase, exercise of a conversion privilege or other acquisition of Cumulative Preferred Stock by the corporation. Subsection 5. Status of Redeemed, Purchased and Converted Shares Except as otherwise required by law, all shares of the Cumulative Preferred Stock redeemed, purchased, converted into other shares of the corporation, or otherwise acquired by the corporation, shall be retired and shall not be reissued. The corporation may, from time to time, take such appropriate corporate action as may be necessary to reduce the authorized amount of the Cumulative Preferred Stock accordingly. Subsection 6. Sinking Funds If in any case the amounts payable with respect to any requirements to retire shares of the Cumulative Preferred Stock are not paid in full with respect to all series for which such requirements exist, the number of shares to be retired in each series shall be in proportion to the respective amounts which would be payable on account of such requirements if all amounts payable were paid in full. Subsection 7. Issuance in Series The Cumulative Preferred Stock may, from time to time, be divided into and issued in series. All shares of the Cumulative Preferred Stock, regardless of series, shall be identical with each other in all respects, except that each series shall be distinctively designated and except as to the following relative rights and preferences as to which there may be variations between the different series: a. The rate of dividend and the date from which dividends shall commence to accrue. b. The price at and the terms and conditions on which shares may be redeemed, which may include a redemption price or scale of redemption prices applicable only to redemption for a sinking fund (which term shall include any fund or requirement for the periodic retirement of shares) and a different redemption price or scale of redemption prices applicable to any other redemption. c. The amount payable upon shares in the event of the voluntary or involuntary liquidation, dissolution or winding up of the corporation. Such amount shall not be more than the par value of the shares plus any additional amount of surplus transferred or to be transferred to stated capital in respect of the shares upon the issuance thereof. d. Sinking fund provisions, if any, for the redemption or purchase of shares. e. The terms and conditions, if any, on which shares may be converted. f. Voting rights, if any, in addition to the rights provided in Subsection 4 of this Section A. The board of directors is hereby expressly vested with authority to divide the Cumulative Preferred Stock into series and, within the limitations herein and by law provided, by resolution prior to the issue of any shares of a series, to distinctively designate the series and to fix and determine the relative rights and preferences of the shares of any series so established. Section B. Common Stock Except for and subject to those rights expressly granted in Section A of this Article III to the holders of the Cumulative Preferred Stock, or except as may be provided by law, the holders of the Common Stock shall have all other rights of shareholders, including, but not by way of limitation: (1) voting power for all purposes and the right to all notices of meetings or of other corporate actions, (2) the right to receive dividends when and as declared by the board of directors out of assets legally available therefor, and (3) in the event of any distribution of assets upon liquidation, dissolution or winding up of the corporation or otherwise, the right to receive all the assets of the corporation remaining after payment to the holders of the Cumulative Preferred Stock of the specific amounts which they are entitled to receive upon such liquidation, dissolution or winding up of the corporation, as provided in Sec- tion A of this Article III. ARTICLE IV No shareholder of the corporation shall, by reason of his holding shares of any class, have any preemptive or preferential rights to purchase or subscribe to any shares of the corporation now or hereafter to be authorized, or any other securities convertible into or carrying a right to subscribe to or acquire shares of any class now or hereafter to be authorized (whether or not the issuance of any such shares or other securities would adversely affect the dividend or voting rights of such shareholder) other than such rights, if any, as the board of directors in its discretion from time to time may grant and at such price as the board of directors may fix; and the corporation may issue unissued or treasury shares or any other securities convertible into or carry- ing rights to subscribe to or acquire shares without offering any such shares or other securities, either in whole or in part, to the existing shareholders. ARTICLE V Subject to the provisions of Article III, the corporation may purchase its own shares to the extent of unreserved and unrestricted capital surplus available therefor without a vote of the shareholders of the corporation upon such terms and conditions as may be fixed by the board of directors of the corporation. ARTICLE VI Subject to the provisions of Article III, the board of directors may from time to time within the limitations herein and by law provided, but without a vote of the shareholders, distribute to the holders of any class of shares of the corporation out of its capital surplus, a portion of its assets, in cash or property; provided that (i) no such distribution shall be made at a time when the corporation is insolvent or when such distribution would render the corporation insolvent, (ii) no such distribution shall be made to the holders of any class of shares unless all cumulative dividends accrued on all preferred or special classes of shares entitled to preferential dividends shall have been fully paid, and (iii) no such distribution shall be made to the holders of any class of shares which would reduce the remaining net assets of the corporation below the aggregate preferential amount payable in event of involuntary liquidation to the holders of shares having preferential rights to the assets of the corporation in the event of liquidation. ARTICLE VII Each person who at any time is or shall have been a director or officer of the corporation, including any director or officer who is or shall have been serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enter- prise, and his heirs, executors and administrators, shall be indemnified by the corporation against expenses (including attorney's fees), judgments, fines and amounts paid in settlement incurred by him in any such capacity or arising out of his status as such, all in accordance with and to the full extent permitted by the Idaho Business Corporation Act as in effect at the time of the adoption of this Article or as amended from time to time. The foregoing right of indemnification shall not be deemed a limitation on the power of the corporation to indemnify any director, officer, employee, agent or other person and shall not be deemed exclusive of other rights to which any such person may be entitled in any capacity as a matter of law or under any bylaw, agreement, vote of shareholders or directors, or otherwise. The corporation may, to the full extent permitted by the Idaho Business Corporation Act as in effect at the time of the adoption of this Article or as amended from time to time, purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability. ARTICLE VIII No person shall be eligible to serve on the board of directors who, on or before the date of the next annual meeting of shareholders, shall have attained the age of 70 years; provided that a director who attains the age of 70 years may continue as a director until the next such annual meeting following his 70th birthday unless sooner removed from office as provided in the bylaws of the corporation. ARTICLE IX The address of the initial registered office of the corporation is 101 South Capitol Boulevard, Boise, Idaho, 83702, and the name of its initial registered agent at such address is Dwight V. Board. ARTICLE X The number of directors of the corporation shall be as fixed by the bylaws of the corporation but shall be not less than nine. The directors shall be divided into three classes designated Class I, Class II and Class III, each class to be as nearly equal in number as possible. The term of office of Class I directors shall expire at the annual meeting of shareholders in 1986, that of Class II directors at the annual meeting of shareholders in 1987 and that of Class III directors at the annual meeting of shareholders in 1988. At each annual meeting of shareholders beginning in 1986, the number of directors equal to the number of the class whose term expires at the time of such meeting shall be elected to hold office for a term expiring at the third succeeding annual meeting of shareholders. ARTICLE XI The name and address of each incorporator is: Name Address Dwight V. Board 101 South Capitol Boulevard Boise, Idaho 83702 ARTICLE XII Section A. Definitions. For purposes of this Article XII: (1) The term "Affiliate," used to indicate a relationship with a specified person, shall mean a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. (2) The term "Beneficially Own," when used with respect to a person's interest in shares of capital stock, shall mean that said person has or shares (or has the right to acquire under any option, warrant, conversion right or other right), directly or indirectly, the power to vote, the power to dispose of, the power to direct the voting or disposition of, or the right to enjoy the economic benefits of such shares. (3) The term "Interested Person" shall mean any individual, corporation, partnership, joint venture, company, trust, association or entity (including any group of persons acting together) which, together with its Affiliates, Beneficially Owns in the aggregate 20 percent or more of the outstanding shares of capital stock of the corporation. (4) The term "Substantial Assets" shall mean assets with a fair market value in excess of 10 percent of the total assets of the corporation as reported in the consolidated financial statements of the corporation as of the end of its most recent fiscal year ending prior to the time the determination is made. (5) The term "Business Combination" shall mean (a) any merger or con- solidation of the corporation or a subsidiary of the corporation with or into an Interested Person (or an Affiliate of an Interested Person) or any merger of an Interested Person (or an Affiliate of an Interested Person) into the corporation or a subsidiary of the corporation, (b) any sale, lease, exchange, transfer, encumbrance or other disposition of Substantial Assets either of the corporation (including without limitation any securities of a subsidiary) or of a subsidiary of the corporation, to an Interested Person (or an Affiliate of an Interested Person), (c) the issuance of any securities of the corporation or a subsidiary of the corporation to an Interested Person (or an Affiliate of an Interested Person), (d) any reclassification, exchange of shares or other recapitalization that would have the effect of increasing the proportion of shares of Common Stock or other capital stock of the corporation or a subsidiary of the corporation Beneficially Owned by an Interested Person and (e) any agreement, contract or other arrangement providing for any of the fore- going transactions. (6) The term "Continuing Director" shall mean a director who was a member of the board of directors of the corporation immediately prior to the time that the Interested Person involved in a Business Combination became an Interested Person and who is not the Interested Person or an Affiliate of the Interested Person. Section B. Approval Required for Certain Transactions. In addition to any vote or approval required by law, any Business Combina- tion shall require the affirmative vote of the holders of not less than 80 per- cent of the outstanding shares of capital stock of the corporation which are not Beneficially Owned by the Interested Person and its Affiliates involved in the Business Combination; provided, however, that such 80 percent voting requirement shall not apply if: (1) The Business Combination is a merger, consolidation or exchange of shares involving the corporation which provides for the conversion of the shares of Common Stock of the corporation into cash, securities or other property with a fair market value per share of Common Stock not less than the highest per share consideration (appropriately adjusted for stock splits, stock dividends and other like changes) paid or given by the Interested Person and any of its Affiliates for any of their shares of Common Stock; or (2) The Business Combination was approved by the board of directors of the corporation; provided that a majority of the board of directors consisted of Continuing Directors and at least two-thirds of the Continuing Directors voted to approve the Business Combination. Section C. Removal of Directors. All or any number of the directors of the corporation may be removed at a meeting called expressly for that purpose, but only for cause and only by the affirmative vote of the holders of not less than 80 percent of the outstanding shares of capital stock of the corporation which are not Beneficially Owned by an Interested Person. Notwithstanding the foregoing, whenever the holders of one or more series of Cumulative Preferred Stock or any other preferred stock of the corporation shall have the right, voting separately as a class, to elect one or more directors, the provisions of this Section C shall not apply with respect to the director or directors elected by such holders. Section D. Amendment of Bylaws. The board of directors of the corporation shall have the power to alter, amend or repeal the bylaws of the corporation or adopt new bylaws, provided that the shareholders may adopt additional bylaws or amend or repeal bylaws whether or not adopted by them by the affirmative vote of the holders of not less than 80 percent of the outstanding shares of capital stock of the corpora- tion which are not Beneficially Owned by an Interested Person. Section E. Repeal and Amendment. The provisions set forth in Article X or this Article XII may not be re- pealed or amended in any respect unless such repeal or amendment is approved by the affirmative vote of the holders of not less than 80 percent of the out- standing shares of capital stock of the corporation which are not Beneficially Owned by an Interested Person. ARTICLE XIII A director of the corporation shall have no personal liability to the corpo- ration or its shareholders for monetary damages for breach of fiduciary duty as a director; provided that this Article XIII shall not eliminate or limit the liability of a director for: a. Any breach of the director's duty of loyalty to the corporation or its shareholders. b. Acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law. c. Any action for which liability is provided under Section 30-1-48, Idaho Code. d. Any transaction from which the director derived an improper personal benefit. e. Any act or omission occurring prior to the effective date of the adoption of this Article XIII. No repeal of or amendment to the foregoing provisions of this Article XIII by the shareholders of the corporation shall adversely affect any right or protection of a director of the corporation existing at the time of such repeal or amendment. EX-10 3 EXHIBIT 10A, EXECUTIVE COMPENSATION PROGRAM EXHIBIT 10A EXECUTIVE COMPENSATION PROGRAM The Registrant's overall approach to executive compensation is based on a philosophy that combines a goal-driven annual cash compensation package with equity incentives designed to build stock ownership among key employees. These two key principles serve to align executives effectively with shareholder interests by focusing management on financial goals needed to secure shareholder value, as well as steady long-term growth, by strongly encouraging significant ownership in the Registrant's stock. The Registrant maintains a competitive salary structure, each year salaries for executive officers are reviewed against market information assembled by consultants. The objective is to maintain salaries at a level which is equivalent to that of banks of comparable size nationwide. Adjustments to competitive rates are then considered based on the Compensation Committee's overall assessment of the Registrant's performance and of each executive's individual contribution and achievement of objectives. The Executive Incentive Bonus Plan rewards participants for the achievement of corporate, subsidiary, business unit, and individual goals. Goals based on return on assets, return on equity, and net income are set at the beginning of each year in the context of a long-term planning process and a review of peer banks with asset sizes comparable to that of the Registrant and its major banking subsidiaries. EX-11 4 COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 WEST ONE BANCORP COMPUTATION OF PER SHARE EARNINGS
Dollars in thousands, except per share, for the year ended December 31, 1993 1992 1991 Primary earnings per share: Weighted average number of shares 32,803,044 29,923,980 27,819,458 Common stock equivalents computed under the treasury stock method using average market price. 488,938 419,416 296,640 Total 33,291,982 30,343,396 28,116,098 Fully diluted earnings per share: Weighted average number of shares 32,803,044 29,923,980 27,819,458 Common stock equivalents computed under the treasury stock method using the greater of ending or average market price. 505,788 514,844 319,560 Other potentially dilutive securities 2,687,450 2,687,450 1,340,044 TOTAL 35,996,282 33,126,274 29,479,062 Net income $83,187 $63,372 $41,199 Interest expense (net of tax) incurred for other potentially dilutive securities $ 2,317 $ 2,353 $ 1,170 Earnings per share: Primary $ 2.50 $ 2.09 $ 1.47 Fully diluted 2.38 1.98 1.44
EX-13 5 PORTIONS OF THE 1993 ANNUAL REPORT TO SHAREHOLDERS SELECTED FINANCIAL DATA
Dollars in thousands, except per share data 1993 1992 1991 1990 1989 For the year Summary of operations Interest income - taxable equivalent $515,798 $446,913 $459,704 $455,050 $431,524 Interest expense 193,435 195,090 249,980 268,014 266,022 Net interest income - taxable equivalent 322,363 251,823 209,724 187,036 165,502 Taxable equivalent adjustment 18,473 13,125 12,152 11,347 9,671 Net interest income 303,890 238,698 197,572 175,689 155,831 Provision for credit losses 13,383 14,308 29,680 11,668 7,514 Net interest income after provision for credit losses 290,507 224,390 167,892 164,021 148,317 Other income 102,014 81,771 70,548 61,931 52,072 Securities gains 495 1,690 2,156 24 862 Total noninterest income 102,509 83,461 72,704 61,955 52,934 Salaries and employee benefits 128,886 104,024 90,485 82,211 78,719 Other expense 143,552 112,500 92,651 80,825 74,169 Total noninterest expense 272,438 216,524 183,136 163,036 152,888 Income before taxes 120,578 91,327 57,460 62,940 48,363 Provision for income taxes 37,391 27,955 16,261 18,673 13,375 Net income $83,187 $63,372 $41,199 $44,267 $34,988 Primary earnings per share $2.50 $2.09 $1.47 $1.60 $1.27 Fully diluted earnings per share 2.38 1.98 1.44 1.60 1.26 Cash dividends declared per share .49 .675 .48 .44 .41 Cash dividends paid per share .595 .51 .47 .44 .40 At December 31 Assets $7,671,353 $7,133,637 $5,417,199 $4,946,989 $4,760,263 Deposits 5,937,047 5,636,339 4,044,408 3,860,881 3,597,072 Loans 5,354,497 4,531,913 3,497,451 3,292,217 2,934,970 Allowance for credit losses 74,923 68,243 53,048 47,823 49,755 Long-term debt 116,460 117,649 111,881 72,614 71,863 Shareholders' equity 623,566 489,825 367,048 332,692 298,469 Full-time equivalent employees 4,477 4,293 3,464 3,370 3,283 Shares outstanding 34,718,731 32,351,160 28,062,404 27,567,672 27,425,588
In September 1992, West One acquired certain assets and deposits from Security Pacific Corporation in Washington. -12- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's discussion and analysis of West One Bancorp and subsidiaries (the Corporation) supplements the accompanying consolidated financial statements. Prior year information has been restated to reflect a two-for-one stock split effected by means of a stock dividend paid in August 1993. PERFORMANCE OVERVIEW Net income was $83.2 million in 1993, a 31% increase over the Corporation's previous record earnings of $63.4 million in 1992. Net income in 1992 was 54% higher than the $41.2 million earned in 1991. Loan growth, a higher net interest margin and lower credit related costs contributed to the earnings improvement in 1993 and 1992. Fully diluted earnings per share increased 20% to $2.38 in 1993 following an increase of 38% in 1992. The Corporation's five- year compound growth rate for net income was 25% and fully diluted earnings per share increased at a compound annual growth rate of 19% over the same period. The Corporation's return on average assets was 1.14% in 1993, an improvement from returns of 1.08% and .80% in 1992 and 1991, respectively. Return on average shareholders' equity was 15.61% in 1993, up from 14.93% in 1992 and 11.82% in 1991. Expansion in the state of Washington contributed to the Corporation's performance in 1993. In September 1992, the Corporation acquired 38 branches with deposits of $1.2 billion and loans of $837 million from Security Pacific Corporation (the Washington Acquisition). The Corporation further improved its competitive position in Washington by acquiring Yakima Valley Bank, a four- branch institution with assets of $119 million, in October 1992,and Ben Franklin National Bank, a three-branch institution with assets of $37 million, in May 1993. REGIONAL ECONOMIC PERFORMANCE A financial institution's performance is directly influenced by economic conditions in its service area. In 1993, the Corporation's service area of Idaho, Washington, Oregon and Utah was one of the strongest economic regions of the country. Utah and Idaho led the nation in employment growth during much of the year, with Utah's gains exceeding 5%. Idaho's employment gains were especially significant in the high technology sector, accompanied by strong growth in tourism and business services. Oregon's economy began to recover from the effects of drastic cuts in timber production on federal lands, and by late 1993 reported annual gains in employment of over 2%. Strength in Washington was largely offset by the effects of aerospace cutbacks; however, metropolitan areas served by the Corporation outside of the Puget Sound region, including Yakima, Spokane, Vancouver and the Tri-Cities, experienced vibrant and expanding economies during the year with rising employment and construction activity. Lower interest rates and substantial net inmigration expanded residential construction in Idaho, Oregon and Utah. The number of new dwelling units authorized was up 13% throughout the region in 1993 as Utah, Oregon and Idaho posted gains of 41%, 17% and 14%, respectively, and no change was reported in Washington. Prospects for continued economic growth in the Corporation's service area appear favorable in 1994, especially in light of an improving national economy. Construction activity is expected to remain strong in Idaho, Oregon and Utah. Washington's economy will not fully participate in the region's growth until production levels in the aerospace industry stabilize. (Graphic material omitted) A map of the Western United States is depicted, our four-state service area of Idaho, Washington, Oregon and Utah is highlighted. -13- AVERAGE BALANCES AND RATIOS
Dollars in thousands 1993 1992 1991 1990 1989 Selected average balances Assets $7,312,017 $5,848,131 $5,165,354 $4,731,919 $4,429,280 Earning assets 6,612,814 5,294,949 4,686,354 4,266,191 3,988,822 Securities 1,666,520 1,321,390 1,110,381 987,800 918,115 Loans 4,903,797 3,767,186 3,349,190 3,110,738 2,692,968 Deposits 5,689,938 4,503,586 3,917,298 3,663,402 3,413,926 Short-term borrowings 880,495 736,043 745,699 621,272 604,860 Long-term debt 117,990 114,727 86,024 67,736 67,225 Shareholders' equity 532,898 424,429 348,684 312,599 283,124 Growth measures (percent change in average balances) Assets 25.0% 13.2% 9.2% 6.8% 12.3% Earning assets 24.9 13.0 9.8 7.0 11.6 Securities 26.1 19.0 12.4 7.6 (1.1) Loans 30.2 12.5 7.7 15.5 16.7 Deposits 26.3 15.0 6.9 7.3 15.6 Short-term borrowings 19.6 (1.3) 20.0 2.7 (2.3) Long-term debt 2.8 33.4 27.0 .8 7.8 Shareholders' equity 25.6 21.7 11.5 10.4 8.9 Ratios (averages) Return on shareholders' equity 15.61% 14.93% 11.82% 14.16% 12.36% Return on assets 1.14 1.08 .80 .94 .79 Dividend payout ratio 19.74 33.11 32.38 26.30 31.63 Loans to deposits 86.18 83.65 85.50 84.91 78.88 Shareholders' equity to assets 7.29 7.26 6.75 6.61 6.39 Shareholders' equity to loans 10.87 11.27 10.41 10.05 10.51
-14- SHAREHOLDERS' EQUITY AND CAPITAL ADEQUACY The Corporation's strong capital position merits the confidence of customers, investors and regulators, and provides a solid foundation for asset growth. Capital management ensures capital is available for current needs, anticipated growth and advantageous business opportunities. The Corporation regularly monitors current and projected consolidated and subsidiary capital positions to ensure capital levels exceed regulatory guidelines. At December 31, 1993, shareholders' equity totaled $624 million, up 27% from a year ago. The primary source of additional shareholders' equity in 1993 was $68 million of retained earnings, up 58% from 1992. In addition, the Corporation issued $47 million of common stock through a dividend reinvestment and stock purchase plan providing shareholders the opportunity to purchase common stock and reinvest dividends at a discount from the market price. At December 31, 1993, the Corporation adopted Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities." In accordance with the pronouncement, securities available for sale were reported at market value and the resulting net unrealized after- tax gain of $9 million was included in shareholders' equity, without impacting net income or risk-based capital ratios in 1993. Shareholders' equity as a percent of assets measures capital strength. At December 31, 1993, the Corporation's ratio increased to 8.13%, up from 6.87% at December 31, 1992 and 6.78% at December 31, 1991. In 1993, the Corporation paid dividends for the 58th consecutive year. The Corporation's dividend policy is designed to strike a balance between providing immediate returns to shareholders through cash dividends and increasing long- term shareholders' value through profitable utilization of earnings as capital. In recognition of record net income and a strong capital position, the Corporation's Board of Directors increased the quarterly dividend by 16% to $.18 per share in October 1993, representing the fifth consecutive year of dividend increases. On a per share basis, dividends paid in 1993 were $.595, a 17% increase from $.51 in 1992. The comparable dividend was $.47 in 1991. The market price per share of the Corporation's common stock was $28.50 at December 31, 1993, or 159% of the $17.96 book value per share. At year-end 1992, the market price was $25.375 or 168% of the $15.14 book value per share. The Corporation's market capitalization was $989.5 million at December 31, 1993, up 21% from $820.9 million a year ago. The average annual compounded return to the Corporation's shareholders for the five-year period ending December 31, 1993 assuming reinvestment of dividends was 27%, significantly outperforming our peer group of 539 commercial banks whose return was 13% and the NASDAQ market index return of 7%. The Corporation's stock was held by 7,328 shareholders of record at December 31, 1993, and is traded in the over-the-counter market on the National Market System of NASDAQ under the symbol WEST. The accompanying market quotations represent the high and low closing sales price per share for the indicated periods, as reported by NASDAQ (NMS). The Corporation is subject to risk-based capital guidelines established by the Federal Reserve Board requiring minimum capital levels based on the perceived risk of assets and off-balance sheet instruments. The Corporation's strong capital position, adequate allowance for credit losses, low intangible asset level and limited off-balance sheet exposure resulted in capital ratios exceeding regulatory minimums as presented in the chart at left. Bank regulators also adopted five capital category definitions applicable to banks for certain regulatory supervision purposes, ranging from well-capitalized to critically undercapitalized. At December 31, 1993, the Corporation and its banking subsidiaries exceeded the regulatory criteria for well-capitalized institutions and qualified for the minimum FDIC insurance assessment. Double leverage is created when debt is incurred to acquire subsidiaries or to increase a subsidiary's capital and when intangible assets arise from acquisitions. The double leverage ratio is calculated for the Parent Company as the sum of investment in subsidiaries plus goodwill and core deposit intangibles divided by total shareholders' equity. Regulators have not specified a maximum level of double leverage. At December 31, 1993, the Corporation's double leverage ratio improved to .98 compared to 1.11 and 1.04, respectively, at December 31, 1992 and 1991. RISK BASED CAPITAL RATIOS (Graphic material omitted, replaces the two graphs presented on this page) Regulatory Capital Levels West One at December 31, 1993 1992 Well Minimum Leverage ratio 7.61% 6.90% 5.00% 3.00% Tier 1 capital 9.53 8.91 6.00 4.00 Total capital 11.80 11.41 10.00 8.00
-15- QUARTERLY COMMON STOCK STATISTICS
Fourth Third Second First 1993 Market quotations High $31 5/8 $29 1/2 $26 3/8 $27 1/4 Low 23 7/8 24 3/8 22 7/8 24 1/2 Quarter-end 28 1/2 29 1/2 24 3/4 25 3/4 Per share Cash dividends declared .18 .155 .155 -- Cash dividends paid .155 .155 .155 .13 Book value, quarter-end 17.96 16.76 16.20 15.71 1992 Market quotations High $25 3/8 $21 1/8 $21 5/8 $19 3/4 Low 20 3/8 19 3/8 18 15 3/4 Quarter-end 25 3/8 20 1/2 20 5/8 19 3/4 Per share Cash dividends declared .285 .13 .13 .13 Cash dividends paid .13 .13 .13 .12 Book value, quarter-end 15.14 14.90 14.49 13.46
See Note 14 to the financial statements -16- NET INTEREST INCOME Net interest income is the Corporation's principal source of revenue and is comprised of interest income on earning assets minus interest expense on interest bearing liabilities. Net interest margin is net interest income expressed as a percent of average earning assets and represents the difference between the yield on earning assets and the composite interest rate paid on all sources of funds. Net interest income is adjusted to a taxable equivalent basis to present income earned on taxable and tax-exempt assets on a comparable basis. References to net interest income and net interest margin in this discussion represent taxable equivalent amounts. Net interest income was $322.4 million in 1993, an increase of 28% from the prior year. Comparable increases were 20% in 1992 and 12% in 1991. Net interest income accounted for 76% of total revenue in 1993, 75% in 1992 and 74% in 1991. Net interest income is influenced primarily by changes in the volume and mix of earning assets and funding sources, market rates of interest and income tax rates. Average earning assets increased $1.32 billion or 25% to $6.61 billion in 1993 following increases of 13% and 10%, respectively, in 1992 and 1991. Approximately 40% of the increase in 1993 was attributable to loans acquired in the Washington Acquisition. Loans represent the highest yielding component of earning assets and accounted for 74% of average earning assets in 1993, up from 71% in 1992 and 72% in 1991. A significant shift in the mix of sources of funds improved net interest income and net interest margin in 1993 and 1992. Depositors, inclined to maintain liquid investments during periods of low interest rates, shifted funds from certificates of deposit to noninterest bearing demand deposits and lower cost interest bearing demand and savings deposits. Average noninterest bearing funds increased to 16% of total sources of funds in 1993 from 14% in 1992 and 12% in 1991, resulting in lower interest expense, higher net interest income and a wider net interest margin. The shift in deposit mix may result in a higher risk of future disintermediation of funding sources as customers seek higher yielding investment alternatives. Net interest margin increased 11 basis points to 4.87% in 1993 from 4.76% in 1992. Net interest margin was 4.48% in 1991. The yield on earning assets and the cost of funds both declined in 1993, reflecting lower money market interest rates. Improvements in the mix of both earning assets and sources of funds, combined with aggressive efforts to reduce funding costs and to price loans profitably, resulted in a 75 basis point decrease in the cost of funds compared to a 64 basis point decline in the earning asset yield. Interest income foregone net of tax on nonperforming loans declined to $1.1 million in 1993 from $1.7 million in 1992 and $2.2 million in 1991. Nonaccrual loans declined to .44% of total loans at December 31, 1993 from .46% at year-end 1992 and 1.20% at year-end 1991. Net interest income and net interest margin also improved in 1992 due to a favorable interest rate environment, steeper yield curve, a higher volume of earning assets and improved asset quality. The accompanying table presents the detailed rate and volume analysis of earning assets and interest bearing liabilities for the last three years. AVERAGE EARNING ASSETS, Percent at December 31, (Graphic material omitted) 1993 1992 1991 1990 1989 Loans 74.2% 71.1% 71.5% 72.9% 67.5% Securities 25.2 25.0 23.7 23.2 23.0 Short-term investments .6 3.9 4.8 3.9 9.5 Total 100.0% 100.0% 100.0% 100.0% 100.0%
-17- CONSOLIDATED AVERAGE BALANCE SHEETS AND TAXABLE EQUIVALENT INTEREST RATE AND VOLUME ANALYSIS
1993-1992 Average Yield Interest Change in 1993-1992 Change Average Balance or Rate Income/ Expense Income/ Attributable to Dollars in thousands 1993 1992 1993 1992 1993 1992 Expense Volume Rate Assets Due from banks-interest bearing $23,894 $184,914 3.26% 4.02% $779 $7,431 $(6,652) $(5,467) $(1,185) Federal funds sold, securities purchased under agreements to resell and other 18,603 21,459 3.18 3.95 592 847 (255) (104) (151) Securities: U.S. Treasury and Government agencies 578,522 537,567 5.51 6.86 31,869 36,875 (5,006) 2,655 (7,661) State and municipal bonds 457,377 248,134 8.35 9.33 38,202 23,161 15,041 17,705 (2,664) Mortgage-backed securities 379,799 321,487 5.75 6.83 21,842 21,971 (129) 3,648 (3,777) Other 250,822 214,202 6.50 7.10 16,292 15,209 1,083 2,452 (1,369) Total securities 1,666,520 1,321,390 6.49 7.36 108,205 97,216 10,989 23,334 (12,345) Loans: Real estate 1,902,330 1,365,050 8.57 9.49 163,060 129,518 33,542 47,024 (13,482) Commercial and agriculture 1,796,611 1,377,120 7.22 7.68 129,660 105,765 23,895 30,596 (6,701) Commercial - tax exempt 109,573 88,366 8.77 9.52 9,605 8,413 1,192 1,899 (707) Consumer 943,815 800,980 9.64 10.55 90,951 84,518 6,433 14,192 (7,759) Leases 151,468 135,670 8.55 9.73 12,946 13,205 (259) 1,446 (1,705) Total loans 4,903,797 3,767,186 8.28 9.06 406,222 341,419 64,803 96,119 (31,316) Total earning assets 6,612,814 5,294,949 7.80 8.44 515,798 446,913 68,885 104,765 (35,880) Cash and due from banks 470,961 366,761 Premises and equipment 122,679 99,680 Allowance for credit losses (72,187) (59,055) Other nonearning assets 177,750 145,796 Total assets $7,312,017 $5,848,131 Liabilities and shareholders' equity Interest bearing deposits: Interest bearing demand $696,996 $521,319 2.13 2.79 14,879 14,532 347 4,220 (3,873) Regular and money market savings 1,856,420 1,353,181 2.88 3.58 53,437 48,476 4,961 15,710 (10,749) Time certificates under $100,000 1,577,139 1,427,677 4.62 5.45 72,921 77,874 (4,953) 7,647 (12,600) Time certificates $100,000 and over 456,431 388,752 4.13 4.95 18,839 19,256 (417) 3,067 (3,484) Total interest bearing deposits 4,586,986 3,690,929 3.49 4.34 160,076 160,138 (62) 34,665 (34,727) Federal funds purchased and securities sold under agreements to repurchase 665,106 624,864 2.80 3.36 18,592 20,995 (2,403) 1,289 (3,692) Other short-term borrowings 215,389 111,179 3.04 3.52 6,543 3,911 2,632 3,229 (597) Long-term debt 117,990 114,727 6.97 8.76 8,224 10,046 (1,822) 279 (2,101) Total interest bearing funds 5,585,471 4,541,699 3.46 4.30 193,435 195,090 (1,655) 40,122 (41,777) Noninterest bearing funds 1,027,343 753,250 Total sources of funds 6,612,814 5,294,949 2.93 3.68 193,435 195,090 Noninterest bearing deposits 1,102,952 812,657 Other liabilities 90,696 69,346 Shareholders' equity 532,898 424,429 Less noninterest bearing funds (1,027,343) (753,250) Total liabilities and shareholders' equity $7,312,017 $5,848,131 Net interest margin and income 4.87% 4.76% $322,363 $251,823 $70,540 $64,643 $5,897 -18- 1992-1991 Average Yield Interest Change in 1992-1991 Change Average Balance or Rate Income/ Expense Income/ Attributable to Dollars in thousands 1991 1991 1991 Expense Volume Rate Assets Due from banks-interest bearing $199,031 6.18% $12,305 $(4,874) $(821) $(4,053) Federal funds sold, securities purchased under agreements to resell and other 27,752 6.16 1,709 (862) (334) (528) Securities: U.S. Treasury and Government agencies 535,706 8.05 43,142 (6,267) 149 (6,416) State and municipal bonds 203,711 9.70 19,761 3,400 4,171 (771) Mortgage-backed securities 229,759 8.50 19,536 2,435 6,773 (4,338) Other 141,205 8.72 12,309 2,900 5,495 (2,595) Total securities 1,110,381 8.53 94,748 2,468 16,567 (14,099) Loans: Real estate 1,135,046 10.15 115,233 14,285 22,196 (7,911) Commercial and agricultural 1,222,859 9.74 119,155 (13,390) 13,843 (27,233) Commercial - tax-exempt 83,141 10.55 8,774 (361) 530 (891) Consumer 782,519 12.14 95,000 (10,482) 2,196 (12,678) Leases 125,625 10.17 12,780 425 993 (568) Total loans 3,349,190 10.48 350,942 (9,523) 40,958 (50,481) Total earning assets 4,686,354 9.81 459,704 (12,791) 55,684 (68,475) Cash and due from banks 298,624 Premises and equipment 90,829 Allowance for credit losses (50,895) Other nonearning assets 140,442 Total assets $5,165,354 Liabilities and shareholders' equity Interest bearing deposits: Interest bearing demand $407,326 4.37 17,810 (3,278) 4,197 (7,475) Regular and money market savings 999,008 5.28 52,768 (4,292) 15,552 (19,844) Time certificates under $100,000 1,461,895 7.00 102,285 (24,411) (2,343) (22,068) Time certificates $100,000 and over 411,040 6.73 27,667 (8,411) (1,433) (6,978) Total interest bearing deposits 3,279,269 6.12 200,530 (40,392) 22,967 (63,359) Federal funds purchased and securities sold under agreements to repurchase 610,014 5.50 33,573 (12,578) 799 (13,377) Other short-term borrowings 135,685 5.82 7,901 (3,990) (1,250) (2,740) Long-term debt 86,024 9.27 7,976 2,070 2,534 (464) Total interest bearing funds 4,110,992 6.08 249,980 (54,890) 24,168 (79,058) Noninterest bearing funds 575,362 Total sources of funds 4,686,354 5.33 249,980 Noninterest bearing deposits 638,029 Other liabilities 67,649 Shareholders' equity 348,684 Less noninterest bearing funds (575,362) Total liabilities and shareholders' equity $5,165,354 Net interest margin and income 4.48% $209,724 $42,099 $31,516 $10,583
Interest income is adjusted to present tax-exempt revenue from securities and loans on a basis comparable with taxable revenue, utilizing the statutory federal and the applicable state tax rates. The taxable equivalent adjustments were $18,473 in 1993, $13,125 in 1992 and $12,152 in 1991. Nonaccrual loans are included in average balances; however, interest income has not been accrued on such loans. Net changes which are attributable to volume and rate are allocated proportionately. -19- COMPOSITION OF AVERAGE EARNING ASSETS
1993 1992 1991 1990 1989 Loans Real estate 28.8% 25.8% 24.2% 24.4% 22.9% Commercial and agricultural 28.8 27.7 27.9 28.1 26.1 Consumer 14.3 15.1 16.7 18.0 16.5 Leases 2.3 2.5 2.7 2.4 2.0 Total loans 74.2 71.1 71.5 72.9 67.5 Securities United States Treasury and Government agencies 8.8 10.2 11.4 11.8 14.5 State and municipal bonds 6.9 4.7 4.4 4.4 3.8 Mortgage-backed securities 5.7 6.1 4.9 4.1 1.8 Other 3.8 4.0 3.0 2.9 2.9 Total securities 25.2 25.0 23.7 23.2 23.0 Short-term investments .6 3.9 4.8 3.9 9.5 Total 100.0% 100.0% 100.0% 100.0% 100.0%
LOANS Favorable economic conditions in the Corporation's market area created strong loan demand in 1993. Recent acquisitions in Washington also presented new market opportunities. Loans are the Corporation's primary earning asset and totaled $5.35 billion at December 31, 1993, an increase of 18% from year-end 1992. Loans increased 30% in 1992 and 6% in 1991. Residential real estate loans totaling $421 million were originated and sold in the secondary market during 1993. The average loan to deposit ratio was 86.18% in 1993 compared to 83.65% in 1992 and 85.50% in 1991. Real estate loans were $2.15 billion at December 31, 1993 and represented 40% of total loans. Residential real estate loans increased 23% to $1.10 billion at December 31, 1993 following increases of 46% and 10%, respectively, in 1992 and 1991. Low mortgage interest rates, a high rate of inmigration to the region and the consolidation of consumer debt into home equity credit lines in response to tax legislation all contributed to the increase in 1993. Commercial real estate loans increased 18% to $808 million at December 31, 1993 compared to increases of 47% in 1992 and 9% in 1991. A major share of the increase in 1993 represented loans to local business customers for expansion of operations and facilities in response to consumer demand for products and -20- services. Less than 1% of commercial real estate loans represented projects outside the Corporation's local market area. Construction loans increased 54% to $245 million at December 31, 1993 and represented 11% of total real estate loans compared to 9% a year ago. Construction loans increased 32% in 1992 and 12% in 1991. Dwelling units authorized in the Corporation's market area increased 13% in 1993 due to an acceleration in single and multi-family residential construction. Commercial and agricultural loans totaled $2 billion at December 31, 1993, a 12% increase from the prior year, compared to increases of 30% in 1992 and 7% in 1991. The commercial loan increase in 1993 was consistent with improved regional economic conditions as measured by increases in employment, population, personal income and retail sales. Management continues to encourage growth in the small-to-middle market by emphasizing efficient and personal service provided by the Corporation's community-based lending officers. Agricultural loans increased 9% to $392 million at December 31, 1993 as the Corporation maintained its position as one of the leading agricultural lenders in the nation. Consumer loans increased 19% to $1.04 billion at December 31, 1993 following an increase of 10% in 1992 and no change in 1991. Bankcard loan growth reflected increases in merchants served, credit cards outstanding and transactions. Student, recreational vehicle and boat loans also contributed to the increase. SECURITIES The Corporation's securities portfolio is comprised of investment quality, marketable debt securities. Management's goal is to maximize long-term returns while maintaining an acceptable level of risk. The Corporation's securities portfolio declined 2% to $1.63 billion at December 31, 1993 to accommodate strong loan growth. Securities increased 36% in 1992 due to the Washington Acquisition and 18% in 1991. State and municipal bonds increased 56% to $565 million at December 31, 1993 compared to the prior year due to increased taxable equivalent yields resulting from higher federal tax rates. Debt securities the Corporation has the ability and intent to hold to maturity are reported at cost adjusted for the amortization of premiums and accretion of discounts. The aggregate market value of securities held to maturity at December 31, 1993 exceeded aggregate cost by $30 million. Securities available for sale may be sold as a part of the Corporation's asset and liability management process and are reported at market value. Unrealized gains or losses related to the adjustment of securities to market value are recorded net LOAN GROWTH
Increase Increase Increase (Decrease) (Decrease) from from from Dollars in thousands at December 31, 1993 1992 1992 1991 1991 1990 Real estate $2,150,835 24.0% $1,734,076 47.1% $1,179,101 8.8% Commercial and agricultural 1,996,865 11.7 1,787,451 29.5 1,379,891 6.7 Consumer 1,038,678 18.7 875,203 9.8 797,076 (.1) Leases 168,119 24.4 135,183 (4.4) 141,383 19.6 Total $5,354,497 18.2% $4,531,913 29.6% $3,497,451 6.2%
-21- COMPOSITION OF SOURCES OF FUNDS BASED ON AVERAGE BALANCES
1993 1992 1991 1990 1989 Interest bearing demand deposits 10.5 % 9.8 % 8.7 % 9.1 % 9.1 % Savings deposits 28.1 25.6 21.3 20.9 22.8 Certificates of deposit 30.8 34.3 40.0 41.6 39.3 Noninterest bearing funds 15.5 14.2 12.3 12.3 11.9 Short-term borrowings 13.3 13.9 15.9 14.5 15.2 Long-term debt 1.8 2.2 1.8 1.6 1.7 Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
of tax as a component of shareholders' equity. At December 31, 1993, the market value of securities available for sale exceeded cost by $15 million. SOURCES OF FUNDS Earning assets are funded primarily by deposits acquired from a broad base of local markets. Deposits increased $301 million or 5% to $5.94 billion at December 31, 1993 following increases of 39% in 1992, due primarily to the Washington Acquisition, and 5% in 1991. Growth in core deposits of $265 million or 5% to $5.47 billion accounted for most of the deposit increase in 1993. Core deposits represented stable funds from local customers and funded 78% of earning assets at year-end 1993. Average short-term borrowings as a percent of average earning assets declined to 13% in 1993 from 14% in 1992 and 16% in 1991. Other short-term borrowings include United States Treasury borrowings, Federal Home Loan Bank borrowings and commercial paper. The 1993 increase in other short-term borrowings was primarily attributable to United States Treasury borrowings, the least expensive source of borrowed funds available. ASSET AND LIABILITY MANAGEMENT The Corporation's assets and liabilities are managed to maximize long-term shareholder returns by optimizing net interest income within the constraints of maintaining high credit quality, conservative interest rate risk disciplines and prudent levels of leverage and liquidity. The Asset and Liability Committee meets regularly to monitor the composition of the balance sheet, to assess current and projected interest rate trends and to formulate strategies consistent with established objectives for liquidity, interest rate risk and capital adequacy. LIQUIDITY The objective of liquidity management is to ensure the availability of sufficient cash flows to meet all financial commitments and to capitalize on opportunities for profitable business expansion. Cash flow from operations contributes significantly to liquidity. Borrowings represent an important and manageable source of liquidity based on the Corporation's ability to raise new funds and renew maturing liabilities in a variety of markets. Liquidity is also obtained by maintaining assets that are readily convertible to cash at minimal cost through maturities and sales. Contingency plans exist and could be implemented on a timely basis to minimize the risk associated with dramatic changes in market conditions. Deposit generation through the Corporation's extensive retail branch network is an important source of liquidity. Deposits increased at a five-year annual compound growth rate of 11%. Core deposits, comprised of certificates of deposit under $100 thousand and local market transaction and savings accounts, are a highly reliable source of funds. Core deposits represented 92% of total deposits at year-ends 1993 and 1992, and 91% at year-end 1991. The Corporation is able to attract but has not used brokered deposits from outside its market area. Securities available for sale totaled $1.06 billion at December 31, 1993, representing a highly accessible source of liquidity. Held to maturity securities will provide liquidity through maturities of $40 million in 1994. Liquidity is also available through a variety of domestic money and capital markets. Short-term borrowings provide a consistent source of funding and are comprised primarily of securities sold under agreements to repurchase, United States Treasury borrowings and federal funds purchased. Additional amounts of short-term funds are raised through commercial paper and bank notes. Back-up -22- sources of liquidity are provided by credit lines available to West One Bancorp. Washington, Oregon and Utah subsidiaries have access to liquidity and matched funding from the Federal Home Loan Bank of Seattle. Additional liquidity could be generated through borrowings from the Federal Reserve Bank of San Francisco. The Corporation's investment grade ratings by Moody's and Standard & Poor's provide flexibility in meeting liquidity requirements through access to national markets. Thompson BankWatch's issuer rating for West One Bancorp is "B" and the short-term ratings of the Corporation and West One Bank, Idaho are "TBW-1," the highest rating available. Asset liquidity also arises from scheduled loan repayments. At December 31, 1993, scheduled principal payments due within one year were $1.96 billion or 37% of loans. The Corporation sells a majority of its residential mortgage loan production, contributing to overall liquidity. In addition, portions of the Corporation's residential mortgage, consumer and credit card loan portfolios could be securitized and sold to increase liquidity. The Corporation maintains a position of short-term investments consisting of interest bearing deposits, federal funds sold and securities purchased under agreements to resell that averaged $42 million in 1993. The position provides flexibility in balancing the fluctuating borrowing requirements of customers with the Corporation's daily funding capacity. In 1994, $14 million of long-term debt matures. The debt obligations will be met through additional external financing and internally generated cash. Aggregate long-term debt maturities over the next five years total $66 million. INTEREST RATE SENSITIVITY The Corporation's net interest income is affected by changes in the level of market interest rates. Management's objectives are to control interest rate risk and to ensure predictable and consistent growth in net interest income. Interest rate risk management focuses on fluctuations in net interest income identified through computer simulations to evaluate volatility under varying interest rate, spread and volume assumptions. The risk is quantified and compared against risk tolerance levels designed to maintain stability in net interest income. Sensitivity analysis indicated that the Corporation was moderately liability sensitive and within established tolerance limits during 1993. The Asset and Liability Maturity Repricing Schedule on page 24 depicts variable rate instruments in the time period the balances are eligible for repricing and fixed rate instruments according to repayment schedules. The analysis provides a general measure of interest rate risk but does not address complexities such as prepayment risk, interperiod sensitivities, interest rate floors and ceilings imposed on financial instruments, interest rate dynamics and customers' response to interest rate changes. PROVISION AND ALLOWANCE FOR CREDIT LOSSES The provision for credit losses is the expense incurred to maintain an adequate allowance for anticipated credit losses. Actual credit losses, net of recoveries of previously charged-off loans, are charged directly against the allowance. The allowance for credit losses reflects management's current estimate of the amount required to absorb losses on existing loans and commitments to extend credit. Determination of the appropriate level of the allowance is based on an analysis of various factors including historical loss experience based on volumes and types of loans; volumes and trends in delinquencies and nonaccruals; trends in portfolio volume, maturity and composition; results of internal or independent external credit reviews; industrial and geographical concentrations; and anticipated economic conditions. Each affiliate regularly evaluates its allowance for credit losses. The adequacy of the allowance is subject to quarterly review by an executive committee and the audit committee of the Board of Directors. Based on this analysis, management considers the allowance for credit losses to be adequate. The Corporation's asset quality ratios ranked among the best in the industry in 1993. Net charge-offs were $7.1 million or .14% of average loans in 1993 compared to $9.8 million or .26% of average loans in 1992. In 1991, net charge-offs totaled $24.5 million or .73% of average loans. During the last two years, gross charge-offs totaled $35.6 million while recoveries amounted to $18.7 million for a recovery ratio of 53%. Nonperforming assets declined 9% to $28 million at December 31, 1993 from $31 million at December 31, 1992. At December 31, 1991 nonperforming assets were $54 million. As a percent of total assets, nonperforming assets were .37% at December 31, 1993 compared to .44% a year ago and 1.00% at December 31, 1991. Other credit risk assets include loans with serious concern, defined as loans classified as doubtful but accruing interest, and accruing loans past due 90 days or more. At December 31, 1993, other credit risk assets totaled $5 million, a 25% decrease from $7 million at December 31, 1992. Other credit risk assets totaled $8 million at December 31, 1991. (Graphic material omitted) Core depostis - Certificates of deposit under $100,000 and transaction and savings accounts of local market area customers. -23- ASSET AND LIABILITY MATURITY REPRICING SCHEDULE
Within Three Six to One to Five to Over Three to Six Twelve Five Ten Ten Dollars in millions at December 31, 1993 Months Months Months Years Years Years Total Loans $2,975.8 $260.8 $378.3 $1,097.4 $417.4 $224.8 $5,354.5 Securities: Available for sale 283.9 52.4 152.9 517.9 27.0 26.5 1,060.6 Held to maturity 14.0 3.7 22.0 151.3 308.2 66.0 565.2 Short-term investments 14.1 -- -- -- -- -- 14.1 Due from banks-interest bearing .3 .2 .1 -- -- -- .6 Nonearning assets -- -- -- -- -- 676.4 676.4 Total assets 3,288.1 317.1 553.3 1,766.6 752.6 993.7 7,671.4 Deposits: Interest bearing demand 729.2 -- -- -- -- -- 729.2 Regular and money market savings 1,971.2 -- -- -- -- -- 1,971.2 Time certificates under $100,000 450.0 296.9 269.2 413.7 74.5 .9 1,505.2 Time certificates $100,000 and over 252.8 76.9 61.5 68.0 11.2 .2 470.6 Short-term borrowings 870.3 8.9 15.4 4.3 -- -- 898.9 Long-term debt 47.4 6.0 2.0 10.9 .2 50.0 116.5 Noninterest bearing liabilities and shareholders' equity -- -- -- -- -- 1,979.8 1,979.8 Total liabilities and shareholders' equity 4,320.9 388.7 348.1 496.9 85.9 2,030.9 7,671.4 Net interest rate sensitivity gap $(1,032.8) $(71.6) $205.2 $1,269.7 $666.7 $(1,037.2) $ --
The provision for credit losses was $13.4 million in 1993, a 6% decrease from the $14.3 million reported in 1992. In 1991, the provision for credit losses was $29.7 million. The allowance for credit losses was $75 million at December 31, 1993, a 10% increase from $68 million a year ago. At December 31, 1991, the allowance for credit losses was $53 million. The allowance for credit losses represented 1.40% of total loans at December 31, 1993 compared to 1.51% and 1.52%, respectively, at year-ends 1992 and 1991. The allowance for credit losses covered 311% of nonperforming loans at December 31, 1993. CREDIT RISK The Corporation's credit policies are designed to minimize losses. The policies require extensive evaluation of new requests for credit and continuing review of existing credits to ensure early identification and monitoring of any evidence of deteriorating loan quality, and quantification of possible loss. A loan is placed on nonaccrual status when all or a portion of the interest is deemed uncollectible. The Corporation's objective is to maintain a loan portfolio that is diverse in terms of the type of loans and borrowers, industry concentration, economic conditions and geographic distribution in an effort to minimize the adverse impact of a single event. The Corporation's recent geographic expansion in Washington and Oregon resulted in a more diversified loan portfolio. In 1993, 50% of the Corporation's loans were in Idaho compared to 81% in 1985. Strong economic conditions in the Corporation's market area are evidenced by healthy commercial and residential real estate and construction industries. All four states experienced significant population growth in 1993 indicating continued strong demand for -24- new housing units. Commercial vacancy rates in the major metropolitan areas of Boise, Seattle, Portland and Salt Lake City are running well below the national average. Commercial loans, the second largest loan category, included no significant industry concentrations. Agricultural and related loans represented the largest single industry concentration in the loan portfolio, accounting for 10% of total loans at December 31, 1993. The average balance per commercial and agricultural loan was $86 thousand at December 31, 1993. Foreign loans totaled only $3 million at December 31, 1993. At year-end 1993, agreements to extend credit totaled $2.26 billion compared to $1.56 billion and $1.25 billion at year-ends 1992 and 1991, respectively. Economic conditions CREDIT RISK ASSETS
Dollars in thousands 1993 1992 1991 1990 1989 Nonperforming assets at December 31 Nonaccrual loans $23,732 $20,966 $41,862 $31,423 $33,982 Restructured loans 357 396 539 404 791 Other real estate owned 4,312 9,739 11,570 7,872 6,954 Total $28,401 $31,101 $53,971 $39,699 $41,727 Other credit risk assets at December 31 Loans with serious concern $1,905 $4,182 $4,775 $4,133 $6,947 Accruing loans past due 90 days or more 2,991 2,379 2,825 4,139 4,560 Provision and allowance for credit losses Allowance for credit losses 74,923 68,243 53,048 47,823 49,755 Net charge-offs 7,053 9,821 24,455 13,600 11,144 Provision for credit losses 13,383 14,308 29,680 11,668 7,514 Ratios Nonperforming assets to loans and other real estate owned .53% .68% 1.54% 1.20% 1.42% Nonperforming assets to shareholders' equity and allowance for credit losses 4.07 5.57 12.85 10.43 11.98 Nonperforming assets to total assets .37 .44 1.00 .80 .88 Allowance for credit losses to total loans 1.40 1.51 1.52 1.45 1.70 Allowance for credit losses to nonperforming loans 311.03 319.46 125.11 150.26 143.09 Net charge-offs to average loans .14 .26 .73 .44 .41
-25- impact credit risk and the Corporation's customers may be adversely impacted by a downturn in the national economy. NONINTEREST INCOME Noninterest income increased 23% to $102.5 million in 1993 following increases of 15% in 1992 and 17% in 1991. Other service charges, fees and commissions included bank card income that increased $6.8 million or 55% in 1993 due to increased credit cards outstanding, transaction volumes and merchants served. Other income included gains on the sale of real estate loans and servicing which increased $1.1 million or 22% in 1993 as a result of significant residential mortgage refinancing activity due to low interest rates. Noninterest income in 1993 also reflected the first full-year impact of the Washington Acquisition. An increasing percentage of the Corporation's earnings is noninterest income generated from a wide variety of fee-based financial products and services. Over the past five years, the compound growth rate for noninterest income, excluding securities gains and losses, was 19% and exceeded the five-year compound growth rate of 12% for assets. NONINTEREST EXPENSE Noninterest expense increased 26% to $272.4 million in 1993 compared with increases of 18% and 12%, respectively, in 1992 and 1991. The current year increase reflected the first full-year impact of the Washington Acquisition. Employee benefits expense in 1993 included $1.7 million of post-retirement benefits in accordance with SFAS No. 106. The interest rate environment in 1993 that was particularly favorable to mortgage origination volume also caused significant prepayments in the mortgage servicing portfolio. Increased prepayments reduced loans serviced and necessitated an acceleration of the amortization of purchased mortgage servicing rights. The amortization increased to $4.1 million in 1993 from $1.4 million in 1992. In 1993, the Corporation established a telephone response system providing immediate customer service seven days a week, twenty-four hours a day. The Customer Service Center is a convenient alternative for customers and reduces retail branch expenses. INCOME TAXES The effective income tax rate for the year-ended December 31, 1993 was 31.0% compared to 30.6% in 1992 and 28.3% in 1991. The current year change reflected the increase in the corporate federal tax rate to 35% in 1993 from 34% in 1992. Note 13 to the financial statements reconciles the effective income tax rates to the federal statutory rates. The implementation of SFAS No. 109, "Accounting for Income Taxes," had no material effect on the income statement or balance sheet. INFLATION In the opinion of management, inflation and changes in prices have not had a material effect on the Corporation's financial results in 1993, 1992 and 1991. -26- QUARTERLY FINANCIAL DATA (unaudited)
Dollars in thousands, except per share data Fourth Third Second First 1993 Interest income $127,442 $126,640 $123,823 $119,420 Interest expense 46,713 48,169 49,018 49,535 Net interest income 80,729 78,471 74,805 69,885 Provision for credit losses 2,983 3,894 3,414 3,092 Net interest income after provision for credit losses 77,746 74,577 71,391 66,793 Noninterest income 27,484 26,508 25,362 23,155 Noninterest expense 73,401 68,873 66,063 64,101 Income before taxes 31,829 32,212 30,690 25,847 Provision for income taxes 9,396 10,437 9,876 7,682 Net income $22,433 $21,775 $20,814 $18,165 Primary earnings per share* $.66 $.65 $.63 $.55 Fully diluted earnings per share* .63 .62 .60 .53 Net interest margin** 4.96% 4.92% 4.82% 4.79% 1992 Interest income $121,175 $108,402 $100,830 $103,381 Interest expense 52,116 47,050 45,699 50,225 Net interest income 69,059 61,352 55,131 53,156 Provision for credit losses 2,552 2,672 4,238 4,846 Net interest income after provision for credit losses 66,507 58,680 50,893 48,310 Noninterest income 23,306 20,448 20,189 19,518 Noninterest expense 64,931 55,398 49,014 47,181 Income before taxes 24,882 23,730 22,068 20,647 Provision for income taxes 7,490 7,227 6,804 6,434 Net income $17,392 $16,503 $15,264 $14,213 Primary earnings per share* $.54 $.52 $.53 $.50 Fully diluted earnings per share* .51 .50 .50 .47 Net interest margin 4.66% 4.86% 4.88% 4.66%
* First and second 1993 quarter and 1992 quarter amounts have been restated for the two-for-one stock split paid August 13, 1993. ** Reflects first and second quarter adjustments to provide for the retroactive federal income tax rate increase. -27- CONSOLIDATED BALANCE SHEETS
Dollars in thousands at December 31, 1993 1992 Assets Cash and due from banks (Note 14) $450,384 $525,162 Due from banks - interest bearing 599 162,500 Federal funds sold, securities purchased under agreements to resell and other 14,055 28,210 Securities (Note 2): Available for sale - market value of $163,025 in 1992 1,060,650 160,989 Held to maturity - market value of $595,146 and $1,519,774 565,165 1,496,480 Total securities 1,625,815 1,657,469 Loans, net of unearned income of $40,244 and $38,681 (Note 14): Real estate 2,150,835 1,734,076 Commercial and agricultural 1,996,865 1,787,451 Consumer 1,038,678 875,203 Leases 168,119 135,183 Total loans 5,354,497 4,531,913 Allowance for credit losses (Note 3) (74,923) (68,243) Net loans 5,279,574 4,463,670 Premises and equipment (Note 4) 122,828 120,587 Interest receivable 50,141 49,513 Other assets 127,957 126,526 Total assets $7,671,353 $7,133,637 -28- Dollars in thousands at December 31, 1993 1992 Liabilities Deposits: Noninterest bearing $1,260,869 $1,135,967 Interest bearing demand 729,247 696,656 Regular and money market savings 1,971,211 1,717,189 Time certificates under $100,000 1,505,177 1,651,344 Time certificates $100,000 and over 470,543 435,183 Total deposits 5,937,047 5,636,339 Short-term borrowings (Note 6): Federal funds purchased and securities sold under agreements to repurchase 568,295 668,631 Other 330,609 141,392 Long-term debt (Note 7) 116,460 117,649 Other liabilities 95,376 79,801 Total liabilities 7,047,787 6,643,812 Commitments and contingencies (Note 8) Shareholders' equity (Note 9) Common stock - $1.00 par value; 75,000,000 shares authorized; 34,718,731 and 32,351,160 shares outstanding 34,719 32,351 Capital surplus 304,413 249,627 Retained earnings 275,351 207,847 Unrealized gain on securities, net of tax 9,083 - Total shareholders' equity 623,566 489,825 Total liabilities and shareholders' equity $7,671,353 $7,133,637
The accompanying notes are an integral part of the financial statements. -29- CONSOLIDATED STATEMENTS OF INCOME
Dollars in thousands, except per share data, for the year ended December 31, 1993 1992 1991 Interest income Loans $402,550 $338,290 $347,563 Short-term investments 1,371 8,278 14,014 Interest and dividends on securities: United States Treasury and Government agencies 31,172 35,711 41,946 State and municipal bonds 25,056 15,392 13,285 Mortgage-backed securities 21,842 21,971 19,536 Other 15,334 14,146 11,208 Total interest income 497,325 433,788 447,552 Interest expense Deposits 160,076 160,138 200,530 Federal funds purchased and securities sold under agreements to repurchase 18,592 20,995 33,573 Other short-term borrowings 6,543 3,911 7,901 Long-term debt 8,224 10,046 7,976 Total interest expense 193,435 195,090 249,980 Net interest income 303,890 238,698 197,572 Provision for credit losses (Note 3) 13,383 14,308 29,680 Net interest income after provision for credit losses 290,507 224,390 167,892 Noninterest income Trust fees and commissions 13,627 11,819 10,902 Service charges on deposit accounts 36,588 30,882 25,538 Other service charges, fees and commissions 41,079 30,569 25,717 Other 10,720 8,501 8,391 Securities gains 495 1,690 2,156 Total noninterest income 102,509 83,461 72,704 Noninterest expense (Note 12) Salaries and employee benefits (Note 11) 128,886 104,024 90,485 Other 143,552 112,500 92,651 Total noninterest expense 272,438 216,524 183,136 Income before taxes 120,578 91,327 57,460 Provision for income taxes (Note 13) 37,391 27,955 16,261 Net income $83,187 $63,372 $41,199 Primary earnings per share $2.50 $2.09 $1.47 Fully diluted earnings per share 2.38 1.98 1.44
The accompanying notes are an integral part of the financial statements. -30- CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Unrealized Common Capital Retained Securities Dollars in thousands, except per share data Stock Surplus Earnings Gains Total Balance at December 31, 1990 $27,568 $167,574 $137,550 $332,692 Net income - - 41,199 41,199 Cash dividends declared - $.48 per share - - (13,339) (13,339) Issuance of common stock - 494,732 shares 494 5,417 (247) 5,664 Tax benefit of stock options exercised - 832 - 832 Balance at December 31, 1991 28,062 173,823 165,163 367,048 Net income - - 63,372 63,372 Cash dividends declared - $.675 per share - - (20,983) (20,983) Issuance of common stock - 3,375,062 shares 3,375 66,234 (1,687) 67,922 Acquisition of Yakima Valley Bank - 913,694 shares 914 8,758 1,982 11,654 Tax benefit of stock options exercised - 812 - 812 Balance at December 31, 1992 32,351 249,627 207,847 489,825 Net income - - 83,187 83,187 Cash dividends declared - $.49 per share - - (16,421) (16,421) Issuance of common stock- 2,161,317 shares 2,162 52,300 (86) 54,376 Acquisition of Ben Franklin National Bank - 206,254 shares 206 2,011 824 3,041 Tax benefit of stock options exercised - 475 - 475 Unrealized gain on securities, net of tax (Note 1) - - - $9,083 9,083 Balance at December 31, 1993 $34,719 $304,413 $275,351 $9,083 $623,566
The accompanying notes are an integral part of the financial statements. -31- CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in thousands for the year ended December 31, 1993 1992 1991 Cash flows from operating activities Net income $83,187 $63,372 $41,199 Adjustments to reconcile net income to net cash provided by operating activities: Provision for credit losses 13,383 14,308 29,680 Depreciation of premises and equipment 15,619 11,451 9,771 Amortization and accretion of premiums and discounts 14,013 9,479 7,401 Amortization of intangible and other assets 12,741 8,547 6,684 Originations of real estate loans held for sale (486,205) (304,612) (276,183) Proceeds from real estate loans sold 421,141 309,249 249,812 Net gain on sale of real estate loans (1,931) (4,756) (2,600) Net gain on sale of securities (495) (1,690) (2,156) Purchase of trading account securities (37,550) (95,266) (125,739) Sale of trading account securities 38,087 104,315 115,821 Net gain on reacquisition of long-term debt - (24) (1,768) Changes in assets and liabilities, net of effect of acquisitions: Interest receivable (156) 3,779 3,885 Other assets (10,775) (7,027) (6,153) Other liabilities 7,557 4,314 9,464 Net cash provided by operating activities 68,616 115,439 59,118 Cash flows from investing activities Change in short-term investments, maturities less than 90 days 177,186 4,776 (86,743) Purchase of securities available for sale (141,903) - - Maturity of securities available for sale 112,007 - - Sale of securities available for sale 82,043 - - Purchase of securities held to maturity (453,933) (1,102,479) (817,544) Maturity of securities held to maturity 448,916 531,152 310,501 Sale of securities held to maturity 704 157,988 312,912 Change in net loans and leases (746,376) (139,251) (208,059) Purchase of premises and equipment (16,946) (14,162) (9,256) Sale of premises and equipment 1,034 677 584 Additions to intangible assets (6,979) (9,455) (3,739) Sale of other real estate owned 9,712 10,960 5,283 Cash provided by acquisitions 2,019 370,159 - Net cash used by investing activities (532,516) (189,635) (496,061) -32- Dollars in thousands for the year ended December 31, 1993 1992 1991 Cash flows from financing activities Change in deposits 268,448 249,910 183,527 Change in short-term borrowings, maturities less than 90 days 59,305 12,721 211,512 Proceeds from short-term borrowings 128,283 164,795 179,659 Payments on short-term borrowings (100,605) (197,406) (184,513) Additions to long-term debt 27,500 5,474 55,000 Payments on long-term debt (28,943) (4,501) (17,005) Proceeds from issuance of common stock 54,526 67,922 5,664 Cash dividends paid (19,392) (15,130) (12,783) Net cash provided by financing activities 389,122 283,785 421,061 Net increase (decrease) in cash and due from banks (74,778) 209,589 (15,882) Cash and due from banks - January 1 525,162 315,573 331,455 Cash and due from banks - December 31 $450,384 $525,162 $315,573 Supplemental information Interest paid $195,094 $198,752 $253,485 Income taxes paid 36,000 19,629 14,699 Noncash activities Reclassification of securities available for sale 939,254 160,989 - Securities purchased not settled 3,761 - - Loans held for sale transferred to the loan portfolio 41,457 14,518 7,235 Loan charge-offs 16,156 19,445 32,316 Transfer of loans to other real estate owned 4,295 9,177 5,283 Additions to core deposit intangibles - 8,188 - Capital lease for computer equipment - 10,857 - Termination of capital lease for computer equipment - 6,460 - Tax benefit of stock options exercised 596 812 832 Dividends declared not paid 6,249 9,220 3,367 Acquisitions: Investments 10,125 31,807 - Loans 21,819 913,432 - Premises and equipment 612 24,631 - Intangible assets - 13,757 - Deposits 32,260 1,342,021 - Equity 3,041 11,654 -
The accompanying notes are an integral part of the financial statements. -33- NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Dollars in thousands The accounting and reporting policies of West One Bancorp and its subsidiaries (West One) conform with generally accepted accounting principles and general practice in the banking industry. West One paid a two-for-one stock split on August 13, 1993 for which prior period amounts have been restated. The significant policies are summarized below. Principles of Consolidation The consolidated financial statements include the accounts of West One with elimination of material intercompany transactions and balances. The Parent Company only financial statements (Note 15) reflect investment in subsidiaries using the equity basis of accounting. Certain reclassifications have been made to prior year financial statements to conform to the 1993 presentation. Assets owned by others and held in a fiduciary or agency capacity by subsidiaries are not included in the consolidated balance sheets. Acquisitions In May 1993, West One acquired Ben Franklin National Bank in exchange for 206,254 shares of West One's common stock. At the date of acquisition, Ben Franklin National Bank had year-to-date revenue of $2,171, year-to-date net loss of $6 and total assets of $36,531. The transaction was accounted for as a pooling of interests. Ben Franklin National Bank's financial position and results of operations were not material to West One's financial position and results of operations, and prior year financial statements have not been restated. In October 1992, West One acquired Yakima Valley Bank in exchange for 913,694 shares of West One's common stock. At the date of acquisition, Yakima Valley Bank had year-to-date revenue of $8,527, year-to-date net income of $895 and total assets of $119,493. The transaction was accounted for as a pooling of interests. Because Yakima Valley Bank's financial position and results of operations were not material to West One's financial position and results of operations, and prior year financial statements have not been restated. In September 1992, West One purchased 38 branches and seven specialty offices in the Puget Sound region of Washington from Security Pacific Corporation. The transaction included the receipt of $315 million of cash, $837 million of loans, $21 million of premises and equipment, $21 million of intangible and other assets, and the assumption of approximately $1.2 billion of deposits. In July 1992, West One purchased three branches of Bank of America Oregon. The transaction included the receipt of $45 million of cash, $1 million of loans, $1 million of premises and equipment, $1 million of intangible and other assets, and the assumption of $48 million of deposits and other liabilities. Both of these transactions were accounted for as purchases of certain assets and assumptions of certain liabilities. In December 1991, West One acquired Washington Federal Savings Bank (WFSB) in exchange for 2,049,030 shares of West One common stock in a transaction accounted for as a pooling of interests. WFSB had total assets of $358,000 at the date of acquisition and revenue of $36,733 and net income of $3,365 in 1991 prior to the acquisition. WFSB paid dividends of $687 in 1991. Securities On December 31, 1993, West One adopted Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Under this pronouncement securities held to maturity are stated at cost, adjusted for amortization of premiums and accretion of discounts. Securities available for sale and trading account securities are stated at market value. Gains and losses on sale of securities, recognized on a specific identification basis, and valuation adjustments of trading account securities are included in noninterest income. Net unrealized gain or loss on securities available for sale are included, net of tax, as a component of shareholders' equity. Loans Loans and leases are stated at the principal amount outstanding, net of unearned income. Interest on loans is recognized as income based on the outstanding principal and the stated interest rates as adjusted for net deferred loan fees, premiums and discounts. Loan origination fees and costs -34- are deferred and recognized as income on the interest method over the life of the loans. Lease income, primarily from financing leases, is recognized on the level interest method. Recognition of interest income is discontinued and all accrued, unpaid interest is reversed when a loan is placed on nonaccrual status. A loan or lease is placed on nonaccrual status when timely collection of interest becomes doubtful. Interest payments received on nonaccrual loans and leases are applied to principal if collection of principal is doubtful or reflected as interest income on a cash basis. Loans and leases are removed from nonaccrual status when they are current and collectibility of principal and interest is no longer doubtful. Loans held for sale are stated at the lower of cost or market. Allowance for Credit Losses The allowance for credit losses is maintained at a level considered adequate by management to provide for losses inherent in the portfolio of loans, leases and commitments to extend credit . Loans sold with servicing released have technical underwriting exception and repurchase risks which are also considered in the determination of the adequacy of the allowance for credit losses. The estimate of additions to the allowance for credit losses, and resulting charge to expense, requires judgment in evaluating the borrower's management, financial position, cash flow, collateral values and guarantees, as well as projection of the outcome of future events. The continuing adequacy of the allowance for credit losses is determined based upon the results of a credit classification system, internal and external credit examinations, historic experience, economic conditions, industry concentrations, elements of risk and other loss factors affecting the quality of the loan portfolio. Premises and Equipment Premises, equipment, major improvements and replacements are stated at cost. Depreciation is recognized on the straight-line method over the estimated useful life of the asset. Leasehold improvements are amortized over the shorter of the useful life of the asset or the remaining term of the lease. Gains or losses from disposal of premises and equipment are reflected in noninterest expense. Maintenance and repairs are expensed and improvements are capitalized. Costs of purchased and internally-developed software are amortized over periods up to five years. Other Real Estate Owned Other real estate owned consists principally of properties acquired through foreclosure and is stated at the lower of cost or market value. Other Assets Other assets include goodwill and core deposit intangibles and are stated at cost, net of amortization provided on straight-line and level interest methods over useful lives ranging up to 25 years. Purchased mortgage servicing rights are stated at cost net of amortization based on the income method and related prepayment assumptions. Income Taxes Income taxes are provided on earnings as reported for financial statement purposes adjusted principally for nontaxable interest income. Deferred income taxes reflect the tax effect of temporary differences between financial statement income and taxable income. In 1993, West One adopted SFAS No. 109, "Accounting for Income Taxes," which prescribes the use of the liability method of accounting for income taxes. Under this method, the change between periods in the deferred tax assets and liabilities together with income taxes currently payable are reflected as income tax expense in the financial statements. Earnings per Share Primary and fully diluted earnings per share are computed using the weighted average number of common and common equivalent shares outstanding. Common equivalent shares result from the assumed exercise of outstanding stock options, if dilutive. Fully diluted earnings per share assumes conversion of the convertible debentures, if dilutive. Statements of Cash Flows Cash and cash equivalents consist of cash and due from banks. New Pronouncements The Financial Accounting Standards Board has issued SFAS No. 112, "Employers' Accounting for Postemployment Benefits," effective for years beginning after December 15, 1993, and SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," effective for years beginning after December 15, 1994. Neither statement is expected to have a material effect on West One. -35- NOTE 2. SECURITIES The amortized cost, gross unrealized gains and losses, and estimated market value of securities follow:
Gross Gross Estimated Amortized Unrealized Unrealized Market Dollars in thousands at December 31, Cost Gains Losses Value 1993 Available for sale United States Treasury securities $289,428 $2,706 $(56) $292,078 United States Government agencies 255,686 5,898 (97) 261,487 Mortgage-backed securities 295,421 3,592 (318) 298,695 Other 205,228 3,187 (25) 208,390 Total available for sale 1,045,763 15,383 (496) 1,060,650 Held to maturity State and municipal bonds 565,165 32,723 (2,742) 595,146 Total securities $1,610,928 $48,106 $(3,238) $1,655,796 1992 Available for sale Securities $160,989 $2,737 $(701) $163,025 Held to maturity United States Treasury securities 287,732 2,732 (584) 289,880 United States Government agencies 281,852 4,243 (460) 285,635 State and municipal bonds 362,110 12,966 (780) 374,296 Mortgage-backed securities 343,236 3,608 (1,225) 345,619 Other 221,550 3,187 (393) 224,344 Total held to maturity 1,496,480 26,736 (3,442) 1,519,774 Total securities $1,657,469 $29,473 $(4,143) $1,682,799
Gross gains of $678 and gross losses of $183 were realized on 1993 sales. Gross gains of $1,991 and gross losses of $301 were realized on 1992 sales. Gross gains of $2,894 and gross losses of $738 were realized on 1991 sales. Securities having book values of $1,342,023 and $1,124,073 at December 31, 1993 and 1992, respectively, were pledged as collateral for public and trust deposits, United States Treasury borrowings and securities sold under agreements to repurchase. -36- Contractual maturities of securities at December 31, 1993 follow. Average yields are based on expected returns on cost and average lives for mortgage-backed securities.
Within One to Five After One Five to Ten Ten Serial Year Years Years Years Maturities Total Available for sale United States Treasury securities $96,398 $195,680 $ - $ - $ - $292,078 United States Government agencies 43,970 41,059 - 176,458 - 261,487 Mortgage-backed securities - - - - 298,695 298,695 Other 4,584 132,372 23,824 47,610 - 208,390 Total market value $144,952 $369,111 $23,824 $224,068 $298,695 $1,060,650 Total amortized cost $143,814 $365,030 $22,882 $218,617 $295,420 $1,045,763 Average yield 5.46% 5.16% 9.30% 5.87% 5.62% 5.57% Held to maturity State and municipal bonds at cost $39,620 $151,321 $308,180 $66,044 - $565,165 Total market value $39,994 $159,577 $324,604 $70,971 - $595,146 Average yield 4.22% 5.30% 5.15% 5.55% - 5.17%
-37- NOTE 3. ALLOWANCE FOR CREDIT LOSSES A summary of allowance for credit loss activity follows:
Dollars in thousands 1993 1992 1991 Balance at January 1 $68,243 $53,048 $47,823 Loan charge-offs Real estate 1,141 1,292 3,135 Commercial and agricultural 4,804 8,111 18,188 Consumer 9,802 9,597 10,330 Leases 409 445 663 Total charge-offs 16,156 19,445 32,316 Loan recoveries Real estate 468 421 113 Commercial and agricultural 4,496 4,298 2,950 Consumer 3,970 4,641 4,507 Leases 169 264 291 Total recoveries 9,103 9,624 7,861 Net charge-offs 7,053 9,821 24,455 Provision for credit losses 13,383 14,308 29,680 Additions from acquisitions 350 10,708 - Balance at December 31 $74,923 $68,243 $53,048
-38- NOTE 4. PREMISES AND EQUIPMENT Premises and equipment at December 31 follow:
Dollars in thousands 1993 1992 Land $33,030 $31,090 Buildings 85,040 80,571 Furniture and equipment 87,053 79,490 Leasehold improvements 12,103 11,771 217,226 202,922 Accumulated depreciation and amortization (94,398) (82,335) Net premises and equipment $122,828 $120,587
Leases of bank premises and equipment generally provide for the payment of taxes, maintenance, insurance and certain other related expenses and contain extension provisions, escalation clauses and purchase options. Lease expense was $10,434 in 1993, $7,506 in 1992, and $5,497 in 1991, and is included in net occupancy and equipment expense. Occupancy expense was reduced by rental income of $2,169 in 1993, $2,283 in 1992 and $2,332 in 1991. At December 31, 1993 future minimum lease payments under long-term noncancelable operating leases were $10,018 in 1994, $8,984 in 1995, $7,416 in 1996, $6,087 in 1997, $4,543 in 1998 and $34,403 thereafter. Management expects to renew or replace expiring leases in the normal course of business. NOTE 5. MORTGAGE BANKING Mortgage banking activities included loan origination, sale and servicing as follows:
Dollars in thousands 1993 1992 1991 Loans originated and serviced Loans sold with servicing released $299,690 $304,493 $247,212 Loans held for sale 76,625 50,988 51,711 Loans serviced for others 1,506,612 1,354,599 1,123,699 Purchased mortgage servicing rights Balance at January 1 $10,884 $6,736 $3,734 Additions 6,969 5,545 3,731 Amortization (4,056) (1,397) (729) Balance at December 31 $13,797 $10,884 $6,736
-39- NOTE 6. SHORT-TERM BORROWINGS A summary of short-term borrowings and average interest rates follows:
1993 1992 1991 Dollars in thousands Amount Rate Amount Rate Amount Rate Federal funds purchased and securities sold under agreements to repurchase Balance at December 31 $568,295 2.68 % $668,631 2.75 % $618,861 4.16 % Average 665,106 2.80 624,864 3.36 610,014 5.50 Maximum month-end balance 735,046 688,689 808,672 Other short-term borrowings Balance at December 31 330,609 2.68 141,392 2.56 206,284 3.96 Average 215,389 3.04 111,179 3.52 135,685 5.82 Maximum month-end balance 434,910 244,765 223,579
The average balance is computed on a daily average method. The average rate is computed by dividing total interest expense by the average outstanding balance. Other short-term borrowings consist of United States Treasury borrowings, bank notes and commercial paper. Unused lines of credit aggregating $45,000 at December 31, 1993 were maintained with banks in support of commercial paper. The lines bear interest at short-term money market rates if drawn upon, and required commitment fees of $84, $76, and $76 in 1993, 1992 and 1991, respectively. -40- NOTE 7. LONG-TERM DEBT Long-term debt at December 31 consisted of the following:
Dollars in thousands 1993 1992 Parent company Convertible subordinated debentures at 7.75% due 2006, interest payable semi-annually $50,000 $50,000 Notes at 11% due 1993, interest payable semi-annually - 23,993 Convertible subordinated capital notes at 1/4% above the three-month LIBOR due 1997, interest payable quarterly 20,983 20,978 Capital leases of computer equipment at 10%, payable in monthly installments through 1997 6,821 9,598 Other - 789 Subsidiaries Federal Home Loan Bank Notes with interest payable monthly at floating and fixed rates ranging primarily from 3.11% to 5.18% and with principal due 1994 through 2000 38,029 11,069 Other 627 1,222 Total $116,460 $117,649
Scheduled reductions of debt are $14,318 in 1994, $9,240 in 1995, $20,590 in 1996, $22,073 in 1997, $25 in 1998 and $50,214 thereafter. The convertible subordinated debentures are convertible into shares of common stock of West One at a conversion price of $18.605 per share. The convertible subordinated capital notes may be called and exchanged for common stock, preferred stock or other capital securities at the option of West One. The interest rate on these notes was 5.25% at December 31, 1993 and 1992. The debt agreements limit indebtedness and sale of subsidiaries' stock. -41- NOTE 8. COMMITMENTS AND CONTINGENCIES West One is a party to certain financial instruments with off-balance sheet risks to meet the financing needs of customers and to reduce exposure to interest rate fluctuations. The following is a summary of the contract or notional amount of these financial instruments as of December 31:
Dollars in thousands 1993 1992 Financial instruments with credit risk up to contract amounts (a) Commitments to extend credit $2,260,507 $1,562,344 Standby letters of credit 188,029 178,350 Commercial letters of credit 25,527 35,589 Financial instruments with risk less than contract or notional amounts Mortgage-backed security contracts (b): Forward sales 32,500 21,000 Purchased options 9,000 8,000 Notional value of interest rate swaps (b) - 20,000 Foreign exchange contracts (c): Commitments to purchase 5,422 11,512 Commitments to sell 1,500 3,888
(a) Commitments to extend credit have fixed maturity dates and represent West One's obligations to fund commercial and real estate loans, including home equity lines, lines of credit, revolving lines of credit and other types of commitments. Letters of credit are performance assurances of customer obligations or guarantees of financing for trade transactions. West One's exposure to credit loss for commitments to extend credit and letters of credit, in the event of nonperformance by others, is represented by the contractual amount of the instruments. Since many commitments to extend credit are expected to expire without being drawn upon, the total commitments do not necessarily represent future cash requirements. West One follows the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Collateral varies, but may include accounts receivable, inventory, premises and equipment, and commercial properties. West One's lending activities are concentrated in Idaho, Washington, Oregon and Utah. (b) Forward sale and purchased option contracts and interest rate swaps are typically hedges against interest rate risk on specific assets or liabilities. West One's forward sales and purchased options are contracts to buy or sell mortgage-backed securities to hedge interest rate risk on fixed rate mortgage loan or rate commitments. Net positions are valued at the lower of cost or market. Gains or losses are recognized upon settlement of the forward sale contracts based on the difference between the net sales proceeds and the net carrying value of the loans sold. Purchased options are contracts to buy or sell mortgage-backed securities at fixed prices during a specified period. The option premium paid, which represents loss exposure, is amortized over the life of the option. Interest rate swap agreements involve the exchange of fixed and floating rate interest payments without the exchange of the underlying notional amount on which the interest payments are calculated. The differential between the fixed and variable rate is recorded as interest income or expense of the liability being hedged. Prior to expiration of the interest rate swap agreements, West One paid fixed interest rates averaging 8.39% in 1993 and 8.46% in 1992 and received floating interest rates based on LIBOR. The credit and market risks associated with forward sale and purchased option contracts, and interest rate swaps arise from the possible inability of counterparties to meet the terms of the contracts and from fluctuations in securities' values and interest rates. West One limits credit risk by restricting counterparties to a list of approved institutions. Generally, West One does not require collateral for these types of instruments. (c) The credit and market risks associated with foreign exchange contracts, which may arise from the counterparty's inability to make payment at the settlement date and fluctuations in value of a foreign currency in relation to the U.S. dollar, were nominal at December 31, 1993 and 1992. West One is a defendant in various pending lawsuits, arising in the ordinary course of business, none of which are expected to have a material effect on West One's financial position or results of operations. -42- NOTE 9. SHAREHOLDERS' EQUITY Authorized capital stock of West One consists of 75,000,000 shares of $1.00 par value common stock and 5,000,000 shares of $1.00 par value preferred stock, of which 150,000 preferred shares are reserved for issuance under the Shareholder Rights Plan. On July 15, 1993, the Board of Directors declared a two-for-one common stock split, issued in the form of stock dividend, payable August 13, 1993 to shareholders of record on July 23, 1993. The number of common shares outstanding, shares issued, stock option information, dividends declared per share, common stock and retained earnings have been restated to reflect the stock split for all prior periods presented. At December 31, 1993 securities available for sale were stated at market and the resulting net after-tax unrealized gain of $9,083 is presented as a component of shareholders' equity. On October 19, 1989 the Board of Directors adopted a Shareholder Rights Plan. Under the terms of the Plan, the Board declared a dividend distribution of one Right for each share of common stock outstanding on October 31, 1989, or at specified times thereafter. When initially issued each Right entitled the registered holder to purchase from West One a unit consisting of one-hundredth of a share of Series A Junior Participating Preferred Stock at a purchase price of $150 per unit, subject to adjustment. Following a dividend distribution on August 13, 1993 of one share of common stock for each share of common stock outstanding as of July 23, 1993, pursuant to the adjustment provision contained in the Rights Plan, each share of common stock outstanding following the distribution had associated with it 0.5 Rights, and each new share of common stock issued thereafter and prior to the Distribution Date (as defined) will be issued 0.5 Rights. The rights will become exercisable upon the occurrence of specified events which could result in a change in control of West One or upon the determination by the Board that an Adverse Person (as defined) beneficially owns 10 percent or more of the outstanding common stock. Once the Rights become exercisable, if the Board determines that a person is an Adverse Person or a person becomes the owner of 25 percent or more of the then-outstanding shares of common stock (with certain exceptions), each holder of a Right (other than an Acquiring Person (as defined) or an Adverse Person) will thereafter become entitled to receive, upon payment of the exercise price, common stock (or in certain circumstances other consideration) having a value equal to two times the exercise price or, at the discretion of the Board, to receive common stock (or other consideration) having one-half that value without payment of the exercise price. The Rights are nonvoting, may be redeemed by West One at a price of $.01 per Right at any time until ten business days after an individual or group acquires 20 percent of West One's common stock and expire on October 31, 1999. The issuance of the Rights is intended to encourage any potential acquiror of West One to negotiate the manner and terms of the transaction with the Board and to protect shareholders from unsolicited tender offers which do not treat all shareholders in a fair and equal manner, and from other coercive takeover tactics. Under shareholder approved incentive programs, the Board of Directors may grant to key employees options to purchase common stock and other stock-based awards. All options are to be granted at market value of the stock at date of grant and may be exercisable over periods up to ten years. No other stock-based awards have been granted. The following summary sets forth the activity under the option plan:
Option Price Available Options Range per Share for Grant Outstanding December 31, 1990 $6.023 - $13.000 370,134 960,174 Authorized - 1,700,000 - Granted 12.188 - 17.000 (183,000) 183,000 Exercised 6.023 - 13.000 - (199,180) Canceled 11.438 - 12.313 - (27,000) December 31, 1991 6.553 - 17.000 1,887,134 916,994 Granted 16.688 - 25.250 (289,226) 289,226 Exercised 6.553 - 14.188 - (91,806) December 31, 1992 6.629 - 25.250 1,597,908 1,114,414 Granted 23.875 - 28.625 (263,701) 263,701 Exercised 6.629 - 14.188 - (125,520) Canceled 11.438 - 24.500 5,000 (5,000) Expired 11.438 - 12.313 (1,000) - December 31, 1993 6.629 - 28.625 1,338,207 1,247,595
Options exercisable under the plans were 599,880, 516,668 and 472,744 at December 31, 1993, 1992 and 1991, respectively. -43- NOTE 10. FAIR VALUE OF FINANCIAL INSTRUMENTS The summary of book value and estimated fair value of principal financial assets and liabilities at December 31 follows:
1993 1992 Estimated Estimated Book Fair Book Fair Dollars in thousands Value Value Value Value Financial assets Cash and short-term investments $465,038 $465,038 $715,872 $715,872 Securities 1,625,815 1,655,796 1,657,469 1,682,799 Loans, net of leases and allowance for credit losses 5,111,455 5,149,693 4,328,487 4,360,747 Financial liabilities Demand and savings deposits $3,961,327 $3,961,327 $3,549,812 $3,549,812 Time certificates of deposit 1,975,720 1,994,389 2,086,527 2,101,580 Short-term borrowings 898,904 898,904 810,023 810,023 Long-term debt 116,460 146,675 117,649 142,074
Financial assets and financial liabilities other than securities and certain long-term debt of West One are not traded in active markets. Estimated fair values require subjective judgments and are approximate. The above estimates of fair value are not necessarily representative of amounts that could be realized in actual market transactions, nor of the underlying value of West One. Changes in the following methodologies and assumptions could significantly affect the estimates: Financial assets The estimated fair value approximates the book value of cash and short-term investments. For securities, the fair value is based on quoted market prices. The book value of securities at December 31, 1993 includes securities available for sale stated at market value and securities held to maturity stated at historical cost. At December 31, 1992, the book value of all securities was historical cost. See Note 2 to the financial statements. The fair value of loans is estimated by discounting future cash flows using current rates at which similar loans would be made, net of the present value of estimated net charge-offs. Financial liabilities The estimated fair value of demand and savings deposits approximates book value. The value of long-term relationships with depositors is not reflected. The fair value of time certificates of deposit is estimated by discounting future cash flows using current rates offered on similar certificates. For short-term borrowings, the fair value approximates book value. The estimated fair value of long-term debt is based on quoted market prices or estimates of discounted cash flows using current rates at which similar financing could be obtained. Off-balance sheet financial instruments Commitments to extend credit and letters of credit represent the principal categories of off-balance sheet financial instruments. The fair value of these commitments is not material. See Note 8 to the financial statements. -44- NOTE 11. EMPLOYEE BENEFITS West One has a noncontributory defined benefit retirement plan covering substantially all employees. Benefits to retired employees are based on years of service and compensation. West One funds at least the minimum annual contributions required by the Employee Retirement Income Security Act of 1974. Since plan assets exceeded accumulated benefit obligation, no additional funding was made in 1993, 1992 or 1991.
Pension income included the following components for the year ended December 31: Dollars in thousands 1993 1992 1991 Service cost - benefits earned during the year $2,319 $1,819 $1,899 Interest cost on projected benefit obligation 3,788 3,342 3,192 Actual return on plan assets (4,618) (4,617) (11,567) Deferred gain (loss) (1,912) (1,408) 6,232 Amortization of transition asset (725) (725) (725) Pension income $(1,148) $(1,589) $(969) The funded status of the plan and prepaid pension cost at December 31 consisted of: 1993 1992 1991 Actuarial present value of accumulated benefit obligation Vested $(44,497) $(27,202) $(23,271) Nonvested (2,891) (1,592) (1,751) Accumulated benefit obligation $(47,388) $(28,794) $(25,022) Plan assets at fair value U.S. Government securities $16,563 $19,416 $20,282 Equity securities 40,199 32,935 28,589 Other 11,963 12,927 13,099 Total 68,725 65,278 61,970 Total projected benefit obligation for participants' past service (54,489) (38,030) (36,431) Plan assets in excess of projected benefit obligation 14,236 27,248 25,539 Unrecognized net (gain) loss and effect of changes in actuarial assumptions 6,892 (6,238) (5,350) Unrecognized net transition asset being recognized over participants' average remaining service (4,610) (5,379) (6,147) Unrecognized prior service cost 260 - - Prepaid pension cost $16,778 $15,631 $14,042
West One also has three unfunded supplemental retirement plans. The Supplemental Executive Retirement Plan provides supplemental benefits to eligible employees when the employee's earnings exceed the dollar amount used for the definition of a highly compensated employee in the Internal Revenue Code (IRC) Section 414 (q) (1) (B) during each of the three preceding years. The Non-Qualified IRC 415 Benefit Limit Make-Up plan provides for additional payments to be made to employees whose defined pension benefit exceeds the limit for maximum benefits from the defined benefit pension plan. The Executive Deferred Compensation Pension Make-Up plan covers pension benefits resulting from salary deferrals which have not been included in the computation of benefits under the regular defined benefit pension plan. -45-
Pension expense for the supplemental retirement plans included the following for years ended December 31: 1993 1992 1991 Supplemental Executive Retirement Plan (SERP) $316 $303 $300 Non-Qualified IRC 415 Benefit Limit Make-Up 16 51 36 Executive Deferred Compensation Pension Make-Up 38 26 22 Total supplemental pension expense $370 $380 $358 Pension expense for the SERP included the following components for the years ended December 31: 1993 1992 1991 Service cost - benefits earned during the year $113 $115 $118 Interest cost on projected benefit obligation 154 139 134 Amortization of net transition obligation 49 49 48 Pension expense $316 $303 $300 The funded status of the SERP and pension liability at December 31 consisted of: 1993 1992 1991 Actuarial present value of accumulated benefit obligation: Vested $(1,747) $(642) $(522) Nonvested (6) - - Accumulated benefit obligation $(1,753) $(642) $(522) Projected benefit obligation for participants' past service $(2,185) $(1,596) $(1,375) Unrecognized net (gain) loss and effect of changes in actuarial assumptions 320 (29) (29) Unrecognized net transition obligation being recognized over participants' average remaining service 584 633 682 Additional liability (472) - - Pension liability $(1,753) $(992) $(722) Assumptions used for projected benefit obligations, computed using the projected unit credit method, were: 1993 1992 1991 Discount rate 7.5% 9.5% 9.5% Rate of increase in compensation levels 3.0 6.0 6.0 Long-term rate of return on assets 10.5 10.5 10.5
-46- The change in salary increase assumption increased pension income by $319 in 1993. Changes in the assumed participant withdrawal rates increased pension income $789 in 1992. The change in the assumed long-term rate of return on plan assets increased pension income in 1991 by $508. West One has an Employee Thrift Investment Plan, under IRC Section 401, covering substantially all employees. Under the plan, West One made contributions of 50% of participating employees' salary deferrals up to 6% of salary in 1993, 5% of salary in 1992 and 4% of salary in 1991, aggregating $2,384 for 1993, $1,566 for 1992 and $1,078 for 1991. West One provides certain health care insurance benefits for retired employees and their dependents. Substantially all of West One's retirees are eligible for those benefits if they retired directly from service with at least ten years of credited service. Retiree contributions are required depending on age and number of years of service at the time of retirement. Net periodic postretirement benefit expense included the following components for the year ended December 31, 1993:
1993 Service cost $165 Interest cost 959 Amortization of transition obligation 554 Net periodic postretirement benefit expense $1,678 The reconciliation of the funded status of the plan at December 31, 1993 follows: Accumulated postretirement benefit obligation: 1993 Retirees and dependents $(10,477) Eligible active employees 243 Other active plan participants (3,122) Accumulated postretirement benefit obligation (13,356) Unrecognized net transition obligation 10,519 Unrecognized net loss 1,884 Accrued postretirement benefit cost $(953) Postretirement benefit claims for the year ended December 31, 1993 $725
In 1993 West One assumed a 14% annual rate of increase in the per capita cost of covered retiree and dependent health care benefits. The medical trend rate was assumed to decrease gradually to 6% in 2006 and remain at that level for future years. A one percentage point increase in the assumed health care cost trend rate would increase the accumulated postretirement benefit obligation at December 31, 1993 by $1,314 and the aggregate of the service cost and interest cost components of net periodic postretirement benefit expense for 1993 by $138. The discount rate used in determining the actuarial present value of the projected postretirement benefit obligation was 7.5%. The salary limits which determine the amount of the deductible paid by the employee were assumed to increase in proportion to West One salary levels. -47- NOTE 12. NONINTEREST EXPENSE
Noninterest expense includes: Dollars in thousands for the year ended December 31, 1993 1992 1991 Salaries $104,737 $85,741 $76,148 Employee benefits 24,149 18,283 14,337 Outside services 28,242 21,590 22,554 Equipment 21,725 17,174 13,182 Net occupancy 19,571 15,255 11,781 Insurance and miscellaneous taxes 16,899 13,506 10,792 Marketing 9,792 7,975 6,508 Postage and courier 8,568 6,344 4,899 Supplies 7,364 5,989 4,956 Telephone 6,551 4,739 3,318 Other 24,840 19,928 14,661 Total $272,438 $216,524 $183,136
NOTE 13. INCOME TAXES The provision for income taxes consisted of the following for the year ended December 31:
Dollars in thousands 1993 1992 1991 Federal Current $29,480 $20,136 $12,936 Deferred and other 1,006 2,925 40 State Current 6,329 4,621 2,503 Deferred and other 576 273 782 Total federal and state $37,391 $27,955 $16,261 Deferred and other taxes were as follows for the year ended December 31: 1993 1992 1991 Provision for credit losses $(2,218) $(926) $(2,302) Cash basis accounting (1,288) (289) (251) Leasing 2,546 2,745 3,118 Alternative minimum tax - 1,154 (1,038) Other 1,083 (572) 1,295 Use of subsidiary preacquisition tax carryforwards to reduce purchased intangibles 1,459 1,086 - Total deferred and other taxes $1,582 $3,198 $822 -48- The provision for income taxes varied from amounts computed at the federal statutory rates as follows: For the year ended December 31, 1993 1992 1991 Provision at statutory rates $42,202 35.0% $31,051 34.0% $19,536 34.0% Nontaxable interest income (10,473) (8.7) (7,045) (7.7) (6,171) (10.7) State income taxes, net of federal benefit 4,367 3.6 3,230 3.5 1,568 2.7 Other 1,295 1.1 719 .8 1,328 2.3 Provision for income taxes $37,391 31.0% $27,955 30.6% $16,261 28.3% The components of the net deferred tax liability are as follows for the years ended December 31: 1993 1992 Deferred tax assets Allowance for credit losses $29,491 $26,318 Cash basis accounting 6,283 5,252 Other 3,744 3,327 Total deferred tax assets 39,518 34,897 Deferred tax liabilities Depreciation and amortization (7,712) (8,174) Leasing (27,828) (24,708) Pension and retirement benefits (6,492) (7,263) Purchase accounting (2,170) (3,376) Unrealized securities gains (5,990) - Other (2,040) (948) Total deferred tax liabilities (52,232) (44,469) Net deferred tax liability $(12,714) $(9,572)
A subsidiary has preacquisition investment tax credit carryforwards remaining of $500 which expire through 2003. Upon realization, the benefit of these tax carryforwards will be reflected as reductions of the purchase price allocated to acquired intangible assets. The tax benefits of stock options exercised of $1,900 in 1993, $1,700 in 1992 and $1,400 in 1991 have been allocated to shareholders' equity. In 1993 the deferred provision for income taxes of $5,800 for unrealized securities gains has been allocated to shareholders' equity. Deferred tax liabilities of approximately $2,100 have not been recognized for a thrift subsidiary's base year tax bad debt reserve of $5,300. If the subsidiary fails to qualify as a savings and loan association or is converted to a commercial bank the bad debt reserve would become taxable. Management does not expect this difference to reverse in the foreseeable future. -49- NOTE 14. REGULATORY REQUIREMENTS and RESTRICTIONS Dollars in thousands Regulatory authorities require banks to maintain cash reserves against deposits which vary according to the type and maturity of the deposit. Cash reserve balances at December 31, 1993 and 1992 were $144,998 and $118,460, respectively. Loans to directors, executive officers and their associates are subject to regulatory limitations. Such loans, which are within the regulatory limitations, totaled $35,021 and $36,328 at December 31, 1993 and 1992, respectively. During 1993 there were $137,254 of additions and $138,561 of reductions of such loans. During 1992 there were $131,029 of additions and $132,704 in reductions of these loans. Federal and state laws also place limitations on the extension of credit by banking subsidiaries to the Parent Company and nonbank affiliates. Under these restrictions, banking subsidiaries may not extend credit beyond an aggregate of $94,155 to the Parent Company as of December 31, 1993. Any extensions of such credit are subject to strict collateral requirements. Federal and state laws restrict the amount of dividends that may be declared by banking subsidiaries without the approval of regulatory authorities. Banking subsidiaries may declare dividends to the Parent Company in 1994 up to $141,465 plus 1994 net income to the date of dividend declaration. NOTE 15. PARENT COMPANY ONLY FINANCIAL STATEMENTS CONDENSED BALANCE SHEETS
Dollars in thousands at December 31, 1993 1992 Assets Cash and due from banks $430 $66 Loans to subsidiaries: Banks 47,475 24,804 Nonbanks 15,375 10,925 Investment in subsidiaries: Banks 607,766 537,743 Nonbanks 5,351 5,044 Other loans and investments 19,563 10,023 Premises and equipment 19,455 21,553 Other assets 40,900 37,615 Total assets $756,315 $647,773 Liabilities Commercial paper $20,162 $14,469 Long-term debt 77,804 105,358 Other liabilities 34,783 38,121 Total liabilities 132,749 157,948 Shareholders' equity 623,566 489,825 Total liabilities and shareholders' equity $756,315 $647,773
-50- CONDENSED STATEMENTS OF INCOME
Dollars in thousands for the year ended December 31, 1993 1992 1991 Income Dividends from subsidiaries: Banks $40,521 $41,650 $27,242 Nonbanks 1,412 1,830 1,493 Interest: Loans to subsidiaries 3,212 2,516 1,122 Loans to nonaffiliates 497 763 971 Other, principally subsidiaries 79,564 54,975 53,728 Total income 125,206 101,734 84,556 Expense Interest 8,345 9,845 7,974 Salaries and employee benefits 40,366 30,203 23,533 Other 51,799 45,045 36,463 Total expense 100,510 85,093 67,970 Income before taxes and equity in earnings of subsidiaries 24,696 16,641 16,586 Income tax benefit 7,016 10,327 5,213 Equity in undistributed earnings of subsidiaries 51,475 36,404 19,400 Net income $83,187 $63,372 $41,199
-51- STATEMENTS OF CASH FLOWS
Dollars in thousands for the year ended December 31, 1993 1992 1991 Cash flows from operating activities Net income $83,187 $63,372 $41,199 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed earnings of subsidiaries (51,475) (36,404) (19,400) Depreciation and amortization 10,296 7,623 6,064 Changes in other assets and liabilities (7,094) (107) (297) Net cash provided by operating activities 34,914 34,484 27,566 Cash flows from investing activities Change in other short-term investments, maturities less than 90 days (15,878) 9,567 (4,848) Purchase of securities held to maturity (3,416) (54,643) (20,147) Maturity of securities held to maturity 6,139 51,053 2,744 Sale of securities - 17,894 - Change in loans to subsidiaries (23,950) (9,279) (20,861) Change in loans to nonaffiliates 320 4,582 252 Other (3,432) (3,429) (2,800) Capitalization of subsidiaries (6,685) (114,211) (11,157) Net cash used by investing activities (46,902) (98,466) (56,817) Cash flows from financing activities Change in short-term borrowings, maturities less than 90 days (1,416) 14,259 (347) Proceeds from short-term borrowings 13,200 - - Payments on short-term borrowings (7,000) - - Additions to long-term debt - - 50,000 Payments on long-term debt (27,566) (4,189) (12,362) Proceeds from issuance of common stock 54,526 67,922 5,664 Cash dividends paid (19,392) (15,130) (12,783) Net cash provided by financing activities 12,352 62,862 30,172 Net increase (decrease) in cash and due from banks 364 (1,120) 921 Cash and due from banks - January 1 66 1,186 265 Cash and due from banks - December 31 $430 $66 $1,186 Supplemental information Interest paid $8,737 $9,936 $8,044 Income taxes paid 36,260 19,325 11,253 Noncash activities Additions to investment in subsidiaries 3,041 11,512 - Capital lease for computer equipment - 10,857 - Termination of capital lease for computer equipment - 6,460 - Tax benefit of stock options exercised 596 812 832 Dividends declared not paid 6,249 9,220 3,367
-52- Report of Independent Accountants To the Shareholders and Directors of West One Bancorp We have audited the consolidated balance sheets of West One Bancorp and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1993. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of West One Bancorp and subsidiaries as of December 31, 1993 and 1992 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. As discussed in Note 1 to the consolidated financial statements, during 1993 the Company adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities". /s/ Coopers and Lybrand Boise, Idaho January 20, 1994 -53- EX-21 6 LIST OF SUBSIDIARIES EXHIBIT 21 WEST ONE BANCORP LIST OF SUBSIDIARIES AS OF DECEMBER 31, 1993 West One Bancorp, its subsidiaries, and the state of incorporation of each are listed below. The name of each subsidiary is indented under the name of its immediate parent. Each subsidiary does business only under the name shown.
State Name of Incorporation West One Bancorp Idaho West One Bank, Idaho Idaho West One Insurance Services, Inc. Idaho West One Bank, Washington Washington West One Bank, Utah Utah West One Leasing Company Utah Tracy Collins Mortgage Company Utah West One Bank, Oregon Oregon West One Bank, Oregon, S.B. Oregon Ward Cook, Inc. Oregon WF Service Corporation Oregon Idaho First Bank Idaho West One Financial Services, Inc. Idaho West One Trust Company Utah West One Trust Company, Washington Washington West One Life Insurance Company Arizona Robideaux Properties, Inc. Utah
EX-23 7 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS We consent to the incorporation by reference in the registration statements of West One Bancorp and Subsidiaries on Forms S-3 (File Nos. 33-12222, 33-14975, 33-41064, 33-48038 and 33-66314), on Forms S-4 (File Nos. 33-25370, 33-28235, 33-33045, 33-42240, 33-50588, and 33-58794), and on Forms S-8 (File Nos. 2-78321, 2-83744, 33-7655, 33-11581, 33-29080, 33-29082, 33-41520 and 33-45003) of our report dated January 20, 1994, on our audits of the consolidated financial statements of West One Bancorp and Subsidiaries as of December 31, 1993 and 1992, and for each of the three years in the period ended December 31, 1993, which report is incorporated by reference in this Annual Report on Form 10-K from the 1993 Annual Report to Shareholders of West One Bancorp. /s/ Coopers & Lybrand Boise, Idaho March 24, 1994 EX-24 8 EXHIBIT 24, POWER OF ATTORNEY POWER OF ATTORNEY (1994 Form 10-K) KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears below constitutes and appoints DANIEL R. NELSON and DWIGHT V. BOARD, and each of them, such person's true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for such person and in his or her name, place and stead, in any and all such person's capacities with West One Bancorp, an Idaho corporation ("Company"), to sign Company's annual report on Form 10-K for the fiscal year ended December 31, 1993, and any and all amendments thereto and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission under the Securities Exchange Act of 1934, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or each of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, this power of attorney has been executed by each of the undersigned as of this 20th day of January, 1994. SIGNATURE TITLE /s/ Daniel R. Nelson ______________________________ Chairman and Chief Executive Daniel R. Nelson Officer and Director (Principal Executive Officer) /s/ Scott M. Hayes ______________________________ Executive Vice President Scott M. Hayes Chief Financial Officer (Principal Financial Officer) /s/ Jim A. Peterson ______________________________ Senior Vice President and Controller Jim A. Peterson (Principal Accounting Officer) SIGNATURE TITLE /s/ Harry Bettis ______________________________ Director Harry Bettis /s/ W. J. Deasy ______________________________ Director William J. Deasy /s/ John B. Fery ______________________________ Director John B. Fery /s/ Stuart A. Hall ______________________________ Director Stuart A. Hall /s/ Jack B. Little ______________________________ Director Jack B. Little /s/ Warren E. McCain ______________________________ Director Warren E. McCain /s/ D.W. McCallum ______________________________ Director Douglas W. McCallum /s/ Allen T. Noble ______________________________ Director Allen T. Noble ______________________________ Director Philip B. Soulen -----END PRIVACY-ENHANCED MESSAGE-----