Annual Report (Form 10-K), fiscal year 1994

ITEM 1. BUSINESS
BOATMEN'S BANCSHARES, INC. ("CORPORATION")
The Corporation was incorporated under the laws of the State of Missouri in June, 1946 and was known as General Bancshares Corporation until the time of its merger with Boatmen's Bancshares, Inc. on March 29, 1986. The Corporation's principal office is located in St. Louis, Missouri where its largest subsidiary, The Boatmen's National Bank of St. Louis ("Boatmen's Bank"), is located. The Corporation directly or indirectly owns substantially all of the capital stock of 45 subsidiary banks, a trust company and its subsidiaries, a mortgage banking company, a credit life insurance company, an insurance agency and a credit card bank. The subsidiary banks operate from approximately 410 banking offices and over 500 off-site automated teller machine locations in Missouri, New Mexico, Oklahoma, Iowa, Texas, Illinois, Arkansas, Tennessee and Kansas.
The business of the Corporation consists primarily of the ownership, supervision and control of its subsidiaries. The Corporation provides its subsidiaries with advice, counsel and specialized services in various fields of financial and banking policy and operations. The Corporation also engages in negotiations designed to lead to the acquisition of other banks and closely related businesses.
Based on total assets as of December 31, 1994, the Corporation was the largest bank holding company headquartered in the State of Missouri and among the 30 largest bank holding companies in the United States. There are numerous bank holding companies and groupings of banks located throughout the Corporation's markets which offer substantial competition in the acquisition and operation of banks and non-bank financial institutions. The Corporation's subsidiaries encounter substantial competition in all of their banking and related activities, and its banking subsidiaries face increasing competition from various non-banking financial institutions that are not subject to the same geographic and other regulatory restraints applicable to banks.
The information under the caption Acquisition Overview on pages 18 through 20 and Table 2 on page 18 of the Corporation's Annual Report to Shareholders for the year ended December 31, 1994, is incorporated herein by reference.
Banking Operations
On January 31, 1995, the Corporation completed the acquisition of National Mortgage Company ("National"), headquartered in Memphis, Tennessee. National had a loan servicing portfolio of $13.8 billion at December 31, 1994.
On January 31, 1995, the Corporation completed the acquisition of Dalhart Bancshares, Inc. ("Dalhart") and its banking subsidiary, Citizens State Bank of Dalhart ("Citizens"), both headquartered in Dalhart, Texas. Citizens operated from three branches and had assets of approximately $138 million at December 31, 1994.
Citizens was merged into Boatmen's First National Bank of Amarillo upon completion of the Dalhart acquisition.
Recent Developments
On February 28, 1995, the Corporation completed the acquisition of Worthen Banking Corporation ("Worthen"). Worthen, headquartered in Little Rock, Arkansas, had assets of approximately $3.5 billion at December 31, 1994, and operates from 112 offices throughout Arkansas and six offices in the Austin, Texas area.
On February 28, 1995, the Corporation completed the acquisition of Salem Community Bancorp, Inc. ("Salem"). Salem, and its banking subsidiary, Community State Bank, Salem, Illinois, has two locations with approximately $80 million in assets at December 31, 1994.
Trust Operations
The Corporation provides a wide range of trust services to both individuals and institutions through Boatmen's Trust Company and its subsidiaries, as well as the trust departments of certain of its subsidiary banks. The Corporation's trust operations rank among the 15 largest providers of trust services in the United States, with total trust assets of $69.2 billion at December 31, 1994, including $36.4 billion under management.
Other Non-Bank Subsidiaries
The Corporation's other non-bank subsidiaries include: (1) a mortgage banking company, whose business is the origination and servicing of real estate mortgage loans for the account of long-term investors and the servicing of real estate loans originated by its affiliate banks; (2) a credit life insurance company which insures or reinsures credit life and accident and health insurance written by the Corporation's subsidiary banks; (3) an insurance agency; and (4) a credit card bank.
Regulation and Supervision
As a bank holding company, the Corporation is subject to regulation pursuant to the Bank Holding Company Act of 1956 (the "Act"), which is administered by the Board of Governors of the Federal Reserve System (the "Board").
A bank holding company must obtain Board approval before acquiring, directly or indirectly, ownership or control of any voting shares of a bank or bank holding company if, after such acquisition, it would own or control more than 5% of such shares. Board approval must also be obtained before any bank holding company acquires all or substantially all of the assets of another bank or bank holding company or merges or consolidates with another bank holding company. Furthermore, any acquisition by a bank holding company of more than 5% of the voting shares, or of all or substantially all of the assets, of a bank located in another state may not be approved by the Board unless the laws of the second state specifically authorize such an acquisition. Missouri law authorizes bank holding companies domiciled in contiguous states to acquire Missouri banks and bank holding companies provided their home states have similar laws. All of the eight contiguous states have similar laws.
The Act also prohibits a bank holding company, with certain limited exceptions, from acquiring or retaining direct or indirect ownership or control of more than 5% of the voting shares of any company which is not a bank or a bank holding company, or from engaging in any activities other than those of banking, managing or controlling banks, or providing services for its subsidiaries. The principal exceptions to these prohibitions involve certain activities which the Board has determined to be closely related to the business of banking or managing or controlling banks.
In September, 1994, the Interstate Banking and Branching Efficiency Act of 1994 was enacted. One year from date of enactment, bank holding companies will be permitted to acquire banks in any state subject to state deposit caps and a 10% nationwide cap. In addition, this law provides for full interstate branching by bank merger commencing on June 1, 1997. States may "opt out" of this branching provision prior to the effective date, and alternatively, states may "opt in" earlier than June, 1997.
A bank holding company and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with the extension of credit, with limited exemptions. Subsidiary banks of a bank holding company are also subject to certain restrictions imposed by the Federal Reserve Act on any extensions of credit to the bank holding company or any of its subsidiaries, or investment in the stock or other securities thereof, and on the taking of such stocks or securities as collateral for loans. The Board possesses cease and desist powers over bank holding companies if their actions represent unsafe or unsound practices or violations of law.
In August, 1989, the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") was enacted. FIRREA allows bank holding companies to acquire healthy savings institutions, removing certain restrictions on operations of such institutions. Acquired savings institutions may now be operated as separate savings subsidiaries, converted to bank charters or merged into existing bank subsidiaries, subject to certain requirements. FIRREA also contains a "cross-guarantee" provision which could result in depository institutions being assessed for losses incurred by the FDIC in the assistance provided to, or the failure of, an affiliated depository institution.
On December 16, 1988, the Board adopted final risk-based capital guidelines for use in its examination and supervision of bank holding companies and banks. The guidelines have three main goals: (1) to make regulatory capital requirements more sensitive to differences in risk profiles among banking organizations; (2) to take off-balance sheet risk exposures into explicit account in assessing capital adequacy; and (3) to minimize disincentives to holding liquid, low-risk assets. A bank holding company's ability to pay dividends and expand its business through the acquisition of new banking or non-banking subsidiaries could be restricted if its capital falls below levels established by these guidelines. The risk-based capital ratios were fully implemented by the end of 1992. In 1991, the Board required bank holding companies and banks to adhere to another capital guideline referred as the Tier 1 leverage ratio. This guideline places a constraint on the degree to which a banking institution can leverage its equity capital base. The Corporation substantially exceeds the requirements of these capital guidelines.
In December, 1991, the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") was enacted. FDICIA, among other things, identifies the following capital standards for depository institutions: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. A depository institution is well capitalized if it significantly exceeds the minimum level required by regulation for each relevant capital measure, adequately capitalized if it meets each such measure, undercapitalized if it fails to meet any such measure, significantly undercapitalized if it is significantly below any such measure, and critically undercapitalized if it fails to meet any critical capital level set forth in the regulations. FDICIA requires a bank that is determined to be undercapitalized to submit a capital restoration plan, and the bank's holding company must guarantee that the bank will meet its capital plan, subject to certain limitations. FDICIA also prohibits banks from making any capital distribution or paying any management fee if the bank would thereafter be undercapitalized. The Corporation's bank subsidiaries currently meet the well capitalized standards.
FDICIA grants the FDIC authority to impose special assessments on insured depository institutions to repay FDIC borrowings from the United States Treasury or other sources and to establish semiannual assessment rates on Bank Insurance Fund ("BIF") member banks so as to maintain the BIF at the designated reserve ratio defined in FDICIA. FDICIA also required the FDIC to implement a risk-based insurance assessment system pursuant to which the premiums paid by a depository institution will be based on the probability that the BIF will incur a loss in respect of such institution. The FDIC has adopted a deposit insurance assessment system that places each insured institution in one of nine risk categories based on the level of its capital, evaluation of its risk by its primary state or federal supervisor, statistical analysis and other information. In 1995, deposit insurance premiums will range between 23 cents and 31 cents per $100 of domestic deposits. In January, 1995, the FDIC proposed reduction of such premiums to between 4 cents and 31 cents effective in the second half of 1995.
The Corporation's national bank subsidiaries are subject to supervision by the Comptroller of the Currency. The Arkansas federal savings bank is subject to supervision by the Office of Thrift Supervision. The FDIC has primary federal supervisory responsibility for the Corporation's state banks, with the exception of three state banks that are members of the Federal Reserve System. The Corporation's state banks and trust companies are also subject to supervision by the bank supervisory authorities in their respective states. Various federal and state laws and regulations apply to many aspects of the operations of the Corporation's subsidiary banks, including interest rates paid on deposits and loans, investments, mergers and acquisitions and the establishment of branch offices and facilities. The payment of dividends by the Corporation's subsidiary banks, which is the Corporation's principal source of income, is also subject to certain statutory restrictions and to regulation by governmental agencies.
Statistical Disclosure
Pages 17 through 49 and footnote number 11 on page 60 of the Corporation's Annual Report to Shareholders for the year ended December 31, 1994, are incorporated herein by reference.
ITEM 2.



ITEM 2. PROPERTIES
The Corporation's headquarters building, Boatmen's Plaza, is located in downtown St. Louis, Missouri. Through a joint venture, Boatmen's Bank owns a one-half undivided interest in two-thirds of the building. On December 31, 1981, Boatmen's Bank entered into a lease agreement for approximately 60 percent of the building for a term of 30 years. This long-term lease obligation was capitalized in accordance with Statement of Financial Accounting Standards No. 13. The principal office of Boatmen's Trust Company, also located in downtown St. Louis, was purchased on January 4, 1994.
In January, 1995, the Corporation completed construction of a technology center in Kansas City, Missouri, and moved existing data operations into this center. The Corporation's principal banking offices in Oklahoma, Iowa and Tennessee are leased under long-term leases. The principal banking offices in New Mexico, Illinois, Arkansas and Texas are owned. The majority of the other banking offices are owned by the respective subsidiary banks. In the opinion of management, the physical properties of the Corporation and its subsidiaries are suitable and adequate and are being fully utilized.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE CORPORATION
There are no family relationships among any of the named persons. Each executive officer is elected by the Board of Directors to serve until the close of the next annual meeting of the shareholders following his election and until the election of his successor. No executive officer of the Corporation was selected to his position pursuant to any arrangement or understanding with any other person.
Each executive officer has held the same position or another executive position with the Corporation or Boatmen's Bank during the past five years, except as follows:
Mr. Dominick was Executive Vice President of Bank One, Dallas, Texas from March 1990 until joining the Corporation on August 4, 1992. Prior to his employment with Bank One, Mr. Dominick was a partner in Dominick/Frerichs Associates Ltd. (a bank consulting firm) from February, 1989 to March 1990.
PART II
ITEM 5.

ITEM 5. MARKET FOR THE CORPORATION'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Footnote number 21 on pages 65 and 66 and page 69 of the Corporation's Annual Report to Shareholders for the year ended December 31, 1994, are incorporated herein by reference. The last trade price for the Corporation's common stock on March 10, 1995, was $30.375.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
Page 17 of the Corporation's Annual Report to Shareholders for the year ended December 31, 1994, is incorporated herein by reference.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Pages 17 through 41 of the Corporation's Annual Report to Shareholders for the year ended December 31, 1994, are incorporated herein by reference.
ITEM 8.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements together with the report thereon of Ernst & Young LLP on pages 50 through 67 and the supplementary quarterly information on page 41 and pages 42 through 45 of the Corporation's Annual Report to Shareholders for the year ended December 31, 1994, are incorporated herein by reference.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.



ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE CORPORATION
The information under the item captioned Election of Directors and Information With Respect to Directors and Executive Officers in the Corporation's Proxy Statement filed for its Annual Meeting of Shareholders scheduled for April 25, 1995, is incorporated herein by reference. The required information regarding the Corporation's executive officers is contained in PART I in the item captioned Executive Officers of the Corporation.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION
The information under the caption Executive Compensation on pages 10 through the graph on page 16 in the Corporation's Proxy Statement filed for its Annual Meeting of Shareholders scheduled for April 25, 1995, is incorporated herein by reference.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the table captioned Amount and Nature of Beneficial Ownership and the caption Security Ownership of Management in the Corporation's Proxy Statement filed for its Annual Meeting of Shareholders scheduled for April 25, 1995, is incorporated herein by reference.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the caption Certain Transactions in the Corporation's Proxy Statement filed for its Annual Meeting of Shareholders scheduled for April 25, 1995, is incorporated herein by reference.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The following financial statements of the Corporation and its consolidated subsidiaries, and the accountants' report thereon, are incorporated herein by reference.
Consolidated Financial Statements
Balance Sheets-December 31, 1994 and 1993.
Statements of Income-Years ended December 31, 1994, 1993 and 1992.
Statements of Changes in Stockholders' Equity-Years ended December 31, 1994, 1993 and 1992.
Statements of Cash Flows-Years Ended December 31, 1994, 1993 and 1992.
Notes to Consolidated Financial Statements.
Financial Statement Schedules
All required schedules for the Corporation and its subsidiaries have been included in the consolidated financial statements or related notes thereto.
The following exhibits are incorporated herein by reference (a):
Exhibit 3(a) - Restated Articles of Incorporation of the Corporation, Exhibit 3(a) to Boatmen's Bancshares, Inc.'s S-4 Registration Statement (File No. 33-55625).
Exhibit 3(b) - Statement of Change of Registered Agent of the Corporation, Exhibit 3(b) to Boatmen's Bancshares, Inc.'s S-4 Registration Statement (File No. 33-55625).
Exhibit 3(c) - Amended By-laws of the Corporation, Exhibit 3(c) to Boatmen's Bancshares, Inc.'s S-4 Registration Statement (File No. 33-55625).
Exhibit 4(a) - Rights Agreement dated as of August 14, 1990, Exhibits 1 and 2 to Registration Statement on Form 8-A.
Exhibit 4(b) - Amendment dated as of January 26, 1993 to Rights Agreement dated as of August 14, 1990, Exhibit 4(a) to Boatmen's Bancshares, Inc.'s Annual Report to the Securities and Exchange Commission on Form 10-K (File No. 1-3750) for the fiscal year ended December 31, 1992.
Note: No long-term debt instrument issued by the Corporation exceeds 10% of the consolidated total assets of the Corporation and its subsidiaries. In accordance with paragraph 4(iii) of Item 601 of Regulation S-K, the Corporation will furnish to the Commission upon request copies of long-term debt instruments and related agreements.
Exhibit 10(c) - Boatmen's Bancshares, Inc. Amended 1981 Incentive Stock Option Plan, Exhibit 10(h) to Boatmen's Bancshares, Inc.'s Annual Report to the Securities and Exchange Commission on Form 10-K (File No. 1-3750) for the fiscal year ended December 31, 1986.
Exhibit 10(d) - Boatmen's Bancshares, Inc. Amended 1982 Long-Term Incentive Plan, Exhibit 10(d) to Boatmen's Bancshares, Inc.'s Annual Report to the Securities and Exchange Commission on Form 10-K (File No. 1-3750) for the fiscal year ended December 31, 1992.
Exhibit 10(e) - Boatmen's Bancshares, Inc. 1987 Non-Qualified Stock Option Plan, Exhibit 10(e) to Boatmen's Bancshares, Inc.'s Annual Report to the Securities and Exchange Commission on Form 10-K (File No. 1-3750) for the fiscal year ended December 31, 1992.
Exhibit 10(f) - Boatmen's Supplemental Retirement Plan dated November 9, 1993, Exhibit 10(v) to Boatmen's Bancshares, Inc.'s Annual Report to the Securities and Exchange Commission on Form 10-K (File No. 1-3750) fror the fiscal year ended December 31, 1993.
Exhibit 10(j) - Boatmen's Executive Deferred Compensation Plan dated August 8, 1989, effective January 1, 1990, Exhibit 10(aa) to Boatmen's Bancshares, Inc.'s Annual Report to the Securities and Exchange Commission on Form 10-K (File No. 1-3750) for the fiscal year ended December 31, 1989.
Exhibit 10(k) - Boatmen's Supplemental Retirement Participation Agreement dated August 4, 1993, between the Corporation and Andrew B. Craig, III, Exhibit 10(w) to Boatmen's Bancshares, Inc.'s Annual Report to the Securities and Exchange Commission on Form 10-K (File No. 1-3750) for the fiscal year ended December 31, 1993.
Exhibit 10(l) - Letter agreement dated November 9, 1993, between the Corporation and John Peters MacCarthy, Exhibit 10(aa) to Boatmen's Bancshares, Inc.'s Annual Report to the Securities and Exchange Commission on Form 10-K (File No. 1-3750) for the fiscal year ended December 31, 1993.
Exhibit 10(m) - Boatmen's Supplemental Retirement Participation Agreement dated June 22, 1994, between the Corporation and Samuel B. Hayes, III, Exhibit 10 to Boatmen's Bancshares, Inc.'s Quarterly Report to the Securities and Exchange Commission on Form 10-Q (File No. 1-3750) for the quarter ended June 30, 1994.
Exhibit 10(n) - Boatmen's Supplemental Retirement Participation Agreement dated August 8, 1989, between the Corporation and John Peters MacCarthy, Exhibit 10(ee) to Boatmen's Bancshares, Inc.'s Annual Report to the Securities and Exchange Commission on Form 10-K (File No. 1-3750) for the fiscal year ended December 31, 1989.
Exhibit 10(o) - Boatmen's Bancshares, Inc. 1991 Incentive Stock Option Plan, Exhibit 10(dd) to Boatmen's Bancshares, Inc.'s Annual Report to the Securities and Exchange Commission on Form 10-K (File No. 1-3750) for the fiscal year ended December 31, 1991.
Exhibit 10(p) - Boatmen's Bancshares, Inc. 1992 Annual Incentive Bonus Plan, Exhibit 10(ee) to Boatmen's Bancshares, Inc.'s Annual Report to the Securities and Exchange Commission on Form 10-K (File No. 1-3750) for the fiscal year ended December 31, 1991.
The following exhibits are submitted herewith:
Exhibit 10(a) - Employment Agreement dated July 1, 1994, between the Corporation and Andrew B. Craig, III.
Exhibit 10(b) - Employment Agreement dated July 1, 1994, between the Corporation and Samuel B. Hayes, III.
Exhibit 10(g) - Centerre Executive Retirement Program, as amended.
Exhibit 10(h) - Centerre Bancorporation Executive Deferred Compensation Plan, as amended.
Exhibit 10(i) - Boatmen's Bancshares, Inc. Deferred Compensation Plan for Directors.
Exhibit 10(q) - Employment Agreement dated July 1, 1994, between the Corporation and Gregory L. Curl.
Exhibit 13 - Portions of the Annual Report to Shareholders for the year ended December 31, 1994.
Exhibit 21 - Subsidiaries of the Corporation.
Exhibit 23 - Independent Auditors' Consent of Ernst & Young LLP.
Exhibit 27 - Financial data schedule.
[FN] - -----
The exhibits included under Exhibit 10 constitute all management contracts, compensatory plans and arrangements required to be filed as an exhibit to this form pursuant to Item 14(c) of this report.
No Form 8-K's were filed by the Corporation in the fourth quarter of 1994.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BOATMEN'S BANCSHARES, INC. -------------------------------------------- (Registrant)
By ANDREW B. CRAIG, III -------------------------------------------- Andrew B. Craig, III, Chairman of the Board and Chief Executive Officer (principal executive officer)
By JAMES W. KIENKER -------------------------------------------- James W. Kienker, Executive Vice President and Chief Financial Officer (principal financial and accounting officer)
Date: March 14, 1995