UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM (NOT APPLICABLE)
COMMISSION FILE NUMBER 1-6880
FIRST BANK SYSTEM, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
41-0255900
(I.R.S. Employer
Identification No.)
FIRST BANK PLACE,
601 SECOND AVENUE SOUTH,
MINNEAPOLIS, MINNESOTA 55402-4302
(Address of principal executive offices and Zip Code)
612-973-1111
(Registrant's telephone number, including area code)
(NOT APPLICABLE)
(Former name, former address and former fiscal year,
if changed since last report).
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 twelve months and (2) has been subject to such filing requirements
for the past 90 days.
YES _X_ NO ___
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding as of July 31, 1995
Common Stock, $1.25 Par Value 132,813,960 shares
FINANCIAL SUMMARY
Three Months Ended Six Months Ended
June 30 June 30 June 30 June 30
(Dollars In Millions, Except Per Share Amounts) 1995 1994 1995 1994
Income from continuing operations $137.9 $115.5 $271.7 $227.4
Discontinued operations -- 1.6 -- .4
Net income $137.9 $117.1 $271.7 $227.8
PER COMMON SHARE
Income from continuing operations $1.00 $.82 $1.97 $1.62
Discontinued operations -- .01 -- .01
Net income $1.00 $.83 $1.97 $1.63
Dividends paid $.3625 $.29 $.725 $.58
Common shareholders' equity 20.33 19.42
RETURN ON AVERAGE ASSETS
Income from continuing operations 1.68% 1.36% 1.67% 1.39%
Discontinued operations -- .02 -- --
Return on average assets 1.68% 1.38% 1.67% 1.39%
RETURN ON AVERAGE COMMON EQUITY
Income from continuing operations 20.4% 17.4% 20.8% 17.3%
Discontinued operations -- .2 -- --
Return on average common equity 20.4% 17.6% 20.8% 17.3%
Net interest margin (taxable-equivalent basis) 4.93% 4.68% 4.99% 4.71%
Efficiency ratio 54.9 58.8 55.3 58.7
June 30 December 31
1995 1994
PERIOD END
Loans $25,699 $24,556
Allowance for credit losses 467 475
Assets 33,456 34,128
Total shareholders' equity 2,817 2,612
Common equity to total assets 8.1% 7.3%
Tier 1 capital ratio 7.7 7.3
TABLE OF CONTENTS AND FORM 10-Q CROSS-REFERENCE INDEX
PART I -- FINANCIAL INFORMATION
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Item 2) 2
Financial Statements (Item 1):
Consolidated Balance Sheet 13
Consolidated Statement of Income 14
Consolidated Statement of Shareholders' Equity 15
Consolidated Statement of Cash Flows 16
Notes to Consolidated Financial Statements 17
Selected Statistical Information:
Consolidated Daily Average Balance Sheet and Related Yields
and Rates (Three Months Ended) 23
Consolidated Daily Average Balance Sheet and Related Yields
and Rates (Six Months Ended) 24
PART II -- OTHER INFORMATION
Exhibits and Reports on Form 8-K (Item 6) 25
Signature 25
Exhibit 11 -- Computation of Primary and Fully Diluted
Net Income Per Common Share 26
Exhibit 12 -- Computation of Ratio of Earnings to Fixed Charges 27
Exhibit 27 -- Article 9 Financial Data Schedule *28
*Copies of this exhibit will be furnished upon request and payment of the
Company's reasonable expenses in furnishing the exhibit.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Earnings Summary
First Bank System, Inc.'s (the "Company") second quarter 1995 earnings were
$137.9 million, an increase of $20.8 million, or 17.8 percent, from the second
quarter of 1994. On a per share basis, earnings increased 20.5 percent to $1.00,
compared with $.83 for the year-earlier quarter. The Company's first half 1995
earnings were $271.7 million, or $1.97 per share, compared with $227.8 million,
or $1.63 per share, in the first half of 1994.
Return on average assets and return on average common equity in the second
quarter of 1995 were 1.68 percent and 20.4 percent, respectively, compared with
1.38 percent and 17.6 percent in the second quarter of 1994. The net interest
margin on a taxable-equivalent basis strengthened 25 basis points from the
second quarter of 1994, to 4.93 percent. The efficiency ratio, the ratio of
expenses to revenues, continued to improve, to 54.9 percent from 58.8 percent
for the second quarter of 1994.
Stronger second quarter net income resulted from increased fee revenue, led by
credit card fees, and effective expense control. Noninterest income increased
$23.9 million, or 14.4 percent, while noninterest expense decreased $4.8
million, or 1.6 percent, as compared with the second quarter of 1994. An
increase in net interest income on a taxable-equivalent basis of $5.2 million,
or 1.5 percent, also contributed to the improved results for the second quarter
of 1995. Net interest income was up slightly over last year, primarily because
increased average loan yields and balances offset lower total earning assets and
higher rates paid on deposits and borrowings. The provision for credit losses
was up $1.0 million, or 3.8 percent, from the level of second quarter 1994.
Nonperforming assets declined $57.6 million, or 24.8 percent, from December 31,
1994, to $174.7 million at June 30, 1995. The ratio of the allowance for credit
losses to nonperforming loans at quarter-end was 388 percent compared with 283
percent at the end of 1994.
TABLE 1.
Summary of Consolidated Income
Three Months Ended
(Taxable-equivalent Basis; June 30 June 30
Dollars In Millions, Except Per Share Data) 1995 1994
Interest income $643.4 $565.1
Interest expense 280.4 207.3
Net interest income 363.0 357.8
Provision for credit losses 27.0 26.0
Net interest income after provision for credit losses 336.0 331.8
Noninterest income 189.7 165.8
Noninterest expense 303.2 308.0
Income from continuing operations before income taxes 222.5 189.6
Taxable-equivalent adjustment 3.5 3.9
Income taxes 81.1 70.2
Income from continuing operations 137.9 115.5
Income from discontinued operations -- 1.6
Net income $137.9 $117.1
Return on average assets 1.68% 1.38%
Return on average common equity 20.4 17.6
Net interest margin 4.93 4.68
Efficiency ratio 54.9 58.8
Per share:
Income from continuing operations $1.00 $.82
Income from discontinued operations -- .01
Net income $1.00 $.83
Common dividends paid $.3625 $.29
Acquisitions
On August 7, 1995, the Company announced that it had signed a purchase agreement
to acquire FirsTier Financial, Inc. ("FirsTier"), a regional financial services
holding company based in Omaha, Nebraska. As of June 30, 1995, FirsTier had
approximately $3.6 billion in assets, $2.8 billion in deposits and operated 63
offices in Nebraska and Iowa. Subject to the completion of due diligence and
shareholder and regulatory approvals, the Company will exchange .8829 shares of
FBS common stock for each common share of FirsTier, resulting in a per share
price of $38. The aggregate purchase price for the transaction is approximately
$700 million. The transaction, which will be accounted for as a purchase, is
expected to close in the first quarter of 1996.
On June 26, 1995, the Company announced that it had signed agreements to acquire
two commercial bank holding companies, Midwestern Services, Inc. and Southwest
Holdings, Inc., both of Omaha, Nebraska. Together, the two subsidiary banks have
total assets of $422 million and 12 branches in Omaha. The transactions are
expected to close in the fourth quarter of 1995.
Line Of Business Financial Review
Business line results are derived from the Company's business unit profitability
reporting system. Designations, assignments, and allocations may change from
time to time as management accounting systems are enhanced or product lines
change. During 1995 certain organization and methodology changes were made and
1994 results are presented on a consistent basis.
RETAIL AND COMMUNITY BANKING -- Retail and Community Banking, which includes
consumer, small-business and middle-market banking services and residential
mortgage lending, maintained strong revenue while reducing costs. Net income
increased 33.4 percent in both the second quarter of 1995 and the first six
months of 1995 compared with the same periods in 1994. Second quarter return on
assets increased to 1.47 percent from 1.00 percent, and return on equity
increased to 19.7 percent from 14.0 percent over the same period. Year-to-date
profitability ratios showed similar improvement.
The increase in net interest income is attributable to aggressive small- and
middle-market business lending and strong home equity loan growth offset by a
decrease in residential mortgage loans. Second quarter noninterest income was
higher than in the same period of last year primarily as a result of increased
income from mortgage banking activities. The decrease in the provision for
credit losses reflects continuing improvement in credit quality. Noninterest
expense in 1995 improved despite the impact of full period expenses of the
purchase acquisitions of Boulevard Bancorp, Inc. and Rocky Mountain Financial
Corporation which were acquired on March 25, 1994. The improvement in
noninterest expense reflects the benefits of continued streamlining of branch
operations, as well as the integration of recent business combinations. The
efficiency ratio improved to 57.9 percent in the second quarter and 59.4 percent
in the first six months of 1995 from 65.9 percent and 66.1 percent in the same
periods in 1994.
PAYMENT SYSTEMS -- Payment Systems includes consumer credit card, corporate and
purchasing card services, card-accessed secured and unsecured lines of credit,
ATM processing, and merchant processing. Fee-based noninterest income for
Payment Systems increased 30.3 percent in the second quarter and 35.7 percent in
the first six months of 1995 compared with the same periods in 1994. The
increase was due to growth in the sales volume of the Corporate Card, the
Purchasing Card, the FBS WorldPerks Visa Card, and the expanded automated teller
machine ("ATM") network. Net interest income decreased due to the change in the
loan mix. Average commercial loans, including increased Corporate Card balances,
comprised 25.5 percent and 23.7 percent of the portfolio during the second
quarter and first six months of 1995, respectively, compared with 19.5 percent
and 19.0 percent in the same periods in 1994. The increase in the provision for
credit losses reflects growth in the loan portfolio and a significant increase
in sales volume. Noninterest expense increased due to the initial investment
expenses associated with the expanded ATM network. Payment Systems continues to
be cost effective as measured by its efficiency ratios of 51.1 percent in the
second quarter of 1995 and 50.4 percent in the first half of 1995.
Net earnings were $19.2 million in the second quarter of 1995, essentially
unchanged from second quarter of 1994. Return on assets was 2.04 percent
compared with 2.47 percent in the second quarter of 1994. Return on equity was
22.2 percent compared with 24.4 percent for the same quarter in the previous
year. Year-to-date net earnings and profitablility ratios reflect the trends in
net interest income, provision for credit losses and noninterest expense
discussed above.
COMMERCIAL BANKING -- Commercial Banking provides lending, treasury management,
and other financial services to middle market, large corporate and mortgage
banking companies. Second quarter return on assets was 1.72 percent compared
with 1.77 percent in 1994, and return on equity was 24.5 percent compared with
25.3 percent in 1994. Year-to-date return on assets was 1.88 compared with 1.75
percent in 1994, and return on equity was 26.8 percent compared with 24.5
percent in 1994. Second quarter earnings were essentially unchanged while
year-to-date earnings improved compared with the same periods of 1994.
Continuing strong performance in both net interest income and noninterest income
as well as ongoing credit quality and expense control contributed to the strong
operating results. Commercial Banking's average loans, excluding loans to
mortgage banking companies, increased $851 million, or 22.7 percent, from the
second quarter of 1994. The $865 million decline in average deposits primarily
relates to less activity in the mortgage banking sector. The efficiency ratio
remained low at 34.4 percent in the second quarter of 1995 and 32.9 percent in
the first half of 1995.
TABLE 2.
Line of Business Financial Performance
Trust and
Retail and Community Commercial Investment Consolidated
Banking Payment Systems Banking Group Company
THREE MONTHS ENDED JUNE 30,
(Dollars in Millions) 1995 1994 1995 1994 1995 1994 1995 1994 1995 1994
CONDENSED INCOME STATEMENT:
Net interest income
(taxable-equivalent basis) $262.3 $259.4 $39.3 $39.6 $53.6 $53.1 $7.8 $5.7 $363.0 $357.8
Provision for credit losses 5.6 8.6 18.9 15.1 2.5 2.3 -- -- 27.0 26.0
Noninterest income 61.6 58.0 62.8 48.2 14.4 14.1 50.9 45.5 189.7 165.8
Noninterest expense 187.4 209.3 52.2 40.9 23.4 22.1 40.2 35.7 303.2 308.0
Income taxes and taxable-
equivalent adjustment 49.8 38.7 11.8 12.5 16.0 16.8 7.0 6.1 84.6 74.1
Income from continuing operations $81.1 $60.8 $19.2 $19.3 $26.1 $26.0 $11.5 $9.4 137.9 115.5
Income from discontinued operations -- 1.6
Net income $137.9 $117.1
AVERAGE BALANCE SHEET DATA:
Commercial loans $5,766 $5,325 $784 $491 $5,049 $4,723 $-- $-- $11,599 $10,539
Consumer loans 11,473 11,543 2,292 2,023 -- -- -- -- 13,765 13,566
Assets 22,193 24,301 3,776 3,133 6,104 5,880 832 735 32,905 34,049
Deposits 20,630 21,968 38 24 1,585 2,450 928 883 23,181 25,325
Common equity 1,652 1,747 347 317 427 412 244 141 2,670 2,617
Return on average assets* 1.47% 1.00% 2.04% 2.47% 1.72% 1.77% ** ** 1.68% 1.36%
Return on average common equity* 19.7 14.0 22.2 24.4 24.5 25.3 18.9% 26.7% 20.4 17.4
Efficiency ratio 57.9 65.9 51.1 46.6 34.4 32.9 68.5 69.7 54.9 58.8
SIX MONTHS ENDED JUNE 30,
CONDENSED INCOME STATEMENT: 1995 1994 1995 1994 1995 1994 1995 1994 1995 1994
Net interest income
(taxable-equivalent basis) $521.8 $492.4 $80.4 $85.9 $111.5 $107.4 $16.1 $11.6 $729.8 $697.3
Provision for credit losses 8.9 18.2 39.2 29.6 4.9 4.8 -- -- 53.0 52.6
Noninterest income 115.4 118.0 121.2 89.3 32.4 29.4 100.3 90.5 369.3 327.2
Noninterest expense 378.5 403.4 101.6 81.4 47.4 45.3 80.0 71.0 607.5 601.1
Income taxes and taxable-
equivalent adjustment 95.0 72.8 23.1 24.9 34.9 33.6 13.9 12.1 166.9 143.4
Income from continuing operations $154.8 $116.0 $37.7 $39.3 $56.7 $53.1 $22.5 $19.0 271.7 227.4
Income from discontinued operations -- 0.4
Net income $271.7 $227.8
AVERAGE BALANCE SHEET DATA:
Commercial loans $5,676 $5,128 $713 $441 $4,922 $4,930 $-- $-- $11,311 $10,499
Consumer loans 11,376 11,207 2,293 1,880 -- -- -- -- 13,669 13,087
Assets 22,165 23,338 3,720 2,906 6,080 6,135 839 731 32,804 33,110
Deposits 20,740 21,585 35 23 1,676 2,589 925 922 23,376 25,119
Common equity 1,589 1,677 343 303 426 437 243 141 2,601 2,558
Return on average assets* 1.41% 1.00% 2.04% 2.73% 1.88% 1.75% ** ** 1.67% 1.39%
Return on average common equity* 19.6 13.9 22.2 26.2 26.8 24.5 18.7% 27.2% 20.8 17.3
Efficiency ratio 59.4 66.1 50.4 46.5 32.9 33.1 68.7 69.5 55.3 58.7
*From continuing operations
**Not meaningful
Note: Preferred dividends are not allocated to the business lines.
TRUST AND INVESTMENT GROUP -- The Trust and Investment Group includes personal,
institutional and corporate trust services, investment management services, and
a full-service brokerage company. Reported earnings increased 22.3 percent in
the second quarter and 18.4 percent in the first six months of 1995 compared
with the same periods in the prior year. The return on average common equity was
18.9 percent in the second quarter and 18.7 percent in the first half of 1995,
down from 26.7 percent and 27.2 percent in the same periods in 1994.
Net earnings in 1995 increased over 1994 primarily due to recent acquisitions,
including J.P. Morgan corporate trust and Boulevard. Stronger noninterest income
is due to growth in Corporate Trust, investment sales and management fees, as
well as the acquisitions. Although the acquisitions have improved net earnings,
the return on equity reflects increased investment in these businesses. The
efficiency ratio improved to 68.5 percent in the second quarter and 68.7 percent
in the first half of 1995 from 69.7 percent in the second quarter and 69.5
percent in the first six months of 1994, reflecting the effective integration of
acquisitions and revenue growth.
Income Statement Analysis
NET INTEREST INCOME -- Net interest income on a taxable-equivalent basis was
$363.0 million in the second quarter of 1995, an increase of $5.2 million, or
1.5 percent, from the second quarter of 1994. The improvement reflects increases
in average loan yields and average loan balances. The yield on loans in the
second quarter averaged 9.08 percent, or 125 basis points higher than the yield
of 7.83 percent in the second quarter of last year, resulting from reference
rate increases during the past 12 months. The yield also benefitted from the
continuing shift in loan mix from mortgage-related loans to higher yielding
consumer and commercial loan balances. Average loans totaled $25.4 billion in
the second quarter of 1995, an increase of $1.3 billion, or 5.2 percent, from
$24.1 billion in the second quarter of 1994. Solid growth occurred in both
nonmortgage consumer and commercial loans, partially offset by decreases in the
balance of loans to mortgage bankers and residential mortgage loans. Excluding
these mortgage-related balances, average loans for the quarter increased by $2.6
billion, or 15.5 percent, over the same quarter in 1994, as demand for small
business and middle-market loans, credit cards, home equity, and other consumer
loans remained strong. The decrease of $1.1 billion, or 3.6 percent, in total
average earning assets over the second quarter of last year reflects the
shrinkage of securities and mortgage-related loan balances.
The average rate paid on interest-bearing liabilities in the second quarter of
1995 was 4.75 percent, or 129 basis points higher than for the same period in
1994, as a result of increases in deposit rates, and to a lesser extent, a shift
in mix from deposits to borrowings. Average interest-bearing deposits in the
second quarter decreased $1.1 billion, or 6.0 percent, from the second quarter
of 1994, reflecting the continued movement of consumer balances into mutual
funds, annuities and other investment products. Average noninterest-bearing
deposits in the second quarter declined $1.0 billion, or 15.7 percent from the
same period of 1994, due primarily to a decline in deposits from customers in
the mortgage banking industry.
TABLE 3.
Analysis of Net Interest Income
Three Months Ended
June 30 June 30
(Dollars in Millions) 1995 1994
Net interest income (taxable-equivalent basis) $363.0 $357.8
Average balances of earning assets supported by:
Interest-bearing liabilities $23,699 $24,011
Noninterest-bearing liabilities 5,860 6,663
Total earning assets $29,559 $30,674
Average yields and weighted average rates (taxable-equivalent basis):
Earning assets yield 8.73% 7.39%
Rate paid on interest-bearing liabilities 4.75 3.46
Gross interest margin 3.98% 3.93%
Net interest margin 4.93% 4.68%
Net interest margin without taxable-equivalent increments 4.88% 4.63%
TABLE 4.
Noninterest Income
Three Months Ended
June 30 June 30
(Dollars in Millions) 1995 1994
Credit card fees $56.7 $43.5
Trust fees 43.0 40.1
Service charges on deposit accounts 30.3 32.3
Insurance commissions 7.0 7.4
Trading account profits and commissions 2.4 2.2
Other 50.3 40.3
Total noninterest income $189.7 $165.8
The net interest margin on a taxable-equivalent basis was 4.93 percent in the
second quarter of 1995, an increase of 25 basis points from 4.68 percent a year
earlier. The margin increase results from both a shift in the mix of earning
assets, from lower margin securities and residential mortgage-related loan
balances to higher yield consumer and commercial loans, and increases in the
reference rate on variable rate loans over the past 12 months. These increases
were partially offset by an increase in the average rate paid on
interest-bearing liabilities.
Compared with the first quarter of this year, net interest income on a
taxable-equivalent basis for the second quarter of 1995 decreased $3.8 million,
or 1.0 percent. The decline was primarily attributable to higher average costs
of interest-bearing deposits, which rose from 4.01 percent in the first quarter
to 4.22 percent in the second quarter, and an increase in the balance of
short-term borrowings. Competitive pressure also resulted in compression of the
spread between the rates charged on loans and the reference rate. The second
quarter net interest margin declined to 4.93 percent from 5.05 percent in the
first quarter as the average cost of interest-bearing liabilities exceeded the
increase in the average yield on earning assets.
PROVISION FOR CREDIT LOSSES -- The provision for credit losses was $27.0 million
in the second quarter of 1995, up $1.0 million from the second quarter of 1994.
Net charge-offs totaled $29.9 million, down from $31.2 million in the same
quarter a year ago. Commercial loan net recoveries for the quarter were $2.7
million, compared with net charge-offs of $7.8 million in the second quarter of
1994. Consumer loan net charge-offs remained flat compared with the first
quarter of 1995, but increased $9.2 million, or 39.3 percent, from the second
quarter of 1994, reflecting the growth in the balance of nonmortgage consumer
loans over the past year.
TABLE 5.
Noninterest Expense
Three Months Ended
June 30 June 30
(Dollars in Millions, Except Per Employee Data) 1995 1994
Salaries $109.8 $113.2
Employee benefits 25.4 26.9
Total personnel expense 135.2 140.1
Net occupancy 24.3 26.4
Furniture and equipment 24.8 22.8
Amortization of goodwill and other intangible assets 14.2 12.7
FDIC insurance 13.8 15.7
Advertising 9.2 9.8
Other personnel costs 9.8 10.0
Professional services 10.5 9.5
Data processing 4.4 5.0
Printing, stationery and supplies 5.8 5.8
Postage 5.7 5.6
Telephone 6.3 6.8
Other 39.2 37.8
Total noninterest expense $303.2 $308.0
Efficiency ratio* 54.9% 58.8%
Quarterly average number of employees (full-time equivalents) 13,237 15,039
Annualized personnel expense per employee $40,855 $37,263
*Computed as noninterest expense divided by the sum of net interest income on
a taxable-equivalent basis and noninterest income net of securities gains and
losses.
The allowance for credit losses was $467.5 million at June 30, 1995, down
slightly from $474.7 million at December 31, 1994, and $480.2 million at June
30, 1994. Reserve coverage remains strong as the allowance for credit losses to
nonperforming loans ratio increased to 388 percent at quarter-end compared with
283 percent at the end of 1994 and 242 percent at the end of the second quarter
a year ago.
NONINTEREST INCOME -- Noninterest income in the second quarter of 1995 was
$189.7 million, an increase of $23.9 million, or 14.4 percent, from the second
quarter last year, reflecting growth in credit card and trust fees. Credit card
fees increased $13.2 million, or 30.3 percent, from the prior year quarter,
reflecting higher sales volume for Corporate Card, Purchasing Card, and the FBS
WorldPerks Visa Card. Trust fees increased $2.9 million, or 7.2 percent,
primarily on growth attributable to the recent J.P. Morgan corporate trust unit
acquisition. Other noninterest income growth in the second quarter of 1995 over
the same period last year resulted primarily from mortgage banking activities
and increased ATM network fees from higher transaction volume.
NONINTEREST EXPENSE -- Ongoing expense control and efficiencies realized through
acquisition integration led to further expense reduction. Noninterest expense of
$303.2 million for the period declined $4.8 million, or 1.6 percent, from the
second quarter of 1994. Noninterest expense for the first half exceeded that of
the first six months of 1994 by $6.4 million, or 1.1 percent, reflecting
additional expenses associated with purchase acquisitions. Compared with
noninterest expense for the same periods of 1994, adjusted to include the
expenses of purchase acquisitions on a pro forma basis, noninterest expense for
the second quarter and first half of 1995 declined $8.8 million, or 2.8 percent,
and $22.7 million, or 3.6 percent, respectively. The Company's efficiency ratio
improved to 54.9 percent for the quarter from 58.8 percent for the same quarter
a year ago.
Total salaries and benefits expense for the second quarter of 1995 decreased
$4.9 million, or 3.5 percent, from the second quarter of 1994. Average full-time
equivalent employees decreased 12.0 percent, to 13,237 in the second quarter of
1995, from 15,039 in the second quarter of 1994. The increase in furniture and
equipment expense in 1995 was primarily related to ATMs deployed in Circle K
convenience stores during 1994 and lobby automation and other equipment
associated with the Metropolitan Financial Corporation acquisition. Compared
with the second quarter of 1994, amortization of goodwill and intangibles
increased $1.5 million, or 11.8 percent, as a result of higher intangible
balances relating to recent purchase acquisitions. The $1.9 million, or 12.1
percent, decrease in FDIC insurance expense for the quarter, compared with the
same period of last year, was attributable to generally lower deposit levels.
PROVISION FOR INCOME TAXES -- The provision for income taxes was $81.1 million
in the second quarter of 1995, compared with $70.2 million in the second quarter
of 1994. The increase was primarily the result of a higher level of taxable
income.
Balance Sheet Analysis
LOANS -- On an aggregate basis, the Company's loan portfolio increased $1.1
billion, or 4.7 percent, to $25.7 billion at June 30, 1995, from $24.6 billion
at December 31, 1994.
COMMERCIAL LENDING. -- The Company's portfolio of commercial loans totaled $7.9
billion at June 30, 1995, up $912 million from December 31, 1994. The increase
reflects growth in small-business and middle-market business lending and in the
Payment Systems balances associated with Corporate and Purchasing Cards. The
Company's portfolios of loans to financial institutions, commercial real estate
mortgages and construction loans were relatively unchanged from December 31,
1994.
CONSUMER LENDING. -- Total consumer loan outstandings were $13.9 billion at June
30, 1995, up from $13.7 billion at December 31, 1994. A $327 million increase
primarily in home equity and second mortgages and automobile loans was partially
offset by a $158 million decrease in residential mortgage loans. Home equity and
second mortgages increased primarily due to successful promotions and automobile
loans increased due to growth in indirect auto loans.
ALLOWANCE FOR CREDIT LOSSES -- For information on the allowance for credit
losses, refer to "Corporate Risk Management-- Credit Management."
SECURITIES -- At June 30, 1995, securities were $3.4 billion compared with $5.2
billion at December 31, 1994, reflecting the sale of $1.56 billion of securities
in connection with the Company's interest rate risk management process. Trading
securities, federal funds sold, and resale agreements were $629 million at June
30, 1995, compared with $548 million at December 31, 1994. The increase is
primarily due to the Company's brokerage subsidiary underwriting U.S. agency
securities which added $80 million to trading securities. Future underwritings
are not expected to continue at this level.
DEPOSITS -- Noninterest-bearing deposits were $5.7 billion at June 30, 1995,
down slightly from $5.9 billion at December 31, 1994. Interest-bearing deposits
were $17.1 billion at June 30, 1995, down $1.2 billion from December 31, 1994,
reflecting the continuing movement of consumer balances into mutual funds,
annuities and other investment products.
TABLE 6.
Summary of Allowance for Credit Losses
Three Months Ended Six Months Ended
June 30 June 30 June 30 June 30
(Dollars in Millions) 1995 1994 1995 1994
Balance at beginning of period $470.4 $485.3 $474.7 $466.1
CHARGE-OFFS:
Commercial:
Commercial 7.3 22.2 11.9 36.7
Financial institutions -- 1.1 -- 1.1
Real estate:
Commercial mortgage 3.4 3.6 10.9 13.4
Construction -- 0.1 -- 0.1
Total commercial 10.7 27.0 22.8 51.3
Consumer:
Residential mortgage 0.9 0.9 2.0 2.1
Credit card 21.9 17.4 44.9 34.1
Other 20.3 11.7 35.8 23.8
Total consumer 43.1 30.0 82.7 60.0
Total 53.8 57.0 105.5 111.3
RECOVERIES:
Commercial:
Commercial 8.9 11.1 19.1 24.7
Financial institutions 0.1 0.1 0.2 0.2
Real estate:
Commercial mortgage 4.3 7.9 6.6 11.4
Construction 0.1 0.1 0.1 0.3
Total commercial 13.4 19.2 26.0 36.6
Consumer:
Residential mortgage 0.1 0.3 0.4 0.4
Credit card 3.0 2.3 5.7 4.5
Other 7.4 4.0 11.4 7.3
Total consumer 10.5 6.6 17.5 12.2
Total 23.9 25.8 43.5 48.8
NET CHARGE-OFFS:
Commercial:
Commercial (1.6) 11.1 (7.2) 12.0
Financial institutions (0.1) 1.0 (0.2) 0.9
Real estate:
Commercial mortgage (0.9) (4.3) 4.3 2.0
Construction (0.1) -- (0.1) (0.2)
Total commercial (2.7) 7.8 (3.2) 14.7
Consumer:
Residential mortgage 0.8 0.6 1.6 1.7
Credit card 18.9 15.1 39.2 29.6
Other 12.9 7.7 24.4 16.5
Total consumer 32.6 23.4 65.2 47.8
Total 29.9 31.2 62.0 62.5
Provision charged to operating expense 27.0 26.0 53.0 52.6
Additions related to acquisitions -- 0.1 1.8 24.0
Balance at end of period $467.5 $480.2 $467.5 $480.2
Allowance as a percentage of period-end loans 1.82% 2.00%
Allowance as a percentage of nonperforming loans 388 242
Allowance as a percentage of nonperforming assets 268 168
BORROWINGS -- Short-term borrowings, which include federal funds purchased,
securities sold under agreements to repurchase and other short-term borrowings,
were $4.2 billion at June 30, 1995, up from $3.5 billion at the end of 1994. The
increase is primarily due to the net issuance of $1.2 billion of notes under the
bank note program. The notes have a weighted average interest rate of 6.01
percent and range in original maturities from 34 days to 12 months. Partially
offsetting this increase is the $649 million reduction in federal funds
purchased and securities sold under agreements to repurchase.
Long-term debt was $2.6 billion at June 30, 1995, relatively unchanged from
December 31, 1994. In April 1995, the Company placed $150 million in 7.625
percent subordinated debt in the form of 10-year noncallable notes. The effect
of this issuance was more than offset by maturities of other outstanding debt.
Corporate Risk Management
CREDIT MANAGEMENT -- The Company's credit management process includes central
credit policy and administration functions and standard underwriting criteria
for specialized lending categories, such as mortgage banking, real estate
construction, and consumer credit. The Company's credit management process is
supported by regular examinations conducted by the credit administration
function. Quarterly, management reviews large loans and all loans experiencing
deterioration of credit quality. A standard credit scoring system is used to
assess consumer credit risks and to price consumer products relative to their
assigned risk rating.
In evaluating credit risk, the Company considers the composition of its loan
portfolio; its level of allowance coverage; macroeconomic concerns, such as the
level of debt outstanding in the public and private sectors, the effects of
domestic and international economic conditions, and regional economic
conditions; and other issues. Approximately 74 percent of the loan portfolio
consists of extensions of credit to customers in the Company's primary operating
region, which includes Minnesota, Colorado, Montana, North Dakota, South Dakota,
Wisconsin, Iowa, Kansas, Nebraska, Wyoming, and Illinois.
ANALYSIS OF NET CHARGE-OFFS AND ALLOWANCE FOR CREDIT LOSSES -- Net loan
charge-offs totaled $29.9 million in the second quarter of 1995, down from $31.2
million in the second quarter of 1994. Commercial loan net recoveries for the
quarter were $2.7 million, compared with net charge-offs of $7.8 million in the
second quarter of 1994, reflecting continued improvement in the credit quality
of this portfolio. Consumer loan net charge-offs increased $9.2 million, or 39.3
percent, from the second quarter of 1994, reflecting the growth in the balance
of nonmortgage consumer loans and sales volume activity in credit card products.
ANALYSIS OF NONPERFORMING ASSETS -- Nonperforming assets include all nonaccrual,
impaired, and restructured loans, other real estate and other nonperforming
assets owned by the Company. At June 30, 1995, nonperforming assets totaled
$174.7 million, down $57.6 million, or 24.8 percent, from December 31, 1994. The
ratio of nonperforming assets to loans and other real estate improved to .68
percent at June 30, 1995, from .94 percent at December 31, 1994. Significant
decreases occurred in virtually all categories of nonperforming assets.
INTEREST RATE RISK MANAGEMENT -- The Company's principal objective for interest
rate risk management is to control exposure of net interest income to risks
associated with interest rate movements. The Company uses derivative financial
instruments ("derivatives") to hedge on-balance sheet items and, to a lesser
extent, in connection with intermediated transactions for customers. The Company
limits market risk on intermediated transactions by entering into generally
matching or offsetting positions. The Company does not enter into derivative
contracts for speculative purposes.
TABLE 7.
Nonperforming Assets
June 30 December 31
(Dollars in Millions) 1995 1994
Nonaccrual loans $120.4 $167.8
Restructured loans .1 .1
Nonperforming loans 120.5 167.9
Other real estate 50.5 64.0
Other nonperforming assets 3.7 .4
Nonperforming assets $174.7 $232.3
Accruing loans 90 days or more past due $37.2 $26.0
Nonperforming loans to total loans .47% .68%
Nonperforming assets to total loans plus other real estate .68 .94
TABLE 8.
Nonperforming Assets by Industry
June 30 December 31
(Dollars in Millions) 1995 1994
COMMERCIAL:
Commercial $18.8 $36.5
Real estate:
Commercial mortgage 54.0 71.0
Construction 2.2 1.6
Total commercial 75.0 109.1
CONSUMER:
Residential mortgage 34.5 43.5
Credit card 8.2 9.9
Other 2.8 5.4
Total consumer 45.5 58.8
Total nonperforming loans 120.5 167.9
OTHER REAL ESTATE 50.5 64.0
OTHER NONPERFORMING ASSETS 3.7 .4
Total nonperforming assets $174.7 $232.3
Interest rate risk is measured and reported to the Company's Asset and Liability
Management Committee ("ALCO") through the use of traditional gap analysis which
measures the difference between assets and liabilities that reprice in a given
time period, simulation modeling which produces projections of net interest
income under various interest rate scenarios and balance sheet strategies, and
valuation modeling which measures the economic value of various components of
the balance sheet under various interest rate scenarios. The significant
assumptions used in these analyses include the amount and timing of changes in
prime and deposit rates compared with changes in money market rates, prepayment
risks, and volume forecasts.
Including the effect of interest rate swaps, futures, options and other hedging
instruments, the Company had a cumulative positive repricing gap position at one
year of $864 million at June 30, 1995, indicating that more assets than
liabilities reprice within that period. While this analysis is useful as a
point-in-time measurement of interest rate risk, there are certain risks that
the repricing gap position does not capture, such as basis risk, prepayment
risk, and other option risks. Due to these limitations, management relies more
on simulation and valuation modeling to measure and manage interest rate risk.
The Company's policy is to maintain a low interest rate risk position by
limiting the amount of forecasted net interest income at risk over a 12-month
period assuming an immediate and sustained 100-basis point change in interest
rates. The Company invests in fixed rate assets or receives the fixed rate
payment on interest rate swaps as a hedge to maintain acceptable interest rate
risk levels.
The derivatives the Company uses to achieve its hedging objectives are primarily
interest rate swaps, caps, and floors. As of June 30, 1995, the Company received
fixed-rate payments on $2.7 billion notional amount of interest rate swap
agreements and made payments based on variable interest rates. These swaps had
an average fixed rate of 6.95 percent and an average variable rate, which is
tied to various LIBOR rates, of 6.10 percent. The maturity of these agreements
ranged from two months to 9.9 years with an average remaining maturity of 4.0
years.
Swaps contributed to the Company's net interest margin by reducing interest
expense by $4.7 million, and $19.9 million for the quarters ended June 30, 1995,
and 1994, respectively.
Interest rate caps and floors are similarly used by the Company to minimize the
impact of fluctuating interest rates on earnings. The total notional amount of
cap agreements purchased as of June 30, 1995, was $200 million with a strike
level of 3-month LIBOR at 6.0 percent. The premium on caps is amortized over the
life of the cap. The total notional amount of floor agreements purchased as of
June 30, 1995, was $950 million with an average strike level of 3-month LIBOR at
3.5 percent and an average remaining maturity of 2.5 years. The impact of caps
and floors on interest income was not material for the quarters ended June 30,
1995, and 1994.
Forward contracts, totaling $371 million at June 30, 1995, hedge the interest
rate risk of the fixed rate mortgage loans originated and held for sale by the
Company's mortgage subsidiary. The Company enters into foreign currency
commitments primarily as an intermediary for customers. The Company manages its
credit risk on derivative contracts through counterparty and credit limit
approvals and monitoring credit concentration risks. Refer to Note I on page 21
for further information on interest rate swaps and options.
TABLE 9.
Interest Rate Swap Hedging Portfolio Notional Balances and Yields by Maturity
Date
At June 30, 1995 (Dollars in Millions)
Weighted Weighted
Average Average
Receive Fixed Swaps* Notional Interest Rate Interest Rate
Maturity Date Amount Received Paid
1995 (remaining six months) $215 7.57% 6.04%
1996 433 7.96 6.05
1997 275 6.42 6.08
1998 406 5.93 6.07
1999 575 6.88 6.20
After 1999** 825 6.97 6.11
Total $2,729 6.95% 6.10%
* At June 30, 1995, the Company does not have any swaps in its portfolio which
requires it to pay fixed-rate interest.
** At June 30, 1995, all swaps with a maturity after 1999 hedge fixed rate
subordinated notes.
CAPITAL MANAGEMENT -- The ratio of common equity to assets increased to 8.1
percent at June 30, 1995, from 7.3 percent at December 31, 1994. Common equity
per share was $20.33 at June 30, 1995, compared with $18.63 at December 31,
1994. Total equity to assets was 8.4 percent at June 30, 1995, up from 7.7
percent at December 31, 1994. The increases are primarily due to earnings
retention and improvement in the market value of available-for-sale securities.
Tier 1 and total risk-based capital ratios were 7.7 percent and 12.2 percent on
June 30, 1995, compared with 7.3 percent and 11.4 percent at December 31, 1994,
respectively. The leverage ratio, the measure of Tier 1 capital to total
quarterly average assets, also increased to 7.0 percent from 6.2 percent at the
end of 1994.
On January 18, 1995, and February 15, 1995, the Board of Directors authorized
repurchase programs of two million and 14 million shares of common stock,
respectively. The two million share authorization, which was intended to provide
shares for stock purchase and option plans and for the purchase acquisition of
First Western Corporation, was completed during the second quarter. The 14
million share authorization is intended to allow the Company to buy back shares
in connection with future excess capital retention expected over the next two
years and is predicated upon such excess capital, as well as for stock purchase
and option plans. As of June 30, 1995, approximately 3.7 million shares have
been repurchased under the two programs, and 1.5 million of these shares have
been reissued for the designated purposes.
Accounting Changes
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. ("SFAS") 114, "ACCOUNTING BY
CREDITORS FOR IMPAIRMENT OF A LOAN" -- SFAS 114, adopted effective January 1,
1995, requires creditors to establish a valuation allowance when it is probable
that all the principal and interest due under the contractual terms of a loan
will not be collected. The impairment is measured based on the present value of
expected future cash flows based on the effective interest rate of the loan, or
the observable market price or the fair value of a collateral dependent loan.
This differs from the Company's prior policy in that it requires the
establishment of a valuation allowance for uncollectible interest in addition to
the principal amounts of impaired loans. The Statement also requires the
reclassification of in-substance foreclosures from other real estate to
nonperforming loans for all periods if the Company has not taken possession of
the collateral. The adoption of SFAS 114 did not have a material effect on the
Company.
TABLE 10.
Capital Ratios
June 30 December 31
(Dollars in Millions) 1995 1994
Common equity $2,711 $2,494
As a percent of assets 8.1% 7.3%
Tangible common equity* $2,295 $2,082
As a percent of assets 6.9% 6.2%
Total shareholders' equity $2,817 $2,612
As a percent of assets 8.4% 7.7%
Tier 1 capital $2,250 $2,052
As a percent of risk-adjusted assets 7.7% 7.3%
Total risk-based capital $3,594 $3,227
As a percent of risk-adjusted assets 12.2% 11.4%
Leverage ratio 7.0 6.2
*Defined as common equity less goodwill
SFAS 122, "ACCOUNTING FOR MORTGAGE SERVICING RIGHTS" -- SFAS 122, issued in May
1995, amends SFAS 65, "Accounting for Certain Mortgage Banking Activities," to
require that entities engaged in mortgage banking activities recognize rights to
service mortgage loans for others as separate assets, whether those rights are
acquired through loan origination activities or through purchase transactions.
In addition, a valuation allowance is established for impairment of the mortgage
servicing rights based on the predominant risk characteristics of the underlying
loans and subsequently adjusted to reflect changes in the fair value of the
servicing rights. The Statement applies to fiscal years beginning after December
15, 1995; the adoption of SFAS 122 is not expected to have a material effect on
the Company.
CONSOLIDATED BALANCE SHEET
June 30 December 31
(In Millions, Except Shares) 1995 1994
(Unaudited)
ASSETS
Cash and due from banks $ 1,772 $ 1,707
Federal funds sold 47 135
Securities purchased under agreements to resell 380 336
Trading account securities 202 77
Available-for-sale securities 3,426 5,185
Loans 25,699 24,556
Less allowance for credit losses 467 475
Net loans 25,232 24,081
Bank premises and equipment 438 479
Interest receivable 192 198
Customers' liability on acceptances 165 178
Other assets 1,602 1,752
Total assets $ 33,456 $ 34,128
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 5,749 $ 5,933
Interest-bearing 17,100 18,323
Total deposits 22,849 24,256
Federal funds purchased 1,539 1,630
Securities sold under agreements to repurchase 380 938
Other short-term funds borrowed 2,306 955
Long-term debt 2,572 2,684
Acceptances outstanding 165 178
Other liabilities 828 875
Total liabilities 30,639 31,516
Shareholders' equity:
Preferred stock 106 118
Common stock, par value $1.25 per share-authorized
200,000,000 shares; issued: 6/30/95-135,632,324
shares; 12/31/94 - 134,599,409 shares 169 168
Capital surplus 898 866
Retained earnings 1,746 1,593
Unrealized loss on securities, net of tax (11) (106)
Less cost of common stock in treasury: 6/30/95
2,212,758 shares; 12/31/94 - 767,000 shares (91) (27)
Total shareholders' equity 2,817 2,612
Total liabilities and shareholders' equity $ 33,456 $ 34,128
CONSOLIDATED STATEMENT OF INCOME
Three Months Ended Six Months Ended
(In Millions, Except Per-share Data) June 30 June 30 June 30 June 30
(Unaudited) 1995 1994 1995 1994
INTEREST INCOME
Loans $572.0 $468.3 $1,119.2 $902.0
Securities:
Taxable 56.1 81.1 122.6 152.3
Exempt from federal income taxes 2.8 3.1 5.6 6.1
Other interest income 9.0 8.7 18.1 15.4
Total interest income 639.9 561.2 1,265.5 1,075.8
INTEREST EXPENSE
Deposits 186.8 144.7 365.2 281.6
Federal funds purchased and repurchase agreements 31.9 22.3 62.8 32.0
Other short-term funds borrowed 19.3 8.4 29.4 14.7
Long-term debt 42.4 31.9 85.3 57.8
Total interest expense 280.4 207.3 542.7 386.1
Net interest income 359.5 353.9 722.8 689.7
Provision for credit losses 27.0 26.0 53.0 52.6
Net interest income after provision for credit losses 332.5 327.9 669.8 637.1
NONINTEREST INCOME
Credit card fees 56.7 43.5 108.3 79.5
Trust fees 43.0 40.1 84.7 78.6
Service charges on deposit accounts 30.3 32.3 62.4 64.5
Insurance commissions 7.0 7.4 13.3 13.2
Other 52.7 42.5 100.6 91.4
Total noninterest income 189.7 165.8 369.3 327.2
NONINTEREST EXPENSE
Salaries 109.8 113.2 221.9 219.7
Employee benefits 25.4 26.9 53.9 54.2
Net occupancy 24.3 26.4 50.0 51.9
Furniture and equipment 24.8 22.8 48.3 44.2
Amortization of goodwill and other intangible assets 14.2 12.7 28.3 23.4
FDIC insurance 13.8 15.7 27.4 30.3
Advertising 9.2 9.8 15.5 19.3
Other personnel costs 9.8 10.0 17.4 18.6
Professional services 10.5 9.5 17.1 17.0
Data processing 4.4 5.0 8.7 9.9
Other 57.0 56.0 119.0 112.6
Total noninterest expense 303.2 308.0 607.5 601.1
Income from continuing operations before income taxes 219.0 185.7 431.6 363.2
Applicable income taxes 81.1 70.2 159.9 135.8
Income from continuing operations 137.9 115.5 271.7 227.4
Income from discontinued operations -- 1.6 -- .4
Net income $137.9 $117.1 $271.7 $227.8
Net income applicable to common equity $136.0 $114.9 $267.9 $219.7
EARNINGS PER COMMON SHARE
Average common and common equivalent shares 135,855,386 137,786,300 135,718,099 135,040,640
Income from continuing operations $1.00 $.82 $1.97 $1.62
Income from discontinued operations -- .01 -- .01
Net income $1.00 $.83 $1.97 $1.63
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Unrealized
Common Gains/(losses)
(In Millions, Except Shares) Shares Preferred Common Capital Retained On Securities, Treasury
(Unaudited) Outstanding* Stock Stock Surplus Earnings Net Of Taxes Stock** Total
BALANCE DECEMBER 31, 1993 130,408,480 $278.1 $169.8 $852.2 $1,575.4 $38.0 $(169.4) $2,744.1
Net Income 227.8 227.8
Dividends declared:
Preferred (8.1) (8.1)
Common (77.5) (77.5)
Purchase of treasury stock (3,428,241) (.6) (8.9) (103.9) (113.4)
Repurchase of stock warrants (2.3) (2.3)
Acquisition of Boulevard Bancorp,
Inc. for common stock,
warrants, and stock options 6,227,649 1.9 54.9 149.4 206.2
Other business combinations 526,000 (8.1) 16.2 8.1
Issuance of common stock:
Dividend reinvestment 95,613 .2 3.1 3.3
Stock option and stock purchase plans 876,993 .3 3.7 (9.6) 19.7 14.1
Stock warrants exercised 371,105 .1 .6 (6.2) 9.8 4.3
Redemption of preferred stock (160.0) (7.0) (167.0)
Change in unrealized gains/(losses) (98.0) (98.0)
BALANCE JUNE 30, 1994 135,077,599 $118.1 $171.5 $900.4 $1,686.7 $(60.0) $(75.1) $2,741.6
BALANCE DECEMBER 31, 1994 133,832,409 $118.1 $168.3 $865.8 $1,592.8 $(106.4) $(26.7) $2,611.9
Net Income 271.7 271.7
Dividends declared:
Preferred (3.8) (3.8)
Common (97.4) (97.4)
Purchase of treasury stock (3,684,885) (148.0) (148.0)
Business combinations 1,619,998 .3 4.3 52.4 57.0
Issuance of common stock:
Dividend reinvestment 112,723 .1 4.4 4.5
Stock option and stock purchase plans 1,500,866 .9 27.7 (15.6) 25.9 38.9
Stock warrants exercised 30,174 (.9) 1.1 .2
Redemption of preferred stock 8,281 (12.4) (1.0) (13.4)
Change in unrealized gains/(losses) 95.9 95.9
BALANCE JUNE 30, 1995 133,419,566 $105.7 $169.5 $897.9 $1,745.8 $(10.5) $(90.9) $2,817.5
*Defined as total common shares less common stock held in treasury.
**Ending treasury shares were 2,212,758 at June 30, 1995; 767,000 at December
31, 1994; 2,144,277 at June 30, 1994; and 5,391,883 at December 31, 1993.
CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended
June 30 June 30
(Unaudited, in Millions) 1995 1994
OPERATING ACTIVITIES
Net income $ 271.7 $ 227.8
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for credit losses 53.0 52.6
Depreciation and amortization of bank premises and equipment 39.7 36.8
Provision for deferred income taxes 48.1 30.1
Amortization of goodwill and other intangible assets 28.3 23.4
Amortization and write-downs of loan servicing related intangibles 5.7 18.2
Changes in operating assets and liabilities, excluding
the effects of purchase acquisitions:
Increase in trading account securities (103.7) (3.3)
(Increase) decrease in loans held for sale (154.9) 639.4
Decrease in accrued receivables 5.9 35.6
Decrease in accrued liabilities (60.3) (88.2)
Other - net 10.4 22.0
Net cash provided by operating activities 143.9 994.4
INVESTING ACTIVITIES
Net cash provided (used) by:
Interest-bearing deposits with banks 28.9 46.0
Loans outstanding (842.3) (352.5)
Securities purchased under agreements to resell (44.0) 13.0
Available-for-sale securities:
Sales 1,908.1 679.8
Maturities 275.6 750.9
Purchases (228.9) (792.4)
Investment securities:
Maturities -- 183.3
Purchases -- (283.4)
Proceeds from sales/repayments of other real estate 23.4 61.4
Net (purchases) sales of bank premises and equipment 2.6 (28.6)
Sales of loans 15.6 --
Purchases of loans (4.6) (496.3)
Cash and cash equivalents of acquired subsidiaries 16.3 72.8
Business acquisitions, net of cash received -- (65.6)
Other - net 2.5 7.1
Net cash provided (used) by investing activities 1,153.2 (204.5)
FINANCING ACTIVITIES
Net cash provided (used) by:
Deposits (1,670.5) (3,605.1)
Federal funds purchased and securities sold under
agreements to repurchase (649.5) 1,316.3
Short-term borrowings 1,124.9 (52.9)
Long-term debt transactions:
Proceeds 150.6 1,301.3
Principal payments (57.0) (520.6)
Redemption of preferred stock (13.4) (167.0)
Proceeds from issuance of common stock 43.6 21.7
Purchase of treasury stock and stock warrants (148.0) (115.7)
Cash dividends (101.2) (85.6)
Net cash used by financing activities (1,320.5) (1,907.6)
Change in cash and cash equivalents (23.4) (1,117.7)
Cash and cash equivalents at beginning of period 1,841.9 2,798.6
Cash and cash equivalents at end of period $ 1,818.5 $ 1,680.9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A. Basis of Presentation
The accompanying consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q and, therefore, do not include all
information and footnotes necessary for a complete presentation of financial
position, results of operations, and cash flow activity required under generally
accepted accounting principles. In the opinion of management of the Company, all
adjustments (consisting only of normal recurring accruals) necessary for a fair
presentation of results have been made and the Company believes such
presentation is adequate to make the information presented not misleading. For
further information, refer to the Company's Current Report on Form 8-K filed
March 3, 1995, which includes a copy of the Company's restated consolidated
financial statements and footnotes for the year ended December 31, 1994, which
give effect to the merger of Metropolitan Financial Corporation, as discussed in
Note C below. Certain amounts in prior periods have been reclassified to conform
to the current presentation.
NOTE B. Accounting Changes
ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN -- Effective January 1, 1995,
the Company adopted Statement of Financial Accounting Standards No. ("SFAS")
114, "Accounting by Creditors for Impairment of a Loan." This Statement requires
creditors to establish a valuation allowance when it is probable that all the
principal and interest due under the contractual terms of a loan will not be
collected. The impairment is measured based on the present value of expected
future cash flows based on the effective interest rate of the loan, or the
observable market price or the fair value of a collateral dependent loan. This
differs from the Company's prior policy in that it requires the establishment of
a valuation allowance for uncollectible interest in addition to the principal
amounts of impaired loans. The Statement also requires the reclassification of
in-substance foreclosures from other real estate to nonperforming loans for all
periods if the Company has not taken possession of the collateral. The adoption
of SFAS 114 did not have a material effect on the Company.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF -- The Company has not yet adopted SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
which requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The impairment is
measured based on the present value of expected future cash flows from the use
of the asset and its eventual disposition. If the expected future cash flows are
less than the carrying amount of the asset, an impairment loss is recognized
based on current fair values. The Statement is effective for fiscal years ending
after December 15, 1995, and is not expected to have a material effect on the
Company.
ACCOUNTING FOR MORTGAGE SERVICING RIGHTS -- SFAS 122, "Accounting for Mortgage
Servicing Rights," issued in May 1995, amends SFAS 65, "Accounting for Certain
Mortgage Banking Activities," to require that entities engaged in mortgage
banking activities recognize rights to service mortgage loans for others as
separate assets, whether those rights were acquired through loan origination
activities or through purchase transactions. In addition, a valuation allowance
is established for impairment of the mortgage servicing rights based on the
predominant risk characteristics of the underlying loans and subsequently
adjusted to reflect changes in the fair value of the servicing rights. The
Statement applies to fiscal years beginning after December 15, 1995; the
adoption of SFAS 122 is not expected to have a material effect on the Company.
NOTE C. Business Combinations and Discontinued Operations
FIRSTIER FINANCIAL, INC. -- On August 7, 1995, the Company announced that it had
signed a purchase agreement to acquire FirsTier Financial, Inc. ("FirsTier"), a
regional financial services holding company based in Omaha, Nebraska. As of June
30, 1995, FirsTier had approximately $3.6 billion in assets, $2.8 billion in
deposits and operated 63 offices in Nebraska and Iowa. Subject to the completion
of due diligence and shareholder and regulatory approvals, the Company will
exchange .8829 shares of FBS common stock for each common share of FirsTier,
resulting in a per share price of $38. The aggregate purchase price for the
transaction is approximately $700 million. The transaction, which will be
accounted for as a purchase, is expected to close in the first quarter of 1996.
METROPOLITAN FINANCIAL CORPORATION -- Effective December 23, 1994, the Company
received all regulatory approvals on the previously announced merger with
Metropolitan Financial Corporation ("MFC"), a regional financial services
holding company headquartered in Minneapolis, Minnesota. On January 24, 1995,
the Company issued 21.7 million shares to complete the transaction. As of
December 31, 1994, MFC had approximately $7.9 billion in assets, $5.5 billion in
deposits and 211 offices principally in North Dakota, Minnesota, Nebraska, Iowa,
Kansas, South Dakota, Wisconsin, and Wyoming. The Company used the pooling of
interests method to account for the transaction. Accordingly, the Company's
financial statements have been restated for all periods prior to the merger to
include the accounts and operations of MFC. The operations of Edina Realty,
Inc., MFC's real estate brokerage subsidiary, are accounted for as discontinued
operations because the Company expects to sell the subsidiary within two years
to comply with regulations which restrict nonbanking activities.
BOULEVARD BANCORP, INC. -- On March 25, 1994, the Company completed the
acquisition of Boulevard Bancorp, Inc. ("Boulevard"), a $1.6 billion commercial
bank holding company headquartered in Chicago, Illinois, which was accounted for
as a purchase. Under the terms of the purchase agreement, 6.2 million shares of
the Company's common stock were issued and Boulevard's outstanding stock options
and warrants were converted into stock options and warrants for the Company's
common stock. The Company bought back existing shares of its common stock
approximately equal to the number of shares issued at the time of closing of the
Boulevard acquisition. The results of operations of Boulevard are included in
the Company's Consolidated Statement of Income since the date of acquisition.
OTHER ACQUISITIONS -- On June 26, 1995, the Company announced that it had signed
agreements to acquire two commercial bank holding companies, Midwestern
Services, Inc. and Southwest Holdings, Inc., both of Omaha, Nebraska. Together,
the two subsidiary banks have total assets of $422 million and 12 branches in
Omaha. The transactions are expected to close in the fourth quarter of 1995.
On March 16, 1995, the Company completed the acquisition of First Western
Corporation, parent company of Western Bank, with $317 million in assets and
nine branches in and around Sioux Falls, South Dakota. On March 25, 1994, the
Company completed the acquisition of Rocky Mountain Financial Corporation, a
$537 million savings bank holding company located in Cheyenne, Wyoming. Both of
these acquisitions were accounted for as purchases.
NOTE D. Securities
The detail of the amortized cost and fair value of available-for-sale securities
consisted of the following:
JUNE 30, 1995 DECEMBER 31, 1994
Amortized Fair Amortized Fair
(In Millions) Cost Value Cost Value
U.S. Treasury $918 $910 $1,177 $1,113
Mortgage-backed securities 1,880 1,847 3,400 3,297
Other U.S. agencies 215 214 333 323
State and political 176 181 178 181
Other 254 274 269 271
Total $3,443 $3,426 $5,357 $5,185
NOTE E. Loans
The composition of the loan portfolio was as follows:
June 30 December 31
(In Millions) 1995 1994
COMMERCIAL:
Commercial $8,274 $7,285
Financial institutions 748 787
Real estate:
Commercial mortgage 2,414 2,454
Construction 331 330
Total commercial loans 11,767 10,856
CONSUMER:
Residential mortgage 4,940 5,098
Residential mortgage held for sale 311 197
Home equity and second mortgage 2,666 2,453
Credit card 2,321 2,409
Automobile 1,884 1,770
Revolving credit 747 725
Installment 686 712
Student 377 336
Total consumer loans 13,932 13,700
Total loans $25,699 $24,556
At June 30, 1995, the recorded investment in loans considered impaired under
SFAS 114 was $75 million, which was included in nonaccrual loans. Of this
amount, $2 million was measured using the present value of expected future cash
flows, $66 million using the fair value of the loans' collateral, and $7 million
was below the Company's threshold for valuing individual loans. The carrying
value of the impaired loans was less than or equal to the present value of
expected future cash flows and, accordingly, no allowance for credit losses was
specifically allocated to impaired loans. For the quarter ended June 30, 1995,
the average recorded investment in impaired loans was approximately $84 million.
No interest income was recognized on these impaired loans during the quarter.
NOTE F. Long-Term Debt
Long-term debt (debt with original maturities of more than one year) consisted
of the following:
June 30 December 31
(In Millions) 1995 1994
Floating-rate subordinated capital notes - due November 29, 1996 $150 $150
Fixed-rate subordinated notes:
8.25% due October 1, 1999 86 86
6.625% due May 15, 2003 100 100
6.00% due October 15, 2003 100 100
7.55% due June 15, 2004 100 100
8.00% due July 2, 2004 125 125
8.35% due November 1, 2004 100 100
7.625% due May 1, 2005 150 --
Step-up subordinated notes - due August 15, 2005 100 100
Floating-rate subordinated notes - due November 30, 2010 107 107
Federal Home Loan Bank advances - maturities to May 28, 2008 882 1,088
Medium-term notes (6.0625%to 9.89%) - maturities to November 1997 476 514
Other 96 114
Total $2,572 $2,684
During May 1995, the Company registered with the Securities and Exchange
Commission an additional $1.0 billion of debt securities to be issued from time
to time for general corporate purposes.
NOTE G. Shareholders' Equity
On January 18, 1995, and February 15, 1995, the Board of Directors authorized
repurchase programs of two million and 14 million shares of common stock,
respectively. The two million share authorization, which was intended to provide
shares for stock purchase and option plans and for the purchase acquisition of
First Western Corporation, was completed during the second quarter. The 14
million share authorization is intended to allow the Company to buy back shares
in connection with future excess capital retention expected over the next two
years and is predicated upon such excess capital, as well as for stock purchase
and option plans. As of June 30, 1995, approximately 3.7 million shares have
been repurchased under the two programs, and approximately 1.5 million of these
shares have been reissued for the designated purposes.
NOTE H. Income Taxes
The components of income tax expense were:
Three Months Ended
June 30 June 30
(In Millions) 1995 1994
FEDERAL:
Current tax $52.1 $45.9
Deferred tax provision 21.7 14.9
Federal income tax 73.8 60.8
STATE:
Current tax 3.2 8.9
Deferred tax provision 4.1 0.5
State income tax 7.3 9.4
Total income tax provision $81.1 $70.2
The reconciliation between income tax expense and the amount computed by
applying the statutory federal income tax rate was as follows:
Three Months Ended
June 30 June 30
(In Millions) 1995 1994
Tax at statutory rate (35%) $76.7 $65.0
State income tax, net of federal tax benefit 4.8 6.6
Tax effect of:
Tax-exempt interest:
Loans (1.3) (1.5)
Securities (1.0) (1.0)
Amortization of goodwill 2.7 2.7
Other items (0.8) (1.6)
Applicable income taxes $81.1 $70.2
The Company's net deferred tax asset was $258.8 million at June 30, 1995, and
$363.0 million at December 31, 1994.
NOTE I. Commitments, Contingent Liabilities and Off-Balance Sheet Financial
Instruments
The Company uses various financial instruments that have off-balance sheet risk
in the normal course of business to manage its interest rate risk and to meet
the financing needs of its customers. The contract or notional amounts of these
financial instruments were as follows:
June 30 December 31
(In Millions) 1995 1994
Commitments to extend credit:
Commercial $6,781 $7,006
Corporate and purchasing cards 7,602 3,210
Consumer credit card 8,123 7,875
Other consumer 2,910 2,628
Letters of credit:
Standby 1,296 1,321
Commercial 171 175
Interest rate swap contracts:
Hedge 2,729 2,674
Intermediated 137 127
Interest rate option contracts:
Hedge interest rate floors purchased 950 950
Hedge interest rate caps purchased 200 250
Intermediated interest rate caps and floors purchased 131 127
Intermediated interest rate caps and floors written 131 127
Liquidity support guarantees and forward and option contracts 549 338
Foreign currency commitments:
Commitments to purchase 1,163 941
Commitments to sell 1,158 941
Mortgages sold with recourse 248 312
Commitments to sell loans 539 935
Activity for the six months ending June 30, 1995, with respect to interest rate
swaps which the Company uses to hedge medium-term notes, subordinated debt,
deposit notes, long-term certificates of deposit, deposit accounts, and savings
certificates was as follows:
(In Millions)
Notional amount outstanding at December 31, 1994 $2,674
Additions 300
Maturities 245
Notional amount outstanding at June 30, 1995 $2,729
For interest rate swaps designated as hedges, the weighted average interest
rates paid were 6.10 percent and 6.09 percent at June 30, 1995, and December 31,
1994, respectively. At these same dates, the weighted average interest rates
received were 6.95 percent and 6.91 percent. The Company receives fixed and pays
floating on all hedges as of June 30, 1995. The amortization of deferred gains
and losses was not material for the quarters ending June 30, 1995, or June 30,
1994. Net unamortized deferred gains and losses were $6.3 million at June 30,
1995. The Company amortizes these gains and losses through the year 2000.
Interest rate floors totaling $950 million with an average remaining maturity of
2.5 years at June 30, 1995, and 3.0 years at December 31, 1994, hedged floating
rate commercial loans. For interest rate floors designated as hedges, the strike
rate ranged from 3.25 percent to 4.0 percent at June 30, 1995, and December 31,
1994. At June 30, 1995, the total notional amount of caps purchased was $200
million with a strike level of 3-month LIBOR at 6.0 percent. The total notional
amount of caps purchased at December 31, 1994, was $250 million with an average
strike level of 3-month LIBOR at 6.10 percent.
NOTE J. Supplemental Information to the Consolidated Financial Statements
CONSOLIDATED BALANCE SHEET -- Time certificates of deposit in denominations of
$100,000 or more totaled $1,122 million and $1,318 million at June 30, 1995, and
December 31, 1994, respectively.
CONSOLIDATED STATEMENT OF CASH FLOWS -- Listed below are supplemental
disclosures to the Consolidated Statement of Cash Flows.
Six Months Ended
June 30
(In Millions) 1995 1994
Income taxes paid $ 118.3 $ 96.4
Interest paid 512.7 380.9
Net noncash transfers to foreclosed property 8.6 17.4
Change in unrealized gain (loss) on available-for-sale
securities, net of taxes of $59.0 in 1995 and $47.0 in 1994 95.9 (98.0)
Cash acquisitions of businesses:
Fair value of noncash assets acquired $ -- $ 703.4
Liabilities assumed -- (637.8)
Net $ -- $ 65.6
Stock acquisitions of businesses:
Fair value of noncash assets acquired $ 329.3 $ 1,674.0
Net cash acquired 16.3 72.8
Liabilities assumed (288.6) (1,540.6)
Net value of common stock issued $ 57.0 $ 206.2
CONSOLIDATED DAILY AVERAGE BALANCE SHEET AND RELATED YIELDS AND RATES
1995 1994 % Change
Interest Interest Average
Yields Yields Balance
For the Three Months Ended June 30 And And Increase
(In Millions) Balance Interest Rates Balance Interest Rates (Decrease)
ASSETS
Securities:
U.S. Treasury $988 $15.2 6.17% $1,777 $23.1 5.21% (44.4)%
Mortgage-backed securities 1,920 33.1 6.91 3,220 49.0 6.10 (40.4)
State & political subdivisions 177 4.8 10.88 195 5.2 10.70 (9.2)
U.S. agencies and other 488 7.3 6.00 703 9.7 5.53 (30.6)
Total securities 3,573 60.4 6.78 5,895 87.0 5.92 (39.4)
Unrealized loss on available-for-sale securities (50) (68)
Net securities 3,523 5,827
Trading account securities 93 1.2 5.18 61 0.7 4.60 52.5
Federal funds sold and resale agreements 293 4.4 6.02 366 3.6 3.95 (19.9)
Loans:
Commercial:
Commercial 8,166 177.7 8.73 6,853 122.6 7.18 19.2
Financial institutions 642 6.6 4.12 1,129 5.6 1.99 (43.1)
Real estate:
Commercial mortgage 2,428 55.9 9.23 2,306 50.1 8.71 5.3
Construction 363 8.7 9.61 251 4.8 7.67 44.6
Total commercial 11,599 248.9 8.61 10,539 183.1 6.97 10.1
Consumer:
Residential mortgage 5,003 93.8 7.52 5,733 101.5 7.10 (12.7)
Residential mortgage held for sale 210 4.0 7.64 348 6.0 6.92 (39.7)
Home equity and second mortgage 2,587 63.2 9.80 2,180 46.9 8.63 18.7
Credit card 2,292 72.0 12.60 2,023 58.0 11.50 13.3
Other 3,673 92.1 10.06 3,282 75.1 9.18 11.9
Total consumer 13,765 325.1 9.47 13,566 287.5 8.50 1.5
Total loans 25,364 574.0 9.08 24,105 470.6 7.83 5.2
Allowance for credit losses 473 493 (4.1)
Net loans 24,891 23,612 5.4
Other earning assets 236 3.4 5.78 247 3.2 5.20 (4.5)
Total earning assets* 29,559 643.4 8.73 30,674 565.1 7.39 (3.6)
Cash and due from banks 1,709 1,758 (2.8)
Other assets 2,160 2,178 (0.8)
Total assets $32,905 $34,049 (3.4)%
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits $5,435 $6,445 (15.7)%
Interest-bearing deposits:
Interest checking 2,854 11.8 1.66 3,249 11.8 1.46 (12.2)
Money market accounts 3,928 37.5 3.83 4,157 26.3 2.54 (5.5)
Other savings accounts 1,697 10.8 2.55 2,176 12.3 2.27 (22.0)
Savings certificates 8,107 107.4 5.31 7,844 74.6 3.81 3.4
Certificates over $100,000 1,160 19.3 6.67 1,454 19.7 5.43 (20.2)
Total interest-bearing deposits 17,746 186.8 4.22 18,880 144.7 3.07 (6.0)
Short-term borrowings 3,346 51.2 6.14 2,808 30.7 4.39 19.2
Long-term debt 2,607 42.4 6.52 2,323 31.9 5.51 12.2
Total interest-bearing liabilities 23,699 280.4 4.75 24,011 207.3 3.46 (1.3)
Other liabilities 995 858 16.0
Preferred equity 106 118 (10.2)
Common equity 2,701 2,660 1.5
Unrealized loss on available-for-sale
securities, net of taxes (31) (43) (27.9)
Total liabilities and shareholders' equity $32,905 $34,049 (3.4)%
Net interest income $363.0 $357.8
Gross interest margin 3.98% 3.93%
Gross interest margin without taxable-
equivalent increments 3.93% 3.88%
Net interest margin 4.93% 4.68%
Net interest margin without taxable-
equivalent increments 4.88% 4.63%
Interest and rates are presented on a fully taxable-equivalent basis under a tax
rate of 35 percent.
Interest income and rates on loans include loan fees. Nonaccrual loans are
included in average loan balances.
*Before deducting the allowance for credit losses and excluding the unrealized
loss on available-for-sale securities.
CONSOLIDATED DAILY AVERAGE BALANCE SHEET AND RELATED YIELDS AND RATES
1995 1994 % Change
Interest Interest Average
Yields Yields Balance
For the Six Months Ended June 30 And And Increase
(In Millions) Balance Interest Rates Balance Interest Rates (Decrease)
ASSETS
Securities:
U.S. Treasury $1,027 $31.4 6.17% $1,728 $44.9 5.24% (40.6)%
Mortgage-backed securities 2,190 74.7 6.88 2,991 90.9 6.13 (26.8)
State & political subdivisions 176 9.4 10.77 194 10.2 10.60 (9.3)
U.S. agencies and other 519 15.6 6.06 568 15.5 5.50 (8.6)
Total securities 3,912 131.1 6.76 5,481 161.5 5.94 (28.6)
Unrealized loss on available-for-sale
securities (94) (10)
Net securities 3,818 5,471
Trading account securities 87 2.3 5.33 62 1.3 4.23 40.3
Federal funds sold and resale agreements 302 9.0 6.01 456 7.9 3.49 (33.8)
Loans:
Commercial:
Commercial 7,832 339.5 8.74 6,555 228.2 7.02 19.5
Financial institutions 683 13.5 3.99 1,420 17.3 2.46 (51.9)
Real estate:
Commercial mortgage 2,436 110.7 9.16 2,282 95.8 8.47 6.7
Construction 360 16.9 9.47 242 9.0 7.50 48.8
Total commercial 11,311 480.6 8.57 10,499 350.3 6.73 7.7
Consumer:
Residential mortgage 5,036 189.9 7.60 5,531 200.0 7.29 (8.9)
Residential mortgage held for sale 192 7.5 7.88 512 17.2 6.77 (62.5)
Home equity and second mortgage 2,517 119.9 9.61 2,068 85.7 8.36 21.7
Credit card 2,293 143.5 12.62 1,880 114.2 12.25 22.0
Other 3,631 181.8 10.10 3,096 139.1 9.06 17.3
Total consumer 13,669 642.6 9.48 13,087 556.2 8.57 4.4
Total loans 24,980 1,123.2 9.07 23,586 906.5 7.75 5.9
Allowance for credit losses 475 487 (2.5)
Net loans 24,505 23,099 6.1
Other earning assets 232 6.9 6.00 247 6.2 5.06 (6.1)
Total earning assets* 29,513 1,272.5 8.69 29,832 1,083.4 7.32 (1.1)
Cash and due from banks 1,693 1,737 (2.5)
Other assets 2,167 2,038 6.3
Total assets $32,804 $33,110 (0.9)%
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits $5,472 $6,556 (16.5)%
Interest-bearing deposits:
Interest checking 2,910 24.2 1.68 3,168 22.2 1.41 (8.1)
Money market accounts 3,834 71.8 3.78 4,159 51.4 2.49 (7.8)
Other savings accounts 1,814 23.0 2.56 2,057 23.2 2.27 (11.8)
Savings certificates 8,226 209.7 5.14 7,743 145.6 3.79 6.2
Certificates over $100,000 1,120 36.5 6.57 1,436 39.2 5.50 (22.0)
Total interest-bearing deposits 17,904 365.2 4.11 18,563 281.6 3.06 (3.6)
Short-term borrowings 3,075 92.2 6.05 2,247 46.7 4.19 36.8
Long-term debt 2,638 85.3 6.52 2,150 57.8 5.42 22.7
Total interest-bearing liabilities 23,617 542.7 4.63 22,960 386.1 3.39 2.9
Other liabilities 1,008 867 16.3
Preferred equity 106 169 (37.3)
Common equity 2,663 2,564 3.9
Unrealized loss on available-for-sale
securities, net of taxes (62) (6) 933.3
Total liabilities and shareholders' equity $32,804 $33,110 (0.9)%
Net interest income $729.8 $697.3
Gross interest margin 4.06% 3.93%
Gross interest margin without taxable-
equivalent increments 4.02% 3.88%
Net interest margin 4.99% 4.71%
Net interest margin without taxable-
equivalent increments 4.94% 4.66%
Interest and rates are presented on a fully taxable-equivalent basis under a tax
rate of 35 percent.
Interest income and rates on loans include loan fees. Nonaccrual loans are
included in average loan balances.
*Before deducting the allowance for credit losses and excluding the unrealized
loss on available-for-sale securities.
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
11 Computation of Primary and Fully Diluted Net Income Per Common Share
12 Computation of Ratio of Earnings to Fixed Charges
27 Article 9 Financial Data Schedule*
(B) REPORTS ON FORM 8-K
During the three months ended June 30, 1995, the Company filed the following
reports on Form 8-K:
Form 8-K filed April 13, 1995, relating to first quarter 1995 earnings.
Form 8-K filed April 25, 1995, relating to the public offering of $150
million of 7.625 percent subordinated notes.
*Copies of this exhibit will be furnished upon request and payment of the
Company's reasonable expenses in furnishing the exhibit.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIRST BANK SYSTEM, INC.
/s/ DAVID J. PARRIN
By: David J. Parrin
Senior Vice President & Controller
(Chief Accounting Officer and
Duly Authorized Officer)
DATE: August 11, 1995
[LOGO]
FIRST BANK SYSTEM
P.O. BOX 522
MINNEAPOLIS, MINNESOTA
55480
SHAREHOLDER INQUIRIES
STOCK AND DIVIDEND INFORMATION
For matters related specifically to First Bank System stock records or dividend
payments, contact the Office of the Corporate Secretary, (612) 973-0334.
DIVIDEND REINVESTMENT
For information regarding First Bank System's dividend reinvestment plan,
contact First Chicago Trust Company of New York, P.O. Box 13531, Newark, New
Jersey 07188-0001, (800) 446-2617.
FINANCIAL INFORMATION
For further information contact John Danielson, Senior Vice President, (612)
973-2261, or Karin Glasgow, Assistant Vice President, (612) 973-2264.