TO OUR STOCKHOLDERS, CUSTOMERS AND FRIENDS
FirsTier Financial, Inc., reported record net income of $15,009,000 for the
third quarter of 1995, an increase of 8.20 percent over net income of
$13,872,000 in the same period of 1994. [Logo] For the first nine months,
earnings were $42,645,000, a 2.90 percent increase over the $41,444,000 earned
in the same period of 1994. On a per share basis, earnings were $.80 for the
third quarter and $2.28 for the first nine months, compared to $.73 and $2.18
for the same periods last year, an increase of 9.59 percent and 4.59 percent,
respectively. [Logo] The acquisition of the Cornerstone Bank Group on January 3,
1995, has been accounted for as a pooling of interests. As a result, all
financial results for 1994 and prior periods have been restated. [Logo] Net
interest income was $33.1 million for the third quarter, compared to $33.3
million for the same period last year. Net interest margin was 4.37 percent,
compared to 4.53 percent for the third quarter of 1994. [Logo] Non-interest
income increased $129,000, or .89 percent from the third quarter of 1994.
Non-interest expense in the third quarter decreased $1,673,000, or 5.87 percent,
compared to the same period in 1994. Non-interest expense in the third quarter
of 1995 reflects a one-time pretax credit of approximately $1.5 million from the
Federal Deposit Insurance Agency, representing a refund on a portion of fees
paid by FirsTier Bank to the FDIC in the second and third quarters of 1995.
[Logo] Under-performing assets on September 30, 1995 totaled $12.1 million, or
.55 percent of total loans and other real estate, compared to $14.5 million, or
.71 percent of total loans and other real estate on September 30, 1994.
Under-performing assets consist of non-accrual loans and leases, loans 90 days
past due and still accruing interest, restructured loans, other real estate
owned and repossessed assets. [Logo] On August 7, 1995, FirsTier Financial,
Inc., and first Bank System, Inc., announced plans for First Bank System to
acquire FirsTier Financial. First Bank System will exchange .8829 shares of
First Bank System common stock for each share of FirsTier Financial, Inc.,
common stock. [Logo] First Bank System is the leading bank in Minnesota and a
major player in a region stretching from Illinois to Wyoming. Our customers will
benefit from their major investment in technology and innovative services
including a broad array of mutual funds. This purchase gives our stockholders an
attractive price, at approximately 1.9 times book value as of June 30, and it
gives stockholders ownership in a company with an excellent track record in
growing shareholder value. [Logo] An application for the merger has been filed
with the Federal Reserve Board, and a proxy statement/ prospectus has been filed
with the Securities and Exchange Commission. Pending regulatory approval, we
expect to mail proxies to FirsTier stockholders in December announcing a special
stockholders' meeting in January, 1996. Subject to regulatory and stockholders'
approvals, the acquisition is expected to be completed early in the first
quarter of 1996.
Sincerely,
/s/ David A. Rismiller
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David A. Rismiller
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
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FIRSTIER FINANCIAL, INC. 2
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BOARD OF DIRECTORS
JAMES P. ABEL
PRESIDENT
NEBCO, Inc.
DUANE W. ACKLIE**
CHAIRMAN
Crete Carrier Corporation
LAWRENCE J. ARTH
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Ameritas Life Insurance Corporation
RICHARD K. DAVIDSON
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Union Pacific Railroad Company
J. ROBERT DUNCAN
CHAIRMAN
Duncan Aviation, Inc.
STEVEN H. DURHAM
CHAIRMAN
Global Resources, Ltd. L.L.C.
CHARLES F. HEIDER**
GENERAL PARTNER
Heider-Weitz Partnership
JACK R. MCDONNELL**
EXECUTIVE VICE PRESIDENT
AND CHIEF OPERATING OFFICER
FirsTier Financial, Inc.
DAVID A. RISMILLER**
CHAIRMAN OF THE BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
FirsTier Financial, Inc.
WALTER SCOTT, JR.*
PRESIDENT AND CHAIRMAN OF THE BOARD
Peter Kiewit Sons', Inc.
THOMAS J. SKUTT
CHAIRMAN OF THE BOARDS AND
CHIEF EXECUTIVE OFFICER
Mutual of Omaha Insurance Companies
DR. L. DENNIS SMITH
PRESIDENT
University of Nebraska
* Chairman of the Executive Committee, Board of Directors
** Member of the Executive Committee, Board of Directors
PRINCIPAL CORPORATE OFFICERS
DAVID A. RISMILLER**
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
JACK R. MCDONNELL**
EXECUTIVE VICE PRESIDENT AND
CHIEF OPERATING OFFICER
DWAIN C. CARLSON
VICE PRESIDENT AND DIRECTOR OF
CORPORATE ASSET LIABILITY MANAGEMENT
THOMAS B. FISCHER
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
DAVID F. GRIEBEL
VICE PRESIDENT AND DIRECTOR OF MARKETING
AARON C. HILKEMANN
VICE PRESIDENT AND DIRECTOR OF
FINANCIAL OPERATIONS
MARK J. MATTHES
VICE PRESIDENT AND DIRECTOR OF OPERATIONS
JOHN F. MOCK
VICE PRESIDENT AND DIRECTOR OF
HUMAN RESOURCES
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FINANCIAL HIGHLIGHTS 3
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FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
PERCENTAGE PERCENTAGE
1995 1994 CHANGE 1995 1994 CHANGE
--------- --------- ---------- ---------- ---------- ----------
INCOME AND DIVIDENDS
($ IN THOUSANDS)
Net Income................ $ 15,009 13,872 8.2% $ 42,645 41,444 2.9%
Cash Dividends Declared... 5,556 4,429 25.4 15,886 13,382 18.7
PER SHARE
Net Income................ .80 .73 9.6 2.28 2.18 4.6
Cash Dividends Declared... .30 .26 15.4 .86 .78 10.3
FINANCIAL INFORMATION
($ IN THOUSANDS)
Average Assets............ 3,583,635 3,457,011 3.7 3,578,841 3,426,205 4.5
Average Loans and
Leases................... 2,175,473 2,024,936 7.4 2,172,554 1,983,521 9.5
Average Deposits.......... 2,820,177 2,692,149 4.8 2,799,288 2,707,833 3.4
Average Stockholders'
Equity................... 369,076 340,229 8.5 358,011 337,145 6.2
Book Value Per Share
(At September 30)........ 20.30 18.43 10.1
Market Value Per Share
(At September 30)........ 41.13 33.00 24.6
RATIOS
Return on Average
Assets................... 1.66% 1.60 3.8 1.59 1.62 (1.9)
Return on Average
Equity................... 16.13 16.18 (0.3) 15.93 16.44 (3.1)
Average Equity to
Assets................... 10.30 9.84 4.7 10.00 9.84 1.6
Tier 1 Leverage........... 10.06 9.71 3.6
Net Interest Margin....... 4.37 4.53 (3.5) 4.46 4.68 (4.7)
OTHER INFORMATION
Number of Shares.......... 18,521,382 18,591,020 (0.4)
Number of Stockholders.... 2,045 2,063 (0.9)
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CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) ($ in thousands, except per share amounts) 4
- --------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1995 1994 1995 1994
--------- --------- --------- ---------
INTEREST INCOME
Interest and fees on loans and leases
Taxable............................................................ $ 47,723 40,528 141,486 116,304
Nontaxable......................................................... 455 479 1,366 2,115
Interest on securities
Taxable............................................................ 9,679 10,913 29,047 34,413
Nontaxable......................................................... 6,172 5,173 18,010 15,240
Interest on federal funds sold and resale agreements................. 1,549 1,317 5,093 2,882
--------- --------- --------- ---------
Total interest income.............................................. 65,578 58,410 195,002 170,954
--------- --------- --------- ---------
INTEREST EXPENSE
Interest on deposits
Savings and interest checking...................................... 5,895 4,817 16,326 14,354
Time............................................................... 21,642 15,846 62,023 45,063
Interest on short-term and FHLB borrowings........................... 4,653 4,097 15,279 9,287
Interest on long-term debt........................................... 292 305 881 918
--------- --------- --------- ---------
Total interest expense............................................. 32,482 25,065 94,509 69,622
--------- --------- --------- ---------
NET INTEREST INCOME................................................ 33,096 33,345 100,493 101,332
Provision for loan and lease losses.................................... 269 370 807 (1,220)
--------- --------- --------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES...... 32,827 32,975 99,686 102,552
--------- --------- --------- ---------
NON-INTEREST INCOME
Trust services....................................................... 4,188 4,126 12,557 12,145
Service charges on deposit accounts.................................. 4,363 3,813 12,758 11,647
Credit card fees..................................................... 2,658 2,562 7,309 6,842
Securities gains, net................................................ (9) -- 1 212
Other................................................................ 3,403 3,973 9,824 10,868
--------- --------- --------- ---------
Total non-interest income.......................................... 14,603 14,474 42,449 41,714
--------- --------- --------- ---------
NON-INTEREST EXPENSE
Salaries and benefits................................................ 14,183 13,524 42,200 41,184
Premises and equipment............................................... 3,566 3,824 10,742 11,368
Data processing fees................................................. 1,280 1,383 3,867 4,090
Credit card processing expense....................................... 1,527 1,340 4,265 4,069
Amortization of goodwill............................................. 464 382 1,323 1,188
Other................................................................ 5,807 8,047 21,575 25,771
--------- --------- --------- ---------
Total non-interest expense......................................... 26,827 28,500 83,972 87,670
--------- --------- --------- ---------
Income before income tax expense................................... 20,603 18,949 58,163 56,596
Income tax expense................................................. 5,594 5,077 15,518 15,152
--------- --------- --------- ---------
NET INCOME............................................................. $ 15,009 13,872 42,645 41,444
--------- --------- --------- ---------
--------- --------- --------- ---------
NET INCOME PER SHARE................................................... $ .80 .73 2.28 2.18
--------- --------- --------- ---------
--------- --------- --------- ---------
See accompanying notes to consolidated financial statements
[LOGO]
CONSOLIDATED BALANCE SHEETS
September 30, (Unaudited) ($ in thousands) 5
- --------------------------------------------------------------------------------
1995 1994
------------ ----------
ASSETS
Cash and due from banks......................................................................... $ 208,242 235,413
Federal funds sold and securities purchased under resale agreements............................. 97,050 151,435
Securities available for sale (amortized cost $255,241 in 1995 and $285,919 in 1994)............ 261,411 282,397
Investment securities (market value $755,303 in 1995 and $695,291 in 1994)...................... 740,843 707,527
Loans and leases, net........................................................................... 2,139,076 2,002,883
Premises and equipment.......................................................................... 50,435 49,828
Accrued interest receivable..................................................................... 35,082 31,943
Other assets.................................................................................... 53,283 56,014
------------ ----------
TOTAL ASSETS.................................................................................. $ 3,585,422 3,517,440
------------ ----------
------------ ----------
LIABILITIES
Deposits
Demand, non-interest-bearing.................................................................. $ 470,703 455,615
Savings and interest checking................................................................. 867,832 855,757
Time.......................................................................................... 1,437,124 1,313,103
------------ ----------
TOTAL DEPOSITS................................................................................ 2,775,659 2,624,475
Short-term borrowings........................................................................... 205,543 339,630
Federal Home Loan Bank borrowings............................................................... 156,500 148,715
Other liabilities............................................................................... 59,934 49,685
Long-term debt.................................................................................. 11,773 12,324
------------ ----------
TOTAL LIABILITIES............................................................................. 3,209,409 3,174,829
------------ ----------
STOCKHOLDERS' EQUITY
Preferred stock -- $30 par value; authorized 2,000,000 shares................................... -- --
Common stock -- $5 par value; authorized 40,000,000 shares; issued and outstanding 18,822,202
shares in 1995 and 18,927,195 shares in 1994................................................... 94,111 94,073
Surplus......................................................................................... 5,432 10,345
Retained earnings............................................................................... 282,621 251,202
Net unrealized securities gains (losses)........................................................ 3,824 (2,285)
------------ ----------
385,988 353,335
Less treasury stock, at cost 300,820 shares in 1995 and 336,175 shares in 1994.................. 9,975 10,724
------------ ----------
TOTAL STOCKHOLDERS' EQUITY.................................................................... 376,013 342,611
------------ ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................................................. $ 3,585,422 3,517,440
------------ ----------
------------ ----------
See accompanying notes to consolidated financial statements
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OTHER FINANCIAL INFORMATION 6
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CONSOLIDATED STATEMENTS OF
RETAINED EARNINGS
Nine Months Ended September 30 (Unaudited)
($ IN THOUSANDS)
1995 1994
---------- ----------
BALANCE AT JANUARY 1.............. $ 255,862 252,092
Net Income........................ 42,645 41,444
Cash dividends declared........... 15,886 13,382
($.86 and $.78 per share in 1995
and 1994, respectively)........
Less transfer to Surplus.......... -- 28,952
---------- ----------
BALANCE AT SEPTEMBER 30........... $ 282,621 251,202
---------- ----------
---------- ----------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) On August 7, 1995, FirsTier and First Bank System announced First Bank
System's intention to acquire FirsTier. Under terms of the agreement,
FirsTier shareholders will receive .8829 shares of First Bank System stock
for each FirsTier share held. Pending regulatory and shareholder approval,
the transaction is expected to be consummated in the first quarter of 1996.
(2) On January 3, 1995, FirsTier acquired Cornerstone Bank Group, Inc. in a
transaction accounted for as a pooling of interests. In connection with this
acquisition, FirsTier issued 1,555,075 shares in exchange for 100% of the
outstanding shares of Cornerstone Bank Group, Inc. All prior period
financial information has been restated to reflect this acquisition.
(3) On April 1, 1995, FirsTier acquired all of the outstanding shares of First
Continental Financial, Inc., the holding company of River City National
Bank, which had assets of approximately $41 million. River City National
Bank operated in three locations in west Omaha, Nebraska, and are now
branches of FirsTier Bank, N.A., Omaha. This acquisition has been accounted
for as a purchase transaction.
(4) Certain accounts in the financial statements of the prior year have been
reclassified to conform with current year presentation. Such
reclassifications had no effect on net income.
ALLOWANCE FOR LOAN AND LEASE LOSSES
($ IN THOUSANDS)
1995 1994
------- ------
BALANCE AT JANUARY 1.................... $53,250 54,345
Addition due to acquisition............. 290 --
Provision for credit losses............. 807 (1,220)
Losses charged off...................... 4,608 3,669
Recoveries on amounts charged off....... 2,325 3,816
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BALANCE AT SEPTEMBER 30................. $52,064 53,272
------- ------
------- ------
Allowance as a percentage of loans and
leases................................. 2.38% 2.59
Net charge-offs as a percentage of
average loans and leases............... .11% (.01)
UNDER-PERFORMING ASSETS
($ IN THOUSANDS)
SEPTEMBER 30 1995 1994
------- ------
Non-accrual loans and leases............ $ 9,053 11,091
Loans ninety days past due and
accruing............................... 1,580 1,397
Restructured loans...................... 18 543
Other real estate owned................. 1,312 1,377
Repossessed assets...................... 154 109
------- ------
TOTAL UNDER-PERFORMING ASSETS........... $12,117 14,517
------- ------
------- ------
Under-performing assets as a
percentage of loans, leases, other
real estate owned and repossessed
assets................................. .55% .71
------- ------
------- ------
[LOGO]
ANALYSIS OF NET INTEREST INCOME
(TAX EQUIVALENT BASIS) ($ IN THOUSANDS) 7
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THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1995 1994 1995 1994
------------ ---------- ------------ ----------
Net interest income................................................. $ 36,040 35,863 109,078 109,025
Average earning assets.............................................. 3,274,896 3,143,766 3,270,364 3,115,985
Average interest-bearing liabilities................................ 2,667,439 2,569,353 2,672,837 2,539,534
Yield on earning assets............................................. 8.30% 7.69 8.32 7.67
Cost of interest-bearing liabilities................................ 4.83 3.87 4.73 3.67
Net interest margin................................................. 4.37 4.53 4.46 4.68
Net interest rate spread............................................ 3.47 3.82 3.59 4.00
Interest-bearing liabilities to interest-earning assets............. 81.45 81.73 81.73 81.50
STOCKHOLDERS' INFORMATION
STOCK DATA
DIVIDENDS
DECLARED
YEAR PERIOD HIGH LOW PER SHARE
- --------- ---------------- --------- --------- ---------------
1994 First Quarter 33.17 28.00 .26
Second Quarter 31.83 29.33 .26
Third Quarter 35.00 31.00 .26
Fourth Quarter 33.00 30.00 .26
1995 First Quarter 33.50 29.50 .26
Second Quarter 37.50 32.75 .30
Third Quarter 41.13 36.00 .30
The common stock of FirsTier Financial, Inc. (FRST) is traded on the
Over-the-Counter Market and is quoted
on the NASDAQ National Market System.
CORPORATE OFFICE
The Corporate Office is located at 1700 Farnam Street, P.O. Box 3443, Omaha,
Nebraska 68103-0443. The telephone number is (402) 348-6000.
FORM 10Q
A copy of the third quarter report to the Securities and Exchange Commission
(Form 10Q) may be obtained without charge by written request to the Director of
Marketing at the Corporate Office.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants of FirsTier Financial, Inc. are Arthur
Andersen LLP, Omaha, Nebraska.
TRANSFER AGENT
Stockholder inquiries may be directed to:
State Street Bank and Trust Company
Securities Transfer Services Department
P.O. Box 8204
Boston, MA 02266
Telephone: (800) 257-1770
8:00 a.m. to 6:00 p.m.
(Eastern Time)
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[LOGO]
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1700 FARNAM STREET
P.O. BOX 3443
OMAHA, NEBRASKA
68103-0443
[LOGO]
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T H I R D Q U A R T E R R E P O R T
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SEPTEMBER 30, 1995