[LOGO] [LOGO]
LEVERAGING A HIGH PERFORMANCE COMPANY
FIRST BANK SYSTEM
ACQUIRES U.S. BANCORP
MARCH 20, 1997
FORWARD-LOOKING INFORMATION
- ------------------------------------------------------------------------------
This presentation contains estimates of future operating results for 1997,
1998 and 1999 for both First Bank System, Inc. and U.S. Bancorp on a
stand-alone and pro forma combined basis, as well as estimates of financial
condition, operating efficiencies and revenue creation on a combined basis.
These estimates constitute forward-looking statements (within the meaning of
the Private Securities Litigation Reform Act of 1995), which involve
significant risks and uncertainties. Actual results may differ materially
from the results discussed in these forward-looking statements. Factors that
might cause such a difference include, but are not limited to: (1) expected
cost savings from the Merger cannot be fully realized or realized within the
expected time frame; (2) revenues following the Merger are lower than
expected; (3) competitive pressures among depository institutions increase
significantly; (4) costs or difficulties related to the integration of the
business of FBS and USBC are greater than expected; (5) changes in the
interest rate environment reduce interest margins; (6) general economic
conditions, either nationally or in the states in which the combined company
will be doing business are less favorable than expected; and (7) legislation
or regulatory changes adversely affect the businesses in which the combined
company would be engaged.
2
COMMON STRATEGY
- --------------------------------------------------------------------------
- Business line organization
- Centrally-directed operations
- Centralized staff
- Standardized products
- Transaction migration to direct channels
- Superior credit quality
- Focus on efficiency
STRONG SHAREHOLDER FOCUS
3
COMBINATION LEADS TO EXCEPTIONAL
FINANCIAL PERFORMANCE
- --------------------------------------------------------------------------
Percent
PRO FORMA
PERFORMANCE FBS USBC COMBINED
MEASURE 1996 1996 1999
- ----------------------------------------------------------------------
ROE 21.4 17.1 Mid 20s
ROTE * 35.2 21.4 High 30s
ROA 1.88 1.43 2.00+
NIM 4.89 5.32 5.00+
Efficiency * 46.8 55.2 Low 40s
- -------------------
* excluding amortization of intangibles
ratios exclude nonrecurring items
4
TRANSACTION SUMMARY
- --------------------------------------------------------------------------
Agreement: Definitive merger agreement signed 3/19/97
Structure: Tax-free exchange
Exchange Ratio: Fixed: 0.755 FBS share per USBC share
Purchase Price: $9.0 Billion (a)
Per Share: $59.08 (a)
Accounting: Pooling
Stock Buybacks: FBS Board has rescinded its stock buyback authorization
Cross Options: 19.9%, minimum $200 million, maximum $300 million
Due Diligence: Completed
Anticipated Closing: 3Q97
- ----------------------
(a) Price as of 3/19/97
5
LEVERAGING A HIGH PERFORMANCE COMPANY
- ------------------------------------------------------------------------
- Builds shareholder value
- IRR = 16.2%, materially exceeds cost of equity
- Accretive to earnings by 2Q98
- Accretion of 8% within 2 years
- Significant cost takeouts
- Clearly identifiable revenue enhancements
- Complementary business line strengths
- Skills to realize the full potential of fast growth markets
- Leverages FBS technology and merger integration skills
6
LEVERAGING A HIGH PERFORMANCE COMPANY
- -------------------------------------------------------------------------
- Builds shareholder value
- Complementary business line strengths
- Skills to realize the full potential of fast growth markets
- Leverages FBS technology and merger integration skills
7
COMPLEMENTARY BUSINESS LINE STRENGTHS
- -------------------------------------------------------------------------
FBS USBC
- - Sophisticated technology - Strong name and brand identity
infrastructure and expertise
- - Product/Distribution paradigm - 8th largest leasing company
- - High-growth Payment Systems - Sizable small business lending
- - Home Equity lending - Strong Ag lending capabilities
- - $39 billion asset management - Leading edge position in PC
banking
- - Corporate Trust leadership
8
SCALE ADVANTAGE - RETAIL
- ------------------------------------------------------------------------
CUSTOMERS FBS USBC COMBINED
Households (millions) 1.9 2.0 3.9
RETAIL
Telephone Banking (millions/yr.) 46 42 88
ATMs 3,235 1,330 4,565
Branches - Traditional 327 578 905
Branches - Store-Based 32 58 90
Home Equity Loans ($ millions) 3,263 1,654 4,917
Other COnsumer Loans ($ millions) 6,699 4,111 10,810
Total Consumer Loans ($ millions) 9,962 5,765 15,727
(excluding residential mortgages)
9
SCALE ADVANTAGE - COMMERCIAL
- ------------------------------------------------------------------------
CUSTOMERS FBS USBC COMBINED
Businesses(thousands) 225 250 475
COMMERCIAL ($ millions)
Leasing (bank-owned) 432 1,416 1,848
Agriculture loans 338 1,261 1,599
Small business 1,535 2,108 3,643
Total Commercial loans 14,105 17,244 31,349
10
UNIQUE PAYMENT SYSTEMS POSITION
- --------------------------------------------------------------------------------
FBS USBC COMBINED
Visa Charge Volume ($ billions) 19 2 21
Merchant Processing ($ billions) 16 6 22
Credit Card Loans ($ billions) 4.0 .8 4.8
(includes Corporate & Purchasing Card)
Fortune 1000 Corporate Card Customers 145 145
Fortune 1000 Purchasing Card Customers 107 107
GROWING TRUST AND ASSET MANAGEMENT BUSINESSES
- --------------------------------------------------------------------------------
FBS USBC COMBINED
Corporate Trust Revenue ($ millions) 120 120
Corporate Trust Offices 13 13
Mutual Funds ($ billions) 12.8 2.5 15.3
Assets Under Management ($ billions) 39.3 10.2 49.5
Total Trust Fee Revenues ($ millions) 230.7 71.6 302.3
LEVERAGING A HIGH PERFORMANCE COMPANY
- --------------------------------------------------------------------------------
- - Builds shareholder value
- - Complementary business line strengths
- - Skills to realize the full potential of fast growth
markets
- - Leverages FBS technology and merger
integration skills
ATTRACTIVE MARKETS
- --------------------------------------------------------------------------------
FBS USBC COMBINED
States 11 6 17
MSAs 29 28 57
Branches 359 636 995
ATMs 3,235 1,330 4,565
[U.S. MAP SHOWING COMBINED MARKETS]
STRONG MARKET POSITIONS
- --------------------------------------------------------------------------------
AVERAGE CUMULATIVE
# OF DEPOSITS SHARE PERCENT
RANK MSAS ($ BILLIONS) PERCENT COMPOSITION
- --------------------------------------------------------------------------------
1 12 20.2 32 40
2 11 8.7 20 57
3 6 5.2 15 67
Lower 28 6.5 4 80
Non MSA -- 7.9 100
-- ----
Total 57 48.5
== ====
STRONG MARKET POSITIONS
- -------------------------------------------------------------------------------
DEPOSITS %
MSA ($ THOUSANDS) SHARE RANK
Minneapolis/St. Paul 9,221,336 30 1
Portland/Vancouver 6,139,619 39 1
Seattle/Bellevue/Everett 3,955,968 14 3
Denver 3,765,946 19 2
Boise 1,417,738 41 1
Omaha 1,401,778 16 2
Salem 677,810 28 1
Spokane 649,553 21 2
Lincoln 638,525 24 2
Sioux Falls 613,788 23 1
Eugene 499,730 22 1
Colorado Springs 407,105 16 2
- -------------------------
Source: SNL Branch Migration Database as of 6/30/96
Markets on this page 58% of total deposits 16
ATTRACTIVE MARKET GROWTH
- -------------------------------------------------------------------------------
HOUSEHOLD GROWTH RATE
1990 to 1996
USBC MARKETS 2.3%
FBS MARKETS 2.0%
U.S. 1.5%
- -------------------------
MSAs where USBC or FBS hold a top 3 ranking - 67% of total deposits 17
ATTRACTIVE MARKET GROWTH
- -------------------------------------------------------------------------------
MEDIAN HOUSEHOLD INCOME GROWTH
1990 to 1996
USBC MARKETS 4.2%
FBS MARKETS 3.6%
U.S. 3.4%
- -------------------------
MSAs where USBC or FBS hold a top 3 ranking - 67% of total deposits 18
ATTRACTIVE MARKET GROWTH
- -------------------------------------------------------------------------------
HOUSEHOLD GROWTH
DEPOSITS GROWTH RATE
MSA ($ THOUSANDS) RATE PERCENTILE
Minneapolis/St.Paul 9,221,336 2.0% 74%
Portland-Vancouver 6,139,619 2.2 81
Seattle-Bellevue-Everett 3,955,968 2.1 77
Denver 3,765,946 2.8 91
Boise 1,417,738 3.8 98
Oakland 1,130,945 1.6 55
Sacramento 688,820 2.2 82
Lincoln 683,525 1.6 54
Salem 677,810 2.6 88
Spokane 649,553 1.9 68
Sioux Falls 613,788 1.9 71
Salt Lake City-Ogden 602,163 2.6 87
Colorado Springs 407,105 3.5 95
ALL U.S. MSAs 1.5% 50%
- -------------------------
Source: Equifax/National Decision Systems
CAGR 1990-1996
Markets on this page - 60% of total deposits 19
LEVERAGING A HIGH PERFORMANCE COMPANY
- -------------------------------------------------------------------------------
- - Builds shareholder value
- - Complementary business line strengths
- - Skills to realize the full potential of fast growth markets
- - Leverages FBS technology and merger integration skills
20
MANAGEMENT STRUCTURE
Gerry Cameron
Chairman
Jack Grundhofer
President & CEO
|
|-------------------|--------------|---------------|--------------|
| | | | |
Bob Sznewajs Phil Heasley | Rick Zona Gary Duim
Vice Chairman Vice Chairman | Vice Chairman Vice Chairman
|
|-------------------|------------------------------|--------------|
| | | |
Bob Hoffmann John Murphy Rob Sayre Dan Rohr
EVP EVP EVP EVP
21
TECHNOLOGY FOR THE FUTURE
-U.S. Bancorp benefits from FBS' $400 million technology investment
-Combined organization will save $100's of millions by leveraging
technology investments
USBC FBS
PLANNED INVESTMENTS CURRENT CAPABILITIES
-Hogan deposit system -Hogan deposit system
-Interstate banking -Interstate banking
-Automated teller system -Automated teller system
-Customer profitability -Relationship Management System
-Rapid systems integration
22
FINANCIALLY ACCRETIVE TRANSACTION
PRO FORMA EARNINGS
--------------------
1998 1999
FBS Estimated EPS $6.09 $6.85
Pro Forma EPS $6.20 $7.41
Accretion 2% 8%
DRIVERS
-$340 million cost takeouts; $220 million in 1998; remaining in 1999
-$84 million revenue enhancements by 1999
23
COST TAKEOUTS
$ Millions FBS USBC COST PERCENT PERCENT
1997 1997 TAKEOUT OF USBC OF COMBINED
Staff/Admin 100 109 60 55 29
Operations 328 370 148 40 21
Occupancy 95 84 18 22 10
Business Lines:
Retail 284 420 91 22 13
Payment Systems 110 34 14 41 10
Commercial/
Private Banking 181 153 3 2 1
Institutional Trust 53 32 6 19 7
Corporate Trust 71 0 0 0 0
----- ----- -----
Total 1,222 1,202 340 28 14
----- -----
Less:Taxes ----- ----- 133
-----
Total Cost Takeouts(AT) 207
-----
-----
24
MERGER-RELATED CHARGES
$Millions
Conversion costs 190
Severance/Retention 270
Occupancy/equipment writedowns 40
Other 125
-----
Merger-related charges 625
Taxes 175
Net merger-related charges 450
-----
-----
1997 380
1998 70
-----
450
-----
-----
25
REVENUE ENHANCEMENTS
$Millions 1999
-------------------------------------
PRE-TAX
VOLUME CONTRIBUTION
Corporate/Purchasing Card Sales 1,600 9
Home Equity Loans 1,200 38
Credit Card Loans 365 19
Other Consumer Lending 230 4
Leasing 50 2
Institutional Trust/Asset Management NA 12
-------------
Total Revenue Enhancements 84
-------------
-------------
26
TRACK RECORD OF RAPID INTEGRATION
PERIOD BETWEEN
COST CLOSING AND
TAKEOUT SYSTEMS INTEGRATION
Western Capital 35% 3 months
Bank Shares 45% 6 months
Colorado National 35% 2 months
Boulevard 40% 1 month
Metropolitan Financial 35% 1 month
FirsTier 34% 3 days
- --------------------------------------------------------------------------------
U.S. Bancorp 28% 6-9 months
- --------------------------------------------------------------------------------
27
FBS ACQUISITION HISTORY
- 24 Acquisitions
- Rapid, on-time integration
- 34-45% cost takeouts
ALWAYS ACHIEVED COST TAKEOUT OBJECTIVES
28
COMBINATION LEADS TO EXCEPTIONAL EFFICIENCY
ADJUSTED EFFICIENCY RATIO
1991 66
1992 63
1993 58
1994 56
1995 51
1996 47
1997
1998
1999 LOW 40s
PEER GROUP 1996
Fifth Third 41.8
- ------------------------------------------------
FBS 46.8
- ------------------------------------------------
Wachovia 52.0
CoreStates 52.6
Comerica 53.1
NationsBank 54.2
U.S. Bancorp 55.2
Wells Fargo 55.3
First Union 55.9
PNC 56.1
BankAmerica 57.0
Bank of Boston 57.6
Barnett 57.6
Banc One 58.2
National City 58.7
KeyCorp 58.8
SunTrust 59.2
Norwest 59.2
Fleet 59.8
First Security 60.0
Mellon 60.4
Northern Trust 60.4
Bancorp Hawaii 62.3
- -----------------------------------------
Excludes amortization of intangibles
29
SUPERIOR ROA
RETURN ON ASSETS
1991 0.85
1992 1.00
1993 1.36
1994 1.63
1995 1.73
1996 1.88
1997
1998
1999 ABOVE 2.00%
PEER GROUP 1996
- ------------------------------------------------
FBS 1.88
- ------------------------------------------------
CoreState 1.76
Fifth Third 1.76
Norwest 1.74
Mellon 1.65
National City 1.55
Wells Fargo 1.44
U.S. Bancorp 1.43
Wachovia 1.42
PNC 1.41
Barnett 1.39
Comerica 1.38
Banc One 1.37
First Security 1.33
KeyCorp 1.32
Fleet 1.30
First Union 1.30
SunTrust 1.27
Bank of Boston 1.26
Northern Trust 1.23
NationsBank 1.20
BankAmerica 1.11
Bancorp Hawaii 1.00
- -----------------------------------------
Excludes nonrecurring items
30
TOP-TIER ROE
Return on Common Equity
1991 11.4
1992 11.7
1993 16.4
1994 19.3
1995 21.3
1996 21.4
1997
1998
1999 MID 20s
PEER GROUP 1996
Norwest 24.1
- ------------------------------------------------
FBS 21.4
- ------------------------------------------------
CoreStates 19.9
Mellon 19.2
First Union 19.1
Northern Trust 18.6
Comerica 18.2
NationsBank 18.2
National City 18.1
Fifth Third 17.6
Wachovia 17.6
PNC 17.4
Fleet 17.2
KeyCorp 17.2
U.S.Bancorp 17.1
Barnett 17.0
Bank of Boston 16.8
First Security 16.2
Banc One 15.8
Bank America 13.5
SunTrust 13.1
Bancorp Hawaii 12.6
Wells Fargo 11.2
LEVERAGING A HIGH PERFORMANCE COMPANY
- Builds shareholder value
- Complementary business line strengths
- Skills to realize the full potential of fast growth
markets
- Leverages FBS technology and merger integration skills
APPENDIX
PRICING
- U S Bancorp transaction multiples appear higher than recent market
transactions as a result of the significant general increase in
bank stock trading multiples including FBS.
- Relative multiples lower than 1995/96 averages.
IMPLIED MULTIPLES
EXCHANGE RATIO .755X
PURCHASE PRICE
FBS USBC % of FBS MULTIPLE
- ----------------------- ----------------- -----------------------
PRICE P/E P/B P/E P/B P/E P/B
- ----- --- --- --- --- --- ---
$78.25 14.5 3.4 17.5 3.4 120% 100%
1995/96 Acquisition Averages (a) 140% 130%
(a) Average of 12 largest acquisitions; at time of announcement
BALANCE SHEET
12/31/96
($ millions)
FBS USBC COMBINED
Net Loans 26,611 24,751 51,362
Investment Securities 3,555 3,845 7,400
Other Assets 6,323 4,664 10,987
------- ------- -------
Total Assets 36,489 33,260 69,749
------- ------- -------
------- ------- -------
Deposits 24,379 24,977 49,356
Funds Purchased 4,097 2,495 6,592
Long Term Debt 3,553 1,811 5,364
Other Liabilities 1,107 966 2,073
Mandatory redeemable capital
securities 300 300 600
------- ------- -------
Total liabilities 33,436 30,549 63,985
Preferred Stock 0 150 150
Common Equity 3,053 2,561 5,614
------- ------- -------
Total equity 3,053 2,711 5,764
------- ------- -------
Total liabilities & equity 36,489 33,260 69,749
------- ------- -------
------- ------- -------
LOAN COMPOSITION
12/31/96
($ millions) FBS USBC Combined
-------------- -------------- ----------------
% OF % OF % OF
BALANCE TOTAL BALANCE TOTAL BALANCE TOTAL
Commercial 9,929 36.6 12,241 48.5 22,170 42.4
Lease financing 432 1.6 1,416 5.6 1,848 3.5
Commercial RE 3,744 13.8 3,587 14.2 7,331 14.0
------ ----- ------ ----- ------ -----
Total Commercial 14,105 52.0 17,244 68.3 31,349 59.9
Residential RE 3,061 11.3 2,218 8.8 5,279 10.1
Home equity/2nd mtges 3,263 12.0 1,654 6.6 4,917 9.4
Credit card 2,858 10.5 774 3.1 3,632 6.9
Other consumer 3,841 14.2 3,337 13.2 7,178 13.7
------ ----- ------ ----- ------ -----
Total consumer 13,023 48.0 7,983 31.7 21,006 40.1
Total loans 27,128 100.0 25,227 100.0 52,355 100.0
------ ----- ------ ----- ------ -----
------ ----- ------ ----- ------ -----
- -----------------------
* includes loans held for sale 36
DEPOSIT COMPOSITION
4Q96 Average
($ millions) FBS USBC Combined
-------------- -------------- ----------------
% OF % OF % OF
BALANCE TOTAL BALANCE TOTAL BALANCE TOTAL
Noninterest bearing 6,672 29 5,831 24 12,503 26
Interest bearing
Interest checking 2,848 12 2,766 11 5,614 12
Money market 4,421 19 5,936 24 10,357 22
Other savings 1,573 7 1,428 6 3,001 6
Certificates 7,762 33 8,548 35 16,310 34
------ ----- ------ ----- ------ -----
Total int. bearing 16,604 71 18,678 76 35,282 74
------ ----- ------ ----- ------ -----
Total deposits 23,276 100 24,509 100 47,785 100
------ ----- ------ ----- ------ -----
------ ----- ------ ----- ------ -----
- -----------------------------------------------------------------------
LOAN/DEPOSIT RATIO 117% 102% 109%
- -----------------------------------------------------------------------
37
CREDIT QUALITY
12/31/96
($ millions)
FBS USBC COMBINED
Nonperforming loans 121 149 270
OREO and other 17 25 42
----- ----- -----
Nonperforming assets 138 174 312
Reserve for loan losses 517 476 993
Loans 27,128 25,227 52,355
Assets 36,489 33,260 69,749
NPLs/Loans (%) .44 .59 .52
NPAs/Assets (%) .38 .52 .45
NCOs/Loans annualized (%) .57 .46 .52
Reserves/Loans (%) 1.90 1.90 1.90
Reserves/NPLs (%) 429 320 368
Reserves/NPAs (%) 375 274 318
38
[LOGO] [LOGO]