FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED MARCH 31, 2000 COMMISSION FILE NUMBER 1-2981
FIRSTAR CORPORATION
(Exact Name of Registrant as Specified in its Charter)
WISCONSIN 39-1940778
(State of Incorporation) (I.R.S. EMPLOYER Identification No.)
777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
Telephone Number (414) 765-4321
The registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
As of April 30, 2000, 969,308,967 shares of common stock were outstanding.
-1-
FIRSTAR CORPORATION AND SUBSIDIARIES
FORM 10-Q
March 31, 2000
Page
Table of Contents Number
- - ----------------------------------------------------------------------
Part I. Financial Information:
Financial Highlights.........................................3
Item 1. Financial Statements:
Consolidated Financial Statements ...................4
Notes to Consolidated Financial Statements ..........8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......15
Item 3. Quantitative and Qualitative Disclosures
About Market Risk ..................................18
Part II. Other Information:
Item 1. Legal Proceedings.................................none
Item 2. Changes in Securities.............................none
Item 3. Defaults Upon Senior Securities...................none
Item 4. Submission of Matters to a Vote of
Security Holders..................................none
Item 5. Other Information.................................none
Item 6. Exhibits and Reports on Form 8-K....................26
Signatures..........................................................26
-2-
PART I FINANCIAL INFORMATION
FIRSTAR CORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(dollars in thousands, except per share data)
First Quarter
----------------------------------------------------
Percent
2000 1999 Change
-------------- -------------- ---------
Net income $ 307,799 $ 287,624 7.0 %
Per share:
Basic earnings per common share $ 0.32 $ 0.29 10.3 %
Diluted earnings per common share 0.31 0.29 6.9
Common stock cash dividends
declared 0.1625 0.10 62.5
Book value per common share 6.46 6.84 (5.6)
Market value per common share 22.94 29.83 (23.1)
Average balances:
Total assets $ 72,540,798 $ 73,804,458 (1.7)%
Earning assets 65,611,147 66,143,934 (0.8)
Loans 51,145,037 48,365,653 5.7
Deposits 51,805,903 52,877,143 (2.0)
Total shareholders' equity 6,397,040 6,763,231 (5.4)
Ratios:
Return on average assets 1.71 % 1.58 %
Return on average equity 19.35 17.25
Average total shareholders' equity
to average total assets 8.82 9.16
Risk-based capital ratios:
Tier 1 8.04 9.51
Total 10.67 11.75
Leverage - average assets (a) 7.56 7.70
Net interest margin 4.17 4.07
Noninterest expense to net revenue 48.49 51.62
Noninterest income as a percent
of net revenue 34.63 33.65
Net income to net revenue 29.51 28.50
Excluding Merger Related Charges:
Net income $ 342,399 $ 297,310 15.2 %
Noninterest expense 453,926 505,843 (10.3)
Basic earnings per common share 0.35 0.30 16.7
Diluted earnings per common share 0.35 0.29 20.7
Return on average assets 1.90 % 1.63 %
Return on average equity 21.53 17.83
Noninterest expense to net revenue 43.52 50.13
(a) - defined by regulatory authorities as tier 1 equity to the current quarter's adjusted
average assets
-3-
FIRSTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in thousands)
March 31, December 31,
2000 1999
-------------- --------------
ASSETS:
Cash and due from banks $ 3,041,839 $ 3,288,291
Money market investments 378,897 896,910
Investment securities:
Available-for-sale 13,331,657 12,919,413
Held-to-maturity (market value of $190,604
at March 31, 2000, $200,310 at December
31, 1999) 190,581 194,454
------------ ------------
Total securities 13,522,238 13,113,867
Loans held for sale 1,885,034 624,680
Loans:
Commercial loans 18,158,574 17,346,596
Real estate loans 17,906,278 19,815,017
Retail loans 14,188,443 13,464,395
------------ ------------
Total loans 50,253,295 50,626,008
Allowance for loan losses 714,966 714,898
------------ ------------
Net loans 49,538,329 49,911,110
Premises and equipment 1,000,244 1,002,887
Acceptances - customers' liability 13,348 15,149
Other assets 3,679,994 3,934,939
------------ ------------
Total assets $ 73,059,923 $ 72,787,833
------------ ------------
------------ ------------
LIABILITIES:
Deposits:
Noninterest-bearing deposits $ 9,951,987 $ 10,299,994
Interest-bearing deposits 41,472,081 41,586,417
------------ ------------
Total deposits 51,424,068 51,886,411
Short-term borrowings 9,357,755 8,302,019
Long-term debt 4,745,450 5,038,383
Acceptances outstanding 13,348 15,149
Other liabilities 1,250,597 1,237,235
------------ ------------
Total liabilities 66,791,218 66,479,197
SHAREHOLDERS' EQUITY:
Common stock:
Shares authorized - 2,000,000,000 at March 31,
2000 and December 31, 1999.
Shares issued - 984,576,391 at March 31,
2000 and 984,579,636 at December 31, 1999. 9,846 9,846
Surplus 1,894,599 1,926,239
Retained earnings 4,810,948 4,660,463
Treasury stock, at cost - 14,550,593 shares at
March 31, 2000 and 9,033,176 shares at
December 31, 1999. (295,987) (192,894)
Accumulated other comprehensive income (150,701) (95,018)
------------ ------------
Total shareholders' equity 6,268,705 6,308,636
------------ ------------
Total liabilities and shareholders' equity $ 73,059,923 $ 72,787,833
------------ ------------
------------ ------------
The accompanying notes are an integral part of these statements.
-4-
FIRSTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(dollars in thousands, except per share data)
First Quarter
--------------------------------
2000 1999
------------- -------------
INTEREST INCOME:
Interest and fees on loans $ 1,059,187 $ 961,703
Interest and fees on loans held for sale 11,714 30,801
Interest on investment securities:
Taxable 199,365 216,745
Non-taxable 22,829 23,699
Interest on trading securities -- 2,564
Interest on money market investments 7,016 6,254
----------- -----------
Total interest income 1,300,111 1,241,766
----------- -----------
INTEREST EXPENSE:
Interest on deposits 440,277 427,217
Interest on short-term borrowings 111,839 77,729
Interest on long-term debt 78,342 81,395
----------- -----------
Total interest expense 630,458 586,341
----------- -----------
Net interest income 669,653 655,425
Provision for loan losses 45,689 43,389
----------- -----------
Net interest income after
provision for loan losses 623,964 612,036
----------- -----------
NONINTEREST INCOME:
Trust income 113,846 101,497
Mortgage banking income 36,295 39,458
Retail deposit income 47,835 45,389
Cash management income 35,755 32,666
Credit card income 29,673 24,270
ATM Income 11,941 8,358
Investment securities gains-net 11 12,961
All other income 85,892 74,914
----------- -----------
Total noninterest income 361,248 339,513
----------- -----------
NONINTEREST EXPENSE:
Salaries 191,567 214,840
Pension and other employee benefits 31,123 45,470
Equipment expense 35,621 35,753
Occupancy expense - net 40,128 43,398
All other expense 155,487 166,382
----------- -----------
453,926 505,843
Merger related charges 51,900 15,000
----------- -----------
Total noninterest expense 505,826 520,843
----------- -----------
INCOME BEFORE TAX 479,386 430,706
Income tax 171,587 143,082
----------- -----------
NET INCOME $ 307,799 $ 287,624
----------- -----------
----------- -----------
PER SHARE:
Basic earnings per common share $ 0.32 $ 0.29
Diluted earnings per common share 0.31 0.29
Common stock cash dividends declared 0.1625 0.10
The accompanying notes are an integral part of these statements
-5-
FIRSTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(dollars in thousands)
(Unaudited)
Accumulated
Other
Common Retained Treasury Comprehensive Total
Stock Surplus Earnings Stock Income Equity
---------- ------------- ------------- ------------ ------------ -------------
Balance, January 1, 1999 $ 9,876 $ 2,170,024 $ 4,302,420 $ (19,659) $ 141,007 $ 6,603,668
Net income 287,624 287,624
Unrealized loss
on securities
available for sale (99,875) (99,875)
Reclassification
adjustment for gains
realized in net income (12,961) (12,961)
Income taxes 41,089 41,089
-----------
Comprehensive income 215,877
Cash dividends declared
on common stock (119,770) (119,770)
Issuance of common stock
and treasury shares 67 101,553 2,894 104,514
Purchase of treasury
stock (25,692) (25,692)
Shares reserved to meet
deferred compensation
obligations 1,416 (1,416) -
Amortization of stock
awards 1,120 1,120
-------- ----------- ----------- ---------- ---------- -----------
Balance, March 31, 1999 $ 9,943 $ 2,274,113 $ 4,470,274 $ (43,873) $ 69,260 $ 6,779,717
-------- ----------- ----------- ---------- ---------- -----------
-------- ----------- ----------- ---------- ---------- -----------
Balance, January 1, 2000 $ 9,846 $ 1,926,239 $ 4,660,463 $ (192,894) $ (95,018) $ 6,308,636
Net income 307,799 307,799
Unrealized loss
on securities
available for sale (85,003) (85,003)
Reclassification
adjustment for gains
realized in net income (11) (11)
Income taxes 29,331 29,331
-----------
Comprehensive income 252,116
Cash dividends declared
on common stock (157,314) (157,314)
Issuance of common stock
and treasury shares (34,487) 82,144 47,657
Purchase of treasury
stock (182,917) (182,917)
Shares reserved to meet
deferred compensation
obligations 2,320 (2,320) -
Amortization of stock
awards 527 527
-------- ----------- ----------- ---------- ---------- -----------
Balance, March 31, 2000 $ 9,846 $ 1,894,599 $ 4,810,948 $ (295,987) $ (150,701) $ 6,268,705
-------- ----------- ----------- ---------- ---------- -----------
-------- ----------- ----------- ---------- ---------- -----------
The accompanying notes are an integral part of these statements
-6-
FIRSTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)
Three Months Ended
March 31
2000 1999
------------ ------------
Cash Flows from Operating Activities:
Net Income $ 307,799 $ 287,624
Adjustments:
Depreciation and amortization 38,355 48,825
Intangible amortization 30,185 30,314
Provision for loan losses 45,689 43,389
Net decrease in trading securities 0 20,118
Provision for deferred taxes 51,192 52,280
(Gain) / loss on sale of premises and equipment - net 3,394 (471)
Net gain on sale of assets (7,080) (3,627)
Gain on sale on loans originated for sale (10,280) (31,126)
Proceeds from sale of loans originated for sale 865,372 2,371,699
Mortgage loans originated for sale on the secondary market (899,221) (1,942,748)
Net change in other assets and liabilities (144,374) 158,025
------------ ------------
Total adjustments (26,768) 746,678
------------ ------------
Net cash provided by/(used in) operating activities 281,031 1,034,302
------------ ------------
Cash Flows from Investing Activities:
Proceeds from maturities of held-to-maturity securities 3,798 18,571
Proceeds from maturities of available-for-sale securities 324,248 1,383,067
Proceeds from sales of available-for-sale securities 358,741 1,114,620
Purchase of held-to-maturity securities 0 0
Purchase of available-for-sale securities (1,111,727) (2,192,202)
Net increase in loans (1,358,637) (895,714)
Proceeds from sales of loans 731,974 50,485
Proceeds from sales of premises and equipment 5,075 8,508
Purchases of premises and equipment (50,249) (38,281)
Purchases of corporate owned life insurance 0 (80,000)
Sale of banking offices, net of cash paid (78,211) 0
------------ ------------
Net cash provided by/(used in) investing activities (1,174,988) (630,946)
------------ ------------
Cash Flows from Financing Activities:
Net decrease in deposits (327,666) (1,722,004)
Net increase/(decrease) in short-term borrowings 1,054,247 (26,509)
Principal payments on long-term debt (291,445) (338,557)
Proceeds from issuance of long-term debt 0 975,000
Proceeds from issuance of common stock 35,771 99,767
Purchase of treasury stock (182,917) (25,692)
Dividends paid (158,498) (115,413)
------------ ------------
Net cash provided by/(used in) financing activities 129,492 (1,153,408)
------------ ------------
Net decrease in cash and cash equivalents (764,465) (750,052)
Cash and cash equivalents at beginning of period 4,185,201 4,605,484
------------ ------------
Cash and cash equivalents at end of period $ 3,420,736 $ 3,855,432
------------ ------------
------------ ------------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 590,002 $ 576,770
Income taxes 62,748 23,013
Transfer to foreclosed assets from loans $ 17,234 $ 22,916
-7-
Notes to Consolidated Financial Statements
- - ------------------------------------------
Note 1. Basis of Presentation
- - ------------------------------
These consolidated financial statements have been prepared by Firstar
Corporation ("Firstar") pursuant to the rules and regulations of the Securities
and Exchange Commission and, therefore, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted. It is
suggested that these financial statements be read in conjunction with the
financial statements and notes thereto included in Firstar's annual report on
Form 10-K for the year ended December 31, 1999, filed with the Securities and
Exchange Commission.
These consolidated financial statements include the accounts of Firstar
and all of its subsidiaries and reflect all adjustments which are, in the
opinion of management, necessary for a fair presentation of the results for the
periods reported. All such adjustments are of a normal recurring nature.
Note 2. Investment Securities
- - ------------------------------
The following table summarizes unrealized gains and losses for
held-to-maturity and available-for-sale securities at March 31, 2000 and
December 31, 1999. (dollars in thousands)
March 31, 2000 December 31, 1999
----------------------------------------- -----------------------------------------
Amortized Unrealized Market Amortized Unrealized Market
Cost Gains Losses Value Cost Gains Losses Value
---------- ------- ------- ----------- ---------- ------- ------- -----------
Held-to-Maturity
- - ----------------
Mortgage-backed
securities $ 43,472 $ 5 $ -- $ 43,477 $ 45,411 $ -- $ -- $ 45,411
Obligations of state and
political subdivisions 147,109 18 -- 147,127 149,043 5,856 -- 154,899
---------- ------- ------- ----------- ---------- ------- ------- -----------
Total held-to-
maturity securities $ 190,581 $ 23 $ -- $ 190,604 $ 194,454 $ 5,856 $ -- $ 200,310
---------- ------- ------- ----------- ---------- ------- ------- -----------
---------- ------- ------- ----------- ---------- ------- ------- -----------
March 31, 2000 December 31, 1999
----------------------------------------- -----------------------------------------
Amortized Unrealized Market Amortized Unrealized Market
Cost Gains Losses Value Cost Gains Losses Value
---------- ------- ------- ----------- ---------- ------- ------- -----------
Available-for-Sale
- - ------------------
U.S. Treasuries and
agencies $ 1,229,841 $ 2,772 $ (15,857) $ 1,216,756 $ 1,787,717 $10,505 $(12,210) $ 1,786,012
Mortgage-backed
securities 8,760,126 19,120 (208,974) 8,570,272 6,654,624 19,880 (119,652) 6,554,852
Obligations of state and
political subdivisions 1,522,913 9,053 (14,232) 1,517,734 1,598,685 14,860 (9,650) 1,603,895
Other debt securities 961,622 -- -- 961,622 1,792,296 1 (50,061) 1,742,236
Money market mutual funds 298,313 471 (23,742) 275,042 437,058 -- -- 437,058
Federal Reserve/FHLB
stock and other
equity securities 790,231 -- -- 790,231 795,407 17 (64) 795,360
---------- ------- ------- ----------- ---------- ------- ------- -----------
Total available-for-
sale securities $13,563,046 $31,416 $(262,805) $13,331,657 $13,065,787 $45,263 $(191,637) $12,919,413
---------- ------- ------- ----------- ---------- ------- ------- -----------
---------- ------- ------- ----------- ---------- ------- ------- -----------
-8-
Note 3. Loans
- - -------------
The following table summarizes the composition of the loan portfolio,
net of unearned interest, as of March 31, 2000 and December 31, 1999.
(dollars in thousands)
March 31, December 31,
2000 1999
------------- ------------
Commercial loans:
Corporate loans $14,494,411 $13,848,385
Asset-based lending 1,397,621 1,326,741
Commercial leasing 1,913,844 1,816,250
Industrial revenue bonds 352,698 355,220
----------- -----------
Total commercial loans 18,158,574 17,346,596
----------- -----------
Real estate loans:
Residential mortgage 6,574,715 8,779,037
Commercial mortgage 9,065,786 8,851,504
Construction and land development 2,265,777 2,184,476
----------- -----------
Total real estate loans 17,906,278 19,815,017
----------- -----------
Retail loans:
Installment 10,306,385 10,053,901
Credit cards 1,379,347 1,403,655
Retail leasing 2,502,711 2,006,839
----------- -----------
Total retail loans 14,188,443 13,464,395
----------- -----------
Total loans $50,253,295 $50,626,008
----------- -----------
----------- -----------
Note 4. Impaired Loans
- - -----------------------
The following table shows Firstar's recorded investment in impaired loans and
the related valuation allowance calculated under SFAS No. 114 (as amended by SFAS No.
118) at March 31, 2000 and December 31, 1999. (dollars in thousands)
March 31, 2000 December 31, 1999
--------------------------- ------------------------
Recorded Valuation Recorded Valuation
Investment Allowance Investment Allowance
---------- ----------- ---------- ----------
Impaired Loans:
Valuation allowance required $ 29,441 $ 9,082 $ 21,696 $ 8,218
No valuation allowance required 136,821 -- 131,514 --
---------- ----------- ---------- ----------
Total impaired loans $ 166,262 $ 9,082 $ 153,210 $ 8,218
---------- ----------- ---------- ----------
---------- ----------- ---------- ----------
The average recorded investment in impaired loans for the three months ended
March 31, 2000 was $165.2 million, compared to $153.9 million for the same period
in 1999. As a general policy, Firstar applies both principal and interest payments
received on impaired loans as a reduction of principal.
-9-
Note 5. Allowance for Loan Losses
- - ---------------------------------
A summary of the activity in the allowance for loan losses is shown in the
following table. (dollars in thousands)
Three Months Ended
March 31,
--------------------
2000 1999
-------- --------
Balance - beginning of period $714,898 $704,846
Loans charged-off (64,050) (54,722)
Recoveries on loans previously charged-off 18,429 17,479
-------- --------
Net charge-offs (45,621) (37,243)
Provision charged to earnings 45,689 43,389
-------- --------
Balance - end of period $714,966 $710,992
-------- --------
-------- --------
Note 6. Deposits
- - -----------------
The following table summarizes the composition of deposits of Firstar as of
March 31, 2000 and December 31, 1999. (dollars in thousands)
March 31, December 31,
2000 1999
------------- ------------
Noninterest-bearing deposits $ 9,951,987 $10,299,994
Interest-bearing deposits:
Savings 3,304,901 3,349,308
NOW accounts 6,796,993 6,980,734
Money market deposit accounts 10,265,872 10,263,894
Time deposits $100,000 and over - domestic 3,713,696 3,753,526
Foreign deposits $100,000 and over 738,000 773,926
All other deposits 16,652,619 16,465,029
----------- -----------
Total interest-bearing deposits 41,472,081 41,586,417
----------- -----------
Total deposits $51,424,068 $51,886,411
----------- -----------
----------- -----------
-10-
Note 7. Merger Related Charges
- - ------------------------------
Firstar recorded merger and integration charges of $51.9 million in
the first three months of 2000 and $15.0 million in the first three months
of 1999. The components of the charges are shown below. Firstar expects
to incur additional merger-related expenses in connection with the combining
of operations of Firstar Corporation and Mercantile Bancorporation, Inc.
(dollars in thousands)
Three Months
Ended
Three Months Ended March 31, 2000 March 31, 1999
------------------------------------------ --------------
Firstar/Star Firstar/Mercantile Firstar/Star
Merger Merger Total Merger
------------ ------------------ --------- --------------
Severance and related costs $ 7,656 $ 12,926 $ 20,582 $ 1,030
Fixed asset write-downs 31 3,018 3,049 --
System conversions 10,233 15,923 26,156 13,636
Gain on sale of branches -- (11,507) (11,507) --
Other merger-related charges 8,080 5,540 13,620 334
----------- ----------- ----------- --------------
Total $ 26,000 $ 25,900 $ 51,900 $ 15,000
----------- ----------- ----------- --------------
----------- ----------- ----------- --------------
The following table presents a summary of activity with respect to the merger
related accrual:
Firstar/Mercantile Firstar/Star
Merger Merger Other Total
------------------ ------------ --------- ----------
Balance at December 31, 1999 $ 21,154 $ -- $ 10,173 $ 31,327
Merger-related charge 25,900 26,000 -- 51,900
Cash payments (24,534) (26,000) (639) (41,173)
Noncash write-downs (16,833) -- (151) (16,984)
---------- ----------- --------- ----------
Balance at March 31, 2000 $ 5,687 $ $ 9,383 $ 15,070
---------- ----------- --------- ----------
---------- ----------- --------- ----------
-11-
Note 8. Mortgage Servicing Assets
- - ----------------------------------
Mortgage servicing rights are capitalized based upon their fair value at
the time a loan is sold. Impairment testing is performed on a quarterly basis
in accordance with SFAS No. 125.
The fair value of capitalized mortgage servicing rights was $263.5 million
on March 31, 2000 and $269.1 million on December 31, 1999. Firstar serviced $18.0
billion of mortgage loans for other investors as of March 31, 2000 compared with
$19.5 billion as of December 31, 1999.
Changes in capitalized mortgage servicing rights at March 31, 2000 and
December 31, 1999 are summarized in the following table. (dollars in thousands)
March 31, December 31,
2000 1999
------------- ------------
Mortgage Servicing Assets:
Balance at beginning of year $ 212,297 $ 232,105
Amount added in acquisitions -- 811
Amount capitalized 24,872 169,678
Amortization (9,026) (46,808)
Sales (20,139) (143,489)
Impairment (313) --
--------- ---------
Balance at end of period $ 207,691 $ 212,297
--------- ---------
--------- ---------
Note 9. Earnings Per Share
- - ---------------------------
The following table shows the amounts used in the computation of basic
and diluted earnings per common share, in accordance with SFAS No. 128, for
the three months ended March 31, 2000 and 1999. (dollars in thousands)
Three Months Ended
March 31,
-------------------
2000 1999
-------- --------
Net income $307,799 $287,624
Weighted average shares (000s):
Common shares 975,071 991,182
Options and stock plans 9,519 17,663
-------- --------
Weighted average diluted common shares 984,590 1,008,845
-------- --------
-------- --------
Basic earnings per common share $ 0.32 $ 0.29
-------- --------
-------- --------
Diluted earnings per common share $ 0.31 $ 0.29
-------- --------
-------- --------
-12-
Note 10. Mergers
- - ----------------
On September 20, 1999, Firstar Corporation and Mercantile Bancorporation,
Inc. merged in a pooling of interests transaction and accordingly all
financial information has been restated to include the historical
information of both companies. Each share of Mercantile Bancorporation
stock was converted into and exchanged for 2.091 shares of Firstar
Corporation common stock. Shares issued in the merger totaled 331,772,028.
Note 11. Business Segments
- - --------------------------
Firstar's operations include three primary business segments: Consumer
Banking, Wholesale Banking, and Trust and Private Banking. Selected financial
information by business segment is summarized below. This information is
derived from the internal reporting systems used by management to assess
segment performance.
Consumer banking provides deposit, installment and credit card lending,
mortgage banking, leasing, investment, payment systems and other financial
services to individuals and small businesses. These services are provided
through retail branch offices, ATMs, voice banking, PC and video banking
options.
Wholesale banking provides traditional business lending, asset-based
lending, commercial real estate loans, equipment financing, cash management
services and international trade services to businesses and governmental
entities.
Trust and private banking provides personal financial and asset
management services, comprehensive employee benefit plan services, mutual fund
custody and corporate bond and stock transfer services.
Treasury includes the net effect of transfer pricing of interest income
and expense along with the operating results of the investment securities and
residential loan portfolios. All revenue and expenses of administrative and
support functions have been allocated to the primary business segments.
-13-
For the quarter ended March 31, 2000
-------------------------------------------------------------------------------------------
Trust and Merger-
Consumer Wholesale Private Related
Banking Banking Banking Treasury Total Expenses Consolidated
- - ----------------------------------------------------------------------------------------------------------------------
Net interest income* $ 420,299 $ 160,473 $ 16,692 $ 84,419 $ 681,883 $ -- $ 681,883
Provision for loan losses 38,164 8,109 260 (844) 45,689 -- 45,689
Noninterest income 165,644 49,439 110,317 35,848 361,248 -- 361,248
Noninterest expense 335,719 41,608 75,033 1,566 453,926 51,900 505,826
Income taxes* 75,896 57,334 18,509 49,378 201,117 (17,300) 183,817
- - ----------------------------------------------------------------------------------------------------------------------
Net income $ 136,164 $ 102,861 $ 33,207 $ 70,167 $ 342,399 $ 34,600 $ 307,799
- - ----------------------------------------------------------------------------------------------------------------------
(dollars in millions)
Average balances:
Loans $ 25,867 $ 18,981 $ 1,193 $ 5,104 $ 51,145
Total assets 28,456 20,412 1,573 22,100 72,541
Deposits 42,184 5,536 1,571 2,515 51,806
- - ----------------------------------------------------------------------------------------------------------------------
*Taxable equivalent basis
For the quarter ended March 31, 1999
-------------------------------------------------------------------------------------------
Trust and Merger-
Consumer Wholesale Private Related
Banking Banking Banking Treasury Total Expenses Consolidated
- - ----------------------------------------------------------------------------------------------------------------------
Net interest income* $ 411,502 $ 147,292 $ 16,950 $ 93,783 $ 669,527 $ -- $ 669,527
Provision for loan losses 31,432 12,464 (1,028) 521 43,389 -- 43,389
Noninterest income 160,754 46,211 109,896 22,652 339,513 -- 339,513
Noninterest expense 372,049 46,627 82,852 4,315 505,843 15,000 520,843
Income taxes* 56,067 44,652 14,956 46,824 162,499 (5,315) 157,184
- - ----------------------------------------------------------------------------------------------------------------------
Net income $ 112,708 $ 89,760 $ 30,066 $ 64,775 $ 297,309 $ 9,685 $ 287,624
- - ----------------------------------------------------------------------------------------------------------------------
(dollars in millions)
Average balances:
Loans $ 24,082 $ 16,119 $ 1,055 $ 7,110 $ 48,366
Total assets 27,726 17,830 1,481 26,767 73,804
Deposits 43,603 5,920 1,926 1,428 52,877
- - ----------------------------------------------------------------------------------------------------------------------
*Taxable equivalent basis
-14-
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
Net income of Firstar Corporation ("Firstar") for the
quarter ended March 31, 2000 was $307.8 million compared with
$287.6 million in the first quarter of 1999. Diluted earnings per
common share was $.31 for the first quarter of 2000, compared
to $.29 for the same period of the prior year.
Net income before merger-related charges was $342.4
million in the first quarter of 2000, a 15.2 % increase over the
$297.3 million in the same period of last year. Diluted earnings
per common share before merger-related charges was $.35 in the
first quarter of 2000, compared to $.29 in the first quarter of last
year, an increase of 20.7%. Return on average assets before
merger-related charges was 1.90% in the first quarter of 2000
compared to 1.63% in the same period of last year. Return on
average common equity before merger-related charges was
21.53% in the first quarter of 2000 compared to 17.83% in the
same period of last year.
The improvement in net income before merger-related
charges for the quarter resulted from higher net interest revenue
and noninterest revenue together with significantly lower
operating costs.
Total assets at March 31, 2000 were $73.1 billion
compared to $72.8 billion at December 31, 1999, while total
earning assets were $66.0 billion at March 31, 2000 compared to
$65.3 billion at last year-end. Continued restructuring of the
balance sheet occurred during the quarter with the sale or transfer
of residential mortgage loans from the loan portfolio and changes
in the mix of investment securities. Loan growth was strong in
both the commercial and retail portfolios during the quarter. On
the liability side of the balance sheet, short-term borrowings
increased during the quarter to fund earning asset growth, to
offset the slight decrease in deposits from year-end and to fund
the stock buyback program.
Total loans were $50.3 billion at March 31, 2000 compared
to $50.6 billion at year-end 1999. Residential real estate loans
have declined reflecting management's decision to transfer $1.7
billion of the residential loan portfolio to loans held for sale.
Excluding residential real estate loans, total loans increased $1.8
billion, or 4.4%, since December 31, 1999. Specifically, retail
loans, which include such areas as installment lending, auto
leasing and credit card services have increased $724 million, or
5.4%, led by a $496 million, or 24.7%, increase in retail leases.
Specialized lending and corporate loans increased $812 million
or 4.7% since December 31, 1999. Commercial and
construction real estate loans increased $296 million or 2.7%
since December 31, 1999. In the third quarter of 1998, Firstar
established a loan conduit, Stellar Funding Group, Inc. At
March 31, 2000, $2.1 billion of short term, high quality, low
yielding commercial loans had been funded in the conduit
compared to $1.7 billion at December 31, 1999.
-15-
Total investment securities were $13.5 billion at March 31,
2000 compared to $13.1 billion at year-end 1999. At March 31,
2000 the net unrealized loss on available for sale securities was
$231.4 million and the related after tax decrease to shareholders'
equity was $150.7 million. Loans held for sale were $ 1.9
billion at March 31, 2000 compared to $625 million at December
31, 1999. This increase resulted from the transfer of $1.7 billion
of loans from the residential mortgage portfolio. As of March
31, 2000, $682 million of these transferred loans have been sold
in the secondary market.
Total deposits were $51.4 billion at March 31, 2000, a
reduction of $462 million, or 0.9%, from year-end 1999. Non-
interest bearing demand deposit balances declined by $348
million from year-end when deposit levels typically peak.
Interest-bearing deposits decreased by $114 million from
December 31, 1999. Merger-related branch divestitures reduced
deposits by $135 million during the first quarter of 2000. The
shift in deposit preferences continues with reductions in savings
and NOW accounts, collectively down by $228 million. Retail
deposit customers are seeking higher yields in deposit accounts
and alternative investment vehicles. Short-term borrowed funds
of $9.4 billion at March 31, 2000 were up $1.1 billion since
year-end 1999 as additional funding was necessary to replace the
reduced levels of deposits and to fund earning asset growth.
Results of Operations
Net interest income on a taxable equivalent basis, was
$681.9 million, an increase of $12.4 million, or 1.8%, as
compared to the first quarter of 1999. The increase in net interest
income was due to an improved mix of assets and liabilities, a
higher net interest margin and the impact of one additional day in
the first quarter of 2000. This was partially offset by the lower
level of average earning assets. Average earning assets for the
first quarter of 2000 were $65.6 billion, a reduction of $533
million from the same period of 1999. This reduction was due to
the balance sheet restructuring as a result of the Mercantile
merger.
Average retail loans increased by $2.4 billion or 21.1%,
which included a 48.5% increase in leases; a 19.8% increase in
home equity loans; a 16.7% increase in installment lending and a
10.1% increase in credit card loans. Average commercial loans
rose by $1.9 billion, or 11.8%. Average total real estate loans
declined by $1.5 billion or 6.9%. Commercial mortgage and
construction loans increased by $641 million or 6.1%. This
growth was offset by a $2.1 billion decline in average residential
mortgage loans due to both maturities and repayments along with
the sale of new originated loans into the secondary market and
the transfer of loans to held for sale status.
Average investment securities were reduced by $2.0
billion, or 13.1%, due to merger-related sales and restructuring
of the investment portfolio. The change in mix of assets from
lower yielding investment securities and residential mortgages to
higher yielding loans have largely contributed to the increase in
net interest income. This positive factor was partially offset by
the increased use of higher cost funding sources and the overall
decrease in average earning assets.
-16-
FIRSTAR CORPORATION AND SUBSIDIARIES
TABLE 1 AVERAGE BALANCE SHEETS AND AVERAGE RATES
(dollars in thousands)
First Quarter, 2000 First Quarter, 1999
----------------------------------- -----------------------------------
Daily Average Daily Average
Average Interest Rate Average Interest Rate
------------ ------------ ------- ------------ ------------ -------
ASSETS:
Commercial loans $ 17,628,570 $ 363,194 8.28% $ 15,772,329 $ 295,607 7.59%
Real estate loans 19,775,401 391,381 7.94 21,242,069 413,295 7.84
Retail loans 13,741,066 305,728 8.95 11,351,255 256,120 9.15
------------ ----------- ------------ -----------
Total loans 51,145,037 1,060,303 8.33 48,365,653 965,022 8.06
Loans held for sale 601,337 11,714 7.79 1,690,751 30,801 7.29
Investment securities 13,405,028 233,308 6.96 15,418,800 251,214 6.52
Money market investments 459,745 7,016 6.14 668,730 8,830 5.36
------------ ----------- ------------ -----------
Total interest-
earning assets 65,611,147 1,312,341 8.03% 66,143,934 1,255,867 7.66%
Cash and due from banks 3,134,887 3,323,301
Allowance for loan losses (708,483) (704,922)
Other assets 4,503,247 5,042,145
------------ ------------
Total assets $ 72,540,798 $ 73,804,458
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Savings and NOW $ 10,137,597 43,244 1.72% $ 10,870,882 50,303 1.88%
Money market deposit accounts 10,237,091 108,744 4.27 10,242,882 99,302 3.93
Time deposits 21,766,233 288,289 5.33 21,644,170 277,611 5.20
Short-term borrowings 8,290,510 111,839 5.43 7,024,965 77,729 4.49
Long-term debt 4,911,336 78,342 6.40 5,850,703 81,395 6.38
------------ ----------- ------------ -----------
Total interest-bearing
liabilities 55,342,767 630,458 4.58% 55,633,602 586,340 4.35%
Noninterest-bearing deposits 9,664,982 10,119,209
Other liabilities 1,136,009 1,288,416
Shareholders' equity 6,397,040 6,763,231
Total liabilities and
shareholders' equity $ 72,540,798 $ 73,804,458
------------ ------------
------------ ------------
Net interest revenue/margin $ 681,883 4.17% $ 669,527 4.07%
----------- -----------
----------- -----------
Interest rate spread 3.45 3.31
Note: Interest and average rate are presented on a fully-taxable equivalent basis. Taxable equivalent amounts
are calculated utilizing marginal federal income tax rate of 35 percent. The yield on available for sale
securities is based upon historical cost balances. The total of nonaccruing loans is included in average
amounts outstanding.
-17-
The net interest margin increased by ten basis points to
4.17% in the first quarter of 2000 compared to the first quarter
of 1999. The yield on total earning assets rose by 37 basis points
to 8.03%. Likewise, the yield on total loans increased by 27
basis points reflecting generally market driven forces. The
comparable rate paid on interest bearing liabilities increased by
23 basis points similarly reflecting higher market rates and more
reliance on higher cost purchased funds. Interest spread, the
difference between the rate earned on total earning assets and the
rate paid on interest bearing liabilities increased by 14 basis
points. The contribution of interest free funds to the net interest
margin declined by four basis points producing the net increase to
the margin of ten basis points. The contribution of interest free
funds was lessened by the higher proportion of earning assets
funded by interest bearing liabilities. Tables 1 provides
detailed information on the average balances, interest
income/expense and rates earned or paid.
Firstar's major market risk exposure is to changing interest
rates. To minimize the volatility of net interest income to
adverse changes in interest rate, Firstar has established guidelines
for its asset and liability activities through its Asset/Liability
Policy Committee. This committee has the responsibility for
approving and ensuring compliance with policies including
interest rate risk exposure, off-balance-sheet activity and the
investment portfolio position.
One of the primary tools to measure interest rate risk and
the effect of interest rate changes on net interest income is
simulation analysis. This earnings simulation model estimates
net interest income under a variety of scenarios that incorporate
changes in the shape of the yield curve, changes in interest rate
relationships, changes in the direction of rates, and changes in
the mix and levels of balance sheet accounts. The most recent
simulation projected the impact of a 100 basis point upward or
downward gradual change of market interest rates over a one
year time period. The results of this simulation indicate that a
declining interest rate scenario would increase net interest
revenue by $12 million from a base case, while an increasing rate
scenario would decrease net interest revenue by $8 million.
The loan loss provision charged to earnings in the first
quarter of 2000 was $45.7 million, compared to $43.4 million
during the same period of last year. Net loan charge-offs were
$45.6 million in the first quarter of 2000 compared to $37.2
million a year earlier. First quarter 2000 net charge-offs were
.36% of average loans compared with .31% in the same quarter
of last year. Management has continued to focus on growing
consumer loans as a higher percentage of total loans and, as a
result of this, would expect charge-offs to be somewhat greater
during the remainder of 2000.
Noninterest income is a significant source of revenue for
Firstar, representing 34.6% of tax equivalent net revenue in the
first quarter of 2000 compared to 32.8% in the same quarter of
1999, excluding securities gains. Noninterest income, excluding
securities gains, increased by $34.7 million, or 10.6%, to a level
of $361.2 million in the first quarter of 2000 when compared to
the same quarter of last year.
-18-
FIRSTAR CORPORATION AND SUBSIDIARIES
TABLE 2 NONINTEREST INCOME
(dollars in thousands)
% Increase/
First Quarter Change (decrease)
-------------------------- From Prior
2000 1999 Period 2000/1999
-----------------------------------------------------------
Trust income $ 113,846 $ 101,497 $ 12,349 12.2 %
Mortgage banking:
Origination and sales 18,113 31,126 (13,013) (41.8)
Loan Servicing, net 11,517 8,295 3,222 38.8
Gain on sale of servicing 6,665 37 6,628 n/m
--------- --------- --------- -------
Total mortgage banking 36,295 39,458 (3,163) (8.0)
Retail deposit fees 47,835 45,389 2,446 5.4
Cash management income 35,755 32,666 3,089 9.5
Credit card income 29,673 24,270 5,403 22.3
ATM income 11,941 8,358 3,583 42.9
Brokerage revenue 5,566 9,250 (3,684) (39.8)
International income 9,760 9,060 700 7.7
Bank owned life insurance 7,365 4,883 2,482 50.8
Insurance commissions 7,335 8,121 (786) (9.7)
Securitization revenue 18,569 6,862 11,707 170.6
All other income 37,297 36,738 559 1.5
--------- --------- --------- -------
Subtotal 361,237 326,552 34,685 10.6
Investment securities
gains/(losses)--net 11 12,961 (12,950) n/m
--------- --------- --------- -------
Total noninterest
income $ 361,248 $ 339,513 $ 21,735 6.4 %
--------- --------- --------- -------
--------- --------- --------- -------
n/m = not meaningful
FIRSTAR CORPORATION AND SUBSIDIARIES
TABLE 3 NONINTEREST EXPENSE
(dollars in thousands)
% Increase/
First Quarter Change (decrease)
-------------------------- From Prior
2000 1999 Period 2000/1999
---------------------------------------------------------
Salaries $ 191,567 $ 214,840 $ (23,273) (10.8)%
Pension and other
employee benefits 31,123 45,470 (14,347) (31.6)
Equipment expense 35,621 35,753 (132) (0.4)
Occupancy expense--net 40,128 43,398 (3,270) (7.5)
Amortization of intangible
assets 30,185 30,314 (129) (0.4)
Outside services 28,090 28,772 (682) (2.4)
Postage and courier 17,920 17,850 70 0.4
Marketing expense 7,832 12,289 (4,457) (36.3)
Professional services 6,132 6,444 (312) (4.8)
Travel and entertainment 5,737 5,716 21 0.4
Stationery and supplies 10,038 9,459 579 6.1
Communication expense 12,305 12,532 (227) (1.8)
All other expense 37,248 43,006 (5,758) (13.4)
--------- --------- --------- -------
Subtotal 453,926 505,843 (51,917) (10.3)
Merger related expenses 51,900 15,000 36,900 n/m
--------- --------- --------- -------
Total noninterest
expense $ 505,826 $ 520,843 $ (15,017) (2.9)%
--------- --------- --------- -------
--------- --------- --------- -------
n/m = not meaningful
-19-
Trust income is the largest source of noninterest income for
Firstar and in the first quarter of 2000 increased $12.3 million,
or 12.2% due to new business in all product lines and higher
stock market values. Additionally, this year's trust income
benefited from one-time changes to accrual procedures, which
increased revenues by $3.7 million. Retail deposit income
increased $2.4 million or 5.4%. Credit card income increased
$5.4 million or 22.3% due to an expanded customer base and
increased card usage. Electronic banking income increased $3.6
million or 42.9% and included $2.9 million of one-time income
from resolution of reconciling issues. Cash management income
increased by $3.1 million or 9.5% and included one-time changes
in accrual procedures, which increased revenues by $3.0 million.
Mortgage banking revenue declined by $3.2 million or 8.0%
with reduced loan gains of $13.0 million partially offset by
increased gains on the sale of servicing rights of $6.6 million.
Securitization revenue increased by $11.7 million or 170.6% due
to the establishment and continued placement of loans and
investments in conduits which provide management and referral
fees to Firstar. Brokerage revenue declined as a result of the
outsourcing of that product to a third party broker. Table 2
shows the components of noninterest income.
Noninterest expense, excluding merger-related expenses,
totaled $453.9 million, a decrease of $51.9 million, or 10.3%,
from the first quarter of 1999.
Staff expense for the first quarter of 2000 decreased $37.6
million, or 14.5%. This decrease resulted from staff reductions
in support and back room operations as a result of mergers and
lower accruals for incentive programs. Employee benefits
expense also declined during the quarter due to lower headcount
and salary levels, the merger of employee benefit plans and
reduced pension costs resulting from increased cash contributions
to the pension plan. Partially offsetting these decreases were
increases in staff as a result of opening new branches and in-store
locations.
Occupancy expenses declined $3.3 million, or 7.5%, due to
the consolidation of facilities related to recent mergers.
Marketing costs declined $4.5 million, or 36.3%, from the first
quarter of last year. Marketing costs will increase in future
periods with the introduction of new products and additional
marketing emphasis in the Mercantile banks' markets. All other
operating expenses declined an aggregate $6.6 million, or 3.5%,
reflecting an $8.5 million reversal of excess expense accruals
from prior periods. Table 3 shows the components of noninterest
expenses.
Before merger-related costs, Firstar's efficiency ratio was
43.52% in the first quarter of 2000, a significant improvement
over the 50.13% of the same quarter of last year.
Merger-related charges totaled $51.9 million in the first
quarter of 2000 compared to $15.0 million in the same period of
last year. Note 7 to the financial statements provides a summary
of merger-related costs and activity in the accrual accounts.
The effective income tax rate was 35.8% in the first quarter
of 2000 compared to 33.2% in the same period of last year. The
increase in the effective tax rate was due to a tax refund
recognized in 1999 along with lower tax exempt revenues relative
to taxable income.
-20-
FIRSTAR CORPORATION AND SUBSIDIARIES
TABLE 4 SUMMARY OF LOAN LOSS EXPERIENCE
(dollars in thousands)
First Quarter
--------------------------------
2000 1999
------------ ------------
Average loans $ 51,145,037 $ 48,365,653
------------ ------------
------------ ------------
Allowance for loan losses:
Balance - beginning of period $ 714,898 $ 704,846
Charge-offs:
Commercial (20,382) (15,291)
Commercial real estate (1,361) (1,666)
Residential real estate (2,597) (3,584)
Credit card (19,009) (17,649)
Other retail (20,701) (16,532)
------------ ------------
Total charge-offs (64,050) (54,722)
------------ ------------
Recoveries:
Commercial 7,050 5,414
Commercial real estate 744 1,356
Residential real estate 79 93
Credit card 3,910 3,380
Other retail 6,646 7,236
------------ ------------
Total recoveries 18,429 17,479
------------ ------------
Net charge-offs (45,621) (37,243)
Provision charged to earnings 45,689 43,389
------------ ------------
Balance - end of period $ 714,966 $ 710,992
------------ ------------
------------ ------------
Ratio of net charge-offs to average
loans:
Commercial 0.30% 0.25%
Commercial real estate 0.02% 0.01%
Residential real estate 0.12% 0.13%
Credit card 4.45% 4.67%
Other Retail 0.46% 0.37%
------- -------
Total loans 0.36% 0.31%
------- -------
------- -------
-21-
Asset Quality
As of March 31,2000, the allowance for loan losses was
$715.0 million, or 1.42% of loans outstanding compared to
1.41% at December 31, 1999 and 1.46% a year earlier. The
decrease from the prior year resulted from a change in the
management of problem loans as a result of the Firstar merger
when a more aggressive charge-off policy had been adopted. The
allowance as a percentage of nonperforming loans was 322% at
March 31, 2000 compared to 341% at December 31, 1999 and
309% a year earlier. Table 4 provides a summary of activity in
the allowance for loan losses by type of loan. Net charge-offs
totaled $45.6 million in the first quarter of 2000 compared with
$37.2 million in the same period of last year. Annualized net
charge-offs as a percent of average loans increased from .31% in
the first quarter of 1999 to .36% in the first quarter of this year.
Credit card net charge-offs decreased from 4.67% of average
outstandings in 1999 to 4.45% in the first quarter of 2000.
Commercial loan net charge-offs increased from a level of .25%
of loans in 1999 to.30% in the same period of 2000. Other retail
lending net charge-offs increased from .37% of average
outstandings in 1999 to .46% in the current period.
Management anticipates the level of net charge-offs to trend
higher over the remainder of 2000 with the continued emphasis
on expanding retail lending.
Nonperforming assets, as shown in Tables 5 and 6, were
$241.8 million at March 31, 2000. This is an increase of $12.9
million from December 31, 1999 and a $15.5 million reduction
from a year earlier. Measured as a percent of loans and other
real estate, nonperforming assets have decreased from .53% at
March 31, 1999 to .48% at March 31, 2000. Lower levels of
retail nonaccrual loans and other real estate owned was partially
offset by higher levels of commercial nonaccrual loans.
Capital Resources
Total shareholders' equity was $6.27 billion at March 31,
2000, a decrease of $39.9 million from December 31, 1999 and
$511.0 million from a year earlier. These declines are the result
of strong core earnings offset by dividend payments, the merger-
related charges, the stock repurchase program and unrealized
losses on investment securities reflected in other comprehensive
income. The tangible common ratio was 6.85% at March 31,
2000, compared to 6.83% at December 31, 1999 and 7.10% a
year earlier. The ratio of total shareholders' equity to total assets
was 8.58% at March 31, 2000 compared to 8.67% at December
31, 1999 and 9.21% at March 31, 1999.
Banking industry regulators define minimum capital
requirements for bank holding companies. At March 31, 2000,
Firstar's Tier I and Total Risk-Based Capital ratios amounted to
8.04% and 10.67%, respectively well above the minimum
requirements of 4.00% for Tier I and 8.00% for Total Risk-
Based Capital. This compares to Tier I and Total Risk-Based
Capital ratios of 9.51% and 11.75% at March 31, 1999.
Regulatory authorities have also established a minimum leverage
ratio of 4.00%, which is defined as Tier I equity to average
quarterly assets. For the first quarter of 2000, the Firstar's
average leverage ratio was 7.56% compared to 7.70% in the
same quarter of 1999. These declines since 1999 were due to the
stock repurchase program and changes in balance sheet mix of
earning assets. These regulatory ratios continue to be in excess
of stated "well capitalized" requirements.
-22-
FIRSTAR CORPORATION AND SUBSIDIARIES
TABLE 5 NONPERFORMING ASSETS
(dollars in thousands)
March 31, December 31, March 31,
2000 1999 1999
---------- ---------- ----------
Loans on nonaccrual status:
Commercial $ 112,402 $ 89,168 $ 94,953
Residential mortgage 36,198 36,806 50,106
Commercial mortgage 46,861 57,733 50,530
Construction and land
development 7,107 6,309 9,583
Retail loans 16,771 17,980 22,223
---------- ---------- ----------
Total nonaccrual loans 219,339 207,996 227,395
Loans which have been
renegotiated 2,609 1,664 2,898
---------- ---------- ----------
Total nonperforming loans 221,948 209,660 230,293
Other real estate owned 19,892 19,272 27,073
---------- ---------- ----------
Total nonperforming
assets $ 241,840 $ 228,932 $ 257,366
---------- ---------- ----------
---------- ---------- ----------
Percentage of nonperforming
loans to loans 0.44% 0.41% 0.47%
Percentage of nonperforming
assets to loans and other
real estate owned 0.48% 0.45% 0.53%
Loans past due 90 days
or more $ 141,155 $ 122,760 $ 136,575
---------- ---------- ----------
---------- ---------- ----------
-23-
FIRSTAR CORPORATION AND SUBSIDIARIES
TABLE 6 COMPOSITION OF NONPERFORMING LOANS
(dollars in thousands)
March 31, 2000
---------------------------------------------------------------------
Nonperforming Loans 90 Days
----------------------------------------
or
Non- Restruc- Percentage More
accrual tured Total of Loans Past Due
----------- ---------- ---------- ----------- -------------
Commercial loans:
Corporate $ 97,611 $ 40 $ 97,651 0.60 % $ 23,618
Commercial leasing 14,791 - 14,791 0.77 185
--------- ------- --------- ---------
Total commercial loans 112,402 40 112,442 0.62 23,803
--------- ------- --------- ---------
Real estate loans:
Residential 36,198 - 36,198 0.55 47,569
Commercial mortgage 46,861 1,198 48,059 0.53 16,181
Construction/land
development 7,107 - 7,107 0.31 3,674
--------- ------- --------- ---------
Total real estate loans 90,166 1,198 91,364 0.51 67,424
--------- ------- --------- ---------
Retail loans:
Other retail 12,081 1,371 13,452 0.13 24,813
Credit cards 4,525 - 4,525 0.33 22,029
Retail leasing 165 - 165 0.01 3,086
--------- ------- --------- ---------
Total retail loans 16,771 1,371 18,142 0.13 49,928
--------- ------- --------- ---------
Total loans $ 219,339 $ 2,609 $ 221,948 0.44 % $ 141,155
--------- ------- --------- ------- ---------
--------- ------- --------- ------- ---------
December 31, 1999
---------------------------------------------------------------------
Nonperforming Loans 90 Days
----------------------------------------
or
Non- Restruc- Percentage More
accrual tured Total of Loans Past Due
----------- ---------- ---------- ----------- -------------
Commercial loans:
Corporate $ 76,382 $ 87 $ 76,469 0.49 % $ 12,819
Commercial leasing 12,786 - 12,786 0.70 17
--------- ------- --------- ---------
Total commercial loans 89,168 87 89,255 0.51 12,836
--------- ------- --------- ---------
Real estate loans:
Residential 36,806 - 36,806 0.42 47,778
Commercial mortgage 57,733 1,577 59,310 0.67 11,281
Construction/land
development 6,309 - 6,309 0.29 2,585
--------- ------- --------- ---------
Total real estate loans 100,848 1,577 102,425 0.52 61,644
--------- ------- --------- ---------
Retail loans:
Other retail 12,563 - 12,563 0.12 25,827
Credit cards 4,960 - 4,960 0.35 20,210
Retail leasing 457 - 457 0.02 2,243
--------- ------- --------- ---------
Total retail loans 17,980 - 17,980 0.13 48,280
--------- ------- --------- ---------
Total loans $ 207,996 $ 1,664 $ 209,660 0.41 % $ 122,760
--------- ------- --------- ------- ---------
--------- ------- --------- ------- ---------
March 31, 1999
---------------------------------------------------------------------
Nonperforming Loans 90 Days
----------------------------------------
or
Non- Restruc- Percentage More
accrual tured Total of Loans Past Due
----------- ---------- ---------- ----------- -------------
Commercial loans:
Corporate $ 83,592 $ 55 $ 83,647 0.58 % $ 19,676
Commercial leasing 11,361 - 11,361 0.78 629
--------- ------- --------- ---------
Total commercial loans 94,953 55 95,008 0.60 20,305
--------- ------- --------- ---------
Real estate loans:
Residential 50,106 - 50,106 0.47 58,860
Commercial mortgage 50,530 1,393 51,923 0.57 9,524
Construction/land
development 9,583 - 9,583 0.58 4,802
--------- ------- --------- ---------
Total real estate loans 110,219 1,393 111,612 0.52 73,186
--------- ------- --------- ---------
Retail loans:
Other retail 19,725 1,450 21,175 0.24 19,882
Credit cards 2,042 - 2,042 0.17 21,386
Retail leasing 456 - 456 0.03 1,816
--------- ------- --------- ---------
Total retail loans 22,223 1,450 23,673 0.21 43,084
--------- ------- --------- ---------
Total loans $ 227,395 $ 2,898 $ 230,293 0.47 % $ 136,575
--------- ------- --------- ------- ---------
--------- ------- --------- ------- ---------
-24-
On April 11, 2000, the Board of Directors approved an
additional common stock repurchase program of 100 million
shares to be completed during the next two years. The
reacquired common shares will be held as treasury shares for
reissuance for various corporate purposes, including employee
stock option plans.
This discussion may contain forward-looking statements
with respect to the financial condition, results of operations and
business of Firstar. These forward-looking statements involve
certain risks and uncertainties. Factors that may cause actual
results to differ materially from those contemplated include
among other things, the following possibilities: (i)expected cost
savings from recent acquisitions cannot be fully realized or
realized within the expected time; (ii)revenues are lower than
expected; (iii)competitive pressure among depository institutions
increases significantly; (iv)changes in the interest rate
environment reduce interest margins; (v)general economic
conditions are less favorable than expected; and (vi)legislation or
regulatory requirements adversely affect the business that Firstar
is engaged in.
-25-
PART II. OTHER INFORMATION
- - --------------------------
ITEM 6. Exhibits and Reports on Form 8-K
- - -------
(A) Exhibits filed:
Exhibit 27. Financial Data Schedule
(B) Reports on Form 8-K
None
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
FIRSTAR CORPORATION
May 15, 2000 /s/ Jerry A. Grundhofer
- - ----------------- ------------------------------------------
Date Jerry A. Grundhofer
President and Chief Executive Officer
May 15, 2000 /s/ David M. Moffett
- - ----------------- ------------------------------------------
Date David M. Moffett
Vice Chairman and Chief Financial Officer
May 15, 2000 /s/ James D. Hogan
- - ----------------- ------------------------------------------
Date James D. Hogan
Executive Vice President and Controller
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