-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, FhMcHtwht9KBPQwoxAGxxmB+ZdmstOP5J2jIe2RgzmQKvP+FeCNxvB/Xeb+3TyMD L1ymolp89G2B8LUf8Yy8WA== 0000105982-95-000055.txt : 19950517 0000105982-95-000055.hdr.sgml : 19950517 ACCESSION NUMBER: 0000105982-95-000055 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST INTERSTATE BANCORP /DE/ CENTRAL INDEX KEY: 0000105982 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 951418530 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04114 FILM NUMBER: 95539976 BUSINESS ADDRESS: STREET 1: 633 W FIFTH ST-T8-19 STREET 2: PO BOX 54068 CITY: LOS ANGELES STATE: CA ZIP: 90054 BUSINESS PHONE: 2136143001 FORMER COMPANY: FORMER CONFORMED NAME: WESTERN BANCORPORATION DATE OF NAME CHANGE: 19911124 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period ended March 31, 1995 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________ to ________________ Commission File No. 1-4114 FIRST INTERSTATE BANCORP (Exact name of registrant as specified in its charter) DELAWARE 95-1418530 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 633 WEST FIFTH STREET LOS ANGELES, CALIFORNIA 90071 (Address of principal executive offices) (Zip Code) (213) 614-3001 (Registrant's telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant has been required to file such (reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: CLASS OUTSTANDING AT APRIL 30, 1995 Common stock, $2 par value 75,969,690 shares PART 1. FINANCIAL INFORMATION Item 1. Financial Statements FIRST INTERSTATE BANCORP CONSOLIDATED BALANCE SHEET (in millions) March 31 December 31 March 31 1995 1994 1994 -------- ----------- -------- ASSETS Cash and due from banks $ 6,230 $ 6,070 $ 4,773 Time deposits, due from banks 27 26 834 Federal funds sold and securities purchased under agreements to resell 265 179 1,471 Trading account securities 52 64 100 Investment securities: Held-to-maturity securities 12,204 13,695 16,475 Available-for-sale securities 127 156 624 -------- --------- -------- Total Investment Securities 12,331 13,851 17,099 Loans (net) 35,096 33,222 27,132 Less: Allowance for credit losses 921 934 1,011 -------- --------- -------- Net Loans 34,175 32,288 26,121 Bank premises and equipment 1,199 1,147 1,040 Customers' liability for acceptances 31 35 53 Other assets 2,646 2,153 2,040 -------- ---------- -------- Total Assets $ 56,956 $ 55,813 $ 53,531 ======== ========== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest bearing $ 16,644 $ 16,599 $ 16,053 Interest bearing 31,720 31,828 30,810 -------- --------- -------- Total Deposits 48,364 48,427 46,863 Short term borrowings 2,361 1,574 321 Acceptances outstanding 31 35 53 Accounts payable and accrued liabilities 1,037 953 1,011 Long term debt 1,470 1,388 1,532 -------- --------- -------- Total Liabilities 53,263 52,377 49,780 Shareholders' equity: Preferred Stock 350 350 350 Common Stock, par value $2 a share: Authorized (in thousands) 250,000 shares; Issued: 84,286 shares 169 168 169 Capital surplus 1,683 1,692 1,683 Retained earnings 2,113 1,967 1,622 Unrealized gain on available-for-sale securities, net of tax 1 1 -- -------- --------- -------- 4,316 4,178 3,824 Less Common Stock in treasury at cost: (in thousands) March 31, 1995 - 8,452 shares December 31, 1994 - 10,082 shares March 31, 1994 - 1,706 shares 623 742 73 -------- --------- -------- Total Shareholders' Equity 3,693 3,436 3,751 -------- --------- -------- Total Liabilities and Shareholders' Equity $ 56,956 $ 55,813 $ 53,531 ======== ========= ======== See notes to consolidated financial statements FIRST INTERSTATE BANCORP CONSOLIDATED STATEMENT OF INCOME (in millions, except per share amounts) Three Months Ended ---------------------------------- March 31 December 31 March 31 1995 1994 1994 -------- ----------- -------- INTEREST INCOME Loans, including fees $ 730.5 $ 662.4 $ 498.7 Trading account 1.6 1.6 1.3 Investment Securities: Held-to-maturity securities 177.4 192.7 207.9 Available-for-sale securities 5.1 0.9 5.1 Other interest income 6.9 4.7 16.2 -------- ---------- -------- Total Interest Income 921.5 862.3 729.2 INTEREST EXPENSE Deposits 225.2 205.7 163.9 Short term borrowings 35.2 14.8 3.4 Long term debt 29.4 25.2 28.5 -------- ---------- -------- Total Interest Expense 289.8 245.7 195.8 -------- ---------- -------- NET INTEREST INCOME 631.7 616.6 533.4 Provision for credit losses -- -- -- NET INTEREST INCOME AFTER PROVISION -------- ---------- -------- FOR CREDIT LOSSES 631.7 616.6 533.4 NONINTEREST INCOME Service charges on deposit accounts 147.1 143.4 139.0 Trust fees 39.4 49.1 47.0 Other charges, commissions, and fees 34.0 32.5 32.7 Merchant credit card fees 12.3 10.6 9.0 Investment securities gains 0.5 14.1 0.8 Other income 35.1 12.6 28.0 -------- ---------- -------- Total Noninterest Income 268.4 262.3 256.5 NONINTEREST EXPENSES Salaries & benefits 273.4 270.3 269.5 Net occupancy expenses 100.1 92.6 88.0 Communications 33.9 30.2 27.6 Outside contract fees 34.0 30.0 16.9 FDIC assessments 27.9 27.8 24.3 Amortization of intangibles 14.9 11.8 6.7 Office supplies 14.0 10.5 11.0 Other real estate -- (6.1) -- Provision for restructuring 4.8 2.3 -- Other expenses 48.7 68.8 48.9 -------- ---------- -------- Total Noninterest Expenses 551.7 538.2 492.9 -------- ---------- -------- INCOME BEFORE INCOME TAXES 348.4 340.7 297.0 Applicable income taxes - including taxes relating to investment securities transactions of $0.2, $5.6 and $0.4 136.4 129.4 112.9 -------- ---------- -------- NET INCOME $ 212.0 $ 211.3 $ 184.1 ======== ========== ======== Net income applicable to common stock $ 203.7 $ 203.0 $ 175.8 Average number of common shares 76,464 76,656 79,485 outstanding (in thousands) Net income per common share $ 2.66 $ 2.65 $ 2.21 Dividends paid per common share 0.75 0.75 0.50 See notes to consolidated financial statements FIRST INTERSTATE BANCORP CONSOLIDATED STATEMENT OF CASH FLOWS (in millions) Three months ended ---------------------- March 31 March 31 1995 1994 --------- --------- Cash Flows from Operating Activities: Net Income $ 212 $ 184 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 46 27 Provision for credit losses - - Provision for deferred income taxes 36 45 Provision for restructuring 5 - Decrease in trading account securities 12 67 Decrease in interest receivable 4 102 Increase in interest payable 11 2 Other, net (28) 66 --------- --------- Net Cash Provided by Operating Activities 298 493 Cash Flows from Investing Activities: Held-to-maturity securities Proceeds from maturities 1,556 1,802 Proceeds from sales - - Purchases (71) (1,217) Available-for-sale securities Proceeds from maturities 36 3,461 Proceeds from sales 644 4 Purchases (4) (3,785) Net loan principal originations (1,032) (1,045) Proceeds from sales of loans 443 807 Loans purchased (125) (211) Acquisition of subsidiaries (74) 210 Proceeds from sales of subsidiaries and operations - - Proceeds from sales of premises and equipment 34 1 Purchases of premises and equipment (73) (66) Proceeds from sales of other real estate 15 6 --------- --------- Net Cash Provided (Used) by Investing Activities 1,349 (33) Cash Flows from Financing Activities: Net increase (decrease) in deposits (2,072) 269 Deposits purchased 187 - Net increase (decrease) in short term borrowings 449 (407) Proceeds from long term debt issued 100 - Repayments of long term debt (18) (40) Cash dividends paid (65) (47) Proceeds from Common Stock issued 19 19 Reacquisition of Common Stock - (15) --------- --------- Net Cash Provided (Used) by Financing Activities (1,400) (221) --------- --------- Net Increase (Decrease) in Cash and Cash Equivalents 247 239 Cash and cash equivalents at beginning of year 6,275 6,839 --------- --------- Cash and Cash Equivalents at end of period $ 6,522 $ 7,078 ========= ========= Additional Disclosures Loans transferred to OREO $ 9 $ 9 Loans originated to facilitate sale of OREO - 1 Interest paid 278 194 Income taxes paid (refunded) (6) 2 See notes to consolidated financial statements
FIRST INTERSTATE BANCORP STATEMENT OF SHAREHOLDERS' EQUITY (dollars in millions) Unrealized Net Gains on Common Stock Available- Preferred -------------------- Capital Retained for-sale Treasury Stock Shares(000s) Amount Surplus Earnings Securities Stock Total --------- ------------ ------ -------- --------- --------- ------- -------- Balance at January 1, 1995 $ 350 74,204 $ 168 $ 1,692 $ 1,967 $ 1 $ (742) $ 3,436 Net income for the period 212 212 Cash dividends Common Stock - $0.75 per share (57) (57) Preferred Stock (9) (9) Common Stock issued: Stock Option and Restricted Stock Plans 184 (4) 12 8 Dividend Reinvestment Plan 119 9 9 Management Incentive Plan 19 1 1 Levy Bancorp acquisition 1,308 (5) 97 92 Other adjustments 1 1 ------ ------ ------- -------- --------- --------- ------- -------- Balance at March 31, 1995 $ 350 75,834 $ 169 $ 1,683 $ 2,113 $ 1 $ (623) $ 3,693 ====== ====== ======= ======== ========= ========= ======= ======== See notes to consolidated financial statements
FIRST INTERSTATE BANCORP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. In the opinion of management, the accompanying consolidated financial statements contain all adjustments (all of which are of a normal recurring nature) necessary to present fairly the consolidated financial position at March 31, 1995, December 31, 1994, and March 31, 1994, the results of operations for the three months ended March 31, 1995, December 31, 1994 and March 31, 1994 and the cash flows for the three months ended March 31, 1995 and 1994. Certain prior year balances have been reclassified to conform to current year classifications. 2. The following table provides the major components of investment securities (in millions): Gross Unrealized Amortized --------------- Estimated Cost Gains Losses Fair Value --------- ------- ------ ---------- March 31, 1995 Held-to-maturity: U.S. Treasury and agencies $10,701 $ 17 $ 192 $10,526 State and political subdivisions 31 2 -- 33 Other debt securities 1,472 2 74 1,400 ------- ------- ------- ------- Total held-to-maturity $12,204 $ 21 $ 266 $11,959 ======= ======= ======= ======= Available-for-sale: U.S. Treasury and agencies $ 8 $ -- $ -- $ 8 Corporate and Federal Reserve Stock 118 1 -- 119 ------- ------- ------- ------- Total available-for-sale $ 126 $ 1 $ -- $ 127 ======= ======= ======= ======= December 31, 1994 Held-to-maturity: U.S. Treasury and agencies $12,105 $ 16 $ 352 $11,769 State and political subdivisions 29 1 -- 30 Other debt securities 1,561 -- 80 1,481 ------- ------- ------- ------- Total held-to-maturity $13,695 $ 17 $ 432 $13,280 ======= ======= ======= ======= Available-for-sale: U.S. Treasury and agencies $ 42 $ -- $ -- $ 42 Corporate and Federal Reserve Stock 113 1 -- 114 ------- ------- ------- ------- Total available-for-sale $ 155 $ 1 $ -- $ 156 ======= ======= ======= ======= March 31, 1994 Held-to-maturity: U.S. Treasury and agencies $14,859 $ 73 $ 131 $14,801 State and political subdivisions 43 1 -- 44 Other debt securities 1,573 3 19 1,557 ------- ------- ------- ------- Total held-to-maturity $16,475 $ 77 $ 150 $16,402 ======= ======= ======= ======= Available-for-sale: U.S. Treasury and agencies $ 180 $ -- $ -- $ 180 Corporate and Federal Reserve Stock 444 -- -- 444 ------- ------- ------- ------- Total available-for-sale $ 624 $ -- $ -- $ 624 ======= ======= ======= ======= During 1994 and the three months ended March 31, 1995 there were no transfers or sales of held-to-maturity securities, or transfers of available-for-sale securities to trading. 3. In January 1995, the Corporation adopted Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan," amended in October 1994 by SFAS No. 118 "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures," hereinafter collectively referred to as SFAS 114. Under SFAS 114, a loan is considered impaired when, based on current information and events, it is probable that a creditor will be unable to collect principal or interest due according to the contractual terms of the loan. SFAS 114 applies to all loans except large groups of smaller-balance homogenous loans which are collectively evaluated, loans measured at fair value or at the lower of cost or fair value, leases and debt securities. The statement does not address the overall adequacy of the allowance for credit losses. When a loan is identified as "impaired", accrual of interest ceases and any amounts that are recorded as receivables are reversed out of interest income. Impaired loans of the Corporation include only commercial (including financial and agricultural), real estate construction and commercial real estate mortgage loans classified as nonperforming loans. The Corporation measures its impaired loans by using the fair value of the collateral if the loan is collateral-dependent and the present value of the expected future cash flows discounted at the loan's effective interest rate if the loan is not collateral- dependent. Impairment allowances, if any, are considered by the Corporation in determining the overall adequacy of the allowance for credit losses. The adoption of SFAS 114 resulted in no material change in unallocated reserves of the allowance for credit losses. The following table presents a breakdown of nonperforming assets, which include impaired loans as defined by SFAS 114 as well as other assets which do not meet that definition, and the SFAS 114 impairment allowance related to impaired loans (in millions): March 31, 1995 ------------------------- SFAS 114 Recorded Impairment Investment Allowance ---------- ---------- Nonperforming loans: Impaired loans: Loans with impairment allowance Commercial, financial and agricultural $ 38 $ 5 Real estate construction -- -- Commercial real estate mortgage 12 2 ------ ------ Total loans with impairment allowance 50 $ 7 ====== Loans without impairment allowance Commercial, financial and agricultural $ 56 Real estate construction 15 Commercial real estate mortgage 44 ------ Total loans without impairment allowance 115 Total impaired loans 165 Other nonperforming loans Residential real estate mortgage 22 Instalment 1 ------ Total nonperforming loans 188 Other real estate 74 ------ Total nonperforming loans $ 262 ====== For the three months ending March 31, 1995, the average balance of impaired loans was $177 million and the total interest income was $1.6 million, all of which was recognized on a cash basis. Transactions in the allowance for credit losses for the quarter ending were as follows (in millions): March 31, December 31, March 31, 1995 1994 1994 --------- ------------ --------- Balance at beginning of period $ 934 $ 952 $ 1,001 Provision for credit losses -- -- -- Other changes - acquisitions 24 20 36 -------- ----------- -------- 958 972 1,037 Deduct: Loans charged-off 78 66 60 Less recoveries ofloans previously charged-off 41 28 34 -------- ----------- -------- Net loans charged-off 37 38 26 -------- ----------- -------- Balance at end of period $ 921 $ 934 $ 1,011 ======== =========== ======== 4. Other assets identified as being held for sale are valued at the lower of cost or market and totaled at March 31, 1995, December 31, 1994 and March 31, 1994, $67 million, $26 million and $126 million, respectively. These balances represent loans held for sale and are included in Other assets on the Consolidated Balance Sheet. 5. At March 31, 1995, December 31, 1994 and March 31, 1994, 15,000,000 shares of Preferred Stock (no par value) were authorized. At March 31, 1995, December 31, 1994 and March 31, 1994, there were outstanding 8,000,000 Depositary Shares, each representing a one-eighth interest in a share of 9.875% Preferred Stock, Series F. The Series F Preferred Stock is redeemable at any time on or after November 15, 1996, at the option of the Corporation, in whole or in part, at $200.00 per share (equivalent to $25.00 per Depositary Share) plus accrued and unpaid dividends to the redemption date. At March 31, 1995, December 31, 1994 and March 31, 1994, there were outstanding 6,000,000 Depositary Shares, each representing a one-eighth interest in a share of 9.0% Preferred Stock, Series G. The Series G Preferred Stock is redeemable any time on or after May 29, 1997, at the option of the Corporation, in whole or in part, at $200.00 per share (equivalent to $25.00 per Depositary Share) plus accrued and unpaid dividends to the redemption date. Dividends on both the Series F and Series G Preferred Stock are cumulative and are paid quarterly on the last day of March, June, September and December of each year. At March 31, 1995, the cost of Common Stock in the treasury averaged $73.70 per share. At December 31, 1994 and March 31, 1994, the cost of Common Stock in the treasury averaged $73.64 and $42.83, respectively. On April 28, 1995, the Board of Directors approved the repurchase of up to 7.6 million shares of Common Stock. The first 2.5 million shares purchased under the program will be used for reissuance through the Corporation's various employee benefit and stock option plans, and Stock Purchase and Dividend Reinvestment Plan. Such repurchases will be made periodically over the next two years in the open market or through privately negotiated transactions, subject to appropriate regulatory and acquisition accounting requirements. 6. During the first three months of 1995, the Corporation was a party to three business combinations with operating entities (University Savings Bank, Levy Bancorp and North Texas Bancshares) resulting in the acquisition of $2.3 billion in assets and $1.8 billion in deposits. University Savings Bank and North Texas Bancshares were cash transactions, and the Corporation issued 1,308,388 shares of its common stock (from its Treasury shares) for the acquisition of Levy Bancorp. All three acquisitions were accounted for as purchases. In addition, the Corporation, through its subsidiary in California, completed a cash transaction resulting in the acquisition of $187 million of deposits from the Federal Deposit Insurance Corporation. The Corporation paid a premium of $16 million for these deposits. 7. For purposes of reporting cash flows, cash and cash equivalents includes cash on hand, amounts due from banks, time deposits with banks, federal funds sold and securities purchased under agreements to resell having maturities of three months or less. Federal funds are purchased and sold for one-day periods. The effect of changes in foreign exchange rates on cash balances is not material. Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations COMPARISON OF FIRST QUARTER RESULTS: The Corporation recorded net income for the first quarter of 1995 of $212.0 million ($2.66 per share). This includes the effect of $4.8 million of previously announced restructuring charges ($3.0 million after taxes, or $0.04 per share) and represents an increase of 15.2% from the 1994 first quarter. Net income of $184.1 million in the 1994 first quarter included a benefit from the recognition of nonrecurring items of $14.7 million ($0.18 per share). Before the effect of nonrecurring items in both periods, income after taxes in the 1995 first quarter amounted to $215.0 million ($2.70 per share), an increase of 26.9% from $169.4 million ($2.03 per share) in the 1994 first quarter. Taxable-equivalent net interest income was $637.5 million in the first quarter of 1995, an increase of 18.4% from a year earlier. This increase resulted from expansion of the net interest margin, up 36 basis points to 5.31%, as well as from earning asset growth, up $4.5 billion (10.2%) to an average of $48.4 billion. The higher level of average earning assets in the first quarter of 1995 reflects loan growth of $8.8 billion, offset by a decline in investment securities of $3.0 billion. The Corporation is, and has been historically, asset sensitive. During periods such as 1994 in which short term interest rates rise, as driven by monetary policy, the net interest margin has generally increased. The net interest margin in the 1995 first quarter was two basis points above the 1994 fourth quarter margin of 5.29%. Growth of the net interest margin in 1995 is expected to stabilize, assuming deposit rates will gradually increase reflecting higher market interest rates, which is consistent with this stage of the economic cycle. Average loans and leases including acquisitions increased $8.8 billion (34.4%) from the 1994 first quarter and $2.8 billion (8.7%) from the fourth quarter to $34.6 billion in the 1995 first quarter. Real estate mortgage loans averaged $11.1 billion in the 1995 first quarter, an increase of $4.8 billion (76.6%) from the comparable 1994 quarterly level. This increase reflects, in part, acquisitions completed since March 1994. Instalment loans averaged $12.4 billion in the first quarter of 1995, up $1.4 billion (13.1%) from a year earlier and up $226 million (1.9%) from the fourth quarter of 1994. Growth of instalment loans reflects the improved economy and the success of marketing programs, as well as the impact of completed acquisitions. Average commercial loans outstanding were up $2.0 billion (26.6%) from a year earlier and up $592 million (6.6%) from the 1994 fourth quarter to an average of $9.6 billion. Average construction loans increased $299 million (40.6%) from the 1994 first quarter and $129 million (14.2%) from the fourth quarter to $1.0 billion in the 1995 period. At March 31, 1995, including the effect of acquisitions, loans and leases totaled $35.1 billion, up $8.0 billion (29.4%) from a year earlier and up $1.9 billion (5.6%) from yearend 1994. Instalment loans totaled $12.4 billion at March 31, 1995, an increase of $1.2 billion (10.2%) from a year earlier and an increase of $129 million (1.1%) from yearend 1994. At the same time, commercial loans were $9.6 billion, an increase of $1.4 billion (17.1%) from a year earlier and up $341 million (3.7%) from yearend 1994. Residential real estate mortgages totaled $6.7 billion, $3.6 billion (116.1%) above a year ago and $0.9 billion (15.5%) above the yearend level. Commercial real estate mortgages amounted to $4.7 billion at March 31, 1995, $1.2 billion (34.3%) above a year ago and $278 million (6.3%) above December 31, 1994. Construction loans were $1.1 billion at March 31, 1995, versus $806 million a year earlier and $933 million at the end of 1994. As a result of maturities and paydowns, investment securities held to maturity declined $4.3 billion (25.9%) from a year earlier and declined $1.5 billion (10.9%) from yearend 1994 to $12.2 billion at March 31, 1995. These proceeds supported the growth in loans. The investment securities portfolio is expected to continue to decline moderately as loan growth is expected to exceed deposit growth. U.S. Treasury and agency-backed securities declined 28.0% from a year earlier to $10.7 billion at March 31, 1995. Of the current amount, $4.3 billion were U.S. Treasury securities and $6.4 billion were government agency securities. Of the $6.4 billion of government agency securities at March 31, 1995, the majority was backed by mortgages. All other investment securities amounted to $1.5 billion at the end of March 1995, down $100 million (6.2%) from a year earlier and down slightly from yearend 1994. Total deposits averaged $48.0 billion in the 1995 first quarter, up $3.4 billion (7.7%) from the 1994 first quarter and up $211 million from the fourth quarter. Average deposits in consumer savings, time and net transaction accounts increased $2.7 billion (7.1%) from the 1994 first quarter to an average of $41.1 billion in the 1995 first quarter. Such deposits increased $244 million from $40.9 billion in the 1994 fourth quarter, including the results of acquisitions. The Corporation's CDs over $100,000 increased $442 million (46.2%) from the 1994 first quarter and increased slightly from the 1994 fourth quarter to an average of $1.4 billion. At the same time, short term borrowings, primarily federal funds purchased, averaged $2.4 billion, up $2.1 billion from the 1994 first quarter and up $1.5 billion from the fourth quarter; these increases include the impact of acquisitions. The higher levels of short term borrowings, together with maturing securities and deposit growth, supported loan growth in the 1995 first quarter. Based on an assessment of the Corporation's current risk profile, no provision for credit losses for the Corporation has been recorded since the fourth quarter of 1993. Loans charged off, net of recoveries, were $37.2 million in the first quarter of 1995, compared to $25.6 million reported for the comparable 1994 quarter. The Corporation continued to experience a strong level of recoveries on prior period chargeoffs. Noninterest income totaled $268.4 million in the first quarter of 1995, an increase of $11.9 million (4.6%) from the 1994 first quarter level. Service charges on deposit accounts rose $8.1 million (5.8%) from the 1994 level, while trust fees declined $7.6 million (16.2%). The decline in trust fees reflects the previously announced disposition of Denver Investment Advisors, a subsidiary of First Interstate Bank of Denver. Total noninterest expenses amounted to $551.7 million in the 1995 first quarter, including $4.8 million of restructuring charges, as previously noted. Noninterest expenses before the effect of these charges and including the effect of completed acquisitions were $546.9 million, an increase of $54.0 million (11.0%) from the comparable 1994 quarter. The increase in noninterest expenses from the 1994 first quarter was attributable primarily to acquisitions. In addition, noninterest expenses in the first quarter of 1994 benefited from the reversal of $13.2 million of litigation reserves included in outside contract fees. The Corporation's efficiency ratio, which reflects noninterest expenses before restructuring and ORE charges as a percent of taxable-equivalent net interest income plus noninterest income, was 60.4% in the 1995 first quarter, 61.3% in the 1994 fourth quarter, and 62.0% in the 1994 first quarter. In the first quarter of 1995, the Corporation recorded income tax expense of $136.4 million, resulting in an effective income tax rate of 39.2%. This compares to an effective rate of 38.0% in the comparable 1994 quarter. LIQUIDITY MANAGEMENT: Liquidity refers to the Corporation's ability to adjust its future cash flows to meet the needs of depositors and borrowers and to fund operations on a timely and cost effective basis. The Corporation continues to utilize the core deposits gathered through its extensive interstate retail banking network as a key source of low-cost funding. Core deposits, defined as demand deposits, interest bearing consumer deposits under $100,000 and noninterest bearing time deposits, together with corporate purchased funds and equity are the primary sources for funding earning assets. During the first quarter of 1995, core deposits represented 85% of average earning assets, down from 88% in both the first and fourth quarters of 1994. At the same time, average corporate purchased funds increased primarily due to the following. Short term borrowings rose $2.1 billion from the first quarter of 1994 and $1.5 billion from the 1994 fourth quarter level. In addition, long term debt decreased $142 million from the 1994 first quarter, and increased $64 million from the 1994 fourth quarter, reflecting the issuance in the 1995 first quarter of $100 million of subordinated debt. Cash and cash equivalents was virtually unchanged from December 31, 1994. Net cash provided by investing activities during the first three months of 1995 totaled $1,349 million. Maturities of investment securities in the held-to-maturity portfolio, net of purchases, provided cash of $1,485 million. Maturities and sales of investment securities in the available-for-sale portfolio, net of purchases, provided $676 million. Loan originations, net of repayments, used cash of $1,032 million. Proceeds from the sale of loans provided $443 million while the purchase of loans used $125 million. Net cash used by financing activities totaled $1,400 million during the first three months of 1995. Deposits, excluding the purchase of $187 million from the Federal Deposit Insurance Corporation as part of the Corporation's ongoing acquisition program, exhibited a net decrease of $2,072 million. The Corporation also reported a net increase of $449 in short term borrowings. These borrowings were primarily federal funds purchased and securities sold under agreements to repurchase. The Corporation continues to have no commercial paper outstanding. Proceeds from the issuance of long term debt provided $100 million while maturities required cash of $18 million. Issuance of common stock provided cash of $19 million while dividends paid totaled $65 million. Cash provided by operations during the first three months of 1995 totaled $298 million. Net income totaled $212 million and noncash adjustments to reconcile net income totaled $87 million. Net changes in other assets and other liabilities decreased cash from operations by $1 million. The Corporation's other sources of liquidity include maturing securities in addition to those which are available for sale or repurchase activity. In addition, subsidiary banks may directly access funds placed by them through existing agency agreements for the placement of federal funds and may also access the Federal Reserve for short term liquidity needs. SOURCE OF FUNDS: The Parent Corporation is a legal entity, separate and distinct from its subsidiary banks. The principal source of the Parent Corporation's revenue is dividends from the subsidiary banks. During the first three months of 1995, the subsidiary banks paid a total of $153 million in dividends to the Parent Corporation. Various statutory provisions limit the amount of dividends the subsidiary banks and certain non-bank subsidiaries can pay without regulatory approval, and various regulations also restrict the payment of dividends. In addition, federal statutes limit the ability of the subsidiary banks to make loans to the Parent Corporation. At March 31, 1995, the Parent Corporation had no external short term borrowings outstanding. Immediate liquidity available to the Corporation includes a $500 million senior revolving credit facility, as well as cash and other short term financial instruments at the Parent Corporation totaling $237 million at March 31, 1995. This compares to $219 million at yearend 1994. At current rates, interest on long term debt and preferred stock dividend requirements from April 1, 1995 through yearend 1995 total $120 million. In addition, from April 1, 1995 through yearend 1995, $113 million of the Parent Corporation's long term debt will mature. Under the appropriate circumstances, the Parent Corporation could consider repurchasing any of its outstanding securities. The Parent Corporation has access to regional, national and international capital and money markets. On December 9, 1994, the Corporation announced the establishment of its $1 billion Global Medium Term Note Program. The program allows for senior and subordinated debt and capital securities issuance in a number of countries and over a broad spectrum of maturities. RISK ELEMENTS: Nonperforming Assets - At March 31, 1995, nonperforming assets totaled $262 million, down $71 million (21.3%) from the year ago level of $333 million, and up $4 million from $258 million reported at yearend 1994. The current level of nonperforming assets represents 0.46% of total assets, versus 0.62% a year earlier and 0.46% at yearend 1994. Nonperforming loans totaled $188 million at March 31, 1995, down 22.2% from $243 million reported a year earlier, and up $2 million from $186 million at yearend 1994. ORE totaled $74 million at March 31, 1995, down from $90 million a year ago and up $2 million from yearend 1994. In addition to credit assets classified as nonperforming, the Corporation reported accruing loans that were past due 90 days or more of $52 million at March 31, 1995, versus $114 million a year earlier and $51 million at yearend 1994. The current level of past due loans represents 0.09% of total assets. Allowance for Credit Losses - At March 31, 1995, the allowance for credit losses totaled $921 million, or 2.62% of total loans. This compares to an allowance of $1,011 million, or 3.73% of loans, a year ago and $934 million, or 2.81% of loans, at December 31, 1994. Historical and projected allowances for credit losses reflect management's assessment of the credit risk inherent in the Corporation's loan portfolio, as well as the possible impact of known and potential problems in certain off-balance sheet financial instruments and uncertain events. Consistent with regulatory guidelines, the allowance is maintained at the level that is adequate to absorb estimated credit losses associated with the total loan and lease portfolio, including all binding commitments to lend. For the past eleven quarters, the Corporation has provided less than net chargeoffs with the credit provision over the past five quarters being zero. Despite zero credit provisions, improving economic conditions and lower levels of problem assets have caused reserves to remain in the upper range of key measures of adequacy. Management continues to evaluate the Corporation's reserve adequacy strategy on a quarterly basis, with the expectation that further reductions in reserve levels will be considered as long as the Corporation's risk profile supports that conclusion. During the first quarter of 1995, the Corporation adopted Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan." The adoption resulted in no material change in unallocated reserves of the allowance for credit losses. Refer to Footnote 3 to the financial statements for further information . Derivatives - The Corporation continues to engage in a minimum of derivative activities, none of a trading or speculative nature. At March 31, 1995, the notional value of derivatives outstanding was $6.6 billion, including $5.4 billion in which the Corporation is an intermediary and $1.2 billion in which the Corporation entered into transactions to hedge interest rate sensitivity. Of the $5.4 billion in which the Corporation is an intermediary, $4.2 billion of notional value has been sold to Standard Chartered, which has assumed the market risk of these instruments, and the Corporation retains only the credit risk. CAPITAL AND OTHER FINANCIAL STATISTICS: At March 31, 1995, total shareholders' equity represented 6.48% of total assets, versus 7.01% a year earlier and 6.16% at yearend 1994. On the same dates, common equity equaled 5.87%, 6.35% and 5.53% of total assets, respectively. The recent decline in the Corporation's various capital ratios largely resulted from common stock repurchase programs and completed acquisitions. The tangible common equity ratio was 4.56% at March 31, 1995, compared to 5.92% a year earlier and 4.57% at yearend 1994. The regulatory leverage ratio was 5.24% at March 31, 1995, versus 6.91% a year ago and 5.35% at yearend 1994. The Corporation's Tier 1 and Total Capital ratios at March 31, 1995 were 6.91% and 10.05%, respectively. The Tier 1 and Total Capital ratios at yearend 1994 were 7.20% and 10.22%, respectively. The decline in risk adjusted capital ratios was also affected by loan growth and declines in the lower risk- weighted investment securities portfolio. During the first quarter of 1995, the Corporation issued $100 million in 8.15% subordinated notes due March 15, 2002. Such notes qualify as Tier 2 capital securities and contributed to the Corporation's Total Capital ratio. On January 17, 1995, the Corporation's Board of Directors declared a quarterly cash dividend of $0.75 on the Corporation's $2 par value Common Stock, payable on February 24, 1995, to shareholders of record on February 6, 1995. On February 1, 1995, the Preferred Stock Committee of the Board of Directors declared dividends on the Corporation's outstanding preferred stock. During the first quarter of 1995, the Corporation recorded common stock dividends of $57.1 million and preferred stock dividends of $8.3 million. Total intangibles amounted to $785 million at March 31, 1995, versus $247 million a year earlier and $561 million at yearend 1994. The higher current level reflects the completion of acquisitions after March 31, 1994. As a result, goodwill increased to $737 million at March 31, 1995, from $217 million a year earlier. The number of common shares used in the calculation of 1995 first quarter results per share was 76,463,802. During the quarter, 1.3 million shares were issued from the Corporation's treasury shares in conjunction with the acquisition of Levy Bancorp in February 1995, of which 1.1 million represent shares repurchased for such purpose. RESTRUCTURING As previously announced, the Corporation has adopted a Restructuring Plan (Plan) to improve efficiency and to better position the company for the introduction of full interstate banking. The restructuring activity related to the Plan is summarized in the following table (in millions): Early Severance and Facility and Retirement Outplacement Equipment Program Services Valuations Other Total ----------- ------------- ------------ ------ ------ 1994 Restructuring provision Initial charge $ 82.0 $ 40.0 $ 15.0 $ 2.0 $139.0 Ongoing -- -- -- 2.3 2.3 ------ ------ ------ ----- ------ Total 82.0 40.0 15.0 4.3 141.3 Utilization for the period Cash 0.4 4.7 6.8 2.3 14.2 Noncash 81.6 -- -- -- 81.6 ------ ------ ------ ----- ------ Total 82.0 4.7 6.8 2.3 95.8 ------ ------ ------ ----- ------ Balance at December 31, 1994 -- 35.3 8.2 2.0 45.5 1995 Restructuring provision -- -- -- 4.8 4.8 Utilization for the period Cash -- 3.1 1.3 6.8 11.2 Noncash -- -- -- -- -- ------ ------ ------ ----- ------ Total -- 3.1 1.3 6.8 11.2 ------ ------ ------ ----- ------ Balance at March 31, 1995 $ -- $ 32.2 $ 6.9 $ -- $ 39.1 ====== ====== ====== ===== ====== The 1994 noncash amount of $81.6 million represents the amount transferred to the Corporation's pension liability during 1994. Payment of the cost of the Early Retirement Program into the Corporation's qualified retirement plan will depend on the timing of the Corporation's contributions to the pension plan. The balance of the restructuring charge will be funded out of operating cash flows with payments for severance and outplacement services occurring through the end of 1995. In addition, it is expected that restructuring charges of another $18.9 million for relocation of staff and facilities, as well as retention payments for certain personnel displaced in the restructuring program, will be incurred and expensed as the program is implemented. Such costs are expected to be incurred relatively evenly through the end of 1995. The total expected cost of the Plan, therefore, will be approximately $165 million, as previously estimated. SUMMARY OF ACQUISITION ACTIVITY: In the first quarter of 1995 , the Corporation closed four acquisitions: University Savings Bank in Seattle-Tacoma, Washington; Levy Bancorp in Ventura, California; North Texas Bancshares, Inc. in Fort Worth, Texas; and First Trust Bank in Ontario, California. On March 16, 1995, First Interstate Bank of Texas, N.A. announced the signing of a definitive agreement to purchase Tomball National Bancshares and its principal subsidiary, Texas National Bank, for $7.7 million in cash. At yearend 1994, Tomball reported assets of $98 million, loans of $36 million and deposits of $88 million. The transaction is expected to be completed in mid-1995. First Interstate currently operates 1,167 banking offices in 13 western states. As previously disclosed, the Corporation continues to explore opportunities to expand its banking operations by means of strategically selected acquisitions within the existing First Interstate Territory. RECENT DEVELOPMENTS: Effective January 1, 1995, President William E. B. Siart succeeded Edward M. Carson as Chief Executive Officer of the Corporation. In addition, William S. Randall was elected Chief Operating Officer of the Corporation, also effective January 1, 1995. Bancorp President and CEO William E. B. Siart was elected to succeed Edward M. Carson as Chairman of the Corporation, effective May 1, 1995. Also, Chief Operating Officer William S. Randall was named President of the Corporation, succeeding Mr. Siart, and California Region CEO Bruce G. Willison was named Vice Chairman of the Corporation. On April 18, 1995, the Corporation's Board of Directors declared a quarterly cash dividend of $0.75 per share on the Corporation's $2 par value Common Stock, payable on May 31, 1995 to shareholders of record on May 8, 1995. On April 28, 1995, the Board of Directors approved the repurchase of up to 7.6 million shares of Common Stock. See Footnote 5 to the financial statements for further information on the repurchase program., PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders (a) The Corporation's Annual Meeting of Stockholders was held on April 28, 1995. (b) At the Annual Meeting of Stockholders, the following matters were voted upon: the election of 15 directors of the Corporation, the ratification of the selection of Ernst & Young LLP, as independent public accountants to examine the accounts of the Corporation for the year 1995, the approval of the First Interstate Bancorp Corporate Executive Incentive Plan, and the approval of the First Interstate Bancorp 1995 Performance Stock Plan. A shareholder proposal recommending that the Board of Directors implement a policy of cumulative voting for all elections of directors, that was included in the First Interstate Bancorp Proxy Statement as "Item 5. Stockholder Proposal," was not presented by its proponent at the annual meeting, and therefor, no formal vote was taken. The results of the voting on matters presented at the Corporation's Annual Meeting of Stockholders were as follows: Votes Votes Description For Withheld ---------- -------- Election of Directors John E. Bryson 61,593,302 282,068 Edward M. Carson 61,602,426 272,944 Jewel Plummer Cobb 61,584,539 290,831 Ralph P. Davidson 61,592,359 283,011 Myron Du Bain 61,586,761 288,609 Don C. Frisbee 61,555,139 320,231 George M. Keller 61,585,007 290,363 Thomas L. Lee 61,605,511 269,859 William F. Miller 61,591,902 283,468 William S. Randall 61,601,350 274,020 Steven B. Sample 61,566,905 308,465 Forrest N. Shumway 61,603,408 271,962 William E.B. Siart 61,602,278 273,092 Richard J. Stegemeier 61,604,669 270,701 Daniel M. Tellep 61,591,530 283,840 There were no abstentions or broker non-votes on the elections of directors. Votes Votes Broker Description For Against Abstentions Non-Votes ------------------------ ---------- --------- ----------- --------- Ratification of the selection of Ernst & Young LLP 61,564,510 127,789 217,764 30,628 Approval of Corporate Executive Incentive Plan 57,751,958 2,644,687 1,513,097 30,949 Approval of 1995 Performance Stock Plan 41,288,970 14,905,324 1,536,265 4,210,132 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (11) Computation of Earnings Per Share (12) Computation of Ratio of Earnings to Fixed Charges for the three-month period ending March 31, 1995. (27) Financial Data Schedule for the three-month period ending March 31, 1995 (b) Reports on Form 8-K A report on Form 8-K dated February 17, 1995 announced the date, time and place of its 1995 Annual Meeting of Stockholders. A report on Form 8-K dated March 24, 1995 announced that Registrant has entered into a Dealer Agreement dated December 9, 1994 among Registrant and various dealers named therein. Copies of related documents were included in such filing. A report on Form 8-K dated May 1, 1995 announced the Corporation's repurchase program for up to 7,600,000 shares of Common Stock. Copies of related documents were included in such filing. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FIRST INTERSTATE BANCORP REGISTRANT DATE: MAY 12, 1995 By /s/ William S. Randall ------------------------ William S. Randall President (Principal Financial Officer) DATE: MAY 12, 1995 By /s/ David S. Belles ------------------------ David S. Belles Executive Vice President and Controller (Principal Accounting Officer) EX-11 2 FIRST INTERSTATE BANCORP COMPUTATION OF EARNINGS PER SHARE (dollars in millions except for per share amounts) Three Months Ended ------------------------------- March 31 December 31 March 31 1995 1994 1994 -------- ----------- -------- Net income applicable to common stock Net income $ 212.0 $ 211.3 $ 184.1 Less dividends on preferred stock 8.3 8.3 8.3 -------- -------- -------- Net income, as adjusted, for calculation of primary and fully diluted earnings per share $ 203.7 $ 203.0 $ 175.8 ======== ======== ======== Weighted average number of shares (in thousands) Weighted average number of shares outstanding 75,041 75,201 78,024 Dilutive effect of outstanding stock options (as determined by application of the treasury stock method) 1,403 1,436 1,444 Stock units under Management Incentive Plan 20 19 17 -------- -------- -------- Weighted average number of shares, as adjusted, for calculation of primary earnings per share 76,464 76,656 79,485 Additional dilutive effect of outstanding stock options 70 -- 204 -------- -------- -------- Weighted average number of shares, as adjusted, for calculation of fully diluted earnings per share 76,534 76,656 79,689 ======== ======== ======== Primary and fully diluted earnings per share (1) Net income $ 2.66 $ 2.65 $ 2.21 ======== ======== ======== (1) Fully diluted earnings per share are considered equal to primary earnings per share because the addition of potentially dilutive securities which are not common stock equivalents resulted in dilution of less than three percent. EX-12 3 FIRST INTERSTATE BANCORP COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (in millions) Three Months Ended March 31, 1995 ------------------ A. First Interstate Bancorp and Subsidiaries (Consolidated): Earnings: 1.Income before income taxes $ 348 2.Plus interest expense (a) 303 --------- 3.Earnings including interest on deposits 651 4.Less interest on deposits 225 --------- 5.Earnings excluding interest on deposits $ 426 ========= Fixed Charges: 6.Including interest on deposits (Line 2) $ 303 7.Less interest on deposits (Line 4) 225 --------- 8.Excluding interest on deposits $ 78 ========= Ratio of Earnings to Fixed Charges: Including interest on deposits (Line 3 divided by Line 6) 2.15 ========= Excluding interest on deposits (Line 5 divided by Line 8) 5.48 ========= B. First Interstate Bancorp (Parent Corporation): Earnings: 9. Income before income taxes and equity in undistributed income of subsidiaries $ 113 10. Plus interest expense (a) 28 --------- 11. Earnings including interest expense $ 141 ========= Fixed Charges: 12. Interest expense (Line 10) $ 28 ========= Ratio of Earnings to Fixed Charges: (Line 11 divided by Line 12) 5.10 ========= (a) Includes amounts representing the estimated interest component of net rental payments. EX-27 4
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FIRST INTERSTATE BANCORP FINANCIAL STATEMENTS AND NOTES THERETO AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1995 MAR-31-1995 6,230 27 265 52 127 12,204 11,959 35,096 921 56,956 48,364 2,361 1,037 1,470 169 0 350 3,174 56,956 731 184 7 922 225 290 632 0 1 552 348 212 0 0 212 2.66 2.66 5.31 188 52 0 0 934 78 41 921 394 0 527
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