0000105982-95-000057.txt : 19950815 0000105982-95-000057.hdr.sgml : 19950815 ACCESSION NUMBER: 0000105982-95-000057 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 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: 95562751 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 June 30, 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 July 31, 1995 Common stock, $2 par value 75,985,361 shares
CONSOLIDATED BALANCE SHEET First Interstate Bancorp ---------------------------------------------------------------------------------------------------------------- 1995 1994 ------------------ ------------------------------------ (dollar amounts in millions) June 30 March 31 December 31 September 30 June 30 ---------------------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks $ 5,898 $ 6,230 $ 6,070 $ 6,240 $ 4,859 Time deposits, due from banks 27 27 26 57 237 Federal funds sold and securities purchased under agreements to resell 268 265 179 603 559 Trading account securities 114 52 64 64 52 Investment Securities: Held-to-maturity securities 10,802 12,204 13,695 14,625 16,373 Available-for-sale securities 107 127 156 119 342 ------- ------- ------- ------- ------- Total Investment Securities 10,909 12,331 13,851 14,744 16,715 Loans (net) 35,904 35,096 33,222 30,331 28,746 Less: Allowance for credit losses 878 921 934 952 972 ------- ------- ------- ------- ------- Net Loans 35,026 34,175 32,288 29,379 27,774 Bank premises and equipment 1,237 1,199 1,147 1,081 1,078 Customers' liability for acceptances 57 31 35 29 36 Other assets 2,416 2,646 2,153 2,010 1,993 ------- ------- ------- ------- ------- Total Assets $55,952 $56,956 $55,813 $54,207 $53,303 ======= ======= ======= ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest bearing $16,981 $16,644 $16,599 $17,659 $15,951 Interest bearing 31,474 31,720 31,828 30,396 30,905 ------- ------- ------- ------- ------- Total Deposits 48,455 48,364 48,427 48,055 46,856 Short term borrowings 1,328 2,361 1,574 405 409 Acceptances outstanding 57 31 35 29 36 Accounts payable and accrued liabilities 797 1,037 953 907 815 Long term debt 1,446 1,470 1,388 1,261 1,391 ------- ------- ------- ------- ------- Total Liabilities 52,083 53,263 52,377 50,657 49,507 Shareholders' equity: Preferred Stock 350 350 350 350 350 Common Stock, par value $2 a share: (in thousands) Authorized: 250,000 shares; Issued: 84,286 shares 169 169 168 169 169 Capital surplus 1,671 1,683 1,692 1,683 1,683 Retained earnings 2,268 2,113 1,967 1,821 1,760 Unrealized gain on available-for-sale securities, net of tax - 1 1 - - ------- ------- ------- ------- ------- 4,458 4,316 4,178 4,023 3,962 Less Common Stock in treasury, at cost: (in thousands) June 30, 1995 - 8,000 shares March 31, 1995 - 8,452 shares December 31, 1994 - 10,082 shares September 30, 1994 - 6,687 shares June 30, 1994 - 2,801 shares 589 623 742 473 166 ------- ------- ------- ------- ------- Total Shareholders' Equity 3,869 3,693 3,436 3,550 3,796 ------- ------- ------- ------- ------- Total Liabilities and Shareholders' Equity $55,952 $56,956 $55,813 $54,207 $53,303 ======= ======= ======= ======= ======= ---------------------------------------------------------------------------------------------------------------- See notes to consolidated financial statements
CONSOLIDATED STATEMENT OF OPERATIONS First Interstate Bancorp ----------------------------------------------------------------------------------------------------------------------------------- 1995 1994 Six Months Ended ----------------- --------------------------- June 30 Second First Fourth Third Second -------------------- (dollar amounts in millions, except per share data) Quarter Quarter Quarter Quarter Quarter 1995 1994 ----------------------------------------------------------------------------------------------------------------------------------- INTEREST INCOME Loans, including fees $779.9 $730.5 $662.4 $591.4 $551.2 $1,510.4 $1,049.9 Trading account 1.7 1.6 1.6 1.0 1.1 3.3 2.4 Investment Securities: Held-to-maturity securities 157.0 177.4 192.7 209.4 221.0 334.4 428.9 Available-for-sale securities 2.3 5.1 0.9 2.8 4.5 7.4 9.6 Other interest income 4.1 6.9 4.7 7.3 10.9 11.0 27.1 ------ ------ ------ ------ ------ -------- -------- Total Interest Income 945.0 921.5 862.3 811.9 788.7 1,866.5 1,517.9 INTEREST EXPENSE Deposits 244.7 225.2 205.7 182.6 172.8 469.9 336.7 Short term borrowings 27.7 35.2 14.8 6.8 9.2 62.9 12.6 Long term debt 31.2 29.4 25.2 26.1 26.5 60.6 55.0 ------ ------ ------ ------ ------ -------- -------- Total Interest Expense 303.6 289.8 245.7 215.5 208.5 593.4 404.3 ------ ------ ------ ------ ------ -------- -------- NET INTEREST INCOME 641.4 631.7 616.6 596.4 580.2 1,273.1 1,113.6 Provision for credit losses - - - - - - - ------ ------ ------ ------ ------ -------- -------- NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 641.4 631.7 616.6 596.4 580.2 1,273.1 1,113.6 NONINTEREST INCOME Service charges on deposit accounts 147.3 147.1 143.4 140.5 138.9 294.4 277.9 Trust fees 40.6 39.4 49.1 48.2 48.9 80.0 95.9 Other charges, commissions, and fees 37.4 34.0 32.5 32.6 34.2 71.4 66.9 Merchant credit card fees 13.7 12.3 10.6 10.8 9.3 26.0 18.3 Investment securities gains 3.6 0.5 14.1 4.1 2.1 4.1 2.9 Other income 31.8 35.1 12.6 44.8 21.1 66.9 49.1 ------ ------ ------ ------ ------ -------- -------- Total Noninterest Income 274.4 268.4 262.3 281.0 254.5 542.8 511.0 NONINTEREST EXPENSES Salaries and benefits 268.4 273.4 270.3 266.7 273.4 541.8 542.9 Net occupancy expenses 95.2 100.1 92.6 91.9 84.1 195.3 172.1 Communications 36.2 33.9 30.2 29.8 30.0 70.1 57.6 Outside contract fees 29.9 34.0 30.0 33.6 11.1 63.9 28.1 FDIC assessments 27.7 27.9 27.8 25.4 25.4 55.6 49.7 Amortization of intangibles 15.0 14.9 11.8 9.0 7.7 29.9 14.4 Office supplies 11.4 14.0 10.5 11.1 11.1 25.4 22.1 Advertising 15.8 10.1 14.6 12.0 9.7 25.9 20.2 Other real estate - - (6.1) (0.7) (5.6) - (5.6) Provision for restructuring 4.3 4.8 2.3 139.0 - 9.1 - Other expenses 50.0 38.6 54.2 50.0 52.0 88.6 90.3 ------ ------ ------ ------ ------ -------- -------- Total Noninterest Expenses 553.9 551.7 538.2 667.8 498.9 1,105.6 991.8 ------ ------ ------ ------ ------ -------- -------- INCOME BEFORE INCOME TAXES 361.9 348.4 340.7 209.6 335.8 710.3 632.8 Applicable income taxes 142.0 136.4 129.4 79.6 127.6 278.4 240.5 ------ ------ ------ ------ ------ -------- -------- NET INCOME $219.9 $212.0 $211.3 $130.0 $208.2 $ 431.9 $ 392.3 ====== ====== ====== ====== ====== ======== ======== Net income applicable to common stock $211.6 $203.7 $203.0 $121.6 $199.9 $ 415.3 $ 375.7 Average number of common shares outstanding (in thousands) 77,470 76,464 76,656 81,700 83,864 76,970 81,686 Per common share: Net income $ 2.73 $ 2.66 $ 2.65 $ 1.49 $ 2.38 $ 5.40 $ 4.60 Dividends paid $ 0.75 $ 0.75 $ 0.75 $ 0.75 $ 0.75 $ 1.50 $ 1.25 ----------------------------------------------------------------------------------------------------------------------------------- NOTE: Certain prior year balances have been reclassified to conform to current year classifications. See notes to consolidated financial statements
CONSOLIDATED STATEMENT OF CASH FLOWS First Interstate Bancorp ---------------------------------------------------------------------------------------------------- Six Months Ended ---------------------------- June 30 June 30 (dollar amounts in millions) 1995 1994 ---------------------------------------------------------------------------------------------------- Cash Flows from Operating Activities: Net Income $ 432 $ 392 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 95 71 Provision for credit losses - - Valuation adjustment on foreclosed property 2 (6) Provision for deferred income taxes 69 96 Decrease (increase) in trading account securities (50) 115 Decrease in interest receivable 13 100 Increase in interest payable 17 (11) Other, net (65) (463) -------- -------- Net Cash Provided by Operating Activities 513 294 Cash Flows from Investing Activities: Held-to-maturity securities Proceeds from maturities 3,000 3,180 Proceeds from sales - - Purchases (133) (2,217) Available-for-sale securities Proceeds from maturities 324 5,352 Proceeds from sales 386 65 Purchases (12) (5,439) Net loan originations (2,421) (2,374) Proceeds from sales of loans 1,342 1,420 Loans purchased (516) (697) Acquisition of subsidiaries (74) 293 Proceeds from sales of premises and equipment 49 16 Purchases of premises and equipment (166) (131) Proceeds from sales of other real estate 35 18 -------- -------- Net Cash Provided (Used) by Investing Activities 1,814 (514) Cash Flows from Financing Activities: Net decrease in deposits (1,980) (701) Deposits purchased 187 315 Net decrease in short term borrowings (584) (199) Proceeds from long term debt issued 100 0 Repayments of long term debt (43) (173) Cash dividends paid (131) (117) Proceeds from Common Stock issued 41 31 Reacquisition of Common Stock - (120) -------- -------- Net Cash Used by Financing Activities (2,409) (964) -------- -------- Net Decrease in Cash and Cash Equivalents (82) (1,184) Cash and cash equivalents at beginning of year 6,275 6,839 -------- -------- Cash and Cash Equivalents at end of period $6,193 $ 5,655 ======== ======== Additional Disclosures Loans transferred to OREO $ 22 $ 17 Loans originated to facilitate sale of OREO - 10 Interest paid 576 415 Income taxes paid 225 159 --------------------------------------------------------------------------------------------------- See notes to consolidated financial statements
STATEMENT OF SHAREHOLDERS' EQUITY First Interstate Bancorp Unrealized Net Gains on Common Stock Available- Preferred --------------------- Capital Retained for-sale Treasury (dollar amounts in millions) 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 432 432 Cash dividends Common Stock - $0.75 per share (114) (114) Preferred Stock (17) (17) Common Stock issued: Stock Option and Restricted Stock Plans 579 (16) 41 25 Dividend Reinvestment Plan 172 13 13 Management Incentive Plan 23 2 2 Levy Bancorp acquisition 1,308 (5) 97 92 Other adjustments 1 (1) - -------- ------ ------ -------- --------- -------- -------- -------- Balance at June 30, 1995 $ 350 76,286 $ 169 $ 1,671 $ 2,268 $ - $ (589) $ 3,869 ======== ====== ====== ======= ======== ======== ======== ======== ----------------------------------------------------------------------------------------------------------------------------------- See notes to consolidated financials
FIRST INTERSTATE BANCORP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The accompanying unaudited consolidated financial statements of First Interstate Bancorp are prepared in conformity with generally accepted accounting principles for interim financial information. In the opinion of management, all adjustments (all of which are of a normal recurring nature) necessary to present fairly the consolidated financial position and the results of operations for the periods presented have been included. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the First Interstate Bancorp Annual Report on Form 10-K for the year ended December 31, 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 --------- ------ ------ ---------- June 30, 1995 Held-to-maturity: U. S. Treasury and agencies $ 9,379 $ 33 $ 94 $ 9,318 State and political subdivisions 25 1 - 26 Other debt securities 1,398 5 21 1,382 -------- ----- ------ ---------- Total held-to-maturity $ 10,802 $ 39 $ 115 $ 10,726 ======== ===== ====== ========== Available-for-sale: U. S. Treasury and agencies $ 7 $ - $ - $ 7 Corporate and Federal Reserve Stock 100 - - 100 -------- ------ ------ ---------- Total available-for-sale $ 107 $ - $ - $ 107 ======== ====== ====== ========== 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 ======== ====== ====== ========== During 1994 and the six months ended June 30, 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 all amounts 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. The difference between the recorded value of the impaired loan and the fair value of the loan is defined as the impairment allowance. 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 impaired loans and the SFAS 114 impairment allowance related to impaired loans (in millions): June 30, 1995 ------------------------ SFAS 114 Recorded Impairment Investment Allowance ---------- --------- Impaired loans: Loans with impairment allowance Commercial, financial, and agricultural $ 32 $ 1 Real estate construction- - Commercial real estate mortgage 22 3 ------ ------- Total loans with impairment allowance 54 $ 4 ======= Loans without impairment allowance Commercial, financial, and agricultural 73 Real estate construction 7 Commercial real estate mortgage 41 ------ Total loans without impairment allowance 121 ------ Total impaired loans $ 175 ====== For the six months ending June 30, 1995, impaired loans averaged $167 million and the total interest income was $6.0 million, all of which was recognized on a cash basis. Interest payments received on impaired loans are recorded as interest income unless there is doubt as to the collectibility of the recorded investment. In those cases, cash received is recorded as a reduction of principal. 4. Transactions in the allowance for credit losses for were as follows (in millions): Quarter Ended Six Months Ended ----------------------------- ---------------- June 30 December 31 June 30 June 30 1995 1994 1994 1995 1994 Balance at beginning of period $ 921 $ 952 $1,011 $ 934 $1,001 Provision for credit losses - - - - - Other changes - acquisitions - 20 8 23 44 ----- ----- ------ ----- ------ 921 972 1,019 957 1,045 Deduct: Loans charged-off 74 66 75 152 135 Less recoveries on loans previously charged-off 31 28 28 73 62 ----- ----- ------ ----- ------ Net loans charged-off 43 38 47 79 73 ----- ----- ------ ----- ------ Balance at end of period $ 878 $ 934 $ 972 $ 878 $ 972 ===== ===== ====== ===== ====== 5. Other assets identified as being held for sale are valued at the lower of cost or market and totaled $83 million at June 30, 1995, compared to $26 million at December 31, 1994. These balances primarily represent residential and commercial mortgage loans held for sale and are included in other assets on the Consolidated Balance Sheet. 6. At June 30, 1995 and December 31, 1994, 15,000,000 shares of Preferred Stock (no par value) were authorized. At June 30, 1995 and December 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 June 30, 1995 and December 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 anytime 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 June 30, 1995, the cost of Common Stock in the treasury averaged $73.69 per share compared to an average of $73.64 at December 31, 1994. 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. During July 1995, the Corporation commenced its program by repurchasing 374,600 shares. 7. During the first six 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 Federal Deposit Insurance Corporation assisted cash transaction resulting in the acquisition of $187 million of deposits and $78 million of loans from First Trust Bank. The Corporation paid a premium of $16 million for these deposits and loans. On July 12, 1995, the Corporation, through its subsidiary in Texas, completed the acquisition of Tomball National Bancshares, Inc. and its principal subsidiary, Texas National Bank, in a cash transaction. As of June 30, 1995 Texas National Bank had $95 million in assets and $81 million in deposits. The acquisition was accounted for as a purchase. 8. 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 SECOND QUARTER RESULTS: The Corporation recorded net income for the second quarter of 1995 of $219.9 million ($2.73 per share). This includes the effect of $4.3 million of restructuring charges ($2.7 million after taxes, or $0.04 per share). Net income of $208.2 million in the 1994 second quarter included an after-tax benefit from the recognition of a nonrecurring item of $13.2 million ($0.16 per share). Before the effect of restructuring charges in the current quarter and the nonrecurring item in the 1994 second quarter, income after taxes in the 1995 second quarter amounted to $222.6 million ($2.77 per share), an increase of 14.2% from $195.0 million ($2.22 per share) in the 1994 second quarter. Taxable-equivalent net interest income was $647.5 million in the second quarter of 1995, an increase of 10.5% from a year earlier. This increase resulted from expansion of the net interest margin, up 35 basis points to 5.45%, as well as from earning asset growth, up $1.6 billion (3.4%) to an average of $47.5 billion. The higher level of average earning assets in the second quarter of 1995 reflects loan growth of $7.8 billion (28.0%), partially offset by a decline in investment securities of $5.5 billion (32.1%). The net interest margin in the 1995 second quarter was 14 basis points above the first quarter margin of 5.31%, reflecting favorable repricing trends, a shift to loans from lower yielding investment securities, and collections of interest on nonaccrual loans. Further declines in short term interest rates should lead to moderate declines in the Corporation's net interest margin. Average loans and leases increased $7.8 billion (28.0%) from the 1994 second quarter and $942 million (2.7%) from the first quarter to $35.5 billion in the 1995 second quarter. Instalment loans averaged $12.5 billion in the second quarter of 1995, up $893 million (7.7%) from a year earlier and up slightly from the first quarter of 1995. Average commercial loans outstanding were up $1.7 billion (20.5%) from a year earlier and up $251 million (2.6%) from the 1995 first quarter to an average of $9.8 billion. Residential real estate mortgages averaged $6.7 billion, $3.3 billion (95.6%) above a year ago and up $212 million (3.3%) from the 1995 first quarter level. Commercial real estate mortgages averaged $4.8 billion, $1.2 billion (34.6%) above a year ago and $197 million (4.3%) above the 1995 first quarter. Average construction loans increased $312 million (38.6%) from the 1994 second quarter and $85 million (8.2%) from the first quarter to $1.1 billion in the 1995 period. These increases reflect, in part, acquisitions completed since June 1994. At June 30, 1995, loans and leases totaled $35.9 billion, up $7.2 billion (24.9%) from a year earlier and up $808 million (2.3%) from March 31, 1995. Instalment loans totaled $12.6 billion at June 30, 1995, an increase of $753 million (6.4%) from a year earlier and an increase of $179 million (1.4%) from March 31, 1995. At the same time, commercial loans were $10.1 billion, an increase of $1.6 billion (18.9%) from a year earlier and up $457 million (4.7%) from the end of the first quarter. Residential real estate mortgages totaled $6.6 billion, $2.9 billion (75.8%) above a year ago and $77 million (1.1%) below the March 31 level. Commercial real estate mortgages amounted to $4.8 billion at June 30, 1995, $1.3 billion (35.1%) above a year ago and $152 million (3.3%) above March 31, 1995. Construction loans were $1.1 billion at June 30, 1995, up $352 million (44.4%) from a year earlier and up $76 million (7.1%) from the end of the first quarter. As a result of maturities and paydowns, investment securities held to maturity declined $5.6 billion (34.0%) from a year earlier and declined $1.4 billion from March 31, 1995, to $10.8 billion at June 30, 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 continue. U.S. Treasury and agency-backed securities declined 35.9% from a year earlier to $9.4 billion at June 30, 1995. Of the current amount, $3.4 billion were U.S. Treasury securities and $6.0 billion were government agency securities. Of the $6.0 billion of government agency securities at June 30, 1995, the majority were backed by mortgages. All other investment securities amounted to $1.4 billion at the end of June 1995, down $320 million (18.5%) from a year earlier and down $93 million (6.2%) from March 31, 1995. Total deposits averaged $47.6 billion in the 1995 second quarter, up $1.3 billion (2.8%) from the 1994 second quarter and down slightly from the first quarter. Average deposits in consumer savings, time and net transaction accounts increased $554 million (1.4%) from the 1994 second quarter to an average of $40.7 billion in the 1995 second quarter. Such deposits declined $467 million (1.1%) from $41.2 billion in the 1995 first quarter, reflecting general industry trends. The Corporation's CDs over $100,000 increased $499 million (52.6%) from the 1994 second quarter and increased $49 million (3.5%) from the 1995 first quarter to an average of $1.4 billion. At the same time, short term borrowings, primarily federal funds purchased, averaged $1.8 billion, up $1.1 billion from the 1994 second quarter and down $633 million from the 1995 first quarter. The higher levels of maturing securities supported loan growth and a reduction in short term borrowings in the 1995 second 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 $42.6 million (0.48% of average loans) in the second quarter of 1995, compared to $46.8 million (0.68%) reported for the comparable 1994 quarter. The Corporation continued to experience a strong level of recoveries on prior period chargeoffs. Noninterest income totaled $274.4 million in the second quarter of 1995, an increase of $19.9 million (7.8%) from the 1994 second quarter level. Service charges on deposit accounts rose $8.4 million (6.0%) from the 1994 level to $147.3 million, while trust fees declined $8.3 million (17.0%) to $40.6 million. 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 $553.9 million in the 1995 second quarter, including $4.3 million of restructuring charges, as previously noted. Such expenses were essentially flat from the 1995 first quarter, which totaled $551.7 million. Noninterest expenses before the effect of these charges and including the effect of completed acquisitions were $549.6 million, an increase of $50.7 million (10.2%) from the comparable 1994 quarter. Noninterest expenses in the second quarter of 1994 benefited from the reversal of $21.3 million of data processing reserves. In addition, due to acquisitions completed since June 1994, expenses arising from the amortization of goodwill and other intangibles increased $7.3 million from the year earlier quarter to a total of $15.0 million in the 1995 second quarter. The remainder of the increase in noninterest expenses from the 1994 second quarter was attributable to higher occupancy and advertising expenses, up $11.1 million and $6.1 million, respectively, including the effect of acquisitions completed since June 1994. 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 59.6% in the 1995 second quarter, 60.4% in the 1995 first quarter, and 60.0% in the 1994 second quarter. The efficiency ratio in the 1994 second quarter includes the favorable effect of the $21.3 million expense reversal noted above. In the second quarter of 1995, the Corporation recorded income tax expense of $142.0 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. COMPARISON OF SIX MONTHS RESULTS: The Corporation recorded net income for the first half of 1995 of $431.9 million, or $5.40 per share. This includes the effect of $9.1 million of restructuring charges ($5.5 million after taxes, or $0.07 per share) and represents an increase in earnings per share of 17.4% from the first half of 1994. Net income of $392.3 million ($4.60 per share) in the 1994 first half included a benefit from the recognition of nonrecurring items of $45 million ($27.9 million after taxes, or $0.34 per share). Before the effect of restructuring charges in 1995 and nonrecurring items in 1994, income after taxes in the first half of 1995 amounted to $437.4 million ($5.47 per share), an increase of 20.0% from $364.4 million ($4.25 per share) in the first half of 1994. Taxable-equivalent net interest income was $1,285.0 million in the 1995 first half, up 14.3% from a year earlier. This increase resulted from an increase in the net interest margin to 5.39% from 5.03% in the 1994 period, together with average earning asset growth of $3.0 billion (6.7%). Average loans increased $8.3 billion (31.1%) from the first half of 1994 to $35.0 billion in the 1995 period. Instalment loans averaged $12.4 billion in the first half of 1995, up $1.2 billion (10.3%) from the year earlier. Residential real estate mortgages averaged $6.6 billion, $3.4 billion above the 1994 first half. Commercial real estate mortgages averaged $4.7 billion, $1.2 billion (35.9%) above a year ago. Average commercial loans were up $1.8 billion (23.4%) from the first half of 1994 to $9.7 billion in the first half of 1995. Average construction loans increased $306 million (39.6%) from the first half of 1994 to $1.1 billion. These increases reflect, in part, acquisitions completed in 1994 and early 1995. At June 30, 1995, total loans were $35.9 billion, an increase of $2.7 billion (8.1%) from $33.2 billion reported at yearend 1994. During the remainder of 1995 loan volume is expected to increase moderately. Total deposits averaged $47.8 billion in the first half of 1995, up $2.4 billion (5.2%) from the comparable 1994 period. Consumer savings, time and net transaction accounts increased $1.6 billion (4.1%) from the first half of 1994 to an average of $41.0 billion in the first half of 1995. The Corporation's CDs over $100,000 increased $471 million (49.5%) from the year earlier. At the same time, short term borrowings, primarily federal funds purchased, averaged $2.1 billion, up $1.6 billion. The higher level of short term borrowings, together with maturing securities and deposits, supported loan growth in the first half of 1995. No provision for credit losses for the consolidated Corporation has been recorded since the fourth quarter of 1993. Loans charged off, net of recoveries, were $79.8 million (0.46% of average loans) for the current year to date, compared to $72.4 million (0.55%) in the 1994 period. Noninterest income totaled $542.8 million for the first six months of 1995, an increase of $31.8 million (6.2%) from a year earlier. Service charges on deposit accounts increased $16.5 million (5.9%) from the 1994 period to $294.4 million and trust fees declined $15.9 million (16.6%) to $80.0 million. The decline in trust fees reflects the previously announced disposition of Denver Investment Advisors, a subsidiary of First Interstate Bank of Denver. Noninterest expenses totaled $1,105.6 million for the first six months of 1995, including $9.1 million of restructuring charges, as previously noted. Noninterest expenses before the effect of these charges and including the effect of completed acquisitions were $1,096.5 million in the current year, an increase of $104.7 million (10.6%) from the first half of 1994. Approximately $23.2 million of the increase reflects higher occupancy and equipment expenses, while $15.5 million of the increase represents higher charges resulting from the amortization of intangibles. In addition, noninterest expenses in the first half of 1994 benefited from the reversal of $34.5 million of expense reserves, as well as an ORE net benefit of $5.6 million. For the first half of 1995, the Corporation recorded income tax expense of $278.4 million, resulting in an effective income tax rate of 39.2%, versus 38.0% in the comparable 1994 period. 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 second quarter of 1995, core deposits represented 86% of average earning assets, compared to 87% in the second quarter of 1994 and 85% in the first quarter of 1995. At the same time, average corporate purchased funds increased $1.6 billion from the 1994 second quarter to $4.7 billion, but declined $511 million from the 1995 first quarter level. Average short term borrowings rose $1.1 billion from the second quarter of 1994 but declined $633 million from the 1995 first quarter level. Cash and cash equivalents were virtually unchanged from December 31, 1994. Net cash provided by investing activities during the first six months of 1995 totaled $1,814 million. Maturities of investment securities in the held-to-maturity portfolio, net of purchases, provided cash of $2,867 million. Maturities and sales of investment securities in the available-for-sale portfolio, net of purchases, provided $698 million. Loan originations, net of repayments, used cash of $2,421 million. Proceeds from sales of loans provided $1,342 million while purchases of loans used $516 million. Net cash used by financing activities totaled $2,409 million during the first six 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, experienced a net decrease of $1,980 million. The Corporation also reported a net increase of $584 in short term borrowings. The Corporation continues to have no commercial paper outstanding. Proceeds from the issuance of long term debt provided $100 million while repayments required cash of $42 million. Issuance of common stock provided cash of $41 million while dividends paid totaled $131 million. Cash provided by operations during the first six months of 1995 totaled $513 million. Net income totaled $432 million and noncash adjustments to reconcile net income totaled $166 million. Net changes in other assets and other liabilities decreased cash from operations by $85 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 six months of 1995, the subsidiary banks paid a total of $273 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. As of July 1, 1995, approximately $333 million were free of dividend restrictions under such statutory limitations. In addition, federal statutes limit the ability of the subsidiary banks to make loans to the Parent Corporation. At June 30, 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 $240 million at June 30, 1995. This compares to $219 million at yearend 1994. At current rates, interest on long term debt and preferred stock dividend requirements from July 1, 1995 through yearend 1995 total $74 million. In addition, from July 1, 1995 through yearend 1995, $90 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 stock. The Parent Corporation has access to regional, national and international capital and money markets, through its $2.3 billion shelf registration on file with the Securities and Exchange Commission. RISK ELEMENTS: Nonperforming Assets - At June 30, 1995, nonperforming assets totaled $249 million, down $50 million (16.7%) from the year ago level of $299 million, and down $13 million from $262 million reported at March 31, 1995. The current level of nonperforming assets represents 0.45% of total assets, versus 0.56% and 0.46% of total assets a year earlier and at March 31, 1995, respectively. Nonperforming loans totaled $180 million at June 30, 1995, down 21.1% from $228 million reported a year earlier, and down $8 million from $188 million at March 31, 1995. ORE totaled $69 million at June 30, 1995, versus $71 million a year ago and $74 million at March 31, 1995. The following table is a reconciliation of nonperforming asset activity for the quarter and six months ended June 30, 1995: Second Quarter 1995 Six Months Ended June30, 1995 --------------------------- ----------------------------- Nonperforming Nonperforming Loans ORE Total Loans ORE Total ------ ----- ----- ----- ----- ----- Beginning balance $ 188 $ 74 $ 262 $ 186 $ 72 $ 258 In-migration (1) 108 - 108 221 - 221 Return to accrual (15) - (15) (18) - (18) Valuation adjustment - 2 2 - 2 2 Payments and sales (69) (18) (87) (160) (38) (198) Net chargeoffs and writedowns (20) (1) (21) (40) (3) (43) Transfers within (12) 12 - (22) 22 - Acquisitions - - - 13 14 27 ------- ----- ----- ------ ------ ------ Ending balance $ 180 $ 69 $ 249 $ 180 $ 69 $ 249 ======= ===== ====== ====== ====== ====== (1) Includes disbursements on loans previously reported as nonperforming. In addition to credit assets classified as nonperforming, the Corporation reported accruing loans that were past due 90 days or more of $72 million at June 30, 1995, versus $66 million a year earlier and $52 million at March 31, 1995. The current level of past due loans represents 0.13% of total assets. Allowance for Credit Losses - At June 30, 1995, the allowance for credit losses totaled $878 million, or 2.45% of total loans. This compares to an allowance of $972 million, or 3.38% of loans, a year ago and $921 million, or 2.62% of loans, at March 31, 1995. 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 twelve quarters, the Corporation has provided less than net chargeoffs, with the credit provision over the past six 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 for risk management purposes. The Corporation does not engage in any trading or speculative derivative activities. At June 30, 1995, the notional value of derivatives outstanding was $6.4 billion, including $5.1 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 $5.1 billion in which the Corporation is an intermediary, $3.8 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 June 30, 1995, total shareholders' equity represented 6.92% of total assets, versus 7.12% a year earlier and 6.48% at March 31, 1995. On the same dates, common equity equaled 6.29%, 6.47% and 5.87% of total assets, respectively. The Corporation's various capital ratios include the effects of the common stock repurchase programs and completed acquisitions. The tangible common equity ratio was 5.01% at June 30, 1995, compared to 5.86% a year earlier and 4.56% at March 31, 1995. The regulatory leverage ratio was at 5.67% at June 30, 1995, versus 6.54% a year ago and 5.24% at March 31, 1995. The Corporation's Tier 1 and Total Capital ratios at June 30, 1995, were 7.22% and 10.22%, respectively. On April 18, 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 May 31, 1995, to shareholders of record on May 8, 1995. On May 1, 1995, the Preferred Stock Committee of the Board of Directors declared dividends on the Corporation's outstanding preferred stock. During the first half of 1995, the Corporation recorded common stock dividends of $114.6 million and preferred stock dividends of $16.6 million. On July 18, 1995, the Corporation's Board of Directors increased the quarterly cash dividend on the Corporation's $2 par value Common Stock to $0.80 per share, payable on August 31, 1995 to shareholders of record on August 7, 1995. On April 28, 1995, the Board of Directors authorized the repurchase of up to 7.6 million shares of issued and outstanding common stock, representing approximately 10% of the total number of shares outstanding. The first 2.5 million shares purchased under the program will be used for reissuance through various employee benefit and stock option plans and through the Stock Purchase and Dividend Reinvestment Plan. The purchases will be made from time to time over the next two years in the open market or through privately negotiated transactions. The Corporation commenced such purchases in July 1995, repurchasing 374,600 shares. The timing and extent of purchases will depend on market conditions and will be subject to appropriate regulatory and acquisition accounting requirements. Total intangibles amounted to $753 million at June 30, 1995, versus $343 million a year earlier and $785 million at March 31, 1995. The higher current level reflects the completion of seven acquisitions after June 30, 1994. As a result, goodwill increased to $708 million at June 30, 1995, from $302 million a year earlier. The common shares used in the calculation of 1995 second quarter and first half results per share were 77,469,817 and 76,969,718, respectively. During the first quarter, 1.3 million of the Corporation's treasury shares were issued 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 Ongoing - - - 9.1 9.1 Utilization for the period Cash - 8.6 1.9 11.1 21.6 Noncash - - - - - ------- -------- ---------- ----- ----- Total - 8.6 1.9 11.1 21.6 ------- -------- ---------- ----- ----- Balance at June 30, 1995 $ - $ 26.7 $ 6.3 $ - $33.0 ======= ======== ========== ===== ===== 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 $14.6 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 July 12, 1995, First Interstate Bank of Texas, N.A. completed the acquisition of Tomball National Bancshares and its principal subsidiary, Texas National Bank, for $7.7 million in cash. At June 30, 1995, Texas National Bank reported assets of $95 million and deposits of $81 million. RECENT DEVELOPMENTS: On May 1, 1995, the Board of Directors announced that Chief Executive Officer William E. B. Siart was additionally elected Chairman, succeeding retiring Chairman, Edward M. Carson. In addition, William S. Randall was named President, succeeding Mr. Siart; and Bruce G. Willison, California Region CEO, was named to the additional post of Vice Chairman. On August 8, 1995, the Federal Deposit Insurance Corporation voted to reduce the annual deposit insurance premium rates for deposits of well capitalized institutions insured by the Bank Insurance Fund (BIF), which represents approximately 91% of the Corporation's deposits, from $0.23 to $0.04 per $100 of deposits. The exact date on which the new assessment rates would apply is still undecided, but they are likely to be applied from a date in the second quarter of 1995. Any overpayment for the second and third quarters of 1995 resulting from the retroactive application of the new rates will be refunded to the BIF-insured institutions no earlier than September 1995. The Corporation will benefit from this reduction in the premium rate. Deposits insured by the Savings Association Insurance Fund (SAIF), which represents approximately 9% of the Corporation's deposits will continue to be assessed at the rate of $0.23 per $100 of deposits. However, federal banking regulators have proposed making a one-time assessment on SAIF deposits to recapitalize the SAIF. The impact to the Corporation of such an assessment is not quantifiable at the present time.
AVERAGE BALANCES, INTEREST, AND AVERAGE RATES First Interstate Bancorp ---------------------------------------------------------------------------------------------------------------------------------- Second Quarter Ended June 30 1995 1994 ---------------------------- ---------------------------- Balance Interest Rate Balance Interest Rate -------------------------------------------------------------- (dollar amounts in millions; interest and average rates on a taxable-equivalent basis) Earning Assets Loans 1 : Commercial, financial and agricultural $ 9,810 $ 208 8.49% $ 8,141 $ 135 6.56% Real estate construction 1,120 27 9.74 808 19 9.19 Real estate mortgage 11,480 232 8.12 6,927 129 7.41 Instalment 12,474 304 9.78 11,581 267 9.19 Other loans and leases 611 12 7.82 267 5 6.39 ------- -------- ------- -------- Total Loans 35,495 783 8.85 27,724 555 8.01 Trading account securities 130 2 5.23 105 1 4.60 Investment Securities: Held-to-maturity securities 11,478 160 5.54 16,667 222 5.32 Available-for-sale securities 117 2 5.70 399 5 4.56 ------- -------- ------- -------- Total Investment Securities 11,595 162 5.54 17,066 227 5.30 Federal funds, repurchases 208 2 5.94 519 5 3.95 Time deposits, due from banks 27 1 7.25 441 4 3.58 Other assets held for sale 60 1 3.90 96 2 7.23 ------- -------- ------- -------- Total Earning Assets 47,515 951 8.01 45,951 794 6.92 Interest Bearing Liabilities: Regular savings 5,767 31 2.17 5,901 30 2.03 NOW accounts and demand - market interest 6,531 22 1.37 6,693 20 1.21 Savings - market interest 10,233 79 3.08 11,604 65 2.25 Other savings and time under $100,000 7,633 95 4.97 5,749 50 3.51 ------- -------- ------- -------- Total Interest Bearing Consumer Funds 30,164 227 3.01 29,947 165 2.22 Large CDs, other money market funds 1,447 18 4.99 948 8 3.03 Short term borrowings 1,834 28 5.98 690 9 5.33 Long term debt 1,464 31 8.52 1,443 26 7.35 ------- -------- ------- -------- Total Corporate Purchased Funds 4,745 77 6.46 3,081 43 5.57 ------- ------- Total Interest Bearing LIabilities 34,909 304 3.48 33,028 208 2.53 Net Interest Income and Gross Spread $ 647 4.53% $ 586 4.39% Noninterest Liabilities, Equity and Assets Demand and noninterest bearing time deposits 16,017 15,447 Other liabilites 1,015 1,016 Preferred equity capital 350 350 Common equity capital 3,422 3,432 ------- ------- Total Noninterest Liabilities and Equity 20,804 20,245 Cash and due from banks 5,457 5,224 Allowance for credit losses (908) (1,002) Bank premises and equipment 1,231 1,070 Other assets 2,418 2,030 ------- ------- Total Noninterest Assets 8,198 7,322 Net Noninterest Sources 12,606 12,923 Total Assets $55,713 $53,273 Interest income as a percentage of average earning assets 8.01% 6.92% Interest expense as a percentage of average earning assets 2.56 1.82 ----- ----- 5.45% 5.10% ===== ===== ---------------------------------------------------------------------------------------------------------------------------------- 1 Net of unearned income and deferred fees. Loans include nonaccrual and renegotiated loans.
AVERAGE BALANCES, INTEREST, AND AVERAGE RATES First Interstate Bancorp ---------------------------------------------------------------------------------------------------------------------------------- Six Months Ended June 30 1995 1994 ---------------------------- ---------------------------- Balance Interest Rate Balance Interest Rate -------------------------------------------------------------- (dollar amounts in millions; interest and average rates on a taxable-equivalent basis) Earning Assets Loans 1 : Commercial, financial and agricultural $ 9,685 $ 401 8.31% $ 7,847 $ 249 6.34% Real estate construction 1,078 55 10.23 772 33 7.98 Real estate mortgage 11,276 450 8.00 6,599 245 7.44 Instalment 12,421 593 9.63 11,259 520 9.23 Other loans and leases 567 21 7.46 244 8 6.58 ------- -------- ------- -------- Total Loans 35,027 1,520 8.72 26,721 1,055 7.95 Trading account securities 121 3 5.60 114 2 4.44 Investment Securities: Held-to-maturity securities 12,222 337 5.54 16,232 435 5.33 Available-for-sale securities 215 7 6.24 451 10 4.28 ------- -------- ------- -------- Total Investment Securities 12,437 344 5.55 16,683 445 5.30 Federal funds, repurchases 221 7 5.85 662 12 3.57 Time deposits, due from banks 37 1 6.58 630 10 3.48 Other assets held for sale 107 3 6.28 118 5 7.15 ------- -------- ------- -------- Total Earning Assets 47,950 1,878 7.88 44,928 1,529 6.84 Interest Bearing Liabilities: Regular savings 5,890 64 2.20 5,754 58 2.04 NOW accounts and demand - market interest 6,641 44 1.35 6,565 40 1.23 Savings - market interest 10,556 156 2.98 11,319 124 2.20 Other savings and time under $100,000 7,358 171 4.69 5,651 100 3.55 ------- -------- ------- -------- Total Interest Bearing Consumer Funds 30,445 435 2.89 29,289 322 2.27 Large CDs, other money market funds 1,423 34 4.76 952 14 2.95 Short term borrowings 2,149 63 5.82 506 13 5.00 Long term debt 1,428 61 8.49 1,488 55 7.39 ------- -------- ------- -------- Total Corporate Purchased Funds 5,000 158 6.28 2,946 82 5.58 ------- ------- Total Interest Bearing LIabilities 35,445 593 3.37 32,235 404 2.57 Net Interest Income and Gross Spread $ 1,285 4.51% $ 1,125 4.27% Noninterest Liabilities, Equity and Assets Demand and noninterest bearing time deposits 15,933 15,205 Other liabilites 1,009 1,000 Preferred equity capital 350 350 Common equity capital 3,313 3,347 ------- ------- Total Noninterest Liabilities and Equity 20,605 19,902 Cash and due from banks 5,422 5,165 Allowance for credit losses (925) (1,000) Bank premises and equipment 1,215 1,025 Other assets 2,388 2,019 ------- ------- Total Noninterest Assets 8,100 7,209 Net Noninterest Sources 12,505 12,693 Total Assets $56,050 $52,137 Interest income as a percentage of average earning assets 7.88% 6.84% Interest expense as a percentage of average earning assets 2.49 1.81 ----- ----- 5.39% 5.03% ===== ===== ---------------------------------------------------------------------------------------------------------------------------------- 1 Net of unearned income and deferred fees. Loans include nonaccrual and renegotiated loans.
PART II. OTHER INFORMATION 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 six-month period ending June 30, 1995. (27) Financial Data Schedule for the three-month and six-month period ending June 30, 1995 (b) Reports on Form 8-K A report on Form 8-K dated February 17, 1995 announced the date, time and place of the Corporation's 1995 Annual Meeting of Stockholders. A report on Form 8-K dated March 25, 1995 announced that the Corporation has entered into a Dealer Agreement dated December 9, 1994 among the Corporation 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. A report on Form 8-K/A dated May 26, 1995 announced the Corporation's amendment to Item 7(c), Financial Statements, Pro Forma Financial Information and Exhibits, of its Form 8-K dated March 25, 1995. 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: AUGUST 11, 1995 By /s/ William S. Randall ---------------------- William S.Randall President (Principal Financial Officer) DATE: AUGUST 11, 1995 By /s/ David S. Belles ---------------------- David S. Belles Executive Vice President and Controller (Principal Accounting Officer) EX-11 2
EXHIBIT (11) COMPUTATION OF EARNINGS PER SHARE First Interstate Bancorp ----------------------------------------------------------------------------------------------------------------------------- Three Months Ended Six Months Ended June 30 June 30 ------------------------ ------------------------ (dollar amounts in millions, except per share amounts) 1995 1994 1995 1994 ----------------------------------------------------------------------------------------------------------------------------- Net income applicable to common stock Net income $ 219.9 $ 208.2 $ 431.9 $ 392.3 Less dividends on preferred stock 8.3 8.3 16.6 16.6 --------- --------- --------- --------- Net income, as adjusted, for calculation of primary and fully diluted earnings per share $ 211.6 $ 199.9 $ 415.3 $ 375.7 ========= ========= ========= ========= Weighted average number of shares (in thousands) Weighted average number of shares outstanding 76,094 82,144 75,570 80,096 Dilutive effect of outstanding stock options (as determined by application of the treasury stock method) 1,354 1,700 1,379 1,572 Stock units under Management Incentive Plan 22 20 21 18 --------- --------- --------- --------- Weighted average number of shares, as adjusted, for calculation of primary earnings per share 77,470 83,864 76,970 81,686 Additional dilutive effect of outstanding stock options 2 1 36 129 ---------- --------- --------- --------- Weighted average number of shares, as adjusted, for calculation of fully diluted earnings per share 77,472 83,865 77,006 81,815 ========= ========= ========= ========= Primary and fully diluted earnings per share 1 Net income $ 2.73 $ 2.38 $ 5.40 $ 4.60 ========= ========= ========= ========= ------------------------------------------------------------------------------------------------------------------------------ 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
EXHIBIT (12) COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES First Interstate Bancorp ----------------------------------------------------------------------------------------- Six Months Ended (dollar amounts in millions) June 30, 1995 ----------------------------------------------------------------------------------------- A. First Interstate Bancorp and Subsidiaries (Consolidated): Earnings: 1.Income before income taxes $ 710 2.Plus interest expense (a) 620 ------ 3.Earnings including interest on deposits 1,330 4.Less interest on deposits 470 ------ 5.Earnings excluding interest on deposits $ 860 ====== Fixed Charges: 6.Including interest on deposits (Line 2) $ 620 7.Less interest on deposits (Line 4) 470 ------ 8.Excluding interest on deposits $ 150 ====== 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) 5.73 ====== B. First Interstate Bancorp (Parent Corporation): Earnings: 9.Income before income taxes and equity in undistributed income of subsidiaries $ 183 10. Plus interest expense (a) 57 ------ 11. Earnings including interest expense $ 240 ====== Fixed Charges: 12. Interest expense (Line 10) $ 57 ======= Ratio of Earnings to Fixed Charges: (Line 11 divided by Line 12) 4.20 ======= ----------------------------------------------------------------------------------------- (a) Includes amounts representing the estimated interest component of net rental payments.
EX-27 4
9 THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FIRST INTERSTATE BANCORP FINANCIAL STATEMENTS AND NOTES THERETO AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 3-MOS 6-MOS DEC-31-1995 DEC-31-1995 APR-01-1995 JAN-01-1995 JUN-30-1995 JUN-30-1995 5,898 5,898 27 27 268 268 114 114 107 107 10,802 10,802 10,726 10,726 35,904 35,904 878 878 55,952 55,952 48,455 48,455 1,328 1,328 797 797 1,446 1,446 169 169 0 0 350 350 3,350 3,350 55,952 55,952 780 1,510 161 345 4 4 945 1,867 245 470 304 593 641 1,273 0 0 4 4 554 1,106 362 710 220 432 0 0 0 0 220 432 2.73 5.40 2.73 5.40 5.45 5.39 180 180 72 72 0 0 0 0 921 934 74 152 31 73 878 878 382 382 0 0 496 496