-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RwjZbuL21eU7VjuFdTs4naHg+wYfZHdi9BcdudK3gBHFf+JKZaRu9QCeH+E+h0pJ mc6RGI4i764VAaRk2XZwdA== 0000105982-96-000043.txt : 19960403 0000105982-96-000043.hdr.sgml : 19960403 ACCESSION NUMBER: 0000105982-96-000043 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960402 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-20657 FILM NUMBER: 96543854 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-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1995 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) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED Common Stock, $2 par value New York and Pacific Stock Exchanges Series F Preferred Stock New York Stock Exchange Series G Preferred Stock New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Senior Medium Term Notes, Series A Subordinated Medium Term Notes, Series C 10.5% Notes Due March 1, 1996 12.75% Subordinated Notes Due May 1, 1997 Floating Rate Subordinated Notes Due June 1997 11.0% Notes Due March 5, 1998 8.625% Subordinated Capital Notes Due April 1, 1999 9.125% Notes Due February 1, 2004 9.00% Notes Due November 15, 2004 8.15% Notes Due March 15, 2002 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ]. State the aggregate market value of the voting stock held by nonaffiliates of the registrant: CLASS MARKET VALUE AT FEBRUARY 29, 1996 Common Stock, $2 par value $12,503,562,047 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 FEBRUARY 29, 1996 Common stock, $2 par value 76,532,897 shares DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report to Stockholders for the year ended December 31, 1995 are incorporated by reference into Part II and IV. First Interstate Bancorp PART I ITEM 1. BUSINESS The Corporation was incorporated under the laws of the State of Delaware and began operations in 1958 under the name "Firstamerica Corporation". The name Western Bancorporation was adopted in 1961 and changed to First Interstate Bancorp in 1981. The Corporation is a bank holding company registered under the Bank Holding Company Act of 1956, as amended. At December 31, 1995, it owned directly and indirectly all of the shares of capital stock of 17 banks (the "Subsidiary Banks") which operated approximately 1,140 banking offices in 13 states. Ranked according to assets, the Corporation was the fifteenth largest commercial banking organization in the United States at December 31, 1995, having total deposits of $50.2 billion and total assets of $58.1 billion. During December 1995, the average number of full-time equivalent persons employed by the Corporation and its subsidiaries was 27,200. The Subsidiary Banks accept checking, savings and other time deposit accounts and employ these funds principally by making consumer, real estate and commercial loans and investing in securities and other interest bearing assets. All Subsidiary Banks are members of the Federal Deposit Insurance Corporation ("FDIC"), all but four exercise trust powers, and the thirteen national banks and one of the three state banks are members of the Federal Reserve System. The Corporation also provides banking-related financial services and products. These include asset-based commercial financing, asset management and investment counseling, bank card operations, mortgage banking, venture capital and investment products. It engages in these activities both through non-bank subsidiaries of the Corporation and through the Subsidiary Banks and their subsidiaries. The larger Subsidiary Banks provide international banking services on a limited basis through the international departments of their domestic offices and through a business development agreement with Standard Chartered PLC. They also maintain correspondent relationships with major banks throughout the world. International banking is subject to special risks such as fluctuating exchange rates, currency revaluations and the policies of foreign governments. United States governmental guarantees and insurance against political risks are sometimes available and are used in certain circumstances to minimize the impact of such factors. The Subsidiary Banks are responsible to the Corporation for achieving mutually agreed upon goals under the management of their own officers and directors. The Corporation retains a staff of specialists who provide assistance and advice to subsidiaries in the areas of investments, credit, accounting, personnel, business development, operations, asset and liability management, budgeting and planning, loan participations, protective controls and compliance with government regulations. Internal audits and reviews are performed to determine the adequacy of internal control systems, compliance with general corporate policy and consistency of accounting practices in accordance with the Corporation's accounting policies. The Corporation monitors the Subsidiary Banks' credit policy, procedures and administration by reviewing portfolio quality, balance and mix. During 1995, 1994 and 1993, the Corporation, through its subsidiaries, was party to thirteen business combinations with operating entities resulting in the acquisition of $9.0 billion in assets and $7.7 billion in deposits. In addition, during 1995, 1994 and 1993, the Corporation, through its subsidiaries, completed six cash transactions resulting in the acquisition of deposits totaling $187 million, $315 million and $443 million, respectively. The Corporation paid premiums of $8 million in 1995, $26 million in 1994 and $13 million in 1993 for these deposits, which were acquired from the Resolution Trust Corporation and the Federal Deposit Insurance Corporation. COMPETITION The commercial banking business is highly competitive. Subsidiary Banks compete with other commercial banks and with other financial and non-financial institutions, including savings and loan associations, finance companies, credit unions, money market mutual funds and credit card issuers. SUPERVISION AND REGULATION The Corporation, as a bank holding company, is subject to regulation under the Bank Holding Company Act of 1956, as amended ("BHCA") and is registered with the Federal Reserve Board under the BHCA. The acquisition of more than 5% of the voting shares of any bank (not already majority owned) requires the prior approval of the Federal Reserve Board. The BHCA also prohibits the Federal Reserve Board from approving an application which would result in the Corporation or any non-bank subsidiary thereof acquiring all or substantially all the assets or more than 5% of the voting shares of any bank (not already majority owned) located outside of California unless an acquisition of such bank by a California-based bank holding company is specifically authorized by the laws of the state in which the bank is located. The laws of several states permit such acquisitions. The BHCA also prohibits the Corporation, with certain exceptions, from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company which is not a bank and from engaging in any business other than that of banking, managing and controlling banks or furnishing services to its Subsidiary Banks, except that the Corporation may engage in, and may own shares of companies engaged in, certain businesses found by the Federal Reserve Board to be so closely related to banking "as to be a proper incident thereto." The BHCA does not place territorial restrictions on the activities of non-bank subsidiaries of bank holding companies. The Corporation is required by the BHCA to file annual reports of its operations with the Federal Reserve Board and is subject to examination by the Federal Reserve Board. Under legislation enacted in 1974, the Federal Reserve Board was given jurisdiction to regulate the terms of certain debt issues of bank holding companies including the authority to impose reserve requirements on such debt. The Subsidiary Banks, as subsidiaries of the Corporation within the meaning of Section 23A of the Federal Reserve Act, are subject to certain restrictions on loans to the Corporation or its non-bank subsidiaries, or investments in the stock or other securities of the Corporation or its non-bank subsidiaries and on advances to any borrower collateralized by such stock or other securities. Further, the Subsidiary Banks are also subject to certain restrictions on most types of transactions with the Corporation or its non-bank subsidiaries, requiring that the terms of such transactions be substantially equivalent to terms of similar transactions with non-affiliated firms. Each of the 17 Subsidiary Banks is either a state or national bank. Three Subsidiary Banks are state-chartered and are subject to supervision and regular examination by the bank supervisory authorities of the respective states in which they are chartered. The remaining Subsidiary Banks are national banks and are subject to supervision and regular examination by the Office of the Comptroller of the Currency. Those Subsidiary Banks which are members of the Federal Reserve System are subject to applicable provisions of the Federal Reserve Act, and First Interstate Bank of California, the Corporation's only state- chartered member bank subsidiary, is subject to regular examination by the Federal Reserve Bank of San Francisco. The deposit accounts held by all of the Subsidiary Banks are insured by the FDIC; as such they are subject to the provisions of the Federal Deposit Insurance Act and, in the case of insured banks not members of the Federal Reserve System, to regular examination by the FDIC. The federal and state laws and regulations of general application to banks regulate, among other things, the scope of their business, their investments, their reserves against deposits, the timing of the availability of deposited funds, and numerous other aspects of their business. The Corporation, as the holder of common stock of Subsidiary Banks which are national banks, may be subject to assessment for the restoration of impaired capital of such banks, as and to the extent provided in Section 5205 of the Revised Statutes of the United States (12 U.S.C. Section 55). Similarly, First Interstate Bank of California may be subject to assessment for the restoration of impaired capital, as and to the extent provided in Section 662 of the California Financial Code. These statutes provide for the restoration of impaired capital by the sale of bank stock, but impose no personal liability upon the stockholder. The Corporation is a legal entity separate and distinct from the Subsidiary Banks. The principal source of the Corporation's revenues is dividends received from the Subsidiary Banks. Another source of revenue, not presently utilized, would be charges to the Subsidiary Banks for administrative services provided by the 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 1989, Congress enacted a law that purports to make banks liable to the FDIC for expenses the FDIC incurs in the case of either its provision of financial assistance to, or the failure of, any affiliated bank. Under that law, the Subsidiary Banks could theoretically be held liable to the FDIC in the event of financial assistance to, or failure of, any other Subsidiary Bank, and theoretically that liability could be substantial enough to cause the surviving Subsidiary Banks either to require financial assistance from the FDIC or to cause the failure of such Subsidiary Banks. On December 19, 1991, comprehensive legislation was enacted that reforms the regulation and supervision of banks and bank holding companies. Among the more significant aspects of the legislation is a requirement that federal regulators prescribe standards relating to internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, employee, director and principal shareholder compensation, fees and benefits, standards specifying a maximum ratio of classified assets to capital, minimum earnings sufficient to absorb losses without impairing capital, and to the extent possible, a minimum ratio of market value to book value of publicly traded shares of bank holding companies, such as the Corporation. The legislation also provides for a system of early intervention by the regulators and prompt corrective action at troubled banks. Under that system, a bank may not pay dividends if its capital fails to meet any required minimum and will be expected to submit to its regulator an acceptable plan to restore its capital to adequate levels. While a bank is undercapitalized, its regulator may preclude its growth, require its recapitalization through the sale of shares, require its acquisition or merger, prohibit its parent from paying dividends, and require divestitures by its parent, including divestiture of the bank itself. Its parent holding company will be expected to guarantee that the bank will comply with the bank's capital restoration plan until the bank has been adequately capitalized, on average, for four consecutive quarters, unless the parent is willing to accept loss or closure of the bank by regulators. This guarantee is limited to the lesser of 5% of the bank's total assets at the time it became undercapitalized or the amount necessary to bring the bank into compliance with all applicable capital standards. If the bank does not submit an acceptable capital restoration plan or if its parent holding company does not guarantee such plan, the regulators will be required to take one or more actions, including requiring recapitalization of the bank through its sale of securities or forced sale or merger, restricting transactions with affiliates, restricting interest rates paid on deposits, restricting asset growth, restructuring activities, replacing management of the bank, prohibiting deposits from correspondent banks, requiring prior approval of dividends by the holding company, and requiring divestiture. The law requires the regulators, in such cases, to require the sale of securities by the bank or to force a sale or merger of the bank, to restrict affiliate transactions, and to restrict interest rates unless the regulator determines that these actions would not resolve the problems of the bank at the least possible long term loss to the Bank Insurance Fund of the FDIC. The law also limits advances to any undercapitalized bank by any Federal Reserve Bank from being outstanding more than 60 days in any 120-day period unless the head of the bank regulatory agency certifies that, giving due regard to economic conditions and circumstances in the market in which the bank operates, the bank is not and is not expected to become critically undercapitalized and is not expected to be placed in conservatorship or receivership. None of the Corporation's Subsidiary Banks is undercapitalized. The foregoing references to applicable statutes and regulations are brief summaries thereof, which do not purport to be complete and are qualified in their entirety by reference to such statutes and regulations. From time to time various bills are introduced in the United States Congress which could result in additional or in less regulation of the business of the Corporation and the Subsidiary Banks. It cannot be predicted whether any such legislation will be adopted or how such adoption would affect the business of the Corporation or the Subsidiary Banks. The Federal Reserve Board has established risk-based capital guidelines for bank holding companies. The guidelines define Tier 1 Capital and Total Capital. Tier 1 Capital consists of common and qualifying preferred shareholders' equity, before unrealized gains and losses on available-for-sale debt securities and minority interests in equity accounts of consolidated subsidiaries, less goodwill, other nonqualifying intangibles, excess deferred tax assets and 50% of investments in unconsolidated subsidiaries. Total Capital consists of, in addition to Tier 1 Capital, mandatory convertible debt, preferred stock not qualifying as Tier 1 Capital, subordinated and other qualifying term debt and a portion of the allowance for loan losses less the remaining 50% of investments in unconsolidated subsidiaries. The Tier 1 component must comprise at least 50% of qualifying Total Capital. Risk-based capital ratios are calculated with reference to risk-weighted assets, as outlined by bank supervisory authorities, which include both on and off- balance sheet exposures. The minimum required qualifying Total Capital ratio is 8%, of which at least 4% must consist of Tier 1 Capital. As of December 31, 1995, the Corporation's Tier 1 Capital and Total Capital ratios were 7.61% and 10.52%, respectively. The Federal Reserve Board has adopted a "minimum leverage ratio" which requires bank holding companies to maintain Tier 1 Capital of at least 3% of adjusted quarterly average assets, although the Federal Reserve Board may require a higher ratio depending upon the rating of the bank holding company and its expected growth. Regulations issued by the FDIC to implement the 1991 legislation referred to above establish five levels of capitalization for banks; any bank with a Tier 1 Capital ratio of 6%, Total Capital ratio of 10% and a leverage ratio of 5% is considered to be "well capitalized." As of December 31, 1995 the Corporation's leverage ratio was 6.28%, and all of the Subsidiary Banks had leverage ratios exceeding 5.00%. MONETARY POLICY AND ECONOMIC CONDITIONS The earnings of the Corporation are affected by the policies of regulatory authorities, including the Federal Reserve System. Federal Reserve monetary policies have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. Interest rates, credit availability and deposit levels may change due to circumstances beyond the control of the Corporation or the Subsidiary Banks because of changing conditions in national and international economies and in the money markets, as a result of actions by monetary and fiscal authorities. ITEM 2. PROPERTIES The Corporation and its Subsidiaries occupied, as of December 31, 1995, 1,267 premises in 13 western states, which consisted primarily of bank buildings. On that date, 617 premises were owned, 543 premises were leased, and the remaining 107 premises were owned in part and leased in part. In addition, the Subsidiary Banks have 1,796 ATM locations. The Corporation's headquarters are in Los Angeles, California. ITEM 3. LEGAL PROCEEDINGS There are presently pending against the Corporation and certain of its Subsidiaries a number of legal proceedings. While it is not possible to predict the outcome of these proceedings, it is the opinion of management, after consulting with counsel, that the ultimate disposition of potential or existing suits will not have a material adverse effect on the Corporation's financial position, results of operations or liquidity. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to security holders during the fourth quarter of the year ended December 31, 1995. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS (a) $2 par value Common Stock The below listed information contained in the Annual Report to Shareholders for the year ended December 31, 1995, with respect to the Corporation's $2 par value Common Stock is incorporated herein by reference: Page ---- Principal United States Market Inside back-cover Sales Prices 32 Dividends Paid 32 As of February 29, 1996, there were 23,486 holders of record of the Corporation's $2 par value Common Stock. ITEM 6. SELECTED FINANCIAL DATA Consolidated Balance Sheets and Consolidated Statements of Operations on pages 56 and 57 of the Annual Report to Shareholders for the year ended December 31, 1995 are incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion & Analysis 1993 - 1995 on pages 10 through 33 of the Annual Report to Shareholders for the year ended December 31, 1995 is incorporated herein by reference. Subsequent Events: On January 24, 1996, the Corporation and Wells Fargo & Company (Wells Fargo) announced that they had reached a definitive agreement to merge the two companies, with Wells Fargo as the surviving corporation in the merger. Under the terms of the merger agreement, the Corporation's stockholders will receive a tax-free exchange of two-thirds of a share of Wells Fargo Common Stock for each share of the Corporation's Common Stock. Based on Wells Fargo's closing price of $217.25 on January 19, 1996, the last trading day before January 21, 1996, the day on which the Corporation and Wells Fargo reached agreement on the Exchange Ratio to be included in the merger agreement, this exchange ratio represents a price of $144.83 for each share of the Corporation's Common Stock. The combined board of directors will consist of the existing members of Wells Fargo's board and seven directors from the Corporation's board. The stockholders of Wells Fargo and the Corporation, at their respective special meetings of stockholders on March 28, 1996, approved the merger agreement and the transactions contemplated thereby. The effective time of the merger is expected to be 12:01 a.m. on April 1, 1996. Concurrent with its entering into the merger agreement with Wells Fargo, the Corporation terminated its November 5, 1995 merger agreement with First Bank System, Inc. An overall settlement agreement was entered into among the Corporation, First Bank System and Wells Fargo. Under the terms of the settlement agreement, the Corporation agreed to pay First Bank System a termination fee of $125 million and an additional termination fee of $75 million upon closing of its merger with Wells Fargo. These payments are being made in full satisfaction of the Corporation's obligations under the stock option and fee agreements entered into as part of its November 5, 1995 merger agreement with First Bank System. In addition, all litigation among the parties related to efforts to merge with the Corporation has been settled. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following consolidated financial statements of the Registrant included in the Annual Report to Shareholders for the year ended December 31, 1995 are incorporated herein by reference: Consolidated Financial Statements of First Interstate Bancorp and Subsidiaries: Consolidated Balance Sheet - December 31, 1995 and 1994 Consolidated Statement of Operations - Years Ended December 31, 1995, 1994 and 1993 Consolidated Statement of Cash Flows - Years Ended December 31, 1995, 1994 and 1993 Statement of Shareholders' Equity - Years Ended December 31, 1995, 1994 and 1993 Notes to Consolidated Financial Statements Report of Ernst & Young LLP, Independent Auditors Summary of Quarterly Results on page 33 of the Annual Report to Shareholders for the year ended December 31, 1995 is incorporated herein by reference. The below listed financial data contained in the Annual Report to Shareholders for the year ended December 31, 1995 is incorporated herein by reference: Page ---- Distribution of Assets, Liabilities and Shareholders' Equity; Interest Rates and Interest Differential: Average balance sheets and net interest earnings 58-59 Change in interest income and expense 11 Investment Portfolio: Investment types 41 Maturities and yields 15-16 Investment concentrations 25 Loan Portfolio: Loan types 42-43 Maturities and sensitivity 14-15 Risk Elements: Nonaccrual, past due and restructured loans 29-30 Potential problem loans 29-30 Foreign outstandings 27 Loan concentrations 26 Summary of Credit Loss Experience: Credit loss experience 27-28 Allocation of allowance 28 Deposits: Average deposits 58-59 Maturities of time certificates of deposit 18 Return on Equity and Assets 55 Short Term Borrowings 43 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (a) Identification of directors Shown below are names and ages of all directors with indication of all positions and offices with the Corporation. Directors are elected to serve until the succeeding Annual Meeting of Stockholders. All of the directors, with the exception of Harold M. Messmer, Jr., were elected to their respective terms of office at the last Annual Meeting of Stockholders. There were no arrangements or understandings between any director and any other person pursuant to which such director was selected as a director of the Corporation. Director Name Age Current Office or Title Since - ---------------------------------------------------------------------- John E. Bryson 52 Director 1991 Edward M. Carson 66 Director 1985 Dr. Jewel Plummer Cobb 72 Director 1985 Ralph P. Davidson 68 Director 1987 Myron Du Bain 72 Director 1983 Don C. Frisbee 72 Director 1985 George M. Keller 72 Director 1974 Thomas L. Lee 53 Director 1993 Harold M. Messmer, Jr. 50 Director October 1995 Dr. William F. Miller 70 Director 1980 Dr. Steven B. Sample 55 Director 1991 Forrest N. Shumway 69 Director 1982 Richard J. Stegemeier 67 Director 1989 Daniel M. Tellep 64 Director 1991 William E. B. Siart 49 Director, Chairman of 1990 the Board and Chief Executive Officer William S. Randall 55 Director and President April 1995 (b) Identification of executive officers Shown below are names and ages of all executive officers with indication of all positions and offices with the Corporation. There were no arrangements or understandings between any executive officer and any other person pursuant to which such executive officer was selected as an executive officer of the Corporation. Name Age Office or Title - ------------------------------------------------------------------------- William E. B. Siart 49 Director, Chairman of the Board and Chief Executive Officer William S. Randall 55 Director and President Bruce G. Willison 47 Vice Chairman - Manager, Corporate/ Commercial Banking and Institutional and Corporate Trust/Trust Operations, and Chairman, President and Chief Executive Officer, First Interstate Bank of California Linnet F. Deily 50 Chief Executive Officer - Manager, Retail Banking and Personal Trust and Private Client Services, and Chairman, President and Chief Executive Officer, First Interstate Bank of Texas, N.A. David S. Belles 58 Executive Vice President and Controller William J. Bogaard 57 Executive Vice President and General Counsel Theodore F. Craver, Jr. 44 Executive Vice President and Treasurer Daniel R. Eitingon 50 Executive Vice President - Technology Banking Lillian R. Gorman 42 Executive Vice President - Human Resources Robert E. Greene 54 Executive Vice President and Chief Credit Officer Steven L. Scheid 42 Executive Vice President - Principal Financial Officer Richard W. Tappey 55 Executive Vice President - Banking Services (c) Family relationships There is no family relationship between any director or executive officer of the Corporation. (d) Business experience The following section briefly describes the business experience for at least the past five years for each director and executive officer. John E. Bryson, Chairman of the Board and Chief Executive Officer, Edison International (formerly SCEcorp) and Southern California Edison Company. Mr. Bryson joined Southern California Edison Company in 1984. In 1990, he was elected Chairman of the Board and Chief Executive Officer of SCEcorp and Southern California Edison Company. Immediately prior to joining Southern California Edison in 1984, Mr. Bryson was a partner in the law firm of Morrison & Foerster. He served as President of the California Public Utilities Commission from 1979 through 1982. Mr. Bryson is also a Director of The Times Mirror Company and The Boeing Company, and is a Trustee of Stanford University. He serves as Chairman of the California Business Roundtable. Edward M. Carson, Chairman of the Board and Chief Executive Officer, Retired, First Interstate Bancorp. Mr. Carson served as Chairman of the Board of First Interstate Bancorp from June 1990 to May 1995 and as Chief Executive Officer from June 1990 through December 1994. Prior to that time he was President of First Interstate Bancorp from February 1985 to May 1990, and President and Chief Executive Officer of First Interstate Bank of Arizona, N.A., from October 1977 to January 1985. Mr. Carson is also a Director of Terra Industries Inc., Aztar Corporation, Automobile Club of Southern California and Castle & Cooke. Dr. Jewel Plummer Cobb, President Emerita, California State University, Fullerton and Trustee Professor of California State University, Los Angeles. Dr. Cobb has taught at a number of colleges and universities, including Connecticut College and Rutgers University's Douglass College. In October 1981, she became President of California State University, Fullerton. Dr. Cobb retired as President in August 1990, and is a Trustee Professor of California State University. Dr. Cobb is also a Director of Georgia-Pacific Corporation. In addition, she serves as a member of the National Institute of Medicine of the National Academy of Sciences, a Fellow of the New York Academy of Sciences, a Trustee of the California Institute of Technology, and a member of the Board of Drew University of Medicine and Science. Ralph P. Davidson, Former Chairman, The John F. Kennedy Center for the Performing Arts. Mr. Davidson joined Time Inc. in 1954, and after several European assignments, he became a Vice President of Time Inc. and was named Publisher of TIME in 1972. In 1980 Mr. Davidson was elected a Director of Time Inc. and became Chairman of the Board later that year. He served as Chairman until September 1986, when he became Chairman of the Executive Committee of Time's Board of Directors. Mr. Davidson retired from Time Inc. in December 1987. He became President of The John F. Kennedy Center for the Performing Arts in November 1987 and served as Chairman from August 1988 to May 1990. Mr. Davidson is also a Director of Kelley Oil Corp., and is Trustee of The John F. Kennedy Center for the Performing Arts. He serves as a Director of the Phoenix House, a drug rehabilitation center, and as Chairman of People's House, a charitable organization in Washington, D.C. Myron Du Bain, Chairman and Chief Executive Officer, Retired, Fireman's Fund Corporation. Mr. Du Bain was Chairman of the Board of SRI International from December 1985 to December 1989, and was President and Chief Executive Officer of Amfac, Inc. from 1983 to September 1985. Prior to that time Mr. Du Bain was Chairman of the Board, President and Chief Executive Officer of Fireman's Fund Insurance Companies from 1975 to 1981 and Chairman and Chief Executive Officer of Fireman's Fund Corporation from 1981 to 1982. Mr. Du Bain is also a Director of Scios Nova Inc., Transamerica Corporation and SRI International. He serves as Chairman of the Board of the James Irvine Foundation and is a Director of the San Francisco Opera Association. Don C. Frisbee, Chairman Emeritus, PacifiCorp (public utility). Mr. Frisbee served as Chairman and Chief Executive Officer of PacifiCorp from December 1972 until January 1, 1989, when he retired as Chief Executive Officer. He retired as Chairman and Director on February 9, 1994. He is also a Director of Standard Insurance Company and Weyerhaeuser Company. Mr. Frisbee serves as the Chairman of the Board of Trustees of Reed College. George M. Keller, Chairman of the Board and Chief Executive Officer, Retired, Chevron Corporation (Petroleum products). Mr. Keller joined Chevron in 1948 and was elected a Director in 1970, Vice Chairman in 1974 and Chairman in May 1981. He retired from Chevron on January 1, 1989. Mr. Keller served as Chairman of the Board of SRI International from January 1990 until December 1993, and continues to serve as a Director. He is also a Director of The Boeing Company, McKesson Corporation, Metropolitan Life Insurance Company and The Chronicle Publishing Company. Thomas L. Lee, Chairman and Chief Executive Officer, The Newhall Land and Farming Company (planned community development and agriculture). Mr. Lee has been Chairman and Chief Executive Officer of The Newhall Land and Farming Company since 1989. He joined Newhall Land in 1970, serving in various positions with residential, commercial and industrial real estate operations while developing the new town of Valencia, California. From 1985 to 1987 he was President and Chief Executive Officer, and he served as President and Chief Executive Officer from 1987 until elected to his present position in 1989. Mr. Lee is also a Director of CalMat Co. He is a Director of the Los Angeles Area Chamber of Commerce and served as its Chairman in 1994. He also is a Member of the California Business Roundtable and the Urban Land Institute and serves as a Trustee of the California Institute of the Arts. Harold M. Messmer, Jr., Chairman and Chief Executive Officer, Robert Half International Inc. Mr. Messmer is currently Chairman and Chief Executive Officer of Robert Half International Inc., which he joined in 1986. Prior to joining Robert Half International, Mr. Messmer was president of Pacific Holding Corporation, a diversified company with operations in agribusiness, textiles and other product areas and also served as president and then chief executive officer of Pacific Holding's largest subsidiary, Cannon Mills Company, from 1982 to 1985. He is also a Director of Airborne Freight Corporation, Pacific Enterprises and its subsidiary, Southern California Gas Company, and Spieker Properties, Inc. Dr. William F. Miller, Professor of Public and Private Management, Stanford University, President Emeritus, SRI International (Research institute). Dr. Miller retired as President and Chief Executive Officer of SRI International in December 1990. Prior to joining SRI International in September 1979, he served as Vice President and Provost of Stanford University from 1971 to 1979. Dr. Miller is now Professor of Public and Private Management in the Graduate School of Business of Stanford University. He serves as Chairman of the Board of Borland International, Inc. He is also a Director of Pacific Gas & Electric Co., Varian Associates, Inc., and Scios Nova Inc. Dr. Miller also serves as Vice Chairman of the Board of Smart Valley, Inc. and Chairman of the Board of the Management Institute for the Environment and Business. He is a Director for the Center for Excellence in Non-profits and the Joint Venture Silicon Valley Network. Dr. Steven B. Sample, President, University of Southern California. Prior to joining the University of Southern California in 1991 as President, Dr. Sample spent nine years as President of the State University of New York at Buffalo. He has taught electrical engineering at several universities, and holds a number of patents. Dr. Sample is also a Director of the Regenstrief Institute, the Presley Companies, Western Atlas Corp., Rebuild L.A. and Los Angeles Annenberg Metropolitan Project. Forrest N. Shumway, Former Vice Chairman and Chairman of the Executive Committee, Allied Signal Inc. (multi-industry company). Mr. Shumway formerly was Vice Chairman and Chairman of the Executive Committee of Allied Signal Inc. Prior to the combination of Allied Corporation and The Signal Companies, Inc. in 1985, he was President, Chairman of the Board and Chief Executive Officer of The Signal Companies for 20 years. Mr. Shumway is also a Director of Aluminum Company of America, American President Companies, Ltd., The Clorox Company and Transamerica Corporation. Richard J. Stegemeier, Chairman Emeritus, Unocal Corporation (energy resources). Mr. Stegemeier served as Chairman of Unocal Corporation from April 1989 to May 1995, and was Chief Executive Officer from July 1988 through April 1994; he was also President from July 1988 through May 1992. From December 1985 through June 1988, he was president and Chief Operating Officer, and prior to that time, he served as Senior Vice President. Mr. Stegemeier is also a Director of Outboard Marine Corporation, Foundation Health Corporation, Northrop Grumman Corporation and Halliburton Company. Daniel M. Tellep, Chairman of the Board, Officer Lockheed Martin Corporation (aerospace). Mr. Tellep joined Lockheed in 1955 and served as President of Lockheed Missiles & Space Company, Inc. a wholly-owned subsidiary of Lockheed, from 1984 to 1988. He also served as Group President-Missiles and Space Systems from 1986 to 1988. From August 1988 to December 1988, Mr. Tellep served as President of Lockheed Corporation, and was elected Chairman of the Board and Chief Executive Officer on January 1, 1989. He has held the sole title of Chairman of the Board since January 1996. He is also a Director of Edison International and Southern California Edison Company. William E.B. Siart, Chairman of the Board and Chief Executive Officer, First Interstate Bancorp. Mr. Siart was elected Chief Executive Officer effective January 1, 1995 and Chairman of the Board of Directors effective May 1, 1995. He served as President of First Interstate Bancorp from June 1, 1990 until May 1, 1995. He was Chairman, President and Chief Executive Officer of First Interstate Bank of California from December 1985 to January 1991. William S. Randall, President, First Interstate Bancorp. Mr. Randall was elected President of First Interstate Bancorp effective May 1, 1995 and Chief Operating Officer from January 1, 1995 until his election as President. He served as Chief Executive Officer of the Southwest Region from September 1991 to December 1994. He was Chairman, President and Chief Executive Officer of First Interstate Bank of Arizona, N.A. from January 11, 1990 to December, 1994. He was previously Chairman, President and Chief Executive Officer of First Interstate Bank of Washington, between July 1985 and January 1990. Bruce G. Willison was elected Vice Chairman of the corporation effective May 1, 1995 . He was appointed Chief Executive Officer of the California Region in September 1991. He was elected Chairman, President, and Chief Executive Officer of First Interstate Bank of California on February 1, 1991 and previously was Chairman and Chief Executive Officer of First Interstate Bank of Oregon, N.A. between January 1986 and February 1991. Linnet F. Deily was appointed Manager, Retail Banking and Personal Trust and Private Client Services in January 1996. She was appointed Chief Executive Officer of the Texas Region in September 1991 and elected Chairman of First Interstate Bank of Texas in November 1991. She was elected President and Chief Executive Officer of First Interstate Bank of Texas on January 1, 1991, having served as President and Chief Operating Officer since November 1988. David S. Belles was elected Executive Vice President and Controller effective September 1994, having assumed responsibility for the management of the Corporate Controller's Group in June 1994. He previously served as Chief Financial Officer of the Northwest Region. William J. Bogaard was elected Executive Vice President and General Counsel in September 1982. Theodore F. Craver, Jr., was elected Executive Vice President and Treasurer in September 1991. He was elected Executive Vice President and Chief Financial Officer of First Interstate Bank, Ltd. in June 1988. Daniel R. Eitingon was elected Executive Vice President in 1989 and currently heads the Technology Banking Group. Prior to his current position he was Executive Vice President and head of California Retail Banking. He joined First Interstate Bank in 1986 as Project Manager of Branch of the Future. Lillian R. Gorman was elected Executive Vice President in January 1994. She has served as Human Resources Director since October 1990. She was named Director of First Interstate Bank of California's Human Resources Division in 1986 and became a Senior Vice President in 1987. Between 1985 and 1989, she was Manager of Human Resources Strategic Planning at First Interstate Bancorp. Robert E. Greene was elected Executive Vice President and Chief Credit Officer in October 1987. Steven L. Scheid was elected Executive Vice President, Financial Planning and Analysis, in May 1994 and is currently responsible for the Finance function for the Corporation; he was appointed Principal Financial Officer in January 1996. He was first elected an Executive Vice President of the Corporation in October 1994. From 1990 to 1994 he was Executive Vice President and Chief Financial Officer of First Interstate Bank of Texas. Richard W. Tappey was elected Executive Vice President in July, 1991. He was Executive Vice President and head of the Banking Service Group of First Interstate Bank of California from July 1990, and previously held various management positions with First Interstate Bank of California since joining the bank in January 1961. ITEM 11. EXECUTIVE COMPENSATION (a) Summary of cash and certain other compensation The following table sets forth the compensation for the Chief Executive Officer of the Corporation and the four most highly compensated executive officers of the Corporation (other than the Chief Executive Officer) who served as executive officers on December 31, 1995:
Summary Compensation Table Long-Term Compensation ------------------------------------- Awards Payouts ----------------------- ------------ Securities Restricted Underlying Annual Compensation Other Annual Stock Options/ All Other Name and Principal ---------------------------- Compensation Awards SARs LTIP Compensation Position Year Salary ($)(1) Bonus ($)(2) ($)(3) ($) (#)(4) Payouts ($) ($)(5) - ------------------------------------------------------------------------------------------------------------------------------- William E.B. Siart 1995 $ 720,000 $ 1,296,000 -- -- 45,000 -- $ 23,364 Chairman of the 1994 629,500 930,000 -- -- 30,000 -- 19,638 Board (6) 1993 645,358 836,000 -- -- 45,000 -- 18,556 William S. Randall 1995 520,008 715,011 -- -- 30,000 -- 18,735 President (7) 1994 440,852 498,400 -- -- 17,000 -- 14,530 1993 453,833 453,000 -- -- 20,000 -- 22,839 Bruce G. Willison 1995 450,000 495,000 -- -- 16,000 -- 14,608 Vice Chairman (8) 1994 430,833 513,300 -- -- 17,000 -- 11,420 1993 405,833 455,000 -- -- 20,000 -- 25,057 James J. Curran 1995 395,004 430,554 -- -- 16,000 -- 14,637 Manager, Corporate 1994 375,004 444,600 -- -- 17,000 -- 12,877 Commercial Banking 1993 374,200 395,000 -- -- 20,000 -- 11,383 and Institutional and Corporate Trust/ Trust Operations (9) Linnet F. Deily 1995 360,000 439,200 -- -- 16,000 -- 11,545 Manager, Retail 1994 345,000 429,525 -- -- 17,000 -- 10,931 Banking and 1993 300,000 300,000 -- -- 20,000 -- 12,501 Personal Trust and Private Client Services (10)
(1) Included in this column are the salaries and directors' fees paid for services rendered to the Corporation's subsidiaries before any salary reduction for contributions to the Corporation's Employee Savings Plan under section 401 (k) of the Internal Revenue Code of 1986, as amended (the "Code"), and salary reductions for contributions for welfare plan coverage under section 125 of the Code. (2) The bonus amounts are payable pursuant to the Corporation's Executive Incentive Plan, Regional Executive Incentive Plan and 1991 Performance Stock Plan, as applicable. This column reflects amounts awarded, even if deferred. (3) Amounts which total the lesser of $50,000 or 10% of the total annual salary and bonus for the named executive officer have been omitted. (4) No tandem Stock Appreciation Rights ("SARs") have been granted since 1991, and no freestanding SARs have ever been granted. (5) The total amounts shown in this column for 1995 consist of the following: (i) Mr. Siart, $21,600 for matching Corporation contributions under the Employee Savings Plan and Supplemental Savings Plan; $1,492 for the benefit attributable to payments of premiums on universal life insurance; and a tax gross-up amount of $272 relating to brokerage fees on stock option exercises; (ii) Mr. Randall, $15,600 for matching Corporation contributions under the Employee Savings Plan and Supplemental Savings Plan; $2,090 for the benefit attributable to payments of premiums on universal life insurance; and a tax gross-up amount of $1,045 relating to brokerage fees on stock option exercises; (iii) Mr. Willison, $13,425 for matching Corporation contributions under the Employee Savings Plan and Supplemental Savings Plan; $819 for the benefit attributable to payments of premiums on universal life insurance; and a tax gross-up amount of $364 relating to brokerage fees on stock option exercises; (iv) Mr. Curran, $11,775 for matching Corporation contributions under the Employee Savings Plan and Supplemental Savings Plan; $2,747 for the benefit attributable to payments of premiums on universal life insurance; and a tax gross-up amount of $115 relating to brokerage fees on stock option exercises; and (v) Mrs. Deily, $10,725 for matching Corporation contributions under the Employee Savings Plan and Supplemental Savings Plan; and $820 for the benefit attributable to payments of premiums on universal life insurance. The Corporation has purchased universal life insurance policies on the lives of the named executives, who have no immediate right to receive the cash surrender value of the policies and may never have any right to receive the cash surrender value. If, and only if, certain conditions are met, will the executive become vested in the cash surrender value. An executive's benefits under various deferred compensation plans will be reduced dollar for dollar by the amount of the cash surrender value of the policy at the time it vests. The premiums paid on the policies are designed to produce a cash surrender value which is less than the accrued benefits under the various plans. (6) Mr. Siart was named as Chief Executive Officer of the Corporation on January 1, 1995, and was elected Chairman of the Board of Directors on May 1, 1995. (7) Mr. Randall became Chief Operating Officer of the Corporation on January 1, 1995 and was named President of the Corporation on May 1, 1995. He was Chief Executive Officer, Southwest Region, through December 31, 1994, and also served as Chairman of the Board, President and Chief Executive Officer of First Interstate Bank of Arizona through December 31, 1994. (8) Mr. Willison also serves as Chairman, President and Chief Executive Officer of First Interstate Bank of California. (9) Mr. Curran's position includes serving as Chairman, President and Chief Executive Officer of First Interstate Bank of Oregon, and Chief Executive Officer and President of First Interstate Banks of Idaho, Montana, and Washington. (10) Mrs. Deily's position includes serving as Chairman, President and Chief Executive Officer of First Interstate Bank of Texas. (b) Option/SAR Grants Table The following tables summarize grants of options and exercises of options to purchase Common Stock during 1995 to or by the executive officers of the Corporation named in the Summary Compensation Table above, and the grant date present value of options held by such persons at the end of 1995. All outstanding SARs were surrendered by the executive Officers of the Corporation in 1993, and no SARs were granted during 1995.
Option/SAR Grants in Last Fiscal Year (1995) Number of % of Total Securities Options/SARs Exercise or Underlying Granted to Base Price Grant Date Options/Sars Employees in Per Share Expiration Present Value Name Granted (#)(1) Fiscal Year ($/Share) Date (2) - ------------------------------------------------------------------------------------------ William E.B. Siart 45,000 5.1% $ 80.375 2/14/05 $ 706,950 William S. Randall 30,000 3.4 80.375 2/14/05 471,300 Bruce G. Willison 16,000 1.8 80.375 2/14/05 251,360 James J. Curran 16,000 1.8 80.375 2/14/05 251,360 Linnet F. Deily 16,000 1.8 80.375 2/14/05 251,360
(1) Options were granted under the 1991 Performance Stock Plan, which provides for the granting of options at an option exercise price of 100% of the fair market value of the stock on the date of grant. Options granted in 1995 were exercisable beginning 12 months after the grant date, with 25% of the shares covered thereby becoming exercisable at that time and with an additional 25% of the option shares becoming exercisable on each successive anniversary date, with full vesting occurring on the fourth anniversary date. The Plan provides that in the event of a change in control of the Corporation, stock options become immediately exercisable to their full extent. The approval of the merger agreement between the Corporation and Wells Fargo & Company by the stockholders of the Corporation on March 28, 1996, constituted a change in control, and each stock option became immediately exercisable. (2) Present market value determinations were made using the Black-Scholes options pricing model. There is no assurance that any value realized by optionees will be at or near the value estimated by that model. The ultimate values of the options will depend on the future market price of the Common Stock, which can not be forecast with reasonable accuracy. The actual value, if any, an optionee will realize upon exercise of an option will depend upon the excess, if any, of the market value of the Common Stock on the date the option is exercised over the exercise price of the option. The assumptions and calculations used for the model were provided to the Corporation by an independent consulting firm. The estimated grant date present value under the Black-Scholes model is based on the following assumptions and adjustments: an exercise price of $80.375 per share, equal to the fair market value of the underlying stock on the date of grant; dividends at the rate of $3.00 per share, representing the annualized dividends paid on a share of Common Stock at the date of grant; a stock price volatility of 23.453%, calculated using daily stock prices for the one-year period prior to the grant date; an option term of 10 years; an interest rate of 7.47%, representing the interest rate on a U.S. Treasury security on the date of grant with a maturity date corresponding to that of the option term; and reductions of approximately 21.70% to reflect the probability of a shortened option term due to termination of employment prior to the option expiration date. (c) Aggregated Option/SAR exercises and fiscal year-end option/SAR value table
Aggregated Option/SAR Exercises in Last Fiscal Year (1995) and Fiscal Year-End Option/SAR Values Number of Securities Underlying Unexercised Value of Unexercised Shares Options/SARs In-the-Money Options/SARs Acquired Value at Fiscal Year-End (#)(3) at Fiscal Year-End ($)(4) on Exercise Realized -------------------------- -------------------------- Name (#)(1) ($)(2) Exercisable Unexercisable Exercisable Unexercisable - ------------------------------------------------------------------------------------------------------ William E.B. Siart 4,000 $ 132,000 164,750 101,250 $15,622,531 $7,153,594 William S. Randall 75,815 6,157,336 15,435 52,750 1,230,164 3,499,594 Bruce G. Willison 13,500 1,193,750 77,750 43,750 7,241,781 3,146,344 James J. Curran 19,000 2,027,500 45,750 43,250 4,242,719 3,096,781 Linnet F. Deily 600 16,275 68,250 42,750 6,472,281 3,047,219
(1) No tandem SARs have been granted since 1991, and no freestanding SARs have ever been granted. All unexercised SARs were surrendered in 1993. (2) Value is based upon the difference between the market value at the date of exercise and the exercise price. (3) In the event of a change in control of the Corporation, stock options become immediately exercisable to their full extent. The approval of the merger agreement between the Corporation and Wells Fargo & Company by the stockholders of the Corporation on March 28, 1996, constituted a change in control, and each stock option became immediately excercisable. (4) Value is based upon the difference between the market value at the end of 1995 and the exercise price. (d) Pension plans The following table indicates the estimated annual benefit payable to a covered participant at normal retirement age under The Retirement Plan for Employees of First Interstate Bancorp and its Affiliates ("Retirement Plan") based on covered compensation and years of service with the Corporation and its subsidiaries. The table includes benefits under the Corporation's Excess Benefit Retirement Plan ("Excess Plan") and Supplemental Executive Retirement Plan ("SERP"), both of which are unfunded. The Excess Plan provides benefits that would otherwise be denied a participant by reason of certain Internal Revenue Code limitations on the Retirement Plan. The SERP covers a select group of management who have attained age 55 and supplements the basic Retirement Plan by including bonuses in the definition of covered compensation. Pension Plan Table Years of Service (1) ------------------------------------------------------- Remuneration 15 Years 20 Years 25 Years 30 Years 35 Years - -------------------------------------------------------------------- $ 300,000 83,555 111,407 139,259 167,111 194,963 400,000 112,055 149,407 186,759 224,111 261,463 500,000 140,555 187,407 234,259 281,111 327,963 600,000 169,055 225,407 281,759 338,111 394,463 700,000 197,555 263,407 329,259 395,111 460,963 800,000 226,055 301,407 376,759 452,111 527,463 900,000 254,555 339,407 424,259 509,111 593,963 1,000,000 283,055 377,407 471,759 566,111 660,463 1,100,000 311,555 415,407 519,259 623,111 726,963 1,200,000 340,055 453,407 566,759 680,111 793,463 1,300,000 368,555 491,407 614,259 737,111 859,963 1,400,000 397,055 529,407 661,759 794,111 926,463 (1) The maximum number of years of service that may be credited under the pension plans is 35. The compensation covered by the pension plans for the individuals named in the Summary Compensation Table includes basic monthly salary or wage rate and certain bonuses described in the Summary Compensation Table and excludes director's fees, amounts paid for life insurance premiums, matching amounts under the Corporation's Employee Savings Plan and imputed income. The remuneration of a participant is an average of the compensation (as stated in the Summary Compensation Table) covered by such plans for the five of the last ten calendar years of the participant's employment with the Corporation for which such average is highest. The remuneration covered by the pension plans for Mr. Siart is $598,000; Mr. Randall, $833,686: Mr. Willison, $406,000; Mr. Curran, $633,799; and Mrs. Deily, $313,000. The credited service in full years for Mr. Siart is 17 years; Mr. Randall, 26 years; Mr. Willison, 16 years; Mr. Curran, 18 years; and Mrs. Deily, 14 years. The benefits shown in the table are computed on a single- life annuity basis are not reduced or adjusted for receipt of Social Security benefits or other offset amounts. (e) Compensation of directors Directors who are salaried officers of the Corporation receive no fees as directors of the Corporation. All other directors are paid an annual retainer for Board service of $20,000, an additional $6,000 which is deferred in stock units, and an attendance fee of $1,300 and $1,000 for each Board and committee meeting attended, respectively. Directors are also reimbursed for any expenses incurred in connection with attendance at regular or special meeting of the Board or any of its committees. The Chairman of the standing committees are paid an additional $5,000 annual retainer. The Corporation has a standard arrangement pursuant to which directors may elect to defer all or part of their directors' fees into either cash or stock units. During 1995 Messrs. Bryson, Du Bain, Keller and Dr. Sample deferred the annual retainer and all attendance fees. The Corporation adopted the First Interstate Bancorp Retirement Plan for Directors, effective January 1, 1988, to provide retirement benefits to eligible directors who have not served as directors while being employed by the Corporation or any of its subsidiaries, and who retire from Board service with at least five years of service as a director. Each eligible director is entitled to an annual retirement benefit equal to the annual retainer for directors as in effect at the time of the eligible director's resignation or retirement, or the director may elect, not less than one year prior to retirement, to receive a lump sum payment upon retirement. Upon attainment of the later of age 65 or retirement, an eligible director will receive one year of retirement payments for each year of service as an outside director, with a maximum payment period of 20 years and with certain spousal rights in the event of death. The First Interstate 1991 Director Option Plan ("Director Plan") was authorized by the Board of Directors on October 15, 1990, and approved by the Corporation's stockholders on April 19, 1991. A total of 200,000 shares of Common Stock has been reserved for issuance under the Director Plan, which provides for the non- discretionary granting of non-qualified options to purchase Common Stock to directors who have not served as directors while being employed by the Corporation or any of its subsidiaries. Each option grant is excercisable in its entirety one year from its date of grant. The Director Plan is designed to operate automatically and not require administration. To the extent that administration is necessary, the Director Plan is administered by the Compensation Committee of the Board of Directors. The purchase price of the Common Stock covered by each option is 100% of the fair market value of the stock on the date of the option grant. The options are generally non-transferable. Each option has a termination date, but in any event, all options granted under the Director Plan terminate upon the first to occur of the following events: (i) the expiration of ten years from the date the option is granted; (ii) the expiration of three months from the date an optionee ceases to serve as a director for any reason other than death, disability or retirement eligibility; (iii) the expiration of one year from the date an optionee ceases to serve as a director of the Corporation because of disability or death; (iv) the expiration of three years from the date an optionee ceases to serve as a director of the Corporation if the director is eligible for retirement benefits under the First Interstate Bancorp Retirement Plan for Directors; or (v) the termination of the Director Plan pursuant to its terms. Upon first being elected, each eligible director is awarded an option to purchase 5,000 shares of Common Stock. Thereafter, on the first business day following each annual stockholders meeting of the Corporation, each eligible director is granted an option to purchase 1,000 shares of Common Stock. The Corporation purchased universal life insurance policies on the lives of outside directors, except for Messrs. Lee, Messmer and Davidson. The death benefits of the policies depend on the length of time a director has served and do not exceed $520,000. The Corporation will continue to pay the premium on such policies for the period the director remains a member of the Board. The directors have entered into "split-dollar" life insurance agreements which provide that a director will become fully entitled to the policy upon the occurrence of certain events, including continuation of service to a future date and resignation for good reason following a change in control. If a director becomes entitled to the policy, the cash value of the policy reduces the payment of benefits under the Directors' Retirement Plan and deferrals of director's fees. During 1995, the directors covered by these insurance agreements received imputed income ranging from $60 to $3,357 and tax gross-up amounts ranging from $118 to $6,536 relating to such imputed income. The varying amounts were due to factors such as the directors age and length of service. (f) Employment agreements In January 1995, the Corporation entered into amended and restated employment agreements with certain of its key executives which are designed to encourage them to remain employees of the Corporation by providing them with greater security. Similar agreements have been entered into between some of the Corporation's bank subsidiaries and certain of their key executives. Messrs. Siart, Randall, Willison and Curran and Mrs. Deily are parties to such agreements. Absent a change in control as defined in the agreements, the amended and restated employment agreements are continuous and generally may be terminated with 14 months' notice. The agreements, as amended, provide for liquidated damages equal to 24 months' base salary in the event that the executive is terminated for a non-allowable reason. Unless the Corporation decides otherwise, such damages are payable at the same time and in the same manner as if the executive had remained employed by the Corporation. As defined in the agreements, as amended, a change in control occurs when any person or group becomes the beneficial owner of the Corporation's securities having 20% or more of the combined voting power of its then outstanding securities, when a majority of the Corporation's Board of Directors is replaced as a result of a contest for the election of directors, or upon the occurrence of certain mergers, acquisitions and other events. In the event of a change in control, the term of the agreements, as amended, is extended to the date two years following the change in control, and the duties of executives may not thereafter be modified. In addition, if an executive is terminated without cause, as defined in the agreements, after a change in control, such person is entitled to a payment equal to the sum of three times annual base salary and the highest bonus awarded in respect of the three years immediately preceding the year of a change in control, an amount equivalent to three additional years of participation in the Corporation's retirement plan, $30,000 to cover the cost of three years' health and welfare benefit plan coverage, and $30,000 to cover the cost of professional financial planning advice. A prorated portion of any bonus that may be accelerated as a result of a change in control will be deducted from the payment. Such a payment to an executive is payable as a cash lump sum within ten days following termination of employment. (g) Compensation committee interlocks and insider participation During 1995, the Compensation Committee of the Corporation's Board of Directors consisted of Messrs. Keller (Chairman), Bryson, Stegemeier and Tellep. The Corporation instituted an executive loan program on January 14, 1991 to provide fixed rate principal residence mortgage loans and general purpose loans at favorable rates to members of the Managing Committee of the Corporation. All loan requests under the executive loan program require the approval of the Chairman or the President of the Corporation and the Compensation Committee of the Board of Directors and are documented in accordance with standard requirements for loans made outside the program. Two of the individuals named in the Summary Compensation Table had loans under the program. Mr. Siart had a principal residence mortgage loan under the program, with a principal balance of $863,083 at December 31, 1995, a maximum balance during 1995 of $874,502 and an interest rate of 6.34%. Mr. Willison obtained a general purpose loan in 1994 under the program in the form of a floating rate instalment note in the principal amount of $150,000. The note had a maximum balance during 1995 and principal balance at December 31, 1995 of $150,000 with an interest rate of 7.00%. No other executive officers have loans under the program. (e) Compliance with section 16(a) of the Securities and Exchange Act of 1934 Section 16(a) of the Securities and Exchange Act of 1934 requires the Corporation's executive officers and directors, and persons who own more than ten percent of a registered class of the Corporation's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. The Corporation believes that during 1995 it complied with all Section 16(a) filing requirements applicable to its executive officers, directors and greater than ten percent beneficial owners, except for the following reports. One report on Form 4 was filed late by Mr. Bryson, who inadvertently failed to report the purchase in 1995 of 500 shares of Common Stock by The Bryson Trust. A Form 4 reflecting the purchase was filed by him approximately four days after the due date. The initial Form 3 for Mr. Scheid was inadvertently filed by the Corporation on his behalf approximately seven days after the due date. The initial Form 3 for Mr. Wilson, Executive Vice President and Senior Credit Review Manager, was inadvertently filed by the Corporation on his behalf approximately two months after the due date. Mr. Wilson ceased being subject to Section 16(a) filing requirements in January 1996. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (a) Security ownership of certain beneficial owners The following entities are the only stockholders known to the Corporation to be the beneficial owners of more than 5% of the Corporation's equity securities outstanding at December 31, 1995: Amount and Nature of Title of Name and Address of Beneficial Percent Class Beneficial Owner Ownership of Class - ------------------------------------------------------------------------- Common Oppenheimer Group, Inc. 5,847,179 (1) 7.64% Stock Oppenheimer Tower, World Financial Center New York, NY 10281 Common DI Associates and KKR Associates 6,131,693 (2) 8.01% Stock c/o Kohlberg Kravis Roberts & Co. 9 West 57th Street New York, NY 10019 (1) This information is based upon a Schedule 13G dated February 1, 1996 filed with the Securities and Exchange Commission ("SEC") by Oppenheimer Group, Inc. ("Group"), as parent holding company on behalf of Oppenheimer & Co., L.P. and Group's subsidiary companies and/or certain investment advisory clients or discretionary accounts of such subsidiaries. Group does not have sole voting and dispositive power with respect to any of the shares, and has shared voting and dispositive power as to all of the shares. An investment advisory subsidiary, Oppenheimer Capital, has shared voting and dispositive power as to 5,847,179 of such shares, and sole voting and dispositive power as to none of the shares. (2) This information is based upon a Schedule 13D dated February 3, 1993 filed with the SEC jointly by DI Associates ("DI") and KKR Associates ("KKR"). DI and KKR have sole voting and dispositive power as to all of the shares. (b) Security ownership by management The following table sets forth the number of shares of each class of equity securities of the Corporation beneficially owned as of December 31, 1995 by each director and executive officer named in the Summary Compensation Table and by all directors and executive officers as a group, with the exception of Common Stock Option Shares which are reported as of February 23, 1996. Beneficial ownership is defined in accordance with the rules of the Securities and Exchange Commission and means generally the power to vote or dispose of securities, regardless of any economic interest. Total Percent of Common Common Stock Common Common Name of Beneficial Owner (1) Stock (2) Option Shares (3) Stock Stock - ------------------------------------------------------------------------------- John E. Bryson (4)(5) 1,140 8,500 9,640 * Edward M. Carson (4)(6) 35,373 217,000 252,373 * Dr. Jewel Plummer Cobb 1,776 8,514 10,290 * James J. Curran (6)(7) 28,699 89,000 117,699 * Ralph P. Davidson 4,000 10,000 14,000 * Linnet F. Deily (6) 12,418 111,000 123,418 * Myron Du Bain (4) 28,939 10,000 38,939 * Don C. Frisbee 872 5,000 5,872 * George M. Keller (4) 5,896 7,000 12,896 * Thomas L. Lee 1,300 7,000 8,300 * Harold M. Messmer, Jr. 1,000 5,000 6,000 * Dr. William F. Miller (4) 2,310 10,000 12,310 * William S. Randall (4)(5)(6) 48,200 68,185 116,385 * Dr. Steven B. Sample 500 8,500 9,000 * Forrest N. Shumway (4) 2,000 10,000 12,000 * William E.B. Siart (6) 42,831 266,000 308,831 * Richard J. Stegemeier (4) 5,874 3,000 8,874 * Daniel M. Tellep 500 9,000 9,500 * Bruce G. Willison (5)(6)(7) 31,479 121,500 152,979 * All directors and executive officers as a group (30 persons) (4)(5)(6)(7)(8)(9) 335,149 1,340,273 1,675,422 2.21% * Represents less than 1% of the outstanding Common Stock. (1) Subject to applicable community property and similar statutes, the person listed as beneficial owners of shares have sole voting and investment power with respect to such shares except as noted. (2) Fractional shares resulting from participation in the Dividend Reinvestment and Stock Purchase Plan and the Employee Savings Plan of First Interstate Bancorp have been rounded to the nearest whole share. (3) Reflects the number of shares that could be purchased by exercise of options presently excercisable or excercisable within 60 days from February 23, 1996, under the Corporation's stock option plans. (4) Includes the following shares of Common Stock held by a living or family trust formed by the named individual in which voting or investment power may be shared: Mr. Bryson, 500 shares; Mr. Carson, 34,125 shares; Mr. Du Bain, 23,839 shares; Mr. Keller, 5,896 shares; Dr. Miller, 2,310 shares; Mr. Randall, 37,956 shares; Mr. Shumway, 2,000 shares; and Mr. Stegemeier, 5,874 shares. Also includes 4,000 shares of Common Stock held in an Individual Retirement Account by Mr. Du Bain. (5) Includes shares held jointly, or in other capacities, as to which in some cases beneficial ownership may be disclaimed. (6) Includes the following shares held by the Trustee of the Employee Savings Plan in the accounts of Mr. Carson and the named executive officers as of December 31, 1995: Mr. Carson 887 Mr. Siart 17,260 Mr. Randall 10,244 Mr. Willison 5,199 Mr. Curran 13,846 Mrs. Deily 1,053 All executive officers as a group (16 persons) 61,649 (7) Includes the following performance units awarded pursuant to the 1991, 1992, 1993 and 1994 annual incentive plans and issued under the 1991 Performance Stock Plan (each performance stock unit represents one share of Common Stock): Mr. Willison 3,465 Mr. Curran 3,005 All executive officer as a group (16 persons) 12,362 The performance stock units are payable in Common Stock or cash upon the date specified by the executive officer, or if earlier, upon a change in control or at termination of employment. Additional performance unit credit will be received based on the value of dividends paid on the underlying performance stock units. (8) Includes 123,944 shares of Common Stock held in living or family trusts in which voting or investment power may be shared. (9) No directors or executive officers owned any shares of Series F or Series G Preferred Stock of the Corporation. (c) Changes in control On January 24, 1996, the Corporation and Wells Fargo & Company (Wells Fargo) announced that they had reached a definitive agreement to merge the two companies, with Wells Fargo as the surviving corporation in the merger. Under the terms of the merger agreement, the Corporation's stockholders will receive a tax-free exchange of two-thirds of a share of Wells Fargo Common Stock for each share of the Corporation's Common Stock. Based on Wells Fargo's closing price of $217.25 on January 19, 1996, the last trading day before January 21, 1996, the day on which the Corporation and Wells Fargo reached agreement on the Exchange Ratio to be included in the merger agreement, this exchange ratio represents a price of $144.83 for each share of the Corporation's Common Stock. The combined board of directors will consist of the existing members of Wells Fargo's board and seven directors from the Corporation's board. The stockholders of Wells Fargo and the Corporation, at their respective special meetings of stockholders on March 28, 1996, approved the merger agreement and the transactions contemplated thereby. The effective time of the merger is expected to be 12:01 a.m. on April 1, 1996 Concurrent with its entering into the merger agreement with Wells Fargo, the Corporation terminated its November 5, 1995 merger agreement with First Bank System, Inc. An overall settlement agreement was entered into among the Corporation, First Bank System and Wells Fargo. Under the terms of the settlement agreement, the Corporation agreed to pay First Bank System a termination fee of $125 million and an additional termination fee of $75 million upon closing of its merger with Wells Fargo. These payments are being made in full satisfaction of the Corporation's obligations under the stock option and fee agreements entered into as part of its November 5, 1995 merger agreement with First Bank System. In addition, all litigation among the parties related to efforts to merge with the Corporation has been settled. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During 1995 a number of the Corporation's subsidiary banks had loan transactions, in the ordinary course of business, with officers and directors of the Corporation. There were also, during 1995, a number of loan transactions in the ordinary course of business between the Corporation's subsidiary banks and associates of officers and directors of the Corporation. Except as described in "Compensation committee interlocks and insider participation" above, all of such transactions were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than a normal risk of collectibility or present other unfavorable features. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1 - Financial Statements The following consolidated financial statements of the Registrant included in the Annual Report to Shareholders for the year ended December 31, 1995 are incorporated herein by reference in Item 8: Consolidated Financial Statements of First Interstate Bancorp and Subsidiaries: Consolidated Balance Sheet - December 31, 1995 and 1994 Consolidated Statement of Operations - Years Ended December 31, 1995, 1994 and 1993 Consolidated Statement of Cash Flows - Years Ended December 31, 1995, 1994 and 1993 Statement of Shareholders' Equity - Years Ended December 31, 1995, 1994 and 1993 Notes to Financial Statements Report of Ernst & Young LLP, Independent Auditors (a) 2 - Other Schedules All other schedules to the consolidated financial statements of the Registrant required by Article 9 of Regulation S-X are not required under the related instructions or are inapplicable and therefore have been omitted. (a) 3 - Exhibits: (1) Dealer Agreement dated as of December 9, 1994 among Registrant and various dealers named therein (incorporated by reference to the Registrant's Form 8-K dated March 24, 1995) (2.1) Agreement and Plan of Merger dated as of November 5, 1995 by and between First Interstate Bancorp, First Bank System,Inc. and Eleven Acquisition Corp. (incorporated by reference to the Registrant's Form 8-K dated November 9, 1995) (2.2) Agreement and Plan of Merger dated as of January 23, 1996, by and between Wells Fargo & Company and First Interstate Bancorp, and Amendment dated as of February 23, 1996 (incorporated by reference to Exhibits 2.1 and 2.2 of Wells Fargo & Company's Form S-4 Registration Statement No. 33-64575) (3.1) Composite Certificate of Incorporation of Registrant incorporating all amendments filed prior to January 30, 1988 (incorporated by reference to the Registrant's Form 10-K filed in March, 1990) (3.2) By-laws of Registrant incorporating all amendments through May 1, 1995 (4.1) Terms of Series F Preferred Stock (incorporated by reference to Registrant's Form S-3 Registration Statement No. 33-42889) (4.2) Terms of Series G Preferred Stock (incorporated by reference to Registrant's Form S-3 Registration Statement No. 33-47174) (4.3) Registrant has outstanding certain long term debt. See Note G of "Notes to Financial Statements" at Page 43 of the 1995 Annual Report to Shareholders. Such long term debt does not exceed 10% of the total assets of Registrant and its consolidated subsidiaries; therefore, copies of constituent instruments defining the rights of holders of such long term debt are not included as exhibits. Registrant agrees to furnish copies of such instruments to the Securities and Exchange Commission upon request. (10.1) 1983 Performance Stock Plan (incorporated by reference to Registrant's Form S-8 Registration Statement No. 2-82812) (10.2) 1988 Performance Stock Plan (incorporated by reference to Registrant's Form S-8 Registration Statement No. 33-23404) (10.3) Amendments dated July 20, 1994, August 22, 1995 and March 25, 1996 to 1988 Performance Stock Plan (10.4) First Interstate Bancorp 1991 Performance Stock Plan (incorporated by reference to Registrant's Form S-8 Registration Statement No. 33-38903) (10.5) Amendments dated July 20, 1994, August 22, 1995 and March 25, 1996 to First Interstate Bancorp 1991 Performance Stock Plan (10.6) First Interstate Bancorp 1995 Performance Stock Plan (incorporated by reference to the Registrant's Form 10-K filed in March 1995) (10.7) First Interstate Bancorp 1991 Director Option Plan (incorporated by reference to Registrant's Form S-8 Registration Statement No. 33-37299) (10.8) Amendments dated July 20, 1994 and March 26, 1996 to First Interstate Bancorp 1991 Director Option Plan (10.9) First Interstate Bancorp 1996 Regional Executive Incentive Plan (10.10) First Interstate Bancorp Corporate Executive Incentive Plan (incorporated by reference to the Registrant's Form 10-K filed in March 1995) (10.11) First Interstate Bancorp 1996 Management Incentive Plan (10.12) First Amendment to the First Interstate Corporate Executive Incentive Plan, 1996 First Interstate Regional Executive Incentive Plan and 1996 First Interstate Management Incentive Plan (10.13) 1989 Restatement of the Supplemental Employee Savings Plan of Registrant (incorporated by reference to the Registrant's Form 10-K filed in March 1990) (10.14) 1992 Restatement of the Supplemental Executive Retirement Plan of Registrant (incorporated by reference to Registrant's Form 10-K filed in March 1992) (10.15) 1989 Restatement of First Interstate Bancorp Excess Benefit Retirement Plan (incorporated by reference to Registrant's Form 10-K filed in March 1990) (10.16) Retirement Plan for Directors, amended and restated (incorporated by reference to Registrant's Form 10-K filed March, 1994) (10.17) Dividend Reinvestment and Stock Purchase Plan, as amended (incorporated by reference to Registrant's Form S-3 Registration Statement No. 33-50054) (10.18) Form of Employment Agreement between Registrant and William E.B. Siart, William S. Randall, Bruce G. Willison, James J. Curran, Linnet F. Deily and certain executive officers (incorporated by reference to Registrant's Form 10-K filed in March 1995) (10.19) Amendment to Amended and Restated Form of Employment Agreement between Registrant and William E.B. Siart, William S. Randall, Bruce G. Willison, James J. Curran, Linnet F. Deily and certain executive officers (10.20) Second Amendment to Amended and Restated Form of Employment Agreement between Registrant and William E.B. Siart, William S. Randall, Bruce G. Willison, James J. Curran, Linnet F. Deily and certain executive officers (10.21) Form of Split-Dollar Insurance Agreement between Registrant and Registrant's Directors (incorporated by reference to Registrant's Form 10-K filed in March 1992) (10.22) Amendment dated March 25, 1996, to Form of Split-Dollar Insurance Agreement between Registrant and Registrant's Directors (10.23) Form of Split-Dollar Life Insurance Agreement between Registrant and Edward M. Carson, William E.B. Siart, William S. Randall, Bruce G. Willison, James J. Curran and Linnet F. Deily (incorporated by reference to Registrant's Form 10-K filed in March 1992) (10.24) Amendment dated March 25, 1996, to Form of Split-Dollar Insurance Agreement between Registrant and Registrant's executive officers (10.25) $500,000,000 Credit Agreement dated as of May 31, 1994 among First Interstate Bancorp and certain banks (incorporated by reference to Registrant's Form 10-Q for the quarter ending June 30, 1994 filed in August 1994) (11) Computation of Earnings Per Share (12) Computation of Ratio of Earnings to Fixed Charges (13) Annual Report to Shareholders for the year ended December 31, 1995 (21) Subsidiaries of the Registrant (23) Consent of Ernst & Young LLP, Independent Auditors (27) Financial Data Schedule (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. Copies of related documents were included in such filing. A report on Form 8-K dated March 24, 1995 announced that the Corporation has entered into a Dealer Agreement dated as of 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 reported 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. A report on Form 8-K dated November 9, 1995 announced the Corporation's Agreement and Plan of Merger, dated as of November 5, 1995, among First Interstate Bancorp, First Bank System, Inc. and Eleven Acquisition Corp. A report on Form 8-K dated November 15, 1995 announced the Corporation's amendment dated as of November 5, 1995 to the Rights Agreement dated as of November 21, 1988, by and between First Interstate Bancorp and First Interstate Bank, Ltd., as Rights Agent A report on Form 8-K dated January 30, 1996 announced the Corporation's Agreement and Plan of Merger, dated as of January 23, 1996, among First Interstate Bancorp and Wells Fargo & Company. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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, this 25th day of March, 1996. FIRST INTERSTATE BANCORP Registrant By /s/Edward S. Garlock -------------------- Edward S. Garlock Secretary POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints David S. Belles and Edward S. Garlock, and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments to this report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his or her substitute may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date --------- ----- ---- /s/William E.B. Siart Chairman of the Board March 25,1996 - --------------------- and Chief Executive Officer William E. B. Siart Director /s/William S. Randall President March 25,1996 - --------------------- Director William S. Randall /s/Steven L. Scheid Executive Vice President March 25,1996 - --------------------- (Principal Financial Officer) Steven L. Scheid Signature Title Date --------- ----- ---- /s/David S. Belles Executive Vice President March 25,1996 - --------------------- (Principal Accounting Officer) David S. Belles /s/John E. Bryson - --------------------- John E. Bryson Director March 25,1996 /s/E. M. Carson - --------------------- E. M Carson Director March 25,1996 /s/Jewel Plummer Cobb - --------------------- Jewel Plummer Cobb Director March 25,1996 /s/Ralph P. Davidson - --------------------- Ralph P. Davidson Director March 25,1996 /s/Myron Du Bain - --------------------- Myron Du Bain Director March 25,1996 /s/Don C. Frisbee - --------------------- Don C. Frisbee Director March 25,1996 /s/George M. Keller - --------------------- George M. Keller Director March 25,1996 /s/Thomas L. Lee - --------------------- Thomas L. Lee Director March 25,1996 /s/Harold M. Messmer, Jr. - ------------------------- Harold M. Messmer, Jr. Director March 25,1996 /s/ William F. Miller - ---------------------- William F. Miller Director March 25,1996 Signature Title Date --------- ----- ---- /s/Steven B. Sample - --------------------- Steven B. Sample Director March 25,1996 /s/Forrest N. Shumway - --------------------- Forrest N. Shumway Director March 25,1996 /s/Richard J. Stegemeier - ------------------------ Richard J. Stegemeier Director March 25,1996 /s/Daniel M. Tellep - --------------------- Daniel M. Tellep Director March 25,1996 EX-3 2 FIRST INTERSTATE BANCORP BYLAWS CERTIFICATE I, ______________________________________, ________________________ Secretary of FIRST INTERSTATE BANCORP, a Delaware corporation, hereby certify that the above and foregoing pages numbered from 1 to 18, both numbers inclusive, is a true and correct copy of the bylaws of said Corporation now in force. WITNESS my hand this ________ day of ______________________________,19____. _________________________________ Secretary [SEAL] Amended, effective May 1, 1995 BYLAWS OF FIRST INTERSTATE BANCORP OFFICES 1. The principal office of this Corporation shall be in the City of Wilmington, County of New Castle, State of Delaware. The Corporation may also have offices at such other places as the Board of Directors may from time to time designate or the business of the Corporation may require. SEAL 2. The corporate seal shall have inscribed thereon the name of the Corporation, and the words "Incorporated September 27, 1957, Delaware." Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. The Secretary may have duplicate seals made and deposited for use with such officers as the Board of Directors may designate. It shall not be necessary to the validity of any instrument executed by any authorized officer or officers of this Corporation, that the execution of such instrument be evidenced by the corporate seal; and all documents, instruments, contracts and writings of all kinds signed on behalf of the Corporation by any authorized officer or officers thereof shall be as effectual and binding on the Corporation without the corporate seal, as if the execution of the same had been evidenced by affixing the corporate seal thereto. STOCKHOLDERS' MEETINGS 3. Meetings of the stockholders for the election of Directors or for any other purpose shall be held at such time and place, within or without the State of Delaware, as may be designated by the Board of Directors and specified in the notice of the meeting or in a duly executed waiver of notice thereof. 4. The Annual Meeting of the stockholders shall be held on such day of the year as may be designated by the Board of Directors and as shall be specified in the notice of the meeting, when they shall elect by a plurality vote, by ballot, a Board of Directors, and transact such other business as may properly be brought before the meeting. (a) To be properly brought before an Annual Meeting, business must be (1) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board, (2) otherwise properly brought before the meeting by or at the direction of the Board, or (3) otherwise properly brought before the meeting by a stockholder. In addition to any other applicable requirements, for business to be properly brought before an Annual Meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than thirty days nor more than sixty days prior to the meeting; provided, however, that in the event that less than forty days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the Annual Meeting was mailed or such public disclosure was made. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the Annual Meeting (i) a brief description of the business desired to be brought before the Annual Meeting and the reasons for conducting such business at the Annual Meeting, (ii) the name and record address of the stockholder proposing such business, (iii) the class and number of shares of the Corporation which are beneficially owned by the stockholder, and (iv) any material interest of the stockholder in such business. Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at the Annual Meeting except in accordance with the procedures set forth in this Section 4, provided, however, that nothing in this Section 4 shall be deemed to preclude discussion by any stockholder of any business properly brought before the Annual Meeting in accordance with said procedures. The chairman of an Annual Meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 4, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. (b) Only persons who are nominated in accordance with the following procedures shall be eligible for election as Directors of the Corporation. Nominations of persons for election to the Board may be made at a meeting of stockholders by or at the direction of the Board by any nominating committee or person appointed by the Board or by any stockholder of the Corporation entitled to vote for the election of Directors at the meeting who complies with the notice procedures set forth in this Section 4. Such nominations, other than those made by or at the direction of the Board, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than thirty days nor more than sixty days prior to the meeting; provided, however, that in the event that less than forty days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such stock- holder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a Director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of the Corporation which are beneficially owned by the person, and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of Directors pursuant to Rule 14a under the Securities Exchange Act of 1934, (v) the consent of each nominee to serve as a Director of the Corporation if so elected; and (b) as to the stockholder giving the notice, (i) the name and record address of stockholder and (ii) the class and number of shares of the Corporation which are beneficially owned by the stockholder, (iii) a representation that the stockholder intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, (iv) a representation that the stockholder (and any party on whose behalf or in concert with whom such stockholder is acting) is qualified at the time of giving such notice to have such individual serve as the nominee of such stockholder (and any party on whose behalf or in concert with whom such stockholder is acting) if such individual is elected, accompanied by copies of any notification or filings with, or orders or other actions by, any governmental authority which are required in order for such stockholder (and any party on whose behalf such stockholder is acting) to be so qualified, (v) a description of all arrangements or understandings between such stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by such stockholder and (vi) such other information regarding such stockholder as would be required to be included in a proxy statement or other filings required to be filed pursuant to Rule 14a under the Securities Exchange Act of 1934. The Corporation may require any proposed nominee to furnish such other information as may be reasonably required by the Corporation to determine the eligibility for election as a Director of the Corporation unless nominated in accordance with the procedures set forth herein. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. 5. The holders of a majority of the stock issued and outstanding, and entitled to vote thereat, present in person, or represented by proxy, shall be requisite and shall constitute a quorum at all meetings of the stockholders for the transaction of business, except as otherwise provided by law, by the Certificate of Incorporation or by these bylaws. If, however, such majority shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the requisite amount of voting stock shall be present or represented. At such adjourned meeting at which the requisite amount of voting stock shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty days, or if after adjournment a new record date is fixed for the adjourned meeting, a new notice of the adjourned meeting shall be given to each stockholder entitled to vote at the meeting. 6. At each meeting of the stockholders, every stockholder having the right to vote shall be entitled to vote in person, or by proxy appointed by an instrument in writing subscribed by such stockholder or by his duly authorized attorney and submitted to the Secretary at or before such meeting, but no such proxy shall be voted or acted upon after three years from its date, unless said instrument provides for a longer period. Each stockholder shall have one vote for each share of Common Stock, and one-half vote for each one-half share of stock, registered in his name on the books of the Corporation. Each stockholder shall have such voting powers, full or limited, but not to exceed one vote per share, or without voting powers, as shall be stated and expressed in the resolution or resolutions providing for the issue thereof adopted by the Board of Directors for each share of Preferred Stock, registered in his name on the books of the Corporation; provided, however, that except where a date shall have been fixed as a record date for the determination of stockholders entitled to vote as hereinafter provided in these bylaws, no share of stock shall be voted at any election for Directors which has been transferred on the books of the Corporation after the close of business on the day next preceding the day on which notice is given. The vote for Directors, and upon the demand of any stockholder, the vote upon any question before the meeting, shall be by ballot. All actions shall be taken and all questions decided by a majority vote, except as otherwise specifically provided by statute or by the Certificate of Incorporation or by these bylaws. The Chairman of the Board, or in his absence or when the office of Chairman of the Board is vacant, the President, or such other member of the Board of Directors as shall be designated by the Board, shall preside at all meetings of the stockholders. 7. Written notice of the Annual Meeting shall be mailed to each stockholder entitled to vote thereat at such address as appears on the records of the Corporation, not less than ten, nor more than sixty days prior to the meeting. 8. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the Chairman of the Board, or in his absence or when the office of Chairman of the Board is vacant, by the President, and shall be called by the Chairman of the Board, or in his absence or when the office of Chairman of the Board is vacant, by the President, or by the Secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the Corporation issued and outstanding, and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. 9. Business transacted at all special meetings shall be confined to the purpose or purposes stated in the call. 10. Written notice of a special meeting of stockholders, stating the place, date and hour, and purpose or purposes for which the meeting is called, shall be mailed, postage prepaid, not less than ten, nor more than sixty days before such meeting, to each stockholder entitled to vote at such meeting. 11. All notices required by these bylaws or otherwise to be mailed may be mailed either from the principal office of the Corporation at Wilmington, Delaware, or from any other office or place that may be determined by the Board of Directors. DIRECTORS 12. The property and business of this Corporation shall be managed by its Board of Directors, which shall number not less than three nor more than twenty-six, as shall be determined by resolution of the Board. Directors need not be stockholders. Except as provided in Section 13 of these bylaws, the Directors shall be elected by a plurality of the votes cast at the Annual Meeting of stockholders, and each Director elected shall serve until his successor is duly elected and qualified, or until his earlier resignation or removal. VACANCIES AND NEWLY CREATED DIRECTORSHIPS 13. Any vacancy in the Board of Directors caused by death, resignation, removal or otherwise, and newly created directorships resulting from any increase in the authorized number of Directors, may be filled either by a majority of the Directors then in office, though less than a quorum, or by the stockholders of the Corporation, and each Director so elected shall hold office until the next annual election of Directors, and until his successor shall be duly elected and qualified, or until his death or until he shall resign or shall have been removed. MEETINGS OF THE BOARD 14. The newly elected Board of Directors shall meet for the purpose of organization or otherwise, at such time and place as shall be fixed by resolution adopted by a majority of the whole Board, and if a majority of the whole Board shall be present, no notice of such meeting shall be necessary to the newly elected Directors in order legally to constitute the meeting; or they may meet at such place and time as shall be fixed by the consent in writing of all the Directors, or as shall be stated in the notice of such meeting given as hereinafter provided in the case of special meetings of the Board. 15. Regular meetings of the Board shall be held without call or notice at such time and place as shall from time to time be fixed by standing resolution of the Board. 16. Special meetings of the Board of Directors may be called by the Chairman of the Board, or in his absence or when the office of Chairman of the Board is vacant, by the President, on twenty-four hours' notice to each Director, personally or by mail or by facsimile transmission or by telephone; special meetings shall be called by the Chairman of the Board, or in his absence or when the office of Chairman of the Board is vacant, by the President or Secretary in like manner and on like notice on the written request of three Directors. Notice of special meetings of the Board shall state the time and place of the meeting, but need not state the purpose thereof except as otherwise in these bylaws expressly provided. 17. At all meetings of the Board of Directors a majority of the whole Board shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation or by these bylaws. Any meeting of the Board may be adjourned to meet again at a stated day and hour. Even though no quorum is present, as required in this Section, a majority of the Directors present at any meeting of the Board, either regular or special, may adjourn from time to time until a quorum be had, but no later than the time fixed for the next regular meeting of the Board. Notice of any adjourned meeting need not be given. 18. The Directors may cause the books of the Corporation to be kept outside of Delaware, at such offices of the Corporation or other places as the Directors may from time to time determine. 19. In addition to the powers and authorities by these bylaws expressly conferred upon it, the Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these bylaws directed or required to be exercised or done by the stockholders. COMMITTEES EXECUTIVE COMMITTEE 20. The Board of Directors, by resolution adopted by a majority of the whole Board, may designate an Executive Committee to consist of three or more Directors, two of whom shall be the Chairman of the Board and the President, and by like resolution may fill vacancies, or reconstitute the membership of, the Executive Committee; provided, however, that in the absence or disqualification of any member of the Executive Committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may appoint another member of the Board of Directors to act at the meeting in the place of any absent or disqualified member. Meetings of the Executive Committee for any purpose or purposes may be called by the Chairman of the Board, or in his absence or when the office of the Chairman of the Board is vacant, by the President, and shall be called by the Chairman of the Board, or in his absence or when the office of the Chairman of the Board is vacant, by the President, or the Secretary, at the request in writing of at least two members of the Executive Committee, to be held in such place as shall be designated from time to time by the Chairman of the Board, or in his absence or when the office of Chairman of the Board is vacant, by the President, or the Executive Committee, and indicated in the notice of such meetings. At least twenty-four hours' notice of such meetings shall be given to each member of the Executive Committee either personally or by mail or by facsimile transmission or by telephone. The Executive Committee shall, between meetings of the Board, have such powers as may be delegated to it from time to time by the Board. The Secretary or someone designated by the Executive Committee shall keep minutes of all its proceedings, all of which shall be reported as soon as practicable to the Board and shall be subject to revision or rescission by the Board, provided no rights of third parties shall be affected thereby. A member of the Executive Committee shall be appointed by the Board as Chairman of the Executive Committee, who shall preside at all meetings of the Executive Committee, or in his absence or if the Board fails to so appoint any such member, the Chairman of the Board shall preside at such meetings, or in his absence or when the office of Chairman of the Board is vacant, the President shall preside at such meetings, or if the President shall also be absent, and a quorum shall remain, the Executive Committee at any such meeting shall select from its members a chairman of the meeting. The presence of a majority of the members of the Executive Committee (but in no event less than three) shall be necessary to constitute a quorum for the transaction of business. OTHER COMMITTEES 21. The Board of Directors may from time to time by resolution create such other committee or committees of Directors designated by it to advise the Board, the Executive Committee and the officers and employees of the Corporation in all such matters as the Board shall deem advisable and with such functions and duties as the Board shall by resolution prescribe. A majority of all the members of any such committee may determine its action and fix the time and place of its meetings, unless the Board shall otherwise provide. The Board shall have power, at any time, to change the members of any such committee, to fill vacancies and to discharge any such committee, either with or without cause. In the absence or disqualification of any member of any such committee, the member or members thereof present at any meeting and not disqualified from voting whether or not he or they constitute a quorum, may appoint another member of the Board of Directors to act at the meeting in the place of any absent or disqualified member. COMPENSATION OF DIRECTORS 22. Directors, in addition to expenses of attendance, shall be allowed such compensation as may be fixed from time to time by resolution adopted by a majority of the whole Board; provided, that nothing herein contained shall be construed to preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. 23. Members of the Executive Committee and of any other special or standing committee shall, in addition to expenses of attendance, be allowed such compensation as may be fixed from time to time by resolution adopted by a majority of the whole Board. MEETINGS BY MEANS OF CONFERENCE 24. Unless otherwise provided by the Certificate of Incorporation or these bylaws, members of the Board of Directors of the Corporation, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 24 shall constitute presence in person at such a meeting. ACTION WITHOUT MEETING 25. Unless otherwise restricted by the Certificate of Incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or of such committee as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. OFFICERS 26. The officers of the Corporation shall be a Chairman of the Board, a President, one or more Executive Vice Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a Secretary, a Treasurer and a Controller. There may also be a Vice Chairman as may from time to time be designated by resolution of the Board of Directors. Two or more offices may be held by the same person. The Board of Directors may, in its discretion, confer additional functional titles including, but not limited to, Chief Financial Officer, Chief Credit Officer, General Counsel and General Auditor. 27. The Board of Directors, at its first meeting after each Annual Meeting of stockholders, shall choose a Chairman of the Board, a President, the Executive Vice Presidents, the Senior Vice Presidents, a Secretary, a Treasurer and a Controller, none of whom except the Chairman of the Board and the President need be members of the Board. If the office of any of the above officer or officers becomes vacant for any reason, the vacancy shall be filled by the Board. 28. The Board of Directors may appoint a Vice Chairman of the Board to hold office at the pleasure of the Board, who may, but need not, be a member of the Board, and who may be an officer of the Corporation. 29. The Chairman of the Board or someone who shall have been designated by the Chairman shall appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Chairman of the Board or his designee. 30. The salaries of officers of the Corporation shall be fixed by the Chief Executive Officer except (l) Officers whose annual salaries are in excess of an amount as shall from time to time be fixed by resolution of the Board; and (2) Officers who are Directors of the Corporation, regardless of the amount of the salary of such officers. 31. The officers of the Corporation shall hold office until their successors are chosen and qualify in their stead. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the whole Board. THE CHAIRMAN OF THE BOARD 32. The Chairman of the Board shall preside at all meetings of the Board of Directors and of the stockholders. He shall be the Chief Executive Officer of the Corporation; he shall have general and active management of the business affairs and property of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. He shall be ex officio a member of all standing committees except where otherwise indicated in these bylaws or in the resolution appointing a committee, and unless otherwise indicated in these bylaws or in the resolution appointing a committee, he shall act as chairman of all such committees. He shall have the general powers and duties of supervision and management usually vested in the chief executive officer of a corporation. THE PRESIDENT, VICE CHAIRMAN AND VICE PRESIDENTS 33. (a) The President shall perform such duties as may be prescribed by the Board or the Executive Committee or the Chairman of the Board. When the office of Chairman of the Board is vacant, or in the absence or disability of the Chairman of the Board, the President shall perform the duties and exercise the powers of the Chairman of the Board. (b) In the absence or disability of the President, the Vice Chairman shall perform the duties and exercise the powers of President. In the absence or disability of said Vice Chairman, any Executive Vice President designated by the Board of Directors or by the Executive Committee shall perform such duties and exercise such powers. (c) The Vice Chairman shall perform such duties as may be prescribed by the Board of Directors or the Executive Committee or the Chairman of the Board or the President. d) The Vice Presidents shall perform such duties as may be prescribed by the Board or the Executive Committee or the Chairman of the Board or the President. THE SECRETARY AND ASSISTANT SECRETARIES 34. (a) The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings of such meetings in a book to be kept for that purpose, and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and of the Board, and shall perform such other duties as may be prescribed by the Board, or by the Chairman of the Board, under whose supervision he shall be. He shall keep in safe custody the seal of the Corporation, and when authorized by the Board or these bylaws, affix the same to any instrument requiring it, and when so affixed, it shall be attested by his signature. (b) The Assistant Secretaries shall perform such duties as the Board shall prescribe and in the absence or disability of the Secretary, an Assistant Secretary, designated by the Board of Directors or by the Executive Committee, shall perform the duties and exercise the powers of the Secretary. THE TREASURER 35. (a) The Treasurer or such other person designated by the Board of Directors shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation, in such depositories as may be designated by the Board. (b) Such person shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chairman of the Board and Directors, whenever they may require it, an account of all his transactions and of the financial condition of the Corporation. (c) Such person shall give the Corporation a bond, if required by the Board of Directors, in a sum, and with one or more sureties, satisfactory to the Board, for the faithful discharge of the duties of his office, and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation; but the Board may, if it sees fit, dispense with such bond. THE CONTROLLER AND ASSISTANT CONTROLLERS 36. (a) The Board of Directors may elect a Controller who shall be the chief accounting officer of the Corporation, who shall have control over all accounting matters concerning the Corporation and who shall perform such other duties as may be required of him by the Chairman of the Board, the President or the Chief Financial Officer. (b) The Assistant Controllers shall perform such duties as the Board may prescribe, and in the absence or disability of the Controller, an Assistant Controller designated by the Board of Directors or by the Executive Committee, shall perform the duties and exercise the powers of the Controller. DUTIES OF OFFICERS MAY BE DELEGATED 37. In the case of the absence of any officer of the Corporation, or for any other reason that the Board of Directors may deem sufficient, the Board may delegate, for the time being, the powers or duties, or any of them, of such officer to any other officer, or to any Director, provided a majority of the entire Board concurs therein. CERTIFICATES OF STOCK 38. The certificates of stock of the Corporation shall be numbered and shall be entered in the books of the Corporation as they are issued. Each certificate shall exhibit the holder's name and certify the number of shares owned by him in the Corporation, and shall be signed by, or in the name of the Corporation by, the Chairman of the Board or the President or a Vice President, and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, provided that the Board of Directors may have the certificates of stock signed by facsimile signatures. The certificates of stock are to be in the form approved by the Board of Directors. TRANSFERS OF STOCK 39. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by attorney, lawfully constituted in writing, and upon surrender of the certificate therefor. RECORD DATE 40. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof; or entitled to receive payment of any dividend or other distribution or allotment of any rights; or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary, request the Board of Directors to fix a record date. The Board of Directors shall promptly, but in all events within ten days after the date on which such a request is received, adopt a resolution fixing the record date. If no record date has been fixed by the Board of Directors within ten days of the date on which such a request is received, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or any officer or agent of the Corporation having custody of the book in which proceedings of stockholders' meetings are recorded, to the attention of the Secretary of the Corporation. Delivery shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by applicable law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board of Directors adopts the resolution taking such prior action. REGISTERED STOCKHOLDERS 41. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of Delaware. LOST CERTIFICATE 42. The Board of Directors may authorize the issue of a new certificate of stock in the place of any certificate theretofore issued by the Corporation, alleged to have been lost or destroyed, and the Board may, in its discretion, require the owner of the lost or destroyed certificate, or his legal representatives, to give the Corporation a bond sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss of any such certificate or the issuance of such new certificate, to furnish such proof of the loss or destruction of such certificate as it shall deem proper, and to comply with such other regulations as the Board shall from time to time fix, including advertising such loss or destruction in such manner as the Board may require. A new certificate may be issued without requiring any bond when, in the judgment of the Board, it is proper to do so. INSPECTION OF BOOKS 43. The Directors shall determine from time to time whether, and, if allowed, when and under what conditions and regulations the accounts and books of the Corporation (except such as may by law be specifically open to inspection), or any of them, shall be open to the inspection of the stockholders, and the stockholders' rights in this respect are and shall be restricted and limited accordingly. CHECKS 44. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers as provided in these bylaws or as the Board of Directors may from time to time designate. FISCAL YEAR 45. The fiscal year shall begin the first day of January in each year. DIVIDENDS 46. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash or in property, including, without limitation, shares of the capital stock of the Corporation. Before payment of any dividend there may be set apart out of any funds of the Corporation available for dividends, such sum or sums as the Directors from time to time, in their absolute discretion, think proper as a reserve to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Directors shall think conducive to the interests of the Corporation. NOTICES 47. Whenever, under the provisions of the statutes or of the Certificate of Incorporation or of these bylaws, notice is required to be given to any Director, committee member, officer or stockholder, it shall not be construed to mean personal notice, but such notice may be given, in the case of stockholders, in writing, by mail, by depositing the same in the post office or letter-box, in a postpaid, sealed wrapper, addressed to such stockholder, at such address as appears on the books of the Corporation, or, in default of other address, to such stockholder at the General Post Office in the City of Wilmington, Delaware, and, in the case of Directors, committee members and officers, by telephone, or by mail or by facsimile transmission to the last business address known to the Secretary of the Corporation, and such notice shall be deemed to be given at the time when the same shall be thus mailed or telephoned or sent by facsimile transmission. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation or of these bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. AMENDMENTS 48. These bylaws may be altered, amended or repealed, in whole or in part, or new bylaws may be adopted by the stockholders or by the Board of Directors, provided, however, that notice of such alteration, amendment, repeal or adoption of new bylaws by the stockholders be contained in the notice of such meeting. All such amendments must be approved by either the holders of a majority of the outstanding capital stock entitled to vote thereon or by a majority of the entire Board of Directors then in office. As used in this Section 48 and in these bylaws generally, the term "entire Board of Directors" means the total number of Directors which the Corporation would have if there were no vacancies. INDEMNIFICATION OF DIRECTORS AND OFFICERS 49. (a) Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative or the lawful spouse (whether such status is derived by reason of statutory law, common law or otherwise), is or was a Director or officer of the Corporation or is or was serving at the request of the Corporation as a Director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a Director, officer, employee or agent or in any other capacity while serving as a Director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators, or lawful spouse; provided, however, that except as provided in paragraph (b) hereof with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such person in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that if the Delaware General Corporation Law requires, the payment of such expenses incurred by a Director or officer in his or her capacity as a Director or officer (and not in any other capacity in which service was or is rendered by such Director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such Director or officer, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such Director or officer is not entitled to be indemnified for such expenses under this Section or otherwise. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of Directors and officers. (b) Right of Claimant to Bring Suit. If a claim under paragraph (a) of this Section is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim, and if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting or defending such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a deter- mination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall create a presumption that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (c) Non-Exclusivity of Rights. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, bylaw, agreement, vote of stockholders or disinterested Directors or otherwise. (d) Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any Director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. EMERGENCY BYLAWS 50. When operative. The Emergency Bylaws provided by the following sections shall be operative during any emergency resulting from an attack on the United States, any nuclear disaster, earthquake or during the existence of any catastrophe, as a result of which a quorum of the Board of Directors or the Executive Committee thereof cannot be readily convened for action, notwithstanding any different provision in the preceding sections of the bylaws or in the Certificate of Incorporation of the Corporation or in the General Corporation Law of the State of Delaware. To the extent not inconsistent with the Emergency Bylaws, the bylaws provided in the preceding sections shall remain in effect during such emergency, and upon the termination of such emergency, the Emergency Bylaws shall cease to be operative unless and until another such emergency shall occur. 51. Meetings. During any such emergency: (a) Any meeting of the Board of Directors may be called by any Director. Whenever any Executive Officer of the Corporation who is not a Director has reason to believe that no Director is available to participate in a meeting, such Executive Officer may call a meeting to be held under the provisions of this section. b) Notice of each meeting called under the provisions of this section shall be given by the person calling the meeting or at his request by any officer of the Corporation. The notice shall specify the time and the place of the meeting, which shall be the head office of the Corporation at the time, if feasible, and otherwise any other place specified in the notice. Notice need be given only to such of the Directors as it may be feasible to reach at the time and may be given by such means as may be feasible at the time, including publication or radio. If given by mail, messenger, telephone or facsimile transmission, the notice shall be addressed to the Director at his residence or business address or such other place as the person giving the notice shall deem suitable. In the case of meetings called by an Executive Officer who is not a Director, notice shall also be given similarly, to the extent feasible, to the persons named on the list referred to in part (c) of this section. Notice shall be given at least two days before the meeting if feasible in the judgment of the person giving the notice and otherwise the meeting may be held on any shorter notice that he shall deem to be suitable. c) At any meeting called under the provisions of this section, the Director or Directors present shall constitute a quorum for the transaction of business. If no Director attends a meeting called by an Executive Officer who is not a Director and if there are present at least three of the persons named on a numbered list of personnel approved by the Board of Directors before the emergency, those present (but not more than thirteen appearing highest in priority on such list) shall be deemed Directors for such meeting and shall constitute a quorum for the transaction of business. 52. Lines of succession. The Board of Directors, during as well as before any such emergency, may provide, and from time to time modify, lines of succession, in the event that during such an emergency any or all officers or agents of the Corporation shall for any reason be rendered incapable of discharging their duties. 53. Offices. The Board of Directors, during as well as before any such emergency, may, effective during the emergency, change the head office or designate several alternative head offices or regional offices, or authorize the officers so to do. 54. Liability. No officer, Director or employee acting in accordance with these Emergency Bylaws shall be liable except for willful misconduct. 55. Repeal or change. The Emergency Bylaws shall be subject to repeal or change by action of the Board of Directors or by the affirmative vote of at least 66 2/3 percent of all votes entitled to be cast by the holders of Capital Stock of the Corporation entitled to vote generally in the election of Directors voting together as a single class, except that no such repeal or change shall modify the provisions of the next preceding section with regard to action or inaction prior to the time of such repeal or change. EX-10 3 EXHIBIT (10.3) FIRST AMENDMENT TO FIRST INTERSTATE 1988 PERFORMANCE STOCK PLAN First Interstate Bancorp adopted the First Interstate Bancorp 1988 performance Stock Plan (the Plan) effective February 16, 1988 as approved by shareholders on April 29, 1988. In order to have consistent treatment under First Interstate Bancorp's various plans in the event that employees become employees of another company, this amendment is being adopted. This amendment is effective August 17, 1992. 1. New sentences have been added to Section 6.1 of the Plan to read as follows: In the event that employees of the Company or its subsidiaries become employees of another company pursuant to a stock or asset sale, merger, or similar transaction or in the event of a corporate reorganization, reduction in force or similar event, the Committee shall have the authority, which shall be exercised in its sole discretion, to continue to credit service for purposes of satisfying the restricted period requirements set forth in the Restricted Stock Agreement. Such Committee authority shall only apply to restricted stock granted to individuals who are not subject to Section 16 of the Securities Exchange Act. 2. The following paragraph has been added as a new Section 15: 15. Expiration of Options. In the event that employees of the Company or its Subsidiaries become employees of another company pursuant to a stock or asset sale, merger or similar transaction or in the event of a corporate reorganization, reduction in force or similar event, the Committee shall have the authority, which shall be exercised in its sole discretion, to modify the dates upon which options previously granted shall expire. Such Committee authority shall only apply to options granted to individuals who are not subject to Section 16 of the Securities Exchange Act. Any modification to the terms under which the option would otherwise expire shall not cause the option to expire later than the date the option was originally scheduled to expire pursuant to the terms or the original Stock Option Agreement. Executed at Los Angeles this 22 day of August, 1995. FIRST INTERSTATE BANCORP By:______________________ Executive Vice President By:_______________________ Secretary EXHIBIT (10.3) SECOND AMENDMENT TO FIRST INTERSTATE BANCORP 1988 PERFORMANCE STOCK PLAN First Interstate Bancorp adopted the First Interstate Bancorp 1988 Performance Stock Plan (the Plan) effective February 16, 1988 as approved by shareholders on April 29, 1988 at the Annual Shareholder's meeting. In order to have a consistent definition of Change in Control among First Interstate Bancorp's various plans, this Amendment is being adopted. This Amendment is effective June 20, 1994. 1. The definition of Change in Control in Section 12 Additional Definitions is amended by revising it to read as follows: Change in Control of the Company means and shall be deemed to have occurred if and when any one of the following five events occurs: (i) any person (as such term is used in Section 13(d) of the Securities Exchange Act of 1934 (the Exchange Act)) becomes a beneficial owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities; (ii) individuals who were member of the Board of Directors of the Company immediately prior to a meeting of the stockholders of the Company involving a contact for the election of Directors do not constitute a majority of the Board of Directors following such election; (iii) the stockholders of the Company approve the dissolution or liquidation of the Company; (iv) the stockholders of the Company approve an agreement to merge or consolidate, or otherwise reorganize, with or into one or more entities which are not Subsidiaries, as a result of which less than 50% of the outstanding voting securities of the surviving or resulting entity are, or are to be, owned by former stockholders of the Company (excluding from the term former stockholders a stockholder who is, or as a result of the transaction in question becomes, an affiliate, as that term is used in the Exchange Act and the Rules promulgated thereunder, of any party to such merger, consolidation or reorganization); or (v) the stockholders of the Company approve the sale of substantially all of the Company's business and/or assets to a person or entity which is not a Subsidiary. Executed at Los Angeles, California this 20th day of July, 1994. FIRST INTERSTATE BANCORP By: _________________________ Executive Vice President By: _________________________ Secretary EXHIBIT (10.3) THIRD AMENDMENT TO FIRST INTERSTATE BANCORP 1988 PERFORMANCE STOCK PLAN First Interstate Bancorp adopted the First Interstate Bancorp 1988 Performance Stock Plan (the "Plan") effective February 16, 1988 as approved by shareholders on April 29, 1988 at the Annual Shareholder's meeting. This Amendment is being adopted to modify the definition of Change in Control. This Amendment is effective January 21, 1996. 1. The definition of Change in Control in Section 12, Additional Definitions, is amended by deleting 50% in clause (iv) and inserting 60% in its place. Executed at Los Angeles, California this 25th day of March, 1996. FIRST INTERSTATE BANCORP By:__________________________ Executive Vice President By:__________________________ Secretary W032596C.DOC EX-10 4 EXHIBIT (10.5) FIRST AMENDMENT TO FIRST INTERSTATE 1991 PERFORMANCE STOCK PLAN First Interstate Bancorp adopted the First Interstate Bancorp 1991 Performance Stock Plan (the Plan) effective February 7, 1991 as approved by shareholders on April 19, 1991. In order to have consistent treatment under First Interstate Bancorp's various plans in the event that employees become employees of another company, this amendment is being adopted. This amendment is effective August 17, 1992. 1. New sentences have been added to Section 6.1 of the Plan to read as follows: In the event that employees of the Company or its subsidiaries become employees of another company pursuant to a stock or asset sale, merger, or similar transaction or in the event of a corporate reorganization, reduction in force or similar event, the Committee shall have the authority, which shall be exercised in its sole discretion, to continue to credit service for purposes of satisfying the restricted period requirements set forth in the Restricted Stock Agreement. Such Committee authority shall only apply to restricted stock granted to individuals who are not subject to Section 16 of the Securities Exchange Act. 2. The following paragraph has been added as a new Section 17: 17. Expiration of Options. In the event that employees of the Company or its Subsidiaries become employees of another company pursuant to a stock or asset sale, merger or similar transaction or in the event of a corporate reorganization, reduction in force or similar event, the Committee shall have the authority, which shall be exercised in its sole discretion, to modify the dates upon which options previously granted shall expire. Such Committee authority shall only apply to options granted to individuals who are not subject to Section 16 of the Securities Exchange Act. Any modification to the terms under which the option would otherwise expire shall not cause the option to expire later than the date the option was originally scheduled to expire pursuant to the terms or the original Stock Option Agreement. Executed at Los Angeles this 22 day of August, 1995. FIRST INTERSTATE BANCORP By:______________________ Executive Vice President By:_______________________ Secretary EXHIBIT (10.5) SECOND AMENDMENT TO FIRST INTERSTATE BANCORP 1991 PERFORMANCE STOCK PLAN First Interstate Bancorp adopted the First Interstate Bancorp 1991 Performance Stock Plan (the Plan) effective February 7, 1991 as approved by shareholders on April 19, 1991 at the Annual Shareholder's meeting. In order to have a consistent definition of Change in Control among First Interstate Bancorp's various plans, this Amendment is being adopted. This Amendment is effective June 20, 1994. 1. The definition of Change in Control in Section 14 Additional Definitions is amended by revising it to read as follows: Change in Control of the Company means and shall be deemed to have occurred if and when any one of the following five events occurs: (a) any person (as such term is used in Section 13(d) of the Securities Exchange Act of 1934 (the Exchange Act)) becomes a beneficial owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities; (b) individuals who were member of the Board of Directors of the Company immediately prior to a meeting of the stockholders of the Company involving a contact for the election of Directors do not constitute a majority of the Board of Directors following such election; (c) the stockholders of the Company approve the dissolution or liquidation of the Company; (d) the stockholders of the Company approve an agreement to merge or consolidate, or otherwise reorganize, with or into one or more entities which are not Subsidiaries, as a result of which less than 50% of the outstanding voting securities of the surviving or resulting entity are, or are to be, owned by former stockholders of the Company (excluding from the term former stockholders a stockholder who is, or as a result of the transaction in question becomes, an affiliate, as that term is used in the Exchange Act and the Rules promulgated thereunder, of any party to such merger, consolidation or reorganization); or (e) the stockholders of the Company approve the sale of substantially all of the Company's business and/or assets to a person or entity which is not a Subsidiary. Executed at Los Angeles, California this 20th day of July, 1994. FIRST INTERSTATE BANCORP By: _________________________ Executive Vice President By: _________________________ Secretary EXHIBIT (10.5) THIRD AMENDMENT TO FIRST INTERSTATE BANCORP 1991 PERFORMANCE STOCK PLAN First Interstate Bancorp adopted the First Interstate Bancorp 1991 Performance Stock Plan (the "Plan") effective February 7, 1991 as approved by shareholders on April 19, 1991 at the Annual Shareholder's meeting. This Amendment is being adopted to modify the definition of Change in Control. This Amendment is effective January 21, 1996. 1. The definition of Change in Control in Section 14, Additional Definitions is amended by deleting 50% in clause (d) and inserting 60% in its place. Executed at Los Angeles, California this 25th day of March, 1996. FIRST INTERSTATE BANCORP By:___________________________ Executive Vice President By:___________________________ Secretary W032596B.DOC EX-10 5 EXHIBIT (10.8) FIRST AMENDMENT TO FIRST INTERSTATE BANCORP 1991 DIRECTOR OPTION PLAN (as amended and restated) First Interstate Bancorp adopted the First Interstate Bancorp 1991 Director Option Plan effective October 16, 1990. In order to have a consistent definition of Change in Control among First Interstate Bancorp's various plans, this Amendment is being adopted. This Amendment is effective June 20, 1994. The definition of Change in Control in Section 7, Change in Control is amended by revising it to read as follows: Any Option granted hereunder shall become immediately exercisable to the full extent theretofore not exercisable upon the occurrence of a Change in Control. Change in Control of the Company means and shall be deemed to have occurred if and when any one of the following five events occurs: (a) any person (as such term is used in Section 13(d) of the Securities Exchange Act of 1934 (the Exchange Act) becomes a beneficial owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities; (b) individuals who were members of the Board of Directors of the Company immediately prior to a meeting of the stockholders of the Company involving a contest for the election of Directors do not constitute a majority of the Board of Directors following such election; (c) the stockholders of the Company approve the dissolution or liquidation of the Company; (d) the stockholders of the Company approve an agreement to merge or consolidate, or otherwise reorganize, with or into one or more entities which are not Subsidiaries, as a result of which less than 50% of the outstanding voting securities of the surviving or resulting entity are, or are to be, owned by former stockholders of the Company (Excluding from the term former stockholders a stockholder who is, or as a result of the transaction in question becomes, an affiliate, as that term is used in the Exchange Act and the Rules promulgated thereunder, of any party to such merger, consolidation or reorganization); or (e) the stockholders of the Company approve the sale of substantially all of the Company's business and/or assets to a person or entity which is not a Subsidiary. Executed at Los Angeles, California this 20th day of July, 1994. FIRST INTERSTATE BANCORP By: ________________________ Executive Vice President By: ________________________ Secretary EXHIBIT (10.8) THIRD AMENDMENT TO FIRST INTERSTATE BANCORP 1991 DIRECTOR OPTION PLAN (as amended and restated) First Interstate Bancorp adopted the First Interstate Bancorp 1991 Director Option Plan effective October 16, 1990. This Amendment is being adopted to modify the definition of Change in Control. This Amendment is effective January 21, 1996. 1. The definition of Change in Control in Section 7, Change in Control is amended by deleting 50% in clause (d) and inserting 60% in its place. Executed at Los Angeles, California this 26th day of March, 1996. FIRST INTERSTATE BANCORP By:_________________________ Executive Vice President By:_________________________ Secretary W032796C.DOC EX-10 6 EXHIBIT (10.10) FIRST INTERSTATE 1996 REGIONAL EXECUTIVE INCENTIVE PLAN Effective January 1, 1996 1. Objectives. The 1996 Regional Executive Incentive Plan is designed to focus the efforts of certain executive employees of selected Subsidiaries on the continued improvement in the performance of such Subsidiaries, and to aid in attracting, motivating and retaining superior executives by providing an incentive and reward for those executive employees who contribute most to the operating progress and performance of the Corporation's Subsidiaries. 2. Definitions. The following definitions shall be applicable to the terms used in the Plan: "Administrator" means the Chief Executive Officer of Bancorp. "Award" means a cash distribution to be made to a Participant for a Performance Year as determined in accordance with the provisions of the Plan. (c) "Award Fund" means the total of the Target Awards for each Participant as determined and approved in accordance with Section 5 hereof. (d) "Bancorp" means First Interstate Bancorp, a Delaware Corporation. (e) "Change in Control" shall have the meaning set forth in Section 17. (f) "Committee" means the Compensation Committee of the Board of Directors of Bancorp. (g) "First Interstate" means the consolidated group of companies comprising First Interstate Bancorp. (h) "Fiscal Year" means the customary fiscal year of Bancorp. (i) "Management Incentive Plan" means the First Interstate Bancorp 1996 Management Incentive Plan. (j) "Offset Value" shall have the meaning set forth in Section 18(b) and (c). (k) "Participant" means an eligible executive who, pursuant to Section 4 hereof, automatically becomes a Participant in the Plan for a Fiscal Year. (l) "Performance Year" means the Fiscal Year. (m) "Plan" means this First Interstate Bancorp 1996 Regional Executive Incentive Plan, as set forth herein. (n) "Policies" shall have the meaning set forth in Section 18(a). (o) "PSP" shall have the meaning set forth in Section 7(c). (p) "Region" means any of the California, Northwest, Southwest or Texas regions consisting of First Interstate banks and as defined by First Interstate Bancorp. (q) "Split-Dollar Life Insurance Agreement" shall have the meaning set forth in Section 18(a). (r) "Subsidiary" means a bank, corporation, association or similar organization of which the majority of the outstanding shares of voting stock is owned by Bancorp, directly or indirectly. (s) "Target Award" is determined for each Participant by multiplying the Participant's base pay rate in effect at the end of the Performance Year by the Target Award Percentage applicable to the Participant set forth under Item I of the Target Award Guidelines attached as Table A. 3. Adoption and Administration of the Plan. The Plan shall become effective as of January 1, 1996 upon adoption by the Committee. Subject to the provisions of this Plan and in the absence of specific action by the Com- mittee, this Plan shall be administered by the Administrator. The Plan shall not be modified except with the consent of the Committee. All decisions of the Administrator or the Committee shall be final and binding. 4. Participation and Target Awards. (a) Determination of Participants and Target Awards. The Chief Executive Officer of each Region shall be Participants in the Plan. As provided in the Plan, participation for an individual may be terminated. Except as provided in Sections 8(b), 10 and 17 to be considered eligible for an Award, a Participant must be participating in the Plan or the Management Incentive Plan for at least six months during the Performance Year. (b) Notification. Each Participant shall be notified of his or her eligibility for participation in the Plan for such Performance Year or shall be notified of his or her termination, as applicable, by a letter from the Administrator or his or her designee. A copy of this Plan shall be provided to each Participant. A Participant shall have no right to or interest in an Award unless and until the Participant's Award has been determined and certified by the Committee. 5. Determination of Award. (a) Performance Review. As soon as practicable after the close of each Performance Year, a determination of each Region's performance shall be made by the Administrator. The Administrator's determination shall be subject to the approval by the Committee. (b) Award Fund. The Committee shall determine the total amount of the Award Fund authorized under this Plan for the Performance Year. The Award Fund amount for a Region may be determined in any manner the Committee deems appropriate from time to time. Without limiting the Committee's discretion to choose other methods to calculate the size of the Award Fund, it is anticipated that the Award Fund amount for the Participants will equal the sum of the Target Awards for each Participant multiplied by a percentage representing the performance of the Region determined by the Administrator. The maximum Award Fund amount may not exceed 1.5 times the sum of Target Awards. (c) Limitations. The Committee shall have the right to reduce an Award to an actual award percentage of no less than 0%. Award payments will be charged against Bancorp or the Subsidiary for which the Participant is an employee, as appropriate. 6. Allocation of Award Fund to Participants. The Award Fund shall be available for allocation to Participants on a totally discretionary basis in a manner designed to give the Administrator the flexibility to take into account the individual performance of each Participant. Based on its evaluation of a Participant's performance, the Administrator may determine an Award equal to any percentage of the Participant's Target Award up to 150%. In the event the amount of the Award Fund exceeds the total Awards for a Performance Year, such excess shall not be carried forward for purposes of Awards in future Performance Years. Award payments will be charged against the Subsidiary for which the Participant is an employee, as appropriate. 7. Time of Payment of Awards, Deferrals, Hardships. (a) Payment Date. Except as provided in (b) below, as soon as practicable after the determination of Awards and approval by the Committee, any Award, less any legally required withholding, shall be paid to the Participant or, in the event of a Participant's death, in accordance with Section 8 hereof. (b) Deferrals. In the year prior to the year in which an Award is earned, a Participant may elect, on a form specified by Bancorp, to defer the receipt of any Award to which he or she may be entitled for such Performance Year until the earlier of (1) termination of employment (the first to occur of retirement, death, disabil- ity, or termination of employment) or (2) January 1 of a specified calendar year. In such event: (i) The amount the Participant elects, net of any legally required withholding, shall become the deferred Award; (ii) Interest on such deferred Award will be the Moody's Investment Grade Corporate Bond Yield as shown in Moody's Yield Average for the last full month of each previous calendar year and will be credited quarterly; and (iii) Such deferred Award, plus accumulated interest, shall be paid upon the earlier of (1) or (2) above, in the form of a lump sum, equal annual installments over not more than 10 years, or such other method as may be selected by the Participant and agreed to by the Administrator or, in the case of any payment to the Administrator, by the Committee. (c) Deferrals into Performance Units. As an alternative to a deferral payable in cash, as described in subsection (b), the deferred Award may, if the Participant elects and the Committee permits, be invested in Performance Units under Section 7.3 of the First Interstate Bancorp 1991 Performance Stock Plan or the 1995 Performance Stock Plan (each, a "PSP"). The amount deferred shall be deemed to be converted into Performance Units under Section 7.3 of the PSP as of the date the Award would have been payable if no deferral had occurred, based on the fair market value, determined in accordance with the terms of said plan, of the common stock of Bancorp on that date. The timing and manner of payment of deferrals shall be governed by a Performance Unit Agreement entered into by the Participant under the PSP. (d) Hardship Withdrawal. A Participant may request in writing, citing the reasons for the request, that the Committee permit the early payment of all or part of a deferred Award. Within 90 days after receipt, the Committee shall rule on the request. The Committee shall grant the request only if, in its sole discretion, the Committee makes a specific finding of financial hardship that is an unanticipated emergency caused by an event beyond the control of the Participant. The amount payable hereunder shall not exceed the amount necessary to avoid such hardship. (e) Acceleration of Deferrals. Anything in this Plan to the contrary notwithstanding, the Com- mittee may accelerate the payment of all deferred Awards hereunder at any time in its sole discretion. In addition, the Committee reserves the right to pay any deferred Awards in the form of a lump sum if the amount is less than $10,000.00. 8. Death of a Participant. (a) Beneficiary Designation. A Participant may file a designation of a beneficiary or beneficiaries on a form to be provided which designation may be changed or revoked by the Participant's sole action, provided that such change or revocation is filed in written form. (b) Death during Performance Year. In case of the death of a Participant during a Performance Year, Bancorp or the Subsidiary, as appropriate, may pay a pro rata portion of the Award to which the Participant would have been entitled for such Performance Year. Such pro rata portion shall be equal to (1) the ratio which the Participant's completed calendar months of participation during the Performance Year bears to 12 multiplied by (2) the amount the Committee determines the Participant would have been entitled to had he or she lived. (c) Death after Performance Year. In case of the death of a Participant after the end of a Performance Year, but before the delivery of an Award to which he or she may be entitled, such Award shall be delivered to the Participant's designated beneficiary. (d) Failure to Designate Beneficiary. If a Participant dies having failed to designate any beneficiary, or if no beneficiary survives the Participant or survives to the date of any payment in question, the amount otherwise payable to such beneficiary shall be paid to the Participant's surviving spouse, if any, and otherwise to the Participant's heirs at law, as determined under the law governing succession to personal property for the state in which the Participant resided on the day the Participant died. 9. Transfer of a Participant. In the event a Participant for any Performance Year is transferred during such Performance Year so that they are no longer eligible to participate in this Plan, such Participant's Award, consistent with Subsection 4(a), shall normally be calculated as the sum of the following: (a) the Award the Participant would have received, had he or she not been transferred, multiplied by the ratio which his or her completed months of participation during such Performance Year prior to the transfer bears to 12, plus (b) the Award, if any, the Participant is entitled to receive based on service after the transfer determined on a Performance Year basis and then multiplied by the ratio which his or her completed months of participation during such Performance Year subsequent to such transfer bears to 12. 10. Retirement or Disability of Participant. In case a Participant becomes totally and permanently disabled during a Performance Year, or retires from active employment after attaining age 55 during a Performance Year, the Committee may but need not grant the Participant an Award. Generally, if an Award is granted, it will be based on a pro rata portion of the Award. 11. Termination of Employment. If the employment of a Participant with a Subsidiary is terminated prior to the approval of an Award by the Committee as specified in Section 5(a), for reasons other than those specified in Sections 8, 9 or 10 hereof, the right to and the amount of an Award shall be forfeited. 12. Termination and Modification. No Award shall be granted under the Plan after any date as of which the Plan shall have been terminated. The Board of Directors of Bancorp or the Committee may at any time modify, terminate or from time to time suspend and, if suspended, may reinstate the provisions of this Plan, including Table A. The Committee may consider but shall not be bound by suggestions of Participants in connection with its periodic amendment of relative weights of the goals set forth by the Committee. 13. Effect of Other Plans. Eligibility in or the receipt of any Award under the Plan shall not be affected by or affect any other compensation or benefit plans in effect for Bancorp or a Subsidiary. 14. No Employment Rights. Nothing contained in nor any action under the Plan will confer upon any individual any right to continue in the employment of Bancorp or a Subsidiary and does not constitute any contract or agreement of employment or interfere in any way with the right of Bancorp or a Subsidiary to terminate any individual's employment. 15. Withholding Tax. As required by law, federal, state or local taxes that are subject to the withholding of tax at the source shall be withheld by Bancorp or a Subsidiary as necessary to satisfy such requirements. 16. Effective Date. This Plan shall be effective as of January 1, 1996. The Plan, including Table A, shall remain in effect as amended from time to time. 17. Provisions Applicable in the Event of a Change in Control. (a) In the event of a "Change in Control" (as defined below), notwithstanding any provisions to the contrary in this Plan, the operation of this Plan shall be modified as set forth below in this Section 17. These modifications shall only apply with respect to Target Awards for the Performance Year in which a Change in Control occurs. (b) Notwithstanding any provision to the contrary in this Plan, within ten (10) days after the Change in Control of Bancorp each Participant shall be paid 100% of his or her Target Award for the year in which the Change in Control occurs, based on the base pay rate then in effect. (c) A "Change in Control" of Bancorp means and shall be deemed to have occurred if and when any one of the following five events occurs: (i) within the meaning of Section 13(d) of the Securities Exchange Act of 1934, any person or group becomes a beneficial owner, directly or indirectly, of securities of Bancorp representing 20% or more of the combined voting power of Bancorp's then outstanding securities; (ii) individuals who were members of the Board of Directors of Bancorp immediately prior to a meeting of the stockholders of Bancorp involving a contest for the election of Directors shall not constitute a majority of the Board of Directors following such election; (iii) the stockholders of Bancorp approve the dissolution or liquidation of Bancorp; (iv) the stockholders of Bancorp approve an agreement to merge or consolidate, or otherwise organize, with or into one or more entities which are not subsidiaries, as a result of which less than 50% of the outstanding voting securities of the surviving or resulting entity are, or are to be, owned by former stockholders of Bancorp (excluding from the term "former stockholders" a stockholder who is, or as a result of the transaction in question becomes, an "affiliate," as that term is used in the Securities Exchange Act of 1934 and the Rules promulgated thereunder, of any party to such merger, consolidation or reorganization); or (v) the stockholders of Bancorp approve the sale of substantially all of Bancorp's business and/or assets to a person or entity which is not a subsidiary. (d) Any Participant shall be entitled to refuse all or any portion of any Target Award under this Plan if he or she determines that receipt of such payment may result in adverse tax consequences to him or her. Bancorp shall be totally and permanently relieved of any obligation to pay any Award which a Participant explicitly so refuses in writing. 18. Provisions Applicable to Offsets for Split- Dollar Life Insurance Agreements. (a) Notwithstanding anything contained herein to the contrary, any benefits payable under this Plan shall be offset by the value of benefits received by the Participant under certain life insurance policies as set forth in this Section. Participants in this Plan may own life insurance policies (the "Policies") purchased on their behalf by Bancorp. The ownership of these Policies by each Participant is, however, subject to certain conditions (set forth in a "Split-Dollar Life Insurance Agreement" between each Participant and Bancorp) and, if the Participant fails to meet the conditions set forth in the Split-Dollar Life Insurance Agreement, the Participant may lose certain rights under the Policy. (b) In the event that a Participant satisfies the conditions specified in Section 4 or 5 of the Split-Dollar Life Insurance Agreement, so that the Participant or his or her beneficiary becomes entitled to benefits under one of those sections, the value of those benefits shall constitute an offset to any benefits otherwise payable under this Plan. As the case may be, this offset (the "Offset Value") shall be equal to the value of benefits payable under the Split-Dollar Life Insurance Agreement and shall be determined as of the date that the Participant satisfies the conditions specified in Section 4 or 5 of the Split- Dollar Life Insurance Agreement, that is, the cash value of the Policy or, in the case of the Participant's death, the death benefit payable to the beneficiary under the Policy reduced by one times the Participant's annual base salary (maximum $500,000) at the time of death. The Offset Value shall then be compared to the Participant's deferred award (including interest accumulated on such award) under this Plan, and such amounts shall be reduced, but not to less than zero, by the Offset Value. (c) If the Policy in subsection (a) is not on the life of the Participant and the insured dies prior to distribution of benefits under this Plan, then the value of the benefits received by the Participant under the Policy will offset the Participant's deferred award (including interest accumulated on such award) under this Plan. This offset ("Offset Value") shall be equal to the amount of death benefit payable to the Participant and shall be determined as of the date of death of the insured. This Offset Value shall then be compared to the Participant's deferred award (including interest accumulated on such award) under this Plan, and such amounts shall be reduced, but not to be less than zero, by the Offset Value. (d) Notwithstanding anything contained herein to the contrary, if, in addition to the benefits otherwise payable under this Plan, the Participant or his or her beneficiary is entitled to benefits under the plans set forth in Table B. The "Offset Value" shall be applied to offset the benefits payable under this Plan and such plans in the order set forth in Table B: 19. Dispute Resolution. (a) If a Participant who has applied for retirement under the Retirement Plan for Employees of First Interstate Bancorp and its Affiliates, or, in the case of the Participant's death, his or her beneficiary, disagrees with the Compensation Committee of the Board of Directors of First Interstate Bancorp (the "Administrator") regarding the interpretation of this Plan, and if the Participant or his or her beneficiary has exhausted the claims review and appeal procedure under Section 503 of the Employee Retirement Income Security Act of 1974 with respect to his or her claim for benefits under this Plan, then the Participant or his or her beneficiary may, if he or she desires, submit any claim for benefits under this Plan or dispute regarding the interpretation of this Plan to arbitration; provided that, the request for arbitration must be brought within the time limit for bringing a judicial proceeding with respect to such claim for benefits, or if less, within one year after the Administrator's final denial of such claim for benefits. This right to select arbitration shall be solely that of Participant or his or her beneficiary and Participant or his or her beneficiary may decide whether or not to arbitrate in his or her discretion. The "right to select arbitration" is not mandatory on Participant or his or her beneficiary and Participant or his or her beneficiary may choose in lieu thereof to bring an action in an appropriate civil court. Once an arbitration is commenced, however, it may not be discontinued without the mutual consent of both parties to the arbitration. During the lifetime of the Participant only he or she can use the arbitration procedure set forth in this section. (b) Any claim for arbitration may be filed in writing with an arbitrator of Participant's or beneficiary's choice who is selected by the method described in the next four sentences. The first step of the selection shall consist of Participant or his or her beneficiary submitting a list of five potential arbitrators to the Administrator. Each of the five arbitrators must be either (1) a member of the National Academy of Arbitrators located in the State of California or (2) a retired California Superior Court or Appellate Court judge. Within one week after receipt of the list, the Administrator shall select one of the five arbitrators as the arbitrator for the dispute in question. If the Administrator fails to select an arbitrator in a timely manner, Participant or his or her beneficiary shall then designate one of the five arbitrators as the arbitrator for the dispute in question. (c) The arbitration hearing shall be held within seven days (or as soon thereafter as possible) after the picking of the arbitrator. No continuance of said hearing shall be allowed without the mutual consent of Participant or his or her beneficiary and the Administrator. Absence from or nonparticipation at the hearing by either party shall not prevent the issuance of an award. Hearing procedures which will expedite the hearing may be ordered at the arbitrator's discretion, and the arbitrator may close the hearing in his or her sole discretion when he or she decides he or she has heard sufficient evidence to satisfy issuance of an award. (d) The arbitrator's award shall be rendered as expeditiously as possible and in no event later than one week after the close of the hearing. In the event the arbitrator finds that Bancorp has violated the terms of this Plan, he or she shall order Bancorp immediately to take the necessary steps to remedy such violation. The award of the arbitrator shall be final and binding upon the parties. The award may be enforced in any appropriate court as soon as possible after its rendition. If an action is brought to confirm the award, both Bancorp and Participant agree that no appeal shall be taken by either party from any decision rendered in such action. (e) Solely for purposes of determining the allocation of the costs described in this Section 19(e), the Administrator will be considered the prevailing party in a dispute if the arbitrator determines (1) that Bancorp has not violated the terms of this Plan, and (2) the claim by Participant or his or her beneficiary was not made in good faith. Otherwise, Participant or his or her beneficiary will be considered the prevailing party. In the event that Bancorp is the prevailing party, the fee of the arbitrator and all necessary expenses of the hearing (excluding any attorneys' fees incurred by Bancorp) including stenographic reporter, if employed, shall be paid by the other party. In the event that Participant or his or her beneficiary is the prevailing party, the fee of the arbitrator and all necessary expenses of the hearing (including all attorneys' fees incurred by Participant or his or her beneficiary in pursuing his or her claim), including the fees of a stenographic reporter if employed, shall be paid by Bancorp. IN WITNESS WHEREOF, First Interstate Bancorp hereby adopts this 1996 Regional Executive Incentive Plan as of November 19, 1996. FIRST INTERSTATE BANCORP By ___________________________ TABLE A 1996 REGIONAL EXECUTIVE INCENTIVE PLAN I. Target Award Percentage Target Award Participant Level Percentage CEO California 50 CEO Northwest 50 CEO Southest 50 CEO Texas 50 TABLE B EMPLOYEE BENEFIT PLANS FIRST The First Interstate Bancorp Excess Benefit Re tirement Plan; SECOND The First Interstate Bancorp Supplemental Execu tive Retirement Plan; THIRD The Supplemental Employee Savings Plan of First Interstate Bancorp; FOURTH The First Interstate Bancorp Management Incentive Plans; FIFTH The First Interstate Bancorp Annual Incentive Compensation Plans; SIXTH The First Interstate Bancorp Profit Improvement Plans; SEVENTH The First Interstate Bancorp Corporate Executive Incentive Plan; EIGHTH The First Interstate Bancorp Regional Executive Incentive Plan; and NINTH The First Interstate Bancorp Supplemental Retirement Program. W011096.A00 -2- G020795A.A00 -12- G020795A.A00 -13- EX-10 7 EXHIBIT (10.11) FIRST INTERSTATE 1996 MANAGEMENT INCENTIVE PLAN Effective January 1, 1996 1 . Objectives. The 1996 Management Incentive Plan is designed to focus the efforts of certain key employees of First Interstate on the continued improvement in the performance of First Interstate and to aid in attracting, motivating and retaining superior executives by providing an incentive and reward for those key employees who contribute most to the operating progress and performance of First Interstate. 2 . Definitions. The following definitions shall be applicable to the terms used in the Plan: (a) "Administrator" means the Chief Executive Officer of Bancorp. (b) "Award" means a cash distribution to be made to a Participant for a Performance Year as determined in accordance with the provisions of the Plan. (c) "Award Fund" means the total of the Target Awards for each Participant as determined and approved in accordance with Section 5 hereof. (d) "Bancorp" means First Interstate Bancorp, a Delaware corporation. (e) "Change in Control" shall have the meaning set forth in Section 17. (f) "Committee" means the Compensation Committee of the Board of Directors of Bancorp. (g) "First Interstate" means the consolidated group of companies comprising First Interstate Bancorp. (h) "Fiscal Year" means the customary fiscal year of Bancorp. (i) "Offset Value" shall have the meaning set forth in Section 18(b) and (c). (j) "Participant" means a person who, pursuant to Section 4 hereof, is designated as a Participant in the Plan for a Fiscal Year. (k) "Performance Year" means the Fiscal Year. (l) "Plan" means this First Interstate 1996 Management Incentive Plan, as set forth herein. (m) "Policies" shall have the meaning set forth in Section 18(a). (n) "PSP" shall have the meaning set forth in Section 7(c). (o) "Split-Dollar Life Insurance Agreement" shall have the meaning set forth in Section 18(a). (p) "Subsidiary" means a bank, corporation, association or similar organization of which the majority of the outstanding shares of voting stock is owned directly or indirectly by Bancorp, directly or indirectly. (q) "Target Award" is determined for each Participant by multiplying the Participant's base pay rate in effect at the end of the Performance Year by the Target Award Percentage applicable to the Participant set forth under Item I of the Target Award Guidelines attached as Table A. 3. Adoption and Administration of the Plan. The Plan shall become effective as of January 1, 1996 upon adoption by the Committee. Subject to the provisions of this Plan and in the absence of specific action by the Committee, this Plan shall be administered by the Administrator. The Plan shall not be modified except with the consent of the Committee. All decisions of the Administrator or the Committee shall be final and binding. 4. Participation and Target Awards. (a) Determination of Participants and Target Awards. Prior to the beginning of each Performance Year, or as soon as practicable thereafter, the Administrator shall prepare a list of proposed Participants in the Plan for such Performance Year and shall, for each such Participant, establish a preliminary Target Award Percentage. Each Subsidiary shall be given an opportunity to make suggestions with respect to both proposed Participants and their preliminary Target Award Percentages. Any such suggestions shall, however, not be binding on the Administrator. Additional Participants may be included during the Performance Year and, as provided in the Plan, participation for an individual may be terminated. Except as provided in Section 8(b), 10 and 17, to be considered eligible for an Award, a Participant must participate in the Plan for at least six months during the Performance Year. (b) Notification. Each Participant shall be notified of his or her participation in the Plan for such Performance Year or shall be notified of his or her termination, as applicable, by a letter from the Administrator or his or her designee. A summary of this Plan shall be provided to each Participant. A Participant shall have no right to or interest in an Award unless and until the Participant's Award has been determined and allocated to the Participant. 5. Determination of Award Fund. (a) Performance Review. As soon as practicable after the close of each Performance Year, a determination of the Corporation's performance and the performance of each Region participating in this Plan shall be made by the Administrator. The Administrator's determination shall be subject to approval by the Committee. (b) Award Fund. The Committee shall determine the total amount of the Award Fund authorized for First Interstate for the Performance Year. The Award Fund shall contain a separate pool of funds for Bancorp and each participating Subsidiary. The Award Fund amount for Bancorp and each participating Subsidiary may be determined in any manner the Committee deems appropriate from time to time. Without limiting the Committee's discretion to choose other methods to calculate the size of the Award Fund, it is anticipated that the Award Fund amount for the Partici- pants employed by Bancorp or a participating Subsidiary will equal the sum of the Target Awards for each Participant of Bancorp or the participating Subsidiary, as applicable, multiplied by the following percentage calculated for such a Participant: (AxC) + (BxD), where A is the percentage, if any, of the Participant's Award to be based on First Interstate's performance, B is the percentage, if any, of the Participant's Award to be based on a Region's performance, as such percentages are set forth under Item II of the Target Award Guidelines attached as Table A, C is a percentage representing the performance of First Interstate determined by the Administrator, and D is a percentage representing the performance of the Region determined by the Administrator. 6. Allocation of Award Fund to Participants. The Award Fund shall be available for allocation to Participants on a totally discretionary basis in a manner designed to give the Administrator the flexibility to take into account the individual performance of each Participant. Based on its evaluation of a Participant's performance, the Administrator may determine an Award equal to any percentage of the Participant's Target Award up to the maximum percentage set forth under Item III of the Target Award Guidelines attached as Table A. The total Awards determined by the Administrator for Bancorp or a participating Subsidiary for a Performance Year shall not exceed the amount of the Award Fund for the particular employer for such Performance Year. In the event the amount of the Award Fund exceeds the total Awards for a Performance Year, such excess shall not be carried forward for purposes of Awards in future Performance Years. Award payments will be charged against Bancorp or the Subsidiary for which the Participant is an employee, as appropriate. 7. Time of Payment of Awards, Deferrals, Hardships. (a) Payment Date. Except as provided in (b) below, as soon as practicable after the allocation of Awards in respect of Participants, any Award, less any legally required withholding, shall be paid to the Participant or, in the event of a Participant's death, in accordance with Section 8 hereof. (b) Deferrals. In the year prior to the year in which the Award is earned, a Participant may elect, on a form specified by Bancorp, to defer the receipt of any Award to which he or she may be entitled for such Performance Year until the earlier of (1) termination of employment (the first to occur of retirement, death, disability, or termination of employment) or (2) January 1 of a specified calendar year. In such event: (i) The amount the Participant elects, net of any legally required withholding, shall become the deferred Award; (ii) Interest on such deferred Award will be the Moody's Investment Grade Corporate Bond Yield as shown in Moody's Yield Average for the last full month of each previous calendar year and will be credited quarterly; and (iii) Such deferred Award, plus accumulated interest, shall be paid upon the earlier of (1) or (2) above, in the form of a lump sum, equal annual installments over not more than 10 years, or such other method as may be selected by the Participant and agreed to by the Administrator. (c) Deferrals into Performance Units. As an alternative to a deferral payable in cash, as described in subsection (b), the deferred Award may, if the Participant elects and the Committee permits, be invested in Performance Units under Section 7.3 of the First Interstate Bancorp 1991 Performance Stock Plan (the "PSP"). The amount deferred shall be deemed to be converted into Performance Units under Section 7.3 of the PSP as of the date the Award would have been payable if no deferral had occurred, based on the fair market value, determined in accordance with the terms of the PSP, of the common stock of Bancorp on that date. The timing and manner of payment of deferrals shall be governed by a Performance Unit Agreement entered into by the Participant under the PSP. (d) Hardship Withdrawal. A Participant may request in writing, citing the reasons for the request, that the Committee permit the early payment of all or part of a deferred Award. Within 90 days after receipt, the Committee shall rule on the request. The Committee shall grant the request only if, in its sole discretion, the Committee makes a specific finding of financial hardship that is an unanticipated emergency caused by an event beyond the control of the Participant. The amount payable hereunder shall not exceed the amount necessary to avoid such hardship. (e) Acceleration of Deferrals. Anything in this Plan to the contrary notwithstanding, the Committee may accelerate the payment of all deferred Awards with respect to Bancorp or any Subsidiary at any time in its sole discretion. In addition, the Committee reserves the right to pay any deferred Awards in the form of a lump sum if the amount is less than $10,000.00. 8. Death of a Participant. (a) Beneficiary Designation. A Participant may file a designation of a beneficiary or beneficiaries on a form to be provided which designation may be changed or revoked by the Participant's sole action, provided that such change or revocation is filed in written form. (b) Death during Performance Year. In case of the death of a Participant during a Performance Year, Bancorp or the Subsidiary, as appropriate, may pay a pro rata portion of the Award to which the Participant would have been entitled for such Performance Year. Such pro rata portion shall be equal to (1) the ratio which the Participant's completed calendar months of participation during the Performance Year bears to 12 multiplied by (2) the amount the Committee determines the Participant would have been entitled to had he or she lived. (c) Death after Performance Year. In case of the death of a Participant after the end of a Performance Year, but before the delivery of an Award to which he or she may be entitled, such Award shall be delivered to the Participant's designated beneficiary. (d) Failure to Designate Beneficiary. If a Participant dies having failed to designate any beneficiary, or if no beneficiary survives the Participant or survives to the date of any payment in question, the amount otherwise payable to such beneficiary shall be paid to the Participant's surviving spouse, if any, and otherwise to the Participant's heirs at law, as determined under the law governing succession to personal property for the state in which the Participant resided on the day the Participant died. 9. Transfer of a Participant. In the event a Participant for any Performance Year is transferred during such Performance Year from Bancorp or a Subsidiary to another Subsidiary or Bancorp, such Participant's Award, consistent with Subsection 4(a), shall normally be calculated as the sum of the following: (a) the Award the Participant would have received under the Plan, had he or she not been transferred, multiplied by the ratio which his or her completed months of participation during such Performance Year prior to the transfer bears to 12, plus (b) the Award, if any, the Participant is entitled to receive under the Plan based on service after the transfer determined on a Performance Year basis and then multiplied by the ratio which his or her completed months of participation during such Performance Year subsequent to such transfer bears to 12. 10. Retirement or Disability of Participant. In case a Participant becomes totally and permanently disabled during a Performance Year, or retires from active employment after attaining age 55 during a Performance Year, the Committee may but need not grant the Participant an Award. Generally, if an Award is granted, it will be based on a pro rata portion of the Award. 11. Termination of Employment. If the employment of a Participant with First Interstate is terminated prior to the approval of the Committee as specified in Section 5(a) for reasons other than those specified in Sections 8, 9 or 10 hereof, the right to and the amount of an Award shall be forfeited. 12. Termination and Modification. No Award shall be granted under the Plan after any date as of which the Plan shall have been terminated. The Board of Directors of Bancorp or the Committee may at any time modify, terminate or from time to time suspend and, if suspended, may reinstate the provisions of this Plan, including Table A. The Committee may consider but shall not be bound by suggestions of participating Subsidiaries in connection with its periodic amendment of relative weights set forth under Item II of Table A. 13. Effect of Other Plans. Eligibility in or the receipt of any Award under the Plan shall not be affected by or affect any other compensation or benefit plans in effect for First Interstate; provided, however that the receipt of an Award under the Corporate Executive Incentive Plan in a Performance year shall preclude participation in any Award under this Plan for such year. 14. No Employment Rights. Nothing contained in nor any action under the Plan will confer upon any individual any right to continue in the employment of First Interstate and does not constitute any contract or agreement of employment or interfere in any way with the right of First Interstate to terminate any individual's employment. 15. Withholding Tax. As required by law, federal, state or local taxes that are subject to the withholding of tax at the source shall be withheld by First Interstate as necessary to satisfy such requirements. 16. Effective Date. This Plan shall be effective as of January 1, 1996. The Plan, including Table A, shall remain in effect as amended from time to time. 17. Provisions Applicable in the Event of a Change in Control. (a) In the event of a "Change in Control" (as defined below), notwithstanding any provisions to the contrary in this Plan, the operation of this Plan shall be modified as set forth below in this Section 17. These modifications shall only apply with respect to Target Awards for the Performance Year in which a Change in Control occurs. (b) Notwithstanding any provision to the contrary in this Plan, within ten (10) days after the Change in Control of Bancorp each Participant shall be paid 100% of his or her Target Award for the year in which the Change in Control occurs, based on the base pay rate then in effect. (c) A "Change in Control" of Bancorp means and shall be deemed to have occurred if and when any one of the following five events occurs: (i) within the meaning of Section 13(d) of the Securities Exchange Act of 1934, any person or group becomes a beneficial owner, directly or indirectly, of securities of First Interstate Bancorp representing 20% or more of the combined voting power of First Interstate Bancorp's then outstanding securities; (ii) individuals who were members of the Board of Directors of First Interstate Bancorp immediately prior to a meeting of the stockholders of First Interstate Bancorp involving a contest for the election of Directors shall not constitute a majority of the Board of Directors following such election; (iii) the stockholders of First Interstate Bancorp approve the dissolution or liquidation of First Interstate Bancorp; (iv) the stockholders of First Interstate Bancorp approve an agreement to merge or consolidate, or otherwise organize, with or into one or more entities which are not subsidiaries, as a result of which less than 50% of the outstanding voting securities of the surviving or resulting entity are, or are to be, owned by former stockholders of First Interstate Bancorp (excluding from the term "former stockholders" a stockholder who is, or as a result of the transaction in question becomes, an "affiliate," as that term is used in the Securities Exchange Act of 1934 and the Rules promulgated thereunder, of any party to such merger, consolidation or reorganization); or (v) the stockholders of First Interstate Bancorp approve the sale of substantially all of First Interstate Bancorp's business and/or assets to a person or entity which is not a Subsidiary. (d) Any Participant shall be entitled to refuse all or any portion of any Target Award under this Plan if he or she determines that receipt of such payment may result in adverse tax consequences to him or her. First Interstate Bancorp shall be totally and permanently relieved of any obligation to pay any Award which a Participant explicitly so refuses in writing. 18. Provisions Applicable to Offsets for Split- Dollar Life Insurance Agreements. (a) Notwithstanding anything contained herein to the contrary, any benefits payable under this Plan shall be offset by the value of benefits received by the Participant under certain life insurance policies as set forth in this Section. Participants in this Plan may own life insurance policies (the "Policies") purchased on their behalf by Bancorp ("the Company"). The ownership of these Policies by each Participant is, however, subject to certain conditions (set forth in a "Split-Dollar Life Insurance Agreement" between each Participant and Bancorp) and, if the Participant fails to meet the conditions set forth in the Split-Dollar Life Insurance Agreement, the Participant may lose certain rights under the Policy. (b) In the event that a Participant satisfies the conditions specified in Section 4 or 5 of the Split-Dollar Life Insurance Agreement, so that the Participant or his or her beneficiary becomes entitled to benefits under one of those sections, the value of those benefits shall constitute an offset to any benefits otherwise payable under this Plan. As the case may be, this offset (the "Offset Value") shall be equal to the value of benefits payable under the Split-Dollar Life Insurance Agreement and shall be determined as of the date that the Participant satisfies the conditions specified in Section 4 or 5 of the Split-Dollar Life Insurance Agreement, that is, the cash value of the Policy or, in the case of the Participant's death, the death benefit payable to the beneficiary under the Policy reduced by one times the Participant's annual base salary (maximum $500,000) at the time of death. The Offset Value shall then be compared to the Participant's deferred award (including interest accumulated on such award) under this Plan, and such amounts shall be reduced, but not to less than zero, by the Offset Value. (c) If the Policy in subsection (a) is not on the life of the Participant and the insured dies prior to distribution of benefits under this Plan, then the value of the benefits received by the Participant under the Policy will offset the Participant's deferred award (including interest accumulated on such award) under this Plan. This offset ("Offset Value") shall be equal to the amount of death benefit payable to the Participant and shall be determined as of the date of death of the insured. This Offset Value shall then be compared to the Participant's deferred award (including interest accumulated on such award) under this Plan, and such amounts shall be reduced, but not to be less than zero, by the Offset Value. (d) Notwithstanding anything contained herein to the contrary, if, in addition to the benefits otherwise payable under this Plan, the Participant or his or her beneficiary is entitled to benefits under (i) the First Interstate Bancorp Annual Incentive Compensation Plans, (ii) the First Interstate Bancorp Profit Improvement Plans, (iii) the First Interstate Bancorp Management Incentive Plans, (iv) the Supplemental Employee Savings Plan of First Interstate Bancorp, (v) the First Interstate Bancorp Excess Benefit Retirement Plan, (vi) the First Interstate Bancorp Supplemental Executive Retirement Plan; (vii) the First Interstate Supplemental Retirement Program or (viii) the First Interstate Executive Incentive Plans, the "Offset Value" shall be applied to offset the benefits payable under this Plan and such plans in the following order: 1. The First Interstate Bancorp Excess Benefit Retirement Plan; 2. The First Interstate Bancorp Supplemental Executive Retirement Plan; 3. The Supplemental Employee Savings Plan of First Interstate Bancorp; 4. The First Interstate Bancorp Management Incentive Plans; 5. The First Interstate Bancorp Annual Incentive Compensation Plans; 6. The First Interstate Bancorp Profit Improvement Plans. 7. The First Interstate Bancorp Corporate Executive Incentive Plan. 8. The First Interstate Bancorp Regional Executive Incentive Plan. 9. The First Interstate Bancorp Supplemental Retirement Program. 19. Dispute Resolution. (a) If a Participant who has applied for retirement under the Retirement Plan for Employees of First Interstate Bancorp and Its Affiliates, or, in the case of the Participant's death, his or her beneficiary, disagrees with the Compensation Committee of the Board of Directors of First Interstate Bancorp (the "Administrator") regarding the interpretation of this Plan, and if the Participant or his or her beneficiary has exhausted the claims review and appeal procedure under Section 503 of the Employee Retirement Income Security Act of 1974 with respect to his or her claim for benefits under this Plan, then the Participant or his or her beneficiary may, if he or she desires, submit any claim for benefits under this Plan or dispute regarding the interpretation of this Plan to arbitration; provided that, the request for arbitration must be brought within the time limit for bringing a judicial proceeding with respect to such claim for benefits, or if less, within one year after the Administrator's final denial of such claim for benefits. This right to select arbitration shall be solely that of Participant or his or her beneficiary and Participant or his or her beneficiary may decide whether or not to arbitrate in his or her discretion. The "right to select arbitration" is not mandato- ry on Participant or his or her beneficiary and Participant or his or her beneficiary may choose in lieu thereof to bring an action in an appropriate civil court. Once an arbitration is commenced, however, it may not be discontinued without the mutual consent of both parties to the arbitration. During the lifetime of the Participant only he or she can use the arbitration procedure set forth in this section. (b) Any claim for arbitration may be filed in writing with an arbitrator of Participant's or beneficiary's choice who is selected by the method described in the next four sentences. The first step of the selection shall consist of Participant or his or her beneficiary submitting a list of five potential arbitrators to the Administrator. Each of the five arbitrators must be either (1) a member of the National Academy of Arbitrators located in the State of California or (2) a retired California Superior Court or Appellate Court judge. Within one week after receipt of the list, the Administrator shall select one of the five arbitrators as the arbitrator for the dispute in question. If the Administrator fails to select an arbitrator in a timely manner, Participant or his or her beneficiary shall then designate one of the five arbitrators as the arbitrator for the dispute in question. (c) The arbitration hearing shall be held within seven days (or as soon thereafter as possible) after the picking of the arbitrator. No continuance of said hearing shall be allowed without the mutual consent of Participant or his or her beneficiary and the Administrator. Absence from or nonparticipation at the hearing by either party shall not prevent the issuance of an award. Hearing procedures which will expedite the hearing may be ordered at the arbitrator's discretion, and the arbitrator may close the hearing in his or her sole discretion when he or she decides he or she has heard sufficient evidence to satisfy issuance of an award. (d) The arbitrator's award shall be rendered as expeditiously as possible and in no event later than one week after the close of the hearing. In the event the arbitrator finds that Bancorp has violated the terms of this Plan, he or she shall order Bancorp immediately to take the necessary steps to remedy such violation. The award of the arbitrator shall be final and binding upon the parties. The award may be enforced in any appropriate court as soon as possible after its rendition. If an action is brought to confirm the award, both Bancorp and Participant agree that no appeal shall be taken by either party from any decision rendered in such action. (e) Solely for purposes of determining the allocation of the costs described in this Section 19(e), the Administrator will be considered the prevailing party in a dispute if the arbitrator determines (1) that Bancorp has not violated the terms of this Plan, and (2) the claim by Participant or his or her beneficiary was not made in good faith. Otherwise, Participant or his or her beneficiary will be considered the prevailing party. In the event that Bancorp is the prevailing party, the fee of the arbitrator and all necessary expenses of the hearing (excluding any attorneys' fees incurred by Bancorp) including stenographic reporter, if employed, shall be paid by the other party. In the event that Participant or his or her beneficiary is the prevailing party, the fee of the arbitrator and all necessary expenses of the hearing (including all attorneys' fees incurred by Participant or his or her beneficiary in pursuing his or her claim), including the fees of a stenographic reporter if employed, shall be paid by Bancorp. IN WITNESS WHEREOF, Bancorp hereby adopts this Restatement as of January 1, 1996. FIRST INTERSTATE BANCORP By ___________________________ TABLE A 1994 MANAGEMENT INCENTIVE PLAN I. Target Award Percentage Participant Level Target Award Percentage (the exact percentage to be selected by the Administrator) Level A 60% to 75% Level B 37.5% to 60% Level C 25% to 50% Level D 15% to 30% II. Relative Performance Weights Level A - [100% for Bancorp employees 40% Bancorp/60% Subsidiary for other employees] Level B - [100% for Bancorp employees 25% Bancorp/75% Subsidiary for other employees] Levels C & D - [100% for Bancorp employees 10% Bancorp/90% Subsidiary for other employees] III. Actual Award Percentage For any individual Participant, a percentage no less than 0% and no more than 150% of his or her Target Award. Level A: Bancorp Managing Committee (excluding Chief Executive Officer and President) Level B: Regional Managing Committee Levels C & D: Other Participants W011096A.A00 -7- G020695.A00 -16- EX-10 8 EXHIBIT (10.12) FIRST AMENDMENT TO FIRST INTERSTATE CORPORATE EXECUTIVE INCENTIVE PLAN, 1996 FIRST INTERSTATE REGIONAL EXECUTIVE INCENTIVE PLAN AND 1996 FIRST INTERSTATE MANAGEMENT INCENTIVE PLAN First Interstate Bancorp adopted the First Interstate Corporate Executive Incentive Plan ("CEIP") on April 28, 1995, as approved by shareholders at its annual meeting on February 21, 1995. First Interstate Bancorp adopted the First Interstate 1996 Regional Executive Incentive Plan ("REIP") and First Interstate Bancorp 1996 Management Incentive Plan ("MIP") effective January 1, 1996. 1. The definition of Change in Control in Subparagrapah (c) of Section 16, Provisions Applicable in the Event of a Change in Control, of the CEIP is amended by deleting "50%" in clause (iv) and inserting "60%" in its place. 2. The definition of Change in Control in Subparagraph (c) of Section 17, Provisions Applicable in the Event of a Change in Control, of the REIP is amended by deleting "50%" in clause (iv) and inserting "60%" in its place. 3. The definition of Change in Control in Subparagraph (c) of Section 17, Provisions Applicable in the Event of Change in Control, of the MIP is amended by deleting "50%" in clause (iv) and inserting "60%" in its place. Executed at Los Angeles, Calfiornia this 25th day of March, 1996. FIRST INTERSTATE BANCORP By:______________________ Executive Vice President By:______________________ Secretary W032596D.DOC EX-10 9 EXHIBIT (10.18) TIER I (BANCORP) AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT FIRST INTERSTATE BANCORP Reference is made to the Amended and Restated Employment Agreement between First Interstate Bancorp ("Employer") and _____________________ ("Employee"), effective as of _______________ (the "Agreement"). Terms which are defined in the Agreement shall have the same meaning in this Amendment. 1. Paragraph 10(b) shall be amended by changing the reference to "(b)" to a reference to "(b)(1)" and inserting the words "Employee's base salary may not be reduced and" after the words "In addition" in the third sentence. 2. The following paragraph shall be added as paragraph 10(b)(2) after paragraph 10(b)(1): "10(b)(2) If prior to a Change in Control, Employee's duties have been modified in connection with or in anticipation of any Change in Control (a "Modification"), whether or not such Change in Control is consummated, the determination of whether there has been any change, addition to, or taking away from the scope of Employee's duties after a Change in Control shall be made with reference to Employee's duties prior to such Modification. Accordingly, following a Change in Control, Employee, if still then employed, may treat the Modification as a material breach of this Agreement provided that following the Change in Control the Employee is offered a position or continues in a position which represents a change, addition to, or taking away from the scope of the duties in existence prior to the Modification. The Employee may treat the Modification as a material breach of this Agreement if within 60 days of the Change in Control he or she is not offered a position with duties equivalent to the duties in existence prior to the Modification. The damages provided for by this Agreement and the amount of such damages shall be calculated without reference to any changes in Employee's compensation or benefits that occurred in connection with the Modification in Employee's duties." 3. Paragraph 10(c) is amended by changing the third sentence thereof to read as follows: "If Employee is terminated for a reason other than one listed in the second preceding sentence, First Interstate shall be treated as having breached this Agreement and Employee shall be entitled to the payments described in subparagraphs (d) and (k) below (as damages and not as penalty for such breach)." 4. Paragraph 10(d)(1)(B) of the Agreement is amended to read as follows: "(B) the largest aggregate amount of the bonuses awarded to Employee in respect of the 1993, 1994 or 1995 plan year under all of the Employer's or First Interstate's incentive plans in which Employee was then participating (whichever year's bouses were largest in the aggregate)." 5. Paragraph 10 of the Agreement is amended by changing the flush language immediately following subparagraph 10(d)(3) to read as follows: "The single sum actuarial equivalents described above shall be determined using the interest rate and mortality table set forth in the Pension Plan for purposes of converting benefits to lump sum payments. If Employee is terminated and simultaneously retires under the Pension Plan, the actuarial equivalents shall be calculated on the basis of the actual and hypothetical benefits then payable. In addition, for the purpose of calculating actuarial equivalents, if Employee is terminated but does not simultaneously retire under the Pension Plan, calculations shall be made by assuming that Employee's retirement occurs on the first day that Employee is eligible to retire under the plan in question and then discounting the benefit to which Employee would then be entitled back to the date of Employee's termination. Consistent with the crediting of additional years of Service and Benefit Service and age under certain plans, the hypothetical retirement date and benefits payable under such plans shall be determined by taking the additional years into account for the purpose of computing the retirement date and increased benefits under such plans. Nothing contained herein shall affect the application of any provisions regarding offsets or non-duplication of benefits applicable to any of the nonqualified deferred compensation plan benefits referred to herein. Upon payment of the amount described under clause (2)(B) above, no further benefits shall be payable to Employee under the plans described therein." 6. Paragraph 10(f)(4) is amended by deleting "50%" and inserting "60%" in its place. 7. Paragraph 10 of the Agreement is amended by adding the following as paragraph 10(k): "(k) Immediately following termination of employment, First Interstate shall pay to the Employee under this paragraph 10 a lump sum in the amount of $30,000 for the purpose of obtaining professional financial planning advice." 8. Paragraph 10 is amended by adding the following as paragraph 10(1): "(1) For purposes of this paragraph 10, if Employer terminates Employee's employment prior to the date of a Change in Control and such termination (i) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change in Control or (ii) otherwise occurred in connection with or in anticipation of a Change in Control, then Employee's employment will be deemed to have terminated on or within two years after a Change in Control and Employee shall be entitled to the payments described in subparagraph (d)." 9. The Agreement is amended by adding the following as paragraph 20: "20. Legal Fees. Employer shall pay or reimburse Employee, as incurred, for all reasonable legal fees and expenses, including reasonable attorneys' fees and expenses as a result of any litigation or other proceeding (other than a proceeding covered by paragraph 10(g) or paragraph 14) between Employer and Employee with respect to the subject matter of this Agreement and the enforcement of rights hereunder, provided, that such litigation or proceeding results in any (a) settlement, requiring Employer to make a payment to Employee, or (b) judgment or order in favor of Employee, regardless of whether such judgment or order is subsequently reversed on appeal or in a collateral proceeding. In order to carry out the intent of the preceding sentence, Employer shall advance Employee the amount of such fees and expenses as incurred and Employee shall be obligated to repay such advances without interest unless the proviso at the end of the preceding sentence is satisfied." 10. The Agreement is amended by adding the following as paragraph 21: "21. Calculation of Benefits. All calculations in respect of payments to be made or benefits to be provided under this Agreement, which may become payable to Employee, shall be performed at Employer's expense by Ernst & Young LLP; provided that, Ernst & Young LLP shall have no authority to determine whether or not payments are owed under the Agreement but shall only have the authority to determine the amount of the payments to be made if it is otherwise determined that Employer owes amounts to employee. The determination of Ernst & Young LLP shall be binding and conclusive upon Employee and Employer." The effective date of this Amendment shall be January 21, 1996; provided, however, that in the event of a transaction that is intended to comply with "pooling of interest" accounting rules, the amendments set forth in paragraphs 6 and 8 above shall have no effect, and shall not be a part of the Agreement, if such amendment would prevent the transaction from so complying. Except as herein modified, the Agreement shall remain in full force and effect. FIRST INTERSTATE BANCORP By: ______________________ [Title] _________________________ [Employee] g:\wp\139666.doc 4 EX-10 10 EXHIBIT (10.20) SECOND AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT FIRST INTERSTATE BANCORP Reference is made to the Amended and Restated Employment Agreement between First Interstate Bancorp ("First Interstate") and _________________ ("Employee"), effective as of ______________ (the "Agreement"). Terms which are defined in the Agreement shall have the same meaning in this amendment. 1. Paragraph 10(d)(2) is amended so that the language following "(B)" reads as follows: "the aggregate of the single sum actuarial equivalents of Employee's vested accrued benefits under all nonqualified employee deferred compensation plans, except for the "Excluded Plans" (as defined in subparagraph (d)(4) below), sponsored by First Interstate or any affiliate thereof (including the SERP) determined without regard to the provisions of the preceding clause (A), and" 2. A new subparagraph (d)(4) is added to paragraph 10(d), which reads as follows: "(4) The term "Excluded Plan" in paragraph 10(d)(2)(B) refers to the portion of any plan sponsored by First Interstate or any affiliate that entitled the Employee to defer the receipt of a bonus that would otherwise be payable until some future time, at which time the deferred amount would be payable in cash. For example, the term "Excluded Plan" encompasses any deferrals by the Employee of bonuses that were otherwise payable under the Annual Incentive and Profit Improvement Plans that were adopted in 1990 and earlier years as well as deferrals for later cash payment of bonuses earned under any Management Incentive Plan, Regional Executive Incentive Plan, or Corporate Executive Incentive Plan adopted in 1990 and later years. The term "Excluded Plan" does not include any portion of a bonus that was deferred in the form of stock units under the 1991 or 1995 Performance Stock Plan. It is the intent of this paragraph 10(d)(2)(B) and (d)(4) that the payment of any bonus deferred for future payment in cash not be accelerated from the time that it would otherwise be payable because a termination of employment has followed a Change in Control, but that such bonus shall instead be payable in accordance with the original terms of the election governing payment, and this Employment Agreement shall be interpreted in a manner that achieves that result." The effective date of this Amendment shall be _________________; except as herein modified, the Agreement shall remain in full force and effect. FIRST INTERSTATE BANCORP By: ________________________ (Title) ____________________________ (Employee) EX-10 11 EXHIBIT (10.22) FIRST AMENDMENT TO SPLIT-DOLLAR LIFE INSURANCE AGREEMENT This Agreement amends the Split-Dollar Life Insurance Agreement entered into as of _____________, 19____ by and between First Interstate Bancorp (the "Company") and ______________ ("Director"): 1. Subsection (b) of Section 9, Qualifying Termination on account of termination after a Change in Control is amended by deleting "50%" and inserting "60%" in its place. Executed at Los Angeles, California this 25th day of March, 1996. FIRST INTERSTATE BANCORP By: _________________________ Executive Vice President By:__________________________ Secretary W032796B.DOC EX-10 12 EXHIBIT (10.24) FIRST AMENDMENT TO SPLIT-DOLLAR LIFE INSURANCE AGREEMENT This Agreement amends the Split-Dollar Life Insurance Agreement entered into as of _____________, 19____ by and between First Interstate Bancorp (the "Company") and ______________ ("Employee"): 1. Subsection (b) of Section 9, Qualifying Termination on account of termination after a Change in Control is amended by deleting "50%" and inserting "60%" in its place. Executed at Los Angeles, California this 25th day of March, 1996. FIRST INTERSTATE BANCORP By: _________________________ Executive Vice President By:__________________________ Secretary W032596F.DOC EX-11 13 EXHIBIT (11) COMPUTATION OF EARNINGS PER SHARE First Interstate Bancorp Year Ended December 31 1995 1994 1993 - -------------------------------------------------------------------------------- (dollar amounts in millions, except per share amounts) Net income applicable to common stock Net income $ 885.1 $ 733.5 $ 736.7 Less dividends on preferred stock 33.2 33.2 46.6 - -------------------------------------------------------------------------------- Net income, as adjusted, for calculation of primary and fully diluted earnings per share $ 851.9 $ 700.3 $ 690.1 ================================================================================ Weighted average number of shares (in thousands) Weighted average number of shares outstanding 5,717 78,853 75,823 Dilutive effect of outstanding stock options (as determined by application of the treasury stock method) 1,591 1,550 1,191 Stock units under Management Incentive Plan 22 19 9 - -------------------------------------------------------------------------------- Weighted average number of shares, as adjusted, for calculation of primary earnings per share 77,330 80,422 77,023 Additional dilutive effect of outstanding stock options 568 73 224 - -------------------------------------------------------------------------------- Weighted average number of shares, as adjusted, for calculation of fully diluted earnings per share 77,898 80,495 77,247 ================================================================================ Primary and fully diluted earnings per share (1) Income before extraordinary item and cumulative effect of accounting changes $ 11.02 $ 8.71 $ 6.68 Extraordinary item - - (0.32) Cumulative effect of account changes - - 2.60 Net income $ 11.02 $ 8.71 $ 8.96 (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 14 EXHIBIT (12) COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES First Interstate Bancorp Year Ended December 31 ---------------------------- (dollar amounts in millions) 1995 1994 1993 - ------------------------------------------------------------------------------ A. First Interstate Bancorp and Subsidiaries (Consolidated): Earnings: 1. Income before income taxes $1,443 $1,183 $ 881 2. Plus interest expense (1) 1,223 915 921 - ------------------------------------------------------------------------------ 3. Earnings including interest on deposits 2,666 2,098 1,802 4. Less interest on deposits 975 725 720 - ------------------------------------------------------------------------------ 5. Earnings excluding interest on deposits $1,691 $1,373 $1,082 ============================================================================== Fixed Charges: 6. Including interest on deposits (Line 2) $1,223 $ 915 $ 921 7. Less interest on deposits (Line 4) 975 725 720 - ------------------------------------------------------------------------------ 8. Excluding interest on deposits $ 248 $ 190 $ 201 ============================================================================== Ratio of Earnings to Fixed Charges: Including interest on deposits (Line 3 divided by Line 6) 2.18 2.29 1.96 ============================================================================== Excluding interest on deposits (Line 5 divided by Line 8) 6.81 7.22 5.39 ============================================================================== B. First Interstate Bancorp (Parent Corporation): Earnings: 9. Income before income taxes and equity in undistributed income of subsidiaries $ 406 $ 348 $ 311 10. Plus interest expense (1) 112 102 132 - ------------------------------------------------------------------------------ 11. Earnings including interest expense $ 518 $ 450 $ 443 ============================================================================== Fixed Charges: 12. Interest expense (Line 10) $ 112 $ 102 $ 132 ============================================================================== Ratio of Earnings to Fixed Charges: (Line 11 divided by Line 12) 4.64 4.40 3.35 ============================================================================== (1) Includes amounts representing the estimated interest component of net rental payments. EX-13 15 Overview of 1995 Performance First Interstate Bancorp recorded consolidated net income for 1995 of $885.1 million, or $11.02 per share, including the effect of $14.7 million ($0.19 per share) of after-tax restructuring charges and $27.6 million ($0.35 per share) of merger-related charges. This compares to net income in 1994 of $733.5 million, or $8.71 per share, which included the after-tax effect of $87.6 million ($1.09 per share) of restructuring charges. These results represent a substantial improvement from the $561.4 million, or $6.68 per share, of earnings before an extraordinary item and the cumulative effect of accounting changes reported for 1993. Reflecting the overall improvement in profitability of the consolidated Corporation, the return on average assets for 1995 rose to 1.59%, a material improvement from 1.38% in 1994. At the same time, the return on average common shareholders' equity rose to 24.57% from 21.56% a year earlier, reflecting increased profitability and the impact of the Corporation's stock repurchase programs. The primary factor contributing to the earnings growth in 1995 was the 8% increase in total revenue. Total taxable-equivalent revenue, which includes taxable-equivalent net interest income and noninterest income, was up $275.7 million in 1995. An improvement in the level of net interest income contributed over 76% of the 1995 increase in total revenue. This resulted principally from a 29 basis point increase in the net interest margin to 5.43% in 1995 from 5.14% in 1994. At the same time, average earning assets increased 3.3% from the 1994 average level, with a shift in the mix to a higher proportion of loans from lower yielding investment securities. The remainder of the increase in total revenue was spread over the major categories of noninterest income. Reflecting significant improvement in the risk profile of the Corporation, no provision for credit losses was recorded in 1994 and 1995. The provision for credit losses amounted to $112.6 million in 1993. In addition, expenses arising from the maintenance, sales and valuation adjustments of other real estate acquired through foreclosure (ORE) amounted to less than $1 million in 1995, versus a net recovery of $12.4 million in 1994 and net expense of $33.6 million in 1993. Nonperforming assets were reduced to $232 million at yearend 1995, down 10% from $258 million a year earlier. This follows declines of nearly 17% at yearend 1994 and 60% at yearend 1993. The Corporation's emphasis on maintaining an exemplary credit profile has contributed to the reduction of consolidated nonperforming assets to 0.40% of total assets, an improvement from 0.46% at yearend 1994 and 0.60% at yearend 1993. Net chargeoffs totaled $154.7 million in 1995 (0.44% of average loans), compared to $133.0 million in 1994 (0.46% of average loans) and $218.1 million in 1993 (0.90% of average loans). Reflecting the factors noted above, the allowance for credit losses equaled 2.19% of total loans at December 31, 1995, versus 2.81% at yearend 1994 and 3.85% at yearend 1993. Noninterest expenses totaled $2,213.1 million in 1995, a slight increase from $2,197.8 million reported for 1994. Noninterest expenses include the effects of the integration of 19 acquisitions over the last three years. Reflecting the success of the Restructuring Plan announced by the Corporation in 1994, the efficiency ratio, which reflects noninterest expenses before merger related expenses, restructuring charges and ORE expenses as a percent of taxable-equivalent revenue, was 58.7% in 1995, a substantial improvement from 60.8% in 1994 and 65.7% in 1993. Merger with Wells Fargo & Company On January 24, 1996, the Corporation and Wells Fargo & Company announced that they had reached a definitive agreement to merge the two companies. Under the terms of the merger agreement, the Corporation's shareholders will receive a tax-free exchange of two-thirds of a share of Wells Fargo Common Stock for each share of the Corporation's Common Stock. At March 1, 1996, the merger was valued at over $12.5 billion, making it the largest bank merger in U.S. history. It is expected to close early in the second quarter of 1996, subject to regulatory and shareholder approvals. Under the terms of the merger agreement, the combined entity will be known as Wells Fargo & Company and will operate from headquarters in San Francisco and Los Angeles, with senior executive presence in both. The combined board of directors will consist of 13 members of Wells Fargo's board and seven directors from First Interstate's board. Concurrent with its entering into the merger agreement with Wells Fargo, the Corporation terminated its November 5, 1995, merger agreement with First Bank System, Inc. An overall settlement agreement was entered into among the Corporation, First Bank System and Wells Fargo. Under the terms of the settlement agreement, the Corporation agreed to pay First Bank System a termination fee of $125 million and an additional termination fee of $75 million upon the closing of its merger with Wells Fargo. These payments are being made in full satisfaction of the Corporation's obligations under the stock option and fee agreements entered into as part of its November 5, 1995, merger agreement with First Bank System. In addition, all litigation among the parties related to efforts to merge with the Corporation has been settled. Earnings Summary The following tables summarize the Corporation's financial results for the last three years:
Change 95/94 Change 94/93 Change 93/92 --------------- ------------------ --------------- Amounts (millions) 1995 1994 1993 $ % $ % $ % - --------------------------------------------------------------------------------------------------------------------- Net interest income (1) $2,558.3 $2,347.9 $2,086.7 210.4 9.0 261.2 12.5 54.4 2.7 Provision for credit losses - - 112.6 - - (112.6) n/m (201.7) (64.2) Net interest income after provision for credit losses 2,558.3 2,347.9 1,974.1 210.4 9.0 373.8 18.9 256.1 14.9 Noninterest income 1,119.6 1,054.3 954.2 65.3 6.2 100.1 10.5 42.1 4.6 Noninterest expenses Operating 2,160.5 2,068.9 1,998.8 91.6 4.4 70.1 3.5 (50.8) (2.5) Other real estate 0.6 (12.4) 33.6 13.0 n/m (46.0) n/m (126.0) (78.9) Restructuring 24.4 141.3 - (116.9) (82.7) 141.3 n/m - - Merger related 27.6 - - 27.6 n/m - - - - - --------------------------------------------------------------------------------------------------------------------- Pretax earnings (1) 1,464.8 1,204.4 895.9 260.4 21.6 308.5 34.4 475.0 n/m Income taxes 558.1 449.5 319.9 108.6 24.2 129.6 40.5 199.0 n/m Taxable-equivalent adjustment 21.6 21.4 14.6 0.2 0.9 6.8 46.6 (3.1) (17.5) Extraordinary item - - (24.8) - - 24.8 n/m (24.8) n/m Cumulative effect of accounting changes - - 200.1 - - (200.1) n/m 200.1 n/m - --------------------------------------------------------------------------------------------------------------------- Net Income $ 885.1 $ 733.5 $ 736.7 151.6 20.7 (3.2) (0.4) 454.4 n/m ===================================================================================================================== (1) Taxable-equivalent basis
Change 95/94 Change 94/93 Change 93/92 ------------ ---------------- -------------- Per Common Share 1995 1994 1993 $ % $ % $ % - --------------------------------------------------------------------------------------------------------------------- Earnings: Income before extraordinary item and cumulative effect of accounting changes $11.02 $8.71 $6.68 2.31 26.5 2.03 30.4 3.45 n/m Extraordinary item - - (0.32) - - 0.32 n/m (0.32) n/m Cumulative effect of accounting changes - - 2.60 - - (2.60) n/m 2.60 n/m - --------------------------------------------------------------------------------------------------------------------- Net Income $11.02 $8.71 $8.96 2.31 26.5 (0.25) (2.8) 5.73 n/m ===================================================================================================================== Dividends Paid $ 3.10 $2.75 $1.60 0.35 12.7 1.15 71.9 0.40 33.3
Earnings Detail Summarized below are taxable-equivalent interest income and interest expense, as well as the consequences of changes in volumes and rates.
Change 95/94 Change 94/93 Change 93/92 -------------- ------------- ---------------- AMOUNTS (millions) 1995 1994 1993 $ % $ % $ % - -------------------------------------------------------------------------------------------------------------------------- Interest income $3,729.5 $3,213.4 $2,958.8 516.1 16.1 254.6 8.6 (248.6) (7.8) Interest expense 1,171.2 865.5 872.1 305.7 35.3 (6.6) (0.8) (303.0) (25.8) - -------------------------------------------------------------------------------------------------------------------------- Net interest income $2,558.3 $2,347.9 $2,086.7 210.4 9.0 261.2 12.5 54.4 2.7 MARGINS (as a % of earning assets) Earning asset yield 7.91 7.04 6.96 12.4 1.1 (9.7) Interest expense 2.48 1.90 2.05 30.5 (7.3) (27.3) - -------------------------------------------------------------------------------------------------------------------------- Net interest margin 5.43 5.14 4.91 5.6 4.7 0.4 ========================================================================================================================== 1995 change due to 1994 change due to 1993 change due to ------------------------------- -------------------------- ---------------------------- Volume Rate Net Volume Rate Net Volume Rate Net - --------------------------------------------------------------------------------------------------------------------------- Interest earned on: Total Loans $ 508.3 $ 243.0 $ 751.3 $ 394 $(76.1) $31.9 $(98.6) $(155.9) $(254.5) Trading account securities 2.2 1.3 3.5 (3.0) (1.1) (4.1) (13.1) (0.8) (13.9) Investment securities: Held-to-maturity securities (259.4) 19.7 (239.7) 28.8 (34.1) (5.3) 259.3 (159.9) 99.4 Available-for-sale securities (1.5) 4.1 2.6 (5.2) 0.6 (4.6) 17.3 (3.2) 14.1 - --------------------------------------------------------------------------------------------------------------------------- Total Investment Securities (260.9) 23.8 (237.1) 23.6 (33.5) (9.9) 276.6 (163.1) 113.5 Federal funds, repurchases 1.0 8.8 9.8 (25.1) 4.4 (20.7) (16.3) (9.5) (25.8) Time deposits, due from banks (12.6) 0.5 (2.3) (32.9) 0.8 (32.1) (36.9) (10.0 (46.9) Other assets held for sale 3.0 (2.3) 0.7 5.3 (1.8) 3.5 (21.4) 0.4 (21.0) - --------------------------------------------------------------------------------------------------------------------------- Total change 241.0 275.1 516.1 361.9 (107.3) 254.6 90.3 (338.9) (248.6) Interest paid on: Savings Deposits (31.5) 79.3 47.8 42.5 (33.7) 8.8 29.7 (144.1) (114.4) Other Time Deposits 81.6 120.3 201.9 2.6 (6.3) (3.7) (45.9) (52.5) (98.4) - ---------------------------------------------------------------------------------------------------------------------------- Total Deposits 50.1 199.6 249.7 45.1 (40.0) 5.1 (16.2) (196.6) (212.8) Short term borrowings 36.5 6.9 43.4 8.3 9.9 18.2 1.5 - 1.5 Long term debt 0.2 12.4 12.6 (35.8) 5.9 (29.9) (88.5) (3.2) (91.7) - --------------------------------------------------------------------------------------------------------------------------- Total change 86.8 218.9 305.7 17.6 (24.2) (6.6) (103.2) (199.8) (303.0) - --------------------------------------------------------------------------------------------------------------------------- Net interest income $ 154.2 $ 56.2 $ 210.4 $ 344.3 $(83.1) $261.2 $193.5 $(139.1) $ 54.4 =========================================================================================================================== Notes: Taxable-equivalent basis using statutory tax rates which vary depending on the tax rates of the various states in which the subsidiary banks are located, but which approximate 40% in 1995 and 1994, and 1993. Taxable-equivalent adjustments to net interest income with offsetting adjustments to income tax expense are designed to reflect income and corresponding yields as if all interest income were fully taxable. The change in interest due to both rate/volume has been allocated entirely to change due to rate.
Earning Assets and Interest Income Earning assets averaged $47.1 billion in 1995, an increase of $1.5 billion (3.3%). This follows increases of $3.1 billion (7.3%) in 1994 and $920 million (2.2%) in 1993. Over the last year, the loan component of earning assets increased as a result of increased demand and the Corporation's acquisition program. The average yield on earning assets increased to 7.91% in 1995, versus 7.04% in 1994 and 6.96% in 1993. The following table provides a comparison of average earning asset volumes for the last three years:
Change 95/94 Change 94/93 Change 93/92 -------------- -------------- ----------------- Average Earning Asset Volumes (millions)(1) 1995 1994 1993 $ % $ % $ % - ----------------------------------------------------------------------------------------------------------------------------------- Commercial, financial and agricultural $ 9,704 $ 8,287 $ 7,618 1,417 17.1 669 8.8 (493) (6.1) Real estate construction 1,105 806 913 299 37.1 (107) (11.7) (833) (47.7) Real estate mortgage 11,271 7,586 5,413 3,685 48.6 2,173 40.1 (59) (1.1) Instalment 12,553 11,660 9,943 893 7.7 1,717 17.3 187 1.9 Foreign 157 83 160 74 89.2 (77) (48.1) (246) (60.6) Lease financing 445 222 81 223 n/m 141 n/m (122) (60.1) - ----------------------------------------------------------------------------------------------------------------------------------- Total loans 35,235 28,644 24,128 6,591 23.0 4,516 18.7 (1,566) (6.1) Trading account securities 161 113 166 48 42.5 (53) (31.9) (219) (56.9) Investment securities: Held-to-maturity securities U.S. Treasury and agencies 9,374 14,000 14,113 (4,62) (33.0) (113) (0.8) 4,368 44.8 Other 1,420 1,624 996 (204) (12.6) 628 63.1 (469) (32.0) - ----------------------------------------------------------------------------------------------------------------------------------- Held-to-maturity securities 10,794 15,624 15,109 (4,830) (30.9) 515 3.4 3,899 34.8 Available-for-sale securities 288 324 458 (36) (11.1) (134) (29.3) 375 n/m - ----------------------------------------------------------------------------------------------------------------------------------- Total investment securities 11,082 15,948 15,567 (4,866) (30.5) 381 2.4 4,274 37.8 Federal funds sold and securities purchased under agreements to resell 495 471 1,282 24 5.1 (811) (63.3) (424) (24.9) Time deposits, due from banks 30 380 1,342 (350) (92.1) (962) (71.7) (886) (39.8) Other assets held for sale 122 82 29 40 48.8 53 n/m (259) (89.9) - ----------------------------------------------------------------------------------------------------------------------------------- Total $47,125 $45,638 $42,514 1,487 3.3 3,124 7.3 920 2.2 =================================================================================================================================== (1) Loans are net of unearned income and deferred fees.
The average yields on the major categories of earning assets for the last three years are presented in the following table: Taxable-Equivalent Average Yields (%) 1995 1994 1993 - ----------------------------------------------------------------------------- Loans: Commercial, financial and agricultural 8.18 6.79 6.25 Real estate construction 10.68 9.42 6.83 Real estate mortgage 8.09 7.63 8.18 Instalment 9.56 9.25 10.09 Foreign 6.78 5.59 4.48 Lease financing 7.57 7.17 8.42 - ----------------------------------------------------------------------------- Total loans 8.71 8.09 8.26 Trading account securities 5.35 4.55 5.57 Investment securities: Held-to-maturity securities: U.S. Treasury and agencies 5.51 5.34 5.59 Other 5.78 5.67 5.54 - ----------------------------------------------------------------------------- Total held-to-maturity securities 5.55 5.37 5.59 Available-for-sale securities 5.51 4.11 3.90 - ----------------------------------------------------------------------------- Total investment securities 5.55 5.35 5.54 Federal funds sold and securities purchased under agreements to resell 5.83 3.98 3.10 Time deposits, due from banks 6.06 3.61 3.42 Other assets held for sale 5.63 7.51 10.00 - ----------------------------------------------------------------------------- Total Earning Assets 7.91 7.04 6.96 ============================================================================= First Interstate Average Prime Rate 8.83 7.15 6.00 Loans: Including the effect of acquisitions, average loans and leases totaled $35.2 billion in 1995, an increase of $6.6 billion (23.0%). This follows an increase of 18.7% in 1994 and a decline of 6.1% in 1993. Total loans accounted for approximately 75% of average earning assets in 1995, up from approximately 63% in 1994 and 57% in 1993. More than half of the growth in average loans from the 1994 level reflects higher average real estate mortgage outstandings (commercial and residential), which were up $3.7 billion (48.6%) to an average of $11.3 billion in 1995. This follows an increase of 40.1% in 1994 and a decline of 1.1% in 1993. Most of the increase in 1995 reflects the Corporation's acquisition program, particularly in California. During 1994 and 1993, loan originations were augmented by selective purchases of high quality, adjustable-rate residential mortgage loans. The combined yield on the real estate mortgage portfolio was 8.09% in 1995, versus 7.63% in 1994 and 8.18% in 1993. Due to increased demand in the Corporation's markets, average commercial loans rose $1.4 billion (17.1%) in 1995 to $9.7 billion. Commercial loan volumes increased 8.8% in 1994 and declined 6.1% in 1993. The average yield on the commercial loan portfolio increased to 8.18% in 1995, a substantial improvement from 6.79% in 1994 and 6.25% in 1993. Instalment loans, including credit card outstandings, increased $893 million (7.7%) from the average 1994 level. This follows increases of 17.3% in 1994 and 1.9% in 1993. The average yield on instalment loans was 9.56% in 1995, versus 9.25% in 1994 and 10.09% in 1993. The Corporation continues its focus on retail banking and increasing its market share in the communities in which it operates. Including the effect of acquisitions, construction loans averaged $1.1 billion in 1995, an increase of $299 million (37.1%) from the year earlier. This follows declines of 11.7% in 1994 and 47.7% in 1993. The yield on the construction portfolio rose to 10.68% in 1995, up substantially from 9.42% in 1994 and 6.83% in 1993. Lease financing balances increased to an average of $445 million in 1995 from an average of $222 million in 1994. The increase in 1995 reflects primarily growth in indirect auto leases. This follows an increase of 174.1% in 1994 and a reduction of 60.1% in 1993. The average yield on lease financing was 7.57% in 1995, versus 7.17% in 1994 and 8.42% in 1993. At December 31, 1995, including both the effect of acquisitions and an increase in new loan originations, loans and leases totaled $36.7 billion, an increase of $3.5 billion (10.4%) from the $33.2 billion reported a year earlier. Instalment loans increased $590 million (4.8%) to $12.9 billion at yearend. Growth of these consumer loans reflects general market conditions that increase consumer demand for credit. At the same time, commercial loans increased $1.6 billion (17.5%) to $10.9 billion at yearend 1995. Residential real estate mortgages totaled $6.4 billion, $537 million (9.2%) above a year ago, while commercial mortgages were up $395 million (9.0%) to $4.8 billion at yearend 1995. Construction loans were $1.1 billion at the end of 1995, an increase of $118 million (12.6%) from a year earlier. The contractual maturity schedule of the loan portfolio, excluding instalment and real estate mortgage loans, is detailed in the following table:
Amounts (millions) Within one year One to five years After five years Total - ---------------------------------------------------------------------------------------------------------- Commercial, financial and agricultural $5,706 $4,112 $1,099 $10,917 Real estate construction 455 352 256 1,063 Foreign 70 99 16 185 - ---------------------------------------------------------------------------------------------------------- Total $6,231 $4,563 $1,371 $12,165 ==========================================================================================================
As shown in the preceding table, loans maturing within one year totaled $6.2 billion at yearend 1995. The Corporation's policy on maturity extensions and rollovers is based on management's assessment of individual loans. Approvals for the extension or renewal of loans without reduction of principal for more than one 12-month period are generally avoided, unless fully secured and properly margined by cash or marketable securities, or are revolving lines subject to annual analysis and renewal. The following table provides additional detail on the remaining $5.9 billion of loans with maturities exceeding one year: Amounts (millions) Fixed Rate Adjustable Rate Total - ------------------------------------------------------------------------------ Commercial, financial and agricultural $2,859 $2,352 $5,211 Real estate construction 236 372 608 Foreign 88 27 115 - ------------------------------------------------------------------------------ Total $3,183 $2,751 $5,934 ============================================================================== Investment Securities: Investment securities are purchased for the primary purpose of deploying excess liquidity while accommodating anticipated loan growth. Loan growth is supported by the maintenance of a laddered portfolio, which generates uniform cash flows throughout the year. In addition, securities classified as available-for-sale can be liquidated to provide additional cash flow. Under SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities," the Corporation at the time of purchase determines whether such securities are to be "held-to-maturity" or "available-for-sale." In December 1995, under a one-time opportunity for organizations to transfer securities from their held-to-maturity portfolios approved by the Financial Accounting Standards Board, the Corporation reclassified substantially all of the investment portfolio to an available-for-sale basis, which provides additional flexibility in the management of the portfolio. Under this classification, securities are carried at fair value and unrealized gains and losses (net of related taxes) are reflected in the equity section of the balance sheet. At December 31, 1995, the Corporation had an unrealized net gain of $6 million. The investment securities portfolio averaged $11.1 billion in 1995, a decline of $4.9 billion (30.5%) from the 1994 average. This follows increases of $381 million (2.4%) in 1994 and $4.3 billion (37.8%) in 1993. Beginning in the second half of 1994 and continuing through 1995, proceeds of maturing securities were used to fund loans as loan growth exceeded deposit growth. At December 31, 1995, total investment securities were $9.1 billion, down $4.8 billion (34.3%) from a year earlier. The amortized cost of U.S. Treasury and agency-backed securities declined $4.6 billion (38.5%) from a year earlier to a total of $7.5 billion at the end of 1995. All other investment securities amounted to $1.6 billion at the end of 1995, down 5.2% from a year earlier. The following table compares the expected average life, carrying amount and approximate market value of the investment securities portfolio at December 31, 1995 and 1994:
December 31, 1995 December 31, 1994 -------------------------------------- -------------------------------------- Held-to-Maturity Expected Carrying Approximate Expected Carrying Approximate (dollars in millions) Average Life Amount Market Value Average Life Amount Market Value - ---------------------------------------------------------------------------------------------------------------- U.S. Treasury and agencies - $ - $ - 22 months $12,105 $11,769 State and political subdivisions - - - 34 months 29 30 Other 300 months 88 51 42 months 1,561 1,481 - ---------------------------------------------------------------------------------------------------------------- Total 300 months $ 88 $ 51 25 months $13,695 $13,280 ================================================================================================================ Available-for-Sale (dollars in millions) - ---------------------------------------------------------------------------------------------------------------- U.S. Treasury and agencies 26 months $7,487 $7,487 22 months $ 42 $ 42 State and political subdivisions 38 months 18 18 - - - Other 30 months 1,505 1,505 n/m 114 114 - ---------------------------------------------------------------------------------------------------------------- Total 27 months $9,010 $9,010 n/m $ 156 $ 156 ================================================================================================================
At December 31, 1995, securities maturing within one year amounted to $2.4 billion, or 26.8% of the investment securities portfolio. The weighted average expected maturity of total investment securities was 27 months at yearend 1995, compared to the weighted average maturities of 25 months in 1994 and 21 months at the end of 1993. The average expected maturities of U.S. Treasury and agency securities were 26 months, 22 months and 20 months at yearend 1995, 1994 and 1993, respectively. The comparable maturities of tax-exempt securities were 38 months, 34 months and 32 months at the same dates. The contractual maturity distribution of the major categories of the investment securities held-to-maturity and available-for-sale portfolios at December 31, 1995, is presented in the following table:
December 31, 1995 ---------------------------------------------------------------------------- Held-to-Maturity Available-for-Sale -------------------------- ---------------------------------------------- Less After Within One Five After than 10 10 one to five to 10 10 Contractual Amounts (millions) years years Total year years years years Total - ------------------------------------------------------------------------------------------------------------- U.S. Treasury and agencies $ - $ - $ - $2,320 $2,441 $1,426 $1,300 $7,487 State and political subdivisions - - - 2 12 4 - 18 Other - 88 88 114 551 4 836 1,505 - ------------------------------------------------------------------------------------------------------------- Total $ - $ 88 $ 88 $2,436 $3,004 $1,434 $2,136 $9,010 =============================================================================================================
As indicated in the preceding table, securities that mature within one year totaled $2.4 billion on a contractual basis at yearend 1995. Contractual maturities plus estimated prepayments during 1996 are expected to equal approximately $4.6 billion. Taxable-equivalent yields of investment securities held at December 31, 1995, are presented by maturity in the following table:
December 31, 1995 ---------------------------------------------------------------------------- Held-to-Maturity Available-for-Sale -------------------------- ---------------------------------------------- Less After Within One Five After than 10 10 one to five to 10 10 Yield (%) years years Total year years years years Total - ------------------------------------------------------------------------------------------------------------- U.S. Treasury and agencies - - - 5.12 5.52 6.14 6.09 5.61 State and political subdivisions - - - 7.97 8.42 8.44 7.41 8.35 Other - 6.77 6.77 5.88 5.48 6.18 5.96 5.78 - ------------------------------------------------------------------------------------------------------------- Total - 6.77 6.77 5.16 5.52 6.14 6.04 5.65 =============================================================================================================
Other Earning Assets: While loans and investment securities are the primary components of earning assets, available funds are also deployed into other revenue producing instruments that are low risk and highly liquid. Offset in recent years by strong growth in higher-yielding loans, interest bearing time deposits due from banks declined $350 million (92.1%) to an average of $30 million in 1995. This follows declines of $962 million (71.7%) in 1994 and $886 million (39.8%) in 1993. Federal funds sold and repurchase agreements averaged $495 million in 1995, an increase of $24 million (5.1%). This follows declines of $811 million (63.3%) in 1994 and $424 million (24.9%) in 1993. At December 31, 1995, interest bearing deposits at other banks totaled $14 million, a decline of $12 million (45.1%) from the year earlier level. At the same time, federal funds sold and repurchase agreements increased $1.6 billion to $1.8 billion, reflecting generally improved liquidity and normal seasonality. Sources of Funds and Interest Expense Earning assets are supported by various sources of funds, each of which is continuously monitored to ensure adequate liquidity to satisfy customer demand and fund the Corporation's operations. The primary source of funds is a broad and diversified base of consumer deposits gathered by a network of 1,140 domestic banking offices in 13 states. Core deposits, including interest bearing consumer funds, demand and noninterest bearing time deposits described below, reduce the Corporation's dependence on corporate purchased funds. Core deposits represented 97% of average deposits in 1995, versus 98% in 1994 and 1993. Core deposits, less cash and due from banks, supported 87% of average earning assets in 1995, versus 88% in 1994 and 86% in 1993. Total interest bearing sources of funds increased $1.5 billion (4.6%) to an average of $34.3 billion in 1995. This follows an increase of $1.8 billion (5.8%) in 1994 and a decline of $1.1 billion (3.5%) in 1993. The average rate paid on total interest bearing liabilities was 3.41% in 1995, versus 2.64% in 1994 and 2.81% in 1993. The higher rate in 1995 reflects increased interest rates and a greater proportion of CDs, largely due to thrift acquisitions. A breakdown of the Corporation's interest bearing sources of funds follows:
Change 95/94 Change 94/93 Change 93/92 --------------- --------------- ---------------- Average Volumes (millions) 1995 1994 1993 $ % $ % $ % - ------------------------------------------------------------------------------------------------------------- Regular savings $ 5,715 $ 5,823 $ 5,288 (108) (1.9) 535 10.1 159 3.1 Market interest demand 6,496 6,644 6,115 (148) (2.2) 529 8.7 222 3.8 Market interest savings 10,262 11,427 10,491 (1,165 ) (10.2) 936 8.9 654 6.6 Other savings and time under $100,000 7,730 5,787 5,799 1,943 33.6 (12) (0.2) (825) (12.5) - ------------------------------------------------------------------------------------------------------------- Total interest bearing consumer funds 30,203 29,681 27,693 522 1.8 1,988 7.2 210 0.8 Large CDs, other money market funds 1,349 1,076 989 273 25.4 87 8.8 (181) (15.5) Short term borrowings 1,362 655 431 707 n/m 224 52.0 43 11.1 Long term debt 1,398 1,395 1,893 3 0.2 (498) (26.3) (1,203) (38.9) - ------------------------------------------------------------------------------------------------------------- Total corporate purchased funds 4,109 3,126 3,313 983 31.4 (187) (5.6) (1,341) (28.8) - ------------------------------------------------------------------------------------------------------------- Total $34,312 $32,807 $31,006 1,505 4.6 1,801 5.8 (1,131) (3.5) =============================================================================================================
Interest rates paid over the past three years on the liability accounts discussed above are summarized in the following table: Average Rates Paid (%) 1995 1994 1993 - ---------------------------------------------------------------------- Regular savings 2.20 2.08 2.25 Market interest demand 1.32 1.25 1.52 Market interest savings 3.01 2.35 2.40 Other savings and time under $100,000 5.02 3.69 3.81 - ---------------------------------------------------------------------- Total interest bearing consumer funds 3.01 2.31 2.48 Large CDs, other money market funds 4.92 3.63 3.54 Short term borrowings 5.62 5.16 3.72 Long term debt 8.50 7.63 7.19 - ---------------------------------------------------------------------- Total corporate purchased funds 6.37 5.74 5.57 - ---------------------------------------------------------------------- Total 3.41 2.64 2.81 ====================================================================== Interest Bearing Consumer Funds: These sources consist of various types of interest bearing deposits in retail accounts. Combined balances averaged $30.2 billion in 1995, up from the $29.7 billion reported in 1994 and $27.7 billion reported in 1993. The average rate paid on consumer funds in 1995 was 3.01%, up from 2.31% in 1994 and 2.48% in 1993. At December 31, 1995, interest bearing consumer funds totaled $29.8 billion, a decline from the $30.5 billion reported a year earlier. Corporate Purchased Funds: While the interest bearing consumer funds described above provide the primary source of funding, liabilities raised in the money markets provide an additional source of liquidity. These funds consist of large certificates of deposit, short term borrowings and long term debt. Corporate purchased funds averaged $4.1 billion in 1995, an increase of $983 million (31.4%). This follows declines of $187 million (5.6%) in 1994 and $1.3 billion (28.8%) in 1993. The increase in 1995 reflects the effect of acquisitions as well as strong loan growth in excess of core deposit generation. The declines in the two previous years reflect the relatively large amount of funds available for investment as well as the repurchase and redemption of long term debt during 1993. The combined cost of corporate purchased funds averaged 6.37% in 1995, versus 5.74% in 1994 and 5.57% in 1993. Corporate purchased funds totaled $3.8 billion at yearend 1995, a decline of $500 million (11.6%) from a year earlier. As of December 31, 1995, time certificates of deposit of $100,000 or more mature as follows: Within Three to Six to 12 After 12 Amounts (millions) three months six months months months Total - ------------------------------------------------------------------------------- Time certificates of deposit $594 $243 $196 $107 $1,140 Other time deposits 137 16 16 74 243 At December 31, 1995, 90% of the Corporation's long term debt had fixed coupon rates. Of this amount, 53% was converted to floating rate debt using interest rate swaps. The effect on net interest income for the years ending December 31, 1995, 1994 and 1993, was a positive increase of approximately $12 million, $16 million and $47 million, respectively. Net Noninterest Sources: Net noninterest sources of funds consist of demand deposits and other noninterest bearing liabilities, shareholders' equity and the allowance for credit losses, less cash and due from banks, net fixed assets and other assets. Demand deposits are a major, stable source of funding for the Corporation and have increased steadily over the last three years. At December 31, 1995, demand and other noninterest bearing deposits increased to $19.1 billion (38% of total deposits), versus $16.6 billion (34%) a year earlier. Investable demand deposits averaged $10.7 billion in 1995, up 3.7% from the $10.3 billion average in 1994. Of the other categories of average net noninterest sources, equity capital increased $218 million from the 1994 average, reflecting the addition of retained earnings net of the effect of the stock buyback and dividends paid, while other assets increased $406 million (20.1%), primarily due to an increase in goodwill. The average volumes of noninterest funding sources for the last three years are shown in the following table:
Change 95/94 Change 94/93 Change 93/92 ------------ -------------- -------------- Average Volumes (millions) 1995 1994 1993 $ % $ % $ % - -------------------------------------------------------------------------------------------------------------- Demand and noninterest bearing time deposits $16,357 $15,556 $13,858 801 5.1 1,698 12.3 1,315 10.5 Less cash and due from banks 5,651 5,233 4,992 418 8.0 241 4.8 55 1.1 - -------------------------------------------------------------------------------------------------------------- Investable demand deposits 10,706 10,323 8,866 383 3.7 1,457 16.4 1,260 16.6 Add: Equity capital 3,817 3,599 3,478 218 6.1 121 3.5 521 17.6 Allowance for credit losses 887 980 1,043 (93) (9.5) (63) (6.0) (218) (17.3) Other liabilities 1,076 1,017 977 59 5.8 40 4.1 (417) (29.9) Less: Bank premises and equipment 1,244 1,065 914 179 16.8 151 16.5 (46) (4.8) Other assets 2,429 2,023 1,942 406 20.1 81 4.2 (859) (30.7) - -------------------------------------------------------------------------------------------------------------- Net Noninterest Sources $12,813 $12,831 $11,508 (18) (0.1) 1,323 11.5 2,051 21.7 ==============================================================================================================
Net Interest Income Taxable-equivalent net interest income amounted to $2,558.3 million in 1995, an increase of $210.4 million (9.0%) from 1994. This follows increases of 12.5% in 1994 and 2.7% in 1993. The higher level of taxable- equivalent net interest income in 1995 resulted primarily from the 29 basis point increase in the net interest margin to 5.43% in 1995 from 5.14% in 1994. In addition, average earning assets increased $1.5 billion (3.3%) to $47.1 billion in 1995. This follows increases of 7.3% in 1994 and 2.2% in 1993. Provision for Credit Losses No provision for credit losses for the consolidated Corporation has been recorded since the fourth quarter of 1993. This decision reflects significant improvements in credit quality. In addition, the Corporation has experienced a substantial reduction in the level of net chargeoffs, which amounted to $154.7 million (0.44% of average loans) in 1995, versus $133.0 million (0.46% of average loans) in 1994 and $218.1 million (0.90% of average loans) in 1993. The provision for credit losses totaled $112.6 million in 1993. Refer to the Risk Elements section of this report for a more complete discussion of the Corporation's credit profile. Noninterest Income Noninterest income totaled $1,119.6 million in 1995, an increase of $65.3 million (6.2%) from the level of a year earlier. Service charges on deposit accounts rose $35.4 million (6.3%) from 1994, while trust fees declined $23.0 million (11.9%). These compare to 1994 increases in deposit service charges and trust fees of 9.5% and 9.0%, respectively. The 1995 decline in trust fees reflects the previously announced disposition of Denver Investment Advisors, a subsidiary of First Interstate Bank of Denver, N.A. Noninterest income in 1995 benefited from venture capital gains of $35.5 million, of which $8.5 million were reported as investment security gains and $27.0 million were reported as other income. Noninterest income in 1994 included venture capital gains of $28.3 million, of which $17.0 million were reported as investment security gains and $11.3 million were reported as other income. The $24.3 million (18.4%) increase in other charges, commissions and fees in 1995 resulted primarily from growth in revenue from sales of investment products. Noninterest income in 1995 also benefited from growth of merchant credit card fees, which rose $18.6 million (46.9%). The major categories of noninterest income are included in the following table:
Change 95/94 Change 94/93 Change 93/92 --------------- --------------- ------------- Noninterest Income (millions) 1995 1994 1993 $ % $ % $ % - ---------------------------------------------------------------------------------------------------------------------- Deposit service charges $ 597.3 $ 561.9 $ 513.0 35.4 6.3 48.9 9.5 34.1 7.1 Trust fees 170.3 193.3 177.4 (23.0) (11.9) 15.9 9.0 7.1 4.2 Other charges, commissions and fees 156.3 132.0 149.4 24.3 18.4 (17.4) (11.6) (14.2) (8.7) Merchant credit card fees 58.3 39.7 44.1 18.6 46.9 (4.4) (10.0) 6.8 18.2 Trading income 20.4 16.8 19.5 3.6 21.4 (2.7) (13.8) 0.1 0.5 Investment security gains 10.0 21.1 9.7 (11.1) (52.6) 11.4 n/m 11.5 n/m Gain on sale of loans 6.9 2.5 8.0 4.4 176.0 (5.5) (68.8) 11.3 n/m Other income 100.1 87.0 33.1 13.1 15.1 53.9 n/m (17.2) (34.2) - --------------------------------------------------------------------------------------------------------------------- Total $1,119.6 $1,054.3 $ 954.2 65.3 6.2 100.1 10.5 39.5 4.3 =====================================================================================================================
Noninterest Expenses Noninterest expenses totaled $2,213.1 million in 1995, versus $2,197.8 million in 1994 and $2,032.4 million in 1993. Total noninterest expenses in 1995 included $24.4 million of restructuring charges, versus $141.3 million in 1994, as previously noted. In addition, noninterest expenses in 1995 included $27.6 million of merger related expenses, which were recognized in the fourth quarter. Noninterest expenses before the effect of restructuring charges, merger related expenses and ORE charges and including the effect of completed acquisitions were $2,160.5 million in 1995, an increase of $91.6 million (4.4%) from 1994. Approximately $53.2 million of the increase represents higher outside contract fees, $32.9 million reflects higher occupancy and equipment expenses, $25.4 million represents higher charges resulting from the amortization of intangibles and $22.0 million represents higher communications expenses. These increases were partially offset by declines of $38.2 million in FDIC assessments and $19.1 million in salary and benefits expenses in 1995. Noninterest expenses in 1994 were favorably impacted by a net recovery of ORE expenses that amounted to $12.4 million. Noninterest expenses in 1994 also benefited from a reversal of capitalized deposit software expense of $21.3 million (included in outside contract fees) and from the reversal of $13.2 million of litigation reserves no longer considered necessary. In September 1994, the Corporation announced a Restructuring Plan to better position the company for the introduction of full interstate banking. The Plan resulted in an initial restructuring charge of $139.0 million in the 1994 third quarter, generally covering an early retirement program, severance and outplacement services, and facility and equipment valuations. In addition, over the five quarters subsequent to the announcement, restructuring charges of $26.7 million were incurred, generally for relocation of staff and facilities and retention payments for certain personnel displaced as a result of the Plan. As of yearend 1995, the activities undertaken as a part of the Plan were largely completed. The Plan was designed to produce ongoing expense savings of approximately $167 million per year. Including the effect of acquisitions and the Restructuring Plan, the number of full-time equivalent staff totaled 27,200 in December 1995. This represents a decline of 194 full-time equivalent staff from December 1994 and follows an increase of 805 (3.0%) from December 1993. The Corporation's efficiency ratio, which reflects noninterest expenses before merger related expenses, restructuring charges and ORE expenses as a percent of taxable-equivalent net interest income plus noninterest income, was 58.7% for all of 1995. This compares to 60.8% in 1994 and 65.7% in 1993. The major categories of noninterest expenses are included in the following table:
Change 95/94 Change 94/93 Change 93/92 --------------- --------------- --------------- Noninterest Expenses (millions) 1995 1994 1993 $ % $ % $ % - ------------------------------------------------------------------------------------------------------------------------ Salaries $ 876.7 $ 865.9 $ 805.8 10.8 1.2 60.1 7.5 (47.7) (5.6) Employee benefits 184.1 214.0 169.5 (29.9) (14.0) 44.5 26.3 (12.4) (6.8) - ------------------------------------------------------------------------------------------------------------------------ Total salaries and benefits 1,060.8 1,079.9 975.3 (19.1) (1.8) 104.6 10.7 (60.1) (5.8) Net occupancy of bank premises 235.1 228.3 207.3 6.8 3.0 21.0 10.1 (16.4) (7.3) Furniture and equipment 154.4 128.3 129.9 26.1 20.3 (1.6) (1.2) (5.8) (4.3) Outside contract fees 145.0 91.8 165.2 53.2 58.0 (73.4) (44.4) 34.9 26.8 Communications 139.6 117.6 105.0 22.0 18.7 12.6 12.0 13.1 14.3 FDIC assessments 64.6 102.8 100.5 (38.2) (37.2) 2.3 2.3 9.9 10.9 Amortization of intangibles 60.6 35.2 24.1 25.4 72.2 11.1 46.1 (8.9) (27.0) Supplies 53.2 43.6 40.7 9.6 22.0 2.9 7.1 1.3 3.3 Advertising 51.7 46.8 52.6 4.9 10.5 (5.8) (11.0) 17.4 49.4 Other expenses 195.5 194.6 198.2 0.9 0.5 (3.6) (1.8) (36.2) (15.4) - ------------------------------------------------------------------------------------------------------------------------ Total before other real estate, restructuring and merger related 2,160.5 2,068.9 1,998.8 91.6 4.4 70.1 3.5 (50.8) (2.5) Other real estate 0.6 (12.4) 33.6 13.0 n/m (46.0) n/m (126.0) (78.9) Restructuring 24.4 141.3 - (116.9) (82.7) 141.3 n/m - - Merger related 27.6 - - 27.6 n/m - - - - - ------------------------------------------------------------------------------------------------------------------------ Total $2,213.1 $2,197.8 $2,032.4 15.3 0.7 165.4 8.1 (176.8) (8.0) ========================================================================================================================
Income Taxes For 1995, the Corporation recorded income tax expense of $558.1 million on pre-tax income of $1,443.2 million, resulting in an effective rate of 38.7%. This compares to an effective income tax rate of 38.0% for 1994. The higher rate in 1995 includes the effect of nondeductible goodwill amortization and merger related expenses, partially offset by previously unrecognized tax benefits. Asset, Liability and Capital Management The objective of the asset, liability and capital management function is to structure the balance sheet to provide high levels of returns while maintaining acceptable levels of interest rate risk, liquidity, and capital. This process is managed on a consolidated basis by the Asset, Liability and Capital Committee (ALCCO), which establishes policies and procedures that define the goals and parameters for the management of liquidity, capital, investments, interest rate risk, and derivative contracts exposures. Compliance with these policies is reported to ALCCO. Interest Rate Sensitivity: First Interstate relies on a combination of gap analyses and simulations of net interest income to measure and manage interest rate risk. The gap analysis reflects the expected repricing or maturity of assets and liabilities, based on management's estimates of these characteristics, as opposed to contractual maturities. This analysis incorporates the anticipated prepayment behavior of various asset products, particularly mortgage-backed securities and mortgage loans, and the effective maturity of various liability products with indeterminate maturities. For the purpose of constructing the gap, prepayment rates for loans and investment securities are projected to be in line with general market expectations for these products. Specific deposit assumptions are based on historical experience for repricing sensitivity and the average life of deposit balances. At December 31, 1995, the cumulative one-year managerial gap for the consolidated Corporation was a positive $1.5 billion, representing 3.1% of earning assets, as shown in the following table. In other words, approximately 3.1% of the Corporation's earning assets reprice or mature more quickly than liabilities within one year.
Rate Sensitive Balances ----------------------------------------------------------------------- Managerial 1 to 30 31 to 90 91 to 180 181 to 365 1 to 2 2 to 5 Over 5 Amounts (millions) days days days days years years years - -------------------------------------------------------------------------------------------------- Earning Assets $13,799 $6,251 $4,795 $5,185 $5,602 $8,433 $3,625 Net Sources: Regular savings and NOW 2,174 908 1,266 2,074 3,902 1,515 - Market interest 3,166 1,054 1,542 2,822 797 566 - Other sources 5,021 2,980 3,182 2,345 2,037 3,769 6,570 - -------------------------------------------------------------------------------------------------- Total Net Sources 10,361 4,942 5,990 7,241 6,736 5,850 6,570 Incremental Gap 3,438 1,309 (1,195) (2,056) (1,134) 2,583 (2,945) Cumulative Gap 3,438 4,747 3,552 1,496 362 2,945 - % of Earning Assets 7.2 10.0 7.4 3.1 0.8 6.2 -
Gap analysis provides only a static view of the Corporation's interest rate sensitivity at a specific point in time. The actual impact of interest rate movements on the Corporation's net interest income may differ from that implied by any gap measurement, depending on the direction and magnitude of the interest rate movement, the repricing characteristics of various on and off-balance sheet instruments, as well as competitive market pressures. The Corporation regularly performs analysis of its interest rate sensitivity using simulation analysis. This approach measures the risk to net interest income due to changes in underlying market rates while considering the dynamic aspects of the balance sheet, repricing, and prepayment behavior under varying rate scenarios. In addition, simulation models capture the impacts of any embedded options, like caps and floors, as well as spread relationships between rates that are not easily represented in a gap analysis. The simulation model is used to create one and three year changes in net interest income levels which are compared to limits which ALCCO has established on the amount of earnings that may be put at risk due to changes in market interest rates. The simulation results are generally within the established limits, but the actual position at any given time is a function of available asset opportunities, historical and expected interest rates, long term balance sheet trends, and any off-balance sheet activity undertaken to manage the interest rate risk position. For example, the repricing of administered deposits tends to follow general market trends but is subject to various lags. The simulation model currently indicates that if market rates decline, the decreases in asset rates will not be fully offset by the lagged response in deposit prices, limiting net interest income growth. To partially offset the Corporation's exposure to falling interest rates, a risk management program was implemented in the first quarter of 1996. This program includes a combination of interest rate floors and swaps where the Corporation receives fixed rate coupons and pays 3-month LIBOR. Liquidity Management: This section should be read in conjunction with the consolidated and Parent Corporation's statements of cash flows included elsewhere in this report. Liquidity refers to the Corporation's ability or the financial flexibility 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's liquidity policy is designed to draw upon its strengths, which include an extensive interstate retail banking franchise. Core deposits have always provided the Corporation's banking subsidiaries with a major source of stable and relatively low-cost funding. Cash and cash equivalents at yearend 1995 increased by $2.6 billion from the previous yearend. Net cash provided by investing activities during 1995 totaled $2.7 billion. Maturities and sales of investment securities, net of purchases, provided cash of $5.4 billion. Loan originations, net of repayments, used cash of $3.3 billion. Proceeds from sales of loans provided $1.3 billion, while purchases of loans used $317 million. Net cash used by financing activities during 1995 totaled $1.2 billion. Deposits, excluding $187 million of purchased deposits, exhibited a net decrease of $330 million. The Corporation also reported a net decrease of $724 million in short term borrowings. These borrowings were primarily federal funds purchased and securities sold under agreements to repurchase. Proceeds from the issuance of long term debt provided $100 million, while maturities of long term debt required cash of $133 million and cash dividends paid totaled $269 million. Cash provided by operations during 1995 totaled $1.1 billion. Net income for the year totaled $885 million, and noncash adjustments to reconcile net income totaled $346 million. In addition, net changes in other assets, other liabilities (including pension plan funding) and trading account securities decreased cash from operations by $146 million. The Parent Corporation had $265 million of cash and other short term financial instruments at yearend 1995, an increase of $46 million from yearend 1994. Immediate liquidity available to the Parent Corporation also includes a $500 million senior revolving credit facility. In 1995, affiliate banks paid a total of $616 million in dividends to the Parent Corporation. This represents an increase of $11 million from the $605 million paid in 1994 and reflects the continuation of improved operating performance at all affiliate banks and ongoing capital management programs at these banks. The Parent Corporation had no external short term borrowings outstanding at yearend 1995. At current rates, interest on long term debt and preferred stock dividend requirements total $128 million for 1996 and $112 million for 1997. In addition, $192 million of the Parent Corporation's long term debt will mature in 1996 and $161 million will mature in 1997. The Corporation has a $2.3 billion Universal Shelf Registration effective since June 1993, which allows for the issuance of debt securities, preferred stock, common stock, securities warrants and currency warrants. Under the Universal Shelf Registration, in December of 1994 the Corporation established a $1 billion Medium Term Note Program, which allows for the issuance of senior and subordinated debt securities in a number of countries and currencies over a broad spectrum of maturities. As of December 31, 1995, $225 million of debt securities ($125 million of 9.00% Subordinated Notes due November 15, 2004 and $100 million of 8.15% Subordinated Notes due March 15, 2002) had been issued under the Universal Shelf Registration, leaving $2.1 billion capacity for future issuance. No securities have been issued to date under the Medium Term Note program. The Corporation's other sources of liquidity include maturing securities in addition to those that are available for sale or repurchase activity. In addition, affiliate 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. The Parent Corporation has access to regional, national and international capital and money markets. The Corporation's debt securities are rated by Moody's Investors Service, Standard & Poor's Corp., Thomson BankWatch, Duff & Phelps and IBCA. Capital Management: The current and projected capital position of the Corporation and its affiliates and the impact of capital plans on both short term and long term strategies is reviewed regularly by senior management. The following table details the capital position of the Corporation over the last two years: Risk-Based Capital December 31, 1995 December 31, 1994 ----------------- ----------------- Ratios (dollars in millions) $ % $ % - ----------------------------------------------------------------------------- Tier 1 Capital 3,431 7.61 2,882 7.20 Tier 1 Capital minimum requirement 1,803 4.00 1,601 4.00 Excess 1,628 3.61 1,281 3.20 Total Capital 4,742 10.52 4,091 10.22 Total Capital minimum requirement 3,609 8.00 3,203 8.00 Excess 1,133 2.52 888 2.22 Risk-adjusted assets, net of goodwill, nonqualifying intangibles, excess allowance and excess deferred tax assets 45,085 - 40,041 - Leverage Ratio (dollars in millions) Tier 1 Capital 3,431 6.28 2,882 5.35 Quarterly average total assets, net of goodwill, nonqualifying intangibles and excess deferred tax assets 54,645 - 53,905 - Under Federal Reserve Board regulations, the minimum capital ratios required are 4.00% for Tier 1 and 8.00% for Total Capital. Under these regulations, a well-capitalized institution is defined as having a Tier 1 Capital ratio of 6.00%, a Total Capital ratio of 10.00% and a leverage ratio of 5.00%. The Corporation and all subsidiary banks currently exceed the minimum requirements of well-capitalized institutions. In February 1995, in conjunction with completion of the acquisition of Levy Bancorp, the Corporation recorded additional equity of $91.6 million through the issuance of 1,308,388 shares of its common stock. An additional 1,178,235 shares, with proceeds of $78.7 million, were issued during the year under the Stock Option Plan. In April 1995, the Board of Directors approved the repurchase of up to 7.6 million shares of common stock from time to time, subject to market conditions and appropriate regulatory and acquisition accounting requirements. The first 2.5 million shares purchased under the program were designated for reissuance through the Corporation's various employee benefit and stock option plans, and Stock Purchase and Dividend Reinvestment Plan. A total of 956,100 shares were repurchased under the program during 1995. The program was suspended in October 1995 as a result of the initiation of merger negotiations. The average cost of common stock held in the treasury at yearend 1995 was $76.07. In July 1995, the Board of Directors approved a 7% increase in the quarterly cash dividend on the Corporation's common stock from $0.75 to $0.80 per share. During 1995, the Corporation recorded common stock dividends of $235.9 million and preferred stock dividends of $33.3 million. Intangible assets totaled $724 million at December 31, 1995, versus $561 million a year earlier. The higher level at yearend 1995 reflects the completion of five acquisitions during the year. As a result, goodwill increased to $682 million from $514 million at yearend 1994. All other intangibles amounted to $42 million and $47 million at yearend 1995 and 1994, respectively, while excess deferred tax assets totaled $17 million and $21 million, respectively. Risk Elements U.S. Economy: The U.S. economy moved to a more moderate growth track in 1995, but the expansion continued. Capital spending was strong for technology products, including telecommunications equipment, computers and software. Consumer spending softened as households grew more cautious about assuming new debt. Inflation remained below three percent. The Federal Reserve changed course in mid-1995 and began to slowly allow short term interest rates to fall. Long term interest rates plunged on signs of continued subdued inflation and promises of a lower federal budget deficit. In 1996, growth is likely to subside further from last year's pace to a trend closer to the economy's long term potential. Exports will be the most rapidly growing sector, as U.S. companies have positioned themselves well in terms of productivity. Inflation should again average slightly below three percent. Although consumer debt levels remain high, lower interest rates mean that debt servicing costs are not the burden experienced in the 1980s. First Interstate's Territory should outpace the nation in terms of economic growth in 1996. Technology, international trade and population gains should drive the entire region forward in 1996. While many states may record more moderate gains than last year, job and income increases should continue to be impressive, especially in such states as Utah, Nevada, Arizona and Oregon. Washington and California are likely to post faster growth in 1996 than in 1995. All regions of California, including the southern part of the state, are now participating in the upswing. Cutbacks in aerospace are subsiding, while other sectors such as entertainment take up the slack. A recession in the rest of the country or in a number of international trade partners would pose the greatest risk to states in FI Territory in 1996. A steep rise in long term interest rates could also jeopardize the expected recovery in California's housing industry during the coming year. Credit Risk: The Corporation manages its credit risk by establishing and implementing strategies appropriate to the characteristics of borrowers, industries, geographic locations and risk products. Diversification of risk within each of these areas is a primary objective of the Corporation. Policies and procedures are developed to ensure that loan commitments conform to current strategies and guidelines. Management continues to refine the Corporation's credit policies and procedures to address the risks in the current environment and to reflect management's current strategic focus. The credit process is controlled with continuous review and analysis. It is supported by independent evaluation of the portfolio's quality by internal credit review, internal and external auditors and regulatory authorities. The Corporation has collateral management policies in place to ensure that collateral lending of all types is approached on a basis consistent with safe and sound standards. Valuation analysis is utilized to take into consideration the potentially adverse economic conditions under which liquidation could occur. Collateral accepted against the commercial loan portfolio includes accounts receivable and inventory, marketable securities and equipment. Autos, second trust deeds and boats are the primary forms of collateral accepted for the instalment loan portfolio. Securities: At December 31, 1995, the Corporation had $9.1 billion of investment securities, of which 82.3% were U.S. Treasury and agency securities. The remaining 17.7% of the investment portfolio consisted primarily of AAA-rated, well diversified asset-backed securities. The Corporation's investment policy requires investments to be made with an emphasis on issuer diversification. Other than the U.S. government and agencies, the Corporation has no other significant concentration of any single issuer in its investment securities portfolio. At December 31, 1995, the Corporation held no securities defined as "High Risk Mortgage Securities" under current regulatory guidelines or leveraged instruments. The Corporation held $35 million of structured notes, of which $15 million mature in 1996 and $20 million mature in 1998. Loans and ORE: At December 31, 1995, the Corporation's commercial loan portfolio of $10.9 billion was diversified with no single industry representing over 10% of total commercial loans outstanding. The residential mortgage, commercial mortgage and real estate construction portfolios accounted for $6.4 billion, $4.7 billion and $1.1 billion, respectively, of total loans. The following table presents a breakdown of outstanding real estate loans by geographic location at yearend 1995 and 1994. Outstandings reported by state may represent loans and ORE that are held by subsidiaries other than the banking affiliate headquartered in those states.
Real Estate Loans(1) Real Estate Nonperforming Loans1 ORE --------------------------------------------- ---------------------------------------------- (Outstanding Mortgage Construction Mortgage Construction at yearend, ---------------------- ---------------------- ---------------------- ---------------------- in millions) Residential Commercial Residential Commercial Total Residential Commercial Residential Commercial Total - ------------------------------------------------------------------------------------------------------------------------------------ 1995 California $3,206 $1,884 $263 $151 $ 5,504 $ 2 $ 36 $ 6 $ - $ 44 $ 44 Northwest(2) 1,666 1,128 56 142 2,992 - 6 - - 6 1 Southwest(3) 935 1,050 74 163 2,222 - 37 - - 37 3 Texas 522 512 42 107 1,183 1 3 1 - 5 6 Other 120 128 1 53 302 - 1 - - 1 7 - ------------------------------------------------------------------------------------------------------------------------------------ Total $6,449 $4,702 $436 $616 $12,203 $ 3 $ 83 $ 7 $ - $ 93 $ 61 ==================================================================================================================================== 1994 California $3,123 $1,906 $288 $233 $ 5,550 $ 8 $ 55 $ 13 $ 1 $ 77 $ 52 Northwest(2) 1,064 891 43 105 2,103 2 6 - 1 9 1 Southwest(3) 1,008 1,020 44 103 2,175 3 14 - 7 24 4 Texas 489 496 33 41 1,059 - 4 - - 4 7 Other 129 92 - 43 264 - - - - - 8 - ------------------------------------------------------------------------------------------------------------------------------------ Total $5,813 $4,405 $408 $525 $11,151 $ 13 $ 79 $ 13 $ 9 $ 114 $ 72 ==================================================================================================================================== (1) Net of unearned income and deferred fees (2) Includes Oregon, Washington, Montana, Idaho, and Alaska (3) Includes Arizona, Nevada, Colorado, Utah, New Mexico, and Wyoming
In addition to real estate loans, at yearend 1995 the Corporation held $61 million of ORE (net of a $21 million reserve). This compares to $72 million of ORE (net of a $25 million reserve) at yearend 1994. Cross-Border Outstandings - The Corporation had no cross-border outstandings in excess of 0.75% of consolidated assets at December 31, 1995 and 1994. At December 31, 1993, the Corporation's cross-border outstandings to Japan totaled $927 million, or 1.80% of total assets. Derivatives: As of December 31, 1995, the Corporation has engaged in minimal derivative activities for risk management purposes. The Corporation does not engage in any trading or other speculative derivative activities. Refer to Note M to the financial statements for further information on derivatives. Credit Losses: Loans charged off, net of recoveries, amounted to $154.7 million in 1995, versus $133.0 million in 1994 and $218.1 million in 1993. Net chargeoffs represented 0.44% of average loans in 1995, compared to 0.46% in 1994 and 0.90% in 1993. Net chargeoffs of real estate construction and mortgage loans totaled $16.0 million in 1995, down substantially from $25.0 million in 1994 and $81.6 million in 1993. The high level of chargeoffs in 1993 reflects, in part, the revaluation of land loans, primarily in California. The following table summarizes the Corporation's loan loss experience for the last five years:
Year Ended December 31 ---------------------------------------------------- Summary of Loan Loss Experience (millions) 1995 1994 1993 1992 1991 - ---------------------------------------------------------------------------------------------- Average amount of loans outstanding(1) $35,235 $ 28,644 $ 24,128 $ 25,694 $ 30,691 Allowance for Credit Losses Balance at beginning of year $ 934.6 $1,001.1 $1,067.8 $1,273.0 $1,010.8 Provision for the year - - 112.6 314.3 810.2 Net changes due to acquisitions (dispositions) 23.9 66.5 38.8 (59.9) (1.1) - ---------------------------------------------------------------------------------------------- 958.5 1,067.6 1,219.2 1,527.4 1,819.9 Deduct: Loans charged off: Commercial, financial and agricultural 44.7 25.0 84.3 159.8 271.1 Real estate construction 5.5 8.8 65.5 183.0 99.6 Real estate mortgage(2) 61.9 34.2 40.2 43.1 87.6 Instalment 199.7 190.3 200.4 195.3 203.4 Foreign - - 6.6 12.0 3.8 Lease financing 2.6 2.5 1.8 13.7 23.7 - ---------------------------------------------------------------------------------------------- Total chargeoffs 314.4 260.8 398.8 606.9 689.2 Less recoveries of loans previously charged off: Commercial, financial and agricultural 41.8 40.9 78.5 67.9 57.2 Real estate construction 23.2 6.2 17.3 6.6 4.5 Real estate mortgage(2) 28.2 11.8 6.8 6.8 6.3 Instalment 62.7 65.5 66.3 55.6 56.1 Foreign 1.8 1.6 9.1 4.8 10.3 Lease financing 2.0 1.8 2.7 5.6 7.9 - ---------------------------------------------------------------------------------------------- Total recoveries 159.7 127.8 180.7 147.3 142.3 - ---------------------------------------------------------------------------------------------- Net loans charged off 154.7 133.0 218.1 459.6 546.9 - ---------------------------------------------------------------------------------------------- Balance at End of Year $ 803.8 $ 934.6 $1,001.1 $1,067.8 $1,273.0 ============================================================================================== Ratio of net loans charged off during the year to average amount of loans outstanding 0.44% 0.46% 0.90% 1.79% 1.78% (1) Net of unearned income and deferred fees. (2) Includes both commercial and residential mortgage.
The composition of net loans charged off, and the ratios to average outstandings, are presented in the following table:
Composition of Net Loans Charged Off Net Loans Charged Off Ratio to Average Loans (%) (millions) -------------------------------------------------- ---------------------------------------- 1995 1994 1993 1992 1991 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------------------- Commercial, financial and agricultural $ 2.9 $ (15.9) $ 5.8 $ 91.9 $ 213.9 0.03 (0.19) 0.08 1.13 2.05 Real estate construction (17.7) 2.6 48.2 176.4 95.1 (1.61) 0.32 5.28 10.10 3.55 Real estate mortgage 33.7 22.4 33.4 36.3 81.3 0.30 0.30 0.62 0.66 1.44 Instalment 137.0 124.8 134.1 139.7 147.3 1.09 1.07 1.35 1.43 1.45 Foreign (1.8) (1.6) (2.5) 7.2 (6.5) (1.17) (1.93) (1.56) 1.78 - Lease Financing 0.6 0.7 (0.9) 8.1 15.8 0.15 0.32 (1.06) 4.00 2.58 - ------------------------------------------------------------------------------------------------------------------------- Total $ 154.7 $ 133.0 $ 218.1 $ 459.6 $ 546.9 0.44 0.46 0.90 1.79 1.78 =========================================================================================================================
Allowance for Credit Losses: The allowance for credit losses is maintained at a level considered appropriate by management and is based on the ongoing assessment of the risks inherent in the loan portfolio, as well as on the possible impact of known and potential problems in certain off-balance sheet financial instruments and uncertain events. In evaluating the adequacy of total reserves, management incorporates such factors as collateral value, portfolio composition, loan concentrations, trends in local economic conditions and evaluation of the financial strength of borrowers. Allocation of the allowance for credit losses by loan category is based on management's assessment of potential losses in the respective portfolios. While reserves are allocated to specific loans and to portfolio segments, the allowance is predominately general in nature and is available for the portfolio in its entirety. At December 31, 1995, the allowance for credit losses amounted to $804 million, or 2.19% of total outstanding loans. This compares to $934 million, or 2.81% at yearend 1994, and $1,001 million, or 3.85% at yearend 1993. In order to commonize reserve strength, the Corporation's management adjusted levels of the allowance for credit losses among the major bank subsidiaries as of yearend 1994. This action had no effect on the Corporation's consolidated financial statements, as there was no change in the consolidated allowance. The following table details the Corporation's allocation of the allowance for credit losses for the last five years:
Allowance Amount Percent of Loans in Each Category to Total Loans Allocation of Allowance December 31 December 31 for Credit Losses ------------------------------------------------- --------------------------------------- (millions) 1995 1994 1993 1992 1991 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------------------- Commercial, financial and agricultural $ 121.7 $ 124.2 $ 150.6 $ 229.6 $ 348.5 29.7 28.0 30.8 32.1 30.7 Real estate construction 18.1 41.3 77.3 119.3 221.3 2.9 2.9 2.8 4.8 7.6 Real estate mortgage 91.1 90.7 47.1 69.5 120.3 30.4 30.7 23.9 22.1 20.3 Instalment 147.9 145.5 153.7 142.0 136.6 35.1 36.9 41.5 39.9 35.5 Foreign - 0.2 0.2 8.3 11.3 0.5 0.4 0.6 0.7 3.5 Lease Financing 0.9 1.8 2.0 1.8 22.1 1.4 1.1 0.4 0.4 2.4 Unallocated 424.1 530.9 570.2 497.3 412.9 n/a n/a n/a n/a n/a - ------------------------------------------------------------------------------------------------------------------------- Total $ 803.8 $ 934.6 $1,001.1 $1,067.8 $1,273.0 100.0 100.0 100.0 100.0 100.0 =========================================================================================================================
Nonperforming Assets: Loans are generally identified as nonperforming when the payment of principal or interest is 90 days past due, or sooner if management believes that collection is doubtful, or when loans are renegotiated below market interest rates. In addition to nonperforming loans, the Corporation holds ORE acquired through foreclosure. Composition of the Corporation's portfolio of nonperforming assets is shown in the following table: December 31 ---------------------------------------- Nonperforming Assets (millions) 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------ Nonaccruing loans:(1) Domestic:(2) Secured by real estate $ 92.5 $113.7 $149.3 $322.3 $ 684.3 Other 77.8 72.5 77.3 255.5 394.3 - ------------------------------------------------------------------------------ Total domestic 170.3 186.2 226.6 577.8 1,078.6 Foreign - - - - 16.0 - ------------------------------------------------------------------------------ Total nonaccruing loans 170.3 186.2 226.6 577.8 1,094.6 Renegotiated loans:(3) Domestic: Secured by real estate - - - - - Other 1.0 - - 0.4 0.1 - ------------------------------------------------------------------------------ Total renegotiated loans 1.0 - - 0.4 0.1 - ------------------------------------------------------------------------------ Total nonperforming loans 171.3 186.2 226.6 578.2 1,094.7 Other real estate 60.9 72.0 82.1 172.9 493.1 - ------------------------------------------------------------------------------ Total Nonperforming Assets $232.2 $258.2 $308.7 $751.1 $1,587.8 ============================================================================== % of Total Assets 0.4 0.5 0.6 1.5 3.2 Accruing loans past due 90 days or more (millions) - ------------------------------------------------------------------------------ Domestic:(2) Instalment $ 33.6 $ 26.1 $ 29.8 $ 30.5 $ 27.5 Other 66.6 25.1 36.3 22.8 43.0 - ------------------------------------------------------------------------------ Total domestic 100.2 51.2 66.1 53.3 70.5 - ------------------------------------------------------------------------------ Foreign - - - - - - ------------------------------------------------------------------------------ Total $100.2 $ 51.2 $ 66.1 $ 53.3 $ 70.5 ============================================================================== (1) Nonaccruing loans are those loans for which there has been no payment of interest and/or principal due for 90 days or more and in the judgment of management should be so classified, as well as loans which, in the judgment of management, should be so classified at an earlier date. When loans are classified as nonaccrual, the accrual of interest ceases and previously accrued but unreceived income is generally reversed. In future periods, when income is received it is recorded as a reduction in principal where the ultimate collection of principal remains in doubt, or as income if there is no question of collectibility of principal. (2) Real estate construction loans at December 31, 1995, were $6.7 million nonaccruing and $1.5 million accruing and past due 90 days or more. (3) Renegotiated loans are those loans for which the interest rate was reduced because of the inability of the borrower to service the obligation under the original terms of the agreement. Income is accrued at the lower rate as long as the borrower is current under the revised terms and conditions of the agreement. Note: The Corporation's classification of nonperforming loans includes those identified loans where management believes collection is doubtful. Management is not aware of any specific borrower relationships that are not reported as nonperforming where management has serious doubts as to the ability of such borrowers to comply with the present loan repayment terms which would cause nonperforming assets to increase materially. Areas of material known risk in the Corporation's loan portfolio are described under Risk Elements. The following table summarizes the changes in nonperforming assets in 1995 and 1994:
1995 1994 -------------------------------------- ------------------------------------- Reconciliation of Nonperforming Nonperforming Nonperforming Nonperforming Nonperforming Assets (millions) Loans ORE Assets Loans ORE Assets - -------------------------------------------------------------------------------------------------------------- Balance at January 1 $186.2 $72.0 $258.2 $226.6 $82.1 $308.7 In-migration1 361.0 - 361.0 395.4 - 395.4 Return to accrual (28.7) - (28.7) (115.5) - (115.5) Valuation adjustment - 2.4 2.4 - 4.4 4.4 Payments and sales (237.3) (63.7) (301.0) (249.1) (84.9) (334.0) Net chargeoffs and writedowns (82.2) (4.8) (87.0) (47.3) (0.7) (48.0) Transfer within nonperforming (40.9) 40.9 - (55.6) 55.6 - Net changes due to acquisitions 13.2 14.1 27.3 31.7 15.5 47.2 - -------------------------------------------------------------------------------------------------------------- Balance at December 31 $171.3 $60.9 $232.2 $186.2 $72.0 $258.2 ============================================================================================================== (1) Includes disbursements on loans previously reported as nonperforming.
At December 31, 1995, nonperforming loans totaled $171 million, an improvement of $15 million (8.1%) from the $186 million reported a year earlier. Principal or interest payments on $111 million (65%) of nonaccruing loans were contractually past due 30 days or more at yearend 1995. At the same time, principal and interest in accordance with contractual terms were current on $59 million (35%) of nonaccruing loans, as shown in the following table: Total Contractually Contractually Nonaccruing At December 31, 1995 (millions)(1) Past Due(2) Current(3) Loans - ------------------------------------------------------------------------------ Real Estate Loans $ 68.4 $ 24.1 $ 92.5 All Other Loans 42.4 35.4 77.8 - ------------------------------------------------------------------------------ Total $ 110.8 $ 59.5 $ 170.3 (1) There can be no assurance that individual borrowers will continue to perform at the level indicated or that the performance characteristics will not change significantly. (2) Contractually past due is defined as a borrower whose loan principal or interest payment is 30 days or more past due. (3) Contractually current is defined as a loan for which principal and interest are being paid in accordance with the contractual terms. At the end of 1995, approximately 54% of total nonperforming loans were real estate related. Of the nonperforming real estate loans, 74% were contractually past due and 26% were contractually current. In addition to nonperforming loans, nonperforming assets include ORE. ORE includes property acquired through foreclosure or deed in lieu of foreclosure. ORE is recorded at the lower of the loan balance on the property at the date of transfer or the fair value of the property received, net of a reserve for estimated selling costs. It is the policy of the Corporation to maintain a reserve against its ORE for estimated selling costs and declines in value as determined by current appraisals. At yearend 1995, ORE totaled $61 million (net of a $21 million reserve), a decline from $72 million (net of a $25 million reserve) in 1994 and $82 million (net of $32 million reserve) in 1993. At December 31, 1995 total nonperforming assets were $232 million, down from $258 million in 1994 and $309 million in 1993. In addition to assets classified as nonperforming, the Corporation reported accruing loans that were past due 90 days or more of $100 million at yearend 1995, versus $51 million a year earlier and $66 million in 1993, which included consumer instalment credit of $34 million, $26 million and $30 million, respectively. Interest lost on domestic nonperforming loans was $17.6 million in 1995, compared to $13.5 million in 1994 and $26.0 million in 1993. The Corporation had no foreign nonperforming loans in the years presented. In addition to the amount of interest that would have been recorded if the loans were performing, interest lost also includes prior period interest reversals and recoveries. Interest Lost Reconciliation (millions) 1995 1994 1993(1) - --------------------------------------------------------------------- Interest income which would have been recorded under original terms $19.0 $20.6 $33.2 Interest income reversed 3.8 2.1 2.6 Less interest income recorded 5.2 9.2 9.8 - ------------------------------------------------------------------ Total Interest Lost $17.6 $13.5 $26.0 ================================================================== (1) Restated from originally reported data. Mergers and Acquisitions At the beginning of 1993, the Corporation began an ambitious acquisition program geographically focused on key markets within the states of California, Washington and Texas. To date, First Interstate has announced and closed 19 transactions totaling over $10 billion in assets, of which 17 transactions with over $9 billion in assets have been in the three targeted states. Within the 52 counties in the First Interstate Territory with over 100,000 households, the acquisition program has added seven counties to those in which the Corporation has achieved a top-three rank in market share and has improved market penetration in 15 others. All of these transactions were completed by the end of July 1995. For additional information, refer to Note P to the financial statements presented elsewhere in this report. Common Stock and Market Data The New York Stock Exchange is the primary market for the Corporation's $2 par value Common Stock. At December 31, 1995, the 75,929,395 outstanding shares of common stock were held by 23,486 registered shareholders. Approximately 79% of the shares outstanding are held by 303 institutional investors. Dividends paid on the $2 par value Common Stock totaled $3.10 per share in 1995, versus $2.75 in 1994 and $1.60 in 1993. The current quarterly rate of $0.80 per share has been in effect since the July 1995 payment and represents a 20% increase from the annual rate in effect at the end of 1994. On January 16, 1996, following the release of the Corporation's fourth quarter results, the Board of Directors declared a common stock dividend of $0.80 per share, which was paid on February 29 to shareholders of record on February 9, 1996. The number of shares used in the calculation of earnings results per share in 1995 were 77,329,761, compared to 80,421,942 in 1994 and 77,022,749 in 1993. The following table includes supplementary quarterly operating results and per share information for the past two years. The data presented should be read in conjunction with the foregoing discussion and analysis of financial results and with the financial statements included elsewhere in this report. Market Price Shareholders' Dividends ------------------------ Average Daily Equity Paid High Low Close Closing Price - -------------------------------------------------------------------------------- 1995 4th Quarter $50.10 $0.80 $142 1/8 $100 1/8 $136 1/2 $128.67 3rd Quarter 47.95 0.80 103 79 3/8 100 3/4 90.58 2nd Quarter 46.13 0.75 89 3/8 74 80 1/4 81.49 1st Quarter 44.09 0.75 82 1/2 67 1/4 79 76.62 1994 4th Quarter $41.59 $0.75 $ 81 1/2 $ 66 7/8 $ 67 5/8 $ 74.52 3rd Quarter 41.24 0.75 84 1/8 72 81 1/8 78.24 2nd Quarter 42.29 0.75 85 71 3/4 77 78.85 1st Quarter 41.18 0.50 79 1/8 62 3/8 73 1/4 68.36 Quarterly Data Quarterly Operations (millions, except per share amounts): Quarter Ended ----------------------------------------- March 31 June 30 Sept. 30 Dec. 31 - -------------------------------------------------------------------------- 1995 Interest income $921.5 $945.0 $922.6 $918.8 Interest expense 289.8 303.6 291.1 286.7 - -------------------------------------------------------------------------- Net interest income 631.7 641.4 631.5 632.1 Provision for credit losses - - - - Investment securities gains 0.5 3.6 1.5 4.4 Other noninterest income 267.9 270.8 279.0 291.9 Operating noninterest expenses 546.9 549.6 525.6 538.4 Other real estate - - 0.5 0.1 Restructuring 4.8 4.3 6.6 8.7 Merger related - - - 27.6 Applicable income taxes 136.4 142.0 141.5 138.2 - -------------------------------------------------------------------------- Net Income $212.0 $219.9 $237.8 $215.4 ========================================================================== Earnings Per Common Share $ 2.66 $ 2.73 $ 2.96 $ 2.66 1994 Interest income $729.2 $788.7 $811.9 $862.3 Interest expense 195.8 208.5 215.5 245.7 - -------------------------------------------------------------------------- Net interest income 533.4 580.2 596.4 616.6 Provision for credit losses - - - - Investment securities gains 0.8 2.1 4.1 14.1 Other noninterest income 255.7 252.4 276.9 248.2 Operating noninterest expenses 492.9 504.5 529.5 542.0 Other real estate - (5.6) (0.7) (6.1) Restructuring - - 139.0 2.3 Applicable income taxes 112.9 127.6 79.6 129.4 - -------------------------------------------------------------------------- Net Income $184.1 $208.2 $130.0 $211.3 ========================================================================== Earnings Per Common Share $ 2.21 $ 2.38 $ 1.49 $ 2.65 CONSOLIDATED BALANCE SHEET December 31 ----------------------- (Dollars in millions) 1995 1994 - ------------------------------------------------------------------------------ Assets Cash and due from banks $ 7,129 $ 6,070 Time deposits, due from banks 14 26 Federal funds sold and securities purchased under agreements to resell 1,774 179 Trading account securities 54 64 Investment securities: Held-to-maturity (approximate market value: 1995 - $51; 1994 - $13,280) U.S. Treasury and agencies - 12,105 State and political subdivisions - 29 Other 88 1,561 - ------------------------------------------------------------------------------ Total held-to-maturity 88 13,695 Available-for-sale U.S. Treasury and agencies 7,487 42 State and political subdivisions 18 - Other 1,505 114 - ------------------------------------------------------------------------------ Total available-for-sale 9,010 156 - ------------------------------------------------------------------------------ Total Investment Securities 9,098 13,851 Loans (net) 36,673 33,222 Less: Allowance for credit losses 804 934 - ------------------------------------------------------------------------------ Net Loans 35,869 32,288 Other assets held for sale 77 26 Bank premises and equipment 1,282 1,147 Customers' liability for acceptances 94 35 Other assets 2,680 2,127 - ------------------------------------------------------------------------------ Total Assets $ 58,071 $ 55,813 ============================================================================== Liabilities and Shareholders' Equity Deposits: Noninterest bearing $ 19,083 $ 16,599 Interest bearing 31,102 31,828 - ------------------------------------------------------------------------------ Total Deposits 50,185 48,427 Short term borrowings 1,194 1,574 Acceptances outstanding 94 35 Accounts payable and accrued liabilities 1,089 953 Long term debt 1,355 1,388 - ------------------------------------------------------------------------------ Total Liabilities 53,917 52,377 Shareholders' Equity: Preferred Stock 350 350 Common Stock, par value $2 a share: Authorized 250,000,000 shares; Issued: 1995 - 84,285,996 shares; 1994 - 84,285,643 shares 169 168 Capital surplus 1,682 1,692 Retained earnings 2,583 1,967 Unrealized gain on available-for-sale securities, net of related taxes 6 1 - ------------------------------------------------------------------------------ 4,790 4,178 Less: Common Stock in treasury, at cost: 1995 - 8,356,601 shares; 1994 - 10,082,163 shares 636 742 Total Shareholders' Equity 4,154 3,436 - ------------------------------------------------------------------------------ Total Liabilities and Shareholders' Equity $ 58,071 $ 55,813 ============================================================================== See notes to consolidated financial statements. CONSOLIDATED STATEMENT OF OPERATIONS Year Ended December 31 ----------------------------- (Dollars in millions) 1995 1994 1993 - -------------------------------------------------------------------------------- Interest Income Loans, including fees $3,052.5 $2,303.7 $1,980.9 Trading account securities 8.4 4.9 5.6 Investment securities: Held-to-maturity Taxable 591.9 828.3 837.3 Exempt from federal income taxes 1.6 2.7 2.9 Available-for-sale 15.7 13.3 24.1 Other interest income 37.8 39.1 93.4 - -------------------------------------------------------------------------------- Total Interest Income 3,707.9 3,192.0 2,944.2 Interest Expense Deposits 974.7 725.0 719.9 Short term borrowings 77.6 34.2 16.0 Long term debt 118.9 106.3 136.2 - -------------------------------------------------------------------------------- Total Interest Expense 1,171.2 865.5 872.1 - -------------------------------------------------------------------------------- Net Interest Income 2,536.7 2,326.5 2,072.1 Provision for credit losses - - 112.6 - -------------------------------------------------------------------------------- Net Interest Income after Provision for Credit Losses 2,536.7 2,326.5 1,959.5 Noninterest Income Service charges on deposit accounts 597.3 561.9 513.0 Trust fees 170.3 193.3 177.4 Other charges, commissions and fees 156.3 132.0 149.4 Merchant credit card fees 58.3 39.7 44.1 Trading income 20.4 16.8 19.5 Investment securities gains 10.0 21.1 9.7 Gain on sale of loans 6.9 2.5 8.0 Other income 100.1 87.0 33.1 - -------------------------------------------------------------------------------- Total Noninterest Income 1,119.6 1,054.3 954.2 - -------------------------------------------------------------------------------- Noninterest Expenses Salaries and benefits 1,060.8 1,079.9 975.3 Net occupancy and equipment 389.5 356.6 337.2 Outside contract services 145.0 91.8 165.2 Communications 139.6 117.6 105.0 FDIC assessments 64.6 102.8 100.5 Amortization of intangibles 60.6 35.2 24.1 Supplies 53.2 43.6 40.7 Advertising 51.7 46.8 52.6 Other real estate 0.6 (12.4) 33.6 Restructuring 24.4 141.3 - Merger related 27.6 - - Other expenses 195.5 194.6 198.2 - -------------------------------------------------------------------------------- Total Noninterest Expenses 2,213.1 2,197.8 2,032.4 - -------------------------------------------------------------------------------- Income before Income Taxes, Extraordinary Item and Cumulative Effect of Accounting Changes 1,443.2 1,183.0 881.3 Applicable income taxes - including taxes relating to investment securities transactions of $3.4, $7.9, and $4.0 558.1 449.5 319.9 - -------------------------------------------------------------------------------- Income before Extraordinary Item and Cumulative Effect of Accounting Changes 885.1 733.5 561.4 Extraordinary Item - Loss on early extinguishment of debt - - (24.8) Cumulative Effect of Accounting Changes SFAS 106 ($104.9 loss) and SFAS 109 ($305.0 gain) - - 200.1 - -------------------------------------------------------------------------------- Net Income $ 885.1 $ 733.5 $ 736.7 ================================================================================ Earnings Per Common Share: Income before extraordinary item and cumulative effect of accounting changes $ 11.02 $ 8.71 $ 6.68 Extraordinary item - - (0.32) Cumulative effect of accounting changes - - 2.60 - -------------------------------------------------------------------------------- Net income $ 11.02 $ 8.71 $ 8.96 ================================================================================ See notes to consolidated financial statements. CONSOLIDATED STATEMENT OF CASH FLOWS Year Ended December 31 -------------------------- (Dollars in millions) 1995 1994 1993 - -------------------------------------------------------------------------------- Cash Flows from Operating Activities: Net Income $ 885 $ 734 $ 737 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 196 152 124 Provision for credit losses - - 113 Valuation adjustment on foreclosed property (2) (4) - Provision for deferred income taxes 152 108 53 Pension plan funding (131) - - Restructuring - 141 - Cumulative effect of accounting changes - - (200) Loss on early extinguishment of debt - - 25 Decrease (increase) in trading account securities 10 103 (41) Decrease (increase) in interest receivable 35 109 (16) Increase (decrease) in interest payable 34 (13) (35) Other, net (94) 25 215 - -------------------------------------------------------------------------------- Net Cash Provided by Operating Activities 1,085 1,355 975 Cash Flows from Investing Activities: Held-to-maturity securities: Proceeds from maturities 6,147 6,382 4,728 Proceeds from sales - - 32 Purchases (1,500) (2,764) (8,211) Available-for-sale securities: Proceeds from maturities 336 128 969 Proceeds from sales 406 88 - Purchases (8) (23) (160) Net loan principal originations (3,346) (5,688) (3,758) Proceeds from sales of loans 1,277 3,054 2,493 Loans purchased (317) (1,263) (530) Acquisition of subsidiaries (77) 355 60 Proceeds from sales of subsidiaries and operations - - 939 Proceeds from sales of premises and equipment 54 32 24 Purchases of premises and equipment (307) (241) (152) Proceeds from sales of other real estate 56 69 121 - -------------------------------------------------------------------------------- Net Cash Provided (Used) by Investing Activities 2,721 129 (3,445) Cash Flows from Financing Activities: Net (decrease) increase in deposits (330) (1,878) 89 Deposits purchased 187 315 443 Net (decrease) increase in short term borrowings (724) 580 437 Proceeds from long term debt issued 100 125 - Repayments of long term debt (133) (270) (185) Reacquisition of long term debt - - (1,022) Cash dividends paid (269) (251) (172) Reacquisition of Preferred Stock - - (334) Proceeds from Common Stock issued 87 43 43 Reacquisition of Common Stock (82) (712) - - -------------------------------------------------------------------------------- Net Cash Used by Financing Activities (1,164) (2,048) (701) - -------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents 2,642 (564) (3,171) Cash and Cash Equivalents at Beginning of Year 6,275 6,839 10,010 - -------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 8,917 $ 6,275 $ 6,839 ================================================================================ Additional Disclosures: Interest paid $ 1,137 $ 879 $ 905 Income taxes paid 427 345 244 Loans transferred to ORE 41 56 97 Loans originated to facilitate sale of ORE 1 52 7 See notes to consolidated financial statements. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Net Unrealized Class A Common Stock Gains (Loss) on Preferred Common ------------------- Capital Retained Available-for-Sale Treasury (Dollars in millions) Stock Stock Shares Amount Surplus Earnings Securities Stock Total - ------------------------------------------------------------------------------------------------------------------------------------ Balance at December 31, 1992 $ 616.9 $ 0.4 75,181,138 $ 153.9 $1,687.1 $ 863.2 $ - $ (70.4) $3,251.1 Net income for the year 736.7 736.7 Cash Dividends: Common Stock - $1.60 a share (121.3) (121.3) Preferred Stock (46.6) (46.6) Preferred Stock redeemed (266.9) (67.4) (334.3) Common Stock issued: Stock Option Plan 636,042 1.3 24.4 25.7 Restricted Stock Plan (8,056) - (0.4) (0.4) Dividend Reinvestment Plan 222,152 0.4 11.8 12.2 Employee Savings Plan 56,586 0.1 2.8 2.9 Incentive Plan 45,744 0.1 2.4 2.5 Acquisition of Cal Rep Bancorp, Inc. 1,188,823 2.4 12.6 4.8 19.8 Conversion of Class A Common (0.4) 3,566 0.4 - - ------------------------------------------------------------------------------------------------------------------------------------ Balance at December 31, 1993 350.0 - 77,325,995 158.2 1,673.7 1,436.8 - (70.4) 3,548.3 Net income for the year 733.5 733.5 Cash Dividends: Common Stock - $2.75 a share (218.2) (218.2) Preferred Stock (33.3) (33.3) Common Stock issued: Stock Option Plan 702,033 0.2 (0.1) 30.2 30.3 Restricted Stock Plan (7,568) (0.5) (0.5) Dividend Reinvestment Plan 152,033 2.9 8.6 11.5 Incentive Plan 18,074 0.4 0.8 1.2 Acquisition of San Diego Financial Corporation 5,067,513 10.1 3.2 48.5 61.8 Common Stock repurchased (9,054,600) (711.7) (711.7) Other changes 12.6 0.9 13.5 - ------------------------------------------------------------------------------------------------------------------------------------ Balance at December 31, 1994 350.0 - 74,203,480 168.5 1,692.2 1,967.3 0.9 (742.5) 3,436.4 Net income for the year 885.1 885.1 Cash Dividends: Common Stock - $3.10 a share (235.9) (235.9) Preferred Stock (33.3) (33.3) Common Stock issued: Stock Option Plan 1,178,235 (7.8) 86.5 78.7 Restricted Stock Plan (72,055) (0.2) (9.4) (9.6) Dividend Reinvestment Plan 243,937 2.7 18.3 21.0 Incentive Plan 23,157 0.2 1.7 1.9 Acquisition of Levy Bancorp 1,308,388 (5.0) 96.6 91.6 Common Stock repurchased (956,100) (86.9) (86.9) Unrealized Gains and Losses: Gain on transfer of securities 34.7 34.7 Loss on transfer of securities (29.7) (29.7) Other changes 353 - - ------------------------------------------------------------------------------------------------------------------------------------ Balance at December 31, 1995 $ 350.0 $ - 75,929,395 $ 168.5 $1,682.1 $2,583.2 $ 5.9 $(635.7) $4,154.0 ==================================================================================================================================== See notes to consolidated financial statements. NOTE A - ACCOUNTING POLICIES First Interstate Bancorp (the Corporation) is a multi-bank holding company organized in 1958 and registered under the Bank Holding Company Act of 1956, as amended. The Corporation provides financial products and services through various banks and subsidiaries throughout the nation, but primarily in thirteen western states. The Corporation's accounting and reporting policies conform with generally accepted accounting principles and reporting practices applicable to the banking industry. Preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. These estimates also affect the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Certain prior year balances have been reclassified to conform with the current year financial statement presentation. The following is a description of significant policies and practices: CONSOLIDATION The consolidated financial statements include the accounts of the Corporation and all majority-owned subsidiaries. Such subsidiaries are consolidated on a line- by-line basis, after elimination of intercompany transactions. Unconsolidated entities are reported in other assets with related earnings included in noninterest income. SECURITIES Securities are classified based on their purpose and holding period, taking into account the financial position, liquidity and future plans of the Corporation. Effective January 1, 1994, with the adoption of Statement of Financial Accounting Standards No. 115 "Accounting for Certain Investments in Debt and Equity Securities" (SFAS 115), securities are classified as held- to-maturity, available-for-sale or trading. Securities that the Corporation has the ability and intent to hold to maturity are carried at cost, adjusted for amortization of premium or accretion of discount using the interest method, and are classified as held-to-maturity. Securities that may be sold prior to maturity for asset/liability purposes or in response to market or other changes are classified as available-for-sale and carried at fair value. Fair values are estimated based on available market quotations with unrealized gains and losses included as a separate component of shareholders' equity, net of related income taxes. Dividends and interest income, including amortization of premiums and accretion of discounts, are included in interest income. Realized gains and losses, which are calculated using the specific identification method, are included in noninterest income. Trading account securities include securities and money market instruments held in anticipation of short term market movements and are carried at fair value with gains and losses, both realized and unrealized, included in noninterest income. In October of 1995, the Financial Accounting Standards Board (FASB) approved a proposal to allow organizations a one-time opportunity to reconsider their ability and intent to hold securities to maturity and transfer securities from their held-to-maturity portfolios without requiring the remaining portfolio to be reported at fair value. Transfers were permitted at a single date between November 15, 1995 and December 31, 1995. During 1995 there were no sales or transfers of held-to-maturity securities, other than those permitted under this one-time reclassification opportunity, or transfers of available-for-sale securities to trading securities. For additional information regarding the one- time transfer of held-to-maturity securities, refer to Note C - Investment Securities. LOANS Loans are carried at the principal amount net of unearned discounts and deferred origination fees and costs. Interest income on loans not discounted is computed on the loan balance outstanding. Interest income on discounted loans is generally recognized based upon methods that approximate the interest method. Net loan origination fees are amortized over the contractual lives of the loans as an adjustment of the yield using the interest method or the straight-line method, if not materially different. Loans identified as held-for-sale are classified separately, and are carried at the lower of cost or market. Loans are generally placed on nonaccrual status when full collectibility of principal or interest is in doubt or when they become 90 days past due and are not fully secured or in the process of collection, whichever occurs earlier. Previously accrued but unpaid interest is reversed and charged against interest income and future accruals are discontinued. If there is doubt as to the ultimate collectibility of principal or interest, all cash received is applied as a reduction of the loan principal. 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 Statement of Financial Accounting Standards 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 receivable 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 loans 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 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 the unallocated portion of the allowance for credit losses. ALLOWANCE FOR CREDIT LOSSES The allowance for credit losses has been established to absorb losses inherent in the credit portfolio. The allowance for credit losses is available to absorb losses related to the loan and lease portfolio as well as other credit extensions. Additions to the allowance for credit losses are made by provisions which are charged to earnings and reduced by charge-offs, net of recoveries. The adequacy of the allowance for credit losses is evaluated regularly by management with consideration given to the probability of loss based upon industry and historical trends as well as economic conditions. Estimates of potential loss are consistent with accounting and regulatory guidelines. BANK PREMISES AND EQUIPMENT Bank premises and equipment are stated at cost less accumulated provisions for depreciation and amortization, computed primarily on the straight-line method based on estimated useful lives. Capital leases, less accumulated amortization, are included in bank premises and equipment and the lease obligations are included in long term debt. Capital leases are amortized on the straight-line method over the lesser of the equipment's estimated useful life or the lease term and the amortization is included in depreciation expense. OTHER REAL ESTATE Other real estate (ORE), which is included in other assets, is comprised of real estate acquired in satisfaction of loans. Property acquired by foreclosure or deed in lieu of foreclosure is transferred to ORE and is recorded at the lower of the loan balance on the property at the date of transfer or the fair value of the property received, less estimated cost to sell. Valuation losses at the date of transfer are charged to the allowance for credit losses. Subsequent gains (to the extent allowable) and losses that result from the ongoing periodic valuation of these properties are included in ORE expense in the period in which they are identified. GOODWILL AND OTHER INTANGIBLE ASSETS The excess of purchase price over fair value of the net assets of acquired companies is classified as goodwill and included in other assets. Goodwill is amortized using the straight-line method, generally over a 15-year period. Core deposit intangibles represent the intangible value of depositor relationships resulting from deposit liabilities assumed in acquisitions and are generally amortized over a ten year period. MORTGAGE SERVICING RIGHTS Mortgage servicing rights represent the value of the right to service mortgage loans not owned by the Corporation, and are generally being amortized over eight to ten years. In the fourth quarter of 1995, the Corporation adopted, retroactive to January 1, 1995, Statement of Financial Accounting Standards No. 122, "Accounting for Mortgage Servicing Rights an amendment to FASB Statement No. 65" (SFAS 122). Issued in May 1995, SFAS 122 requires balance sheet recognition of the rights to service mortgage loans owned by others, irrespective of whether such servicing rights are purchased or originated. In addition, it requires the capitalization of originated mortgage servicing rights based on fair values. Mortgage servicing rights acquired after adoption of SFAS 122 are stratified based upon interest rates, for purposes of measuring impairment. Mortgage servicing rights acquired prior to January 1, 1995 are evaluated for impairment on an aggregate basis. Fair value is determined based on discounted cash flows using incremental direct and indirect costs. The adoption of SFAS 122 did not have a material effect on the Corporation's earnings, liquidity, capital resources or financial position. PENSION, OTHER POSTRETIREMENT AND POSTEMPLOYMENT PLANS The Corporation has established a noncontributory defined benefit plan covering all eligible employees. The plan provides retirement benefits which are a function of both the years of service and the highest level of compensation during any consecutive five year period during the last ten years before retirement. The Corporation also has a contributory defined contribution savings plan covering substantially all employees. The Corporation is required to make contributions to this plan in varying amounts based on a percentage of amounts contributed by participating employees. In addition to these plans, the Corporation also accrues for certain postretirement and postemployment costs such as health care and disability benefits. The costs of these benefits are accrued over the period for which the employees qualify and are based upon actuarial assumptions. The costs of pension, postemployment and postretirement benefits are charged to Salaries and benefits. In January 1994, Statement of Financial Accounting Standards No. 112, "Employers Accounting for Postemployment Benefits" was adopted by the Corporation. Employers are required to record the obligation for benefits owed to former employees. The effect of adoption of this pronouncement was immaterial to the Corporation. DERIVATIVE FINANCIAL INSTRUMENTS The Corporation engages in derivative activities for interest rate risk management purposes, in addition to those transactions entered into as an intermediary on behalf of its customers. Accrual accounting, whereby income or expense from the derivative financial instrument is accrued and reported as an adjustment to income or expense on the item being hedged, is followed when the appropriate criteria are met. The level of derivatives is monitored on a regular basis and reported to management. INCOME TAXES Income tax expense is the current and deferred tax consequences, to the extent permitted, of all events that have been recognized in the financial statements, as measured by the provisions of enacted tax laws. A consolidated U.S. federal income tax return is filed by the Parent Corporation and includes all subsidiaries. State, local and foreign income tax returns are also filed according to the taxable activity of the entity. Consolidated or combined returns are also filed, as required by certain states, including California. Generally, the consolidated and combined tax liabilities are settled between subsidiaries as if each company had filed a separate return. Foreign tax payments are applied, as permitted, to reduce federal income tax. Investment tax credits related to leasing transactions are accounted for by the deferral method. EARNINGS PER SHARE CALCULATIONS Earnings per common share are computed based on the weighted average number of common shares outstanding during each year, the dilutive effect of stock options outstanding, and after deducting from earnings dividends paid on preferred stock. Fully diluted earnings per common share are considered equal to primary earnings per common share in each year because dilution is less than three percent. CASH FLOWS For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks, time deposits due from banks, federal funds sold and securities purchased under agreements to resell having maturities of three months or less. Generally, federal funds are purchased and sold for one-day periods. Changes in assets and liabilities are net of the effects of sales and acquisitions. The effect of changes in foreign exchange rates on cash balances is not material. RECENT ACCOUNTING PRONOUNCEMENTS In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets to be Disposed of." This statement, effective for fiscal years beginning after December 15, 1995, requires a company to assess impairment of "assets held or used" and "assets to be disposed of." Whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, the related undiscounted cash flows are compared to the assets book value. If the sum of the undiscounted cash flows is less than the book value, a loss is recorded based upon the excess of the book value over the fair value of the asset. Assets to be disposed of are recorded at fair value less cost to sell and are not depreciated while held. The Corporation does not expect the adoption of this pronouncement in 1996 to have a material effect on its financial statements. The American Institute of Certified Public Accountants issued Statement of Position (SOP) 94-6, "Disclosures of Certain Significant Risks and Uncertainties" in December 1994 which is applicable to fiscal years ending after December 15, 1995. Disclosures required in the notes to the financial statements include a discussion of the nature of operations; use of estimates; certain significant estimates; and current vulnerability due to certain concentrations. Disclosures about the nature of operations and use of estimates are included as appropriate in this note. The Corporation does not believe that it is exposed to material risk as defined in the latter two disclosure requirements. In October 1995, the FASB issued Statement of Financial Accounting Standards No. 123, "Stock-Based Compensation" (SFAS 123), which encourages the use of the fair value method of accounting for all employee stock options. The fair value method includes measuring the value of the stock option at grant date and amortizing this value over the service period of the award. The "intrinsic value method" as prescribed by Accounting Principles Bulletin No. 25, "Accounting for Stock Issued to Employees" will also be allowed. This method requires that compensation cost be measured as the excess of the quoted market price of the stock, at the grant date or other measurement date, over the amount an employee must pay to acquire the stock. SFAS 123 is effective for fiscal years beginning after December 15, 1995. NOTE - B RESTRICTIONS ON CASH AND DUE FROM BANKS The Corporation's banking subsidiaries are required to maintain balances with the Federal Reserve Banks based on a percentage of deposit liabilities. Such balances averaged approximately ^$0.9 billion in 1995 and $1.0 billion in 1994. NOTE - C INVESTMENT SECURITIES On January 1, 1994, the Corporation adopted SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities." The adoption of this pronouncement had no significant impact on the Corporation's financial statements. Under the provisions of SFAS 115, securities are to be classified as held-to-maturity, available-for- sale, or trading. In November 1995, the Financial Accounting Standards Board staff issued a Special Report, "A Guide to Implementation of Statement 115 on Accounting for Certain Investments in Debt and Equity Securities," which provided a one-time opportunity for reassessment of intent with regard to the classification of securities. The Corporation reclassified $8.9 billion of securities from held-to- maturity to available-for-sale on December 27, 1995. At the date of transfer, the amortized cost of those securities was $8.9 billion and the unrealized net gain, net of related taxes, on those securities was $5 million which is included in shareholders' equity. The following table provides the major components of investment securities (in millions): Gross Unrealized Amortized ------------------ Estimated Cost Gains Losses Fair Value - ------------------------------------------------------------------------------ December 31, 1995 Held-to-maturity: Other debt securities $ 88 $ -- $ 37 $ 51 - ------------------------------------------------------------------------------ Total held-to-maturity securities $ 88 $ -- $ 37 $ 51 ============================================================================== Available-for-sale: U.S. Treasury securities $ 2,366 $ 11 $ 4 $ 2,373 U.S. government agency securities: Mortgage-backed securities: Pass-throughs 2,754 32 10 2,776 CMOs and REMICs 2,091 5 22 2,074 Direct agencies 262 3 1 264 State and political subdivisions 17 1 -- 18 Other mortgage-backed securities: CMOs and REMICs 834 1 10 825 Asset backed securities 552 5 2 555 Other debt securities 35 -- -- 35 Corporate and Federal Reserve Bank Stock 89 1 -- 90 ----------------------------------------------------------------------------- Total available-for-sale securities$ 9,000 $ 59 $ 49 $ 9,010 ============================================================================== December 31, 1994 Held-to-maturity: U.S. Treasury securities $ 5,199 $ 3 $ 97 $ 5,105 U.S. government agency securities: Mortgage-backed securities: Pass-throughs 2,773 10 110 2,673 CMOs and REMICs 3,652 2 137 3,517 Direct agencies 481 1 8 474 State and political subdivisions 29 1 -- 30 Other mortgage-backed securities CMOs and REMICs 641 -- 37 604 Asset backed securities 770 -- 20 750 Other debt securities 150 -- 23 127 - ------------------------------------------------------------------------------ Total held-to-maturity securities $13,695 $ 17 $ 432 $13,280 ============================================================================== Available-for-sale: U.S. Treasury securities $ 20 $ -- $ -- $ 20 U.S. government agency securities: Mortgage-backed securities: Pass-throughs 5 -- -- 5 CMOs and REMICs 14 -- -- 14 Direct agencies 3 -- -- 3 Corporate and Federal Reserve Bank Stock 113 1 -- 114 - ------------------------------------------------------------------------------ Total available-for-sale securities$ 155 $ 1 $ -- $ 156 ============================================================================== Maturities of securities classified as held-to-maturity and available-for-sale as of December 31, 1995 are as follows (in millions): Held-to-Maturity Securities Available-for-Sale Securities --------------------------- ----------------------------- Estimated Estimated Amortized Fair Average Amortized Fair Average Cost Value Yield(1) Cost Value Yield(1) - ------------------------------------------------------------------------------- Due in one year or less $ $ % $1,830 $1,804 5.24% Due after one year through five years -- -- -- 840 876 5.13% Due after five years through ten years -- -- -- 9 9 5.87% Due after ten years(2) 88 51 6.77% 1 1 5.44% - ------------------------------------------------------------------------------- 88 51 6.77% 2,680 2,690 5.21% Mortgage-backed securities -- -- -- 6,231 6,230 5.85% Corporate and Federal Reserve Bank stock -- -- -- 89 90 5.43% =============================================================================== Total securities $ 88 $ 51 6.77% $9,000 $9,010 5.65% (1) The weighted average yield is computed using the amortized cost of securities. (2) Securities with no stated maturity are included with securities with a remaining maturity of ten years or more. There is minimal risk associated with the mortgage- backed securities issued by U.S. Government agencies. At December 31, 1995, $2,093 million of the U.S. Government agency pass-through mortgage-backed securities were fixed rate and $683 million were adjustable rate. The REMIC holdings of the Corporation are rated in the highest category by at least one nationally recognized rating organization. Mortgage-backed securities included above have a weighted average contractual maturity of approximately 9 years. Expected maturity is often significantly shorter than contractual maturity for mortgage-backed securities due to scheduled payments and unscheduled prepayment activity affecting these securities. The expected average life of the mortgage-backed securities portfolio at December 31, 1995 was 2.8 years. Mortgage-backed securities are subject in varying degrees to extension risk in the event of a material decrease or increase in the level of prevailing interest rates. The Corporation believes its exposure to such price risk is modest because of the relatively short maturity structure of its mortgage-backed securities holdings. Measured in terms of duration, a widely used factor to estimate market-price sensitivity to changes in interest rates, the Corporation estimates adverse market-price exposure to a one percentage point change in interest rates would be approximately $134 million, or 2.36% of the aggregate carrying value of the U.S. Government pass- through mortgage- backed securities, CMOs and REMICs held by the Corporation. The components of gains and losses on sales of securities for the years ended December 31, were as follows (in millions): 1995 1994 1993 - --------------------------------------------------------------------------- Proceeds from sales $ 406 $ 88 $ 32 Gross gains on sales of securities 10 21 10 Gross losses on sales of securities -- -- -- - --------------------------------------------------------------------------- Net gain on sales of securities $ 10 $ 21 $ 10 =========================================================================== Securities and other assets carried at $3.9 billion at December 31, 1995 and $7.3 billion at December 31, 1994 were pledged to secure public and trust deposits and for other purposes as required or permitted by law. The net unrealized holding gains on available-for-sale securities reported, net of related taxes, as a separate component of shareholders' equity was $5.9 million at December 31, 1995 and $0.9 million at December 31, 1994. The net unrealized holding gains on trading securities reported in earnings was $5 million for 1995 and 1994. NOTE - D LOANS AND RELATED COMMITMENTS The composition of the loan and lease portfolio at December 31, 1995 and 1994 is summarized as follows (in millions): Outstandings ------------------------ 1995 1994 - ----------------------------------------------------------------------- Commercial, financial and agricultural $ 10,917 $ 9,294 Real estate construction 1,063 962 Real estate mortgage 11,211 10,263 Instalment 12,854 12,272 Other 772 566 - ----------------------------------------------------------------------- Gross Loans 36,817 33,357 Less: Unearned income 133 107 Net deferred fees 11 28 - ----------------------------------------------------------------------- Net Loans $ 36,673 $ 33,222 ======================================================================= Loans included in other assets held for sale $ 77 $ 26 ======================================================================= See "Risk Elements under the Management's Discussion & Analysis section of this annual report for a summary of nonperforming loans, concentrations of credit risk and other information. Commitments are contractual agreements to extend credit which generally have fixed expiration dates or other termination clauses and may require payment of a fee. Substantially all of the Corporation's commitments to extend credit are contingent upon the customers maintaining specific credit standards at the time of loan funding. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Standby letters of credit and financial guarantees are conditional commitments issued by the Corporation to guarantee the performance of a customer to a third party. Standby letters of credit and financial guarantees are primarily issued as credit enhancements for public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending other credit arrangements to customers. Risks associated with standby letters of credit are reduced by participation to third parties. At December 31, 1995 and 1994 approximately $26 million and $40 million respectively, of standby letters of credit had been participated to others. A commercial letter of credit represents an extension of credit by a bank to its customer where the customer is usually the buyer/importer of goods and the beneficiary is typically the seller/exporter. Credit risk is limited as the merchandise shipped serves as collateral for the transaction. The Corporation's exposure to credit loss under commitments to extend credit, standby letters of credit and financial guarantees as well as commercial letters of credit, is represented by the contractual amount of these instruments (in millions): December 31 -------------------- 1995 1994 - -------------------------------------------------------------------------- Commitments to extend credit $29,231 $28,508 Standby letters of credit and financial guarantees 2,018 2,076 Commercial letters of credit 190 264 ========================================================================== The following summarizes the expiration schedule of the Corporation's loan commitments outstanding and standby letters of credit issued as of December 31, 1995 (in millions): Standby Letters of Commitments Credit - -------------------------------------------------------------------- 1996 $18,960 $1,564 1997 2,043 257 1998 1,665 49 1999 1,741 54 2000 3,569 14 Thereafter 1,253 80 - -------------------------------------------------------------------- Total outstanding at end of year $29,231 $2,018 ==================================================================== 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 Statement of Financial Accounting Standards No. 118, "Accounting by Creditors for Impairment of a Loan Income Recognition and Disclosures." The following table presents a breakdown of impaired loans and the impairment allowance related to impaired loans (in millions): December 31, 1995 ------------------------- Recorded Impairment Investment Allowance - ------------------------------------------------------------------------ Impaired loans: Loans with impairment allowance: Commercial, financial and agricultural $ 30 $ 1 Real estate construction - - Commercial real estate mortgage 5 1 - ----------------------------------------------------------------------- Total loans with impairment allowance 35 $ 2 === Loans without impairment allowance: Commercial, financial and agricultural 49 Real estate construction 7 Commercial real estate mortgage 79 - --------------------------------------------------------- Total loans without impairment allowance 135 - --------------------------------------------------------- Total impaired loans $ 170 ========================================================= For the year ended December 31, 1995, impaired loans averaged $150 million and interest income recorded on impaired loans totaled $4.8 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. Transactions in the allowance for credit losses were as follows (in millions): December 31 --------------------------- 1995 1994 1993 - ------------------------------------------------------------- Balance at beginning of year $ 934 $1,001 $1,068 Provision for the year 112 Other changes acquisitions 24 66 39 - ------------------------------------------------------------- 958 1,067 1,219 Deduct: Loans charged off 314 261 399 Less recoveries on loans previously charged off 160 128 181 - ------------------------------------------------------------- Net loans charged off 154 133 218 - ------------------------------------------------------------- Balance at end of year $ 804 $ 934 $1,001 ============================================================= Certain directors and executive officers of the Parent Corporation and certain of its significant subsidiaries, including their associates, were loan customers of the subsidiary banks. These loans were made in the ordinary course of business at rates and terms no more favorable than those offered to other customers with a similar credit standing. The aggregate dollar amounts of those loans exceeding $60,000 to any one director or executive officer (but excluding loans to the immediate families of executive officers and directors of subsidiaries) were $66 million and $80 million at December 31, 1995 and 1994, respectively. During 1995, $16 million of new loans were made and repayments totaled $30 million. NOTE - E BANK PREMISES AND EQUIPMENT Bank premises and equipment consist of the following (in millions): December 31 ----------------- 1995 1994 - -------------------------------------------------------------------- Land $ 194 $ 188 Buildings and improvements: Owned 1,262 1,151 Capital leases 45 45 Furniture, fixtures and equipment: Owned 1,008 930 Capital leases 5 5 - -------------------------------------------------------------------- 2,514 2,319 Less accumulated depreciation and amortization: Owned 1,192 1,133 Capital leases 40 39 - -------------------------------------------------------------------- Total premises and equipment $1,282 $1,147 ==================================================================== Depreciation and amortization totaled $126 million, $109 million and $99 million in 1995, 1994 and 1993, respectively. NOTE - F SHORT TERM BORROWINGS Short term borrowings are detailed as follows (in millions): December 31 ---------------------------- 1995 1994 1993 - ---------------------------------------------------------------------------- Federal funds purchased: Balance at December 31 $ 676 $1,436 $ 557 Average daily balance 1,144 514 234 Maximum amount outstanding at any month end 2,453 1,436 984 Average interest rate: During the year 5.92% 4.44% 2.78% At December 31 3.30% 4.29% 2.29% Securities sold under agreements to repurchase: Balance at December 31 $ 264 $ 73 $ 144 Average daily balance 106 93 149 Maximum amount outstanding at any month end 264 219 194 Average interest rate: During the year 5.77% 3.86% 2.50% At December 31 5.01% 4.75% 2.75% Other liabilities for short term borrowed money averaged $112 million in 1995 and $48 million in 1994 and 1993. Federal funds purchased generally mature the day following the date of purchase, while securities sold under agreements to repurchase generally mature within 30 days from the various dates of sale. Other short term borrowings generally mature within twelve months. During 1994, the Corporation finalized a three year, $500 million senior revolving credit facility as part of its liability management plan for the Parent Corporation. This facility has numerous interest rate and borrowing options, as well as a $150 million line of credit for cash management purposes. As of December 31, 1995 there were no borrowings outstanding against this facility. NOTE - G LONG TERM DEBT AND DIVIDEND RESTRICTIONS Following is a description of the Corporation's senior and subordinated long term debt which, unless noted otherwise, is not subject to early redemption by the Corporation (in millions): December 31 ----------------- 1995 1994 - ------------------------------------------------------------------------------ Parent Corporation: Senior Medium Term Notes, Series A bearing interest rates ranging from 7.775% to 10.90% $ 200 $ 328 8.625% Subordinated Capital Notes due April 1, 1999 182 182 Subordinated Medium Term Notes, Series C bearing interest rates ranging from 9.38% to 11.25% 163 163 9.125% Subordinated Notes due February 1, 2004 133 133 9.00% Subordinated Notes due November 15, 2004 125 125 8.15% Subordinated Notes due March 15, 2002 100 -- Other Issues (under $100 million each): Fixed Rate 5.75% DM100 million Bearer Bonds due May 6, 1996 43 43 Other fixed rate notes bearing interest ranging from 10.5% to 12.75% 188 188 Variable Rate 128 128 - ------------------------------------------------------------------------------ 1,262 1,290 Subsidiaries: Mortgages 73 74 Obligations under capital leases 20 24 - ------------------------------------------------------------------------------ Total long term debt $ 1,355 $ 1,388 ============================================================================== The Corporation has a $2.3 billion Universal Shelf Registration effective since June 1993, which allows for the issuance of debt securities, preferred stock, common stock, securities warrants and currency warrants. Under the Universal Shelf Registration, the Corporation established a $1 billion Medium Term Note Program in December of 1994, which allows for the issuance of senior and subordinated debt securities in a number of countries and currencies over a broad spectrum of maturities. As of December 31, 1995, $225 million of debt securities ($125 million 9.00% Subordinated Notes due November 15, 2004 and $100 million 8.15% Subordinated Notes due March 15, 2002) had been issued under the Universal Shelf Registration, leaving $2.1 billion capacity for future issuance. No securities have been issued to date under the Medium Term Note program. During 1993, the Corporation repurchased $441 million of its long term debt in the open market and redeemed $369 million of its long term debt. In addition, the Corporation tendered for $175 million of long term debt. As a result, an after-tax loss of $25 million was recorded as an extraordinary item on the Corporation's Consolidated Statement of Operations. The various indentures of the Corporation, pursuant to which long term debt is issued, contain covenants limiting the sale of stock of principal subsidiaries. The Senior Medium Term Notes, Series A and the Subordinated Medium Term Notes, Series C are offered on a continuing basis by the Corporation. The 8.625% Subordinated Capital Notes are subordinated to senior indebtedness of the Corporation. These notes are considered to be Total Capital, but not Tier 1 Capital, for regulatory purposes as, upon maturity, they will be exchanged, at the option of the Corporation, for common stock, perpetual preferred stock or other eligible capital securities of the Corporation having a market value equal to the principal amount of the notes. The 9.125% Subordinated Notes, due February 1, 2004, 9.00% Subordinated Notes, due November 15, 2004, and 8.15% Subordinated Notes, due March 15, 2002, are subordinated to senior indebtedness of the Corporation. These notes are considered to be Total Capital, but not Tier 1 Capital, for regulatory purposes. Included in other issues of the Parent Corporation under $100 million at December 31, 1995 were four fixed rate issues totaling $231 million, and two floating rate issues totaling $128 million. In conjunction with the fixed rate $43 million of 5.75% DM100 mil-lion Bearer Bonds due May 7, 1996, the Corporation has entered into separate agreements whereby the DM/US$ exchange rate is fixed throughout the term of the issue. The floating rate issues consisted of $45 million of Floating Rate FOREX-Linked Notes due February 26, 1996 with a current interest rate of 6.1844%, and $83 million of floating rate notes due June 30, 1997 with a current interest rate of 6.00%. The FOREX Notes bear interest at a rate equal to 20 basis points per annum above the London interbank offered rates for six-month Eurodollar deposits, adjusted semiannually on interest payment dates. The final payment at maturity depends on the exchange rate at that time. The corporation has entered into forward currency contracts to fix this payment. The aggregate minimum annual repayments for the Parent Corporation of long term borrowings for the years 1996 through 2000 and thereafter are as follows (in millions): Minimum Year Repayment --------------------------- 1996 $ 192 1997 161 1998 178 1999 188 2000 -- Thereafter 543 --------------------------- Total $1,262 =========================== At December 31, 1995, $1,134 million (90%) of the Parent Corporation's long term debt had fixed coupon rates. Of this amount, $596 million is converted to floating-rate debt using interest rate swaps. The effect of the Corporation's swap activity was to decrease interest expense on long term debt by $12 million, or 86 basis points, for 1995, $16 million, or 115 basis points, for 1994, and $47 million, or 248 basis points, for 1993. The Corporation is prohibited from borrowing from its bank subsidiaries on less than a fully secured basis under regulations of the Federal Reserve Board. Dividends that may be paid by the bank subsidiaries are restricted by various statutory limitations. As of January 1, 1996, approximately $638 million were free of dividend restrictions under such statutory limitations. Unrestricted net assets of nonbank subsidiaries are insignificant. NOTE - H SHAREHOLDERS' EQUITY Preferred Stock At December 31, 1995 and 1994, 15,000,000 shares of Preferred Stock (no par value) were authorized. Shares Issued Carrying Amount Dividends Declared and Outstanding (in millions) (in millions) ---------------------- ------------- ---------------------- December 31 December 31 Year ended December 31 ---------------------- ----------- ---------------------- 1995 1994 1995 1994 1995 1994 1993 9.875% Cumulative, Series F 8,000,000 8,000,000 $200 $200 $19.8 $19.8 $19.8 (Liquidation preference $200) 9.00% Cumulative, Series G 6,000,000 6,000,000 150 150 13.5 13.5 13.5 (Liquidation preference $200) Other issues previously redeemed --- --- -- -- -- -- 13.3 - -------------------------------------------------------------------------------- Total preferred stock 14,000,000 14,000,000 $350 $350 $33.3 $33.3 $46.6 ================================================================================ The 9.875% Preferred Stock, Series F has been issued as Depositary shares each representing a one-eighth interest in a share of the Series F Preferred Stock. 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. The 9.00% Preferred Stock, Series G has been issued as Depositary shares each representing a one-eighth interest in a share of the Series G Preferred Stock. The Series G Preferred Stock is redeemable at 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. TREASURY STOCK At December 31, 1995 and 1994, the cost of Common Stock in the treasury averaged $76.07 per share and $73.64 per share, respectively. 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, to be made from time to time through mid-1997 in the open market or through privately negotiated transactions. The first 2.5 million shares purchased under the program were to be used for reissuance through the Corporation's various employee benefit and stock option plans, and Stock Purchase and Dividend Reinvestment Plan. The Corporation commenced such purchases in July 1995. As of December 31, 1995, the Corporation had repurchased 956,100 shares. The program was suspended in October 1995, as a result of the initiation of merger negotiations, see Note P Business Combinations. RIGHTS The Corporation declared a dividend of one common share purchase right for each outstanding share of Common Stock, par value $2.00, payable on December 30, 1988 to shareholders of record on that date. Such rights also apply to new issuance of shares after that date. Each right entitles the registered holders to purchase from the Corporation one share of its $2.00 par value Common Stock at a price of $170.00 per share, subject to adjustment. The rights are not exercisable or separable from the Common Stock until the earlier of 10 days after a party acquires beneficial ownership of 20% or more of the outstanding Common Shares or announces a tender offer to do so. The rights, which expire on December 31, 1998, may be redeemed by the Corporation at any time prior to the acquisition by any party of beneficial ownership of 20% or more of the Common Stock at a price of $0.001 per right. When exercisable, and under certain circumstances, each right may entitle the holders to purchase Common Stock of the Corporation at 50% of the then current per share market price of the Common Stock or common stock of the acquiring party at 50% of the then current per share market price of the common stock of the acquiring party. The Corporation has represented to Wells Fargo that the rights have not and will not become exercisable, distributed or triggered in connection with the execution of the merger agreement with Wells Fargo or the consummation of the merger. The rights will expire upon consummation of the merger. NOTE - I STOCK OPTION PLANS The stock option plans adopted in 1988 and 1991 provide for the granting of "non-qualified options and "incentive stock options to key employees of the Corporation and its subsidiaries to purchase Common Stock of the Corporation at a price not less than 100% of the fair market value on the dates of grant. The First Interstate Bancorp 1991 Director Option Plan, as amended and restated, provides for the granting to non-employee directors of the Corporation of "non-qualified options to purchase Common Stock of the Corporation at a price not less than 100% of the fair market value on the dates of grant. Under the plans, options generally become exercisable over a four-year period beginning one year after grant except when a change in control occurs, as defined in the stock option plans, at which time all outstanding options become immediately exercisable. At the time options are exercised, the excess of the proceeds over par value is credited to capital surplus. There are no charges or credits to income in connection with the grant or exercise of options. The 1988 and 1991 Plans also provide for the sale of restricted Common Stock of the Corporation to key employees. Generally, restrictions lapse on 25% of the shares sold, per year, over a four year period from the anniversary of the grant. The following table sets forth information on the options to purchase the Common Stock and the restricted stock of the Corporation:
Price per Restricted Non- Share (range) Common Stock Outstanding Employee ---------------- Weighted ----------------------- Options Employees Directors Low High Average Outstanding Employees - ---------------------------------------------------------------------------------------------------------------- December 31, 1992 3,846,660 855 14 $18.500 - 62.625 $39.94 111,590 82 Granted Stock Options 1,007,600 50.000 - 66.875 50.11 Restricted Stock 1,000 Less: Exercised 636,042 18.500 - 62.625 40.43 51,750 Canceled 340,632 28.875 - 62.625 42.13 7,740 - ---------------------------------------------------------------------------------------------------------------- December 31, 1993 3,877,586 720 15 18.500 - 66.875 42.36 53,100 59 Granted Stock Options 835,100 66.875 - 83.875 67.26 Restricted Stock 16,897 Less: Exercised 702,033 18.500 - 62.625 42.27 44,500 Canceled 78,223 28.875 - 66.875 46.20 - ---------------------------------------------------------------------------------------------------------------- December 31, 1994 3,932,430 712 14 18.500 - 83.875 47.70 25,497 17 Granted Stock Options 886,250 75.125 - 106.000 80.44 Restricted Stock Less: Exercised 1,178,235 18.500 - 71.125 42.81 12,074 Canceled 135,097 33.500 - 80.375 54.24 3,000 - ---------------------------------------------------------------------------------------------------------------- December 31, 1995 3,505,348 702 14 $18.500 - 106.000 $57.44 10,423 14 ================================================================================================================
At December 31, 1995 options for 1,425,048 shares were exercisable and 6,155,091 shares were reserved for future grants under the plans. NOTE - J EMPLOYEE BENEFIT PLANS The Corporation has a noncontributory defined benefit plan that provides retirement benefits which are a function of both the years of service and the highest level of compensation during any consecutive five-year period during the last 10 years before retirement. It is the Corporation's policy to fund the plan sufficient to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1974, plus such additional amounts as the Corporation may determine to be appropriate from time to time. During 1995 the Corporation contributed $131 million to the plan. The following table sets forth the plans funded status and amounts recognized in the Corporation's Consolidated Balance Sheet (in millions): December 31 ---------------------- 1995 1994 - --------------------------------------------------------------------------- Actuarial present value of benefit obligations: Accumulated benefit obligation: Vested $ 855 $ 582 Nonvested 42 39 - --------------------------------------------------------------------------- $ 897 $ 621 =========================================================================== Plan assets at fair value, primarily marketable securities $ 947 $ 706 Projected benefit obligation 1,033 742 - --------------------------------------------------------------------------- Plan assets less than projected benefit obligation (86) (36) Unrecognized prior service costs 5 5 Unrecognized net transition asset being amortized over 13 years (18) (24) Unrecognized net loss due to past experience different from assumptions made 189 23 - --------------------------------------------------------------------------- Prepaid pension asset (pension liability) $ 90 $ (32) =========================================================================== A summary of assets held by the plan is as follows (in millions): December 31 ---------------------- 1995 1994 - --------------------------------------------------------------------------- Cash equivalents $ 56 $ 25 Fixed income securities 284 241 Equity securities 571 298 Other investments 32 138 Accrued income 4 4 - --------------------------------------------------------------------------- Total plan assets $ 947 $ 706 =========================================================================== The net pension cost included the following (in millions): Year Ended December 31 1995 1994 1993 - ----------------------------------------------------------------------------- Service costs (benefits earned during the period) $ 24 $ 30 $ 23 Interest costs on projected benefit obligation 67 59 49 Net amortization and deferral 73 (76) 23 164 13 95 Less return on plan assets 145 (10) 89 Net pension cost included in salaries and benefits 19 23 6 Early Retirement Program expense included in provision for restructuring 82 Total pension cost recognized $ 19 $ 105 $ 6 The following assumptions were used in determining the projected benefit obligation 1995 1994 1993 - ----------------------------------------------------------------------------- Weighted average discount rate 7.00% 8.75% 7.38% Increase in salary levels 4.00% 4.50% 4.00% Expected long term return on plan assets 9.25% 9.25% 9.25% In addition to the noncontributory defined benefit plan, the Corporation and its subsidiaries have several nonqualified noncontributory defined benefit plans covering certain senior employees benefits in excess of those covered under the Corporation's qualified noncontributory defined benefit plan. The accumulated benefit obligation under these plans was $48 million and $29 million and projected benefit obligation in excess of plan assets was $54 million and $33 million as of December 31, 1995 and 1994, respectively. Net pension cost included in salaries and benefits was $5 million in 1995, $16 million in 1994 and $2 million in 1993. The Corporation provides certain health care benefits to retired employees through the Master Welfare Benefit Plan for Employees of First Interstate Bancorp and Affiliates (Plan). Under the terms of the Plan, employees hired prior to January 1, 1992 and who retire at or after age 55 with at least 10 years of service will be eligible for a fixed maximum contribution from the Corporation. Employees hired on or after January 1, 1992 will not be eligible for retiree health care benefits. Effective in the first quarter of 1993, the Corporation adopted SFAS 106, "Employers Accounting for Postretirement Benefits Other Than Pensions (SFAS 106), on an immediate recognition basis. SFAS 106 requires the Corporation to accrue the estimated cost of retiree benefit payments, other than pensions, during employees active service period. The cumulative effect of adopting SFAS 106 was the recognition of accrued postretirement health care costs totaling $169 million. After related tax benefits of $64 million, net income for 1993 was reduced by $105 million. The Corporation currently intends to fund postretirement health care costs as they are incurred. The following table sets forth the Plans accumulated cost included on the Corporation's Consolidated Balance Sheet (in millions): December 31 ------------------- 1995 1994 - --------------------------------------------------------------------------- Accumulated postretirement benefit obligation: Current retirees $ 132 $ 117 Active employees fully eligible for benefits 2 2 Other active Plan participants 13 17 - --------------------------------------------------------------------------- Accumulated postretirement benefit obligation 147 136 Unrecognized prior service costs 8 8 Unrecognized net gains due to past experience different from assumptions made 12 26 - --------------------------------------------------------------------------- Accrued postretirement benefit cost $ 167 $ 170 =========================================================================== Net periodic postretirement benefit cost for 1995, 1994 and 1993 included the following components (in millions): December 31 ------------------------------- 1995 1994 1993 - ----------------------------------------------------------------------- Service cost $ 1 $ 1 $ 1 Interest cost 11 10 14 Amortization of net gains (10) (1) -- - ----------------------------------------------------------------------- Total postretirement benefit cost $ 2 $ 10 $ 15 ======================================================================= During 1995, the Corporation determined that $25 million, included in the unrecognized net gains, represented a nonreversible gain due to past experience versus the assumptions made. The nonreversible gain is a result of the actual payments being made under the Plan by the Corporation being less than the fixed schedule of payments anticipated in the original accumulated postretirement benefit obligation recognized at the adoption date. It is expected that the payments will reach the original fixed-schedule level during the next several years. Accordingly, the Corporation has recorded a reduction to its expense for 1995 of $8 million, which is a component of the amortization of net gains. Since the Plan contains a fixed maximum contribution by the Corporation, the health care cost trend rate assumption has no effect on the amounts reported. Accordingly, increasing the assumed health care cost trend rates by one percentage point in each year would not change either the accumulated postretirement benefit obligation as of implementation, or the aggregate of the service and interest cost components of the net periodic postretirement benefit cost for 1995, 1994 and 1993. In accordance with the Plan, the increase in the Corporation's fixed maximum contribution for participants who retired before January 1, 1993 was 10.0% in 1993, 9.0% in 1994, and zero for 1995 and thereafter. For participants who retired on or after January 1, 1993, there is no increase in the Corporation's fixed maximum contribution. The weighted average discount rates used in determining the accumulated postretirement benefit obligation were 7.00% for 1995, 8.75% for 1994 and 7.375% for 1993. The Corporation has a savings plan covering substantially all employees. Savings plan expense was $14 million for both 1995 and 1994 and $13 million for 1993. NOTE - K INCOME TAXES The provision for income taxes (benefit) attributable to continuing operations consists of the following (in millions): State and Federal Local Foreign Total - --------------------------------------------------------------- 1995: Current $ 324 $ 82 $ -- $ 406 Deferred 128 24 -- 152 - --------------------------------------------------------------- $ 452 $ 106 $ -- $ 558 =============================================================== 1994: Current $ 294 $ 52 $ (4) $ 342 Deferred 84 24 -- 108 - --------------------------------------------------------------- $ 378 $ 76 $ (4) $ 450 =============================================================== 1993: Current $ 223 $ 44 $ -- $ 267 Deferred 41 12 -- 53 - --------------------------------------------------------------- $ 264 $ 56 $ -- $ 320 =============================================================== Effective January 1, 1993, the Corporation changed its method of accounting for income taxes from the liability method required under SFAS 96 to the liability method required by SFAS 109 on a prospective basis. The cumulative effect of adopting SFAS 109 increased net income for 1993 by $305 million. The deferred tax expense represents the changes in the amounts of temporary differences. The types of temporary differences that give rise to significant portions of the deferred tax include reserves for credit losses, restructuring expenses and other real estate owned. The amounts previously reported as the current and deferred portion of income tax expense for 1994 have been revised. Such changes to the components occur because all alternatives available to the Corporation are not known for a number of months subsequent to yearend. The effective income tax rate varies from the statutory rate due to a number of factors including the exemption from tax on interest income earned on obligations of state and political subdivisions, nondeductible goodwill amortization and certain merger related expenses. A reconciliation between the statutory federal and the effective income tax rates follows: % of Pretax Income ----------------------------- 1995 1994 1993 - -------------------------------------------------------------------------- Federal income tax at statutory rate 35 35 35 Nontaxable interest income (1) (1) (1) Nondeductible goodwill 1 -- -- Nondeductible merger related costs 1 -- -- Enacted statutory tax rate change -- -- (1) Foreign tax credit carryovers -- -- (1) State income taxes 7 6 6 Foreign income taxes -- (1) -- Previously unrecognized tax benefits (3) -- -- Other net (1) (1) (2) - -------------------------------------------------------------------------- Effective income tax rate 39 38 36 ========================================================================== The tax effects of temporary differences and tax carryforwards which give rise to significant elements of deferred tax assets and liabilities are detailed below (in millions): December 31 ------------------- 1995 1994 - -------------------------------------------------------------------------- Gross deferred assets: Allowance for credit losses $ 323 $ 368 Compensation and benefits 87 121 Reserves and accruals 81 114 Purchase accounting adjustments on loans 25 13 Other real estate 14 26 Foreign tax credit 11 13 Other 10 13 - -------------------------------------------------------------------------- Total gross deferred assets 551 668 Gross deferred liabilities: Leases (54) (39) Fixed assets (31) (33) Acquisition related tax accounting method changes (26) (30) State taxes (4) (16) Other (9) (9) - -------------------------------------------------------------------------- Total gross deferred liabilities (124) (127) Valuation allowance (36) (38) - -------------------------------------------------------------------------- Net deferred asset $ 391 $ 503 ========================================================================== The valuation allowance applies to foreign tax credits and to the uncertainty of the realization of future deductions to the extent that realization is dependent on levels of future taxable income in excess of present levels. During 1995, the valuation allowance was decreased by $2.4 million, resulting from the utilization of foreign tax credits on the 1994 federal tax return. For tax return purposes, the Corporation has foreign tax credit carryforwards of $10.6 million. Of this total, $0.3 million represents tax return carryforwards which will expire in the years 1996 through 1998. The remaining $10.3 million represents foreign taxes paid by subsidiaries which will be available as a credit against U.S. taxes when distributions are made to the U.S. parent. The income tax benefit for the Parent Corporation reflects the effect of its separate company loss and the settlement of intercompany tax amounts in accordance with the Corporation's tax allocation policies. NOTE - L LEASES At December 31, 1995, the Corporation and its subsidiaries were obligated under a number of noncancelable leases for land, buildings and equipment. Minimum future obligations on leases in effect at December 31, 1995 were as follows (in millions): Capital Operating Year Ending December 31 Leases Leases - ----------------------------------------------------------------------- 1996 $ 6 $ 117 1997 5 117 1998 4 101 1999 4 70 2000 3 80 Later years 9 437 - ----------------------------------------------------------------------- Total minimum obligations 31 $ 922 ====== Less executory obligations -- - ----------------------------------------------------- Net minimum obligations 31 Less amount representing interest 11 - ----------------------------------------------------- Present value of net minimum obligations $ 20 ===================================================== Minimum future rentals receivable under noncancelable operating subleases at December 31, 1995 were $51 million. Rental expense for all operating leases was $156 million, $149 million, and $146 million for the years ended December 31, 1995, 1994 and 1993, respectively. NOTE - M FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK In the normal course of business, the Corporation is a party to financial instruments with off-balance sheet risk to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit, standby letters of credit and financial guarantees, forward and futures contracts, interest rate and currency swaps, options and interest rate caps and floors. These instruments involve, to varying degrees, elements of credit and market risk in excess of the amounts recognized in the Consolidated Balance Sheet. The Corporation is not a dealer but an end-user of these instruments and does not use them speculatively. The Corporation also offers contracts to its customers, but they are offset by simultaneously entering into matching contracts. Credit risk for off-balance sheet financial instruments is defined as the possibility of sustaining a loss because any other party to a financial instrument fails to perform in accordance with the terms of the contract. The Corporation uses the same credit policies in making commitments and conditional obligations as it does for on- balance sheet financial instruments through established credit approvals, risk control limits and monitoring procedures. Market risk represents the possibility that the value of financial instruments will change, either positively or negatively, with changes in market prices, such as interest rates. The Corporation requires collateral to support off- balance sheet financial instruments when it is deemed necessary. Collateral held varies, but may include deposits held in financial institutions; U.S. Treasury securities; other marketable securities; accounts receivable; property, plant and equipment; and inventory. COMMITMENTS, LETTERS OF CREDIT AND FINANCIAL GUARANTEES Commitments are contractual agreements to extend credit which generally have fixed expiration dates or other termination clauses and may require payment of a fee. Letters of credit and financial guarantees are conditional commitments issued by the Corporation to guarantee the performance of a customer to a third party. Additional information concerning commitments and letters of credits including types and maturities is located in Note D. When-issued securities represent a method of trading in listed or unlisted securities which have not yet been issued and, therefore, are not deliverable. The Corporation had no commitments to purchase when-issued securities at December 31, 1995 or 1994. In a typical securities borrowing/lending arrangement, a broker/dealer or bank borrows securities from an institution owning the securities. In return, collateral in the form of U.S. government or federal agency securities, cash or letters of credit equal to or in excess of the market value of the securities lent is given to the lender of the securities. The Corporation lends its own securities as well as those of its customers and does, in some instances, indemnify its customers against potential losses. Such arrangements expose the Corporation to potential loss. At December 31, 1995 and 1994, the Corporation's securities lending transactions amounted to $2.4 billion and $2.0 billion, respectively. DERIVATIVE AND OTHER FINANCIAL INSTRUMENTS NATURE OF INSTRUMENTS The Corporation enters into a variety of interest rate contracts, including interest rate caps and floors, interest rate options and interest rate swap agreements in managing its interest rate exposure. Forward and futures contracts are contracts for delayed delivery of securities or money market instruments in which the seller agrees to make delivery at a specified future date of a specified instrument, at a specified price or yield. Risks arise from the possible inability of counterparties to meet the terms of their contracts and from movements in securities values and interest rates. Interest rate swap transactions generally involve the exchange of fixed and floating rate interest payment obligations without the exchange of the underlying principal amounts. Though swaps are also used as part of asset/liability management, most of the interest rate swap activity arises when the Corporation acts as an intermediary in arranging interest rate swap transactions for customers entered into on an over-the-counter basis. The Corporation typically becomes a principal in the exchange of interest payments between the parties and, therefore, is exposed to loss should one of the parties default. The Corporation's credit policies provide the measures to be taken when entering into and subsequently monitoring these contracts. Exposure to interest rate risk inherent in intermediary swaps is minimized by performing normal credit reviews on its swap customers and by entering into offsetting swap positions that essentially counterbalance each other. Currency swap agreements are entered into primarily on an over-the-counter basis, as a means of protection against fluctuations in foreign currency. Interest rate caps and floors are used by the Corporation to manage interest rate risk. In addition, they are written by the Corporation to enable customers to transfer, modify, or reduce their interest rate risk. Interest rate options are contracts that allow the holder of the option to purchase or sell a financial instrument at a specified price and within a specified period of time from the seller or "writer of the option. As a writer of interest rate caps, floors and options, the Corporation receives a premium at the outset and then bears the risk of an unfavorable change in the price of the financial instrument underlying the cap, floor or option. Exposure to market risk due to such changes on intermediary transactions is minimized by purchasing offsetting options transactions that counterbalance the risk. The Corporation's credit policies define the procedures associated with originating and controlling the risks of these transactions. These instruments are executed through established market exchanges as well as over-the-counter sources. As a matter of policy, neither First Interstate Bancorp nor its banks are allowed to act as a dealer or market maker in financial derivative contracts. Thus, none of the Corporation's derivative activity is classified as trading activity. Derivative financial instruments held or issued for purposes other than trading executed by the Corporation are divided into three groups based upon objectives, as described below: RISK MANAGEMENT TRANSACTIONS The Corporation enters into financial derivative contracts from time to time to manage exposures to changes in the level of interest rates or the value of currencies. The Boards of Directors of the subsidiary banks and the Corporation have delegated oversight responsibility for such activity to the Asset- Liability & Capital Committee (ALCCO), and transactions may not be executed without the approval of ALCCO. The Corporation's policies view risk in terms of the overall balance sheets of the Corporation, and specify risk tolerance and instruments to be used for hedging, as well as governing ongoing review of the effectiveness of such positions. Forward and futures agreements are used to hedge the mortgage "pipeline" risk related to the Corporation's mortgage banking activities and to match the amounts and terms of specific customer loans. Forward sales of whole loans and mortgage-backed securities as well as purchases of put options on mortgage-backed securities are used to hedge the Corporation's residential mortgage loan purchase commitments that have interest rate locks. Interest rate and currency swap agreements are primarily used to convert certain long term debt of the Corporation to floating interest payable in U.S. dollars. Included in the December 31, 1995 notional amounts below is $608 million of receive-fixed interest rate swaps (average receive rate of 8.26% and average pay rate of 6.00%) and $12 million of pay-fixed interest rate swaps (average receive rate of 5.84% and average pay rate of 9.73%). As discussed in Note G, these swaps effectively converted $596 million of the Corporation's fixed rate long term debt to floating rate debt. The December 31, 1995 amount also includes $118 million of cross currency contracts to convert foreign currency denominated obligations to U.S. dollar denominated obligations and to offset the foreign exchange leverage feature embedded in certain debt obligations of the Corporation. Interest rate caps and floors are primarily used to hedge certain floating rate debt obligations of the Corporation and to hedge options embedded in specific customer loan transactions. The Corporation also utilizes equity derivative contracts to manage certain risks in its venture capital portfolio. During 1994, the Corporation entered into an equity option collar transaction to hedge the value of common stock held as part of a limited partnership. The accounting for all hedging transactions follows the accounting for the underlying instrument being hedged. INTERMEDIARY TRANSACTIONS: MERCHANT BANKING - SOLD On January 1, 1993, the Corporation sold its merchant banking and foreign operations to Standard Chartered Bank PLC, a London-based multinational banking company. The transaction included the sale of the market risk associated with the Corporations derivative instruments that were then outstanding as part of its merchant banking operations. However, the related credit risk on these instruments was retained. Reserves for credit losses were recorded at the time of the sale, and the adequacy of these reserves is tested quarterly. Since the cash flows underlying these transactions have been sold to Standard Chartered Bank, no gain or loss (with the exception of credit losses in excess of reserves) is reported on the Corporation's financial statements for these transactions. INTERMEDIARY TRANSACTIONS: CUSTOMER ACCOMMODATION CONTRACTS Since the sale of the Corporation's merchant banking activities to Standard Chartered Bank, the Corporation has not acted as a market maker or dealer in financial derivatives and does not pursue the execution of derivatives contracts as a line of business. However, from time to time the Corporation's banks do enter into financial derivative contracts with their corporate customers. These contracts are most often executed in conjunction with the provisions of a loan to the customer, though that is not always the case. In executing these contracts, the Corporation takes on minimal market risk of a short term nature, and takes on no correlation or basis risk, since the terms of the transactions are perfectly offset by simultaneously entering into a matching contract with a market maker with the exception of a small spread received for the assumption of credit risk as an intermediary. No open positions or portfolio hedging techniques are allowed with the activity and the banks do not buy or sell positions on their own account, but rather only execute transactions in response to the specific needs of a customer. Activity in these customer accommodation contracts is further restricted to the most common over-the-counter contracts to ensure that the credit risk that the banks undertake can be properly managed and monitored. Customer accommodation contracts are accounted for on an accrual basis, with the spread taken to cover credit risk recognized in income over time as it is earned. Income generated from this activity is immaterial. The contractual/notional amounts and the credit risk represented by the replacement cost of financial instruments in a gain position follows (in millions): December 31, 1995 December 31, 1994 -------------------- -------------------- Contractual/ Credit Contractual/ Credit Notional Risk Notional Risk Amount Amount Amount Amount - -------------------------------------------------------------------------------- Forward and futures rate agreements: Hedging $ 25 $ -- $ 37 $ -- Intermediary: Customer Accommodation 137 2 -- -- Interest rate and currency swap agreements: Hedging 738 103 782 33 Intermediary: Portfolio Sold 1,913 61 3,226 64 Customer Accommodation 472 10 503 12 Interest rate caps and floors: Written: Hedging 100 -- 100 -- Intermediary: Portfolio Sold 324 -- 759 -- Customer Accommodation 86 -- 193 -- Purchased: Hedging 16 -- 52 -- Intermediary: Portfolio Sold 108 -- 855 14 Customer Accommodation 102 -- 188 2 Options: Written: Hedging 15 -- 15 -- Intermediary: Customer Accommodation -- 7 -- Purchased: Hedging 113 2 117 3 Intermediary: Customer Accommodation -- -- 7 -- NOTE - N FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair value of financial instruments of the Corporation is as follows (in millions): December 31, 1995 December 31, 1994 -------------------- -------------------- Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value - ------------------------------------------------------------------------------- Financial assets: Cash and cash equivalents $ 8,917 $ 8,917 $ 6,275 $ 6,275 Trading securities 54 54 64 64 Investment securities: Held-to-maturity 88 51 13,695 13,280 Available-for-sale 9,010 9,010 156 156 - ------------------------------------------------------------------------------- Total Investment securities 9,098 9,061 13,851 13,436 Loans: Commercial, financial, agricultural 10,917 10,660 9,294 9,033 Real estate construction 1,063 1,063 962 948 Real estate mortgage 11,211 11,146 10,263 9,638 Instalment 12,854 12,772 12,272 11,906 Other 772 750 566 566 - ------------------------------------------------------------------------------- Total Loans 36,817 36,391 33,357 32,091 Less: Unearned income 133 -- 107 -- Net deferred fees 11 -- 28 -- Allowance for credit losses 804 -- 934 -- - ------------------------------------------------------------------------------- Net Loans 35,869 36,391 32,288 32,091 Other assets held for sale 77 77 26 26 Customers liability for acceptances 94 94 35 35 Other assets 326 326 344 344 Financial liabilities: Deposits 50,185 50,194 48,427 48,256 Short term borrowings 1,194 1,194 1,574 1,574 Acceptances outstanding 94 94 35 35 Other liabilities 132 132 86 86 Capital notes and debentures 1,262 1,397 1,290 1,313 Mortgages 73 73 74 93 Off balance sheet financial instruments: Commitments to extend credit (6) (6) (14) (14) Standby letters of credit and financial guarantees (3) (3) (4) (4) Forward and future rate agreements Interest rate and currency swap agreements -- 61 -- (20) Options, interest rate caps and floors -- 1 -- 3 The following methods and assumptions were used by the Corporation to estimate the fair value of each class of financial instruments: CASH AND CASH EQUIVALENTS The carrying amounts reported in the balance sheet for cash and short term instruments approximate those assets fair values. SECURITIES (HELD-TO-MATURITY, AVAILABLE-FOR-SALE AND TRADING) Fair values are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. LOANS RECEIVABLE For loans with variable rates and no fixed maturities, and for loans with maturities of three months or less, fair value is considered to be equal to carrying value. The fair value of other types of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings for the same remaining maturities. OTHER ASSETS HELD FOR SALE Carrying value is considered to approximate fair value. CUSTOMERS LIABILITY FOR ACCEPTANCES AND ACCEPTANCES OUTSTANDING Bankers Acceptances with maturities of three months or less are reported at their carrying values. For those instruments with maturities of more than three months, the fair value of the portfolio is estimated based on discounted cash flows. OTHER ASSETS AND OTHER LIABILITIES The fair value of financial instruments included in other assets and other liabilities is considered to be equal to the carrying value. DEPOSIT LIABILITIES The carrying value for all deposits without fixed maturities, and for time deposits greater than $100,000 with maturities of three months or less, is considered to be equal to the fair value. The fair value for time deposits greater than $100,000 with maturities greater than three months as well as time deposits less than $100,000 is based upon the appropriate discount rate for similar pools. The fair value of demand deposits is the amount payable on demand, and is not adjusted for any value derived from retaining those deposits for an expected future period of time. That component, commonly referred to as deposit base intangible, was not estimated at December 31, 1995 and 1994, and is not considered in the fair value amounts. SHORT TERM BORROWINGS Carrying amounts of federal funds purchased, borrowings under repurchase agreements and other short term borrowings approximate fair values. LONG TERM DEBT The fair values of long term borrowings (other than deposits) are valued at their quoted market price or are estimated using discounted cash flow analyses, based on the current incremental borrowings rates for similar types of borrowing arrangements. OFF-BALANCE SHEET INSTRUMENTS The fair value of commitments to extend credit, standby letters of credit and financial guarantees represent deferred fees. The fair value of forward and future rate agreements; interest rate and currency swap agreements; interest rate caps, floors and collars; and options are based upon quoted market prices, where available, or discounted estimated cash flows. NOTE - O PARENT CORPORATION Condensed financial information of Parent Corporation is presented as follows (in millions): December 31 --------------------- Condensed Balance Sheet 1995 1994 - --------------------------------------------------------------------------- Assets Cash and due from subsidiary banks $ 9 $ 7 Time deposits due from subsidiary banks 235 41 Securities purchased under agreements to resell: Subsidiary banks 30 150 Investment securities: Available-for-sale 1 33 Loans net 21 22 Due from subsidiaries: Banks 230 112 Nonbanks 33 52 Investment in subsidiaries: Banks 4,640 4,204 Nonbanks 51 41 Other assets 501 377 - --------------------------------------------------------------------------- Total Assets $ 5,751 $ 5,039 =========================================================================== Liabilities and Shareholders' Equity Due to subsidiary banks $ 16 $ 15 Accounts payable and accrued liabilities 311 261 Other short term borrowings: Nonbank subsidiaries 4 37 Long term debt 1,266 1,290 - --------------------------------------------------------------------------- Total Liabilities 1,597 1,603 Shareholders' Equity 4,154 3,436 - --------------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $ 5,751 $ 5,039 =========================================================================== Year Ended December 31 -------------------------- Condensed Statement of Operations 1995 1994 1993 - ----------------------------------------------------------------------------- Income Dividend from subsidiaries: Banks $ 616 $ 605 $ 491 Interest from subsidiaries: Banks 16 3 2 Nonbanks 3 5 11 Other interest 10 29 35 Noninterest income 19 30 1 - ----------------------------------------------------------------------------- 664 672 540 Expenses Interest on: Long term debt 109 96 123 Short term borrowings -- 4 -- Indebtedness to subsidiaries -- -- 7 Noninterest expenses Other expenses 97 83 99 Restructuring 24 141 -- Merger related 28 -- -- - ----------------------------------------------------------------------------- 258 324 229 - ----------------------------------------------------------------------------- Income before income tax benefit, extraordinary item, cumulative effect of accounting changes and equity in undistributed income of subsidiaries 406 348 311 Income tax benefit 99 96 44 - ----------------------------------------------------------------------------- Income before extraordinary item, cumulative effect of accounting changes and equity in undistributed income of subsidiaries 505 444 355 Extraordinary item -- -- (25) Cumulative effect of accounting changes -- -- 231 - ----------------------------------------------------------------------------- Income before equity in undistributed income of subsidiaries 505 444 561 Equity in undistributed income of subsidiaries: Banks 369 283 176 Nonbanks 11 7 -- - ----------------------------------------------------------------------------- 380 290 176 - ----------------------------------------------------------------------------- Net Income $ 885 $ 734 $ 737 ============================================================================= Year Ended December 31 ----------------------------- Statement of Cash Flows 1995 1994 1993 - -------------------------------------------------------------------------------- Cash Flows from Operating Activities: Net income $ 885 $ 734 $ 737 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed income of subsidiaries (380) (290) (176) Depreciation and amortization 17 17 19 Pension plan funding (131) -- -- Restructuring -- 141 -- Cumulative effect of accounting changes -- -- (231) Loss on early extinguishment of debt -- -- 25 Gain on sale of assets (6) (20) (10) Decrease in interest receivable -- 6 30 Increase (decrease) in interest payable 2 (2) (24) Other net 52 (38) 271 - -------------------------------------------------------------------------------- Net Cash Provided by Operating Activities 439 548 641 Cash Flows from Investing Activities: Held-to-maturity securities Proceeds from maturities -- 2 2 Proceeds from sales -- -- 16 Purchases -- (1) (5) Available-for-sale securities Proceeds from maturities 28 128 969 Proceeds from sales 4 25 -- Purchases -- (15) (160) Net increase in advances to subsidiaries (102) (5) (147) Net decrease in loans 1 -- 19 Proceeds from sales of subsidiaries 6 -- -- Capital contributions to subsidiaries (31) (22) (3) Return of capital from subsidiaries 56 83 366 - -------------------------------------------------------------------------------- Net Cash (Used) Provided by Investing Activities (38) 195 1,057 Cash Flows from Financing Activities: Net (decrease) increase in other short term borrowings from Nonbank subsidiaries (33) 16 (1) Proceeds from long term debt issued 100 125 -- Repayments of long term debt (128) (259) (171) Reacquisition of long term debt -- -- (1,014) Cash dividends paid (269) (251) (171) Redemption of Preferred Stock -- -- (334) Proceeds from Common Stock issued 87 43 43 Reacquisition of Common Stock (82) (712) -- - -------------------------------------------------------------------------------- Net Cash Used by Financing Activities (325) (1,038) (1,648) - -------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents 76 (295) 50 Cash and cash equivalents at beginning of year 198 493 443 - -------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 274 $ 198 $ 493 ================================================================================ NOTE - P BUSINESS COMBINATIONS During 1995, 1994 and 1993, the Corporation, through its subsidiaries, was party to thirteen business combinations with operating entities resulting in the acquisition of $9.0 billion in assets and $7.7 billion in deposits as detailed in the following table (in millions): Closing Purchase Total Date Price Loans Assets Deposits State - -------------------------------------------------------------------------------- 1993 Cal Rep Bancorp, Inc. 12/10 $ 68 $ 381 $ 535 $ 495 CA 1994 First State Bank of the Oaks 1/13 23 57 144 130 CA San Diego Financial Corporation 3/18 340 806 1,939 1,764 CA BancWest Bancorp 4/29 36 39 240 215 TX Chase Bank of Arizona 4/29 102 356 610 392 AZ MNB Bancshares, Inc. 5/30 5 21 47 41 TX Med Center Bank 7/29 12 53 143 152 TX Sacramento Savings Bank 11/1 337 2,230 3,010 2,598 CA Park Forest National Bank 12/16 2 13 23 22 TX 1995 University Savings Bank 1/6 205 731 1,274 929 WA North Texas Bancshares, Inc. 1/9 65 211 424 387 TX Levy Bancorp 2/1 92 266 557 506 CA Tomball National Bancshares 7/12 8 39 95 81 TX The acquisitions of Cal Rep Bancorp, Inc. and San Diego Financial Corporation were accounted for as poolings-of- interests, while the remaining acquisitions were accounted for as purchases. In addition, all the acquisitions were cash transactions, with the exception of Cal Rep Bancorp, Inc., San Diego Financial Corporation and Levy Bancorp for which the Corporation issued 1,188,823 shares, 5,067,513 shares and 1,308,388 shares of its Common Stock, respectively. In addition, during 1995, 1994 and 1993, the Corporation, through its subsidiaries, completed six cash transactions resulting in the acquisition of deposits totaling $187 million, $315 million and $443 million, respectively. The Corporation paid premiums of $8 million in 1995, $26 million in 1994 and $13 million in 1993 for these deposits, which were acquired from the Resolution Trust Corporation and the Federal Deposit Insurance Corporation. The results of operations of the acquired companies are included in the Consolidated Statement of Operations from the dates of acquisition shown above. The Corporation's financial statements have not been restated for the results of operations of Cal Rep Bancorp, Inc. or San Diego Financial Corporation prior to the dates of acquisition due to immateriality. The following table presents unaudited pro forma financial information for 1994 for the Corporation and the acquired companies accounted for as purchase transactions as if the acquisitions had been effective on January 1, 1994. Pro forma financial information for 1995 has not been presented. The results of operations of the acquisitions closed in 1995 prior to the dates of acquisition were not material. Year Ended December 31 ---------------------- (in millions, except for per share amounts) 1994 - ------------------------------------------------------------------------ Net interest income $2,455.5 Provision for credit losses 4.9 Noninterest income 1,085.2 Noninterest expense 2,346.0 Applicable income taxes 465.6 Income before extraordinary item and cumulative effect of accounting changes 724.2 Earnings per common share before extraordinary item and cumulative effect of accounting changes 8.45 Goodwill and other intangible assets arising from 1995 and 1994 purchase acquisitions totaled $217 million and $327 million, respectively. Goodwill related to those acquisitions is being amortized on a straight line basis over 15 years and the other intangibles on a straight line basis over periods ranging from five to 10 years. On January 24, 1996, the Corporation and Wells Fargo & Company (Wells Fargo) announced that they had reached a definitive agreement to merge the two companies. Under the terms of the merger agreement, the Corporation's shareholders will receive a tax-free exchange of two-thirds of a share of Wells Fargo Common Stock for each share of the Corporation's Common Stock. Based on Wells Fargo's closing price of $217.25 on January 19, 1996, the last trading day before January 21, 1996, the day on which the Corporation and Wells Fargo reached agreement on the Exchange Ratio to be included in the merger agreement, this exchange ratio represents a price of $144.83 for each share of the Corporation's Common Stock. Under the terms of the agreement, the name of the newly combined company will be Wells Fargo & Company and will operate from headquarters in San Francisco and Los Angeles, with senior executive presence in both. The combined board of directors will consist of the existing members of Wells Fargo's board and seven directors from the Corporation's board. Concurrent with its entering into the merger agreement with Wells Fargo, the Corporation terminated its November 5, 1995, merger agreement with First Bank System, Inc. An overall settlement agreement was entered into among the Corporation, First Bank System and Wells Fargo. Under the terms of the settlement agreement, the Corporation agreed to pay First Bank System a termination fee of $125 million and an additional termination fee of $75 million upon closing of its merger with Wells Fargo. These payments are being made in full satisfaction of the Corporation's obligations under the stock option and fee agreements entered into as part of its November 5, 1995 merger agreement with First Bank System. In addition, all litigation among the parties related to efforts to merge with the Corporation has been settled. NOTE - Q RESTRUCTURING On September 20, 1994, the Corporation announced that management had adopted a Restructuring Plan (Plan) to improve efficiency and to better position the company for the introduction of full interstate banking. This Plan resulted in restructuring charges of $24 million and $141 million in 1995 and 1994, respectively. The restructuring activity 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 $40 $15 $ 2 $139 Ongoing -- -- -- 2 2 - -------------------------------------------------------------------------------- Total 82 40 15 4 141 Utilization for the period Cash -- 5 7 2 14 Noncash(1) 82 -- -- -- 82 - -------------------------------------------------------------------------------- Total 82 5 7 2 96 - -------------------------------------------------------------------------------- Balance at December 31, 1994 -- 35 8 2 45 1995 Restructuring Provision Ongoing -- -- -- 24 24 Reallocation(2) -- (4) 3 1 -- - -------------------------------------------------------------------------------- Total -- (4) 3 25 24 Utilization for the period Cash -- 20 3 21 44 - -------------------------------------------------------------------------------- Total -- 20 3 21 44 - -------------------------------------------------------------------------------- Balance at December 31, 1995 $-- $11 $ 8(3) $ 6(4) $ 25 ================================================================================ (1) $82 million represents the amount transferred to the Corporation's pension liability during 1994. (2) Reallocation during 1995 resulted from actual experience over the life of the Plan being different than the original estimates calculated in 1994 . (3) $8 million represents reserves for writedowns of specifically identified fixed assets during 1995. (4) $6 million represents remaining payouts to be made for relocation and retention. The balance of the restructuring charge will be funded out of operating cash flows with payments scheduled to be substantially completed during early 1996. No additional restructuring charges will be incurred under the Plan. The total cost of the Plan, therefore, was approximately $165 million, as previously estimated. The Plan called for the consolidations of operations and administrative functions, formation of a company-wide Risk Management Group, and implementation of best practices in business lines. As part of the Plan, 1,854 personnel took advantage of the Corporation's Early Retirement Program. In the course of implementing the Plan, more than 3,300 additional personnel were involuntarily terminated. Because some of the vacancies created by the Early Retirement Program and by the geographic consolidations were filled, the total permanent reduction was approximately 3,000 full- time equivalent staff. The Plan resulted in expense savings which allowed the Corporation to achieve an efficiency ratio of 57.7% in the fourth quarter of 1995. The Plan had a limited impact on the revenues of the Corporation. NOTE - R LEGAL ACTIONS There are presently a number of legal proceedings pending against the Corporation and certain of its subsidiaries. While it is not possible to predict the outcome of these proceedings, it is the opinion of management, after consulting with counsel, that the ultimate disposition of potential or existing suits will not have a material adverse effect on the Corporation's financial position, results of operations or liquidity. REPORT OF ERNST & YOUNG LLP, Independent Auditors Shareholders and Board of Directors First Interstate Bancorp We have audited the accompanying consolidated balance sheets of First Interstate Bancorp and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of operations, cash flows and shareholders' equity for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of First Interstate Bancorp and subsidiaries at December 31, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. As discussed in Notes to Consolidated Financial Statements, the Corporation changed its method of accounting for investment securities in 1994 and for income taxes and postretirement benefits other than pensions in 1993. /s/ Ernst & Young LLP Los Angeles, California January 23, 1996
SIX YEAR SUMMARY Year Ended December 31 ------------------------------------------------------------------------------- 1995 1994 1993 1992 1991 1990 - ----------------------------------------------------------------------------------------------------------------------------------- Per Common Share Data Earnings (loss) per share: Primary: Income (loss) before extraordinary item and cumulative effect of accounting changes $11.02 $ 8.71 $ 6.68 $ 3.23 $(5.24) $ 6.79 Extraordinary item -- -- (0.32) -- -- -- Cumulative effect of accounting changes -- -- 2.60 -- -- 0.51 Net income (loss) 11.02 8.71 8.96 3.23 (5.24) 7.30 Fully diluted: Income (loss) before extraordinary item and cumulative effect of accounting changes 11.02 8.71 6.68 3.23 (5.24) 6.79 Extraordinary item -- -- (0.32) -- -- -- Cumulative effect of accounting changes -- -- 2.60 -- -- 0.51 Net income (loss) 11.02 8.71 8.96 3.23 (5.24) 7.30 Dividends paid 3.10 2.75 1.60 1.20 1.80 3.00 Book value, yearend 50.10 41.59 41.36 35.04 32.57 39.78 Market price, yearend 136 1/2 67 5/8 64 1/8 46 3/4 30 23 1/2 Market price, range for year 142 1/8-67 1/4 85-62 3/8 68-44 1/2 48 1/4-29 1/4 42 1/2-20 45 7/8-15 5/8 Growth Measures (% change) Average loans 23.0 18.7 (6.1) (16.3) (14.1) (5.8) Average earning assets 3.3 7.3 2.2 (1.0) (9.8) (7.0) Average savings deposits (1.9) 10.1 3.1 5.2 0.1 (0.7) Average demand deposits 5.1 12.4 10.7 7.5 (0.8) 0.5 Average total assets 4.9 7.4 0.6 (0.2) (9.4) (5.8) Performance Measures (%) Return on average assets 1.59 1.38 1.49 0.57 (0.59) 0.86 Return on average common equity 24.57 21.56 23.24 9.63 (13.96) 19.56 Return on average total equity 23.19 20.38 21.18 9.52 (10.42) 17.98 Dividends paid to net income 28.13 31.57 17.86 37.15 n/m 41.10 Average total equity to average total assets 6.87 6.79 7.05 6.03 5.63 4.81 Credit Allowance (millions) Loans charged off $314.4 $260.8 $398.8 $606.9 $689.2 $1,012.5 Recoveries of previous loan charge-offs 159.7 127.8 180.7 147.3 142.3 138.9 Net loans charged off 154.7 133.0 218.1 459.6 546.9 873.6 Net charge-offs to average loans 0.44% 0.46% 0.90% 1.79% 1.78% 2.45% Allowance to loans, yearend 2.19 2.81 3.85 4.41 4.52 3.06 Miscellaneous Data Shares outstanding, yearend, net 75,929,395 74,203,480 77,325,995 75,181,138 62,779,015 62,176,509 Shares outstanding, average, net 75,717,220 78,852,492 75,823,371 68,780,642 62,498,682 58,889,300 Shareholders 23,486 24,902 28,090 32,920 35,594 37,668 Employees, average December full-time equivalent 27,200 27,394 26,589 26,990 30,281 35,192 Domestic banking offices 1,140 1,137 1,020 993 1,046 1,056
CONSOLIDATED BALANCE SHEET Year Ended December 31 ---------------------------------------------------------------------------- 1995 1994 1993 1992 1991 1990 - ---------------------------------------------------------------------------------------------------------------------------- Assets Cash and due from banks $ 7,129 $ 6,070 $ 5,064 $ 5,695 $ 5,370 $ 5,171 Time deposits, due from banks 14 26 1,157 1,970 2,304 335 Federal funds sold and securities purchased under agreements to resell 1,774 179 618 2,345 2,015 891 Trading account securities 54 64 167 126 401 625 Investment securities: Held-to-maturity U.S. Treasury and agencies -- 12,105 14,894 12,117 6,465 4,738 State and political subdivisions -- 29 23 8 12 704 Other 88 1,561 1,456 808 2,019 1,225 - ---------------------------------------------------------------------------------------------------------------------------- Total held-to-maturity 88 13,695 16,373 12,933 8,496 6,667 Available-for-sale 9,010 156 169 980 -- 308 - ---------------------------------------------------------------------------------------------------------------------------- Total Investment Securities 9,098 13,851 16,542 13,913 8,496 6,975 Loans: Commercial, financial and agricultural 10,917 9,294 7,998 7,799 8,721 12,092 Real estate construction 1,063 962 728 1,170 2,155 3,248 Real estate mortgage 11,211 10,263 6,237 5,364 5,732 5,450 Instalment 12,854 12,272 10,778 9,685 10,108 10,417 Foreign 185 140 166 163 1,003 1,286 Lease financing 587 426 126 90 701 851 - ---------------------------------------------------------------------------------------------------------------------------- Total Loans 36,817 33,357 26,033 24,271 28,420 33,344 Unearned income and deferred fees (144) (135) (45) (70) (238) (337) Allowance for credit losses (804) (934) (1,001) (1,068) (1,273) (1,011) - ---------------------------------------------------------------------------------------------------------------------------- Net Loans 35,869 32,288 24,987 23,133 26,909 31,996 Other assets held for sale 77 26 133 966 -- 1,166 Bank premises and equipment 1,282 1,147 948 897 986 1,050 Customers' liability for acceptances 94 35 48 66 309 361 Other assets 2,680 2,127 1,797 1,752 2,132 2,786 - ---------------------------------------------------------------------------------------------------------------------------- Total Assets $ 58,071 $ 55,813 $ 51,461 $ 50,863 $ 48,922 $ 51,356 ============================================================================================================================ Liabilities and Shareholders' Equity Deposits: Noninterest bearing $ 19,083 $ 16,599 $ 15,425 $ 14,615 $ 12,525 $ 13,132 Interest bearing 31,102 31,828 29,276 29,060 28,908 30,009 - ---------------------------------------------------------------------------------------------------------------------------- Total Deposits 50,185 48,427 44,701 43,675 41,433 43,141 Short term borrowings 1,194 1,574 767 331 570 854 Acceptances outstanding 94 35 48 168 309 361 Accounts payable and accrued liabilities 1,089 953 864 736 863 954 Long term debt 1,355 1,388 1,533 2,702 3,108 3,178 - ---------------------------------------------------------------------------------------------------------------------------- Total Liabilities 53,917 52,377 47,913 47,612 46,283 48,488 Shareholders' Equity 4,154 3,436 3,548 3,251 2,639 2,868 - ---------------------------------------------------------------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $ 58,071 $ 55,813 $ 51,461 $ 50,863 $ 48,922 $ 51,356 ============================================================================================================================
CONSOLIDATED STATEMENT OF OPERATIONS Year Ended December 31 --------------------------------------------------------------------------- (Dollars in millions) 1995 1994 1993 1992 1991 1990 - --------------------------------------------------------------------------------------------------------------------------- Interest Income Loans, including fees $ 3,052.5 $ 2,303.7 $ 1,980.9 $ 2,238.8 $ 3,071.2 $ 3,876.2 Trading account securities 8.4 4.9 5.6 18.0 37.9 60.3 Investment securities: Held-to-maturity Taxable 591.9 828.3 837.3 743.1 557.2 558.1 Exempt from federal income taxes 1.6 2.7 2.9 3.9 7.2 55.7 Available-for-sale 15.7 13.3 24.1 3.8 18.4 17.2 Other interest income 37.8 39.1 93.4 182.1 243.4 253.3 - ---------------------------------------------------------------------------------------------------------------------------- Total Interest Income 3,707.9 3,192.0 2,944.2 3,189.7 3,935.3 4,820.8 Interest Expense Deposits 974.7 725.0 719.9 932.8 1,526.0 2,017.7 Short term borrowings 77.6 34.2 16.0 14.4 44.3 169.6 Long term debt 118.9 106.3 136.2 227.9 273.3 330.3 - ---------------------------------------------------------------------------------------------------------------------------- Total Interest Expense 1,171.2 865.5 872.1 1,175.1 1,843.6 2,517.6 - ---------------------------------------------------------------------------------------------------------------------------- Net Interest Income 2,536.7 2,326.5 2,072.1 2,014.6 2,091.7 2,303.2 Provision for credit losses -- -- 112.6 314.3 810.2 499.4 - ---------------------------------------------------------------------------------------------------------------------------- Net Interest Income after Provision for Credit Losses 2,536.7 2,326.5 1,959.5 1,700.3 1,281.5 1,803.8 Noninterest Income Service charges on deposit accounts 597.3 561.9 513.0 478.9 471.8 428.6 Trust fees 170.3 193.3 177.4 170.3 172.7 159.2 Other charges, commissions and fees 156.3 132.0 149.4 163.6 184.4 173.3 Merchant credit card fees 58.3 39.7 44.1 37.3 53.5 53.1 Trading income 20.4 16.8 19.5 19.4 82.5 52.5 Investment securities gains (losses) 10.0 21.1 9.7 (1.8) 42.8 10.6 Gain (loss) on sale of loans 6.9 2.5 8.0 (3.3) 2.3 2.8 Gain (loss) on sale of subsidiaries -- -- -- (2.6) 27.1 90.1 Other income 100.1 87.0 33.1 50.3 147.3 233.3 - ---------------------------------------------------------------------------------------------------------------------------- Total Noninterest Income 1,119.6 1,054.3 954.2 912.1 1,184.4 1,203.5 Noninterest Expenses Salaries and benefits 1,060.8 1,079.9 975.3 1,035.4 1,212.6 1,224.7 Net occupancy and equipment 389.5 356.6 337.2 359.4 426.2 425.0 Outside contract services 145.0 91.8 165.2 130.3 97.8 121.9 Communications 139.6 117.6 105.0 91.9 95.5 93.4 FDIC assessments 64.6 102.8 100.5 90.6 84.1 51.1 Amortization of intangibles 60.6 35.2 24.1 33.0 31.4 33.9 Supplies 53.2 43.6 40.7 39.4 47.9 54.6 Advertising 51.7 46.8 52.6 35.2 35.2 54.7 Other real estate 0.6 (12.4) 33.6 159.6 312.0 229.3 Restructuring 24.4 141.3 -- -- 90.0 -- Merger related 27.6 -- -- -- -- -- Other expenses 195.5 194.6 198.2 234.4 299.5 273.7 - ---------------------------------------------------------------------------------------------------------------------------- Total Noninterest Expenses 2,213.1 2,197.8 2,032.4 2,209.2 2,732.2 2,562.3 - ---------------------------------------------------------------------------------------------------------------------------- Income (Loss) before Income Taxes, Extraordinary Item and Cumulative Effect of Accounting Changes 1,443.2 1,183.0 881.3 403.2 (266.3) 445.0 Applicable income taxes 558.1 449.5 319.9 120.9 21.8 6.4 - ---------------------------------------------------------------------------------------------------------------------------- Income (Loss) before Extraordinary Item and Cumulative Effect of Accounting Changes 885.1 733.5 561.4 282.3 (288.1) 438.6 Extraordinary Item -- -- (24.8) -- -- -- Cumulative Effect of Accounting Changes -- -- 200.1 -- -- 30.1 - ---------------------------------------------------------------------------------------------------------------------------- Net Income (Loss) $ 885.1 $ 733.5 $ 736.7 $ 282.3 $ (288.1) $ 468.7 ============================================================================================================================
FINANCIAL SUMMARY Year Ended December 31 - ---------------------------------------------------------------------------------------------------------- (Dollars in millions; interest and average rates on a taxable-equivalent basis) 1995 1994 - -----------------------------------------------============================------------------------------- Average Average Average Average Earning Assets Balance Interest Rate Balance Interest Rate - ---------------------------------------------------------------------------------------------------------- Loans (net of unearned income and deferred fees): Commercial, financial and agricultural $ 9,704 $ 793.8 8.18% $ 8,287 $ 562.5 6.79% Real estate construction 1,105 118.0 10.68 806 76.0 9.42 Real estate mortgage 11,271 911.1 8.09 7,586 578.5 7.63 Instalment 12,553 1,200.6 9.56 11,660 1,079.0 9.25 Foreign 157 10.6 6.78 83 4.6 5.59 Lease financing 445 33.7 7.57 222 15.9 7.17 - ---------------------------------------------------------------------------------------------------------- Total Loans 35,235 3,067.8 8.71 28,644 2,316.5 8.09 Trading account securities 161 8.6 5.35 113 5.1 4.55 Investment securities: Held-to-maturity securities U.S. Treasury and agencies 9,374 517.6 5.51 14,000 747.3 5.34 Other 1,420 82.1 5.78 1,624 92.1 5.67 - ---------------------------------------------------------------------------------------------------------- Total held-to-maturity securities 10,794 599.7 5.55 15,624 839.4 5.37 Available-for-sale securities 288 15.9 5.51 324 13.3 4.11 - ---------------------------------------------------------------------------------------------------------- Total Investment Securities 11,082 615.6 5.55 15,948 852.7 5.35 Federal funds sold and securities purchased under agreements to resell 495 28.8 5.83 471 19.0 3.98 Time deposits, due from banks 30 1.8 6.06 380 13.9 3.61 Other assets held for sale 122 6.9 5.63 82 6.2 7.51 - ---------------------------------------------------------------------------------------------------------- Total Earning Assets 47,125 3,729.5 7.91 45,638 3,213.4 7.04 Interest Bearing Liabilities Regular savings 5,715 125.6 2.20 5,823 120.9 2.08 Market interest demand 6,496 85.6 1.32 6,644 82.7 1.25 Market interest savings 10,262 309.2 3.01 11,427 269.0 2.35 Other savings and time under $100,000 7,730 387.9 5.02 5,787 213.3 3.69 - ---------------------------------------------------------------------------------------------------------- Total Interest Bearing Consumer Funds 30,203 908.3 3.01 29,681 685.9 2.31 Large CDs, other money market funds 1,349 66.4 4.92 1,076 39.1 3.63 Short term borrowings 1,362 77.6 5.62 655 34.2 5.16 Long term debt 1,398 118.9 8.50 1,395 106.3 7.63 - ---------------------------------------------------------------------------------------------------------- Total Corporate Purchased Funds 4,109 262.9 6.37 3,126 179.6 5.74 - ---------------------------------------------------------------------------------------------------------- Total Interest Bearing Liabilities 34,312 1,171.2 3.41 32,807 865.5 2.64 - ---------------------------------------------------------------------------------------------------------- Net Interest Income and Gross Spread $2,558.3 4.50 $2,347.9 4.40 ========================================================================================================== Noninterest Liabilities, Equity and Assets Demand and noninterest bearing time deposits 16,357 15,556 Other liabilities 1,076 1,017 Preferred equity capital 350 350 Common equity capital 3,467 3,249 - ---------------------------------------------------------------------------------------------------------- Total Noninterest Liabilities and Equity 21,250 20,172 Cash and due from banks 5,651 5,233 Allowance for credit losses (887) (980) Bank premises and equipment 1,244 1,065 Other assets 2,429 2,023 - ---------------------------------------------------------------------------------------------------------- Total Noninterest Assets 8,437 7,341 Net Noninterest Sources 12,813 0.93 12,831 0.74 Total Assets $55,562 $52,979 ========================================================================================================== Percent of Earning Assets Net interest margin 5.43 5.14 Provision for credit losses - - Net interest margin after provision for credit losses 5.43 5.14 Noninterest income 2.38 2.31 Noninterest expenses 4.70 4.81 Earnings (loss) before income taxes, extraordinary item and cumulative effect of accounting changes 3.11 2.64 Income taxes 1.23 1.03 Extraordinary item - - Cumulative effect of accounting changes - - Net Income (Loss) 1.88 1.61 Loan fees included in interest income $ 144.1 $ 134.7 Taxable-equivalent adjustment 21.6 21.4
Year Ended December 31 - ---------------------------------------------------------------------------------------------------------- (Dollars in millions; interest and average rates on a taxable-equivalent basis) 1993 1992 - -----------------------------------------------===========================-------------------------------- Average Average Average Average Earning Assets Balance Interest Rate Balance Interest Rate - ---------------------------------------------------------------------------------------------------------- Loans (net of unearned income and deferred fees): Commercial, financial and agricultural $ 7,618 $ 476.0 6.25% $ 8,111 $ 560.3 6.91% Real estate construction 913 62.4 6.83 1,746 109.1 6.25 Real estate mortgage 5,413 442.9 8.18 5,472 484.2 8.85 Instalment 9,943 1,003.3 10.09 9,756 1,049.6 10.76 Foreign 160 7.2 4.48 406 28.4 5.85 Lease financing 81 6.8 8.42 203 21.5 10.57 - ---------------------------------------------------------------------------------------------------------- Total Loans 24,128 1,998.6 8.26 25,694 2,253.1 8.77 Trading account securities 166 9.2 5.57 385 23.1 6.00 Investment securities: Held-to-maturity securities U.S. Treasury and agencies 14,113 789.6 5.59 9,745 648.9 6.69 Other 996 55.1 5.54 1,465 96.4 6.32 - ---------------------------------------------------------------------------------------------------------- Total held-to-maturity securities 15,109 844.7 5.59 11,210 745.3 6.65 Available-for-sale securities 458 17.9 3.90 83 3.8 4.61 - ---------------------------------------------------------------------------------------------------------- Total Investment Securities 15,567 862.6 5.54 11,293 749.1 6.63 Federal funds sold and securities purchased under agreements to resell 1,282 39.7 3.10 1,706 65.5 3.84 Time deposits, due from banks 1,342 46.0 3.42 2,228 92.9 4.17 Other assets held for sale 29 2.7 10.00 288 23.7 8.28 - ---------------------------------------------------------------------------------------------------------- Total Earning Assets 42,514 2,958.8 6.96 41,594 3,207.4 7.71 Interest Bearing Liabilities Regular savings 5,288 119.1 2.25 5,129 143.7 2.80 Market interest demand 6,115 92.7 1.52 5 893 122.8 2.08 Market interest savings 10,491 252.0 2.40 9,837 311.7 3.17 Other savings and time under $100,000 5,799 221.1 3.81 6,624 313.5 4.73 - ---------------------------------------------------------------------------------------------------------- Total Interest Bearing Consumer Funds 27,693 684.9 2.48 27,483 891.7 3.24 Large CDs, other money market funds 989 35.0 3.54 1,170 41.0 3.50 Short term borrowings 431 16.0 3.72 388 14.5 3.61 Long term debt 1,893 136.2 7.19 3,096 227.9 7.36 - ---------------------------------------------------------------------------------------------------------- Total Corporate Purchased Funds 3,313 187.2 5.57 4,654 283.4 6.09 - ---------------------------------------------------------------------------------------------------------- Total Interest Bearing Liabilities 31,006 872.1 2.81 32,137 1,175.1 3.66 - ---------------------------------------------------------------------------------------------------------- Net Interest Income and Gross Spread $2,086.7 4.15 $2,032.3 4.05 ========================================================================================================== Noninterest Liabilities, Equity and Assets Demand and noninterest bearing time deposits 13,858 12,543 Other liabilities 977 1,394 Preferred equity capital 508 640 Common equity capital 2,970 2,317 - ---------------------------------------------------------------------------------------------------------- Total Noninterest Liabilities and Equity 18,313 16,894 Cash and due from banks 4,992 4,937 Allowance for credit losses (1,043) (1,261) Bank premises and equipment 914 960 Other assets 1,942 2,801 - ---------------------------------------------------------------------------------------------------------- Total Noninterest Assets 6,805 7,437 Net Noninterest Sources 11,508 0.76 9,457 0.84 Total Assets $49,319 $49,031 ========================================================================================================== Percent of Earning Assets Net interest margin 4.91 4.89 Provision for credit losses 0.26 0.76 Net interest margin after provision for credit losses 4.65 4.13 Noninterest income 2.24 2.19 Noninterest expenses 4.78 5.31 Earnings (loss) before income taxes, extraordinary item and cumulative effect of accounting changes 2.11 1.01 Income taxes 0.79 0.33 Extraordinary item (0.06) - Cumulative effect of accounting changes 0.47 - Net Income (Loss) 1.73 0.68 Loan fees included in interest income $ 45.3 $ 46.2 Taxable-equivalent adjustment 14.6 17.7
Year Ended December 31 - ---------------------------------------------------------------------------------------------------------- (Dollars in millions; interest and average rates on a taxable-equivalent basis) 1991 1990 - -----------------------------------------------===========================-------------------------------- Average Average Average Average Earning Assets Balance Interest Rate Balance Interest Rate - ---------------------------------------------------------------------------------------------------------- Loans (net of unearned income and deferred fees): Commercial, financial and agricultural $10,459 $ 879.7 8.41% $13,532 $1,349.5 9.97% Real estate construction 2,677 240.0 8.97 3,583 376.0 10.49 Real estate mortgage 5,646 564.4 10.00 5,461 576.6 10.56 Instalment 10,137 1,226.1 12.09 10,953 1,355.1 12.37 Foreign 1,161 111.5 9.61 1,440 159.5 11.07 Lease financing 611 68.0 11.13 739 82.3 11.14 - ---------------------------------------------------------------------------------------------------------- Total Loans 30,691 3,089.7 10.07 35,708 3,899.0 10.92 Trading account securities 567 43.4 6.87 737 60.8 8.24 Investment securities: Held-to-maturity securities U.S. Treasury and agencies 5,266 441.6 8.39 4,681 421.6 9.01 Other 1,547 120.6 7.79 2,438 221.1 9.07 - ---------------------------------------------------------------------------------------------------------- Total held-to-maturity securities 6,813 562.2 8.25 7,119 642.7 9.03 Available-for-sale securities 248 22.7 8.38 210 17.2 8.21 - ---------------------------------------------------------------------------------------------------------- Total Investment Securities 7,061 584.9 8.28 7,329 659.9 9.00 Federal funds sold and securities purchased under agreements to resell 1,422 80.2 5.73 884 54.8 7.28 Time deposits, due from banks 1,757 109.2 6.22 775 58.4 7.54 Other assets held for sale 519 54.0 10.38 1,130 140.1 12.40 - ---------------------------------------------------------------------------------------------------------- Total Earning Assets 42,017 3,961.4 9.43 46,563 4,873.0 10.47 Interest Bearing Liabilities Regular savings 4,874 230.4 4.73 4,870 160.0 5.12 Market interest demand 5,386 209.5 3.89 5,135 312.1 6.08 Market interest savings 9,092 456.6 5.02 8,553 517.9 6.06 Other savings and time under $100,000 8,200 520.8 6.35 9,807 745.2 7.60 - ---------------------------------------------------------------------------------------------------------- Total Interest Bearing Consumer Funds 27,552 1,417.3 5.14 28,365 1,735.2 6.12 Large CDs, other money market funds 1,782 108.7 6.15 3,742 282.5 7.55 Short term borrowings 941 44.3 5.73 2,340 169.6 7.25 Long term debt 3,122 273.3 8.76 3,566 330.3 9.26 - ---------------------------------------------------------------------------------------------------------- Total Corporate Purchased Funds 5,845 426.3 7.29 9,648 782.4 8.11 - ---------------------------------------------------------------------------------------------------------- Total Interest Bearing Liabilities 33,397 1,843.6 5.52 38,013 2,517.6 6.62 - ---------------------------------------------------------------------------------------------------------- Net Interest Income and Gross Spread $2,117.8 3.91 $2,355.4 3.85 ========================================================================================================== Noninterest Liabilities, Equity and Assets Demand and noninterest bearing time deposits 11,717 11,875 Other liabilities 1,246 1,709 Preferred equity capital 420 409 Common equity capital 2,346 2,199 - ---------------------------------------------------------------------------------------------------------- Total Noninterest Liabilities and Equity 15,729 16,192 Cash and due from banks 4,357 4,518 Allowance for credit losses (1,132) (1,256) Bank premises and equipment 1,027 1,059 Other assets 2,857 3,321 - ---------------------------------------------------------------------------------------------------------- Total Noninterest Assets 7,109 7,642 Net Noninterest Sources 8,620 1.13 8,550 1.21 Total Assets $49,126 $54,205 ========================================================================================================== Percent of Earning Assets Net interest margin 5.04 5.06 Provision for credit losses 1.93 1.07 Net interest margin after provision for credit losses 3.11 3.99 Noninterest income 2.82 2.58 Noninterest expenses 6.50 5.50 Earnings (loss) before income taxes, extraordinary item and cumulative effect of accounting changes (0.57) 1.07 Income taxes 0.12 0.12 Extraordinary item - - Cumulative effect of accounting changes - 0.06 Net Income (Loss) (0.69) 1.01 Loan fees included in interest income $ 75.6 $ 108.5 Taxable-equivalent adjustment 26.1 52.2
EX-21 16 EXHIBIT (21) FIRST INTERSTATE BANCORP SUBSIDIARIES OF THE REGISTRANT
The following is a list of the consolidated subsidiaries of the Corporation as of December 31, 1995 with each name followed by the headquarters location, percentage of its voting securities owned by the Corporation, indication of Federal Reserve Bank membership and FRB district. Beneath the names of certain subsidiaries are the names of their subsidiaries followed by the percentage of voting securities owned by their parent. The Corporation has no parent within the meaning of section 12b-2 of the Securities and Exchange Act of 1934. First Interstate Bank of Alaska, N.A., Anchorage, Alaska 100% M 12 (Incorporated under the National Bank Act) First Interstate Annuities, Inc. (Alaska), Anchorage, Alaska 100% (Incorporated in Alaska) First Interstate Bank of Arizona, N.A., Phoenix, Arizona 100% M 12 (Incorporated under the National Bank Act) First Interstate Insurance Agency, Phoenix, Arizona 100% (Incorporated in Arizona) First Interstate Investments, Inc., Phoenix, Arizona 100% (Incorporated in Arizona) First Interstate Annuities, Inc. (Montana), Kalispell, Montana 100% (Incorporated in Montana) First Interstate Annuities, Inc. (Nevada), Las Vegas, Nevada 100% (Incorporated in Nevada) First Interstate Annuities, Inc. (Oregon), Tigard, Oregon 100% (Incorporated in Oregon) First Interstate Annuities, Inc. (Washington), Bellevue, Washington 100% (Incorporated in Washington) First Interstate Annuities, Inc. (Wyoming), Casper, Wyoming 100% (Incorporated in Wyoming) First Interstate Leasing Corp., Phoenix, Arizona 100% (Incorporated in Arizona) First Interstate Management Services Co., Scottsdale, Arizona 100% (Incorporated in Arizona) First Interstate Mortgage Holding Co., Phoenix, Arizona 100% (Incorporated in Arizona) First Interstate Bank of California, Los Angeles, California 100% M 12 (Incorporated in California) Central Valley Security Corp., Los Angeles, California 100% (Incorporated in California) EZG Associates Limited Partnership, Los Angeles, California 94% (Incorporated in Delaware) First Interstate Capital Management, Inc., Los Angeles, California 100% (Incorporated in California) First Interstate Portfolio Lending Services, Inc. , Los Angeles, California 100% (Incorporated in California) First Interstate Mortgage Co., Pasadena, California 100% (Incorporated in California) First Interstate Southwest Corp., Houston, Texas 100% (Incorporated in California) Stonegate Partners, Inc., Los Angeles, California 100% (Incorporated in California) T.M.M. Realty Services, Los Angeles, California 100% (Incorporated in California) United California Bank Realty Corp., Los Angeles, California 100% (Incorporated in California) EZG Associates Limited Partnership, Los Angeles, California 6% (Incorporated in Delaware) First Interstate Bancard Co., Los Angeles, California 100% (Incorporated in California) First Interstate Tower, Los Angeles, California 50% (A Joint Venture) (E) 707 Housing Corp., Los Angeles, California 100% (Incorporated in California) First Interstate Bank of Denver, N.A., Denver, Colorado 100% M 12 (Incorporated under the National Bank Act) First Interstate Bank of Englewood, N.A., Englewood, Colorado 100% M 10 (Incorporated under the National Bank Act) First Interstate Bank of Idaho, N.A., Boise, Idaho 100% M 12 (Incorporated under the National Bank Act) First Interstate Bank, Ltd., Los Angeles, California 100% NM (Incorporated in California) First Interstate Bank of Montana, N.A., Kalispell, Montana 100% M 9 (Incorporated under the National Bank Act) First Interstate Insurance Agency of Montana, Inc., Kalispell, Montana 100% (Incorporated in Montana) First Interstate Bank of Nevada, N.A., Reno, Nevada 100% M 12 (Incorporated under the National Bank Act) First Interstate Cash Centers, Inc., Las Vegas, Nevada 100% (Incorporated in Nevada) First Interstate Bank of New Mexico, N.A., Santa Fe, New Mexico 100% M 10 (Incorporated under the National Bank Act) First Interstate Bank of Oregon, N.A., Portland, Oregon 100% M 12 (Incorporated under the National Bank Act) First Interstate Bank of Texas, N.A., Houston, Texas 100% M 11 (Incorporated under the National Bank Act) Idlewilde Co., Houston, Texas 100% (Incorporated in Texas) First Interstate Bank of Utah, N.A., Salt Lake City, Utah 100% M 12 (Incorporated under the National Bank Act) First Interstate Insurance Agency of Utah, Inc., Park City, Utah 100% (Incorporated in Utah) First Interstate Bank of Washington, N.A., Seattle, Washington 100% M 12 (Incorporated under the National Bank Act) Evergreen Marine Leasing, Inc., Seattle, Washington 100% (Incorporated in Washington) First Interstate Acco, Inc., Reno, Nevada 100% (Incorporated in Nevada) First Interstate Electronic Services Corp., Seattle, Washington 100% (Incorporated in Washington) Tacsea, Inc., Seattle, Washington 100% (Incorporated in Washington) First Interstate Bank of Wyoming, N.A., Casper, Wyoming 100% M 10 (Incorporated under the National Bank Act) First Wyoming Holdings, Inc., Casper, Wyoming 100% (Incorporated in Wyoming) First Interstate Central Bank, Calabasas, California 100% NM (Incorporated in California) DAG Management, Inc., Denver, Colorado 100% (Incorporated in Colorado) First Interstate Commercial Corp., Denver, Colorado 100% (Incorporated in California) First Interstate Commercial Mortgage Co., Chicago, Illinois 100% (Incorporated in Illinois) Regency Land Co., Denver, Colorado 100% (Incorporated in Colorado) FIL Holding Co., London England 100% (Incorporated in Delaware) First Interstate Holding (UK) Ltd., London, England 100% (Incorporated in the United Kingdom) First Interstate Resource Finance Associates, Newport Beach, California 100% (Incorporated in California) First Interstate Services Co. (UK) Ltd., London, England 100% (Incorporated in the United Kingdom) Western Bonding & Casualty Co., Burlington, Vermont 100% (Incorporated in Vermont) M: member of Federal Reserve System NM: nonmember of Federal Reserve System E: included in the consolidated financial statements on the basis of equity in total capital accounts and results of operations This listing excludes inactive subsidiaries of the Corporation.
EX-23 17 EXHIBIT (23) CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in First Interstate Bancorp's Registration Statements on Form S-3 (Nos. 33-50054 and 33-61688) and related Prospectuses and Registration Statements on Form S-8 (Nos. 2-82812, 33-23404, 33-37299 and 33-38903) of our report dated January 23, 1996 with respect to the consolidated financial statements of First Interstate Bancorp incorporated by reference in this Annual Report (Form 10-K) for the year ended December 31, 1995. ERNST & YOUNG LLP Los Angeles, California March 25, 1996 EX-27 18
9 EXHIBIT (27) FINANCIAL DATA SCHEDULE First Interstate Bancorp 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. (dollar amounts in millions, except per share data) 12-MOS DEC-31-1995 DEC-31-1995 7,129 14 1,774 54 9,010 88 51 36,673 804 58,071 50,185 1,194 1,089 1,355 0 350 169 3,635 58,071 3,053 617 38 3,708 975 1,171 2,537 0 10 2,213 1,443 885 0 0 885 11.02 11.02 5.43 170 100 0 0 934 314 160 804 380 0 424 -----END PRIVACY-ENHANCED MESSAGE-----