10-K/A
1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(AMENDMENT 1)
[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, 1994
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)
Pursuant to Rule 12b-15 of the Securities and Exchange Act of 1934, as
amended, Registrant hereby amends Item 14(a)(3) of Part IV, "Exhibits,
Financial Statement Schedules, and Reports on Form 8-K," by including a
complete copy of Exhibit 13, which was inadvertently omitted from the
Exhibits filed by Registrant with the Form 10-K on March 30, 1995. The
complete text of Exhibit 13 is included in this filing.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST INTERSTATE BANCORP
REGISTRANT
DATE: MARCH 31, 1995 /s/ David S. Belles
------------------------
David S. Belles
Executive Vice President
and Controller
Chief Accounting Officer
EX-13
2
MANAGEMENT'S DISCUSSION & ANALYSIS FIRST INTERSTATE BANCORP
Overview of 1994 Performance
First Interstate Bancorp recorded consolidated net income in 1994 of
$733.5 million, or $8.71 per share, including the effect of $141.3
million of restructuring charges ($87.6 million after taxes, or $1.09
per share). Before the effect of these charges, which are described in
detail on the following page, after-tax earnings were $821.1
million, or $9.80 per share. This compares to earnings before an
extraordinary item and the cumulative effect of accounting changes
for 1993 of $561.4 million, or $6.68 per share, and net income of
$736.7 million, or $8.96 per share. These results represent a
substantial improvement from net income of $282.3 million, or
$3.23 per share, reported for 1992.
The Corporation recorded an extraordinary item reflecting aftertax
charges associated with long term debt repurchases and redemptions of
$985 million during 1993. As a result, 1993 net income was reduced
by $24.8 million ($0.32 per share).
In addition, the cumulative effect of two accounting changes that
were adopted early in 1993 resulted in a net after-tax addition of
$200.1 million, or $2.60 per share. Statement of Financial
Accounting Standards No. 109 (SFAS 109), "Accounting for Income
Taxes," resulted in the recognition of additional tax benefits of
$305.0 million ($3.96 per share). This accounting change was
partially offset by the Corporation's decision to adopt SFAS 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions," on an immediate rather than a prospective basis, which
reduced net income by $104.9 million ($1.36 per share).
Based on consolidated income before the cumulative effect of
accounting changes and the extraordinary item described above, the
return on average assets for 1994 rose to 1.38%, a material
improvement from 1.14% in 1993. At the same time, the return on
average common shareholders' equity rose to 21.56% from 17.33% a
year earlier.
The Corporation's significant increase in overall profitability in
1994 resulted primarily from two factors: revenue growth and an
excellent risk profile.
The primary factor contributing to earnings growth in 1994 was a 12%
increase in total revenue. Total revenue, which includes taxable-
equivalent net interest income and noninterest income, was up $361.3
million in 1994. Net interest income contributed over 70% of the
1994 increase in total revenue. This resulted principally from
earning asset growth, coupled with a shift in the mix of earning
assets to a higher proportion of loans. At the same time, the net
interest margin increased to 5.14% in 1994, up 23 basis points from
the 1993 level. The remainder of the increase in total revenue was
spread over most major categories of noninterest income.
Second, reflecting the risk profile of the Corporation, no
provision for credit losses was recorded in 1994. The provision for
credit losses amounted to $112.6 million in 1993 and $314.3 million in
1992. In addition, expenses arising from the maintenance, sales and
valuation adjustments of other real estate acquired through
foreclosure (ORE) reflected a net recovery of $12.4 million in
1994, versus expenses of $33.6 million and $159.6 million in 1993
and 1992, respectively.
Nonperforming assets were reduced to $258 million at yearend 1994, down
nearly 17% from $309 million a year earlier. This follows a decline of
nearly 60% at yearend 1993 versus a year earlier. Consistent implementation
of the Corporation's risk management techniques has resulted in the
reduction of consolidated nonperforming assets to 0.46% of total assets,
an improvement from 0.60% at yearend 1993 and 1.48% at yearend 1992. Net
chargeoffs declined to $133.0 million in 1994 (0.46% of average loans),
compared to $218.1 million in 1993 (0.90%) and $459.6 million in 1992
(1.79%). Reflecting the factors noted above, the allowance for credit
losses declined to 2.81% of loans at December 31, 1994, versus 3.85%
at yearend 1993 and 4.41% at yearend 1992.
Noninterest expenses totaled $2,197.8 million in 1994 and $2,032.4
million in 1993. The increase in 1994 resulted primarily from the
restructuring charges noted above and the effect of integrating 10
acquisitions during the year.
Restructuring Plan
On September 20, 1994, the Corporation announced that management had
adopted a Restructuring Plan (Plan) to improve efficiency and better
position the Corporation for the introduction of full interstate banking.
This Plan resulted in restructuring charges in 1994 of $141.3 million,
consisting of the following (in millions):
Early Retirement Program $ 82.0
Severance and Outplacement Services 40.0
Facility and Equipment Valuations 15.0
Other 4.3
TOTAL RESTRUCTURING CHARGES $141.3
The restructuring charges will be funded out of operating cash flows with
payments for severance and outplacement services occuring approximately
ratably over the next year. Payment of the cost of the Early Retirement
Program into the Corporation's qualified retirement plan will depend on
the timing of the Corporation's contributions to the plan.
In addition, it is expected that restructuring charges of another $23.7
million for relocation of staff and facilities, as well as retention
payments for certain personnel displaced in the restructuring program,
will be incurred and expensed as the program is implemented. Such costs
are expected to be incurred relatively evenly through the third quarter
of 1995. The total expected cost of the Plan, therefore, will be
approximately $165 million.
The Plan calls 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, another
approximately 3,300 personnel are expected to be involuntarily terminated.
Because some of the vacancies created by the Early Retirement Program
and by the geographic consolidations will have to be filled, the total
permanent reduction is expected to be approximately 3,000 full-time
equivalent staff.
The Plan is expected to result in annualized expense savings of
$167 million by June 1996; the savings are expected to be achieved
progressively through this time period. Of the $167 million, staff
savings total $107 million, facilities savings total $20 million,
and other savings (primarily in the areas of purchasing,
appraisals, and branch savings) total $40 million. As a result, the
Corporation expects to achieve a 58% efficiency ratio in 1995. The
Plan should have limited impact on
the revenues of the Corporation.
The expense savings of this Plan described above are before the
impact of any acquisitions announced by the Corporation after March
22, 1994. The Corporation has announced the following acquisitions
since that date: 17 branches from the Resolution Trust Corporation in
Oregon and Washington; Sacramento Savings Bank and Levy Bancorp in
California; North Texas Bancshares and Park Forest National Bank in
Texas; and University Savings Bank in Washington.
Earnings Summary
The following tables summarize the Corporation's financial results
for the last three years:
Change 94/93 Change 93/92 Change 92/91
AMOUNTS (millions) 1994 1993 1992 $ % $ % $ %
Net interest income(1) $2,347.9 $2,086.7 $2,032.3 261.2 12.5 54.4 2.7 (85.5) (4.0)
Provision for credit losses _ 112.6 314.3 (112.6) n/m (201.7) (64.2) (495.9) (61.2)
Net interest income after
provision for credit losses(1) 2,347.9 1,974.1 1,718.0 373.8 18.9 256.1 14.9 410.4 31.4
Noninterest income 1,054.3 954.2 912.1 100.1 10.5 42.1 4.6 (272.3) (23.0)
Noninterest expenses
Operating 2,068.9 1,998.8 2,049.6 70.1 3.5 (50.8) (2.5) (280.6) (12.4)
Provision for restructuring 141.3 _ _ 141.3 n/m _ n/m (90.0) n/m
Other real estate (12.4) 33.6 159.6 (46.0) n/m (126.0) (78.9) (152.4) (48.8)
Pretax earnings(1) 1,204.4 895.9 420.9 308.5 34.4 475.0 n/m 661.1 n/m
Income taxes 449.5 319.9 120.9 129.6 40.5 199.0 n/m 99.1 n/m
Taxable-equivalent
adjustment 21.4 14.6 17.7 6.8 46.6 (3.1) (17.5) (8.4) (32.2)
Extraordinary item _ (24.8) _ 24.8 n/m (24.8) n/m _ n/m
Cumulative effect of
accounting changes _ 200.1 _ (200.1) n/m 200.1 n/m _ _
NET INCOME $ 733.5 $ 736.7 $ 282.3 (3.2) (0.4) 454.4 n/m 570.4 n/m
(1)Taxable-equivalent basis.
Change 94/93 Change 93/92 Change 92/91
PER COMMON SHARE 1994 1993 1992 $ % $ % $ %
Earnings :
Income before
extraordinary item and
cumulative effect of
accounting changes $8.71 $6.68 $3.23 2.03 30.4 3.45 n/m 8.47 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 8.71 8.96 3.23 (0.25) (2.8) 5.73 n/m 8.47 n/m
Dividends paid 2.75 1.60 1.20 1.15 71.9 0.40 33.3 (0.60) (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 94/93 Change 93/92 Change 92/91
AMOUNTS (millions) 1994 1993 1992 $ % $ % $ %
Interest income $3,213.4 $2,958.8 $3,207.4 254.6 8.6 (248.6) (7.8) (754.0) (19.0)
Interest expense 865.5 872.1 1,175.1 (6.6) (0.8) (303.0) (25.8) (668.5) (36.3)
Net interest income $2,347.9 $2,086.7 $2,032.3 261.2 12.5 54.4 2.7 (85.5) (4.0)
MARGINS (as a % of earning assets)
Earning asset yield 7.04 6.96 7.71 1.1 (9.7) (18.2)
Interest expense 1.90 2.05 2.82 (7.3) (27.3) (35.8)
Net interest margin 5.14 4.91 4.89 4.7 0.4 (3.0)
1994 change due to 1993 Change due to 1992 Change due to
Volume Rate Net Volume Rate Net Volume Rate Net
Interest earned on:
Total loans $394.0 $(76.1) $317.9 $(98.6) $(155.9) $(254.5) $(462.5) $(374.1) $(836.6)
Trading account securities (3.0) (1.1) (4.1) (13.1) (0.8) (13.9) (12.5) (7.8) (20.3)
Held-to-maturity securities 28.8 (34.1) (5.3) 259.3 (159.9) 99.4 362.8 (179.7) 183.1
Available-for-sale securities (5.2) 0.6 (4.6) 17.3 (3.2) 14.1 (13.8) (5.1) (18.9)
Federal funds, repurchases (25.1) 4.4 (20.7) (16.3) (9.5) (25.8) 16.3 (31.0) (14.7)
Time deposits, due from banks (32.9) 0.8 (32.1) (36.9) (10.0) (46.9) 29.3 (45.6) (16.3)
Other assets held for sale 5.3 (1.8) 3.5 (21.4) 0.4 (21.0) (24.0) (6.3) (30.3)
Total change 361.9 (107.3) 254.6 90.3 (338.9) (248.6) (104.4) (649.6) (754.0)
Interest paid on:
Savings deposits 42.5 (33.7) 8.8 29.7 (144.1) (114.4) 69.3 (387.6) (318.3)
Other time deposits 2.6 (6.3) (3.7) (45.9) (52.5) (98.4) (141.0) (134.0) (275.0)
Short term borrowings 8.3 9.9 18.2 1.5 _ 1.5 (26.0) (3.8) (29.8)
Long term debt (35.8) 5.9 (29.9) (88.5) (3.2) (91.7) (2.2) (43.2) (45.4)
Total change 17.6 (24.2) (6.6) (103.2) (199.8) (303.0) (99.9) (568.6) (668.5)
Net interest income $344.3 $(83.1) $261.2 $193.5 $(139.1) $ 54.4 $ (4.5) $(81.0) $(85.5)
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 1994 and
1993, and 39% in 1992. 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: In 1994, earning assets averaged $45.6 billion, an
increase of $3.1 billion (7.3%). This follows an increase of $920
million (2.2%) in 1993 and a decline of $423 million (1.0%) in
1992. Over the last year, the loan component of earning assets
increased as a result of increased demand and the completion of 10
acquisitions. The lower level of loans in the two preceding years
reflected adverse economic conditions resulting in lower demand as
well as the Corporation's focus on improving credit quality. The
average yield on earning assets was 7.04% in 1994, versus 6.96% in
1993 and 7.71% in 1992. The current trend of increasing loan growth
and a decline in the investment securities portfolio reflecting
maturities is expected to continue throughout 1995.
The following table provides a comparison of average earning asset
volumes for the last three years:
AVERAGE EARNING Change 94/93 Change 93/92 Change 92/91
ASSET VOLUMES (millions)(1) 1994 1993 1992 $ % $ % $ %
Commercial, financial
and agricultural $ 8,287 $ 7,618 $ 8,111 669 8.8 (493) (6.1) (2,348) (22.4)
Real estate construction 806 913 1,746 (107) (11.7) (833) (47.7) (931) (34.8)
Real estate mortgage 7,586 5,413 5,472 2,173 40.1 (59) (1.1) (174) (3.1)
Instalment 11,660 9,943 9,756 1,717 17.3 187 1.9 (381) (3.7)
Foreign 83 160 406 (77) (48.1) (246) (60.6) (755) (65.0)
Lease financing 222 81 203 141 n/m (122) (60.1) (408) (66.8)
Total loans 28,644 24,128 25,694 4,516 18.7 (1,566) (6.1) (4,997) (16.3)
Trading account securities 113 166 385 (53) (31.9) (219) (56.9) (182) (32.1)
Held-to-maturity securities
U.S. Treasury and agencies 14,000 14,113 9,745 (113) (0.8) 4,368 44.8 4,479 85.1
Other 1,624 996 1,465 628 63.1 (469) (32.0) (82) (5.3)
Held-to-maturity securities 15,624 15,109 11,210 515 3.4 3,899 34.8 4,397 64.5
Available-for-sale securities 324 458 83 (134) (29.3) 375 n/m (165) (66.5)
Federal funds, repurchases 471 1,282 1,706 (811) (63.3) (424) (24.9) 284 20.0
Time deposits, due from banks 380 1,342 2,228 (962) (71.7) (886) (39.8) 471 26.8
Other assets held for sale 82 29 288 53 n/m (259) (89.9) (231) (44.5)
TOTAL $45,638 $42,514 $41,594 3,124 7.3 920 2.2 (423) (1.0)
(1)Loans are net of unearned income and deferred fees.
Loans: Including the effect of acquisitions, average loans totaled
$28.6 billion in 1994, an increase of $4.5 billion (18.7%). This
follows declines of 6.1% and 16.3% in 1993 and 1992, respectively.
Total loans accounted for approximately 63% of average earning
assets in 1994, up from approximately 57% in 1993 and 62% in 1992.
Loan growth is expected to continue during 1995.
Nearly half of the growth in average loans from the 1993 level
reflects higher average real estate mortgage outstandings
(commercial and residential), which were up $2.2 billion (40.1%) to an
average of $7.6 billion in 1994. This follows declines of 1.1% in
1993 and 3.1% in 1992. Most of the increase in 1994 reflects the
Corporation's acquisition program, particularly in California. The
combined average yield on the real estate mortgage portfolio was
7.63% in 1994, versus 8.18% in 1993 and 8.85% in 1992.
Instalment loans increased $1.7 billion (17.3%) from the average
1993 level. This follows an increase of 1.9% in 1993 and a decline of
3.7% in 1992. The average yield on instalment loans was 9.25% in 1994
versus 10.09% in 1993 and 10.76% in 1992. The Corporation continues
its focus on retail banking and increasing its market share in the
communities in which it operates.
Average commercial loans rose $669 million (8.8%) in 1994 to $8.3
billion. This increase is largely the result of loan demand and
renewed marketing efforts. Commercial loan volumes declined 6.1% in
1993 and 22.4% in 1992. The average yield on the commercial loan
portfolio increased to 6.79% in 1994, compared to 6.25% in 1993
and 6.91% in 1992.
Construction loans averaged $806 million in 1994, down $107 million
(11.7%) from the year earlier. This follows declines of 47.7% in 1993
and 34.8% in 1992. The combined yield on the construction portfolio
rose to 9.42% in 1994, compared to 6.83% in 1993 and 6.25% in 1992.
Foreign loans, primarily short term trade finance activity,
averaged $83 million in 1994, down $77 million (48.1%). This
follows declines of 60.6% in 1993 and 65.0% in 1992 and reflects
the sale of approximately $1.1 billion of foreign loans in 1992. The
average yield on foreign loans was 5.59% in 1994, compared to 4.48%
in 1993 and 5.85% in 1992.
Lease financing balances increased to an average of $222 million in
1994 from an average of $81 million in 1993. This follows
reductions of 60.1% in 1993 and 66.8% in 1992. The average yield on
lease financing was 7.17% in 1994, versus 8.42% in 1993 and 10.57% in 1992.
At December 31, 1994, including both the effect of acquisitions and an
increase in new loan originations, loans and leases totaled $33.2
billion, an increase of $7.2 billion (27.8%) from the $26.0 billion
reported a year earlier. Instalment loans increased $1.5 billion
(14.0%) to $12.3 billion at yearend. Growth of these consumer
loans reflects the success of marketing programs targeting the sale
of such products. At the same time, commercial loans increased
$1.3 billion (16.2%) to $9.3 billion at yearend 1994. Residential
real estate mortgages totaled $5.8 billion, $2.9 billion (99.4%)
above a year ago, while commercial mortgages were up $1.1 billion
(30.1%) to $4.4 billion at yearend 1994. Construction loans
were $984 million at the end of 1994, an increase of $208 million
(28.7%) from a year earlier. The Corporation expects that core
loan growth will continue through 1995.
Investment Securities: The investment securities portfolio averaged
$15.9 billion in 1994, an increase of $381 million (2.4%) from the
1993 average. This follows increases of $4.3 billion (37.8%) in 1993 and
$4.2 billion (59.9%) in 1992. The sharp increases in the investment
securities portfolio in 1992 and 1993 affected the ongoing changes in
the mix of earning assets, reducing the share of loans and increasing
the volume of other investment alternatives. This pattern was reversed
in 1994 as loan growth exceeded deposit growth and proceeds of maturing
securities were used to fund loans, a trend that should continue during 1995.
At December 31, 1994, total investment securities were $13.9
billion, down $2.7 billion (16.3%) from a year earlier. U.S.
Treasury and agency securities declined $2.9 billion (19.4%) from a
year earlier to a total of $12.1 billion at the end of 1994. All
other investment securities amounted to $1.8 billion at yearend, up
5.9% from a year earlier.
The following table compares the average life, book value
and approximate market value of the investment securities
portfolio at December 31, 1994 and 1993:
December 31, 1994 December 31, 1993
HELD-TO-MATURITY (millions) Expected Carrying Approximate Expected Carrying Approximate
Average Life Amount Market Value Average Life Amount Market Value
U.S. Treasury and agencies 22 months $12,105 $11,769 20 months $14,894 $15,004
State and political subdivisions 34 months 29 30 32 months 23 25
Other 42 months 1,561 1,481 33 months 1,456 1,460
TOTAL 25 months $13,695 $13,280 21 months $16,373 $16,489
AVAILABLE-FOR-SALE
(millions)
U.S. Treasury and agencies 22 months $ 42 $ 42 7 months $169 $169
Other n/m 114 114 _ _ _
TOTAL 22 months $156 $156 7 months $169 $169
The average yield on U.S. Treasury and agency securities was
5.34% in 1994, versus 5.59% in 1993 and 6.69% in 1992. The
average yield on all other securities was 5.67% in 1994,
compared to 5.54% and 6.32% in 1993 and 1992, respectively.
The average yield on the entire held-to-maturity portfolio
was 5.37% in 1994, compared to 5.59% in 1993 and 6.65%
in 1992. Taxable-equivalent yields of investment securities
held at December 31, 1994, are presented by maturity in the
following table:
Held-to-Maturity Available-forSale
Within One Five After Within One Five After
one to five to 10 10 one to five to 10 10
YIELD (%) year years years years Total year years years years Total
U.S. Treasury and agencies 4.92 5.41 5.79 6.02 5.46 4.39 5.67 7.85 8.00 5.29
State and political subdivisions 12.68 10.56 11.77 8.69 11.63 _ _ _ _ _
Other 4.85 5.19 6.73 7.10 6.48 _ _ _ 4.21 4.21
TOTAL 4.95 5.39 5.87 6.25 5.59 4.39 5.67 7.85 4.23 4.50
Investment securities are purchased for the primary
purpose of deploying excess liquidity while
accommodating anticipated loan growth by employing an
investment strategy of "laddering" maturities and
maintaining a short duration portfolio. A laddered
portfolio generates uniform cash flows throughout the year
that can be redeployed to loans as needed or reinvested.
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." The
Corporation has adopted an investment strategy with the
intent and ability to hold securities to maturity and
classified $13.7 billion of securities as held-to maturity
at December 31, 1994. Securities classified as held-to-maturity
are carried at amortized cost. Changes in estimated fair market
value are not reflected on the balance sheet or income
statement.
The Corporation's investment strategy of maintaining
a short duration portfolio consisting of low volatility
instruments proved effective at minimizing the risk
to market value during the substantial rise in interest
rates in 1994. Yields on one- and twoyear U.S. Treasury
securities, for example, rose by approximately 350 basis
points each during the year. This increase in rates
resulted in an unrecognized market value loss of $415
million at December 31, 1994, or 3.0% of the book value
of the portfolio. In addition, the duration of the
portfolio increased slightly to 1.6 years at December
31, 1994, from 1.3 years at December 31, 1993, reflecting
limited extension of portfolio securities. The
Corporation's management philosophy is that the
investment securities portfolio is one component of an
integrated balance sheet. Changes in interest rates
affect certain components of the balance sheet, including
the investment securities portfolio. As interest rates
rose in 1994, the market value decline in the
investment portfolio was mitigated by market value
increases in other components of the balance sheet,
specifically core deposits. This is further supported by
an increase in the net interest margin to 5.14% for 1994
from 4.91% for 1993.
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 by strong growth in higher-yielding
loans, interest bearing time deposits due from banks
declined $962 million (71.7%) to an average of $380
million in 1994. This follows a decline of $886 million
(39.8%) in 1993 and an increase of $471 million (26.8%) in
1992. The level of the interbank placement of funds
typically expands and contracts in conjunction with the
liquidity and yields available in the market and
alternative investments for such funds. Federal funds
sold and repurchase agreements averaged $471 million in
1994, a decline of $811 million (63.3%). This follows a
decline of 24.9% in 1993 and an increase of 20.0% in
1992. It is expected that these earning assets will
essentially remain flat during 1995.
At December 31, 1994, interest bearing time deposits due
from banks totaled $26 million, a substantial decline of
$1.1 billion (97.8%) from the level a year earlier. At the
same time, federal funds sold and repurchase agreements
dropped $439 million (71.0%) to $179 million. Average
Yields: The average yields on the major categories of
earning assets for the last three years are presented
in the following table:
AVERAGE YIELDS (%)(1) 1994 1993 1992
Commercial, financial and agricultural 6.79 6.25 6.91
Real estate construction 9.42 6.83 6.25
Real estate mortgage 7.63 8.18 8.85
Instalment 9.25 10.09 10.76
Foreign 5.59 4.48 5.85
Lease financing 7.17 8.42 10.57
Total loans 8.09 8.26 8.77
Trading account securities 4.55 5.57 6.00
Held-to-maturity securities:
U.S. Treasury and agencies 5.34 5.59 6.69
Other 5.67 5.54 6.32
Total held-to-maturity securities 5.37 5.59 6.65
Securities available-for-sale 4.11 3.90 4.61
Federal funds, repurchases 3.98 3.10 3.84
Time deposits, due from banks 3.61 3.42 4.17
Other assets held for sale 7.51 10.00 8.28
TOTAL EARNING ASSETS 7.04 6.96 7.71
First Interstate average prime rate 7.15 6.00 6.25
(1)Taxable-equivalent basis.
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 core deposits
gathered by a network of 1,137 domestic banking offices in
13 states. Core deposits include interest bearing
consumer funds described below and demand and noninterest
bearing time deposits, which are included in the
discussion of noninterest sources. Core deposits reduce
the Corporation's dependence on corporate purchased funds.
Core deposits represented 98% of average deposits in
1994 and 1993, versus 97% in 1992. Core deposits, less
cash and due from banks, supported 88% of average earning
assets in 1994, up from 86% in 1993 and 84% in 1992.
Total interest bearing sources of funds increased $1.8
billion (5.8%) to an average of $32.8 billion in
1994. This follows declines of $1.1 billion (3.5%) in
1993 and $1.3 billion (3.8%) in 1992. The average rate
paid on total interest bearing liabilities was 2.64% in
1994, versus 2.81% in 1993 and 3.66% in 1992. The Corporation
expects that these rates will increase in 1995,
reflecting the seven market rate increases since the
beginning of 1994.
A breakdown of the Corporation's interest bearing sources
of funds follows:
AVERAGE VOLUMES Change 94/93 Change 93/92 Change 92/91
(millions) 1994 1993 1992 $ % $ % $ %
Regular savings $ 5,823 $ 5,288 $ 5,129 535 10.1 159 3.1 255 5.2
NOW accounts and
demand_market interest 6,644 6,115 5,893 529 8.7 222 3.8 507 9.4
Savings_market interest 11,427 10,491 9,837 936 8.9 654 6.6 745 8.2
Other savings and time
under $100,000 5,787 5,799 6,624 (12) (0.2) (825) (12.5) (1,576) (19.2)
Total interest bearing consumer
funds 29,681 27,693 27,483 1,988 7.2 210 0.8 (69) (0.3)
Large CDs, other money
market funds 1,076 989 1,170 87 8.8 (181) (15.5) (612) (34.3)
Short termborrowings 655 431 388 224 52.0 43 11.1 (553) (58.8)
Long term debt 1,395 1,893 3,096 (498) (26.3) (1,203) (38.9) (26) (0.8)
Total corporate purchased funds 3,126 3,313 4,654 (187) (5.6) (1,341) (28.8) (1,191) (20.4)
TOTAL $32,807 $31,006 $32,137 1,801 5.8 (1,131) (3.5) (1,260) (3.8)
Interest Bearing Consumer Funds: These sources consist of
various types of interest bearing deposits in retail
accounts. Combined balances averaged $29.7 billion in
1994, up 7.2% from the $27.7 billionreported in 1993
and $27.5 billion reported in 1992. The average rate paid on
consumer funds in 1994 was 2.31%, down from 2.48% in
1993 and3.24% in 1992. The Corporation expects that average
rates paid on interest bearing consumer funds will increase in
1995. At December 31, 1994, interest bearing consumer funds
totaled $30.5 billion, an increase from the $28.2 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 important additional source of
liquidity. These funds consist of large certificates
of deposit, short term borrowings and long term debt.
Corporate purchased funds averaged $3.1 billion in 1994,
a decline of $187 million (5.6%). This follows declines
of $1.3 billion (28.8%) in 1993 and $1.2 billion
(20.4%) in 1992. The declines in recent years reflect
the impact of pricing on some of the Corporation's
liability products, as well as the repurchase and
redemption of long term debt during 1993. The
combined cost of corporate purchased funds averaged
5.74% in 1994, versus 5.57% in 1993 and 6.09% in 1992.
Corporate purchased funds totaled $4.3 billion at yearend
1994, an increase of $995 million (29.9%) from a year earlier.
It is expected that corporate purchased funds will increase in
1995 to the extent that loan growth exceeds deposit
growth and investment securities maturities.
As of December 31, 1994, time certificates of deposit of
$100,000 or more mature as follows:
Within Three to six to 12 After12
AMOUNTS (millions) three months six months months months Total
Time certificates of deposit $633 $207 $198 $271 $1,309
Other time deposits 88 1 17 30 136
Interest Expense: Interest rates paid over the past
three years on the liability accounts discussed
above are summarized in the following table:
AVERAGE RATES PAID (%) 1994 1993 1992
Regular savings 2.08 2.25 2.80
NOW accounts and demand_market interest 1.25 1.52 2.08
Savings_market interest 2.35 2.40 3.17
Other savings and time under $100,000 3.69 3.81 4.73
Total interest bearing consumer funds 2.31 2.48 3.24
Large CDs, other money market funds 3.63 3.54 3.50
Short term borrowings 5.16 3.72 3.61
Long term debt 7.63 7.19 7.36
Total corporate purchased funds 5.74 5.57 6.09
TOTAL 2.64 2.81 3.66
At December 31, 1994, 90% of the Parent Corporation's long term
debt had fixed coupon rates. Of this amount, 49% was converted
to floating rate debt using interest rate swaps. The effect to
net interest income for the years ending December 31, 1994, and
December 31, 1993, was a positive increase of approximately
$16 million and $47 million, respectively.
Net Noninterest Sources: Noninterest sources of funds consist
of demand deposits, net of cash and due from banks, and
other noninterest bearing liabilities, as well as
shareholders' equity and the allowance for credit losses,
less net fixed assets and other assets.
Demand deposits area major, stable source of funding for
the Corporation and have increased steadily over the last three
years. At December 31, 1994, demand and other noninterest bearing
deposits increased to $16.6 billion (34% of total deposits), versus
$15.4 billion (35%) a year earlier. Investable demand deposits
averaged $10.3 billion in 1994, up 16.4% from the $8.9 billion
average in 1993. Of the other categories of average net
noninterest sources, equity capital increased $121 million,
reflecting the addition of retained earnings net of the effect
of the stock buyback, as well as the increase in bank premises
and equipment.
The average volumes of noninterest funding sources for the
last three years are shown in the following table:
AVERAGE VOLUMES Change 94/93 Change 93/92 Change 92/91
(millions) 1994 1993 1992 $ % $ % $ %
Demand and noninterest bearing
time deposits $15,556 $13,858 $12,543 1,698 12.3 1,315 10.5 826 7.0
Less cash and due from banks 5,233 4,992 4,937 241 4.8 55 1.1 580 13.3
Investable demand deposits 10,323 8,866 7,6061,457 16.4 1,260 16.62463.3
Add:
Equity capita l3,599 3,478 2,957 121 3.5 521 17.61916.9
Allowance forcredit losses 980 1,043 1,261 (63) (6.0) (218)(17.3)12911.4
Other liabilities 1,017 977 1,394 40 4.1 (417)(29.9)148 11.9
Less: Bank premises and equipment 1,065 914 960 151 16.5 (46)(4.8) (67)(6.5)
Other assets 2,023 1,942 2,801 81 4.2(859)(30.7) (56) (2.0)
NET NONINTEREST
SOURCES $12,831 $11,508$ 9,4571,323 11.5 2,051 21.7 8379.7
Net Interest Income
Taxable-equivalent net interest income amounted to $2,347.9
million in 1994, an increase of $261.2 million (12.5%) from
1993. This follows a 2.7% increase in 1993 and a 4.0% decline
in 1992. The higher level of taxable-equivalent net interest
income in 1994 resulted primarily from earning asset
growth, up $3.1 billion (7.3%). This growth follows an
increase of 2.2% in 1993 and a decline of 1.0% in 1992.
In addition, the net interest margin increased 23 basis
points in 1994 to 5.14%, versus 4.91% in 1993 and 4.89% in
1992.
Provision for Credit Losses
The Corporation recorded no provision for credit losses in
1994, which reflects significant improvements in credit
quality. The Corporation has experienced a substantial
reduction in the level of net chargeoffs, which declined to
$133.0 million in 1994 from $218.1 million in 1993 and $459.6
million in 1992. The provision for credit losses totaled $112.6
million in 1993 and $314.3 million in 1992.
In January 1995, the Corporation adopted SFAS 114, "Accounting
by Creditors for Impairment of a Loan." It is not expected
that adoption of this statement will have a material impact
on 1995 earnings.
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 $1,054.3 million in 1994, an increase
of $100.1 million (10.5%) from the level of a year earlier.
Among the recurring categories of noninterest income, service
charges on deposit accounts rose $48.9 million (9.5%) from 1993
and trust fees increased $15.9 million (9.0%). These compare to
1993 increases in deposit service charges and trust fees
of 7.1% and 4.2%, respectively. Noninterest income in 1994
benefited from venture capital gains of $28.3 million, of
which $17.0 million were reported as investment securities
gains and $11.3 million were reported as other income. Of the
1993 investment securities gains, $8.1 million resulted from
the sale of equity interests. Noninterest income in 1994
also benefited from interest on state tax settlements of $10.5
million. The increases in 1994 were offset in part by a lower
level of other charges, commissions and fees, which declined
$17.4 million (11.6%) in 1994. This decline resulted primarily
from a reduction in the sale of various investment
products.
The major categories of noninterest income are included in
the following table:
NONINTEREST INCOME Change 94/93 Change 93/92 Change 92/91
(millions) 1994 1993 1992 $ % $ % $ %
Deposit service charges $ 561.9 $513.0 $478.9 48.9 9.5 34.1 7.1 7.1 1.5
Trust fees 193.3 177.4 170.3 15.9 9.0 7.1 4.2 (2.4) (1.4)
Other charges, commissions and fees 132.0 149.4 163.6 (17.4) (11.6) (14.2) (8.7) (20.8) (11.3)
Merchant credit card fees 39.7 44.1 37.3 (4.4) (10.0) 6.8 18.2 (16.2) (30.3)
Investment securities gains (losses) 21.1 9.7 (1.8) 11.4 n/m 11.5 n/m (44.6) n/m
Trading income 16.8 19.5 19.4 (2.7) (13.8) 0.1 0.5 (63.1) (76.5)
Gain (loss) on sale of loans 2.5 8.0 (3.3) (5.5) (68.8) 11.3 n/m (5.6) n/m
Gain (loss) on sale of subsidiaries _ _ (2.6) _ _ 2.6 n/m (29.7) n/m
Other income 87.0 33.1 50.3 53.9 n/m (17.2) (34.2) (97.0) (65.9)
TOTAL $ 1,054.3 $954.2 $912.1 100.1 10.5 42.1 4.6 (272.3) (23.0)
Noninterest Expenses
Noninterest expenses totaled $2,197.8 million in 1994,
versus $2,032.4 million in 1993 and $2,209.2 million in 1992.
The $165.4 million (8.1%) increase in 1994 includes the
$141.3 million restructuringcharges, as previously noted.
Excluding the restructuring charges, 1994 noninterest expenses
including the impact of completed acquisitions rose $24.1
million (1.2%). Net ORE expenses dropped $46.0 million in 1994
to a net recovery of $12.4 million. This follows a drop of
$126.0 million in 1993 and reflects the declining level of ORE
over the last three years. Including acquisitions and increased
pension costs, salaries and other staff expenses increased
$104.6 million (10.7%) in 1994 to $1,079.9 million. This
follows a $60.1 million (5.8%) decline in 1993. Including
acquisitions, the December 1994 staff level of 27,394 was up
805 (3.0%) full-time equivalent employees from December 1993.
This follows a decline of 1.5% in 1993.
In January 1994, the Corporation adopted SFAS 112,
"Employers' Accounting for Postemployment Benefits."
Implementation of this statement did not have a material
impact on the Corporation's results.
The Corporation's efficiency ratio, which reflects
noninterest expenses before restructuring and ORE charges as
a percent of taxable-equivalent net interest income plus
noninterest income, was 60.8% for all of 1994. This compares to
65.7% in 1993 and 69.6% in 1992. The Corporation expects to
achieve an efficiency ratio of 58% in 1995.
The major categories of noninterest expenses are included in
the following table:
NONINTEREST EXPENSES Change 94/93 Change 93/92 Change 92/91
(millions) 1994 1993 1992 $ % $ % $ %
Salaries $ 865.9 $ 805.8 $ 853.5 60.1 7.5 (47.7) (5.6) (138.2) (13.9)
Employee benefits 214.0 169.5 181.9 44.5 26.3 (12.4) (6.8) (39.0) (17.7)
Total salaries and benefits 1,079.9 975.3 1,035.4 104.6 10.7 (60.1) (5.8) (177.2) (14.6)
Net occupancy of bank premises 228.3 207.3 223.7 21.0 10.1 (16.4) (7.3) (21.3) (8.7)
Furniture and equipment 128.3 129.9 135.7 (1.6) (1.2) (5.8) (4.3) (45.5) (25.1)
FDIC assessments 102.8 100.5 90.6 2.3 2.3 9.9 10.9 6.5 7.7
Communications 117.6 105.0 91.9 12.6 12.0 13.1 14.3 (3.6) (3.8)
Supplies 43.6 40.7 39.4 2.9 7.1 1.3 3.3 (8.5) (17.7)
Outside contract services 91.8 165.2 130.3 (73.4) (44.4) 34.9 26.8 32.5 33.2
Advertising 46.8 52.6 35.2 (5.8) (11.0) 17.4 49.4 (0.2) (0.6)
Other expenses 229.8 222.3 267.4 7.5 3.4 (45.1) (16.9) (63.3) (19.1)
Total before restructuring
and other real estate 2,068.9 1,998.8 2,049.6 70.1 3.5 (50.8) (2.5) (280.6) (12.0)
Provision for restructuring 141.3 _ _ 141.3 n/m _ _ (90.0) n/m
Other real estate (12.4) 33.6 159.6 (46.0) n/m (126.0) (78.9) (152.4) (48.8)
TOTAL $2,197.8 $2,032.4 $2,209.2 165.4 8.1 (176.8) (8.0) (523.0) (19.1)
Income Taxes
For 1994, the Corporation recorded income tax expense of
$449.5 million on pre-tax income of $1,183.0 million,
resulting in an effective income tax rate of 38.0%. This
compares to an effective rate of 36.3% for 1993.
The lower effective tax rate in 1993 included the benefits of
two events. First, the Corporation recorded a $12.4 million
benefit resulting from the enactment of the Omnibus Budget
Reconciliation Act of 1993. This benefit reflects the effect
of the increase in the federal statutory rate from 34% to 35%
on the Corporation's net deferred tax assets as of the date of
enactment. In addition, the Corporation recognized a $9.0
million benefit from the utilization in 1993 of foreign tax credit
carryforwards.
As of January 1, 1993, the Corporation adopted SFAS 109
on a prospective basis. The cumulative effect of the adoption
of SFAS 109 increased net income by $305.0 million, and
is reported separately in the consolidated statement of
earnings.
The Corporation's effective tax rate in 1995 is expected to
approximate 38%-39%.
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 credit risk, 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 individual
operating units regarding liquidity, capital, investments,
interest rate risk management and derivative contracts.
Compliance with these policies is reported to ALCCO, which
meets on a regular basis.
Interest Rate Sensitivity: Interest rate risk can be measured
along a variety of dimensions, including its impact on net
interest income as well as the market value of portfolio
equity. First Interstate relies on a combination of gap
analysis and simulations of net interest income to measure and
manage interest rate risk.
Traditional "gap" analysis represents interest rate risk in
terms of the mismatch between the stated repricing and
maturities of the Corporation's earning assets and
liabilities within defined time periods. At December 31,
1994, the cumulative 90 day contractual gap for the
consolidated Corporation was a negative $0.3 billion,
representing 0.7% of earning assets, and the cumulative one-
year contractual gap was a positive $3.6 billion,
representing7.5% of earning assets, as shown in the
following table. In other words, approximately equal
amounts of the Corporation's assets and liabilities
reprice or mature within a 90 day period, and 7.5% of the
Corporation's earning assets reprice or mature more quickly
than the liabilities within one year.
Rate Sensitive Balances December 31, 1994
CONTRACTUAL 1 to 30 31 to 90 91 to 180 181 to 365 1 to 2 2 to 5 Over
AMOUNTS (millions) days days days days years years 5 years
Earning assets:
Loans $12,086 $3,467 $2,132 $2,462 $1,652 $ 4,719 $ 6,730
Securities 1,299 939 878 1,616 1,981 3,260 3,878
Other(1) 284 (457) (132) 80 48 74 371
Total earning assets 13,669 3,949 2,878 4,158 3,681 8,053 10,979
Net sources:
Demand deposits _ _ _ _ _ _ 10,529
Interest bearing deposits 15,038 1,185 1,506 1,540 956 11,239 364
Short term borrowings 1,550 20 _ _ _ 4 _
Long term debt 5 129 9 99 139 420 587
Other(2) _ _ _ _ _ _ 2,048
Total net sources 16,593 1,334 1,515 1,639 1,095 11,663 13,528
Incremental gap (2,924) 2,615 1,363 2,519 2,586 (3,610) (2,549)
Cumulative gap (2,924) (309) 1,054 3,573 6,159 2,549 _
% of earning assets (6.2) (0.7) 2.2 7.5 13.0 5.4 _
(1)Includes the effects of swaps, financial futures and
similar agreements used to manage interest rate risk.
(2)Includes other funding sources such as common and preferred
stock.
The "managerial" gap reflects the expected repricing or
maturity of assets and liabilities as opposed to their
contractual maturity. This refinement to gap analysis
incorporates the options that are embedded in the balance
sheet, 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 "managerial" 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. Adjusting for these
factors, the Corporation was asset sensitive, with $2.9
billion (6.1%) of its assets repricing more quickly
than liabilities. The $2.1 billion increase in the cumulative
one year gap from yearend 1993 principally reflects a
reduction in the amount of fixed rate securities in the
investment portfolio along with an increase in the amount
of adjustable rate loans. In particular, adjustable rate
mortgages increased significantly with the acquisition of
Sacramento Savings Bank.
Rate Sensitive Balances December 31, 1994
MANAGERIAL 1 to 30 31 to 90 91 to 180 181 to 365 1 to 2 2 to 5 Over
AMOUNTS (millions) days days days days years years 5 years
Earning assets $13,512 $5,473 $3,842 $5,486 $5,843 $6,923 $6,290
Net sources:
Passbook savings and NOW 3,079 750 616 1,846 1,186 2,737 2,462
Market interest 5,058 1,781 441 579 1,047 2,286 _
Other sources 5,168 1,766 2,155 2,184 2,081 3,532 6,615
Total net sources 13,305 4,297 3,212 4,609 4,314 8,555 9,077
Incremental gap 207 1,176 630 877 1,529 (1,632) (2,787)
Cumulative gap 207 1,383 2,013 2,890 4,419 2,787 _
% of earning assets 0.4 2.9 4.2 6.1 9.3 5.9 _
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. The actual impact on net
interest income may depend on the direction and magnitude of
the interest rate movement, as well as competitive and market
pressures. Given the complexity of these dynamics, 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, such as caps and floors, as well as 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 well within the
established limits, but the actual position at any given time
is a function of available asset opportunities, historical
and expected interest rates, and long term balance sheet
trends. For example, should market interest rates remain
unchanged or continue to move higher, deposit pricing pressure
is expected to reduce the positive impact on net interest
margin that an asset sensitive gap position suggests.
Similarly, if market rates begin to decline, industry
pressure on deposit prices may limit the Corporation's ability
to reprice liabilities quickly.
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
operationson 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 declined $564 million for the year
ended December 31, 1994.
Net cash provided by investing activities during 1994 totaled
$129 million. Maturities of investment securities in the
held-tomaturity portfolio, net of purchases, provided cash
of $3,618 million. Maturities and sales of investment
securities in the available-for-sale portfolio, net of
purchases, provided $193 million. Loan originations, net of
repayments, used cash of $5,688 million. Proceeds from the
sale of loans provided $3,054 million, while the purchase of
loans used $1,263 million.
Net cash used by financing activities totaled $2,048 million
during 1994. Deposits, excluding the purchase of $315
million from the Resolution Trust Corporation as part of the
Corporation's ongoing acquisition program, exhibited a net
decrease of $1,878 million. The Corporation also reported
a net increase of $580 million in short term borrowings.
These borrowings were primarily federal funds purchased and
securities sold under agreements to repurchase. The
Corporation continues to have no commercial paper outstanding.
Proceeds from the issuance of long term debt provided $125
million, while maturities of long term debt required cash of
$270 million. Repurchases of common stock used cash of $712
million, while cash dividends totaled $251 million.
Cash provided by operations during 1994 totaled $1,355
million. Net income totaled $734 million and noncash
adjustments to reconcile net income totaled $416 million. Net
changes in other assets, other liabilities and trading
account securities increased cash from operations by $205
million.
Given the outlook for loan generation and the prevailing
economicconditions which serve to limit the Corporation's
prospects to increase deposits, the trend of funding
increases in the loan portfolio with maturities and
paydowns from investment securities should continue in the
near future. As a result, the investment portfolio is
expected to show year-toyear declines again in 1995.
The Parent Corporation's statement of cash flows includes a
$295 million decrease in cash and cash equivalents during
1994. The Parent Corporation had $219 million of cash and
other short term financial instruments at yearend 1994, a
decline of $433 million from yearend 1993 that resulted
primarily from the common stock repurchase program described
in the Capital Management section.
In 1994, affiliate banks paid a total of $605 million in
dividends to the Parent Corporation. This represents an
increase of $114 million from the $491 million paid in 1993
and reflects continued improved operating performance at
affiliate banks and the bank capital restructuring
activities undertaken in 1994. The Parent Corporation had
no external short term borrowings outstanding at yearend
1994. At current rates, interest on long term debt and
preferred stock dividend requirements total $129 million for
1995 and $121 million for 1996. In addition, $128 million of
the Parent Corporation's long term debt will mature in 1995
and $192 million will mature in 1996. The Parent Corporation
expects to retire this long term debt as it matures. Under
the appropriate circumstances, the Parent Corporation could
consider repurchasing any of its outstanding securities.
Immediate liquidity available to the Corporation includes a
$500 million senior revolving credit facility. On December 9,
1994, the Corporation announced the establishment of its $1
billion Global Medium Term Note Program. The program will
allow for senior and subordinated debt and capital
securities issuance in a number of countries and over a broad
spectrum of maturities.
The Corporation's other sources of liquidity include
maturing securities in addition to those which are available
for sale or repurchase activity. In addition, affiliate
banks may directly access funds placed by them through
existing agency agreements for the placements 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 (Moody's), Standard & Poor's Corp. (S&P),
Thomson BankWatch (Thomson) and Duff & Phelps Credit Rating
Co. (D&P). These debt securities were upgraded by Moody's
in November 1994, by S&P in December 1993, by Thomson in
December 1994, and by D&P in January 1994. The upgrades should
have a positive effect on the Corporation's funding costs.
Securities and Loans: At December 31, 1994, securities
maturing within one year amounted to $3.5 billion, or 25.5%
of the held-tomaturity portfolio. The weighted average
expected maturity of total held-to-maturity securities was 25
months at yearend 1994, compared to the weighted average
maturities of 21 months in 1993 and 24 months at the end
of 1992. The average expected maturities of U.S. Treasury
and agency securities were 22 months, 20 months and 25
months at yearend 1994, 1993 and 1992, respectively. The
comparable maturities of tax-exempt securities were 34 months,
32 months and 26 months at the same dates.
The contractual maturity distribution of the major
categories of investment securities in the held-to- maturity
and availableforsale portfolios at December 31, 1994, is
presented in the following table:
Held-to-Maturity Available-for-Sale
CONTRACTUAL Within One Five After Within One Five After
AMOUNTS One to five to 10 10 one to five to 10 10
(millions) year years years years Total year years years years Total
U.S. Treasury and agencies $3,427 $4,362 $1,738 $2,578 $12,105 $16 $22 $2 $ 2 $ 42
State and political subdivisions 12 10 6 1 29 _ _ _ _ _
Other 53 667 113 728 1,561 _ _ _ 114 114
TOTAL $3,492 $5,039 $1,857 $3,307 $13,695 $16 $22 $2 $116 $156
As indicated in the preceding table, securities held to
maturity that mature within one year totaled $3.5 billion on
a contractual basis at yearend 1994. Contractual
maturities plus estimated prepayments during 1995 are
expected to equal approximately $5.8 billion.
The contractual maturity schedule of the loan portfolio,
excluding instalment and real estate mortgage loans, is
detailed in the following table:
Within One to five After five
AMOUNTS (millions) one year years years Total
Commercial, financial and agricultural $4,706 $3,531 $1,057 $ 9,294
Real estate construction 779 124 59 962
Foreign 49 54 37 140
TOTAL $5,534 $3,709 $1,153 $10,396
As shown in the preceding table, loans maturing within
one year totaled $5.5 billion at yearend 1994. 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 details the remaining $4.9 billion of
loans with maturities exceeding one year:
AMOUNTS (millions) Fixed Rate Adjustable Rate Total
Commercial, financial and agricultural $1,746 $2,842 $4,588
Real estate construction 45 138 183
Foreign 9 82 91
TOTAL $1,800 $3,062 $4,862
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.
In April 1994, the Board of Directors approved a 50%
increase in the quarterly cash dividend on the Corporation's
common stock from $0.50 to $0.75 per share.
In the first half of 1994, the Board of Directors approved
the repurchase of up to 8 million shares of common stock from
time to time during the year, subject to market conditions
and appropriate regulatory and acquisition accounting
requirements. Additionally, in connection with the
acquisition of Levy Bancorp, the Board approved in September
1994 the buyback of up to 1.2 million shares of common stock.
The repurchase programs were completed in 1994; a total of
9.1 million shares were repurchased. The average cost of
common stock held in the treasury at yearend 1994 was $73.64.
On March 18, 1994, in conjunction with completion of
the acquisition of San Diego Financial Corporation, the
Corporation recorded additional equity of $61.8 million
through the issuance of 5.1 million shares of its common
stock. An additional 702,033 shares, with proceeds of $30.3
million, were issued under the Stock Option Plan.
During 1994, the Corporation recorded common stock
dividends of $218.2 million and preferred stock dividends of
$33.3 million.
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 ratio of 6.00%, a Total Capital ratio of 10.00%
and a leverage ratio of 5.00%. At yearend 1994, the Corporation
and all subsidiary banks exceeded the minimum requirements of
wellcapitalized institutions. The decline in the Corporation's
various capital ratios largely resulted from the common stock
repurchase programs, completed acquisitions and growth in
riskadjusted assets. The following tables detail the capital
and leverage positions of the Corporation over the last two years:
RISK-BASED CAPITAL December 31, 1994 December 31, 1993
RATIOS (dollars in millions) $ % $ %
Tier 1 Capital 2,882 7.20 3,313 9.88
Tier 1 Capital minimum requirement 1,601 4.00 1,341 4.00
Excess 1,281 3.20 1,972 5.88
Total Capital 4,091 10.22 4,385 13.08
Total Capital minimum requirement 3,203 8.00 2,683 8.00
Excess 888 2.22 1,702 5.08
Risk-adjusted assets, net of goodwill, nonqualifying intangibles,
excess allowance and excess deferred tax assets 40,041 _ 33,533 _
December 31, 1994 December 31,
1993 LEVERAGE RATIO
(dollars in millions) $ % $ %
Tier 1 Capital 2,882 5.35 3,313 6.60
Quarterly average total assets, net of goodwill,nonqualifying
intangibles and excess deferred tax assets 53,905 _ 50,198 _
Total intangibles amounted to $561 million at December 31, 1994,
versus $233 million a year earlier. The higher level at yearend
1994 reflects the completion of 10 acquisitions during the year.
Goodwill increased to $514 million from $204 million at yearend
1993. All other intangibles amounted to $47 million and $29
million at yearend 1994 and 1993, respectively, while excess
deferred tax assets totaled $21 million and $31 million,
respectively.
Risk Elements
The U.S. economy staged a strong performance in 1994, with real
growth of 4.0%. Increases in consumer spending, home
construction, business investment in capital equipment, and
inventory building spurred sizable gains in bank loans. While
inflation remained well contained, with consumer prices up an
average of less than 3.0%, the Federal Reserve acted to prevent
a future buildup in inflation and raised interest rates seven
times since the beginning of 1994. Long-term interest rates rose
sharply early in 1994 before edging lower at yearend.
In 1995, the delayed effects of monetary tightening should slow
the nation's economic growth closer to the Federal Reserve's long
term goal of about 2.5%. Consumer spending and inventory building
should moderate, while home-building subsides from its 1994
peak. Inflation will show some acceleration, but consumer
prices are still likely to rise an average of less than 3.5%.
The yield curve is expected to flatten, with an easing in long
term rates.
All 13 states in the First Interstate Territory should record
positive job growth in 1995 for a second consecutive year and
most should outperform the nation. Ongoing population gains,
rising exports, and the region's technology clusters will
support increases in jobs and personal income. California can be
expected to counter the national trend of slower growth compared
with 1994. The Territory's various local economies, however,
will remain vulnerable to further reductions in defense
spending, including a new round of base closings in 1995.
Another large upswing in both short and long term interest
rates would also pose a significant risk to interestsensitive
sectors in the region.
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. 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 and prospective 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, equipment, and
agricultural products. Autos, second trust deeds, and marketable
securities are accepted as collateral for the instalment loan
portfolio.
Securities: At December 31, 1994, the Corporation had $13.9 billion
of investment securities, of which 87.7% were U.S. Treasury and
agency securities. The remaining 12.3% of the investment portfolio
consisted primarily of AAA-rated, welldiversified, asset-backed
securities. The Corporation's investment policy requires
investments to be made with an emphasis on geographic and 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.
In addition to maintaining a low-risk credit profile, the
Corporation has established investment securities policies and
procedures to manage and monitor the interest rate risk exposure of
the portfolio. Investments are directed toward low volatility
instruments to minimize interest rate risk. At December 31, 1994,
41% of the portfolio was invested in short term U.S. Treasury and
direct agency securities with a duration of 0.9 years. Fixed rate
collateralized mortgage obligations structured to stabilize cash
flows during volatile interest rate environments accounted for 31%
of securities holdings with a duration of 1.5 years. U.S. agency
mortgage pass-through securities with a duration of 3.0 years
represented 20% of the portfolio. The remaining 8% of the portfolio
consisted primarily of short term asset-backed securities
collateralized by consumer receivables with a duration of 2.3
years. The Corporation held no leveraged instruments, structured
notes or securities defined as "High Risk Mortgage Securities"
under current regulatory guidelines.
Loans and ORE: At yearend 1994, the Corporation's commercial loan
portfolio of $9.3 billion was diversified with no single industry
representing over 10% of total commercial loans. The residential
mortgage, commercial mortgage and real estate
construction portfolios accounted for $5.8 billion, $4.4
billion and $0.9 billion, respectively, of total loans.
The following table presents a breakdown of outstanding real estate
loans by geographic location at yearend 1994 and 1993. 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 Loans ORE
(outstanding Mortgage Construction Mortgage Construction
at yearend, Res- Com- Res- Com- Res- Com- Res- Com-
in millions) idential mercial idential mercial Total idential mercial idential mercial Total
Total 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
1993
California $ 848 $ 978 $247 $142 $ 2,215 $ 6 $ 4 $22 $_ $ 32 $36
Northwest(2) 908 869 22 52 1,851 3 5 1 1 10 3
Southwest(3) 736 876 27 116 1,755 3 21 1 32 57 7
Texas 330 475 16 34 855 _ 5 _ _ 5 22
Other 102 98 _ 69 269 _ _ _ 45 45 14
TOTAL $2,924 $3,296 $312 $413 $ 6,945 $12 $35 $24 $78 $149 $82
(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
Real estate related assets comprised 72% of
total nonperforming assets at the end of 1994,
versus 75% in 1993 and 66% in 1992. Net chargeoffs
of real estate construction and mortgage loans
combined amounted to $25.0 million in 1994, a
substantial decline from $81.6 million in 1993
and $212.7 million in 1992. Management considers
such comparisons in determining the level and the
allocation of the allowance for credit losses. The
portion of the allowance allocated to real estate
was approximately 14% at yearend 1994, versus 12%
in 1993 and 18% in 1992.
California At December 31, 1994, First
Interstate Bank of California accounted for 45%
of total assets, 41% of loans and 44% of total
deposits. Despite the initial devastation of
the Northridge earthquake in January 1994,
California's economy rebounded and continues in
the early phases of economic recovery. It is
currently estimated that the state added 100,000 to
150,000 nonfarm jobs during 1994, with most of the
gains occurring in the services sector.
However, other sectors are also adding to payrolls,
including construction, retail trade, government, and
nondefense manufacturing. California's unemployment
rate fell about 1.5 percentage points between the
first and final quarters of 1994.
In addition, retail sales advanced approximately
5% during 1994. With inflation running at 2%, last
year thus marked the first time since 1990 in
which consumers registered a real spending gain.
A healthier economy has also contributed to
stronger than anticipated growth in state
government revenues and a slowing in the rate of
residential and commercial foreclosures. The state's
housing market is also helping California's economy
recover. Home sales advanced substantially and residential
building permits increased approximately 15% in
1994, with both single-family and multi-family
permits recording double-digit gains. More
importantly, the downward slide in home prices
appears to be abating throughout most areas of the
state. California homeowners can expect home
values to begin rising again perhaps as early as
spring 1995.
Cross-Border Outstandings _ The Corporation had
no crossborder outstandings in excess of 0.75% of
consolidated assets at December 31, 1994. The following
table details the Corporation's cross-border outstandings
to foreign countries that represent 0.75% or more of assets
for 1993 and 1992:
Banks and Percent
CROSS-BORDER OUTSTANDINGS(1) Other Financial All of Total
(millions) Institutions Other Total Assets
At December 31, 1993
Japan $ 927 $_ $ 927 1.80%
At December 31, 1992
Japan 1,957 8 1,965 3.86
Italy 568 _ 568 1.12
(1)Cross-border outstandings are defined as total
loans(including accrued interest), acceptances,
interbank placements, other interest bearing
investments and other monetary assets
denominated in dollars or other non-local currency,
net of third party guarantees and cash collateral.
There were no outstandingsto governments
andofficial institutions of Japan or Italy for the
years presented.
Derivatives: The Corporation has engaged in
minimal 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 $133.0 million in 1994,
down substantially from $218.1 million in 1993 and
$459.6 million in 1992. Net chargeoffs represented
0.46% of average loans in 1994, compared to 0.90%
in 1993 and 1.79% in 1992. Net chargeoffs of real estate
construction and mortgage loans totaled $25.0
million in 1994, down substantially from $81.6
million in 1993 and $212.7 million in 1992. The
high level of chargeoffs in 1993 and 1992
reflects, in part, the revaluation of land loans,
primarily in California. Overall, there is
continued improvement in the Corporation's credit
risk profile.
The following table summarizes the Corporation's
loan loss experience for the last five years:
SUMMARY OF LOAN LOSS Year Ended December 31
EXPERIENCE (millions) 1994 1993 1992 1991 1990
Average amount of loans outstanding(1) $ 28,644 $ 24,128 $ 25,694 $ 30,691 $ 35,708
ALLOWANCE FOR CREDIT LOSSES
Balance at beginning
of year $1,001.1 $1,067.8 $1,273.0 $1,010.8 $1,437.5
Provision for the year _ 112.6 314.3 810.2 499.4
Net changes due to
acquisitions (dispositions) 66.5 38.8 (59.9) (1.1) (52.5)
1,067.6 1,219.2 1,527.4 1,819.9 1,884.4
Deduct:
Loans charged off:
Commercial, financial and agricultural 25.0 84.3 159.8 271.1 290.2
Real estate construction 8.8 65.5 183.0 99.6 100.8
Real estate mortgage 34.2 40.2 43.1 87.6 223.0
Instalment 190.3 200.4 195.3 203.4 200.3
Foreign _ 6.6 12.0 3.8 169.7
Lease financing 2.5 1.8 13.7 23.7 28.5
Total chargeoffs 260.8 398.8 606.9 689.2 1,012.5
Less recoveries of loans previously charged off:
Commercial, financial and agricultural 40.9 78.5 67.9 57.2 38.3
Real estate construction 6.2 17.3 6.6 4.5 11.4
Real estate mortgage 11.8 6.8 6.8 6.3 6.5
Instalment 65.5 66.3 55.6 56.1 58.7
Foreign 1.6 9.1 4.8 10.3 15.8
Lease financing 1.8 2.7 5.6 7.9 8.2
Total recoveries 127.8 180.7 147.3 142.3 138.9
Net loans charged off 133.0 218.1 459.6 546.9 873.6
Balance at end of year $ 934.6 $1,001.1 $1,067.8 $1,273.0 $1,010.8
Ratio of net loans charged off during the year
to average amount of loans outstanding 0.46% 0.90% 1.79% 1.78% 2.45%
(1)Net of unearned income and deferred fees.
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) 1994 1993 1992 1991 1990 1994 1993 1992 1991 1990
Commercial, financial
and agricultural $(15.9) $ 5.8 $ 91.9 $213.9 $251.9 (0.19) 0.08 1.13 2.05 1.86
Real estate construction 2.6 48.2 176.4 95.1 89.4 0.32 5.28 10.10 3.55 2.50
Real estate mortgage 22.4 33.4 36.3 81.3 216.5 0.30 0.62 0.66 1.44 3.96
Instalment 124.8 134.1 139.7 147.3 141.6 1.07 1.35 1.43 1.45 1.29
Foreign (1.6) (2.5) 7.2 (6.5) 153.9 (1.93) (1.56) 1.78 _ 10.69
Lease financing 0.7 (0.9) 8.1 15.8 20.3 0.32 (1.06) 4.00 2.58 2.74
TOTAL $133.0 $218.1 $459.6 $546.9 $873.6 0.46 0.90 1.79 1.78 2.45
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 and
subsidiary 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 predominantly
general in nature and is available for the portfolio in
its entirety.
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. At December 31, 1994, the allowance for
credit losses amounted to $934 million, or 2.81% of
total outstanding loans. This compares to $1,001
million, or 3.85% at yearend 1993 and $1,068 million,
or 4.41% at yearend 1992.
The following table details the Corporation's allocation of
the allowance for credit losses for the last five years:
ALLOCATION OF Percent of Loans in Each
ALLOWANCE FOR Allowance Amount Category to Total Loans
CREDIT LOSSES December 31 December 31
(millions) 1994 1993 1992 1991 1990 1994 1993 1992 1991 1990
Commercial, financial
and agricultural $124.2 $ 150.6 $ 229.6 $ 348.5 $ 365.3 28.0 30.8 32.1 30.7 36.3
Real estate construction 41.3 77.3 119.3 221.3 179.1 2.9 2.8 4.8 7.6 9.7
Real estate mortgage 90.7 47.1 69.5 120.3 93.1 30.7 23.9 22.1 20.3 16.3
Instalment 145.5 153.7 142.0 136.6 132.6 36.9 41.5 39.9 35.5 31.2
Foreign 0.2 0.2 8.3 11.3 26.4 0.4 0.6 0.7 3.5 3.9
Lease financing 1.8 2.0 1.8 22.1 9.6 1.1 0.4 0.4 2.4 2.6
Unallocated allowance 530.9 570.2 497.3 412.9 204.7 n/a n/a n/a n/a n/a
TOTAL $934.6 $1,001.1 $1,067.8 $1,273.0 $1,010.8 100.0 100.0 100.0 100.0 100.0
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) 1994 1993 1992 1991 1990
Nonaccruing loans:(1)
Domestic:(2)
Secured by real estate $113.7 $149.3 $322.3 $ 684.3 $ 460.5
Other 72.5 77.3 255.5 394.3 439.6
Total domestic 186.2 226.6 577.8 1,078.6 900.1
Foreign _ _ _ 16.0 25.5
186.2 226.6 577.8 1,094.6 925.6
Renegotiated loans:(3)
Domestic
Secured by real estate _ _ _ _ 0.2
Other _ _ 0.4 0.1 2.7
Total domestic _ _ 0.4 0.1 2.9
Total nonperforming loans 186.2 226.6 578.2 1,094.7 928.5
Other Real Estate 72.0 82.1 172.9 493.1 820.8
TOTAL $258.2 $308.7 $751.1 $1,587.8 $1,749.3
%of total assets 0.5 0.6 1.5 3.2 3.4
Accruing loans past due 90 days or more:
Domestic(2)
Instalment $ 26.1 $ 29.8 $ 30.5 $ 27.5 $ 35.0
Other 25.1 36.3 22.8 43.0 28.8
Total Domestic 51.2 66.1 53.3 70.5 63.8
Foreign _ _ _ _ 10.6
TOTAL $ 51.2 $ 66.1 $ 53.3 $ 70.5 $ 74.4
(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
collectability of principal.
(2)Real estate construction loans at December 31, 1994,
were $21.6 million nonaccruing and $0.5 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 1994 and 1993:
RECONCILIATION OF 1994 1993
NONPERFORMING Nonperforming Nonperforming Nonperforming Nonperforming
ASSETS (millions) Loans ORE Assets Loans ORE Assets
Balance at January 1 $226.6 $82.1 $308.7 $578.2 $172.9 $751.1
In-migration 395.4 _ 395.4 369.1 _ 369.1
Return to accrual (115.5) _ (115.5) (89.8) - (89.8)
Provision for ORE _ 4.4 4.4 _ (0.2) (0.2)
Payments/sales (249.1) (84.9) (334.0) (396.4) (183.9) (580.3)
Net chargeoffs/writedowns (47.3) (0.7) (48.0) (148.2) (13.5) (161.7)
Transfer within
nonperforming (55.6) 55.6 _ (96.9) 96.9 _
Net changes due to acquisitions 31.7 15.5 47.2 10.6 9.9 20.5
Balance at December 31 $186.2 $72.0 $258.2 $226.6 $ 82.1 $308.7
At December 31, 1994, nonperforming loans totaled $186
million, an improvement of $41 million (18.1%) from the
$227 million reported a year earlier. Principal or interest
payments on $124 million (67%) of nonperforming loans were
contractually past due 30 days or more at yearend 1994. At
the same time, principal and interest in accordance with
contractual terms were current on $62 million (33%) of
nonperforming loans, as shown in the following table:
Total Contractually Contractually Nonperforming
At December 31, 1994(millions)(1) Past Due(2) Current(3) Loans
Real Estate Loans $ 86.7 $27.0 $113.7
All Others Loans 36.9 35.6 72.5
Total $123.6 $62.6 $186.2
(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
contractual terms.
At the end of 1994, approximately 61% of total nonperforming
loans were real estate related. Of the nonperforming real
estate loans, 76% were contractually past due and 24%
were contractually current.
In addition to nonperforming loans, nonperforming
assets also include ORE. ORE includes property acquired
through foreclosure or deed in lieu of foreclosure. These
outstandings are 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 costs. Losses that result from the
ongoing periodic valuation of these properties are
charged against ORE reserves. 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 the same time, if
in the case of a particular property such conditions
indicate a possible greater decline in value between
appraisals, then a higher valuation reserve is
provided for that property.
At yearend 1994, ORE totaled $72 million (net of a $25
million reserve), a decline from $82 million (net of a $32
million reserve) in 1993 and $173 million (net of $45
million reserve) in 1992.
At December 31, 1994 total nonperforming assets were $258
million, down from $309 million in 1993 and $751 million
in 1992. In addition to credit assets classified as
nonperforming, the Corporation reported accruing loans
that were past due 90 days or more of $51 million at
yearend 1994, versus $66 million a year earlier and $53
million in 1992, which included consumer instalment credit
of $26 million, $30 million, and $31 million,
respectively.
Reflecting the Corporation's improved credit quality,
interest lost on nonperforming loans was $13.5 million in
1994, down from $26.0 million reported in 1993 and $84.2
million reported in 1992. 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 (thousands) 1994 1993(1) 1992
Interest income which would have been recorded under
original terms:
Domestic $20,581 $33,184 $84,423
Foreign _ _ 802
Interest income reversed:
Domestic 2,083 2,556 11,698
Foreign _ _ _
Less interest income recorded:
Domestic 9,188 9,768 12,684
Foreign _ _ _
Interest lost:
Domestic 13,476 25,972 83,437
Foreign _ _ 802
TOTAL $13,476 $25,972 $84,239
(1)Restated from originally reported data.
Mergers and Acquisitions
At the beginning of 1993, the Corporation began an
acquisition program primarily focused on key markets
within the states of California, Washington and Texas.
Since then, the Corporation has announced and closed 17
transactions totaling nearly $10 billion in assets, of
which 15 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 resulted
in the achievement of top three position share in six
counties and has improved market penetration in 14
others. The Corporation continues to explore acquisition
opportunities in a highly disciplined manner, consistent
with its strategic and financial objectives.
The following table includes summary information
regarding the eight acquisitions announced in 1993 and
the nine announced in 1994. All of these transactions
were completed by February 1, 1995. The data presented
should be read in conjunction with Note P to the financial
statements.
ACQUISITIONS ANNOUNCED/ Announced Announced Market
CLOSED IN 1993 & 1994 Closing Asset Purchase Cost Principal Rank
(dollars in millions)(1) Date Size Price Savings Market (from/to)
CALIFORNIA
HomeFed Bank_Fresno Cluster (RTC) 2-2--93 $ 149 $ 4.1(2) n/m Fresno 12/4
HomeFed Bank_
West L.A. Cluster (RTC) 12-3-93 248 6.1(2) n/m Los Angeles 4/4
Cal Rep Bancorp, Inc. 12-10-93 569 68.0 57% Bakersfield 7/2
First State Bank of the Oaks 1-13-94 144 23.0 71% Ventura 11/6
San Diego Financial Corp. 3-18-94 2,028 340.0 42% San Diego 9/3
Sacramento Savings Bank 11-1 94 3,026 331.0 49% Sacramento 6/2
Levy Bancorp 2-1-95 625 86.5 50% Ventura 6/2
WASHINGTON
Great American_
Seattle & Olympia Clusters (RTC) 5-13-94 358 25.9(2) n/m Olympia 15/5
University Savings Bank 1-6-95 1,144 190.4 30% Seattle 5/3
Tacoma 4/3
TEXAS
Tarrant Bank (FDIC) 8-25-93 60 2.9(2) n/m Ft. Worth 8/7
BancWest Bancorp 4-29-94 249 35.8 25% Austin 28/9
MNB Bancshares, Inc. 5-30-94 46 5.5 21% Dallas 8/7
Med Center Bank (branch purchase) 7-29-94 175 12.2 47% Houston 4/4
Park Forest National Bank 12-16-94 24 2.5 31% Dallas 7/7
North Texas Bancshares, Inc. 1-9-95 388 66.0 24% Ft. Worth 7/5
ARIZONA
Chase Bank of Arizona 4-29-94 527 102.0 70% Phoenix 3/3
OREGON
Far West, FSB_Two branches (RTC) 4-15-94 15 0.9(2) n/m Portland 2/2
TOTAL $9,775 $1,302.8 47%
(1)At date of announcement
(2)Deposit premium
Common Stock, Market and Quarterly Data
The New York Stock Exchange is the primary market for
the Corporation's $2 par value Common Stock. At December 31,
1994, the 74,203,480 outstanding shares of common stock were
held by 24,902 registered shareholders. Approximately
82% of the shares outstanding are held by 283 institutional
investors. Dividends paid on the $2 par value Common Stock
totaled $2.75 per share in 1994, versus $1.60 in 1993 and
$1.20 in 1992. The current quarterly rate of $0.75 per share
has been in effect since the May 1994 payment and represents
a 50% increase from the quarterly rate in effect at the end
of 1993. On January 17, 1995, following the release of the
Corporation's fourth quarter results, the Board of
Directors declared a common stock dividend of $0.75 per share,
payable on February 24 to shareholders of record on February
6, 1995.
The number of shares used in the calculation of earnings results
per share in 1994 were 80,421,942 compared to 77,022,749 in 1993
and 69,135,224 in 1992.
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.
Shareholders' Dividends Market Price Average Daily
Equity Paid High Low Close Closing Price
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
1993
4th Quarter $41.36 $0.50 $68 $53 1/2 $64 1/8 $61.08
3rd Quarter 41.29 0.40 67 58 3/8 66 5/8 63.19
2nd Quarter 39.84 0.40 64 1/2 52 1/2 62 3/4 57.49
1st Quarter 38.62 0.40 58 7/8 44 1/2 58 3/4 52.24
Quarterly Operations (millions, except per share amounts): Quater Ended
March 31 June 30 Sept. 30 Dec. 31
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
Provision for restructuring _ _ 139.0 2.3
Other real estate _ (5.6) (0.7) (6.1)
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
1993
Interest income $739.1 $740.6 $733.9 $730.6
Interest expense 238.3 216.8 210.4 206.6
Net interest income 500.8 523.8 523.5 524.0
Provision for credit losses 45.6 26.1 21.9 19.0
Other noninterest income 3.6 1.4 _ 4.7
Operating noninterest expenses 242.9 228.6 239.0 234.0
Provision for restructuring 498.5 498.3 497.9 504.1
Other real estate 10.4 10.0 9.6 3.6
Applicable income taxes 73.3 83.4 82.6 80.6
Income before extraordinary item and
cumulative effect of accounting changes 119.5 136.0 150.5 155.4
Extraordinary item (15.4) _ _ (9.3)
Cumulative effect of accounting changes 200.1 _ _ _
Net income $304.2 $136.0 $150.5 $146.1
Earnings per common share
Income before extraordinary item and
cumulative effect of accounting changes $ 1.38 $ 1.60 $ 1.80 $1.90
Extraordinary item (0.20) _ _ (0.12)
Cumulative effect of accounting changes 2.62 _ _ _
Net income 3.80 1.60 1.80 1.78
Consolidated Balance Sheet
FIRST INTERSTATE BANCORP December 31
(in millions)
1994 1993
Assets
Cash and due from banks $ 6,070 $ 5,064
Time deposits, due from banks 26 1,157
Federal funds sold and securities purchased under
agreements to resell 179 618
Trading account securities 64 167
Investment securities:
Held-to-maturity securities
(approximate market value: 1994_$13,280; 1993_$16,489)
U.S. Treasury and agencies 12,105 14,894
State and political subdivisions 29 23
Other 1,561 1,456
Total held-to-maturity securities 13,695 16,373
Available-for-sale securities 156 169
Total Investment Securities 13,851 16,542
Loans (net) 33,222 25,988
Less: Allowance for credit losses 934 1,001
Net Loans 32,288 24,987
Other assets held for sale 26 133
Bank premises and equipment 1,147 948
Customers' liability for acceptances 35 48
Other assets 2,127 1,797
Total Assets $55,813 $51,461
Liabilities and Shareholders'Equity
Deposits:
Noninterest bearing $16,599 $15,425
Interest bearing 31,828 29,276
Total Deposits 48,427 44,701
Short term borrowings 1,574 767
Acceptances outstanding 35 48
Accounts payable and accrued liabilities 953 864
Long term debt 1,388 1,533
Total Liabilities 52,377 47,913
Shareholders' equity:
Preferred Stock 350 350
Common Stock, par value $2 a share:
Authorized 250,000,000 shares;
Issued:1994_ 84,285,643 shares; 1993_ 79,100,546 shares 168 158
Capital surplus 1,692 1,673
Retained earnings 1,967 1,437
Unrealized gain on available-for-sale
securities, net of related taxes 1 _
4,178 3,618
Less Common Stock in treasury, at cost:
1994_10,082,163 shares; 1993_1,774,551 shares 742 70
Total Shareholders' Equity 3,436 3,548
Total Liabilities and Shareholders' Equity $55,813 $51,461
See notes to financial statements.
Consolidated Statement of Operations
FIRST INTERSTATE BANCORP Year Ended December 31
(in millions) 1994 1993 1992
Interest Income
Loans, including fees $2,303.7 $1,980.9 $2,238.8
Trading account securities 4.9 5.6 18.0
Investment securities:
Held-to-maturity
Taxable 828.3 837.3 743.1
Exempt from federal income taxes 2.7 2.9 3.9
Available-for-sale 13.3 24.1 3.8
Other interest income 39.1 93.4 182.1
Total Interest Income 3,192.0 2,944.2 3,189.7
Interest Expense
Deposits 725.0 719.9 932.8
Short term borrowings 34.2 16.0 14.4
Long term debt 106.3 136.2 227.9
Total Interest Expense 865.5 872.1 1,175.1
Net Interest Income 2,326.5 2,072.1 2,014.6
Provision for credit losses _ 112.6 314.3
Net Interest Income after
Provision for Credit Losses 2,326.5 1,959.5 1,700.3
Noninterest Income
Service charges on deposit accounts 561.9 513.0 478.9
Trust fees 193.3 177.4 170.3
Other charges, commissions and fees 132.0 149.4 163.6
Merchant credit card fees 39.7 44.1 37.3
Investment securities gains (losses) 21.1 9.7 (1.8)
Trading income 16.8 19.5 19.4
Gain (loss) on sale of loans 2.5 8.0 (3.3)
Loss on sale of subsidiaries _ _ (2.6)
Other income 87.0 33.1 50.3
Total Noninterest Income 1,054.3 954.2 912.1
Noninterest Expenses
Salaries and benefits 1,079.9 975.3 1,035.4
Net occupancy and equipment 356.6 337.2 359.4
FDIC assessments 102.8 100.5 90.6
Communications 117.6 105.0 91.9
Supplies 43.6 40.7 39.4
Outside contract services 91.8 165.2 130.3
Advertising 46.8 52.6 35.2
Other real estate (12.4) 33.6 159.6
Provision for restructuring 141.3 _ _
Other expenses 229.8 222.3 267.4
Total Noninterest Expenses 2,197.8 2,032.4 2,209.2
Income before Income Taxes, Extraordinary Item
and Cumulative Effect of Accounting Changes 1,183.0 881.3 403.2
Applicable income taxes_including taxes (benefit) relating
to investment securities transactions
of $7.9, $4.0 and $(0.7) 449.5 319.9 120.9
Income before Extraordinary Item and Cumulative
Effect of Accounting Changes 733.5 561.4 282.3
Extraordinary Item_Loss on early extinguishment of debt _ (24.8) _
Cumulative Effect of Accounting Changes_
SFAS 106 ($104.9 loss) and SFAS109($305.0 gain) _ 200.1 _
Net Income $ 733.5 $ 736.7 $ 282.3
Earnings per common share:
Income before extraordinary item and cumulative
effect of accounting changes $8.71 $6.68 $3.23
Extraordinary item _ (0.32) _
Cumulative effect of accounting changes _ 2.60 _
Net income
$8.71 $8.96 $3.23
See notes to financial statements.
Consolidated Statement of Cash Flows
FIRST INTERSTATE BANCORP Year Ended December 31
(in millions) 1994 1993 1992
Cash Flows from Operating Activities
Net income $ 734 $ 737 $ 282
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 152 124 141
Provision for credit losses _ 113 314
Provision for foreclosed property losses (4) _ 105
Provision for deferred income taxes (benefit) 127 53 (103)
Provision for restructuring 141 _ _
Cumulative effect of accounting changes _ (200) _
Loss on early extinguishment of debt _ 25 _
Decrease (increase) in trading account securities 103 (41) 169
Decrease (increase) in interest receivable 109 (16) 58
Decrease in interest payable (13) (35) (67)
Other, net 6 215 (328)
Net Cash Provided by Operating Activities 1,355 975 571
Cash Flows from Investing Activities:
Held-to-maturity securities
Proceeds from maturities 6,382 4,728 3,731
Proceeds from sales _ 32 16
Purchases (2,764) (8,211) (8,858)
Available-for-sale securities
Proceeds from maturities 128 969 133
Proceeds from sales 88 _ 1
Purchases (23) (160) (526)
Net loan principal repayments (originations) (5,688) (3,758) 1,019
Proceeds from sales of loans 3,054 2,493 2,173
Loans purchased (1,263) (530) (126)
Acquisition of subsidiaries 355 60 _
Proceeds from sales of subsidiaries and operations _ 939 15
Proceeds from sales of premises and equipment 32 24 18
Purchases of premises and equipment (241) (152) (108)
Proceeds from sales of other real estate 69 121 323
Net Cash Provided (Used) by Investing Activities 129 (3,445) (2,189)
Cash Flows from Financing Activities:
Net increase (decrease) in deposits (1,878) 89 2,243
Deposits purchased 315 443 _
Net decrease (increase) in short term borrowings 580 437 (259)
Proceeds from long term debt issued 125 _ 328
Repayments of long term debt (270) (185) (443)
Reacquisition of long term debt _ (1,022) (272)
Cash dividends paid (251) (172) (143)
Proceeds from Preferred Stock issued _ _ 145
Redemption of Preferred Stock _ (334) (128)
Proceeds from Common Stock issued 43 43 468
Reacquisition of Common Stock (712) _ _
Net Cash Provided (Used) by Financing Activities $(2,048) (701) 1,939
Net Increase (Decrease) in Cash and Cash Equivalents (564) (3,171) 321
Cash and cash equivalents at beginning of year 6,839 10,010 9,689
Cash and Cash Equivalents at End of Year 6,275 6,839 10,010
Interest paid $ 879 $ 905 $1,242
Income taxes paid 345 244 136
Loans transferred to ORE 56 97 194
Loans originated to facilitate sale of ORE 52 7 89
See notes to financial statements.
Statement of Shareholders'Equity
FIRST INTERSTATE BANCORP
Class A
Preferred Common Common Stock Capital Retained Treasury
(dollars in millions) Stock Stock Shares Amount Surplus Earnings Stock Total
Balance at December 31, 1991 $594.6 $0.4 62,779,015 $129.1 $1,249.4 $ 736.3 $(70.4) $2,639.4
Net income for the year 282.3 282.3
Cashdividends:
Common Stock_$1.20 a share (82.4) (82.4)
Preferred Stock (59.2) (59.2)
Preferred Stock issued 150.0 (4.7) 145.3
Preferred Stock redeemed (127.5) (0.2) (127.7)
Common Stock issued:
Stock Option Plan 152,767 0.3 4.4 4.7
Restricted Stock Plan (14,660) (0.5) (0.5)
Dividend Reinvestment Plan 12,118,265 24.3 434.1 458.4
Employee Savings Plan 118,835 0.2 4.0 4.2
Incentive Plan 26,992 0.9 0.9
Other changes (0.2) (76) (0.3) (13.8) (14.3)
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 $1,968.2 $(742.5) $3,436.4
See notes to financial statements.
Note A_Accounting Policies
First Interstate Bancorp and its subsidiaries (the Cor
poration) follow generally accepted accounting principles
and reporting practices applicable to the banking industry.
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.
Certain prior year balances have been reclassified to
conform to current year classifications.
SECURITIES Securities are classified based on their purpose
and holding period, taking into account the financial
position, liquidity and future plans of the Corporation.
Securities for which the Corporation has the intent and
ability to hold to maturity are reported at cost, increased
by the accretion of discounts and reduced by the
amortization of premiums, using the interest method. Trading
account securities, representing securities that are held
for a short term and sold in response to market changes, are
carried at market value with gains and losses, both realized
and unrealized, included in noninterest income.
Prior to January 1, 1994, securities to be held for
indefinite periods of time, including securities that
management intended to use for asset/liability management
purposes or that might be sold in response to changes in
interest rates, changes in prepayment risk, the need to
increase regulatory capital or other similar factors, were
classified as held-for-sale and carried at the lower of
aggregate cost or market. The related valuation adjustments
were included in noninterest income. Upon the adoption at
January 1, 1994 of Statement of Financial Accounting
Standards No. 115 (SFAS 115), "Accounting for Certain
Investments in Debt and Equity Securities," such securities
are now classified as available-for-sale and are carried at
fair value. Fair values are estimated based on available
market quotations. Unrealized gains and losses are included
as a separate component of shareholders' equity, net of
related income taxes. Realized gains and losses are included
in noninterest income.
The Corporation uses the specific identification method for
calculating gains and losses on securities transactions.
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 separately classified, and
are carried at the lower of cost or market.
Loans are placed on nonaccrual status when full
collectibility of principal or interest is in doubt or when
they become 90 days past due, 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, cash received is applied as a
reduction of the loan principal.
In May 1993, the Financial Accounting Standards Board issued
SFAS No. 114, "Accounting by Creditors for Impairment of a
Loan," amended in October 1994 by SFAS No. 118, "Accounting
by Creditors for Impairment of a Loan_Income Recognition and
Disclosures." Under SFAS 114, a loan is considered impaired
when, based on current information and events, it is
probable that a creditor will be unable to collect principal
or interest due according to the contractual terms of the
loan. Impaired loans are measured by one of three methods:
present value of expected future cash flows discounted at
the loan's effective interest rate; observable market price;
or the fair value of the collateral if the loan is
collateral-dependent. The pronouncements are effective for
fiscal years beginning after December 15, 1994. The adoption
of these pronouncements is not expected to have a
significant impact on the Corporation's 1995 financial
statements.
ALLOWANCE FOR CREDIT LOSSES The allowance for credit losses
is increased by provisions charged to expense and reduced by
charge-offs, net of recoveries. This is a general reserve
for losses related to the loan portfolio and other
extensions of credit, including off-balance sheet credit
commitments such as standby letters of credit, guarantees
and commitments to extend credit. In evaluating the credit
portfolio, management considers the loss probability of
classified and large credits, a statistical and historical
valuation for small credits and groups of credits with
similar characteristics, as well as prevailing and
anticipated economic conditions.
BANK PREMISES AND EQUIPMENT Bank premises and equipment
are stated at cost less accumulated provisions for
depreciation and amortization, computed primarily on the
straightline 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
equipment's estimated useful life or the lease term,
whichever is shorter, and the amortization is included in
depreciation expense.
OTHER REAL ESTATE (ORE) Real estate acquired in
satisfaction of loans is reported in other assets.
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 costs 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 the fair value of net assets of
acquired companies is classified as goodwill and reported
as other assets. Goodwill is amortized using the
straightline method, generally over 15 years.
Purchased mortgage servicing rights represent the right
to service mortgage loans originated and owned by others
and are reported in other assets. Purchased mortgage
servicing rights are generally amortized over eight to
ten years.
PENSION, OTHER POSTRETIREMENT AND POST -
EMPLOYMENT PLANS The Corporation has 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 within 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, the Corporation adopted SFAS
112, "Employers' Accounting for Post employment
Benefits." Employers are required to record the
obligation for benefits owed to former employees. The
effect of adoption of this pronouncement was not
material to the Corporation's financial statements.
INTEREST RATE AND FOREIGN EXCHANGE RATE CONTRACTS The
Corporation uses interest rate swaps, futures, caps
and floors, options, forward and foreign exchange
rate contracts primarily as part of its overall
interest rate risk management strategy. Gains and
losses on such contracts are deferred and recognized
over the lives of the hedged assets or liabilities
as an adjustment to interest income or expense.
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 each entity. Consolidated or combined
returns are filed, as required by certain states,
including California. Generally, the consolidated and
combined tax liabilities are settled between
subsidiaries as if each 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.
Note B_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. The following table
provides the major components of investment securities
(in millions):
Estimated
Amortized Gross Unrealized Fair
Cost Gains Losses Value
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 641 _ 37 604
Other debt securities 920 _ 43 877
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
December 31, 1993
Held-to-Maturity:
U.S. Treasury securities $ 7,006 $ 69 $ 4 $ 7,071
U.S. government agency securities:
Mortgage-backed securities
Pass-throughs 1,994 41 9 2,026
CMOs and REMICs 5,382 25 21 5,386
Direct agencie 512 9 _ 521
State and political subdivisions 23 2 _ 25
Other mortgage-backed securities 583 2 3 582
Other debt securities 776 7 2 781
Corporate and Federal Reserve
Bank stock 97 _ _ 97
Total held-to-maturity securities $16,373 $155 $ 39 $ 16,489
Available-for-Sale (1) :
U.S. Treasury securities $ 127 $ _ $ _ $ 127
U.S. government securities:
Mortgage-backed securities 42 _ _ 42
Total available-for-sale securities $ 169 $ _ $ _ $ 169
(1)Classified as securities held-for-sale at
December 31, 1993 and carried at the lower of cost or
market.
Maturities of securities classified as held-
to-maturity and available-for-sale as of December 31,
1994 are as follows (in millions):
Amortized Estimated
Cost Fair Value
Held-toMaturity Securities
Due in one year or less $ 3,480 $ 3,467
Due after one year through five years 2,913 2,805
Due after five years through ten years 125 123
Due after ten years 111 91
6,629 6,486
Mortgage-backed securities 7,066 6,794
Total $13,695 $13,280
Available-for-Sale Securities
Due in one year or less $ 16 $ 16
Due after one year through five years 6 6
Due after five years through ten years 1 1
Due in ten years _ _
23 23
Mortgage-backed securities 19 19
Corporate and Federal Reserve
Bank stock 113 114
Total $ 155 $ 156
Mortgage-backed securities included above have a
weighted average contractual maturity of
approximately 12 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 was 2.6 years.
Securities and other assets carried at $7,316 million
at December 31, 1994 and $6,188 million at December
31, 1993 were pledged to secure public and trust
deposits and for other purposes as required or
permitted by law.
Proceeds from sales of available-for-sale
securities during 1994 were $88 million. Gross gains
of $21 million and no losses were realized on
sales. Proceeds from the sale of securities were $32
million and $17 million, while gross gains were $10
million and $2 million in 1993 and 1992,
respectively. There were no gross losses during 1993
and $4 million of gross losses during 1992.
The net unrealized holding gains on available-for
sale securities reported, net of related taxes, as a
separate component of shareholders' equity is $1
million. The net unrealized holding gains on trading
securities reported in earnings was $5 million for
1994. During 1994 there were no transfers or sales of
heldtomaturity securities, or transfers of
available-forsale securities to trading securities.
Note C_Loans
Loans consist of the following (in millions):
December 31
1994 1993
Commercial, financial and agricultural $ 9,294 $ 7,998
Real estate construction 962 728
Real estate mortgage 10,263 6,237
Instalment 12,272 10,778
Other 566 292
33,357 26,033
Less: Unearned income 107 25
Net deferred fees 28 20
Loans (net) $33,222 $25,988
Loans included in other assets held for sale $ 26 $ 133
Transactions in the allowance for credit losses were
as follows (in millions):
December 31
1994 1993 1992
Balance at beginning of year $1,001 $1,068 $1,273
Provision for the year _ 112 314
Net changes due to
acquisitions (dispositions) 66 39 (60)
1,067 1,219 1,527
Deduct:
Loans charged off 261 399 606
Less recoveries of loans
previously charged-off 128 181 147
Net loans charged-off 133 218 459
Balance at end of year $ 934 $1,001 $1,068
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.
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 similar credit standings. The aggregate
dollar amounts of those loans exceeding $60,000 (but
excluding loans to the immediate families of
executive officers and directors of subsidiaries)
were $81 million and $86 million at December 31, 1994
and 1993, respectively. During 1994, $23 million of new
loans were made and repayments totaled $28 million.
Note D_Bank Premises and Equipment
Bank premises and equipment consist of the following
(in millions):
December 31
1994 1993
Land $ 188 $ 165
Buildings and improvements:
Owned 1,151 973
Capital leases 45 46
Furniture, fixtures and equipment:
Owned 930 814
Capital leases 5 5
2,319 2,003
Less accumulated depreciation
and amortization:
Owned 1,133 1,017
Capital leases 39 38
$1,147 $ 948
Depreciation and amortization totaled $109 million,
$99 million and $107 million in 1994, 1993 and
1992, respectively.
Note E_Short Term Borrowings
Short term borrowings are detailed as follows
(in
millions):
December 31
1994 1993 1992
Federal funds purchased:
Balance at December 31 $1,436 $ 557 $ 138
Average balance 514 234 111
Maximum amount outstanding
at any month end 1,436 984 275
Average interest rate:
During the year 4.44% 2.78% 3.30%
At December 31 4.29 2.29 2.52
Securities sold under
agreements to repurchase:
Balance at December 31 $ 73 $ 144 $ 135
Average balance 93 149 220
Maximum amount outstanding
at any month end 219 194 325
Average interest rate:
During the year 3.86% 2.50% 3.00%
At December 31 4.75 2.75 2.32
Other liabilities for short term borrowed money
averaged $48 million in 1994, $48 million in 1993
and $56 million in 1992.
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, 1994 there were no
borrowings outstanding against this facility.
Note F_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
1994 1993
Parent Corporation:
Senior Medium Term Notes, Series A $ 328 $ 335
8.625% Subordinated Capital Notes
due April 1, 1999 182 182
Subordinated Medium Term Notes,
Series C 163 163
9.125% Subordinated Notes
due February 1, 2004 133 133
9.00% Subordinated Notes due
November 15, 2004 125 _
Other Issues (under $100 million each):
Fixed Rate 231 356
Variable Rate 128 255
1,290 1,424
Subsidiaries:
Subordinated notes and debentures _ 7
Other notes _ 1
Mortgages 74 74
Obligations under capital leases 24 27
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 also 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 are offered on
a continuing basis by the Corporation and are due
$128 million in 1995, $38 million in 1996, $10 million
in 1997, $111 million in 1998, $6 million in 1999 and
$35 million thereafter. The notes bear interest ranging
from 7.0% to 10.9%.
The 8.625% Subordinated Capital Notes, due April 1,
1999, are subordinated to senior indebtedness
of the Corporation. These notes are considered to
be Total Capital, but not Tier 1 Capital, for
regulatory purposes since, upon maturity, they may 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 Subordinated Medium Term Notes, Series C are
offered on a continuing basis by the Corporation and
are due $13 million in 1998, $121 million in 2001 and
$29 million in 2002. The notes bear interest ranging
from 9.375% to 11.25%.
The 9.125% Subordinated Notes, due February 1, 2004,
are subordinated to senior indebtedness of the
Corporation. The 9.00% Subordinated Notes, due
November 15, 2004, 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, 1994 were two
floating rate issues totaling $128 million and four
fixed rate issues totaling $231 million. The
floating rate issues consist of $45 million of
Floating Rate FOREX-Linked Notes due
February 26, 1996 with a current interest rate of
5.125%, and $83 million of floating rate notes due
June 30, 1997 with a current interest rate of
6.8125%. 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
Corporation currently has two longdated cross
currency contracts outstanding that are used to
hedge the leverage features embedded in the Notes. The fixed
rate issues include $43 million of 5.75% DM100
million Bearer Bonds due May 7, 1996. In conjunction
with these bonds, the Corporation has entered into
separate agreements whereby the DM/US$ exchange
rate is fixed throughout the term of the issue.
The remaining $188 million of fixed rate notes are
due between March 1, 1996 and March 5, 1998 with
interest rates ranging from 10.50% to 12.75%.
Maturities of notes and debentures of the Parent
Corporation for the five years succeeding December 31,
1994 are $128 million in 1995, $192 million in 1996,
$161 million in 1997, $178 million in 1998, $188
million in 1999 and $443 million thereafter.
At December 31, 1994, $1,157 million (90%) of the
Parent Corporation's long term debt had fixed coupon
rates. Of this amount, $566 million is converted to
floating rate debt using interest rate swaps. The
effect of these swaps was to decrease interest
expense on long term debt by $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, 1995, approximately
$381 million were free of dividend restrictions
under such statutory limitations. Unrestricted net
assets of nonbank subsidiaries are insignificant.
Note G_Contingent Liabilities and Commitments
The Corporation's banking subsidiaries are required
to maintain balances with Federal Reserve Banks based
on a percentage of deposit liabilities. Such balances
averaged approximately $1.0 billion and $1.2 billion
in 1994 and 1993, respectively.
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.
Note H_Shareholders' Equity
PREFERRED STOCK At December 31, 1994 and 1993,
15,000,000 shares of Preferred Stock (no par value)
were authorized.
At December 31, 1994 and 1993, there were outstanding
8,000,000 Depositary Shares each representing a one-eighth
interest in a share of 9.875% Preferred Stock, Series F.
The Series F Preferred Stock is redeemable at any time on or
after November 15, 1996, at the option of the
Corporation, in whole or in part, at $200.00 per
share (equivalent to $25.00 per Depositary Share)
plus accrued and unpaid dividends to the redemption
date.
At December 31, 1994 and 1993, there were
outstanding 6,000,000 Depositary Shares each
representing a one-eighth interest in a share of 9.0%
Preferred Stock, Series G. The Series G Preferred
Stock is redeemable any time on or after May 29,
1997, at the option of the Corporation, in whole or
in part, at $200.00 per share (equivalent to $25.00
per Depositary Share) plus accrued and unpaid
dividends to the redemption date.
Dividends on both the Series F and Series G
Preferred Stock are cumulative and are paid quarterly
on the last day of March, June, September, and
December of each year.
TREASURY STOCK At December 31, 1994 and December
31, 1993, the cost of Common Stock in the treasury
averaged $73.64 per share and $39.68 per share,
respectively. In January 1994 and April 1994, the
Board of Directors approved the repurchase of up
to 1.5 million and 6.5 million shares of common
stock, respectively, for reissuance through the Corporation's
Dividend Reinvestment and Stock Purchase Plan and stock
performance plans. In addition, in connection with
the acquisition of Levy Bancorp, the Board of
Directors approved in September 1994, the
repurchase of up to an additional 1.2 million
shares of common stock. Such repurchases were
made periodically in the open market or through
privately negotiated transactions, subject to
appropriate regulatory and acquisition accounting
requirements. As of December 31, 1994, the
Corporation had completed the share repurchase
programs.
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.
Note I_Stock Option Plans
The stock option plans adopted in 1983, as amended,
1988 and 1991 provide for the granting of "non-
qualified'' options and "incentive stock options'' to
key employees of the Corporation to purchase Common
Stock of the Cor poration 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. 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 1983, 1988 and 1991 Plans also provide for the
sale of restricted Common Stock of the
Corporation to key employees at a minimum purchase
price of $2 per share. Generally, restrictions lapse
on 10%, 30% and 60% of the shares sold on the third,
fourth and fifth anniversaries of the grant, respectively. At
December 31, 1994, 25,497 shares of restricted Common
Stock granted to 17 employees were outstanding.
At December 31, 1994, options for 3,932,430
shares, granted to 712 employees and 14 non-employee
directors, were outstanding with expiration dates
ranging from August 11, 1995 to November 20, 2004
and with exercise prices ranging from $18.50 to
$83.875 per share, an average of $47.70 per share.
During 1994, options for 835,100 shares were granted.
At December 31, 1993, options for 3,877,586
shares, granted to 720 employees and 15 non-employee
directors, were outstanding with expiration dates
ranging from March 18, 1994 to November 15, 2003
and with exercise prices ranging from $18.50 to
$62.625 per share, an average price of $42.36 per
share. During 1993, options for 1,007,600 shares were
granted.
Options exercised in 1994 were 702,033, compared
to 636,042 in 1993 and 152,767 in 1992. Prices
ranged from $18.50 to $62.625 per share.
At December 31, 1994 options for 1,807,830 shares
were exercisable and 1,919,841 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 within 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.
The following table sets forth the plan's funded
status and amounts recognized in the Corporation's
Consolidated Balance Sheet (in millions):
December 31
1994 1993
Actuarial present value of benefit obligations:
Accumulated benefit obligation:
Vested $582 $535
Nonvested 39 64
$621 $599
Plan assets at fair value, primarily marketable
securities $706 $722
Projected benefit obligation 742 732
Plan assets less than projected
benefit obligation (36) (10)
Unrecognized prior service costs 5 6
Unrecognized net transition asset being
amortized over 13 years (24) (30)
Unrecognized net loss due to past experience
different from assumptions made 23 107
Prepaid pension asset (pension liability) $(32) $ 73
The net pension cost included the following (in millions):
Year ended December 31
1994 1993 1992
Service costs_benefits earned during
the period $ 30 $23 $23
Interest costs on projected benefit
obligation 59 49 43
Net amortization and deferral (76) 23 (23)
13 95 43
Less return on plan assets (10) 89 42
Net pension cost included in salaries
and benefits 23 6 1
Early Retirement Program
expense included in
provision for restructuring 82 _ _
Total pension cost recognized $105 $ 6 $ 1
The weighted average discount rate and increase in
salary levels used in determining the
projected benefit obligation were 8.75% and 4.5% for
1994, 7.375% and 4.0% for 1993 and 8.5% and 4.75%
for 1992, respectively. The expected long term return
on plan assets was 9.25% in 1994 and 1993 and 9.5% in 1992.
Also, 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 $29 million and $18 million and projected benefit
obligation in excess of plan assets was $33 million
and $22 million as of December 31, 1994 and 1993,
respectively. Net pension cost related to these plans
included in salaries and benefits was $16 million in
1994 and $2 million in 1993 and 1992.
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,'' 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 Plan's
accumulated cost included on the Corporation's
consolidated balance sheet (in millions):
December 31
1994 1993
Accumulated postretirement benefit obligation:
Current retirees $117 $137
Active employees fully eligible for benefits 2 3
Other active Plan participants 17 22
Accumulated postretirement benefit
obligation 136 162
Unrecognized prior service costs 8 17
Unrecognized net (gains) losses due to
past experience different from
assumptions made 26 (11)
Accrued postretirement benefit cost $170 $168
Net periodic postretirement benefit cost for 1994 and
1993 included the following components (in millions):
December 31
1994 1993
Service cost $ 1 $ 1
Interest cost 10 14
Amortization of net gains (1) _
Total postretirement benefit cost $ 10 $ 15
A total of $11 million was recognized in 1992 for
expenses related to postretirement benefits. 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 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 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 1994 and $13 million for 1993 and
1992.
Note K_Income Taxes
Effective January 1, 1993, the Corporation changed
its method of accounting for income taxes from the
liability method required by 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 provision for income taxes (benefit) attributable
to continuing operations consists of the
following (in millions):
State
and
Federal Local Foreign Total
1994:
Current $274.9 $52.4 $(4.6) $322.7
Deferred 103.3 23.5 _ 126.8
$378.2 $75.9 $(4.6) $449.5
1993:
Current $222.7 $44.0 $ _ $266.7
Deferred 41.6 11.6 _ 53.2
$264.3 $55.6 $ _ $319.9
1992:
Current $152.4 $57.1 $14.4 $223.9
Deferred (103.0) _ _ (103.0)
$ 49.4 $57.1 $14.4 $120.9
The deferred tax expense (benefit) 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 provision for state and local income taxes for
1992 reflects the effect of certain restrictions
imposed by state tax laws limiting the
Corporation's ability to offset losses incurred in
one period against the income of another period.
The effective federal income tax rate varied from
the statutory rate due to a number of factors
including the exemption from tax on interest
income earned on the obligations of state and
political subdivisions. For 1992, the effective
income tax rate varied from the statutory federal
rate due primarily to the recognition of prior years'
federal tax benefits previously limited under SFAS 96,
offset by the limitation of current year's state tax benefits
under that accounting method.
A reconciliation between the statutory federal and
the effective income tax rates follows:
% of Pretax Income
1994 1993 1992
Federal Income tax at statutory rate 35 35 34
Effect of nontaxable interest income (1) (1) (2)
Unrecorded tax benefits _ _ (30)
NOL benefit allocated to goodwill _ _ 8
Enacted statutory tax rate change _ (1) _
Foreign tax credits carryovers _ (1) _
State income taxes 6 6 14
Foreign income taxes (1) _ 4
Other net (1) (2) 2
Effective income tax rate 38 36 30
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
1994 1993
Gross deferred assets:
Allowance for credit losses $373.7 $413.5
Reserves and accruals 109.5 127.6
Compensation and benefits 83.4 68.0
Other real estate 29.3 40.4
Foreign tax credit 13.0 20.0
Other 16.6 1.5
Total gross deferred assets 625.5 671.0
Gross deferred liabilities:
Leases (36.4) (25.2)
Fixed assets (19.2) (31.8)
Acquisition related tax accounting
method changes (15.6) _
State taxes (14.2) (20.7)
Other (17.6) (24.7)
Total gross deferred liabilities (103.0) (102.4)
Valuation allowance (38.0) (45.0)
Net deferred tax asset $484.5 $523.6
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 1994, the valuation
allowance was decreased by $7.0 million, resulting
from the utilization of foreign tax credits on the
1993 federal tax return and refund of foreign taxes
previously available as credits.
For tax return purposes, the Corporation has foreign
tax credit carryforwards of $13.0 million. Of this
total, $2.7 million represents tax return carryforwards
which will expire in the years 1995 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, 1994, 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, 1994 were as follows (in
millions):
Capital
Operating Year Ending December 31 Leases Leases
1995 $ 6 $118
1996 6 109
1997 4 93
1998 4 84
1999 4 75
Later years 13 547
Total minimum obligations 37 $1,026
Less executory obligations _
Net minimum obligations 37
Less amount representing interest 13
Present value of net minimum obligations $24
Minimum future rentals receivable under
noncancelable operating subleases at December 31,
1994 were $51 million.
Rental expense for all operating leases was $149
million, $146 million, and $142 million for 1994,
1993 and 1992, 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.
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
onbalance 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, Standby Letters of Credit
and Financial Guarantees
Commitments are contractual agreements to extend
credit which generally have fixed expiration dates or
other ter mination 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. Standbys 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
standby letters of credit is essentially the same as
that involved in extending facilities to customers.
Risks associated with standby letters of credit
are reduced by participation to third parties. At December 31,
1994 approximately $40 million 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
1994 1993
Commitments to extend credit $28,508 $23,548
Standby letters of credit and financial
guarantees 2,076 1,814
Commercial letters of credit 264 262
The following summarizes the expiration schedule of
the Corporation's loan commitments and standby letters
of credit issued as of December outstanding 31, 1994 (in
millions):
Standby
Letters of
Commitments Credit
1995 $20,332 $1,519
1996 2,407 264
1997 2,158 174
1998 907 21
1999 2,137 43
Thereafter 567 55
$28,508 $2,076
When-issued securities represent a method of trading
in listed or unlisted securities which have not yet
been issued and, therefore, are not deliverable. At
December 31, 1994 the Corporation had no commitments
to purchase when-issued securities, compared to
$100 million at December 31, 1993.
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, 1994
and 1993, the Corporation's securities lending
transactions amounted to $2.0 billion and $1.9
billion, respectively.
Derivatives and Other Financial Instruments
NATURE OF INSTRUMENTS The Corporation enters
into a variety of derivative financial instruments
in managing its interest rate exposure and as
intermediary for customer accommodations.
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-
thecounter 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 written by the
Corporation 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
overthe-counter sources.
As a matter of policy, neither the Corporation nor
its subsidiary 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:
HEDGING TRANSACTIONS The Corporation enters
into financial derivative contracts from time to time to
hedge exposure 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 and Capital
Committee (ALCCO), and transactions may not be executed
without the approval of ALCCO. The Cor poration's policies
view risk in terms of the overall balance sheet of the banks,
andspecify risk tolerance and instruments to be used for
hedging, as well as governing ongoing review of
hedging efficiency.
Forward and futures rate agreements are primarily used
to hedge the mortgage "pipeline" risk related
to the Corporation's mortgage banking activities. 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 rates payable
in U.S. dollars. Included in the December 31, 1994
notional amounts below is $608 million of receive
fixed interest rate swaps (average receive rate of
8.34% and average pay rate of 5.68%) and $42
million of pay-fixed interest rate swaps (average
receive rate of 5.72% and average pay rate of
9.68%). As discussed in Note F, these swaps
effectively converted $566 million of the
Corporation's fixed rate long term debt to floating
rate debt. The December 31, 1994 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. The remaining notional amount of $14
million consists of pay-fixed interest rate swaps
to match the amounts and terms of specific customer loans.
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 Corporation's 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 stand ready to 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
derivatives and other financial instruments in a gain
position follows (in millions):
December 31, 1994
Contractual/Notional Credit Risk
Amount Amount
Forward and futures rate agreements:
Hedging $ 37 $ _
Interest rate and currency swap agreements:
Hedging 782 33
Intermediary: Portfolio Sold 3,226 64
Customer Accommodation 503 12
Interest rate caps and floors:
Written:
Hedging 100 _
Intermediary: Portfolio Sold 759 _
Customer Accommodation 193 _
Purchased:
Hedging 52 _
Intermediary: Portfolio Sold 855 14
Customer Accommodation 188 2
Options:
Written:
Hedging 15 _
Intermediary: Portfolio Sold _ _
Customer Accommodation 7 _
Purchased:
Hedging 117 3
Intermediary: Portfolio Sold _ _
Customer Accommodation 7 _
December 31, 1993
Contractual/Notional Credit Risk
Amount Amount
Forward and futures rate agreements:
Hedging $ 245 $ 7
Interest rate and currency swap agreements:
Hedging 659 69
Intermediary 6,646 341
Interest rate caps and floors:
Written:
Hedging 100 _
Intermediary 1,063 _
Purchased:
Hedging 40 _
Intermediary 1,373 44
Options:
Written:
Intermediary 1 _
Note N_Fair Value of Financial Instruments
The estimated fair value of financial instruments as
of December 31, 1994 is as follows (in
millions):
Carrying Estimated
Amount Fair Value
Financial assets:
Cash and cash equivalents $ 6,275 $ 6,275
Trading account securities 64 64
Held-to-maturity securities 13,695 13,280
Available-for-sale securities 156 156
Loans:
Commercial, financial, agricultural 9,294 9,033
Real estate construction 962 948
Real estate mortgage 10,263 9,638
Instalment 12,272 11,906
Other 566 566
33,357 32,091
Less: Unearned income 107 _
Net deferred fees 28 _
Allowance for credit losses 934 _
Net Loans 32,288 32,091
Other assets held for sale 26 26
Customers' liability for acceptances 35 35
Other assets 344 344
Financial liabilities:
Deposits 48,427 48,256
Short term borrowings 1,574 1,574
Acceptances outstanding 35 35
Other liabilities 86 86
Capital notes and debentures 1,290 1,313
Mortgages 74 93
Off balance sheet financial instruments:
Commitments to extend credit (14) (14)
Standby letters of credit and financial guarantees (4) (4)
Forward and future rate agreements _ _
Interest rate and currency swap agreements _ (20)
Options, interest rate caps and floors _ 3
The estimated fair value of financial instruments as
of December 31, 1993 is as follows (in millions):
Carrying Estimated
Amount Fair Value
Financial assets:
Cash and cash equivalents $ 6,839 $ 6,839
Trading account securities 167 167
Held-to-maturity securities 16,373 16,489
Available-for-sale securities 169 169
Loans:
Commercial, financial, agricultural 7,998 8,039
Real estate construction 728 698
Real estate mortgage 6,237 6,101
Instalment 10,778 10,953
Other 292 293
26,033 26,084
Less: Unearned income 25 _
Net deferred fees 20 _
Allowance for credit losses 1,001 _
Net Loans 24,987 26,084
Other assets held for sale 133 133
Customers' liability for acceptances 48 48
Other assets 421 421
Financial liabilities:
Deposits 44,701 44,723
Short term borrowings 767 767
Acceptances outstanding 48 48
Other liabilities 92 92
Capital notes and debentures 1,432 1,545
Mortgages 74 109
Off balance sheet financial instruments:
Commitments to extend credit (12) (12)
Standby letters of credit and
financial guarantees (3) (3)
Interest rate and currency swap agreements 1 1
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 fair values of those assets.
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 those 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 recorded 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, 1994 and 1993, 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 the Parent
Corporation is presented as follows (in millions):
Condensed Balance Sheet
December 31,
1994 1993
Assets
Cash and due from banks:
Subsidiary banks $ 7 $ 10
Time deposits, due from banks:
Subsidiary banks 41 3
Other banks _ 480
Securities purchased under agreements to resell:
Subsidiary banks 150 _
Held-to-maturity securities
(approximate market value: 1993 $6 ) _ 6
Available-for-sale securities 33 169
Loans_net 22 22
Due from subsidiaries:
Banks 112 5
Nonbanks 52 139
Investment in subsidiaries:
Banks 4,204 3,855
Nonbanks 41 53
Other assets 377 343
$5,039 $5,085
Liabilities and Shareholders' Equity
Due to subsidiary banks $ 15 $ _
Accounts payable and accrued liabilities 261 92
Other short term borrowings:
Nonbank subsidiaries 37 21
Long term debt 1,290 1,424
Total Liabilities 1,603 1,537
Shareholders' Equity 3,436 3,548
$5,039 $5,085
Condensed Statement of Operations
Year Ended December 31
1994 1993 1992
Income
Dividends from subsidiaries:
Banks $605 $491 $44
Nonbanks _ _ 1
Interest from subsidiaries:
Banks 3 2 8
Nonbanks 5 11 20
Other interest 29 35 72
Noninterest income 30 1 2
672 540 147
Expenses
Interest on:
Long term debt 96 123 197
Short term borrowings 4 _ _
Indebtedness to subsidiaries _ 7 20
Noninterest expenses
Provision for restructuring 141 _ _
Other noninterest expenses 83 99 121
324 229 338
Income (loss) before income tax benefit,
extraordinary item, cumulative effect
of accounting changes and equity
in undistributed income (loss)
of subsidiaries 348 311 (191)
Income tax benefit 96 44 32
Income (loss) before extraordinary item,
cumulative effect of accounting
changes and equity in undistributed
income (loss) of subsidiaries 444 355 (159)
Extraordinary item _ (25) _
Cumulative effect of accounting changes _ 231 _
Income (loss) before equity in
undistributed income (loss) of
subsidiaries 444 561 (159)
Equity in undistributed income (loss)of
subsidiaries:
Banks 283 176 455
Nonbank 7 _ (14)
290 176 441
Net Income $734 $737 $282
Statement of Cash Flows
Year Ended December 31
1994 1993 1992
Cash Flows from Operating Activities
Net income $ 734 $ 737 $ 282
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Equity in undistributed income of
subsidiaries (290) (176) (441)
Depreciation and amortization 17 19 15
Provision for restructuring 141 _ _
Cumulative effect of accounting
changes _ (231) _
Loss on early extinguishment of debt _ 25 _
(Gain) loss on sale of assets (20) (10) _
Decrease (increase) in interest
receivable 6 30 (25)
Decrease in interest payable (2) (24) (2)
Other_net (38) 271 40
Net Cash Provided (Used) by
Operating Activities 548 641 (131)
Cash Flows from Investing Activities:
Held-to-maturity securities
Proceeds from maturities 2 2 37
Proceeds from sales _ 16 _
Purchases (1) (5) _
Available-for-sale securities
Proceeds from maturities 128 969 133
Proceeds from sales 25 _ 1
Purchases (15) (160) (526)
Net (increase) decrease in advances to
subsidiaries (5) (147) 542
Net decrease in loans _ 19 17
Proceeds from sales of loans _ _ 6
Capital contributions to subsidiaries (22) (3) (315)
Return of capital from subsidiaries 83 366 _
Net Cash Provided (Used) by
Investing Activities 195 1,057 (105)
Cash Flows from Financing Activities:
Net increase (decrease) in other short term
borrowings from nonbank subsidiaries 16 (1) 22
Proceeds from long term debt issued 125 _ 285
Repayments of long term debt (259) (171) (392)
Reacquisition of long term debt _ (1,014) (272)
Cash dividends paid (251) (171) (143)
Proceeds from Preferred Stock issued _ _ 145
Redemption of Preferred Stock _ (334) (128)
Repurchase of Common Stock (712) _ _
Proceeds from Common Stock issued 43 43 468
Net Cash Used by
Financing Activities (1,038) (1,648) (15)
Net Increase (Decrease) in Cash
and Cash Equivalents (295) 50 (251)
Cash and cash equivalents at beginning
of year 493 443 694
Cash and Cash Equivalents at
End of Year $ 198 $ 493 $ 443
Note P_Acquisition Activities
During 1993 and 1994, the Corporation, through
its subsidiaries, completed five cash transactions
resulting in the acquisition of deposits totaling $443 million
and $315 million, respectively. The Corporation paid
premiums of $13 million in 1993 and $26 million in 1994
for these deposits, which were acquired from the
Resolution Trust Corporation and the Federal Deposit
Insurance Corporation. In addition, the Corporation
was a party to business combinations with various
operating entities as detailed in the following table:
ClosingPurchase
($ in millions) 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 Corp. 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 1/6 205 154 1,274 929 WA
North Texas Bancshares, Inc. 1/9 65 211 424 387 TX
Levy Bancorp 2/1 92 266 557 506 CA
The acquisitions of Cal Rep Bancorp, Inc. and San
Diego Financial Corporation were accounted for as
poolings of interest, 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 1,308,384 shares of its common stock,
respectively.
The results of operations of companies which were
acquired in 1993 and 1994 were 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. and San Diego
Financial Corporation prior to the dates of
acquisition due to immateriality.
The following table presents unaudited pro forma
financial information for the Corporation and the
acquired companies accounted for as purchase
transactions as if the acquisitions had been
effective on January 1, 1994 and January 1, 1993,
respectively:
Year Ended December 31
1994 1993
(in millions except per share amounts)
Net interest income $2,384.1 $2,186.6
Provision for credit losses 5.5 119.6
Noninterest income 1,063.1 983.3
Noninterest expense 2,272.7 2,169.8
Applicable income taxes 442.2 334.6
Income before extraordinary
item and cumulative effect of accounting changes 724.8 545.9
Earnings per common share before extraordinary
item and cumulative effect of accounting changes 8.60 6.48
Goodwill and other intangible assets arising from 1994
purchase acquisitions totaled $307 million and $20
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 5 to 10 years.
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 in 1994 of $141.3 million.
The restructuring activity during 1994 is
summarized in the following table (in millions):
Early Severance and Facility and
Retirement Outplacement Equipment
Program Services Valuations Other Total
Restructuring provision
Initial charge $82.0 $40.0 $15.0 $2.0 $139.0
Ongoing _ _ _ 2.3 2.3
Total 82.0 40.0 15.0 4.3 141.3
Utilization for the period
Cash 0.4 4.7 6.8 2.3 14.2
Noncash 81.6(1) _ _ _ 81.6
Total 82.0 4.7 6.8 2.3 95.8
Balance at
December 31, 1994 $ _ $35.3 $ 8.2 $2.0 $ 45.5
(1) Noncash amount of $81.6 represents the
amount transferred to the Corporation's pension
liability during 1994. Payment of the cost of the
Early Retirement Program into the Corporation's
qualified retirement plan will depend on the timing
of the Corporation's contributions to the pension
plan. The balance of the restructuring charge will be
funded out of operating cash flows with payments for
severance and outplacement services occurring
approximately ratably over the next year. Payment of
the cost of the Early Retirement Program into the
Corporation's qualified retirement plan will depend
on the timing of the Corporation's
contributions to the plan.
In addition, it is expected that restructuring
charges of another $23.7 million for relocation of
staff and facilities, as well as retention payments for
certain personnel displaced in the restructuring
program, will be incurred and expensed as the program
is implemented. Such costs are expected to be
incurred relatively evenly through the third quarter
of 1995. The total expected cost of the Plan,
therefore, will be approximately $165
million.
The Plan calls 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, another approximately
3,300 personnel are expected to be
involuntarily terminated. Because some of the
vacancies created by the Early Retirement Program
and by the geographic consolidations will have to be filled,
the total permanent reduction is expected to be
approximately 3,000 full-time equivalent staff.
The Plan is expected to result in annualized
expense savings of $167 million by June 1996; the
savings are expected to be achieved progressively
through this time period. Of the $167 million,
staff savings total $107 million, facilities
savings total $20 million, and other savings
(primarily in the areas of purchasing, appraisals, and
branch savings) total $40 million. As a result, the
Corporation expects to achieve a 58% efficiency ratio
in 1995. The Plan should have limited impact on the
revenues of the Corporation.
The expense savings of this Plan described above
are before the impact of any acquisitions announced
by the Corporation after March 22, 1994. The
Corporation has announced the following acquisitions
since that date: 17 branches from the Resolution
Trust Corporation in Oregon and Washington;
Sacramento Savings Bank and Levy Bancorp in
California; North Texas Bancshares and Park Forest
National Bank in Texas; and University Savings Bank
in Washington.
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, 1994 and 1993, and the related consolidated
statements of operations, cash flows and shareholders'
equity for each of the three years in the period ended
December 31, 1994. 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, 1994 and 1993, and the
consolidated results of their operations and their cash
flows for each of the three years in the period ended
December 31, 1994 in conformity with generally accepted
accounting principles.
As discussed in Notes to Financial Statements, in 1994,
the Corporation changed its method of accounting for
investment securities and, in 1993, the Corporation
changed its methods of accounting for income taxes and
for postretirement benefits other than pensions.
Los Angeles, California
January 16, 1995
Six Year Summary
FIRST INTERSTATE BANCORP
1994 1993 1992 1991 1990 1989
Per Common Share Data
Earnings (loss) per share:
Primary:
Income (loss) before extraordinary
item and cumulative effect
of accounting changes $ 8.71 $ 6.68 $ 3.23 $ (5.24) $ 6.79 $ (3.89)
Extraordinary item _ (0.32) _ _ _ _
Cumulative effect of
accounting changes _ 2.60 _ _ 0.51 0.59
Net income (loss) 8.71 8.96 3.23 (5.24) 7.30 (3.30)
Fully diluted:
Income (loss) before extraordinary
item and cumulative effect
of accounting changes 8.71 6.68 3.23 (5.24) 6.79 (3.89)
Extraordinary item _ (0.32) _ _ _ _
Cumulative effect of
accounting changes _ 2.60 _ _ 0.51 0.59
Net income (loss) 8.71 8.96 3.23 (5.24) 7.30 (3.30)
Dividends paid 2.75 1.60 1.20 1.80 3.00 2.98
Book value, yearend 41.59 41.36 35.04 32.57 39.78 36.78
Market price, yearend 67 5/8 64 1/8 46 3/4 30 23 1/2 41 7/8
Market price, range for year 85-62 3/8 68-44 1/2 48 1/4-29 1/4 42 1/2-20 45 7/8-15 5/8 70 3/8-40 3/4
Growth Measures (% change)
Average loans 18.7 (6.1) (16.3) (14.1) (5.8) 1.9
Average earning assets 7.3 2.2 (1.0) (9.8) (7.0) 1.1
Average savings deposits 10.1 3.1 5.2 0.1 (0.7) (1.9)
Average demand deposits 12.4 10.7 7.5 (0.8) 0.5 0.6
Average total assets 7.4 0.6 (0.2) (9.4) (5.8) 1.0
Performance Measures (%)
Return on average assets 1.38 1.49 0.57 (0.59) 0.86 (0.22)
Return on average common equity 21.56 23.24 9.63 (13.96) 19.56 (7.36)
Return on average total equity 20.38 21.18 9.52 (10.42) 17.98 (4.85)
Dividends paid to net income 31.57 17.86 37.15 n/m 41.10 n/m
Average total equity to average
total assets 6.79 7.05 6.03 5.63 4.81 4.46
Credit Allowance (millions)
Loans charged off $260.8 $398.8 $606.9 $689.2 $1,012.5 $1,050.5
Recoveries of previous
loan chargeoffs 127.8 180.7 147.3 142.3 138.9 121.8
Net loans charged off 133.0 218.1 459.6 546.9 873.6 928.7
Net chargeoffs to average loans 0.46% 0.90% 1.79% 1.78% 2.45% 2.45%
Allowance to loans, yearend 2.81 3.85 4.41 4.52 3.06 3.76
Miscellaneous Data
Shares outstanding, yearend, net 74,203,480 77,325,995 75,181,138 62,779,015 62,176,509 48,791,625
Shares outstanding, average, net 78,852,492 75,823,371 68,780,642 62,498,682 58,889,300 46,655,871
Shareholders 24,902 28,090 32,920 35,594 37,668 38,694
Employees, average December
full-time equivalent 27,394 26,589 26,990 30,281 35,192 36,027
Domestic banking offices 1,137 1,020 993 1,046 1,056 1,042
Consolidated Balance Sheet
FIRST INTERSTATE BANCORP
(yearend, in millions) 1994 1993 1992 1991 1990 1989
Assets
Cash and due from banks $ 6,070 $ 5,064 $ 5,695 $ 5,370 $ 5,171 $ 5,841
Time deposits, due from banks 26 1,157 1,970 2,304 335 2,278
Federal funds, repurchases 179 618 2,345 2,015 891 1,575
Trading account securities 64 167 126 401 625 610
Investment securities:
Held-to-maturity
U.S. Treasury and agencies 12,105 14,894 12,117 6,465 4,738 4,505
State and political subdivisions 29 23 8 12 704 1,189
Other 1,561 1,456 808 2,019 1,225 2,002
Total held-to-maturity 13,695 16,373 12,933 8,496 6,667 7,696
Available-for-sale 156 169 980 _ 308 _
Total Investment Securities 13,851 16,542 13,913 8,496 6,975 7,696
Loans:
Commercial, financial and agricultural 9,294 7,998 7,799 8,721 12,092 15,252
Real estate construction 962 728 1,170 2,155 3,248 3,977
Real estate mortgage 10,263 6,237 5,364 5,732 5,450 5,846
Instalment 12,272 10,778 9,685 10,108 10,417 11,223
Foreign 140 166 163 1,003 1,286 1,435
Lease financing 426 126 90 701 851 969
Total Loans 33,357 26,033 24,271 28,420 33,344 38,702
Unearned income and deferred fees (135) (45) (70) (238) (337) (497)
Allowance for credit losses (934) (1,001) (1,068) (1,273) (1,011) (1,437)
Net Loans 32,288 24,987 23,133 26,909 31,996 36,768
Other assets held for sale 26 133 966 _ 1,166 _
Bank premises and equipment 1,147 948 897 986 1,050 976
Customers' liability for acceptances 35 48 66 309 361 452
Other assets 2,127 1,797 1,752 2,132 2,786 2,855
Total Assets $55,813 $51,461 $50,863 $48,922 $51,356 $59,051
Liabilities and Shareholders'Equity
Deposits:
Noninterest bearing $16,599 $15,425 $14,615 $12,525 $13,132 $13,046
Interest bearing 31,828 29,276 29,060 28,908 30,009 33,422
Total Deposits 48,427 44,701 43,675 41,433 43,141 46,468
Short term borrowings 1,574 767 331 570 854 4,936
Acceptances outstanding 35 48 168 309 361 452
Accounts payable and accrued liabilities 953 864 736 863 954 1,137
Long term debt 1,388 1,533 2,702 3,108 3,178 3,719
Total Liabilities 52,377 47,913 47,612 46,283 48,488 56,712
Shareholders' equity 3,436 3,548 3,251 2,639 2,868 2,339
Total Liabilities and Shareholders' Equity $55,813 $51,461 $50,863 $48,922 $51,356 $59,051
Consolidated Statement of Operations
FIRST INTERSTATE BANCORP
(in millions) 1994 1993 1992 1991 1990 1989
Interest Income
Loans, including fees $2,303.7 $1,980.9 $2,238.8 $3,071.2 $3,876.2 $4,319.6
Trading account securities 4.9 5.6 18.0 37.9 60.3 64.6
Investment securities:
Held-to-maturity
Taxable 828.3 837.3 743.1 557.2 558.1 601.2
Exempt from federal income taxes 2.7 2.9 3.9 7.2 55.7 99.8
Available-for-sale 13.3 24.1 3.8 18.4 17.2 _
Other interest income 39.1 93.4 182.1 243.4 253.3 290.9
Total Interest Income 3,192.0 2,944.2 3,189.7 3,935.3 4,820.8 5,376.1
Interest Expense
Deposits 725.0 719.9 932.8 1,526.0 2,017.7 2,111.8
Short term borrowings 34.2 16.0 14.4 44.3 169.6 502.9
Long term debt 106.3 136.2 227.9 273.3 330.3 339.0
Total Interest Expense 865.5 872.1 1,175.1 1,843.6 2,517.6 2,953.7
Net Interest Income 2,326.5 2,072.1 2,014.6 2,091.7 2,303.2 2,422.4
Provision for credit losses _ 112.6 314.3 810.2 499.4 1,204.1
Net Interest Income after Provision
for Credit Losses 2,326.5 1,959.5 1,700.3 1,281.5 1,803.8 1,218.3
Noninterest Income
Service charges on deposit accounts 561.9 513.0 478.9 471.8 428.6 396.9
Trust fees 193.3 177.4 170.3 172.7 159.2 149.8
Other charges, commissions and fees 132.0 149.4 163.6 184.4 173.3 190.2
Merchant credit card fees 39.7 44.1 37.3 53.5 53.1 53.2
Investment securities gains (losses) 21.1 9.7 (1.8) 42.8 10.6 4.4
Trading income 16.8 19.5 19.4 82.5 52.5 90.0
Gain (loss) on sale of loans 2.5 8.0 (3.3) 2.3 2.8 79.8
Gain (loss) on sale of subsidiaries _ _ (2.6) 27.1 90.1 (14.2)
Other income 87.0 33.1 50.3 147.3 233.3 208.4
Total Noninterest Income 1,054.3 954.2 912.1 1,184.4 1,203.5 1,158.5
Noninterest Expenses
Salaries and benefits 1,079.9 975.3 1035.4 1,212.6 1,224.7 1,220.0
Net occupancy and equipment 356.6 337.2 359.4 426.2 425.0 418.8
FDIC assessments 102.8 100.5 90.6 84.1 51.1 34.1
Communications 117.6 105.0 91.9 95.5 93.4 99.5
Supplies 43.6 40.7 39.4 47.9 54.6 55.9
Outside contract services 91.8 165.2 130.3 97.8 121.9 118.3
Advertising 46.8 52.6 35.2 35.2 54.7 56.9
Other real estate (12.4) 33.6 159.6 312.0 229.3 224.8
Provision for restructuring 141.3 _ _ 90.0 _ _
Other expenses 229.8 222.3 267.4 330.9 307.6 317.2
Total Noninterest Expenses 2,197.8 2,032.4 2,209.2 2,732.2 2,562.3 2,545.5
Income (Loss)before Income Taxes,
Extraordinary Item and Cumulative
Effect of Accounting Changes 1,183.0 881.3 403.2 (266.3) 445.0 (168.7)
Applicable income taxes (benefit) 449.5 319.9 120.9 21.8 6.4 (16.8)
Income (Loss) before Extraordinary Item and
Cumulative Effect of Accounting Changes 733.5 561.4 282.3 (288.1) 438.6 (151.9)
Extraordinary Item _ (24.8) _ _ _ _
Cumulative Effect of Accounting Changes _ 200.1 _ _ 30.1 27.4
Net Income (Loss) $ 733.5 $ 736.7 $ 282.3 $ (288.1) $ 468.7 $ (124.5)
Financial Summary
FIRST INTERSTATE BANCORP
(dollars in millions;interest and average rates on a taxable-equivalent basis)
1994 1993
Average Average Average Average
Balance Interest Rate Balance Interest Rate
Earning Assets
Loans(1):
Commercial, financial and agricultural $ 8,287 $ 562.5 6.79% $ 7,618 $ 476.0 6.25%
Real estate construction 806 76.0 9.42 913 62.4 6.83
Real estate mortgage 7,586 578.5 7.63 5,413 442.9 8.18
Instalment 11,660 1,079.0 9.25 9,943 1,003.3 10.09
Foreign 83 4.6 5.59 160 7.2 4.48
Lease financing 222 15.9 7.17 81 6.8 8.42
Total Loans 28,644 2,316.5 8.09 24,128 1,998.6 8.26
Trading account securities 113 5.1 4.55 166 9.2 5.57
Investment securities:
Held-to-maturity securities
U.S. Treasury and agencies 14,000 747.3 5.34 14,113 789.6 5.59
Other 1,624 92.1 5.67 996 55.1 5.54
Total held-to-maturity securities 15,624 839.4 5.37 15,109 844.7 5.59
Available-for-sale securities 324 13.3 4.11 458 17.9 3.90
Total Investment Securities 15,948 852.7 5.35 15,567 862.6 5.54
Federal funds, repurchases 471 19.0 3.98 1,282 39.7 3.10
Time deposits, due from banks 380 13.9 3.61 1,342 46.0 3.42
Other assets held for sale 82 6.2 7.51 29 2.7 10.00
Total Earning Assets 45,638 3,213.4 7.04 42,514 2,958.8 6.96
Interest Bearing Liabilities
Regular savings 5,823 120.9 2.08 5,288 119.1 2.25
NOW accounts and demand_market interest 6,644 82.7 1.25 6,115 92.7 1.52
Savings_market interest 11,427 269.0 2.35 10,491 252.0 2.40
Other savings and time under $100,000 5,787 213.3 3.69 5,799 221.1 3.81
Total Interest Bearing Consumer Funds 29,681 685.9 2.31 27,693 684.9 2.48
Large CDs, other money market funds 1,076 39.1 3.63 989 35.0 3.54
Short term borrowings 655 34.2 5.16 431 16.0 3.72
Long term debt 1,395 106.3 7.63 1,893 136.2 7.19
Total Corporate Purchased Funds 3,126 179.6 5.74 3,313 187.2 5.57
Total Interest Bearing Liabilities 32,807 865.5 2.64 31,006 872.1 2.81
Net Interest Income and Gross Spread $2,347.9 4.40 $2,086.7 4.15
Noninterest Liabilities, Equity and Assets
Demand and noninterest bearing time deposits 15,556 13,858
Other liabilities 1,017 977
Preferred equity capital 350 508
Common equity capital 3,249 2,970
Total Noninterest Liabilities and Equity 20,172 18,313
Cash and due from banks 5,233 4,992
Allowance for credit losses (980) (1,043)
Bank premises and equipment 1,065 914
Other assets 2,023 1,942
Total Noninterest Assets 7,341 6,805
Net Noninterest Sources 12,831 0.74 11,508 0.76
Total Assets $52,979 $49,319
Percent of Earning Assets
Net interest margin 5.14 4.91
Provision for credit losses _ 0.26
Net interest margin after provision for credit losses 5.14 4.65
Noninterest income 2.31 2.24
Noninterest expenses 4.81 4.78
Earnings (loss) before income taxes, extraordinary
item and cumulative effect of accounting changes 2.64 2.11
Income taxes 1.03 0.79
Extraordinary item _ (0.06)
Cumulative effect of accounting changes _ 0.47
Net Income (Loss) 1.61 1.73
(1)Net of unearned income and deferred fees. Includes loan fees of $134.7 $45.3
Taxable-equivalent adjustment 21.4 14.6
Loans
1992 1991 1990 1989
Average Average Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate Balance Interest Rate
$ 8,111 $ 560.3 6.91% $10,459 $ 879.7 8.41% $13,532 $1,349.5 9.97% $14,809 $1,593.7 10.76%
1,746 109.1 6.25 2,677 240.0 8.97 3,583 376.0 10.49 4,243 451.1 10.63
5,472 484.2 8.85 5,646 564.4 10.00 5,461 576.6 10.56 5,783 665.8 11.51
9,756 1,049.6 10.76 10,137 1,226.1 12.09 10,953 1,355.1 12.37 10,454 1,346.8 12.88
406 28.4 5.85 1,161 111.5 9.61 1,440 159.5 11.07 1,562 176.5 11.30
203 21.5 10.57 611 68.0 11.13 739 82.3 11.14 1,056 119.3 11.30
25,694 2,253.1 8.77 30,691 3,089.7 10.07 35,708 3,899.0 10.92 37,907 4,353.2 11.48
385 23.1 6.00 567 43.4 6.87 737 60.8 8.24 825 65.0 7.87
9,745 648.9 6.69 5,266 441.6 8.39 4,681 421.6 9.01 4,407 387.0 8.78
1,465 96.4 6.32 1,547 120.6 7.79 2,438 221.1 9.07 3,820 363.8 9.52
11,210 745.3 6.65 6,813 562.2 8.25 7,119 642.7 9.03 8,227 750.8 9.13
83 3.8 4.61 248 22.7 8.38 210 17.2 8.21 _ _ _
11,293 749.1 6.63 7,061 584.9 8.28 7,329 659.9 9.00 8,227 750.8 9.13
1,706 65.5 3.84 1,422 80.2 5.73 884 54.8 7.28 1,349 119.6 8.87
2,228 92.9 4.17 1,757 109.2 6.22 775 58.4 7.54 1,771 171.3 9.67
288 23.7 8.28 519 54.0 10.38 1,130 140.1 12.40 _ _ _
41,594 3,207.4 7.71 42,017 3,961.4 9.43 46,563 4,873.0 10.47 50,079 5,459.9 10.90
5,129 143.7 2.80 4,874 230.4 4.73 4,870 160.0 5.12 4,906 246.3 5.02
5,893 122.8 2.08 5,386 209.5 3.89 5,135 312.1 6.08 4,901 217.5 4.44
9,837 311.7 3.17 9,092 456.6 5.02 8,553 517.9 6.06 7,891 490.7 6.22
6,624 313.5 4.73 8,200 520.8 6.35 9,807 745.2 7.60 9,271 717.4 7.74
27,483 891.7 3.24 27,552 1,417.3 5.14 28,365 1,735.2 6.12 26,969 1,671.9 6.20
1,170 41.0 3.50 1,782 108.7 6.15 3,742 282.5 7.55 5,063 439.9 8.69
388 14.5 3.61 941 44.3 5.73 2,340 169.6 7.25 5,743 502.9 8.76
3,096 227.9 7.36 3,122 273.3 8.76 3,566 330.3 9.26 3,583 339.0 9.46
4,654 283.4 6.09 5,845 426.3 7.29 9,648 782.4 8.11 14,389 1,281.8 8.91
32,137 1,175.1 3.66 33,397 1,843.6 5.52 38,013 2,517.6 6.62 41,358 2,953.7 7.14
$2,032.3 4.05 $2,117.8 3.91 $2,355.4 3.85 $2,506.2 3.76
12,543 11,717 11,875 11,762
1,394 1,246 1,709 1,835
640 420 409 473
2,317 2,346 2,199 2,092
16,894 15,729 16,192 16,162
4,937 4,357 4,518 4,586
(1,261) (1,132) (1,256) (1,170)
960 1,027 1,059 969
2,801 2,857 3,321 3,056
7, 437 7,109 7,642 7,441
9,457 0.84 8,620 1.13 8,550 1.21 8,721 1.24
$49,031 $49,126 $54,205 $57,520
4.89 5.04 5.06 5.00
0.76 1.93 1.07 2.40
4.13 3.11 3.99 2.60
2.19 2.82 2.58 2.31
5.31 6.50 5.50 5.08
1.01 (0.57) 1.07 (0.17)
0.33 0.12 0.12 0.13
_ _ _ _
_ _ 0.06 0.05
0.68 (0.69) 1.01 (0.25)
$46.2 $75.6 $108.5 $141.2
17.7 26.1 52.2 83.8