-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, H6lWwGABYbGBo3cjEjLhkLxl6pM+3i4IwHYYeBNa3fVQ/58owTqLL/mzAjo8ydIz HUmUFjWplMn+3TJLCRVaUQ== 0000898430-95-000324.txt : 19950615 0000898430-95-000324.hdr.sgml : 19950615 ACCESSION NUMBER: 0000898430-95-000324 CONFORMED SUBMISSION TYPE: 424B5 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19950317 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST INTERSTATE BANCORP /DE/ CENTRAL INDEX KEY: 0000105982 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 951418530 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B5 SEC ACT: 1933 Act SEC FILE NUMBER: 033-61688 FILM NUMBER: 95521565 BUSINESS ADDRESS: STREET 1: 633 W FIFTH ST-T8-19 STREET 2: PO BOX 54068 CITY: LOS ANGELES STATE: CA ZIP: 90071 BUSINESS PHONE: 2136143001 FORMER COMPANY: FORMER CONFORMED NAME: WESTERN BANCORPORATION DATE OF NAME CHANGE: 19911124 424B5 1 PROSPECTUS SUPPLEMENT FILED PURSUANT TO RULE 424(b)(5) REGISTRATION NO. 33-61688 PROSPECTUS SUPPLEMENT (To Prospectus dated March 15, 1995) $100,000,000 [LOGO OF FIRST INTERSTATE BANCORP] 8.15% SUBORDINATED NOTES DUE MARCH 15, 2002 ---------------- Interest on the First Interstate Bancorp (the "Corporation") 8.15% Subordi- nated Notes due March 15, 2002 ("Notes") is payable semi-annually on March 15 and September 15 of each year, commencing September 15, 1995. The Notes are redeemable at the option of the Corporation, upon not less than 30 days' prior written notice, in whole on any Interest Payment Date on or after March 15, 1998, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus interest accrued and unpaid to the redemption date. See "Certain Terms of the Notes." The Notes are subordinate to all present and fu- ture Senior Debt (as defined in the accompanying Prospectus) of the Corpora- tion. The Notes are issuable only in fully registered form in denominations of $1,000 and integral multiples thereof and represented by one Permanent Global Note (as defined herein) registered in the name of a nominee of The Depository Trust Company, as the depositary (a "Book-Entry Note"). Beneficial interests in Book-Entry Notes will be shown on, and transfers thereof will be effected only through, records maintained by the depositary's participants. Except as provided herein, owners of beneficial interests in the Permanent Global Note will not be entitled to receive Notes in definitive form and will not be con- sidered owners or Holders thereof. So long as the Notes are represented by the Permanent Global Note registered in the name of The Depository Trust Company or its nominee, the Notes will trade in The Depository Trust Company's Same- Day Funds Settlement System, and secondary market trading activity for the Notes will therefore settle in immediately available funds. See "Certain Terms of the Notes." THE NOTES ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR NONBANK SUBSIDIARY OF THE CORPORATION, AND ARE NOT INSURED BY THE FED- ERAL DEPOSIT INSURANCE CORPORATION, BANK INSURANCE FUND OR ANY OTHER GOVERN- MENT AGENCY. ---------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
Price to Underwriting Proceeds to Public(1) Discounts(2) Corporation(1)(3) - -------------------------------------------------------------------------------- Per Note......................... 100% .575% 99.425% - -------------------------------------------------------------------------------- Total............................ $100,000,000 $575,000 $99,425,000
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (1) Plus accrued interest, if any, from March 22, 1995. (2) The Corporation has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. (3 ) Before deducting estimated expenses of $100,000 payable by the Corporation. ---------------- The Notes are offered, subject to prior sale, when, as and if accepted by the Underwriters and subject to certain conditions, including delivery of opinions of counsel. It is expected that delivery of the Notes will be made on or about March 22, 1995 through the facilities of The Depository Trust Company, against payment therefor in immediately available funds. ---------------- LEHMAN BROTHERS SALOMON BROTHERS INC SMITH BARNEY INC. March 15, 1995 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. FOR NORTH CAROLINA RESIDENTS: THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA HAS NOT APPROVED OR DISAPPROVED THIS OFFERING NOR HAS THE COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. CERTAIN TERMS OF THE NOTES The following is a brief description of the Notes and does not purport to be complete. This description should be read in conjunction with the statements under "Description of Debt Securities" in the accompanying Prospectus and is subject to and qualified in its entirety by reference to the Subordinated Indenture, dated as of November 1, 1994 (the "Indenture"), between the Corporation and The First National Bank of Chicago, as Trustee. The 8.15% Subordinated Notes due March 15, 2002 offered hereby (the "Notes") will be limited to $100,000,000 aggregate principal amount and will mature on March 15, 2002. The Notes will bear interest from March 22, 1995 at the rate of 8.15% per annum, payable semiannually on March 15 and September 15 in each year to the person in whose name the Note (or any predecessor Note) is registered at the close of business on the March 1 or September 1, as the case may be, next preceding such interest payment date. The Notes, which are a series of Subordinated Debt Securities, will be direct, unsecured, subordinated obligations of the Corporation and are to be issued under the Indenture. Payment of the principal of the Notes may be accelerated only in the case of certain events involving the bankruptcy, insolvency or reorganization of the Corporation. See "Description of Debt Securities--Particular Terms of the Subordinated Debt Securities." The Notes are redeemable at the option of the Corporation, upon not less than 30 days' prior written notice, in whole on any Interest Payment Date on or after March 15, 1998, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus interest accrued and unpaid to the redemption date. All of the Notes will be issued in the form of one permanent Global Note (the "Permanent Global Note") that will be deposited with, or on behalf of, the Depositary. The Depository Trust Company ("DTC") will be the initial Depositary with respect to the Notes. DTC has advised the Corporation that it is a limited-purpose trust company organized under the laws of the State of New York, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of section 17A of the Securities Exchange Act of 1934 (the "Exchange Act"). DTC was created to hold securities of its participating organizations ("participants") and to facilitate the clearance and settlement of securities transactions among its participants in such securities through electronic computerized book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities certificates. DTC's direct participants include securities brokers and dealers (including the Underwriters), banks, trust companies, clearing corporations and certain other organizations, some of whom (and/or their representatives) own DTC. Access to DTC's book-entry system is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a direct participant, either directly or indirectly ("indirect participants"). Persons who are not participants may beneficially own securities held by DTC only through participants or indirect participants. Upon the issuance of the Permanent Global Note, the Depositary will credit, on its book-entry registration and transfer system, the respective principal amounts of the Notes represented by such Permanent S-2 Global Note to the accounts of participants. The accounts to be credited shall be designated by the Underwriters through which the Notes were offered and sold. Ownership of beneficial interests in such Permanent Global Note will be limited to participants or indirect participants. Ownership of beneficial interests in such Permanent Global Note will be shown on, and the transfer of that ownership will be effected only through, records maintained by the Depositary for such Permanent Global Note (with respect to interests of participants) or by participants or indirect participants (with respect to interests of persons other than participants). The laws of some states require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and such laws may impair the ability to transfer beneficial interests in a Permanent Global Note. So long as the Depositary for the Permanent Global Note, or its nominee, is the registered owner of such Permanent Global Note, such Depositary or such nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by such Permanent Global Note for all purposes. Except as set forth below, owners of beneficial interests in the Permanent Global Note will not be entitled to have the Notes represented by such Permanent Global Note registered in their names, will not receive or be entitled to receive physical delivery of Notes in definitive form and will not be considered the owners or holders thereof under the Indenture. Accordingly, each person owning a beneficial interest in the Permanent Global Note must rely on procedures of the Depositary and, if such person is not a participant, on the procedures of the indirect participant through which such person owns its interest, to exercise any rights of a Holder under the Indenture. The Indenture provides that the Depositary may grant proxies and otherwise authorize participants to take any action which a Holder is entitled to take under the Indenture. DTC has informed the Corporation that under existing DTC policies and industry practices, if the Corporation requests any action of Holders, or if any owner of a beneficial interest in the Permanent Global Note desires to give any notice or take any action that a Holder is entitled to give or take under the Indenture or the Permanent Global Note, DTC would authorize and cooperate with each participant to whose account any portion of the Notes represented by the Permanent Global Note is credited on DTC's books and records to give such notice or take such action. Any person owning a beneficial interest in such Permanent Global Note that is not a participant must rely on any contractual arrangements it has directly, or indirectly through its immediate financial intermediary, with a participant to give such notice or take such action. Payment of principal and interest on the Notes will be made to the Depositary or its nominee, as the case may be, as the registered owner or the holder of the Permanent Global Note representing the Notes. None of the Corporation, the Trustee, any Paying Agent or the Security Registrar for such Notes will have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the Permanent Global Note for the Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. The Corporation expects that the Depositary for the Notes, upon receipt of any payment of principal, premium or interests in respect of the Permanent Global Note, will credit immediately participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Permanent Global Note as shown on the records of the Depositary. The Corporation also expects that payments by participants to owners of beneficial interests in the Permanent Global Note held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in "street name", and will be the responsibility of such participants. The Permanent Global Note may not be transferred except as a whole by the Depositary to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another nominee of such Depositary. The Permanent Global Note is exchangeable for the Notes registered in the names of persons other than the Depositary with respect to such Permanent Global Note or its nominee only if (x) the Depositary notifies the Corporation that it is unwilling or unable to continue as Depositary for the Permanent Global Note or if at any time the Depositary ceases to be a clearing agency registered under the Exchange Act, (y) the Corporation executes and delivers to the Trustee a Company Order that the Permanent Global Note shall be exchangeable or (z) there shall have occurred and be continuing an Event of Default or an S-3 event which, with the giving of notice or lapse of time or both, would constitute an Event of Default with respect to the Notes. If the Permanent Global Note is exchangeable pursuant to the preceding sentence, it will be exchangeable for Notes registered in such names as the Depositary with respect to the Permanent Global Note shall direct. Settlement for, and payments of principal of and interest on, the Notes will be made in immediately available funds. The Notes will trade in the Depositary's Same-Day Funds Settlement System until Maturity, and therefore the Depositary will require secondary trading activity in the Notes to be settled in immediately available funds. RECENT DEVELOPMENTS On January 16, 1995, the Corporation announced its results for the fourth quarter and full year of 1994. The following is a summary of such results. COMPARISON OF ANNUAL RESULTS The Corporation recorded net income for 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, after tax earnings were $821.1 million, or $9.80 per share. This compares to earnings before the cumulative effect of accounting changes and an extraordinary item for 1993 of $561.4 million, or $6.68 per share, and net income of $736.7 million, or $8.96 per share. In 1993, the cumulative effect of two accounting changes that were adopted during the first quarter resulted in a net after tax addition of $200.1 million, or $2.60 per share for the year. The Corporation also recorded an extraordinary item in 1993 reflecting after tax charges associated with long- term debt repurchases and redemptions of $985 million during 1993. As a result, net income in 1993 was reduced by $24.8 million ($0.32 per share). Taxable-equivalent net interest income was $2,347.9 million in 1994, up 12.5% from a year earlier. Approximately 60% of the increase from 1993 resulted from earning asset growth of $3.1 billion (7.3%), with the remainder attributable to the 23 basis point increase in the net interest margin to 5.14%. The Corporation is, and has been historically, asset sensitive. During periods such as 1994 in which short term interest rates rise, as driven by monetary policy, the net interest margin has generally increased. Average loans increased $4.5 billion (18.7%) from 1993 to $28.6 billion in 1994. Instalment loans averaged $11.7 billion in 1994, up $1.7 billion (17.3%) from the year earlier, reflecting the improved economy and the success of marketing programs, as well as the impact of completed acquisitions. Real estate mortgage loans averaged $7.6 billion in 1994, an increase of $2.2 billion (40.1%) from the 1993 level, reflecting in part acquisition activity. Average commercial loans of $8.3 billion were up $669 million (8.8%) from 1993. Average construction loans were down $107 million (11.7%) to $806 million, with most of the reduction attributable to reduced outstandings in California. At year-end 1994, including the effect of acquisitions, loans and leases totaled $33.2 billion, up $7.2 billion (27.8%) from a year earlier and up $2.9 billion (9.5%) from September 30, 1994. Instalment loans totaled $12.3 billion at year-end 1994. This represents an increase of $1.5 billion (14.0%) from a year earlier and an increase of $111 million (1.0%) from September 30, 1994. At the same time, commercial loans were $9.3 billion, an increase of $1.3 billion (16.2%) from a year earlier and up $281 million (3.1%) from September 30, 1994. Residential real estate mortgages totaled $5.8 billion, $2.9 billion (99.4%) above a year ago and $1.6 billion (37.4%) above the September 30 level. Commercial real estate mortgages amounted to $4.4 billion at December 31, 1994, $1.1 billion (30.1%) above a year ago and $631 million (16.8%) above September 30, 1994. Construction loans were $933 million at year-end 1994, versus $725 million a year earlier and $814 million at September 30, 1994. S-4 As a result of maturities and paydowns, investment securities held to maturity declined $2.7 billion (16.3%) from a year earlier and declined $930 million from September 30 to $13.7 billion at December 31, 1994. These proceeds supported the growth in loans. The investment securities portfolio is expected to continue to decline moderately as loan growth is expected to exceed deposit growth. U.S. Treasury and agency-backed securities declined 18.7% from the end of 1993 to $12.1 billion at year-end 1994. Of the current amount, $5.2 billion were U.S. Treasury securities and $6.9 billion were government agency securities. Of the $6.9 billion of government agency securities at year-end 1994, the majority was backed by mortgages. All other investment securities amounted to $1.6 billion at the end of 1994, up $111 million (7.5%) from a year earlier and down slightly from September 30, 1994. The adoption of SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities," in January 1994 did not have a material impact on the Corporation. Consumer savings, time and net transaction accounts increased $3.4 billion (9.4%) from 1993 to an average of $40.0 billion in 1994. At the same time, the Corporation's corporate purchased funds, which include CDs over $100,000, were reduced by $187 million (5.6%) to an average of $3.1 billion. The decline in corporate purchased funds reflects the impact of pricing on some of the Corporation's liability products, external market alternatives and the repurchase and redemption of long term debt in 1993. No provision for credit losses for the Corporation was recorded for 1994. In 1993, the provision for credit losses was $112.6 million. Loans charged off, net of recoveries, were $133.0 million in 1994, down substantially from $218.1 million in 1993. Noninterest income totaled $1,054.3 million for 1994, an increase of $100.1 million (10.5%) from 1993. Service charges on deposit accounts increased $48.9 million (9.5%) from 1993 and trust fees rose $15.9 million (9.0%). Noninterest income also benefited from venture capital gains of $28.3 million in 1994, of which $17.0 million were reported as investment securities gains and $11.3 million were reported as other income. For 1994, total noninterest expenses amounted to $2,197.8 million including $141.3 million of restructuring charges and $2,056.5 million before the effect of these charges but including the effect of completed acquisitions. This compares to $2,032.4 million in 1993. Increases in expenses related to salaries and benefits, net occupancy, and communications were largely attributable to the 10 acquisitions completed in 1994. In addition, ORE reflected a net benefit of $12.4 million in 1994, versus net expenses of $33.6 million in 1993. 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% in 1994, compared to 65.7% in 1993. This exceeds the previously announced target of 62% for 1994. For 1994, the Corporation recorded income tax expense of $449.5 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 rate for 1993 was due to the recognition of $12.4 million in deferred tax benefits resulting from the enactment of an increase in the federal statutory rate from 34% to 35%. In addition, a $9.0 million benefit was recorded for previously unrecognized foreign tax credits in 1993. COMPARISON OF FOURTH QUARTER RESULTS The Corporation recorded net income for the fourth quarter of 1994 of $211.3 million ($2.65 per share). This includes the effect of $2.3 million of restructuring charges ($1.4 million after taxes, or $0.02 per share) noted above. Before the effect of these charges, income after taxes amounted to $212.7 million ($2.67 per share), an increase of 36.9% from income of $155.4 million ($1.90 per share) before extraordinary item reported in the 1993 fourth quarter. Taxable-equivalent net interest income was $621.7 million in the fourth quarter of 1994, an increase of 17.7% from a year earlier. This increase resulted from expansion of the net interest margin, up 45 basis points S-5 to 5.29%, as well as from average earning asset growth, up $3.4 billion (7.8%). The Corporation is, and has been historically, asset sensitive. During periods such as 1994 in which short term interest rates rise, as driven by monetary policy, the net interest margin has generally increased. Average loans and leases including acquisitions increased $7.0 billion (28.0%) from the 1993 fourth quarter to $31.8 billion in the 1994 fourth quarter. Real estate mortgage loans averaged $9.4 billion in the 1994 fourth quarter, an increase of $3.5 billion (61.1%) from the comparable 1993 quarterly level. This increase reflects, in part, acquisitions completed throughout 1994. Instalment loans averaged $12.1 billion in the fourth quarter of 1994, up $1.7 billion (16.8%) from a year earlier and up $163 million (1.4%) from the 1994 third quarter. Growth of instalment loans reflects the improved economy and the success of marketing programs, as well as the impact of completed acquisitions. Average commercial loans outstanding were up $1.4 billion (18.0%) from a year earlier and up $463 million (5.4%) from the 1994 third quarter to an average of $9.0 billion. Average construction loans increased $140 million (18.3%) from the 1993 fourth quarter to $906 million in the 1994 period. Average consumer savings, time and net transaction accounts increased $3.2 billion (8.5%) from the 1993 fourth quarter to an average of $40.9 billion in the 1994 fourth quarter. Such deposits increased 1.4% from $40.4 billion in the 1994 third quarter. The Corporation's corporate purchased funds, which include CDs over $100,000, increased $667 million (21.9%) from the 1993 fourth quarter and $824 million (28.5%) from the 1994 third quarter to an average of $3.7 billion. The increase from prior quarterly levels largely reflects the impact of acquisitions completed in the 1994 fourth quarter. Based on an assessment of the Corporation's current risk profile, no provision for credit losses for the Corporation was recorded in the fourth quarter of 1994. In the fourth quarter of 1993, the consolidated provision for credit losses was $19.0 million. Loans charged off, net of recoveries, were $38.2 million in the fourth quarter of 1994, compared to $58.2 million reported for the comparable 1993 quarter. The Corporation continued to experience an unusually strong level of recoveries on prior period chargeoffs. Noninterest income totaled $262.3 million in the fourth quarter of 1994, an increase of $23.6 million (9.9%) from the 1993 fourth quarter. Service charges on deposit accounts rose $17.9 million (14.3%) from the 1993 level and trust fees increased $4.1 million (9.1%). Noninterest income in the 1994 fourth quarter also included $13.6 million from the sale of venture capital investments, which were reported as investment securities gains. Other charges, commissions and fees declined $16.0 million (33.0%), reflecting primarily lower fees from the sale of investment products. Total noninterest expenses amounted to $538.2 million in the 1994 fourth quarter, including $2.3 million of restructuring charges, as previously noted. Noninterest expenses before the effect of these charges and including the effect of completed acquisitions were $535.9 million, an increase of $28.2 million (5.6%) from the comparable 1993 quarter. Most of the increase from the 1993 fourth quarter was attributable to higher salaries and benefits expenses, up $38.2 million (16.5%), reflecting acquisitions completed during 1994. The number of full-time equivalent staff was 27,394 in December 1994, versus 26,589 a year earlier and 26,763 in September 1994. The Corporation's efficiency ratio, which reflects noninterest expenses before restructuring and ORE charges as a percent of taxable-equivalent net interest income plus noninterest income, was 61.3% in the 1994 fourth quarter, 60.0% in the 1994 third quarter and 65.7% in the 1993 fourth quarter. In the fourth quarter of 1994, the Corporation recorded income tax expense of $129.4 million, resulting in an effective income tax rate of 38.0%. This compares to an effective rate of 34.2% in the comparable 1993 quarter. The lower effective rate for the 1993 fourth quarter was due to the recognition of $9.0 million of foreign tax credits. LIQUIDITY MANAGEMENT The Corporation continues to utilize the core deposits gathered through its extensive interstate retail banking network as a key source of low-cost funding. Core deposits, defined as demand deposits, interest S-6 bearing consumer deposits under $100,000 and noninterest bearing time deposits, together with equity were the primary sources for funding average earning assets during the fourth quarter of 1994. The Corporation's other sources of liquidity include maturing securities in addition to those which are available for repurchase activity. In addition, subsidiary banks may directly access funds placed by them through existing agency agreements and may also access the Federal Reserve for short term liquidity needs. Unlike 1993, the Corporation did not repurchase or redeem in the open market any material amount of its long-term debt in 1994. Total long-term debt issuance in 1994 was $125 million, all of which was completed during the fourth quarter. Under the appropriate circumstances, the Corporation could consider repurchasing any of its outstanding securities. At December 31, 1994, the Corporation (at the holding company level) had no external short term borrowings outstanding. Immediate liquidity available to the Corporation includes a $500 million senior revolving credit facility that was finalized in the 1994 second quarter, as well as cash and other short term financial instruments totaling $219 million at year-end 1994. This compares to $652 million at year-end 1993, which was solely in cash and other short term financial instruments. The decline in cash and other liquid balances from year- end 1993 resulted primarily from the Corporation's common stock repurchase programs. The Corporation (at the holding company level) has access to regional, national and international capital and money markets. On December 9, 1994, the Corporation announced the establishment of its $1 billion Global Medium-Term Note Program. The program will allow for senior and subordinated debt and capital securities issuances in a number of countries and currencies, with a broad spectrum of maturities. RISK ELEMENTS Nonperforming Assets--At December 31, 1994, nonperforming assets totaled $258 million, down $51 million (16.4%) from the year ago level of $309 million, and down $33 million (11.4%) from $291 million reported at September 30, 1994. The current level of nonperforming assets represents 0.46% of total assets, versus 0.60% and 0.54% of total assets a year earlier and at September 30, 1994, respectively. Approximately 72% of nonperforming assets are real estate related. Nonperforming loans totaled $186 million at year-end 1994, a decline of $41 million (18.1 %) from $227 million a year earlier and a decline of $24 million (11.5%) from $210 million at September 30, 1994. Interest lost on nonperforming loans amounted to $13.5 million in 1994, down significantly from $26.0 million reported a year earlier. ORE totaled $72 million at December 31, 1994, down from $82 million a year ago and $81 million at September 30, 1994. 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 December 31, 1994, versus $66 million a year earlier and $56 million at September 30, 1994. The current level of past due loans represents 0.09% of total assets. Allowance for Credit Losses--At year-end 1994, the allowance for credit losses totaled $934 million, or 2.81% of total loans. This compares to an allowance of $1,001 million, or 3.85% of loans, a year ago and $952 million, or 3.14% of loans, at September 30, 1994. Historical and projected allowances for credit losses reflect management's assessment of the credit risk inherent in the Corporation's loan portfolio. CAPITAL AND OTHER FINANCIAL STATISTICS At December 31, 1994, total shareholders' equity represented 6.16% of total assets, versus 6.90% a year earlier and 6.55% at September 30, 1994. On the same dates, common equity equaled 5.53%, 6.21%, and 5.90% of total assets, respectively. The recent decline in the Corporation's various capital ratios largely resulted from the common stock repurchase programs and completed acquisitions. S-7 The tangible common equity ratio was 4.57% at year-end 1994, compared to 5.79% a year earlier and 5.30% at September 30, 1994. The regulatory leverage ratio was 5.35% at year-end 1994, versus 6.60% a year ago and 6.08% at September 30, 1994. The Corporation's Tier 1 and Total Capital ratios at September 30, 1994, were 8.64% and 11.49%, respectively, and at December 31, 1994 were 7.20% and 10.22%, respectively. The decline in risk adjusted capital ratios was also affected by loan growth. During the fourth quarter of 1994, the Corporation issued $125 million in subordinated notes. Such notes qualify as Tier 2 capital securities and increased the Corporation's Total Capital ratio. On October 17, 1994, the Corporation's Board of Directors declared a quarterly cash dividend of $0.75 on the Corporation's $2 par value Common Stock, payable on November 30, 1994, to shareholders of record on November 7, 1994. On November 1, 1994, the Preferred Stock Committee of the Board of Directors declared dividends on the Corporation's outstanding preferred stock. During 1994, the Corporation recorded common stock dividends of $218.2 million and preferred stock dividends of $33.3 million. Total intangibles amounted to $561 million at year-end 1994, versus $233 million a year earlier. The higher current level reflects the completion of 10 acquisitions in 1994. As a result, goodwill increased to $514 million at the end of 1994 from $204 million at year-end 1993. The common shares used in the calculation of 1994 fourth quarter and full year results per share were 76,656,474 and 80,421,942 respectively. STOCK REPURCHASE PROGRAMS As previously announced, in the first half of 1994 the Board of Directors approved the repurchase of 8,000,000 shares of its common stock from time to time during the year, subject to market conditions and appropriate regulatory and acquisition accounting requirements. The repurchase program was completed in November 1994. Additionally, in connection with the acquisition of Levy Bancorp, the Board also approved on September 16, 1994, the buyback of up to an additional 1,200,000 shares of common stock. The Corporation has completed the repurchase of shares for the Levy acquisition. SUMMARY OF ACQUISITION ACTIVITY On November 1, 1994, the Corporation acquired Sacramento Savings Bank (SSB) from Alleghany Corporation for $331 million in cash, subject to certain adjustments. At the close of the transaction, which was accounted for as a purchase, SSB reported assets of $3.0 billion, loans of $2.2 billion and deposits of $2.6 billion. The merger makes First Interstate the second largest bank serving the counties of Sacramento, Yuba and Butte. On January 6, 1995, First Interstate Bank of Washington, N.A. completed its acquisition of University Savings Bank in Washington, a wholly owned subsidiary of Glendale Federal Bank, FSB, for $205 million in cash. The acquisition increases First Interstate's market share and enhances the bank's residential mortgage origination capability in the State of Washington. On February 1, 1995, the Corporation completed its acquisition of Levy Bancorp and its principal subsidiary, Bank of A. Levy, in a stock transaction valued at $92 million. This acquisition substantially increases First Interstate's market position from sixth to second among financial institutions in Ventura County. On December 16, 1994, First Interstate Bank of Texas, N.A. completed its purchase of Park Forest National Bank, which will enhance small business lending capabilities in the Dallas/Fort Worth Metroplex area. On January 9, 1995, FI Texas completed its purchase of North Texas Bancshares, Inc., and its principal subsidiary, Bank of North Texas, N.A. (BNT). As the area's top SBA lender and the sixth largest nationwide, BNT complements the growing small business network in North Texas and more than doubles First Interstate's market share in Tarrant County. S-8 UNDERWRITING Subject to the terms and conditions set forth in an Underwriting Agreement and a related Terms Agreement, the Corporation has agreed to sell to each of the Underwriters named below, and each of the Underwriters has severally agreed to purchase, the principal amount of Notes set forth opposite its name below:
PRINCIPAL AMOUNT OF UNDERWRITER NOTES ----------- ------------ Lehman Brothers Inc. ....................................... $ 34,000,000 Salomon Brothers Inc ....................................... 33,000,000 Smith Barney Inc. .......................................... 33,000,000 ------------ Total................................................... $100,000,000 ============
The Underwriting Agreement provides that the obligation of the Underwriters to pay for and accept delivery of the Notes is subject to the delivery of opinions of counsel and to certain other conditions. The Underwriters are obligated to take and pay for all the Notes if any are taken. The Underwriters initially propose to offer part of the Notes directly to the public at the public offering price set forth on the cover page hereof and part to certain dealers at a price that represents a concession not in excess of 0.375% of the principal amount of the Notes. The Underwriters may allow, and such dealers may reallow, a concession not in excess of 0.250% of the principal amount of the Notes to certain other dealers. After the initial public offering of the Notes, the offering price and other selling terms may be changed by the Underwriters. The Corporation has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. The Corporation does not intend to apply for listing of the Notes on a national securities exchange, but has been advised by the Underwriters that they presently intend to make a market in the Notes, as permitted by applicable laws and regulations. The Underwriters are not obligated, however, to make a market in the Notes and any such market making may be discontinued at any time at the sole discretion of the Underwriters. Accordingly, no assurance can be given as to the liquidity of, or trading markets for, the Notes. In the ordinary course of their respective businesses, each of the Underwriters have engaged and may engage in investment banking transactions with the Corporation. VALIDITY OF NOTES The validity of the Notes will be passed upon for the Corporation by Edward S. Garlock, Esq., Group General Counsel, Corporate Services Group, for the Corporation, Los Angeles, California and for the Underwriters by Sullivan & Cromwell, Los Angeles, California. Mr. Garlock will rely, as to all matters governed by New York law, on the opinion of Sullivan & Cromwell. From time to time, Sullivan & Cromwell has performed certain legal services for the Corporation. As of December 31, 1994, Mr. Garlock owned beneficially approximately 1,524 shares of the Corporation's Common Stock and owned options exercisable within 60 days for 11,175 shares of such stock. S-9 PROSPECTUS LOGO OF FIRST INTERSTATE BANK DEBT SECURITIES First Interstate Bancorp (the "Corporation") may offer from time to time in one or more series its debt securities ("Debt Securities") in amounts and on terms to be determined in light of market conditions at the time of sale. The Debt Securities may be unsecured Debt Securities (the "Senior Debt Securities") or unsecured and subordinated Debt Securities (the "Subordinated Debt Securities"). The Senior Debt Securities, if issued, will rank on a parity with all the unsecured and unsubordinated indebtedness of the Corporation, and the Subordinated Debt Securities, if issued, will be subordinated in right of payment to all obligations of the Corporation to all of its general creditors, except obligations ranking on a parity with or junior to the Subordinated Debt Securities. See "Description of Debt Securities--Particular Terms of the Subordinated Debt Securities--Subordination Terms." As used herein, Debt Securities shall include securities denominated in U.S. dollars or, at the option of the Corporation if so specified in the applicable Prospectus Supplement, in any other currency, including composite currencies such as the European Currency Unit ("ECU"). Debt Securities of a series may be issuable in registered definitive form ("Registered Notes") or in the form of one or more global securities (each a "Global Note"). Pursuant to the terms of the Registration Statement of which this Prospectus forms a part, the Corporation may also issue (i) warrants to purchase its Debt Securities, (ii) shares of its preferred stock, fractional interests in which may be represented by depositary shares, (iii) warrants to purchase its preferred stock or depositary shares, (iv) shares of its common stock, par value $2.00 per share, (v) warrants to purchase its common stock and (vi) warrants entitling the holder to receive the cash value of the right to purchase or to sell foreign currencies or composite currencies. The specific designation, aggregate principal amount, currency, denominations, maturity, premium, rate and time of payment of interest, terms for redemption at the option of the Corporation or repayment at the option of the holder, terms for sinking fund payments, terms for conversion or exchange into capital securities and description of such capital securities, and the initial public offering price, to the extent applicable to the Debt Securities in respect of which this Prospectus is being delivered ("Offered Debt Securities") are set forth in the accompanying Prospectus Supplement ("Prospectus Supplement"). The Prospectus Supplement also contains information, to the extent applicable, about certain United States Federal income tax considerations relating to, and listing on a securities exchange of, the Offered Debt Securities covered by the Prospectus Supplement. The Offered Debt Securities may be offered directly through dealers designated from time to time by the Corporation, or to or through underwriters or dealers. If any dealers or underwriters are involved in the sale of the Offered Debt Securities, their names, and any applicable fee, commission, purchase price or discount arrangements with them will be set forth, or will be calculable from information set forth, in the Prospectus Supplement. THE DEBT SECURITIES ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR NONBANK SUBSIDIARY OF THE CORPORATION, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, BANK INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE DATE OF THIS PROSPECTUS IS MARCH 15, 1995. NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT (INCLUDING ANY PRICING SUPPLEMENT) AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE CORPORATION OR ANY UNDERWRITER. THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT (INCLUDING ANY PRICING SUPPLEMENT) DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. THE DELIVERY OF THIS PROSPECTUS OR A PROSPECTUS SUPPLEMENT (INCLUDING ANY PRICING SUPPLEMENT) AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THEIR RESPECTIVE DATES. AVAILABLE INFORMATION First Interstate Bancorp (the "Corporation") is subject to the informational requirements of the United States Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Reports, proxy statements and other information filed by the Corporation can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20459; Citicorp Center, Suite 1400, 500 West Madison Street, Chicago, Illinois 60661; and Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of such material can be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Reports, proxy statements and other information concerning the Corporation can be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005, and at the offices of the Pacific Stock Exchange, 301 Pine Street, San Francisco, California 94104, where the Corporation's Common Stock is listed. This Prospectus does not contain all information set forth in the Registration Statement and Exhibits thereto which the Corporation has filed with the Commission under the United States Securities Act of 1933, as amended (the "Act"), and to which reference is hereby made. ---------------- INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed with the Commission by the Corporation (File No. 1-4114) are incorporated in this Prospectus by reference: (1) the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1993; (2) the Corporation's Current Reports on Form 8-K dated January 19, 1994, March 22, 1994, April 20, 1994, July 20, 1994, September 21, 1994, October 25, 1994 and February 17, 1995; and (3) the Corporation's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994, June 30, 1994 and September 30, 1994. All documents filed by the Corporation pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of the Debt Securities shall be deemed to be incorporated by reference in this Prospectus. Any statement contained in this Prospectus or in a document all or a portion of which is incorporated or deemed to be incorporated herein by reference shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated herein by reference modifies or supersedes such statement. Any statement so modified shall not be deemed to constitute a part hereof except as so modified, and any statement so superseded shall not be deemed to constitute a part hereof. Such incorporation by reference shall not be deemed to incorporate specifically by reference the information referred to in Item 402(a)(8) of Regulation S-K. 2 The Corporation will provide without charge to each person, including any beneficial owner, to whom a copy of this Prospectus is delivered, upon the written request of any such person, a copy of any and all of the foregoing documents incorporated by reference herein, other than certain exhibits to such documents. Requests should be directed to: David S. Belles, Executive Vice President and Controller of First Interstate Bancorp, First Interstate Bank of Arizona, N.A., Corporate Controller Group, Dept. 497, P.O. Box 29791, Phoenix, Arizona 85038-9791, telephone no. (602) 949-4974. This Prospectus may not be used to consummate sales of Offered Debt Securities unless accompanied by a Prospectus Supplement. The delivery of this Prospectus together with a Prospectus Supplement relating to particular Offered Debt Securities in any jurisdiction shall not constitute an offer in that jurisdiction of any of the other Debt Securities covered by this Prospectus. Unless otherwise indicated, currency amounts in this Prospectus and any Prospectus Supplement are stated in United States dollars ("$", "dollars", "U.S." or "US$"). FOR NORTH CAROLINA RESIDENTS: THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA HAS NOT APPROVED OR DISAPPROVED THIS OFFERING NOR HAS THE COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. FIRST INTERSTATE BANCORP The Corporation is a bank holding company which owned at December 31, 1994 directly or indirectly through wholly owned subsidiaries, all of the shares of capital stock of 16 banks (the "Subsidiary Banks"). At December 31, 1994, the Subsidiary Banks operated approximately 1,100 banking offices in 13 states. The Corporation is incorporated under the laws of the State of Delaware. At December 31, 1994, the Corporation was the 14th largest banking organization in the United States based on total assets. At that date, the Corporation had total assets of $55.8 billion, total deposits of $48.4 billion and stockholders' equity of $3.4 billion. The Subsidiary Banks accept checking, savings and time-deposit accounts and employ these funds by making principally consumer, real estate and commercial loans and investing in securities and other interest-bearing assets. All are members of the Federal Deposit Insurance Corporation (the "FDIC"), all but three exercise trust powers, and the thirteen nationally chartered banks and one of the three state chartered banks are members of the Federal Reserve System. The larger Subsidiary Banks provide international banking services through the international departments of their domestic offices and through a business development agreement with Standard Chartered PLC. They also maintain correspondent relationships with major banks throughout the world. The Corporation also provides banking-related financial services and products. These include asset-based commercial financing, asset management and investment counseling, bank card operations, mortgage banking, venture capital and investment products. It engages in these activities through non-bank subsidiaries of the Corporation, through Subsidiary Banks and through subsidiaries of the Subsidiary Banks. The Corporation and its Subsidiary Banks on a continuous basis identify and evaluate possible acquisitions of banks and savings and loan associations within the geographic territory served by the Corporation. 3 The following table summarizes the total assets of the Corporation by principal Subsidiary Banks and other subsidiaries as of September 30, 1994 (in millions): First Interstate: Bank of California................................................ $23,015 Bank of Arizona, N.A. ............................................ 7,736 Bank of Oregon, N.A. ............................................. 6,120 Bank of Texas, N.A. .............................................. 5,741 Bank of Washington, N.A. ......................................... 4,537 Bank of Nevada, N.A. ............................................. 3,818 Other Banks......................................................... 4,142 Parent corporation, non-bank subsidiaries and eliminations.......... (902) ------- TOTAL............................................................. $54,207 =======
The Corporation is a legal entity separate and distinct from the Subsidiary Banks. The principal source of the Corporation's revenues is dividends received from the Subsidiary Banks. Various statutory provisions limit the amount of dividends the Subsidiary Banks and certain nonbank subsidiaries can pay without regulatory approval, and various regulations can also restrict the payment of dividends. In addition, federal statutes limit the ability of the Subsidiary Banks to make loans to the Corporation. The Corporation's executive office is located at 633 West Fifth Street, Los Angeles, California 90071 (telephone number 213-614-3001). Unless the context indicates otherwise, references herein to the Corporation are to First Interstate Bancorp and its subsidiaries, including the Subsidiary Banks. USE OF PROCEEDS The Corporation intends to use the net proceeds from the sale of the Debt Securities for general corporate purposes, principally to fund investments in, or extensions of credit to, the Subsidiary Banks, banking-related and nonbanking-related subsidiaries or to repay borrowings incurred for such purposes. Except as otherwise described in the Prospectus Supplement, specific allocations of the proceeds for such purposes will not have been made at the date of the Prospectus Supplement, although the management of the Corporation will have determined that funds should be borrowed at that time in anticipation of future funding requirements of such subsidiaries or repayments of such borrowings. The precise amount and timing of investments in, and extensions of credit to, the subsidiaries or repayment of borrowings will depend upon the subsidiaries' funding requirements and the availability of other funds. 4 SELECTED CONSOLIDATED FINANCIAL DATA The following is qualified in its entirety by the detailed information and financial statements available as described under "Incorporation of Certain Documents by Reference." Effective March 31, 1989, the Corporation adopted the mark-to-market method of accounting for interest rate swaps, which resulted in income of $27.4 million which is reflected as a cumulative effect of an accounting change in the Consolidated Statement of Operations for the year ended December 31, 1989. On January 1, 1990, the Corporation adopted Statement of Financial Accounting Standards ("SFAS") No. 96, "Accounting for Income Taxes," which resulted in $30.1 million of income which is reflected as a cumulative effect of an accounting change in the Consolidated Statement of Operations for the year ended December 31, 1990. On January 1, 1993, the Corporation adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," which resulted in $104.9 million of expense, and SFAS No. 109, "Accounting for Income Taxes," which resulted in $305.0 million of income, which together are reflected as the cumulative effect of accounting changes in the Consolidated Statement of Operations for the nine months ended September 30, 1993 and the year ended December 31, 1993. The Corporation also recorded in 1993 an extraordinary item reflecting the repurchase and redemption of $985 million of long term debt; as a result, 1993 net income was reduced by $24.8 million. On January 1, 1994, the Corporation adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits," and SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities." Implementation of these SFAS pronouncements did not have a material impact on the Corporation's results. The dollar figures are in millions except per share amounts.
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31, ------------------ ------------------------------------------------ 1994 1993 1993 1992 1991 1990 1989 -------- -------- -------- -------- -------- -------- -------- CONSOLIDATED STATEMENTS OF OPERATIONS: Interest income........ $2,329.8 $2,213.6 $2,944.2 $3,189.7 $3,935.3 $4,820.8 $5,376.1 Interest expense....... 619.8 665.5 872.1 1,175.1 1,843.6 2,517.6 2,953.7 -------- -------- -------- -------- -------- -------- -------- Net interest income.... 1,710.0 1,548.1 2,072.1 2,014.6 2,091.7 2,303.2 2,422.4 Provision for credit losses................ -- 93.6 112.6 314.3 810.2 499.4 1,204.1 -------- -------- -------- -------- -------- -------- -------- Net interest income after provision for credit losses......... 1,710.0 1,454.5 1,959.5 1,700.3 1,281.5 1,803.8 1,218.3 Investment securities gains (losses)........ 7.0 5.1 9.7 (1.8) 42.8 10.6 4.4 Other noninterest income................ 785.0 710.4 944.5 913.9 1,141.6 1,192.9 1,154.1 Noninterest expense.... 1,659.6 1,524.7 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.... 842.4 645.3 881.3 403.2 (266.3) 445.0 (168.7) Applicable income taxes (benefit)............. 320.1 239.3 319.9 120.9 21.8 6.4 (16.8) -------- -------- -------- -------- -------- -------- -------- Income (loss) before extraordinary item and cumulative effect of accounting changes.... 522.3 406.0 561.4 282.3 (288.1) 438.6 (151.9) Extraordinary item..... -- (15.4) (24.8) -- -- -- -- Cumulative effect of accounting changes.... -- 200.1 200.1 -- -- 30.1 27.4 -------- -------- -------- -------- -------- -------- -------- Net income (loss)...... $ 522.3 $ 590.7 $ 736.7 $ 282.3 $ (288.1) $ 468.7 $ (124.5) ======== ======== ======== ======== ======== ======== ======== INCOME (LOSS) AND DIVIDENDS PER COMMON SHARE(1): Primary and fully diluted earnings (loss) per share: Income (loss) before extraordinary item and cumulative effect of accounting changes.... $ 6.09 $ 4.78 $ 6.68 $ 3.23 $ (5.24) $ 6.79 $ (3.89) Net income (loss)...... 6.09 7.20 8.96 3.23 (5.24) 7.30 (3.30) Cash dividends paid.... 2.00 1.10 1.60 1.20 1.80 3.00 2.98 CONSOLIDATED BALANCE SHEET DATA(2): Total assets........... $ 54,207 $ 50,090 $ 51,461 $ 50,863 $ 48,922 $ 51,356 $ 59,051 Loans, net............. 30,331 24,748 25,988 24,201 28,182 33,007 38,205 Allowance for credit losses................ 952 1,010 1,001 1,068 1,273 1,011 1,437 Deposits............... 48,055 43,365 44,701 43,675 41,433 43,141 46,468 Long term debt......... 1,261 1,700 1,533 2,702 3,108 3,178 3,719 Total shareholders' equity................ 3,550 3,630 3,548 3,251 2,639 2,868 2,339 RATIO ANALYSIS: Return on average total shareholders' equity(3)............. 19.09% 22.68% 21.18% 9.52% N/M 17.98% N/M Return on average total assets(3)............. 1.33 1.61 1.49 0.57 N/M 0.86 N/M Average total shareholders' equity as a percent of average total assets.. 6.97 7.11 7.05 6.03 5.63% 4.81 4.46% Dividends paid per common share as a percent of net income per common share...... 32.84 15.28 17.86 37.15 N/M 41.10 N/M Ratio of earnings to fixed charges: Parent corporation on- ly(4)................. 6.82x 3.28x 3.35x (5) (5) 2.05x 1.35x Consolidated(6): Excluding interest on deposits............. 7.12 5.22 5.39 2.39x (7) 1.79 (7) Including interest on deposits............. 2.28 1.92 1.96 1.33 (7) 1.17 (7)
5 - -------- (1) Earnings (loss) per common share are computed based on the weighted average number of common shares outstanding during each year and the dilutive effect of stock options outstanding and after deducting dividends paid on preferred stock. Fully diluted earnings per common share are considered equal to primary earnings per common share in each year because the addition of potentially dilutive securities which are not common stock equivalents would have resulted in dilution of less than 3% or would have been antidilutive. (2) At end of period indicated. (3) Calculated using net income. The ratios were considered not meaningful ("N/M") if a loss was experienced in the period. Ratios for 1993 were significantly affected by an extraordinary item and the cumulative effect of accounting changes. Return on average total shareholders' equity and return on average total assets for the period ended September 30, 1993, without these adjustments would have been 15.59 and 1.11, respectively, while the ratios for the period ended December 31, 1993, would have been 16.14 and 1.14, respectively. (4) For purposes of computing this ratio, earnings represent income (loss) before extraordinary item and cumulative effect of accounting changes of the parent corporation only, plus fixed charges less income tax credit. Fixed charges represent all interest expense and one-third (the proportion deemed representative of the interest factor) of rents. (5) For the years ended December 31, 1992 and 1991, fixed charges exceeded earnings by $191 million and $61 million, respectively. (6) For purposes of computing these ratios, earnings represent income (loss) before extraordinary item and cumulative effect of accounting changes plus applicable income taxes and fixed charges. Fixed charges, excluding interest on deposits, include other interest expense and one-third (the proportion deemed representative of the interest factor) of rents. Fixed charges, including interest on deposits, include all interest expense and one-third (the proportion deemed representative of the interest factor) of rents. (7) For the years ended December 31, 1991 and 1989, fixed charges exceeded earnings by $266 million and $169 million, respectively. 6 DESCRIPTION OF DEBT SECURITIES The following description of the terms of the Debt Securities sets forth certain general terms and provisions of the Debt Securities to which any Prospectus Supplement may relate. The particular terms of the Debt Securities offered by any Prospectus Supplement and the extent, if any, to which such general provisions may apply to the Debt Securities so offered will be described in the Prospectus Supplement relating to such Debt Securities. The Senior Debt Securities are to be issued under an Indenture, dated as of July 1, 1982, as amended by the First Supplemental Indenture, dated as of February 5, 1986, and the Second Supplemental Indenture, dated as of May 15, 1989 (together, the "Senior Debt Securities Indenture"), between the Corporation and Bankers Trust Company, as Trustee (the "Senior Debt Securities Trustee"). The Subordinated Debt Securities will be issued under an Indenture, dated as of November 1, 1994, (the "Subordinated Debt Securities Indenture"), between the Corporation and The First National Bank of Chicago, as Trustee (the "Subordinated Debt Securities Trustee"). The Senior Debt Securities Indenture and the Subordinated Debt Securities Indenture are referred to herein individually as the "Indenture" and collectively as the "Indentures;" and the Senior Debt Securities Trustee and the Subordinated Debt Securities Trustee are referred to herein individually as the "Trustee" and collectively as the "Trustees." A copy of the Senior Debt Securities Indenture and the form of the Subordinated Debt Securities Indenture are filed as an exhibit to the Registration Statement. The following presents summaries of certain provisions of the Indentures. Where no distinction is made between the Senior Debt Securities and the Subordinated Debt Securities or between the Senior Debt Securities Indenture and the Subordinated Debt Securities Indenture, such summaries refer to any Debt Securities and either Indenture. Such summaries do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all of the provisions of the Indentures, including the definitions therein of certain terms. Wherever particular sections or defined terms of the Indentures are referred to, it is intended that such sections or defined terms shall be incorporated herein by reference. The following sets forth certain general terms and provisions of the Debt Securities. Further terms of the Offered Debt Securities are set forth in the Prospectus Supplement. Because the Corporation is a holding company, its rights and the rights of its creditors, including the Holders of the Debt Securities offered hereby, to participate in any distribution of the assets of any subsidiary upon the subsidiary's liquidation or recapitalization will be subject to the prior claims of the subsidiary's creditors except to the extent that the Corporation may itself be a creditor with recognized claims against the subsidiary. The principal source of the Corporation's revenues is dividends received from the Subsidiary Banks. Various statutory provisions limit the amount of dividends the Subsidiary Banks and certain nonbank subsidiaries can pay without regulatory approval, and various regulations can also restrict the payment of dividends. Certain proposed regulations could further limit the ability of the Subsidiary Banks to pay dividends to the Corporation, and federal statutes limit the ability of the Subsidiary Banks to make loans to the Corporation. GENERAL The Indentures do not limit the aggregate principal amount of Debt Securities which may be issued thereunder and provide that Debt Securities may be issued from time to time in series. The Senior Debt Securities will be unsecured obligations of the Corporation and will rank on a parity with all other unsecured and unsubordinated indebtedness of the Corporation. The Subordinated Debt Securities will be unsecured obligations of the Corporation and, as set forth below under "Particular Terms of the Subordinated Debt Securities-- Subordination Terms," will be subordinate in right of payment to all 7 obligations of the Corporation to its general creditors, except obligations ranking on a parity with or junior to the Subordinated Debt Securities. Reference is made to the Prospectus Supplement relating to the Offered Debt Securities, which describes additional terms of the Offered Debt Securities including, where applicable: (1) the title of the Offered Debt Securities; (2) any limit on the aggregate principal amount of the Offered Debt Securities; (3) the date or dates on which the Offered Debt Securities will mature; (4) the rate or rates per annum at which the Offered Debt Securities will bear interest, if any, or the formula or provision pursuant to which such rate or rates are determined and the date from which such interest, if any, will accrue; (5) the dates on which such interest, if any, on the Offered Debt Securities will be payable and the Regular Record Dates for such Interest Payment Dates; (6) any mandatory or optional sinking fund or analogous provisions; (7) the date, if any, after which and the price or prices at which the Offered Debt Securities may, pursuant to any optional or mandatory redemption provisions, be redeemed and the other detailed terms and provisions of any such optional or mandatory redemption provisions; (8) the currency or currencies of payment of principal of and premium, if any, and interest on the Offered Debt Securities; (9) whether the Offered Debt Securities are to be issued in whole or part in the form of a Global Note or Notes and, if so, the identity of the Depositary for such Global Note or Notes; (10) the terms and conditions, if any, upon which a Global Note or Notes may be exchanged in whole or in part for other definitive Offered Debt Securities; (11) any terms by which the Subordinated Debt Securities may be convertible into Common Stock of the Corporation, as described below under "Particular Terms of the Subordinated Debt Securities--Conversion Rights"; and (12) any other terms of the series of Offered Debt Securities. Debt Securities may be issued as Original Issue Discount Securities to be sold at a substantial discount below their principal amount. Special Federal income tax and other considerations applicable thereto will be described in the Prospectus Supplement relating thereto. FORM, EXCHANGE, REGISTRATION, TRANSFER AND PAYMENT Debt Securities of a series may be issuable in definitive form solely as registered Debt Securities, solely as bearer Debt Securities, or as both registered and bearer Debt Securities. Unless otherwise indicated in the Prospectus Supplement, bearer Debt Securities other than bearer Debt Securities issued as temporary or permanent Global Securities will have interest coupons attached. The Indenture also provides that bearer or registered Debt Securities of a series may be issuable as permanent Global Securities. Unless otherwise provided in the Prospectus Supplement, principal of, and premium and interest, if any, on the Offered Debt Securities issued in registered form will be payable, and the transfer of such Offered Debt Securities will be registrable, at the office of the Trustee, except that, at the option of the Corporation, interest may be paid by mailing a check to the address of the person entitled thereto as such address appears on the Security Register. (Sections 301, 305 and 1002) Acting in accordance with the Indentures, the Corporation has also designated the principal office of First Interstate Bank of California, Los Angeles, as an office where principal, premium and interest, if any, may be paid and the transfer of the Offered Debt Securities may be registered. (Sections 305 and 1002) Offered Debt Securities may be issuable in whole or in part in the form of one or more temporary or permanent Global Notes, as described below under "Temporary Global Notes" and "Permanent Global Notes." Unless otherwise indicated in the Prospectus Supplement, the Debt Securities will be issued only in fully registered form without coupons and in denominations of $1,000 or any integral multiple thereof. One or more Global Notes will be issued in a denomination or aggregate denominations equal to the aggregate principal amount of Outstanding Debt Securities of the series to be represented by such Global Note or Notes. The Prospectus Supplement relating to a series of Offered Debt Securities denominated in a foreign or composite currency will specify the denomination 8 thereof. No service charge will be made for registration of any transfer or exchange of the Debt Securities, but the Corporation may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. (Sections 302 and 305) PAYING AGENTS FOR BEARER DEBT SECURITIES Unless otherwise indicated in the Prospectus Supplement, payments of principal of and premium, if any, and interest, if any, on bearer Debt Securities will be payable, subject to any applicable laws and regulations, at such Paying Agencies outside the United States (or its possessions) as the Corporation may appoint from time to time. Unless otherwise indicated in the Prospectus Supplement, payment of interest on bearer Debt Securities on any Interest Payment Date will be made only against surrender of the coupon relating to such Interest Payment Date to a Paying Agent outside the United States. No payment with respect to any bearer Debt Security will be made at any office or Paying Agency maintained by the Corporation in the United States nor will any such payment be made by transfer to an account, or by mail to an address, in the United States. Notwithstanding the foregoing, payments of principal of and premium, if any, and interest, if any, on bearer Debt Securities will be made at an office or agency of, and designated by, the Corporation located in the United States, if payment of the full amount thereof at all Paying Agencies outside the United States is illegal or effectively precluded by exchange controls or similar restrictions. TEMPORARY GLOBAL NOTES If so specified in the applicable Prospectus Supplement, all or any portion of the Debt Securities of a series that are issuable as bearer Debt Securities will initially be represented by one or more temporary Global Notes, without interest coupons, to be deposited with a common depositary, appointed by the Corporation, for credit to designated accounts. On and after the date determined as provided in any such temporary Global Note and described in the applicable Prospectus Supplement, each such temporary Global Note will be exchangeable for definitive bearer Debt Securities, definitive registered Debt Securities or all or a portion of a permanent bearer Global Note, or any combination thereof, as specified in such Prospectus Supplement. No definitive bearer Debt Security or permanent bearer Global Note delivered in exchange for a portion of a temporary Global Note shall be mailed or otherwise delivered to any location in the United States in connection with such exchange. Additional information regarding restrictions on and special United States Federal income tax consequences relating to temporary Global Notes will be set forth in the Prospectus Supplement relating thereto. PERMANENT GLOBAL NOTES The Debt Securities of a series may be issued in whole or in part in the form of one or more permanent Global Notes (each a "Permanent Global Note") that will be deposited with, or on behalf of, a depositary (the "Depositary") identified in the Prospectus Supplement relating to such series. The specific terms of the depositary arrangement with respect to any Debt Securities of a series will be described in the Prospectus Supplement relating to such series. The Corporation anticipates that the following provisions will apply to all depositary arrangements. Upon the issuance of a Permanent Global Note, the Depositary for such Permanent Global Note will credit, on its book-entry registration and transfer system, the respective principal amounts of the Debt Securities represented by such Permanent Global Note to the accounts of institutions that have accounts with such Depositary ("participants"). The accounts to be credited shall be designated by the underwriters or dealers through which such Debt Securities were offered and sold or by the Corporation, if such Debt Securities are offered and sold directly by the Corporation. Ownership of beneficial interests in such Permanent Global Note will be limited to participants or persons that may hold interests through participants. Ownership of beneficial interests in such Permanent Global Note will be shown on, and 9 the transfer of that ownership will be effected only through, records maintained by the Depositary for such Permanent Global Note (with respect to interests of participants) or by participants or persons that hold through participants (with respect to interests of persons other than participants). The laws of some states require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and such laws may impair the ability to transfer beneficial interests in a Permanent Global Note. So long as the Depositary for a Permanent Global Note, or its nominee, is the registered owner of such Permanent Global Note, such Depositary or such nominee, as the case may be, will be considered the sole owner or holder of the Debt Securities represented by such Permanent Global Note for all purposes. Except as set forth below, owners of beneficial interests in a Permanent Global Note will not be entitled to have Debt Securities of the series represented by such Permanent Global Note registered in their names, will not receive or be entitled to receive physical delivery of Debt Securities of such series in definitive form and will not be considered the owners or holders thereof under the applicable Indenture. Accordingly, each person owning a beneficial interest in the Permanent Global Note must rely on the procedures of the Depositary and, if such person is not a participant, on the procedures of the participant through which such person owns its interest, to exercise any rights of a Holder under the applicable Indenture. The Indentures provide that the Depositary may grant proxies and otherwise authorize participants to take any action which a Holder is entitled to take under the Indentures. The Corporation understands that under existing industry practice, in the event that the Corporation requests any action of Holders or a beneficial owner desires to take any action that a Holder is entitled to take, the Depositary would authorize the participants to take such action and that the participants would authorize beneficial owners owning through such participants to take such action or would otherwise act upon the instructions of beneficial owners owning through such participants. Payment of principal, premium, if any, and interest, if any, on Debt Securities registered in the name of or held by a Depositary or its nominee will be made to the Depositary or its nominee, as the case may be, as the registered owner or the holder of the Permanent Global Note representing such Debt Securities. None of the Corporation, the Trustee, any Paying Agent or the Security Registrar for such Debt Securities will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a Permanent Global Note for such Debt Securities or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. The Corporation expects that the Depositary for Debt Securities of a series, upon receipt of any payment of principal, premium or interest in respect of a Permanent Global Note, will credit immediately participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Permanent Global Note as shown on the records of such Depositary. The Corporation also expects that payments by participants to owners of beneficial interests in such Permanent Global Note held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in "street name", and will be the responsibility of such participants. A Permanent Global Note may not be transferred except as a whole by the Depositary for such Permanent Global Note to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another nominee of such Depositary. A Permanent Global Note is exchangeable for Debt Securities registered in the names of persons other than the Depositary with respect to such Permanent Global Note or its nominee only if (x) such Depositary notifies the Corporation that it is unwilling or unable to continue as Depositary for such Permanent Global Note or if at any time such Depositary ceases to be a clearing agency registered under the Securities Exchange Act of 1934, (y) the Corporation executes and delivers to the Trustee a Company Order that all such Permanent Global Notes shall be exchangeable or (z) there shall have occurred and be continuing an Event of Default or an event which, with the giving of notice or lapse of time or both, would constitute an Event of Default 10 with respect to the Debt Securities. Any Permanent Global Note that is exchangeable pursuant to the preceding sentence shall be exchangeable for Debt Securities registered in such names as the Depositary with respect to such Permanent Global Note shall direct. (Section 305) PARTICULAR TERMS OF THE SUBORDINATED DEBT SECURITIES The following description of the specific terms of the Subordinated Debt Securities sets forth certain general terms and provisions of the Subordinated Debt Securities to which any Prospectus Supplement may relate, which differ from the terms of the Senior Debt Securities and outstanding series of subordinated debt securities of the Corporation. The particular terms of the Subordinated Debt Securities offered by any Prospectus Supplement and the extent, if any, to which such general provisions may apply to the Subordinated Debt Securities so offered will be described in the Prospectus Supplement relating to such Subordinated Debt Securities. Under the subordination provisions of the Subordinated Debt Securities, the holder of Subordinated Debt Securities may receive less, ratably, in the event of bankruptcy or insolvency of the Corporation than other creditors of the Corporation, which may include holders of several series of outstanding subordinated debt securities of the Corporation in light of changes in the level of subordination required for subordinated indebtedness to qualify as capital under the risk-based capital regulations to which the Corporation is subject. The changes are reflected in the staff of the Federal Reserve Board's interpretation (the "Interpretation") of its capital guidelines which became effective on September 4, 1992, as subsequently amended. The Interpretation, among other things, indicates that debt of bank holding companies issued after that date will not be included in capital for calculation of regulatory capital ratios unless subordinated to claims of all "general creditors" or if the subordinated debt is subject to certain covenants or events of default. As a result, the Subordinated Debt Securities Indenture provides that the Subordinated Debt Securities will be effectively subordinated to all "general creditors" and omits certain restrictive covenants and narrows the definition of an Event of Default with respect to the Subordinated Debt Securities as compared to outstanding series of subordinated debt securities of the Corporation. Subordination Terms The payment of the principal of and interest on any series of Subordinated Debt Securities will, to the extent set forth in the Subordinated Debt Securities Indenture, be subordinated in right of payment to the prior payment in full of all Senior Debt (as defined). In certain events of insolvency, the payment of the principal of and interest on any Subordinated Debt Securities will, to the extent set forth in the Subordinated Debt Securities Indenture, also be effectively subordinated in right of payment to the prior payment in full of all General Obligations (as defined). Upon any payment or distribution of assets to creditors upon any liquidation, dissolution, winding up, reorganization, assignment for the benefit of creditors, marshalling of assets or any bankruptcy, insolvency or similar proceedings of the Corporation, the holders of all Senior Debt will first be entitled to receive payment in full of all amounts due or to become due thereon before the Holder or Holders of Subordinated Debt Securities will be entitled to receive any payment in respect of the principal of or interest on Subordinated Debt Securities. If upon any such payment or distribution of assets to creditors, there remains, after giving effect to such subordination provisions in favor of the holders of Senior Debt, any amount of cash, property or securities available for payment or distribution in respect of Subordinated Debt Securities (as defined in the Subordinated Debt Securities Indenture, "Excess Proceeds") and if, at such time, any creditors in respect of General Obligations have not received payment in full of all amounts due or to become due on or in respect of such General Obligations, then such Excess Proceeds shall first be applied to pay or provide for the payment in full of such General Obligations before any payment or distribution may be made in respect of the Subordinated Debt Securities. In the event of the acceleration of the maturity 11 of any Subordinated Debt Securities, the holders of all Senior Debt outstanding at the time of such acceleration will first be entitled to receive payment in full of all amounts due or to become due thereon before the Holder or Holders of the Subordinated Debt Securities will be entitled to receive any payment upon the principal of or interest on the Subordinated Debt Securities. No payments on account of principal or interest in respect of the Subordinated Debt Securities may be made if there shall have occurred and be continuing a default in any payment with respect to Senior Debt, or if any judicial proceeding shall be pending with respect to any such default. (Section 101) "Senior Debt" is defined in the Subordinated Debt Securities Indenture as (a) the principal of (and premium, if any), and interest on all indebtedness of the Corporation for money borrowed other than the Subordinated Debt Securities, whether outstanding on the date of execution of the Indenture or thereafter created, assumed or incurred, except (i) such indebtedness as is by its terms expressly stated to be junior in right of payment to the Subordinated Debt Securities and (ii) such indebtedness as is by its terms expressly stated to rank pari passu with the Subordinated Debt Securities, and (b) any deferrals, renewals or extensions of any such Senior Debt; provided, however, that Senior Debt does not include the Corporation's Floating Rate Subordinated Notes Due June 25, 1997, 8 5/8% Subordinated Capital Notes Due April 1, 1999, 12 3/4% Subordinated Notes Due May 1, 1997, 9 1/8% Subordinated Notes Due February 1, 2004 and Subordinated Medium Term Notes, Series C. (Section 101) "General Obligations" means, unless otherwise determined with respect to any series of Subordinated Debt Securities, all obligations to make payment pursuant to the terms of financial instruments, such as (i) securities contracts and foreign currency exchange contracts, (ii) derivative instruments, such as swap agreements (including interest rate and foreign exchange rate swap agreements), cap agreements, floor agreements, collar agreements, interest rate agreements, foreign exchange rate agreements, options, commodity futures contracts, commodity options contracts and(iii) in the case of both (i) and (ii) above, similar financial instruments other than (A) obligations on account of Senior Debt and (B) obligations on account of indebtedness for money borrowed ranking pari passu with or subordinate to the Subordinated Debt Securities; provided, however, that General Obligations do not include the Corporation's Floating Rate Subordinated Notes Due June 25, 1997,8 5/8% Subordinated Capital Notes Due April 1, 1999, 12 3/4% Subordinated Notes Due May 1, 1997, 9 1/8% Subordinated Notes Due February 1, 2004 and Subordinated Medium Term Notes, Series C; provided further, however, that if the Federal Reserve Board (or other applicable regulatory agency or authority) shall promulgate any rule or issue any interpretation defining or describing the term "general creditor" or "general creditors" for purposes of its criteria for the inclusion of subordinated debt of a bank holding company in capital, the term "General Obligations" shall mean obligations to "general creditors" as defined or described in such rule or interpretation, as from time to time in effect, other than obligations described in clauses (A) and (B) above. "Claim" shall have the meaning assigned thereto in Section 101(5) of the Bankruptcy Code of 1978, as amended to the date of the Subordinated Debt Securities Indenture. The term "indebtedness for money borrowed" when used with respect to the Corporation is defined to mean any obligation of, or any obligation guaranteed by, the Corporation for the repayment of borrowed money, whether or not evidenced by bonds, debentures, notes or other written instruments.(Section 101) At December 31, 1994, Senior Debt aggregated approximately $536.2 million. The Corporation expects from time to time to incur additional indebtedness constituting Senior Debt. The Indenture does not prohibit or limit the incurrence of additional Senior Debt. The subordination provisions of the Subordinated Debt Securities Indenture described herein are provided for the benefit of holders of Senior Debt and are not intended for the benefit of creditors in respect of General Obligations. The Corporation and the Trustee may amend the Subordinated Debt Securities Indenture to reduce or eliminate the rights of creditors in respect of General Obligations without the consent of such creditors or the Holders of the Subordinated Debt Securities. Upon (i) the 12 promulgation of any rule or regulation or the issuance of any interpretation by the Federal Reserve Board (or other applicable regulatory agency or authority) that (a) permits the Corporation to include the Subordinated Debt Securities in its capital if they were subordinated in right of payment to Senior Debt without regard to any other obligations of the Corporation, (b) otherwise eliminates the requirement that subordinated debt of a bank holding company be subordinated in right of payment to the claims of its "general creditors" in order to be included in capital or (c) causes the Subordinated Debt Securities to be excluded from capital notwithstanding the subordination provisions described above or (ii) any event that results in the Corporation no longer being subject to capital requirements of bank regulatory authorities, the provisions of the Subordinated Debt Securities Indenture providing for subordination of the Subordinated Debt Securities in favor of creditors in respect of General Obligations shall immediately and automatically be terminated without further action by the Corporation or the Trustee. (Sections 101 and 1415) Events of Default THE SUBORDINATED DEBT SECURITIES INDENTURE (WITH RESPECT TO ANY SERIES OF SUBORDINATED DEBT SECURITIES) PROVIDES THAT AN EVENT OF DEFAULT IS LIMITED TO CERTAIN EVENTS OF BANKRUPTCY, INSOLVENCY OR REORGANIZATION OF THE CORPORATION. UNDER THE SUBORDINATED DEBT SECURITIES INDENTURE, THERE WILL BE NO RIGHT OF ACCELERATION OF THE PAYMENT OF PRINCIPAL OF THE SUBORDINATED DEBT SECURITIES UPON A DEFAULT ON THE PAYMENT OF PRINCIPAL OR INTEREST THEREON OR IN THE PERFORMANCE OF ANY COVENANT OR AGREEMENT IN THE SUBORDINATED DEBT SECURITIES OR IN THE SUBORDINATED DEBT SECURITIES INDENTURE. THIS PROVISION GIVES EFFECT TO THE INTERPRETATION OF THE FEDERAL RESERVE BOARD. (SECTION 501) IF AN EVENT OF DEFAULT WITH RESPECT TO SUBORDINATED DEBT SECURITIES OF ANY SERIES AT THE TIME OUTSTANDING OCCURS AND IS CONTINUING, EITHER THE APPLICABLE TRUSTEE OR THE HOLDERS OF AT LEAST 25% IN AGGREGATE PRINCIPAL AMOUNT OF THE OUTSTANDING SUBORDINATED DEBT SECURITIES OF THAT SERIES BY NOTICE AS PROVIDED IN THE SUBORDINATED DEBT SECURITIES INDENTURE MAY DECLARE THE PRINCIPAL AMOUNT (OR, IF THE SUBORDINATED DEBT SECURITIES OF THAT SERIES ARE ORIGINAL ISSUE DISCOUNT NOTES, SUCH PORTION OF THE PRINCIPAL AMOUNT AS MAY BE SPECIFIED IN THE TERMS OF THAT SERIES) OF ALL THE SUBORDINATED DEBT SECURITIES OF THAT SERIES TO BE DUE AND PAYABLE IMMEDIATELY. AT ANY TIME AFTER A DECLARATION OF ACCELERATION WITH RESPECT TO SUBORDINATED DEBT SECURITIES OF ANY SERIES HAS BEEN MADE, BUT BEFORE A JUDGMENT OR DECREE FOR PAYMENT OF MONEY HAS BEEN OBTAINED BY THE APPLICABLE TRUSTEE WITH RESPECT TO THAT SERIES, THE HOLDERS OF A MAJORITY IN AGGREGATE PRINCIPAL AMOUNT OF OUTSTANDING SUBORDINATED DEBT SECURITIES OF THAT SERIES MAY, UNDER CERTAIN CIRCUMSTANCES, RESCIND AND ANNUL SUCH ACCELERATION. (SECTION 502) Conversion Rights The Subordinated Debt Securities may be convertible into Common Stock of the Corporation on the terms and subject to the conditions set forth in the applicable Prospectus Supplement. The right to convert Subordinated Debt Securities called for redemption will terminate at the close of business on the redemption date, unless the Corporation defaults in making the payment due upon redemption, and will be lost if not exercised prior to that time. The conversion price will be subject to adjustment in case of certain events, including (i) dividends (and other distributions) payable in Common Stock on any class of capital stock of the Corporation, (ii) the issuance to all holders of Common Stock of rights or warrants entitling them to subscribe for or purchase Common Stock at less than the then current market price (the average of the closing prices of the Common Stock for 15 consecutive business days selected by the Corporation commencing not more than 30 nor less than 20 days prior to the date of determination), (iii) subdivisions, combinations and reclassifications of Common Stock and (iv) distributions to all holders of Common Stock of evidences of indebtedness of the Corporation or assets (including securities, but excluding those rights, warrants, dividends and distributions referred to above and 13 dividends and distributions paid in cash out of the retained earnings of the Corporation). In addition to the foregoing adjustments, the Corporation will be permitted to make such reductions in the conversion price as it considers to be advisable in order that any event treated for federal income tax purposes as a dividend of stock or stock rights will not be taxable to the holders of the Common Stock. The Corporation is not required to make adjustments in the conversion price of less than 1% of such price, but any adjustment that would otherwise be required to be made will be taken into account in the computation of any subsequent adjustment. No adjustment is required in respect of the issuance of Common Stock at a price not below 95% of the current market price under the Corporation's dividend reinvestment plan, employee benefit plans, stock option plans or similar plans. Fractional shares of Common Stock will not be issued upon conversion, but, in lieu thereof, the Corporation will pay a cash adjustment based upon market price. Subordinated Debt Securities surrendered for conversion between the record date for an interest payment and the interest payment date (except Subordinated Debt Securities redeemed during such period) must be accompanied by payment of an amount equal to the interest thereon, which the registered holder is to receive. (Sections 1201, 1202, 1203 and 1204) If at any time the Corporation makes a distribution of property to its shareholders which would be taxable to such shareholders as a dividend for Federal income tax purposes (e.g., distributions of evidences of indebtedness or assets of the Corporation, but generally not stock dividends or rights to subscribe for Common Stock) and, pursuant to the antidilution provisions of the Subordinated Debt Securities Indenture, the conversion price of Subordinated Debt Securities is reduced, such reduction may be deemed to be the payment of a taxable dividend to holders of Subordinated Debt Securities. In case of any consolidation or merger of the Corporation with or into any other corporation or any sale or transfer of all or substantially all of the assets of the Corporation, or in the case of any consolidation or merger of another corporation into the Corporation in which the Corporation is the surviving corporation involving a change or reclassification of shares of the Common Stock, the holder of each Subordinated Debt Security shall after such consolidation, merger, sale or transfer only have the right to convert such Subordinated Debt Security into the kind and amount of shares of stock, other securities or property, which may include cash, which such holder would have been entitled to receive upon such consolidation, merger, sale or transfer if such holder had held the Common Stock issuable upon the conversion of such Subordinated Debt Security immediately prior to such consolidation, merger, sale or transfer. (Section 1211) PARTICULAR TERMS OF THE SENIOR DEBT SECURITIES The following description of the Senior Debt Securities sets forth certain general terms and provisions of the Senior Debt Securities to which any Prospectus Supplement may relate which differ from the terms of the Subordinated Debt Securities. The particular terms of the Senior Debt Securities offered by any Prospectus Supplement and the extent, if any, to which such general provisions may apply to the Senior Debt Securities so offered will be described in the Prospectus Supplement relating to such Senior Debt Securities. Covenants The Senior Debt Securities Indenture contains a covenant by the Corporation that it will at all times own directly more than 80% of the outstanding voting stock of each Principal Bank; provided, however, that the foregoing will not apply to (i) any sale of such voting stock where the proceeds are invested, within 90 days of such sale, in any Subsidiary (including any corporation which upon such investment becomes a Subsidiary) engaged in a banking business or any other business then legally permissible for bank holding companies, or (ii) any disposition in exchange for stock of any bank. (Section 1007) A Principal Bank is defined in the Senior Debt Securities Indenture and, as of the date of this Prospectus, included the following Subsidiary Banks: First Interstate Bank of California, First Interstate Bank of Oregon, N.A., First Interstate Bank of Texas, N.A. and First Interstate Bank of Arizona, N.A. (Section 101) 14 Events of Default If an Event of Default with respect to Senior Debt Securities of any series at the time Outstanding occurs and is continuing, either the applicable Trustee or the Holders of at least 25% in aggregate principal amount of the Outstanding Senior Debt Securities of that series by notice as provided in the Senior Debt Securities Indenture may declare the principal amount (or, if the Senior Debt Securities of that series are Original Issue Discount Notes, such portion of the principal amount as may be specified in the terms of that series) of all the Senior Debt Securities of that series to be due and payable immediately. At any time after a declaration of acceleration with respect to Senior Debt Securities of any series has been made, but before a judgment or decree for payment of money has been obtained by the applicable Trustee with respect to that series, the Holders of a majority in aggregate principal amount of Outstanding Senior Debt Securities of that series may, under certain circumstances, rescind and annul such acceleration. (Section 502) The Senior Debt Securities Indenture (with respect to any series of Senior Debt Securities) defines an Event of Default with respect to the Senior Debt Securities of any series as any of the following events: (a) failure to pay principal of or any premium on any Senior Debt Security of that series when due; (b) failure to pay any interest on any Senior Debt Security of that series when due, continued for 30 days; (c) failure to deposit any sinking fund payment, when due, in respect of any Senior Debt Security of that series; (d) failure to perform any other covenant of the Corporation in the applicable Indenture (other than a covenant included in the applicable Indenture solely for the benefit of series of Senior Debt Securities other than that series), continued for 60 days after written notice as provided in the Indenture; (e) acceleration of Senior Debt Securities or any other indebtedness for borrowed money, in an aggregate principal amount exceeding $1,000,000, of the Corporation under the terms of the instrument or instruments under which such indebtedness is issued or secured, if such acceleration is not annulled, or such indebtedness is not discharged, or a sum of money sufficient to discharge in full such indebtedness is not deposited in trust, within 10 days after written notice as provided in the applicable Indenture; (f) certain events in bankruptcy, insolvency or reorganization; and (g) any other Event of Default provided with respect to the Senior Debt Securities of that series. (Section 501) MODIFICATION AND WAIVER Modifications and amendments of the Indentures may be made by the Corporation and the applicable Trustee with the consent of the Holders of 66 2/3% in aggregate principal amount of the Outstanding Debt Securities of each series affected by such modification or amendment; provided, however, that no such modification or amendment may, without the consent of the Holder of each Outstanding Debt Security affected thereby, (a) change the stated maturity date of the principal of, or any installment of principal of or interest, if any, on, any Debt Security, (b) reduce the principal amount of, or premium or interest, if any, on any Debt Security, (c) reduce the amount of principal of an Original Issue Discount Debt Security payable upon acceleration of the maturity thereof, (d) change the place or currency of payment of principal of, or premium or interest, if any, on Debt Security, (e) impair the right to institute suit for the enforcement of any payment on or with respect to any Debt Security or,(f) reduce the percentage in principal amount of Outstanding Debt Securities of any series, the consent of the Holders of which is required for modification or amendment of the Indentures or for waiver of compliance with certain provisions of the Indentures or for waiver of certain defaults. (Section 902) The Holders of 66 2/3% in aggregate principal amounts of the Outstanding Debt Securities of each series may, on behalf of all Holders of Debt Securities of that series, waive, insofar as that series is concerned, compliance by the Corporation with certain restrictive provisions of the Indentures. (Section 1008) 15 The Holders of a majority in aggregate principal amount of the Outstanding Debt Securities of each series may, on behalf of all Holders of Debt Securities of that series, waive any past default under the Indenture with respect to Debt Securities of that series, except (a) a default in the payment of principal of, or of premium or interest, if any, on any Debt Security of such series, and (b) in respect of a covenant or provision of the Indenture which cannot be modified or amended without the consent of the Holder of each Outstanding Debt Security of such series affected. (Section 513) CONSOLIDATION, MERGER AND SALE OF ASSETS The Corporation, without the consent of the Holders of any of the Outstanding Debt Securities under either Indenture, may consolidate or merge with or into, or transfer or lease its assets substantially as an entirety to, any corporation organized under the laws of any domestic jurisdiction, provided that the successor corporation assumes the Corporation's obligations on the Debt Securities and under the Indentures, that after giving effect to the transaction no Event of Default, and no event which, after notice or lapse of time or both would become an Event of Default, shall have occurred and be continuing, and that certain other conditions are met. (Section 801) REGARDING THE TRUSTEES The Corporation maintains deposit accounts and banking relations with the Trustees. In addition, some of the Subsidiary Banks maintain correspondent banking relations with the Trustees. Each Indenture provides that, subject to the duty of the Trustee during any default to act with the required standard of care, the Trustee will not be under any obligation to exercise any of its rights or powers under the Indenture at the request or direction of any of the Holders, unless such Holders shall have offered to that Trustee reasonable security or indemnity. Subject to such provisions for the indemnification of the Trustees, the Holders of a majority in aggregate principal amount of the Outstanding Securities of any series will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the applicable Trustee, or exercising any trust or power conferred on the applicable Trustee, with respect to the Debt Securities of that series. The Corporation is required to furnish to each Trustee annually a statement as to the performance by the Corporation of certain of its obligations under the applicable Indenture and as to any default in such performance. (Section 102) PLAN OF DISTRIBUTION The Corporation may sell Debt Securities to one or more underwriters for public offering and sale by them or may sell Debt Securities to investors directly or through dealers. Any such underwriter or dealer involved in the offer and sale of the Offered Debt Securities is named in the Prospectus Supplement. Underwriters may offer and sell the Offered Debt Securities at a fixed price or prices, which may be changed, or from time to time at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. The Corporation also may offer and sell the Offered Debt Securities in exchange for one or more of its outstanding issues of debt or convertible debt securities. The Corporation also may, from time to time, authorize underwriters acting as the Corporation's dealer to offer and sell the Offered Debt Securities upon the terms and conditions as are set forth in any Prospectus Supplement. In connection with the sale of Offered Debt Securities, underwriters may be deemed to have received compensation from the Corporation in the form of underwriting discounts or commissions and may also receive commissions from purchasers of Offered Debt Securities for whom they may act as dealer. Underwriters may sell Offered Debt Securities to or 16 through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commission from the purchasers for whom they may act as dealer. Any underwriting compensation paid by the Corporation to underwriters or dealers in connection with the offering of Offered Debt Securities, and any discounts, concessions or commissions allowed by underwriters to participating dealers, are set forth in the Prospectus Supplement. Underwriters, dealers and agents participating in the distribution of the Offered Debt Securities may be deemed to be underwriters, and any discounts and commissions received by them and any profit realized by them on resale of the Offered Debt Securities may be deemed to be underwriting discounts and commissions, under the Act. Underwriters, dealers and agents may be entitled, under agreements entered into with the Corporation, to indemnification against and contribution toward certain civil liabilities, including liabilities under the Act. If so indicated in the Prospectus Supplement, the Corporation will authorize dealers acting as the Corporation's dealers to solicit offers by certain institutions to purchase Offered Debt Securities from the Corporation at the public offering price set forth in the Prospectus Supplement pursuant to Delayed Delivery Contracts ("Contracts") providing for payment and delivery on the date or dates stated in the Prospectus Supplement. Each Contract will be for an amount not less than, and the aggregate principal amount of Offered Debt Securities sold pursuant to Contracts shall be not less nor more than, the respective amounts stated in the Prospectus Supplement. Institutions with whom Contracts, when authorized, may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions, and other institutions but will in all cases be subject to the approval of the Corporation. Contracts will not be subject to any conditions except(i) the purchase by an institution of the Offered Debt Securities covered by its Contracts shall not at the time of delivery be prohibited under the laws of any jurisdiction in the United States to which such institution is subject, and (ii) if the Offered Debt Securities are being sold to underwriters, the Corporation shall have sold to such underwriters the total principal amount of the Offered Debt Securities less the principal amount thereof covered by Contracts. Certain of the underwriters and their associates may be customers of, engage in transactions with and perform services for the Corporation and its subsidiaries in the ordinary course of business. LEGAL MATTERS The validity of the Offered Debt Securities will be passed upon for the Corporation by Edward S. Garlock, Esq., Group General Counsel, Corporate Services Group, for the Corporation, Los Angeles, California, and for any underwriters by counsel named in the applicable Prospectus Supplement.Mr. Garlock will rely, as to all matters governed by New York law, on the opinion of counsel for the underwriters. EXPERTS The consolidated financial statements of the Corporation included in the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 and incorporated by reference herein have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. 17 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE- SENTATION OTHER THAN AS CONTAINED OR INCORPORATED BY REFERENCE IN THIS PRO- SPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IN CONNECTION WITH THE OF- FERING MADE HEREBY. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE DESCRIBED ON THE COVER PAGE HEREOF OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY WITHIN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OF- FER OR SOLICITATION WITHIN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HERE- UNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CORPORATION SINCE THE DATE HEREOF. --------------- TABLE OF CONTENTS
Page ---- PROSPECTUS SUPPLEMENT Certain Terms of the Notes.................................................. S-2 Recent Developments......................................................... S-4 Underwriting................................................................ S-9 Validity of Notes........................................................... S-9 PROSPECTUS Available Information....................................................... 2 Incorporation of Certain Documents by Reference............................. 2 First Interstate Bancorp.................................................... 3 Use of Proceeds............................................................. 4 Selected Consolidated Financial Data........................................ 5 Description of Debt Securities.............................................. 7 Plan of Distribution........................................................ 16 Legal Matters............................................................... 17 Experts..................................................................... 17
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- $100,000,000 [LOGO OF FIRST INTERSTATE BANCORP] 8.15% SUBORDINATED NOTES DUE MARCH 15, 2002 ----------------- PROSPECTUS SUPPLEMENT March 15, 1995 ----------------- LEHMAN BROTHERS SALOMON BROTHERS INC SMITH BARNEY INC. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----