-----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, lcluBuF15WH+1OptdsIw76pq54BzDbeVPD6IM+E6jWiXu6yv/mCLjYFqDXiyQFy9 2wqrfl2V/JzRVmvUp8sMSQ== 0000037076-95-000078.txt : 19950516 0000037076-95-000078.hdr.sgml : 19950516 ACCESSION NUMBER: 0000037076-95-000078 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: MSE SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRSTAR CORP /WI/ CENTRAL INDEX KEY: 0000037076 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 390711710 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 002-28711 FILM NUMBER: 95539841 BUSINESS ADDRESS: STREET 1: 777 E WISCONSIN AVE CITY: MILWAUKEE STATE: WI ZIP: 53202 BUSINESS PHONE: 4147654321 MAIL ADDRESS: STREET 1: 777 EAST WISCONSIN AVENUE CITY: MILWAUKEE STATE: WI ZIP: 53202 FORMER COMPANY: FORMER CONFORMED NAME: FIRST WISCONSIN CORP DATE OF NAME CHANGE: 19890124 FORMER COMPANY: FORMER CONFORMED NAME: FIRST WISCONSIN BANKSHARES CORP DATE OF NAME CHANGE: 19750204 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTERLY PERIOD ENDED MARCH 31, 1995 COMMISSION FILE NUMBER 1-2981 FIRSTAR CORPORATION (Exact Name of Registrant as Specified in its Charter) WISCONSIN 39-0711710 (State of Incorporation) (I.R.S. EMPLOYER Identification No.) 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202 Telephone Number (414) 765-4985 The registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the precedeing 12 months and (2) has been subject to such filing requirements for the past 90 days. As of May 1, 1995, 76,263,317 shares of common stock were outstanding. FIRSTAR CORPORATION CONTENTS PAGE PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Consolidated Balance Sheets 1 Consolidated Statements of Income 2 Consolidated Statements of Cash Flows 3 Supplemental Footnotes 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Additional Financial Data 13 PART II. OTHER INFORMATION Item 5. Other Information 15 Item 6. Exhibits and Reports on Form 8-K 15 SIGNATURES 15
FIRSTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - ------------------------------------------------------------------------------------------------ March 31 December 31 March 31 (thousands of dollars) 1995 1994 1994 ------------ ------------ ------------ (unaudited) (unaudited) ASSETS Cash and due from banks $ 894,016 $ 1,090,636 $ 1,439,383 Interest-bearing deposits with banks 4,201 4,777 7,821 Federal funds sold and resale agreements 222,663 351,304 252,515 Trading securities 12,922 29,050 18,967 Securities held to maturity (market value $3,965,401 $3,606,979 and $3,208,417 on March 31, 1995, December 31, 1994 and March 31, 1994) 3,987,903 3,702,232 3,215,324 Securities available for sale 165,601 222,719 186,761 Loans: Commercial and industrial 2,938,264 2,934,609 2,729,626 Real estate 2,813,114 2,774,185 2,501,295 Other 964,250 963,883 875,682 ------------ ------------ ------------ Commercial loans 6,715,628 6,672,677 6,106,603 Credit card 533,442 575,278 504,401 Real estate - mortgage 1,600,666 1,513,289 1,455,531 Home equity 723,154 662,681 577,339 Other 1,455,730 1,463,799 1,396,975 ------------ ------------ ------------ Consumer loans 4,312,992 4,215,047 3,934,246 ------------ ------------ ------------ Total loans 11,028,620 10,887,724 10,040,849 Reserve for loan losses (192,355) (186,930) (188,454) ------------ ------------ ------------ Loans - net 10,836,265 10,700,794 9,852,395 Bank premises and equipment 327,268 319,304 292,148 Customer acceptance liability 27,866 13,466 24,465 Other assets 452,173 436,771 402,747 ------------ ------------ ------------ Total assets $ 16,930,878 $ 16,871,053 $ 15,692,526 ============ ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Demand $ 2,898,301 $ 3,086,455 $ 2,890,517 Interest-bearing demand 1,548,278 1,691,123 1,635,326 Money market accounts 2,057,380 1,983,565 1,908,767 Savings passbook 1,741,467 1,809,973 1,873,515 Certificates of deposit 4,602,619 4,199,838 3,977,909 ------------ ------------ ------------ Total deposits 12,848,045 12,770,954 12,286,034 Short-term borrowed funds 2,144,935 2,196,478 1,650,308 Long-term debt 185,231 149,734 150,508 Bank acceptances outstanding 27,866 13,466 24,465 Other liabilities 260,836 280,599 232,734 ------------ ------------ ------------ Total liabilities 15,466,913 15,411,231 14,344,049 Stockholders' equity: Preferred stock 19,388 19,388 20,125 Common stock 92,127 92,662 90,779 Issued: March 31, 1995, 73,701,239 shares Issued: December 31, 1994, 74,129,315 shares Issued: March 31, 1994, 72,917,676 shares Capital surplus 203,604 220,906 203,539 Retained earnings 1,151,979 1,139,024 1,040,407 Treasury stock (2,600) (10,669) (5,574) Held: March 31, 1995, 478,653 shares Held: December 31, 1994, 792,303 shares Held: March 31, 1994, 637,611 shares Restricted stock (426) (435) (665) Unrealized losses on securities available for sale (107) (1,054) (134) ------------ ------------ ------------ Total Stockholders' equity 1,463,965 1,459,822 1,348,477 ------------ ------------ ------------ Total liabilities and stockholders' equity $ 16,930,878 $ 16,871,053 $ 15,692,526 ============ ============ ============ -1-
FIRSTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME - -------------------------------------------------------------------- Three Months Ended March 31 (thousands of dollars, except per share data) 1995 1994 ---------------------- (unaudited) INTEREST REVENUE Loans $ 239,533 $ 193,579 Securities 59,274 44,730 Interest-bearing deposits with banks 58 84 Federal funds sold and resale agreements 2,967 1,762 Trading securities 218 239 ---------- ---------- Total interest revenue 302,050 240,394 INTEREST EXPENSE Deposits 95,943 65,819 Short-term borrowed funds 30,385 10,058 Long-term debt 3,638 3,423 ---------- ---------- Total interest expense 129,966 79,300 NET INTEREST REVENUE 172,084 161,094 Provision for loan losses 12,936 3,557 ---------- ---------- NET INTEREST REVENUE AFTER LOAN LOSS PROVISION 159,148 157,537 OTHER OPERATING REVENUE Trust and investment management fees 31,684 30,838 Service charges on deposit accounts 19,638 20,410 Credit card service revenue 13,954 12,369 Data processing fees 4,919 5,058 Securities (losses) gains (5,683) 649 Other revenue 20,596 18,906 ---------- ---------- Total other operating revenue 85,108 88,230 OTHER OPERATING EXPENSE Salaries 77,749 72,494 Employee benefits 18,760 17,852 Equipment expense 13,555 13,197 Net occupancy expense 13,846 13,198 Net other real estate revenue (395) (299) Restructuring expense 19,857 Other expense 48,944 43,229 ---------- ---------- Total other operating expense 192,316 159,671 INCOME BEFORE INCOME TAXES 51,940 86,096 Applicable income taxes 16,728 28,622 ---------- ---------- NET INCOME $ 35,212 $ 57,474 ========== ========== Net income applicable to common stock $ 34,873 $ 57,122 ========== ========== PER COMMON SHARE Net income $.48 $.79 Dividends .30 .26 -2-
FIRSTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - ------------------------------------------------------------------------------------------------------ Three Months Ended March 31 (thousands of dollars) 1995 1994 - ------------------------------------------------------------------------------------------------------ (unaudited) Cash Flows from Operating Activities: Net Income $ 34,873 $ 57,122 Adjustments: Provision for loan losses 12,936 3,557 Depreciation, amortization, and accretion 7,476 9,443 Net increase in trading securities 16,128 (6,476) Net decrease in loans held for resale 13,649 115,232 Gains on sale of assets (1,315) (464) (Increase) decrease in other assets (14,769) 722 (Decrease) increase in other liabilities (18,203) 6,030 Other net (364) (113) ------------- ------------- Net cash provided by operating activities 50,411 185,053 Cash Flows from Investing Activities: Net decrease in federal funds sold and resale agreements 128,641 39,417 Net decrease (increase) in interest-bearing deposits with banks 576 (130) Purchase of securities available for sale (489) 0 Sale of securities available for sale 119,563 0 Maturities of securities held to maturity 337,580 275,512 Purchase of securities held to maturity (633,802) (311,776) Net increase in loans (136,601) (135,576) Cash acquired in acquisitions 294 0 Proceeds from sale of other real estate 804 3,927 Purchase of bank premises and equipment (16,726) (19,057) Proceeds from sale of bank premises and equipment 161 35 ------------- ------------- Net cash used in investing activities (199,999) (147,648) Cash Flows from Financing Activities: Net increase (decrease) in deposits 3,163 (393,291) Net (decrease) increase in short-term borrowed funds (64,316) 503,511 Issuance of long-term debt 58,500 0 Repayment of long-term debt (1,500) (2,777) Common stock transactions (20,621) (1,885) Cash dividends (22,258) (18,423) ------------- ------------- Net cash (used in) provided by financing activities (47,032) 87,135 Net (decrease) increase in cash and due from banks (196,620) 124,540 Cash and due from banks at beginning of period 1,090,636 1,314,843 ------------- ------------- Cash and due from banks at end of period $ 894,016 $ 1,439,383 ============= ============= Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 129,966 $ 76,097 Income taxes 5,813 10,639 Transfer to other real estate from loans $ 1,966 $ 1,688 -3-
FIRSTAR CORPORATION AND SUBSIDIARIES SUPPLEMENTAL FOOTNOTES (unaudited) - ------------------------------------------------------------------------------- (thousands of dollars except as otherwise indicated) 1. The financial data presented herein are unaudited, but in the opinion of management, reflect all adjustments which are necessary for a fair presentation of such information. Results for interim periods should not be considered indicative of results for a full year. Reference should be made to the financial statements contained in the registrant's annual report on Form 10-K for the year ended December 31, 1994. 2. Mergers and Acquisitions On January 31, 1995, Firstar Corporation completed its merger with First Colonial Bankshares Corporation, a $1.8 billion banking company, in a transaction accounted for as a pooling of interests. Firstar issued .7725 shares of Firstar common stock for each share of First Colonial Bankshares Corporation common stock. The total number of shares of Firstar common stock issued was approximately 7,700,000 shares. All financial information has been restated to reflect this transaction. On March 31, 1995, Firstar Corporation completed its acquisition of First Moline Financial Corporation, an $80 million thrift holding company. The transaction was accounted for as a purchase with the issuance of 313,650 shares of Firstar common stock. On April 28, 1995, Firstar Corporation completed the acquisition of Investors Bank Corp., a $1 billion banking company. The transaction will be accounted for as a pooling of interests through the issuance of approximately 3,000,000 shares of Firstar common stock. All financial information will be restated to reflect this transaction. 3. Securities The amortized cost and approximate market values of securities held to maturity are as follows:
March 31, 1995 ------------------------------------------------- Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value ----------- ---------- ------------ ---------- Securities held to maturity: U.S. Treasury and federal agencies $ 1,805,107 $ 6,800 $ (34,407)$ 1,777,500 Mortgage backed obligations of federal agencies 1,012,832 9,927 (4,726) 1,018,033 State and political subdivisions 1,022,307 10,741 (10,682) 1,022,366 Corporate debt 36,408 82 (237) 36,253 Equity securities 47,938 0 0 47,938 Other 63,311 0 0 63,311 ----------- ---------- ------------ ---------- Total $ 3,987,903 $ 27,550 $ (50,052)$ 3,965,401 =========== ========== ============ ==========
-4- FIRSTAR CORPORATION AND SUBSIDIARIES SUPPLEMENTAL FOOTNOTES (unaudited) - ---------------------------- ------------------------------------------------- 4. Nonperforming Assets and Past Due Loans
March 31 December 31 March 31 1995 1994 1994 ---------- ------------ ---------- Nonaccrual loans: Commercial $ 26,722 $ 29,710 $ 41,307 Commercial - real estate 35,545 28,993 28,122 Consumer 12,201 7,726 8,438 ---------- ------------ ---------- 74,468 66,429 77,867 Renegotiated loans: Commercial 69 71 820 Commercial - real estate 644 674 701 ---------- ------------ ---------- 713 745 1,521 Other real estate 8,800 11,256 12,328 ---------- ------------ ---------- Total $ 83,981 $ 78,430 $ 91,716 ========== ============ ========== Nonperforming assets as a percent of: Loans and other real estate 0.76 % 0.72 % 0.91 % Total assets 0.50 0.46 0.58 Loans past due 90 days and still accruing Commercial $ 16,218 $ 7,432 $ 9,211 Commercial - eeal estate 10,147 3,760 9,138 Consumer 13,941 15,709 13,261 ---------- ------------ ---------- Total $ 40,306 $ 26,901 $ 31,610 ========== ============ ==========
4. Reserve for Loan Losses
Three Months Ended March 31 ------------------------ 1995 1994 ------------ ---------- Balance - beginning of period As previously reported $ 172,606 $ 174,873 Adjustments for pooling of interests 14,324 11,860 ------------ ---------- Balance - as restated 186,930 186,733 Provision for loan losses 12,936 3,557 Loan recoveries 3,915 4,268 Loan charge-offs (12,291) (7,315) Reserves of acquired banks 865 1,211 ------------ ---------- Balance - end of period $ 192,355 $ 188,454 ============ ========== Net charge-offs to average loans .31 % .13 % Reserve to period-end loans 1.74 1.88
Firstar adopted Financial Accounting Standards Board Statements Nos. 114 and 118, Accounting by Creditors for Impairment of a Loan on January 1, 1995. These statements establish procedures for determining the appropriate reserve for loan losses for loans deemed impaired. The calculation of reserve levels is based upon the discounted present value of expected cash flows received from the debtor or other measures of value such as market prices or collateral values. Firstar has identified $62.3 million of loans considered to be impaired. Income recognition for these loans is limited to actual cash receipts. These statements did not have any impact on the current level of the reserve for loan losses and is not expected to effect 1995 operating results. -5- FIRSTAR CORPORATION AND SUBSIDIARIES SUPPLEMENTAL FOOTNOTES (unaudited) - ------------------------------------------------------------------------------- 6. Changes in Stockholders' Equity
Three Months Ended March 31 ------------------------ 1995 1994 ------------ ---------- Balance - beginning of period As previously reported $ 1,306,528 $ 1,155,897 Adjustments for pooling of interests 153,294 156,264 ------------ ---------- Balance - as restated 1,459,822 1,312,161 Net income 35,212 57,474 Common stock issued 4,856 2,385 Common stock retired (22,693) 0 Preferred stock converted 0 (1,200) Treasury stock issued 8,069 0 Treasury stock purchased 0 (2,540) Restricted stock transactions 10 (6) Unrealized losses on securities Available for sale 947 (1,234) Dividends - common stock (21,922) (18,211) - preferred stock (336) (352) ------------------------ Balance - end of period $ 1,463,965 $ 1,348,477 ========================
7. Derivative Financial Instruments The following table summarizes the various types of interest rate contracts that Firstar uses for the purpose of managing interest rate risk as of March 31, 1995.
March 31, 1995 ------------------------------------------------------------- Market 12-31-94 Average Average Weighted Value Notional Notional Receive Pay Average Asset Amount Amount Rate Rate Maturity (Liability) --------- --------- ----------- ---------- ------------ ---------- (millions) Interest rate swaps Receive fixed rate Index amortizing $ 290 $ 290 5.33 % 6.23 % 3.1 yr $ (14.0) Other 75 75 6.99 7.35 1.0 (0.8) Receive variable 77 77 5.96 6.79 1.4 (1.3) Periodic caps 930 930 4.88 6.01 2.1 (17.0) Interest rate floors* 301 391 5.05 4.4 3.1 Interest rate caps* 80 40 6.33 .4 0.3 --------- --------- ---------- $ 1,753 $ 1,803 $ (29.7) ========= ========= ========== * Interest rate floors and caps provide for the receipt of payments when the index interest rate is below or above the predetermined rate. <\TABLE. -6- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Firstar Corporation reported net income for the three months ended March 31, 1995 of $35.2 million, or $.48 per common share, down from $57.5 million, or $.79 per common share, for the same period last year. Return on common equity was 9.83% for the first three months of the year, compared with 17.66% for the same period last year, while return on assets was .86% compared to 1.56% during the same period last year. Earnings declined as a result of merger related restructuring charges taken in the first quarter of 1995. Without these charges, net income would have been $57.4 million, or $.78 per share; return on equity would have been 16.07% and return on assets 1.40%. Table 1 shows the components of net interest revenue, net income and net interest margin. Table 1. Condensed income statements - taxable equivalent basis Three Months Ended March 31 ----------------------------- 1995 1994 Change ------ ---------- --------- (millions of dollars) Interest revenue $ 302.0 $ 240.4 $ 61.6 Taxable-equivalent adjustment 8.5 8.3 0.2 ------ ---------- --------- Interest revenue - taxable-equivalent 310.5 248.7 61.8 Interest expense 130.0 79.3 50.7 ------ ---------- --------- Net interest revenue - taxable-equivalent 180.5 169.4 11.1 Provision for loan losses 12.9 3.5 9.4 Other operating revenue 85.1 88.2 (3.1) Other operating expense 192.3 159.7 32.6 ------ ---------- --------- Income before income taxes 60.4 94.4 (34.0) Provision for income taxes 16.7 28.6 (11.9) Taxable-equivalent adjustment 8.5 8.3 0.2 ------ ---------- --------- Net income $ 35.2 $ 57.5 $ (22.3) ====== ========== ========= Yield on earning assets 8.31 % 7.50 % 0.81 % Cost of interest-bearing liabilities 4.36 3.07 1.29 ------ ---------- --------- Interest spread 3.95 4.43 (0.48) Impact of interest-free funds 0.87 0.67 0.20 ------ ---------- --------- Net interest margin 4.82 % 5.10 % (0.28)% ====== ========== =========
In the first quarter of 1995 certain merger and restructuring charges were taken in connection with completed acquisitions. These expenses totaled $34.4 million pre-tax and reduced net income by $22.1 million, or 30 cents per share as shown in Table 2. This action will enable Firstar to begin realizing the long-term benefits of these transactions more quickly. [CAPTION] Table 2. Merger and restructuring costs Three Months Ended 3-31-95 ---------- (thousands of dollars) Additional loan loss provisions $ 8,794 Losses on sales of securities 5,709 Restructuring expenses: Employee severence 10,400 Facilities and equipment 4,032 Professional fees 2,042 Other 3,383 ---------- 19,857 ---------- Total pre-tax costs 34,360 Income tax benefit 12,248 ---------- Total $ 22,112 ========== Per common share impact $ 0.30 -7- Additional loan loss provisions of $8.8 million were taken to increase the new acquisitions' loan loss reserve levels to conform with Firstar's policy. Also, securities not compatible with Firstar's investment policy were sold with a resulting loss of $5.7 million. These funds, totaling $120 million, were redeployed in the securities portfolio with a resulting increase in the net yield which will recover the realized loss within one year. A restructuring charge totaling $19.9 million is included in operating expenses. Included in this charge was $10.4 million of costs associated with the severance of approximately 400 employees, $4.0 million related with office closings and write-off of unusable equipment, $2.1 million of professional fees and $3.4 million of other costs associated with the merger. The restructuring charge of $19.9 million consists of $14.6 million in anticipated cash expenditures and $5.3 million of non-cash asset write-downs. All cash expenditures associated with restructuring charges should be made by the end of 1995. Net interest revenue during the first three months of 1995, on a taxable equivalent basis, was $180.6 million which was $11.2 million, or 7%, above the level of the same period last year. The net interest margin was 4.82% during the first three months compared to 5.10% a year earlier. The increase in net interest revenue was attributable to the higher average earning asset balances, up 12.8% from a year earlier, partially offset by the reduced net interest margin. The margin has been compressed as a result of narrowing interest rate spreads between earning assets and liabilities. Table 3 shows the components of interest revenue and expense along with changes related to volumes and rates. Total interest revenue on a taxable-equivalent basis increased by 24.9% to $310.5 million during the first three months of 1995 compared to the same period last year. This resulted from a 12.8% increase in average earning assets, along with higher interest rates. The rate received on earning assets increased from 7.50% in the first three months of 1994 to 8.31% in the same period in 1995. Loan revenue increased $46.1 million, or 23.6%, in the first three months of 1995 compared to the same period last year. The increased loan balances, up 10.7% from the same period last year, accounted for the increase in revenue. Interest revenue from commercial loans increased $33.5 million due to both higher balances and rates. Total interest expense was $130.0 million during the first three months in 1995, an increase of $50.7 million, or 63.9%, from the same period last year. Interest rates on liabilities increased from 3.07% in 1994 to 4.36% in 1995, which was a major factor in the increase of expense. Expense on total deposits increased $30.1 million, or 45.8%, in the first three months of 1995 compared to the same period last year, due primarily to higher interest rates. Interest paid on short-term borrowed funds increased by $20.3 million, or 102.1%, due to both higher average balances and rates. Net cash flows of off-balance sheet derivative instruments used to manage interest rate risk reduced net interest revenue by $3.4 million and net interest margin by .09% during the first quarter of 1995. This compares to an increase in net interest revenue of $2.0 million and an increase in net interest margin of .06% in the same period of 1994. Using a most likely interest rate scenario, it is expected that derivative financial instruments will result in a reduction of net interest margin of approximately .10% during the next twelve months. -8-
Table 3. Analysis of interest revenue and expense Three Months Ended March 31 --------------------------------------------------------------- Interest Total Due to --------------------- -------------------------- 1995 1994 Change Volume Rate ---------- --------- ------------ ------------ ------------ (thousands of dollars) Interest-bearing deposits with banks $ 58 $ 84 $ (26)$ (34)$ 8 Federal funds sold and resale agreements 2,967 1,762 1,205 (56) 1,261 Trading securities 270 308 (38) (74) 36 Securities 65,883 51,324 14,559 10,814 3,745 Commercial loans 146,640 113,121 33,519 13,770 19,749 Consumer loans 94,713 82,102 12,611 8,250 4,361 ---------- --------- ------------ Total loans 241,353 195,223 46,130 22,135 23,995 ---------- --------- ------------ Total interest revenue 310,531 248,701 61,830 33,608 28,222 Interest-bearing demand 6,890 5,098 1,792 (141) 1,933 Money market accounts 21,191 10,775 10,416 1,586 8,830 Savings passbook 11,622 10,384 1,238 (247) 1,485 Certificates of deposit 56,240 39,562 16,678 7,887 8,791 ---------- --------- ------------ Total deposits 95,943 65,819 30,124 6,090 24,034 Short-term borrowed funds 30,385 10,058 20,327 8,390 11,937 Long-term debt 3,638 3,423 215 250 (35) ---------- --------- ------------ Total interest expense 129,966 79,300 50,666 13,455 37,211 ---------- --------- ------------ Net interest revenue $ 180,565 $ 169,401 $ 11,164 22,473 (11,309) ========== ========= ============ Calculations are computed on a taxable-equivalent basis using a tax rate of 35%. The change attributable to both volume and rate has been allocated proportionately to the changes due to volume and rate.
The provision for loan losses of $12.9 million was $9.4 million higher than last year, with net charge-offs increasing $5.3 million from the same period last year. As discussed previously, $8.8 million of this increase was a merger related adjustment to loan loss reserve levels. Net charge-offs for the first three months were at a level of .31% of average outstanding loans compared to .13% a year earlier. One-half of the quarter's charge-offs was the result of conforming the new banks' charge-off policies to Firstar's standards. The reserve for loan losses represented 1.74% of total loans at March 31, 1995, up from the the year-end level of 1.72% and down from 1.88% a year earlier. Nonperforming assets were $84.0 million at March 31, 1995, which amounted to .76% of total loans and other real estate. This was a $5.6 million increase from the December 31, 1994 level. Nonperforming real estate related assets increased $4.1 million during the first quarter. Commercial nonperforming loans decreased $3.0 million and consumer nonperforming loans increased $4.5 million. Real estate related nonperforming assets represent the major portion of the nonperforming portfolio, with the balance at March 31, 1995 of $45.0 million, or 54%, of total nonperforming assets. Commercial nonperforming assets currently represent $26.8 million, or 32% of the nonperforming portfolio. Other operating revenue, excluding securities gains and losses, increased by 3.7% to a level of $90.8 million in the first three months of 1995 compared to the same period last year. Firstar continues to emphasize growth in non-interest revenue although recent quarterly growth trends have been lower than previously experienced. Firstar's broad customer base provides opportunities for expanded revenues as the marketplace looks to financial institutions for services beyond traditional lending and deposit activities. Table 4 shows the composition of other operating revenue. -9- Table 4. Other operating revenue Three Months Ended March 31, 1995 ---------------------------------------- 1995 1994 Change ------------ ------------ ------------ (thousands of dollars) Trust and investment management fees $ 31,684 $ 30,838 2.7 % Service charges on deposit accounts 19,638 20,410 (3.8) Credit card service revenue 13,954 12,369 12.8 Data processing fees 4,919 5,058 (2.7) Mortgage loan servicing 4,151 2,078 99.8 Mortgage loan origination 693 3,294 (79.0) Insurance revenue 2,658 2,011 32.2 Brokerage revenue 1,855 2,725 (31.9) International fees 1,402 1,300 7.8 Foreign exchange gains 539 432 24.8 ATM fees 1,258 1,076 16.9 Safe deposit fees 1,137 1,048 8.5 Trading securities gains (losses) 689 (973) Other 6,214 5,915 5.1 ------------ ------------ Subotal 90,791 87,581 3.7 Securities (losses) gains (5,683) 649 Total ------------ ------------ $ 85,108 $ 88,230 (3.5)% ============ ============
Other operating revenue represents 33% of Firstar's revenue. An industry measure of fee revenue prominence is the ratio of this revenue stream to average assets. During the first three months of 1995, this ratio was 2.22% compared to 2.38% during the same period last year. While fee revenue increased 3.7%, the effect of the 11.4% growth in average assets is shown in the reduction of this ratio to 2.22% during the first quarter of 1995. Trust and investment management fees are the single largest source of fee revenue, contributing $31.7 million, or 35%, of other operating revenue. This level represents a 2.7% growth in revenue during the first three months of 1995 compared to the same period last year. Trust assets under management were $16.1 billion on March 31, 1995, a 4.7% increase from the year-end level reflecting primarily market appreciation. Revenue from service charges on deposit accounts at $19.6 million for the first three months of 1995 was 3.8% lower than last year. This reduction was primarily due to higher rate credits given to business customers for services, thus reducing the level of cash payments necessary. Credit card service revenues are the third largest source of fee revenue totaling $14.0 million during the first three months of 1995, which was a 12.8% increase over the same period last year. The introduction of new credit card products, increased merchant fee revenue and the repricing of service charges have all added to this revenue growth. Data processing fee income declined 2.7% in the first three months of 1995 from the same period last year. A shrinking customer base due to continuing bank consolidations through mergers or acquisitions and conversions by smaller community banks to in-house data processing systems have acted to reduce revenues. Revenue from mortgage loan origination activities decreased 79.0% to $693 thousand during the first three months of 1995 compared to the same period last year, due to substantially reduced refinancing activity resulting from higher interest rates. Mortgage loan servicing revenues have nearly doubled, to a level of $4.2 million including a $1.9 million gain on the sale of servicing rights in the first quarter of 1995. -10- The remaining sources of other operating revenue derive from a wide range of services and collectively increased by $556 thousand, or 3.8%, exclusive of trading and securities transactions, in the first three months of 1995 compared to the same period last year. Other operating expense increased to a level of $192.3 million. Excluding the restructuring charges taken in the first quarter of this year, expenses increased 8%. Personnel costs rose by 6.8% to a level of $96.5 million due in part to a bank acquisition that occurred late in 1994. Nonpersonnel costs, excluding the restructuring charges, increased 9.6%. The efficiency ratio, which is the ratio of expense to revenue was 63.55% in the first three months of 1995 compared to 62.13% a year earlier. It is Firstar's goal to reach a 55% efficiency ratio in 1997. The detail of other expense is shown in table 5.
Table 5. Other operating expense Three Months Ended March 31, 1995 ---------------------------------------- 1995 1994 Change ------------ ------------ ------------ (thousands of dollars) Salaries $ 77,749 $ 72,494 7.2 % Employee benefits 18,760 17,852 5.1 ------------ ------------ Total personnel expense 96,509 90,346 6.8 Net occupancy expense 13,846 13,198 4.9 Equipment expense 13,555 13,197 2.7 Business development 6,651 5,381 23.6 F.D.I.C. insurance 6,988 6,745 3.6 Stationery and supplies 4,458 4,357 2.3 Delivery 4,582 3,629 26.3 Professional fees 4,347 3,508 23.9 Information processing expense 5,286 4,518 17.0 Amortization of intangibles 2,881 2,526 14.1 Employee education/recruiting 2,211 1,741 27.0 Federal Reserve processing fees 1,087 1,387 (21.6) Commissions and service fees 1,246 1,420 (12.3) Wire communication 1,691 1,911 (11.5) Processing and other losses 1,291 856 50.8 Credit card assessment fees 1,201 1,125 6.8 Net other real estate income (395) (299) 32.1 Published information 883 680 29.9 Insurance 387 466 (17.0) Other 3,754 2,979 26.0 Restructuring charges 19,857 0 ------------ ------------ Total nonpersonnel expense 95,807 69,325 38.2 ------------ ------------ Total other operating expense $ 192,316 $ 159,671 20.4 % ============ ============
Total assets on March 31, 1995 were $16.9 billion, an increase of $1.2 billion from the same time last year. Earning assets totaled $15.4 billion on March 31, 1995, an increase of $1.7 billion, or 12.4%, over March 31, 1994. Loans, the largest category of earning assets, represented 71.5% of earning assets as compared to 73.2% a year earlier. Total loans were $11.0 billion on March 31, 1995, an increase of $1.3 billion, or 12.7%, over the 1994 level, which excludes the effect of mortgage loan securitizations. Firstar securitized $290 million of residential mortgages at the end of 1994. These loans, now carrying a U.S. agency guarantee, are included in securities held to maturity. Commercial loans, which account for 61% of the loan portfolio, increased by $609.0 million, or 10.0%, to $6.7 billion on March 31, 1995. Consumer loans totaled $4.3 billion, an increase of $668.8 million, or 17.0% compared to the same time last year, adjusted for the securitization. -11- Short-term investments, which include interest-bearing deposits with banks, trading account securities, and federal funds sold and resale agreements, totaled $239.8 million on March 31, 1995, a decrease of $39.5 million, or 14.1%, from a year earlier. Securities represent 27% of earning assets. They totaled $4.2 billion on March 31, 1995, an increase of $461.4 million, or 13.6%, over last year. The average maturity of the portfolio was 3.75 years at the end of March. Total fund sources, consisting of deposits and borrowed funds, increased by $1.1 billion, or 7.7%, to $15.2 billion on March 31, 1995. Total deposits were $12.8 billion, an increase of $562.0 million, or 4.6% over a year earlier. Core deposits, which include transaction accounts and other stable time deposits, are Firstar's prime source of funding. These deposits equaled $12.1 billion on March 31, 1995, in increase of $360.3 million, or 3.1% from last year due entirely to bank acquisitions. Increased competition for consumer deposits and heightened consumer sensitivity to interest rates have limited Firstar's core deposit growth. Increased emphasis will be placed on generating more core deposits in 1995 through competitive pricing of deposit products. More reliance was placed on purchased fund sources to support the growth in loan balances. Other time deposits, primarily certificates of deposit over $100,000, increased $201.7 million from last year, to $789.8 million at March 31, 1995. Short-term borrowed funds were increased $494.6 million, or 30.0%, to a level of $2.1 billion in the same period. Stockholders' equity totaled $1,464.0 million at the end of the first quarter, an increase of $4.1 million from the level at year-end and $115.5 million over last year. Total equity as a percent of total assets amounted to 8.65%. Under risk-based capital rules, total capital is 13.07% of risk-adjusted assets, compared to an 8% requirement. A summary of capital components and ratios is shown in table 6.
Table 6. Capital components and ratios March 31 December 31 March 31 1995 1994 1994 ------------ ------------ ------------ (thousands of dollars) Risk-based capital: Stockholders' equity $ 1,463,965 $ 1,459,822 $ 1,348,477 Unrealized losses on securities available for sale 107 1,054 134 Minority interest in subsidiaries 2,849 2,920 2,329 Less goodwill (110,774) (107,967) (110,726) ------------ ------------ ------------ Total Tier I capital 1,356,147 1,355,829 1,240,214 Allowable reserve for loan losses 149,932 148,067 138,877 Allowable long-term debt 55,786 56,627 81,445 ------------ ------------ ------------ Total Tier II capital 205,718 204,694 220,322 ------------ ------------ ------------ Total capital $ 1,561,865 $ 1,560,523 $ 1,460,536 ============ ============ ============ Risk-adjusted assets $ 11,952,122 $ 11,806,519 $ 10,989,182 Tier I capital to risk-adjusted assets 11.35 % 11.48 % 11.29 % Total capital to risk-adjusted assets 13.07 13.21 13.29 Tier I leverage ratio 8.22 8.38 8.38 The Board of Directors declared a quarterly dividend to common stockholders of 34 cents per share which is payable May 15 to shareholders of record May 1. This was a 13% increase in the quarterly dividend rate.
FIRSTAR CORPORATION AND SUBSIDIARIES ADDITIONAL FINANCIAL DATA (unaudited) - -------------------------------------------------------------------------------------------------- Selected Financial Data (thousands of dollars, except per share) Quarter ended March 31 ------------------------------ 1995 1994 ------------------------------ Earnings and Dividends Net income $ 35,212 $ 57,474 Per common share: Net income 0.48 0.79 Dividends 0.30 0.26 Stockholders' equity 19.73 18.45 Performance Ratios Return on average assets 0.86 % 1.56 % Return on average common equity 9.83 17.66 Dividend payout ratio 62.50 32.91 Equity to assets 8.65 8.59 Net loan charge-offs as a percentage of average loans 0.31 0.13 Nonperforming assets as a percentage of loans and other real estate 0.76 0.91 Net interest margin 4.82 5.10 Statistical Data Full-time equivalent staff (at quarter end) 9,300 9,411 Average common shares outstanding (000's) 72,989 71,993 Actual common shares outstanding (000's at quarter end) 73,223 71,986 Stock Price Information High $ 30.25 $ 34.75 Low 26.25 29.75 Close 29.50 33.00 -13-
FIRSTAR CORPORATION AND SUBSIDIARIES ADDITIONAL FINANCIAL DATA (Unaudited) - -------------------------------------------------------------------------------------------------- Consolidated Average Balance Sheets, Net Interest Revenue and Rate Analysis (Thousands of Dollars) Quarter ended March 31 ------------------------------------------------------------------ 1995 1994 ---------------------------------- ------------------------------- Average Average Average Average Balance Interest Rate Balance Interest Rate ---------------------------------- ------------------------------- Assets Interest-bearing deposits with banks $ 3,963 $ 58 5.94 % $ 6,373 $ 84 5.35 % Federal funds sold and resale agreements 206,556 2,967 5.83 213,174 1,762 3.35 Trading securities 14,594 270 7.50 18,770 308 6.65 Securities: Taxable 2,953,458 46,025 6.28 2,273,045 33,069 5.87 Nontaxable 1,058,724 19,858 7.40 1,069,374 18,255 6.83 ----------- --------- ----------- --------- Total securities 4,012,182 65,883 6.60 3,342,419 51,324 6.18 Loans: Commercial 6,604,307 146,640 9.00 5,928,142 113,121 7.73 Consumer 4,267,289 94,713 8.96 3,889,207 82,102 8.52 ----------- --------- ----------- --------- Total loans 10,871,596 241,353 8.99 9,817,349 195,223 8.05 ----------- --------- ----------- --------- Interest earning assets 15,108,891 310,531 8.31 13,398,085 248,701 7.50 Reserve for loan losses (187,864) (187,274) Cash and due from banks 905,979 983,263 Other assets 770,879 709,287 ----------- ----------- Total assets $16,597,885 $14,903,361 =========== =========== Liabilities and Stockholders' Equity Interest-bearing demand $ 1,589,874 $ 6,890 1.76 % $ 1,639,017 $ 5,098 1.26 % Money market accounts 2,069,624 21,191 4.15 1,838,966 10,775 2.38 Savings passbook 1,759,925 11,622 2.68 1,801,943 10,384 2.34 Certificates of deposit 4,399,733 56,240 5.18 3,757,104 39,562 4.27 Short-term borrowed funds 2,112,763 30,385 5.83 1,309,599 10,058 3.11 Long-term debt 151,246 3,638 9.64 136,977 3,423 10.00 ----------- --------- ----------- --------- Interest-bearing liabilities 12,083,165 129,966 4.36 10,483,606 79,300 3.07 Demand deposits 2,769,699 2,824,111 Other liabilities 287,359 263,127 Stockholders' equity 1,457,662 1,332,517 ----------- ----------- Total liabilities and stockholders' equity $16,597,885 $14,903,361 =========== =========== Net interest revenue/margin $ 180,565 4.82 % $ 169,401 5.10 % ========= ========= -14-
PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The annual meeting of the shareholders of Firstar Corporation was held on April 20, 1995. The items presented at the meeting and the results of the vote were as follows: 1. The management nominees for directors for terms expiring in 1998 were elected. There were no abstentions or broker nonvotes. For Withheld Roger H. Derusha 55,540,108 470,944 Jerry M. Hiegel 55,512,165 498,887 Sheldon B. Lubar 55,520,347 490,705 Daniel F. McKeithan, Jr. 55,184,848 826,204 George W. Mead II 55,452,835 558,217 Guy A. Osborn 55,515,086 495,966 William W. Wirtz 55,475,759 535,293 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits to Part 1 of Form 10-Q 27. Financial Data Schedule (b) An 8-K report dated January 31, 1995 was filed regarding the completion of the acquisition of First Colonial Bankshares Corporation in a transaction accounted for as a pooling of interests. Firstar Corporation issued .7725 shares of Firstar Common Stock for each share of First Colonial Bankshares Corporation Class A and Class B Common Stock. The total number of shares of Firstar Common Stock issued will approximate 7,700,766 shares. Firstar also issued 38,775 shares of Series D preferred stock which is convertible into 832,000 shares of Firstar common stock. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FIRSTAR CORPORATION /s/ William H. Risch ___________________________________ William H. Risch Senior Vice President-Finance and Treasurer (Chief Financial Officer) EX-27 2 EXHIBIT 27 (FDS) FILED WITH FORM 10-Q
9 1,000 3-MOS DEC-31-1994 MAR-31-1995 894,016 4,201 222,663 12,922 165,601 3,987,903 3,965,401 11,028,620 192,355 16,930,878 12,848,045 2,144,935 288,702 185,231 92,127 0 19,388 1,352,450 16,930,878 239,533 59,274 3,243 302,050 95,943 129,966 172,084 12,936 (5,683) 192,316 51,940 35,212 0 0 35,212 0.48 0.48 4.82 74,468 40,306 713 0 186,930 12,291 3,915 192,355 191,801 554 0
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