-----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, F3QcAts0cLmOVUhgvj5s7hCHYhYPcZaMi6wBeplifbEdi4cAKmqkaAc3owowhBxh 6BTDPy1FZlvnNBXVBmYTTA== 0000950124-95-001748.txt : 19950616 0000950124-95-001748.hdr.sgml : 19950616 ACCESSION NUMBER: 0000950124-95-001748 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950615 SROS: CSX SROS: NASD 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-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 002-28711 FILM NUMBER: 95547290 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-K/A 1 10-K/A 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K/A AMENDMENT NO. 1 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 1994 Commission File Number 1-2981 ------------------------ FIRSTAR CORPORATION WISCONSIN (State of Incorporation) 30-0711710 (I.R.S. Employer Identification No.) 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202 Telephone Number (414) 765-4321 This Form 10-K/A amends and restates in its entirety the consolidated financial statements of Firstar Corporation and its subsidiaries included under Item 8 on pages 26 through 52 of its Form 10-K to reflect the acquisitions of First Colonial Bankshares Corporation and Investors Bank Corp. The acquisitions were accounted for using the pooling of interests method of accounting and, accordingly, the financial statements have been restated for all periods prior to the acquisitions to include the effect of those acquisitions. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 The undersigned registrant hereby amends the following items, financial statements, exhibits or other portions of its 1994 Annual Report on Form 10-K as set forth in the pages attached hereto. ITEM 8. FINANCIAL STATEMENTS Exhibit 23. Consent of Independent Auditors Exhibit 27. Financial Data Schedule Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. Firstar Corporation June 15, 1995 By /s/ ROGER L. FITZSIMONDS -------------------------------------- Chairman, Chief Executive Officer and Director By /s/ JOHN A. BECKER -------------------------------------- President, Chief Operating Officer and Director By /s/ WILLIAM H. RISCH -------------------------------------- Senior Vice President-Finance & Treasurer (Principal financial accounting officer) DIRECTORS Michael E. Batten* John H. Hendee, Jr.* Daniel F. McKeithan, Jr.* Robert C. Buchanan* Jerry M. Hiegel* George W. Mead II* George M. Chester, Jr.* Joe Hladky* Guy A. Osborn* Roger H. Derusha* C. Paul Johnson* Judith D. Pyle* James L. Forbes* James H. Keyes* Clifford V. Smith, Jr.* Holmes Foster* Sheldon B. Lubar* William W. Wirtz* Joseph F. Heil, Jr.*
*By WILLIAM H. RISCH June 15, 1995 - --------------------------------- William H. Risch Attorney-in-Fact 1 3 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA FIRSTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31 -------------------------- 1994 1993 ----------- ----------- (thousands of dollars) ASSETS Cash and due from banks............................................ $ 1,118,138 $ 1,373,158 Interest-bearing deposits with banks............................... 5,076 5,635 Federal funds sold and resale agreements........................... 351,304 291,932 Trading securities................................................. 29,050 12,491 Securities held to maturity (market value $3,638,604 and $3,210,293 on December 31, 1994 and 1993)................................... 3,750,895 3,150,307 Securities available for sale...................................... 222,719 209,445 Loans.............................................................. 11,905,829 10,824,821 Reserve for loan losses............................................ (190,552) (189,714) ----------- ----------- Loans-net..................................................... 11,715,277 10,635,107 Bank premises and equipment........................................ 335,078 304,425 Customer acceptance liability...................................... 13,466 17,905 Other assets....................................................... 454,080 411,878 ----------- ----------- Total assets.................................................. $17,995,083 $16,412,283 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Demand........................................................... $ 3,113,103 $ 3,361,001 Interest-bearing demand.......................................... 1,714,369 1,792,660 Money market accounts............................................ 2,086,663 1,967,432 Savings passbook................................................. 1,822,836 1,803,630 Certificates of deposit.......................................... 4,672,244 4,208,600 ----------- ----------- Total deposits................................................ 13,409,215 13,133,323 Short-term borrowed funds.......................................... 2,497,478 1,397,106 Long-term debt..................................................... 272,545 266,635 Bank acceptances outstanding....................................... 13,466 17,905 Other liabilities.................................................. 289,694 238,000 ----------- ----------- Total liabilities............................................. 16,482,398 15,052,969 Stockholders' equity: Preferred stock.................................................. 26,979 28,916 Common stock..................................................... 96,465 94,256 Issued: 1994, 77,171,835 shares............................... 1993, 75,404,276 shares............................... Capital surplus.................................................. 230,453 209,234 Retained earnings................................................ 1,172,062 1,030,177 Treasury stock, at cost.......................................... (10,669) (3,034) Held: 1994, 792,303 shares.................................... 1993, 558,603 shares.................................... Restricted stock................................................. (1,551) (1,335) Unrealized (losses) gains on securities available for sale....... (1,054) 1,100 ----------- ----------- Total stockholders' equity.................................... 1,512,685 1,359,314 ----------- ----------- Total liabilities and stockholders' equity.................... $17,995,083 $16,412,283 =========== ===========
See accompanying notes to consolidated financial statements. 2 4 FIRSTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31 ------------------------------------ 1994 1993 1992 -------- -------- -------- (thousands of dollars, except per share data) INTEREST REVENUE Loans.................................................... $914,311 $824,082 $830,227 Securities: Taxable................................................ 142,981 145,460 161,603 Nontaxable............................................. 51,251 50,931 55,907 -------- -------- -------- Total securities.................................. 194,232 196,391 217,510 Interest-bearing deposits with banks..................... 345 1,677 5,347 Federal funds sold and resale agreements................. 9,645 5,119 10,366 Trading securities....................................... 1,211 785 792 -------- -------- -------- Total interest revenue............................ 1,119,744 1,028,054 1,064,242 INTEREST EXPENSE Deposits: Interest-bearing demand................................ 21,064 29,366 39,872 Money market accounts.................................. 57,275 49,583 61,727 Savings passbook....................................... 43,887 45,330 48,314 Certificates of deposit................................ 199,743 191,579 240,076 -------- -------- -------- Total deposits.................................... 321,969 315,858 389,989 Short-term borrowed funds................................ 77,994 34,366 30,991 Long-term debt........................................... 20,943 17,891 16,891 -------- -------- -------- Total interest expense............................ 420,906 368,115 437,871 -------- -------- -------- NET INTEREST REVENUE..................................... 698,838 659,939 626,371 Provision for loan losses................................ 23,891 29,090 50,733 -------- -------- -------- NET INTEREST REVENUE AFTER LOAN LOSS PROVISION........... 674,947 630,849 575,638 OTHER OPERATING REVENUE Trust and investment management fees..................... 120,349 112,521 98,296 Service charges on deposit accounts...................... 81,980 83,060 75,273 Credit card service revenue.............................. 56,265 53,728 51,867 Data processing fees..................................... 20,263 21,431 24,215 Mortgage banking revenue................................. 35,478 57,877 38,353 Securities gains (losses)................................ (3,583) 420 2,544 Other revenue............................................ 59,867 63,881 57,388 -------- -------- -------- Total other operating revenue..................... 370,619 392,918 347,936 OTHER OPERATING EXPENSE Salaries................................................. 312,121 301,171 276,184 Employee benefits........................................ 68,841 67,343 56,354 Equipment expense........................................ 54,556 53,123 52,680 Net occupancy expense.................................... 52,984 58,328 53,514 Net other real estate (income) expense................... (553) 2,354 4,736 Other expense............................................ 218,236 206,955 211,976 -------- -------- -------- Total other operating expense..................... 706,185 689,274 655,444 -------- -------- -------- INCOME BEFORE INCOME TAXES............................... 339,381 334,493 268,130 Provision for income taxes............................... 112,708 106,555 82,131 -------- -------- -------- NET INCOME............................................... $226,673 $227,938 $185,999 ======== ======== ======== Net income applicable to common stock.................... $224,450 $221,932 $179,852 PER COMMON SHARE Net income............................................... $ 2.98 $ 2.99 $ 2.50 Dividends................................................ 1.16 1.00 .80
See accompanying notes to consolidated financial statements. 3 5 FIRSTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
UNREALIZED LOSSES ON SECURITIES PREFERRED COMMON CAPITAL RETAINED AVAILABLE RESTRICTED TREASURY STOCK STOCK SURPLUS EARNINGS FOR SALE STOCK STOCK TOTAL --------- ------- -------- ---------- ---------- ---------- -------- ---------- (thousands of dollars, except per share data) BALANCE AT DECEMBER 31, 1991 As previously reported.......... $49,005 $77,144 $111,518 $ 681,432 $ 0 $ 0 $ (2,760) $ 916,339 Adjustments for poolings of interests....................... 12,719 11,621 54,204 74,738 153,282 --------- ------- -------- ---------- ---------- ---------- -------- ---------- BALANCE AT DECEMBER 31, 1991 AS RESTATED........................ 61,724 88,765 165,722 756,170 0 0 (2,760) 1,069,621 Net income........................ 185,999 185,999 Cash dividends: Preferred stock, series B ($7.5502 per share)........... (3,775) (3,775) Common stock ($.80 per share)... (49,429) (49,429) Pooled affiliates............... (7,601) (7,601) Preferred stock issued: Pooled affiliates............... 20,125 (894) 19,231 Common stock issued: Bank acquisitions............... 1,634 15,812 19,948 37,394 Employee benefit plans.......... 184 2,947 416 3,547 Other........................... 118 701 819 Pooled affiliates stock activity...................... 271 3,289 3,560 Treasury stock purchased.......... (22,492) (22,492) Pooled affiliate restricted stock granted......................... 50 450 (500) 0 Pooled affiliate restricted stock amortization.................... 50 50 --------- ------- -------- ---------- ---------- ---------- -------- ---------- BALANCE AT DECEMBER 31, 1992...... 81,849 91,022 188,027 881,364 0 (450) (4,888) 1,236,924 Net income........................ 227,938 227,938 Cash dividends: Preferred stock, series B ($7.4419 per share)........... (3,720) (3,720) Common stock ($1.00 per share)........................ (63,733) (63,733) Pooled affiliates............... (9,177) (9,177) Redemption of preferred stock..... (49,005) (2,495) (51,500) Redemption of preferred stock of pooled affiliate................ (3,928) (345) (4,273) Common stock issued: Bank acquisitions............... 1,273 12,234 3,098 16,605 Employee benefit plans.......... 130 1,920 31 2,081 Other........................... 628 3,858 4,486 Pooled affiliates stock activity...................... 264 3,239 3,503 Treasury stock purchased.......... (1,275) (1,275) Restricted stock granted.......... 38 892 (930) 0 Amortization of restricted stock........................... 271 271 Pooled affiliate amortization/adjustment of restricted stock................ 310 (226) 84 Pooled affiliate stock split...... 901 (901) 0 Pooled affiliate implementation of change in accounting for unrealized gains on securities available for sale.............. 1,100 1,100 --------- ------- -------- ---------- ---------- ---------- -------- ---------- BALANCE AT DECEMBER 31, 1993...... 28,916 94,256 209,234 1,030,177 1,100 (1,335) (3,034) 1,359,314 Net income........................ 226,673 226,673 Cash dividends: Common stock ($1.16 per share)........................ (75,081) (75,081) Pooled affiliates............... (9,707) (9,707) Pooled affiliate conversion of preferred stock................. (1,937) 112 1,825 0 Common stock issued: Bank acquisitions............... 2,078 22,735 4,551 29,364 Employee benefit plans.......... 105 1,563 36 1,704 Pooled affiliates stock activity...................... (116 ) (5,494) (5,610) Treasury stock purchased.......... (12,222) (12,222) Unrealized losses on securities available for sale.............. (988) (988) Pooled affiliate change in unrealized loss on securities available for sale.............. (1,166) (1,166) Pooled affiliate restricted stock granted......................... 30 533 (563) 0 Amortization/adjustment of restricted stock................ (113) 224 111 Pooled affiliate amortization/adjustment of restricted stock................ 170 123 293 --------- ------- -------- ---------- ---------- ---------- -------- ---------- BALANCE AT DECEMBER 31, 1994...... $26,979 $96,465 $230,453 $1,172,062 $ (1,054) $ (1,551) $(10,669) $1,512,685 ======= ======= ======== ========= ======== ======== ======== =========
See accompanying notes to consolidated financial statements. 4 6 FIRSTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31 ----------------------------------------- 1994 1993 1992 ----------- ----------- ----------- (thousands of dollars) CASH FLOWS FROM OPERATING ACTIVITIES Net income................................................. $ 226,673 $ 227,938 $ 185,999 Adjustments: Provision for loan losses................................ 23,891 29,090 50,733 Depreciation, amortization and accretion................. 44,211 46,873 67,908 Net (increase) decrease in trading securities............ (16,559) 8,382 (4,824) Net decrease (increase) in loans held for resale......... 275,326 (72,055) (83,318) Gain on securities and other assets...................... (9,164) (12,964) (15,293) Deferred income taxes.................................... 558 (9,531) (13,540) Decrease in other assets................................. 31,910 5,484 21,540 Increase (decrease) in other liabilities................. 30,045 24,818 (23,681) Other net................................................ (5,927) (1,557) (3,151) ----------- ----------- ----------- Net cash provided by operating activities.............. 600,964 246,478 182,373 CASH FLOWS FROM INVESTING ACTIVITIES Net (increase) decrease in federal funds sold and resale agreements............................................... (58,072) (40,291) 63,582 Net decrease in interest-bearing deposits with banks....... 858 208,815 40,951 Sales of securities........................................ 10,753 205,030 Sales of securities available for sale..................... 131,801 Maturities of securities................................... 1,066,192 1,866,343 2,083,989 Purchases of securities held to maturity................... (1,662,474) (1,901,786) (2,144,784) Purchases of securities available for sale................. (6,539) Net increase in loans...................................... (1,070,168) (804,646) (366,755) Net cash from acquisitions................................. 25,884 11,695 6,713 Proceeds from sales of other real estate................... 18,243 20,623 10,511 Purchases of bank premises and equipment................... (58,735) (43,235) (54,452) Proceeds from sales of bank premises and equipment......... 1,125 458 2,486 ----------- ----------- ----------- Net cash used in investing activities.................. (1,611,885) (671,271) (152,729) CASH FLOWS FROM FINANCING ACTIVITIES Net (decrease) increase in deposits........................ (247,949) 179,769 208,792 Net increase in short-term borrowed funds.................. 1,094,553 371,760 63,562 Repayment of long-term debt................................ (31,706) (39,442) (26,336) Proceeds from long-term debt............................... 43,690 3,263 36,154 Cash dividends............................................. (84,688) (76,510) (60,669) Proceeds from issuance of preferred stock.................. 19,231 Preferred stock redemption................................. (55,773) Common stock transactions.................................. (17,999) 3,641 (16,229) ----------- ----------- ----------- Net cash provided by financing activities.............. 755,901 386,708 224,505 ----------- ----------- ----------- NET (DECREASE) INCREASE IN CASH AND DUE FROM BANKS......... (255,020) (38,085) 254,149 Cash and due from banks at beginning of year............... 1,373,158 1,411,243 1,157,094 ----------- ----------- ----------- Cash and due from banks at end of year..................... $ 1,118,138 $ 1,373,158 $ 1,411,243 =========== =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for: Interest................................................. $ 407,182 $ 373,314 $ 455,945 Income taxes............................................. 113,463 121,207 87,177 Transfers to foreclosed assets from loans.................. 10,708 9,326 22,124 Acquisitions: Assets acquired.......................................... 610,541 218,592 655,095 Cash paid for purchase of stock.......................... $ (29,101) $ $ (12,730) Cash acquired............................................ 54,985 11,695 19,443 ----------- ----------- ----------- Net cash from acquisitions............................. $ 25,884 $ 11,695 $ 6,713 =========== =========== ===========
See accompanying notes to consolidated financial statements. 5 7 FIRSTAR CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1994, 1993 AND 1992 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies of Firstar Corporation and its subsidiaries are summarized as follows: Principles of consolidation--The consolidated financial statements include the accounts of Firstar and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Results of operations of companies purchased are included from the date of acquisition. Financial statements have been restated to include companies acquired under pooling of interests when material. Certain prior year amounts have been reclassified to conform to current year classifications. Securities--Purchases of securities that are made with the positive intent and ability to hold them to maturity are carried at cost, adjusted for amortization of premium and accretion of discount using a level yield method. Securities to be held for indefinite periods of time and not intended to be held to maturity or on a long-term basis are classified as available for sale and carried at market value. Valuation adjustments are recorded as an adjustment to stockholders' equity. Securities held for indefinite periods of time may include securities that management intends to use as part of its asset/liability management strategy or have been acquired in business acquisitions and are designated to be sold. Gains or losses on sales of securities are computed on the basis of specific identification of the adjusted cost of each security. Trading account securities are carried at market. Valuation adjustments are included in other revenue in the consolidated statements of income. Loans--Loans, which include lease financing receivables, are stated at the principal amount. Interest is accrued on all loans not discounted by applying the interest rate to the amount outstanding. On discounted loans, income is recognized on a basis which results in approximately level rates of return over the term of the loans. Loan origination and commitment fees and certain direct loan origination costs are being deferred where material and the net amount amortized as an adjustment of the related loans' yield. These amounts are being amortized over the contractual life of the related loans. Where it is not reasonable to expect that income will be realized, accrual of income ceases and these loans are placed on a "cash basis" for purposes of income recognition. Loans upon which foreclosure action is commenced or for which borrowers have begun bankruptcy proceedings are reviewed individually as to continuation of interest accrual. Mortgage loans held for sale are carried at the lower of aggregate cost or market, after consideration of related loan sale commitments. Reserve for loan losses--The reserve for loan losses is maintained at a level adequate to provide for potential loan losses through charges to operating expense. The reserve is based upon a continuing review of loans which includes consideration of actual net loan loss experience, changes in the size and character of the loan portfolio, identification of problem situations which may affect the borrowers' ability to repay and evaluation of current economic conditions. Loan losses are recognized through charges to the reserve. Installment and credit card loan losses are charged to the reserve based upon fixed delinquency periods. All other loans are evaluated individually and charged to the reserve to the extent that outstanding principal balances are deemed uncollectible. Any subsequent recoveries are added to the reserve. Other Real Estate--Other real estate, the balance of which is included in other assets, includes primarily properties acquired through loan foreclosure proceedings or acceptance of deeds in lieu of foreclosure. These properties are recorded at the lower of the carrying value of the related loans or the fair market value of the real estate acquired less the estimated costs to sell the real estate. Initial valuation adjustments, if any, are charged against the reserve for loan losses. Subsequent reevaluations of the properties, which indicate reduced value, are recognized through charges to operating expense. Revenues and expenditures related to holding and operating these properties are included in other operating expense. 6 8 Bank premises and equipment--Bank premises and equipment are stated at cost less depreciation, which has been accumulated on the straight-line basis. Intangible assets--Intangible assets attributable to the value of core deposits and goodwill acquired are included in other assets and are amortized over fifteen to twenty-five years, on a straight-line basis. The value of mortgage servicing rights acquired is amortized in relation to the servicing revenue expected to be earned. Firstar periodically evaluates the carrying value and remaining amortization periods of intangible assets for impairment. Adjustments are recorded when the benefit of the intangible asset decreases due to disposition of branches or deposits with regard to goodwill and core deposit premium, and prepayments of serviced loans for purchased mortgage servicing rights. Income taxes--Firstar and its subsidiaries file a consolidated federal income tax return. The effect of items of income and expense that are recognized for financial reporting purposes in periods other than those in which they are recognized for tax purposes are reflected as a current or deferred tax asset or liability based on current tax laws. Accordingly, income taxes provided in the consolidated statements of income include charges or credits for deferred income taxes related to temporary differences. Foreign currency transactions--Monetary assets and liabilities recorded in foreign currencies are translated at the rate of exchange in effect at each year-end. Income statement items are translated monthly using the average rate for the month. Firstar enters into forward exchange contracts on behalf of its customers and hedges its risk by entering into offsetting transactions with other counterparties. The fair value of these transactions are included in other assets and liabilities and the related gain or loss is recorded in other revenue. Cash and cash equivalents--For purposes of the consolidated statements of cash flows, cash and cash equivalents are considered to include the balance sheet caption cash and due from banks. Derivative and other financial instruments--Firstar enters into interest rate swaps and other financial instruments to manage interest rate risks arising from financial assets and financial liabilities and also as an intermediary for transactions with its customers. Interest rate instruments entered into as an intermediary are accounted for as trading instruments and are recorded in the balance sheet at fair value. Realized and unrealized changes in fair values are recognized in other operating revenue. Amounts receivable or payable under financial instruments used to manage interest rate risks are recognized as interest income or expense using the accrual method. Gains and losses on financial instruments qualifying as hedges of existing assets or liabilities are included in the carrying amount of those assets and liabilities. Gains and losses on early termination of interest rate swaps are included in the carrying amount of the related loan or debt and amortized as yield adjustments over the remaining term of the loan or debt. Fees paid or received in connection with interest rate floors and caps are deferred and amortized over the life of the instrument. Income per common share--Net Income per common share is based on the weighted average number of shares of common stock outstanding during each year, after giving effect to common stock splits and the amortization of restricted stock. The weighted average shares were 75,195,000 in 1994, 74,131,000 in 1993 and 71,992,000 in 1992. For calculation purposes, earnings are reduced by preferred stock dividends. Common stock equivalents are not significant in any year presented. 7 9 NOTE 2. MERGERS AND ACQUISITIONS The following table summarizes completed acquisitions:
TOTAL METHOD OF NAME OF INSTITUTION ASSETS ACQUISITION DATE CONSIDERATION ACCOUNTING - ---------------------------------------- ------ ---------------- --------------- ---------- (millions of dollars) 1995: Investors Bank Corp. Wayzata, MN........................ $1,134 April 1995 3,006,923 Pooling of shares of interests common stock First Moline Financial Corp. Moline, IL......................... $ 86 March 1995 313,650 shares Purchase of common stock First Colonial Bankshares Corporation Chicago, IL........................ $1,780 January 1995 7,700,767 Pooling of shares of interests common stock ------ Total............................ $3,000 ====== 1994: First Southeast Banking Corp. Lake Geneva, WI.................... $ 423 October 1994 1,801,577 Pooling of shares of interests common stock ------ Total............................ $ 423 ====== 1993: Bank of Athens Athens, WI......................... $ 102 August 1993 447,655 shares Pooling of of common stock interests Deerfield State Bank Deerfield, IL...................... 120 February 1993 676,317 shares Pooling of of common stock interests ------ Total............................ $ 222 ====== 1992: Federated Bank, S.S.B. Wauwatosa, WI...................... $ 413 September 1992 Cash $12.7 Purchase 734,616 shares of common stock Citizens National Bank of Lake Geneva Lake Geneva, WI.................... 49 August 1992 262,958 shares Pooling of of common stock interests First National Bank of Geneva Geneva, IL......................... 193 June 1992 999,704 shares Pooling of of common stock interests ------ Total............................ $ 655 ======
The acquisitions of First Colonial Bankshares Corporation and Investors Bank Corp. were completed in January and April 1995 respectively. The financial statements of Firstar Corporation as presented herein have been restated giving effect to these transactions as poolings of interests. The table below reconciles total assets and net income previously reported by Firstar Corporation to the data reported in the restated consolidated statements. 8 10 The other bank acquisitions shown above, accounted for as poolings of interests were not material to prior years' reported operating results and, accordingly, previously reported results have not been restated.
DECEMBER 31 ----------------------------------------- 1994 1993 1992 ----------- ----------- ----------- (thousands of dollars, except per share data) Total assets: Firstar Corporation................................. $15,104,307 $13,793,995 $13,168,917 First Colonial Bankshares Corporation............... 1,766,746 1,601,203 1,576,565 Investor Bank Corp. ................................ 1,124,030 1,017,085 815,844 ----------- ----------- ----------- Restated....................................... $17,995,083 $16,412,283 $15,561,326 ========== ========== ========== Net Income: Firstar Corporation................................. $ 207,743 $ 204,294 $ 165,985 First Colonial Bankshares Corporation............... 12,002 13,619 12,202 Investor Bank Corp. ................................ 6,928 10,025 7,812 ----------- ----------- ----------- Total $ 226,673 $ 227,938 $ 185,999 ========== ========== ========== Net Income per common share: Firstar Corporation................................. $ 3.22 $ 3.15 $ 2.62 Firstar Corporation -- Restated..................... 2.98 2.99 2.50
NOTE 3. INTANGIBLE ASSETS Intangible assets, net of accumulated amortization, are summarized as follows:
DECEMBER 31 ----------------------------------------- 1994 1993 1992 ----------- ----------- ----------- (thousands of dollars) Goodwill.............................................. $ 107,967 $ 98,527 $ 105,372 Core deposit intangibles.............................. 17,538 20,519 23,503 Purchased mortgage servicing rights................... 8,718 6,810 14,083 ----------- ----------- ----------- Total............................................ $ 134,223 $ 125,856 142,958 ========== ========== ========== Amortization of intangibles during year............... $ 11,746 $ 18,738 $ 22,562
9 11 NOTE 4. SECURITIES The amortized cost and approximate market values of securities are as follows:
DECEMBER 31, 1994 ---------------------------------------------------- AMORTIZED UNREALIZED UNREALIZED MARKET COST GAINS LOSSES VALUE ---------- ---------- ---------- ---------- (thousands of dollars) Held to maturity: U.S. Treasury and federal agencies............ $1,613,291 $ 1,001 $ (65,163) $1,549,129 Mortgage backed obligations of federal agencies................................... 867,990 1,889 (31,865) 838,014 State and political subdivisions.............. 1,069,755 6,913 (23,715) 1,052,953 Corporate debt................................ 78,677 103 (1,454) 77,326 Equity securities............................. 57,621 57,621 Other......................................... 63,561 63,561 ---------- ---------- ---------- ---------- Total...................................... $3,750,895 $ 9,906 $ (122,197) $3,638,604 ========= ======== ========= ========= Available for sale: U.S. Treasury and federal agencies............ $ 203,974 $ 10 $ (1,045) $ 202,939 Mortgage backed obligations of federal agencies................................... 12,672 103 (715) 12,060 State and political subdivisions.............. 7,754 59 (93) 7,720 ---------- ---------- ---------- ---------- Total...................................... $ 224,400 $ 172 $ (1,853) $ 222,719 ========= ======== ========= =========
DECEMBER 31, 1993 ---------------------------------------------------- AMORTIZED UNREALIZED UNREALIZED MARKET COST GAINS LOSSES VALUE ---------- ---------- ---------- ---------- (thousands of dollars) Held to maturity: U.S. Treasury and federal agencies............ $1,510,216 $ 24,890 $ (2,992) $1,532,114 Mortgage backed obligations of federal agencies................................... 361,784 15,041 (749) 376,076 State and political subdivisions.............. 1,036,236 24,785 (1,941) 1,059,080 Corporate debt................................ 108,429 1,281 (329) 109,381 Equity securities............................. 32,122 32,122 Other......................................... 101,520 101,520 ---------- ---------- ---------- ---------- Total...................................... $3,150,307 $ 65,997 $ (6,011) $3,210,293 ========= ======== ========= ========= Available for sale: U.S. Treasury and federal agencies............ $ 79,159 $ 51 $ (10) $ 79,200 Mortgage backed obligations of federal agencies................................... 93,096 529 (198) 93,427 State and political subdivisions.............. 31,767 1,464 33,231 Corporate debt................................ 3,590 (3) 3,587 ---------- ---------- ---------- ---------- Total...................................... $ 207,612 $ 2,044 $ (211) $ 209,445 ========= ======== ========= =========
10 12 The amortized cost and approximate market value of securities at December 31, 1994, by contractual maturity, are shown below. Maturities of mortgage backed obligations were estimated based on anticipated payments.
HELD TO MATURITY AVAILABLE FOR SALE ------------------------ -------------------------- AMORTIZED MARKET AMORTIZED MARKET COST VALUE COST VALUE ---------- ---------- ----------- ----------- (thousands of dollars) Due in one year or less................... $ 661,540 $ 657,936 $ 165,811 $ 165,620 Due after one year through five years..... 2,109,100 2,033,716 23,530 23,034 Due after five years through ten years.... 702,660 681,413 32,428 31,807 Due after 10 years........................ 219,974 207,918 2,631 2,258 ---------- ---------- ----------- ----------- 3,693,274 3,580,983 $ 224,400 $ 222,719 Equity securities......................... 57,621 57,621 =========== =========== ---------- ---------- Total................................ $3,750,895 $3,638,604 ========== ==========
Gross gains of $718,000, $476,000 and $2,764,000 and gross losses of $4,301,000, $56,000 and $220,000 were realized on securities sales in 1994, 1993 and 1992, respectively. The amortized cost of securities pledged to secure public or trust deposits, securities sold under repurchase agreements and for other purposes as required or permitted by law was $947,461,000 at December 31, 1994 and $821,696,000 at December 31, 1993. NOTE 5. LOANS The composition of loans, including lease financing receivables, is summarized below. Loans are presented net of unearned discount which amounted to $24,116,000 and $17,417,000 at December 31, 1994 and 1993, respectively. Commercial loans pledged to secure public deposits were $5,526,000 on December 31, 1994 and $15,444,000 on December 31, 1993. Firstar serviced $3,871 million, $3,514 million and $2,856 million of mortgage loans for other investors as of December 31, 1994, 1993 and 1992, respectively. Residential mortgage loans held for resale were $39,296,000 and $304,302,000 on December 31, 1994 and 1993, respectively.
DECEMBER 31 -------------------------- 1994 1993 ----------- ----------- (thousands of dollars) Commercial and industrial........................................ $ 2,934,609 $ 2,636,626 Real estate--construction........................................ 329,717 262,476 Real estate--mortgage............................................ 2,450,638 2,141,101 Foreign.......................................................... 32,395 31,269 Other............................................................ 931,488 894,101 ----------- ----------- Commercial..................................................... 6,678,847 5,965,573 Credit card...................................................... 575,278 547,769 Real estate--mortgage............................................ 2,414,217 2,299,100 Home equity...................................................... 767,539 645,002 Other............................................................ 1,469,948 1,367,377 ----------- ----------- Consumer....................................................... 5,226,982 4,859,248 ----------- ----------- Total....................................................... $11,905,829 $10,824,821 =========== ===========
11 13 Loans on which income is recognized only as cash payments are received or is accrued at less than the original contract rate are summarized below.
DECEMBER 31 ---------------------------------- 1994 1993 1992 -------- -------- -------- (thousands of dollars) Commercial............................................... $ 59,448 $ 57,074 $ 61,247 Consumer................................................. 9,831 10,880 13,287 -------- -------- -------- Total $ 69,279 $ 67,954 $ 74,534 ======== ======== ========
The effect of nonperforming loans on interest revenue was as follows:
YEARS ENDED DECEMBER 31 ---------------------------------- 1994 1993 1992 -------- -------- -------- (thousands of dollars) Interest at original contract rate....................... $ 8,229 $ 7,949 $ 9,423 Interest collected....................................... 3,844 2,919 2,381 -------- -------- -------- Net reduction of interest revenue................... $ 4,385 $ 5,030 $ 7,042 ======== ======== ========
Certain executive officers, directors, shareholders, and their associates of Firstar and significant subsidiaries are loan customers of the banking subsidiaries. Loans outstanding to such parties were $150.3 million on December 31, 1994 and $154.5 million on December 31, 1993. During 1994 new loans of $34.9 million were made and loan payments of $39.1 million were received. These loans were made in the ordinary course of business and on substantially the same terms as those prevailing for comparable transactions with other persons. NOTE 6. RESERVE FOR LOAN LOSSES An analysis of the reserve for loan losses is as follows:
YEARS ENDED DECEMBER 31 ---------------------------------- 1994 1993 1992 -------- -------- -------- (thousands of dollars) Balance at beginning of year............................. $189,714 $183,251 $163,197 Provision for loan losses................................ 23,891 29,090 50,733 Loan recoveries.......................................... 19,961 17,732 18,665 Loan charge-offs......................................... (47,728) (42,838) (55,477) Reserves of acquired banks............................... 4,714 2,479 6,133 -------- -------- -------- Balance at end of year................................. $190,552 $189,714 $183,251 ======== ======== ======== Charge-offs, net of recoveries, as a percentage of average loans.......................................... .25% .25% .40% Reserve as a percentage of year-end loans................ 1.60 1.75 1.87
The Financial Accounting Standards Board issued Statement No. 114, "Accounting by Creditors for Impairment of a Loan", which is effective in 1995. The Statement established procedures for determining the appropriate reserve for loan losses for loans deemed impaired. The calculation of reserve levels would be 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. This statement was adopted January 1, 1995 and did not have any significant impact on the current level of the reserve for loan losses and is not expected to effect 1995 operating results. 12 14 NOTE 7. BANK PREMISES AND EQUIPMENT Bank premises and equipment are summarized as follows:
DECEMBER 31 ------------------------ 1994 1993 ---------- --------- (thousands of dollars) Land................................................................ $ 43,655 $ 36,200 Bank premises....................................................... 318,216 282,916 Equipment........................................................... 274,274 254,083 ---------- --------- Subtotal.......................................................... 636,145 573,199 Accumulated depreciation............................................ (301,067) (268,774) ---------- --------- Total............................................................. $ 335,078 $ 304,425 ========= =========
Depreciation charged to other operating expense amounted to $40,003,000, $39,721,000 and $38,317,000 in 1994, 1993 and 1992, respectively. Rental expense for bank premises and equipment amounted to $35,804,000, $35,648,000 and $33,870,000 in 1994, 1993 and 1992, respectively. Contingent rentals and sublease rental income amounts were not significant. Occupancy expense is net of amortization of a total of $68 million of pre-tax deferred gain on a building sale which is being amortized through 1997, at which time the related leaseback expires. This amortization was $9,029,000 in 1994 and $6,312,000 in 1993 and 1992. Firstar and its subsidiaries are obligated under noncancellable operating leases for various bank premises and equipment. These leases expire intermittently over the years through 2038. The minimum rental commitments under noncancellable leases for the next five years are shown below.
PERIOD AMOUNT ---------- --------- (thousands of dollars) Bank premises and equipment........................................... 1995 $ 23,052 1996 21,872 1997 21,126 1998 18,998 1999 18,246
NOTE 8. SHORT-TERM BORROWED FUNDS Short-term borrowed funds are summarized as follows:
1994 1993 1992 ---------- ---------- --------- (thousands of dollars) Federal funds purchased and repurchase agreements: At December 31........................................ $2,133,709 $1,076,316 $ 818,266 Average during year................................... 1,530,644 777,185 647,005 Maximum month-end balance............................. 2,133,709 1,087,606 840,692 Average rate at year-end.............................. 5.59% 2.90% 2.62% Average rate during year.............................. 4.28 2.84 3.32
Federal funds purchased, which totaled $1,647 million at December 31, 1994, generally represent one-day borrowings obtained primarily from financial institutions in Firstar's marketplace in conjunction with their customer correspondent relationships with the subsidiary banks. Securities sold under repurchase agreements, which totaled $487 million at December 31, 1994, represent borrowings maturing within one year that are secured by U.S. Treasury and federal agency securities. Other short-term borrowed funds comprise primarily treasury, tax and loan notes and Federal Home Loan Bank notes. 13 15 NOTE 9. LONG-TERM DEBT Long-term debt is summarized as follows:
DECEMBER 31 -------------------- 1994 1993 -------- -------- (thousands of dollars) Federal Home Loan Bank notes............................................ $101,500 $108,000 10 1/4% subordinated notes.............................................. 78,340 78,405 10% notes............................................................... 43,910 44,200 9 1/4% subordinated notes............................................... 23,000 23,000 Other debt.............................................................. 25,795 13,030 -------- -------- Total.............................................................. $272,545 $266,635 ======== ========
Notes payable to the Federal Home Loan Bank are collateralized by Federal Home Bank stock and first mortgage real estate loans. The notes mature from 1996 through 2000 and have a variable interest rate with an average of 5.50% as of December 31, 1994. Firstar issued $100,000,000 of 10 1/4% notes under an indenture dated as of May 1, 1988. The notes, which are subordinated to all unsubordinated indebtedness of Firstar for borrowed money, are unsecured and mature May 1, 1998. The indenture contains a provision which restricts the disposition of or subjecting to lien any common stock of certain subsidiaries. Firstar issued $50,000,000 of 10% notes under an indenture dated as of June 1, 1986. The notes are unsecured and mature June 1, 1996. The indenture contains a provision which restricts the disposition of or subjecting to lien any common stock of certain subsidiaries. The 9.25% subordinate notes are unsecured and may be redeemed at par on or after December 15, 1995. The notes mature December 15, 2002. Other debt at December 31, 1994 includes notes of $2,706,000 which bear interest at 11.50% and mature in 1996, loans sold under a repurchase agreement of $10,000,000 which mature in 1999 and bear interest at a variable LIBOR based rate, a variable rate term note of $8,473,000 due in 1998, and capitalized lease obligations of $2,061,000. Long-term debt has aggregate maturities for the five years 1995 through 1999 as follows: $1,985,000 in 1995, $58,431,000 in 1996, $43,653,000 in 1997, $106,910,000 in 1998 and $10,033,000 in 1999. Firstar has repurchased portions of the 10 1/4% and 10% notes and incurred losses of $25,000, $57,000 and $605,000, in 1994, 1993 and 1992, respectively. 14 16 NOTE 10. STOCKHOLDERS' EQUITY The authorized and outstanding shares of Firstar are as follows:
DECEMBER 31 -------------------------- 1994 1993 ----------- ----------- Preferred stock, $1.00 par value Authorized--Series C............................................. 2,500,000 2,500,000 Preferred stock from acquired banks: First Colonial Bankshares Corporation, Series B Authorized.................................................... 12,500 Outstanding................................................... 7,500 First Colonial Bankshares Corporation, Series C Authorized.................................................... 40,250 40,250 Outstanding................................................... 38,775 40,250 Investors Bank Corp. Authorized.................................................... 1,000,000 1,000,000 Outstanding................................................... 303,640 303,640 Common stock, $1.25 par value: Authorized.................................................... 120,000,000 120,000,000 Outstanding (net of treasury stock)........................... 76,379,532 74,845,673
Under the Firstar Shareholder rights plan each share of common stock entitles its holder to one-half right. Under certain conditions, each right entitles the holder to purchase one one-hundredth of a share of Series C preferred stock at a price of $85, subject to adjustment. The rights will only be exercisable if a person or group has acquired, or announced an intention to acquire, 20% or more of the outstanding shares of Firstar common stock. Under certain circumstances, including the existence of a 20% acquiring party, each holder of a right, other than the acquiring party, will be entitled to purchase at the exercise price Firstar common shares having a market value of two times the exercise price. In the event of the acquisition of Firstar by another company subsequent to a party acquiring 20% or more of Firstar common stock, each holder of a right is entitled to receive the acquiring company's common shares having a market value of two times the exercise price. The rights may be redeemed at a price of $.01 per right prior to the existence of a 20% acquiring party, and thereafter, may be exchanged for one common share per right prior to the existence of a 50% acquiring party. The rights will expire on January 19, 1999. The rights do not have voting or dividend rights and until they become exercisable, have no dilutive effect on the earnings of Firstar. Under the rights plan, the Board of Directors of Firstar may reduce the thresholds applicable to the rights from 20% to not less than 10%. Preferred shares, when issued, rank prior to common shares both as to dividends and liquidation but have no general voting rights. The Series C preferred stock, none of which is outstanding, is entitled to 100 votes per share and other rights such that the value of a one one-hundredth interest in a Series C preferred share should approximate the value of one common share. Firstar redeemed all of its Series B preferred stock on December 29, 1993 at $103 per share plus accrued dividends. Dividends deducted from net income for purposes of determining net income applicable to common stockholders were $3,266,000 in 1993 and $3,747,000 in 1992. First Colonial Bankshares Corporation in April, 1992 issued 40,250 shares of its Series C preference stock, represented by 863,765 depository shares. Each share receives annual dividends of $35.00, payable quarterly, and is convertible into 21.46 shares of common stock. During 1994, a total of 1,475 shares were converted into 31,653 shares of common stock. Shares may be redeemed after June 30, 1997 at $500 per share. Dividends deducted from net income for purposes of determining net income applicable to common stockholders were $1,389,000 in 1994, $1,409,000 in 1993, and $951,000 in 1992. On January 31, 1995 Firstar converted 38,775 shares of First Colonial Bankshares Corporation Series C preference stock into 38,775 shares of its Series D, preferred stock in connection with the acquisition of First Colonial Bankshares Corporation. 15 17 Investors Bank Corp. in November, 1991 issued 303,640 shares of preferred stock in exchange for $7,591,000 of their 12.75% subordinated capital notes due 1999. The preferred stock was issued in units consisting of one share of preferred stock and one warrant to purchase one half of Investor's Bank Corp. common stock. Each share received annual dividends of $3.1875 until October, 1993 and are at an annual rate of $2.75 thereafter. Dividends are cumulative from the date of original issue and are payable quarterly. Dividends deducted from net income for purposes of determining net income applicable to common stockholders were $835,000 in 1994, $946,000 in 1993, and $968,000 in 1992. Shares are redeemable on or after October 31, 1996, at $25.00 per share plus accumulated and unpaid dividends. Pursuant to the merger of Investors Bank Corp. and Firstar Corporation each outstanding share of preferred stock would have the right to receive $27.50 plus accumulated and unpaid dividends. Pursuant to the merger of Investor Bank Corp. and Firstar Corporation the warrants became warrants to purchase Firstar common stock. The warrants permit the purchase of 174,758 shares of common stock at a price of $12.75 per share on or after February 11, 1992. The warrants expire on November 13, 1996. First Colonial Bankshares Corporation converted in March 1994, all issued and outstanding shares of their Series B preference stock into 57,938 shares of common stock. Dividends deducted from net income for purposes of determining net applicable for common stock were $102,000 in 1993 and $102,000 in 1992. First Colonial Bankshares Corporation in September 1993, redeemed all issued and outstanding shares of their Series A preferred stock at a price of $62.00 per share. Dividends deducted from net income for purposes of determining net income applicable for common stock were $284,000 in 1993 and $379,000 in 1992. In conjunction with long-term incentive plans, 94,414 shares of restricted common stock are being held in escrow for executive officers as of December 31, 1994. The shares cannot be sold prior to the end of the vesting period and are subject to adjustment in accordance with the terms of the award. Firstar reacquired 234,200 shares of its common stock during 1994 which are expected to be reissued in 1995 in connection with a specific purchase business combination. NOTE 11. STOCK OPTIONS Firstar has an incentive stock plan that provides for a maximum grant of 5,600,000 stock options, stock appreciation rights and/or shares of stock. The options expire ten years and one month after the date of grant. Firstar in connection with bank acquisitions, converted existing options for shares of the acquired banks into an equivalent number of options for shares of Firstar common stock. As of December 31, 1994 these 16 18 options totalled 1,414,996 with an exercise price of $4.11 to $25.99. No additional stock options will be awarded under these plans. The following table summarizes option activity under these plans:
NUMBER OF SHARES OPTION PRICE --------- ---------------- Options outstanding at December 31, 1991......................... 2,476,206 $ 2.88 to $24.12 Granted........................................................ 627,829 10.59 to 25.13 Exercised...................................................... (397,533) 2.88 to 25.13 Cancelled...................................................... (79,455) 4.76 to 25.13 --------- Options outstanding at December 31, 1992......................... 2,627,047 2.88 to 25.13 Granted........................................................ 633,086 12.32 to 32.50 Exercised...................................................... (328,031) 2.88 to 21.68 Cancelled...................................................... (119,230) 5.19 to 32.50 --------- Options outstanding at December 31, 1993......................... 2,812,872 2.88 to 32.50 Granted........................................................ 549,258 19.59 to 31.25 Assumed through acquisitions................................... 27,832 9.36 to 15.72 Exercised...................................................... (262,093) 2.88 to 25.13 Cancelled...................................................... (50,305) 2.88 to 32.50 --------- Options outstanding at December 31, 1994......................... 3,077,564 4.11 to 32.50 =========
At December 31, 1994, 2,356,964 options to acquire common stock were exercisable, including all options of acquired banks whose options vested on the merger date. In January 1995, options to acquire 499,300 shares of common stock at $27.38 to $27.50 per share were granted. NOTE 12. OTHER OPERATING EXPENSE A summary of other operating expense is as follows:
YEARS ENDED DECEMBER 31 -------------------------------- 1994 1993 1992 -------- -------- -------- (thousands of dollars) F.D.I.C. insurance............................................ $ 28,361 $ 27,898 $ 26,770 Business development.......................................... 26,602 27,789 27,131 Stationery and supplies....................................... 18,087 20,956 20,207 Information processing expense................................ 20,957 19,034 18,274 Professional fees............................................. 17,937 18,355 17,126 Delivery...................................................... 16,105 17,046 17,615 Check kiting loss............................................. 22,000 Other......................................................... 68,187 75,877 84,853 -------- -------- -------- Total....................................................... $218,236 $206,955 $211,976 ======== ======== ========
NOTE 13. EMPLOYEE BENEFIT PLANS Firstar and its subsidiaries have non-contributory defined benefit pension plans covering substantially all employees. The benefits are based upon years of service and the employee's compensation during the last five years of employment. The funding policy is to contribute annually the minimum amount necessary to satisfy 17 19 federal minimum funding standards. Plan assets are primarily invested in listed stocks and U.S. Treasury and federal agency securities. The table below summarizes data relative to the plans.
DECEMBER 31 -------------------------------- 1994 1993 1992 -------- -------- -------- (thousands of dollars) Actuarial present value of benefit obligations: Vested benefit obligation................................... $175,537 $168,978 $145,806 Accumulated benefit obligation.............................. 179,086 172,742 148,892 Projected benefit obligation................................ 218,660 215,931 190,405 Plan assets at fair value..................................... 195,436 205,941 190,667 Plan assets (less than) in excess of projected benefit obligation.................................................. (23,224) (9,990) 262 Unrecognized prior service cost............................... (2,075) (2,360) (859) Unrecognized net asset........................................ (5,914) (7,147) (8,381) Unrecognized net loss (gain).................................. 18,797 4,341 (5,857) -------- -------- -------- Pension liability........................................ $(12,416) $(15,156) $(14,835) ======== ======== ======== Net pension expense comprised the following: Service cost................................................ $ 7,852 $ 7,176 $ 6,739 Interest cost on projected benefit obligation............... 16,355 15,705 14,389 Actual loss (return) on plan assets......................... 8,725 (20,008) (13,133) Net amortization and deferral............................... (26,755) 2,994 (2,870) -------- -------- -------- Net pension expense...................................... $ 6,177 $ 5,867 $ 5,125 ======== ======== ======== Assumptions used in actuarial values: Discount rate............................................... 8.50% 7.75% 8.25% Rates of increase in compensation levels.................... 5.50 5.50 6.00 Expected rate of return on plan assets...................... 9.00 9.50 9.50
Firstar also has unfunded pension plans covering certain employees. Interest rates used in calculating the actuarial values are essentially the same as in the previously described plans. The table below summarizes data relative to the plans.
DECEMBER 31 -------------------------------- 1994 1993 1992 -------- -------- -------- (thousands of dollars) Projected benefit obligation.................................. $(12,238) $ (9,275) $ (6,257) Unrecognized prior service cost............................... 2,779 Unrecognized transition obligation............................ 189 232 275 Unrecognized net loss......................................... 2,641 3,847 1,486 -------- -------- -------- Pension liability........................................ $ (6,629) $ (5,196) $ (4,496) ======== ======== ======== Net pension expense comprised the following: Service cost................................................ $ 436 $ 218 $ 131 Interest cost on projected benefit obligation............... 916 612 474 Net amortization and deferral............................... 416 211 122 -------- -------- -------- Net pension expense...................................... $ 1,768 $ 1,041 $ 727 ======== ======== ========
First Colonial Bankshares Corporation's pension plan existed as a defined plan until October 31, 1989, the effective date of the plan curtailment. Under the curtailment, a plan participant's account is maintained by the plan and is accessible only when the participant attains age 59 1/2 or upon separation from the Company. Payouts under the plan are made at the greater of the participant's account balance on the date of curtailment increased annually by 8%, or an amount based upon the accrued benefit as of the date of the curtailment 18 20 discounted at the current pension Benefit Guaranty Corporation's rate. The table below summarizes the plan's funded status.
DECEMBER 31 --------------------------------- 1994 1993 1992 ------- -------- -------- (thousands of dollars) Actuarial present value of benefit obligations: Vested benefit obligation................................. $(1,511) $ (2,193) $ (1,933) Projected benefit obligation.............................. (1,511) (2,193) (1,933) Plan assets at fair value................................... 2,114 2,492 2,577 Plan assets in excess of projected benefit obligation....... 603 299 644 Unrecognized net loss....................................... 673 1,125 991 ------- -------- -------- Prepaid pension cost................................. $ 1,276 $ 1,424 $ 1,635 ======= ======== ======== Net pension expense comprised the following: Interest cost on projected benefit obligation............. $ 143 $ 149 $ 136 Actual loss (return) on plan assets....................... 33 (134) (127) Net amortization and deferral............................. (155) 14 (9) ------- -------- -------- Net periodic pension expense........................... 21 29 0 Loss recognized on settlements......................... 128 182 ------- -------- -------- Total pension expense................................ $ 149 $ 211 $ 0 ======= ======== ======== Assumptions used in actuarial values: Discount rate............................................. 8.25% 7.00% 7.25% Expected rate of return on plan assets.................... 8.00 8.00 8.00
Firstar has profit sharing plans under which eligible employees can participate by contributing a portion of their salary for investment in one or more trust funds. Contributions are made to the account of each participant based upon profitability or at the discretion of the board of directors. Amounts expensed in connection with this plan were $11,804,000 in 1994, $11,057,000 in 1993 and $9,705,000 in 1992. In addition to pension benefits, certain health care benefits are made available to active and retired employees. The table below summarizes data relative to this benefit program. The program is unfunded and the transition obligation is being amortized over 20 years.
DECEMBER 31 --------------------- 1994 1993 -------- -------- (thousands of dollars) Accumulated postretirement benefit obligation: Retirees........................................................... $(41,029) $(33,507) Fully eligible active plan participants............................ (7,340) (18,056) Other active plan participants..................................... (13,290) (20,354) -------- -------- Total........................................................... (61,659) (71,917) Unrecognized transition obligation................................. 53,146 56,099 Unrecognized net (gain) loss....................................... (4,872) 8,854 -------- -------- Postretirement benefit liability................................ $(13,385) $ (6,964) ======== ======== Net postretirement benefit expense comprised the following: Service cost....................................................... $ 1,220 $ 1,515 Interest cost...................................................... 4,721 4,938 Amortization of transition obligation.............................. 2,953 2,953 -------- -------- Net postretirement benefit expense.............................. $ 8,894 $ 9,406 ======== ========
For measurement purposes, an 11% annual rate of increase in the per capita cost of covered health care benefits was assumed, decreasing to 6% by 2004 and remaining at that level thereafter. The health care cost 19 21 trend rate assumption has an effect on the amounts reported. To illustrate, increasing the assumed health care cost trend rates by one percentage point in each year would increase the accumulated postretirement accumulated benefit obligation by $4,954,000 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost by $405,000. The discount rate used in determining the accumulated postretirement benefit obligation was 8.50% and 7.75% at December 31, 1994 and 1993, respectively. NOTE 14. INCOME TAXES Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", was adopted by Firstar on January 1, 1993. The cumulative effect of adoption of Statement No. 109 did not have a significant effect on net income in 1993. The taxes applicable to net income were as follows:
YEARS ENDED DECEMBER 31 -------------------------------- 1994 1993 1992 -------- -------- -------- (thousands of dollars) Current income taxes: Federal..................................................... $ 91,584 $ 95,271 $ 78,377 State and other............................................. 20,566 20,940 17,294 -------- -------- -------- Subtotal................................................. 112,150 116,211 95,671 Deferred income taxes (benefit): Federal..................................................... 419 (6,454) (12,379) State and other............................................. 139 (798) (1,161) -------- -------- -------- Subtotal................................................. 558 (7,252) (13,540) Cumulative effect of change in accounting principle........... (2,404) -------- -------- -------- Provision for income taxes............................... $112,708 $106,555 $ 82,131 ======== ======== ========
Income tax expense differed from the amount computed by applying the federal statutory rate of 35% (34% in 1992) to income before taxes as shown below:
YEARS ENDED DECEMBER 31 -------------------------------- 1994 1993 1992 -------- -------- -------- (thousands of dollars) Tax expense at statutory rate................................. $118,989 $117,261 $ 91,393 Increase (reduction) in taxes resulting from: Tax-exempt income........................................... (21,001) (20,563) (22,688) State and local taxes--net of federal income tax benefit.... 13,401 13,092 10,648 Amortization of intangibles................................. 2,542 2,265 2,997 Cumulative effect of change in accounting principle......... (2,404) Adjustment to deferred tax assets and liabilities for enacted changes in tax laws and rates.................... (1,586) Other--net.................................................. (1,223) (1,510) (219) -------- -------- -------- Provision for income taxes............................... $112,708 $106,555 $ 82,131 ======== ======== ========
20 22 The significant components of deferred income tax expense attributable to income from continuing operations are as follows:
YEARS ENDED DECEMBER 31 -------------------- 1994 1993 -------- -------- (thousands of dollars) Deferred tax expense (exclusive of the effects of other components listed below)......................................................... $ 38 $ (6,364) Adjustments to deferred tax assets and liabilities for enacted changes in tax laws and rates................................................. (1,586) Change in balance of the valuation allowance for deferred tax assets.... 520 698 -------- -------- Total.............................................................. $ 558 $ (7,252) ======== ========
The significant components of the net deferred tax asset were as follows:
YEARS ENDED DECEMBER 31 -------------------- 1994 1993 -------- -------- (thousands of dollars) Deferred tax liabilities: Depreciation of bank premises and equipment........................... $(13,514) $(13,050) Equipment leased to customers......................................... (14,276) (16,478) Difference in basis of certain acquired assets accounted for as a purchase........................................................... (9,265) (10,993) Deferred tax assets: Pension costs......................................................... 11,169 8,628 Reserve for loan losses............................................... 75,191 75,016 Other real estate..................................................... 3,904 3,187 Deferred gain on sale of building..................................... 7,720 11,338 Deferred compensation................................................. 7,089 6,977 State and federal net operating loss carryforwards.................... 10,532 8,965 Other--net............................................................ 9,795 8,909 -------- -------- Subtotal........................................................... 88,345 82,499 Less valuation allowance................................................ (11,066) (9,271) -------- -------- Net deferred tax asset............................................. $ 77,279 $ 73,228 ======== ========
The deferred tax asset increased due to tax benefits recorded on securities which were marked-to-market in accordance with Statement No. 115 and acquisitions. The valuation allowance has been recognized primarily to offset deferred tax assets related to state net operating loss carryforwards totaling approximately $187,000,000 which expire at various times within the next 15 years. If realized, the tax benefit for these items will reduce current tax expense for that period. A valuation allowance of $1,275,000 was added in 1994 due to the acquisition of First Southeast Banking Corp. Other assets include net deferred income tax charges of $77,279,000 and $73,228,000 at December 31, 1994 and 1993, respectively. Furthermore, amounts originally reported for 1993 have been reclassified to reflect actual tax return results. NOTE 15. COMMITMENTS AND CONTINGENT LIABILITIES Firstar has outstanding at any time a significant number of commitments to extend credits to its customers. These commitments include revolving credit agreements, term loan commitments, short-term borrowing agreements and standby letters of credit. These commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated balance sheets. 21 23 Commitments to extend credit are agreements to lend to a customer as long as there is not a violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Credit card commitments are unsecured agreements to extend credit. Such commitments are reviewed periodically, at which time the commitments may be maintained, increased, decreased or canceled depending upon evaluation of the customer's credit worthiness and other considerations. Standby and commercial letters of credit are conditional commitments issued by Firstar to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. Firstar uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Firstar evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on management's credit evaluation of the party. Firstar originates and sells residential mortgage loans as a part of various mortgage-backed security programs sponsored by United States government agencies or government-sponsored agencies, such as the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association and the Government National Mortgage Association. These sales are often subject to certain recourse provisions in the event of default by the borrower. The following is a summary of such commitments at December 31, 1994 and 1993:
DECEMBER 31 --------------------- 1994 1993 ------ ------ (millions of dollars) Commitments to extend credit........................................... $4,461 $4,140 Credit card lines...................................................... 1,543 1,365 Standby and commercial letters of credit............................... 422 372 Mortgage loans sold with recourse...................................... 36 27
Firstar and its subsidiaries are subject to various legal actions and proceedings in the normal course of business, some of which involve substantial claims for compensatory or punitive damages. Although litigation is subject to many uncertainties and the ultimate exposure with respect to these matters cannot be ascertained, management does not believe that the final outcome will have a material adverse effect on the financial condition of Firstar. NOTE 16. REGULATORY RESTRICTIONS ON SUBSIDIARY DIVIDENDS AND CASH Federal regulations require Firstar to maintain as reserves, minimum cash balances based on deposit levels at subsidiary banks. Cash balances restricted from usage due to these requirements were $253 million and $276 million at December 31, 1994 and 1993, respectively. Firstar's subsidiary banks are restricted by regulation as to the amount of funds which can be transferred to the parent in the form of dividends. As of December 31, 1994, $255 million could be paid to Firstar by subsidiary banks in the form of dividends. In addition each subsidiary bank could pay dividends to Firstar in an amount which approximates Firstar's equity in their 1995 net income. The payment of dividends by any subsidiary bank may also be affected by other factors beyond this regulatory limitation, such as maintenance of adequate capital for each subsidiary bank. 22 24 NOTE 17. DERIVATIVE FINANCIAL INSTRUMENTS Rate Risk Management As part of its asset and liability management, Firstar uses various types of interest rate contracts for the purpose of managing its interest rate risks. The use of interest rate contracts enables Firstar to synthetically alter the repricing characteristics of designated earning assets and interest-bearing liabilities. The following tables summarize the notional amounts of interest rate contracts at December 31, 1994, used by Firstar in its asset and liability management process:
INTEREST RATE SWAPS ------------------------------------------- RECEIVE FIXED RATE TOTAL ------------------- INTEREST INDEX RECEIVE PERIODIC CAPS AND RATE AMORTIZING OTHER VARIABLE CAPS FLOORS CONTRACTS ---------- ----- -------- -------- -------- --------- (millions of dollars) December 31, 1992........................ $ $ 113 $ 193 $ $ 80 $ 386 Additions.............................. 200 10 50 720 120 1,100 Maturities............................. (63) (57) (20) (140) ---- ----- ------ ---- ---- ------- December 31, 1993........................ 200 60 186 720 180 1,346 Additions.............................. 90 50 5 210 241 596 Maturities............................. (35) (115) (40) (190) ---- ----- ------ ---- ---- ------- December 31, 1994........................ $290 $ 75 $ 76 $930 $381 $ 1,752 ==== ===== ====== ==== ==== =======
Index amortizing interest rate swaps are used to convert variable rate loans to a fixed rate basis. The amortizing feature of these swaps serves to extend the maturity after a predetermined mandatory period if the three-month LIBOR index rate is above a pre-established reference rate on a quarterly basis. Additionally, the notional amount of the swaps is reduced on a quarterly basis based upon pre-established rates beginning in 1997. Interest rate swaps used to convert variable rate loans to fixed rate loans have a total notional value of $75 million. Other swaps totalling $76 million were used to convert fixed rate loans and securities to a variable rate basis. Interest rate swaps with periodic caps involve the exchange of LIBOR based variable interest payments with one party receiving a fixed basis point shim over the LIBOR index, subject to a 25 basis point cap in quarterly increases in rates receivable by Firstar. These swaps were entered into in 1993 and early 1994, when interest rates were at cycle lows, to preserve the net interest margin on variable rate loans which were funded by low cost savings and transaction deposit accounts. These swaps hedge loans of $230 million and deposits of $700 million. Interest rate floors provide for the receipt of payments when the three month LIBOR rate is below a predetermined interest rate floor. Firstar entered into $195 million of floors to hedge variable rate loans against a decline in interest rates. Floors were also entered into to hedge $106 million of deposits where such deposits have a guaranteed interest rate. Interest rate caps provide for the receipt of payments when the three month LIBOR rate exceeds predetermined interest rate caps. These instruments manage interest rate risk on securities and loans. 23 25 The maturity of derivative financial instruments as of December 31, 1994 is as follows:
MATURITY RANGE OF DERIVATIVE FINANCIAL INSTRUMENTS ------------------------------------------------------------------------------------------- WEIGHTED MARKET AVERAGE VALUE ASSET 1995 1996 1997 1998 1999 BEYOND TOTAL MATURITIES (LIABILITY) ----- ----- ----- ----- ----- ------ ------ ---------- ----------- (millions of dollars) Interest Rate Swaps Receive variable........... $ 37 $ 6 $ 25 $ 8 $ 76 1.5 yr $ (0.2) Average receive rate..... 5.19% 6.12% 6.19% 6.31% 5.79% Average pay rate......... 5.56% 6.52% 8.33% 8.59% 6.85% Receive fixed.............. $ 20 $ 55 $ 75 1.2 yrs (1.8) Average receive rate..... 6.39% 7.20% 6.99% Average pay rate......... 6.75% 7.07% 6.99% Receive fixed--amortizing.. $ 100 $ 100 $ 90 $ 290 3.4 yrs (23.2) Average receive rate..... 4.90% 5.17% 6.00 5.33% Average pay rate......... 5.62% 5.75% 6.50 5.94% Periodic cap............... $ 5 $ 205 $ 620 $ 100 $ 930 2.3 yrs (38.8) Average receive rate..... 6.54% 4.91% 4.34% 4.86% 4.54% Average pay rate......... 6.50% 6.16% 5.49% 5.94% 5.69% Interest Rate Floors......... $ 10 $ 50 $ 10 $ 201 $ 30 $ 301 4.3 yrs 1.2 Average floor rate......... 4.50% 4.70% 5.00% 5.04% 5.17% 4.98% Interest Rate Caps........... $ 80 $ 80 .6 yr 1.2 Average cap rate........... 4.00% 4.00% ----- ----- ----- ----- ----- ----- ------ ------- Total.................. $ 142 $ 276 $ 795 $ 210 $ 299 $ 30 $1,752 2.7 yrs $ (61.6) ===== ===== ===== ===== ===== ===== ====== =======
- ------------ All interest rates represent rates in effect on December 31, 1994. Index rate for interest rate caps/floors is three month LIBOR. The notional values of derivative financial instruments represent the amounts on which interest payments are exchanged between the counterparties. Those notional values do not represent direct credit exposures. Firstar is exposed to credit-related losses in the event of nonperformance by counterparties to these instruments but does not expect any counterparty to fail to meet their obligations. Where appropriate, Firstar requires collateral based upon the positive market value of the exposure taking into account bi-lateral netting agreements with certain counterparties. Based on market values, Firstars' credit exposure was $3.6 million at December 31, 1994. Firstar enters into both mandatory and optional commitments to sell groups of residential mortgage loans that it originates or purchases as part of its mortgage banking activities. Firstar commits to sell the loans at specified prices in a future period typically within 90 days. The risk associated with these commitments consists primarily of loans not closing in sufficient volumes and at appropriate yields to meet the sale commitments. Firstar had contracts totaling $44 million and $328 million on December 31, 1994 and 1993, respectively. Gains or losses on these contracts are included in the determination of the market value of mortgages held for sale. 24 26 Trading Activities Firstar also acts as an intermediary for customers in their management of interest rate and foreign currency rate risk. In this regard, Firstar will enter into interest rate swaps, caps, floors and foreign exchange contracts with customers to minimize their exposure to market risk. Firstar enters into essentially offsetting transactions with other counterparties. Customer related derivative activity is marked-to-market value. The credit exposure at year-end of $21.1 million is represented by the fair value of contracts with a positive value. Gross credit exposure amounts disregard the value of any collateral. Revenue from this intermediary activity was $3.2 million and $1.8 million in 1994 and 1993 respectively. Information on these transactions is shown below.
1994 1993 ------------------------------- ------------------------------- ESTIMATED ESTIMATED FAIR VALUE FAIR VALUE NOTIONAL ------------------- NOTIONAL ------------------- AMOUNT YEAR-END AVERAGE AMOUNT YEAR-END AVERAGE -------- -------- ------- -------- -------- ------- (millions of dollars) Interest Rate Swaps: In a receivable position............... $442 $ 18.1 $21.8 $586 $ 10.0 $11.3 In a payable position.................. 442 18.5 21.3 586 9.1 10.6 Interest Rate Caps/Floors: Held................................... 115 2.2 1.3 36 .1 .1 Written................................ 115 2.2 1.3 36 .1 .1 Foreign Exchange Contracts: In a receivable position............... 28 .7 1.0 39 1.5 N/A In a payable position.................. 29 .7 1.1 38 1.4 N/A
25 27 NOTE 18. FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments", requires that Firstar disclose estimated fair values for its financial instruments. Fair value estimates were based on relevant market data and information about the various financial instruments. These estimates do not reflect any premium or discount that could result from offering for sale at one time Firstar's entire holdings of a particular financial instrument. Because no market exists for a significant portion of Firstar's financial instruments, fair value estimates are based on judgments regarding current economic conditions, risk characteristics of various financial instruments, future expected loss experience, and other factors. These estimates are subjective and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on and off balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities which are not considered financial instruments. Significant assets that are not considered financial instruments include goodwill, core deposit-intangibles, certain customer relationships and fixed assets. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered. Fair value estimates, methods, and assumptions are set forth below for Firstar's financial instruments. Cash and short-term investments--The carrying amounts for short-term investments (which include interest-bearing deposits with banks, federal funds sold and resale agreements) approximate fair value because they mature in 90 days or less and do not represent unanticipated credit concerns. Securities--Estimated fair value for securities is based on quoted market prices. The fair value of certain small issues and municipal securities which are not readily available through market quotations is assumed to equal carrying value as these securities generally have short terms. These securities do not represent a significant portion of the portfolio. Loans--Fair values were estimated for loans with similar financial characteristics. The commercial loan portfolio was separated into credit risk categories by variable and fixed rate loans. The fair value of performing loans, except for internally criticized commercial and lease financing loans, was calculated by discounting cash flows using an estimated discount rate that reflects current market rates, the type of loan, credit risk inherent in the loan category and repricing characteristics. Fair value for criticized commercial loans was calculated by reducing the carrying value by an amount that reflects the estimated principal loss. This loss was based on internal credit analysis of specific borrowers taking into consideration past loan loss experience and trends in loan quality. For lease financing loans, carrying value was considered to approximate fair value. The fair value of credit card loans was estimated using the net present value method. Credit card portfolios are not actively traded and the discount rate used reflects an estimated rate of return based on the credit quality of the portfolio. This estimate does not include the value that relates to estimated cash flows from new loans generated from existing cardholders over the remaining life of the portfolio. For residential mortgages, fair value was estimated by discounting cash flows adjusted for anticipated prepayments using discount rates based on current market rates for similar loans. Deposits--The fair value of deposits with no stated maturity, such as interest bearing and non-interest bearing demand, savings and money market accounts, is equal to the amount payable on demand. The fair value of certificates of deposit is based on the discounted value of contractual cash flows using current market rates for similar types of deposits. Borrowed funds--The carrying value of short-term borrowed funds approximate fair value as they are payable within three months or less. The estimated fair value of long-term debt is based on broker quotations, when available. Debt for which quoted prices were not available was valued using cash flows discounted at a current market rate for similar types of debt. 26 28 Derivative financial instruments--The fair value of interest rate swap agreements is based on the present value of the swap primarily using dealer quotes. Fair values for caps and floors were obtained using an option pricing model. These values represent the estimated amount Firstar would receive or pay to terminate the contracts or agreements taking into account current interest rates and market volatility. The fair value of commitments to extend credit and standby letters of credit was estimated using fees currently charged to enter into similar agreements. The fair value of credit card lines is based on cardholder fees currently being charged. The estimated fair value of Firstar's financial instruments is summarized as follows:
DECEMBER 31, 1994 DECEMBER 31, 1993 -------------------------- -------------------------- CARRYING ESTIMATED CARRYING ESTIMATED VALUE FAIR VALUE VALUE FAIR VALUE ----------- ----------- ----------- ----------- (thousands of dollars) Financial assets: Cash and short-term investments......... $ 1,474,518 $ 1,474,518 $ 1,670,725 $ 1,670,725 Trading securities...................... 29,050 29,050 12,491 12,491 Securities available for sale........... 222,719 222,719 209,445 209,445 Securities held to maturity............. 3,750,895 3,638,604 3,150,307 3,210,293 Loans, net of allowance for loan losses............................... 11,715,277 11,501,567 10,635,107 10,883,943 Financial liabilities: Deposits: Without stated maturities............ 8,736,971 8,736,971 8,924,723 8,924,723 With stated maturities............... 4,672,244 4,661,409 4,208,600 4,239,524 Short-term borrowed funds............... 2,497,478 2,497,478 1,397,106 1,397,106 Long-term debt.......................... 272,545 272,464 266,635 284,646 Derivative financial instruments: Asset and liability management: Interest rate instruments: Asset.............................. -- 3,728 -- 3,981 Liability.......................... -- 64,778 -- 7,792 Credit commitments...................... -- 13,643 -- 15,345 As Intermediary for customers: Interest rate contracts: Asset.............................. 20,491 20,491 -- 10,091 Liability.......................... 20,843 20,843 -- 9,195 Foreign exchange contracts: Asset.............................. 740 740 1,535 1,535 Liability.......................... 659 659 1,354 1,354
27 29 NOTE 19. PARENT CORPORATION CONDENSED FINANCIAL STATEMENTS BALANCE SHEETS
DECEMBER 31 ------------------------ 1994 1993 ---------- ---------- (thousands of dollars) Assets: Cash and due from banks............................................ $ 670 $ 124 Short-term investments............................................. 70,950 52,485 Commercial loans................................................... 424 694 Loans to bank subsidiaries......................................... 35,000 25,000 Loans to other subsidiaries........................................ 3,758 8,018 Investment in bank subsidiaries.................................... 1,522,825 1,396,922 Investment in other subsidiaries................................... 15,668 13,473 Other assets....................................................... 7,266 6,166 ---------- ---------- Total assets.................................................... $1,656,561 $1,502,882 ========== ========== Liabilities and stockholders' equity: Long-term debt..................................................... $ 124,956 $ 125,311 Other liabilities.................................................. 18,920 18,257 Stockholders' equity............................................... 1,512,685 1,359,314 ---------- ---------- Total liabilities and stockholders' equity...................... $1,656,561 $1,502,882 ========== ==========
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31 -------------------------------------- 1994 1993 1992 ---------- ---------- ---------- (thousands of dollars) Revenue: Dividends from bank subsidiaries....................... $ 119,920 $ 135,519 $ 90,611 Dividends from other subsidiaries...................... 4,000 4,024 2,000 Fees from subsidiaries................................. 22,859 21,566 20,005 Investment and loan income............................. 4,897 3,784 3,834 Other revenue.......................................... 1,201 1,673 148 ---------- ---------- ---------- Total revenue....................................... 152,877 166,566 116,598 Expense: Interest............................................... 12,748 13,045 13,578 Salaries and employee benefits......................... 16,003 15,267 14,182 Other expense.......................................... 12,396 10,508 13,290 ---------- ---------- ---------- Total expense....................................... 41,147 38,820 41,050 Income before income taxes and equity in undistributed income of subsidiaries................................. 111,730 127,746 75,548 Provision for income tax expense (benefits).............. (5,413) 8,151 (5,216) ---------- ---------- ---------- Income before equity in undistributed income of subsidiaries........................................... 117,143 119,595 80,764 Equity in undistributed income of subsidiaries........... 109,530 108,343 105,235 ---------- ---------- ---------- Net income.......................................... $ 226,673 $ 227,938 $ 185,999 ========== ========== ==========
28 30 STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31 ----------------------------------- 1994 1993 1992 --------- --------- --------- (thousands of dollars) Cash flows from operating activities: Net income............................................... $ 226,673 $ 227,938 $ 185,999 Adjustments: Equity in undistributed income of subsidiaries........ (109,530) (108,343) (105,235) Depreciation, amortization and accretion.............. 813 733 729 (Increase) decrease in other assets................... (991) 10,527 (4,397) Increase in other liabilities......................... 185 3,153 785 Other net............................................. 30 406 1,216 --------- --------- --------- Net cash provided by operating activities........... 117,180 134,414 79,097 Cash flows from investing activities: Net (increase) decrease in short-term investments........ (18,465) (18,335) 23,615 Net decrease (increase) in commercial loans.............. 270 174 (1,513) Net (increase) decrease in loans to subsidiaries......... (5,740) 5,978 2,566 Purchases of premises and equipment...................... (1,031) (902) (328) Funds invested in acquisitions........................... (12,730) Capital contributions to subsidiaries.................... (5,950) (710) (10,300) Purchase of minority shares of subsidiaries.............. (9) (591) (779) Net decrease (increase) in intercompany receivables...... 622 (956) 168 Other net................................................ 206 167 (451) --------- --------- --------- Net cash (used in) provided by investing activities....................................... (30,097) (15,175) 248 Cash flows from financing activities: Repayment of long-term debt.............................. (380) (366) (6,428) Cash dividends........................................... (75,081) (67,453) (53,204) Preferred stock redemption............................... (51,500) Common stock transactions................................ (11,076) 138 (19,788) --------- --------- --------- Net cash used in financing activities............... (86,537) (119,181) (79,420) --------- --------- --------- Net increase (decrease) in cash and due from banks......... 546 58 (75) Cash and due from banks at beginning of year............... 124 66 141 --------- --------- --------- Cash and due from banks at end of year..................... $ 670 $ 124 $ 66 ========= ========= ========= Supplemental disclosures of cash flow information: Cash paid during the year for interest................... $ 12,753 $ 12,829 $ 13,672
29 31 INDEPENDENT AUDITORS' REPORT The Board of Directors Firstar Corporation: We have audited the accompanying consolidated balance sheets of Firstar Corporation and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1994. These consolidated financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Firstar Corporation and subsidiaries at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1994, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Milwaukee, Wisconsin January 19, 1995 30 EX-23 2 CONSENT OF INDEPENDENT AUDITORS 1 EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT The Board of Directors Firstar Corporation: Under date of January 19, 1995, we issued our audit report on the consolidated balance sheets of Firstar Corporation and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, stockholders' equity and cash flows for each of the years in the three-year period ending December 31, 1994 that were included in the annual report on Form 10-K for the year 1994. Firstar Corporation is amending its aforementioned annual report by substituting the attached consolidated financial statements and related notes for the corresponding statements in item 8 in the original filing which have been restated for business combinations accounted for as poolings of interests subsequent to December 31, 1994. We consent to the use of our audit report dated January 19, 1995, included in the aforementioned annual report on Form 10-K, as it is being amended. [Signature] KPMG Peat Marwick LLP Milwaukee, Wisconsin January 19, 1995 EX-27 3 FINANCIAL DATA SCHEDULE
9 1,000 12-MOS DEC-31-1994 DEC-31-1994 1,118,138 5,076 351,304 29,050 222,719 3,750,895 3,638,604 11,905,829 190,552 17,995,083 13,409,215 2,497,478 303,160 272,545 96,465 0 26,979 1,389,241 17,995,083 914,311 194,232 11,201 1,119,744 321,969 420,906 698,838 23,891 (3,583) 706,185 339,381 339,381 0 0 226,673 2.98 2.98 4.89 69,279 26,901 745 0 189,714 47,728 19,961 190,552 189,933 619 0
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