-----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, i5sfC7XE44YKH9VHbXpddMNVPw0BYFxmTeT4jrNUEAP2JD7A1R43fTdDnrS18Pr2 h0xhAN+VSOJa8Xi5gK5w2w== 0000950124-95-000757.txt : 19950615 0000950124-95-000757.hdr.sgml : 19950615 ACCESSION NUMBER: 0000950124-95-000757 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950320 SROS: MSE 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-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-02981 FILM NUMBER: 95521831 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-K405 1 10-K405 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K 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) 39-0711710 (I.R.S. Employer Identification No.) 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202 Telephone Number (414) 765-4321 Securities Registered Pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED -------------------------------- -------------------------------- Common Stock, $1.25 par value New York Stock Exchange, Inc. Chicago Stock Exchange, Inc. Preferred Stock, Series D Nasdaq 10% Notes due June 1, 1996 New York Stock Exchange, Inc. Preferred Share Purchase Rights New York Stock Exchange, Inc. Chicago Stock Exchange, Inc.
Securities Registered Pursuant to Section 12(g) of the Act: None ------------------------ Indicated by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X As of March 2, 1995, 72,861,171 shares of common stock were outstanding, and the aggregate market value of the shares (based upon the closing price) held by nonaffiliates was approximately $1.867 billion. Documents Incorporated by Reference: Portions of the 1995 Notice of Annual Meeting and Proxy Statement are incorporated by reference into Part III of the Form 10-K. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 FORM 10-K TABLE OF CONTENTS
PAGE ---- PART I Item 1 - Business.................................................................. 2 Item 2 - Properties................................................................ 5 Item 3 - Legal Proceedings......................................................... 5 Item 4 - Submission of Matters to a Vote of Security Holders....................... 5 PART II Item 5 - Market for the Registrant's Common Equity and Related Stockholder Matters................................................................... 5 Item 6 - Selected Financial Data................................................... 6 Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations................................................................ 7 Item 8 - Financial Statements and Supplementary Data............................... 26 Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................................................................ 56 PART III Item 10 - Directors and Executive Officers of the Registrant........................ 56 Item 11 - Executive Compensation.................................................... 56 Item 12 - Security Ownership of Certain Beneficial Owners and Management............ 56 Item 13 - Certain Relationships and Related Transactions............................ 56 PART IV Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K........... 56 Signatures.......................................................................... 58
1 3 PART I ITEM 1. BUSINESS GENERAL Firstar Corporation is a registered bank holding company incorporated in Wisconsin in 1929. Firstar Corporation ("Firstar") is the largest bank holding company headquartered in Wisconsin. Firstar's 15 bank subsidiaries in Wisconsin had total assets of $10.0 billion at December 31, 1994. Its eleven Iowa banks, one Illinois bank and one Minnesota bank had total assets of approximately $2.7 billion, $959 million and $1.2 billion, respectively, as of December 31, 1994. Firstar has one bank in Phoenix, Arizona with total assets of $102 million. Firstar's principal subsidiary, Firstar Bank Milwaukee, N.A., had total assets of $6.0 billion which represented 40 percent of Firstar's consolidated assets at December 31, 1994, and is the largest commercial bank in Wisconsin. Firstar provides banking services throughout Wisconsin and Iowa and in the Chicago, Minneapolis- St. Paul and Phoenix metropolitan areas. Its Wisconsin bank subsidiaries operate in 135 locations, with offices in eight of the ten largest metropolitan population centers of the state, including 74 offices in the Milwaukee metropolitan area. Its Iowa bank subsidiaries operate in 43 locations; its Illinois bank subsidiaries in 15 locations; its Minnesota bank subsidiary in 24 locations; its Arizona bank in three locations; and a trust subsidiary in Florida in two locations. Firstar's bank subsidiaries provide a broad range of financial services for companies based in Wisconsin, Iowa, Illinois and Minnesota, national business organizations, governmental entities and individuals. These commercial and consumer banking activities include accepting demand, time and savings deposits; making both secured and unsecured business and personal loans; and issuing and servicing credit cards. The bank subsidiaries also engage in correspondent banking and provide trust and investment management services to individual and corporate customers. Firstar Milwaukee, N.A., Firstar Bank Cedar Rapids, N.A. and Firstar Bank Madison, N.A. also conduct international banking services consisting of foreign trade financing, issuance and confirmation of letters of credit, funds collection and foreign exchange transactions. Nonbank subsidiaries provide retail brokerage services, trust and investment management services, residential mortgage banking activities, title insurance, business insurance, consumer and credit related insurance, and corporate computer and operational services. At December 31, 1994, Firstar and its subsidiaries employed 7,680 full-time and 2,196 part-time employees, of which approximately 970 full-time employees are represented by a union under a collective bargaining agreement that expires on August 31, 1996. Management considers its relations with its employees to be good. COMPETITION Banking and bank-related services is a highly competitive business. Firstar's subsidiaries compete primarily in Wisconsin and the Midwestern United States. Firstar and its subsidiaries have numerous competitors, some of which are larger and have greater financial resources. Firstar competes with other commercial banks and financial intermediaries, such as savings banks, savings and loan associations, credit unions, mortgage companies, leasing companies and a variety of financial services and advisory companies located throughout the country. SUPERVISION Firstar's business activities as a bank holding company are regulated by the Federal Reserve Board under the Bank Holding Company Act of 1956 which imposes various requirements and restrictions on its operations. The activities of Firstar and those of its banking and nonbanking subsidiaries are limited to the business of banking and activities closely related or incidental to banking. The business of banking is highly regulated, and there are various requirements and restrictions in the laws of the United States and the states in which the subsidiary banks operate including the requirement to maintain reserves against deposits and adequate capital to support their operations, restrictions on the nature 2 4 and amount of loans which may be made by the banks, restrictions relating to investment (including loans to and investments in affiliates), branching and other activities of the banks. Firstar's subsidiary banks with a national charter are supervised and examined by the Comptroller of the Currency. The subsidiary banks with a state charter are supervised and examined by their respective state banking agency and either by the Federal Reserve if a member bank of the Federal Reserve or by the FDIC if a nonmember. All of the Firstar subsidiary banks are also subject to examination by the Federal Deposit Insurance Corporation. In recent years Congress has enacted significant legislation which has substantially changed the federal deposit insurance system and the regulatory environment in which depository institutions and their holding companies operate. The Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), the Comprehensive Thrift and Bank Fraud Prosecution and Taxpayer Recovery Act of 1990 and the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") have significantly increased the enforcement powers of the federal regulatory agencies having supervisory authority over Firstar and its subsidiaries. Certain parts of such legislation increase the cost of doing business for depository institutions and their holding companies. FIRREA also provides that all commonly controlled FDIC insured depository institutions may be held liable for any loss incurred by the FDIC resulting from a failure of, or any assistance given by the FDIC, to any of such commonly controlled institutions. Federal regulatory agencies have implemented provisions of FDICIA with respect to taking prompt corrective action when a depository institution's capital falls to certain levels. Under the new rules, five capital categories have been established which range from "critically undercapitalized" to "well capitalized". Failure of a depository institution to maintain a capital level within the top two categories will result in specific actions from the federal regulatory agencies. These actions could include the inability to pay dividends, restricting new business activity, prohibiting bank acquisitions, asset growth limitations and other restrictions on a case by case basis. In addition to the impact of regulation, commercial banks are affected significantly by the actions of the Federal Reserve Board as it attempts to control the money supply and credit availability in order to influence the economy. Changes to such monetary policies have had a significant effect on operating results of financial institutions in the past and are expected to have such an effect in the future; however, the effect of possible future changes in such policies on the business and operations of Firstar cannot be determined. 3 5 EXECUTIVE OFFICERS OF THE REGISTRANT The following is a list of all the executive officers (16) of Firstar as of December 31, 1994. All of these officers are elected annually by their respective boards of directors. All of the officers have been employed by Firstar and/or one or more of its subsidiaries during the past five years, except Mr. Schoenke, who was previously employed by another banking company and joined Firstar as an executive officer in 1990. There are no family relationships between any of the executive officers.
NAME AGE POSITION - ------------------------------------------ --- -------------------------------------------- Roger L. Fitzsimonds...................... 56 Chairman of the Board and Chief Executive Officer of Firstar (Since February 1991) John A. Becker............................ 52 President and Chief Operating Officer of Firstar (Since January 1990) Chris M. Bauer............................ 46 Chairman of the Board of Firstar Bank Milwaukee (Since January 1991) James R. Lang............................. 51 Chairman of the Board and President of Firstar Corporation of Iowa (Since April 1991) Ronald A. Bero............................ 59 Senior Executive Vice President of Firstar (Since September 1989) Michael J. Bills.......................... 51 Executive Vice President of Firstar (Since April 1994) Jay B. Williams........................... 43 President of Firstar Bank Illinois (Since January 1995) Richard W. Schoenke....................... 51 President of Firstar Bank of Minnesota (Since July 1990) Michael J. Schmitz........................ 60 Executive Vice President of Firstar (Since October 1990) Jon H. Stowe.............................. 50 Executive Vice President of Firstar (Since January 1994) Blaine E. Rieke........................... 61 Chairman of the Board of Firstar Trust Company (Since November 1981) William H. Risch.......................... 56 Senior Vice President-Finance & Treasurer of Firstar (Since January 1984) Dennis R. Fredrickson..................... 50 Senior Vice President of Firstar (Since October 1988) John R. Heistad........................... 48 Senior Vice President and Chief Credit Officer of Firstar (Since January 1992) Howard H. Hopwood III..................... 49 Senior Vice President and General Counsel of Firstar (Since January 1986) Ronald E. Roder........................... 46 Senior Vice President of Firstar Bank Milwaukee (Since December 1988)
4 6 ITEM 2. PROPERTIES On December 31, 1994, Firstar had 222 banking locations, of which 159 were owned and 63 were leased. All of these offices are considered by management to be well maintained and adequate for the purpose intended. See Note 7 of the Notes to Consolidated Financial Statements included under Item 8 of this document for further information on properties. ITEM 3. LEGAL PROCEEDINGS 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. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS See Item 6 of this document for information on stock price ranges and dividends. The principal markets for the quotations of stock prices are the New York Stock Exchange and Chicago Stock Exchange. There were 11,033 holders of record of Firstar's $1.25 par value Common Stock on March 2, 1995. 5 7 ITEM 6. SELECTED FINANCIAL DATA
YEARS ENDED DECEMBER 31 ------------------------------------------------------------ 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- (thousands of dollars, except per share) EARNINGS AND DIVIDENDS Net interest revenue................. $597,586 $568,056 $539,152 $480,596 $429,954 Provision for loan losses............ 17,139 24,567 44,821 50,276 49,161 Other operating revenue.............. 335,235 342,265 300,767 272,535 248,301 Other operating expense.............. 604,925 587,744 557,566 515,536 464,800 Net income........................... 207,743 204,294 165,985 134,331 117,457 Per common share: Net income......................... 3.22 3.15 2.62 2.14 1.82 Dividends.......................... 1.16 1.00 .80 .705 .635 Stockholders' equity............... 19.83 17.96 15.94 14.17 12.79 Average common shares (000's)........ 64,611 63,747 61,879 60,998 61,218 - ---------------------------------------------------------------------------------------------------- PERFORMANCE RATIOS Return on average assets............. 1.51% 1.59% 1.36% 1.16% 1.06% Return on average common equity...... 16.97 18.61 17.43 15.85 14.83 Equity to assets..................... 8.65 8.38 7.96 7.44 7.03 Total risk-based capital............. 13.46 13.18 13.20 11.92 11.94 Net loan charge-offs as a percentage of average loans................... .25 .25 .43 .47 .48 Nonperforming assets as a percentage of loans and other real estate..... .58 .72 1.09 1.43 1.87 Net interest margin.................. 5.03 5.21 5.27 5.00 4.76 Efficiency ratio..................... 60.61* 62.56 64.04 65.50 65.40 Fee revenue as a percentage of average assets.................. 2.43 2.66 2.46 2.33 2.20 - ---------------------------------------------------------------------------------------------------- (millions of dollars) BALANCE SHEET AT DECEMBER 31 Total assets......................... $ 15,104 $ 13,794 $ 13,169 $ 12,309 $ 12,020 Securities........................... 3,391 2,834 2,864 2,870 2,642 Loans: Commercial loans................... 5,978 5,306 4,803 4,556 4,426 Consumer loans..................... 3,850 3,678 3,308 2,989 2,920 Total loans..................... 9,828 8,984 8,111 7,545 7,346 Earning assets....................... 13,595 12,117 11,408 10,747 10,326 Deposits: Core deposits...................... 10,719 10,793 10,524 9,629 9,180 Other deposits..................... 516 371 360 434 541 Total deposits.................. 11,235 11,164 10,884 10,063 9,721 Short-term borrowed funds............ 2,141 1,113 861 934 1,044 Long-term debt....................... 135 126 158 144 185 Stockholders' equity................. 1,307 1,156 1,048 916 844 - ---------------------------------------------------------------------------------------------------- STOCK PRICE INFORMATION High................................. $ 35 3/8 $ 37 1/4 $ 31 7/8 $24 7/16 $16 15/16 Low.................................. 25 1/8 29 3/8 23 1/8 12 3/4 11 Close................................ 26 7/8 30 3/4 31 1/2 24 1/8 14 1/8 - ----------------------------------------------------------------------------------------------------
* excludes check kiting loss 6 8 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HIGHLIGHTS Firstar reported earnings in 1994 of $207.7 million, a 1.7% increase over the $204.3 million earned in 1993. On a per common share basis, 1994 net income increased 2.2% to $3.22 from $3.15 earned in 1993. In 1992, net income was $166.0 million, or $2.62 per common share. While net income has increased in 1994, the effect of a higher stockholders' equity base reduced the return on equity in 1994. Return on average common equity declined to 16.97% in 1994 compared with 18.61% in 1993 and 17.43% in 1992. Firstar has measured its performance against a peer group of 30 other bank holding companies ranging in asset size from $10 billion to $25 billion. Firstar has placed within the top 25% of this group as measured by the return on equity for the past six years. This slowdown in the momentum of improvement during 1994 reflects the impact of a $22 million pre-tax charge against earnings taken in the second quarter for a check kiting fraud. This loss reduced 1994 earnings per share by 20 cents. While this loss had an impact on Firstar's earning trends, Firstar's overall financial soundness remained unaffected. Return on average assets for 1994 was 1.51% compared with 1.59% in 1993 and 1.36% in 1992. Major factors affecting underlying earnings during 1994 were: - Net interest margin declined to 5.03% in 1994 from 5.21% in 1993. During 1992 the margin was 5.27%. - Strong loan growth of 11.1% offset the effects of the decline in margins, helping increase net interest revenue by 4.9%. - The provision for loan losses was reduced further in 1994 reflecting the lower level of nonperforming assets and related net loan charge-offs. - Growth in major fee revenue businesses continued, with trust and investment management fees up 7.0% and credit card revenue up 4.6% during 1994. These gains in fee revenue were, however, offset by reduced mortgage banking revenues as a result of a market driven contraction in origination volumes. - Operating expenses declined by just under 1% during 1994 after excluding the check kiting loss. - These factors combined to improve Firstar's efficiency ratio to 60.6% in 1994 compared to 62.6% in 1993 and 64.0% in 1992. Further reductions in nonperforming assets were realized in 1994. Total nonperforming assets were $56.8 million at the end of the year, a reduction of 12.4% from year-end 1993. Nonperforming assets now represent .58% of total loans and other real estate. Stockholders' equity increased to $1.31 billion at the end of 1994. Market capitalization was $1.77 billion. Capital strength, by all measures, remains strong. Firstar's capital ratios are in the top quartile of its peer group and it has the highest capital rating by its regulatory agency. 7 9 NET INTEREST REVENUE Net interest revenue, which comprises interest and loan-related fees less interest expense, is the principal source of earnings for Firstar. Net interest revenue is affected by a number of factors including the level, pricing and maturity of earning assets and interest-bearing liabilities, interest rate fluctuations and asset quality. Net interest margin is net interest revenue expressed as a percentage of average earning assets. To permit comparisons, net interest revenue and margins in the accompanying discussion and tables have been adjusted to show tax-exempt income, such as interest on municipal securities and loans, on a taxable-equivalent basis. Table 1 shows the components of net interest revenue, net income and net interest margin for the last three years. TABLE 1 CONDENSED INCOME STATEMENTS -- TAXABLE-EQUIVALENT BASIS
CHANGE FROM PRIOR YEAR --------------------------------------- 1994 VS 1993 1993 VS 1992 ----------------- ----------------- 1994 1993 1992 AMOUNT PERCENT AMOUNT PERCENT ------ ------ ------ ------ ------- ------ ------- (millions of dollars) Interest revenue.......................... $938.0 $867.0 $898.5 $71.0 8.2% $(31.5) (3.5)% Taxable-equivalent adjustment............. 29.0 29.3 31.7 (.3) (1.0) (2.4) (7.6) ------ ------ ------ ------ ------ Interest revenue--taxable-equivalent.... 967.0 896.3 930.2 70.7 7.9 (33.9) (3.6) Interest expense.......................... 340.4 298.9 359.4 41.5 13.9 (60.5) (16.8) ------ ------ ------ ------ ------ Net interest revenue-- taxable-equivalent.................... 626.6 597.4 570.8 29.2 4.9 26.6 4.7 Provision for loan losses................. 17.1 24.6 44.8 (7.5) (30.5) (20.2) (45.1) Other operating revenue................... 335.2 342.2 300.8 (7.0) (2.0) 41.4 13.8 Other operating expense................... 604.9 587.7 557.6 17.2 2.9 30.1 5.4 ------ ------ ------ ------ ------ Income before income taxes.............. 339.8 327.3 269.2 12.5 3.8 58.1 21.6 Provision for income taxes................ 103.1 93.7 71.5 9.4 22.2 Taxable-equivalent adjustment............. 29.0 29.3 31.7 (.3) (2.4) ------ ------ ------ ------ ------ Net income.............................. $207.7 $204.3 $166.0 $ 3.4 1.7 $38.3 23.1 ====== ====== ====== ====== ====== Yield on earning assets................... 7.77% 7.82% 8.58% (.05)% (.76)% Cost of interest-bearing liabilities...... 3.48 3.34 4.16 .14 (.82) ------ ------ ------ ------ ------ Interest spread........................... 4.29 4.48 4.42 (.19) .06 Impact of interest-free funds............. .74 .73 .85 .01 (.12) ------ ------ ------ ------ ------ Net interest margin..................... 5.03% 5.21% 5.27% (.18)% (.06)% ====== ====== ====== ====== ======
Net interest revenue increased 4.9% to $626.6 million during 1994. This follows a similar 4.7% increase in 1993. The growth in both years benefited from higher average earning asset balances, driven principally by continued strong loan growth. This positive impact was somewhat offset by a reduction in the net interest margin, particularly in 1994. The net interest margin for 1994 was 5.03% compared with 5.21% in 1993 and 5.27% in 1992. The margin declined moderately from the record high levels of the prior two years. Interest rates increased dramatically during 1994 with the prime rate rising from 6.00% at the beginning of the year to 8.50% at year-end. Rates paid on fund sources increased by .14%, or 14 basis points, in 1994 as more reliance was put on higher cost purchased funds. On the asset side, higher rates earned on commercial loans was more than offset by declines in rates on consumer lending and the securities portfolio, reducing the overall yield on earning assets by five basis points. The impact of interest-free funds supporting earning assets was not a factor in 1994 as shown by the one basis point increase in margin attributable to these deposits. The level of earning assets supported by interest-free funds was 21.3% in 1994 compared with 21.8% in 1993 and 20.4% in 1992. The six basis point decline in net interest margin during 1993 resulted from the reduced benefit of interest-free funds partially offset by a modest increase in the interest spread reflecting the general decline in interest rates during that period. Firstar expects that further reductions in its net interest margin are likely as interest rates stabilize or 8 10 increase moderately from current levels. Firstar remains within the top quartile of its peer group with respect to net interest margin. Foregone interest on nonperforming loans and other real estate reduced net interest revenue by $3.8 million in 1994, $4.6 million in 1993 and $8.3 million in 1992. This resulted in corresponding reductions in net interest margin of .03% in 1994 and .03% in 1993 and .05% in 1992. The nominal impact is a reflection of Firstar's continued low level of nonperforming assets. Table 2 shows the components of interest revenue and expense along with changes related to volumes and rates. Total interest revenue increased by 7.9% to $967.0 million. This resulted from higher average earning assets, up 8.6%, which was partially offset by the slightly lower yield on earning assets. Interest income on commercial loans rose by 16.3% due to both higher balances and interest rates. Consumer loan interest, while up 4.5%, was impacted by the lower net interest rate which was 47 basis points less than 1993. This reduced rate on consumer loans reflects the refinancing activity and general lower rates available late in 1993. Securities income has declined as higher rate investments have matured and were replaced with securities with currently lower market yields. During 1993, total interest revenue declined by 3.6%, to $896.3 million. This resulted from lower overall interest rates, which was partially offset by the 5.7% increase in average earning assets. The rate received on earning assets declined from 8.58% in 1992 to 7.82% in 1993. TABLE 2 ANALYSIS OF INTEREST REVENUE AND EXPENSE
1994 VS 1993 1993 VS 1992 ---------------------------- ----------------------------- INTEREST DUE TO DUE TO ------------------------------ TOTAL ------------------ TOTAL ------------------ 1994 1993 1992 CHANGE VOLUME RATE CHANGE VOLUME RATE -------- -------- -------- ------- ------- -------- -------- ------- -------- (thousands of dollars) Interest-bearing deposits with banks... $ 288 $ 1,385 $ 2,608 $(1,097) $(1,501) $ 404 $ (1,223) $(1,441) $ 218 Federal funds sold and resale agreements..... 8,841 4,602 9,791 4,239 1,941 2,298 (5,189) (4,138) (1,051) Trading securities...... 1,560 985 1,012 575 307 268 (27) 111 (138) Securities.............. 187,783 197,373 215,586 (9,590) 2,076 (11,666) (18,213) 6,221 (24,434) Commercial loans........ 448,190 385,322 382,129 62,868 46,871 15,997 3,193 33,766 (30,573) Consumer loans.......... 320,347 306,658 319,102 13,689 30,122 (16,433) (12,444) 27,327 (39,771) -------- -------- -------- ------- -------- Total loans......... 768,537 691,980 701,231 76,557 77,045 (488) (9,251) 61,111 (70,362) -------- -------- -------- ------- -------- Total interest revenue........... 967,009 896,325 930,228 70,684 76,824 (6,140) (33,903) 51,334 (85,237) Interest-bearing demand................ 18,173 23,666 31,977 (5,493) (231) (5,262) (8,311) 3,105 (11,416) Money market accounts... 44,416 38,968 49,555 5,448 659 4,789 (10,587) 548 (11,135) Savings passbook........ 36,112 38,214 40,247 (2,102) 1,296 (3,398) (2,033) 7,306 (9,339) Certificates of deposit............... 163,427 160,786 199,626 2,641 4,177 (1,536) (38,840) (7,287) (31,553) -------- -------- -------- ------- -------- Total deposits...... 262,128 261,634 321,405 494 4,530 (4,036) (59,771) 8,359 (68,130) Short-term borrowed funds................. 65,408 23,811 23,423 41,597 26,627 14,970 388 4,028 (3,640) Long-term debt.......... 12,865 13,453 14,541 (588) (634) 46 (1,088) (1,026) (62) -------- -------- -------- ------- -------- Total interest expense........... 340,401 298,898 359,369 41,503 28,707 12,796 (60,471) 13,049 (73,520) -------- -------- -------- ------- -------- Net interest revenue........... $626,608 $597,427 $570,859 $29,181 50,243 (21,062) $ 26,568 31,715 (5,147) ========= ========= ========= ======== =========
- ------------ Calculations are computed on a taxable-equivalent basis using a tax rate of 35% in 1994 and 1993 and 34% in 1992. The change attributable to both volume and rate has been allocated proportionately to the changes due to volume and rate. Total interest expense increased by 13.9% in 1994, to $340.4 million. Interest expense on deposits increased modestly with the impact of deposit growth being offset by lower interest rates paid in most categories of deposits. The cost of short-term borrowed funds increased 175% with both higher usage of this funding source and increased interest rates. The interest rate on liabilities increased from 3.34% in 1993 to 3.48% in 1994. During 1993, total interest expense declined by 16.8% to a level of $298.9 million. The interest rates on liabilities was reduced from 4.16% in 1992 to 3.34% in 1993. 9 11 OTHER OPERATING REVENUE Total other operating revenue amounted to $335.2 million, a decrease of $7.0 million or 2.1% from 1993. Excluding the impact of mortgage origination revenues, other operating revenue rose by 1.5% in 1994 and 10.3% in 1993. This growth reflects the continuing effort to emphasize non-interest revenue. This focus provides several benefits to Firstar. Much of Firstar's fee revenue is not subject to the fluctuations that are inherent in the interest rate cycle. Firstar's broad customer base provides opportunities for expanded revenues as the marketplace looks to financial institutions for services beyond traditional lending and deposit activities. Table 3 shows the composition of other operating revenue. TABLE 3 ANALYSIS OF OTHER OPERATING REVENUE
YEARS ENDED DECEMBER 31 -------------------------------------------------------- 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- (thousands of dollars) Trust and investment management fees...... $117,872 $110,185 $ 95,926 $ 80,813 $ 70,051 Service charges on deposit accounts....... 72,366 74,071 66,301 59,368 50,250 Credit card service revenue............... 55,779 53,316 51,867 54,594 51,562 Data processing fees...................... 20,263 21,431 24,215 24,286 24,348 Mortgage servicing........................ 8,100 7,192 4,781 4,955 3,959 Mortgage originations..................... 6,953 18,966 7,591 2,258 1,562 -------- -------- -------- -------- -------- Mortgage banking revenue 15,053 26,158 12,372 7,213 5,521 Insurance revenue......................... 11,631 10,410 8,440 7,643 7,147 Brokerage revenue......................... 6,947 8,718 6,135 3,012 2,113 International fees........................ 5,854 5,234 5,151 4,712 4,476 Electronic funds transfer fees............ 4,234 3,678 3,135 2,849 2,732 Safe deposit fees......................... 3,394 3,323 3,237 3,136 3,058 Foreign exchange gains.................... 2,041 1,877 1,752 1,370 667 Municipal finance fees.................... 991 1,368 1,153 937 1,222 Trading securities gains.................. 139 2,074 1,802 1,579 1,559 Securities gains.......................... 76 182 981 1,619 117 Other..................................... 18,595 20,240 18,300 19,404 23,478 -------- -------- -------- -------- -------- Total................................... $335,235 $342,265 $300,767 $272,535 $248,301 ======== ======== ======== ======== ========
Other operating revenue now represents 35% of Firstar's revenue. An industry measure of fee revenue prominence is the ratio of this revenue stream to average assets. During 1994 this ratio was 2.43% compared to 2.66% in 1993 and 2.46% in 1992. These figures place Firstar sixth among the 30 banking organizations with total assets of $10 billion to $25 billion. Trust and investment management fees are the single largest source of fee revenue, contributing $117.9 million, over one-third of other operating revenue. This level represents a 7.0% growth in revenue in 1994 which in turn followed a 14.9% rise in the previous year. The development and addition of new business was a factor in both years. Additionally, the reduction in the market value of assets resulting from general market conditions, restricted the growth in revenue during 1994. Expanded services are being offered through Firstar's banking network. Additional marketing efforts are also being directed to institutional investors beyond the Midwest. The introduction of fifteen proprietary mutual funds and the serving as custodian/transfer agent for 175 publicly registered mutual funds have enhanced trust revenues. Trust assets under management increased by 1.9% during 1994 to $15.1 billion at the end of the year. Additional assets held in custody accounts were $38.5 billion. Revenue from service charges on deposit accounts declined by 2.3% in 1994, to a level of $72.4 million. This reduction was primarily due to higher rate credits given to business customers for services, thus reducing 10 12 the level of cash payments necessary. The opposite trend was evident in 1993, where the lower rate environment generated increased cash payments for services and increased service charge revenue by 11.7%. Credit card service revenues are the third largest source of fee revenue totaling $55.8 million during 1994, which was a 4.6% increase over 1993. This follows a 2.8% increase the previous year. The introduction of new credit card products and growth in merchant fee activity have aided in the revenue growth of the past two years. Firstar services 570,000 active card holders, has 33,300 merchant accounts and provides credit card programs to more than 750 financial institutions. This customer base, which covers the Upper Midwest and includes Wisconsin, Iowa, Illinois, Minnesota, Upper Michigan, Nebraska and the Dakotas, provides a market for the sale and expansion of other financial products. Data processing fee income declined 5.5% in 1994 and 11.5% in 1993. A shrinking customer base due to continuing bank consolidations through mergers or acquisitions and conversions by smaller community banks to in-house data processing systems have acted to reduce revenues. Intense price competition has also occurred due to the shrinking market for sales and has affected revenue levels through pricing changes and some loss of customers. Revenue from mortgage banking activities has fluctuated dramatically during the last three years as a result of the refinancing boom which peaked in 1993. Revenue from mortgage originations reached $19.0 million in 1993, an increase of $11.4 million over 1992 and then declined by $12.0 million during 1994. Mortgage origination volume was $1.5 billion in 1993 and declined by one third to $1.0 billion in 1994. Mortgage loan servicing revenue has shown continued increases during this period, increasing 50% in 1993 and 13% in 1994. Mortgage loans serviced for others were $2.5 billion at the end of 1994, a 25% increase from a year earlier. Firstar has expanded its mortgage banking activities through coordinated marketing efforts within Firstar's banking network. The past two years saw continued growth in insurance activity, with a 11.7% increase in 1994 to $11.6 million, compared with a 23.3% increase during 1993. This line of business generates revenue from the sale of annuities and insurance products and represents an important element in Firstar's strategy to continually expand fee revenue. Brokerage revenue declined by 20.3% during 1994 to $6.9 million, as a result of the generally unfavorable market conditions. This followed a very strong growth in the prior two years. The remaining sources of other operating revenue, excluding securities transactions and other nonrecurring revenue, derive from a wide range of services and collectively increased by 4.1% in 1994 and 3.0% in 1993. 11 13 OTHER OPERATING EXPENSES Total operating expenses increased 2.9% to $604.9 million in 1994 compared with an increase of 5.4% in 1993. Excluding the impact of a check kiting fraud, operating expenses declined by just under 1% during 1994. Information on the components of other operating expense is shown in Table 4. TABLE 4 ANALYSIS OF OTHER OPERATING EXPENSE
YEARS ENDED DECEMBER 31 -------------------------------------------------------- 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- (thousands of dollars) Salaries.................................. $265,731 $257,405 $237,997 $221,780 $205,082 Employee benefits......................... 60,175 59,443 49,610 44,977 40,489 -------- -------- -------- -------- -------- Total personnel expense................. 325,906 316,848 287,607 266,757 245,571 Equipment expense......................... 49,251 48,139 48,720 42,483 39,774 Net occupancy expense..................... 45,914 48,731 44,408 42,252 35,708 F.D.I.C. insurance........................ 23,789 23,670 22,488 19,325 10,360 Business development...................... 23,503 24,063 23,055 20,883 16,960 Stationery and supplies................... 16,456 19,060 18,123 16,767 15,591 Information processing expense............ 16,233 14,996 14,544 14,836 14,048 Professional fees......................... 14,958 15,336 14,040 14,688 15,431 Delivery.................................. 14,585 15,452 15,840 15,149 13,141 Amortization of intangibles............... 8,318 12,717 15,520 8,676 9,006 Employee education/recruiting............. 7,553 7,730 5,982 4,258 4,224 Commissions and service fees.............. 5,387 4,631 6,264 4,330 4,021 Wire communication........................ 5,246 4,586 4,411 4,250 4,246 Federal Reserve processing fees........... 4,478 5,033 5,370 4,992 5,210 Credit card assessment fees............... 4,209 3,851 3,475 3,133 2,739 Processing and other losses............... 3,550 3,972 3,314 3,222 2,713 Published information..................... 2,053 2,051 2,216 2,099 2,253 Insurance................................. 1,175 1,240 1,211 1,510 1,867 Net other real estate (income) expense.... (1,489) 2,056 4,303 10,537 9,837 Check kiting loss......................... 22,000 Other..................................... 11,850 13,582 16,675 15,389 12,100 -------- -------- -------- -------- -------- Total nonpersonnel expense.............. 279,019 270,896 269,959 248,779 219,229 -------- -------- -------- -------- -------- Total other operating expense........... $604,925 $587,744 $557,566 $515,536 $464,800 ======== ======== ======== ======== ========
Personnel costs, which include salaries and fringe benefits, are the largest component of operating expenses, representing more than one-half of operating costs. This expense rose by 2.9% in 1994 compared with 10.2% in 1993. Salaries rose by 3.2% in 1994 and 8.2% in 1993. The salary increase during 1994 was limited to the effect of merit increases. Full-time equivalent employees remained, for the most part, level during the year. One-half of the 1993 increase in salaries was attributed to bank acquisitions. Employee benefit costs rose by only 1.2% in 1994 after increasing 19.8% in 1993. Firstar adopted Statement of Financial Accounting Standards No. 106, "Accounting for Postretirement Benefits Other Than Pensions" in 1993. The statement requires employers to recognize postretirement benefits on an accrual basis over employee service periods, as contrasted to the expensed-as-incurred method of accounting. Excluding the impact of Statement No. 106, which increased costs by $7.0 million, employee benefit costs rose by 5.7% during 1993. 12 14 Equipment expense increased by 2.3% in 1994 compared to a decline of 1.2% in 1993. Firstar continues to invest in upgraded data processing equipment, ensuring that its data processing capabilities are up-to-date in order to provide quality service in a cost effective manner. Net occupancy expense declined by 5.8% in 1994 reflecting the impact of a partial acceleration of a deferred gain on a building sale of $2.1 million in 1994. Also affecting comparison between years was the costs associated with office closings of $2.2 million in 1993 and $1.5 million in 1992. FDIC insurance is an uncontrollable cost, with the premium established by the federal regulatory agency. The FDIC sets varying premium amounts based upon capitalization levels and soundness criteria. Firstar's capital strength has permitted payments at the lowest rate levels. The FDIC is currently considering reducing the premium levels which could result in a significant reduction in Firstar's cost of FDIC insurance. The amortization of intangibles includes amounts associated with goodwill, core deposit intangibles and purchased mortgage loan servicing rights. During 1993 and 1992, additional amortization of mortgage servicing rights was taken due to the high volume of the underlying mortgage loans which were refinanced. Expense associated with the amortization of mortgage servicing rights was $.7 million in 1994, $5.2 million in 1993 and $8.3 million in 1992. This expense fluctuates with changing interest rates and loan prepayment trends. The remaining unamortized mortgage loan servicing rights were $4.7 million at the end of 1994. Net other real estate operations produced income of $1.5 million in 1994 as a result of gains realized on the sale of properties. This contrasts to net expenses of $2.1 million in 1993 and $4.3 million in 1992. The current low level of other real estate held should continue to be reflected in reduced expenses. The $22 million check kiting loss was recorded in the second quarter of 1994 when it was discovered that two affiliated commercial customers were involved in a series of fraudulent check transactions. The customers are in bankruptcy proceedings and although Firstar is pursuing its legal rights, there is no assurance of any recovery. All other expenses include a wide range of items and were decreased by 3.2% in 1994 and increased by less than 1% in 1993. A measure of the success in managing operating expense is expressed in the ratio of expense to revenue and is referred to as the efficiency ratio. The objective is to reduce this ratio through revenue growth, cost control or a combination of both. Excluding the check kiting loss, this ratio was 60.6% in 1994, 62.6% in 1993 and 64.0% in 1992 and placed Firstar above the median level of its peer companies. Firstar continues to seek ways to improve its efficiency with a goal of operating at a 60% level in 1995. PROVISIONS FOR LOAN LOSSES The provision for loan losses is used to cover actual loan losses and to adjust the size of the reserve relative to the amount and quality of loans. In determining the adequacy of the reserve, management considers the financial strength of borrowers, loan collateral, current and anticipated economic conditions and other factors. The 1994 provision for loan losses was $17.1 million, compared with $24.6 million in 1993 and $44.8 million in 1992. The reduced level of nonperforming assets and lower net charge-offs have permitted Firstar to reduce its provision for loan losses. INCOME TAXES Income tax expense was $103.0 million in 1994, compared to $93.7 million in 1993 and $71.5 million in 1992. The effective tax rate was 33.1% in 1994, 31.4% in 1993 and 30.1% in 1992. The effective tax rate rose in 1994 as compared to 1993 due to a reduction in tax-exempt municipal interest income, an increase in state tax expense and the benefit of the adoption of Statement No. 109 in 1993. The effective tax rate rose in 1993 compared to 1992 due to a 1% increase in the federal corporate tax rate. 13 15 BALANCE SHEET ANALYSIS Changes in the balance sheet of a financial institution reflect both the forces of the marketplace and the company's response to these conditions. Firstar's strategy in managing balance sheet growth is based upon the goals of enhancing soundness and providing a broad range of services for customers. Total assets at the end of 1994 reached $15.1 billion, an increase of $1.3 billion or 9.5% over a year earlier. Approximately one third of this increase was attributable to a bank acquisition. Average total assets for 1994 were $13.8 billion, an increase of 7.3% over 1993. Table 5 shows the geographic distribution of Firstar's banking assets. Firstar has expanded beyond its Wisconsin base through select acquisitions. Assets outside of Wisconsin now represent 34% of consolidated assets. Firstar's acquisition activity will focus on attractive markets in the upper Midwest that will complement the existing Firstar banking network. The combination of internal growth and acquisitions provides new opportunities to build and diversify Firstar's earnings within an economically stable region. TABLE 5 SUBSIDIARY AVERAGE ASSETS
1994 1993 1992 -------------------- -------------------- -------------------- AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT --------- ------- --------- ------- --------- ------- (millions of dollars) Bank groups: Wisconsin--lead bank................ $ 5,164.1 37.4% $ 4,900.0 38.1% $ 4,500.0 37.0% Wisconsin banks..................... 3,637.6 26.4 3,227.0 25.1 3,122.0 25.6 Iowa banks.......................... 2,537.6 18.4 2,470.4 19.2 2,525.9 20.8 Minnesota bank...................... 1,135.7 8.2 1,057.5 8.2 1,016.9 8.4 Illinois bank....................... 909.7 6.6 880.3 6.9 734.3 6.0 Arizona bank........................ 93.4 .7 86.6 .7 78.1 .6 --------- ------- --------- ------- --------- ------- Subtotal......................... 13,478.1 97.7 12,621.8 98.2 11,977.2 98.4 Trust and investment management subsidiaries........................ 100.3 .7 80.3 .6 71.1 .6 Parent/other subsidiaries............. 218.4 1.6 155.1 1.2 121.5 1.0 --------- ------- --------- ------- --------- ------- Total............................ $13,796.8 100.0% $12,857.2 100.0% $12,169.8 100.0% ======== ===== ======== ===== ======== =====
- ------------ Assets have been adjusted for intercompany amounts. Significant acquisition activity occurred during 1994. Firstar announced three merger agreements in the third quarter of the year which will add to its existing franchises. The merger with First Colonial Bankshares Corporation, a $1.8 billion bank holding company with 30 offices in the Chicago area was announced in July. The transaction was completed on January 31, 1995, and, along with its existing Illinois locations, gives Firstar a $3 billion banking franchise with 45 offices in the Chicago area market. In August, a second major acquisition was announced. This, with Investors Bank Corp., a $1.1 billion thrift with 12 offices and a large mortgage banking business in the Minneapolis/St. Paul market, will double both the size of Firstar's Minnesota banking operations and corporate wide mortgage banking business. This transaction should be completed in the second quarter of 1995. A third pending acquisition will add $80 million of assets to Firstar Bank Davenport through the acquisition of First Moline Financial Corp. of Moline, Illinois. Also, the previously announced acquisition of First Southeast Banking Corporation was completed in the fourth quarter of 1994, adding over $400 million of assets to Firstar's southeast Wisconsin banking franchise. 14 16 LOANS AND INVESTMENTS Earning assets, shown in Table 6, averaged $12.4 billion, an increase of $988 million, or 8.6% over 1993. Loans, the largest category of earning assets, represented 74.4% of earning assets as compared with 72.7% in 1993. On average, loans totaled $9.3 billion, an increase of $928 million or 11.1% over 1993. Excluding the impact of loans added through bank acquisitions, average loans grew by 10.0%. This followed a 5.1% increase in average loans in 1993. This growth was especially strong in the Wisconsin (excluding the lead bank) and Minnesota markets which recorded loan growth in excess of 18%. The Iowa banks and the lead bank located in Milwaukee showed loan growth in the 7-8% range. Firstar expects this trend of increased loan demand to continue into 1995. TABLE 6 AVERAGE EARNING ASSETS
1994 1993 1992 -------------------- -------------------- -------------------- AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT --------- ------- --------- ------- --------- ------- (millions of dollars) Commercial and industrial.......... $ 2,554.0 20.5% $ 2,287.4 20.0% $ 2,003.7 18.5% Real estate........................ 2,086.3 16.8 1,860.7 16.2 1,711.7 15.8 Foreign............................ 29.1 .2 21.9 .2 19.6 .2 Other.............................. 850.2 6.8 766.6 6.7 784.8 7.2 --------- ------- --------- ------- --------- ------- Commercial loans.............. 5,519.6 44.3 4,936.6 43.1 4,519.8 41.7 Credit card........................ 508.6 4.1 500.9 4.4 520.6 4.8 Real estate--mortgage.............. 1,396.5 11.2 1,291.1 11.3 1,197.1 11.0 Home equity........................ 471.0 3.8 416.5 3.6 325.2 3.0 Other.............................. 1,365.7 11.0 1,187.9 10.3 1,072.3 9.9 --------- ------- --------- ------- --------- ------- Consumer loans................ 3,741.8 30.1 3,396.4 29.6 3,115.2 28.7 --------- ------- --------- ------- --------- ------- Total loans................... 9,261.4 74.4 8,333.0 72.7 7,635.0 70.4 Securities held to maturity........ 2,949.1 23.7 2,929.0 25.6 2,845.0 26.2 Securities available for sale...... 11.0 .1 Trading securities................. 22.1 .2 17.3 .1 15.5 .2 Interest-bearing deposits with banks............................ 4.9 33.0 .3 67.9 .6 Federal funds sold and resale agreements....................... 200.1 1.6 147.8 1.3 277.1 2.6 --------- ------- --------- ------- --------- ------- Total......................... $12,448.6 100.0% $11,460.1 100.0% $10,840.5 100.0% ======== ===== ======== ===== ======== =====
Commercial loans, which account for 60% of the loan portfolio, increased by $583 million, or 11.8% on average, to $5.5 billion during 1994. Excluding bank acquisitions which occurred during the past two years, commercial loans have increased by 10.4%. This follows the 7.0% growth achieved in 1993. Consumer loans averaged $3.7 billion, an increase of $345 million or 10.2% over 1993. Excluding the affect of acquisitions, consumer loans rose by 9.3%. Increased levels of mortgage loans and installment debt aided in this growth. The lower interest rates available in 1993 and early 1994 prompted increased consumer debt assumption. Credit card balances reversed the previous downward trend in 1994, increasing by 1.5% in 1994. Firstar's new cards offering variable rates and rebates have been well accepted and should result in continued loan growth. Firstar securitized $290 million of residential mortgage loans at the end of 1994. These loans, now carrying a U.S. agency guarantee, are included in securities held to maturity. This action gives Firstar increased liquidity through the ability to borrow funds using repurchase agreements collateralized by the securitized loans. 15 17 Total securities, including both held to maturity and available for sale securities, represent 24% of earning assets. They averaged $3.0 billion during 1994, an increase of $31 million, or 1.1% over 1993. Tables 7 and 8 show the maturity range and changing mix of the investment portfolio. The average maturity of the portfolio was 3.3 years as of the end of 1994. TABLE 7 MATURITY RANGE AND AVERAGE YIELD OF SECURITIES
DUE WITHIN FIVE TO TEN TOTAL ONE YEAR ONE TO FIVE YEARS YEARS AFTER TEN YEARS DECEMBER 31, 1994 --------------- ----------------- --------------- --------------- ----------------- AMOUNT RATE AMOUNT RATE AMOUNT RATE AMOUNT RATE AMOUNT RATE -------- ---- ---------- ---- -------- ---- -------- ---- ---------- ---- (thousands of dollars) Securities held to maturity: U.S. Treasury and federal agencies............... $212,217 7.24% $1,102,784 5.15% $142,707 7.51% $ % $1,457,708 5.69% Mortgage backed obligations of federal agencies............... 107,295 7.68 330,871 7.56 230,827 7.49 169,172 7.06 838,165 7.42 State and political subdivisions........... 191,022 7.37 443,953 7.48 234,586 7.99 22,319 9.10 891,880 7.63 Corporate debt........... 37,706 6.61 14,632 7.11 2,275 7.18 687 7.85 55,300 6.80 Other.................... 63,452 3.95 63,452 3.95 -------- ---------- -------- -------- ---------- Subtotal............. $611,692 6.98 $1,892,240 6.13 $610,395 7.69 $192,178 7.30 $3,306,505 6.65 ========= ========== ========= ========= Equity securities........ 33,406 7.59 ---------- Total................ $3,339,911 6.66 ========== Securities available for sale: U.S. Treasury and federal agencies............... $ % $ 7,797 6.78% $ 30,089 7.44% $ % $ 37,886 7.30% Mortgage backed obligations of federal agencies............... 1,143 5.02 6,799 5.75 850 5.64 1,988 5.21 10,780 5.55 State and political subdivisions........... 563 5.63 1,582 6.37 497 6.95 2,642 6.32 -------- ---------- -------- -------- ---------- Total................ $ 1,706 5.22 $ 16,178 6.31 $ 31,436 7.38 $ 1,988 5.21 $ 51,308 6.89 ========= ========== ========= ========= ==========
- ------------ Rates are calculated on a taxable-equivalent basis using a tax rate of 35%. The maturity information on mortgage-backed obligations is based on anticipated payments. TABLE 8 SECURITIES
DECEMBER 31 ------------------------------------------------------------------ 1994 1993 1992 1991 1990 ---------- ---------- ---------- ---------- ---------- (thousands of dollars) Securities held to maturity: U.S. Treasury and federal agencies......... $1,457,708 $1,410,917 $1,131,715 $1,183,770 $1,247,864 Mortgage backed obligations of federal agencies................................. 838,165 332,737 385,215 410,826 395,186 State and political subdivisions........... 891,880 905,396 952,377 885,349 779,290 Corporate debt............................. 55,300 70,494 244,821 287,326 195,171 Equity securities.......................... 33,406 13,745 13,713 10,968 10,224 Other...................................... 63,452 101,016 136,174 92,019 13,968 ---------- ---------- ---------- ---------- ---------- Total.................................. $3,339,911 $2,834,305 $2,864,015 $2,870,258 $2,641,703 ========== ========== ========== ========== ========== Securities available for sale: U.S. Treasury and federal agencies......... $ 37,886 Mortgage backed obligations of federal agencies................................. 10,780 State and political subdivisions........... 2,642 ---------- Total.................................. $ 51,308 ==========
16 18 Short-term investments, which include interest-bearing deposits with banks, trading account securities, and federal funds sold and resale agreements, averaged $227 million in 1994, an increase of $29 million, or 14.6%, from a year earlier. FUND SOURCES Average fund sources, consisting of deposits and borrowed funds, increased by $838 million, or 7.3%, to $12.3 billion in 1994. Total deposits averaged $10.7 billion, an increase of $142 million, or 1.3%. Bank acquisitions accounted for most of this increase in average deposits. Table 9 shows the composition of Firstar's fund sources. TABLE 9 AVERAGE FUND SOURCES
1994 1993 1992 -------------------- -------------------- -------------------- AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT --------- ------- --------- ------- --------- ------- (millions of dollars) Transaction accounts.................. $ 3,946.1 32.0% $ 3,949.9 34.4% $ 3,604.1 32.9% Savings passbook...................... 1,542.0 12.5 1,490.2 13.0 1,239.4 11.3 Money market accounts................. 1,580.9 12.8 1,555.5 13.5 1,538.3 14.1 Certificates of deposit............... 3,155.8 25.6 3,207.4 27.9 3,366.9 30.7 --------- ------- --------- ------- --------- ------- Total core deposits................. 10,224.8 82.9 10,203.0 88.8 9,748.7 89.0 Other time deposits................... 449.6 3.7 329.7 2.9 367.8 3.3 --------- ------- --------- ------- --------- ------- Total deposits...................... 10,674.4 86.6 10,532.7 91.7 10,116.5 92.3 Short-term borrowed funds............. 1,526.0 12.4 822.6 7.2 692.9 6.3 Long-term debt........................ 126.2 1.0 133.1 1.1 146.7 1.4 --------- ------- --------- ------- --------- ------- Total............................... $12,326.6 100.0% $11,488.4 100.0% $10,956.1 100.0% ======== ===== ======== ===== ======== =====
Core deposits, which include transaction accounts and other stable time deposits, are Firstar's prime source of funding. These deposits averaged $10.2 billion in 1994, essentially level with 1993. Increased competition for consumer deposits and heightened consumer sensitivity to interest rates have limited Firstar's core deposit growth. Increased emphasis will be placed on generating more core deposits in 1995 through competitive pricing of deposit products. More reliance was placed on purchased fund sources during 1994 to support the growth in loan balances. Other time deposits, primarily certificates of deposit over $100,000, increased $120 million, to $450 million on average. Short-term borrowed funds were increased by $703 million to an average level of $1.5 billion. 17 19 CREDIT RISK MANAGEMENT Since the mid-1980's, credit management has been refined through procedural and personnel changes. Emphasis on credit quality standards and diversification of risk have been key strategies. The benefits of this program are seen in the significant reductions in nonperforming assets and overall credit quality achieved during the past several years. During this period nonperforming assets as a percentage of loans and other real estate have declined from 1.87% in 1990 to .58% at the end of 1994. Put in perspective of Firstar's peer group of banks, this placed Firstar ninth within the group for asset quality. Nonperforming assets consist of loans that are not accruing interest, loans with renegotiated credit terms and collateral acquired in settlement of nonperforming loans. The composition of these assets is shown in Table 10. These nonperforming assets totaled $56.8 million at December 31, 1994 and represented .58% of Firstar's $9.8 billion of loans and other real estate. This is a $8.1 million, or 12.4%, reduction from a year earlier. TABLE 10 NONPERFORMING ASSETS AND PAST DUE LOANS
DECEMBER 31 ----------------------------------------------------- 1994 1993 1992 1991 1990 ------- ------- ------- -------- -------- (thousands of dollars) Nonaccrual loans: Commercial................................. $24,539 $21,243 $24,640 $ 30,548 $ 35,531 Commercial--real estate.................... 18,876 25,477 21,750 26,673 45,718 Consumer................................... 5,307 6,417 7,997 7,190 7,130 ------- ------- ------- -------- -------- Total nonaccrual loans.................. 48,722 53,137 54,387 64,411 88,379 Renegotiated loans: Commercial................................. 71 823 1,899 2,821 1,769 Commercial--real estate.................... 574 690 542 1,418 4,039 ------- ------- ------- -------- -------- Total renegotiated loans................ 645 1,513 2,441 4,239 5,808 Other real estate*........................... 7,423 10,215 31,978 39,880 43,963 ------- ------- ------- -------- -------- Total nonperforming assets.............. $56,790 $64,865 $88,806 $108,530 $138,150 ======= ======= ======= ======== ======== Nonperforming assets as a percentage of: Loans and other real estate................ .58% .72% 1.09% 1.43% 1.87% Total assets............................... .38 .47 .67 .88 1.15 Loans past due 90 days: Commercial................................. $ 7,122 $ 5,521 $ 5,020 $ 5,621 $ 8,376 Commercial--real estate.................... 2,859 3,934 3,248 9,016 3,518 Consumer................................... 14,152 12,348 12,359 13,591 12,524 ------- ------- ------- -------- -------- Total loans past due 90 days............ $24,133 $21,803 $20,627 $ 28,228 $ 24,418 ======= ======= ======= ======== ========
- ------------ * Nonperforming loans which were included in other real estate under "in substance foreclosure" accounting rules were $10.5 million, $10.5 million, and $5.0 million at December 31, 1992, 1991, and 1990, respectively. Such "in substance foreclosed" loans were reclassified to loans in 1993. Commercial real estate related nonperforming assets totaled $26.9 million at the end of 1994, a reduction of 26% from a year earlier. These nonperforming assets represented 1.17% of their respective loan category. Firstar experienced an increase in real estate related nonperforming assets several years ago, although to a much lesser extent than many other financial institutions. These assets reached a high of $93.7 million at the end of 1990. As can be seen, significant progress has been made in reducing this category of nonperforming assets. 18 20 The remaining commercial loan portfolio had a nonperforming asset ratio of .67% compared to .66% a year earlier. This is reflective of the overall consistent financial strength of Firstar's commercial borrowers. Nonperforming consumer loans have also declined from previously higher levels. At year-end 1994, they represented a very minimal .14% of outstandings. While further reductions of nonperforming assets are not likely, the attainment of this low level is an indication of Firstar's overall high asset quality. Loans ninety days or more past due on December 31, 1994, totaled $24.1 million, compared with $21.8 million a year earlier. These loans are on a full accrual basis and are judged by management to be collectible in full. In addition, Firstar had $22 million of loans at December 31, 1994, on which interest is accruing, but, because of existing economic conditions or circumstances of the borrower, doubt exists as to the ability of the borrower to comply with the present loan terms. While these loans are identified as requiring additional monitoring, they do not necessarily represent future nonperforming assets. Additional indicators of asset quality can be found in the geographic distribution, industry diversification and type of lending represented in the loan portfolio. Credit policies have been changed over the past several years to reduce vulnerability to potential adverse economic trends. Marketing efforts have been directed to Firstar's primary market segments which are consumer, small business and middle market customers in communities where Firstar banks are located. This emphasis on smaller, locally based credits brings with it a diversified group of customers without any significant industry concentration. Firstar does not participate in any significant syndicated lending or highly leveraged transactions. Commercial real estate lending includes construction loans, income property loans and other commercial loans where real estate is involved as collateral. Midwestern real estate did not experience the rapid price appreciation that occurred in other areas, spurring over-investment in development projects and subsequent collapse of demand. Consequently, the earlier recessionary economy has not put as much pressure on some of Firstar's borrowers. Policy limits control this type of lending. Approximately sixty percent of these loans represent owner-occupied commercial properties. The remaining portion involves loans to developers and investors. The average loan size in the developer portion of the portfolio was $250,000 and reflects the regional focus and customer diversification of the portfolio. The reserve for loan losses is reviewed and adjusted quarterly, subject to evaluation of economic conditions and expectations, historical experience and the risk rating of individual loans. Table 11 shows the activity affecting the reserve for loan losses for the last five years. The reserve totaled $172.6 million at the end of 1994, compared with $174.9 million a year earlier. Total net charge-offs of $22.9 million represented .25% of average loans during 1994, the same level as experienced in 1993. As a regional financial institution, Firstar lends to a diversified group of Midwestern borrowers and, to a much lesser degree, to national companies with Midwest operations. Net charge-offs in this commercial segment of the portfolio were $10.8 million, or .32% of average loans. This compares with $6.1 million of net charge-offs in 1993, representing .20% of loans. This charge-off level, while up from the prior year, remains lower than earlier years. 19 21 Commercial real estate loans experienced a net recovery of prior years' charge-offs in 1994 of $732,000. This compares with nominal net charge-offs of .03% in 1993. These charge-off levels are unusually low and Firstar would expect that commercial real estate charge-offs will in the long run approximate the overall charge-off rate of the other commercial lending areas. TABLE 11 RESERVE FOR LOAN LOSSES
1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- (thousands of dollars) Balance at beginning of year.............. $174,873 $168,482 $150,628 $134,222 $116,177 Loan charge-offs: Commercial.............................. 16,868 12,142 18,565 15,110 16,346 Commercial--real estate................. 2,009 3,050 6,135 4,227 12,614 Consumer................................ 7,758 6,399 7,049 9,754 7,941 Consumer--real estate................... 422 915 1,534 1,187 662 Credit card............................. 14,212 14,989 17,779 19,172 12,078 Foreign................................. 219 -------- -------- -------- -------- -------- Total charge-offs.................... 41,488 37,495 51,062 49,450 49,641 Loan recoveries: Commercial.............................. 6,056 6,084 6,789 5,160 6,627 Commercial--real estate................. 2,741 2,448 3,439 845 1,482 Consumer................................ 4,048 3,359 3,383 2,557 2,276 Consumer--real estate................... 549 232 368 350 115 Credit card............................. 4,376 4,113 3,555 2,760 2,665 Foreign................................. 809 604 428 3,479 3,204 -------- -------- -------- -------- -------- Total recoveries..................... 18,579 16,840 17,962 15,151 16,369 -------- -------- -------- -------- -------- Net loan charge-offs...................... 22,909 20,655 33,100 34,299 33,272 Provision for loan losses................. 17,139 24,567 44,821 50,276 49,161 Reserves of acquired banks................ 3,503 2,479 6,133 429 2,156 -------- -------- -------- -------- -------- Total balance at end of year......... $172,606 $174,873 $168,482 $150,628 $134,222 ======== ======== ======== ======== ======== Reserve to year-end loans................. 1.76% 1.95% 2.08% 2.00% 1.83% Net charge-offs to average loans: Commercial.............................. .32% .20% .42% .35% .35% Commercial--real estate................. (.04) .03 .16 .22 .78 Foreign................................. (2.03) (2.76) (2.18) (14.36) (12.29) Total commercial loans............... .17 .12 .31 .22 .42 Consumer................................ .27 .26 .34 .57 .47 Consumer--real estate................... (.01) .04 .08 .08 .06 Credit card............................. 1.93 2.17 2.73 2.90 1.73 Total consumer loans................. .36 .43 .61 .84 .57 Total loans.......................... .25 .25 .43 .47 .48
Consumer lending includes loans to individuals in communities served by Firstar's banks. These loans include both open-ended credit arrangements subject to an overall limit per customer, such as credit card and home equity loans, and closed-end loans subject to specific contractual payment schedules, such as installment loans and residential mortgages. Consumer net charge-offs were $13.4 million in 1994, compared with $14.6 million in 1993 and $19.1 million in 1992. The net charge-offs of .36% in 1994 compares with .43% and .61% in 1993 and 1992, respectively. Credit card net charge-offs have declined from 2.90% in 1991 to 1.93% during 1994 reflecting both lower charge-offs and higher recovery rates. This progressive reduction in 20 22 consumer charge-off levels reinforces the conclusion about the economic strength of Firstar's marketplace. Consumer charge-offs are expected to remain at or near this level. TABLE 12 COMPOSITION OF LOANS
DECEMBER 31 ------------------------------------------------------------------ 1994 1993 1992 1991 1990 ---------- ---------- ---------- ---------- ---------- (thousands of dollars) Commercial and industrial.......... $2,753,251 $2,470,454 $2,086,146 $1,987,897 $2,054,802 Real estate--construction.......... 272,266 209,181 236,794 278,971 256,506 Real estate--mortgage.............. 2,014,262 1,739,608 1,564,001 1,336,556 1,234,978 Foreign............................ 32,395 31,269 20,546 22,077 21,885 Other.............................. 905,795 855,249 895,667 930,675 857,459 ---------- ---------- ---------- ---------- ---------- Commercial loans................. 5,977,969 5,305,761 4,803,154 4,556,176 4,425,630 Credit card........................ 573,157 546,051 532,787 581,863 606,276 Real estate--mortgage.............. 1,360,088 1,363,671 1,318,179 1,067,716 1,021,554 Home equity........................ 522,201 445,135 375,427 289,386 * Other.............................. 1,394,612 1,323,200 1,081,944 1,049,519 1,292,653 ---------- ---------- ---------- ---------- ---------- Consumer loans................... 3,850,058 3,678,057 3,308,337 2,988,484 2,920,483 ---------- ---------- ---------- ---------- ---------- Total loans...................... $9,828,027 $8,983,818 $8,111,491 $7,544,660 $7,346,113 ========== ========== ========== ========== ==========
- ------------ * Comparable data not available LIQUIDITY AND INTEREST RATE RISK MANAGEMENT Two objectives of Firstar's asset and liability management strategy include the maintenance of appropriate liquidity and management of interest rate risk. Liquidity management aligns sources and uses of funds to meet the cash flow requirements of customers and Firstar. Interest rate risk management seeks to generate growth in net interest revenue and manage exposure to risks associated with interest rate movements and provide for acceptable and predictable results. Although conceptually distinct, liquidity and interest rate sensitivity must be managed together since action taken with respect to one often influences the other. The scheduled maturity of loans can provide a source of asset liquidity. Table 13 shows the range of loan maturities as of December 31, 1994. Short-term investments, such as federal funds, repurchase agreements and interest-bearing deposits, are another source of liquidity. These investments stood at $376 million at the end of 1994. The securities portfolio provides liquidity through scheduled maturities, as shown in Table 7, and the ability to use these securities in borrowing transactions. Additionally, those securities designated as available for sale were $51 million at the end of 1994 and can be sold to meet liquidity needs. TABLE 13 MATURITY DISTRIBUTION OF LOANS
TOTAL DUE WITHIN ONE TO FIVE AFTER FIVE DECEMBER 31, ONE YEAR YEARS YEARS 1994 ---------- ----------- ---------- ------------ (thousands of dollars) Commercial.................................... $2,668,476 $ 2,460,123 $ 849,370 $5,977,969 Consumer...................................... 992,502 2,286,867 570,689 3,850,058 ---------- ----------- ---------- ------------ Total....................................... $3,660,978 $ 4,746,990 $1,420,059 $9,828,027 ========= ========= ========= ==========
- ------------ The maturity is based upon contractual terms and Firstar may however extend the maturity at prevailing rates and terms in the normal course of business. Of the above loans due after one year, $4,147,088,000 have predetermined interest rates and $2,019,961,000 have floating or adjustable interest rates. 21 23 TABLE 14 MATURITY RANGE OF TIME DEPOSITS
TOTAL DUE WITHIN THREE TO SIX TO AFTER DECEMBER 31, THREE MONTHS SIX MONTHS TWELVE MONTHS TWELVE MONTHS 1994 ------------ ---------- ------------- ------------- ------------ (thousands of dollars) Certificates of deposit of $100,000 or more............................ $342,763 $ 94,151 $95,945 $ 116,114 $648,973 Other time deposits of $100,000 or more............................... 6,924 3,563 3,399 9,235 23,121 ---------- --------- --------- ----------- ---------- Total.............................. $349,687 $ 97,714 $99,344 $ 125,349 $672,094 ========== ========= ========= =========== ==========
The requirement of liquidity is diminished by the predominance of core deposits, which account for 83% of Firstar's fund sources. Stable core deposits do not require significant amounts of liquidity to meet the net withdrawal demands of customers on a short or intermediate term basis. Other sources of liquidity are short-term borrowed funds and time deposits which totaled $2.7 billion at the end of 1994. Firstar's ability to refinance maturing amounts and, when necessary, increase this funding base is a significant factor in its liquidity management. The absolute level and volatility of interest rates can have a significant impact on earnings. The objective of interest rate risk management is to identify and manage the sensitivity of net interest revenue to changing interest rates. Firstar uses computer simulation modeling as its primary method of quantifying and evaluating interest rate risk. Simulation modeling is performed at least quarterly and is used to quantify the impact on net interest revenue of various assumptions about interest rate and balance sheet changes and the use of off-balance sheet derivatives and financial instruments. The use of simulation modeling also enables Firstar to develop and test alternative asset and liability management strategies. Interest rate risk and the results of the simulation modeling is reviewed quarterly by bank, regional and corporate committees who assess the interest rate risk position and approve corresponding strategies. The objective of Firstar's asset liability management policy is to maintain adequate capital and liquidity and manage interest rate risk to produce an acceptable level of net interest revenue. Firstar's guideline is to employ an asset liability management strategy which limits the potential impact of projected interest rate changes to 5% of net income over the subsequent four quarters. In the most recent simulation, which excludes pending acquisitions, net interest revenue was forecast for 1995 under four interest rate scenarios. First, if current rates continued unchanged at the fourth quarter 1994 level with a prime rate of 8.50%, and then under most likely, high and low interest rate scenarios in which the prime rate changes to 9.25%, 10.50% and 7.00% respectively, by the fourth quarter of 1995. Compared to 1994 net interest revenue in 1995 would increase by $21 million if rates in the fourth quarter of 1994 remained unchanged throughout 1995. Under the most likely and low scenarios, net interest revenue in 1995 would increase by $9 million and $22 million, respectively, compared to 1994. Under the high scenario, net interest revenue would decline by $9 million compared to 1994. 22 24 The simulation model is supplemented with a tool used in the banking industry for measurement of interest rate risk known as the gap analysis. This measures the difference between assets and liabilities repricing or maturing within specified time periods. The gap analysis does however, have some limitations such as not reflecting the magnitude which assets or liabilities may reprice within a given interest rate scenario. A positive gap indicates that there are more rate sensitive assets than rate sensitive liabilities repricing within a given time frame. A positive gap would generally imply a favorable impact on net income in periods of rising rates. Conversely, a negative gap indicates a liability sensitive position. Table 15 shows Firstar's interest sensitivity under a traditional gap approach. While Firstar believes the above assumptions for the gap analysis and simulations are reasonable, actual interest rates and other factors could be significantly different from those assumed. Such differences could produce actual results which are different from projected results and the differences could be significant. TABLE 15 ASSET AND LIABILITY INTEREST SENSITIVITY
NON-RATE 1-30 31-90 91-180 181-365 TOTAL SENSITIVE & DAYS DAYS DAYS DAYS ONE YEAR OVER 1 YEAR TOTAL ------ ------- ------- ------- -------- ----------- ------- (millions of dollars) Loans........................ $3,964 $ 525 $ 346 $ 846 $ 5,681 $ 4,147 $ 9,828 Securities................... 72 125 79 337 613 2,778 3,391 Interest-bearing deposits with banks................. 4 4 4 Short-term investments....... 371 371 371 Other assets................. 1,683 1,683 Less: Reserve for loan losses..................... (173) (173) ------ ------- ------- ------- -------- ----------- ------- Total assets............ 4,411 650 425 1,183 6,669 8,435 15,104 Non-interest-bearing demand deposits................... 2,778 2,778 Interest-bearing demand accounts................... 200 200 400 1,075 1,475 Savings passbook............. 150 150 300 1,209 1,509 Money market accounts........ 205 756 700 1,661 1,661 Less than one year certificates............... 173 187 192 214 766 766 Other deposits............... 501 245 284 815 1,845 1,200 3,045 Borrowed funds............... 1,731 224 149 38 2,142 135 2,277 Other liabilities............ 286 286 Stockholders' equity......... 1,307 1,307 ------ ------- ------- ------- -------- ----------- ------- Total liabilities and stockholders' equity................ 2,960 1,006 1,381 1,767 7,114 7,990 15,104 Interest sensitive gap....... 1,451 (356) (956) (584) (445 ) (445) Interest rate swaps........ (110) (230) 12 (328 ) Periodic caps.............. (375) (555) (930 ) ------ ------- ------- ------- -------- Adjusted interest sensitive gap........................ $ 966 $(1,141) $ (944) $ (584) $(1,703 ) ====== ======= ======= ======= ======= Cumulative adjusted interest sensitive gap.............. $ 966 $ (175) $(1,119) $(1,703)
23 25 Firstar seeks to manage interest rate risk by adjusting the pricing and levels of assets and liabilities along with the use of off-balance sheet derivative financial instruments. Firstar enters into interest rate swaps and interest rate caps and floors as part of this process. These derivative instruments synthetically alter the repricing characteristics of designated assets and liabilities. Additional information on derivative financial instruments are included in Notes 17 and 18 to the Consolidated Financial Statements. Firstar's off-balance sheet financial derivative portfolio has a notional value of $1.7 billion as of December 31, 1994. During 1993 and early 1994, Firstar's simulation modeling indicated a risk to net interest revenue in a falling rate environment. Under this scenario income on variable rate loans would be reduced and not matched by corresponding reductions in the cost of deposits being used to fund these loans. Such deposits, savings passbook, interest bearing transactions and money market accounts were deemed to have already reached their lowest cost point based on competitive considerations. Consequently, Firstar, in 1993 and early 1994, entered into approximately $1.3 billion of new off-balance sheet financial derivative instruments to mitigate this risk. Interest rates have subsequently increased and while Firstar is currently a net payor on the instruments, it is also realizing an increased net yield on the designated hedged assets and liabilities. Net cash flows of off-balance sheet derivative instruments used to manage interest rate risk contributed $930 thousand to net interest revenue during 1994 compared with $5.7 million in 1993 and $8.8 million in 1992. Expressed in terms of net interest margin, the financial derivative portfolio had no impact in 1994 compared with .05% in 1993 and .09% in 1992. Using the most likely interest rate scenario, it is expected that derivative financial instruments will result in a reduction of net interest margin of .10% in 1995. Capital Total stockholders' equity increased 13.0% to $1.31 billion as of December 31, 1994. Stockholders' equity represented 8.65% of total assets at the end of 1994 compared to 8.38% a year earlier. Firstar redeemed its adjustable rate preferred stock at the end of 1993 at a price of $103 per share, or $51.5 million. This action removed a higher cost equity component. Dividends paid to common stockholders totaled $75.1 million, or $1.16 per share, a 16% increase over 1993. This represented a 36% payout of net income for 1994. It is Firstar's target to maintain a dividend payout level approximately equal to the median of its peer group. Bank regulatory agencies have established capital adequacy standards which are used extensively in their monitoring and control of the industry. These standards relate capital to level of risk by assigning different weightings to assets and certain off-balance sheet activity. Capital is measured by two risk-based ratios: Tier I capital and total capital, which includes Tier II capital. The rules require that companies have minimum ratios of 4% and 8% for Tier I and total capital, respectively. As of December 31, 1994, Firstar had Tier I capital of 11.68% and total capital of 13.46%, significantly exceeding regulatory minimum standards. The components of these capital levels are shown in Table 16. Additionally, a Tier I leverage ratio is also used by bank regulators as another measure of capital strength. This ratio compares Tier I capital to total reported assets reduced by goodwill. The regulatory minimum level of this ratio is 3%, and it acts as a constraint on the degree to which a company can leverage its equity base. Firstar's Tier I leverage ratio was 8.58% at December 31, 1994. The Federal Deposit Insurance Corporation Improvement Act of 1991 provided additional guidelines that considers capital levels and other factors. The guidelines established five supervisory groupings of capital adequacy. Firstar is considered "well capitalized" which is the highest group. 24 26 Maintaining a strong capital position is important to Firstar's long-term strategies which emphasize soundness, profitability and growth. Higher capital levels contribute to overall financial soundness as a cushion against cyclical economic trends which can effect the banking industry. Strong capital levels also will permit future growth through both internal asset generation and bank acquisitions. TABLE 16 CAPITAL COMPONENTS AND RATIOS
DECEMBER 31 ------------------------------------------- 1994 1993 1992 ----------- ---------- ---------- (thousands of dollars) Risk-based capital: Stockholders' equity.............................. $ 1,306,528 $1,155,897 $1,048,388 Unrealized losses on securities available for sale........................................... 988 Minority interest in subsidiaries................. 2,920 2,214 1,979 Less goodwill..................................... (71,392) (72,602) (76,992) ----------- ---------- ---------- Total Tier I capital........................... 1,239,044 1,085,509 973,375 Allowable reserve for loan losses................. 133,121 123,953 114,837 Allowable long-term debt.......................... 56,327 81,486 107,010 ----------- ---------- ---------- Total Tier II capital.......................... 189,448 205,439 221,847 ----------- ---------- ---------- Total capital.................................. $ 1,428,492 $1,290,948 $1,195,222 ========== ========= ========= Risk-adjusted assets................................ $10,610,207 $9,792,746 $9,056,307 Tier I capital to risk-adjusted asset............... 11.68% 11.08% 10.75% Total capital to risk-adjusted assets............... 13.46 13.18 13.20 Tier I leverage ratio............................... 8.58 8.30 7.71
25 27 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA FIRSTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31 AVERAGE BALANCES ------------------------- ------------------------- 1994 1993 1994 1993 ----------- ----------- ----------- ----------- (thousands of dollars) ASSETS Cash and due from banks..................... $ 999,926 $ 1,228,957 $ 873,275 $ 938,407 Interest-bearing deposits with banks........ 4,372 4,328 4,902 33,043 Federal funds sold and resale agreements.... 342,234 282,517 200,039 147,744 Trading securities.......................... 29,050 12,491 22,123 17,332 Securities held to maturity (market value $3,244,658 and $2,894,594 on December 31, 1994 and 1993)............................ 3,339,911 2,834,305 2,949,088 2,929,035 Securities available for sale............... 51,308 11,041 Loans....................................... 9,828,027 8,983,818 9,261,409 8,332,963 Reserve for loan losses..................... (172,606) (174,873) (175,393) (173,224) ----------- ----------- ----------- ----------- Loans-net.............................. 9,655,421 8,808,945 9,086,016 8,159,739 Bank premises and equipment................. 294,026 264,569 270,218 259,064 Customer acceptance liability............... 13,260 17,412 19,874 19,962 Other assets................................ 374,799 340,471 360,271 352,913 ----------- ----------- ----------- ----------- Total assets........................... $15,104,307 $13,793,995 $13,796,847 $12,857,239 ========== ========== ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Demand.................................... $ 2,778,240 $ 3,064,314 $ 2,533,883 $ 2,531,844 Interest-bearing demand................... 1,474,949 1,557,145 1,412,178 1,418,061 Money market accounts..................... 1,661,283 1,564,414 1,580,884 1,555,455 Savings passbook.......................... 1,508,918 1,528,222 1,542,044 1,490,209 Certificates of deposit................... 3,811,623 3,449,519 3,605,420 3,537,120 ----------- ----------- ----------- ----------- Total deposits......................... 11,235,013 11,163,614 10,674,409 10,532,689 Short-term borrowed funds................... 2,141,456 1,112,490 1,525,982 822,580 Long-term debt.............................. 135,088 126,275 126,184 133,135 Bank acceptances outstanding................ 13,260 17,412 19,874 19,962 Other liabilities........................... 272,962 218,307 226,449 218,683 ----------- ----------- ----------- ----------- Total liabilities...................... 13,797,779 12,638,098 12,572,898 11,727,049 Stockholders' equity: Preferred stock........................... 495 Common stock.............................. 83,332 81,149 81,642 80,401 Issued: 1994, 66,665,739 shares........ 1993, 64,919,422 shares......... Capital surplus........................... 174,067 149,882 155,265 189,718 Retained earnings......................... 1,061,221 928,559 995,554 863,311 Treasury stock, at cost................... (10,669) (3,034) (7,719) (3,343) Held: 1994, 792,303 shares............. 1993, 558,603 shares.............. Restricted stock.......................... (435) (659) (624) (392) Unrealized losses on securities available for sale............................... (988) (169) ----------- ----------- ----------- ----------- Total stockholders' equity............. 1,306,528 1,155,897 1,223,949 1,130,190 ----------- ----------- ----------- ----------- Total liabilities and stockholders' equity............................... $15,104,307 $13,793,995 $13,796,847 $12,857,239 ========== ========== ========== ==========
- ------------ The average balances are not covered by the Independent Auditors' Report. See accompanying notes to consolidated financial statements. 26 28 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.................................................... $761,672 $685,530 $693,594 Securities: Taxable................................................ 122,759 129,574 140,632 Nontaxable............................................. 43,216 45,078 51,104 -------- -------- -------- Total securities.................................. 165,975 174,652 191,736 Interest-bearing deposits with banks..................... 288 1,385 2,608 Federal funds sold and resale agreements................. 8,841 4,602 9,791 Trading securities....................................... 1,211 785 792 -------- -------- -------- Total interest revenue............................ 937,987 866,954 898,521 INTEREST EXPENSE Deposits: Interest-bearing demand................................ 18,173 23,666 31,977 Money market accounts.................................. 44,416 38,968 49,555 Savings passbook....................................... 36,112 38,214 40,247 Certificates of deposit................................ 163,427 160,786 199,626 -------- -------- -------- Total deposits.................................... 262,128 261,634 321,405 Short-term borrowed funds................................ 65,408 23,811 23,423 Long-term debt........................................... 12,865 13,453 14,541 -------- -------- -------- Total interest expense............................ 340,401 298,898 359,369 -------- -------- -------- NET INTEREST REVENUE..................................... 597,586 568,056 539,152 Provision for loan losses................................ 17,139 24,567 44,821 -------- -------- -------- NET INTEREST REVENUE AFTER LOAN LOSS PROVISION........... 580,447 543,489 494,331 OTHER OPERATING REVENUE Trust and investment management fees..................... 117,872 110,185 95,926 Service charges on deposit accounts...................... 72,366 74,071 66,301 Credit card service revenue.............................. 55,779 53,316 51,867 Data processing fees..................................... 20,263 21,431 24,215 Mortgage banking revenue................................. 15,053 26,158 12,372 Securities gains......................................... 76 182 981 Other revenue............................................ 53,826 56,922 49,105 -------- -------- -------- Total other operating revenue..................... 335,235 342,265 300,767 OTHER OPERATING EXPENSE Salaries................................................. 265,731 257,405 237,997 Employee benefits........................................ 60,175 59,443 49,610 Equipment expense........................................ 49,251 48,139 48,720 Net occupancy expense.................................... 45,914 48,731 44,408 Net other real estate (income) expense................... (1,489) 2,056 4,303 Other expense............................................ 185,343 171,970 172,528 -------- -------- -------- Total other operating expense..................... 604,925 587,744 557,566 -------- -------- -------- INCOME BEFORE INCOME TAXES............................... 310,757 298,010 237,532 Provision for income taxes............................... 103,014 93,716 71,547 -------- -------- -------- NET INCOME............................................... $207,743 $204,294 $165,985 ======== ======== ======== Net income applicable to common stock.................... $207,743 $201,028 $162,238 PER COMMON SHARE Net income............................................... $ 3.22 $ 3.15 $ 2.62 Dividends................................................ 1.16 1.00 .80
See accompanying notes to consolidated financial statements. 27 29 FIRSTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
UNREALIZED LOSSES ON PREFERRED STOCK COMMON STOCK SECURITIES ----------------- -------------------- CAPITAL RETAINED AVAILABLE SHARES AMOUNT SHARES AMOUNT SURPLUS EARNINGS FOR SALE -------- ------ ---------- ------- -------- ---------- ---------- (thousands of dollars, except per share data) BALANCE AT DECEMBER 31, 1991............. 500,000 $ 500 61,715,280 $77,144 $160,023 $ 681,432 $ 0 Net income............................... 165,985 Cash dividends: Preferred stock, series B ($7.5502 per share)............................... (3,775) Common stock ($.80 per share).......... (49,429) Common stock issued: Bank acquisitions...................... 1,307,016 1,634 15,812 Employee benefit plans................. 147,124 184 2,947 Other.................................. 94,031 118 701 Treasury stock purchased................. -------- ------ ---------- ------- -------- ---------- ---------- BALANCE AT DECEMBER 31, 1992............. 500,000 500 63,263,451 79,080 179,483 794,213 0 Net income............................... 204,294 Cash dividends: Preferred stock, series B ($7.4419 per share)............................... (3,720) Common stock ($1.00 per share)......... (63,733) Redemption of preferred stock............ (500,000) (500 ) (48,505) (2,495) Common stock issued: Bank acquisitions...................... 1,018,734 1,273 12,234 Employee benefit plans................. 104,043 130 1,920 Other.................................. 502,959 628 3,858 Treasury stock purchased................. Restricted stock granted................. 30,235 38 892 Amortization of restricted stock......... -------- ------ ---------- ------- -------- ---------- ---------- BALANCE AT DECEMBER 31, 1993............. 0 0 64,919,422 81,149 149,882 928,559 0 Net income............................... 207,743 Cash dividends: Common stock ($1.16 per share)......... (75,081) Common stock issued: Bank acquisitions...................... 1,662,033 2,078 22,735 Employee benefit plans................. 84,284 105 1,563 Treasury stock purchased................. Unrealized losses on securities available for sale............................... (988) Amortization/adjustment of restricted stock.................................. (113) -------- ------ ---------- ------- -------- ---------- ---------- BALANCE AT DECEMBER 31, 1994............. 0 $ 0 66,665,739 $83,332 $174,067 $1,061,221 $ (988) ========= ======= ========== ======== ========= ========== ========== TREASURY STOCK RESTRICTED ------------------- STOCK SHARES AMOUNT TOTAL ---------- -------- -------- ---------- BALANCE AT DECEMBER 31, 1991............. $ 0 (583,648) $ (2,760) $ 916,339 Net income............................... 165,985 Cash dividends: Preferred stock, series B ($7.5502 per share)............................... (3,775) Common stock ($.80 per share).......... (49,429) Common stock issued: Bank acquisitions...................... 690,262 19,948 37,394 Employee benefit plans................. 50,520 416 3,547 Other.................................. 819 Treasury stock purchased................. (780,606) (22,492) (22,492) ---------- -------- -------- ---------- BALANCE AT DECEMBER 31, 1992............. 0 (623,472) (4,888) 1,048,388 Net income............................... 204,294 Cash dividends: Preferred stock, series B ($7.4419 per share)............................... (3,720) Common stock ($1.00 per share)......... (63,733) Redemption of preferred stock............ (51,500) Common stock issued: Bank acquisitions...................... 105,069 3,098 16,605 Employee benefit plans................. 935 31 2,081 Other.................................. 4,486 Treasury stock purchased................. (41,135) (1,275) (1,275) Restricted stock granted................. (930) 0 Amortization of restricted stock......... 271 271 ---------- -------- -------- ---------- BALANCE AT DECEMBER 31, 1993............. (659) (558,603) (3,034) 1,155,897 Net income............................... 207,743 Cash dividends: Common stock ($1.16 per share)......... (75,081) Common stock issued: Bank acquisitions...................... 139,508 4,551 29,364 Employee benefit plans................. 1,100 36 1,704 Treasury stock purchased................. (374,308) (12,222) (12,222) Unrealized losses on securities available for sale............................... (988) Amortization/adjustment of restricted stock.................................. 224 111 ---------- -------- -------- ---------- BALANCE AT DECEMBER 31, 1994............. $ (435) (792,303) $(10,669) $1,306,528 ========= ========= ========= ==========
See accompanying notes to consolidated financial statements. 28 30 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............................................ $ 207,743 $ 204,294 $ 165,985 Adjustments: Provision for loan losses........................... 17,139 24,567 44,821 Depreciation, amortization and accretion............ 33,160 29,530 47,571 Net (increase) decrease in trading securities....... (16,559) 8,382 (4,824) Net decrease (increase) in loans held for resale.... 193,439 (52,143) (92,471) (Gain) loss on securities and other assets.......... (3,034) 1,249 (2,710) Deferred income taxes............................... (1,488) (9,866) (10,061) Decrease in other assets............................ 26,629 5,667 14,045 Increase (decrease) in other liabilities............ 29,772 26,739 (19,246) Other net........................................... (3,336) 211 (6,123) ----------- ----------- ----------- Net cash provided by operating activities........ 483,465 238,630 136,987 CASH FLOWS FROM INVESTING ACTIVITIES Net (increase) decrease in federal funds sold and resale agreements................................... (58,417) (52,756) 74,567 Net decrease (increase) in interest-bearing deposits with banks.......................................... (44) 178,855 (37,826) Sales of securities................................... 4,155 92,461 Maturities of securities.............................. 878,044 1,467,156 1,714,272 Purchases of securities held to maturity.............. (1,334,281) (1,380,307) (1,719,290) Purchases of securities available for sale............ (6,539) Net increase in loans................................. (831,358) (693,323) (102,818) Net cash from acquisitions............................ 34,199 11,695 6,713 Proceeds from sales of other real estate.............. 13,149 15,818 6,832 Purchases of bank premises and equipment.............. (54,607) (36,141) (43,093) Proceeds from sales of bank premises and equipment.... 1,125 458 2,486 ----------- ----------- ----------- Net cash used in investing activities............ (1,358,729) (484,390) (5,696) CASH FLOWS FROM FINANCING ACTIVITIES Net (decrease) increase in deposits................... (297,268) 85,116 259,999 Net increase (decrease) in short-term borrowed funds............................................... 1,024,795 245,803 (79,984) Repayment of long-term debt........................... (5,137) (27,337) (18,899) Proceeds from long-term debt.......................... 10,000 Cash dividends........................................ (75,081) (67,453) (53,204) Preferred stock redemption............................ (51,500) Common stock transactions............................. (11,076) 138 (19,788) ----------- ----------- ----------- Net cash provided by financing activities........ 646,233 184,767 88,124 ----------- ----------- ----------- NET (DECREASE) INCREASE IN CASH AND DUE FROM BANKS.... (229,031) (60,993) 219,415 Cash and due from banks at beginning of year.......... 1,228,957 1,289,950 1,070,535 ----------- ----------- ----------- Cash and due from banks at end of year................ $ 999,926 $ 1,228,957 $ 1,289,950 ========== ========== ========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for: Interest............................................ $ 327,446 $ 303,069 $ 372,713 Income taxes........................................ 102,991 107,525 74,483 Transfers to other real estate from loans............. 9,935 4,964 17,263 Acquisitions: Assets acquired..................................... 437,563 218,592 655,095 Cash paid for purchase of stock..................... $ $ $ (12,730) Cash acquired....................................... 34,199 11,695 19,443 ----------- ----------- ----------- Net cash from acquisitions....................... $ 34,199 $ 11,695 $ 6,713 ========== ========== ==========
See accompanying notes to consolidated financial statements. 29 31 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 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. Bank premises and equipment--Bank premises and equipment are stated at cost less depreciation, which has been accumulated on the straight-line basis. 30 32 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 64,611,000 in 1994, 63,747,000 in 1993 and 61,879,000 in 1992. For calculation purposes, earnings are reduced by preferred stock dividends. Common stock equivalents are not significant in any year presented. 31 33 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) 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 bank acquisitions shown above, accounted for as pooling of interests, were not material to prior years' reported operating results and, accordingly, previously reported results have not been restated. On January 31, 1995, Firstar Corporation completed its merger with First Colonial Bankshares Corporation in a transaction accounted for as a pooling of interests. Firstar Corporation issued .7725 shares of Firstar common stock for each share of First Colonial Bankshares Corporation common stock. The total number of shares of Firstar common stock issued was approximately 7,700,000 shares. 32 34 A summary of unaudited pro forma financial information giving effect to the merger with First Colonial Bankshares Corporation is shown below. The unaudited financial information is not indicative of the results that would have been realized had the entities been a single company during these periods, nor is it indicative of the actual results the combined company will report in the future. Firstar will present restated financial statements to reflect this transaction beginning with the fiscal quarter ended March 31, 1995.
YEARS ENDED DECEMBER 31 ----------------------------------------- 1994 1993 1992 ----------- ----------- ----------- (thousands of dollars, except per share) Total assets.......................................... $16,871,053 $15,398,037 $14,749,501 Net interest revenue.................................. 676,491 632,829 603,172 Other operating revenue............................... 353,122 364,617 324,142 Net income............................................ 219,745 217,913 178,187 Net income per common share........................... 3.02 2.99 2.50
In 1994, Firstar Corporation announced a merger agreement with Investors Bank Corp., a $1.1 billion thrift holding company in Wayzata, MN. The transaction will be accounted for as a pooling of interests with the issuance of approximately 3,000,000 shares of Firstar stock. In 1994, Firstar Corporation announced a merger agreement with First Moline Financial Corporation, an $80 million thrift holding company in Moline, IL. The transaction will be accounted for as a purchase with the issuance of approximately 300,000 shares of Firstar stock. NOTE 3. INTANGIBLE ASSETS Intangible assets, net of accumulated amortization, are summarized as follows:
DECEMBER 31 ----------------------------------------- 1994 1993 1992 ----------- ----------- ----------- (thousands of dollars) Goodwill.............................................. $ 71,392 $ 72,602 $ 76,992 Core deposit intangibles.............................. 17,417 20,119 22,821 Purchased mortgage servicing rights................... 4,653 2,357 6,464 ----------- ----------- ----------- Total............................................... $ 93,462 $ 95,078 $ 106,277 =========== =========== =========== Amortization of intangibles during year............... $ 8,318 $ 12,717 $ 15,520
33 35 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) Securities held to maturity: U.S. Treasury and federal agencies............ $1,457,708 $ 996 $ (57,211) $1,401,493 Mortgage backed obligations of federal agencies................................... 838,165 1,889 (30,351) 809,703 State and political subdivisions.............. 891,880 6,025 (16,025) 881,880 Corporate debt................................ 55,300 71 (647) 54,724 Equity securities............................. 33,406 33,406 Other......................................... 63,452 63,452 ---------- ---------- ---------- ---------- Total...................................... $3,339,911 $ 8,981 $ (104,234) $3,244,658 ========= ======== ========= ========= Securities available for sale: U.S. Treasury and federal agencies............ $ 38,759 $ $ (873) $ 37,886 Mortgage backed obligations of federal agencies................................... 11,396 98 (714) 10,780 State and political subdivisions.............. 2,734 (92) 2,642 ---------- ---------- ---------- ---------- Total...................................... $ 52,889 $ 98 $ (1,679) $ 51,308 ========= ======== ========= =========
DECEMBER 31, 1993 ---------------------------------------------------- AMORTIZED UNREALIZED UNREALIZED MARKET COST GAINS LOSSES VALUE ---------- ---------- ---------- ---------- (thousands of dollars) Securities held to maturity: U.S. Treasury and federal agencies............ $1,410,917 $ 24,639 $ (2,477) $1,433,079 Mortgage backed obligations of federal agencies................................... 332,737 15,041 (700) 347,078 State and political subdivisions.............. 905,396 24,287 (1,340) 928,343 Corporate debt................................ 70,494 1,067 (228) 71,333 Equity securities............................. 13,745 13,745 Other......................................... 101,016 101,016 ---------- ---------- ---------- ---------- Total...................................... $2,834,305 $ 65,034 $ (4,745) $2,894,594 ========= ======== ========= =========
34 36 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.
SECURITIES SECURITIES HELD TO MATURITY AVAILABLE FOR SALE ------------------------ ------------------------ AMORTIZED MARKET AMORTIZED MARKET COST VALUE COST VALUE ---------- ---------- ---------- ---------- (thousands of dollars) Due in one year or less....................... $ 611,692 $ 608,941 $ 1,740 $ 1,706 Due after one year through five years......... 1,892,240 1,826,161 16,728 16,178 Due after five years through ten years........ 610,395 595,578 32,058 31,436 Due after 10 years............................ 192,178 180,572 2,363 1,988 ---------- ---------- ---------- ---------- 3,306,505 3,211,252 $ 52,889 $ 51,308 ========= ========= Equity securities............................. 33,406 33,406 ---------- ---------- Total....................................... $3,339,911 $3,244,658 ========= =========
Gross gains of $78,000, $232,000 and $1,106,000 and gross losses of $2,000, $50,000 and $125,000 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 $806,461,000 at December 31, 1994 and $712,696,000 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 $17,989,000 and $10,938,000 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 $2,551 million, $2,045 million and $1,672 million of mortgage loans for other investors as of December 31, 1994, 1993 and 1992, respectively. Residential mortgage loans held for resale were $22,511,000 and $215,950,000 on December 31, 1994 and 1993, respectively.
DECEMBER 31 ------------------------ 1994 1993 ---------- ---------- (thousands of dollars) Commercial and industrial............................................ $2,753,251 $2,470,454 Real estate--construction............................................ 272,266 209,181 Real estate--mortgage................................................ 2,014,262 1,739,608 Foreign.............................................................. 32,395 31,269 Other................................................................ 905,795 855,249 ---------- ---------- Commercial......................................................... 5,977,969 5,305,761 Credit card.......................................................... 573,157 546,051 Real estate--mortgage................................................ 1,360,088 1,363,671 Home equity.......................................................... 522,201 445,135 Other................................................................ 1,394,612 1,323,200 ---------- ---------- Consumer........................................................... 3,850,058 3,678,057 ---------- ---------- Total........................................................... $9,828,027 $8,983,818 ========= =========
35 37 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.................................................... $ 44,060 $ 48,233 $ 48,690 Consumer...................................................... 5,307 6,417 8,138 -------- -------- -------- Total....................................................... $ 49,367 $ 54,650 $ 56,828 ======== ======== ========
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............................ $ 6,485 $ 6,586 $ 7,593 Interest collected............................................ 3,127 2,567 1,721 -------- -------- -------- Net reduction of interest revenue........................... $ 3,358 $ 4,019 $ 5,872 ======== ======== ========
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 $101.1 million on December 31, 1994 and $109.3 million on December 31, 1993. During 1994 new loans of $16.5 million were made and loan payments of $24.7 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.................................. $174,873 $168,482 $150,628 Provision for loan losses..................................... 17,139 24,567 44,821 Loan recoveries............................................... 18,579 16,840 17,962 Loan charge-offs.............................................. (41,488) (37,495) (51,062) Reserves of acquired banks.................................... 3,503 2,479 6,133 -------- -------- -------- Balance at end of year...................................... $172,606 $174,873 $168,482 ======== ======== ======== Charge-offs, net of recoveries, as a percentage of average loans....................................................... .25% .25% .43% Reserve as a percentage of year-end loans..................... 1.76 1.95 2.08
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. 36 38 NOTE 7. BANK PREMISES AND EQUIPMENT Bank premises and equipment are summarized as follows:
DECEMBER 31 ------------------------ 1994 1993 ---------- --------- (thousands of dollars) Land................................................................ $ 36,981 $ 31,373 Bank premises....................................................... 286,048 253,062 Equipment........................................................... 247,551 228,187 ---------- --------- Subtotal.......................................................... 570,580 512,622 Accumulated depreciation............................................ (276,554) (248,053) ---------- --------- Total............................................................. $ 294,026 $ 264,569 ========= =========
Depreciation charged to other operating expense amounted to $34,187,000, $34,385,000 and $33,418,000 in 1994, 1993 and 1992, respectively. Rental expense for bank premises and equipment amounted to $30,045,000, $30,079,000 and $28,843,000 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 2034. 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 $ 18,710 1996 17,889 1997 17,414 1998 15,331 1999 14,627
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........................................ $2,090,056 $1,032,438 $ 785,967 Average during year................................... 1,476,677 745,865 622,227 Maximum month-end balance............................. 2,090,056 1,051,567 808,393 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 $1,636 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 $454 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. 37 39 NOTE 9. LONG-TERM DEBT Long-term debt is summarized as follows:
DECEMBER 31 -------------------------- 1994 1993 ----------- ----------- (thousands of dollars) 10 1/4% subordinated notes......................................... $ 78,340 $ 78,405 10% notes.......................................................... 43,910 44,200 Other debt......................................................... 12,838 3,670 ----------- ----------- Total............................................................ $ 135,088 $ 126,275 ========== ==========
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. Other debt at December 31, 1994 includes notes of $2,706,000 which bear interest at 11.50% and mature in 1996 and loans sold under a repurchase agreement of $10,000,000 which mature in 1999 and bear interest at a variable LIBOR based rate. Long-term debt has aggregate maturities for the five years 1995 through 1999 as follows: $75,000 in 1995, $46,616,000 in 1996, $78,397,000 in 1998 and $10,000,000 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. 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 Common stock, $1.25 par value: Authorized....................................................... 120,000,000 120,000,000 Outstanding (net of treasury stock).............................. 65,873,436 64,360,819
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 38 40 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. In conjunction with long-term incentive plans, 30,235 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 a three-year 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. On January 31, 1995 Firstar issued 38,775 shares of Series D preferred stock in connection with its merger with First Colonial Bankshares Corporation. These shares are convertible into 832,112 shares of Firstar common stock and are redeemable after June 30, 1997. 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. The following table summarizes option activity under these plans:
NUMBER OF SHARES OPTION PRICE ---------- ---------------- Options outstanding at December 31, 1991......................... 1,082,176 $ 3.06 to $15.81 Granted........................................................ 354,800 25.13 Exercised...................................................... (155,914) 3.06 to 25.13 Cancelled...................................................... (19,200) 13.38 to 25.13 ---------- Options outstanding at December 31, 1992......................... 1,261,862 4.37 to 25.13 Granted........................................................ 310,600 32.50 Exercised...................................................... (104,978) 4.37 to 15.81 Cancelled...................................................... (30,000) 13.38 to 32.50 ---------- Options outstanding at December 31, 1993......................... 1,437,484 5.68 to 32.50 Granted........................................................ 368,900 30.88 to 31.25 Exercised...................................................... (85,384) 5.68 to 25.13 Cancelled...................................................... (10,900) 25.13 to 32.50 ---------- Options outstanding at December 31, 1994......................... 1,710,100 11.38 to 32.50 ========
At December 31, 1994, options to acquire 989,500 shares were exercisable. In January 1995, options to acquire 499,300 shares of common stock at $27.38 to $27.50 per share were granted. 39 41 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............................................ $ 23,789 $ 23,670 $ 22,488 Business development.......................................... 23,503 24,063 23,055 Stationery and supplies....................................... 16,456 19,060 18,123 Information processing expense................................ 16,233 14,996 14,544 Professional fees............................................. 14,958 15,336 14,040 Delivery...................................................... 14,585 15,452 15,840 Check kiting loss............................................. 22,000 Other......................................................... 53,819 59,393 64,438 -------- -------- -------- Total....................................................... $185,343 $171,970 $172,528 ======== ======== ========
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 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............................. 9.00 9.50 9.50
40 42 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 ======== ======== ========
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 $10,382,000 in 1994, $9,667,000 in 1993 and $8,539,000 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 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. 41 43 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..................................................... $ 85,747 $ 85,344 $ 66,746 State and other............................................. 18,755 18,238 14,862 -------- -------- -------- Subtotal................................................. 104,502 103,582 81,608 Deferred income taxes (benefit): Federal..................................................... (1,358) (6,731) (9,229) State and other............................................. (130) (856) (832) -------- -------- -------- Subtotal................................................. (1,488) (7,587) (10,061) Cumulative effect of change in accounting principle........... (2,279) -------- -------- -------- Provision for income taxes............................... $103,014 $ 93,716 $ 71,547 ======== ======== ========
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................................. $108,969 $104,498 $ 80,991 Increase (reduction) in taxes resulting from: Tax-exempt income........................................... (18,075) (18,486) (20,882) State and local taxes--net of federal income tax benefit.... 12,106 11,298 9,260 Amortization of intangibles................................. 1,702 1,663 2,433 Cumulative effect of change in accounting principle......... (2,279) Adjustment to deferred tax assets and liabilities for enacted changes in tax laws and rates.................... (1,586) Other--net.................................................. (1,688) (1,392) (255) -------- -------- -------- Provision for income taxes............................... $103,014 $ 93,716 $ 71,547 ======== ======== ========
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)......................................................... $ (2,008) $ (6,699) 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.............................................................. $ (1,488) $ (7,587) ======== ========
42 44 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........................... $(12,176) $(11,741) Equipment leased to customers......................................... (14,525) (16,188) Difference in basis of certain acquired assets accounted for as a purchase........................................................... (8,454) (10,195) Deferred tax assets: Pension costs......................................................... 11,675 9,190 Reserve for loan losses............................................... 69,109 70,005 Other real estate..................................................... 3,904 3,187 Deferred gain on sale of building..................................... 7,720 11,338 Deferred compensation................................................. 6,916 6,950 State and federal net operating loss carryforwards.................... 10,532 8,965 Other--net............................................................ 12,003 9,058 -------- -------- Subtotal........................................................... 86,704 80,569 Less valuation allowance................................................ (11,066) (9,271) -------- -------- Net deferred tax asset............................................. $ 75,638 $ 71,298 ======== ========
The deferred tax asset increased due to tax benefits recorded on securities which were marked-to-market in accordance with Statement No. 115 and the acquisition of First Southeast Banking Corp. 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. Net deferred tax assets of $2,358,000 including a valuation allowance of $1,275,000 were added in 1994 due to the acquisition of First Southeast Banking Corp. Other assets include net deferred income tax charges of $75,638,000 and $71,298,000 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 credit 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. 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. 43 45 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:
DECEMBER 31 --------------------- 1994 1993 ------ ------ (millions of dollars) Commitments to extend credit........................................... $4,063 $3,763 Credit card lines...................................................... 1,541 1,364 Standby and commercial letters of credit............................... 404 349 Mortgage loans sold with recourse...................................... 30 21
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 $248 million and $267 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 loans and dividends. As of December 31, 1994, $128 million could be loaned to Firstar by the subsidiary banks subject to strict collateral requirements, and $250 million could be loaned to Firstar by the 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 such subsidiary bank. 44 46 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 $ 91 $ $ 80 $ 284 Additions.............................. 200 10 50 720 120 1,100 Maturities............................. (63) (24) (20) (107) ---------- ----- -------- -------- -------- --------- December 31, 1993........................ 200 60 117 720 180 1,277 Additions.............................. 90 50 210 241 591 Maturities............................. (35) (80) (40) (155) ---------- ----- -------- -------- -------- --------- December 31, 1994........................ $290 $ 75 $ 37 $930 $381 $ 1,713 ======== ==== ====== ====== ======= =======
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 fixed rate loans to variable rate loans or vice versa have a total notional value of $112 million on December 31, 1994. 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 certain securities and loans. 45 47 The maturity range of derivative financial instruments as of December 31, 1994 is as follows:
MATURITY RANGE OF DERIVATIVE FINANCIAL INSTRUMENTS ------------------------------------------------------------------------------------------- MARKET WEIGHTED VALUE AVERAGE ASSET 1995 1996 1997 1998 1999 BEYOND TOTAL MATURITIES (LIABILITY) ---- ---- ---- ---- ---- ------ ------ ---------- ----------- (millions of dollars) Interest Rate Swaps Receive variable........ $ 37 $ 37 .6 yr $ -- Average receive rate................ 5.19% 5.19% Average pay rate...... 5.56 5.56 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 $270 $770 $210 $291 $ 30 $1,713 2.7 yrs $ (61.4) ===== ===== ===== ===== ===== ======= ====== =========
- ------------ 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, Firstar's 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 $22 million and $202 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. 46 48 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 December 31, 1994 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............... $445 $ 18.2 $21.8 $590 $ 10.2 $11.3 In a payable position.................. 445 18.6 21.3 590 9.3 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
47 49 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 judgements 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 judgement 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. 48 50 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. 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............. $1,346,532 $ 1,346,532 $1,515,802 $ 1,515,802 Trading securities.......................... 29,050 29,050 12,491 12,491 Securities available for sale............... 51,308 51,308 Securities held to maturity................. 3,339,911 3,244,658 2,834,305 2,894,594 Loans, net of allowance for loan losses..... 9,655,421 9,468,169 8,808,945 9,022,477 Financial liabilities: Deposits: Without stated maturities................ 7,423,390 7,423,390 7,714,095 7,714,095 With stated maturities................... 3,811,623 3,804,196 3,449,519 3,474,675 Short-term borrowed funds................... 2,141,456 2,141,456 1,112,490 1,112,490 Long-term debt.............................. 135,088 140,321 126,275 145,018 Derivative financial contracts: Asset and liability management: Interest rate contracts: Asset.................................. 3,585 3,611 Liability.............................. 64,405 3,706 Credit commitments.......................... 12,955 14,940 As intermediary for customers: Interest rate contracts: Asset.................................. 20,564 20,564 10,304 Liability.............................. 20,916 20,916 9,388 Foreign exchange contracts: Asset.................................. 740 740 1,535 1,535 Liability.............................. 659 659 1,354 1,354
49 51 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.................................... 1,316,668 1,193,505 Investment in other subsidiaries................................... 15,668 13,473 Other assets....................................................... 7,266 6,166 ---------- ---------- Total assets.................................................... $1,450,404 $1,299,465 ========= ========= Liabilities and stockholders' equity: Long-term debt..................................................... $ 124,956 $ 125,311 Other liabilities.................................................. 18,920 18,257 Stockholders' equity............................................... 1,306,528 1,155,897 ---------- ---------- Total liabilities and stockholders' equity...................... $1,450,404 $1,299,465 ========= =========
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........... 90,600 84,699 85,221 ---------- ---------- ---------- Net income.......................................... $ 207,743 $ 204,294 $ 165,985 ========= ========= =========
50 52 STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31 --------------------------------- 1994 1993 1992 -------- --------- -------- (thousands of dollars) Cash flows from operating activities: Net income................................................. $207,743 $ 204,294 $165,985 Adjustments: Equity in undistributed income of subsidiaries.......... (90,600) (84,699) (85,221) 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
51 53 [KPMG Letterhead] 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. [Signature] KPMG Peat Marwick LLP Milwaukee, Wisconsin January 19, 1995 52 54 FIRSTAR CORPORATION AND SUBSIDIARIES SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
1994 -------------------------------------------- FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER -------- -------- -------- -------- (thousands of dollars, except per share) Interest revenue.................................... $214,649 $225,515 $237,656 $260,167 Interest expense.................................... 70,634 77,831 89,249 102,687 -------- -------- -------- -------- Net interest revenue................................ 144,015 147,684 148,407 157,480 Provision for loan losses........................... 2,958 2,642 2,674 8,865 Other operating revenue............................. 83,113 84,096 82,403 85,623 Other operating expense............................. 144,203 167,148 143,314 150,260 -------- -------- -------- -------- Income before income taxes.......................... 79,967 61,990 84,822 83,978 Provision for income taxes.......................... 26,745 19,485 28,953 27,831 -------- -------- -------- -------- Net income.......................................... $ 53,222 $ 42,505 $ 55,869 $ 56,147 ======== ======== ======== ======== Per common share Net income.......................................... $ .83 $ .66 $ .87 $ .86 Dividends........................................... .26 .30 .30 .30 Stock price ranges: High.............................................. 34 3/4 35 3/8 35 1/8 30 7/8 Low............................................... 29 3/4 32 5/8 29 5/8 25 1/8 Close............................................. 33 35 3/8 31 26 7/8
1993 -------------------------------------------- FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER -------- -------- -------- -------- (thousands of dollars, except per share) Interest revenue.................................... $217,901 $216,253 $216,549 $216,251 Interest expense.................................... 78,149 75,409 74,037 71,303 -------- -------- -------- -------- Net interest revenue................................ 139,752 140,844 142,512 144,948 Provision for loan losses........................... 6,334 5,328 6,789 6,116 Other operating revenue............................. 79,325 84,285 88,058 90,597 Other operating expense............................. 141,739 144,882 147,885 153,238 -------- -------- -------- -------- Income before income taxes.......................... 71,004 74,919 75,896 76,191 Provision for income taxes.......................... 20,978 24,522 24,541 23,675 -------- -------- -------- -------- Net income.......................................... $ 50,026 $ 50,397 $ 51,355 $ 52,516 ======== ======== ======== ======== Per common share Net income.......................................... $ .78 $ .78 $ .79 $ .80 Dividends........................................... .22 .26 .26 .26 Stock price ranges: High.............................................. 35 7/8 37 1/4 34 1/8 35 3/8 Low............................................... 29 7/8 29 1/2 31 5/8 29 3/8 Close............................................. 33 7/8 32 1/2 33 5/8 30 3/4
53 55 FIRSTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND FINANCIAL RATIOS
YEARS ENDED DECEMBER 31 ---------------------------------------------------- 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- (thousands of dollars, except per share data) INTEREST REVENUE Loans....................................... $761,672 $685,530 $693,594 $757,069 $769,384 Securities.................................. 165,975 174,652 191,736 206,577 195,366 Other....................................... 10,340 6,772 13,191 18,033 28,288 -------- -------- -------- -------- -------- Total interest revenue.................... 937,987 866,954 898,521 981,679 993,038 INTEREST EXPENSE Deposits.................................... 262,128 261,634 321,405 438,799 474,114 Short-term borrowed funds................... 65,408 23,811 23,423 45,434 70,410 Long-term debt.............................. 12,865 13,453 14,541 16,850 18,560 -------- -------- -------- -------- -------- Total interest expense.................... 340,401 298,898 359,369 501,083 563,084 -------- -------- -------- -------- -------- NET INTEREST REVENUE........................ 597,586 568,056 539,152 480,596 429,954 Provision for loan losses................... 17,139 24,567 44,821 50,276 49,161 -------- -------- -------- -------- -------- NET INTEREST REVENUE AFTER LOAN LOSS PROVISION................................. 580,447 543,489 494,331 430,320 380,793 OTHER OPERATING REVENUE Trust and investment management fees........ 117,872 110,185 95,926 80,813 70,051 Service charges on deposit accounts......... 72,366 74,071 66,301 59,368 50,250 Credit card service revenue................. 55,779 53,316 51,867 54,594 51,562 Other....................................... 89,218 104,693 86,673 77,760 76,438 -------- -------- -------- -------- -------- Total other operating revenue............. 335,235 342,265 300,767 272,535 248,301 OTHER OPERATING EXPENSE Salaries and employee benefits.............. 325,906 316,848 287,607 266,757 245,571 Equipment expense........................... 49,251 48,139 48,720 42,483 39,774 Net occupancy expense....................... 45,914 48,731 44,408 42,252 35,708 Other....................................... 183,854 174,026 176,831 164,044 143,747 -------- -------- -------- -------- -------- Total other operating expense............. 604,925 587,744 557,566 515,536 464,800 -------- -------- -------- -------- -------- INCOME BEFORE INCOME TAXES.................. 310,757 298,010 237,532 187,319 164,294 Provision for income taxes.................. 103,014 93,716 71,547 52,988 46,837 -------- -------- -------- -------- -------- NET INCOME.................................. $207,743 $204,294 $165,985 $134,331 $117,457 ======== ======== ======== ======== ======== Per common share: Net income................................ $ 3.22 $ 3.15 $ 2.62 $ 2.14 $ 1.82 Dividends................................. 1.16 1.00 .80 .705 .635 Return on average total assets.............. 1.51% 1.59% 1.36% 1.16% 1.06% Return on average common equity............. 16.97 18.61 17.43 15.85 14.83 Dividend payout ratio....................... 36.02 31.75 30.53 32.94 34.89 Equity as a percentage of assets: At year-end............................... 8.65 8.38 7.96 7.44 7.03 Average for the year...................... 8.87 8.79 8.06 7.50 7.41 Full-time equivalent staff (at year-end).... 8,716 8,608 8,246 7,709 7,791 Number of common stockholders (at year-end)................................. 9,896 9,990 9,652 8,742 9,422 Average common shares outstanding (000's)... 64,611 63,747 61,879 60,998 61,218
54 56 FIRSTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED AVERAGE BALANCE SHEETS, NET INTEREST REVENUE AND RATE ANALYSIS
1994 1993 1992 ------------------------------- ------------------------------- ------------------------------- AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE ----------- -------- ------- ----------- -------- ------- ----------- -------- ------- (thousands of dollars) ASSETS Interest-bearing deposits with banks................ $ 4,902 $ 288 5.88% $ 33,043 $ 1,385 4.19% $ 67,864 $ 2,608 3.84% Federal funds sold and resale agreements......... 200,039 8,841 4.42 147,744 4,602 3.11 277,075 9,791 3.53 Trading securities......... 22,123 1,560 7.05 17,332 985 5.68 15,514 1,012 6.52 Securities: Taxable................... 2,046,687 122,790 6.00 2,005,584 129,593 6.46 1,913,174 140,652 7.35 Nontaxable................ 913,442 64,993 7.12 923,451 67,780 7.34 931,803 74,934 8.04 ----------- -------- ----------- -------- ----------- -------- Total securities........ 2,960,129 187,783 6.34 2,929,035 197,373 6.74 2,844,977 215,586 7.58 Loans: Commercial................ 5,519,600 448,190 8.12 4,936,620 385,322 7.81 4,519,772 382,129 8.45 Consumer.................. 3,741,809 320,347 8.56 3,396,343 306,658 9.03 3,115,162 319,102 10.24 ----------- -------- ----------- -------- ----------- -------- Total loans............. 9,261,409 768,537 8.30 8,332,963 691,980 8.30 7,634,934 701,231 9.18 ----------- -------- ----------- -------- ----------- -------- Interest earning assets... 12,448,602 967,009 7.77 11,460,117 896,325 7.82 10,840,364 930,228 8.58 Reserve for loan losses.... (175,393) (173,224) (160,642) Cash and due from banks.... 873,275 938,407 855,297 Other assets............... 650,363 631,939 634,794 ----------- ----------- ----------- Total assets.......... $13,796,847 $12,857,239 $12,169,813 =========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing demand.... $ 1,412,178 $ 18,173 1.29% $ 1,418,061 $ 23,666 1.67% $ 1,280,893 $ 31,977 2.50% Money market accounts...... 1,580,884 44,416 2.81 1,555,455 38,968 2.51 1,538,279 49,555 3.22 Savings passbook........... 1,542,044 36,112 2.34 1,490,209 38,214 2.56 1,239,367 40,247 3.25 Certificates of deposit.... 3,605,420 163,427 4.53 3,537,120 160,786 4.55 3,734,726 199,626 5.35 Short-term borrowed funds..................... 1,525,982 65,408 4.29 822,580 23,811 2.89 692,879 23,423 3.38 Long-term debt............. 126,184 12,865 10.20 133,135 13,453 10.10 146,748 14,541 9.91 ----------- -------- ----------- -------- ----------- -------- Interest-bearing liabilities............. 9,792,692 340,401 3.48 8,956,560 298,898 3.34 8,632,892 359,369 4.16 Demand deposits............ 2,533,883 2,531,844 2,323,260 Other liabilities.......... 246,323 238,645 232,773 Stockholders' equity....... 1,223,949 1,130,190 980,888 ----------- ----------- ----------- Total liabilities and stockholders' equity.............. $13,796,847 $12,857,239 $12,169,813 =========== =========== =========== Net interest revenue/margin............ $626,608 5.03% $597,427 5.21% $570,859 5.27% ======== ======== ======== 1991 1990 --------------------------------- --------------------------------- AVERAGE AVERAGE AVERAGE AVERAGE BALANCE INTEREST RATE BALANCE INTEREST RATE ----------- ---------- ------- ----------- ---------- ------- ASSETS Interest-bearing deposits with banks................ $ 59,003 $ 4,238 7.18% $ 64,772 $ 5,668 8.75% Federal funds sold and resale agreements......... 232,272 13,016 5.60 265,280 21,572 8.13 Trading securities......... 13,089 989 7.56 15,068 1,331 8.83 Securities: Taxable................... 1,881,714 155,821 8.28 1,701,890 147,506 8.67 Nontaxable................ 813,033 75,327 9.26 734,592 71,133 9.68 ----------- ---------- ----------- ---------- Total securities........ 2,694,747 231,148 8.58 2,436,482 218,639 8.97 Loans: Commercial................ 4,399,308 439,212 9.98 4,247,266 462,684 10.89 Consumer.................. 2,917,125 328,633 11.27 2,754,243 319,319 11.59 ----------- ---------- ----------- ---------- Total loans............. 7,316,433 767,845 10.49 7,001,509 782,003 11.17 ----------- ---------- ----------- ---------- Interest earning assets... 10,315,544 1,017,236 9.86 9,783,111 1,029,213 10.52 Reserve for loan losses.... (144,714) (124,955) Cash and due from banks.... 810,141 838,644 Other assets............... 641,521 607,499 ----------- ----------- Total assets.......... $11,622,492 $11,104,299 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing demand.... $ 1,086,022 $ 45,490 4.19% $ 958,890 $ 44,370 4.63% Money market accounts...... 1,356,638 67,690 4.99 1,235,677 71,653 5.80 Savings passbook........... 1,017,324 48,789 4.80 945,242 48,199 5.10 Certificates of deposit.... 4,048,706 276,830 6.84 3,943,226 309,892 7.86 Short-term borrowed funds..................... 840,780 45,434 5.40 913,330 70,410 7.71 Long-term debt............. 167,833 16,850 10.04 181,797 18,560 10.21 ----------- ---------- ----------- ---------- Interest-bearing liabilities............. 8,517,303 501,083 5.88 8,178,162 563,084 6.89 Demand deposits............ 2,001,692 1,877,794 Other liabilities.......... 231,662 225,920 Stockholders' equity....... 871,835 822,423 ----------- ----------- Total liabilities and stockholders' equity.............. $11,622,492 $11,104,299 =========== =========== Net interest revenue/margin............ $ 516,153 5.00% $ 466,129 4.76% ========== ==========
Interest and rates are calculated on a taxable equivalent basis, using a tax rate of 35% in 1994 and 1993 and 34% in 1992, 1991 and 1990. The rate calculations include the effect of certain loans on which income is recognized only as cash payments are received or is accrued at less than the original contract rate. 55 57 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The Notice of the 1995 Annual Meeting and Proxy Statement filed pursuant to Regulation 14A is incorporated herein by reference. The executive officers of Firstar Corporation are listed under Item 1 of this document. ITEM 11. EXECUTIVE COMPENSATION The Notice of the 1995 Annual Meeting and Proxy Statement filed pursuant to Regulation 14A is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The Notice of the 1995 Annual Meeting and Proxy Statement filed pursuant to Regulation 14A is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Notice of the 1995 Annual Meeting and Proxy Statement filed pursuant to Regulation 14A is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (A)1. FINANCIAL STATEMENTS The following financial statements of Firstar Corporation are filed as a part of this document under Item 8. Financial Statements and Supplementary Data. Consolidated Balance Sheets as of December 31, 1994 and 1993 Consolidated Statements of Income for the Years Ended December 31, 1994, 1993 and 1992 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1994, 1993 and 1992 Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992 Notes to Consolidated Financial Statements Independent Auditors' Report (A)2. FINANCIAL STATEMENT SCHEDULES All financial statement schedules have been included in the consolidated financial statements or are either not applicable or not significant. 56 58 (A)3. EXHIBITS 3.1 Articles of incorporation of Firstar Corporation 3.2 By-Laws of Firstar Corporation (incorporated by reference to Exhibit 3.2 of the Form 10-K for the year ended December 31, 1991) 4.2 Indenture dated as of June 1, 1986 between Firstar Corporation and Chemical Bank, as Trustee, relating to 10% Notes due June 1, 1996 (incorporated by reference to Exhibit 4(b) to Amendment No. 1 to Registration No. 33-5932 of Firstar) 4.3 Indenture dated as of May 1, 1988 between Firstar Corporation and Chemical Bank, as Trustee, relating to 10 1/4% Subordinated Notes due May 1, 1998 (incorporated by reference to Exhibit 4(a) to Amendment No. 1 to Registration No. 33-21527 of Firstar) 4.4 Shareholder Rights Plan of Firstar Corporation (incorporated by reference to Exhibit 4 of Form 8-K dated January 19, 1989 of Firstar) 10.1 Collective Bargaining Agreement between Firstar Bank Milwaukee, N.A. and Firstar Bank Milwaukee Employees Association dated July 30, 1993 (incorporated by reference to Exhibit 10.1 of the Form 10-Q of Firstar for the quarter ended September 30, 1993) 10.3 Directors' Deferred Compensation Plan, as amended (incorporated by reference to Exhibit 10.3 of the Annual Report Form 10-K of Firstar for the year ended December 31, 1988) 10.4* Key Executive Employment and Severance Agreement, as amended (incorporated by reference to Exhibit 10.4 of the Form 10-Q of Firstar for the quarter ended September 30, 1993) 10.5 First Colonial Bankshares Corporation 1988 Stock Option Plan, as amended, assumed by Firstar (incorporated by reference to Exhibits 4.1 to 4.10 of Registration No. 33-57521 of Firstar) 10.7* 1988 Incentive Stock Plan, as amended (incorporated by reference to Exhibit A of the Notice of the 1994 Annual Meeting and Proxy Statement of Firstar) 10.8* Annual Executive Incentive Plan, as amended (incorporated by reference to Exhibit B of the Notice of the 1994 Annual Meeting and Proxy Statement of Firstar) 10.9* Long-Term Incentive Plan, as amended (incorporated by reference to Exhibit 10.9 of the Form 10-Q of Firstar for the quarter ended September 30, 1993) 10.10 Form of Indemnity Agreement between Firstar Corporation and its directors (incorporated by reference to Exhibit 10 of the Quarterly Report on Form 10-Q of Firstar for the quarter ended September 30, 1988) 21. Subsidiaries of Firstar Corporation 23. Consent of independent auditors 24. Powers of attorney 27. Financial data schedule
- ------------ * Executive Compensation Plans A copy of the exhibits listed herein can be obtained by writing to Mr. William H. Risch, Senior Vice President-Finance and Treasurer, Firstar Corporation, P.O. Box 532, Milwaukee, Wisconsin 53201. (B) No reports on Form 8-K were filed during the fourth quarter of 1994. 57 59 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FIRSTAR CORPORATION -------------------------------------- Roger L. Fitzsimonds March 20, 1995 Chairman and Chief Executive Officer Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. - ----------------------------------------------- March 20, 1995 Roger L. Fitzsimonds Chairman, Chief Executive Officer and director March 20, 1995 - ----------------------------------------------- John A. Becker President, Chief Operating Officer and director March 20, 1995 - ----------------------------------------------- William H. Risch Senior Vice President-Finance and Treasurer (principal finance and 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 March 20, 1995 - --------------------------------------------- William H. Risch Attorney-in-Fact
58 60 INDEX TO EXHIBITS
Exhibit Number 3.1 Articles of Incorporation of Firstar Corporation 21 Subsidiaries of Firstar Corporation 23 Consent of Independent Auditors 24 Powers of attorney 27 Financial data schedule
EX-3.1 2 RESTATED ARTICLES OF INCORPORATION 1 EXHIBIT 3.1 FIRSTAR CORPORATION RESTATED ARTICLES OF INCORPORATION RESTATED AS OF MAY 7, 1981 (As Amended and in Effect September 9, 1992) This Corporation, being organized under the laws of Wisconsin and being subject to the provisions of Chapter 180 of the Wisconsin Statutes, hereby amends its restated articles of incorporation in their entirety and as so amended adopts the following Restated Articles of Incorporation, which supersede and take the place of its heretofore existing restated articles of incorporation and all amendments thereto: ARTICLE I NAME Amended The name of the Corporation is "FIRSTAR CORPORATION". 1/1/89 ARTICLE II PURPOSE The purposes for which the Corporation is organized are to engage in any lawful activity within the purposes for which corporations may be organized under the Wisconsin Business Corporation Law (Chapter 180, Wisconsin Statutes); provided, however, that the Corporation shall not engage in any activities prohibited by the Bank Holding Company Act of 1956, as amended. ARTICLE III CAPITAL STOCK Amended (1) The number of shares of which the Corporation shall 4/19/84 have authority to issue is 122,500,000, divided into 4/28/86 the following classes: 9/09/92 (a) 120,000,000 shares of the par value of $1.25 each, designated as "Common Stock"; and (b) 2,500,000 shares of the par value of $1.00 each, designated as "Preferred Stock". (2) The Preferred Stock may be issued from time to time in one or more series, with such designations, preferences, limitations, and relative rights as shall be stated and 2 expressed in the resolution or resolutions providing for the issuance of such series and adopted by the board of directors pursuant to the authority given as provided by the Wisconsin Business Corporation Law and not inconsistent with the provisions hereof. All shares of Preferred Stock shall be identical except as to the following relative rights and preferences, in respect of any or all of which there may be variations between different series as fixed and determined by the board of directors in the resolution or resolutions providing for the issuance of such series: (a) rate of dividend; (b) price at and terms and conditions on which shares may be redeemed; (c) amount payable upon shares in event of voluntary or involuntary liquidation; (d) sinking fund provisions for the redemption or purchase of shares; (e) terms and conditions on which shares may be converted, if the shares of any series are issued with the privilege of conversion; and (f) voting rights, if any. (3) The holders of Preferred Stock shall be entitled to receive, if and when declared by the board of directors out of the funds of the Corporation legally available therefor, dividends at, but not exceeding, the rate established by the board of directors in the resolution or resolutions providing for the issuance of any series of Preferred Stock, and such dividends shall be paid or set apart before any dividends (other than dividends payable in Common Stock of the Corporation) shall be paid upon or set apart for the Common Stock. The dividends on the Preferred Stock shall be cumulative, so if at any time the full amount of dividends accrued and in arrears on the Preferred Stock shall not be paid, the deficiency (without interest) shall be payable before any dividends shall be paid upon or set apart on the Common Stock. Dividends on the Preferred Stock shall accrue and be cumulative from the date of issue and shall be without priority as between series. Any dividends paid upon the Preferred Stock in an amount less than full cumulative dividends accrued and in arrears upon all Preferred Stock shall, if more than one series be outstanding, be distributed among the different series in proportion to the aggregate amounts which would be distributed to the Preferred Stock of each series if full cumulative dividends were declared and paid thereon. Whenever all dividends accrued and in arrears on the Preferred Stock shall have been declared and shall have been paid or set apart, the board of directors may declare dividends on the Common Stock out of the funds of the Corporation legally available therefor. (4) In the event of the liquidation or winding up of the Corporation, whether voluntary or involuntary, the holders of Preferred Stock, shall be entitled to receive the fixed liquidation amount per share, plus accrued dividends, all as provided in the resolution or resolutions adopted by the board of directors providing for the issuance of any series of Preferred Stock, and no more, before any amount shall be paid to the holders of Common Stock. As used in this paragraph "accrued dividends" means, in respect to each share of Preferred Stock, an amount equal to the fixed dividend rate per annum for each share (without interest thereon), from the date from which dividends commence to accrue in respect of such share to the date as of which the computation is to be made, less the aggregate amount (without interest thereon) of all dividends theretofore paid or declared and set aside for payment in respect thereof. If, upon any such voluntary or involuntary liquidation, the assets of the Corporation shall be insufficient to permit payment to the holders of Preferred Stock of the full preferential amounts aforesaid, then the entire assets of the Corporation available for distribution to shareholders shall be distributed ratably among the 3 holders of Preferred Stock in proportion to the full preferential amounts to which they are respectively entitled. The holders of Preferred Stock shall not otherwise be entitled to participate in any distribution of assets of the Corporation which assets shall be divided and distributed among the holders of Common Stock according to their respective rights and preferences. No consolidation or merger of the Corporation with or into another corporation or corporations and no sale by the Corporation of all or substantially all of its assets shall be deemed a liquidation or winding up of the Corporation within the meaning of this paragraph. (5) The holders of Preferred Stock shall have only such voting rights as shall be stated in the resolution or resolutions of the board of directors providing for the issuance of any series of Preferred Stock. (6) The Common Stock shall be junior to the Preferred Stock and shall be subject to all the rights and preferences of the Preferred Stock. (7) No holder of any shares of the Corporation shall have any preemptive right to acquire any unissued shares of this Corporation, now or hereafter authorized, or other securities whether or not convertible into shares of the Corporation or carrying a right to subscribe to or acquire such shares. (8) The Corporation is authorized by action of the board of directors without further consent of shareholders to purchase, take, receive or otherwise acquire shares of the Corporation, subject only to the provisions of Sections 180.385(1)(a) and (b) of the Wisconsin Statutes. (9)The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the owner thereof for all purposes, and shall not be bound to recognize any equitable or other claim to or interest in any such share or shares on the part of any other person, whether or not it shall have express or other notice thereof. ARTICLE IV BOARD OF DIRECTORS Amended(1)Subject to the terms of any series of Preferred Stock as 4/19/90 may be issued from time to time pursuant to the provisions of Section (2) of Article III, as such terms are stated and expressed in the resolution or resolutions of the board of directors providing for the issuance of such Preferred Stock, (a) The board of directors shall consist of such number of directors as is fixed from time to time by a majority of the board of directors in the manner provided in the By-Laws. (b)The number of directors may be increased or decreased from time to time by a majority of the board of directors in the manner provided in the By-Laws, but no decrease shall have the effect of shortening the term of any incumbent director. (2) The board of directors shall be divided into three (3) classes, as nearly equal in number as possible, as shall be provided in the By-Laws. (3) Subject to the terms of any series of Preferred Stock as may be issued from time to time pursuant to the provisions of Section (2) of Article III, as such terms are stated and expressed in the resolution or resolutions of the board of directors providing for the issuance of such Preferred Stock, 4 (a) Any vacancy occurring in the board of directors resulting from death, resignation, removal, disqualification or any other cause, including a vacancy created by an increase in the number of directors, may be filled only by the affirmative vote of not less than a majority of the directors then in office, although less than a quorum. (b) If there shall be no directors then in office, the shareholders shall be entitled to fill the vacancies on the board of directors. (c) Directors appointed to newly created directorships resulting from any increase in the authorized number of directors or to fill any vacancies in the board of directors resulting from death, resignation, removal, disqualification or any other cause shall hold office for a term expiring at the next annual meeting of shareholders at which the term of the class to which they have been appointed expires. (4) Subject to the terms of any series of Preferred Stock as may be issued from time to time pursuant to the provisions of Section (2) of Article III, as such terms are stated and expressed in the resolution or resolutions of the board of directors providing for the issuance of such Preferred Stock, a director may be removed from office only by the affirmative vote of not less than 75% of the outstanding shares entitled to vote for the election of such director, voting together as a single class, taken at a special meeting of shareholders called for that purpose. (5) Notwithstanding the provisions of Article VI, the affirmative vote of not less than 75% of the outstanding shares entitled to vote generally for the election of directors, voting together as a single class, shall be required to amend or repeal this Article IV, or to adopt any provision of the Restated Articles of Incorporation or By-Laws inconsistent with the purpose or intent of this Article IV. ARTICLE V REGISTERED OFFICE AND AGENT At the time of adoption of these Restated Articles of Incorporation the address of the registered office of the Corporation is 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202, and the name of the registered agent at that address is Howard H. Dahms.* *The registered agent, effective July 1, 1983, is William J. Schulz. 5 ARTICLE VI ELECTION OF MAJORITY AFFIRMATIVE VOTING REQUIREMENTS Amended The Corporation expressly elects the majority affirmative voting 1/1/89 requirements pursuant to Subsection 180.25(2) of the Wisconsin Business Corporation Law (or any successor provision to such subsection) with respect to all subjects referenced in such subsection (or such successor provision, as the case may be). 6 ARTICLES OF AMENDMENT RELATING TO SERIES D CONVERTIBLE PREFERRED STOCK OF FIRSTAR CORPORATION Pursuant to Sections 180.0602 and 180.1002 of the Wisconsin Business Corporation Law I, William J. Schulz, Senior Vice President and Deputy General Counsel of Firstar Corporation, a corporation organized and existing under the Wisconsin Business Corporation Law (the "Corporation"), in accordance with the provisions of Sections 180.0602 and 180.1002 thereof, DO HEREBY CERTIFY THAT: A. Pursuant to the authority conferred upon the Board of Directors by the Restated Articles of Incorporation, as amended, of the Corporation and in accordance with Sections 180.0602 and 180.1002 of the Wisconsin Business Corporation Law, the Board of Directors of the Corporation adopted a resolution on July 29, 1994, but which was not effective until the date hereof, creating a series of shares of Preferred Stock, $1.00 par value, of the Corporation, designated as Series D Convertible Preferred Stock. B. Said resolution of the Board of Directors of the Corporation creating the series designated as Series D Convertible Preferred Stock provides that said series shall have such designation and number of shares and such preferences, limitations and relative rights as are set forth in the paragraphs below: Series D Convertible Preferred Stock 1. Designation and Amount. The shares of such series shall be designated "Series D Convertible Preferred Stock" and the number of shares constituting such series shall be limited to 38,775. The liquidation value shall be $500 per share. 2. Dividends. (a) The holders of shares of Series D Convertible Preferred Stock shall be entitled to receive, out of the assets of the Corporation legally available therefor and as and if declared by the Board of Directors, cash dividends at the rate of $35 per share per annum, payable quarterly on the last day of the months of March, June, September and December in each year, commencing March 31, 1995. Each such dividend shall be paid to the holders of record of shares of Series D Convertible Preferred Stock on the 7 applicable record date, not exceeding 30 days preceding the payment date thereof, as shall be fixed by the Board of Directors. Dividends on account of arrears for any past dividend periods may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date as may be fixed by the Board of Directors, which shall not exceed 45 days preceding such dividend payment date. Such dividends shall be cumulative (whether or not in any quarterly dividend period there 8 shall be funds of the Corporation legally available for the payment of such dividends), commencing on the date of original issuance. (b) No full dividends shall be declared or paid or set apart for payment on any class or series of stock of the Corporation ranking, as to dividends, on a parity with the Series D Convertible Preferred Stock for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Series D Convertible Preferred Stock for all dividend payment periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full, as aforesaid, upon the shares of the Series D Convertible Preferred Stock and any class or series of stock of the Corporation ranking on a parity as to dividends with the Series D Convertible Preferred Stock, all dividends declared upon shares of the Series D Convertible Preferred Stock and any class or series of stock of the Corporation ranking on a parity as to dividends with the Series D Convertible Preferred Stock shall be declared pro rata so that the amount of dividends declared per share on the Series D Convertible Preferred Stock and such other stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of the Series D Convertible Preferred Stock and such other stock bear to each other. Holders of shares of the Series D Convertible Preferred Stock shall not be entitled to any dividend, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on the Series D Convertible Preferred Stock. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series D Convertible Preferred Stock which may be in arrears. (c) So long as any shares of the Series D Convertible Preferred Stock are outstanding, no dividend (other than a dividend in Common Stock, par value $1.25 per share, of the Corporation ("Common Stock") or in any other class or series of stock of the Corporation ranking junior to the Series D Convertible Preferred Stock as to dividends and upon liquidation and other than as provided in paragraph (b) of this Section 2) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other class or series of stock of the Corporation ranking junior to or on a parity with the Series D Convertible Preferred Stock as to dividends or upon liquidation, nor shall any Common Stock or any class or series of stock of the Corporation ranking junior to or on a parity with the Series D Convertible Preferred Stock as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to the Series D Convertible Preferred Stock as to dividends and upon liquidation) unless, in each case, the full cumulative dividends on all outstanding shares of the Series D Convertible Preferred Stock shall have been paid for all past dividend payment periods. 3. Conversion. Each holder of shares of Series D Convertible Preferred Stock shall have the right, at his option, to convert all or any part of such shares into shares of Common Stock of the Corporation at any time on and subject to the following terms and conditions: (a) The shares of Series D Convertible Preferred Stock shall be convertible at the office of the transfer agent for such series (the "Transfer Agent"), and at such other 9 place or places, if any, as the Board of Directors of the Corporation may designate, into fully paid and nonassessable (except as otherwise provided by the Wisconsin Business Corporation Law) shares (calculated as to each conversion to the nearest 1/100th of a share) of Common Stock. The number of shares of Common Stock issuable upon conversion of each share of Series D Convertible Preferred Stock shall be equal to $500 divided by the conversion price in effect at the time of conversion determined as hereinafter provided. The price at which shares of Common Stock shall be delivered upon conversion (herein called the "conversion price") shall be initially $23.30 per share of Common Stock; provided, however, that such conversion price shall be subject to adjustment from time to time in certain instances as hereinafter provided. No payment or adjustment shall be made in respect of dividends on Common Stock or Series D Convertible Preferred Stock upon conversion of shares of Series D Convertible Preferred Stock. Shares of Series D Convertible Preferred Stock surrendered for conversion after the record date next preceding a dividend payment date for the Series D Convertible Preferred Stock and before the dividend payment date must be accompanied by payment of an amount equal to the dividend thereon which is to be paid on such dividend payment date (unless the shares of Series D Convertible Preferred Stock surrendered for conversion have been called for redemption prior to such dividend payment date). If the Corporation calls for redemption any shares of Series D Convertible Preferred Stock such right of conversion shall cease and terminate, as to the shares designated for redemption, at the close of business on the redemption date, unless the Corporation defaults in the payment of the redemption price. No fractional shares of Common Stock will be issued, and a cash payment will be made in lieu of any fractional share in an amount equal to the same fraction of the last sale price of the Common Stock (determined as provided in sub-paragraph (c) (iv) of this Section 3) at the close of business on the business day which next precedes the day of conversion. (b) Before any holder of shares of Series D Convertible Preferred Stock shall be entitled to convert the same into Common Stock, he shall surrender the certificate or certificates therefor, duly endorsed to the Corporation or in blank, at the office of the Transfer Agent for such series or at such other place or places, if any, as the Board of Directors of the Corporation has designated, and shall give written notice to the Corporation at said office or place that he elects to convert the same and shall state in writing therein the name or names (with addresses) in which he wishes the certificate or certificates for Common Stock to be issued. The Corporation will, as soon as practicable thereafter, issue and deliver at said office or place to such holder of shares of Series D Convertible Preferred Stock or to his nominee or nominees, certificates for the number of full shares of Common Stock to which he shall be entitled as aforesaid, together with cash in lieu of any fraction of a share. Shares of Series D Convertible Preferred Stock shall be deemed to have been converted as of the close of business on the date of the surrender of such shares for conversion as provided above, and the person or persons entitled to receive the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Common Stock as of the close of business on such date. (c) The conversion price in effect at any time shall be subject to adjustment as follows: 10 (i) In case the Corporation shall (A) declare and pay a dividend on its Common Stock in shares of its capital stock, (B) subdivide its outstanding shares of Common Stock, (C) combine its outstanding shares of Common Stock into a smaller number of shares, or (D) issue by reclassification of its Common Stock (including any such reclassification in connection with a consolidation or merger in which the Corporation is the continuing corporation) any shares of its capital stock, the conversion price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that the holder of any share of Series D Convertible Preferred Stock surrendered for conversion after such time shall be entitled to receive the kind and amount of shares which he would have owned or have been entitled to receive had such share of Series D Convertible Preferred Stock been converted immediately prior to such time. Such adjustment shall be made successively whenever any event listed above shall occur. (ii) In case the Corporation shall issue rights or warrants to all holders of its Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Current Market Price (as defined below in paragraph (iv) of this Section 3(c)), on the date fixed for the determination of shareholders entitled to receive such rights or warrants the conversion price shall be reduced by multiplying the conversion price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock which the aggregate of the offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at such Current Market Price and the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination; provided, however, in the event that all the shares of Common Stock offered for subscription or purchase are not delivered upon the exercise of such rights or warrants, upon the expiration of such rights or warrants the conversion rate shall be readjusted to the conversion rate which would have been in effect had the numerator and the denominator of the foregoing fraction and the resulting adjustment been made based upon the number of shares of Common Stock actually delivered upon the exercise of such rights or warrants rather than upon the number of shares of Common Stock offered for subscription or purchase, such adjustment to become effective immediately after the opening of business on the day following the expiration of such rights or warrants. For the purposes of this paragraph (ii), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. (iii) In case the Corporation shall distribute to all holders of its Common Stock (including any such distribution made in connection with a consolidation or merger in which the Corporation is the continuing corporation) evidences of its indebtedness or assets (excluding dividends or other distributions paid out of earned surplus) or subscription rights or warrants excluding those referred to in paragraph (ii) above), the conversion price shall be adjusted so that the same shall equal the price determined by multiplying the conversion price in effect immediately prior to the close 11 of business on the date fixed for the determination of shareholders entitled to receive such distribution by a fraction of which the numerator shall be the Current Market Price per share of the Common Stock on the date fixed for such determination less the then fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a resolution filed with the Transfer Agent for such series) of the portion of the assets or evidences of indebtedness so distributed applicable to one share of Common Stock and the denominator shall be such Current Market Price per share of the Common Stock, such adjustment to become effective immediately prior to the opening of business on the day following the date fixed for the determination of shareholders entitled to receive such distribution. Such adjustment shall be made successively whenever any such distribution is made and shall become effective retroactively after such record date. (iv) For the purpose of any computation under paragraphs (ii) and (iii) above, the "Current Market Price" on any date shall be deemed to be the average of the daily closing prices per share of Common Stock for 30 consecutive business days selected by the Corporation commencing 45 business days before such date. The closing price for each day shall be the last sale price regular way or, in case no such sale takes place on such day, the average of the closing bid and asked prices regular way, in either case on the New York Stock Exchange, or, if the Common Stock is not listed or admitted to trading on such Exchange, on the principal national securities exchange or national market system on which the Common Stock is listed or admitted to trading, or if it is not listed or admitted to trading on any national securities exchange or national market system, the average of the closing bid and asked prices as furnished by any member of the National Association of Securities Dealers, Inc. selected from time to time by the Corporation for that purpose. (v) All calculations under this Section 3(c) shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. (vi) In case of any consolidation or merger of the Corporation with or into any other corporation (other than a consolidation or merger in which the Corporation is the continuing corporation), or in case of any sale or transfer of all or substantially all of the assets of the Corporation, the holder of each share of Series D Convertible Preferred Stock shall, after such consolidation, merger, sale or transfer, have the right to convert such share of Series D Convertible Preferred Stock into the kind and amount of shares of stock and other securities and property which such holder would have been entitled to receive upon such consolidation, merger, sale or transfer if he had held the Common Stock issuable upon the conversion of such share of Series D Convertible Preferred Stock immediately prior to such consolidation, merger, sale or transfer. In any such event, effective provision shall be made, in the articles or certificate of incorporation of the resulting or surviving corporation or other corporation issuing or delivering such shares, other securities, cash or other property or otherwise, so that the provisions set forth herein for the protection of the conversion rights of the Series D Convertible Preferred Stock shall thereafter be applicable, as nearly as reasonably may be, to any such other shares of stock and other securities, cash and other property deliverable upon conversion of the Series D Convertible Preferred Stock remaining outstanding or other convertible stock or securities received by the holders in place thereof; and any such resulting or surviving corporation or other corporation 12 issuing or delivering such shares, other securities, cash or other property shall expressly assume the obligation to deliver, upon the exercise of the conversion privilege, such shares, securities, cash or other property as the holders of the Series D Convertible Preferred Stock remaining outstanding, or other convertible stock or securities received by the holders in place thereof, shall be entitled to receive, pursuant to the provisions hereof, and to make provision for the protection of the conversion rights as above provided. (vii) In the event that at any time, as a result of an adjustment made pursuant to paragraph (i) above, the holder of any share of Series D Convertible Preferred Stock thereafter surrendered for conversion shall become entitled to receive any securities other than shares of Common Stock, thereafter the amount of such other securities so receivable upon conversion of any share of Series D Convertible Preferred Stock shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in paragraph (i) to (vi), inclusive, above, and the provisions of this Section 3(c) with respect to the Common Stock shall apply on like terms to any such other securities. (viii) No adjustment in the conversion price shall be required unless such adjustment would require a change of at least 1% in such price; provided, however, that any adjustments which by reason of this paragraph (viii) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. (d) Whenever the conversion price is adjusted as herein provided: (i) the Corporation shall promptly file with the Transfer Agent for such series a certificate of the Treasurer of the Corporation setting forth the adjusted conversion price and showing in reasonable detail the facts upon which such adjustment is based, including a statement of the consideration received or to be received by the Corporation for any shares of Common Stock issued or deemed to have been issued; and (ii) a notice stating that the conversion price has been adjusted and setting forth the adjusted conversion price shall forthwith be required, and as soon as practicable after it is required, such notice shall be mailed by the Corporation to the holders of record of Series D Convertible Preferred Stock; provided, however, that if within ten days after the mailing of such notice, an additional notice is required, such additional notice shall be deemed to be required pursuant to this paragraph (ii) as of the opening of business on the tenth day after such mailing and shall set forth the conversion price as adjusted at such opening of business, and upon the mailing of such additional notice no other notice need be given of any adjustment in the conversion price occurring at or prior to such opening of business and after the time that the next preceding notice given by mailing became required. (e) In case: (i) the Corporation shall authorize the distribution to all holders of its Common Stock of evidences of its indebtedness or assets (other than dividends or other distributions paid out of earned surplus); or 13 (ii) the Corporation shall authorize the granting to the holders of its Common Stock of rights to subscribe for or purchase any shares of capital stock of any class or of any other rights; or (iii) of any reclassification of the Common Stock of the Corporation (other than a subdivision or combination of its outstanding shares of Common Stock), or of any consolidation or merger to which the Corporation is a party and for which approval of any shareholders of the Corporation is required, or of the sale or transfer of all or substantially all of the assets of the company; or (iv) of the voluntary or involuntary dissolution, liquidation or winding up of the Corporation; then, in each case, the Corporation shall cause to be filed with the Transfer Agent for the Series D Convertible Preferred Stock and shall cause to be mailed, first class postage prepaid, to the holders of record of the outstanding shares of Series D Convertible Preferred Stock at least 10 days prior to the applicable record date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such distribution or rights, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such distribution or rights are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up. (f) The Corporation shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, solely for the purpose of effecting the conversion of the shares of Series D Convertible Preferred Stock, the full number of shares of Common Stock then issuable upon the conversion of all outstanding shares of Series D Convertible Preferred Stock. For the purpose of this Section 3(f) the full number of shares of Common Stock issuable upon the conversion of all outstanding shares of Series D Convertible Preferred Stock shall be computed as if at the time of computation of such number of shares of Common Stock all outstanding shares of Series D Convertible Preferred Stock were held by a single holder. The Corporation shall from time to time, in accordance with the Wisconsin Business Corporation Law, increase the authorized amount of its Common Stock if at any time the authorized amount of its Common Stock remaining unissued shall not be sufficient to permit the conversion of all shares of Series D Convertible Preferred Stock at the time outstanding. If any shares of Common Stock required to be reserved for issuance upon conversion of shares of Series D Convertible Preferred Stock hereunder require registration with or approval of any governmental authority under any Federal or State law before such shares may be issued upon such conversion, the Corporation will in good faith and as expeditiously as possible endeavor to cause such shares to be so registered or approved. 14 (g) The Corporation will pay any and all taxes that may be payable in respect of the issue or delivery of shares of Common Stock on conversion of shares of Series D Convertible Preferred Stock pursuant hereto. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue or transfer and delivery of shares of Common Stock in a name other than that in which the shares of Series D Convertible Preferred Stock so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of any such tax or has established to the satisfaction of the Corporation that such tax has been paid. (h) Before taking any action which would cause an adjustment reducing the conversion price below the then par value of the Common Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable (except as otherwise provided by the Wisconsin Business Corporation Law) shares of Common Stock at the conversion price as so adjusted. 4. Liquidation Rights. (a) Upon the voluntary dissolution, liquidation or winding-up of the Corporation, the holders of the shares of Series D Convertible Preferred Stock then outstanding shall be entitled to receive out of the assets of the Corporation (whether representing capital or surplus), before any payment or distribution shall be made on the Common Stock or any other class or series of stock of the Corporation ranking junior to the Series D Convertible Preferred Stock as to dividends or as to distribution upon liquidation, dissolution or winding-up, cash in an amount of $500 per share, plus an amount equal to all dividends cumulated and unpaid thereon, to the date of final distribution to the holders of the Series D Convertible Preferred Stock. (b) Upon the involuntary dissolution, liquidation or winding-up of the Corporation, the holders of the shares of the Series D Convertible Preferred Stock then outstanding shall be entitled to receive out of the assets of the Corporation (whether representing capital or surplus), before any payment or distribution shall be made on the Common Stock or any other class or series of stock of the Corporation ranking junior to the Series D Convertible Preferred Stock as to dividends or as to distribution upon liquidation, dissolution or winding-up, cash in the amount equal to $500 per share, plus an amount equal to all dividends cumulated and unpaid thereon, to the date of final distribution to the holders of the Series D Convertible Preferred Stock. (c) After the payment to the holders of the shares of the Series D Convertible Preferred Stock of the full preferential amounts provided for in this Section 4, the holders of the Series D Convertible Preferred Stock as such shall have no right or claim to any of the remaining assets of the Corporation. (d) In the event the assets of the Corporation available for distribution to the holders of shares of the Series D Convertible Preferred Stock upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to paragraph (a) or (b) of this Section 4, no distribution shall be made on account of any shares of any class or series of stock of the Corporation ranking on a parity with the 15 shares of the Series D Convertible Preferred Stock upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of the Series D Convertible Preferred Stock, ratably, in proportion to the full distributable amounts to which such holders and the holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (e) Upon the dissolution, liquidation or winding up of the Corporation, the holders of shares of the Series D Convertible Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders all amounts to which such holders are entitled pursuant to paragraph (a) or (b) of this Section 4 before any payment shall be made to the holders of any class or series of stock of the Corporation ranking junior upon liquidation to the Series D Convertible Preferred Stock. (f) Upon the voluntary or involuntary dissolution, liquidation or winding up of the Corporation, cumulated dividends shall not include fractional periods between records dates. 5. Optional Redemption. The shares of Series D Convertible Preferred Stock are not redeemable prior to June 30, 1997. Thereafter the shares of Series D Convertible Preferred Stock are redeemable in whole at any time or in part from time to time at the option of the Corporation at a redemption price of $500 per share, plus an amount equal to any arrearage in dividends thereon. In the case of a redemption in part of the shares of Series D Convertible Preferred Stock, the shares to be redeemed shall be selected pro rata or by lot or in such other manner as the Board of Directors may determine. Notice of redemption shall be mailed at least 30 days but not more than 60 days before the redemption date to each holder of record of shares of Series D Convertible Preferred Stock to be redeemed at the address shown on the stock books of the Corporation (but no failure to mail such notice or any defect therein or in the mailing thereof shall affect the validity of the proceedings for such redemption except as to the holder to whom the Corporation has failed to mail such notice or except as to the holder whose notice was defective). On and after the redemption date, dividends shall cease to accumulate on shares of Series D Convertible Preferred Stock called for redemption (unless the Corporation defaults in the payment of the redemption price). 6. Voting Rights. (a) Holders of shares of Series D Convertible Preferred Stock shall not be entitled to vote on any matter, except as otherwise provided by law or by the Restated Articles of Incorporation, as amended, and except that: (i) The affirmative vote of the holders of a majority of the outstanding shares of Series D Convertible Preferred Stock, voting separately as a single class, shall be required to amend the Restated Articles of Incorporation of the Corporation to create or authorize, or increase the authorized amount of, any class or series of stock ranking prior to the Series D Convertible Preferred Stock in respect of dividends or distribution of assets on liquidation, dissolution or winding up of the Corporation or otherwise alter or abolish the liquidation preferences or any other 16 preferential right of the Series D Convertible Preferred Stock, alter or abolish the conversion rights of the Series D Convertible Preferred Stock, reduce the redemption price or otherwise alter any redemption rights of the Series D Convertible Preferred Stock, alter or abolish any right of the Series D Convertible Preferred Stock to receive dividends, or exclude or limit the voting rights as to these matters. (ii) If at any time the Corporation falls in arrears in the payment of dividends on the Series D Convertible Preferred Stock in an aggregate amount at least equal to the full accrued dividends for six (6) quarterly dividend periods (a "voting event"), the number of directors of the Corporation shall be increased by two and the holders of the Series D Convertible Preferred Stock, voting separately as a single class, shall have the right to elect two directors to fill the positions so created. Until such voting event shall have been terminated by payment of all dividends for all past dividend periods, any director who has been so elected by the holders of Series D Convertible Preferred Stock may be removed at any time, either with or without cause, only by the affirmative vote of the holders of a majority of the votes entitled to be cast for the election of any such director at a special meeting of such holders called for that purpose, and any vacancy thereby created may only be filled by the vote of such holders. If and when such voting event shall have been terminated, the holders of Series D Convertible Preferred Stock shall be divested of the foregoing special voting rights, subject to revesting upon the further occurrence of a voting event. Upon termination of such voting event, the terms of office of all persons who may have been elected directors by vote of the holders of Series D Convertible Preferred Stock pursuant to the foregoing special voting rights shall immediately terminate. Upon the occurrence of a voting event, the Corporation shall immediately call special meeting of the holders of Series D Convertible Preferred Stock entitled to vote upon the occurrence of such voting event by mailing, by first-class mail, postage prepaid, to each holder of record of such shares, at such holder's address as the same appears on the books of the Corporation, a notice of special meeting to be held not less than 20 days nor more than 60 days after the date such notice is given. If the Corporation does not call such special meeting, such special meeting may be called by any holder or holders of 10 percent or more of such class, on like notice. The record date for determining the holders entitled to notice of and to vote at such meeting shall be the business day immediately preceding the day on which such notice is mailed. The holders of the Series D Convertible Preferred Stock, at the time entitled to cast one-third of the votes entitled to be cast for the election of directors at such special meeting, present in person or by proxy, shall constitute a quorum for the election of directors at such special meeting. At any such meeting or adjournment thereof in the absence of a quorum, subject to the provisions of any applicable law, the holders of a majority of the shares of Series D Convertible Preferred Stock, present in person or by proxy at such meeting, shall have the power to adjourn the meeting for the election of such directors without notice, other than an announcement at the meeting, until a quorum is present. 17 If such voting event shall have been terminated after the notice of a special meeting provided for in this paragraph has been given but before such special meeting shall have been held, the Corporation shall, as soon as practicable after such termination, mail notice of such termination to the holders of the Series D Convertible Preferred Stock that would have been entitled to vote at such special meeting. (b) The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such voting would otherwise be required shall be effected, all outstanding Series D Convertible Preferred Stock shall have been (i) redeemed or called for redemption and sufficient funds shall have been deposited, in trust, to effect such redemption in accordance with the provisions hereof, or (ii) purchased or otherwise acquired by the Corporation and cancelled, or converted into Common Stock of the Corporation. 7. Rank. The Series D Convertible Preferred Stock shall, as to dividends and distributions upon liquidation, dissolution (whether voluntary or involuntary) or winding up of the Corporation: (a) rank in parity with any class or series of Preferred Stock of the Corporation, without preference or priority as among holders of such stock and the Series D Convertible Preferred Stock; and (b) have preference and priority in ranking to the Common Stock and any other class or series of common stock of the Corporation. * * * C. None of the shares of Series D Convertible Preferred Stock have been issued. D. The amendment creating the Series D Convertible Preferred Stock was adopted by the Board of Directors of the Corporation in accordance with section 180.1002 of the Wisconsin Business Corporation Law and shareholder action was not required. These Articles of Amendment shall be effective as of 3:29 P.M. on the date hereof. IN WITNESS WHEREOF, the undersigned has executed and subscribed these Articles of Amendment on behalf of the Corporation and does affirm the foregoing as true this 31st day of January, 1995. By: _____________________________ William J. Schulz Senior Vice President and Deputy General Counsel ________________ This instrument was drafted by, and should be returned to, William J. Schulz, Senior Vice President and Deputy General Counsel, Firstar Corporation, 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202. EX-21 3 SUBSIDIARIES OF THE REGISTRANT 1 Exhibit 21 SUBSIDIARIES OF THE REGISTRANT Firstar Corporation has no parents. The following list shows the name of each subsidiary of Firstar and the state or juristiction of the incorporation.
State or Other Jurisdiction in which Incorporated Name of Subsidiary or Organized ------------------------------- ---------------------------- 1 Firstar Bank Milwaukee, N.A. United States 1 Firstar Bank Appleton Wisconsin 1 Firstar Bank Eau Claire, N.A. United States 1 Firstar Bank Fond du Lac, N.A. United States 1 Firstar Bank Grantsburg, N.A. United States 1 Firstar Bank Green Bay Wisconsin 1 Firstar Bank Madison, N.A. United States 1 Firstar Bank Manitowoc Wisconsin 1 Firstar Bank Minocqua Wisconsin 1 Firstar Bank Oshkosh, N.A. United States 1 Firstar Bank Rice Lake, N.A. United States 1 Firstar Bank Sheboygan, N.A. United States 1 Firstar Bank Wausau, N.A. United States 1 Firstar Bank Wisconsin Rapids, N.A. United States 1 First Bank Southeast of Lake Geneva, N.A. United States 1 First Bank Souhteast, N.A. United States 4 Firstar Bank Ames Iowa 4 Firstar Bank Burlington, N.A. United States 4 Firstar Bank Cedar Falls Iowa 4 Firstar Bank Cedar Rapids, N.A. United States 4 Firstar Bank Council Bluffs Iowa 4 Firstar Bank Davenport, N.A. United States 4 Firstar Bank Des Moines, N.A. United States 4 Firstar Bank Mount Pleasant Iowa 4 Firstar Bank Ottumwa Iowa 4 Firstar Bank Red Oak, N.A. United States 4 Firstar Bank Sioux City, N.A. United States 2 Firstar Bank of Minnesota, N.A. United States 1 Firstar Bank Illinois Illinois 3 Firstar Metropolitan Bank & Trust Arizona Firstar Corporation of Wisconsin Wisconsin Firstar Corporation of Minnesota Minnesota Firstar Corporation of Arizona Arizona Firstar Corporation of Iowa Iowa 1 Firstar Trust Company Wisconsin 1 Firstar Trust Company of Florida, N.A. United States 1 Firstar Trust Company of Illinois Illinois 2 Firstar Trust Company of Minnesota Minnesota Firstar Investment Research & Management Company Wisconsin Firstar Insurance Services, Inc. Wisconsin 5 Elan Investment Services, Inc. Wisconsin Elan Life Insurance Company, Inc. Arizona Elan Title Services, Inc. Wisconsin
2
State or Other Jurisdiction in which Incorporated Name of Subsidiary or Organized ------------------------------- ---------------------------- 5 Firstar Community Investment Corporation Wisconsin Firstar Development Corporation Delaware 5 Firstar Leasing Services Corporation Wisconsin 5 Firstar Mortgage Corporation Wisconsin 5 FM Properties of Wisconsin, Inc. Wisconsin 5 CSFM Corporation Wisconsin Firstar Home Mortgage Corporation Wisconsin 5 Firstar Information Services Corporation Wisconsin 4 Banks of Iowa Capital Corporation Iowa 4 Banks of Iowa Credit Corporation Iowa 6 CRC Corporation Wisconsin 4 Firstar CSC Corporation Iowa 5 DPC of Milwaukee, Inc. Wisconsin Appleton Capital Corporation Nevada Eau Claire Capital Corporation Nevada Fond du Lac Capital Corporation Nevada Grantsburg Capital Corporation Nevada Green Bay Capital Corporation Nevada Madison Capital Corporation Nevada Manitowoc Capital Corporation Nevada Milwaukee Capital Corporation Nevada Minocqua Capital Corporation Nevada Oshkosh Capital Corporation Nevada Rice Lake Capital Corporation Nevada Sheboygan Capital Corporation Nevada Wausau Capital Corporation Nevada Wisconsin Rapids Capital Corporation Nevada First Southeast Securities Corp. Nevada First Southeast Investment Corp. Nevada Burlington Capital Corporation Nevada Cedar Rapids Capital Corporation Nevada Davenport Capital Corporation Nevada Des Moines Capital Corporation Nevada Red Oak Capital Corporation Nevada Sioux City Capital Corporation Nevada Notes 1 Subsidiary of Firstar Corporation of Wisconsin 2 Subsidiary of Firstar Corporation of Minnesota 3 Subsidiary of Firstar Corporation of Arizona 4 Subsidiary of Firstar Corporation of Iowa 5 Subsidiary of Firstar Bank Milwaukee, N.A. 6 Subsidiary of Firstar Bank Madison, N.A.
All Capital Corporations are subsidiaries of their respective banks EX-23 4 CONSENT OF KPMG PEAT MARWICK 1 Exhibit 23 The Board of Directors Firstar Corporation: We consent to incorporation by reference in the Registration Statements Nos. 33-38830, 33-41030, 33-19830, 33-57521, 33-57657 and 33-57523 on Form S-8 of Firstar Corporation of our report dated January 19, 1995 relating to 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 ended December 31, 1994, which report appears in the December 31, 1994 Annual Report on Form 10-K of Firstar Corporation. KPMG Peat Marwick LLP Milwaukee, Wisconsin March 20, 1995 EX-24 5 POWERS OF ATTORNEY 1 Exhibit 24 POWER OF ATTORNEY Firstar Corporation (Commission File No. 1-2981) FIRSTAR CORPORATION Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities and Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1994; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, WILLIAM H. RISCH AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 10th day of February, 1995. /s/ Michael E. Batten SEAL 2 POWER OF ATTORNEY Firstar Corporation (Commission File No. 1-2981) FIRSTAR CORPORATION Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities and Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1994; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, WILLIAM H. RISCH AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 6th day of February, 1995. /s/ Robert C. Buchanan SEAL 3 POWER OF ATTORNEY Firstar Corporation (Commission File No. 1-2981) FIRSTAR CORPORATION Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities and Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1994; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, WILLIAM H. RISCH AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 6th day of February 1995. /s/ George M. Chester, Jr. SEAL 4 POWER OF ATTORNEY Firstar Corporation (Commission File No. 1-2981) FIRSTAR CORPORATION Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities and Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1994; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, WILLIAM H. RISCH AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 26th day of January, 1995. /s/ Roger H. Derusha SEAL 5 POWER OF ATTORNEY Firstar Corporation (Commission File No. 1-2981) FIRSTAR CORPORATION Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities and Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1994; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, WILLIAM H. RISCH AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 30th day of January, 1995. /s/ James L. Forbes SEAL 6 POWER OF ATTORNEY Firstar Corporation (Commission File No. 1-2981) FIRSTAR CORPORATION Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities and Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1994; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, WILLIAM H. RISCH AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 30th day of January, 1995. /s/ Holmes Foster SEAL 7 POWER OF ATTORNEY Firstar Corporation (Commission File No. 1-2981) FIRSTAR CORPORATION Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities and Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1994; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, WILLIAM H. RISCH AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 30th day of January, 1995. /s/ Joseph F. Heil, Jr. SEAL 8 POWER OF ATTORNEY Firstar Corporation (Commission File No. 1-2981) FIRSTAR CORPORATION Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities and Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1994; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, WILLIAM H. RISCH AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 27th day of January, 1995. /s/ John H. Hendee, Jr. SEAL 9 POWER OF ATTORNEY Firstar Corporation (Commission File No. 1-2981) FIRSTAR CORPORATION Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities and Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1994; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, WILLIAM H. RISCH AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 3rd day of February, 1995. /s/ Jerry M. Hiegel SEAL 10 POWER OF ATTORNEY Firstar Corporation (Commission File No. 1-2981) FIRSTAR CORPORATION Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities and Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1994; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, WILLIAM H. RISCH AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 4th day of February, 1995. /s/ Joe Hladky SEAL 11 POWER OF ATTORNEY Firstar Corporation (Commission File No. 1-2981) FIRSTAR CORPORATION Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities and Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1994; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, WILLIAM H. RISCH AND WILLIAM J. SCHULTZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 11th day of March, 1995. /S/ C. Paul Johnson SEAL 12 POWER OF ATTORNEY Firstar Corporation (Commission File No. 1-2981) FIRSTAR CORPORATION Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities and Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1994; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, WILLIAM H. RISCH AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 2nd day of February, 1995. /s/ James H. Keyes SEAL 13 POWER OF ATTORNEY Firstar Corporation (Commission File No. 1-2981) FIRSTAR CORPORATION Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities and Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1994; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, WILLIAM H. RISCH AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 26th day of January, 1995. /s/ Sheldon B. Lubar SEAL 14 POWER OF ATTORNEY Firstar Corporation (Commission File No. 1-2981) FIRSTAR CORPORATION Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities and Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1994; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, WILLIAM H. RISCH AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 31st day of January, 1995. /s/ Daniel F. McKeithan, Jr. SEAL 15 POWER OF ATTORNEY Firstar Corporation (Commission File No. 1-2981) FIRSTAR CORPORATION Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities and Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1994; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, WILLIAM H. RISCH AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 29th day of January, 1995. /s/ George W. Mead II SEAL 16 POWER OF ATTORNEY Firstar Corporation (Commission File No. 1-2981) FIRSTAR CORPORATION Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities and Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1994; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, WILLIAM H. RISCH AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 27th day of January, 1995. /s/ Guy A. Osborn SEAL 17 POWER OF ATTORNEY Firstar Corporation (Commission File No. 1-2981) FIRSTAR CORPORATION Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities and Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1994; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, WILLIAM H. RISCH AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 31st day of January, 1995. /s/ Judith D. Pyle SEAL 18 POWER OF ATTORNEY Firstar Corporation (Commission File No. 1-2981) FIRSTAR CORPORATION Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities and Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1994; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, WILLIAM H. RISCH AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 27th day of January, 1995. /s/ Clifford V. Smith, Jr. SEAL 19 POWER OF ATTORNEY Firstar Corporation (Commission File No. 1-2981) FIRSTAR CORPORATION Annual Report on Form 10-K WHEREAS, FIRSTAR CORPORATION, a Wisconsin corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities and Exchange Act of 1934, an Annual Report on Form 10-K for the fiscal year ended December 31, 1994; and WHEREAS, the undersigned is or may hereafter be a director or executive officer of the Corporation; NOW, THEREFORE, the undersigned hereby constitutes and appoints ROGER L. FITZSIMONDS, WILLIAM H. RISCH AND WILLIAM J. SCHULZ, and each of them, his or her attorney, with full power to act for and in his or her name, place and stead, to sign his or her name in such capacity to the Annual Report on Form 10-K, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 13th day of February, 1995. /s/ William W. Wirtz SEAL EX-27 6 FINANCIAL DATA SCHEDULE
9 YEAR DEC-31-1994 DEC-31-1994 996,926 4,372 342,234 29,050 51,308 3,339,911 3,244,658 9,828,027 172,606 15,104,307 11,235,013 2,141,456 286,222 135,088 0 0 83,332 1,223,196 15,104,307 761,672 165,975 10,340 937,987 262,128 340,401 597,586 17,139 76 604,925 310,757 207,743 0 0 207,743 3.22 3.22 7.77 48,722 24,133 645 21,848 174,873 41,488 18,579 172,606 171,987 619 0
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