<PAGE>
FILED PURSUANT TO RULE 424(b)(5)
REGISTRATION NO. 33-61688
PROSPECTUS SUPPLEMENT
(To Prospectus dated March 15, 1995)
$100,000,000
[LOGO OF FIRST INTERSTATE BANCORP]
8.15% SUBORDINATED NOTES DUE MARCH 15, 2002
----------------
Interest on the First Interstate Bancorp (the "Corporation") 8.15% Subordi-
nated Notes due March 15, 2002 ("Notes") is payable semi-annually on March 15
and September 15 of each year, commencing September 15, 1995. The Notes are
redeemable at the option of the Corporation, upon not less than 30 days' prior
written notice, in whole on any Interest Payment Date on or after March 15,
1998, at a redemption price equal to 100% of the principal amount of the Notes
to be redeemed plus interest accrued and unpaid to the redemption date. See
"Certain Terms of the Notes." The Notes are subordinate to all present and fu-
ture Senior Debt (as defined in the accompanying Prospectus) of the Corpora-
tion.
The Notes are issuable only in fully registered form in denominations of
$1,000 and integral multiples thereof and represented by one Permanent Global
Note (as defined herein) registered in the name of a nominee of The Depository
Trust Company, as the depositary (a "Book-Entry Note"). Beneficial interests
in Book-Entry Notes will be shown on, and transfers thereof will be effected
only through, records maintained by the depositary's participants. Except as
provided herein, owners of beneficial interests in the Permanent Global Note
will not be entitled to receive Notes in definitive form and will not be con-
sidered owners or Holders thereof. So long as the Notes are represented by the
Permanent Global Note registered in the name of The Depository Trust Company
or its nominee, the Notes will trade in The Depository Trust Company's Same-
Day Funds Settlement System, and secondary market trading activity for the
Notes will therefore settle in immediately available funds. See "Certain Terms
of the Notes."
THE NOTES ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY
BANK OR NONBANK SUBSIDIARY OF THE CORPORATION, AND ARE NOT INSURED BY THE FED-
ERAL DEPOSIT INSURANCE CORPORATION, BANK INSURANCE FUND OR ANY OTHER GOVERN-
MENT AGENCY.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public(1) Discounts(2) Corporation(1)(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note......................... 100% .575% 99.425%
- --------------------------------------------------------------------------------
Total............................ $100,000,000 $575,000 $99,425,000
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from March 22, 1995.
(2) The Corporation has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(3 ) Before deducting estimated expenses of $100,000 payable by the
Corporation.
----------------
The Notes are offered, subject to prior sale, when, as and if accepted by
the Underwriters and subject to certain conditions, including delivery of
opinions of counsel. It is expected that delivery of the Notes will be made on
or about March 22, 1995 through the facilities of The Depository Trust
Company, against payment therefor in immediately available funds.
----------------
LEHMAN BROTHERS
SALOMON BROTHERS INC
SMITH BARNEY INC.
March 15, 1995
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
FOR NORTH CAROLINA RESIDENTS:
THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA HAS NOT APPROVED
OR DISAPPROVED THIS OFFERING NOR HAS THE COMMISSIONER PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS.
CERTAIN TERMS OF THE NOTES
The following is a brief description of the Notes and does not purport to be
complete. This description should be read in conjunction with the statements
under "Description of Debt Securities" in the accompanying Prospectus and is
subject to and qualified in its entirety by reference to the Subordinated
Indenture, dated as of November 1, 1994 (the "Indenture"), between the
Corporation and The First National Bank of Chicago, as Trustee.
The 8.15% Subordinated Notes due March 15, 2002 offered hereby (the "Notes")
will be limited to $100,000,000 aggregate principal amount and will mature on
March 15, 2002. The Notes will bear interest from March 22, 1995 at the rate of
8.15% per annum, payable semiannually on March 15 and September 15 in each year
to the person in whose name the Note (or any predecessor Note) is registered at
the close of business on the March 1 or September 1, as the case may be, next
preceding such interest payment date.
The Notes, which are a series of Subordinated Debt Securities, will be
direct, unsecured, subordinated obligations of the Corporation and are to be
issued under the Indenture. Payment of the principal of the Notes may be
accelerated only in the case of certain events involving the bankruptcy,
insolvency or reorganization of the Corporation. See "Description of Debt
Securities--Particular Terms of the Subordinated Debt Securities."
The Notes are redeemable at the option of the Corporation, upon not less than
30 days' prior written notice, in whole on any Interest Payment Date on or
after March 15, 1998, at a redemption price equal to 100% of the principal
amount of the Notes to be redeemed plus interest accrued and unpaid to the
redemption date.
All of the Notes will be issued in the form of one permanent Global Note (the
"Permanent Global Note") that will be deposited with, or on behalf of, the
Depositary. The Depository Trust Company ("DTC") will be the initial Depositary
with respect to the Notes. DTC has advised the Corporation that it is a
limited-purpose trust company organized under the laws of the State of New
York, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of section 17A of the Securities Exchange
Act of 1934 (the "Exchange Act"). DTC was created to hold securities of its
participating organizations ("participants") and to facilitate the clearance
and settlement of securities transactions among its participants in such
securities through electronic computerized book-entry changes in accounts of
the participants, thereby eliminating the need for physical movement of
securities certificates. DTC's direct participants include securities brokers
and dealers (including the Underwriters), banks, trust companies, clearing
corporations and certain other organizations, some of whom (and/or their
representatives) own DTC. Access to DTC's book-entry system is also available
to others, such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a direct participant, either
directly or indirectly ("indirect participants"). Persons who are not
participants may beneficially own securities held by DTC only through
participants or indirect participants.
Upon the issuance of the Permanent Global Note, the Depositary will credit,
on its book-entry registration and transfer system, the respective principal
amounts of the Notes represented by such Permanent
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<PAGE>
Global Note to the accounts of participants. The accounts to be credited shall
be designated by the Underwriters through which the Notes were offered and
sold. Ownership of beneficial interests in such Permanent Global Note will be
limited to participants or indirect participants. Ownership of beneficial
interests in such Permanent Global Note will be shown on, and the transfer of
that ownership will be effected only through, records maintained by the
Depositary for such Permanent Global Note (with respect to interests of
participants) or by participants or indirect participants (with respect to
interests of persons other than participants). The laws of some states require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such limits and such laws may impair the ability to
transfer beneficial interests in a Permanent Global Note.
So long as the Depositary for the Permanent Global Note, or its nominee, is
the registered owner of such Permanent Global Note, such Depositary or such
nominee, as the case may be, will be considered the sole owner or holder of the
Notes represented by such Permanent Global Note for all purposes. Except as set
forth below, owners of beneficial interests in the Permanent Global Note will
not be entitled to have the Notes represented by such Permanent Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of Notes in definitive form and will not be considered the owners or
holders thereof under the Indenture. Accordingly, each person owning a
beneficial interest in the Permanent Global Note must rely on procedures of the
Depositary and, if such person is not a participant, on the procedures of the
indirect participant through which such person owns its interest, to exercise
any rights of a Holder under the Indenture. The Indenture provides that the
Depositary may grant proxies and otherwise authorize participants to take any
action which a Holder is entitled to take under the Indenture.
DTC has informed the Corporation that under existing DTC policies and
industry practices, if the Corporation requests any action of Holders, or if
any owner of a beneficial interest in the Permanent Global Note desires to give
any notice or take any action that a Holder is entitled to give or take under
the Indenture or the Permanent Global Note, DTC would authorize and cooperate
with each participant to whose account any portion of the Notes represented by
the Permanent Global Note is credited on DTC's books and records to give such
notice or take such action. Any person owning a beneficial interest in such
Permanent Global Note that is not a participant must rely on any contractual
arrangements it has directly, or indirectly through its immediate financial
intermediary, with a participant to give such notice or take such action.
Payment of principal and interest on the Notes will be made to the Depositary
or its nominee, as the case may be, as the registered owner or the holder of
the Permanent Global Note representing the Notes. None of the Corporation, the
Trustee, any Paying Agent or the Security Registrar for such Notes will have
any responsibility or liability for any aspect of the records relating to, or
payments made on account of, beneficial ownership interests in the Permanent
Global Note for the Notes or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
The Corporation expects that the Depositary for the Notes, upon receipt of
any payment of principal, premium or interests in respect of the Permanent
Global Note, will credit immediately participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Permanent Global Note as shown on the records of the Depositary.
The Corporation also expects that payments by participants to owners of
beneficial interests in the Permanent Global Note held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name", and will be the responsibility of such
participants.
The Permanent Global Note may not be transferred except as a whole by the
Depositary to a nominee of such Depositary or by a nominee of such Depositary
to such Depositary or another nominee of such Depositary. The Permanent Global
Note is exchangeable for the Notes registered in the names of persons other
than the Depositary with respect to such Permanent Global Note or its nominee
only if (x) the Depositary notifies the Corporation that it is unwilling or
unable to continue as Depositary for the Permanent Global Note or if at any
time the Depositary ceases to be a clearing agency registered under the
Exchange Act, (y) the Corporation executes and delivers to the Trustee a
Company Order that the Permanent Global Note shall be exchangeable or (z) there
shall have occurred and be continuing an Event of Default or an
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<PAGE>
event which, with the giving of notice or lapse of time or both, would
constitute an Event of Default with respect to the Notes. If the Permanent
Global Note is exchangeable pursuant to the preceding sentence, it will be
exchangeable for Notes registered in such names as the Depositary with respect
to the Permanent Global Note shall direct.
Settlement for, and payments of principal of and interest on, the Notes will
be made in immediately available funds. The Notes will trade in the
Depositary's Same-Day Funds Settlement System until Maturity, and therefore the
Depositary will require secondary trading activity in the Notes to be settled
in immediately available funds.
RECENT DEVELOPMENTS
On January 16, 1995, the Corporation announced its results for the fourth
quarter and full year of 1994. The following is a summary of such results.
COMPARISON OF ANNUAL RESULTS
The Corporation recorded net income for 1994 of $733.5 million, or $8.71 per
share, including the effect of $141.3 million of restructuring charges ($87.6
million after taxes, or $1.09 per share). Before the effect of these charges,
after tax earnings were $821.1 million, or $9.80 per share. This compares to
earnings before the cumulative effect of accounting changes and an
extraordinary item for 1993 of $561.4 million, or $6.68 per share, and net
income of $736.7 million, or $8.96 per share.
In 1993, the cumulative effect of two accounting changes that were adopted
during the first quarter resulted in a net after tax addition of $200.1
million, or $2.60 per share for the year. The Corporation also recorded an
extraordinary item in 1993 reflecting after tax charges associated with long-
term debt repurchases and redemptions of $985 million during 1993. As a result,
net income in 1993 was reduced by $24.8 million ($0.32 per share).
Taxable-equivalent net interest income was $2,347.9 million in 1994, up 12.5%
from a year earlier. Approximately 60% of the increase from 1993 resulted from
earning asset growth of $3.1 billion (7.3%), with the remainder attributable to
the 23 basis point increase in the net interest margin to 5.14%. The
Corporation is, and has been historically, asset sensitive. During periods such
as 1994 in which short term interest rates rise, as driven by monetary policy,
the net interest margin has generally increased.
Average loans increased $4.5 billion (18.7%) from 1993 to $28.6 billion in
1994. Instalment loans averaged $11.7 billion in 1994, up $1.7 billion (17.3%)
from the year earlier, reflecting the improved economy and the success of
marketing programs, as well as the impact of completed acquisitions. Real
estate mortgage loans averaged $7.6 billion in 1994, an increase of $2.2
billion (40.1%) from the 1993 level, reflecting in part acquisition activity.
Average commercial loans of $8.3 billion were up $669 million (8.8%) from 1993.
Average construction loans were down $107 million (11.7%) to $806 million, with
most of the reduction attributable to reduced outstandings in California.
At year-end 1994, including the effect of acquisitions, loans and leases
totaled $33.2 billion, up $7.2 billion (27.8%) from a year earlier and up $2.9
billion (9.5%) from September 30, 1994. Instalment loans totaled $12.3 billion
at year-end 1994. This represents an increase of $1.5 billion (14.0%) from a
year earlier and an increase of $111 million (1.0%) from September 30, 1994. At
the same time, commercial loans were $9.3 billion, an increase of $1.3 billion
(16.2%) from a year earlier and up $281 million (3.1%) from September 30, 1994.
Residential real estate mortgages totaled $5.8 billion, $2.9 billion (99.4%)
above a year ago and $1.6 billion (37.4%) above the September 30 level.
Commercial real estate mortgages amounted to $4.4 billion at December 31, 1994,
$1.1 billion (30.1%) above a year ago and $631 million (16.8%) above September
30, 1994. Construction loans were $933 million at year-end 1994, versus $725
million a year earlier and $814 million at September 30, 1994.
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As a result of maturities and paydowns, investment securities held to
maturity declined $2.7 billion (16.3%) from a year earlier and declined $930
million from September 30 to $13.7 billion at December 31, 1994. These proceeds
supported the growth in loans. The investment securities portfolio is expected
to continue to decline moderately as loan growth is expected to exceed deposit
growth. U.S. Treasury and agency-backed securities declined 18.7% from the end
of 1993 to $12.1 billion at year-end 1994. Of the current amount, $5.2 billion
were U.S. Treasury securities and $6.9 billion were government agency
securities. Of the $6.9 billion of government agency securities at year-end
1994, the majority was backed by mortgages. All other investment securities
amounted to $1.6 billion at the end of 1994, up $111 million (7.5%) from a year
earlier and down slightly from September 30, 1994. The adoption of SFAS 115,
"Accounting for Certain Investments in Debt and Equity Securities," in January
1994 did not have a material impact on the Corporation.
Consumer savings, time and net transaction accounts increased $3.4 billion
(9.4%) from 1993 to an average of $40.0 billion in 1994. At the same time, the
Corporation's corporate purchased funds, which include CDs over $100,000, were
reduced by $187 million (5.6%) to an average of $3.1 billion. The decline in
corporate purchased funds reflects the impact of pricing on some of the
Corporation's liability products, external market alternatives and the
repurchase and redemption of long term debt in 1993.
No provision for credit losses for the Corporation was recorded for 1994. In
1993, the provision for credit losses was $112.6 million. Loans charged off,
net of recoveries, were $133.0 million in 1994, down substantially from $218.1
million in 1993.
Noninterest income totaled $1,054.3 million for 1994, an increase of $100.1
million (10.5%) from 1993. Service charges on deposit accounts increased $48.9
million (9.5%) from 1993 and trust fees rose $15.9 million (9.0%). Noninterest
income also benefited from venture capital gains of $28.3 million in 1994, of
which $17.0 million were reported as investment securities gains and $11.3
million were reported as other income.
For 1994, total noninterest expenses amounted to $2,197.8 million including
$141.3 million of restructuring charges and $2,056.5 million before the effect
of these charges but including the effect of completed acquisitions. This
compares to $2,032.4 million in 1993. Increases in expenses related to salaries
and benefits, net occupancy, and communications were largely attributable to
the 10 acquisitions completed in 1994. In addition, ORE reflected a net benefit
of $12.4 million in 1994, versus net expenses of $33.6 million in 1993.
The Corporation's efficiency ratio, which reflects noninterest expenses
before restructuring and ORE charges as a percent of taxable-equivalent net
interest income plus noninterest income, was 60.8% in 1994, compared to 65.7%
in 1993. This exceeds the previously announced target of 62% for 1994.
For 1994, the Corporation recorded income tax expense of $449.5 million,
resulting in an effective income tax rate of 38.0%. This compares to an
effective rate of 36.3% for 1993. The lower effective rate for 1993 was due to
the recognition of $12.4 million in deferred tax benefits resulting from the
enactment of an increase in the federal statutory rate from 34% to 35%. In
addition, a $9.0 million benefit was recorded for previously unrecognized
foreign tax credits in 1993.
COMPARISON OF FOURTH QUARTER RESULTS
The Corporation recorded net income for the fourth quarter of 1994 of $211.3
million ($2.65 per share). This includes the effect of $2.3 million of
restructuring charges ($1.4 million after taxes, or $0.02 per share) noted
above. Before the effect of these charges, income after taxes amounted to
$212.7 million ($2.67 per share), an increase of 36.9% from income of $155.4
million ($1.90 per share) before extraordinary item reported in the 1993 fourth
quarter.
Taxable-equivalent net interest income was $621.7 million in the fourth
quarter of 1994, an increase of 17.7% from a year earlier. This increase
resulted from expansion of the net interest margin, up 45 basis points
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to 5.29%, as well as from average earning asset growth, up $3.4 billion (7.8%).
The Corporation is, and has been historically, asset sensitive. During periods
such as 1994 in which short term interest rates rise, as driven by monetary
policy, the net interest margin has generally increased.
Average loans and leases including acquisitions increased $7.0 billion
(28.0%) from the 1993 fourth quarter to $31.8 billion in the 1994 fourth
quarter. Real estate mortgage loans averaged $9.4 billion in the 1994 fourth
quarter, an increase of $3.5 billion (61.1%) from the comparable 1993 quarterly
level. This increase reflects, in part, acquisitions completed throughout 1994.
Instalment loans averaged $12.1 billion in the fourth quarter of 1994, up $1.7
billion (16.8%) from a year earlier and up $163 million (1.4%) from the 1994
third quarter. Growth of instalment loans reflects the improved economy and the
success of marketing programs, as well as the impact of completed acquisitions.
Average commercial loans outstanding were up $1.4 billion (18.0%) from a year
earlier and up $463 million (5.4%) from the 1994 third quarter to an average of
$9.0 billion. Average construction loans increased $140 million (18.3%) from
the 1993 fourth quarter to $906 million in the 1994 period.
Average consumer savings, time and net transaction accounts increased $3.2
billion (8.5%) from the 1993 fourth quarter to an average of $40.9 billion in
the 1994 fourth quarter. Such deposits increased 1.4% from $40.4 billion in the
1994 third quarter. The Corporation's corporate purchased funds, which include
CDs over $100,000, increased $667 million (21.9%) from the 1993 fourth quarter
and $824 million (28.5%) from the 1994 third quarter to an average of $3.7
billion. The increase from prior quarterly levels largely reflects the impact
of acquisitions completed in the 1994 fourth quarter.
Based on an assessment of the Corporation's current risk profile, no
provision for credit losses for the Corporation was recorded in the fourth
quarter of 1994. In the fourth quarter of 1993, the consolidated provision for
credit losses was $19.0 million. Loans charged off, net of recoveries, were
$38.2 million in the fourth quarter of 1994, compared to $58.2 million reported
for the comparable 1993 quarter. The Corporation continued to experience an
unusually strong level of recoveries on prior period chargeoffs.
Noninterest income totaled $262.3 million in the fourth quarter of 1994, an
increase of $23.6 million (9.9%) from the 1993 fourth quarter. Service charges
on deposit accounts rose $17.9 million (14.3%) from the 1993 level and trust
fees increased $4.1 million (9.1%). Noninterest income in the 1994 fourth
quarter also included $13.6 million from the sale of venture capital
investments, which were reported as investment securities gains. Other charges,
commissions and fees declined $16.0 million (33.0%), reflecting primarily lower
fees from the sale of investment products.
Total noninterest expenses amounted to $538.2 million in the 1994 fourth
quarter, including $2.3 million of restructuring charges, as previously noted.
Noninterest expenses before the effect of these charges and including the
effect of completed acquisitions were $535.9 million, an increase of $28.2
million (5.6%) from the comparable 1993 quarter. Most of the increase from the
1993 fourth quarter was attributable to higher salaries and benefits expenses,
up $38.2 million (16.5%), reflecting acquisitions completed during 1994. The
number of full-time equivalent staff was 27,394 in December 1994, versus 26,589
a year earlier and 26,763 in September 1994.
The Corporation's efficiency ratio, which reflects noninterest expenses
before restructuring and ORE charges as a percent of taxable-equivalent net
interest income plus noninterest income, was 61.3% in the 1994 fourth quarter,
60.0% in the 1994 third quarter and 65.7% in the 1993 fourth quarter.
In the fourth quarter of 1994, the Corporation recorded income tax expense of
$129.4 million, resulting in an effective income tax rate of 38.0%. This
compares to an effective rate of 34.2% in the comparable 1993 quarter. The
lower effective rate for the 1993 fourth quarter was due to the recognition of
$9.0 million of foreign tax credits.
LIQUIDITY MANAGEMENT
The Corporation continues to utilize the core deposits gathered through its
extensive interstate retail banking network as a key source of low-cost
funding. Core deposits, defined as demand deposits, interest
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bearing consumer deposits under $100,000 and noninterest bearing time deposits,
together with equity were the primary sources for funding average earning
assets during the fourth quarter of 1994.
The Corporation's other sources of liquidity include maturing securities in
addition to those which are available for repurchase activity. In addition,
subsidiary banks may directly access funds placed by them through existing
agency agreements and may also access the Federal Reserve for short term
liquidity needs.
Unlike 1993, the Corporation did not repurchase or redeem in the open market
any material amount of its long-term debt in 1994. Total long-term debt
issuance in 1994 was $125 million, all of which was completed during the fourth
quarter. Under the appropriate circumstances, the Corporation could consider
repurchasing any of its outstanding securities.
At December 31, 1994, the Corporation (at the holding company level) had no
external short term borrowings outstanding. Immediate liquidity available to
the Corporation includes a $500 million senior revolving credit facility that
was finalized in the 1994 second quarter, as well as cash and other short term
financial instruments totaling $219 million at year-end 1994. This compares to
$652 million at year-end 1993, which was solely in cash and other short term
financial instruments. The decline in cash and other liquid balances from year-
end 1993 resulted primarily from the Corporation's common stock repurchase
programs.
The Corporation (at the holding company level) has access to regional,
national and international capital and money markets. On December 9, 1994, the
Corporation announced the establishment of its $1 billion Global Medium-Term
Note Program. The program will allow for senior and subordinated debt and
capital securities issuances in a number of countries and currencies, with a
broad spectrum of maturities.
RISK ELEMENTS
Nonperforming Assets--At December 31, 1994, nonperforming assets totaled $258
million, down $51 million (16.4%) from the year ago level of $309 million, and
down $33 million (11.4%) from $291 million reported at September 30, 1994. The
current level of nonperforming assets represents 0.46% of total assets, versus
0.60% and 0.54% of total assets a year earlier and at September 30, 1994,
respectively. Approximately 72% of nonperforming assets are real estate
related.
Nonperforming loans totaled $186 million at year-end 1994, a decline of $41
million (18.1 %) from $227 million a year earlier and a decline of $24 million
(11.5%) from $210 million at September 30, 1994. Interest lost on nonperforming
loans amounted to $13.5 million in 1994, down significantly from $26.0 million
reported a year earlier. ORE totaled $72 million at December 31, 1994, down
from $82 million a year ago and $81 million at September 30, 1994.
In addition to credit assets classified as nonperforming, the Corporation
reported accruing loans that were past due 90 days or more of $51 million at
December 31, 1994, versus $66 million a year earlier and $56 million at
September 30, 1994. The current level of past due loans represents 0.09% of
total assets.
Allowance for Credit Losses--At year-end 1994, the allowance for credit
losses totaled $934 million, or 2.81% of total loans. This compares to an
allowance of $1,001 million, or 3.85% of loans, a year ago and $952 million, or
3.14% of loans, at September 30, 1994.
Historical and projected allowances for credit losses reflect management's
assessment of the credit risk inherent in the Corporation's loan portfolio.
CAPITAL AND OTHER FINANCIAL STATISTICS
At December 31, 1994, total shareholders' equity represented 6.16% of total
assets, versus 6.90% a year earlier and 6.55% at September 30, 1994. On the
same dates, common equity equaled 5.53%, 6.21%, and 5.90% of total assets,
respectively. The recent decline in the Corporation's various capital ratios
largely resulted from the common stock repurchase programs and completed
acquisitions.
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The tangible common equity ratio was 4.57% at year-end 1994, compared to
5.79% a year earlier and 5.30% at September 30, 1994. The regulatory leverage
ratio was 5.35% at year-end 1994, versus 6.60% a year ago and 6.08% at
September 30, 1994.
The Corporation's Tier 1 and Total Capital ratios at September 30, 1994, were
8.64% and 11.49%, respectively, and at December 31, 1994 were 7.20% and 10.22%,
respectively. The decline in risk adjusted capital ratios was also affected by
loan growth. During the fourth quarter of 1994, the Corporation issued $125
million in subordinated notes. Such notes qualify as Tier 2 capital securities
and increased the Corporation's Total Capital ratio.
On October 17, 1994, the Corporation's Board of Directors declared a
quarterly cash dividend of $0.75 on the Corporation's $2 par value Common
Stock, payable on November 30, 1994, to shareholders of record on November 7,
1994. On November 1, 1994, the Preferred Stock Committee of the Board of
Directors declared dividends on the Corporation's outstanding preferred stock.
During 1994, the Corporation recorded common stock dividends of $218.2 million
and preferred stock dividends of $33.3 million.
Total intangibles amounted to $561 million at year-end 1994, versus $233
million a year earlier. The higher current level reflects the completion of 10
acquisitions in 1994. As a result, goodwill increased to $514 million at the
end of 1994 from $204 million at year-end 1993.
The common shares used in the calculation of 1994 fourth quarter and full
year results per share were 76,656,474 and 80,421,942 respectively.
STOCK REPURCHASE PROGRAMS
As previously announced, in the first half of 1994 the Board of Directors
approved the repurchase of 8,000,000 shares of its common stock from time to
time during the year, subject to market conditions and appropriate regulatory
and acquisition accounting requirements. The repurchase program was completed
in November 1994. Additionally, in connection with the acquisition of Levy
Bancorp, the Board also approved on September 16, 1994, the buyback of up to an
additional 1,200,000 shares of common stock. The Corporation has completed the
repurchase of shares for the Levy acquisition.
SUMMARY OF ACQUISITION ACTIVITY
On November 1, 1994, the Corporation acquired Sacramento Savings Bank (SSB)
from Alleghany Corporation for $331 million in cash, subject to certain
adjustments. At the close of the transaction, which was accounted for as a
purchase, SSB reported assets of $3.0 billion, loans of $2.2 billion and
deposits of $2.6 billion. The merger makes First Interstate the second largest
bank serving the counties of Sacramento, Yuba and Butte.
On January 6, 1995, First Interstate Bank of Washington, N.A. completed its
acquisition of University Savings Bank in Washington, a wholly owned subsidiary
of Glendale Federal Bank, FSB, for $205 million in cash. The acquisition
increases First Interstate's market share and enhances the bank's residential
mortgage origination capability in the State of Washington.
On February 1, 1995, the Corporation completed its acquisition of Levy
Bancorp and its principal subsidiary, Bank of A. Levy, in a stock transaction
valued at $92 million. This acquisition substantially increases First
Interstate's market position from sixth to second among financial institutions
in Ventura County.
On December 16, 1994, First Interstate Bank of Texas, N.A. completed its
purchase of Park Forest National Bank, which will enhance small business
lending capabilities in the Dallas/Fort Worth Metroplex area. On January 9,
1995, FI Texas completed its purchase of North Texas Bancshares, Inc., and its
principal subsidiary, Bank of North Texas, N.A. (BNT). As the area's top SBA
lender and the sixth largest nationwide, BNT complements the growing small
business network in North Texas and more than doubles First Interstate's market
share in Tarrant County.
S-8
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting Agreement
and a related Terms Agreement, the Corporation has agreed to sell to each of
the Underwriters named below, and each of the Underwriters has severally agreed
to purchase, the principal amount of Notes set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
UNDERWRITER NOTES
----------- ------------
<S> <C>
Lehman Brothers Inc. ....................................... $ 34,000,000
Salomon Brothers Inc ....................................... 33,000,000
Smith Barney Inc. .......................................... 33,000,000
------------
Total................................................... $100,000,000
============
</TABLE>
The Underwriting Agreement provides that the obligation of the Underwriters
to pay for and accept delivery of the Notes is subject to the delivery of
opinions of counsel and to certain other conditions. The Underwriters are
obligated to take and pay for all the Notes if any are taken.
The Underwriters initially propose to offer part of the Notes directly to the
public at the public offering price set forth on the cover page hereof and part
to certain dealers at a price that represents a concession not in excess of
0.375% of the principal amount of the Notes. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of 0.250% of the principal
amount of the Notes to certain other dealers. After the initial public offering
of the Notes, the offering price and other selling terms may be changed by the
Underwriters.
The Corporation has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
The Corporation does not intend to apply for listing of the Notes on a
national securities exchange, but has been advised by the Underwriters that
they presently intend to make a market in the Notes, as permitted by applicable
laws and regulations. The Underwriters are not obligated, however, to make a
market in the Notes and any such market making may be discontinued at any time
at the sole discretion of the Underwriters. Accordingly, no assurance can be
given as to the liquidity of, or trading markets for, the Notes.
In the ordinary course of their respective businesses, each of the
Underwriters have engaged and may engage in investment banking transactions
with the Corporation.
VALIDITY OF NOTES
The validity of the Notes will be passed upon for the Corporation by Edward
S. Garlock, Esq., Group General Counsel, Corporate Services Group, for the
Corporation, Los Angeles, California and for the Underwriters by Sullivan &
Cromwell, Los Angeles, California. Mr. Garlock will rely, as to all matters
governed by New York law, on the opinion of Sullivan & Cromwell. From time to
time, Sullivan & Cromwell has performed certain legal services for the
Corporation. As of December 31, 1994, Mr. Garlock owned beneficially
approximately 1,524 shares of the Corporation's Common Stock and owned options
exercisable within 60 days for 11,175 shares of such stock.
S-9
<PAGE>
PROSPECTUS
LOGO
OF FIRST INTERSTATE BANK
DEBT SECURITIES
First Interstate Bancorp (the "Corporation") may offer from time to time in
one or more series its debt securities ("Debt Securities") in amounts and on
terms to be determined in light of market conditions at the time of sale. The
Debt Securities may be unsecured Debt Securities (the "Senior Debt Securities")
or unsecured and subordinated Debt Securities (the "Subordinated Debt
Securities"). The Senior Debt Securities, if issued, will rank on a parity with
all the unsecured and unsubordinated indebtedness of the Corporation, and the
Subordinated Debt Securities, if issued, will be subordinated in right of
payment to all obligations of the Corporation to all of its general creditors,
except obligations ranking on a parity with or junior to the Subordinated Debt
Securities. See "Description of Debt Securities--Particular Terms of the
Subordinated Debt Securities--Subordination Terms." As used herein, Debt
Securities shall include securities denominated in U.S. dollars or, at the
option of the Corporation if so specified in the applicable Prospectus
Supplement, in any other currency, including composite currencies such as the
European Currency Unit ("ECU"). Debt Securities of a series may be issuable in
registered definitive form ("Registered Notes") or in the form of one or more
global securities (each a "Global Note"). Pursuant to the terms of the
Registration Statement of which this Prospectus forms a part, the Corporation
may also issue (i) warrants to purchase its Debt Securities, (ii) shares of its
preferred stock, fractional interests in which may be represented by depositary
shares, (iii) warrants to purchase its preferred stock or depositary shares,
(iv) shares of its common stock, par value $2.00 per share, (v) warrants to
purchase its common stock and (vi) warrants entitling the holder to receive the
cash value of the right to purchase or to sell foreign currencies or composite
currencies.
The specific designation, aggregate principal amount, currency,
denominations, maturity, premium, rate and time of payment of interest, terms
for redemption at the option of the Corporation or repayment at the option of
the holder, terms for sinking fund payments, terms for conversion or exchange
into capital securities and description of such capital securities, and the
initial public offering price, to the extent applicable to the Debt Securities
in respect of which this Prospectus is being delivered ("Offered Debt
Securities") are set forth in the accompanying Prospectus Supplement
("Prospectus Supplement"). The Prospectus Supplement also contains information,
to the extent applicable, about certain United States Federal income tax
considerations relating to, and listing on a securities exchange of, the
Offered Debt Securities covered by the Prospectus Supplement.
The Offered Debt Securities may be offered directly through dealers
designated from time to time by the Corporation, or to or through underwriters
or dealers. If any dealers or underwriters are involved in the sale of the
Offered Debt Securities, their names, and any applicable fee, commission,
purchase price or discount arrangements with them will be set forth, or will be
calculable from information set forth, in the Prospectus Supplement.
THE DEBT SECURITIES ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS
OF ANY BANK OR NONBANK SUBSIDIARY OF THE CORPORATION, AND ARE NOT INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, BANK INSURANCE FUND OR ANY OTHER
GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MARCH 15, 1995.
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
ANY PROSPECTUS SUPPLEMENT (INCLUDING ANY PRICING SUPPLEMENT) AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE CORPORATION OR ANY UNDERWRITER. THIS PROSPECTUS AND ANY
PROSPECTUS SUPPLEMENT (INCLUDING ANY PRICING SUPPLEMENT) DO NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER IN SUCH JURISDICTION. THE DELIVERY OF THIS PROSPECTUS OR A
PROSPECTUS SUPPLEMENT (INCLUDING ANY PRICING SUPPLEMENT) AT ANY TIME DOES NOT
IMPLY THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THEIR RESPECTIVE DATES.
AVAILABLE INFORMATION
First Interstate Bancorp (the "Corporation") is subject to the informational
requirements of the United States Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Reports, proxy statements and other information filed by
the Corporation can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20459; Citicorp Center, Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661; and Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of such material can be obtained from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Reports, proxy statements and other information concerning
the Corporation can be inspected at the offices of the New York Stock Exchange,
20 Broad Street, New York, New York 10005, and at the offices of the Pacific
Stock Exchange, 301 Pine Street, San Francisco, California 94104, where the
Corporation's Common Stock is listed. This Prospectus does not contain all
information set forth in the Registration Statement and Exhibits thereto which
the Corporation has filed with the Commission under the United States
Securities Act of 1933, as amended (the "Act"), and to which reference is
hereby made.
----------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Corporation (File
No. 1-4114) are incorporated in this Prospectus by reference: (1) the
Corporation's Annual Report on Form 10-K for the fiscal year ended December 31,
1993; (2) the Corporation's Current Reports on Form 8-K dated January 19, 1994,
March 22, 1994, April 20, 1994, July 20, 1994, September 21, 1994, October 25,
1994 and February 17, 1995; and (3) the Corporation's Quarterly Reports on Form
10-Q for the quarters ended March 31, 1994, June 30, 1994 and September 30,
1994.
All documents filed by the Corporation pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Debt Securities shall be deemed
to be incorporated by reference in this Prospectus. Any statement contained in
this Prospectus or in a document all or a portion of which is incorporated or
deemed to be incorporated herein by reference shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or
is deemed to be incorporated herein by reference modifies or supersedes such
statement. Any statement so modified shall not be deemed to constitute a part
hereof except as so modified, and any statement so superseded shall not be
deemed to constitute a part hereof. Such incorporation by reference shall not
be deemed to incorporate specifically by reference the information referred to
in Item 402(a)(8) of Regulation S-K.
2
<PAGE>
The Corporation will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written request of any such person, a copy of any and all of the foregoing
documents incorporated by reference herein, other than certain exhibits to such
documents. Requests should be directed to: David S. Belles, Executive Vice
President and Controller of First Interstate Bancorp, First Interstate Bank of
Arizona, N.A., Corporate Controller Group, Dept. 497, P.O. Box 29791, Phoenix,
Arizona 85038-9791, telephone no. (602) 949-4974.
This Prospectus may not be used to consummate sales of Offered Debt
Securities unless accompanied by a Prospectus Supplement. The delivery of this
Prospectus together with a Prospectus Supplement relating to particular Offered
Debt Securities in any jurisdiction shall not constitute an offer in that
jurisdiction of any of the other Debt Securities covered by this Prospectus.
Unless otherwise indicated, currency amounts in this Prospectus and any
Prospectus Supplement are stated in United States dollars ("$", "dollars",
"U.S." or "US$").
FOR NORTH CAROLINA RESIDENTS:
THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA HAS NOT APPROVED
OR DISAPPROVED THIS OFFERING NOR HAS THE COMMISSIONER PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS.
FIRST INTERSTATE BANCORP
The Corporation is a bank holding company which owned at December 31, 1994
directly or indirectly through wholly owned subsidiaries, all of the shares of
capital stock of 16 banks (the "Subsidiary Banks"). At December 31, 1994, the
Subsidiary Banks operated approximately 1,100 banking offices in 13 states. The
Corporation is incorporated under the laws of the State of Delaware.
At December 31, 1994, the Corporation was the 14th largest banking
organization in the United States based on total assets. At that date, the
Corporation had total assets of $55.8 billion, total deposits of $48.4 billion
and stockholders' equity of $3.4 billion.
The Subsidiary Banks accept checking, savings and time-deposit accounts and
employ these funds by making principally consumer, real estate and commercial
loans and investing in securities and other interest-bearing assets. All are
members of the Federal Deposit Insurance Corporation (the "FDIC"), all but
three exercise trust powers, and the thirteen nationally chartered banks and
one of the three state chartered banks are members of the Federal Reserve
System. The larger Subsidiary Banks provide international banking services
through the international departments of their domestic offices and through a
business development agreement with Standard Chartered PLC. They also maintain
correspondent relationships with major banks throughout the world.
The Corporation also provides banking-related financial services and
products. These include asset-based commercial financing, asset management and
investment counseling, bank card operations, mortgage banking, venture capital
and investment products. It engages in these activities through non-bank
subsidiaries of the Corporation, through Subsidiary Banks and through
subsidiaries of the Subsidiary Banks.
The Corporation and its Subsidiary Banks on a continuous basis identify and
evaluate possible acquisitions of banks and savings and loan associations
within the geographic territory served by the Corporation.
3
<PAGE>
The following table summarizes the total assets of the Corporation by
principal Subsidiary Banks and other subsidiaries as of September 30, 1994 (in
millions):
<TABLE>
<S> <C>
First Interstate:
Bank of California................................................ $23,015
Bank of Arizona, N.A. ............................................ 7,736
Bank of Oregon, N.A. ............................................. 6,120
Bank of Texas, N.A. .............................................. 5,741
Bank of Washington, N.A. ......................................... 4,537
Bank of Nevada, N.A. ............................................. 3,818
Other Banks......................................................... 4,142
Parent corporation, non-bank subsidiaries and eliminations.......... (902)
-------
TOTAL............................................................. $54,207
=======
</TABLE>
The Corporation is a legal entity separate and distinct from the Subsidiary
Banks. The principal source of the Corporation's revenues is dividends received
from the Subsidiary Banks. Various statutory provisions limit the amount of
dividends the Subsidiary Banks and certain nonbank subsidiaries can pay without
regulatory approval, and various regulations can also restrict the payment of
dividends. In addition, federal statutes limit the ability of the Subsidiary
Banks to make loans to the Corporation.
The Corporation's executive office is located at 633 West Fifth Street, Los
Angeles, California 90071 (telephone number 213-614-3001). Unless the context
indicates otherwise, references herein to the Corporation are to First
Interstate Bancorp and its subsidiaries, including the Subsidiary Banks.
USE OF PROCEEDS
The Corporation intends to use the net proceeds from the sale of the Debt
Securities for general corporate purposes, principally to fund investments in,
or extensions of credit to, the Subsidiary Banks, banking-related and
nonbanking-related subsidiaries or to repay borrowings incurred for such
purposes. Except as otherwise described in the Prospectus Supplement, specific
allocations of the proceeds for such purposes will not have been made at the
date of the Prospectus Supplement, although the management of the Corporation
will have determined that funds should be borrowed at that time in anticipation
of future funding requirements of such subsidiaries or repayments of such
borrowings. The precise amount and timing of investments in, and extensions of
credit to, the subsidiaries or repayment of borrowings will depend upon the
subsidiaries' funding requirements and the availability of other funds.
4
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following is qualified in its entirety by the detailed information and
financial statements available as described under "Incorporation of Certain
Documents by Reference." Effective March 31, 1989, the Corporation adopted the
mark-to-market method of accounting for interest rate swaps, which resulted in
income of $27.4 million which is reflected as a cumulative effect of an
accounting change in the Consolidated Statement of Operations for the year
ended December 31, 1989. On January 1, 1990, the Corporation adopted Statement
of Financial Accounting Standards ("SFAS") No. 96, "Accounting for Income
Taxes," which resulted in $30.1 million of income which is reflected as a
cumulative effect of an accounting change in the Consolidated Statement of
Operations for the year ended December 31, 1990. On January 1, 1993, the
Corporation adopted SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," which resulted in $104.9 million of expense, and
SFAS No. 109, "Accounting for Income Taxes," which resulted in $305.0 million
of income, which together are reflected as the cumulative effect of accounting
changes in the Consolidated Statement of Operations for the nine months ended
September 30, 1993 and the year ended December 31, 1993. The Corporation also
recorded in 1993 an extraordinary item reflecting the repurchase and redemption
of $985 million of long term debt; as a result, 1993 net income was reduced by
$24.8 million. On January 1, 1994, the Corporation adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits," and SFAS 115, "Accounting
for Certain Investments in Debt and Equity Securities." Implementation of these
SFAS pronouncements did not have a material impact on the Corporation's
results. The dollar figures are in millions except per share amounts.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------ ------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS
OF OPERATIONS:
Interest income........ $2,329.8 $2,213.6 $2,944.2 $3,189.7 $3,935.3 $4,820.8 $5,376.1
Interest expense....... 619.8 665.5 872.1 1,175.1 1,843.6 2,517.6 2,953.7
-------- -------- -------- -------- -------- -------- --------
Net interest income.... 1,710.0 1,548.1 2,072.1 2,014.6 2,091.7 2,303.2 2,422.4
Provision for credit
losses................ -- 93.6 112.6 314.3 810.2 499.4 1,204.1
-------- -------- -------- -------- -------- -------- --------
Net interest income
after provision for
credit losses......... 1,710.0 1,454.5 1,959.5 1,700.3 1,281.5 1,803.8 1,218.3
Investment securities
gains (losses)........ 7.0 5.1 9.7 (1.8) 42.8 10.6 4.4
Other noninterest
income................ 785.0 710.4 944.5 913.9 1,141.6 1,192.9 1,154.1
Noninterest expense.... 1,659.6 1,524.7 2,032.4 2,209.2 2,732.2 2,562.3 2,545.5
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes,
extraordinary item and
cumulative effect of
accounting changes.... 842.4 645.3 881.3 403.2 (266.3) 445.0 (168.7)
Applicable income taxes
(benefit)............. 320.1 239.3 319.9 120.9 21.8 6.4 (16.8)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
extraordinary item and
cumulative effect of
accounting changes.... 522.3 406.0 561.4 282.3 (288.1) 438.6 (151.9)
Extraordinary item..... -- (15.4) (24.8) -- -- -- --
Cumulative effect of
accounting changes.... -- 200.1 200.1 -- -- 30.1 27.4
-------- -------- -------- -------- -------- -------- --------
Net income (loss)...... $ 522.3 $ 590.7 $ 736.7 $ 282.3 $ (288.1) $ 468.7 $ (124.5)
======== ======== ======== ======== ======== ======== ========
INCOME (LOSS) AND
DIVIDENDS PER COMMON
SHARE(1):
Primary and fully
diluted earnings
(loss) per share:
Income (loss) before
extraordinary item and
cumulative effect of
accounting changes.... $ 6.09 $ 4.78 $ 6.68 $ 3.23 $ (5.24) $ 6.79 $ (3.89)
Net income (loss)...... 6.09 7.20 8.96 3.23 (5.24) 7.30 (3.30)
Cash dividends paid.... 2.00 1.10 1.60 1.20 1.80 3.00 2.98
CONSOLIDATED BALANCE
SHEET DATA(2):
Total assets........... $ 54,207 $ 50,090 $ 51,461 $ 50,863 $ 48,922 $ 51,356 $ 59,051
Loans, net............. 30,331 24,748 25,988 24,201 28,182 33,007 38,205
Allowance for credit
losses................ 952 1,010 1,001 1,068 1,273 1,011 1,437
Deposits............... 48,055 43,365 44,701 43,675 41,433 43,141 46,468
Long term debt......... 1,261 1,700 1,533 2,702 3,108 3,178 3,719
Total shareholders'
equity................ 3,550 3,630 3,548 3,251 2,639 2,868 2,339
RATIO ANALYSIS:
Return on average total
shareholders'
equity(3)............. 19.09% 22.68% 21.18% 9.52% N/M 17.98% N/M
Return on average total
assets(3)............. 1.33 1.61 1.49 0.57 N/M 0.86 N/M
Average total
shareholders' equity
as a percent of
average total assets.. 6.97 7.11 7.05 6.03 5.63% 4.81 4.46%
Dividends paid per
common share as a
percent of net income
per common share...... 32.84 15.28 17.86 37.15 N/M 41.10 N/M
Ratio of earnings to
fixed charges:
Parent corporation on-
ly(4)................. 6.82x 3.28x 3.35x (5) (5) 2.05x 1.35x
Consolidated(6):
Excluding interest on
deposits............. 7.12 5.22 5.39 2.39x (7) 1.79 (7)
Including interest on
deposits............. 2.28 1.92 1.96 1.33 (7) 1.17 (7)
</TABLE>
5
<PAGE>
- --------
(1) Earnings (loss) per common share are computed based on the weighted average
number of common shares outstanding during each year and the dilutive
effect of stock options outstanding and after deducting dividends paid on
preferred stock. Fully diluted earnings per common share are considered
equal to primary earnings per common share in each year because the
addition of potentially dilutive securities which are not common stock
equivalents would have resulted in dilution of less than 3% or would have
been antidilutive.
(2) At end of period indicated.
(3) Calculated using net income. The ratios were considered not meaningful
("N/M") if a loss was experienced in the period. Ratios for 1993 were
significantly affected by an extraordinary item and the cumulative effect
of accounting changes. Return on average total shareholders' equity and
return on average total assets for the period ended September 30, 1993,
without these adjustments would have been 15.59 and 1.11, respectively,
while the ratios for the period ended December 31, 1993, would have been
16.14 and 1.14, respectively.
(4) For purposes of computing this ratio, earnings represent income (loss)
before extraordinary item and cumulative effect of accounting changes of
the parent corporation only, plus fixed charges less income tax credit.
Fixed charges represent all interest expense and one-third (the proportion
deemed representative of the interest factor) of rents.
(5) For the years ended December 31, 1992 and 1991, fixed charges exceeded
earnings by $191 million and $61 million, respectively.
(6) For purposes of computing these ratios, earnings represent income (loss)
before extraordinary item and cumulative effect of accounting changes plus
applicable income taxes and fixed charges. Fixed charges, excluding
interest on deposits, include other interest expense and one-third (the
proportion deemed representative of the interest factor) of rents. Fixed
charges, including interest on deposits, include all interest expense and
one-third (the proportion deemed representative of the interest factor) of
rents.
(7) For the years ended December 31, 1991 and 1989, fixed charges exceeded
earnings by $266 million and $169 million, respectively.
6
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt Securities
offered by any Prospectus Supplement and the extent, if any, to which such
general provisions may apply to the Debt Securities so offered will be
described in the Prospectus Supplement relating to such Debt Securities.
The Senior Debt Securities are to be issued under an Indenture, dated as of
July 1, 1982, as amended by the First Supplemental Indenture, dated as of
February 5, 1986, and the Second Supplemental Indenture, dated as of May 15,
1989 (together, the "Senior Debt Securities Indenture"), between the
Corporation and Bankers Trust Company, as Trustee (the "Senior Debt Securities
Trustee"). The Subordinated Debt Securities will be issued under an Indenture,
dated as of November 1, 1994, (the "Subordinated Debt Securities Indenture"),
between the Corporation and The First National Bank of Chicago, as Trustee (the
"Subordinated Debt Securities Trustee"). The Senior Debt Securities Indenture
and the Subordinated Debt Securities Indenture are referred to herein
individually as the "Indenture" and collectively as the "Indentures;" and the
Senior Debt Securities Trustee and the Subordinated Debt Securities Trustee are
referred to herein individually as the "Trustee" and collectively as the
"Trustees." A copy of the Senior Debt Securities Indenture and the form of the
Subordinated Debt Securities Indenture are filed as an exhibit to the
Registration Statement.
The following presents summaries of certain provisions of the Indentures.
Where no distinction is made between the Senior Debt Securities and the
Subordinated Debt Securities or between the Senior Debt Securities Indenture
and the Subordinated Debt Securities Indenture, such summaries refer to any
Debt Securities and either Indenture. Such summaries do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all of the provisions of the Indentures, including the definitions therein
of certain terms. Wherever particular sections or defined terms of the
Indentures are referred to, it is intended that such sections or defined terms
shall be incorporated herein by reference. The following sets forth certain
general terms and provisions of the Debt Securities. Further terms of the
Offered Debt Securities are set forth in the Prospectus Supplement.
Because the Corporation is a holding company, its rights and the rights of
its creditors, including the Holders of the Debt Securities offered hereby, to
participate in any distribution of the assets of any subsidiary upon the
subsidiary's liquidation or recapitalization will be subject to the prior
claims of the subsidiary's creditors except to the extent that the Corporation
may itself be a creditor with recognized claims against the subsidiary.
The principal source of the Corporation's revenues is dividends received from
the Subsidiary Banks. Various statutory provisions limit the amount of
dividends the Subsidiary Banks and certain nonbank subsidiaries can pay without
regulatory approval, and various regulations can also restrict the payment of
dividends. Certain proposed regulations could further limit the ability of the
Subsidiary Banks to pay dividends to the Corporation, and federal statutes
limit the ability of the Subsidiary Banks to make loans to the Corporation.
GENERAL
The Indentures do not limit the aggregate principal amount of Debt Securities
which may be issued thereunder and provide that Debt Securities may be issued
from time to time in series. The Senior Debt Securities will be unsecured
obligations of the Corporation and will rank on a parity with all other
unsecured and unsubordinated indebtedness of the Corporation. The Subordinated
Debt Securities will be unsecured obligations of the Corporation and, as set
forth below under "Particular Terms of the Subordinated Debt Securities--
Subordination Terms," will be subordinate in right of payment to all
7
<PAGE>
obligations of the Corporation to its general creditors, except obligations
ranking on a parity with or junior to the Subordinated Debt Securities.
Reference is made to the Prospectus Supplement relating to the Offered Debt
Securities, which describes additional terms of the Offered Debt Securities
including, where applicable: (1) the title of the Offered Debt Securities; (2)
any limit on the aggregate principal amount of the Offered Debt Securities; (3)
the date or dates on which the Offered Debt Securities will mature; (4) the
rate or rates per annum at which the Offered Debt Securities will bear
interest, if any, or the formula or provision pursuant to which such rate or
rates are determined and the date from which such interest, if any, will
accrue; (5) the dates on which such interest, if any, on the Offered Debt
Securities will be payable and the Regular Record Dates for such Interest
Payment Dates; (6) any mandatory or optional sinking fund or analogous
provisions; (7) the date, if any, after which and the price or prices at which
the Offered Debt Securities may, pursuant to any optional or mandatory
redemption provisions, be redeemed and the other detailed terms and provisions
of any such optional or mandatory redemption provisions; (8) the currency or
currencies of payment of principal of and premium, if any, and interest on the
Offered Debt Securities; (9) whether the Offered Debt Securities are to be
issued in whole or part in the form of a Global Note or Notes and, if so, the
identity of the Depositary for such Global Note or Notes; (10) the terms and
conditions, if any, upon which a Global Note or Notes may be exchanged in whole
or in part for other definitive Offered Debt Securities; (11) any terms by
which the Subordinated Debt Securities may be convertible into Common Stock of
the Corporation, as described below under "Particular Terms of the Subordinated
Debt Securities--Conversion Rights"; and (12) any other terms of the series of
Offered Debt Securities.
Debt Securities may be issued as Original Issue Discount Securities to be
sold at a substantial discount below their principal amount. Special Federal
income tax and other considerations applicable thereto will be described in the
Prospectus Supplement relating thereto.
FORM, EXCHANGE, REGISTRATION, TRANSFER AND PAYMENT
Debt Securities of a series may be issuable in definitive form solely as
registered Debt Securities, solely as bearer Debt Securities, or as both
registered and bearer Debt Securities. Unless otherwise indicated in the
Prospectus Supplement, bearer Debt Securities other than bearer Debt Securities
issued as temporary or permanent Global Securities will have interest coupons
attached. The Indenture also provides that bearer or registered Debt Securities
of a series may be issuable as permanent Global Securities.
Unless otherwise provided in the Prospectus Supplement, principal of, and
premium and interest, if any, on the Offered Debt Securities issued in
registered form will be payable, and the transfer of such Offered Debt
Securities will be registrable, at the office of the Trustee, except that, at
the option of the Corporation, interest may be paid by mailing a check to the
address of the person entitled thereto as such address appears on the Security
Register. (Sections 301, 305 and 1002) Acting in accordance with the
Indentures, the Corporation has also designated the principal office of First
Interstate Bank of California, Los Angeles, as an office where principal,
premium and interest, if any, may be paid and the transfer of the Offered Debt
Securities may be registered. (Sections 305 and 1002)
Offered Debt Securities may be issuable in whole or in part in the form of
one or more temporary or permanent Global Notes, as described below under
"Temporary Global Notes" and "Permanent Global Notes." Unless otherwise
indicated in the Prospectus Supplement, the Debt Securities will be issued only
in fully registered form without coupons and in denominations of $1,000 or any
integral multiple thereof. One or more Global Notes will be issued in a
denomination or aggregate denominations equal to the aggregate principal amount
of Outstanding Debt Securities of the series to be represented by such Global
Note or Notes. The Prospectus Supplement relating to a series of Offered Debt
Securities denominated in a foreign or composite currency will specify the
denomination
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thereof. No service charge will be made for registration of any transfer or
exchange of the Debt Securities, but the Corporation may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith. (Sections 302 and 305)
PAYING AGENTS FOR BEARER DEBT SECURITIES
Unless otherwise indicated in the Prospectus Supplement, payments of
principal of and premium, if any, and interest, if any, on bearer Debt
Securities will be payable, subject to any applicable laws and regulations, at
such Paying Agencies outside the United States (or its possessions) as the
Corporation may appoint from time to time. Unless otherwise indicated in the
Prospectus Supplement, payment of interest on bearer Debt Securities on any
Interest Payment Date will be made only against surrender of the coupon
relating to such Interest Payment Date to a Paying Agent outside the United
States. No payment with respect to any bearer Debt Security will be made at any
office or Paying Agency maintained by the Corporation in the United States nor
will any such payment be made by transfer to an account, or by mail to an
address, in the United States. Notwithstanding the foregoing, payments of
principal of and premium, if any, and interest, if any, on bearer Debt
Securities will be made at an office or agency of, and designated by, the
Corporation located in the United States, if payment of the full amount thereof
at all Paying Agencies outside the United States is illegal or effectively
precluded by exchange controls or similar restrictions.
TEMPORARY GLOBAL NOTES
If so specified in the applicable Prospectus Supplement, all or any portion
of the Debt Securities of a series that are issuable as bearer Debt Securities
will initially be represented by one or more temporary Global Notes, without
interest coupons, to be deposited with a common depositary, appointed by the
Corporation, for credit to designated accounts. On and after the date
determined as provided in any such temporary Global Note and described in the
applicable Prospectus Supplement, each such temporary Global Note will be
exchangeable for definitive bearer Debt Securities, definitive registered Debt
Securities or all or a portion of a permanent bearer Global Note, or any
combination thereof, as specified in such Prospectus Supplement. No definitive
bearer Debt Security or permanent bearer Global Note delivered in exchange for
a portion of a temporary Global Note shall be mailed or otherwise delivered to
any location in the United States in connection with such exchange. Additional
information regarding restrictions on and special United States Federal income
tax consequences relating to temporary Global Notes will be set forth in the
Prospectus Supplement relating thereto.
PERMANENT GLOBAL NOTES
The Debt Securities of a series may be issued in whole or in part in the form
of one or more permanent Global Notes (each a "Permanent Global Note") that
will be deposited with, or on behalf of, a depositary (the "Depositary")
identified in the Prospectus Supplement relating to such series. The specific
terms of the depositary arrangement with respect to any Debt Securities of a
series will be described in the Prospectus Supplement relating to such series.
The Corporation anticipates that the following provisions will apply to all
depositary arrangements.
Upon the issuance of a Permanent Global Note, the Depositary for such
Permanent Global Note will credit, on its book-entry registration and transfer
system, the respective principal amounts of the Debt Securities represented by
such Permanent Global Note to the accounts of institutions that have accounts
with such Depositary ("participants"). The accounts to be credited shall be
designated by the underwriters or dealers through which such Debt Securities
were offered and sold or by the Corporation, if such Debt Securities are
offered and sold directly by the Corporation. Ownership of beneficial interests
in such Permanent Global Note will be limited to participants or persons that
may hold interests through participants. Ownership of beneficial interests in
such Permanent Global Note will be shown on, and
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the transfer of that ownership will be effected only through, records
maintained by the Depositary for such Permanent Global Note (with respect to
interests of participants) or by participants or persons that hold through
participants (with respect to interests of persons other than participants).
The laws of some states require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such limits and such
laws may impair the ability to transfer beneficial interests in a Permanent
Global Note.
So long as the Depositary for a Permanent Global Note, or its nominee, is the
registered owner of such Permanent Global Note, such Depositary or such
nominee, as the case may be, will be considered the sole owner or holder of the
Debt Securities represented by such Permanent Global Note for all purposes.
Except as set forth below, owners of beneficial interests in a Permanent Global
Note will not be entitled to have Debt Securities of the series represented by
such Permanent Global Note registered in their names, will not receive or be
entitled to receive physical delivery of Debt Securities of such series in
definitive form and will not be considered the owners or holders thereof under
the applicable Indenture. Accordingly, each person owning a beneficial interest
in the Permanent Global Note must rely on the procedures of the Depositary and,
if such person is not a participant, on the procedures of the participant
through which such person owns its interest, to exercise any rights of a Holder
under the applicable Indenture. The Indentures provide that the Depositary may
grant proxies and otherwise authorize participants to take any action which a
Holder is entitled to take under the Indentures. The Corporation understands
that under existing industry practice, in the event that the Corporation
requests any action of Holders or a beneficial owner desires to take any action
that a Holder is entitled to take, the Depositary would authorize the
participants to take such action and that the participants would authorize
beneficial owners owning through such participants to take such action or would
otherwise act upon the instructions of beneficial owners owning through such
participants.
Payment of principal, premium, if any, and interest, if any, on Debt
Securities registered in the name of or held by a Depositary or its nominee
will be made to the Depositary or its nominee, as the case may be, as the
registered owner or the holder of the Permanent Global Note representing such
Debt Securities. None of the Corporation, the Trustee, any Paying Agent or the
Security Registrar for such Debt Securities will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in a Permanent Global Note for such Debt
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Corporation expects that the Depositary for Debt Securities of a series,
upon receipt of any payment of principal, premium or interest in respect of a
Permanent Global Note, will credit immediately participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Permanent Global Note as shown on the records of
such Depositary. The Corporation also expects that payments by participants to
owners of beneficial interests in such Permanent Global Note held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name", and will be the responsibility of such
participants.
A Permanent Global Note may not be transferred except as a whole by the
Depositary for such Permanent Global Note to a nominee of such Depositary or by
a nominee of such Depositary to such Depositary or another nominee of such
Depositary. A Permanent Global Note is exchangeable for Debt Securities
registered in the names of persons other than the Depositary with respect to
such Permanent Global Note or its nominee only if (x) such Depositary notifies
the Corporation that it is unwilling or unable to continue as Depositary for
such Permanent Global Note or if at any time such Depositary ceases to be a
clearing agency registered under the Securities Exchange Act of 1934, (y) the
Corporation executes and delivers to the Trustee a Company Order that all such
Permanent Global Notes shall be exchangeable or (z) there shall have occurred
and be continuing an Event of Default or an event which, with the giving of
notice or lapse of time or both, would constitute an Event of Default
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with respect to the Debt Securities. Any Permanent Global Note that is
exchangeable pursuant to the preceding sentence shall be exchangeable for Debt
Securities registered in such names as the Depositary with respect to such
Permanent Global Note shall direct. (Section 305)
PARTICULAR TERMS OF THE SUBORDINATED DEBT SECURITIES
The following description of the specific terms of the Subordinated Debt
Securities sets forth certain general terms and provisions of the Subordinated
Debt Securities to which any Prospectus Supplement may relate, which differ
from the terms of the Senior Debt Securities and outstanding series of
subordinated debt securities of the Corporation. The particular terms of the
Subordinated Debt Securities offered by any Prospectus Supplement and the
extent, if any, to which such general provisions may apply to the Subordinated
Debt Securities so offered will be described in the Prospectus Supplement
relating to such Subordinated Debt Securities.
Under the subordination provisions of the Subordinated Debt Securities, the
holder of Subordinated Debt Securities may receive less, ratably, in the event
of bankruptcy or insolvency of the Corporation than other creditors of the
Corporation, which may include holders of several series of outstanding
subordinated debt securities of the Corporation in light of changes in the
level of subordination required for subordinated indebtedness to qualify as
capital under the risk-based capital regulations to which the Corporation is
subject.
The changes are reflected in the staff of the Federal Reserve Board's
interpretation (the "Interpretation") of its capital guidelines which became
effective on September 4, 1992, as subsequently amended. The Interpretation,
among other things, indicates that debt of bank holding companies issued after
that date will not be included in capital for calculation of regulatory capital
ratios unless subordinated to claims of all "general creditors" or if the
subordinated debt is subject to certain covenants or events of default. As a
result, the Subordinated Debt Securities Indenture provides that the
Subordinated Debt Securities will be effectively subordinated to all "general
creditors" and omits certain restrictive covenants and narrows the definition
of an Event of Default with respect to the Subordinated Debt Securities as
compared to outstanding series of subordinated debt securities of the
Corporation.
Subordination Terms
The payment of the principal of and interest on any series of Subordinated
Debt Securities will, to the extent set forth in the Subordinated Debt
Securities Indenture, be subordinated in right of payment to the prior payment
in full of all Senior Debt (as defined). In certain events of insolvency, the
payment of the principal of and interest on any Subordinated Debt Securities
will, to the extent set forth in the Subordinated Debt Securities Indenture,
also be effectively subordinated in right of payment to the prior payment in
full of all General Obligations (as defined). Upon any payment or distribution
of assets to creditors upon any liquidation, dissolution, winding up,
reorganization, assignment for the benefit of creditors, marshalling of assets
or any bankruptcy, insolvency or similar proceedings of the Corporation, the
holders of all Senior Debt will first be entitled to receive payment in full of
all amounts due or to become due thereon before the Holder or Holders of
Subordinated Debt Securities will be entitled to receive any payment in respect
of the principal of or interest on Subordinated Debt Securities. If upon any
such payment or distribution of assets to creditors, there remains, after
giving effect to such subordination provisions in favor of the holders of
Senior Debt, any amount of cash, property or securities available for payment
or distribution in respect of Subordinated Debt Securities (as defined in the
Subordinated Debt Securities Indenture, "Excess Proceeds") and if, at such
time, any creditors in respect of General Obligations have not received payment
in full of all amounts due or to become due on or in respect of such General
Obligations, then such Excess Proceeds shall first be applied to pay or provide
for the payment in full of such General Obligations before any payment or
distribution may be made in respect of the Subordinated Debt Securities. In the
event of the acceleration of the maturity
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of any Subordinated Debt Securities, the holders of all Senior Debt outstanding
at the time of such acceleration will first be entitled to receive payment in
full of all amounts due or to become due thereon before the Holder or Holders
of the Subordinated Debt Securities will be entitled to receive any payment
upon the principal of or interest on the Subordinated Debt Securities. No
payments on account of principal or interest in respect of the Subordinated
Debt Securities may be made if there shall have occurred and be continuing a
default in any payment with respect to Senior Debt, or if any judicial
proceeding shall be pending with respect to any such default. (Section 101)
"Senior Debt" is defined in the Subordinated Debt Securities Indenture as (a)
the principal of (and premium, if any), and interest on all indebtedness of the
Corporation for money borrowed other than the Subordinated Debt Securities,
whether outstanding on the date of execution of the Indenture or thereafter
created, assumed or incurred, except (i) such indebtedness as is by its terms
expressly stated to be junior in right of payment to the Subordinated Debt
Securities and (ii) such indebtedness as is by its terms expressly stated to
rank pari passu with the Subordinated Debt Securities, and (b) any deferrals,
renewals or extensions of any such Senior Debt; provided, however, that Senior
Debt does not include the Corporation's Floating Rate Subordinated Notes Due
June 25, 1997, 8 5/8% Subordinated Capital Notes Due April 1, 1999, 12 3/4%
Subordinated Notes Due May 1, 1997, 9 1/8% Subordinated Notes Due February 1,
2004 and Subordinated Medium Term Notes, Series C. (Section 101)
"General Obligations" means, unless otherwise determined with respect to any
series of Subordinated Debt Securities, all obligations to make payment
pursuant to the terms of financial instruments, such as (i) securities
contracts and foreign currency exchange contracts, (ii) derivative instruments,
such as swap agreements (including interest rate and foreign exchange rate swap
agreements), cap agreements, floor agreements, collar agreements, interest rate
agreements, foreign exchange rate agreements, options, commodity futures
contracts, commodity options contracts and(iii) in the case of both (i) and
(ii) above, similar financial instruments other than (A) obligations on account
of Senior Debt and (B) obligations on account of indebtedness for money
borrowed ranking pari passu with or subordinate to the Subordinated Debt
Securities; provided, however, that General Obligations do not include the
Corporation's Floating Rate Subordinated Notes Due June 25, 1997,8 5/8%
Subordinated Capital Notes Due April 1, 1999, 12 3/4% Subordinated Notes Due
May 1, 1997, 9 1/8% Subordinated Notes Due February 1, 2004 and Subordinated
Medium Term Notes, Series C; provided further, however, that if the Federal
Reserve Board (or other applicable regulatory agency or authority) shall
promulgate any rule or issue any interpretation defining or describing the term
"general creditor" or "general creditors" for purposes of its criteria for the
inclusion of subordinated debt of a bank holding company in capital, the term
"General Obligations" shall mean obligations to "general creditors" as defined
or described in such rule or interpretation, as from time to time in effect,
other than obligations described in clauses (A) and (B) above. "Claim" shall
have the meaning assigned thereto in Section 101(5) of the Bankruptcy Code of
1978, as amended to the date of the Subordinated Debt Securities Indenture. The
term "indebtedness for money borrowed" when used with respect to the
Corporation is defined to mean any obligation of, or any obligation guaranteed
by, the Corporation for the repayment of borrowed money, whether or not
evidenced by bonds, debentures, notes or other written instruments.(Section
101)
At December 31, 1994, Senior Debt aggregated approximately $536.2 million.
The Corporation expects from time to time to incur additional indebtedness
constituting Senior Debt. The Indenture does not prohibit or limit the
incurrence of additional Senior Debt.
The subordination provisions of the Subordinated Debt Securities Indenture
described herein are provided for the benefit of holders of Senior Debt and are
not intended for the benefit of creditors in respect of General Obligations.
The Corporation and the Trustee may amend the Subordinated Debt Securities
Indenture to reduce or eliminate the rights of creditors in respect of General
Obligations without the consent of such creditors or the Holders of the
Subordinated Debt Securities. Upon (i) the
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promulgation of any rule or regulation or the issuance of any interpretation by
the Federal Reserve Board (or other applicable regulatory agency or authority)
that (a) permits the Corporation to include the Subordinated Debt Securities in
its capital if they were subordinated in right of payment to Senior Debt
without regard to any other obligations of the Corporation, (b) otherwise
eliminates the requirement that subordinated debt of a bank holding company be
subordinated in right of payment to the claims of its "general creditors" in
order to be included in capital or (c) causes the Subordinated Debt Securities
to be excluded from capital notwithstanding the subordination provisions
described above or (ii) any event that results in the Corporation no longer
being subject to capital requirements of bank regulatory authorities, the
provisions of the Subordinated Debt Securities Indenture providing for
subordination of the Subordinated Debt Securities in favor of creditors in
respect of General Obligations shall immediately and automatically be
terminated without further action by the Corporation or the Trustee. (Sections
101 and 1415)
Events of Default
THE SUBORDINATED DEBT SECURITIES INDENTURE (WITH RESPECT TO ANY SERIES OF
SUBORDINATED DEBT SECURITIES) PROVIDES THAT AN EVENT OF DEFAULT IS LIMITED TO
CERTAIN EVENTS OF BANKRUPTCY, INSOLVENCY OR REORGANIZATION OF THE CORPORATION.
UNDER THE SUBORDINATED DEBT SECURITIES INDENTURE, THERE WILL BE NO RIGHT OF
ACCELERATION OF THE PAYMENT OF PRINCIPAL OF THE SUBORDINATED DEBT SECURITIES
UPON A DEFAULT ON THE PAYMENT OF PRINCIPAL OR INTEREST THEREON OR IN THE
PERFORMANCE OF ANY COVENANT OR AGREEMENT IN THE SUBORDINATED DEBT SECURITIES OR
IN THE SUBORDINATED DEBT SECURITIES INDENTURE. THIS PROVISION GIVES EFFECT TO
THE INTERPRETATION OF THE FEDERAL RESERVE BOARD. (SECTION 501)
IF AN EVENT OF DEFAULT WITH RESPECT TO SUBORDINATED DEBT SECURITIES OF ANY
SERIES AT THE TIME OUTSTANDING OCCURS AND IS CONTINUING, EITHER THE APPLICABLE
TRUSTEE OR THE HOLDERS OF AT LEAST 25% IN AGGREGATE PRINCIPAL AMOUNT OF THE
OUTSTANDING SUBORDINATED DEBT SECURITIES OF THAT SERIES BY NOTICE AS PROVIDED
IN THE SUBORDINATED DEBT SECURITIES INDENTURE MAY DECLARE THE PRINCIPAL AMOUNT
(OR, IF THE SUBORDINATED DEBT SECURITIES OF THAT SERIES ARE ORIGINAL ISSUE
DISCOUNT NOTES, SUCH PORTION OF THE PRINCIPAL AMOUNT AS MAY BE SPECIFIED IN THE
TERMS OF THAT SERIES) OF ALL THE SUBORDINATED DEBT SECURITIES OF THAT SERIES TO
BE DUE AND PAYABLE IMMEDIATELY. AT ANY TIME AFTER A DECLARATION OF ACCELERATION
WITH RESPECT TO SUBORDINATED DEBT SECURITIES OF ANY SERIES HAS BEEN MADE, BUT
BEFORE A JUDGMENT OR DECREE FOR PAYMENT OF MONEY HAS BEEN OBTAINED BY THE
APPLICABLE TRUSTEE WITH RESPECT TO THAT SERIES, THE HOLDERS OF A MAJORITY IN
AGGREGATE PRINCIPAL AMOUNT OF OUTSTANDING SUBORDINATED DEBT SECURITIES OF THAT
SERIES MAY, UNDER CERTAIN CIRCUMSTANCES, RESCIND AND ANNUL SUCH ACCELERATION.
(SECTION 502)
Conversion Rights
The Subordinated Debt Securities may be convertible into Common Stock of the
Corporation on the terms and subject to the conditions set forth in the
applicable Prospectus Supplement. The right to convert Subordinated Debt
Securities called for redemption will terminate at the close of business on the
redemption date, unless the Corporation defaults in making the payment due upon
redemption, and will be lost if not exercised prior to that time. The
conversion price will be subject to adjustment in case of certain events,
including (i) dividends (and other distributions) payable in Common Stock on
any class of capital stock of the Corporation, (ii) the issuance to all holders
of Common Stock of rights or warrants entitling them to subscribe for or
purchase Common Stock at less than the then current market price (the average
of the closing prices of the Common Stock for 15 consecutive business days
selected by the Corporation commencing not more than 30 nor less than 20 days
prior to the date of determination), (iii) subdivisions, combinations and
reclassifications of Common Stock and (iv) distributions to all holders of
Common Stock of evidences of indebtedness of the Corporation or assets
(including securities, but excluding those rights, warrants, dividends and
distributions referred to above and
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dividends and distributions paid in cash out of the retained earnings of the
Corporation). In addition to the foregoing adjustments, the Corporation will be
permitted to make such reductions in the conversion price as it considers to be
advisable in order that any event treated for federal income tax purposes as a
dividend of stock or stock rights will not be taxable to the holders of the
Common Stock. The Corporation is not required to make adjustments in the
conversion price of less than 1% of such price, but any adjustment that would
otherwise be required to be made will be taken into account in the computation
of any subsequent adjustment. No adjustment is required in respect of the
issuance of Common Stock at a price not below 95% of the current market price
under the Corporation's dividend reinvestment plan, employee benefit plans,
stock option plans or similar plans. Fractional shares of Common Stock will not
be issued upon conversion, but, in lieu thereof, the Corporation will pay a
cash adjustment based upon market price. Subordinated Debt Securities
surrendered for conversion between the record date for an interest payment and
the interest payment date (except Subordinated Debt Securities redeemed during
such period) must be accompanied by payment of an amount equal to the interest
thereon, which the registered holder is to receive. (Sections 1201, 1202, 1203
and 1204)
If at any time the Corporation makes a distribution of property to its
shareholders which would be taxable to such shareholders as a dividend for
Federal income tax purposes (e.g., distributions of evidences of indebtedness
or assets of the Corporation, but generally not stock dividends or rights to
subscribe for Common Stock) and, pursuant to the antidilution provisions of the
Subordinated Debt Securities Indenture, the conversion price of Subordinated
Debt Securities is reduced, such reduction may be deemed to be the payment of a
taxable dividend to holders of Subordinated Debt Securities.
In case of any consolidation or merger of the Corporation with or into any
other corporation or any sale or transfer of all or substantially all of the
assets of the Corporation, or in the case of any consolidation or merger of
another corporation into the Corporation in which the Corporation is the
surviving corporation involving a change or reclassification of shares of the
Common Stock, the holder of each Subordinated Debt Security shall after such
consolidation, merger, sale or transfer only have the right to convert such
Subordinated Debt Security into the kind and amount of shares of stock, other
securities or property, which may include cash, which such holder would have
been entitled to receive upon such consolidation, merger, sale or transfer if
such holder had held the Common Stock issuable upon the conversion of such
Subordinated Debt Security immediately prior to such consolidation, merger,
sale or transfer. (Section 1211)
PARTICULAR TERMS OF THE SENIOR DEBT SECURITIES
The following description of the Senior Debt Securities sets forth certain
general terms and provisions of the Senior Debt Securities to which any
Prospectus Supplement may relate which differ from the terms of the
Subordinated Debt Securities. The particular terms of the Senior Debt
Securities offered by any Prospectus Supplement and the extent, if any, to
which such general provisions may apply to the Senior Debt Securities so
offered will be described in the Prospectus Supplement relating to such Senior
Debt Securities.
Covenants
The Senior Debt Securities Indenture contains a covenant by the Corporation
that it will at all times own directly more than 80% of the outstanding voting
stock of each Principal Bank; provided, however, that the foregoing will not
apply to (i) any sale of such voting stock where the proceeds are invested,
within 90 days of such sale, in any Subsidiary (including any corporation which
upon such investment becomes a Subsidiary) engaged in a banking business or any
other business then legally permissible for bank holding companies, or (ii) any
disposition in exchange for stock of any bank. (Section 1007) A Principal Bank
is defined in the Senior Debt Securities Indenture and, as of the date of this
Prospectus, included the following Subsidiary Banks: First Interstate Bank of
California, First Interstate Bank of Oregon, N.A., First Interstate Bank of
Texas, N.A. and First Interstate Bank of Arizona, N.A. (Section 101)
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Events of Default
If an Event of Default with respect to Senior Debt Securities of any series
at the time Outstanding occurs and is continuing, either the applicable Trustee
or the Holders of at least 25% in aggregate principal amount of the Outstanding
Senior Debt Securities of that series by notice as provided in the Senior Debt
Securities Indenture may declare the principal amount (or, if the Senior Debt
Securities of that series are Original Issue Discount Notes, such portion of
the principal amount as may be specified in the terms of that series) of all
the Senior Debt Securities of that series to be due and payable immediately. At
any time after a declaration of acceleration with respect to Senior Debt
Securities of any series has been made, but before a judgment or decree for
payment of money has been obtained by the applicable Trustee with respect to
that series, the Holders of a majority in aggregate principal amount of
Outstanding Senior Debt Securities of that series may, under certain
circumstances, rescind and annul such acceleration. (Section 502)
The Senior Debt Securities Indenture (with respect to any series of Senior
Debt Securities) defines an Event of Default with respect to the Senior Debt
Securities of any series as any of the following events: (a) failure to pay
principal of or any premium on any Senior Debt Security of that series when
due; (b) failure to pay any interest on any Senior Debt Security of that series
when due, continued for 30 days; (c) failure to deposit any sinking fund
payment, when due, in respect of any Senior Debt Security of that series; (d)
failure to perform any other covenant of the Corporation in the applicable
Indenture (other than a covenant included in the applicable Indenture solely
for the benefit of series of Senior Debt Securities other than that series),
continued for 60 days after written notice as provided in the Indenture; (e)
acceleration of Senior Debt Securities or any other indebtedness for borrowed
money, in an aggregate principal amount exceeding $1,000,000, of the
Corporation under the terms of the instrument or instruments under which such
indebtedness is issued or secured, if such acceleration is not annulled, or
such indebtedness is not discharged, or a sum of money sufficient to discharge
in full such indebtedness is not deposited in trust, within 10 days after
written notice as provided in the applicable Indenture; (f) certain events in
bankruptcy, insolvency or reorganization; and (g) any other Event of Default
provided with respect to the Senior Debt Securities of that series. (Section
501)
MODIFICATION AND WAIVER
Modifications and amendments of the Indentures may be made by the Corporation
and the applicable Trustee with the consent of the Holders of 66 2/3% in
aggregate principal amount of the Outstanding Debt Securities of each series
affected by such modification or amendment; provided, however, that no such
modification or amendment may, without the consent of the Holder of each
Outstanding Debt Security affected thereby, (a) change the stated maturity date
of the principal of, or any installment of principal of or interest, if any,
on, any Debt Security, (b) reduce the principal amount of, or premium or
interest, if any, on any Debt Security, (c) reduce the amount of principal of
an Original Issue Discount Debt Security payable upon acceleration of the
maturity thereof, (d) change the place or currency of payment of principal of,
or premium or interest, if any, on Debt Security, (e) impair the right to
institute suit for the enforcement of any payment on or with respect to any
Debt Security or,(f) reduce the percentage in principal amount of Outstanding
Debt Securities of any series, the consent of the Holders of which is required
for modification or amendment of the Indentures or for waiver of compliance
with certain provisions of the Indentures or for waiver of certain defaults.
(Section 902)
The Holders of 66 2/3% in aggregate principal amounts of the Outstanding Debt
Securities of each series may, on behalf of all Holders of Debt Securities of
that series, waive, insofar as that series is concerned, compliance by the
Corporation with certain restrictive provisions of the Indentures.
(Section 1008)
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The Holders of a majority in aggregate principal amount of the Outstanding
Debt Securities of each series may, on behalf of all Holders of Debt Securities
of that series, waive any past default under the Indenture with respect to Debt
Securities of that series, except (a) a default in the payment of principal of,
or of premium or interest, if any, on any Debt Security of such series, and (b)
in respect of a covenant or provision of the Indenture which cannot be modified
or amended without the consent of the Holder of each Outstanding Debt Security
of such series affected. (Section 513)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Corporation, without the consent of the Holders of any of the Outstanding
Debt Securities under either Indenture, may consolidate or merge with or into,
or transfer or lease its assets substantially as an entirety to, any
corporation organized under the laws of any domestic jurisdiction, provided
that the successor corporation assumes the Corporation's obligations on the
Debt Securities and under the Indentures, that after giving effect to the
transaction no Event of Default, and no event which, after notice or lapse of
time or both would become an Event of Default, shall have occurred and be
continuing, and that certain other conditions are met. (Section 801)
REGARDING THE TRUSTEES
The Corporation maintains deposit accounts and banking relations with the
Trustees. In addition, some of the Subsidiary Banks maintain correspondent
banking relations with the Trustees.
Each Indenture provides that, subject to the duty of the Trustee during any
default to act with the required standard of care, the Trustee will not be
under any obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders, unless such
Holders shall have offered to that Trustee reasonable security or indemnity.
Subject to such provisions for the indemnification of the Trustees, the Holders
of a majority in aggregate principal amount of the Outstanding Securities of
any series will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the applicable Trustee,
or exercising any trust or power conferred on the applicable Trustee, with
respect to the Debt Securities of that series.
The Corporation is required to furnish to each Trustee annually a statement
as to the performance by the Corporation of certain of its obligations under
the applicable Indenture and as to any default in such performance. (Section
102)
PLAN OF DISTRIBUTION
The Corporation may sell Debt Securities to one or more underwriters for
public offering and sale by them or may sell Debt Securities to investors
directly or through dealers. Any such underwriter or dealer involved in the
offer and sale of the Offered Debt Securities is named in the Prospectus
Supplement.
Underwriters may offer and sell the Offered Debt Securities at a fixed price
or prices, which may be changed, or from time to time at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Corporation also may offer and sell the
Offered Debt Securities in exchange for one or more of its outstanding issues
of debt or convertible debt securities. The Corporation also may, from time to
time, authorize underwriters acting as the Corporation's dealer to offer and
sell the Offered Debt Securities upon the terms and conditions as are set forth
in any Prospectus Supplement. In connection with the sale of Offered Debt
Securities, underwriters may be deemed to have received compensation from the
Corporation in the form of underwriting discounts or commissions and may also
receive commissions from purchasers of Offered Debt Securities for whom they
may act as dealer. Underwriters may sell Offered Debt Securities to or
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through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters and/or commission
from the purchasers for whom they may act as dealer.
Any underwriting compensation paid by the Corporation to underwriters or
dealers in connection with the offering of Offered Debt Securities, and any
discounts, concessions or commissions allowed by underwriters to participating
dealers, are set forth in the Prospectus Supplement. Underwriters, dealers and
agents participating in the distribution of the Offered Debt Securities may be
deemed to be underwriters, and any discounts and commissions received by them
and any profit realized by them on resale of the Offered Debt Securities may be
deemed to be underwriting discounts and commissions, under the Act.
Underwriters, dealers and agents may be entitled, under agreements entered into
with the Corporation, to indemnification against and contribution toward
certain civil liabilities, including liabilities under the Act.
If so indicated in the Prospectus Supplement, the Corporation will authorize
dealers acting as the Corporation's dealers to solicit offers by certain
institutions to purchase Offered Debt Securities from the Corporation at the
public offering price set forth in the Prospectus Supplement pursuant to
Delayed Delivery Contracts ("Contracts") providing for payment and delivery on
the date or dates stated in the Prospectus Supplement. Each Contract will be
for an amount not less than, and the aggregate principal amount of Offered Debt
Securities sold pursuant to Contracts shall be not less nor more than, the
respective amounts stated in the Prospectus Supplement. Institutions with whom
Contracts, when authorized, may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions, and other institutions but will in all cases be
subject to the approval of the Corporation. Contracts will not be subject to
any conditions except(i) the purchase by an institution of the Offered Debt
Securities covered by its Contracts shall not at the time of delivery be
prohibited under the laws of any jurisdiction in the United States to which
such institution is subject, and (ii) if the Offered Debt Securities are being
sold to underwriters, the Corporation shall have sold to such underwriters the
total principal amount of the Offered Debt Securities less the principal amount
thereof covered by Contracts.
Certain of the underwriters and their associates may be customers of, engage
in transactions with and perform services for the Corporation and its
subsidiaries in the ordinary course of business.
LEGAL MATTERS
The validity of the Offered Debt Securities will be passed upon for the
Corporation by Edward S. Garlock, Esq., Group General Counsel, Corporate
Services Group, for the Corporation, Los Angeles, California, and for any
underwriters by counsel named in the applicable Prospectus Supplement.Mr.
Garlock will rely, as to all matters governed by New York law, on the opinion
of counsel for the underwriters.
EXPERTS
The consolidated financial statements of the Corporation included in the
Corporation's Annual Report on Form 10-K for the fiscal year ended December 31,
1993 and incorporated by reference herein have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATION OTHER THAN AS CONTAINED OR INCORPORATED BY REFERENCE IN THIS PRO-
SPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IN CONNECTION WITH THE OF-
FERING MADE HEREBY. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
DO NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE DESCRIBED ON THE
COVER PAGE HEREOF OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY
WITHIN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OF-
FER OR SOLICITATION WITHIN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HERE-
UNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF THE CORPORATION SINCE THE DATE HEREOF.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PROSPECTUS SUPPLEMENT
Certain Terms of the Notes.................................................. S-2
Recent Developments......................................................... S-4
Underwriting................................................................ S-9
Validity of Notes........................................................... S-9
PROSPECTUS
Available Information....................................................... 2
Incorporation of Certain Documents by Reference............................. 2
First Interstate Bancorp.................................................... 3
Use of Proceeds............................................................. 4
Selected Consolidated Financial Data........................................ 5
Description of Debt Securities.............................................. 7
Plan of Distribution........................................................ 16
Legal Matters............................................................... 17
Experts..................................................................... 17
</TABLE>
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$100,000,000
[LOGO OF FIRST INTERSTATE BANCORP]
8.15% SUBORDINATED NOTES
DUE MARCH 15, 2002
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PROSPECTUS SUPPLEMENT
March 15, 1995
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LEHMAN BROTHERS
SALOMON BROTHERS INC
SMITH BARNEY INC.
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