SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
Commission File No. 1-4114
FIRST INTERSTATE BANCORP
(Exact name of registrant as specified in its charter)
DELAWARE 95-1418530
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
633 WEST FIFTH STREET
LOS ANGELES, CALIFORNIA 90071
(Address of principal executive offices) (Zip Code)
(213) 614-3001
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE
ON WHICH REGISTERED
Common Stock, $2 par value New York and Pacific
Stock Exchanges
Series F Preferred Stock New York Stock
Exchange
Series G Preferred Stock New York Stock
Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Senior Medium Term Notes, Series A
Subordinated Medium Term Notes, Series C
10.5% Notes Due March 1, 1996
12.75% Subordinated Notes Due May 1, 1997
Floating Rate Subordinated Notes Due June 1997
11.0% Notes Due March 5, 1998
8.625% Subordinated Capital Notes Due April 1, 1999
9.125% Notes Due February 1, 2004
9.00% Notes Due November 15, 2004
8.15% Notes Due March 15, 2002
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceeding 12 months (or
for such shorter period that the registrant has been required to
file such (reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K [ ].
State the aggregate market value of the voting stock held by
nonaffiliates of the registrant:
CLASS MARKET VALUE AT FEBRUARY 28, 1995
Common Stock, $2 par value $6,167,071,021
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
CLASS OUTSTANDING AT FEBRUARY 28, 1995
Common stock, $2 par value 75,785,819
shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the year ended
December 31, 1994 are incorporated by reference into Part II.
Portions of the definitive Proxy Statement for the 1995 annual
meeting of stockholders are incorporated by reference into Part III.
PART I
ITEM 1. BUSINESS
The Corporation was incorporated under the laws of the State of
Delaware and began operations in 1958 under the name
"Firstamerica Corporation". The name Western Bancorporation was
adopted in 1961 and changed to First Interstate Bancorp in 1981.
The Corporation is a bank holding company registered under the
Bank Holding Company Act of 1956, as amended. At December 31,
1994, it owned directly all of the shares of capital stock of 16
banks (the "Subsidiary Banks") which operated approximately 1,100
banking offices in 13 states. Ranked according to assets, the
Corporation was the fourteenth largest commercial banking
organization in the United States at December 31, 1994, having
total deposits of $48.4 billion and total assets of $55.8
billion. During December 1994, the average number of full-time
equivalent persons employed by the Corporation and its
subsidiaries was 27,394.
The Subsidiary Banks accept checking, savings and other time
deposit accounts and employ these funds principally by making
consumer, real estate and commercial loans and investing in
securities and other interest bearing assets. All Subsidiary
Banks are members of the Federal Deposit Insurance Corporation,
all but three exercise trust powers, and the thirteen national
banks and one of the three state banks are members of the Federal
Reserve System.
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 both through non-bank subsidiaries of
the Corporation and through the Subsidiary Banks and their
subsidiaries.
The larger Subsidiary Banks provide international banking
services on a limited basis 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. International banking is subject to special risks such as
fluctuating exchange rates, currency revaluations and the
policies of foreign governments. United States governmental
guarantees and insurance against political risks are sometimes
available and are used in certain circumstances to minimize the
impact of such factors.
The Subsidiary Banks are responsible to the Corporation for
achieving mutually agreed upon goals under the management of
their own officers and directors. The Corporation retains a
staff of specialists who provide assistance and advice to
subsidiaries in the areas of investments, credit, accounting,
personnel, business development, operations, asset and liability
management, budgeting and planning, loan participations,
protective controls and compliance with government regulations.
Internal audits and reviews are performed to determine the
adequacy of internal control systems, compliance with general
corporate policy and consistency of accounting practices in
accordance with the Corporation's accounting policies. The
Corporation monitors the Subsidiary Banks' credit policy,
procedures and administration by reviewing portfolio quality,
balance and mix.
The Corporation and the 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 and its Subsidiary Banks. During 1993 and 1994
the Corporation completed five transactions resulting in the
acquisition of deposits from both the Resolution Trust
Corporation and the Federal Deposit Insurance Corporation. In
addition, the Corporation was party to business combinations with
various operating entities located within the territory. These
transactions resulted in the acquisition of $8.4 billion of
deposits and $9.7 billion of assets. Additional details of these
transactions are included in the Consolidated Financial
Statements and Notes to the Financial Statements attached as an
exhibit to this document.
COMPETITION
The commercial banking business is highly competitive.
Subsidiary Banks compete with other commercial banks and with
other financial and non-financial institutions, including savings
and loan associations, finance companies, credit unions, money
market mutual funds and credit card issuers.
SUPERVISION AND REGULATION
The Corporation, as a bank holding company, is subject to
regulation under the Bank Holding Company Act of 1956, as amended
(BHCA) and is registered with the Federal Reserve Board under the
BHCA. The acquisition of more than 5% of the voting shares of
any bank (not already majority owned) requires the prior approval
of the Federal Reserve Board. The BHCA also prohibits the
Federal Reserve Board from approving an application which would
result in the Corporation or any non-bank subsidiary thereof
acquiring all or substantially all the assets or more than 5% of
the voting shares of any bank (not already majority owned)
located outside of California unless an acquisition of such bank
by a California-based bank holding company is specifically
authorized by the laws of the state in which the bank is located.
The laws of several states permit such acquisitions. The BHCA
also prohibits the Corporation, with certain exceptions, from
acquiring direct or indirect ownership or control of more than 5%
of the voting shares of any company which is not a bank and from
engaging in any business other than that of banking, managing and
controlling banks or furnishing services to its Subsidiary Banks,
except that the Corporation may engage in, and may own shares of
companies engaged in, certain businesses found by the Federal
Reserve Board to be so closely related to banking "as to be a
proper incident thereto." The BHCA does not place territorial
restrictions on the activities of non-bank subsidiaries of bank
holding companies. The Corporation is required by the BHCA to
file annual reports of its operations with the Federal Reserve
Board and is subject to examination by the Federal Reserve Board.
Under legislation enacted in 1974, the Federal Reserve Board was
given jurisdiction to regulate the terms of certain debt issues
of bank holding companies including the authority to impose
reserve requirements on such debt.
The Subsidiary Banks, as subsidiaries of the Corporation within
the meaning of Section 23A of the Federal Reserve Act, are
subject to certain restrictions on loans to the Corporation or
its non-bank subsidiaries, or investments in the stock or other
securities of the Corporation or its non-bank subsidiaries and on
advances to any borrower collateralized by such stock or other
securities. Further, the Subsidiary Banks are also subject to
certain restrictions on most types of transactions with the
Corporation or its non-bank subsidiaries, requiring that the
terms of such transactions be substantially equivalent to terms
of similar transactions with non-affiliated firms.
Each of the 16 Subsidiary Banks is either a state or national
bank. Three Subsidiary Banks are state-chartered and are subject
to supervision and regular examination by the bank supervisory
authorities of the respective states in which they are chartered.
The remaining Subsidiary Banks are national banks and are
subject to supervision and regular examination by the Office of
the Comptroller of the Currency. Those Subsidiary Banks which
are members of the Federal Reserve System are subject to
applicable provisions of the Federal Reserve Act, and First
Interstate Bank of California, the Corporation's only state-
chartered member bank subsidiary, is subject to regular
examination by the Federal Reserve Bank of San Francisco. The
deposit accounts held by all of the Subsidiary Banks are insured
by the FDIC; as such they are subject to the provisions of the
Federal Deposit Insurance Act and, in the case of insured banks
not members of the Federal Reserve System, to regular examination
by the FDIC. The federal and state laws and regulations of
general application to banks regulate, among other things, the
scope of their business, their investments, their reserves
against deposits, the timing of the availability of deposited
funds, and numerous other aspects of their business.
The Corporation, as the holder of common stock of Subsidiary
Banks which are national banks, may be subject to assessment for
the restoration of impaired capital of such banks, as and to the
extent provided in Section 5205 of the Revised Statutes of the
United States (12 U.S.C. Section 55). Similarly, First Interstate
Bank of California may be subject to assessment for the
restoration of impaired capital, as and to the extent provided in
Section 662 of the California Financial Code. These statutes
provide for the restoration of impaired capital by the sale of
bank stock, but impose no personal liability upon the
stockholder.
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.
Another source of revenue, not presently utilized, would be
charges to the Subsidiary Banks for administrative services
provided by the Corporation. Various statutory provisions limit
the amount of dividends the Subsidiary Banks and certain non-bank
subsidiaries can pay without regulatory approval, and various
regulations also restrict the payment of dividends.
In 1989, Congress enacted a law that purports to make banks
liable to the FDIC for expenses the FDIC incurs in the case of
either its provision of financial assistance to, or the failure
of, any affiliated bank. Under that law, the Subsidiary Banks
could theoretically be held liable to the FDIC in the event of
financial assistance to, or failure of, any other Subsidiary
Bank, and theoretically that liability could be substantial
enough to cause the surviving Subsidiary Banks either to require
financial assistance from the FDIC or to cause the failure of
such Subsidiary Banks.
On December 19, 1991, comprehensive legislation was enacted that
reforms the regulation and supervision of banks and bank holding
companies. Among the more significant aspects of the legislation
is a requirement that federal regulators prescribe standards
relating to internal controls, information systems, internal
audit systems, loan documentation, credit underwriting, interest
rate exposure, asset growth, employee, director and principal
shareholder compensation, fees and benefits, standards specifying
a maximum ratio of classified assets to capital, minimum earnings
sufficient to absorb losses without impairing capital, and to the
extent possible, a minimum ratio of market value to book value of
publicly traded shares of bank holding companies, such as the
Corporation. The legislation also provides for a system of early
intervention by the regulators and prompt corrective action at
troubled banks. Under that system, a bank may not pay dividends
if its capital fails to meet any required minimum and will be
expected to submit to its regulator an acceptable plan to restore
its capital to adequate levels. While a bank is
undercapitalized, its regulator may preclude its growth, require
its recapitalization through the sale of shares, require its
acquisition or merger, prohibit its parent from paying dividends,
and require divestitures by its parent, including divestiture of
the bank itself. Its parent holding company will be expected to
guarantee that the bank will comply with the bank's capital
restoration plan until the bank has been adequately capitalized,
on average, for four consecutive quarters, unless the parent is
willing to accept loss or closure of the bank by regulators.
This guarantee is limited to the lesser of 5% of the bank's total
assets at the time it became undercapitalized or the amount
necessary to bring the bank into compliance with all applicable
capital standards.
If the bank does not submit an acceptable capital restoration
plan or if its parent holding company does not guarantee such
plan, the regulators will be required to take one or more
actions, including requiring recapitalization of the bank through
its sale of securities or forced sale or merger, restricting
transactions with affiliates, restricting interest rates paid on
deposits, restricting asset growth, restructuring activities,
replacing management of the bank, prohibiting deposits from
correspondent banks, requiring prior approval of dividends by the
holding company, and requiring divestiture. The law requires the
regulators, in such cases, to require the sale of securities by
the bank or to force a sale or merger of the bank, to restrict
affiliate transactions, and to restrict interest rates unless the
regulator determines that these actions would not resolve the
problems of the bank at the least possible long-term loss to the
Bank Insurance Fund of the FDIC. The law also limits advances to
any undercapitalized bank by any Federal Reserve Bank from being
outstanding more than 60 days in any 120-day period unless the
head of the bank regulatory agency certifies that, giving due
regard to economic conditions and circumstances in the market in
which the bank operates, the bank is not and is not expected to
become critically undercapitalized and is not expected to be
placed in conservatorship or receivership. None of the
Corporation's Subsidiary Banks is undercapitalized.
The foregoing references to applicable statutes and regulations
are brief summaries thereof, which do not purport to be complete
and are qualified in their entirety by reference to such statutes
and regulations.
From time to time various bills are introduced in the United
States Congress which could result in additional or in less
regulation of the business of the Corporation and the Subsidiary
Banks. It cannot be predicted whether any such legislation will
be adopted or how such adoption would affect the business of the
Corporation or the Subsidiary Banks.
The Federal Reserve Board has established risk-based capital
guidelines for bank holding companies. The guidelines define
Tier 1 Capital and Total Capital. Tier 1 Capital consists of
common and qualifying preferred shareholders' equity, before
unrealized gains and losses on available-for-sale debt securities
and minority interests in equity accounts of consolidated
subsidiaries, less goodwill, other nonqualifying intangibles,
excess deferred tax assets and 50% of investments in
unconsolidated subsidiaries. Total Capital consists of, in
addition to Tier 1 Capital, mandatory convertible debt, preferred
stock not qualifying as Tier 1 Capital, subordinated and other
qualifying term debt and a portion of the allowance for loan
losses less the remaining 50% of investments in unconsolidated
subsidiaries. The Tier 1 component must comprise at least 50% of
qualifying Total Capital. Risk-based capital ratios are
calculated with reference to risk-weighted assets, as outlined by
bank supervisory authorities, which include both on and off-
balance sheet exposures. The minimum required qualifying Total
Capital ratio is 8%, of which at least 4% must consist of Tier 1
Capital. As of December 31, 1994, the Corporation's Tier 1
Capital and Total Capital ratios were 7.20% and 10.22%,
respectively.
The Federal Reserve Board has adopted a "minimum leverage ratio"
which requires bank holding companies to maintain Tier 1 Capital
of at least 3% of adjusted quarterly average assets, although the
Federal Reserve Board may require a higher ratio depending upon
the rating of the bank holding company and its expected growth.
Regulations issued by the FDIC to implement the 1991 legislation
referred to above establish five levels of capitalization for
banks; any bank with a Tier 1 Capital ratio of 6%, Total Capital
ratio of 10% and a leverage ratio of 5% is considered to be "well
capitalized." As of December 31, 1994, the Corporation's
leverage ratio was 5.35%, and all of the Subsidiary Banks had
leverage ratios exceeding 5.50%.
MONETARY POLICY AND ECONOMIC CONDITIONS
The earnings of the Corporation are affected by the policies of
regulatory authorities, including the Federal Reserve System.
Federal Reserve monetary policies have had a significant effect
on the operating results of commercial banks in the past and are
expected to continue to do so in the future. Interest rates,
credit availability and deposit levels may change due to
circumstances beyond the control of the Corporation or the
Subsidiary Banks because of changing conditions in national and
international economies and in the money markets, as a result of
actions by monetary and fiscal authorities.
ITEM 2. PROPERTIES
The Corporation and its Subsidiaries occupied, as of December 31,
1994, 1,192 premises in 13 western states, which consisted
primarily of bank buildings. On that date, 584 premises were
owned, 456 premises were leased, and the remaining 152 premises
were owned in part and leased in part. In addition, the
Subsidiary Banks have 1,633 ATM locations. The Corporation's
headquarters are in Los Angeles, California.
ITEM 3. LEGAL PROCEEDINGS
There are presently pending against the Corporation and certain
of its Subsidiaries a number of legal proceedings. While it is
not possible to predict the outcome of these proceedings, it is
the opinion of management, after consulting with counsel, that
the ultimate disposition of potential or existing suits will not
have a material adverse effect on the Corporation's financial
position, results of operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to security holders during the fourth
quarter of the year ended December 31, 1994.
EXECUTIVE OFFICERS OF THE REGISTRANT
Shown below are names and ages of all executive officers with
indication of all positions and offices with the Corporation.
There were no family relationships among the executive officers
of the Corporation.
NAME AGE OFFICE
Edward M. Carson 65 Chairman of the Board
William E. B. Siart 48 President and Chief Executive Officer
William S. Randall 54 Chief Operating Officer
James J. Curran 55 Chief Executive Officer - Northwest Region
Linnet F. Deily 49 Chief Executive Officer - Texas Region
John S. Lewis 40 Chief Executive Officer - Southwest Region
Bruce G. Willison 46 Chief Executive Officer - California Region
David S. Belles 57 Executive Vice President and Controller
William J. Bogaard 56 Executive Vice President and
General Counsel
Theodore F. Craver 43 Executive Vice President and Treasurer
Gary S. Gertz 50 Executive Vice President and
General Auditor
Lillian R. Gorman 41 Executive Vice President and
Human Resources Director
Robert E. Greene 53 Executive Vice President and
Chief Credit Officer
Thomas P. Marrie 56 Executive Vice President and
Chief Financial Officer
Richard W. Tappey 54 Executive Vice President and
Administration Director
David K. Wilson 40 Executive Vice President and
Manager of Credit Review
Mr. Carson was elected Chairman of the Board on June 1, 1990. He
was Chief Executive Officer from June, 1990 to December 31, 1994
and President from January, 1985 to May 31, 1990.
Mr. Siart was elected Chief Executive Officer effective January
1, 1995 and President of First Interstate Bancorp on June 1,
1990. He was Chairman, President and Chief Executive Officer of
First Interstate Bank of California from December, 1985 to
January, 1991.
Mr. Randall was elected Chief Operating Officer effective January
1, 1995. He served as Chief Executive Officer of the Southwest
Region from September, 1991 to December, 1994. He was Chairman,
President and Chief Executive Officer of First Interstate Bank of
Arizona, N.A. from January 11, 1990 to December, 1994. He was
previously Chairman, President and Chief Executive Officer of
First Interstate Bank of Washington, N.A. between July, 1985 and
January, 1990.
Mr. Curran was appointed Chief Executive Officer of the Northwest
Region in September, 1991. He was elected Chairman and Chief
Executive Officer of First Interstate Bank of Oregon, N.A. on
February 1, 1991 and President on October 22, 1991. He was
elected President and Chief Executive Officer of First
Interstate Bank of Washington, N.A. on October 16, 1991 and
served as Chairman from October 16, 1991 to March 30, 1994. He
was elected President and Chief Executive Officer of First
Interstate Bank of Idaho, N.A. and First Interstate Bank of
Montana, N.A. on December 17, 1991 and served as Chairman from
December 17, 1991 to March 15, 1994. He was previously Chairman
and Chief Executive Officer of First Interstate Bank of Denver,
N.A. between March, 1990 and February, 1991, and he was Chairman
and Chief Executive Officer of First Interstate Bank of Idaho,
N.A. between July, 1984 and March, 1990.
Ms. Deily was appointed Chief Executive Officer of the Texas
Region in September, 1991. She was elected Chairman of First
Interstate Bank of Texas, N.A. in November, 1991. She was
elected President and Chief Executive Officer January 1, 1991,
having served as President and Chief Operating Officer since
November, 1988.
Mr. Lewis was appointed Chairman and Chief Executive Officer of
the Southwest Region in December, 1994 at which time he was also
elected Chairman and Chief Executive Officer of First Interstate
Bank of Arizona, N.A. He has served as Chief Operating Officer
of the Southwest Region since April, 1994 and as Chairman of both
First Interstate Bank of New Mexico, N.A. and First Interstate
Bank of Utah, N. A. since 1993.
Mr. Willison was appointed Chief Executive Officer of the
California Region in September, 1991. He was elected Chairman,
President, and Chief Executive Officer of First Interstate Bank
of California on February 1, 1991 and previously was Chairman and
Chief Executive Officer of First Interstate Bank of Oregon, N.A.
between January, 1986 and February, 1991.
Mr. Belles was elected Executive Vice President and Controller
effective September, 1994 having assumed responsibility for the
management of the Corporate Controller's Group in June, 1994. He
previously served as Chief Financial Officer of the Northwest
Region.
Mr. Bogaard was elected Executive Vice President and General
Counsel in September, 1982.
Mr. Craver was elected Executive Vice President and Treasurer in
September, 1991. He was elected Executive Vice President and
Chief Financial Officer of First Interstate Bank, Ltd. in June,
1988
Mr. Gertz was elected Executive Vice President and General
Auditor in April, 1991. Between August, 1986 and April, 1991 he
held various managerial positions with First Interstate Bank of
California, including General Auditor, Chief Financial Officer
and Division Manager.
Ms. Gorman was elected Executive Vice President in January, 1994.
She has served as Human Resources Director since October, 1990.
She was named Director of First Interstate Bank of California's
Human Resources Division in 1986 and became a Senior Vice
President in 1987. Between 1985 and 1989, she was Manager of
Human Resources Strategic Planning at First Interstate Bancorp.
Mr. Greene was elected Executive Vice President and Chief Credit
Officer in October, 1987.
Mr. Marrie was elected Executive Vice President and Chief
Financial Officer in December, 1988.
Mr. Tappey was elected Executive Vice President in July, 1991.
He was Executive Vice President and head of the Banking Service
Group of First Interstate Bank of California from July 1990, and
previously held various management positions with First
Interstate Bank of California since joining the bank in January,
1961.
Mr. Wilson was elected Executive Vice President and Manager of
Credit Review effective March, 1995. He previously served as
Senior Vice President and Manager of Credit Review for the
Northwest Region.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
(a) $2 par value Common Stock
The below listed information contained in the Annual Report to
Shareholders for the year ended December 31, 1994, with respect
to the Corporation's $2 par value Common Stock is incorporated
herein by reference:
Page
Principal Market 60
Sales Prices 33
Dividends Paid 33
As of February 28, 1995, there were 24,976 holders of record of
the Corporation's $2 par value Common Stock.
ITEM 6. SELECTED FINANCIAL DATA
Consolidated Balance Sheets and Consolidated Statements of
Operations on pages 56 and 57 of the Annual Report to
Shareholders for the year ended December 31, 1994 are
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's Discussion & Analysis 1992 - 1994 on pages 11
through 33 of the Annual Report to Shareholders for the year
ended December 31, 1994 is incorporated herein by reference.
Subsequent Events:
On March 15, 1995, the Corporation issued $100 million of 8.15%
Subordinated Notes Due March 15, 2002. Interest on the 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. The Notes are
subordinate to all present and future Senior Debt of the
Corporation. In addition these Notes are considered to be Total
Capital, but not Tier 1 Capital, for regulatory purposes.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the Registrant
included in the Annual Report to Shareholders for the year ended
December 31, 1994 are incorporated herein by reference:
Consolidated Financial Statements of First Interstate Bancorp and
Subsidiaries:
Consolidated Balance Sheet - December 31, 1994 and 1993
Consolidated Statement of Operations - Years Ended December 31,
1994, 1993 and 1992
Consolidated Statement of Cash Flows - Years Ended December 31,
1994, 1993 and 1992
Statement of Shareholders' Equity - Years Ended December 31,
1994, 1993 and 1992
Notes to Financial Statements
Report of Ernst & Young LLP, Independent Auditors
Summary of Quarterly Results on page 33 of the Annual Report to
Shareholders for the year ended December 31, 1994 is incorporated
herein by reference.
The below listed financial data contained in the Annual Report to
Shareholders for the year ended December 31, 1994 is incorporated
herein by reference:
Page
Distribution of Assets, Liabilities and Shareholders'
Equity;
Interest Rates and Interest Differential:
Average balance sheets and net interest earnings 58-59
Change in interest income and expense 14
Investment Portfolio:
Investment types 40
Maturities and yields 16, 24
Investment concentrations 26-27
Loan Portfolio:
Loan types 41
Maturities and sensitivity 25
Risk Elements:
Nonaccrual, past due and restructured loans 30-31
Potential problem loans 30-31
Foreign outstandings 28
Loan concentrations 27
Summary of Credit Loss Experience:
Credit loss experience 28-29
Allocation of allowance 29
Deposits:
Average deposits 58-59
Maturities of time certificates of deposit 19
Return on Equity and Assets 55
Short Term Borrowings 41
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required under this item relating to Directors of the
Registrant is contained in the Registrant's 1994 Proxy Statement
("1994 Proxy Statement") with respect to the Registrant's Annual
Meeting of Shareholders to take place on April 28, 1995, pursuant
to Regulation 14A of the Securities Exchange Act of 1934, as
amended, and is incorporated herein by reference. Information
required under this item related to Executive Officers of the
Registrant is contained in Part I of this report under the
caption "Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
Information required under this item is contained in the
Registrant's 1994 Proxy Statement, pursuant to Regulation 14A,
and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information required under this item is contained in the
Registrant's 1994 Proxy Statement, pursuant to Regulation 14A,
and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required under this item is contained in the
Registrant's 1994 Proxy Statement, pursuant to Regulation 14A,
and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) 1 - Financial Statements
The following consolidated financial statements of the Registrant
included in the Annual Report to Shareholders for the year ended
December 31, 1994 are incorporated herein by reference in Item 8:
Consolidated Financial Statements of First Interstate Bancorp and
Subsidiaries:
Consolidated Balance Sheet - December 31, 1994 and 1993
Consolidated Statement of Operations - Years Ended December 31,
1994, 1993 and 1992
Consolidated Statement of Cash Flows - Years Ended December 31,
1994, 1993 and 1992
Statement of Shareholders' Equity - Years Ended December 31,
1994, 1993 and 1992
Notes to Financial Statements
Report of Ernst & Young LLP, Independent Auditors
(a) 2 - Other Schedules
All other schedules to the consolidated financial statements of
the Registrant required by Article 9 of Regulation S-X are not
required under the related instructions or are inapplicable and
therefore have been omitted.
(a) 3 - Exhibits:
(1) Dealer agreement dated as of December 9, 1994
among Registrant and various dealers named there-
in incorporated by reference to the Registrant's
Form 8-K dated March 24, 1995)
(3.1) Composite Certificate of Incorporation of Regis-
trant incorporating all amendments filed prior to
January 30, 1988 (incorporated by reference to
the Registrant's Form 10-K filed in March, 1990)
(3.2) By laws of Registrant incorporating all amend-
ments through July 20, 1993 (incorporated by
reference to the Registrant's Form 10-K filed in
March, 1994)
(4.1) Terms of Series F Preferred Stock (incorporated
by reference to Registrant's Form S-3 Regis-
tration Statement No. 33-42889)
(4.2) Terms of Series G Preferred Stock (incorporated
by reference to Registrant's Form S-3 Regis-
tration Statement No. 33-47174
(4.3) Registrant has outstanding certain long term
debt. See Note F of "Notes to Financial State-
ments" at Page 42 of the 1994 Annual Report
to shareholders. Such long term debt does not
exceed 10% of the total assets of Registrant
and its consolidated subsidiaries; therefore,
copies of constituent instruments defining the
rights of holders of such long term debt are not
included as exhibits. Registrant agrees to
furnish copies of such instruments to the
Securities and Exchange Commission upon request.
(10.1) 1983 Performance Stock Plan (incorporated by
reference to Registrant's Form S-8 Registration
Statement No.2-82812)
(10.2) 1988 Performance Stock Plan (incorporated by
reference to Registrant's Form S-8 Registration
Statement No. 33-23404)
(10.3) First Interstate Bancorp 1991 Performance Stock
Plan (incorporated by reference to Registrant's
Form S-8 Registration Statement No. 33-38903)
(10.4) First Interstate Bancorp 1995 Performance Stock
Plan
(10.5) First Interstate Bancorp 1991 Director Option
Plan (incorporated by reference to Registrant's
Form S-8 Registration Statement No. 33-37299)
(10.6) First Interstate Bancorp 1995 Regional Executive
Incentive Plan
(10.7) First Interstate Bancorp Corporate Executive
Incentive Plan
(10.8) First Interstate Bancorp 1995 Management Incent-
ive Plan
(10.9) 1989 Restatement of the Supplemental Employee
Savings Plan of Registrant (incorporated by
reference to the Registrant's Form 10-K filed in
March 1990)
(10.10) 1992 Restatement of the Supplemental Executive
Retirement Plan of Registrant (incorporated by
reference to Registrant's Form 10-K filed in
March 1992)
(10.11) 1989 Restatement of First Interstate Bancorp
Benefit Retirement Plan (incorporated by refer-
ence to Registrant's Form 10-K filed in March
1990)
(10.12) Retirement Plan for Directors, amended and re-
stated (incorporated by reference to Registrant's
Form 10-K filed in March, 1994)
(10.13) Dividend Reinvestment and Stock Purchase Plan, as
amended(incorporated by reference to Registrant's
Form S-3 Registration Statement No. 33-50054)
(10.14) Form of Employment Agreement between Registrant
and Edward M. Carson (incorporated by reference
to Registrant's Form 10-K filed in March 1990)
(10.15) Form of Employment Agreement between Registrant
and William E. B. Siart, William S. Randall,
Bruce G. Willison and James J. Curran
(10.16) Form of Split-Dollar Life Insurance Agreement
between Registrant and Edward M. Carson, William
E.B. Siart, William S. Randall, Bruce G. Willison
and James J. Curran (incorporated by reference
to Registrant's Form 10-K filed in March 1992)
(10.17) Form of Split-Dollar Insurance Agreement between
Registrant and Registrant's Directors (incorpor-
ated by reference to Registrant's Form 10-K filed
in March 1992)
(10.18) $500,000,000 Credit Agreement dated as of May 31,
1994 among First Interstate Bancorp and certain
banks (incorporated by reference to Registrant's
Form 10-Q for the quarter ending June 30, 1994
filed in August 1994)
(10.19) Other Agreements (1) (incorporated by reference
to Registrant's Form 10-K filed in March 1993)
(11) Computation of Earnings Per Share
(12) Computation of Ratio of Earnings to Fixed Charges
(13) Annual Report to Shareholders for the year ended
December 31, 1994
(21) Subsidiaries of the Registrant
(23) Consent of Ernst & Young LLP, Independent Auditors
(27) Financial Data Schedule
(b) - Reports on Form 8-K
A report on Form 8-K dated January 19, 1994 announced the
Corporation's 1993 fourth quarter and annual results; the
date, time and place of its 1994 Annual Meeting of Stock-
holders; and a repurchase program for up to 1,500,000
shares of Common Stock. Copies of related documents were
included in such filing.
A report on Form 8-K dated March 22, 1994 announced the
Corporation's next phase of its ongoing strategic plan. Key
elements include reduction in the expense/revenue ratio,
improved capital management, internal revenue growth,
appropriate acquisition growth and earnings improvement.
Copies of related documents were included in such filing.
A report on Form 8-K dated April 20, 1994 announced the
Corporation's 1994 first quarter results and the repurchase
of up to 6,500,000 shares of Common Stock. Copies of
related documents were included in such filing.
A report on Form 8-K dated July 20, 1994 announced the
Corporation's 1994 second quarter results and purchases
under the previously announced repurchase program for up
to 6,500,000 shares of Common Stock, as well as completion
of the repurchase program for 1,500,000 shares. Copies of
related documents were included in such filing.
A report on Form 8-K dated September 21, 1994 announced the
adoption of a restructuring plan to better position the
Corporation for the introduction of full interstate bank-
ing, purchases under the previously announced 1.5 million
and 6.5 million share repurchase programs and the approval
by the Board of Directors of a plan to repurchase up to an
additional 1.2 million shares in connection with the
proposed acquisition of Levy Bancorp. Copies of related
documents were included in such filing.
A report on Form 8-K dated October 25, 1994 announced that
President William E. B. Siart will succeed Edward M. Carson
as Chief Executive Officer of the Corporation, William S.
Randall, head of the Corporation's Southwest Region, will
become Executive Vice President and Chief Operating Officer
of the Corporation, effective January 1, 1995, and Mr.
Carson will remain Chairman of the Corporation until his
retirement on May 1, 1995. Copies of related documents
were included in such filing.
A report on Form 8-K dated February 17, 1995 announced the
date, time and place of its 1995 Annual Meeting of Stock-
holders. Copies of related documents were included in such
filing.
A report on Form 8-K dated March 24, 1995 announced that
Registrant has entered into a Dealer Agreement dated as of
December 9, 1994 among Registrant and various dealers named
therein. Copies of related documents were included in such
filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, this 24th day of March, 1995.
FIRST INTERSTATE BANCORP
Registrant
By /s/ Edward S. Garlock
Edward S. Garlock
Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints David S. Belles and Edward
S. Garlock, and each of them, as his or her true and lawful
attorney-in-fact and agent, with full power of substitution, for
him or her and in his or her name, place and stead, in any and
all capacities, to sign any or all amendments to this report and
to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, full
power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent, or his or her substitute may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
Signature Title Date
/s/ E. M. Carson
Chairman of the Board 03/24/95
E. M. Carson
Director
/s/ William E. B. Siart President and
Chief Executive Officer 03/24/95
William E. B. Siart
Director
/s/ William S. Randall
Chief Operating Officer 03/24/95
William S. Randall
(Principal Financial Officer)
Signature Title Date
/s/ David S. Belles
Executive Vice President 03/24/95
David S. Belles
(Principal Accounting Officer)
/s/ John E. Bryson
John E. Bryson
Director 03/24/95
/s/ Jewel Plummer Cobb
Jewel Plummer Cobb
Director 03/24/95
/s/ Ralph P. Davidson
Ralph P. Davidson
Director 03/24/95
/s/ Myron Du Bain
Myron Du Bain
Director 03/24/95
/s/ Don C. Frisbee
Don C. Frisbee
Director 03/24/95
/s/ George M. Keller
George M. Keller
Director 03/24/95
/s/ W. F. Kieschnick
W. F. Kieschnick
Director 03/24/95
/s/ William F. Miller
William F. Miller
Director 03/24/95
/s/ J. J. Pinola
J. J. Pinola
Director 03/24/95
/s/ Thomas L. Lee
Thomas L. Lee
Director 03/24/95
Signature Title Date
/s/ Steven B. Sample
Steven B. Sample
Director 03/24/95
/s/ Forrest N. Shumway
Forrest N. Shumway
Director 03/24/95
/s/ Richard J. Stegemeier
Richard J. Stegemeier
Director 03/24/95
/s/ Daniel M. Tellep
Daniel M. Tellep
Director 03/24/95
12
EXHIBIT (10.4)
FIRST INTERSTATE BANCORP
1995 PERFORMANCE STOCK PLAN
1. Purpose. The purpose of the 1995 Performance Stock
Plan (the "Plan") is to promote the interests of First Interstate
Bancorp (the "Company") and its Subsidiaries by providing
performance incentives to certain of its key employees who are
responsible for the management, growth and financial success of
the Company. Pursuant to the Plan, stock options, stock
appreciation rights, restricted stock awards, performance units
and stock awards may be granted.
2. Administration. The Plan shall be administered by a
Committee (the "Committee") consisting of those members of the
Compensation Committee of the Board of Directors of the Company
who are (a) at least the minimum number of members required under
Rule 16b-3 (or any successor rule) promulgated by the Securities
and Exchange Commission pursuant to the Securities Exchange Act
of 1934 ("Rule 16b-3"), (b) "disinterested persons" as defined
under such rule and (c) "outside directors" as defined in Section
162(m) of the Internal Revenue Code of 1986, as amended
("Internal Revenue Code") and the regulations thereunder. The
Committee shall have full authority to administer the Plan,
including authority to interpret and construe any provision of
the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary. Decisions of
the Committee shall be final and binding on all persons who have
an interest in the Plan.
3. Eligibility. The persons eligible to participate in
the Plan shall be those key employees (including officers,
whether or not directors) of the Company and its Subsidiaries
selected by the Committee. Directors who are not officers are
not eligible to participate in the Plan.
4. Shares Subject to the Plan. The shares subject to the
Plan shall be shares of the Company's $2 par value Common Stock
("Common Stock"). The aggregate number of shares of Common Stock
which may be delivered pursuant to awards granted under this Plan
shall not exceed 5,000,000, subject to adjustment pursuant to
Section 9. The maximum number of shares of Common Stock for
which stock options, including those containing Stock
Appreciation Rights, may be granted under this Plan shall not
exceed 150,000 per Participant during any calendar year, subject
to adjustment pursuant to Section 9. If Restricted Stock is
forfeited or if an option shall expire or terminate for any
reason, except for the surrender thereof upon exercise of a
related Stock Appreciation Right, without having been exercised
in full, such Restricted Stock or the shares applicable to the
unexercised portion of such option shall become available under
the Plan for all purposes. To the extent any award of
Performance Units is paid in cash rather than shares, the number
of shares represented by such Performance Units shall again be
available for purposes of the Plan. If shares of Common Stock
already owned by a Participant are tendered or exchanged under
Section 5.3(b) in full or partial payment of the purchase price
of an exercised option, such tendered or exchanged shares shall
be added back to the number of shares available for issuance or
delivery under this Plan; provided that for purposes of
determining the number of shares available for the granting of
Incentive Options, the aggregate number of shares available for
delivery or issuance under this Plan shall not be increased by
the number of shares tendered or exchanged. If any of the
foregoing provisions for determining the number of shares
available for issuance under the Plan would cause the Plan to not
be considered to be described under Rule 16b-3, such provision
shall have no effect, and the number of shares available for
issuance shall instead be determined in a manner which complies
with such rule. Either authorized and unissued shares or treasury
shares may be delivered under the Plan; provided, however, that
unissued shares shall not be awarded as Restricted Stock, or
pursuant to Performance Units, or as Stock Awards to any
Participant unless the Committee expressly determines, after
consideration of all other remuneration paid or payable to the
Participant, that the services already rendered to the Company
and its Subsidiaries by the Participant have a value of not less
than the par value of the shares so awarded.
5. Stock Options. Stock options granted under the Plan
may be either incentive stock options qualifying under Section
422 of the Internal Revenue Code ("Incentive Options") or non-
qualified stock options ("Non-Qualified Options"). The options
shall be evidenced by agreements in such form as the Committee
may, from time to time, approve ("Stock Option Agreement") and
shall be subject to the following terms and conditions.
5.1 Option Price. The option price of the shares of Common
Stock subject to each option shall be determined by the Committee
but shall be not less than 100% of the Fair Market Value of such
shares on the date of granting of the option.
5.2 Terms of Exercise. Each option granted under the Plan
shall be exercisable in whole or in part on such terms as the
Committee may determine, but in no event shall the option be
exercisable within six months of or more than 10 years after the
date the option is granted.
5.3 Manner of Exercise. The option shall be exercised in
the manner specified by the Committee. Payment of the option
price may be by any of the following methods, as determined by
the Committee at the date of grant and provided for in the Stock
Option Agreement:
(a) In cash;
(b) In shares of Common Stock already owned by the
holder of the option ("Optionee") or partly in cash and partly in
shares of Common Stock. If Common Stock is used to pay the
purchase price (i.e., a "Stock-for-Stock Swap Transaction"), the
Common Stock used must have been owned by the Optionee for at
least six months prior to the date of exercise and must not have
been used in a Stock-for-Stock Swap Transaction within the
preceding six months (i.e., the Common Stock must be "mature").
Payments made in Common Stock shall be valued at the Fair Market
Value of the Common Stock on the date of exercise. Any portion
of the option price representing a fraction of a share shall be
paid in cash.
(c) Subject to such guidelines as may be promulgated
by the Committee, an Optionee may deliver a notice instructing
the Company to deliver the shares being purchased to a broker,
subject to the broker's delivery of cash to the Company equal to
the purchase price and any applicable tax withholding amount.
5.4 Additional Terms of Incentive Options. An Incentive
Option granted pursuant to the Plan:
(a) Must be designated as an Incentive Option by the
Committee.
(b) Shall only be an Incentive Option to the extent
that the aggregate Fair Market Value of the Common Stock
(determined as of the date of grant of the option) with respect
to which the option is first exercisable in any calendar year
does not exceed $100,000. For the purpose of the preceding
sentence all options granted by the Company and any Parent or
Subsidiary which are intended to be incentive stock options under
Section 422 of the Internal Revenue Code shall be taken into
account. To the extent the $100,000 limit is exceeded, the
$100,000 in options (measured as described above) granted
earliest in time will be treated as incentive stock options; and
(c) If issuable to an employee who on the date of
grant is the owner of stock (determined with application of the
ownership attribution rules of Section 424(d) of the Internal
Revenue Code) possessing more than 10% of the total combined
voting power of all classes of stock of the Company or any Parent
or Subsidiary, the Incentive Option price shall not be less than
110% of the Fair Market Value of the Common Stock on the date of
grant and the Incentive Option shall not have a term in excess of
five years from the date of grant.
5.5 Termination of Right to Exercise Options. Each option
granted under this Plan shall set forth a termination date
thereof, which date shall be determined by the Committee. In any
event, all options granted pursuant to the Plan shall terminate
upon the first to occur of the following events:
(a) The expiration of 10 years from the date such
option was granted, or any earlier termination date specified in
the Stock Option Agreement;
(b) The expiration of three months from the date an
Optionee ceases to be employed by the Company or a Subsidiary
other than by reason of death, Retirement, Disability or
termination of employment for cause as determined by the
Committee;
(c) The expiration of one year from the date an
Optionee ceases to be employed by the Company or a Subsidiary by
reason of Disability or death;
(d) The expiration of three years from the date an
Optionee ceases to be employed by the Company or a Subsidiary by
reason of Retirement;
(e) The termination of the Optionee's employment for
cause, as determined by the Committee; or
(f) The termination of the Plan pursuant to Section
10;
provided, that if an Optionee's death occurs after the Optionee
ceases to be employed by the Company or a Subsidiary for a reason
other than Retirement but at a time when the Optionee has a right
to exercise any options pursuant to the foregoing, the right to
exercise such option shall not expire prior to one year from the
date of death of the Optionee. Subsequent to termination of the
Optionee's employment for any reason, only that portion of an
option which was exercisable on the date of termination of
employment shall be exercisable, and only during the period, if
any, set forth above. Failure to exercise an Incentive Option
within three months of the date the Optionee ceases to be
employed by the Company or a Subsidiary by reason of Retirement
shall cause an Incentive Option to cease to be treated as an
incentive stock option for purposes of Section 421 of the
Internal Revenue Code.
5.6 Stock Appreciation Rights. Any option granted pursuant
to the Plan may, in the discretion of the Committee, contain a
stock appreciation right ("Stock Appreciation Right"). A Stock
Appreciation Right will permit the holder thereof to exercise
such right by the surrender of the option or portion thereof
which is then exercisable and receive in exchange therefor, upon
such terms, restrictions and conditions as the Committee deems
advisable, an amount equal to the excess of the Fair Market Value
of the shares of Common Stock offered by the option surrendered,
or portion thereof, determined on the date of surrender, over the
aggregate option exercise price of such shares. Such payment may
be made in shares of Common Stock valued at Fair Market Value, in
cash, or partly in cash and partly in shares of Common Stock as
the holder may elect, subject to the consent or disapproval of
the Committee in its sole discretion. If a Stock Appreciation
Right extends to less than all the shares of Common Stock covered
by the related option and if a portion of the related option is
thereafter exercised, the number of shares subject to the
unexercised Stock Appreciation Right shall be reduced only if and
to the extent that the remaining number of shares covered by such
related option is less than the remaining number of shares
subject to such Stock Appreciation Right.
The Stock Appreciation Right, in addition to any other
restrictions imposed by the Committee:
(a) shall expire no later than the underlying stock option;
(b) shall not permit the issuance of cash or shares of a
value which exceeds the difference between the exercise price of
the underlying stock option and the Fair Market Value of the
Common Stock subject to the underlying option at the time the
Stock Appreciation Right is exercised;
(c) shall be transferable only when the underlying stock
option is transferable, and under the same conditions;
(d) shall be exercisable only when the underlying stock
option is eligible to be exercised and then only when the Fair
Market Value of the stock subject to the underlying option
exceeds the option exercise price; and
(e) shall contain such conditions upon exercise (including,
without limitation, conditions limiting the time of exercise to
specified periods) as may be required to satisfy applicable
regulatory requirements, including, without limitation, Rule 16b-
3 (or any successor rule) promulgated by the Securities and
Exchange Commission.
In the event of the exercise of a Stock Appreciation Right,
shares represented by the option or part thereof surrendered upon
such exercise shall not be available for reissuance under the
Plan.
5.7 Award of Accelerated Ownership Stock Option. If the
Committee so provides in the Stock Option Agreement, effective as
of the date of exercise by an Optionee of all or part of an
option using "mature" Common Stock as defined in Section 5.3 of
the Plan as payment for the full purchase price (except that cash
may be used to purchase the nearest whole share of Common Stock),
an Employee shall be granted an accelerated ownership Non-
Qualified Option ("AO") to purchase at the Fair Market Value as
of the date of said exercise and grant, the number of share of
Common Stock equal to the sum of the number of whole shares used
by the Optionee in payment of the purchase price. An AO may be
exercised between the date of vesting and the original date of
expiration of the underlying option to which the AO is related.
No AO shall vest sooner than six months after its date of grant.
The AO shall be evidenced by an agreement containing such
additional terms and conditions as the Committee shall approve,
which conditions may provide that upon exercise of any AO, an
additional AO may be granted with respect to the number of whole
shares used to exercise the AO.
5.8 Options Non-transferable. Except as otherwise provided
in the Stock Option Agreement, no option rights shall be
assignable or transferable except by will or the laws of descent
and distribution (except to the extent not permitted in the case
of an Incentive Option). During the lifetime of an Optionee, an
option or Stock Appreciation Right shall be exercisable only by
the Optionee or by the Optionee's guardian or legal
representative. After the death of an Optionee, the option or
Stock Appreciation Right may be exercised prior to its
termination by the Optionee's legal representative, heir or
legatee. The foregoing shall not restrict, to the extent
permitted by the Committee and provided for in the Stock Option
Agreement, and subject to such terms and conditions as deemed
appropriate by the Committee, transfers for estate and financial
planning purposes, provided the inclusion of such features would
not render the particular award ineligible for the benefits of
Rule 16b-3. Nothing contained herein shall require the Committee
to permit such other transfers.
6. Restricted Stock Awards. The award of restricted stock
("Restricted Stock") to employees may be made in the discretion
of the Committee pursuant to agreements in such forms as the
Committee may, from time to time, approve ("Restricted Stock
Agreement"), subject to the following terms and conditions.
6.1 Restricted Period. The Committee shall set a
restricted period during which the Restricted Stock may not be
sold, assigned, transferred, pledged or otherwise encumbered,
except as permitted by this Plan and the Restricted Stock
Agreement (the "Restricted Period"). If a holder of Restricted
Stock ceases to be an employee of the Company or a Subsidiary
during the Restricted Period for any reason other than death,
Disability or Retirement, all shares of Restricted Stock which
are then subject to the restrictions imposed by the Committee
shall upon such termination of employment be immediately
forfeited and returned to the Company. If a holder of Restricted
Stock ceases to be an employee of the Company or a Subsidiary
during the Restricted Period by reason of death, Disability or
Retirement, shares of Restricted Stock shall become free of the
restrictions imposed by the Committee only to the extent
determined by the Committee, and the Company will deliver to the
holder, or the holder's successor, as the case may be, within 60
days, such shares of Common Stock as are freed from restrictions,
and all other shares shall be forfeited and returned to the
Company. The Committee may, at any time, reduce or terminate the
Restricted Period. Subject to the foregoing, at the end of the
Restricted Period, the holder of Restricted Stock shall be
entitled to receive the Restricted Stock free of restrictions.
In the event that employees of the Company or its Subsidiaries
become employees of another company pursuant to a stock or asset
sale, merger or similar transaction, or in the event of a
corporate reorganization, reduction in force or similar event,
the Committee shall have the authority, which shall be exercised
in its sole discretion, to continue to credit service for
purposes of satisfying the restricted period requirements set
forth in the Restricted Stock Agreement. Such Committee
authority shall only apply to Restricted Stock granted to
individuals who are not subject to Section 16 of the Securities
Exchange Act of 1934.
6.2 Restrictive Legend and Deposit of Certificates. Each
certificate issued in respect of shares of Restricted Stock
awarded under the Plan shall be registered in the name of the
Participant, shall be deposited by the Participant with the
Company together with a stock power endorsed in blank and shall
bear the following legend:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the terms and
conditions contained in an Agreement entered into between
the registered owner and First Interstate Bancorp. A copy
of such Agreement is on file in the office of the Secretary
of First Interstate Bancorp, 633 West Fifth Street, Los
Angeles, California 90071."
6.3 Rights as Shareholder. Subject to the terms of the
Restricted Stock Agreement, the holder of Restricted Stock shall
have all the rights of a shareholder with respect to the
Restricted Stock, including the right to vote such shares;
provided, however, that dividends paid with respect to the shares
of Restricted Stock shall be deposited with the Company and shall
be subject to forfeiture until the expiration of the Restricted
Period, subject to the condition that the sums so deposited shall
be free of restriction and not subject to forfeiture to the
extent applied by the Company to satisfy that employee's
withholding obligations with respect to Restricted Stock
pursuant to Section 13 of the Plan, or otherwise released by the
Committee in its sole discretion. The holder of Restricted Stock
shall not be entitled to interest with respect to the dividends
so deposited.
6.4 Purchase Price. Unless the purchase price of
Restricted Stock is its par value, it shall be at least equal to
50% of Fair Market Value, unless otherwise allowed under Rule 16b-
3.
7. Performance Units. The award of performance units
("Performance Units") to employees shall be made in the
discretion of the Committee pursuant to agreements in such form
as the Committee may, from time to time, approve ("Performance
Unit Agreement"), subject to the following terms and conditions.
7.1 Payment of Shares and Dividends. Each Performance Unit
shall represent one share of Common Stock and shall, at the time
and to the extent it becomes vested, be payable by the delivery
of one share of Common Stock, subject to the provisions of
Section 9 of this Plan, or, if and to the extent provided in the
Performance Unit Agreement, cash based on the Fair Market Value
of the Common Stock at the time of payment. In addition, each
Participant who has been awarded Performance Units shall receive
additional Performance Unit credit based on the value of any
dividends which would have been paid to the Participant if he or
she had owned a number of shares of Common Stock equal to the
number of his or her Performance Units. The amount of such
dividend credit shall be applied towards additional Performance
Units for the Participant at the value of shares of Common Stock
on the dividend date.
7.2 Performance Conditions. The Performance Unit
Agreements shall specify any terms and conditions relating to
performance or otherwise which may be established in the
discretion of the Committee.
7.3 Incentive Plan Deferrals. Performance Units under this
Plan may be attributable to a Participant's deferral election
under the annual Management Incentive Plan, Regional Incentive
Plan or Corporate Executive Incentive Plan, or any successor plan
thereto. Such Performance Units will be payable at the time
selected by the Participant and permitted by the Committee in the
applicable Performance Unit Agreement in shares of Common Stock,
one share for each Performance Unit or, if permitted by the
Committee and provided in the Performance Unit Agreement, in cash
based on the Fair Market Value of the Common Stock at the time of
payment.
8. Stock Awards. The award of Common Stock ("Stock
Award") to employees may be made in the discretion of the
Committee at such times and in such amounts as the Committee
deems appropriate.
8.1 No Restrictions. Common Stock issued to a Participant
pursuant to a Stock Award shall not be subject to any
restrictions under the Plan.
8.2 Corporate Executive Incentive Plan. The Committee may,
in its discretion, issue Stock Awards to key employees who are
also participants in the Corporate Executive Incentive Plan
("CEIP"). A Stock Award to participants in the CEIP pursuant to
this Plan shall be made solely on account of the achievement of
the performance goals established by the Committee under the CEIP
for the year in question. No such award shall be issued under
this Plan until the Committee has certified in writing that such
performance goals have been achieved and has determined the
amount of the participant's cash award under the CEIP. The
maximum stock award attainable by participants in the CEIP under
this Plan shall be that number of shares which is equivalent in
value to one-third of the participant's cash award under the
CEIP, based on the Fair Market Value of the Common Stock on the
date that such cash award is approved by the Committee.
9. Changes in Capitalization. If there are any changes in
the capitalization of the Company affecting in any manner the
number or kind of outstanding shares of Common Stock of the
Company, whether such changes have been occasioned by declaration
of stock dividends, stock split-ups, reclassifications or
recapitalization of such stock, or because the Company has merged
or consolidated with some other corporation (and provided the
option is not thereby terminated pursuant to Section 10 hereof),
or for any other reason whatsoever, then the number and kind of
shares then subject to this Plan and to outstanding options and
the prices to be paid therefor, as well as any related Stock
Appreciation Right, and the number of Performance Units then
outstanding shall be proportionately adjusted by the Committee
whenever and to the extent that the Committee determines that any
such change equitably requires an adjustment. Any shares of
Common Stock or other securities received by a holder of
Restricted Stock with respect to such Restricted Stock by reason
of any such change shall be subject to the same restrictions and
shall be deposited with the Company.
10. Mergers or Consolidations. If the Company, at any
time, should elect to dissolve, undergo a reorganization, merge
or consolidate with any other corporation and the Company is not
the surviving corporation, then (unless in the case of a
reorganization, merger or consolidation, one or more of the
surviving corporations assumes the options under the Plan or
issues substitute options in place thereof) each Optionee holding
outstanding options not yet exercised shall be notified of the
Optionee's right to exercise such options and any related Stock
Appreciation Right to the extent then exercisable prior to such
dissolution, reorganization, merger or consolidation. Subject to
Section 11, the Committee may, in its discretion and on such
terms and conditions as it deems appropriate, accelerate the
vesting of such options and any related Stock Appreciation Right
with respect to all shares covered thereby. Any option and
related Stock Appreciation Right not so exercised within 30 days
of such notification shall thereupon be deemed terminated and
simultaneously the Plan itself shall be deemed terminated.
11. Acceleration of Options, Stock Appreciation Rights, and
Restricted Stock Awards. In the event of a Change in Control,
(i) each option and each related Stock Appreciation Right shall
become immediately exercisable to the full extent theretofore not
exercisable, (ii) the Restricted Period for Restricted Stock
shall immediately expire, and (iii) unless otherwise provided in
Performance Unit Agreements, all Performance Units shall be
immediately payable in Common Stock in the maximum amount
available under the terms of such Performance Unit Agreements;
provided, however, that Awards other than Restricted Stock Awards
shall not, in any event, be so accelerated to a date less than
six months after the date of grant. Acceleration of Awards shall
comply with applicable regulatory requirements, including,
without limitation, Rule 16b-3. Notwithstanding the foregoing,
any Participant shall be entitled to decline the acceleration of
all or any of his or her options, Stock Appreciation Rights or
Restricted Stock if he or she determines that such acceleration
may result in adverse tax consequences to him or her.
12. Expiration of Options. In the event employees of the
Company or its Subsidiaries become employees of another company
pursuant to a stock or asset sale, merger, or similar transaction
or in the event of a corporate reorganization, reduction in force
or similar event, the Committee shall have the authority, which
shall be exercised in its sole discretion, to modify the dates
upon which options previously granted (including any related
Stock Appreciation Rights) shall expire. Such Committee
authority shall only apply to options granted to individuals who
are not subject to Section 16 of the Securities Exchange Act of
1934. Any modification to the terms under which the option would
otherwise expire shall not cause the option to expire later than
the date the option was originally scheduled to expire pursuant
to the terms of the original Stock Option Agreement.
13. Effect on Employment. Nothing herein shall be
construed to limit or restrict the right of the Company or any of
its Subsidiaries to terminate the employment of any Participant
in the Plan, at any time, with or without cause, or to increase
or decrease the compensation of such Participant from the rate of
compensation in existence at the time the employee became a
Participant.
14. Withholding. The Company shall have the right to
withhold from amounts due Participants, or to collect from
Participants directly, the amount which the Company deems
necessary to satisfy any taxes required by law to be withheld by
reason of participation in the Plan. There is no obligation
under this Plan that any Participant be advised of the existence
of the tax or the amount required to be withheld. The
Participant may, prior to the payment of any Award, pay such
amounts to the Company in cash or in shares of Common Stock
already owned (which shall be valued at their Fair Market Value
on the date of payment). The Company may also require, or grant
Participants the right to elect, subject to such terms and
conditions as the Committee may establish, that shares be
withheld to satisfy tax withholding requirements arising from the
exercise of an option, the receipt of a Stock Award or the
vesting of a Restricted Stock award. Notwithstanding any other
provision of this Plan, the Committee may impose such conditions
on the payment of any withholding obligation as may be required
to satisfy applicable regulatory requirements, including, without
limitation, Rule 16b-3 (or any successor rule) promulgated by the
Securities and Exchange Commission.
15. Additional Definitions. "Awards" shall mean an
Incentive Option, a Non-Qualified Option, a Stock Appreciation
Right, A Restricted Stock award, a Performance Unit or a Stock
Award.
"Change in Control" of the Company means and shall be deemed
to have occurred if and when any one of the following five events
occurs: (a) any "person" (as such term is used Section 13(d) of
the Securities Exchange Act of 1934) or group becomes a
beneficial owner, directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of
the Company's then outstanding securities; (b) individuals who
were members of the Board of Directors of the Company immediately
prior to a meeting of the stockholders of the Company involving a
contest for the election of Directors do not constitute a
majority of the Board of Directors following such election; (c)
the stockholders of the Company approve the dissolution or
liquidation of the Company; (d) the stockholders of the Company
approve an agreement to merge or consolidate, or otherwise
reorganize, with or into one or more entities which are not
Subsidiaries, as a result of which less than 50% of the
outstanding voting securities of the surviving or resulting
entity are, or are to be, owned by former stockholders of the
Company (excluding from the term "former stockholders" a
stockholder who is, or as a result of the transaction in question
becomes, an "affiliate", as that term is used in the Exchange Act
and the Rules promulgated thereunder, of any party to such
merger, consolidation or reorganization); or (e) the stockholders
of the Company approve the sale of substantially all of the
Company's business and/or assets to a person or entity which is
not a Subsidiary.
"Disability" shall mean such physical or mental condition
affecting the employee as shall be determined by the Committee,
in its sole discretion, to constitute a disability causing a
termination of employment.
"Fair Market Value" on a specified day means the closing
price on that day of the Common Stock as reported on New York
Stock Exchange-Composite Tape, or if no sale of the Common Stock
was so reported on that date, on the next preceding day on which
there was such a sale.
"Parent" means any corporation owning directly or indirectly
50% or more of the total combined voting power of all classes of
stock of the Company.
"Participant" means an eligible employee selected by the
Committee to participate in the Plan.
"Retirement" means normal or early retirement in accordance
with the provisions of the Retirement Plan of First Interstate
Bancorp and its Affiliates.
"Subsidiary" means any corporation of which the Company
owns, directly or indirectly, 50% or more of the total combined
voting power of all classes of stock. If an entity ceases to be
a Subsidiary, each employee of that entity shall no longer be
deemed employed by the Company or a Subsidiary under the Plan
(unless the employee continues to be employed by the Company or
another entity which is a Subsidiary).
16. Amendment of Plan. The Board of Directors of the
Company may make such amendments to this Plan and to any
agreements thereunder as it shall deem advisable, including, but
not limited to, accelerating the time at which an option may be
exercised or the time when restrictions on Restricted Stock shall
expire. Such amendments shall be subject to shareholder approval
to the extent such approval is required by Rule 16b-3 or the
federal tax rules applicable to Incentive Options or other
applicable law. Without the consent of the Participant, no
amendment shall impair rights of any Participant under the Plan,
except as permitted by the Plan.
17. Construction of the Plan. It is the intent of the
Company that this Plan and the Awards hereunder satisfy and be
interpreted in a manner that, in the case of Participants who are
or may be subject to Section 16 of the Securities Exchange Act of
1934, satisfies the applicable requirements of Rule 16b-3 so that
such persons (unless they otherwise agree) will be entitled to
the benefits of Rule 16b-3 or other exemptive rules under Section
16. If any provision of this Plan or of any Award would conflict
with this intent, that provision to the extent possible shall be
interpreted and deemed amended so as to avoid such conflict, but
to the extent such conflict cannot be avoided, such provision
shall be disregarded as to such Participants.
18. Effective Date and Termination of Plan. The Plan shall
be effective upon filing with the Securities and Exchange
Commission, subject to receipt of shareholder approval of the
Plan at the 1995 Annual Shareholder Meeting. All Awards pursuant
to the Plan prior to the receipt of shareholder approval shall be
subject to receipt of such approval. If such approval is not
received the Awards shall be forfeited. The Plan shall terminate
10 years from the effective date; provided, however, that the
Board of Directors of the Company may terminate the Plan at any
prior time within its absolute discretion. No such termination,
other than as provided for in Section 10 hereof, shall in any way
affect any Award then outstanding.
-13-
EXHIBIT (10.6)
FIRST INTERSTATE
1995 REGIONAL EXECUTIVE INCENTIVE PLAN
Effective January 1, 1995
1. Objectives. The 1994 Regional Executive Incentive
Plan is designed to focus the efforts of certain executive
employees of selected Subsidiaries on the continued
improvement in the performance of such Subsidiaries, and to
aid in attracting, motivating and retaining superior
executives by providing an incentive and reward for those
executive employees who contribute most to the operating
progress and performance of the Corporation's Subsidiaries.
2. Definitions. The following definitions shall be
applicable to the terms used in the Plan:
(a) "Administrator" means the Chief Executive
Officer of Bancorp.
(b) "Award" means a cash distribution to be
made to a Participant for a Performance Year as determined
in accordance with the provisions of the Plan.
(c) "Award Fund" means the total of the Target
Awards for each Participant as determined and approved in
accordance with Section 5 hereof.
(d) "Bancorp" means First Interstate Bancorp, a
Delaware Corporation.
(e) "Change in Control" shall have the meaning
set forth in Section 17.
(f) "Committee" means the Compensation Committee
of the Board of Directors of Bancorp.
(g) "First Interstate" means the consolidated
group of companies comprising First Interstate Bancorp.
(h) "Fiscal Year" means the customary fiscal year
of Bancorp.
(i) "Management Incentive Plan" means the First
Interstate Bancorp 1995 Management Incentive Plan.
(j) "Offset Value" shall have the meaning set
forth in Section 18(b) and (c).
(k) "Participant" means an eligible executive
who, pursuant to Section 4 hereof, automatically becomes a
Participant in the Plan for a Fiscal Year.
(l) "Performance Year" means the Fiscal Year.
(m) "Plan" means this First Interstate Bancorp
1995 Regional Executive Incentive Plan, as set forth herein.
(n) "Policies" shall have the meaning set forth
in Section 18(a).
(o) "PSP" shall have the meaning set forth in
Section 7(c).
(p) "Region" means any of the California,
Northwest, Southwest or Texas regions consisting of First
Interstate banks and as defined by First Interstate Bancorp.
(q) "Split-Dollar Life Insurance Agreement" shall
have the meaning set forth in Section 18(a).
(r) "Subsidiary" means a bank, corporation,
association or similar organization of which the majority of
the outstanding shares of voting stock is owned by Bancorp,
directly or indirectly.
(s) "Target Award" is determined for each Partic-
ipant by multiplying the Participant's base pay rate in
effect at the end of the Performance Year by the Target
Award Percentage applicable to the Participant set forth
under Item I of the Target Award Guidelines attached as
Table A.
3. Adoption and Administration of the Plan. The Plan
shall become effective as of January 1, 1995 upon adoption
by the Committee. Subject to the provisions of this Plan
and in the absence of specific action by the Committee, this
Plan shall be administered by the Administrator. The Plan
shall not be modified except with the consent of the
Committee. All decisions of the Administrator or the
Committee shall be final and binding.
4. Participation and Target Awards.
(a) Determination of Participants and Target Awards.
The Chief Executive Officer of each Region shall be
Participants in the Plan. As provided in the Plan,
participation for an individual may be terminated. Except
as provided in Sections 8(b) and 10, to be considered
eligible for an Award, a Participant must be participating
in the Plan or the Management Incentive Plan for at least
six months during the Performance Year.
(b) Notification. Each Participant shall be notified
of his or her eligibility for participation in the Plan for
such Performance Year or shall be notified of his or her
termination, as applicable, by a letter from the Adminis-
trator or his or her designee. A copy of this Plan shall be
provided to each Participant. A Participant shall have no
right to or interest in an Award unless and until the
Participant's Award has been determined and certified by the
Committee.
5. Determination of Award.
(a) Performance Review. As soon as practicable after
the close of each Performance Year, a determination of each
Region's performance shall be made by the Administrator.
The Administrator's determination shall be subject to the
approval by the Committee.
(b) Award Fund. The Committee shall determine
the total amount of the Award Fund authorized under this
Plan for the Performance Year. The Award Fund amount for a
Region may be determined in any manner the Committee deems
appropriate from time to time. Without limiting the
Committee's discretion to choose other methods to calculate
the size of the Award Fund, it is anticipated that the Award
Fund amount for the Participants will equal the sum of the
Target Awards for each Participant multiplied by a
percentage representing the performance of the Region
determined by the Administrator. The maximum Award Fund
amount may not exceed 1.5 times the sum of Target Awards.
(c) Limitations. The Committee shall have the
right to reduce an Award to an actual award percentage of no
less than 0%. Award payments will be charged against
Bancorp or the Subsidiary for which the Participant is an
employee, as appropriate.
6. Allocation of Award Fund to Participants. The
Award Fund shall be available for allocation to Participants
on a totally discretionary basis in a manner designed to
give the Administrator the flexibility to take into account
the individual performance of each Participant. Based on
its evaluation of a Participant's performance, the
Administrator may determine an Award equal to any percentage
of the Participant's Target Award up to 150%. In the event
the amount of the Award Fund exceeds the total Awards for a
Performance Year, such excess shall not be carried forward
for purposes of Awards in future Performance Years. Award
payments will be charged against the Subsidiary for which
the Participant is an employee, as appropriate.
7. Time of Payment of Awards, Deferrals, Hardships.
(a) Payment Date. Except as provided in (b)
below, as soon as practicable after the determination of
Awards and approval by the Committee, any Award, less any
legally required withholding, shall be paid to the
Participant or, in the event of a Participant's death, in
accordance with Section 8 hereof.
(b) Deferrals. In the year prior to the year in
which an Award is earned, a Participant may elect, on a
form specified by Bancorp, to defer the receipt of any Award
to which he or she may be entitled for such Performance Year
until the earlier of (1) termination of employment (the
first to occur of retirement, death, disability, or
termination of employment) or (2) January 1 of a specified
calendar year. In such event:
(i) The amount the Participant elects, net
of any legally required withholding, shall become the
deferred Award;
(ii) Interest on such deferred Award will be
the Moody's Investment Grade Corporate Bond Yield as
shown in Moody's Yield Average for the last full month
of each previous calendar year and will be credited
quarterly; and
(iii) Such deferred Award, plus accumulated
interest, shall be paid upon the earlier of (1) or (2)
above, in the form of a lump sum, equal annual install
ments over not more than 10 years, or such other method
as may be selected by the Participant and agreed to by
the Administrator or, in the case of any payment to the
Administrator, by the Committee.
(c) Deferrals into Performance Units. As an
alternative to a deferral payable in cash, as described in
subsection (b), the deferred Award may, if the Participant
elects and the Committee permits, be invested in Performance
Units under Section 7.3 of the First Interstate Bancorp 1991
Performance Stock Plan or the 1995 Performance Stock Plan
(each, a "PSP"). The amount deferred shall be deemed to be
converted into Performance Units under Section 7.3 of the
PSP as of the date the Award would have been payable if no
deferral had occurred, based on the fair market value,
determined in accordance with the terms of said plan, of the
common stock of Bancorp on that date. The timing and manner
of payment of deferrals shall be governed by a Performance
Unit Agreement entered into by the Participant under the
PSP.
(d) Hardship Withdrawal. A Participant may request
in writing, citing the reasons for the request, that the
Committee permit the early payment of all or part of a
Deferred Award. Within 90 days after receipt, the Committee
shall rule on the request. The Committee shall grant the
request only if, in its sole discretion, the Committee makes
a specific finding of financial hardship that is an
unanticipated emergency caused by an event beyond the
control of the Participant. The amount payable hereunder
shall not exceed the amount necessary to avoid such
hardship.
(e) Acceleration of Deferrals. Anything in this
Plan to the contrary notwithstanding, the Committee may
accelerate the payment of all deferred Awards hereunder at
any time in its sole discretion. In addition, the Committee
reserves the right to pay any deferred Awards in the form of
a lump sum if the amount is less than $10,000.00.
8. Death of a Participant.
(a) Beneficiary Designation. A Participant may
file a designation of a beneficiary or beneficiaries on a
form to be provided which designation may be changed or
revoked by the Participant's sole action, provided that such
change or revocation is filed in written form.
(b) Death during Performance Year. In case of
the death of a Participant during a Performance Year,
Bancorp or the Subsidiary, as appropriate, may pay a pro
rata portion of the Award to which the Participant would
have been entitled for such Performance Year. Such pro rata
portion shall be equal to (1) the ratio which the
Participant's completed calendar months of participation
during the Performance Year bears to 12 multiplied by
(2) the amount the Committee determines the Participant
would have been entitled to had he or she lived.
(c) Death after Performance Year. In case of the
death of a Participant after the end of a Performance Year,
but before the delivery of an Award to which he or she may
be entitled, such Award shall be delivered to the
Participant's designated beneficiary.
(d) Failure to Designate Beneficiary. If a
Participant dies having failed to designate any beneficiary,
or if no beneficiary survives the Participant or survives to
the date of any payment in question, the amount otherwise
payable to such beneficiary shall be paid to the
Participant's surviving spouse, if any, and otherwise to the
Participant's heirs at law, as determined under the law
governing succession to personal property for the state in
which the Participant resided on the day the Participant
died.
9. Transfer of a Participant. In the event a Parti-
cipant for any Performance Year is transferred during such
Performance Year so that they are no longer eligible to
participate in this Plan, such Participant's Award,
consistent with Subsection 4(a), shall normally be
calculated as the sum of the following:
(a) the Award the Participant would have
received, had he or she not been transferred, multiplied by
the ratio which his or her completed months of participation
during such Performance Year prior to the transfer bears to
12, plus
(b) the Award, if any, the Participant is
entitled to receive based on service after the transfer
determined on a Performance Year basis and then multiplied
by the ratio which his or her completed months of
participation during such Performance Year subsequent to
such transfer bears to 12.
10. Retirement or Disability of Participant. In case
a Participant becomes totally and permanently disabled
during a Performance Year, or retires from active employment
after attaining age 55 during a Performance Year, the
Committee may but need not grant the Participant an Award.
Generally, if an Award is granted, it will be based on a pro
rata portion of the Award.
11. Termination of Employment. If the employment of a
Participant with a Subsidiary is terminated prior to the
approval of an Award by the Committee as specified in
Section 5(a), for reasons other than those specified in Sec-
tions 8, 9 or 10 hereof, the right to and the amount of an
Award shall be forfeited.
12. Termination and Modification. No Award shall be
granted under the Plan after any date as of which the Plan
shall have been terminated. The Board of Directors of
Bancorp or the Committee may at any time modify, terminate
or from time to time suspend and, if suspended, may
reinstate the provisions of this Plan, including Table A.
The Committee may consider but shall not be bound by sugges-
tions of Participants in connection with its periodic amend-
ment of relative weights of the goals set forth by the
Committee.
13. Effect of Other Plans. Eligibility in or the
receipt of any Award under the Plan shall not be affected by
or affect any other compensation or benefit plans in effect
for Bancorp or a Subsidiary.
14. No Employment Rights. Nothing contained in nor
any action under the Plan will confer upon any individual
any right to continue in the employment of Bancorp or a
Subsidiary and does not constitute any contract or agreement
of employment or interfere in any way with the right of
Bancorp or a Subsidiary to terminate any individual's
employment.
15. Withholding Tax. As required by law, federal,
state or local taxes that are subject to the withholding of
tax at the source shall be withheld by Bancorp or a
Subsidiary as necessary to satisfy such requirements.
16. Effective Date. This Plan shall be effective as
of January 1, 1995. The Plan, including Table A, shall
remain in effect as amended from time to time.
17. Provisions Applicable in the Event of a Change in
Control.
(a) In the event of a "Change in Control" (as de-
fined below), notwithstanding any provisions to the contrary
in this Plan, the operation of this Plan shall be modified
as set forth below in this Section 17. These modifications
shall only apply with respect to Target Awards for the
Performance Year in which a Change in Control occurs.
(b) Notwithstanding any provision to the contrary
in this Plan, within ten (10) days after the Change in Con-
trol of Bancorp each Participant shall be paid 100% of his
or her Target Award for the year in which the Change in Con-
trol occurs, based on the base pay rate then in effect.
(c) A "Change in Control" of Bancorp means and
shall be deemed to have occurred if and when any one of the
following five events occurs: (i) within the meaning of
Section 13(d) of the Securities Exchange Act of 1934, any
person or group becomes a beneficial owner, directly or
indirectly, of securities of Bancorp representing 20% or
more of the combined voting power of Bancorp's then outstand
ing securities; (ii) individuals who were members of the
Board of Directors of Bancorp immediately prior to a meeting
of the stockholders of Bancorp involving a contest for the
election of Directors shall not constitute a majority of
the Board of Directors following such election; (iii) the
stockholders of Bancorp approve the dissolution or
liquidation of Bancorp; (iv) the stockholders of Bancorp
approve an agreement to merge or consolidate, or otherwise
organize, with or into one or more entities which are not
subsidiaries, as a result of which less than 50% of the
outstanding voting securities of the surviving or resulting
entity are, or are to be, owned by former stockholders of
Bancorp (excluding from the term "former stockholders" a
stockholder who is, or as a result of the transaction in
question becomes, an "affiliate," as that term is used in
the Securities Exchange Act of 1934 and the Rules
promulgated thereunder, of any party to such merger,
consolidation or reorganization); or (v) the stockholders of
Bancorp approve the sale of substantially all of Bancorp's
business and/or assets to a person or entity which is not a
subsidiary.
(d) Any Participant shall be entitled to refuse
all or any portion of any Target Award under this Plan if he
or she determines that receipt of such payment may result in
adverse tax consequences to him or her. Bancorp shall be
totally and permanently relieved of any obligation to pay
any Award which a Participant explicitly so refuses in
writing.
18. Provisions Applicable to Offsets for Split-Dollar
Life Insurance Agreements.
(a) Notwithstanding anything contained herein to
the contrary, any benefits payable under this Plan shall be
offset by the value of benefits received by the Participant
under certain life insurance policies as set forth in this
Section. Participants in this Plan may own life insurance
policies (the "Policies") purchased on their behalf by
Bancorp. The ownership of these Policies by each
Participant is, however, subject to certain conditions (set
forth in a "Split-Dollar Life Insurance Agreement" between
each Participant and Bancorp) and, if the Participant fails
to meet the conditions set forth in the Split-Dollar Life
Insurance Agreement, the Participant may lose certain rights
under the Policy.
(b) In the event that a Participant satisfies the
conditions specified in Section 4 or 5 of the Split-Dollar
Life Insurance Agreement, so that the Participant or his or
her beneficiary becomes entitled to benefits under one of
those sections, the value of those benefits shall constitute
an offset to any benefits otherwise payable under this Plan.
As the case may be, this offset (the "Offset Value") shall
be equal to the value of benefits payable under the Split-
Dollar Life Insurance Agreement and shall be determined as
of the date that the Participant satisfies the conditions
specified in Section 4 or 5 of the Split-Dollar Life Insur-
ance Agreement, that is, the cash value of the Policy or, in
the case of the Participant's death, the death benefit
payable to the beneficiary under the Policy reduced by one
times the Participant's annual base salary (maximum
$500,000) at the time of death. The Offset Value shall then
be compared to the Participant's deferred award (including
interest accumulated on such award) under this Plan, and
such amounts shall be reduced, but not to less than zero, by
the Offset Value.
(c) If the Policy in subsection (a) is not on the
life of the Participant and the insured dies prior to dis-
tribution of benefits under this Plan, then the value of the
benefits received by the Participant under the Policy will
offset the Participant's deferred award (including interest
accumulated on such award) under this Plan. This offset
("Offset Value") shall be equal to the amount of death
benefit payable to the Participant and shall be determined
as of the date of death of the insured. This Offset Value
shall then be compared to the Participant's deferred award
(including interest accumulated on such award) under this
Plan, and such amounts shall be reduced, but not to be less
than zero, by the Offset Value.
(d) Notwithstanding anything contained herein to
the contrary, if, in addition to the benefits otherwise
payable under this Plan, the Participant or his or her
beneficiary is entitled to benefits under the plans set
forth in Table B. The "Offset Value" shall be applied to
offset the benefits payable under this Plan and such plans
in the order set forth in Table B:
19. Dispute Resolution.
(a) If a Participant who has applied for
retirement under the Retirement Plan for Employees of First
Interstate Bancorp and its Affiliates, or, in the case of
the Participant's death, his or her beneficiary, disagrees
with the Compensation Committee of the Board of Directors of
First Interstate Bancorp (the "Administrator") regarding the
interpretation of this Plan, and if the Participant or his
or her beneficiary has exhausted the claims review and
appeal procedure under Section 503 of the Employee
Retirement Income Security Act of 1974 with respect to his
or her claim for benefits under this Plan, then the
Participant or his or her beneficiary may, if he or she
desires, submit any claim for benefits under this Plan or
dispute regarding the interpretation of this Plan to arbi-
tration; provided that, the request for arbitration must be
brought within the time limit for bringing a judicial
proceeding with respect to such claim for benefits, or if
less, within one year after the Administrator's final denial
of such claim for benefits. This right to select
arbitration shall be solely that of Participant or his or
her beneficiary and Participant or his or her beneficiary
may decide whether or not to arbitrate in his or her discre-
tion. The "right to select arbitration" is not mandatory on
Participant or his or her beneficiary and Participant or his
or her beneficiary may choose in lieu thereof to bring an
action in an appropriate civil court. Once an arbitration
is commenced, however, it may not be discontinued without
the mutual consent of both parties to the arbitration.
During the lifetime of the Participant only he or she can
use the arbitration procedure set forth in this section.
(b) Any claim for arbitration may be filed in
writing with an arbitrator of Participant's or beneficiary's
choice who is selected by the method described in the next
four sentences. The first step of the selection shall
consist of Participant or his or her beneficiary submitting
a list of five potential arbitrators to the Administrator.
Each of the five arbitrators must be either (1) a member of
the National Academy of Arbitrators located in the State of
California or (2) a retired California Superior Court or
Appellate Court judge. Within one week after receipt of the
list, the Administrator shall select one of the five
arbitrators as the arbitrator for the dispute in question.
If the Administrator fails to select an arbitrator in a
timely manner, Participant or his or her beneficiary shall
then designate one of the five arbitrators as the arbitrator
for the dispute in question.
(c) The arbitration hearing shall be held within
seven days (or as soon thereafter as possible) after the
picking of the arbitrator. No continuance of said hearing
shall be allowed without the mutual consent of Participant
or his or her beneficiary and the Administrator. Absence
from or nonparticipation at the hearing by either party
shall not prevent the issuance of an award. Hearing
procedures which will expedite the hearing may be ordered at
the arbitrator's discretion, and the arbitrator may close
the hearing in his or her sole discretion when he or she
decides he or she has heard sufficient evidence to satisfy
issuance of an award.
(d) The arbitrator's award shall be rendered as
expeditiously as possible and in no event later than one
week after the close of the hearing. In the event the
arbitrator finds that Bancorp has violated the terms of this
Plan, he or she shall order Bancorp immediately to take the
necessary steps to remedy such violation. The award of the
arbitrator shall be final and binding upon the parties. The
award may be enforced in any appropriate court as soon as
possible after its rendition. If an action is brought to
confirm the award, both Bancorp and Participant agree that
no appeal shall be taken by either party from any decision
rendered in such action.
(e) Solely for purposes of determining the allo-
cation of the costs described in this Section 19(e), the
Administrator will be considered the prevailing party in a
dispute if the arbitrator determines (1) that Bancorp has
not violated the terms of this Plan, and (2) the claim by
Participant or his or her beneficiary was not made in good
faith. Otherwise, Participant or his or her beneficiary
will be considered the prevailing party. In the event that
Bancorp is the prevailing party, the fee of the arbitrator
and all necessary expenses of the hearing (excluding any
attorneys' fees incurred by Bancorp) including stenographic
reporter, if employed, shall be paid by the other party. In
the event that Participant or his or her beneficiary is the
prevailing party, the fee of the arbitrator and all
necessary expenses of the hearing (including all attorneys'
fees incurred by Participant or his or her beneficiary in
pursuing his or her claim), including the fees of a steno-
graphic reporter if employed, shall be paid by Bancorp.
IN WITNESS WHEREOF, First Interstate Bancorp
hereby adopts this 1995 Regional Executive Incentive Plan as
of January 1, 1995.
FIRST INTERSTATE BANCORP
By ___________________________
TABLE A
1995 REGIONAL EXECUTIVE INCENTIVE PLAN
I. Target Award Percentage
Target Award
Participant Level Percentage
California 37.5
Northwest 37.5
Texas 37.5
Southwest 37.5
TABLE B
EMPLOYEE BENEFIT PLANS
FIRST The First Interstate Bancorp Excess Benefit Retirement
Plan;
SECOND The First Interstate Bancorp Supplemental Executive
Retirement Plan;
THIRD The Supplemental Employee Savings Plan of First Interstate
Bancorp;
FOURTH The First Interstate Bancorp Management Incentive Plans;
FIFTH The First Interstate Bancorp Annual Incentive Compensation
Plans;
SIXTH The First Interstate Bancorp Profit Improvement Plans;
SEVENTH The First Interstate Bancorp Corporate Executive Incentive
Plan;
EIGHTH The First Interstate Bancorp Regional Executive Incentive
Plan; and
NINTH The First Interstate Bancorp Supplemental Retirement Plans.
-7-
EXHIBIT (10.7)
FIRST INTERSTATE
CORPORATE EXECUTIVE INCENTIVE PLAN
Effective January 1, 1995
1. Objectives. The Corporate Executive Incentive
Plan is designed to focus the efforts of certain key
executive employees of First Interstate Bancorp and the
Regions on the continued improvement in the performance of
First Interstate, and to aid in attracting, motivating and
retaining superior executives by providing an incentive and
reward for those executive employees who contribute most to
the operating progress and performance of the First
Interstate.
2. Definitions. The following definitions shall
be applicable to the terms used in the Plan:
(a) "Award" means a cash distribution to be made
to a Participant for a Performance Year as determined in
accordance with the provisions of the Plan.
(b) "Bancorp" means First Interstate Bancorp, a
Delaware corporation.
(c) "Change in Control" shall have the meaning
set forth in Section 16.
(d) "Committee" means the Compensation Committee
of the Board of Directors of Bancorp.
(e) "First Interstate" means the consolidated
group of companies comprising First Interstate Bancorp.
(f) "Fiscal Year" means the customary fiscal
year of Bancorp.
(g) "Management Incentive Plan" means the First
Interstate annual Management Incentive Plan.
(h) "Offset Value" shall have the meaning set
forth in Section 17(b) and (c).
(i) "Participant" means an eligible executive
who, pursuant to Section 4 hereof, automatically becomes a
participant in the Plan for a Fiscal Year.
(j) "Performance Year" means the Fiscal Year.
(k) "Plan" means this First Interstate Corporate
Executive Incentive Plan, as set forth herein.
(l) "Policies" shall have the meaning set forth
in Section 17(a).
(m) "PSP" shall have the meaning set forth in
Section 6(c).
(n) "Region" means any of the California,
Northwest, Southwest or Texas regions as defined by First
Interstate Bancorp consisting of First Interstate banks.
(o) "Split-Dollar Life Insurance Agreement"
shall have the meaning set forth in Section 17(a).
(p) "Subsidiary" means a bank, corporation,
association or similar organization of which the majority of
the outstanding shares of voting stock is owned by Bancorp,
directly or indirectly.
(q) "Target Award" is determined for each Par-
ticipant by multiplying the Participant's base pay rate in
effect at the end of the Performance Year by the Target
Award Percentage applicable to the Participant set forth
under Item I of the Target Award Guidelines attached as
Table A.
3. Adoption and Administration of the Plan. The Plan
shall become effective as of January 1, 1995 upon adoption
by the Board of Directors of Bancorp, subject to shareholder
approval. Subject to the provisions of this Plan and in the
absence of specific action by the Committee, this Plan shall
be administered by the Administrator. The Plan shall not be
modified, terminated or suspended except with the consent of
the Committee. All decisions of the Administrator or the
Committee shall be final and binding.
4. Participation and Target Awards.
(a) Determination of Participants and Target
Awards. The Chairman of the Board of Directors of Bancorp,
the Chief Executive Officer of Bancorp, the Chief Operating
Officer of Bancorp and the Chief Executive Officer of each
Region shall be Participants in the Plan. Except as provided
in Sections 7(b) and 9, to be considered eligible for an
Award, a Participant must be participating in the Plan, the
Regional Executive Incentive Plan or the Management Incent-
ive Plan for at least six months during the Performance Year.
(b) Notification. Each Participant shall be noti-
fied of his or her eligibility for participation in the Plan
for such Performance Year or shall be notified of his or her
termination, as applicable, by a letter from the Administra
tor or his or her designee. A copy of this Plan shall be
provided to each Participant. A Participant shall have no
right to or interest in an Award unless and until the
Participant's Award has been determined and certified by the
Committee.
5. Determination of Award.
(a) Performance Review. As soon as practicable
after the close of each Performance Year, a determination of
the First Interstate's performance will be made by the
Committee.
(b) Awards. The Awards shall be available to
Participants on the basis of the goals and percentages
described in Table B. Based on the goals and the extent to
which they are achieved, the Committee shall calculate the
Award by using the formula contained in Table B. The
Committee shall compare First Interstate's performance with
the performance goals and, if achieved, shall certify, in
writing, that the performance goals and any other material
terms were in fact satisfied.
(c) Limitations. The Committee shall have the
right to reduce an Award to an actual award percentage of no
less than 0% upon attainment of a goal for which an Award is
payable.
6. Time of Payment of Awards, Deferrals, Hardships.
(a) Payment Date. Except as provided in (b) below,
as soon as practicable after the determination of Awards and
certification by the Committee, any Award, less any legally
required withholding, shall be paid to the Participant or,
in the event of a Participant's death, in accordance with
Section 7 hereof.
(b) Deferrals. In the year prior to the year in
which an Award is earned, a Participant may elect, on a
form specified by Bancorp, to defer the receipt of any Award
to which he or she may be entitled for such Performance Year
until the earlier of (1) termination of employment (the
first to occur of retirement, death, disability, or
termination of employment) or (2) January 1 of a specified
calendar year. In such event:
(i) The amount the Participant elects, net
of any legally required withholding, shall become the
deferred Award;
(ii) Interest on such deferred Award will be
the Moody's Investment Grade Corporate Bond Yield as
shown in Moody's Yield Average for the last full month
of each previous calendar year and will be credited
quarterly; and
(iii) Such deferred Award, plus accumulated
interest, shall be paid upon the earlier of (1) or (2)
above, in the form of a lump sum, equal annual install-
ments over not more than 10 years, or such other method
as may be selected by the Participant and agreed to by
the Committee.
(c) Deferrals into Performance Units. As an
alternative to a deferral payable in cash, as described in
subsection (b), the deferred Award may, if the Participant
elects and the Committee permits, be invested in Performance
Units under Section 7.3 of the First Interstate Bancorp 1995
Performance Stock Plan (the "PSP"). The amount deferred
shall be deemed to be converted into Performance Units under
Section 7.3 of the PSP as of the date the Award would have
been payable if no deferral had occurred, based on the fair
market value, determined in accordance with the terms of the
PSP, of the common stock of Bancorp on that date. The
timing and manner of payment of deferrals shall be governed
by a Performance Unit Agreement entered into by the
Participant under the PSP.
(d) Hardship Withdrawal. A Participant may
request in writing, citing the reasons for the request, that
the Committee permit the early payment of all or part of a
deferred Award. Within 90 days after receipt, the Committee
shall rule on the request. The Committee shall grant the re-
quest only if, in its sole discretion, the Committee makes a
specific finding of financial hardship that is an
unanticipated emergency caused by an event beyond the
control of the Participant. The amount payable hereunder
shall not exceed the amount necessary to avoid such
hardship.
(e) Acceleration of Deferrals. Anything in this
Plan to the contrary notwithstanding, the Committee may
accelerate the payment of all deferred Awards with respect
to Bancorp or any Subsidiary at any time in its sole
discretion. In addition, the Committee reserves the right to
pay any deferred Awards in the form of a lump sum if the
amount is less than $10,000.00.
7. Death of a Participant.
(a) Beneficiary Designation. A Participant may
file a designation of a beneficiary or beneficiaries on a
form to be provided which designation may be changed or re-
voked by the Participant's sole action, provided that such
change or revocation is filed in written form.
(b) Death during Performance Year. In case of the
death of a Participant during a Performance Year, Bancorp
may pay a pro rata portion of the Award to which the
Participant would have been entitled for such Performance
Year. Such pro rata portion shall be equal to (1) the ratio
which the Participant's completed calendar months of
participation during the Performance Year bears to 12
multiplied by (2) the amount the Committee determines the
Participant would have been entitled to had he or she lived.
(c) Death after Performance Year. In case of the
death of a Participant after the end of a Performance Year,
but before the delivery of an Award to which he or she may
be entitled, such Award shall be delivered to the
Participant's designated beneficiary.
(d) Failure to Designate Beneficiary. If a
Participant dies having failed to designate any beneficiary,
or if no beneficiary survives the Participant or survives to
the date of any payment in question, the amount otherwise
payable to such beneficiary shall be paid to the
Participant's surviving spouse, if any, and otherwise to the
Participant's heirs at law, as determined under the law
governing succession to personal property for the state in
which the Participant resided on the day the Participant
died.
8. Transfer of a Participant. In the event a Parti-
cipant for any Performance Year is transferred during such
Performance Year from Bancorp or a Subsidiary to another
Subsidiary or Bancorp, such Participant's Award, consistent
with Subsection 4(a), shall normally be calculated as the
sum of the following:
(a) the Award the Participant would have received,
had he or she not been transferred, multiplied by the ratio
which his or her completed months of participation during
such Performance Year prior to the transfer bears to 12,
plus
(b) the Award, if any, the Participant is entitled
to receive based on service after the transfer determined on
a Performance Year basis and then multiplied by the ratio
which his or her completed months of participation during
such Performance Year subsequent to such transfer bears to
12.
9. Retirement or Disability of Participant. In case
a Participant becomes totally and permanently disabled
during a Performance Year, or retires from active employment
after attaining age 55 during a Performance Year, the
Committee may but need not grant the Participant an Award.
Generally, if an Award is granted, it will be based on a pro
rata portion of the Award (but in no event greater than the
full Award that the Participant would have received upon
satisfaction of the performance goals).
10. Termination of Employment. If the employment of a
Participant with Bancorp or a Subsidiary is terminated prior
to the certification of the Committee for reasons other than
those specified in Sections 7, 8, or 9 hereof, the right to
and the amount of an Award shall be forfeited.
11. Termination and Modification. No Award shall be
granted under the Plan after any date as of which the Plan
shall have been terminated. The Board of Directors of
Bancorp or the Committee may at any time modify, terminate
or from time to time suspend and, if suspended, may
reinstate the provisions of this Plan, including any of the
tables. No Award shall be increased and no Award shall be
reallocated to increase the Award to another Participant.
12. Effect of Other Plans. Eligibility in or the
receipt of any Award under the Plan shall not be affected by
or affect any other compensation or benefit plans in effect
for Bancorp or a Subsidiary.
13. No Employment Rights. Nothing contained in nor
any action under the Plan will confer upon any individual
any right to continue in the employment of Bancorp or a
Subsidiary and does not constitute any contract or agreement
of employment or interfere in any way with the right of
Bancorp or a Subsidiary to terminate any individual's
employment.
14. Withholding Tax. As required by law, federal,
state or local taxes that are subject to the withholding of
tax at the source shall be withheld by Bancorp or a
Subsidiary as necessary to satisfy such requirements.
15. Effective Date. Subject to shareholder approval,
this Plan shall be effective as of January 1, 1995.
16. Provisions Applicable in the Event of a Change in
Control.
(a) In the event of a "Change in Control" (as de-
fined below), notwithstanding any provisions to the contrary
in this Plan, the operation of this Plan shall be modified
as set forth below in this Section 16. These modifications
shall only apply with respect to Target Awards for the
Performance Year in which a Change in Control occurs.
(b) Notwithstanding any provision to the contrary
in this Plan, within ten (10) days after the Change in Con-
trol of Bancorp each Participant shall be paid 100% of his
or her Target Award for the year in which the Change in Con-
trol occurs, based on the base pay rate then in effect.
(c) A "Change in Control" of Bancorp means and
shall be deemed to have occurred if and when any one of the
following five events occurs: (i) within the meaning of
Section 13(d) of the Securities Exchange Act of 1934, any
person or group becomes a beneficial owner, directly or
indirectly, of securities of Bancorp representing 20% or
more of the combined voting power of Bancorp's then outstand
ing securities; (ii) individuals who were members of the
Board of Directors of Bancorp immediately prior to a meeting
of the stockholders of Bancorp involving a contest for the
election of Directors shall not constitute a majority of
the Board of Directors following such election; (iii) the
stockholders of Bancorp approve the dissolution or
liquidation of Bancorp; (iv) the stockholders of Bancorp
approve an agreement to merge or consolidate, or otherwise
organize, with or into one or more entities which are not
subsidiaries, as a result of which less than 50% of the
outstanding voting securities of the surviving or resulting
entity are, or are to be, owned by former stockholders of
Bancorp (excluding from the term "former stockholders" a
stockholder who is, or as a result of the transaction in
question becomes, an "affiliate," as that term is used in
the Securities Exchange Act of 1934 and the Rules
promulgated thereunder, of any party to such merger,
consolidation or reorganization); or (v) the stockholders of
Bancorp approve the sale of substantially all of Bancorp's
business and/or assets to a person or entity which is not a
subsidiary.
(d) Any Participant shall be entitled to refuse
all or any portion of any Target Award under this Plan if he
or she determines that receipt of such payment may result
in adverse tax consequences to him or her. Bancorp shall be
totally and permanently relieved of any obligation to pay
any Award which a Participant explicitly so refuses in
writing.
17. Provisions Applicable to Offsets for Split-Dollar
Life Insurance Agreements.
(a) Notwithstanding anything contained herein to
the contrary, any benefits payable under this Plan shall be
offset by the value of benefits received by the Participant
under certain life insurance policies as set forth in this
Section. Participants in this Plan may own life insurance
policies (the "Policies") purchased on their behalf by
Bancorp. The ownership of these Policies by each
Participant is, however, subject to certain conditions (set
forth in a "Split-Dollar Life Insurance Agreement" between
each Participant and Bancorp) and, if the Participant fails
to meet the conditions set forth in the Split-Dollar Life
Insurance Agreement, the Participant may lose certain rights
under the Policy.
(b) In the event that a Participant satisfies the
conditions specified in Section 4 or 5 of the Split-Dollar
Life Insurance Agreement, so that the Participant or his or
her beneficiary becomes entitled to benefits under one of
those sections, the value of those benefits shall constitute
an offset to any benefits otherwise payable under this Plan.
As the case may be, this offset (the "Offset Value") shall
be equal to the value of benefits payable under the Split-
Dollar Life Insurance Agreement and shall be determined as
of the date that the Participant satisfies the conditions
specified in Section 4 or 5 of the Split-Dollar Life Insur-
ance Agreement, that is, the cash value of the Policy or, in
the case of the Participant's death, the death benefit
payable to the beneficiary under the Policy reduced by one
times the Participant's annual base salary (maximum
$500,000) at the time of death. The Offset Value shall then
be compared to the Participant's deferred award (including
interest accumulated on such award) under this Plan, and
such amounts shall be reduced, but not to less than zero, by
the Offset Value.
(c) If the Policy in subsection (a) is not on the
life of the Participant and the insured dies prior to dis-
tribution of benefits under this Plan, then the value of the
benefits received by the Participant under the Policy will
offset the Participant's deferred award (including interest
accumulated on such award) under this Plan. This offset
("Offset Value") shall be equal to the amount of death
benefit payable to the Participant and shall be determined
as of the date of death of the insured. This Offset Value
shall then be compared to the Participant's deferred award
(including interest accumulated on such award) under this
Plan, and such amounts shall be reduced, but not to be less
than zero, by the Offset Value.
(d) Notwithstanding anything contained herein to
the contrary, if, in addition to the benefits otherwise
payable under this Plan, the Participant or his or her
beneficiary is entitled to benefits under any of the plans
set forth in Table C, the "Offset Value" shall be applied to
offset the benefits payable under this Plan and such plans
in the order set forth in Table C.
18. Dispute Resolution.
(a) If a Participant who has applied for
retirement under the Retirement Plan for Employees of First
Interstate Bancorp and its Affiliates, or, in the case of
the Participant's death, his or her beneficiary, disagrees
with the Committee regarding the interpretation of this
Plan, and if the Participant or his or her beneficiary has
exhausted the claims review and appeal procedure under
Section 503 of the Employee Retirement Income Security Act
of 1974 with respect to his or her claim for benefits under
this Plan, then the Participant or his or her beneficiary
may, if he or she desires, submit any claim for benefits
under this Plan or dispute regarding the interpretation of
this Plan to arbitration; provided that, the request for
arbitration must be brought within the time limit for
bringing a judicial proceeding with respect to such claim
for benefits, or if less, within one year after the
Committee's final denial of such claim for benefits. This
right to select arbitration shall be solely that of Partici-
pant or his or her beneficiary and Participant or his or her
beneficiary may decide whether or not to arbitrate in his or
her discretion. The "right to select arbitration" is not
mandatory on Participant or his or her beneficiary and
Participant or his or her beneficiary may choose in lieu
thereof to bring an action in an appropriate civil court.
Once an arbitration is commenced, however, it may not be
discontinued without the mutual consent of both parties to
the arbitration. During the lifetime of the Participant
only he or she can use the arbitration procedure set forth
in this section.
(b) Any claim for arbitration may be filed in
writing with an arbitrator of Participant's or beneficiary's
choice who is selected by the method described in the next
four sentences. The first step of the selection shall
consist of Participant or his or her beneficiary submitting
a list of five potential arbitrators to the Committee. Each
of the five arbitrators must be either (1) a member of the
National Academy of Arbitrators located in the State of
California or (2) a retired California Superior Court or
Appellate Court judge. Within one week after receipt of the
list, the Committee shall select one of the five arbitrators
as the arbitrator for the dispute in question. If the
Committee fails to select an arbitrator in a timely manner,
Participant or his or her beneficiary shall then designate
one of the five arbitrators as the arbitrator for the
dispute in question.
(c) The arbitration hearing shall be held within
seven days (or as soon thereafter as possible) after the
picking of the arbitrator. No continuance of said hearing
shall be allowed without the mutual consent of Participant
or his or her beneficiary and the Committee. Absence from
or nonparticipation at the hearing by either party shall not
prevent the issuance of an award. Hearing procedures which
will expedite the hearing may be ordered at the arbitrator's
discretion, and the arbitrator may close the hearing in his
or her sole discretion when he or she decides he or she has
heard sufficient evidence to satisfy issuance of an award.
(d) The arbitrator's award shall be rendered as
expeditiously as possible and in no event later than one
week after the close of the hearing. In the event the
arbitrator finds that Bancorp has violated the terms of this
Plan, he or she shall order Bancorp immediately to take the
necessary steps to remedy such violation. The award of the
arbitrator shall be final and binding upon the parties. The
award may be enforced in any appropriate court as soon as
possible after its rendition. If an action is brought to
confirm the award, both Bancorp and Participant agree that
no appeal shall be taken by either party from any decision
rendered in such action.
(e) Solely for purposes of determining the al-
location of the costs described in this Section 18(e), the
Committee will be considered the prevailing party in a
dispute if the arbitrator determines (1) that Bancorp has
not violated the terms of this Plan, and (2) the claim by
the Participant or his or her beneficiary was not made in
good faith. Otherwise, the Participant or his or her
beneficiary will be considered the prevailing party. In the
event that Bancorp is the prevailing party, the fee of the
arbitrator and all necessary expenses of the hearing
(excluding any attorneys' fees incurred by Bancorp)
including stenographic reporter, if employed, shall be paid
by the other party. In the event that the Participant or
his or her beneficiary is the prevailing party, the fee of
the arbitrator and all necessary expenses of the hearing
(including all attorneys' fees incurred by the Participant
or his or her beneficiary in pursuing his or her claim),
including the fees of a stenographic reporter if employed,
shall be paid by Bancorp.
IN WITNESS WHEREOF, First Interstate Bancorp
hereby adopts this First Interstate Corporate Executive
Incentive Plan as of January 1, 1995, subject to shareholder
approval.
FIRST INTERSTATE BANCORP
By ___________________________
TABLE A
1995 CORPORATE EXECUTIVE INCENTIVE PLAN
I. Target Award Percentage
Target Award
Participant Level Percentage
Chief Executive Officer 90%
of the Corporation
Chief Operating Officer 90%
of the Corporation
Chief Executive Officer 30%
of a Region
II. Maximum Award Percentage
150% of Target Award Percentage
III. Salary Data for Computation of Awards
Chairman $790,000
Chief Executive Officer $720,000
Chief Operating Officer $520,000
Chief Executive Officer - CA Region $435,000
Chief Executive Officer - SW Region $225,000
Chief Executive Officer - NW Region $395,000
Chief Executive Officer - TX Region $345,000
TABLE B
CORPORATE EXECUTIVE INCENTIVE PLAN GOAL'S
I. ROE
Consolidated return on average common equity (ROCE) as
published in the Annual Report, will be measured against
the 10 year median ROCE of the peer group as well as the
"performance year's" median peer group ROCE.
FI ROCE
50% of the total award is based on a matrix consisting
of a scale of six ROCE achievement levels, anchored by
the 10 year median ROCE of the peer group (14% for
1994) and each of the achievement levels is related to
a "% of target award" payout. If First Interstate
earned the median ROCE, the payout for this portion of
the award would be 50% of the 50% or 25%.
FI ROCE % of Target Award Payout "A"
<14% 0%
14% 50%
15% 60%
16% 70%
17% 85%
18% 100%
19% or > 125%
FI ROCE RELATIVE TO "PERFORMANCE YEAR" PEER GROUP MEDIAN ROCE
50% of the total award is based on a matrix consisting
of a scale of six ROCE achievement levels, anchored by
the "performance year's" median peer group ROCE and
each of the achievement levels is related to a " % of
target award" payout. If First Interstate earned the
median ROCE, for the payout this portion of the award
would be 50% of the 50% or 25%.
FI ROCE % of Target Award Payout "B"
<Median ROCE % 0%
Median ROCE % 50%
Median + 1% 60%
Median + 2% 70%
Median + 3% 85%
Median + 4% 100%
Median + 5% or > 125%
CALCULATION FORMULA
A Participant's Award is calculated by multiplying the
Participant's Target Award by the following percentage:
(A x 50%) + (B x 50%)
where "A" is the percentage representing the Corporation's
performance against it's internal ROCE objective; and "B" is
the percentage representing the Corporation's performance
compared to the peer group median ROCE for the Performance
Year.
The Target Award for the Chief Executive Officer of the
Corporation and the President of the Corporation is 90% of
year-end base salary. The Target Award for all other
Participants is 30% of year-end base salary. For purposes of
calculating Awards, year-end base salary shall not be treated
as increasing in any performance Year by more than the average
salary increases for employees at this level at comparable
banks, taking into consideration, increases on account of
promotions.
II. Revenue.
III. Gross Income. A Participant's Target Award with respect to
Gross Income is 0%.
IV. Pre-Tax Income. A Participant's Target Award with respect to
Pre-Tax Income is 0%.
V. Deposits. A Participant's Target Award with respect to
Deposits is 0%.
VII. Non-Interest Expenses. A Participant's Target Award with
respect to Non-Interest Expenses is 0%.
VIII.Non-Performing Assets. A Participant's Target Award with
respect to Non-Performing Assets is 0%.
IX. Total Shareholder Return. A Participant's Target Award with
respect to Total Shareholder Return is 0%.
PEER GROUP
BankAmerica
NationsBank
BancOne
First Union
PNC Financial
Wells Fargo
Norwest
Fleet Financial
NBD Bancorp
SunTrust
Barnett Banks
Wachovia
Mellon Bank
First Fidelity
KeyCorp
National City
Society Corp
US Bancorp
First of America
If any of the peer banks do not continue to exist as a result
of merger, the remaining banks will be used as the peer group.
TABLE C
APPLICABLE PLANS AND ORDER OF DESCENT
FIRST The First Interstate Bancorp Excess Benefit Retire
ment Plan;
SECOND The First Interstate Bancorp Supplemental Executive
Retirement Plan;
THIRD The Supplemental Employee Savings Plan of First
Interstate Bancorp;
FOURTH The First Interstate Bancorp Management Incentive
Plans;
FIFTH The First Interstate Bancorp Annual Incentive
Compensation Plans;
SIXTH The First Interstate Bancorp Profit Improvement
Plans;
SEVENTH The First Interstate Bancorp Corporate Executive
Incentive Plan;
EIGHTH The First Interstate Bancorp Regional Executive
Incentive Plan; and
NINTH The First Interstate Bancorp Supplemental Retirement
Program.
-4-
EXHIBIT (10.8)
FIRST INTERSTATE
1995 MANAGEMENT INCENTIVE PLAN
Effective January 1, 1995
1. Objectives. The 1995 Management Incentive Plan is
designed to focus the efforts of certain key employees of
First Interstate on the continued improvement in the
performance of First Interstate and to aid in attracting,
motivating and retaining superior executives by providing an
incentive and reward for those key employees who contribute
most to the operating progress and performance of First
Interstate.
2. Definitions. The following definitions shall be
applicable to the terms used in the Plan:
(a) "Administrator" means the Chief Executive
Officer of Bancorp.
(b) "Award" means a cash distribution to be made
to a Participant for a Performance Year as determined in
accordance with the provisions of the Plan.
(c) "Award Fund" means the total of the Target
Awards for each Participant as determined and approved in
accordance with Section 5 hereof.
(d) "Bancorp" means First Interstate Bancorp, a
Delaware corporation.
(e) "Change in Control" shall have the meaning
set forth in Section 17.
(f) "Committee" means the Compensation Committee
of the Board of Directors of Bancorp.
(g) "First Interstate" means the consolidated
group of companies comprising First Interstate Bancorp.
(h) "Fiscal Year" means the customary fiscal year
of Bancorp.
(i) "Offset Value" shall have the meaning set
forth in Section 18(b) and (c).
(j) "Participant" means a person who, pursuant to
Section 4 hereof, is designated as a Participant in the Plan
for a Fiscal Year.
(k) "Performance Year" means the Fiscal Year.
(l) "Plan" means this First Interstate 1995
Management Incentive Plan, as set forth herein.
(m) "Policies" shall have the meaning set forth
in Section 18(a).
(n) "PSP" shall have the meaning set forth in
Section 7(c).
(o) "Split-Dollar Life Insurance Agreement" shall
have the meaning set forth in Section 18(a).
(p) "Subsidiary" means a bank, corporation,
association or similar organization of which the majority of
the outstanding shares of voting stock is owned directly or
indirectly by Bancorp, directly or indirectly.
(q) "Target Award" is determined for each
Participant by multiplying the Participant's base pay rate
in effect at the end of the Performance Year by the Target
Award Percentage applicable to the Participant set forth
under Item I of the Target Award Guidelines attached as
Table A.
3. Adoption and Administration of the Plan. The Plan
shall become effective as of January 1, 1995 upon adoption
by the Committee. Subject to the provisions of this Plan
and in the absence of specific action by the Committee, this
Plan shall be administered by the Administrator. The Plan
shall not be modified except with the consent of the
Committee. All decisions of the Administrator or the
Committee shall be final and binding.
4. Participation and Target Awards.
(a) Determination of Participants and Target
Awards. Prior to the beginning of each Performance Year, or
as soon as practicable thereafter, the Administrator shall
prepare a list of proposed Participants in the Plan for
such Performance Year and shall, for each such Participant
establish a preliminary Target Award Percentage. Each
Subsidiary shall be given an opportunity to make suggestions
with respect to both proposed Participants and their
preliminary Target Award Percentages. Any such suggestions
shall, however, not be binding on the Administrator.
Additional Participants may be included during the
Performance Year and, as provided in the Plan, participation
for an individual may be terminated. Except as provided in
Section 8(b) and 10, to be considered eligible for an Award,
a Participant must participate in the Plan for at least six
months during the Performance Year.
(b) Notification. Each Participant shall be noti-
fied of his or her participation in the Plan for such Per-
formance Year or shall be notified of his or her termina-
tion, as applicable, by a letter from the Administrator or
his or her designee. A summary of this Plan shall be pro-
vided to each Participant. A Participant shall have no
right to or interest in an Award unless and until the
Participant's Award has been determined and allocated to
the Participant.
5. Determination of Award Fund.
(a) Performance Review. As soon as practicable
after the close of each Performance Year, a determination of
the Corporation's performance and the performance of each
Region participating in this Plan shall be made by the
Administrator. The Administrator's determination shall be
subject to approval by the Committee.
(b) Award Fund. The Committee shall determine the
total amount of the Award Fund authorized for First
Interstate for the Performance Year. The Award Fund shall
contain a separate pool of funds for Bancorp and each
participating Subsidiary. The Award Fund amount for Bancorp
and each participating Subsidiary may be determined in any
manner the Committee deems appropriate from time to time.
Without limiting the Committee's discretion to choose other
methods to calculate the size of the Award Fund, it is
anticipated that the Award Fund amount for the Participants
employed by Bancorp or a participating Subsidiary will equal
the sum of the Target Awards for each Participant of Bancorp
or the participating Subsidiary, as applicable, multiplied
by the following percentage calculated for such a
Participant:
(AxC) + (BxD),
where A is the percentage, if any, of the Participant's
Award to be based on First Interstate's performance, B is
the percentage, if any, of the Participant's Award to be
based on a Region's performance, as such percentages are set
forth under Item II of the Target Award Guidelines attached
as Table A, C is a percentage representing the performance
of First Interstate determined by the Administrator, and D
is a percentage representing the performance of the Region
determined by the Administrator.
6. Allocation of Award Fund to Participants. The
Award Fund shall be available for allocation to Participants
on a totally discretionary basis in a manner designed to
give the Administrator the flexibility to take into account
the individual performance of each Participant. Based on
its evaluation of a Participant's performance, the
Administrator may determine an Award equal to any percentage
of the Participant's Target Award up to the maximum
percentage set forth under Item III of the Target Award
Guidelines attached as Table A. The total Awards determined
by the Administrator for Bancorp or a participating
Subsidiary for a Performance Year shall not exceed the
amount of the Award Fund for the particular employer for
such Performance Year. In the event the amount of the Award
Fund exceeds the total Awards for a Performance Year, such
excess shall not be carried forward for purposes of Awards
in future Performance Years. Award payments will be charged
against Bancorp or the Subsidiary for which the Participant
is an employee, as appropriate.
7. Time of Payment of Awards, Deferrals, Hardships.
(a) Payment Date. Except as provided in (b) below,
as soon as practicable after the allocation of Awards in
respect of Participants, any Award, less any legally
required withholding, shall be paid to the Participant or,
in the event of a Participant's death, in accordance with
Section 8 hereof.
(b) Deferrals. In the year prior to the year in
which the Award is earned, a Participant may elect, on a
form specified by Bancorp, to defer the receipt of any Award
to which he or she may be entitled for such Performance Year
until the earlier of (1) termination of employment (the
first to occur of retirement, death, disability, or
termination of employment) or (2) January 1 of a specified
calendar year. In such event:
(i) The amount the Participant elects, net
of any legally required withholding, shall become the
deferred Award;
(ii) Interest on such deferred Award will be
the Moody's Investment Grade Corporate Bond Yield as
shown in Moody's Yield Average for the last full month
of each previous calendar year and will be credited
quarterly; and
(iii) Such deferred Award, plus accumulated
interest, shall be paid upon the earlier of (1) or (2)
above, in the form of a lump sum, equal annual
installments over not more than 10 years, or such other
method as may be selected by the Participant and agreed
to by the Administrator.
(c) Deferrals into Performance Units. As an
alternative to a deferral payable in cash, as described in
subsection (b), the deferred Award may, if the Participant
elects and the Committee permits, be invested in Performance
Units under Section 7.3 of the First Interstate Bancorp 1991
Performance Stock Plan (the "PSP"). The amount deferred
shall be deemed to be converted into Performance Units under
Section 7.3 of the PSP as of the date the Award would have
been payable if no deferral had occurred, based on the fair
market value, determined in accordance with the terms of the
PSP, of the common stock of Bancorp on that date. The
timing and manner of payment of deferrals shall be governed
by a Performance Unit Agreement entered into by the
Participant under the PSP.
(d) Hardship Withdrawal. A Participant may request
in writing, citing the reasons for the request, that the
Committee permit the early payment of all or part of a De-
ferred Award. Within 90 days after receipt, the Committee
shall rule on the request. The Committee shall grant the re-
quest only if, in its sole discretion, the Committee makes a
specific finding of financial hardship that is an
unanticipated emergency caused by an event beyond the
control of the Participant. The amount payable hereunder
shall not exceed the amount necessary to avoid such
hardship.
(e) Acceleration of Deferrals. Anything in this
Plan to the contrary notwithstanding, the Committee may
accelerate the payment of all deferred Awards with respect
to Bancorp or any Subsidiary at any time in its sole
discretion. In addition, the Committee reserves the right to
pay any deferred Awards in the form of a lump sum if the
amount is less than $10,000.00.
8. Death of a Participant.
(a) Beneficiary Designation. A Participant may
file a designation of a beneficiary or beneficiaries on a
form to be provided which designation may be changed or
revoked by the Participant's sole action, provided that such
change or revocation is filed in written form.
(b) Death during Performance Year. In case of the
death of a Participant during a Performance Year, Bancorp or
the Subsidiary, as appropriate, may pay a pro rata portion
of the Award to which the Participant would have been
entitled for such Performance Year. Such pro rata portion
shall be equal to (1) the ratio which the Participant's
completed calendar months of participation during the
Performance Year bears to 12 multiplied by (2) the amount
the Committee determines the Participant would have been
entitled to had he or she lived.
(c) Death after Performance Year. In case of the
death of a Participant after the end of a Performance Year,
but before the delivery of an Award to which he or she may
be entitled, such Award shall be delivered to the
Participant's designated beneficiary.
(d) Failure to Designate Beneficiary. If a
Participant dies having failed to designate any beneficiary,
or if no beneficiary survives the Participant or survives to
the date of any payment in question, the amount otherwise
payable to such beneficiary shall be paid to the
Participant's surviving spouse, if any, and otherwise to the
Participant's heirs at law, as determined under the law
governing succession to personal property for the state in
which the Participant resided on the day the Participant
died.
9. Transfer of a Participant. In the event a
Participant for any Performance Year is transferred during
such Performance Year from Bancorp or a Subsidiary to
another Subsidiary or Bancorp, such Participant's Award,
consistent with Subsection 4(a), shall normally be
calculated as the sum of the following:
(a) the Award the Participant would have received
under the Plan, had he or she not been transferred, multi-
plied by the ratio which his or her completed months of
participation during such Performance Year prior to the
transfer bears to 12, plus
(b) the Award, if any, the Participant is entitled
to receive under the Plan based on service after the transf-
er determined on a Performance Year basis and then multi-
plied by the ratio which his or her completed months of
participation during such Performance Year subsequent to
such transfer bears to 12.
10. Retirement or Disability of Participant. In case
a Participant becomes totally and permanently disabled
during a Performance Year, or retires from active employment
after attaining age 55 during a Performance Year, the
Committee may but need not grant the Participant an Award.
Generally, if an Award is granted, it will be based on a pro
rata portion of the Award.
11. Termination of Employment. If the employment of a
Participant with First Interstate is terminated prior to the
approval of the Committee as specified in Section 5(a) for
reasons other than those specified in Sections 8, 9 or 10
hereof, the right to and the amount of an Award shall be
forfeited.
12. Termination and Modification. No Award shall be
granted under the Plan after any date as of which the Plan
shall have been terminated. The Board of Directors of
Bancorp or the Committee may at any time modify, terminate
or from time to time suspend and, if suspended, may
reinstate the provisions of this Plan, including Table A.
The Committee may consider but shall not be bound by sugges-
tions of participating Subsidiaries in connection with its
periodic amendment of relative weights set forth under Item
II of Table A.
13. Effect of Other Plans. Eligibility in or the
receipt of any Award under the Plan shall not be affected by
or affect any other compensation or benefit plans in effect
for First Interstate; provided, however that the receipt of
an Award under the Corporate Executive Incentive Plan in a
Performance year shall preclude participation in any Award
under this Plan for such year.
14. No Employment Rights. Nothing contained in nor
any action under the Plan will confer upon any individual
any right to continue in the employment of First Interstate
and does not constitute any contract or agreement of employ
ment or interfere in any way with the right of First
Interstate to terminate any individual's employment.
15. Withholding Tax. As required by law, federal,
state or local taxes that are subject to the withholding of
tax at the source shall be withheld by First Interstate as
necessary to satisfy such requirements.
16. Effective Date. This Plan shall be effective as
of January 1, 1995. The Plan, including Table A, shall
remain in effect as amended from time to time.
17. Provisions Applicable in the Event of a Change in
Control.
(a) In the event of a "Change in Control" (as de-
fined below), notwithstanding any provisions to the contrary
in this Plan, the operation of this Plan shall be modified
as set forth below in this Section 17. These modifications
shall only apply with respect to Target Awards for the
Performance Year in which a Change in Control occurs.
(b) Notwithstanding any provision to the contrary
in this Plan, within ten (10) days after the Change in Con-
trol of Bancorp each Participant shall be paid 100% of his
or her Target Award for the year in which the Change in
Control occurs, based on the base pay rate then in effect.
(c) A "Change in Control" of Bancorp means and
shall be deemed to have occurred if and when any one of the
following five events occurs: (i) within the meaning of
Section 13(d) of the Securities Exchange Act of 1934, any
person or group becomes a beneficial owner, directly or
indirectly, of securities of First Interstate Bancorp
representing 20% or more of the combined voting power of
First Interstate Bancorp's then outstanding securities;
(ii) individuals who were members of the Board of Directors
of First Interstate Bancorp immediately prior to a meeting
of the stockholders of First Interstate Bancorp involving a
contest for the election of Directors shall not constitute a
majority of the Board of Directors following such election;
(iii) the stockholders of First Interstate Bancorp approve
the dissolution or liquidation of First Interstate Bancorp;
(iv) the stockholders of First Interstate Bancorp approve an
agreement to merge or consolidate, or otherwise organize,
with or into one or more entities which are not
subsidiaries, as a result of which less than 50% of the
outstanding voting securities of the surviving or resulting
entity are, or are to be, owned by former stockholders of
First Interstate Bancorp (excluding from the term "former
stockholders" a stockholder who is, or as a result of the
transaction in question becomes, an "affiliate," as that
term is used in the Securities Exchange Act of 1934 and the
Rules promulgated thereunder, of any party to such merger,
consolidation or reorganization); or (v) the stockholders of
First Interstate Bancorp approve the sale of substantially
all of First Interstate Bancorp's business and/or assets to
a person or entity which is not a subsidiary.
(d) Any Participant shall be entitled to refuse
all or any portion of any Target Award under this Plan if he
or she determines that receipt of such payment may result in
adverse tax consequences to him or her. First Interstate
Bancorp shall be totally and permanently relieved of any
obligation to pay any Award which a Participant explicitly
so refuses in writing.
18. Provisions Applicable to Offsets for Split-Dollar
Life Insurance Agreements.
(a) Notwithstanding anything contained herein to
the contrary, any benefits payable under this Plan shall be
offset by the value of benefits received by the Participant
under certain life insurance policies as set forth in this
Section. Participants in this Plan may own life insurance
policies (the "Policies") purchased on their behalf by
Bancorp ("the Company"). The ownership of these Policies by
each Participant is, however, subject to certain conditions
(set forth in a "Split-Dollar Life Insurance Agreement"
between each Participant and Bancorp) and, if the
Participant fails to meet the conditions set forth in the
Split-Dollar Life Insurance Agreement, the Participant may
lose certain rights under the Policy.
(b) In the event that a Participant satisfies the
conditions specified in Section 4 or 5 of the Split-Dollar
Life Insurance Agreement, so that the Participant or his or
her beneficiary becomes entitled to benefits under one of
those sections, the value of those benefits shall constitute
an offset to any benefits otherwise payable under this Plan.
As the case may be, this offset (the "Offset Value") shall
be equal to the value of benefits payable under the Split-
Dollar Life Insurance Agreement and shall be determined as
of the date that the Participant satisfies the conditions
specified in Section 4 or 5 of the Split-Dollar Life Insur-
ance Agreement, that is, the cash value of the Policy or, in
the case of the Participant's death, the death benefit
payable to the beneficiary under the Policy reduced by one
times the Participant's annual base salary (maximum
$500,000) at the time of death. The Offset Value shall then
be compared to the Participant's deferred award (including
interest accumulated on such award) under this Plan, and
such amounts shall be reduced, but not to less than zero, by
the Offset Value.
(c) If the Policy in subsection (a) is not on the
life of the Participant and the insured dies prior to
distribution of benefits under this Plan, then the value of
the benefits received by the Participant under the Policy
will offset the Participant's deferred award (including
interest accumulated on such award) under this Plan. This
offset ("Offset Value") shall be equal to the amount of
death benefit payable to the Participant and shall be
determined as of the date of death of the insured. This
Offset Value shall then be compared to the Participant's
deferred award (including interest accumulated on such
award) under this Plan, and such amounts shall be reduced,
but not to be less than zero, by the Offset Value.
(d) Notwithstanding anything contained herein to
the contrary, if, in addition to the benefits otherwise
payable under this Plan, the Participant or his or her
beneficiary is entitled to benefits under (i) the First
Interstate Bancorp Annual Incentive Compensation Plans, (ii)
the First Interstate Bancorp Profit Improvement Plans, (iii)
the First Interstate Bancorp Management Incentive Plans,
(iv) the Supplemental Employee Savings Plan of First Inter-
state Bancorp, (v) the First Interstate Bancorp Excess
Benefit Retirement Plan, (vi) the First Interstate Bancorp
Supplemental Executive Retirement Plan; (vii) the First
Interstate Supplemental Retirement Program or (viii) the
First Interstate Executive Incentive Plans, the "Offset
Value" shall be applied to offset the benefits payable under
this Plan and such plans in the following order:
1. The First Interstate Bancorp Exces s Benefit
Retirement Plan;
2. The First Interstate Bancorp Supplemental
Executive Retirement Plan;
3. The Supplemental Employee Savings Plan of
First Interstate Bancorp;
4. The First Interstate Bancorp Management Incen-
tive Plans;
5. The First Interstate Bancorp Annual Incentive
Compensation Plans;
6. The First Interstate Bancorp Profit Improve-
ment Plans.
7. The First Interstate Bancorp Corporate Execu-
tive Incentive Plan.
8. The First Interstate Bancorp Regional Execu-
tive Incentive Plan.
9. The First Interstate Bancorp Supplemental
Retirement Program.
19. Dispute Resolution.
(a) If a Participant who has applied for
retirement under the Retirement Plan for Employees of First
Interstate Bancorp and Its Affiliates, or, in the case of
the Participant's death, his or her beneficiary, disagrees
with the Compensation Committee of the Board of Directors of
First Interstate Bancorp (the "Administrator") regarding the
interpretation of this Plan, and if the Participant or his
or her beneficiary has exhausted the claims review and
appeal procedure under Section 503 of the Employee
Retirement Income Security Act of 1974 with respect to his
or her claim for benefits under this Plan, then the
Participant or his or her beneficiary may, if he or she
desires, submit any claim for benefits under this Plan or
dispute regarding the interpretation of this Plan to arbi-
tration; provided that, the request for arbitration must be
brought within the time limit for bringing a judicial
proceeding with respect to such claim for benefits, or if
less, within one year after the Administrator's final denial
of such claim for benefits. This right to select
arbitration shall be solely that of Participant or his or
her beneficiary and Participant or his or her beneficiary
may decide whether or not to arbitrate in his or her discre-
tion. The "right to select arbitration" is not mandatory on
Participant or his or her beneficiary and Participant or his
or her beneficiary may choose in lieu thereof to bring an
action in an appropriate civil court. Once an arbitration
is commenced, however, it may not be discontinued without
the mutual consent of both parties to the arbitration.
During the lifetime of the Participant only he or she can
use the arbitration procedure set forth in this section.
(b) Any claim for arbitration may be filed in
writing with an arbitrator of Participant's or beneficiary's
choice who is selected by the method described in the next
four sentences. The first step of the selection shall
consist of Participant or his or her beneficiary submitting
a list of five potential arbitrators to the Administrator.
Each of the five arbitrators must be either (1) a member of
the National Academy of Arbitrators located in the State of
California or (2) a retired California Superior Court or
Appellate Court judge. Within one week after receipt of the
list, the Administrator shall select one of the five
arbitrators as the arbitrator for the dispute in question.
If the Administrator fails to select an arbitrator in a
timely manner, Participant or his or her beneficiary shall
then designate one of the five arbitrators as the arbitrator
for the dispute in question.
(c) The arbitration hearing shall be held within
seven days (or as soon thereafter as possible) after the
picking of the arbitrator. No continuance of said hearing
shall be allowed without the mutual consent of Participant
or his or her beneficiary and the Administrator. Absence
from or nonparticipation at the hearing by either party
shall not prevent the issuance of an award. Hearing
procedures which will expedite the hearing may be ordered at
the arbitrator's discretion, and the arbitrator may close
the hearing in his or her sole discretion when he or she
decides he or she has heard sufficient evidence to satisfy
issuance of an award.
(d) The arbitrator's award shall be rendered as
expeditiously as possible and in no event later than one
week after the close of the hearing. In the event the
arbitrator finds that Bancorp has violated the terms of this
Plan, he or she shall order Bancorp immediately to take the
necessary steps to remedy such violation. The award of the
arbitrator shall be final and binding upon the parties. The
award may be enforced in any appropriate court as soon as
possible after its rendition. If an action is brought to
confirm the award, both Bancorp and Participant agree that
no appeal shall be taken by either party from any decision
rendered in such action.
(e) Solely for purposes of determining the
allocation of the costs described in this Section 19(e), the
Administrator will be considered the prevailing party in a
dispute if the arbitrator determines (1) that Bancorp has
not violated the terms of this Plan, and (2) the claim by
Participant or his or her beneficiary was not made in good
faith. Otherwise, Participant or his or her beneficiary
will be considered the prevailing party. In the event that
Bancorp is the prevailing party, the fee of the arbitrator
and all necessary expenses of the hearing (excluding any
attorneys' fees incurred by Bancorp) including stenographic
reporter, if employed, shall be paid by the other party. In
the event that Participant or his or her beneficiary is the
prevailing party, the fee of the arbitrator and all
necessary expenses of the hearing (including all attorneys'
fees incurred by Participant or his or her beneficiary in
pursuing his or her claim), including the fees of a
stenographic reporter if employed, shall be paid by Bancorp.
IN WITNESS WHEREOF, Bancorp hereby adopts this
Restatement as of January 1, 1995.
FIRST INTERSTATE BANCORP
By ___________________________
TABLE A
1994 MANAGEMENT INCENTIVE PLAN
I. Target Award Percentage
Participant Level 1 Target Award Percentage
(the exact percentage to be selected by the Administrator)
Level A 60% to 75%
Level B 37.5% to 60%
Level C 25% to 50%
Level D 15% to 30%
II. Relative Performance Weights
Level A - [100% for Bancorp employees
40% Bancorp/60% Subsidiary for other employees]
Level B - [100% for Bancorp employees
25% Bancorp/75% Subsidiary for other employees]
Levels C & D - [100% for Bancorp employees
10% Bancorp/90% Subsidiary for other employees]
III. Actual Award Percentage
For any individual Participant, a percentage no less than 0% and
no more than 150% of his or her Target Award.
Level A: Bancorp Managing Committee (excluding
Chief Executive Officer and President)
Level B: Regional Managing Committee
Levels C & D: Other Participants
13
EXHIBIT (10.15)
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement
("Agreement") is dated as of ______________, 1995, and is
entered into by and between
_________________________________, ("Employee") and First
Interstate Bancorp, a Delaware corporation ("First
Interstate"). This Agreement terminates and supersedes the
Employment Agreement dated ______________, _____ between
First Interstate and Employee and sets forth the terms and
conditions of Employee's continued employment with First
Interstate. Employee and First Interstate hereby agree that
Employee will render services to First Interstate on the
following terms and conditions:
1. Employment. Upon the terms and subject to
the conditions contained herein, during the term of this
Agreement, First Interstate hereby agrees to employ Employee
to provide full-time services for First Interstate. During
the term hereof, Employee agrees to devote his or her best
efforts to the business of First Interstate, and shall
perform his or her duties in a diligent, trustworthy,
business-like manner, all for the purpose of advancing the
business of First Interstate.
2. Duties. The duties of Employee shall be
those duties which can reasonably be expected to be
performed by a person with the title of
____________________________________________________________
__________________________________________________. Except
as provided in paragraph 10 of this Agreement, Employee's
duties may, from time to time, be changed or modified at the
discretion of the Chief Executive Officer or the Compensa-
tion Committee of First Interstate.
3. Salary and Benefits. First Interstate shall,
during the term of this Agreement, pay Employee a base
salary, which shall initially be the salary in effect on the
date of this Agreement. Such salary shall be paid in
semimonthly installments less applicable withholding and
salary reductions. First Interstate may, in its discretion,
periodically increase the base salary and/or grant a bonus
or other compensation or benefits to Employee, during the
term of the Agreement. First Interstate may not, however,
reduce Employee's base salary during the term of this
Agreement. Employee shall be entitled to participate in the
employee benefit programs generally available to employees
of First Interstate.
4. Term of Agreement. This Agreement shall be
effective beginning on the date of this Agreement and shall
continue until either party, in its sole discretion and for
any reason, provides written notice of termination to the
other party. Such termination will be effective no earlier
than the first day of the 14th month following the notice so
that, for example, a notice delivered on September 1, 1994
could terminate this Agreement no earlier than November 1,
1995. Notwithstanding the preceding sentences, and except
as otherwise provided in paragraph 9, this Agreement shall
terminate on the Employee's last day of employment if the
Employee voluntarily terminates for any reason or is
terminated by First Interstate for a reason described in
paragraph 5.
5. Termination. During the term of this Agree-
ment, and except as otherwise provided in paragraph 10 of
this Agreement, the parties agree that First Interstate may
terminate the employment of the Employee only for "Cause" or
for breach of the provisions of paragraph 8 or as set forth
in paragraph 9. Cause for termination shall be limited to
the following: (1) Employee engages in an act of dishonesty
or moral turpitude (including but not limited to conviction
of a felony) which materially injures or damages First
Interstate, (2) Employee willfully fails to substantially
perform his or her duties hereunder and such willful failure
results in demonstrable material injury and damage to First
Interstate, (3) it is determined that Employee has misrepre-
sented or concealed a material fact for the purpose of
securing employment or this Employment Agreement, or (4)
Employee's performance is substantially below the standard
of performance which can reasonably be expected from an
individual occupying Employee's position or Employee
substantially fails to meet performance objectives which
have been previously agreed to between Employee and First
Interstate, such as performance objectives relating to
profit.
6. Remedy for Breach. In the event that First
Interstate breaches this Agreement by terminating the
employment of Employee other than pursuant to paragraph 5,
and provided that Employee executes a release agreement in
the form attached hereto as Exhibit A, First Interstate
agrees to pay to Employee, as damages and not as a penalty
for such breach, a sum of money equal to Employee's monthly
base salary multiplied by 24. Unless First Interstate
determines in its complete discretion to pay such amount
more quickly, damages owed to Employee shall be paid at the
same time and in the same manner as if employment under this
Agreement had continued for 24 months past the date of
breach. By signing the Agreement Employee agrees that the
payments to which Employee may become entitled under this
paragraph are in lieu of any other payments to which Employ-
ee might be entitled and that First Interstate's discharge
of its obligations under this paragraph shall constitute
full satisfaction of any and all claims of any nature
whatsoever that Employee might otherwise possess against
First Interstate and its subsidiaries, except (1) such
claims as are specifically provided for in the terms of any
generally applicable employee benefit or executive
compensation plans evidenced by written agreements or (2)
any claims for personal injuries (other than claims that are
based on or relate to a contention that First Interstate has
wrongfully discharged Employee).
7. Successors. The rights and obligations of
First Interstate under this Agreement shall inure to the
benefit of and shall be binding upon the successors and
assigns of First Interstate.
8. Non-Disclosure of Confidential Information.
Employee agrees that during the term of this Agreement and
thereafter Employee will not disclose any information or
data concerning the business or customers of First Inter-
state that is disclosed to Employee or acquired by Employee
in confidence at any time during the period of his or her
employment. Employee further agrees that he or she will
neither publicly disclose the terms of this Agreement nor
publicly discuss First Interstate in a manner that tends to
portray First Interstate in an unfavorable light. Violation
of these provisions subsequent to the termination of this
Agreement will cause Employee to immediately forfeit his or
her right to any payments under paragraph 6 that have not
yet been paid. Notwithstanding anything contained in
paragraph 14, First Interstate shall have the right to file
a suit to enjoin any action of Employee which would
constitute a breach of this paragraph 8.
9. Illness, Incapacity, or Death. In the event
of illness or incapacity of Employee, First Interstate shall
continue Employee's salary for six months and may, at its
sole option, continue payment of Employee's salary until he
or she is able to return to work. If Employee is unable to
work due to illness or incapacity for a period greater than
six months, First Interstate may elect, in its discretion,
to terminate this Agreement. If Employee should die during
the term of this Agreement, Employee's employment shall be
treated as terminating and First Interstate's obligations
hereunder shall terminate as of the end of the month in
which Employee's death occurs. Employee's death during a
payout period under paragraph 6 of this Agreement shall,
however, not be treated the same as a death during
employment, i.e., the obligation to make payments under
paragraph 6 shall not terminate as of the end of the month
in which death occurs.
10. Change in Control. Upon a Change in Control
of First Interstate, as defined herein, Employee and First
Interstate agree that, notwithstanding any provisions to the
contrary in this Agreement, the terms and conditions of this
Agreement will be modified as follows:
(a) The term of this Agreement will automatically
be extended to the date two years following the date of
the Change in Control of First Interstate.
(b) Employee's duties shall remain defined as set
forth in paragraph 2 of this Agreement, or as otherwise
modified pursuant to paragraph 2 prior to the date of
the Change in Control. Following the Change in
Control, Employee's duties may not be changed and the
Chief Executive Officer and the Compensation Committee
shall no longer have the power to change, modify, add
to, or take away from the scope of Employee's duties.
In addition, Employee shall be entitled to benefits
under First Interstate's employee benefits programs
which are at least as favorable, in the aggregate, as
the most favorable of those benefits provided to
Employee under such programs prior to the Change in
Control or, if more favorable to Employee, those
provided generally at any time after the Change in
Control to other peer executives of First Interstate.
Any breach of this subparagraph (b) (which shall be
deemed to include the transfer of Employee's job
location to a site more than 50 miles away from his or
her place of employment prior to the Change in
Control), as determined by Employee in good faith, may
be deemed a material breach of this Agreement, and will
entitle Employee, at his or her election, to terminate
this Agreement and receive damages pursuant to
paragraph 6 of this Agreement (as modified by
subparagraphs 10(c) and 10(d) below and without regard
to the requirement that Employee execute a release).
(c) Upon a Change in Control, paragraphs 5 and 8
of this Agreement shall have no further force or
effect, and the employment of Employee may be term-
inated by First Interstate without causing a breach of
the Agreement only if (1) Employee engages in an act of
dishonesty or moral turpitude (including but not
limited to conviction of a felony) which materially
injures or damages First Interstate or (2) Employee
willfully fails to substantially perform his or her
duties hereunder and such willful failure results in
demonstrable material injury and damage to First
Interstate. The terms of paragraph 9 shall remain in
full force and effect following a Change in Control.
If Employee is terminated for a reason other than one
listed in the second preceding sentence, First
Interstate shall be treated as having breached this
Agreement and Employee shall be entitled to the payment
described in subparagraph (d) below (as damages and not
as a penalty for such breach). Such payment shall be
paid in a lump sum no later than 10 days following the
date of breach and there shall be no excuse for a delay
in payment.
(d) The amount First Interstate agrees to pay
Employee under this paragraph 10 shall equal an amount
determined by adding (1) and (2) and, if Employee's
employment is terminated in the same calendar year in
which the Change in Control occurs, by reducing the
result by (3), where
(1) is equal to $30,000 plus three
times the sum of (A) the amount of Employee's
annual base salary in effect immediately prior to
Employee's termination of employment and (B) the
aggregate of the amounts of Employee's target
bonus awards for the year in which Employee's
employment terminates under all of First
Interstate's incentive plans or programs in which
Employee was then participating,
(2) is equal to the sum of (A) the
aggregate of the increases in the single sum
actuarial equivalents of Employee's vested accrued
benefits under the Retirement Plan for the
Employees of First Interstate Bancorp and its
Affiliates or any successor plan (hereinafter
referred to as the "Pension Plan") and each
nonqualified defined benefit pension plan
sponsored by First Interstate other than the First
Interstate Bancorp Supplemental Executive
Retirement Plan (the "SERP") that would result if
Employee were credited with three additional years
of Service and Benefit Service (as such terms are
defined in the Pension Plan) and three additional
years of age, provided that the additional years
of Service shall in no event alter the determi-
nation of Employee's Basic Monthly Salary (as
defined in the Pension Plan), and (B) the
aggregate of the single sum actuarial equivalents
of Employee's vested accrued benefits under all
nonqualified employee deferred compensation plans
sponsored by First Interstate (including the SERP)
determined without regard to the provisions of the
preceding clause (A), and
(3) is an amount equal to the aggregate
of the amounts of any bonus awards paid to
Employee under First Interstate's incentive plans
or programs that were accelerated because of the
Change in Control, multiplied by a fraction, the
numerator of which is the number of full months
between the date of Employee's termination of
employment and January 1 of the year following the
year in which the Change in Control occurred, and
the denominator of which is 12.
The single sum actuarial equivalents described above
shall be determined using the interest rate and
mortality table set forth in the Pension Plan for
purposes of converting benefits to lump sum payments.
Nothing contained herein shall affect the application
of any provisions regarding offsets or non-duplication
of benefits applicable to any of the nonqualified
deferred compensation plan benefits referred to herein.
Upon payment of the amount described under clause
(2)(B) above, no further benefits shall be payable to
Employee under the plans described therein.
(e) Following a Change in Control, Employee's
base annual salary for the remaining term of this
Agreement shall be no less than his or her base salary
immediately prior to the date of the Change in Control.
(f) A "Change in Control" of First Interstate
means and shall be deemed to have occurred if and when
any one of the following five events occurs: (1)
within the meaning of Section 13(d) of the Securities
Exchange Act of 1934, any person or group becomes a
beneficial owner, directly or indirectly, of securities
of First Interstate representing 20% or more of the
combined voting power of First Interstate's then
outstanding securities; (2) individuals who were
members of the Board of Directors of First Interstate
immediately prior to a meeting of the stockholders of
First Interstate involving a contest for the election
of Directors shall not constitute a majority of the
Board of Directors following such election; (3) the
stockholders of First Interstate approve the dissolu-
tion or liquidation of First Interstate; (4) the
stockholders of First Interstate approve an agreement
to merge or consolidate, or otherwise reorganize, with
or into one or more entities which are not subsidiar-
ies, as a result of which less than 50% of the out-
standing voting securities of the surviving or result
ing entity are, or are to be, owned by former stock
holders of First Interstate (excluding from the term
"former stockholders" a stockholder who is, or as a
result of the transaction in question becomes, an
"affiliate", as that term is used in the Securities
Exchange Act of 1934 and the Rules promulgated thereun-
der, of any party to such merger, consolidation or
reorganization); or (5) the stockholders of First
Interstate approve the sale of substantially all of
First Interstate's business and/or assets to a person
or entity which is not a subsidiary.
(g) Paragraph 14 shall no longer apply and the
following arbitration provisions shall apply:
(1) Because it is agreed that time will
be of the essence in determining whether any
payments are due to Employee under this Agreement
following a Change in Control, Employee may, if he
or she desires, submit any claim for payment under
this Agreement or dispute regarding the
interpretation of this Agreement to arbitration.
This right to select arbitration shall be solely
that of Employee and Employee may decide whether
or not to arbitrate in his or her discretion. The
"right to select arbitration" is not mandatory on
Employee and Employee may choose in lieu thereof
to bring an action in an appropriate civil court.
Once an arbitration is commenced, however, it may
not be discontinued without the mutual consent of
both parties to the arbitration.
(2) Any claim for arbitration may be
filed in writing with an arbitrator of Employee's
choice who is selected by the method described in
the next four sentences. The first step of the
selection shall consist of Employee submitting a
list of five potential arbitrators to First
Interstate. Each of the five arbitrators must be
either (A) a member of the National Academy of
Arbitrators located in the State of California or
(B) a retired California Superior Court or
Appellate Court judge. Within one week after
receipt of the list, First Interstate shall select
one of the five arbitrators as the arbitrator for
the dispute in question. If First Interstate
fails to select an arbitrator in a timely manner,
Employee shall then designate one of the five
arbitrators as the arbitrator for the dispute in
question.
(3) The arbitration hearing shall be
held within seven days (or as soon thereafter as
possible) after the picking of the arbitrator. No
continuance of said hearing shall be allowed
without the mutual consent of Employee and First
Interstate. Absence from or nonparticipation at
the hearing by either party shall not prevent the
issuance of an award. Hearing procedures which
will expedite the hearing may be ordered at the
arbitrator's discretion, and the arbitrator may
close the hearing in his or her sole discretion
when he or she decides he or she has heard
sufficient evidence to satisfy issuance of an
award.
(4) The arbitrator's award shall be
rendered as expeditiously as possible and in no
event later than one week after the close of the
hearing. In the event the arbitrator finds that
First Interstate has breached this Agreement, he
or she shall order First Interstate to immediately
take the necessary steps to remedy the breach.
The award of the arbitrator shall be final and
binding upon the parties. The award may be
enforced in any appropriate court as soon as
possible after its rendition. If an action is
brought to confirm the award, both First
Interstate and Employee agree that no appeal shall
be taken by either party from any decision
rendered in such action.
(5) Solely for purposes of determining
the allocation of the costs described in this
subsection, First Interstate will be considered
the prevailing party in a dispute if the
arbitrator determines (A) that First Interstate
has not breached this Agreement and (B) the claim
by Employee was not made in good faith.
Otherwise, Employee will be considered the
prevailing party. In the event that First
Interstate is the prevailing party, the fee of the
arbitrator and all necessary expenses of the
hearing (excluding any attorneys' fees incurred by
First Interstate) including stenographic reporter,
if employed, shall be paid by Employee. In the
event that Employee is the prevailing party, the
fee of the arbitrator and all necessary expenses
of the hearing (including all attorneys' fees
incurred by Employee in pursuing his or her
claim), including the fees of a stenographic
reporter if employed, shall be paid by First
Interstate.
(h) Paragraph 15 shall be deleted.
(i) First Interstate agrees that, if Employee is
terminated under circumstances that constitute a breach
of this Agreement, First Interstate will make no
statements with regard to Employee which might be
interpreted to reflect adversely upon his or her job
competency.
(j) Employee shall be entitled to refuse all or
any portion of any payment under this Agreement if he
or she determines that receipt of such payment may
result in adverse tax consequences to him or her.
First Interstate shall be totally and permanently
relieved of any obligation to pay any amount which
Employee explicitly so refuses in writing.
11. Consultation with Legal Counsel. Employee
acknowledges that he or she has been encouraged to consult
with legal counsel before signing this Agreement.
12. Governing Law. This Agreement is made and
entered into in the State of California, and the laws of
California shall govern its validity and interpretation in
the performance by the parties hereto of their respective
duties and obligations hereunder.
13. Entire Agreement. This Agreement constitutes
the entire agreement between the parties respecting the
employment of Employee, and there are no representations,
warranties or commitments, other than those set forth
herein. This Agreement may be amended or modified only by
an instrument in writing executed by all of the parties
hereto. This is an integrated agreement.
14. Arbitration. Except as otherwise provided in
paragraph 8, any dispute, controversy, or claim arising out
of or relating to this Agreement or breach thereof, or
arising out of or relating in any way to the employment of
the Employee or the termination thereof, shall be submitted
to arbitration in accordance with the Voluntary Labor
Arbitration Rules of the American Arbitration Association.
Judgment upon the award rendered by the arbitrator may be
entered in any court in the State of California, or in any
other court of competent jurisdiction. In reaching his or
her decision, the arbitrator shall have no authority to
ignore, change, modify, add to or delete from any provision
of this Agreement, but instead is limited to interpreting
this Agreement. In the case of any arbitration or
subsequent judicial proceeding arising after a Change in
Control, Employee shall be awarded his or her costs,
including attorneys' fees.
15. Assistance in Litigation. Employee shall
make himself or herself available, upon the request of First
Interstate, to testify or otherwise assist in litigation,
arbitration, or other disputes involving First Interstate,
or its directors, officers, employees, subsidiaries, or
parent corporations, (1) during the term of this Agreement
at no additional cost and (2) at any time following the
termination of this Agreement so long as Employee receives a
reasonable fee for his or her services plus reimbursement of
out-of-pocket expenses.
16. Notices. Any notice or communications
required or permitted to be given to the parties hereto
shall be delivered personally or be sent by United States
registered or certified mail, postage prepaid and return
receipt requested, and addressed or delivered as follows, or
as such other addresses the party addressed may have substi-
tute by notice pursuant to this section:
(a) If to First Interstate:
First Interstate Bancorp
633 West 5th Street
Los Angeles, California 90071
Attention: Corporate Secretary
(b) If to Employee:
17. Captions. The captions of this Agreement are
inserted for convenience and do not constitute a part
hereof.
18. Severability. In case any one or more of the
provisions contained in this Agreement shall for any reason
be held to be invalid, illegal or unenforceable in any other
respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but
this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained
herein and there shall be deemed substituted therefor such
other provision as will most nearly accomplish the intent of
the parties to the extent permitted by the applicable law.
In case this Agreement, or any one or more of the provisions
hereof, shall be held to be invalid, illegal or unenforce-
able within any governmental jurisdiction or subdivision
thereof, this Agreement or any such provision thereof shall
not as a consequence thereof be deemed to be invalid,
illegal or unenforceable in any other governmental jurisdic-
tion or subdivision thereof.
19. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which
shall be deemed an original, but all of which shall together
constitute one and the same Agreement.
IN WITNESS HEREOF, the parties hereto have caused
this Agreement to be duly executed and delivered as of the
day and year first written above in Los Angeles, California.
EXECUTED: _______________, 19__.
First Interstate Bancorp
By ___________________________
EXECUTED: _______________, 19__.
___________________________
[Name of Employee]
EXHIBIT A
RESIGNATION AND GENERAL RELEASE AGREEMENT
In consideration of the covenants undertaken and
releases contained in this Resignation and General Release
Agreement (the "Agreement"), _________________ ("______") and
First Interstate Bancorp ("First Interstate"), agree as
follows:
______ hereby resigns, effective ___________, 199_,
from his or her position as _______________________ of First
Interstate, and as an officer, director, employee, or in any
other capacity with First Interstate or any of First
Interstate's divisions, subsidiaries or affiliates. First
Interstate shall as severance continue to and including
______, 199_, to pay to ______ his or her monthly base salary
of $_______________, less standard withholding and authorized
deductions. Such severance payment is for and in lieu of all
accrued but unpaid wages including vacation pay and any bonus,
and any other payments or benefits and none shall accrue
beyond _________________, 199_, provided, however, that First
Interstate shall pay to ______ on or before ___________, 199_,
his or her accrued but unused vacation to that date. _______
shall have the option to convert and continue his or her
health insurance after ____________, 199_, as may be required
or authorized by law under the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA").
Except for those obligations created by or arising
out of this Agreement and any benefits specifically provided
for in the terms of any employee pension benefit plans (as
defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974) evidenced by written agreements, ______
hereby acknowledges full and complete satisfaction of and
releases and discharges and covenants not to sue First
Interstate, its divisions, subsidiaries, parent, affiliated
corporations, past and present, and each of them, as well as
their directors, officers, shareholders, representatives,
assignees, successors, agents and employees, past and present,
and each of them (individually and collectively, "Releasees")
from and with respect to any and all claims, wages,
agreements, obligations, demands and causes of action, known
or unknown, suspected or unsuspected, arising out of or in any
way connected with his or her employment relationship with, or
his or her separation or resignation from, First Interstate,
including, without limiting the generality of the foregoing,
any claim for severance pay, bonus or similar benefit, sick
leave, vacation pay, life insurance, health or medical
insurance or any other fringe benefit, workers' compensation
or disability, or any other occurrences, acts or omissions
whatever, known or unknown, suspected or unsuspected,
resulting from any act or omission by or on the part of
Releasees committed or omitted prior to the date of this
Agreement, including, without limiting the generality of the
foregoing, any claim under Title VII of the Civil Rights Act
of 1964, the Age Discrimination in Employment Act, the
Americans with Disabilities Act, the Family and Medical Leave
Act, the California Fair Employment and Housing Act, the
California Family Rights Act, or any other federal, state or
local law, regulation or ordinance.
This Agreement is intended to be effective as a bar
to every claim, demand and cause of action stated above.
Accordingly, ______ hereby expressly waives any rights and
benefits conferred by Section 1542 of the California Civil
Code, which provides that, "A GENERAL RELEASE DOES NOT EXTEND
TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST
IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH
THE DEBTOR."
If any provision of this Agreement or its appli-
cation is held invalid, the invalidity shall not affect other
provisions or applications of the Agreement which can be given
effect without the invalid provisions or application and,
therefore, the provisions of this Agreement are declared to be
severable. _______ agrees to keep the terms of this Agreement
confidential.
_______________ acknowledges that he or she has been
encouraged to consult with legal counsel before signing this
Agreement.
[For employees 40 or older] _____ will be provided ample time
and opportunity to consider the terms of this Agreement and to
consult with an attorney if he or she chooses to do so. If
_____ agrees to all the provisions of this Agreement, he or
she shall return the executed original of this Agreement to
________________________. _____ shall have twenty-one (21)
days from the date he or she receives this Agreement in which
to sign this Agreement. He or she shall have seven (7) days
from the date he or she signs the Agreement within which to
revoke it.
The undersigned have read and understand the conse-
quences of this Agreement and voluntarily sign it. The under
signed declare under penalty of perjury that the foregoing is
true and correct.
EXECUTED this ______ day of ________ 199_, at
____________ County, California.
FIRST INTERSTATE BANCORP ________________________
[Name]
By _______________________ ________________________
[Signature]
Title _______________________
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT (11)
FIRST INTERSTATE BANCORP
COMPUTATION OF EARNINGS PER SHARE
(dollars in thousands except for per share amounts)
Year Ended December 31
--------------------- --------------------- ---------------------
1994 1993 1992
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Net income $ 733,510 $ 736,716 $ 282,261
Less dividends on preferred stock 33,250 46,624 59,183
--------------------- --------------------- ---------------------
Net income, as adjusted, for calculation of
primary and fully diluted earnings per share $ 700,260 $ 690,092 $ 223,078
Less:
Extraordinary Item -- (24,788) --
Cumulative effect of accounting changes -- 200,103 --
--------------------- --------------------- ---------------------
Income before extraordinary item and
cumulative effect of accounting
changes for calculation of primary
and fully diluted earnings per share $ 700,260 $ 514,777 $ 223,078
===================== ===================== =====================
Weighted average number of shares outstanding 78,852,492 75,823,371 68,780,642
Dilutive effect of outstanding stock options
(as determined by application of the
treasury stock method) 1,550,473 1,190,527 346,101
Shares issuable from assumed conversion of
Class A Common Stock -- --(1) 4,303
Stock units under Management Incentive Plan 18,977 8,851 4,178
--------------------- --------------------- ---------------------
Weighted average number of shares, as
adjusted, for calculation of primary
earnings per share 80,421,942 77,022,749 69,135,224
Additional dilutive effect of
outstanding stock options 73,184 224,636 374,009
--------------------- --------------------- ---------------------
Weighted average number of shares, as
adjusted, for calculation of fully
diluted earnings per share 80,495,126 77,247,385 69,509,233
===================== ===================== =====================
Primary and fully diluted earnings per share (2):
Income before extraordinary item and
cumulative effect ofaccounting changes $ 8.71 $ 6.68 $ 3.23
Extraordinary Item -- (0.32) --
Cumulative effect of accounting changes -- 2.60 --
--------------------- --------------------- ---------------------
Net income $ 8.71 $ 8.96 $ 3.23
===================== ===================== =====================
<FN>
(1) Shares previously issuable from assumed conversion of Class A Common Stock
were issued in February and are included in the actual average shares number.
(2) Fully diluted earnings per share are considered equal to primary earnings
per share because the addition of potentially dilutive securities which
are not common stock equivalents resulted in dilution of less than three percent.
</FN>
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT (12)
FIRST INTERSTATE BANCORP
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(in thousands)
Year Ended December 31
--------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
A. First Interstate Bancorp and Subsidiaries (Consolidated):
Earnings:
1.Income before income taxes, extraordinary item
and cumulative effect of accounting changes $ 1,183 $ 881 $ 403
2.Plus interest expense (a) 915 921 1,223
------------ ------------ ------------
3.Earnings including interest on deposits 2,098 1,802 1,626
4.Less interest on deposits 725 720 933
------------ ------------ ------------
5.Earnings excluding interest on deposits $ 1,373 $ 1,082 $ 693
============ ============ ============
Fixed Charges:
6.Including interest on deposits (Line 2) $ 915 $ 921 $ 1,223
7.Less interest on deposits (Line 4) 725 720 933
------------ ------------ ------------
8.Excluding interest on deposits $ 190 $ 201 $ 290
============ ============ ============
Ratio of Earnings to Fixed Charges:
Including interest on deposits
(Line 3 divided by Line 6) 2.29 1.96 1.33
============ ============ ============
Excluding interest on deposits
(Line 5 divided by Line 8) 7.22 5.39 2.39
============ ============ ============
B. First Interstate Bancorp (Parent Corporation):
Earnings:
9.Income (loss) before income taxes, extraordinary
item, cumulative effect of accounting changes and
equity in undistributed income of subsidiaries $ 348 $ 311 $ (191)
10.Plus interest expense (a) 102 132 215
------------ ------------ ------------
11.Earnings including interest expense $ 450 $ 443 $ 24
============ ============ ============
Fixed Charges:
12.Interest expense (Line 10) $ 102 $ 132 $ 215
============ ============ ============
Ratio of Earnings to Fixed Charges:
(Line 11 divided by Line 12) 4.40 3.35 (b)
============ ============ ============
<FN>
(a) Includes amounts representing the estimated
interest component of net rental payments.
(b) For the year ended December 31, 1992, fixed
charges exceeded earnings by $191 million.
</TABLE>
MANAGEMENT'S DISCUSSION & ANALYSIS FIRST INTERSTATE BANCORP
Overview of 1994 Performance
First Interstate Bancorp recorded consolidated net income in 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, which are described in
detail on the following page, after-tax earnings were $821.1
million, or $9.80 per share. This compares to earnings before an
extraordinary item and the cumulative effect of accounting changes
for 1993 of $561.4 million, or $6.68 per share, and net income of
$736.7 million, or $8.96 per share. These results represent a
substantial improvement from net income of $282.3 million, or
$3.23 per share, reported for 1992.
The Corporation recorded an extraordinary item reflecting aftertax
charges associated with long term debt repurchases and redemptions of
$985 million during 1993. As a result, 1993 net income was reduced
by $24.8 million ($0.32 per share).
In addition, the cumulative effect of two accounting changes that
were adopted early in 1993 resulted in a net after-tax addition of
$200.1 million, or $2.60 per share. Statement of Financial
Accounting Standards No. 109 (SFAS 109), "Accounting for Income
Taxes," resulted in the recognition of additional tax benefits of
$305.0 million ($3.96 per share). This accounting change was
partially offset by the Corporation's decision to adopt SFAS 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions," on an immediate rather than a prospective basis, which
reduced net income by $104.9 million ($1.36 per share).
Based on consolidated income before the cumulative effect of
accounting changes and the extraordinary item described above, the
return on average assets for 1994 rose to 1.38%, a material
improvement from 1.14% in 1993. At the same time, the return on
average common shareholders' equity rose to 21.56% from 17.33% a
year earlier.
The Corporation's significant increase in overall profitability in
1994 resulted primarily from two factors: revenue growth and an
excellent risk profile.
The primary factor contributing to earnings growth in 1994 was a 12%
increase in total revenue. Total revenue, which includes taxable-
equivalent net interest income and noninterest income, was up $361.3
million in 1994. Net interest income contributed over 70% of the
1994 increase in total revenue. This resulted principally from
earning asset growth, coupled with a shift in the mix of earning
assets to a higher proportion of loans. At the same time, the net
interest margin increased to 5.14% in 1994, up 23 basis points from
the 1993 level. The remainder of the increase in total revenue was
spread over most major categories of noninterest income.
Second, reflecting the risk profile of the Corporation, no
provision for credit losses was recorded in 1994. The provision for
credit losses amounted to $112.6 million in 1993 and $314.3 million in
1992. In addition, expenses arising from the maintenance, sales and
valuation adjustments of other real estate acquired through
foreclosure (ORE) reflected a net recovery of $12.4 million in
1994, versus expenses of $33.6 million and $159.6 million in 1993
and 1992, respectively.
Nonperforming assets were reduced to $258 million at yearend 1994, down
nearly 17% from $309 million a year earlier. This follows a decline of
nearly 60% at yearend 1993 versus a year earlier. Consistent implementation
of the Corporation's risk management techniques has resulted in the
reduction of consolidated nonperforming assets to 0.46% of total assets,
an improvement from 0.60% at yearend 1993 and 1.48% at yearend 1992. Net
chargeoffs declined to $133.0 million in 1994 (0.46% of average loans),
compared to $218.1 million in 1993 (0.90%) and $459.6 million in 1992
(1.79%). Reflecting the factors noted above, the allowance for credit
losses declined to 2.81% of loans at December 31, 1994, versus 3.85%
at yearend 1993 and 4.41% at yearend 1992.
Noninterest expenses totaled $2,197.8 million in 1994 and $2,032.4
million in 1993. The increase in 1994 resulted primarily from the
restructuring charges noted above and the effect of integrating 10
acquisitions during the year.
Restructuring Plan
On September 20, 1994, the Corporation announced that management had
adopted a Restructuring Plan (Plan) to improve efficiency and better
position the Corporation for the introduction of full interstate banking.
This Plan resulted in restructuring charges in 1994 of $141.3 million,
consisting of the following (in millions):
Early Retirement Program $ 82.0
Severance and Outplacement Services 40.0
Facility and Equipment Valuations 15.0
Other 4.3
TOTAL RESTRUCTURING CHARGES $141.3
The restructuring charges will be funded out of operating cash flows with
payments for severance and outplacement services occuring approximately
ratably over the next year. Payment of the cost of the Early Retirement
Program into the Corporation's qualified retirement plan will depend on
the timing of the Corporation's contributions to the plan.
In addition, it is expected that restructuring charges of another $23.7
million for relocation of staff and facilities, as well as retention
payments for certain personnel displaced in the restructuring program,
will be incurred and expensed as the program is implemented. Such costs
are expected to be incurred relatively evenly through the third quarter
of 1995. The total expected cost of the Plan, therefore, will be
approximately $165 million.
The Plan calls for the consolidations of operations and administrative
functions, formation of a company-wide Risk Management Group, and
implementation of "best practices" in business lines. As part of the
Plan, 1,854 personnel took advantage of the Corporation's Early
Retirement Program. In the course of implementing the Plan, another
approximately 3,300 personnel are expected to be involuntarily terminated.
Because some of the vacancies created by the Early Retirement Program
and by the geographic consolidations will have to be filled, the total
permanent reduction is expected to be approximately 3,000 full-time
equivalent staff.
The Plan is expected to result in annualized expense savings of
$167 million by June 1996; the savings are expected to be achieved
progressively through this time period. Of the $167 million, staff
savings total $107 million, facilities savings total $20 million,
and other savings (primarily in the areas of purchasing,
appraisals, and branch savings) total $40 million. As a result, the
Corporation expects to achieve a 58% efficiency ratio in 1995. The
Plan should have limited impact on
the revenues of the Corporation.
The expense savings of this Plan described above are before the
impact of any acquisitions announced by the Corporation after March
22, 1994. The Corporation has announced the following acquisitions
since that date: 17 branches from the Resolution Trust Corporation in
Oregon and Washington; Sacramento Savings Bank and Levy Bancorp in
California; North Texas Bancshares and Park Forest National Bank in
Texas; and University Savings Bank in Washington.
Earnings Summary
The following tables summarize the Corporation's financial results
for the last three years:
<TABLE>
<CAPTION>
Change 94/93 Change 93/92 Change 92/91
AMOUNTS (millions) 1994 1993 1992 $ % $ % $ %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest income(1) $2,347.9 $2,086.7 $2,032.3 261.2 12.5 54.4 2.7 (85.5) (4.0)
Provision for credit losses _ 112.6 314.3 (112.6) n/m (201.7) (64.2) (495.9) (61.2)
Net interest income after
provision for credit losses(1) 2,347.9 1,974.1 1,718.0 373.8 18.9 256.1 14.9 410.4 31.4
Noninterest income 1,054.3 954.2 912.1 100.1 10.5 42.1 4.6 (272.3) (23.0)
Noninterest expenses
Operating 2,068.9 1,998.8 2,049.6 70.1 3.5 (50.8) (2.5) (280.6) (12.4)
Provision for restructuring 141.3 _ _ 141.3 n/m _ n/m (90.0) n/m
Other real estate (12.4) 33.6 159.6 (46.0) n/m (126.0) (78.9) (152.4) (48.8)
Pretax earnings(1) 1,204.4 895.9 420.9 308.5 34.4 475.0 n/m 661.1 n/m
Income taxes 449.5 319.9 120.9 129.6 40.5 199.0 n/m 99.1 n/m
Taxable-equivalent
adjustment 21.4 14.6 17.7 6.8 46.6 (3.1) (17.5) (8.4) (32.2)
Extraordinary item _ (24.8) _ 24.8 n/m (24.8) n/m _ n/m
Cumulative effect of
accounting changes _ 200.1 _ (200.1) n/m 200.1 n/m _ _
NET INCOME $ 733.5 $ 736.7 $ 282.3 (3.2) (0.4) 454.4 n/m 570.4 n/m
<FN>
(1)Taxable-equivalent basis.
</TABLE>
<TABLE>
<CAPTION>
Change 94/93 Change 93/92 Change 92/91
PER COMMON SHARE 1994 1993 1992 $ % $ % $ %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings :
Income before
extraordinary item and
cumulative effect of
accounting changes $8.71 $6.68 $3.23 2.03 30.4 3.45 n/m 8.47 n/m
Extraordinary item _ (0.32) _ 0.32 n/m (0.32) n/m _ _
Cumulative effect
of accounting changes _ 2.60 _ (2.60) n/m 2.60 n/m _ _
Net income 8.71 8.96 3.23 (0.25) (2.8) 5.73 n/m 8.47 n/m
Dividends paid 2.75 1.60 1.20 1.15 71.9 0.40 33.3 (0.60) (33.3)
</TABLE>
Earnings Detail
Summarized below are taxable-equivalent interest income and
interest expense, as well as the consequences of changes in volumes
and rates.
<TABLE>
<CAPTION>
Change 94/93 Change 93/92 Change 92/91
AMOUNTS (millions) 1994 1993 1992 $ % $ % $ %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $3,213.4 $2,958.8 $3,207.4 254.6 8.6 (248.6) (7.8) (754.0) (19.0)
Interest expense 865.5 872.1 1,175.1 (6.6) (0.8) (303.0) (25.8) (668.5) (36.3)
Net interest income $2,347.9 $2,086.7 $2,032.3 261.2 12.5 54.4 2.7 (85.5) (4.0)
MARGINS (as a % of earning assets)
Earning asset yield 7.04 6.96 7.71 1.1 (9.7) (18.2)
Interest expense 1.90 2.05 2.82 (7.3) (27.3) (35.8)
Net interest margin 5.14 4.91 4.89 4.7 0.4 (3.0)
</TABLE>
<TABLE>
<CAPTION>
1994 change due to 1993 Change due to 1992 Change due to
Volume Rate Net Volume Rate Net Volume Rate Net
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest earned on:
Total loans $394.0 $(76.1) $317.9 $(98.6) $(155.9) $(254.5) $(462.5) $(374.1) $(836.6)
Trading account securities (3.0) (1.1) (4.1) (13.1) (0.8) (13.9) (12.5) (7.8) (20.3)
Held-to-maturity securities 28.8 (34.1) (5.3) 259.3 (159.9) 99.4 362.8 (179.7) 183.1
Available-for-sale securities (5.2) 0.6 (4.6) 17.3 (3.2) 14.1 (13.8) (5.1) (18.9)
Federal funds, repurchases (25.1) 4.4 (20.7) (16.3) (9.5) (25.8) 16.3 (31.0) (14.7)
Time deposits, due from banks (32.9) 0.8 (32.1) (36.9) (10.0) (46.9) 29.3 (45.6) (16.3)
Other assets held for sale 5.3 (1.8) 3.5 (21.4) 0.4 (21.0) (24.0) (6.3) (30.3)
Total change 361.9 (107.3) 254.6 90.3 (338.9) (248.6) (104.4) (649.6) (754.0)
Interest paid on:
Savings deposits 42.5 (33.7) 8.8 29.7 (144.1) (114.4) 69.3 (387.6) (318.3)
Other time deposits 2.6 (6.3) (3.7) (45.9) (52.5) (98.4) (141.0) (134.0) (275.0)
Short term borrowings 8.3 9.9 18.2 1.5 _ 1.5 (26.0) (3.8) (29.8)
Long term debt (35.8) 5.9 (29.9) (88.5) (3.2) (91.7) (2.2) (43.2) (45.4)
Total change 17.6 (24.2) (6.6) (103.2) (199.8) (303.0) (99.9) (568.6) (668.5)
Net interest income $344.3 $(83.1) $261.2 $193.5 $(139.1) $ 54.4 $ (4.5) $(81.0) $(85.5)
<FN>
Notes: Taxable-equivalent basis using statutory tax rates which
vary depending on the tax rates of the various states in which the
subsidiary banks are located, but which approximate 40% in 1994 and
1993, and 39% in 1992. Taxable-equivalent adjustments to net
interest income with offsetting adjustments to income tax expense
are designed to reflect income and corresponding yields as if all
interest income were fully taxable. The change in interest due to
both rate/volume has been allocated entirely to change due to rate.
</TABLE>
Earning Assets and Interest Income
Earning Assets: In 1994, earning assets averaged $45.6 billion, an
increase of $3.1 billion (7.3%). This follows an increase of $920
million (2.2%) in 1993 and a decline of $423 million (1.0%) in
1992. Over the last year, the loan component of earning assets
increased as a result of increased demand and the completion of 10
acquisitions. The lower level of loans in the two preceding years
reflected adverse economic conditions resulting in lower demand as
well as the Corporation's focus on improving credit quality. The
average yield on earning assets was 7.04% in 1994, versus 6.96% in
1993 and 7.71% in 1992. The current trend of increasing loan growth
and a decline in the investment securities portfolio reflecting
maturities is expected to continue throughout 1995.
The following table provides a comparison of average earning asset
volumes for the last three years:
<TABLE>
<CAPTION>
AVERAGE EARNING Change 94/93 Change 93/92 Change 92/91
ASSET VOLUMES (millions)(1) 1994 1993 1992 $ % $ % $ %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural $ 8,287 $ 7,618 $ 8,111 669 8.8 (493) (6.1) (2,348) (22.4)
Real estate construction 806 913 1,746 (107) (11.7) (833) (47.7) (931) (34.8)
Real estate mortgage 7,586 5,413 5,472 2,173 40.1 (59) (1.1) (174) (3.1)
Instalment 11,660 9,943 9,756 1,717 17.3 187 1.9 (381) (3.7)
Foreign 83 160 406 (77) (48.1) (246) (60.6) (755) (65.0)
Lease financing 222 81 203 141 n/m (122) (60.1) (408) (66.8)
Total loans 28,644 24,128 25,694 4,516 18.7 (1,566) (6.1) (4,997) (16.3)
Trading account securities 113 166 385 (53) (31.9) (219) (56.9) (182) (32.1)
Held-to-maturity securities
U.S. Treasury and agencies 14,000 14,113 9,745 (113) (0.8) 4,368 44.8 4,479 85.1
Other 1,624 996 1,465 628 63.1 (469) (32.0) (82) (5.3)
Held-to-maturity securities 15,624 15,109 11,210 515 3.4 3,899 34.8 4,397 64.5
Available-for-sale securities 324 458 83 (134) (29.3) 375 n/m (165) (66.5)
Federal funds, repurchases 471 1,282 1,706 (811) (63.3) (424) (24.9) 284 20.0
Time deposits, due from banks 380 1,342 2,228 (962) (71.7) (886) (39.8) 471 26.8
Other assets held for sale 82 29 288 53 n/m (259) (89.9) (231) (44.5)
TOTAL $45,638 $42,514 $41,594 3,124 7.3 920 2.2 (423) (1.0)
<FN>
(1)Loans are net of unearned income and deferred fees.
</TABLE>
Loans: Including the effect of acquisitions, average loans totaled
$28.6 billion in 1994, an increase of $4.5 billion (18.7%). This
follows declines of 6.1% and 16.3% in 1993 and 1992, respectively.
Total loans accounted for approximately 63% of average earning
assets in 1994, up from approximately 57% in 1993 and 62% in 1992.
Loan growth is expected to continue during 1995.
Nearly half of the growth in average loans from the 1993 level
reflects higher average real estate mortgage outstandings
(commercial and residential), which were up $2.2 billion (40.1%) to an
average of $7.6 billion in 1994. This follows declines of 1.1% in
1993 and 3.1% in 1992. Most of the increase in 1994 reflects the
Corporation's acquisition program, particularly in California. The
combined average yield on the real estate mortgage portfolio was
7.63% in 1994, versus 8.18% in 1993 and 8.85% in 1992.
Instalment loans increased $1.7 billion (17.3%) from the average
1993 level. This follows an increase of 1.9% in 1993 and a decline of
3.7% in 1992. The average yield on instalment loans was 9.25% in 1994
versus 10.09% in 1993 and 10.76% in 1992. The Corporation continues
its focus on retail banking and increasing its market share in the
communities in which it operates.
Average commercial loans rose $669 million (8.8%) in 1994 to $8.3
billion. This increase is largely the result of loan demand and
renewed marketing efforts. Commercial loan volumes declined 6.1% in
1993 and 22.4% in 1992. The average yield on the commercial loan
portfolio increased to 6.79% in 1994, compared to 6.25% in 1993
and 6.91% in 1992.
Construction loans averaged $806 million in 1994, down $107 million
(11.7%) from the year earlier. This follows declines of 47.7% in 1993
and 34.8% in 1992. The combined yield on the construction portfolio
rose to 9.42% in 1994, compared to 6.83% in 1993 and 6.25% in 1992.
Foreign loans, primarily short term trade finance activity,
averaged $83 million in 1994, down $77 million (48.1%). This
follows declines of 60.6% in 1993 and 65.0% in 1992 and reflects
the sale of approximately $1.1 billion of foreign loans in 1992. The
average yield on foreign loans was 5.59% in 1994, compared to 4.48%
in 1993 and 5.85% in 1992.
Lease financing balances increased to an average of $222 million in
1994 from an average of $81 million in 1993. This follows
reductions of 60.1% in 1993 and 66.8% in 1992. The average yield on
lease financing was 7.17% in 1994, versus 8.42% in 1993 and 10.57% in 1992.
At December 31, 1994, including both the effect of acquisitions and an
increase in new loan originations, loans and leases totaled $33.2
billion, an increase of $7.2 billion (27.8%) from the $26.0 billion
reported a year earlier. Instalment loans increased $1.5 billion
(14.0%) to $12.3 billion at yearend. Growth of these consumer
loans reflects the success of marketing programs targeting the sale
of such products. At the same time, commercial loans increased
$1.3 billion (16.2%) to $9.3 billion at yearend 1994. Residential
real estate mortgages totaled $5.8 billion, $2.9 billion (99.4%)
above a year ago, while commercial mortgages were up $1.1 billion
(30.1%) to $4.4 billion at yearend 1994. Construction loans
were $984 million at the end of 1994, an increase of $208 million
(28.7%) from a year earlier. The Corporation expects that core
loan growth will continue through 1995.
Investment Securities: The investment securities portfolio averaged
$15.9 billion in 1994, an increase of $381 million (2.4%) from the
1993 average. This follows increases of $4.3 billion (37.8%) in 1993 and
$4.2 billion (59.9%) in 1992. The sharp increases in the investment
securities portfolio in 1992 and 1993 affected the ongoing changes in
the mix of earning assets, reducing the share of loans and increasing
the volume of other investment alternatives. This pattern was reversed
in 1994 as loan growth exceeded deposit growth and proceeds of maturing
securities were used to fund loans, a trend that should continue during 1995.
At December 31, 1994, total investment securities were $13.9
billion, down $2.7 billion (16.3%) from a year earlier. U.S.
Treasury and agency securities declined $2.9 billion (19.4%) from a
year earlier to a total of $12.1 billion at the end of 1994. All
other investment securities amounted to $1.8 billion at yearend, up
5.9% from a year earlier.
The following table compares the average life, book value
and approximate market value of the investment securities
portfolio at December 31, 1994 and 1993:
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
HELD-TO-MATURITY (millions) Expected Carrying Approximate Expected Carrying Approximate
Average Life Amount Market Value Average Life Amount Market Value
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury and agencies 22 months $12,105 $11,769 20 months $14,894 $15,004
State and political subdivisions 34 months 29 30 32 months 23 25
Other 42 months 1,561 1,481 33 months 1,456 1,460
TOTAL 25 months $13,695 $13,280 21 months $16,373 $16,489
AVAILABLE-FOR-SALE
(millions)
U.S. Treasury and agencies 22 months $ 42 $ 42 7 months $169 $169
Other n/m 114 114 _ _ _
TOTAL 22 months $156 $156 7 months $169 $169
</TABLE>
The average yield on U.S. Treasury and agency securities was
5.34% in 1994, versus 5.59% in 1993 and 6.69% in 1992. The
average yield on all other securities was 5.67% in 1994,
compared to 5.54% and 6.32% in 1993 and 1992, respectively.
The average yield on the entire held-to-maturity portfolio
was 5.37% in 1994, compared to 5.59% in 1993 and 6.65%
in 1992. Taxable-equivalent yields of investment securities
held at December 31, 1994, are presented by maturity in the
following table:
<TABLE>
<CAPTION>
Held-to-Maturity Available-forSale
Within One Five After Within One Five After
one to five to 10 10 one to five to 10 10
YIELD (%) year years years years Total year years years years Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and agencies 4.92 5.41 5.79 6.02 5.46 4.39 5.67 7.85 8.00 5.29
State and political subdivisions 12.68 10.56 11.77 8.69 11.63 _ _ _ _ _
Other 4.85 5.19 6.73 7.10 6.48 _ _ _ 4.21 4.21
TOTAL 4.95 5.39 5.87 6.25 5.59 4.39 5.67 7.85 4.23 4.50
</TABLE>
Investment securities are purchased for the primary
purpose of deploying excess liquidity while
accommodating anticipated loan growth by employing an
investment strategy of "laddering" maturities and
maintaining a short duration portfolio. A laddered
portfolio generates uniform cash flows throughout the year
that can be redeployed to loans as needed or reinvested.
Under SFAS 115, "Accounting for Certain Investments in
Debt and Equity Securities," the Corporation at the time
of purchase determines whether such securities are to
be "held-to-maturity" or "available-for-sale." The
Corporation has adopted an investment strategy with the
intent and ability to hold securities to maturity and
classified $13.7 billion of securities as held-to maturity
at December 31, 1994. Securities classified as held-to-maturity
are carried at amortized cost. Changes in estimated fair market
value are not reflected on the balance sheet or income
statement.
The Corporation's investment strategy of maintaining
a short duration portfolio consisting of low volatility
instruments proved effective at minimizing the risk
to market value during the substantial rise in interest
rates in 1994. Yields on one- and twoyear U.S. Treasury
securities, for example, rose by approximately 350 basis
points each during the year. This increase in rates
resulted in an unrecognized market value loss of $415
million at December 31, 1994, or 3.0% of the book value
of the portfolio. In addition, the duration of the
portfolio increased slightly to 1.6 years at December
31, 1994, from 1.3 years at December 31, 1993, reflecting
limited extension of portfolio securities. The
Corporation's management philosophy is that the
investment securities portfolio is one component of an
integrated balance sheet. Changes in interest rates
affect certain components of the balance sheet, including
the investment securities portfolio. As interest rates
rose in 1994, the market value decline in the
investment portfolio was mitigated by market value
increases in other components of the balance sheet,
specifically core deposits. This is further supported by
an increase in the net interest margin to 5.14% for 1994
from 4.91% for 1993.
Other Earning Assets: While loans and investment
securities are the primary components of earning assets,
available funds are also deployed into other revenue-
producing instruments that are low risk and highly
liquid. Offset by strong growth in higher-yielding
loans, interest bearing time deposits due from banks
declined $962 million (71.7%) to an average of $380
million in 1994. This follows a decline of $886 million
(39.8%) in 1993 and an increase of $471 million (26.8%) in
1992. The level of the interbank placement of funds
typically expands and contracts in conjunction with the
liquidity and yields available in the market and
alternative investments for such funds. Federal funds
sold and repurchase agreements averaged $471 million in
1994, a decline of $811 million (63.3%). This follows a
decline of 24.9% in 1993 and an increase of 20.0% in
1992. It is expected that these earning assets will
essentially remain flat during 1995.
At December 31, 1994, interest bearing time deposits due
from banks totaled $26 million, a substantial decline of
$1.1 billion (97.8%) from the level a year earlier. At the
same time, federal funds sold and repurchase agreements
dropped $439 million (71.0%) to $179 million. Average
Yields: The average yields on the major categories of
earning assets for the last three years are presented
in the following table:
AVERAGE YIELDS (%)(1) 1994 1993 1992
Commercial, financial and agricultural 6.79 6.25 6.91
Real estate construction 9.42 6.83 6.25
Real estate mortgage 7.63 8.18 8.85
Instalment 9.25 10.09 10.76
Foreign 5.59 4.48 5.85
Lease financing 7.17 8.42 10.57
Total loans 8.09 8.26 8.77
Trading account securities 4.55 5.57 6.00
Held-to-maturity securities:
U.S. Treasury and agencies 5.34 5.59 6.69
Other 5.67 5.54 6.32
Total held-to-maturity securities 5.37 5.59 6.65
Securities available-for-sale 4.11 3.90 4.61
Federal funds, repurchases 3.98 3.10 3.84
Time deposits, due from banks 3.61 3.42 4.17
Other assets held for sale 7.51 10.00 8.28
TOTAL EARNING ASSETS 7.04 6.96 7.71
First Interstate average prime rate 7.15 6.00 6.25
(1)Taxable-equivalent basis.
Sources of Funds and Interest Expense
Earning assets are supported by various sources of funds,
each of which is continuously monitored to ensure
adequate liquidity to satisfy customer demand and fund
the Corporation's operations. The primary source of
funds is a broad and diversified base of core deposits
gathered by a network of 1,137 domestic banking offices in
13 states. Core deposits include interest bearing
consumer funds described below and demand and noninterest
bearing time deposits, which are included in the
discussion of noninterest sources. Core deposits reduce
the Corporation's dependence on corporate purchased funds.
Core deposits represented 98% of average deposits in
1994 and 1993, versus 97% in 1992. Core deposits, less
cash and due from banks, supported 88% of average earning
assets in 1994, up from 86% in 1993 and 84% in 1992.
Total interest bearing sources of funds increased $1.8
billion (5.8%) to an average of $32.8 billion in
1994. This follows declines of $1.1 billion (3.5%) in
1993 and $1.3 billion (3.8%) in 1992. The average rate
paid on total interest bearing liabilities was 2.64% in
1994, versus 2.81% in 1993 and 3.66% in 1992. The Corporation
expects that these rates will increase in 1995,
reflecting the seven market rate increases since the
beginning of 1994.
A breakdown of the Corporation's interest bearing sources
of funds follows:
<TABLE>
<CAPTION>
AVERAGE VOLUMES Change 94/93 Change 93/92 Change 92/91
(millions) 1994 1993 1992 $ % $ % $ %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Regular savings $ 5,823 $ 5,288 $ 5,129 535 10.1 159 3.1 255 5.2
NOW accounts and
demand_market interest 6,644 6,115 5,893 529 8.7 222 3.8 507 9.4
Savings_market interest 11,427 10,491 9,837 936 8.9 654 6.6 745 8.2
Other savings and time
under $100,000 5,787 5,799 6,624 (12) (0.2) (825) (12.5) (1,576) (19.2)
Total interest bearing consumer
funds 29,681 27,693 27,483 1,988 7.2 210 0.8 (69) (0.3)
Large CDs, other money
market funds 1,076 989 1,170 87 8.8 (181) (15.5) (612) (34.3)
Short termborrowings 655 431 388 224 52.0 43 11.1 (553) (58.8)
Long term debt 1,395 1,893 3,096 (498) (26.3) (1,203) (38.9) (26) (0.8)
Total corporate purchased funds 3,126 3,313 4,654 (187) (5.6) (1,341) (28.8) (1,191) (20.4)
TOTAL $32,807 $31,006 $32,137 1,801 5.8 (1,131) (3.5) (1,260) (3.8)
</TABLE>
Interest Bearing Consumer Funds: These sources consist of
various types of interest bearing deposits in retail
accounts. Combined balances averaged $29.7 billion in
1994, up 7.2% from the $27.7 billionreported in 1993
and $27.5 billion reported in 1992. The average rate paid on
consumer funds in 1994 was 2.31%, down from 2.48% in
1993 and3.24% in 1992. The Corporation expects that average
rates paid on interest bearing consumer funds will increase in
1995. At December 31, 1994, interest bearing consumer funds
totaled $30.5 billion, an increase from the $28.2 billion
reported a year earlier.
Corporate Purchased Funds: While the interest bearing
consumer funds described above provide the primary
source of funding, liabilities raised in the money
markets provide an important additional source of
liquidity. These funds consist of large certificates
of deposit, short term borrowings and long term debt.
Corporate purchased funds averaged $3.1 billion in 1994,
a decline of $187 million (5.6%). This follows declines
of $1.3 billion (28.8%) in 1993 and $1.2 billion
(20.4%) in 1992. The declines in recent years reflect
the impact of pricing on some of the Corporation's
liability products, as well as the repurchase and
redemption of long term debt during 1993. The
combined cost of corporate purchased funds averaged
5.74% in 1994, versus 5.57% in 1993 and 6.09% in 1992.
Corporate purchased funds totaled $4.3 billion at yearend
1994, an increase of $995 million (29.9%) from a year earlier.
It is expected that corporate purchased funds will increase in
1995 to the extent that loan growth exceeds deposit
growth and investment securities maturities.
As of December 31, 1994, time certificates of deposit of
$100,000 or more mature as follows:
Within Three to six to 12 After12
AMOUNTS (millions) three months six months months months Total
Time certificates of deposit $633 $207 $198 $271 $1,309
Other time deposits 88 1 17 30 136
Interest Expense: Interest rates paid over the past
three years on the liability accounts discussed
above are summarized in the following table:
AVERAGE RATES PAID (%) 1994 1993 1992
Regular savings 2.08 2.25 2.80
NOW accounts and demand_market interest 1.25 1.52 2.08
Savings_market interest 2.35 2.40 3.17
Other savings and time under $100,000 3.69 3.81 4.73
Total interest bearing consumer funds 2.31 2.48 3.24
Large CDs, other money market funds 3.63 3.54 3.50
Short term borrowings 5.16 3.72 3.61
Long term debt 7.63 7.19 7.36
Total corporate purchased funds 5.74 5.57 6.09
TOTAL 2.64 2.81 3.66
At December 31, 1994, 90% of the Parent Corporation's long term
debt had fixed coupon rates. Of this amount, 49% was converted
to floating rate debt using interest rate swaps. The effect to
net interest income for the years ending December 31, 1994, and
December 31, 1993, was a positive increase of approximately
$16 million and $47 million, respectively.
Net Noninterest Sources: Noninterest sources of funds consist
of demand deposits, net of cash and due from banks, and
other noninterest bearing liabilities, as well as
shareholders' equity and the allowance for credit losses,
less net fixed assets and other assets.
Demand deposits area major, stable source of funding for
the Corporation and have increased steadily over the last three
years. At December 31, 1994, demand and other noninterest bearing
deposits increased to $16.6 billion (34% of total deposits), versus
$15.4 billion (35%) a year earlier. Investable demand deposits
averaged $10.3 billion in 1994, up 16.4% from the $8.9 billion
average in 1993. Of the other categories of average net
noninterest sources, equity capital increased $121 million,
reflecting the addition of retained earnings net of the effect
of the stock buyback, as well as the increase in bank premises
and equipment.
The average volumes of noninterest funding sources for the
last three years are shown in the following table:
<TABLE>
<CAPTION>
AVERAGE VOLUMES Change 94/93 Change 93/92 Change 92/91
(millions) 1994 1993 1992 $ % $ % $ %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Demand and noninterest bearing
time deposits $15,556 $13,858 $12,543 1,698 12.3 1,315 10.5 826 7.0
Less cash and due from banks 5,233 4,992 4,937 241 4.8 55 1.1 580 13.3
Investable demand deposits 10,323 8,866 7,6061,457 16.4 1,260 16.62463.3
Add:
Equity capita l3,599 3,478 2,957 121 3.5 521 17.61916.9
Allowance forcredit losses 980 1,043 1,261 (63) (6.0) (218)(17.3)12911.4
Other liabilities 1,017 977 1,394 40 4.1 (417)(29.9)148 11.9
Less: Bank premises and equipment 1,065 914 960 151 16.5 (46)(4.8) (67)(6.5)
Other assets 2,023 1,942 2,801 81 4.2(859)(30.7) (56) (2.0)
NET NONINTEREST
SOURCES $12,831 $11,508$ 9,4571,323 11.5 2,051 21.7 8379.7
</TABLE>
Net Interest Income
Taxable-equivalent net interest income amounted to $2,347.9
million in 1994, an increase of $261.2 million (12.5%) from
1993. This follows a 2.7% increase in 1993 and a 4.0% decline
in 1992. The higher level of taxable-equivalent net interest
income in 1994 resulted primarily from earning asset
growth, up $3.1 billion (7.3%). This growth follows an
increase of 2.2% in 1993 and a decline of 1.0% in 1992.
In addition, the net interest margin increased 23 basis
points in 1994 to 5.14%, versus 4.91% in 1993 and 4.89% in
1992.
Provision for Credit Losses
The Corporation recorded no provision for credit losses in
1994, which reflects significant improvements in credit
quality. The Corporation has experienced a substantial
reduction in the level of net chargeoffs, which declined to
$133.0 million in 1994 from $218.1 million in 1993 and $459.6
million in 1992. The provision for credit losses totaled $112.6
million in 1993 and $314.3 million in 1992.
In January 1995, the Corporation adopted SFAS 114, "Accounting
by Creditors for Impairment of a Loan." It is not expected
that adoption of this statement will have a material impact
on 1995 earnings.
Refer to the Risk Elements section of this report for a
more complete discussion of the Corporation's credit profile.
Noninterest Income
Noninterest income totaled $1,054.3 million in 1994, an increase
of $100.1 million (10.5%) from the level of a year earlier.
Among the recurring categories of noninterest income, service
charges on deposit accounts rose $48.9 million (9.5%) from 1993
and trust fees increased $15.9 million (9.0%). These compare to
1993 increases in deposit service charges and trust fees
of 7.1% and 4.2%, respectively. Noninterest income in 1994
benefited from venture capital gains of $28.3 million, of
which $17.0 million were reported as investment securities
gains and $11.3 million were reported as other income. Of the
1993 investment securities gains, $8.1 million resulted from
the sale of equity interests. Noninterest income in 1994
also benefited from interest on state tax settlements of $10.5
million. The increases in 1994 were offset in part by a lower
level of other charges, commissions and fees, which declined
$17.4 million (11.6%) in 1994. This decline resulted primarily
from a reduction in the sale of various investment
products.
The major categories of noninterest income are included in
the following table:
<TABLE>
<CAPTION>
NONINTEREST INCOME Change 94/93 Change 93/92 Change 92/91
(millions) 1994 1993 1992 $ % $ % $ %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Deposit service charges $ 561.9 $513.0 $478.9 48.9 9.5 34.1 7.1 7.1 1.5
Trust fees 193.3 177.4 170.3 15.9 9.0 7.1 4.2 (2.4) (1.4)
Other charges, commissions and fees 132.0 149.4 163.6 (17.4) (11.6) (14.2) (8.7) (20.8) (11.3)
Merchant credit card fees 39.7 44.1 37.3 (4.4) (10.0) 6.8 18.2 (16.2) (30.3)
Investment securities gains (losses) 21.1 9.7 (1.8) 11.4 n/m 11.5 n/m (44.6) n/m
Trading income 16.8 19.5 19.4 (2.7) (13.8) 0.1 0.5 (63.1) (76.5)
Gain (loss) on sale of loans 2.5 8.0 (3.3) (5.5) (68.8) 11.3 n/m (5.6) n/m
Gain (loss) on sale of subsidiaries _ _ (2.6) _ _ 2.6 n/m (29.7) n/m
Other income 87.0 33.1 50.3 53.9 n/m (17.2) (34.2) (97.0) (65.9)
TOTAL $ 1,054.3 $954.2 $912.1 100.1 10.5 42.1 4.6 (272.3) (23.0)
</TABLE>
Noninterest Expenses
Noninterest expenses totaled $2,197.8 million in 1994,
versus $2,032.4 million in 1993 and $2,209.2 million in 1992.
The $165.4 million (8.1%) increase in 1994 includes the
$141.3 million restructuringcharges, as previously noted.
Excluding the restructuring charges, 1994 noninterest expenses
including the impact of completed acquisitions rose $24.1
million (1.2%). Net ORE expenses dropped $46.0 million in 1994
to a net recovery of $12.4 million. This follows a drop of
$126.0 million in 1993 and reflects the declining level of ORE
over the last three years. Including acquisitions and increased
pension costs, salaries and other staff expenses increased
$104.6 million (10.7%) in 1994 to $1,079.9 million. This
follows a $60.1 million (5.8%) decline in 1993. Including
acquisitions, the December 1994 staff level of 27,394 was up
805 (3.0%) full-time equivalent employees from December 1993.
This follows a decline of 1.5% in 1993.
In January 1994, the Corporation adopted SFAS 112,
"Employers' Accounting for Postemployment Benefits."
Implementation of this statement did not have a material
impact on the Corporation's results.
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% for all of 1994. This compares to
65.7% in 1993 and 69.6% in 1992. The Corporation expects to
achieve an efficiency ratio of 58% in 1995.
The major categories of noninterest expenses are included in
the following table:
<TABLE>
<CAPTION>
NONINTEREST EXPENSES Change 94/93 Change 93/92 Change 92/91
(millions) 1994 1993 1992 $ % $ % $ %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries $ 865.9 $ 805.8 $ 853.5 60.1 7.5 (47.7) (5.6) (138.2) (13.9)
Employee benefits 214.0 169.5 181.9 44.5 26.3 (12.4) (6.8) (39.0) (17.7)
Total salaries and benefits 1,079.9 975.3 1,035.4 104.6 10.7 (60.1) (5.8) (177.2) (14.6)
Net occupancy of bank premises 228.3 207.3 223.7 21.0 10.1 (16.4) (7.3) (21.3) (8.7)
Furniture and equipment 128.3 129.9 135.7 (1.6) (1.2) (5.8) (4.3) (45.5) (25.1)
FDIC assessments 102.8 100.5 90.6 2.3 2.3 9.9 10.9 6.5 7.7
Communications 117.6 105.0 91.9 12.6 12.0 13.1 14.3 (3.6) (3.8)
Supplies 43.6 40.7 39.4 2.9 7.1 1.3 3.3 (8.5) (17.7)
Outside contract services 91.8 165.2 130.3 (73.4) (44.4) 34.9 26.8 32.5 33.2
Advertising 46.8 52.6 35.2 (5.8) (11.0) 17.4 49.4 (0.2) (0.6)
Other expenses 229.8 222.3 267.4 7.5 3.4 (45.1) (16.9) (63.3) (19.1)
Total before restructuring
and other real estate 2,068.9 1,998.8 2,049.6 70.1 3.5 (50.8) (2.5) (280.6) (12.0)
Provision for restructuring 141.3 _ _ 141.3 n/m _ _ (90.0) n/m
Other real estate (12.4) 33.6 159.6 (46.0) n/m (126.0) (78.9) (152.4) (48.8)
TOTAL $2,197.8 $2,032.4 $2,209.2 165.4 8.1 (176.8) (8.0) (523.0) (19.1)
</TABLE>
Income Taxes
For 1994, the Corporation recorded income tax expense of
$449.5 million on pre-tax income of $1,183.0 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 tax rate in 1993 included the benefits of
two events. First, the Corporation recorded a $12.4 million
benefit resulting from the enactment of the Omnibus Budget
Reconciliation Act of 1993. This benefit reflects the effect
of the increase in the federal statutory rate from 34% to 35%
on the Corporation's net deferred tax assets as of the date of
enactment. In addition, the Corporation recognized a $9.0
million benefit from the utilization in 1993 of foreign tax credit
carryforwards.
As of January 1, 1993, the Corporation adopted SFAS 109
on a prospective basis. The cumulative effect of the adoption
of SFAS 109 increased net income by $305.0 million, and
is reported separately in the consolidated statement of
earnings.
The Corporation's effective tax rate in 1995 is expected to
approximate 38%-39%.
Asset, Liability and Capital Management
The objective of the asset, liability and capital
management function is to structure the balance sheet to
provide high levels of returns while maintaining acceptable
levels of credit risk, interest rate risk, liquidity and
capital. This process is managed on a consolidated basis
by the Asset, Liability and Capital Committee (ALCCO),
which establishes policies and procedures that define the
goals and parameters for the management of individual
operating units regarding liquidity, capital, investments,
interest rate risk management and derivative contracts.
Compliance with these policies is reported to ALCCO, which
meets on a regular basis.
Interest Rate Sensitivity: Interest rate risk can be measured
along a variety of dimensions, including its impact on net
interest income as well as the market value of portfolio
equity. First Interstate relies on a combination of gap
analysis and simulations of net interest income to measure and
manage interest rate risk.
Traditional "gap" analysis represents interest rate risk in
terms of the mismatch between the stated repricing and
maturities of the Corporation's earning assets and
liabilities within defined time periods. At December 31,
1994, the cumulative 90 day contractual gap for the
consolidated Corporation was a negative $0.3 billion,
representing 0.7% of earning assets, and the cumulative one-
year contractual gap was a positive $3.6 billion,
representing7.5% of earning assets, as shown in the
following table. In other words, approximately equal
amounts of the Corporation's assets and liabilities
reprice or mature within a 90 day period, and 7.5% of the
Corporation's earning assets reprice or mature more quickly
than the liabilities within one year.
<TABLE>
<CAPTION>
Rate Sensitive Balances December 31, 1994
CONTRACTUAL 1 to 30 31 to 90 91 to 180 181 to 365 1 to 2 2 to 5 Over
AMOUNTS (millions) days days days days years years 5 years
Earning assets:
<S> <C> <C> <C> <C> <C> <C> <C>
Loans $12,086 $3,467 $2,132 $2,462 $1,652 $ 4,719 $ 6,730
Securities 1,299 939 878 1,616 1,981 3,260 3,878
Other(1) 284 (457) (132) 80 48 74 371
Total earning assets 13,669 3,949 2,878 4,158 3,681 8,053 10,979
Net sources:
Demand deposits _ _ _ _ _ _ 10,529
Interest bearing deposits 15,038 1,185 1,506 1,540 956 11,239 364
Short term borrowings 1,550 20 _ _ _ 4 _
Long term debt 5 129 9 99 139 420 587
Other(2) _ _ _ _ _ _ 2,048
Total net sources 16,593 1,334 1,515 1,639 1,095 11,663 13,528
Incremental gap (2,924) 2,615 1,363 2,519 2,586 (3,610) (2,549)
Cumulative gap (2,924) (309) 1,054 3,573 6,159 2,549 _
% of earning assets (6.2) (0.7) 2.2 7.5 13.0 5.4 _
<FN>
(1)Includes the effects of swaps, financial futures and
similar agreements used to manage interest rate risk.
(2)Includes other funding sources such as common and preferred
stock.
</TABLE>
The "managerial" gap reflects the expected repricing or
maturity of assets and liabilities as opposed to their
contractual maturity. This refinement to gap analysis
incorporates the options that are embedded in the balance
sheet, the anticipated prepayment behavior of various asset
products, particularly mortgage-backed securities
and mortgage loans, and the effective maturity of various
liability products with indeterminate maturities. For
the purpose of constructing the "managerial" gap, prepayment
rates for loans and investment securities are projected to
be in line with general market expectations for these
products. Specific deposit assumptions are based on
historical experience for repricing sensitivity and the
average life of deposit balances. Adjusting for these
factors, the Corporation was asset sensitive, with $2.9
billion (6.1%) of its assets repricing more quickly
than liabilities. The $2.1 billion increase in the cumulative
one year gap from yearend 1993 principally reflects a
reduction in the amount of fixed rate securities in the
investment portfolio along with an increase in the amount
of adjustable rate loans. In particular, adjustable rate
mortgages increased significantly with the acquisition of
Sacramento Savings Bank.
<TABLE>
<CAPTION>
Rate Sensitive Balances December 31, 1994
MANAGERIAL 1 to 30 31 to 90 91 to 180 181 to 365 1 to 2 2 to 5 Over
AMOUNTS (millions) days days days days years years 5 years
<S> <C> <C> <C> <C> <C> <C> <C>
Earning assets $13,512 $5,473 $3,842 $5,486 $5,843 $6,923 $6,290
Net sources:
Passbook savings and NOW 3,079 750 616 1,846 1,186 2,737 2,462
Market interest 5,058 1,781 441 579 1,047 2,286 _
Other sources 5,168 1,766 2,155 2,184 2,081 3,532 6,615
Total net sources 13,305 4,297 3,212 4,609 4,314 8,555 9,077
Incremental gap 207 1,176 630 877 1,529 (1,632) (2,787)
Cumulative gap 207 1,383 2,013 2,890 4,419 2,787 _
% of earning assets 0.4 2.9 4.2 6.1 9.3 5.9 _
</TABLE>
Gap analysis provides only a static view of the
Corporation's interest rate sensitivity at a specific point
in time. The actual impact of interest rate movements on the
Corporation's net interest income may differ from that
implied by any gap measurement. The actual impact on net
interest income may depend on the direction and magnitude of
the interest rate movement, as well as competitive and market
pressures. Given the complexity of these dynamics, the
Corporation regularly performs analysis of its interest
rate sensitivity using simulation analysis. This approach
measures the risk to net interest income due to changes in
underlying market rates while considering the dynamic
aspects of the balance sheet,repricing and prepayment
behavior under varying rate scenarios. In addition,
simulation models capture the impacts of any embedded
options, such as caps and floors, as well as relationships
between rates that are not easily represented in a gap
analysis.
The simulation model is used to create one and three year
changes in net interest income levels, which are compared to
limits which ALCCO has established on the amount of earnings
that may be put at risk due to changes in market interest
rates. The simulation results are generally well within the
established limits, but the actual position at any given time
is a function of available asset opportunities, historical
and expected interest rates, and long term balance sheet
trends. For example, should market interest rates remain
unchanged or continue to move higher, deposit pricing pressure
is expected to reduce the positive impact on net interest
margin that an asset sensitive gap position suggests.
Similarly, if market rates begin to decline, industry
pressure on deposit prices may limit the Corporation's ability
to reprice liabilities quickly.
Liquidity Management: This section should be read in
conjunction with the consolidated and Parent Corporation's
statements of cash flows included elsewhere in this report.
Liquidity refers to the Corporation's ability or the
financial flexibility to adjust its future cash flows to meet
the needs of depositors and borrowers and to fund
operationson a timely and cost effective basis.
The Corporation's liquidity policy is designed to draw upon
its strengths, which include an extensive interstate retail
banking franchise. Core deposits have always provided the
Corporation's banking subsidiaries with a major source of
stable and relatively low-cost funding.
Cash and cash equivalents declined $564 million for the year
ended December 31, 1994.
Net cash provided by investing activities during 1994 totaled
$129 million. Maturities of investment securities in the
held-tomaturity portfolio, net of purchases, provided cash
of $3,618 million. Maturities and sales of investment
securities in the available-for-sale portfolio, net of
purchases, provided $193 million. Loan originations, net of
repayments, used cash of $5,688 million. Proceeds from the
sale of loans provided $3,054 million, while the purchase of
loans used $1,263 million.
Net cash used by financing activities totaled $2,048 million
during 1994. Deposits, excluding the purchase of $315
million from the Resolution Trust Corporation as part of the
Corporation's ongoing acquisition program, exhibited a net
decrease of $1,878 million. The Corporation also reported
a net increase of $580 million in short term borrowings.
These borrowings were primarily federal funds purchased and
securities sold under agreements to repurchase. The
Corporation continues to have no commercial paper outstanding.
Proceeds from the issuance of long term debt provided $125
million, while maturities of long term debt required cash of
$270 million. Repurchases of common stock used cash of $712
million, while cash dividends totaled $251 million.
Cash provided by operations during 1994 totaled $1,355
million. Net income totaled $734 million and noncash
adjustments to reconcile net income totaled $416 million. Net
changes in other assets, other liabilities and trading
account securities increased cash from operations by $205
million.
Given the outlook for loan generation and the prevailing
economicconditions which serve to limit the Corporation's
prospects to increase deposits, the trend of funding
increases in the loan portfolio with maturities and
paydowns from investment securities should continue in the
near future. As a result, the investment portfolio is
expected to show year-toyear declines again in 1995.
The Parent Corporation's statement of cash flows includes a
$295 million decrease in cash and cash equivalents during
1994. The Parent Corporation had $219 million of cash and
other short term financial instruments at yearend 1994, a
decline of $433 million from yearend 1993 that resulted
primarily from the common stock repurchase program described
in the Capital Management section.
In 1994, affiliate banks paid a total of $605 million in
dividends to the Parent Corporation. This represents an
increase of $114 million from the $491 million paid in 1993
and reflects continued improved operating performance at
affiliate banks and the bank capital restructuring
activities undertaken in 1994. The Parent Corporation had
no external short term borrowings outstanding at yearend
1994. At current rates, interest on long term debt and
preferred stock dividend requirements total $129 million for
1995 and $121 million for 1996. In addition, $128 million of
the Parent Corporation's long term debt will mature in 1995
and $192 million will mature in 1996. The Parent Corporation
expects to retire this long term debt as it matures. Under
the appropriate circumstances, the Parent Corporation could
consider repurchasing any of its outstanding securities.
Immediate liquidity available to the Corporation includes a
$500 million senior revolving credit facility. 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 issuance in a number of countries and over a broad
spectrum of maturities.
The Corporation's other sources of liquidity include
maturing securities in addition to those which are available
for sale or repurchase activity. In addition, affiliate
banks may directly access funds placed by them through
existing agency agreements for the placements of federal
funds and may also access the Federal Reserve for short term
liquidity needs.
The Parent Corporation has access to regional, national
and international capital and money markets. The
Corporation's debt securities are rated by Moody's
Investors Service (Moody's), Standard & Poor's Corp. (S&P),
Thomson BankWatch (Thomson) and Duff & Phelps Credit Rating
Co. (D&P). These debt securities were upgraded by Moody's
in November 1994, by S&P in December 1993, by Thomson in
December 1994, and by D&P in January 1994. The upgrades should
have a positive effect on the Corporation's funding costs.
Securities and Loans: At December 31, 1994, securities
maturing within one year amounted to $3.5 billion, or 25.5%
of the held-tomaturity portfolio. The weighted average
expected maturity of total held-to-maturity securities was 25
months at yearend 1994, compared to the weighted average
maturities of 21 months in 1993 and 24 months at the end
of 1992. The average expected maturities of U.S. Treasury
and agency securities were 22 months, 20 months and 25
months at yearend 1994, 1993 and 1992, respectively. The
comparable maturities of tax-exempt securities were 34 months,
32 months and 26 months at the same dates.
The contractual maturity distribution of the major
categories of investment securities in the held-to- maturity
and availableforsale portfolios at December 31, 1994, is
presented in the following table:
<TABLE>
<CAPTION>
Held-to-Maturity Available-for-Sale
CONTRACTUAL Within One Five After Within One Five After
AMOUNTS One to five to 10 10 one to five to 10 10
(millions) year years years years Total year years years years Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and agencies $3,427 $4,362 $1,738 $2,578 $12,105 $16 $22 $2 $ 2 $ 42
State and political subdivisions 12 10 6 1 29 _ _ _ _ _
Other 53 667 113 728 1,561 _ _ _ 114 114
TOTAL $3,492 $5,039 $1,857 $3,307 $13,695 $16 $22 $2 $116 $156
</TABLE>
As indicated in the preceding table, securities held to
maturity that mature within one year totaled $3.5 billion on
a contractual basis at yearend 1994. Contractual
maturities plus estimated prepayments during 1995 are
expected to equal approximately $5.8 billion.
The contractual maturity schedule of the loan portfolio,
excluding instalment and real estate mortgage loans, is
detailed in the following table:
<TABLE>
<CAPTION>
Within One to five After five
AMOUNTS (millions) one year years years Total
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $4,706 $3,531 $1,057 $ 9,294
Real estate construction 779 124 59 962
Foreign 49 54 37 140
TOTAL $5,534 $3,709 $1,153 $10,396
</TABLE>
As shown in the preceding table, loans maturing within
one year totaled $5.5 billion at yearend 1994. The
Corporation's policy on maturity extensions and rollovers
is based on management's assessment of individual loans.
Approvals for the extension or renewal of loans without reduction
of principal for more than one 12-month period are
generally avoided, unless fully secured and properly
margined by cash or marketable securities, or are
revolving lines subject to annual analysis and renewal.
The following table details the remaining $4.9 billion of
loans with maturities exceeding one year:
AMOUNTS (millions) Fixed Rate Adjustable Rate Total
Commercial, financial and agricultural $1,746 $2,842 $4,588
Real estate construction 45 138 183
Foreign 9 82 91
TOTAL $1,800 $3,062 $4,862
Capital Management: The current and projected capital
position of the Corporation and its affiliates and the
impact of capital plans on both short term and long term
strategies is reviewed regularly by senior management.
In April 1994, the Board of Directors approved a 50%
increase in the quarterly cash dividend on the Corporation's
common stock from $0.50 to $0.75 per share.
In the first half of 1994, the Board of Directors approved
the repurchase of up to 8 million shares of common stock from
time to time during the year, subject to market conditions
and appropriate regulatory and acquisition accounting
requirements. Additionally, in connection with the
acquisition of Levy Bancorp, the Board approved in September
1994 the buyback of up to 1.2 million shares of common stock.
The repurchase programs were completed in 1994; a total of
9.1 million shares were repurchased. The average cost of
common stock held in the treasury at yearend 1994 was $73.64.
On March 18, 1994, in conjunction with completion of
the acquisition of San Diego Financial Corporation, the
Corporation recorded additional equity of $61.8 million
through the issuance of 5.1 million shares of its common
stock. An additional 702,033 shares, with proceeds of $30.3
million, were issued under the Stock Option Plan.
During 1994, the Corporation recorded common stock
dividends of $218.2 million and preferred stock dividends of
$33.3 million.
Under Federal Reserve Board regulations, the minimum capital
ratios required are 4.00% for Tier 1 and 8.00% for Total Capital.
Under these regulations, a well-capitalized institution is defined
as having a Tier 1 ratio of 6.00%, a Total Capital ratio of 10.00%
and a leverage ratio of 5.00%. At yearend 1994, the Corporation
and all subsidiary banks exceeded the minimum requirements of
wellcapitalized institutions. The decline in the Corporation's
various capital ratios largely resulted from the common stock
repurchase programs, completed acquisitions and growth in
riskadjusted assets. The following tables detail the capital
and leverage positions of the Corporation over the last two years:
<TABLE>
<CAPTION>
RISK-BASED CAPITAL December 31, 1994 December 31, 1993
RATIOS (dollars in millions) $ % $ %
<S> <C> <C> <C> <C>
Tier 1 Capital 2,882 7.20 3,313 9.88
Tier 1 Capital minimum requirement 1,601 4.00 1,341 4.00
Excess 1,281 3.20 1,972 5.88
Total Capital 4,091 10.22 4,385 13.08
Total Capital minimum requirement 3,203 8.00 2,683 8.00
Excess 888 2.22 1,702 5.08
Risk-adjusted assets, net of goodwill, nonqualifying intangibles,
excess allowance and excess deferred tax assets 40,041 _ 33,533 _
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994 December 31,
1993 LEVERAGE RATIO
(dollars in millions) $ % $ %
<S> <C> <C> <C> <C>
Tier 1 Capital 2,882 5.35 3,313 6.60
Quarterly average total assets, net of goodwill,nonqualifying
intangibles and excess deferred tax assets 53,905 _ 50,198 _
</TABLE>
Total intangibles amounted to $561 million at December 31, 1994,
versus $233 million a year earlier. The higher level at yearend
1994 reflects the completion of 10 acquisitions during the year.
Goodwill increased to $514 million from $204 million at yearend
1993. All other intangibles amounted to $47 million and $29
million at yearend 1994 and 1993, respectively, while excess
deferred tax assets totaled $21 million and $31 million,
respectively.
Risk Elements
The U.S. economy staged a strong performance in 1994, with real
growth of 4.0%. Increases in consumer spending, home
construction, business investment in capital equipment, and
inventory building spurred sizable gains in bank loans. While
inflation remained well contained, with consumer prices up an
average of less than 3.0%, the Federal Reserve acted to prevent
a future buildup in inflation and raised interest rates seven
times since the beginning of 1994. Long-term interest rates rose
sharply early in 1994 before edging lower at yearend.
In 1995, the delayed effects of monetary tightening should slow
the nation's economic growth closer to the Federal Reserve's long
term goal of about 2.5%. Consumer spending and inventory building
should moderate, while home-building subsides from its 1994
peak. Inflation will show some acceleration, but consumer
prices are still likely to rise an average of less than 3.5%.
The yield curve is expected to flatten, with an easing in long
term rates.
All 13 states in the First Interstate Territory should record
positive job growth in 1995 for a second consecutive year and
most should outperform the nation. Ongoing population gains,
rising exports, and the region's technology clusters will
support increases in jobs and personal income. California can be
expected to counter the national trend of slower growth compared
with 1994. The Territory's various local economies, however,
will remain vulnerable to further reductions in defense
spending, including a new round of base closings in 1995.
Another large upswing in both short and long term interest
rates would also pose a significant risk to interestsensitive
sectors in the region.
Credit Risk: The Corporation manages its credit risk
by establishing and implementing strategies appropriate to
the characteristics of borrowers, industries, geographic locations
and risk products. Diversification of risk within each of these
areas is a primary objective. Policies and procedures are
developed to ensure that loan commitments conform to current
strategies and guidelines. Management continues to refine the
Corporation's credit policies and procedures to address the risks
in the current and prospective environment and to reflect
management's current strategic focus. The credit process is
controlled with continuous review and analysis. It is supported by
independent evaluation of the portfolio's quality by internal
credit review, internal and external auditors and regulatory
authorities.
The Corporation has collateral management policies in place to
ensure that collateral lending of all types is approached on a
basis consistent with safe and sound standards. Valuation analysis
is utilized to take into consideration the potentially adverse
economic conditions under which liquidation could occur. Collateral
accepted against the commercial loan portfolio includes accounts
receivable and inventory, marketable securities, equipment, and
agricultural products. Autos, second trust deeds, and marketable
securities are accepted as collateral for the instalment loan
portfolio.
Securities: At December 31, 1994, the Corporation had $13.9 billion
of investment securities, of which 87.7% were U.S. Treasury and
agency securities. The remaining 12.3% of the investment portfolio
consisted primarily of AAA-rated, welldiversified, asset-backed
securities. The Corporation's investment policy requires
investments to be made with an emphasis on geographic and issuer
diversification. Other than the U.S. government and agencies, the
Corporation has no other significant concentration of any single
issuer in its investment securities portfolio.
In addition to maintaining a low-risk credit profile, the
Corporation has established investment securities policies and
procedures to manage and monitor the interest rate risk exposure of
the portfolio. Investments are directed toward low volatility
instruments to minimize interest rate risk. At December 31, 1994,
41% of the portfolio was invested in short term U.S. Treasury and
direct agency securities with a duration of 0.9 years. Fixed rate
collateralized mortgage obligations structured to stabilize cash
flows during volatile interest rate environments accounted for 31%
of securities holdings with a duration of 1.5 years. U.S. agency
mortgage pass-through securities with a duration of 3.0 years
represented 20% of the portfolio. The remaining 8% of the portfolio
consisted primarily of short term asset-backed securities
collateralized by consumer receivables with a duration of 2.3
years. The Corporation held no leveraged instruments, structured
notes or securities defined as "High Risk Mortgage Securities"
under current regulatory guidelines.
Loans and ORE: At yearend 1994, the Corporation's commercial loan
portfolio of $9.3 billion was diversified with no single industry
representing over 10% of total commercial loans. The residential
mortgage, commercial mortgage and real estate
construction portfolios accounted for $5.8 billion, $4.4
billion and $0.9 billion, respectively, of total loans.
The following table presents a breakdown of outstanding real estate
loans by geographic location at yearend 1994 and 1993. Outstandings
reported by state may represent loans and ORE that are held by
subsidiaries other than the banking affiliate headquartered in
those states.
<TABLE>
<CAPTION>
Real Estate Loans(1) Real Estate Nonperforming Loans ORE
(outstanding Mortgage Construction Mortgage Construction
at yearend, Res- Com- Res- Com- Res- Com- Res- Com-
in millions) idential mercial idential mercial Total idential mercial idential mercial Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total 1994
California $3,123 $1,906 $288 $233 $ 5,550 $ 8 $55 $13 $ 1 $ 77 $52
Northwest(2) 1,064 891 43 105 2,103 2 6 _ 1 9 1
Southwest(3) 1,008 1,020 44 103 2,175 3 14 _ 7 24 4
Texas 489 496 33 41 1,059 _ 4 _ _ 4 7
Other 129 92 _ 43 264 _ _ _ _ _ 8
TOTAL $5,813 $4,405 $408 $525 $11,151 $13 $79 $13 $ 9 $114 $72
1993
California $ 848 $ 978 $247 $142 $ 2,215 $ 6 $ 4 $22 $_ $ 32 $36
Northwest(2) 908 869 22 52 1,851 3 5 1 1 10 3
Southwest(3) 736 876 27 116 1,755 3 21 1 32 57 7
Texas 330 475 16 34 855 _ 5 _ _ 5 22
Other 102 98 _ 69 269 _ _ _ 45 45 14
TOTAL $2,924 $3,296 $312 $413 $ 6,945 $12 $35 $24 $78 $149 $82
<FN>
(1)Net of unearned income and deferred fees
(2)Includes Oregon, Washington, Montana, Idaho and Alaska
(3)Includes Arizona, Nevada, Colorado, Utah, New Mexico and Wyoming
</TABLE>
Real estate related assets comprised 72% of
total nonperforming assets at the end of 1994,
versus 75% in 1993 and 66% in 1992. Net chargeoffs
of real estate construction and mortgage loans
combined amounted to $25.0 million in 1994, a
substantial decline from $81.6 million in 1993
and $212.7 million in 1992. Management considers
such comparisons in determining the level and the
allocation of the allowance for credit losses. The
portion of the allowance allocated to real estate
was approximately 14% at yearend 1994, versus 12%
in 1993 and 18% in 1992.
California At December 31, 1994, First
Interstate Bank of California accounted for 45%
of total assets, 41% of loans and 44% of total
deposits. Despite the initial devastation of
the Northridge earthquake in January 1994,
California's economy rebounded and continues in
the early phases of economic recovery. It is
currently estimated that the state added 100,000 to
150,000 nonfarm jobs during 1994, with most of the
gains occurring in the services sector.
However, other sectors are also adding to payrolls,
including construction, retail trade, government, and
nondefense manufacturing. California's unemployment
rate fell about 1.5 percentage points between the
first and final quarters of 1994.
In addition, retail sales advanced approximately
5% during 1994. With inflation running at 2%, last
year thus marked the first time since 1990 in
which consumers registered a real spending gain.
A healthier economy has also contributed to
stronger than anticipated growth in state
government revenues and a slowing in the rate of
residential and commercial foreclosures. The state's
housing market is also helping California's economy
recover. Home sales advanced substantially and residential
building permits increased approximately 15% in
1994, with both single-family and multi-family
permits recording double-digit gains. More
importantly, the downward slide in home prices
appears to be abating throughout most areas of the
state. California homeowners can expect home
values to begin rising again perhaps as early as
spring 1995.
Cross-Border Outstandings _ The Corporation had
no crossborder outstandings in excess of 0.75% of
consolidated assets at December 31, 1994. The following
table details the Corporation's cross-border outstandings
to foreign countries that represent 0.75% or more of assets
for 1993 and 1992:
Banks and Percent
CROSS-BORDER OUTSTANDINGS(1) Other Financial All of Total
(millions) Institutions Other Total Assets
At December 31, 1993
Japan $ 927 $_ $ 927 1.80%
At December 31, 1992
Japan 1,957 8 1,965 3.86
Italy 568 _ 568 1.12
(1)Cross-border outstandings are defined as total
loans(including accrued interest), acceptances,
interbank placements, other interest bearing
investments and other monetary assets
denominated in dollars or other non-local currency,
net of third party guarantees and cash collateral.
There were no outstandingsto governments
andofficial institutions of Japan or Italy for the
years presented.
Derivatives: The Corporation has engaged in
minimal derivative activities. Refer to Note M to
the financial statements for further information on
derivatives.
Credit Losses: Loans charged off, net of
recoveries, amounted to $133.0 million in 1994,
down substantially from $218.1 million in 1993 and
$459.6 million in 1992. Net chargeoffs represented
0.46% of average loans in 1994, compared to 0.90%
in 1993 and 1.79% in 1992. Net chargeoffs of real estate
construction and mortgage loans totaled $25.0
million in 1994, down substantially from $81.6
million in 1993 and $212.7 million in 1992. The
high level of chargeoffs in 1993 and 1992
reflects, in part, the revaluation of land loans,
primarily in California. Overall, there is
continued improvement in the Corporation's credit
risk profile.
The following table summarizes the Corporation's
loan loss experience for the last five years:
<TABLE>
<CAPTION>
SUMMARY OF LOAN LOSS Year Ended December 31
EXPERIENCE (millions) 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Average amount of loans outstanding(1) $ 28,644 $ 24,128 $ 25,694 $ 30,691 $ 35,708
ALLOWANCE FOR CREDIT LOSSES
Balance at beginning
of year $1,001.1 $1,067.8 $1,273.0 $1,010.8 $1,437.5
Provision for the year _ 112.6 314.3 810.2 499.4
Net changes due to
acquisitions (dispositions) 66.5 38.8 (59.9) (1.1) (52.5)
1,067.6 1,219.2 1,527.4 1,819.9 1,884.4
Deduct:
Loans charged off:
Commercial, financial and agricultural 25.0 84.3 159.8 271.1 290.2
Real estate construction 8.8 65.5 183.0 99.6 100.8
Real estate mortgage 34.2 40.2 43.1 87.6 223.0
Instalment 190.3 200.4 195.3 203.4 200.3
Foreign _ 6.6 12.0 3.8 169.7
Lease financing 2.5 1.8 13.7 23.7 28.5
Total chargeoffs 260.8 398.8 606.9 689.2 1,012.5
Less recoveries of loans previously charged off:
Commercial, financial and agricultural 40.9 78.5 67.9 57.2 38.3
Real estate construction 6.2 17.3 6.6 4.5 11.4
Real estate mortgage 11.8 6.8 6.8 6.3 6.5
Instalment 65.5 66.3 55.6 56.1 58.7
Foreign 1.6 9.1 4.8 10.3 15.8
Lease financing 1.8 2.7 5.6 7.9 8.2
Total recoveries 127.8 180.7 147.3 142.3 138.9
Net loans charged off 133.0 218.1 459.6 546.9 873.6
Balance at end of year $ 934.6 $1,001.1 $1,067.8 $1,273.0 $1,010.8
Ratio of net loans charged off during the year
to average amount of loans outstanding 0.46% 0.90% 1.79% 1.78% 2.45%
<FN>
(1)Net of unearned income and deferred fees.
</TABLE>
The composition of net loans charged off, and the ratios
to average outstandings, are presented in the following
table:
<TABLE>
<CAPTION>
COMPOSITION OF NET
LOANS CHARGED OFF Net Loans Charged Off Ratio to Average Loans (%)
(millions) 1994 1993 1992 1991 1990 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural $(15.9) $ 5.8 $ 91.9 $213.9 $251.9 (0.19) 0.08 1.13 2.05 1.86
Real estate construction 2.6 48.2 176.4 95.1 89.4 0.32 5.28 10.10 3.55 2.50
Real estate mortgage 22.4 33.4 36.3 81.3 216.5 0.30 0.62 0.66 1.44 3.96
Instalment 124.8 134.1 139.7 147.3 141.6 1.07 1.35 1.43 1.45 1.29
Foreign (1.6) (2.5) 7.2 (6.5) 153.9 (1.93) (1.56) 1.78 _ 10.69
Lease financing 0.7 (0.9) 8.1 15.8 20.3 0.32 (1.06) 4.00 2.58 2.74
TOTAL $133.0 $218.1 $459.6 $546.9 $873.6 0.46 0.90 1.79 1.78 2.45
</TABLE>
Allowance for Credit Losses: The allowance for credit
losses is maintained at a level considered appropriate by
management and is based on the ongoing assessment of the
risks inherent in the loan portfolio, as well as on the
possible impact of known and potential problems in certain off-
balance sheet financial instruments and uncertain
events. In evaluating the adequacy of total and
subsidiary reserves, management incorporates such
factors as collateral value, portfolio composition, loan
concentrations, trends in local economic conditions
and evaluation of the financial strength of borrowers.
Allocation of the allowance for credit losses by
loan category is based on management's assessment of
potential losses in the respective portfolios. While
reserves are allocated to specific loans and to
portfolio segments, the allowance is predominantly
general in nature and is available for the portfolio in
its entirety.
In order to commonize reserve strength, the Corporation's
management adjusted levels of the allowance for credit losses
among the major bank subsidiaries as of yearend 1994. This action
had no effect on the Corporation's consolidated financial
statements, as there was no change in the consolidated
allowance. At December 31, 1994, the allowance for
credit losses amounted to $934 million, or 2.81% of
total outstanding loans. This compares to $1,001
million, or 3.85% at yearend 1993 and $1,068 million,
or 4.41% at yearend 1992.
The following table details the Corporation's allocation of
the allowance for credit losses for the last five years:
<TABLE>
<CAPTION>
ALLOCATION OF Percent of Loans in Each
ALLOWANCE FOR Allowance Amount Category to Total Loans
CREDIT LOSSES December 31 December 31
(millions) 1994 1993 1992 1991 1990 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural $124.2 $ 150.6 $ 229.6 $ 348.5 $ 365.3 28.0 30.8 32.1 30.7 36.3
Real estate construction 41.3 77.3 119.3 221.3 179.1 2.9 2.8 4.8 7.6 9.7
Real estate mortgage 90.7 47.1 69.5 120.3 93.1 30.7 23.9 22.1 20.3 16.3
Instalment 145.5 153.7 142.0 136.6 132.6 36.9 41.5 39.9 35.5 31.2
Foreign 0.2 0.2 8.3 11.3 26.4 0.4 0.6 0.7 3.5 3.9
Lease financing 1.8 2.0 1.8 22.1 9.6 1.1 0.4 0.4 2.4 2.6
Unallocated allowance 530.9 570.2 497.3 412.9 204.7 n/a n/a n/a n/a n/a
TOTAL $934.6 $1,001.1 $1,067.8 $1,273.0 $1,010.8 100.0 100.0 100.0 100.0 100.0
</TABLE>
Nonperforming Assets: Loans are generally
identified as nonperforming when the payment of
principal or interest is 90 days past due, or sooner
if management believes that collection is doubtful, or
when loans are renegotiated below market interest
rates. In addition to nonperforming loans, the
Corporation holds ORE acquired through foreclosure.
Composition of the Corporation's portfolio of
nonperforming assets is shown in the following table:
December 31
NONPERFORMING ASSETS (millions) 1994 1993 1992 1991 1990
Nonaccruing loans:(1)
Domestic:(2)
Secured by real estate $113.7 $149.3 $322.3 $ 684.3 $ 460.5
Other 72.5 77.3 255.5 394.3 439.6
Total domestic 186.2 226.6 577.8 1,078.6 900.1
Foreign _ _ _ 16.0 25.5
186.2 226.6 577.8 1,094.6 925.6
Renegotiated loans:(3)
Domestic
Secured by real estate _ _ _ _ 0.2
Other _ _ 0.4 0.1 2.7
Total domestic _ _ 0.4 0.1 2.9
Total nonperforming loans 186.2 226.6 578.2 1,094.7 928.5
Other Real Estate 72.0 82.1 172.9 493.1 820.8
TOTAL $258.2 $308.7 $751.1 $1,587.8 $1,749.3
%of total assets 0.5 0.6 1.5 3.2 3.4
Accruing loans past due 90 days or more:
Domestic(2)
Instalment $ 26.1 $ 29.8 $ 30.5 $ 27.5 $ 35.0
Other 25.1 36.3 22.8 43.0 28.8
Total Domestic 51.2 66.1 53.3 70.5 63.8
Foreign _ _ _ _ 10.6
TOTAL $ 51.2 $ 66.1 $ 53.3 $ 70.5 $ 74.4
(1)Nonaccruing loans are those loans for which there has
been no payment of interest and/or principal due for 90
days or more and in the judgment of management should be
so classified, as well as loans which, in the judgment of
management, should be so classified at an earlier date.
When loans are classified as nonaccrual, the accrual of
interest ceases and previously accrued but unreceived
income is generally reversed. In future periods, when
income is received it is recorded as a reduction in
principal where the ultimate collection of principal
remains in doubt, or as income if there is no question of
collectability of principal.
(2)Real estate construction loans at December 31, 1994,
were $21.6 million nonaccruing and $0.5 million accruing
and past due 90 days or more.
(3)Renegotiated loans are those loans for which the
interest rate was reduced because of the inability of the borrower
to service the obligation under the original terms of the
agreement. Income is accrued at the lower rate as long as
the borrower is current under the revised terms and
conditions of the agreement.
Note: The Corporation's classification of nonperforming
loans includes those identified loans where management
believes collection is doubtful. Management is not aware
of any specific borrower relationships that are not
reported as nonperforming where management has serious
doubts as to the ability of such borrowers to comply
with the present loan repayment terms which would cause
nonperforming assets to increase materially. Areas of
material known risk in the Corporation's loan portfolio
are described under "Risk Elements."
The following table summarizes the changes in
nonperforming assets in 1994 and 1993:
<TABLE>
<CAPTION>
RECONCILIATION OF 1994 1993
NONPERFORMING Nonperforming Nonperforming Nonperforming Nonperforming
ASSETS (millions) Loans ORE Assets Loans ORE Assets
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1 $226.6 $82.1 $308.7 $578.2 $172.9 $751.1
In-migration 395.4 _ 395.4 369.1 _ 369.1
Return to accrual (115.5) _ (115.5) (89.8) - (89.8)
Provision for ORE _ 4.4 4.4 _ (0.2) (0.2)
Payments/sales (249.1) (84.9) (334.0) (396.4) (183.9) (580.3)
Net chargeoffs/writedowns (47.3) (0.7) (48.0) (148.2) (13.5) (161.7)
Transfer within
nonperforming (55.6) 55.6 _ (96.9) 96.9 _
Net changes due to acquisitions 31.7 15.5 47.2 10.6 9.9 20.5
Balance at December 31 $186.2 $72.0 $258.2 $226.6 $ 82.1 $308.7
</TABLE>
At December 31, 1994, nonperforming loans totaled $186
million, an improvement of $41 million (18.1%) from the
$227 million reported a year earlier. Principal or interest
payments on $124 million (67%) of nonperforming loans were
contractually past due 30 days or more at yearend 1994. At
the same time, principal and interest in accordance with
contractual terms were current on $62 million (33%) of
nonperforming loans, as shown in the following table:
Total Contractually Contractually Nonperforming
At December 31, 1994(millions)(1) Past Due(2) Current(3) Loans
Real Estate Loans $ 86.7 $27.0 $113.7
All Others Loans 36.9 35.6 72.5
Total $123.6 $62.6 $186.2
(1) There can be no assurance that individual borrowers
will continue to perform at the level indicated or that
the performance characteristics will not change
significantly.
(2) Contractually past due is defined as a
borrower whose loan principal or interest payment is 30
days or more past due.
(3) Contractually current is defined as a loan for which
principal and interest are being paid in accordance with
contractual terms.
At the end of 1994, approximately 61% of total nonperforming
loans were real estate related. Of the nonperforming real
estate loans, 76% were contractually past due and 24%
were contractually current.
In addition to nonperforming loans, nonperforming
assets also include ORE. ORE includes property acquired
through foreclosure or deed in lieu of foreclosure. These
outstandings are recorded at the lower of the loan
balance on the property at the date of transfer or the
fair value of the property received, net of a reserve
for estimated costs. Losses that result from the
ongoing periodic valuation of these properties are
charged against ORE reserves. It is the policy of the
Corporation to maintain a reserve against its ORE for
estimated selling costs and declines in value as
determined by current appraisals. At the same time, if
in the case of a particular property such conditions
indicate a possible greater decline in value between
appraisals, then a higher valuation reserve is
provided for that property.
At yearend 1994, ORE totaled $72 million (net of a $25
million reserve), a decline from $82 million (net of a $32
million reserve) in 1993 and $173 million (net of $45
million reserve) in 1992.
At December 31, 1994 total nonperforming assets were $258
million, down from $309 million in 1993 and $751 million
in 1992. 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
yearend 1994, versus $66 million a year earlier and $53
million in 1992, which included consumer instalment credit
of $26 million, $30 million, and $31 million,
respectively.
Reflecting the Corporation's improved credit quality,
interest lost on nonperforming loans was $13.5 million in
1994, down from $26.0 million reported in 1993 and $84.2
million reported in 1992. In addition to the amount of
interest that would have been recorded if the loans were
performing, interest lost also includes prior period
interest reversals and recoveries.
INTEREST LOST RECONCILIATION (thousands) 1994 1993(1) 1992
Interest income which would have been recorded under
original terms:
Domestic $20,581 $33,184 $84,423
Foreign _ _ 802
Interest income reversed:
Domestic 2,083 2,556 11,698
Foreign _ _ _
Less interest income recorded:
Domestic 9,188 9,768 12,684
Foreign _ _ _
Interest lost:
Domestic 13,476 25,972 83,437
Foreign _ _ 802
TOTAL $13,476 $25,972 $84,239
(1)Restated from originally reported data.
Mergers and Acquisitions
At the beginning of 1993, the Corporation began an
acquisition program primarily focused on key markets
within the states of California, Washington and Texas.
Since then, the Corporation has announced and closed 17
transactions totaling nearly $10 billion in assets, of
which 15 transactions with over $9 billion in assets
have been in the three targeted states. Within the 52
counties in the First Interstate Territory with over
100,000 households, the acquisition program has resulted
in the achievement of top three position share in six
counties and has improved market penetration in 14
others. The Corporation continues to explore acquisition
opportunities in a highly disciplined manner, consistent
with its strategic and financial objectives.
The following table includes summary information
regarding the eight acquisitions announced in 1993 and
the nine announced in 1994. All of these transactions
were completed by February 1, 1995. The data presented
should be read in conjunction with Note P to the financial
statements.
<TABLE>
<CAPTION>
ACQUISITIONS ANNOUNCED/ Announced Announced Market
CLOSED IN 1993 & 1994 Closing Asset Purchase Cost Principal Rank
(dollars in millions)(1) Date Size Price Savings Market (from/to)
<S> <C> <C> <C> <C> <C> <C>
CALIFORNIA
HomeFed Bank_Fresno Cluster (RTC) 2-2--93 $ 149 $ 4.1(2) n/m Fresno 12/4
HomeFed Bank_
West L.A. Cluster (RTC) 12-3-93 248 6.1(2) n/m Los Angeles 4/4
Cal Rep Bancorp, Inc. 12-10-93 569 68.0 57% Bakersfield 7/2
First State Bank of the Oaks 1-13-94 144 23.0 71% Ventura 11/6
San Diego Financial Corp. 3-18-94 2,028 340.0 42% San Diego 9/3
Sacramento Savings Bank 11-1 94 3,026 331.0 49% Sacramento 6/2
Levy Bancorp 2-1-95 625 86.5 50% Ventura 6/2
WASHINGTON
Great American_
Seattle & Olympia Clusters (RTC) 5-13-94 358 25.9(2) n/m Olympia 15/5
University Savings Bank 1-6-95 1,144 190.4 30% Seattle 5/3
Tacoma 4/3
TEXAS
Tarrant Bank (FDIC) 8-25-93 60 2.9(2) n/m Ft. Worth 8/7
BancWest Bancorp 4-29-94 249 35.8 25% Austin 28/9
MNB Bancshares, Inc. 5-30-94 46 5.5 21% Dallas 8/7
Med Center Bank (branch purchase) 7-29-94 175 12.2 47% Houston 4/4
Park Forest National Bank 12-16-94 24 2.5 31% Dallas 7/7
North Texas Bancshares, Inc. 1-9-95 388 66.0 24% Ft. Worth 7/5
ARIZONA
Chase Bank of Arizona 4-29-94 527 102.0 70% Phoenix 3/3
OREGON
Far West, FSB_Two branches (RTC) 4-15-94 15 0.9(2) n/m Portland 2/2
TOTAL $9,775 $1,302.8 47%
<FN>
(1)At date of announcement
(2)Deposit premium
</TABLE>
Common Stock, Market and Quarterly Data
The New York Stock Exchange is the primary market for
the Corporation's $2 par value Common Stock. At December 31,
1994, the 74,203,480 outstanding shares of common stock were
held by 24,902 registered shareholders. Approximately
82% of the shares outstanding are held by 283 institutional
investors. Dividends paid on the $2 par value Common Stock
totaled $2.75 per share in 1994, versus $1.60 in 1993 and
$1.20 in 1992. The current quarterly rate of $0.75 per share
has been in effect since the May 1994 payment and represents
a 50% increase from the quarterly rate in effect at the end
of 1993. On January 17, 1995, following the release of the
Corporation's fourth quarter results, the Board of
Directors declared a common stock dividend of $0.75 per share,
payable on February 24 to shareholders of record on February
6, 1995.
The number of shares used in the calculation of earnings results
per share in 1994 were 80,421,942 compared to 77,022,749 in 1993
and 69,135,224 in 1992.
The following table includes supplementary quarterly operating results
and per share information for the past two years. The data presented
should be read in conjunction with the foregoing discussion and analysis
of financial results and with the financial statements included elsewhere
in this report.
<TABLE>
<CAPTION>
Shareholders' Dividends Market Price Average Daily
Equity Paid High Low Close Closing Price
<C> <C> <C> <C> <C> <C>
1994
4th Quarter $41.59 $0.75 $81 1/2 $66 7/8 $67 5/8 $74.52
3rd Quarter 41.24 0.75 84 1/8 72 81 1/8 78.24
2nd Quarter 42.29 0.75 85 71 3/4 77 78.85
1st Quarter 41.18 0.50 79 1/8 62 3/8 73 1/4 68.36
1993
4th Quarter $41.36 $0.50 $68 $53 1/2 $64 1/8 $61.08
3rd Quarter 41.29 0.40 67 58 3/8 66 5/8 63.19
2nd Quarter 39.84 0.40 64 1/2 52 1/2 62 3/4 57.49
1st Quarter 38.62 0.40 58 7/8 44 1/2 58 3/4 52.24
</TABLE>
<TABLE>
<CAPTION>
Quarterly Operations (millions, except per share amounts): Quater Ended
March 31 June 30 Sept. 30 Dec. 31
<S> <C> <C> <C> <C>
1994
Interest income $729.2 $788.7 $811.9 $862.3
Interest expense 195.8 208.5 215.5 245.7
Net interest income 533.4 580.2 596.4 616.6
Provision for credit losses _ _ _ _
Investment securities gains 0.8 2.1 4.1 14.1
Other noninterest income 255.7 252.4 276.9 248.2
Operating noninterest expenses 492.9 504.5 529.5 542.0
Provision for restructuring _ _ 139.0 2.3
Other real estate _ (5.6) (0.7) (6.1)
Applicable income taxes 112.9 127.6 79.6 129.4
Net income 184.1 208.2 130.0 211.3
Earnings per common share $ 2.21 $ 2.38 $ 1.49 $ 2.65
1993
Interest income $739.1 $740.6 $733.9 $730.6
Interest expense 238.3 216.8 210.4 206.6
Net interest income 500.8 523.8 523.5 524.0
Provision for credit losses 45.6 26.1 21.9 19.0
Other noninterest income 3.6 1.4 _ 4.7
Operating noninterest expenses 242.9 228.6 239.0 234.0
Provision for restructuring 498.5 498.3 497.9 504.1
Other real estate 10.4 10.0 9.6 3.6
Applicable income taxes 73.3 83.4 82.6 80.6
Income before extraordinary item and
cumulative effect of accounting changes 119.5 136.0 150.5 155.4
Extraordinary item (15.4) _ _ (9.3)
Cumulative effect of accounting changes 200.1 _ _ _
Net income $304.2 $136.0 $150.5 $146.1
Earnings per common share
Income before extraordinary item and
cumulative effect of accounting changes $ 1.38 $ 1.60 $ 1.80 $1.90
Extraordinary item (0.20) _ _ (0.12)
Cumulative effect of accounting changes 2.62 _ _ _
Net income 3.80 1.60 1.80 1.78
</TABLE>
Consolidated Balance Sheet
FIRST INTERSTATE BANCORP December 31
(in millions)
1994 1993
Assets
Cash and due from banks $ 6,070 $ 5,064
Time deposits, due from banks 26 1,157
Federal funds sold and securities purchased under
agreements to resell 179 618
Trading account securities 64 167
Investment securities:
Held-to-maturity securities
(approximate market value: 1994_$13,280; 1993_$16,489)
U.S. Treasury and agencies 12,105 14,894
State and political subdivisions 29 23
Other 1,561 1,456
Total held-to-maturity securities 13,695 16,373
Available-for-sale securities 156 169
Total Investment Securities 13,851 16,542
Loans (net) 33,222 25,988
Less: Allowance for credit losses 934 1,001
Net Loans 32,288 24,987
Other assets held for sale 26 133
Bank premises and equipment 1,147 948
Customers' liability for acceptances 35 48
Other assets 2,127 1,797
Total Assets $55,813 $51,461
Liabilities and Shareholders'Equity
Deposits:
Noninterest bearing $16,599 $15,425
Interest bearing 31,828 29,276
Total Deposits 48,427 44,701
Short term borrowings 1,574 767
Acceptances outstanding 35 48
Accounts payable and accrued liabilities 953 864
Long term debt 1,388 1,533
Total Liabilities 52,377 47,913
Shareholders' equity:
Preferred Stock 350 350
Common Stock, par value $2 a share:
Authorized 250,000,000 shares;
Issued:1994_ 84,285,643 shares; 1993_ 79,100,546 shares 168 158
Capital surplus 1,692 1,673
Retained earnings 1,967 1,437
Unrealized gain on available-for-sale
securities, net of related taxes 1 _
4,178 3,618
Less Common Stock in treasury, at cost:
1994_10,082,163 shares; 1993_1,774,551 shares 742 70
Total Shareholders' Equity 3,436 3,548
Total Liabilities and Shareholders' Equity $55,813 $51,461
See notes to financial statements.
Consolidated Statement of Operations
FIRST INTERSTATE BANCORP Year Ended December 31
(in millions) 1994 1993 1992
Interest Income
Loans, including fees $2,303.7 $1,980.9 $2,238.8
Trading account securities 4.9 5.6 18.0
Investment securities:
Held-to-maturity
Taxable 828.3 837.3 743.1
Exempt from federal income taxes 2.7 2.9 3.9
Available-for-sale 13.3 24.1 3.8
Other interest income 39.1 93.4 182.1
Total Interest Income 3,192.0 2,944.2 3,189.7
Interest Expense
Deposits 725.0 719.9 932.8
Short term borrowings 34.2 16.0 14.4
Long term debt 106.3 136.2 227.9
Total Interest Expense 865.5 872.1 1,175.1
Net Interest Income 2,326.5 2,072.1 2,014.6
Provision for credit losses _ 112.6 314.3
Net Interest Income after
Provision for Credit Losses 2,326.5 1,959.5 1,700.3
Noninterest Income
Service charges on deposit accounts 561.9 513.0 478.9
Trust fees 193.3 177.4 170.3
Other charges, commissions and fees 132.0 149.4 163.6
Merchant credit card fees 39.7 44.1 37.3
Investment securities gains (losses) 21.1 9.7 (1.8)
Trading income 16.8 19.5 19.4
Gain (loss) on sale of loans 2.5 8.0 (3.3)
Loss on sale of subsidiaries _ _ (2.6)
Other income 87.0 33.1 50.3
Total Noninterest Income 1,054.3 954.2 912.1
Noninterest Expenses
Salaries and benefits 1,079.9 975.3 1,035.4
Net occupancy and equipment 356.6 337.2 359.4
FDIC assessments 102.8 100.5 90.6
Communications 117.6 105.0 91.9
Supplies 43.6 40.7 39.4
Outside contract services 91.8 165.2 130.3
Advertising 46.8 52.6 35.2
Other real estate (12.4) 33.6 159.6
Provision for restructuring 141.3 _ _
Other expenses 229.8 222.3 267.4
Total Noninterest Expenses 2,197.8 2,032.4 2,209.2
Income before Income Taxes, Extraordinary Item
and Cumulative Effect of Accounting Changes 1,183.0 881.3 403.2
Applicable income taxes_including taxes (benefit) relating
to investment securities transactions
of $7.9, $4.0 and $(0.7) 449.5 319.9 120.9
Income before Extraordinary Item and Cumulative
Effect of Accounting Changes 733.5 561.4 282.3
Extraordinary Item_Loss on early extinguishment of debt _ (24.8) _
Cumulative Effect of Accounting Changes_
SFAS 106 ($104.9 loss) and SFAS109($305.0 gain) _ 200.1 _
Net Income $ 733.5 $ 736.7 $ 282.3
Earnings per common share:
Income before extraordinary item and cumulative
effect of accounting changes $8.71 $6.68 $3.23
Extraordinary item _ (0.32) _
Cumulative effect of accounting changes _ 2.60 _
Net income
$8.71 $8.96 $3.23
See notes to financial statements.
<TABLE>
<CAPTION>
Consolidated Statement of Cash Flows
FIRST INTERSTATE BANCORP Year Ended December 31
(in millions) 1994 1993 1992
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income $ 734 $ 737 $ 282
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 152 124 141
Provision for credit losses _ 113 314
Provision for foreclosed property losses (4) _ 105
Provision for deferred income taxes (benefit) 127 53 (103)
Provision for restructuring 141 _ _
Cumulative effect of accounting changes _ (200) _
Loss on early extinguishment of debt _ 25 _
Decrease (increase) in trading account securities 103 (41) 169
Decrease (increase) in interest receivable 109 (16) 58
Decrease in interest payable (13) (35) (67)
Other, net 6 215 (328)
Net Cash Provided by Operating Activities 1,355 975 571
Cash Flows from Investing Activities:
Held-to-maturity securities
Proceeds from maturities 6,382 4,728 3,731
Proceeds from sales _ 32 16
Purchases (2,764) (8,211) (8,858)
Available-for-sale securities
Proceeds from maturities 128 969 133
Proceeds from sales 88 _ 1
Purchases (23) (160) (526)
Net loan principal repayments (originations) (5,688) (3,758) 1,019
Proceeds from sales of loans 3,054 2,493 2,173
Loans purchased (1,263) (530) (126)
Acquisition of subsidiaries 355 60 _
Proceeds from sales of subsidiaries and operations _ 939 15
Proceeds from sales of premises and equipment 32 24 18
Purchases of premises and equipment (241) (152) (108)
Proceeds from sales of other real estate 69 121 323
Net Cash Provided (Used) by Investing Activities 129 (3,445) (2,189)
Cash Flows from Financing Activities:
Net increase (decrease) in deposits (1,878) 89 2,243
Deposits purchased 315 443 _
Net decrease (increase) in short term borrowings 580 437 (259)
Proceeds from long term debt issued 125 _ 328
Repayments of long term debt (270) (185) (443)
Reacquisition of long term debt _ (1,022) (272)
Cash dividends paid (251) (172) (143)
Proceeds from Preferred Stock issued _ _ 145
Redemption of Preferred Stock _ (334) (128)
Proceeds from Common Stock issued 43 43 468
Reacquisition of Common Stock (712) _ _
Net Cash Provided (Used) by Financing Activities $(2,048) (701) 1,939
Net Increase (Decrease) in Cash and Cash Equivalents (564) (3,171) 321
Cash and cash equivalents at beginning of year 6,839 10,010 9,689
Cash and Cash Equivalents at End of Year 6,275 6,839 10,010
Interest paid $ 879 $ 905 $1,242
Income taxes paid 345 244 136
Loans transferred to ORE 56 97 194
Loans originated to facilitate sale of ORE 52 7 89
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Shareholders'Equity
FIRST INTERSTATE BANCORP
Class A
Preferred Common Common Stock Capital Retained Treasury
(dollars in millions) Stock Stock Shares Amount Surplus Earnings Stock Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1991 $594.6 $0.4 62,779,015 $129.1 $1,249.4 $ 736.3 $(70.4) $2,639.4
Net income for the year 282.3 282.3
Cashdividends:
Common Stock_$1.20 a share (82.4) (82.4)
Preferred Stock (59.2) (59.2)
Preferred Stock issued 150.0 (4.7) 145.3
Preferred Stock redeemed (127.5) (0.2) (127.7)
Common Stock issued:
Stock Option Plan 152,767 0.3 4.4 4.7
Restricted Stock Plan (14,660) (0.5) (0.5)
Dividend Reinvestment Plan 12,118,265 24.3 434.1 458.4
Employee Savings Plan 118,835 0.2 4.0 4.2
Incentive Plan 26,992 0.9 0.9
Other changes (0.2) (76) (0.3) (13.8) (14.3)
Balance at December 31, 1992 616.9 0.4 75,181,138 153.9 1,687.1 863.2 (70.4) 3,251.1
Net income for the year 736.7 736.7
Cash dividends:
Common Stock_$1.60 a share (121.3) (121.3)
Preferred Stock (46.6) (46.6)
Preferred Stock redeemed (266.9) (67.4) (334.3)
Common Stock issued:
Stock Option Plan 636,042 1.3 24.4 25.7
Restricted Stock Plan (8,056) (0.4) (0.4)
Dividend Reinvestment Plan 222,152 0.4 11.8 12.2
Employee Savings Plan 56,586 0.1 2.8 2.9
Incentive Plan 45,744 0.1 2.4 2.5
Acquisition of Cal Rep
Bancorp, Inc. 1,188,823 2.4 12.6 4.8 19.8
Conversion of Class A
Common (0.4) 3,566 0.4
Balance at December 31, 1993 350.0 _ 77,325,995 158.2 1,673.7 1,436.8 (70.4) 3,548.3
Net income for the year 733.5 733.5
Cash dividends:
Common Stock_$2.75 a share (218.2) (218.2)
Preferred Stock (33.3) (33.3)
Common Stock issued:
Stock Option Plan 702,033 0.2 (0.1) 30.2 30.3
Restricted Stock Plan (7,568) (0.5) (0.5)
Dividend Reinvestment Plan 152,033 2.9 8.6 11.5
Incentive Plan 18,074 0.4 0.8 1.2
Acquisition of San Diego
Financial Corporation 5,067,513 10.1 3.2 48.5 61.8
Common Stock repurchased (9,054,600) (711.7) (711.7)
Other changes 12.6 0.9 13.5
Balance at December 31, 1994 $350.0 $ _ 74,203,480 $168.5 $1,692.2 $1,968.2 $(742.5) $3,436.4
See notes to financial statements.
</TABLE>
REPORT OF ERNST &YOUNG LLP, INDEPENDENT AUDITORS
Shareholders and Board of Directors
First Interstate Bancorp
We have audited the accompanying consolidated balance
sheets of First Interstate Bancorp and subsidiaries as of
December 31, 1994 and 1993, and the related consolidated
statements of operations, cash flows and shareholders'
equity for each of the three years in the period ended
December 31, 1994. These financial statements are the
responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of First Interstate Bancorp and
subsidiaries at December 31, 1994 and 1993, and the
consolidated results of their operations and their cash
flows for each of the three years in the period ended
December 31, 1994 in conformity with generally accepted
accounting principles.
As discussed in Notes to Financial Statements, in 1994,
the Corporation changed its method of accounting for
investment securities and, in 1993, the Corporation
changed its methods of accounting for income taxes and
for postretirement benefits other than pensions.
Los Angeles, California
January 16, 1995
<TABLE>
<CAPTION>
Six Year Summary
FIRST INTERSTATE BANCORP
1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
Per Common Share Data
Earnings (loss) per share:
Primary:
Income (loss) before extraordinary
item and cumulative effect
of accounting changes $ 8.71 $ 6.68 $ 3.23 $ (5.24) $ 6.79 $ (3.89)
Extraordinary item _ (0.32) _ _ _ _
Cumulative effect of
accounting changes _ 2.60 _ _ 0.51 0.59
Net income (loss) 8.71 8.96 3.23 (5.24) 7.30 (3.30)
Fully diluted:
Income (loss) before extraordinary
item and cumulative effect
of accounting changes 8.71 6.68 3.23 (5.24) 6.79 (3.89)
Extraordinary item _ (0.32) _ _ _ _
Cumulative effect of
accounting changes _ 2.60 _ _ 0.51 0.59
Net income (loss) 8.71 8.96 3.23 (5.24) 7.30 (3.30)
Dividends paid 2.75 1.60 1.20 1.80 3.00 2.98
Book value, yearend 41.59 41.36 35.04 32.57 39.78 36.78
Market price, yearend 67 5/8 64 1/8 46 3/4 30 23 1/2 41 7/8
Market price, range for year 85-62 3/8 68-44 1/2 48 1/4-29 1/4 42 1/2-20 45 7/8-15 5/8 70 3/8-40 3/4
Growth Measures (% change)
Average loans 18.7 (6.1) (16.3) (14.1) (5.8) 1.9
Average earning assets 7.3 2.2 (1.0) (9.8) (7.0) 1.1
Average savings deposits 10.1 3.1 5.2 0.1 (0.7) (1.9)
Average demand deposits 12.4 10.7 7.5 (0.8) 0.5 0.6
Average total assets 7.4 0.6 (0.2) (9.4) (5.8) 1.0
Performance Measures (%)
Return on average assets 1.38 1.49 0.57 (0.59) 0.86 (0.22)
Return on average common equity 21.56 23.24 9.63 (13.96) 19.56 (7.36)
Return on average total equity 20.38 21.18 9.52 (10.42) 17.98 (4.85)
Dividends paid to net income 31.57 17.86 37.15 n/m 41.10 n/m
Average total equity to average
total assets 6.79 7.05 6.03 5.63 4.81 4.46
Credit Allowance (millions)
Loans charged off $260.8 $398.8 $606.9 $689.2 $1,012.5 $1,050.5
Recoveries of previous
loan chargeoffs 127.8 180.7 147.3 142.3 138.9 121.8
Net loans charged off 133.0 218.1 459.6 546.9 873.6 928.7
Net chargeoffs to average loans 0.46% 0.90% 1.79% 1.78% 2.45% 2.45%
Allowance to loans, yearend 2.81 3.85 4.41 4.52 3.06 3.76
Miscellaneous Data
Shares outstanding, yearend, net 74,203,480 77,325,995 75,181,138 62,779,015 62,176,509 48,791,625
Shares outstanding, average, net 78,852,492 75,823,371 68,780,642 62,498,682 58,889,300 46,655,871
Shareholders 24,902 28,090 32,920 35,594 37,668 38,694
Employees, average December
full-time equivalent 27,394 26,589 26,990 30,281 35,192 36,027
Domestic banking offices 1,137 1,020 993 1,046 1,056 1,042
</TABLE>
<TABLE>
<CAPTION>
Consolidated Balance Sheet
FIRST INTERSTATE BANCORP
(yearend, in millions) 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
Assets
Cash and due from banks $ 6,070 $ 5,064 $ 5,695 $ 5,370 $ 5,171 $ 5,841
Time deposits, due from banks 26 1,157 1,970 2,304 335 2,278
Federal funds, repurchases 179 618 2,345 2,015 891 1,575
Trading account securities 64 167 126 401 625 610
Investment securities:
Held-to-maturity
U.S. Treasury and agencies 12,105 14,894 12,117 6,465 4,738 4,505
State and political subdivisions 29 23 8 12 704 1,189
Other 1,561 1,456 808 2,019 1,225 2,002
Total held-to-maturity 13,695 16,373 12,933 8,496 6,667 7,696
Available-for-sale 156 169 980 _ 308 _
Total Investment Securities 13,851 16,542 13,913 8,496 6,975 7,696
Loans:
Commercial, financial and agricultural 9,294 7,998 7,799 8,721 12,092 15,252
Real estate construction 962 728 1,170 2,155 3,248 3,977
Real estate mortgage 10,263 6,237 5,364 5,732 5,450 5,846
Instalment 12,272 10,778 9,685 10,108 10,417 11,223
Foreign 140 166 163 1,003 1,286 1,435
Lease financing 426 126 90 701 851 969
Total Loans 33,357 26,033 24,271 28,420 33,344 38,702
Unearned income and deferred fees (135) (45) (70) (238) (337) (497)
Allowance for credit losses (934) (1,001) (1,068) (1,273) (1,011) (1,437)
Net Loans 32,288 24,987 23,133 26,909 31,996 36,768
Other assets held for sale 26 133 966 _ 1,166 _
Bank premises and equipment 1,147 948 897 986 1,050 976
Customers' liability for acceptances 35 48 66 309 361 452
Other assets 2,127 1,797 1,752 2,132 2,786 2,855
Total Assets $55,813 $51,461 $50,863 $48,922 $51,356 $59,051
Liabilities and Shareholders'Equity
Deposits:
Noninterest bearing $16,599 $15,425 $14,615 $12,525 $13,132 $13,046
Interest bearing 31,828 29,276 29,060 28,908 30,009 33,422
Total Deposits 48,427 44,701 43,675 41,433 43,141 46,468
Short term borrowings 1,574 767 331 570 854 4,936
Acceptances outstanding 35 48 168 309 361 452
Accounts payable and accrued liabilities 953 864 736 863 954 1,137
Long term debt 1,388 1,533 2,702 3,108 3,178 3,719
Total Liabilities 52,377 47,913 47,612 46,283 48,488 56,712
Shareholders' equity 3,436 3,548 3,251 2,639 2,868 2,339
Total Liabilities and Shareholders' Equity $55,813 $51,461 $50,863 $48,922 $51,356 $59,051
</TABLE>
<TABLE>
<CAPTION>
Consolidated Statement of Operations
FIRST INTERSTATE BANCORP
(in millions) 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
Interest Income
Loans, including fees $2,303.7 $1,980.9 $2,238.8 $3,071.2 $3,876.2 $4,319.6
Trading account securities 4.9 5.6 18.0 37.9 60.3 64.6
Investment securities:
Held-to-maturity
Taxable 828.3 837.3 743.1 557.2 558.1 601.2
Exempt from federal income taxes 2.7 2.9 3.9 7.2 55.7 99.8
Available-for-sale 13.3 24.1 3.8 18.4 17.2 _
Other interest income 39.1 93.4 182.1 243.4 253.3 290.9
Total Interest Income 3,192.0 2,944.2 3,189.7 3,935.3 4,820.8 5,376.1
Interest Expense
Deposits 725.0 719.9 932.8 1,526.0 2,017.7 2,111.8
Short term borrowings 34.2 16.0 14.4 44.3 169.6 502.9
Long term debt 106.3 136.2 227.9 273.3 330.3 339.0
Total Interest Expense 865.5 872.1 1,175.1 1,843.6 2,517.6 2,953.7
Net Interest Income 2,326.5 2,072.1 2,014.6 2,091.7 2,303.2 2,422.4
Provision for credit losses _ 112.6 314.3 810.2 499.4 1,204.1
Net Interest Income after Provision
for Credit Losses 2,326.5 1,959.5 1,700.3 1,281.5 1,803.8 1,218.3
Noninterest Income
Service charges on deposit accounts 561.9 513.0 478.9 471.8 428.6 396.9
Trust fees 193.3 177.4 170.3 172.7 159.2 149.8
Other charges, commissions and fees 132.0 149.4 163.6 184.4 173.3 190.2
Merchant credit card fees 39.7 44.1 37.3 53.5 53.1 53.2
Investment securities gains (losses) 21.1 9.7 (1.8) 42.8 10.6 4.4
Trading income 16.8 19.5 19.4 82.5 52.5 90.0
Gain (loss) on sale of loans 2.5 8.0 (3.3) 2.3 2.8 79.8
Gain (loss) on sale of subsidiaries _ _ (2.6) 27.1 90.1 (14.2)
Other income 87.0 33.1 50.3 147.3 233.3 208.4
Total Noninterest Income 1,054.3 954.2 912.1 1,184.4 1,203.5 1,158.5
Noninterest Expenses
Salaries and benefits 1,079.9 975.3 1035.4 1,212.6 1,224.7 1,220.0
Net occupancy and equipment 356.6 337.2 359.4 426.2 425.0 418.8
FDIC assessments 102.8 100.5 90.6 84.1 51.1 34.1
Communications 117.6 105.0 91.9 95.5 93.4 99.5
Supplies 43.6 40.7 39.4 47.9 54.6 55.9
Outside contract services 91.8 165.2 130.3 97.8 121.9 118.3
Advertising 46.8 52.6 35.2 35.2 54.7 56.9
Other real estate (12.4) 33.6 159.6 312.0 229.3 224.8
Provision for restructuring 141.3 _ _ 90.0 _ _
Other expenses 229.8 222.3 267.4 330.9 307.6 317.2
Total Noninterest Expenses 2,197.8 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 1,183.0 881.3 403.2 (266.3) 445.0 (168.7)
Applicable income taxes (benefit) 449.5 319.9 120.9 21.8 6.4 (16.8)
Income (Loss) before Extraordinary Item and
Cumulative Effect of Accounting Changes 733.5 561.4 282.3 (288.1) 438.6 (151.9)
Extraordinary Item _ (24.8) _ _ _ _
Cumulative Effect of Accounting Changes _ 200.1 _ _ 30.1 27.4
Net Income (Loss) $ 733.5 $ 736.7 $ 282.3 $ (288.1) $ 468.7 $ (124.5)
</TABLE>
<TABLE>
<CAPTION>
Financial Summary
FIRST INTERSTATE BANCORP
(dollars in millions;interest and average rates on a taxable-equivalent basis)
1994 1993
Average Average Average Average
Balance Interest Rate Balance Interest Rate
Earning Assets
Loans(1):
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and agricultural $ 8,287 $ 562.5 6.79% $ 7,618 $ 476.0 6.25%
Real estate construction 806 76.0 9.42 913 62.4 6.83
Real estate mortgage 7,586 578.5 7.63 5,413 442.9 8.18
Instalment 11,660 1,079.0 9.25 9,943 1,003.3 10.09
Foreign 83 4.6 5.59 160 7.2 4.48
Lease financing 222 15.9 7.17 81 6.8 8.42
Total Loans 28,644 2,316.5 8.09 24,128 1,998.6 8.26
Trading account securities 113 5.1 4.55 166 9.2 5.57
Investment securities:
Held-to-maturity securities
U.S. Treasury and agencies 14,000 747.3 5.34 14,113 789.6 5.59
Other 1,624 92.1 5.67 996 55.1 5.54
Total held-to-maturity securities 15,624 839.4 5.37 15,109 844.7 5.59
Available-for-sale securities 324 13.3 4.11 458 17.9 3.90
Total Investment Securities 15,948 852.7 5.35 15,567 862.6 5.54
Federal funds, repurchases 471 19.0 3.98 1,282 39.7 3.10
Time deposits, due from banks 380 13.9 3.61 1,342 46.0 3.42
Other assets held for sale 82 6.2 7.51 29 2.7 10.00
Total Earning Assets 45,638 3,213.4 7.04 42,514 2,958.8 6.96
Interest Bearing Liabilities
Regular savings 5,823 120.9 2.08 5,288 119.1 2.25
NOW accounts and demand_market interest 6,644 82.7 1.25 6,115 92.7 1.52
Savings_market interest 11,427 269.0 2.35 10,491 252.0 2.40
Other savings and time under $100,000 5,787 213.3 3.69 5,799 221.1 3.81
Total Interest Bearing Consumer Funds 29,681 685.9 2.31 27,693 684.9 2.48
Large CDs, other money market funds 1,076 39.1 3.63 989 35.0 3.54
Short term borrowings 655 34.2 5.16 431 16.0 3.72
Long term debt 1,395 106.3 7.63 1,893 136.2 7.19
Total Corporate Purchased Funds 3,126 179.6 5.74 3,313 187.2 5.57
Total Interest Bearing Liabilities 32,807 865.5 2.64 31,006 872.1 2.81
Net Interest Income and Gross Spread $2,347.9 4.40 $2,086.7 4.15
Noninterest Liabilities, Equity and Assets
Demand and noninterest bearing time deposits 15,556 13,858
Other liabilities 1,017 977
Preferred equity capital 350 508
Common equity capital 3,249 2,970
Total Noninterest Liabilities and Equity 20,172 18,313
Cash and due from banks 5,233 4,992
Allowance for credit losses (980) (1,043)
Bank premises and equipment 1,065 914
Other assets 2,023 1,942
Total Noninterest Assets 7,341 6,805
Net Noninterest Sources 12,831 0.74 11,508 0.76
Total Assets $52,979 $49,319
Percent of Earning Assets
Net interest margin 5.14 4.91
Provision for credit losses _ 0.26
Net interest margin after provision for credit losses 5.14 4.65
Noninterest income 2.31 2.24
Noninterest expenses 4.81 4.78
Earnings (loss) before income taxes, extraordinary
item and cumulative effect of accounting changes 2.64 2.11
Income taxes 1.03 0.79
Extraordinary item _ (0.06)
Cumulative effect of accounting changes _ 0.47
Net Income (Loss) 1.61 1.73
(1)Net of unearned income and deferred fees. Includes loan fees of $134.7 $45.3
Taxable-equivalent adjustment 21.4 14.6
Loans
</TABLE>
<TABLE>
<CAPTION>
1992 1991 1990 1989
Average Average Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 8,111 $ 560.3 6.91% $10,459 $ 879.7 8.41% $13,532 $1,349.5 9.97% $14,809 $1,593.7 10.76%
1,746 109.1 6.25 2,677 240.0 8.97 3,583 376.0 10.49 4,243 451.1 10.63
5,472 484.2 8.85 5,646 564.4 10.00 5,461 576.6 10.56 5,783 665.8 11.51
9,756 1,049.6 10.76 10,137 1,226.1 12.09 10,953 1,355.1 12.37 10,454 1,346.8 12.88
406 28.4 5.85 1,161 111.5 9.61 1,440 159.5 11.07 1,562 176.5 11.30
203 21.5 10.57 611 68.0 11.13 739 82.3 11.14 1,056 119.3 11.30
25,694 2,253.1 8.77 30,691 3,089.7 10.07 35,708 3,899.0 10.92 37,907 4,353.2 11.48
385 23.1 6.00 567 43.4 6.87 737 60.8 8.24 825 65.0 7.87
9,745 648.9 6.69 5,266 441.6 8.39 4,681 421.6 9.01 4,407 387.0 8.78
1,465 96.4 6.32 1,547 120.6 7.79 2,438 221.1 9.07 3,820 363.8 9.52
11,210 745.3 6.65 6,813 562.2 8.25 7,119 642.7 9.03 8,227 750.8 9.13
83 3.8 4.61 248 22.7 8.38 210 17.2 8.21 _ _ _
11,293 749.1 6.63 7,061 584.9 8.28 7,329 659.9 9.00 8,227 750.8 9.13
1,706 65.5 3.84 1,422 80.2 5.73 884 54.8 7.28 1,349 119.6 8.87
2,228 92.9 4.17 1,757 109.2 6.22 775 58.4 7.54 1,771 171.3 9.67
288 23.7 8.28 519 54.0 10.38 1,130 140.1 12.40 _ _ _
41,594 3,207.4 7.71 42,017 3,961.4 9.43 46,563 4,873.0 10.47 50,079 5,459.9 10.90
5,129 143.7 2.80 4,874 230.4 4.73 4,870 160.0 5.12 4,906 246.3 5.02
5,893 122.8 2.08 5,386 209.5 3.89 5,135 312.1 6.08 4,901 217.5 4.44
9,837 311.7 3.17 9,092 456.6 5.02 8,553 517.9 6.06 7,891 490.7 6.22
6,624 313.5 4.73 8,200 520.8 6.35 9,807 745.2 7.60 9,271 717.4 7.74
27,483 891.7 3.24 27,552 1,417.3 5.14 28,365 1,735.2 6.12 26,969 1,671.9 6.20
1,170 41.0 3.50 1,782 108.7 6.15 3,742 282.5 7.55 5,063 439.9 8.69
388 14.5 3.61 941 44.3 5.73 2,340 169.6 7.25 5,743 502.9 8.76
3,096 227.9 7.36 3,122 273.3 8.76 3,566 330.3 9.26 3,583 339.0 9.46
4,654 283.4 6.09 5,845 426.3 7.29 9,648 782.4 8.11 14,389 1,281.8 8.91
32,137 1,175.1 3.66 33,397 1,843.6 5.52 38,013 2,517.6 6.62 41,358 2,953.7 7.14
$2,032.3 4.05 $2,117.8 3.91 $2,355.4 3.85 $2,506.2 3.76
12,543 11,717 11,875 11,762
1,394 1,246 1,709 1,835
640 420 409 473
2,317 2,346 2,199 2,092
16,894 15,729 16,192 16,162
4,937 4,357 4,518 4,586
(1,261) (1,132) (1,256) (1,170)
960 1,027 1,059 969
2,801 2,857 3,321 3,056
7, 437 7,109 7,642 7,441
9,457 0.84 8,620 1.13 8,550 1.21 8,721 1.24
$49,031 $49,126 $54,205 $57,520
4.89 5.04 5.06 5.00
0.76 1.93 1.07 2.40
4.13 3.11 3.99 2.60
2.19 2.82 2.58 2.31
5.31 6.50 5.50 5.08
1.01 (0.57) 1.07 (0.17)
0.33 0.12 0.12 0.13
_ _ _ _
_ _ 0.06 0.05
0.68 (0.69) 1.01 (0.25)
$46.2 $75.6 $108.5 $141.2
17.7 26.1 52.2 83.8
</TABLE>
EXHIBIT (21)
FIRST INTERSTATE BANCORP
SUBSIDIARIES OF THE REGISTRANT
The following is a list of the consolidated subsidiaries of the
Corporation as of December 31, 1994 with each name followed by the
headquarters location, percentage of its voting securities owned by
the Corporation, indication of Federal Reserve Bank membership and
FRB district. Beneath the names of certain subsidiaries are the
names of their subsidiaries followed by the percentage of voting
securities owned by their parent. The Corporation has no "parent"
within the meaning of section 12b-2 of the Securities and Exchange
Act of 1934.
<TABLE>
<C> <C> <C> <C> <C><C>
First Interstate Bank of Alaska,N.A., Anchorage, Alaska 100% M 12
(Incorporated under the National Bank Act)
First Interstate Bank of Arizona,N.A., Phoenix, Arizona 100% M 12
(Incorporated under the National Bank Act)
CBSA Service Corp., Scottsdale, Arizona 100%
(Incorporated in Arizona)
Condo Six, Inc., Scottsdale, Arizona 100%
(Incorporated in Arizona)
First Interstate Equity Corp., Phoenix, Arizona 100%
(Incorporated in Arizona)
First Interstate Financial Services Co., Phoenix, Arizona 100%
(Incorporated in Arizona)
First Interstate Insurance Co. of Arizona, Phoenix, Arizona 100%
(Incorporated in Arizona)
First Interstate Leasing Corp., Phoenix, Arizona 100%
(Incorporated in Arizona)
First Interstate Real Estate Mortgage Company of Arizona
Phoenix, Arizona 100%
(Incorporated in Arizona)
GDV, Inc., Scottsdale, Arizona 100%
(Incorporated in Arizona)
JCG, Inc., Scottsdale, Arizona 100%
(Incorporated in Arizona)
ZTP, Inc., Scottsdale, Arizona 100%
(Incorporated in Arizona)
First Interstate Bank of California, Los Angeles, California 100% M 12
(Incorporated in California)
Central Valley Security Corp., Los Angeles, California 100%
(Incorporated in California)
First Interstate Bank of Canada, Toronto, Canada 100%
(Incorporated under section 25(1) of the Federal Reserve Act)
First Interstate Investment Services,Inc.,Los Angeles, Calif. 100%
(Incorporated in California)
First Interstate Capital Management, Inc., San Diego, California 100%
(Incorporated in California)
First Interstate Portfolio Lending Services, Inc.,Los Angeles, California 100%
(Incorporated in California)
Leland O'Brien Rubinstein Associates, Inc., Los Angeles, California (E) 20%
(Incorporated in California)
First Interstate Mortgage Co., Pasadena, California 100%
(Incorporated in California)
First Interstate Southwest Corp., Houston, Texas 100%
(Incorporated in California)
Stonegate Partners, Inc., Los Angeles, California 100%
(Incorporated in California)
T.M.M. Realty Services, Los Angeles, California 100%
(Incorporated in California)
United California Bank Realty Corp., Los Angeles, California 100%
(Incorporated in California)
First Interstate Bancard Co., Los Angeles, California 100%
(Incorporated in California)
First Interstate Tower, Los Angeles, California 50%
(A Joint Venture) (E)
First Interstate Central Bank, Willows, California 100% NM
(Incorporated in California)
First Interstate Bank of Denver, N.A., Denver Colorado 100% M 12
(Incorporated under the National Bank Act)
Denver Investment Advisors, Inc., Denver, Colorado 100%
(Incorporated in Colorado)
Downtown Capital Corp., Denver, Colorado 100%
(Incorporated in Colorado)
First Energy Properties,Inc., Denver, Colorado 100%
(Incorporated in Colorado)
First Interstate Denver Asset Corp., Denver, Colorado 100%
(Incorporated in Colorado)
First Interstate Switch, Inc., Denver, Colorado 100%
(Incorporated in Colorado)
First Interstate Bank of Englewood, N.A., Englewood, Colorado 100% M 10
(Incorporated under the National Bank Act)
First Interstate Bank of Idaho, N.A., Boise, Idaho 100% M 12
(Incorporated under the National Bank Act)
Day Resources Development Co., Inc., Boise, Idaho 100%
(Incorporated in Idaho)
First Interstate Bank,Ltd, Los Angeles, California 100% NM
(Incorporated in California)
First Interstate Bank of Montana, N.A., Kalispell, Montana 100% M 9
(Incorporated under the National Bank Act)
First Interstate Insurance Agency of Montana, Inc., Kalispell, Montana 100%
(Incorporated in Montana)
First Interstate Bank of Nevada, N.A., Reno, Nevada 100% M 12
(Incorporated under the National Bank Act)
Diversified Assets I,Inc., Las Vegas, Nevada 100%
(Incorporated in Nevada)
First Interstate Cash Centers, Inc., Las Vegas, Nevada 100%
(Incorporated in Nevada)
First Interstate Bank of New Mexico, N.A., Santa Fe, New Mexico 100% M 10
(Incorporated under the National Bank Act)
First Interstate Bank of Oregon, N.A., Portland, Oregon 100% M 12
(Incorporated under the National Bank Act)
Equity Holding Company Limited, Portland, Oregon 100%
(Incorporated in Oregon)
First Interstate Development Corp., Portland, Oregon 100%
(Incorporated in Oregon)
First Interstate Insurance Agency of Oregon,Inc., Portland,Oregon 100%
(Incorporated in Oregon)
First Interstate Bank of Texas, N.A., Houston, Texas 100% M 11
(Incorporated under the National Bank Act)
Idlewilde Co., Houston, Texas 100%
(Incorporated in Texas)
First Interstate Bank of Utah, N.A., Salt Lake City, Utah 100% M 12
(Incorporated under the National Bank Act)
First Interstate Insurance Agency of Utah,Inc., Park City, Utah 100%
(Incorporated in Utah)
First Interstate Bank of Washington, N.A., Seattle, Washington 100% M 12
(Incorporated under the National Bank Act)
Evergreen Marine Leasing, Inc., Seattle, Washington 100%
(Incorporated in Washington)
First Interstate Electronic Services Corp., Seattle, Washington 100%
(Incorporated in Washington)
First Interstate Insurance Agency of Washington,Inc., Seattle, Washington 100%
(Incorporated in Washington)
Tacsea, Inc., Seattle, Washington 100%
(Incorporated in Washington)
First Interstate Bank of Wyoming, N.A., Casper, Wyoming 100% M 10
(Incorporated under the National Bank Act)
First Interstate Wyoming Holdings Inc., Casper, Wyoming 100%
(Incorporated in Wyoming)
DAG Management, Inc., Denver, Colorado 100%
(Incorporated in Colorado)
First Interstate Commercial Corp., Denver, Colorado 100%
(Incorporated in California)
First Interstate Commercial Mortgage Co., Chicago, Illinois 100%
(Incorporated in Illinois)
Regency Land Co., Denver, Colorado 100%
(Incorporated in Colorado)
FIL Holding Co., London England 100%
(Incorporated in Delaware)
First Interstate Holding (UK) Ltd, London, England 100%
(Incorporated in the United Kingdom)
First Interstate Administracao e Servicos,Ltd, Rio De Janerio, Brazil 100%
(Incorporated under section 25(a) of the Federal Reserve Act)
First Interstate Franchise Services, Inc., Los Angeles, California 100%
(Incorporated in California)
First Interstate International Trust Co. (Cayman) Ltd,Grand Cayman, Cayman Islands 100%
(Incorporated in the Cayman Islands)
First Interstate Resource Finance Associates, Newport Beach, Calif. 100%
(Incorporated in California)
First Interstate Securities, Inc., San Diego, California 100%
(Incorporated in California)
First Interstate Services Co. (UK) Ltd, London, England 100%
(Incorporated in the United Kingdom)
First Interstate Servicios Financieros,S.A., Madrid, Spain 100%
(Incorporated in Spain)
San Diego Life Insurance Co., San Diego, California 100%
(Incorporated in California)
Western Bonding & Casualty Company, Burlington, Vermont 100%
(Incorporated in Vermont)
<FN>
M: member of Federal Reserve System
NM: nonmember of Federal Reserve System
E: included in the consolidated financial statements on the basis
of equity in total capital accounts and results of operations
This listing does not include inactive subsidiaries of the
Corporation.
</TABLE>
EXHIBIT (23)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in First
Interstate Bancorp's Registration Statements on Form S-3
(Nos. 33-50054 and 33-61688) and related Prospectuses and
Registration Statements on Form S-8 (Nos. 2-82812, 33-23404,
33-37299 and 33-38903) of our report dated January 16, 1995
with respect to the consolidated financial statements of
First Interstate Bancorp incorporated by reference in this
Annual Report (Form 10-K) for the year ended December 31,
1994.
ERNST & YOUNG LLP
Los Angeles, California
March 24, 1995
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FIRST INTERSTATE BANCORP FINANCIAL STATEMENTS AND NOTES THERETO AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 6,070
<INT-BEARING-DEPOSITS> 26
<FED-FUNDS-SOLD> 179
<TRADING-ASSETS> 64
<INVESTMENTS-HELD-FOR-SALE> 156
<INVESTMENTS-CARRYING> 13,695
<INVESTMENTS-MARKET> 13,280
<LOANS> 33,222
<ALLOWANCE> 934
<TOTAL-ASSETS> 55,813
<DEPOSITS> 48,427
<SHORT-TERM> 1,574
<LIABILITIES-OTHER> 953
<LONG-TERM> 1,388
<COMMON> 168
0
350
<OTHER-SE> 2,918
<TOTAL-LIABILITIES-AND-EQUITY> 55,813
<INTEREST-LOAN> 2,304
<INTEREST-INVEST> 849
<INTEREST-OTHER> 39
<INTEREST-TOTAL> 3,192
<INTEREST-DEPOSIT> 725
<INTEREST-EXPENSE> 865
<INTEREST-INCOME-NET> 2,327
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 21
<EXPENSE-OTHER> 2,198
<INCOME-PRETAX> 1,183
<INCOME-PRE-EXTRAORDINARY> 734
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 734
<EPS-PRIMARY> 8.71
<EPS-DILUTED> 8.71
<YIELD-ACTUAL> 5.14
<LOANS-NON> 186
<LOANS-PAST> 51
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,001
<CHARGE-OFFS> 261
<RECOVERIES> 128
<ALLOWANCE-CLOSE> 934
<ALLOWANCE-DOMESTIC> 403
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 531
</TABLE>
