FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended June 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------ ------------
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)
Not Applicable
(Former name, former address and former
fiscal year, if changed since last report)
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 preceding 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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
CLASS OUTSTANDING AT July 31, 1995
Common stock, $2 par value 75,985,361 shares
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<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET First Interstate Bancorp
----------------------------------------------------------------------------------------------------------------
1995 1994
------------------ ------------------------------------
(dollar amounts in millions) June 30 March 31 December 31 September 30 June 30
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<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 5,898 $ 6,230 $ 6,070 $ 6,240 $ 4,859
Time deposits, due from banks 27 27 26 57 237
Federal funds sold and securities
purchased under agreements to resell 268 265 179 603 559
Trading account securities 114 52 64 64 52
Investment Securities:
Held-to-maturity securities 10,802 12,204 13,695 14,625 16,373
Available-for-sale securities 107 127 156 119 342
------- ------- ------- ------- -------
Total Investment Securities 10,909 12,331 13,851 14,744 16,715
Loans (net) 35,904 35,096 33,222 30,331 28,746
Less: Allowance for credit losses 878 921 934 952 972
------- ------- ------- ------- -------
Net Loans 35,026 34,175 32,288 29,379 27,774
Bank premises and equipment 1,237 1,199 1,147 1,081 1,078
Customers' liability for acceptances 57 31 35 29 36
Other assets 2,416 2,646 2,153 2,010 1,993
------- ------- ------- ------- -------
Total Assets $55,952 $56,956 $55,813 $54,207 $53,303
======= ======= ======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing $16,981 $16,644 $16,599 $17,659 $15,951
Interest bearing 31,474 31,720 31,828 30,396 30,905
------- ------- ------- ------- -------
Total Deposits 48,455 48,364 48,427 48,055 46,856
Short term borrowings 1,328 2,361 1,574 405 409
Acceptances outstanding 57 31 35 29 36
Accounts payable and accrued liabilities 797 1,037 953 907 815
Long term debt 1,446 1,470 1,388 1,261 1,391
------- ------- ------- ------- -------
Total Liabilities 52,083 53,263 52,377 50,657 49,507
Shareholders' equity:
Preferred Stock 350 350 350 350 350
Common Stock, par value $2 a share: (in thousands)
Authorized: 250,000 shares;
Issued: 84,286 shares 169 169 168 169 169
Capital surplus 1,671 1,683 1,692 1,683 1,683
Retained earnings 2,268 2,113 1,967 1,821 1,760
Unrealized gain on
available-for-sale securities, net of tax - 1 1 - -
------- ------- ------- ------- -------
4,458 4,316 4,178 4,023 3,962
Less Common Stock in treasury, at cost: (in thousands)
June 30, 1995 - 8,000 shares
March 31, 1995 - 8,452 shares
December 31, 1994 - 10,082 shares
September 30, 1994 - 6,687 shares
June 30, 1994 - 2,801 shares 589 623 742 473 166
------- ------- ------- ------- -------
Total Shareholders' Equity 3,869 3,693 3,436 3,550 3,796
------- ------- ------- ------- -------
Total Liabilities and Shareholders' Equity $55,952 $56,956 $55,813 $54,207 $53,303
======= ======= ======= ======= =======
----------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS First Interstate Bancorp
-----------------------------------------------------------------------------------------------------------------------------------
1995 1994 Six Months Ended
----------------- --------------------------- June 30
Second First Fourth Third Second --------------------
(dollar amounts in millions, except per share data) Quarter Quarter Quarter Quarter Quarter 1995 1994
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<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $779.9 $730.5 $662.4 $591.4 $551.2 $1,510.4 $1,049.9
Trading account 1.7 1.6 1.6 1.0 1.1 3.3 2.4
Investment Securities:
Held-to-maturity securities 157.0 177.4 192.7 209.4 221.0 334.4 428.9
Available-for-sale securities 2.3 5.1 0.9 2.8 4.5 7.4 9.6
Other interest income 4.1 6.9 4.7 7.3 10.9 11.0 27.1
------ ------ ------ ------ ------ -------- --------
Total Interest Income 945.0 921.5 862.3 811.9 788.7 1,866.5 1,517.9
INTEREST EXPENSE
Deposits 244.7 225.2 205.7 182.6 172.8 469.9 336.7
Short term borrowings 27.7 35.2 14.8 6.8 9.2 62.9 12.6
Long term debt 31.2 29.4 25.2 26.1 26.5 60.6 55.0
------ ------ ------ ------ ------ -------- --------
Total Interest Expense 303.6 289.8 245.7 215.5 208.5 593.4 404.3
------ ------ ------ ------ ------ -------- --------
NET INTEREST INCOME 641.4 631.7 616.6 596.4 580.2 1,273.1 1,113.6
Provision for credit losses - - - - - - -
------ ------ ------ ------ ------ -------- --------
NET INTEREST INCOME AFTER PROVISION FOR
CREDIT LOSSES 641.4 631.7 616.6 596.4 580.2 1,273.1 1,113.6
NONINTEREST INCOME
Service charges on deposit accounts 147.3 147.1 143.4 140.5 138.9 294.4 277.9
Trust fees 40.6 39.4 49.1 48.2 48.9 80.0 95.9
Other charges, commissions, and fees 37.4 34.0 32.5 32.6 34.2 71.4 66.9
Merchant credit card fees 13.7 12.3 10.6 10.8 9.3 26.0 18.3
Investment securities gains 3.6 0.5 14.1 4.1 2.1 4.1 2.9
Other income 31.8 35.1 12.6 44.8 21.1 66.9 49.1
------ ------ ------ ------ ------ -------- --------
Total Noninterest Income 274.4 268.4 262.3 281.0 254.5 542.8 511.0
NONINTEREST EXPENSES
Salaries and benefits 268.4 273.4 270.3 266.7 273.4 541.8 542.9
Net occupancy expenses 95.2 100.1 92.6 91.9 84.1 195.3 172.1
Communications 36.2 33.9 30.2 29.8 30.0 70.1 57.6
Outside contract fees 29.9 34.0 30.0 33.6 11.1 63.9 28.1
FDIC assessments 27.7 27.9 27.8 25.4 25.4 55.6 49.7
Amortization of intangibles 15.0 14.9 11.8 9.0 7.7 29.9 14.4
Office supplies 11.4 14.0 10.5 11.1 11.1 25.4 22.1
Advertising 15.8 10.1 14.6 12.0 9.7 25.9 20.2
Other real estate - - (6.1) (0.7) (5.6) - (5.6)
Provision for restructuring 4.3 4.8 2.3 139.0 - 9.1 -
Other expenses 50.0 38.6 54.2 50.0 52.0 88.6 90.3
------ ------ ------ ------ ------ -------- --------
Total Noninterest Expenses 553.9 551.7 538.2 667.8 498.9 1,105.6 991.8
------ ------ ------ ------ ------ -------- --------
INCOME BEFORE INCOME TAXES 361.9 348.4 340.7 209.6 335.8 710.3 632.8
Applicable income taxes 142.0 136.4 129.4 79.6 127.6 278.4 240.5
------ ------ ------ ------ ------ -------- --------
NET INCOME $219.9 $212.0 $211.3 $130.0 $208.2 $ 431.9 $ 392.3
====== ====== ====== ====== ====== ======== ========
Net income applicable to common stock $211.6 $203.7 $203.0 $121.6 $199.9 $ 415.3 $ 375.7
Average number of common shares outstanding (in thousands) 77,470 76,464 76,656 81,700 83,864 76,970 81,686
Per common share:
Net income $ 2.73 $ 2.66 $ 2.65 $ 1.49 $ 2.38 $ 5.40 $ 4.60
Dividends paid $ 0.75 $ 0.75 $ 0.75 $ 0.75 $ 0.75 $ 1.50 $ 1.25
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NOTE: Certain prior year balances have been reclassified to conform to current year classifications.
See notes to consolidated financial statements
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS First Interstate Bancorp
----------------------------------------------------------------------------------------------------
Six Months Ended
----------------------------
June 30 June 30
(dollar amounts in millions) 1995 1994
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 432 $ 392
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 95 71
Provision for credit losses - -
Valuation adjustment on foreclosed property 2 (6)
Provision for deferred income taxes 69 96
Decrease (increase) in trading account securities (50) 115
Decrease in interest receivable 13 100
Increase in interest payable 17 (11)
Other, net (65) (463)
-------- --------
Net Cash Provided by Operating Activities 513 294
Cash Flows from Investing Activities:
Held-to-maturity securities
Proceeds from maturities 3,000 3,180
Proceeds from sales - -
Purchases (133) (2,217)
Available-for-sale securities
Proceeds from maturities 324 5,352
Proceeds from sales 386 65
Purchases (12) (5,439)
Net loan originations (2,421) (2,374)
Proceeds from sales of loans 1,342 1,420
Loans purchased (516) (697)
Acquisition of subsidiaries (74) 293
Proceeds from sales of premises and equipment 49 16
Purchases of premises and equipment (166) (131)
Proceeds from sales of other real estate 35 18
-------- --------
Net Cash Provided (Used) by Investing Activities 1,814 (514)
Cash Flows from Financing Activities:
Net decrease in deposits (1,980) (701)
Deposits purchased 187 315
Net decrease in short term borrowings (584) (199)
Proceeds from long term debt issued 100 0
Repayments of long term debt (43) (173)
Cash dividends paid (131) (117)
Proceeds from Common Stock issued 41 31
Reacquisition of Common Stock - (120)
-------- --------
Net Cash Used by Financing Activities (2,409) (964)
-------- --------
Net Decrease in Cash and Cash Equivalents (82) (1,184)
Cash and cash equivalents at beginning of year 6,275 6,839
-------- --------
Cash and Cash Equivalents at end of period $6,193 $ 5,655
======== ========
Additional Disclosures
Loans transferred to OREO $ 22 $ 17
Loans originated to facilitate sale of OREO - 10
Interest paid 576 415
Income taxes paid 225 159
---------------------------------------------------------------------------------------------------
See notes to consolidated financial statements
</TABLE>
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<TABLE>
<CAPTION>
STATEMENT OF SHAREHOLDERS' EQUITY First Interstate Bancorp
Unrealized
Net Gains on
Common Stock Available-
Preferred --------------------- Capital Retained for-sale Treasury
(dollar amounts in millions) Stock Shares (000s) Amount Surplus Earnings Securities Stock Total
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995 $ 350 74,204 $ 168 $ 1,692 $ 1,967 $ 1 $ (742) $ 3,436
Net income for the period 432 432
Cash dividends
Common Stock - $0.75 per share (114) (114)
Preferred Stock (17) (17)
Common Stock issued:
Stock Option and Restricted Stock Plans 579 (16) 41 25
Dividend Reinvestment Plan 172 13 13
Management Incentive Plan 23 2 2
Levy Bancorp acquisition 1,308 (5) 97 92
Other adjustments 1 (1) -
-------- ------ ------ -------- --------- -------- -------- --------
Balance at June 30, 1995 $ 350 76,286 $ 169 $ 1,671 $ 2,268 $ - $ (589) $ 3,869
======== ====== ====== ======= ======== ======== ======== ========
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See notes to consolidated financials
</TABLE>
<PAGE>
FIRST INTERSTATE BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated financial statements
of First Interstate Bancorp are prepared in conformity with
generally accepted accounting principles for interim
financial information. In the opinion of management, all
adjustments (all of which are of a normal recurring nature)
necessary to present fairly the consolidated financial
position and the results of operations for the periods
presented have been included. These unaudited consolidated
financial statements should be read in conjunction with the
audited consolidated financial statements included in the
First Interstate Bancorp Annual Report on Form 10-K for the
year ended December 31, 1994. Certain prior year balances
have been reclassified to conform to current year
classifications.
2. The following table provides the major components of
investment securities (in millions):
Gross Unrealized
Amortized ---------------- Estimated
Cost Gains Losses Fair Value
--------- ------ ------ ----------
June 30, 1995
Held-to-maturity:
U. S. Treasury and agencies $ 9,379 $ 33 $ 94 $ 9,318
State and political subdivisions 25 1 - 26
Other debt securities 1,398 5 21 1,382
-------- ----- ------ ----------
Total held-to-maturity $ 10,802 $ 39 $ 115 $ 10,726
======== ===== ====== ==========
Available-for-sale:
U. S. Treasury and agencies $ 7 $ - $ - $ 7
Corporate and Federal Reserve Stock 100 - - 100
-------- ------ ------ ----------
Total available-for-sale $ 107 $ - $ - $ 107
======== ====== ====== ==========
December 31, 1994
Held-to-maturity:
U. S. Treasury and agencies $ 12,105 $ 16 $ 352 $ 11,769
State and political subdivisions 29 1 - 30
Other debt securities 1,561 - 80 1,481
-------- ------ ------ ----------
Total held-to-maturity $ 13,695 $ 17 $ 432 $ 13,280
======== ====== ====== ==========
Available-for-sale:
U. S. Treasury and agencies $ 42 $ - $ - $ 42
Corporate and Federal Reserve Stock 113 1 - 114
-------- ------ ------ ----------
Total available-for-sale $ 155 $ 1 $ - $ 156
======== ====== ====== ==========
During 1994 and the six months ended June 30, 1995 there
were no transfers or sales of held-to-maturity securities,
or transfers of available-for-sale securities to trading.
3. In January 1995, the Corporation adopted Statement of
Financial Accounting Standards No. 114, "Accounting by
Creditors for Impairment of a Loan," amended in October 1994
by SFAS No. 118 "Accounting by Creditors for Impairment of a
Loan - Income Recognition and Disclosures," hereinafter
collectively referred to as SFAS 114. Under SFAS 114, a loan
is considered impaired when, based on current information
and events, it is probable that a creditor will be unable to
collect all amounts due according to the contractual terms
of the loan. SFAS 114 applies to all loans except large
groups of smaller-balance homogenous loans which are
collectively evaluated, loans measured at fair value or at
the lower of cost or fair value, leases and debt securities.
The statement does not address the overall adequacy of the
allowance for credit losses. When a loan is identified as
"impaired," accrual of interest ceases and any amounts that
are recorded as receivables are reversed out of interest
income.
Impaired loans of the Corporation include only commercial
(including financial and agricultural), real estate
construction and commercial real estate mortgage loans
classified as nonperforming loans. The Corporation measures
its impaired loans by using the fair value of the collateral
if the loan is collateral-dependent and the present value of
the expected future cash flows discounted at the loan's
effective interest rate if the loan is not collateral-
dependent. The difference between the recorded value of the
impaired loan and the fair value of the loan is defined as
the impairment allowance. Impairment allowances, if any, are
considered by the Corporation in determining the overall
adequacy of the allowance for credit losses. The adoption
of SFAS 114 resulted in no material change in unallocated
reserves of the allowance for credit losses.
The following table presents a breakdown of impaired loans
and the SFAS 114 impairment allowance related to impaired
loans (in millions):
June 30, 1995
------------------------
SFAS 114
Recorded Impairment
Investment Allowance
---------- ---------
Impaired loans:
Loans with impairment allowance
Commercial, financial, and agricultural $ 32 $ 1
Real estate construction- -
Commercial real estate mortgage 22 3
------ -------
Total loans with impairment allowance 54 $ 4
=======
Loans without impairment allowance
Commercial, financial, and agricultural 73
Real estate construction 7
Commercial real estate mortgage 41
------
Total loans without impairment allowance 121
------
Total impaired loans $ 175
======
For the six months ending June 30, 1995, impaired loans
averaged $167 million and the total interest income was $6.0
million, all of which was recognized on a cash basis.
Interest payments received on impaired loans are recorded as
interest income unless there is doubt as to the
collectibility of the recorded investment. In those cases,
cash received is recorded as a reduction of principal.
4. Transactions in the allowance for credit losses for were as
follows (in millions):
Quarter Ended Six Months Ended
----------------------------- ----------------
June 30 December 31 June 30 June 30
1995 1994 1994 1995 1994
Balance at beginning of period $ 921 $ 952 $1,011 $ 934 $1,001
Provision for credit losses - - - - -
Other changes - acquisitions - 20 8 23 44
----- ----- ------ ----- ------
921 972 1,019 957 1,045
Deduct:
Loans charged-off 74 66 75 152 135
Less recoveries on loans
previously charged-off 31 28 28 73 62
----- ----- ------ ----- ------
Net loans charged-off 43 38 47 79 73
----- ----- ------ ----- ------
Balance at end of period $ 878 $ 934 $ 972 $ 878 $ 972
===== ===== ====== ===== ======
5. Other assets identified as being held for sale are valued at
the lower of cost or market and totaled $83 million at June
30, 1995, compared to $26 million at December 31, 1994.
These balances primarily represent residential and
commercial mortgage loans held for sale and are included in
other assets on the Consolidated Balance Sheet.
6. At June 30, 1995 and December 31, 1994, 15,000,000 shares of
Preferred Stock (no par value) were authorized.
At June 30, 1995 and December 31, 1994, there were
outstanding 8,000,000 Depositary Shares, each representing a
one-eighth interest in a share of 9.875% Preferred Stock,
Series F. The Series F Preferred Stock is redeemable at any
time on or after November 15, 1996, at the option of the
Corporation, in whole or in part, at $200.00 per share
(equivalent to $25.00 per Depositary Share) plus accrued and
unpaid dividends to the redemption date.
At June 30, 1995 and December 31, 1994, there were
outstanding 6,000,000 Depositary Shares, each representing a
one-eighth interest in a share of 9.0% Preferred Stock,
Series G. The Series G Preferred Stock is redeemable
anytime on or after May 29, 1997, at the option of the
Corporation, in whole or in part, at $200.00 per share
(equivalent to $25.00 per Depositary Share) plus accrued and
unpaid dividends to the redemption date.
Dividends on both the Series F and Series G Preferred Stock
are cumulative and are paid quarterly on the last day of
March, June, September and December of each year.
At June 30, 1995, the cost of Common Stock in the treasury
averaged $73.69 per share compared to an average of $73.64
at December 31, 1994. On April 28, 1995, the Board of
Directors approved the repurchase of up to 7.6 million
shares of Common Stock. The first 2.5 million shares
purchased under the program will be used for reissuance
through the Corporation's various employee benefit and stock
option plans, and Stock Purchase and Dividend Reinvestment
Plan. Such repurchases will be made periodically over the
next two years in the open market or through privately
negotiated transactions, subject to appropriate regulatory
and acquisition accounting requirements. During July 1995,
the Corporation commenced its program by repurchasing
374,600 shares.
7. During the first six months of 1995, the Corporation was a
party to three business combinations with operating entities
(University Savings Bank, Levy Bancorp and North Texas
Bancshares) resulting in the acquisition of $2.3 billion in
assets and $1.8 billion in deposits. University Savings
Bank and North Texas Bancshares were cash transactions, and
the Corporation issued 1,308,388 shares of its common stock
(from its Treasury shares) for the acquisition of Levy
Bancorp. All three acquisitions were accounted for as
purchases.
In addition, the Corporation, through its subsidiary in
California, completed a Federal Deposit Insurance
Corporation assisted cash transaction resulting in the
acquisition of $187 million of deposits and $78 million of
loans from First Trust Bank. The Corporation paid a premium
of $16 million for these deposits and loans.
On July 12, 1995, the Corporation, through its subsidiary in
Texas, completed the acquisition of Tomball National
Bancshares, Inc. and its principal subsidiary, Texas
National Bank, in a cash transaction. As of June 30, 1995
Texas National Bank had $95 million in assets and $81
million in deposits. The acquisition was accounted for as a
purchase.
8. For purposes of reporting cash flows, cash and cash
equivalents includes cash on hand, amounts due from banks,
time deposits with banks, federal funds sold and securities
purchased under agreements to resell having maturities of
three months or less. Federal funds are purchased and sold
for one-day periods. The effect of changes in foreign
exchange rates on cash balances is not material.
<PAGE>
Item 2:
Management's Discussion and Analysis of Financial Condition and
Results of Operations
COMPARISON OF SECOND QUARTER RESULTS:
The Corporation recorded net income for the second quarter of
1995 of $219.9 million ($2.73 per share). This includes the
effect of $4.3 million of restructuring charges ($2.7 million
after taxes, or $0.04 per share). Net income of $208.2 million
in the 1994 second quarter included an after-tax benefit from the
recognition of a nonrecurring item of $13.2 million ($0.16 per
share). Before the effect of restructuring charges in the
current quarter and the nonrecurring item in the 1994 second
quarter, income after taxes in the 1995 second quarter amounted
to $222.6 million ($2.77 per share), an increase of 14.2% from
$195.0 million ($2.22 per share) in the 1994 second quarter.
Taxable-equivalent net interest income was $647.5 million in the
second quarter of 1995, an increase of 10.5% from a year earlier.
This increase resulted from expansion of the net interest margin,
up 35 basis points to 5.45%, as well as from earning asset
growth, up $1.6 billion (3.4%) to an average of $47.5 billion.
The higher level of average earning assets in the second quarter
of 1995 reflects loan growth of $7.8 billion (28.0%), partially
offset by a decline in investment securities of $5.5 billion
(32.1%). The net interest margin in the 1995 second quarter was
14 basis points above the first quarter margin of 5.31%,
reflecting favorable repricing trends, a shift to loans from
lower yielding investment securities, and collections of interest
on nonaccrual loans. Further declines in short term interest
rates should lead to moderate declines in the Corporation's net
interest margin.
Average loans and leases increased $7.8 billion (28.0%) from the
1994 second quarter and $942 million (2.7%) from the first
quarter to $35.5 billion in the 1995 second quarter. Instalment
loans averaged $12.5 billion in the second quarter of 1995, up
$893 million (7.7%) from a year earlier and up slightly from the
first quarter of 1995. Average commercial loans outstanding were
up $1.7 billion (20.5%) from a year earlier and up $251 million
(2.6%) from the 1995 first quarter to an average of $9.8 billion.
Residential real estate mortgages averaged $6.7 billion, $3.3
billion (95.6%) above a year ago and up $212 million (3.3%) from
the 1995 first quarter level. Commercial real estate mortgages
averaged $4.8 billion, $1.2 billion (34.6%) above a year ago and
$197 million (4.3%) above the 1995 first quarter. Average
construction loans increased $312 million (38.6%) from the 1994
second quarter and $85 million (8.2%) from the first quarter to
$1.1 billion in the 1995 period. These increases reflect, in
part, acquisitions completed since June 1994.
At June 30, 1995, loans and leases totaled $35.9 billion, up
$7.2 billion (24.9%) from a year earlier and up $808 million
(2.3%) from March 31, 1995. Instalment loans totaled $12.6
billion at June 30, 1995, an increase of $753 million (6.4%) from
a year earlier and an increase of $179 million (1.4%) from March
31, 1995. At the same time, commercial loans were $10.1 billion,
an increase of $1.6 billion (18.9%) from a year earlier and up
$457 million (4.7%) from the end of the first quarter.
Residential real estate mortgages totaled $6.6 billion, $2.9
billion (75.8%) above a year ago and $77 million (1.1%) below the
March 31 level. Commercial real estate mortgages amounted to
$4.8 billion at June 30, 1995, $1.3 billion (35.1%) above a year
ago and $152 million (3.3%) above March 31, 1995. Construction
loans were $1.1 billion at June 30, 1995, up $352 million (44.4%)
from a year earlier and up $76 million (7.1%) from the end of the
first quarter.
As a result of maturities and paydowns, investment securities
held to maturity declined $5.6 billion (34.0%) from a year
earlier and declined $1.4 billion from March 31, 1995, to $10.8
billion at June 30, 1995. These proceeds supported the growth in
loans. The investment securities portfolio is expected to
continue to decline moderately as loan growth is expected to
continue. U.S. Treasury and agency-backed securities declined
35.9% from a year earlier to $9.4 billion at June 30, 1995. Of
the current amount, $3.4 billion were U.S. Treasury securities
and $6.0 billion were government agency securities. Of the $6.0
billion of government agency securities at June 30, 1995, the
majority were backed by mortgages. All other investment
securities amounted to $1.4 billion at the end of June 1995, down
$320 million (18.5%) from a year earlier and down $93 million
(6.2%) from March 31, 1995.
Total deposits averaged $47.6 billion in the 1995 second quarter,
up $1.3 billion (2.8%) from the 1994 second quarter and down
slightly from the first quarter. Average deposits in consumer
savings, time and net transaction accounts increased $554 million
(1.4%) from the 1994 second quarter to an average of $40.7
billion in the 1995 second quarter. Such deposits declined $467
million (1.1%) from $41.2 billion in the 1995 first quarter,
reflecting general industry trends. The Corporation's CDs over
$100,000 increased $499 million (52.6%) from the 1994 second
quarter and increased $49 million (3.5%) from the 1995 first
quarter to an average of $1.4 billion. At the same time, short
term borrowings, primarily federal funds purchased, averaged $1.8
billion, up $1.1 billion from the 1994 second quarter and down
$633 million from the 1995 first quarter. The higher levels of
maturing securities supported loan growth and a reduction in
short term borrowings in the 1995 second quarter.
Based on an assessment of the Corporation's current risk profile,
no provision for credit losses for the Corporation has been
recorded since the fourth quarter of 1993. Loans charged off,
net of recoveries, were $42.6 million (0.48% of average loans) in
the second quarter of 1995, compared to $46.8 million (0.68%)
reported for the comparable 1994 quarter. The Corporation
continued to experience a strong level of recoveries on prior
period chargeoffs.
Noninterest income totaled $274.4 million in the second quarter
of 1995, an increase of $19.9 million (7.8%) from the 1994 second
quarter level. Service charges on deposit accounts rose $8.4
million (6.0%) from the 1994 level to $147.3 million, while trust
fees declined $8.3 million (17.0%) to $40.6 million. The decline
in trust fees reflects the previously announced disposition of
Denver Investment Advisors, a subsidiary of First Interstate Bank
of Denver.
Total noninterest expenses amounted to $553.9 million in the 1995
second quarter, including $4.3 million of restructuring charges,
as previously noted. Such expenses were essentially flat from
the 1995 first quarter, which totaled $551.7 million. Noninterest
expenses before the effect of these charges and including the
effect of completed acquisitions were $549.6 million, an increase
of $50.7 million (10.2%) from the comparable 1994 quarter.
Noninterest expenses in the second quarter of 1994 benefited from
the reversal of $21.3 million of data processing reserves. In
addition, due to acquisitions completed since June 1994, expenses
arising from the amortization of goodwill and other intangibles
increased $7.3 million from the year earlier quarter to a total
of $15.0 million in the 1995 second quarter. The remainder of
the increase in noninterest expenses from the 1994 second quarter
was attributable to higher occupancy and advertising expenses, up
$11.1 million and $6.1 million, respectively, including the
effect of acquisitions completed since June 1994.
The Corporation's efficiency ratio, which reflects noninterest
expenses before restructuring and ORE charges as a percent of
taxable-equivalent net interest income plus noninterest income,
was 59.6% in the 1995 second quarter, 60.4% in the 1995 first
quarter, and 60.0% in the 1994 second quarter. The efficiency
ratio in the 1994 second quarter includes the favorable effect of
the $21.3 million expense reversal noted above.
In the second quarter of 1995, the Corporation recorded income
tax expense of $142.0 million, resulting in an effective income
tax rate of 39.2%. This compares to an effective rate of 38.0%
in the comparable 1994 quarter.
COMPARISON OF SIX MONTHS RESULTS:
The Corporation recorded net income for the first half of 1995 of
$431.9 million, or $5.40 per share. This includes the effect of
$9.1 million of restructuring charges ($5.5 million after taxes,
or $0.07 per share) and represents an increase in earnings per
share of 17.4% from the first half of 1994. Net income of $392.3
million ($4.60 per share) in the 1994 first half included a
benefit from the recognition of nonrecurring items of $45 million
($27.9 million after taxes, or $0.34 per share). Before the
effect of restructuring charges in 1995 and nonrecurring items in
1994, income after taxes in the first half of 1995 amounted to
$437.4 million ($5.47 per share), an increase of 20.0% from
$364.4 million ($4.25 per share) in the first half of 1994.
Taxable-equivalent net interest income was $1,285.0 million in
the 1995 first half, up 14.3% from a year earlier. This increase
resulted from an increase in the net interest margin to 5.39%
from 5.03% in the 1994 period, together with average earning
asset growth of $3.0 billion (6.7%).
Average loans increased $8.3 billion (31.1%) from the first half
of 1994 to $35.0 billion in the 1995 period. Instalment loans
averaged $12.4 billion in the first half of 1995, up $1.2 billion
(10.3%) from the year earlier. Residential real estate mortgages
averaged $6.6 billion, $3.4 billion above the 1994 first half.
Commercial real estate mortgages averaged $4.7 billion, $1.2
billion (35.9%) above a year ago. Average commercial loans were
up $1.8 billion (23.4%) from the first half of 1994 to $9.7
billion in the first half of 1995. Average construction loans
increased $306 million (39.6%) from the first half of 1994 to
$1.1 billion. These increases reflect, in part, acquisitions
completed in 1994 and early 1995.
At June 30, 1995, total loans were $35.9 billion, an increase of
$2.7 billion (8.1%) from $33.2 billion reported at yearend 1994.
During the remainder of 1995 loan volume is expected to increase
moderately.
Total deposits averaged $47.8 billion in the first half of 1995,
up $2.4 billion (5.2%) from the comparable 1994 period. Consumer
savings, time and net transaction accounts increased $1.6 billion
(4.1%) from the first half of 1994 to an average of $41.0 billion
in the first half of 1995. The Corporation's CDs over $100,000
increased $471 million (49.5%) from the year earlier. At the
same time, short term borrowings, primarily federal funds
purchased, averaged $2.1 billion, up $1.6 billion. The higher
level of short term borrowings, together with maturing securities
and deposits, supported loan growth in the first half of 1995.
No provision for credit losses for the consolidated Corporation
has been recorded since the fourth quarter of 1993. Loans charged
off, net of recoveries, were $79.8 million (0.46% of average
loans) for the current year to date, compared to $72.4 million
(0.55%) in the 1994 period.
Noninterest income totaled $542.8 million for the first six
months of 1995, an increase of $31.8 million (6.2%) from a year
earlier. Service charges on deposit accounts increased $16.5
million (5.9%) from the 1994 period to $294.4 million and trust
fees declined $15.9 million (16.6%) to $80.0 million. The
decline in trust fees reflects the previously announced
disposition of Denver Investment Advisors, a subsidiary of First
Interstate Bank of Denver.
Noninterest expenses totaled $1,105.6 million for the first six
months of 1995, including $9.1 million of restructuring charges,
as previously noted. Noninterest expenses before the effect of
these charges and including the effect of completed acquisitions
were $1,096.5 million in the current year, an increase of $104.7
million (10.6%) from the first half of 1994. Approximately $23.2
million of the increase reflects higher occupancy and equipment
expenses, while $15.5 million of the increase represents higher
charges resulting from the amortization of intangibles. In
addition, noninterest expenses in the first half of 1994
benefited from the reversal of $34.5 million of expense reserves,
as well as an ORE net benefit of $5.6 million.
For the first half of 1995, the Corporation recorded income tax
expense of $278.4 million, resulting in an effective income tax
rate of 39.2%, versus 38.0% in the comparable 1994 period.
LIQUIDITY MANAGEMENT:
Liquidity refers to the Corporation's ability to adjust its
future cash flows to meet the needs of depositors and borrowers
and to fund operations on a timely and cost effective basis.
The Corporation continues to utilize the core deposits gathered
through its extensive interstate retail banking network as a key
source of low-cost funding. Core deposits, defined as demand
deposits, interest bearing consumer deposits under $100,000 and
noninterest bearing time deposits, together with corporate
purchased funds and equity are the primary sources for funding
earning assets. During the second quarter of 1995, core deposits
represented 86% of average earning assets, compared to 87% in the
second quarter of 1994 and 85% in the first quarter of 1995.
At the same time, average corporate purchased funds increased
$1.6 billion from the 1994 second quarter to $4.7 billion, but
declined $511 million from the 1995 first quarter level. Average
short term borrowings rose $1.1 billion from the second quarter
of 1994 but declined $633 million from the 1995 first quarter
level.
Cash and cash equivalents were virtually unchanged from December
31, 1994.
Net cash provided by investing activities during the first six
months of 1995 totaled $1,814 million. Maturities of investment
securities in the held-to-maturity portfolio, net of purchases,
provided cash of $2,867 million. Maturities and sales of
investment securities in the available-for-sale portfolio, net of
purchases, provided $698 million. Loan originations, net of
repayments, used cash of $2,421 million. Proceeds from sales of
loans provided $1,342 million while purchases of loans used $516
million.
Net cash used by financing activities totaled $2,409 million
during the first six months of 1995. Deposits, excluding the
purchase of $187 million from the Federal Deposit Insurance
Corporation as part of the Corporation's ongoing acquisition
program, experienced a net decrease of $1,980 million. The
Corporation also reported a net increase of $584 in short term
borrowings. The Corporation continues to have no commercial paper
outstanding. Proceeds from the issuance of long term debt
provided $100 million while repayments required cash of $42
million. Issuance of common stock provided cash of $41 million
while dividends paid totaled $131 million.
Cash provided by operations during the first six months of 1995
totaled $513 million. Net income totaled $432 million and
noncash adjustments to reconcile net income totaled $166 million.
Net changes in other assets and other liabilities decreased cash
from operations by $85 million
The Corporation's other sources of liquidity include maturing
securities in addition to those which are available for sale or
repurchase activity. In addition, subsidiary banks may directly
access funds placed by them through existing agency agreements
for the placement of federal funds and may also access the
Federal Reserve for short term liquidity needs.
SOURCE OF FUNDS:
The Parent Corporation is a legal entity, separate and distinct
from its subsidiary banks. The principal source of the Parent
Corporation's revenue is dividends from the subsidiary banks.
During the first six months of 1995, the subsidiary banks paid a
total of $273 million in dividends to the Parent 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. As of July 1, 1995,
approximately $333 million were free of dividend restrictions
under such statutory limitations. In addition, federal statutes
limit the ability of the subsidiary banks to make loans to the
Parent Corporation. At June 30, 1995, the Parent Corporation had
no external short term borrowings outstanding. Immediate
liquidity available to the Corporation includes a $500 million
senior revolving credit facility, as well as cash and other short
term financial instruments at the Parent Corporation totaling
$240 million at June 30, 1995. This compares to $219 million at
yearend 1994. At current rates, interest on long term debt and
preferred stock dividend requirements from July 1, 1995 through
yearend 1995 total $74 million. In addition, from July 1, 1995
through yearend 1995, $90 million of the Parent Corporation's
long term debt will mature. Under the appropriate circumstances,
the Parent Corporation could consider repurchasing any of its
outstanding stock.
The Parent Corporation has access to regional, national and
international capital and money markets, through its $2.3
billion shelf registration on file with the Securities and
Exchange Commission.
RISK ELEMENTS:
Nonperforming Assets - At June 30, 1995, nonperforming assets
totaled $249 million, down $50 million (16.7%) from the year ago
level of $299 million, and down $13 million from $262 million
reported at March 31, 1995. The current level of nonperforming
assets represents 0.45% of total assets, versus 0.56% and 0.46%
of total assets a year earlier and at March 31, 1995,
respectively. Nonperforming loans totaled $180 million at June
30, 1995, down 21.1% from $228 million reported a year earlier,
and down $8 million from $188 million at March 31, 1995. ORE
totaled $69 million at June 30, 1995, versus $71 million a year
ago and $74 million at March 31, 1995. The following table is a
reconciliation of nonperforming asset activity for the quarter
and six months ended June 30, 1995:
Second Quarter 1995 Six Months Ended June30, 1995
--------------------------- -----------------------------
Nonperforming Nonperforming
Loans ORE Total Loans ORE Total
------ ----- ----- ----- ----- -----
Beginning balance $ 188 $ 74 $ 262 $ 186 $ 72 $ 258
In-migration (1) 108 - 108 221 - 221
Return to accrual (15) - (15) (18) - (18)
Valuation adjustment - 2 2 - 2 2
Payments and sales (69) (18) (87) (160) (38) (198)
Net chargeoffs
and writedowns (20) (1) (21) (40) (3) (43)
Transfers within (12) 12 - (22) 22 -
Acquisitions - - - 13 14 27
------- ----- ----- ------ ------ ------
Ending balance $ 180 $ 69 $ 249 $ 180 $ 69 $ 249
======= ===== ====== ====== ====== ======
(1) Includes disbursements on loans previously reported as
nonperforming.
In addition to credit assets classified as nonperforming, the
Corporation reported accruing loans that were past due 90 days or
more of $72 million at June 30, 1995, versus $66 million a year
earlier and $52 million at March 31, 1995. The current level of
past due loans represents 0.13% of total assets.
Allowance for Credit Losses - At June 30, 1995, the allowance for
credit losses totaled $878 million, or 2.45% of total loans.
This compares to an allowance of $972 million, or 3.38% of loans,
a year ago and $921 million, or 2.62% of loans, at March 31,
1995.
Historical and projected allowances for credit losses reflect
management's assessment of the credit risk inherent in the
Corporation's loan portfolio, as well as the possible impact of
known and potential problems in certain off-balance sheet
financial instruments and uncertain events. Consistent with
regulatory guidelines, the allowance is maintained at the level
that is adequate to absorb estimated credit losses associated
with the total loan and lease portfolio, including all binding
commitments to lend.
For the past twelve quarters, the Corporation has provided less
than net chargeoffs, with the credit provision over the past six
quarters being zero. Despite zero credit provisions, improving
economic conditions and lower levels of problem assets have
caused reserves to remain in the upper range of key measures of
adequacy. Management continues to evaluate the Corporation's
reserve adequacy strategy on a quarterly basis, with the
expectation that further reductions in reserve levels will be
considered as long as the Corporation's risk profile supports
that conclusion.
During the first quarter of 1995, the Corporation adopted
Statement of Financial Accounting Standards No. 114, "Accounting
by Creditors for Impairment of a Loan." The adoption resulted in
no material change in unallocated reserves of the allowance for
credit losses. Refer to Footnote 3 to the financial statements
for further information.
Derivatives - The Corporation continues to engage in a minimum of
derivative activities for risk management purposes. The
Corporation does not engage in any trading or speculative
derivative activities. At June 30, 1995, the notional value of
derivatives outstanding was $6.4 billion, including $5.1 billion
in which the Corporation is an intermediary and $1.2 billion in
which the Corporation entered into transactions to hedge interest
rate sensitivity. Of the $5.1 billion in which the Corporation
is an intermediary, $3.8 billion of notional value has been sold
to Standard Chartered, which has assumed the market risk of these
instruments, and the Corporation retains only the credit risk.
CAPITAL AND OTHER FINANCIAL STATISTICS:
At June 30, 1995, total shareholders' equity represented 6.92% of
total assets, versus 7.12% a year earlier and 6.48% at March 31,
1995. On the same dates, common equity equaled 6.29%, 6.47% and
5.87% of total assets, respectively. The Corporation's various
capital ratios include the effects of the common stock repurchase
programs and completed acquisitions.
The tangible common equity ratio was 5.01% at June 30, 1995,
compared to 5.86% a year earlier and 4.56% at March 31, 1995.
The regulatory leverage ratio was at 5.67% at June 30, 1995,
versus 6.54% a year ago and 5.24% at March 31, 1995.
The Corporation's Tier 1 and Total Capital ratios at June 30,
1995, were 7.22% and 10.22%, respectively.
On April 18, 1995, the Corporation's Board of Directors declared
a quarterly cash dividend of $0.75 on the Corporation's $2 par
value Common Stock, payable on May 31, 1995, to shareholders of
record on May 8, 1995. On May 1, 1995, the Preferred Stock
Committee of the Board of Directors declared dividends on the
Corporation's outstanding preferred stock. During the first half
of 1995, the Corporation recorded common stock dividends of
$114.6 million and preferred stock dividends of $16.6 million.
On July 18, 1995, the Corporation's Board of Directors increased
the quarterly cash dividend on the Corporation's $2 par value
Common Stock to $0.80 per share, payable on August 31, 1995 to
shareholders of record on August 7, 1995.
On April 28, 1995, the Board of Directors authorized the
repurchase of up to 7.6 million shares of issued and outstanding
common stock, representing approximately 10% of the total number
of shares outstanding. The first 2.5 million shares purchased
under the program will be used for reissuance through various
employee benefit and stock option plans and through the Stock
Purchase and Dividend Reinvestment Plan. The purchases will be
made from time to time over the next two years in the open market
or through privately negotiated transactions. The Corporation
commenced such purchases in July 1995, repurchasing 374,600
shares. The timing and extent of purchases will depend on market
conditions and will be subject to appropriate regulatory and
acquisition accounting requirements.
Total intangibles amounted to $753 million at June 30, 1995,
versus $343 million a year earlier and $785 million at March 31,
1995. The higher current level reflects the completion of seven
acquisitions after June 30, 1994. As a result, goodwill
increased to $708 million at June 30, 1995, from $302 million a
year earlier.
The common shares used in the calculation of 1995 second quarter
and first half results per share were 77,469,817 and 76,969,718,
respectively. During the first quarter, 1.3 million of the
Corporation's treasury shares were issued in conjunction with the
acquisition of Levy Bancorp in February 1995, of which 1.1
million represent shares repurchased for such purpose.
RESTRUCTURING:
As previously announced, the Corporation has adopted a
Restructuring Plan (Plan) to improve efficiency and to better
position the company for the introduction of full interstate
banking. The restructuring activity related to the Plan is
summarized in the following table (in millions):
Early Severance and Facility and
Retirement Outplacement Equipment
Program Services Valuations Other Total
1994
Restructuring provision
Initial charge $ 82.0 $ 40.0 $ 15.0 $ 2.0 $139.0
Ongoing - - - 2.3 2.3
------- -------- ---------- ----- ------
Total 82.0 40.0 15.0 4.3 141.3
Utilization for the period
Cash 0.4 4.7 6.8 2.3 14.2
Noncash 81.6 - - - 81.6
------- -------- ---------- ----- ------
Total 82.0 4.7 6.8 2.3 95.8
------- -------- ---------- ----- ------
Balance at December 31, 1994 - 35.3 8.2 2.0 45.5
1995
Restructuring provision
Ongoing - - - 9.1 9.1
Utilization for the period
Cash - 8.6 1.9 11.1 21.6
Noncash - - - - -
------- -------- ---------- ----- -----
Total - 8.6 1.9 11.1 21.6
------- -------- ---------- ----- -----
Balance at June 30, 1995 $ - $ 26.7 $ 6.3 $ - $33.0
======= ======== ========== ===== =====
The 1994 noncash amount of $81.6 million represents the amount
transferred to the Corporation's pension liability during 1994.
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 pension plan.
The balance of the restructuring charge will be funded out of
operating cash flows with payments for severance and outplacement
services occurring through the end of 1995. In addition, it is
expected that restructuring charges of another $14.6 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 end of 1995. The total expected cost of the Plan, therefore,
will be approximately $165 million, as previously estimated.
SUMMARY OF ACQUISITION ACTIVITY:
In the first quarter of 1995, the Corporation closed four
acquisitions: University Savings Bank in Seattle-Tacoma,
Washington; Levy Bancorp in Ventura, California; North Texas
Bancshares, Inc. in Fort Worth, Texas; and First Trust Bank in
Ontario, California.
On July 12, 1995, First Interstate Bank of Texas, N.A. completed
the acquisition of Tomball National Bancshares and its principal
subsidiary, Texas National Bank, for $7.7 million in cash. At
June 30, 1995, Texas National Bank reported assets of $95
million and deposits of $81 million.
RECENT DEVELOPMENTS:
On May 1, 1995, the Board of Directors announced that Chief
Executive Officer William E. B. Siart was additionally elected
Chairman, succeeding retiring Chairman, Edward M. Carson. In
addition, William S. Randall was named President, succeeding Mr.
Siart; and Bruce G. Willison, California Region CEO, was named to
the additional post of Vice Chairman.
On August 8, 1995, the Federal Deposit Insurance Corporation
voted to reduce the annual deposit insurance premium rates
for deposits of well capitalized institutions insured by the
Bank Insurance Fund (BIF), which represents approximately
91% of the Corporation's deposits, from $0.23 to $0.04 per
$100 of deposits. The exact date on which the new
assessment rates would apply is still undecided, but they
are likely to be applied from a date in the second quarter
of 1995. Any overpayment for the second and third quarters
of 1995 resulting from the retroactive application of the
new rates will be refunded to the BIF-insured institutions
no earlier than September 1995. The Corporation will
benefit from this reduction in the premium rate. Deposits
insured by the Savings Association Insurance Fund (SAIF),
which represents approximately 9% of the Corporation's
deposits will continue to be assessed at the rate of $0.23
per $100 of deposits. However, federal banking regulators
have proposed making a one-time assessment on SAIF deposits
to recapitalize the SAIF. The impact to the Corporation of
such an assessment is not quantifiable at the present time.
<PAGE>
<TABLE>
<CAPTION>
AVERAGE BALANCES, INTEREST, AND AVERAGE RATES First Interstate Bancorp
----------------------------------------------------------------------------------------------------------------------------------
Second Quarter Ended June 30
1995 1994
---------------------------- ----------------------------
Balance Interest Rate Balance Interest Rate
--------------------------------------------------------------
(dollar amounts in millions; interest and average rates on a taxable-equivalent basis)
<S> <C> <C> <C> <C> <C> <C>
Earning Assets
Loans 1 :
Commercial, financial and agricultural $ 9,810 $ 208 8.49% $ 8,141 $ 135 6.56%
Real estate construction 1,120 27 9.74 808 19 9.19
Real estate mortgage 11,480 232 8.12 6,927 129 7.41
Instalment 12,474 304 9.78 11,581 267 9.19
Other loans and leases 611 12 7.82 267 5 6.39
------- -------- ------- --------
Total Loans 35,495 783 8.85 27,724 555 8.01
Trading account securities 130 2 5.23 105 1 4.60
Investment Securities:
Held-to-maturity securities 11,478 160 5.54 16,667 222 5.32
Available-for-sale securities 117 2 5.70 399 5 4.56
------- -------- ------- --------
Total Investment Securities 11,595 162 5.54 17,066 227 5.30
Federal funds, repurchases 208 2 5.94 519 5 3.95
Time deposits, due from banks 27 1 7.25 441 4 3.58
Other assets held for sale 60 1 3.90 96 2 7.23
------- -------- ------- --------
Total Earning Assets 47,515 951 8.01 45,951 794 6.92
Interest Bearing Liabilities:
Regular savings 5,767 31 2.17 5,901 30 2.03
NOW accounts and demand - market interest 6,531 22 1.37 6,693 20 1.21
Savings - market interest 10,233 79 3.08 11,604 65 2.25
Other savings and time under $100,000 7,633 95 4.97 5,749 50 3.51
------- -------- ------- --------
Total Interest Bearing Consumer Funds 30,164 227 3.01 29,947 165 2.22
Large CDs, other money market funds 1,447 18 4.99 948 8 3.03
Short term borrowings 1,834 28 5.98 690 9 5.33
Long term debt 1,464 31 8.52 1,443 26 7.35
------- -------- ------- --------
Total Corporate Purchased Funds 4,745 77 6.46 3,081 43 5.57
------- -------
Total Interest Bearing LIabilities 34,909 304 3.48 33,028 208 2.53
Net Interest Income and Gross Spread $ 647 4.53% $ 586 4.39%
Noninterest Liabilities, Equity and Assets
Demand and noninterest bearing time deposits 16,017 15,447
Other liabilites 1,015 1,016
Preferred equity capital 350 350
Common equity capital 3,422 3,432
------- -------
Total Noninterest Liabilities and Equity 20,804 20,245
Cash and due from banks 5,457 5,224
Allowance for credit losses (908) (1,002)
Bank premises and equipment 1,231 1,070
Other assets 2,418 2,030
------- -------
Total Noninterest Assets 8,198 7,322
Net Noninterest Sources 12,606 12,923
Total Assets $55,713 $53,273
Interest income as a percentage of average earning assets 8.01% 6.92%
Interest expense as a percentage of average earning assets 2.56 1.82
----- -----
5.45% 5.10%
===== =====
----------------------------------------------------------------------------------------------------------------------------------
1 Net of unearned income and deferred fees.
Loans include nonaccrual and renegotiated loans.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AVERAGE BALANCES, INTEREST, AND AVERAGE RATES First Interstate Bancorp
----------------------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30
1995 1994
---------------------------- ----------------------------
Balance Interest Rate Balance Interest Rate
--------------------------------------------------------------
(dollar amounts in millions; interest and average rates on a taxable-equivalent basis)
<S> <C> <C> <C> <C> <C> <C>
Earning Assets
Loans 1 :
Commercial, financial and agricultural $ 9,685 $ 401 8.31% $ 7,847 $ 249 6.34%
Real estate construction 1,078 55 10.23 772 33 7.98
Real estate mortgage 11,276 450 8.00 6,599 245 7.44
Instalment 12,421 593 9.63 11,259 520 9.23
Other loans and leases 567 21 7.46 244 8 6.58
------- -------- ------- --------
Total Loans 35,027 1,520 8.72 26,721 1,055 7.95
Trading account securities 121 3 5.60 114 2 4.44
Investment Securities:
Held-to-maturity securities 12,222 337 5.54 16,232 435 5.33
Available-for-sale securities 215 7 6.24 451 10 4.28
------- -------- ------- --------
Total Investment Securities 12,437 344 5.55 16,683 445 5.30
Federal funds, repurchases 221 7 5.85 662 12 3.57
Time deposits, due from banks 37 1 6.58 630 10 3.48
Other assets held for sale 107 3 6.28 118 5 7.15
------- -------- ------- --------
Total Earning Assets 47,950 1,878 7.88 44,928 1,529 6.84
Interest Bearing Liabilities:
Regular savings 5,890 64 2.20 5,754 58 2.04
NOW accounts and demand - market interest 6,641 44 1.35 6,565 40 1.23
Savings - market interest 10,556 156 2.98 11,319 124 2.20
Other savings and time under $100,000 7,358 171 4.69 5,651 100 3.55
------- -------- ------- --------
Total Interest Bearing Consumer Funds 30,445 435 2.89 29,289 322 2.27
Large CDs, other money market funds 1,423 34 4.76 952 14 2.95
Short term borrowings 2,149 63 5.82 506 13 5.00
Long term debt 1,428 61 8.49 1,488 55 7.39
------- -------- ------- --------
Total Corporate Purchased Funds 5,000 158 6.28 2,946 82 5.58
------- -------
Total Interest Bearing LIabilities 35,445 593 3.37 32,235 404 2.57
Net Interest Income and Gross Spread $ 1,285 4.51% $ 1,125 4.27%
Noninterest Liabilities, Equity and Assets
Demand and noninterest bearing time deposits 15,933 15,205
Other liabilites 1,009 1,000
Preferred equity capital 350 350
Common equity capital 3,313 3,347
------- -------
Total Noninterest Liabilities and Equity 20,605 19,902
Cash and due from banks 5,422 5,165
Allowance for credit losses (925) (1,000)
Bank premises and equipment 1,215 1,025
Other assets 2,388 2,019
------- -------
Total Noninterest Assets 8,100 7,209
Net Noninterest Sources 12,505 12,693
Total Assets $56,050 $52,137
Interest income as a percentage of average earning assets 7.88% 6.84%
Interest expense as a percentage of average earning assets 2.49 1.81
----- -----
5.39% 5.03%
===== =====
----------------------------------------------------------------------------------------------------------------------------------
1 Net of unearned income and deferred fees.
Loans include nonaccrual and renegotiated loans.
</TABLE>
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Computation of Earnings Per Share
(12) Computation of Ratio of Earnings to Fixed
Charges for the six-month period ending June 30, 1995.
(27) Financial Data Schedule for the three-month and
six-month period ending June 30, 1995
(b) Reports on Form 8-K
A report on Form 8-K dated February 17, 1995 announced
the date, time and place of the Corporation's 1995
Annual Meeting of Stockholders.
A report on Form 8-K dated March 25, 1995 announced
that the Corporation has entered into a Dealer
Agreement dated December 9, 1994 among the Corporation
and various dealers named therein. Copies of related
documents were included in such filing.
A report on Form 8-K dated May 1, 1995 announced
the Corporation's repurchase program for up to
7,600,000 shares of Common Stock. Copies of related
documents were included in such filing.
A report on Form 8-K/A dated May 26, 1995 announced the
Corporation's amendment to Item 7(c), Financial
Statements, Pro Forma Financial Information and
Exhibits, of its Form 8-K dated March 25, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
FIRST INTERSTATE BANCORP
REGISTRANT
DATE: AUGUST 11, 1995 By /s/ William S. Randall
----------------------
William S.Randall
President
(Principal Financial Officer)
DATE: AUGUST 11, 1995 By /s/ David S. Belles
----------------------
David S. Belles
Executive Vice President and Controller
(Principal Accounting Officer)
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT (11)
COMPUTATION OF EARNINGS PER SHARE First Interstate Bancorp
-----------------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
------------------------ ------------------------
(dollar amounts in millions, except per share amounts) 1995 1994 1995 1994
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income applicable to common stock
Net income $ 219.9 $ 208.2 $ 431.9 $ 392.3
Less dividends on preferred stock 8.3 8.3 16.6 16.6
--------- --------- --------- ---------
Net income, as adjusted, for calculation of
primary and fully diluted earnings per share $ 211.6 $ 199.9 $ 415.3 $ 375.7
========= ========= ========= =========
Weighted average number of shares (in thousands)
Weighted average number of shares outstanding 76,094 82,144 75,570 80,096
Dilutive effect of outstanding stock options
(as determined by application of the
treasury stock method) 1,354 1,700 1,379 1,572
Stock units under Management Incentive Plan 22 20 21 18
--------- --------- --------- ---------
Weighted average number of shares, as
adjusted, for calculation of primary
earnings per share 77,470 83,864 76,970 81,686
Additional dilutive effect of
outstanding stock options 2 1 36 129
---------- --------- --------- ---------
Weighted average number of shares, as
adjusted, for calculation of fully
diluted earnings per share 77,472 83,865 77,006 81,815
========= ========= ========= =========
Primary and fully diluted earnings per share 1
Net income $ 2.73 $ 2.38 $ 5.40 $ 4.60
========= ========= ========= =========
------------------------------------------------------------------------------------------------------------------------------
1 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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT (12)
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES First Interstate Bancorp
-----------------------------------------------------------------------------------------
Six Months Ended
(dollar amounts in millions) June 30, 1995
-----------------------------------------------------------------------------------------
<S> <C>
A. First Interstate Bancorp and Subsidiaries (Consolidated):
Earnings:
1.Income before income taxes $ 710
2.Plus interest expense (a) 620
------
3.Earnings including interest on deposits 1,330
4.Less interest on deposits 470
------
5.Earnings excluding interest on deposits $ 860
======
Fixed Charges:
6.Including interest on deposits (Line 2) $ 620
7.Less interest on deposits (Line 4) 470
------
8.Excluding interest on deposits $ 150
======
Ratio of Earnings to Fixed Charges:
Including interest on deposits
(Line 3 divided by Line 6) 2.15
======
Excluding interest on deposits
(Line 5 divided by Line 8) 5.73
======
B. First Interstate Bancorp (Parent Corporation):
Earnings:
9.Income before income taxes and equity in
undistributed income of subsidiaries $ 183
10. Plus interest expense (a) 57
------
11. Earnings including interest expense $ 240
======
Fixed Charges:
12. Interest expense (Line 10) $ 57
=======
Ratio of Earnings to Fixed Charges:
(Line 11 divided by Line 12) 4.20
=======
-----------------------------------------------------------------------------------------
(a) Includes amounts representing the estimated
interest component of net rental payments.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY 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> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> APR-01-1995 JAN-01-1995
<PERIOD-END> JUN-30-1995 JUN-30-1995
<CASH> 5,898 5,898
<INT-BEARING-DEPOSITS> 27 27
<FED-FUNDS-SOLD> 268 268
<TRADING-ASSETS> 114 114
<INVESTMENTS-HELD-FOR-SALE> 107 107
<INVESTMENTS-CARRYING> 10,802 10,802
<INVESTMENTS-MARKET> 10,726 10,726
<LOANS> 35,904 35,904
<ALLOWANCE> 878 878
<TOTAL-ASSETS> 55,952 55,952
<DEPOSITS> 48,455 48,455
<SHORT-TERM> 1,328 1,328
<LIABILITIES-OTHER> 797 797
<LONG-TERM> 1,446 1,446
<COMMON> 169 169
0 0
350 350
<OTHER-SE> 3,350 3,350
<TOTAL-LIABILITIES-AND-EQUITY> 55,952 55,952
<INTEREST-LOAN> 780 1,510
<INTEREST-INVEST> 161 345
<INTEREST-OTHER> 4 4
<INTEREST-TOTAL> 945 1,867
<INTEREST-DEPOSIT> 245 470
<INTEREST-EXPENSE> 304 593
<INTEREST-INCOME-NET> 641 1,273
<LOAN-LOSSES> 0 0
<SECURITIES-GAINS> 4 4
<EXPENSE-OTHER> 554 1,106
<INCOME-PRETAX> 362 710
<INCOME-PRE-EXTRAORDINARY> 220 432
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 220 432
<EPS-PRIMARY> 2.73 5.40
<EPS-DILUTED> 2.73 5.40
<YIELD-ACTUAL> 5.45 5.39
<LOANS-NON> 180 180
<LOANS-PAST> 72 72
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 921 934
<CHARGE-OFFS> 74 152
<RECOVERIES> 31 73
<ALLOWANCE-CLOSE> 878 878
<ALLOWANCE-DOMESTIC> 382 382
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 496 496
</TABLE>
