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, 1995
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 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 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 29, 1996
Common Stock, $2 par value $12,503,562,047
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 29, 1996
Common stock, $2 par value 76,532,897 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the year ended
December 31, 1995 are incorporated by reference into Part II and IV.
First Interstate Bancorp
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,
1995, it owned directly and indirectly all of the shares of
capital stock of 17 banks (the "Subsidiary Banks") which operated
approximately 1,140 banking offices in 13 states. Ranked
according to assets, the Corporation was the fifteenth largest
commercial banking organization in the United States at December
31, 1995, having total deposits of $50.2 billion and total assets
of $58.1 billion. During December 1995, the average number of
full-time equivalent persons employed by the Corporation and its
subsidiaries was 27,200.
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
("FDIC"), all but four 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.
During 1995, 1994 and 1993, the Corporation, through its
subsidiaries, was party to thirteen business combinations with
operating entities resulting in the acquisition of $9.0 billion
in assets and $7.7 billion in deposits. In addition, during 1995,
1994 and 1993, the Corporation, through its subsidiaries,
completed six cash transactions resulting in the acquisition of
deposits totaling $187 million, $315 million and $443 million,
respectively. The Corporation paid premiums of $8 million in
1995, $26 million in 1994 and $13 million in 1993 for these
deposits, which were acquired from the Resolution Trust
Corporation and the Federal Deposit Insurance Corporation.
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 17 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, 1995, the Corporation's Tier 1
Capital and Total Capital ratios were 7.61% and 10.52%,
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, 1995 the Corporation's leverage
ratio was 6.28%, and all of the Subsidiary Banks had leverage
ratios exceeding 5.00%.
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,
1995, 1,267 premises in 13 western states, which consisted
primarily of bank buildings. On that date, 617 premises were
owned, 543 premises were leased, and the remaining 107 premises
were owned in part and leased in part. In addition, the
Subsidiary Banks have 1,796 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, 1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a) $2 par value Common Stock
The below listed information contained in the Annual Report to
Shareholders for the year ended December 31, 1995, with respect
to the Corporation's $2 par value Common Stock is incorporated
herein by reference:
Page
----
Principal United States Market Inside back-cover
Sales Prices 32
Dividends Paid 32
As of February 29, 1996, there were 23,486 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, 1995 are
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's Discussion & Analysis 1993 - 1995 on pages 10
through 33 of the Annual Report to Shareholders for the year
ended December 31, 1995 is incorporated herein by reference.
Subsequent Events:
On January 24, 1996, the Corporation and Wells Fargo & Company
(Wells Fargo) announced that they had reached a definitive
agreement to merge the two companies, with Wells Fargo as the
surviving corporation in the merger. Under the terms of the
merger agreement, the Corporation's stockholders will receive a
tax-free exchange of two-thirds of a share of Wells Fargo Common
Stock for each share of the Corporation's Common Stock. Based on
Wells Fargo's closing price of $217.25 on January 19, 1996, the
last trading day before January 21, 1996, the day on which the
Corporation and Wells Fargo reached agreement on the Exchange
Ratio to be included in the merger agreement, this exchange ratio
represents a price of $144.83 for each share of the Corporation's
Common Stock. The combined board of directors will consist of the
existing members of Wells Fargo's board and seven directors from
the Corporation's board.
The stockholders of Wells Fargo and the Corporation, at their
respective special meetings of stockholders on March 28, 1996,
approved the merger agreement and the transactions contemplated
thereby. The effective time of the merger is expected to be 12:01
a.m. on April 1, 1996.
Concurrent with its entering into the merger agreement with Wells
Fargo, the Corporation terminated its November 5, 1995 merger
agreement with First Bank System, Inc. An overall settlement
agreement was entered into among the Corporation, First Bank
System and Wells Fargo. Under the terms of the settlement
agreement, the Corporation agreed to pay First Bank System a
termination fee of $125 million and an additional termination fee
of $75 million upon closing of its merger with Wells Fargo. These
payments are being made in full satisfaction of the Corporation's
obligations under the stock option and fee agreements entered
into as part of its November 5, 1995 merger agreement with First
Bank System. In addition, all litigation among the parties
related to efforts to merge with the Corporation has been
settled.
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, 1995 are incorporated herein by reference:
Consolidated Financial Statements of First Interstate Bancorp and
Subsidiaries:
Consolidated Balance Sheet
- December 31, 1995 and 1994
Consolidated Statement of Operations
- Years Ended December 31, 1995, 1994 and 1993
Consolidated Statement of Cash Flows
- Years Ended December 31, 1995, 1994 and 1993
Statement of Shareholders' Equity
- Years Ended December 31, 1995, 1994 and 1993
Notes to Consolidated 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, 1995 is incorporated
herein by reference.
The below listed financial data contained in the Annual Report to
Shareholders for the year ended December 31, 1995 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 11
Investment Portfolio:
Investment types 41
Maturities and yields 15-16
Investment concentrations 25
Loan Portfolio:
Loan types 42-43
Maturities and sensitivity 14-15
Risk Elements:
Nonaccrual, past due and restructured loans 29-30
Potential problem loans 29-30
Foreign outstandings 27
Loan concentrations 26
Summary of Credit Loss Experience:
Credit loss experience 27-28
Allocation of allowance 28
Deposits:
Average deposits 58-59
Maturities of time certificates of deposit 18
Return on Equity and Assets 55
Short Term Borrowings 43
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
(a) Identification of directors
Shown below are names and ages of all directors with indication
of all positions and offices with the Corporation. Directors are
elected to serve until the succeeding Annual Meeting of
Stockholders. All of the directors, with the exception of Harold
M. Messmer, Jr., were elected to their respective terms of office
at the last Annual Meeting of Stockholders. There were no
arrangements or understandings between any director and any other
person pursuant to which such director was selected as a director
of the Corporation.
Director
Name Age Current Office or Title Since
- ----------------------------------------------------------------------
John E. Bryson 52 Director 1991
Edward M. Carson 66 Director 1985
Dr. Jewel Plummer Cobb 72 Director 1985
Ralph P. Davidson 68 Director 1987
Myron Du Bain 72 Director 1983
Don C. Frisbee 72 Director 1985
George M. Keller 72 Director 1974
Thomas L. Lee 53 Director 1993
Harold M. Messmer, Jr. 50 Director October 1995
Dr. William F. Miller 70 Director 1980
Dr. Steven B. Sample 55 Director 1991
Forrest N. Shumway 69 Director 1982
Richard J. Stegemeier 67 Director 1989
Daniel M. Tellep 64 Director 1991
William E. B. Siart 49 Director, Chairman of 1990
the Board and Chief
Executive Officer
William S. Randall 55 Director and President April 1995
(b) Identification of executive officers
Shown below are names and ages of all executive officers with
indication of all positions and offices with the Corporation.
There were no arrangements or understandings between any
executive officer and any other person pursuant to which such
executive officer was selected as an executive officer of the
Corporation.
Name Age Office or Title
- -------------------------------------------------------------------------
William E. B. Siart 49 Director, Chairman of the Board and
Chief Executive Officer
William S. Randall 55 Director and President
Bruce G. Willison 47 Vice Chairman - Manager, Corporate/
Commercial Banking and Institutional
and Corporate Trust/Trust Operations,
and Chairman, President and Chief
Executive Officer, First Interstate
Bank of California
Linnet F. Deily 50 Chief Executive Officer - Manager,
Retail Banking and Personal Trust
and Private Client Services, and
Chairman, President and Chief
Executive Officer, First Interstate
Bank of Texas, N.A.
David S. Belles 58 Executive Vice President and Controller
William J. Bogaard 57 Executive Vice President and
General Counsel
Theodore F. Craver, Jr. 44 Executive Vice President and Treasurer
Daniel R. Eitingon 50 Executive Vice President - Technology
Banking
Lillian R. Gorman 42 Executive Vice President -
Human Resources
Robert E. Greene 54 Executive Vice President and
Chief Credit Officer
Steven L. Scheid 42 Executive Vice President - Principal
Financial Officer
Richard W. Tappey 55 Executive Vice President - Banking
Services
(c) Family relationships
There is no family relationship between any director or executive
officer of the Corporation.
(d) Business experience
The following section briefly describes the business experience
for at least the past five years for each director and executive
officer.
John E. Bryson, Chairman of the Board and Chief Executive
Officer, Edison International (formerly SCEcorp) and Southern
California Edison Company. Mr. Bryson joined Southern California
Edison Company in 1984. In 1990, he was elected Chairman of the
Board and Chief Executive Officer of SCEcorp and Southern
California Edison Company. Immediately prior to joining Southern
California Edison in 1984, Mr. Bryson was a partner in the law
firm of Morrison & Foerster. He served as President of the
California Public Utilities Commission from 1979 through 1982.
Mr. Bryson is also a Director of The Times Mirror Company and The
Boeing Company, and is a Trustee of Stanford University. He
serves as Chairman of the California Business Roundtable.
Edward M. Carson, Chairman of the Board and Chief Executive
Officer, Retired, First Interstate Bancorp. Mr. Carson served as
Chairman of the Board of First Interstate Bancorp from June 1990
to May 1995 and as Chief Executive Officer from June 1990 through
December 1994. Prior to that time he was President of First
Interstate Bancorp from February 1985 to May 1990, and President
and Chief Executive Officer of First Interstate Bank of Arizona,
N.A., from October 1977 to January 1985. Mr. Carson is also a
Director of Terra Industries Inc., Aztar Corporation, Automobile
Club of Southern California and Castle & Cooke.
Dr. Jewel Plummer Cobb, President Emerita, California State
University, Fullerton and Trustee Professor of California State
University, Los Angeles. Dr. Cobb has taught at a number of
colleges and universities, including Connecticut College and
Rutgers University's Douglass College. In October 1981, she
became President of California State University, Fullerton. Dr.
Cobb retired as President in August 1990, and is a Trustee
Professor of California State University. Dr. Cobb is also a
Director of Georgia-Pacific Corporation. In addition, she serves
as a member of the National Institute of Medicine of the National
Academy of Sciences, a Fellow of the New York Academy of
Sciences, a Trustee of the California Institute of Technology,
and a member of the Board of Drew University of Medicine and
Science.
Ralph P. Davidson, Former Chairman, The John F. Kennedy Center
for the Performing Arts. Mr. Davidson joined Time Inc. in 1954,
and after several European assignments, he became a Vice
President of Time Inc. and was named Publisher of TIME in 1972.
In 1980 Mr. Davidson was elected a Director of Time Inc. and
became Chairman of the Board later that year. He served as
Chairman until September 1986, when he became Chairman of the
Executive Committee of Time's Board of Directors. Mr. Davidson
retired from Time Inc. in December 1987. He became President of
The John F. Kennedy Center for the Performing Arts in November
1987 and served as Chairman from August 1988 to May 1990. Mr.
Davidson is also a Director of Kelley Oil Corp., and is Trustee
of The John F. Kennedy Center for the Performing Arts. He serves
as a Director of the Phoenix House, a drug rehabilitation center,
and as Chairman of People's House, a charitable organization in
Washington, D.C.
Myron Du Bain, Chairman and Chief Executive Officer, Retired,
Fireman's Fund Corporation. Mr. Du Bain was Chairman of the Board
of SRI International from December 1985 to December 1989, and was
President and Chief Executive Officer of Amfac, Inc. from 1983 to
September 1985. Prior to that time Mr. Du Bain was Chairman of
the Board, President and Chief Executive Officer of Fireman's
Fund Insurance Companies from 1975 to 1981 and Chairman and Chief
Executive Officer of Fireman's Fund Corporation from 1981 to
1982. Mr. Du Bain is also a Director of Scios Nova Inc.,
Transamerica Corporation and SRI International. He serves as
Chairman of the Board of the James Irvine Foundation and is a
Director of the San Francisco Opera Association.
Don C. Frisbee, Chairman Emeritus, PacifiCorp (public utility).
Mr. Frisbee served as Chairman and Chief Executive Officer of
PacifiCorp from December 1972 until January 1, 1989, when he
retired as Chief Executive Officer. He retired as Chairman and
Director on February 9, 1994. He is also a Director of Standard
Insurance Company and Weyerhaeuser Company. Mr. Frisbee serves
as the Chairman of the Board of Trustees of Reed College.
George M. Keller, Chairman of the Board and Chief Executive
Officer, Retired, Chevron Corporation (Petroleum products). Mr.
Keller joined Chevron in 1948 and was elected a Director in 1970,
Vice Chairman in 1974 and Chairman in May 1981. He retired from
Chevron on January 1, 1989. Mr. Keller served as Chairman of the
Board of SRI International from January 1990 until December 1993,
and continues to serve as a Director. He is also a Director of
The Boeing Company, McKesson Corporation, Metropolitan Life
Insurance Company and The Chronicle Publishing Company.
Thomas L. Lee, Chairman and Chief Executive Officer, The Newhall
Land and Farming Company (planned community development and
agriculture). Mr. Lee has been Chairman and Chief Executive
Officer of The Newhall Land and Farming Company since 1989. He
joined Newhall Land in 1970, serving in various positions with
residential, commercial and industrial real estate operations
while developing the new town of Valencia, California. From 1985
to 1987 he was President and Chief Executive Officer, and he
served as President and Chief Executive Officer from 1987 until
elected to his present position in 1989. Mr. Lee is also a
Director of CalMat Co. He is a Director of the Los Angeles Area
Chamber of Commerce and served as its Chairman in 1994. He also
is a Member of the California Business Roundtable and the Urban
Land Institute and serves as a Trustee of the California
Institute of the Arts.
Harold M. Messmer, Jr., Chairman and Chief Executive Officer,
Robert Half International Inc. Mr. Messmer is currently Chairman
and Chief Executive Officer of Robert Half International Inc.,
which he joined in 1986. Prior to joining Robert Half
International, Mr. Messmer was president of Pacific Holding
Corporation, a diversified company with operations in
agribusiness, textiles and other product areas and also served as
president and then chief executive officer of Pacific Holding's
largest subsidiary, Cannon Mills Company, from 1982 to 1985. He
is also a Director of Airborne Freight Corporation, Pacific
Enterprises and its subsidiary, Southern California Gas Company,
and Spieker Properties, Inc.
Dr. William F. Miller, Professor of Public and Private
Management, Stanford University, President Emeritus, SRI
International (Research institute). Dr. Miller retired as
President and Chief Executive Officer of SRI International in
December 1990. Prior to joining SRI International in September
1979, he served as Vice President and Provost of Stanford
University from 1971 to 1979. Dr. Miller is now Professor of
Public and Private Management in the Graduate School of Business
of Stanford University. He serves as Chairman of the Board of
Borland International, Inc. He is also a Director of Pacific Gas
& Electric Co., Varian Associates, Inc., and Scios Nova Inc. Dr.
Miller also serves as Vice Chairman of the Board of Smart Valley,
Inc. and Chairman of the Board of the Management Institute for
the Environment and Business. He is a Director for the Center
for Excellence in Non-profits and the Joint Venture Silicon
Valley Network.
Dr. Steven B. Sample, President, University of Southern
California. Prior to joining the University of Southern
California in 1991 as President, Dr. Sample spent nine years as
President of the State University of New York at Buffalo. He has
taught electrical engineering at several universities, and holds
a number of patents. Dr. Sample is also a Director of the
Regenstrief Institute, the Presley Companies, Western Atlas
Corp., Rebuild L.A. and Los Angeles Annenberg Metropolitan
Project.
Forrest N. Shumway, Former Vice Chairman and Chairman of the
Executive Committee, Allied Signal Inc. (multi-industry company).
Mr. Shumway formerly was Vice Chairman and Chairman of the
Executive Committee of Allied Signal Inc. Prior to the
combination of Allied Corporation and The Signal Companies, Inc.
in 1985, he was President, Chairman of the Board and Chief
Executive Officer of The Signal Companies for 20 years. Mr.
Shumway is also a Director of Aluminum Company of America,
American President Companies, Ltd., The Clorox Company and
Transamerica Corporation.
Richard J. Stegemeier, Chairman Emeritus, Unocal Corporation
(energy resources). Mr. Stegemeier served as Chairman of Unocal
Corporation from April 1989 to May 1995, and was Chief Executive
Officer from July 1988 through April 1994; he was also President
from July 1988 through May 1992. From December 1985 through June
1988, he was president and Chief Operating Officer, and prior to
that time, he served as Senior Vice President. Mr. Stegemeier is
also a Director of Outboard Marine Corporation, Foundation Health
Corporation, Northrop Grumman Corporation and Halliburton
Company.
Daniel M. Tellep, Chairman of the Board, Officer Lockheed Martin
Corporation (aerospace). Mr. Tellep joined Lockheed in 1955 and
served as President of Lockheed Missiles & Space Company, Inc. a
wholly-owned subsidiary of Lockheed, from 1984 to 1988. He also
served as Group President-Missiles and Space Systems from 1986 to
1988. From August 1988 to December 1988, Mr. Tellep served as
President of Lockheed Corporation, and was elected Chairman of
the Board and Chief Executive Officer on January 1, 1989. He has
held the sole title of Chairman of the Board since January 1996.
He is also a Director of Edison International and Southern
California Edison Company.
William E.B. Siart, Chairman of the Board and Chief Executive
Officer, First Interstate Bancorp. Mr. Siart was elected Chief
Executive Officer effective January 1, 1995 and Chairman of the
Board of Directors effective May 1, 1995. He served as President
of First Interstate Bancorp from June 1, 1990 until May 1, 1995.
He was Chairman, President and Chief Executive Officer of First
Interstate Bank of California from December 1985 to January 1991.
William S. Randall, President, First Interstate Bancorp. Mr.
Randall was elected President of First Interstate Bancorp
effective May 1, 1995 and Chief Operating Officer from January 1,
1995 until his election as President. 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, between July 1985 and January 1990.
Bruce G. Willison was elected Vice Chairman of the corporation
effective May 1, 1995 . He 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.
Linnet F. Deily was appointed Manager, Retail Banking and
Personal Trust and Private Client Services in January 1996. She
was appointed Chief Executive Officer of the Texas Region in
September 1991 and elected Chairman of First Interstate Bank of
Texas in November 1991. She was elected President and Chief
Executive Officer of First Interstate Bank of Texas on January
1, 1991, having served as President and Chief Operating Officer
since November 1988.
David S. 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.
William J. Bogaard was elected Executive Vice President and
General Counsel in September 1982.
Theodore F. Craver, Jr., 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.
Daniel R. Eitingon was elected Executive Vice President in 1989
and currently heads the Technology Banking Group. Prior to his
current position he was Executive Vice President and head of
California Retail Banking. He joined First Interstate Bank in
1986 as Project Manager of Branch of the Future.
Lillian R. 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.
Robert E. Greene was elected Executive Vice President and Chief
Credit Officer in October 1987.
Steven L. Scheid was elected Executive Vice President, Financial
Planning and Analysis, in May 1994 and is currently responsible
for the Finance function for the Corporation; he was appointed
Principal Financial Officer in January 1996. He was first elected
an Executive Vice President of the Corporation in October 1994.
From 1990 to 1994 he was Executive Vice President and Chief
Financial Officer of First Interstate Bank of Texas.
Richard W. 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.
ITEM 11. EXECUTIVE COMPENSATION
(a) Summary of cash and certain other compensation
The following table sets forth the compensation for the Chief
Executive Officer of the Corporation and the four most highly
compensated executive officers of the Corporation (other than the
Chief Executive Officer) who served as executive officers on
December 31, 1995:
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term Compensation
-------------------------------------
Awards Payouts
----------------------- ------------
Securities
Restricted Underlying
Annual Compensation Other Annual Stock Options/ All Other
Name and Principal ---------------------------- Compensation Awards SARs LTIP Compensation
Position Year Salary ($)(1) Bonus ($)(2) ($)(3) ($) (#)(4) Payouts ($) ($)(5)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William E.B. Siart 1995 $ 720,000 $ 1,296,000 -- -- 45,000 -- $ 23,364
Chairman of the 1994 629,500 930,000 -- -- 30,000 -- 19,638
Board (6) 1993 645,358 836,000 -- -- 45,000 -- 18,556
William S. Randall 1995 520,008 715,011 -- -- 30,000 -- 18,735
President (7) 1994 440,852 498,400 -- -- 17,000 -- 14,530
1993 453,833 453,000 -- -- 20,000 -- 22,839
Bruce G. Willison 1995 450,000 495,000 -- -- 16,000 -- 14,608
Vice Chairman (8) 1994 430,833 513,300 -- -- 17,000 -- 11,420
1993 405,833 455,000 -- -- 20,000 -- 25,057
James J. Curran 1995 395,004 430,554 -- -- 16,000 -- 14,637
Manager, Corporate 1994 375,004 444,600 -- -- 17,000 -- 12,877
Commercial Banking 1993 374,200 395,000 -- -- 20,000 -- 11,383
and Institutional and
Corporate Trust/
Trust Operations (9)
Linnet F. Deily 1995 360,000 439,200 -- -- 16,000 -- 11,545
Manager, Retail 1994 345,000 429,525 -- -- 17,000 -- 10,931
Banking and 1993 300,000 300,000 -- -- 20,000 -- 12,501
Personal Trust and
Private Client
Services (10)
</TABLE>
(1) Included in this column are the salaries and directors' fees
paid for services rendered to the Corporation's subsidiaries
before any salary reduction for contributions to the
Corporation's Employee Savings Plan under section 401 (k) of the
Internal Revenue Code of 1986, as amended (the "Code"), and
salary reductions for contributions for welfare plan coverage
under section 125 of the Code.
(2) The bonus amounts are payable pursuant to the Corporation's
Executive Incentive Plan, Regional Executive Incentive Plan and
1991 Performance Stock Plan, as applicable. This column reflects
amounts awarded, even if deferred.
(3) Amounts which total the lesser of $50,000 or 10% of the
total annual salary and bonus for the named executive officer
have been omitted.
(4) No tandem Stock Appreciation Rights ("SARs") have been
granted since 1991, and no freestanding SARs have ever been
granted.
(5) The total amounts shown in this column for 1995 consist of
the following: (i) Mr. Siart, $21,600 for matching Corporation
contributions under the Employee Savings Plan and Supplemental
Savings Plan; $1,492 for the benefit attributable to payments of
premiums on universal life insurance; and a tax gross-up amount
of $272 relating to brokerage fees on stock option exercises;
(ii) Mr. Randall, $15,600 for matching Corporation contributions
under the Employee Savings Plan and Supplemental Savings Plan;
$2,090 for the benefit attributable to payments of premiums on
universal life insurance; and a tax gross-up amount of $1,045
relating to brokerage fees on stock option exercises; (iii) Mr.
Willison, $13,425 for matching Corporation contributions under
the Employee Savings Plan and Supplemental Savings Plan; $819 for
the benefit attributable to payments of premiums on universal
life insurance; and a tax gross-up amount of $364 relating to
brokerage fees on stock option exercises; (iv) Mr. Curran,
$11,775 for matching Corporation contributions under the Employee
Savings Plan and Supplemental Savings Plan; $2,747 for the
benefit attributable to payments of premiums on universal life
insurance; and a tax gross-up amount of $115 relating to
brokerage fees on stock option exercises; and (v) Mrs. Deily,
$10,725 for matching Corporation contributions under the Employee
Savings Plan and Supplemental Savings Plan; and $820 for the
benefit attributable to payments of premiums on universal life
insurance. The Corporation has purchased universal life insurance
policies on the lives of the named executives, who have no
immediate right to receive the cash surrender value of the
policies and may never have any right to receive the cash
surrender value. If, and only if, certain conditions are met,
will the executive become vested in the cash surrender value. An
executive's benefits under various deferred compensation plans
will be reduced dollar for dollar by the amount of the cash
surrender value of the policy at the time it vests. The premiums
paid on the policies are designed to produce a cash surrender
value which is less than the accrued benefits under the various
plans.
(6) Mr. Siart was named as Chief Executive Officer of the
Corporation on January 1, 1995, and was elected Chairman of the
Board of Directors on May 1, 1995.
(7) Mr. Randall became Chief Operating Officer of the
Corporation on January 1, 1995 and was named President of the
Corporation on May 1, 1995. He was Chief Executive Officer,
Southwest Region, through December 31, 1994, and also served as
Chairman of the Board, President and Chief Executive Officer of
First Interstate Bank of Arizona through December 31, 1994.
(8) Mr. Willison also serves as Chairman, President and Chief
Executive Officer of First Interstate Bank of California.
(9) Mr. Curran's position includes serving as Chairman,
President and Chief Executive Officer of First Interstate Bank of
Oregon, and Chief Executive Officer and President of First
Interstate Banks of Idaho, Montana, and Washington.
(10) Mrs. Deily's position includes serving as Chairman,
President and Chief Executive Officer of First Interstate Bank of
Texas.
(b) Option/SAR Grants Table
The following tables summarize grants of options and exercises of
options to purchase Common Stock during 1995 to or by the
executive officers of the Corporation named in the Summary
Compensation Table above, and the grant date present value of
options held by such persons at the end of 1995. All outstanding
SARs were surrendered by the executive Officers of the
Corporation in 1993, and no SARs were granted during 1995.
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year (1995)
Number of % of Total
Securities Options/SARs Exercise or
Underlying Granted to Base Price Grant Date
Options/Sars Employees in Per Share Expiration Present Value
Name Granted (#)(1) Fiscal Year ($/Share) Date (2)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
William E.B. Siart 45,000 5.1% $ 80.375 2/14/05 $ 706,950
William S. Randall 30,000 3.4 80.375 2/14/05 471,300
Bruce G. Willison 16,000 1.8 80.375 2/14/05 251,360
James J. Curran 16,000 1.8 80.375 2/14/05 251,360
Linnet F. Deily 16,000 1.8 80.375 2/14/05 251,360
</TABLE>
(1) Options were granted under the 1991 Performance Stock Plan,
which provides for the granting of options at an option exercise
price of 100% of the fair market value of the stock on the date
of grant. Options granted in 1995 were exercisable beginning 12
months after the grant date, with 25% of the shares covered
thereby becoming exercisable at that time and with an additional
25% of the option shares becoming exercisable on each successive
anniversary date, with full vesting occurring on the fourth
anniversary date. The Plan provides that in the event of a change
in control of the Corporation, stock options become immediately
exercisable to their full extent. The approval of the merger
agreement between the Corporation and Wells Fargo & Company by
the stockholders of the Corporation on March 28, 1996,
constituted a change in control, and each stock option became
immediately exercisable.
(2) Present market value determinations were made using the
Black-Scholes options pricing model. There is no assurance that
any value realized by optionees will be at or near the value
estimated by that model. The ultimate values of the options will
depend on the future market price of the Common Stock, which can
not be forecast with reasonable accuracy. The actual value, if
any, an optionee will realize upon exercise of an option will
depend upon the excess, if any, of the market value of the Common
Stock on the date the option is exercised over the exercise price
of the option. The assumptions and calculations used for the
model were provided to the Corporation by an independent
consulting firm. The estimated grant date present value under the
Black-Scholes model is based on the following assumptions and
adjustments: an exercise price of $80.375 per share, equal to the
fair market value of the underlying stock on the date of grant;
dividends at the rate of $3.00 per share, representing the
annualized dividends paid on a share of Common Stock at the date
of grant; a stock price volatility of 23.453%, calculated using
daily stock prices for the one-year period prior to the grant
date; an option term of 10 years; an interest rate of 7.47%,
representing the interest rate on a U.S. Treasury security on
the date of grant with a maturity date corresponding to that of
the option term; and reductions of approximately 21.70% to
reflect the probability of a shortened option term due to
termination of employment prior to the option expiration date.
(c) Aggregated Option/SAR exercises and fiscal year-end
option/SAR value table
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year (1995)
and Fiscal Year-End Option/SAR Values
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options/SARs In-the-Money Options/SARs
Acquired Value at Fiscal Year-End (#)(3) at Fiscal Year-End ($)(4)
on Exercise Realized -------------------------- --------------------------
Name (#)(1) ($)(2) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William E.B. Siart 4,000 $ 132,000 164,750 101,250 $15,622,531 $7,153,594
William S. Randall 75,815 6,157,336 15,435 52,750 1,230,164 3,499,594
Bruce G. Willison 13,500 1,193,750 77,750 43,750 7,241,781 3,146,344
James J. Curran 19,000 2,027,500 45,750 43,250 4,242,719 3,096,781
Linnet F. Deily 600 16,275 68,250 42,750 6,472,281 3,047,219
</TABLE>
(1) No tandem SARs have been granted since 1991, and no
freestanding SARs have ever been granted. All unexercised SARs
were surrendered in 1993.
(2) Value is based upon the difference between the market value
at the date of exercise and the exercise price.
(3) In the event of a change in control of the Corporation,
stock options become immediately exercisable to their full
extent. The approval of the merger agreement between the
Corporation and Wells Fargo & Company by the stockholders of the
Corporation on March 28, 1996, constituted a change in control,
and each stock option became immediately excercisable.
(4) Value is based upon the difference between the market value
at the end of 1995 and the exercise price.
(d) Pension plans
The following table indicates the estimated annual benefit
payable to a covered participant at normal retirement age under
The Retirement Plan for Employees of First Interstate Bancorp and
its Affiliates ("Retirement Plan") based on covered compensation
and years of service with the Corporation and its subsidiaries.
The table includes benefits under the Corporation's Excess
Benefit Retirement Plan ("Excess Plan") and Supplemental
Executive Retirement Plan ("SERP"), both of which are unfunded.
The Excess Plan provides benefits that would otherwise be denied
a participant by reason of certain Internal Revenue Code
limitations on the Retirement Plan. The SERP covers a select
group of management who have attained age 55 and supplements the
basic Retirement Plan by including bonuses in the definition of
covered compensation.
Pension Plan Table
Years of Service (1)
-------------------------------------------------------
Remuneration 15 Years 20 Years 25 Years 30 Years 35 Years
- --------------------------------------------------------------------
$ 300,000 83,555 111,407 139,259 167,111 194,963
400,000 112,055 149,407 186,759 224,111 261,463
500,000 140,555 187,407 234,259 281,111 327,963
600,000 169,055 225,407 281,759 338,111 394,463
700,000 197,555 263,407 329,259 395,111 460,963
800,000 226,055 301,407 376,759 452,111 527,463
900,000 254,555 339,407 424,259 509,111 593,963
1,000,000 283,055 377,407 471,759 566,111 660,463
1,100,000 311,555 415,407 519,259 623,111 726,963
1,200,000 340,055 453,407 566,759 680,111 793,463
1,300,000 368,555 491,407 614,259 737,111 859,963
1,400,000 397,055 529,407 661,759 794,111 926,463
(1) The maximum number of years of service that may be credited
under the pension plans is 35.
The compensation covered by the pension plans for the individuals
named in the Summary Compensation Table includes basic monthly
salary or wage rate and certain bonuses described in the Summary
Compensation Table and excludes director's fees, amounts paid for
life insurance premiums, matching amounts under the Corporation's
Employee Savings Plan and imputed income. The remuneration of a
participant is an average of the compensation (as stated in the
Summary Compensation Table) covered by such plans for the five of
the last ten calendar years of the participant's employment with
the Corporation for which such average is highest. The
remuneration covered by the pension plans for Mr. Siart is
$598,000; Mr. Randall, $833,686: Mr. Willison, $406,000; Mr.
Curran, $633,799; and Mrs. Deily, $313,000. The credited service
in full years for Mr. Siart is 17 years; Mr. Randall, 26 years;
Mr. Willison, 16 years; Mr. Curran, 18 years; and Mrs. Deily, 14
years. The benefits shown in the table are computed on a single-
life annuity basis are not reduced or adjusted for receipt of
Social Security benefits or other offset amounts.
(e) Compensation of directors
Directors who are salaried officers of the Corporation receive no
fees as directors of the Corporation. All other directors are
paid an annual retainer for Board service of $20,000, an
additional $6,000 which is deferred in stock units, and an
attendance fee of $1,300 and $1,000 for each Board and committee
meeting attended, respectively. Directors are also reimbursed for
any expenses incurred in connection with attendance at regular or
special meeting of the Board or any of its committees. The
Chairman of the standing committees are paid an additional $5,000
annual retainer. The Corporation has a standard arrangement
pursuant to which directors may elect to defer all or part of
their directors' fees into either cash or stock units. During
1995 Messrs. Bryson, Du Bain, Keller and Dr. Sample deferred the
annual retainer and all attendance fees.
The Corporation adopted the First Interstate Bancorp Retirement
Plan for Directors, effective January 1, 1988, to provide
retirement benefits to eligible directors who have not served as
directors while being employed by the Corporation or any of its
subsidiaries, and who retire from Board service with at least
five years of service as a director. Each eligible director is
entitled to an annual retirement benefit equal to the annual
retainer for directors as in effect at the time of the eligible
director's resignation or retirement, or the director may elect,
not less than one year prior to retirement, to receive a lump sum
payment upon retirement. Upon attainment of the later of age 65
or retirement, an eligible director will receive one year of
retirement payments for each year of service as an outside
director, with a maximum payment period of 20 years and with
certain spousal rights in the event of death.
The First Interstate 1991 Director Option Plan ("Director Plan")
was authorized by the Board of Directors on October 15, 1990, and
approved by the Corporation's stockholders on April 19, 1991. A
total of 200,000 shares of Common Stock has been reserved for
issuance under the Director Plan, which provides for the non-
discretionary granting of non-qualified options to purchase
Common Stock to directors who have not served as directors while
being employed by the Corporation or any of its subsidiaries.
Each option grant is excercisable in its entirety one year from
its date of grant. The Director Plan is designed to operate
automatically and not require administration. To the extent that
administration is necessary, the Director Plan is administered by
the Compensation Committee of the Board of Directors. The
purchase price of the Common Stock covered by each option is 100%
of the fair market value of the stock on the date of the option
grant. The options are generally non-transferable. Each option
has a termination date, but in any event, all options granted
under the Director Plan terminate upon the first to occur of the
following events: (i) the expiration of ten years from the date
the option is granted; (ii) the expiration of three months from
the date an optionee ceases to serve as a director for any reason
other than death, disability or retirement eligibility; (iii)
the expiration of one year from the date an optionee ceases to
serve as a director of the Corporation because of disability or
death; (iv) the expiration of three years from the date an
optionee ceases to serve as a director of the Corporation if the
director is eligible for retirement benefits under the First
Interstate Bancorp Retirement Plan for Directors; or (v) the
termination of the Director Plan pursuant to its terms. Upon
first being elected, each eligible director is awarded an option
to purchase 5,000 shares of Common Stock. Thereafter, on the
first business day following each annual stockholders meeting of
the Corporation, each eligible director is granted an option to
purchase 1,000 shares of Common Stock.
The Corporation purchased universal life insurance policies on
the lives of outside directors, except for Messrs. Lee, Messmer
and Davidson. The death benefits of the policies depend on the
length of time a director has served and do not exceed $520,000.
The Corporation will continue to pay the premium on such policies
for the period the director remains a member of the Board. The
directors have entered into "split-dollar" life insurance
agreements which provide that a director will become fully
entitled to the policy upon the occurrence of certain events,
including continuation of service to a future date and
resignation for good reason following a change in control. If a
director becomes entitled to the policy, the cash value of the
policy reduces the payment of benefits under the Directors'
Retirement Plan and deferrals of director's fees. During 1995,
the directors covered by these insurance agreements received
imputed income ranging from $60 to $3,357 and tax gross-up
amounts ranging from $118 to $6,536 relating to such imputed
income. The varying amounts were due to factors such as the
directors age and length of service.
(f) Employment agreements
In January 1995, the Corporation entered into amended and
restated employment agreements with certain of its key executives
which are designed to encourage them to remain employees of the
Corporation by providing them with greater security. Similar
agreements have been entered into between some of the
Corporation's bank subsidiaries and certain of their key
executives. Messrs. Siart, Randall, Willison and Curran and Mrs.
Deily are parties to such agreements.
Absent a change in control as defined in the agreements, the
amended and restated employment agreements are continuous and
generally may be terminated with 14 months' notice. The
agreements, as amended, provide for liquidated damages equal to
24 months' base salary in the event that the executive is
terminated for a non-allowable reason. Unless the Corporation
decides otherwise, such damages are payable at the same time and
in the same manner as if the executive had remained employed by
the Corporation.
As defined in the agreements, as amended, a change in control
occurs when any person or group becomes the beneficial owner of
the Corporation's securities having 20% or more of the combined
voting power of its then outstanding securities, when a majority
of the Corporation's Board of Directors is replaced as a result
of a contest for the election of directors, or upon the
occurrence of certain mergers, acquisitions and other events.
In the event of a change in control, the term of the agreements,
as amended, is extended to the date two years following the
change in control, and the duties of executives may not
thereafter be modified. In addition, if an executive is
terminated without cause, as defined in the agreements, after a
change in control, such person is entitled to a payment equal to
the sum of three times annual base salary and the highest bonus
awarded in respect of the three years immediately preceding the
year of a change in control, an amount equivalent to three
additional years of participation in the Corporation's retirement
plan, $30,000 to cover the cost of three years' health and
welfare benefit plan coverage, and $30,000 to cover the cost of
professional financial planning advice. A prorated portion of
any bonus that may be accelerated as a result of a change in
control will be deducted from the payment. Such a payment to an
executive is payable as a cash lump sum within ten days following
termination of employment.
(g) Compensation committee interlocks and insider participation
During 1995, the Compensation Committee of the Corporation's
Board of Directors consisted of Messrs. Keller (Chairman),
Bryson, Stegemeier and Tellep.
The Corporation instituted an executive loan program on January
14, 1991 to provide fixed rate principal residence mortgage loans
and general purpose loans at favorable rates to members of the
Managing Committee of the Corporation. All loan requests under
the executive loan program require the approval of the Chairman
or the President of the Corporation and the Compensation
Committee of the Board of Directors and are documented in
accordance with standard requirements for loans made outside the
program. Two of the individuals named in the Summary Compensation
Table had loans under the program. Mr. Siart had a principal
residence mortgage loan under the program, with a principal
balance of $863,083 at December 31, 1995, a maximum balance
during 1995 of $874,502 and an interest rate of 6.34%. Mr.
Willison obtained a general purpose loan in 1994 under the
program in the form of a floating rate instalment note in the
principal amount of $150,000. The note had a maximum balance
during 1995 and principal balance at December 31, 1995 of
$150,000 with an interest rate of 7.00%. No other executive
officers have loans under the program.
(e) Compliance with section 16(a) of the Securities and Exchange
Act of 1934
Section 16(a) of the Securities and Exchange Act of 1934 requires
the Corporation's executive officers and directors, and persons
who own more than ten percent of a registered class of the
Corporation's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission.
The Corporation believes that during 1995 it complied with all
Section 16(a) filing requirements applicable to its executive
officers, directors and greater than ten percent beneficial
owners, except for the following reports. One report on Form 4
was filed late by Mr. Bryson, who inadvertently failed to report
the purchase in 1995 of 500 shares of Common Stock by The Bryson
Trust. A Form 4 reflecting the purchase was filed by him
approximately four days after the due date. The initial Form 3
for Mr. Scheid was inadvertently filed by the Corporation on his
behalf approximately seven days after the due date. The initial
Form 3 for Mr. Wilson, Executive Vice President and Senior Credit
Review Manager, was inadvertently filed by the Corporation on his
behalf approximately two months after the due date. Mr. Wilson
ceased being subject to Section 16(a) filing requirements in
January 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) Security ownership of certain beneficial owners
The following entities are the only stockholders known to the
Corporation to be the beneficial owners of more than 5% of the
Corporation's equity securities outstanding at December 31, 1995:
Amount and
Nature of
Title of Name and Address of Beneficial Percent
Class Beneficial Owner Ownership of Class
- -------------------------------------------------------------------------
Common Oppenheimer Group, Inc. 5,847,179 (1) 7.64%
Stock Oppenheimer Tower,
World Financial Center
New York, NY 10281
Common DI Associates and KKR Associates 6,131,693 (2) 8.01%
Stock c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, NY 10019
(1) This information is based upon a Schedule 13G dated February
1, 1996 filed with the Securities and Exchange Commission ("SEC")
by Oppenheimer Group, Inc. ("Group"), as parent holding company
on behalf of Oppenheimer & Co., L.P. and Group's subsidiary
companies and/or certain investment advisory clients or
discretionary accounts of such subsidiaries. Group does not have
sole voting and dispositive power with respect to any of the
shares, and has shared voting and dispositive power as to all of
the shares. An investment advisory subsidiary, Oppenheimer
Capital, has shared voting and dispositive power as to 5,847,179
of such shares, and sole voting and dispositive power as to none
of the shares.
(2) This information is based upon a Schedule 13D dated February
3, 1993 filed with the SEC jointly by DI Associates ("DI") and
KKR Associates ("KKR"). DI and KKR have sole voting and
dispositive power as to all of the shares.
(b) Security ownership by management
The following table sets forth the number of shares of each class
of equity securities of the Corporation beneficially owned as of
December 31, 1995 by each director and executive officer named
in the Summary Compensation Table and by all directors and
executive officers as a group, with the exception of Common Stock
Option Shares which are reported as of February 23, 1996.
Beneficial ownership is defined in accordance with the rules of
the Securities and Exchange Commission and means generally the
power to vote or dispose of securities, regardless of any
economic interest.
Total Percent of
Common Common Stock Common Common
Name of Beneficial Owner (1) Stock (2) Option Shares (3) Stock Stock
- -------------------------------------------------------------------------------
John E. Bryson (4)(5) 1,140 8,500 9,640 *
Edward M. Carson (4)(6) 35,373 217,000 252,373 *
Dr. Jewel Plummer Cobb 1,776 8,514 10,290 *
James J. Curran (6)(7) 28,699 89,000 117,699 *
Ralph P. Davidson 4,000 10,000 14,000 *
Linnet F. Deily (6) 12,418 111,000 123,418 *
Myron Du Bain (4) 28,939 10,000 38,939 *
Don C. Frisbee 872 5,000 5,872 *
George M. Keller (4) 5,896 7,000 12,896 *
Thomas L. Lee 1,300 7,000 8,300 *
Harold M. Messmer, Jr. 1,000 5,000 6,000 *
Dr. William F. Miller (4) 2,310 10,000 12,310 *
William S. Randall (4)(5)(6) 48,200 68,185 116,385 *
Dr. Steven B. Sample 500 8,500 9,000 *
Forrest N. Shumway (4) 2,000 10,000 12,000 *
William E.B. Siart (6) 42,831 266,000 308,831 *
Richard J. Stegemeier (4) 5,874 3,000 8,874 *
Daniel M. Tellep 500 9,000 9,500 *
Bruce G. Willison (5)(6)(7) 31,479 121,500 152,979 *
All directors and executive
officers as a group
(30 persons)
(4)(5)(6)(7)(8)(9) 335,149 1,340,273 1,675,422 2.21%
* Represents less than 1% of the outstanding Common Stock.
(1) Subject to applicable community property and similar
statutes, the person listed as beneficial owners of shares have
sole voting and investment power with respect to such shares
except as noted.
(2) Fractional shares resulting from participation in the
Dividend Reinvestment and Stock Purchase Plan and the Employee
Savings Plan of First Interstate Bancorp have been rounded to the
nearest whole share.
(3) Reflects the number of shares that could be purchased by
exercise of options presently excercisable or excercisable within
60 days from February 23, 1996, under the Corporation's stock
option plans.
(4) Includes the following shares of Common Stock held by a
living or family trust formed by the named individual in which
voting or investment power may be shared: Mr. Bryson, 500 shares;
Mr. Carson, 34,125 shares; Mr. Du Bain, 23,839 shares; Mr.
Keller, 5,896 shares; Dr. Miller, 2,310 shares; Mr. Randall,
37,956 shares; Mr. Shumway, 2,000 shares; and Mr. Stegemeier,
5,874 shares. Also includes 4,000 shares of Common Stock held in
an Individual Retirement Account by Mr. Du Bain.
(5) Includes shares held jointly, or in other capacities, as to
which in some cases beneficial ownership may be disclaimed.
(6) Includes the following shares held by the Trustee of the
Employee Savings Plan in the accounts of Mr. Carson and the named
executive officers as of December 31, 1995:
Mr. Carson 887
Mr. Siart 17,260
Mr. Randall 10,244
Mr. Willison 5,199
Mr. Curran 13,846
Mrs. Deily 1,053
All executive officers as a group (16 persons) 61,649
(7) Includes the following performance units awarded pursuant
to the 1991, 1992, 1993 and 1994 annual incentive plans and
issued under the 1991 Performance Stock Plan (each performance
stock unit represents one share of Common Stock):
Mr. Willison 3,465
Mr. Curran 3,005
All executive officer as a group (16 persons) 12,362
The performance stock units are payable in Common Stock or cash
upon the date specified by the executive officer, or if earlier,
upon a change in control or at termination of employment.
Additional performance unit credit will be received based on the
value of dividends paid on the underlying performance stock
units.
(8) Includes 123,944 shares of Common Stock held in living or
family trusts in which voting or investment power may be shared.
(9) No directors or executive officers owned any shares of Series
F or Series G Preferred Stock of the Corporation.
(c) Changes in control
On January 24, 1996, the Corporation and Wells Fargo & Company
(Wells Fargo) announced that they had reached a definitive
agreement to merge the two companies, with Wells Fargo as the
surviving corporation in the merger. Under the terms of the
merger agreement, the Corporation's stockholders will receive a
tax-free exchange of two-thirds of a share of Wells Fargo Common
Stock for each share of the Corporation's Common Stock. Based on
Wells Fargo's closing price of $217.25 on January 19, 1996, the
last trading day before January 21, 1996, the day on which the
Corporation and Wells Fargo reached agreement on the Exchange
Ratio to be included in the merger agreement, this exchange ratio
represents a price of $144.83 for each share of the Corporation's
Common Stock. The combined board of directors will consist of the
existing members of Wells Fargo's board and seven directors from
the Corporation's board.
The stockholders of Wells Fargo and the Corporation, at their
respective special meetings of stockholders on March 28, 1996,
approved the merger agreement and the transactions contemplated
thereby. The effective time of the merger is expected to be 12:01
a.m. on April 1, 1996
Concurrent with its entering into the merger agreement with Wells
Fargo, the Corporation terminated its November 5, 1995 merger
agreement with First Bank System, Inc. An overall settlement
agreement was entered into among the Corporation, First Bank
System and Wells Fargo. Under the terms of the settlement
agreement, the Corporation agreed to pay First Bank System a
termination fee of $125 million and an additional termination fee
of $75 million upon closing of its merger with Wells Fargo. These
payments are being made in full satisfaction of the Corporation's
obligations under the stock option and fee agreements entered
into as part of its November 5, 1995 merger agreement with First
Bank System. In addition, all litigation among the parties
related to efforts to merge with the Corporation has been
settled.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1995 a number of the Corporation's subsidiary banks had
loan transactions, in the ordinary course of business, with
officers and directors of the Corporation. There were also,
during 1995, a number of loan transactions in the ordinary course
of business between the Corporation's subsidiary banks and
associates of officers and directors of the Corporation. Except
as described in "Compensation committee interlocks and insider
participation" above, all of such transactions were made on
substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable
transactions with other persons and did not involve more than a
normal risk of collectibility or present other unfavorable
features.
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, 1995 are incorporated herein by reference in Item 8:
Consolidated Financial Statements of First Interstate Bancorp and
Subsidiaries:
Consolidated Balance Sheet -
December 31, 1995 and 1994
Consolidated Statement of Operations -
Years Ended December 31, 1995, 1994 and 1993
Consolidated Statement of Cash Flows -
Years Ended December 31, 1995, 1994 and 1993
Statement of Shareholders' Equity -
Years Ended December 31, 1995, 1994 and 1993
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 therein (incorporated by reference
to the Registrant's Form 8-K dated March 24, 1995)
(2.1) Agreement and Plan of Merger dated as of November 5, 1995
by and between First Interstate Bancorp, First Bank System,Inc.
and Eleven Acquisition Corp. (incorporated by reference to
the Registrant's Form 8-K dated November 9, 1995)
(2.2) Agreement and Plan of Merger dated as of January 23, 1996,
by and between Wells Fargo & Company and First Interstate
Bancorp, and Amendment dated as of February 23, 1996
(incorporated by reference to Exhibits 2.1 and 2.2 of
Wells Fargo & Company's Form S-4 Registration Statement
No. 33-64575)
(3.1) Composite Certificate of Incorporation of Registrant
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 amendments through
May 1, 1995
(4.1) Terms of Series F Preferred Stock (incorporated by reference
to Registrant's Form S-3 Registration Statement No. 33-42889)
(4.2) Terms of Series G Preferred Stock (incorporated by reference
to Registrant's Form S-3 Registration Statement No. 33-47174)
(4.3) Registrant has outstanding certain long term debt. See Note G
of "Notes to Financial Statements" at Page 43 of the 1995 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) Amendments dated July 20, 1994, August 22, 1995 and
March 25, 1996 to 1988 Performance Stock Plan
(10.4) First Interstate Bancorp 1991 Performance Stock Plan
(incorporated by reference to Registrant's Form S-8
Registration Statement No. 33-38903)
(10.5) Amendments dated July 20, 1994, August 22, 1995 and
March 25, 1996 to First Interstate Bancorp 1991 Performance
Stock Plan
(10.6) First Interstate Bancorp 1995 Performance Stock Plan
(incorporated by reference to the Registrant's Form 10-K filed
in March 1995)
(10.7) First Interstate Bancorp 1991 Director Option Plan (incorporated
by reference to Registrant's Form S-8 Registration
Statement No. 33-37299)
(10.8) Amendments dated July 20, 1994 and March 26, 1996 to First
Interstate Bancorp 1991 Director Option Plan
(10.9) First Interstate Bancorp 1996 Regional Executive Incentive Plan
(10.10) First Interstate Bancorp Corporate Executive Incentive Plan
(incorporated by reference to the Registrant's Form 10-K
filed in March 1995)
(10.11) First Interstate Bancorp 1996 Management Incentive Plan
(10.12) First Amendment to the First Interstate Corporate Executive
Incentive Plan, 1996 First Interstate Regional Executive
Incentive Plan and 1996 First Interstate Management Incentive
Plan
(10.13) 1989 Restatement of the Supplemental Employee Savings Plan of
Registrant (incorporated by reference to the Registrant's
Form 10-K filed in March 1990)
(10.14) 1992 Restatement of the Supplemental Executive Retirement Plan
of Registrant (incorporated by reference to Registrant's
Form 10-K filed in March 1992)
(10.15) 1989 Restatement of First Interstate Bancorp Excess Benefit
Retirement Plan (incorporated by reference to Registrant's
Form 10-K filed in March 1990)
(10.16) Retirement Plan for Directors, amended and restated
(incorporated by reference to Registrant's Form 10-K filed
March, 1994)
(10.17) Dividend Reinvestment and Stock Purchase Plan, as amended
(incorporated by reference to Registrant's Form S-3
Registration Statement No. 33-50054)
(10.18) Form of Employment Agreement between Registrant and
William E.B. Siart, William S. Randall, Bruce G. Willison,
James J. Curran, Linnet F. Deily and certain executive officers
(incorporated by reference to Registrant's Form 10-K filed in
March 1995)
(10.19) Amendment to Amended and Restated Form of Employment Agreement
between Registrant and William E.B. Siart, William S. Randall,
Bruce G. Willison, James J. Curran, Linnet F. Deily and certain
executive officers
(10.20) Second Amendment to Amended and Restated Form of Employment
Agreement between Registrant and William E.B. Siart,
William S. Randall, Bruce G. Willison, James J. Curran,
Linnet F. Deily and certain executive officers
(10.21) Form of Split-Dollar Insurance Agreement between Registrant
and Registrant's Directors (incorporated by reference to
Registrant's Form 10-K filed in March 1992)
(10.22) Amendment dated March 25, 1996, to Form of Split-Dollar Insurance
Agreement between Registrant and Registrant's Directors
(10.23) Form of Split-Dollar Life Insurance Agreement between Registrant
and Edward M. Carson, William E.B. Siart, William S. Randall,
Bruce G. Willison, James J. Curran and Linnet F. Deily
(incorporated by reference to Registrant's Form 10-K filed
in March 1992)
(10.24) Amendment dated March 25, 1996, to Form of Split-Dollar Insurance
Agreement between Registrant and Registrant's executive officers
(10.25) $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)
(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, 1995
(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 February 17, 1995 announced the date, time
and place of its 1995 Annual Meeting of Stockholders. Copies of related
documents were included in such filing.
A report on Form 8-K dated March 24, 1995 announced that the Corporation
has entered into a Dealer Agreement dated as of 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 reported 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.
A report on Form 8-K dated November 9, 1995 announced the Corporation's
Agreement and Plan of Merger, dated as of November 5, 1995, among First
Interstate Bancorp, First Bank System, Inc. and Eleven Acquisition Corp.
A report on Form 8-K dated November 15, 1995 announced the Corporation's
amendment dated as of November 5, 1995 to the Rights Agreement dated as
of November 21, 1988, by and between First Interstate Bancorp and First
Interstate Bank, Ltd., as Rights Agent
A report on Form 8-K dated January 30, 1996 announced the Corporation's
Agreement and Plan of Merger, dated as of January 23, 1996, among First
Interstate Bancorp and Wells Fargo & Company.
<PAGE>
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
25th day of March, 1996.
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/William E.B. Siart Chairman of the Board March 25,1996
- --------------------- and Chief Executive Officer
William E. B. Siart Director
/s/William S. Randall President March 25,1996
- --------------------- Director
William S. Randall
/s/Steven L. Scheid Executive Vice President March 25,1996
- --------------------- (Principal Financial Officer)
Steven L. Scheid
<PAGE>
Signature Title Date
--------- ----- ----
/s/David S. Belles Executive Vice President March 25,1996
- --------------------- (Principal Accounting Officer)
David S. Belles
/s/John E. Bryson
- ---------------------
John E. Bryson Director March 25,1996
/s/E. M. Carson
- ---------------------
E. M Carson Director March 25,1996
/s/Jewel Plummer Cobb
- ---------------------
Jewel Plummer Cobb Director March 25,1996
/s/Ralph P. Davidson
- ---------------------
Ralph P. Davidson Director March 25,1996
/s/Myron Du Bain
- ---------------------
Myron Du Bain Director March 25,1996
/s/Don C. Frisbee
- ---------------------
Don C. Frisbee Director March 25,1996
/s/George M. Keller
- ---------------------
George M. Keller Director March 25,1996
/s/Thomas L. Lee
- ---------------------
Thomas L. Lee Director March 25,1996
/s/Harold M. Messmer, Jr.
- -------------------------
Harold M. Messmer, Jr. Director March 25,1996
/s/ William F. Miller
- ----------------------
William F. Miller Director March 25,1996
<PAGE>
Signature Title Date
--------- ----- ----
/s/Steven B. Sample
- ---------------------
Steven B. Sample Director March 25,1996
/s/Forrest N. Shumway
- ---------------------
Forrest N. Shumway Director March 25,1996
/s/Richard J. Stegemeier
- ------------------------
Richard J. Stegemeier Director March 25,1996
/s/Daniel M. Tellep
- ---------------------
Daniel M. Tellep Director March 25,1996
FIRST INTERSTATE BANCORP
BYLAWS
CERTIFICATE
I, ______________________________________,
________________________ Secretary of FIRST INTERSTATE
BANCORP, a Delaware corporation, hereby certify that the above and
foregoing pages numbered from 1 to 18, both numbers inclusive, is a
true and correct copy of the bylaws of said Corporation now in force.
WITNESS my hand this ________ day of
______________________________,19____.
_________________________________
Secretary
[SEAL]
Amended, effective May 1, 1995
BYLAWS
OF
FIRST INTERSTATE BANCORP
OFFICES
1. The principal office of this Corporation shall be in the
City of Wilmington, County of New Castle, State of Delaware. The
Corporation may also have offices at such other places as the Board of
Directors may from time to time designate or the business of the
Corporation may require.
SEAL
2. The corporate seal shall have inscribed thereon the name
of the Corporation, and the words "Incorporated September 27, 1957,
Delaware." Said seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise. The Secretary may
have duplicate seals made and deposited for use with such officers as the
Board of Directors may designate.
It shall not be necessary to the validity of any instrument
executed by any authorized officer or officers of this Corporation, that
the execution of such instrument be evidenced by the corporate seal; and
all documents, instruments, contracts and writings of all kinds signed on
behalf of the Corporation by any authorized officer or officers thereof
shall be as effectual and binding on the Corporation without the
corporate seal, as if the execution of the same had been evidenced by
affixing the corporate seal thereto.
STOCKHOLDERS' MEETINGS
3. Meetings of the stockholders for the election of
Directors or for any other purpose shall be held at such time and place,
within or without the State of Delaware, as may be designated by the
Board of Directors and specified in the notice of the meeting or in a duly
executed waiver of notice thereof.
4. The Annual Meeting of the stockholders shall be held on
such day of the year as may be designated by the Board of Directors and
as shall be specified in the notice of the meeting, when they shall elect
by a plurality vote, by ballot, a Board of Directors, and transact such
other business as may properly be brought before the meeting.
(a) To be properly brought before an Annual Meeting,
business must be (1) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board, (2)
otherwise properly brought before the meeting by or at the direction of
the Board, or (3) otherwise properly brought before the meeting by a
stockholder. In addition to any other applicable requirements, for
business to be properly brought before an Annual Meeting by a
stockholder, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than thirty days
nor more than sixty days prior to the meeting; provided, however, that in
the event that less than forty days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the tenth day following the day on which such notice of the
date of the Annual Meeting was mailed or such public disclosure was
made. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the Annual Meeting (i) a
brief description of the business desired to be brought before the Annual
Meeting and the reasons for conducting such business at the Annual
Meeting, (ii) the name and record address of the stockholder proposing
such business, (iii) the class and number of shares of the Corporation
which are beneficially owned by the stockholder, and (iv) any material
interest of the stockholder in such business.
Notwithstanding anything in these bylaws to the
contrary, no business shall be conducted at the Annual Meeting except
in accordance with the procedures set forth in this Section 4, provided,
however, that nothing in this Section 4 shall be deemed to preclude
discussion by any stockholder of any business properly brought before
the Annual Meeting in accordance with said procedures.
The chairman of an Annual Meeting shall, if the facts
warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the provisions
of this Section 4, and if he should so determine, he shall so declare to the
meeting and any such business not properly brought before the meeting
shall not be transacted.
(b) Only persons who are nominated in accordance with
the following procedures shall be eligible for election as Directors of the
Corporation. Nominations of persons for election to the Board may be
made at a meeting of stockholders by or at the direction of the Board by
any nominating committee or person appointed by the Board or by any
stockholder of the Corporation entitled to vote for the election of
Directors at the meeting who complies with the notice procedures set
forth in this Section 4. Such nominations, other than those made by or at
the direction of the Board, shall be made pursuant to timely notice in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to or mailed and received at the principal
executive offices of the Corporation not less than thirty days nor more
than sixty days prior to the meeting; provided, however, that in the event
that less than forty days' notice or prior public disclosure of the date of
the meeting is given or made to stockholders, notice by the stockholder
to be timely must be so received not later than the close of business on
the tenth day following the day on which such notice of the date of the
meeting was mailed or such public disclosure was made. Such stock-
holder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or re-election as a Director, (i) the
name, age, business address and residence address of the person, (ii) the
principal occupation or employment of the person, (iii) the class and
number of shares of the Corporation which are beneficially owned by
the person, and (iv) any other information relating to the person that is
required to be disclosed in solicitations for proxies for election of
Directors pursuant to Rule 14a under the Securities Exchange Act of
1934, (v) the consent of each nominee to serve as a Director of the
Corporation if so elected; and (b) as to the stockholder giving the notice,
(i) the name and record address of stockholder and (ii) the class and
number of shares of the Corporation which are beneficially owned by
the stockholder, (iii) a representation that the stockholder intends to
appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice, (iv) a representation that the stockholder
(and any party on whose behalf or in concert with whom such
stockholder is acting) is qualified at the time of giving such notice to
have such individual serve as the nominee of such stockholder (and any
party on whose behalf or in concert with whom such stockholder is
acting) if such individual is elected, accompanied by copies of any
notification or filings with, or orders or other actions by, any
governmental authority which are required in order for such stockholder
(and any party on whose behalf such stockholder is acting) to be so
qualified, (v) a description of all arrangements or understandings
between such stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by such stockholder and (vi)
such other information regarding such stockholder as would be required
to be included in a proxy statement or other filings required to be filed
pursuant to Rule 14a under the Securities Exchange Act of 1934. The
Corporation may require any proposed nominee to furnish such other
information as may be reasonably required by the Corporation to
determine the eligibility for election as a Director of the Corporation
unless nominated in accordance with the procedures set forth herein.
The chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so determine,
he shall so declare to the meeting and the defective nomination shall be
disregarded.
5. The holders of a majority of the stock issued and
outstanding, and entitled to vote thereat, present in person, or
represented by proxy, shall be requisite and shall constitute a quorum at
all meetings of the stockholders for the transaction of business, except as
otherwise provided by law, by the Certificate of Incorporation or by
these bylaws. If, however, such majority shall not be present or
represented at any meeting of the stockholders, the stockholders entitled
to vote thereat, present in person or by proxy, shall have power to
adjourn the meeting from time to time, without notice other than
announcement at the meeting, until the requisite amount of voting stock
shall be present or represented. At such adjourned meeting at which the
requisite amount of voting stock shall be present or represented, any
business may be transacted which might have been transacted at the
meeting as originally noticed. If the adjournment is for more than thirty
days, or if after adjournment a new record date is fixed for the adjourned
meeting, a new notice of the adjourned meeting shall be given to each
stockholder entitled to vote at the meeting.
6. At each meeting of the stockholders, every stockholder
having the right to vote shall be entitled to vote in person, or by proxy
appointed by an instrument in writing subscribed by such stockholder or
by his duly authorized attorney and submitted to the Secretary at or
before such meeting, but no such proxy shall be voted or acted upon
after three years from its date, unless said instrument provides for a
longer period. Each stockholder shall have one vote for each share of
Common Stock, and one-half vote for each one-half share of stock,
registered in his name on the books of the Corporation. Each
stockholder shall have such voting powers, full or limited, but not to
exceed one vote per share, or without voting powers, as shall be stated
and expressed in the resolution or resolutions providing for the issue
thereof adopted by the Board of Directors for each share of Preferred
Stock, registered in his name on the books of the Corporation; provided,
however, that except where a date shall have been fixed as a record date
for the determination of stockholders entitled to vote as hereinafter
provided in these bylaws, no share of stock shall be voted at any election
for Directors which has been transferred on the books of the Corporation
after the close of business on the day next preceding the day on which
notice is given. The vote for Directors, and upon the demand of any
stockholder, the vote upon any question before the meeting, shall be by
ballot. All actions shall be taken and all questions decided by a majority
vote, except as otherwise specifically provided by statute or by the
Certificate of Incorporation or by these bylaws. The Chairman of the
Board, or in his absence or when the office of Chairman of the Board is
vacant, the President, or such other member of the Board of Directors as
shall be designated by the Board, shall preside at all meetings of the
stockholders.
7. Written notice of the Annual Meeting shall be mailed to
each stockholder entitled to vote thereat at such address as appears on
the records of the Corporation, not less than ten, nor more than sixty
days prior to the meeting.
8. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute, may be called by the
Chairman of the Board, or in his absence or when the office of Chairman
of the Board is vacant, by the President, and shall be called by the
Chairman of the Board, or in his absence or when the office of Chairman
of the Board is vacant, by the President, or by the Secretary at the
request in writing of a majority of the Board of Directors, or at the
request in writing of stockholders owning a majority in amount of the
entire capital stock of the Corporation issued and outstanding, and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
9. Business transacted at all special meetings shall be
confined to the purpose or purposes stated in the call.
10. Written notice of a special meeting of stockholders,
stating the place, date and hour, and purpose or purposes for which the
meeting is called, shall be mailed, postage prepaid, not less than ten, nor
more than sixty days before such meeting, to each stockholder entitled to
vote at such meeting.
11. All notices required by these bylaws or otherwise to be
mailed may be mailed either from the principal office of the Corporation
at Wilmington, Delaware, or from any other office or place that may be
determined by the Board of Directors.
DIRECTORS
12. The property and business of this Corporation shall be
managed by its Board of Directors, which shall number not less than
three nor more than twenty-six, as shall be determined by resolution of
the Board. Directors need not be stockholders. Except as provided in
Section 13 of these bylaws, the Directors shall be elected by a plurality
of the votes cast at the Annual Meeting of stockholders, and each
Director elected shall serve until his successor is duly elected and
qualified, or until his earlier resignation or removal.
VACANCIES AND NEWLY CREATED DIRECTORSHIPS
13. Any vacancy in the Board of Directors caused by death,
resignation, removal or otherwise, and newly created directorships
resulting from any increase in the authorized number of Directors, may
be filled either by a majority of the Directors then in office, though less
than a quorum, or by the stockholders of the Corporation, and each
Director so elected shall hold office until the next annual election of
Directors, and until his successor shall be duly elected and qualified, or
until his death or until he shall resign or shall have been removed.
MEETINGS OF THE BOARD
14. The newly elected Board of Directors shall meet for the
purpose of organization or otherwise, at such time and place as shall be
fixed by resolution adopted by a majority of the whole Board, and if a
majority of the whole Board shall be present, no notice of such meeting
shall be necessary to the newly elected Directors in order legally to
constitute the meeting; or they may meet at such place and time as shall
be fixed by the consent in writing of all the Directors, or as shall be
stated in the notice of such meeting given as hereinafter provided in the
case of special meetings of the Board.
15. Regular meetings of the Board shall be held without call
or notice at such time and place as shall from time to time be fixed by
standing resolution of the Board.
16. Special meetings of the Board of Directors may be
called by the Chairman of the Board, or in his absence or when the
office of Chairman of the Board is vacant, by the President, on
twenty-four hours' notice to each Director, personally or by mail or by
facsimile transmission or by telephone; special meetings shall be called
by the Chairman of the Board, or in his absence or when the office of
Chairman of the Board is vacant, by the President or Secretary in like
manner and on like notice on the written request of three Directors.
Notice of special meetings of the Board shall state the time and place of
the meeting, but need not state the purpose thereof except as otherwise
in these bylaws expressly provided.
17. At all meetings of the Board of Directors a majority of
the whole Board shall be necessary and sufficient to constitute a quorum
for the transaction of business, and the act of a majority of the Directors
present at any meeting at which there is a quorum shall be the act of the
Board, except as may be otherwise specifically provided by statute or by
the Certificate of Incorporation or by these bylaws. Any meeting of the
Board may be adjourned to meet again at a stated day and hour. Even
though no quorum is present, as required in this Section, a majority of
the Directors present at any meeting of the Board, either regular or
special, may adjourn from time to time until a quorum be had, but no
later than the time fixed for the next regular meeting of the Board.
Notice of any adjourned meeting need not be given.
18. The Directors may cause the books of the Corporation to
be kept outside of Delaware, at such offices of the Corporation or other
places as the Directors may from time to time determine.
19. In addition to the powers and authorities by these
bylaws expressly conferred upon it, the Board of Directors may exercise
all such powers of the Corporation and do all such lawful acts and things
as are not by statute or by the Certificate of Incorporation or by these
bylaws directed or required to be exercised or done by the stockholders.
COMMITTEES
EXECUTIVE COMMITTEE
20. The Board of Directors, by resolution adopted by a
majority of the whole Board, may designate an Executive Committee to
consist of three or more Directors, two of whom shall be the Chairman
of the Board and the President, and by like resolution may fill vacancies,
or reconstitute the membership of, the Executive Committee; provided,
however, that in the absence or disqualification of any member of the
Executive Committee, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may appoint another member of the Board of
Directors to act at the meeting in the place of any absent or disqualified
member. Meetings of the Executive Committee for any purpose or
purposes may be called by the Chairman of the Board, or in his absence
or when the office of the Chairman of the Board is vacant, by the
President, and shall be called by the Chairman of the Board, or in his
absence or when the office of the Chairman of the Board is vacant, by
the President, or the Secretary, at the request in writing of at least two
members of the Executive Committee, to be held in such place as shall
be designated from time to time by the Chairman of the Board, or in his
absence or when the office of Chairman of the Board is vacant, by the
President, or the Executive Committee, and indicated in the notice of
such meetings. At least twenty-four hours' notice of such meetings shall
be given to each member of the Executive Committee either personally
or by mail or by facsimile transmission or by telephone.
The Executive Committee shall, between meetings of
the Board, have such powers as may be delegated to it from time to time
by the Board.
The Secretary or someone designated by the Executive
Committee shall keep minutes of all its proceedings, all of which shall
be reported as soon as practicable to the Board and shall be subject to
revision or rescission by the Board, provided no rights of third parties
shall be affected thereby. A member of the Executive Committee shall
be appointed by the Board as Chairman of the Executive Committee,
who shall preside at all meetings of the Executive Committee, or in his
absence or if the Board fails to so appoint any such member, the
Chairman of the Board shall preside at such meetings, or in his absence
or when the office of Chairman of the Board is vacant, the President
shall preside at such meetings, or if the President shall also be absent,
and a quorum shall remain, the Executive Committee at any such
meeting shall select from its members a chairman of the meeting. The
presence of a majority of the members of the Executive Committee (but
in no event less than three) shall be necessary to constitute a quorum for
the transaction of business.
OTHER COMMITTEES
21. The Board of Directors may from time to time by
resolution create such other committee or committees of Directors
designated by it to advise the Board, the Executive Committee and the
officers and employees of the Corporation in all such matters as the
Board shall deem advisable and with such functions and duties as the
Board shall by resolution prescribe. A majority of all the members of
any such committee may determine its action and fix the time and place
of its meetings, unless the Board shall otherwise provide. The Board
shall have power, at any time, to change the members of any such
committee, to fill vacancies and to discharge any such committee, either
with or without cause. In the absence or disqualification of any member
of any such committee, the member or members thereof present at any
meeting and not disqualified from voting whether or not he or they
constitute a quorum, may appoint another member of the Board of
Directors to act at the meeting in the place of any absent or disqualified
member.
COMPENSATION OF DIRECTORS
22. Directors, in addition to expenses of attendance, shall be
allowed such compensation as may be fixed from time to time by
resolution adopted by a majority of the whole Board; provided, that
nothing herein contained shall be construed to preclude any Director
from serving the Corporation in any other capacity and receiving
compensation therefor.
23. Members of the Executive Committee and of any other
special or standing committee shall, in addition to expenses of
attendance, be allowed such compensation as may be fixed from time to
time by resolution adopted by a majority of the whole Board.
MEETINGS BY MEANS OF CONFERENCE
24. Unless otherwise provided by the Certificate of
Incorporation or these bylaws, members of the Board of Directors of the
Corporation, or any committee designated by the Board of Directors,
may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar
communications equipment by means of which all persons participating
in the meeting can hear each other, and participation in a meeting
pursuant to this Section 24 shall constitute presence in person at such a
meeting.
ACTION WITHOUT MEETING
25. Unless otherwise restricted by the Certificate of
Incorporation or these bylaws, any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee
thereof may be taken without a meeting, if all members of the Board or
of such committee as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the
Board or committee.
OFFICERS
26. The officers of the Corporation shall be a Chairman of
the Board, a President, one or more Executive Vice Presidents, one or
more Senior Vice Presidents, one or more Vice Presidents, a Secretary, a
Treasurer and a Controller. There may also be a Vice Chairman as may
from time to time be designated by resolution of the Board of Directors.
Two or more offices may be held by the same person.
The Board of Directors may, in its discretion, confer
additional functional titles including, but not limited to, Chief Financial
Officer, Chief Credit Officer, General Counsel and General Auditor.
27. The Board of Directors, at its first meeting after each
Annual Meeting of stockholders, shall choose a Chairman of the Board,
a President, the Executive Vice Presidents, the Senior Vice Presidents, a
Secretary, a Treasurer and a Controller, none of whom except the
Chairman of the Board and the President need be members of the Board.
If the office of any of the above officer or officers becomes vacant for
any reason, the vacancy shall be filled by the Board.
28. The Board of Directors may appoint a Vice Chairman of
the Board to hold office at the pleasure of the Board, who may, but need
not, be a member of the Board, and who may be an officer of the
Corporation.
29. The Chairman of the Board or someone who shall have
been designated by the Chairman shall appoint such other officers and
agents as it shall deem necessary, who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Chairman of the Board or his
designee.
30. The salaries of officers of the Corporation shall be fixed
by the Chief Executive Officer except (l) Officers whose annual salaries
are in excess of an amount as shall from time to time be fixed by
resolution of the Board; and (2) Officers who are Directors of the
Corporation, regardless of the amount of the salary of such officers.
31. The officers of the Corporation shall hold office until
their successors are chosen and qualify in their stead. Any officer
elected or appointed by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the whole Board.
THE CHAIRMAN OF THE BOARD
32. The Chairman of the Board shall preside at all meetings
of the Board of Directors and of the stockholders. He shall be the Chief
Executive Officer of the Corporation; he shall have general and active
management of the business affairs and property of the Corporation and
shall see that all orders and resolutions of the Board of Directors are
carried into effect. He shall be ex officio a member of all standing
committees except where otherwise indicated in these bylaws or in the
resolution appointing a committee, and unless otherwise indicated in
these bylaws or in the resolution appointing a committee, he shall act as
chairman of all such committees. He shall have the general powers and
duties of supervision and management usually vested in the chief
executive officer of a corporation.
THE PRESIDENT, VICE CHAIRMAN AND VICE PRESIDENTS
33. (a) The President shall perform such duties as may be
prescribed by the Board or the Executive Committee or the Chairman of
the Board. When the office of Chairman of the Board is vacant, or in the
absence or disability of the Chairman of the Board, the President shall
perform the duties and exercise the powers of the Chairman of the
Board.
(b) In the absence or disability of the President, the Vice
Chairman shall perform the duties and exercise the powers of President.
In the absence or disability of said Vice Chairman, any Executive Vice
President designated by the Board of Directors or by the Executive
Committee shall perform such duties and exercise such powers.
(c) The Vice Chairman shall perform such duties as may
be prescribed by the Board of Directors or the Executive Committee or
the Chairman of the Board or the President.
d) The Vice Presidents shall perform such duties as may
be prescribed by the Board or the Executive Committee or the Chairman
of the Board or the President.
THE SECRETARY AND ASSISTANT SECRETARIES
34. (a) The Secretary shall attend all meetings of the Board
of Directors and all meetings of the stockholders and record all the
proceedings of such meetings in a book to be kept for that purpose, and
shall perform like duties for the standing committees when required. He
shall give, or cause to be given, notice of all meetings of the
stockholders and of the Board, and shall perform such other duties as
may be prescribed by the Board, or by the Chairman of the Board, under
whose supervision he shall be. He shall keep in safe custody the seal of
the Corporation, and when authorized by the Board or these bylaws,
affix the same to any instrument requiring it, and when so affixed, it
shall be attested by his signature.
(b) The Assistant Secretaries shall perform such duties
as the Board shall prescribe and in the absence or disability of the
Secretary, an Assistant Secretary, designated by the Board of Directors
or by the Executive Committee, shall perform the duties and exercise the
powers of the Secretary.
THE TREASURER
35. (a) The Treasurer or such other person designated by the
Board of Directors shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit
all monies and other valuable effects in the name and to the credit of the
Corporation, in such depositories as may be designated by the Board.
(b) Such person shall disburse the funds of the
Corporation as may be ordered by the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the Chairman of the
Board and Directors, whenever they may require it, an account of all his
transactions and of the financial condition of the Corporation.
(c) Such person shall give the Corporation a bond, if
required by the Board of Directors, in a sum, and with one or more
sureties, satisfactory to the Board, for the faithful discharge of the duties
of his office, and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his
possession or under his control belonging to the Corporation; but the
Board may, if it sees fit, dispense with such bond.
THE CONTROLLER AND ASSISTANT CONTROLLERS
36. (a) The Board of Directors may elect a Controller who
shall be the chief accounting officer of the Corporation, who shall have
control over all accounting matters concerning the Corporation and who
shall perform such other duties as may be required of him by the
Chairman of the Board, the President or the Chief Financial Officer.
(b) The Assistant Controllers shall perform such duties
as the Board may prescribe, and in the absence or disability of the
Controller, an Assistant Controller designated by the Board of Directors
or by the Executive Committee, shall perform the duties and exercise the
powers of the Controller.
DUTIES OF OFFICERS MAY BE DELEGATED
37. In the case of the absence of any officer of the
Corporation, or for any other reason that the Board of Directors may
deem sufficient, the Board may delegate, for the time being, the powers
or duties, or any of them, of such officer to any other officer, or to any
Director, provided a majority of the entire Board concurs therein.
CERTIFICATES OF STOCK
38. The certificates of stock of the Corporation shall be
numbered and shall be entered in the books of the Corporation as they
are issued. Each certificate shall exhibit the holder's name and certify
the number of shares owned by him in the Corporation, and shall be
signed by, or in the name of the Corporation by, the Chairman of the
Board or the President or a Vice President, and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary, provided
that the Board of Directors may have the certificates of stock signed by
facsimile signatures. The certificates of stock are to be in the form
approved by the Board of Directors.
TRANSFERS OF STOCK
39. Transfers of stock shall be made on the books of the
Corporation only by the person named in the certificate or by attorney,
lawfully constituted in writing, and upon surrender of the certificate
therefor.
RECORD DATE
40. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof; or entitled to receive payment
of any dividend or other distribution or allotment of any rights; or
entitled to exercise any rights in respect of any change, conversion or
exchange of stock or for the purpose of any other lawful action, the
Board of Directors may fix, in advance, a record date, which shall not be
more than sixty nor less than ten days before the date of such meeting,
nor more than sixty days prior to any other action.
In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing without a
meeting, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record
date is adopted by the Board of Directors, and which date shall not be
more than ten days after the date upon which the resolution fixing the
record date is adopted by the Board of Directors. Any stockholder of
record seeking to have the stockholders authorize or take corporate
action by written consent shall, by written notice to the Secretary,
request the Board of Directors to fix a record date. The Board of
Directors shall promptly, but in all events within ten days after the date
on which such a request is received, adopt a resolution fixing the record
date. If no record date has been fixed by the Board of Directors within
ten days of the date on which such a request is received, the record date
for determining stockholders entitled to consent to corporate action in
writing without a meeting, when no prior action by the Board of
Directors is required by applicable law, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be
taken is delivered to the Corporation by delivery to its registered office
in the State of Delaware, its principal place of business, or any officer or
agent of the Corporation having custody of the book in which
proceedings of stockholders' meetings are recorded, to the attention of
the Secretary of the Corporation. Delivery shall be by hand or by
certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board
of Directors is required by applicable law, the record date for
determining stockholders entitled to consent to corporate action in
writing without a meeting shall be at the close of business on the date on
which the Board of Directors adopts the resolution taking such prior
action.
REGISTERED STOCKHOLDERS
41. The Corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact thereof and,
accordingly, shall not be bound to recognize any equitable or other claim
to or interest in such share on the part of any other person, whether or
not it shall have express or other notice thereof, save as expressly
provided by the laws of Delaware.
LOST CERTIFICATE
42. The Board of Directors may authorize the issue of a new
certificate of stock in the place of any certificate theretofore issued by
the Corporation, alleged to have been lost or destroyed, and the Board
may, in its discretion, require the owner of the lost or destroyed
certificate, or his legal representatives, to give the Corporation a bond
sufficient to indemnify the Corporation against any claim that may be
made against it on account of the alleged loss of any such certificate or
the issuance of such new certificate, to furnish such proof of the loss or
destruction of such certificate as it shall deem proper, and to comply
with such other regulations as the Board shall from time to time fix,
including advertising such loss or destruction in such manner as the
Board may require. A new certificate may be issued without requiring
any bond when, in the judgment of the Board, it is proper to do so.
INSPECTION OF BOOKS
43. The Directors shall determine from time to time
whether, and, if allowed, when and under what conditions and
regulations the accounts and books of the Corporation (except such as
may by law be specifically open to inspection), or any of them, shall be
open to the inspection of the stockholders, and the stockholders' rights in
this respect are and shall be restricted and limited accordingly.
CHECKS
44. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers as provided in
these bylaws or as the Board of Directors may from time to time
designate.
FISCAL YEAR
45. The fiscal year shall begin the first day of January in
each year.
DIVIDENDS
46. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may
be declared by the Board of Directors at any regular or special meeting,
pursuant to law. Dividends may be paid in cash or in property,
including, without limitation, shares of the capital stock of the
Corporation.
Before payment of any dividend there may be set apart
out of any funds of the Corporation available for dividends, such sum or
sums as the Directors from time to time, in their absolute discretion,
think proper as a reserve to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the
Corporation, or for such other purpose as the Directors shall think
conducive to the interests of the Corporation.
NOTICES
47. Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these bylaws, notice is required to be
given to any Director, committee member, officer or stockholder, it shall
not be construed to mean personal notice, but such notice may be given,
in the case of stockholders, in writing, by mail, by depositing the same
in the post office or letter-box, in a postpaid, sealed wrapper, addressed
to such stockholder, at such address as appears on the books of the
Corporation, or, in default of other address, to such stockholder at the
General Post Office in the City of Wilmington, Delaware, and, in the
case of Directors, committee members and officers, by telephone, or by
mail or by facsimile transmission to the last business address known to
the Secretary of the Corporation, and such notice shall be deemed to be
given at the time when the same shall be thus mailed or telephoned or
sent by facsimile transmission.
Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of
these bylaws, a waiver thereof in writing, signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
AMENDMENTS
48. These bylaws may be altered, amended or repealed, in
whole or in part, or new bylaws may be adopted by the stockholders or
by the Board of Directors, provided, however, that notice of such
alteration, amendment, repeal or adoption of new bylaws by the
stockholders be contained in the notice of such meeting. All such
amendments must be approved by either the holders of a majority of the
outstanding capital stock entitled to vote thereon or by a majority of the
entire Board of Directors then in office.
As used in this Section 48 and in these bylaws generally,
the term "entire Board of Directors" means the total number of Directors
which the Corporation would have if there were no vacancies.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
49. (a) Right to Indemnification. Each person who was or is
made a party or is threatened to be made a party to or is otherwise
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of
the fact that he or she, or a person of whom he or she is the legal
representative or the lawful spouse (whether such status is derived by
reason of statutory law, common law or otherwise), is or was a Director
or officer of the Corporation or is or was serving at the request of the
Corporation as a Director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the
basis of such proceeding is alleged action in an official capacity as a
Director, officer, employee or agent or in any other capacity while
serving as a Director, officer, employee or agent, shall be indemnified
and held harmless by the Corporation to the fullest extent authorized by
the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to
the extent that such amendment permits the Corporation to provide
broader indemnification rights than such law permitted the Corporation
to provide prior to such amendment), against all expense, liability and
loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) reasonably incurred or
suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a
Director, officer, employee or agent and shall inure to the benefit of his
or her heirs, executors and administrators, or lawful spouse; provided,
however, that except as provided in paragraph (b) hereof with respect to
proceedings to enforce rights to indemnification, the Corporation shall
indemnify any such person in connection with a proceeding (or part
thereof) initiated by such person only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Corporation.
The right to indemnification conferred in this Section shall be a contract
right and shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its
final disposition; provided, however, that if the Delaware General
Corporation Law requires, the payment of such expenses incurred by a
Director or officer in his or her capacity as a Director or officer (and not
in any other capacity in which service was or is rendered by such
Director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding, shall be
made only upon delivery to the Corporation of an undertaking, by or on
behalf of such Director or officer, to repay all amounts so advanced if it
shall ultimately be determined by final judicial decision from which
there is no further right to appeal that such Director or officer is not
entitled to be indemnified for such expenses under this Section or
otherwise. The Corporation may, by action of its Board of Directors,
provide indemnification to employees and agents of the Corporation
with the same scope and effect as the foregoing indemnification of
Directors and officers.
(b) Right of Claimant to Bring Suit. If a claim under
paragraph (a) of this Section is not paid in full by the Corporation within
thirty days after a written claim has been received by the Corporation,
the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim, and if successful
in whole or in part, the claimant shall be entitled to be paid also the
expense of prosecuting or defending such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any, has been tendered to
the Corporation) that the claimant has not met the standards of conduct
which make it permissible under the Delaware General Corporation Law
for the Corporation to indemnify the claimant for the amount claimed,
but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a deter-
mination prior to the commencement of such action that indemnification
of the claimant is proper in the circumstances because he or she has met
the applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of
conduct, shall create a presumption that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create
a presumption that the claimant has not met the applicable standard of
conduct.
(c) Non-Exclusivity of Rights. The right to
indemnification and the payment of expenses incurred in defending a
proceeding in advance of its final disposition conferred in this Section
shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, bylaw, agreement, vote of stockholders or disinterested
Directors or otherwise.
(d) Insurance. The Corporation may maintain insurance,
at its expense, to protect itself and any Director, officer, employee or
agent of the Corporation or another corporation, partnership, joint
venture, trust or other enterprise against any such expense, liability or
loss, whether or not the Corporation would have the power to indemnify
such person against such expense, liability or loss under the Delaware
General Corporation Law.
EMERGENCY BYLAWS
50. When operative. The Emergency Bylaws provided by
the following sections shall be operative during any emergency resulting
from an attack on the United States, any nuclear disaster, earthquake or
during the existence of any catastrophe, as a result of which a quorum of
the Board of Directors or the Executive Committee thereof cannot be
readily convened for action, notwithstanding any different provision in
the preceding sections of the bylaws or in the Certificate of
Incorporation of the Corporation or in the General Corporation Law of
the State of Delaware. To the extent not inconsistent with the
Emergency Bylaws, the bylaws provided in the preceding sections shall
remain in effect during such emergency, and upon the termination of
such emergency, the Emergency Bylaws shall cease to be operative
unless and until another such emergency shall occur.
51. Meetings. During any such emergency:
(a) Any meeting of the Board of Directors may be called
by any Director. Whenever any Executive Officer of the Corporation
who is not a Director has reason to believe that no Director is available
to participate in a meeting, such Executive Officer may call a meeting to
be held under the provisions of this section.
b) Notice of each meeting called under the provisions of
this section shall be given by the person calling the meeting or at his
request by any officer of the Corporation. The notice shall specify the
time and the place of the meeting, which shall be the head office of the
Corporation at the time, if feasible, and otherwise any other place
specified in the notice. Notice need be given only to such of the
Directors as it may be feasible to reach at the time and may be given by
such means as may be feasible at the time, including publication or
radio. If given by mail, messenger, telephone or facsimile transmission,
the notice shall be addressed to the Director at his residence or business
address or such other place as the person giving the notice shall deem
suitable. In the case of meetings called by an Executive Officer who is
not a Director, notice shall also be given similarly, to the extent feasible,
to the persons named on the list referred to in part (c) of this section.
Notice shall be given at least two days before the meeting if feasible in
the judgment of the person giving the notice and otherwise the meeting
may be held on any shorter notice that he shall deem to be suitable.
c) At any meeting called under the provisions of this
section, the Director or Directors present shall constitute a quorum for
the transaction of business. If no Director attends a meeting called by an
Executive Officer who is not a Director and if there are present at least
three of the persons named on a numbered list of personnel approved by
the Board of Directors before the emergency, those present (but not
more than thirteen appearing highest in priority on such list) shall be
deemed Directors for such meeting and shall constitute a quorum for the
transaction of business.
52. Lines of succession. The Board of Directors, during as
well as before any such emergency, may provide, and from time to time
modify, lines of succession, in the event that during such an emergency
any or all officers or agents of the Corporation shall for any reason be
rendered incapable of discharging their duties.
53. Offices. The Board of Directors, during as well as
before any such emergency, may, effective during the emergency,
change the head office or designate several alternative head offices or
regional offices, or authorize the officers so to do.
54. Liability. No officer, Director or employee acting in
accordance with these Emergency Bylaws shall be liable except for
willful misconduct.
55. Repeal or change. The Emergency Bylaws shall be
subject to repeal or change by action of the Board of Directors or by the
affirmative vote of at least 66 2/3 percent of all votes entitled to be cast
by the holders of Capital Stock of the Corporation entitled to vote
generally in the election of Directors voting together as a single class,
except that no such repeal or change shall modify the provisions of the
next preceding section with regard to action or inaction prior to the time
of such repeal or change.
EXHIBIT (10.3)
FIRST AMENDMENT
TO
FIRST INTERSTATE
1988 PERFORMANCE STOCK PLAN
First Interstate Bancorp adopted the First Interstate Bancorp 1988
performance Stock Plan (the Plan) effective February 16, 1988 as approved
by shareholders on April 29, 1988.
In order to have consistent treatment under First Interstate
Bancorp's various plans in the event that employees become employees of
another company, this amendment is being adopted. This amendment is
effective August 17, 1992.
1. New sentences have been added to Section 6.1 of the Plan to
read as follows:
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.
2. The following paragraph has been added as a new Section 15:
15. Expiration of Options. 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 modify the dates upon which options previously granted
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. 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 or the original
Stock Option Agreement.
Executed at Los Angeles this 22 day of August, 1995.
FIRST INTERSTATE
BANCORP
By:______________________
Executive Vice
President
By:_______________________
Secretary
EXHIBIT (10.3)
SECOND AMENDMENT
TO
FIRST INTERSTATE BANCORP
1988 PERFORMANCE STOCK PLAN
First Interstate Bancorp adopted the First Interstate Bancorp 1988
Performance Stock Plan (the Plan) effective February 16, 1988 as approved
by shareholders on April 29, 1988 at the Annual Shareholder's meeting.
In order to have a consistent definition of Change in Control among
First Interstate Bancorp's various plans, this Amendment is being adopted.
This Amendment is effective June 20, 1994.
1. The definition of Change in Control in Section 12 Additional
Definitions is amended by revising it to read as follows:
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:
(i) any person (as such term is used in Section 13(d) of the
Securities Exchange Act of 1934 (the Exchange Act)) 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; (ii) individuals who were member of the Board of
Directors of the Company immediately prior to a meeting of the
stockholders of the Company involving a contact for the election of
Directors do not constitute a majority of the Board of Directors following
such election; (iii) the stockholders of the Company approve the
dissolution or liquidation of the Company; (iv) 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 (v) 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.
Executed at Los Angeles, California this 20th day of July, 1994.
FIRST
INTERSTATE BANCORP
By:
_________________________
Executive Vice President
By:
_________________________
Secretary
EXHIBIT (10.3)
THIRD AMENDMENT
TO
FIRST INTERSTATE BANCORP
1988 PERFORMANCE STOCK PLAN
First Interstate Bancorp adopted the First Interstate Bancorp 1988
Performance Stock Plan (the "Plan") effective February 16, 1988 as approved by
shareholders on April 29, 1988 at the Annual Shareholder's meeting.
This Amendment is being adopted to modify the definition of Change in
Control. This Amendment is effective January 21, 1996.
1. The definition of Change in Control in Section 12, Additional
Definitions, is amended by deleting 50% in clause (iv) and inserting 60%
in its place.
Executed at Los Angeles, California this 25th day of March, 1996.
FIRST INTERSTATE
BANCORP
By:__________________________
Executive Vice
President
By:__________________________
Secretary
W032596C.DOC
EXHIBIT (10.5)
FIRST AMENDMENT
TO
FIRST INTERSTATE
1991 PERFORMANCE STOCK PLAN
First Interstate Bancorp adopted the First Interstate
Bancorp 1991 Performance Stock Plan (the Plan) effective
February 7, 1991 as approved by shareholders on April 19,
1991.
In order to have consistent treatment under First
Interstate Bancorp's various plans in the event that
employees become employees of another company, this
amendment is being adopted. This amendment is effective
August 17, 1992.
1. New sentences have been added to Section 6.1 of
the Plan to read as follows:
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.
2. The following paragraph has been added as a new
Section 17:
17. Expiration of Options. 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 modify the dates
upon which options previously granted 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. 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 or
the original Stock Option Agreement.
Executed at Los Angeles this 22 day of August, 1995.
FIRST INTERSTATE
BANCORP
By:______________________
Executive
Vice President
By:_______________________
Secretary
EXHIBIT (10.5)
SECOND AMENDMENT
TO
FIRST INTERSTATE BANCORP
1991 PERFORMANCE STOCK PLAN
First Interstate Bancorp adopted the First Interstate
Bancorp 1991 Performance Stock Plan (the Plan) effective
February 7, 1991 as approved by shareholders on April 19,
1991 at the Annual Shareholder's meeting.
In order to have a consistent definition of Change in
Control among First Interstate Bancorp's various plans, this
Amendment is being adopted. This Amendment is effective
June 20, 1994.
1. The definition of Change in Control in Section 14
Additional Definitions is amended by revising it to read as
follows:
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
in Section 13(d) of the Securities Exchange Act of 1934
(the Exchange Act)) 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 member of
the Board of Directors of the Company immediately prior to
a meeting of the stockholders of the Company involving a
contact 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.
Executed at Los Angeles, California this 20th day of
July, 1994.
FIRST
INTERSTATE BANCORP
By:
_________________________
Executive Vice President
By:
_________________________
Secretary
EXHIBIT (10.5)
THIRD AMENDMENT
TO
FIRST INTERSTATE BANCORP
1991 PERFORMANCE STOCK PLAN
First Interstate Bancorp adopted the First Interstate
Bancorp 1991 Performance Stock Plan (the "Plan") effective
February 7, 1991 as approved by shareholders on April 19, 1991
at the Annual Shareholder's meeting.
This Amendment is being adopted to modify the definition
of Change in Control. This Amendment is effective January 21,
1996.
1. The definition of Change in Control in Section 14,
Additional Definitions is amended by deleting 50% in clause
(d) and inserting 60% in its place.
Executed at Los Angeles, California this 25th day of
March, 1996.
FIRST INTERSTATE
BANCORP
By:___________________________
Executive
Vice President
By:___________________________
Secretary
W032596B.DOC
EXHIBIT (10.8)
FIRST AMENDMENT
TO
FIRST INTERSTATE BANCORP
1991 DIRECTOR OPTION PLAN
(as amended and restated)
First Interstate Bancorp adopted the First Interstate
Bancorp 1991 Director Option Plan effective October 16,
1990.
In order to have a consistent definition of Change in
Control among First Interstate Bancorp's various plans, this
Amendment is being adopted. This Amendment is effective
June 20, 1994. The definition of Change in Control in
Section 7, Change in Control is amended by revising it to
read as follows:
Any Option granted hereunder shall become immediately
exercisable to the full extent theretofore not exercisable
upon the occurrence of a Change in Control. 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 in Section
13(d) of the Securities Exchange Act of 1934 (the Exchange
Act) 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.
Executed at Los Angeles, California this 20th day of
July, 1994.
FIRST
INTERSTATE BANCORP
By:
________________________
Executive Vice President
By:
________________________
Secretary
EXHIBIT (10.8)
THIRD AMENDMENT
TO
FIRST INTERSTATE BANCORP
1991 DIRECTOR OPTION PLAN
(as amended and restated)
First Interstate Bancorp adopted the First Interstate
Bancorp 1991 Director Option Plan effective October 16, 1990.
This Amendment is being adopted to modify the definition
of Change in Control. This Amendment is effective January 21,
1996.
1. The definition of Change in Control in Section 7,
Change in Control is amended by deleting 50% in clause (d)
and inserting 60% in its place.
Executed at Los Angeles, California this 26th day of
March, 1996.
FIRST INTERSTATE
BANCORP
By:_________________________
Executive Vice
President
By:_________________________
Secretary
W032796C.DOC
EXHIBIT (10.10)
FIRST INTERSTATE
1996 REGIONAL EXECUTIVE INCENTIVE PLAN
Effective January 1, 1996
1. Objectives. The 1996 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:
"Administrator" means the Chief Executive Officer of
Bancorp.
"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 1996
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
1996 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
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, 1996 upon
adoption by the Committee. Subject to the provisions of
this Plan and in the absence of specific action by the Com-
mittee, 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), 10 and 17 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
Administrator 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,
disabil-
ity, 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 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 Com-
mittee 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
Participant 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 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 suggestions of Participants in
connection with its periodic amendment 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, 1996. 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
defined 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 Control 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
Bancorp representing 20% or more of the combined voting
power of Bancorp's then outstanding 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 Insurance 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 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 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 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 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 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, First Interstate Bancorp
hereby adopts this 1996 Regional
Executive Incentive Plan as of November 19, 1996.
FIRST INTERSTATE BANCORP
By
___________________________
TABLE A
1996 REGIONAL EXECUTIVE INCENTIVE PLAN
I. Target Award Percentage
Target
Award
Participant Level Percentage
CEO California
50
CEO Northwest
50
CEO Southest
50
CEO Texas
50
TABLE B
EMPLOYEE BENEFIT PLANS
FIRST The First Interstate Bancorp Excess Benefit Re
tirement Plan;
SECOND The First Interstate Bancorp Supplemental Execu
tive 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.
W011096.A00 -2-
G020795A.A00 -12-
G020795A.A00 -13-
EXHIBIT (10.11)
FIRST INTERSTATE
1996 MANAGEMENT INCENTIVE PLAN
Effective January 1, 1996
1 . Objectives. The 1996 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 1996
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, 1996 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), 10 and 17, 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
notified of his or her
participation in the Plan for such Performance Year or shall
be notified of his or her
termination, as applicable, by a letter from the
Administrator or his or her designee. A
summary 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 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 Partici-
pants 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 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 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, 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 under the
Plan 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 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 suggestions 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 employment 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, 1996.
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
defined 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 Control 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 Insurance 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 Interstate 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 Excess 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
Incentive Plans;
5. The First Interstate Bancorp Annual Incentive
Compensation
Plans;
6. The First Interstate Bancorp Profit Improvement
Plans.
7. The First Interstate Bancorp Corporate Executive
Incentive
Plan.
8. The First Interstate Bancorp Regional Executive
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 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
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 discretion. The "right to
select arbitration" is not mandato-
ry 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, 1996.
FIRST INTERSTATE
BANCORP
By
___________________________
TABLE A
1994 MANAGEMENT INCENTIVE PLAN
I. Target Award Percentage
Participant Level 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
W011096A.A00 -7-
G020695.A00 -16-
EXHIBIT (10.12)
FIRST AMENDMENT
TO
FIRST INTERSTATE
CORPORATE EXECUTIVE INCENTIVE PLAN,
1996 FIRST INTERSTATE REGIONAL EXECUTIVE INCENTIVE PLAN
AND
1996 FIRST INTERSTATE MANAGEMENT INCENTIVE PLAN
First Interstate Bancorp adopted the First Interstate
Corporate Executive
Incentive Plan ("CEIP") on April 28, 1995, as approved by
shareholders at its annual
meeting on February 21, 1995. First Interstate Bancorp
adopted the First Interstate
1996 Regional Executive Incentive Plan ("REIP") and First
Interstate Bancorp 1996
Management Incentive Plan ("MIP") effective January 1, 1996.
1. The definition of Change in Control in
Subparagrapah (c) of Section
16, Provisions Applicable in the Event of a Change in
Control, of the CEIP is amended
by deleting "50%" in clause (iv) and inserting "60%" in its
place.
2. The definition of Change in Control in
Subparagraph (c) of Section
17, Provisions Applicable in the Event of a Change in
Control, of the REIP is amended
by deleting "50%" in clause (iv) and inserting "60%" in its
place.
3. The definition of Change in Control in
Subparagraph (c) of Section
17, Provisions Applicable in the Event of Change in Control,
of the MIP is amended by
deleting "50%" in clause (iv) and inserting "60%" in its
place.
Executed at Los Angeles, Calfiornia this 25th day of
March, 1996.
FIRST INTERSTATE BANCORP
By:______________________
Executive Vice
President
By:______________________
Secretary
W032596D.DOC
EXHIBIT (10.18)
TIER I (BANCORP)
AMENDMENT TO
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
FIRST INTERSTATE BANCORP
Reference is made to the Amended and Restated
Employment Agreement
between First Interstate Bancorp ("Employer") and
_____________________
("Employee"), effective as of _______________ (the
"Agreement").
Terms which are defined in the Agreement shall have
the same meaning in this
Amendment.
1. Paragraph 10(b) shall be amended by changing the
reference to "(b)"
to a reference to "(b)(1)" and inserting the words
"Employee's base salary may not be
reduced and" after the words "In addition" in the third
sentence.
2. The following paragraph shall be added as
paragraph 10(b)(2) after
paragraph 10(b)(1):
"10(b)(2) If prior to a Change in Control, Employee's
duties have been
modified in connection with or in anticipation of any Change
in Control (a
"Modification"), whether or not such Change in Control is
consummated, the
determination of whether there has been any change, addition
to, or taking away from
the scope of Employee's duties after a Change in Control
shall be made with reference
to Employee's duties prior to such Modification.
Accordingly, following a Change in
Control, Employee, if still then employed, may treat the
Modification as a material
breach of this Agreement provided that following the Change
in Control the Employee
is offered a position or continues in a position which
represents a change, addition to, or
taking away from the scope of the duties in existence prior
to the Modification. The
Employee may treat the Modification as a material breach of
this Agreement if within
60 days of the Change in Control he or she is not offered a
position with duties
equivalent to the duties in existence prior to the
Modification. The damages provided
for by this Agreement and the amount of such damages shall
be calculated without
reference to any changes in Employee's compensation or
benefits that occurred in
connection with the Modification in Employee's duties."
3. Paragraph 10(c) is amended by changing the third
sentence thereof to
read as follows:
"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 payments described in
subparagraphs (d) and (k)
below (as damages and not as penalty for such breach)."
4. Paragraph 10(d)(1)(B) of the Agreement is
amended to read as
follows:
"(B) the largest aggregate amount of the bonuses
awarded to Employee in
respect of the 1993, 1994 or 1995 plan year under all of the
Employer's or First
Interstate's incentive plans in which Employee was then
participating (whichever year's
bouses were largest in the aggregate)."
5. Paragraph 10 of the Agreement is amended by
changing the flush
language immediately following subparagraph 10(d)(3) to read
as follows:
"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. If
Employee is
terminated and simultaneously retires under the Pension
Plan, the actuarial
equivalents shall be calculated on the basis of the actual
and hypothetical
benefits then payable. In addition, for the purpose of
calculating actuarial
equivalents, if Employee is terminated but does not
simultaneously retire under
the Pension Plan, calculations shall be made by assuming
that Employee's
retirement occurs on the first day that Employee is eligible
to retire under the
plan in question and then discounting the benefit to which
Employee would
then be entitled back to the date of Employee's termination.
Consistent with
the crediting of additional years of Service and Benefit
Service and age under
certain plans, the hypothetical retirement date and benefits
payable under such
plans shall be determined by taking the additional years
into account for the
purpose of computing the retirement date and increased
benefits under such
plans. 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."
6. Paragraph 10(f)(4) is amended by deleting "50%"
and inserting "60%"
in its place.
7. Paragraph 10 of the Agreement is amended by
adding the following as
paragraph 10(k):
"(k) Immediately following termination of employment,
First
Interstate shall pay to the Employee under this paragraph 10
a lump sum in the
amount of $30,000 for the purpose of obtaining professional
financial planning
advice."
8. Paragraph 10 is amended by adding the following
as paragraph 10(1):
"(1) For purposes of this paragraph 10, if Employer
terminates
Employee's employment prior to the date of a Change in
Control and such
termination (i) was at the request of a third party who has
indicated an
intention or taken steps reasonably calculated to effect a
Change in Control or
(ii) otherwise occurred in connection with or in
anticipation of a Change in
Control, then Employee's employment will be deemed to have
terminated on or
within two years after a Change in Control and Employee
shall be entitled to
the payments described in subparagraph (d)."
9. The Agreement is amended by adding the following
as paragraph 20:
"20. Legal Fees. Employer shall pay or reimburse
Employee, as
incurred, for all reasonable legal fees and expenses,
including reasonable
attorneys' fees and expenses as a result of any litigation
or other proceeding
(other than a proceeding covered by paragraph 10(g) or
paragraph 14) between
Employer and Employee with respect to the subject matter of
this Agreement
and the enforcement of rights hereunder, provided, that such
litigation or
proceeding results in any
(a) settlement, requiring Employer to make a
payment to
Employee, or
(b) judgment or order in favor of Employee,
regardless of
whether such judgment or order is subsequently reversed on
appeal or in a
collateral proceeding.
In order to carry out the intent of the preceding sentence,
Employer shall
advance Employee the amount of such fees and expenses as
incurred and
Employee shall be obligated to repay such advances without
interest unless the
proviso at the end of the preceding sentence is satisfied."
10. The Agreement is amended by adding the following
as paragraph 21:
"21. Calculation of Benefits. All calculations in
respect of
payments to be made or benefits to be provided under this
Agreement, which
may become payable to Employee, shall be performed at
Employer's expense by
Ernst & Young LLP; provided that, Ernst & Young LLP shall
have no
authority to determine whether or not payments are owed
under the Agreement
but shall only have the authority to determine the amount of
the payments to be
made if it is otherwise determined that Employer owes
amounts to employee.
The determination of Ernst & Young LLP shall be binding and
conclusive upon
Employee and Employer."
The effective date of this Amendment shall be
January 21, 1996;
provided, however, that in the event of a transaction that
is intended to comply with
"pooling of interest" accounting rules, the amendments set
forth in paragraphs 6 and 8
above shall have no effect, and shall not be a part of the
Agreement, if such amendment
would prevent the transaction from so complying. Except as
herein modified, the
Agreement shall remain in full force and effect.
FIRST INTERSTATE BANCORP
By:
______________________
[Title]
_________________________
[Employee]
g:\wp\139666.doc
4
EXHIBIT (10.20)
SECOND
AMENDMENT TO
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
FIRST INTERSTATE BANCORP
Reference is made to the Amended and Restated
Employment Agreement
between First Interstate Bancorp ("First Interstate") and
_________________
("Employee"), effective as of ______________ (the
"Agreement").
Terms which are defined in the Agreement shall have
the same meaning
in this amendment.
1. Paragraph 10(d)(2) is amended so that the language
following "(B)" reads as
follows:
"the aggregate of the single sum actuarial equivalents
of Employee's vested
accrued benefits under all nonqualified employee
deferred compensation plans, except
for the "Excluded Plans" (as defined in subparagraph (d)(4)
below), sponsored by First
Interstate or any affiliate thereof (including the SERP)
determined without regard to the
provisions of the preceding clause (A), and"
2. A new subparagraph (d)(4) is added to paragraph
10(d), which reads as
follows:
"(4) The term "Excluded Plan" in paragraph 10(d)(2)(B)
refers to the portion of
any plan sponsored by First Interstate or any affiliate that
entitled the Employee to defer
the receipt of a bonus that would otherwise be payable until
some future time, at which
time the deferred amount would be payable in cash.
For example, the term "Excluded
Plan" encompasses any deferrals by the Employee of bonuses
that were otherwise
payable under the Annual Incentive and Profit Improvement
Plans that were adopted in
1990 and earlier years as well as deferrals for later cash
payment of bonuses earned
under any Management Incentive Plan, Regional Executive
Incentive Plan, or
Corporate Executive Incentive Plan adopted in 1990 and later
years. The term
"Excluded Plan" does not include any portion of a bonus that
was deferred in the form
of stock units under the 1991 or 1995 Performance Stock
Plan. It is the intent of this
paragraph 10(d)(2)(B) and (d)(4) that the payment of any
bonus deferred for future
payment in cash not be accelerated from the time that it
would otherwise be payable
because a termination of employment has followed a
Change in Control, but that such
bonus shall instead be payable in accordance with the
original terms of the election
governing payment, and this Employment Agreement shall be
interpreted in a manner
that achieves that result."
The effective date of this Amendment shall be
_________________; except as
herein modified, the Agreement shall remain in full force
and effect.
FIRST INTERSTATE
BANCORP
By:
________________________
(Title)
____________________________
(Employee)
EXHIBIT (10.22)
FIRST AMENDMENT
TO
SPLIT-DOLLAR LIFE INSURANCE AGREEMENT
This Agreement amends the Split-Dollar Life Insurance
Agreement entered
into as of _____________, 19____ by and between First
Interstate Bancorp (the
"Company") and ______________ ("Director"):
1. Subsection (b) of Section 9, Qualifying
Termination on account of
termination after a Change in Control is amended by deleting
"50%" and inserting
"60%" in its place.
Executed at Los Angeles, California this 25th day of
March, 1996.
FIRST INTERSTATE BANCORP
By:
_________________________
Executive Vice
President
By:__________________________
Secretary
W032796B.DOC
EXHIBIT (10.24)
FIRST AMENDMENT
TO
SPLIT-DOLLAR LIFE INSURANCE AGREEMENT
This Agreement amends the Split-Dollar Life Insurance
Agreement entered
into as of _____________, 19____ by and between First
Interstate Bancorp (the
"Company") and ______________ ("Employee"):
1. Subsection (b) of Section 9, Qualifying
Termination on account of
termination after a Change in Control is amended by deleting
"50%" and inserting
"60%" in its place.
Executed at Los Angeles, California this 25th day of
March, 1996.
FIRST INTERSTATE BANCORP
By:
_________________________
Executive Vice
President
By:__________________________
Secretary
W032596F.DOC
EXHIBIT (11)
COMPUTATION OF EARNINGS PER SHARE First Interstate Bancorp
Year Ended December 31
1995 1994 1993
- --------------------------------------------------------------------------------
(dollar amounts in millions, except per share amounts)
Net income applicable to common stock
Net income $ 885.1 $ 733.5 $ 736.7
Less dividends on preferred stock 33.2 33.2 46.6
- --------------------------------------------------------------------------------
Net income, as adjusted, for calculation of
primary and fully diluted earnings per share $ 851.9 $ 700.3 $ 690.1
================================================================================
Weighted average number of shares (in thousands)
Weighted average number of shares outstanding 5,717 78,853 75,823
Dilutive effect of outstanding stock options
(as determined by application of the
treasury stock method) 1,591 1,550 1,191
Stock units under Management Incentive Plan 22 19 9
- --------------------------------------------------------------------------------
Weighted average number of shares, as
adjusted, for calculation of primary
earnings per share 77,330 80,422 77,023
Additional dilutive effect of
outstanding stock options 568 73 224
- --------------------------------------------------------------------------------
Weighted average number of shares, as
adjusted, for calculation of fully
diluted earnings per share 77,898 80,495 77,247
================================================================================
Primary and fully diluted earnings per share (1)
Income before extraordinary item and cumulative
effect of accounting changes $ 11.02 $ 8.71 $ 6.68
Extraordinary item - - (0.32)
Cumulative effect of account changes - - 2.60
Net income $ 11.02 $ 8.71 $ 8.96
(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.
EXHIBIT (12)
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
First Interstate Bancorp
Year Ended December 31
----------------------------
(dollar amounts in millions) 1995 1994 1993
- ------------------------------------------------------------------------------
A. First Interstate Bancorp and Subsidiaries (Consolidated):
Earnings:
1. Income before income taxes $1,443 $1,183 $ 881
2. Plus interest expense (1) 1,223 915 921
- ------------------------------------------------------------------------------
3. Earnings including interest on deposits 2,666 2,098 1,802
4. Less interest on deposits 975 725 720
- ------------------------------------------------------------------------------
5. Earnings excluding interest on deposits $1,691 $1,373 $1,082
==============================================================================
Fixed Charges:
6. Including interest on deposits (Line 2) $1,223 $ 915 $ 921
7. Less interest on deposits (Line 4) 975 725 720
- ------------------------------------------------------------------------------
8. Excluding interest on deposits $ 248 $ 190 $ 201
==============================================================================
Ratio of Earnings to Fixed Charges:
Including interest on deposits
(Line 3 divided by Line 6) 2.18 2.29 1.96
==============================================================================
Excluding interest on deposits
(Line 5 divided by Line 8) 6.81 7.22 5.39
==============================================================================
B. First Interstate Bancorp (Parent Corporation):
Earnings:
9. Income before income taxes and equity in
undistributed income of subsidiaries $ 406 $ 348 $ 311
10. Plus interest expense (1) 112 102 132
- ------------------------------------------------------------------------------
11. Earnings including interest expense $ 518 $ 450 $ 443
==============================================================================
Fixed Charges:
12. Interest expense (Line 10) $ 112 $ 102 $ 132
==============================================================================
Ratio of Earnings to Fixed Charges:
(Line 11 divided by Line 12) 4.64 4.40 3.35
==============================================================================
(1) Includes amounts representing the estimated interest component
of net rental payments.
Overview of 1995 Performance
First Interstate Bancorp recorded consolidated net income for 1995 of
$885.1 million, or $11.02 per share, including the effect of $14.7 million
($0.19 per share) of after-tax restructuring charges and $27.6 million
($0.35 per share) of merger-related charges. This compares to net income in
1994 of $733.5 million, or $8.71 per share, which included the after-tax
effect of $87.6 million ($1.09 per share) of restructuring charges. These
results represent a substantial improvement from the $561.4 million, or
$6.68 per share, of earnings before an extraordinary item and the
cumulative effect of accounting changes reported for 1993.
Reflecting the overall improvement in profitability of the consolidated
Corporation, the return on average assets for 1995 rose to 1.59%, a
material improvement from 1.38% in 1994. At the same time, the return on
average common shareholders' equity rose to 24.57% from 21.56% a year
earlier, reflecting increased profitability and the impact of the
Corporation's stock repurchase programs.
The primary factor contributing to the earnings growth in 1995 was the 8%
increase in total revenue. Total taxable-equivalent revenue, which includes
taxable-equivalent net interest income and noninterest income, was up
$275.7 million in 1995. An improvement in the level of net interest income
contributed over 76% of the 1995 increase in total revenue. This resulted
principally from a 29 basis point increase in the net interest margin to
5.43% in 1995 from 5.14% in 1994. At the same time, average earning assets
increased 3.3% from the 1994 average level, with a shift in the mix to a
higher proportion of loans from lower yielding investment securities. The
remainder of the increase in total revenue was spread over the major
categories of noninterest income.
Reflecting significant improvement in the risk profile of the Corporation,
no provision for credit losses was recorded in 1994 and 1995. The provision
for credit losses amounted to $112.6 million in 1993. In addition, expenses
arising from the maintenance, sales and valuation adjustments of other real
estate acquired through foreclosure (ORE) amounted to less than $1 million
in 1995, versus a net recovery of $12.4 million in 1994 and net expense of
$33.6 million in 1993.
Nonperforming assets were reduced to $232 million at yearend 1995, down 10%
from $258 million a year earlier. This follows declines of nearly 17% at
yearend 1994 and 60% at yearend 1993. The Corporation's emphasis on
maintaining an exemplary credit profile has contributed to the reduction of
consolidated nonperforming assets to 0.40% of total assets, an improvement
from 0.46% at yearend 1994 and 0.60% at yearend 1993. Net chargeoffs
totaled $154.7 million in 1995 (0.44% of average loans), compared to $133.0
million in 1994 (0.46% of average loans) and $218.1 million in 1993 (0.90%
of average loans). Reflecting the factors noted above, the allowance for
credit losses equaled 2.19% of total loans at December 31, 1995, versus
2.81% at yearend 1994 and 3.85% at yearend 1993.
Noninterest expenses totaled $2,213.1 million in 1995, a slight increase
from $2,197.8 million reported for 1994. Noninterest expenses include the
effects of the integration of 19 acquisitions over the last three years.
Reflecting the success of the Restructuring Plan announced by the
Corporation in 1994, the efficiency ratio, which reflects noninterest
expenses before merger related expenses, restructuring charges and ORE
expenses as a percent of taxable-equivalent revenue, was 58.7% in 1995, a
substantial improvement from 60.8% in 1994 and 65.7% in 1993.
Merger with Wells Fargo & Company
On January 24, 1996, the Corporation and Wells Fargo & Company announced
that they had reached a definitive agreement to merge the two companies.
Under the terms of the merger agreement, the Corporation's shareholders
will receive a tax-free exchange of two-thirds of a share of Wells Fargo
Common Stock for each share of the Corporation's Common Stock. At March 1,
1996, the merger was valued at over $12.5 billion, making it the largest
bank merger in U.S. history. It is expected to close early in the second
quarter of 1996, subject to regulatory and shareholder approvals.
Under the terms of the merger agreement, the combined entity will be known
as Wells Fargo & Company and will operate from headquarters in San
Francisco and Los Angeles, with senior executive presence in both. The
combined board of directors will consist of 13 members of Wells Fargo's
board and seven directors from First Interstate's board.
Concurrent with its entering into the merger agreement with Wells Fargo,
the Corporation terminated its November 5, 1995, merger agreement with
First Bank System, Inc. An overall settlement agreement was entered into
among the Corporation, First Bank System and Wells Fargo. Under the terms
of the settlement agreement, the Corporation agreed to pay First Bank
System a termination fee of $125 million and an additional termination fee
of $75 million upon the closing of its merger with Wells Fargo. These
payments are being made in full satisfaction of the Corporation's
obligations under the stock option and fee agreements entered into as part
of its November 5, 1995, merger agreement with First Bank System. In
addition, all litigation among the parties related to efforts to merge with
the Corporation has been settled.
Earnings Summary
The following tables summarize the Corporation's financial results for the
last three years:
<TABLE>
<CAPTION>
Change 95/94 Change 94/93 Change 93/92
--------------- ------------------ ---------------
Amounts (millions) 1995 1994 1993 $ % $ % $ %
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest income (1) $2,558.3 $2,347.9 $2,086.7 210.4 9.0 261.2 12.5 54.4 2.7
Provision for credit losses - - 112.6 - - (112.6) n/m (201.7) (64.2)
Net interest income after
provision for credit losses 2,558.3 2,347.9 1,974.1 210.4 9.0 373.8 18.9 256.1 14.9
Noninterest income 1,119.6 1,054.3 954.2 65.3 6.2 100.1 10.5 42.1 4.6
Noninterest expenses
Operating 2,160.5 2,068.9 1,998.8 91.6 4.4 70.1 3.5 (50.8) (2.5)
Other real estate 0.6 (12.4) 33.6 13.0 n/m (46.0) n/m (126.0) (78.9)
Restructuring 24.4 141.3 - (116.9) (82.7) 141.3 n/m - -
Merger related 27.6 - - 27.6 n/m - - - -
- ---------------------------------------------------------------------------------------------------------------------
Pretax earnings (1) 1,464.8 1,204.4 895.9 260.4 21.6 308.5 34.4 475.0 n/m
Income taxes 558.1 449.5 319.9 108.6 24.2 129.6 40.5 199.0 n/m
Taxable-equivalent
adjustment 21.6 21.4 14.6 0.2 0.9 6.8 46.6 (3.1) (17.5)
Extraordinary item - - (24.8) - - 24.8 n/m (24.8) n/m
Cumulative effect of
accounting changes - - 200.1 - - (200.1) n/m 200.1 n/m
- ---------------------------------------------------------------------------------------------------------------------
Net Income $ 885.1 $ 733.5 $ 736.7 151.6 20.7 (3.2) (0.4) 454.4 n/m
=====================================================================================================================
<FN>
(1) Taxable-equivalent basis
</TABLE>
<TABLE>
<CAPTION>
Change 95/94 Change 94/93 Change 93/92
------------ ---------------- --------------
Per Common Share 1995 1994 1993 $ % $ % $ %
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income before
extraordinary item
and cumulative effect
of accounting changes $11.02 $8.71 $6.68 2.31 26.5 2.03 30.4 3.45 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 $11.02 $8.71 $8.96 2.31 26.5 (0.25) (2.8) 5.73 n/m
=====================================================================================================================
Dividends Paid $ 3.10 $2.75 $1.60 0.35 12.7 1.15 71.9 0.40 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 95/94 Change 94/93 Change 93/92
-------------- ------------- ----------------
AMOUNTS (millions) 1995 1994 1993 $ % $ % $ %
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $3,729.5 $3,213.4 $2,958.8 516.1 16.1 254.6 8.6 (248.6) (7.8)
Interest expense 1,171.2 865.5 872.1 305.7 35.3 (6.6) (0.8) (303.0) (25.8)
- --------------------------------------------------------------------------------------------------------------------------
Net interest income $2,558.3 $2,347.9 $2,086.7 210.4 9.0 261.2 12.5 54.4 2.7
MARGINS (as a % of earning assets)
Earning asset yield 7.91 7.04 6.96 12.4 1.1 (9.7)
Interest expense 2.48 1.90 2.05 30.5 (7.3) (27.3)
- --------------------------------------------------------------------------------------------------------------------------
Net interest margin 5.43 5.14 4.91 5.6 4.7 0.4
==========================================================================================================================
1995 change due to 1994 change due to 1993 change due to
------------------------------- -------------------------- ----------------------------
Volume Rate Net Volume Rate Net Volume Rate Net
- ---------------------------------------------------------------------------------------------------------------------------
Interest earned on:
Total Loans $ 508.3 $ 243.0 $ 751.3 $ 394 $(76.1) $31.9 $(98.6) $(155.9) $(254.5)
Trading account securities 2.2 1.3 3.5 (3.0) (1.1) (4.1) (13.1) (0.8) (13.9)
Investment securities:
Held-to-maturity securities (259.4) 19.7 (239.7) 28.8 (34.1) (5.3) 259.3 (159.9) 99.4
Available-for-sale securities (1.5) 4.1 2.6 (5.2) 0.6 (4.6) 17.3 (3.2) 14.1
- ---------------------------------------------------------------------------------------------------------------------------
Total Investment Securities (260.9) 23.8 (237.1) 23.6 (33.5) (9.9) 276.6 (163.1) 113.5
Federal funds, repurchases 1.0 8.8 9.8 (25.1) 4.4 (20.7) (16.3) (9.5) (25.8)
Time deposits, due from banks (12.6) 0.5 (2.3) (32.9) 0.8 (32.1) (36.9) (10.0 (46.9)
Other assets held for sale 3.0 (2.3) 0.7 5.3 (1.8) 3.5 (21.4) 0.4 (21.0)
- ---------------------------------------------------------------------------------------------------------------------------
Total change 241.0 275.1 516.1 361.9 (107.3) 254.6 90.3 (338.9) (248.6)
Interest paid on:
Savings Deposits (31.5) 79.3 47.8 42.5 (33.7) 8.8 29.7 (144.1) (114.4)
Other Time Deposits 81.6 120.3 201.9 2.6 (6.3) (3.7) (45.9) (52.5) (98.4)
- ----------------------------------------------------------------------------------------------------------------------------
Total Deposits 50.1 199.6 249.7 45.1 (40.0) 5.1 (16.2) (196.6) (212.8)
Short term borrowings 36.5 6.9 43.4 8.3 9.9 18.2 1.5 - 1.5
Long term debt 0.2 12.4 12.6 (35.8) 5.9 (29.9) (88.5) (3.2) (91.7)
- ---------------------------------------------------------------------------------------------------------------------------
Total change 86.8 218.9 305.7 17.6 (24.2) (6.6) (103.2) (199.8) (303.0)
- ---------------------------------------------------------------------------------------------------------------------------
Net interest income $ 154.2 $ 56.2 $ 210.4 $ 344.3 $(83.1) $261.2 $193.5 $(139.1) $ 54.4
===========================================================================================================================
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 1995 and 1994, and 1993. 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 averaged $47.1 billion in 1995, an increase of $1.5 billion
(3.3%). This follows increases of $3.1 billion (7.3%) in 1994 and $920
million (2.2%) in 1993. Over the last year, the loan component of earning
assets increased as a result of increased demand and the Corporation's
acquisition program. The average yield on earning assets increased to 7.91%
in 1995, versus 7.04% in 1994 and 6.96% in 1993.
The following table provides a comparison of average earning asset volumes
for the last three years:
<TABLE>
<CAPTION>
Change 95/94 Change 94/93 Change 93/92
-------------- -------------- -----------------
Average Earning Asset Volumes (millions)(1) 1995 1994 1993 $ % $ % $ %
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial and agricultural $ 9,704 $ 8,287 $ 7,618 1,417 17.1 669 8.8 (493) (6.1)
Real estate construction 1,105 806 913 299 37.1 (107) (11.7) (833) (47.7)
Real estate mortgage 11,271 7,586 5,413 3,685 48.6 2,173 40.1 (59) (1.1)
Instalment 12,553 11,660 9,943 893 7.7 1,717 17.3 187 1.9
Foreign 157 83 160 74 89.2 (77) (48.1) (246) (60.6)
Lease financing 445 222 81 223 n/m 141 n/m (122) (60.1)
- -----------------------------------------------------------------------------------------------------------------------------------
Total loans 35,235 28,644 24,128 6,591 23.0 4,516 18.7 (1,566) (6.1)
Trading account securities 161 113 166 48 42.5 (53) (31.9) (219) (56.9)
Investment securities:
Held-to-maturity securities
U.S. Treasury and agencies 9,374 14,000 14,113 (4,62) (33.0) (113) (0.8) 4,368 44.8
Other 1,420 1,624 996 (204) (12.6) 628 63.1 (469) (32.0)
- -----------------------------------------------------------------------------------------------------------------------------------
Held-to-maturity securities 10,794 15,624 15,109 (4,830) (30.9) 515 3.4 3,899 34.8
Available-for-sale securities 288 324 458 (36) (11.1) (134) (29.3) 375 n/m
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment securities 11,082 15,948 15,567 (4,866) (30.5) 381 2.4 4,274 37.8
Federal funds sold and securities
purchased under agreements to resell 495 471 1,282 24 5.1 (811) (63.3) (424) (24.9)
Time deposits, due from banks 30 380 1,342 (350) (92.1) (962) (71.7) (886) (39.8)
Other assets held for sale 122 82 29 40 48.8 53 n/m (259) (89.9)
- -----------------------------------------------------------------------------------------------------------------------------------
Total $47,125 $45,638 $42,514 1,487 3.3 3,124 7.3 920 2.2
===================================================================================================================================
<FN>
(1) Loans are net of unearned income and deferred fees.
</TABLE>
The average yields on the major categories of earning assets for the last
three years are presented in the following table:
Taxable-Equivalent Average Yields (%) 1995 1994 1993
- -----------------------------------------------------------------------------
Loans:
Commercial, financial and agricultural 8.18 6.79 6.25
Real estate construction 10.68 9.42 6.83
Real estate mortgage 8.09 7.63 8.18
Instalment 9.56 9.25 10.09
Foreign 6.78 5.59 4.48
Lease financing 7.57 7.17 8.42
- -----------------------------------------------------------------------------
Total loans 8.71 8.09 8.26
Trading account securities 5.35 4.55 5.57
Investment securities:
Held-to-maturity securities:
U.S. Treasury and agencies 5.51 5.34 5.59
Other 5.78 5.67 5.54
- -----------------------------------------------------------------------------
Total held-to-maturity securities 5.55 5.37 5.59
Available-for-sale securities 5.51 4.11 3.90
- -----------------------------------------------------------------------------
Total investment securities 5.55 5.35 5.54
Federal funds sold and securities
purchased under agreements to resell 5.83 3.98 3.10
Time deposits, due from banks 6.06 3.61 3.42
Other assets held for sale 5.63 7.51 10.00
- -----------------------------------------------------------------------------
Total Earning Assets 7.91 7.04 6.96
=============================================================================
First Interstate Average Prime Rate 8.83 7.15 6.00
Loans: Including the effect of acquisitions, average loans and leases
totaled $35.2 billion in 1995, an increase of $6.6 billion (23.0%). This
follows an increase of 18.7% in 1994 and a decline of 6.1% in 1993. Total
loans accounted for approximately 75% of average earning assets in 1995, up
from approximately 63% in 1994 and 57% in 1993.
More than half of the growth in average loans from the 1994 level reflects
higher average real estate mortgage outstandings (commercial and
residential), which were up $3.7 billion (48.6%) to an average of $11.3
billion in 1995. This follows an increase of 40.1% in 1994 and a decline of
1.1% in 1993. Most of the increase in 1995 reflects the Corporation's
acquisition program, particularly in California. During 1994 and 1993, loan
originations were augmented by selective purchases of high quality,
adjustable-rate residential mortgage loans. The combined yield on the real
estate mortgage portfolio was 8.09% in 1995, versus 7.63% in 1994 and 8.18%
in 1993.
Due to increased demand in the Corporation's markets, average commercial
loans rose $1.4 billion (17.1%) in 1995 to $9.7 billion. Commercial loan
volumes increased 8.8% in 1994 and declined 6.1% in 1993. The average yield
on the commercial loan portfolio increased to 8.18% in 1995, a substantial
improvement from 6.79% in 1994 and 6.25% in 1993.
Instalment loans, including credit card outstandings, increased $893
million (7.7%) from the average 1994 level. This follows increases of 17.3%
in 1994 and 1.9% in 1993. The average yield on instalment loans was 9.56%
in 1995, versus 9.25% in 1994 and 10.09% in 1993. The Corporation continues
its focus on retail banking and increasing its market share in the
communities in which it operates.
Including the effect of acquisitions, construction loans averaged $1.1
billion in 1995, an increase of $299 million (37.1%) from the year earlier.
This follows declines of 11.7% in 1994 and 47.7% in 1993. The yield on the
construction portfolio rose to 10.68% in 1995, up substantially from 9.42%
in 1994 and 6.83% in 1993.
Lease financing balances increased to an average of $445 million in 1995
from an average of $222 million in 1994. The increase in 1995 reflects
primarily growth in indirect auto leases. This follows an increase of
174.1% in 1994 and a reduction of 60.1% in 1993. The average yield on lease
financing was 7.57% in 1995, versus 7.17% in 1994 and 8.42% in 1993.
At December 31, 1995, including both the effect of acquisitions and an
increase in new loan originations, loans and leases totaled $36.7 billion,
an increase of $3.5 billion (10.4%) from the $33.2 billion reported a year
earlier. Instalment loans increased $590 million (4.8%) to $12.9 billion at
yearend. Growth of these consumer loans reflects general market conditions
that increase consumer demand for credit. At the same time, commercial
loans increased $1.6 billion (17.5%) to $10.9 billion at yearend 1995.
Residential real estate mortgages totaled $6.4 billion, $537 million (9.2%)
above a year ago, while commercial mortgages were up $395 million (9.0%) to
$4.8 billion at yearend 1995. Construction loans were $1.1 billion at the
end of 1995, an increase of $118 million (12.6%) from a year earlier.
The contractual maturity schedule of the loan portfolio, excluding
instalment and real estate mortgage loans, is detailed in the following
table:
<TABLE>
<CAPTION>
Amounts (millions) Within one year One to five years After five years Total
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $5,706 $4,112 $1,099 $10,917
Real estate construction 455 352 256 1,063
Foreign 70 99 16 185
- ----------------------------------------------------------------------------------------------------------
Total $6,231 $4,563 $1,371 $12,165
==========================================================================================================
</TABLE>
As shown in the preceding table, loans maturing within one year totaled
$6.2 billion at yearend 1995. 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 provides additional detail on the remaining $5.9
billion of loans with maturities exceeding one year:
Amounts (millions) Fixed Rate Adjustable Rate Total
- ------------------------------------------------------------------------------
Commercial, financial and agricultural $2,859 $2,352 $5,211
Real estate construction 236 372 608
Foreign 88 27 115
- ------------------------------------------------------------------------------
Total $3,183 $2,751 $5,934
==============================================================================
Investment Securities: Investment securities are purchased for the primary
purpose of deploying excess liquidity while accommodating anticipated loan
growth. Loan growth is supported by the maintenance of a laddered
portfolio, which generates uniform cash flows throughout the year. In
addition, securities classified as available-for-sale can be liquidated to
provide additional cash flow.
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." In
December 1995, under a one-time opportunity for organizations to transfer
securities from their held-to-maturity portfolios approved by the Financial
Accounting Standards Board, the Corporation reclassified substantially all
of the investment portfolio to an available-for-sale basis, which provides
additional flexibility in the management of the portfolio. Under this
classification, securities are carried at fair value and unrealized gains
and losses (net of related taxes) are reflected in the equity section of
the balance sheet. At December 31, 1995, the Corporation had an unrealized
net gain of $6 million.
The investment securities portfolio averaged $11.1 billion in 1995, a
decline of $4.9 billion (30.5%) from the 1994 average. This follows
increases of $381 million (2.4%) in 1994 and $4.3 billion (37.8%) in 1993.
Beginning in the second half of 1994 and continuing through 1995, proceeds
of maturing securities were used to fund loans as loan growth exceeded
deposit growth.
At December 31, 1995, total investment securities were $9.1 billion, down
$4.8 billion (34.3%) from a year earlier. The amortized cost of U.S.
Treasury and agency-backed securities declined $4.6 billion (38.5%) from a
year earlier to a total of $7.5 billion at the end of 1995. All other
investment securities amounted to $1.6 billion at the end of 1995, down
5.2% from a year earlier.
The following table compares the expected average life, carrying amount and
approximate market value of the investment securities portfolio at December
31, 1995 and 1994:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
-------------------------------------- --------------------------------------
Held-to-Maturity Expected Carrying Approximate Expected Carrying Approximate
(dollars in millions) 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
State and political subdivisions - - - 34 months 29 30
Other 300 months 88 51 42 months 1,561 1,481
- ----------------------------------------------------------------------------------------------------------------
Total 300 months $ 88 $ 51 25 months $13,695 $13,280
================================================================================================================
Available-for-Sale
(dollars in millions)
- ----------------------------------------------------------------------------------------------------------------
U.S. Treasury and agencies 26 months $7,487 $7,487 22 months $ 42 $ 42
State and political subdivisions 38 months 18 18 - - -
Other 30 months 1,505 1,505 n/m 114 114
- ----------------------------------------------------------------------------------------------------------------
Total 27 months $9,010 $9,010 n/m $ 156 $ 156
================================================================================================================
</TABLE>
At December 31, 1995, securities maturing within one year amounted to $2.4
billion, or 26.8% of the investment securities portfolio. The weighted
average expected maturity of total investment securities was 27 months at
yearend 1995, compared to the weighted average maturities of 25 months in
1994 and 21 months at the end of 1993. The average expected maturities of
U.S. Treasury and agency securities were 26 months, 22 months and 20 months
at yearend 1995, 1994 and 1993, respectively. The comparable maturities of
tax-exempt securities were 38 months, 34 months and 32 months at the same
dates.
The contractual maturity distribution of the major categories of the
investment securities held-to-maturity and available-for-sale portfolios at
December 31, 1995, is presented in the following table:
<TABLE>
<CAPTION>
December 31, 1995
----------------------------------------------------------------------------
Held-to-Maturity Available-for-Sale
-------------------------- ----------------------------------------------
Less After Within One Five After
than 10 10 one to five to 10 10
Contractual Amounts (millions) years years Total year years years years Total
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and agencies $ - $ - $ - $2,320 $2,441 $1,426 $1,300 $7,487
State and political subdivisions - - - 2 12 4 - 18
Other - 88 88 114 551 4 836 1,505
- -------------------------------------------------------------------------------------------------------------
Total $ - $ 88 $ 88 $2,436 $3,004 $1,434 $2,136 $9,010
=============================================================================================================
</TABLE>
As indicated in the preceding table, securities that mature within one year
totaled $2.4 billion on a contractual basis at yearend 1995. Contractual
maturities plus estimated prepayments during 1996 are expected to equal
approximately $4.6 billion.
Taxable-equivalent yields of investment securities held at December 31,
1995, are presented by maturity in the following table:
<TABLE>
<CAPTION>
December 31, 1995
----------------------------------------------------------------------------
Held-to-Maturity Available-for-Sale
-------------------------- ----------------------------------------------
Less After Within One Five After
than 10 10 one to five to 10 10
Yield (%) years years Total year years years years Total
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and agencies - - - 5.12 5.52 6.14 6.09 5.61
State and political subdivisions - - - 7.97 8.42 8.44 7.41 8.35
Other - 6.77 6.77 5.88 5.48 6.18 5.96 5.78
- -------------------------------------------------------------------------------------------------------------
Total - 6.77 6.77 5.16 5.52 6.14 6.04 5.65
=============================================================================================================
</TABLE>
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
in recent years by strong growth in higher-yielding loans, interest bearing
time deposits due from banks declined $350 million (92.1%) to an average of
$30 million in 1995. This follows declines of $962 million (71.7%) in 1994
and $886 million (39.8%) in 1993. Federal funds sold and repurchase
agreements averaged $495 million in 1995, an increase of $24 million
(5.1%). This follows declines of $811 million (63.3%) in 1994 and $424
million (24.9%) in 1993.
At December 31, 1995, interest bearing deposits at other banks totaled $14
million, a decline of $12 million (45.1%) from the year earlier level. At
the same time, federal funds sold and repurchase agreements increased $1.6
billion to $1.8 billion, reflecting generally improved liquidity and normal
seasonality.
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 consumer deposits gathered by a network
of 1,140 domestic banking offices in 13 states. Core deposits, including
interest bearing consumer funds, demand and noninterest bearing time
deposits described below, reduce the Corporation's dependence on corporate
purchased funds. Core deposits represented 97% of average deposits in 1995,
versus 98% in 1994 and 1993. Core deposits, less cash and due from banks,
supported 87% of average earning assets in 1995, versus 88% in 1994 and 86%
in 1993.
Total interest bearing sources of funds increased $1.5 billion (4.6%) to an
average of $34.3 billion in 1995. This follows an increase of $1.8 billion
(5.8%) in 1994 and a decline of $1.1 billion (3.5%) in 1993. The average
rate paid on total interest bearing liabilities was 3.41% in 1995, versus
2.64% in 1994 and 2.81% in 1993. The higher rate in 1995 reflects increased
interest rates and a greater proportion of CDs, largely due to thrift
acquisitions.
A breakdown of the Corporation's interest bearing sources of funds follows:
<TABLE>
<CAPTION>
Change 95/94 Change 94/93 Change 93/92
--------------- --------------- ----------------
Average Volumes (millions) 1995 1994 1993 $ % $ % $ %
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Regular savings $ 5,715 $ 5,823 $ 5,288 (108) (1.9) 535 10.1 159 3.1
Market interest demand 6,496 6,644 6,115 (148) (2.2) 529 8.7 222 3.8
Market interest savings 10,262 11,427 10,491 (1,165 ) (10.2) 936 8.9 654 6.6
Other savings and time
under $100,000 7,730 5,787 5,799 1,943 33.6 (12) (0.2) (825) (12.5)
- -------------------------------------------------------------------------------------------------------------
Total interest bearing
consumer funds 30,203 29,681 27,693 522 1.8 1,988 7.2 210 0.8
Large CDs, other money
market funds 1,349 1,076 989 273 25.4 87 8.8 (181) (15.5)
Short term borrowings 1,362 655 431 707 n/m 224 52.0 43 11.1
Long term debt 1,398 1,395 1,893 3 0.2 (498) (26.3) (1,203) (38.9)
- -------------------------------------------------------------------------------------------------------------
Total corporate
purchased funds 4,109 3,126 3,313 983 31.4 (187) (5.6) (1,341) (28.8)
- -------------------------------------------------------------------------------------------------------------
Total $34,312 $32,807 $31,006 1,505 4.6 1,801 5.8 (1,131) (3.5)
=============================================================================================================
</TABLE>
Interest rates paid over the past three years on the liability accounts
discussed above are summarized in the following table:
Average Rates Paid (%) 1995 1994 1993
- ----------------------------------------------------------------------
Regular savings 2.20 2.08 2.25
Market interest demand 1.32 1.25 1.52
Market interest savings 3.01 2.35 2.40
Other savings and time under $100,000 5.02 3.69 3.81
- ----------------------------------------------------------------------
Total interest bearing consumer funds 3.01 2.31 2.48
Large CDs, other money market funds 4.92 3.63 3.54
Short term borrowings 5.62 5.16 3.72
Long term debt 8.50 7.63 7.19
- ----------------------------------------------------------------------
Total corporate purchased funds 6.37 5.74 5.57
- ----------------------------------------------------------------------
Total 3.41 2.64 2.81
======================================================================
Interest Bearing Consumer Funds: These sources consist of various types of
interest bearing deposits in retail accounts. Combined balances averaged
$30.2 billion in 1995, up from the $29.7 billion reported in 1994 and $27.7
billion reported in 1993. The average rate paid on consumer funds in 1995
was 3.01%, up from 2.31% in 1994 and 2.48% in 1993.
At December 31, 1995, interest bearing consumer funds totaled $29.8
billion, a decline from the $30.5 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 additional source of liquidity. These funds
consist of large certificates of deposit, short term borrowings and long
term debt. Corporate purchased funds averaged $4.1 billion in 1995, an
increase of $983 million (31.4%). This follows declines of $187 million
(5.6%) in 1994 and $1.3 billion (28.8%) in 1993. The increase in 1995
reflects the effect of acquisitions as well as strong loan growth in excess
of core deposit generation. The declines in the two previous years reflect
the relatively large amount of funds available for investment as well as
the repurchase and redemption of long term debt during 1993. The combined
cost of corporate purchased funds averaged 6.37% in 1995, versus 5.74% in
1994 and 5.57% in 1993.
Corporate purchased funds totaled $3.8 billion at yearend 1995, a decline
of $500 million (11.6%) from a year earlier.
As of December 31, 1995, time certificates of deposit of $100,000 or more
mature as follows:
Within Three to Six to 12 After 12
Amounts (millions) three months six months months months Total
- -------------------------------------------------------------------------------
Time certificates of deposit $594 $243 $196 $107 $1,140
Other time deposits 137 16 16 74 243
At December 31, 1995, 90% of the Corporation's long term debt had fixed
coupon rates. Of this amount, 53% was converted to floating rate debt using
interest rate swaps. The effect on net interest income for the years ending
December 31, 1995, 1994 and 1993, was a positive increase of approximately
$12 million, $16 million and $47 million, respectively.
Net Noninterest Sources: Net noninterest sources of funds consist of demand
deposits and other noninterest bearing liabilities, shareholders' equity
and the allowance for credit losses, less cash and due from banks, net
fixed assets and other assets.
Demand deposits are a major, stable source of funding for the Corporation
and have increased steadily over the last three years. At December 31,
1995, demand and other noninterest bearing deposits increased to $19.1
billion (38% of total deposits), versus $16.6 billion (34%) a year earlier.
Investable demand deposits averaged $10.7 billion in 1995, up 3.7% from the
$10.3 billion average in 1994. Of the other categories of average net
noninterest sources, equity capital increased $218 million from the 1994
average, reflecting the addition of retained earnings net of the effect of
the stock buyback and dividends paid, while other assets increased $406
million (20.1%), primarily due to an increase in goodwill.
The average volumes of noninterest funding sources for the last three years
are shown in the following table:
<TABLE>
<CAPTION>
Change 95/94 Change 94/93 Change 93/92
------------ -------------- --------------
Average Volumes (millions) 1995 1994 1993 $ % $ % $ %
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Demand and noninterest bearing
time deposits $16,357 $15,556 $13,858 801 5.1 1,698 12.3 1,315 10.5
Less cash and due from banks 5,651 5,233 4,992 418 8.0 241 4.8 55 1.1
- --------------------------------------------------------------------------------------------------------------
Investable demand deposits 10,706 10,323 8,866 383 3.7 1,457 16.4 1,260 16.6
Add: Equity capital 3,817 3,599 3,478 218 6.1 121 3.5 521 17.6
Allowance for credit losses 887 980 1,043 (93) (9.5) (63) (6.0) (218) (17.3)
Other liabilities 1,076 1,017 977 59 5.8 40 4.1 (417) (29.9)
Less: Bank premises and equipment 1,244 1,065 914 179 16.8 151 16.5 (46) (4.8)
Other assets 2,429 2,023 1,942 406 20.1 81 4.2 (859) (30.7)
- --------------------------------------------------------------------------------------------------------------
Net Noninterest Sources $12,813 $12,831 $11,508 (18) (0.1) 1,323 11.5 2,051 21.7
==============================================================================================================
</TABLE>
Net Interest Income
Taxable-equivalent net interest income amounted to $2,558.3 million in
1995, an increase of $210.4 million (9.0%) from 1994. This follows
increases of 12.5% in 1994 and 2.7% in 1993. The higher level of taxable-
equivalent net interest income in 1995 resulted primarily from the 29 basis
point increase in the net interest margin to 5.43% in 1995 from 5.14% in
1994. In addition, average earning assets increased $1.5 billion (3.3%) to
$47.1 billion in 1995. This follows increases of 7.3% in 1994 and 2.2% in
1993.
Provision for Credit Losses
No provision for credit losses for the consolidated Corporation has been
recorded since the fourth quarter of 1993. This decision reflects
significant improvements in credit quality. In addition, the Corporation
has experienced a substantial reduction in the level of net chargeoffs,
which amounted to $154.7 million (0.44% of average loans) in 1995, versus
$133.0 million (0.46% of average loans) in 1994 and $218.1 million (0.90%
of average loans) in 1993. The provision for credit losses totaled $112.6
million in 1993.
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 $1,119.6 million in 1995, an increase of $65.3
million (6.2%) from the level of a year earlier. Service charges on deposit
accounts rose $35.4 million (6.3%) from 1994, while trust fees declined
$23.0 million (11.9%). These compare to 1994 increases in deposit service
charges and trust fees of 9.5% and 9.0%, respectively. The 1995 decline in
trust fees reflects the previously announced disposition of Denver
Investment Advisors, a subsidiary of First Interstate Bank of Denver, N.A.
Noninterest income in 1995 benefited from venture capital gains of $35.5
million, of which $8.5 million were reported as investment security gains
and $27.0 million were reported as other income. Noninterest income in 1994
included venture capital gains of $28.3 million, of which $17.0 million
were reported as investment security gains and $11.3 million were reported
as other income. The $24.3 million (18.4%) increase in other charges,
commissions and fees in 1995 resulted primarily from growth in revenue from
sales of investment products. Noninterest income in 1995 also benefited
from growth of merchant credit card fees, which rose $18.6 million (46.9%).
The major categories of noninterest income are included in the following
table:
<TABLE>
<CAPTION>
Change 95/94 Change 94/93 Change 93/92
--------------- --------------- -------------
Noninterest Income (millions) 1995 1994 1993 $ % $ % $ %
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Deposit service charges $ 597.3 $ 561.9 $ 513.0 35.4 6.3 48.9 9.5 34.1 7.1
Trust fees 170.3 193.3 177.4 (23.0) (11.9) 15.9 9.0 7.1 4.2
Other charges, commissions and fees 156.3 132.0 149.4 24.3 18.4 (17.4) (11.6) (14.2) (8.7)
Merchant credit card fees 58.3 39.7 44.1 18.6 46.9 (4.4) (10.0) 6.8 18.2
Trading income 20.4 16.8 19.5 3.6 21.4 (2.7) (13.8) 0.1 0.5
Investment security gains 10.0 21.1 9.7 (11.1) (52.6) 11.4 n/m 11.5 n/m
Gain on sale of loans 6.9 2.5 8.0 4.4 176.0 (5.5) (68.8) 11.3 n/m
Other income 100.1 87.0 33.1 13.1 15.1 53.9 n/m (17.2) (34.2)
- ---------------------------------------------------------------------------------------------------------------------
Total $1,119.6 $1,054.3 $ 954.2 65.3 6.2 100.1 10.5 39.5 4.3
=====================================================================================================================
</TABLE>
Noninterest Expenses
Noninterest expenses totaled $2,213.1 million in 1995, versus $2,197.8
million in 1994 and $2,032.4 million in 1993. Total noninterest expenses in
1995 included $24.4 million of restructuring charges, versus $141.3 million
in 1994, as previously noted. In addition, noninterest expenses in 1995
included $27.6 million of merger related expenses, which were recognized in
the fourth quarter. Noninterest expenses before the effect of restructuring
charges, merger related expenses and ORE charges and including the effect
of completed acquisitions were $2,160.5 million in 1995, an increase of
$91.6 million (4.4%) from 1994. Approximately $53.2 million of the increase
represents higher outside contract fees, $32.9 million reflects higher
occupancy and equipment expenses, $25.4 million represents higher charges
resulting from the amortization of intangibles and $22.0 million represents
higher communications expenses. These increases were partially offset by
declines of $38.2 million in FDIC assessments and $19.1 million in salary
and benefits expenses in 1995.
Noninterest expenses in 1994 were favorably impacted by a net recovery of
ORE expenses that amounted to $12.4 million. Noninterest expenses in 1994
also benefited from a reversal of capitalized deposit software expense of
$21.3 million (included in outside contract fees) and from the reversal of
$13.2 million of litigation reserves no longer considered necessary.
In September 1994, the Corporation announced a Restructuring Plan to better
position the company for the introduction of full interstate banking. The
Plan resulted in an initial restructuring charge of $139.0 million in the
1994 third quarter, generally covering an early retirement program,
severance and outplacement services, and facility and equipment valuations.
In addition, over the five quarters subsequent to the announcement,
restructuring charges of $26.7 million were incurred, generally for
relocation of staff and facilities and retention payments for certain
personnel displaced as a result of the Plan. As of yearend 1995, the
activities undertaken as a part of the Plan were largely completed. The
Plan was designed to produce ongoing expense savings of approximately $167
million per year.
Including the effect of acquisitions and the Restructuring Plan, the number
of full-time equivalent staff totaled 27,200 in December 1995. This
represents a decline of 194 full-time equivalent staff from December 1994
and follows an increase of 805 (3.0%) from December 1993.
The Corporation's efficiency ratio, which reflects noninterest expenses
before merger related expenses, restructuring charges and ORE expenses as a
percent of taxable-equivalent net interest income plus noninterest income,
was 58.7% for all of 1995. This compares to 60.8% in 1994 and 65.7% in
1993.
The major categories of noninterest expenses are included in the following
table:
<TABLE>
<CAPTION>
Change 95/94 Change 94/93 Change 93/92
--------------- --------------- ---------------
Noninterest Expenses (millions) 1995 1994 1993 $ % $ % $ %
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries $ 876.7 $ 865.9 $ 805.8 10.8 1.2 60.1 7.5 (47.7) (5.6)
Employee benefits 184.1 214.0 169.5 (29.9) (14.0) 44.5 26.3 (12.4) (6.8)
- ------------------------------------------------------------------------------------------------------------------------
Total salaries and benefits 1,060.8 1,079.9 975.3 (19.1) (1.8) 104.6 10.7 (60.1) (5.8)
Net occupancy of bank premises 235.1 228.3 207.3 6.8 3.0 21.0 10.1 (16.4) (7.3)
Furniture and equipment 154.4 128.3 129.9 26.1 20.3 (1.6) (1.2) (5.8) (4.3)
Outside contract fees 145.0 91.8 165.2 53.2 58.0 (73.4) (44.4) 34.9 26.8
Communications 139.6 117.6 105.0 22.0 18.7 12.6 12.0 13.1 14.3
FDIC assessments 64.6 102.8 100.5 (38.2) (37.2) 2.3 2.3 9.9 10.9
Amortization of intangibles 60.6 35.2 24.1 25.4 72.2 11.1 46.1 (8.9) (27.0)
Supplies 53.2 43.6 40.7 9.6 22.0 2.9 7.1 1.3 3.3
Advertising 51.7 46.8 52.6 4.9 10.5 (5.8) (11.0) 17.4 49.4
Other expenses 195.5 194.6 198.2 0.9 0.5 (3.6) (1.8) (36.2) (15.4)
- ------------------------------------------------------------------------------------------------------------------------
Total before other real estate,
restructuring and
merger related 2,160.5 2,068.9 1,998.8 91.6 4.4 70.1 3.5 (50.8) (2.5)
Other real estate 0.6 (12.4) 33.6 13.0 n/m (46.0) n/m (126.0) (78.9)
Restructuring 24.4 141.3 - (116.9) (82.7) 141.3 n/m - -
Merger related 27.6 - - 27.6 n/m - - - -
- ------------------------------------------------------------------------------------------------------------------------
Total $2,213.1 $2,197.8 $2,032.4 15.3 0.7 165.4 8.1 (176.8) (8.0)
========================================================================================================================
</TABLE>
Income Taxes
For 1995, the Corporation recorded income tax expense of $558.1 million on
pre-tax income of $1,443.2 million, resulting in an effective rate of
38.7%. This compares to an effective income tax rate of 38.0% for 1994. The
higher rate in 1995 includes the effect of nondeductible goodwill
amortization and merger related expenses, partially offset by previously
unrecognized tax benefits.
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 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
liquidity, capital, investments, interest rate risk, and derivative
contracts exposures. Compliance with these policies is reported to ALCCO.
Interest Rate Sensitivity: First Interstate relies on a combination of gap
analyses and simulations of net interest income to measure and manage
interest rate risk.
The gap analysis reflects the expected repricing or maturity of assets and
liabilities, based on management's estimates of these characteristics, as
opposed to contractual maturities. This analysis incorporates 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 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.
At December 31, 1995, the cumulative one-year managerial gap for the
consolidated Corporation was a positive $1.5 billion, representing 3.1% of
earning assets, as shown in the following table. In other words,
approximately 3.1% of the Corporation's earning assets reprice or mature
more quickly than liabilities within one year.
<TABLE>
<CAPTION>
Rate Sensitive Balances
-----------------------------------------------------------------------
Managerial 1 to 30 31 to 90 91 to 180 181 to 365 1 to 2 2 to 5 Over 5
Amounts (millions) days days days days years years years
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earning Assets $13,799 $6,251 $4,795 $5,185 $5,602 $8,433 $3,625
Net Sources:
Regular savings and NOW 2,174 908 1,266 2,074 3,902 1,515 -
Market interest 3,166 1,054 1,542 2,822 797 566 -
Other sources 5,021 2,980 3,182 2,345 2,037 3,769 6,570
- --------------------------------------------------------------------------------------------------
Total Net Sources 10,361 4,942 5,990 7,241 6,736 5,850 6,570
Incremental Gap 3,438 1,309 (1,195) (2,056) (1,134) 2,583 (2,945)
Cumulative Gap 3,438 4,747 3,552 1,496 362 2,945 -
% of Earning Assets 7.2 10.0 7.4 3.1 0.8 6.2 -
</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, depending on the direction and magnitude of
the interest rate movement, the repricing characteristics of various on and
off-balance sheet instruments, as well as competitive market pressures. 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, like caps and floors, as well as spread
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
within the established limits, but the actual position at any given time is
a function of available asset opportunities, historical and expected
interest rates, long term balance sheet trends, and any off-balance sheet
activity undertaken to manage the interest rate risk position. For example,
the repricing of administered deposits tends to follow general market
trends but is subject to various lags. The simulation model currently
indicates that if market rates decline, the decreases in asset rates will
not be fully offset by the lagged response in deposit prices, limiting net
interest income growth.
To partially offset the Corporation's exposure to falling interest rates, a
risk management program was implemented in the first quarter of 1996. This
program includes a combination of interest rate floors and swaps where the
Corporation receives fixed rate coupons and pays 3-month LIBOR.
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 operations on 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 at yearend 1995 increased by $2.6 billion from
the previous yearend.
Net cash provided by investing activities during 1995 totaled $2.7 billion.
Maturities and sales of investment securities, net of purchases, provided
cash of $5.4 billion. Loan originations, net of repayments, used cash of
$3.3 billion. Proceeds from sales of loans provided $1.3 billion, while
purchases of loans used $317 million.
Net cash used by financing activities during 1995 totaled $1.2 billion.
Deposits, excluding $187 million of purchased deposits, exhibited a net
decrease of $330 million. The Corporation also reported a net decrease of
$724 million in short term borrowings. These borrowings were primarily
federal funds purchased and securities sold under agreements to repurchase.
Proceeds from the issuance of long term debt provided $100 million, while
maturities of long term debt required cash of $133 million and cash
dividends paid totaled $269 million.
Cash provided by operations during 1995 totaled $1.1 billion. Net income
for the year totaled $885 million, and noncash adjustments to reconcile net
income totaled $346 million. In addition, net changes in other assets,
other liabilities (including pension plan funding) and trading account
securities decreased cash from operations by $146 million.
The Parent Corporation had $265 million of cash and other short term
financial instruments at yearend 1995, an increase of $46 million from
yearend 1994. Immediate liquidity available to the Parent Corporation also
includes a $500 million senior revolving credit facility.
In 1995, affiliate banks paid a total of $616 million in dividends to the
Parent Corporation. This represents an increase of $11 million from the
$605 million paid in 1994 and reflects the continuation of improved
operating performance at all affiliate banks and ongoing capital management
programs at these banks. The Parent Corporation had no external short term
borrowings outstanding at yearend 1995. At current rates, interest on long
term debt and preferred stock dividend requirements total $128 million for
1996 and $112 million for 1997. In addition, $192 million of the Parent
Corporation's long term debt will mature in 1996 and $161 million will
mature in 1997.
The Corporation has a $2.3 billion Universal Shelf Registration effective
since June 1993, which allows for the issuance of debt securities,
preferred stock, common stock, securities warrants and currency warrants.
Under the Universal Shelf Registration, in December of 1994 the Corporation
established a $1 billion Medium Term Note Program, which allows for the
issuance of senior and subordinated debt securities in a number of
countries and currencies over a broad spectrum of maturities. As of
December 31, 1995, $225 million of debt securities ($125 million of 9.00%
Subordinated Notes due November 15, 2004 and $100 million of 8.15%
Subordinated Notes due March 15, 2002) had been issued under the Universal
Shelf Registration, leaving $2.1 billion capacity for future issuance. No
securities have been issued to date under the Medium Term Note program.
The Corporation's other sources of liquidity include maturing securities in
addition to those that are available for sale or repurchase activity. In
addition, affiliate 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.
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, Standard & Poor's Corp., Thomson BankWatch, Duff
& Phelps and IBCA.
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.
The following table details the capital position of the Corporation over
the last two years:
Risk-Based Capital December 31, 1995 December 31, 1994
----------------- -----------------
Ratios (dollars in millions) $ % $ %
- -----------------------------------------------------------------------------
Tier 1 Capital 3,431 7.61 2,882 7.20
Tier 1 Capital minimum requirement 1,803 4.00 1,601 4.00
Excess 1,628 3.61 1,281 3.20
Total Capital 4,742 10.52 4,091 10.22
Total Capital minimum requirement 3,609 8.00 3,203 8.00
Excess 1,133 2.52 888 2.22
Risk-adjusted assets, net of goodwill,
nonqualifying intangibles,
excess allowance and excess
deferred tax assets 45,085 - 40,041 -
Leverage Ratio
(dollars in millions)
Tier 1 Capital 3,431 6.28 2,882 5.35
Quarterly average total assets,
net of goodwill,
nonqualifying intangibles and
excess deferred tax assets 54,645 - 53,905 -
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
Capital ratio of 6.00%, a Total Capital ratio of 10.00% and a leverage
ratio of 5.00%. The Corporation and all subsidiary banks currently exceed
the minimum requirements of well-capitalized institutions.
In February 1995, in conjunction with completion of the acquisition of Levy
Bancorp, the Corporation recorded additional equity of $91.6 million
through the issuance of 1,308,388 shares of its common stock. An additional
1,178,235 shares, with proceeds of $78.7 million, were issued during the
year under the Stock Option Plan.
In April 1995, the Board of Directors approved the repurchase of up to 7.6
million shares of common stock from time to time, subject to market
conditions and appropriate regulatory and acquisition accounting
requirements. The first 2.5 million shares purchased under the program were
designated for reissuance through the Corporation's various employee
benefit and stock option plans, and Stock Purchase and Dividend
Reinvestment Plan. A total of 956,100 shares were repurchased under the
program during 1995. The program was suspended in October 1995 as a result
of the initiation of merger negotiations. The average cost of common stock
held in the treasury at yearend 1995 was $76.07.
In July 1995, the Board of Directors approved a 7% increase in the
quarterly cash dividend on the Corporation's common stock from $0.75 to
$0.80 per share.
During 1995, the Corporation recorded common stock dividends of $235.9
million and preferred stock dividends of $33.3 million.
Intangible assets totaled $724 million at December 31, 1995, versus $561
million a year earlier. The higher level at yearend 1995 reflects the
completion of five acquisitions during the year. As a result, goodwill
increased to $682 million from $514 million at yearend 1994. All other
intangibles amounted to $42 million and $47 million at yearend 1995 and
1994, respectively, while excess deferred tax assets totaled $17 million
and $21 million, respectively.
Risk Elements
U.S. Economy: The U.S. economy moved to a more moderate growth track in
1995, but the expansion continued. Capital spending was strong for
technology products, including telecommunications equipment, computers and
software. Consumer spending softened as households grew more cautious about
assuming new debt. Inflation remained below three percent.
The Federal Reserve changed course in mid-1995 and began to slowly allow
short term interest rates to fall. Long term interest rates plunged on
signs of continued subdued inflation and promises of a lower federal budget
deficit.
In 1996, growth is likely to subside further from last year's pace to a
trend closer to the economy's long term potential. Exports will be the most
rapidly growing sector, as U.S. companies have positioned themselves well
in terms of productivity. Inflation should again average slightly below
three percent. Although consumer debt levels remain high, lower interest
rates mean that debt servicing costs are not the burden experienced in the
1980s.
First Interstate's Territory should outpace the nation in terms of economic
growth in 1996. Technology, international trade and population gains should
drive the entire region forward in 1996. While many states may record more
moderate gains than last year, job and income increases should continue to
be impressive, especially in such states as Utah, Nevada, Arizona and
Oregon. Washington and California are likely to post faster growth in 1996
than in 1995. All regions of California, including the southern part of the
state, are now participating in the upswing. Cutbacks in aerospace are
subsiding, while other sectors such as entertainment take up the slack. A
recession in the rest of the country or in a number of international trade
partners would pose the greatest risk to states in FI Territory in 1996. A
steep rise in long term interest rates could also jeopardize the expected
recovery in California's housing industry during the coming year.
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 of the Corporation.
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 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
and equipment. Autos, second trust deeds and boats are the primary forms of
collateral accepted for the instalment loan portfolio.
Securities: At December 31, 1995, the Corporation had $9.1 billion of
investment securities, of which 82.3% were U.S. Treasury and agency
securities. The remaining 17.7% of the investment portfolio consisted
primarily of AAA-rated, well diversified asset-backed securities. The
Corporation's investment policy requires investments to be made with an
emphasis on 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.
At December 31, 1995, the Corporation held no securities defined as "High
Risk Mortgage Securities" under current regulatory guidelines or leveraged
instruments. The Corporation held $35 million of structured notes, of which
$15 million mature in 1996 and $20 million mature in 1998.
Loans and ORE: At December 31, 1995, the Corporation's commercial loan
portfolio of $10.9 billion was diversified with no single industry
representing over 10% of total commercial loans outstanding. The
residential mortgage, commercial mortgage and real estate construction
portfolios accounted for $6.4 billion, $4.7 billion and $1.1 billion,
respectively, of total loans.
The following table presents a breakdown of outstanding real estate loans
by geographic location at yearend 1995 and 1994. 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 Loans1 ORE
--------------------------------------------- ----------------------------------------------
(Outstanding Mortgage Construction Mortgage Construction
at yearend, ---------------------- ---------------------- ---------------------- ----------------------
in millions) Residential Commercial Residential Commercial Total Residential Commercial Residential Commercial Total
- ------------------------------------------------------------------------------------------------------------------------------------
1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
California $3,206 $1,884 $263 $151 $ 5,504 $ 2 $ 36 $ 6 $ - $ 44 $ 44
Northwest(2) 1,666 1,128 56 142 2,992 - 6 - - 6 1
Southwest(3) 935 1,050 74 163 2,222 - 37 - - 37 3
Texas 522 512 42 107 1,183 1 3 1 - 5 6
Other 120 128 1 53 302 - 1 - - 1 7
- ------------------------------------------------------------------------------------------------------------------------------------
Total $6,449 $4,702 $436 $616 $12,203 $ 3 $ 83 $ 7 $ - $ 93 $ 61
====================================================================================================================================
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
====================================================================================================================================
<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>
In addition to real estate loans, at yearend 1995 the Corporation held $61
million of ORE (net of a $21 million reserve). This compares to $72 million
of ORE (net of a $25 million reserve) at yearend 1994.
Cross-Border Outstandings - The Corporation had no cross-border
outstandings in excess of 0.75% of consolidated assets at December 31, 1995
and 1994. At December 31, 1993, the Corporation's cross-border outstandings
to Japan totaled $927 million, or 1.80% of total assets.
Derivatives: As of December 31, 1995, the Corporation has engaged in
minimal derivative activities for risk management purposes. The Corporation
does not engage in any trading or other speculative 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 $154.7
million in 1995, versus $133.0 million in 1994 and $218.1 million in 1993.
Net chargeoffs represented 0.44% of average loans in 1995, compared to
0.46% in 1994 and 0.90% in 1993. Net chargeoffs of real estate construction
and mortgage loans totaled $16.0 million in 1995, down substantially from
$25.0 million in 1994 and $81.6 million in 1993. The high level of
chargeoffs in 1993 reflects, in part, the revaluation of land loans,
primarily in California.
The following table summarizes the Corporation's loan loss experience for
the last five years:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------------
Summary of Loan Loss Experience (millions) 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average amount of loans outstanding(1) $35,235 $ 28,644 $ 24,128 $ 25,694 $ 30,691
Allowance for Credit Losses
Balance at beginning of year $ 934.6 $1,001.1 $1,067.8 $1,273.0 $1,010.8
Provision for the year - - 112.6 314.3 810.2
Net changes due to
acquisitions (dispositions) 23.9 66.5 38.8 (59.9) (1.1)
- ----------------------------------------------------------------------------------------------
958.5 1,067.6 1,219.2 1,527.4 1,819.9
Deduct:
Loans charged off:
Commercial, financial and agricultural 44.7 25.0 84.3 159.8 271.1
Real estate construction 5.5 8.8 65.5 183.0 99.6
Real estate mortgage(2) 61.9 34.2 40.2 43.1 87.6
Instalment 199.7 190.3 200.4 195.3 203.4
Foreign - - 6.6 12.0 3.8
Lease financing 2.6 2.5 1.8 13.7 23.7
- ----------------------------------------------------------------------------------------------
Total chargeoffs 314.4 260.8 398.8 606.9 689.2
Less recoveries of loans previously charged off:
Commercial, financial and agricultural 41.8 40.9 78.5 67.9 57.2
Real estate construction 23.2 6.2 17.3 6.6 4.5
Real estate mortgage(2) 28.2 11.8 6.8 6.8 6.3
Instalment 62.7 65.5 66.3 55.6 56.1
Foreign 1.8 1.6 9.1 4.8 10.3
Lease financing 2.0 1.8 2.7 5.6 7.9
- ----------------------------------------------------------------------------------------------
Total recoveries 159.7 127.8 180.7 147.3 142.3
- ----------------------------------------------------------------------------------------------
Net loans charged off 154.7 133.0 218.1 459.6 546.9
- ----------------------------------------------------------------------------------------------
Balance at End of Year $ 803.8 $ 934.6 $1,001.1 $1,067.8 $1,273.0
==============================================================================================
Ratio of net loans charged off during the year
to average amount of
loans outstanding 0.44% 0.46% 0.90% 1.79% 1.78%
<FN>
(1) Net of unearned income and deferred fees.
(2) Includes both commercial and residential mortgage.
</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) -------------------------------------------------- ----------------------------------------
1995 1994 1993 1992 1991 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural $ 2.9 $ (15.9) $ 5.8 $ 91.9 $ 213.9 0.03 (0.19) 0.08 1.13 2.05
Real estate construction (17.7) 2.6 48.2 176.4 95.1 (1.61) 0.32 5.28 10.10 3.55
Real estate mortgage 33.7 22.4 33.4 36.3 81.3 0.30 0.30 0.62 0.66 1.44
Instalment 137.0 124.8 134.1 139.7 147.3 1.09 1.07 1.35 1.43 1.45
Foreign (1.8) (1.6) (2.5) 7.2 (6.5) (1.17) (1.93) (1.56) 1.78 -
Lease Financing 0.6 0.7 (0.9) 8.1 15.8 0.15 0.32 (1.06) 4.00 2.58
- -------------------------------------------------------------------------------------------------------------------------
Total $ 154.7 $ 133.0 $ 218.1 $ 459.6 $ 546.9 0.44 0.46 0.90 1.79 1.78
=========================================================================================================================
</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 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 predominately general in nature and is available
for the portfolio in its entirety.
At December 31, 1995, the allowance for credit losses amounted to $804
million, or 2.19% of total outstanding loans. This compares to $934
million, or 2.81% at yearend 1994, and $1,001 million, or 3.85% at yearend
1993. 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.
The following table details the Corporation's allocation of the allowance
for credit losses for the last five years:
<TABLE>
<CAPTION>
Allowance Amount Percent of Loans in Each Category to Total Loans
Allocation of Allowance December 31 December 31
for Credit Losses ------------------------------------------------- ---------------------------------------
(millions) 1995 1994 1993 1992 1991 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural $ 121.7 $ 124.2 $ 150.6 $ 229.6 $ 348.5 29.7 28.0 30.8 32.1 30.7
Real estate construction 18.1 41.3 77.3 119.3 221.3 2.9 2.9 2.8 4.8 7.6
Real estate mortgage 91.1 90.7 47.1 69.5 120.3 30.4 30.7 23.9 22.1 20.3
Instalment 147.9 145.5 153.7 142.0 136.6 35.1 36.9 41.5 39.9 35.5
Foreign - 0.2 0.2 8.3 11.3 0.5 0.4 0.6 0.7 3.5
Lease Financing 0.9 1.8 2.0 1.8 22.1 1.4 1.1 0.4 0.4 2.4
Unallocated 424.1 530.9 570.2 497.3 412.9 n/a n/a n/a n/a n/a
- -------------------------------------------------------------------------------------------------------------------------
Total $ 803.8 $ 934.6 $1,001.1 $1,067.8 $1,273.0 100.0 100.0 100.0 100.0 100.0
=========================================================================================================================
</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) 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------
Nonaccruing loans:(1)
Domestic:(2)
Secured by real estate $ 92.5 $113.7 $149.3 $322.3 $ 684.3
Other 77.8 72.5 77.3 255.5 394.3
- ------------------------------------------------------------------------------
Total domestic 170.3 186.2 226.6 577.8 1,078.6
Foreign - - - - 16.0
- ------------------------------------------------------------------------------
Total nonaccruing loans 170.3 186.2 226.6 577.8 1,094.6
Renegotiated loans:(3)
Domestic:
Secured by real estate - - - - -
Other 1.0 - - 0.4 0.1
- ------------------------------------------------------------------------------
Total renegotiated loans 1.0 - - 0.4 0.1
- ------------------------------------------------------------------------------
Total nonperforming loans 171.3 186.2 226.6 578.2 1,094.7
Other real estate 60.9 72.0 82.1 172.9 493.1
- ------------------------------------------------------------------------------
Total Nonperforming Assets $232.2 $258.2 $308.7 $751.1 $1,587.8
==============================================================================
% of Total Assets 0.4 0.5 0.6 1.5 3.2
Accruing loans past due 90 days or more (millions)
- ------------------------------------------------------------------------------
Domestic:(2)
Instalment $ 33.6 $ 26.1 $ 29.8 $ 30.5 $ 27.5
Other 66.6 25.1 36.3 22.8 43.0
- ------------------------------------------------------------------------------
Total domestic 100.2 51.2 66.1 53.3 70.5
- ------------------------------------------------------------------------------
Foreign - - - - -
- ------------------------------------------------------------------------------
Total $100.2 $ 51.2 $ 66.1 $ 53.3 $ 70.5
==============================================================================
(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 collectibility of principal.
(2) Real estate construction loans at December 31, 1995, were $6.7 million
nonaccruing and $1.5 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 1995
and 1994:
<TABLE>
<CAPTION>
1995 1994
-------------------------------------- -------------------------------------
Reconciliation of Nonperforming Nonperforming Nonperforming Nonperforming
Nonperforming Assets (millions) Loans ORE Assets Loans ORE Assets
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1 $186.2 $72.0 $258.2 $226.6 $82.1 $308.7
In-migration1 361.0 - 361.0 395.4 - 395.4
Return to accrual (28.7) - (28.7) (115.5) - (115.5)
Valuation adjustment - 2.4 2.4 - 4.4 4.4
Payments and sales (237.3) (63.7) (301.0) (249.1) (84.9) (334.0)
Net chargeoffs and writedowns (82.2) (4.8) (87.0) (47.3) (0.7) (48.0)
Transfer within nonperforming (40.9) 40.9 - (55.6) 55.6 -
Net changes due to acquisitions 13.2 14.1 27.3 31.7 15.5 47.2
- --------------------------------------------------------------------------------------------------------------
Balance at December 31 $171.3 $60.9 $232.2 $186.2 $72.0 $258.2
==============================================================================================================
<FN>
(1) Includes disbursements on loans previously reported as nonperforming.
</TABLE>
At December 31, 1995, nonperforming loans totaled $171 million, an
improvement of $15 million (8.1%) from the $186 million reported a year
earlier.
Principal or interest payments on $111 million (65%) of nonaccruing loans
were contractually past due 30 days or more at yearend 1995. At the same
time, principal and interest in accordance with contractual terms were
current on $59 million (35%) of nonaccruing loans, as shown in the
following table:
Total
Contractually Contractually Nonaccruing
At December 31, 1995 (millions)(1) Past Due(2) Current(3) Loans
- ------------------------------------------------------------------------------
Real Estate Loans $ 68.4 $ 24.1 $ 92.5
All Other Loans 42.4 35.4 77.8
- ------------------------------------------------------------------------------
Total $ 110.8 $ 59.5 $ 170.3
(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 the contractual terms.
At the end of 1995, approximately 54% of total nonperforming loans were
real estate related. Of the nonperforming real estate loans, 74% were
contractually past due and 26% were contractually current.
In addition to nonperforming loans, nonperforming assets include ORE. ORE
includes property acquired through foreclosure or deed in lieu of
foreclosure. ORE is 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 selling costs. 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 yearend 1995, ORE totaled $61 million (net of a $21 million reserve), a
decline from $72 million (net of a $25 million reserve) in 1994 and $82
million (net of $32 million reserve) in 1993.
At December 31, 1995 total nonperforming assets were $232 million, down
from $258 million in 1994 and $309 million in 1993.
In addition to assets classified as nonperforming, the Corporation reported
accruing loans that were past due 90 days or more of $100 million at
yearend 1995, versus $51 million a year earlier and $66 million in 1993,
which included consumer instalment credit of $34 million, $26 million and
$30 million, respectively.
Interest lost on domestic nonperforming loans was $17.6 million in 1995,
compared to $13.5 million in 1994 and $26.0 million in 1993. The
Corporation had no foreign nonperforming loans in the years presented. 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 (millions) 1995 1994 1993(1)
- ---------------------------------------------------------------------
Interest income which would have been
recorded under original terms $19.0 $20.6 $33.2
Interest income reversed 3.8 2.1 2.6
Less interest income recorded 5.2 9.2 9.8
- ------------------------------------------------------------------
Total Interest Lost $17.6 $13.5 $26.0
==================================================================
(1) Restated from originally reported data.
Mergers and Acquisitions
At the beginning of 1993, the Corporation began an ambitious acquisition
program geographically focused on key markets within the states of
California, Washington and Texas. To date, First Interstate has announced
and closed 19 transactions totaling over $10 billion in assets, of which 17
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 added seven counties to
those in which the Corporation has achieved a top-three rank in market
share and has improved market penetration in 15 others. All of these
transactions were completed by the end of July 1995. For additional
information, refer to Note P to the financial statements presented
elsewhere in this report.
Common Stock and Market Data
The New York Stock Exchange is the primary market for the Corporation's $2
par value Common Stock. At December 31, 1995, the 75,929,395 outstanding
shares of common stock were held by 23,486 registered shareholders.
Approximately 79% of the shares outstanding are held by 303 institutional
investors. Dividends paid on the $2 par value Common Stock totaled $3.10
per share in 1995, versus $2.75 in 1994 and $1.60 in 1993. The current
quarterly rate of $0.80 per share has been in effect since the July 1995
payment and represents a 20% increase from the annual rate in effect at the
end of 1994. On January 16, 1996, following the release of the
Corporation's fourth quarter results, the Board of Directors declared a
common stock dividend of $0.80 per share, which was paid on February 29 to
shareholders of record on February 9, 1996.
The number of shares used in the calculation of earnings results per share
in 1995 were 77,329,761, compared to 80,421,942 in 1994 and 77,022,749 in
1993.
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.
Market Price
Shareholders' Dividends ------------------------ Average Daily
Equity Paid High Low Close Closing Price
- --------------------------------------------------------------------------------
1995
4th Quarter $50.10 $0.80 $142 1/8 $100 1/8 $136 1/2 $128.67
3rd Quarter 47.95 0.80 103 79 3/8 100 3/4 90.58
2nd Quarter 46.13 0.75 89 3/8 74 80 1/4 81.49
1st Quarter 44.09 0.75 82 1/2 67 1/4 79 76.62
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
Quarterly Data
Quarterly Operations (millions, except per share amounts):
Quarter Ended
-----------------------------------------
March 31 June 30 Sept. 30 Dec. 31
- --------------------------------------------------------------------------
1995
Interest income $921.5 $945.0 $922.6 $918.8
Interest expense 289.8 303.6 291.1 286.7
- --------------------------------------------------------------------------
Net interest income 631.7 641.4 631.5 632.1
Provision for credit losses - - - -
Investment securities gains 0.5 3.6 1.5 4.4
Other noninterest income 267.9 270.8 279.0 291.9
Operating noninterest expenses 546.9 549.6 525.6 538.4
Other real estate - - 0.5 0.1
Restructuring 4.8 4.3 6.6 8.7
Merger related - - - 27.6
Applicable income taxes 136.4 142.0 141.5 138.2
- --------------------------------------------------------------------------
Net Income $212.0 $219.9 $237.8 $215.4
==========================================================================
Earnings Per Common Share $ 2.66 $ 2.73 $ 2.96 $ 2.66
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
Other real estate - (5.6) (0.7) (6.1)
Restructuring - - 139.0 2.3
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
CONSOLIDATED BALANCE SHEET
December 31
-----------------------
(Dollars in millions) 1995 1994
- ------------------------------------------------------------------------------
Assets
Cash and due from banks $ 7,129 $ 6,070
Time deposits, due from banks 14 26
Federal funds sold and securities
purchased under agreements to resell 1,774 179
Trading account securities 54 64
Investment securities:
Held-to-maturity
(approximate market value: 1995 - $51; 1994 - $13,280)
U.S. Treasury and agencies - 12,105
State and political subdivisions - 29
Other 88 1,561
- ------------------------------------------------------------------------------
Total held-to-maturity 88 13,695
Available-for-sale
U.S. Treasury and agencies 7,487 42
State and political subdivisions 18 -
Other 1,505 114
- ------------------------------------------------------------------------------
Total available-for-sale 9,010 156
- ------------------------------------------------------------------------------
Total Investment Securities 9,098 13,851
Loans (net) 36,673 33,222
Less: Allowance for credit losses 804 934
- ------------------------------------------------------------------------------
Net Loans 35,869 32,288
Other assets held for sale 77 26
Bank premises and equipment 1,282 1,147
Customers' liability for acceptances 94 35
Other assets 2,680 2,127
- ------------------------------------------------------------------------------
Total Assets $ 58,071 $ 55,813
==============================================================================
Liabilities and Shareholders' Equity
Deposits:
Noninterest bearing $ 19,083 $ 16,599
Interest bearing 31,102 31,828
- ------------------------------------------------------------------------------
Total Deposits 50,185 48,427
Short term borrowings 1,194 1,574
Acceptances outstanding 94 35
Accounts payable and accrued liabilities 1,089 953
Long term debt 1,355 1,388
- ------------------------------------------------------------------------------
Total Liabilities 53,917 52,377
Shareholders' Equity:
Preferred Stock 350 350
Common Stock, par value $2 a share:
Authorized 250,000,000 shares;
Issued: 1995 - 84,285,996 shares;
1994 - 84,285,643 shares 169 168
Capital surplus 1,682 1,692
Retained earnings 2,583 1,967
Unrealized gain on available-for-sale securities,
net of related taxes 6 1
- ------------------------------------------------------------------------------
4,790 4,178
Less: Common Stock in treasury, at cost:
1995 - 8,356,601 shares; 1994 - 10,082,163 shares 636 742
Total Shareholders' Equity 4,154 3,436
- ------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 58,071 $ 55,813
==============================================================================
See notes to consolidated financial statements.
CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31
-----------------------------
(Dollars in millions) 1995 1994 1993
- --------------------------------------------------------------------------------
Interest Income
Loans, including fees $3,052.5 $2,303.7 $1,980.9
Trading account securities 8.4 4.9 5.6
Investment securities:
Held-to-maturity
Taxable 591.9 828.3 837.3
Exempt from federal income taxes 1.6 2.7 2.9
Available-for-sale 15.7 13.3 24.1
Other interest income 37.8 39.1 93.4
- --------------------------------------------------------------------------------
Total Interest Income 3,707.9 3,192.0 2,944.2
Interest Expense
Deposits 974.7 725.0 719.9
Short term borrowings 77.6 34.2 16.0
Long term debt 118.9 106.3 136.2
- --------------------------------------------------------------------------------
Total Interest Expense 1,171.2 865.5 872.1
- --------------------------------------------------------------------------------
Net Interest Income 2,536.7 2,326.5 2,072.1
Provision for credit losses - - 112.6
- --------------------------------------------------------------------------------
Net Interest Income after Provision
for Credit Losses 2,536.7 2,326.5 1,959.5
Noninterest Income
Service charges on deposit accounts 597.3 561.9 513.0
Trust fees 170.3 193.3 177.4
Other charges, commissions and fees 156.3 132.0 149.4
Merchant credit card fees 58.3 39.7 44.1
Trading income 20.4 16.8 19.5
Investment securities gains 10.0 21.1 9.7
Gain on sale of loans 6.9 2.5 8.0
Other income 100.1 87.0 33.1
- --------------------------------------------------------------------------------
Total Noninterest Income 1,119.6 1,054.3 954.2
- --------------------------------------------------------------------------------
Noninterest Expenses
Salaries and benefits 1,060.8 1,079.9 975.3
Net occupancy and equipment 389.5 356.6 337.2
Outside contract services 145.0 91.8 165.2
Communications 139.6 117.6 105.0
FDIC assessments 64.6 102.8 100.5
Amortization of intangibles 60.6 35.2 24.1
Supplies 53.2 43.6 40.7
Advertising 51.7 46.8 52.6
Other real estate 0.6 (12.4) 33.6
Restructuring 24.4 141.3 -
Merger related 27.6 - -
Other expenses 195.5 194.6 198.2
- --------------------------------------------------------------------------------
Total Noninterest Expenses 2,213.1 2,197.8 2,032.4
- --------------------------------------------------------------------------------
Income before Income Taxes, Extraordinary Item
and Cumulative Effect of Accounting Changes 1,443.2 1,183.0 881.3
Applicable income taxes - including taxes
relating to investment securities
transactions of $3.4, $7.9, and $4.0 558.1 449.5 319.9
- --------------------------------------------------------------------------------
Income before Extraordinary Item and
Cumulative Effect of Accounting Changes 885.1 733.5 561.4
Extraordinary Item -
Loss on early extinguishment of debt - - (24.8)
Cumulative Effect of Accounting Changes
SFAS 106 ($104.9 loss) and SFAS 109 ($305.0 gain) - - 200.1
- --------------------------------------------------------------------------------
Net Income $ 885.1 $ 733.5 $ 736.7
================================================================================
Earnings Per Common Share:
Income before extraordinary item and cumulative
effect of accounting changes $ 11.02 $ 8.71 $ 6.68
Extraordinary item - - (0.32)
Cumulative effect of accounting changes - - 2.60
- --------------------------------------------------------------------------------
Net income $ 11.02 $ 8.71 $ 8.96
================================================================================
See notes to consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31
--------------------------
(Dollars in millions) 1995 1994 1993
- --------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Net Income $ 885 $ 734 $ 737
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 196 152 124
Provision for credit losses - - 113
Valuation adjustment on foreclosed property (2) (4) -
Provision for deferred income taxes 152 108 53
Pension plan funding (131) - -
Restructuring - 141 -
Cumulative effect of accounting changes - - (200)
Loss on early extinguishment of debt - - 25
Decrease (increase) in trading account securities 10 103 (41)
Decrease (increase) in interest receivable 35 109 (16)
Increase (decrease) in interest payable 34 (13) (35)
Other, net (94) 25 215
- --------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 1,085 1,355 975
Cash Flows from Investing Activities:
Held-to-maturity securities:
Proceeds from maturities 6,147 6,382 4,728
Proceeds from sales - - 32
Purchases (1,500) (2,764) (8,211)
Available-for-sale securities:
Proceeds from maturities 336 128 969
Proceeds from sales 406 88 -
Purchases (8) (23) (160)
Net loan principal originations (3,346) (5,688) (3,758)
Proceeds from sales of loans 1,277 3,054 2,493
Loans purchased (317) (1,263) (530)
Acquisition of subsidiaries (77) 355 60
Proceeds from sales of subsidiaries and operations - - 939
Proceeds from sales of premises and equipment 54 32 24
Purchases of premises and equipment (307) (241) (152)
Proceeds from sales of other real estate 56 69 121
- --------------------------------------------------------------------------------
Net Cash Provided (Used) by Investing Activities 2,721 129 (3,445)
Cash Flows from Financing Activities:
Net (decrease) increase in deposits (330) (1,878) 89
Deposits purchased 187 315 443
Net (decrease) increase in short term borrowings (724) 580 437
Proceeds from long term debt issued 100 125 -
Repayments of long term debt (133) (270) (185)
Reacquisition of long term debt - - (1,022)
Cash dividends paid (269) (251) (172)
Reacquisition of Preferred Stock - - (334)
Proceeds from Common Stock issued 87 43 43
Reacquisition of Common Stock (82) (712) -
- --------------------------------------------------------------------------------
Net Cash Used by Financing Activities (1,164) (2,048) (701)
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 2,642 (564) (3,171)
Cash and Cash Equivalents at Beginning of Year 6,275 6,839 10,010
- --------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 8,917 $ 6,275 $ 6,839
================================================================================
Additional Disclosures:
Interest paid $ 1,137 $ 879 $ 905
Income taxes paid 427 345 244
Loans transferred to ORE 41 56 97
Loans originated to facilitate sale of ORE 1 52 7
See notes to consolidated financial statements.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Net Unrealized
Class A Common Stock Gains (Loss) on
Preferred Common ------------------- Capital Retained Available-for-Sale Treasury
(Dollars in millions) Stock Stock Shares Amount Surplus Earnings Securities Stock Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 1,967.3 0.9 (742.5) 3,436.4
Net income for the year 885.1 885.1
Cash Dividends:
Common Stock -
$3.10 a share (235.9) (235.9)
Preferred Stock (33.3) (33.3)
Common Stock issued:
Stock Option Plan 1,178,235 (7.8) 86.5 78.7
Restricted Stock Plan (72,055) (0.2) (9.4) (9.6)
Dividend Reinvestment Plan 243,937 2.7 18.3 21.0
Incentive Plan 23,157 0.2 1.7 1.9
Acquisition of Levy Bancorp 1,308,388 (5.0) 96.6 91.6
Common Stock repurchased (956,100) (86.9) (86.9)
Unrealized Gains and Losses:
Gain on transfer of securities 34.7 34.7
Loss on transfer of securities (29.7) (29.7)
Other changes 353 -
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 $ 350.0 $ - 75,929,395 $ 168.5 $1,682.1 $2,583.2 $ 5.9 $(635.7) $4,154.0
====================================================================================================================================
See notes to consolidated financial statements.
NOTE A - ACCOUNTING POLICIES
First Interstate Bancorp (the Corporation) is a multi-bank
holding company organized in 1958 and registered under the
Bank Holding Company Act of 1956, as amended. The
Corporation provides financial products and services
through various banks and subsidiaries throughout the
nation, but primarily in thirteen western states.
The Corporation's accounting and reporting policies
conform with generally accepted accounting principles and
reporting practices applicable to the banking industry.
Preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date
of the consolidated financial statements. These estimates
also affect the reported amounts of revenue and expenses
during the reporting period. Actual results could differ
from those estimates.
Certain prior year balances have been reclassified to
conform with the current year financial statement
presentation. The following is a description of significant
policies and practices:
CONSOLIDATION The consolidated financial statements include
the accounts of the Corporation and all majority-owned
subsidiaries. Such subsidiaries are consolidated on a line-
by-line basis, after elimination of intercompany
transactions. Unconsolidated entities are reported in other
assets with related earnings included in noninterest
income.
SECURITIES Securities are classified based on their purpose
and holding period, taking into account the financial
position, liquidity and future plans of the Corporation.
Effective January 1, 1994, with the adoption of
Statement of Financial Accounting Standards No. 115
"Accounting for Certain Investments in Debt and Equity
Securities" (SFAS 115), securities are classified as held-
to-maturity, available-for-sale or trading. Securities that
the Corporation has the ability and intent to hold to
maturity are carried at cost, adjusted for amortization of
premium or accretion of discount using the interest method,
and are classified as held-to-maturity. Securities that may
be sold prior to maturity for asset/liability purposes or
in response to market or other changes are classified as
available-for-sale and carried at fair value. Fair values
are estimated based on available market quotations with
unrealized gains and losses included as a separate
component of shareholders' equity, net of related income
taxes. Dividends and interest income, including
amortization of premiums and accretion of discounts, are
included in interest income. Realized gains and losses,
which are calculated using the specific identification
method, are included in noninterest income. Trading account
securities include securities and money market instruments
held in anticipation of short term market movements and are
carried at fair value with gains and losses, both realized
and unrealized, included in noninterest income. In October
of 1995, the Financial Accounting Standards Board (FASB)
approved a proposal to allow organizations a one-time
opportunity to reconsider their ability and intent to hold
securities to maturity and transfer securities from their
held-to-maturity portfolios without requiring the remaining
portfolio to be reported at fair value. Transfers were
permitted at a single date between November 15, 1995 and
December 31, 1995. During 1995 there were no sales or
transfers of held-to-maturity securities, other than those
permitted under this one-time reclassification opportunity,
or transfers of available-for-sale securities to trading
securities. For additional information regarding the one-
time transfer of held-to-maturity securities, refer to Note
C - Investment Securities.
LOANS Loans are carried at the principal amount net of
unearned discounts and deferred origination fees and costs.
Interest income on loans not discounted is computed on the
loan balance outstanding. Interest income on discounted
loans is generally recognized based upon methods that
approximate the interest method. Net loan origination fees
are amortized over the contractual lives of the loans as an
adjustment of the yield using the interest method or the
straight-line method, if not materially different. Loans
identified as held-for-sale are classified separately, and
are carried at the lower of cost or market.
Loans are generally placed on nonaccrual status when
full collectibility of principal or interest is in doubt or
when they become 90 days past due and are not fully secured
or in the process of collection, whichever occurs earlier.
Previously accrued but unpaid interest is reversed and
charged against interest income and future accruals are
discontinued. If there is doubt as to the ultimate
collectibility of principal or interest, all cash received
is applied as a reduction of the loan principal.
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 Statement of Financial Accounting Standards 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 receivable 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 loans 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 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
the unallocated portion of the allowance for credit losses.
ALLOWANCE FOR CREDIT LOSSES The allowance for credit losses
has been established to absorb losses inherent in the
credit portfolio. The allowance for credit losses is
available to absorb losses related to the loan and lease
portfolio as well as other credit extensions. Additions to
the allowance for credit losses are made by provisions
which are charged to earnings and reduced by charge-offs,
net of recoveries.
The adequacy of the allowance for credit losses is
evaluated regularly by management with consideration given
to the probability of loss based upon industry and
historical trends as well as economic conditions. Estimates
of potential loss are consistent with accounting and
regulatory guidelines.
BANK PREMISES AND EQUIPMENT Bank premises and equipment are
stated at cost less accumulated provisions for depreciation
and amortization, computed primarily on the straight-line
method based on estimated useful lives. Capital leases,
less accumulated amortization, are included in bank
premises and equipment and the lease obligations are
included in long term debt. Capital leases are amortized on
the straight-line method over the lesser of the equipment's
estimated useful life or the lease term and the
amortization is included in depreciation expense.
OTHER REAL ESTATE Other real estate (ORE), which is
included in other assets, is comprised of real estate
acquired in satisfaction of loans. Property acquired by
foreclosure or deed in lieu of foreclosure is transferred
to ORE and is recorded at the lower of the loan balance on
the property at the date of transfer or the fair value of
the property received, less estimated cost to sell.
Valuation losses at the date of transfer are charged to the
allowance for credit losses. Subsequent gains (to the
extent allowable) and losses that result from the ongoing
periodic valuation of these properties are included in ORE
expense in the period in which they are identified.
GOODWILL AND OTHER INTANGIBLE ASSETS The excess of purchase
price over fair value of the net assets of acquired
companies is classified as goodwill and included in other
assets. Goodwill is amortized using the straight-line
method, generally over a 15-year period. Core deposit
intangibles represent the intangible value of depositor
relationships resulting from deposit liabilities assumed in
acquisitions and are generally amortized over a ten year
period.
MORTGAGE SERVICING RIGHTS Mortgage servicing rights
represent the value of the right to service mortgage loans
not owned by the Corporation, and are generally being
amortized over eight to ten years.
In the fourth quarter of 1995, the Corporation adopted,
retroactive to January 1, 1995, Statement of Financial
Accounting Standards No. 122, "Accounting for Mortgage
Servicing Rights an amendment to FASB Statement No. 65"
(SFAS 122). Issued in May 1995, SFAS 122 requires balance
sheet recognition of the rights to service mortgage loans
owned by others, irrespective of whether such servicing
rights are purchased or originated. In addition, it
requires the capitalization of originated mortgage
servicing rights based on fair values. Mortgage servicing
rights acquired after adoption of SFAS 122 are stratified
based upon interest rates, for purposes of measuring
impairment. Mortgage servicing rights acquired prior to
January 1, 1995 are evaluated for impairment on an
aggregate basis. Fair value is determined based on
discounted cash flows using incremental direct and indirect
costs. The adoption of SFAS 122 did not have a material
effect on the Corporation's earnings, liquidity, capital
resources or financial position.
PENSION, OTHER POSTRETIREMENT AND POSTEMPLOYMENT PLANS The
Corporation has established a noncontributory defined
benefit plan covering all eligible employees. The plan
provides retirement benefits which are a function of both
the years of service and the highest level of compensation
during any consecutive five year period during the last ten
years before retirement.
The Corporation also has a contributory defined
contribution savings plan covering substantially all
employees. The Corporation is required to make
contributions to this plan in varying amounts based on a
percentage of amounts contributed by participating
employees.
In addition to these plans, the Corporation also accrues
for certain postretirement and postemployment costs such as
health care and disability benefits. The costs of these
benefits are accrued over the period for which the
employees qualify and are based upon actuarial assumptions.
The costs of pension, postemployment and postretirement
benefits are charged to Salaries and benefits.
In January 1994, Statement of Financial Accounting
Standards No. 112, "Employers Accounting for Postemployment
Benefits" was adopted by the Corporation. Employers are
required to record the obligation for benefits owed to
former employees. The effect of adoption of this
pronouncement was immaterial to the Corporation.
DERIVATIVE FINANCIAL INSTRUMENTS The Corporation engages in
derivative activities for interest rate risk management
purposes, in addition to those transactions entered into as
an intermediary on behalf of its customers. Accrual
accounting, whereby income or expense from the derivative
financial instrument is accrued and reported as an
adjustment to income or expense on the item being hedged,
is followed when the appropriate criteria are met. The
level of derivatives is monitored on a regular basis and
reported to management.
INCOME TAXES Income tax expense is the current and deferred
tax consequences, to the extent permitted, of all events
that have been recognized in the financial statements, as
measured by the provisions of enacted tax laws.
A consolidated U.S. federal income tax return is filed
by the Parent Corporation and includes all subsidiaries.
State, local and foreign income tax returns are also filed
according to the taxable activity of the entity.
Consolidated or combined returns are also filed, as
required by certain states, including California.
Generally, the consolidated and combined tax liabilities
are settled between subsidiaries as if each company had
filed a separate return.
Foreign tax payments are applied, as permitted, to
reduce federal income tax. Investment tax credits related
to leasing transactions are accounted for by the deferral
method.
EARNINGS PER SHARE CALCULATIONS Earnings per common share
are computed based on the weighted average number of common
shares outstanding during each year, the dilutive effect of
stock options outstanding, and after deducting from
earnings dividends paid on preferred stock. Fully diluted
earnings per common share are considered equal to primary
earnings per common share in each year because dilution is
less than three percent.
CASH FLOWS For purposes of reporting cash flows, cash and
cash equivalents include cash and due from banks, time
deposits due from banks, federal funds sold and securities
purchased under agreements to resell having maturities of
three months or less. Generally, federal funds are
purchased and sold for one-day periods. Changes in assets
and liabilities are net of the effects of sales and
acquisitions. The effect of changes in foreign exchange
rates on cash balances is not material.
RECENT ACCOUNTING PRONOUNCEMENTS In March 1995, the
Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets to be Disposed of." This
statement, effective for fiscal years beginning after
December 15, 1995, requires a company to assess impairment
of "assets held or used" and "assets to be disposed of."
Whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable, the
related undiscounted cash flows are compared to the assets
book value. If the sum of the undiscounted cash flows is
less than the book value, a loss is recorded based upon the
excess of the book value over the fair value of the asset.
Assets to be disposed of are recorded at fair value less
cost to sell and are not depreciated while held. The
Corporation does not expect the adoption of this
pronouncement in 1996 to have a material effect on its
financial statements.
The American Institute of Certified Public Accountants
issued Statement of Position (SOP) 94-6, "Disclosures of
Certain Significant Risks and Uncertainties" in December
1994 which is applicable to fiscal years ending after
December 15, 1995. Disclosures required in the notes to the
financial statements include a discussion of the nature of
operations; use of estimates; certain significant
estimates; and current vulnerability due to certain
concentrations. Disclosures about the nature of operations
and use of estimates are included as appropriate in this
note. The Corporation does not believe that it is exposed
to material risk as defined in the latter two disclosure
requirements.
In October 1995, the FASB issued Statement of Financial
Accounting Standards No. 123, "Stock-Based Compensation"
(SFAS 123), which encourages the use of the fair value
method of accounting for all employee stock options. The
fair value method includes measuring the value of the stock
option at grant date and amortizing this value over the
service period of the award. The "intrinsic value method"
as prescribed by Accounting Principles Bulletin No. 25,
"Accounting for Stock Issued to Employees" will also be
allowed. This method requires that compensation cost be
measured as the excess of the quoted market price of the
stock, at the grant date or other measurement date, over
the amount an employee must pay to acquire the stock. SFAS
123 is effective for fiscal years beginning after December
15, 1995.
NOTE - B RESTRICTIONS ON CASH AND DUE FROM BANKS
The Corporation's banking subsidiaries are required to
maintain balances with the Federal Reserve Banks based on a
percentage of deposit liabilities. Such balances averaged
approximately ^$0.9 billion in 1995 and $1.0 billion in
1994.
NOTE - C INVESTMENT SECURITIES
On January 1, 1994, the Corporation adopted SFAS 115,
"Accounting for Certain Investments in Debt and Equity
Securities." The adoption of this pronouncement had no
significant impact on the Corporation's financial
statements. Under the provisions of SFAS 115, securities
are to be classified as held-to-maturity, available-for-
sale, or trading.
In November 1995, the Financial Accounting Standards
Board staff issued a Special Report, "A Guide to
Implementation of Statement 115 on Accounting for Certain
Investments in Debt and Equity Securities," which provided
a one-time opportunity for reassessment of intent with
regard to the classification of securities. The Corporation
reclassified $8.9 billion of securities from held-to-
maturity to available-for-sale on December 27, 1995. At the
date of transfer, the amortized cost of those securities
was $8.9 billion and the unrealized net gain, net of
related taxes, on those securities was $5 million which is
included in shareholders' equity.
The following table provides the major components of investment
securities (in millions):
Gross Unrealized
Amortized ------------------ Estimated
Cost Gains Losses Fair Value
- ------------------------------------------------------------------------------
December 31, 1995
Held-to-maturity:
Other debt securities $ 88 $ -- $ 37 $ 51
- ------------------------------------------------------------------------------
Total held-to-maturity securities $ 88 $ -- $ 37 $ 51
==============================================================================
Available-for-sale:
U.S. Treasury securities $ 2,366 $ 11 $ 4 $ 2,373
U.S. government agency securities:
Mortgage-backed securities:
Pass-throughs 2,754 32 10 2,776
CMOs and REMICs 2,091 5 22 2,074
Direct agencies 262 3 1 264
State and political subdivisions 17 1 -- 18
Other mortgage-backed securities:
CMOs and REMICs 834 1 10 825
Asset backed securities 552 5 2 555
Other debt securities 35 -- -- 35
Corporate and Federal Reserve
Bank Stock 89 1 -- 90
-----------------------------------------------------------------------------
Total available-for-sale securities$ 9,000 $ 59 $ 49 $ 9,010
==============================================================================
December 31, 1994
Held-to-maturity:
U.S. Treasury securities $ 5,199 $ 3 $ 97 $ 5,105
U.S. government agency securities:
Mortgage-backed securities:
Pass-throughs 2,773 10 110 2,673
CMOs and REMICs 3,652 2 137 3,517
Direct agencies 481 1 8 474
State and political subdivisions 29 1 -- 30
Other mortgage-backed securities
CMOs and REMICs 641 -- 37 604
Asset backed securities 770 -- 20 750
Other debt securities 150 -- 23 127
- ------------------------------------------------------------------------------
Total held-to-maturity securities $13,695 $ 17 $ 432 $13,280
==============================================================================
Available-for-sale:
U.S. Treasury securities $ 20 $ -- $ -- $ 20
U.S. government agency securities:
Mortgage-backed securities:
Pass-throughs 5 -- -- 5
CMOs and REMICs 14 -- -- 14
Direct agencies 3 -- -- 3
Corporate and Federal Reserve
Bank Stock 113 1 -- 114
- ------------------------------------------------------------------------------
Total available-for-sale securities$ 155 $ 1 $ -- $ 156
==============================================================================
Maturities of securities classified as held-to-maturity
and available-for-sale as of December 31, 1995 are as
follows (in millions):
Held-to-Maturity Securities Available-for-Sale Securities
--------------------------- -----------------------------
Estimated Estimated
Amortized Fair Average Amortized Fair Average
Cost Value Yield(1) Cost Value Yield(1)
- -------------------------------------------------------------------------------
Due in one year or less $ $ % $1,830 $1,804 5.24%
Due after one year
through five years -- -- -- 840 876 5.13%
Due after five years
through ten years -- -- -- 9 9 5.87%
Due after ten years(2) 88 51 6.77% 1 1 5.44%
- -------------------------------------------------------------------------------
88 51 6.77% 2,680 2,690 5.21%
Mortgage-backed securities -- -- -- 6,231 6,230 5.85%
Corporate and Federal
Reserve Bank stock -- -- -- 89 90 5.43%
===============================================================================
Total securities $ 88 $ 51 6.77% $9,000 $9,010 5.65%
(1) The weighted average yield is computed using the amortized
cost of securities.
(2) Securities with no stated maturity are included with securities
with a remaining maturity of ten years or more.
There is minimal risk associated with the mortgage-
backed securities issued by U.S. Government agencies. At
December 31, 1995, $2,093 million of the U.S. Government
agency pass-through mortgage-backed securities were fixed
rate and $683 million were adjustable rate. The REMIC
holdings of the Corporation are rated in the highest
category by at least one nationally recognized rating
organization.
Mortgage-backed securities included above have a
weighted average contractual maturity of approximately 9
years. Expected maturity is often significantly shorter
than contractual maturity for mortgage-backed securities
due to scheduled payments and unscheduled prepayment
activity affecting these securities. The expected average
life of the mortgage-backed securities portfolio at
December 31, 1995 was 2.8 years.
Mortgage-backed securities are subject in varying
degrees to extension risk in the event of a material
decrease or increase in the level of prevailing interest
rates. The Corporation believes its exposure to such price
risk is modest because of the relatively short maturity
structure of its mortgage-backed securities holdings.
Measured in terms of duration, a widely used factor to
estimate market-price sensitivity to changes in interest
rates, the Corporation estimates adverse market-price
exposure to a one percentage point change in interest rates
would be approximately $134 million, or 2.36% of the
aggregate carrying value of the U.S. Government pass-
through mortgage- backed securities, CMOs and REMICs held
by the Corporation.
The components of gains and losses on sales of
securities for the years ended December 31, were as follows
(in millions):
1995 1994 1993
- ---------------------------------------------------------------------------
Proceeds from sales $ 406 $ 88 $ 32
Gross gains on sales of securities 10 21 10
Gross losses on sales of securities -- -- --
- ---------------------------------------------------------------------------
Net gain on sales of securities $ 10 $ 21 $ 10
===========================================================================
Securities and other assets carried at $3.9 billion at
December 31, 1995 and $7.3 billion at December 31, 1994
were pledged to secure public and trust deposits and for
other purposes as required or permitted by law.
The net unrealized holding gains on available-for-sale
securities reported, net of related taxes, as a separate
component of shareholders' equity was $5.9 million at
December 31, 1995 and $0.9 million at December 31, 1994.
The net unrealized holding gains on trading securities
reported in earnings was $5 million for 1995 and 1994.
NOTE - D LOANS AND RELATED COMMITMENTS
The composition of the loan and lease portfolio at December
31, 1995 and 1994 is summarized as follows (in millions):
Outstandings
------------------------
1995 1994
- -----------------------------------------------------------------------
Commercial, financial and agricultural $ 10,917 $ 9,294
Real estate construction 1,063 962
Real estate mortgage 11,211 10,263
Instalment 12,854 12,272
Other 772 566
- -----------------------------------------------------------------------
Gross Loans 36,817 33,357
Less: Unearned income 133 107
Net deferred fees 11 28
- -----------------------------------------------------------------------
Net Loans $ 36,673 $ 33,222
=======================================================================
Loans included in other assets held for sale $ 77 $ 26
=======================================================================
See "Risk Elements under the Management's Discussion &
Analysis section of this annual report for a summary of
nonperforming loans, concentrations of credit risk and
other information.
Commitments are contractual agreements to extend credit
which generally have fixed expiration dates or other
termination clauses and may require payment of a fee.
Substantially all of the Corporation's commitments to
extend credit are contingent upon the customers maintaining
specific credit standards at the time of loan funding.
Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements.
Standby letters of credit and financial guarantees are
conditional commitments issued by the Corporation to
guarantee the performance of a customer to a third party.
Standby letters of credit and financial guarantees are
primarily issued as credit enhancements for public and
private borrowing arrangements, including commercial paper,
bond financing, and similar transactions. The credit risk
involved in issuing letters of credit is essentially the
same as that involved in extending other credit
arrangements to customers. Risks associated with standby
letters of credit are reduced by participation to third
parties. At December 31, 1995 and 1994 approximately $26
million and $40 million respectively, of standby letters of
credit had been participated to others.
A commercial letter of credit represents an extension of
credit by a bank to its customer where the customer is
usually the buyer/importer of goods and the beneficiary is
typically the seller/exporter. Credit risk is limited as
the merchandise shipped serves as collateral for the
transaction.
The Corporation's exposure to credit loss under
commitments to extend credit, standby letters of credit and
financial guarantees as well as commercial letters of
credit, is represented by the contractual amount of these
instruments (in millions):
December 31
--------------------
1995 1994
- --------------------------------------------------------------------------
Commitments to extend credit $29,231 $28,508
Standby letters of credit and financial guarantees 2,018 2,076
Commercial letters of credit 190 264
==========================================================================
The following summarizes the expiration schedule of the
Corporation's loan commitments outstanding and standby
letters of credit issued as of December 31, 1995 (in
millions):
Standby
Letters of
Commitments Credit
- --------------------------------------------------------------------
1996 $18,960 $1,564
1997 2,043 257
1998 1,665 49
1999 1,741 54
2000 3,569 14
Thereafter 1,253 80
- --------------------------------------------------------------------
Total outstanding at end of year $29,231 $2,018
====================================================================
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 Statement of Financial Accounting Standards No.
118, "Accounting by Creditors for Impairment of a Loan
Income Recognition and Disclosures." The following table
presents a breakdown of impaired loans and the impairment
allowance related to impaired loans (in millions):
December 31, 1995
-------------------------
Recorded Impairment
Investment Allowance
- ------------------------------------------------------------------------
Impaired loans:
Loans with impairment allowance:
Commercial, financial and agricultural $ 30 $ 1
Real estate construction - -
Commercial real estate mortgage 5 1
- -----------------------------------------------------------------------
Total loans with impairment allowance 35 $ 2
===
Loans without impairment allowance:
Commercial, financial and agricultural 49
Real estate construction 7
Commercial real estate mortgage 79
- ---------------------------------------------------------
Total loans without impairment allowance 135
- ---------------------------------------------------------
Total impaired loans $ 170
=========================================================
For the year ended December 31, 1995, impaired loans
averaged $150 million and interest income recorded on
impaired loans totaled $4.8 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.
Transactions in the allowance for credit losses were as
follows (in millions):
December 31
---------------------------
1995 1994 1993
- -------------------------------------------------------------
Balance at beginning of year $ 934 $1,001 $1,068
Provision for the year 112
Other changes acquisitions 24 66 39
- -------------------------------------------------------------
958 1,067 1,219
Deduct:
Loans charged off 314 261 399
Less recoveries on loans
previously charged off 160 128 181
- -------------------------------------------------------------
Net loans charged off 154 133 218
- -------------------------------------------------------------
Balance at end of year $ 804 $ 934 $1,001
=============================================================
Certain directors and executive officers of the Parent
Corporation and certain of its significant subsidiaries,
including their associates, were loan customers of the
subsidiary banks. These loans were made in the ordinary
course of business at rates and terms no more favorable
than those offered to other customers with a similar credit
standing. The aggregate dollar amounts of those loans
exceeding $60,000 to any one director or executive officer
(but excluding loans to the immediate families of executive
officers and directors of subsidiaries) were $66 million
and $80 million at December 31, 1995 and 1994,
respectively. During 1995, $16 million of new loans were
made and repayments totaled $30 million.
NOTE - E BANK PREMISES AND EQUIPMENT
Bank premises and equipment consist of the following (in
millions):
December 31
-----------------
1995 1994
- --------------------------------------------------------------------
Land $ 194 $ 188
Buildings and improvements:
Owned 1,262 1,151
Capital leases 45 45
Furniture, fixtures and equipment:
Owned 1,008 930
Capital leases 5 5
- --------------------------------------------------------------------
2,514 2,319
Less accumulated depreciation and amortization:
Owned 1,192 1,133
Capital leases 40 39
- --------------------------------------------------------------------
Total premises and equipment $1,282 $1,147
====================================================================
Depreciation and amortization totaled $126 million, $109
million and $99 million in 1995, 1994 and 1993,
respectively.
NOTE - F SHORT TERM BORROWINGS
Short term borrowings are detailed as follows (in
millions):
December 31
----------------------------
1995 1994 1993
- ----------------------------------------------------------------------------
Federal funds purchased:
Balance at December 31 $ 676 $1,436 $ 557
Average daily balance 1,144 514 234
Maximum amount outstanding
at any month end 2,453 1,436 984
Average interest rate:
During the year 5.92% 4.44% 2.78%
At December 31 3.30% 4.29% 2.29%
Securities sold under agreements to repurchase:
Balance at December 31 $ 264 $ 73 $ 144
Average daily balance 106 93 149
Maximum amount outstanding
at any month end 264 219 194
Average interest rate:
During the year 5.77% 3.86% 2.50%
At December 31 5.01% 4.75% 2.75%
Other liabilities for short term borrowed money averaged
$112 million in 1995 and $48 million in 1994 and 1993.
Federal funds purchased generally mature the day
following the date of purchase, while securities sold under
agreements to repurchase generally mature within 30 days
from the various dates of sale. Other short term borrowings
generally mature within twelve months.
During 1994, the Corporation finalized a three year,
$500 million senior revolving credit facility as part of
its liability management plan for the Parent Corporation.
This facility has numerous interest rate and borrowing
options, as well as a $150 million line of credit for cash
management purposes. As of December 31, 1995 there were no
borrowings outstanding against this facility.
NOTE - G LONG TERM DEBT AND DIVIDEND RESTRICTIONS
Following is a description of the Corporation's senior and
subordinated long term debt which, unless noted otherwise,
is not subject to early redemption by the Corporation (in
millions):
December 31
-----------------
1995 1994
- ------------------------------------------------------------------------------
Parent Corporation:
Senior Medium Term Notes, Series A
bearing interest rates ranging from 7.775% to 10.90% $ 200 $ 328
8.625% Subordinated Capital Notes due April 1, 1999 182 182
Subordinated Medium Term Notes, Series C
bearing interest rates ranging from 9.38% to 11.25% 163 163
9.125% Subordinated Notes due February 1, 2004 133 133
9.00% Subordinated Notes due November 15, 2004 125 125
8.15% Subordinated Notes due March 15, 2002 100 --
Other Issues (under $100 million each):
Fixed Rate
5.75% DM100 million Bearer Bonds
due May 6, 1996 43 43
Other fixed rate notes bearing interest
ranging from 10.5% to 12.75% 188 188
Variable Rate 128 128
- ------------------------------------------------------------------------------
1,262 1,290
Subsidiaries:
Mortgages 73 74
Obligations under capital leases 20 24
- ------------------------------------------------------------------------------
Total long term debt $ 1,355 $ 1,388
==============================================================================
The Corporation has a $2.3 billion Universal Shelf
Registration effective since June 1993, which allows for
the issuance of debt securities, preferred stock, common
stock, securities warrants and currency warrants. Under the
Universal Shelf Registration, the Corporation established a
$1 billion Medium Term Note Program in December of 1994,
which allows for the issuance of senior and subordinated
debt securities in a number of countries and currencies
over a broad spectrum of maturities. As of December 31,
1995, $225 million of debt securities ($125 million 9.00%
Subordinated Notes due November 15, 2004 and $100 million
8.15% Subordinated Notes due March 15, 2002) had been
issued under the Universal Shelf Registration, leaving $2.1
billion capacity for future issuance. No securities have
been issued to date under the Medium Term Note program.
During 1993, the Corporation repurchased $441 million of
its long term debt in the open market and redeemed $369
million of its long term debt. In addition, the
Corporation tendered for $175 million of long term debt.
As a result, an after-tax loss of $25 million was recorded
as an extraordinary item on the Corporation's Consolidated
Statement of Operations.
The various indentures of the Corporation, pursuant to
which long term debt is issued, contain covenants limiting
the sale of stock of principal subsidiaries.
The Senior Medium Term Notes, Series A and the
Subordinated Medium Term Notes, Series C are offered on a
continuing basis by the Corporation.
The 8.625% Subordinated Capital Notes are subordinated
to senior indebtedness of the Corporation. These notes are
considered to be Total Capital, but not Tier 1 Capital, for
regulatory purposes as, upon maturity, they will be
exchanged, at the option of the Corporation, for common
stock, perpetual preferred stock or other eligible capital
securities of the Corporation having a market value equal
to the principal amount of the notes.
The 9.125% Subordinated Notes, due February 1, 2004,
9.00% Subordinated Notes, due November 15, 2004, and 8.15%
Subordinated Notes, due March 15, 2002, are subordinated to
senior indebtedness of the Corporation. These notes are
considered to be Total Capital, but not Tier 1 Capital, for
regulatory purposes.
Included in other issues of the Parent Corporation under
$100 million at December 31, 1995 were four fixed rate
issues totaling $231 million, and two floating rate issues
totaling $128 million. In conjunction with the fixed rate
$43 million of 5.75% DM100 mil-lion Bearer Bonds due May 7,
1996, the Corporation has entered into separate agreements
whereby the DM/US$ exchange rate is fixed throughout the
term of the issue. The floating rate issues consisted of
$45 million of Floating Rate FOREX-Linked Notes due
February 26, 1996 with a current interest rate of 6.1844%,
and $83 million of floating rate notes due June 30, 1997
with a current interest rate of 6.00%. The FOREX Notes bear
interest at a rate equal to 20 basis points per annum above
the London interbank offered rates for six-month Eurodollar
deposits, adjusted semiannually on interest payment dates.
The final payment at maturity depends on the exchange rate
at that time. The corporation has entered into forward
currency contracts to fix this payment.
The aggregate minimum annual repayments for the Parent
Corporation of long term borrowings for the years 1996
through 2000 and thereafter are as follows (in millions):
Minimum
Year Repayment
---------------------------
1996 $ 192
1997 161
1998 178
1999 188
2000 --
Thereafter 543
---------------------------
Total $1,262
===========================
At December 31, 1995, $1,134 million (90%) of the Parent
Corporation's long term debt had fixed coupon rates. Of
this amount, $596 million is converted to floating-rate
debt using interest rate swaps. The effect of the
Corporation's swap activity was to decrease interest
expense on long term debt by $12 million, or 86 basis
points, for 1995, $16 million, or 115 basis points, for
1994, and $47 million, or 248 basis points, for 1993.
The Corporation is prohibited from borrowing from its
bank subsidiaries on less than a fully secured basis under
regulations of the Federal Reserve Board. Dividends that
may be paid by the bank subsidiaries are restricted by
various statutory limitations. As of January 1, 1996,
approximately $638 million were free of dividend
restrictions under such statutory limitations. Unrestricted
net assets of nonbank subsidiaries are insignificant.
NOTE - H SHAREHOLDERS' EQUITY
Preferred Stock At December 31, 1995 and 1994, 15,000,000
shares of Preferred Stock (no par value) were authorized.
Shares Issued Carrying Amount Dividends Declared
and Outstanding (in millions) (in millions)
---------------------- ------------- ----------------------
December 31 December 31 Year ended December 31
---------------------- ----------- ----------------------
1995 1994 1995 1994 1995 1994 1993
9.875% Cumulative,
Series F 8,000,000 8,000,000 $200 $200 $19.8 $19.8 $19.8
(Liquidation preference $200)
9.00% Cumulative,
Series G 6,000,000 6,000,000 150 150 13.5 13.5 13.5
(Liquidation preference $200)
Other issues
previously redeemed --- --- -- -- -- -- 13.3
- --------------------------------------------------------------------------------
Total preferred
stock 14,000,000 14,000,000 $350 $350 $33.3 $33.3 $46.6
================================================================================
The 9.875% Preferred Stock, Series F has been issued as
Depositary shares each representing a one-eighth interest
in a share of the Series F Preferred Stock. 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.
The 9.00% Preferred Stock, Series G has been issued as
Depositary shares each representing a one-eighth interest
in a share of the Series G Preferred Stock. The Series G
Preferred Stock is redeemable at any time 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.
TREASURY STOCK At December 31, 1995 and 1994, the cost of
Common Stock in the treasury averaged $76.07 per share and
$73.64 per share, respectively. 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, to be made from time to time through
mid-1997 in the open market or through privately negotiated
transactions. The first 2.5 million shares purchased under
the program were to be used for reissuance through the
Corporation's various employee benefit and stock option
plans, and Stock Purchase and Dividend Reinvestment Plan.
The Corporation commenced such purchases in July 1995. As
of December 31, 1995, the Corporation had repurchased
956,100 shares. The program was suspended in October 1995,
as a result of the initiation of merger negotiations, see
Note P Business Combinations.
RIGHTS The Corporation declared a dividend of one common
share purchase right for each outstanding share of Common
Stock, par value $2.00, payable on December 30, 1988 to
shareholders of record on that date. Such rights also apply
to new issuance of shares after that date. Each right
entitles the registered holders to purchase from the
Corporation one share of its $2.00 par value Common Stock
at a price of $170.00 per share, subject to adjustment.
The rights are not exercisable or separable from the
Common Stock until the earlier of 10 days after a party
acquires beneficial ownership of 20% or more of the
outstanding Common Shares or announces a tender offer to do
so. The rights, which expire on December 31, 1998, may be
redeemed by the Corporation at any time prior to the
acquisition by any party of beneficial ownership of 20% or
more of the Common Stock at a price of $0.001 per right.
When exercisable, and under certain circumstances, each
right may entitle the holders to purchase Common Stock of
the Corporation at 50% of the then current per share market
price of the Common Stock or common stock of the acquiring
party at 50% of the then current per share market price of
the common stock of the acquiring party.
The Corporation has represented to Wells Fargo that the
rights have not and will not become exercisable,
distributed or triggered in connection with the execution
of the merger agreement with Wells Fargo or the
consummation of the merger. The rights will expire upon
consummation of the merger.
NOTE - I STOCK OPTION PLANS
The stock option plans adopted in 1988 and 1991 provide for
the granting of "non-qualified options and "incentive stock
options to key employees of the Corporation and its
subsidiaries to purchase Common Stock of the Corporation at
a price not less than 100% of the fair market value on the
dates of grant. The First Interstate Bancorp 1991 Director
Option Plan, as amended and restated, provides for the
granting to non-employee directors of the Corporation of
"non-qualified options to purchase Common Stock of the
Corporation at a price not less than 100% of the fair
market value on the dates of grant. Under the plans,
options generally become exercisable over a four-year
period beginning one year after grant except when a change
in control occurs, as defined in the stock option plans, at
which time all outstanding options become immediately
exercisable. At the time options are exercised, the excess
of the proceeds over par value is credited to capital
surplus. There are no charges or credits to income in
connection with the grant or exercise of options.
The 1988 and 1991 Plans also provide for the sale of
restricted Common Stock of the Corporation to key
employees. Generally, restrictions lapse on 25% of the
shares sold, per year, over a four year period from the
anniversary of the grant. The following table sets forth
information on the options to purchase the Common Stock and
the restricted stock of the Corporation:
</TABLE>
<TABLE>
<CAPTION>
Price per Restricted
Non- Share (range) Common Stock
Outstanding Employee ---------------- Weighted -----------------------
Options Employees Directors Low High Average Outstanding Employees
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1992 3,846,660 855 14 $18.500 - 62.625 $39.94 111,590 82
Granted
Stock Options 1,007,600 50.000 - 66.875 50.11
Restricted Stock 1,000
Less: Exercised 636,042 18.500 - 62.625 40.43 51,750
Canceled 340,632 28.875 - 62.625 42.13 7,740
- ----------------------------------------------------------------------------------------------------------------
December 31, 1993 3,877,586 720 15 18.500 - 66.875 42.36 53,100 59
Granted
Stock Options 835,100 66.875 - 83.875 67.26
Restricted Stock 16,897
Less: Exercised 702,033 18.500 - 62.625 42.27 44,500
Canceled 78,223 28.875 - 66.875 46.20
- ----------------------------------------------------------------------------------------------------------------
December 31, 1994 3,932,430 712 14 18.500 - 83.875 47.70 25,497 17
Granted
Stock Options 886,250 75.125 - 106.000 80.44
Restricted Stock
Less: Exercised 1,178,235 18.500 - 71.125 42.81 12,074
Canceled 135,097 33.500 - 80.375 54.24 3,000
- ----------------------------------------------------------------------------------------------------------------
December 31, 1995 3,505,348 702 14 $18.500 - 106.000 $57.44 10,423 14
================================================================================================================
</TABLE>
At December 31, 1995 options for 1,425,048 shares were
exercisable and 6,155,091 shares were reserved for future
grants under the plans.
NOTE - J EMPLOYEE BENEFIT PLANS
The Corporation has a noncontributory defined benefit plan
that provides retirement benefits which are a function of
both the years of service and the highest level of
compensation during any consecutive five-year period during
the last 10 years before retirement.
It is the Corporation's policy to fund the plan
sufficient to meet the minimum funding requirements set
forth in the Employee Retirement Income Security Act of
1974, plus such additional amounts as the Corporation may
determine to be appropriate from time to time. During 1995
the Corporation contributed $131 million to the plan.
The following table sets forth the plans funded status
and amounts recognized in the Corporation's Consolidated
Balance Sheet (in millions):
December 31
----------------------
1995 1994
- ---------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Accumulated benefit obligation:
Vested $ 855 $ 582
Nonvested 42 39
- ---------------------------------------------------------------------------
$ 897 $ 621
===========================================================================
Plan assets at fair value,
primarily marketable securities $ 947 $ 706
Projected benefit obligation 1,033 742
- ---------------------------------------------------------------------------
Plan assets less than projected benefit obligation (86) (36)
Unrecognized prior service costs 5 5
Unrecognized net transition asset being
amortized over 13 years (18) (24)
Unrecognized net loss due to past experience
different from assumptions made 189 23
- ---------------------------------------------------------------------------
Prepaid pension asset (pension liability) $ 90 $ (32)
===========================================================================
A summary of assets held by the plan is as follows (in millions):
December 31
----------------------
1995 1994
- ---------------------------------------------------------------------------
Cash equivalents $ 56 $ 25
Fixed income securities 284 241
Equity securities 571 298
Other investments 32 138
Accrued income 4 4
- ---------------------------------------------------------------------------
Total plan assets $ 947 $ 706
===========================================================================
The net pension cost included the following (in millions):
Year Ended December 31
1995 1994 1993
- -----------------------------------------------------------------------------
Service costs (benefits earned during the period) $ 24 $ 30 $ 23
Interest costs on projected benefit obligation 67 59 49
Net amortization and deferral 73 (76) 23
164 13 95
Less return on plan assets 145 (10) 89
Net pension cost included in salaries and benefits 19 23 6
Early Retirement Program expense included
in provision for restructuring 82
Total pension cost recognized $ 19 $ 105 $ 6
The following assumptions were used in determining the
projected benefit obligation
1995 1994 1993
- -----------------------------------------------------------------------------
Weighted average discount rate 7.00% 8.75% 7.38%
Increase in salary levels 4.00% 4.50% 4.00%
Expected long term return on plan assets 9.25% 9.25% 9.25%
In addition to the noncontributory defined benefit plan,
the Corporation and its subsidiaries have several
nonqualified noncontributory defined benefit plans covering
certain senior employees benefits in excess of those
covered under the Corporation's qualified noncontributory
defined benefit plan. The accumulated benefit obligation
under these plans was $48 million and $29 million and
projected benefit obligation in excess of plan assets was
$54 million and $33 million as of December 31, 1995 and
1994, respectively. Net pension cost included in salaries
and benefits was $5 million in 1995, $16 million in 1994
and $2 million in 1993.
The Corporation provides certain health care benefits to
retired employees through the Master Welfare Benefit Plan
for Employees of First Interstate Bancorp and Affiliates
(Plan). Under the terms of the Plan, employees hired prior
to January 1, 1992 and who retire at or after age 55 with
at least 10 years of service will be eligible for a fixed
maximum contribution from the Corporation. Employees hired
on or after January 1, 1992 will not be eligible for
retiree health care benefits.
Effective in the first quarter of 1993, the Corporation
adopted SFAS 106, "Employers Accounting for Postretirement
Benefits Other Than Pensions (SFAS 106), on an immediate
recognition basis. SFAS 106 requires the Corporation to
accrue the estimated cost of retiree benefit payments,
other than pensions, during employees active service
period. The cumulative effect of adopting SFAS 106 was the
recognition of accrued postretirement health care costs
totaling $169 million. After related tax benefits of $64
million, net income for 1993 was reduced by $105 million.
The Corporation currently intends to fund postretirement
health care costs as they are incurred. The following table
sets forth the Plans accumulated cost included on the
Corporation's Consolidated Balance Sheet (in millions):
December 31
-------------------
1995 1994
- ---------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Current retirees $ 132 $ 117
Active employees fully eligible for benefits 2 2
Other active Plan participants 13 17
- ---------------------------------------------------------------------------
Accumulated postretirement benefit obligation 147 136
Unrecognized prior service costs 8 8
Unrecognized net gains due to past experience
different from assumptions made 12 26
- ---------------------------------------------------------------------------
Accrued postretirement benefit cost $ 167 $ 170
===========================================================================
Net periodic postretirement benefit cost for 1995, 1994
and 1993 included the following components (in millions):
December 31
-------------------------------
1995 1994 1993
- -----------------------------------------------------------------------
Service cost $ 1 $ 1 $ 1
Interest cost 11 10 14
Amortization of net gains (10) (1) --
- -----------------------------------------------------------------------
Total postretirement benefit cost $ 2 $ 10 $ 15
=======================================================================
During 1995, the Corporation determined that $25
million, included in the unrecognized net gains,
represented a nonreversible gain due to past experience
versus the assumptions made. The nonreversible gain is a
result of the actual payments being made under the Plan by
the Corporation being less than the fixed schedule of
payments anticipated in the original accumulated
postretirement benefit obligation recognized at the
adoption date. It is expected that the payments will reach
the original fixed-schedule level during the next several
years. Accordingly, the Corporation has recorded a
reduction to its expense for 1995 of $8 million, which is a
component of the amortization of net gains.
Since the Plan contains a fixed maximum contribution by
the Corporation, the health care cost trend rate assumption
has no effect on the amounts reported. Accordingly,
increasing the assumed health care cost trend rates by one
percentage point in each year would not change either the
accumulated postretirement benefit obligation as of
implementation, or the aggregate of the service and
interest cost components of the net periodic postretirement
benefit cost for 1995, 1994 and 1993.
In accordance with the Plan, the increase in the
Corporation's fixed maximum contribution for participants
who retired before January 1, 1993 was 10.0% in 1993, 9.0%
in 1994, and zero for 1995 and thereafter. For participants
who retired on or after January 1, 1993, there is no
increase in the Corporation's fixed maximum contribution.
The weighted average discount rates used in determining
the accumulated postretirement benefit obligation were
7.00% for 1995, 8.75% for 1994 and 7.375% for 1993.
The Corporation has a savings plan covering
substantially all employees. Savings plan expense was $14
million for both 1995 and 1994 and $13 million for 1993.
NOTE - K INCOME TAXES
The provision for income taxes (benefit) attributable to
continuing operations consists of the following (in millions):
State and
Federal Local Foreign Total
- ---------------------------------------------------------------
1995:
Current $ 324 $ 82 $ -- $ 406
Deferred 128 24 -- 152
- ---------------------------------------------------------------
$ 452 $ 106 $ -- $ 558
===============================================================
1994:
Current $ 294 $ 52 $ (4) $ 342
Deferred 84 24 -- 108
- ---------------------------------------------------------------
$ 378 $ 76 $ (4) $ 450
===============================================================
1993:
Current $ 223 $ 44 $ -- $ 267
Deferred 41 12 -- 53
- ---------------------------------------------------------------
$ 264 $ 56 $ -- $ 320
===============================================================
Effective January 1, 1993, the Corporation changed its
method of accounting for income taxes from the liability
method required under SFAS 96 to the liability method
required by SFAS 109 on a prospective basis. The cumulative
effect of adopting SFAS 109 increased net income for 1993
by $305 million.
The deferred tax expense represents the changes in the
amounts of temporary differences. The types of temporary
differences that give rise to significant portions of the
deferred tax include reserves for credit losses,
restructuring expenses and other real estate owned. The
amounts previously reported as the current and deferred
portion of income tax expense for 1994 have been revised.
Such changes to the components occur because all
alternatives available to the Corporation are not known for
a number of months subsequent to yearend.
The effective income tax rate varies from the statutory
rate due to a number of factors including the exemption
from tax on interest income earned on obligations of state
and political subdivisions, nondeductible goodwill
amortization and certain merger related expenses. A
reconciliation between the statutory federal and the
effective income tax rates follows:
% of Pretax Income
-----------------------------
1995 1994 1993
- --------------------------------------------------------------------------
Federal income tax at statutory rate 35 35 35
Nontaxable interest income (1) (1) (1)
Nondeductible goodwill 1 -- --
Nondeductible merger related costs 1 -- --
Enacted statutory tax rate change -- -- (1)
Foreign tax credit carryovers -- -- (1)
State income taxes 7 6 6
Foreign income taxes -- (1) --
Previously unrecognized tax benefits (3) -- --
Other net (1) (1) (2)
- --------------------------------------------------------------------------
Effective income tax rate 39 38 36
==========================================================================
The tax effects of temporary differences and tax
carryforwards which give rise to significant elements of
deferred tax assets and liabilities are detailed below (in
millions):
December 31
-------------------
1995 1994
- --------------------------------------------------------------------------
Gross deferred assets:
Allowance for credit losses $ 323 $ 368
Compensation and benefits 87 121
Reserves and accruals 81 114
Purchase accounting adjustments on loans 25 13
Other real estate 14 26
Foreign tax credit 11 13
Other 10 13
- --------------------------------------------------------------------------
Total gross deferred assets 551 668
Gross deferred liabilities:
Leases (54) (39)
Fixed assets (31) (33)
Acquisition related tax accounting method changes (26) (30)
State taxes (4) (16)
Other (9) (9)
- --------------------------------------------------------------------------
Total gross deferred liabilities (124) (127)
Valuation allowance (36) (38)
- --------------------------------------------------------------------------
Net deferred asset $ 391 $ 503
==========================================================================
The valuation allowance applies to foreign tax credits
and to the uncertainty of the realization of future
deductions to the extent that realization is dependent on
levels of future taxable income in excess of present
levels. During 1995, the valuation allowance was decreased
by $2.4 million, resulting from the utilization of foreign
tax credits on the 1994 federal tax return.
For tax return purposes, the Corporation has foreign tax
credit carryforwards of $10.6 million. Of this total, $0.3
million represents tax return carryforwards which will
expire in the years 1996 through 1998. The remaining $10.3
million represents foreign taxes paid by subsidiaries which
will be available as a credit against U.S. taxes when
distributions are made to the U.S. parent.
The income tax benefit for the Parent Corporation
reflects the effect of its separate company loss and the
settlement of intercompany tax amounts in accordance with
the Corporation's tax allocation policies.
NOTE - L LEASES
At December 31, 1995, the Corporation and its subsidiaries
were obligated under a number of noncancelable leases for
land, buildings and equipment. Minimum future obligations
on leases in effect at December 31, 1995 were as follows
(in millions):
Capital Operating
Year Ending December 31 Leases Leases
- -----------------------------------------------------------------------
1996 $ 6 $ 117
1997 5 117
1998 4 101
1999 4 70
2000 3 80
Later years 9 437
- -----------------------------------------------------------------------
Total minimum obligations 31 $ 922
======
Less executory obligations --
- -----------------------------------------------------
Net minimum obligations 31
Less amount representing interest 11
- -----------------------------------------------------
Present value of net minimum obligations $ 20
=====================================================
Minimum future rentals receivable under noncancelable
operating subleases at December 31, 1995 were $51 million.
Rental expense for all operating leases was $156
million, $149 million, and $146 million for the years ended
December 31, 1995, 1994 and 1993, respectively.
NOTE - M FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, the Corporation is a
party to financial instruments with off-balance sheet risk
to meet the financing needs of its customers and to reduce
its own exposure to fluctuations in interest rates. These
financial instruments include commitments to extend credit,
standby letters of credit and financial guarantees, forward
and futures contracts, interest rate and currency swaps,
options and interest rate caps and floors. These
instruments involve, to varying degrees, elements of credit
and market risk in excess of the amounts recognized in the
Consolidated Balance Sheet. The Corporation is not a dealer
but an end-user of these instruments and does not use them
speculatively. The Corporation also offers contracts to its
customers, but they are offset by simultaneously entering
into matching contracts.
Credit risk for off-balance sheet financial instruments
is defined as the possibility of sustaining a loss because
any other party to a financial instrument fails to perform
in accordance with the terms of the contract. The
Corporation uses the same credit policies in making
commitments and conditional obligations as it does for on-
balance sheet financial instruments through established
credit approvals, risk control limits and monitoring
procedures.
Market risk represents the possibility that the value of
financial instruments will change, either positively or
negatively, with changes in market prices, such as interest
rates.
The Corporation requires collateral to support off-
balance sheet financial instruments when it is deemed
necessary. Collateral held varies, but may include deposits
held in financial institutions; U.S. Treasury securities;
other marketable securities; accounts receivable; property,
plant and equipment; and inventory.
COMMITMENTS, LETTERS OF CREDIT AND FINANCIAL GUARANTEES
Commitments are contractual agreements to extend credit
which generally have fixed expiration dates or other
termination clauses and may require payment of a fee.
Letters of credit and financial guarantees are conditional
commitments issued by the Corporation to guarantee the
performance of a customer to a third party. Additional
information concerning commitments and letters of credits
including types and maturities is located in Note D.
When-issued securities represent a method of trading in
listed or unlisted securities which have not yet been
issued and, therefore, are not deliverable. The Corporation
had no commitments to purchase when-issued securities at
December 31, 1995 or 1994.
In a typical securities borrowing/lending arrangement, a
broker/dealer or bank borrows securities from an
institution owning the securities. In return, collateral in
the form of U.S. government or federal agency securities,
cash or letters of credit equal to or in excess of the
market value of the securities lent is given to the lender
of the securities. The Corporation lends its own securities
as well as those of its customers and does, in some
instances, indemnify its customers against potential
losses. Such arrangements expose the Corporation to
potential loss. At December 31, 1995 and 1994, the
Corporation's securities lending transactions amounted to
$2.4 billion and $2.0 billion, respectively.
DERIVATIVE AND OTHER FINANCIAL INSTRUMENTS
NATURE OF INSTRUMENTS The Corporation enters into a variety
of interest rate contracts, including interest rate caps
and floors, interest rate options and interest rate swap
agreements in managing its interest rate exposure.
Forward and futures contracts are contracts for delayed
delivery of securities or money market instruments in which
the seller agrees to make delivery at a specified future
date of a specified instrument, at a specified price or
yield. Risks arise from the possible inability of
counterparties to meet the terms of their contracts and
from movements in securities values and interest rates.
Interest rate swap transactions generally involve the
exchange of fixed and floating rate interest payment
obligations without the exchange of the underlying
principal amounts. Though swaps are also used as part of
asset/liability management, most of the interest rate swap
activity arises when the Corporation acts as an
intermediary in arranging interest rate swap transactions
for customers entered into on an over-the-counter basis.
The Corporation typically becomes a principal in the
exchange of interest payments between the parties and,
therefore, is exposed to loss should one of the parties
default. The Corporation's credit policies provide the
measures to be taken when entering into and subsequently
monitoring these contracts. Exposure to interest rate risk
inherent in intermediary swaps is minimized by performing
normal credit reviews on its swap customers and by entering
into offsetting swap positions that essentially
counterbalance each other.
Currency swap agreements are entered into primarily on
an over-the-counter basis, as a means of protection against
fluctuations in foreign currency.
Interest rate caps and floors are used by the
Corporation to manage interest rate risk. In addition, they
are written by the Corporation to enable customers to
transfer, modify, or reduce their interest rate risk.
Interest rate options are contracts that allow the holder
of the option to purchase or sell a financial instrument at
a specified price and within a specified period of time
from the seller or "writer of the option. As a writer of
interest rate caps, floors and options, the Corporation
receives a premium at the outset and then bears the risk of
an unfavorable change in the price of the financial
instrument underlying the cap, floor or option. Exposure to
market risk due to such changes on intermediary
transactions is minimized by purchasing offsetting options
transactions that counterbalance the risk. The
Corporation's credit policies define the procedures
associated with originating and controlling the risks of
these transactions. These instruments are executed through
established market exchanges as well as over-the-counter
sources.
As a matter of policy, neither First Interstate Bancorp
nor its banks are allowed to act as a dealer or market
maker in financial derivative contracts. Thus, none of the
Corporation's derivative activity is classified as trading
activity.
Derivative financial instruments held or issued for
purposes other than trading executed by the Corporation are
divided into three groups based upon objectives, as
described below:
RISK MANAGEMENT TRANSACTIONS The Corporation enters into
financial derivative contracts from time to time to manage
exposures to changes in the level of interest rates or the
value of currencies. The Boards of Directors of the
subsidiary banks and the Corporation have delegated
oversight responsibility for such activity to the Asset-
Liability & Capital Committee (ALCCO), and transactions may
not be executed without the approval of ALCCO. The
Corporation's policies view risk in terms of the overall
balance sheets of the Corporation, and specify risk
tolerance and instruments to be used for hedging, as well
as governing ongoing review of the effectiveness of such
positions.
Forward and futures agreements are used to hedge the
mortgage "pipeline" risk related to the Corporation's
mortgage banking activities and to match the amounts and
terms of specific customer loans. Forward sales of whole
loans and mortgage-backed securities as well as purchases
of put options on mortgage-backed securities are used to
hedge the Corporation's residential mortgage loan purchase
commitments that have interest rate locks.
Interest rate and currency swap agreements are primarily
used to convert certain long term debt of the Corporation
to floating interest payable in U.S. dollars. Included in
the December 31, 1995 notional amounts below is $608
million of receive-fixed interest rate swaps (average
receive rate of 8.26% and average pay rate of 6.00%) and
$12 million of pay-fixed interest rate swaps (average
receive rate of 5.84% and average pay rate of 9.73%). As
discussed in Note G, these swaps effectively converted $596
million of the Corporation's fixed rate long term debt to
floating rate debt. The December 31, 1995 amount also
includes $118 million of cross currency contracts to
convert foreign currency denominated obligations to U.S.
dollar denominated obligations and to offset the foreign
exchange leverage feature embedded in certain debt
obligations of the Corporation.
Interest rate caps and floors are primarily used to
hedge certain floating rate debt obligations of the
Corporation and to hedge options embedded in specific
customer loan transactions.
The Corporation also utilizes equity derivative
contracts to manage certain risks in its venture capital
portfolio. During 1994, the Corporation entered into an
equity option collar transaction to hedge the value of
common stock held as part of a limited partnership.
The accounting for all hedging transactions follows the
accounting for the underlying instrument being hedged.
INTERMEDIARY TRANSACTIONS: MERCHANT BANKING - SOLD On
January 1, 1993, the Corporation sold its merchant banking
and foreign operations to Standard Chartered Bank PLC, a
London-based multinational banking company. The transaction
included the sale of the market risk associated with the
Corporations derivative instruments that were then
outstanding as part of its merchant banking operations.
However, the related credit risk on these instruments was
retained. Reserves for credit losses were recorded at the
time of the sale, and the adequacy of these reserves is
tested quarterly.
Since the cash flows underlying these transactions have
been sold to Standard Chartered Bank, no gain or loss (with
the exception of credit losses in excess of reserves) is
reported on the Corporation's financial statements for
these transactions.
INTERMEDIARY TRANSACTIONS: CUSTOMER ACCOMMODATION CONTRACTS
Since the sale of the Corporation's merchant banking
activities to Standard Chartered Bank, the Corporation has
not acted as a market maker or dealer in financial
derivatives and does not pursue the execution of
derivatives contracts as a line of business.
However, from time to time the Corporation's banks do
enter into financial derivative contracts with their
corporate customers. These contracts are most often
executed in conjunction with the provisions of a loan to
the customer, though that is not always the case. In
executing these contracts, the Corporation takes on minimal
market risk of a short term nature, and takes on no
correlation or basis risk, since the terms of the
transactions are perfectly offset by simultaneously
entering into a matching contract with a market maker with
the exception of a small spread received for the assumption
of credit risk as an intermediary. No open positions or
portfolio hedging techniques are allowed with the activity
and the banks do not buy or sell positions on their own
account, but rather only execute transactions in response
to the specific needs of a customer.
Activity in these customer accommodation contracts is
further restricted to the most common over-the-counter
contracts to ensure that the credit risk that the banks
undertake can be properly managed and monitored.
Customer accommodation contracts are accounted for on an
accrual basis, with the spread taken to cover credit risk
recognized in income over time as it is earned. Income
generated from this activity is immaterial.
The contractual/notional amounts and the credit risk
represented by the replacement cost of financial
instruments in a gain position follows (in millions):
December 31, 1995 December 31, 1994
-------------------- --------------------
Contractual/ Credit Contractual/ Credit
Notional Risk Notional Risk
Amount Amount Amount Amount
- --------------------------------------------------------------------------------
Forward and futures rate agreements:
Hedging $ 25 $ -- $ 37 $ --
Intermediary: Customer Accommodation 137 2 -- --
Interest rate and currency swap agreements:
Hedging 738 103 782 33
Intermediary: Portfolio Sold 1,913 61 3,226 64
Customer Accommodation 472 10 503 12
Interest rate caps and floors:
Written:
Hedging 100 -- 100 --
Intermediary: Portfolio Sold 324 -- 759 --
Customer Accommodation 86 -- 193 --
Purchased:
Hedging 16 -- 52 --
Intermediary: Portfolio Sold 108 -- 855 14
Customer Accommodation 102 -- 188 2
Options:
Written:
Hedging 15 -- 15 --
Intermediary: Customer Accommodation -- 7 --
Purchased:
Hedging 113 2 117 3
Intermediary: Customer Accommodation -- -- 7 --
NOTE - N FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments of the
Corporation is as follows (in millions):
December 31, 1995 December 31, 1994
-------------------- --------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
- -------------------------------------------------------------------------------
Financial assets:
Cash and cash equivalents $ 8,917 $ 8,917 $ 6,275 $ 6,275
Trading securities 54 54 64 64
Investment securities:
Held-to-maturity 88 51 13,695 13,280
Available-for-sale 9,010 9,010 156 156
- -------------------------------------------------------------------------------
Total Investment securities 9,098 9,061 13,851 13,436
Loans:
Commercial, financial,
agricultural 10,917 10,660 9,294 9,033
Real estate construction 1,063 1,063 962 948
Real estate mortgage 11,211 11,146 10,263 9,638
Instalment 12,854 12,772 12,272 11,906
Other 772 750 566 566
- -------------------------------------------------------------------------------
Total Loans 36,817 36,391 33,357 32,091
Less: Unearned income 133 -- 107 --
Net deferred fees 11 -- 28 --
Allowance for credit losses 804 -- 934 --
- -------------------------------------------------------------------------------
Net Loans 35,869 36,391 32,288 32,091
Other assets held for sale 77 77 26 26
Customers liability
for acceptances 94 94 35 35
Other assets 326 326 344 344
Financial liabilities:
Deposits 50,185 50,194 48,427 48,256
Short term borrowings 1,194 1,194 1,574 1,574
Acceptances outstanding 94 94 35 35
Other liabilities 132 132 86 86
Capital notes and debentures 1,262 1,397 1,290 1,313
Mortgages 73 73 74 93
Off balance sheet financial instruments:
Commitments to extend credit (6) (6) (14) (14)
Standby letters of credit and
financial guarantees (3) (3) (4) (4)
Forward and future
rate agreements
Interest rate and currency
swap agreements -- 61 -- (20)
Options, interest rate
caps and floors -- 1 -- 3
The following methods and assumptions were used by the
Corporation to estimate the fair value of each class of
financial instruments:
CASH AND CASH EQUIVALENTS The carrying amounts reported in
the balance sheet for cash and short term instruments
approximate those assets fair values.
SECURITIES (HELD-TO-MATURITY, AVAILABLE-FOR-SALE AND
TRADING) Fair values are based on quoted market prices,
where available. If quoted market prices are not available,
fair values are based on quoted market prices of comparable
instruments.
LOANS RECEIVABLE For loans with variable rates and no fixed
maturities, and for loans with maturities of three months
or less, fair value is considered to be equal to carrying
value. The fair value of other types of loans is estimated
by discounting the future cash flows using the current
rates at which similar loans would be made to borrowers
with similar credit ratings for the same remaining
maturities.
OTHER ASSETS HELD FOR SALE Carrying value is considered to
approximate fair value.
CUSTOMERS LIABILITY FOR ACCEPTANCES AND ACCEPTANCES
OUTSTANDING Bankers Acceptances with maturities of three
months or less are reported at their carrying values. For
those instruments with maturities of more than three
months, the fair value of the portfolio is estimated based
on discounted cash flows.
OTHER ASSETS AND OTHER LIABILITIES The fair value of
financial instruments included in other assets and other
liabilities is considered to be equal to the carrying
value.
DEPOSIT LIABILITIES The carrying value for all deposits
without fixed maturities, and for time deposits greater
than $100,000 with maturities of three months or less, is
considered to be equal to the fair value. The fair value
for time deposits greater than $100,000 with maturities
greater than three months as well as time deposits less
than $100,000 is based upon the appropriate discount rate
for similar pools.
The fair value of demand deposits is the amount payable
on demand, and is not adjusted for any value derived from
retaining those deposits for an expected future period of
time. That component, commonly referred to as deposit base
intangible, was not estimated at December 31, 1995 and
1994, and is not considered in the fair value amounts.
SHORT TERM BORROWINGS Carrying amounts of federal funds
purchased, borrowings under repurchase agreements and other
short term borrowings approximate fair values.
LONG TERM DEBT The fair values of long term borrowings
(other than deposits) are valued at their quoted market
price or are estimated using discounted cash flow analyses,
based on the current incremental borrowings rates for
similar types of borrowing arrangements.
OFF-BALANCE SHEET INSTRUMENTS The fair value of commitments
to extend credit, standby letters of credit and financial
guarantees represent deferred fees. The fair value of
forward and future rate agreements; interest rate and
currency swap agreements; interest rate caps, floors and
collars; and options are based upon quoted market prices,
where available, or discounted estimated cash flows.
NOTE - O PARENT CORPORATION
Condensed financial information of Parent Corporation is
presented as follows (in millions):
December 31
---------------------
Condensed Balance Sheet 1995 1994
- ---------------------------------------------------------------------------
Assets
Cash and due from subsidiary banks $ 9 $ 7
Time deposits due from subsidiary banks 235 41
Securities purchased under agreements to resell:
Subsidiary banks 30 150
Investment securities:
Available-for-sale 1 33
Loans net 21 22
Due from subsidiaries:
Banks 230 112
Nonbanks 33 52
Investment in subsidiaries:
Banks 4,640 4,204
Nonbanks 51 41
Other assets 501 377
- ---------------------------------------------------------------------------
Total Assets $ 5,751 $ 5,039
===========================================================================
Liabilities and Shareholders' Equity
Due to subsidiary banks $ 16 $ 15
Accounts payable and accrued liabilities 311 261
Other short term borrowings:
Nonbank subsidiaries 4 37
Long term debt 1,266 1,290
- ---------------------------------------------------------------------------
Total Liabilities 1,597 1,603
Shareholders' Equity 4,154 3,436
- ---------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 5,751 $ 5,039
===========================================================================
Year Ended December 31
--------------------------
Condensed Statement of Operations 1995 1994 1993
- -----------------------------------------------------------------------------
Income
Dividend from subsidiaries:
Banks $ 616 $ 605 $ 491
Interest from subsidiaries:
Banks 16 3 2
Nonbanks 3 5 11
Other interest 10 29 35
Noninterest income 19 30 1
- -----------------------------------------------------------------------------
664 672 540
Expenses
Interest on:
Long term debt 109 96 123
Short term borrowings -- 4 --
Indebtedness to subsidiaries -- -- 7
Noninterest expenses
Other expenses 97 83 99
Restructuring 24 141 --
Merger related 28 -- --
- -----------------------------------------------------------------------------
258 324 229
- -----------------------------------------------------------------------------
Income before income tax benefit,
extraordinary item, cumulative effect
of accounting changes and equity in
undistributed income of subsidiaries 406 348 311
Income tax benefit 99 96 44
- -----------------------------------------------------------------------------
Income before extraordinary item,
cumulative effect of accounting
changes and equity in undistributed
income of subsidiaries 505 444 355
Extraordinary item -- -- (25)
Cumulative effect of accounting changes -- -- 231
- -----------------------------------------------------------------------------
Income before equity in undistributed
income of subsidiaries 505 444 561
Equity in undistributed income of subsidiaries:
Banks 369 283 176
Nonbanks 11 7 --
- -----------------------------------------------------------------------------
380 290 176
- -----------------------------------------------------------------------------
Net Income $ 885 $ 734 $ 737
=============================================================================
Year Ended December 31
-----------------------------
Statement of Cash Flows 1995 1994 1993
- --------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Net income $ 885 $ 734 $ 737
Adjustments to reconcile net income to
net cash provided by operating activities:
Equity in undistributed income
of subsidiaries (380) (290) (176)
Depreciation and amortization 17 17 19
Pension plan funding (131) -- --
Restructuring -- 141 --
Cumulative effect of accounting changes -- -- (231)
Loss on early extinguishment of debt -- -- 25
Gain on sale of assets (6) (20) (10)
Decrease in interest receivable -- 6 30
Increase (decrease) in interest payable 2 (2) (24)
Other net 52 (38) 271
- --------------------------------------------------------------------------------
Net Cash Provided
by Operating Activities 439 548 641
Cash Flows from Investing Activities:
Held-to-maturity securities
Proceeds from maturities -- 2 2
Proceeds from sales -- -- 16
Purchases -- (1) (5)
Available-for-sale securities
Proceeds from maturities 28 128 969
Proceeds from sales 4 25 --
Purchases -- (15) (160)
Net increase in advances
to subsidiaries (102) (5) (147)
Net decrease in loans 1 -- 19
Proceeds from sales of subsidiaries 6 -- --
Capital contributions to subsidiaries (31) (22) (3)
Return of capital from subsidiaries 56 83 366
- --------------------------------------------------------------------------------
Net Cash (Used) Provided
by Investing Activities (38) 195 1,057
Cash Flows from Financing Activities:
Net (decrease) increase in other short term
borrowings from Nonbank subsidiaries (33) 16 (1)
Proceeds from long term debt issued 100 125 --
Repayments of long term debt (128) (259) (171)
Reacquisition of long term debt -- -- (1,014)
Cash dividends paid (269) (251) (171)
Redemption of Preferred Stock -- -- (334)
Proceeds from Common Stock issued 87 43 43
Reacquisition of Common Stock (82) (712) --
- --------------------------------------------------------------------------------
Net Cash Used by Financing Activities (325) (1,038) (1,648)
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Cash
and Cash Equivalents 76 (295) 50
Cash and cash equivalents at beginning of year 198 493 443
- --------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 274 $ 198 $ 493
================================================================================
NOTE - P BUSINESS COMBINATIONS
During 1995, 1994 and 1993, the Corporation, through its
subsidiaries, was party to thirteen business combinations
with operating entities resulting in the acquisition of
$9.0 billion in assets and $7.7 billion in deposits as
detailed in the following table (in millions):
Closing Purchase Total
Date Price Loans Assets Deposits State
- --------------------------------------------------------------------------------
1993
Cal Rep Bancorp, Inc. 12/10 $ 68 $ 381 $ 535 $ 495 CA
1994
First State Bank of the Oaks 1/13 23 57 144 130 CA
San Diego Financial Corporation 3/18 340 806 1,939 1,764 CA
BancWest Bancorp 4/29 36 39 240 215 TX
Chase Bank of Arizona 4/29 102 356 610 392 AZ
MNB Bancshares, Inc. 5/30 5 21 47 41 TX
Med Center Bank 7/29 12 53 143 152 TX
Sacramento Savings Bank 11/1 337 2,230 3,010 2,598 CA
Park Forest National Bank 12/16 2 13 23 22 TX
1995
University Savings Bank 1/6 205 731 1,274 929 WA
North Texas Bancshares, Inc. 1/9 65 211 424 387 TX
Levy Bancorp 2/1 92 266 557 506 CA
Tomball National Bancshares 7/12 8 39 95 81 TX
The acquisitions of Cal Rep Bancorp, Inc. and San Diego
Financial Corporation were accounted for as poolings-of-
interests, while the remaining acquisitions were accounted
for as purchases. In addition, all the acquisitions were
cash transactions, with the exception of Cal Rep Bancorp,
Inc., San Diego Financial Corporation and Levy Bancorp for
which the Corporation issued 1,188,823 shares, 5,067,513
shares and 1,308,388 shares of its Common Stock,
respectively.
In addition, during 1995, 1994 and 1993, the
Corporation, through its subsidiaries, completed six cash
transactions resulting in the acquisition of deposits
totaling $187 million, $315 million and $443 million,
respectively. The Corporation paid premiums of $8 million
in 1995, $26 million in 1994 and $13 million in 1993 for
these deposits, which were acquired from the Resolution
Trust Corporation and the Federal Deposit Insurance
Corporation.
The results of operations of the acquired companies are
included in the Consolidated Statement of Operations from
the dates of acquisition shown above. The Corporation's
financial statements have not been restated for the results
of operations of Cal Rep Bancorp, Inc. or San Diego
Financial Corporation prior to the dates of acquisition due
to immateriality.
The following table presents unaudited pro forma
financial information for 1994 for the Corporation and the
acquired companies accounted for as purchase transactions
as if the acquisitions had been effective on January 1,
1994. Pro forma financial information for 1995 has not been
presented. The results of operations of the acquisitions
closed in 1995 prior to the dates of acquisition were not
material.
Year Ended December 31
----------------------
(in millions, except for per share amounts) 1994
- ------------------------------------------------------------------------
Net interest income $2,455.5
Provision for credit losses 4.9
Noninterest income 1,085.2
Noninterest expense 2,346.0
Applicable income taxes 465.6
Income before extraordinary item and
cumulative effect of accounting changes 724.2
Earnings per common share before extraordinary
item and cumulative effect of accounting changes 8.45
Goodwill and other intangible assets arising from 1995
and 1994 purchase acquisitions totaled $217 million and
$327 million, respectively. Goodwill related to those
acquisitions is being amortized on a straight line basis
over 15 years and the other intangibles on a straight line
basis over periods ranging from five to 10 years.
On January 24, 1996, the Corporation and Wells Fargo &
Company (Wells Fargo) announced that they had reached a
definitive agreement to merge the two companies. Under the
terms of the merger agreement, the Corporation's
shareholders will receive a tax-free exchange of two-thirds
of a share of Wells Fargo Common Stock for each share of
the Corporation's Common Stock. Based on Wells Fargo's
closing price of $217.25 on January 19, 1996, the last
trading day before January 21, 1996, the day on which the
Corporation and Wells Fargo reached agreement on the
Exchange Ratio to be included in the merger agreement, this
exchange ratio represents a price of $144.83 for each share
of the Corporation's Common Stock.
Under the terms of the agreement, the name of the newly
combined company will be Wells Fargo & Company and will
operate from headquarters in San Francisco and Los Angeles,
with senior executive presence in both. The combined board
of directors will consist of the existing members of Wells
Fargo's board and seven directors from the Corporation's
board.
Concurrent with its entering into the merger agreement
with Wells Fargo, the Corporation terminated its November
5, 1995, merger agreement with First Bank System, Inc. An
overall settlement agreement was entered into among the
Corporation, First Bank System and Wells Fargo. Under the
terms of the settlement agreement, the Corporation agreed
to pay First Bank System a termination fee of $125 million
and an additional termination fee of $75 million upon
closing of its merger with Wells Fargo. These payments are
being made in full satisfaction of the Corporation's
obligations under the stock option and fee agreements
entered into as part of its November 5, 1995 merger
agreement with First Bank System. In addition, all
litigation among the parties related to efforts to merge
with the Corporation has been settled.
NOTE - Q RESTRUCTURING
On September 20, 1994, the Corporation announced that
management had adopted a Restructuring Plan (Plan) to
improve efficiency and to better position the company for
the introduction of full interstate banking. This Plan
resulted in restructuring charges of $24 million and $141
million in 1995 and 1994, respectively. The restructuring
activity 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 $40 $15 $ 2 $139
Ongoing -- -- -- 2 2
- --------------------------------------------------------------------------------
Total 82 40 15 4 141
Utilization for the period
Cash -- 5 7 2 14
Noncash(1) 82 -- -- -- 82
- --------------------------------------------------------------------------------
Total 82 5 7 2 96
- --------------------------------------------------------------------------------
Balance at December 31, 1994 -- 35 8 2 45
1995
Restructuring Provision
Ongoing -- -- -- 24 24
Reallocation(2) -- (4) 3 1 --
- --------------------------------------------------------------------------------
Total -- (4) 3 25 24
Utilization for the period
Cash -- 20 3 21 44
- --------------------------------------------------------------------------------
Total -- 20 3 21 44
- --------------------------------------------------------------------------------
Balance at December 31, 1995 $-- $11 $ 8(3) $ 6(4) $ 25
================================================================================
(1) $82 million represents the amount transferred to the
Corporation's pension liability during 1994.
(2) Reallocation during 1995 resulted from actual
experience over the life of the Plan being different than
the original estimates calculated in 1994 .
(3) $8 million represents reserves for writedowns of
specifically identified fixed assets during 1995.
(4) $6 million represents remaining payouts to be made for
relocation and retention.
The balance of the restructuring charge will be funded out
of operating cash flows with payments scheduled to be
substantially completed during early 1996. No additional
restructuring charges will be incurred under the Plan. The
total cost of the Plan, therefore, was approximately $165
million, as previously estimated.
The Plan called 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, more than 3,300
additional personnel were involuntarily terminated. Because
some of the vacancies created by the Early Retirement
Program and by the geographic consolidations were filled,
the total permanent reduction was approximately 3,000 full-
time equivalent staff.
The Plan resulted in expense savings which allowed the
Corporation to achieve an efficiency ratio of 57.7% in the
fourth quarter of 1995. The Plan had a limited impact on
the revenues of the Corporation.
NOTE - R LEGAL ACTIONS
There are presently a number of legal proceedings pending
against the Corporation and certain of its subsidiaries.
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.
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, 1995 and 1994, and the related consolidated
statements of operations, cash flows and shareholders'
equity for each of the three years in the period ended
December 31, 1995. 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, 1995 and 1994, and the
consolidated results of their operations and their cash
flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted
accounting principles.
As discussed in Notes to Consolidated Financial
Statements, the Corporation changed its method of
accounting for investment securities in 1994 and for income
taxes and postretirement benefits other than pensions in
1993.
/s/ Ernst & Young LLP
Los Angeles, California
January 23, 1996
<TABLE>
<CAPTION>
SIX YEAR SUMMARY
Year Ended December 31
-------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------------------------
<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 $11.02 $ 8.71 $ 6.68 $ 3.23 $(5.24) $ 6.79
Extraordinary item -- -- (0.32) -- -- --
Cumulative effect of accounting changes -- -- 2.60 -- -- 0.51
Net income (loss) 11.02 8.71 8.96 3.23 (5.24) 7.30
Fully diluted:
Income (loss) before extraordinary item
and cumulative effect of accounting changes 11.02 8.71 6.68 3.23 (5.24) 6.79
Extraordinary item -- -- (0.32) -- -- --
Cumulative effect of accounting changes -- -- 2.60 -- -- 0.51
Net income (loss) 11.02 8.71 8.96 3.23 (5.24) 7.30
Dividends paid 3.10 2.75 1.60 1.20 1.80 3.00
Book value, yearend 50.10 41.59 41.36 35.04 32.57 39.78
Market price, yearend 136 1/2 67 5/8 64 1/8 46 3/4 30 23 1/2
Market price, range for year 142 1/8-67 1/4 85-62 3/8 68-44 1/2 48 1/4-29 1/4 42 1/2-20 45 7/8-15 5/8
Growth Measures (% change)
Average loans 23.0 18.7 (6.1) (16.3) (14.1) (5.8)
Average earning assets 3.3 7.3 2.2 (1.0) (9.8) (7.0)
Average savings deposits (1.9) 10.1 3.1 5.2 0.1 (0.7)
Average demand deposits 5.1 12.4 10.7 7.5 (0.8) 0.5
Average total assets 4.9 7.4 0.6 (0.2) (9.4) (5.8)
Performance Measures (%)
Return on average assets 1.59 1.38 1.49 0.57 (0.59) 0.86
Return on average common equity 24.57 21.56 23.24 9.63 (13.96) 19.56
Return on average total equity 23.19 20.38 21.18 9.52 (10.42) 17.98
Dividends paid to net income 28.13 31.57 17.86 37.15 n/m 41.10
Average total equity to average total assets 6.87 6.79 7.05 6.03 5.63 4.81
Credit Allowance (millions)
Loans charged off $314.4 $260.8 $398.8 $606.9 $689.2 $1,012.5
Recoveries of previous loan charge-offs 159.7 127.8 180.7 147.3 142.3 138.9
Net loans charged off 154.7 133.0 218.1 459.6 546.9 873.6
Net charge-offs to average loans 0.44% 0.46% 0.90% 1.79% 1.78% 2.45%
Allowance to loans, yearend 2.19 2.81 3.85 4.41 4.52 3.06
Miscellaneous Data
Shares outstanding, yearend, net 75,929,395 74,203,480 77,325,995 75,181,138 62,779,015 62,176,509
Shares outstanding, average, net 75,717,220 78,852,492 75,823,371 68,780,642 62,498,682 58,889,300
Shareholders 23,486 24,902 28,090 32,920 35,594 37,668
Employees, average December
full-time equivalent 27,200 27,394 26,589 26,990 30,281 35,192
Domestic banking offices 1,140 1,137 1,020 993 1,046 1,056
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
Year Ended December 31
----------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Cash and due from banks $ 7,129 $ 6,070 $ 5,064 $ 5,695 $ 5,370 $ 5,171
Time deposits, due from banks 14 26 1,157 1,970 2,304 335
Federal funds sold and securities
purchased under agreements to resell 1,774 179 618 2,345 2,015 891
Trading account securities 54 64 167 126 401 625
Investment securities:
Held-to-maturity
U.S. Treasury and agencies -- 12,105 14,894 12,117 6,465 4,738
State and political subdivisions -- 29 23 8 12 704
Other 88 1,561 1,456 808 2,019 1,225
- ----------------------------------------------------------------------------------------------------------------------------
Total held-to-maturity 88 13,695 16,373 12,933 8,496 6,667
Available-for-sale 9,010 156 169 980 -- 308
- ----------------------------------------------------------------------------------------------------------------------------
Total Investment Securities 9,098 13,851 16,542 13,913 8,496 6,975
Loans:
Commercial, financial and agricultural 10,917 9,294 7,998 7,799 8,721 12,092
Real estate construction 1,063 962 728 1,170 2,155 3,248
Real estate mortgage 11,211 10,263 6,237 5,364 5,732 5,450
Instalment 12,854 12,272 10,778 9,685 10,108 10,417
Foreign 185 140 166 163 1,003 1,286
Lease financing 587 426 126 90 701 851
- ----------------------------------------------------------------------------------------------------------------------------
Total Loans 36,817 33,357 26,033 24,271 28,420 33,344
Unearned income and deferred fees (144) (135) (45) (70) (238) (337)
Allowance for credit losses (804) (934) (1,001) (1,068) (1,273) (1,011)
- ----------------------------------------------------------------------------------------------------------------------------
Net Loans 35,869 32,288 24,987 23,133 26,909 31,996
Other assets held for sale 77 26 133 966 -- 1,166
Bank premises and equipment 1,282 1,147 948 897 986 1,050
Customers' liability for acceptances 94 35 48 66 309 361
Other assets 2,680 2,127 1,797 1,752 2,132 2,786
- ----------------------------------------------------------------------------------------------------------------------------
Total Assets $ 58,071 $ 55,813 $ 51,461 $ 50,863 $ 48,922 $ 51,356
============================================================================================================================
Liabilities and Shareholders' Equity
Deposits:
Noninterest bearing $ 19,083 $ 16,599 $ 15,425 $ 14,615 $ 12,525 $ 13,132
Interest bearing 31,102 31,828 29,276 29,060 28,908 30,009
- ----------------------------------------------------------------------------------------------------------------------------
Total Deposits 50,185 48,427 44,701 43,675 41,433 43,141
Short term borrowings 1,194 1,574 767 331 570 854
Acceptances outstanding 94 35 48 168 309 361
Accounts payable and accrued liabilities 1,089 953 864 736 863 954
Long term debt 1,355 1,388 1,533 2,702 3,108 3,178
- ----------------------------------------------------------------------------------------------------------------------------
Total Liabilities 53,917 52,377 47,913 47,612 46,283 48,488
Shareholders' Equity 4,154 3,436 3,548 3,251 2,639 2,868
- ----------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 58,071 $ 55,813 $ 51,461 $ 50,863 $ 48,922 $ 51,356
============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31
---------------------------------------------------------------------------
(Dollars in millions) 1995 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income
Loans, including fees $ 3,052.5 $ 2,303.7 $ 1,980.9 $ 2,238.8 $ 3,071.2 $ 3,876.2
Trading account securities 8.4 4.9 5.6 18.0 37.9 60.3
Investment securities:
Held-to-maturity
Taxable 591.9 828.3 837.3 743.1 557.2 558.1
Exempt from federal income taxes 1.6 2.7 2.9 3.9 7.2 55.7
Available-for-sale 15.7 13.3 24.1 3.8 18.4 17.2
Other interest income 37.8 39.1 93.4 182.1 243.4 253.3
- ----------------------------------------------------------------------------------------------------------------------------
Total Interest Income 3,707.9 3,192.0 2,944.2 3,189.7 3,935.3 4,820.8
Interest Expense
Deposits 974.7 725.0 719.9 932.8 1,526.0 2,017.7
Short term borrowings 77.6 34.2 16.0 14.4 44.3 169.6
Long term debt 118.9 106.3 136.2 227.9 273.3 330.3
- ----------------------------------------------------------------------------------------------------------------------------
Total Interest Expense 1,171.2 865.5 872.1 1,175.1 1,843.6 2,517.6
- ----------------------------------------------------------------------------------------------------------------------------
Net Interest Income 2,536.7 2,326.5 2,072.1 2,014.6 2,091.7 2,303.2
Provision for credit losses -- -- 112.6 314.3 810.2 499.4
- ----------------------------------------------------------------------------------------------------------------------------
Net Interest Income after
Provision for Credit Losses 2,536.7 2,326.5 1,959.5 1,700.3 1,281.5 1,803.8
Noninterest Income
Service charges on deposit accounts 597.3 561.9 513.0 478.9 471.8 428.6
Trust fees 170.3 193.3 177.4 170.3 172.7 159.2
Other charges, commissions and fees 156.3 132.0 149.4 163.6 184.4 173.3
Merchant credit card fees 58.3 39.7 44.1 37.3 53.5 53.1
Trading income 20.4 16.8 19.5 19.4 82.5 52.5
Investment securities gains (losses) 10.0 21.1 9.7 (1.8) 42.8 10.6
Gain (loss) on sale of loans 6.9 2.5 8.0 (3.3) 2.3 2.8
Gain (loss) on sale of subsidiaries -- -- -- (2.6) 27.1 90.1
Other income 100.1 87.0 33.1 50.3 147.3 233.3
- ----------------------------------------------------------------------------------------------------------------------------
Total Noninterest Income 1,119.6 1,054.3 954.2 912.1 1,184.4 1,203.5
Noninterest Expenses
Salaries and benefits 1,060.8 1,079.9 975.3 1,035.4 1,212.6 1,224.7
Net occupancy and equipment 389.5 356.6 337.2 359.4 426.2 425.0
Outside contract services 145.0 91.8 165.2 130.3 97.8 121.9
Communications 139.6 117.6 105.0 91.9 95.5 93.4
FDIC assessments 64.6 102.8 100.5 90.6 84.1 51.1
Amortization of intangibles 60.6 35.2 24.1 33.0 31.4 33.9
Supplies 53.2 43.6 40.7 39.4 47.9 54.6
Advertising 51.7 46.8 52.6 35.2 35.2 54.7
Other real estate 0.6 (12.4) 33.6 159.6 312.0 229.3
Restructuring 24.4 141.3 -- -- 90.0 --
Merger related 27.6 -- -- -- -- --
Other expenses 195.5 194.6 198.2 234.4 299.5 273.7
- ----------------------------------------------------------------------------------------------------------------------------
Total Noninterest Expenses 2,213.1 2,197.8 2,032.4 2,209.2 2,732.2 2,562.3
- ----------------------------------------------------------------------------------------------------------------------------
Income (Loss) before Income Taxes,
Extraordinary Item and Cumulative
Effect of Accounting Changes 1,443.2 1,183.0 881.3 403.2 (266.3) 445.0
Applicable income taxes 558.1 449.5 319.9 120.9 21.8 6.4
- ----------------------------------------------------------------------------------------------------------------------------
Income (Loss) before Extraordinary Item
and Cumulative Effect of
Accounting Changes 885.1 733.5 561.4 282.3 (288.1) 438.6
Extraordinary Item -- -- (24.8) -- -- --
Cumulative Effect of Accounting Changes -- -- 200.1 -- -- 30.1
- ----------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $ 885.1 $ 733.5 $ 736.7 $ 282.3 $ (288.1) $ 468.7
============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL SUMMARY
Year Ended December 31
- ----------------------------------------------------------------------------------------------------------
(Dollars in millions; interest and
average rates on a taxable-equivalent basis) 1995 1994
- -----------------------------------------------============================-------------------------------
Average Average Average Average
Earning Assets Balance Interest Rate Balance Interest Rate
- ----------------------------------------------------------------------------------------------------------
Loans (net of unearned income and deferred fees):
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and agricultural $ 9,704 $ 793.8 8.18% $ 8,287 $ 562.5 6.79%
Real estate construction 1,105 118.0 10.68 806 76.0 9.42
Real estate mortgage 11,271 911.1 8.09 7,586 578.5 7.63
Instalment 12,553 1,200.6 9.56 11,660 1,079.0 9.25
Foreign 157 10.6 6.78 83 4.6 5.59
Lease financing 445 33.7 7.57 222 15.9 7.17
- ----------------------------------------------------------------------------------------------------------
Total Loans 35,235 3,067.8 8.71 28,644 2,316.5 8.09
Trading account securities 161 8.6 5.35 113 5.1 4.55
Investment securities:
Held-to-maturity securities
U.S. Treasury and agencies 9,374 517.6 5.51 14,000 747.3 5.34
Other 1,420 82.1 5.78 1,624 92.1 5.67
- ----------------------------------------------------------------------------------------------------------
Total held-to-maturity securities 10,794 599.7 5.55 15,624 839.4 5.37
Available-for-sale securities 288 15.9 5.51 324 13.3 4.11
- ----------------------------------------------------------------------------------------------------------
Total Investment Securities 11,082 615.6 5.55 15,948 852.7 5.35
Federal funds sold and securities purchased
under agreements to resell 495 28.8 5.83 471 19.0 3.98
Time deposits, due from banks 30 1.8 6.06 380 13.9 3.61
Other assets held for sale 122 6.9 5.63 82 6.2 7.51
- ----------------------------------------------------------------------------------------------------------
Total Earning Assets 47,125 3,729.5 7.91 45,638 3,213.4 7.04
Interest Bearing Liabilities
Regular savings 5,715 125.6 2.20 5,823 120.9 2.08
Market interest demand 6,496 85.6 1.32 6,644 82.7 1.25
Market interest savings 10,262 309.2 3.01 11,427 269.0 2.35
Other savings and time under $100,000 7,730 387.9 5.02 5,787 213.3 3.69
- ----------------------------------------------------------------------------------------------------------
Total Interest Bearing Consumer Funds 30,203 908.3 3.01 29,681 685.9 2.31
Large CDs, other money market funds 1,349 66.4 4.92 1,076 39.1 3.63
Short term borrowings 1,362 77.6 5.62 655 34.2 5.16
Long term debt 1,398 118.9 8.50 1,395 106.3 7.63
- ----------------------------------------------------------------------------------------------------------
Total Corporate Purchased Funds 4,109 262.9 6.37 3,126 179.6 5.74
- ----------------------------------------------------------------------------------------------------------
Total Interest Bearing Liabilities 34,312 1,171.2 3.41 32,807 865.5 2.64
- ----------------------------------------------------------------------------------------------------------
Net Interest Income and Gross Spread $2,558.3 4.50 $2,347.9 4.40
==========================================================================================================
Noninterest Liabilities, Equity and Assets
Demand and noninterest bearing time deposits 16,357 15,556
Other liabilities 1,076 1,017
Preferred equity capital 350 350
Common equity capital 3,467 3,249
- ----------------------------------------------------------------------------------------------------------
Total Noninterest Liabilities and Equity 21,250 20,172
Cash and due from banks 5,651 5,233
Allowance for credit losses (887) (980)
Bank premises and equipment 1,244 1,065
Other assets 2,429 2,023
- ----------------------------------------------------------------------------------------------------------
Total Noninterest Assets 8,437 7,341
Net Noninterest Sources 12,813 0.93 12,831 0.74
Total Assets $55,562 $52,979
==========================================================================================================
Percent of Earning Assets
Net interest margin 5.43 5.14
Provision for credit losses - -
Net interest margin after
provision for credit losses 5.43 5.14
Noninterest income 2.38 2.31
Noninterest expenses 4.70 4.81
Earnings (loss) before income
taxes, extraordinary item and
cumulative effect of accounting changes 3.11 2.64
Income taxes 1.23 1.03
Extraordinary item - -
Cumulative effect of accounting changes - -
Net Income (Loss) 1.88 1.61
Loan fees included in interest income $ 144.1 $ 134.7
Taxable-equivalent adjustment 21.6 21.4
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31
- ----------------------------------------------------------------------------------------------------------
(Dollars in millions; interest and
average rates on a taxable-equivalent basis) 1993 1992
- -----------------------------------------------===========================--------------------------------
Average Average Average Average
Earning Assets Balance Interest Rate Balance Interest Rate
- ----------------------------------------------------------------------------------------------------------
Loans (net of unearned income and deferred fees):
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and agricultural $ 7,618 $ 476.0 6.25% $ 8,111 $ 560.3 6.91%
Real estate construction 913 62.4 6.83 1,746 109.1 6.25
Real estate mortgage 5,413 442.9 8.18 5,472 484.2 8.85
Instalment 9,943 1,003.3 10.09 9,756 1,049.6 10.76
Foreign 160 7.2 4.48 406 28.4 5.85
Lease financing 81 6.8 8.42 203 21.5 10.57
- ----------------------------------------------------------------------------------------------------------
Total Loans 24,128 1,998.6 8.26 25,694 2,253.1 8.77
Trading account securities 166 9.2 5.57 385 23.1 6.00
Investment securities:
Held-to-maturity securities
U.S. Treasury and agencies 14,113 789.6 5.59 9,745 648.9 6.69
Other 996 55.1 5.54 1,465 96.4 6.32
- ----------------------------------------------------------------------------------------------------------
Total held-to-maturity securities 15,109 844.7 5.59 11,210 745.3 6.65
Available-for-sale securities 458 17.9 3.90 83 3.8 4.61
- ----------------------------------------------------------------------------------------------------------
Total Investment Securities 15,567 862.6 5.54 11,293 749.1 6.63
Federal funds sold and securities purchased
under agreements to resell 1,282 39.7 3.10 1,706 65.5 3.84
Time deposits, due from banks 1,342 46.0 3.42 2,228 92.9 4.17
Other assets held for sale 29 2.7 10.00 288 23.7 8.28
- ----------------------------------------------------------------------------------------------------------
Total Earning Assets 42,514 2,958.8 6.96 41,594 3,207.4 7.71
Interest Bearing Liabilities
Regular savings 5,288 119.1 2.25 5,129 143.7 2.80
Market interest demand 6,115 92.7 1.52 5 893 122.8 2.08
Market interest savings 10,491 252.0 2.40 9,837 311.7 3.17
Other savings and time under $100,000 5,799 221.1 3.81 6,624 313.5 4.73
- ----------------------------------------------------------------------------------------------------------
Total Interest Bearing Consumer Funds 27,693 684.9 2.48 27,483 891.7 3.24
Large CDs, other money market funds 989 35.0 3.54 1,170 41.0 3.50
Short term borrowings 431 16.0 3.72 388 14.5 3.61
Long term debt 1,893 136.2 7.19 3,096 227.9 7.36
- ----------------------------------------------------------------------------------------------------------
Total Corporate Purchased Funds 3,313 187.2 5.57 4,654 283.4 6.09
- ----------------------------------------------------------------------------------------------------------
Total Interest Bearing Liabilities 31,006 872.1 2.81 32,137 1,175.1 3.66
- ----------------------------------------------------------------------------------------------------------
Net Interest Income and Gross Spread $2,086.7 4.15 $2,032.3 4.05
==========================================================================================================
Noninterest Liabilities, Equity and Assets
Demand and noninterest bearing time deposits 13,858 12,543
Other liabilities 977 1,394
Preferred equity capital 508 640
Common equity capital 2,970 2,317
- ----------------------------------------------------------------------------------------------------------
Total Noninterest Liabilities and Equity 18,313 16,894
Cash and due from banks 4,992 4,937
Allowance for credit losses (1,043) (1,261)
Bank premises and equipment 914 960
Other assets 1,942 2,801
- ----------------------------------------------------------------------------------------------------------
Total Noninterest Assets 6,805 7,437
Net Noninterest Sources 11,508 0.76 9,457 0.84
Total Assets $49,319 $49,031
==========================================================================================================
Percent of Earning Assets
Net interest margin 4.91 4.89
Provision for credit losses 0.26 0.76
Net interest margin after
provision for credit losses 4.65 4.13
Noninterest income 2.24 2.19
Noninterest expenses 4.78 5.31
Earnings (loss) before income
taxes, extraordinary item and
cumulative effect of accounting changes 2.11 1.01
Income taxes 0.79 0.33
Extraordinary item (0.06) -
Cumulative effect of accounting changes 0.47 -
Net Income (Loss) 1.73 0.68
Loan fees included in interest income $ 45.3 $ 46.2
Taxable-equivalent adjustment 14.6 17.7
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31
- ----------------------------------------------------------------------------------------------------------
(Dollars in millions; interest and
average rates on a taxable-equivalent basis) 1991 1990
- -----------------------------------------------===========================--------------------------------
Average Average Average Average
Earning Assets Balance Interest Rate Balance Interest Rate
- ----------------------------------------------------------------------------------------------------------
Loans (net of unearned income and deferred fees):
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and agricultural $10,459 $ 879.7 8.41% $13,532 $1,349.5 9.97%
Real estate construction 2,677 240.0 8.97 3,583 376.0 10.49
Real estate mortgage 5,646 564.4 10.00 5,461 576.6 10.56
Instalment 10,137 1,226.1 12.09 10,953 1,355.1 12.37
Foreign 1,161 111.5 9.61 1,440 159.5 11.07
Lease financing 611 68.0 11.13 739 82.3 11.14
- ----------------------------------------------------------------------------------------------------------
Total Loans 30,691 3,089.7 10.07 35,708 3,899.0 10.92
Trading account securities 567 43.4 6.87 737 60.8 8.24
Investment securities:
Held-to-maturity securities
U.S. Treasury and agencies 5,266 441.6 8.39 4,681 421.6 9.01
Other 1,547 120.6 7.79 2,438 221.1 9.07
- ----------------------------------------------------------------------------------------------------------
Total held-to-maturity securities 6,813 562.2 8.25 7,119 642.7 9.03
Available-for-sale securities 248 22.7 8.38 210 17.2 8.21
- ----------------------------------------------------------------------------------------------------------
Total Investment Securities 7,061 584.9 8.28 7,329 659.9 9.00
Federal funds sold and securities purchased
under agreements to resell 1,422 80.2 5.73 884 54.8 7.28
Time deposits, due from banks 1,757 109.2 6.22 775 58.4 7.54
Other assets held for sale 519 54.0 10.38 1,130 140.1 12.40
- ----------------------------------------------------------------------------------------------------------
Total Earning Assets 42,017 3,961.4 9.43 46,563 4,873.0 10.47
Interest Bearing Liabilities
Regular savings 4,874 230.4 4.73 4,870 160.0 5.12
Market interest demand 5,386 209.5 3.89 5,135 312.1 6.08
Market interest savings 9,092 456.6 5.02 8,553 517.9 6.06
Other savings and time under $100,000 8,200 520.8 6.35 9,807 745.2 7.60
- ----------------------------------------------------------------------------------------------------------
Total Interest Bearing Consumer Funds 27,552 1,417.3 5.14 28,365 1,735.2 6.12
Large CDs, other money market funds 1,782 108.7 6.15 3,742 282.5 7.55
Short term borrowings 941 44.3 5.73 2,340 169.6 7.25
Long term debt 3,122 273.3 8.76 3,566 330.3 9.26
- ----------------------------------------------------------------------------------------------------------
Total Corporate Purchased Funds 5,845 426.3 7.29 9,648 782.4 8.11
- ----------------------------------------------------------------------------------------------------------
Total Interest Bearing Liabilities 33,397 1,843.6 5.52 38,013 2,517.6 6.62
- ----------------------------------------------------------------------------------------------------------
Net Interest Income and Gross Spread $2,117.8 3.91 $2,355.4 3.85
==========================================================================================================
Noninterest Liabilities, Equity and Assets
Demand and noninterest bearing time deposits 11,717 11,875
Other liabilities 1,246 1,709
Preferred equity capital 420 409
Common equity capital 2,346 2,199
- ----------------------------------------------------------------------------------------------------------
Total Noninterest Liabilities and Equity 15,729 16,192
Cash and due from banks 4,357 4,518
Allowance for credit losses (1,132) (1,256)
Bank premises and equipment 1,027 1,059
Other assets 2,857 3,321
- ----------------------------------------------------------------------------------------------------------
Total Noninterest Assets 7,109 7,642
Net Noninterest Sources 8,620 1.13 8,550 1.21
Total Assets $49,126 $54,205
==========================================================================================================
Percent of Earning Assets
Net interest margin 5.04 5.06
Provision for credit losses 1.93 1.07
Net interest margin after
provision for credit losses 3.11 3.99
Noninterest income 2.82 2.58
Noninterest expenses 6.50 5.50
Earnings (loss) before income
taxes, extraordinary item and
cumulative effect of accounting changes (0.57) 1.07
Income taxes 0.12 0.12
Extraordinary item - -
Cumulative effect of accounting changes - 0.06
Net Income (Loss) (0.69) 1.01
Loan fees included in interest income $ 75.6 $ 108.5
Taxable-equivalent adjustment 26.1 52.2
</TABLE>
EXHIBIT (21)
FIRST INTERSTATE BANCORP
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
The following is a list of the consolidated subsidiaries of the Corporation as of December 31, 1995 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.
<S> <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 Annuities, Inc. (Alaska), Anchorage, Alaska 100%
(Incorporated in Alaska)
First Interstate Bank of Arizona, N.A., Phoenix, Arizona 100% M 12
(Incorporated under the National Bank Act)
First Interstate Insurance Agency, Phoenix, Arizona 100%
(Incorporated in Arizona)
First Interstate Investments, Inc., Phoenix, Arizona 100%
(Incorporated in Arizona)
First Interstate Annuities, Inc. (Montana), Kalispell, Montana 100%
(Incorporated in Montana)
First Interstate Annuities, Inc. (Nevada), Las Vegas, Nevada 100%
(Incorporated in Nevada)
First Interstate Annuities, Inc. (Oregon), Tigard, Oregon 100%
(Incorporated in Oregon)
First Interstate Annuities, Inc. (Washington), Bellevue, Washington 100%
(Incorporated in Washington)
First Interstate Annuities, Inc. (Wyoming), Casper, Wyoming 100%
(Incorporated in Wyoming)
First Interstate Leasing Corp., Phoenix, Arizona 100%
(Incorporated in Arizona)
First Interstate Management Services Co., Scottsdale, Arizona 100%
(Incorporated in Arizona)
First Interstate Mortgage Holding Co., Phoenix, 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)
EZG Associates Limited Partnership, Los Angeles, California 94%
(Incorporated in Delaware)
First Interstate Capital Management, Inc., Los Angeles, California 100%
(Incorporated in California)
First Interstate Portfolio Lending Services, Inc. , Los Angeles, California 100%
(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)
EZG Associates Limited Partnership, Los Angeles, California 6%
(Incorporated in Delaware)
First Interstate Bancard Co., Los Angeles, California 100%
(Incorporated in California)
First Interstate Tower, Los Angeles, California 50%
(A Joint Venture) (E)
707 Housing Corp., Los Angeles, California 100%
(Incorporated in California)
First Interstate Bank of Denver, N.A., Denver, Colorado 100% M 12
(Incorporated under the National Bank Act)
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)
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)
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)
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 Acco, Inc., Reno, Nevada 100%
(Incorporated in Nevada)
First Interstate Electronic Services Corp., 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 Wyoming Holdings, Inc., Casper, Wyoming 100%
(Incorporated in Wyoming)
First Interstate Central Bank, Calabasas, California 100% NM
(Incorporated in California)
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 Resource Finance Associates, Newport Beach, California 100%
(Incorporated in California)
First Interstate Services Co. (UK) Ltd., London, England 100%
(Incorporated in the United Kingdom)
Western Bonding & Casualty Co., 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 excludes 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 23, 1996 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, 1995.
ERNST & YOUNG LLP
Los Angeles, California
March 25, 1996
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
EXHIBIT (27)
FINANCIAL DATA SCHEDULE First Interstate Bancorp
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.
(dollar amounts in millions, except per share data)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 7,129
<INT-BEARING-DEPOSITS> 14
<FED-FUNDS-SOLD> 1,774
<TRADING-ASSETS> 54
<INVESTMENTS-HELD-FOR-SALE> 9,010
<INVESTMENTS-CARRYING> 88
<INVESTMENTS-MARKET> 51
<LOANS> 36,673
<ALLOWANCE> 804
<TOTAL-ASSETS> 58,071
<DEPOSITS> 50,185
<SHORT-TERM> 1,194
<LIABILITIES-OTHER> 1,089
<LONG-TERM> 1,355
0
350
<COMMON> 169
<OTHER-SE> 3,635
<TOTAL-LIABILITIES-AND-EQUITY> 58,071
<INTEREST-LOAN> 3,053
<INTEREST-INVEST> 617
<INTEREST-OTHER> 38
<INTEREST-TOTAL> 3,708
<INTEREST-DEPOSIT> 975
<INTEREST-EXPENSE> 1,171
<INTEREST-INCOME-NET> 2,537
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 10
<EXPENSE-OTHER> 2,213
<INCOME-PRETAX> 1,443
<INCOME-PRE-EXTRAORDINARY> 885
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 885
<EPS-PRIMARY> 11.02
<EPS-DILUTED> 11.02
<YIELD-ACTUAL> 5.43
<LOANS-NON> 170
<LOANS-PAST> 100
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 934
<CHARGE-OFFS> 314
<RECOVERIES> 160
<ALLOWANCE-CLOSE> 804
<ALLOWANCE-DOMESTIC> 380
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 424
