UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995
OR
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM (NOT APPLICABLE)
COMMISSION FILE NUMBER 1-6880
FIRST BANK SYSTEM, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
41-0255900
(I.R.S. Employer
Identification No.)
FIRST BANK PLACE,
601 SECOND AVENUE SOUTH,
MINNEAPOLIS, MINNESOTA 55402-4302
(Address of principal executive offices and Zip Code)
612-973-1111
(Registrant's telephone number, including area code)
(NOT APPLICABLE)
(Former name, former address and former fiscal year,
if changed since last report).
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date.
Class Outstanding as of April 30, 1995
Common Stock, $1.25 Par Value 135,567,431 shares
Total # of pages: 27
Exhibit Index appears on page 1.
FINANCIAL SUMMARY
<TABLE>
<CAPTION>
MARCH 31 MARCH 31
(DOLLARS in millions, except per share amounts) 1995 1994
THREE MONTHS ENDED
<S> <C> <C>
Income from continuing operations $133.8 $111.9
Discontinued operations -- (1.2)
Net income $133.8 $110.7
PER COMMON SHARE
Income from continuing operations $.97 $.80
Discontinued operations -- (.01)
Net income $.97 $.79
Dividends paid $.3625 $.29
Common shareholders' equity 19.58 19.49
RETURN ON AVERAGE ASSETS
Income from continuing operations 1.66 % 1.41 %
Discontinued operations -- (.01)
Return on average assets 1.66% 1.40%
RETURN ON AVERAGE COMMON EQUITY
Income from continuing operations 21.1% 17.2 %
Discontinued operations -- (.2)
Return on average common equity 21.1% 17.0 %
Net interest margin (taxable-equivalent basis) 5.05% 4.75%
Efficiency ratio 55.7 58.5
</TABLE>
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1995 1994
PERIOD END
<S> <C> <C>
Loans $25,215 $24,556
Allowance for credit losses 470 475
Assets 32,712 34,128
Total shareholders' equity 2,757 2,612
Common equity to total assets 8.1% 7.3%
Tier 1 capital ratio 7.7 7.3
</TABLE>
TABLE OF CONTENTS AND FORM 10-Q CROSS-REFERENCE INDEX
<TABLE>
<CAPTION>
<S> <C>
PART I -- FINANCIAL INFORMATION
Management's Discussion and Analysis of Financial Condition and Results of Operations (Item 2) 2
Financial Statements (Item 1):
Consolidated Balance Sheet 13
Consolidated Statement of Income 14
Consolidated Statement of Shareholders' Equity 15
Consolidated Statement of Cash Flows 16
Notes to Consolidated Financial Statements 17
Selected Statistical Information:
Consolidated Daily Average Balance Sheet and Related Yields and Rates 23
PART II -- OTHER INFORMATION
Submission of Matters to a Vote of Security Holders (Item 4) 24
Exhibits and Reports on Form 8-K (Item 6) 24
Signature 25
Exhibit 11 -- Computation of Primary and Fully Diluted Net Income Per Common Share 26
Exhibit 12 -- Computation of Ratio of Earnings to Fixed Charges 27
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Earnings Summary
First Bank System, Inc. (the "Company") reported first quarter 1995 operating
earnings of $133.8 million, an increase of $21.9 million, or 19.6 percent,
from the first quarter of 1994. On a per share basis, operating earnings were
$.97 in the first quarter of 1995, compared with $.80 in the first quarter of
1994, an increase of 21.3 percent. Reported net income for the first quarters
of 1995 and 1994 was $133.8 million and $110.7 million, or $.97 and $.79 per
share, respectively.
Return on average assets and return on average common equity in the first
quarter of 1995 were 1.66 percent and 21.1 percent, respectively, compared
with returns of 1.41 percent and 17.2 percent from continuing operations in
the first quarter of 1994. The net interest margin on a taxable-equivalent
basis increased 30 basis points from the first quarter of 1994, to 5.05
percent. The efficiency ratio, the ratio of expenses to revenues, was 55.7
percent, an improvement of 282 basis points from 58.5 percent in the first
quarter of 1994.
The strong quarterly improvement in net income resulted from loan and fee
income growth, ongoing expense control, continued improvement in credit
quality and effective capital management. During the first quarter of 1995,
net interest income on a taxable-equivalent basis increased $27.3 million, or
8.0 percent, and noninterest income increased $18.2 million, or 11.3 percent,
as compared with the first quarter of 1994. The provision for credit losses
was essentially unchanged from that of the first quarter of 1994. Noninterest
expense for the quarter increased only 3.8 percent over last year, despite
the addition of expenses associated with several acquisitions. These included
Boulevard Bancorp, Inc. ("Boulevard") and Rocky Mountain Financial
Corporation ("Rocky Mountain"), which were both acquired on March 25, 1994,
and the corporate trust business of J.P. Morgan, acquired on September 2,
1994. All were accounted for as purchases. Compared with noninterest expense
for the first quarter of 1994, adjusted to include the operations of
Boulevard, Rocky Mountain and the acquired corporate trust business, on a pro
forma basis, noninterest expense for the current quarter declined by $20.4
million, or 6.3 percent.
Nonperforming assets declined $16.6 million, or 7.1 percent, from December
31, 1994, to a level of $215.7 million at March 31, 1995. The ratio of the
allowance for credit losses to nonperforming loans at quarter-end was 318
percent compared with 283 percent at the end of 1994.
ACQUISITIONS
On January 24, 1995, the Company issued approximately 21.7 million shares to
complete its merger with Metropolitan Financial Corporation ("MFC"). At
December 31, 1994, MFC had $7.9 billion in assets, $5.5 billion in deposits,
and 211 offices, principally in North Dakota, Minnesota, Nebraska, Iowa,
Kansas, South Dakota, Wisconsin, and Wyoming. Results for 1994 have been
restated to reflect this pooling of interests. Because of regulatory
restrictions on nonbanking activities, the Company expects to sell Edina
Realty, Inc., MFC's real estate brokerage subsidiary, within two years.
Accordingly, the operations of Edina Realty are accounted for as discontinued
operations in the accompanying financial statements.
TABLE 1. Summary of Consolidated Income
<TABLE>
<CAPTION>
THREE MONTHS ENDED
(Taxable-equivalent basis; MARCH 31 MARCH 31
Dollars in millions, except per share data) 1995 1994
<S> <C> <C>
Interest income $629.1 $518.3
Interest expense 262.3 178.8
Net interest income 366.8 339.5
Provision for credit losses 26.0 26.6
Net interest income after provision for credit losses 340.8 312.9
Noninterest income 179.6 161.4
Noninterest expense 304.3 293.1
Income from continuing operations before income taxes 216.1 181.2
Taxable-equivalent adjustment 3.5 3.7
Income taxes 78.8 65.6
Income from continuing operations 133.8 111.9
Loss from discontinued operations -- (1.2)
Net income $133.8 $110.7
Return on average assets 1.66% 1.40%
Return on average common equity 21.1 17.0
Net interest margin 5.05 4.75
Efficiency ratio 55.7 58.5
Per share:
Income from continuing operations $0.97 $0.80
Loss from discontinued operations -- (0.01)
Net income $0.97 $0.79
Common dividends paid $0.3625 $0.29
</TABLE>
TABLE 2. Line of Business Financial Performance
<TABLE>
<CAPTION>
TRUST AND
RETAIL & COMMUNITY COMMERCIAL INVESTMENT CONSOLIDATED
BANKING PAYMENT SYSTEMS BANKING GROUP COMPANY
THREE MONTHS ENDED MARCH 31,
(Dollars in Millions) 1995 1994 1995 1994 1995 1994 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONDENSED INCOME STATEMENT:
Net interest income
(taxable-equivalent basis) $259.7 $232.7 $41.1 $46.6 $57.7 $54.3 $ 8.3 $ 5.9 $366.8 $339.5
Provision for credit
losses 3.3 9.6 20.3 14.5 2.4 2.5 -- -- 26.0 26.6
Noninterest income 53.8 62.1 58.4 41.2 18.0 15.3 49.4 42.8 179.6 161.4
Noninterest expense 192.2 194.9 47.8 40.5 24.1 23.3 40.2 34.4 304.3 293.1
Income taxes and
taxable-equivalent
adjustment 44.9 34.4 12.0 12.6 18.7 16.8 6.7 5.5 82.3 69.3
Income from continuing
operations $ 73.1 $ 55.9 $19.4 $20.2 $30.5 $27.0 $10.8 $ 8.8 133.8 111.9
Loss from discontinued
operations -- (1.2)
Net income $133.8 $110.7
AVERAGE BALANCE SHEET DATA:
Commercial loans $5,584 $4,932 $ 643 $ 391 $4,794 $5,141 $ -- $ -- $11,021 $10,464
Consumer loans 11,277 10,856 2,294 1,736 -- -- -- -- 13,571 12,592
Assets 22,141 22,369 3,661 2,671 6,055 6,391 845 728 32,702 32,159
Deposits 20,854 21,199 32 22 1,768 2,729 921 961 23,575 24,911
Common equity 1,524 1,604 340 288 424 463 243 142 2,531 2,497
Return on average assets* 1.34% 1.01% 2.15% 3.07% 2.04% 1.71% ** ** 1.66% 1.41%
Return on average common
equity* 19.5 14.1 23.1 28.4 29.2 23.7 18.0% 25.1% 21.1 17.2
Efficiency ratio 61.3 66.1 48.0 46.1 31.8 33.5 69.7 70.6 55.7 58.5
</TABLE>
* From continuing operations
**Not meaningful
Note: Preferred dividends are not allocated to the business lines.
In February 1995, the Company entered into agreements to sell deposits of
approximately $960 million and incidental assets associated with 63 former
MFC branch locations. These dispositions are expected to close in the second
and third quarters of 1995. This portion of MFC's branch network was not part
of MFC's core business and was used primarily as a funding source. In 1994,
the 63 branches contributed approximately 2 percent of total loans originated
and 2.5 percent of noninterest income generated by MFC. The incidental
assets, consisting primarily of deposit-related loans and premises and
equipment, represent less than 1 percent of MFC's total assets. The
operations of these branches were not material to MFC in 1994. The $960
million of deposits will be replaced with other sources of funding.
On March 16, 1995, the Company completed the acquisition of First Western
Corporation ("FWC"), a $317 million bank holding company based in Sioux
Falls, South Dakota. FWC owned Western Bank, which had nine branches in and
around Sioux Falls, South Dakota. The transaction was accounted for as a
purchase.
Line of Business Financial Review
Each of the Company's four business lines--Retail and Community Banking,
Payment Systems, Commercial Banking, and the Trust and Investment
Group--contributed to the strong financial performance in the first quarter
of 1995.
Business line results are derived from the Company's business unit
profitability reporting system. Designations, assignments, and allocations
may change from time to time as management accounting systems are enhanced or
product lines change. During 1995 certain methodologies changed and 1994
results are presented on a consistent basis.
RETAIL AND COMMUNITY BANKING - Retail and Community Banking, which includes
consumer, small business and middle market banking services and residential
mortgage lending, achieved strong revenue growth while containing costs. Net
income increased 30.8 percent to $73.1 million in the first quarter of 1995
compared with the first quarter of 1994. Return on assets increased to 1.34
percent from 1.01 percent, and return on equity increased to 19.5 percent from
14.1 percent.
The increase in net interest income is attributable to strong home equity loan
growth and aggressive small- and middle-market business lending. Noninterest
income was down over the prior year quarter primarily due to reduced residential
mortgage activity resulting from higher market interest rates. The decrease in
the provision for credit losses reflects continuing improvement in credit
quality. Noninterest expense improved slightly despite the acquisition of
Boulevard and Rocky Mountain on March 25, 1994, reflecting the benefits of
integrating recent business combinations including MFC which was integrated
within one month of completing the transaction. The efficiency ratio improved to
61.3 percent in the first quarter of 1995 compared with 66.1 percent in the
first quarter of 1994.
PAYMENT SYSTEMS - Payment Systems includes consumer credit card, corporate and
purchasing card services, card-accessed secured and unsecured lines of credit,
ATM processing, and merchant processing. This business line reported net
earnings of $19.4 million in the first quarter of 1995, down slightly from first
quarter of 1994. Return on assets was 2.15 percent compared with 3.07 percent in
the first quarter of 1994. Return on equity was 23.1 percent compared with 28.4
percent for the same quarter in the previous year.
Net interest income decreased due to lower interest rates earned on retail
credit cards, consistent with recent rate competitiveness in the industry, and
increased Corporate Card activity. The increase in fee-based noninterest income
is attributable to growth in the sales volume of the Corporate Card, the
Purchasing Card, the Northwest Airlines WorldPerks credit card, and merchant
processing. The increase in the provision for credit losses reflects growth in
the loan portfolio and a significant increase in sales volume. Noninterest
expense increased due to the initial investment expenses associated with the
expanded automated teller machines ("ATM") network. Net earnings from this
business line are expected to be stronger in the remaining quarters of 1995 as
the ATM network's transaction volume increases and the seasonal retail credit
card activity increases. Payment Systems continues to be cost effective as
measured by its efficiency ratios of 48.0 percent in the first quarter of 1995
and 46.1 percent in the first quarter of 1994. Excluding initial investment
expenses incurred with the ATM network the efficiency ratio was essentially flat
year over year.
COMMERCIAL BANKING - Commercial Banking, which provides lending, treasury
management, and other financial services to middle market, large corporate and
mortgage banking companies, contributed net earnings of $30.5 million in the
first quarter of 1995, a 13.0 percent increase over the first quarter of 1994.
Return on assets rose to 2.04 percent in the first quarter of 1995 from 1.71
percent in the same quarter a year ago.
The earnings increase reflects continuing strong performance in both net
interest income and noninterest income as well as ongoing credit quality and
expense control. Commercial Banking's average loans, excluding loans to mortgage
banking companies, increased $655 million, or 18.2 percent, from the first
quarter of 1994. The decline in deposits relates to less activity in the
mortgage banking sector. The efficiency ratio improved to 31.8 percent in the
first quarter of 1995 compared with 33.5 percent in the first quarter of 1994.
TRUST AND INVESTMENT GROUP - The Trust and Investment Group, which includes
personal, institutional and corporate trust services, investment management
services, and a full-service brokerage company, reported an earnings increase of
22.7 percent in the first quarter of 1995 compared with the first quarter of
1994. The return on average common equity was 18.0 percent in the first quarter
of 1995 and 25.1 percent in the first quarter of the prior year.
The current quarter's net earnings increased over the first quarter of 1994
primarily due to recent acquisitions, including J.P. Morgan and Boulevard.
Stronger noninterest income is due to growth in Corporate Trust and investment
sales and management fees as well as recent acquisitions. Although the recent
acquisitions have improved net earnings, the return on equity reflects increased
investment in recent acquisitions. The efficiency ratio was 69.7 percent in the
first quarter compared with 70.6 percent in the first quarter of 1994,
reflecting the effective integration of acquisitions and revenue growth.
TABLE 3. Analysis of Net Interest Income
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 MARCH 31
(Dollars in millions) 1995 1994
<S> <C> <C>
Net interest income (taxable-equivalent basis) $366.8 $339.5
Average balances of earning assets supported by:
Interest-bearing liabilities $23,534 $21,897
Noninterest-bearing liabilities 5,932 7,073
Total earning assets $29,466 $28,970
Average yields and weighted average rates (taxable-equivalent basis):
Earning assets yield 8.66% 7.26%
Rate paid on interest-bearing liabilities 4.52 3.31
Gross interest margin 4.14% 3.95%
Net interest margin 5.05% 4.75%
Net interest margin without taxable-equivalent increments 5.00% 4.70%
</TABLE>
Income Statement Analysis
NET INTEREST INCOME - Net interest income on a taxable-equivalent basis was
$366.8 million in the first quarter of 1995, an increase of $27.3 million, or
8.0 percent, from the first quarter of 1994. The improvement in net interest
income reflects increases in average loan yields and average loan balances. The
average yield on loans in the first quarter was 9.06 percent, or 139 basis
points higher than the yield of 7.67 percent in the first quarter of last year,
reflecting increases in the Company's average reference rate during 1994 and the
increasing proportion of higher-yielding consumer loans. The effect of the
increase in average yields on loans more than offset the impact of higher rates
paid on interest-bearing liabilities; the average of these rates was 4.52
percent in the first quarter, or 121 basis points higher than for the same
period of 1994. Average loans totaled $24.6 billion in the first quarter of
1995, an increase of $1.5 billion, or 6.7 percent, reflecting growth in both
nonmortgage consumer and commercial loans (including loans acquired with
Boulevard and Rocky Mountain) partially offset by decreases in the balance of
loans to mortgage bankers and residential mortgage loans. Excluding these
mortgage-related balances and the effect of Boulevard and Rocky Mountain loans,
average loans for the quarter increased $2.3 billion, or 14.4 percent, over the
same quarter in 1994, reflecting strong growth in small business and middle
market loans, credit cards, and home equity loans. The decline in nonperforming
assets also contributed to the growth in net interest income.
The net interest margin on a taxable-equivalent basis was 5.05 percent in the
first quarter of 1995, an increase of 30 basis points from 4.75 percent in the
first quarter of 1994. The increase in the net interest margin from a year ago
results from both a shift in the mix of earning assets from lower margin
securities and residential mortgage-related loan balances to higher yielding
consumer and commercial loans, and a widening of the spread between earning
assets and interest-bearing liabilities that repriced during the period.
PROVISION FOR CREDIT LOSSES - The provision for credit losses was $26.0 million
in the first quarter of 1995, essentially unchanged from the level in the first
quarter of 1994. Total net charge-offs of $32.1 million also were essentially
unchanged from the total of $31.3 million for the same quarter a year ago. The
allowance for credit losses was $470.4 million at March 31, 1995, down slightly
from $474.7 million at December 31, 1994. Reserve coverage remains strong as the
ratio of the allowance for credit losses to nonperforming loans increased to 318
percent at quarter-end compared with 283 percent at the end of 1994.
NONINTEREST INCOME - Noninterest income in the first quarter of 1995 was $179.6
million, an increase of $18.2 million, or 11.3 percent, from the first quarter
last year, reflecting growth in credit card and trust fees. Credit card fees
increased $15.6 million, or 43.3 percent, from the prior year quarter,
reflecting higher sales volumes for Corporate Card, Purchasing Card, and the
Northwest Airlines WorldPerks credit card. Trust fees were up over the first
quarter of 1994 by $3.2 million, or 8.3 percent, reflecting growth in corporate
trust fees, including fees attributable to the September 1994 J.P. Morgan
corporate trust unit acquisition. Insurance commissions were higher this quarter
because of increased commission income on annuity sales.
NONINTEREST EXPENSE - Noninterest expense was $304.3 million in the first
quarter of 1995, an increase of $11.2 million, or 3.8 percent, from first
quarter of 1994. The increase reflects the addition of Boulevard, Rocky Mountain
and the J.P. Morgan corporate trust acquisition. Compared with noninterest
expense for the first quarter of 1994, adjusted to include the expenses of these
acquisitions on a pro forma basis, noninterest expense for the first quarter of
1995 declined by $20.4 million, or 6.3 percent. This decline reflects the
benefits of integrating recent business combinations, including MFC which was
integrated within one month of closing the transaction. The Company's efficiency
ratio, the measure of expenses to revenues, improved to 55.7 percent for the
quarter from 58.5 percent for the same quarter a year ago.
TABLE 4. Noninterest Income
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 MARCH 31
(Dollars in millions) 1995 1994
<S> <C> <C>
Credit card fees $51.6 $36.0
Trust fees 41.7 38.5
Service charges on deposit accounts 32.1 32.2
Insurance commissions 6.3 5.8
Trading account profits and commissions 3.2 2.7
Other 44.7 46.2
Total noninterest income $179.6 $161.4
</TABLE>
TABLE 5. Noninterest Expense
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 MARCH 31
(Dollars in millions, except per employee data) 1995 1994
<S> <C> <C>
Salaries $112.1 $106.5
Employee benefits 28.5 27.3
Total personnel expense 140.6 133.8
Net occupancy 25.7 25.5
Furniture and equipment 23.5 21.4
Amortization of goodwill and other intangible assets 14.1 10.7
FDIC insurance 13.6 14.6
Advertising 6.3 9.5
Other personnel costs 7.6 8.6
Professional services 6.6 7.5
Data processing 4.3 4.9
Printing, stationery and supplies 4.8 5.7
Postage 5.9 5.8
Telephone 5.8 6.2
Other real estate -- 0.9
Other 45.5 38.0
Total noninterest expense $304.3 $293.1
Efficiency ratio* 55.7% 58.5%
Quarterly average number of employees (full-time equivalents) 13,874 14,406
Annualized personnel expense per employee $40,536 $37,151
</TABLE>
*Computed as noninterest expense divided by the sum of net interest income on
a taxable-equivalent basis and noninterest income net of securities gains and
losses.
Total salaries and benefits expense for the first quarter of 1995 increased $6.8
million, or 5.1 percent, from the first quarter of 1994, primarily due to
acquisitions in 1994. Average full-time equivalent employees decreased by 10.3
percent, to 13,874 in the first quarter of 1995, compared with 15,459 (including
the employees of Boulevard, Rocky Mountain and the J.P Morgan trust business, on
a pro forma basis) for the first quarter of 1994. The increase in net occupancy
and furniture and equipment expense for the current quarter, compared with the
first quarter of 1994, also was the result of acquisitions. Advertising expense
decreased $3.2 million, or 33.7 percent, over the 1994 level, reflecting
efficiencies realized from the overlap of MFC's and the Company's geographic
markets. Compared with the same period of 1994, amortization of goodwill and
intangibles expense for the first quarter increased by $3.4 million, or 31.8
percent, due to recent acquisitions.
PROVISION FOR INCOME TAXES - The provision for income taxes was $78.8 million in
the first quarter of 1995, compared with $65.6 million in the first quarter of
1994. The increase primarily results from a higher level of taxable income.
At March 31, 1995, the Company's net deferred tax asset was $312.8 million,
compared with $363.0 million at December 31, 1994. For further information
regarding income taxes, refer to Note H on page 20.
Balance Sheet Analysis
LOANS - On an aggregate basis, the Company's loan portfolio increased $659
million, or 2.7 percent, to $25.2 billion at March 31, 1995, from $24.6 billion
at December 31, 1994. An increase of $942 million primarily in the commercial,
automobile, and home equity and second mortgage portfolios was offset by a $283
million decrease in loans to mortgage bankers and residential mortgages.
Commercial. The Company's portfolio of commercial loans totaled $7.8 billion at
March 31, 1995, up $828 million from December 31, 1994. The increase over prior
quarter reflects growth in small business and middle-market business lending and
in the Payment Systems balances associated with corporate and purchasing cards.
Financial Institutions. The portfolio of loans to financial institutions totaled
$.6 billion at March 31, 1995, a decrease of $228 million from the $.8 billion
balance at December 31, 1994. The decrease from December 31, 1994, is
attributable to cyclical activity in the Company's secured loans to mortgage
banking firms. The mortgage banking firms' loan volume decreased due to a
decline in refinancing activity in response to a rise in market interest rates.
Commercial Real Estate. The Company's portfolio of commercial real estate
mortgages and construction loans grew approximately $51 million during the first
quarter of 1995, to $2.8 billion at March 31, 1995. The Company is seeing
increased activity in commercial real estate loans as market prices stabilize
and vacant space declines, allowing more projects to meet the Company's
stringent credit standards.
Highly Leveraged Transactions. The Company's exposure to commercial loans
involving the buyout, recapitalization or acquisition of an existing business,
called highly leveraged transactions ("HLTs"), remains at relatively low levels.
At March 31, 1995, the Company had HLT outstandings totaling $348 million and
was committed under definitive agreements to lend an additional amount of
approximately $202 million. This exposure increased from December 31, 1994, when
outstandings were $283 million and additional commitments were $179 million. The
increase in HLT originations is consistent with industry and economic trends.
The Company continues to have vigorous underwriting criteria and monitoring
procedures for HLT lending.
Consumer. Total consumer loan outstandings were $13.6 billion at March 31, 1995,
essentially unchanged from December 31, 1994. A $159 million increase, primarily
in home equity and second mortgages and automobile loans, was offset by a $216
million decrease in residential mortgage loans, residential mortgage loans held
for sale, and credit card loans. Home equity and second mortgages increased
primarily due to successful promotions, and automobile loans increased due to
growth in indirect auto loans. The reduction in residential mortgage loans is
the result of management's decision to focus on other consumer loan products.
Residential mortgage loans held for sale declined primarily due to fewer housing
starts and refinancings as a result of rising market interest rates. The
decrease in credit cards reflects seasonal fluctuations.
ALLOWANCE FOR CREDIT LOSSES - At March 31, 1995, the allowance for credit losses
was $470.4 million, compared with an allowance of $474.7 million at December 31,
1994. The ratio of the allowance for credit losses to nonperforming loans
increased to 318 percent at March 31, 1995, from 283 percent at December 31,
1994. For further information on the allowance for credit losses, refer to
"Credit Management" on page 9.
SECURITIES - At March 31, 1995, securities were $3.5 billion compared with $5.2
billion at December 31, 1994, reflecting the sale of $1.56 billion of securities
in connection with the Company's interest rate risk management process.
Trading and other short-term earning assets were $344 million at March 31, 1995,
compared with $576 million at December 31, 1994. The decrease is primarily the
result of the decline in federal funds sold and resale agreements to $253
million at March 31, 1995, from $471 million at December 31, 1994.
DEPOSITS - Noninterest-bearing deposits were $5.3 billion at March 31, 1995,
down $.6 billion from December 31, 1994. The decrease in noninterest-bearing
deposits results from reduced loan production at mortgage banking firm customers
which generate noninterest-bearing deposits.
Interest-bearing deposits include certificates of deposit, savings certificates,
money market accounts, other savings accounts, and interest checking products.
These deposits were $18.1 billion at March 31, 1995, essentially unchanged from
December 31, 1994.
TABLE 6. Summary of Allowance for Credit Losses
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 MARCH 31
(Dollars in millions) 1995 1994
<S> <C> <C>
Balance at beginning of period $474.7 $466.1
CHARGE-OFFS:
Commercial:
Commercial 4.6 11.4
Financial institutions -- --
Real estate:
Commercial mortgage 7.5 9.8
Construction -- --
HLTs -- 3.1
Total commercial 12.1 24.3
Consumer:
Residential mortgage 1.1 1.2
Credit card 23.0 16.7
Other 15.5 12.1
Total consumer 39.6 30.0
Total 51.7 54.3
RECOVERIES:
Commercial:
Commercial 7.8 9.6
Financial institutions 0.1 0.1
Real estate:
Commercial mortgage 2.3 3.5
Construction -- 0.2
HLTs 2.4 4.0
Total commercial 12.6 17.4
Consumer:
Residential mortgage 0.3 0.1
Credit card 2.7 2.2
Other 4.0 3.3
Total consumer 7.0 5.6
Total 19.6 23.0
NET CHARGE-OFFS:
Commercial:
Commercial (3.2) 1.8
Financial institutions (0.1) (0.1)
Real estate:
Commercial mortgage 5.2 6.3
Construction -- (0.2)
HLTs (2.4) (0.9)
Total commercial (0.5) 6.9
Consumer:
Residential mortgage 0.8 1.1
Credit card 20.3 14.5
Other 11.5 8.8
Total consumer 32.6 24.4
Total 32.1 31.3
Provision charged to operating expense 26.0 26.6
Additions related to acquisitions 1.8 23.9
Balance at end of period $470.4 $485.3
Allowance as a percentage of period-end loans 1.87% 2.04%
Allowance as a percentage of nonperforming loans 318 238
Allowance as a percentage of nonperforming assets 218 153
</TABLE>
BORROWINGS - Short-term borrowings, which include federal funds purchased,
securities sold under agreements to repurchase and other short-term borrowings,
were $2.9 billion at March 31, 1995, down from $3.5 billion at the end of 1994.
The decrease is primarily due to repayment of approximately $400 million of
securities sold under agreements to repurchase. Intermediate- and long-term debt
declined to $2.5 billion at March 31, 1995, from $2.7 billion at December 31,
1994 due to maturities.
TABLE 7. Nonperforming Assets
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
(Dollars in millions) 1995 1994
<S> <C> <C>
Nonaccrual loans $148.0 $167.8
Restructured loans 0.1 0.1
Nonperforming loans 148.1 167.9
Other real estate 63.7 64.0
Other nonperforming assets 3.9 0.4
Nonperforming assets $215.7 $232.3
Accruing loans 90 days or more past due $34.4 $26.0
Nonperforming loans to total loans 0.59 % 0.68 %
Nonperforming assets to total loans plus other real estate 0.85 0.94
</TABLE>
Credit Management
The Company's credit management process includes central credit policy and
administration functions and standard underwriting criteria for specialized
lending categories, such as mortgage banking, real estate construction, and
consumer credit. The Company's credit management process is supported by
regular examinations conducted by the credit administration function.
Quarterly, management reviews large loans and all loans experiencing
deterioration of credit quality. A standard credit scoring system is used to
assess consumer credit risks and to price consumer products relative to their
assigned risk rating.
In evaluating credit risk, the Company takes into consideration the
composition of its loan portfolio; its level of allowance coverage;
macroeconomic concerns, such as the level of debt outstanding in the public
and private sectors, the effects of domestic and international economic
conditions, and regional economic conditions; and other issues. The Company's
primary operating region includes Minnesota, Colorado, Montana, North Dakota,
South Dakota, Wisconsin, Iowa, Kansas, Nebraska, Wyoming, and Illinois.
Approximately 80 percent of the loan portfolio consists of extensions of
credit to customers in the Company's primary operating region.
ANALYSIS OF NET LOAN CHARGE-OFFS - Net loan charge-offs totaled $32.1 million in
the first quarter of 1995, essentially unchanged from the first quarter of 1994.
Commercial loan net recoveries for the quarter were $.5 million, compared with
net charge-offs of $6.9 million in the first quarter of 1994, reflecting
continued improvement in the credit quality of this portfolio. Consumer loan net
charge-offs increased $8.2 million, or 33.6 percent, from the first quarter of
1994, commensurate with the growth in the balance of nonmortgage consumer loans
and sales volume activity in credit card products over the past year.
ANALYSIS OF NONPERFORMING ASSETS - Nonperforming assets include all nonaccrual,
impaired, and restructured loans, other real estate and other nonperforming
assets owned by the Company. At March 31, 1995, nonperforming assets totaled
$215.7 million, down $16.6 million, or 7.1 percent, from December 31, 1994. The
ratio of nonperforming assets to loans and other real estate improved to .85
percent at March 31, 1995, from .94 percent at December 31, 1994. Significant
decreases occurred in the categories of nonperforming HLT and commercial loans,
primarily as the result of loan repayments.
TABLE 8. Nonperforming Assets by Industry
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
(Dollars in millions) 1995 1994
<S> <C> <C>
COMMERCIAL:
Commercial $19.9 $26.6
Real estate:
Commercial mortgage 69.1 71.0
Construction 2.5 1.6
HLTs 1.8 9.9
Total commercial 93.3 109.1
CONSUMER:
Residential mortgage 41.9 43.5
Credit card 10.2 9.9
Other 2.7 5.4
Total consumer 54.8 58.8
Total nonperforming loans 148.1 167.9
OTHER REAL ESTATE 63.7 64.0
OTHER NONPERFORMING ASSETS 3.9 0.4
Total nonperforming assets $215.7 $232.3
</TABLE>
TABLE 9. Interest Rate Swap Hedging Portfolio Notional Balances and Yields by
Maturity Date
<TABLE>
<CAPTION>
At March 31, 1995 (Dollars in millions)
WEIGHTED WEIGHTED
AVERAGE AVERAGE
Receive Fixed Swaps* NOTIONAL INTEREST RATE INTEREST RATE
Maturity Date AMOUNT RECEIVED PAID
<S> <C> <C> <C>
1995 (remaining nine months) $345 7.79% 6.27%
1996 433 7.96 6.13
1997 275 6.42 6.15
1998 406 5.93 6.18
1999 575 6.88 6.27
After 1999** 675 6.89 6.23
Total $2,709 6.98% 6.21%
</TABLE>
* At March 31, 1995, the Company does not have any swaps in its portfolio
which requires it to pay fixed-rate interest.
**At March 31, 1995, all swaps with a maturity after 1999 hedge fixed-rate
subordinated notes.
Interest Rate Risk Management
The Company's principal objective for interest rate risk management is to
control the exposure of net interest income to risks associated with interest
rate movements. The Company uses derivative financial instruments
("derivatives") to hedge on-balance sheet items and, to a lesser extent, in
connection with intermediated transactions for customers. The market risk on
intermediated transactions is limited by entering into generally matching or
offsetting positions. The Company does not enter into derivative contracts
for speculative purposes.
Interest rate risk is measured and reported to the Company's Asset and
Liability Management Committee ("ALCO") through the use of traditional gap
analysis which measures the difference between assets and liabilities that
reprice in a given time period, simulation modeling which produces
projections of net interest income under various interest rate scenarios and
balance sheet strategies, and valuation modeling which measures the economic
value of various components of the balance sheet under various interest rate
scenarios. The significant assumptions used in these analyses include rate
sensitivities, prepayment risks, and the timing of changes in prime and
deposit rates compared with changes in money market rates.
Including the effect of interest rate swaps, futures, options and other
hedging instruments, the Company had a cumulative positive repricing gap
position at one year of $102 million at March 31, 1995, indicating that more
assets than liabilities reprice within that period. While this analysis is
useful as a point-in-time measurement of interest rate risk, there are
certain risks that the repricing gap position does not capture, such as basis
risk, prepayment risk, and other option risks. Due to these limitations,
management places a greater reliance on simulation and valuation modeling to
measure and manage interest rate risk.
The Company's policy is to maintain a low interest rate risk position by
limiting the amount of forecasted net interest income at risk over a 12-month
period assuming an immediate and sustained 100-basis point change in interest
rates. The Company invests in fixed rate assets or receives the fixed rate
payment on interest rate swaps as a hedge to maintain acceptable interest
rate risk levels.
The derivatives the Company uses to achieve its hedging objectives are
primarily interest rate swaps, caps, and floors. As of March 31, 1995, the
Company received payments on $2.7 billion notional amount of interest rate
swap agreements, based on fixed interest rates, and made payments based on
variable interest rates. These swaps had an average fixed rate of 6.98
percent and an average variable rate, which is tied to various LIBOR rates,
of 6.21 percent. The maturity of these agreements ranged from one month to
9.6 years with an average remaining maturity of 3.9 years.
Swaps contributed to the Company's net interest margin by reducing interest
expense $4.5 million and $25.6 million for the quarters ended March 31, 1995,
and 1994, respectively.
Interest rate caps and floors are used similarly by the Company to minimize the
impact of fluctuating interest rates on earnings. The total notional amount of
cap agreements purchased as of March 31, 1995, was $200 million with a strike
level of 3-month LIBOR at 6.00 percent. The premium on caps is amortized over
the life of the cap. The impact of caps on interest income was not material for
the quarters ended March 31, 1995, or March 31, 1994. The total notional amount
of floor agreements purchased as of March 31, 1995, was $950 million with an
average strike level of 3-month LIBOR at 3.50 percent and an average remaining
maturity of 2.7 years. Floors did not materially affect interest income for the
quarters ended March 31, 1995, or March 31, 1994.
TABLE 10. Capital Ratios
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
(Dollars in millions) 1995 1994
<S> <C> <C>
Common equity $2,651 $2,494
As a percent of assets 8.1% 7.3%
Tangible common equity* $2,225 $2,082
As a percent of assets 6.9% 6.2%
Total shareholders' equity $2,757 $2,612
As a percent of assets 8.4% 7.7%
Tier 1 capital $2,219 $2,052
As a percent of risk-adjusted assets 7.7% 7.3%
Total risk-based capital $3,405 $3,227
As a percent of risk-adjusted assets 11.8% 11.4%
Leverage ratio 6.9 6.2
</TABLE>
*Defined as common equity less goodwill
Forward contracts, totaling $200 million at March 31, 1995, hedged the
interest rate risk of the fixed rate mortgage loans originated and held for
sale by the Company's mortgage subsidiary. The Company enters into foreign
currency commitments primarily as an intermediary for customers. The Company
manages its credit risk on derivative contracts through counterparty and
credit limit approvals and monitoring credit concentration risks. Refer to
Note I on page 21 for further information on interest rate swaps and options.
Liquidity Management
The objective of liquidity management is to ensure the continuous
availability of funds to meet the demands of depositors, investors and
borrowers. ALCO is responsible for managing these needs while achieving the
Company's financial objectives. ALCO meets regularly to review funding
capacity, current and forecasted loan demand and investment opportunities.
With this information, ALCO supervises funding needs, excess funding
positions and maintenance of contingent funding sources to achieve a balance
sheet structure that provides sufficient liquidity.
Capital Management
The ratio of common equity to assets increased 80 basis points from December
31, 1994, to 8.1 percent at March 31, 1995. Common equity per share was
$19.58 at March 31, 1995, compared with $18.63 at December 31, 1994. Total
equity to assets was 8.4 percent at March 31, 1995, up from 7.7 percent at
December 31, 1994. The increases are primarily due to earnings retention and
improvement in the market value of available-for-sale securities.
Tier 1 and total risk-based capital ratios were 7.7 percent and 11.8 percent
on March 31, 1995, compared with 7.3 percent and 11.4 percent at December 31,
1994, respectively. The leverage ratio, the measure of Tier 1 capital to
total quarterly average assets, also increased to 6.9 percent from 6.2
percent at the end of 1994.
On January 18, 1995, and February 15, 1995, the Board of Directors authorized
repurchase programs of two million and 14 million shares of common stock,
respectively. The two million share authorization is intended to provide
shares for stock purchase and option plans and for the purchase acquisition
of First Western Corporation. One million shares were repurchased and
subsequently reissued in the first quarter for these purposes. The 14 million
share authorization is intended to allow the Company to buy back shares in
connection with the future excess capital retention expected over the next
two years and is predicated upon such excess capital, as well as for stock
purchase and option plans. No shares have been repurchased under this
authorization at March 31, 1995.
Accounting Changes
Effective January 1, 1995, the Company adopted Statement of Financial Accounting
Standards No. ("SFAS") 114, "Accounting by Creditors for Impairment of a Loan."
This Statement requires creditors to establish a valuation allowance when it is
probable that all the principal and interest due under the contractual terms of
a loan will not be collected. The impairment is measured based on the present
value of expected future cash flows based on the effective interest rate of the
loan, or the observable market price or the fair value of a collateral dependent
loan. This differs from the Company's prior policy in that it requires the
establishment of a valuation allowance for uncollectible interest in addition to
the principal amounts of impaired loans. The Statement also requires the
reclassification of in-substance foreclosures from other real estate to
nonperforming loans for all periods if the Company has not taken possession of
the collateral. The adoption of SFAS 114 did not have a material effect on the
Company.
The Financial Accounting Standards Board recently issued SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of," which requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. The impairment is measured based on the present value of
expected future cash flows from the use of the asset and its eventual
disposition. If the expected future cash flows are less than the carrying
amount of the asset, an impairment loss is recognized based on current fair
values. The Statement is effective for fiscal years ending after December 15,
1995. The adoption of SFAS 121 is not expected to have a material effect on
the Company.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
(In millions, except shares) 1995 1994
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,598 $ 1,707
Federal funds sold 26 135
Securities purchased under agreements to resell 227 336
Trading account securities 90 77
Available-for-sale securities 3,535 5,185
Loans 25,215 24,556
Less allowance for credit losses 470 475
Net loans 24,745 24,081
Bank premises and equipment 475 479
Interest receivable 185 198
Customers' liability on acceptances 189 178
Other assets 1,642 1,752
Total assets $ 32,712 $ 34,128
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 5,346 $ 5,933
Interest-bearing 18,131 18,323
Total deposits 23,477 24,256
Federal funds purchased 1,839 1,630
Securities sold under agreements to repurchase 440 938
Other short-term funds borrowed 650 955
Long-term debt 2,542 2,684
Acceptances outstanding 189 178
Other liabilities 818 875
Total liabilities 29,955 31,516
Shareholders' equity:
Preferred stock 106 118
Common stock, par value $1.25 a share-authorized 200,000,000 shares; issued:
3/31/95 - 135,424,331 shares; 12/31/94 - 134,599,409 shares 169 168
Capital surplus 868 866
Retained earnings 1,671 1,593
Unrealized loss on securities, net of tax (57) (106)
Less cost of common stock in treasury: 3/31/95 - 2,976 shares; 12/31/94 - 767,000
shares -- (27)
Total shareholders' equity 2,757 2,612
Total liabilities and shareholders' equity $ 32,712 $ 34,128
</TABLE>
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 MARCH 31
(In millions, except per share data) 1995 1994
<S> <C> <C>
INTEREST INCOME
Loans $547.2 $433.7
Securities:
Taxable 66.5 71.2
Exempt from federal income taxes 2.8 3.0
Other interest income 9.1 6.7
Total interest income 625.6 514.6
INTEREST EXPENSE
Deposits 178.4 136.9
Federal funds purchased and repurchase agreements 30.9 9.7
Other short-term funds borrowed 10.1 6.3
Long-term debt 42.9 25.9
Total interest expense 262.3 178.8
Net interest income 363.3 335.8
Provision for credit losses 26.0 26.6
Net interest income after provision for credit losses 337.3 309.2
NONINTEREST INCOME
Credit card fees 51.6 36.0
Trust fees 41.7 38.5
Service charges on deposit accounts 32.1 32.2
Insurance commissions 6.3 5.8
Other 47.9 48.9
Total noninterest income 179.6 161.4
NONINTEREST EXPENSE
Salaries 112.1 106.5
Employee benefits 28.5 27.3
Net occupancy 25.7 25.5
Furniture and equipment 23.5 21.4
Amortization of goodwill and other intangible assets 14.1 10.7
FDIC insurance 13.6 14.6
Advertising 6.3 9.5
Other personnel costs 7.6 8.6
Professional services 6.6 7.5
Data processing 4.3 4.9
Other real estate -- 0.9
Other 62.0 55.7
Total noninterest expense 304.3 293.1
Income from continuing operations before income taxes 212.6 177.5
Applicable income taxes 78.8 65.6
Income from continuing operations 133.8 111.9
Loss from discontinued operations -- (1.2)
Net income $133.8 $110.7
Net income applicable to common equity $131.9 $104.8
EARNINGS PER COMMON SHARE
Average common and common equivalent shares 135,545,733 132,349,979
Income from continuing operations $.97 $.80
Loss from discontinued operations -- $(.01)
Net income $.97 $.79
</TABLE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNREALIZED
GAINS/(LOSSES)
COMMON ON
SHARES PREFERRED COMMON CAPITAL RETAINED SECURITIES, TREASURY
(In millions, except shares) OUTSTANDING* STOCK STOCK SURPLUS EARNINGS NET OF TAXES STOCK** TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1993 130,408,480 $278.1 $169.8 $852.2 $1,575.4 $ 38.0 $(169.4) $2,744.1
Net Income 110.7 110.7
Dividends declared:
Preferred (5.9) (5.9)
Common (38.1) (38.1)
Purchase of treasury stock (860,812) (0.5) (8.6) (14.8) (23.9)
Acquisition of Boulevard Bancorp,
Inc. for common stock, warrants,
and stock options 6,227,649 1.9 54.9 149.4 206.2
Other business acquisitions 526,000 (8.1) 16.2 8.1
Issuance of common stock:
Dividend reinvestment 51,070 1.6 1.6
Stock option and stock purchase
plans 283,692 0.1 2.7 (3.1) 3.8 3.5
Stock warrants exercised 23,437 0.1 0.1
Redemption of preferred stock (160.0) (7.0) (167.0)
Change in unrealized
gains/(losses) (57.4) (57.4)
BALANCE MARCH 31, 1994 136,659,516 118.1 171.3 901.3 1,623.9 (19.4) (13.2) 2,782.0
BALANCE DECEMBER 31, 1994 133,832,409 $118.1 $168.3 $865.8 $1,592.8 $(106.4) $(26.7) $2,611.9
Net Income 133.8 133.8
Dividends declared:
Preferred (1.9) (1.9)
Common (48.6) (48.6)
Purchase of treasury stock (1,040,475) (39.7) (39.7)
Business acquisitions 1,619,998 0.3 4.3 52.4 57.0
Issuance of common stock:
Dividend reinvestment 57,142 0.1 2.1 2.2
Stock option and stock purchase
plans 926,355 0.7 (2.0) (3.7) 10.9 5.9
Stock warrants exercised 25,926 (0.7) 0.9 0.2
Redemption of preferred stock (12.2) (1.0) (13.2)
Change in unrealized
gains/(losses) 49.8 49.8
BALANCE MARCH 31, 1995 135,421,355 $105.9 $169.3 $868.2 $1,670.7 $ (56.6) $ (0.1) $2,757.4
</TABLE>
* Defined as total common shares less common stock held in treasury.
**Ending treasury shares were 2,976 at March 31, 1995; 767,000 at December
31, 1994; 398,337 at March 31, 1994; and 5,391,883 at December 31, 1993.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 MARCH 31
(In millions) 1995 1994
<S> <C> <C>
OPERATING ACTIVITIES
Net income $133.8 $110.7
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses 26.0 26.6
Depreciation and amortization of bank premises and equipment 19.6 17.8
Provision for deferred income taxes 22.3 14.7
Amortization of goodwill and other intangible assets 14.1 10.7
Amortization and write-downs of loan servicing related intangibles 3.4 9.3
Write-downs of other real estate 0.3 0.6
Changes in operating assets and liabilities, excluding the effects of purchase
acquisitions:
Increase in trading account securities (13.0) (5.2)
(Increase) decrease in loans held for sale (24.2) 598.9
Decrease (increase) in accrued receivables 25.2 (30.3)
Decrease in accrued liabilities (10.3) (58.9)
Other - net 0.7 (16.0)
Net cash provided by operating activities 197.9 678.9
INVESTING ACTIVITIES
Net cash provided (used) by:
Interest-bearing deposits with banks 28.9 31.7
Loans outstanding (445.6) 394.5
Securities purchased under agreements to resell 109.6 37.9
Available-for-sale securities:
Sales 1,739.7 318.5
Maturities 172.0 539.5
Purchases (138.5) (722.1)
Investment securities:
Maturities -- 113.4
Purchases -- (233.4)
Proceeds from sales/repayments of other real estate 10.5 22.2
Proceeds from sales of bank premises and equipment 1.8 2.1
Purchases of bank premises and equipment (16.3) (13.2)
Purchases of loans (1.0) (467.0)
Cash and cash equivalents of acquired subsidiaries 16.3 72.8
Business acquisitions, net of cash received -- (49.8)
Other - net 1.0 8.4
Net cash provided by investing activities 1,478.4 55.5
FINANCING ACTIVITIES
Net cash provided (used) by:
Deposits (1,042.5) (1,600.1)
Federal funds purchased and securities sold under agreements to repurchase (288.7) 1.1
Short-term borrowings (442.3) (63.8)
Purchases of deposits -- 11.1
Long-term debt transactions:
Proceeds -- 532.0
Principal payments (25.4) (196.8)
Redemption of preferred stock (13.2) (0.9)
Proceeds from dividend reinvestment, stock option, and stock purchase plans 8.1 5.1
Purchase of treasury stock (39.7) (23.9)
Stock warrants exercised 0.2 0.1
Cash dividends (50.5) (44.0)
Net cash used by financing activities (1,894.0) (1,380.1)
Change in cash and cash equivalents (217.7) (645.7)
Cash and cash equivalents at beginning of period 1,841.9 2,798.6
Cash and cash equivalents at end of period $1,624.2 $2,152.9
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A. Basis of Presentation
The accompanying consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q and, therefore, do not include
all information and footnotes necessary for a complete presentation of
financial position, results of operations, and cash flow activity required
under generally accepted accounting principles. In the opinion of management
of the Company, all adjustments (consisting only of normal recurring
accruals) necessary for a fair presentation of results have been made and the
Company believes such presentation is adequate to make the information
presented not misleading. For further information, refer to the Company's
Current Report on Form 8-K filed March 3, 1995, which includes a copy of the
Company's restated consolidated financial statements and footnotes for the
year ended December 31, 1994, which give effect to the acquisition of
Metropolitan Financial Corporation, as discussed in Note C below. Certain
amounts in prior periods have been reclassified to conform to the current
presentation.
NOTE B. Accounting Changes
ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN - In January 1995, the Company
adopted Statement of Financial Accounting Standards No. ("SFAS") 114,
"Accounting by Creditors for Impairment of a Loan." The adoption of this
Statement, which did not have a material effect on the Company, requires
creditors to establish a valuation allowance when it is probable that all the
principal and interest due under the contractual terms of a loan will not be
collected. The impairment is measured based on the present value of expected
future cash flows based on the loan's effective interest rate, or the observable
market price or the fair value of a collateral dependent loan. Accordingly, the
Company established a valuation allowance for uncollectible interest in addition
to the principal amounts of impaired loans. In addition, in-substance
foreclosures, where the Company has not taken possession of the collateral, were
reclassified from other real estate to nonperforming loans for all periods.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF - The Financial Accounting Standards Board recently issued SFAS
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," which requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. The impairment is measured based on the present value of expected
future cash flows from the use of the asset and its eventual disposition. If the
expected future cash flows are less than the carrying amount of the asset, an
impairment loss is recognized based on current fair values. The Statement is
effective for fiscal years ending after December 15, 1995. The adoption of SFAS
121 is not expected to have a material effect on the Company.
NOTE C. Business Combinations and Discontinued Operations
METROPOLITAN FINANCIAL CORPORATION - Effective December 23, 1994, the Company
received all regulatory approvals on the previously announced merger with
Metropolitan Financial Corporation ("MFC"), a regional financial services
holding company headquartered in Minneapolis, Minnesota. On January 24, 1995,
the Company issued approximately 21.7 million shares to complete the
transaction. As of December 31, 1994, MFC had approximately $7.9 billion in
assets, $5.5 billion in deposits and 211 offices principally in North Dakota,
Minnesota, Nebraska, Iowa, Kansas, South Dakota, Wisconsin, and Wyoming. The
Company used the pooling of interests method to account for the transaction.
Accordingly, the Company's financial statements have been restated for all
periods prior to the merger to include the accounts and operations of MFC. The
operations of Edina Realty, Inc., MFC's real estate brokerage subsidiary, are
accounted for as discontinued operations because the Company expects to sell the
subsidiary within two years to comply with regulations which restrict nonbanking
activities.
Operating results of the Company and MFC for the three months ended March 31,
1994, prior to restatement are:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
(In millions) MARCH 31, 1994
<S> <C>
The Company
Net interest income $281.3
Net income 98.5
MFC
Net interest income 54.5
Loss from discontinued operations (1.2)
Net income 12.2
Combined
Net interest income 335.8
Loss from discontinued operations (1.2)
Net income 110.7
</TABLE>
BOULEVARD BANCORP, INC. - On March 25, 1994, the Company completed the
acquisition of Boulevard Bancorp, Inc. ("Boulevard"), a $1.6 billion commercial
bank holding company headquartered in Chicago, Illinois, which was accounted for
as a purchase. Under the terms of the purchase agreement, 6.2 million shares of
the Company's common stock were issued and Boulevard's outstanding stock options
and warrants were converted into stock options and warrants for the Company's
common stock, at the same conversion rate. The Company bought back existing
shares of its common stock approximately equal to the number of shares issued at
the time of closing of the Boulevard acquisition. The results of operations of
Boulevard are included in the Company's Consolidated Statement of Income since
the date of acquisition.
The following pro forma operating results of the Company assume that the
Boulevard acquisition had occurred on January 1, 1994. In addition to combining
the historical results of operations of the two companies, the pro forma results
include adjustments for the estimated effect of purchase accounting on the
Company's results, principally amortization of intangibles.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
(In millions, except per-share amounts) MARCH 31, 1994
<S> <C>
Net interest income $347.8
Loss from discontinued operations (1.2)
Net income 94.6
Net income per share .64
</TABLE>
The pro forma information may not be indicative of the results that actually
would have occurred if the combination had been in effect on the dates indicated
or which may be obtained in the future.
OTHER ACQUISITIONS - On March 16, 1995, the Company completed the acquisition of
First Western Corporation, parent company of Western Bank, with $317 million in
assets and nine branches in and around Sioux Falls, South Dakota. On March 25,
1994, the Company completed the acquisition of Rocky Mountain Financial
Corporation, a $537 million savings bank holding company located in Cheyenne,
Wyoming. Both of these acquisitions were accounted for as purchases.
NOTE D. Securities
The detail of the amortized cost and fair value of available-for-sale
securities consisted of the following:
<TABLE>
<CAPTION>
MARCH 31, 1995 DECEMBER 31, 1994
AMORTIZED FAIR AMORTIZED FAIR
(In millions) COST VALUE COST VALUE
<S> <C> <C> <C> <C>
U.S. Treasury $1,004 $971 $1,177 $1,113
Mortgage-backed
securities 1,945 1,877 3,400 3,297
Other U.S. agencies 236 230 333 323
State and political 178 183 178 181
Other 263 274 269 271
Total $3,626 $3,535 $5,357 $5,185
</TABLE>
NOTE E. Loans
The composition of the loan portfolio was as follows:
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
(In millions) 1995 1994
<S> <C> <C>
COMMERCIAL:
Commercial $7,830 $7,002
Financial institutions 559 787
Real estate:
Commercial mortgage 2,461 2,454
Construction 374 330
HLTs 348 283
Total commercial loans 11,572 10,856
CONSUMER:
Residential mortgage 5,060 5,098
Residential mortgage held for sale 180 197
Home equity and second mortgage 2,505 2,453
Credit card 2,248 2,409
Automobile 1,837 1,770
Revolving credit 737 725
Installment 699 712
Student loans held for sale 377 336
Total consumer loans 13,643 13,700
Total loans $25,215 $24,556
</TABLE>
At March 31, 1995, the recorded investment in loans considered impaired under
SFAS 114 was $93 million, which was included in nonaccrual loans. Of this
amount, $3 million was measured using the present value of expected future
cash flows, $82 million using the fair value of the loans' collateral, and $8
million was below the Company's threshold for valuing individual loans. The
carrying value of the impaired loans was greater than or equal to the present
value of expected future cash flows and, accordingly, no allowance for credit
losses was specifically allocated to impaired loans. For the quarter ended
March 31, 1995, the average recorded investment in impaired loans was
approximately $101 million. No interest income was recognized on these
impaired loans during the quarter.
NOTE F. Long-Term Debt
Long-term debt (debt with original maturities of more than one year)
consisted of the following:
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
(In millions) 1995 1994
<S> <C> <C>
Floating-rate subordinated capital notes - due November 29, 1996 $150 $150
Fixed-rate 8.25% subordinated notes - due October 1, 1999 86 86
Fixed-rate 6.625% subordinated notes - due May 15, 2003 100 100
Fixed-rate 6.00% subordinated notes - due October 15, 2003 100 100
Fixed-rate 7.55% subordinated notes - due June 15, 2004 100 100
Fixed-rate 8.00% subordinated notes - due July 2, 2004 125 125
Fixed-rate 8.35% subordinated notes - due November 1, 2004 100 100
Step-up subordinated notes - due August 15, 2005 100 100
Floating-rate subordinated notes - due November 30, 2010 107 107
Federal Home Loan Bank advances 971 1,088
Medium-term notes (6.125% to 9.89%) - maturities to November 1997 492 514
Other 111 114
Total $2,542 $2,684
</TABLE>
NOTE G. Shareholders' Equity
On January 18, 1995, and February 15, 1995, the Board of Directors authorized
repurchase programs of two million and 14 million shares of common stock,
respectively. The two million share authorization is intended to provide
shares for stock purchase and option plans and for the purchase acquisition
of First Western Corporation. One million shares were repurchased and
subsequently reissued in the first quarter for these purposes. The 14 million
share authorization is intended to allow the Company to buy back shares in
connection with the future excess capital retention expected over the next
two years and is predicated upon such excess capital, as well as for stock
purchase and option plans. No shares have been repurchased under this
authorization at March 31, 1995.
On January 19, 1994, the Board of Directors authorized the redemption of the
1989A and 1989B series of preferred stock. This redemption is reflected in
the March 31, 1994, capital ratios.
NOTE H. Income Taxes
The components of income tax expense were:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 MARCH 31
(In millions) 1995 1994
<S> <C> <C>
FEDERAL:
Current tax $52.8 $41.6
Deferred tax provision 18.3 13.9
Federal income tax 71.1 55.5
STATE:
Current tax 3.7 9.3
Deferred tax provision 4.0 0.8
State income tax 7.7 10.1
Total income tax provision $78.8 $65.6
</TABLE>
The reconciliation between income tax expense and the amount computed by
applying the statutory federal income tax rate was as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 MARCH 31
(In millions) 1995 1994
<S> <C> <C>
Tax at statutory rate (35%) $74.4 $62.1
State income tax, net of federal tax benefit 5.0 6.5
Tax effect of:
Tax-exempt interest:
Loans (1.3) (1.4)
Securities (1.0) (1.0)
Amortization of goodwill 3.4 1.9
Other items (1.7) (2.5)
Applicable income taxes $78.8 $65.6
</TABLE>
At March 31, 1995, the Company's net deferred tax asset was $312.8 million,
compared with $363.0 million at December 31, 1994.
NOTE I. Commitments, Contingent Liabilities and Off-Balance Sheet Financial
Instruments
The Company uses various financial instruments that have off-balance sheet
risk in the normal course of business to meet the financing needs of its
customers and to manage its interest rate risk. The contract or notional
amounts of these financial instruments were as follows:
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
(In millions) 1995 1994
<S> <C> <C>
Commitments to extend credit:
Commercial $6,507 $7,006
Corporate and purchasing cards 3,740 3,210
Consumer credit card 8,609 7,875
Other consumer 2,736 2,628
Letters of Credit:
Standby 1,325 1,321
Commercial 164 175
Interest rate swap contracts:
Hedge 2,709 2,674
Intermediated 127 127
Interest rate options contracts:
Hedge interest rate floors purchased 950 950
Hedge interest rate caps purchased 200 250
Intermediated interest rate caps and floors purchased 121 127
Intermediated interest rate caps and floors written 121 127
Liquidity support guarantees and forward and option contracts 353 338
Foreign currency commitments:
Commitments to purchase 1,062 941
Commitments to sell 1,062 941
Mortgages sold with recourse 306 312
Commitment to sell loans 780 935
</TABLE>
The Company enters into interest rate swap contracts to hedge its balance
sheet for risks caused by fluctuations in interest rates and as an
intermediary for customers. Activity for the three months ending March 31,
1995, with respect to interest rate swaps which the Company uses to hedge
medium-term notes, subordinated debt, deposit notes, long-term certificates
of deposit, deposit accounts, and savings certificates was as follows:
<TABLE>
<CAPTION>
(In millions)
<S> <C>
Notional amount outstanding at December 31, 1994 $2,674
Additions 150
Maturities 115
Notional amount outstanding at March 31, 1995 $2,709
</TABLE>
For interest rate swaps designated as hedges, the weighted average interest
rates to be paid were 6.21 percent and 6.09 percent at March 31, 1995, and
December 31, 1994, respectively. At these same dates, the weighted average
interest rates to be received were 6.98 percent and 6.91 percent. The Company
is a receiver of fixed and payer of floating on all hedges as of March 31,
1995. The amortization of deferred gains and losses increased net interest
income by $.4 million in the first quarter of 1995 and decreased net interest
income by $.3 million in the first quarter of 1994. Net unamortized deferred
gains and losses were $6.0 million at March 31, 1995. The Company will
amortize these gains and losses through the year 2000. Interest rate floors
totaling $950 million with an average remaining maturity of 2.7 years at
March 31, 1995, and 3.0 years at December 31, 1994, hedged floating rate
commercial loans. For interest rate floors designated as hedges, the strike
rate ranged from 3.25 to 4.0 at March 31, 1995, and December 31, 1994. At
March 31, 1995, the total notional amount of caps purchased was $200 million
with a strike level of 3-month LIBOR at 6.00 percent. The total notional
amount of caps purchased at December 31, 1994, was $250 million with an
average strike level of 3-month LIBOR at 6.10 percent.
NOTE J. Supplemental Information to the Consolidated Financial Statements
CONSOLIDATED BALANCE SHEET - Time certificates of deposit in denominations of
$100,000 or more totaled $1,240 million and $1,318 million at March 31, 1995,
and December 31, 1994, respectively.
CONSOLIDATED STATEMENT OF CASH FLOWS - Listed below are supplemental disclosures
to the Consolidated Statement of Cash Flows.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
(In millions) 1995 1994
<S> <C> <C>
Income taxes paid $ 36.9 $ 10.7
Interest paid 244.0 185.0
Net noncash transfers to foreclosed property 8.8 8.8
Noncash transfer to other liabilities resulting
from notification to shareholders of preferred stock redemption -- 166.1
Change in unrealized gain (loss) on available-for-sale
securities, net of taxes of $30.8 in 1995 and $32.6 in 1994 49.8 (57.4)
Cash acquisitions of businesses:
Fair value of noncash assets acquired $ -- $ 529.0
Liabilities assumed -- (479.2)
Net $ -- $ 49.8
Stock acquisitions of businesses:
Fair value of noncash assets acquired $ 329.3 $ 1,674.0
Net cash acquired 16.3 72.8
Liabilities assumed (288.6) (1,540.6)
Net value of common stock issued $ 57.0 $ 206.2
</TABLE>
CONSOLIDATED DAILY AVERAGE BALANCE SHEET AND RELATED YIELDS AND RATES
<TABLE>
<CAPTION>
1995 1994
% CHANGE
INTEREST INTEREST AVERAGE
YIELDS YIELDS BALANCE
For the three months ended March 31 AND AND INCREASE
(In millions) BALANCE INTEREST RATES BALANCE INTEREST RATES (DECREASE)
ASSETS
<S> <C> <C> <C> <C> <C> <C> <C>
Securities:
U.S. Treasury $ 1,065 $ 16.2 6.17% $ 1,676 $ 21.8 5.28% (36.5)%
Mortgage-backed securities 2,464 41.6 6.85 2,759 41.9 6.16 (10.7)
State & political subdivisions 175 4.6 10.66 193 5.0 10.51 (9.3)
U.S. agencies and other 551 8.3 6.11 430 5.8 5.47 28.1
Total securities 4,255 70.7 6.74 5,058 74.5 5.97 (15.9)
Unrealized gain/(loss) on
available-for-sale securities (138) 51
Net securities 4,117 5,109
Trading account securities 82 1.1 5.44 64 .6 3.80 28.1
Federal funds sold and resale agreements 311 4.6 6.00 547 4.3 3.19 (43.1)
Loans:
Commercial:
Commercial 7,496 165.1 8.93 6,253 105.6 6.85 19.9
Financial institutions 724 6.9 3.87 1,715 11.7 2.77 (57.8)
Real estate:
Commercial mortgage 2,444 51.5 8.55 2,262 45.7 8.19 8.0
Construction 357 8.2 9.32 234 4.2 7.28 52.6
Total commercial 11,021 231.7 8.53 10,464 167.2 6.48 5.3
Consumer:
Residential mortgage 5,069 96.1 7.69 5,312 98.5 7.52 (4.6)
Residential mortgage held for sale 174 3.5 8.16 680 11.2 6.68 (74.4)
Home equity and second mortgage 2,445 56.7 9.40 1,954 38.8 8.05 25.1
Credit card 2,294 71.5 12.64 1,736 56.2 13.13 32.1
Other 3,589 89.7 10.14 2,910 64.0 8.92 23.3
Total consumer 13,571 317.5 9.49 12,592 268.7 8.65 7.8
Total loans 24,592 549.2 9.06 23,056 435.9 7.67 6.7
Allowance for credit losses 478 480 (.4)
Net loans 24,114 22,576 6.8
Other earning assets 226 3.5 6.28 245 3.0 4.97 (7.8)
Total earning assets* 29,466 629.1 8.66 28,970 518.3 7.26 1.7
Cash and due from banks 1,677 1,718 (2.4)
Other assets 2,175 1,900 14.5
Total assets $32,702 $32,159 1.7%
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits $5,511 $6,669 (17.4)%
Interest-bearing deposits:
Interest checking 2,967 12.4 1.69 3,087 10.4 1.37 (3.9)
Money market accounts 3,739 34.3 3.72 4,161 25.1 2.45 (10.1)
Other savings accounts 1,933 12.2 2.56 1,937 10.9 2.28 (.2)
Savings certificates 8,347 102.3 4.97 7,638 71.0 3.77 9.3
Certificates over $100,000 1,078 17.2 6.47 1,419 19.5 5.57 (24.0)
Total interest-bearing deposits 18,064 178.4 4.01 18,242 136.9 3.04 (1.0)
Short-term borrowings 2,801 41.0 5.94 1,682 16.0 3.86 66.5
Long-term debt 2,669 42.9 6.52 1,973 25.9 5.32 35.3
Total interest-bearing liabilities 23,534 262.3 4.52 21,897 178.8 3.31 7.5
Other liabilities 1,020 875 16.6
Preferred equity 106 221 (52.0)
Common equity 2,623 2,467 6.3
Unrealized gain/(loss) on available-for-sale
securities, net of taxes (92) 30 (406.7)
Total liabilities and shareholders' equity $32,702 $32,159 1.7%
Net interest income $366.8 $339.5
Gross interest margin 4.14% 3.95%
Gross interest margin without taxable-
equivalent increments 4.09% 3,89%
Net interest margin 5.05% 4.75%
Net interest margin without taxable-
equivalent increments 5.00% 4.70%
</TABLE>
Interest and rates are presented on a fully taxable-equivalent basis under a
tax rate of 35 percent.
Interest income and rates on loans include loan fees. Nonaccrual loans are
included in average loan balances.
* Before deducting the allowance for credit losses and excluding the
unrealized gain/(loss) on available-for-sale securities.
PART II -- OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - The 66th Annual
Meeting of Shareholders of First Bank System, Inc. was held on Wednesday, April
26, 1995, at the Minneapolis Convention Center. John F. Grundhofer, Chairman,
President and Chief Executive Officer, presided.
The holders of 115,834,705 shares of common stock, 87 percent of the 133,374,350
outstanding shares entitled to vote, were represented at the meeting in person
or by proxy. The candidates for election as Class III Directors listed in the
proxy statement were elected to serve three-year terms expiring at the 1998
annual shareholders' meeting. The tabulation for each nominee for office is
listed in the table below.
The proposal to ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the year ending December 31, 1995, was approved. The
proposal to amend the Company's 1991 Stock Incentive Plan to provide for an
increase in the number of stock options automatically granted at the date of
each Annual Meeting of Stockholders and to provide for the grant of certain
"reload" options to nonemployee directors was approved. The 1995 Executive
Incentive Plan was approved.
SUMMARY OF MATTERS VOTED UPON BY SHAREHOLDERS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
NUMBER OF SHARES
IN FAVOR WITHHELD
Election of Class III Directors:
John F. Grundhofer 115,329,085 505,620
Delbert W. Johnson 115,344,781 489,924
John H. Kareken 115,321,271 513,434
Kenneth A. Macke 115,289,206 545,499
IN FAVOR AGAINST ABSTAINED NON VOTE
Other Matters:
Ratification of appointment of Ernst & Young LLP
as independent auditors 115,232,026 328,008 274,671 --
Amendments to 1991 Stock Incentive Plan 94,668,524 19,965,192 1,200,989 --
Approval of 1995 Executive Incentive Plan 107,074,303 7,622,647 1,137,755 --
</TABLE>
For a copy of the meeting minutes, please write to the Office of the Secretary,
First Bank System, P.O. Box 522, Minneapolis, Minnesota 55480.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10A First Bank System, Inc. 1991 Stock Incentive Plan, as amended*
10B First Bank System, Inc. 1995 Executive Incentive Plan*
10C First Bank System, Inc. Nonqualified Supplemental Executive Retirement
Plan, as amended*
11 Computation of Primary and Fully Diluted Net Income Per Common Share
12 Computation of Ratio of Earnings to Fixed Charges
27 Article 9 Financial Data Schedule*
(b) REPORTS ON FORM 8-K
During the three months ended March 31, 1995, the Company filed the following
reports on Form 8-K:
Form 8-K/A filed February 13, 1995, amending the Form 8-K filed on August
5, 1994, to include revised pro forma financial information.
Form 8-K filed March 3, 1995, which includes the Company's restated
consolidated financial statements and Management's Discussion and Analysis
of Financial Condition and Results of Operations for the year ended
December 31, 1994, to give effect to the acquisition of Metropolitan
Financial Corporation.
Form 8-K/A filed on March 7, 1995, amending the Form 8-K filed on March 3,
1995, which was originally filed with a technical EDGAR error.
*Copies of this exhibit will be furnished upon request and payment of the
Company's reasonable expenses in furnishing the exhibit.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIRST BANK SYSTEM, INC.
/s/ DAVID J. PARRIN
By: David J. Parrin
Senior Vice President & Controller
(Chief Accounting Officer and Duly Authorized Officer)
May 12, 1995
First Bank System
P.O. BOX 522
MINNEAPOLIS, MINNESOTA
55480
First Class
U.S. Postage
PAID
Permit No. 2440
Minneapolis, MN
SHAREHOLDER INQUIRIES
STOCK AND DIVIDEND INFORMATION
FOR MATTERS RELATED SPECIFICALLY TO FIRST BANK SYSTEM STOCK RECORDS OR
DIVIDEND PAYMENTS, CONTACT THE OFFICE OF THE CORPORATE SECRETARY, (612)
973-0334.
DIVIDEND REINVESTMENT
FOR INFORMATION REGARDING FIRST BANK SYSTEM'S DIVIDEND REINVESTMENT PLAN,
CONTACT FIRST CHICAGO TRUST COMPANY OF NEW YORK, P.O. BOX 13531, NEWARK, NEW
JERSEY 07188-0001, (800) 446-2617.
FINANCIAL INFORMATION
FOR FURTHER INFORMATION CONTACT JOHN DANIELSON, SENIOR VICE PRESIDENT, (612)
973-2261, OR KARIN GLASGOW, ASSISTANT VICE PRESIDENT, (612) 973-2264.
FIRST BANK SYSTEM, INC.
1991 STOCK INCENTIVE PLAN
(Including Amendments Effective April 21, 1993,
Amendments Effective April 28, 1994 and Amendments
Effective April 26, 1995)
SECTION 1. PURPOSE; EFFECT ON PRIOR PLANS.
(a) Purpose. The purpose of the First Bank System, Inc. 1991
Stock Incentive Plan (the "Plan") is to aid in attracting and retaining
management personnel and members of the Board of Directors who are not also
employees ("Non-Employee Directors") of First Bank System, Inc. (the "Company")
capable of assuring the future success of the Company, to offer such personnel
and Non-Employee Directors incentives to put forth maximum efforts for the
success of the Company's business and to afford such personnel and Non-Employee
Directors an opportunity to acquire a proprietary interest in the Company.
(b) Effect on Prior Plans. From and after the effective date
of the Plan, no stock options or restricted stock awards shall be granted under
the Company's 1987 Stock Option Plan and Special Performance and Retention Plan.
All outstanding stock options and restricted stock awards previously granted
under the 1987 Stock Option Plan and Special Performance and Retention Plan
shall remain outstanding in accordance with the terms thereof.
SECTION 2. DEFINITIONS.
As used in the Plan, the following terms shall have the
meanings set forth below:
(a) "Affiliate" shall mean (i) any entity that, directly or
indirectly through one or more intermediaries, is controlled by the Company and
(ii) any entity in which the Company has a significant equity interest, as
determined by the Committee.
(b) "Award" shall mean any Option, Stock Appreciation Right,
Restricted Stock, Restricted Stock Unit, Performance Award, Dividend Equivalent
or other Stock-Based Award granted under the Plan.
(c) "Award Agreement" shall mean any written agreement,
contract or other instrument or document evidencing any Award granted under the
Plan.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any regulations promulgated thereunder.
(e) "Committee" shall mean a committee of the Board of
Directors of the Company designated by such Board to administer the Plan and
composed of not less than three directors, each of whom is a "disinterested
person" within the meaning of Rule 16b-3. Each member of the Committee shall be
an "outside director" within the meaning of Section 162(m) of the Code.
(f) "Dividend Equivalent" shall mean any right granted under
Section 6(e) of the Plan.
(g) "Eligible Person" shall mean any employee, officer,
consultant or independent contractor providing services to the Company or any
Affiliate who the Committee determines to be an Eligible Person. Eligible Person
shall not include any Non-Employee Director, who shall receive Awards only
pursuant to Section 6(h) of the Plan.
(h) "Fair Market Value" shall mean, with respect to any
property (including, without limitation, any Shares or other securities), the
fair market value of such property determined by such methods or procedures as
shall be established from time to time by the Committee or, in the case of
grants pursuant to Section 6(h), the Board of Directors. Notwithstanding the
foregoing, for purposes of the Plan, the Fair Market Value of Shares on a given
date shall be the closing price of the Shares as reported on the New York Stock
Exchange on such date, if the Shares are then quoted on the New York Stock
Exchange.
(i) "Incentive Stock Option" shall mean an option granted
under Section 6(a) of the Plan that is intended to meet the requirements of
Section 422 of the Code or any successor provision.
(j) "Non-Qualified Stock Option" shall mean an option granted
under Section 6(a) of the Plan, or Section 6(h) of the Plan in the case of
grants to Non-Employee Directors, that is not intended to be an Incentive Stock
Option.
(k) "Option" shall mean an Incentive Stock Option or a
Non-Qualified Stock Option.
(l) "Other Stock-Based Award" shall mean any right granted
under Section 6(f) of the Plan.
(m) "Participant" shall mean an Eligible Person designated to
be granted an Award under the Plan.
(n) "Performance Award" shall mean any right granted under
Section 6(d) of the Plan.
(o) "Person" shall mean any individual, corporation,
partnership, association or trust.
(p) "Restricted Stock" shall mean any Share granted under
Section 6(c) of the Plan.
(q) "Restricted Stock Unit" shall mean any unit granted under
Section 6(c) of the Plan evidencing the right to receive a Share (or a cash
payment equal to the Fair Market Value of a Share) at some future date.
(r) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934.
(s) "Shares" shall mean shares of Common Stock, $1.25 par
value, of the Company or such other securities or property as may become subject
to Awards pursuant to an adjustment made under Section 4(c) of the Plan.
(t) "Stock Appreciation Right" shall mean any right granted
under Section 6(b) of the Plan.
SECTION 3. ADMINISTRATION.
(a) Power and Authority of the Committee. The Plan shall be
administered by the Committee; provided, however, that Section 6(h) of the Plan
shall not be administered by the Committee but rather by the Board of Directors
subject to the provisions and restrictions of such Section 6(h). Subject to the
terms of the Plan and applicable law, and except with respect to Section 6(h) of
the Plan, the Committee shall have full power and authority to: (i) designate
Participants; (ii) determine the type or types of Awards to be granted to each
Participant under the Plan; (iii) determine the number of Shares to be covered
by (or with respect to which payments, rights or other matters are to be
calculated in connection with) each Award; (iv) determine the terms and
conditions of any Award or Award Agreement; (v) amend the terms and conditions
of any Award or Award Agreement and accelerate the exercisability of Options or
the lapse of restrictions relating to Restricted Stock or Restricted Stock
Units; (vi) determine whether, to what extent and under what circumstances
Awards may be exercised in cash, Shares, other securities, other Awards or other
property, or canceled, forfeited or suspended; (vii) determine whether, to what
extent and under what circumstances cash, Shares, other securities, other
Awards, other property and other amounts payable with respect to an Award under
the Plan shall be deferred either automatically or at the election of the holder
thereof or the Committee; (viii) interpret and administer the Plan and any
instrument or agreement relating to, or Award made under, the Plan; (ix)
establish, amend, suspend or waive such rules and regulations and appoint such
agents as it shall deem appropriate for the proper administration of the Plan;
and (x) make any other determination and take any other action that the
Committee deems necessary or desirable for the administration of the Plan.
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations and other decisions under or with respect to the
Plan or any Award shall be within the sole discretion of the Committee, may be
made at any time and shall be final, conclusive and binding upon any
Participant, any holder or beneficiary of any Award and any employee of the
Company or any Affiliate.
(b) Meetings of the Committee. The Committee shall select one
of its members as its chairman and shall hold its meetings at such times and
places as the Committee may determine. A majority of the Committee's members
shall constitute a quorum. All determinations of the Committee shall be made by
not less than a majority of its members. Any decision or determination reduced
to writing and signed by all of the members of the Committee shall be fully
effective as if it had been made by a majority vote at a meeting duly called and
held. The Committee may appoint a secretary and may make such rules and
regulations for the conduct of its business as it shall deem advisable.
SECTION 4. SHARES AVAILABLE FOR AWARDS.
(a) Shares Available. Subject to adjustment as provided in
Section 4(c), the number of Shares available for granting Awards under the Plan
shall be 5,000,000. If any Shares covered by an Award or to which an Award
relates are not purchased or are forfeited, or if an Award otherwise terminates
without delivery of any Shares, then the number of Shares counted against the
aggregate number of Shares available under the Plan with respect to such Award,
to the extent of any such forfeiture or termination, shall again be available
for granting Awards under the Plan. In addition, any Shares that are used by a
Participant as full or partial payment to the Company of the purchase price
relating to an Award, or in connection with satisfaction of tax obligations
relating to an Award in accordance with the provisions of Section 8(a) of the
Plan, shall again be available for granting Awards to Eligible Persons who are
not officers or directors of the Company for purposes of Section 16 of the
Securities Exchange Act of 1934, as amended.
(b) Accounting for Awards. For purposes of this Section 4, if
an Award entitles the holder thereof to receive or purchase Shares, the number
of Shares covered by such Award or to which such Award relates shall be counted
on the date of grant of such Award against the aggregate number of Shares
available for granting Awards under the Plan.
(c) Adjustments. In the event that the Committee (or, in the
case of grants under Section 6(h) of the Plan, the Board of Directors) shall
determine that any dividend or other distribution (whether in the form of cash,
Shares, other securities or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other
securities of the Company or other similar corporate transaction or event
affects the Shares such that an adjustment is determined by the Committee (or,
in the case of grants under Section 6(h) of the Plan, the Board of Directors) to
be appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee (or, in the case of grants under Section 6(h) of the Plan, the Board
of Directors) shall, in such manner as it may deem equitable, adjust any or all
of (i) the number and type of Shares (or other securities or other property)
which thereafter may be made the subject of Awards, (ii) the number and type of
Shares (or other securities or other property) subject to outstanding Awards and
(iii) the purchase or exercise price with respect to any Award; provided,
however, that the number of Shares covered by any Award or to which such Award
relates shall always be a whole number.
(d) Incentive Stock Options. Notwithstanding the foregoing,
the number of Shares available for granting Incentive Stock Options under the
Plan shall not exceed 3,000,000, subject to adjustment as provided in the Plan
and Section 422 or 424 of the Code or any successor provisions.
(e) Award Limitations Under the Plan. No Eligible Person may
be granted any Award or Awards, the value of which Awards are based solely on an
increase in the value of the Shares after the date of grant of such Awards, for
more than 500,000 Shares, in the aggregate, in any three calendar year period
beginning with the period commencing January 1, 1994 and ending December 31,
1996; provided, however, that such limitation shall apply only to Shares
available for granting Awards under the Plan pursuant to amendments to the Plan
submitted for stockholder approval at the Company's 1994 annual meeting of
stockholders and amendments adopted thereafter. The foregoing limitation
specifically includes the grant of any "performance-based" Awards within the
meaning of ss.162(m) of the Code.
SECTION 5. ELIGIBILITY.
Any Eligible Person, including any Eligible Person who is an
officer or director of the Company or any Affiliate, shall be eligible to be
designated a Participant; provided, however, that an Incentive Stock Option may
only be granted to full or part-time employees (which term as used herein
includes, without limitation, officers and directors who are also employees) and
an Incentive Stock Option shall not be granted to an employee of an Affiliate
unless such Affiliate is also a "subsidiary corporation" of the Company within
the meaning of Section 424(f) of the Code or any successor provision.
Non-Employee Directors shall receive Awards of Non-Qualified Stock Options as
provided in Section 6(h) of the Plan.
SECTION 6. AWARDS.
(a) Options. The Committee is hereby authorized to grant
Options to Participants with the following terms and conditions and with such
additional terms and conditions not inconsistent with the provisions of the Plan
as the Committee shall determine:
(i) Exercise Price. The purchase price per Share purchasable
under an Option shall be determined by the Committee; provided,
however, that such purchase price shall not be less than 100% of the
Fair Market Value of a Share on the date of grant of such Option.
(ii) Option Term. The term of each Option shall be fixed by
the Committee.
(iii) Time and Method of Exercise. The Committee shall
determine the time or times at which an Option may be exercised in
whole or in part and the method or methods by which, and the form or
forms (including, without limitation, cash, Shares, other securities,
other Awards or other property, or any combination thereof, having a
Fair Market Value on the exercise date equal to the relevant exercise
price) in which, payment of the exercise price with respect thereto may
be made or deemed to have been made.
(iv) Reload Options. The Committee may grant "reload"
options, separately or together with another Option, pursuant to which,
subject to the terms and conditions established by the Committee and
any applicable requirements of Rule 16b-3 or any other applicable law,
the Participant would be granted a new Option when the payment of the
exercise price of a previously granted option is made by the delivery
of shares of the Company's Common Stock owned by the Participant
pursuant to Section 6(a)(iii) hereof or the relevant provisions of
another plan of the Company, and/or when shares of the Company's Common
Stock are tendered or forfeited as payment of the amount to be withheld
under applicable income tax laws in connection with the exercise of an
option, which new Option would be an option to purchase the number of
Shares not exceeding the sum of (A) the number of shares of the
Company's Common Stock provided as consideration upon the exercise of
the previously granted option to which such "reload" option relates and
(B) the number of shares of the Company's Common Stock tendered or
forfeited as payment of the amount to be withheld under applicable
income tax laws in connection with the exercise of the option to which
such "reload" option relates. "Reload" options may be granted with
respect to options previously granted under this Plan, the First Bank
System 1987 Stock Option Plan or any other stock option plan of the
Company, and may be granted in connection with any Option granted under
this Plan at the time of such grant. Such "reload" options shall have a
per share exercise price equal to the Fair Market Value as of the date
of grant of the new Option.
(b) Stock Appreciation Rights. The Committee is hereby
authorized to grant Stock Appreciation Rights to Participants subject to the
terms of the Plan and any applicable Award Agreement. A Stock Appreciation Right
granted under the Plan shall confer on the holder thereof a right to receive
upon exercise thereof the excess of (i) the Fair Market Value of one Share on
the date of exercise (or, if the Committee shall so determine, at any time
during a specified period before or after the date of exercise) over (ii) the
grant price of the Stock Appreciation Right as specified by the Committee, which
price shall not be less than 100% of the Fair Market Value of one Share on the
date of grant of the Stock Appreciation Right. Subject to the terms of the Plan
and any applicable Award Agreement, the grant price, term, methods of exercise,
dates of exercise, methods of settlement and any other terms and conditions of
any Stock Appreciation Right shall be as determined by the Committee. The
Committee may impose such conditions or restrictions on the exercise of any
Stock Appreciation Right as it may deem appropriate.
(c) Restricted Stock and Restricted Stock Units. The Committee
is hereby authorized to grant Awards of Restricted Stock and Restricted Stock
Units to Participants with the following terms and conditions and with such
additional terms and conditions not inconsistent with the provisions of the Plan
as the Committee shall determine:
(i) Restrictions. Shares of Restricted Stock and Restricted
Stock Units shall be subject to such restrictions as the Committee may
impose (including, without limitation, any limitation on the right to
vote a Share of Restricted Stock or the right to receive any dividend
or other right or property with respect thereto), which restrictions
may lapse separately or in combination at such time or times, in such
installments or otherwise as the Committee may deem appropriate.
(ii) Stock Certificates. Any Restricted Stock granted under
the Plan shall be evidenced by issuance of a stock certificate or
certificates, which certificate or certificates shall be held by the
Company. Such certificate or certificates shall be registered in the
name of the Participant and shall bear an appropriate legend referring
to the terms, conditions and restrictions applicable to such Restricted
Stock. In the case of Restricted Stock Units, no Shares shall be
issued at the time such Awards are granted.
(iii) Forfeiture; Delivery of Shares. Except as otherwise
determined by the Committee, upon termination of employment (as
determined under criteria established by the Committee) during the
applicable restriction period, all Shares of Restricted Stock and all
Restricted Stock Units at such time subject to restriction shall be
forfeited and reacquired by the Company; provided, however, that the
Committee may, when it finds that a waiver would be in the best
interest of the Company, waive in whole or in part any or all remaining
restrictions with respect to Shares of Restricted Stock or Restricted
Stock Units. Shares representing Restricted Stock that is no longer
subject to restrictions shall be delivered to the holder thereof
promptly after the applicable restrictions lapse or are waived. Upon
the lapse or waiver of restrictions and the restricted period relating
to Restricted Stock Units evidencing the right to receive Shares, such
Shares shall be issued and delivered to the holders of the Restricted
Stock Units.
(d) Performance Awards. The Committee is hereby authorized to
grant Performance Awards to Participants subject to the terms of the Plan and
any applicable Award Agreement. A Performance Award granted under the Plan (i)
may be denominated or payable in cash, Shares (including, without limitation,
Restricted Stock), other securities, other Awards or other property and (ii)
shall confer on the holder thereof the right to receive payments, in whole or in
part, upon the achievement of such performance goals during such performance
periods as the Committee shall establish. Subject to the terms of the Plan and
any applicable Award Agreement, the performance goals to be achieved during any
performance period, the length of any performance period, the amount of any
Performance Award granted and the amount of any payment or transfer to be made
pursuant to any Performance Award shall be determined by the Committee.
(e) Dividend Equivalents. The Committee is hereby authorized
to grant to Participants Dividend Equivalents under which such Participants
shall be entitled to receive payments (in cash, Shares, other securities, other
Awards or other property as determined in the discretion of the Committee)
equivalent to the amount of cash dividends paid by the Company to holders of
Shares with respect to a number of Shares determined by the Committee. Subject
to the terms of the Plan and any applicable Award Agreement, such Dividend
Equivalents may have such terms and conditions as the Committee shall determine.
(f) Other Stock-Based Awards. The Committee is hereby
authorized to grant to Participants such other Awards that are denominated or
payable in, valued in whole or in part by reference to, or otherwise based on or
related to, Shares (including, without limitation, securities convertible into
Shares), as are deemed by the Committee to be consistent with the purpose of the
Plan; provided, however, that such grants must comply with Rule 16b-3 and
applicable law. Subject to the terms of the Plan and any applicable Award
Agreement, the Committee shall determine the terms and conditions of such
Awards. Shares or other securities delivered pursuant to a purchase right
granted under this Section 6(f) shall be purchased for such consideration, which
may be paid by such method or methods and in such form or forms (including
without limitation, cash, Shares, other securities, other Awards or other
property or any combination thereof), as the Committee shall determine, the
value of which consideration, as established by the Committee, shall not be less
than 100% of the Fair Market Value of such Shares or other securities as of the
date such purchase right is granted.
(g) General. Except as otherwise specified with respect to
Awards to Non-Employee Directors pursuant to Section 6(h) of the Plan:
(i) No Cash Consideration for Awards. Awards shall be granted
for no cash consideration or for such minimal cash consideration as may be
required by applicable law.
(ii) Awards May Be Granted Separately or Together. Awards
may, in the discretion of the Committee, be granted either alone or in
addition to, in tandem with or in substitution for any other Award or
any award granted under any plan of the Company or any Affiliate other
than the Plan. Awards granted in addition to or in tandem with other
Awards or in addition to or in tandem with awards granted under any
such other plan of the Company or any Affiliate may be granted either
at the same time as or at a different time from the grant of such other
Awards or awards.
(iii) Forms of Payment under Awards. Subject to the terms of
the Plan and of any applicable Award Agreement, payments or transfers
to be made by the Company or an Affiliate upon the grant, exercise or
payment of an Award may be made in such form or forms as the Committee
shall determine (including, without limitation, cash, Shares, other
securities, other Awards or other property or any combination thereof),
and may be made in a single payment or transfer, in installments or on
a deferred basis, in each case in accordance with rules and procedures
established by the Committee. Such rules and procedures may include,
without limitation, provisions for the payment or crediting of
reasonable interest on installment or deferred payments or the grant or
crediting of Dividend Equivalents with respect to installment or
deferred payments.
(iv) Limits on Transfer of Awards. No Award and no right
under any such Award shall be transferable by a Participant otherwise
than by will or by the laws of descent and distribution; provided,
however, that, if so determined by the Committee, a Participant may, in
the manner established by the Committee, designate a beneficiary or
beneficiaries to exercise the rights of the Participant and receive any
property distributable with respect to any Award upon the death of the
Participant. Each Award or right under any Award shall be exercisable
during the Participant's lifetime only by the Participant or, if
permissible under applicable law, by the Participant's guardian or
legal representative. No Award or right under any such Award may be
pledged, alienated, attached or otherwise encumbered, and any purported
pledge, alienation, attachment or encumbrance thereof shall be void and
unenforceable against the Company or any Affiliate.
(v) Term of Awards. The term of each Award shall be for such
period as may be determined by the Committee.
(vi) Restrictions; Securities Exchange Listing. All
certificates for Shares or other securities delivered under the Plan
pursuant to any Award or the exercise thereof shall be subject to such
stop transfer orders and other restrictions as the Committee (or, in
the case of grants under Section 6(h) of the Plan, the Board of
Directors) may deem advisable under the Plan or the rules, regulations
and other requirements of the Securities and Exchange Commission and
any applicable federal or state securities laws, and the Committee (or,
in the case of grants under Section 6(h) of the Plan, the Board of
Directors) may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions. If the
Shares or other securities are traded on a securities exchange, the
Company shall not be required to deliver any Shares or other securities
covered by an Award unless and until such Shares or other securities
have been admitted for trading on such securities exchange.
(h) Non-Qualified Stock Options to Non-Employee Directors. The
Board of Directors shall issue Non-Qualified Stock Options to Non-Employee
Directors in accordance with this Section 6(h).
Each Non-Employee Director serving on the Company's Board of
Directors immediately following the 1993 Annual Meeting of Stockholders of the
Company shall be granted, as of the date of such meeting, a Non-Qualified Stock
Option to purchase 2,500 Shares (subject to adjustment pursuant to Section 4(c)
of the Plan). Each Non-Employee Director first elected or appointed to the
Company's Board of Directors after the 1993 Annual Meeting of Stockholders and
during the term of the Plan shall be granted, as of the date of such Director's
first election or appointment to the Board of Directors, a Non-Qualified Stock
Option to purchase 2,500 Shares (subject to adjustment pursuant to Section 4(c)
of the Plan). After the initial grant to each Non-Employee Director as set forth
above in this Section 6(h), each such Director shall be granted during the term
of the Plan, as of the date of each Annual Meeting of Stockholders of the
Company, if such Director's term of office continues after such date, a
Non-Qualified Stock Option to purchase 1,000 Shares (subject to adjustment
pursuant to Section 4(c) of the Plan); provided that such number of shares shall
be increased from 1,000 Shares to 1,500 Shares (subject to adjustment pursuant
to Section 4(c) of the Plan) for any such grants occurring on or after the date
of the Company's 1995 Annual Meeting of Stockholders.
Each Non-Qualified Stock Option granted to a Non-Employee
Director pursuant to this Section 6(h) shall be exercisable in full as of the
date of grant, shall have an exercise price equal to the Fair Market Value of a
Share on the date of grant and shall expire on the tenth anniversary of the date
of grant, except as provided below. This Section 6(h) shall not be amended more
than once every six months other than to comport with changes in the Code, the
Employee Retirement Income Security Act or the rules and regulations thereunder.
Subject to the last sentence of this paragraph, and except as
hereinafter provided, each Option granted pursuant to this Section 6(h) on or
after the date of the Company's 1995 Annual Meeting of Stockholders shall
include, and all outstanding Options on the date of the Company's 1995 Annual
Meeting of Stockholders granted pursuant to this Section 6(h) shall be deemed
amended to include, a provision entitling the optionee to a further
Non-Qualified Stock Option (a "Non-Employee Director Reload Option") in the
event the optionee exercises such an Option, in whole or in part, by
surrendering other Shares in accordance with this Section 6(h) and the terms of
the Option. Any such Non-Employee Director Reload Option (i) shall be for a
number of Shares equal to the number of Shares surrendered as part or all of the
exercise price of the Option to which it relates; (ii) shall have an expiration
date which is the same as the expiration date of the Option to which it relates;
(iii) shall have an exercise price equal to the Fair Market Value of a Share on
the date of exercise of the Option to which it relates; and (iv) shall be
exercisable in full as of the date of grant. A Non-Employee Director Reload
Option may be reloaded under the same terms, provided that the original Option
to which such series of Non-Employee Director Reload Options relates may be
reloaded a maximum of three times. Non-Employee Director Reload Options shall
only be granted to a Director during such Director's term as a Non-Employee
Director. Any such Non-Employee Director Reload Option shall be subject to
availability of sufficient shares for grant under the Plan. Shares surrendered
as part or all of the exercise price of the Option to which it relates that have
been owned by the optionee less than six months will not be counted for purposes
of determining the number of Shares that may be purchased pursuant to a
Non-Employee Director Reload Option. The provisions of this paragraph shall not
become effective and shall be void unless and until receipt by the Company of an
interpretive letter from the Securities and Exchange Commission or an opinion of
counsel reasonably acceptable to the Company to the effect that the grant of
such reload options will not cause any such Non-Employee Director to lose his or
her status as a "disinterested person" under Rule 16b-3 of the Securities
Exchange Act of 1934, as amended.
All grants of Non-Qualified Stock Options pursuant to this
Section 6(h) shall be automatic and non-discretionary and shall be made strictly
in accordance with the foregoing terms and the following additional provisions:
(i) Non-Qualified Stock Options granted to a Non-Employee
Director hereunder shall terminate and may no longer be exercised if
such Director ceases to be a Non-Employee Director of the Company,
except that:
(A) If such Director's term shall be terminated for any
reason other than gross and willful misconduct, death,
disability, or retirement, such Director may at any time within a
period of three months after such termination, but not after the
termination date of the Option, exercise the Option.
(B) If such Director's term shall be terminated by reason of
gross and willful misconduct during the course of the term,
including but not limited to, wrongful appropriation of funds of
the Company or the commission of a gross misdemeanor or felony,
the Option shall be terminated as of the date of the misconduct.
(C) If such Director's term shall be terminated by reason of
disability or retirement, such Director may exercise the Option
in accordance with the terms thereof as though such termination
had never occurred. If such Director shall die following any such
termination, the Option may be exercised in accordance with its
terms by the personal representatives or administrators of such
Director or by any person or persons to whom the Option has been
transferred by will or the applicable laws of descent and
distribution.
(D) If such Director shall die while a Director of the
Company or within three months after termination of such
Director's term for any reason other than disability or
retirement or gross and willful misconduct, the Option may be
exercised in accordance with its terms by the personal
representatives or administrators of such Director or by any
person or persons to whom the Option has been transferred by will
or the applicable laws of descent and distribution.
(ii) Non-Qualified Stock Options granted to Non-Employee
Directors may be exercised in whole or in part from time to time by
serving written notice of exercise on the Company at its principal
executive offices, to the attention of the Company's Secretary. The
notice shall state the number of shares as to which the Option is being
exercised and be accompanied by payment of the purchase price. A
Non-Employee Director may, at such Director's election, pay the
purchase price by check payable to the Company, by promissory note, or
in shares of the Company's Common Stock, or in any combination thereof
having a Fair Market Value on the exercise date equal to the applicable
exercise price. If payment or partial payment is made by promissory
note, such note shall (A) be secured by the Shares to be delivered upon
exercise of such Option (other than those withheld in payment of taxes
as set forth below), (B) be limited in principal amount to the maximum
amount permitted under applicable laws, rules and regulations, (C) be
for a term of six years and (D) bear interest at the applicable federal
rate (as determined in accordance with Section 1274(d) of the Code),
compounded semi-annually.
(iii) In order to comply with all applicable federal or state
income tax laws or regulations, the Company may take such action as it
deems appropriate to ensure that all applicable federal or state
payroll, withholding, income or other taxes, which are the sole and
absolute responsibility of a Non-Employee Director, are withheld or
collected from such Director. At any time when a Non-Employee Director
is required to pay the Company an amount required to be withheld under
applicable income tax laws in connection with an Option granted
pursuant to this Section 6(h), such Director may (A) elect to have the
Company withhold a portion of the Shares otherwise to be delivered upon
exercise of such Option with a Fair Market Value equal to the amount of
such taxes (an "Election") or (B) deliver to the Company Shares other
than Shares issuable upon exercise of such Option with a Fair Market
Value equal to the amount of such taxes. An Election, if any, must be
made on or before the date that the amount of tax to be withheld is
determined. The Board of Directors may disapprove of any Election, may
suspend or terminate the right to make Elections, may limit the amount
of any Election, and may make rules concerning the required information
to be included in any Election. Non-Employee Directors may only make an
Election in compliance with the Rules established by the Company to
comply with Section 16(b) of the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
SECTION 7. AMENDMENT AND TERMINATION; ADJUSTMENTS.
Except to the extent prohibited by applicable law and unless
otherwise expressly provided in an Award Agreement or in the Plan:
(a) Amendments to the Plan. The Board of Directors of the
Company may amend, alter, suspend, discontinue or terminate the Plan; provided,
however, that, notwithstanding any other provision of the Plan or any Award
Agreement, without the approval of the stockholders of the Company, no such
amendment, alteration, suspension, discontinuation or termination shall be made
that, absent such approval:
(i) would cause Rule 16b-3 to become unavailable with
respect to the Plan;
(ii) would violate the rules or regulations of the New York
Stock Exchange, any other securities exchange or the National
Association of Securities Dealers, Inc. that are applicable to the
Company; or
(iii) would cause the Company to be unable, under the Code,
to grant Incentive Stock Options under the Plan.
(b) Amendments to Awards. Except with respect to Awards
granted pursuant to Section 6(h) of the Plan, the Committee may waive
any conditions of or rights of the Company under any outstanding Award,
prospectively or retroactively. The Committee may not amend, alter,
suspend, discontinue or terminate any outstanding Award, prospectively
or retroactively, without the consent of the Participant or holder or
beneficiary thereof, except as otherwise herein provided.
(c) Correction of Defects, Omissions and Inconsistencies. The
Committee (or, in the case of grants under Section 6(h) of the Plan,
the Board of Directors) may correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Award in the manner and
to the extent it shall deem desirable to carry the Plan into effect.
SECTION 8. INCOME TAX WITHHOLDING; TAX BONUSES.
(a) Withholding. In order to comply with all applicable
federal or state income tax laws or regulations, the Company may take such
action as it deems appropriate to ensure that all applicable federal or state
payroll, withholding, income or other taxes, which are the sole and absolute
responsibility of a Participant, are withheld or collected from such
Participant. In order to assist a Participant in paying all federal and state
taxes to be withheld or collected upon exercise or receipt of (or the lapse of
restrictions relating to) an Award, the Committee, in its discretion and subject
to such additional terms and conditions as it may adopt, may permit the
Participant to satisfy such tax obligation by (i) electing to have the Company
withhold a portion of the Shares otherwise to be delivered upon exercise or
receipt of (or the lapse of restrictions relating to) such Award with a Fair
Market Value equal to the amount of such taxes or (ii) delivering to the Company
Shares other than Shares issuable upon exercise or receipt of (or the lapse of
restrictions relating to) such Award with a Fair Market Value equal to the
amount of such taxes. The election, if any, must be made on or before the date
that the amount of tax to be withheld is determined.
(b) Tax Bonuses. The Committee, in its discretion, shall have
the authority, at the time of grant of any Award under this Plan or at any time
thereafter, to approve cash bonuses to designated Participants to be paid upon
their exercise or receipt of (or the lapse of restrictions relating to) Awards
in order to provide funds to pay all or a portion of federal and state taxes due
as a result of such exercise or receipt (or the lapse of such restrictions). The
Committee shall have full authority in its discretion to determine the amount of
any such tax bonus.
SECTION 9. GENERAL PROVISIONS.
(a) No Rights to Awards. Except as otherwise provided in
Section 6(h) of the Plan, no Eligible Person, Participant or other Person shall
have any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Eligible Persons, Participants or
holders or beneficiaries of Awards under the Plan. The terms and conditions of
Awards need not be the same with respect to different Participants.
(b) Delegation. The Committee may delegate to one or more
officers of the Company or any Affiliate or a committee of such officers the
authority, subject to such terms and limitations as the Committee shall
determine, to grant Awards to Eligible Persons who are not officers or directors
of the Company for purposes of Section 16 of the Securities Exchange Act of
1934, as amended.
(c) Award Agreements. No Participant will have rights under an
Award granted to such Participant unless and until an Award Agreement shall have
been duly executed on behalf of the Company.
(d) No Limit on Other Compensation Arrangements. Nothing
contained in the Plan shall prevent the Company or any Affiliate from adopting
or continuing in effect other or additional compensation arrangements, and such
arrangements may be either generally applicable or applicable only in specific
cases.
(e) No Right to Employment, Etc. The grant of an Award shall
not be construed as giving a Participant the right to be retained in the employ,
or as giving a Non-Employee Director the right to continue as a Director, of the
Company or any Affiliate. In addition, the Company or an Affiliate may at any
time dismiss a Participant from employment, or terminate the term of a
Non-Employee Director, free from any liability or any claim under the Plan,
unless otherwise expressly provided in the Plan or in any Award Agreement.
(f) Governing Law. The validity, construction and effect of
the Plan and any rules and regulations relating to the Plan shall be determined
in accordance with the laws of the State of Minnesota.
(g) Severability. If any provision of the Plan or any Award is
or becomes or is deemed to be invalid, illegal or unenforceable in any
jurisdiction or would disqualify the Plan or any Award under any law deemed
applicable by the Committee (or, in the case of grants under Section 6(h) of the
Plan, the Board of Directors), such provision shall be construed or deemed
amended to conform to applicable laws, or if it cannot be so construed or deemed
amended without, in the determination of the Committee (or, in the case of
grants under Section 6(h) of the Plan, the Board of Directors), materially
altering the purpose or intent of the Plan or the Award, such provision shall be
stricken as to such jurisdiction or Award, and the remainder of the Plan or any
such Award shall remain in full force and effect.
(h) No Trust or Fund Created. Neither the Plan nor any Award
shall create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a Participant or
any other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.
(i) No Franctional Shares. No fractional Shares shall be
issued or delivered pursuant to the Plan or any Award, and the Committee (or, in
the case of grants under Section 6(h) of the Plan, the Board of Directors) shall
determine whether cash shall be paid in lieu of any fractional Shares or whether
such fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.
(j) Headings. Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the construction
or interpretation of the Plan or any provision thereof.
SECTION 10. EFFECTIVE DATE OF THE PLAN.
The Plan shall be effective as of the date of its approval by
the stockholders of the Company.
SECTION 11. TERM OF THE PLAN.
Awards shall only be granted under the Plan during a 10-year
period beginning on the effective date of the Plan. However, unless otherwise
expressly provided in the Plan or in an applicable Award Agreement, any Award
theretofore granted may extend beyond the end of such 10-year period, and the
authority of the Committee provided for hereunder with respect to the Plan and
any Awards, and the authority of the Board of Directors of the Company to amend
the Plan, shall extend beyond the end of such period.
FIRST BANK SYSTEM, INC.
1995
EXECUTIVE INCENTIVE PLAN
1. ESTABLISHMENT. On February 15, 1995, the Board of Directors of FIRST BANK
SYSTEM, INC., upon recommendation by the Compensation and Human Resources
Committee of the Board of Directors, approved a 1995 executive incentive plan
for executives as described herein, which plan shall be known as the "FIRST BANK
SYSTEM, INC. 1995 EXECUTIVE INCENTIVE PLAN." This Plan shall be submitted for
approval by the stockholders of First Bank System, Inc. at the 1995 Annual
Meeting of Stockholders. This Plan shall be effective as of January 1, 1995,
subject to its approval by the stockholders, and no benefits shall be issued
pursuant thereto until after this Plan has been approved by the stockholders.
2. PURPOSE. The purpose of this Plan is to advance the interests of First Bank
System, Inc. and its stockholders by attracting and retaining key employees, and
by stimulating the efforts of such employees to contribute to the continued
success and growth of the business of the Company.
3. DEFINITIONS. When the following terms are used herein with initial capital
letters, they shall have the following meanings:
3.1. BASE SALARY - a Participant's annualized base salary, as determined by
the Committee, as of the last day of a Performance Period.
3.2. CODE - the Internal Revenue Code of 1986, as it may be amended from
time to time, and any proposed, temporary or final Treasury Regulations
promulgated thereunder.
3.3. COMMITTEE - the Compensation and Human Resources Committee of the
Board of Directors of the Company designated by such Board to administer
the Plan which shall consist of members appointed from time to time by the
Board of Directors. Each member of the Committee shall be a "disinterested
person" within the meaning of Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934 and,
following the 1996 Annual Meeting of Stockholders of the Company, an
"outside director" within the meaning of Section 162(m) of the Code.
3.4. COMPANY - First Bank System, Inc. a Delaware corporation, and any of
its subsidiaries or affiliates, whether now or hereafter established.
3.5. MAXIMUM AWARD PERCENTAGE - a percentage, which may be greater or less
than 100%, as determined by the Committee with respect to each Performance
Period and with respect to each Performance Threshold.
3.6. PARTICIPANT - any executive officer of the Company who is also an
"officer" within the meaning of Section 16(a) of the Securities Exchange
Act of 1934 and who is designated by the Committee, as provided for herein,
to participate with respect to a Performance Period as a Participant in
this Plan. Directors of the Company who are not also employees of the
Company are not eligible to participate in the Plan.
3.7. PERFORMANCE THRESHOLD - the preestablished, objective performance
goals selected by the Committee with respect to each Performance Period and
which shall be based solely on ROA .
3.8. PERFORMANCE PERIOD - each consecutive twelve-month period commencing
on January 1 of each year during the term of this Plan and coinciding with
the Company's fiscal year.
3.9. PLAN - this FIRST BANK SYSTEM, INC., 1995 EXECUTIVE INCENTIVE PLAN.
3.10. RETURN ON ASSETS OR ROA - a percentage computed as the Company's
consolidated net income for its fiscal year divided by the Company's
consolidated total average assets for such fiscal year. The Company's
Return on Assets shall be computed in accordance with generally accepted
accounting principles, as in effect from time to time, as applied by the
Company in the preparation of its financial statements included as part of
its Form 10-K, as filed with the Securities and Exchange Commission. The
Company's Return on Assets computed in accordance with the foregoing for a
fiscal year shall be adjusted to eliminate the effect of (1) changes in
generally accepted accounting principles; (2) merger related charges; and
(3) extraordinary items.
3.11. TARGET AWARD - a percentage, which may be greater or less than 100%,
as determined by the Committee with respect to each Performance Period.
4. ADMINISTRATION.
4.1. POWER AND AUTHORITY OF COMMITTEE. The Plan shall be administered by the
Committee. The Committee shall have full power and authority, subject to all the
applicable provisions of the Plan and applicable law, to (a) establish, amend,
suspend or waive such rules and regulations and appoint such agents as it deems
necessary or advisable for the proper administration of the Plan, (b) construe,
interpret and administer the Plan and any instrument or agreement relating to
the Plan, and (c) make all other determinations and take all other actions
necessary or advisable for the administration of the Plan. Unless otherwise
expressly provided in the Plan, each determination made and each action taken by
the Committee pursuant to the Plan or any instrument or agreement relating to
the Plan (x) shall be within the sole discretion of the Committee, (y) may be
made at any time and (z) shall be final, binding and conclusive for all purposes
on all persons, including, but not limited to, Participants and their legal
representatives and beneficiaries, and employees of the Company.
4.2. DETERMINATIONS MADE PRIOR TO EACH PERFORMANCE PERIOD. At any time ending
on or before the 90th day of each Performance Period, the Committee shall:
(a) designate all Participants and their Target Awards for such Performance
Period; and
(b) With respect to each Participant, establish one or more objective
Performance Thresholds (including a minimum level of achievement), based
solely on ROA, and a corresponding Maximum Award Percentage for each
Performance Threshold;
4.3. CERTIFICATION. Following the close of each Performance Period and prior
to payment of any amount to any Participant under the Plan, the Committee must
certify in writing the Company's ROA for that Performance Period (and the
corresponding Performance Thresholds) and certify as to the attainment of all
other factors upon which any payments to a Participant for that Performance
Period are to be based.
4.4. STOCKHOLDER APPROVAL. The material terms of this Plan shall be disclosed
to and approved by stockholders of the Company in accordance with Section 162(m)
of the Code. No amount shall be paid to any Participant under this Plan unless
such stockholder approval has been obtained.
5. INCENTIVE PAYMENT.
5.1. FORMULA. Each Participant shall receive a bonus payment for each
Performance Period in an amount not greater than:
(a) the Participant's Base Pay for the Performance Period, multiplied by
(b) the Participant's Target Award for the Performance Period, multiplied
by
(c) the Participant's Maximum Award Percentage for the Performance Period
that corresponds to the Performance Threshold achieved by the Company
for that Performance Period.
5.2. LIMITATIONS.
(a) MINIMUM ROA ACHIEVEMENT. In no event shall any Participant receive any
payment hereunder unless the Company's ROA for a Performance Period is at
least equal to a minimum percentage as determined by the Committee for that
Performance Period.
(b) DISCRETIONARY REDUCTION. The Committee shall retain sole and full
discretion to reduce by any amount the incentive payment otherwise payable
to any Participant under this Plan.
(c) CONTINUED EMPLOYMENT. Except as otherwise provided by the Committee, no
incentive payment under this Plan with respect to a Performance Period
shall be paid or owed to a Participant whose employment terminates prior to
the last day of such Performance Period.
(d) MAXIMUM PAYMENTS. No Participant shall receive a payment under this
Plan for any Performance Period in excess of $1.5 million.
6. BENEFIT PAYMENTS.
6.1. TIME AND FORM OF PAYMENTS. Subject to any deferred compensation election
pursuant to any such plans of the Company applicable hereto, benefits shall be
paid to the Participant in a single lump sum cash payment as soon as
administratively feasible after the Committee has certified that the Company
Performance Threshold has been attained.
6.2. NONTRANSFERABILITY. Participants and beneficiaries shall not have the
right to assign, encumber or otherwise anticipate the payments to be made under
this Plan, and the benefits provided hereunder shall not be subject to seizure
for payment of any debts or judgments against any Participant or any
beneficiary.
6.3. TAX WITHHOLDING. In order to comply with all applicable federal or
state income, social security, payroll, withholding or other tax laws or
regulations, the Committee may establish such policy or policies as it deems
appropriate with respect to such laws and regulations, including without
limitation, the establishment of policies to ensure that all applicable federal
or state income, social security, payroll, withholding or other taxes, which are
the sole and absolute responsibility of the Participant, are withheld or
collected from such Participant.
7. AMENDMENT AND TERMINATION; ADJUSTMENTS. Except to the extent prohibited by
applicable law and unless otherwise expressly provided in the Plan:
(a) AMENDMENTS TO THE PLAN. The Committee may amend this Plan prospectively
at any time and for any reason deemed sufficient by it without notice to
any person affected by this Plan and may likewise terminate or curtail the
benefits of this Plan both with regard to persons expecting to receive
benefits hereunder in the future and persons already receiving benefits at
the time of such action.
(b) CORRECTION OF DEFECTS, OMISSIONS AND INCONSISTENCIES. The Committee may
correct any defect, supply any omission or reconcile any inconsistency in
the Plan in the manner and to the extent it shall deem desirable to carry
the Plan into effect.
8. MISCELLANEOUS.
8.1. EFFECTIVE DATE. This Plan shall be deemed effective, subject to
stockholder approval, as of January 1, 1995.
8.2. HEADINGS. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
8.3. APPLICABILITY TO SUCCESSORS. This Plan shall be binding upon and inure
to the benefit of the Company and each Participant, the successors and assigns
of the Company, and the beneficiaries, personal representatives and heirs of
each Participant. If the Company becomes a party to any merger, consolidation or
reorganization, this Plan shall remain in full force and effect as an obligation
of the Company or its successors in interest.
8.4. EMPLOYMENT RIGHTS AND OTHER BENEFIT PROGRAMS. The provisions of this
Plan shall not give any Participant any right to be retained in the employment
of the Company. In the absence of any specific agreement to the contrary, this
Plan shall not affect any right of the Company, or of any affiliate of the
Company, to terminate, with or without cause, any Participant's employment at
any time. This Plan shall not replace any contract of employment, whether oral
or written, between the Company and any Participant, but shall be considered a
supplement thereto. This Plan is in addition to, and not in lieu of, any other
employee benefit plan or program in which any Participant may be or become
eligible to participate by reason of employment with the Company. No
compensation or benefit awarded to or realized by any Participant under the Plan
shall be included for the purpose of computing such Participant's compensation
under any compensation-based retirement, disability, or similar plan of the
Company unless required by law or otherwise provided by such other plan.
8.5. NO TRUST OR FUND CREATED. This Plan shall not create or be construed to
create a trust or separate fund of any kind or a fiduciary relationship between
the Company or any affiliate and a Participant or any other person. To the
extent that any person acquires a right to receive payments from the Company or
any affiliate pursuant to this Plan, such right shall be no greater than the
right of any unsecured general creditor of the Company or of any affiliate.
8.6. GOVERNING LAW. The validity, construction and effect of the Plan or any
incentive payment payable under the Plan shall be determined in accordance with
the laws of the State of Minnesota.
8.7. SEVERABILITY. If any provision of the Plan is or becomes or is deemed to
be invalid, illegal or unenforceable in any jurisdiction, such provision shall
be construed or deemed amended to conform to applicable laws, or if it cannot be
so construed or deemed amended without, in the determination of the Committee,
materially altering the purpose or intent of the Plan, such provision shall be
stricken as to such jurisdiction, and the remainder of the Plan shall remain in
full force and effect.
8.8. QUALIFIED PERFORMANCE-BASED COMPENSATION. All of the terms and
conditions of the Plan shall be interpreted in such a fashion as to qualify all
compensation paid hereunder as "qualified performance-based compensation" within
the meaning of Section 162(m) of the Code.
FIRST BANK SYSTEM, INC.
NONQUALIFIED SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN
Effective January 1, 1992
And
As Amended By
The FIRST AMENDMENT Adopted October 21, 1991
But Effective January 1, 1992
The SECOND AMENDMENT Adopted January 20, 1993
But Effective January 1, 1992
The THIRD AMENDMENT Adopted January 18, 1995
But Effective January 1, 1992 and January 1, 1995
FIRST BANK SYSTEM, INC.
NONQUALIFIED SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN
Effective January 1, 1992
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. INTRODUCTION ............................................................................ 1
1.1. History
1.2. Definitions
1.2.1. Accrual Percentage
1.2.2. Accrued SERP Benefit
1.2.3. Actuarial Equivalent
1.2.4. Affiliate
1.2.5. Average Compensation
1.2.6. Beneficiary
1.2.7. CAP
1.2.8. Change in Control
1.2.9. Compensation
1.2.10. Effective Date
1.2.11. Employer
1.2.12. FBS
1.2.13. Normal Retirement Age
1.2.14. Organization Committee
1.2.15. Participant
1.2.16. Plan
1.2.17. Plan Statement
1.2.18. PRA
1.2.19. Principal Sponsor
1.2.20. Prior Plans' Offset
1.2.21. Projected Average Compensation
1.2.22. Projected Compensation
1.2.23. Projected PIA
1.2.24. Projected PRA Account
1.2.25. Projected PRA Annuity
1.2.26. SERP Benefit
1.2.27. Service
1.2.28. Social Security Benefit
1.2.29. Survivor Benefit
1.2.30. Termination of Employment
1.3. Rules of Interpretation
SECTION 2. ELIGIBILITY AND PARTICIPATION ........................................................... 8
2.1. General Eligibility Rule
2.2. Specific Exclusion
SECTION 3. PARTICIPANT'S BENEFIT ................................................................... 9
3.1. SERP Benefit
3.2. Suspension of Benefits
3.3. Change in Control Distributions
3.3.1. Accelerated Determination of Participant Status
3.3.2. Accelerated Payment Upon Request
3.3.3. Forfeitures
3.4. Other Accelerated Distributions
3.4.1. When Available
3.4.2. Amount
3.4.3. Forfeitures
3.5. Effect on Service
SECTION 4. FORM OF PAYMENT ......................................................................... 12
4.1. Optional Forms of Payment
4.2. Payments in Case of Incompetency or Disability
4.3. Small Benefits
SECTION 5. DEATH BENEFITS .......................................................................... 13
5.1. Death Benefits
5.1.1. Death Before SERP Benefit Commencement
5.1.2. Death After SERP Benefit Commencement
5.2. Designation of Beneficiaries
5.2.1. Right to Designate
5.2.2. Failure of Designation
5.2.3. Disclaimers by Beneficiaries
5.2.4. Definitions
5.2.5. Special Rules
5.2.6. No Spousal Rights
5.3. Death Prior to Full Distribution
SECTION 6. FUNDING OF PLAN ......................................................................... 16
6.1. Unfunded Agreement
6.2. Spendthrift Provision
SECTION 7. AMENDMENT AND TERMINATION ............................................................... 17
SECTION 8. DETERMINATIONS - RULES AND REGULATIONS .................................................. 18
8.1. Determinations
8.2. Rules and Regulations
8.3. Method of Executing Instruments
8.4. Claims Procedure
8.4.1. Original Claim
8.4.2. Claims Review Procedure
8.4.3. General Rules
8.5. Information Furnished by Participants
SECTION 9. PLAN ADMINISTRATION ..................................................................... 20
9.1. Principal Sponsor
9.1.1. Officers
9.1.2. Chief Executive Officer
9.1.3. Board of Directors
9.2. Conflict of Interest
9.3. Administrator
9.4. Service of Process
9.5. IRC and ERISA Status
SECTION 10. DISCLAIMERS ............................................................................. 22
10.1. Term of Employment
10.2. Source of Payment
10.3. Delegation
SCHEDULE I..................................................................................................... SI-1
SCHEDULE II.................................................................................................... SII-1
APPENDIX A - ACTUARIALLY EQUIVALENT BENEFITS .................................................................. A-1
</TABLE>
FIRST BANK SYSTEM, INC.
NONQUALIFIED SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN
SECTION 1
INTRODUCTION
1.1. HISTORY. First Bank System, Inc., a Delaware corporation (hereinafter
"Principal Sponsor") and certain subsidiaries of the Principal Sponsor have
heretofore adopted and currently maintain a tax qualified defined benefit ("cash
balance") pension plan known as the "First Bank System, Inc. Personal Retirement
Account" (hereinafter "PRA") and a tax qualified defined contribution profit
sharing plan (including a qualified cash or deferred arrangement, sometimes
called a ss.401(k) feature) known as the First Bank System, Inc. Capital
Accumulation Plan (hereinafter "CAP") for the purpose of developing retirement
benefits for employees. PRA and CAP are subject to the Employee Retirement
Income Security Act of 1974, as amended (hereinafter "ERISA") and they are
intended to qualify under section 401(a) of the Internal Revenue Code of 1954,
as amended (hereinafter "Code").
By operation of section 401(a) of the Code, benefits which may be
paid under PRA are restricted so that they do not exceed certain maximum
limitations established under section 415 of the Code. For benefits accruing
under PRA during plan years beginning after December 31, 1988, the maximum
amount of annual compensation which may be taken into account for any employee
may not exceed a fixed dollar amount which is established under section
401(a)(17) of the Code. Regulations issued under section 401(a)(4) of the Code
limit the amounts and types of remuneration that can be taken into account under
PRA without engaging in discrimination in favor of highly compensated employees
which is prohibited for tax qualified plans under the Code.
ERISA authorizes the establishment of an unfunded, nonqualified plan
of deferred compensation maintained by an employer solely for the purpose of
providing benefits for employees which are in excess of the limitations on
benefits imposed on qualified defined benefit plans by section 415 of the Code.
ERISA also authorizes the establishment of an unfunded, nonqualified plan
maintained primarily for the purpose of providing deferred compensation for a
select group of management or highly compensated employees. To make provision
for such benefits, effective January 1, 1984, the Principal Sponsor adopted the
"First Bank System, Inc. Excess Benefit Plan" to provide benefits not otherwise
available under PRA. Effective January 1, 1989, that Plan was amended and
restated by the adoption of the "First Bank System, Inc. Excess Benefit Plan
(1989 Restatement)."
It is in the interest of this corporation to provide benefits to
certain executive employees in excess of those available under PRA, to provide
the full allocations for those certain employees under PRA without regard to the
limitations on benefits imposed by section 415, 401(a)(17) and 401(a)(4) of the
Code, to coordinate the benefits provided to them under PRA and the Excess Plan
and that an unfunded nonqualified deferred compensation plan be maintained for
those purposes.
Therefore, this corporation does hereby establish this Plan, the
terms and conditions of which are as follows.
1.2. DEFINITIONS. Words used herein with initial capital letters which are also
defined in Section 1 of PRA shall have the meanings assigned in PRA unless a
contrary intention is expressed herein. When used herein with initial capital
letters, the following words have the following meanings:
1.2.1. ACCRUAL PERCENTAGE - a number not greater than one (expressed
as either a decimal or a percentage) determined as of a specified date which is
equal to (a) divided by (b) divided by (c):
(a) Fifty-five percent (55%) of the Participant's Projected Average
Compensation determined as of such specified date, minus the total of:
(i) The Participant's Projected PRA Annuity
determined as of such specified date, and
(ii) Seventy-five percent (75%) of the
Participant's Projected PIA determined as of
such specified date, and
(iii) The Participant's Prior Plans' Offset
determined as of such specified date.
(b) The Participant's Projected Average Compensation determined as of
such specified date.
(c) The number (never less than one) of total possible years of
continuous and full time service with the Employer which the Participant could
have completed from his or her most recent date of hire to his or her Normal
Retirement Age. To the same extent that the Organization Committee determines
under Section 1.2.11 of the Plan Statement that a business entity was an
Employer prior to the date on which the business entity first became an
Employer, the business entity shall be considered an Employer for the purposes
of this subparagraph.
The Accrual Percentage may decrease from time to time.
1.2.2. ACCRUED SERP BENEFIT - a dollar amount determined as of a
specified date which is equal to the product of (a) multiplied by (b) multiplied
by (c):
(a) The Participant's Accrual Percentage determined as of such
specified date.
(b) The Participant's Average Compensation determined as of such
specified date.
(c) The number (which may be less than one, but may not exceed the
number of years determined under Section 1.2.1(c)) of total years
of continuous and full-time service with the Employer which the
Participant has completed from his or her most recent date of
hire to the date the Accrued SERP Benefit is determined;
provided, however, that a Participant may receive credit for
additional years of service, solely for purposes of this Section
1.2.2(c), under subparagraph (i), (ii) or (iii) below, but not
under more than one subparagraph:
(i) If a Participant attains age 60 while employed by an
Employer, five additional years of service shall be
added to the years of continuous and full-time service
of such Participant.
(ii) If a Participant is entitled to receive severance
payments under a severance pay plan maintained by an
Employer and such payments are made on account of a
Change in Control, there shall be included within the
years of continuous and full-time service of such
Participant the number of years and fractions of years
of such payments (even if such payments are paid in a
lump sum or other accelerated manner).
(iii) A Participant who terminates employment shall be
credited with additional years of service to the extent
such credit is expressly provided under the terms of an
employment agreement or a change in control severance
plan or agreement between the Participant and an
Employer.
The Accrued SERP Benefit may decrease from time to time. To the same extent that
the Organization Committee determines under Section 1.2.11 of the Plan Statement
that a business entity was an Employer prior to the date on which the business
entity first became an Employer, the business entity shall be considered an
Employer for the purposes of this subparagraph.
1.2.3. ACTUARIAL EQUIVALENT - a benefit of equivalent value computed
on the basis of actuarial tables, factors and assumptions set forth in the
Appendix A to this Plan Statement.
1.2.4. AFFILIATE - a business entity which is affiliated in ownership
with the Principal Sponsor or an Employer and is recognized as an Affiliate by
the Principal Sponsor for the purposes of this Plan.
1.2.5. AVERAGE COMPENSATION - a dollar amount which is the annual
average of the Participant's Compensation for each of the thirty-six (36)
calendar months ending with the last day of the calendar month immediately
before the date the Average Compensation is determined. Average Compensation may
decrease from time to time. For this purpose, short term annual incentive
compensation which has been determined in fact by the Employer before the date
as of which the Average Compensation is determined shall be treated as if paid
in fact before such event. If it is not so determined before such date, it shall
be wholly disregarded for the purposes of this Plan. For this purpose, short
term annual incentive compensation, although paid less frequently, shall be
evenly allocated to the calendar months with respect to which it is paid.
Notwithstanding anything apparently to the contrary, in determining Average
Compensation, there shall be taken into account the short term annual incentive
compensation attributable to the thirty-six (36) calendar months preceding the
date as of which the Average Compensation is determined or, if it would produce
a greater Average Compensation, the short term annual incentive compensation
attributable to the thirty-six (36) calendar months ending with the December 31
preceding the date as of which the Average Compensation is determined.
1.2.6. BENEFICIARY - a person designated by a Participant (or
automatically by operation of this Plan Statement) to receive the Survivor
Benefit in the event of the Participant's death under circumstances when such
benefit is payable under Section 5. A person so designated shall not be
considered a Beneficiary until the death of the Participant.
1.2.7. CAP - the tax-qualified defined contribution ("ss.401(k)")
profit sharing plan known as the FIRST BANK SYSTEM, INC. CAPITAL ACCUMULATION
PLAN, as the same is existing and may be amended from time to time.
1.2.8. CHANGE IN CONTROL - an event defined as a Change in Control in
the form of nonqualified stock option agreement adopted by the Organization
Committee of the Board of Directors under the "First Bank System, Inc. 1991
Stock Incentive Plan" or any comparable successor plan most recently before such
event. FBS shall determine the date on which a Change in Control has occurred.
1.2.9. COMPENSATION - a dollar amount which is the annual amount of
base salary and short term annual incentive compensation paid to the Participant
for services rendered as an employee of the Employer. Compensation may decrease
from time to time.
(a) CAP INCOME. Compensation shall include amounts which the
Participant would have received and would have been included as
Compensation but for section 402(a)(8) of the Code.
(b) CAFETERIA PLAN CONTRIBUTIONS. Compensation shall include amounts
which the Participant would have received and which would have
been included as Compensation but for section 125 of the Code.
(c) DEFERRED COMPENSATION. Notwithstanding the foregoing,
Compensation shall include amounts of base salary and short term
annual incentive compensation which were deferred at the election
of the Participant or otherwise under a nonqualified plan of
deferred compensation at the time such amounts would have been
paid but for such election to defer and not at the time actually
received by the Participant.
1.2.10. EFFECTIVE DATE - January 1, 1992.
1.2.11. EMPLOYER - the Principal Sponsor and any business entity
affiliated with the Principal Sponsor that employs persons who are designated
for participation in this Plan. Unless the Organization Committee determines
otherwise, no business entity shall be considered an Employer for any period of
time prior to the date on which the business entity first became an Employer.
1.2.12. FBS-FIRST BANK SYSTEM, INC., a Delaware corporation.
1.2.13. NORMAL RETIREMENT AGE - a date determined as of a
specified date:
(a) for a Participant who is not yet age sixty-five (65) years as of
the specified date, the last day of the calendar month in which
the Participant will attain age sixty-five (65) years, or
(b) for a Participant who is age sixty-five (65) years or older as of
the specified date, the last day of the calendar month
immediately preceding the date as of which the Normal Retirement
Age is being determined.
1.2.14. ORGANIZATION COMMITTEE - the committee of that name
constituted by the Board of Directors of the Principal Sponsor.
1.2.15. PARTICIPANT - an employee of an Employer who becomes a
Participant in the Plan in accordance with the provisions of Section 2. An
employee who has become a Participant shall be considered to continue as a
Participant in the Plan until the date of the Participant's death or, if
earlier, the date when the Participant is no longer employed by an Employer and
upon which the Participant no longer has any SERP Benefit under the Plan (that
is, the Participant has received a distribution of all of the Participant's SERP
Benefit or the Participant's SERP Benefit has been forfeited).
1.2.16. PLAN - the nonqualified deferred compensation plan of the
Employer established for the benefit of employees eligible to participate
therein, as first set forth in this Plan Statement. (As used herein, "Plan"
refers to the legal entity established by an Employer and not to the document
pursuant to which the Plan is maintained. That document is referred to herein as
the "Plan Statement.") The Plan shall be referred to as the "FIRST BANK SYSTEM,
INC. NONQUALIFIED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN."
1.2.17. PLAN STATEMENT - this document entitled "FIRST BANK SYSTEM,
INC. NONQUALIFIED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN," as adopted by the
Principal Sponsor effective as of January 1, 1992, as the same may be amended
from time to time thereafter.
1.2.18. PRA - the tax-qualified defined benefit ("cash balance")
pension plan known as the FIRST BANK SYSTEM, INC. PERSONAL RETIREMENT ACCOUNT,
as the same is existing and amended from time to time.
1.2.19. PRINCIPAL SPONSOR - FIRST BANK SYSTEM, INC., a Delaware
corporation.
1.2.20. PRIOR PLANS' OFFSET - a dollar amount equal to the product of
the Participant's Projected Average Compensation multiplied by the factor for
that Participant determined from Schedule II to this Plan Statement. The factor
for the participant shall be determined by reference to the Participant's age at
his or her most recent date of hire by the Employer. To the same extent that the
Organization Committee determines under Section 1.2.11 of the Plan Statement
that a business entity was an Employer prior to the date on which the business
entity first became an Employer, the business entity shall be considered an
Employer for the purposes of this paragraph.
1.2.21. PROJECTED AVERAGE COMPENSATION - a dollar amount which is the
average of the Participant's Compensation or Projected Compensation or both for
each of the three (3) calendar years ending with:
(a) if the date as of which the Projected Average Compensation is
determined is before the Participant's Normal Retirement Age, the
calendar year in which the Participant would attain Normal
Retirement Age, or
(b) if the date as of which the Projected Average Compensation is
determined is on or after the Participant's Normal Retirement
Age, the Plan Year in which the Participant's SERP Benefit is
determined.
Projected Average Compensation may decrease from time to time.
1.2.22. PROJECTED COMPENSATION - a separate dollar amount determined
for each Plan Year commencing after the date as of which Projected Compensation
is determined, assuming:
(a) the Participant continues to earn short-term incentive payments
at the target levels, and
(b) the annual rate of the Participant's Compensation as of the first
day of the Plan Year in which it is determined increased at four
percent (4%) per annum, compounded annually, on the first day of
each successive Plan Year.
Projected Compensation may decrease from time to time.
1.2.23. PROJECTED PIA - the dollar amount of annual old age Social
Security benefit expected to be paid to the Participant at the Participant's
Normal Retirement Age, assuming:
(a) that the Participant has had and continues to have taxable wages
at or above the taxable wage base for Social Security purposes,
(b) that the maximum Social Security taxable wage base increases at
the rate at which Projected Compensation is deemed to increase
under this Plan Statement,
(c) that the consumer price index increases at one percentage point
less than the rate at which Projected Compensation is deemed to
increase under this Plan Statement.
1.2.24. PROJECTED PRA ACCOUNT - a dollar amount equal to the Account
balance the Participant would be expected to have under PRA at his or her Normal
Retirement Age based on the following assumptions:
(a) The initial account balance shall be the balance determined under
PRA as of the last day of the Plan Year immediately preceding the
date as of which the Projected PRA Account is determined
(together with such amounts as would have been included in such
balance if there were no limitations on benefits under section
415 of the Internal Revenue Code and no limitations on
compensation under section 401(a)(17) of the Internal Revenue
Code).
(b) The Participant shall receive increases in recognized
compensation at the rate Projected Compensation is deemed to
increase under this Plan Statement.
(c) Compensation credits under PRA shall be made under the terms of
PRA as they exist on the last day of the Plan Year immediately
preceding the date as of which the Projected PRA Account is
determined.
(d) Interest credits under PRA shall be made at an annual rate that
is 3 percentage points greater than the rate at which Projected
Compensation is deemed to increase under this Plan Statement.
(e) Compensation credits and interest credits under PRA have been and
shall be made as if there were no limitations on benefits under
section 415 of the Internal Revenue Code and no limitations on
compensation under section 401(a)(17) of the Internal Revenue
Code.
(f) Subject to the following, the Participant's initial account
balance shall not include any amounts attributable to service
with a business entity prior to the date the business entity
first became an Employer. To the same extent that the
Organization Committee determines under Section 1.2.11 of the
Plan Statement that a business entity was an Employer prior to
the date on which the business entity first became an Employer,
amounts attributable to service with the business entity shall be
included in the Participant's initial account balance.
(g) Projected PRA Account may decrease from time to time.
1.2.25. PROJECTED PRA ANNUITY - a dollar amount equal to the
Actuarial Equivalent amount of single life annuity payable at Normal Retirement
Age which the Projected PRA Account will produce.
1.2.26. SERP BENEFIT - a single, lump sum, dollar amount which is
equal to the Actuarial Equivalent present value of the Participant's Accrued
SERP Benefit payable as a single life annuity commencing at the Participant's
Normal Retirement Age. The SERP Benefit may decrease from time to time. The SERP
Benefit may be paid in any of the optional forms of payment which are permitted
under Section 4.1.
1.2.27. SERVICE - a measure of an employee's service with all
Employers and all Affiliates (stated as a number of years) which is equal to the
number of years of "Vesting Service" determined under the rules of PRA (or any
similar successor plan) as those rules may exist at the time the Participant's
Service is being determined. For this purpose, however, there shall be taken
into account only years of continuous and full time service with the Employer
which the Participant has completed from his or her most recent date of hire.
Unless the Organization Committee determines otherwise, service with an employer
prior to the date on which the employer first became an Employer shall not be
taken into account for this purpose. Any determination by the Organization
Committee under this Section 1.2.27 shall be independent of any determination by
the Organization Committee under Section 1.2.11 of the Plan Statement.
1.2.28. SOCIAL SECURITY BENEFIT - the approximate monthly amount
available for the benefit of the Participant at age sixty-five (65) years,
(including amounts available for spouses but excluding amounts available for
other dependents), as an old age or disability insurance benefit under the
provisions of Title II of the Federal Social Security Act in effect on the date
of the Participant's Termination of Employment (or his or her sixty-fifth
birthday if the Termination of Employment is later than the sixty-fifth
birthday) whether or not payment of such amount in delayed, suspended or
forfeited because of failure to apply, accepting other work, or any other
similar reason within the control of the Participant (and determined without any
increases in cost of living, legislated changes or any other similar factors).
For this purpose, the Participant's spouse, if any, shall be deemed to be the
same age as the Participant. Unless the Participant shall have furnished
verified proof of wages before the earlier of his or her Termination of
Employment or death, he or she shall be deemed to have had taxable wages at or
above the taxable wage base in all years prior to the year of his or her
Termination of Employment or death. The determination by the Principal Sponsor
of the Social Security Benefit shall be final and binding upon all parties
interested in this Plan.
1.2.29. SURVIVOR BENEFIT - the lump sum benefit or single life
annuity payable to the Beneficiary of a deceased Participant pursuant to
Section 5.1.
1.2.30. TERMINATION OF EMPLOYMENT - a complete severance of an
employee's employment relationship with the Principal Sponsor, all Employers and
all Affiliates, if any, for any reason other than the employee's death. A
transfer from employment with an Employer to employment with an Affiliate of an
Employer shall not constitute a Termination of Employment. If an Employer who is
an Affiliate ceases to be an Affiliate because of a sale of substantially all
the stock or assets of an Employer, then Participants who are employed by that
Employer and who cease to be employed by the Principal Sponsor or that Employer
on account of the sale of substantially all the stock or assets of that Employer
shall be deemed to have thereby had a Termination of Employment for the purpose
of making distributions from this Plan.
1.3. RULES OF INTERPRETATION. An individual shall be considered to have attained
a given age on the individual's birthday for that age (and not on the day
before). The birthday of any individual born on a February 29 shall be deemed to
be February 28 in any year that is not a leap year. Notwithstanding any other
provision of this Plan Statement or any election or designation made under the
Plan, any individual who feloniously and intentionally kills a Participant shall
be deemed for all purposes of this Plan and all elections and designations made
under this Plan to have died before such Participant. A final judgment of
conviction of felonious and intentional killing is conclusive for the purposes
of this Section. In the absence of a conviction of felonious and intentional
killing, the Principal Sponsor shall determine whether the killing was felonious
and intentional for the purposes of this Section. Whenever appropriate, words
used herein in the singular may be read in the plural, or words used herein in
the plural may be read in the singular; the masculine may include the feminine;
and the words "hereof," "herein" or "hereunder" or other similar compounds of
the word "here" shall mean and refer to the entire Plan Statement and not to any
particular paragraph or Section of this Plan Statement unless the context
clearly indicates to the contrary. The titles given to the various Sections of
this Plan Statement are inserted for convenience of reference only and are not
part of this Plan Statement, and they shall not be considered in determining the
purpose, meaning or intent of any provision hereof. Any reference in this Plan
Statement to a statute or regulation shall be considered also to mean and refer
to any subsequent amendment or replacement of that statute or regulation. This
instrument has been executed and delivered in the State of Minnesota and has
been drawn in conformity to the laws of that State and shall, except to the
extent that federal law is controlling, be construed and enforced in accordance
with the laws of the State of Minnesota.
SECTION 2
ELIGIBILITY AND PARTICIPATION
2.1. GENERAL ELIGIBILITY RULE. The status of an employee as a Participant in
this Plan shall be determined only as of Termination of Employment or death.
Each employee who:
(a) has not less than five (5) years of Service with FIRST BANK
SYSTEM, INC. and its subsidiaries at Termination of Employment or
death; and
(b) was actively employed at Grade 18 or above for at least one year
immediately prior to Termination of Employment or death; and
(c) is a "highly compensated employee" as defined in Code section
414(q) at the time of Termination of Employment or death; and
(d) was actively employed by an Employer on or after January 1, 1992,
shall be a Participant in this Plan at his or her Termination of Employment or
death (subject to Section 2.2 and all other rules of this Plan Statement).
Notwithstanding the foregoing, the Chief Executive Officer of the Principal
Sponsor may exclude any individual who would otherwise be Participant from being
a Participant and such determination shall be effective if such person receives
notice of such determination in writing before his or her Termination of
Employment.
2.2. SPECIFIC EXCLUSION. Notwithstanding anything apparently to the contrary in
this Plan or in any written communication, summary, resolution or document or
oral communication, no individual shall be a Participant in this Plan, develop
benefits under this Plan or be entitled to receive benefits under this Plan
(either for himself or his or her survivors) unless such individual is a member
of a select group of management or highly compensated employees (as that
expression is used in ERISA). If a court of competent jurisdiction, any
representative of the U.S. Department of Labor or any other governmental,
regulatory or similar body makes any direct or indirect, formal or informal,
determination that an individual is not a member of a select group of management
or highly compensated employees (as that expression is used in ERISA), such
individual shall not be (and shall not have ever been) a Participant in this
Plan at any time. If any person not so defined has been erroneously treated as a
Participant in this Plan, upon discovery of such error such person's erroneous
participation shall immediately terminate ab initio and upon demand such person
shall be obligated to reimburse the Principal Sponsor for all amounts
erroneously paid to him or her.
SECTION 3
PARTICIPANT'S BENEFIT
3.1. SERP BENEFIT. Upon Termination of Employment, the Participant shall receive
a SERP Benefit determined as of the date of the Termination of Employment. The
SERP Benefit shall be paid in a single lump sum unless an election of an
optional form of payment is in effect under Section 4.1. Payment shall be made
or commenced as soon as may be practicable on or after the fifteenth day of the
second calendar month following Termination of Employment. Such payment shall be
in full and complete discharge of all benefits payable to, or with respect to,
the Participant under this Agreement including, but not limited to, any Survivor
Benefit to which his or her Beneficiary might otherwise have been entitled. The
consent of a spouse or Beneficiary shall not be required before making the
single lump sum payment or optional form of payment herein described.
3.2. SUSPENSION OF BENEFITS. The SERP Benefit shall not be paid during
employment, reemployment or continued employment under rules adopted by the
Principal Sponsor. Until such rules are adopted, the suspension of benefits
rules of PRA shall apply.
3.3. CHANGE IN CONTROL DISTRIBUTIONS.
3.3.1. ACCELERATED DETERMINATION OF PARTICIPANT STATUS.
Notwithstanding anything apparently to the contrary in this Plan Statement, upon
the occurrence of a Change in Control all employees who would be considered
Participants if they had a Termination of Employment on the date of the Change
in Control shall be considered Participants. This determination shall be made
without regard to whether such employees have five (5) or more years of Service
with FIRST BANK SYSTEM, INC. and its subsidiaries at the date of such Change in
Control.
3.3.2. ACCELERATED PAYMENT UPON REQUEST. A Participant who has not
yet commenced to receive payments of the SERP Benefit may receive a distribution
of his or her entire SERP Benefit (after reduction for the forfeiture described
in Section 3.4.3) if a Change in Control has occurred.
3.3.3. FORFEITURES. Upon the approval of a Change in Control
distribution, there shall be irrevocably forfeited from the SERP Benefit of the
Participant an amount equal to five percent (5%) of the SERP Benefit. A
Participant receiving this distribution of the SERP Benefit on account of a
Change in Control shall not thereafter ever be a Participant in the Plan again.
3.4. OTHER ACCELERATED DISTRIBUTIONS.
3.4.1. WHEN AVAILABLE. At any time following the Participant's
Termination of Employment, the Participant or the Beneficiary of a deceased
Participant who has elected an optional form of payment under Section 4.1 may
elect to receive an accelerated distribution of the SERP Benefit in a lump sum
payment determined under this Section 3.4 payable sixty (60) days after giving
the Principal Sponsor written notice of the election on a form furnished by and
filed with the Principal Sponsor.
In the event of the severe financial hardship of a Participant
following Termination of Employment or of a Beneficiary, the Participant or
Beneficiary may elect to receive an accelerated distribution of part of the SERP
benefit in a lump sum payment determined under this Section 3.4. The Principal
Sponsor shall determine whether a severe financial hardship exists in its sole
discretion, in good faith, and on a uniform, nondiscriminatory and reasonable
basis.
3.4.2. AMOUNT. Subject to penalties under Section 3.4.3, the amount
of any accelerated lump sum distribution shall be determined as follows:
(a) Before the commencement of payment of the SERP Benefit, the lump
sum payment to a Participant shall equal the lump sum value of
the Participant's Accrued SERP Benefit.
(b) After the commencement of payment of the SERP Benefit, the lump
sum payment to a Participant shall equal the difference between
(i) minus (ii) below, determined as of the date for the
commencement of SERP Benefit payments (the "Commencement Date")
and accumulated to the date of the lump sum payment using the
same interest rate that is used in calculating the amounts under
(i) and (ii):
(i) The lump sum value of the Participant's Accrued SERP
Benefit determined as of the Participant's Commencement
Date,
(ii) The lump sum value of the SERP Benefit payments
previously paid to the Participant discounted to the
Participant's Commencement Date. The lump sum value of
the SERP Benefit payments previously paid to the
Participant shall be calculated based on the monthly
payments which would have been made if the Participant
had elected to receive the SERP Benefit as a single
life annuity, irrespective of the optional form of
payment of the SERP Benefit actually elected by the
Participant.
(c) The lump sum payment to a Beneficiary of a deceased Participant
shall be determined in a manner similar to that used for a
Participant, except that the lump sum payment shall only reflect
the value of the remaining payments of the SERP Benefit which
would be made to the Beneficiary under the optional form of
payment elected by the Participant assuming that the Beneficiary
dies upon reaching his or her original life expectancy determined
as of the Participant's Commencement Date.
(d) For an accelerated distribution to a Participant or Beneficiary
on account of a severe financial hardship, the lump sum payment
shall not exceed the amount necessary to relieve the hardship,
and subsequent payments of the SERP Benefit shall be reduced
according to the ratio of (i) to (ii) below:
(i) The amount of the hardship distribution paid to the
Participant or Beneficiary,
(ii) The entire lump sum payment which the Participant or
Beneficiary could have elected to receive on the date of the
hardship distribution.
For example, if the hardship distribution represents
forty percent (40%) of the entire lump sum distribution which could have been
received, subsequent payments to the Participant or Beneficiary will each be
reduced by forty percent (40%).
(e) All calculations under this Section 3.4. shall be based on the
tables, factors (including interest rate), and assumptions that
are set forth in Appendix A to this Plan Statement for
determining Actuarially Equivalent benefits.
(f) All calculations under this Section 3.4 shall be made by the
Principal Sponsor, and its determinations with respect to
accelerated distributions shall be final and binding on all
parties.
3.4.3. FORFEITURES. Any lump sum payment under this Section 3.4,
except any hardship distribution, shall be reduced by a penalty equal to ten
percent (10%) of such payment which shall be forfeited to the Principal Sponsor;
provided, however, that if any such payment is made within 24 months after a
Change in Control has occurred, the penalty shall be equal to five percent (5%).
Notwithstanding any other provisions of this Plan, no penalty shall apply if the
Principal Sponsor determines, based on the advice of counsel or a final
determination by the Internal Revenue Service or any court of competent
jurisdiction, that by reason of the elective provisions of this Section 3.4, any
Participant or Beneficiary has recognized or will recognize gross income for
federal income tax purposes under this Plan in advance of payment to him or her
of the SERP Benefit. The Principal Sponsor may also reduce or eliminate the
penalty if it determines that this action will not cause any Participant or
Beneficiary to recognize gross income for federal income tax purposes under this
Plan in advance of payment of the SERP Benefit.
3.5. EFFECT ON SERVICE. If a Participant receives a lump sum distribution or
commences to receive any optional form of payment of the Participant's SERP
Benefit, the Plan shall thereafter disregard the Participant's Service and the
Participant's years of continuous and full-time service used in determining the
SERP Benefit with respect to which the Participant received or commenced to
receive such distribution.
SECTION 4
FORM OF PAYMENT
4.1. OPTIONAL FORMS OF PAYMENT. An employee who has four (4) or more years of
Service with FIRST BANK SYSTEM, INC., is actively employed at Grade 18 or above,
and is a "highly compensated employee" as defined in Code section 414(q) may
elect at any time more than 12 months preceding Termination of Employment to
have the SERP Benefit paid in monthly payments as a single life annuity, 50% or
100% joint and survivor annuity, or single life annuity with 10 or 15 year
certain payments. All optional forms of payment shall have the same Actuarial
Equivalent present value as the lump sum payment. An election of an optional
form of payment must be made by the Participant in writing on a form furnished
by and filed with the Principal Sponsor and may be changed at any time more than
12 months preceding Termination of Employment. Any election which is not timely
made will be disregarded. Notwithstanding such an election, an optional form of
payment of the SERP Benefit (other than a lump sum payment) will only be made to
a Participant who has a Termination of Employment (A) after attaining age 65 or
(B) after attaining age 55, when the sum of the Participant's age and years of
continuous and full-time service with the Employer equals or exceeds 65.
4.2. PAYMENTS IN CASE OF INCOMPETENCY OR DISABILITY. In case of legal
incompetency or disability, (including minority), of a person entitled to
receive any payment under this Plan, payment may be made, if the Principal
Sponsor has been advised of the existence of such condition:
(a) to the duly appointed guardian, conservator or other legal
representative of such incompetent or disabled person; or
(b) to a person or institution entrusted with the care or maintenance
of the incompetent or disabled person, provided such person or
institution has satisfied the Principal Sponsor that the payment
will be used for the best interest and assist in the care of such
disabled or incompetent person or, provided further, that no
prior claim for said payment has been made by a duly appointed
guardian, conservator or other legal representative of such
disabled or incompetent person.
Any payment made in accordance with this Section shall constitute a complete
discharge of any liability or obligation of this Plan, the Principal Sponsor and
all Employers therefor.
4.3. SMALL BENEFITS. Notwithstanding any other provision of this Plan Statement
to the contrary, the Principal Sponsor, in its discretion, may pay any benefit
which is payable under the Plan to a Participant or Beneficiary in a lump sum
payment if the lump sum amount which is payable is less than $50,000.
SECTION 5
DEATH BENEFITS
5.1. DEATH BENEFITS.
5.1.1. DEATH BEFORE SERP BENEFIT COMMENCEMENT. Upon the death of a
Participant who at his or her death had not yet commenced to receive payment of
the SERP Benefit under the Plan, there shall be paid to the Participant's
Beneficiary the single lump sum which the Participant would have received under
Section 3.1 if the Participant had not died, but had instead had a Termination
of Employment on the date of his or her death; provided, however, that an
employee who is eligible to make an election under Section 4.1 may elect at any
time prior to his or her death to have the death benefit which is payable upon
his or her death before commencement of payment of the SERP Benefit paid as a
single life annuity for the life of the Beneficiary. Such single life annuity
shall have the same Actuarial Equivalent present value as the lump sum payment
which would otherwise be made to the Beneficiary. An election to have the death
benefit paid as a single life annuity must be made by the employee eligible to
make such an election in writing on a form furnished by and filed with the
Principal Sponsor and may be changed at any time during such employee's lifetime
before commencement of payment of the SERP Benefit. Payment to the Beneficiary
shall be made or commenced as soon as may be practicable on or after the
fifteenth day of the second calendar month after the death of the Participant.
5.1.2. DEATH AFTER SERP BENEFIT COMMENCEMENT. If payment to a
Participant of the SERP Benefit has been made in a lump sum or commenced as a
single life annuity, no death benefit will be payable upon the death of the
Participant. If payment to a Participant of the SERP Benefit has commenced as a
50% or 100% joint and survivor annuity or as a single life annuity with 10 or 15
year certain payments, payments will be made following the death of the
Participant only in accordance with the terms of the optional form of payment of
the SERP Benefit which was elected by the Participant.
5.2. DESIGNATION OF BENEFICIARIES.
5.2.1. RIGHT TO DESIGNATE. Each employee who is eligible to make an
election under Section 4.1 may designate, upon forms to be furnished by and
filed with the Principal Sponsor, one or more primary Beneficiaries or alternate
Beneficiaries to receive all or a specified part of such employee's Survivor
Benefit in the event of his or her death. Such employee may change or revoke any
such designation from time to time before commencement of payment of the SERP
Benefit without notice to or consent from any Beneficiary or spouse. No such
designation, change or revocation shall be effective unless executed by the
employee eligible to make such designation and received by the Principal Sponsor
during such employee's lifetime and prior to commencement of payment of the SERP
Benefit.
5.2.2. FAILURE OF DESIGNATION. If a Participant:
(a) fails to designate a Beneficiary,
(b) designates a Beneficiary and thereafter revokes such designation
without naming another Beneficiary, or
(c) designates one or more Beneficiaries and all such Beneficiaries
so designated fail to survive the Participant,
such Participant's Survivor Benefit, or the part thereof as to which such
Participant's designation fails, as the case may be, shall be payable to the
first class of the following classes of automatic Beneficiaries with a member
surviving the Participant and (except in the case of surviving issue) in equal
shares if there is more than one member in such class surviving the Participant:
Participant's surviving spouse
Participant's surviving issue per stirpes and not per capita
Participant's surviving parents
Participant's surviving brothers and sisters
Representative of Participant's estate.
5.2.3. DISCLAIMERS BY BENEFICIARIES. A Beneficiary entitled to a
distribution of all or a portion of a deceased Participant's Survivor Benefit
may disclaim an interest therein subject to the following requirements. To be
eligible to disclaim, a Beneficiary must be a natural person, must not have
received a distribution of all or any portion of the lump sum death benefit at
the time such disclaimer is executed and delivered, and must have attained at
least age twenty-one (21) years as of the date of the Participant's death. Any
disclaimer must be in writing and must be executed personally by the Beneficiary
before a notary public. A disclaimer shall state that the Beneficiary's entire
interest in the undistributed Survivor Benefit is disclaimed or shall specify
what portion thereof is disclaimed. To be effective, duplicate original executed
copies of the disclaimer must be both executed and actually delivered to the
Principal Sponsor after the date of the Participant's death but not later than
one hundred eighty (180) days after the date of the Participant's death. A
disclaimer shall be irrevocable when delivered to the Principal Sponsor. A
disclaimer shall be considered to be delivered to the Principal Sponsor only
when actually received by the Principal Sponsor. The Principal Sponsor shall be
the sole judge of the content, interpretation and validity of a purported
disclaimer. Upon the filing of a valid disclaimer, the Beneficiary shall be
considered not to have survived the Participant as to the interest disclaimed. A
disclaimer by a Beneficiary shall not be considered to be a transfer of an
interest in violation of the provisions of Section 6 and shall not be considered
to be an assignment or alienation of benefits in violation of federal law
prohibiting the assignment or alienation of benefits under this Plan. No other
form of attempted disclaimer shall be recognized by the Principal Sponsor.
5.2.4. DEFINITIONS. When used herein and, unless the Participant has
otherwise specified in the Participant's Beneficiary designation, when used in a
Beneficiary designation, "issue" means all persons who are lineal descendants of
the person whose issue are referred to, including legally adopted descendants
and their descendants but not including illegitimate descendants and their
descendants; "child" means an issue of the first generation; "per stirpes" means
in equal shares among living children of the person whose issue are referred to
and the issue (taken collectively) of each deceased child of such person, with
such issue taking by right of representation of such deceased child; and
"survive" and "surviving" mean living after the death of the Participant.
5.2.5. SPECIAL RULES. Unless the Participant has otherwise specified
in the Participant's Beneficiary designation, the following rules shall apply:
(a) If there is not sufficient evidence that a Beneficiary was living
at the time of the death of the Participant, it shall be deemed
that the Beneficiary was not living at the time of the death of
the Participant.
(b) The automatic Beneficiaries specified in Section 5.2.2 and the
Beneficiaries designated by the Participant shall become fixed at
the time of the Participant's death so that, if a Beneficiary
survives the Participant but dies before the receipt of all
payments due such Beneficiary hereunder, such remaining payments
shall be payable to the representative of such Beneficiary's
estate.
(c) If the Participant designates as a Beneficiary the person who is
the Participant's spouse on the date of the designation, either
by name or by relationship, or both, the dissolution, annulment
or other legal termination of the marriage between the
Participant and such person shall automatically revoke such
designation. (The foregoing shall not prevent the Participant
from designating a former spouse as a Beneficiary on a form
executed by the Participant and received by the Principal Sponsor
after the date of the legal termination of the marriage between
the Participant and such former spouse, and during the
Participant's lifetime.)
(d) Any designation of a nonspouse Beneficiary by name that is
accompanied by a description of relationship to the Participant
shall be given effect without regard to whether the relationship
to the Participant exists either then or at the Participant's
death.
(e) Any designation of a Beneficiary only by statement of
relationship to the Participant shall be effective only to
designate the person or persons standing in such relationship to
the Participant at the Participant's death.
A Beneficiary designation is permanently void if it either is executed or is
filed by a Participant who, at the time of such execution or filing, is then a
minor under the law of the state of the Participant's legal residence. The
Principal Sponsor shall be the sole judge of the content, interpretation and
validity of a purported Beneficiary designation.
5.2.6. NO SPOUSAL RIGHTS. No spouse or surviving spouse of a
Participant and no person designated to be a Beneficiary shall have any rights
or interest in the benefits accumulated under this Plan including, but not
limited to, the right to be the sole Beneficiary or to consent to the
designation of Beneficiaries (or the changing of designated Beneficiaries) by
the Participant.
5.3. DEATH PRIOR TO FULL DISTRIBUTION. If, at the death of the Participant, any
payment to the Participant was due or otherwise pending but not actually paid,
the amount of such payment shall be included in the Survivor Benefit which are
payable to the Beneficiary (and shall not be paid to the Participant's estate).
SECTION 6
FUNDING OF PLAN
6.1. UNFUNDED AGREEMENT. The obligation of the Employers to make payments under
this Plan constitutes only the unsecured (but legally enforceable) promise of
the Employers to make such payments. The Participant shall have no lien, prior
claim or other security interest in any property of any Employer. If a fund is
established by the Employers in connection with this Plan, the property therein
shall remain the sole and exclusive property of the Employers. The Employers
will pay the cost of this Plan out of their general assets.
If the Principal Sponsor elects to finance all or a portion of its costs in
connection with this Plan through the purchase of life insurance or other
similar investments, the Participant agrees, as a condition of participation in
this Plan, to cooperate with the Principal Sponsor in the purchase of such
investment to any extent reasonably required by the Principal Sponsor and
relinquishes any claim he or she may have either for himself or herself or any
beneficiary to the proceeds of any such investment or any other rights or
interests in such investment. If a Participant fails or refuses to cooperate,
then notwithstanding any other provision of this Plan Statement (including,
without limiting the generality of the foregoing, Section 4) the Principal
Sponsor shall immediately and irrevocably terminate and forfeit the
Participant's entitlement to benefits under the Plan.
6.2. SPENDTHRIFT PROVISION. No Participant or Beneficiary shall have any
interest under this Plan which can be transferred nor shall any Participant or
Beneficiary have any power to anticipate, alienate, dispose of, pledge or
encumber the same while in the possession or control of the Employers, nor shall
the Principal Sponsor recognize any assignment thereof, either in whole or in
part, nor shall any benefit under this Plan be subject to attachment,
garnishment, execution following judgment or other legal process while in the
possession or control of the Employers.
The power to designate Beneficiaries to receive the Survivor Benefit of a
Participant in the event of such Participant's death shall not permit or be
construed to permit such power or right to be exercised by the Participant so as
thereby to anticipate, pledge, mortgage or encumber such Participant's SERP
Benefit or any part thereof, and any attempt of a Participant so to exercise
said power in violation of this provision shall be of no force and effect and
shall be disregarded by the Principal Sponsor.
SECTION 7
AMENDMENT AND TERMINATION
The Principal Sponsor reserves the power to amend the Plan Statement or
terminate the Plan prior to a Change in Control. No such amendment of the Plan
Statement or termination of the Plan, however, shall reduce a Participant's SERP
Benefit earned as of the date of such amendment unless the Participant so
affected consents in writing to the amendment. After a Change in Control, the
Plan cannot be amended or terminated (as applied to Participants who are
Participants on the date of the Change in Control) unless:
(a) all SERP Benefits of all Participants as of the date of the
Change in Control have been paid, or
(b) eighty percent (80%) of all the Participants as of the date of
the Change in Control give written consent to such amendment or
termination.
Notwithstanding the rules of Section 2, for the purposes of the rules of this
Section 7, each employee who would be a Participant at the time of the Change in
Control if he or she: (i) had a Termination of Employment coincident with the
Change in Control, and (ii) had not less than five (5) years of Service with
FIRST BANK SYSTEM, INC. and its subsidiaries at the time of the Change in
Control, shall be considered a Participant. No modification of the terms of this
Plan Statement shall be effective unless it is in writing and signed on behalf
of the Principal Sponsor by a person authorized to execute such writing. No oral
representation concerning the interpretation or effect of this Plan Statement
shall be effective to amend the Plan Statement.
SECTION 8
DETERMINATIONS - RULES AND REGULATIONS
8.1. DETERMINATIONS. The Principal Sponsor shall make such determinations as may
be required from time to time in the administration of the Plan. The Principal
Sponsor shall have the discretionary authority and responsibility to interpret
and construe the Plan Statement and to determine all factual and legal questions
under the Plan, including but not limited to the entitlement of Participants and
Beneficiaries, and the amounts of their respective interests. Each interested
party may act and rely upon all information reported to them hereunder and need
not inquire into the accuracy thereof, nor be charged with any notice to the
contrary.
8.2. RULES AND REGULATIONS. Any rule not in conflict or at variance with the
provisions hereof may be adopted by the Principal Sponsor. The Principal Sponsor
shall adopt rules regarding the computation of continuous and full time service
with the Employer including, without limiting the generality of the foregoing,
rules regarding the exclusion of periods of employment with respect to which
benefits may have been previously paid under this Plan, the exclusion of periods
of employment at levels or in positions not covered by this Plan, the
computation of continuous and full time service upon the reemployment of a
former employee and the exclusion of periods of employment when disabled (under
the Employer's separate plan of long term disability benefits or otherwise).
Such rules shall also prescribe the effect of loss of eligibility, deemed
Termination of Employment upon loss of eligibility, the computation of
continuous and full time service upon reemployment and the method for computing
the Projected PRA Account when the period benefits accrued under PRA does not
match the period of continuous and full time service under this Plan.
8.3. METHOD OF EXECUTING INSTRUMENTS. Information to be supplied or written
notices to be made or consents to be given by the Principal Sponsor pursuant to
any provision of this Plan Statement may be signed in the name of the Principal
Sponsor by any officer who has been authorized to make such certification or to
give such notices or consents.
8.4. CLAIMS PROCEDURE. The claims procedure set forth in this Section 8.4 shall
be the exclusive procedure for the disposition of claims for benefits arising
under the Plan until such time as a Change in Control occurs.
8.4.1. ORIGINAL CLAIM. Any employee, former employee or beneficiary
of such employee or former employee may, if he or she so desires, file with the
Principal Sponsor a written claim for benefits under the Plan. Within ninety
(90) days after the filing of such a claim, the Principal Sponsor shall notify
the claimant in writing whether the claim is upheld or denied in whole or in
part or shall furnish the claimant a written notice describing specific special
circumstances requiring a specified amount of additional time (but not more than
one hundred eighty days from the date the claim was filed) to reach a decision
on the claim. If the claim is denied in whole or in part, the Principal Sponsor
shall state in writing:
(a) the specific reasons for the denial;
(b) the specific references to the pertinent provisions of this Plan
Statement on which the denial is based;
(c) a description of any additional material or information necessary
for the claimant to perfect the claim and an explanation of why
such material or information is necessary; and
(d) an explanation of the claims review procedure set forth in this
section.
8.4.2. CLAIMS REVIEW PROCEDURE. Within sixty (60) days after receipt
of notice that the claim has been denied in whole or in part, the claimant may
file with the Principal Sponsor a written request for a review and may, in
conjunction therewith, submit written issues and comments. Within sixty (60)
days after the filing of such a request for review, the Principal Sponsor shall
notify the claimant in writing whether, upon review, the claim was upheld or
denied in whole or in part or shall furnish the claimant a written notice
describing specific special circumstances requiring a specified amount of
additional time (but not more than one hundred twenty days from the date the
request for review was filed) to reach a decision on the request for review.
8.4.3. GENERAL RULES.
(a) No inquiry or question shall be deemed to be a claim or a request
for a review of a denied claim unless made in accordance with the
claims procedure. The Principal Sponsor may require that any
claim for benefits and any request for a review of a denied claim
be filed on forms to be furnished by the Principal Sponsor upon
request.
(b) All decisions on claims and on requests for a review of denied
claims shall be made by the Principal Sponsor.
(c) the Principal Sponsor may, in its discretion, hold one or more
hearings on a claim or a request for a review of a denied claim.
(d) A claimant may be represented by a lawyer or other representative
(at the claimant's own expense), but the Principal Sponsor
reserves the right to require the claimant to furnish written
authorization. A claimant's representative shall be entitled to
copies of all notices given to the claimant.
(e) The decision of the Principal Sponsor on a claim and on a request
for a review of a denied claim shall be served on the claimant in
writing. If a decision or notice is not received by a claimant
within the time specified, the claim or request for a review of a
denied claim shall be deemed to have been denied.
(f) Prior to filing a claim or a request for a review of a denied
claim, the claimant or his or her representative shall have a
reasonable opportunity to review a copy of this Plan Statement
and all other pertinent documents in the possession of the
Principal Sponsor.
8.5. INFORMATION FURNISHED BY PARTICIPANTS. The Principal Sponsor shall not be
liable or responsible for any error in the computation of the SERP Benefit of a
Participant resulting from any misstatement of fact made by the Participant,
directly or indirectly, to the Principal Sponsor, and used by it in determining
the Participant's SERP Benefit. The Principal Sponsor shall not be obligated or
required to increase the SERP Benefit of such Participant which, on discovery of
the misstatement, is found to be understated as a result of such misstatement of
the Participant. However, the SERP Benefit of any Participant which are
overstated by reason of any such misstatement shall be reduced to the amount
appropriate in view of the truth.
SECTION 9
PLAN ADMINISTRATION
9.1. PRINCIPAL SPONSOR.
9.1.1. OFFICERS. Except as hereinafter provided, functions generally
assigned to the Principal Sponsor shall be discharged by its officers or
delegated and allocated as provided herein.
9.1.2. CHIEF EXECUTIVE OFFICER. Except as hereinafter provided, the
Chief Executive Officer of the Principal Sponsor may delegate or redelegate and
allocate and reallocate to one or more persons or to a committee of persons
jointly or severally, and whether or not such persons are directors, officers or
employees, such functions assigned to the Principal Sponsor generally hereunder
as the Chief Executive Officer may from time to time deem advisable.
9.1.3. BOARD OF DIRECTORS. Notwithstanding the foregoing, the
Organization Committee of the Board of Directors of the Principal Sponsor shall
have the exclusive authority, which may not be delegated, to act for the
Principal Sponsor to amend this Plan Statement, to terminate this Plan, and to
determine eligibility to participate in the Plan under Section 2.
9.2. CONFLICT OF INTEREST. If any officer or employee of the Principal Sponsor
or any Employer, or any member of the Organization Committee of the Board of
Directors of the Principal Sponsor or any Employer to whom authority has been
delegated or redelegated hereunder shall also be a Participant in the Plan, such
Participant shall have no authority as such officer, employee or member with
respect to any matter specially affecting such Participant's individual interest
hereunder or the interest of a person superior to him or her in the organization
(as distinguished from the interests of all Participants and Beneficiaries or a
broad class of Participants and Beneficiaries), all such authority being
reserved exclusively to the other officers, employees or members as the case may
be, to the exclusion of such Participant, and such Participant shall act only in
such Participant's individual capacity in connection with any such matter.
9.3. ADMINISTRATOR. FIRST BANK SYSTEM, INC. shall be the administrator for
purposes of section 3(16)(A) of the Employee Retirement Income Security Act of
1974.
9.4. SERVICE OF PROCESS. In the absence of any designation to the contrary by
the Principal Sponsor, the Secretary of FIRST BANK SYSTEM, INC. is designated as
the appropriate and exclusive agent for the receipt of service of process
directed to the Plan in any legal proceeding, including arbitration, involving
the Plan.
9.5. IRC AND ERISA STATUS. This Plan is intended to be a nonqualified deferred
compensation arrangement. The rules of section 401(a) et. seq. of the Code shall
not apply to this Plan. This Plan is adopted with the understanding that it is
in part an unfunded excess benefit plan within the meaning of section 3(36)
ERISA and is in part an unfunded plan maintained primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees as provided in sections 201(2), 301(3) and 401(a)(1) of
ERISA. Each provision hereof shall be interpreted and administered accordingly.
This Plan shall not alter, enlarge or diminish any person's employment rights or
obligations or rights or obligations under PRA or any other plan.
It is specifically contemplated that PRA and the Excess Plan will,
from time to time, be amended and possibly terminated. All such amendments and
termination shall be given effect under this Plan (it being expressly intended
that this Plan shall not lock in the benefit structures of PRA and the Excess
Plan as they exist at the adoption of this Plan or upon the commencement of
participation, or commencement of benefits by any Participant).
This Plan will not provide any excess benefits with respect to any
profit sharing plan, stock bonus plan, employee stock ownership plan or PAYSOP.
This Plan shall be construed to prevent the duplication of benefits provided
under any other plan or arrangement, whether qualified or nonqualified, funded
or unfunded, to the extent that such other benefits are provided directly or
indirectly by an Employer.
SECTION 10
DISCLAIMERS
10.1. TERM OF EMPLOYMENT. Neither the terms of this Plan Statement nor the
benefits hereunder nor the continuance thereof shall be a term of the employment
of any employee. The Principal Sponsor and the Employers shall not be obliged to
continue the Plan. The terms of this Plan Statement shall not give any employee
the right to be retained in the employment of any Employer.
10.2. SOURCE OF PAYMENT. Neither the Principal Sponsor, any Employer nor any of
its officers nor any member of their Boards of Directors in any way secure or
guarantee the payment of any benefit or amount which may become due and payable
hereunder to any Participant or to any Beneficiary or to any creditor of a
Participant or a Beneficiary. Each Participant, Beneficiary or other person
entitled at any time to payments hereunder shall look solely to the assets of
the Employers for such payments or to the benefits distributed to any
Participant or Beneficiary, as the case may be, for such payments. In each case
where benefits shall have been distributed to a former Participant or a
Beneficiary or to the person or any one of a group of persons entitled jointly
to the receipt thereof and which purports to cover in full the benefit
hereunder, such former Participant or Beneficiary, or such person or persons, as
the case may be, shall have no further right or interest in the other assets of
the Employers. Neither the Employers nor any of their officers nor any member of
their Boards of Directors shall be under any liability or responsibility for
failure to effect any of the objectives or purposes of the Plan by reason of the
insolvency of any of the Employers.
10.3. DELEGATION. The Employers and their officers and the members of their
Boards of Directors shall not be liable for an act or omission of another person
with regard to a responsibility that has been allocated to or delegated to such
other person pursuant to the terms of this Plan Statement or pursuant to
procedures set forth in this Plan Statement.
SCHEDULE I
PARTICIPATING EMPLOYERS
Effective as of January 1, 1995
<TABLE>
<CAPTION>
NAME EMPLOYER ID NUMBER
<S> <C>
Boulevard Bank National Association 36-1521230
Boulevard Technical Services, Inc., Chicago, IL 36-3610403
Colorado Capital Advisors, Inc., Denver, CO 84-1072892
Colorado National Bank, Denver, CO 84-0165025
Colorado National Bank Aspen, Aspen, CO 84-0671596
Colorado National Bankshares, Inc., Denver, CO 84-0571505
Colorado National Leasing, Inc., Denver, CO 84-0636453
Colorado National Service Corporation, Denver, CO 84-1041820
FBS Ag. Credit, Inc., Englewood, CO 84-0818505
FBS Business Finance Corporation, Minneapolis, MN 41-0832663
FBS Card Services, Inc., Minneapolis, MN 41-1558798
FBS Information Services Corporation, St. Paul, MN 41-0880291
FBS Investment Services, Inc., Denver, CO 84-1019337
FBS Mortgage Corporation, Minneapolis, MN 58-1025135
First Bank (N.A.), Milwaukee, WI 39-0152428
First Bank Montana, National Association, Billings, MT 81-0166295
First Bank National Association, Minneapolis, MN 41-0256895
First Bank of North Dakota, National Association, Fargo, ND 45-0164355
First Bank of South Dakota, National Association, Sioux Falls, SD 46-0168855
First Bank System, Inc., Minneapolis, MN 41-0255900
First National Bank of East Grand Forks, East Grand Forks, MN 41-0417860
First System Agencies,Inc., Minneapolis, MN 41-0831328
First System Services, Inc., Minneapolis, MN 41-0257030
First Trust National Association, St. Paul, MN 41-0257700
First Trust Company of Montana, National Association, Billings, MT 81-0259015
First Trust Company of North Dakota, Fargo, ND 45-0342631
First Trust of California, National Association, San Francisco, CA 94-3160100
First Trust of New York, National Association, New York, NY 13-3781471
First Trust Washington, Seattle, WA 91-1587893
Republic Acceptance Corporation, Minneapolis, MN 41-1753837
Rocky Mountain BankCard System, Inc., Denver, CO 84-1010148
</TABLE>
SCHEDULE II
PRIOR PLANS' OFFSET
AGE WHEN FIRST EMPLOYED FACTOR
36 0.45%
37 0.94%
38 1.47%
39 2.06%
40 2.71%
41 3.41%
42 4.18%
43 5.01%
44 5.92%
45 6.91%
46 7.98%
47 9.14%
48 10.40%
49 11.76%
50 13.23%
51 14.82%
52 16.53%
53 18.38%
54 20.37%
55 22.51%
56 24.82%
57 27.30%
58 29.97%
59 32.83%
60 35.91%
61 39.21%
62 42.76%
63 46.56%
64 50.63%
65 55.00%
APPENDIX A
ACTUARIALLY EQUIVALENT BENEFITS
Section 1. GENERAL RULES. The point of reference for determining the
Actuarially Equivalent single lump sum benefit is the monthly benefit amount
expressed in the single life annuity form. When, under the terms of the Plan,
the monthly amount of the SERP Benefit or other benefit has been determined in
the single life annuity form, reference to the following factors and tables will
determine the Actuarially Equivalent single lump sum benefit:
INTEREST: The interest rate used by the Pension Benefit Guaranty Corporation to
value immediate annuities (for participants who are age 65 years) in the event
of plan terminations occurring on the first day of the Plan Year in which occurs
the date as of which the Actuarially Equivalent single lump sum benefit is being
determined
MORTALITY: 1971 Group Annuity Mortality Table, assuming all Participants are
male.
The single life annuity benefit to be converted to the single lump sum benefit
shall be the benefit commencing on the first day of the calendar month following
the attainment of age sixty-five (65) years or if later the first day of the
calendar month after Termination of Employment
EXHIBIT 11
COMPUTATION OF PRIMARY AND FULLY DILUTED NET INCOME PER COMMON SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
(Dollars in millions, except per share data) 1995 1994
<S> <C> <C>
PRIMARY:
Average shares outstanding 133,797,144 130,689,547
Net effect of the assumed purchase of stock under the stock option and
stock purchase plans--based on the treasury stock method using average market
price 1,748,589 1,660,432
135,545,733 132,349,979
Income from continuing operations $133.8 $111.9
Preferred dividends (1.9) (5.9)
Income from continuing operations applicable to common equity $131.9 $106.0
Income from continuing operations per common share $0.97 $0.80
Loss from discontinued operations -- $(1.2)
Loss from discontinued operations per common share -- $(0.01)
Net income $133.8 $110.7
Preferred dividends (1.9) (5.9)
Net income applicable to common equity $131.9 $104.8
Net income per common share $0.97 $0.79
FULLY DILUTED: *
Average shares outstanding 133,797,144 130,689,547
Net effect of the assumed purchase of stock under the stock option and
stock purchase plans--based on the treasury stock method using average
market price or period-end market price, whichever is higher 2,151,338 1,791,484
Assumed conversion of Series 1991A Preferred Stock 3,655,684 3,655,684
139,604,166 136,136,715
Income from continuing operations $133.8 $111.9
Preferred dividends, excluding 1991A Preferred Stock -- (4.0)
Income from continuing operations applicable to common equity $133.8 $107.9
Income from continuing operations per common share $0.96 $0.79
Loss from discontinued operations -- $(1.2)
Loss from discontinued operations per common share -- $(0.01)
Net income $133.8 $110.7
Preferred dividends, excluding 1991A Preferred Stock -- (4.0)
Net income applicable to common equity $133.8 $106.7
Net income per common share $0.96 $0.78
</TABLE>
*This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 17 of APB Opinion
No. 15 because it results in dilution of less than 3%.
EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
<S> <C> <C>
(Dollars in Millions) 1995
EARNINGS
1. Net income $133.8
2. Applicable income taxes 78.8
3. Net income before taxes (1 + 2) $212.6
4. Fixed charges:
a. Interest expense excluding interest on deposits $83.9
b. Portion of rents representative of interest and amortization of debt expense 6.3
c. Fixed charges excluding interest on deposits (4a + 4b) 90.2
d. Interest on deposits 178.4
e. Fixed charges including interest on deposits (4c + 4d) $268.6
5. Amortization of interest capitalized $ 1.2
6. Earnings excluding interest on deposits (3 + 4c + 5) 304.0
7. Earnings including interest on deposits (3 + 4e + 5) 482.4
8. Fixed charges excluding interest on deposits (4c) 90.2
9. Fixed charges including interest on deposits (4e) 268.6
RATIO OF EARNINGS TO FIXED CHARGES
10. Excluding interest on deposits (line 6/ line 8) 3.37
11. Including interest on deposits (line 7/ line 9) 1.80
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FIRST
BANK SYSTEM, INC. MARCH 31, 1995, 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,598,000
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 253,000
<TRADING-ASSETS> 90,000
<INVESTMENTS-HELD-FOR-SALE> 3,535,000
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 25,215,000
<ALLOWANCE> 470,400
<TOTAL-ASSETS> 32,712,000
<DEPOSITS> 23,477,000
<SHORT-TERM> 2,929,000
<LIABILITIES-OTHER> 818,000
<LONG-TERM> 2,542,000
<COMMON> 169,000
0
106,000
<OTHER-SE> 2,482,000
<TOTAL-LIABILITIES-AND-EQUITY> 32,712,000
<INTEREST-LOAN> 547,200
<INTEREST-INVEST> 69,300
<INTEREST-OTHER> 9,100
<INTEREST-TOTAL> 625,600
<INTEREST-DEPOSIT> 178,400
<INTEREST-EXPENSE> 262,300
<INTEREST-INCOME-NET> 363,300
<LOAN-LOSSES> 26,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 304,300
<INCOME-PRETAX> 212,600
<INCOME-PRE-EXTRAORDINARY> 133,800
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 133,800
<EPS-PRIMARY> 0.97
<EPS-DILUTED> 0.96
<YIELD-ACTUAL> 5.05
<LOANS-NON> 148,000
<LOANS-PAST> 34,400
<LOANS-TROUBLED> 100
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 474,700
<CHARGE-OFFS> 51,700
<RECOVERIES> 19,600
<ALLOWANCE-CLOSE> 470,400
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
