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, 1996
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.
<TABLE>
<CAPTION>
<S> <C>
Class Outstanding as of April 30, 1996
Common Stock, $1.25 Par Value 137,827,945 shares
</TABLE>
FINANCIAL SUMMARY
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 MARCH 31
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 1996 1995
<S> <C> <C>
Income before nonrecurring items $ 160.1 $ 133.8
Nonrecurring items 16.7 --
Net income $ 176.8 $ 133.8
PER COMMON SHARE
Primary income before nonrecurring items $ 1.16 $ .97
Nonrecurring items .12 --
Primary net income $ 1.28 $ .97
Fully diluted income before nonrecurring items $ 1.14 $ .96
Nonrecurring items .12 --
Fully diluted net income $ 1.26 $ .96
Earnings on a cash basis (fully diluted)* $ 1.59 $ 1.06
Dividends paid .4125 .3625
Common shareholders' equity 22.92 19.58
RETURN ON AVERAGE ASSETS
Income before nonrecurring items 1.84% 1.66 %
Nonrecurring items .19 --
Return on average assets 2.03% 1.66%
RETURN ON AVERAGE COMMON EQUITY
Income before nonrecurring items 21.0% 21.1 %
Nonrecurring items 2.2 --
Return on average common equity 23.2% 21.1 %
Net interest margin (taxable-equivalent basis) 4.86% 5.05%
Efficiency ratio before nonrecurring items 50.7 55.7
Efficiency ratio 56.7 55.7
</TABLE>
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1996 1995
PERIOD END
<S> <C> <C>
Loans $26,878 $26,400
Allowance for credit losses 530 474
Assets 36,572 33,874
Total shareholders' equity 3,329 2,725
Tangible common equity to total
assets 7.1% 6.5%
Tier 1 capital ratio 7.1 6.5
Total risk-based capital ratio 11.9 11.0
Leverage ratio 6.7 6.1
</TABLE>
* Calculated by adding amortization of goodwill and other intangible assets to
net income.
Refer to "Earnings Summary" on page 2 for a description of nonrecurring items.
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) 13
PART II -- OTHER INFORMATION
Submission of Matters to a Vote of Security Holders (Item 4) 25
Exhibits and Reports on Form 8-K (Item 6) 25
Signature 26
Exhibit 3 -- Bylaws of First Bank System, Inc. *
Exhibit 10A -- First Bank System, Inc. 1996 Stock Incentive Plan *
Exhibit 10B -- First Bank System, Inc. Restated Employee Stock Purchase Plan, as amended *
Exhibit 11 -- Computation of Primary and Fully Diluted Net Income Per Common Share 27
Exhibit 12 -- Computation of Ratio of Earnings to Fixed Charges 28
Exhibit 27 -- Article 9 Financial Data Schedule *
* Copies of this exhibit will be furnished upon request and payment of the
Company's reasonable expenses in furnishing the exhibit.
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
EARNINGS SUMMARY
First Bank System, Inc. (the "Company") reported first quarter 1996 net income
of $176.8 million, an increase of $43 million, or 32 percent, from the first
quarter of 1995. On a per share basis, net income was $1.28 in the first quarter
of 1996, compared with $.97 in the first quarter of 1995, an increase of 32
percent. Return on average assets and return on average common equity were 2.03
percent and 23.2 percent, respectively, in the first quarter of 1996, compared
with returns of 1.66 percent and 21.1 percent in the first quarter of 1995.
Several nonrecurring items affected operating results in the first quarter of
1996. The impact of these items on net income was $16.7 million ($48.6 million
on a pretax basis) or $.12 per share. Nonrecurring pretax gains included $125
million received from First Interstate Bancorp ("First Interstate") as partial
payment of a termination fee, net of $10 million in transaction costs; $45.8
million in gain on the sale of the Company's mortgage banking operations; and
$14.6 million in net securities gains. Nonrecurring pretax charges included
$31.3 million in merger and integration charges associated with the acquisitions
of FirsTier Financial, Inc. ("FirsTier") and the corporate trust business of
BankAmerica Corporation ("BankAmerica"); $38.6 million in branch distribution
resizing expenses; a $29.5 million valuation adjustment of cardholder and core
deposit intangibles; $10.1 million for a one-time employee bonus; and $17.3
million to acquire software and write off other miscellaneous assets.
Excluding these nonrecurring items, operating earnings for the first quarter of
1996 were $160.1 million, an increase of $26.3 million, or 20 percent, from the
first quarter of 1995. On a per share basis, operating earnings were $1.16 in
the first quarter of 1996, compared with $.97 in the first quarter of 1995, an
increase of 20 percent. Return on average assets and return on average common
equity, excluding nonrecurring items, were 1.84 percent and 21.0 percent,
respectively, in the first quarter of 1996, compared with returns of 1.66
percent and 21.1 percent in the first quarter of 1995. Excluding nonrecurring
items, the efficiency ratio improved to 50.7 percent in the first quarter of
1996 from 55.7 percent in the first quarter of 1995.
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) 1996 1995
<S> <C> <C>
Interest income $659.3 $629.1
Interest expense 280.0 262.3
Net interest income 379.3 366.8
Provision for credit losses 31.0 26.0
Net interest income after provision for credit
losses 348.3 340.8
Nonrecurring gains 175.4 --
Other noninterest income 208.1 179.6
Nonrecurring charges 126.8 --
Other noninterest expense 297.6 304.3
Income before income taxes 307.4 216.1
Taxable-equivalent adjustment 4.7 3.5
Income taxes 125.9 78.8
Net income $176.8 $133.8
Return on average assets 2.03% 1.66%
Return on average common equity 23.2 21.1
Net interest margin 4.86 5.05
Efficiency ratio 56.7 55.7
Efficiency ratio before nonrecurring items 50.7 55.7
Per Common Share:
Net income $1.28 $.97
Dividends paid .4125 .3625
</TABLE>
Stronger first quarter operating results reflected growth in net interest and
noninterest income, lower operating expenses, and effective capital management.
Net interest income on a taxable-equivalent basis was $379.3 million, an
increase of $12.5 million, or 3 percent, from the first quarter of 1995. The
increase reflects the impact of recent acquisitions and core loan growth.
Excluding nonrecurring items, noninterest income for the quarter was $208.1
million, an increase of $28.5 million, or 16 percent, from the same quarter of
1995. The increase was primarily due to recent acquisitions and growth in credit
card and trust fees. First quarter noninterest expense, excluding nonrecurring
items, totaled $297.6 million, a decrease of $6.7 million, or 2 percent, from
the first quarter of 1995. Compared with noninterest expense for the first
quarter of 1995, adjusted to include the operations of acquired businesses on a
pro forma basis, noninterest expense declined in the current quarter $45.7
million, or 13 percent.
Credit quality remained strong in the first quarter of 1996. Nonperforming
assets totaled $157.1 million at March 31, 1996, up $3.4 million, or 2 percent,
from December 31, 1995, as a result of the acquisition of FirsTier, and down
$58.6 million, or 27 percent, from March 31, 1995. The ratio of the allowance
for credit losses to nonperforming loans at quarter-end was 461 percent,
compared with 401 percent at the end of 1995 and 318 percent at March 31, 1995.
ACQUISITION AND DIVESTITURE ACTIVITY
On February 16, 1996, the Company completed its acquisition of Omaha-based
FirsTier for $717 million. FirsTier had $3.7 billion in assets, $2.9 billion in
deposits, and 63 offices in Nebraska and Iowa. Under terms of the purchase
agreement, the Company issued .8829 shares of its common stock for each common
share of FirsTier, or a total of 16.5 million shares. As a purchase transaction,
the results of operations of FirsTier are included in the Company's results from
the date of acquisition.
On February 26, 1996, the Company announced that it had entered into agreements
with three parties for the sale of the Company's servicing and mortgage loan
production business. Effective February 29, 1996, Bank of America, fsb, a
subsidiary of BankAmerica, purchased approximately $14 billion in mortgage
servicing rights. Columbia National, Inc., of Maryland, and Knutson Mortgage
Co., of Minnesota, agreed to purchase the Company's loan production business.
The Company will now deliver mortgage loan products through bank branches and
telemarketing. These transactions resulted in a net gain of $45.8 million.
On August 22, 1995, the Company announced that it had signed a definitive
agreement to acquire the corporate trust business of BankAmerica. After the
acquisition, the Company became the nation's leading provider of domestic
corporate trust services as measured by revenues. Approximately 80 percent of
the transaction was completed in December 1995, with the remainder completed in
the first quarter of 1996.
On January 24, 1996, First Interstate announced that it had terminated the
merger agreement with the Company and entered into a definitive agreement with
Wells Fargo & Company. Under the terms of a settlement agreement, the Company
received $125 million on January 24, 1996. The agreement called for an
additional $75 million to be paid upon consummation of the merger of First
Interstate and Wells Fargo & Company, which the Company received on April 1,
1996, and which will be included in the Company's second quarter results.
LINE OF BUSINESS FINANCIAL REVIEW
Financial performance is measured by major lines of business, which include:
Retail Banking, Payment Systems, Business Banking and Private Financial
Services, Commercial Banking, and Trust and Investment Group. 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
first quarter 1996 certain organization and methodology changes were made and
1995 results are presented on a consistent basis.
RETAIL BANKING -- Retail Banking, which delivers products and services to the
broad consumer market and small-business through branch offices, telemarketing,
direct mail, and automated teller machines ("ATM"), contributed net income of
$52.8 million, a 16 percent increase over the first quarter of 1995. First
quarter return on assets increased to 1.58 percent from 1.30 percent in the same
quarter a year ago. First quarter return on average common equity increased to
21.4 percent compared to 21.3 percent in the first quarter of the prior year.
Net interest income increased over the first quarter of 1995 due to nonmortgage
consumer loan growth resulting from recent acquisitions and growth in core
consumer loans. First quarter noninterest income was higher than in the same
period of last year primarily as a result of recent acquisitions. Noninterest
expense improved reflecting the benefits of continued streamlining of branch
operations, as well as the integration of recent business combinations. The
efficiency ratio improved to 59.1 percent in the first quarter of 1996 compared
with 64.9 percent in the first quarter of 1995.
PAYMENT SYSTEMS -- Payment Systems includes consumer and business credit card,
corporate and purchasing card services, card-accessed secured and unsecured
lines of credit, ATM processing, and merchant processing. Net earnings were
$25.6 million in the first quarter of 1996, a 38 percent increase from the first
quarter of 1995. Return on assets was 2.44 percent, up from 2.05 percent in the
first quarter of 1995, and return on equity was 27.3 percent up from 22.2
percent for the same quarter in the previous year.
TABLE 2. Line of Business Financial Performance
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
BUSINESS BANKING
AND PRIVATE TRUST AND
RETAIL FINANCIAL COMMERCIAL INVESTMENT
BANKING PAYMENT SYSTEMS SERVICES BANKING GROUP
(DOLLARS IN MILLIONS) 1996 1995 1996 1995 1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONDENSED INCOME STATEMENT:
Net interest income
(taxable-equivalent basis) $183.3 $177.1 $40.3 $40.9 $90.6 $81.7 $54.0 $58.1 $7.4 $6.7
Provision for credit losses 6.0 .7 19.2 20.3 3.2 2.6 2.6 2.4 -- --
Noninterest income 39.8 34.3 68.7 59.3 28.1 23.7 17.5 18.0 49.4 33.3
Noninterest expense 131.8 137.3 48.3 49.9 48.4 49.3 22.9 23.8 37.1 27.2
Income taxes and
taxable-equivalent
adjustment 32.5 27.9 15.9 11.4 25.5 20.4 17.5 19.0 7.5 4.9
Income before nonrecurring
items $52.8 $45.5 $25.6 $18.6 $41.6 $33.1 $28.5 $30.9 $12.2 $7.9
AVERAGE BALANCE SHEET DATA:
Commercial loans $444 $311 $912 $643 $6,358 $5,273 $5,328 $4,792 $-- $--
Consumer loans 10,011 10,632 2,501 2,294 555 468 -- -- -- --
Assets 13,459 14,174 4,222 3,679 9,247 7,676 6,560 6,057 1,158 726
Deposits 16,942 17,484 44 32 3,336 3,237 1,504 1,775 892 805
Common equity 992 866 377 340 876 657 459 424 272 177
Return on average assets 1.58% 1.30% 2.44% 2.05% 1.81% 1.75% 1.75% 2.07% * *
Return on average common equity
("ROCE") 21.4 21.3 27.3 22.2 19.1 20.4 25.0 29.6 18.0% 18.1%
ROCE on a cash basis ** 23.0 22.6 29.2 24.1 19.7 20.9 25.1 29.7 22.0 21.2
Efficiency ratio 59.1 64.9 44.3 49.8 40.8 46.8 32.0 31.3 65.3 68.0
</TABLE>
* Not meaningful
** Calculated by adding amortization of goodwill and other intangible assets to
net income.
Note: Preferred dividends and nonrecurring items are not allocated to the
business lines. FBS's mortgage banking operations, which were sold in
first quarter 1996, are not reflected in the table.
Fee-based noninterest income for Payment Systems increased 16 percent in the
first quarter of 1996 compared with the same period in 1995. The increase was
due to growth in the sales volume of the Corporate Card, the Purchasing Card,
the First Bank WorldPerks(R) VISA(R) card, and the expansion of the ATM network.
Net interest income decreased slightly due to a change in the loan mix. Average
commercial loans, which are primarily noninterest-earning Corporate and
Purchasing Card balances, comprised 27 percent of the portfolio during the first
quarter of 1996 compared with 22 percent in first quarter of 1995. The decrease
in the provision for credit losses reflects lower net charge-offs on credit card
loans. Noninterest expense decreased due to ongoing expense control and the
recognition of initial investment expenses in the first quarter of 1995
associated with the expansion of the ATM network.
BUSINESS BANKING AND PRIVATE FINANCIAL SERVICES -- Business Banking and
Private Financial Services includes middle-market banking services, private
banking, and personal trust. Net income for the first quarter of 1996 increased
26 percent to $41.6 million compared with the first quarter of 1995. First
quarter return on assets was 1.81 percent compared with 1.75 percent in 1995,
and return on equity was 19.1 percent compared with 20.4 percent in 1995.
The increase in net interest income is due to recent acquisitions and growth in
core middle-market business lending reflected in an increase in average
commercial loans of 21 percent. Noninterest income in the first quarter of 1996
was higher than in the first quarter of 1995 as a result of recent acquisitions
and a change in the fee structure for some services provided. Noninterest
expense was lower in the first quarter of 1996 compared to the same period of
1995 despite the impact of additional expenses relating to recent acquisitions.
The reduction in noninterest expense reflects the benefits of increased
operational efficiencies, as well as the integration of recent business
acquisitions. Although the acquisitions have improved net earnings, the return
on equity reflects increased investment in these businesses. The efficiency
ratio improved to 40.8 percent from 46.8 percent in the same period of 1995.
COMMERCIAL BANKING -- Commercial Banking provides lending, treasury management,
and other financial services to middle-market, large corporate and mortgage
banking companies. Return on assets was 1.75 percent in the first quarter of
1996 compared with 2.07 percent in the first quarter of 1995. Return on equity
remained strong at 25.0 percent in the first quarter of 1996 compared with 29.6
percent in the same quarter a year ago.
Although average loans increased $536 million, or 11 percent, from the first
quarter of 1995, net interest income decreased due to lower interest recoveries
and a narrowing of the net interest margin on loans. Noninterest income and
noninterest expense remained relatively flat in the first quarter of 1996
compared with the same period of 1995. The decline in deposits relates to less
activity in the mortgage banking sector. The efficiency ratio remained low at
32.0 percent in the first quarter of 1996 compared with 31.3 percent in the
first quarter of 1995.
TRUST AND INVESTMENT GROUP -- The Trust and Investment Group includes
institutional and corporate trust services, investment management services, and
a full-service brokerage company. Earnings increased 54 percent to $12.2 million
in the first quarter of 1996 compared with the similar period in the prior year.
The return on average equity was 18.0 percent in the first quarter of 1996
compared with 18.1 percent in the first quarter of 1995.
The current quarter's net earnings increased over the first quarter of 1995
primarily due to the Company's acquisition strategy to grow its fee-based
businesses. Although the acquisitions have improved net earnings, the return on
equity reflects increased investment in these businesses. The efficiency ratio
improved to 65.3 percent in the first quarter compared with 68.0 in the first
quarter of 1995, reflecting the effective integration of acquisitions, process
re-engineering efforts, and revenue growth.
INCOME STATEMENT ANALYSIS
NET INTEREST INCOME -- Net interest income on a taxable-equivalent basis was
$379.3 million in the first quarter of 1996, an increase of $12.5 million, or 3
percent, from the first quarter of 1995. The improvement was primarily
attributable to an increase in average loans of $1.7 billion, or 7 percent, from
the first quarter of 1995, reflecting the addition of acquisitions and core loan
growth. During the first quarter of 1996, $1.3 billion ($.8 billion in average
balances) of residential mortgage loans were securitized and reclassified to
available-for-sale securities to enhance liquidity and financial management
flexibility. Excluding residential mortgage loan balances, average loans for the
first quarter were higher by $2.9 billion, or 15 percent, than in the first
quarter of 1995. This increase reflected growth in core commercial and consumer
loans, including loans to small- and middle-market businesses, credit cards and
home equity loans, as well as approximately $1 billion in average balances
attributable to the FirsTier acquisition. Without FirsTier and residential
mortgage loans, average loans for the first quarter of 1996 increased 9 percent
from the first quarter of 1995, including growth of 12 percent in commercial
loans and 13 percent in home equity loans. Average securities for the first
quarter were down $105 million from 1995, despite the transfer of securitized
mortgage loan balances in 1996, as lower yielding assets continued to decline as
a result of sales and maturities over the past year.
Partially offsetting the impact of higher average loan balances in the first
quarter of 1996, compared with the first quarter of 1995, were the effects of a
lower average yield on loans and a change in the mix of interest-bearing
liabilities in the current quarter. The average yield on loans was 8.81 percent,
or 25 basis points lower than in the same period for 1995, as a result of
declining market interest rates over the past three quarters. The average cost
of interest-bearing liabilities in the first quarter of 1996, however, was
essentially unchanged from that of the first quarter of last year. The effect of
a decrease in the average cost of borrowings, reflecting lower market interest
rates, was offset by the impact of a shift in the composition of
interest-bearing liabilities over the past year from lower rate deposits to
higher rate borrowings. Average interest-bearing deposits decreased $1.2
billion, or 6 percent, during this period, while average borrowings increased
$2.3 billion, or 42 percent, including funds borrowed for the repurchase of
common stock. The decline in average deposit balances reflects the divestiture
in 1995 of $848 million in deposits, as well as the national trend over the past
year of consumers moving funds into alternative investment vehicles. The net
interest margin in the first quarter of 1996 was 4.86 percent, down from 5.05
percent in the first quarter of 1995, but up from 4.83 percent in the fourth
quarter of 1995.
TABLE 3. Analysis of Net Interest Income
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 MARCH 31
(DOLLARS IN MILLIONS) 1996 1995
<S> <C> <C>
Net interest income (taxable-equivalent basis) $379.3 $366.8
Average balances of earning assets supported by:
Interest-bearing liabilities $24,661 $23,534
Noninterest-bearing liabilities 6,710 5,932
Total earning assets $31,371 $29,466
Average yields and weighted average rates (taxable-equivalent
basis):
Earning assets yield 8.45% 8.66%
Rate paid on interest-bearing liabilities 4.57 4.52
Gross interest margin 3.88% 4.14%
Net interest margin 4.86% 5.05%
Net interest margin without taxable-equivalent increments 4.80% 5.00%
</TABLE>
TABLE 4. Noninterest Income
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 MARCH 31
(DOLLARS IN MILLIONS) 1996 1995
<S> <C> <C>
Credit card fees $62.8 $51.6
Trust fees 56.2 41.7
Service charges on deposit accounts 33.9 32.1
Investment products fees and commissions 8.5 5.5
Trading account profits and commissions 2.7 3.2
Securities gains 14.6 --
Termination fee, net 115.0 --
Gain on sale of mortgage banking
operations 45.8 --
Other 44.0 45.5
Total noninterest income $383.5 $179.6
</TABLE>
PROVISION FOR CREDIT LOSSES -- The provision for credit losses was $31.0 million
in the first quarter of 1996, up $5.0 million, or 19 percent, from the first
quarter of 1995. Net charge-offs totaled $33.5 million, up $1.4 million, from
the same quarter a year ago, reflecting higher loan volume. Commercial loan net
recoveries for the quarter were $3.5 million, compared with $.7 million in the
first quarter of 1995. Consumer loan net charge-offs increased $4.2 million, or
13 percent, from the first quarter of 1995, to $37.0 million reflecting higher
loan balances.
The allowance for credit losses was $530.1 million at March 31, 1996, up from
$473.5 million at December 31, 1995, and $470.4 million at March 31, 1995,
because of the addition of FirsTier reserves. Reserve coverage remains strong as
the allowance for credit losses to nonperforming loans ratio increased to 461
percent at quarter-end, compared with 401 percent at the end of 1995 and 318
percent at the end of the first quarter of 1995.
NONINTEREST INCOME -- Noninterest income in the first quarter of 1996 was $383.5
million compared with $179.6 million in the first quarter of 1995, an increase
of $203.9 million. Nonrecurring gains included in noninterest income in the
first quarter of 1996 totaled $175.4 million, including the $125 million
termination fee received from First Interstate, net of $10 million in
transaction costs, the $45.8 million in gain on the sale of the Company's
mortgage banking operations, and $14.6 million in net securities gains.
Excluding nonrecurring items, noninterest income was $208.1 million, an increase
of $28.5 million, or 16 percent, from the first quarter of 1995. The improvement
resulted primarily from the addition of FirsTier and other acquisitions and
growth in credit card and trust fees. Credit card fees increased $11.2 million,
or 22 percent, from the first quarter of 1995, reflecting higher sales volumes
for Purchasing Card, Corporate Card, and the First Bank WorldPerks VISA card and
merchant processing. Trust fees increased $14.5 million, or 35 percent, from the
first quarter of 1995, primarily related to the acquisition of the corporate
trust business of BankAmerica. Investment product fees in the first quarter were
higher by $3.0 million, or 55 percent, than in the same period of last year,
reflecting an increase in sales of mutual funds and annuities.
NONINTEREST EXPENSE -- First quarter noninterest expense was $424.4 million, an
increase of $120.1 million, from $304.3 in the first quarter of 1995.
Nonrecurring charges recorded in the first quarter of 1996 totaled $126.8
million. Merger, integration and resizing charges of $69.9 million consisted of
$31.3 million associated with the acquisitions of FirsTier and the BankAmerica
corporate trust business, including costs incurred for systems conversion, lease
terminations and consolidation of facilities, and $38.6 million in branch
distribution resizing expenses. Resizing charges are associated with the
Company's streamlining of the branch distribution network and trust operations.
The Company is expanding alternative distribution channels, including
telemarketing, automated teller machines and in-store branches. The resizing
charges include a valuation adjustment of $25.6 million associated with the
planned sale of bank-owned properties as the Company consolidates branch
locations reducing the space requirements of branch facilities. The Company is
presently marketing these bank-owned facilities and expects to dispose of them
over the next 12 months. Also included in resizing charges is severance of $10
million. The Company also recorded a $29.5 million valuation adjustment, which
is included in goodwill and other intangible assets expense, to reduce the
carrying value of credit card and core deposit intangibles to their estimated
fair value. The credit card intangible was written down following the Company's
evaluation of alternatives to enhance the profitability of a segment of its
credit card portfolio. The core deposit intangible adjustment is due to an
assessment of the mix of deposits and the impact of market interest rates on the
profitability of those deposits at certain acquired entities. Salaries and
benefits expense for the quarter included $10.1 million for a one-time, $750
per-employee bonus to thank employees for staying focused on customers and
shareholder value during the bid for First Interstate. Other noninterest expense
included $17.3 million to acquire credit card and revolving credit software and
to write off other miscellaneous assets.
TABLE 5. Noninterest Expense
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 MARCH 31
(DOLLARS IN MILLIONS, EXCEPT PER EMPLOYEE DATA) 1996 1995
<S> <C> <C>
Salaries $123.4 $112.1
Employee benefits 28.9 28.5
Total personnel expense 152.3 140.6
Goodwill and other intangible assets 47.4 14.1
Net occupancy 25.8 25.7
Furniture and equipment 23.8 23.5
Other personnel costs 9.7 7.6
Professional services 8.3 6.6
Advertising 6.8 6.3
Postage 6.2 5.9
Printing, stationery and supplies 6.0 4.8
Telephone 5.8 5.8
Third party data processing 5.4 4.3
FDIC insurance 3.5 13.6
Merger, integration, and resizing 69.9 --
Other 53.5 45.5
Total noninterest expense $424.4 $304.3
Efficiency ratio* 56.7% 55.7%
Efficiency ratio before nonrecurring items 50.7 55.7
Quarterly average number of employees (full-time
equivalents) 13,246 13,874
Annualized personnel expense per employee $45,991 $40,536
</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.
Excluding nonrecurring charges, noninterest expense totaled $297.6 million, a
decrease of $6.7 million, or 2 percent, from the first quarter of 1995. The
reduction in operating expenses was achieved as a result of lower FDIC premium
expense in 1996, effective acquisition integration, and ongoing expense control.
Compared with noninterest expense for the first quarter of 1995, adjusted to
include the operations of acquired businesses on a pro forma basis, noninterest
expense declined in the current quarter by $45.7 million, or 13 percent.
Excluding nonrecurring items, the Company's efficiency ratio improved to 50.7
percent for the quarter from 55.7 percent for the same quarter a year ago.
Total salaries and benefits expense for the first quarter of 1996, excluding
nonrecurring charges, remained relatively flat at $142.2 million, compared with
$140.6 million for the first quarter of 1995. Average full-time equivalent
employees decreased 5 percent to 13,246 in the first quarter of 1996, from
13,874 in the first quarter of 1995. FDIC insurance expense was lower by $10.1
million, or 74 percent, in the first quarter than in the same period of last
year because the FDIC has suspended the assessment of premiums on deposits
covered by the Bank Insurance Fund, which is now fully funded. The Company
continues to pay insurance premiums on approximately $6.1 billion of deposits
covered by the Savings Association Insurance Fund ("SAIF").
Compared with the same period in 1995, amortization of goodwill and intangibles
for the first quarter, excluding nonrecurring charges, increased $3.8 million,
or 27 percent, as a result of recent acquisitions. The $2.1 million, or 28
percent, increase in other personnel expense and the $1.7 million, or 26
percent, increase in professional services fees related primarily to several
technology projects currently in process. Third party data processing was $1.1
million, or 26 percent, higher in the first quarter of 1996 than in the first
quarter of last year as a result of increased transaction volume in the payment
systems business.
PROVISION FOR INCOME TAXES -- The provision for income taxes was $125.9 million
in the first quarter of 1996, compared with $78.8 million in the first quarter
of 1995. The increase was primarily the result of a higher level of taxable
income, including $31.9 million of taxes related to the nonrecurring items
discussed above.
CONTINGENCIES
Various legislative proposals have been made, but not enacted, that would affect
the SAIF premium assessments, including a one-time special assessment for SAIF
deposits. It is not clear when such legislation will be passed, if at all. Based
on current proposals, the Company may be subject to a special assessment of up
to $57 million.
The Company expects to receive a tax refund of approximately $55 million to $65
million from the State of Minnesota relating to the exemption of interest income
received on investments in U.S. government securities for the years 1979 to
1983. The refund is subject to final audit reports by the State, as well as
appropriate funding authority to pay the claims, both of which are anticipated
in 1996.
BALANCE SHEET ANALYSIS
LOANS -- The Company's loan portfolio increased $478 million, or 2 percent, to
$26.9 billion at March 31, 1996, from $26.4 billion at December 31, 1995. Growth
in most commercial and consumer loan categories was partially offset by a
decrease in residential mortgage-related balances. This decrease reflects the
securitization of $1.3 billion of residential mortgage loans resulting in a
reclassification to available-for-sale securities, during the first quarter of
1996. The securitization will enhance liquidity and financial management
flexibility.
SECURITIES -- At March 31, 1996, securities totaled $4.4 billion compared with
$3.3 billion at December 31, 1995, reflecting the securitization discussed
above.
DEPOSITS -- Noninterest-bearing deposits were $6.6 billion at March 31, 1996, up
slightly from $6.4 billion at December 31, 1995. Interest-bearing deposits were
$17.8 billion at March 31, 1996, up $1.6 billion from December 31, 1995. The
increase in deposit balances reflects the acquisition of FirsTier during the
first quarter of 1996.
BORROWINGS -- Short-term borrowings, which include federal funds purchased,
securities sold under agreements to repurchase and other short-term borrowings,
were $4.2 billion at March 31, 1996, down slightly from $4.4 billion at the end
of 1995. The decrease was primarily due to a $100 million reduction in notes
outstanding under the $5 billion bank/thrift note programs. The remaining
outstanding notes have a weighted average interest rate of 5.39 percent and
range in original maturities from 6 to 9 months.
Long-term debt was $3.5 billion at March 31, 1996, up from $3.2 billion at
December 31, 1995. In March 1996, the Company placed $125 million in 6.875
percent subordinated debt in the form of 10-year noncallable notes. The Company
also issued $300 million in medium-term bank notes during the first quarter of
1996. The effect of these issuances was partially offset by the early retirement
and maturities of approximately $145 million of Federal Home Loan Bank Advances.
CORPORATE RISK MANAGEMENT
CREDIT MANAGEMENT -- The Company's strategy for credit risk management includes
stringent, centralized credit policies, and standard underwriting criteria for
specialized lending categories, such as mortgage banking, real estate
construction, and consumer credit. The strategy also emphasizes diversification
on both a geographic and customer level, regular credit examinations, and
quarterly management reviews of large loans and loans experiencing deterioration
of credit quality. The Company strives to identify potential problem loans
early, take any necessary charge-offs promptly, and maintain strong reserve
levels. In the Company's retail banking operations, a standard credit scoring
system is used to assess consumer credit risks and to price consumer products
accordingly. Commercial banking operations rely on a strong credit culture that
combines prudent credit policies and individual lender accountability. In
addition, the commercial lenders generally focus on middle-market companies
within their regions.
In evaluating its credit risk, the Company considers its loan portfolio
composition, its level of allowance coverage, and macroeconomic concerns. Most
economic indicators in the Company's primary operating region, which includes
Minnesota, Colorado, Montana, North Dakota, South Dakota, Wisconsin, Iowa,
Kansas, Nebraska, Wyoming, and Illinois, compare favorably with national trends.
Approximately 80 percent of the loan portfolio consists of extensions of credit
to customers in this operating region.
TABLE 6.
Summary of Allowance for Credit Losses
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 MARCH 31
(DOLLARS IN MILLIONS) 1996 1995
<S> <C> <C>
Balance at beginning of period $473.5 $474.7
CHARGE-OFFS:
Commercial:
Commercial 5.7 4.6
Financial institutions -- --
Real estate:
Commercial mortgage 5.5 7.3
Construction -- --
Total commercial 11.2 11.9
Consumer:
Residential mortgage 1.0 1.3
Credit card 21.2 23.0
Other 23.1 15.5
Total consumer 45.3 39.8
Total 56.5 51.7
RECOVERIES:
Commercial:
Commercial 8.3 10.2
Financial institutions -- .1
Real estate:
Commercial mortgage 6.4 2.3
Construction -- --
Total commercial 14.7 12.6
Consumer:
Residential mortgage .2 .3
Credit card 2.5 2.7
Other 5.6 4.0
Total consumer 8.3 7.0
Total 23.0 19.6
NET CHARGE-OFFS:
Commercial:
Commercial (2.6) (5.6)
Financial institutions -- (.1)
Real estate:
Commercial mortgage (.9) 5.0
Construction -- --
Total commercial (3.5) (.7)
Consumer:
Residential mortgage .8 1.0
Credit card 18.7 20.3
Other 17.5 11.5
Total consumer 37.0 32.8
Total 33.5 32.1
Provision charged to operating expense 31.0 26.0
Additions related to acquisitions 59.1 1.8
Balance at end of period $530.1 $470.4
Allowance as a percentage of period-end loans 1.97% 1.87%
Allowance as a percentage of nonperforming loans 461 318
Allowance as a percentage of nonperforming assets 337 218
</TABLE>
ANALYSIS OF NET CHARGE-OFFS AND ALLOWANCE FOR CREDIT LOSSES -- Net loan
charge-offs totaled $33.5 million in the first quarter of 1996, up from $32.1
million in the first quarter of 1995. Commercial loan net recoveries for the
quarter were $3.5 million, compared with $.7 million in the first quarter of
1995, reflecting continued improvement in the credit quality of this portfolio.
Consumer loan net charge-offs increased $4.2 million, or 13 percent, from the
first quarter of 1995, reflecting higher loan balances.
TABLE 7. Nonperforming Assets*
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
(DOLLARS IN MILLIONS) 1996 1995
<S> <C> <C>
COMMERCIAL:
Commercial $20.7 $25.1
Real estate:
Commercial mortgage 46.5 42.3
Construction 1.3 1.5
Total commercial 68.5 68.9
CONSUMER:
Residential mortgage 33.4 37.3
Credit card 5.9 5.7
Other 7.1 6.3
Total consumer 46.4 49.3
Total nonperforming loans 114.9 118.2
OTHER REAL ESTATE 36.5 33.2
OTHER NONPERFORMING ASSETS 5.7 2.3
Total nonperforming assets $157.1 $153.7
Accruing loans 90 days or more past due $42.8 $38.8
Nonperforming loans to total loans .43% .45%
Nonperforming assets to total loans plus other real estate .58 .58
</TABLE>
* Throughout this document, nonperforming assets and related ratios do not
include loans more than 90 days past due and still accruing interest.
ANALYSIS OF NONPERFORMING ASSETS -- Nonperforming assets include all nonaccrual
loans, restructured loans, other real estate and other nonperforming assets
owned by the Company. At March 31, 1996, nonperforming assets totaled $157.1
million, up $3.4 million, or 2 percent, from the balance at December 31, 1995.
The increase is due to the addition of approximately $14 million of
nonperforming assets from the FirsTier acquisition. The ratio of nonperforming
assets to loans and other real estate was .58 percent at March 31, 1996, or
unchanged from the level at December 31, 1995.
INTEREST RATE RISK MANAGEMENT -- The Company's policy is to maintain a low
interest rate risk position. The Company limits the exposure of net interest
income to risks associated with interest rate movements through asset/liability
management strategies. The Company's Asset and Liability Management Committee
("ALCO") uses three methods for measuring and managing interest rate risk: Net
Interest Income Simulation Modeling, Static Gap Analysis and Market
Value/Duration Analysis.
Net Interest Income Simulation: The Company has developed a net interest income
simulation model to measure near-term (under one year) risk due to changes in
interest rates. The model is particularly useful because it incorporates
substantially all the Company's assets and liabilities and off-balance sheet
instruments, together with forecasted changes in the balance sheet mix and
assumptions that reflect the current interest rate environment. The balance
sheet changes are based on forecasted prepayments of loans, loan and deposit
growth, and historical pricing spreads. The model is updated monthly with the
current balance sheet structure and the current forecast of expected balance
sheet changes. ALCO uses the model to simulate the effect of immediate and
sustained parallel shifts in the current yield curve of 1 percent, 2 percent and
3 percent. ALCO also calculates the sensitivity of the simulation results to
changes in the key assumptions, such as the Prime/LIBOR spread. The results from
the simulation are reviewed by ALCO monthly and are used to guide ALCO's hedging
strategies. ALCO has established guidelines, approved by the Company's Board of
Directors, that limit the estimated change in net interest income, assuming
modest changes in Prime/LIBOR spreads and deposit pricing lags, over the
succeeding 12 months to approximately 3 percent of forecasted net interest
income, given a 1 percent change in interest rates.
Static Gap Analysis: A traditional gap analysis provides a point-in-time
measurement of the relationship between the repricing amounts of the interest
rate sensitive assets and liabilities. While the gap analysis provides a useful
snapshot of interest rate risk, it does not capture all aspects of interest rate
risk. As a result, ALCO uses the gap analysis primarily for managing interest
rate risk beyond one year and has established guidelines, approved by the
Company's Board of Directors, for the gap position in the one- to three-year
time periods. The Company's natural asset sensitive gap position has been
modified through the use of off-balance sheet hedging instruments to maintain a
low risk position with the cumulative one year position reflecting a negative
gap of $406 million.
Market Value/Duration Analysis: One of the limiting factors of the net interest
income simulation model is its dependence upon accurate forecasts of future
business activity and the resulting effect on balance sheet assets and
liabilities. As a result, its usefulness is greatly diminished for periods
beyond two years. The Company measures this longer-term component of interest
rate risk (referred to as market value or duration risk) by modeling the effect
of interest rate changes on the estimated discounted future cash flows of the
Company's assets, liabilities and off-balance sheet instruments.
TABLE 8. Interest Rate Swap Hedging Portfolio Notional Balances and Yields by
Maturity Date
<TABLE>
<CAPTION>
At March 31, 1996 (Dollars in Millions)
Weighted Weighted
Average Average
Receive Fixed Swaps* Notional Interest Rate Interest Rate
Maturity Date Amount Received Paid
<S> <C> <C> <C>
1996 (remaining nine months) $333 7.97 % 5.39 %
1997 275 6.42 5.33
1998 606 5.99 5.40
1999 575 6.88 5.35
2000 150 6.57 5.30
After 2000** 1,025 6.90 5.41
Total $2,964 6.77 % 5.38 %
</TABLE>
*At March 31, 1996, the Company did not have any swaps in its portfolio that
required it to pay fixed-rate interest.
**At March 31, 1996, all swaps with a maturity after 2000 hedge fixed rate
subordinated notes.
While each of the interest rate risk measurements has limitations, taken
together they represent a comprehensive view of the magnitude of the Company's
interest rate risk over various time intervals. The Company uses a variety of
balance sheet and off-balance sheet financial instruments ("derivatives") to
manage its interest rate risk. The Company manages the forecasted net interest
income at risk by entering into off-balance sheet transactions (primarily
interest rate swaps), investing in fixed rate assets or increasing variable rate
liabilities. To a lesser degree, the Company also uses interest rate caps and
floors to hedge this risk. These derivatives help maintain acceptable levels of
rate risk. The Company does not enter into derivative contracts for speculative
purposes.
As of March 31, 1996, the Company received payments on $3.0 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 6.77 percent and an average variable rate, which is tied to various LIBOR
rates, of 5.38 percent. The maturity of these agreements ranges from one month
to 11 years with an average remaining maturity of 4.38 years. Swaps increased
net interest income for the quarters ended March 31, 1996 and 1995 by $7.9
million and $4.5 million, respectively.
The Company also purchases interest rate caps and floors to minimize the impact
of fluctuating interest rates on earnings. The total notional amount of cap
agreements purchased as of March 31, 1996, was $200 million. The impact of caps
on net interest income was not material for the quarters ended March 31, 1996
and 1995. To hedge against falling interest rates, the Company uses interest
rate floors. The total notional amount of floor agreements purchased as of March
31, 1996 was $1.25 billion. LIBOR- based floors totaled $950 million and
Constant Maturity Treasury floors totaled $300 million. The impact of floors on
net interest income was not material for the quarters ended March 31, 1996 and
1995.
TABLE 9. Capital Ratios
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
(DOLLARS IN MILLIONS) 1996 1995
<S> <C> <C>
Tangible common equity* $2,532 $2,184
As a percent of assets 7.1% 6.5%
Tier 1 capital** $2,286 $1,989
As a percent of risk-adjusted assets 7.1% 6.5%
Total risk-based capital** $3,832 $3,367
As a percent of risk-adjusted assets 11.9% 11.0%
Leverage ratio** 6.7 6.1
</TABLE>
*Defined as common equity less goodwill.
**In accordance with regulatory guidelines, unrealized securities gains and
losses are excluded from these calculations.
CAPITAL MANAGEMENT -- The Company is committed to managing capital for maximum
shareholder benefit and maintaining strong protection for depositors and
creditors. At March 31, 1996, total tangible common equity was $2.5 billion, or
7.1 percent of assets, compared with 6.5 percent at December 31, 1995. The total
risk-based capital ratio increased to 11.9 percent at March 31, 1996, from 11.0
percent at December 31, 1995. The increase in the capital ratios reflects
earnings retention as well as the issuance of common stock to complete the
FirsTier acquisition, partially offset by the related common stock repurchases.
On February 21, 1996, the Board of Directors authorized the repurchase of up to
25 million common shares through December 1997. This new authorization replaces
previous authorizations, which provided for the repurchase of up to 24.3 million
shares through the end of 1996. Approximately 3.7 million shares were
repurchased under this program in the first quarter of 1996, of which 3.4
million related to the FirsTier acquisition.
ACCOUNTING CHANGES
SFAS 121, "ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF" -- The Company adopted Statement of Financial
Accounting Standards No. ("SFAS") 121 on January 1, 1996, 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 is not recoverable. The Company recorded a $25.6
million adjustment to the carrying value of certain bank premises following a
decision to sell several buildings in connection with the streamlining of the
branch distribution network. See Note H for further discussion.
SFAS 123, "ACCOUNTING FOR STOCK-BASED COMPENSATION" -- SFAS 123 provides an
alternative to APB Opinion No. 25, "Accounting for Stock Issued to Employees,"
in accounting for stock-based compensation issued to employees. The Statement
allows for a fair value based accounting method for stock options and similar
equity instruments. Companies that continue to account for such arrangements
under APB Opinion No. 25 must disclose the pro forma effect of its fair value
based accounting for those arrangements on net income and earnings per share.
These disclosure requirements become effective in 1996's year-end financial
statements. The Company continues to account for such arrangements in accordance
with APB Opinion No. 25.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
(IN MILLIONS, EXCEPT SHARES) 1996 1995
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and due from banks $2,053 $1,837
Federal funds sold 24 35
Securities purchased under agreements to resell 556 230
Trading account securities 142 86
Available-for-sale securities 4,430 3,256
Loans 26,878 26,400
Less allowance for credit losses 530 474
Net loans 26,348 25,926
Bank premises and equipment 419 413
Interest receivable 220 197
Customers' liability on acceptances 180 223
Other assets 2,200 1,671
Total assets $36,572 $33,874
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $6,553 $6,357
Interest-bearing 17,793 16,157
Total deposits 24,346 22,514
Federal funds purchased 1,609 2,000
Securities sold under agreements to repurchase 584 269
Other short-term funds borrowed 2,029 2,116
Long-term debt 3,504 3,201
Acceptances outstanding 180 223
Other liabilities 991 826
Total liabilities 33,243 31,149
Shareholders' equity:
Preferred stock 96 103
Common stock, par value $1.25 a share-authorized 200,000,000 shares; issued:
3/31/96 - 144,360,504 shares; 12/31/95 - 135,632,324 shares 180 170
Capital surplus 1,275 909
Retained earnings 1,969 1,918
Unrealized gain (loss) on securities, net of tax (1) 23
Less cost of common stock in treasury: 3/31/96 - 3,277,809 shares; 12/31/95 -
8,297,756 shares (190) (398)
Total shareholders' equity 3,329 2,725
Total liabilities and shareholders' equity $36,572 $33,874
</TABLE>
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
(IN MILLIONS, EXCEPT PER SHARE DATA) MARCH 31 MARCH 31
(UNAUDITED) 1996 1995
<S> <C> <C>
INTEREST INCOME
Loans $574.7 $547.2
Securities:
Taxable 63.8 66.5
Exempt from federal income taxes 4.9 2.8
Other interest income 11.2 9.1
Total interest income 654.6 625.6
INTEREST EXPENSE
Deposits 167.0 178.4
Federal funds purchased and repurchase
agreements 31.4 30.9
Other short-term funds borrowed 32.1 6.5
Long-term debt 49.5 46.5
Total interest expense 280.0 262.3
Net interest income 374.6 363.3
Provision for credit losses 31.0 26.0
Net interest income after provision for credit
losses 343.6 337.3
NONINTEREST INCOME
Credit card fees 62.8 51.6
Trust fees 56.2 41.7
Service charges on deposit accounts 33.9 32.1
Investment products fees and commissions 8.5 5.5
Securities gains 14.6 --
Termination fee 115.0 --
Gain on sale of mortgage banking operations 45.8 --
Other 46.7 48.7
Total noninterest income 383.5 179.6
NONINTEREST EXPENSE
Salaries 123.4 112.1
Employee benefits 28.9 28.5
Goodwill and other intangible assets 47.4 14.1
Net occupancy 25.8 25.7
Furniture and equipment 23.8 23.5
Other personnel costs 9.7 7.6
Professional services 8.3 6.6
Advertising 6.8 6.3
Third party data processing 5.4 4.3
FDIC insurance 3.5 13.6
Merger, integration, and resizing 69.9 --
Other 71.5 62.0
Total noninterest expense 424.4 304.3
Income before income taxes 302.7 212.6
Applicable income taxes 125.9 78.8
Net income $176.8 $133.8
Net income applicable to common equity $175.1 $131.9
EARNINGS PER COMMON SHARE
Average common and common equivalent shares 137,020,911 135,545,733
Net income $1.28 $.97
</TABLE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNREALIZED
COMMON GAINS/(LOSSES)
(IN MILLIONS, EXCEPT SHARES) SHARES PREFERRED COMMON CAPITAL RETAINED ON SECURITIES, TREASURY
(UNAUDITED) OUTSTANDING* STOCK STOCK SURPLUS EARNINGS NET OF TAXES STOCK** TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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)
Issuance of common stock:
Acquisitions 1,619,998 .3 4.3 52.4 57.0
Dividend reinvestment 57,142 .1 2.1 2.2
Stock option and stock
purchase plans 926,355 .7 (2.0) (3.7) 10.9 5.9
Stock warrants exercised 25,926 (.7) .9 .2
Redemption/conversion 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) $(.1) $2,757.4
BALANCE DECEMBER 31, 1995 127,334,568 $103.2 $169.5 $909.3 $1,918.2 $22.5 $(397.8) $2,724.9
Net Income 176.8 176.8
Dividends declared:
Preferred (1.7) (1.7)
Common (59.5) (59.5)
Purchase of treasury
stock (3,713,727) (217.0) (217.0)
Issuance of common stock:
Acquisitions 16,460,215 10.7 361.7 (44.4) 384.2 712.2
Dividend reinvestment 53,514 3.1 3.1
Stock option and stock
purchase plans 694,819 .2 4.4 (13.1) 23.2 14.7
Conversion of preferred
stock 253,306 (7.3) (7.4) 14.7 --
Change in unrealized
gains/(losses) (24.0) (24.0)
BALANCE MARCH 31, 1996 141,082,695 $95.9 $180.4 $1,275.4 $1,968.9 $(1.5) $(189.6) $3,329.5
</TABLE>
*Defined as total common shares less common stock held in treasury.
**Ending treasury shares were 3,277,809 at March 31, 1996; 8,297,756 at
December 31, 1995; 2,976 at March 31, 1995; and 767,000 at December 31, 1994.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 MARCH 31
(UNAUDITED, IN MILLIONS) 1996 1995
<S> <C> <C>
OPERATING ACTIVITIES
Net cash provided by operating activities $189.6 $197.9
INVESTING ACTIVITIES
Net cash provided (used) by:
Interest-bearing deposits with banks -- 28.9
Loans outstanding 483.4 (446.6)
Securities purchased under agreements to resell (285.3) 109.6
Available-for-sale securities:
Sales 921.4 1,739.7
Maturities 432.7 172.0
Purchases (371.1) (138.5)
Proceeds from sales of other real estate 6.1 10.5
Net purchases of bank premises and equipment (16.7) (14.5)
Cash and cash equivalents of acquired subsidiaries 116.5 16.3
Acquisitions, net of cash received (31.2) --
Other -- net 10.9 1.0
Net cash provided by investing activities 1,266.7 1,478.4
FINANCING ACTIVITIES
Net cash used by:
Deposits (936.2) (1,042.5)
Federal funds purchased and securities sold under
agreements to repurchase (260.9) (288.7)
Short-term borrowings (86.8) (393.9)
Long-term debt transactions:
Proceeds 499.0 --
Principal payments (205.7) (73.8)
Redemption of preferred stock -- (13.2)
Proceeds from issuance of common stock 17.8 8.3
Purchase of treasury stock (217.0) (39.7)
Cash dividends (61.2) (50.5)
Net cash used by financing activities (1,251.0) (1,894.0)
Change in cash and cash equivalents 205.3 (217.7)
Cash and cash equivalents at beginning of period 1,871.6 1,841.9
Cash and cash equivalents at end of period $2,076.9 $1,624.2
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 consolidated financial statements and
footnotes included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995. Certain amounts in prior periods have been reclassified
to conform to the current presentation.
NOTE B. Accounting Changes
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF -- Effective January 1, 1996, the Company adopted Statement of
Financial Accounting Standards No. ("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 is not recoverable. The Company recorded a $25.6
million adjustment to the carrying value of certain bank premises following a
decision to sell several buildings in connection with the streamlining of the
branch distribution network. See Note H for further discussion.
The Company also performed an evaluation of those intangible assets not covered
by SFAS 121. In this regard, the Company recorded a charge of $29.5 million of
credit card holder and core deposit intangibles to reduce the carrying value of
these assets to their fair value. The Company performed an analysis of the fair
value of these assets following its reassessment of business alternatives for a
segment of its credit card portfolio and a change in the mix of deposits at
certain acquired entities, respectively.
ACCOUNTING FOR STOCK-BASED COMPENSATION -- SFAS 123, "Accounting for Stock-Based
Compensation," establishes a new fair value based accounting method for
stock-based compensation plans. Companies may continue to apply the accounting
provisions of APB 25, "Accounting for Stock Issued to Employees," in determining
net income; however, they must make pro forma disclosures of net income and
earnings per share as if the fair value based method of accounting defined in
SFAS 123 had been applied. These disclosure requirements are effective beginning
in 1996's year-end financial statements. The Company continues to account for
such arrangements in accordance with APB Opinion No. 25.
NOTE C. Business Combinations and Divestitures
FIRSTIER FINANCIAL, INC. -- On February 16, 1996, the Company issued 16.5
million shares to complete its acquisition of Omaha-based FirsTier Financial,
Inc. ("FirsTier"). FirsTier had $3.7 billion in assets, $2.9 billion in
deposits, and 63 offices in Nebraska and Iowa. Under terms of the purchase
agreement, the Company exchanged .8829 shares of its common stock for each
common share of FirsTier. In addition, FirsTier's outstanding stock options were
converted into stock options for the Company's common stock.
The acquisition of FirsTier was accounted for under the purchase method of
accounting, and accordingly, the purchase price of $717 million was allocated to
assets acquired and liabilities assumed based on their fair market values at the
date of acquisition. The excess of the purchase price over the fair market
values of net assets acquired was recorded as goodwill. Core deposit intangibles
of $63 million will be amortized over the estimated lives of the deposits of
approximately 10 years, and goodwill of $289 million will be amortized over
approximately 25 years. The results of operations of FirsTier have been included
in the Company's Consolidated Statement of Income since the date of acquisition
but did not have a significant effect on earnings.
The following pro forma operating results of the Company assume that the
FirsTier acquisition had occurred at the beginning of each period presented. 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.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
(IN MILLIONS, EXCEPT PER-SHARE AMOUNTS) 1996 1995
<S> <C> <C>
Net interest income $389.3 $391.2
Net income 174.6 139.3
Net income per share 1.22 .95
</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.
BANKAMERICA CORPORATE TRUST BUSINESS -- On August 22, 1995, the Company
announced that it had signed a definitive agreement to acquire the corporate
trust business of BankAmerica Corporation. After the acquisition, the Company
became the nation's leading provider of domestic corporate trust services as
measured by revenues. Approximately 80 percent of the transaction was completed
in December 1995 with the remainder completed in the first quarter of 1996.
SALE OF MORTGAGE BANKING OPERATIONS -- On February 26, 1996, the Company
announced that it had entered into agreements with three parties for the sale of
the Company's servicing and mortgage loan production business. Effective
February 29, 1996, Bank of America, fsb, a subsidiary of BankAmerica
Corporation, purchased approximately $14 billion in mortgage servicing rights
resulting in a net gain of $45.8 million. Columbia, National, Inc., of Maryland,
and Knutson Mortgage Co., of Minnesota, agreed to purchase the Company's loan
production business. The Company will now deliver mortgage loan products through
its bank branches and telemarketing.
FIRST INTERSTATE BANCORP -- On November 6, 1995, the Company and First
Interstate Bancorp ("First Interstate") announced that they had entered into a
definitive agreement whereby the Company would exchange 2.6 shares of its common
stock for each share of First Interstate common stock. On January 24, 1996,
First Interstate announced that it had terminated the merger agreement with the
Company and had entered into a definitive agreement with Wells Fargo & Company
("Wells Fargo"). Under the terms of a settlement agreement, the Company received
$125 million on January 24, 1996. The Company received an additional $75 million
on April 1, 1996, upon consummation of the merger of First Interstate and Wells
Fargo, which will be included in second quarter results. In addition, all
litigation among the parties related to the acquisition of First Interstate has
been settled.
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, 1996 DECEMBER 31, 1995
AMORTIZED FAIR AMORTIZED FAIR
(IN MILLIONS) COST VALUE COST VALUE
<S> <C> <C>
U.S. Treasury $709 $702 $921 $925
Mortgage-backed
securities 2,895 2,901 1,703 1,693
Other U.S. agencies 168 167 157 157
State and political 540 537 174 179
Other 121 123 265 302
Total $4,433 $4,430 $3,220 $3,256
</TABLE>
NOTE E. Loans
The composition of the loan portfolio was as follows:
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
(IN MILLIONS) 1996 1995
<S> <C> <C>
COMMERCIAL:
Commercial $9,336 $8,271
Financial institutions 901 1,060
Real estate:
Commercial mortgage 3,048 2,784
Construction 484 403
Total commercial 13,769 12,518
CONSUMER:
Residential mortgage 3,399 4,655
Residential mortgage held for
sale 258 257
Home equity and second mortgage 2,959 2,805
Credit card 2,469 2,586
Automobile 2,125 1,821
Revolving credit 749 757
Installment 682 607
Student* 468 394
Total consumer 13,109 13,882
Total loans $26,878 $26,400
</TABLE>
*All or part of the student loan portfolio may be sold when the repayment period
begins.
At March 31, 1996, the Company had $69 million in loans considered impaired
under SFAS 114 included in nonaccrual loans. Of this amount, $57 million was
valued using the fair value of the loans' collateral and $12 million was below
the Company's threshold for valuing individual loans. The carrying value of the
impaired loans was less 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, 1996, the average
recorded investment in impaired loans was approximately $69 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) 1996 1995
<S> <C> <C>
Fixed-rate subordinated notes:
6.625% due May 15, 2003 $100 $100
6.00% due October 15, 2003 100 100
7.55% due June 15, 2004 100 100
8.00% due July 2, 2004 125 125
8.35% due November 1, 2004 100 100
7.625% due May 1, 2005 150 150
6.875% due April 1, 2006 125 --
6.875% due September 15, 2007 250 250
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 (4.36% to 7.9%) -
maturities to August 2000 954 1,099
Medium-term notes (5.35% to 8.2%) - maturities to
August 1999 613 580
Bank notes (5.34-6.38%) - maturities to March 1999 600 300
Other 80 90
Total $3,504 $3,201
</TABLE>
NOTE G. Shareholders' Equity
On February 21, 1996, the Board of Directors authorized the repurchase of up to
25 million common shares through December 1997. Approximately 3.7 million shares
have been repurchased under the new program as of March 31, 1996. This new
authorization replaces previous authorizations, which provided for the
repurchase of up to 24.3 million shares through the end of 1996. Under previous
authorizations, the Company repurchased 11.9 million shares in 1995.
NOTE H. Merger, Integration and Resizing Charges
During the first quarter of 1996, the Company recorded merger, integration and
resizing charges of $69.9 million. Merger and integration charges of $31.3
million were associated with the acquisitions of FirsTier and the BankAmerica
corporate trust business. Resizing charges of $38.6 million were associated with
the Company's streamlining of the branch distribution network and trust
operations as the Company expands its alternative distribution channels,
including telemarketing, automated teller machines and in-store branches. The
components of the charges are shown below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
(IN MILLIONS) 1996
<S> <C>
Systems conversions, required customer communications and professional
services $29.7
Premise writedowns 26.0
Severance 14.2
Total merger, integration and resizing charges $69.9
</TABLE>
Systems conversions, required customer communications and professional services
relate to preparation and mailing of numerous customer communications for the
acquisitions and conversion of customer accounts, printing and distribution of
training materials and policy and procedure manuals, outside consulting fees,
and similar expenses related to the conversion and integration of acquired
branches and operations. Premise writedowns include a valuation adjustment of
$25.6 million associated with the planned sale of bank-owned properties as the
Company consolidates and reduces the space requirements of branch facilities.
The Company is presently marketing these bank-owned facilities and expects to
dispose of them over the next 12 months. Severance charges include the cost of
terminations, other benefits, and outplacement costs associated with the
elimination of employees primarily in branch offices and in centralized
corporate support and data processing functions.
The following table presents a summary of activity with respect to the Company's
merger, integration and resizing accrual:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
(IN MILLIONS) 1996
<S> <C> <C>
BALANCE AT DECEMBER 31, 1995 $12.6
Provision charged to operating expense 69.9
Cash outlays (12.6)
Noncash writedowns (26.0)
Balance at March 31, 1996 $43.9
</TABLE>
The Company expects that substantially all remaining costs will be paid by the
end of 1996. Additional noncash writedowns are not expected to be significant.
NOTE I. Income Taxes
The components of income tax expense were:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 MARCH 31
(IN MILLIONS) 1996 1995
<S> <C> <C>
FEDERAL:
Current tax $115.9 $52.8
Deferred tax provision 1.8 18.3
Federal income tax 117.7 71.1
STATE:
Current tax 8.4 3.7
Deferred tax provision
(credit) (.2) 4.0
State income tax 8.2 7.7
Total income tax provision $125.9 $78.8
</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) 1996 1995
<S> <C> <C>
Tax at statutory rate (35%) $105.9 $74.4
State income tax, net of federal tax
benefit 5.3 5.0
Tax effect of:
Tax-exempt interest:
Loans (1.2) (1.3)
Securities (1.7) (1.0)
Amortization of goodwill 16.5 3.4
Other items 1.1 (1.7)
Applicable income taxes $125.9 $78.8
</TABLE>
The Company expects to receive a tax refund of approximately $55 million to $65
million from the State of Minnesota relating to the exemption of interest income
received on investments in U.S. government securities for the years 1979 to
1983. The refund is subject to final audit reports by the State, as well as
appropriate funding authority to pay the claims, both of which are anticipated
in the second quarter of 1996.
The Company's net deferred tax asset was $247.8 million at March 31, 1996, and
$216.3 million at December 31, 1995.
NOTE J. Commitments, Contingent Liabilities and Off-Balance Sheet Financial
Instruments
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS -- In the normal course of business, the
Company uses various financial instruments with off-balance sheet risk to meet
the financing needs of its customers and to manage its interest rate risk. These
instruments carry varying degrees of credit, interest rate or liquidity risk.
The contract or notional amounts of these financial instruments were as follows:
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
(IN MILLIONS) 1996 1995
<S> <C> <C>
Commitments to extend credit:
Commercial $8,145 $7,240
Corporate and purchasing cards 5,917 5,220
Consumer credit card 10,129 9,247
Other consumer 3,435 3,264
Letters of credit:
Standby 1,391 1,412
Commercial 187 161
Interest rate swap contracts:
Hedges 2,964 2,839
Intermediated 179 169
Interest rate options contracts:
Hedge interest rate floors purchased 1,250 1,250
Hedge interest rate caps purchased 200 200
Intermediated interest rate caps and floors
purchased 179 126
Intermediated interest rate caps and floors
written 179 126
Liquidity support guarantees 101 142
Forward contracts 321 294
Commitments to sell loans -- 223
Mortgages sold with recourse 233 242
Foreign currency commitments:
Commitments to purchase 1,087 792
Commitments to sell 1,080 785
</TABLE>
Activity for the three months ending March 31, 1996, with respect to interest
rate swaps which the Company uses to hedge commercial loans, subordinated debt,
bank 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,
1995 $2,838.8
Additions 225.0
Maturities (100.0)
Terminations --
Notional amount outstanding at March 31, 1996 $2,963.8
Weighted average interest rates paid 5.38%
Weighted average interest rates received 6.77%
</TABLE>
The Company receives fixed rates and pays floating rates on all hedges as of
March 31, 1996. Net unamortized deferred gains were $.3 million at March 31,
1996, which amortize through the year 2000.
At March 31, 1996 and December 31, 1995, LIBOR based interest rate floors
totaling $950 million with a remaining maturity of 1.73 years to 2.00 years,
respectively, hedged floating rate commercial loans. The strike rate on these
LIBOR based floors ranged from 3.25 percent to 4.00 percent at March 31, 1996
and December 31, 1995. Constant Maturity Treasury (CMT) interest rate floors
totaling $300 million with a remaining maturity of 6 months and 9 months at
March 31, 1996 and December 31, 1995, respectively, hedged the reinvestment risk
of fixed rate residential mortgage loans. The strike rate on these CMT floors
ranged from 6.25 percent to 6.36 percent at March 31, 1996 and December 31,
1995. At March 31, 1996 and December 31, 1995, the total notional amount of
interest rate caps purchased was $200 million with an average strike level at
6.00 percent.
COMMITMENTS AND CONTINGENT LIABILITIES -- Varous legislative proposals have been
made, but not enacted, that would affect the Savings Association Insurance Fund
("SAIF") premium assessments, including a one-time special assessment for SAIF
deposits. It is not clear when such legislation will be passed, if at all. Based
on current proposals, the Company may be subject to a special assessment of up
to $57 million.
NOTE K. Supplemental Information to the Consolidated Financial Statements
CONSOLIDATED BALANCE SHEET -- Time certificates of deposit in denominations of
$100,000 or more totaled $1,007 million and $900 million at March 31, 1996, and
December 31, 1995, 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 MARCH 31
(IN MILLIONS) 1996 1995
<S> <C> <C>
Income taxes paid $43.5 $36.9
Interest paid 270.2 244.0
Net noncash transfers to foreclosed property 9.7 8.8
Change in unrealized gain (loss) on available-for-sale
securities, net of taxes of $14.7 in 1996 and $30.8 in 1995 (24.0) 49.8
Cash acquisitions of businesses:
Fair value of noncash assets acquired $31.2 $--
Liabilities assumed -- --
Net $31.2 $--
Stock acquisitions of businesses:
Fair value of noncash assets acquired $3,627.9 $329.3
Net cash acquired 116.5 16.3
Liabilities assumed (3,032.2) (288.6)
Net value of common stock issued $712.2 $57.0
</TABLE>
CONSOLIDATED DAILY AVERAGE BALANCE SHEET AND RELATED YIELDS AND RATES
<TABLE>
<CAPTION>
1996 1995 % CHANGE
INTEREST INTEREST AVERAGE
FOR THE THREE MONTHS ENDED MARCH 31 YIELDS YIELDS BALANCE
(IN MILLIONS) AND AND INCREASE
(UNAUDITED) BALANCE INTEREST RATES BALANCE INTEREST RATES (DECREASE)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Securities:
U.S. Treasury $896 $14.0 6.28% $1,065 $16.2 6.17% (15.9)%
Mortgage-backed securities 2,514 43.3 6.93 2,464 41.6 6.85 2.0
State & political subdivisions 344 7.9 9.24 175 4.6 10.66 96.6
U.S. agencies and other 396 6.1 6.20 551 8.3 6.11 (28.1)
Total securities 4,150 71.3 6.91 4,255 70.7 6.74 (2.5)
Unrealized gain (loss) on
available-for-sale securities 33 (138)
Net securities 4,183 4,117
Trading account securities 108 1.3 4.84 82 1.1 5.44 31.7
Federal funds sold and resale agreements 490 6.4 5.25 311 4.6 6.00 57.6
Loans:
Commercial:
Commercial 8,667 174.0 8.07 7,496 163.7 8.86 15.6
Financial institutions 1,029 11.7 4.57 724 6.9 3.87 42.1
Real estate:
Commercial mortgage 2,904 66.2 9.17 2,444 52.9 8.78 18.8
Construction 443 10.4 9.44 357 8.2 9.32 24.1
Total commercial 13,043 262.3 8.09 11,021 231.7 8.53 18.3
Consumer:
Residential mortgage 3,870 74.1 7.70 5,069 96.1 7.69 (23.7)
Residential mortgage held for sale 220 4.0 7.31 174 3.5 8.16 26.4
Home equity and second mortgage 2,879 68.8 9.61 2,445 56.7 9.40 17.8
Credit card 2,500 73.3 11.79 2,294 71.5 12.64 9.0
Other 3,817 94.3 9.94 3,589 89.7 10.14 6.4
Total consumer 13,286 314.5 9.52 13,571 317.5 9.49 (2.1)
Total loans 26,329 576.8 8.81 24,592 549.2 9.06 7.1
Allowance for credit losses 501 478 4.8
Net loans 25,828 24,114 7.1
Other earning assets 294 3.5 4.79 226 3.5 6.28 30.1
Total earning assets* 31,371 659.3 8.45 29,466 629.1 8.66 6.5
Cash and due from banks 1,725 1,677 2.9
Other assets 2,416 2,175 11.1
Total assets $35,044 $32,702 7.2%
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits $6,148 $5,511 11.6 %
Interest-bearing deposits:
Interest checking 3,000 10.2 1.37 2,967 12.4 1.69 1.1
Money market accounts 4,078 36.3 3.58 3,739 34.3 3.72 9.1
Other savings accounts 1,648 8.9 2.17 1,933 12.2 2.56 (14.7)
Savings certificates 7,272 97.6 5.40 8,347 102.3 4.97 (12.9)
Certificates over $100,000 901 14.0 6.25 1,078 17.2 6.47 (16.4)
Total interest-bearing deposits 16,899 167.0 3.97 18,064 178.4 4.01 (6.4)
Short-term borrowings 4,498 63.5 5.68 2,535 37.4 5.98 77.4
Long-term debt 3,264 49.5 6.10 2,935 46.5 6.43 11.2
Total interest-bearing liabilities 24,661 280.0 4.57 23,534 262.3 4.52 4.8
Other liabilities 1,102 1,020 8.0
Preferred equity 101 106 (4.7)
Common equity 3,012 2,623 14.8
Unrealized gain (loss) on
available-for-sale
securities, net of taxes 20 (92) (121.7)
Total liabilities and shareholders'
equity $35,044 $32,702 7.2%
Net interest income $379.3 $366.8
Gross interest margin 3.88% 4.14%
Gross interest margin without taxable-
equivalent increments 3.82% 4.09%
Net interest margin 4.86% 5.05%
Net interest margin without taxable-
equivalent increments 4.80% 5.00%
</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 67th Annual
Meeting of Stockholders of First Bank System, Inc. was held on Wednesday, April
17, 1996, at the Minneapolis Convention Center. John F. Grundhofer, Chairman,
President and Chief Executive Officer, presided.
The holders of 125,135,445 shares of common stock, 86.8 percent of the
144,143,244 outstanding shares entitled to vote as of the record date, were
represented at the meeting in person or by proxy. The candidates for election as
Class I Directors listed in the proxy statement were elected to serve three-year
terms expiring at the 1999 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, 1996, was approved. The
1996 Stock Incentive Plan was approved. The proposal to amend the Company's
Employee Stock Purchase Plan to increase the shares of the Company's Common
Stock available for issuance thereunder was approved.
SUMMARY OF MATTERS VOTED UPON BY SHAREHOLDERS
<TABLE>
<CAPTION>
NUMBER OF SHARES
IN FAVOR WITHHELD
<S> <C> <C> <C> <C>
Election of Class I Directors:
Roger L. Hale 123,423,623 1,711,822
Richard L. Knowlton 123,406,042 1,729,403
Edward J. Phillips 123,368,029 1,767,416
James J. Renier 123,380,587 1,754,858
Richard L. Schall 123,374,197 1,761,248
In Favor Against Abstained Non Vote
Other Matters:
Ratification of appointment of Ernst & Young LLP
as independent auditors 123,677,195 397,197 1,061,053 0
Approval of 1996 Stock Incentive Plan 83,473,286 27,922,197 1,400,500 12,339,462
Amendment to Employee Stock Purchase Plan 101,369,495 10,073,819 1,352,669 12,339,462
</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
3 Bylaws of First Bank System, Inc.*
10A First Bank System, Inc. 1996 Stock Incentive Plan*
10B First Bank System, Inc. Restated Employee Stock Purchase 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, 1996, the Company filed the following
Current Reports on Form 8-K:
Form 8-K filed January 9, 1996, relating to fourth quarter 1995 earnings.
Form 8-K filed January 19, 1996, discussing a change to the previously
announced capital management program.
Form 8-K filed on January 29, 1996, discussing the termination of its merger
agreement with First Interstate Bancorp.
* 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.
By: /s/ David J. Parrin
David J. Parrin
Senior Vice President and Controller
(Chief Accounting Officer and Duly
Authorized Officer)
DATE: May 14, 1996
First Bank System
P.O. BOX 522
MINNEAPOLIS, MINNESOTA
55480
First Class
U.S. Postage
PAID
Permit No. 2440
Minneapolis, MN
SHAREHOLDER INQUIRIES
FINANCIAL INFORMATION
FBS news and financial results are available by fax, mail or on-line.
Fax.
To access FBS's fax-on-demand service, call 1-800-758-5804. When asked, enter
FBS's extension number, 312402. Enter "1" for the most current news release or
"2" for a menu of recent releases. Enter your fax and phone numbers as directed.
The information will be faxed to you immediately.
Mail.
If you don't have access to a fax machine or prefer not to use FBS's
fax-on-demand service, we will, on request, automatically mail to you our
quarterly earnings news release. To be added to FBS's mailing list, please
contact Corporate Relations, First Bank System, First Bank Place, Minneapolis,
Minnesota, 55402, (612) 973-2434.
Internet.
For information about FBS, including news releases, product information, and a
list of service locations, access FBS's home page on the world wide web. The
address is www.fbs.com. For further information contact John Danielson, Senior
Vice President, (612) 973-2261, or Karin Glasgow, Assistant Vice President,
(612) 973-2264.
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 2598, Jersey City, New
Jersey 07303-2598, (800) 446-2617.
Amended as
of 04/17/96
BYLAWS
OF
FIRST BANK SYSTEM, INC.
ARTICLE I.
OFFICES
Section 1. Offices.
The registered office of the Corporation in the State of Delaware shall be
in the City of Wilmington, County of New Castle, State of Delaware.
The Corporation shall have offices at such other places as the Board of
Directors may from time to time determine.
ARTICLE II.
STOCKHOLDERS
Section 1. Annual Meeting.
The annual meeting of the stockholders for the election of Directors and
for the transaction of such other business as may properly come before the
meeting shall be held on such date as the Board of Directors shall each year
fix. Each such annual meeting shall be held at such place, within or without the
State of Delaware, and hour as shall be determined by the Board of Directors.
The day, place and hour of such annual meeting shall be specified in the notice
of annual meeting.
The meeting may be adjourned from time to time and place to place until
its business is completed.
Section 2. Special Meeting.
Special meetings of stockholders may be called by the Board of Directors
or the chief executive officer. The notice of such meeting shall state the
purpose of such meeting and no business shall be transacted thereat except as
stated in the notice thereof. Any such meeting may be held at such place within
or without the State of Delaware as may be fixed by the Board of Directors or
the Chief Executive Officer, and as may be stated in the notice of such meeting.
Section 3. Notice of Meeting.
Notice of every meeting of the stockholders shall be given in the manner
prescribed by law.
Section 4. Quorum.
Except as otherwise required by law, the Certificate of Incorporation or
these Bylaws, the holders of not less than one-third of the shares entitled to
vote at any meeting of the stockholders, present in person or by proxy, shall
constitute a quorum and the act of the majority of such quorum shall be deemed
the act of the stockholders.
If a quorum shall fail to attend any meeting, the chairman of the meeting
may adjourn the meeting to another place, date, or time.
Section 5. Qualification of Voters.
The Board of Directors may fix a day and hour not more than sixty nor less
than ten days prior to the day of holding any meeting of the stockholders as the
time as of which the stockholders entitled to notice of and to vote at such
meeting shall be determined. Only those persons who were holders of record of
voting stock at such time shall be entitled to notice of and to vote at such
meeting.
Section 6. Procedure.
The presiding officer at each meeting of stockholders shall conclusively
determine the order of business, all matters of procedure and whether or not a
proposal is proper business to be transacted at the meeting and has been
properly brought before the meeting.
The Board shall appoint two or more inspectors of election to serve at
every meeting of the stockholders at which Directors are to be elected.
Section 7. Nomination of Directors.
Only persons nominated in accordance with the following procedures shall
be eligible for election by stockholders as Directors. Nominations of persons
for election as Directors at a meeting of stockholders called for the purpose of
electing Directors may be made (a) by or at the direction of the Board of
Directors or (b) by any stockholder in the manner herein provided. For a
nomination to be properly made by a stockholder, the stockholder must give
written notice to the Secretary of the Corporation so as to be received at the
principal executive offices of the Corporation not later than (i) with respect
to an annual meeting of stockholders, 90 days in advance of such meeting and
(ii) with respect to a special meeting of stockholders for the election of
directors, the close of business on the seventh day following the date on which
the notice of such meeting is first given to stockholders. Each such notice
shall set forth (a) the name and address of the stockholder who intends to make
the nomination and of the person or persons to be nominated; (b) a
representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice; (c) a description of all arrangements or understanding between the
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the stockholder; (d) such other information regarding each nominee proposed by
such stockholder as would have been required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission had
each nominee been nominated, or intended to be nominated, by the Board; and (e)
the consent of each nominee to serve as a Director of the Corporation if so
elected.
ARTICLE III.
DIRECTORS
Section 1. Number and Election.
The Board of Directors of the Corporation shall consist of sixteen
Directors. Commencing with the annual election of Directors by the stockholders
in 1986, the Directors shall be divided into three classes: Class I, Class II
and Class III, each such class, as nearly as possible, to have the same number
of Directors. The term of office of the initial Class I Directors shall expire
at the annual election of Directors by the stockholders in 1987, the term of
office of the initial Class II Directors shall expire at the annual election of
Directors by the stockholders in 1988, and the term of office of the initial
Class III Directors shall expire at the annual election of Directors by the
stockholders in 1989. At each annual election of Directors by the stockholders
held after 1985, the Directors chosen to succeed those whose terms have then
expired shall be identified as being of the same class as the Directors they
succeed and shall be elected by the stockholders for a term expiring at the
third succeeding annual election of Directors. In all cases, Directors shall
hold office until their respective successors are elected by the stockholders
and have qualified.
In the event that the holders of any class or series of stock of the
Corporation having a preference as to dividends or upon liquidation of the
Corporation shall be entitled, by a separate class vote, to elect Directors as
may be specified pursuant to Article Fourth of the Corporation's Restated
Certificate of Incorporation, then the provisions of such class or series of
stock with respect to their rights shall apply. The number of Directors that may
be elected by the holders of any such class or series of stock shall be in
addition to the number fixed pursuant to the preceding paragraph. Except as
otherwise expressly provided pursuant to Article Fourth of the Corporation's
Restated Certificate of Incorporation, the number of Directors that may be so
elected by the holders of any such class or series of stock shall be elected for
terms expiring at the next annual meeting of stockholders and without regard to
the classification of the remaining members of the Board of Directors and
vacancies among Directors so elected by the separate class vote of any such
class or series of stock shall be filled by the remaining Directors elected by
such class or series, or, if there are no such remaining Directors, by the
holders of such class or series in the same manner in which such class or series
initially elected a Director.
If at any meeting for the election of Directors, more than one class of
stock, voting separately as classes, shall be entitled to elect one or more
Directors and there shall be a quorum of only one such class of stock, that
class of stock shall be entitled to elect its quota of Directors notwithstanding
the absence of a quorum of the other class or classes of stock.
Section 2. Vacancies.
Vacancies and newly created directorships resulting from an increase in
the number of Directors shall be filled by a majority of the Directors then in
office, although less than a quorum, or by a sole remaining Director, and such
Directors so chosen shall hold office until the next election of the class for
which such Directors shall have been chosen, and until their successors are
elected and qualified.
Section 3. Regular Meetings.
Regular meetings of the Board shall be held at such times and places as
the Board may from time to time determine.
Section 4. Special Meetings.
Special meetings of the Board may be called at any time, at any place and
for any purpose by the Chairman of the Board, or the President, or by any
officer of the Corporation upon the request of a majority of the entire Board.
Section 5. Notice of Meetings.
Notice of regular meetings of the Board need not be given.
Notice of every special meeting of the Board shall be given to the
Directors at their usual places of business, or at such other addresses as shall
have been furnished by them for the purpose. Such notice shall be given at least
twelve hours (three hours if meeting is to be conducted by conference telephone)
before the meeting by telephone or by being personally delivered, mailed, or
telegraphed. Such notice need not include a statement of the business to be
transacted at, or the purpose of, any such meeting.
Section 6. Quorum.
Except as may be otherwise provided by law or in these Bylaws, the
presence of one-third of the entire Board shall be necessary and sufficient to
constitute a quorum for the transaction of business at any meeting of the Board,
and the act of a majority of such quorum shall be deemed the act of the Board.
Less than a quorum may adjourn any meeting of the Board from time to time
without notice.
Section 7. Participation in Meetings by Conference Telephone.
Members of the Board, or of any committee thereof, may participate in a
meeting of such Board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other and such participation shall constitute presence in
person at such meeting.
Section 8. Powers.
The business, property, and affairs of the Corporation shall be managed by
or under the direction of its Board of Directors, which shall have and may
exercise all the powers of the Corporation to do all such lawful acts and things
as are not by law, or by the Certificate of Incorporation, or by these Bylaws,
directed or required to be exercised or done by the stockholders.
Section 9. Compensation of Directors.
Directors shall receive such compensation for their services as shall be
determined by a majority of the entire Board provided that Directors who are
serving the Corporation as officers or employees and who receive compensation
for their services as such officers or employees shall not receive any salary or
other compensation for their services as Directors.
Section 10. Committees of the Board.
A majority of the entire Board of Directors may designate one or more
standing or temporary committees consisting of one or more Directors. The Board
may invest such committees with such powers and authority, subject to the
limitations of law and such conditions as it may see fit.
ARTICLE IV.
EXECUTIVE COMMITTEE
Section 1. Election.
At any meeting of the Board, an Executive Committee, composed of the
Chairman of the Board, the President, and not less than three other members, may
be elected by a majority vote of the entire Board to serve until the Board shall
otherwise determine. Either the Chairman of the Board or the President,
whichever is the chief executive officer, shall be the Chairman of the Executive
Committee, and the other shall be the Vice Chairman thereof, unless the Board
shall otherwise determine. Members of the Executive Committee shall be members
of the Board.
Section 2. Powers.
The Executive Committee shall have and may exercise all of the powers of
the Board of Directors when the Board is not in session, except that, unless
specifically authorized by the Board of Directors, it shall have no power to (a)
elect directors or officers; (b) alter, amend, or repeal these Bylaws or any
resolution of the Board of Directors relating to the Executive Committee; (c)
declare any dividend or make any other distribution to the stockholders of the
Corporation; (d) appoint any member of the Executive Committee; or (e) take any
other action which legally may be taken only by the Board.
Section 3. Rules.
The Executive Committee shall adopt such rules as it may see fit with
respect to the calling of its meetings, the procedure to be followed thereat,
and its functioning generally. Any action taken with the written consent of all
members of the Executive Committee shall be as valid and effectual as though
formally taken at a meeting of said Executive Committee.
Section 4. Vacancies.
Vacancies in the Executive Committee may be filled at any time by a
majority vote of the entire board.
ARTICLE V.
OFFICERS
Section 1. Number.
The officers of the Corporation shall be appointed or elected by the Board
of Directors. The officers shall be a Chairman of the Board, a President, one or
more Vice Chairmen, such number of Vice Presidents or other officers as the
Board may from time to time determine, a Secretary, a Treasurer, and a
Controller. The Chairman of the Board shall be the Chief Executive Officer
unless the Board shall determine otherwise. The Chairman of the Board or, in his
absence or if such office be vacant, the President shall preside at all meetings
of the stockholders and of the Board. In the absence of the Chairman of the
Board and the President, any other Board member designated by the Board may
preside at all meetings of the stockholders and of the Board. The Board of
Directors may appoint or elect a person as a Vice Chairman without regard to
whether such person is a member of the Board of Directors.
Section 2. Staff and Divisional Officers.
The Chief Executive Officer may appoint at his discretion such persons to
hold the title of staff vice president, divisional chairman, divisional
president, divisional vice president or other similar designation. Such persons
shall not be officers of the Corporation and shall retain such title at the sole
discretion of the Chief Executive Officer who may at his will and from time to
time make or revoke such designation.
Section 3. Terms of Office.
All officers, agents, and employees of the Corporation shall hold their
respective offices or positions at the pleasure of the Board of Directors or the
appropriate appointing authority and may be removed at any time by such
authority with or without cause.
Section 4. Duties.
The officers, agents, and employees shall perform the duties and exercise
the powers usually incident to the offices or positions held by them
respectively, and/or such other duties and powers as may be assigned to them
from time to time by the Board of Directors or the Chief Executive Officer.
ARTICLE VI.
INDEMNIFICATION OF DIRECTORS, OFFICERS, AND EMPLOYEES
Section 1.
The Corporation shall indemnify to the full extent permitted by, and in
the manner permissible under the Delaware General Corporation Law, as amended
from time to time, any person made, or threatened to be made, a party to any
action, suit, or proceeding, whether criminal, civil, administrative, or
investigative, by reason of the fact that such person is or was a director,
advisory director, or officer of the Corporation or any predecessor of the
Corporation, or served any other enterprise as a director, advisory director or
officer at the request of the Corporation or any predecessor of the Corporation.
The foregoing rights of indemnification shall not be deemed exclusive of any
other rights to which any director, advisory director, or officer may be
entitled apart from the provisions of this Article.
The Board of Directors in its discretion shall have power on behalf of the
Corporation to indemnify any person, other than a director, advisory director or
officer, made a party to any action, suit, or proceeding by reason of the fact
that such person, or the testator or intestate of such person, is or was an
employee of the Corporation.
Section 2.
Expenses incurred by a director, advisory director or officer in defending
a civil or criminal action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director, advisory director or officer
to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized by Delaware law.
Such expenses incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the Board of Directors deems appropriate.
ARTICLE VII.
STOCK
Section 1. Stock Certificates.
The interest of each stockholder of the Corporation shall be evidenced by
a certificate or certificates for shares of stock in such form as the Board of
Directors may from time to time prescribe. The shares of the stock of the
Corporation shall be transferable on the books of the Corporation by the holder
thereof in person or by his attorney upon surrender for cancellation of a
certificate or certificates for the same number of shares with an assignment and
power of transfer endorsed thereon or attached thereto, duly executed, and with
such proof of the validity of the signature as the Corporation or its agents may
reasonably require.
Section 2. Signatures.
The certificates of stock shall be signed by the Chairman, President, or a
Vice President and by the Secretary or an Assistant Secretary, provided that if
such certificates are signed by a transfer agent or transfer clerk and by a
registrar, the signatures of such Chairman, President, Vice President,
Secretary, or Assistant Secretary may be facsimiles, engraved, or printed.
Section 3. Replacement.
No certificate for shares of stock in the Corporation shall be issued in
place of any certificate alleged to have been lost, stolen, or destroyed except
upon production of such evidence of such loss, theft, or destruction and upon
delivery to the Corporation of a bond of indemnity in such amount, and upon such
terms and secured by such surety as the Board of Directors or the Executive
Committee in its discretion may require.
ARTICLE VIII.
MISCELLANEOUS
Section 1. Seal.
The Corporation seal shall bear the name of the Corporation, the date 1929
and the words "Corporation Seal, Delaware".
Section 2. Fiscal Year.
The fiscal year of the Corporation shall begin on the first day of January
in each year and shall end on the thirty-first day of December following.
ARTICLE IX.
AMENDMENTS
Section 1.
These Bylaws, or any of them, may from time to time be supplemented,
amended, or repealed (a) by a majority vote of the entire Board of Directors or
(b) at any annual or special meeting of the stockholders.
ARTICLE X.
EMERGENCY BYLAW
Section 1. Operative Event.
The Emergency Bylaw provided in this Article X shall be operative during
any emergency resulting from an attack on the United States, any nuclear or
atomic incident, or other event which creates a state of disaster of sufficient
severity to prevent the normal conduct and management of the affairs and
business of the Corporation, notwithstanding any different provision in the
preceding articles of the Bylaws or in the Certificate of Incorporation of the
Corporation or in the General Corporation Law of Delaware. To the extent not
inconsistent with this Emergency Bylaw, the Bylaws provided in the preceding
Articles shall remain in effect during such emergency and upon the termination
of such emergency the Emergency Bylaw shall cease to be operative unless and
until another such emergency shall occur.
Section 2. Notice of Meeting.
During any such emergency, any meeting of the Board of Directors may be
called by any officer of the Corporation or by any Director. Notice shall be
given by such person or by any officer of the Corporation. The notice shall
specify the place of the meeting, which shall be the head office of the
Corporation at the time if feasible and otherwise any other place specified in
the notice. The notice shall also specify the time of the meeting. Notice may be
given only to such of the Directors as it may be feasible to reach at the time
and by such means as may be feasible at the time, including publication or
radio. If given by mail, messenger, telephone, or telegram, the notice shall be
addressed to the Directors at their residences or business addresses, or such
other places as the person giving the notice shall deem most suitable. Notice
shall be similarly given, to the extent feasible, to the other persons serving
as Directors referred to in Section 3 below. Notice shall be given at least two
days before the meeting if feasible in the judgment of the person giving the
notice and otherwise on any shorter time he may deem necessary.
Section 3. Quorum.
During any such emergency, at any meeting of the Board of Directors, a
quorum shall consist of one-third of the number of Directors fixed at the time
pursuant to Article III of the Bylaws. If the Directors present at any
particular meeting shall be fewer than the number required for such quorum,
other persons present, to the number necessary to make up such quorum, shall be
deemed Directors for such particular meeting as determined by the following
provisions and in the following order of priority:
(a) All Executive Vice Presidents of the Corporation in order of their
seniority of first election to such office, or if two or more shall have
been first elected to such office on the same day, in the order of their
seniority in age; and
(b) All Senior Vice Presidents of the Corporation in order of their
seniority of first election to such office, or if two or more shall have
been first elected to such office on the same day, in the order of their
seniority in age; and
(c) All Vice Presidents of the Corporation in order of their seniority of
first election to such office, or if two or more shall have been first
elected to such office on the same day, in the order of their seniority in
age; and
(d) Any other persons that are designated on a list that shall have been
approved by the Board of Directors before the emergency, such persons to
be taken in such order of priority and subject to such conditions as may
be provided in the resolution approving the list.
Section 4. Lines of Management Succession.
The Board of Directors, during as well as before any such emergency, may
provide and from time to time modify lines of succession in the event that
during such an emergency any or all officers or agents of the Corporation shall
for any reason be rendered incapable of discharging their duties.
Section 5. Office Relocation.
The Board of Directors, during as well as before any such emergency, may,
effective in the emergency, change the head office or designate several
alternative head offices or regional offices, or authorize the officers to do
so.
Section 6. Liability.
No officer, director, or employee acting in accordance with this Emergency
Bylaw shall be liable except for willful misconduct.
Section 7. Repeal or Amendment.
This Emergency Bylaw shall be subject to repeal or change by further
action of the Board of Directors or by action of the stockholders, except that
no such repeal or change shall modify the provisions of the next preceding
paragraph with regard to action or inaction prior to the time of such repeal or
change. Any such amendment of this Emergency Bylaw may make any further or
different provision that may be practical and necessary for the circumstances of
the emergency deems it to be in the best interest of the Corporation to do so.
EXHIBIT 10.a
FIRST BANK SYSTEM, INC.
1996 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE; EFFECT ON PRIOR PLANS.
(a) PURPOSE. The purpose of the First Bank System, Inc. 1996 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. The Company hereby adopts these proposed
amendments and restatements of the 1991 Stock Incentive Plan and the 1994 Stock
Incentive Plan, subject to stockholder approval. As so amended, restated,
established and approved, the Plan shall be known as the 1996 Stock Incentive
Plan. All outstanding options issued, restricted stock issued and other awards
issued under other plans of the Company shall remain subject to the terms and
conditions of the plans under which they were issued, but shares of stock
relating to outstanding options, restricted stock or other awards under the 1991
Stock Incentive Plan and the 1994 Stock Incentive Plan are considered as shares
of stock subject to the Plan under Section 4 of the Plan.
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 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) "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(g) of the Plan.
(g) "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(g), 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.
(h) "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.
(i) "Non-Qualified Stock Option" shall mean an option granted under
Section 6(a) of the Plan, or Section 6(g) of the Plan in the case of grants to
Non-Employee Directors, that is not intended to be an Incentive Stock Option.
(j) "Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option.
(k) "Other Stock-Based Award" shall mean any right granted under
Section 6(e) of the Plan.
(l) "Participant" shall mean an Eligible Person designated to be
granted an Award under the Plan.
(m) "Performance Award" shall mean any right granted under Section 6(d)
of the Plan.
(n) "Person" shall mean any individual, corporation, partnership,
association or trust.
(o) "Restricted Stock" shall mean any Share granted under Section 6(c)
of the Plan.
(p) "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.
(q) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities
and Exchange Commission under the Securities Exchange Act of 1934.
(r) "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 7(c) of the Plan.
(s) "Stock Appreciation Right" shall mean any right granted under
Section 6(b) of the Plan.
SECTION 3. ADMINISTRATION.
The Plan shall be administered by the Committee; provided, however,
that Section 6(g) 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(g). Subject to the terms of the Plan and applicable law, and
except with respect to Section 6(g) 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.
SECTION 4. SHARES AVAILABLE FOR AWARDS.
(a) SHARES AVAILABLE. Subject to adjustment as provided in Section
7(c), the number of Shares available for granting Awards under the Plan shall be
17,000,000 (5,000,000 of which were previously authorized under the 1991 Stock
Incentive Plan, 5,000,000 of which were previously authorized under the 1994
Stock Incentive Plan and 7,000,000 of which will be authorized upon stockholder
approval of the Plan). Not more than 1,000,000 of such Shares will be available
for grant of additional Awards of Restricted Stock following the effective date
of the Plan determined in accordance with Section 10 of the Plan. 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 of the Plan, shall again be
available for granting Awards under the Plan.
(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) INCENTIVE STOCK OPTIONS. Notwithstanding the foregoing, the number
of Shares available for granting Incentive Stock Options under the Plan shall
not exceed 7,000,000, subject to adjustment as provided in the Plan and Section
422 or 424 of the Code or any successor provisions.
(d) 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
1,000,000 Shares, in the aggregate, in any calendar year beginning with the year
commencing January 1, 1996. 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(g) 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 granted under this Plan or any other stock option
plan of the Company. 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 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) 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(e) 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.
(f) GENERAL. Except as otherwise specified with respect to Awards to
Non-Employee Directors pursuant to Section 6(g) 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.
(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(g) 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(g) 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.
(g) 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(g).
Each Non-Employee Director serving on the Company's Board of Directors
immediately prior to the 1996 Annual Meeting of Stockholders of the Company was
granted an Option to purchase 2,500 Shares (subject to adjustment pursuant to
Section 7(c) of the Plan) pursuant to the terms of the 1991 Stock Incentive
Plan. Each Non-Employee Director first elected or appointed to the Company's
Board of Directors after the 1996 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 7(c) of the
Plan). After the initial grant to each Non-Employee Director as set forth above
in this Section 6(g), 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
commencing with the 1996 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 1,500 Shares (subject to adjustment pursuant to Section 7(c)
of the Plan).
Each Non-Qualified Stock Option granted to a Non-Employee Director
pursuant to this Section 6(g) 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(g) 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.
Except as hereinafter provided, each Option granted pursuant to this
Section 6(g) (including those Options granted pursuant to Section 6(h) of the
1991 Stock Incentive Plan as provided therein) shall 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(g) 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.
All grants of Non-Qualified Stock Options pursuant to this Section 6(g)
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 be a full recourse note and shall (A) be secured
by the Shares to be delivered upon exercise of such Option, (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.
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(g) 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) ADJUSTMENTS. In the event 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 or other similar corporate transaction or
event affecting the Shares would be reasonably likely to result in the
diminution or enlargement of any of the benefits or potential benefits intended
to be made available under the Plan or under an Award (including, without
limitation, the benefits or potential benefits of provisions relating to the
term, vesting or exercisability of any Option, the availability of any tandem
stock appreciation rights or "reload" option rights, if any, contained in any
Option Award, and any "change in control" or similar provisions of any Award),
the Committee (or, in the case of grants under Section 6(g) of the Plan, the
Board of Directors) shall, in such manner as it shall deem equitable or
appropriate in order to prevent such diminution or enlargement of any such
benefits or potential benefits, 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) CORRECTION OF DEFECTS, OMISSIONS AND INCONSISTENCIES. The Committee
(or, in the case of grants under Section 6(g) 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.
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.
SECTION 9. GENERAL PROVISIONS.
(a) NO RIGHTS TO AWARDS. Except as otherwise provided in Section 6(g)
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(g) 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(g)
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 FRACTIONAL 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(g) 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.
(k) SECTION 16 COMPLIANCE. The Plan is intended to comply in all
respects with Rule 16b-3 or any successor provision, as in effect from time to
time and in all events the Plan shall be construed in accordance with the
requirements of Rule 16b-3. If any Plan provision does not comply with Rule
16b-3 as hereafter amended or interpreted, the provision shall be deemed
inoperative. The Board of Directors, in its absolute discretion, may bifurcate
the Plan so as to restrict, limit or condition the use of any provision of the
Plan with respect to persons who are officers or directors subject to Section 16
of the Securities and Exchange Act of 1934, as amended, without so restricting,
limiting or conditioning the Plan with respect to other Participants.
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.
EXHIBIT 10.b
FIRST BANK SYSTEM, INC.
EMPLOYEE STOCK PURCHASE PLAN 1984
(As Amended and Restated February 15, 1989 and
As Amended and Restated April 24, 1991
and reflecting further amendments through
April 17, 1996)
ARTICLE I. INTRODUCTION
Section 1.01 Purpose. The purpose of this 1984 Employee Stock Purchase
Plan (amended and restated as of February 15, 1989) (the "Plan") is to provide
employees of First Bank System, Inc., a Delaware corporation (the "Company"),
and certain related corporations with an opportunity to share in the ownership
of the Company by providing them with a convenient means for regular and
systematic purchases of the Company's Common Stock, par value $1.25 per share,
and, thus, to develop a stronger incentive to work for the continued success of
the Company. The Plan shall constitute an amendment and restatement of the
Company's existing 1984 Employee Stock Purchase Plan (as amended January 31,
1987) (the "Former Plan") and as such shall supersede and replace the Former
Plan. No additional offers to purchase shares of the Company's Common Stock or
any other rights or benefits shall be provided or granted under the Former Plan;
provided, however, that the Former Plan shall deem to be outstanding to the
extent necessary solely for the purpose of determining the terms and conditions
of any such purchase offer or other rights previously granted under the Former
Plan.
Section 1.02 Rules of Interpretation. It is intended that the Plan be
an "employee stock purchase plan"as defined in Section 423(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), and Treasury Regulations
promulgated thereunder, if approved by the Company's shareholders. Accordingly,
the Plan will be interpreted and administered in a manner consistent therewith
if so approved. All Participants in the Plan will have the same rights and
privileges consistent with the provisions of the Plan.
Section 1.03 Definitions. For purposes of the Plan, the following terms
will have the meanings set forth below:
(a) "Acceleration Date" means the earlier of the date of shareholder
approval or approval by the Company's Board of Directors of (i) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of Company Stock
would be converted into cash, securities or other property, other than a merger
of the Company in which shareholders immediately prior to the merger have the
same proportionate ownership of stock in the surviving corporation immediately
after the merger; (ii) any sale lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all, of
the assets of the Company; or (iii) any plan of liquidation or dissolution of
the Company.
(b) "Affiliate" means any parent or subsidiary corporation of the
Company, as defined in Sections 425(e) and 425(f) of the Code, whether now or
hereafter acquired or established.
(c) "Committee" means the committee appointed under Section 10.01.
(d) "Company" means First Bank System, Inc. a Delaware corporation, and
its successors by merger or consolidation as contemplated by Article XI herein.
(e) "Current Compensation" means all gross cash compensation (including
wage, salary, incentive, bonus and overtime earnings) paid by the Company or an
Affiliate to a Participant, but excluding all expense allowances or
reimbursements, stock options and compensation or income payable in a form other
than cash, but including amounts which would have constituted compensation but
for a Participant's election to defer or reduce compensation pursuant to any
deferred compensation, cafeteria, capital accumulation or any other similar plan
provided by the Company.
(f) "Fair Market Value" as of a given date means such value of the
Common Stock as reasonably determined by the committee but which is not less
than the last sale price as reported by the New York Stock Exchange.
(g) "Participant" means a Permanent Full-Time Employee who is eligible
to participate in the Plan under Section 2.01 and who has elected to participate
in the Plan.
(h) "Participating Affiliate" means an Affiliate which has been
designated by the Committee in advance of the Purchase Period in question as a
corporation whose eligible Permanent Full-Time Employees may participate in the
Plan.
(i) "Permanent Full-Time Employee" means an employee of the Company or
a Participating Affiliate as of the first day of a Purchase Period, including an
officer or director who is also an employee, except an employee whose customary
employment is less than 20 hours per week or any employee who has not been
employed by the Company or its Affiliates for more than one (1) year.
(j) "Plan" means the First Bank System, Inc. 1984 Employee Stock
Purchase Plan as amended and restated as of February 15, 1989), the provisions
of which are set forth herein.
(k) "Purchase Period" means a period beginning on such business day as
may be designated by the Committee prior thereto and ending on the earlier of
such business day as may be designated by the Committee prior to the first
business day of such Purchase Period or any Acceleration Date; provided,
however, that in no event shall the Committee designate a Purchase Period which
is less than six (6) months in duration.
(l) "Stock" means the Company's Common Stock, $1.25 par value, as such
stock may be adjusted for changes in the stock or the Company as contemplated by
Article XI herein.
(m) "Stock Purchase Account" means the account maintained on the books
and records of the Company recording the amount received from each Participant
through payroll deductions made under the Plan.
ARTICLE II. ELIGIBILITY AND PARTICIPATION
Section 2.01 Eligible Employees. All Permanent Full-Time Employees
shall be eligible to participate in the Plan beginning on the first day of the
first Purchase Period to commence after such person becomes a Permanent
Full-Time Employee. Subject to the provisions of Article VI, each such employee
will continue to be eligible to participate in the Plan so long as he or she
remains a Permanent Full-Time Employee.
Section 2.02 Election to Participate. An eligible Permanent Full-Time
Employee may elect to participate in the Plan for a given Purchase Period by
filing with the Company, in advance of that Purchase Period and in accordance
with such terms and conditions as the Committee in its sole discretion may
impose, a form provided by the Company for such purpose (which authorizes
regular payroll deductions from Current Compensation beginning with the first
payday in that Purchase Period and continuing until the employee withdraws from
the Plan or ceases to be eligible to participate in the Plan).
Section 2.03 Limits on Stock Purchase. No employee shall be granted any
right to purchase Stock hereunder if such employee, immediately after such a
right to purchase is granted, would own, directly or indirectly, within the
meaning of Section 423(b)(3) and Section 425(d) of the Code, stock possessing 5%
or more of the total combined voting power or value of all the then classes of
the capital stock of the Company or of all Affiliates.
Section 2.04 Voluntary Participation. Participation in the Plan on the
part of the Participant is voluntary and such participation is not a condition
of employment nor does participation in the Plan entitle a Participant to be
retained as an employee.
ARTICLE III. PAYROLL DEDUCTIONS AND
STOCK PURCHASE ACCOUNT
Section 3.01 Deduction from Pay. The form described in Section 2.02
will permit a participant to elect payroll deductions of any whole dollar amount
or whole percentage of Current Compensation for each pay period, subject to such
limitations as the Committee in its sole discretion may impose. A Participant
may cease making payroll deductions at any time, as provided in Section 6.01.
Section 3.02 Credit to Account. Payroll deductions will be credited to
the Participant's Stock Purchase Account on each payday.
Section 3.03 Interest. No interest will be paid upon payroll deductions
or on any amount credited to, or on deposit in, a Participant's Stock Purchase
Account.
Section 3.04 Nature of Account. The Stock Purchase Account is
established solely for accounting purposes, and all amounts credited to the
Stock Purchase Account will remain part of the general assets of the Company or
the Participating Affiliate (as the case may be).
Section 3.05 No Additional Contributions. A Participant may not make
any payment into the Stock Purchase Account other than the payroll deductions
made pursuant to the Plan.
ARTICLE IV. RIGHT TO PURCHASE SHARES
Section 4.01 Number of Shares. Each Participant will have the right to
purchase on the last business day of the Purchase Period all, but not less than
all, of the largest number of whole shares of Stock that can be purchased at the
price specified in Section 4.02 with the entire credit balance in the
Participant's Stock Purchase Account, subject to the limitations that (a) no
more than 5,000 shares of Stock may be purchased under the Plan by any one
Participant for a given Purchase Period and (b) in accordance with Section
423(b)(8) of the Code, no more than $25,000 in Fair Market Value (determined at
the beginning of each Purchase Period) of Stock and other stock may be purchased
under the Plan and all other employee stock purchase plans (if any) of the
Company and the Affiliates by any one Participant for each calendar year. If the
purchases for all Participants would otherwise cause the aggregate number of
shares of Stock to be sold under the Plan to exceed the number specified in
Section 10.03, however, each Participant shall be allocated a pro rata portion
of the Stock to be sold.
Section 4.02 Purchase Price. The purchase price for any Purchase Period
shall be that price as announced by the Committee prior to the first business
day of that Purchase Period, which price may, in the discretion of the
Committee, be a price which is not fixed or determinable as of the first
business day of that Purchase Period; provided, however, that in no event shall
the purchase price for any Purchase Period be less than (a) 85% of the Fair
Market Value of the Stock on the first business day of that Purchase Period or
(b) 85% of the Fair Market Value of the Stock on the last business day of that
Purchase Period, in each case rounded up to the next higher full cent, whichever
is lower.
ARTICLE V. EXERCISE OF RIGHT
Section 5.01 Purchase of Stock. On the last business day of a Purchase
Period, the entire credit balance in each Participant's Stock Purchase Account
will be used to purchase the largest number of whole shares of Stock purchasable
with such amount (subject to the limitations of Section 4.01), unless the
Participant has filed with the Company, in advance of that date and subject to
such terms and conditions as the Committee in its sole discretion may impose, a
form provided by the Company (which elects to receive the entire credit balance
in cash).
Section 5.02 Cash Distributions. Any amount remaining in a
Participant's Stock Purchase Account after the last business day of a Purchase
Period will be paid to the Participant in cash within 30 days after the end of
that Purchase Period.
Section 5.03 Notice of Acceleration Date. The Company shall use its
best efforts to notify each Participant in writing at least ten days prior to
any Acceleration Date that the then current Purchase Period will end on such
Acceleration Date.
ARTICLE VI. WITHDRAWAL FROM PLAN
Section 6.01 Voluntary Withdrawal. A Participant may, in accordance
with such terms and conditions as the Committee in its sole discretion may
impose, withdraw from the Plan and cease making payroll deductions by filing
with the Company a form provided for this purpose. In such event, the entire
credit balance in the Participant's Stock Purchase Account will be paid to the
Participant in cash within 30 days. A Participant who withdraws from the Plan
will not be eligible to reenter the Plan until the beginning of the next
Purchase Period.
Section 6.02 Death. Subject to such terms and conditions as the
Committee in its sole discretion may impose, upon the death of a Participant, no
further amounts shall be credited to the Participant's Stock Purchase Account.
Thereafter, on the last business day of the Purchase Period during which such
Participant's death occurred and in accordance with Section 5.01, the entire
credit balance in such Participant's Stock Purchase Account will be used to
purchase Stock, unless Participant's estate has filed with the Company, in
advance of that day and subject to such terms and conditions as the Committee in
it sole discretion may impose, a form provided by the Company which elects to
have the entire credit balance in such Participant's Stock Purchase Account will
be used to purchase Stock, unless Participant's estate has filed with the
Company, in advance of that day and subject to such terms and conditions as the
Committee in its sole discretion may impose, a form provided by the Company
which elects to have the entire credit balance in such participant's Stock
Account distributed in cash, in accordance with Section 5.02 or at such earlier
time as the Committee in its sole discretion may decide. Each Participant,
however, may designate one or more beneficiaries who, upon death, are to receive
the stock or the amount that otherwise would have been distributed or paid to
the Participant's estate and may change or revoke any such designation from time
to time. No such designation, change or revocation will be effective unless made
by the Participant in writing and filed with the Company during the
Participant's lifetime. Unless the Participant has otherwise specified in the
beneficiary designation, the beneficiary or beneficiaries so designated will
become fixed as of death so that, if a beneficiary survives the Participant but
dies before the receipt of the payment due such beneficiary, the payment will be
made to such beneficiary's estate.
Section 6.03 Termination of Employment. Subject to such terms and
conditions as the Committee in its sole discretion may impose, upon a
Participant's normal or early retirement with the consent of the Company under
any pension or retirement plan of the Company or Participating Affiliate, no
further amounts shall be credited to the Participant's Stock Purchase Account.
Thereafter, on the last business day of the Purchase Period during which such
Participant's approved retirement occurred and in accordance with Section 5.01,
the entire credit balance in such Participant's Stock Purchase Account will be
used to purchase Stock, unless such Participant has filed with the Company, in
advance of that day and subject to such terms and conditions as the Committee in
its sole discretion may impose, a form provided by the Company which elects to
receive the entire credit balance in such Participant's Stock Purchase Account
in cash, in accordance with Section 5.02; provided, however, that such
Participant shall have no right to purchase Stock in the event that the last day
of such a Purchase Period occurs more than three (3) months following the
termination of such Participant's employment with the Company by reason of such
an approved retirement. In the event of any other termination of employment
(other than death) with the Company or a Participatory Affiliate by a
Participant, participation in the Plan will cease on the date the Participant
ceases to be a Permanent Full-Time Employee for any reason. In such event, the
entire credit balance in such Participant's Stock Purchase Account will be paid
to the Participant in cash within 30 days. For purposes of this Section, a
transfer of employment to any Affiliate, or a leave of absence which has been
approved by the Committee, will not be deemed a termination of employment as a
Permanent Full-Time Employee.
ARTICLE VII. NONTRANSFERABILITY
Section 7.01 Nontransferable Right to Purchase. The right to purchase
Stock hereunder may not be assigned, transferred, pledged or hypothecated
(whether by operation of law or otherwise), except as provided in Section 6.02,
and will not be subject to execution, attachment or similar process. Any
attempted assignment, transfer, pledge, hypothecation or other disposition or
levy of attachment or similar process upon the right to purchase will be null
and void and without effect.
Section 7.02 Nontransferable Account. Except as provided in Section
6.02, the amounts credited to a Stock Purchase Account may not be assigned,
transferred, pledged or hypothecated in any way, and any attempted assignment,
transfer, pledge, hypothecation or other disposition of such amount will be null
and void and without effect.
ARTICLE VIII. STOCK CERTIFICATES
Section 8.01 Delivery. Promptly after the last day of each Purchase
Period and subject to such terms and conditions as the Committee in its sole
discretion may impose, the Company will cause to be delivered to or for the
benefit of the Participant a certificate representing the Stock purchased on the
last business day of such Purchase Period.
Section 8.02 Securities Laws. The Company shall not be required to
issue or deliver any certificate representing Stock prior to registration under
the Securities Act of 1933, as amended, or registration or qualification under
any state law if such registration is required. The Company will use its best
efforts to accomplish such registration (if and to the extent required) not
later than a reasonable time following the Purchase Period, and delivery of
certificates may be deferred until such registration is accomplished.
Section 8.03 Completion of Purchase. A Participant will have no
interest in the Stock purchased until a certificate representing the same is
issued to or for the benefit of the Participant.
Section 8.04 Form of Ownership. The certificates representing Stock
issued under the Plan will be registered in the name of the Participant or
jointly in the name of the Participant and another person, as the Participant
may direct on a form provided by the Company.
ARTICLE IX. EFFECTIVE DATE AND AMENDMENT OR
TERMINATION OF PLAN
Section 9.01 Effective Date. The Plan will become effective on February
15, 1989, but only if the Plan is approved by the Company's shareholders at
their 1989 annual meeting.
Section 9.02 Powers of Board. The Board of Directors of the Company may
at any time amend or terminate the Plan, except that no amendment will be made
without prior approval of the shareholders which would (a) authorize an increase
in the number of shares of Stock which may be purchased under the Plan, except
as provided in Section 11.01, (b) permit the issuance of Stock before payment
therefor in full, or (c) reduce the price per share at which the Stock may be
purchased.
Section 9.03 Automatic Termination. No Purchase Period shall begin
after May 1, 2001.
ARTICLE X. ADMINISTRATION
Section 10.01 Appointment of Committee. The Board of Directors of the
Company shall appoint a Committee to administer the Plan consisting of three or
more persons (who may, but need not be, directors of the Company or of a
Participating Affiliate). The Board will determine the size of the Committee
from time to time and will have the power to remove and replace the members
thereof.
Section 10.02. Powers of Committee. Subject to the provisions of the
Plan, the Committee will have full authority to administer the Plan, including
authority to interpret and construe any provision of the Plan, to establish
deadlines by which the various administrative forms must be received in order to
be effective, and to adopt such other rules and regulations for administering
the Plan as it may deem appropriate. The Committee shall have full and complete
authority to determine whether all or any part of the Stock acquired pursuant to
the Plan shall be subject to restrictions on the transferability thereof or any
other restrictions affecting in any manner a Participant's rights with respect
thereto but any such restrictions shall be contained in the form by which a
Participant elects to participate in the Plan pursuant to Section 2.02.
Decisions of the Committee will be final and binding on all parties who have an
interest in the Plan.
Section 10.03 Stock to be Sold. The Stock to be issued and sold under
the Plan may be treasury stock or authorized but unissued Stock, or the Company
may purchase Stock in the market for sale under the Plan. Except as provided in
Section 11.01, the aggregate number of shares of Stock to be sold under the Plan
will not exceed 4,600,000 shares.
Section 10.03. Notices. Notices to the Committee should be addressed as
follows:
First Bank System, Inc.
1200 First Bank Place East
Minneapolis, Minnesota 55480
Attn: Employee Stock Purchase Plan Committee
ARTICLE XI. ADJUSTMENT FOR CHANGES
IN STOCK OR COMPANY
Section 11.01 Stock Dividend or Reclassification. If the outstanding
shares of Stock are increased, decreased, changed into or exchanged for a
different number or kind of securities of the Company, or shares of a different
par value or without par value, through reorganization, recapitalization,
reclassification, stock dividend, stock split, amendment to the Company's
Articles of Incorporation, reverse stock split or otherwise, an appropriate
adjustment shall be made in the maximum numbers and/or kind of securities to be
sold under this Plan with a corresponding adjustment in the purchase price to be
paid therefor.
Section 11.02 Merger or Consolidation. If the Company is merged into or
consolidated with one or more corporations during the term of the Plan,
appropriate adjustments will be made to give effect thereto on an equitable
basis in terms of issuance of shares of the corporation surviving the merger or
of the consolidated corporation, as the case may be.
ARTICLE XII. APPLICABLE LAW
Rights to purchase Stock granted under this Plan shall be construed and
shall take effect in accordance with the laws of the State of Minnesota.
ARTICLE XIII. PARTICIPATION OF NON-EMPLOYEE DIRECTORS
Section 13.01 Eligible Directors. Each director of the Company is
eligible to participate in the Plan pursuant to this Article XIII unless such
director is an employee of the Company or Affiliate. An eligible director is
herein referred to as a "non-employee Director." A Non-employee Director shall
be eligible to participate in the Plan beginning on the first day of the first
Purchase Period to commence after such person becomes a Non-employee Director.
Subject to the provisions of this Article XIII, each such Non-employee Director
will continue to be eligible to participate in the Plan so long as he or she
remains a Non-employee Director.
Section 13.02 Election to Participate. A Non-employee Director may
elect to participate in the Plan by filing with the Company, in advance of the
first succeeding Purchase Period following adoption of this Article XIII or, in
the case of a newly appointed or elected Non-employee Director, following such
appointment or election, a form provided by the Company for such purpose (which
authorizes the Company to deduct for the purchase of Stock hereunder all or a
portion of the Director Compensation (as defined below) that such Non-employee
Director is entitled to receive for the period beginning with the first day in
that Purchase Period and continuing until the Non-employee Director ceases to be
eligible to participate in the Plan). "Director Compensation" shall mean all
amounts which the director would be entitled to receive for serving as a
director in the relevant Purchase Periods, including fees for attendance at
meetings of the Board of Directors or any committee of the Board of Directors or
for any other services as a director of the Company.
Section 13.03. Deduction from Director Compensation. The form described
in Section 13.02 will permit a Non-employee Director to elect deductions of any
whole dollar amount or whole percentage of Director Compensation to be used to
purchase Stock hereunder. Director Compensation will be credited to the
Non-employee Director's Stock Purchase Account on each day that Director
Compensation would otherwise be paid to such Non-employee Director, subject to
Section 3.04.
Section 13.04 Interest. No interest will be paid upon deductions from
Director Compensation or on any amount credited to, or on deposit in, a
Nonemployee Director's Stock Purchase Account.
Section 13.05 No Additional Contributions. A Non-employee Director may
not make any payment into the Stock Purchase Account other than the deductions
from Director Compensation made pursuant to the Plan.
Section 13.06 Purchase of Shares; Purchase Price.
(a) Each Non-employee Director will automatically purchase on the last
day of the Purchase Period all of the largest number of whole shares of stock
that can be purchased at the purchase price specified in Section 13.06(b) with
the entire credit balance in the Non-employee Director's Stock Purchase Account.
Any amount remaining in a Non-employee Director's Stock Purchase Account after
the last business day of a Purchase Period will remain in the Non-employee
Director's Stock Purchase Account, except that for the Purchase Period in which
the Non-employee Director ceases to be eligible to participate in the Plan, any
amount remaining in such account after giving effect to the purchase for such
period will be paid to the Non-employee director in cash within 30 days.
(b) The purchase price for Non-employee Directors for any Purchase
Period shall be the lower of (i) 85% of the Fair Market Value of the Stock on
the first business day of that Purchase Period or (b) 85% of the Fair Market
Value of the Stock on the last business day of that Purchase Period, in each
case rounded up to the next higher full cent.
Section 13.07 No Voluntary Withdrawal. A Non-employee Director may not
voluntarily withdraw from the Plan.
Section 13.08 Death. Upon the death of a Non-employee Director, no
further amounts shall be credited to the Non-employee Director's Stock Purchase
Account. Thereafter, on the last business day of the Purchase Period during
which such Non-employee Director's death occurred and in accordance with Section
13.06, the entire credit balance in such Non-employee Director's Stock Purchase
Account will be used to purchase Stock. Each Non-employee Director, however, may
designate one or more beneficiaries who, upon death, are to receive the stock
and any amount that otherwise would have been distributed or paid to the
Non-employee Director's estate and may change or revoke any such designation
from time to time. No such designation, change or revocation will be effective
unless made by the Non-employee Director in writing and filed with the Company
during the Non-employee Director's lifetime. Unless the Non-employee Director
has otherwise specified in the beneficiary designation, the beneficiary or
beneficiaries so designated will become fixed as of death so that, if a
beneficiary survives the Non-employee Director but dies before the receipt of
the payment due such beneficiary, the payment will be made to such beneficiary's
estate.
Section 13.10 Termination as a Director. Participation in the Plan will
cease on the date the Non-employee Director ceases to be eligible to participate
in the Plan pursuant to Section 13.01. In such event, on the last business day
of the Purchase Period during which such Non-employee Director ceased to be
eligible under Section 13.01 and in accordance with Section 13.06 the entire
credit balance in such Non-employee Director's Stock Purchase Account will be
used to purchase Stock.
Section 13.11 Nontransferable Right to Purchase. The right to purchase
Stock hereunder may not be assigned, transferred, pledged or hypothecated
(whether by operation of law or otherwise), except as provided in Section 13.08
and will not be subject to execution, attachment or similar process. Any
attempted assignment, transfer, pledge, hypothecation or other disposition or
levy of attachment or similar process upon the right to purchase will be null
and void and without effect.
Section 13.12 Nontransferable Account. Except as provided in Section
13.08 the amounts credited to a Stock Purchase Account may not be assigned,
transferred, pledged or hypothecated in any way, and any attempted assignment,
transfer, pledge, hypothecation or other disposition of such amounts will be
null and void and without effect.
Section 13.13 Stock Certificates. All matters pertaining to the
issuance and delivery of and the Non-employee Director's interest in the Stock
purchased pursuant to this Plan and the certificates representing such Stock
shall be governed by Article VIII.
Section 13.14 Tax Matters. This Article XIII is not subject to Section
423 of the Code or any other provision of the Plan which refers to, or is based
upon, such section. For tax purposes, this Article XIII shall be treated as
separate and apart from the balance of the Plan.
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) 1996 1995
<S> <C> <C>
PRIMARY:
Average shares outstanding 134,586,125 133,797,144
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 2,434,786 1,748,589
137,020,911 135,545,733
Net income $176.8 $133.8
Preferred dividends (1.7) (1.9)
Net income applicable to common equity $175.1 $131.9
Net income per common share $1.28 $.97
FULLY DILUTED:*
Average shares outstanding 134,586,125 133,797,144
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 2,693,688 2,151,338
Assumed conversion of Series 1991A Preferred Stock 3,443,702 3,655,684
140,723,515 139,604,166
Net income $176.8 $133.8
Preferred dividends, excluding 1991A Preferred Stock -- --
Net income applicable to common equity $176.8 $133.8
Net income per common share $1.26 $.96
</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
(Dollars In Millions) 1996
<S> <C> <C>
EARNINGS
1. Net income $176.8
2. Applicable income taxes 125.9
3. Net income before taxes (1 + 2) $302.7
4. Fixed charges:
a. Interest expense excluding interest on deposits $113.0
Portion of rents representative of interest and amortization of debt
b. expense 6.6
c. Fixed charges excluding interest on deposits (4a + 4b) 119.6
d. Interest on deposits 167.0
e. Fixed charges including interest on deposits (4c + 4d) $286.6
5. Amortization of interest capitalized $--
6. Earnings excluding interest on deposits (3 + 4c + 5) 422.3
7. Earnings including interest on deposits (3 + 4e + 5) 589.3
8. Fixed charges excluding interest on deposits (4c) 119.6
9. Fixed charges including interest on deposits (4e) 286.6
RATIO OF EARNINGS TO FIXED CHARGES
10. Excluding interest on deposits (line 6/line 8) 3.53
11. Including interest on deposits (line 7/line 9) 2.06
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FIRST
BANK SYSTEM, INC. MARCH 31, 1996, 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,053,000
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 580,000
<TRADING-ASSETS> 142,000
<INVESTMENTS-HELD-FOR-SALE> 4,430,000
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 26,878,000
<ALLOWANCE> 530,000
<TOTAL-ASSETS> 36,572,000
<DEPOSITS> 24,346,000
<SHORT-TERM> 4,222,000
<LIABILITIES-OTHER> 991,000
<LONG-TERM> 3,504,000
0
96,000
<COMMON> 180,000
<OTHER-SE> 3,053,000
<TOTAL-LIABILITIES-AND-EQUITY> 36,572,000
<INTEREST-LOAN> 574,700
<INTEREST-INVEST> 68,700
<INTEREST-OTHER> 11,200
<INTEREST-TOTAL> 654,600
<INTEREST-DEPOSIT> 167,000
<INTEREST-EXPENSE> 280,000
<INTEREST-INCOME-NET> 374,600
<LOAN-LOSSES> 31,000
<SECURITIES-GAINS> 14,600
<EXPENSE-OTHER> 424,400
<INCOME-PRETAX> 302,700
<INCOME-PRE-EXTRAORDINARY> 176,800
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 176,800
<EPS-PRIMARY> 1.28
<EPS-DILUTED> 1.26
<YIELD-ACTUAL> 4.86
<LOANS-NON> 114,800
<LOANS-PAST> 42,800
<LOANS-TROUBLED> 100
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 473,500
<CHARGE-OFFS> 56,500
<RECOVERIES> 23,000
<ALLOWANCE-CLOSE> 530,100
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
