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 SEPTEMBER 30, 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.
Class Outstanding as of October 31, 1996
Common Stock, $1.25 Par Value 134,518,031 shares
FINANCIAL SUMMARY
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THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Income before nonrecurring items $ 169.1 $ 145.7 $ 496.3 $ 417.4
Nonrecurring items (31.6) -- 72.1 --
Net income $ 137.5 $ 145.7 $ 568.4 $ 417.4
PER COMMON SHARE
Primary income before nonrecurring items $ 1.22 $ 1.08 $ 3.56 $ 3.05
Nonrecurring items (.23) -- .52 --
Primary net income $ .99 $ 1.08 $ 4.08 $ 3.05
Fully diluted income before nonrecurring items $ 1.20 $ 1.06 $ 3.50 $ 2.99
Nonrecurring items (.22) -- .51 --
Fully diluted net income $ .98 $ 1.06 $ 4.01 $ 2.99
Earnings on a cash basis before nonrecurring items* $ 1.34 $ 1.16 $ 3.91 $ 3.30
Nonrecurring items (.23) -- .71 --
Earnings on a cash basis (fully diluted)* $ 1.11 $ 1.16 $ 4.62 $ 3.30
Dividends paid .4125 .3625 1.2375 1.0875
Common shareholders' equity 22.84 20.33
RETURN ON AVERAGE ASSETS
Income before nonrecurring items 1.90% 1.76% 1.87% 1.70%
Nonrecurring items (.35) -- .27 --
Return on average assets 1.55% 1.76% 2.14% 1.70%
RETURN ON AVERAGE COMMON EQUITY
Income before nonrecurring items 21.4% 21.2% 21.2% 20.9%
Nonrecurring items (4.0) -- 3.2 --
Return on average common equity 17.4% 21.2% 24.4% 20.9%
Net interest margin (taxable-equivalent basis) 4.91% 4.85% 4.89% 4.94%
Efficiency ratio before nonrecurring items 49.8 51.3 50.2 54.0
Efficiency ratio 58.1 53.9 51.4 54.8
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1996 1995
<S> <C> <C>
PERIOD END
Loans $27,037 $26,400
Allowance for credit losses 521 474
Assets 36,843 33,874
Total shareholders' equity 3,181 2,725
Tangible common equity to total
assets 6.7% 6.5%
Tier 1 capital ratio 6.7 6.5
Total risk-based capital ratio 11.4 11.0
Leverage ratio 6.4 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
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PART I -- FINANCIAL INFORMATION
Management's Discussion and Analysis of Financial Condition and Results of Operations (Item 2) 2
Financial Statements (Item 1) 14
PART II -- OTHER INFORMATION
Exhibits and Reports on Form 8-K (Item 6) 27
Signature 27
Exhibit 3 -- Bylaws of First Bank System, Inc., as amended **
Exhibit 10A -- First Bank System, Inc. 1996 Stock Incentive Plan, as amended **
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 28
Exhibit 12 -- Computation of Ratio of Earnings to Fixed Charges 29
Exhibit 27 -- Article 9 Financial Data Schedule **
</TABLE>
**Copies of this exhibit will be furnished upon request and payment of the
Company's reasonable expenses in furnishing the exhibit.
MANAGEMENT'S DISCUSSION AND ANALYSIS
EARNINGS SUMMARY
First Bank System, Inc. (the "Company") reported third quarter 1996 operating
earnings (net income excluding nonrecurring items) of $169.1 million, an
increase of $23.4 million, or 16 percent, from the third quarter of 1995. On a
per share basis, operating earnings were $1.22 in the third quarter of 1996,
compared with $1.08 in the third quarter of 1995. Return on average assets and
return on average common equity, excluding nonrecurring items, were 1.90 percent
and 21.4 percent, compared with returns of 1.76 percent and 21.2 percent in the
third quarter of 1995. Excluding nonrecurring items, the efficiency ratio (the
ratio of expenses to revenues) improved to 49.8 percent from 51.3 percent in the
third quarter of 1995.
Net income of $137.5 million in the third quarter of 1996 included a $51 million
($31.6 million, or $.23 per share on an after-tax basis) one-time special
assessment by the Federal Deposit Insurance Corporation ("FDIC") on deposits
insured by the Savings Association Insurance Fund ("SAIF"). On a per share
basis, net income was $.99 compared with $1.08 in the third quarter of 1995.
Return on average assets and return on average common equity were 1.55 percent
and 17.4 percent, compared with returns of 1.76 percent and 21.2 percent in the
third quarter of 1995.
Third quarter operating results reflected growth in net interest and noninterest
income, controlled operating expenses, and effective capital management. Net
interest income on a taxable-equivalent basis was $391.3 million, an increase of
$30.8 million (9 percent) from the third quarter of 1995. Noninterest income
increased $34.8 million (19 percent) from the third quarter of 1995, excluding
nonrecurring items, primarily as a result of growth in credit card and trust
fees. Excluding nonrecurring items, third quarter 1996 noninterest expense
increased $24.4 million (9 percent) compared with the same period in 1995
primarily because of acquisitions. Compared with noninterest expense for third
quarter 1995, adjusted to include acquisitions and exclude divestitures,
noninterest expense declined $11.6 million, or 4 percent, in the third quarter
of 1996.
Net income for the first nine months of 1996 was $568.4 million, or $4.08 per
share, compared with $417.4 million, or $3.05 per share, in 1995. Year-to-date
return on average assets and return on average common equity were 2.14 percent
and 24.4 percent compared with returns of 1.70 percent and 20.9 percent
year-to-date 1995.
Nonrecurring items totaled $72.1 million ($138.0 million on a pre-tax basis), or
$.52 per share for the first nine months of 1996. Nonrecurring gains were: $190
million, net of expenses, received for the termination of the First Interstate
Bancorp ("First Interstate") merger agreement; a $65 million refund of state
income taxes, including interest; $45.8 million in gain on the sale of the
Company's mortgage banking operations; and, $15 million in net securities gains.
In addition to the $51 million SAIF special assessment, nonrecurring 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.
TABLE 1. Summary of Consolidated Income
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THREE MONTHS ENDED NINE MONTHS ENDED
(TAXABLE-EQUIVALENT BASIS; SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest income $ 672.0 $ 640.9 $ 2,001.5 $ 1,913.4
Interest expense 280.7 280.4 839.1 823.1
Net interest income 391.3 360.5 1,162.4 1,090.3
Provision for credit losses 35.0 31.0 101.0 84.0
Net interest income after provision for credit
losses 356.3 329.5 1,061.4 1,006.3
Nonrecurring gains -- 31.0 315.8 31.0
Other noninterest income 220.3 185.5 647.9 554.8
Nonrecurring charges 51.0 31.0 177.8 31.0
Other noninterest expense 304.5 280.1 908.3 887.6
Income before income taxes 221.1 234.9 939.0 673.5
Taxable-equivalent adjustment 5.4 3.4 15.6 10.4
Income taxes 78.2 85.8 355.0 245.7
Net income $ 137.5 $ 145.7 $ 568.4 $ 417.4
Return on average assets 1.55% 1.76% 2.14% 1.70%
Return on average common equity 17.4 21.2 24.4 20.9
Net interest margin 4.91 4.85 4.89 4.94
Efficiency ratio 58.1 53.9 51.4 54.8
Efficiency ratio before nonrecurring items 49.8 51.3 50.2 54.0
Per Common Share:
Net income $ .99 $ 1.08 $ 4.08 $ 3.05
Dividends paid .4125 .3625 1.2375 1.0875
</TABLE>
Excluding nonrecurring items, operating earnings for the first nine months of
1996 were $496.3 million, an increase of $78.9 million (19 percent) compared
with 1995. On a per share basis, operating earnings were $3.56 in the first nine
months compared with $3.05 in 1995, a 17 percent increase. On the same basis,
year-to-date return on average assets was 1.87 percent, up from 1.70 percent in
1995; return on average common equity was 21.2 percent, up from 20.9 percent in
1995; and the efficiency ratio was 50.2 percent, down from 54.0 percent in 1995.
Credit quality remained strong in the third quarter of 1996. Nonperforming
assets totaled $145.7 million at September 30, 1996, down $8.0 million (5
percent) and $21.2 million (13 percent) from December 31, 1995 and September 30,
1995. The ratio of the allowance for credit losses to nonperforming loans at
quarter-end was 431 percent compared with 401 percent at the end of 1995 and 400
percent at September 30, 1995. See "Analysis of Nonperforming Assets" for
additional information.
Operating results reflect acquisition and divestiture activity. On February 16,
1996, the Company completed its acquisition of Omaha-based FirsTier, which had
$3.7 billion in assets, $2.9 billion in deposits, and 63 offices in Nebraska and
Iowa. In the first quarter of 1996, the Company sold its servicing and mortgage
loan production business, and during the fourth quarter of 1995 and the first
quarter of 1996, the Company completed its acquisition of the corporate trust
business of BankAmerica.
On September 26, 1996, the Company announced that it will acquire the bond
indenture services and paying agency business of Comerica Incorporated. This
business serves approximately 860 municipal and corporate clients with about
2,400 bond issues. The transaction is expected to close in the first quarter of
1997.
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 Corporate Trust and Institutional Financial
Services. 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 1996 certain organization and methodology changes
were made and 1995 results are presented on a consistent basis.
RETAIL BANKING -- Retail Banking delivers products and services to the broad
consumer market and small-business through branch offices, telemarketing, direct
mail, and automated teller machines ("ATMs"). Net income was $49.4 million and
$149.8 million in the third quarter and first nine months of 1996 compared with
$49.0 million and $135.7 million in the same periods in 1995. Third quarter and
year-to-date 1996 return on average assets increased to 1.50 percent and 1.51
percent from 1.39 percent and 1.29 percent in the same periods in 1995. Third
quarter and year-to-date return on equity was 20.0 percent and 20.4 percent
compared with 20.3 percent and 19.7 percent in the same periods in 1995.
The increase in net interest income resulted from growth in core commercial and
nonmortgage consumer loans and the February 1996 acquisition of FirsTier. The
provision for credit losses increased to $17.1 million in the first nine months
of 1996, compared with $11.9 million in 1995. Growth in average loans, excluding
residential mortgage loan balances, and higher consumer loan charge-offs
contributed to the increase. Noninterest income and expense were higher in 1996
compared with 1995, reflecting the impact of acquisitions.
PAYMENT SYSTEMS -- Payment Systems includes consumer and business credit cards,
corporate and purchasing card services, card-accessed secured and unsecured
lines of credit, ATM processing, and merchant processing. Net earnings increased
22 percent in the third quarter and 28 percent in the first nine months of 1996
compared with the same periods in 1995. Third quarter return on assets was 2.54
percent, essentially unchanged from third quarter 1995, and return on equity was
27.5 percent compared with 27.9 percent in 1995. Year-to-date return on assets
and return on equity were 2.40 percent and 25.9 percent compared with returns of
2.25 percent and 24.5 percent in 1995.
Fee-based noninterest income increased approximately 25 percent in the third
quarter and the first nine months of 1996 compared with the same periods in
1995. The increases were 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
approximately 30 percent of the portfolio during the third quarter and first
nine months of 1996, compared with approximately 25 percent in the same periods
of 1995. Noninterest expense was relatively flat, despite an increase in sales
volume, reflecting ongoing expense control and the recognition of initial
investment expenses in 1995 associated with the expansion of the ATM network.
The efficiency ratio improved to 42.4 percent in the third quarter and 44.1
percent in the first nine months of 1996 from 46.7 percent and 49.0 percent in
the same periods of 1995.
TABLE 2. Line of Business Financial Performance
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CORPORATE TRUST
BUSINESS BANKING AND
AND INSTITUTIONAL
RETAIL PRIVATE FINANCIAL COMMERCIAL FINANCIAL
BANKING PAYMENT SYSTEMS SERVICES BANKING SERVICES
THREE MONTHS ENDED SEPTEMBER 30,
(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) $191.2 $177.2 $35.5 $37.2 $100.9 $82.1 $52.8 $53.3 $10.3 $6.0
Provision for credit losses 5.7 8.2 23.3 17.6 3.4 2.8 2.5 2.4 -- --
Noninterest income 40.1 36.8 89.6 70.9 28.4 23.1 13.6 13.3 48.6 33.7
Noninterest expense 146.1 126.5 53.0 50.5 51.0 43.0 18.5 21.3 35.1 24.7
Income taxes and
taxable-equivalent adjustment 30.1 30.3 18.5 15.2 28.4 22.6 17.2 16.3 9.0 5.7
Income before nonrecurring items $49.4 $49.0 $30.3 $24.8 $46.5 $36.8 $28.2 $26.6 $14.8 $9.3
AVERAGE BALANCE SHEET DATA:
Commercial loans $462 $382 $1,208 $848 $6,794 $5,521 $5,303 $4,896 $-- $--
Consumer loans 9,698 10,682 2,708 2,347 596 498 -- -- -- --
Assets 13,063 13,943 4,737 3,886 9,719 7,781 6,642 5,936 1,177 672
Deposits 16,998 16,371 37 41 3,679 3,037 1,590 1,588 1,045 737
Common equity 982 959 439 353 933 724 465 416 290 170
Return on average assets 1.50% 1.39% 2.54% 2.53% 1.90% 1.88% 1.69% 1.78% * *
Return on average common
equity ("ROCE") 20.0 20.3 27.5 27.9 19.8 20.2 24.1 25.4 20.3% 21.7%
ROCE on a cash basis** 22.6 22.2 29.3 30.9 21.1 20.9 24.4 25.6 26.9 26.7%
Efficiency ratio 63.2 59.1 42.4 46.7 39.4 40.9 27.9 32.0 59.6 62.2
Efficiency ratio on a cash basis** 60.3 57.0 40.7 44.3 37.1 39.7 27.4 31.5 51.6 56.9
NINE MONTHS ENDED SEPTEMBER 30,
1996 1995 1996 1995 1996 1995 1996 1995 1996 1995
CONDENSED INCOME STATEMENT:
Net interest income
(taxable-equivalent basis) $568.6 $531.7 $111.9 $117.4 $293.4 $247.2 $156.0 $164.9 $26.9 $19.5
Provision for credit losses 17.1 11.9 66.1 56.8 10.0 8.1 7.7 7.2 -- --
Noninterest income 120.0 105.9 240.9 194.9 87.2 71.2 46.2 46.0 148.9 99.5
Noninterest expense 429.7 406.5 155.5 152.9 148.0 134.2 58.9 68.5 107.2 78.9
Income taxes and
taxable-equivalent adjustment 92.0 83.5 49.9 38.9 84.7 67.0 51.6 51.4 26.1 15.3
Income before nonrecurring items $149.8 $135.7 $81.3 $63.7 $137.9 $109.1 $84.0 $83.8 $42.5 $24.8
AVERAGE BALANCE SHEET DATA:
Commercial loans $437 $347 $1,084 $759 $6,673 $5,408 $5,370 $4,909 $-- $--
Consumer loans 9,822 10,688 2,602 2,311 586 495 -- -- -- --
Assets 13,231 14,058 4,516 3,786 9,601 7,772 6,723 6,031 1,157 700
Deposits 17,138 17,053 42 37 3,593 3,154 1,560 1,651 951 775
Common equity 981 920 420 347 911 703 471 422 288 172
Return on average assets 1.51% 1.29% 2.40% 2.25% 1.92% 1.88% 1.67% 1.86% * *
Return on average common
equity ("ROCE") 20.4 19.7 25.9 24.5 20.2 20.7 23.8 26.5 19.7% 19.3%
ROCE on a cash basis** 23.0 21.7 28.3 27.5 21.4 21.4 24.1 26.7 26.4 24.2
Efficiency ratio 62.4 63.8 44.1 49.0 38.9 42.1 29.1 32.5 61.0 66.3
Efficiency ratio on a cash basis** 59.6 61.6 42.0 46.5 36.8 41.0 28.7 32.1 53.0 61.0
</TABLE>
* Not meaningful
** Calculated by excluding amortization of goodwill and other intangible
assets.
Note: Preferred dividends and nonrecurring items are not allocated to the
business lines. The Company's mortgage banking operations, which were sold
in first quarter 1996, are not reflected in the table.
BUSINESS BANKING AND PRIVATE FINANCIAL SERVICES -- Business Banking and Private
Financial Services includes middle-market banking services, private banking, and
personal trust. Third quarter and year-to-date 1996 net income increased 25
percent compared with the same periods in 1995. Third quarter return on assets
was 1.90 percent compared with 1.88 percent in 1995, and return on equity was
19.8 percent compared with 20.2 percent in 1995. Year-to-date performance ratios
showed similar trends.
Net interest income in the third quarter and year-to-date increased consistent
with a 23 percent growth in average loan balances as well as acquisitions. The
23 percent increase in noninterest income in the third quarter and first nine
months of 1996 compared with 1995 resulted from acquisitions and a more
effective approach to charging for private financial services. Noninterest
expense increased in 1996 compared with 1995 reflecting the impact of
acquisitions. The efficiency ratio improved to 39.4 percent in the third quarter
and 38.9 percent in the first nine months of 1996 from 40.9 percent and 42.1
percent in the same periods in 1995.
COMMERCIAL BANKING -- Commercial Banking provides lending, treasury management,
and other financial services to middle-market, large corporate and mortgage
banking companies. Net earnings increased 6 percent in the third quarter and
remained relatively flat in the first nine months of 1996. Third quarter return
on assets was 1.69 percent compared with 1.78 percent in 1995, and return on
equity was 24.1 percent compared with 25.4 percent in 1995. Year-to-date return
on assets was 1.67 percent compared with 1.86 percent in 1995, and return on
equity was 23.8 percent compared with 26.5 percent in 1995.
Although third quarter and year-to-date average loans increased $407 million, or
8 percent, and $461 million, or 9 percent, from the same periods in 1995, net
interest income decreased reflecting lower interest recoveries and narrowing
spreads in this highly competitive sector. Noninterest income remained
relatively flat in the third quarter and first nine months of 1996 compared with
the same periods in 1995. The decrease in noninterest expense for both the third
quarter and first nine months of 1996, compared to the same periods in 1995,
reflected the benefits of increased operational efficiencies. The efficiency
ratio improved to 27.9 percent in the third quarter and 29.1 percent in the
first nine months of 1996 compared to 32.0 percent and 32.5 percent in the same
periods in 1995.
CORPORATE TRUST AND INSTITUTIONAL FINANCIAL SERVICES -- Corporate Trust and
Institutional Financial Services includes institutional and corporate trust
services, investment management services, and a full-service brokerage company.
Earnings increased 59 percent in the third quarter and 71 percent in the first
nine months of 1996 compared with the same periods in the prior year. The return
on average equity was 20.3 percent in the third quarter and 19.7 percent in the
first nine months of 1996, compared with 21.7 percent and 19.3 percent in the
same periods in 1995.
Net earnings increased over 1995 primarily due to the Company's strategy to grow
its fee-based businesses. The efficiency ratio improved to 59.6 percent in the
third quarter and 61.0 percent in the first nine months of 1996 from 62.2
percent in the third quarter and 66.3 percent in the first nine months 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
$391.3 million in the third quarter of 1996, an increase of $30.8 million (9
percent) from the third quarter of 1995, and $1.2 billion in the first nine
months of 1996, an increase of $72 million (7 percent) from the same period in
1995. The increases were attributable primarily to growth in average loans in
the third quarter and first nine months of 1996, compared with the same periods
in 1995. In the first quarter of 1996, $1.3 billion 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 both the third quarter and first nine
months of 1996 were higher by approximately $3.1 billion than the same periods
in 1995, reflecting growth in core commercial and consumer loans, as well as the
February 1996 acquisition of FirsTier. Average securities for the third quarter
and first nine months of 1996 were higher than the respective 1995 periods,
reflecting the transfer of securitized mortgage loan balances in the first
quarter of 1996 and the addition of securities acquired with FirsTier, offset by
maturities and sales.
Partially offsetting the impact of higher average loan balances in the third
quarter and first nine months of 1996, compared with the same periods of 1995,
was the effect of a lower average yield on loans. The average yield on loans for
both the third quarter and first nine months of 1996 was 8.76 percent compared
with 8.95 percent and 9.03 percent in 1995. The decrease was due to declining
market interest rates over the past year. The net interest margin in the third
quarter and first nine months of 1996 was essentially unchanged at 4.91 percent
and 4.89 percent compared with 4.85 percent and 4.94 percent in 1995.
TABLE 3. Analysis of Net Interest Income
<TABLE>
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THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
(DOLLARS IN MILLIONS) 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C>
Net interest income (taxable-equivalent basis) $391.3 $360.5 $1,162.4 $1,090.3
Average balances of earning assets supported by:
Interest-bearing liabilities $24,519 $23,336 $24,717 $23,522
Noninterest-bearing liabilities 7,179 6,144 7,008 5,979
Total earning assets $31,698 $29,480 $31,725 $29,501
Average yields and weighted average rates (taxable-equivalent basis):
Earning assets yield 8.43% 8.63% 8.43% 8.67%
Rate paid on interest-bearing liabilities 4.55 4.77 4.53 4.68
Gross interest margin 3.88% 3.86% 3.90% 3.99%
Net interest margin 4.91% 4.85% 4.89% 4.94%
Net interest margin without taxable-equivalent increments 4.84% 4.81% 4.83% 4.89%
</TABLE>
PROVISION FOR CREDIT LOSSES -- The provision for credit losses was $35.0 million
in the third quarter of 1996, up $4.0 million compared with $31 million in 1995.
The provision for the first nine months of 1996 increased $17.0 million to $101
million from the first nine months of 1995. These increases resulted from
increased loan volumes, higher credit card net charge-offs, and lower commercial
loan recoveries. Refer to "Corporate Risk Management" for further information on
the credit quality.
NONINTEREST INCOME -- Third quarter noninterest income was $220.3 million,
compared with $216.5 million in the third quarter of 1995, and $963.7 million
year-to-date 1996 compared with $585.8 million in 1995. Nonrecurring gains
included in noninterest income in the first nine months of 1996 totaled $315.8
million, including a $190 million termination fee received from the First
Interstate transaction, net of $10 million in costs; a $65 million state tax
refund, including interest; a $45.8 million gain on the sale of the Company's
mortgage banking operations; and, $15 million in net securities gains.
Noninterest income in 1995 included a $31 million nonrecurring gain on the sale
of 63 branches.
Excluding nonrecurring items, noninterest income was $220.3 million, a 19
percent increase from the third quarter of 1995 and $647.9 million for the first
nine months of 1996, a 17 percent increase from the first nine months of 1995.
The improvement in both periods resulted primarily from growth in credit card
and trust fees and the addition of FirsTier and other acquisitions, offset in
part by the loss of mortgage banking revenues. Credit card fees increased due to
higher sales volumes for Corporate and Purchasing Cards and the First Bank
WorldPerks VISA card. Trust fees were up with the acquisition of the corporate
trust business of BankAmerica, the acquisition of FirsTier and core growth in
personal and institutional trust revenues. Service charges on deposits increased
primarily as a result of increased demand deposits and the acquisition of
FirsTier. Other noninterest income decreased, reflecting the impact of the sale
of the Company's mortgage banking operations discussed above.
TABLE 4. Noninterest Income
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
(DOLLARS IN MILLIONS) 1996 1995 1996 1995
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Credit card fees $79.5 $62.7 $215.8 $171.0
Trust fees 57.1 42.8 171.8 127.5
Service charges on deposit accounts 36.9 30.9 105.5 93.3
Investment products fees and commissions 7.4 7.8 24.6 20.0
Trading account profits and commissions 3.2 2.4 9.7 8.0
Securities gains -- -- 15.0 --
Termination fee, net -- -- 190.0 --
State income tax refund -- -- 65.0 --
Gain on sale of mortgage banking operations -- -- 45.8 --
Gain on sale of branches -- 31.0 -- 31.0
Other 36.2 38.9 120.5 135.0
Total noninterest income $220.3 $216.5 $963.7 $585.8
</TABLE>
TABLE 5. Noninterest Expense
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
(DOLLARS IN MILLIONS, EXCEPT PER EMPLOYEE DATA) 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Salaries $113.4 $108.0 $351.3 $329.9
Employee benefits 25.5 22.1 80.8 76.0
Total personnel expense 138.9 130.1 432.1 405.9
Goodwill and other intangible assets 19.6 13.9 86.9 42.2
Net occupancy 24.2 24.3 74.2 74.3
Furniture and equipment 21.1 23.5 67.0 71.8
Other personnel costs 16.7 11.0 40.4 28.4
Professional services 8.3 8.5 27.5 25.6
Advertising and marketing 9.1 8.4 26.1 23.9
Telephone 7.3 6.1 20.0 18.2
Printing, stationery and supplies 5.8 5.4 17.7 16.0
Postage 5.7 5.4 17.4 17.0
Third party data processing 5.3 4.2 16.0 12.9
FDIC insurance 3.5 2.8 10.6 30.2
SAIF special assessment 51.0 -- 51.0 --
Merger, integration, and resizing -- -- 69.9 --
Other 39.0 67.5 129.3 152.2
Total noninterest expense $355.5 $311.1 $1,086.1 $918.6
Efficiency ratio* 58.1% 53.9% 51.4% 54.8%
Efficiency ratio before nonrecurring items 49.8 51.3 50.2 54.0
Average number of employees (full-time equivalents) 12,889 12,894 13,092 13,335
Annualized personnel expense per employee $43,107 $40,360 $44,007 $40,585
</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.
NONINTEREST EXPENSE -- Third quarter noninterest expense was $355.5 million
compared with $311.1 million in the third quarter of 1995, and $1.1 billion in
the first nine months of 1996 compared with $918.6 million in 1995. Nonrecurring
charges in the third quarter of 1996 included a $51 million one-time special
assessment by the FDIC on SAIF deposits. Nonrecurring charges in the first nine
months of 1996 totaled $177.8 million, including merger, integration and
resizing charges of $31.3 million for the acquisitions of FirsTier and the
BankAmerica corporate trust business and $38.6 million in branch distribution
resizing expenses; a $29.5 million valuation adjustment to reduce the carrying
value of credit card and core deposit intangibles to estimated fair value; $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;
$17.3 million to acquire credit card and revolving credit software and to write
off other miscellaneous assets; and, the $51 million SAIF deposits special
assessment. Nonrecurring charges in the third quarter and first nine months of
1995 included the write-off of $23 million of unamortized software costs related
to a change in the Company's policy to expense software costs and an $8 million
write-off of other miscellaneous assets. Refer to Note H for further information
on merger, integration and resizing charges.
On a pro forma basis (including acquired companies and excluding divested
businesses and nonrecurring items), noninterest expense declined $11.6 million
(4 percent) in the current quarter and $91 million (9 percent) year-to-date.
These reductions were achieved as a result of effective acquisition integration
and ongoing expense control. Year-to-date 1996 noninterest expense also
benefited from a reduction in FDIC premiums. Excluding nonrecurring items, the
Company's efficiency ratio improved to 49.8 percent in the third quarter and
50.2 percent in the first nine months of 1996, from 51.3 percent and 54.0
percent in the same periods in 1995.
Total salaries and benefits, excluding nonrecurring charges, increased $8.8
million (7 percent) and $16.1 million (4 percent) for the third quarter and
first nine months of 1996 compared with the same periods in 1995, reflecting
recent acquisitions. Average full-time equivalent employees remained relatively
unchanged at 12,889 in 1996 compared with 12,894 in 1995.
Compared with the same periods in 1995, amortization of goodwill and intangibles
for the third quarter and first nine months of 1996, excluding the valuation
adjustment discussed above, increased as a result of FirsTier and the
BankAmerica corporate trust business acquisitions. The increases in other
personnel expense related to several technology projects currently in process.
FDIC insurance premiums were lower in the first nine months of 1996 compared
with the same period last year because the FDIC suspended the assessment of
premiums on deposits covered by the Bank Insurance Fund ("BIF"). Third quarter
1995 included a $10 million premium rebate on BIF deposits for the period from
June 1, 1995 to September 30, 1995. In addition to the one-time special
assessment, BIF-insured institutions are required to assist paying interest on
the Financing Corp. ("FICO") bonds, which financed the resolution of the thrift
industry series. The FICO assessment will be 1.3 basis points of deposits for
BIF-insured institutions and 6.4 basis points of deposits for SAIF-insured
institutions starting in 1997 or $1.5 million per quarter based upon September
30, 1996 deposits. The FDIC plans to refund a portion of the fourth quarter 1996
premiums, or about $3 million for the Company.
PROVISION FOR INCOME TAXES -- The provision for income taxes was $78.2 million
in the third quarter and $355.0 million in the first nine months of 1996,
compared with $85.8 million and $245.7 million in the same periods of 1995. The
third quarter 1996 provision reflects the impact of the nonrecurring special
assessment discussed above, offset partially by a higher level of operating
earnings. The year-to-date increase was primarily the result of a higher level
of taxable income and the nonrecurring items discussed above.
BALANCE SHEET ANALYSIS
LOANS -- The Company's loan portfolio increased $637 million to $27.0 billion at
September 30, 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, which were reclassified to
available-for-sale securities in the first quarter of 1996. The securitization
enhances liquidity and financial management flexibility. Excluding residential
mortgages, average loans for both the third quarter and first nine months of
1996 were higher than the same periods in 1995 by approximately $3.1 billion,
reflecting growth in core commercial and consumer loans as well as the
acquisition of FirsTier.
SECURITIES -- At September 30, 1996, securities totaled $3.8 billion compared
with $3.3 billion at December 31, 1995, reflecting the securitization discussed
above and the addition of approximately $900 million of FirsTier securities,
offset by maturities and sales.
DEPOSITS -- Noninterest-bearing deposits were $8.1 billion at September 30,
1996, up from $6.4 billion at December 31, 1995. Interest-bearing deposits were
$16.9 billion at September 30, 1996, up from $16.2 billion at December 31, 1995.
The increases were primarily due to the acquisitions of FirsTier and the
corporate trust business of BankAmerica.
BORROWINGS -- Long-term debt was $3.4 billion at September 30, 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. These issuances were partially offset by a net decrease
of $170 million in Federal Home Loan Bank Advances and Holding Company
Medium-term notes.
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 the loan portfolio
composition, the level of allowance coverage, and macroeconomic factors. 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 NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
(DOLLARS IN MILLIONS) 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Balance at beginning of period $ 529.1 $ 467.5 $ 473.5 $ 474.7
CHARGE-OFFS:
Commercial:
Commercial 12.4 7.5 31.5 19.4
Financial institutions -- -- -- --
Real estate:
Commercial mortgage .2 3.5 11.9 13.6
Construction -- .1 1.0 .1
Total commercial 12.6 11.1 44.4 33.1
Consumer:
Residential mortgage 1.3 1.3 3.4 4.1
Credit card 24.9 20.4 71.9 65.3
Other 23.0 19.9 68.2 55.7
Total consumer 49.2 41.6 143.5 125.1
Total 61.8 52.7 187.9 158.2
RECOVERIES:
Commercial:
Commercial 7.2 9.1 32.5 28.2
Financial institutions -- .3 -- .5
Real estate:
Commercial mortgage 4.6 4.6 18.9 11.2
Construction -- -- -- .1
Total commercial 11.8 14.0 51.4 40.0
Consumer:
Residential mortgage .2 -- .7 .4
Credit card 2.2 2.8 7.5 8.5
Other 4.9 5.9 16.1 17.3
Total consumer 7.3 8.7 24.3 26.2
Total 19.1 22.7 75.7 66.2
NET CHARGE-OFFS:
Commercial:
Commercial 5.2 (1.6) (1.0) (8.8)
Financial institutions -- (.3) -- (.5)
Real estate:
Commercial mortgage (4.4) (1.1) (7.0) 2.4
Construction -- .1 1.0 --
Total commercial .8 (2.9) (7.0) (6.9)
Consumer:
Residential mortgage 1.1 1.3 2.7 3.7
Credit card 22.7 17.6 64.4 56.8
Other 18.1 14.0 52.1 38.4
Total consumer 41.9 32.9 119.2 98.9
Total 42.7 30.0 112.2 92.0
Provision charged to operating expense 35.0 31.0 101.0 84.0
Additions related to acquisitions -- -- 59.1 1.8
Balance at end of period $ 521.4 $ 468.5 $ 521.4 $ 468.5
Allowance as a percentage of period-end loans 1.93% 1.81%
Allowance as a percentage of nonperforming loans 431 400
Allowance as a percentage of nonperforming assets 358 281
</TABLE>
TABLE 7. Net Charge-offs as a Percentage of Average Loans Outstanding
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
COMMERCIAL:
Commercial .22% (.08)% (.01)% (.15)%
Financial institutions -- (.15) -- (.09)
Real Estate:
Commercial mortgage (.58) (.18) (.31) .13
Construction -- .12 .28 --
Total commercial .02 (.10) (.07) (.08)
CONSUMER:
Residential mortgage .13 .10 .10 .09
Credit card 3.33 2.98 3.31 3.29
Other 1.04 .88 1.02 .83
Total consumer 1.28 .94 1.21 .96
Total .63% .47% .56% .49%
</TABLE>
ANALYSIS OF NET CHARGE-OFFS AND ALLOWANCE FOR CREDIT LOSSES -- Net loan
charge-offs totaled $42.7 million and $112.2 million in the third quarter and
first nine months of 1996, up from $30.0 million and $92.0 million in the same
periods in 1995. Commercial loan net charge-offs for the quarter were $.8
million compared with net recoveries of $2.9 million for the third quarter of
1995. Commercial loan net recoveries were $7.0 million for the first nine months
of 1996 compared with $6.9 million for the same period in 1995. Third quarter
and year-to-date consumer loan net charge-offs increased $9.0 million (27
percent) from the third quarter of 1995 and $20.3 million (21 percent) from
year-to-date 1995 reflecting higher average nonmortgage loan balances and higher
loss ratios. Excluding first mortgage loans, the annualized ratio of consumer
net charge-offs to average loans in the third quarter of 1996 was 1.68 percent,
essentially flat with the ratio in the second quarter of 1996, but up from 1.44
percent in the same period of last year. The ratio of total net charge-offs to
average loans was .63 percent in the third quarter of 1996 compared with .47
percent in the third quarter of 1995.
TABLE 8. Nonperforming Assets*
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
(DOLLARS IN MILLIONS) 1996 1995
<S> <C> <C>
COMMERCIAL:
Commercial $38.7 $25.1
Real estate:
Commercial mortgage 31.4 42.3
Construction 10.6 1.5
Total commercial 80.7 68.9
CONSUMER:
Residential mortgage 37.3 37.3
Credit card -- 5.7
Other 3.0 6.3
Total consumer 40.3 49.3
Total nonperforming loans 121.0 118.2
OTHER REAL ESTATE 19.4 33.2
OTHER NONPERFORMING ASSETS 5.3 2.3
Total nonperforming assets $145.7 $153.7
Nonperforming loans to total loans .45% .45%
Nonperforming assets to total loans plus other real
estate .54 .58
</TABLE>
*Throughout this document, nonperforming assets and related ratios do not
include loans more than 90 days past due and still accruing interest.
TABLE 9. Delinquent Loans
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
(DOLLARS IN MILLIONS) 1996 1995
<S> <C> <C>
Accruing loans 30 days or more past due $343.3 $335.2
Accruing loans 90 days or more past due 43.3 38.8
DELINQUENCY RATIOS*:
Total commercial:
30 days or more past due 1.32% 1.36%
90 days or more past due .59 .56
Total consumer:
30 days or more past due 2.15 2.04
90 days or more past due .62 .62
Total loans:
30 days or more past due 1.72 1.72
90 days or more past due .61 .59
</TABLE>
*Ratios include nonperforming loans and are expressed as a percent of ending
loan balances.
ANALYSIS OF NONPERFORMING ASSETS -- Nonperforming assets include nonaccrual
loans, restructured loans, other real estate and other nonperforming assets
owned by the Company. At September 30, 1996, nonperforming assets totaled $145.7
million, down $8.0 million (5 percent) from the balance at December 31, 1995.
During the third quarter of 1996, the Company conformed its reporting practice
for nonperforming loans to that of most banks and has excluded restructured
revolving consumer loans from nonperforming loans. At December 31, 1995,
nonperforming loans included $9.5 million of revolving consumer loans. Revolving
consumer loans are charged off at specific delinquency dates (generally 120
days). The ratio of nonperforming assets to loans and other real estate was .54
percent at September 30, 1996, down from .58 percent at December 31, 1995.
Accruing loans 90 days or more past due totaled $43.3 million compared with
$38.8 million at December 31, 1995. These loans are not included in
nonperforming assets and continue to accrue interest because they are secured by
collateral and/or are in the process of collection and are reasonably expected
to result in repayment or restoration to current status. Consumer loans 30 days
or more past due were 2.15 percent of the total consumer loan portfolio at
September 30, 1996 compared with 2.04 percent of the total consumer portfolio at
December 31, 1995. The percentage of consumer loans 90 days or more past due of
the total consumer loan portfolio totaled .62 percent at September 30, 1996,
unchanged from year-end 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, Market Value/Duration Analysis, and Static
Gap 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 and securities, 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.
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 changes on the estimated discounted future cash flows of the
Company's current assets, liabilities and off-balance sheet instruments.
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 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.
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. The Company does not enter into derivative contracts
for speculative purposes.
As of September 30, 1996, the Company received payments on $2.7 billion notional
amount of interest rate swap agreements, based on fixed interest rates, and made
payments based on variable interest rates. These swaps had an average fixed rate
of 6.59 percent and an average variable rate, which is tied to various LIBOR
rates, of 5.51 percent. The maturity of these agreements ranges from one month
to 11 years with an average remaining maturity of 4.27 years. Swaps increased
net interest income for third quarter 1996 by $6.3 million and $5.6 million in
1995, and year-to-date 1996 by $22.2 million and $14.8 million in 1995.
TABLE 10. Interest Rate Swap Hedging Portfolio Notional Balances and
Yields by Maturity Date
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1996 (DOLLARS IN MILLIONS)
WEIGHTED WEIGHTED
AVERAGE AVERAGE
RECEIVE FIXED SWAPS* NOTIONAL INTEREST RATE INTEREST RATE
MATURITY DATE AMOUNT RECEIVED PAID
<S> <C>
1996 (remaining three months) $133 7.54% 5.48%
1997 275 6.42 5.48
1998 581 6.03 5.51
1999 450 6.40 5.46
2000 150 6.57 5.50
After 2000** 1,100 6.89 5.54
Total $2,689 6.59% 5.51%
</TABLE>
*At September 30, 1996, the Company did not have any hedging swaps in its
portfolio that required it to pay fixed-rate interest.
**Of the total amount maturing after the year 2000 $925 million hedges fixed
rate subordinate notes.
TABLE 11. Capital Ratios
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
(DOLLARS IN MILLIONS) 1996 1995
<S> <C> <C>
Tangible common equity* $2,416 $2,184
As a percent of assets 6.7% 6.5%
Tier 1 capital** $2,185 $1,989
As a percent of risk-adjusted assets 6.7% 6.5%
Total risk-based capital** $3,685 $3,367
As a percent of risk-adjusted assets 11.4% 11.0%
Leverage ratio** 6.4 6.1
</TABLE>
*Defined as common equity less goodwill.
**In accordance with regulatory guidelines, unrealized securities gains and
losses are excluded from these calculations.
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 at September 30, 1996, was $100 million. The impact of caps
on net interest income was not material for year-to-date periods in 1996 and
1995. To hedge against falling interest rates, the Company uses interest rate
floors which had a total notional amount purchased at September 30, 1996 of
$1.15 billion. LIBOR-based floors totaled $950 million and Constant Maturity
Treasury floors totaled $200 million. The impact of floors on net interest
income was not material for year-to-date 1996 and 1995.
CAPITAL MANAGEMENT -- The Company is committed to managing capital for maximum
shareholder benefit and maintaining strong protection for depositors and
creditors. At September 30, 1996, tangible common equity was $2.4 billion, or
6.7 percent of assets, compared with 6.5 percent of assets at December 31, 1995.
The total risk-based capital ratio increased to 11.4 percent at September 30,
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, offset by 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. Approximately 11.1 million shares have been repurchased
under the 1996 authorization as of September 30, 1996. In addition, the Board of
Directors authorized the retirement of 2.6 million shares repurchased in the
second quarter of 1996. Under previous authorizations, the Company repurchased
11.9 million shares in 1995.
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. In the first quarter of 1996,
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 Accounting Principles Board ("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 are effective in 1996's
year-end financial statements. The Company continues to account for such
arrangements in accordance with APB Opinion No. 25.
SFAS 125, "ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENTS OF LIABILITIES" -- SFAS 125 addresses whether the transfer of
financial assets should be accounted for as a sale and removed from the balance
sheet, or as a financing recognized as a borrowing. The Statement uses a
"financial components" approach which focuses on control to determine whether
the assets have been sold. If the entity has surrendered control over the
transferred assets, the transaction is considered a sale. Control is considered
surrendered only if the seller has no legal rights to the assets, even in
bankruptcy; the buyer has the right to pledge or exchange the assets; and the
seller does not maintain effective control over the assets through an agreement
to repurchase or redeem them. SFAS 125 is effective for transactions occurring
after December 31, 1996, and is to be applied prospectively, with earlier or
retroactive application not permitted. The adoption of SFAS 125 is not expected
to have a material impact on the Company.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
(IN MILLIONS, EXCEPT SHARES) 1996 1995
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and due from banks $2,990 $1,837
Federal funds sold 62 35
Securities purchased under agreements to resell 566 230
Trading account securities 76 86
Available-for-sale securities 3,778 3,256
Loans 27,037 26,400
Less allowance for credit losses 521 474
Net loans 26,516 25,926
Bank premises and equipment 408 413
Interest receivable 203 197
Customers' liability on acceptances 210 223
Other assets 2,034 1,671
Total assets $36,843 $33,874
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $8,094 $6,357
Interest-bearing 16,914 16,157
Total deposits 25,008 22,514
Federal funds purchased 961 2,000
Securities sold under agreements to repurchase 590 269
Other short-term funds borrowed 2,390 2,116
Long-term debt 3,443 3,201
Acceptances outstanding 210 223
Other liabilities 1,060 826
Total liabilities 33,662 31,149
Shareholders' equity:
Preferred stock 87 103
Common stock, par value $1.25 a share - authorized 200,000,000 shares;
issued: 9/30/96 - 141,747,738 shares; 12/31/95 - 135,632,324 shares 177 170
Capital surplus 1,145 909
Retained earnings 2,170 1,918
Unrealized gain (loss) on securities, net of tax (17) 23
Less cost of common stock in treasury:
9/30/96 - 6,300,788 shares; 12/31/95 - 8,297,756 shares (381) (398)
Total shareholders' equity 3,181 2,725
Total liabilities and shareholders' equity $36,843 $33,874
</TABLE>
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
(IN MILLIONS, EXCEPT PER-SHARE DATA) SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
(UNAUDITED) 1996 1995 1996 1995
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $588.1 $573.8 $1,744.8 $1,693.0
Securities:
Taxable 59.3 52.6 186.7 175.2
Exempt from federal income taxes 6.8 2.8 19.1 8.4
Other interest income 12.4 8.3 35.3 26.4
Total interest income 666.6 637.5 1,985.9 1,903.0
INTEREST EXPENSE
Deposits 169.2 173.0 507.1 538.2
Federal funds purchased and repurchase agreements 31.6 24.8 90.6 87.6
Other short-term funds borrowed 29.2 34.6 89.8 56.8
Long-term debt 50.7 48.0 151.6 140.5
Total interest expense 280.7 280.4 839.1 823.1
Net interest income 385.9 357.1 1,146.8 1,079.9
Provision for credit losses 35.0 31.0 101.0 84.0
Net interest income after provision for credit
losses 350.9 326.1 1,045.8 995.9
NONINTEREST INCOME
Credit card fees 79.5 62.7 215.8 171.0
Trust fees 57.1 42.8 171.8 127.5
Service charges on deposit accounts 36.9 30.9 105.5 93.3
Investment products fees and commissions 7.4 7.8 24.6 20.0
Securities gains -- -- 15.0 --
Termination fee -- -- 190.0 --
State income tax refund -- -- 65.0 --
Gain on sale of mortgage banking operations -- -- 45.8 --
Gain on sale of branches -- 31.0 -- 31.0
Other 39.4 41.3 130.2 143.0
Total noninterest income 220.3 216.5 963.7 585.8
NONINTEREST EXPENSE
Salaries 113.4 108.0 351.3 329.9
Employee benefits 25.5 22.1 80.8 76.0
Goodwill and other intangible assets 19.6 13.9 86.9 42.2
Other personnel costs 16.7 11.0 40.4 28.4
FDIC insurance 3.5 2.8 10.6 30.2
SAIF special assessment 51.0 -- 51.0 --
Merger, integration, and resizing -- -- 69.9 --
Other 125.8 153.3 395.2 411.9
Total noninterest expense 355.5 311.1 1,086.1 918.6
Income before income taxes 215.7 231.5 923.4 663.1
Applicable income taxes 78.2 85.8 355.0 245.7
Net income $137.5 $145.7 $568.4 $ 417.4
Net income applicable to common equity $135.9 $143.9 $563.5 $ 411.8
EARNINGS PER COMMON SHARE
Average common and common equivalent shares 137,679,789 133,648,942 138,122,270 135,007,519
Net income $.99 $1.08 $4.08 $3.05
</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 417.4 417.4
Dividends declared:
Preferred (5.6) (5.6)
Common (145.2) (145.2)
Purchase of treasury stock (7,991,505) (341.8) (341.8)
Issuance of common stock:
Acquisitions 1,619,998 .3 4.3 52.4 57.0
Dividend reinvestment 169,590 .3 6.8 7.1
Stock option and stock
purchase plans 1,725,303 .9 29.2 (20.1) 35.1 45.1
Stock warrants exercised 34,404 (1.0) 1.2 .2
Redemption/conversion of
preferred stock 39,164 (13.3) (1.3) 1.5 (13.1)
Change in unrealized
gains/(losses) 103.2 103.2
BALANCE SEPTEMBER 30, 1995 129,429,363 $104.8 $169.5 $899.6 $1,837.0 $(3.2) $(271.5) $2,736.2
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 568.4 568.4
Dividends declared:
Preferred (4.9) (4.9)
Common (172.5) (172.5)
Purchase and retirement of
treasury stock (11,092,711) (3.2) (151.4) (508.0) (662.6)
Issuance of common stock:
Acquisitions 16,460,215 10.7 361.7 (44.4) 384.2 712.2
Dividend reinvestment 154,765 .3 9.1 9.4
Stock option and stock
purchase plans 2,041,052 .2 25.5 (78.7) 99.1 46.1
Conversion of preferred stock 549,061 (15.9) (16.1) 32.0 --
Change in unrealized gains/(losses) (39.6) (39.6)
BALANCE SEPTEMBER 30, 1996 135,446,950 $87.3 $177.2 $1,145.4 $2,170.0 $(17.1) $(381.4) $3,181.4
</TABLE>
*Defined as total common shares less common stock held in treasury.
**Ending treasury shares were 6,300,788 at September 30, 1996; 8,297,756 at
December 31, 1995; 6,202,961 at September 30, 1995; and 767,000 at December 31,
1994.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
(UNAUDITED, IN MILLIONS) 1996 1995
<S> <C> <C>
OPERATING ACTIVITIES
Net cash provided by operating activities $1,097.7 $515.6
INVESTING ACTIVITIES
Net cash provided (used) by:
Interest-bearing deposits with banks -- 29.1
Loans outstanding 41.9 (996.1)
Securities purchased under agreements to resell (296.2) 103.6
Available-for-sale securities:
Sales 1,225.7 1,978.1
Maturities 801.3 411.3
Purchases (416.3) (296.6)
Proceeds from sales of other real estate 38.0 34.6
Net purchases of bank premises and equipment (43.1) (4.1)
Cash and cash equivalents of acquired subsidiaries 116.5 16.3
Acquisitions, net of cash received (37.9) --
Sale of mortgage banking operations 162.1 --
Other - net (54.3) 2.5
Net cash provided by investing activities 1,537.7 1,278.7
FINANCING ACTIVITIES
Net cash (used) provided by:
Deposits (274.1) (2,624.4)
Federal funds purchased and securities sold under
agreements to repurchase (903.0) (965.9)
Short-term borrowings 284.6 1,885.2
Long-term debt transactions:
Proceeds 649.3 700.6
Principal payments (427.8) (564.6)
Redemption of preferred stock -- (13.1)
Proceeds from issuance of common stock 55.5 52.4
Purchase of treasury stock (662.6) (341.8)
Cash dividends (177.4) (150.8)
Net cash used by financing activities (1,455.5) (2,022.4)
Change in cash and cash equivalents 1,179.9 (228.1)
Cash and cash equivalents at beginning of period 1,871.6 1,841.9
Cash and cash equivalents at end of period $3,051.5 $1,613.8
</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. In the first quarter of 1996,
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 and recorded a first quarter charge of $29.5 million to reduce the
carrying value of credit card holder and core deposit intangibles to their fair
value. The Company performed this analysis of the fair value 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.
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS
OF LIABILITIES -- SFAS 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities," addresses whether the transfer of
financial assets should be accounted for as a sale and removed from the balance
sheet, or as a financing recognized as a borrowing. The Statement uses a
"financial components" approach which focuses on control to determine whether
assets have been sold. If the entity has surrendered control over the
transferred assets, the transaction is considered a sale. Control is considered
surrendered only if the seller has no legal right to the assets, even in
bankruptcy; the buyer has the right to pledge or exchange the assets; and the
seller does not maintain effective control over the assets through an agreement
to repurchase or redeem them. SFAS 125 is effective for transactions occurring
after December 31, 1996, and is to be applied prospectively, with earlier or
retroactive application not permitted. The adoption of SFAS 125 is not expected
to have a material effect on the Company.
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. Goodwill of $289 million
will be amortized over approximately 25 years and core deposit intangibles of
$63 million will be amortized over the estimated lives of the deposits of
approximately 10 years. The results of operations of FirsTier have been included
in the Company's Consolidated Statement of Income since the date of acquisition.
The following pro forma operating results of the Company assume that the
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 NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net interest income $385.9 $386.0 $1,161.5 $1.165.4
Net income 137.5 153.6 566.2 437.1
Net income per share .99 1.06 4.01 3.00
</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 -- In the first quarter of 1996, the Company
sold its servicing and mortgage loan production business to three parties. Bank
of America, fsb, a subsidiary of BankAmerica Corporation, 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.
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. In addition, all litigation among the parties related to the acquisition
of First Interstate has been settled. The Company incurred transaction costs of
approximately $10 million in connection with the proposed merger.
COMERICA CORPORATE TRUST BUSINESS -- On September 26, 1996, the Company
announced that it had signed a definitive agreement to acquire the bond
indenture services and paying agency business of Comerica Incorporated. This
business serves approximately 860 municipal and corporate clients with about
2,400 bond issues. The transaction is expected to close in the first quarter of
1997.
NOTE D. Securities
The detail of the amortized cost and fair value of available-for-sale securities
consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 DECEMBER 31, 1995
AMORTIZED FAIR AMORTIZED FAIR
(IN MILLIONS) COST VALUE COST VALUE
<S> <C> <C> <C> <C>
U.S. Treasury $634 $623 $921 $925
Mortgage-backed securities 2,577 2,563 1,703 1,693
Other U.S. agencies 60 60 157 157
State and political 496 491 174 179
Other 39 41 265 302
Total $3,806 $3,778 $3,220 $3,256
</TABLE>
NOTE E. Loans
The composition of the loan portfolio was as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
(IN MILLIONS) 1996 1995
<S> <C> <C>
COMMERCIAL:
Commercial $9,682 $8,271
Financial institutions 756 1,060
Real estate:
Commercial mortgage 3,034 2,784
Construction 582 403
Total commercial 14,054 12,518
CONSUMER:
Residential mortgage 3,164 4,655
Residential mortgage held for sale 47 257
Home equity and second mortgage 3,144 2,805
Credit card 2,769 2,586
Automobile 2,013 1,821
Revolving credit 736 757
Installment 621 607
Student * 489 394
Total consumer 12,983 13,882
Total loans $27,037 $26,400
</TABLE>
* All or part of the student loan portfolio may be sold when the repayment
period begins.
At September 30, 1996, the Company had $81 million in loans considered impaired
under SFAS 114 included in nonaccrual loans. Of this amount, $64 million was
valued using the fair value of the loans' collateral, $1 million using the
present value of expected future cash flows and $16 million was below the
Company's threshold for valuing individual loans. Based on the results of this
valuation, no allowance for credit losses was specifically allocated to impaired
loans. For the quarter ended September 30, 1996, the average recorded investment
in impaired loans was approximately $79 million. No interest income was
recognized on 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>
SEPTEMBER 30 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 (4.91% to 7.34%) - maturities to March 2011 996 1,099
Medium-term notes (5.38% to 5.64%) - maturities to August 1999 513 580
Bank notes (5.47% to 6.38%) - maturities to March 2001 600 300
Other 77 90
Total $3,443 $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. This authorization replaces
previous authorizations. Approximately 11.1 million shares have been repurchased
under this authorization as of September 30, 1996. In addition, the Board of
Directors authorized the retirement of 2.6 million shares repurchased in the
second quarter of 1996. Under previous authorizations, the Company repurchased
11.9 million shares in 1995.
NOTE H. Merger, Integration and Resizing Charges
In 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>
NINE
MONTHS ENDED
SEPTEMBER 30
(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>
System 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
complete the sales of the properties over the next three to six 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>
NINE
MONTHS ENDED
SEPTEMBER 30
(IN MILLIONS) 1996
<S> <C>
BALANCE AT DECEMBER 31, 1995 $12.6
Provision charged to operating expense 69.9
Cash outlays (36.3)
Noncash writedowns (26.0)
Balance at September 30, 1996 $20.2
</TABLE>
The Company expects that substantially all remaining costs will be paid by the
end of the 1996 or early 1997. 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 NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
(IN MILLIONS) 1996 1995 1996 1995
<S> <C> <C> <C> <C>
FEDERAL:
Current tax $72.0 $65.0 $311.8 $169.9
Deferred tax provision (credit) (1.3) 11.8 12.3 51.8
Federal income tax 70.7 76.8 324.1 221.7
STATE:
Current tax 8.0 11.3 32.0 18.2
Deferred tax provision (credit) (.5) (2.3) (1.1) 5.8
State income tax 7.5 9.0 30.9 24.0
Total income tax provision $78.2 $85.8 $355.0 $245.7
</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 NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
(IN MILLIONS) 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Tax at statutory rate (35%) $75.5 $81.0 $323.2 $232.1
State income tax, net of federal tax benefit 4.9 5.8 20.1 15.6
Tax effect of:
Tax-exempt interest:
Loans (1.1) (1.3) (3.5) (3.9)
Securities (2.4) (.9) (6.7) (2.9)
Amortization of goodwill 4.3 3.0 25.3 9.1
Other items (3.0) (1.8) (3.4) (4.3)
Applicable income taxes $78.2 $85.8 $355.0 $245.7
</TABLE>
During the second quarter, the Company received a tax refund of $65 million,
including interest, from the State of Minnesota relating to the exemption of
interest income received on investments in U.S. government securities for the
period 1979 to 1983.
The Company's net deferred tax asset was $245.9 million at September 30, 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>
SEPTEMBER 30 DECEMBER 31
(IN MILLIONS) 1996 1995
<S> <C> <C>
Commitments to extend credit:
Commercial $8,406 $7,240
Corporate and purchasing cards 12,292 5,220
Consumer credit card 10,318 9,247
Other consumer 3,307 3,264
Letters of credit:
Standby 1,391 1,412
Commercial 222 161
Interest rate swap contracts:
Hedges 2,689 2,839
Intermediated 146 169
Options contracts:
Hedge interest rate floors purchased 1,150 1,250
Hedge interest rate caps purchased 100 200
Intermediated interest rate and foreign exchange caps and floors purchased 127 126
Intermediated interest rate and foreign exchange caps and floors written 127 126
Liquidity support guarantees 100 142
Forward contracts 38 294
Commitments to sell loans 5 223
Mortgages sold with recourse 118 242
Foreign currency commitments:
Commitments to purchase 1,054 792
Commitments to sell 1,050 785
</TABLE>
Activity for the nine months ended September 30, 1996, with respect to interest
rate swaps which the Company uses to hedge commercial loans, subordinated debt,
bank notes, certificates of deposit, deposit accounts, and savings certificates
was as follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
Notional amount outstanding at December 31, 1995 $2,839
Additions 450
Maturities (300)
Terminations (300)
Notional amount outstanding at September 30, 1996 $2,689
Weighted average interest rates paid 5.51%
Weighted average interest rates received 6.59%
</TABLE>
The Company receives fixed rates and pays floating rates on all swap hedges as
of September 30, 1996. Net unamortized deferred gains, which amortize through
the year 2000, were $.7 million at September 30, 1996.
At September 30, 1996 and December 31, 1995, LIBOR based interest rate floors
totaling $950 million with a remaining maturity of 1.23 years and 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 September 30,
1996 and December 31, 1995. Constant Maturity Treasury (CMT) interest rate
floors totaling $200 million with an average remaining maturity of 7 months at
September 30, 1996 and $300 million with an average remaining maturity of 9
months at December 31, 1995, hedged the reinvestment risk of fixed rate
residential mortgage loans. The strike rate on these CMT floors ranged from 5.70
percent to 6.36 percent at September 30, 1996 and from 6.25 percent to 6.36
percent at December 31, 1995. The total notional amount of interest rate caps
purchased was $100 million with an average strike level at 6.00 percent at
September 30, 1996 and $200 million with an average strike level at 6.00 percent
at December 31, 1995.
NOTE K. Supplemental Information to the Consolidated Financial Statements
CONSOLIDATED BALANCE SHEET -- Time certificates of deposit in denominations of
$100,000 or more totaled $866 million and $900 million at September 30, 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>
NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
(IN MILLIONS) 1996 1995
<S> <C> <C>
Income taxes paid $ 251.6 $ 168.4
Interest paid 817.6 785.2
Net noncash transfers to foreclosed property 19.2 15.8
Change in unrealized gain (loss) on available-for-sale
securities, net of taxes of $24.3 in
1996 and $63.5 in 1995 (39.6) 103.2
Cash acquisitions of businesses:
Fair value of noncash assets acquired $ 37.9 $ --
Liabilities assumed -- --
Net $ 37.9 $ --
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>
FOR THE THREE MONTHS ENDED SEPTEMBER 30
1996 1995
Yields Yields % Change
(In Millions) and and Average
(Unaudited) Balance Interest Rates Balance Interest Rates Balance
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Securities:
U.S. Treasury $620 $9.6 6.16% $919 $14.6 6.30% (32.5)%
Mortgage-backed 2,677 46.8 6.95 1,831 31.1 6.74 46.2
State and political subdivisions 498 10.7 8.55 173 4.5 10.32 187.9
U.S. agencies and other 182 2.7 5.90 433 6.6 6.05 (58.0)
Total securities 3,977 69.8 6.98 3,356 56.8 6.71 18.5
Unrealized loss on available-for-sale securities (46) (13)
Net securities 3,931 3,343
Trading account securities 86 1.2 5.55 87 1.2 5.47 (1.1)
Federal funds sold and resale agreements 511 6.9 5.37 263 3.8 5.73 94.3
Loans:
Commercial:
Commercial 9,382 188.2 7.98 8,091 173.5 8.51 16.0
Financial institutions 834 7.8 3.72 814 8.7 4.24 2.5
Real estate:
Commercial mortgage 3,035 67.6 8.86 2,406 55.4 9.14 26.1
Construction 517 11.3 8.70 340 8.1 9.45 52.1
Total commercial 13,768 274.9 7.94 11,651 245.7 8.37 18.2
Consumer:
Residential mortgage 3,262 63.6 7.76 4,841 92.0 7.54 (32.6)
Residential mortgage held for sale 86 1.7 7.86 358 6.8 7.54 (76.0)
Home equity and second mortgage 3,084 73.9 9.53 2,679 65.8 9.74 15.1
Credit card 2,708 76.7 11.27 2,347 73.4 12.41 15.4
Other 3,863 98.9 10.19 3,660 92.2 9.99 5.5
Total consumer 13,003 314.8 9.63 13,885 330.2 9.43 (6.4)
Total loans 26,771 589.7 8.76 25,536 575.9 8.95 4.8
Allowance for credit losses 530 469 13.0
Net loans 26,241 25,067 4.7
Other earning assets 353 4.4 4.96 238 3.2 5.33 48.3
Total earning assets* 31,698 672.0 8.43 29,480 640.9 8.63 7.5
Cash and due from banks 1,801 1,659 8.6
Other assets 2,444 2,111 15.8
Total assets $35,367 $32,768 7.9%
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits $6,463 $5,591 15.6%
Interest-bearing deposits:
Interest checking 2,882 9.5 1.31 2,728 10.1 1.47 5.6
Money market accounts 4,343 39.2 3.59 3,871 36.9 3.78 12.2
Other savings accounts 1,637 8.7 2.11 1,633 9.7 2.36 0.2
Savings certificates 7,257 99.0 5.43 7,256 98.9 5.41 --
Certificates over $100,000 828 12.8 6.15 1,028 17.4 6.72 (19.5)
Total interest-bearing deposits 16,947 169.2 3.97 16,516 173.0 4.16 2.6
Short-term borrowings 4,175 60.8 5.79 3,928 59.4 6.00 6.3
Long-term debt 3,397 50.7 5.94 2,892 48.0 6.58 17.5
Total interest-bearing liabilities 24,519 280.7 4.55 23,336 280.4 4.77 5.1
Other liabilities 1,187 1,043 13.8
Preferred equity 88 105 (16.2)
Common equity 3,139 2,701 16.2
Unrealized loss on available-for-sale
securities, net of taxes (29) (8) 262.5
Total liabilities and shareholders' equity $35,367 $32,768 7.9%
Net interest income $391.3 $360.5
Gross interest margin 3.88% 3.86%
Gross interest margin without taxable-
equivalent increments 3.82% 3.81%
Net interest margin 4.91% 4.85%
Net interest margin without taxable-
equivalent increments 4.84% 4.81%
</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.
CONSOLIDATED DAILY AVERAGE BALANCE SHEET AND RELATED YIELDS AND RATES
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30
1996 1995
Yields Yields % Change
(In Millions) and and Average
(Unaudited) Balance Interest Rates Balance Interest Rates Balance
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Securities:
U.S. Treasury $720 $33.5 6.22% $990 $46.0 6.21% (27.3)%
Mortgage-backed 2,673 139.4 6.97 2,069 105.8 6.84 29.2
State and political subdivisions 456 30.1 8.82 175 13.9 10.62 160.6
U.S. agencies and other 281 12.9 6.13 490 22.2 6.06 (42.7)
Total securities 4,130 215.9 6.98 3,724 187.9 6.75 10.9
Unrealized loss on available-for-sale securities (16) (66)
Net securities 4,114 3,658
Trading account securities 95 3.8 5.34 87 3.5 5.38 9.2
Federal funds sold and resale agreements 494 19.5 5.27 289 12.8 5.92 70.9
Loans:
Commercial:
Commercial 9,154 546.2 7.97 7,920 515.3 8.70 15.6
Financial institutions 948 29.8 4.20 727 22.2 4.08 30.4
Real estate:
Commercial mortgage 2,988 200.8 8.98 2,426 163.8 9.03 23.2
Construction 475 32.0 9.00 353 25.0 9.47 34.6
Total commercial 13,565 808.8 7.96 11,426 726.3 8.50 18.7
Consumer:
Residential mortgage 3,503 204.4 7.79 4,970 281.9 7.58 (29.5)
Residential mortgage held for sale 155 8.6 7.41 248 14.3 7.71 (37.5)
Home equity and second mortgage 2,973 213.4 9.59 2,571 185.7 9.66 15.6
Credit card 2,602 223.1 11.45 2,311 216.9 12.55 12.6
Other 3,880 291.9 10.05 3,641 274.0 10.06 6.6
Total consumer 13,113 941.4 9.59 13,741 972.8 9.47 (4.6)
Total loans 26,678 1,750.2 8.76 25,167 1,699.1 9.03 6.0
Allowance for credit losses 523 473 10.6
Net loans 26,155 24,694 5.9
Other earning assets 328 12.1 4.93 234 10.1 5.77 40.2
Total earning assets* 31,725 2,001.5 8.43 29,501 1,913.4 8.67 7.5
Cash and due from banks 1,791 1,681 6.5
Other assets 2,467 2,151 14.7
Total assets $35,444 $32,794 8.1%
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits $6,396 $5,512 16.0%
Interest-bearing deposits:
Interest checking 3,017 30.3 1.34 2,849 34.3 1.61 5.9
Money market accounts 4,229 112.9 3.57 3,846 108.7 3.78 10.0
Other savings accounts 1,656 26.5 2.14 1,753 32.7 2.49 (5.5)
Savings certificates 7,320 296.8 5.42 7,899 308.6 5.22 (7.3)
Certificates over $100,000 881 40.6 6.16 1,089 53.9 6.62 (19.1)
Total interest-bearing deposits 17,103 507.1 3.96 17,436 538.2 4.13 (1.9)
Short-term borrowings 4,236 180.4 5.69 3,185 144.4 6.06 33.0
Long-term debt 3,378 151.6 5.99 2,901 140.5 6.48 16.4
Total interest-bearing liabilities 24,717 839.1 4.53 23,522 823.1 4.68 5.1
Other liabilities 1,147 1,022 12.2
Preferred equity 93 106 (12.3)
Common equity 3,101 2,676 15.9
Unrealized loss on available-for-sale
securities, net of taxes (10) (44) 77.3
Total liabilities and shareholders' equity $35,444 $32,794 8.1%
Net interest income $1,162.4 $1,090.3
Gross interest margin 3.90% 3.99%
Gross interest margin without taxable-
equivalent increments 3.83% 3.94%
Net interest margin 4.89% 4.94%
Net interest margin without taxable-
equivalent increments 4.83% 4.89%
</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 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
3 Bylaws of First Bank System, Inc., as amended*
10A First Bank System, Inc. 1996 Stock Incentive Plan, as amended*
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 September 30, 1996, the Company did not file
any Current Reports on Form 8-K.
* Copies of this exhibit will be furnished upon request and payment of the
Company's reasonable expenses in furnishing the exhibit.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIRST BANK SYSTEM, INC.
/s/ DAVID J. PARRIN
By: David J. Parrin
Senior Vice President and Controller
(Chief Accounting Officer and Duly
Authorized Officer)
DATE: November 13, 1996
[LOGO] FIRST BANK SYSTEM
P.O. BOX 522
MINNEAPOLIS, MINNESOTA
55480
SHAREHOLDER INQUIRIES
FINANCIAL INFORMATION
FBS news and financial results are available by fax, mail, or internet.
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, mail to you our quarterly earnings
news release. To be added to FBS's mailing list, please contact Investor &
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.
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 11/05/96
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 other wise 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 (i) is or was a director,
advisory director, or officer of the Corporation or any predecessor of the
Corporation, or (ii) is or was a director, advisory director or officer of the
Corporation or any predecessor of the Corporation and served any other
corporation, partnership, joint venture, trust or other enterprise as a
director, advisory director, officer, partner, trustee, employee or agent 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 such 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 such 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 for which
indemnification is required pursuant to Section 1 shall 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.
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 two directors, each of whom is a "Non-Employee
Director" within the meaning of Rule 16b-3 (which term is defined in this
paragraph for purposes of the definition of "Committee" only and is not intended
to define such term as used elsewhere in the Plan). 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.
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
August 15, 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
two 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 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 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 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 withdraws from the Plan or 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 Period, 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 Non-employee 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, unless the Non-employee Director 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). Any amount remaining in a
Non-employee Director's Stock Purchase Account after the last business day of a
Purchase Period will be paid to the Non-employee Director in cash within 30 days
after the end of that Purchase Period.
(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 Voluntary Withdrawal. A Non-employee Director
may, in accordance with such terms and conditions as the Committee in its sole
discretion may impose, withdraw from the Plan and cease having deductions made
from Director Compensation by filing with the Company a form provided for this
purpose. In such event, the entire credit balance in the Non-employee Director's
Stock Purchase Account will be paid to the Non-employee Director in cash within
30 days. A Non-employee Director who withdraws from the Plan will not be
eligible to reenter the Plan until the beginning of the next Purchase Period.
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 NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) 1996 1995 1996 1995
<S> <C> <C> <C> <C>
PRIMARY:
Average shares outstanding 135,928,744 131,401,366 136,079,521 133,014,010
Net effect of the assumed purchase of stock under the stock
option and stock purchase plans--based on the treasury stock
method using average market price 1,751,045 2,247,576 2,042,749 1,993,509
137,679,789 133,648,942 138,122,270 135,007,519
Net income $137.5 $145.7 $568.4 $417.4
Preferred dividends (1.6) (1.8) (4.9) (5.6)
Net income applicable to common equity $135.9 $143.9 $563.5 $411.8
Net income per common share $ .99 $1.08 $4.08 $3.05
FULLY DILUTED: *
Average shares outstanding 135,928,744 131,401,366 136,079,521 133,014,010
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 1,971,983 2,605,311 2,425,883 2,747,842
Assumed conversion of Series 1991A Preferred Stock 3,032,761 3,616,512 3,193,986 3,616,512
140,933,488 137,623,189 141,699,390 139,378,364
Net income $137.5 $145.7 $568.4 $417.4
Preferred dividends, excluding 1991A Preferred Stock -- -- -- --
Net income applicable to common equity $137.5 $145.7 $568.4 $417.4
Net income per common share $ .98 $1.06 $4.01 $2.99
</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 NINE
MONTHS MONTHS
ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30
(DOLLARS IN MILLIONS) 1996 1996
<S> <C> <C> <C>
EARNINGS
1. Net income $137.5 $568.4
2. Applicable income taxes 78.2 355.0
3. Net income before taxes (1 + 2) $215.7 $923.4
4. Fixed charges:
a. Interest expense excluding interest on deposits $111.5 $332.0
b. Portion of rents representative of interest and amortization of debt
expense 6.1 21.0
c. Fixed charges excluding interest on deposits (4a + 4b) 117.6 353.0
d. Interest on deposits 169.2 507.1
e. Fixed charges including interest on deposits (4c + 4d) $286.8 $860.1
5. Amortization of interest capitalized $-- $--
6. Earnings excluding interest on deposits (3 + 4c + 5) 333.3 1,276.4
7. Earnings including interest on deposits (3 + 4e + 5) 502.5 1,783.5
8. Fixed charges excluding interest on deposits (4c) 117.6 353.0
9. Fixed charges including interest on deposits (4e) 286.8 860.1
RATIO OF EARNINGS TO FIXED CHARGES
10. Excluding interest on deposits (line 6/line 8) 2.83 3.62
11. Including interest on deposits (line 7/line 9) 1.75 2.07
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FIRST
BANK SYSTEM, INC. SEPTEMBER 30, 1996, 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,990,000
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 628,000
<TRADING-ASSETS> 76,000
<INVESTMENTS-HELD-FOR-SALE> 3,778,000
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 27,037,000
<ALLOWANCE> 521,400
<TOTAL-ASSETS> 36,843,000
<DEPOSITS> 25,008,000
<SHORT-TERM> 3,941,000
<LIABILITIES-OTHER> 1,060,000
<LONG-TERM> 3,443,000
0
87,000
<COMMON> 177,000
<OTHER-SE> 2,917,000
<TOTAL-LIABILITIES-AND-EQUITY> 36,843,000
<INTEREST-LOAN> 1,744,800
<INTEREST-INVEST> 205,800
<INTEREST-OTHER> 35,300
<INTEREST-TOTAL> 1,985,900
<INTEREST-DEPOSIT> 507,100
<INTEREST-EXPENSE> 839,100
<INTEREST-INCOME-NET> 1,146,800
<LOAN-LOSSES> 101,000
<SECURITIES-GAINS> 15,000
<EXPENSE-OTHER> 1,086,100
<INCOME-PRETAX> 923,400
<INCOME-PRE-EXTRAORDINARY> 568,400
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 568,000
<EPS-PRIMARY> 4.08
<EPS-DILUTED> 4.01
<YIELD-ACTUAL> 4.89
<LOANS-NON> 120,900
<LOANS-PAST> 43,300
<LOANS-TROUBLED> 100
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 473,500
<CHARGE-OFFS> 187,900
<RECOVERIES> 75,700
<ALLOWANCE-CLOSE> 521,400
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
