FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED MARCH 31, 1994 COMMISSION FILE NUMBER 1-2981
FIRSTAR CORPORATION
(Exact Name of Registrant as Specified in its Charter)
WISCONSIN 39-0711710
(State of Incorporation) (I.R.S. EMPLOYER
Identification No.)
777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
Telephone Number (414) 765-4985
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 precedeing
12 months and (2) has been subject to such filing requirements for the
past 90 days.
As of May 2, 1994, 64,324,611 shares of common stock were outstanding.
FIRSTAR CORPORATION
CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets 1
Consolidated Statements of Income 2
Consolidated Statements of Cash Flows 3
Supplemental Footnotes 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security 8
Holders
Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURES 9
PART I. FINANCIAL INFORMATION
The financial data presented herein are unaudited, but in the opinion
of management reflect all adjustments which are necessary for a fair
presentation of such infomation. Results for interim periods should
not be considered indicative of results for a full year. Reference
should be made to the financial statements contained in the registrant's
Annual Report on Form 10-K for the year ended December 31, 1993.
<TABLE>
FIRSTAR CORPORATION AND SUBSIDIARIES `
CONSOLIDATED BALANCE SHEETS (unaudited)
<CAPTION>
=============================================================================
March 31 December 31
(Thousands of Dollars) 1994 1993
- - -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and Due from Banks $1,343,354 $1,228,957
Interest-Bearing Deposits with Banks 4,458 4,328
Federal Funds Sold and Resale Agreements 215,454 282,517
Trading Account Securities 18,967 12,491
Investment Securities (market value $2,878,586 and
$2,894,594 on 3/31/94 & 12/31/93) 2,876,265 2,834,305
Loans:
Commercial and Industrial 2,548,577 2,470,454
Real Estate 2,012,787 1,948,789
Other 852,335 886,518
------------ ------------
Commercial Loans 5,413,699 5,305,761
Credit Card 502,483 546,051
Real Estate - Mortgage 1,293,282 1,363,671
Home Equity 443,056 445,135
Other 1,347,246 1,323,200
------------ ------------
Consumer Loans 3,586,067 3,678,057
------------ ------------
Total Loans 8,999,766 8,983,818
Reserve for Loan Losses (175,399) (174,873)
------------ ------------
Loans - Net 8,824,367 8,808,945
Bank Premises and Equipment 265,169 264,569
Customer Acceptance Liability 24,143 17,412
Other Assets 336,233 340,471
------------ ------------
Total Assets $13,908,410 $13,793,995
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand 2,613,347 3,064,314
Interest-Bearing Demand 1,424,229 1,557,145
Savings Passbook 1,557,113 1,528,222
Consumer Time 4,058,714 4,041,411
Commercial Time 1,117,825 972,522
------------ ------------
Total Deposits 10,771,228 11,163,614
Short-Term Borrowed Funds 1,579,306 1,112,490
Long-Term Debt 126,025 126,275
Bank Acceptances Outstanding 24,143 17,412
Other Liabilities 217,322 218,307
------------ ------------
Total Liabilities 12,718,024 12,638,098
Stockholders' Equity:
Common Stock 81,194 81,149
Capital Surplus 150,412 149,882
Retained Earnings 965,019 928,559
Treasury Stock (6,239) (3,693)
------------ ------------
Total Stockholders' Equity 1,190,386 1,155,897
------------ ------------
Total Liabilities and Stockholders' Equity $13,908,410 $13,793,995
============ ============
</TABLE>
<TABLE>
FIRSTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
<CAPTION>
================================================================================
Three Months Ended
March 31
(Thousands of Dollars, Except Per Share Data) 1994 1993
- - --------------------------------------------------------------------------------
<S> <C> <C>
INTEREST REVENUE
Loans $173,431 $169,898
Investment Securities 39,249 45,511
Interest-Bearing Deposits with Banks 73 1,019
Federal Funds Sold and Resale Agreements 1,657 1,307
Trading Account Securities 239 166
------------ ----------
Total Interest Revenue 214,649 217,901
INTEREST EXPENSE
Deposits 57,971 68,959
Short-Term Borrowed Funds 9,446 5,569
Long-Term Debt 3,217 3,621
------------ ---------
Total Interest Expense 70,634 78,149
------------ ---------
NET INTEREST REVENUE 144,015 139,752
Provision for Loan Losses 2,958 6,334
------------ ---------
NET INTEREST REVENUE AFTER LOAN LOSS PROVISION 141,057 133,418
OTHER OPERATING REVENUE
Trust and Investment Management Fees 30,190 27,213
Service Charges on Deposit Accounts 18,380 17,084
Credit Card Service Revenue 12,249 11,805
Data Processing Fees 5,058 5,445
Investment Securities Gains 27 9
Other Revenue 17,209 17,769
------------ ---------
Total Other Operating Revenue 83,113 79,325
OTHER OPERATING EXPENSE
Salaries 65,677 60,747
Employee Benefits 16,496 16,817
Equipment Expense 12,295 11,740
Net Occupancy Expense 12,130 11,592
Net Other Real Estate (Revenue) Expense (343) 456
Other Expense 37,948 40,387
------------ ---------
Total Other Operating Expense 144,203 141,739
------------ ---------
INCOME BEFORE INCOME TAXES 79,967 71,004
Applicable Income Taxes 26,745 20,978
------------ ---------
NET INCOME $53,222 $50,026
============ =========
Net Income Applicable to Common Stock $53,222 $49,138
============ =========
PER COMMON SHARE
Net Income $0.83 $0.78
Dividends 0.26 0.22
</TABLE>
<TABLE>
FIRSTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
- - -------------------------------------------------------------------------------
Three Months Ended
March 31
(Thousands of Dollars) 1994 1993
- - -------------------------------------------------------------------------------
<S> <C> <C>
(Unaudited)
Cash Flows from Operating Activities:
Net Income $53,222 $50,026
Adjustments:
Provision for loan losses 2,958 6,334
Depreciation, amortization, and accretion 7,896 9,301
Net increase in trading account securities (6,476) (883)
Net decrease in loans held for resale 115,232 135,437
Gains on sale of assets (464) (2,836)
Decrease (increase) in other assets 641 (5,228)
Increase in other liabilities 743 10,230
Other net (465) (779)
------------ ------------
Net cash provided by operating activities 173,287 201,602
Cash Flows from Investing Activities:
Net decrease (increase) in federal funds sold and
resale agreements 67,063 (12,608)
Net (increase) decrease in interest-bearing deposits
with banks (130) 142,980
Sales of investment securities 6,192
Maturities of investment securities 198,543 357,318
Purchase of investment securities (244,373) (454,663)
Net increase in loans (129,654) (68,418)
Cash acquired in acquisitions 11,290
Proceeds from sale of other real estate 3,927 2,776
Purchase of bank premises and equipment (9,647) (7,716)
Proceeds from sale of bank premises and equipment 35 82
------------ ------------
Net cash used in investing activities (114,236) (22,767)
Cash Flows from Financing Activities:
Net decrease in deposits (392,386) (473,629)
Net increase in short-term borrowed funds 466,816 50,178
Repayment of long-term debt (271) (26,083)
Common stock transactions (2,051) 738
Cash dividends (16,762) (14,851)
------------ ------------
Net cash provided by ( used in) financing activities 55,346 (463,647)
Net increase (decrease) in cash and due from banks 114,397 (284,812)
Cash and due from banks at beginning of period 1,228,957 1,289,950
------------ ------------
Cash and due from banks at end of period $1,343,354 $1,005,138
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $67,229 $77,921
Income taxes 10,639 9,287
Transfer to other real estate from loans $1,688 $3,244
</TABLE>
SUPPLEMENTAL FOOTNOTES (Unaudited)
(Thousands of Dollars)
1. Nonperforming Assets
March 31 December 31 March 31
1994 1993 1993
------------ ------------ ------------
Nonaccrual Loans:
Commercial $39,353 $21,243 $24,982
Commercial - Real Estate 24,542 25,477 26,695
Consumer 6,455 6,417 7,728
------------ ------------ ------------
70,350 53,137 59,405
Renegotiated Loans:
Commercial 820 823 1,432
Commercial - Real Estate 664 690 515
------------ ------------ ------------
1,484 1,513 1,947
Other Real Estate* 8,138 10,215 31,683
------------ ------------ ------------
Total $79,972 $64,865 $93,035
============ ============ ============
Nonperfor. Assets as a Percent of:
Loans and Other Real Estate 0.89% 0.72% 1.14%
Total Assets .57 .47 .72
*Nonperforming loans which were included in other real estate under
"in substance foreclosure" accounting rules were $9.8 million, at
March 31, 1993. Such "in substance foreclosed" loans were reclassified
to loans in subsequent periods.
2. Loans Past Due 90 Days and Still Accruing
March 31 December 31 March 31
1994 1993 1993
------------ ------------ ------------
Commercial $8,236 $5,521 $11,086
Commercial - Real Estate 8,114 3,934 5,510
Consumer 12,460 12,348 12,416
------------ ------------ ------------
Total $28,810 $21,803 $29,012
============ ============ ============
3. Reserve for Loan Losses
Three Months Ended
March 31
1994 1993
------------ ------------
Balance - Beginning of period $174,873 $168,482
Provision for Loan Losses 2,958 6,334
Loan Recoveries 4,104 4,297
Loan Charge-Offs (6,536) (8,502)
Reserves of Acquired Banks 1,370
------------ ------------
Balance - End of period $175,399 $171,981
============ ============
Net Charge-Offs to Average Loans 0.11% 0.21%
Reserve to Period-End Loans 1.95% 2.12%
4. The Corporation's net income for the twelve months ended March 31, 1994
was $207,490,000 or $3.20 per common share.
5. Firstar uses interest rate swaps, caps and floors in the process of
managing interest rate sensitivity. The use of these hedges allows Firstar
to change interest rate sensitivity while retaining the ability to offer
products that satisfy customer needs. Interest rate instruments have been
used to alter the rate characteristics of both loans and deposits.
The table below shows information on interest rate risk management
instruments. The notional amount of these agreements was $1.6 billion
on March 31, 1994. Additionally, Firstar has $1.4 billion of interest
rate instruments for which it serves as an intermediary for customers.
Where Firstar acts as an intermediary, it enters into positions that
essentially offset one another. Notional principal amounts are the
basis for the exchange of interest payments.
<TABLE>
Interest Rate Derivative Instruments
(Millions of Dollars)
Unrealized
<CAPTION> Market Value
December 31 March 31 March 31
1993 1994 1994
------------ ------------ ------------
<S> <C> <C> <C>
Interest rate swaps:
Receive fixed rate pay variable rate $260 $365 ($10.1)
Receive variable rate pay fixed rate 117 97 (0.3)
Receive variable rate pay variable rate 720 945 (13.7)
--------------------------------------
Subtotal $1,097 $1,407 ($24.1)
Interest rate caps 120 120 1.0
Interest rate floors 60 80 0.6
--------------------------------------
Total $1,277 $1,607 ($22.5)
======================================
</TABLE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Net income of Firstar Corporation was $53.2 million, or $.83 per common
share during the first quarter of 1994, compared to $50.0 million, or
$.78 per common share during the same period last year. This represented
a 6.4% increase in net income per common share. Return on equity was
18.37% during the first quarter of 1994 compared to 19.48% in 1993,
while return on average assets was 1.62% compared to 1.61% during the
same period last year.
Net interest revenue, on a taxable equivalent basis, was $151.0 million
which was $4.2 million, or 3% above the level of last year. The net
interest margin was 5.11% during the first quarter compared to 5.27% a
year earlier. The increase in net interest revenue was attributable to
the higher earning asset balances, up 6% from a year earlier, partially
offset by the reduced net interest margin. The margin has been compressed
as a result of the rising interest rates.
The provision for loan losses of $3.0 million was $3.4 million lower
than last year, with net charge-offs decreasing $1.8 million from the same
period last year. Net charge-offs for the first quarter were at a level
of .11% of average outstanding loans compared to .21% a year earlier.
Credit card charge-offs have decreased to 1.97% of outstanding loans
during the first quarter of 1994 from a level of 2.60% during the same
period last year. The level of charge-offs may not be representative
of full year results. The reserve for loan losses represented 1.95% of
total loans at March 31, 1994, the same level as at year-end and down
from 2.12% a year earlier.
Nonperforming assets were $80.0 million at March 31, 1994, which amounted
to .89% of total loans and other real estate. This was a $15.1 million
increase from the December 31, 1993 level. This increase in nonperforming
assets during the quarter resulted from the addition of loans to one
borrower and does not represent a trend. Nonperforming real estate
related assets decreased $3.0 million during the first quarter. Commercial
nonperforming loans increased $18.1 million, while consumer nonperforming
loans were level. Commercial nonperforming assets represent the major
portion of the nonperforming portfolio, with the balance at March 31, 1994
of $40.2 million, or 50% of total nonperforming assets. Real estate
related nonperforming assets currently represent 42% of the nonperforming
portfolio.
Other operating revenue rose by 5% to a level of $83.1 million.
While this first quarter growth is less than the 14% achieved during
1993, Firstar anticipates stronger growth later in the year and annual
fee growth of over 10%. Trust and investment management fee revenue
rose by 11% while deposit service charges rose by 8%. Credit card fee
revenue increased 4% from the year earlier levels despite an intense
marketplace. All other fee revenue has shown a decline of 4%.
Other operating expense increased by 2% to a level of $144.2 million.
Personnel costs rose by 6% to a level of $82.2 million due in the most
part to merit increases taking effect at the beginning of the year.
Nonpersonnel costs decreased 3%. The efficiency ratio, which is the
ratio of expense to revenue improved further during the quarter. This
ratio was 61.6% in the first quarter of 1994 compared to 62.7% a year
earlier. It is Firstar's goal to reach an efficiency ratio in 1995.
Total assets on March 31, 1994 were $13.9 billion, an increase of $114.4
million from the level at year-end. Short-term investments were $60.5
million lower; investment securities were increased by $42.0 million
from the year-end level; and loans were $15.9 million higher than at
year-end.
Total deposits were $10.8 billion on March 31, 1994, a decrease of $392.4
million from the levels at year-end. Transaction accounts were $583.9
million lower reflecting higher balances generally maintained by customers
at year-end. Other deposits have increased by $191.5 million. Short-term
borrowed fund levels increased $466.8 million from year-end.
Stockholders' equity totaled $1,190.4 million at the end of the first
quarter, an increase of $34.5 million from the level at year-end. Total
equity as a percent of total assets amounted to 8.56%. Under risk-based
capital rules, total capital is 13.57% of risk-adjusted assets, compared
to an 8% requirement. Management considers its capital levels adequate
for current needs
The Board of Directors approved an increase in the quarterly dividend
to common stockholders from 26 cents to 30 cents per share which is
payable May 15 to shareholders of record May 2.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of the shareholders of Firstar Corporation was held
on April 21, 1994. The items presented at the meeting and the results
of the vote were as follows:
1. The management nominees for directors for terms expiring in 1997
were elected. There were no abstentions or broker nonvotes.
For Withheld
----------- ---------
John A. Becker 53,343,379 524,523
George M. Chester, Jr. 53,351,056 516,846
Roger L. Fitzsimonds 53,345,915 521,987
Holmes Foster 53,279,392 588,510
Joe Hladky 53,337,014 530,888
Judith D. Pyle 53,321,080 546,822
Dr. Clifford V. Smith, Jr. 53,290,397 577,505
2. The Amendment to the 1988 Incentive Stock Plan for Key Employees was
approved.
For 48,345,781
Against 4,867,782
Abstain 654,339
Broker Nonvotes 0
3. The Annual Executive Incentive Plan was approved.
For 50,502,760
Against 2,712,473
Abstain 652,669
Broker Nonvotes 0
4. An advisory shareholder proposal concerning South Africa was defeated.
For 5,085,920
Against 39,822,850
Abstain 2,683,057
Broker Nonvotes 6,276,075
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) No reports on Form 8-K were filed during the quarter.
-8-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
FIRSTAR CORPORATION
/s/ William H. Risch
----------------------
May 6, 1994 William H. Risch
Senior Vice President-Finance and
Treasurer (Chief Financial Officer)
