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 QUARTERLY PERIOD ENDED MARCH 31, 1995 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 1, 1995, 76,263,317 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 7
Additional Financial Data 13
PART II. OTHER INFORMATION
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 15
<TABLE>
<CAPTION>
FIRSTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------------------------
March 31 December 31 March 31
(thousands of dollars) 1995 1994 1994
------------ ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 894,016 $ 1,090,636 $ 1,439,383
Interest-bearing deposits with banks 4,201 4,777 7,821
Federal funds sold and resale agreements 222,663 351,304 252,515
Trading securities 12,922 29,050 18,967
Securities held to maturity (market value $3,965,401
$3,606,979 and $3,208,417 on March 31, 1995,
December 31, 1994 and March 31, 1994) 3,987,903 3,702,232 3,215,324
Securities available for sale 165,601 222,719 186,761
Loans:
Commercial and industrial 2,938,264 2,934,609 2,729,626
Real estate 2,813,114 2,774,185 2,501,295
Other 964,250 963,883 875,682
------------ ------------ ------------
Commercial loans 6,715,628 6,672,677 6,106,603
Credit card 533,442 575,278 504,401
Real estate - mortgage 1,600,666 1,513,289 1,455,531
Home equity 723,154 662,681 577,339
Other 1,455,730 1,463,799 1,396,975
------------ ------------ ------------
Consumer loans 4,312,992 4,215,047 3,934,246
------------ ------------ ------------
Total loans 11,028,620 10,887,724 10,040,849
Reserve for loan losses (192,355) (186,930) (188,454)
------------ ------------ ------------
Loans - net 10,836,265 10,700,794 9,852,395
Bank premises and equipment 327,268 319,304 292,148
Customer acceptance liability 27,866 13,466 24,465
Other assets 452,173 436,771 402,747
------------ ------------ ------------
Total assets $ 16,930,878 $ 16,871,053 $ 15,692,526
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand $ 2,898,301 $ 3,086,455 $ 2,890,517
Interest-bearing demand 1,548,278 1,691,123 1,635,326
Money market accounts 2,057,380 1,983,565 1,908,767
Savings passbook 1,741,467 1,809,973 1,873,515
Certificates of deposit 4,602,619 4,199,838 3,977,909
------------ ------------ ------------
Total deposits 12,848,045 12,770,954 12,286,034
Short-term borrowed funds 2,144,935 2,196,478 1,650,308
Long-term debt 185,231 149,734 150,508
Bank acceptances outstanding 27,866 13,466 24,465
Other liabilities 260,836 280,599 232,734
------------ ------------ ------------
Total liabilities 15,466,913 15,411,231 14,344,049
Stockholders' equity:
Preferred stock 19,388 19,388 20,125
Common stock 92,127 92,662 90,779
Issued: March 31, 1995, 73,701,239 shares
Issued: December 31, 1994, 74,129,315 shares
Issued: March 31, 1994, 72,917,676 shares
Capital surplus 203,604 220,906 203,539
Retained earnings 1,151,979 1,139,024 1,040,407
Treasury stock (2,600) (10,669) (5,574)
Held: March 31, 1995, 478,653 shares
Held: December 31, 1994, 792,303 shares
Held: March 31, 1994, 637,611 shares
Restricted stock (426) (435) (665)
Unrealized losses on securities available for sale (107) (1,054) (134)
------------ ------------ ------------
Total Stockholders' equity 1,463,965 1,459,822 1,348,477
------------ ------------ ------------
Total liabilities and stockholders' equity $ 16,930,878 $ 16,871,053 $ 15,692,526
============ ============ ============
-1-
</TABLE>
<TABLE>
<CAPTION>
FIRSTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------
Three Months Ended
March 31
(thousands of dollars, except per share data) 1995 1994
----------------------
(unaudited)
<S> <C> <C>
INTEREST REVENUE
Loans $ 239,533 $ 193,579
Securities 59,274 44,730
Interest-bearing deposits with banks 58 84
Federal funds sold and resale agreements 2,967 1,762
Trading securities 218 239
---------- ----------
Total interest revenue 302,050 240,394
INTEREST EXPENSE
Deposits 95,943 65,819
Short-term borrowed funds 30,385 10,058
Long-term debt 3,638 3,423
---------- ----------
Total interest expense 129,966 79,300
NET INTEREST REVENUE 172,084 161,094
Provision for loan losses 12,936 3,557
---------- ----------
NET INTEREST REVENUE AFTER
LOAN LOSS PROVISION 159,148 157,537
OTHER OPERATING REVENUE
Trust and investment management fees 31,684 30,838
Service charges on deposit accounts 19,638 20,410
Credit card service revenue 13,954 12,369
Data processing fees 4,919 5,058
Securities (losses) gains (5,683) 649
Other revenue 20,596 18,906
---------- ----------
Total other operating revenue 85,108 88,230
OTHER OPERATING EXPENSE
Salaries 77,749 72,494
Employee benefits 18,760 17,852
Equipment expense 13,555 13,197
Net occupancy expense 13,846 13,198
Net other real estate revenue (395) (299)
Restructuring expense 19,857
Other expense 48,944 43,229
---------- ----------
Total other operating expense 192,316 159,671
INCOME BEFORE INCOME TAXES 51,940 86,096
Applicable income taxes 16,728 28,622
---------- ----------
NET INCOME $ 35,212 $ 57,474
========== ==========
Net income applicable to common stock $ 34,873 $ 57,122
========== ==========
PER COMMON SHARE
Net income $.48 $.79
Dividends .30 .26
-2-
</TABLE>
<TABLE>
<CAPTION>
FIRSTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------------------------------
Three Months Ended
March 31
(thousands of dollars) 1995 1994
- ------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 34,873 $ 57,122
Adjustments:
Provision for loan losses 12,936 3,557
Depreciation, amortization, and accretion 7,476 9,443
Net increase in trading securities 16,128 (6,476)
Net decrease in loans held for resale 13,649 115,232
Gains on sale of assets (1,315) (464)
(Increase) decrease in other assets (14,769) 722
(Decrease) increase in other liabilities (18,203) 6,030
Other net (364) (113)
------------- -------------
Net cash provided by operating activities 50,411 185,053
Cash Flows from Investing Activities:
Net decrease in federal funds sold and resale agreements 128,641 39,417
Net decrease (increase) in interest-bearing deposits with banks 576 (130)
Purchase of securities available for sale (489) 0
Sale of securities available for sale 119,563 0
Maturities of securities held to maturity 337,580 275,512
Purchase of securities held to maturity (633,802) (311,776)
Net increase in loans (136,601) (135,576)
Cash acquired in acquisitions 294 0
Proceeds from sale of other real estate 804 3,927
Purchase of bank premises and equipment (16,726) (19,057)
Proceeds from sale of bank premises and equipment 161 35
------------- -------------
Net cash used in investing activities (199,999) (147,648)
Cash Flows from Financing Activities:
Net increase (decrease) in deposits 3,163 (393,291)
Net (decrease) increase in short-term borrowed funds (64,316) 503,511
Issuance of long-term debt 58,500 0
Repayment of long-term debt (1,500) (2,777)
Common stock transactions (20,621) (1,885)
Cash dividends (22,258) (18,423)
------------- -------------
Net cash (used in) provided by financing activities (47,032) 87,135
Net (decrease) increase in cash and due from banks (196,620) 124,540
Cash and due from banks at beginning of period 1,090,636 1,314,843
------------- -------------
Cash and due from banks at end of period $ 894,016 $ 1,439,383
============= =============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 129,966 $ 76,097
Income taxes 5,813 10,639
Transfer to other real estate from loans $ 1,966 $ 1,688
-3-
</TABLE>
FIRSTAR CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL FOOTNOTES (unaudited)
- -------------------------------------------------------------------------------
(thousands of dollars except as otherwise indicated)
1. 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 information. 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, 1994.
2. Mergers and Acquisitions
On January 31, 1995, Firstar Corporation completed its merger with
First Colonial Bankshares Corporation, a $1.8 billion banking company,
in a transaction accounted for as a pooling of interests. Firstar
issued .7725 shares of Firstar common stock for each share of First
Colonial Bankshares Corporation common stock. The total number of
shares of Firstar common stock issued was approximately 7,700,000
shares. All financial information has been restated to reflect this
transaction.
On March 31, 1995, Firstar Corporation completed its acquisition of
First Moline Financial Corporation, an $80 million thrift holding
company. The transaction was accounted for as a purchase with the
issuance of 313,650 shares of Firstar common stock.
On April 28, 1995, Firstar Corporation completed the acquisition of
Investors Bank Corp., a $1 billion banking company. The transaction
will be accounted for as a pooling of interests through the issuance of
approximately 3,000,000 shares of Firstar common stock. All financial
information will be restated to reflect this transaction.
3. Securities
The amortized cost and approximate market values of securities held to
maturity are as follows:
<TABLE>
<CAPTION>
March 31, 1995
-------------------------------------------------
Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Securities held to maturity:
U.S. Treasury and federal agencies $ 1,805,107 $ 6,800 $ (34,407)$ 1,777,500
Mortgage backed obligations of federal agencies 1,012,832 9,927 (4,726) 1,018,033
State and political subdivisions 1,022,307 10,741 (10,682) 1,022,366
Corporate debt 36,408 82 (237) 36,253
Equity securities 47,938 0 0 47,938
Other 63,311 0 0 63,311
----------- ---------- ------------ ----------
Total $ 3,987,903 $ 27,550 $ (50,052)$ 3,965,401
=========== ========== ============ ==========
</TABLE>
-4-
FIRSTAR CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL FOOTNOTES (unaudited)
- ---------------------------- -------------------------------------------------
4. Nonperforming Assets and Past Due Loans
<TABLE>
<CAPTION>
March 31 December 31 March 31
1995 1994 1994
---------- ------------ ----------
<S> <C> <C> <C>
Nonaccrual loans:
Commercial $ 26,722 $ 29,710 $ 41,307
Commercial - real estate 35,545 28,993 28,122
Consumer 12,201 7,726 8,438
---------- ------------ ----------
74,468 66,429 77,867
Renegotiated loans:
Commercial 69 71 820
Commercial - real estate 644 674 701
---------- ------------ ----------
713 745 1,521
Other real estate 8,800 11,256 12,328
---------- ------------ ----------
Total $ 83,981 $ 78,430 $ 91,716
========== ============ ==========
Nonperforming assets as a percent of:
Loans and other real estate 0.76 % 0.72 % 0.91 %
Total assets 0.50 0.46 0.58
Loans past due 90 days and still accruing
Commercial $ 16,218 $ 7,432 $ 9,211
Commercial - eeal estate 10,147 3,760 9,138
Consumer 13,941 15,709 13,261
---------- ------------ ----------
Total $ 40,306 $ 26,901 $ 31,610
========== ============ ==========
</TABLE>
4. Reserve for Loan Losses
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------------
1995 1994
------------ ----------
<S> <C> <C>
Balance - beginning of period
As previously reported $ 172,606 $ 174,873
Adjustments for pooling of interests 14,324 11,860
------------ ----------
Balance - as restated 186,930 186,733
Provision for loan losses 12,936 3,557
Loan recoveries 3,915 4,268
Loan charge-offs (12,291) (7,315)
Reserves of acquired banks 865 1,211
------------ ----------
Balance - end of period $ 192,355 $ 188,454
============ ==========
Net charge-offs to average loans .31 % .13 %
Reserve to period-end loans 1.74 1.88
</TABLE>
Firstar adopted Financial Accounting Standards Board Statements Nos.
114 and 118, Accounting by Creditors for Impairment of a Loan on
January 1, 1995. These statements establish procedures for determining
the appropriate reserve for loan losses for loans deemed impaired.
The calculation of reserve levels is based upon the discounted present
value of expected cash flows received from the debtor or other measures
of value such as market prices or collateral values. Firstar has
identified $62.3 million of loans considered to be impaired. Income
recognition for these loans is limited to actual cash receipts. These
statements did not have any impact on the current level of the reserve
for loan losses and is not expected to effect 1995 operating results.
-5-
FIRSTAR CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL FOOTNOTES (unaudited)
- -------------------------------------------------------------------------------
6. Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------------
1995 1994
------------ ----------
<S> <C> <C>
Balance - beginning of period
As previously reported $ 1,306,528 $ 1,155,897
Adjustments for pooling of interests 153,294 156,264
------------ ----------
Balance - as restated 1,459,822 1,312,161
Net income 35,212 57,474
Common stock issued 4,856 2,385
Common stock retired (22,693) 0
Preferred stock converted 0 (1,200)
Treasury stock issued 8,069 0
Treasury stock purchased 0 (2,540)
Restricted stock transactions 10 (6)
Unrealized losses on securities
Available for sale 947 (1,234)
Dividends - common stock (21,922) (18,211)
- preferred stock (336) (352)
------------------------
Balance - end of period $ 1,463,965 $ 1,348,477
========================
</TABLE>
7. Derivative Financial Instruments
The following table summarizes the various types of interest rate
contracts that Firstar uses for the purpose of managing interest
rate risk as of March 31, 1995.
<TABLE>
<CAPTION>
March 31, 1995
-------------------------------------------------------------
Market
12-31-94 Average Average Weighted Value
Notional Notional Receive Pay Average Asset
Amount Amount Rate Rate Maturity (Liability)
--------- --------- ----------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
(millions)
Interest rate swaps
Receive fixed rate
Index amortizing $ 290 $ 290 5.33 % 6.23 % 3.1 yr $ (14.0)
Other 75 75 6.99 7.35 1.0 (0.8)
Receive variable 77 77 5.96 6.79 1.4 (1.3)
Periodic caps 930 930 4.88 6.01 2.1 (17.0)
Interest rate floors* 301 391 5.05 4.4 3.1
Interest rate caps* 80 40 6.33 .4 0.3
--------- --------- ----------
$ 1,753 $ 1,803 $ (29.7)
========= ========= ==========
* Interest rate floors and caps provide for the receipt of payments
when the index interest rate is below or above the predetermined
rate.
<\TABLE.
-6-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Firstar Corporation reported net income for the three months ended March 31,
1995 of $35.2 million, or $.48 per common share, down from $57.5 million, or
$.79 per common share, for the same period last year. Return on common equity
was 9.83% for the first three months of the year, compared with 17.66% for
the same period last year, while return on assets was .86% compared to 1.56%
during the same period last year. Earnings declined as a result of merger
related restructuring charges taken in the first quarter of 1995. Without
these charges, net income would have been $57.4 million, or $.78 per share;
return on equity would have been 16.07% and return on assets 1.40%. Table 1
shows the components of net interest revenue, net income and net interest
margin.
<CAPTION>
Table 1. Condensed income statements - taxable equivalent basis
Three Months Ended March 31
-----------------------------
1995 1994 Change
------ ---------- ---------
<S> <C> <C> <C>
(millions of dollars)
Interest revenue $ 302.0 $ 240.4 $ 61.6
Taxable-equivalent adjustment 8.5 8.3 0.2
------ ---------- ---------
Interest revenue - taxable-equivalent 310.5 248.7 61.8
Interest expense 130.0 79.3 50.7
------ ---------- ---------
Net interest revenue - taxable-equivalent 180.5 169.4 11.1
Provision for loan losses 12.9 3.5 9.4
Other operating revenue 85.1 88.2 (3.1)
Other operating expense 192.3 159.7 32.6
------ ---------- ---------
Income before income taxes 60.4 94.4 (34.0)
Provision for income taxes 16.7 28.6 (11.9)
Taxable-equivalent adjustment 8.5 8.3 0.2
------ ---------- ---------
Net income $ 35.2 $ 57.5 $ (22.3)
====== ========== =========
Yield on earning assets 8.31 % 7.50 % 0.81 %
Cost of interest-bearing liabilities 4.36 3.07 1.29
------ ---------- ---------
Interest spread 3.95 4.43 (0.48)
Impact of interest-free funds 0.87 0.67 0.20
------ ---------- ---------
Net interest margin 4.82 % 5.10 % (0.28)%
====== ========== =========
</TABLE>
In the first quarter of 1995 certain merger and restructuring charges were
taken in connection with completed acquisitions. These expenses totaled
$34.4 million pre-tax and reduced net income by $22.1 million, or 30 cents per
share as shown in Table 2. This action will enable Firstar to begin
realizing the long-term benefits of these transactions more quickly.
[CAPTION]
Table 2. Merger and restructuring costs
Three
Months
Ended
3-31-95
----------
(thousands of dollars)
Additional loan loss provisions $ 8,794
Losses on sales of securities 5,709
Restructuring expenses:
Employee severence 10,400
Facilities and equipment 4,032
Professional fees 2,042
Other 3,383
----------
19,857
----------
Total pre-tax costs 34,360
Income tax benefit 12,248
----------
Total $ 22,112
==========
Per common share impact $ 0.30
-7-
Additional loan loss provisions of $8.8 million were taken to increase the
new acquisitions' loan loss reserve levels to conform with Firstar's policy.
Also, securities not compatible with Firstar's investment policy were sold
with a resulting loss of $5.7 million. These funds, totaling $120 million,
were redeployed in the securities portfolio with a resulting increase in the
net yield which will recover the realized loss within one year.
A restructuring charge totaling $19.9 million is included in operating
expenses. Included in this charge was $10.4 million of costs associated with
the severance of approximately 400 employees, $4.0 million related with office
closings and write-off of unusable equipment, $2.1 million of professional
fees and $3.4 million of other costs associated with the merger. The
restructuring charge of $19.9 million consists of $14.6 million in
anticipated cash expenditures and $5.3 million of non-cash asset write-downs.
All cash expenditures associated with restructuring charges should be made by
the end of 1995.
Net interest revenue during the first three months of 1995, on a taxable
equivalent basis, was $180.6 million which was $11.2 million, or 7%, above the
level of the same period last year. The net interest margin was 4.82% during
the first three months compared to 5.10% a year earlier. The increase in net
interest revenue was attributable to the higher average earning asset
balances, up 12.8% from a year earlier, partially offset by the reduced net
interest margin. The margin has been compressed as a result of narrowing
interest rate spreads between earning assets and liabilities.
Table 3 shows the components of interest revenue and expense along with
changes related to volumes and rates. Total interest revenue on a
taxable-equivalent basis increased by 24.9% to $310.5 million during the first
three months of 1995 compared to the same period last year. This resulted
from a 12.8% increase in average earning assets, along with higher interest
rates. The rate received on earning assets increased from 7.50% in the first
three months of 1994 to 8.31% in the same period in 1995. Loan revenue
increased $46.1 million, or 23.6%, in the first three months of 1995 compared
to the same period last year. The increased loan balances, up 10.7% from the
same period last year, accounted for the increase in revenue. Interest revenue
from commercial loans increased $33.5 million due to both higher balances and
rates.
Total interest expense was $130.0 million during the first three months in
1995, an increase of $50.7 million, or 63.9%, from the same period last year.
Interest rates on liabilities increased from 3.07% in 1994 to 4.36% in 1995,
which was a major factor in the increase of expense. Expense on total
deposits increased $30.1 million, or 45.8%, in the first three months of 1995
compared to the same period last year, due primarily to higher interest rates.
Interest paid on short-term borrowed funds increased by $20.3 million, or
102.1%, due to both higher average balances and rates.
Net cash flows of off-balance sheet derivative instruments used to manage
interest rate risk reduced net interest revenue by $3.4 million and net
interest margin by .09% during the first quarter of 1995. This compares to an
increase in net interest revenue of $2.0 million and an increase in net
interest margin of .06% in the same period of 1994. Using a most likely
interest rate scenario, it is expected that derivative financial instruments
will result in a reduction of net interest margin of approximately .10% during
the next twelve months.
-8-
<TABLE>
<CAPTION>
Table 3. Analysis of interest revenue and expense
Three Months Ended March 31
---------------------------------------------------------------
Interest Total Due to
--------------------- --------------------------
1995 1994 Change Volume Rate
---------- --------- ------------ ------------ ------------
(thousands of dollars)
<S> <C> <C> <C> <C> <C>
Interest-bearing deposits
with banks $ 58 $ 84 $ (26)$ (34)$ 8
Federal funds sold and
resale agreements 2,967 1,762 1,205 (56) 1,261
Trading securities 270 308 (38) (74) 36
Securities 65,883 51,324 14,559 10,814 3,745
Commercial loans 146,640 113,121 33,519 13,770 19,749
Consumer loans 94,713 82,102 12,611 8,250 4,361
---------- --------- ------------
Total loans 241,353 195,223 46,130 22,135 23,995
---------- --------- ------------
Total interest revenue 310,531 248,701 61,830 33,608 28,222
Interest-bearing demand 6,890 5,098 1,792 (141) 1,933
Money market accounts 21,191 10,775 10,416 1,586 8,830
Savings passbook 11,622 10,384 1,238 (247) 1,485
Certificates of deposit 56,240 39,562 16,678 7,887 8,791
---------- --------- ------------
Total deposits 95,943 65,819 30,124 6,090 24,034
Short-term borrowed funds 30,385 10,058 20,327 8,390 11,937
Long-term debt 3,638 3,423 215 250 (35)
---------- --------- ------------
Total interest expense 129,966 79,300 50,666 13,455 37,211
---------- --------- ------------
Net interest revenue $ 180,565 $ 169,401 $ 11,164 22,473 (11,309)
========== ========= ============
Calculations are computed on a taxable-equivalent basis using a tax rate of 35%. The change attributable
to both volume and rate has been allocated proportionately to the changes due to volume
and rate.
</TABLE>
<TABLE>
<CAPTION>
The provision for loan losses of $12.9 million was $9.4 million higher than
last year, with net charge-offs increasing $5.3 million from the same period
last year. As discussed previously, $8.8 million of this increase was a
merger related adjustment to loan loss reserve levels. Net charge-offs for
the first three months were at a level of .31% of average outstanding loans
compared to .13% a year earlier. One-half of the quarter's charge-offs was
the result of conforming the new banks' charge-off policies to Firstar's
standards. The reserve for loan losses represented 1.74% of total loans at
March 31, 1995, up from the the year-end level of 1.72% and down from 1.88% a
year earlier.
Nonperforming assets were $84.0 million at March 31, 1995, which amounted to
.76% of total loans and other real estate. This was a $5.6 million increase
from the December 31, 1994 level. Nonperforming real estate related assets
increased $4.1 million during the first quarter. Commercial nonperforming
loans decreased $3.0 million and consumer nonperforming loans increased $4.5
million. Real estate related nonperforming assets represent the major portion
of the nonperforming portfolio, with the balance at March 31, 1995 of $45.0
million, or 54%, of total nonperforming assets. Commercial nonperforming
assets currently represent $26.8 million, or 32% of the nonperforming
portfolio.
Other operating revenue, excluding securities gains and losses, increased by
3.7% to a level of $90.8 million in the first three months of 1995 compared to
the same period last year. Firstar continues to emphasize growth in
non-interest revenue although recent quarterly growth trends have been lower
than previously experienced. Firstar's broad customer base provides
opportunities for expanded revenues as the marketplace looks to financial
institutions for services beyond traditional lending and deposit activities.
Table 4 shows the composition of other operating revenue.
-9-
Table 4. Other operating revenue
Three Months Ended
March 31, 1995
----------------------------------------
1995 1994 Change
------------ ------------ ------------
(thousands of dollars)
<S> <C> <C> <C>
Trust and investment management fees $ 31,684 $ 30,838 2.7 %
Service charges on deposit accounts 19,638 20,410 (3.8)
Credit card service revenue 13,954 12,369 12.8
Data processing fees 4,919 5,058 (2.7)
Mortgage loan servicing 4,151 2,078 99.8
Mortgage loan origination 693 3,294 (79.0)
Insurance revenue 2,658 2,011 32.2
Brokerage revenue 1,855 2,725 (31.9)
International fees 1,402 1,300 7.8
Foreign exchange gains 539 432 24.8
ATM fees 1,258 1,076 16.9
Safe deposit fees 1,137 1,048 8.5
Trading securities gains (losses) 689 (973)
Other 6,214 5,915 5.1
------------ ------------
Subotal 90,791 87,581 3.7
Securities (losses) gains (5,683) 649
Total ------------ ------------
$ 85,108 $ 88,230 (3.5)%
============ ============
</TABLE>
Other operating revenue represents 33% of Firstar's revenue. An industry
measure of fee revenue prominence is the ratio of this revenue stream to
average assets. During the first three months of 1995, this ratio was 2.22%
compared to 2.38% during the same period last year. While fee revenue
increased 3.7%, the effect of the 11.4% growth in average assets is shown in
the reduction of this ratio to 2.22% during the first quarter of 1995.
Trust and investment management fees are the single largest source of fee
revenue, contributing $31.7 million, or 35%, of other operating revenue. This
level represents a 2.7% growth in revenue during the first three months of
1995 compared to the same period last year. Trust assets under management
were $16.1 billion on March 31, 1995, a 4.7% increase from the year-end
level reflecting primarily market appreciation.
Revenue from service charges on deposit accounts at $19.6 million for the
first three months of 1995 was 3.8% lower than last year. This reduction was
primarily due to higher rate credits given to business customers for
services, thus reducing the level of cash payments necessary.
Credit card service revenues are the third largest source of fee revenue
totaling $14.0 million during the first three months of 1995, which was a
12.8% increase over the same period last year. The introduction of new credit
card products, increased merchant fee revenue and the repricing of service
charges have all added to this revenue growth.
Data processing fee income declined 2.7% in the first three months of 1995
from the same period last year. A shrinking customer base due to continuing
bank consolidations through mergers or acquisitions and conversions by smaller
community banks to in-house data processing systems have acted to reduce
revenues.
Revenue from mortgage loan origination activities decreased 79.0% to $693
thousand during the first three months of 1995 compared to the same period
last year, due to substantially reduced refinancing activity resulting from
higher interest rates. Mortgage loan servicing revenues have nearly doubled,
to a level of $4.2 million including a $1.9 million gain on the sale of
servicing rights in the first quarter of 1995.
-10-
The remaining sources of other operating revenue derive from a wide range of
services and collectively increased by $556 thousand, or 3.8%, exclusive of
trading and securities transactions, in the first three months of 1995
compared to the same period last year.
Other operating expense increased to a level of $192.3 million. Excluding
the restructuring charges taken in the first quarter of this year, expenses
increased 8%. Personnel costs rose by 6.8% to a level of $96.5 million due in
part to a bank acquisition that occurred late in 1994. Nonpersonnel costs,
excluding the restructuring charges, increased 9.6%. The efficiency ratio,
which is the ratio of expense to revenue was 63.55% in the first three months
of 1995 compared to 62.13% a year earlier. It is Firstar's goal to reach a
55% efficiency ratio in 1997. The detail of other expense is shown in table 5.
<TABLE>
<CAPTION>
Table 5. Other operating expense
Three Months Ended
March 31, 1995
----------------------------------------
1995 1994 Change
------------ ------------ ------------
(thousands of dollars)
<S> <C> <C> <C>
Salaries $ 77,749 $ 72,494 7.2 %
Employee benefits 18,760 17,852 5.1
------------ ------------
Total personnel expense 96,509 90,346 6.8
Net occupancy expense 13,846 13,198 4.9
Equipment expense 13,555 13,197 2.7
Business development 6,651 5,381 23.6
F.D.I.C. insurance 6,988 6,745 3.6
Stationery and supplies 4,458 4,357 2.3
Delivery 4,582 3,629 26.3
Professional fees 4,347 3,508 23.9
Information processing expense 5,286 4,518 17.0
Amortization of intangibles 2,881 2,526 14.1
Employee education/recruiting 2,211 1,741 27.0
Federal Reserve processing fees 1,087 1,387 (21.6)
Commissions and service fees 1,246 1,420 (12.3)
Wire communication 1,691 1,911 (11.5)
Processing and other losses 1,291 856 50.8
Credit card assessment fees 1,201 1,125 6.8
Net other real estate income (395) (299) 32.1
Published information 883 680 29.9
Insurance 387 466 (17.0)
Other 3,754 2,979 26.0
Restructuring charges 19,857 0
------------ ------------
Total nonpersonnel expense 95,807 69,325 38.2
------------ ------------
Total other operating expense $ 192,316 $ 159,671 20.4 %
============ ============
</TABLE>
Total assets on March 31, 1995 were $16.9 billion, an increase of $1.2
billion from the same time last year.
Earning assets totaled $15.4 billion on March 31, 1995, an increase of $1.7
billion, or 12.4%, over March 31, 1994. Loans, the largest category of
earning assets, represented 71.5% of earning assets as compared to 73.2% a
year earlier. Total loans were $11.0 billion on March 31, 1995, an increase
of $1.3 billion, or 12.7%, over the 1994 level, which excludes the effect of
mortgage loan securitizations. Firstar securitized $290 million of
residential mortgages at the end of 1994. These loans, now carrying a U.S.
agency guarantee, are included in securities held to maturity.
Commercial loans, which account for 61% of the loan portfolio, increased by
$609.0 million, or 10.0%, to $6.7 billion on March 31, 1995. Consumer loans
totaled $4.3 billion, an increase of $668.8 million, or 17.0% compared to the
same time last year, adjusted for the securitization.
-11-
Short-term investments, which include interest-bearing deposits with banks,
trading account securities, and federal funds sold and resale agreements,
totaled $239.8 million on March 31, 1995, a decrease of $39.5 million, or
14.1%, from a year earlier.
Securities represent 27% of earning assets. They totaled $4.2 billion on
March 31, 1995, an increase of $461.4 million, or 13.6%, over last year. The
average maturity of the portfolio was 3.75 years at the end of March.
Total fund sources, consisting of deposits and borrowed funds, increased by
$1.1 billion, or 7.7%, to $15.2 billion on March 31, 1995. Total deposits
were $12.8 billion, an increase of $562.0 million, or 4.6% over a year
earlier.
Core deposits, which include transaction accounts and other stable time
deposits, are Firstar's prime source of funding. These deposits equaled $12.1
billion on March 31, 1995, in increase of $360.3 million, or 3.1% from last
year due entirely to bank acquisitions. Increased competition for consumer
deposits and heightened consumer sensitivity to interest rates have limited
Firstar's core deposit growth. Increased emphasis will be placed on
generating more core deposits in 1995 through competitive pricing of deposit
products.
More reliance was placed on purchased fund sources to support the growth in
loan balances. Other time deposits, primarily certificates of deposit over
$100,000, increased $201.7 million from last year, to $789.8 million at March
31, 1995. Short-term borrowed funds were increased $494.6 million, or 30.0%,
to a level of $2.1 billion in the same period.
Stockholders' equity totaled $1,464.0 million at the end of the first
quarter, an increase of $4.1 million from the level at year-end and $115.5
million over last year. Total equity as a percent of total assets amounted to
8.65%. Under risk-based capital rules, total capital is 13.07% of
risk-adjusted assets, compared to an 8% requirement. A summary of capital
components and ratios is shown in table 6.
<TABLE>
<CAPTION>
Table 6. Capital components and ratios
March 31 December 31 March 31
1995 1994 1994
------------ ------------ ------------
(thousands of dollars)
<S> <C> <C> <C>
Risk-based capital:
Stockholders' equity $ 1,463,965 $ 1,459,822 $ 1,348,477
Unrealized losses on securities available for sale 107 1,054 134
Minority interest in subsidiaries 2,849 2,920 2,329
Less goodwill (110,774) (107,967) (110,726)
------------ ------------ ------------
Total Tier I capital 1,356,147 1,355,829 1,240,214
Allowable reserve for loan losses 149,932 148,067 138,877
Allowable long-term debt 55,786 56,627 81,445
------------ ------------ ------------
Total Tier II capital 205,718 204,694 220,322
------------ ------------ ------------
Total capital $ 1,561,865 $ 1,560,523 $ 1,460,536
============ ============ ============
Risk-adjusted assets $ 11,952,122 $ 11,806,519 $ 10,989,182
Tier I capital to risk-adjusted assets 11.35 % 11.48 % 11.29 %
Total capital to risk-adjusted assets 13.07 13.21 13.29
Tier I leverage ratio 8.22 8.38 8.38
The Board of Directors declared a quarterly dividend to common stockholders of
34 cents per share which is payable May 15 to shareholders of record May 1.
This was a 13% increase in the quarterly dividend rate.
</TABLE>
<TABLE>
<CAPTION>
FIRSTAR CORPORATION AND SUBSIDIARIES
ADDITIONAL FINANCIAL DATA (unaudited)
- --------------------------------------------------------------------------------------------------
Selected Financial Data
(thousands of dollars, except per share)
Quarter ended March 31
------------------------------
1995 1994
------------------------------
<S> <C> <C>
Earnings and Dividends
Net income $ 35,212 $ 57,474
Per common share:
Net income 0.48 0.79
Dividends 0.30 0.26
Stockholders' equity 19.73 18.45
Performance Ratios
Return on average assets 0.86 % 1.56 %
Return on average common equity 9.83 17.66
Dividend payout ratio 62.50 32.91
Equity to assets 8.65 8.59
Net loan charge-offs as a percentage
of average loans 0.31 0.13
Nonperforming assets as a
percentage of loans and other
real estate 0.76 0.91
Net interest margin 4.82 5.10
Statistical Data
Full-time equivalent staff (at quarter end) 9,300 9,411
Average common shares
outstanding (000's) 72,989 71,993
Actual common shares
outstanding (000's at quarter end) 73,223 71,986
Stock Price Information
High $ 30.25 $ 34.75
Low 26.25 29.75
Close 29.50 33.00
-13-
</TABLE>
<TABLE>
<CAPTION>
FIRSTAR CORPORATION AND SUBSIDIARIES
ADDITIONAL FINANCIAL DATA (Unaudited)
- --------------------------------------------------------------------------------------------------
Consolidated Average Balance Sheets, Net Interest Revenue and Rate Analysis
(Thousands of Dollars)
Quarter ended March 31
------------------------------------------------------------------
1995 1994
---------------------------------- -------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
---------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-bearing deposits
with banks $ 3,963 $ 58 5.94 % $ 6,373 $ 84 5.35 %
Federal funds sold and
resale agreements 206,556 2,967 5.83 213,174 1,762 3.35
Trading securities 14,594 270 7.50 18,770 308 6.65
Securities:
Taxable 2,953,458 46,025 6.28 2,273,045 33,069 5.87
Nontaxable 1,058,724 19,858 7.40 1,069,374 18,255 6.83
----------- --------- ----------- ---------
Total securities 4,012,182 65,883 6.60 3,342,419 51,324 6.18
Loans:
Commercial 6,604,307 146,640 9.00 5,928,142 113,121 7.73
Consumer 4,267,289 94,713 8.96 3,889,207 82,102 8.52
----------- --------- ----------- ---------
Total loans 10,871,596 241,353 8.99 9,817,349 195,223 8.05
----------- --------- ----------- ---------
Interest earning assets 15,108,891 310,531 8.31 13,398,085 248,701 7.50
Reserve for loan losses (187,864) (187,274)
Cash and due from banks 905,979 983,263
Other assets 770,879 709,287
----------- -----------
Total assets $16,597,885 $14,903,361
=========== ===========
Liabilities and
Stockholders' Equity
Interest-bearing demand $ 1,589,874 $ 6,890 1.76 % $ 1,639,017 $ 5,098 1.26 %
Money market accounts 2,069,624 21,191 4.15 1,838,966 10,775 2.38
Savings passbook 1,759,925 11,622 2.68 1,801,943 10,384 2.34
Certificates of deposit 4,399,733 56,240 5.18 3,757,104 39,562 4.27
Short-term borrowed funds 2,112,763 30,385 5.83 1,309,599 10,058 3.11
Long-term debt 151,246 3,638 9.64 136,977 3,423 10.00
----------- --------- ----------- ---------
Interest-bearing liabilities 12,083,165 129,966 4.36 10,483,606 79,300 3.07
Demand deposits 2,769,699 2,824,111
Other liabilities 287,359 263,127
Stockholders' equity 1,457,662 1,332,517
----------- -----------
Total liabilities and
stockholders' equity $16,597,885 $14,903,361
=========== ===========
Net interest
revenue/margin $ 180,565 4.82 % $ 169,401 5.10 %
========= =========
-14-
</TABLE>
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 20, 1995. 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 1998 were
elected. There were no abstentions or broker nonvotes.
For Withheld
Roger H. Derusha 55,540,108 470,944
Jerry M. Hiegel 55,512,165 498,887
Sheldon B. Lubar 55,520,347 490,705
Daniel F. McKeithan, Jr. 55,184,848 826,204
George W. Mead II 55,452,835 558,217
Guy A. Osborn 55,515,086 495,966
William W. Wirtz 55,475,759 535,293
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits to Part 1 of Form 10-Q
27. Financial Data Schedule
(b) An 8-K report dated January 31, 1995 was filed
regarding the completion of the acquisition of
First Colonial Bankshares Corporation in a
transaction accounted for as a pooling of
interests. Firstar Corporation issued .7725 shares
of Firstar Common Stock for each share of First
Colonial Bankshares Corporation Class A and Class B
Common Stock. The total number of shares of
Firstar Common Stock issued will approximate
7,700,766 shares. Firstar also issued 38,775
shares of Series D preferred stock which is
convertible into 832,000 shares of Firstar common
stock.
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
___________________________________
William H. Risch
Senior Vice President-Finance and
Treasurer (Chief Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> MAR-31-1995
<CASH> 894,016
<INT-BEARING-DEPOSITS> 4,201
<FED-FUNDS-SOLD> 222,663
<TRADING-ASSETS> 12,922
<INVESTMENTS-HELD-FOR-SALE> 165,601
<INVESTMENTS-CARRYING> 3,987,903
<INVESTMENTS-MARKET> 3,965,401
<LOANS> 11,028,620
<ALLOWANCE> 192,355
<TOTAL-ASSETS> 16,930,878
<DEPOSITS> 12,848,045
<SHORT-TERM> 2,144,935
<LIABILITIES-OTHER> 288,702
<LONG-TERM> 185,231
<COMMON> 92,127
0
19,388
<OTHER-SE> 1,352,450
<TOTAL-LIABILITIES-AND-EQUITY> 16,930,878
<INTEREST-LOAN> 239,533
<INTEREST-INVEST> 59,274
<INTEREST-OTHER> 3,243
<INTEREST-TOTAL> 302,050
<INTEREST-DEPOSIT> 95,943
<INTEREST-EXPENSE> 129,966
<INTEREST-INCOME-NET> 172,084
<LOAN-LOSSES> 12,936
<SECURITIES-GAINS> (5,683)
<EXPENSE-OTHER> 192,316
<INCOME-PRETAX> 51,940
<INCOME-PRE-EXTRAORDINARY> 35,212
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,212
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.48
<YIELD-ACTUAL> 4.82
<LOANS-NON> 74,468
<LOANS-PAST> 40,306
<LOANS-TROUBLED> 713
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<ALLOWANCE-OPEN> 186,930
<CHARGE-OFFS> 12,291
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<ALLOWANCE-CLOSE> 192,355
<ALLOWANCE-DOMESTIC> 191,801
<ALLOWANCE-FOREIGN> 554
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</TABLE>
