SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-8186
Inter-Regional Financial Group, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 41-1228350
(State or other jurisdiction of (IRS Employer
incorporation of organization) Identification Number)
Dain Bosworth Plaza, 60 South Sixth Street,
Minneapolis, Minnesota 55402-4422
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 371-7750
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, par value $.125 New York Stock
per share Exchange, Inc.
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 12 months and 2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [X]
As of February 28, 1994, 8,160,180 shares of common stock were
outstanding, and the aggregate market value of the common shares (based upon
the closing price at February 28, 1994, on the New York Stock
Exchange) of Inter-Regional Financial Group, Inc., held by non-affiliates
was approximately $151,325,505.
Documents Incorporated by Reference
Portions of the Proxy Statement of Registrant to be
filed within 120 days of December 31, 1993
are incorporated in Part III of this report.
<PAGE>
PART I
ITEM 1. BUSINESS:
(a) General Development of Business.
Inter-Regional Financial Group, Inc. (the "Company") is a
holding company, formed in 1973 and based in Minneapolis,
Minnesota. The Company offers regional securities brokerage and
investment banking services through its wholly owned
subsidiaries, Dain Bosworth Incorporated ("Dain Bosworth"),
headquartered in Minneapolis, Minnesota, and Rauscher Pierce
Refsnes, Inc. ("Rauscher Pierce Refsnes"), headquartered in
Dallas, Texas. The Company's largest subsidiary, Dain Bosworth,
serves the Midwest, Rocky Mountain and Pacific Northwest regions
of the United States. At December 31, 1993, Dain Bosworth had
1,700 employees located in 16 states. Rauscher Pierce Refsnes
primarily serves the Southwest region of the United States. At
December 31, 1993, Rauscher Pierce Refsnes had 920 employees
located in eight states. Rauscher Pierce Refsnes also serves as
clearing agent for approximately 125 correspondent brokerage
firms through its RPR Clearing Services unit ("RPRC") based in
St. Louis, Missouri. In April 1993 the Company consolidated the
securities operations and settlement activities previously
performed by each of Dain Bosworth and Rauscher Pierce Refsnes as
self-clearing firms into a third wholly owned subsidiary,
Regional Operations Group, Inc. ("ROG"), which was registered as
a broker-dealer. Each of Dain Bosworth and Rauscher Pierce
Refsnes, as well as the RPRC correspondents and other broker-
dealers previously clearing through them, now clears on a fully
disclosed basis through ROG. ROG, which was previously named IFG
Information Services, Inc., also provides data processing and
information services to IFG and its subsidiaries. Insight
Investment Management, Inc., the Company's wholly owned money
management subsidiary ("Insight Management"), manages a series of
mutual funds, Great Hall Investment Funds, and also provides
fixed income portfolio management services. Dain Corporation,
another wholly owned subsidiary of the Company, engages in real
estate services. The Company is a Delaware corporation with its
executive offices located at Dain Bosworth Plaza, 60 South Sixth
Street, Minneapolis, Minnesota 55402-4422. Its telephone number
is (612) 371-7750.
(b) Financial Information About Industry Segments
The Company, through its principal subsidiaries, operates in
a single segment, the securities brokerage and investment banking
business.
<PAGE>
The following table lists the Company's revenues by source
for the last three years. Because these classes of services use
the same distribution personnel and facilities and the same
support services, it is impractical to identify the cost,
expenses and profitability of each class of service.
<TABLE>
INTER-REGIONAL FINANCIAL GROUP, INC. AND SUBSIDIARIES
REVENUES BY SOURCE
(Dollars in thousands)
<CAPTION>
Year Ended December 31,
------------------------------------------------------
1993 1992 1991
Amount Percent. Amount Percent. Amount Percent.
<S> <C> <C> <C> <C> <C> <C>
Principal Transactions:
Corporate securities $87,498 17.1% $74,091 16.9% $57,059 15.1%
Government
obligations and
other 28,482 5.5 30,696 7.0 30,136 7.9
Municipal
obligations 23,324 4.6 21,352 4.9 15,355 4.1
------- ---- ------- ---- ------- ----
Total 139,304 27.2 126,139 28.8 102,550 27.1
------- ---- ------- ---- ------- ----
Commissions:
Listed securities 71,768 14.0 65,048 14.8 55,752 14.7
Mutual funds 45,913 9.0 36,862 8.4 24,146 6.4
Over-the-counter
securities 16,408 3.2 11,706 2.7 11,500 3.0
Options 3,919 .8 3,542 .8 3,905 1.0
Commodities and other 1,280 .2 1,596 .4 2,197 .7
------- ---- ------- ---- ------- ----
Total 139,288 27.2 118,754 27.1 97,500 25.8
------- ---- ------- ---- ------- ----
Investment Banking and Underwriting:
Municipal 60,770 11.9 55,852 12.8 39,768 10.5
Corporate 57,911 11.3 40,665 9.3 30,623 8.1
Other 10,922 2.1 8,427 1.9 6,806 1.8
------- ----- ------- ----- ------- -----
Total 129,603 25.3 104,944 24.0 77,197 20.4
------- ----- ------- ----- ------- -----
Interest:
Customer margin
accounts 23,375 4.6 19,787 4.5 19,167 5.1
Deposits and short-
term investments 16,173 3.1 21,834 5.0 39,717 10.5
Trading inventories
and other 15,319 3.0 13,856 3.1 15,860 4.2
------- ----- ------- ----- ------- -----
Total 54,867 10.7 55,477 12.6 74,744 19.8
------- ----- ------- ----- ------- -----
Asset Management:
Money market funds 5,915 1.1 4,986 1.1 432 .1
Individual &
institutional
accounts 6,483 1.3 4,244 1.0 2,377 .7
Other mutual funds 419 .1 221 .1 69 __
------- ----- ------- ----- ------- -----
Total 12,817 2.5 9,451 2.2 2,878 .8
------- ----- ------- ----- ------- -----
Correspondent Clearing 11,499 2.3 9,627 2.2 6,916 1.8
Other 24,237 4.8 13,869 3.1 16,489 4.3
------- ----- ------- ----- ------- -----
Total revenues $511,615 100.0% $438,261 100.0% $378,274 100.0%
======= ===== ======= ===== ======= =====
</TABLE>
<PAGE>
(c) Narrative Description of Business
Securities Business
General. The securities brokerage and investment banking
activities of the Company are conducted through Dain Bosworth and
Rauscher Pierce Refsnes. Both Dain Bosworth and Rauscher Pierce
Refsnes deal in securities of and are market-makers for entities
based throughout the United States. In general, research and
investment banking activities are concentrated on entities based
in their respective regions. At December 31, 1993, Dain Bosworth
had 745 retail sales representatives and 55 institutional sales
representatives in 60 offices located in 16 states and Rauscher
Pierce Refsnes had 287 retail sales representatives and 45
institutional sales representatives in 23 offices located in
seven states. Both firms are member firms of the New York Stock
Exchange ("NYSE") and are registered in the NASDAQ system as
market makers. At December 31, 1993, Dain Bosworth was
registered as a market maker for 369 companies and Rauscher
Pierce Refsnes was registered as a market maker for 275
companies.
Dain Bosworth's and Rauscher Pierce Refsnes' operating
results are sensitive to many factors outside the control of the
Company, including volatility of securities prices and interest
rates, trading volume of securities, income and capital gains tax
legislation and demand for investment banking services. Economic
conditions in the regions in which Dain Bosworth and Rauscher
Pierce Refsnes operate also affect operating results.
Principal Transactions. Dain Bosworth and Rauscher Pierce
Refsnes are dealers in corporate, tax-exempt and governmental
fixed income securities and corporate equity securities and may
recognize profits or losses on transactions in, or fluctuations
in the value of, such securities held in inventory. Internal
guidelines intended to limit the size and risk of inventories
maintained have been established and are periodically reviewed.
These inventories require the commitment of substantial capital
and expose the companies to the risk of a loss if market prices
of the securities held in inventory decrease. General market
conditions, interest rates and the financial prospects for
issuers of such securities may affect the market price of
securities held in inventory.
Commission Business. As securities brokers, Dain Bosworth
and Rauscher Pierce Refsnes act as agents in the purchase and
sale of securities, options, commodities and futures contracts
traded on various securities and commodities exchanges or in the
over-the-counter ("OTC") market. Dain Bosworth and Rauscher
Pierce Refsnes charge a brokerage commission when acting as agent
for the purchaser or seller of a security. If the security is
listed on an exchange, the transaction is generally effected
through Dain Bosworth's or Rauscher Pierce Refsnes' own floor
broker or a floor broker who is unaffiliated with either of them.
If the security is traded in the OTC market, transactions are
generally effected with a market maker in the security. In
addition, Dain Bosworth and Rauscher Pierce Refsnes also earn
commissions from transactions involving various other financial
products including mutual funds. Dain Bosworth's and Rauscher
Pierce Refsnes' commission business is derived primarily from
individual investors. However, commission revenues from
institutional investors have increased in recent years and both
companies are investing resources to develop more fully their
institutional businesses.
Investment Banking Activities. Dain Bosworth and Rauscher
Pierce Refsnes earn investment banking revenues by assisting
clients in planning to meet their financial needs and advising
them on the most advantageous means of raising capital. Such
plans are sometimes implemented by managing or co-managing public
offerings of securities or by arranging private placements of
securities with institutional or individual investors. The
syndicate departments coordinate the distribution of managed and
co-managed corporate underwritings, accept invitations to
participate in competitive or negotiated underwritings managed by
other investment banking firms, and allocate and merchandise Dain
Bosworth's and Rauscher Pierce Refsnes' selling allotments to
their branch office systems, to institutional clients and to
other broker-dealers. Both companies are among the leaders in
their respective regions in the origination, syndication and
distribution of securities of municipalities, state and local
agencies, health care organizations and financial institutions.
Participation in underwritings can expose the companies to
material risk since the possibility exists that securities they
have committed to purchase cannot be sold at the initial offering
price. Federal and state securities laws and regulations also
affect the activities of underwriters and impose substantial
potential liabilities for violations in connection with sales of
securities by underwriters to the public. In addition to public
offerings and private placements, Dain Bosworth and Rauscher
Pierce Refsnes provide other consulting services, including
appraising securities, arranging and evaluating mergers and
acquisitions and advising clients with respect to financing plans
and related matters.
<PAGE>
Customer Financing. A significant portion of Dain
Bosworth's and Rauscher Pierce Refsnes' profitability is derived
from net interest income, the major portion of which relates to
customer balances. Customer transactions are effected on either
a cash or margin basis. Purchases on a cash basis require full
payment by the designated settlement date, generally the fifth
business day following the transaction date. Beginning in April
1993, ROG began carrying all customer balances of each of Dain
Bosworth and Rauscher Pierce Refsnes and allocating interest
income and expense related to customers, as well as uncollectible
amounts due from customers, back to Dain Bosworth and Rauscher
Pierce Refsnes. Both Dain Bosworth and Rauscher Pierce Refsnes
are at risk in the event a customer fails to settle a trade and
the value of the securities declines subsequent to the
transaction date. When a purchase is made on a margin basis,
Dain Bosworth or Rauscher Pierce Refsnes, through ROG, extends
credit to the customer for a portion of the purchase price. The
amount of the loan is subject to margin regulations of the
Federal Reserve Board, the NYSE and the internal policies of Dain
Bosworth, Rauscher Pierce Refsnes and ROG, which are generally
more stringent than applicable regulations. In permitting
customers to purchase on margin, Dain Bosworth and Rauscher
Pierce Refsnes, through ROG, take the risk that a market decline
could reduce the value of the collateral securing the margin loan
below the amount of the customer's indebtedness and that the
customer might be unable to repay the indebtedness. Interest is
charged at a floating rate based on amounts borrowed by customers
to finance purchases on margin. The rate charged is dependent on
the average net debit balance in the customer's accounts, the
activity level in the accounts and the applicable cost of funds.
Customers will at times accumulate credit balances in their
accounts. Such balances result from payment of dividends,
interest or principal on securities held for such customers, from
funds received in connection with sales of a customer's
securities and from cash deposits made by customers pending
investment. Pending investment of such funds or reimbursement
upon the customer's request, ROG pays interest on those credit
balances on behalf of Dain Bosworth and Rauscher Pierce Refsnes.
ROG uses available credit balances to lend funds to Dain Bosworth
and Rauscher Pierce Refsnes customers purchasing securities on
margin. Excess customer credit balances are invested in short-
term securities in accordance with applicable regulations and are
segregated for the exclusive benefit of customers. Both Dain
Bosworth and Rauscher Pierce Refsnes generate net interest income
through ROG from the positive interest rate spread between the
rate earned from margin lending and alternative short-term
investments and the rate paid on customer credit balances.
Dain Bosworth, Rauscher Pierce Refsnes and ROG are members
of the Securities Investor Protection Corporation ("SIPC"), which
insures customer accounts up to specified limits in the event of
liquidation of either firm. Additionally, all three firms
maintain insurance coverage in order to insure customer accounts
to specified amounts in excess of SIPC coverage.
Security Repurchase Activities. Dain Bosworth and Rauscher
Pierce Refsnes act as principals in the purchase and sale to
their customers of securities of the United States Government and
its agencies, including repurchase agreements in such securities
and certain other money market instruments. Dain Bosworth and
Rauscher Pierce Refsnes may match purchases and sales of these
securities. Dain Bosworth and Rauscher Pierce Refsnes are at
risk to the extent that they do not properly match the contracts
or their customers are unable to meet their obligations,
especially during periods of rapidly changing interest rates and
fluctuations in market conditions. All positions are
collateralized. Dain Bosworth and Rauscher Pierce Refsnes
generally take physical possession of securities purchased under
agreements to resell. Such agreements provide Dain Bosworth and
Rauscher Pierce Refsnes with the right to maintain the
relationship between the market value of the collateral and the
receivable. Typically, these contracts are entered into only
with clients of substantial size and credit-worthiness. Dain
Bosworth and Rauscher Pierce Refsnes also periodically utilize
securities sold under repurchase agreements as a means of
financing portions of their trading inventories.
Securities Lending and Borrowing Activities. Securities
brokers and dealers, including ROG, borrow securities from and
lend securities to other brokers and dealers to facilitate
clearance and delivery of securities that have been sold when
customers fail to deliver securities prior to settlement date.
ROG also will act as a conduit by arranging securities lending
transactions between brokers wishing to lend securities and those
wishing to borrow the same securities. When such transactions
occur, the lending broker provides excess customer margin
securities to the borrowing broker in return for a cash deposit
that is generally equivalent to 102 percent of the market value
of the securities loaned. Both the lending and borrowing brokers
have the right to mark the securities to market in order to
maintain the relationship between the market value of the
securities loaned and the cash collateral deposited. When the
securities are no longer needed by the borrowing firm, they are
returned to the lending broker, which returns the cash deposit
held, plus interest, to the borrowing broker. When engaging in
such securities lending and borrowing activities, ROG collects
cash deposits from brokers that collateralize the securities
loaned, invests the cash deposit and profits from the spread
between the interest rate paid to the borrowing broker on the
cash deposit and the rate earned by ROG. In all securities
lending transactions, ROG is at risk to the extent that it does
not maintain the relationship between the market value of
securities loaned and the value of the cash deposit held. ROG is
also at risk to the extent that securities it borrows decline in
value and the loaning broker fails to return ROG's cash deposit.
<PAGE>
Research Activities. Both Dain Bosworth and Rauscher Pierce
Refsnes have research departments which provide analysis,
investment recommendations and market information with an
emphasis on companies located in their respective regions. At
December 31, 1993, Dain Bosworth had 20 securities analysts and
Rauscher Pierce Refsnes had 10. Both companies also purchase
certain research products from independent research organizations
to supplement their internal research activities.
Regulation. The securities industry is subject to
comprehensive regulation by federal and state governments, the
various securities and commodities exchanges and self-regulatory
bodies. The regulations cover all aspects of the securities
business including sales methods, trade practices among broker-
dealers, transactions with affiliates, conflicts of interest,
uses and safekeeping of customers' funds and securities, capital
levels of securities firms, record keeping and the conduct of
employees. Violations of these rules and regulations can result
in censure, fines, suspensions and revocation of the right to do
business. Dain Bosworth, Rauscher Pierce Refsnes, ROG and
Insight Investment Management believe they have operated in
compliance with such rules and regulations in all material
respects.
Uniform Net Capital Rule. As broker-dealers and member
firms of the NYSE, Dain Bosworth, Rauscher Pierce Refsnes and ROG
are subject to the Uniform Net Capital Rule (the "Rule")
promulgated by the Securities and Exchange Commission (the
"Commission"). The Rule is designed to measure the general
financial integrity and liquidity of a broker-dealer and the
minimum net capital deemed necessary to meet the broker-dealer's
continuing commitments to its customers. The Rule provides for
two methods of computing net capital. ROG currently uses what is
generally referred to as the alternative method. Minimum net
capital is defined under this method to be equal to 2 percent of
customer debit balances, as defined. The NYSE may also require a
member organization to reduce its business if net capital is less
than 4 percent of such aggregate debit items and may prohibit a
member firm from expanding its business and declaring cash
dividends if its net capital is less than 5 percent of such
aggregate debit items. In computing net capital, various
adjustments are made to exclude assets which are not readily
convertible into cash and to provide a conservative valuation of
other assets such as a company's trading securities. Failure to
maintain the required net capital may subject a firm to
suspension or expulsion by the NYSE, the Commission and other
regulatory bodies and may ultimately require its liquidation.
Dain Bosworth and Rauscher Pierce Refsnes, which do not carry
customer accounts, must maintain minimum net capital of $1
million each. At all times, Dain Bosworth, Rauscher Pierce
Refsnes and ROG have maintained their net capital above the
required levels. See Note K to "Consolidated Financial
Statements."
Money Management
Insight Management currently sponsors and serves as
investment adviser to Great Hall Investment Funds, Inc. ("Great
Hall"), an open-end management investment company currently
offering its shares in five series each of which, in essence, is
a separate mutual fund with its own portfolio of assets and
liabilities. Three of the series are money market funds which
were introduced to Dain Bosworth and Rauscher Pierce Refsnes
customers in 1991 as a replacement for comparable funds managed
by Carnegie Capital Management Company ("Carnegie"), 48 percent
of which was then owned by Dain Bosworth and Rauscher Pierce
Refsnes. The two remaining series of Great Hall invest primarily
in longer-term municipal securities and were initially
capitalized in June 1992 with the transfer of assets and
liabilities of comparable funds managed by Carnegie for which
Insight Management acted as sub-adviser. Also in June 1992, the
assets and liabilities of six other mutual funds then managed by
Carnegie were transferred to comparable funds managed by Fortis
Advisers, Inc. ("Fortis"). In connection with this transfer, the
Company entered into certain agreements to perform or cause its
affiliates to perform future marketing and other services for
Fortis and to refrain from sponsoring or acting as investment
adviser of any open-end, domestic equity or taxable bond
investment company for periods ranging from two to three years.
Under these agreements, the Company is entitled to receive fees
based upon the level of assets transferred to the Fortis funds
and certain other factors in exchange for such services and
agreements. Following these transactions, the shares of
Carnegie's stock then owned by Dain Bosworth and Rauscher Pierce
Refsnes were redeemed.
In addition to its mutual fund operations, Insight
Management provides private portfolio management services to
individuals and institutions. Although Insight Management's
expertise historically has been in the tax-exempt fixed-income
area, a major initiative of Insight Management in 1994 and beyond
will be building its portfolio management business through the
expansion of its taxable fixed income management capabilities,
which Insight Management anticipates will be marketed primarily
to institutional investors.
During 1993 Insight Management introduced and sponsored two
series of Great Hall Value Ten Trusts, "unit investment trusts"
which each offered units in a portfolio of "blue-chip" equity
securities. In 1994 Insight Management plans to sponsor three or
four additional equity unit investment trusts.
<PAGE>
Additionally, in 1994 and beyond, Insight Management expects
to implement a comprehensive new program that enables sales
representatives of Dain Bosworth, Rauscher Pierce Refsnes and RPR
Clearing to offer their clients a full spectrum of high quality
mutual funds under flexible new pricing arrangements.
Real Estate Services
Minneapolis-based Dain Corporation provides real estate
investment services. In so doing, it generates revenues from
property management activities and may generate fees from
refinancing and property disposal activities performed for
limited partnerships in which it serves as the general partner.
Prior to 1989, Dain Corporation sold participation interests in
the partnerships to individual and institutional investors
primarily through the sales representatives of Dain Bosworth,
Rauscher Pierce Refsnes and other financial services firms.
However, federal tax reform, depressed market values and
extremely tight credit conditions have dramatically affected the
real estate industry in recent years and, as a result, Dain
Corporation has not raised capital for new property syndications
since 1988. It is currently focusing its resources on managing
the portfolios of properties owned by partnerships in which it
serves as general partner and on selling certain partnership
properties as it deems appropriate.
At December 31, 1993, Dain Corporation was a general partner
in 10 operating public and private partnerships which own 21
properties consisting primarily of garden apartment complexes and
suburban office developments in major metropolitan areas in the
United States. Until February 28, 1993, Dain Corporation managed
most of its syndicated properties indirectly through its 50-
percent ownership of Griffin Dain Property Management Company, a
joint venture established in 1990 with Griffin Real Estate
Company. On February 28, 1993, Dain Corporation sold its
partnership interest to The Griffin Group and terminated the
joint venture. The Griffin Group continues to manage certain
Dain Corporation multi-family properties. Remaining properties
are managed indirectly through third-party management contracts.
At December 31, 1993, Dain Corporation had approximately 2,200
apartment units, 5 office buildings and 3 shopping centers under
management.
Clearing and Other Services
In April 1993, ROG, a wholly owned subsidiary of the Company
based in Minneapolis, Minnesota, began clearing and settling
trades for Dain Bosworth, and Rauscher Pierce Refsnes, and the
correspondent brokerage firms clearing through them on a fully
disclosed basis. Previously, Dain Bosworth and Rauscher Pierce
Refsnes cleared and settled their own trades and the trades of
correspondent firms clearing through them. RPR Clearing
Services, a division of Rauscher Pierce Refsnes, is in the
business of marketing correspondent clearing services and as of
December 31, 1993, provided clearing services with ROG to
approximately 125 correspondent brokerage firms.
A single operations subsidiary has as one of its objectives,
positioning the Company to grow its core brokerage business more
effectively in the future. ROG also continues to provide data
processing services to the Company and its subsidiaries. ROG's
costs are allocated to the Company and its other subsidiaries
based on their use of its services. Correspondent brokerage
firms clearing through RPR Clearing Services and ROG are charged
fees based on their use of services.
Competition
Dain Bosworth, Rauscher Pierce Refsnes and Insight
Management encounter intense competition in their businesses and
compete directly with numerous firms, many of which have
substantially greater capital and other resources. Such
subsidiaries also encounter competition from banks, insurance
companies and financial institutions in many elements of their
businesses. Legislative proposals currently under consideration
would permit banks to offer additional services which have
traditionally been provided only by securities and money
management firms. Additionally, competition among securities
firms and other competitors for successful sales representatives,
securities traders and investment bankers is intense and
continuous.
Dain Bosworth and Rauscher Pierce Refsnes compete with other
securities firms and with banks, insurance companies and other
financial institutions principally on the basis of service,
product selection, location and reputation in local markets.
Dain Bosworth and Rauscher Pierce Refsnes operate at a price
disadvantage to discount brokerage firms that do not offer
equivalent services.
<PAGE>
Insight Investment competes with other fixed income money
managers principally on the basis of portfolio performance, price
and convenience.
Employees
At December 31, 1993, the Company had approximately 2,950
full-time employees. Of these, 1,700 were employed by Dain
Bosworth, 920 were employed by Rauscher Pierce Refsnes, 275 were
employed by ROG and the rest were employed in other activities.
None of the Company's employees is represented by a collective
bargaining unit.
ITEM 2. PROPERTIES:
The headquarters and administrative offices of the Company,
Dain Bosworth, Insight Management, Dain Corporation and ROG are
located in two buildings in downtown Minneapolis, Minnesota. The
Company began occupying space in the new Dain Bosworth Plaza
under a long-term operating lease in January 1992. The Company's
office space in the second building remains under a long-term
lease commitment and was renovated in 1992 to facilitate the
consolidation of Dain Bosworth's and Rauscher Pierce Refsnes'
clearance and settlement functions into ROG (see "Clearing and
Other Services"). Rauscher Pierce Refsnes leases office space in
Dallas, Texas that is used as its corporate headquarters. Both
Dain Bosworth and Rauscher Pierce Refsnes have extensive branch
office systems which lease space in various locations throughout
their regions. The Company believes that its facilities are
suitable and adequate to meet its needs and that such facilities
have sufficient productive capacity and are appropriately
utilized.
Further information about the lease obligations of the
Company is provided in Note I to the "Consolidated Financial
Statements."
ITEM 3. LEGAL PROCEEDINGS:
Dain Bosworth and Rauscher Pierce Refsnes are defendants in
various civil actions and arbitrations incidental to their
business involving alleged violations of federal and state
securities laws and other laws. Some of these actions, including
certain actions against Rauscher Pierce Refsnes that are
described in more detail below, have been brought on behalf of
purported classes of plaintiffs claiming substantial damages
relating to underwritings of securities.
Rauscher Pierce Refsnes is named as a defendant in a number
of class action complaints that have been consolidated in a
multi-district proceeding, In Re Taxable Municipal Bond
Securities Litigation (MDL 863), in the Eastern District of
Louisiana, as well as in certain Texas state court actions and
arbitrations that have either been consolidated into such
proceeding or stayed pending its resolution. Such actions have
been described in detail in periodic reports previously filed by
the Company on Forms 10-K and 10-Q. Such actions resulted from
Rauscher Pierce Refsnes participation as a member of the
underwriting syndicates in seven taxable municipal bond offerings
for an aggregate of $1.55 billion in 1986. The proceeds of such
bond offerings were invested in guaranteed investment contracts
issued by Executive Life Insurance Company which was placed in
conservatorship by the State of California in 1991. Rauscher
Pierce Refsnes has also been named as a defendant in a contingent
claim for damages in state court in California in connection with
the conservatorship proceeding. This claim was contingent upon
the determination of the priority status of the investment
contracts, which issue has been favorably resolved. Rauscher
Pierce Refsnes underwrote an aggregate of $57.8 million of bonds
in all of such offerings, and served as co-manager of one $200
million bond offering. Drexel Burnham Lambert Incorporated, the
lead managing underwriter for all of such offerings, and one
other member of the underwriting syndicates, filed for
reorganization under the bankruptcy laws and have failed to honor
their syndicate obligations in connection with those claims.
Plaintiffs in certain of these actions allege violations of
federal and state securities laws, common law fraud, negligence
and various other claims. Plaintiffs in certain of these actions
also alleged violations of the Racketeer Influenced and Corrupt
Practices Act, but such claims have been dismissed. Rauscher
Pierce Refsnes believes that it has substantial and meritorious
defenses to the claims raised by plaintiffs and will defend
itself vigorously against these actions.
While the outcome of any litigation is uncertain,
management, based in part upon consultation with legal counsel as
to certain of the actions pending against Dain Bosworth and
Rauscher Pierce Refsnes, believes that the resolution of all such
matters will not have a material adverse effect on the Company's
consolidated financial condition.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
No matters were submitted to a vote of security holders
during the fourth quarter ended December 31, 1993.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following officers have been designated by the Board of
Directors of the Company as its current Executive Officers. All
officers are generally elected annually at the Board Meeting held
in conjunction with the Company's Annual Stockholders meeting and
hold such offices until the following year, subject to their
earlier death, resignation or removal.
Principal Occupation and
Business Experience
Name Age for the Past Five Years
- -----------------------------------------------------------------
John C. Appel............45 President and Chief Operating
Officer, Dain Bosworth Incorporated
since February 1994; Executive Vice
President and Chief Financial
Officer, Dain Bosworth Incorporated
April 1990 to February 1994;
Executive Vice President, IFG since
April 1990; Senior Vice President
of IFG from May 1986 to April 1990;
Chief Financial Officer of IFG from
May 1986 to February 1994. Member
of IFG Executive Committee.
Richard D. McFarland.....64 Chairman of the Board, IFG since
June 1985; Chief Executive Officer
of IFG from June 1985 to December
1989; President of IFG from January
1982 to June 1985.
Daniel J. Reuss..........38 Senior Vice President, IFG since
May 1991; Vice President, IFG
April 1987 to May 1991; Treasurer,
IFG since May 1989; Corporate
Controller, IFG since February
1985.
David A. Smith...........47 Chief Executive Officer, Rauscher
Pierce Refsnes since May 1983;
President, Rauscher Pierce Refsnes
since January 1985; Chairman of the
Board, Rauscher Pierce Refsnes
since January 1990; Executive Vice
President of IFG since May 1991;
Member of IFG Executive Committee.
J. Scott Spiker..........38 Senior Vice President and Director
of Strategic Planning and Corporate
Development, IFG since February
1994; Senior Vice President and
Manager Employee Benefit Services,
Norwest Bank Minnesota, N.A. June
1989 to January 1994; Vice
President, Strategic Planning and
Acquisitions, Norwest Corporation,
December 1987 to June 1989.
Irving Weiser............46 Chief Executive Officer, IFG since
January 1990; President, IFG since
July 1985; Chief Executive Officer,
Dain Bosworth Incorporated since
April 1990; Chairman of the Board,
Dain Bosworth Incorporated since
April 1990; President, Dain
Bosworth Incorporated April 1990 to
February 1994. Member of IFG
Executive Committee.
<PAGE>
PART II
ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS:
(a) Market Information.
The Company's common stock trades on the NYSE under the
symbol "IFG." The high and low sales prices per share of the
Company's common stock by quarter for the last two years were as
follows:
<TABLE>
<CAPTION>
1993 1992
QUARTER HIGH LOW HIGH LOW
-------------------------------------------------------
<S> <C> <C> <C> <C>
First $ 22 $17-7/8 $19-1/2 $15-1/2
Second 22-1/2 19-3/8 17-1/8 14-1/8
Third 30-1/4 21-1/8 17-1/8 13-7/8
Fourth 34 26-1/2 18-1/4 13-1/8
</TABLE>
(b) Holders.
At February 28, 1994, there were approximately 5,700
shareholders of the Company's common stock. The number of
shareholders was determined by adding the number of recordholders
to the estimated number of proxies to be sent to street name
holders.
(c) Dividends.
Cash dividends per common share paid by the Company by
quarter for the last two years were as follows:
<TABLE>
<C> <C> <C>
Quarter 1993 1992
------- ---- ----
First $.04 $.16
Second .08 .04
Third .08 .04
Fourth .08 .04
</TABLE>
The Company paid a special cash dividend of $.16 per share
on its common stock during the first quarter of 1992 and regular
quarterly cash dividends of $.04 per share each quarter
thereafter through the first quarter of 1993. Beginning in the
second quarter of 1993, the regular quarterly dividend was
increased to $.08 per share. The determination of the amount of
future cash dividends, if any, to be declared and paid will
depend on the Company's future financial condition, earnings and
available funds. Prior to 1992 the Company was prevented from
paying cash dividends on its common stock by a cumulative net
earnings test contained in its convertible subordinated debt
agreements.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA:
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in thousands,
except per-share amounts) 1993 1992 1991 1990 1989
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net revenues: (A)
Dain Bosworth
Incorporated $301,808 $255,324 $204,346 $157,805 $161,188
Rauscher Pierce
Refsnes, Inc. 179,649 150,522 120,817 85,344 81,979
Corporate, other and
eliminations 1,503 62 (2,571) (3,505) (6,627)
------- ------- ------- ------- -------
Total net revenues $482,960 $405,908 $322,592 $239,644 $236,540
======= ======= ======= ======= =======
Total revenues $511,615 $438,261 $378,274 $312,882 $319,936
======= ======= ======= ======= =======
Earnings (Loss) before income taxes
and extraordinary items:
Dain Bosworth
Incorporated $51,717 $38,912 $26,072 $6,912 $13,765
Rauscher Pierce
Refsnes, Inc. 30,080 21,183 12,839 (782) 1,133
Corporate, other and
eliminations (4,444) (6,404) (5,893) (4,524) (10,988)
------- ------- ------- ------- -------
$77,353 $53,691 $33,018 $1,606 $3,910
======= ======= ======= ======= =======
Net earnings:
Before extraordinary
items $47,649 $34,523 $21,130 $1,325 $2,878
Extraordinary items,
net __ __ 6,611 12,349 686
------- ------- ------- ------- ------
$47,649 $34,523 $27,741 $13,674 $3,564
======= ======= ======= ======= ======
Earnings before extraordinary
items, per common and common
equivalent share:
Primary $5.67 $4.03 $2.50 $.16 $.34
===== ===== ===== ===== =====
Fully diluted $5.63 $3.91 $2.30 $.16 $.34
===== ===== ===== ===== =====
Total assets $1,786,022 $1,270,945 $1,464,359 $1,367,791 $1,519,531
========== ========== ========== ========== ==========
Long-term debt $22,166 $16,364 $26,686 $45,166 $62,259
========== ========== ========== ========== ==========
Shareholders' equity $177,683 $131,953 $104,110 $76,234 $61,270
========== ========== ========== ========== ==========
Other information:
Equity per common share $21.86 $16.33 $12.56 $9.18 $7.52
Cash dividends per
common share (B) $.28 $.12 $ __ $ __ $ __
Common shares outstanding
at year-end, in
thousands 8,131 8,082 8,171 8,096 7,876
Pretax margin - before
extraordinaryitems,
based on net revenues 16.0% 13.2% 10.2% .7% 1.7%
Net return on average
equity - before
extraordinary items 31.0% 28.9% 23.8% 2.4% 5.0%
Net return on average
equity - net earnings 31.0% 28.9% 31.3% 20.1% 6.1%
Long-term debt-to-equity
ratio 12.5% 12.4% 25.6% 59.2% 101.6%
Average number of
employees 2,806 2,591 2,391 2,390 2,454
Average number of
investment executives 1,084 1,009 943 927 982
Operating office locations 83 74 69 70 71
<FN>
(A) Net revenues equal total revenues less interest expense.
(B) 1992 dividends exclude a $.16 per share special dividend paid
in February 1992.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS:
Business Environment
The Company's subsidiaries are principally engaged in
securities brokerage, investment banking and trading as
principals in equity and fixed income securities. All of these
activities are highly competitive and sensitive to many factors
outside the control of the Company, including volatility of
securities prices and interest rates, trading volume of
securities, economic conditions in the regions in which the
Company does business, income tax legislation and demand for
investment banking services. While revenues are dependent upon
the level of trading volume, which may fluctuate significantly, a
large portion of the Company's expenses remain fixed.
Consequently, net earnings can vary significantly from period to
period.
Three Years Ended December 31, 1993
Summary of Operating Results
During 1993 net earnings totaled $47.6 million, an increase
of $13.1 million or 38 percent over the prior year. Net earnings
and net revenues (revenues less interest expense) for 1993
represent the highest achieved in the Company's history. The
Company, along with the rest of the securities industry,
benefited in 1993 from continued strong financial markets, low
interest rates, high securities prices and increased levels of
municipal and corporate underwritings. As a result of the
favorable economic environment and, in management's opinion,
actions taken during the past several years, the Company's core
securities brokerage and investment banking businesses within
Dain Bosworth and Rauscher Pierce Refsnes all posted record
results for 1993.
Earnings before extraordinary items totaled $34.5 million in
1992, an increase of $13.4 million or 63 percent over 1991. Net
earnings increased 24 percent over the $27.7 million earned in
the prior year. 1991 net earnings included $6.6 million of
extraordinary gains, primarily tax benefits from the utilization
of net operating loss carryforwards. As was the case throughout
the securities industry, all facets of Dain Bosworth's and
Rauscher Pierce Refsnes' broker-dealer operations generated
significantly higher revenues and profits in 1992 than in the
prior year. However, the traditional strengths of the two
securities firms, the retail brokerage business at Dain Bosworth
and the fixed income business at Rauscher Pierce Refsnes, were
the primary reasons for the improved operating results.
Additionally, the Company believes that actions taken to
strengthen the firms' core securities brokerage and investment
banking operations, as well as actions taken to reduce long-term
debt levels at the parent company, favorably impacted 1992 and
1991 earnings.
<PAGE>
Comparative Net Revenues and Expenses Summary. The
following is a summary of the year-to-year increases (decreases)
in categories of net revenues and operating expenses:
<TABLE>
<CAPTION>
1993 vs. 1992 1992 vs. 1991
(Dollars in thousands) Amount Percent Amount Percent
-------------------------------------
<S> <C> <C> <C> <C>
Net Revenues:
Principal transactions $13,165 10% $23,589 23%
Commissions 20,534 17 21,254 22
Investment banking and
underwriting 24,659 23 27,747 36
Net interest 3,088 13 4,062 21
Asset management 3,366 36 6,573 228
Correspondent clearing 1,872 19 2,711 39
Other 10,368 75 (2,620) (16)
------- --- ------- ---
77,052 19 83,316 26
------- --- ------- ---
Expenses excluding interest:
Compensation and benefits 39,747 16 50,674 25
Communications 4,685 18 3,826 17
Occupancy and equipment rental 1,748 8 3,800 20
Travel and promotional 3,315 26 1,305 12
Floor brokerage and clearing
fees 1,125 15 561 8
Other 2,770 9 2,477 9
------ --- ------ ---
53,390 15 62,643 22
------ --- ------ ---
Earnings before income taxes $23,662 44% $20,673 63%
====== === ====== ===
<TABLE/>
<PAGE>
Principal Transactions
The 10-percent increase in revenues from principal
transactions in 1993 over 1992 was due primarily to higher
transaction volumes, declining interest rates and improved
trading results in over-the-counter equity and fixed income
securities (both taxable and tax-exempt).
Principal transaction revenues increased 23 percent in 1992
over 1991, chiefly due to improved trading results in and
increased investor demand for over-the-counter equity and tax-
exempt fixed income securities. Declining interest rates and
relatively heavy trading volumes also contributed to the improved
results.
Commissions
Commission revenues increased 17 percent in 1993 over 1992,
due chiefly to higher sales of mutual funds and listed
securities. Contributing to the increase was a 7-percent rise in
the average number of investment executives, as well as a 30-
percent increase in the New York Stock Exchange's average daily
trading volume and higher securities prices.
The 22-percent increase in commission revenues from 1991 to
1992 was due principally to higher sales of listed securities and
mutual funds to both individual and institutional investors.
This rise was due partially to a 7-percent increase in the
average number of investment executives and a 13-percent increase
in the New York Stock Exchange's average daily trading volume.
Investment Banking and Underwriting
Investment banking and underwriting revenues increased 23
percent from 1992 to 1993 as Dain Bosworth and Rauscher Pierce
Refsnes clients issued greater quantities of corporate and
municipal securities in order to take advantage of favorable
market conditions for raising capital. During 1993 investment
banking revenues benefited from an increased number of initial
public offerings underwritten for corporate clients, as well as
higher volumes of municipal refundings. The Company estimates
that 1993 revenues and pretax earnings derived from such
refundings totaled approximately $41 million and $13 million,
respectively. Such amounts represent 8 percent of consolidated
net revenues and 17 percent of consolidated pretax earnings for
1993. Because demand for these refundings has been driven
largely by a favorable interest environment, and because much of
the municipal debt in the Company's markets has now been
refunded, the Company anticipates that revenues from such
refundings will decline significantly in 1994. If the Company's
strategies to generate additional revenues from other sources in
the business are not successful, the decline in volume of such
municipal refundings would have a material impact on the
Company's net earnings.
Investment banking and underwriting revenues increased 36
percent from 1991 to 1992 as the securities industry in general,
as well as Dain Bosworth and Rauscher Pierce Refsnes, assisted
their corporate and municipal clients in issuing what then were
record amounts of securities in connection with refinancing,
public offering, private placement and other types of
transactions in order to take advantage of favorable capital
market conditions.
Net Interest Income
The major sources of interest revenues and expenses for the
past three years are:
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31,
(In thousands) 1993 1992 1991
-----------------------------
<S> <C> <C> <C>
Revenues:
Customer margin accounts $23,375 $19,787 $19,167
Deposits and short-term investments 16,173 21,834 39,717
Trading inventories and other 15,319 13,856 15,860
------ ------ ------
54,867 55,477 74,744
------ ------ ------
Expenses:
Customer funds on deposit 16,249 21,571 38,510
Bank loans and other 10,850 8,955 13,616
Subordinated and other long-term
debt 1,556 1,827 3,556
------ ------ ------
28,655 32,353 55,682
------ ------ ------
Net interest income $26,212 $23,124 $19,062
====== ====== ======
</TABLE>
<PAGE>
Net interest income accounted for 5 percent of the Company's
net revenues in 1993 and 6 percent in each of 1992 and 1991.
Short-term investments segregated for regulatory purposes and
margin loans to customers, both financed primarily by credit
balances in customer accounts, comprise the majority of the
Company's interest-earning assets. Fixed income trading
inventories, which are generally financed with short-term bank
borrowings or repurchase agreements, also generated significant
net interest income. The Company's net interest income is
dependent upon the level of customer balances and trading
inventories, as well as the spread between the rate it earns on
those assets compared with its cost of funds.
As long as favorable interest rate spreads are maintained
and the level of interest-bearing accounts remains stable, the
Company expects net interest income to continue to be a
significant component of its earnings. The Company continues to
examine alternative cash management products and services that it
may offer to customers with credit balances in their accounts.
Management believes that implementation of new cash management
products and services would not have a material effect on net
earnings.
Average balances and interest rates for 1991 through 1993
are:
<TABLE>
<CAPTION>
Year ended December 31,
(Dollars in thousands) 1993 1992 1991
----------------------------
<S> <C> <C> <C>
Interest revenues:
Margin loans to customers
Average balance $388,398 $299,438 $210,090
Average interest rate 6.0% 6.6% 9.1%
------- ------- --------
$23,375 $19,787 $19,167
======= ======= ========
Deposits and short-term investments
Average balance $534,723 $597,669 $663,645
Average interest rate 3.0% 3.7% 6.0%
------- ------- -------
$16,173 $21,834 $39,717
======= ======= =======
Interest expense:
Interest-bearing customer funds
on deposit
Average balance $685,194 $701,765 $737,403
Average interest rate 2.4% 3.1% 5.2%
------- ------- -------
$16,249 $21,571 $38,510
======= ======= =======
</TABLE>
The $3.1 million increase in net interest income in 1993
over 1992 was principally attributable to an increase in average
margin loan balances to customers of $89.0 million resulting from
increased individual investor participation in the financial
markets. See "Liquidity and Capital Resources."
The $4.1 million increase in net interest income in 1992 is
due primarily to decreased interest expense from lower interest
rates on bank borrowings and from reduced levels of subordinated
and other long-term debt. See "Liquidity and Capital Resources."
These positive factors were partially offset by the negative
effect of slightly reduced spreads on customer balances.
Asset Management
During 1993 asset management revenues increased $3.4 million
or 36 percent from 1992, as a result of a 12-percent increase in
assets under management at Insight Management, as well as
increased revenues from larger volumes of assets in fee-based,
managed account programs at Dain Bosworth and Rauscher Pierce
Refsnes.
Asset management revenues increased $6.6 million from 1991
to 1992, primarily due to increased revenues from Insight
Management's first full year of operation and, to a lesser
extent, increases in revenues from fee-based, managed account
programs at Dain Bosworth and Rauscher Pierce Refsnes.
<PAGE>
Correspondent Clearing and Other Revenues
Correspondent clearing revenues increased $1.9 million or 19
percent from 1992 to 1993 primarily as a result of increased
trade volumes and a 13-percent increase in the number of
correspondents handled by RPR Clearing, the Rauscher Pierce
Refsnes unit that serves as clearing agent for approximately 125
correspondent brokerage firms. Approximately $5.2 million of the
increase in other revenues from 1992 to 1993 was the result of a
one-time gain recorded during the third quarter of 1993 from the
sale of the Minneapolis Energy Center, a district heating and
cooling company owned by a partnership in which Dain Bosworth was
the general partner. Net of expenses, this transaction increased
the Company's pretax earnings by $4.0 million, net earnings by
$2.4 million and earnings per share by $.29.
Correspondent clearing revenues increased $2.7 million from
1991 to 1992 as a result of increased trade volumes handled by
RPR Clearing. Other revenues declined $2.6 million in 1992 from
1991 due primarily to the loss of $3.2 million in fees paid by
Carnegie to the Company for Dain Bosworth and Rauscher Pierce
Refsnes customer balances held in funds managed by Carnegie
before their transfer to money market funds managed by Insight
Management. As of December 31, 1992, substantially all of Dain
Bosworth and Rauscher Pierce Refsnes customers' money market fund
balances previously held in funds managed by Carnegie had been
transferred to funds managed by Insight Management.
Compensation and Benefits
Compensation and benefits expense is generally affected by
the level of operating revenues, earnings and the number of
employees. The 1993 and 1992 increases in compensation and
benefits expense of 16 percent and 25 percent, respectively, were
comprised primarily of increased commissions, incentive
compensation and related benefits that rose in conjunction with
increased operating revenues and earnings. The increases for
1993 and 1992 were also partially the result of increases in the
average number of employees of 8 percent each year.
Other Expenses
During 1993 expenses other than compensation and benefits
and interest increased $13.6 million or 14 percent principally as
a result of volume-driven increases in the use of communications,
market data and clearing services; increased travel costs
associated with the generation of new business; increased
reserves; and increased occupancy expenses related to higher real
estate and operating costs at the Company's Minneapolis
headquarters, the net addition of nine operating office locations
and the expansion of several others.
During 1992 expenses other than compensation and benefits
and interest rose $12.0 million or 14 percent, due primarily to
higher usage of communications and market data services;
increased occupancy costs related to the Company's new
headquarters and moving or opening several branch locations;
increased travel and promotional costs from the larger number of
investment executives qualifying for incentive awards; higher
floor brokerage and clearing costs due to heavier trade volumes;
and increased expenses associated with preparations for the April
1993 consolidation of Dain Bosworth's and Rauscher Pierce
Refsnes' operations areas into Regional Operations Group.
Management anticipates higher operating expenses in 1994 and
subsequent years as the Company expects to make additional
investments in new or expanded operating offices, hire additional
employees, and make additional investments in systems, training
and other areas in connection with the Company's strategic growth
initiatives over the next five years.
Effect of Recent Accounting Standards
In November 1992 the Financial Accounting Standards Board
issued a new statement on accounting for post-employment benefits
other than pensions. The standard will be adopted as required in
1994. The Company does not expect the statement to have a
material effect on financial results.
Inflation
Since the Company's assets are primarily liquid in nature
and experience a high rate of turnover, they are not
significantly affected by inflation. However, the rate of
inflation does affect many of the Company's operating costs which
may not be readily recoverable through price increases on
services offered by the Company.
<PAGE>
Liquidity and Capital Resources
The Company's assets are substantially liquid in nature and
consist mainly of cash or assets readily convertible into cash.
These assets are financed primarily by interest-bearing and non-
interest bearing customer credit balances, repurchase agreements,
other payables, short-term and subordinated bank borrowings and
equity capital. Changes in the amount of trading securities owned
by the Company, customer and broker receivables and securities
purchased under agreements to resell directly affect the amount
of the Company's financing requirements.
The Company has various sources of capital for operations
and growth. In addition to capital provided by earnings,
Regional Operations Group maintains uncommitted lines of credit
from a number of banks to finance transactions (principally
trading and underwriting positions of Dain Bosworth and Rauscher
Pierce Refsnes) when internally generated capital is not
sufficient. These uncommitted lines of credit are collateralized
by trading securities and customers' excess margin securities.
Also, the Company has a $15 million, committed, unsecured
revolving credit facility that is used for advances to its
subsidiaries and general corporate purposes. On February 28,
1994, $15 million of this revolving credit facility was unused.
Dain Bosworth and Rauscher Pierce Refsnes must comply with
certain regulations of the Securities and Exchange Commission
measuring capitalization and liquidity and restricting amounts of
capital that may be transferred to affiliates. In April 1993 the
Company's new operations subsidiary, Regional Operations Group,
began clearing and settling trades for Dain Bosworth and Rauscher
Pierce Refsnes (including the accounts of RPR Clearing). Regional
Operations Group now carries all customer accounts, extends
margin credit to customers, pays interest on credit balances of
customers and invests any excess customer balances. As a result,
Regional Operations Group is subject to similar Securities and
Exchange Commission regulations. During 1993 Dain Bosworth,
Rauscher Pierce Refsnes and Regional Operations Group all
operated above the minimum net capital standards. At December
31, 1993, regulatory net capital was $46.2 million at Regional
Operations Group, which was 8.2 percent of aggregate debit
balances and $18.2 million in excess of the 5-percent
requirement. Beginning in April 1993, Dain Bosworth's and
Rauscher Pierce Refsnes' net capital requirement was reduced to
$1 million for each company because neither carries customer
balances on its balance sheet. At December 31, 1993, Dain
Bosworth and Rauscher Pierce Refsnes had net capital of $18.4
million and $19.0 million, respectively, in excess of the $1
million requirement.
The Company paid a special cash dividend of $.16 per share
on the Company's common stock during the first quarter of 1992
and regular quarterly cash dividends of $.04 per share thereafter
through the first quarter of 1993. Beginning in the second
quarter of 1993, the regular quarterly dividend was increased to
$.08 per share. The determination of future cash dividends, if
any, to be declared and paid will depend on the Company's future
financial condition, earnings and available funds. Prior to 1992
the Company had been prevented from paying cash dividends on its
common stock by a cumulative net earnings test contained in its
subordinated debt agreements.
In 1993 the Company purchased automated workstations
totaling approximately $4.6 million in conjunction with the
rollout of the Client Management System, which is designed to
improve the productivity and client service of Dain Bosworth and
Rauscher Pierce Refsnes investment executives. The purchases
were financed with a series of secured notes which require the
Company to make 48 equal monthly payments of principal plus
interest.
Rauscher Pierce Refsnes entered into a $3.0 million, five-
year subordinated bank loan during the first quarter of 1993.
Proceeds of the loan qualify as regulatory capital and will be
used for general corporate purposes.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
As of December 31, 1993 and 1992, and for each of
the years in the three-year period ended December 31, 1993
and Supplementary Data
Page
Independent Auditors' Report............................... 18
Consolidated Financial Statements:
Consolidated statements of operations................. 19
Consolidated balance sheets........................... 20
Consolidated statements of shareholders' equity....... 21
Consolidated statements of cash flows................. 22
Notes to consolidated financial statements............ 23
Quarterly Financial Information............................ 31
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Inter-Regional Financial Group, Inc.:
We have audited the accompanying consolidated balance sheets
of Inter-Regional Financial Group, Inc. and subsidiaries as of
December 31, 1993 and 1992, and the related consolidated
statements of operations, shareholders' equity and cash flows for
each of the years in the three-year period ended December 31,
1993. In connection with our audits of the consolidated
financial statements, we have also audited the financial
statement schedules as listed in the table of contents on page 36
hereof. These consolidated financial statements and financial
statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of Inter-Regional Financial Group, Inc. and
subsidiaries as of December 31, 1993 and 1992, and the results of
their operations and their cash flows for each of the years in
the three-year period ended December 31, 1993, in conformity with
generally accepted accounting principles. Also, in our opinion,
the related financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as
a whole, present fairly, in all material respects, the
information set forth therein.
KPMG Peat Marwick
Minneapolis, Minnesota
February 1, 1994
<PAGE>
<TABLE>
INTER-REGIONAL FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per-share amounts)
<CAPTION>
Year ended December 31,
1993 1992 1991
-----------------------------------
<S> <C> <C> <C>
Revenues:
Principal transactions $139,304 $126,139 $ 102,550
Commissions 139,288 118,754 97,500
Investment banking and
underwriting 129,603 104,944 77,197
Interest 54,867 55,477 74,744
Asset management 12,817 9,451 2,878
Correspondent clearing 11,499 9,627 6,916
Other 24,237 13,869 16,489
------- ------- -------
Total revenues 511,615 438,261 378,274
------- ------- -------
Interest expense (28,655) (32,353) (55,682)
------- ------- -------
Net revenues 482,960 405,908 322,592
------- ------- -------
Expenses excluding interest:
Compensation and benefits 292,587 252,840 202,166
Communications 30,725 26,040 22,214
Occupancy and equipment
rental 24,675 22,927 19,127
Travel and promotional 15,889 12,574 11,269
Floor brokerage and
clearing fees 8,612 7,487 6,926
Other 33,119 30,349 27,872
------ ------ ------
Total expenses excluding
interest 405,607 352,217 289,574
------- ------- -------
Earnings:
Earnings before income
taxes and extraordinary
items 77,353 53,691 33,018
Income tax expense (29,704) (19,168) (11,888)
------- ------- -------
Earnings before
extraordinary items 47,649 34,523 21,130
Extraordinary items, net __ __ 6,611
------- ------- -------
Net earnings $47,649 $34,523 $27,741
======= ======= =======
Earnings per common and common equivalent share:
Primary:
Before extraordinary items $5.67 $4.03 $2.50
Extraordinary items __ __ .78
----- ----- -----
Net $5.67 $4.03 $3.28
===== ===== =====
Fully diluted:
Before extraordinary items $5.63 $3.91 $2.30
Extraordinary items __ __ .66
----- ----- -----
Net $5.63 $3.91 $2.96
===== ===== =====
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
INTER-REGIONAL FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
December 31,
1993 1992
----------------------
<S> <C> <C>
Assets:
Cash and cash equivalents $14,047 $34,461
Cash and short-term investments
segregated for regulatory purposes 581,005 501,705
Receivable from customers 531,636 383,540
Receivable from brokers and dealers 178,448 95,378
Securities purchased under agreements
to resell 111,887 40,583
Trading securities owned 271,378 140,821
Equipment, leasehold improvements and
buildings, at cost, less accumulated
depreciation of $14,086 and $11,043,
respectively 24,720 17,121
Other receivables 40,744 28,717
Deferred income taxes 18,995 12,236
Other assets 13,162 16,383
---------- ----------
$1,786,022 $1,270,945
========== ==========
Liabilities and Shareholders' Equity:
Liabilities:
Short-term borrowings $123,973 $18,617
Drafts payable 32,041 34,116
Payable to customers 866,144 777,504
Payable to brokers and dealers 250,594 111,202
Securities sold under repurchase
agreements 83,978 27,115
Trading securities sold, but not yet
purchased 72,218 33,843
Accrued compensation 83,458 64,780
Other accrued expenses and accounts
payable 63,776 48,607
Accrued income taxes 9,991 6,844
Subordinated and other debt 22,166 16,364
--------- ---------
1,608,339 1,138,992
--------- ---------
Shareholders' equity:
Common stock (issued and outstanding,
8,130,602 and 8,081,656 shares,
respectively) 1,016 1,010
Additional paid-in capital 73,475 73,128
Retained earnings 103,192 57,815
---------- ----------
177,683 131,953
---------- ----------
$1,786,022 $1,270,945
========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
INTER-REGIONAL FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
<CAPTION>
Convertible Additional Total
Preferred Stock Common Stock Paid-In Retained Shareholders'
Shares Amount Shares Amount Capital Earnings Equity
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at
December 31,
1990 119 $1,862 8,096 $1,012 $70,166 $3,194 $76,234
--- ------ ----- ------ ------- ------ -------
Net earnings __ __ __ __ __ 27,741 27,741
Common stock
issued upon
conversion
of preferred
stock (22) (350) 30 3 347 __ __
Common stock
issued upon
exercise of
incentive
stock options __ __ 45 6 322 __ 328
Cash dividends
on preferred
stock __ __ __ __ __ (193) (193)
--- ----- ----- ----- ----- ------ -------
Balances at
December 31,
1991 97 1,512 8,171 1,021 70,835 30,742 104,110
--- ----- ----- ----- ------ ------ -------
Net earnings __ __ __ __ __ 34,523 34,523
Common stock
issued upon
conversion
of preferred
stock (92) (1,452) 125 16 1,436 __ __
Common stock
issued upon
exercise of
incentive
stock options __ __ 91 11 857 __ 868
Cash dividends
on preferred
stock __ __ __ __ __ (52) (52)
Cash dividends
on common
stock ($.28
per share) __ __ __ __ __ (2,313) (2,313)
Redemption of
preferred
stock (5) (60) __ __ __ (18) (78)
Purchase and
retirement
of common
stock from
Commercial
Credit
Company __ __ (305) (38) __ (5,067) (5,105)
--- --- ----- ----- ------ ------ -------
Balances at
December 31,
1992 __ __ 8,082 1,010 73,128 57,815 131,953
--- --- ----- ----- ------ ------ -------
Net earnings __ __ __ __ __ 47,649 47,649
Common stock
issued upon
exercise of
incentive
stock options __ __ 49 6 347 __ 353
Cash dividends
on common stock
($.28 per
share) __ __ __ __ __ (2,272) (2,272)
--- --- ----- ----- ------ ------ ------
Balances at
December 31,
1993 __ $ __ 8,131 $1,016 $73,475 $103,192 $177,683
=== === ===== ===== ====== ======= =======
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
INTER-REGIONAL FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
Year ended December 31,
1993 1992 1991
--------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $47,649 $34,523 $21,130
Adjustments to reconcile net
earnings to cash provided
(used) by operating activities:
Depreciation and amortization 5,812 4,419 3,744
Deferred income taxes (6,759) (5,028) (3,611)
Utilization of tax-loss
carryforwards __ __ 6,953
Other non-cash items 11,274 8,371 8,801
Cash and short-term investments
segregated for regulatory
purposes (79,300) 101,293 24,791
Securities purchased under
agreements to resell (71,304) 16,101 69,449
Net trading securities owned and
trading securities sold, but
not yet purchased (92,182) 54,827 2,485
Drafts payable and short-term
borrowings of securities
companies 108,731 (23,669) (24,306)
Net payable to customers (59,456) (45,277) (98,386)
Net payable to brokers and
dealers 56,322 (65,725) 54,779
Securities sold under repurchase
agreements 56,863 (53,755) (84,549)
Accrued compensation 18,678 16,812 21,236
Other (3,763) 3,496 18,408
------ ------ ------
Cash provided (used) by operating
activities (7,435) 46,388 20,924
------ ------ ------
Cash flows from financing activities:
Proceeds from:
Subordinated and other debt 7,427 7,000 __
Issuance of common stock 353 868 328
Payments for:
Subordinated and other debt (1,625) (20,274) (18,451)
Revolving credit agreement, net (5,450) (9,550) __
Dividends on common stock (2,272) (2,313) __
Purchase of common stock __ (5,105) __
Redemption of and dividends on
preferred stock __ (130) (193)
------- ------- -------
Cash (used) for financing
activities (1,567) (29,504) (18,316)
------- ------- -------
Cash flows from investing activities:
Proceeds from investment
dividends and sales 1,613 1,324 1,694
Payments for equipment, leasehold
improvements and other (13,025) (5,687) (3,695)
------- ------- -------
Cash (used) by investing
activities (11,412) (4,363) (2,001)
------- ------- -------
Increase (Decrease) in cash and
cash equivalents (20,414) 12,521 607
Cash and cash equivalents:
At beginning of year 34,461 21,940 21,333
------- ------- -------
At end of year $14,047 $34,461 $21,940
======= ======= =======
<FN>
Cash income tax payments totaled $33,053,000 in 1993, $21,001,000
in 1992 and $3,866,000 in 1991. Cash interest payments totaled
$28,494,000, $32,766,000 and $57,173,000 in 1993, 1992 and 1991,
respectively.
During 1992 and 1991, respectively, the Company entered into non-
cash financing activity of $1,452,000 and $350,000 associated
with the conversion of preferred stock to common stock. Non-cash
financing activity of $2,952,000 and $373,000 occurred during
1992 and 1991, respectively, as a result of the Company entering
into capital lease obligations for new furniture, fixtures and
equipment.
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1993, 1992 and 1991
Inter-Regional Financial Group, Inc. and Subsidiaries
A. Summary of Significant Accounting Policies
Basis of Presentation: The consolidated financial
statements include the Company and its subsidiaries, all of which
are wholly owned. All material inter-company balances and
transactions have been eliminated in consolidation. Certain
prior year amounts in the financial statements have been
reclassified to conform to the 1993 presentation.
Cash and Cash Equivalents: Cash and cash equivalents
include cash on hand, cash in depository accounts with other
financial institutions and money market investments with original
maturities of 90 days or less.
Securities: Securities transactions and the related
commission revenues and expenses are recorded on settlement date,
which is not materially different than if transactions were
recorded on trade date.
Trading securities owned and trading securities sold, but
not yet purchased, are stated at market value. Unrealized gains
and losses on such securities are recognized currently in
revenues.
Repurchase Transactions: Securities purchased under
agreements to resell (reverse repurchase agreements) and
securities sold under repurchase agreements are accounted for as
financing transactions and are recorded at the contract amount at
which the securities will subsequently be resold or reacquired,
plus accrued interest.
Depreciation and Amortization: Equipment is depreciated
using the straight-line method over estimated useful lives of two
to eight years. Leasehold improvements are amortized over the
lesser of the estimated useful life of the improvement or the
life of the lease. Buildings are depreciated using the straight-
line method over an estimated useful life of 25 years.
Income Taxes: Effective January 1, 1993, the Company
adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." Under this method, deferred tax
liabilities and assets and the resultant provision for income
taxes are determined based on the difference between the
financial statement and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences
are expected to reverse. Financial statements for prior years
have not been restated and the cumulative effect of the
accounting change was not material. (See note M.)
Prior to 1993 the provision for income taxes was based on
income and expenses included in the accompanying consolidated
statements of operations. Differences between taxes so computed
and taxes payable under applicable statutes and regulations were
classified as deferred taxes arising from timing differences.
Fair Values of Financial Instruments: Substantially all of
the Company's financial assets and liabilities are carried at
market value or at amounts which, because of their short-term
nature, approximate current fair value. The Company's borrowings,
if recalculated based on current interest rates, would not differ
significantly from the amounts recorded at December 31, 1993.
Recent Accounting Pronouncements: In November 1992 the
Financial Accounting Standards Board issued Statement No. 112 -
Employers' Accounting for Post-Employment Benefits Other Than
Pensions (FAS 112). The Company expects to adopt the provisions
of FAS 112 when required in 1994 and does not expect the
statement to have a material effect on financial results.
Earnings Per Share: Primary earnings per share are based
upon the weighted average number of common shares outstanding and
the dilutive effect of common stock options and, in years prior
to 1993, the assumed conversion of the Series 10% and 12%
convertible preferred stock.
Fully diluted earnings per share for 1992 and 1991 reflect
the additional dilutive effect of the assumed conversion of
convertible subordinated debentures. The weighted average number
of shares used in the primary and fully diluted computations,
respectively, are: 1993 - 8,404,501 and 8,466,797; 1992 -
8,573,507 and 8,960,560; and 1991 - 8,463,211 and 10,066,831.
<PAGE>
B. Extraordinary Items
During 1991 the Company recognized net extraordinary gains
of $6,611,000. This amount was comprised of the realization of
tax benefits from utilization of net operating loss carryforwards
of $6,953,000 and a net loss from the redemption and buyback of
the Company's 11-1/2% convertible subordinated debentures of
$342,000.
C. Receivable From and Payable to Customers
The amounts receivable from and payable to customers result
from cash and margin transactions. Securities owned by customers
and held as collateral for receivables and securities sold short
by customers are not reflected in the consolidated financial
statements. Included in payable to customers are customer funds
on deposit for reinvestment totaling $713 million and $687
million as of December 31, 1993 and 1992, respectively. The
Company pays interest on such funds at varying rates, the
weighted average of which was 2.4 percent at December 31, 1993.
D. Receivable From and Payable to Brokers and Dealers
<TABLE>
<CAPTION>
December 31,
(In thousands) 1993 1992
--------------------
<S> <C> <C>
Receivable from brokers and dealers:
Deposits for securities borrowed $138,906 $63,610
Securities failed to deliver 35,094 16,280
Clearing organizations, correspondent
brokers and other 4,448 15,488
-------- -------
$178,448 $95,378
======== =======
Payable to brokers and dealers:
Deposits for securities loaned $193,312 $89,234
Securities failed to receive 50,054 13,702
Clearing organizations, correspondent
brokers and other 7,228 8,266
-------- --------
$250,594 $111,202
======== ========
</TABLE>
Securities failed to deliver and receive represent the
contract value of securities which have not been delivered or
received subsequent to settlement date. Deposits paid for
securities borrowed and deposits received for securities loaned
approximate the market value of the related securities.
E. Trading Securities
The market values of trading security positions are summarized as
follows:
<TABLE>
<CAPTION>
December 31,
(In thousands) 1993 1992
--------------------
<S> <C> <C>
Owned:
Government securities $118,787 $47,676
Municipal securities 85,131 61,347
Corporate and other securities 67,460 31,798
-------- --------
$271,378 $140,821
======== ========
Sold, but not yet purchased:
Government and municipal securities $67,007 $29,428
Corporate and other securities 5,211 4,415
------- -------
$72,218 $33,843
======= =======
</TABLE>
<PAGE>
F. Short-Term Borrowings
<TABLE>
<CAPTION>
December 31,
(In thousands) 1993 1992
--------------------
<S> <C> <C>
Loans to the securities subsidiaries $123,973 $13,167
Revolving credit loan __ 5,450
-------- -------
$123,973 $18,617
======== =======
</TABLE>
The loans to the securities subsidiaries consist primarily
of bank borrowings on uncommitted lines of credit collateralized
by trading securities owned and securities held in customer
margin accounts, and have a floating rate of interest
approximately .50 percent above the Federal Funds rate. The
market value of trading securities pledged as collateral at
December 31, 1993 was $113 million.
Revolving credit loan borrowings and irrevocable letters of
credit are available under a commitment totaling $15 million (all
of which was unused as of December 31, 1993) which expires June
30, 1995. Loans under this facility are unsecured and bear
interest at a floating rate of Federal Funds plus 1.125 percent.
The Company must maintain certain levels of net worth under the
agreement.
G. Subordinated and Other Debt
<TABLE>
<CAPTION>
December 31,
(In thousands) 1993 1992
--------------------
<S> <C> <C>
Subordinated debt of securities
subsidiaries $8,000 $5,000
Other debt:
Capital lease obligations (Note I) 8,006 8,866
Other 6,160 2,498
------- -------
14,166 11,364
------- -------
$22,166 $16,364
======= =======
</TABLE>
Other debt is used primarily to finance equipment and
building improvements and is payable in monthly or quarterly
installments and bears interest at floating rates which
approximated 5.8 percent at December 31, 1993. The Company must
maintain certain levels of net worth under one of the debt
agreements.
Annual principal payments on subordinated bank loans and
other debt (excluding obligations under capital leases) during
the next five years are as follows: 1994-$1,463,000; 1995-
$3,782,000; 1996-$4,273,000; 1997-$3,908,000; 1998-$468,000.
H. Shareholders' Equity
Common Stock: The common stock has a par value of $.125 per
share; 20,000,000 shares are authorized.
At December 31, 1993, 1,761,000 shares of the Company's
common stock were reserved for the 1986 Stock Option Plan and
106,000 shares were reserved for issuance to the IFG Stock Bonus
Plan.
Dividends: The Company paid a special cash dividend of $.16
per share during the first quarter of 1992 and regular quarterly
cash dividends of $.04 per share each quarter thereafter through
the first quarter of 1993. Beginning in the second quarter of
1993, the regular quarterly dividend was increased to $.08 per
share. The determination of the amount of future cash
dividends, if any, to be declared and paid will depend on the
Company's future financial condition, earnings and available
funds. Prior to 1992 the Company was prevented from paying cash
dividends on its common stock by a cumulative net earnings test
contained in its convertible subordinated debt agreements.
<PAGE>
Stock Options: The Company maintains a stock option plan,
under which key employees and outside directors may be granted
options to purchase common stock at not less than 100 percent of
the fair market value of the shares at the date of grant for
incentive stock options or 50 percent for non-qualified options.
Options granted to employees prior to December 31, 1989,
generally become exercisable at the rate of 33-1/3 percent each
year and expire five years from the grant date. Options granted
to employees subsequent to December 31, 1989, generally become
exercisable at rates of 20, 50 and 100 percent as of two, three
and four years, respectively, after the date of grant and expire
ten years from date of grant. Options granted to outside
directors prior to December 31, 1991, become exercisable
immediately and expire five years from grant date. Options
granted to outside directors subsequent to December 31, 1991,
become exercisable six months after grant date and expire five
years after grant date. At December 31, 1993, 1,067,884 shares
of common stock were available for grant.
The following table summarizes the activity related to the
Company's stock option plan for each of the last three years:
<TABLE>
<CAPTION>
Year ended December 31,
1993 1992 1991
----------------------------
<S> <C> <C> <C>
Options outstanding at
beginning of year 493,900 476,968 566,350
Granted 271,900 132,500 134,000
Exercised (50,600) (88,268) (98,915)
Expired __ (2,000) (93,000)
Cancelled (21,700) (25,300) (31,467)
------- ------- -------
Options outstanding at end
of year 693,500 493,900 476,968
======= ======= =======
Options exerciseable at end
of year 130,200 94,460 128,257
======= ======= =======
Price range of outstanding
options $6.50- $6.50- $6.50-
$20.25 $17.625 $13.125
Price range of options
exercised $6.875- $7.00- $7.375-
$8.50 $13.25 $13.25
</TABLE>
All outstanding options were granted at 100 percent of the
fair market value of the shares at the date of grant. The
Company's closing stock price on December 31, 1993 was $27.875.
I. Commitments and Contingent Liabilities
Leases: The Company and its subsidiaries lease office space,
furniture and communications and data processing equipment under
several noncancelable leases. Most office space leases are
subject to escalation and provide for the payment of real estate
taxes, insurance and other expenses of occupancy, in addition to
rent.
Aggregate minimum rental commitments as of December 31, 1993
are as follows:
<TABLE>
<CAPTION>
Capital Operating
(In thousands) leases leases
---------------------
<S> <C> <C>
1994 $1,876 $14,341
1995 1,802 13,271
1996 1,325 9,654
1997 1,176 7,659
1998 1,056 6,293
Thereafter 8,775 29,253
------- -------
Total minimum lease payments $16,010 $80,471
=======
Less amount representing interest (8,004)
-------
Present value of minimum lease payments 8,006
=======
</TABLE>
Rental expense for operating leases was $19,085,000,
$18,741,000 and $15,486,000, for the years ended December 31,
1993, 1992 and 1991, respectively. Included in net equipment,
leasehold improvements and buildings at December 31, 1993 and
1992, is $5,952,000 and $6,915,000, respectively, for leases
which have been capitalized.
<PAGE>
Litigation: The Company's securities subsidiaries are
defendants in various civil actions and arbitrations incidental
to their business involving alleged violations of federal and
state securities laws, and other laws. Some of these actions
have been brought on behalf of purported classes of plaintiffs
claiming substantial damages relating to underwritings of
securities.
Several such actions resulted from Rauscher Pierce Refsnes'
participation as a member of the underwriting syndicates in seven
taxable municipal bond offerings for an aggregate of $1.55
billion in 1986. Rauscher Pierce Refsnes agreed to underwrite
approximately $57.8 million of these bonds, and served as co-
manager in one offering of $200 million of bonds. Drexel Burnham
Lambert Incorporated, the lead managing underwriter for all seven
of such offerings, and one other member of the underwriting
syndicates for certain of such offerings have filed for
reorganization under the bankruptcy laws and have failed to honor
their syndicate obligations in connection with such claims.
Plaintiffs in certain of these actions allege violations of
federal and state securities laws, common law fraud, negligence,
and various other claims. Plaintiffs in certain of the actions
also alleged violations of the Racketeer Influenced and Corrupt
Practices Act, but such claims have been dismissed. Plaintiffs
seek an unspecified amount of actual and punitive damages,
rescission and other relief. Rauscher Pierce Refsnes believes
that it has substantial and meritorious defenses available and
plans to defend itself vigorously against these actions.
While the outcome of any litigation is uncertain,
management, based in part upon consultation with legal counsel as
to certain of these actions, believes that the resolution of
these matters will not have a material adverse effect on the
Company's consolidated financial condition.
J. Financial Instruments with Off-Balance-Sheet Risk
In the normal course of business, the Company's activities
involve the execution, settlement and financing of various
securities transactions. These activities may expose the Company
to off-balance-sheet credit and market risks in the event the
customer or counterparty is unable to fulfill its contractual
obligations. Such risks may be increased by volatile trading
markets.
In the normal course of business, the securities
subsidiaries enter into when-issued underwriting and purchase
commitments. Transactions relating to such commitments open at
year end and subsequently settled had no material effect on the
consolidated financial statements.
As part of its normal brokerage activities, the Company
sells securities not yet purchased (short sales) for its own
account. The establishment of short positions exposes the
Company to off-balance-sheet risk in the event prices increase,
as the Company may be obligated to acquire the securities at
prevailing market prices.
The Company also periodically hedges its fixed income
trading inventories with financial futures contracts. These
contracts expose the Company to off-balance-sheet risk in the
event that the change in the futures price does not closely
correlate with the change in the inventory price. At December
31, 1993, the Company had open commitments under financial
futures contracts with a notional amount of $2.0 million.
The Company does not enter into interest-rate swap
agreements, foreign currency contracts or interest-rate option
agreements.
The Company seeks to control the risks associated with its
customer activities by requiring customers to maintain margin
collateral in compliance with various regulatory and internal
guidelines. The Company monitors required margin levels daily
and, pursuant to such guidelines, requires customers to deposit
additional collateral or to reduce positions when necessary.
A portion of the Company's customer activity involves the
sale of securities not yet purchased and the writing of option
contracts. Such transactions may require the Company to purchase
or sell financial instruments at prevailing market prices in
order to fulfill the customer's obligations.
The Company lends money subject to reverse repurchase
agreements. All positions are collateralized, primarily with U.S.
government or U.S. government agency securities. The Company
generally takes physical possession of securities purchased under
agreements to resell. Such transactions may expose the Company to
risk in the event such borrowers do not repay the loans and the
value of collateral held is less than that of the underlying
receivable. These agreements provide the Company with the right
to maintain the relationship between market value of the
collateral and the receivable.
<PAGE>
The Company may pledge firm or customer margin securities
for bank loans, repurchase agreements, securities loaned or to
satisfy margin deposits of clearing organizations. In the event
the counterparty is unable to return such securities pledged, the
Company may be exposed to the risks of acquiring the securities
at prevailing market prices or holding collateral possessing a
market value less than that of the related pledged securities.
The Company seeks to control these risks by monitoring the market
value of securities pledged and requiring adjustments of
collateral levels where necessary. At December 31, 1993, the
market value of such securities pledged approximated the
borrowings outstanding.
K. Regulatory Requirements
Dain Bosworth and Rauscher Pierce Refsnes are subject to the
Securities and Exchange Commission's Uniform Net Capital Rule.
In April 1993 the Company's new operations subsidiary, Regional
Operations Group, began clearing and settling trades for Dain
Bosworth and Rauscher Pierce Refsnes (including the accounts of
RPR Clearing). Regional Operations Group now carries all
customer accounts, extends margin credit to customers, pays
interest on credit balances of customers and invests any excess
customer balances. As a result, Regional Operations Group is
subject to the Uniform Net Capital Rule whereby net capital of
not less than 2 percent of aggregate debit items must be
maintained. The New York Stock Exchange, Inc. also may require a
member organization to reduce its business if regulatory net
capital is less than 4 percent of such aggregate debit items, and
may prohibit a member firm from expanding its business and
declaring cash dividends if its regulatory net capital is less
than 5 percent of such aggregate debit items. At December 31,
1993, net capital was $46.2 million at Regional Operations Group,
which was 8.2 percent of aggregate debit balances and $18.2
million in excess of the 5-percent requirement. Beginning in
April 1993, Dain Bosworth's and Rauscher Pierce Refsnes' net
capital requirement was reduced to $1 million for each company as
neither firm carries customer balances on its balance sheet. At
December 31, 1993, Dain Bosworth and Rauscher Pierce Refsnes had
net capital of $18.4 million and $19.0 million, respectively, in
excess of the $1 million requirement.
Rule 15c3-3 of the Securities Exchange Act of 1934 specifies
certain conditions under which brokers and dealers carrying
customer accounts are required to maintain cash or qualified
securities in a special reserve account for the exclusive benefit
of customers. Amounts to be maintained are computed in
accordance with a formula defined in the Rule. At December 31,
1993, Regional Operations Group had $581.0 million segregated in
special reserve accounts. This amount consisted of qualified
securities purchased under agreements to resell and was
collateralized by U.S. government or government agency
securities.
L. Employee Benefit Plans
The Company and its participating subsidiaries have profit
sharing and stock bonus plans which cover substantially all full-
time employees who are at least 21 years of age and have been
employed for at least one year.
Company contributions to the profit sharing plan are 3
percent of each participant's eligible compensation, plus a
discretionary contribution determined by each participating
company's board of directors based on profits. Employees may
contribute on a pretax basis up to 10 percent of their eligible
compensation to the plan, less any amounts contributed to the
stock bonus plan and subject to certain aggregate limitations
under federal regulations.
Stock bonus plan contributions are used to purchase common
stock of the Company. Employees may allot on a pretax basis up
to 5 percent of their eligible compensation to the plan, subject
to certain aggregate limitations with contributions to the profit
sharing plan under federal regulations. The Company and its
participating subsidiaries match 50 percent of their employees'
contributions to the stock bonus plan. The Company also makes
matching contributions to the stock bonus plan equal to 25
percent of employee pretax contributions of up to 5 percent of
eligible compensation (less any amount contributed to the stock
bonus plan) to the profit sharing plan. Only aggregate employee
pretax contributions of up to 5 percent for both the stock bonus
plan and profit sharing plan are eligible for Company matching
contributions.
The Company's policy is to fund currently profit sharing and
stock bonus plan costs. Earnings have been charged for
contributions, net of forfeitures, to the above plans as follows:
<TABLE>
<CAPTION>
Year ended December 31,
(In thousands) 1993 1992 1991
------------------------------
<S> <C> <C> <C>
Profit sharing plan $15,863 $14,023 $10,079
Stock bonus plan 2,885 2,334 1,845
------- ------- -------
$18,748 $16,357 $11,924
======= ======= =======
</TABLE>
<PAGE>
M. Income Taxes
Income tax expense consists of the following:
<TABLE>
<CAPTION>
Year ended December 31,
(In thousands) 1993 1992 1991
-----------------------------
<S> <C> <C> <C>
Current:
Federal $30,557 $19,786 $ 6,308
State 5,906 4,410 2,238
Deferred:
Federal (5,741) (4,330) (3,470)
State (1,018) (698) (141)
Charge equivalent to benefit of
net operating loss
carryforwards __ __ 6,953
------- ------- -------
$29,704 $19,168 $11,888
======= ======= =======
</TABLE>
A reconciliation of ordinary federal income taxes (based on
rates of 35 percent for 1993 and 34 percent for 1992 and 1991)
with the actual tax expense provided on earnings is as follows:
<TABLE>
<CAPTION>
Year ended December 31,
(In thousands) 1993 1992 1991
-----------------------------
<S> <C> <C> <C>
Ordinary federal income tax
expense $27,074 $18,255 $11,226
State income taxes, net of
federal tax benefit 3,178 2,449 1,384
Tax-exempt interest, net of
related interest expense (780) (584) (777)
Other 232 (952) 55
------- ------- -------
$29,704 $19,168 $11,888
======= ======= =======
Effective tax rate 38.4% 35.7% 36.0%
======= ======= =======
</TABLE>
Deferred income tax expenses/benefits result from
differences in the timing of revenue and expense recognition for
financial statement and tax reporting purposes. The sources and
tax effect of the changes in deferred taxes are:
<TABLE>
<CAPTION>
Year ended December 31,
(In thousands) 1993 1992 1991
-------------------------------
<S> <C> <C> <C>
Accruals not currently deductible $(5,521) $(3,689) $(4,333)
Partnership investments (1,703) (550) 328
Fixed assets 1,196 (566) 69
Other (731) (223) 325
------- ------- -------
$(6,759) $(5,028) $(3,611)
======= ======= =======
</TABLE>
<PAGE>
The tax effects of temporary differences that give rise to
the deferred tax assets and deferred tax liabilities are:
<TABLE>
<CAPTION>
December 31,
(In thousands) 1993 1992
---------------------
<S> <C> <C>
Deferred tax assets:
Accruals not currently deductible $18,567 $13,046
Fixed assets 393 1,589
Other 1,771 1,040
------- -------
20,731 15,675
------- -------
Deferred tax liabilities:
Partnership investments (1,736) (3,439)
------- -------
$18,995 $12,236
======= =======
</TABLE>
The Company has determined that it is not required to
establish a valuation allowance for the deferred tax asset since
it is more likely than not that the deferred tax asset will be
realized principally through carryback to taxable income in prior
years, and future reversals of existing taxable temporary
differences, and, to a lesser extent, future taxable income.
<PAGE>
<TABLE>
INTER-REGIONAL FINANCIAL GROUP, INC.
QUARTERLY FINANCIAL INFORMATION
(Unaudited, in thousands, except per-share amounts)
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------------------------------------------
<S> <C> <C> <C> <C>
1993
Net revenues $112,344 $114,646 $128,573 $127,397
======== ======== ======== ========
Earnings before income
taxes $16,347 $16,542 $24,150 $20,314
======== ======== ======== ========
Net earnings $10,135 $10,256 $14,460 $12,798
======== ======== ======== ========
Per share data:
Primary net earnings
per share $1.22 $1.23 $1.72 $1.51
======== ======== ======== ========
Fully diluted net
earnings per share $1.22 $1.23 $1.70 $1.51
======== ======== ======== ========
Dividends $.04 $.08 $.08 $.08
======== ======== ======== ========
1992
Net revenues $100,006 $96,886 $95,763 $113,253
======== ======== ======== ========
Earnings before income
taxes $13,274 $12,827 $12,049 $15,541
======== ======== ======== ========
Net earnings $8,694 $8,449 $7,864 $9,516
======== ======== ======== ========
Per share data:
Primary net earnings
per share $1.00 $.98 $.92 $1.11
======== ======== ======== ========
Fully diluted net
earnings per share $.95 $.94 $.92 $1.11
======== ======== ======== ========
Dividends (A) $.16 $.04 $.04 $.04
======== ======== ======== ========
<FN>
(A) The $.16 per share dividend paid in first-quarter 1992 was a
special dividend.
</TABLE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE:
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT:
See Part I, Item 4 of this Annual Report for information
with respect to executive officers of the Company. Other
information required in Item 10 will be contained in the
Company's definitive Proxy Statement to be filed pursuant to
Regulation 14A within 120 days after the close of the fiscal year
for which this Report is filed and is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION:
The information required in Item 11 will be contained in the
Company's definitive Proxy Statement to be filed pursuant to
Regulation 14A within 120 days after the close of the fiscal year
for which this Report is filed and is incorporated herein by
reference, except that, pursuant to Item 402(a)(8) of Regulation
S-K, the information to be contained in the Company's definitive
Proxy Statement in response to paragraphs (k) and (l) of Item 402
is not incorporated by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT:
The information required in Item 12 will be contained in the
Company's definitive Proxy Statement to be filed pursuant to
Regulation 14A within 120 days after the close of the fiscal year
for which this Report is filed and is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:
The information required in Item 13 will be contained in the
Company's definitive Proxy Statement to be filed pursuant to
Regulation 14A within 120 days after the close of the fiscal year
for which this Report is filed and is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K:
(a) Documents filed as part of this Report:
Page
----
1. Financial statements:
Reference is made to the table of contents to
financial statements and financial statement
schedules hereinafter contained 36
2. Financial statement schedules:
Reference is made to the table of contents
to financial statements and financial statement
schedules hereinafter contained for all other
financial statement schedules 36
<PAGE>
3. Exhibits:
Item No. Item Method of Filing
- -------- ---- ----------------
3(a) Certificate of Incorporated by
Incorporation of the reference to Exhibit
Company, as amended. 3(a) to the Company's
Annual Report on Form
10-K for the year ended
December 31, 1988.
3(b) Bylaws of the Company, as Incorporated by
amended. reference to Exhibit
3(b) to the Company's
Annual Report on Form
10-K for the year ended
December 31, 1989.
4(a) Credit Agreement dated Incorporated by
June 23, 1994. reference to Exhibit
4(a) to the Company's
Current Report on Form
8-K dated July 15,
1993.
4(b) First Amendment to Credit Incorporated by
Agreement dated November reference to Exhibit
30, 1993. 4(a) to the Company's
Current Report on Form
8-K dated February 11,
1994.
4(c) Term Loan Agreement dated Incorporated by
October 16, 1992. reference to Exhibit
4(e) to the Company's
Annual Report on Form
10-K for the year ended
December 31, 1992.
4(d) First Amendment to Term Incorporated by
Loan Agreement dated reference to Exhibit
March 12, 1993. 4(g) to the Company's
Annual Report on Form
10-K for the year ended
December 31, 1992.
4(e) Second Amendment to Term Incorporated by
Loan Agreement dated June reference to Exhibit
23, 1993. 4(b) to the Company's
Current Report on Form
8-K dated July 15,
1993.
4(f) Third Amendment to Term Incorporated by
Loan Agreement dated reference to Exhibit
November 30, 1993. 4(b) to the Company's
Current Report on Form
8-K dated February 11,
1994.
10(a)* 1986 Stock Option Incorporated by
Plan, as amended on April reference to Exhibit
24, 1987, May 9, 1990, 10(b) to the Company's
March 3, 1993 and April Current Report on Form
27, 1993. 8-K dated July 15,
1993.
10(b) Form of Indemnity Incorporated by
Agreement with Directors reference to Exhibit
and Officers of the 10(c) to the Company's
Company. Annual Report on Form
10-K for the year ended
December 31, 1990.
10(c)* Retirement Agreement Incorporated by
between the Company and reference to Exhibit
Richard D. McFarland 10(f) to the Company's
dated January 1, 1990. Annual Report on Form
10-K for the year ended
December 31, 1989.
10(d)* Form of Non-Employee Incorporated by
Director Retirement reference to Exhibit
Compensation Agreement. 10(g) to the Company's
Annual Report on Form
10-K for the year ended
December 31, 1992.
10(e)* IFG Executive Deferred Incorporated by
Compensation Plan dated reference to Exhibit
March 31, 1993. 10(a) to the Company's
Current Report on Form
8-K dated July 15,
1993.
10(f) Trust Agreement for Filed herewith.
Executive Deferred
Compensation Plan dated
February 11, 1994.
11 Computation of net Filed herewith.
earnings per share.
21 List of subsidiaries. Filed herewith.
23 Independent Auditors' Filed herewith.
consent.
24 Power of attorney. Filed herewith.
* Management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to Item 14(c)
of this report.
<PAGE>
(b) No reports on Form 8-K were filed during the fourth quarter
of 1993.
REPORT FOR EMPLOYEE STOCK PURCHASE PLAN:
The financial statements required by Form 11-K with respect
to the Company's Stock Bonus Plan will be filed by amendment
hereto within 180 days of such plan's fiscal year end as
permitted by Rule 15d-21.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
INTER-REGIONAL FINANCIAL
GROUP, INC.
By Daniel J. Reuss
__________________________
Daniel J. Reuss
Senior Vice President,
Corporate Controller and
Treasurer
Dated: March 21, 1994
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant in the capacities and on the dates
indicated:
Signature Title
Irving Weiser President, Chief Executive
_____________________ Officer (Principal Executive
Irving Weiser Officer) and Director
Daniel J. Reuss Senior Vice President, Controller
_____________________ and Treasurer (Principal
Daniel J. Reuss Financial and Accounting Officer)
Susan S. Boren Director
_____________________
Susan S. Boren
F. Gregory Fitz-Gerald Director By Daniel J. Reuss
_____________________ _________________
F. Gregory Fitz-Gerald Daniel J. Reuss
Pro Se and as
Attorney-in-Fact
Richard D. McFarland Chairman of the Dated: March 21, 1994
_____________________ Board and
Richard D. McFarland Director
Lawrence Perlman Director
_____________________
Lawrence Perlman
C.A. Rundell, Jr. Director
_____________________
C.A. Rundell, Jr.
Robert L. Ryan Director
_____________________
Robert L. Ryan
Arthur R. Schulze, Jr. Director
_____________________
Arthur R. Schulze, Jr.
David A. Smith Executive Vice President
_____________________ and Director
David A. Smith
<PAGE>
INTER-REGIONAL FINANCIAL GROUP, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
As of December 31, 1993 and 1992 and for each
of the years in the three-year period
ended December 31, 1993
TABLE OF CONTENTS
Page
----
Independent Auditors' Report 18
Consolidated Financial Statements:
Consolidated statements of operations 19
Consolidated balance sheets 20
Consolidated statements of shareholders' equity 21
Consolidated statements of cash flows 22
Notes to consolidated financial statements 23
Financial Statement Schedules:
Schedule III - Condensed financial information of
the registrant 37
Schedule IX - Short-term borrowings 41
___________
Schedules not listed above have been omitted because they
are either not applicable or the required information has been
provided in the consolidated financial statements or notes
thereto.
<PAGE>
<TABLE>
SCHEDULE III __ CONDENSED FINANCIAL INFORMATION
OF THE REGISTRANT
INTER-REGIONAL FINANCIAL GROUP, INC.
(Parent Company)
STATEMENTS OF OPERATIONS
(In thousands)
<CAPTION>
Year ended December 31,
1993 1992 1993
--------------------------
<S> <C> <C> <C>
Revenues:
Management fees $3,114 $2,810 $2,495
Facilities rental 1,055 1,059 1,052
Interest 291 678 1,625
------ ------ ------
4,460 4,547 5,172
------ ------ ------
Expenses:
Compensation and benefits 2,417 2,312 1,779
Interest 1,226 2,182 4,887
Other operating expenses 3,669 5,904 3,702
------ ------ ------
7,312 10,398 10,368
------ ------ ------
Loss before income taxes and
equity in subsidiaries'
earnings (2,852) (5,851) (5,196)
Income tax benefit 1,125 2,882 2,219
------ ------ ------
Loss before equity in
subsidiaries' earnings (1,727) (2,969) (2,977)
Equity in subsidiaries'
earnings 49,376 37,492 24,107
------ ------ ------
Earnings before extraordinary
items 47,649 34,523 21,130
Extraordinary items __ __ 6,611
------ ------ ------
Net earnings $47,649 $34,523 $27,741
====== ====== =======
<FN>
See accompanying notes to condensed financial information.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE III - CONDENSED FINANCIAL INFORMATION
OF THE REGISTRANT - (Continued)
INTER-REGIONAL FINANCIAL GROUP, INC.
(Parent Company)
BALANCE SHEETS
(In thousands)
<CAPTION>
December 31,
1993 1992
---------------------
<S> <C> <C>
Assets:
Cash $45 $248
Advances to subsidiaries (eliminated in
consolidation) 25,120 9,102
Equipment, leasehold improvements and
building, at cost, less accumulated
depreciation of $5,291 and $3,358,
respectively 13,306 7,802
Investment in subsidiaries, at cost,
plus equity in undistributed earnings
(eliminated in consolidation) 227,627 145,523
Other assets 1,593 3,106
-------- --------
$267,691 $165,781
======== ========
Liabilities and Shareholders' Equity:
Liabilities:
Short-term borrowings $ __ $5,450
Advances from subsidiaries
(eliminated in consolidation) 59,068 3,657
Accounts payable and accrued expenses 17,307 14,009
Capital lease obligations and other
debt 13,633 10,712
------- -------
90,008 33,828
------- -------
Shareholders' equity:
Common stock 1,016 1,010
Additional paid-in capital 73,475 73,128
Retained earnings 103,192 57,815
------- -------
177,683 131,953
------- -------
$267,691 $165,781
======= =======
<FN>
See accompanying notes to condensed financial information.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE III - CONDENSED FINANCIAL INFORMATION
OF THE REGISTRANT - (Continued)
INTER-REGIONAL FINANCIAL GROUP, INC.
(Parent Company)
STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
Year ended December 31,
1993 1992 1991
-----------------------------
<S> <C> <C> <C>
Cash flows from operating
activities:
Earnings before extraordinary
items $47,649 $34,523 $21,130
Non-cash items included in
earnings:
Equity in net earnings of
subsidiaries (49,376) (37,492) (24,107)
Depreciation and amortization 2,024 282 341
Utilization of tax loss
carryforwards __ __ 6,953
------ ------ ------
297 (2,687) 4,317
Change in operating assets and
liabilities 4,781 4,478 2,779
------ ------ ------
Cash provided by operating
activities 5,078 1,791 7,096
------ ------ ------
Cash flows from financing activities:
Proceeds from:
Advances from subsidiaries,
net 39,393 24,247 7,036
Long-term debt 4,427 2,000 __
Issuance of common stock 353 868 328
Payments for:
Revolving credit agreement,
net (5,450) (9,550) __
Dividends on common stock (2,272) (2,313) __
Subordinated and other debt (1,505) (19,696) (18,204)
Purchases of common stock __ (5,105) __
Redemption of and dividends
on preferred stock __ (130) (193)
------ ------ ------
Cash provided (used) by financing
activities 34,946 (9,679) (11,033)
------ ------ ------
Cash flows from investing
activities:
Dividends from subsidiaries 19,571 8,124 7,888
Investment in subsidiaries (52,270) __ (3,400)
Purchases of fixed assets. (7,528) (484) __
Acquisitions __ __ (250)
------ ------ ------
Cash provided (used) by investing
activities (40,227) 7,640 4,238
------ ------ ------
Increase/(Decrease) in cash (203) (248) 301
Cash at beginning of year 248 496 195
------ ------ ------
Cash at end of year $45 $248 $496
====== ====== ======
<FN>
See accompanying notes to condensed financial information.
<PAGE>
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION
OF THE REGISTRANT -- (Continued)
INTER-REGIONAL FINANCIAL GROUP, INC.
(Parent Company)
NOTES TO CONDENSED FINANCIAL INFORMATION
A. The condensed financial statements of Inter-Regional Financial
Group, Inc. (Parent Company), should be read in conjunction
with the consolidated financial statements of Inter-Regional
Financial Group, Inc., and the notes thereto beginning on Page
19.
B. Investments in subsidiaries are carried at cost plus equity in
undistributed earnings. See Note K to consolidated financial
statements for information regarding net capital requirements
of the broker-dealer subsidiaries which could result in
restriction on the ability of the subsidiaries to transfer
funds to the parent in the form of loans, advances or cash
dividends.
Between April and December, 1993, the Parent Company received
$52 million in loans from two of its subsidiary broker-
dealers, Dain Bosworth and Rauscher Pierce Refsnes, in order
to capitalize its third broker-dealer, Regional Operations
Group, Inc. Beginning in April 1993, Regional Operations
Group began providing securities clearance and settlement
functions to Dain Bosworth and Rauscher Pierce Refsnes. See
Item 1(c) "Securities Business - Customer Financing" and
"Securities Business - Uniform Net Capital Rule."
C. For information regarding the composition of extraordinary
items in 1991, see Note B to the Consolidated Financial
Statements.
D. Other Debt:
Other debt is used primarily to finance equipment and building
improvements and is payable in monthly and quarterly
installments and bears interest at floating rates which
approximated 5.8 percent at December 31, 1993. The Parent
Company must maintain certain levels of net worth under one of
the debt agreements.
Annual principal payments on other debt (excluding obligations
under capital leases) during the next five years are as
follows: 1994 - $1,423,000; 1995 - $1,490,000; 1996 -
$1,561,000; 1997 - $1,193,000; 1998 - $-0-.
E. Commitments:
The Parent Company has guaranteed up to $15 million of
Regional Operations Group's financial obligations to a
clearing organization until February 1995.
Aggregate minimum rental commitments as of December 31, 1993,
are as follows:
</TABLE>
<TABLE>
<CAPTION>
(In thousands) Capital leases Operating leases
---------------------------------
<S> <C> <C>
1994 $1,835 $3,014
1995 1,802 3,432
1996 1,325 3,487
1997 1,176 3,769
1998 1,056 3,699
Thereafter 8,775 27,007
------ -------
15,969 $44,408
------ =======
Less amount representing
interest (8,003)
------
Present value of minimum
lease payments $7,966
======
</TABLE>
<PAGE>
SCHEDULE IX - SHORT-TERM BORROWINGS
<TABLE>
INTER-REGIONAL FINANCIAL GROUP, INC.
(Dollars in thousands)
CAPTION>
Maximum Average Weighted
Category of amount amount average
aggregate Weighted outstanding outstanding interest rate
short-term Balance at average during during during
borrowings end of year interest rate the year the year(A) the year(B)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 31, 1993:
Banks $123,973 3.7% $376,332 $150,799 3.5%
December 31, 1992:
Banks $18,617 4.0% $198,670 $99,906 4.0%
December 31, 1991:
Banks $61,735 5.2% $141,615 $81,688 6.3%
<FN>
(A) Average amount outstanding during the year is computed by
dividing the total of the month-end balances by twelve.
(B) Weighted average interest rate for the year is computed by
dividing the actual short-term interest by the daily
average short-term borrowings outstanding.
</TABLE>
<PAGE>
Exhibit 10(f)
TRUST AGREEMENT
IFG EXECUTIVE DEFERRED COMPENSATION PLAN
First Effective February 11, 1994
TABLE OF CONTENTS
Page
----
SECTION 1 INTRODUCTION 2
SECTION 2 ESTABLISHMENT OF TRUST 4
SECTION 3 PAYMENTS TO PLAN PARTICIPANTS
AND THEIR BENEFICIARIES 4
SECTION 4 PAYMENTS TO COMPANY 5
SECTION 5 TRUSTEE RESPONSIBILITY REGARDING
PAYMENTS TO TRUST BENEFICIARY WHEN
COMPANY IS INSOLVENT 5
SECTION 6 INVESTMENT AUTHORITY 6
SECTION 7 DISPOSITION OF INCOME 6
SECTION 8 ACCOUNTING BY TRUSTEE 6
SECTION 9 RESPONSIBILITY OF TRUSTEE 7
SECTION 10 COMPENSATION AND EXPENSES OF TRUSTEE 7
SECTION 11 RESIGNATION AND REMOVAL OF TRUSTEE 7
SECTION 12 APPOINTMENT OF SUCCESSOR 8
SECTION 13 AMENDMENT OR TERMINATION 8
SECTION 14 MISCELLANEOUS 9
SECTION 15 EFFECTIVE DATE 9
SIGNATURES 9
<PAGE>
TRUST AGREEMENT
IFG EXECUTIVE DEFERRED COMPENSATION PLAN
THIS TRUST AGREEMENT, Made and entered into as of February 11,
1994, by and between INTER-REGIONAL FINANCIAL GROUP, INC., a
Delaware corporation (hereinafter sometimes referred to as
"IFG"), and First Trust National Association , a national banking
association, as trustee (said trustee and its successor or
successors in trust from time to time being hereinafter
collectively referred to as the "Trustee"):
WHEREAS, IFG has established a nonqualified deferred compensation
plan for the benefit of its eligible employees and eligible
employees of affiliated corporations by the adoption of a
document known as the "IFG EXECUTIVE DEFERRED COMPENSATION PLAN"
(the "Plan"); and
WHEREAS, IFG may from time to time hereafter amend, renew and
extend such Plan; and
WHEREAS, the Plan is unfunded and is maintained by IFG primarily
for the purpose of providing deferred compensation for a select
group of management or highly compensated employees for purposes
of Title I of the Employee Retirement Income Security Act of
1974; and
WHEREAS, IFG has determined that it will establish a trust fund
which, subject to the claims of creditors of IFG, shall be held
to pay such portion of the benefits under the Plans which IFG
does not directly pay; and
WHEREAS, the creation of such a trust fund requires that IFG
select a Trustee and enter into a Trust Agreement; and
WHEREAS, this is the Trust Agreement so contemplated; and
WHEREAS, the Trustee has agreed to serve as Trustee according to
the terms of this Trust Agreement and the officers of IFG are
authorized to execute this Trust Agreement on behalf of IFG;
NOW, THEREFORE, in consideration of the premises, the parties
hereto do hereby agree as follows:
<PAGE>
SECTION 1
INTRODUCTION
1.1. Definitions. When used herein with initial capital
letters, the following words have the following meanings:
1.1.1. Beneficiary - a person designated by a Participant (or
automatically by operation of the Plan Statement) to receive any
benefit remaining at the death of a Participant under the terms
of the Plan Statement.
1.1.2. Change in Control -
(1) the public announcement (which, for purposes of this
definition), shall include, without limitation, a report filed
pursuant to Section 13(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") that any person, entity or
"group," within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act, other than IFG or any of its subsidiaries, or
the IFG Stock Bonus Plan or any other employee benefit plan of
IFG or any of its subsidiaries, or any entity holding shares in
IFG's Common Stock organized, appointed or established for, or
pursuant to the terms of, any such plan, has become the
beneficial owner (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 35% or more of the combined voting
power of IFG's then outstanding voting securities in a
transaction or series of transactions;
(2) the Continuing Directors cease to constitute a majority
of IFG's Board of Directors;
(3) the shareholders of IFG approve (1) any consolidation or
merger of IFG in which IFG is not the continuing or surviving
corporation or pursuant to which shares of IFG's stock would be
converted into cash, securities or other property, other than a
merger of IFG in which shareholders immediately prior to the
merger have the same proportionate ownership of stock of the
surviving corporation immediately after the merger; (2) 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 IFG; or (3) any plan of liquidation or dissolution of
IFG; or
(4) the majority of the Continuing Directors determine in
their sole and absolute discretion that there has been a change
in control of IFG.
"Continuing Director" shall mean any person who is a member of
the Board of Directors of IFG, while such a person is a member of
the Board of Directors, who is not an Acquiring Person (as
hereinafter defined) or an Affiliate or Associated (as
hereinafter defined) of an Acquiring Person, or a representative
of an Acquiring Person or of any such Affiliate or Associate, and
who (A) was a member of the Board of Directors on the date of
this Agreement or (B) subsequently becomes a member of the Board
of Directors, if such person's initial nomination for election or
initial election to the Board of Directors is recommended or
approved by a majority of the Continuing Directors.
For purposes of this Section, "Acquired Person" shall mean any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) who or which, together with all Affiliates and
Associates of such person, is the "beneficial owner" (as defined
in Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of securities of IFG representing 35% or more of the
combined voting power of IFG's then outstanding securities, but
shall not include IFG, any subsidiary of IFG or any employee
benefit plan of IFG or of any subsidiary of IFG or any entity
holding shares of IFG's Common Stock organized, appointed or
established for, or pursuant to the terms of, any such plan; and
"Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 promulgated under the
Exchange Act.
<PAGE>
1.1.3. Company - Inter-Regional Financial Group, Inc., a
Delaware corporation, and any successor thereof that adopts the
Plan.
1.1.4. Compensation Committee - the Compensation and
Organization Committee of the Board of Directors of IFG or any
successor Committee thereto established by such Board of
Directors.
1.1.5. Fund - the assets held under this Trust Agreement by the
Trustee from time to time, including all contributions of the
Company and the investments and reinvestments, earnings and
profits thereon.
1.1.6. Insolvent, Insolvency - the condition which exists when
Company is: (i) generally unable to pay its debts when they are
due, or (ii) subject to a pending proceeding as a debtor under
the United States Bankruptcy Code.
1.1.7. Participant - an employee of the Company who has become
and remains a participant in the Plan in accordance with the
provisions of the Plan Statement.
1.1.8. Plan - the unfunded, nonqualified "IFG Executive Deferred
Compensation Plan" of the Company which is established for the
benefit of a select group of management or highly compensated
employees eligible to participate therein, as set forth in the
Plan Statement and as amended, renewed or extended from time to
time.
1.1.9. Plan Statement - the separate written documents, as
adopted by Company which sets forth the terms, conditions and
provisions of the Plan, as the same may be amended, renewed or
extended from time to time thereafter.
1.1.10. Trust Agreement - this written document entitled "TRUST
AGREEMENT, IFG EXECUTIVE DEFERRED COMPENSATION PLAN" entered into
by and between Company and the Trustee effective as of February
11, 1994, as the same may be amended from time to time
thereafter.
1.1.11. Trustee - the Trustee originally named hereunder and its
successor in trust.
1.1.12. Valuation Date - each December 31.
1.2. Rules of Interpretation. Whenever appropriate, words used
herein in the singular may be read in the plural, or words used
herein in the plural may be read in the singular; the masculine
may include the feminine; and the words "hereof," "herein" or
"hereunder" or other similar compounds of the word "here" shall
mean and refer to this entire Trust Agreement and not to any
particular paragraph or section of this Trust Agreement unless
the context clearly indicates to the contrary. The titles given
to the various sections of this Trust Agreement are inserted for
convenience of reference only and are not part of this Trust
Agreement, and they shall not be considered in determining the
purpose, meaning or intent of any provision hereof. Any
reference in this Trust Agreement to a statute or regulation
shall be considered also to mean and refer to any subsequent
amendment or replacement of that statute or regulation. This
instrument has been executed and delivered in the State of
Minnesota and has been drawn in conformity to the laws of that
State and shall be construed and enforced in accordance with the
laws of the State of Minnesota.
<PAGE>
SECTION 2
ESTABLISHMENT OF TRUST
2.1. Establishment Of Trust. Company hereby deposits with
Trustee in trust $2,832,193.00, which shall become the principal
of the Trust to be held, administered and disposed of by Trustee
as provided in this Trust Agreement. The Company shall make
additional deposits of cash or other property from time to time
as it may determine in its sole and absolute discretion. Neither
Trustee nor any Participant or beneficiary shall have any right
to compel any additional deposits.
2.2. Fund Established. A Fund is hereby established by Company.
The Fund shall be held by Trustee in trust and dealt with in
accordance with the provisions of this Trust Agreement. This
Trust Agreement is intended to create a trust which is a grantor
trust within the meaning of section 671 of the Internal Revenue
Code, as amended, and shall be construed accordingly. Subject to
all other terms and provisions of this Trust Agreement, the Fund
shall be held and disposed of:
2.2.1. For the purpose of paying benefits required to be paid
under the Plan Statement to Participants and Beneficiaries, as
provided in Section 3; and
2.2.2. To satisfy claims of creditors of Company in the event
Company is determined to be Insolvent; and
2.2.3. To return assets to Company which both are requested by
Company and are determined by the Trustee to be in excess of
amounts reasonably believed necessary to satisfy the claims of
all Participants and Beneficiaries under the terms of the Plan,
as provided in Sections 3 and 4.
2.3. Valuation. Trustee shall value the Fund as of each
Valuation Date, which valuation shall reflect, as nearly as
possible, the then fair market value of the assets comprising the
Fund (including income accumulations therein).
2.4. Irrevocability of Trust. The Trust hereby established
shall be irrevocable by Company.
SECTION 3
PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES
3.1. Payments to Plan Participants -
3.1.1. Company shall deliver to Trustee from time to time one or
more schedules (the "Payment Schedule") that indicate the amounts
payable in respect of each Participant (and his or her
Beneficiaries), that provides a formula or other instructions
acceptable to Trustee for determining the amounts so payable, the
form in which such amount is to be paid (as provided for or
available under the Plan), and the time of commencement for
payment of such amounts. Except as otherwise provided herein,
Trustee shall make payments to the Participants and their
Beneficiaries in accordance with the Payment Schedule. Trustee
shall make provision for the reporting and withholding of any
federal, state or local taxes that may be required to be withheld
with respect to the payments of benefits pursuant to the terms of
the Plan and shall pay amounts withheld to the appropriate taxing
authorities or determine that such amounts have been reported,
withheld and paid by Company.
3.1.2. The entitlement of a Participant or his Beneficiaries to
benefits under the Plan shall be determined by Company or such
party as it shall designate under the Plan, and any claim for
such benefits shall be considered and reviewed under the
procedures set forth in the Plan.
<PAGE>
3.1.3. Company may make payment of benefits directly to
Participants or their Beneficiaries as they become due under the
terms of the Plan. Company shall notify Trustee of its decision
to make payment of benefits directly prior to the time amounts
are payable to Participants or their Beneficiaries. In addition,
if the principal of the Trust, and any earnings thereon, are not
sufficient to make payments of benefits in accordance with the
terms of the Plan, Company shall make the balance of each such
payment as it falls due. Trustee shall notify Company where
principal and earnings are not sufficient. Trustee shall also
notify the Company when and if any assets may be returned to the
Company as provided in Section 2.2.3 hereof.
SECTION 4
PAYMENTS TO COMPANY
Except as provided in Section 2.2.3 and Section 3 hereof, Company
shall have no right or power to direct Trustee to return to
Company or to divert to others any of the Trust assets before all
benefits have been paid to all Participants and Beneficiaries
pursuant to the terms of the Plan.
SECTION 5
TRUSTEE RESPONSIBILITY REGARDING PAYMENTS
TO TRUST BENEFICIARY WHEN COMPANY IS INSOLVENT
5.1. Cease Payments. Trustee shall cease payment of benefits to
Participants and Beneficiaries if the Company is Insolvent.
5.2. Claims of Creditors. At all times during the continuance
of this Trust, the principal and income of the Trust shall be
subject to claims of general creditors of Company under federal
and state law as set forth below.
5.2.1. The Compensation Committee shall have the duty to inform
Trustee in writing of Company's Insolvency. If a person claiming
to be a creditor of Company alleges in writing to Trustee that
Company has become Insolvent, Trustee shall determine whether
Company is Insolvent and, pending such determination, Trustee
shall discontinue payment of benefits to Participants or
Beneficiaries.
5.2.2. Unless Trustee has actual knowledge of Company's
Insolvency, or has received notice from Company or a person
claiming to be a creditor alleging that Company is Insolvent,
Trustee shall have no duty to inquire whether Company is
Insolvent. Trustee may in all events rely on such evidence
concerning Company's solvency as may be furnished to Trustee and
that provides Trustee with a reasonable basis for making a
determination concerning Company's solvency.
5.2.3. If at any time Trustee has determined that Company is
Insolvent, Trustee shall discontinue payments to Participants and
Beneficiaries and shall hold the assets of the Trust for the
benefit of Company's general creditors. Nothing in this Trust
Agreement shall in any way diminish any rights of Participants
and Beneficiaries to pursue their rights as general creditors of
Company with respect to benefits due under the Plan or otherwise.
<PAGE>
5.2.4. Trustee shall resume the payment of benefits to
Participants and Beneficiaries in accordance with Section 3 of
this Trust Agreement only after Trustee has determined that
Company is not Insolvent (or is no longer Insolvent).
5.3. Resumption of Payments. Provided that there are sufficient
assets, if Trustee discontinues the payment of benefits from the
Trust pursuant to Section 5 hereof and subsequently resumes such
payments, the first payment following such discontinuance shall
include the aggregate amount of all payments due to Participants
and Beneficiaries under the terms of the Plan for the period of
such discontinuance, less the aggregate amount of payments, if
any, made to Participants and Beneficiaries by Company pursuant
to the Plan during any such period of discontinuance.
SECTION 6
INVESTMENT AUTHORITY
Trustee shall invest any funds transferred to it by Company in
such manner as may reasonably be requested by Company. In the
event Company fails to give such instructions to Trustee or
Trustee determines such instructions are grossly unreasonable,
Trustee shall then have full authority to invest any funds
transferred to it by Company as Trustee sees fit, consistent with
the terms and conditions of this Trust Agreement and the Plan.
Trustee may invest in securities (including stock or rights to
acquire stock) or obligations issued by Company. All rights
associated with assets of the Trust, including voting rights with
respect to any equity securities held by the Trust (including
shares of IFG's Common Stock), shall be exercised by Trustee or
the person designated by Trustee, and shall in no event be
exercisable by or rest with Participants.
Company shall have the right at any time, and from time to time
in its sole discretion, to substitute assets, acceptable to
Trustee, of equal fair market value for any asset held by the
Trust. This right is exercisable by Company in a nonfiduciary
capacity without the approval or consent of any person in a
fiduciary capacity.
SECTION 7
DISPOSITION OF INCOME
During the term of this Trust, all income received by the Trust,
net of expenses and taxes, if any, shall be accumulated and
reinvested in accordance with the terms hereof.
SECTION 8
ACCOUNTING BY TRUSTEE
Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions
required to be made, including such specific records as shall be
agreed upon in writing between Company and Trustee. Within sixty
(60) days following the close of each calendar year and within
sixty (60) days after the removal or resignation of Trustee,
Trustee shall deliver to Company a written account of its
administration of the Trust during such year or during the period
from the close of the last preceding year to the date of such
removal or resignation, setting forth all investments, receipts,
disbursements and other transactions effected by it, including a
description of all securities and investments purchased and sold
with the cost or net proceeds of such purchases or sales (accrued
interest paid or receivable being shown separately), and showing
all cash, securities and other property held in the Trust at the
end of such year or as of the date of such removal or
resignation, as the case may be.
<PAGE>
SECTION 9
RESPONSIBILITY OF TRUSTEE
9.1 General Duty of Care. Trustee shall act with the care,
skill, prudence and diligence under the circumstances then
prevailing that a prudent person acting in like capacity and
familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided,
however, that Trustee shall incur no liability to any person for
any action taken pursuant to a direction, request or approval
given by Company which is contemplated by, and in conformity, the
terms of the Plan or this Trust and is given in writing by
Company. In the event of a dispute between Company and any
person, Trustee may apply to a court of competent jurisdiction to
resolve the dispute.
9.2. Litigation Expenses. If Trustee undertakes or defends any
litigation arising in connection with this Trust, Company agrees
to indemnify Trustee against Trustee's costs, expenses and
liabilities (including, without limitation, attorneys' fees and
expenses) relating thereto and to be primarily liable for such
payments. If Company does not pay such costs, expenses and
liabilities in a reasonably timely manner, Trustee may obtain
payment from the Trust.
9.3 Use of Counsel. Trustee may consult with legal counsel (who
may also be counsel for Company generally) with respect to any of
its duties or obligations hereunder.
9.4 Use of Agents. Trustee may hire agents, accountants,
actuaries, investment advisors, financial consultants or other
professionals to assist it in performing any of its duties or
obligations hereunder.
9.5. General Grant of Authority. Trustee shall have, without
exclusion, all powers conferred on trustees by applicable law,
unless expressly provided otherwise herein.
9.6. No Business Obligation. Notwithstanding any powers granted
to Trustee pursuant to this Trust Agreement or to applicable law,
Trustee shall not have any power that could give this Trust the
objective of carrying on a business and dividing the gains
therefrom, within the meaning of Section 301.7701-2 of the
Procedure and Administrative Regulations promulgated pursuant to
the Internal Revenue Code of 1986, as amended.
SECTION 10
COMPENSATION AND EXPENSES OF TRUSTEE
Company shall pay all administrative and Trustee's fees and
expenses. If not so paid, the fees and expenses shall be paid
from the Trust.
<PAGE>
SECTION 11
RESIGNATION AND REMOVAL OF TRUSTEE
11.1. Resignation. Trustee may resign at any time by written
notice to Company, which shall be effective thirty (30) days
after receipt of such notice unless Company and Trustee agree
otherwise.
11.2. Removal. Trustee may be removed by Company on thirty (30)
days notice or upon shorter notice accepted by Trustee
11.3. Change in Control. Upon a Change in Control, as defined
herein, Trustee may not be removed by Company for ninety (90)
days. If for any reason Trustee resigns or is removed within
ninety (90) days of a Change in Control, Trustee shall select a
successor Trustee in accordance with the provisions of
Section 12.2 hereof prior to the effective date of Trustee's
resignation or removal.
11.4. Transfer of Assets. Upon resignation or removal of
Trustee and appointment of a successor Trustee, all assets shall
subsequently be transferred to the successor Trustee. The
transfer shall be completed within thirty (30) days after receipt
of notice of resignation, removal or transfer, unless Company
extends the time limit.
11.5. Court Appointment. If Trustee resigns or is removed, a
successor shall be appointed, in accordance with the terms
hereof. If no such appointment has been made, Trustee may apply
to a court of competent jurisdiction for appointment of a
successor or for instructions. All expenses of Trustee in
connection with the proceeding shall be allowed as administrative
expenses of the Trust.
SECTION 12
APPOINTMENT OF SUCCESSOR
12.1. New Trustee. If Trustee resigns or is removed in
accordance with Section 11 hereof,the Compensation Committee may
appoint any third party, such as a bank trust department or other
party that may be granted corporate trustee powers under
Minnesota law, as a successor to replace Trustee upon resignation
or removal. The appointment shall be effective when accepted in
writing by the new Trustee, who shall have all of the rights and
powers of the former Trustee, including ownership rights in the
Trust assets. The former Trustee shall execute any instrument
necessary or reasonably requested by Company or the successor
Trustee to evidence the transfer.
12.2. Change in Control. Upon a Change in Control, if Trustee
resigns or is removed and selects a successor Trustee pursuant to
Section 11.3, Trustee may appoint any third party such as a bank
trust department or other party that may be granted corporate
trustee powers under Minnesota law. The appointment of a
successor Trustee shall be effective when accepted in writing by
the new Trustee. The new Trustee shall have all the rights and
powers of the former Trustee, including ownership rights in Trust
assets. The former Trustee shall execute any instrument
necessary or reasonably requested by the successor Trustee to
evidence the transfer.
12.3. Successor Trustee Not Liable. The successor Trustee need
not examine the records and acts of any prior Trustee and may
retain or dispose of existing Trust assets, subject to the terms
hereof. The successor Trustee shall not be responsible for and
Company shall indemnify and defend the successor Trustee from any
claim or liability resulting from any action or inaction of any
prior Trustee or from any other past event, or any condition
existing at the time it becomes successor Trustee.
<PAGE>
SECTION 13
AMENDMENT OR TERMINATION
13.1. Amendment. This Trust Agreement may be amended by a
written instrument executed by Trustee and Company.
Notwithstanding the foregoing, no such amendment shall conflict
with the terms of the Plan or shall make the Trust revocable.
Notwithstanding the foregoing, after a Change in Control, and
prior to the time that all liabilities to all Participants and
all Beneficiaries under the Plan have been satisfied in full, no
amendment to this Trust Agreement shall be effective without the
affirmative, prior written concurrence of all Participants and
all Beneficiaries of deceased Participants (determined as of the
time any such amendment is to be adopted).
13.2. Termination. Subject to Company's powers set forth in
Sections 13.1 hereof, which may not be exercised to commence an
early termination of the Trust, the Trust shall not terminate
until the date on which all Participants and Beneficiaries are no
longer entitled to benefits pursuant to the terms of the Plan.
Notwithstanding the foregoing, Company may terminate the Trust
prior to the satisfaction of all such benefits if Company obtains
the prior written concurrence of Participants and Beneficiaries
of deceased Participants (determined as of the time of such
termination) whose accounts are credited with seventy-five
percent (75%) of all of the assets of the Trust. All assets
remaining a part of the Trust at its termination shall be
returned to Company.
SECTION 14
MISCELLANEOUS
14.1. Separability. Any provision of this Trust Agreement
prohibited by law shall be ineffective to the extent of any such
prohibition, without invalidating the remaining provisions
hereof.
14.2. Spendthrift Provision. Benefits payable to Participants
and Beneficiaries under this Trust Agreement may not be
anticipated, assigned (either at law or in equity), alienated,
pledged, encumbered or subjected to attachment, garnishment,
levy, execution or other legal or equitable process.
SECTION 15
EFFECTIVE DATE
The effective date of this Trust Agreement shall be February 11,
1994.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Trust Agreement to be executed as of the day and year first above
written.
INTER-REGIONAL
FINANCIAL GROUP, INC.
By: Connie L. Bush By: Daniel J. Reuss
Its: Vice President Its: Senior Vice
President
FIRST TRUST NATIONAL
ASSOCIATION
And: Beth A. Mega And: Dale Schumachar
Its: Vice President Its: Vice President
<PAGE>
EXHIBIT 11
<TABLE>
INTER-REGIONAL FINANCIAL GROUP, INC.
COMPUTATION OF NET EARNINGS PER SHARE
(Amounts in thousands, except per share data)
<CAPTION>
Year ended December 31,
1993 1992 1991
-----------------------------
<S> <C> <C> <C>
PRIMARY EARNINGS PER SHARE:
Earnings before extraordinary
items $47,649 $34,523 $21,130
Preferred stock dividend
requirement __ __ __
------ ------ ------
Earnings before extraordinary
items applicable to common
stock 47,649 34,523 21,130
Extraordinary items __ __ 6,611
------ ------ ------
Net earnings applicable to
common stock $47,649 $34,523 $27,741
====== ====== ======
Average number of common and
common equivalent shares
outstanding:
Average common shares
outstanding 8,113 8,302 8,112
Incentive stock options 292 217 194
Dilutive effect of preferred
stock __ 55 157
------ ------ ------
8,405 8,574 8,463
====== ====== ======
Primary earnings per share:
Before extraordinary items $5.67 $4.03 $2.50
Extraordinary items __ __ .78
------ ------ ------
Net $5.67 $4.03 $3.28
====== ====== ======
EARNINGS PER SHARE ASSUMING FULL
DILUTION:
Earnings before extraordinary
items $47,649 $34,523 $21,130
Interest added back assuming
conversion of convertible
subordinated debentures
(net of tax) __ 531 2,031
Preferred stock dividend
requirement __ __ __
------ ------ ------
Earnings before extraordinary
items for fully diluted
computation 47,649 35,054 23,161
Extraordinary items __ __ 6,611
------ ------ ------
Net earnings for fully diluted
computation $47,649 $35,054 $29,772
====== ====== ======
Average number of common and
common equivalent shares
outstanding:
Average common shares
outstanding 8,113 8,302 8,112
Dilutive effect of:
Incentive stock options 354 236 352
Preferred stock __ 55 157
Convertible subordinated
debentures __ 368 1,446
----- ------ ------
8,467 8,961 10,067
===== ====== ======
Fully diluted earnings per share:
Before extraordinary items $5.63 $3.91 $2.30
Extraordinary items __ __ .66
------ ------ ------
Net $5.63 $3.91 $2.96
====== ====== ======
</TABLE>
<PAGE>
EXHIBIT 22
<TABLE>
INTER-REGIONAL FINANCIAL GROUP, INC.
LIST OF SUBSIDIARIES
December 31, 1993
<CAPTION>
Percentage
of Voting
State in Which Securities
Name Incorporated Owned
- -----------------------------------------------------------------
<S> <C> <C>
Consolidated subsidiaries of Registrant:
Dain Bosworth Incorporated Delaware 100%
Dain Corporation Minnesota 100
Insight Investment Management, Inc. Minnesota 100
Rauscher Pierce Refsnes, Inc. Delaware 100
Regional Operations Group, Inc. Minnesota 100
Consolidated subsidiaries of Dain
Bosworth Incorporated:
Dain Equity Partners, Inc. Minnesota 100
Dain Kalman & Quail Municipal-
Nebraska, Inc. Nebraska 100
Consolidated subsidiary of Dain
Corporation:
Dain Properties, Inc. Minnesota 100
Consolidated subsidiaries of Rauscher
Pierce Refsnes, Inc.:
Rauscher Pierce Refsnes
Leasing, Inc. Arizona 100
RP Transportation Corp Delaware 100
RPR Mortgage Finance Corporation Texas 100
</TABLE>
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
Board of Directors
Inter-Regional Financial Group, Inc.:
We consent to the incorporation by reference in Registration
Statement No. 33-59426, Registration Statement No. 33-39261,
Registration Statement No. 33-39182, Registration Statement No.
33-25979, post-effective amendment No. 1 to Registration
Statement No. 33-13068, post-effective amendment No. 2 to
Registration Statement No. 33-10243, post-effective amendment No.
2 to Registration Statement No. 33-10242, post-effective
amendment No. 4 to Registration Statement No. 2-90634, post-
effective amendment No. 8 to Registration Statement No. 2-61514,
post-effective amendment No. 11 to Registration Statement No. 2-
57759, post-effective amendment No. 15 to Registration Statement
No. 2-53289 and post-effective amendment No. 16 to Registration
Statement No. 2-51150, on Form S-8 of Inter-Regional Financial
Group, Inc., and subsidiaries of our report dated February 1,
1994, relating to the consolidated balance sheets of Inter-
Regional Financial Group, Inc. and subsidiaries as of December
31, 1993 and 1992, and the consolidated statements of operations,
shareholders' equity and cash flows and related financial
statement schedules for each of the years in the three-year
period ended December 31, 1993, which report appears in the
December 31, 1993 Annual Report on Form 10-K of Inter-Regional
Financial Group, Inc.
KPMG Peat Marwick
Minneapolis, Minnesota
March 21, 1994
<PAGE>
Exhibit 24
POWER OF ATTORNEY
The undersigned hereby constitute and appoint IRVING WEISER and
DANIEL J. REUSS and each of them his true and lawful attorneys-
in-fact and agents, with full powers of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign the Annual Report on Form 10-K of
Inter-Regional Financial Group, Inc. for the fiscal year ending
December 31, 1993 and all amendments to such Annual Report on
Form 10-K, and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and
agents, each acting alone, full power and authority to do and
perform to all intents and purposes as he might or could do in
person, hereby ratifying all that said attorneys-in-fact and
agents, each acting alone, or his substitutes, may lawfully do or
cause to be done by virtue thereof.
SIGNATURE DATE
--------- ----
Susan S. Boren
- -------------------------------- March 6, 1994
Susan S. Boren
F. Gregory Fitz-Gerald
- -------------------------------- March 1, 1994
F. Gregory Fitz-Gerald
Richard D. McFarland
- -------------------------------- March 7, 1994
Richard D. McFarland
Lawrence Perlman
- -------------------------------- March 1, 1994
Lawrence Perlman
Daniel J. Reuss
- -------------------------------- March 1, 1994
Daniel J. Reuss
C.A. Rundell, Jr.
- -------------------------------- March 5, 1994
C.A. Rundell, Jr.
Robert L. Ryan
- -------------------------------- March 7, 1994
Robert L. Ryan
Arthur R. Schulze, Jr.
- -------------------------------- March 1, 1994
Arthur R. Schulze, Jr.
David A. Smith
- -------------------------------- March 14, 1994
David A. Smith
Irving Weiser
- -------------------------------- March 7, 1994
Irving Weiser
