ITEM 1. BUSINESS
GENERAL
Firstar Corporation is a registered bank holding company incorporated in Wisconsin in 1929. Firstar Corporation ("Firstar") is the largest bank holding company headquartered in Wisconsin. Firstar's 15 bank subsidiaries in Wisconsin had total assets of $10.0 billion at December 31, 1994. Its eleven Iowa banks, one Illinois bank and one Minnesota bank had total assets of approximately $2.7 billion, $959 million and $1.2 billion, respectively, as of December 31, 1994. Firstar has one bank in Phoenix, Arizona with total assets of $102 million. Firstar's principal subsidiary, Firstar Bank Milwaukee, N.A., had total assets of $6.0 billion which represented 40 percent of Firstar's consolidated assets at December 31, 1994, and is the largest commercial bank in Wisconsin.
Firstar provides banking services throughout Wisconsin and Iowa and in the Chicago, Minneapolis- St. Paul and Phoenix metropolitan areas. Its Wisconsin bank subsidiaries operate in 135 locations, with offices in eight of the ten largest metropolitan population centers of the state, including 74 offices in the Milwaukee metropolitan area. Its Iowa bank subsidiaries operate in 43 locations; its Illinois bank subsidiaries in 15 locations; its Minnesota bank subsidiary in 24 locations; its Arizona bank in three locations; and a trust subsidiary in Florida in two locations. Firstar's bank subsidiaries provide a broad range of financial services for companies based in Wisconsin, Iowa, Illinois and Minnesota, national business organizations, governmental entities and individuals. These commercial and consumer banking activities include accepting demand, time and savings deposits; making both secured and unsecured business and personal loans; and issuing and servicing credit cards. The bank subsidiaries also engage in correspondent banking and provide trust and investment management services to individual and corporate customers. Firstar Milwaukee, N.A., Firstar Bank Cedar Rapids, N.A. and Firstar Bank Madison, N.A. also conduct international banking services consisting of foreign trade financing, issuance and confirmation of letters of credit, funds collection and foreign exchange transactions. Nonbank subsidiaries provide retail brokerage services, trust and investment management services, residential mortgage banking activities, title insurance, business insurance, consumer and credit related insurance, and corporate computer and operational services.
At December 31, 1994, Firstar and its subsidiaries employed 7,680 full-time and 2,196 part-time employees, of which approximately 970 full-time employees are represented by a union under a collective bargaining agreement that expires on August 31, 1996. Management considers its relations with its employees to be good.
COMPETITION
Banking and bank-related services is a highly competitive business. Firstar's subsidiaries compete primarily in Wisconsin and the Midwestern United States. Firstar and its subsidiaries have numerous competitors, some of which are larger and have greater financial resources. Firstar competes with other commercial banks and financial intermediaries, such as savings banks, savings and loan associations, credit unions, mortgage companies, leasing companies and a variety of financial services and advisory companies located throughout the country.
SUPERVISION
Firstar's business activities as a bank holding company are regulated by the Federal Reserve Board under the Bank Holding Company Act of 1956 which imposes various requirements and restrictions on its operations. The activities of Firstar and those of its banking and nonbanking subsidiaries are limited to the business of banking and activities closely related or incidental to banking.
The business of banking is highly regulated, and there are various requirements and restrictions in the laws of the United States and the states in which the subsidiary banks operate including the requirement to maintain reserves against deposits and adequate capital to support their operations, restrictions on the nature
and amount of loans which may be made by the banks, restrictions relating to investment (including loans to and investments in affiliates), branching and other activities of the banks.
Firstar's subsidiary banks with a national charter are supervised and examined by the Comptroller of the Currency. The subsidiary banks with a state charter are supervised and examined by their respective state banking agency and either by the Federal Reserve if a member bank of the Federal Reserve or by the FDIC if a nonmember. All of the Firstar subsidiary banks are also subject to examination by the Federal Deposit Insurance Corporation.
In recent years Congress has enacted significant legislation which has substantially changed the federal deposit insurance system and the regulatory environment in which depository institutions and their holding companies operate. The Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), the Comprehensive Thrift and Bank Fraud Prosecution and Taxpayer Recovery Act of 1990 and the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") have significantly increased the enforcement powers of the federal regulatory agencies having supervisory authority over Firstar and its subsidiaries. Certain parts of such legislation increase the cost of doing business for depository institutions and their holding companies. FIRREA also provides that all commonly controlled FDIC insured depository institutions may be held liable for any loss incurred by the FDIC resulting from a failure of, or any assistance given by the FDIC, to any of such commonly controlled institutions. Federal regulatory agencies have implemented provisions of FDICIA with respect to taking prompt corrective action when a depository institution's capital falls to certain levels. Under the new rules, five capital categories have been established which range from "critically undercapitalized" to "well capitalized". Failure of a depository institution to maintain a capital level within the top two categories will result in specific actions from the federal regulatory agencies. These actions could include the inability to pay dividends, restricting new business activity, prohibiting bank acquisitions, asset growth limitations and other restrictions on a case by case basis.
In addition to the impact of regulation, commercial banks are affected significantly by the actions of the Federal Reserve Board as it attempts to control the money supply and credit availability in order to influence the economy. Changes to such monetary policies have had a significant effect on operating results of financial institutions in the past and are expected to have such an effect in the future; however, the effect of possible future changes in such policies on the business and operations of Firstar cannot be determined.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following is a list of all the executive officers (16) of Firstar as of December 31, 1994. All of these officers are elected annually by their respective boards of directors. All of the officers have been employed by Firstar and/or one or more of its subsidiaries during the past five years, except Mr. Schoenke, who was previously employed by another banking company and joined Firstar as an executive officer in 1990. There are no family relationships between any of the executive officers.
ITEM 2.

ITEM 2. PROPERTIES
On December 31, 1994, Firstar had 222 banking locations, of which 159 were owned and 63 were leased. All of these offices are considered by management to be well maintained and adequate for the purpose intended. See Note 7 of the Notes to Consolidated Financial Statements included under Item 8 of this document for further information on properties.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
Firstar and its subsidiaries are subject to various legal actions and proceedings in the normal course of business, some of which involve substantial claims for compensatory or punitive damages. Although litigation is subject to many uncertainties and the ultimate exposure with respect to these matters cannot be ascertained, management does not believe that the final outcome will have a material adverse effect on the financial condition of Firstar.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
See Item 6

ITEM 6. SELECTED FINANCIAL DATA
* excludes check kiting loss
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
HIGHLIGHTS
Firstar reported earnings in 1994 of $207.7 million, a 1.7% increase over the $204.3 million earned in 1993. On a per common share basis, 1994 net income increased 2.2% to $3.22 from $3.15 earned in 1993. In 1992, net income was $166.0 million, or $2.62 per common share.
While net income has increased in 1994, the effect of a higher stockholders' equity base reduced the return on equity in 1994. Return on average common equity declined to 16.97% in 1994 compared with 18.61% in 1993 and 17.43% in 1992. Firstar has measured its performance against a peer group of 30 other bank holding companies ranging in asset size from $10 billion to $25 billion. Firstar has placed within the top 25% of this group as measured by the return on equity for the past six years.
This slowdown in the momentum of improvement during 1994 reflects the impact of a $22 million pre-tax charge against earnings taken in the second quarter for a check kiting fraud. This loss reduced 1994 earnings per share by 20 cents. While this loss had an impact on Firstar's earning trends, Firstar's overall financial soundness remained unaffected.
Return on average assets for 1994 was 1.51% compared with 1.59% in 1993 and 1.36% in 1992.
Major factors affecting underlying earnings during 1994 were:
- Net interest margin declined to 5.03% in 1994 from 5.21% in 1993. During 1992 the margin was 5.27%.
- Strong loan growth of 11.1% offset the effects of the decline in margins, helping increase net interest revenue by 4.9%.
- The provision for loan losses was reduced further in 1994 reflecting the lower level of nonperforming assets and related net loan charge-offs.
- Growth in major fee revenue businesses continued, with trust and investment management fees up 7.0% and credit card revenue up 4.6% during 1994. These gains in fee revenue were, however, offset by reduced mortgage banking revenues as a result of a market driven contraction in origination volumes.
- Operating expenses declined by just under 1% during 1994 after excluding the check kiting loss.
- These factors combined to improve Firstar's efficiency ratio to 60.6% in 1994 compared to 62.6% in 1993 and 64.0% in 1992.
Further reductions in nonperforming assets were realized in 1994. Total nonperforming assets were $56.8 million at the end of the year, a reduction of 12.4% from year-end 1993. Nonperforming assets now represent .58% of total loans and other real estate.
Stockholders' equity increased to $1.31 billion at the end of 1994. Market capitalization was $1.77 billion. Capital strength, by all measures, remains strong. Firstar's capital ratios are in the top quartile of its peer group and it has the highest capital rating by its regulatory agency.
NET INTEREST REVENUE
Net interest revenue, which comprises interest and loan-related fees less interest expense, is the principal source of earnings for Firstar. Net interest revenue is affected by a number of factors including the level, pricing and maturity of earning assets and interest-bearing liabilities, interest rate fluctuations and asset quality. Net interest margin is net interest revenue expressed as a percentage of average earning assets. To permit comparisons, net interest revenue and margins in the accompanying discussion and tables have been adjusted to show tax-exempt income, such as interest on municipal securities and loans, on a taxable-equivalent basis. Table 1 shows the components of net interest revenue, net income and net interest margin for the last three years.
TABLE 1
CONDENSED INCOME STATEMENTS -- TAXABLE-EQUIVALENT BASIS
Net interest revenue increased 4.9% to $626.6 million during 1994. This follows a similar 4.7% increase in 1993. The growth in both years benefited from higher average earning asset balances, driven principally by continued strong loan growth. This positive impact was somewhat offset by a reduction in the net interest margin, particularly in 1994.
The net interest margin for 1994 was 5.03% compared with 5.21% in 1993 and 5.27% in 1992. The margin declined moderately from the record high levels of the prior two years. Interest rates increased dramatically during 1994 with the prime rate rising from 6.00% at the beginning of the year to 8.50% at year-end. Rates paid on fund sources increased by .14%, or 14 basis points, in 1994 as more reliance was put on higher cost purchased funds. On the asset side, higher rates earned on commercial loans was more than offset by declines in rates on consumer lending and the securities portfolio, reducing the overall yield on earning assets by five basis points. The impact of interest-free funds supporting earning assets was not a factor in 1994 as shown by the one basis point increase in margin attributable to these deposits. The level of earning assets supported by interest-free funds was 21.3% in 1994 compared with 21.8% in 1993 and 20.4% in 1992. The six basis point decline in net interest margin during 1993 resulted from the reduced benefit of interest-free funds partially offset by a modest increase in the interest spread reflecting the general decline in interest rates during that period. Firstar expects that further reductions in its net interest margin are likely as interest rates stabilize or
increase moderately from current levels. Firstar remains within the top quartile of its peer group with respect to net interest margin.
Foregone interest on nonperforming loans and other real estate reduced net interest revenue by $3.8 million in 1994, $4.6 million in 1993 and $8.3 million in 1992. This resulted in corresponding reductions in net interest margin of .03% in 1994 and .03% in 1993 and .05% in 1992. The nominal impact is a reflection of Firstar's continued low level of nonperforming assets.
Table 2 shows the components of interest revenue and expense along with changes related to volumes and rates. Total interest revenue increased by 7.9% to $967.0 million. This resulted from higher average earning assets, up 8.6%, which was partially offset by the slightly lower yield on earning assets. Interest income on commercial loans rose by 16.3% due to both higher balances and interest rates. Consumer loan interest, while up 4.5%, was impacted by the lower net interest rate which was 47 basis points less than 1993. This reduced rate on consumer loans reflects the refinancing activity and general lower rates available late in 1993. Securities income has declined as higher rate investments have matured and were replaced with securities with currently lower market yields. During 1993, total interest revenue declined by 3.6%, to $896.3 million. This resulted from lower overall interest rates, which was partially offset by the 5.7% increase in average earning assets. The rate received on earning assets declined from 8.58% in 1992 to 7.82% in 1993.
TABLE 2
ANALYSIS OF INTEREST REVENUE AND EXPENSE
- ------------ Calculations are computed on a taxable-equivalent basis using a tax rate of 35% in 1994 and 1993 and 34% in 1992.
The change attributable to both volume and rate has been allocated proportionately to the changes due to volume and rate.
Total interest expense increased by 13.9% in 1994, to $340.4 million. Interest expense on deposits increased modestly with the impact of deposit growth being offset by lower interest rates paid in most categories of deposits. The cost of short-term borrowed funds increased 175% with both higher usage of this funding source and increased interest rates. The interest rate on liabilities increased from 3.34% in 1993 to 3.48% in 1994. During 1993, total interest expense declined by 16.8% to a level of $298.9 million. The interest rates on liabilities was reduced from 4.16% in 1992 to 3.34% in 1993.
OTHER OPERATING REVENUE
Total other operating revenue amounted to $335.2 million, a decrease of $7.0 million or 2.1% from 1993. Excluding the impact of mortgage origination revenues, other operating revenue rose by 1.5% in 1994 and 10.3% in 1993. This growth reflects the continuing effort to emphasize non-interest revenue. This focus provides several benefits to Firstar. Much of Firstar's fee revenue is not subject to the fluctuations that are inherent in the interest rate cycle. Firstar's broad customer base provides opportunities for expanded revenues as the marketplace looks to financial institutions for services beyond traditional lending and deposit activities. Table 3 shows the composition of other operating revenue.
TABLE 3
ANALYSIS OF OTHER OPERATING REVENUE
Other operating revenue now represents 35% of Firstar's revenue. An industry measure of fee revenue prominence is the ratio of this revenue stream to average assets. During 1994 this ratio was 2.43% compared to 2.66% in 1993 and 2.46% in 1992. These figures place Firstar sixth among the 30 banking organizations with total assets of $10 billion to $25 billion.
Trust and investment management fees are the single largest source of fee revenue, contributing $117.9 million, over one-third of other operating revenue. This level represents a 7.0% growth in revenue in 1994 which in turn followed a 14.9% rise in the previous year. The development and addition of new business was a factor in both years. Additionally, the reduction in the market value of assets resulting from general market conditions, restricted the growth in revenue during 1994. Expanded services are being offered through Firstar's banking network. Additional marketing efforts are also being directed to institutional investors beyond the Midwest. The introduction of fifteen proprietary mutual funds and the serving as custodian/transfer agent for 175 publicly registered mutual funds have enhanced trust revenues. Trust assets under management increased by 1.9% during 1994 to $15.1 billion at the end of the year. Additional assets held in custody accounts were $38.5 billion.
Revenue from service charges on deposit accounts declined by 2.3% in 1994, to a level of $72.4 million. This reduction was primarily due to higher rate credits given to business customers for services, thus reducing
the level of cash payments necessary. The opposite trend was evident in 1993, where the lower rate environment generated increased cash payments for services and increased service charge revenue by 11.7%.
Credit card service revenues are the third largest source of fee revenue totaling $55.8 million during 1994, which was a 4.6% increase over 1993. This follows a 2.8% increase the previous year. The introduction of new credit card products and growth in merchant fee activity have aided in the revenue growth of the past two years. Firstar services 570,000 active card holders, has 33,300 merchant accounts and provides credit card programs to more than 750 financial institutions. This customer base, which covers the Upper Midwest and includes Wisconsin, Iowa, Illinois, Minnesota, Upper Michigan, Nebraska and the Dakotas, provides a market for the sale and expansion of other financial products.
Data processing fee income declined 5.5% in 1994 and 11.5% in 1993. A shrinking customer base due to continuing bank consolidations through mergers or acquisitions and conversions by smaller community banks to in-house data processing systems have acted to reduce revenues. Intense price competition has also occurred due to the shrinking market for sales and has affected revenue levels through pricing changes and some loss of customers.
Revenue from mortgage banking activities has fluctuated dramatically during the last three years as a result of the refinancing boom which peaked in 1993. Revenue from mortgage originations reached $19.0 million in 1993, an increase of $11.4 million over 1992 and then declined by $12.0 million during 1994. Mortgage origination volume was $1.5 billion in 1993 and declined by one third to $1.0 billion in 1994. Mortgage loan servicing revenue has shown continued increases during this period, increasing 50% in 1993 and 13% in 1994. Mortgage loans serviced for others were $2.5 billion at the end of 1994, a 25% increase from a year earlier. Firstar has expanded its mortgage banking activities through coordinated marketing efforts within Firstar's banking network.
The past two years saw continued growth in insurance activity, with a 11.7% increase in 1994 to $11.6 million, compared with a 23.3% increase during 1993. This line of business generates revenue from the sale of annuities and insurance products and represents an important element in Firstar's strategy to continually expand fee revenue.
Brokerage revenue declined by 20.3% during 1994 to $6.9 million, as a result of the generally unfavorable market conditions. This followed a very strong growth in the prior two years.
The remaining sources of other operating revenue, excluding securities transactions and other nonrecurring revenue, derive from a wide range of services and collectively increased by 4.1% in 1994 and 3.0% in 1993.
OTHER OPERATING EXPENSES
Total operating expenses increased 2.9% to $604.9 million in 1994 compared with an increase of 5.4% in 1993. Excluding the impact of a check kiting fraud, operating expenses declined by just under 1% during 1994. Information on the components of other operating expense is shown in Table 4.
TABLE 4 ANALYSIS OF OTHER OPERATING EXPENSE
Personnel costs, which include salaries and fringe benefits, are the largest component of operating expenses, representing more than one-half of operating costs. This expense rose by 2.9% in 1994 compared with 10.2% in 1993. Salaries rose by 3.2% in 1994 and 8.2% in 1993. The salary increase during 1994 was limited to the effect of merit increases. Full-time equivalent employees remained, for the most part, level during the year. One-half of the 1993 increase in salaries was attributed to bank acquisitions.
Employee benefit costs rose by only 1.2% in 1994 after increasing 19.8% in 1993. Firstar adopted Statement of Financial Accounting Standards No. 106, "Accounting for Postretirement Benefits Other Than Pensions" in 1993. The statement requires employers to recognize postretirement benefits on an accrual basis over employee service periods, as contrasted to the expensed-as-incurred method of accounting. Excluding the impact of Statement No. 106, which increased costs by $7.0 million, employee benefit costs rose by 5.7% during 1993.
Equipment expense increased by 2.3% in 1994 compared to a decline of 1.2% in 1993. Firstar continues to invest in upgraded data processing equipment, ensuring that its data processing capabilities are up-to-date in order to provide quality service in a cost effective manner.
Net occupancy expense declined by 5.8% in 1994 reflecting the impact of a partial acceleration of a deferred gain on a building sale of $2.1 million in 1994. Also affecting comparison between years was the costs associated with office closings of $2.2 million in 1993 and $1.5 million in 1992.
FDIC insurance is an uncontrollable cost, with the premium established by the federal regulatory agency. The FDIC sets varying premium amounts based upon capitalization levels and soundness criteria. Firstar's capital strength has permitted payments at the lowest rate levels. The FDIC is currently considering reducing the premium levels which could result in a significant reduction in Firstar's cost of FDIC insurance.
The amortization of intangibles includes amounts associated with goodwill, core deposit intangibles and purchased mortgage loan servicing rights. During 1993 and 1992, additional amortization of mortgage servicing rights was taken due to the high volume of the underlying mortgage loans which were refinanced. Expense associated with the amortization of mortgage servicing rights was $.7 million in 1994, $5.2 million in 1993 and $8.3 million in 1992. This expense fluctuates with changing interest rates and loan prepayment trends. The remaining unamortized mortgage loan servicing rights were $4.7 million at the end of 1994.
Net other real estate operations produced income of $1.5 million in 1994 as a result of gains realized on the sale of properties. This contrasts to net expenses of $2.1 million in 1993 and $4.3 million in 1992. The current low level of other real estate held should continue to be reflected in reduced expenses.
The $22 million check kiting loss was recorded in the second quarter of 1994 when it was discovered that two affiliated commercial customers were involved in a series of fraudulent check transactions. The customers are in bankruptcy proceedings and although Firstar is pursuing its legal rights, there is no assurance of any recovery.
All other expenses include a wide range of items and were decreased by 3.2% in 1994 and increased by less than 1% in 1993.
A measure of the success in managing operating expense is expressed in the ratio of expense to revenue and is referred to as the efficiency ratio. The objective is to reduce this ratio through revenue growth, cost control or a combination of both. Excluding the check kiting loss, this ratio was 60.6% in 1994, 62.6% in 1993 and 64.0% in 1992 and placed Firstar above the median level of its peer companies. Firstar continues to seek ways to improve its efficiency with a goal of operating at a 60% level in 1995.
PROVISIONS FOR LOAN LOSSES
The provision for loan losses is used to cover actual loan losses and to adjust the size of the reserve relative to the amount and quality of loans. In determining the adequacy of the reserve, management considers the financial strength of borrowers, loan collateral, current and anticipated economic conditions and other factors. The 1994 provision for loan losses was $17.1 million, compared with $24.6 million in 1993 and $44.8 million in 1992. The reduced level of nonperforming assets and lower net charge-offs have permitted Firstar to reduce its provision for loan losses.
INCOME TAXES
Income tax expense was $103.0 million in 1994, compared to $93.7 million in 1993 and $71.5 million in 1992. The effective tax rate was 33.1% in 1994, 31.4% in 1993 and 30.1% in 1992. The effective tax rate rose in 1994 as compared to 1993 due to a reduction in tax-exempt municipal interest income, an increase in state tax expense and the benefit of the adoption of Statement No. 109 in 1993. The effective tax rate rose in 1993 compared to 1992 due to a 1% increase in the federal corporate tax rate.
BALANCE SHEET ANALYSIS
Changes in the balance sheet of a financial institution reflect both the forces of the marketplace and the company's response to these conditions. Firstar's strategy in managing balance sheet growth is based upon the goals of enhancing soundness and providing a broad range of services for customers.
Total assets at the end of 1994 reached $15.1 billion, an increase of $1.3 billion or 9.5% over a year earlier. Approximately one third of this increase was attributable to a bank acquisition. Average total assets for 1994 were $13.8 billion, an increase of 7.3% over 1993.
Table 5 shows the geographic distribution of Firstar's banking assets. Firstar has expanded beyond its Wisconsin base through select acquisitions. Assets outside of Wisconsin now represent 34% of consolidated assets. Firstar's acquisition activity will focus on attractive markets in the upper Midwest that will complement the existing Firstar banking network. The combination of internal growth and acquisitions provides new opportunities to build and diversify Firstar's earnings within an economically stable region.
TABLE 5
SUBSIDIARY AVERAGE ASSETS
- ------------ Assets have been adjusted for intercompany amounts.
Significant acquisition activity occurred during 1994. Firstar announced three merger agreements in the third quarter of the year which will add to its existing franchises.
The merger with First Colonial Bankshares Corporation, a $1.8 billion bank holding company with 30 offices in the Chicago area was announced in July. The transaction was completed on January 31, 1995, and, along with its existing Illinois locations, gives Firstar a $3 billion banking franchise with 45 offices in the Chicago area market.
In August, a second major acquisition was announced. This, with Investors Bank Corp., a $1.1 billion thrift with 12 offices and a large mortgage banking business in the Minneapolis/St. Paul market, will double both the size of Firstar's Minnesota banking operations and corporate wide mortgage banking business. This transaction should be completed in the second quarter of 1995.
A third pending acquisition will add $80 million of assets to Firstar Bank Davenport through the acquisition of First Moline Financial Corp. of Moline, Illinois. Also, the previously announced acquisition of First Southeast Banking Corporation was completed in the fourth quarter of 1994, adding over $400 million of assets to Firstar's southeast Wisconsin banking franchise.
LOANS AND INVESTMENTS
Earning assets, shown in Table 6, averaged $12.4 billion, an increase of $988 million, or 8.6% over 1993. Loans, the largest category of earning assets, represented 74.4% of earning assets as compared with 72.7% in 1993. On average, loans totaled $9.3 billion, an increase of $928 million or 11.1% over 1993. Excluding the impact of loans added through bank acquisitions, average loans grew by 10.0%. This followed a 5.1% increase in average loans in 1993. This growth was especially strong in the Wisconsin (excluding the lead bank) and Minnesota markets which recorded loan growth in excess of 18%. The Iowa banks and the lead bank located in Milwaukee showed loan growth in the 7-8% range. Firstar expects this trend of increased loan demand to continue into 1995.
TABLE 6 AVERAGE EARNING ASSETS
Commercial loans, which account for 60% of the loan portfolio, increased by $583 million, or 11.8% on average, to $5.5 billion during 1994. Excluding bank acquisitions which occurred during the past two years, commercial loans have increased by 10.4%. This follows the 7.0% growth achieved in 1993.
Consumer loans averaged $3.7 billion, an increase of $345 million or 10.2% over 1993. Excluding the affect of acquisitions, consumer loans rose by 9.3%. Increased levels of mortgage loans and installment debt aided in this growth. The lower interest rates available in 1993 and early 1994 prompted increased consumer debt assumption. Credit card balances reversed the previous downward trend in 1994, increasing by 1.5% in 1994. Firstar's new cards offering variable rates and rebates have been well accepted and should result in continued loan growth.
Firstar securitized $290 million of residential mortgage loans at the end of 1994. These loans, now carrying a U.S. agency guarantee, are included in securities held to maturity. This action gives Firstar increased liquidity through the ability to borrow funds using repurchase agreements collateralized by the securitized loans.
Total securities, including both held to maturity and available for sale securities, represent 24% of earning assets. They averaged $3.0 billion during 1994, an increase of $31 million, or 1.1% over 1993. Tables 7 and 8 show the maturity range and changing mix of the investment portfolio. The average maturity of the portfolio was 3.3 years as of the end of 1994.
TABLE 7 MATURITY RANGE AND AVERAGE YIELD OF SECURITIES
- ------------ Rates are calculated on a taxable-equivalent basis using a tax rate of 35%. The maturity information on mortgage-backed obligations is based on anticipated payments.
TABLE 8 SECURITIES
Short-term investments, which include interest-bearing deposits with banks, trading account securities, and federal funds sold and resale agreements, averaged $227 million in 1994, an increase of $29 million, or 14.6%, from a year earlier.
FUND SOURCES
Average fund sources, consisting of deposits and borrowed funds, increased by $838 million, or 7.3%, to $12.3 billion in 1994. Total deposits averaged $10.7 billion, an increase of $142 million, or 1.3%. Bank acquisitions accounted for most of this increase in average deposits. Table 9 shows the composition of Firstar's fund sources.
TABLE 9
AVERAGE FUND SOURCES
Core deposits, which include transaction accounts and other stable time deposits, are Firstar's prime source of funding. These deposits averaged $10.2 billion in 1994, essentially level with 1993. Increased competition for consumer deposits and heightened consumer sensitivity to interest rates have limited Firstar's core deposit growth. Increased emphasis will be placed on generating more core deposits in 1995 through competitive pricing of deposit products.
More reliance was placed on purchased fund sources during 1994 to support the growth in loan balances. Other time deposits, primarily certificates of deposit over $100,000, increased $120 million, to $450 million on average. Short-term borrowed funds were increased by $703 million to an average level of $1.5 billion.
CREDIT RISK MANAGEMENT
Since the mid-1980's, credit management has been refined through procedural and personnel changes. Emphasis on credit quality standards and diversification of risk have been key strategies. The benefits of this program are seen in the significant reductions in nonperforming assets and overall credit quality achieved during the past several years. During this period nonperforming assets as a percentage of loans and other real estate have declined from 1.87% in 1990 to .58% at the end of 1994. Put in perspective of Firstar's peer group of banks, this placed Firstar ninth within the group for asset quality.
Nonperforming assets consist of loans that are not accruing interest, loans with renegotiated credit terms and collateral acquired in settlement of nonperforming loans. The composition of these assets is shown in Table 10. These nonperforming assets totaled $56.8 million at December 31, 1994 and represented .58% of Firstar's $9.8 billion of loans and other real estate. This is a $8.1 million, or 12.4%, reduction from a year earlier.
TABLE 10
NONPERFORMING ASSETS AND PAST DUE LOANS
- ------------ * Nonperforming loans which were included in other real estate under "in substance foreclosure" accounting rules were $10.5 million, $10.5 million, and $5.0 million at December 31, 1992, 1991, and 1990, respectively. Such "in substance foreclosed" loans were reclassified to loans in 1993.
Commercial real estate related nonperforming assets totaled $26.9 million at the end of 1994, a reduction of 26% from a year earlier. These nonperforming assets represented 1.17% of their respective loan category. Firstar experienced an increase in real estate related nonperforming assets several years ago, although to a much lesser extent than many other financial institutions. These assets reached a high of $93.7 million at the end of 1990. As can be seen, significant progress has been made in reducing this category of nonperforming assets.
The remaining commercial loan portfolio had a nonperforming asset ratio of .67% compared to .66% a year earlier. This is reflective of the overall consistent financial strength of Firstar's commercial borrowers.
Nonperforming consumer loans have also declined from previously higher levels. At year-end 1994, they represented a very minimal .14% of outstandings.
While further reductions of nonperforming assets are not likely, the attainment of this low level is an indication of Firstar's overall high asset quality.
Loans ninety days or more past due on December 31, 1994, totaled $24.1 million, compared with $21.8 million a year earlier. These loans are on a full accrual basis and are judged by management to be collectible in full. In addition, Firstar had $22 million of loans at December 31, 1994, on which interest is accruing, but, because of existing economic conditions or circumstances of the borrower, doubt exists as to the ability of the borrower to comply with the present loan terms. While these loans are identified as requiring additional monitoring, they do not necessarily represent future nonperforming assets.
Additional indicators of asset quality can be found in the geographic distribution, industry diversification and type of lending represented in the loan portfolio. Credit policies have been changed over the past several years to reduce vulnerability to potential adverse economic trends. Marketing efforts have been directed to Firstar's primary market segments which are consumer, small business and middle market customers in communities where Firstar banks are located. This emphasis on smaller, locally based credits brings with it a diversified group of customers without any significant industry concentration. Firstar does not participate in any significant syndicated lending or highly leveraged transactions.
Commercial real estate lending includes construction loans, income property loans and other commercial loans where real estate is involved as collateral. Midwestern real estate did not experience the rapid price appreciation that occurred in other areas, spurring over-investment in development projects and subsequent collapse of demand. Consequently, the earlier recessionary economy has not put as much pressure on some of Firstar's borrowers. Policy limits control this type of lending. Approximately sixty percent of these loans represent owner-occupied commercial properties. The remaining portion involves loans to developers and investors. The average loan size in the developer portion of the portfolio was $250,000 and reflects the regional focus and customer diversification of the portfolio.
The reserve for loan losses is reviewed and adjusted quarterly, subject to evaluation of economic conditions and expectations, historical experience and the risk rating of individual loans. Table 11 shows the activity affecting the reserve for loan losses for the last five years. The reserve totaled $172.6 million at the end of 1994, compared with $174.9 million a year earlier.
Total net charge-offs of $22.9 million represented .25% of average loans during 1994, the same level as experienced in 1993.
As a regional financial institution, Firstar lends to a diversified group of Midwestern borrowers and, to a much lesser degree, to national companies with Midwest operations. Net charge-offs in this commercial segment of the portfolio were $10.8 million, or .32% of average loans. This compares with $6.1 million of net charge-offs in 1993, representing .20% of loans. This charge-off level, while up from the prior year, remains lower than earlier years.
Commercial real estate loans experienced a net recovery of prior years' charge-offs in 1994 of $732,000. This compares with nominal net charge-offs of .03% in 1993. These charge-off levels are unusually low and Firstar would expect that commercial real estate charge-offs will in the long run approximate the overall charge-off rate of the other commercial lending areas.
TABLE 11
RESERVE FOR LOAN LOSSES
Consumer lending includes loans to individuals in communities served by Firstar's banks. These loans include both open-ended credit arrangements subject to an overall limit per customer, such as credit card and home equity loans, and closed-end loans subject to specific contractual payment schedules, such as installment loans and residential mortgages. Consumer net charge-offs were $13.4 million in 1994, compared with $14.6 million in 1993 and $19.1 million in 1992. The net charge-offs of .36% in 1994 compares with .43% and .61% in 1993 and 1992, respectively. Credit card net charge-offs have declined from 2.90% in 1991 to 1.93% during 1994 reflecting both lower charge-offs and higher recovery rates. This progressive reduction in
consumer charge-off levels reinforces the conclusion about the economic strength of Firstar's marketplace. Consumer charge-offs are expected to remain at or near this level.
TABLE 12
COMPOSITION OF LOANS
- ------------ * Comparable data not available
LIQUIDITY AND INTEREST RATE RISK MANAGEMENT
Two objectives of Firstar's asset and liability management strategy include the maintenance of appropriate liquidity and management of interest rate risk. Liquidity management aligns sources and uses of funds to meet the cash flow requirements of customers and Firstar. Interest rate risk management seeks to generate growth in net interest revenue and manage exposure to risks associated with interest rate movements and provide for acceptable and predictable results. Although conceptually distinct, liquidity and interest rate sensitivity must be managed together since action taken with respect to one often influences the other.
The scheduled maturity of loans can provide a source of asset liquidity. Table 13 shows the range of loan maturities as of December 31, 1994. Short-term investments, such as federal funds, repurchase agreements and interest-bearing deposits, are another source of liquidity. These investments stood at $376 million at the end of 1994. The securities portfolio provides liquidity through scheduled maturities, as shown in Table 7, and the ability to use these securities in borrowing transactions. Additionally, those securities designated as available for sale were $51 million at the end of 1994 and can be sold to meet liquidity needs.
TABLE 13
MATURITY DISTRIBUTION OF LOANS
- ------------ The maturity is based upon contractual terms and Firstar may however extend the maturity at prevailing rates and terms in the normal course of business.
Of the above loans due after one year, $4,147,088,000 have predetermined interest rates and $2,019,961,000 have floating or adjustable interest rates.
TABLE 14
MATURITY RANGE OF TIME DEPOSITS
The requirement of liquidity is diminished by the predominance of core deposits, which account for 83% of Firstar's fund sources. Stable core deposits do not require significant amounts of liquidity to meet the net withdrawal demands of customers on a short or intermediate term basis. Other sources of liquidity are short-term borrowed funds and time deposits which totaled $2.7 billion at the end of 1994. Firstar's ability to refinance maturing amounts and, when necessary, increase this funding base is a significant factor in its liquidity management.
The absolute level and volatility of interest rates can have a significant impact on earnings. The objective of interest rate risk management is to identify and manage the sensitivity of net interest revenue to changing interest rates. Firstar uses computer simulation modeling as its primary method of quantifying and evaluating interest rate risk. Simulation modeling is performed at least quarterly and is used to quantify the impact on net interest revenue of various assumptions about interest rate and balance sheet changes and the use of off-balance sheet derivatives and financial instruments. The use of simulation modeling also enables Firstar to develop and test alternative asset and liability management strategies. Interest rate risk and the results of the simulation modeling is reviewed quarterly by bank, regional and corporate committees who assess the interest rate risk position and approve corresponding strategies. The objective of Firstar's asset liability management policy is to maintain adequate capital and liquidity and manage interest rate risk to produce an acceptable level of net interest revenue. Firstar's guideline is to employ an asset liability management strategy which limits the potential impact of projected interest rate changes to 5% of net income over the subsequent four quarters. In the most recent simulation, which excludes pending acquisitions, net interest revenue was forecast for 1995 under four interest rate scenarios. First, if current rates continued unchanged at the fourth quarter 1994 level with a prime rate of 8.50%, and then under most likely, high and low interest rate scenarios in which the prime rate changes to 9.25%, 10.50% and 7.00% respectively, by the fourth quarter of 1995.
Compared to 1994 net interest revenue in 1995 would increase by $21 million if rates in the fourth quarter of 1994 remained unchanged throughout 1995. Under the most likely and low scenarios, net interest revenue in 1995 would increase by $9 million and $22 million, respectively, compared to 1994. Under the high scenario, net interest revenue would decline by $9 million compared to 1994.
The simulation model is supplemented with a tool used in the banking industry for measurement of interest rate risk known as the gap analysis. This measures the difference between assets and liabilities repricing or maturing within specified time periods. The gap analysis does however, have some limitations such as not reflecting the magnitude which assets or liabilities may reprice within a given interest rate scenario. A positive gap indicates that there are more rate sensitive assets than rate sensitive liabilities repricing within a given time frame. A positive gap would generally imply a favorable impact on net income in periods of rising rates. Conversely, a negative gap indicates a liability sensitive position. Table 15 shows Firstar's interest sensitivity under a traditional gap approach.
While Firstar believes the above assumptions for the gap analysis and simulations are reasonable, actual interest rates and other factors could be significantly different from those assumed. Such differences could produce actual results which are different from projected results and the differences could be significant.
TABLE 15
ASSET AND LIABILITY INTEREST SENSITIVITY
Firstar seeks to manage interest rate risk by adjusting the pricing and levels of assets and liabilities along with the use of off-balance sheet derivative financial instruments. Firstar enters into interest rate swaps and interest rate caps and floors as part of this process. These derivative instruments synthetically alter the repricing characteristics of designated assets and liabilities. Additional information on derivative financial instruments are included in Notes 17 and 18 to the Consolidated Financial Statements.
Firstar's off-balance sheet financial derivative portfolio has a notional value of $1.7 billion as of December 31, 1994. During 1993 and early 1994, Firstar's simulation modeling indicated a risk to net interest revenue in a falling rate environment. Under this scenario income on variable rate loans would be reduced and not matched by corresponding reductions in the cost of deposits being used to fund these loans. Such deposits, savings passbook, interest bearing transactions and money market accounts were deemed to have already reached their lowest cost point based on competitive considerations. Consequently, Firstar, in 1993 and early 1994, entered into approximately $1.3 billion of new off-balance sheet financial derivative instruments to mitigate this risk. Interest rates have subsequently increased and while Firstar is currently a net payor on the instruments, it is also realizing an increased net yield on the designated hedged assets and liabilities.
Net cash flows of off-balance sheet derivative instruments used to manage interest rate risk contributed $930 thousand to net interest revenue during 1994 compared with $5.7 million in 1993 and $8.8 million in 1992. Expressed in terms of net interest margin, the financial derivative portfolio had no impact in 1994 compared with .05% in 1993 and .09% in 1992. Using the most likely interest rate scenario, it is expected that derivative financial instruments will result in a reduction of net interest margin of .10% in 1995.
Capital
Total stockholders' equity increased 13.0% to $1.31 billion as of December 31, 1994. Stockholders' equity represented 8.65% of total assets at the end of 1994 compared to 8.38% a year earlier.
Firstar redeemed its adjustable rate preferred stock at the end of 1993 at a price of $103 per share, or $51.5 million. This action removed a higher cost equity component.
Dividends paid to common stockholders totaled $75.1 million, or $1.16 per share, a 16% increase over 1993. This represented a 36% payout of net income for 1994. It is Firstar's target to maintain a dividend payout level approximately equal to the median of its peer group.
Bank regulatory agencies have established capital adequacy standards which are used extensively in their monitoring and control of the industry. These standards relate capital to level of risk by assigning different weightings to assets and certain off-balance sheet activity. Capital is measured by two risk-based ratios: Tier I capital and total capital, which includes Tier II capital. The rules require that companies have minimum ratios of 4% and 8% for Tier I and total capital, respectively. As of December 31, 1994, Firstar had Tier I capital of 11.68% and total capital of 13.46%, significantly exceeding regulatory minimum standards. The components of these capital levels are shown in Table 16.
Additionally, a Tier I leverage ratio is also used by bank regulators as another measure of capital strength. This ratio compares Tier I capital to total reported assets reduced by goodwill. The regulatory minimum level of this ratio is 3%, and it acts as a constraint on the degree to which a company can leverage its equity base. Firstar's Tier I leverage ratio was 8.58% at December 31, 1994.
The Federal Deposit Insurance Corporation Improvement Act of 1991 provided additional guidelines that considers capital levels and other factors. The guidelines established five supervisory groupings of capital adequacy. Firstar is considered "well capitalized" which is the highest group.
Maintaining a strong capital position is important to Firstar's long-term strategies which emphasize soundness, profitability and growth. Higher capital levels contribute to overall financial soundness as a cushion against cyclical economic trends which can effect the banking industry. Strong capital levels also will permit future growth through both internal asset generation and bank acquisitions.
TABLE 16
CAPITAL COMPONENTS AND RATIOS
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FIRSTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- ------------ The average balances are not covered by the Independent Auditors' Report.
See accompanying notes to consolidated financial statements.
FIRSTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
See accompanying notes to consolidated financial statements.
FIRSTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
See accompanying notes to consolidated financial statements.
FIRSTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
See accompanying notes to consolidated financial statements.
FIRSTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies of Firstar Corporation and its subsidiaries are summarized as follows:
Principles of consolidation--The consolidated financial statements include the accounts of Firstar and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Results of operations of companies purchased are included from the date of acquisition. Financial statements have been restated to include companies acquired under pooling of interests when material. Certain prior year amounts have been reclassified to conform to current year classifications.
Securities--Purchases of securities that are made with the positive intent and ability to hold them to maturity are carried at cost, adjusted for amortization of premium and accretion of discount using a level yield method. Securities to be held for indefinite periods of time and not intended to be held to maturity or on a long-term basis are classified as available for sale and carried at market value. Valuation adjustments are recorded as an adjustment to stockholders' equity. Securities held for indefinite periods of time may include securities that management intends to use as part of its asset/liability management strategy or have been acquired in business acquisitions and are designated to be sold. Gains or losses on sales of securities are computed on the basis of specific identification of the adjusted cost of each security. Trading securities are carried at market. Valuation adjustments are included in other revenue in the consolidated statements of income.
Loans--Loans, which include lease financing receivables, are stated at the principal amount. Interest is accrued on all loans not discounted by applying the interest rate to the amount outstanding. On discounted loans, income is recognized on a basis which results in approximately level rates of return over the term of the loans. Loan origination and commitment fees and certain direct loan origination costs are being deferred where material and the net amount amortized as an adjustment of the related loans' yield. These amounts are being amortized over the contractual life of the related loans. Where it is not reasonable to expect that income will be realized, accrual of income ceases and these loans are placed on a "cash basis" for purposes of income recognition. Loans upon which foreclosure action is commenced or for which borrowers have begun bankruptcy proceedings are reviewed individually as to continuation of interest accrual. Mortgage loans held for sale are carried at the lower of aggregate cost or market, after consideration of related loan sale commitments.
Reserve for loan losses--The reserve for loan losses is maintained at a level adequate to provide for potential loan losses through charges to operating expense. The reserve is based upon a continuing review of loans which includes consideration of actual net loan loss experience, changes in the size and character of the loan portfolio, identification of problem situations which may affect the borrowers' ability to repay and evaluation of current economic conditions. Loan losses are recognized through charges to the reserve. Installment and credit card loan losses are charged to the reserve based upon fixed delinquency periods. All other loans are evaluated individually and charged to the reserve to the extent that outstanding principal balances are deemed uncollectible. Any subsequent recoveries are added to the reserve.
Other Real Estate--Other real estate, the balance of which is included in other assets, includes primarily properties acquired through loan foreclosure proceedings or acceptance of deeds in lieu of foreclosure. These properties are recorded at the lower of the carrying value of the related loans or the fair market value of the real estate acquired less the estimated costs to sell the real estate. Initial valuation adjustments, if any, are charged against the reserve for loan losses. Subsequent reevaluations of the properties, which indicate reduced value, are recognized through charges to operating expense. Revenues and expenditures related to holding and operating these properties are included in other operating expense.
Bank premises and equipment--Bank premises and equipment are stated at cost less depreciation, which has been accumulated on the straight-line basis.
Intangible assets--Intangible assets attributable to the value of core deposits and goodwill acquired are included in other assets and are amortized over fifteen to twenty-five years, on a straight-line basis. The value of mortgage servicing rights acquired is amortized in relation to the servicing revenue expected to be earned. Firstar periodically evaluates the carrying value and remaining amortization periods of intangible assets for impairment. Adjustments are recorded when the benefit of the intangible asset decreases due to disposition of branches or deposits with regard to goodwill and core deposit premium, and prepayments of serviced loans for purchased mortgage servicing rights.
Income taxes--Firstar and its subsidiaries file a consolidated federal income tax return. The effect of items of income and expense that are recognized for financial reporting purposes in periods other than those in which they are recognized for tax purposes are reflected as a current or deferred tax asset or liability based on current tax laws. Accordingly, income taxes provided in the consolidated statements of income include charges or credits for deferred income taxes related to temporary differences.
Foreign currency transactions--Monetary assets and liabilities recorded in foreign currencies are translated at the rate of exchange in effect at each year-end. Income statement items are translated monthly using the average rate for the month. Firstar enters into forward exchange contracts on behalf of its customers and hedges its risk by entering into offsetting transactions with other counterparties. The fair value of these transactions are included in other assets and liabilities and the related gain or loss is recorded in other revenue.
Cash and cash equivalents--For purposes of the consolidated statements of cash flows, cash and cash equivalents are considered to include the balance sheet caption cash and due from banks.
Derivative and other financial instruments--Firstar enters into interest rate swaps and other financial instruments to manage interest rate risks arising from financial assets and financial liabilities and also as an intermediary for transactions with its customers. Interest rate instruments entered into as an intermediary are accounted for as trading instruments and are recorded in the balance sheet at fair value. Realized and unrealized changes in fair values are recognized in other operating revenue.
Amounts receivable or payable under financial instruments used to manage interest rate risks are recognized as interest income or expense using the accrual method. Gains and losses on financial instruments qualifying as hedges of existing assets or liabilities are included in the carrying amount of those assets and liabilities. Gains and losses on early termination of interest rate swaps are included in the carrying amount of the related loan or debt and amortized as yield adjustments over the remaining term of the loan or debt. Fees paid or received in connection with interest rate floors and caps are deferred and amortized over the life of the instrument.
Income per common share--Net income per common share is based on the weighted average number of shares of common stock outstanding during each year, after giving effect to common stock splits and the amortization of restricted stock. The weighted average shares were 64,611,000 in 1994, 63,747,000 in 1993 and 61,879,000 in 1992. For calculation purposes, earnings are reduced by preferred stock dividends. Common stock equivalents are not significant in any year presented.
NOTE 2. MERGERS AND ACQUISITIONS
The following table summarizes completed acquisitions:
The bank acquisitions shown above, accounted for as pooling of interests, were not material to prior years' reported operating results and, accordingly, previously reported results have not been restated.
On January 31, 1995, Firstar Corporation completed its merger with First Colonial Bankshares Corporation in a transaction accounted for as a pooling of interests. Firstar Corporation issued .7725 shares of Firstar common stock for each share of First Colonial Bankshares Corporation common stock. The total number of shares of Firstar common stock issued was approximately 7,700,000 shares.
A summary of unaudited pro forma financial information giving effect to the merger with First Colonial Bankshares Corporation is shown below. The unaudited financial information is not indicative of the results that would have been realized had the entities been a single company during these periods, nor is it indicative of the actual results the combined company will report in the future. Firstar will present restated financial statements to reflect this transaction beginning with the fiscal quarter ended March 31, 1995.
In 1994, Firstar Corporation announced a merger agreement with Investors Bank Corp., a $1.1 billion thrift holding company in Wayzata, MN. The transaction will be accounted for as a pooling of interests with the issuance of approximately 3,000,000 shares of Firstar stock.
In 1994, Firstar Corporation announced a merger agreement with First Moline Financial Corporation, an $80 million thrift holding company in Moline, IL. The transaction will be accounted for as a purchase with the issuance of approximately 300,000 shares of Firstar stock.
NOTE 3. INTANGIBLE ASSETS
Intangible assets, net of accumulated amortization, are summarized as follows:
NOTE 4. SECURITIES
The amortized cost and approximate market values of securities are as follows:
The amortized cost and approximate market value of securities at December 31, 1994, by contractual maturity, are shown below. Maturities of mortgage backed obligations were estimated based on anticipated payments.
Gross gains of $78,000, $232,000 and $1,106,000 and gross losses of $2,000, $50,000 and $125,000 were realized on securities sales in 1994, 1993 and 1992, respectively.
The amortized cost of securities pledged to secure public or trust deposits, securities sold under repurchase agreements and for other purposes as required or permitted by law was $806,461,000 at December 31, 1994 and $712,696,000 at December 31, 1993.
NOTE 5. LOANS
The composition of loans, including lease financing receivables, is summarized below. Loans are presented net of unearned discount which amounted to $17,989,000 and $10,938,000 at December 31, 1994 and 1993, respectively. Commercial loans pledged to secure public deposits were $5,526,000 on December 31, 1994 and $15,444,000 on December 31, 1993. Firstar serviced $2,551 million, $2,045 million and $1,672 million of mortgage loans for other investors as of December 31, 1994, 1993 and 1992, respectively. Residential mortgage loans held for resale were $22,511,000 and $215,950,000 on December 31, 1994 and 1993, respectively.
Loans on which income is recognized only as cash payments are received or is accrued at less than the original contract rate are summarized below.
The effect of nonperforming loans on interest revenue was as follows:
Certain executive officers, directors, shareholders, and their associates of Firstar and significant subsidiaries are loan customers of the banking subsidiaries. Loans outstanding to such parties were $101.1 million on December 31, 1994 and $109.3 million on December 31, 1993. During 1994 new loans of $16.5 million were made and loan payments of $24.7 million were received. These loans were made in the ordinary course of business and on substantially the same terms as those prevailing for comparable transactions with other persons.
NOTE 6. RESERVE FOR LOAN LOSSES
An analysis of the reserve for loan losses is as follows:
The Financial Accounting Standards Board issued Statement No. 114, "Accounting by Creditors for Impairment of a Loan", which is effective in 1995. The Statement established procedures for determining the appropriate reserve for loan losses for loans deemed impaired. The calculation of reserve levels would be based upon the discounted present value of expected cash flows received from the debtor or other measures of value such as market prices or collateral values. This statement was adopted January 1, 1995 and did not have any significant impact on the current level of the reserve for loan losses and is not expected to effect 1995 operating results.
NOTE 7. BANK PREMISES AND EQUIPMENT
Bank premises and equipment are summarized as follows:
Depreciation charged to other operating expense amounted to $34,187,000, $34,385,000 and $33,418,000 in 1994, 1993 and 1992, respectively. Rental expense for bank premises and equipment amounted to $30,045,000, $30,079,000 and $28,843,000 in 1994, 1993 and 1992, respectively. Contingent rentals and sublease rental income amounts were not significant.
Occupancy expense is net of amortization of a total of $68 million of pre-tax deferred gain on a building sale which is being amortized through 1997, at which time the related leaseback expires. This amortization was $9,029,000 in 1994 and $6,312,000 in 1993 and 1992.
Firstar and its subsidiaries are obligated under noncancellable operating leases for various bank premises and equipment. These leases expire intermittently over the years through 2034. The minimum rental commitments under noncancellable leases for the next five years are shown below.
NOTE 8. SHORT-TERM BORROWED FUNDS
Short-term borrowed funds are summarized as follows:
Federal funds purchased, which totaled $1,636 million at December 31, 1994, generally represent one-day borrowings obtained primarily from financial institutions in Firstar's marketplace in conjunction with their customer correspondent relationships with the subsidiary banks. Securities sold under repurchase agreements, which totaled $454 million at December 31, 1994, represent borrowings maturing within one year that are secured by U.S. Treasury and federal agency securities. Other short-term borrowed funds comprise primarily treasury, tax and loan notes.
NOTE 9. LONG-TERM DEBT
Long-term debt is summarized as follows:
Firstar issued $100,000,000 of 10 1/4% notes under an indenture dated as of May 1, 1988. The notes, which are subordinated to all unsubordinated indebtedness of Firstar for borrowed money, are unsecured and mature May 1, 1998. The indenture contains a provision which restricts the disposition of or subjecting to lien any common stock of certain subsidiaries.
Firstar issued $50,000,000 of 10% notes under an indenture dated as of June 1, 1986. The notes are unsecured and mature June 1, 1996. The indenture contains a provision which restricts the disposition of or subjecting to lien any common stock of certain subsidiaries.
Other debt at December 31, 1994 includes notes of $2,706,000 which bear interest at 11.50% and mature in 1996 and loans sold under a repurchase agreement of $10,000,000 which mature in 1999 and bear interest at a variable LIBOR based rate.
Long-term debt has aggregate maturities for the five years 1995 through 1999 as follows: $75,000 in 1995, $46,616,000 in 1996, $78,397,000 in 1998 and $10,000,000 in 1999.
Firstar has repurchased portions of the 10 1/4% and 10% notes and incurred losses of $25,000, $57,000 and $605,000, in 1994, 1993 and 1992, respectively.
NOTE 10. STOCKHOLDERS' EQUITY
The authorized and outstanding shares of Firstar are as follows:
Under the Firstar Shareholder rights plan each share of common stock entitles its holder to one-half right. Under certain conditions, each right entitles the holder to purchase one one-hundredth of a share of series C preferred stock at a price of $85, subject to adjustment. The rights will only be exercisable if a person or group has acquired, or announced an intention to acquire, 20% or more of the outstanding shares of Firstar common stock. Under certain circumstances, including the existence of a 20% acquiring party, each holder of a right, other than the acquiring party, will be entitled to purchase at the exercise price Firstar common shares having a market value of two times the exercise price. In the event of the acquisition of Firstar by another company subsequent to a party acquiring 20% or more of Firstar common stock, each holder of a right is entitled to receive the acquiring company's common shares having a market value of two times the exercise price. The rights may be redeemed at a price of $.01 per right prior to the existence of a 20% acquiring party, and thereafter, may be exchanged for one common share per right prior to the existence of a 50% acquiring party. The rights will expire on January 19, 1999. The rights do not have voting or dividend rights and until
they become exercisable, have no dilutive effect on the earnings of Firstar. Under the rights plan, the Board of Directors of Firstar may reduce the thresholds applicable to the rights from 20% to not less than 10%.
Preferred shares, when issued, rank prior to common shares both as to dividends and liquidation but have no general voting rights. The series C preferred stock, none of which is outstanding, is entitled to 100 votes per share and other rights such that the value of a one one-hundredth interest in a series C preferred share should approximate the value of one common share.
Firstar redeemed all of its series B preferred stock on December 29, 1993 at $103 per share plus accrued dividends. Dividends deducted from net income for purposes of determining net income applicable to common stockholders were $3,266,000 in 1993 and $3,747,000 in 1992.
In conjunction with long-term incentive plans, 30,235 shares of restricted common stock are being held in escrow for executive officers as of December 31, 1994. The shares cannot be sold prior to the end of a three-year period and are subject to adjustment in accordance with the terms of the award.
Firstar reacquired 234,200 shares of its common stock during 1994 which are expected to be reissued in 1995 in connection with a specific purchase business combination.
On January 31, 1995 Firstar issued 38,775 shares of Series D preferred stock in connection with its merger with First Colonial Bankshares Corporation. These shares are convertible into 832,112 shares of Firstar common stock and are redeemable after June 30, 1997.
NOTE 11. STOCK OPTIONS
Firstar has an incentive stock plan that provides for a maximum grant of 5,600,000 stock options, stock appreciation rights and/or shares of stock. The options expire ten years and one month after the date of grant.
The following table summarizes option activity under these plans:
At December 31, 1994, options to acquire 989,500 shares were exercisable. In January 1995, options to acquire 499,300 shares of common stock at $27.38 to $27.50 per share were granted.
NOTE 12. OTHER OPERATING EXPENSE
A summary of other operating expense is as follows:
NOTE 13. EMPLOYEE BENEFIT PLANS
Firstar and its subsidiaries have non-contributory defined benefit pension plans covering substantially all employees. The benefits are based upon years of service and the employee's compensation during the last five years of employment. The funding policy is to contribute annually the minimum amount necessary to satisfy federal minimum funding standards. Plan assets are primarily invested in listed stocks and U.S. Treasury and federal agency securities. The table below summarizes data relative to the plans.
Firstar also has unfunded pension plans covering certain employees. Interest rates used in calculating the actuarial values are essentially the same as in the previously described plans. The table below summarizes data relative to the plans.
Firstar has profit sharing plans under which eligible employees can participate by contributing a portion of their salary for investment in one or more trust funds. Contributions are made to the account of each participant based upon profitability or at the discretion of the board of directors. Amounts expensed in connection with this plan were $10,382,000 in 1994, $9,667,000 in 1993 and $8,539,000 in 1992.
In addition to pension benefits, certain health care benefits are made available to active and retired employees. The table below summarizes data relative to this benefit program. The program is unfunded and the transition obligation is being amortized over 20 years.
For measurement purposes, an 11% annual rate of increase in the per capita cost of covered health care benefits was assumed, decreasing to 6% by 2004 and remaining at that level thereafter. The health care cost trend rate assumption has an effect on the amounts reported. To illustrate, increasing the assumed health care cost trend rates by one percentage point in each year would increase the accumulated postretirement accumulated benefit obligation by $4,954,000 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost by $405,000. The discount rate used in determining the accumulated postretirement benefit obligation was 8.50% and 7.75% at December 31, 1994 and 1993, respectively.
NOTE 14. INCOME TAXES
Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", was adopted by Firstar on January 1, 1993. The cumulative effect of adoption of Statement No. 109 did not have a significant effect on net income in 1993.
The taxes applicable to net income were as follows:
Income tax expense differed from the amount computed by applying the federal statutory rate of 35% (34% in 1992) to income before taxes as shown below:
The significant components of deferred income tax expense attributable to income from continuing operations are as follows:
The significant components of the net deferred tax asset were as follows:
The deferred tax asset increased due to tax benefits recorded on securities which were marked-to-market in accordance with Statement No. 115 and the acquisition of First Southeast Banking Corp.
The valuation allowance has been recognized primarily to offset deferred tax assets related to state net operating loss carryforwards totaling approximately $187,000,000 which expire at various times within the next 15 years. If realized, the tax benefit for these items will reduce current tax expense for that period. Net deferred tax assets of $2,358,000 including a valuation allowance of $1,275,000 were added in 1994 due to the acquisition of First Southeast Banking Corp.
Other assets include net deferred income tax charges of $75,638,000 and $71,298,000 at December 31, 1994 and 1993, respectively. Furthermore, amounts originally reported for 1993 have been reclassified to reflect actual tax return results.
NOTE 15. COMMITMENTS AND CONTINGENT LIABILITIES
Firstar has outstanding at any time a significant number of commitments to extend credit to its customers. These commitments include revolving credit agreements, term loan commitments, short-term borrowing agreements and standby letters of credit. These commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated balance sheets.
Commitments to extend credit are agreements to lend to a customer as long as there is not a violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.
Credit card commitments are unsecured agreements to extend credit. Such commitments are reviewed periodically, at which time the commitments may be maintained, increased, decreased or canceled depending upon evaluation of the customer's credit worthiness and other considerations.
Standby and commercial letters of credit are conditional commitments issued by Firstar to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions.
Firstar uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Firstar evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on management's credit evaluation of the party.
Firstar originates and sells residential mortgage loans as a part of various mortgage-backed security programs sponsored by United States government agencies or government-sponsored agencies, such as the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association and the Government National Mortgage Association. These sales are often subject to certain recourse provisions in the event of default by the borrower.
The following is a summary of such commitments:
Firstar and its subsidiaries are subject to various legal actions and proceedings in the normal course of business, some of which involve substantial claims for compensatory or punitive damages. Although litigation is subject to many uncertainties and the ultimate exposure with respect to these matters cannot be ascertained, management does not believe that the final outcome will have a material adverse effect on the financial condition of Firstar.
NOTE 16. REGULATORY RESTRICTIONS ON SUBSIDIARY DIVIDENDS AND CASH
Federal regulations require Firstar to maintain as reserves, minimum cash balances based on deposit levels at subsidiary banks. Cash balances restricted from usage due to these requirements were $248 million and $267 million at December 31, 1994 and 1993, respectively.
Firstar's subsidiary banks are restricted by regulation as to the amount of funds which can be transferred to the parent in the form of loans and dividends. As of December 31, 1994, $128 million could be loaned to Firstar by the subsidiary banks subject to strict collateral requirements, and $250 million could be loaned to Firstar by the subsidiary banks in the form of dividends. In addition each subsidiary bank could pay dividends to Firstar in an amount which approximates Firstar's equity in their 1995 net income. The payment of dividends by any subsidiary bank may also be affected by other factors beyond this regulatory limitation, such as maintenance of adequate capital for such subsidiary bank.
NOTE 17. DERIVATIVE FINANCIAL INSTRUMENTS
Rate Risk Management
As part of its asset and liability management, Firstar uses various types of interest rate contracts for the purpose of managing its interest rate risks. The use of interest rate contracts enables Firstar to synthetically alter the repricing characteristics of designated earning assets and interest-bearing liabilities. The following tables summarize the notional amounts of interest rate contracts at December 31, 1994, used by Firstar in its asset and liability management process:
Index amortizing interest rate swaps are used to convert variable rate loans to a fixed rate basis. The amortizing feature of these swaps serves to extend the maturity after a predetermined mandatory period if the three-month LIBOR index rate is above a pre-established reference rate on a quarterly basis. Additionally, the notional amount of the swaps is reduced on a quarterly basis based upon pre-established rates beginning in 1997.
Interest rate swaps used to convert fixed rate loans to variable rate loans or vice versa have a total notional value of $112 million on December 31, 1994.
Interest rate swaps with periodic caps involve the exchange of LIBOR based variable interest payments with one party receiving a fixed basis point shim over the LIBOR index, subject to a 25 basis point cap in quarterly increases in rates receivable by Firstar. These swaps were entered into in 1993 and early 1994, when interest rates were at cycle lows, to preserve the net interest margin on variable rate loans which were funded by low cost savings and transaction deposit accounts. These swaps hedge loans of $230 million and deposits of $700 million.
Interest rate floors provide for the receipt of payments when the three month LIBOR rate is below a predetermined interest rate floor. Firstar entered into $195 million of floors to hedge variable rate loans against a decline in interest rates. Floors were also entered into to hedge $106 million of deposits where such deposits have a guaranteed interest rate.
Interest rate caps provide for the receipt of payments when the three month LIBOR rate exceeds predetermined interest rate caps. These instruments manage interest rate risk on certain securities and loans.
The maturity range of derivative financial instruments as of December 31, 1994 is as follows:
- ------------ All interest rates represent rates in effect on December 31, 1994.
Index rate for interest rate caps/floors is three month LIBOR.
The notional values of derivative financial instruments represent the amounts on which interest payments are exchanged between the counterparties. Those notional values do not represent direct credit exposures. Firstar is exposed to credit-related losses in the event of nonperformance by counterparties to these instruments but does not expect any counterparty to fail to meet their obligations. Where appropriate, Firstar requires collateral based upon the positive market value of the exposure taking into account bi-lateral netting agreements with certain counterparties. Based on market values, Firstar's credit exposure was $3.6 million at December 31, 1994.
Firstar enters into both mandatory and optional commitments to sell groups of residential mortgage loans that it originates or purchases as part of its mortgage banking activities. Firstar commits to sell the loans at specified prices in a future period typically within 90 days. The risk associated with these commitments consists primarily of loans not closing in sufficient volumes and at appropriate yields to meet the sale commitments. Firstar had contracts totaling $22 million and $202 million on December 31, 1994 and 1993 respectively. Gains or losses on these contracts are included in the determination of the market value of mortgages held for sale.
Trading Activities
Firstar also acts as an intermediary for customers in their management of interest rate and foreign currency rate risk. In this regard, Firstar will enter into interest rate swaps, caps, floors and foreign exchange contracts with customers to minimize their exposure to market risk. Firstar enters into essentially offsetting transactions with other counterparties. Customer related derivative activity is marked to market value. The credit exposure at December 31, 1994 of $21.1 million is represented by the fair value of contracts with a positive value. Gross credit exposure amounts disregard the value of any collateral. Revenue from this intermediary activity was $3.2 million and $1.8 million in 1994 and 1993 respectively.
Information on these transactions is shown below:
NOTE 18. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments", requires that Firstar disclose estimated fair values for its financial instruments. Fair value estimates were based on relevant market data and information about the various financial instruments. These estimates do not reflect any premium or discount that could result from offering for sale at one time Firstar's entire holdings of a particular financial instrument. Because no market exists for a significant portion of Firstar's financial instruments, fair value estimates are based on judgements regarding current economic conditions, risk characteristics of various financial instruments, future expected loss experience, and other factors. These estimates are subjective and involve uncertainties and matters of significant judgement and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on and off balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities which are not considered financial instruments. Significant assets that are not considered financial instruments include goodwill, core deposit intangibles, certain customer relationships and fixed assets. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered.
Fair value estimates, methods, and assumptions are set forth below for Firstar's financial instruments.
Cash and short-term investments--The carrying amounts for short-term investments (which include interest-bearing deposits with banks, federal funds sold and resale agreements) approximate fair value because they mature in 90 days or less and do not represent unanticipated credit concerns.
Securities--Estimated fair value for securities is based on quoted market prices. The fair value of certain small issues and municipal securities which are not readily available through market quotations is assumed to equal carrying value as these securities generally have short terms. These securities do not represent a significant portion of the portfolio.
Loans--Fair values were estimated for loans with similar financial characteristics. The commercial loan portfolio was separated into credit risk categories by variable and fixed rate loans. The fair value of performing loans, except for internally criticized commercial and lease financing loans, was calculated by discounting cash flows using an estimated discount rate that reflects current market rates, the type of loan, credit risk inherent in the loan category and repricing characteristics. Fair value for criticized commercial loans was calculated by reducing the carrying value by an amount that reflects the estimated principal loss. This loss was based on internal credit analysis of specific borrowers taking into consideration past loan loss experience and trends in loan quality. For lease financing loans, carrying value was considered to approximate fair value.
The fair value of credit card loans was estimated using the net present value method. Credit card portfolios are not actively traded and the discount rate used reflects an estimated rate of return based on the credit quality of the portfolio. This estimate does not include the value that relates to estimated cash flows from new loans generated from existing cardholders over the remaining life of the portfolio. For residential mortgages, fair value was estimated by discounting cash flows adjusted for anticipated prepayments using discount rates based on current market rates for similar loans.
Deposits--The fair value of deposits with no stated maturity, such as interest bearing and non-interest bearing demand, savings and money market accounts, is equal to the amount payable on demand. The fair value of certificates of deposit is based on the discounted value of contractual cash flows using current market rates for similar types of deposits.
Borrowed funds--The carrying value of short-term borrowed funds approximate fair value as they are payable within three months or less. The estimated fair value of long-term debt is based on broker quotations, when available. Debt for which quoted prices were not available was valued using cash flows discounted at a current market rate for similar types of debt.
Derivative financial instruments--The fair value of interest rate swap agreements is based on the present value of the swap primarily using dealer quotes. Fair values for caps and floors were obtained using an option pricing model. These values represent the estimated amount Firstar would receive or pay to terminate the contracts or agreements taking into account current interest rates and market volatility. The fair value of commitments to extend credit and standby letters of credit was estimated using fees currently charged to enter into similar agreements. The fair value of credit card lines is based on cardholder fees currently being charged.
The estimated fair value of Firstar's financial instruments is summarized as follows:
NOTE 19. PARENT CORPORATION CONDENSED FINANCIAL STATEMENTS
BALANCE SHEETS
STATEMENTS OF INCOME
STATEMENTS OF CASH FLOWS
[KPMG Letterhead]
INDEPENDENT AUDITORS' REPORT
The Board of Directors Firstar Corporation:
We have audited the accompanying consolidated balance sheets of Firstar Corporation and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1994. These consolidated financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these consolidated financial statements 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 Firstar Corporation and subsidiaries at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1994, in conformity with generally accepted accounting principles.
[Signature]
KPMG Peat Marwick LLP
Milwaukee, Wisconsin January 19, 1995
FIRSTAR CORPORATION AND SUBSIDIARIES SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
FIRSTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND FINANCIAL RATIOS
FIRSTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCE SHEETS, NET INTEREST REVENUE AND RATE ANALYSIS
Interest and rates are calculated on a taxable equivalent basis, using a tax rate of 35% in 1994 and 1993 and 34% in 1992, 1991 and 1990. The rate calculations include the effect of certain loans on which income is recognized only as cash payments are received or is accrued at less than the original contract rate.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Notice of the 1995 Annual Meeting and Proxy Statement filed pursuant to Regulation 14A is incorporated herein by reference.
The executive officers of Firstar Corporation are listed under Item 1 of this document.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION
The Notice of the 1995 Annual Meeting and Proxy Statement filed pursuant to Regulation 14A is incorporated herein by reference.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Notice of the 1995 Annual Meeting and Proxy Statement filed pursuant to Regulation 14A is incorporated herein by reference.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Notice of the 1995 Annual Meeting and Proxy Statement filed pursuant to Regulation 14A is incorporated herein by reference.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A)1. FINANCIAL STATEMENTS
The following financial statements of Firstar Corporation are filed as a part of this document under Item 8. Financial Statements and Supplementary Data.
Consolidated Balance Sheets as of December 31, 1994 and 1993
Consolidated Statements of Income for the Years Ended December 31, 1994, 1993 and 1992
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
Independent Auditors' Report
(A)2. FINANCIAL STATEMENT SCHEDULES
All financial statement schedules have been included in the consolidated financial statements or are either not applicable or not significant.
(A)3. EXHIBITS
- ------------ * Executive Compensation Plans
A copy of the exhibits listed herein can be obtained by writing to Mr. William H. Risch, Senior Vice President-Finance and Treasurer, Firstar Corporation, P.O. Box 532, Milwaukee, Wisconsin 53201.
(B) No reports on Form 8-K were filed during the fourth quarter of 1994.
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.
FIRSTAR CORPORATION
-------------------------------------- Roger L. Fitzsimonds March 20, 1995 Chairman and Chief Executive Officer
Pursuant to the requirement 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.
DIRECTORS
Michael E. Batten* John H. Hendee, Jr.* Daniel F. McKeithan, Jr.* Robert C. Buchanan* Jerry M. Hiegel* George W. Mead II* George M. Chester, Jr.* Joe Hladky* Guy A. Osborn* Roger H. Derusha* C. Paul Johnson* Judith D. Pyle* James L. Forbes* James H. Keyes* Clifford V. Smith, Jr.* Holmes Foster* Sheldon B. Lubar* William W. Wirtz* Joseph F. Heil, Jr.*
INDEX TO EXHIBITS