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FIRST BANK SYSTEM REPORTS RECORD LEVEL OF NET INCOME IN THE SECOND QUARTER

 FIRST BANK SYSTEM REPORTS RECORD LEVEL
 OF NET INCOME IN THE SECOND QUARTER
 EARNINGS SUMMARY
 2Q 1992 2Q 1991 First Half
 1992 1991
 Net income (in millions) $59.3 $45.3 $116.2 $86.0
 Earnings per common share $.65 $.51 $1.27 $.96
 Dividends paid per common share .225 .205 .43 .41
 Return on average assets (percent) 1.34 1.06 1.32 .99
 Return on average common equity 17.1 14.9 17.0 14.2
 MINNEAPOLIS, July 9 /PRNewswire/ -- First Bank System, Inc. (NYSE: FBS) today reported a record level of net income in the second quarter of 1992 of $59.3 million, an increase of $14.0 million, or 30.9 percent, from the second quarter of last year. Pre-tax income increased $20.9 million, or 41.1 percent, from the second quarter of 1991. The company's effective tax rate has increased in 1992 as a result of alternative minimum tax. On a per share basis, earnings were $.65 in 1992, compared with $.51 in 1991, an increase of 27.5 percent. Second quarter 1992 net income included $11.4 million, or $.14 per share, of tax benefits compared with $9.5 million, or $.12 per share, in the second quarter a year ago. In the first half of 1992, net income totaled $116.2 million, or $1.27 per share, compared with $86.0 million, or $.96 per share, in the first half of 1991.
 Key performance measures continued to improve during the current quarter. Return on average assets was 1.34 percent in the second quarter of 1992, up from 1.06 percent in the same quarter a year ago. Return on average common equity increased to 17.1 percent in the second quarter of 1992, up 220 basis points from the 14.9 percent reported a year ago. On a normalized basis (without tax benefits) second quarter 1992 return on average assets and return on average common equity were 1.08 percent and 13.3 percent, respectively, compared with .84 percent and 11.3 percent a year ago. Net interest margin on a taxable- equivalent basis strengthened 37 basis points from a year ago to 5.05 percent. The efficiency ratio, the ratio of expenses to revenues, improved to 61.1 percent from 64.1 percent in the second quarter of 1991.
 The strong improvement in net income in the second quarter of 1992 reflects increased revenues. Net interest income on a taxable- equivalent basis increased $19.5 million, or 10.8 percent, from the second quarter of 1991. Noninterest income increased $10.6 million, or 12.7 percent, reflecting strong increases in credit card fees, trust fees and deposit charges.
 Nonperforming assets totaled $280.7 million at June 30, 1992, a decline of $16.9 million, or 5.7 percent, from March 31, 1992, and a decline of $96.0 million, or 25.5 percent, from June 30, 1991. The ratio of the allowance for credit losses to nonperforming loans equaled 165.2 percent compared with 163.9 percent at the end of the first quarter and 116.9 percent at the end of the second quarter a year ago.
 First Bank System's Chairman, President and Chief Executive Officer John F. Grundhofer said, "I want to thank the employees of First Bank System for their efforts in achieving a record level of net income in the second quarter of $59.3 million as well as a record level of net interest margin. The efficiency ratio continued to improve to 61.1 percent reflecting both improved revenues and continue cost control. These results underscore the company's commitment to enhancing shareholder value by delivering a high quality earnings stream."
 In May, First Bank System increased its regular quarterly dividend 10 percent.
 Acquisitions are an important part of the disciplined effort to enhance shareholder value at First Bank System. On June 30, 1992, First Bank System completed the purchase of the previously announced acquisition of Siouxland Bank Holding Company, a $174 million North Dakota institution. Earlier this week the company completed the acquisition of the corporate trust business of Bankers Trust Company of California. This business, which will be called First Trust California, has approximately 1,300 municipal, revenue, housing and corporate trusteeships. The previously announced acquisitions of Bank Shares Incorporated and Western Capital Investment Corporation (NASDAQ: WECA) are awaiting regulatory approval.
 INCOME STATEMENT HIGHLIGHTS
 (Dollars in millions)
 2Q 1992 2Q 1991
 Net interest income (TEB) $200.5 $181.0
 Provision for credit losses 37.0 36.4
 Noninterest income 94.3 83.7
 Noninterest expense 180.1 169.6
 Taxable-equivalent adjustment 5.9 7.8
 Income taxes 12.5 5.6
 Net income $59.3 $45.3
 Net interest margin (TEB)(percent) 5.05 4.68
 Efficiency ratio 61.1 64.1
 Net interest income on a taxable-equivalent basis was $200.5 million in the second quarter of 1992, an increase of $19.5 million, or 10.8 percent, from the second quarter of 1991. The improvement in net interest income reflects a change in mix of the company's loan portfolio towards higher-yielding consumer loans and an increase in average core deposits including an increase in average noninterest bearing deposits of $894 million, or 28.3 percent. Net interest income growth was also aided by the decline in nonperforming assets and modest loan growth.
 The net interest margin on a taxable-equivalent basis was 5.05 percent in the second quarter of 1992, an increase of 37 basis points from 4.68 percent in the second quarter of 1991. The improvement in net interest margin results from the changing mix of the company's assets and liabilities, as discussed above. Average earning assets were $16.0 billion in the second quarter of 1992, up slightly from the previous quarter of $15.9 billion and up from the $15.5 billion a year ago.
 ALLOWANCE FOR CREDIT LOSSES SUMMARY
 (in millions)
 2Q 1992 1Q 1992 2Q 1992
 Balance at beginning of period $339.2 $345.2 $349.9
 Net charge-offs (42.0) (43.0) (45.0)

 Provision for credit losses 37.0 37.0 36.4
 Asset acquisition additions 1.3 -- 6.6
 Balance at end of period $335.5 $339.2 $347.9
 The provision for credit losses was $37.0 million in the second quarter of 1992, unchanged from the level in the first quarter of 1992 and up $.6 million from the second quarter of 1991. Net charge-offs totaled $42.0 million in the second quarter of 1992 compared with $45.0 in the same quarter a year ago.
 The allowance for credit losses was $335.5 million at June 30, 1992, compared with $339.2 million at March 31, 1992, and $347.9 million at June 30, 1991. Reserve coverage remained strong as the allowance for credit losses to nonperforming loans ratio increased to 165.2 percent at the end of the second quarter of 1992 compared with 116.9 percent a year earlier. Reserve coverage was 163.9 percent at March 31, 1992.
 ASSET QUALITY
 (Dollars in millions)
 June 30 March 31 Dec. 31 Sept. 30 June 30
 1992 1992 1991 1991 1991
 Nonperforming loans $203.1 $206.9 $236.3 $276.2 $297.6
 Other real estate 69.6 81.6 91.3 78.2 79.1
 Other nonperforming
 assets 8.0 9.1 9.0 9.1 --
 Total nonperforming
 assets $280.7 $297.6 $336.6 $363.5 $376.7
 Allowance as percent
 of nonperforming
 loans(percent) 165.2 163.9 146.1 127.2 116.9
 Nonperforming assets at June 30, 1992, declined to $280.7 million, down $16.9 million, or 5.7 percent, from the first quarter of 1992 and down $96.0 million, or 25.5 percent from the level a year ago.
 NONINTEREST INCOME
 (In millions)
 2Q 1992 2Q 1991
 Trust fees $28.1 $25.4
 Service charges 18.6 16.6
 Credit card fees 14.2 11.3
 Insurance commissions 6.1 6.0
 Trading account profits 2.9 2.5
 Investment securities gains -- --
 Other 24.4 21.9
 Total noninterest income $94.3 $83.7
 Noninterest income in the second quarter of 1992 was $94.3 million, an increase of $10.6 million, or 12.7 percent, from the second quarter of 1991. Trust fees, service charges and credit card fees increased $7.6 million, or 14.3 percent, from the prior year quarter. The increase in trust fees reflects a new pricing structure for trust services which was introduced during the third quarter of 1991. The increase in credit card fees reflects increased volume, including fees from the portfolios acquired during 1991.
 NONINTEREST EXPENSE
 (in millions)
 2Q 1992 2Q 1991
 Salaries $69.8 $67.0
 Employee benefits 16.8 15.8
 Net occupancy 16.9 15.8
 Furniture and equipment 11.4 11.3
 FDIC Insurance 7.9 6.8
 Professional services 6.7 7.0
 Other 50.6 45.9
 Total noninterest expense $180.1 $169.6
 Noninterest expense in the second quarter of 1992 was $180.1 million, an increase of $10.5 million, or 6.2 percent, from the second quarter of9?91. The increase in expenses from a year ago reflected several acquisitions during 1991 including the Capitol Federal transaction and the acquisitions of the Wells Fargo Ag Credit subsidiary and credit card portfolios. Salaries and employee benefits expenses increased $3.8 million, or 4.6 percent. The increase in other noninterest expense of $4.7 million, or 10.2 percent, includes increases in postage, telephone, training and amortization of intangible assets attributable to the 1991 acquisitions. In addition, FDIC insurance expense increased $1.1 million from the second quarter of 1991 resulting from the increase in the rate charged on deposits.
 Second quarter 1992 expenses include approximately $2.4 million related to the company's move to a new headquarters building. During 1992 net occupancy expense will increase by approximately $7.0 million as a result of the move.
 The provision for income taxes was $12.5 million in the second quarter of 1992 compared with $5.6 million in the second quarter of 1991 reflecting a higher level of taxable income and the payment of alternative minimum tax. Included in the current quarter provision is the recognition of tax benefits from the utilization of operating loss carryforwards (net of alternative minimum tax) of $11.4 million, or $.14 per share. This compares with $11.2 million, or $.14 per share, in the first qu ?of 1992 and $9.5 million, or $.12 per share, in the second quarter of 1991. At June 30, 1992, the company had approximately $434 million of net operating losses available to carryforward for financial reporting purposes and $17 million of alternative minimum tax credit carryforwards.
 The company has not yet adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." This statement, which is generally effective for 1993 financial reporting, requires companies to record a deferred tax asset related to the unrecognized benefit of income tax carryforwards under certain circumstances. It is not known whether federal bank regulatory agencies will permit the inclusion in regulatory capital of the equity capital created by the adoption of the statement. The capital effect of this statement would be partially offset by the adoption of SFAS No. 106, "Employer's Accounting for Postretirement Benefits Other than Pensions." This statement requires accrual of costs associated with postretirement benefits, and permits either immediate recognition of the accumulated obligation or amortization of the obligation over a transition period. If these statements were adopted at June 30, 1992 (and the immediate recognition method was adopted for SFAS No. 106), the pro forma net increase in common and total shareholders' equity to assets ratios would be approximately 65 basis points.
 CAPITAL POSITION
 (In percents)
 June 30 March 31 Dec. 31 Sept. 30 June 30
 1992 1992 1991 1991 1991
 Common equity to
 assets 7.0 6.6 6.3 6.2 6.4
 Tangible common
 equity to assets(a) 6.4 6.0 5.7 5.6 5.7
 Total shareholders'
 equity to assets 9.2 8.7 8.4 7.7 7.9
 Tier 1 capital ratio(b) 8.9 8.6 8.3 7.3 7.2
 Total capital ratio(b) 12.2 11.9 11.6 10.6 10.4
 Leverage ratio 8.5 8.3 8.1 7.3 7.2
 (a) Defined as common equity less goodwill
 (b) Computed using 1992 rules
 Common equity to assets increased 60 basis points from a year ago to 7.0 percent at June 30, 1992. Total equity to assets reached 9.2 percent at the end of the second quarter of 1992, an increase of 130 basis points from the same quarter a year ago, reflecting in part the issuance of $114.5 million of Convertible Preferred Stock in November 1991. The company's total equity ratio is one of the highest among regional banks.
 Risk-based capital ratios (under the 1992 rules) also continued to strengthen. Tier 1 and total capital ratios were 8.9 percent and 12.2 percent on June 30, 1992, compared with 7.2 percent and 10.4 percent at June 30, 1991, respectively. This improvement occurred as a result of earnings retention and the preferred equity issuance. On July 2, 1992, the company placed $125 million of 8.0 percent, 12-year subordinated notes. On a pro forma basis, this debt issue adds approximately 80 basis points to the total risk-based capital ratio at June 30, 1992. The leverage ratio, a measure of Tier 1 capital to total quarterly average assets, also increased to 8.5 percent from 7.2 percent a year ago.
 First Bank System is a regional bank holding company headquartered in Minneapolis with assets of $17.8 billion. The company provides complete financial services to individuals and institutions through 28 banks and trust companies with more than 159 offices located in Minnesota, Colorado, Montana, North Dakota, South Dakota, Wisconsin, Washington and California.
 FIRST BANK SYSTEM, INC. AND SUBSIDIARIES
 CONSOLIDATED FINANCIAL SUMMARY
 (Dollars in millions)
 6/30/92 3/31/92 6/30/91
 Loan portfolio:
 Commercial and financial $6,437 $6,433 $6,649
 HLTs 346 344 466
 Commercial real estate 1,314 1,291 1,233
 Consumer 5,165 5,159 4,735
 Total loans 13,262 13,227 13,083
 Total assets 17,766 18,025 17,018
 Total deposits 13,956 14,385 13,291
 Tier 1 capital
 ratio (1992 rules)(percent) 8.9 8.6 7.2
 Common shares outstanding 80,004,719 78,749,283 77,952,523
 Book value per common share $15.64 $15.10 $13.90
 Nonperforming assets 280.7 297.6 376.7
 Six Months Ended
 6/30/92 6/30/91
 Net interest margin(percent)(a) 5.00 4.53
 Efficiency ratio(percent) 61.2 64.5
 Average loans $13,108 $12,963
 Interest yield on
 average loans (percent) 8.97 10.23
 Average earning assets $15,922 $15,879
 Average total assets 17,760 17,443
 Average deposits 14,046 13,450
 Average interest-bearing liabilities 11,819 12,492
 Rate paid on average interest-bearing
 liabilities (percent) 4.54 6.63
 Average common equity $1,194 $1,059
 Average total equity 1,573 1,323
 Return on average assets (percent) 1.32 0.99
 Return on average common equity 17.0 14.2
 Preferred dividends $15.2 $11.2
 Three Months Ended
 6/30/92 3/31/92 6/30/91
 Net interest margin(a)(percent) 5.05 4.96 4.68
 Efficiency ratio(percent) 61.1 61.2 64.1
 Average loans $13,244 $12,971 $12,983
 Interest yield on average
 loans(percent) 8.86 9.08 10.00
 Average earning assets $15,984 $15,861 $15,505
 Average total assets 17,847 17,673 17,115
 Average deposits 14,127 13,966 13,333
 Average interest-bearing
 liabilities 11,676 11,963 12,102
 Rate paid on average interest-
 bearing liabilities (percent) 4.41 4.68 6.30
 Average common equity $1,214 $1,173 $1,069
 Average total equity 1,593 1,552 1,333
 Return on average
 assets (percent) 1.34 1.29 1.06
 Return on average
 common equity (percent) 17.1 16.9 14.9
 Preferred dividends $7.6 $7.6 $5.6
 (a) On a taxable-equivalent basis
 -0- 7/9/92
 /CONTACT: (Media) Wendy L. Raway, 612-370-5154, or (Investors) Thomas R. Rice, 612-370-3596, both of First Bank System/
 (FBS) CO: First Bank System, Inc. ST: Minnesota IN: FIN SU: ERN


AL -- MN007 -- 8135 07/09/92 12:01 EDT
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Date:Jul 9, 1992
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