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FIRST BANK SYSTEM REPORTS RECORD THIRD QUARTER NET INCOME

 FIRST BANK SYSTEM REPORTS RECORD THIRD QUARTER NET INCOME
 EARNINGS SUMMARY
 3Q 3Q Nine Months
 1992 1991 1992 1991
 Net income (in millions) $61.8 $50.2 $178.0 $136.2
 Earnings per common
 share .67 .57 1.95 1.53
 Dividends paid per
 common share .225 .205 .655 .615
 Return on average assets
 (percents) 1.38 1.14 1.34 1.04
 Return on average common
 equity (percents) 17.0 16.0 17.0 14.9
 MINNEAPOLIS, Oct. 14 /PRNewswire/ -- First Bank System, Inc. (NYSE: FBS) today reported record net income in the third quarter of 1992 of $61.8 million, an increase of $11.6 million, or 23.1 percent, from the third quarter of last year. Pre-tax income increased $19.1 million, or 34.2 percent, from the third 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 $.67 in 1992, compared with $.57 in 1991, an increase of 17.5 percent. Third quarter 1992 net income included $12.1 million, or $.15 per share, of tax benefits compared with $11.9 million, or $.15 per share, in the third quarter a year ago. During the first nine months of 1992, net income totaled $178.0 million, or $1.95 per share, compared with $136.2 million, or $1.53 per share, in the same period in 1991.
 Return on average assets increased 24 basis points from the third quarter a year ago to 1.38 percent in the third quarter of 1992. Return on average common equity was up 100 basis points to 17.0 percent in the third quarter of 1992. On a normalized basis (without tax benefits) third quarter 1992 return on average assets and return on average common equity were 1.11 percent and 13.2 percent, respectively, compared with .87 percent and 11.7 percent a year ago. Net interest margin on a taxable-equivalent basis strengthened 25 basis points from a year ago to 5.01 percent. The efficiency ratio, the ratio of expenses to revenues, was 61.1 percent, an improvement of 100 basis points from 62.1 percent in the third quarter of 1991.
 The strong improvement in net income in the third quarter of 1992 reflects increased revenues. Net interest income on a taxable- equivalent basis increased $12.0 million, or 6.3 percent, from the third quarter of 1991. Noninterest income increased $8.5 million, or 9.6 percent, as a result of increases in credit card fees, trust fees and deposit charges.
 Nonperforming assets declined $94.0 million from a year ago, and declined $11.2 million from the previous quarter, to a level of $269.5 million at Sept. 30, 1992. The ratio of the allowance for credit losses to nonperforming loans equaled 175.3 percent compared with 165.2 percent at the end of the second quarter and 127.2 percent at the end of the third quarter a year ago.
 First Bank System's Chairman, President and Chief Executive Officer, John F. Grundhofer said, "We are pleased to report a record quarter of high-quality earnings. The third quarter earnings improvement reflects stronger net interest income, fee growth in our core businesses and continued attention to cost control. In addition, our balance sheet was further strengthened during the third quarter as evidenced by lower nonperforming assets, a higher percentage of reserves for credit losses to nonperforming loans, and stronger capital ratios."
 On Sept. 25, 1992, First Bank System announced that it had signed a purchase agreement to acquire the corporate trust business of two U.S. Bancorp subsidiaries in Washington and Oregon. The transaction is subject to regulatory approvals. This acquisition strengthens First Bank System's position as a leading provider of bond indenture trusteeship services. In July of this year, First Bank System completed the purchase of the San Francisco corporate trust business from Bankers Trust of California. The previously announced acquisitions of Bank Shares Incorporated and Western Capital Investment Corporation (NASDAQ: WECA) are awaiting regulatory approval.
 During the third quarter the company announced that it had signed agreements to sell its Montana insurance agencies and Dakota Data Processing, Inc., a data processing services subsidiary of the former Siouxland Bank Holding Company which FBS acquired earlier this year. As part of First Bank System's ongoing analysis of its business lines, the company concluded that it would be more successful in creating value for its shareholders by focusing its retail and community banking efforts on other opportunities in the region and, therefore, chose to divest these businesses.
 First Bank System's continued improvement in profitability and risk reduction has been further recognized by recent upgrades from two debt rating agencies. On Aug. 17, 1992, Thomson BankWatch raised the issuer rating on the company to "B" from "B/C" and the senior debt, subordinated debt and preferred stock ratings were raised to "A+," "A" and "A-," respectively. On Oct. 5, 1992, IBCA raised the company's long-term debt rating to "A" from "A-" and raised the rating on the lead bank's long-term debt to "A+" from "A."
 INCOME STATEMENT HIGHLIGHTS
 ($ in millions)
 3Q 1992 3Q 1991
 Net interest income (TEB) $201.7 $189.7
 Provision for credit losses 36.0 42.3
 Noninterest income 97.1 88.6
 Noninterest expense 182.5 172.7
 Taxable-equivalent adjustment 5.3 7.4
 Pretax income 75.0 55.9
 Income taxes 13.2 5.7
 Net income $61.8 $50.2
 Net interest margin (TEB)
 (percents) 5.01 4.76
 Efficiency ratio (percents) 61.1 62.1
 Net interest income on a taxable-equivalent basis was $201.7 million in the third quarter of 1992, an increase of $12.0 million, or 6.3 percent, from the third 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 $704 million, or 21.2 percent. Net interest income growth was also aided by the decline in nonperforming assets.
 Net interest margin on a taxable-equivalent basis was 5.01 percent in the third quarter of 1992, an increase of 25 basis points from 4.76 percent in the third quarter of 1991. The increase in the net interest margin from a year ago results from the changing mix of the company's assets and liabilities, as discussed above. Average earning assets were $16.0 billion in the third quarter of 1992, unchanged from the previous quarter and up from the $15.8 billion a year ago.
 ALLOWANCE FOR CREDIT LOSSES SUMMARY
 ($ in millions)
 3Q 1992 2Q 1992 3Q 1991
 Balance at beginning of period $335.5 $339.2 $347.9
 Net charge-offs (40.0) (42.0) (44.6)
 Provision for credit losses 36.0 37.0 42.3
 Asset acquisition additions -- 1.3 5.6
 Balance at end of period $331.5 $335.5 $351.2
 The provision for credit losses was $36.0 million in the third quarter of 1992, down $1.0 million from the level in the second quarter of 1992 and down $6.3 million from the third quarter of 1991. Net charge-offs totaled $40.0 million in the third quarter of 1992 compared with $44.6 million in the same quarter a year ago.
 The allowance for credit losses was $331.5 million at Sept. 30, 1992, compared with $335.5 million at June 30, 1992, and $351.2 million at Sept. 30, 1991. Reserve coverage remained strong as the allowance for credit losses to nonperforming loans ratio increased to 175.3 percent at the end of the third quarter of 1992 compared with 127.2 percent a year earlier. Reserve coverage was 165.2 percent at June 30, 1992.
 ASSET QUALITY
 ($ in millions)
 9/30/92 6/30/92 3/31/92 12/31/91 9/30/91
 Nonperforming loans $189.1 $203.1 $206.9 $236.3 $276.2
 Other Real Estate (ORE) 72.3 69.6 81.6 91.3 78.2
 Other nonperforming
 assets 8.1 8.0 9.1 9.0 9.1
 Total nonperforming
 assets $269.5 $280.7 $297.6 $336.6 $363.5
 Accruing loans 90 days
 or more past due 31.6 41.3 44.8 38.0 39.7
 Nonperforming assets as
 a percent of loans
 plus ORE 2.05 2.11 2.24 2.54 2.73
 Allowance as a percent of
 nonperforming loans 175.3 165.2 163.9 146.1 127.2
 Nonperforming assets at Sept. 30, 1992, declined to $269.5 million, down $11.2 million, or 4.0 percent, from the second quarter of 1992 and down $94.0 million, or 25.9 percent from the level a year ago. The ratio of nonperforming assets to loans plus other real estate improved to 2.05 percent at Sept. 30, 1992, compared with 2.73 percent at Sept. 30, 1991.
 NONINTEREST INCOME
 ($ in millions)
 3Q 1992 3Q 1991
 Trust fees $29.7 $26.5
 Service charges 19.6 17.6
 Credit card fees 15.4 13.2
 Insurance commissions 6.4 6.2
 Trading account profits 2.2 2.7
 Other 23.8 22.4
 Total noninterest income $97.1 $88.6
 Noninterest income in the third quarter of 1992 was $97.1 million, an increase of $8.5 million, or 9.6 percent, from the third quarter of 1991. Trust fees, service charges and credit card fees increased $7.4 million, or 12.9 percent, from the prior year quarter. The increase in trust fees reflects $1.5 million in fees from First Trust of California, the corporate business acquired from Bankers Trust of California in July. The increase in credit card fees reflects increased volume, including fees from the portfolios acquired during 1991.
 NONINTEREST EXPENSE
 ($ in millions)
 3Q 1992 3Q 1991
 Salaries $71.1 $67.9
 Employee benefits 16.0 14.3
 Net occupancy 17.7 15.8
 Furniture and equipment 11.3 10.4
 FDIC insurance 7.8 7.3
 Professional services 7.7 6.3
 Other 50.9 50.7
 Total noninterest expense $182.5 $172.7
 Noninterest expense in the third quarter of 1992 was $182.5 million, an increase of $9.8 million, or 5.7 percent, from the third quarter of 1991. The increase in expenses from a year ago reflects the acquisition of Siouxland Bank Holding Company in June 1992, the corporate trust business from Bankers Trust of California in July 1992, and several acquisitions completed in the last half of 1991 as well as expenses related to the new headquarters building.
 Salaries and benefits expense increased $4.9 million, or 6.0 percent, reflecting the recent acquisitions. Net occupancy and furniture and equipment expenses include approximately $1.7 million related to the company's move to a new headquarters building. The increase in professional services expense is partially attributable to an increase in expenses of OCC (Office of the Comptroller of the Currency) examinations.
 The provision for income taxes was $13.2 million in the third quarter of 1992 compared with $5.7 million in the third 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 carryfowards (net of alternative minimum tax) of $12.1 million, or $.15 per share. This compares with $11.4 million, or $.14 per share, in the second quarter of 1992 and $11.9 million, or $.15 per share, in the third quarter of 1991. At Sept. 30, 1992, the company had approximately $379 million of net operating losses available to carryforward for financial reporting purposes and $25 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" which requires accrual of costs associated with postretirement benefits. If these statements were adopted at Sept. 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 57 basis points.
 CAPITAL POSITION
 (Percent to Assets)
 9/30/92 6/30/92 3/31/92 12/31/91 9/30/91
 Common equity 7.1 7.0 6.6 6.3 6.2
 Tangible common equity(a) 6.4 6.4 6.0 5.7 5.6
 Total shareholders' equity 9.2 9.2 8.7 8.4 7.7
 Tier 1 capital ratio(b) 9.1 8.9 8.6 8.3 7.3
 Total capital ratio(b) 13.1 12.2 11.9 11.6 10.6
 Leverage ratio 8.6 8.5 8.3 8.1 7.3
 Book value per share $16.10 $15.64 $15.10 $14.68 $14.30
 (a) Defined as common equity less goodwill
 (b) As a percent of risk-adjusted assets. Computed using 1992 rules.
 FIRST BANK SYSTEM, INC. AND SUBSIDIARIES
 Consolidated Financial Summary
 (Dollars in Millions)
 9/30/92 6/30/92 9/30/91
 Loan portfolio:
 Commercial and financial $6,274 $6,452 $6,300
 HLTs 295 331 389
 Commercial real estate 1,288 1,314 1,263
 Consumer 5,240 5,165 5,289
 Total loans 13,097 13,262 13,241
 Total assets 18,133 17,766 17,878
 Total deposits 14,201 13,956 14,066
 Tier 1 capital ratio
 (1992 rules) (percent) 9.1 8.9 7.3
 Common shares outstanding 80,200,749 80,004,719 78,112,666
 Book value per common share $16.10 $15.64 $14.30
 Nonperforming assets 269.5 280.7 363.5
 Nine Months Ended Three Months Ended
 9/30/92 9/30/91 9/30/92 6/30/92 9/30/91
 Net interest
 margin(a)(pct.) 5.01 4.60 5.01 5.05 4.76
 Efficiency ratio(pct.) 61.1 63.7 61.1 61.1 62.1
 Average loans $13,065 $12,980 $12,979 $13,244 $13,012
 Interest yield on
 average loans (pct.) 8.82 10.11 8.53 8.86 9.88
 Average earning assets $15,951 $15,857 $16,004 $15,984 $15,814
 Average total assets 17,787 17,461 17,840 17,847 17,497
 Average deposits 14,013 13,560 13,948 14,127 13,774
 Average interest-
 bearing liabilities 11,742 12,428 11,587 11,676 12,302
 Rate paid on average
 interest-bearing
 liabilities(pct.) 4.33 6.42 3.90 4.41 5.98
 Average common equity $1,219 $1,075 $1,272 $1,214 $1,107
 Average total equity 1,598 1,339 1,651 1,593 1,371
 Return on average
 assets(pct.) 1.34 1.04 1.38 1.34 1.14
 Return on average
 common equity(pct.) 17.0 14.9 17.0 17.1 16.0
 Preferred dividends $22.8 $16.8 $7.6 $7.6 $5.6
 (a) On a taxable-equivalent basis
 Common equity to assets increased 90 basis points from a year ago to 7.1 percent at Sept. 30, 1992. Total equity to assets reached 9.2 percent at the end of the third quarter of 1992, an increase of 150 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.
 Risk-based capital ratios (under the 1992 rules) also continued to strengthen. Tier 1 and total capital ratios were 9.1 percent and 13.1 percent on Sept. 30, 1992 compared with 7.3 percent and 10.6 percent at Sept. 30, 1991, respectively. This improvement occurred as a result of earnings retention, the preferred equity issuance and the issuance of $125 million, 12-year subordinated notes on July 2, 1992. The leverage ratio, a measure of Tier 1 capital to total quarterly average assets, also increased to 8.6 percent from 7.3 percent a year ago.
 First Bank System is a regional bank holding company headquartered in Minneapolis with assets of $18.1 billion. The company provides complete financial services to individuals and institutions through 28 banks and trust companies with 161 offices located in Minnesota, Colorado, Montana, North Dakota, South Dakota, Wisconsin, Washington and California.
 -0-
 /CONTACT: Wendy L. Raway, Media Relations, 612-973-2429, or Patricia Henning, Investor Relations, 612-973-2263, both of First Bank System/
 (FBS) CO: First Bank System, Inc. ST: Minnesota IN: FIN SU: ERN


DS -- MN014 -- 9973 10/14/92 14:41 EDT
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Date:Oct 14, 1992
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