1st Bank Gives a Vice Chairman Heave-Ho - for Second Time

William Farley was considered a hero among some First Bank System Inc. employees in 1988 when he challenged then-chairman and chief executive D.H. Ankeny over risks associated with the company's bond investments.

For his combativeness, Mr. Farley was fired, only to be rehired when John Grundhofer took the chief executive's job at the Minneapolis banking company two years later.

But last week First Bank sent the 52-year-old vice chairman packing a second time.

A bank spokeswoman said he would not be replaced. Mr. Farley's duties will be divided between vice chairmen Philip Heasley, who heads retail and technology products, and Richard Zona, who was chief financial officer.

Mr. Zona will now be responsible for private financial services and business banking, while Mr. Heasley will take over the company's branch system, its consumer banking, and its small-business sales and services.

The title of chief financial officer will go to executive vice president Susan E. Lester, who was hired a year ago from Shawmut National Corp. Andrew J. Cecere was also promoted in the shuffle, to the newly created position of senior vice president of "acquisition integration and process management." Both Ms. Lester and Mr. Cecere will report to Mr. Zona.

The spokeswoman said Mr. Farley's departure was part of a "management streamlining" to cut costs. Moreover, First Bank is looking at other cost- cutting measures, including a paring of staff at the company's 324 branches. "We don't talk about specifics," said spokeswoman Wendy Raway, "but culturally, we look at managing costs all the time. There are ongoing opportunities for us."

Mr. Farley's total salary and stock options were $2 million at the end of 1994. His departure didn't surprise analysts.

When the $34 billion-asset First Bank proposed merging with First Interstate last November, Mr. Farley was left out of the management lineup for the merged bank. His duties as head of retail and community banking operations would have been replaced by a First Interstate executive.

Moreover, First Bank has been moving toward a strategy of alternative delivery of products with less emphasis on branches, of which Mr. Farley was in charge.

"It seems to me, the strategy of the company was moving more and more away from branch distribution, and that was Farley's area," said Ben Crabtree, an analyst with Dain Bosworth Inc.

Michael Durante, with McDonald & Co., agreed. "It was obvious he was the odd man out on the First Interstate transaction," he said.

Mr. Durante said he believes Mr. Grundhofer and Mr. Farley could not come to terms "on how far to cut the branches back." Mr. Farley declined to be interviewed, but released a statement through a publicist.

"Given the events surrounding the First Interstate transaction, now is the time for me to move on to other opportunities," he said.

Mr. Farley's departure was announced last Thursday.

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