1st Interstate Plugs Investing Loophole
LOS ANGELES - After suspending it last August, First Interstate Bancorp has reinstituted a cash-purchase component of its dividend reinvestment plan.
"We believe that this program will facilitate reaching the corporation's goal of at least a 5% tangible common equity ratio," said Thomas P. Marrie, executive vice president and chief financial officer.
The new plan, set to resume in July, includes safeguards against short-term transactions that had previously caused unusual volatility in the stock price.
Direct investments now take place monthly instead of quarterly. The company also changed the discount to between 1% and 3%, from 2.5% in 1990. At one time it had been 5%.
Bank Has Built Capital
A multiplier that determines how much an investor can spend based on shares held was also reduced. The minimum investment is $100 a month.
First Interstate has steadily built capital over the last two years. Many banks have seen their capital accounts erode due to losses. At the end of the first quarter, First Interstate's tangible common equity was 4.24%, up from 3.23% as of March 31, 1990.
Analysts estimate that First Interstate will earn about $3.25 a share this year. That will be down significantly from the $7.30 a share it earned in 1990. But First Interstate's management is on an agressive campaign to reduce nonperforming assets.