Dean Witter's Anthony Davis wasn't kidding when he called First Bank System's fourth-quarter profits "incredibly good." At a time when other banks are suffering margin squeeze from repeated interest rate hikes, Minneapolis-based First Bank System Inc. watched its loan yields leap 129 basis points to 8.77%.

As a result, First Bank's net interest margin rose 42 basis points to 5.42%. The $26 billion-asset bank also benefited from an asset shift away from mortgages and into commercial and consumer loans.

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