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First Interstate Bancorp
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First Interstate Bancorp was a bank holding company based in the United States. Headquartered in Los Angeles, it was the nation's eighth largest banking company.[1]

Key Information

Although First Interstate Bancorp was taken over by Wells Fargo in 1996, the name (along with the company logo) has continued to be used in the banking world by First Interstate BancSystem, who has been using the name under a franchise agreement since 1984.

History

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In 1928, Amadeo Giannini, born in California to Italian immigrant parents, formed a holding company, the Transamerica Corporation, to consolidate his existing financial ventures, which began business with $1.1 billion in assets and both banking and non-banking activities. From the 1930s through the mid-1950s, Transamerica made a number of acquisitions of banks and other financial corporations throughout the western United States, creating the framework for the later First Interstate system.

In 1953, regulators succeeded in forcing the separation of Transamerica Corporation and Bank of America under the Clayton Antitrust Act. Transamerica Corporation, a Delaware corporation, petitioned this court to review an order of the Board of Governors of the Federal Reserve System entered against it under Section 11 of the Clayton Act, 15 U.S.C.A. § 21, to enforce compliance with Section 7 of the Act, 15 U.S.C.A. § 18.[2]

The Bank Holding Company Act of 1956 placed new restrictions on companies such as Transamerica. Thus Transamerica's banking operations, which included 23 banks in 11 western states, were spun off as Firstamerica Corporation in 1958.[3] Transamerica continued to pursue its insurance and other operations.

Firstamerica (doing business as First Western Bank and Trust Company) changed its name to Western Bancorporation in 1961, and the retail operations were renamed United California Bank (UCB), after the acquisition of Los Angeles-based California Bank, which operated primarily in Southern California. In large part to compete with Bank of America (by far the largest bank in California at the time), Western expanded steadily in the 1960s, both domestically and overseas, ending the decade with assets of more than $10 billion. The bank's financial services network grew through the 1974 founding of the Western Bancorporation Mortgage Company and the 1979 formation of Western Bancorp Venture Capital Company.

During the 1960s, 1970s, and 1980s Western Bancorporation operated in California under the UCB brand. In the early 1970s, noticing Bank of America's (BofA) successful credit card BankAmericard, UCB decided to offer its own card which would be issued locally by individual banks under the name "Master Charge," Later, when BofA spun off its franchised credit card operations to a separate organization named Visa International and changed the card's name to "Visa," UCB did the same thing, spinning off Master Charge to Master Card International and changing the name to MasterCard.

In 1970, their affiliated bank, United California Bank of Basel, Switzerland collapsed after unauthorized trades in cocoa and silver futures. Several of the bank's officers, including President Paul Erdman spent time in jail on fraud charges.[4]

In June 1981 the company changed its name to First Interstate Bancorp.[5] The First Interstate name became a systemwide brand for most of the company's banks, thus promoting greater public recognition of the company and internal consistency. During the 1980s, in addition to acquiring more banks, First Interstate jumped into new areas of financial services as the deregulation of the banking industry progressed. In 1983 the First Interstate Discount Brokerage was set up to provide bank customers with securities and commodities support. In 1984 the bank branched into merchant banking with the purchase of Continental Illinois Ltd. and equipment leasing with the acquisition of the Commercial Alliance Corporation of New York, and broadened its mortgage banking activities by acquiring the Republic Realty Mortgage Corporation. In 1986 and 1987, First Interstate attempted a $3.2 billion hostile takeover of the ailing Bank of America, but the bid was defeated. Undaunted, First Interstate acquired Allied Bancshares, a Houston based bank. [6]

First Interstate ran into its own troubles in the late 1980s and early 1990s stemming from bad real estate loans and the severe recession in California. The bank posted losses in the hundreds of millions for 1987, 1989, and 1991. Consequently, First Interstate concentrated on rebuilding and rejuvenating its existing operations rather than acquiring new ones. A number of noncore unprofitable subsidiaries were jettisoned, including the equipment leasing unit, a government securities operation, and most of the wholesale banking unit. Rumors of a takeover of First Interstate were rife in the early 1990s before the bank recovered fully by mid-decade under the leadership of Chairman and CEO Edward M. Carson (1929–2010).[7][8] In 1994, they acquired 15 branches in Washington from the failed Great American Bank.[9]

Despite First Interstate's healthier condition, and with the banking industry consolidation in full swing, Wells Fargo made a hostile bid for First Interstate in October 1995 initially valued at $10.8 billion. Other banks came forward as potential 'white knights,' including Norwest Corporation, Bank One Corporation, and First Bank System. The latter made a serious bid for First Interstate, with the two banks reaching a formal merger agreement in November valued initially at $10.3 billion. But First Bank ran into regulatory difficulties with the way it had structured its offer and was forced to bow out of the takeover battle in mid-January 1996. Talks between Wells Fargo and First Interstate then led within days to a merger agreement for $11.3 billion in stock.[10] Wells Fargo completed the acquisition on April 1, 1996 and announced the elimination of 7,200 jobs.[11]

First Interstate Bancorp's stock was traded on the New York Stock Exchange under the stock symbol "I".[12]

In 1984, First Interstate BancSystem of Montana entered into a franchise agreement with First Interstate Bancorp of California to use the First Interstate Bank name and logo. In 1996 when First Interstate Bancorp was split up, the Montana organization successfully negotiated to retain the well known First Interstate name and logo. The current First Interstate BancSystem continues to operate 306 locations in 14 states as of 2023 in chiefly the northern Great Plains and Rocky Mountain regions.[13]

1986 Hollywood heist

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In June 1986, a highly trained group, called the "Hole in the Ground" crew by the media, tunneled under the First Interstate Bank in Hollywood at Spaulding Avenue and Sunset Boulevard through an extensive network of tunnels over the course of several months and took about US$270,000 (equivalent to $770,000 in 2024) in cash and the contents of 36 safe deposit boxes valued at US$2,500,000 (equivalent to $7,200,000 in 2024). The group rode all-terrain vehicles through the underground storm drain system of Los Angeles, and used gas-powered generators, hammer drills, power saws, and digging equipment to tunnel 100 ft (30 m) up into the bank's vault.[14][15]

1992 Victorville heist

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On January 24, 1992, four robbers wearing boiler suits and ski mask and brandishing AK-47s broke into the Interstate Bank in Victorville across the street from the mall. The robbers ran off with US$331,951 (equivalent to $743,800 in 2024) in cash and lead the Victorville Police in the longest high speed chase at the time. Two hours after the robbery the police arrested Gerry Edward Alexander, getaway driver Jon Harrington, and robbers Anthony Hicks and Willie Harris. They were eventually sentenced to 30 years in prison. This robbery is the subject of crime drama Rescue 911 and was shown in the episode of the same name.[16]

See also

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References

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First Interstate Bancorp

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First Interstate Bancorp was a major headquartered in , , that grew into one of the nation's largest banking institutions through aggressive expansion and acquisitions before its dissolution in 1996.

Origins and Early Development

The company traces its roots to the banking operations of , which were spun off in to form Firstamerica Corporation as a separate focused on commercial banking in the . In 1961, it adopted the name Western Bancorporation to reflect its regional scope, operating a network of banks primarily in and expanding into neighboring states through mergers and purchases during the and . Under leadership such as Joseph Pinola, who served as chairman from the , the firm emphasized interstate banking, capitalizing on regulatory changes that allowed holding companies to cross state lines.

Growth and Expansion

By the early , Western Bancorporation rebranded to First Interstate Bancorp in , signaling a national ambition while maintaining its western focus. The company pursued significant acquisitions, including the 1959 purchase of California Bank—the state's second-largest at the time—and later expansions into with the 1983 acquisition of IntraWest Bank of , which solidified its position as the largest bank in that state. Further growth included the 1986 takeover of the failed First National Bank and Trust of amid the . By the mid-1990s, First Interstate operated approximately 1,000 branches across 13 states, employed nearly 37,000 people, and held assets valued at around $58 billion, ranking it as the fourteenth-largest banking organization in the U.S. Iconic symbols of its prominence included the 73-story First Interstate World Center tower in , completed in 1989.

Challenges and Acquisition

Despite its scale, First Interstate faced operational hurdles, including high overhead costs, regional economic downturns in the and early , and underperformance relative to peers, with lagging behind competitors. An ambitious but unsuccessful bid to acquire in 1986-1987 highlighted its growth strategy but also exposed vulnerabilities. Under Chairman William E.B. Siart from the mid-, the bank improved profitability, achieving $1.59 per $100 of assets in 1995. However, in October 1995, & Company launched a hostile takeover, culminating in a $11.3 billion stock acquisition announced in January 1996—the largest banking merger in U.S. history at the time. The deal integrated First Interstate's operations into , leading to the closure of up to 350 branches and the elimination of about 8,000 jobs, effectively ending First Interstate Bancorp as an independent entity. The acquisition bolstered 's position as a national powerhouse, particularly in .

Origins and Early Development

Spin-off from Transamerica

was established in 1928 by Amadeo P. Giannini as a to consolidate his banking interests, including control over the , which had evolved from the founded by Giannini in 1904. This structure allowed Transamerica to oversee a vast network of banking operations alongside non-banking assets, such as insurance, reflecting Giannini's vision for an integrated financial empire spanning multiple states. Regulatory scrutiny intensified in the mid-20th century due to antitrust concerns over the concentration of banking power. In 1953, a U.S. Court of Appeals decision in a Board case under Section 7 of the Clayton Antitrust Act initially limited enforcement against Transamerica's banking holdings, ruling that the Act did not fully apply to bank holding companies at the time; however, this prompted further legislative action. The resulting of 1956 closed this loophole by requiring holding companies to divest either their banking or non-banking assets to prevent undue economic concentration, forcing Transamerica to separate its banking operations while retaining its insurance and other non-banking interests. In response, Transamerica announced plans in September 1957 to spin off its banking subsidiaries into a new entity called Firstamerica Corporation, with the transfer completed on July 1, 1958. Firstamerica received Transamerica's majority-owned banks, encompassing 23 institutions across 11 western states, including key operations such as First Western Bank and Trust Company and California Bank, which later merged to form United California Bank in 1961. The initial capitalization of Firstamerica consisted entirely of the transferred bank stocks, exchanged for all of its capital stock issued to Transamerica. All shares of Firstamerica were then distributed pro rata to Transamerica shareholders in proportion to their existing holdings, effectively divesting Transamerica of its banking interests by 1958. This spin-off complied with the Act's mandates and marked the formal separation of Transamerica's diversified operations from its banking arm.

Formation as Firstamerica Corporation

Firstamerica Corporation was formed in 1957 as a through the spin-off of Transamerica Corporation's banking operations, which included 23 banks across 11 western states. This separation was mandated by the of 1956, which prohibited conglomerates from combining banking and non-banking activities to prevent undue concentration of economic power. The corporation established its headquarters in , , at 707 , positioning it as the central hub for coordinating regional banking efforts. Upon , Firstamerica's core subsidiaries comprised the transferred banks from Transamerica, with First Western Bank and Trust Company emerging as a primary operational entity focused on trust and commercial banking services in . The initial was composed of seasoned banking executives drawn from these subsidiaries to ensure smooth transition and governance under the new holding structure. The company's early strategic goals centered on fostering regional expansion throughout the , emphasizing consolidation of banking services while strictly adhering to federal regulations under the to avoid antitrust scrutiny. This approach aimed to build a cohesive network of affiliated banks capable of competing with larger national institutions without overstepping legal boundaries on interstate operations. In 1961, Firstamerica marked its first major consolidation by acquiring California Bank and merging it with its subsidiary First Western Bank and Trust Company, creating United California Bank as the flagship institution with over 100 branches primarily in . This and integration strengthened Firstamerica's presence in the state's key markets, setting the stage for further growth in commercial and .

Expansion and Acquisitions

Major Bank Purchases in the 1960s and 1970s

In 1961, Western Bancorporation completed a pivotal merger between the California Bank of and the First Western Bank and Trust Company of , forming the United California Bank as its flagship subsidiary. This transaction, valued through the exchange of stock and approved by the Federal Reserve Board, combined institutions with approximately $2 billion in assets and $1.7 billion in deposits, positioning Western Bancorporation as the fourth-largest bank in and laying the foundation for regional dominance in the West. Throughout the , Western Bancorporation pursued steady geographic expansion by acquiring banks in key Western states, including and , to build a multi-state network while adhering to regulatory restrictions on interstate banking. These purchases enhanced its presence beyond , diversifying operations and increasing in underserved regions. By the end of the decade, the holding company's assets had surpassed $10 billion, reflecting the scale of this organic growth through targeted integrations rather than aggressive hostile takeovers. The 1970s marked an acceleration in acquisitions, exemplified by the merger of the National Bank of Washington in Tacoma and the Pacific National Bank of Seattle to create the Pacific National Bank of Washington, Western Bancorporation's largest subsidiary at the time. This deal consolidated operations in the Pacific Northwest, adding significant branch networks and deposit bases in Washington state amid rising competition from national players. Further expansions into Oregon and other Western markets followed, contributing to a branch count exceeding 300 by 1979 and propelling total assets beyond $20 billion by 1980, underscoring the era's focus on scale and operational efficiency.

Diversification into New Services in the 1980s

During the , the U.S. banking industry underwent significant deregulation, exemplified by the Depository Institutions Deregulation and Monetary Control Act of 1980, which phased out interest rate ceilings on deposits, and the Garn-St. Germain Depository Institutions Act of 1982, which expanded the powers of financial institutions to offer new services like checking accounts and consumer lending. These changes, combined with state-level relaxations of interstate banking restrictions starting in the early , enabled multibank holding companies like Western Bancorporation (rebranded as First Interstate Bancorp in 1981) to diversify beyond traditional deposit and loan operations into merchant banking, equipment leasing, and broader geographic expansion. This regulatory environment facilitated First Interstate's growth, allowing it to leverage its existing multibank structure—established through earlier acquisitions in the and —to enter competitive new markets and services. In 1984, First Interstate marked its entry into merchant banking by acquiring Continental Illinois Ltd., a London-based of the troubled National Bank and Trust Company, for an undisclosed amount; this move provided access to international activities, including and advisory services in . That same year, the company expanded into equipment leasing through the purchase of Commercial Alliance Corporation, an independent commercial financing firm based in New York, in a deal valued at $184.5 million, which bolstered its portfolio with specialized leasing for industrial and transportation equipment. These acquisitions aligned with the deregulation-driven push for banks to compete with non-bank financial firms, enabling First Interstate to generate fee-based revenue streams outside . The diversification continued with territorial expansion, as First Interstate acquired Allied Bancshares Inc., a Houston-based , in 1987 for securities valued between $415 million and $450.4 million; this deal added 66 branches and strengthened the company's presence in amid the state's oil-driven economic challenges. By the late , these efforts contributed to First Interstate operating over 1,000 branches across 13 states, primarily in the West and Southwest, reflecting the accelerating trend of interstate consolidation permitted by regional banking compacts.

Rebranding and Organizational Changes

Transition to Western Bancorporation

In 1961, Firstamerica Corporation restructured its corporate identity by changing its name to Western Bancorporation, a move designed to emphasize its strategic emphasis on expansion across the and to consolidate its branding as a regional banking powerhouse. This renaming occurred under the leadership of Chairman Frank P. King Jr. and aligned with the company's growing portfolio of banks primarily operating in western states, building on its origins as the banking arm of following the 1958 spin-off. A key element of this transition involved the rebranding of major subsidiaries to support the new corporate direction. Notably, First Western Bank and Trust Company merged with Bank in 1961, creating United California Bank as the surviving entity with a unified statewide presence in . This merger, approved by the Board, integrated operations and rebranded the combined network under the United California Bank name, enhancing the holding company's visibility and operational cohesion in its core market. The restructuring also prompted operational shifts toward a more integrated model, with centralized oversight from to coordinate activities among its affiliated banks. This facilitated early interstate banking strategies, enabling coordinated growth and service offerings across western states such as , , and , while laying the groundwork for further domestic and international expansion. The resulting entity emerged stronger, with the 1961 merger alone producing a combined boasting approximately $2 billion in assets and $1.7 billion in deposits, establishing it as California's fourth-largest at the time. By the close of the decade, Western Bancorporation's total assets had surpassed $10 billion, underscoring the effectiveness of these changes in driving scale and regional dominance.

Adoption of First Interstate Name

In June 1981, Western Bancorporation underwent a significant , changing its name to First Interstate Bancorp to highlight its status as the nation's first major interstate banking organization and to foster greater public awareness through a cohesive identity across its operations. The move, led by Chairman Joseph Pinola, aimed to unify the previously disparate names under a single banner, emphasizing the interconnected network spanning multiple states. The rollout of the new branding was swift and comprehensive, involving the adoption of the First Interstate name at approximately 900 banking offices across 11 Western states and 40 international locations, complete with updated signage, logos, and standardized marketing materials for affiliates like . This systemwide implementation marked the introduction of the country's inaugural bank franchise program, enabling participating institutions to leverage shared advertising campaigns and operational support while preserving local management. In 1984, First Interstate Bancorp formalized a franchise agreement with First Interstate BancSystem of , granting the regional entity rights to the First Interstate name, branding elements, and select services in areas without direct competition from the parent company. This arrangement extended the brand's reach without full ownership integration, aligning with the broader strategy of national expansion. The rebranding effort received favorable market response, enhancing customer familiarity and driving operational growth; by 1985, the company's total assets had expanded to approximately $20 billion, reflecting the strengthened position in a competitive landscape.

Notable Incidents and Challenges

1970 United California Bank of Basel Collapse

Originally founded in 1965 as Salik Bank by economist Paul Erdman in partnership with Charles E. Salik, it was acquired by United California Bank (a of Firstamerica Corporation) in May 1969, with the parent company holding a 58% stake, and renamed United California Bank of Basel to expand operations into and facilitate cross-border financial activities. The quickly grew its assets to $69 million by year-end 1969, focusing on high-risk ventures in volatile markets. The collapse occurred in September 1970 when UCB Basel became insolvent due to unauthorized speculative trades in futures, primarily cocoa and silver, executed by bank officers without proper oversight. These trades, involving attempts to corner segments of the cocoa market, resulted in massive losses estimated at $40 million—equivalent to the costliest banking in Swiss history at the time—as market prices turned against the positions during audits revealing and falsified balance sheets. Key figures included vice chairman Paul Erdman and deputy chairman Alfred Kaltenbach, with seven officers arrested by Swiss authorities on charges of , , and mismanagement; Erdman, an American executive, was later imprisoned before fleeing to the . Firstamerica responded immediately by directing United California Bank to inject funds from its reserves, ultimately setting aside $40 million to cover the losses, safeguard depositors, and settle claims, though net extraordinary charges to the parent totaled approximately $19.4 million after recoveries. UCB Basel was shuttered permanently on September 16, 1970, with its and branches also closed, marking the end of the subsidiary's operations. The incident triggered intense U.S. regulatory scrutiny from federal banking authorities over Firstamerica's oversight of foreign subsidiaries. In Switzerland, it prompted parliamentary discussions on stricter banking controls, heightening skepticism toward American financial institutions abroad. Despite the embarrassment, the failure had no direct repercussions on Firstamerica's domestic U.S. operations, which remained stable with over $5 billion in assets.

1986 and 1992 Bank Heists

In June 1986, a professional crew known as the Hole in the Ground Gang executed a daring underground heist at the First Interstate Bank branch located at 7700 in Hollywood, . Over the weekend of June 6–8, the perpetrators accessed the bank's vault by tunneling through the city's system using all-terrain vehicles for initial entry, then drilling a 20-by-25-inch hole through three feet of and flooring. Once inside, they targeted at least 75 safety deposit boxes, making off with approximately $190,000 in cash along with jewelry, rare coins, and other valuables valued at around $2.5 million. The operation demonstrated advanced planning and engineering skills, but no arrests were made, and the case remains unsolved despite joint investigations by the and the FBI. The 1992 incident shifted to a more direct armed at a First branch in , in the high desert region. On January 24, 1992, four masked robbers dressed in blue boiler suits, gloves, and ski masks burst into the bank around 9:30 a.m., brandishing rifles and ordering employees and customers to the floor. They compelled bank staff to open the vault and seized $331,951 in cash before fleeing in a white van, which led to an intense high-speed chase along involving San Bernardino County Sheriff's deputies. Shots were exchanged during the pursuit, but the robbers abandoned some of the stolen money, enabling partial recovery of the funds; several participants, including Gary Edward Alexander and James Hicks, were subsequently arrested and convicted of armed under 18 U.S.C. § 2113. The event was linked to an organized criminal network through evidence of coordinated roles and prior associations among the perpetrators. These heists resulted in combined losses for First Interstate Bancorp of under $3.5 million, with the 1986 accounting for the majority due to the unrecovered valuables. In response, the bank temporarily shuttered the affected Hollywood branch to assess damage and notify impacted customers for loss inventories, while federal authorities, including the FBI, conducted thorough probes into both cases to trace potential connections to broader criminal activities. Extensive media coverage in outlets like the portrayed the incidents as emblematic of escalating threats to California's prominent banking institutions, exposing weaknesses in physical barriers against tunneling tactics and the rising aggression of firearm-wielding gangs.

Leadership and Governance

Key Executives and Their Tenures

First Interstate Bancorp's early leadership was marked by the efforts of Frank King, who served as chairman from 1959 to 1972 following the company's formation as Firstamerica Corporation in 1958 through the spin-off of Transamerica Corporation's banking subsidiaries. King, who had previously grown Bank from 37 to 248 branches between 1946 and 1959, orchestrated the pivotal 1959 merger with First Western Bank and Trust Company, establishing a statewide banking chain and expanding the network to 21 banks across 11 western states under the renamed Western Bancorporation. During his tenure, the organization navigated significant challenges, including the 1970 collapse of its Swiss affiliate, United Bank of Basel, which incurred approximately $40 million in losses from unauthorized futures trading in cocoa, leading to arrests and regulatory scrutiny; King oversaw the recovery efforts that limited broader impacts on the . In the mid-1970s, Clifford Tweter succeeded King as chairman from 1972 to 1978, focusing on stabilizing and diversifying operations post-Basel while Ralph J. served as president during the same period. Tweter and expanded the portfolio by establishing subsidiaries such as Western Bancorporation Mortgage Company in 1974 and a in 1975, alongside developing the Transaction Information Processing System (TIPS), which handled up to 750,000 daily transactions by 1985 and supported interstate banking growth. Joseph J. Pinola took over as chairman and CEO in 1978, serving until 1990, during which he centralized across the decentralized network of banks and spearheaded the 1981 rebranding to First Interstate Bancorp to emphasize interstate operations. Pinola drove key acquisitions, including the 1983 acquisition of Financial Corp., merging it into First Interstate Bank of and making it the largest bank in the state with over $2.4 billion in assets; he also navigated the late-1980s real estate crisis by cutting the workforce by 8% and divesting non-core subsidiaries to mitigate provisions exceeding $1 billion. Edward M. Carson assumed the role of chairman and CEO in June 1990, holding it until his retirement in May 1995, after previously serving as president from 1985. Amid the , Carson implemented a rigorous recovery strategy that reduced headcount by over 25% from 35,000 employees, reassigned or removed one-third of lending officers through stringent performance tests, and refocused on core banking to restore profitability and shareholder confidence. His cost-cutting measures and operational streamlining positioned the company for its eventual $11.6 billion acquisition by in 1996, just a year after his departure; Carson, who began his career at First National Bank of Arizona in 1951, died on March 12, 2010, at age 80.

Board Oversight During Growth Periods

During the and , the of First Interstate Bancorp's predecessor organization, Western Bancorporation, played a pivotal role in navigating antitrust regulations while facilitating regional mergers to drive expansion. Under Chairman Frank King, who served from 1959 to 1972, the board approved key acquisitions, including the 1959 purchase of California Bank, which led to the formation of United California Bank in 1961 and helped grow assets to over $10 billion by 1969. These decisions were shaped by ongoing antitrust scrutiny, stemming from a 1948 Federal Reserve lawsuit resolved in 1953 that cleared the company of monopoly charges in interstate banking. A significant challenge during this era was the 1970 collapse of United California Bank's Basel, Switzerland subsidiary, triggered by a involving fraudulent cocoa trades that resulted in losses estimated at $40 million—the costliest banking in Swiss history at the time. The board oversaw the subsidiary's suspension of operations and the parent company's application to the IRS for tax relief on the losses, underscoring early emphasis on in international operations. In 1972, following King's retirement, the board transitioned leadership to Clifford Tweter as chairman and Ralph J. as president and CEO, maintaining focus on compliant growth strategies. In the 1980s, as First Interstate Bancorp rebranded in 1981, the board under Joseph J. Pinola—appointed chairman and CEO in 1978—centralized strategic oversight to manage diversification risks amid banking . Pinola's leadership emphasized balanced expansion, approving entries into non-traditional services such as investments starting in 1979, discount securities broking in 1983, mortgage banking, and equipment leasing in 1984, while preserving local operational autonomy at subsidiary banks. To address emerging risks, including those highlighted by the prior Basel incident, the board directed efforts to mitigate exposure in volatile sectors; for instance, in 1987, it supported Pinola's initiatives to counter $500 million in Texas bad debts from energy and downturns by reducing the workforce by 8% and divesting unprofitable units. Entering the , the board shifted toward efficiency measures amid economic pressures and takeover threats, approving cost-cutting restructurings to rebuild after late-1980s losses. In response to growing acquisition speculation, the board in implemented a allowing additional stock purchases at half price in the event of a two-step , serving as a key defensive mechanism. This reflected a collective push for operational streamlining and protection of during a period of industry consolidation.

Acquisition by Wells Fargo

Hostile Takeover Bid and Negotiations

In October 1995, & Company launched a hostile takeover bid for First Interstate Bancorp, offering approximately $10.8 billion in stock, equivalent to 0.625 shares of common stock per First Interstate share. First Interstate's management, led by CEO William E.B. Siart, strongly opposed the bid, viewing it as undervaluing the company and preferring a friendly merger with First Bank System of as a strategic alternative. To resist the unsolicited offer, First Interstate employed defensive measures, including activation of its shareholder rights plan—commonly known as a "poison pill"—which would dilute any acquirer's stake if it exceeded 20% ownership without board approval. Siart's strategy emphasized maintaining independence through the pursuit of the First Bank merger, announced on November 6, 1995, at a value of about $10.1 billion, or 2.6 shares of First Bank stock per First Interstate share, positioning it as a "white knight" defense against Wells Fargo. However, First Interstate's corporate structure, lacking a staggered board or restrictions on shareholder consents, limited its defenses and exposed it to pressure from institutional investors holding roughly 70% of its shares. The bidding war escalated with counteroffers and legal challenges. Wells Fargo raised its proposal to $10.6 billion on November 13, 1995, increasing the exchange ratio to 0.68 shares, but First Interstate rejected it and proceeded with First Bank. Shareholder lawsuits emerged almost immediately, alleging breaches of by First Interstate's board in rebuffing Wells Fargo, while First Interstate countersued Wells Fargo in December 1995 for violations of securities laws related to open-market purchases. These actions prolonged negotiations amid shifting stock prices and shareholder dynamics, with Wells Fargo securing support from key investors like Kohlberg Kravis Roberts & Co., which owned 8.1% of First Interstate. By January 23, 1996, after First Interstate terminated its agreement with First Bank (which received a $200 million breakup fee), the parties reached a definitive merger agreement valued at $11.6 billion, providing First Interstate shareholders with two-thirds of a share per share—approximately 0.67 shares—yielding about $152 per First Interstate share based on prevailing prices. This represented a premium of about 43% from pre-bid levels and marked the largest acquisition in U.S. at the time. Regulatory scrutiny followed, with the and California Attorney General approving the deal in late February 1996 after required divestitures of 61 overlapping branches to address antitrust concerns. The Board granted final clearance on March 6, 1996, following public hearings and reviews under the , enabling shareholder votes and completion of the merger later that year.

Merger Integration and Job Impacts

The acquisition of First Interstate Bancorp by was finalized on April 1, 1996, enabling to absorb First Interstate's approximately $58 billion in assets and form a combined with $108 billion in total assets, positioning it as the eighth-largest in the United States. This merger marked the largest banking transaction in U.S. history at the time, as measured by the value of stock exchanged. Significant operational overlaps, especially in California where the banks shared extensive branch networks, necessitated widespread consolidation. This resulted in the planned closure of about 350 branches by the end of 1996, alongside the elimination of 7,200 jobs—roughly 16% of the merged workforce of 45,800 employees. Wells Fargo announced initial layoffs affecting 1,750 workers on the day of completion, with further reductions targeting redundant roles in administration, operations, and customer service. Integrating the two banks' cultures, information technology systems, and branding presented notable challenges, as prioritized rapid unification to realize cost savings. Key efforts included converting First Interstate customer accounts to 's IT platforms, a process slated for late summer , and phasing out First Interstate signage and operations centers. These transitions, however, encountered difficulties such as system glitches and staff attrition, with full operational alignment not achieved until 1997; the rushed pace contributed to temporary disruptions in service and the departure of several First Interstate executives. On the financial front, the merger generated short-term costs through a restructuring charge, covering severance packages—some offering up to two years' pay for senior managers—and other integration expenses. Despite these outlays, the acquisition bolstered Wells Fargo's earnings, with second-quarter net income rising 56% to $363 million compared to the prior year, driven by expanded scale and revenue synergies.

Legacy and Influence

Relation to Modern First Interstate BancSystem

The modern First Interstate BancSystem, Inc., a Montana-based financial , traces its origins to 1968, when founder Homer Scott, Sr. acquired the in , establishing the foundation for what would become a regional community banking network. This entity operated independently from the California-headquartered First Interstate Bancorp, developing its own growth trajectory through acquisitions and organic expansion in the northern and Mountain regions. By 2023, First Interstate BancSystem had grown to operate approximately 306 branches across 14 states, managing total assets of around $30 billion. As of September 2025, following divestitures of branches in , , and , it operates approximately 280 branches across 14 states with total assets of $27.3 billion. A pivotal connection to the original First Interstate Bancorp emerged in 1984, when entered into a franchise agreement with the Los Angeles-based Bancorp, granting perpetual rights to use the "First Interstate" name and logo in , , and . This agreement, part of Bancorp's innovative nationwide franchise program, allowed BancSystem to leverage the established brand for and identity while maintaining full operational autonomy. The licensing emphasized brand continuity for franchisees outside Bancorp's core markets, with no shared ownership or management structures. When acquired First Interstate Bancorp in 1996, First Interstate BancSystem was unaffected due to the geographic non-overlap between its regional footprint and Bancorp's primarily West Coast operations. The franchise terms ensured that BancSystem retained its indefinitely, enabling it to continue as an independent entity without involvement in the merger's integration or regulatory divestitures. This separation preserved BancSystem's distinct corporate identity and trajectory, evolving it into a standalone (NASDAQ: FIBK) focused on community banking services, including deposits, commercial real estate loans, commercial loans, agricultural loans, consumer loans, wealth management, and mortgage banking.

Role in California Banking History

First Interstate Bancorp emerged as a pioneer in the structure of interstate bank holding companies following the of 1956, which imposed restrictions on conglomerates like its parent and mandated the separation of banking from non-banking interests. Formed in as Firstamerica Corporation through the spin-off of Transamerica's banking assets, it became one of the earliest large multibank holding companies, operating across multiple states while complying with federal regulations that limited direct branching but allowed holding company expansions. This model influenced subsequent regulatory interpretations and set a precedent for interstate growth, particularly as the 1980s deregulation—through acts like the Garn-St. Germain Depository Institutions Act of 1982—eased restrictions on acquisitions and diversified services, enabling First Interstate to expand into discount brokerage and other financial products. In California, First Interstate achieved significant dominance, particularly in Southern California, where the majority of its branches were concentrated. By the mid-1980s, it controlled approximately $35.5 billion in deposits as of June 30, 1986, making it a key player in the state's commercial banking sector with over 320 branches, most located in the south. A proposed merger with BankAmerica in 1986 would have combined these deposits with BankAmerica's $94.3 billion, capturing 42% of California's total commercial bank deposits based on 1985 data, underscoring First Interstate's substantial foothold and the concentrated nature of the market. The company's legacy in mergers positioned it as a precursor to the era of mega-banks, accelerating the consolidation wave in U.S. banking during the late . Its aggressive acquisition strategy, including the 1983 purchase of Bank in , exemplified the shift toward regional super-regionals that paved the way for nationwide institutions. Economically, First Interstate supported West Coast growth from the 1970s through the 1990s by financing regional development and innovating services like the Cirrus ATM network launched in 1982, which connected over 1,000 branches across 13 states. Preceding its 1996 acquisition by , it managed over $55 billion in assets as of October 1995, reflecting its scale in bolstering California's amid real estate booms and recessions.

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