EXHIBIT 99
CHEMICAL BANKING CORPORATION
AND THE CHASE MANHATTAN CORPORATION
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(In millions)
The following unaudited pro forma combined balance sheet combines the
historical consolidated balance sheets of Chemical Banking Corporation (the
"Corporation") and The Chase Manhattan Corporation ("Chase") giving effect to
the merger of the Corporation and Chase (the "Merger"), which will be accounted
for as a pooling of interests, as if the Merger had been effective on September
30, 1995. The information set forth below should be read in conjunction with the
notes to the pro forma combined financial statements which describe the pro
forma adjustments. The effect of the estimated $1.5 billion restructuring charge
($925 million net of tax) expected to be taken in connection with the Merger has
been reflected in the pro forma combined balance sheet; however, since the
proposed restructuring charge is nonrecurring, it has not been reflected in the
pro forma combined statement of income. The pro forma financial data do not give
effect to the anticipated cost savings in connection with the Merger. The pro
forma financial data are not necessarily indicative of the actual financial
position that would have occurred had the Merger been consummated on September
30, 1995 or that may be obtained in the future.
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CHEMICAL BANKING CORPORATION
AND THE CHASE MANHATTAN CORPORATION
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(In millions)
At September 30, 1995
--------------------------------------------------------------
Chemical Chase Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------- ---------- ------------- ---------
ASSETS (a,i,j,n)
Cash and Due from Banks $ 7,118 $ 5,141 $ - $ 12,259
Deposits with Banks 3,690 5,798 - 9,488
Federal Funds Sold and Securities
Purchased Under Resale Agreements 13,348 10,959 - 24,307
Trading Assets:
Debt and Equity Instruments 14,080 6,826 - 20,906
Risk Management Instruments 19,750 8,001 - 27,751
Securities: (b)
Held-to-Maturity 8,074 1,900 - 9,974
Available-for-Sale 26,017 5,807 (424)(c) 31,400
Loans 85,623 64,821 424 (c) 151,031
163 (d)
Allowance for Credit Losses (2,405) (1,404) - (3,809)
Premises and Equipment 2,134 1,866 (102)(o) 3,898
Due from Customers on Acceptances 1,200 862 - 2,062
Accrued Interest Receivable 1,301 1,201 - 2,502
Assets Acquired as Loan Satisfactions 56 - 72 (d) 128
Assets Held for Accelerated Disposition 202 - - 202
Other Assets 7,665 8,314 (235)(d) 15,744
-------- -------- ------- ---------
Total Assets $187,853 $120,092 $ (102) $ 307,843
======== ======== ======= ==========
LIABILITIES
Deposits:
Domestic Noninterest-Bearing $ 18,482 $ 12,196 $ - $ 30,678
Domestic Interest-Bearing 45,826 19,917 - 65,743
Foreign 32,480 37,320 - 69,800
-------- -------- ------- ----------
Total Deposits 96,788 69,433 - 166,221
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements 30,911 12,539 - 43,450
Other Borrowed Funds 14,690 4,756 (4,946)(e) 14,500
Acceptances Outstanding 1,203 871 - 2,074
Trading Liabilities 20,664 10,959 4,946 (e) 36,569
Accounts Payable, Accrued Expenses and Other Liabilities 4,229 7,038 144 (f) 12,297
925 (g)
(39)(o)
Long-Term Debt 7,537 5,518 -- 13,055
-------- -------- ------- ---------
Total Liabilities 176,022 111,114 1,030 288,166
STOCKHOLDERS' EQUITY
Preferred Stock 1,250 1,400 - 2,650
Common Stock 255 389 (203)(h) 441
Capital Surplus 6,444 4,357 (205)(h) 10,596
Retained Earnings 4,153 3,484 (144)(f) 6,256
(925)(g)
(249)(h)
(63)(o)
Net Unrealized Gain (Loss) on Securities
Available-for-Sale, Net of Taxes (135) 5 - (130)
Treasury Stock, at Cost (136) (657) 657 (h) (136)
--------- --------- -------- ---------
Total Stockholders' Equity 11,831 8,978 (1,132) 19,677
--------- --------- -------- ---------
Total Liabilities and Stockholders' Equity $ 187,853 $ 120,092 $ (102) $ 307,843
========= ========= ======== =========
See Notes to Unaudited Pro Forma Combined Financial Statements
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EXHIBIT 99
CHEMICAL BANKING CORPORATION
AND THE CHASE MANHATTAN CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(In millions, except per share data)
The following unaudited pro forma combined statements of income, for the
nine month periods ended September 30, 1995 and 1994, combine the historical
consolidated statements of income of the Corporation and Chase giving effect to
the Merger, which will be accounted for as a pooling of interests, as if the
Merger had been effective as of the beginning of the periods indicated after
giving effect to the pro forma adjustments described in the notes to the pro
forma combined financial statements. The effect of the estimated $1.5 billion
restructuring charge ($925 million net of tax) expected to be taken in
connection with the Merger has been reflected in the pro forma combined balance
sheet; however, since the proposed restructuring charge is nonrecurring, it has
not been reflected in the pro forma combined statement of income. The pro forma
financial data do not give effect to the anticipated cost savings in connection
with the Merger. The pro forma financial data are not necessarily indicative of
the results that actually would have occurred had the Merger been consummated on
the dates indicated or that may be obtained in the future.
The unaudited pro forma combined statements of income for each of the
three years ended December 31, 1994, 1993 and 1992 are included in the
Corporation's current report on Form 8-K filed with the Securities and Exchange
Commission on October 26, 1995.
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CHEMICAL BANKING CORPORATION
AND THE CHASE MANHATTAN CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(In millions, except per share data)
For the Nine Months Ended September 30, 1995
----------------------------------------------------------------
Chemical Chase Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------- ---------- ----------- ---------
INTEREST INCOME (a,j,n)
Loans $ 5,275 $ 4,323 $ 38 (c) $ 9,636
Securities 1,553 358 (38)(c) 1,873
Trading Assets 615 332 - 947
Federal Funds Sold and Securities Purchased
Under Resale Agreements 612 786 - 1,398
Deposits with Banks 211 426 - 637
------- ------- ------- -------
Total Interest Income 8,266 6,225 - 14,491
------- ------- ------- -------
INTEREST EXPENSE
Deposits 2,725 1,964 - 4,689
Short-Term and Other Borrowings 1,614 1,307 - 2,921
Long-Term Debt 412 299 - 711
------- ------- ------- -------
Total Interest Expense 4,751 3,570 - 8,321
------- ------- ------- -------
Net Interest Income 3,515 2,655 - 6,170
Provision for Credit Losses 362 210 - 572
------- ------- ------- -------
Net Interest Income After Provision for Credit Losses 3,153 2,445 - 5,598
NONINTEREST REVENUE
Trust and Investment Management Fees 284 409 - 693
Corporate Finance and Syndication Fees 405 207 - 612
Service Charges on Deposit Accounts 225 - 91 (k) 316
Fees for Other Financial Services 891 831 (91)(k) 1,631
Trading Revenue 440 315 - 755
Securities Gains 98 32 (23)(c) 107
Other Revenue 465 345 23 (c) 833
------- ------- ------- -------
Total Noninterest Revenue 2,808 2,139 - 4,947
------- ------- ------- -------
NONINTEREST EXPENSE
Salaries 1,719 1,362 (3)(l) 3,078
Employee Benefits 328 418 (10)(f) 736
Occupancy Expense 395 278 - 673
Equipment Expense 295 249 24 (o) 568
Foreclosed Property Expense (21) - (39)(m) (60)
Restructuring Charge - - 15 (l) 15
Other Expense 1,035 954 (12)(l) 2,016
- - 39 (m) -
------- ------- ------- -------
Total Noninterest Expense 3,751 3,261 14 7,026
------- ------- ------- -------
Income Before Income Tax Expense and Effect of
Accounting Change 2,210 1,323 (14) 3,519
Income Tax Expense 884 498 (6) 1,376
------- ------- ------- -------
Income Before Effect of Accounting Change $ 1,326 $ 825 $ (8) $ 2,143
------- ------- ------- -------
Income Applicable to Common Stock $ 1,245 $ 733 $ (8) $ 1,970
------- ------- ------- -------
Income Per Share (Before Accounting Change):
Primary $ 4.95 $ 4.07 $ 4.49
Assuming Full Dilution $ 4.66 $ 4.04 $ 4.32
Average Common Shares Outstanding:
Primary 251.3 180.0 438.5(h)
Assuming Full Dilution 268.8 181.4 457.5(h)
See Notes to Unaudited Pro Forma Combined Financial Statements
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CHEMICAL BANKING CORPORATION
AND THE CHASE MANHATTAN CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(In millions, except per share data)
For the Nine Months Ended September 30, 1994
---------------------------------------------------------
Chemical Chase Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------- ---------- ------------ ---------
INTEREST INCOME (a,j,n)
Loans $ 4,155 $ 3,929 $ 44 (c) $ 8,128
Securities 1,270 545 (44)(c) 1,771
Trading Assets 545 300 - 845
Federal Funds Sold and Securities Purchased Under Resale Agreements 372 1,048 - 1,420
Deposits with Banks 280 365 - 645
------- --------- ------ ------
Total Interest Income 6,622 6,187 - 12,809
------- --------- ------ -------
INTEREST EXPENSE
Deposits 1,660 1,717 - 3,377
Short-Term and Other Borrowings 1,056 1,456 - 2,512
Long-Term Debt 401 229 - 630
------- ------- ------- -------
Total Interest Expense 3,117 3,402 - 6,519
------- ------- ------- -------
Net Interest Income 3,505 2,785 - 6,290
Provision for Credit Losses 465 410 - 875
------- ------- ------- -------
Net Interest Income After Provision for Credit Losses 3,040 2,375 - 5,415
NONINTEREST REVENUE
Trust and Investment Management Fees 322 423 - 745
Corporate Finance and Syndication Fees 272 162 - 434
Service Charges on Deposit Accounts 222 - 80 (k) 302
Fees for Other Financial Services 854 799 (80)(k) 1,573
Trading Revenue 600 519 - 1,119
Securities Gains 65 95 (93) (c) 67
Other Revenue 447 383 93 (c) 923
------- ------- ------- -------
Total Noninterest Revenue 2,782 2,381 - 5,163
------- ------- ------- -------
NONINTEREST EXPENSE
Salaries 1,634 1,298 - 2,932
Employee Benefits 329 369 (10)(f) 688
Occupancy Expense 431 296 - 727
Equipment Expense 275 222 24 (o) 521
Foreclosed Property Expense 39 - 36 (m) 75
Restructuring Charge 48 - - 48
Other Expense 1,160 1,012 (36)(m) 2,136
------- ------- ------- -------
Total Noninterest Expense 3,916 3,197 14 7,127
------- ------- ------- -------
Income Before Income Tax Expense 1,906 1,559 (14) 3,451
Income Tax Expense 791 583 (6) 1,368
------- ------- ------- -------
Net Income $ 1,115 $ 976 $ (8) $ 2,083
------- ------- ------- -------
Income Applicable to Common Stock $ 1,007 $ 880 $ (8) $ 1,879
------- ------- ------- -------
Income Per Share:
Primary $ 3.98 $ 4.76 $ 4.22
Assuming Full Dilution $ 3.92 $ 4.73 $ 4.17
Average Common Shares Outstanding:
Primary 253.0 185.0 445.4(h)
Assuming Full Dilution 260.6 186.1 454.1(h)
See Notes to Unaudited Pro Forma Combined Financial Statements
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EXHIBIT 99
Notes to Unaudited Pro Forma Combined Financial Statements
(a) The Corporation and Chase are in the process of reviewing their
accounting policies and as a result of this review, it may be necessary
to restate either the Corporation's or Chase's financial statements to
conform to those accounting policies that are determined to be most
appropriate by the combined company. While some restatements of prior
periods have been included in the pro forma combined financial statements
included in this Exhibit, further restatements may be necessary upon the
completion of this review process.
(b) The Corporation and Chase intend to review their combined securities
portfolio to determine the classification of such securities as either
available-for-sale or held-to-maturity in connection with the combined
company's anticipated interest rate risk position. As a result of this
review, certain reclassifications of the combined company's securities
might take place. No such adjustments have been made to existing
securities classifications in the pro forma condensed combined balance
sheet. Any such reclassifications will be accounted for in accordance
with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities."
(c) Chase's historical financial data includes within available-for-sale
securities certain securities issued by foreign governments (such as
Mexico) to financial institutions as part of a debt renegotiation (i.e.,
"Brady Bonds"). To conform to the Corporation's classification, Chase's
historical financial data have been reclassified on a pro forma basis to
reflect such securities as a component of loans. Both the Corporation and
Chase have accounted for Brady Bonds in accordance with the provisions of
SFAS 115.
Chase's historical financial data reflect sales of Brady Bonds as a
component of securities gains and interest income from Brady Bonds as a
component of interest income from securities. To conform to the
Corporation's classification, Chase's historical financial data have been
reclassified on a pro forma basis to reflect sales of Brady Bonds as a
component of other revenue and interest income from Brady Bonds as a
component of interest income from loans.
(d) Chase's historical financial data reflect assets acquired as loan
satisfactions as a component of other assets. Effective January 1, 1995,
Chase adopted SFAS 114, "Accounting by Creditors for Impairment of a
Loan," and prospectively classified in substance foreclosures (ISFs) as
nonperforming loans (the ISF balance as of the January 1, 1995 adoption
remained in other assets). To conform to the Corporation's
classification, Chase's September 30, 1995 historical financial data have
been reclassified on a pro forma basis to reflect the remaining $163
million balance of ISFs as nonperforming loans. To conform to the
Corporation's classification, Chase's historical financial data have been
reclassified on a pro forma basis to reflect assets acquired as loan
satisfactions (excluding ISFs) as a separate balance sheet caption.
(e) The Corporation's historical financial data reflect securities sold but
not yet purchased as a component of other borrowed funds. To conform to
Chase's classification, the Corporation's historical financial data have
been reclassified on a pro forma basis to reflect its securities sold but
not yet purchased as a component of trading liabilities.
(f) Chase elected at the time of its adoption of SFAS No. 106 (effective
January 1, 1993) to amortize the transition liability for accumulated
postretirement benefits over 20 years, while the Corporation upon its
adoption of SFAS No. 106 (effective January 1, 1993) elected to expense
its entire transition liability. To conform with the Corporation's
adoption of SFAS No. 106, Chase's historical financial data have been
- 66 -
adjusted on a pro forma basis to reverse the amortization of Chase's
transition liability reflected as a component of OPEB expense under SFAS
106. Chase's transition liability of approximately $270 million ($167
million after-tax), net of the $38 million ($23 million after-tax)
reversal of amortization expense, has been reflected in retained earnings
on the pro forma consolidated balance sheet. Both the pre-tax and tax
effect are included in the caption "Accounts Payable, Accrued Expenses
and Other Liabilities" on the pro forma balance sheet.
(g) In connection with the Merger, it is expected that a one-time
restructuring charge of approximately $1.5 billion ($925 million
after-tax) will be incurred at the time of the consummation of the
Merger. The restructuring charge is the result of severance expenses to
be incurred in connection with anticipated staff reductions, costs
incurred in connection with planned office eliminations and other
merger-related expenses, including costs to eliminate redundant back
office and other operations of the Corporation and Chase. The
restructuring charge is assumed to have the following components for the
purpose of the pro forma financial statements:
(in millions)
Severance.................................. $ 550
Real Estate Costs.......................... 550
Other...................................... 400
---
$ 1,500
The effect of the proposed restructuring charge has been reflected in the
pro forma combined balance sheet; however, since the proposed
restructuring charge is nonrecurring, it has not been reflected in the
pro forma combined statement of income. Both the pre-tax and tax effect
are included in the caption "Accounts Payable, Accrued Expenses and Other
Liabilities" on the pro forma balance sheet.
(h) It is assumed that the Merger will be accounted for on a pooling of
interests accounting basis and, accordingly, the related pro forma
adjustments to the common stock, capital surplus and retained earnings
accounts at September 30, 1995 reflect (i) an exchange of 186.1 million
shares of the Corporation's Common Stock (using the exchange ratio of
1.04) for the 179.0 million shares of Chase common stock outstanding at
September 30, 1995; (ii) the exchange of each outstanding share of Chase
preferred stock into one share of the Corporation's preferred stock; and
(iii) the cancellation and retirement of all remaining shares of Chase
common stock held in Chase's treasury. Reference is made to the Form
8-K, which the Corporation has filed with the Securities and Exchange
Commission on October 26, 1995, for more information regarding the
Merger.
For the income per share calculations, the pro forma combined average
common shares outstanding (primary and assuming full dilution) reflects
the exchange of the Corporation's Common Stock (using the exchange ratio
of 1.04) for the outstanding shares of Chase common stock.
(i) The pro forma financial information presented does not give effect to the
planned net repurchase of up to a maximum of 9 million shares in the
aggregate of the Corporation's Common Stock and of Chase's Common Stock
(after giving effect to the issuance of shares by both the Corporation
and Chase under various employee benefit plans) prior to the consummation
of the Merger pursuant to their respective previously announced buyback
programs.
(j) On September 2, 1995, Chase acquired the securities processing businesses
of U.S. Trust Corporation which was merged into Chase and accounted for
under the purchase method. The results of U.S. Trust Corporation are
included in these statements from the date of acquisition.
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The Corporation's disposition of approximately 60% of Chemical Bank New
Jersey, National Association in the 1995 fourth quarter is not considered
significant to the pro forma combined financial statements and,
therefore, its impact is not included in these statements.
(k) Chase's historical financial data reflect service charges on deposit
accounts as a component of fees for other financial services. To conform
to the Corporation's classification, such charges have been reclassified
under a separate caption.
(l) Chase's historical financial statements reflect the components of
restructuring charges within various noninterest expense categories. To
conform to the Corporation's classification, all such charges have been
reclassified to restructuring charge. The following costs have been
reclassified:
Nine Months
ended September 30, 1995
(in millions)
Salaries........................................... $ 3
Other Expense...................................... 12
------
Costs reclassified to Restructuring Charge......... $ 15
======
(m) Chase's historical financial data reflect foreclosed property expense as
a component of other expense. To conform to the Corporation's
classification, Chase's historical financial data have been reclassified
on a pro forma basis to reflect foreclosed property expense as a separate
income statement caption.
(n) Transactions between the Corporation and Chase are not material in
relation to the pro forma combined financial statements and therefore
intercompany balances have not been eliminated from the pro forma
combined amounts.
(o) Chase's historical financial data reflect the capitalization of computer
software costs. To conform to the Corporation's accounting policy,
Chase's historical financial data have been adjusted on a pro forma basis
to recognize immediately as expense those computer software costs that
are capitalized.
The pro forma adjustment to the balance sheet reflects the unamortized
capitalized computer software costs of $102 million ($63 million net of
tax) as of September 30, 1995. The pro forma adjustment to the statement
of income for each period reflects the net impact of (i) charging to
expense computer software costs that were capitalized during each
respective period less (ii) the elimination of the previously recorded
amortization of capitalized computer software costs.
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