UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 20, 1998
1-2981
(Commission File Number)
-----------------------------
FIRSTAR CORPORATION
(Exact name of Registrant as specified in its charter)
WISCONSIN 39-1940778
(State of incorporation) (I.R.S. Employer
Identification Number)
777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
(Address of Registrant's principal executive office)
414-765-4321
(Registrant's telephone number)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Effective November 20, 1998, Star, Firstar, Firstar (WI) and Merger Sub
(each as defined below) consummated the Merger (as defined below)
pursuant to the Amended and Restated Agreement and Plan of
Reorganization, dated as of June 30, 1998, as amended and restated as of
September 17, 1998 (the "Merger Agreement"), by and among Star Banc
Corporation, an Ohio corporation ("Star"), Firstar Corporation, a
Wisconsin corporation ("Firstar"), Firstar (WI) Corporation, a Wisconsin
corporation and wholly-owned subsidiary of Firstar ("Firstar (WI)," or
"Registrant") and Firstar Merger Corporation, a Wisconsin corporation
and wholly-owned subsidiary of Firstar (WI) ("Merger Sub"). Pursuant to
the Merger Agreement, (i) Merger Sub merged with and into Firstar (the
"First Step Merger"), so that (a) Firstar is the surviving corporation
in the First Step Merger and (b) Firstar (WI) became the ultimate parent
holding company for Firstar after the First Step Merger, and (ii) Star
merged with and into Firstar (the "Second Step Merger" and, with the
First Step Merger, the "Merger") so that (a) Firstar is the surviving
corporation of the Second Step Merger, and (b) Firstar (WI) continues to
be the ultimate parent holding company for Firstar after the Second Step
Merger. Firstar (WI) has been renamed "Firstar Corporation." A copy of
the press release announcing the consummation of the Merger is filed as
Exhibit 99.1 to this Current Report on Form 8-K.
ITEM 5. OTHER MATTERS
A. MATTERS RELATED TO THE MERGER
Pursuant to the Merger Agreement, (i) each share of Firstar common
stock, par value $1.25 per share, has been converted into the right to
receive 0.76 shares of the common stock, par value $0.01, of Firstar
(WI) ("Registrant Common Stock"), with cash in lieu of fractional
shares, and (ii) each share of Star common stock, par value $5.00 per
share, has been converted into the right to receive one share of
Registrant Common Stock. Registrant's Registration Statement on Form S-
4, which was declared effective by the Securities and Exchange
Commission on September 23, 1998, sets forth certain information
regarding the Merger, the Registrant, Star, Firstar and Merger Sub.
The Registrant is the successor issuer to Firstar under Rule 12g-3(a) of
the Securities Exchange Act of 1934, as amended. The Registrant Common
Stock is, therefore, deemed registered under Section 12(b) of the
Exchange Act.
The following individuals have been appointed as Directors of Registrant
to serve until they are eligible for nomination and election by the
shareholders of Registrant for the terms set forth below or until their
successors are elected and qualified:
-2-
Class I Class II Class III
Paul M. Baker James R. Bridgeland, Jr. Robert C. Buchanan
Michael E. Battan Samuel M. Cassidy Victoria B. Buyniski
Laurance L.
Browning, Jr. George M. Chester, Jr. John C. Dannemiller
Roger L. Fitzsimonds V. Anderson Coombe David B. Garvin
James L. Forbes Jerry A. Grundhofer William H. Lacy
J.P. Hayden, Jr. Joe F. Hladky Kenneth P. Manning
Roger L. Howe Thomas J. Klinedinst, Jr. Daniel F.
McKeithan, Jr.
Sheldon B. Lubar Robert J. O'Toole Charles S.
Mechem, Jr.
David B. O'Maley Judith D. Pyle Daniel J. Meyer
O'dell M. Owens John J. Stollenwerk Thomas E. Petry
William W. Wirtz Oliver W. Waddell
Directors in Class I will be eligible for nomination and election in
1999, those in Class II in 2000 and those in Class III in 2001. After
election, each Director will serve for a three year term, or until his
or her successor is elected and qualified.
B. DESCRIPTION OF REGISTRANT CAPITAL STOCK
GENERAL
The authorized capital stock of Registrant consists of 800,000,000
shares of Registrant Common Stock, and 10,000,000 shares of preferred
stock, par value $1.00 ("Registrant Preferred Stock"). After taking
into account the shares of Registrant Common Stock to be reserved or
issued pursuant to the Merger, the number of shares of Registrant Common
Stock available for other corporate purposes is approximately
570,000,000. The availability for issue of shares of Registrant Common
Stock by the directors of Registrant without further action by
shareholders (except as may be required by applicable stock exchange
requirements) would enable Registrant's Board of Directors (the
"Registrant Board") to consider additional transactions, including
mergers and acquisitions, in which shares of Registrant Common Stock
would be issued and could also be viewed as enabling the directors to
take certain actions, including issuing shares, warrants or rights to
acquire shares, which might make it more difficult for persons who seek
to obtain control of Registrant. Registrant has no present plans to
issue any shares of Registrant Common Stock other than as described
herein, pursuant to the Merger Agreement and through employee benefit
plans of Registrant.
-3-
REGISTRANT COMMON STOCK
Listing. Registrant Common Stock is listed on the New York Stock
Exchange under the trading symbol "FSR."
Voting and Other Rights. The holders of Registrant Common Stock
are entitled to one vote per share, and in general, a majority of votes
cast with respect to a matter will be sufficient to authorize action on
routine matters. Directors are to be elected by a plurality of the
votes cast, and shareholders do not have the right to cumulate their
votes in the election of directors. Subject to supermajority
requirements, (i) amendments to the Articles of Incorporation of
Registrant will be approved if the votes cast within a voting group
favoring the action exceed the votes cast within the voting group
opposing the action and (ii) a merger or dissolution of Registrant, or
the sale of all or substantially all of its assets, must be approved by
both the affirmative vote of the holders of a majority of the voting
power of the outstanding voting shares and the affirmative vote of the
holders of a majority of the outstanding shares of each class entitled
to vote thereon as a class.
In the event of liquidation, holders of Registrant Common Stock
would be entitled to receive pro rata any assets legally available for
distribution to shareholders of Registrant with respect to shares held
by them, subject to any prior rights of any Registrant Preferred Stock
(as described below) then outstanding.
Registrant Common Stock does not have any preemptive rights, redemption
privileges, sinking fund privileges or conversion rights. Upon issuance
in the First Step Merger and the Second Step Merger, the shares of
Registrant Common Stock will be validly issued, fully paid and
nonassessable, except for possible assessment in certain circumstances.
Firstar Bank Milwaukee, N.A. acts as transfer agent and registrar
for the Registrant Common Stock.
Distributions. The holders of Registrant Common Stock are entitled
to receive such dividends or distributions as the Registrant Board may
declare out of funds legally available for such payments. The payment
of distributions by Registrant is subject to the restrictions of
Wisconsin law applicable to the declaration of distributions by a
corporation. A Wisconsin corporation generally may not authorize and
make distributions if, after giving effect thereto, it would be unable
to meet its debts as they become due in the usual course of business or
if the corporation's total assets would be less than the sum of its
total liabilities plus the amount that would be needed, if it were to be
dissolved at the time of distribution, to satisfy claims upon of
shareholders who have preferential rights superior to the rights of the
holders of its common stock. In addition, the payment of distributions
to shareholders is subject to any prior rights of outstanding preferred
stock.
As a bank holding company, the ability of Registrant to pay
distributions will be affected by the ability of its banking
subsidiaries to pay dividends. The ability of such banking
subsidiaries, as well as of Registrant, to pay dividends in the future
currently is, and could be further, influenced by bank regulatory
requirements and capital guidelines.
-4-
REGISTRANT PREFERRED STOCK
Registrant has authorized 10,000,000 shares of Registrant Preferred
Stock and may issue such Registrant Preferred Stock in one or more
series, each with such preferences, limitations, designations,
conversion rights, voting rights, distribution rights, voluntary and
involuntary liquidation rights and other rights as the Registrant Board
may determine.
C. ADOPTION OF RIGHTS PLAN
On November 20, 1998, the Registrant Board declared a
dividend of one preferred share purchase right ("Rights") on each
outstanding share of Registrant Common Stock. A copy of the press
release announcing the declaration of the Rights dividend is filed as
Exhibit 99.2 to this Current Report on Form 8-K.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION AND SELECTED
FINANCIAL DATA
The following unaudited Pro Forma Condensed Financial Information and
explanatory notes are presented to show the impact on the historical financial
position and the results of operations of the Combined Company for the proposed
merger of Star Banc Corporation ("Star") and Firstar Corporation ("Firstar") and
should be read in conjunction with the consolidated financial statements,
including the notes thereto, of Star and Firstar which are incorporated by
reference in this filing. The Pro Forma Condensed Financial Information also
reflects the combination of Star and Trans Financial, Inc. ("Trans Financial")
which was completed on August 21, 1998. The unaudited Pro Forma Condensed
Combined Financial Information is presented for illustration purposes only in
accordance with the assumptions set forth below, and is not necessarily
indicative of the operating results or financial position that would have
occurred if the Merger had been consummated nor is it necessarily indicative of
future operating results or financial position of the combined company.
In accordance with the terms of the Merger Agreement and Plan of
Reorganization, each share of Firstar Common Stock outstanding immediately prior
to the effective time of the merger will be converted into the right to receive
0.76 of a share of the combined company. Each share of Star Common Stock
outstanding immediately prior to the effective time of the merger will be
converted into the right to receive one share of the combined company.
In accordance with the terms of the merger agreement between Star and
Trans Financial each share of Trans Financial Common Stock outstanding
immediately prior to the effective time of the merger was converted into the
right to receive 0.9003 of a share of Star Common Stock.
The unaudited Pro Forma Financial Information reflects the Star/Firstar
merger using the pooling of interest method of accounting. Star's acquisition
of Great Financial Corporation ("Great Financial") was completed on February 7,
1998 and is reflected in Star's September 30, 1998 unaudited balance sheet. The
unaudited Pro Forma Condensed Balance Sheet assumes the Star/Firstar merger was
consummated on September 30, 1998. The unaudited Pro Forma Condensed Combined
Income Statements for the nine months ended September 30, 1998 and the year
ended December 31, 1997 present the combined results of operations of Star,
Great Financial, Trans Financial and Firstar as if the mergers and the Great
Financial acquisition had been effective January 1, 1997, after the effect of
certain adjustments described in the Notes to the Unaudited Pro Forma Condensed
Combined Financial Information. The unaudited Pro Forma Condensed Combined
Income Statements for the years ended December 31, 1996 and 1995, present the
combined results of operations of only Star, Trans Financial and Firstar as if
the mergers had occurred at the beginning of each period presented.
The Great Financial acquisition was accounted for as a purchase and
accordingly, the results of the transaction and the operations have been
reflected in the financial statements of Star from the date of acquisition.
Under the purchase method, the purchase price is allocated to the assets and
liabilities acquired based on their estimated fair values at the time of the
-5-
acquisition. The allocation of the purchase price for Great Financial is
preliminary and may change as certain estimates and contingencies are finalized,
although any adjustments are not expected to be material.
The combined company expects to achieve substantial merger benefits
including operating cost savings and revenue enhancements. The pro forma
earnings, which do not reflect any potential savings or revenue enhancements
which are expected to result from the consolidation of operations of Star and
Firstar, in addition to Star and Trans Financial, and are not indicative of the
results of future operations. No assurances can be given with respect to the
ultimate level of expense savings and revenue enhancements to be realized.
-6-
PROFORMA FIRSTAR SELECTED FINANCIAL DATA
(dollars in thousands except per share data)
Nine Nine
Months Months
ended ended
Sept. 30, Sept. 30, Year Ended December 31,
----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------
Results of Operations
Interest income $ 1,979,826 $ 1,920,461 $ 2,578,695 $ 2,266,358 $ 2,192,418 $ 1,803,450 $ 1,649,040
Interest expense 937,374 901,938 1,212,959 1,023,404 1,018,634 691,899 607,056
- ----------------------------------------------------------------------------------------------------------
Net interest income 1,042,452 1,018,523 1,365,736 1,242,954 1,173,784 1,111,551 1,041,984
Taxable equivalent
adjustment (a) 32,323 30,163 40,558 39,053 38,490 39,630 37,278
- ----------------------------------------------------------------------------------------------------------
Net interest
income (Fte) 1,074,775 1,048,686 1,406,294 1,282,007 1,212,274 1,151,181 1,079,262
Noninterest income 657,082 547,968 767,959 640,663 554,732 504,804 522,840
- ----------------------------------------------------------------------------------------------------------
Net revenue 1,731,857 1,596,654 2,174,253 1,922,670 1,767,006 1,655,985 1,602,102
Noninterest expense 993,328 893,724 1,224,923 1,162,183 1,086,385 1,026,566 992,953
Provision for loan
losses 87,466 81,976 123,595 97,334 67,117 50,475 64,892
Net income 417,163 387,681 518,574 415,418 380,831 357,684 342,261
- ----------------------------------------------------------------------------------------------------------
Per Share (b)
Basic EPS $ 1.92 $ 1.79 $ 2.39 $ 1.96 $ 1.76 $ 1.66 $ 1.59
Diluted EPS 1.88 1.75 2.35 1.93 1.74 1.64 1.57
Common stock cash
dividends declared
(Star) 0.69 0.60 0.80 0.63 0.53 0.47 0.39
Period-end market
value (Star) 66.13 45.94 57.38 30.63 19.83 12.13 11.67
Star 106,706 106,108 106,037 98,760 100,211 99,678 98,661
Firstar (@0.76) 110,386 110,401 110,309 112,526 115,088 114,297 112,679
----------------------------------------------------------------------------------
Weighted avg. shares
- basic 217,092 216,509 216,346 211,286 215,299 213,975 211,340
Star 109,832 109,035 109,015 100,549 101,470 101,230 101,673
Firstar (@0.76) 111,810 112,011 111,953 114,331 117,691 117,412 116,227
----------------------------------------------------------------------------------
Weighted avg. shares
- diluted 221,642 221,046 220,968 214,880 219,161 218,642 217,900
- ----------------------------------------------------------------------------------------------------------
Average Balances
Loans, net of
unearned interest $24,964,864 $24,335,608 $24,672,899 $21,524,241 $20,151,581 $18,011,109 $16,154,256
Loans held for sale 846,436 336,033 154,839 53,824 19,436 17,913 33,689
Investment
securities 6,654,307 6,582,578 6,518,682 6,192,654 6,401,651 5,780,779 5,357,232
Short-term
investments 124,196 198,752 214,726 139,314 234,360 323,226 549,043
- ----------------------------------------------------------------------------------------------------------
Total interest-
earning assets 32,589,803 31,452,971 31,561,146 27,910,033 26,807,028 24,133,027 22,094,220
Total assets 36,306,773 34,430,792 34,584,979 30,721,777 29,327,958 26,385,339 24,315,538
Noninterest-bearing
deposits 5,425,222 5,001,317 5,030,484 4,733,197 4,188,735 4,071,936 3,974,983
Interest-bearing
deposits 21,271,298 20,548,009 20,572,478 18,689,884 18,058,090 16,331,182 15,857,719
- ----------------------------------------------------------------------------------------------------------
Total deposits 26,696,520 25,549,326 25,602,962 23,423,081 22,246,825 20,403,118 19,832,702
Short-term
borrowings 3,986,993 3,800,328 3,774,257 3,354,009 3,378,162 2,664,178 1,521,488
Long-term debt 1,704,922 1,688,062 1,737,296 929,515 821,517 673,333 509,819
Shareholders'
equity 3,330,156 2,856,411 2,894,784 2,540,314 2,425,113 2,248,238 2,074,482
- ----------------------------------------------------------------------------------------------------------
Ratios
Return on average
assets 1.54% 1.51% 1.50% 1.35% 1.30% 1.36% 1.41%
Return on average
equity 16.75 18.15 17.91 16.35 15.70 15.91 16.50
Noninterest expense
to net revenue 57.36 55.97 56.34 60.45 61.48 61.99 61.98
Average shareholders'
equity to average
total assets 9.17 8.30 8.37 8.27 8.27 8.52 8.53
- ----------------------------------------------------------------------------------------------------------
Excluding SAIF Special Assessment and Restructuring Charges:
Net income $ 444,639 $ 387,681 $ 518,574 $ 460,131 $ 395,879 $ 357,684 $ 342,261
Diluted EPS 2.01 1.75 2.35 2.14 1.81 1.64 1.57
Return on average
assets 1.64% 1.51% 1.50% 1.50% 1.35% 1.36% 1.41%
Return on average
equity 17.85 18.15 17.91 18.11 16.32 15.91 16.50
Noninterest expense
to net revenue
(effeciency ratio) 54.92 55.97 56.34 56.87 60.17 61.99 61.98
- ----------------------------------------------------------------------------------------------------------
(a)Taxable equivalent adjustment was calculated utilizing a marginal federal income tax rate of 35 percent
for 1993-1998.
(b)Share amounts have been restated to reflect a 3-for-1 stock split in December 1996 for Star and a
2-for-1 stock split in January 1997 by Firstar.
-7-
STAR SELECTED FINANCIAL DATA
(dollars in thousands except per share data)
Nine Nine
Months Months
ended ended
Sept. 30, Sept. 30, Year Ended December 31,
----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------
Results of Operations
Interest income $ 903,267 $ 715,122 $ 804,552 $ 735,525 $ 710,404 $ 569,724 $ 518,167
Interest expense 420,225 312,594 342,653 317,326 332,196 223,618 194,691
- ----------------------------------------------------------------------------------------------------------
Net interest income 483,042 402,528 461,899 418,199 378,208 346,106 323,476
Taxable equivalent
adjustment (a) 3,538 3,591 3,400 3,300 3,356 3,069 3,283
- ----------------------------------------------------------------------------------------------------------
Taxable equivalent
net interest income 486,580 406,119 465,299 421,499 381,564 349,175 326,759
Noninterest income 241,879 175,537 204,576 170,522 138,124 117,015 112,890
- ----------------------------------------------------------------------------------------------------------
Net revenue 728,459 581,656 669,875 592,021 519,688 466,190 439,649
Noninterest expense 392,944 288,533 321,763 308,211 286,214 260,311 250,849
Provision for loan
losses 48,946 49,114 53,614 40,773 25,101 24,372 33,008
Net income 186,072 160,584 194,754 158,359 136,603 116,591 100,273
- ----------------------------------------------------------------------------------------------------------
Per Share (b)
Basic EPS $ 1.76 $ 1.66 $ 2.26 $ 1.79 $ 1.52 $ 1.30 $ 1.12
Diluted EPS 1.71 1.61 2.19 1.75 1.50 1.28 1.10
Common stock cash
dividends declared 0.69 0.60 0.80 0.63 0.53 0.47 0.39
Period-end book value 15.73 10.76 10.62 9.86 9.16 8.01 7.44
Period-end market
value 66.13 45.94 57.38 30.63 19.83 12.13 11.67
Weighted avg. shares
- basic 105,477 96,523 86,160 88,544 90,086 89,618 88,646
Weighted avg. shares
- diluted 108,603 99,450 88,877 90,238 91,247 91,095 91,549
- ----------------------------------------------------------------------------------------------------------
Average Balances
Loans, net of
unearned interest $11,340,444 $ 9,320,082 $ 8,012,368 $ 7,255,113 $ 6,669,806 $ 5,721,667 $ 5,146,341
Loans held for sale 471,303 125,720 -- -- -- -- --
Investment
securities 2,453,209 1,627,724 1,321,363 1,531,349 1,901,722 1,900,290 1,592,210
Short-term
investments 52,773 61,432 81,087 31,097 17,059 43,080 264,502
- ----------------------------------------------------------------------------------------------------------
Total interest-
earning assets 14,317,729 11,134,958 9,414,818 8,817,559 8,588,587 7,665,037 7,003,053
Total assets 16,091,445 12,213,498 10,357,273 9,705,620 9,439,626 8,252,244 7,542,798
Noninterest-bearing
deposits 2,140,728 1,674,329 1,487,192 1,345,296 1,188,364 1,065,933 1,036,141
Interest-bearing
deposits 9,835,276 7,712,342 6,402,135 6,298,664 6,155,334 5,212,946 5,085,718
- ----------------------------------------------------------------------------------------------------------
Total deposits 11,976,004 9,386,671 7,889,327 7,643,960 7,343,698 6,278,879 6,121,859
Short-term
borrowings 1,576,438 1,129,370 1,016,900 898,025 1,014,552 995,901 621,482
Long-term debt 705,617 481,194 380,659 162,840 163,788 155,172 54,308
Shareholders'
equity 1,534,103 988,202 861,029 835,566 777,674 702,605 640,868
- ----------------------------------------------------------------------------------------------------------
Ratios
Return on average
assets 1.55% 1.76% 1.88% 1.63% 1.45% 1.41% 1.33%
Return on average
equity 16.22 21.73 22.62 18.95 17.57 16.59 15.65
Net interest margin 4.53 4.86 4.94 4.78 4.44 4.55 4.67
Noninterest expense
to net revenue 53.94 49.61 48.03 52.06 55.07 55.84 57.06
Dividend payout ratio 40.26 35.54 35.07 34.69 35.00 35.89 34.41
Tier 1 risk-based
capital 8.11 8.70 8.77 7.64 7.97 8.66 11.10
Total risk-based
capital 11.36 12.54 12.61 11.88 11.23 12.16 12.41
Leverage (c) 6.75 7.73 8.01 6.53 6.23 6.27 8.24
Average shareholders'
equity to average
total assets 9.53 8.09 8.31 8.61 8.24 8.51 8.50
- ----------------------------------------------------------------------------------------------------------
(a)Taxable equivalent adjustment was calculated utilizing a marginal federal income tax rate of 35 percent
for 1993-1998.
(b)Share amounts have been restated to reflect a 3-for-1 stock split in December 1996.
(c)Defined as tier 1 equity as a percent of average assets.
-8-
FIRSTAR CORPORATION SELECTED FINANCIAL DATA (a)
(dollars in thousands except per share data)
Nine Nine
Months Months
ended ended
Sept. 30, Sept. 30, Year Ended December 31,
----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------
Results of Operations
Interest income $ 1,055,575 $ 1,046,372 $ 1,401,473 $ 1,382,898 $ 1,347,786 $ 1,119,744 $ 1,028,054
Interest expense 503,367 484,874 651,088 633,012 621,839 420,906 368,115
- ----------------------------------------------------------------------------------------------------------
Net interest income 552,208 561,498 750,385 749,886 725,947 698,838 659,939
Taxable equivalent
adjustment (b) 28,785 26,572 35,803 34,095 33,468 34,964 32,468
- ----------------------------------------------------------------------------------------------------------
Taxable equivalent
net interest income 580,993 588,070 786,188 783,981 759,415 733,802 692,407
Noninterest income 411,443 343,530 491,139 440,452 392,197 370,619 392,918
- ----------------------------------------------------------------------------------------------------------
Net revenue 992,436 931,600 1,277,327 1,224,433 1,151,612 1,104,421 1,085,325
Noninterest expense 589,472 541,291 744,018 773,330 734,122 706,185 689,274
Provision for loan
losses 36,187 30,539 54,658 42,647 36,756 23,891 29,090
Net income (loss) 231,058 219,790 295,209 250,177 228,913 226,673 227,938
- ----------------------------------------------------------------------------------------------------------
Per Share
Basic EPS $ 1.59 $ 1.51 $ 2.03 $ 1.68 $ 1.50 $ 1.49 $ 1.50
Diluted EPS 1.57 1.49 2.00 1.66 1.48 1.47 1.49
Common stock cash
dividends declared 0.67 0.61 0.82 0.74 0.66 0.58 0.50
Period-end book value 12.58 11.28 11.65 11.26 10.31 9.73 8.89
Period-end market
value 50.63 36.25 42.44 26.25 19.81 13.44 15.38
- ----------------------------------------------------------------------------------------------------------
Average Balances
Loans, net of
unearned interest $13,367,485 $13,125,311 $13,290,260 $12,922,374 $12,291,674 $11,215,862 $10,110,788
Loans held for sale 361,566 134,850 -- -- -- -- --
Investment
securities 4,112,001 4,184,282 4,181,962 4,369,452 4,195,257 3,526,614 3,378,348
Short-term
investments 71,423 137,320 124,923 107,202 203,452 266,487 247,206
- ----------------------------------------------------------------------------------------------------------
Total interest-
earning assets 17,912,475 17,581,763 17,597,145 17,399,028 16,690,383 15,008,963 13,736,342
Total assets 19,824,362 19,292,830 19,323,549 19,158,829 18,215,400 16,545,035 15,308,906
Noninterest-bearing
deposits 3,265,007 3,174,327 3,186,828 3,174,569 2,827,623 2,837,257 2,793,567
Interest-bearing
deposits 11,176,975 11,107,810 11,101,272 11,121,768 10,674,814 9,937,224 9,637,911
- ----------------------------------------------------------------------------------------------------------
Total deposits 14,441,982 14,282,137 14,288,100 14,296,337 13,502,437 12,774,481 12,431,478
Short-term
borrowings 2,385,757 2,439,833 2,397,346 2,357,838 2,275,739 1,591,305 865,298
Long-term debt 978,036 707,361 746,500 641,082 610,889 477,405 421,537
Shareholders'
equity 1,753,764 1,586,985 1,607,837 1,575,348 1,525,393 1,433,746 1,327,513
- ----------------------------------------------------------------------------------------------------------
Ratios
Return on average
assets 1.56% 1.52% 1.53% 1.31% 1.26% 1.37% 1.49%
Return on average
equity 17.64 18.57 18.41 15.95 15.11 15.96 17.81
Net interest margin 4.33 4.47 4.47 4.51 4.55 4.89 5.04
Noninterest expense
to net revenue 59.40 58.10 58.25 63.16 63.75 63.94 63.51
Dividend payout ratio 42.14 40.40 40.39 44.05 44.00 38.93 33.33
Tier 1 risk-based
capital 10.26 10.67 10.21 11.67 10.36 11.29 10.98
Total risk-based
capital 11.51 12.19 11.71 13.47 12.45 13.18 13.17
Leverage (c) 8.66 8.28 8.50 8.55 7.52 8.15 8.05
Average shareholders'
equity to average
total assets 8.85 8.23 8.32 8.22 8.37 8.67 8.67
- ----------------------------------------------------------------------------------------------------------
-9-
Per Share Data
For the
Nine Months
Ended
Sept. 30, For the Year Ended December 31,
1998 1997 1996 1995
------------ --------------------------------------
Earnings per common share (basic)-
Star:
Historical $ 1.76 $ 2.26 $ 1.79 $ 1.52
Pro forma combined for Great Financial 1.74 2.08 n/a n/a
Pro forma combined for Trans Financial n/a 2.11 1.67 1.52
Pro forma combined for the merger 1.92 2.39 1.96 1.76
Firstar:
Historical 1.59 2.03 1.68 1.50
Pro forma equivalent for the merger(1) 1.46 1.82 1.49 1.34
Cash dividends declared per common share-
Star:
Historical 0.69 0.80 0.63 0.53
Pro forma combined for the merger(2) 0.69 0.80 0.63 0.53
Firstar:
Historical 0.67 0.82 0.74 0.66
Pro forma equivalent for the merger(1) 0.52 0.61 0.48 0.40
At Sept. 30, At Dec. 31,
1998 1997
------------ ------------
Shareholders' equity per common share (end of period)-
Star:
Historical $ 15.73 $ 10.62
Pro forma combined for Great Financial -- 14.37
Pro forma combined for Trans Financial -- 14.38
Pro forma combined for the merger 15.18 14.89
Firstar:
Historical 12.58 11.65
Pro forma equivalent for the merger(1) 11.54 11.32
(1) Pro forma equivalent amounts for the Merger are calculated by multiplying
the pro forma combined amounts by the Exchange Ratio of .76.
(2) Pro forma combined dividends per share represent historical dividends per
share paid by Star.
-10-
Unaudited Pro Forma Condensed Combined Balance Sheet
As of September 30, 1998
(dollars in thousands)
Star Banc Firstar Pro Forma Pro Forma
Corp. Corporation Adjustments Firstar Corp.
------------- ------------- ------------- -------------
ASSETS:
Cash and Due from Banks..........................$ 681,774 $ 1,168,766 $ -- $ 1,850,540
Short-Term Investments........................... 16,092 66,098 -- 82,190
Loans Held for Sale.............................. 745,687 395,159 -- 1,140,846
Investment Securities:
Available-for-Sale............................. 2,596,298 1,662,245 -- 4,258,543
Held-to-Maturity............................... 139,928 2,288,465 -- 2,428,393
------------- ------------- ------------- -------------
Total Securities............................. 2,736,226 3,950,710 -- 6,686,936
Loans Net of Unearned Interest................... 11,708,779 14,012,054 -- 25,720,833
Allowance for Loan Losses............. 178,575 231,457 -- 410,032
------------- ------------- ------------- -------------
Net Loans.................................... 11,530,204 13,780,597 -- 25,310,801
Bank Premises and Equipment...................... 231,467 386,157 (40,000)B 577,624
Acceptances - Customers' Liability............... 22,398 9,266 -- 31,664
Intangibles...................................... 697,822 232,778 -- 930,600
Mortgage Servicing Rights........................ 138,755 27,600 -- 166,355
Other Assets..................................... 490,643 671,265 -- 1,161,908
------------- ------------- ------------- -------------
Total Assets...............................$ 17,291,068 $ 20,688,396 $ (40,000) $ 37,939,464
============= ============= ============= =============
LIABILITIES:
Deposits:
Noninterest Bearing Deposits...................$ 2,318,305 $ 3,496,318 $ -- $ 5,814,623
Interest Bearing Deposits...................... 10,633,730 11,063,853 -- 21,697,583
------------- ------------- ------------- -------------
Total Deposits............................. 12,952,035 14,560,171 -- 27,512,206
Short-Term Borrowings............................ 1,666,592 3,164,443 -- 4,831,035
Long-Term Debt................................... 484,607 705,944 -- 1,190,551
Trust Preferred Securities....................... 148,617 150,000 -- 298,617
Acceptances Outstanding.......................... 22,398 9,286 -- 31,684
Other Liabilities................................ 337,577 270,797 171,000 B 779,374
------------- ------------- ------------- -------------
Total Liabilities............................ 15,611,826 18,860,641 171,000 34,643,467
------------- ------------- ------------- -------------
SHAREHOLDERS' EQUITY:
Common Stock..................................... 536,540 182,207 (716,566)A 2,181
Preferred Stock.................................. -- -- -- --
Surplus.......................................... 389,921 13,567 716,566 A 1,120,054
Retained Earnings................................ 735,404 1,617,921 (211,000)B 2,142,325
Treasury Stock, at cost.......................... (9,497) (22,283) -- (31,780)
ESOP Shares Purchased with Debt.................. -- -- -- --
Net Unrealized Gain/(Loss) on Securities --
Available-for-Sale............................. 26,874 36,343 -- 63,217
------------- ------------- ------------- -------------
Total Shareholders' Equity................... 1,679,242 1,827,755 (211,000) 3,295,997
------------- ------------- ------------- -------------
Total Liabilities and Shareholders' Equity...$ 17,291,068 $ 20,688,396 $ (40,000) $ 37,939,464
============= ============= ============= =============
A Entry to adjust common stock and surplus for shares issued for the combined company at $0.01 per share.
B Entry to record estimated merger related and restructuring charges to be recorded at time of merger.
-11-
Unaudited Pro Forma Condensed Combined Income Statement
For the Nine Months Ended September 30, 1998
(amounts in thousands except per share amounts)
Great Pro Forma Pro Forma
Star Banc Financial Pro Forma Star Banc Firstar Pro Forma Firstar
Corporation Corporation Adjustments Corporation Corporation Adjustments Corporation
----------- ------------ ----------- ------------- ----------- ------------ -------------
INTEREST INCOME:
Interest and Fees on Loans..$ 752,070 $ 16,386 $ (187)(4) $ 768,269 $ 845,694 $ -- $ 1,613,963
Interest and Fees on Loans
Held For Sale............. 25,848 -- -- 25,848 19,060 -- 44,908
Interest on Investment
Securities................ 123,088 4,950 (194)(4) 127,844 187,852 -- 315,696
Other....................... 2,261 29 -- 2,290 2,969 -- 5,259
----------- ------------ ----------- ------------- ----------- ------------ -------------
Total Interest Income..... 903,267 21,365 (381) 924,251 1,055,575 -- 1,979,826
----------- ------------ ----------- ------------- ----------- ------------ -------------
INTEREST EXPENSE:
Interest on Deposits........ 325,784 9,682 (419)(4) 335,047 359,483 -- 694,530
Interest on Borrowings...... 94,441 3,677 842 (4) 98,960 143,884 -- 242,844
----------- ------------ ----------- ------------- ----------- ------------ -------------
Total Interest Expense.... 420,225 13,359 423 434,007 503,367 -- 937,374
----------- ------------ ----------- ------------- ----------- ------------ -------------
Net Interest Income..... 483,042 8,006 (804) 490,244 552,208 -- 1,042,452
Provision for Loan Losses... 48,946 2,333 -- 51,279 36,187 -- 87,466
----------- ------------ ----------- ------------- ----------- ------------ -------------
Net Interest Income
after Provision for
Loan Losses........... 434,096 5,673 (804) 438,965 516,021 -- 954,986
----------- ------------ ----------- ------------- ----------- ------------ -------------
NONINTEREST INCOME:
Trust Income................ 53,892 -- -- 53,892 140,933 -- 194,825
Service Charges on Deposits. 62,045 353 -- 62,398 76,690 -- 139,088
Credit Card Income.......... 18,491 -- -- 18,491 41,920 -- 60,411
Electronic Banking Income... 13,790 -- -- 13,790 18,363 -- 32,153
Mortgage Banking Income..... 49,835 2,506 (24)(4) 52,317 66,251 -- 118,568
Investment Securities Gains/
(Losses)-Net.............. 305 -- -- 305 801 -- 1,106
All Other Income............ 43,521 925 -- 44,446 66,485 -- 110,931
----------- ------------ ----------- ------------- ----------- ------------ -------------
Total Noninterest Income.. 241,879 3,784 (24) 245,639 411,443 -- 657,082
----------- ------------ ----------- ------------- ----------- ------------ -------------
NONINTEREST EXPENSE:
Salaries.................... 146,077 3,215 -- 149,292 270,254 -- 419,546
Pension and Other Employee
Benefits................. 22,383 1,438 -- 23,821 52,383 -- 76,204
Equipment Expense........... 22,753 1,149 -- 23,902 53,356 -- 77,258
Occupancy Expense - Net..... 24,698 -- -- 24,698 49,604 -- 74,302
All Other Expense........... 147,063 3,848 1,262 (4) 152,173 163,875 -- 316,048
----------- ------------ ----------- ------------- ----------- ------------ -------------
362,974 9,650 1,262 373,886 589,472 -- 963,358
Merger Related Charges...... 29,970 28,844 (28,844)(5) 29,970 -- -- 29,970
----------- ------------ ----------- ------------- ----------- ------------ -------------
Total Noninterest Expense. 392,944 38,494 (27,582) 403,856 589,472 -- 993,328
----------- ------------ ----------- ------------- ----------- ------------ -------------
INCOME BEFORE TAXES......... 283,031 (29,037) 26,754 280,748 337,992 -- 618,740
Income Tax.................. 96,959 (8,048) 5,732 (4)(5) 94,643 106,934 -- 201,577
----------- ------------ ----------- ------------- ----------- ------------ -------------
NET INCOME................$ 186,072 $ (20,989) $ 21,022 $ 186,105 $ 231,058 $ -- $ 417,163
=========== ============ =========== ============= =========== ============ =============
Basic earnings per common
share $ 1.76 $ 1.74 $ 1.59 $ 1.92
Diluted earnings per
common share 1.71 1.69 1.57 1.88
Average common shares -
basic 105,477 106,706 145,245 217,092
Average common shares -
diluted 108,603 109,832 147,118 221,642
See accompanying notes to the unaudited pro forma condensed financial information.
-12-
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL INFORMATION
(Amounts in thousands, except per share data)
NOTE 1 - BASIS OF PRESENTATION
The unaudited Pro Forma Condensed Combined Financial Information has been
prepared assuming the Star/Firstar merger will be accounted for under the
pooling of interests method and is based on the historical consolidated
financial statements of Star and Firstar. Star and Firstar are in the process
of reviewing their respective accounting policies. As a result of this review,
it might be necessary to restate certain amounts in financial statements of the
combined company to conform to those accounting policies that are most
appropriate. Any such restatements are not expected to be material.
On August 21, 1998, Star completed its acquisition of Trans Financial,
Inc. The purchase of Trans Financial was a tax-free stock-for-stock exchange,
which was accounted for as a pooling-of-interest. Star issued 10.7 million
shares of common stock to the Trans Financial shareholders in this transaction.
As a result of this acquisition, all prior period financial information has been
restated to include the historical results of Trans Financial Inc.
On February 7, 1998 Star completed the purchase of Great Financial
Corporation for 70 percent stock and 30 percent cash. Star issued 9.5 million
shares of common stock and paid out $190 million in cash for a total value of
$648 million for this transaction. This transaction was structured as a tax-
free exchange for shareholders receiving stock and has been accounted for as a
purchase. The pro forma adjustments for Great Financial represent management's
best estimates based on available information at this time. The actual
adjustments may differ from those reflected in the unaudited Pro Forma Condensed
Combined Financial Information as estimates and contingencies are finalized,
although any adjustments are not expected to be material.
NOTE 2 - SHAREHOLDERS' EQUITY
For the merger of Star and Firstar, Firstar shareholders will receive 0.76
shares of common stock in the combined company for each share of Firstar common
stock. Star shareholders will receive one share of common stock in the combined
company for each share of Star Banc common stock. Firstar had 145,288,419
shares of common stock outstanding at September 30, 1998, which will be
exchanged for 110,419,198 shares of the combined company, while Star had
106,753,757 shares of common stock outstanding at September 30, 1998. This
would result in a total of 217,172,955 shares of common stock issued for the
combined company. The common stock in the unaudited Pro Forma Condensed
Combined Balance Sheet has been adjusted to reflect the par value amount of the
total amount of shares of the combined company. Pro forma retained earnings
reflects an adjustment for estimated merger related charges as described in Note
3 below.
For the merger of Star and Trans Financial, Star exchanged 0.9003 of a
share of Star common stock for each share of Trans Financial common stock. Star
-13-
issued 10,733,116 shares on common stock for the acquisition of Trans Financial.
The common stock in the unaudited Pro Forma Condensed Combined Balance Sheet
includes the effect of the Star shares issued.
NOTE 3 - MERGER RELATED CHARGES
In connection with the merger of Star and Firstar, the combined company
expects to incur pre-tax merger related charges of approximately $325 million.
These are expected to include approximately $95 million in severance, change of
control, relocation and other employee related payments, $79 million in direct
conversion costs, $77 million in charges related to consolidation of systems and
operations, $40 million in occupancy and equipment charges (lease termination
costs, elimination of duplicate facilities and write-off of equipment) and $34
million in other merger related costs (including legal and investment banking
fees).
In connection with the merger of Star and Trans Financial, the combined
company incurred pre-tax merger related charges of approximately $30 million.
These charges included approximately $9.0 million in severance, change of
control and relocation payments, $5.3 million in occupancy and equipment charges
(lease termination costs, elimination of duplicate facilities and write-off of
equipment), $4.7 million in conversion costs and contract terminations, a $3.0
million commitment to establish a Foundation and $8.0 million in other merger
related costs (including legal and investment banking fees). In addition, a
$12.3 million provision for loan losses was charged to earnings on the merger
date. This additional loan loss provision was recorded in connection with the
change in the management of Trans Financial problem loans.
The Star/Firstar merger related charges and the related tax effect have
been reflected in the Unaudited Pro Forma Condensed Combined Balance Sheet as of
September 30, 1998, and have not been reflected in the Unaudited Pro Forma
Condensed Combined Income Statements as they are not expected to have a
continuing impact on the operations of the combined company.
NOTE 4 - GREAT FINANCIAL ACQUISITION
The historical balance sheet of Star as of September 30, 1998 includes the
acquisition of Great Financial, which occurred on February 7, 1998 and was
accounted for as a purchase transaction. The $190 million cash portion of the
purchase price represents 30 percent of the purchase price and was funded with
short-term borrowings. The Unaudited Pro Forma Condensed Combined Income
Statements for the nine months ended September 30, 1998 and the year ended
December 31, 1997 reflect Great Financial's operating results and the impact of
purchase accounting adjustments as if the transaction occurred on January 1,
1997.
-14-
The purchase accounting and pro forma adjustments related to the merger
reflected in the unaudited Pro Forma Condensed Combined Income Statements are
summarized as follows:
Nine Months Year
Ended Ended
Sept. 30, Dec. 31,
1998 1997
----------- ----------
Interest income -
Amortization of investment
securities $(194) $(2,333)
Amortization of loans (187) (2,264)
Interest expense -
Amortization of CDs (419) (5,023)
Amortization of long-term debt (31) (372)
Interest expense on short-term
borrowings to fund cash
portion of purchase price 873 10,475
Noninterest income -
Amortization of mortgage
servicing rights (24) (292)
Noninterest expense -
Amortization of identifiable
intangibles and Goodwill 1,262 15,140
Income tax expense on the pro forma adjustments is reflected using a 35% tax
rate.
The following assumptions were used in establishing the purchase
accounting adjustments for Great Financial included in the Unaudited Pro Forma
Condensed Income Statements.
Securities - The securities premium is assumed to be amortized into
interest income on an effective interest method basis over the remaining
estimated maturities of the securities, approximately 9 years.
Loans - The fair value adjustment is being amortized on a straight-line
basis over the estimated remaining maturities of the various loan types, ranging
from 3 to 13 years.
Mortgage servicing rights - The excess of fair value over carrying value
is amortized on an accelerated basis over estimated maturity of the underlying
mortgages.
Intangibles - Identifiable intangibles are amortized on a straight-line
basis over an average of 11 years based on the estimated lives of the deposits
acquired. Goodwill is amortized on a straight-line basis over 25 years.
Certificates of Deposit and Long-term Debt - The fair value adjustments
are amortized on an effective interest method over the remaining maturities of
the deposits and debt.
-15-
NOTE 5 MERGER RELATED CHARGES OF GREAT FINANCIAL
Included in Great Financial's results for January 1, 1998 through February
6, 1998, as shown in the Unaudited Pro Forma Condensed Combined Income Statement
for the nine months ended September 30, 1998, were the following merger related
charges incurred directly by Great Financial:
(Dollars in thousands)
Severance and benefit payments $ 4,301
Contract termination payments 4,847
Payout of nonqualified stock options 14,244
Investment banking and legal fees 4,235
Other direct merger charges 1,217
-------
Total merger related charges $28,844
=======
Noninterest expense (and the related tax effect) in the Unaudited Pro
Forma Condensed Combined Income Statement for September 30, 1998 was adjusted to
exclude the above one-time merger charges in the pro forma operating results.
-16-
ITEM 7(c) EXHIBITS
The following exhibits are filed herewith:
Exhibit
Number Title
99.1 Text of press release, dated November 20, 1998, issued
by Registrant.
99.2 Text of press release, dated November 20, 1998, issued
by Registrant.
-17-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Form 8-K to be signed on its behalf by
the undersigned, thereunto duly authorized.
FIRSTAR CORPORATION
By: /s/ Jennie P. Carlson
----------------------
Jennie P. Carlson
Senior Vice President,
General Counsel
and Secretary
Date: November 24, 1998
-18-
Exhibit Index
Exhibit
Number Title
99.1 Text of press release, dated November 20, 1998
issued by Registrant.
99.2 Text of press release, dated November 20, 1998,
issued by Registrant.
-19-