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EXHIBIT 99.1
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Contained in Exhibit 99.1 to this Form 8-K under "Unaudited Pro Forma
Condensed Financial Information" and "Notes to Unaudited Pro Forma Condensed
Financial Information" are certain forward-looking information statements
regarding the estimated amounts of acquisition and restructuring charges
related to the Somerset and Affiliated transactions. These forward-looking
statements are inherently uncertain, and actual results may differ from the
Company's expectations.
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
UST CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINING BALANCE SHEET
March 31, 1998
The following Unaudited Pro Forma Condensed Combining Balance Sheet
presents the combined financial position of UST Corp. and subsidiaries ("UST")
and Affiliated Community Bancorp., Inc. ("Affiliated") and its subsidiaries as
of March 31, 1998, assuming the combination, which was consummated on August 7,
1998, had occurred as of March 31, 1998. The Unaudited Pro Forma Condensed
Combining Balance Sheet also gives effect to the acquisition by UST of Somerset
Savings Bank ("Somerset") assuming the combination which was consummated on July
20, 1998, had occurred as of March 31, 1998. Refer to UST's Report on Form 8-K
filed on July 31, 1998 for a further discussion of the Somerset acquisition.
The accompanying pro forma information is based on historical balance
sheet data of UST, Somerset and Affiliated as of March 31, 1998, giving effect
to the combination of UST, Somerset and Affiliated under the pooling of
interests method of accounting. The combination of Affiliated with UST reflects
the issuance of 1.41 shares of UST Common stock in exchange for, and in
cancellation of, each outstanding share of Affiliated Common Stock. The
difference between the par value of the UST Common Stock issued and the par
value of the Affiliated Common Stock acquired ($5,832,000) has been recorded to
Additional paid-in capital. The Unaudited Pro Forma Condensed Combining Balance
Sheet reflects an after-tax charge for estimated merger and reorganization
expenses of $8.7 million ($12.0 million pre-tax) related to the Affiliated
transaction. The combination of Somerset with UST reflects the issuance of 0.19
shares of UST Common Stock in exchange for, and in cancellation of, each
outstanding share of Somerset Common Stock. The difference between the par value
of the UST Common Stock issued and the par value of the Somerset Common Stock
acquired ($14,741,000) has been recorded to Additional paid-in capital. The
unaudited Pro Forma Condensed Combining Balance Sheet reflects an after-tax
charge for estimated merger and reorganization expenses of $5.3 million ($7.5
million pre-tax) related to the Somerset transaction.
The Unaudited Pro Forma Condensed Combining Balance Sheet should be
read in conjunction with the Unaudited Pro Forma Condensed Combined Statements
of Income contained herein and the unaudited financial statements and notes
thereto of each of UST and Affiliated. The unaudited financial statements of
Affiliated are incorporated by reference in this Form 8-K. The Unaudited Pro
Forma Condensed Combining Balance Sheet is presented for informational purposes
only and is not necessarily indicative of the combined financial position that
would have occurred if the combination of UST and Affiliated had been
consummated on March 31, 1998, or at the beginning of the periods indicated or
which may be obtained in the near future.
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UST CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED
COMBINING BALANCE SHEET
MARCH 31, 1998
(IN THOUSANDS)
Pro Forma UST,
Pro Forma UST Somerset &
Historical Historical Pro Forma & Somerset Historical Pro Forma Affiliated
UST Somerset Adjustments Combined Affiliated Adjustments Combined
Cash and due from banks,
and interest-bearing deposits $ 101,914 $ 8,417 $ 110,331 $ 16,023 $ 126,354
Federal funds sold and
other short-term investments 28,821 7,490 36,311 7,868 44,179
Securities:
Available-for-sale.......... 689,605 689,605 237,946 927,551
Held-to-maturity............ 84,663 84,663 152,973 237,636
---------- --------- ---------- ---------- ----------
Total................... 689,605 84,663 774,268 390,919 1,165,187
Loans, net of reserve for
possible loan losses........ 2,839,129 408,427 3,247,556 690,498 3,938,054
Premises, furniture and
equipment, net.............. 63,947 12,372 76,319 8,662 84,981
Intangible assets, net......... 55,987 55,987 1,141 57,128
Other property owned, net...... 1,370 4,402 5,772 1 5,773
Loans held for sale............ 9,694 9,694
Other assets................... 54,082 7,249 61,331 15,956 77,287
---------- --------- ---------- ---------- ----------
Total assets.......... $3,834,855 $ 533,020 $ --- $4,367 875 $1,140,762 $ --- $5,508,637
========== ========= ======== ========== ========== ======== ==========
Deposits:
Noninterest bearing......... $ 657,672 $ 22,748 $ 680,420 $ 51,600 $ 732,020
Interest bearing:
NOW...................... 56,391 30,452 86,843 62,939 149,782
Money market............. 678,470 48,909 727,379 72,342 799,721
Regular savings.......... 703,330 69,838 773,168 123,879 897,047
Time deposits............ 862,215 280,530 1,142,745 419,481 1,562,226
---------- --------- ---------- ---------- ----------
Total deposits........ 2,958,078 452,477 3,410,555 730,241 4,140,796
Borrowings..................... 474,679 38,447 513,126 287,017 800,143
Other liabilities.............. 51,497 3,446 $ 5,300 (1) 60,243 7,529 $ 8,700 (1) 76,472
---------- --------- -------- ---------- ---------- -------- ----------
Total liabilities..... 3,484,254 494,370 5,300 3,983,924 1,024,787 8,700 5,017,411
Stockholders' investment:
Common stock................ 18,636 16,727 (14,741)(2) 20,622 68 5,832 (2) 26,522
Additional paid-in capital.. 118,767 18,692 14,741 (2) 152,200 51,032 (9,234)(2) 193,998
Retained earnings........... 210,633 3,231 (5,300)(1) 208,564 68,375 (8,700)(1) 268,239
Accumulated other
comprehensive income..... 2,326 2,326 831 3,157
Deferred compensation and
other.................... 239 239 (929) (690)
Treasury stock.............. (3,402) 3,402 (2)
---------- --------- -------- ---------- ---------- -------- ----------
Stockholders' investment.... 350,601 38,650 (5,300) 383,951 115,975 (8,700) 491,226
---------- --------- -------- ---------- ---------- -------- ----------
Total liabilities and
stockholders' investment... $3,834,855 $ 533,020 $ --- $4,367,875 $1,140,762 $ --- $5,508,637
========== ========= ======== ========== ========== ======== ==========
See accompanying Notes to Unaudited Pro Forma Condensed Financial Information.
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UST CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENTS OF INCOME SUMMARY
The following Unaudited Pro Forma Condensed Combined Statements of
Income give effect to UST's acquisition of Affiliated by combining the results
of operations of UST for the three months ended March 31, 1998, with the results
of operations of Affiliated for the three months ended March 31, 1998, on a
pooling of interests basis, assuming the combination, which was consummated on
August 7, 1998, had occurred as of January 1, 1998. Basic and Diluted earnings
per share and weighted average common shares outstanding are based on the
exchange ratio of 1.41 shares of UST for each share of Affiliated as specified
in the Affiliation Agreement. The Unaudited Pro Forma Condensed Combined
Statements of Income also give effect to the acquisition by UST of Somerset
assuming the combination, which was consummated on July 20, 1998 and accounted
for as a pooling of interests, had occurred as of January 1, 1998. The Unaudited
Pro Forma Condensed Combined Statements of Income should be read in conjunction
with the Unaudited Pro Forma Condensed Combining Balance Sheet appearing
elsewhere in this Form 8-K. The Unaudited Pro Forma Condensed Combining Balance
Sheet reflects an after-tax charge for estimated merger and reorganization
expenses of $8.7 million ($12.0 million pre-tax) in connection with the
Affiliated acquisition and an after-tax charge for estimated merger and
reorganization expenses of $5.3 million ($7.5 million pre-tax) in connection
with the Somerset acquisition; however, since these expenses are nonrecurring,
they have not been reflected in the Unaudited Pro Forma Condensed Combined
Statements of Income. The Pro Forma Combined Statements of Income do not give
effect to any cost savings in connection with the combination. The Unaudited Pro
Forma Condensed Combined Statements of Income are presented for information
purposes only and are not necessarily indicative of the combined results of
operations that would have occurred if the combination of UST and Affiliated had
been consummated on January 1, 1998 or which may be obtained in the future.
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UST CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Pro Forma UST Pro Forma UST,
Historical Historical and Somerset Historical Somerset &
UST Somerset Combined Affiliated Affiliated Combined
--- -------- -------- ---------- -------------------
Interest income:
Interest and fees on loans........... $ 62,421 $ 9,945 $ 72,366 $ 14,686 $ 87,052
Interest and dividends on securities 10,729 1,432 12,161 6,469 18,630
Interest on federal funds sold and other 966 55 1,021 130 1,151
-------- -------- -------- -------- --------
Total interest income............. 74,116 11,432 85,548 21,285 106,833
-------- -------- -------- -------- --------
Interest expense:
Interest on deposits................. 20,543 5,057 25,600 7,600 33,200
Interest on borrowings............... 5,945 600 6,545 4,318 10,863
-------- -------- -------- -------- --------
Total interest expense............ 26,488 5,657 32,145 11,918 44,063
-------- -------- -------- -------- --------
Net interest income.................... 47,628 5,775 53,403 9,367 62,770
Provision for possible loan losses..... 975 975 126 1,101
-------- -------- -------- -------- --------
Noninterest income..................... 46,653 5,775 52,428 9,241 61,669
-------- -------- -------- -------- --------
Asset management fees................ 3,728 3,728 3,728
Fees and charges..................... 3,952 143 4,095 218 4,313
Gain on sale of assets............... 9 9 145 154
Securities gains, net................ 1,441 1,441 118 1,559
Other................................ 2,200 246 2,446 277 2,723
-------- -------- -------- -------- --------
Total noninterest income.......... 11,321 398 11,719 758 12,477
-------- -------- -------- -------- --------
Noninterest expense:
Salary and employee benefits......... 19,279 1,827 21,106 2,943 24,049
Occupancy and equipment.............. 5,682 404 6,086 618 6,704
Data processing services ............ 1,378 152 1,530 308 1,838
Professional and consulting.......... 966 110 1,076 141 1,217
Foreclosed asset and workout expense. 156 343 499 (8) 491
Other................................ 9,696 653 10,349 980 11,329
-------- -------- -------- -------- --------
Total noninterest expense......... 37,157 3,489 40,646 4,982 45,628
-------- -------- -------- -------- --------
Income before income taxes............. 20,817 2,684 23,501 5,017 28,518
Income taxes........................... 7,961 19 7,980 1,805 9,785
-------- -------- -------- -------- --------
Net income............................. $ 12,856 $ 2,665 $ 15,521 $ 3,212 $ 18,733
======== ======== ======== ======== ========
Per share data:
Basic earnings per share............. $ 0.43 $0.16 $0.47 $0.50 $0.45
Diluted earnings per share........... $ 0.42 $0.16 $0.46 $0.47 $0.43
Basic weighted average shares 29,801 16,665 32,967 6,437 42,043
Diluted weighted average shares...... 30,370 16,964 33,593 6,792 43,169
See accompanying Notes to Unaudited Pro Forma Condensed Financial Information.
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NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
NOTE 1:
The combinations have been accounted for as a poolings of interests.
Accordingly, pro forma financial information assumes that the
combinations were consummated as of the beginning of the periods
indicated herein. Certain reclassifications have been made to the
accounts of Affiliated and Somerset in the accompanying Unaudited Pro
Forma Condensed Combining Balance Sheet and Unaudited Pro Forma
Condensed Combined Statements of Income to conform to UST presentation.
Pro forma results of operations do not reflect nonrecurring items of
income and expense relating directly from the combinations.
The effect of estimated one-time, after-tax charges of $8.7 million
($12.0 million pre-tax) recorded in connection with the Affiliated
acquisition has been reflected in the accompanying Unaudited Pro Forma
Condensed Combining Balance Sheet as a reduction in retained earnings,
and an increase in other liabilities, net of a 40 percent tax benefit
of $3.3 million, after excluding $3.8 million of nondeductible expense.
The effect of estimated one-time, after-tax charges of $5.3 million
($7.5 million pre-tax) recorded in connection with the Somerset
acquisition has been reflected in the accompanying Unaudited Pro Forma
Condensed Combining Balance Sheet as a reduction in retained earnings,
and an increase in other liabilities, net of a 40 percent tax benefit
of $2.2 million, after excluding $2.1 million of nondeductible expense.
These charges have not been reflected in the Unaudited Pro Forma
Condensed Combined Statements of Income since they are nonrecurring.
The pro forma financial information does not give effect to any cost
savings in connection with the acquisitions.
NOTE 2:
The pro forma stockholders' investment accounts of UST and Somerset
have been adjusted in the accompanying Unaudited Pro Forma Condensed
Combining Balance Sheet to reflect the issuance of shares of UST Common
Stock in exchange for all of the outstanding shares of Somerset Common
Stock. The number of shares of UST Common Stock issued pursuant to the
acquisition of Somerset were based upon the number of Somerset shares
outstanding as of July 20, 1998. The exchange ratio of 0.19 shares of
UST Common Stock for each share of Somerset Common Stock is specified
in the Affiliation Agreement. The differences between the par value of
the UST Common Stock issued ($0.625 per share) and the par value of the
Somerset Common Stock acquired ($1.00 per share) has been recorded to
Additional paid-in capital.
The pro forma stockholders' investment accounts of UST, as adjusted for
Somerset, and Affiliated have been adjusted in the accompanying
Unaudited Pro Forma Condensed Combining Balance Sheet to reflect the
issuance of shares of UST Common Stock in exchange for all of the
outstanding shares of Affiliated Common Stock. The number of shares of
UST Common Stock issued pursuant to the acquisition of Affiliated were
based upon the number of Affiliated shares outstanding as of August 7,
1998. The exchange ratio of 1.41 shares of UST Common Stock for each
share of Affiliated Common Stock is specified in the Affiliation
Agreement. The difference between the par value of the UST Common Stock
issued ($0.625 per share) and the par value of the Affiliated Common
Stock acquired ($0.01 per share) has been recorded to Additional
paid-in capital.
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NOTE 3:
UST classifies its investments in debt and equity securities as
"Securities Available-for-Sale" in accordance with the provisions of
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." Accordingly, such
securities are carried at fair value, with unrealized gains and losses,
net of tax, reported as a separate component of Stockholders'
Investment. In order to maintain UST's existing interest rate risk
position, the securities in the Affiliated and Somerset portfolios,
which are designated as Held-to-Maturity and are carried at cost
adjusted for the amortization of premium and accretion of discount,
were redesignated as Available-for-Sale upon consummation of the
acquisitions. At March 31, 1998, the Available-for-Sale designation
would add approximately $1.2 million and $334 thousand, respectively,
to the Stockholders' Investment accounts of Affiliated and Somerset.
NOTE 4:
Pro forma earnings per share amounts in the accompanying Unaudited Pro
Forma Condensed Combined Statements of Income are based on the weighted
average number of Basic and Diluted common shares of the constituent
companies outstanding during each period assuming an exchange ratio of
1.41 shares of UST Common Stock for each share of Affiliated Common
Stock and an exchange ratio of 0.19 shares of UST Common Stock for each
share of Somerset Common Stock.