Exhibit (99)(a)
PRO FORMA FINANCIAL INFORMATION
PRO FORMA COMBINED CONDENSED BALANCE SHEET
FUNC, CoreStates, Signet, Wheat and Covenant
September 30, 1997
(Unaudited)
The following unaudited pro forma combined condensed balance sheet combines the
consolidated historical balance sheets of FUNC, CoreStates, Signet, Wheat and
Covenant assuming the companies had been combined as of September 30, 1997, on
a pooling of interests accounting basis with respect to the CoreStates, Signet,
and Wheat Acquisitions, and on a purchase accounting basis with respect to the
Covenant Acquisition.
Pro Forma
(In millions) FUNC CoreStates Signet Wheat Adjustments
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ASSETS
Cash and due from banks $ 6,200 3,166 462 34 -
Interest-bearing bank balances 200 3,044 4 - -
Federal funds sold and securities
purchased under resale agreements 6,011 139 887 77 -
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Total cash and cash equivalents 12,411 6,349 1,353 111 -
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Trading account assets 7,548 327 277 180 -
Securities available for sale 16,690 2,211 2,233 6 -
Investment securities 2,268 1,413 - - -
Loans, net of unearned income 94,904 35,085 6,522 - -
Allowance for loan losses (1,370) (679) (126) - -
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Loans, net 93,534 34,406 6,396 - -
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Premises and equipment 4,056 627 172 66 -
Due from customers on acceptances 837 791 - - -
Other intangible assets 2,701 287 31 - -
Other assets 3,859 1,180 809 810 -
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Total $ 143,904 47,591 11,271 1,173 -
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LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing deposits 18,963 8,942 1,771 - -
Interest-bearing deposits 72,727 24,799 5,941 - -
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Total deposits 91,690 33,741 7,712 - -
Short-term borrowings 27,623 4,239 1,922 271 -
Bank acceptances outstanding 837 789 - - -
Other liabilities 4,225 1,925 297 651 -
Long-term debt 7,819 3,784 350 86 -
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Total liabilities 132,194 44,478 10,281 1,008 -
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Guaranteed preferred beneficial interests
in Corporation's junior subordinated
deferrable interest debentures 990 - - - -
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STOCKHOLDERS' EQUITY
Preferred stock - - - 3 (3)
Common stock 1,894 224 305 17 779
Paid-in capital 999 1,253 216 21 (985)
Retained earnings 7,681 2,955 435 124 (1,145)
Unrealized gain (loss) on debt and
equity securities, net 146 35 34 - -
Treasury stock - (1,302) - - 1,302
Unallocated shares held by ESOP - (52) - - 52
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Total stockholders' equity 10,720 3,113 990 165 -
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Total $ 143,904 47,591 11,271 1,173 -
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Pro Forma Pro Forma Pro Forma
(In millions) Combined Covenant Adjustments Combined
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ASSETS
Cash and due from banks 9,862 16 (87) 9,791
Interest-bearing bank balances 3,248 - - 3,248
Federal funds sold and securities
purchased under resale agreements 7,114 - - 7,114
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Total cash and cash equivalents 20,224 16 (87) 20,153
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Trading account assets 8,332 - 8,332
Securities available for sale 21,140 120 - 21,260
Investment securities 3,681 11 - 3,692
Loans, net of unearned income 136,511 258 - 136,769
Allowance for loan losses (2,175) (3) - (2,178)
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Loans, net 134,336 255 - 134,591
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Premises and equipment 4,921 9 - 4,930
Due from customers on acceptances 1,628 - - 1,628
Other intangible assets 3,019 - 55 3,074
Other assets 6,658 9 - 6,667
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Total 203,939 420 (32) 204,327
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LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing deposits 29,676 48 - 29,724
Interest-bearing deposits 103,467 256 - 103,723
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Total deposits 133,143 304 - 133,447
Short-term borrowings 34,055 64 - 34,119
Bank acceptances outstanding 1,626 - - 1,626
Other liabilities 7,098 5 - 7,103
Long-term debt 12,039 15 - 12,054
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Total liabilities 187,961 388 - 188,349
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Guaranteed preferred beneficial interests
in Corporation's junior subordinated
deferrable interest debentures 990 - - 990
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STOCKHOLDERS' EQUITY
Preferred stock - 8 (8) -
Common stock 3,219 15 (15) 3,219
Paid-in capital 1,504 12 (12) 1,504
Retained earnings 10,050 (3) 3 10,050
Unrealized gain (loss) on debt and
equity securities, net 215 - - 215
Treasury stock - - - -
Unallocated shares held by ESOP - - - -
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Total stockholders' equity 14,988 32 (32) 14,988
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Total 203,939 420 (32) 204,327
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See accompanying notes to pro forma financial information.
PRO FORMA FINANCIAL INFORMATION
PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
FUNC, CoreStates, Signet, Wheat and Covenant
September 30, 1997
(Unaudited)
The following unaudited pro forma combined condensed statements of income
present the combined statements of income of FUNC, CoreStates, Signet, Wheat and
Covenant assuming the companies had been combined for each period presented on a
pooling of interests accounting basis with respect to the CoreStates, Signet,
and Wheat Acquisitions, and on a purchase accounting basis with respect to the
Covenant Acquisition (for the nine months ended September 30, 1997, and the year
ended December 31, 1996, only). Such information for Wheat for the 12-month
periods ended March 31 has been added to comparable information related to FUNC,
CoreStates, Signet and Covenant for the preceding 12-month periods ended
December 31, as appropriate.
Nine Months Ended
September 30,
-----------------------------------------
(In millions, except per share data) 1997 1996
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CONSOLIDATED SUMMARIES OF INCOME
Interest income $ 10,789 10,308
Interest expense 4,839 4,591
------------------ ------------------
Net interest income 5,950 5,717
Provision for loan losses 658 488
Net interest income after provision for
------------------ ------------------
loan losses 5,292 5,229
Securities available for sale transactions 101 142
Investment security transactions 3 3
Noninterest income 3,438 2,715
Merger-related restructuring charges - 130
SAIF special assessment - 147
Noninterest expense 5,497 5,299
------------------ ------------------
Income before income taxes 3,337 2,513
Income taxes 1,173 905
------------------ ------------------
Net income 2,164 1,608
Dividends on preferred stock - 8
------------------ ------------------
Net income applicable to common
stockholders before redemption premium 2,164 1,600
Redemption premium on preferred stock - -
------------------ ------------------
Net income applicable to common
stockholders after redemption premium $ 2,164 1,600
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PER COMMON SHARE DATA
Net income before redemption premium $ 2.22 1.61
Net income after redemption premium $ 2.22 1.61
Average common shares outstanding (In thousands) 973,263 990,901
FUNC HISTORICAL PER COMMON SHARE DATA
Net income before redemption premium $ 2.60 1.85
Net income after redemption premium $ 2.60 1.85
Average common shares outstanding (In thousands) 562,534 557,968
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(In millions, except per share data) 1997/1996 1996/1995 1995/1994
- ---------------------------------------------------------- ------------ ------------------ ------------------
CONSOLIDATED SUMMARIES OF INCOME
Interest income 13,831 13,068 11,086
Interest expense 6,187 5,752 4,052
------------ ------------------ ------------------
Net interest income 7,644 7,316 7,034
Provision for loan losses 679 402 472
Net interest income after provision for
------------ ------------------ ------------------
loan losses 6,965 6,914 6,562
Securities available for sale transactions 184 156 97
Investment security transactions 4 6 4
Noninterest income 3,794 3,269 3,115
Merger-related restructuring charges 422 139 107
SAIF special assessment 148 - -
Noninterest expense 6,802 6,750 6,673
------------ ------------------ ------------------
Income before income taxes 3,575 3,456 2,998
Income taxes 1,278 1,232 1,018
------------ ------------------ ------------------
Net income 2,297 2,224 1,980
Dividends on preferred stock 10 26 46
------------ ------------------ ------------------
Net income applicable to common
stockholders before redemption premium 2,287 2,198 1,934
Redemption premium on preferred stock - - 41
------------ ------------------ ------------------
Net income applicable to common
stockholders after redemption premium 2,287 2,198 1,893
------------ ------------------ ------------------
PER COMMON SHARE DATA
Net income before redemption premium 2.31 2.21 1.93
Net income after redemption premium 2.31 2.21 1.89
Average common shares outstanding (In thousands) 989,106 993,504 1,003,740
FUNC HISTORICAL PER COMMON SHARE DATA
Net income before redemption premium 2.67 2.52 2.36
Net income after redemption premium 2.67 2.52 2.29
Average common shares outstanding (In thousands) 557,624 557,354 563,325
Twelve Months Ended
---------------------------------------------
(In millions, except per share data) 1994/1993 1993/1992
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CONSOLIDATED SUMMARIES OF INCOME
Interest income 10,335 10,480
Interest expense 3,660 4,477
------------------ ------------------
Net interest income 6,675 6,003
Provision for loan losses 606 972
Net interest income after provision for
------------------ ------------------
loan losses 6,069 5,031
Securities available for sale transactions 111 129
Investment security transactions 7 (21)
Noninterest income 2,987 2,708
Merger-related restructuring charges - -
SAIF special assessment - -
Noninterest expense 6,324 6,190
------------------ ------------------
Income before income taxes 2,850 1,657
Income taxes 916 511
------------------ ------------------
Net income 1,934 1,146
Dividends on preferred stock 46 53
------------------ ------------------
Net income applicable to common
stockholders before redemption premium 1,888 1,093
Redemption premium on preferred stock - -
------------------ ------------------
Net income applicable to common
stockholders after redemption premium 1,888 1,093
------------------ ------------------
PER COMMON SHARE DATA
Net income before redemption premium 1.91 1.17
Net income after redemption premium 1.91 1.17
Average common shares outstanding (In thousands) 988,055 933,400
FUNC HISTORICAL PER COMMON SHARE DATA
Net income before redemption premium 2.15 1.26
Net income after redemption premium 2.15 1.26
Average common shares outstanding (In thousands) 544,876 510,768
See accompanying notes to pro forma financial information.
NOTES TO PRO FORMA FINANCIAL INFORMATION
(1) The unaudited pro forma information presented herein is not necessarily
indicative of the results of operations or the combined financial position that
would have resulted had the Acquisitions been consummated at the beginning of
the applicable periods indicated, nor is it necessarily indicative of the
results of operations in future periods or the future financial position of the
combined entities. Consummation of each Acquisition is not contingent upon
consummation of any other such Acquisitions. Pro forma financial information
with respect to the CoreStates, Signet and Wheat Acquisitions assumes such
Acquisitions were consummated as of the beginning of each period presented. Such
information for Wheat for the 12-month periods ended March 31 has been added to
comparable information related to FUNC, CoreStates and Signet for the preceding
12-month periods ended December 31, as appropriate. Pro forma financial
information for the Covenant Acquisition is included only for the nine months
ended September 30, 1997, and the year ended December 31, 1996.
(2) It is assumed that the CoreStates Acquisition will be accounted for on a
pooling of interests accounting basis, and accordingly, the related pro forma
adjustments herein reflect, where applicable, an exchange ratio of 1.62 shares
of FUNC common stock for each of the 197,597,000 shares of CoreStates common
stock which were outstanding at September 30, 1997. The 1.62 exchange ratio is
subject to possible adjustment under certain circumstances.
As a result, information was adjusted for the CoreStates Acquisition by the (i)
addition of 320,107,000 shares of FUNC common stock amounting to $1.1 billion
(excluding an estimated 4.9 million shares of CoreStates common stock that
CoreStates expects to issue in order to qualify the CoreStates Acquisition as a
pooling of interests); (ii) elimination of 197,597,000 shares of outstanding
CoreStates common stock amounting to $198 million; (iii) elimination of the cost
of CoreStates treasury stock of $1.3 billion; (iv) elimination of the cost of
unallocated shares held by the CoreStates ESOP of $52 million; and (v)
recordation of the remaining amount of $1.1 billion as a reduction of paid-in
capital at September 30, 1997.
As of September 30, 1997, FUNC and CoreStates had 50,530,000 and 16,915,000
shares of common stock reserved for issuance primarily for stock option plans,
respectively, (excluding, as to FUNC, shares reserved for issuance in connection
with the Acquisitions, or upon exercise of the rights attached to FUNC common
stock), which are not included in the unaudited pro forma financial information
presented herein.
For the nine months ended September 30, 1997, CoreStates had net income
applicable to common stockholders of $597 million.
In 1993, CoreStates changed its method of accounting for postemployment
benefits, and in 1992 CoreStates changed its method of accounting for
post-retirement benefits. As a result, CoreStates reported an additional expense
as a cumulative effect of a change in accounting principle, net of tax of
$16 million in 1993 and $108 million in 1992. Such amounts have been included in
noninterest expense in 1993 and 1992, respectively, in the pro forma financial
information presented herein.
(3) The Signet Acquisition will be accounted for on a pooling of interests
accounting basis, and accordingly, the related pro forma adjustments herein
reflect, where applicable, an exchange ratio of 1.10 shares of FUNC common stock
for each of the 60,944,000 shares of Signet common stock which were outstanding
at September 30, 1997.
As a result, information was adjusted for the Signet Acquisition by the (i)
addition of 67,038,000 shares of FUNC common stock amounting to $223 million;
(ii) elimination of 60,944,000 shares of Signet common stock amounting to $305
million; and (iii) recordation of the remaining amount of $82 million as an
increase to paid-in capital at September 30, 1997.
As of September 30, 1997, FUNC and Signet had 50,530,000 and 3,501,000 shares of
common stock reserved for issuance primarily for stock option plans,
respectively, (excluding, as to FUNC, shares reserved for issuance in connection
with the Acquisitions, or upon exercise of the rights attached to FUNC common
stock and, as to Signet, shares reserved for issuance upon exercise of the
rights attached to shares of Signet common stock), which are not included in the
unaudited pro forma financial information presented herein.
For the nine months ended September 30, 1997, Signet had net income applicable
to common stockholders of $73 million.
(4) It is assumed that the Wheat Acquisition will be accounted for on a pooling
of interests accounting basis, and accordingly, the related pro forma
adjustments herein reflect, where applicable, an exchange ratio of 1.1621
shares of FUNC common stock for each of the 209,000 shares of Wheat preferred
stock and 8,599,000 shares of Wheat common stock which were outstanding at
September 30, 1997. The 1.1621 exchange ratio is subject to possible adjustment
under certain circumstances.
As a result, information was adjusted for the Wheat Acquisition by the (i)
addition of 10,267,000 shares of FUNC common stock amounting to $35 million;
(ii) elimination of 209,000 shares of Wheat preferred stock amounting to $3
million; (iii) elimination of 8,599,000 shares of Wheat common stock amounting
to $17 million; and (iv) recordation of the remaining amount of $15 million as a
reduction of paid-in capital at September 30, 1997.
As of September 30, 1997, FUNC had 50,530,000, and Wheat had no shares of common
stock reserved for issuance primarily for stock option plans (excluding, as to
FUNC, shares reserved for issuance in connection with the Acquisitions, or upon
exercise of the rights attached to FUNC common stock), which are not included in
the unaudited pro forma financial information presented herein.
For the nine months ended September 30, 1997, Wheat had net income applicable to
common stockholders of $33 million, which includes $9 million related to Wheat's
results of operations in the fourth quarter ended March 31, 1997.
(5) The Covenant Acquisition will be accounted for on a purchase accounting
basis, and accordingly, the related pro forma adjustments herein reflect, where
applicable, (i) an exchange ratio of (a) 1.516 shares of FUNC common stock for
each of the 138,000 shares of Covenant series A preferred stock which were
outstanding at September 30, 1997, (b) an exchange ratio of 1.2 shares of FUNC
common stock for each of the 162,000 shares of Covenant series B preferred stock
which were outstanding at September 30, 1997, (c) an exchange ratio of .3813
shares of FUNC common stock for each of the 3,057,000 shares of Covenant common
stock which were outstanding at September 30, 1997, and (d) the resulting
issuance of 1,743,000 shares of FUNC common stock; (ii) the repurchase of such
aggregate shares of FUNC common stock in the open market at a cost of $87
million; and (iii) an increase in goodwill and deposit base premium of $49
million and $6 million, respectively.
Additionally, the pro forma adjustments related to the unaudited pro forma
combined condensed statements of income with respect to the Covenant Acquisition
reflect a (i) 5.51 percent and 5.27 percent cost of funds for the nine months
ended September 30, 1997, and for the year ended December 31, 1996,
respectively; (ii) ten-year sum-of-the-digits years' method related to deposit
base premium; and (iii) 25-year straight- line life related to goodwill.
As a result, for the nine months ended September 30, 1997, and the year ended
December 31, 1996, these adjustments amounted to (i) an increase in
noninterest expense of $2 million and $10 million, respectively; and (ii)
reductions in (a) interest income of $2 million and $4 million, respectively,
(b) income taxes of $1 million and $5 million, respectively, and (c) net income
applicable to common stockholders of $3 million and $9 million, respectively.
(6) In the second quarter of 1997, FUNC acquired the Bank of Boca Raton with
assets of $29 million, net loans of $15 million and deposits of $27 million for
$2 million in cash. This purchase accounting acquisition has been reflected in
the pro forma financial information only from the date of consummation.
From January 1, 1997, through September 30, 1997, FUNC has purchased 24 million
shares of FUNC common stock in the open market at a cost of $1.0 billion, of
which 1.65 million shares relate to the Covenant Acquisition as noted above.
The historical financial statements of FUNC will be restated for the CoreStates
Acquisition for all periods presented and for the Signet Acquisition only for
periods beginning January 1, 1995, and thereafter. Such statements will not be
restated for the Wheat Acquisition or the Covenant Acquisition.
(7) Income per share data has been computed based on the combined historical net
income applicable to common stockholders of FUNC and the Acquisitions using the
historical weighted average shares outstanding of FUNC common stock and the
weighted average outstanding shares, adjusted to equivalent shares of FUNC
common stock, as of the earliest applicable period presented, as appropriate.
(8) Certain insignificant reclassifications have been included herein to conform
to statement presentations. Transactions conducted in the ordinary course of
business between FUNC, CoreStates, Signet, Wheat and Covenant are immaterial,
and accordingly, have not been eliminated.
(9) The unaudited pro forma financial information does not include any material
merger-related expenses or any material expenses related to the Acquisitions.
FUNC currently estimates after-tax restructuring and merger-related charges of
approximately (i) $135 million related to the Signet Acquisition, or $0.42 per
share of FUNC common stock, expected to be taken in the fourth quarter of 1997;
and (ii) $795 million related to the CoreStates Acquisition, or $0.81 per share
of FUNC common stock, expected to be taken in the second quarter of 1998. In
addition, FUNC expects to incur an estimated $75 million in after-tax
restructuring and merger-related expenses in the 12-month period following the
CoreStates Acquisition.
(10) FUNC expects to realize significant revenue enhancements and cost savings
from the Acquisitions. The pro forma financial information, which does not
reflect any revenue enhancements, direct costs or potential savings from the
consolidation of operations of FUNC and the Acquisitions, is not indicative of
the results of future operations. No assurance can be given with respect to the
ultimate level of such revenue enhancements or cost savings. As indicated by the
foregoing unaudited pro forma financial information and based solely on the
foregoing assumptions, consummation of the Acquisitions would have diluted
FUNC's historical net income per common share for the nine months ended
September 30, 1997, and the year ended December 31, 1996, by 15 percent and 13
percent, respectively.