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): September 20, 1999
1-2981
(Commission File Number)
---------------------------
FIRSTAR CORPORATION
(Exact Name of Registrant as Specified in its Charter)
WISCONSIN 39-1940778
(State of Incorporation) (IRS EMPLOYER
Identification No.)
777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
(Address of Registrant's principal executive office)
(414) 765-4321
(Registrant's telephone number)
FORM 8-K/A
FIRSTAR CORPORATION
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits
(a) Pro Forma Financial Information
FIRSTAR CORPORATION
AND MERCANTILE BANCORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION
Note 1-Basis of Presentation
On September 20, 1999 Firstar Corporation acquired Mercantile
Bancorporation Inc. through an exchange of shares.
The unaudited pro forma condensed combined financial information
has been prepared under the pooling of interests method and is based on
the historical consolidated financial statements of the two companies
adjusted for presentation differences. These restatements were not material.
Note 2-Shareholders' Equity
Under the terms of the merger agreement, Mercantile shareholders
received 2.091 shares of Firstar common stock for each share of Mercantile
stock owned. Mercantile had 158,672,542 shares of common stock outstanding
at September 20, 1999 which was exchanged for approximately 331,748,000 shares
of Firstar common stock. The combined company has approximately 981,200,000
shares outstanding after the merger. The common stock in the unaudited pro
forma condensed combined balance sheet has been adjusted to reflect the par
value 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.
Note 3-Merger Related Charges
In connection with the merger, Firstar and Mercantile expect the
combined company to incur pre-tax merger charges of approximately $560
million. These are expected to include losses on the sale of securities
of $178 million in conjunction with the balance sheet restructure discussed
below, $157 million in employee related payments, $88 million
in direct conversion costs, $53 million in charges related to consolidation
of systems and operations, $29 million in occupancy and equipment charges
(elimination of duplicate facilities and write-off of equipment) and $109
million in other merger related costs (including legal fees, investment
banking fees and charitable contributions). Partially offsetting these
merger costs will be the reversal of $54 million of prior restructuring
and merger accruals of both Firstar and Mercantile. The merger related
charges and related tax effect have been reflected in the unaudited pro
forma condensed combined balance sheet as of June 30, 1999. The loss on
the sale of securities of $178 million is shown on the balance sheet
adjustment net of existing market value adjustments of $30 million. The
merger charges 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.
A balance sheet restructuring will occur to conform the combined
company's asset and liability management policies. The restructuring, which
will include the sale of $6.1 billion of assets, includes the following: the
sale of $2.4 billion in U.S. government agency callable securities, $1.9
billion in fixed rate pass-through mortgage-backed securities, $175.0 million
non-agency, securities outside Firstar's investment policies and $1.6 billion
residential real estate mortgages that will be reclassified as held-for-sale.
The proceeds from these sales will be used to reduce short-term borrowings.
These transactions have been reflected in the unaudited pro forma condensed
combined balance sheet as of June 30, 1999, and have not been reflected in the
unaudited pro forma condensed combined statements as they are not expected to
have a material impact on the operations of the combined company.
Unaudited Pro Forma Condensed Combined Balance Sheet
As of June 30, 1999
(dollars in thousands)
Mercantile Pro Forma
Firstar Bancorporation Pro Forma Firstar
Corporation Inc. Ajustments Corporation
------------- ------------- ------------- -------------
ASSETS:
Cash and due from banks......................$ 2,058,034 $ 1,234,011 $ $ 3,292,045
Money market investments..................... 225,850 338,648 564,498
Trading securities........................... 120,801 120,801
Investment securities: (4,475,000)
Available-for-sale......................... 5,258,760 9,376,320 (147,733) 10,012,347
Held-to-maturity........................... 208,022 62,503 270,525
------------- ------------- ------------- -------------
Total securities........................ 5,466,782 9,438,823 (147,733) 10,282,872
Loans held for sale 1,128,541 139,036 1,600,000 2,867,577
Loans:
Commercial loans........................... 9,644,394 6,800,926 16,445,320
Real estate loans.......................... 8,833,230 12,346,426 (1,600,000) 19,579,656
Held-to-maturity........................... 8,211,107 3,497,663 11,708,770
------------- ------------- ------------- -------------
Total Loans.................................. 26,688,731 22,645,015 (1,600,000) 47,733,746
Allowance for loan losses............... 405,159 309,271 7,500 721,930
------------- ------------- ------------- -------------
Net loans.................................. 26,283,572 22,335,744 (1,607,500) 47,011,816
Premises and equipment....................... 620,020 407,420 (29,000) 998,440
Goodwill..................................... 594,669 695,604 1,290,273
Core deposit intangibles..................... 241,841 241,841
Mortgage Sevicing Rights..................... 179,433 47,509 226,942
Other intangible assets...................... 55,799 7,414 63,213
Acceptances - customers' liability........... 23,600 6,325 29,925
Other assets................................. 1,258,600 748,964 2,007,564
------------- ------------- ------------- -------------
Total assets.............................$ 38,136,741 $ 35,520,299 $ (4,659,233)$ 68,997,807
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
LIABILITIES:
Deposits:
Noninterest-bearing deposits...............$ 6,361,199 $ 3,814,609 $ $ 10,175,808
Interest-bearing deposits.................. 21,787,292 20,519,129 42,306,421
------------- ------------- ------------- -------------
Total deposits......................... 28,148,491 24,333,738 0 52,482,229
Short-term borrowings........................ 4,027,645 3,546,657 (4,475,000) 3,099,302
Long-term debt............................... 1,667,574 4,099,855 5,767,429
Acceptances outstanding...................... 23,600 6,325 29,925
Other liabilities............................ 655,267 480,818 216,267 1,352,352
------------- ------------- ------------- -------------
Total liabilities........................ 34,522,577 32,467,393 (4,258,733) 62,731,237
------------- ------------- ------------- -------------
SHAREHOLDERS' EQUITY:
Common stock................................. 6,641 1,581 1,727 9,949
Surplus...................................... 1,244,896 1,015,017 (1,727) 2,258,186
Retained earnings............................ 2,475,708 2,166,302 (420,000) 4,222,010
Treasury stock, at cost...................... (134,348) (3,083) (137,431)
Accumulated other comprehensive income....... 21,267 (126,911) 19,500 (86,144)
------------- ------------- ------------- -------------
Total shareholders' equity............... 3,614,164 3,052,906 (400,500) 6,266,570
------------- ------------- ------------- -------------
Total liabilities and shareholders'
equity...............................$ 38,136,741 $ 35,520,299 $ (4,659,233)$ 68,997,807
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
See accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Information.
Firstar/Mercantile
Unaudited Pro Forma Condensed Combined Income Statement
For the Six Months Ended June 30, 1999
(amounts in thousands, except per share amounts)
Mercantile Pro Forma
Firstar Bancorporation Pro Forma Firstar
Corporation Inc. Ajustments Corporation
----------- -------------- ----------- ------------
INTEREST INCOME:
Interest and fees on loans...................$ 1,071,390 $ 868,429 $ $ 1,939,819
Interest and fees on loans held for sale..... 46,593 6,528 53,121
Interest on investment securities:
Taxable................................... 143,284 284,247 427,531
Non-taxable............................... 36,066 10,788 46,854
Interest on trading securities............... (7) 5,398 5,391
Interest on money market investments......... 2,987 10,249 13,236
----------- ----------- ----------- -----------
Total interest income...................... 1,300,313 1,185,639 0 2,485,952
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Interest on deposits......................... 413,519 426,925 840,444
Interest on short-term borrowings............ 95,988 66,409 162,397
Interest on long-term debt................... 51,758 112,517 164,275
----------- ----------- ----------- -----------
Total interest expense..................... 561,265 605,851 0 1,167,116
----------- ----------- ----------- -----------
Net interest income...................... 739,048 579,788 0 1,318,836
Provision for loan losses.................... 71,270 16,957 88,227
----------- ----------- ----------- -----------
Net interest income after
provision for loan losses.............. 667,778 562,831 0 1,230,609
----------- ----------- ----------- -----------
NONINTEREST INCOME:
Trust income................................. 147,414 60,886 208,300
Mortgage banking income...................... 72,053 9,420 81,473
Retail deposit Income........................ 47,259 40,409 87,668
Cash management income....................... 46,705 20,529 67,234
Credit card income........................... 45,749 6,706 52,455
ATM Income................................... 11,542 6,391 17,933
All other income............................. 86,166 75,049 161,215
----------- ----------- ----------- -----------
456,888 219,390 0 676,278
Investment securities gains/(losses) - net... (2) 16,246 16,244
----------- ----------- ----------- -----------
Total noninterest income................... 456,886 235,636 0 692,522
----------- ----------- ----------- -----------
NONINTEREST EXPENSE:
Salaries..................................... 239,531 200,252 439,783
Pension and other employee benefits.......... 37,466 45,213 82,679
Equipment expense............................ 45,332 28,551 73,883
Occupancy expense - net...................... 49,915 33,894 83,809
All other expense............................ 200,866 130,870 331,736
----------- ----------- ----------- -----------
573,110 438,780 0 1,011,890
Merger and retructuring expenses............. 45,100 45,100
----------- ----------- ----------- -----------
Total noninterest expense.................. 618,210 438,780 0 1,056,990
----------- ----------- ----------- -----------
INCOME BEFORE TAX............................ 506,454 359,687 0 866,141
Income tax................................... 166,109 121,119 287,228
----------- ----------- ----------- -----------
NET INCOME...................................$ 340,345 $ 238,568 $ 0 $ 578,913
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
PER SHARE:
Basic earnings per common share..............$ 0.51 $ 1.51 $ 0.58
Diluted earnings per common share............ 0.50 1.49 0.57
Average common shares - basic................ 661,827 157,827 991,843
Average common shares - diluted.............. 674,920 159,896 1,009,262
See accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Information.
Firstar/Mercantile
Unaudited Pro Forma Condensed Combined Income Statement
For the Year Ended December 31, 1998
(amounts in thousands, except per share amounts)
Mercantile Pro Forma
Firstar Bancorporation Pro Forma Firstar
Corporation Inc. Ajustments Corporation
----------- -------------- ------------ -----------
INTEREST INCOME:
Interest and fees on loans...................$ 2,152,359 $ 1,775,781 $ $ 3,928,140
Interest and fees on loans held for sale..... 70,808 14,036 84,844
Interest on investment securities:
Taxable................................... 340,080 566,831 906,911
Non-taxable............................... 72,132 23,230 95,362
Interest on trading securities............... 73 8,821 8,894
Interest on money market investments......... 6,036 22,001 28,037
----------- ----------- ----------- -----------
Total interest income...................... 2,641,488 2,410,700 0 5,052,188
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Interest on deposits......................... 911,958 931,716 1,843,674
Interest on short-term borrowings............ 207,650 174,335 381,985
Interest on long-term debt................... 109,101 181,807 290,908
----------- ----------- ----------- -----------
Total interest expense..................... 1,228,709 1,287,858 0 2,516,567
----------- ----------- ----------- -----------
Net interest income...................... 1,412,779 1,122,842 0 2,535,621
Provision for loan losses.................... 113,636 51,154 164,790
----------- ----------- ----------- -----------
Net interest income after
provision for loan losses.............. 1,299,143 1,071,688 0 2,370,831
----------- ----------- ----------- -----------
NONINTEREST INCOME:
Trust income................................. 262,259 112,999 375,258
Mortgage banking income...................... 151,096 51,494 202,590
Retail deposit Income........................ 92,486 85,276 177,762
Cash management income....................... 84,522 32,944 117,466
Credit card income........................... 83,531 10,139 93,670
ATM Income................................... 24,765 12,100 36,865
All other income............................. 154,328 142,831 297,159
----------- ----------- ----------- -----------
852,987 447,783 0 1,300,770
Investment securities gains/(losses) - net... 1,095 15,435 16,530
Gain on sale of merchant processing.......... 48,051 48,051
----------- ----------- ----------- -----------
Total noninterest income................... 854,082 511,269 0 1,365,351
----------- ----------- ----------- -----------
NONINTEREST EXPENSE:
Salaries..................................... 544,672 413,469 958,141
Pension and other employee benefits.......... 93,330 79,303 172,633
Equipment expense............................ 103,713 57,024 160,737
Occupancy expense - net...................... 102,464 67,003 169,467
All other expense............................ 427,977 263,569 691,546
----------- ----------- ----------- -----------
1,272,156 880,368 0 2,152,524
Merger and retructuring expenses............. 242,970 134,322 377,292
----------- ----------- ----------- -----------
Total noninterest expense.................. 1,515,126 1,014,690 0 2,529,816
----------- ----------- ----------- -----------
INCOME BEFORE TAX............................ 638,099 568,267 0 1,206,366
Income tax................................... 207,952 192,964 400,916
----------- ----------- ----------- -----------
NET INCOME...................................$ 430,147 $ 375,303 $ 0 $ 805,450
----------- ----------- ----------- -----------
PER SHARE:
Basic earnings per common share..............$ 0.66 $ 2.45 $ 0.83
Diluted earnings per common share............ 0.65 2.41 0.81
Average common shares - basic................ 649,530 153,462 970,420
Average common shares - diluted.............. 663,054 155,921 989,085
See accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Information.
Firstar/Mercantile
Unaudited Pro Forma Condensed Combined Income Statement
For the Year Ended December 31, 1997
(amounts in thousands, except per share amounts)
Mercantile Pro Forma
Firstar Bancorporation Pro Forma Firstar
Corporation Inc. Ajustments Corporation
----------- -------------- ------------ -----------
INTEREST INCOME:
Interest and fees on loans...................$ 1,982,684 $ 1,662,944 $ $ 3,645,628
Interest and fees on loans held for sale..... 20,878 6,755 27,633
Interest on investment securities:
Taxable................................... 298,134 413,175 711,309
Non-taxable............................... 64,090 25,797 89,887
Interest on trading securities............... 11,182 7,077 18,259
Interest on money market investments......... 131 20,813 20,944
----------- ----------- ----------- -----------
Total interest income...................... 2,377,099 2,136,561 0 4,513,660
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Interest on deposits......................... 804,406 842,949 1,647,355
Interest on short-term borrowings............ 183,642 159,013 342,655
Interest on long-term debt................... 86,884 68,978 155,862
----------- ----------- ----------- -----------
Total interest expense..................... 1,074,932 1,070,940 0 2,145,872
----------- ----------- ----------- -----------
Net interest income...................... 1,302,167 1,065,621 0 2,367,788
Provision for loan losses.................... 117,772 86,355 204,127
----------- ----------- ----------- -----------
Net interest income after
provision for loan losses.............. 1,184,395 979,266 0 2,163,661
----------- ----------- ----------- -----------
NONINTEREST INCOME:
Trust income................................. 234,195 103,928 338,123
Mortgage banking income...................... 70,644 22,755 93,399
Retail deposit Income........................ 83,579 79,704 163,283
Cash management income....................... 68,831 27,121 95,952
Credit card income........................... 87,499 11,878 99,377
ATM Income................................... 19,194 10,329 29,523
All other income............................. 123,769 123,260 247,029
----------- ----------- ----------- -----------
687,711 378,975 0 1,066,686
Investment securities gains/(losses) - net... (3,916) 7,649 3,733
Gain on sale of merchant processing.......... 22,821 22,821
----------- ----------- ----------- -----------
Total noninterest income................... 706,616 386,624 0 1,093,240
----------- ----------- ----------- -----------
NONINTEREST EXPENSE:
Salaries..................................... 480,339 380,076 860,415
Pension and other employee benefits.......... 88,934 86,892 175,826
Equipment expense............................ 94,369 52,541 146,910
Occupancy expense - net...................... 91,348 61,697 153,045
All other expense............................ 366,089 224,093 590,182
----------- ----------- ----------- -----------
1,121,079 805,299 0 1,926,378
Loss on sale of credit card loans............ 50,000 50,000
Merger and retructuring expenses............. 121,393 121,393
----------- ----------- ----------- -----------
Total noninterest expense.................. 1,121,079 976,692 0 2,097,771
----------- ----------- ----------- -----------
INCOME BEFORE TAX............................ 769,932 389,198 0 1,159,130
Income tax................................... 256,038 142,376 398,414
----------- ----------- ----------- -----------
NET INCOME...................................$ 513,894 $ 246,822 $ 0 $ 760,716
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
PER SHARE:
Basic earnings per common share..............$ 0.83 $ 1.76 $ 0.83
Diluted earnings per common share............ 0.81 1.73 0.82
Average common shares - basic................ 620,283 140,009 913,042
Average common shares - diluted.............. 634,149 142,639 932,407
See accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Information.
Firstar/Mercantile
Unaudited Pro Forma Condensed Combined Income Statement
For the Year Ended December 31, 1996
(amounts in thousands, except per share amounts)
Mercantile Pro Forma
Firstar Bancorporation Pro Forma Firstar
Corporation Inc. Ajustments Corporation
----------- -------------- ------------ -----------
INTEREST INCOME:
Interest and fees on loans...................$ 1,869,407 $ 1,402,307 $ $ 3,271,714
Interest and fees on loans held for sale..... 20,454 7,341 27,795
Interest on investment securities............ 378,408 347,757 726,165
Interest on trading securities............... 344 3,630 3,974
Interest on money market investments......... 7,062 14,924 21,986
----------- ----------- ----------- -----------
Total interest income...................... 2,275,675 1,775,959 0 4,051,634
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Interest on deposits......................... 788,023 692,138 1,480,161
Interest on short-term borrowings............ 171,694 89,676 261,370
Interest on long-term debt................... 63,687 40,343 104,030
----------- ----------- ----------- -----------
Total interest expense..................... 1,023,404 822,157 0 1,845,561
----------- ----------- ----------- -----------
Net interest income...................... 1,252,271 953,802 0 2,206,073
Provision for loan losses.................... 97,334 78,766 176,100
----------- ----------- ----------- -----------
Net interest income after
provision for loan losses.............. 1,154,937 875,036 0 2,029,973
----------- ----------- ----------- -----------
NONINTEREST INCOME:
Trust income................................. 196,891 93,704 290,595
Mortgage banking income...................... 64,811 13,793 78,604
Service charges on deposits.................. 147,424 98,908 246,332
Credit card income........................... 81,622 28,415 110,037
ATM Income................................... 15,547 8,450 23,997
All other income............................. 117,485 119,609 237,094
----------- ----------- ----------- -----------
623,780 362,879 0 986,659
Investment securities gains/(losses) - net... (2,365) 292 (2,073)
----------- ----------- ----------- -----------
Total noninterest income................... 621,415 363,171 0 984,586
----------- ----------- ----------- -----------
NONINTEREST EXPENSE:
Salaries..................................... 466,133 334,470 800,603
Pension and other employee benefits.......... 97,089 77,437 174,526
Equipment expense............................ 86,952 50,860 137,812
Occupancy expense - net...................... 91,460 55,489 146,949
All other expense............................ 341,829 223,475 565,304
----------- ----------- ----------- -----------
1,083,463 741,731 0 1,825,194
SAIF assessments............................. 15,522 12,385 27,907
Merger and retructuring expenses............. 53,267 51,071 104,338
----------- ----------- ----------- -----------
Total noninterest expense.................. 1,152,252 805,187 0 1,957,439
----------- ----------- ----------- -----------
INCOME BEFORE TAX............................ 624,100 433,020 0 1,057,120
Income tax................................... 208,682 148,567 357,249
----------- ----------- ----------- -----------
NET INCOME...................................$ 415,418 $ 284,453 $ 0 $ 699,871
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
PER SHARE:
Basic earnings per common share..............$ 0.65 $ 2.12 $ 0.77
Diluted earnings per common share............ 0.64 2.09 0.75
Average common shares - basic................ 633,858 133,926 913,897
Average common shares - diluted.............. 644,640 135,996 929,008
See accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Information.
(b) Exhibits: None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FIRSTAR CORPORATION
Dated: October 28, 1999 /s/ David M. Moffett
-------------------------
David M. Moffett
Vice Chairman &
Chief Financial Officer