<PAGE> 1
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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
October 26, 1995
Date of Report (Date of earliest event reported)
------------------------------------
CHEMICAL BANKING CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
1-5805 13-2624428
(Commission File Number) (IRS Employer Identification No.)
270 Park Avenue, New York, New York 10017
(Address of principal executive offices) (Zip Code)
(212) 270-6000
(Registrant's telephone number, including area code)
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<PAGE> 2
Item 5. OTHER EVENTS.
As previously announced in the Current Report on Form 8-K of Chemical
Banking Corporation, a Delaware corporation (the "registrant" or "Chemical"),
filed with the Securities and Exchange Commission on August 29, 1995 (the "Prior
Form 8-K"), Chemical and The Chase Manhattan Corporation, a Delaware corporation
("Chase"), entered into an Agreement and Plan of Merger, dated as of August 27,
1995 (the "Merger Agreement"), whereby Chase will merge with and into the
registrant (the "Merger") with the registrant as the surviving entity (the
"Surviving Corporation"). A copy of the Merger Agreement is attached as an
exhibit to, and described in, the Prior Form 8-K. The Merger is expected to
qualify as a "pooling of interests" for accounting and financial reporting
purposes.
Certain financial information for Chase and pro forma combined financial
information for the combined entity giving effect to the Merger is set forth
under Item 7 below.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired
(1) The audited consolidated statements of condition of Chase and
subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of income, cash flows and changes in
stockholders' equity for each of the years in the three-year period
ended December 31, 1994 (incorporated by reference to pages 51-77 of
Chase's Annual Report on Form 10-K for the fiscal year ended December
31, 1994 (File No. 1-5945)).
(2) The unaudited consolidated statement of condition of Chase as of June
30, 1995 and the unaudited consolidated statements of income, cash flows
and changes in shareholders' equity of Chase and subsidiaries for the
six months ended June 30, 1995 and 1994 (incorporated by reference to
pages 3-8 of Chase's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995 (File No. 1-5945)).
(b) Pro Forma Financial Information
The Chemical and Chase unaudited pro forma combined statement of income
summary, unaudited pro forma combined balance sheet at June 30, 1995,
unaudited pro forma combined statements of income for each of the years in
the three-year period ended December 31, 1994 and for the six months ended
June 30, 1995 and June 30, 1994, and the notes to unaudited pro forma
combined financial statements.
2
<PAGE> 3
PRO FORMA COMBINED FINANCIAL DATA
CHEMICAL BANKING CORPORATION
AND THE CHASE MANHATTAN CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME SUMMARY
(IN MILLIONS, EXCEPT PER SHARE DATA)
The following Unaudited Pro Forma Combined Statement of Income Summary
combines the historical Consolidated Statements of Income of Chemical and Chase
giving effect to the Merger, which will be accounted for as a pooling of
interests, as if the Merger had occurred on the dates indicated herein, after
giving effect to the pro forma adjustments described in the Notes to the Pro
Forma Combined Financial Statements. This information should be read in
conjunction with the historical consolidated financial statements of Chase
incorporated by reference herein and the historical consolidated financial
statements of Chemical included in its Annual Report on Form 10-K for the year
ended December 31, 1994 (the "1994 Form 10-K") and its Quarterly Report on Form
10-Q for the six months ended June 30, 1995 (the "June Form 10-Q"). The effect
of the estimated $1.5 billion restructuring charge ($925 million net of tax)
expected to be taken in connection with the Merger has been reflected in the pro
forma combined balance sheet; however, since the proposed restructuring charge
is nonrecurring, it has not been reflected in the pro forma combined statements
of income. The pro forma financial data do not give effect to the anticipated
cost savings in connection with the Merger. The pro forma financial data are not
necessarily indicative of the results that actually would have occurred had the
Merger been consummated on the dates indicated or that may be obtained in the
future.
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS FOR THE YEAR
ENDED JUNE 30, ENDED DECEMBER 31,
--------------- ---------------------------
1995 1994 1994 1993 1992
------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans.............................................. $6,340 $5,386 $11,055 $11,252 $12,633
Securities......................................... 1,234 1,247 2,329 2,412 2,332
Trading Assets..................................... 616 575 1,142 691 735
Federal Funds Sold and Securities Purchased Under
Resale Agreements................................ 950 1,036 1,827 1,368 1,120
Deposits With Banks................................ 443 451 869 985 1,033
------ ------ ------- ------- -------
Total Interest Income............................ 9,583 8,695 17,222 16,708 17,853
------ ------ ------- ------- -------
INTEREST EXPENSE
Deposits........................................... 3,096 2,241 4,704 4,255 5,803
Short-Term and Other Borrowings.................... 1,930 1,837 3,307 3,092 2,805
Long-Term Debt..................................... 472 420 848 1,025 1,083
------ ------ ------- ------- -------
Total Interest Expense........................... 5,498 4,498 8,859 8,372 9,691
------ ------ ------- ------- -------
NET INTEREST INCOME................................ 4,085 4,197 8,363 8,336 8,162
Provision for Credit Losses........................ 380 675 1,050 2,254 2,585
Provision for Loans Held for Accelerated
Disposition...................................... -- -- -- 566 --
------ ------ ------- ------- -------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT
LOSSES AND PROVISION FOR LOANS HELD FOR
ACCELERATED DISPOSITION.......................... 3,705 3,522 7,313 5,516 5,577
</TABLE>
3
<PAGE> 4
PRO FORMA COMBINED FINANCIAL DATA
CHEMICAL BANKING CORPORATION
AND THE CHASE MANHATTAN CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME SUMMARY -- (CONTINUED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS FOR THE YEAR
ENDED JUNE 30, ENDED DECEMBER 31,
--------------- ---------------------------
1995 1994 1994 1993 1992
------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
NONINTEREST REVENUE
Trust and Investment Management Fees............... 450 500 988 871 768
Corporate Finance and Syndication Fees............. 393 290 638 532 465
Service Charges on Deposit Accounts................ 211 198 408 397 366
Fees for Other Financial Services.................. 1,068 1,044 2,116 2,008 1,954
Trading Revenue.................................... 406 719 1,196 1,789 1,321
Securities Gains................................... 54 60 65 189 66
Other Revenue...................................... 671 642 1,239 1,350 435
------ ------ ------- ------- -------
Total Noninterest Revenue........................ 3,253 3,453 6,650 7,136 5,375
------ ------ ------- ------- -------
NONINTEREST EXPENSE
Salaries........................................... 2,004 1,893 3,978 3,660 3,482
Employee Benefits.................................. 508 461 929 869 783
Occupancy Expense.................................. 446 485 968 991 949
Equipment Expense.................................. 391 333 724 664 604
Foreclosed Property Expense........................ (53) 97 50 509 413
Provision for Other Real Estate Held for
Accelerated Disposition.......................... -- -- -- 318 --
Restructuring Charge............................... 15 48 465 203 --
Other Expense...................................... 1,383 1,425 2,888 2,614 2,570
------ ------ ------- ------- -------
Total Noninterest Expense........................ 4,694 4,742 10,002 9,828 8,801
------ ------ ------- ------- -------
Income Before Income Tax Expense and Effect of
Accounting Changes............................... 2,264 2,233 3,961 2,824 2,151
Income Tax Expense................................. 885 890 1,475 798 428
------ ------ ------- ------- -------
INCOME BEFORE EFFECT OF ACCOUNTING CHANGES......... $1,379 $1,343 $ 2,486 $ 2,026 $ 1,723
------ ------ ------- ------- -------
Income Applicable to Common Stock.................. $1,262 $1,213 $ 2,221 $ 1,731 $ 1,449
------ ------ ------- ------- -------
Income Per Share (Before Accounting Changes):
Primary.......................................... $ 2.91 $ 2.71 $ 5.02 $ 4.00 $ 3.65
Assuming Full Dilution........................... $ 2.85 $ 2.67 $ 4.97 $ 3.96 $ 3.61
Average Common Shares Outstanding:
Primary.......................................... 433.5 448.2 442.2 433.1 397.5
Assuming Full Dilution........................... 444.7 457.8 450.9 441.7 408.2
</TABLE>
See the additional Unaudited Pro Forma Combined Financial Statements and Notes
thereto below.
4
<PAGE> 5
CHEMICAL BANKING CORPORATION
AND THE CHASE MANHATTAN CORPORATION
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(IN MILLIONS)
The following Unaudited Pro Forma Combined Balance Sheet combines the
historical Consolidated Balance Sheets of Chemical and Chase giving effect to
the Merger, which will be accounted for as a pooling of interests, as if the
Merger had been effective on June 30, 1995. This information should be read in
conjunction with the historical consolidated financial statements of Chase
incorporated by reference herein and the historical consolidated financial
statements of Chemical included in its 1994 Form 10-K and its June Form 10-Q.
The effect of the estimated $1.5 billion restructuring charge ($925 million net
of tax) expected to be taken in connection with the Merger has been reflected in
the pro forma combined balance sheet; however, since the proposed restructuring
charge is nonrecurring, it has not been reflected in the pro forma combined
statement of income. The pro forma financial data do not give effect to the
anticipated cost savings in connection with the Merger. The pro forma financial
data are not necessarily indicative of the actual financial position that would
have occurred had the Merger been consummated on June 30, 1995 or that may be
obtained in the future.
<TABLE>
<CAPTION>
AT JUNE 30, 1995
-----------------------------------------------------
CHEMICAL CHASE PRO FORMA
HISTORICAL HISTORICAL PRO FORMA COMBINED
---------- ---------- ADJUSTMENTS ---------
-----------
(A, P)
<S> <C> <C> <C> <C>
ASSETS
Cash and Due from Banks........................ $ 7,756 $ 4,309 $ -- $ 12,065
Deposits with Banks............................ 2,903 6,623 -- 9,526
Federal Funds Sold and Securities Purchased
Under Resale Agreements...................... 12,883 8,722 -- 21,605
Trading Assets:
Debt and Equity Instruments.................. 12,059 7,257 -- 19,316
Risk Management Instruments.................. 18,412 9,442 -- 27,854
Securities: (b)
Held-to-Maturity............................. 8,287 2,004 -- 10,291
Available-for-Sale........................... 19,965 5,106 (416)(c) 24,655
Loans.......................................... 84,675 64,239 416(c) 149,503
173(d)
Allowance for Credit Losses.................... (2,430) (1,416) -- (3,846)
Premises and Equipment......................... 2,138 1,940 (104)(q) 3,974
Due from Customers on Acceptances.............. 1,156 960 -- 2,116
Accrued Interest Receivable.................... 1,197 1,195 -- 2,392
Assets Acquired as Loan Satisfactions.......... 54 -- 93(d) 147
Assets Held for Accelerated Disposition........ 240 -- -- 240
Other Assets................................... 9,236 8,375 (266)(d) 17,709
364(j)
-------- -------- -------- --------
TOTAL ASSETS................................. $ 178,531 $ 118,756 $ 260 $ 297,547
-------- -------- -------- --------
</TABLE>
5
<PAGE> 6
CHEMICAL BANKING CORPORATION
AND THE CHASE MANHATTAN CORPORATION
UNAUDITED PRO FORMA COMBINED BALANCE SHEET -- (CONTINUED)
(IN MILLIONS)
<TABLE>
<CAPTION>
AT JUNE 30, 1995
-----------------------------------------------------
CHEMICAL CHASE PRO FORMA
HISTORICAL HISTORICAL PRO FORMA COMBINED
---------- ---------- ADJUSTMENTS ---------
-----------
(A, P)
<S> <C> <C> <C> <C>
LIABILITIES
Deposits:
Domestic Noninterest-Bearing................. $ 21,387 $ 11,293 $ -- $ 32,680
Domestic Interest-Bearing.................... 45,860 20,897 -- 66,757
Foreign...................................... 27,642 36,092 -- 63,734
-------- -------- -------- --------
Total Deposits............................ 94,889 68,282 -- 163,171
Federal Funds Purchased and Securities Sold
Under Repurchase Agreements.................. 23,557 12,519 -- 36,076
Other Borrowed Funds........................... 15,780 4,060 (6,930)(e) 12,910
Acceptances Outstanding........................ 1,162 967 -- 2,129
Trading Liabilities............................ 20,353 11,787 6,930(e) 39,070
Accounts Payable, Accrued Expenses and Other
Liabilities.................................. 4,208 7,004 146(f) 12,243
925(g)
(40)(q)
Long-Term Debt................................. 7,202 5,568 -- 12,770
-------- -------- -------- --------
TOTAL LIABILITIES............................ 167,151 110,187 1,031 278,369
STOCKHOLDERS' EQUITY
Preferred Stock................................ 1,250 1,400 -- 2,650
Common Stock................................... 255 374 (199)(h) 443
13(j)
Capital Surplus................................ 6,476 3,982 (111)(h) 10,698
351(j)
Retained Earnings.............................. 3,826 3,309 (146)(f) 5,821
(925)(g)
(179)(h)
(64)(q)
Net Unrealized Loss on Securities
Available-for-Sale, Net of Taxes............. (216) (7) -- (223)
Treasury Stock, at Cost........................ (211) (489) 489(h) (211)
-------- -------- -------- --------
TOTAL STOCKHOLDERS' EQUITY................... 11,380 8,569 (771) 19,178
-------- -------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY... $ 178,531 $ 118,756 $ 260 $ 297,547
======== ======== ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements
6
<PAGE> 7
CHEMICAL BANKING CORPORATION
AND THE CHASE MANHATTAN CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
The following unaudited Pro Forma Combined Statements of Income combine the
Consolidated Statements of Income of Chemical and Chase giving effect to the
Merger, which will be accounted for as a pooling of interests, as if the Merger
had been effective as of the beginning of the periods indicated after giving
effect to the pro forma adjustments described in the Notes to the Pro Forma
Combined Financial Statements. This information should be read in conjunction
with the historical consolidated financial statements of Chase incorporated by
reference herein and the historical consolidated financial statements of
Chemical included in its 1994 Form 10-K and its June Form 10-Q. The effect of
the estimated $1.5 billion restructuring charge ($925 million net of tax)
expected to be taken in connection with the Merger has been reflected in the pro
forma combined balance sheet; however, since the proposed restructuring charge
is nonrecurring, it has not been reflected in the pro forma combined statement
of income. The pro forma financial data do not give effect to the anticipated
cost savings in connection with the Merger. The pro forma financial data are not
necessarily indicative of the results that actually would have occurred had the
Merger been consummated on the dates indicated or that may be obtained in the
future.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1995
-------------------------------------------------------
CHEMICAL CHASE PRO FORMA
HISTORICAL HISTORICAL PRO FORMA COMBINED
---------- ---------- ADJUSTMENTS ----------
----------
(A, P)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans........................................... $3,431 $2,883 $ 26(c) $6,340
Securities...................................... 1,018 242 (26)(c) 1,234
Trading Assets.................................. 404 212 -- 616
Federal Funds Sold and Securities
Purchased Under Resale Agreements............. 431 519 -- 950
Deposits With Banks............................. 149 294 -- 443
------ ------ --- ------
Total Interest Income......................... 5,433 4,150 -- 9,583
------ ------ --- ------
INTEREST EXPENSE
Deposits........................................ 1,782 1,314 -- 3,096
Short-term and Other Borrowings................. 1,055 875 -- 1,930
Long-Term Debt.................................. 278 194 -- 472
------ ------ --- ------
Total Interest Expense........................ 3,115 2,383 -- 5,498
------ ------ --- ------
NET INTEREST INCOME............................. 2,318 1,767 -- 4,085
Provision for Credit Losses..................... 240 140 -- 380
------ ------ --- ------
NET INTEREST INCOME AFTER PROVISION FOR
CREDIT LOSSES................................. 2,078 1,627 -- 3,705
NONINTEREST REVENUE
Trust and Investment Management Fees............ 188 262 -- 450
Corporate Finance and Syndication Fees.......... 248 145 -- 393
Service Charges on Deposit Accounts............. 150 -- 61(k) 211
Fees for Other Financial Services............... 584 545 (61)(k) 1,068
Trading Revenue................................. 227 179 -- 406
Securities Gains................................ 51 26 (23)(c) 54
Other Revenue................................... 383 265 23(c) 671
------ ------ --- ------
Total Noninterest Revenue..................... 1,831 1,422 -- 3,253
------ ------ --- ------
</TABLE>
7
<PAGE> 8
CHEMICAL BANKING CORPORATION
AND THE CHASE MANHATTAN CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME -- (CONTINUED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1995
-------------------------------------------------------
CHEMICAL CHASE PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
---------- ---------- ---------- ----------
(A,P)
<S> <C> <C> <C> <C>
NONINTEREST EXPENSE
Salaries........................................ 1,103 904 (3)(1) 2,004
Employee Benefits............................... 224 291 (7)(f) 508
Occupancy Expense............................... 264 182 -- 446
Equipment Expense............................... 198 168 25(q) 391
Foreclosed Property Expense..................... (21) -- (32)(m) (53)
Restructuring Charge............................ -- -- 15(l) 15
Other Expense................................... 726 637 (12)(1) 1,383
32(m)
------ ------ --- ------
Total Noninterest Expense..................... 2,494 2,182 18 4,694
------ ------ --- ------
Income Before Income Tax Expense and
Effect of Accounting Changes.................. 1,415 867 (18) 2,264
Income Tax Expense.............................. 566 326 (7) 885
------ ------ --- ------
INCOME BEFORE EFFECT OF ACCOUNTING CHANGES...... $ 849 $ 541 $(11) $1,379
------ ------ --- ------
Income Applicable to Common Stock............... $ 793 $ 480 $(11) $1,262
------ ------ --- ------
Income Per Share (Before Accounting Changes):
Primary....................................... $ 3.21 $ 2.67 $ 2.91
Assuming Full Dilution........................ $ 3.12 $ 2.64 $ 2.85
Average Common Shares Outstanding:
Primary....................................... 246.8 179.5 433.5(h)
Assuming Full Dilution........................ 255.8 181.6 444.7(h)
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements
8
<PAGE> 9
CHEMICAL BANKING CORPORATION
AND THE CHASE MANHATTAN CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME -- (CONTINUED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1994
-------------------------------------------------
CHEMICAL CHASE PRO FORMA
HISTORICAL HISTORICAL PRO FORMA COMBINED
---------- ---------- ADJUSTMENTS ---------
-----------
(A,P)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans................................................. $2,682 $2,677 $ 27(c) $ 5,386
Securities............................................ 848 426 (27)(c) 1,247
Trading Assets........................................ 364 211 -- 575
Federal Funds Sold and Securities Purchased Under
Resale Agreements................................... 221 815 -- 1,036
Deposits With Banks................................... 194 257 -- 451
------ ------ ---- ------
Total Interest Income............................... 4,309 4,386 -- 8,695
------ ------ ---- ------
INTEREST EXPENSE
Deposits.............................................. 1,063 1,178 -- 2,241
Short-Term and Other Borrowings....................... 651 1,186 -- 1,837
Long-Term Debt........................................ 267 153 -- 420
------ ------ ---- ------
Total Interest Expense.............................. 1,981 2,517 -- 4,498
------ ------ ---- ------
NET INTEREST INCOME................................... 2,328 1,869 -- 4,197
Provision for Credit Losses........................... 365 310 -- 675
------ ------ ---- ------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT
LOSSES.............................................. 1,963 1,559 -- 3,522
NONINTEREST REVENUE
Trust and Investment Management Fees.................. 218 282 -- 500
Corporate Finance and Syndication Fees................ 175 115 -- 290
Service Charges on Deposit Accounts................... 144 -- 54(k) 198
Fees for Other Financial Services..................... 569 529 (54)(k) 1,044
Trading Revenue....................................... 388 331 -- 719
Securities Gains...................................... 59 80 (79)(c) 60
Other Revenue......................................... 245 318 79(c) 642
------ ------ ---- ------
Total Noninterest Revenue........................... 1,798 1,655 -- 3,453
------ ------ ---- ------
NONINTEREST EXPENSE
Salaries.............................................. 1,060 833 -- 1,893
Employee Benefits..................................... 221 247 (7)(f) 461
Occupancy Expense..................................... 286 199 -- 485
Equipment Expense..................................... 175 145 13(q) 333
Foreclosed Property Expense........................... 37 -- 60(m) 97
Restructuring Charge.................................. 48 -- -- 48
Other Expense......................................... 778 707 (60)(m) 1,425
------ ------ ---- ------
Total Noninterest Expense........................... 2,605 2,131 6 4,742
------ ------ ---- ------
Income Before Income Tax Expense...................... 1,156 1,083 (6) 2,233
Income Tax Expense.................................... 480 412 (2) 890
------ ------ ---- ------
NET INCOME............................................ $ 676 $ 671 $ (4) $ 1,343
------ ------ ---- ------
Income Applicable to Common Stock..................... $ 611 $ 606 $ (4) $ 1,213
------ ------ ---- ------
Income Per Share:
Primary............................................. $ 2.39 $ 3.27 $ 2.71
Assuming Full Dilution.............................. $ 2.36 $ 3.24 $ 2.67
Average Common Shares Outstanding:
Primary............................................. 255.2 185.6 448.2(h)
Assuming Full Dilution.............................. 263.0 187.3 457.8(h)
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements
9
<PAGE> 10
CHEMICAL BANKING CORPORATION
AND THE CHASE MANHATTAN CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME -- (CONTINUED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1994
---------------------------------------------------
CHEMICAL CHASE PRO FORMA
HISTORICAL HISTORICAL PRO FORMA COMBINED
---------- ---------- ADJUSTMENTS ---------
-----------
(A, P)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans............................................... $5,730 $5,270 $ 55(c) $11,055
Securities.......................................... 1,715 669 (55)(c) 2,329
Trading Assets...................................... 722 420 -- 1,142
Federal Funds Sold and Securities Purchased Under
Resale Agreements................................. 550 1,277 -- 1,827
Deposits With Banks................................. 371 498 -- 869
----- ----- ---- ------
Total Interest Income............................. 9,088 8,134 -- 17,222
----- ----- ---- ------
INTEREST EXPENSE
Deposits............................................ 2,378 2,326 -- 4,704
Short-Term and Other Borrowings..................... 1,500 1,807 -- 3,307
Long-Term Debt...................................... 536 312 -- 848
----- ----- ---- ------
Total Interest Expense............................ 4,414 4,445 -- 8,859
----- ----- ---- ------
NET INTEREST INCOME................................. 4,674 3,689 -- 8,363
Provision for Credit Losses......................... 550 500 -- 1,050
----- ----- ---- ------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT
LOSSES............................................ 4,124 3,189 -- 7,313
NONINTEREST REVENUE
Trust and Investment Management Fees................ 421 567 -- 988
Corporate Finance and Syndication Fees.............. 405 233 -- 638
Service Charges on Deposit Accounts................. 300 -- 108(k) 408
Fees for Other Financial Services................... 1,148 1,076 (108)(k) 2,116
Trading Revenue..................................... 645 551 -- 1,196
Securities Gains.................................... 66 105 (106)(c) 65
Other Revenue....................................... 612 521 106(c) 1,239
----- ----- ---- ------
Total Noninterest Revenue......................... 3,597 3,053 -- 6,650
----- ----- ---- ------
NONINTEREST EXPENSE
Salaries............................................ 2,205 1,773 -- 3,978
Employee Benefits................................... 439 649 (145)(l) 929
(14)(f)
Occupancy Expense................................... 573 395 -- 968
Equipment Expense................................... 382 307 35(q) 724
Foreclosed Property Expense......................... 41 -- 9(m) 50
Restructuring Charge................................ 308 -- 157(l) 465
Other Expense....................................... 1,561 1,348 (12)(l) 2,888
(9)(m)
----- ----- ---- ------
Total Noninterest Expense......................... 5,509 4,472 21 10,002
----- ----- ---- ------
Income Before Income Tax Expense.................... 2,212 1,770 (21) 3,961
Income Tax Expense.................................. 918 565 (8) 1,475
----- ----- ---- ------
NET INCOME.......................................... $1,294 $1,205 $ (13) $ 2,486
----- ----- ---- ------
Income Applicable to Common Stock................... $1,156 $1,078 $ (13) $ 2,221
----- ----- ---- ------
Income Per Share:
Primary........................................... $ 4.60 $ 5.87 $ 5.02
Assuming Full Dilution............................ $ 4.54 $ 5.84 $ 4.97
Average Common Shares Outstanding:
Primary........................................... 251.3 183.6 442.2(h)
Assuming Full Dilution............................ 258.9 184.6 450.9(h)
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements
10
<PAGE> 11
CHEMICAL BANKING CORPORATION
AND THE CHASE MANHATTAN CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME -- (CONTINUED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1993
-----------------------------------------------------
CHEMICAL CHASE PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
---------- ---------- ----------- ----------
(A,P)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans..................................................... $5,620 $5,795 $(163)(n) $ 11,252
Securities................................................ 1,727 685 -- 2,412
Trading Assets............................................ 449 242 -- 691
Federal Funds Sold and Securities Purchased Under Resale
Agreements.............................................. 339 1,029 -- 1,368
Deposits With Banks....................................... 268 717 -- 985
---------- ---------- ----------- ----------
Total Interest Income................................... 8,403 8,468 (163) 16,708
---------- ---------- ----------- ----------
INTEREST EXPENSE
Deposits.................................................. 2,241 2,014 -- 4,255
Short-Term and Other Borrowings........................... 992 2,100 -- 3,092
Long-Term Debt............................................ 534 491 -- 1,025
---------- ---------- ----------- ----------
Total Interest Expense.................................. 3,767 4,605 -- 8,372
---------- ---------- ----------- ----------
NET INTEREST INCOME....................................... 4,636 3,863 (163) 8,336
Provision for Credit Losses............................... 1,259 995 -- 2,254
Provision for Loans Held for Accelerated Disposition...... -- 566 -- 566
---------- ---------- ----------- ----------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES AND
PROVISION FOR LOANS HELD FOR ACCELERATED DEPOSITION..... 3,377 2,302 (163) 5,516
NONINTEREST REVENUE
Trust and Investment Management Fees...................... 406 465 -- 871
Corporate Finance and Syndication Fees.................... 338 194 -- 532
Service Charges on Deposit Accounts....................... 288 -- 109(k) 397
Fees for Other Financial Services......................... 1,067 903 (109)(k) 2,008
147(o)
Trading Revenue........................................... 1,073 716 -- 1,789
Securities Gains.......................................... 142 47 -- 189
Other Revenue............................................. 710 624 163(n) 1,350
(147)(o)
---------- ---------- ----------- ----------
Total Noninterest Revenue............................... 4,024 2,949 163 7,136
---------- ---------- ----------- ----------
NONINTEREST EXPENSE
Salaries.................................................. 2,070 1,590 -- 3,660
Employee Benefits......................................... 396 487 (14)(f) 869
Occupancy Expense......................................... 587 404 -- 991
Equipment Expense......................................... 337 298 29(q) 664
Foreclosed Property Expense............................... 287 -- 222(m) 509
Provision for Other Real Estate Held for Accelerated
Disposition............................................. -- 318 -- 318
Restructuring Charge...................................... 158 -- 45(l) 203
Other Expense............................................. 1,458 1,423 (45)(l) 2,614
(222)(m)
---------- ---------- ----------- ----------
Total Noninterest Expense............................... 5,293 4,520 15 9,828
---------- ---------- ----------- ----------
Income Before Income Tax Expense and Effect of Accounting
Changes................................................. 2,108 731 (15) 2,824
Income Tax Expense........................................ 539 265 (6) 798
---------- ---------- ----------- ----------
INCOME BEFORE EFFECT OF ACCOUNTING CHANGES................ $1,569 $ 466 $ (9) $ 2,026
---------- ---------- ----------- ----------
Income Applicable to Common Stock......................... $1,414 $ 326 $ (9) $ 1,731
---------- ---------- ----------- ----------
Income Per Share (Before Accounting Changes):
Primary................................................. $ 5.57 $ 1.89 $ 4.00
Assuming Full Dilution.................................. $ 5.48 $ 1.88 $ 3.96
Average Common Shares Outstanding:
Primary................................................. 253.9 172.3 433.1(h)
Assuming Full Dilution.................................. 261.6 173.2 441.7(h)
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements
11
<PAGE> 12
CHEMICAL BANKING CORPORATION
AND THE CHASE MANHATTAN CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME -- (CONTINUED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1992
-----------------------------------------------------
CHEMICAL CHASE PRO FORMA
HISTORICAL HISTORICAL PRO FORMA COMBINED
---------- ---------- ADJUSTMENTS ---------
-----------
(A,P)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans........................................... $6,353 $6,280 $ -- $12,633
Securities...................................... 1,753 579 -- 2,332
Trading Assets.................................. 419 316 -- 735
Federal Funds Sold and Securities Purchased
Under Resale Agreements....................... 349 771 -- 1,120
Deposits With Banks............................. 274 759 -- 1,033
------ ------ ----- -------
Total Interest Income......................... 9,148 8,705 -- 17,853
------ ------ ----- -------
INTEREST EXPENSE
Deposits........................................ 2,868 2,935 -- 5,803
Short-Term and Other Borrowings................. 1,228 1,577 -- 2,805
Long-Term Debt.................................. 454 629 -- 1,083
------ ------ ----- -------
Total Interest Expense........................ 4,550 5,141 -- 9,691
------ ------ ----- -------
NET INTEREST INCOME............................. 4,598 3,564 -- 8,162
Provision for Credit Losses..................... 1,365 1,220 -- 2,585
------ ------ ----- -------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT
LOSSES........................................ 3,233 2,344 -- 5,577
NONINTEREST REVENUE
Trust and Investment Management Fees............ 361 407 -- 768
Corporate Finance and Syndication Fees.......... 265 200 -- 465
Service Charges on Deposit Accounts............. 264 -- 102(k) 366
Fees for Other Financial Services............... 1,040 975 (102)(k) 1,954
41(o)
Trading Revenue................................. 853 468 -- 1,321
Securities Gains................................ 53 13 -- 66
Other Revenue................................... 190 286 (41)(o) 435
------ ------ ----- -------
Total Noninterest Revenue..................... 3,026 2,349 -- 5,375
------ ------ ----- -------
NONINTEREST EXPENSE
Salaries........................................ 1,977 1,505 -- 3,482
Employee Benefits............................... 372 411 -- 783
Occupancy Expense............................... 566 383 -- 949
Equipment Expense............................... 316 285 3(q) 604
Foreclosed Property Expense..................... 283 -- 130(m) 413
Other Expense................................... 1,416 1,284 (130)(m) 2,570
------ ------ ----- -------
Total Noninterest Expense..................... 4,930 3,868 3 8,801
------ ------ ----- -------
Income Before Income Tax Expense................ 1,329 825 (3) 2,151
Income Tax Expense.............................. 243 186 (1) 428
------ ------ ----- -------
NET INCOME...................................... $1,086 $ 639 $ (2) $ 1,723
------ ------ ----- -------
Income Applicable to Common Stock............... $ 936 $ 515 $ (2) $ 1,449
------ ------ ----- -------
Income Per Share:
Primary....................................... $ 3.85 $ 3.46 $ 3.65
Assuming Full Dilution........................ $ 3.81 $ 3.41 $ 3.61
Average Common Shares Outstanding:
Primary....................................... 242.9 148.7 397.5(h)
Assuming Full Dilution........................ 251.6 150.6 408.2(h)
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements
12
<PAGE> 13
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(a) Chemical and Chase are in the process of reviewing their accounting
policies and as a result of this review, it may be necessary to restate
either Chemical's or Chase's financial statements to conform to those
accounting policies that are determined to be most appropriate by the
Surviving Corporation. While some restatements of prior periods have been
included in the pro forma combined financial statements, further
restatements may be necessary upon the completion of this review process.
(b) Chemical and Chase intend to review their combined securities portfolio to
determine the classification of such securities as either
available-for-sale or held-to-maturity in connection with the combined
company's anticipated interest rate risk position. As a result of this
review, certain reclassifications of the combined company's securities
might take place. No such adjustments have been made to existing securities
classifications in the pro forma condensed combined balance sheet. Any such
reclassifications will be accounted for in accordance with SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities."
(c) Chase's historical financial data includes within available-for-sale
securities certain securities issued by foreign governments (such as
Mexico) to financial institutions as part of a debt renegotiation (i.e.,
"Brady Bonds"). To conform to Chemical's classification, Chase's historical
financial data have been reclassified on a pro forma basis to reflect such
securities as a component of loans. Both Chemical and Chase have accounted
for Brady Bonds in accordance with the provisions of SFAS 115.
Chase's historical financial data reflect sales of Brady Bonds as a
component of securities gains and interest income from Brady Bonds as a
component of interest income from securities. To conform to Chemical's
classification, Chase's historical financial data have been reclassified on
a pro forma basis to reflect sales of Brady Bonds as a component of other
revenue and interest income from Brady Bonds as a component of interest
income from loans.
(d) Chase's historical financial data reflect assets acquired as loan
satisfactions as a component of other assets. Effective January 1, 1995,
Chase adopted SFAS 114, "Accounting by Creditors for Impairment of a Loan,"
and prospectively classified in substance foreclosures (ISF's) as
nonperforming loans (the ISF balance as of the January 1, 1995 adoption
remained in other assets). To conform to Chemical's classification, Chase's
June 30, 1995 historical financial data have been reclassified on a pro
forma basis to reflect the remaining $173 million balance of ISF's as
nonperforming loans. To conform to Chemical's classification, Chase's
historical financial data have been reclassified on a pro forma basis to
reflect assets acquired as loan satisfactions (excluding ISF's) as a
separate balance sheet caption.
(e) Chemical's historical financial data reflect securities sold but not yet
purchased as a component of other borrowed funds. To conform to Chase's
classification, Chemical's historical financial data have been reclassified
on a pro forma basis to reflect its securities sold but not yet purchased
as a component of trading liabilities.
(f) Chase elected at the time of its adoption of SFAS No. 106 (effective
January 1, 1993) to amortize the transition liability for accumulated
postretirement benefits over 20 years, while Chemical upon its adoption of
SFAS No. 106 (effective January 1, 1993) elected to expense its entire
transition liability. To conform with Chemical's adoption of SFAS No. 106,
Chase's historical financial data have been adjusted on a pro forma basis
to reverse the amortization of Chase's transition liability reflected as a
component of OPEB expense under SFAS 106. Chase's transition liability of
approximately $270 million ($167 million after-tax), net of the $35 million
($21 million after-tax) reversal of amortization expense, has been
reflected in retained earnings on the pro forma consolidated balance sheet.
Both the pre-tax and tax effect are included in the caption "Accounts
Payable, Accrued Expenses and Other Liabilities" on the pro forma balance
sheet.
(g) In connection with the Merger, it is expected that a one-time restructuring
charge of approximately $1.5 billion ($925 million after-tax) will be
incurred at the time of the consummation of the Merger. The restructuring
charge is the result of severance expenses to be incurred in connection
with anticipated staff reductions, costs incurred in connection with
planned office eliminations and other merger-related expenses, including
costs to eliminate redundant back office and other operations of Chemical
and Chase.
13
<PAGE> 14
The restructuring charge is assumed to have the following components for
the purpose of the pro forma financial statements:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
Severance........................................ $ 550
Real Estate Costs................................ 550
Other............................................ 400
------
$ 1,500
------
</TABLE>
The effect of the proposed restructuring charge has been reflected in the
pro forma combined balance sheet; however, since the proposed restructuring
charge is nonrecurring, it has not been reflected in the pro forma combined
statement of income. Both the pre-tax and tax effect are included in the
caption "Accounts Payable, Accrued Expenses and Other Liabilities" on the
pro forma balance sheet.
(h) It is assumed that the Merger will be accounted for on a pooling of
interests accounting basis and, accordingly, the related pro forma
adjustments to the common stock, capital surplus and retained earnings
accounts at June 30, 1995 reflect (i) an exchange of 188.4 million shares
of Common Stock, par value $1.00 per share, of Chemical ("Chemical Common
Stock") (using the Exchange Ratio of 1.04) for the 174.5 million
outstanding shares of Common Stock, par value $2.00 per share, of Chase
("Chase Common Stock") at June 30, 1995 plus 6.6 million shares of Chase
Common Stock issued to acquire the securities processing businesses of U.S.
Trust Corporation (as discussed further in note (j) below); (ii) the
exchange of each outstanding share of preferred stock of Chase into one
share of preferred stock of Chemical; and (iii) the cancellation and
retirement of all remaining shares of Chase Common Stock held in Chase's
treasury.
For the income per share calculations, the pro forma combined average
common shares outstanding (primary and assuming full dilution) reflects the
exchange of Chemical Common Stock (using the Exchange Ratio of 1.04) for
the outstanding shares of Chase Common Stock.
(i) The pro forma financial information presented does not give effect to the
planned net repurchase of up to a maximum of 9 million shares in the
aggregate of Chemical Common Stock and Chase Common Stock (after giving
effect to the issuance of shares by both Chemical and Chase subsequent to
June 30, 1995, under various employee benefit plans) prior to the
consummation of the Merger pursuant to their respective previously
announced buyback programs.
(j) On September 2, 1995, Chase acquired the securities processing businesses of
U.S. Trust Corporation which will be merged into Chase and accounted for
under the purchase method. Although when compared with Chase's historical
financial statements, the securities processing businesses of U.S. Trust
Corporation do not qualify as a "significant subsidiary", a pro forma
adjustment has been made since Chase's investment in the securities
processing businesses of U.S. Trust Corporation involved the issuance of
6.6 million shares of Chase Common Stock (which had a fair value on the
date of issuance of $364 million). The net assets acquired (which are
largely intangible assets) are disclosed net in other assets on the pro
forma combined balance sheet.
Chemical's disposition of approximately 60% of Chemical Bank New Jersey,
National Association in the 1995 fourth quarter is not considered
significant to the pro forma combined financial statements and, therefore,
its impact is not included in these statements.
(k) Chase's historical financial data reflect service charges on deposit
accounts as a component of fees for other financial services. To conform to
Chemical's classification, such charges have been reclassified under a
separate caption.
14
<PAGE> 15
(l) Chase's historical financial statements reflect the components of
restructuring charges within various noninterest expense categories. To
conform to Chemical's classification, all such charges have been
reclassified to restructuring charge. The following costs have been
reclassified:
<TABLE>
<CAPTION>
SIX MONTHS FULL YEAR FULL YEAR
ENDED JUNE 1995 1994 1993
--------------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Salaries..................................... $ 3 $ -- $--
Employee Benefits............................ -- 145 --
Other Expense................................ 12 12 45
--- ---- ---
Costs reclassified to Restructuring Charge... $15 $ 157 $45
=== ==== ===
</TABLE>
(m) Chase's historical financial data reflect foreclosed property expense as a
component of other expense. To conform to Chemical's classification,
Chase's historical financial data have been reclassified on a pro forma
basis to reflect foreclosed property expense as a separate income statement
caption.
(n) Chase's historical financial data reflect the sale of Brazilian and
Argentine past due interest (PDI) bonds as a component of net interest
income. To conform to Chemical's classification, Chase's historical
financial data have been reclassified on a pro forma basis to reflect these
bond sales as a component of other revenue.
(o) Chase's historical financial data reflect accelerated mortgage servicing
writedowns as a component of fees for other financial services. To conform
to Chemical's classification, Chase's historical financial data have been
reclassified on a pro forma basis to reflect such writedowns as a component
of other revenue.
(p) Transactions between Chemical and Chase are not material in relation to the
pro forma combined financial statements and therefore intercompany balances
have not been eliminated from the pro forma combined amounts.
(q) Chase's historical financial data reflect the capitalization of computer
software costs. To conform to Chemical's accounting policy, Chase's
historical financial data have been adjusted on a pro forma basis to
immediately recognize as expense those computer software costs that are
capitalized.
The pro forma adjustment to the balance sheet reflects the unamortized
capitalized computer software costs of $104 million ($64 million net of
tax) as of June 30, 1995. The pro forma adjustment to the statement of
income for each period reflects the net impact of (i) charging to expense
computer software costs that were capitalized during each respective period
less (ii) the elimination of the previously recorded amortization of
capitalized computer software costs.
(c) Exhibits
The following exhibits are filed with this report:
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -------------------------------------------------------------------------
<C> <S>
99 Report of Price Waterhouse LLP dated January 17, 1995
</TABLE>
15
<PAGE> 16
SIGNATURE
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 thereunto duly authorized.
CHEMICAL BANKING CORPORATION
By: /s/ JOHN B. WYNNE
Name: John B. Wynne
Title: Secretary
Dated: October 26, 1995.
16
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION PAGE
- -------------- ----------------------------------------------------------------------- ----
<C> <S> <C>
99 Report of Price Waterhouse LLP dated January 17, 1995 18
</TABLE>
17
<PAGE> 1
EXHIBIT 99
REPORT OF INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
To the Board of Directors and
Stockholders of The Chase Manhattan Corporation
In our opinion, the consolidated statement of condition of The Chase
Manhattan Corporation and Subsidiaries and the related consolidated statements
of income, of changes in stockholders' equity and of cash flows and the
consolidated statement of condition of The Chase Manhattan Bank, N.A. and
Subsidiaries appearing on pages 51 through 77 of the Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 of The Chase Manhattan Corporation,
present fairly, in all material respects, the financial position of The Chase
Manhattan Corporation and Subsidiaries at December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1994 and the financial position of The Chase
Manhattan Bank, N.A. and Subsidiaries at December 31, 1994 and 1993, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the management of The Chase Manhattan
Corporation and The Chase Manhattan Bank, N.A.; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Notes 1, 10 and 11 to the consolidated financial
statements, The Chase Manhattan Corporation and Subsidiaries changed their
method of accounting for the offsetting of amounts related to certain derivative
contracts in 1994, and their method of accounting for investments in debt and
equity securities, postretirement benefit plans and income taxes in 1993.
/s/ PRICE WATERHOUSE LLP
January 17, 1995
18
