<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarterly Period Ended JUNE 30, 1995
---------------------------------------------
Commission file number 0-8709
-------------------------------------------------
U. S. TRUST CORPORATION
-----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-2927955
-----------------------------------------------------------------------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
114 West 47th Street, New York, New York 10036
-----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 852-1000
-----------------------------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
-----------------------------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
9,660,664 shares, Common Stock $1 par value, as of July 31, 1995
<PAGE>
<PAGE>
U.S. TRUST CORPORATION
Exhibit 99 - Pro Forma Condensed Financial Statements
The following unaudited pro forma condensed statement of
condition as of June 30, 1995, unaudited pro forma condensed
statements of income for the year ended December 31, 1994, the three
and six month periods ended June 30, 1995, and unaudited pro forma
condensed statement of average balances for the six month period ended
June 30, 1995 (collectively, the "Pro Forma Statements"), were
prepared to present the estimated effects of the pending Disposition
and Merger transaction with The Chase Manhattan Corporation, the
related restructuring transactions and the effect of the Services
Agreement as if such transactions had occurred for statement of
condition purposes as of June 30, 1995 and for statement of income
purposes as of January 1, 1994.
The "Disposition Adjustments" column in each of the Pro Forma
Statements includes the reduction in assets and liabilities and the
elimination from operations of the revenue and expenses related to the
merger of the Chase Acquired Business.
The "Other Adjustments" column in each of the Pro Forma
Statements includes the following:
the balance sheet impact of the nonrecurring adjustments as set
forth in footnote (k) of the Notes to Pro Forma Condensed
Financial Statements, and
the ongoing impact on the Corporation's results of operations
arising from the nonrecurring adjustments and the Services
Agreement including the nonrecurring adjustments that have been
incurred during the fourth quarter of 1994 and the first six
months of 1995.
All of the pro forma adjustments are based upon available
information and upon certain assumptions that the Corporation believes
are appropriate and include only "exit costs" as defined in Emerging
Issues Task Force Issue 94-3 ("EITF 94-3") that are directly related
to the transaction. The information is not intended to be indicative
of the Corporation's actual results had the transactions occurred as
of the dates indicated above nor do they purport to indicate results
which may be attained in the future.
The Pro Forma Statements and accompanying notes should be read in
conjunction with the historical financial statements and other
financial information relating to the Corporation. For financial
reporting purposes, New USTC will be a "successor registrant" to the
Corporation and, as a result, the historical information set forth in
the Pro Forma Statements is the historical information of the
Corporation.
The Distribution will be accounted for by New USTC as if the
Corporation had continued in existence, with the carrying amounts of
the assets and liabilities being distributed being accounted for in
accordance with generally accepted accounting principles at their
historical values.
-1-
<PAGE>
<TABLE>
PRO FORMA CONDENSED STATEMENT OF CONDITION
June 30, 1995
(Dollars In Thousands)
(UNAUDITED)
Corporation
Disposition Before Other Other Corporation
Historical Adjustments(a) Adjustments Adjustments Pro Forma
---------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and Cash Equivalents $ 231,185 $ (97,921) $ 133,264 $(34,320)(b) $ 98,944
Securities and Short-Term Investments 1,231,431 (515,340) 716,091 - 716,091
Net Loans, After Allowance for
Credit Losses 1,652,816 (232,317) 1,420,499 - 1,420,499
Other Assets 273,633 (47,509) 226,124 42,337 (c) 268,461
---------- --------- ---------- -------- ----------
Total Assets $3,389,065 $(893,087) $2,495,978 $ 8,017 $2,503,995
========== ========= ========== ======== ==========
LIABILITIES
Deposits $2,722,840 $(680,893) $2,041,947 $ - $2,041,947
Short-Term Borrowings 210,524 (200,000) 10,524 41,412 (d) 51,936
Accounts Payable and
Accrued Liabilities 148,817 (12,194) 136,623 79,628 (e) 216,251
Long-Term Debt 57,187 - 57,187 (40,753)(f) 16,434
---------- --------- ---------- -------- ----------
Total Liabilities 3,139,368 (893,087) 2,246,281 80,287 2,326,568
---------- --------- ---------- -------- ----------
STOCKHOLDERS' EQUITY
Common Stock - $1.00 Par Value 11,764 - 11,764 (2,054)(g) 9,710
Capital Surplus 79,422 - 79,422 (79,422)(h)
Retained Earnings 255,350 - 255,350 (77,095)(i) 178,255
Treasury Stock at Cost (86,301) - (86,301) 86,301 (j)
Loan to ESOP (13,434) - (13,434) - (13,434)
Unrealized Gain (Loss), Net of Taxes,
on Securities Available for Sale 2,896 - 2,896 - 2,896
---------- --------- ------------ -------- ----------
Total Stockholders' Equity 249,697 - 249,697 (72,270) 177,427
---------- --------- ---------- -------- ----------
Total Liabilities and
Stockholders' Equity $3,389,065 $(893,087) $2,495,978 $ 8,017 $2,503,995
========== ========= ========== ======== ==========
CAPITAL RATIOS
As a Percentage of Risk-Adjusted
Period End Total Assets:
Tier 1 Capital 13.08% 9.33%
Total Capital 14.32 10.46
Tier 1 Leverage 6.80 5.12
</TABLE>
-2-
<PAGE>
<TABLE>
PRO FORMA CONDENSED STATEMENT OF INCOME
Year Ended December 31, 1994
(Dollars In Thousands, Except Per Share Amounts)
(UNAUDITED)
Reversal of
Back Office Corporation
Disposition & Corporate Before Other Other Corporation
Historical Adjustments(l) Staff (m) Adjustments Adjustments Pro Forma(k)
----------- -------------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net Interest Income $ 108,112 $ (42,133) $ - $ 65,979 $ - $ 65,979
Provision for Credit Losses 2,000 - - 2,000 - 2,000
---------- --------- -------- -------- -------- --------
Net Interest Income After
Provision for Credit Losses 106,112 (42,133) - 63,979 - 63,979
Fees 295,565 (102,704) - 192,861 - 192,861
Securities Gains (Losses), net (42,118) - - (42,118) 44,172 (k) 2,054
Other Income 16,748 (5,447) - 11,301 (1,966)(n) 9,335
---------- --------- -------- -------- -------- --------
Total Revenue 376,307 (150,284) - 226,023 42,206 268,229
---------- --------- -------- -------- -------- --------
Operating Expenses
Salaries and Benefits 207,483 (72,798) 24,691 159,376 (31,696)(o) 127,680
Net Occupancy 40,030 (10,616) 4,659 34,073 (4,763)(o) 29,310
Other 94,422 (30,190) 17,236 81,468 (18,537)(o,k) 62,931
---------- --------- -------- -------- -------- --------
Total Operating Expenses 341,935 (113,604) 46,586 274,917 (54,996) 219,921
---------- --------- -------- -------- -------- --------
Income Before Income Tax
Expense 34,372 (36,680) (46,586) (48,894) 97,202 48,308
Income Tax Expense
(Benefit) (p) 13,405 (16,506) (20,964) (24,065) 43,291 19,226
---------- --------- -------- -------- -------- --------
Net Income $ 20,967 $ (20,174) $(25,622) $(24,829) $ 53,911 $ 29,082
========== ========= ======== ======== ======== ========
Net Income Per Share: (q)
Fully Diluted $ 2.12 $ 2.83
========= ==========
Average Shares Outstanding:
Fully Diluted 10,019,592 10,400,000
========== ==========
</TABLE>
-3-
<PAGE>
<TABLE>
PRO FORMA CONDENSED STATEMENT OF INCOME
Three Months Ended June 30, 1995
(Dollars In Thousands, Except Per Share Amounts)
(UNAUDITED)
Reversal of
Back Office Corporation
Disposition & Corporate Before Other Other Corporation
Historical Adjustments(l) Staff(m) Adjustments Adjustments Pro Forma(k,t)
---------- ------------- ----------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net Interest Income $ 25,152 $ (7,873) $ - $ 17,279 $ - $ 17,279
Provision for Credit Losses 400 - - 400 - 400
---------- --------- -------- -------- -------- --------
Net Interest Income After
Provision for Credit Losses 24,752 (7,873) - 16,879 - 16,879
Fees 77,162 (24,468) - 52,694 - 52,694
Other Income 1,302 (1,704) - (402) 1,691 (n,k) 1,289
--------- --------- -------- -------- -------- --------
Total Revenue 103,216 (34,045) - 69,171 1,691 70,862
---------- --------- -------- -------- -------- --------
Operating Expenses
Salaries and Benefits 55,105 (17,456) 5,425 43,074 (10,829)(o,k) 32,245
Net Occupancy 10,285 (2,674) 958 8,569 (717)(o) 7,852
Other 28,881 (7,366) 4,150 25,665 (9,018)(o,k) 16,647
---------- --------- -------- -------- -------- --------
Total Operating Expenses 94,271 (27,496) 10,533 77,308 (20,564) 56,744
---------- --------- -------- -------- -------- --------
Income Before Income Tax
Expense 8,945 (6,549) (10,533) (8,137) 22,255 14,118
Income Tax Expense
(Benefit) (p) 3,578 (2,947) (4,739) (4,108) 9,727 5,619
---------- --------- -------- -------- -------- --------
Net Income $ 5,367 (3,602) (5,794) $ (4,029) $ 12,528 $ 8,499
========== ========= ======== ======== ======== ========
Net Income Per Share: (q)
Fully Diluted $ 0.52 $ 0.83
========= ==========
Average Shares Outstanding:
Fully Diluted 10,406,481 10,600,000
========== ==========
</TABLE>
-4-
<PAGE>
<TABLE>
PRO FORMA CONDENSED STATEMENT OF INCOME
Six Months Ended June 30, 1995
(Dollars In Thousands, Except Per Share Amounts)
(UNAUDITED)
Reversal of
Back Office Corporation
Disposition & Corporate Before Other Other Corporation
Historical Adjustments(l) Staff(m) Adjustments Adjustments Pro Forma(k,t)
---------- ------------- ----------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net Interest Income $ 53,820 $ (20,179) $ - $ 33,641 $ - $ 33,641
Provision for Credit Losses 800 - - 800 - 800
---------- --------- -------- -------- -------- --------
Net Interest Income After
Provision for Credit Losses 53,020 (20,179) - 32,841 - 32,841
Fees 150,665 (49,526) - 101,139 - 101,139
Other Income 3,929 (3,206) - 723 2,345 (n,k) 3,068
--------- --------- -------- -------- -------- --------
Total Revenue 207,614 (72,911) - 134,703 2,345 137,048
---------- --------- -------- -------- -------- --------
Operating Expenses
Salaries and Benefits 110,895 (36,204) 11,473 86,164 (20,239)(o,k) 65,925
Net Occupancy 20,790 (5,377) 1,998 17,411 (1,763)(o) 15,648
Other 52,604 (15,023) 8,834 46,415 (14,246)(o,k) 32,169
---------- --------- -------- -------- -------- --------
Total Operating Expenses 184,289 (56,604) 22,305 149,990 (36,248) 113,742
---------- --------- -------- -------- -------- --------
Income Before Income Tax
Expense 23,325 (16,307) (22,305) (15,287) 38,593 23,306
Income Tax Expense
(Benefit) (p) 9,330 (7,338) (10,036) (8,044) 17,320 9,276
---------- --------- -------- -------- -------- --------
Net Income $ 13,995 (8,969) (12,269) $ (7,243) $ 21,273 $ 14,030
========== ========= ======== ======== ======== ========
Net Income Per Share: (q)
Fully Diluted $ 1.37 $ 1.37
========= ==========
Average Shares Outstanding:
Fully Diluted 10,379,439 10,600,000
========== ==========
</TABLE>
-5-
<PAGE>
<TABLE>
PRO FORMA CONDENSED STATEMENT OF AVERAGE BALANCES
For the Six Months Ended June 30 1995
(In Thousands)
(UNAUDITED)
Disposition Other Corporation
Historical Adjustments Adjustments(s) Pro Forma
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Cash and Cash Equivalents $ 300,716 $ (120,945) $ (32,020) $ 147,751
Securities and Short-Term
Investments 1,452,858 (710,000) - 742,858
Net Loans, After Allowance for
Credit Losses 1,333,900 - - 1,333,900
Other Assets 458,462 (180,263)(r) 35,089 313,288
---------- ----------- ---------- ----------
Total Assets $3,545,936 $(1,011,208) 3,069 $2,537,797
---------- ----------- ---------- ----------
LIABILITIES AND STOCKHOLDERS'
EQUITY
Deposits $2,878,052 $ (976,208) $ - $1,901,844
Short-Term Borrowings 228,936 - 41,412 270,348
Accounts Payable and
Accrued Liabilities 148,000 (35,000) 78,128 191,128
Long-Term Debt 58,302 (40,753) 17,549
---------- ----------- ---------- ----------
Total Liabilities $3,313,290 $(1,011,208) 78,787 $2,380,869
---------- ----------- ---------- ----------
Stockholders' Equity 232,646 - (75,718) 156,928
---------- ----------- ---------- ----------
Total Liabilities and
Stockholders' Equity $3,545,936 $(1,011,208) 3,069 $2,537,797
========== =========== ========== ==========
</TABLE>
-6-
<PAGE>
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
(a) Disposition Adjustments (Pro Forma Condensed Statement of
Condition) -- The Disposition Adjustments presented in the Pro Forma
Condensed Statement of Condition reflect the disposition of the Chase
Acquired Business. The Pro Forma Condensed Statement of Average
Balances presents the Corporation's daily average balance sheet for
the six month periods ended June 30, 1995 adjusted for the pending
Disposition and Merger and Other Adjustments.
During the six month period ended June 30, 1995, the Chase
Acquired Business generated average non-interest bearing deposits of
approximately $976 million. Investable Balances, defined as total
average non-interest bearing deposits less average cash items in the
process of collection and average overdrafts, were approximately $710
million during the six month period ended June 30, 1995.
(b) Cash and Cash Equivalents -- The $34.3 million adjustment is
comprised of the estimated payments of investment banking, legal,
accounting, consulting and printing professional fees ($3,400,000 --
determined based upon actual invoices and estimates supplied by the
various vendors), the estimated amount of payments necessary to cash-
out holders of outstanding stock options ($31,748,000), estimated
costs associated with the redemption of long-term debt and other
miscellaneous payments ($1,800,000) and the estimated amount of cash
to be received from the exercise of certain incentive stock options
($2,628,000).
(c) Other Assets -- The $42.3 million increase in Other Assets
reflects (i) certain tax benefits resulting from the Disposition
Adjustments and the Other Adjustments ($58,378,000) and (ii) the
write-off of the net book value of premises and equipment and computer
software ($14,041,000) related to the termination of various leases
and (iii) the write-off of aged receivables ($2,000,000).
(d) Short-Term Borrowings -- The $41.4 million increase in
short-term borrowings reflects the borrowings required to replace
accrued interest and long-term debt (see notes (e) and (f)).
(e) Accounts Payable and Accrued Liabilities -- The $79.6 million
increase in accounts payable and accrued liabilities includes
estimated severance costs ($32,664,000), the estimated present value
(discounted at 8%) of the cost of terminating leases at discontinued
locations an the estimated cost of terminating computer hardware
leases, software licenses and contracts ($38,402,000), the
estimated cost of terminating certain incentive compensation plans
($5,731,000), a settlement and other reserve for Processing Business
contingencies ($3,500,000) and an amount to record the reversal in
accrued interest payable related to the redemption and satisfaction
and discharge of certain issues of long-term debt ($659,000).
-7-
<PAGE>
(f) Long-Term Debt -- The $40.8 million reduction in long-term
debt reflects the redemption of the Trust Company's 8.5% Capital Notes
Due 2001 and the satisfaction and discharge of the Corporation's 8%
Notes Due 1996. The cost of redeeming and defeasing this long-term
debt is insignificant to the Corporation's pro forma results of
operations.
(g) Common Stock -- The $2.1 million decrease in the
Corporation's Common Stock reflects the retirement of treasury stock
($2,127,000) offset by the aggregate par value amount of the shares to
be issued pursuant to the exercise of incentive stock options.
(h) Capital Surplus -- The $79.4 million adjustment reflects the
retirement of treasury stock ($81,977,000) offset, in part, by the
amount of cash proceeds in excess of the par value received in
connection with the expected exercise of incentive stock options
($2,555,000).
(i) Retained Earnings -- The $77.1 million adjustment reflects
the after-tax impact of the nonrecurring adjustments presented in note
(k) below ($74,898,000) and the amount by which the book value of
treasury stock retired exceeds capital surplus ($2,197,000).
(j) Treasury Stock at Cost -- The adjustment of $86.3 million
reflects the retirement of treasury stock.
(k) The objective of the pro forma financial statements is to
provide information concerning the impact of the transaction by
showing how it might have affected historical financial statements if
the transaction had been consummated as of an earlier date.
Accordingly, the analysis begins with the historical financial
statements of the Corporation, deletes the Processing Business and
reflects other pro forma adjustments, as permitted, to present the
pro forma results of the surviving entity.
Therefore, the Pro Forma Statements of Income for the three and
six month periods ended June 30, 1995 and for the year ended
December 31, 1994, report net income which does not include material
nonrecurring charges and credits and related tax effects, as presented
below, which result directly from the Disposition and Merger.
Corporation Pro Forma net income is computed assuming the
transaction was consummated at the beginning of the period presented
and includes adjustments which give effect to events that are directly
attributable to the transaction and that are expected to have a
continuing impact on the Corporation. The Disposition and Merger is
expected to occur during the third quarter of 1995.
The adjustments are related to severance and other termination
related costs associated with the elimination of approximately 150
positions, the cost of the disposition of certain facilities, premises
and equipment and the termination and modification of certain leases
and third party services agreements. The staff reductions are tied to
specific expense reduction initiatives including optimizing corporate
support staff following the transfer of certain back office functions
to Chase.
-8-
<PAGE>
Changes related to the announced charges are related principally
to changes in Corporate facility plans since the Disposition and
Merger announcement and revised estimates of occupancy-related costs,
severance expense and equipment disposals associated with the
transaction.
<TABLE>
(Millions)
----------
<S> <C>
Severance and other termination related costs $ 38.4
Disposition of facilities, premises and
equipment and termination of leases 52.4
Other 42.5
------
133.3
Applicable tax benefits 58.4
------
Total $ 74.9
======
</TABLE>
In addition to the costs enumerated in the preceding table, the
Corporation has already incurred (since the announcement of the
transaction) and reflected in it historical statements of income for
the year ended December 31, 1994 and the six months ended June 30,
1995, the following charges.
<TABLE>
Three Six Twelve
Months Months Months Cumulative
Ended Ended Ended Restruct-
June 30, June 30, Dec. 31, uring To
1995 1995 1994 Date
(Millions) ------- ------- ------- ----------
<S> <C> <C> <C> <C>
Portfolio Balancing $ 1.0 $ 1.0 $44.2 $ 45.2
Severance and Other Termination
Related Costs 2.9 4.0 - 4.0
Disposition of Facilities,
Premises and Equipment and
Termination of Leases - - - -
Other 3.5 3.9 6.0 9.9
------- ------- ------- ----------
7.4 8.9 50.2 59.1
Tax benefit 3.0 3.6 22.2 25.8
------- ------- ------- ----------
Total $ 4.4 $ 5.3 $28.0 $ 33.3
======= ======= ======= ==========
</TABLE>
These charges are eliminated in the Other Adjustments columns so
that the Corporation Pro Forma results excludes the one-time
nonrecurring effect of these charges.
Of the total $108.2 million of restructuring charges on an
after-tax basis, $74.9 million is expected to be accrued or paid by
the closing date of the transaction, and $33.3 million has already
been incurred in the fourth quarter of 1994 or the first six months of
1995.
-9-
<PAGE>
In conjunction with the announcement of the Distribution and the
Merger, the Corporation disclosed that it may incur up to $110 million
of restructuring charges on an after-tax basis in connection with the
Distribution and the Merger. The difference between the $108.2
million and the estimated $110 million represents charges that do not
presently meet the definition of "exit costs" as defined by EITF 94-3.
While the amounts set forth above represent the Corporation's
best estimate of the restructuring costs that will be incurred, the
ultimate level of such charges will not be precisely determinable
until the Closing Date.
The cost of terminating computer hardware leases takes into
consideration the estimated residual value of the equipment when it is
returned to the lessor. Such residual values could be severely
impacted and the cost of terminating the leases increased if the
manufacturer releases upgraded versions of the equipment prior to the
lease termination date.
The payout for stock options is based upon various assumptions,
including the Determined Value (as defined under "Effect of
Transactions on UST Employees and UST Benefit Plans - Retained Plans"
in the Proxy Statement/Prospectus dated February 9, 1995, relating to
the Special Meeting of the Corporation's Stockholders held on
March 22, 1995 and filed with the Securities and Exchange Commission
on February 28, 1995) of the shares of the Corporation's common stock,
the number of stock options that are outstanding as of the Closing
Date and the average exercise price of such outstanding options. As a
result, the actual amount of the cash payment to be made in respect of
stock options will not be determinable until the Closing Date.
In a similar manner, the other exit costs listed above are
subject to change based upon events and circumstances that will not be
finalized until the consummation of the transaction.
Pursuant to the Post Closing Covenants Agreement, the Corporation
has agreed to maintain a minimum net worth for four years following
the Distribution. See "The Distribution -- Terms of the Post Closing
Covenants Agreement -- Minimum Net Worth" included in the Proxy
Statement/Prospectus dated February 9, 1995, relating to the Special
Meeting of the Corporation's Stockholders held on March 22, 1995 and
filed with the Securities and Exchange Commission on February 28,
1995). The Corporation believes that New USTC's initial annual
dividend will be $1.00 per share. See "Special Factors -- Dividends
and Dividend Policy" included in the Proxy Statement/Prospectus dated
February 9, 1995, relating to the Special Meeting of the Corporation's
Stockholders held on March 22, 1995 and filed with the Securities and
Exchange Commission on February 28, 1995).
-10-
<PAGE>
(l) Disposition Adjustments (Pro Forma Condensed Statements of
Income) -- The Disposition Adjustments reflect the disposition of the
Chase Acquired Business pursuant to the Disposition and Merger. The
Disposition Adjustments include the revenues and expenses of the Chase
Acquired Business as allocated in accordance with the methodologies
utilized by the Corporation's internal management reporting system.
The amount of net interest income is based upon the average Investable
Balances multiplied by an internally calculated interest rate. The
rate is based upon the rates earned by the Corporation's long- and
short-term securities. The blended rates were 5.43% and 5.73% for the
three and six month periods ended June 30, 1995, respectively, and
5.43% for the year ended December 31, 1994.
Fees and Other Income represent amounts earned by the Chase
Acquired Business. In addition, fees earned by the Corporation's
asset management business from customers of the Chase Acquired
Business are included in Fees and Other Income, which fees are
expected to be earned by Chase following the Disposition and Merger.
Expenses reflect direct costs incurred and allocations of other costs
in accordance with the Corporation's internal management reporting
system.
(m) Back Office and Corporate Staff -- The $46.6 million of back
office and corporate staff charges for the year ended December 31,
1994, and $10.5 million and $22.3 million for the three and six month
periods ended June 30, 1995, respectively, are derived from the
Corporation's internal management accounting system and represent the
amounts allocated to the Chase Acquired Business for services
provided. Back office support costs include securities processing and
custody, check clearance and computer services processing and support
services while the corporate staff cost allocations include financial,
personnel, legal and general services support functions. Such back
office support and corporate staff costs have been added to the
expenses of the Corporation Before Other Adjustments because such
costs were not eliminated in connection with the disposition of the
Chase Acquired Business. The estimated downsizing of the corporate
staff and the impact of the Services Agreement are reflected in the
Other Adjustments.
(n) Other Income -- The $2.0 million for the year ended December
31, 1994 and approximately $660,000 and $1.3 million of the total $1.7
million and $2.3 million for the three and six month periods ended
June 30, 1995, respectively, reflect the elimination of certain
revenues generated from computer processing activities conducted for
third parties which will no longer be provided following the
Disposition and Merger.
-11-
<PAGE>
(o) Salaries and Benefits, Net Occupancy and Other Expenses --
Reflects the reduction of personnel (including $2.9 million and $4.0
million of severance charges incurred in the three and six month
periods ended June 30, 1995, respectively), net occupancy costs and
other expenses, as indicated, resulting from the Disposition and
Merger, the downsizing of the Corporation's corporate staff and the
Services Agreement.
(p) Income Taxes -- Income taxes reflected in the Pro Forma
Statements of Income are recorded at the statutory Federal tax rate of
35%, adjusted for the impact of state and local taxes and
nondeductible items. The resulting effective tax rate for the
Corporation was approximately 40% for both periods presented.
Taxes have been calculated on the "Other Adjustments" in the Pro
Forma Statement of Condition at the statutory Federal tax rate of 35%,
adjusted for state and local taxes and nondeductible items. The
resulting effective tax benefit was approximately 45%. The
Corporation anticipates realizing these tax benefits in the periods in
which the adjustments are reported in the Corporation's tax returns.
(q) Pro Forma Net Income Per Share -- Net income per share has
been calculated on a basis consistent with the Corporation's past
practices and was determined by dividing "Net Income -- Corporation
Pro Forma" by the estimated fully diluted average shares outstanding
for each period. For the three and six month periods ended June 30,
1995, estimated fully diluted average shares outstanding include the
actual average shares outstanding, the assumed exercise of stock
options and the dilutive effects of approximately 900,000 phantom
shares granted under the Corporation's variable stock award plans.
For the year ended December 31, 1994, estimated fully diluted average
shares outstanding include the actual average shares outstanding, the
assumed exercise of stock options and the dilutive effects of
approximately 800,000 phantom shares. For both periods, dividends
paid on phantom shares have been added back to net income on an after-
tax basis. For both periods, the primary and fully diluted net income
per share amounts are the same.
(r) For the purposes of determining the Pro Forma Condensed
Statement of Average Balances, the Chase Acquired Business average
overdrafts are included in Other Assets.
(s) For the purposes of determining the Pro Forma Condensed
Statement of Average Balances, all Other Adjustments are assumed to
have occurred as of January 1, 1995.
(t) The following table summarizes the pro forma effects of the
Disposition and Merger on net income and net income per share for the
six month periods ended June 30, 1995 and June 30, 1994. The
methodologies employed in preparing the pro forma results for the six
month period ended June 30, 1994 were consistent with the 1995
period.
-12-
<PAGE>
<TABLE>
June 30,
---------------------------
1995 1994
(In Thousands, Except Per Share Amounts) -------- --------
<S> <C> <C>
Net Income $13,995 $23,568
Net Effect of Disposition and Merger
and Restructuring Charges 35 (9,189)
-------- --------
Pro Forma Net Income $14,030 $14,379
======== ========
Per Common Share:
Net Income $ 1.37 $ 2.38
Net Effect of Disposition and Merger - (0.98)
-------- --------
Pro Forma Net Income $ 1.37 $ 1.40
======== ========
</TABLE>
Net income for the first half of 1994, includes $2.0 million of
net securities gains from the sale of U.S. Government Treasury
obligations. Net securities losses were approximately $844,000 for
the first half of 1995. Net income for the first half of 1994 also
includes a $3.7 million reduction in operating expense primarily due
to the termination of certain lease commitments. Considering both of
these items, normalized pro forma net income and net income per share
for the first six months of 1994 was $11.0 million and $1.10 per
share, respectively.
-13-
<PAGE>
