<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A - AMENDMENT NO. 2
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): NOVEMBER 10, 1994
-----------------
FIRST BANK SYSTEM, INC.
-----------------------
(Exact name of registrant as specified in its charter)
DELAWARE 1-6880 41-0255900
(State or other jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
601 SECOND AVENUE SOUTH, MINNEAPOLIS, MINNESOTA 55402
----------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 612-973-1111
------------
NOT APPLICABLE
--------------
(Former name or former address, if changed since last report)
<PAGE>
The undersigned registrant hereby amends its Current Report on Form 8-K filed on
August 5, 1994, to revise the Pro Forma Financial Information as set forth in
the pages attached hereto:
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(b) Pro Forma Financial Information -
Proforma financial information, required to be filed pursuant to
Item 7(b) of Form 8-K filed on August 5, 1994, reflecting the
acquisition of Metropolitan Financial Corporation.
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.
FIRST BANK SYSTEM, INC.
By /s/ David J. Parrin
--------------------------------
David J. Parrin
Senior Vice President & Controller
DATE: NOVEMBER 10, 1994
-2-
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited Pro Forma Combined Balance Sheet as of September 30,
1994, combines the historical consolidated balance sheets of FBS and MFC as if
the Merger had been effective on September 30, 1994, after giving effect to
certain adjustments described in the attached Notes to Pro Forma Combined
Financial Statements. The unaudited Pro Forma Combined Statements of Income for
the nine months ended September 30, 1994 and 1993, and the years ended December
31, 1993, 1992 and 1991, present the combined results of operations of FBS and
MFC as if the Merger had been effective at the beginning of each period, after
giving effect to certain adjustments described in the attached Notes to Pro
Forma Combined Financial Statements.
The unaudited pro forma combined financial statements and accompanying notes
reflect the application of the pooling-of-interests method of accounting for the
MFC transaction. Under this method of accounting, the recorded assets,
liabilities, shareholders' equity, income and expenses of FBS and MFC are
combined and recorded at their historical amounts.
The pro forma combined financial information included within is not
necessarily indicative of the results of the future operations of the combined
entity or the actual results that would have been achieved had the acquisition
been consummated prior to the periods indicated.
INDEX
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Pro Forma Combined Balance Sheet at September 30, 1994............................................ F-2
Pro Forma Combined Statements of Income:
Nine months Ended September 30, 1994.......................................................... F-3
Nine months Ended September 30, 1993.......................................................... F-4
Year ended December 31, 1993.................................................................. F-5
Year ended December 31, 1992.................................................................. F-6
Year ended December 31, 1991.................................................................. F-7
Notes to Pro Forma Combined Financial Statements.................................................. F-8
</TABLE>
F-1
<PAGE>
FIRST BANK SYSTEM, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
ACQUISITION OF METROPOLITAN FINANCIAL CORPORATION
SEPTEMBER 30, 1994
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
MERGER
FBS MFC ADJUSTMENTS PRO FORMA
HISTORICAL HISTORICAL (SEE NOTES) COMBINED
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks.......................................... $ 1,870 $ 82 $ (922) $ 1,030
Federal funds sold and other short-term deposits................. 79 31 (13) 97
Securities purchased under agreements to resell.................. 281 -- 281
Trading account securities....................................... 108 -- 108
Available-for-sale securities.................................... 3,377 629 1,554 5,560
Investment securities............................................ -- 1,626 (1,626) --
Loans............................................................ 19,110 5,266 24,376
Allowance for loan losses........................................ 437 40 14 491
----------- ----------- ----------- -----------
Net loans...................................................... 18,673 5,226 (14) 23,885
Bank premises and equipment...................................... 392 101 (26) 467
Interest receivable.............................................. 138 45 183
Customers' liability on acceptances.............................. 116 -- 116
Other assets..................................................... 1,296 333 42 1,671
----------- ----------- ----------- -----------
Total assets............................................... $ 26,330 $ 8,073 $ (1,006) $ 33,397
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Domestic:
Noninterest-bearing............................................ $ 6,030 $ 221 $ (38) $ 6,213
Interest-bearing............................................... 12,763 5,285 (914) 17,134
----------- ----------- ----------- -----------
Total deposits............................................... 18,793 5,506 (952) 23,347
Federal funds purchased.......................................... 2,118 -- 2,118
Securities sold under agreements to repurchase................... 695 410 1,105
Other short-term funds borrowed.................................. 399 386 785
Long-term debt................................................... 1,265 1,137 2,402
Acceptances outstanding.......................................... 116 -- 116
Other liabilities................................................ 625 136 59 820
----------- ----------- ----------- -----------
Total liabilities.......................................... 24,011 7,575 (893) 30,693
Shareholders' Equity
Preferred stock................................................ 106 0 0 106
Common stock................................................... 145 1 26 172
Capital surplus................................................ 728 241 (38) 931
Retained earnings.............................................. 1,392 279 (124) 1,547
Treasury stock................................................. (52) (23) 23 (52)
----------- ----------- ----------- -----------
Total shareholders' equity................................. 2,319 498 (113) 2,704
----------- ----------- ----------- -----------
Total liabilities and shareholders' equity............... $ 26,330 $ 8,073 $ (1,006) $ 33,397
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See Notes to the unaudited Pro Forma Combined Financial Statements
F-2
<PAGE>
FIRST BANK SYSTEM, INC.
ACQUISITION OF METROPOLITAN FINANCIAL CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
FBS MFC SALE OF PRO FORMA
(IN MILLIONS, EXCEPT SHARE DATA) HISTORICAL HISTORICAL SUBSIDIARY COMBINED
- ----------------------------------------------------------------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans............................................................ $1,091.5 $ 301.4 $1,392.9
Securities:
Taxable........................................................ 151.7 91.9 243.6
Exempt from federal income taxes............................... 9.1 -- 9.1
Other interest income............................................ 18.0 4.7 22.7
------- ----------- -------
Total interest income........................................ 1,270.3 398.0 1,668.3
INTEREST EXPENSE
Deposits......................................................... 268.3 169.5 437.8
Federal funds purchased and repurchase agreements................ 60.1 6.4 66.5
Other short-term funds borrowed.................................. 10.0 11.3 21.3
Long-term debt................................................... 48.1 46.5 94.6
------- ----------- -------
Total interest expense....................................... 386.5 233.7 620.2
------- ----------- -------
Net interest income.............................................. 883.8 164.3 1,048.1
Provision for credit losses...................................... 70.0 9.6 79.6
------- ----------- -------
Net interest income after provision for credit losses............ 813.8 154.7 968.5
NONINTEREST INCOME
Trust fees....................................................... 117.5 -- 117.5
Credit card fees................................................. 128.7 -- 128.7
Service charges on deposit accounts.............................. 87.7 9.7 97.4
Edina Realty commission income................................... -- 27.8 $ (27.8 ) --
Insurance commissions............................................ 17.4 6.5 23.9
Securities gains................................................. (2.8) (0.1 ) (2.9)
Other............................................................ 116.4 19.2 (0.4 ) 135.2
------- ----------- ----------- -------
Total noninterest income..................................... 464.9 63.1 (28.2 ) 499.8
NONINTEREST EXPENSE
Salaries......................................................... 292.9 50.5 (7.9 ) 335.5
Employee benefits................................................ 70.6 13.1 (1.3 ) 82.4
Net occupancy.................................................... 65.7 19.1 (5.6 ) 79.2
Furniture and equipment.......................................... 58.1 4.5 (1.0 ) 61.6
FDIC insurance................................................... 34.8 9.2 44.0
Professional services............................................ 23.6 4.2 (0.7 ) 27.1
Amortization of goodwill and other intangibles................... 28.4 3.9 (0.5 ) 31.8
Other............................................................ 208.3 63.2 (22.4 ) 249.1
------- ----------- ----------- -------
Total noninterest expense.................................... 782.4 167.7 (39.4 ) 910.7
------- ----------- ----------- -------
Income before income taxes....................................... 496.3 50.1 11.2 557.6
Applicable income taxes.......................................... 187.0 19.1 4.1 210.2
------- ----------- ----------- -------
Net income....................................................... $309.3 $ 31.0 $ 7.1 $347.4
------- ----------- ----------- -------
------- ----------- ----------- -------
Net income applicable to common equity........................... $300.0 $338.1
------- -------
------- -------
EARNINGS PER COMMON SHARE
Average common and common equivalent shares...................... 114,347,741 136,331,806
Primary and fully diluted net income............................. $2.62 $2.48
</TABLE>
See Notes to unaudited Pro Forma Combined Financial Statements
F-3
<PAGE>
FIRST BANK SYSTEM, INC.
ACQUISITION OF METROPOLITAN FINANCIAL CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1993
<TABLE>
<CAPTION>
FBS MFC SALE OF PRO FORMA
(IN MILLIONS, EXCEPT SHARE DATA) HISTORICAL HISTORICAL SUBSIDIARY COMBINED
- ----------------------------------------------------------------- ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans............................................................ $1,046.0 $ 242.1 $1,288.1
Securities:
Taxable........................................................ 171.3 105.6 276.9
Exempt from federal income taxes............................... 9.9 -- 9.9
Other interest income............................................ 23.6 3.6 27.2
------- ----------- -------
Total interest income........................................ 1,250.8 351.3 1,602.1
INTEREST EXPENSE
Deposits......................................................... 329.7 175.9 505.6
Federal funds purchased and repurchase agreements................ 24.2 -- 24.2
Other short-term funds borrowed.................................. 14.1 7.8 21.9
Long-term debt................................................... 39.5 21.0 60.5
------- ----------- -------
Total interest expense....................................... 407.5 204.7 612.2
------- ----------- -------
Net interest income.............................................. 843.3 146.6 989.9
Provision for credit losses...................................... 98.2 6.0 104.2
------- ----------- -------
Net interest income after provision for credit losses............ 745.1 140.6 885.7
NONINTEREST INCOME
Trust fees....................................................... 108.6 -- 108.6
Credit card fees................................................. 99.6 -- 99.6
Service charges on deposit accounts.............................. 86.9 7.8 94.7
Edina Realty commission income................................... -- 27.0 $ (27.0 ) --
Insurance commissions............................................ 15.6 2.6 18.2
Securities gains................................................. 0.3 0.1 0.4
Other............................................................ 112.7 23.7 (0.8 ) 135.6
------- ----------- ------ -------
Total noninterest income..................................... 423.7 61.2 (27.8 ) 457.1
NONINTEREST EXPENSE
Salaries......................................................... 294.1 44.9 (6.8 ) 332.2
Employee benefits................................................ 66.7 10.4 (1.2 ) 75.9
Net occupancy.................................................... 70.6 16.7 (5.0 ) 82.3
Furniture and equipment.......................................... 53.5 3.9 (0.8 ) 56.6
FDIC insurance................................................... 34.9 7.9 42.8
Professional services............................................ 26.0 3.2 (0.3 ) 28.9
Amortization of goodwill and other intangibles................... 22.9 3.1 (0.4 ) 25.6
Merger, integration and restructuring............................ 72.2 3.5 75.7
Other............................................................ 204.3 47.8 (9.5 ) 242.6
------- ----------- ------ -------
Total noninterest expense.................................... 845.2 141.4 (24.0 ) 962.6
------- ----------- ------ -------
Income before income taxes....................................... 323.6 60.4 (3.8 ) 380.2
Applicable income taxes.......................................... 121.5 13.1 (1.8 ) 132.8
------- ----------- ------ -------
Net income....................................................... $202.1 $ 47.3 $ (2.0 ) $247.4
------- ----------- ------ -------
------- ----------- ------ -------
Net income applicable to common equity........................... $179.8 $225.1
------- -------
------- -------
EARNINGS PER COMMON SHARE
Average common and common equivalent shares...................... 113,677,049 135,179,910
Primary and fully diluted net income............................. $1.58 $1.67
</TABLE>
See Notes to unaudited Pro Forma Combined Financial Statements
F-4
<PAGE>
FIRST BANK SYSTEM, INC.
ACQUISITION OF METROPOLITAN FINANCIAL CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
FBS MFC SALE OF PRO FORMA
(IN MILLIONS, EXCEPT SHARE DATA) HISTORICAL HISTORICAL SUBSIDIARY COMBINED
- --------------------------------------------------------------- ------------ ----------- ------------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans.......................................................... $1,398.6 $ 331.9 $1,730.5
Securities:
Taxable...................................................... 218.2 136.0 354.2
Exempt from federal income taxes............................. 14.6 -- 14.6
Other interest income.......................................... 30.4 4.8 35.2
----- ----------- -------
Total interest income...................................... 1,661.8 472.7 2,134.5
INTEREST EXPENSE
Deposits....................................................... 423.7 231.8 655.5
Federal funds purchased and repurchase agreements.............. 31.8 -- 31.8
Other short-term funds borrowed................................ 19.0 1.2 20.2
Long-term debt................................................. 54.4 41.6 96.0
----- ----------- -------
Total interest expense..................................... 528.9 274.6 803.5
----- ----------- -------
Net interest income............................................ 1,132.9 198.1 1,331.0
Provision for credit losses.................................... 125.2 7.8 133.0
----- ----------- -------
Net interest income after provision for credit losses.......... 1,007.7 190.3 1,198.0
NONINTEREST INCOME
Trust fees..................................................... 146.1 -- 146.1
Credit card fees............................................... 137.1 -- 137.1
Service charges on deposit accounts............................ 115.3 11.5 126.8
Edina Realty commission income................................. -- 35.3 $ (35.3 ) 0.0
Insurance commissions.......................................... 20.9 4.6 25.5
Securities gains............................................... 0.3 -- 0.3
Other.......................................................... 149.9 37.1 (0.9 ) 186.1
----- ----------- ------ -------
Total noninterest income................................... 569.6 88.5 (36.2 ) 621.9
NONINTEREST EXPENSE
Salaries....................................................... 389.1 63.1 (9.4 ) 442.8
Employee benefits.............................................. 86.3 14.8 (1.5 ) 99.6
Net occupancy.................................................. 93.4 23.2 (6.4 ) 110.2
Furniture and equipment........................................ 72.7 5.3 (1.4 ) 76.6
FDIC insurance................................................. 46.4 11.1 57.5
Professional services.......................................... 36.7 4.9 (1.1 ) 40.5
Amortization of goodwill and other intangibles................. 30.6 4.1 34.7
Merger, integration and restructuring.......................... 72.2 3.5 75.7
Other.......................................................... 273.1 62.3 (13.3 ) 322.1
----- ----------- ------ -------
Total noninterest expense.................................. 1,100.5 192.3 (33.1 ) 1,259.7
----- ----------- ------ -------
Income before income taxes..................................... 476.8 86.5 (3.1 ) 560.2
Applicable income taxes........................................ 178.8 21.3 (1.5 ) 198.6
----- ----------- ------ -------
Net income..................................................... $ 298.0 $ 65.2 $ (1.6 ) $ 361.6
------- ----------- ------ -------
------- ----------- ------ -------
Net income applicable to common equity......................... $ 270.2 $ 333.8
------- -------
------- -------
EARNINGS PER COMMON SHARE
Average common and common equivalent shares.................... 113,075,429 134,615,088
Primary and fully diluted net income........................... $2.39 $2.48
</TABLE>
See Notes to unaudited Pro Forma Combined Financial Statements
F-5
<PAGE>
FIRST BANK SYSTEM, INC.
ACQUISITION OF METROPOLITAN FINANCIAL CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1992
<TABLE>
<CAPTION>
FBS MFC SALE OF PRO FORMA
(IN MILLIONS, EXCEPT SHARE DATA) HISTORICAL HISTORICAL SUBSIDIARY COMBINED
- --------------------------------------------------------------- ------------ ----------- ------------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans.......................................................... $1,418.8 $ 268.2 $1,687.0
Securities:
Taxable...................................................... 186.4 151.8 338.2
Exempt from federal income taxes............................. 12.0 -- 12.0
Other interest income.......................................... 64.1 4.8 68.9
------- ----------- -------
Total interest income...................................... 1,681.3 424.8 2,106.1
INTEREST EXPENSE
Deposits....................................................... 568.7 234.3 803.0
Federal funds purchased and repurchase agreements.............. 37.1 -- 37.1
Other short-term funds borrowed................................ 14.3 2.8 17.1
Long-term debt................................................. 66.1 35.1 101.2
------- ----------- -------
Total interest expense..................................... 686.2 272.2 958.4
------- ----------- -------
Net interest income............................................ 995.1 152.6 1,147.7
Provision for credit losses.................................... 183.4 8.3 191.7
------- ----------- -------
Net interest income after provision for credit losses.......... 811.7 144.3 956.0
NONINTEREST INCOME
Trust fees..................................................... 127.8 -- 127.8
Credit card fees............................................... 116.9 -- 116.9
Service charges on deposit accounts............................ 108.4 6.9 115.3
Edina Realty commission income................................. -- 32.1 $ (32.1 ) 0.0
Insurance commissions.......................................... 27.3 0.9 28.2
Securities gains............................................... 1.9 44.3 46.2
Other.......................................................... 153.4 29.5 (1.8 ) 181.1
------- ----------- ------ -------
Total noninterest income................................... 535.7 113.7 (33.9 ) 615.5
NONINTEREST EXPENSE
Salaries....................................................... 388.7 48.8 (8.8 ) 428.7
Employee benefits.............................................. 85.5 11.5 (1.4 ) 95.6
Net occupancy.................................................. 87.9 16.0 (6.2 ) 97.7
Furniture and equipment........................................ 67.2 3.9 (1.3 ) 69.8
FDIC insurance................................................. 42.2 9.3 51.5
Professional services.......................................... 38.7 4.8 (0.3 ) 43.2
Amortization of goodwill and other intangibles................. 25.2 4.0 29.2
Merger, integration and restructuring.......................... 84.0 -- 84.0
Other.......................................................... 294.9 49.6 (12.8 ) 331.7
------- ----------- ------ -------
Total noninterest expense.................................. 1,114.3 147.9 (30.8 ) 1,231.4
------- ----------- ------ -------
Income before income taxes..................................... 233.1 110.1 (3.1 ) 340.1
Applicable income taxes........................................ 78.6 42.6 (1.4 ) 119.8
------- ----------- ------ -------
Income before extraordinary item and cumulative effect of
changes in accounting principles.............................. 154.5 67.5 (1.7 ) 220.3
Extraordinary item............................................. -- (6.3 ) (6.3)
Cumulative effect of changes in accounting principles.......... 157.3 75.9 233.2
------- ----------- ------ -------
Net income..................................................... $ 311.8 $ 137.1 ($ 1.7 ) $ 447.2
------- ----------- ------ -------
------- ----------- ------ -------
Net income applicable to common equity......................... $ 281.6 $ 417.0
------- -------
------- -------
EARNINGS PER COMMON SHARE
Average common and common equivalent shares.................... 105,361,022 124,670,657
Primary and fully diluted income before extraordinary item and
cumulative effect of changes in accounting principles......... $1.18 $1.52
Primary and fully diluted net income........................... 2.67 3.34
</TABLE>
See Notes to unaudited Pro Forma Combined Financial Statements
F-6
<PAGE>
FIRST BANK SYSTEM, INC.
ACQUISITION OF METROPOLITAN FINANCIAL CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1991
<TABLE>
<CAPTION>
FBS MFC SALE OF PRO FORMA
(IN MILLIONS, EXCEPT SHARE DATA) HISTORICAL HISTORICAL SUBSIDIARY COMBINED
- --------------------------------------------------------------- ------------ ----------- ----------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans.......................................................... $1,624.3 $ 217.0 $1,841.3
Securities:
Taxable...................................................... 221.1 159.9 381.0
Exempt from federal income taxes............................. 19.1 -- 19.1
Other interest income.......................................... 97.5 30.1 127.6
------- ----------- -------
Total interest income...................................... 1,962.0 407.0 2,369.0
INTEREST EXPENSE
Deposits....................................................... 872.8 256.0 1,128.8
Federal funds purchased and repurchase agreements.............. 57.9 -- 57.9
Other short-term funds borrowed................................ 24.2 5.6 29.8
Long-term debt................................................. 100.3 40.3 140.6
------- ----------- -------
Total interest expense..................................... 1,055.2 301.9 1,357.1
------- ----------- -------
Net interest income............................................ 906.8 105.1 1,011.9
Provision for credit losses.................................... 202.2 8.0 210.2
------- ----------- -------
Net interest income after provision for credit losses.......... 704.6 97.1 801.7
NONINTEREST INCOME
Trust fees..................................................... 115.5 -- 115.5
Credit card fees............................................... 94.4 -- 94.4
Service charges on deposit accounts............................ 97.2 5.4 102.6
Edina Realty commission income................................. -- 26.2 $ (26.2 ) 0.0
Insurance commissions.......................................... 27.2 -- 27.2
Securities gains............................................... 8.9 33.4 42.3
Other.......................................................... 154.5 23.8 (1.9 ) 176.4
------- ----------- ----------- -------
Total noninterest income................................... 497.7 88.8 (28.1 ) 558.4
NONINTEREST EXPENSE
Salaries....................................................... 371.7 39.5 (9.1 ) 402.1
Employee benefits.............................................. 79.3 8.5 87.8
Net occupancy.................................................. 84.0 14.6 (5.9 ) 92.7
Furniture and equipment........................................ 64.8 3.0 (1.4 ) 66.4
FDIC insurance................................................. 38.5 8.0 46.5
Professional services.......................................... 37.8 2.3 (0.4 ) 39.7
Amortization of goodwill and other intangibles................. 21.6 5.4 27.0
Other.......................................................... 271.6 42.8 (11.2 ) 303.2
------- ----------- ----------- -------
Total noninterest expense.................................. 969.3 124.1 (28.0 ) 1,065.4
------- ----------- ----------- -------
Income before income taxes..................................... 233.0 61.8 (0.1 ) 294.7
Applicable income taxes........................................ 25.9 4.4 30.3
------- ----------- ----------- -------
Net income..................................................... $ 207.1 $ 57.4 $ (0.1 ) $ 264.4
------- ----------- ----------- -------
------- ----------- ----------- -------
Net income applicable to common equity......................... $ 183.4 $ 240.7
------- -------
------- -------
EARNINGS PER COMMON SHARE
Average common and common equivalent shares.................... 102,533,284 117,259,058
Primary net income............................................. $1.79 $2.05
Fully diluted net income....................................... 1.78 1.97
</TABLE>
See Notes to unaudited Pro Forma Combined Financial Statements
F-7
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
NOTE A: BASIS OF PRESENTATION
On July 21, 1994, First Bank System, Inc. ("FBS") signed a definitive
agreement to acquire Metropolitan Financial Corporation ("MFC"), a regional
financial services holding company headquartered in Minneapolis, Minnesota, with
$8.1 billion in assets, $5.5 billion in deposits and $498 million in
shareholders' equity. The agreement calls for the tax-free exchange of .6803
share of the common stock of FBS for each common share of MFC, or approximately
21.2 million FBS shares.
The merger with MFC will be accounted for by FBS under the pooling of
interests method of accounting in accordance with APB No. 16 and, accordingly,
this method has been applied in the unaudited pro forma combined financial
statements. Under this method of accounting, the recorded assets, liabilities,
shareholders' equity, income, and expenses of FBS and MFC are combined and
recorded at their historical amounts. FBS expects that certain adjustments will
be recorded by MFC, primarily to accrue for specific, identified costs related
to the merger that are expected to be incurred within one year of the closing
and to establish additional credit loss reserves that may be necessary to
reflect FBS' plans with respect to the anticipated timing of and strategies
related to the disposition of problem assets. The amounts of merger-related
costs included or disclosed in these unaudited pro forma combined financial
statements may change as additional information becomes available.
The Unaudited Pro Forma Combined Balance Sheet is based on the unaudited
consolidated balance sheets of FBS and MFC as of September 30, 1994. The
Unaudited Pro Forma Combined Statements of Income are based on the unaudited
consolidated statements of income of FBS and MFC.
FBS expects to achieve operating cost savings primarily through reductions
in staff, the consolidation and elimination of certain duplicate or excess
office facilities, and the consolidation of certain data processing and other
back office operations. The operating cost savings are expected to be achieved
in various amounts at various times during the year subsequent to the closing
and not ratably over, or at the beginning or end of, such period. No adjustment
has been included in the unaudited pro forma combined financial statements for
the anticipated operating cost savings.
Certain amounts in the historical financial statements of MFC have been
reclassified in the unaudited pro forma combined financial statements to conform
to FBS' historical financial statement presentation.
FBS completed the acquisition of Boulevard Bancorp, Inc. ("BBI") on March
25, 1994, and used the purchase method of accounting for the transaction. BBI, a
holding company for four banks located in Chicago, Illinois, had $1.6 billion in
assets and $1.2 billion in deposits. The unaudited statement of income for FBS
for the six months ended June 30, 1994, included the results of operations of
BBI since its acquisition date of March 25, 1994. The unaudited pro forma
combined statements of income do not include the results of operations of BBI
prior to March 25, 1994 as they are immaterial.
The FBS results of operations for the year ended December 31, 1993, included
merger-related charges of $72.2 million ($50.0 million after tax) associated
with the acquisition of Colorado National Bankshares, Inc. These charges include
a $29.7 million provision for anticipated reorganization and restructuring
costs, system conversions, and customer communication costs and a $14.3 million
write-down of premises and equipment related to redundant main office and branch
facilities. Other charges, totaling $28.2 million, primarily involved severance.
The FBS results of operations for the year ended December 31, 1992, included
the effect of adopting two new accounting standards: Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," and SFAS
No. 106, "Employers' Accounting for Postretirement Benefits Other than
Pensions." Income from continuing operations before cumulative effect of changes
in accounting principles for the year ended December 31, 1992, was reduced by
$56.6 million as a result of increased income tax expense under SFAS No. 109 and
$1.0 million for increased employee benefit expenses under SFAS No. 106. In
addition, the net cumulative effect for prior years of adopting SFAS No. 109 and
SFAS No. 106 resulted in a $157.3 million increase in net income in 1992.
F-8
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Also included in FBS results of operations for 1992 are merger-related
charges of $124.0 million ($81.8 million after tax) associated with the
acquisitions of Western Capital Investment Corporation and Bank Shares
Incorporated. These charges included a $13.6 million provision for credit
losses, a $26.4 million provision for losses on other real estate, and $84.0
million in merger, integration and restructuring provisions. These provisions
were made to reflect FBS' intentions with respect to the disposition of problem
assets and to provide for anticipated merger-related costs.
The MFC results of operations for the nine months ended September 30, 1994
include charges totaling $9.5 million (net of tax), or approximately $.30 per
share, related to the planned merger with FBS and the tentative settlement of
two class action lawsuits against MFC and its subsidiaries, Edina Realty, Inc.
and Equity Title Services, Inc. Expenses related to the merger totaled $1.4
million. An accrual of $14 million was recorded in the third quarter for costs
associated with the tentative settlement of the lawsuits. The settlement was
announced in September 1994 and requires final court approval.
MFC's earnings in 1992 include $75,941,000 resulting from the cumulative
effect of an accounting change related to the adoption of SFAS No. 109,
"Accounting for Income Taxes" (SFAS 109). The prospective adoption of SFAS 109
resulted in an effective tax rate of nearly 39 percent in 1992 compared with 7
percent in 1991 and a tax benefit in 1990. The net effect of the adoption of
SFAS 109 on current year net income was an increase of $41.5 million.
NOTE B: SALE OF BRANCHES
Subsequent to the Merger, FBS proposes to sell the deposit relationships
associated with approximately 60 excess branch locations. In addition, certain
fixed assets which are used to service those deposit relationships will be sold.
Earning assets will not be sold.
NOTE C: CLASSIFICATION OF INVESTMENT SECURITIES
Effective December 31, 1993, FBS adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") 115, "Accounting for Certain Investments
in Debt and Equity Securities" and reported its entire $3.3 billion investment
portfolio as available for sale. Based upon the preliminary analysis performed
by FBS on the held to maturity investment securities of MFC, FBS anticipates
reclassifying this entire portfolio as available for sale. The MFC investment
securities reflected in the unaudited Pro Forma Combined Balance Sheet have been
reclassified as available for sale securities and a mark to market adjustment of
$72 million has been recorded, based on the reported market value at September
30, 1994. In addition, deferred taxes of $27 million and a reduction in
shareholders' equity of $45 million were also recorded.
NOTE D: SALE OF REAL ESTATE BROKERAGE SUBSIDIARY
Because of regulatory restrictions on nonbanking activities, FBS expects
that within two years of the closing of the Merger, it will sell Edina Realty,
Inc., MFC's real estate brokerage subsidiary.
NOTE E: REORGANIZATION AND RESTRUCTURING ACCRUALS
The pro forma statements assume that in 1994 MFC will, consistent with
generally accepted accounting principles, establish such additional accruals and
reserves as may be necessary to reflect the plans of FBS with respect to the
conduct of MFC's business following the Merger, including the anticipated timing
of and strategies for the disposition of problem assets, and to provide for
certain costs and expenses relating to the Merger. Accordingly it is expected
that additional credit-related reserves of approximately $14 million will be
established, principally related to FBS' plan and policies with respect to
certain commercial loans and the consumer loan portfolios, and accruals
aggregating approximately $82 million will be recorded to reflect specific
expenses and identified restructuring charges, expected to be incurred within
one year of closing. Accordingly, for purposes of the unaudited Pro Forma
Combined Balance Sheet, the following accruals have been recorded: $16 million
reserve for the expense of closing duplicate facilities, $30 million accrual for
the estimated costs related to
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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION--(CONCLUDED)
severance, $24 million accrual for systems and operations conversion costs, and
$12 million for other specific merger-related costs. In addition, deferred tax
benefits of $37 million and deferred tax liabilities of $11 million related to
the pro forma adjustments have been recorded.
The amount of the adjustments discussed and reflected in the unaudited Pro
Forma Combined Balance Sheet are preliminary estimates. The actual amount of the
adjustments to be made by MFC will be based on information available at that
time and could be different from the estimates. These adjustments have not been
included in the unaudited Pro Forma Combined Statements of Income, as they are
not expected to have a continuing impact on FBS.
NOTE F: SHAREHOLDERS' EQUITY
In conjunction with the Merger, each of the 488,750 outstanding shares of
MFC preferred stock will be converted into a right to receive $27.00 cash, plus
any accumulated and unpaid dividends on such shares, and as a result, MFC's
shareholders' equity in the unaudited Pro Forma Combined Balance Sheet has been
reduced by $13.2 million.
Common stock in the unaudited Pro Forma Combined Balance Sheet has been
adjusted to reflect the par value of the FBS stock to be issued, with a related
adjustment to capital surplus. Investment securities and capital surplus have
been adjusted to reflect the retirement of MFC shares held by FBS prior to the
merger. MFC's retained earnings reflect the adjustments for anticipated
merger-related costs as discussed above.
NOTE G: INCOME TAX PROVISIONS
The income tax provision for adjustments related to the MFC acquisition
reflected in the unaudited Pro Forma Combined Statements of Income have been
computed at FBS' effective combined federal and state marginal tax rate.
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