<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): JUNE 24, 1997
--------------
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>
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On March 19, 1997, First Bank System, Inc., a Delaware corporation
("FBS"), and U.S. Bancorp, an Oregon corporation ("USBC") entered into
an Agreement and Plan of Merger, dated as of March 19, 1997 (the
"Merger Agreement"), pursuant to which USBC will be merged into FBS.
In connection with the merger, each outstanding share of Common Stock
of USBC will be converted into 0.755 shares of common Stock of FBS.
In addition, each outstanding share of USBC 8 1/8% Cumulative
Preferred Stock will be converted into one share of new preferred
stock of FBS with substantially identical terms. Pursuant to the
Merger Agreement, FBS has agreed to change its name to U.S. Bancorp as
of the effective time of the merger. The merger is intended to be tax
free for federal income tax purposes to the holders of the USBC Common
Stock receiving shares of FBS Common Stock and to be accounted for as
a "pooling-of-interests." The merger is subject to various
conditions, including the affirmative vote of a majority of the
outstanding shares of common stock of each of USBC and FBS and various
regulatory approvals. The merger was previously announced in two
Current Reports on Form 8-K filed by FBS on March 19, 1997, and this
report is being filed for the purpose of filing the financial
statements and pro forma financial information included in item 7
hereof.
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION
This Current Report on Form 8-K contains or may contain
forward-looking statements that involve risks or uncertainties. This
Current Report on Form 8-K contains certain forward-looking statements
with respect to the financial condition, results of operations, plans,
objectives, future performance and business of each of FBS and USBC on
a stand-alone basis and of FBS and USBC on a pro forma combined basis
following the consummation of the merger, including (a) statements
relating to the cost savings and the impact of the reported earnings
that are expected to result from the merger; (b) statements relating
to the impact on revenues of the merger; (c) statements relating to
the restructuring charges expected to be incurred in connection with
the merger; and (d) statements preceded by, followed by or that
include the words "believes," "expects," "anticipates," or similar
expressions. These forward-looking statements involve certain risks
and uncertainties. Factors that may cause actual results to differ
materially from those contemplated by such forward-looking statements
include, among others, the following possibilities: (1) expected cost
savings from the merger cannot be fully realized or realized within
the expected time frame; (2) revenues following the merger are lower
than expected, or deposit attrition, operating costs or customer loss
and business disruption following the merger are greater than
expected; (3) competitive pressures among depository and other
financial institutions increase significantly; (4) costs or
difficulties related to the integration of the businesses of FBS and
USBC are greater than expected; (5) changes in the interest rate
environment reduce margins; (6) general economic or business
conditions, either nationally or in the states in which the combined
FBS and USBC will be doing business, are less favorable than expected
resulting in, among other things, a deterioration in credit quality or
a reduced demand for credit; (7) legislative or regulatory changes
adversely affect the businesses in which the combined FBS and USBC
will be engaged; and (8) changes in the securities markets.
<PAGE>
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF U.S. BANCORP
The following financial statements, which are included in the
documents filed by USBC with the Commission listed below, are
hereby incorporated into this Form 8-K by reference:
1. Financial statements included in USBC's Annual Report on
Form 10-K for the year ended December 31, 1996:
Consolidated Balance Sheet as of December 31, 1996 and
December 31, 1995
Consolidated Statement of Income for the years ended
December 31, 1996, 1995 and 1994
Consolidated Statement of Changes in Shareholders' Equity
for the years ended December 31, 1996, 1995 and 1994
Consolidated Statement of Cash Flows for the years ended
December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements for the years
ended December 31, 1996, 1995 and 1994
Independent Auditors' Report of Deloitte & Touche LLP
Report of Independent Accountants of Coopers & Lybrand L.L.P.
2. Financial statements included in USBC's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997:
Consolidated Balance Sheet as of March 31, 1997 (Unaudited),
December 31, 1996 and March 31, 1996 (Unaudited)
Consolidated Income Statement -- First Quarter Ended March
31, 1997 and 1996 (Unaudited)
Consolidated Statement of Changes in Shareholders' Equity
-- First Quarter Ended March 31, 1997 and 1996 (Unaudited)
Consolidated Statement of Cash Flows -- First Quarter Ended
March 31, 1997 and 1996 (Unaudited)
Notes to Consolidated Financial Statements -- First Quarter
Ended March 31, 1997 and 1996 (Unaudited)
(b) PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Condensed Combined Balance Sheet at March 31,
1997
Unaudited Pro Forma Condensed Combined Statement of Income:
Three months ended March 31, 1997
Three months ended March 31, 1996
Year ended December 31, 1996
Year ended December 31, 1995
Year ended December 31, 1994
Notes to Unaudited Pro Forma Condensed Combined Financial
Information
(c) EXHIBITS
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Coopers & Lybrand L.L.P.
<PAGE>
MERGER OF FBS AND USBC
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
ADJUSTED
PRO FORMA
(DOLLARS IN MILLIONS) FBS USBC ADJUSTMENTS COMBINED
- --------------------------------------------------------------- --------- --------- ------------- -----------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks........................................ $ 2,483 $ 1,945 $ 4,428
Federal funds sold and resale agreements....................... 585 517 1,102
Trading account securities..................................... 105 87 192
Available-for-sale securities.................................. 3,373 3,060 6,433
Held-to-maturity securities.................................... -- 776 776
Loans and leases............................................... 27,173 25,574 52,747
Allowance for loans and leases................................. 512 481 993
--------- --------- -----------
Net loans................................................ 26,661 25,093 51,754
Bank premises and equipment.................................... 393 617 $ (86)(C) 924
Customers' liability on acceptances............................ 188 433 621
Other assets................................................... 2,212 1,226 175(C) 3,613
--------- --------- ----- -----------
Total assets............................................. $ 36,000 $ 33,754 $ 89 $ 69,843
--------- --------- ----- -----------
--------- --------- ----- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits....................................................... $ 23,423 $ 25,079 $ 48,502
Federal funds purchased and repurchase agreements.............. 2,032 1,709 3,741
Other short-term funds borrowed................................ 1,762 824 2,586
Long-term debt................................................. 4,257 1,950 6,207
Company-obligated mandatorily redeemable preferred securities
of subsidiary trust.......................................... 300 300 600
Acceptances outstanding........................................ 188 433 621
Other liabilities.............................................. 1,037 677 $ 539(C) 2,253
--------- --------- ----- -----------
Total liabilities........................................ 32,999 30,972 539 64,510
Shareholders' equity:
Preferred stock................................................ -- 150 150
Common stock................................................... 177 741 (601)(D) 317
Capital surplus................................................ 1,162 199 601(D) 1,962
Retained earnings.............................................. 2,256 1,715 (450)(C) 3,521
Unrealized loss on securities, net of tax...................... (26) (23) (49)
Less: treasury stock........................................... 568 -- 568
--------- --------- ----- -----------
Shareholders' equity........................................... 3,001 2,782 (450) 5,333
--------- --------- ----- -----------
Total liabilities and shareholders' equity..................... $ 36,000 $ 33,754 $ 89 $ 69,843
--------- --------- ----- -----------
--------- --------- ----- -----------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Information
<PAGE>
MERGER OF FBS AND USBC
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE QUARTER ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
HISTORICAL
------------------------------ PRO FORMA
(IN MILLIONS, EXCEPT PER SHARE DATA) FBS USBC COMBINED
- ---------------------------------------------------------------- -------------- -------------- --------------
<S> <C> <C> <C>
INTEREST INCOME
Loans........................................................... $ 586.2 $ 576.5 $ 1,162.7
Securities...................................................... 57.4 58.7 116.1
Other interest income........................................... 12.6 2.2 14.8
-------------- -------------- --------------
Total interest income....................................... 656.2 637.4 1,293.6
INTEREST EXPENSE
Deposits........................................................ 158.6 193.2 351.8
Federal funds purchased, repurchase agreements and other
short-term borrowings......................................... 54.9 29.5 84.4
Long-term debt.................................................. 56.6 31.6 88.2
Company-obligated mandatorily redeemable preferred securities of
subsidiary trust.............................................. 6.1 6.2 12.3
-------------- -------------- --------------
Total interest expense...................................... 276.2 260.5 536.7
-------------- -------------- --------------
Net interest income............................................. 380.0 376.9 756.9
Provision for credit losses..................................... 37.0 45.9 82.9
-------------- -------------- --------------
Net interest income after provision for credit losses........... 343.0 331.0 674.0
NONINTEREST INCOME
Credit card fee revenue......................................... 77.3 13.1 90.4
Trust fees...................................................... 66.0 18.6 84.6
Service charges on deposit accounts............................. 36.4 50.2 86.6
Securities gains................................................ -- 1.7 1.7
Equity investment income........................................ -- 5.0 5.0
Other........................................................... 46.1 57.0 103.1
-------------- -------------- --------------
Total noninterest income.................................... 225.8 145.6 371.4
NONINTEREST EXPENSE
Salaries and benefits........................................... 141.4 159.9 301.3
Occupancy and equipment......................................... 46.7 49.7 96.4
Goodwill and other intangible assets............................ 19.8 7.5 27.3
Other........................................................... 88.1 70.0 158.1
-------------- -------------- --------------
Total noninterest expense................................... 296.0 287.1 583.1
-------------- -------------- --------------
Income from continuing operations before income taxes........... 272.8 189.5 462.3
Applicable income taxes......................................... 101.0 68.0 169.0
-------------- -------------- --------------
Income from continuing operations............................... $ 171.8 $ 121.5 $ 293.3
-------------- -------------- --------------
-------------- -------------- --------------
Income from continuing operations applicable to common equity... $ 171.8 $ 118.5 $ 290.3
-------------- -------------- --------------
-------------- -------------- --------------
EARNINGS PER COMMON SHARE
Average common and common equivalent shares..................... 135,525,339 147,934,580 249,153,010
Income from continuing operations............................... $ 1.27 $ .80 $ 1.17
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Information
<PAGE>
MERGER OF FBS AND USBC
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE QUARTER ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
HISTORICAL
------------------------------ PRO FORMA
(IN MILLIONS, EXCEPT PER SHARE DATA) FBS USBC COMBINED
- ---------------------------------------------------------------- -------------- -------------- --------------
<S> <C> <C> <C>
INTEREST INCOME
Loans........................................................... $ 574.7 $ 531.2 $ 1,105.9
Securities...................................................... 68.7 59.4 128.1
Other interest income........................................... 11.2 9.4 20.6
-------------- -------------- --------------
Total interest income....................................... 654.6 600.0 1,254.6
INTEREST EXPENSE
Deposits........................................................ 167.0 189.8 356.8
Federal funds purchased, repurchase agreements and other
short-term borrowings......................................... 63.5 38.3 101.8
Long-term debt.................................................. 49.5 23.7 73.2
-------------- -------------- --------------
Total interest expense...................................... 280.0 251.8 531.8
-------------- -------------- --------------
Net interest income............................................. 374.6 348.2 722.8
Provision for credit losses..................................... 31.0 30.1 61.1
-------------- -------------- --------------
Net interest income after provision for credit losses........... 343.6 318.1 661.7
NONINTEREST INCOME
Credit card fee revenue......................................... 62.8 18.4 81.2
Trust fees...................................................... 56.2 17.2 73.4
Service charges on deposit accounts............................. 33.9 47.0 80.9
Securities gains................................................ 14.6 3.4 18.0
Termination fee................................................. 115.0 -- 115.0
Gain on sale of mortgage banking operations..................... 45.8 -- 45.8
Equity investment income........................................ -- 10.5 10.5
Other........................................................... 55.2 48.0 103.2
-------------- -------------- --------------
Total noninterest income.................................... 383.5 144.5 528.0
NONINTEREST EXPENSE
Salaries and benefits........................................... 152.3 151.0 303.3
Occupancy and equipment......................................... 49.6 51.4 101.0
Goodwill and other intangible assets............................ 47.4 3.4 50.8
Merger and restructuring........................................ 69.9 8.4 78.3
Other........................................................... 105.2 73.0 178.2
-------------- -------------- --------------
Total noninterest expense................................... 424.4 287.2 711.6
-------------- -------------- --------------
Income from continuing operations before income taxes........... 302.7 175.4 478.1
Applicable income taxes......................................... 125.9 62.5 188.4
-------------- -------------- --------------
Income from continuing operations............................... $ 176.8 $ 112.9 $ 289.7
-------------- -------------- --------------
-------------- -------------- --------------
Income from continuing operations applicable to common equity... $ 175.1 $ 109.9 $ 285.0
-------------- -------------- --------------
-------------- -------------- --------------
EARNINGS PER COMMON SHARE
Average common and common equivalent shares..................... 137,020,911 150,814,519 252,254,906
Income from continuing operations............................... $ 1.28 $ .73 $ 1.13
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Information
<PAGE>
MERGER OF FBS AND USBC
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
HISTORICAL
---------------------------- PRO FORMA
(IN MILLIONS, EXCEPT PER SHARE DATA) FBS USBC COMBINED
- -------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
INTEREST INCOME
Loans............................................................... $ 2,339.3 $ 2,221.2 $ 4,560.5
Securities.......................................................... 267.0 233.6 500.6
Other interest income............................................... 47.6 28.5 76.1
------------- ------------- -------------
Total interest income........................................... 2,653.9 2,483.3 5,137.2
INTEREST EXPENSE
Deposits............................................................ 673.1 768.2 1,441.3
Federal funds purchased, repurchase agreements and other
borrowings........................................................ 245.1 147.4 392.5
Long-term debt...................................................... 202.7 101.1 303.8
------------- ------------- -------------
Total interest expense.......................................... 1,120.9 1,016.7 2,137.6
------------- ------------- -------------
Net interest income................................................. 1,533.0 1,466.6 2,999.6
Provision for credit losses......................................... 136.0 135.2 271.2
------------- ------------- -------------
Net interest income after provision for credit losses............... 1,397.0 1,331.4 2,728.4
NONINTEREST INCOME
Credit card fee revenue............................................. 292.6 59.7 352.3
Trust fees.......................................................... 230.7 71.6 302.3
Service charges on deposit accounts................................. 141.5 197.4 338.9
Securities gains.................................................... 15.0 5.8 20.8
Termination fee..................................................... 190.0 -- 190.0
State income tax refund............................................. 65.0 -- 65.0
Gain on sale of mortgage banking operations......................... 45.8 -- 45.8
Equity investment income............................................ -- 27.8 27.8
Gain on sale of operations and loans................................ -- 25.6 25.6
Other............................................................... 205.1 197.3 402.4
------------- ------------- -------------
Total noninterest income........................................ 1,185.7 585.2 1,770.9
NONINTEREST EXPENSE
Salaries and benefits............................................... 570.6 615.2 1,185.8
Occupancy and equipment............................................. 187.5 200.5 388.0
Goodwill and other intangible assets................................ 106.5 22.8 129.3
SAIF special assessment............................................. 51.0 10.3 61.3
Merger and restructuring............................................ 69.9 18.2 88.1
Other............................................................... 402.6 307.8 710.4
------------- ------------- -------------
Total noninterest expense....................................... 1,388.1 1,174.8 2,562.9
------------- ------------- -------------
Income from continuing operations before income taxes............... 1,194.6 741.8 1,936.4
Applicable income taxes............................................. 454.8 262.9 717.7
------------- ------------- -------------
Income from continuing operations................................... $ 739.8 $ 478.9 $ 1,218.7
------------- ------------- -------------
------------- ------------- -------------
Income from continuing operations applicable to common equity....... $ 733.6 $ 466.7 $ 1,200.3
------------- ------------- -------------
------------- ------------- -------------
EARNINGS PER COMMON SHARE...........................................
Average common and common equivalent shares......................... 137,415,619 151,312,898 253,240,035
Income from continuing operations................................... $ 5.34 $ 3.08 $ 4.74
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Information
<PAGE>
MERGER OF FBS AND USBC
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
HISTORICAL
------------------------------ PRO FORMA
(IN MILLIONS, EXCEPT PER SHARE DATA) FBS USBC COMBINED
- ---------------------------------------------------------------- -------------- -------------- ---------------
<S> <C> <C> <C>
INTEREST INCOME
Loans........................................................... $ 2,273.4 $ 2,116.9 $ 4,390.3
Securities...................................................... 237.2 249.9 487.1
Other interest income........................................... 34.6 25.7 60.3
-------------- -------------- ---------------
Total interest income....................................... 2,545.2 2,392.5 4,937.7
INTEREST EXPENSE
Deposits........................................................ 706.7 710.0 1,416.7
Federal funds purchased, repurchase agreements and other
borrowings.................................................... 208.3 199.7 408.0
Long-term debt.................................................. 190.0 83.4 273.4
-------------- -------------- ---------------
Total interest expense...................................... 1,105.0 993.1 2,098.1
-------------- -------------- ---------------
Net interest income............................................. 1,440.2 1,399.4 2,839.6
Provision for credit losses..................................... 115.0 124.1 239.1
-------------- -------------- ---------------
Net interest income after provision for credit losses........... 1,325.2 1,275.3 2,600.5
NONINTEREST INCOME
Credit card fee revenue......................................... 232.7 73.4 306.1
Trust fees...................................................... 175.3 65.8 241.1
Service charges on deposit accounts............................. 123.7 189.5 313.2
Securities gains................................................ -- 3.0 3.0
Gain on sale of branches........................................ 31.0 -- 31.0
Gain on sale of operations and loans............................ -- 8.9 8.9
Equity investment income -- 3.2 3.2
Other........................................................... 220.4 180.9 401.3
-------------- -------------- ---------------
Total noninterest income.................................... 783.1 524.7 1,307.8
NONINTEREST EXPENSE
Salaries and benefits........................................... 537.4 602.1 1,139.5
Occupancy and equipment......................................... 192.8 212.8 405.6
Goodwill and other intangible assets............................ 57.1 16.6 73.7
Merger and restructuring........................................ -- 98.9 98.9
Other........................................................... 418.6 360.4 779.0
-------------- -------------- ---------------
Total noninterest expense................................... 1,205.9 1,290.8 2,496.7
-------------- -------------- ---------------
Income from continuing operations before income taxes........... 902.4 509.2 1,411.6
Applicable income taxes......................................... 334.3 180.2 514.5
-------------- -------------- ---------------
Income from continuing operations............................... $ 568.1 $ 329.0 $ 897.1
-------------- -------------- ---------------
-------------- -------------- ---------------
Income from continuing operations applicable to common equity... $ 560.6 $ 316.8 $ 877.4
-------------- -------------- ---------------
-------------- -------------- ---------------
EARNINGS PER COMMON SHARE
Average common and common equivalent shares..................... 133,936,030 151,554,000 250,100,100
Income from continuing operations............................... $ 4.19 $ 2.09 $ 3.51
-------------- -------------- ---------------
-------------- -------------- ---------------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Information
<PAGE>
MERGER OF FBS AND USBC
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
HISTORICAL
------------------------------ PRO FORMA
(IN MILLIONS, EXCEPT PER SHARE DATA) FBS USBC COMBINED
- ---------------------------------------------------------------- -------------- -------------- --------------
<S> <C> <C> <C>
INTEREST INCOME
Loans........................................................... $ 1,914.7 $ 1,786.4 $ 3,701.1
Securities...................................................... 339.9 263.2 603.1
Other interest income........................................... 33.5 24.8 58.3
-------------- -------------- --------------
Total interest income....................................... 2,288.1 2,074.4 4,362.5
INTEREST EXPENSE
Deposits........................................................ 597.3 523.8 1,121.1
Federal funds purchased, repurchase agreements and other
borrowings.................................................... 123.5 135.6 259.1
Long-term debt.................................................. 147.9 79.3 227.2
-------------- -------------- --------------
Total interest expense...................................... 868.7 738.7 1,607.4
-------------- -------------- --------------
Net interest income............................................. 1,419.4 1,335.7 2,755.1
Provision for credit losses..................................... 123.6 120.1 243.7
-------------- -------------- --------------
Net interest income after provision for credit losses........... 1,295.8 1,215.6 2,511.4
NONINTEREST INCOME
Credit card fee revenue......................................... 179.0 73.3 252.3
Trust fees...................................................... 159.2 65.3 224.5
Service charges on deposit accounts............................. 127.3 191.6 318.9
Securities losses............................................... (115.0) (9.2) (124.2)
Gain on sales of operations and loans........................... -- 62.9 62.9
Equity investment loss.......................................... -- (5.4) (5.4)
Other........................................................... 208.4 174.2 382.6
-------------- -------------- --------------
Total noninterest income.................................... 558.9 552.7 1,111.6
NONINTEREST EXPENSE
Salaries and benefits........................................... 556.4 646.2 1,202.6
Occupancy and equipment......................................... 192.1 227.4 419.5
Goodwill and other intangible assets............................ 50.4 16.0 66.4
Merger and restructuring........................................ 125.3 100.0 225.3
Other........................................................... 425.2 415.5 840.7
-------------- -------------- --------------
Total noninterest expense................................... 1,349.4 1,405.1 2,754.5
-------------- -------------- --------------
Income from continuing operations before income taxes........... 505.3 363.2 868.5
Applicable income taxes......................................... 191.8 108.5 300.3
-------------- -------------- --------------
Income from continuing operations............................... $ 313.5 $ 254.7 $ 568.2
-------------- -------------- --------------
-------------- -------------- --------------
Income from continuing operations applicable to common equity... $ 300.9 $ 242.5 $ 543.4
-------------- -------------- --------------
-------------- -------------- --------------
EARNINGS PER COMMON SHARE
Average common and common equivalent shares..................... 136,274,991 151,391,600 251,859,146
Income from continuing operations............................... $ 2.21 $ 1.60 $ 2.16
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Information
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
NOTE A: MERGERS AND ACQUISITIONS
On February 16, 1996, FBS completed its acquisition of Omaha-based FirsTier
Financial Inc. ("FirsTier"), a regional financial services holding company based
in Omaha, Nebraska, with $3.7 billion in assets and $2.9 billion in deposits.
The acquisition was accounted for under the purchase method of accounting.
On June 6, 1996, USBC acquired California Bancshares, Inc., a $1.6 billion
bank holding company headquartered in the San Francisco East Bay Area, in a
transaction accounted for as a purchase.
NOTE B: BASIS OF PRESENTATION
The unaudited pro forma financial information has been prepared under the
pooling-of-interests method of accounting and is based on the historical
consolidated financial statements of FBS and USBC. Certain amounts in the
historical financial statements of USBC have been reclassified to conform with
FBS's historical financial statement presentation.
The pro forma adjustments represent management's best estimate based on
available information at this time. These adjustments may change as additional
information becomes available.
NOTE C: MERGER AND INTEGRATION COSTS
In connection with the merger, New USBC expects to incur pre-tax
merger-related costs of $625 million ($450 million after tax), $450 million of
which is expected to occur at closing with the remaining $175 million to be
incurred within a year. The costs are expected to include: $270 million in
severance and retention, $190 million in conversion costs (primarily system
development and production costs, and customer forms and communication costs),
$40 million in occupancy expenses (primarily lease exit costs) and $39 million
in other merger costs (principally legal and investment banking fees). These
costs also include an $86 million write down of duplicate facilities and other
capitalized assets.
These amounts, including the related tax effect of $175 million, have been
reflected in the Unaudited Pro Forma Condensed Combined Balance Sheet as of
March 31, 1997 and are not reflected in the Unaudited Pro Forma Condensed
Combined Statements of Income as they are not expected to have a continuing
impact on New USBC. These amounts will be recorded in the financial statements
in accordance with generally accepted accounting principles.
NOTE D: SHAREHOLDERS' EQUITY
In conjunction with the transaction, FBS will exchange 0.755 shares of FBS
Common Stock for each share of common stock of USBC. USBC had 148,175,994 shares
of common stock outstanding as of March 31, 1997. The common stock in the
Unaudited Pro Forma Condensed Combined Balance Sheet has been adjusted to
reflect the par value of FBS Common Stock to be issued, with a related
adjustment to capital surplus. Pro forma combined retained earnings reflects the
adjustments for anticipated merger-related costs as discussed above.
NOTE E: OPERATING COST SAVINGS
FBS expects to achieve $340 million of pre-tax operating cost savings
through reductions in staff, consolidation of data processing and back office
operations, and elimination of certain duplicate or excess office facilities.
Approximately $220 million, or 65 percent, of the operating cost savings are
expected to be
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
NOTE E: OPERATING COST SAVINGS (CONTINUED)
achieved by the end of 1998 with the remainder achieved in 1999. No adjustment
has been included in the unaudited pro forma condensed financial information for
the anticipated operating cost savings. There can be no assurance that
anticipated operating cost savings will be achieved in the amounts or at the
times anticipated.
NOTE F: EARNINGS PER SHARE
The pro forma combined earnings per common share data is computed based on
the average number of outstanding shares and common equivalent shares of FBS,
and the average number of outstanding shares and common equivalent shares of
USBC adjusted for the exchange ratio, for each period presented.
The historical earnings per common share for USBC was based on the average
number of common shares outstanding. The impact of common share equivalents,
such as stock options, and other potentially dilutive securities, is not
material; therefore, they were not included in the historical USBC calculations.
The following table summarizes USBC average common shares and USBC average
common shares and common equivalent shares.
<TABLE>
<CAPTION>
USBC AVERAGE COMMON AND
USBC AVERAGE COMMON SHARES COMMON EQUIVALENT SHARES
------------------------------------ ----------------------------------
<S> <C> <C>
March 31, 1997.......................... 147,934,580 150,500,227
March 31, 1996.......................... 150,814,519 152,627,808
December 31, 1996....................... 151,312,898 153,409,823
December 31, 1995....................... 151,554,000 153,859,695
December 31, 1994....................... 151,391,600 153,091,596
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
FIRST BANK SYSTEM, INC.
By /s/ David J. Parrin
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David J. Parrin
Senior Vice President & Controller
DATE: June 24, 1997.
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[Company Letterhead]
EXHIBIT 23.1
INDEPENDENT AUDITORS
We agree to the incorporation by reference in this Form 8-K of First Bank
System, Inc. of our report dated January 31, 1997 appearing in the Annual
Report on Form 10-K of U.S. Bancorp for the year ended December 31, 1996.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Portland, Oregon
June 17,1997
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[Company Letterhead]
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We agree to the incorporation by reference in this Form 8-K of First Bank
System, Inc. of our report dated January 19, 1995 incorporated by reference
in the 1996 Annual Report on Form 10-K of U.S. Bancorp.
/s/ Coopers & Lybrand L.L.P.
Boise, Idaho
June 17, 1997
