UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
Current Report
Pursuant to Section 13 or 15(d)of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported: July 2, 1998
Commission File Number 0-7601
STAR BANC CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-0838189
---------------- --------------------
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation)
425 Walnut Street, Cincinnati, OH 45202
------------------------------------------
(Address of principal executive offices)
(513) 632-4000
--------------------------------------------------
Registrant's telephone number, including area code
1
<PAGE>
ITEM 2.
In a press release dated July 1, 1998, Star Banc Corporation and Firstar
Corporation announced that they have signed a definitive agreement to merge
through an exchange of shares valued at approximately $7.2 billion. Under the
terms of the agreement, Firstar shareholders will receive 0.76 shares of common
stock in the combined company for each share of Firstar common stock.
Shareholders of Star Banc will retain one share of common stock in the combined
company for each Star Banc common share. For additional information see item
7.(b) UNAUDITED PRO FORMA FINANCIAL INFORMATION.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) FINANCIAL STATEMENTS OF THE BUSINESS ACQUIRED
The following documents filed with the Commission by
Firstar Corporation under the Exchange Act are incorporated
by reference (Commission File No. 1-2981):
(i) Firstar Corporation's Annual Report on Form 10-K for
the year ended December 31, 1997.
(ii) Firstar Corporation's Quarterly Report on Form 10-Q for
the period ended March 31, 1998.
ITEM 7 (b) UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
The following unaudited Pro Forma Condensed Financial Information and
explanatory notes are presented to show the impact on the historical financial
position and the results of operations of the combined company for the proposed
merger of equals of Star Banc Corporation ("Star") and Firstar Corporation
("Firstar") and should be read in conjunction with the consolidated financial
statements, including the notes thereto, of Star and Firstar which are either
included or incorporated by reference in this filing. The Pro Forma Condensed
Financial Information also reflects the proposed combination of Star and Trans
Financial, Inc. ("Trans Financial") which is expected to be completed on August
21, 1998. The unaudited Pro Forma Condensed Combined Financial Information is
presented for illustration purposes only in accordance with the assumptions set
forth below, and is not necessarily indicative of the operating results or
financial position that would have occurred if the Merger had been consummated
nor is it necessarily indicative of future operating results or financial
position of the combined company.
In accordance with the terms of the Merger Agreement and Plan of
Reorganization, each share of Firstar Common Stock outstanding immediately
prior to the effective time of the merger will be converted into the right
to receive 0.76 of a share of the combined company. Each share of Star Common
Stock outstanding immediately prior to the effective time of the merger will be
converted into the right to receive one share of the combined company.
2
<PAGE>
In accordance with the terms of the merger agreement between Star and
Trans Financial each share of Trans Financial Common Stock outstanding
immediately prior to the effective time of the merger will be converted into
the right to receive 0.9003 of a share of Star Common Stock.
The unaudited Pro Forma Financial Information reflects both the
Star/Firstar and Star/Trans Financial mergers using the pooling of interest
method of accounting. Star's acquisition of Great Financial Corporation ("Great
Financial") was completed on February 7, 1998 and is reflected in Star's March
31, 1998 unaudited balance sheet. The unaudited Pro Forma Condensed Balance
Sheet assumes the mergers were consummated on March 31, 1998. The unaudited Pro
Forma Condensed Combined Income Statements for the three months ended March 31,
1998 and the year ended December 31, 1997 present the combined results of
operations of Star, Great Financial, Trans Financial and Firstar as if the
mergers and the Great Financial acquisition had been effective January 1, 1997,
after the effect of certain adjustments described in the Notes to the Unaudited
Pro Forma Condensed Combined Financial Information. The unaudited Pro Forma
Condensed Combined Income Statements for the years ended December 31, 1996 and
1995, present the combined results of operations of only Star, Trans Financial
and Firstar as if the mergers had occurred at the beginning of each period
presented.
The Great Financial acquisition was accounted for as a purchase and
accordingly, the results of the transaction and the operations have been
reflected in the financial statements of Star from the date of acquisition.
Under the purchase method, the purchase price is allocated to the assets and
liabilities acquired based on their estimated fair values at the time of the
acquisition. The allocation of the purchase price for Great Financial is
preliminary and may change as certain estimates and contingencies are
finalized, although any adjustments are not expected to be material.
The combined company expects to achieve substantial merger benefits
including operating cost savings and revenue enhancements. The pro forma
earnings, which do not reflect any potential savings or revenue enhancements
which are expected to result from the consolidation of operations of Star and
Firstar, in addition to Star and Trans Financial, and are not indicative of the
results of future operations. No assurances can be given with respect to the
ultimate level of expense savings and revenue enhancements to be realized.
3
<PAGE>
<TABLE>
Unaudited Pro Forma Condensed Combined Balance Sheet
As of March 31, 1998
(dollars in thousands)
<CAPTION>
Trans Pro Forma
Star Banc Financial, Pro Forma Star Banc
Corporation Inc. Adjustments Corporation
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Cash and Due from Banks...........................$ 572,507 $ 84,651 $ -- $ 657,158
Money Market Instruments.......................... 42,574 99 -- 42,673
Loans Held for Sale............................... 290,496 189,511 -- 480,007
Investment Securities:
Available-for-Sale.............................. 2,052,273 262,465 -- 2,314,738
Held-to-Maturity................................ 146,007 -- -- 146,007
- ---------------------------------------------------------------------------------------------------------------
Total Securities.............................. 2,198,280 262,465 -- 2,460,745
Loans Net of Unearned Interest.................... 9,666,629 1,556,665 -- 11,223,294
Allowance for Loan Losses.............. 151,193 22,777 12,000 (3) 185,970
- ---------------------------------------------------------------------------------------------------------------
Net Loans..................................... 9,515,436 1,533,888 (12,000) 11,037,324
Bank Premises and Equipment....................... 176,435 38,843 (5,660)(3) 209,618
Acceptances - Customers' Liability................ 11,113 -- -- 11,113
Intangibles....................................... 578,515 8,806 -- 587,321
Mortgage Servicing Rights......................... 67,425 45,180 -- 112,605
Other Assets...................................... 403,222 40,361 -- 443,583
- ---------------------------------------------------------------------------------------------------------------
Total Assets................................$ 13,856,003 $ 2,203,804 $ (17,660) $ 16,042,147
===============================================================================================================
LIABILITIES:
Deposits:
Noninterest Bearing Deposits....................$ 1,944,618 $ 254,151 $ -- $ 2,198,769
Interest Bearing Deposits....................... 8,430,980 1,370,282 -- 9,801,262
- ---------------------------------------------------------------------------------------------------------------
Total Deposits.............................. 10,375,598 1,624,433 -- 12,000,031
Short-Term Borrowings............................. 1,277,976 195,391 -- 1,473,367
Long-Term Debt.................................... 371,808 195,125 (1,679) 565,254
Trust Preferred Securities........................ 148,593 -- -- 148,593
Acceptances Outstanding........................... 11,113 -- -- 11,113
Other Liabilities................................. 258,141 28,521 8,340 (3) 295,002
- ---------------------------------------------------------------------------------------------------------------
Total Liabilities............................. 12,443,229 2,043,470 6,661 14,493,360
- ---------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Common Stock...................................... 480,901 21,970 30,775 A 533,646
Preferred Stock................................... -- -- -- --
Surplus........................................... 354,225 50,723 (30,775)A 374,173
Retained Earnings................................. 577,635 88,422 (26,000)(3) 640,057
Treasury Stock, at cost........................... (9,076) -- -- (9,076)
ESOP Shares Purchased with Debt................... -- (1,679) 1,679 --
Net Unrealized Gain/(Loss) on Securities --
Available-for-Sale.............................. 9,089 898 -- 9,987
- ---------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity.................... 1,412,774 160,334 (24,321) 1,548,787
- ---------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity....$ 13,856,003 $ 2,203,804 $ (17,660) $ 16,042,147
===============================================================================================================
A Entry to adjust common stock and surplus for Star Banc Corporation shares issued for Trans Financial.
</TABLE>
4
<PAGE>
<TABLE>
Unaudited Pro Forma Condensed Combined Balance Sheet
As of March 31, 1998
(dollars in thousands)
<CAPTION>
Pro Forma Pro Forma
Star Banc Firstar Pro forma Firstar
Corporation Corporation Adjustments Corporation
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Cash and Due from Banks...........................$ 657,158 $ 1,575,234 $ -- $ 2,232,392
Money Market Instruments.......................... 42,673 42,473 -- 85,146
Loans Held for Sale............................... 480,007 546,226 -- 1,026,233
Investment Securities:
Available-for-Sale.............................. 2,314,738 1,756,959 -- 4,071,697
Held-to-Maturity................................ 146,007 2,406,057 -- 2,552,064
- ----------------------------------------------------------------------------------------------------------------
Total Securities.............................. 2,460,745 4,163,016 -- 6,623,761
Loans Net of Unearned Interest.................... 11,223,294 13,280,273 -- 24,503,567
Allowance for Loan Losses.............. 185,970 218,977 -- 404,947
- ----------------------------------------------------------------------------------------------------------------
Net Loans..................................... 11,037,324 13,061,296 -- 24,098,620
Bank Premises and Equipment....................... 209,618 376,006 (40,000)(3) 545,624
Acceptances - Customers' Liability................ 11,113 11,535 -- 22,648
Intangibles....................................... 587,321 192,082 -- 779,403
Mortgage Servicing Rights......................... 112,605 19,800 -- 132,405
Other Assets...................................... 443,583 396,002 -- 839,585
- ----------------------------------------------------------------------------------------------------------------
Total Assets................................$ 16,042,147 $ 20,383,670 $ (40,000) $ 36,385,817
================================================================================================================
LIABILITIES:
Deposits:
Noninterest Bearing Deposits....................$ 2,198,769 $ 3,882,701 $ -- $ 6,081,470
Interest Bearing Deposits....................... 9,801,262 11,241,746 -- 21,043,008
- ----------------------------------------------------------------------------------------------------------------
Total Deposits.............................. 12,000,031 15,124,447 -- 27,124,478
Short-Term Borrowings............................. 1,473,367 2,166,866 -- 3,640,233
Long-Term Debt.................................... 565,254 886,194 -- 1,451,448
Trust Preferred Securities........................ 148,593 150,000 -- 298,593
Acceptances Outstanding........................... 11,113 11,535 -- 22,648
Other Liabilities................................. 295,002 300,706 171,000(3) 766,708
- ----------------------------------------------------------------------------------------------------------------
Total Liabilities............................. 14,493,360 18,639,748 171,000 33,304,108
- ----------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Common Stock...................................... 533,646 181,394 (712,982)B 2,058
Preferred Stock................................... -- 4,717 (4,717)B --
Surplus........................................... 374,173 4,258 717,699 B 1,096,130
Retained Earnings................................. 640,057 1,526,611 (211,000)(3) 1,955,668
Treasury Stock, at cost........................... (9,076) (4) -- (9,080)
ESOP Shares Purchased with Debt................... -- -- -- --
Net Unrealized Gain/(Loss) on Securities -- --
Available-for-Sale.............................. 9,987 26,946 -- 36,933
- ----------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity.................... 1,548,787 1,743,922 (211,000) 3,081,709
- ----------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity....$ 16,042,147 $ 20,383,670 $ (40,000) $ 36,385,817
================================================================================================================
B Entry to adjust common stock and surplus for shares issued for the combined company at $0.01 per share.
</TABLE>
5
<PAGE>
<TABLE>
Unaudited Pro Forma Condensed Combined Income Statement
For the Three Months Ended March 31, 1998
(amounts in thousands except per share amounts)
<CAPTION>
Great Pro Forma
Star Banc Financial Pro Forma Star Banc
Corporation Corporation Adjustments Corporation
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans..............$ 208,180 $ 16,386 $ (187)(4) $ 224,379
Interest and Fees on Loans Held For Sale 3,269 -- -- 3,269
Interest on Investment Securities....... 28,188 4,950 (194)(4) 32,944
Other................................... 1,336 29 -- 1,365
- ------------------------------------------------------------------------------------------------
Total Interest Income................. 240,973 21,365 (381) 261,957
- ------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on Deposits.................... 82,156 9,682 (419)(4) 91,419
Interest on Borrowings.................. 25,596 3,677 842 (4) 30,115
- ------------------------------------------------------------------------------------------------
Total Interest Expense................ 107,752 13,359 423 121,534
- ------------------------------------------------------------------------------------------------
Net Interest Income................. 133,221 8,006 (804) 140,423
Provision for Loan Losses............... 10,775 2,333 -- 13,108
- ------------------------------------------------------------------------------------------------
Net Interest Income after
Provision for Loan Losses......... 122,446 5,673 (804) 127,315
- ------------------------------------------------------------------------------------------------
NONINTEREST INCOME:
Trust Income............................ 16,078 -- -- 16,078
Service Charges on Deposits............. 16,386 353 -- 16,739
Credit Card Income...................... 5,506 -- -- 5,506
Electronic Banking Income............... 3,859 -- -- 3,859
Mortgage Banking Income................. 8,441 2,506 (24)(4) 10,923
Investment Securities Gains/(Losses)-Net 176 -- -- 176
All Other Income........................ 10,870 925 -- 11,795
- ------------------------------------------------------------------------------------------------
Total Noninterest Income.............. 61,316 3,784 (24) 65,076
- ------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE:
Salaries................................ 36,582 3,215 -- 39,797
Pension and Other Employee Benefits..... 6,392 1,438 -- 7,830
Equipment Expense....................... 5,832 1,149 -- 6,981
Occupancy Expense - Net................. 6,388 -- -- 6,388
All Other Expense....................... 38,399 3,848 1,262 (4) 43,509
- ------------------------------------------------------------------------------------------------
93,593 9,650 1,262 104,505
Merger Related Charges -- 28,844 (28,844)(5) --
- ------------------------------------------------------------------------------------------------
Total Noninterest Expense............. 93,593 38,494 (27,582) 104,505
- ------------------------------------------------------------------------------------------------
INCOME BEFORE TAXES..................... 90,169 (29,037) 26,754 87,886
Income Tax.............................. 30,825 (8,048) 5,732 (4)(5) 28,509
- ------------------------------------------------------------------------------------------------
NET INCOME............................$ 59,344 $ (20,989) $ 21,022 $ 59,377
================================================================================================
Basic earnings per common share $ 0.65 $ 0.62
Diluted earnings per common share 0.63 0.60
Average common shares - basic 91,834 95,562
Average common shares - diluted 94,707 98,435
See accompanying notes to the unaudited pro forma condensed financial information.
</TABLE>
6
<PAGE>
<TABLE>
Unaudited Pro Forma Condensed Combined Income Statement
For the Three Months Ended March 31, 1998
(amounts in thousands except per share amounts)
<CAPTION>
Pro Forma Trans Pro Forma
Star Banc Financial, Pro Forma Star Banc
Corporation Inc. Adjustments Corporation
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans..............$ 224,379 $ 35,786 $ -- $ 260,165
Interest and Fees on Loans Held For Sale 3,269 2,468 -- 5,737
Interest on Investment Securities....... 32,944 3,817 -- 36,761
Other................................... 1,365 7 -- 1,372
- ------------------------------------------------------------------------------------------------
Total Interest Income................. 261,957 42,078 -- 304,035
- ------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on Deposits.................... 91,419 16,466 -- 107,885
Interest on Borrowings.................. 30,115 5,282 -- 35,397
- ------------------------------------------------------------------------------------------------
Total Interest Expense................ 121,534 21,748 -- 143,282
- ------------------------------------------------------------------------------------------------
Net Interest Income................. 140,423 20,330 -- 160,753
Provision for Loan Losses............... 13,108 2,220 -- 15,328
- ------------------------------------------------------------------------------------------------
Net Interest Income after
Provision for Loan Losses......... 127,315 18,110 -- 145,425
- ------------------------------------------------------------------------------------------------
NONINTEREST INCOME:
Trust Income............................ 16,078 617 -- 16,695
Service Charges on Deposits............. 16,739 2,471 -- 19,210
Credit Card Income...................... 5,506 237 -- 5,743
Electronic Banking Income............... 3,859 167 -- 4,026
Mortgage Banking Income................. 10,923 4,610 -- 15,533
Investment Securities Gains/(Losses)-Net 176 150 -- 326
All Other Income........................ 11,795 2,013 -- 13,808
- ------------------------------------------------------------------------------------------------
Total Noninterest Income.............. 65,076 10,265 -- 75,341
- ------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE:
Salaries................................ 39,797 7,939 -- 47,736
Pension and Other Employee Benefits..... 7,830 1,480 -- 9,310
Equipment Expense....................... 6,981 1,809 -- 8,790
Occupancy Expense - Net................. 6,388 1,160 -- 7,548
All Other Expense....................... 43,509 6,107 -- 49,616
- ------------------------------------------------------------------------------------------------
104,505 18,495 -- 123,000
Merger Related Charges -- -- -- --
- ------------------------------------------------------------------------------------------------
Total Noninterest Expense............. 104,505 18,495 -- 123,000
- ------------------------------------------------------------------------------------------------
INCOME BEFORE TAXES..................... 87,886 9,880 -- 97,766
Income Tax.............................. 28,509 3,306 -- 31,815
- ------------------------------------------------------------------------------------------------
NET INCOME............................$ 59,377 $ 6,574 $ -- $ 65,951
================================================================================================
Basic earnings per common share $ 0.65 $ 0.57 $ 0.62
Diluted earnings per common share 0.63 0.55 0.60
Average common shares - basic 91,834 11,597 106,111
Average common shares - diluted 94,707 11,910 109,266
See accompanying notes to the unaudited pro forma condensed financial information.
</TABLE>
7
<PAGE>
<TABLE>
Unaudited Pro Forma Condensed Combined Income Statement
For the Three Months Ended March 31, 1998
(amounts in thousands except per share amounts)
<CAPTION>
Pro Forma Pro Forma
Star Banc Firstar Pro Forma Firstar
Corporation Corporation Adjustments Corporation
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans..............$ 260,165 $ 278,692 $ -- $ 538,857
Interest and Fees on Loans Held For Sale 5,737 5,417 -- 11,154
Interest on Investment Securities....... 36,761 63,859 -- 100,620
Other................................... 1,372 1,378 -- 2,750
- -----------------------------------------------------------------------------------------------
Total Interest Income................. 304,035 349,346 -- 653,381
- -----------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on Deposits.................... 107,885 119,840 -- 227,725
Interest on Borrowings.................. 35,397 45,752 -- 81,149
- -----------------------------------------------------------------------------------------------
Total Interest Expense................ 143,282 165,592 -- 308,874
- -----------------------------------------------------------------------------------------------
Net Interest Income................. 160,753 183,754 -- 344,507
Provision for Loan Losses............... 15,328 15,650 -- 30,978
- -----------------------------------------------------------------------------------------------
Net Interest Income after
Provision for Loan Losses......... 145,425 168,104 -- 313,529
- -----------------------------------------------------------------------------------------------
NONINTEREST INCOME:
Trust Income............................ 16,695 46,046 -- 62,741
Service Charges on Deposits............. 19,210 24,439 -- 43,649
Credit Card Income...................... 5,743 14,156 -- 19,899
Electronic Banking Income............... 4,026 7,004 -- 11,030
Mortgage Banking Income................. 15,533 21,294 -- 36,827
Investment Securities Gains/(Losses)-Net 326 3 -- 329
All Other Income........................ 13,808 16,105 -- 29,913
- -----------------------------------------------------------------------------------------------
Total Noninterest Income.............. 75,341 129,047 -- 204,388
- -----------------------------------------------------------------------------------------------
NONINTEREST EXPENSE:
Salaries................................ 47,736 86,698 -- 134,434
Pension and Other Employee Benefits..... 9,310 20,024 -- 29,334
Equipment Expense....................... 8,790 16,299 -- 25,089
Occupancy Expense - Net................. 7,548 16,805 -- 24,353
All Other Expense....................... 49,616 50,640 -- 100,256
- -----------------------------------------------------------------------------------------------
123,000 190,466 -- 313,466
Merger Related Charges -- -- -- --
- -----------------------------------------------------------------------------------------------
Total Noninterest Expense............. 123,000 190,466 -- 313,466
- -----------------------------------------------------------------------------------------------
INCOME BEFORE TAXES..................... 97,766 106,685 -- 204,451
Income Tax.............................. 31,815 33,769 -- 65,584
- -----------------------------------------------------------------------------------------------
NET INCOME............................$ 65,951 $ 72,916 $ -- $ 138,867
===============================================================================================
Basic earnings per common share $ 0.64 $ 0.50 $ 0.64
Diluted earnings per common share 0.62 0.50 0.63
Average common shares - basic 102,383 144,990 216,303
Average common shares - diluted 105,538 147,031 221,010
See accompanying notes to the unaudited pro forma condensed financial information.
</TABLE>
8
<PAGE>
<TABLE>
Unaudited Pro forma Condensed Combined Income Statement
For the Year Ended December 31, 1997
(amounts in thousands except per share amounts)
<CAPTION>
Great Pro Forma
Star Banc Financial Pro Forma Star Banc
Corporation Corporation Adjustments Corporation
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans..............$ 709,196 $ 163,586 $ (2,264)(4) $ 870,518
Interest on Investment Securities....... 90,750 51,825 (2,333)(4) 140,242
Other................................... 4,606 445 -- 5,051
- ------------------------------------------------------------------------------------------------
Total Interest Income................. 804,552 215,856 (4,597) 1,015,811
- ------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on Deposits.................... 268,355 92,103 (5,023)(4) 355,435
Interest on Borrowings.................. 74,298 40,835 10,103 (4) 125,236
- ------------------------------------------------------------------------------------------------
Total Interest Expense................ 342,653 132,938 5,080 480,671
- ------------------------------------------------------------------------------------------------
Net Interest Income................. 461,899 82,918 (9,677) 535,140
Provision for Loan Losses............... 53,614 5,823 -- 59,437
- ------------------------------------------------------------------------------------------------
Net Interest Income after
Provision for Loan Losses......... 408,285 77,095 (9,677) 475,703
- ------------------------------------------------------------------------------------------------
NONINTEREST INCOME:
Trust Income............................ 56,661 -- -- 56,661
Service Charges on Deposits............. 61,252 2,921 -- 64,173
Credit Card Income...................... 24,427 -- -- 24,427
Electronic Banking Income............... 15,377 -- -- 15,377
Mortgage Banking Income................. 12,832 26,488 (292)(4) 39,028
Investment Securities Gains/(Losses)-Net (4,239) 1,499 -- (2,740)
Gain on Sale of Merchant Processing..... -- -- -- --
All Other Income........................ 38,266 7,218 -- 45,484
- ------------------------------------------------------------------------------------------------
Total Noninterest Income.............. 204,576 38,126 (292) 242,410
- ------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE:
Salaries and Benefits................... 147,072 37,154 -- 184,226
Equipment Expense....................... 19,892 9,652 -- 29,544
Occupancy Expense - Net................. 23,523 -- -- 23,523
All Other Expense....................... 131,276 28,063 15,140 (4) 174,479
- ------------------------------------------------------------------------------------------------
321,763 74,869 15,140 411,772
SAIF special assessment -- -- -- --
- ------------------------------------------------------------------------------------------------
Total Noninterest Expense............. 321,763 74,869 15,140 411,772
- ------------------------------------------------------------------------------------------------
INCOME BEFORE TAXES..................... 291,098 40,352 (25,109) 306,341
Income Tax.............................. 96,344 14,054 (3,489)(4) 106,909
- ------------------------------------------------------------------------------------------------
NET INCOME............................$ 194,754 $ 26,298 $ (21,620) $ 199,432
================================================================================================
Basic earnings per common share $ 2.26 $ 2.03 $ 2.08
Diluted earnings per common share 2.19 1.88 2.03
Average common shares - basic 86,160 12,974 95,745
Average common shares - diluted 88,877 13,997 98,462
See accompanying notes to the unaudited pro forma condensed financial information.
</TABLE>
9
<PAGE>
<TABLE>
Unaudited Pro forma Condensed Combined Income Statement
For the Year Ended December 31, 1997
(amounts in thousands except per share amounts)
<CAPTION>
Pro Forma Trans Pro Forma
Star Banc Financial, Pro Forma Star Banc
Corporation Inc. Adjustments Corporation
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans..............$ 870,518 $ 146,284 $ -- $ 1,016,802
Interest on Investment Securities....... 140,242 15,117 -- 155,359
Other................................... 5,051 10 -- 5,061
- ------------------------------------------------------------------------------------------------
Total Interest Income................. 1,015,811 161,411 -- 1,177,222
- ------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on Deposits.................... 355,435 64,389 -- 419,824
Interest on Borrowings.................. 125,236 16,811 -- 142,047
- ------------------------------------------------------------------------------------------------
Total Interest Expense................ 480,671 81,200 -- 561,871
- ------------------------------------------------------------------------------------------------
Net Interest Income................. 535,140 80,211 -- 615,351
Provision for Loan Losses............... 59,437 9,500 -- 68,937
- ------------------------------------------------------------------------------------------------
Net Interest Income after
Provision for Loan Losses......... 475,703 70,711 -- 546,414
- ------------------------------------------------------------------------------------------------
NONINTEREST INCOME:
Trust Income............................ 56,661 2,475 -- 59,136
Service Charges on Deposits............. 64,173 10,154 -- 74,327
Credit Card Income...................... 24,427 869 -- 25,296
Electronic Banking Income............... 15,377 515 -- 15,892
Mortgage Banking Income................. 39,028 13,509 -- 52,537
Investment Securities Gains/(Losses)-Net (2,740) (356) -- (3,096)
Gain on Sale of Merchant Processing..... -- -- -- --
All Other Income........................ 45,484 7,244 -- 52,728
- ------------------------------------------------------------------------------------------------
Total Noninterest Income.............. 242,410 34,410 -- 276,820
- ------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE:
Salaries and Benefits................... 184,226 34,931 -- 219,157
Equipment Expense....................... 29,544 6,799 -- 36,343
Occupancy Expense - Net................. 23,523 4,660 -- 28,183
All Other Expense....................... 174,479 22,743 -- 197,222
- ------------------------------------------------------------------------------------------------
411,772 69,133 -- 480,905
SAIF special assessment -- -- -- --
- ------------------------------------------------------------------------------------------------
Total Noninterest Expense............. 411,772 69,133 -- 480,905
- ------------------------------------------------------------------------------------------------
INCOME BEFORE TAXES..................... 306,341 35,988 -- 342,329
Income Tax.............................. 106,909 12,055 -- 118,964
- ------------------------------------------------------------------------------------------------
NET INCOME............................$ 199,432 $ 23,933 $ -- $ 223,365
================================================================================================
Basic earnings per common share $ 2.08 $ 2.09 $ 2.10
Diluted earnings per common share 2.03 2.04 2.04
Average common shares - basic 95,745 11,432 106,294
Average common shares - diluted 98,462 11,722 109,272
See accompanying notes to the unaudited pro forma condensed financial information.
</TABLE>
10
<PAGE>
<TABLE>
Unaudited Pro forma Condensed Combined Income Statement
For the Year Ended December 31, 1997
(amounts in thousands except per share amounts)
<CAPTION>
Pro Forma Pro Forma
Star Banc Firstar Pro Forma Firstar
Corporation Corporation Adjustments Corporation
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans..............$ 1,016,802 $ 1,138,417 $ -- $ 2,155,219
Interest on Investment Securities....... 155,359 256,354 -- 411,713
Other................................... 5,061 6,702 -- 11,763
- ----------------------------------------------------------------------------------------------
Total Interest Income................. 1,177,222 1,401,473 -- 2,578,695
- ----------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on Deposits.................... 419,824 471,670 -- 891,494
Interest on Borrowings.................. 142,047 179,418 -- 321,465
- ----------------------------------------------------------------------------------------------
Total Interest Expense................ 561,871 651,088 -- 1,212,959
- ----------------------------------------------------------------------------------------------
Net Interest Income................. 615,351 750,385 -- 1,365,736
Provision for Loan Losses............... 68,937 54,658 -- 123,595
- ----------------------------------------------------------------------------------------------
Net Interest Income after
Provision for Loan Losses......... 546,414 695,727 -- 1,242,141
- ----------------------------------------------------------------------------------------------
NONINTEREST INCOME:
Trust Income............................ 59,136 174,899 -- 234,035
Service Charges on Deposits............. 74,327 87,483 -- 161,810
Credit Card Income...................... 25,296 71,038 -- 96,334
Electronic Banking Income............... 15,892 26,497 -- 42,389
Mortgage Banking Income................. 52,537 46,829 -- 99,366
Investment Securities Gains/(Losses)-Net (3,096) 679 -- (2,417)
Gain on Sale of Merchant Processing..... -- 22,821 -- 22,821
All Other Income........................ 52,728 60,893 -- 113,621
- ----------------------------------------------------------------------------------------------
Total Noninterest Income.............. 276,820 491,139 -- 767,959
- ----------------------------------------------------------------------------------------------
NONINTEREST EXPENSE:
Salaries and Benefits................... 219,157 399,702 -- 618,859
Equipment Expense....................... 36,343 69,574 -- 105,917
Occupancy Expense - Net................. 28,183 63,232 -- 91,415
All Other Expense....................... 197,222 211,510 -- 408,732
- ----------------------------------------------------------------------------------------------
480,905 744,018 -- 1,224,923
SAIF special assessment -- -- -- --
- ----------------------------------------------------------------------------------------------
Total Noninterest Expense............. 480,905 744,018 -- 1,224,923
- ----------------------------------------------------------------------------------------------
INCOME BEFORE TAXES..................... 342,329 442,848 -- 785,177
Income Tax.............................. 118,964 147,639 -- 266,603
- ----------------------------------------------------------------------------------------------
NET INCOME............................$ 223,365 $ 295,209 $ -- $ 518,574
==============================================================================================
Basic earnings per common share $ 2.10 $ 2.03 $ 2.39
Diluted earnings per common share 2.04 2.00 2.34
Average common shares - basic 106,294 145,143 216,603
Average common shares - diluted 109,272 147,306 221,225
See accompanying notes to the unaudited pro forma condensed financial information.
</TABLE>
11
<PAGE>
<TABLE>
Unaudited Pro Forma Condensed Combined Income Statement
For the Year Ended December 31, 1996
(amounts in thousands except per share amounts)
<CAPTION>
Pro Forma Trans Pro Forma
Star Banc Financial, Pro Forma Star Banc
Corporation Inc. Adjustments Corporation
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans..............$ 635,619 $ 131,466 $ -- $ 767,085
Interest on Investment Securities....... 98,206 16,403 -- 114,609
Other................................... 1,700 66 -- 1,766
- ----------------------------------------------------------------------------------------------
Total Interest Income................. 735,525 147,935 -- 883,460
- ----------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on Deposits.................... 262,675 59,795 -- 322,470
Interest on Borrowings.................. 54,651 13,271 -- 67,922
- ----------------------------------------------------------------------------------------------
Total Interest Expense................ 317,326 73,066 -- 390,392
- ----------------------------------------------------------------------------------------------
Net Interest Income................. 418,199 74,869 -- 493,068
Provision for Loan Losses............... 40,773 13,914 -- 54,687
- ----------------------------------------------------------------------------------------------
Net Interest Income after
Provision for Loan Losses......... 377,426 60,955 -- 438,381
- ----------------------------------------------------------------------------------------------
NONINTEREST INCOME:
Trust Income............................ 46,917 1,955 -- 48,872
Service Charges on Deposits............. 55,983 9,541 -- 65,524
Credit Card Income...................... 19,183 949 -- 20,132
Electronic Banking Income............... 10,231 207 -- 10,438
Mortgage Banking Income................. 7,556 10,728 -- 18,284
Investment Securities Gains/(Losses)-Net (2,451) 20 -- (2,431)
All Other Income........................ 33,103 6,289 -- 39,392
- ----------------------------------------------------------------------------------------------
Total Noninterest Income.............. 170,522 29,689 -- 200,211
- ----------------------------------------------------------------------------------------------
NONINTEREST EXPENSE:
Salaries and Benefits................... 141,271 38,509 -- 179,780
Equipment Expense....................... 17,329 7,005 -- 24,334
Occupancy Expense - Net................. 22,019 5,206 -- 27,225
All Other Expense....................... 122,592 27,237 -- 149,829
- ----------------------------------------------------------------------------------------------
303,211 77,957 -- 381,168
Restructuring expense................... -- -- -- --
SAIF special assessment................. 5,000 2,685 -- 7,685
- ----------------------------------------------------------------------------------------------
Total Noninterest Expense............. 308,211 80,642 -- 388,853
- ----------------------------------------------------------------------------------------------
INCOME BEFORE TAXES..................... 239,737 10,002 -- 249,739
Income Tax.............................. 81,378 3,120 -- 84,498
- ----------------------------------------------------------------------------------------------
NET INCOME............................$ 158,359 $ 6,882 $ -- $ 165,241
==============================================================================================
Basic earnings per common share $ 1.79 $ 0.61 $ 1.67
Diluted earnings per common share 1.75 0.60 1.64
Average common shares - basic 88,544 11,347 99,093
Average common shares - diluted 90,238 11,453 100,882
See accompanying notes to the unaudited pro forma condensed financial information.
</TABLE>
12
<PAGE>
<TABLE>
Unaudited Pro Forma Condensed Combined Income Statement
For the Year Ended December 31, 1996
(amounts in thousands except per share amounts)
<CAPTION>
Pro Forma Pro Forma
Star Banc Firstar Pro Forma Firstar
Corporation Corporation Adjustments Corporation
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans..............$ 767,085 $ 1,113,459 $ -- $ 1,880,544
Interest on Investment Securities....... 114,609 263,799 -- 378,408
Other................................... 1,766 5,640 -- 7,406
- ----------------------------------------------------------------------------------------------
Total Interest Income................. 883,460 1,382,898 -- 2,266,358
- ----------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on Deposits.................... 322,470 465,553 -- 788,023
Interest on Borrowings.................. 67,922 167,459 -- 235,381
- ----------------------------------------------------------------------------------------------
Total Interest Expense................ 390,392 633,012 -- 1,023,404
- ----------------------------------------------------------------------------------------------
Net Interest Income................. 493,068 749,886 -- 1,242,954
Provision for Loan Losses............... 54,687 42,647 -- 97,334
- ----------------------------------------------------------------------------------------------
Net Interest Income after
Provision for Loan Losses......... 438,381 707,239 -- 1,145,620
- ----------------------------------------------------------------------------------------------
NONINTEREST INCOME:
Trust Income............................ 48,872 148,019 -- 196,891
Service Charges on Deposits............. 65,524 91,953 -- 157,477
Credit Card Income...................... 20,132 69,945 -- 90,077
Electronic Banking Income............... 10,438 24,552 -- 34,990
Mortgage Banking Income................. 18,284 49,100 -- 67,384
Investment Securities Gains/(Losses)-Net (2,431) 66 -- (2,365)
All Other Income........................ 39,392 56,817 -- 96,209
- ----------------------------------------------------------------------------------------------
Total Noninterest Income.............. 200,211 440,452 -- 640,663
- ----------------------------------------------------------------------------------------------
NONINTEREST EXPENSE:
Salaries and Benefits................... 179,780 391,516 -- 571,296
Equipment Expense....................... 24,334 63,197 -- 87,531
Occupancy Expense - Net................. 27,225 64,235 -- 91,460
All Other Expense....................... 149,829 193,278 -- 343,107
- ----------------------------------------------------------------------------------------------
381,168 712,226 -- 1,093,394
Restructuring expense................... -- 53,267 -- 53,267
SAIF special assessment................. 7,685 7,837 -- 15,522
- ----------------------------------------------------------------------------------------------
Total Noninterest Expense............. 388,853 773,330 -- 1,162,183
- ----------------------------------------------------------------------------------------------
INCOME BEFORE TAXES..................... 249,739 374,361 -- 624,100
Income Tax.............................. 84,498 124,184 -- 208,682
- ----------------------------------------------------------------------------------------------
NET INCOME............................$ 165,241 $ 250,177 $ -- $ 415,418
==============================================================================================
Basic earnings per common share $ 1.67 $ 1.68 $ 1.96
Diluted earnings per common share 1.64 1.66 1.93
Average common shares - basic 99,093 148,061 211,619
Average common shares - diluted 100,882 150,436 215,213
See accompanying notes to the unaudited pro forma condensed financial information.
</TABLE>
13
<PAGE>
<TABLE>
Unaudited Pro forma Condensed Combined Income Statement
For the Year Ended December 31, 1995
(amounts in thousands except per share amounts)
<CAPTION>
Pro Forma Trans Pro Forma
Star Banc Financial, Pro Forma Star Banc
Corporation Inc. Adjustments Corporation
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans..............$ 586,416 $ 115,757 $ -- $ 702,173
Interest on Investment Securities....... 122,939 17,650 -- 140,589
Other................................... 1,049 821 -- 1,870
- ----------------------------------------------------------------------------------------------
Total Interest Income................. 710,404 134,228 -- 844,632
- ----------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on Deposits.................... 265,972 56,465 -- 322,437
Interest on Borrowings.................. 66,224 8,134 -- 74,358
- ----------------------------------------------------------------------------------------------
Total Interest Expense................ 332,196 64,599 -- 396,795
- ----------------------------------------------------------------------------------------------
Net Interest Income................. 378,208 69,629 -- 447,837
Provision for Loan Losses............... 25,101 5,260 -- 30,361
- ----------------------------------------------------------------------------------------------
Net Interest Income after
Provision for Loan Losses......... 353,107 64,369 -- 417,476
- ----------------------------------------------------------------------------------------------
NONINTEREST INCOME:
Trust Income............................ 41,512 1,392 -- 42,904
Service Charges on Deposits............. 43,870 8,472 -- 52,342
Credit Card Income...................... 15,118 1,001 -- 16,119
Electronic Banking Income............... 7,652 306 -- 7,958
Mortgage Banking Income................. 2,362 7,853 -- 10,215
Investment Securities Gains/(Losses)-Net 1,910 200 -- 2,110
All Other Income........................ 25,700 5,187 -- 30,887
- ----------------------------------------------------------------------------------------------
Total Noninterest Income.............. 138,124 24,411 -- 162,535
- ----------------------------------------------------------------------------------------------
NONINTEREST EXPENSE:
Salaries and Benefits................... 133,196 31,341 -- 164,537
Equipment Expense....................... 16,284 6,126 -- 22,410
Occupancy Expense - Net................. 22,059 4,836 -- 26,895
All Other Expense....................... 114,675 23,746 -- 138,421
- ----------------------------------------------------------------------------------------------
286,214 66,049 -- 352,263
Restructuring expense................... -- -- -- --
SAIF special assessment................. -- -- -- --
- ----------------------------------------------------------------------------------------------
Total Noninterest Expense............. 286,214 66,049 -- 352,263
- ----------------------------------------------------------------------------------------------
INCOME BEFORE TAXES..................... 205,017 22,731 -- 227,748
Income Tax.............................. 68,414 7,416 -- 75,830
- ----------------------------------------------------------------------------------------------
NET INCOME............................$ 136,603 $ 15,315 $ -- $ 151,918
==============================================================================================
Basic earnings per common share $ 1.52 $ 1.36 $ 1.51
Diluted earnings per common share 1.50 1.35 1.49
Average common shares - basic 90,086 11,246 100,635
Average common shares - diluted 91,247 11,356 101,895
See accompanying notes to the unaudited pro forma condensed financial information.
</TABLE>
14
<PAGE>
<TABLE>
Unaudited Pro forma Condensed Combined Income Statement
For the Year Ended December 31, 1995
(amounts in thousands except per share amounts)
<CAPTION>
Pro Forma Pro Forma
Star Banc Firstar Pro Forma Firstar
Corporation Corporation Adjustments Corporation
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans..............$ 702,173 $ 1,081,685 $ -- $ 1,783,858
Interest on Investment Securities....... 140,589 253,794 -- 394,383
Other................................... 1,870 12,307 -- 14,177
- ----------------------------------------------------------------------------------------------
Total Interest Income................. 844,632 1,347,786 -- 2,192,418
- ----------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on Deposits.................... 322,437 444,706 -- 767,143
Interest on Borrowings.................. 74,358 177,133 -- 251,491
- ----------------------------------------------------------------------------------------------
Total Interest Expense................ 396,795 621,839 -- 1,018,634
- ----------------------------------------------------------------------------------------------
Net Interest Income................. 447,837 725,947 -- 1,173,784
Provision for Loan Losses............... 30,361 36,756 -- 67,117
- ----------------------------------------------------------------------------------------------
Net Interest Income after
Provision for Loan Losses......... 417,476 689,191 -- 1,106,667
- ----------------------------------------------------------------------------------------------
NONINTEREST INCOME:
Trust Income............................ 42,904 134,354 -- 177,258
Service Charges on Deposits............. 52,342 81,775 -- 134,117
Credit Card Income...................... 16,119 62,106 -- 78,225
Electronic Banking Income............... 7,958 23,009 -- 30,967
Mortgage Banking Income................. 10,215 38,479 -- 48,694
Investment Securities Gains/(Losses)-Net 2,110 (5,730) -- (3,620)
All Other Income........................ 30,887 58,204 -- 89,091
- ----------------------------------------------------------------------------------------------
Total Noninterest Income.............. 162,535 392,197 -- 554,732
- ----------------------------------------------------------------------------------------------
NONINTEREST EXPENSE:
Salaries and Benefits................... 164,537 395,361 -- 559,898
Equipment Expense....................... 22,410 56,282 -- 78,692
Occupancy Expense - Net................. 26,895 57,992 -- 84,887
All Other Expense....................... 138,421 201,336 -- 339,757
- ----------------------------------------------------------------------------------------------
352,263 710,971 -- 1,063,234
Restructuring expense................... -- 23,151 -- 23,151
SAIF special assessment................. -- -- -- --
- ----------------------------------------------------------------------------------------------
Total Noninterest Expense............. 352,263 734,122 -- 1,086,385
- ----------------------------------------------------------------------------------------------
INCOME BEFORE TAXES..................... 227,748 347,266 -- 575,014
Income Tax.............................. 75,830 118,353 -- 194,183
- ----------------------------------------------------------------------------------------------
NET INCOME............................$ 151,918 $ 228,913 $ -- $ 380,831
==============================================================================================
Basic earnings per common share $ 1.51 $ 1.50 $ 1.77
Diluted earnings per common share 1.49 1.48 1.73
Average common shares - basic 100,635 151,432 215,723
Average common shares - diluted 101,895 154,856 219,586
See accompanying notes to the unaudited pro forma condensed financial information.
</TABLE>
15
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL INFORMATION
(Amounts in thousands, except per share data)
NOTE 1 - BASIS OF PRESENTATION
The unaudited Pro Forma Condensed Combined Financial Information has been
prepared assuming both the Star/Firstar and Star/Trans Financial mergers will
be accounted for under the pooling of interests method and is based on the
historical consolidated financial statements of Star, Firstar and Trans
Financial. Star, Firstar and Trans Financial are in the process of reviewing
their respective accounting policies. As a result of this review, it might be
necessary to restate certain amounts in financial statements of the combined
company to conform to those accounting policies that are most appropriate. Any
such restatements are not expected to be material.
On February 7, 1998 Star completed the purchase of Great Financial
Corporation for 70 percent stock and 30 percent cash. Star issued 9.5 million
shares of common stock and paid out $190 million in cash for a total value of
$648 million for this transaction. This transaction was structured as a tax-
free exchange for shareholders receiving stock and has been accounted for as a
purchase. The pro forma adjustments for Great Financial represent management's
best estimates based on available information at this time. The actual
adjustments may differ from those reflected in the unaudited Pro Forma
Condensed Combined Financial Information as estimates and contin-gencies are
finalized, although any adjustments are not expected to be material.
NOTE 2 - SHAREHOLDERS' EQUITY
For the merger of Star and Firstar, Firstar shareholders will receive 0.76
shares of common stock in the combined company for each share of Firstar common
stock. Star shareholders will receive one share of common stock in the combined
company for each share of Star Banc common stock. Firstar had 145,113,914
shares of common stock outstanding at March 31, 1998, which will be exchanged
for 110,286,574 shares of the combined company, while Star had 95,567,121
shares of common stock outstanding at March 31, 1998. This would result in a
total of 205,853,695 shares of common stock issued for the combined company.
The common stock in the unaudited Pro Forma Condensed Combined Balance Sheet
has been adjusted to reflect the par value amount of the total amount of shares
of the combined company. Pro forma retained earnings reflects an adjustment
for estimated merger related charges as described in Note 3 below.
For the merger of Star and Trans Financial, Star will exchange 0.9003 of a
share of Star common stock for each share of Trans Financial common stock.
Trans Financial had 11,717,356 shares on common stock outstanding at March 31,
1998, which will be exchanged for approximately 10,549,000 shares of Star
common stock. The common stock in the unaudited Pro Forma Condensed Combined
Balance Sheet has been adjusted to reflect the par value amount of the Star
shares issued. Pro forma retained earnings reflects an adjustment for
estimated merger related charges as described in Note 3 below.
16
<PAGE>
NOTE 3 - MERGER RELATED CHARGES
In connection with the merger of Star and Firstar, the combined company
expects to incur pre-tax merger related charges of approximately $325 million.
These are expected to include approximately $95 million in severance, change of
control, relocation and other employee related payments, $79 million in direct
conversion costs, $77 million in charges related to consolidation of systems
and operations, $40 million in occupancy and equipment charges (lease
termination costs, elimination of duplicate facilities and write-off of
equiment) and $34 million in other merger related costs (including legal and
investment banking fees).
In connection with the merger of Star and Trans Financial, the combined
company expects to incur pre-tax merger related charges of approximately $40
million. These are expected to include approximately $9 million in severance,
change of control and relocation payments, $4 million in occupancy and
equipment charges (lease termination costs, elimination of duplicate
facilities and write-off of equipment), $4 million in conversion costs and
contract terminations, a $3 million commitment to establish a Foundation
and $8 million in other merger related costs (including legal and investment
banking fees). Star currently intends to provide up to an additional $12
million in allowance for loan losses as a charge to earnings at the
effective date. This additional loan loss provision is being recorded in
connection with the change in the management of Trans Financial problem
loans.
The merger related charges and the related tax effect have been reflected
in the Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31,
1998, and have not been reflected in the Unaudited Pro Forma Condensed Combined
Income Statements as they are not expected to have a continuing impact on the
operations of the combined company.
NOTE 4 - GREAT FINANCIAL ACQUISITION
The historical balance sheet of Star as of March 31, 1998 includes the
acquisition of Great Financial, which occurred on February 7, 1998 and was
accounted for as a purchase transaction. The $190 million cash portion of the
purchase price represents 30 percent of the purchase price and was funded with
short-term borrowings. The Unaudited Pro Forma Condensed Combined Income
Statements for the three months ended March 31, 1998 and the year ended
December 31, 1997 reflect Great Financial's operating results and the impact
of purchase accounting adjustments as if the transaction occurred on January
1, 1997.
The purchase accounting and pro forma adjustments related to the merger
reflected in the unaudited Pro Forma Condensed Combined Income Statements are
summarized as follows:
17
<PAGE>
Three Months
Ended Year Ended
March 31, 1998 Dec. 31, 1997
-------------- -------------
Interest income -
Amortization of investment
securities $ (194) $(2,333)
Amortization of loans (187) (2,264)
Interest expense:
Amortization of CDs (419) (5,023)
Amortization of long-term debt (31) (372)
Interest expense on short-term
borrowings to fund cash portion of
purchase price 873 10,475
Noninterest income -
Amortization of mortgage
servicing rights (24) (292)
Noninterest expense -
Amortization of identifiable
intangibles and Goodwill 1,262 15,140
Income tax expense on the pro forma adjustments is reflected using a 35% tax
rate.
The following assumptions were used in establishing the purchase
accounting adjustments for Great Financial included in the Unaudited Pro Forma
Condensed Income Statements.
Securities - The securities premium is assumed to be amortized into
interest income on an effective interest method basis over the remaining
estimated maturities of the securities, approximately 9 years.
Loans - The fair value adjustment is being amortized on a straight-line
basis over the estimated remaining maturities of the various loan types,
ranging from 3 to 13 years.
Mortgage servicing rights - The excess of fair value over carrying value
is amortized on an accelerated basis over estimated maturity of the
underlying mortgages.
Intangibles - Identifiable intangibles are amortized on a straight-line
basis over an average of 11 years based on the estimated lives of the deposits
acquired. Goodwill is amortized on a straight-line basis over 25 years.
Certificates of Deposit and Long-term Debt - The fair value adjustments
are amortized on an effective interest method over the remaining maturities
of the deposits and debt.
18
<PAGE>
NOTE 5 MERGER RELATED CHARGES OF GREAT FINANCIAL
Included in Great Financial's results for January 1, 1998 through February
6, 1998, as shown in the Unaudited Pro Forma Condensed Combined Income
Statement for the three months ended March 31, 1998, were the following
merger related charges incurred directly by Great Financial:
(Dollars in thousands)
Severance and benefit payments $ 4,301
Contract termination payments 4,847
Payout of nonqualified stock options 14,244
Investment banking and legal fees 4,235
Other direct merger charges 1,217
--------
Total merger related charges $ 28,844
========
Noninterest expense (and the related tax effect) in the Unaudited Pro
Forma Condensed Combined Income Statement for March 31, 1998 was adjusted to
exclude the above one-time merger charges in the pro forma operating results.
19
<PAGE>
ITEM 7(c) EXHIBIT INDEX:
Exhibit 2 - Agreement and Plan of Reorganization dated as
of June 30, 1998 among Star Banc, Firstar and
Foxtrot (DE) (previously filed as an exhibit to
the registrant's Form 8-K filed on July 2, 1998)
Exhibit 23 - Consent of Independent Public Accountants in
regards to the Financial Statements of Star Banc
and Firstar, which are incorporated by reference
in this filing.
Exhibit 99.1- Firstar Stock Option Agreement dated as of June
30, 1998 between Firstar and Star Banc (previously
filed as an exhibit to the registrant's Form 8-K
filed on July 2, 1998)
Exhibit 99.2- Star Banc Stock Option Agreement dated as of
June 30, 1998 between Star Banc and Firstar.
(previously filed as an exhibit to the
registrant's form 8-K filed on July 2, 1998)
Exhibit 99.3- Press Release of Star Banc and Firstar issued
July 1, 1998 (previously filed as an exhibit to
the registrant's Form 8-K filed on July 2, 1998)
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.
STAR BANC CORPORATION
DATE: July 10, 1998 By: /s/ Jennie P. Carlson
------------------- -----------------------------
Jennie P. Carlson
Sr. Vice President, General
Counsel and Secretary
20
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Firstar Corporation:
We consent to the incorporation by reference of our report dated January 14,
1998, relating to the consolidated balance sheets of Firstar Coporation and
subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1997, which report appears
in the December 31, 1997 annual report on Form 10-K of Firstar Corporation,
in the Current Report on Form 8-K/A of Star Banc Corporation dated July 2,
1998.
/s/ KPMG Peat Marwick LLP
Milwaukee, Wisconsin
July 10, 1998
