FIRSTAR CORPORATION
777 EAST WISCONSIN AVENUE
MILWAUKEE, WI U.S.A. 53202
July 13, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D. C. 20549
Re: Firstar Corporation Prospectus Relating to
Registration Statement No. 033-53781 on Form S-4
Ladies and Gentlemen:
On behalf of Firstar Corporation, a Wisconsin corporation
("Firstar"), pursuant to Regulation S-T, we are transmitting
herewith for filing Firstar's Prospectus relating
to Registration Statement No. 033-53781 on Form
S-4.
This Prospectus has been redlined to show the changes
effected thereby.
For your reference, Firstar received "no review" status from
the staff concerning this Registration Statement and became
effective on July 6, 1994.
It would be appreciated if you would contact either Joan M.
Fagan, Assistant General Counsel, at (414) 765-5618 or the
undersigned at (414) 765-5479 with any comments or questions
regarding the attached.
Very truly yours,
William J. Schulz
First Vice President, Secretary
and Deputy General Counsel
FIRST SOUTHEAST BANKING CORP.
303 Center Street
Lake Geneva, Wisconsin 53147
___________________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 8, 1994
___________________________
To the Shareholders of First Southeast Banking Corp.:
NOTICE IS HEREBY GIVEN that a special meeting
("Special Meeting") of the shareholders of First Southeast
Banking Corp. ("First Southeast"), a Wisconsin corporation,
pursuant to action of the Board of Directors, will be held at
the offices of First Southeast, 303 Center Street, Lake Geneva,
Wisconsin, on August 8, 1994 at 9:00 a.m. local time, for the
purpose of considering and voting upon the following matters:
1. The approval and adoption of an Agreement and
Plan of Reorganization and a Plan of Merger, each dated as
of February 10, 1994, that provide for, among other
things, the merger of First Southeast with and into
Firstar Corporation of Wisconsin, a wholly owned
subsidiary of Firstar Corporation, and for the conversion
of the outstanding shares of First Southeast Common Stock
into the right to receive shares of Firstar Corporation
Common Stock and associated Preferred Stock Purchase
Rights, as described and set forth in the Proxy
Statement-Prospectus accompanying this notice (the
"Merger"); and
2. Such other matters as may properly be brought
before the Special Meeting or any adjournment or
adjournments thereof.
First Southeast shareholders have the statutory right
to assert dissenters' rights under Sections 180.1301 to
180.1331 of the Wisconsin Business Corporation Law. In order
to perfect this right, a First Southeast shareholder must not
vote in favor of the Merger (this may be done by marking the
proxy either to vote against the Merger or to abstain from
voting thereon or by not voting at all) and must take such
other action as is required by such statute, including delivery
of, prior to the vote upon the Merger, written notice of intent
to demand the "fair value" of the shareholder's First Southeast
Common Stock. A copy of Section 180.1301 et seq. of the
Wisconsin Business Corporation Law is attached as Exhibit A to
the Proxy Statement-Prospectus.
The Special Meeting may be postponed or adjourned
from time to time without any notice other than by announcement
at the Special Meeting of any postponements or adjournments
thereof, and any and all business for which notice is hereby
given may be transacted at such postponed or adjourned Special
Meeting.
THE BOARD OF DIRECTORS OF FIRST SOUTHEAST BELIEVES
THE PROPOSED MERGER IS IN THE BEST INTERESTS OF FIRST SOUTHEAST
AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF FIRST SOUTHEAST VOTE "FOR" PROPOSAL NUMBER ONE
(1) ABOVE.
The affirmative vote of the holders of a majority of
the shares of common stock of First Southeast outstanding on
the record date of June 22, 1994, is required to approve the
above proposal. If you are unable to attend the Special
Meeting in person, please complete, date and sign the enclosed
proxy, which is solicited by First Southeast's Board of
Directors, and return it promptly to First Southeast, so that
your shares may be voted in accordance with your wishes. The
giving of such proxy does not affect your right to vote in
person in the event you attend the Special Meeting. You may
revoke the proxy at any time prior to its exercise by later
proxy received by, or by giving written notice to First
Southeast or by attending the Special Meeting and voting in
person.
By Order of the Board of Directors
_________________________________
David A. Straz, Jr., President
June ____, 1994
PROSPECTUS
OF
FIRSTAR CORPORATION
____________________
PROXY STATEMENT
OF
FIRST SOUTHEAST BANKING CORP.
____________________
This Proxy Statement-Prospectus relates to shares of
Common Stock of Firstar Corporation ("Firstar"), a Wisconsin
corporation, to be issued pursuant to an Agreement and Plan of
Reorganization, dated as of February 10, 1994 (the
"Reorganization Agreement"), providing for the merger of First
Southeast Banking Corp. ("First Southeast"), a Wisconsin
corporation, into Firstar Corporation of Wisconsin ("FCW"), a
Wisconsin corporation and a wholly owned subsidiary of
Firstar. This Proxy Statement-Prospectus also serves as a
proxy statement for the special meeting of shareholders of
First Southeast to be held on August 8, 1994, and any
adjournments or postponements thereof (the "Special Meeting").
A description of the proposed merger is included herein.
This Proxy Statement-Prospectus is being furnished to
the shareholders of First Southeast in connection with the
solicitation of proxies by the Board of Directors of First
Southeast for use at the Special Meeting. At the Special
Meeting, holders of First Southeast Common Stock will consider
and vote upon the approval and adoption of the Reorganization
Agreement and a related Plan of Merger dated as of February 10,
1994 by and between First Southeast and FCW and joined in by
Firstar for certain limited purposes (the "Plan of Merger" and,
together with the Reorganization Agreement, the "Merger
Agreements"), which provide for the merger of First Southeast
with and into FCW (the "Merger").
Under the Merger Agreements, each outstanding share
of common stock of First Southeast, $1.00 par value ("First
Southeast Common Stock"), (other than shares held by any
shareholder who properly exercises and preserves his statutory
dissenter's rights) will be converted into the right to receive
16.91844 shares of common stock of Firstar, $1.25 par value,
and associated Preferred Stock Purchase Rights (collectively
referred to herein as "Firstar Common Stock"), subject to
certain adjustments as provided in the Merger Agreements in
connection with changes in Firstar Common Stock.
Firstar Common Stock is traded on the New York Stock
Exchange and the Chicago Stock Exchange, Incorporated. The
composite closing price of Firstar Common Stock on such
exchanges on May 31, 1994 was $32.875.
Firstar has filed a Registration Statement on Form
S-4 pursuant to the provisions of Rule 145 under the Securities
Act of 1933, as amended, covering the shares of Firstar Common
Stock to be issued in connection with the Merger. This Proxy
Statement-Prospectus also constitutes a prospectus of Firstar
filed as part of such Registration Statement. All information
herein with respect to Firstar and FCW has been furnished by
Firstar and all information with respect to First Southeast and
the Banks has been furnished by First Southeast.
This Proxy Statement-Prospectus does not cover any
resale of the securities to be received by shareholders of
First Southeast upon consummation of the Merger and no person
is authorized to make any use of this Proxy
Statement-Prospectus in connection with any such resale.
Copies of this Proxy Statement-Prospectus will be
mailed to shareholders on or about July 8, 1994.
__________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSIONER NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSIONER PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT-PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Proxy Statement-Prospectus is July 6, 1994.
__________________
AVAILABLE INFORMATION
Firstar is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and in accordance therewith, files reports,
proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at
the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and
at the Regional Offices of the Commission at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60621-2511; and 26 Federal Plaza, Room 1228, New York,
New York 10007. Copies of such material may also be obtained
at prescribed rates by writing to the Public Reference Section
of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549. In addition, reports, proxy statements and other
information filed by Firstar with the New York Stock Exchange
and the Chicago Stock Exchange, Incorporated may be inspected
at the offices of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005 and the Chicago Stock Exchange
Incorporated, 440 South LaSalle Street, Chicago, Illinois 60605.
No person is authorized to give any information or
make any representation not contained in this Proxy
Statement-Prospectus and, if given or made, the information or
representation should not be relied upon as having been
authorized by Firstar, FCW or First Southeast. This Proxy
Statement-Prospectus does not constitute an offer to sell or a
solicitation of an offer to purchase the securities offered
hereby, or the solicitation of a proxy, in any jurisdiction to
or from any person to whom it is unlawful to make such offer or
solicitation of an offer or proxy in such jurisdiction.
Neither the delivery of this Proxy Statement-Prospectus nor any
distribution of the securities to which this Proxy
Statement-Prospectus relates shall, under any circumstances,
create any implication that there has been no change in the
affairs of Firstar, FCW or First Southeast since the date of
this Proxy Statement-Prospectus.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES
DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR
DELIVERED HEREWITH. COPIES OF THESE DOCUMENTS (OTHER THAN
EXHIBITS THERETO, UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE INTO SUCH INCORPORATED DOCUMENTS) ARE
AVAILABLE UPON REQUEST WITHOUT CHARGE FROM MR. WILLIAM H.
RISCH, SENIOR VICE PRESIDENT-FINANCE AND TREASURER, FIRSTAR
CORPORATION, 777 EAST WISCONSIN AVENUE, MILWAUKEE, WISCONSIN
53202 (TELEPHONE 414/765-4985). IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
August 1, 1994.
The following documents filed by Firstar with the
Commission are incorporated herein by reference:
(a) Firstar's Annual Report on Form 10-K for the
year ended December 31, 1993;
(b) Firstar's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1994; and
(c) the description of Firstar Common Stock
(including the Preferred Stock Purchase Rights) contained
in Firstar's registration statements filed pursuant to
Section 12 of the Exchange Act and any amendment or report
filed for the purpose of updating such description.
All documents subsequently filed by Firstar pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date hereof and prior to the Closing Date
referred to herein will be deemed to be incorporated by
reference into this Proxy Statement-Prospectus and to be a part
hereof from the date of filing of the documents.
Any statement contained in a document incorporated by
reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained
herein (or in any subsequently filed document which also is
incorporated by reference herein) modifies or supersedes such
statement. Any statement so modified or superseded shall not
be deemed to constitute a part hereof except as so modified or
superseded.
FIRSTAR CORPORATION
AND
FIRST SOUTHEAST BANKING CORP.
PROXY STATEMENT-PROSPECTUS
TABLE OF CONTENTS
Page
SUMMARY ...............................................
Firstar Corporation and Firstar Corporation of
Wisconsin ......................................
First Southeast Banking Corp. ....................
The Proposed Merger ..............................
The Meeting ......................................
Vote Required ....................................
Recommendation of the Board of Directors .........
Dissenters' Rights ...............................
Certain Federal Income Tax Consequences ..........
Accounting Treatment .............................
Date of the Proposed Merger ......................
Terms and Conditions of the Merger;
Regulatory Approval ............................
Management and Operations After the Merger .......
Waivers and Amendments to the Merger Agreements ..
Termination ......................................
Interests of Certain Persons in the Merger .......
Resales of Firstar Common Stock by Affiliates ....
Preferred Stock Purchase Rights ..................
Markets and Dividends ............................
Selected Consolidated Financial Data of Firstar
Corporation ....................................
Selected Consolidated Financial Data of
First Southeast Banking Corp. ..................
Comparative Per Common Share Data ................
Historical and Pro Forma Selected Financial
Contributions ..................................
MEETING INFORMATION ...................................
General ..........................................
Date, Place and Time .............................
Record Date; Vote Required .......................
Voting and Revocation of Proxies .................
Solicitation of Proxies ..........................
THE PROPOSED MERGER ...................................
Background of and Reasons for the Merger .........
First Southeast Board Recommendation .............
Terms ............................................
Voting and Stock Purchase Agreements of
First Southeast's Shareholders .................
Material Contacts Between Firstar and
First Southeast ................................
Conduct of Business Until the Merger .............
Date of the Merger ...............................
Conditions to the Merger .........................
Regulatory Approval ..............................
Termination, Amendment and Waiver of
Merger Agreements ..............................
Management and Operations of First Southeast
After the Merger; Interests of First Southeast
Management in the Merger .......................
Certain Federal Income Tax Consequences ..........
Certain Differences in Rights of Shareholders ....
Accounting Treatment of the Merger ...............
Resale of Firstar Common Stock ...................
Rights of Dissenting Shareholders ................
FIRSTAR CORPORATION ...................................
General ..........................................
Competition ......................................
Supervision ......................................
Other Acquisitions and Transactions ..............
Recent Development ...............................
Incorporation of Certain Information by Reference
FIRST SOUTHEAST BANKING CORP. AND THE BANKS ...........
General ..........................................
Services .........................................
Competition ......................................
Properties .......................................
Regulation .......................................
Management .......................................
Share Ownership ..................................
Markets and Dividends ............................
Management's Discussion and Analysis of
Operations and Financial Condition - Tables ....
Management's Discussion and Analysis of
Operations and Financial Condition .............
OPINIONS ..............................................
EXPERTS ...............................................
SHAREHOLDER PROPOSALS .................................
INDEX TO FIRST SOUTHEAST BANKING CORP. CONSOLIDATED
FINANCIAL STATEMENTS ................................
EXHIBIT
Exhibit A - Section 180.1301 et seq. of the Wisconsin
Business Corporation Law
SUMMARY
The following is a brief summary of certain
information with respect to matters to be considered at the
special meeting (the "Special Meeting") of shareholders of
First Southeast Banking Corp. ("First Southeast"). This
summary includes information presented in connection with the
proposed acquisition by Firstar Corporation ("Firstar") of all
of the outstanding common stock of First Southeast, $1.00 par
value ("First Southeast Common Stock"). This summary is not
intended to be complete and is qualified in its entirety by
reference to the more detailed information contained elsewhere
in this Proxy Statement of First Southeast and Prospectus of
Firstar, including the Exhibit hereto (this "Proxy
Statement-Prospectus"), and the documents incorporated in this
Proxy Statement-Prospectus by reference. Shareholders are
urged to review carefully the entire Proxy Statement-Prospectus.
Firstar Corporation and Firstar Corporation of Wisconsin:
Firstar, a Wisconsin corporation whose
common stock, $1.25 par value, and
associated Preferred Stock Purchase
Rights (collectively referred to herein as
"Firstar Common Stock"), are traded on the
New York Stock Exchange and the Chicago
Stock Exchange, is a multi-bank holding
company organized in 1929. The principal
assets of Firstar are its investments in
Firstar Bank Milwaukee, N.A. and 34 other
banks with offices located in the states of
Wisconsin, Minnesota, Illinois, Iowa and
Arizona. On March 31, 1994, Firstar had
consolidated total assets of $13.9 billion
and stockholders' equity of $1.2 billion.
Firstar's principal executive offices are
located at 777 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202 (telephone:
(414) 765-4321). See "FIRSTAR CORPORATION."
Additional information concerning Firstar
is included in the Firstar documents
incorporated herein by reference. See
"FIRSTAR CORPORATION--Incorporation of
Certain Information by Reference."
Firstar Corporation of Wisconsin ("FCW"), a
Wisconsin corporation and a wholly owned
subsidiary of Firstar, is a multi-bank
holding company. The principal assets of
FCW are its investments in Firstar's 18
banks with offices located in Wisconsin.
FCW's principal executive offices are
located at 777 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202
(telephone: (414) 765-5848).
First Southeast Banking Corp.:
First Southeast, a Wisconsin corporation,
is a bank holding company. On March 31,
1994, First Southeast had consolidated
total assets of $422.3 million and
stockholders' equity of $30.8 million.
First Southeast's principal executive
offices are located at 303 Center Street,
Lake Geneva, Wisconsin 53147 (telephone
(414) 248-9116). First Southeast, together
with bank directors, owns all of the
240,000 issued and outstanding shares of
common stock of First Bank Southeast, N.A.
("First Bank Southeast"), a national bank
which is headquartered in Milwaukee,
Wisconsin, and 81,478 of the 83,000 issued
and outstanding shares of common stock of
First Bank Southeast of Lake Geneva, N.A.
("First Bank Lake Geneva," and, together
with First Bank Southeast, the "Banks"), a
national bank which is headquartered in
Lake Geneva, Wisconsin. See "FIRST
SOUTHEAST BANKING CORP. AND THE BANKS."
The Proposed Merger:
Firstar, First Southeast and FCW have
entered into an Agreement and Plan of
Reorganization dated as of February 10,
1994 (the "Reorganization Agreement") and a
related Plan of Merger dated as of
February 10, 1994 (the "Plan of Merger"
and, together with the Reorganization
Agreement, the "Merger Agreements"),
providing, among other things, for the
merger (the "Merger") of First Southeast
with and into FCW, as a result of which
Firstar will directly own 100% of the stock
of the surviving corporation, FCW, and
indirectly own all of the issued and
outstanding shares of common stock of the
Banks. See "THE PROPOSED MERGER." Subject
to certain limitations and dissenters'
rights provided by law and certain
adjustments set forth in the Merger
Agreements which relate to changes in
Firstar Common Stock, upon consummation of
the Merger each outstanding share of First
Southeast Common Stock will be converted
into the right to receive 16.91844 shares
of common stock of Firstar, $1.25 par
value, and associated Preferred Stock
Purchase Rights (collectively referred to
herein as "Firstar Common Stock," unless
otherwise required by context). Upon the
Merger, the rights of First Southeast
shareholders will be governed by Wisconsin
law and the Restated Articles of
Incorporation and Bylaws of Firstar. See
"THE PROPOSED MERGER--Terms."
The Meeting:
A special meeting of the shareholders of
First Southeast (the "Special Meeting")
will be held at the offices of First
Southeast, 303 Center Street, Lake Geneva,
Wisconsin, on August 8, 1994 at 9:00 a.m.,
local time. The close of business on June 22,
1994 is the record date (the "Record
Date") for determining the holders of
record of First Southeast Common Stock
entitled to notice of and to vote at the
Special Meeting and any postponement or
adjournments thereof. The purpose of the
Special Meeting is to consider and vote
upon a proposal to approve the Merger
Agreements. For additional information
relating to the Special Meeting, see
"MEETING INFORMATION."
Vote Required:
The Wisconsin Business Corporation Law
requires that the Merger Agreements be
approved by the affirmative vote of a
majority of the outstanding shares of
common stock of First Southeast. As of the
Record Date, there were outstanding and
entitled to vote 106,486 shares of First
Southeast Common Stock, of which 105,886
were held by directors and executive
officers of First Southeast. Neither
Firstar nor any of its or FCW's directors
or executive officers own any shares of
First Southeast Common Stock. In order to
induce Firstar to enter into the Merger
Agreements, all the shareholders of First
Southeast (the "Shareholders") have agreed
to vote all of their shares of First
Southeast Common Stock in favor of the
Merger Agreements, pursuant to the terms of
certain Voting and Stock Purchase
Agreements with Firstar (the "Voting
Agreements"). The Shareholders own 100% of
the total outstanding shares of First
Southeast Common Stock on the Record Date;
thus, First Southeast is assured of
approval of the Merger Agreements. The
Voting Agreements also grant Firstar an
option to purchase the Shareholders' First
Southeast Common Stock, subject to certain
conditions. See "MEETING
INFORMATION--Record Date; Vote Required"
and "THE PROPOSED MERGER--Voting and Stock
Purchase Agreements of First Southeast's
Shareholders."
Recommendation of the Board of Directors:
The Board of Directors of First Southeast
recommends that First Southeast
shareholders vote for approval of the
Merger Agreements. The Board believes that
the terms of the Merger Agreements are fair
and that the Merger is in the best interest
of First Southeast and its shareholders.
In making its recommendation, the Board has
not sought the advice of an independent
financial advisor. See "THE PROPOSED
MERGER--Background of and Reasons for the
Merger; First Southeast Board
Recommendation."
Dissenters' Rights:
Under the provisions of Wisconsin law, any
shareholders of First Southeast who assert
dissenters' rights will have a statutory
right to demand payment of the "fair value"
of their First Southeast Common Stock in
cash. To perfect this right, an First
Southeast shareholder must not vote such
shares in favor of the Merger Agreements at
the Special Meeting (this may be done by
marking the proxy either to vote against
the Merger Agreements or to abstain from
voting thereon or by not voting at all) and
must take such other action as is required
by the provisions of Sections 180.1301 to
18.1331 of the Wisconsin Business
Corporation Law, including delivering
written notice of intent to demand the
"fair value" of First Southeast Common
Stock. See "THE PROPOSED MERGER--Rights of
Dissenting Shareholders" and Exhibit A
hereto.
Certain Federal Income Tax Consequences:
It is expected that the Merger will
constitute a tax-free reorganization within
the meaning of Sections 368(a)(1)(A) and
368(a)(2)(D) of the Internal Revenue Code
(the "Code"), and, therefore, that holders
of First Southeast Common Stock who receive
Firstar Common Stock in the Merger will not
recognize gain or loss for federal income
tax purposes as a result of the Merger
(except upon the receipt of cash in lieu of
fractional shares of Firstar Common Stock
or upon the receipt of cash pursuant to
dissenting shareholders' right of
appraisal). Receipt by First Southeast of
an opinion of tax counsel to that effect is
a condition to First Southeast's
obligations under the Merger Agreements.
IT IS RECOMMENDED THAT EACH FIRST SOUTHEAST
SHAREHOLDER CONSULT HIS OR HER OWN TAX
ADVISER CONCERNING THE FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER, AS WELL AS ANY
APPLICABLE STATE, LOCAL OR FOREIGN TAX
CONSEQUENCES, BASED UPON SUCH SHAREHOLDER'S
OWN PARTICULAR FACTS AND CIRCUMSTANCES.
See "THE PROPOSED MERGER--Certain Federal
Income Tax Consequences."
Accounting Treatment:
Firstar anticipates that the Merger will be
accounted for as a pooling of interests.
See "THE PROPOSED MERGER--Accounting
Treatment of the Merger."
Date of the Proposed Merger:
The Merger Agreements provide that the
Merger will be consummated within five
business days of the satisfaction or waiver
of the conditions to the Merger Agreements,
including the receipt of all necessary
approvals of governmental agencies and
authorities and expiration of the statutory
30-day waiting period after approval by the
Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") or on
another mutually agreed upon date. It is
presently anticipated that the Merger will
be consummated in September or October, 1994. See "THE
PROPOSED MERGER--Date of the Merger;
Conditions to the Merger."
Terms and Conditions of the Merger; Regulatory Approval:
The Merger is conditioned upon approval by
the shareholders of First Southeast and the
Federal Reserve Board and upon the
satisfaction of other terms and conditions
of the Merger Agreements, including
treatment of the Merger as a pooling of
interests for accounting purposes. Firstar
filed an application with the Federal Reserve
Board for approval of the Merger under the
Bank Holding Company Act of 1956, as amended
(the "BHCA") on April 27, 1994. Comments on the
application were received by the Federal Reserve
Board, the Board requested additional information,
and the application was technically returned. It
was refiled on June 30, 1994.
Firstar anticipates that the
Federal Reserve Board will act on such
application in August or September, 1994. There can be no
assurance that the Federal Reserve Board
will approve the Merger and, if the Merger
is approved, there can be no assurance
concerning the date of any such approval.
See "THE PROPOSED MERGER--Date of the
Merger; Regulatory Approval; Conditions to
the Merger."
Management and Operations After the Merger:
Following the Merger, the successor to
First Southeast and FCW will be a wholly
owned subsidiary holding company of
Firstar, and the Banks will be controlled
by Firstar. The officers and directors of
FCW prior to the Merger will continue as
officers and directors of the surviving
corporation. David A. Straz, Jr. ("Mr.
Straz"), who is the principal shareholder
of First Southeast, one of its directors,
and its President, CEO and Treasurer, will
be appointed to the Board of Directors of
Firstar's lead bank, Firstar Bank
Milwaukee, N.A. Following the Merger,
Firstar and FCW intend to manage and direct
the operations of the Banks as they manage
and direct their present bank
subsidiaries. Immediately following the
date on which the Merger occurs (the
"Closing Date"), one or more management
representatives of Firstar will be added to
the board of each Bank. Within several
months of the Closing Date, Firstar and FCW
intend to merge First Bank Southeast with
Firstar Bank Milwaukee, N.A., merge First
Bank Lake Geneva with Firstar's subsidiary,
Firstar Bank Lake Geneva, N.A., close
certain branches of the Banks and transfer
one of First Bank Southeast's branches to
Firstar Bank Lake Geneva, N.A. The dates
for the bank-level branch closings, mergers
and purchase and assumption transactions,
which are subject to regulatory approval,
have not been determined at this time. At
the time of the bank-level mergers, the
officers of the Banks will become officers
of the surviving banks and certain Lake
Geneva bank directors may be invited to
join the Board of Directors of the
surviving bank. See "THE PROPOSED MERGER--
Management and Operations of First
Southeast After the Merger; Interests of
First Southeast Management in the Merger."
Waivers and Amendments to the Merger Agreements:
Firstar and First Southeast may amend,
modify or waive certain terms and
conditions of the Merger Agreements.
Any such action taken by First Southeast
following a favorable vote by its
shareholders may be taken only if, in the
opinion of the Board of Directors of First
Southeast, the action will not have a
material adverse effect on the benefits
intended for its shareholders. See "THE
PROPOSED MERGER--Termination, Amendment and
Waiver of Merger Agreements."
Termination:
The Merger Agreements may be terminated and
the Merger may be abandoned at any time
before the Closing Date (i) by mutual
written consent of Firstar and First
Southeast at any time before the Merger
takes place, (ii) by either Firstar or
First Southeast if (a) any condition set
forth in Articles VII, VIII or IX of the
Reorganization Agreement has not been
substantially satisfied or waived in
writing by October 31, 1994, (b) any
warranty or representation made by the
other party in the Merger Agreements is
discovered to have become untrue,
incomplete or misleading in any material
respect, where such change has not been
cured within ten business days of notice,
or (c) the other party commits one or more
material breaches of the Merger Agreements
considering all such breaches in the
aggregate, where such breach has not been
cured within ten business days of notice,
or (iii) by First Southeast if the average
of the daily closing prices of a share of
Firstar Common Stock during a specified ten
trading days before the Closing Date is
less than $27.00. See "THE PROPOSED
MERGER--Termination, Amendment and Waiver
of Merger Agreements."
Interests of Certain Persons in the Merger:
Directors and executive officers of First
Southeast and the Bank have an interest in
the Merger to the extent that it will
affect their stock of First Southeast.
Further, Firstar and FCW currently intend
to retain the current officers of the Bank
after the Merger and have agreed to ask Mr.
Straz, a director and executive officer of
First Southeast, to join the Board of
Firstar's and FCW's subsidiary, Firstar
Bank Milwaukee, N.A. See "THE PROPOSED
MERGER--Management and Operations of First
Southeast after the Merger; Interests of
First Southeast Management in the Merger."
Resales of Firstar Common Stock by Affiliates:
Resales of Firstar Common Stock issued to
"affiliates" of First Southeast have not
been registered under applicable securities
laws in connection with the Merger. Such
shares may only be sold (a) under a
separate registration for distribution
(which Firstar has not agreed to provide),
(b) pursuant to Rule 145 under the
Securities Act of 1933, as amended, or
(c) pursuant to some other exemption from
registration. For Firstar to be able to
account for the Merger as a pooling of
interests, certain additional restrictions
will be placed on affiliates of First
Southeast and Firstar with respect to
dispositions of First Southeast Common
Stock and Firstar Common Stock during the
period beginning 30 days before the Merger
and ending when the results for at least 30
days of post-Merger combined operations
have been published. See "THE PROPOSED
MERGER--Resale of Firstar Common Stock."
Preferred Stock Purchase Rights:
Firstar has adopted a Shareholder Rights
Plan, pursuant to which each share of
Firstar Common Stock, including the Firstar
Common Stock to be issued in the Merger,
entitles its holder to one-half of a right
("Preferred Stock Purchase Right") to
purchase one one-hundredth of a share of
Firstar's Series C Preferred Stock under
certain limited circumstances. The Rights
have certain anti-takeover effects. The
Rights will cause substantial dilution to a
person or group that attempts to acquire
Firstar without conditioning the offer on
redemption of the Rights or on a
substantial number of Rights being
acquired. The Rights should not interfere
with any merger or other business
combination approved by Firstar's Board of
Directors prior to the time that the Rights
have become nonredeemable. See "THE
PROPOSED MERGER--Certain Differences in
Rights of Shareholders."
Markets and Dividends:
There is no established public trading
market for First Southeast stock.
The following table sets forth the closing
price per share of Firstar Common Stock as
reported on the Consolidated Tape System
for NYSE stock on the dates set forth,
which include February 9, 1994, the last
trading day preceding public announcement
of the Merger, and July 6, 1994, as well
as the equivalent per share prices for
First Southeast Common Stock. The
equivalent per share price of First
Southeast Common Stock at each specified
date represents the closing price of a
share of Firstar Common Stock on such date
multiplied by the unadjusted Merger
conversion factor of 16.91844. See "THE
PROPOSED MERGER--Terms."
Equivalent
First
Firstar Southeast
Common Per Share
Stock Price
Market Value Per Share at:
December 31, 1993 $30.75 $520.24
February 9, 1994 $30.75 $520.24
March 31, 1994 $33.00 $558.31
July 6, 1994 $34.50 $583.69
Because the market price of Firstar Common
Stock is subject to fluctuation and the
conversion ratio is fixed, the market value
of the shares of Firstar Common Stock that
holders of First Southeast Common Stock
will receive in the Merger may increase or
decrease prior to the Merger. First
Southeast shareholders are advised to
obtain current market quotations for
Firstar Common Stock.
In 1992, First Southeast paid dividends of
$9.35 per share; in 1993 no dividends were
paid; in 1994 prior to execution of the
Merger Agreements, First Southeast paid
dividends of $9.35 per share. Between
execution of the Merger Agreements and the
Closing Date, First Southeast can pay
aggregate cash dividends in amounts not to
exceed the cash dividends that shareholders
of First Southeast would have received from
Firstar had they owned 1,801,577 shares of
Firstar Common Stock after February 15,
1994. There can be no assurance as to the
amount of future dividends on First
Southeast Common Stock, because the
dividend policy of First Southeast is
subject to the discretion of the Board of
Directors of First Southeast, cash needs
and general business conditions.
SELECTED CONSOLIDATED FINANCIAL DATA OF FIRSTAR
- -----------------------------------------------------------------------------
The following table sets forth in summary form certain consolidated financial
data of Firstar. This summary should be read in conjunction with the
financial review and consolidated financial statements included in the
documents incorporated by reference in this Proxy Statement-Prospectus.
<TABLE>
<CAPTION>
Three Months Ended
March 31 Years Ended December 31
------------------ ------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Summary
(Thousands of dollars)
Net interest revenue $144,015 $139,752 $568,056 $539,152 $480,596 $429,954 $413,102
Provision for loan losses 2,958 6,334 24,567 44,821 50,276 49,161 52,362
-------- -------- -------- -------- -------- -------- --------
Net interest revenue after
loan loss provision 141,057 133,418 543,489 494,331 430,320 380,793 360,740
Other operating revenue 83,113 79,325 342,265 300,767 272,535 248,301 225,521
Other operating expense 144,203 141,739 587,744 557,566 515,536 464,800 429,508
-------- -------- -------- -------- -------- -------- --------
Income before income taxes
& extraordinary item 79,967 71,004 298,010 237,532 187,319 164,294 156,753
Provision for income tax 26,745 20,978 93,716 71,547 52,988 46,837 45,618
-------- -------- -------- -------- -------- -------- --------
Net income $ 53,222 $ 50,026 $204,294 $165,985 $134,331 $117,457 $111,135
======== ======== ======== ======== ======== ======== ========
Per common share:
Net income $ 0.83 $ 0.78 $ 3.15 $ 2.62 $ 2.14 $ 1.82 $ 1.72
Dividends 0.26 0.22 1.00 0.80 .705 .635 .545
Selected Period-End Balances
(Millions of dollars)
Total assets $ 13,908 $ 12,880 $ 13,794 $ 13,169 $ 12,309 $ 12,020 $ 11,163
Loans 9,000 8,107 8,984 8,111 7,545 7,346 6,871
Deposits 10,771 10,518 11,164 10,884 10,063 9,721 8,931
Long-term debt 126 132 126 158 144 185 166
Stockholders' equity 1,190 1,092 1,156 1,048 916 844 790
Selected Financial Ratios
Net income as a %
of average assets 1.62 % 1.61 % 1.59 % 1.36 % 1.16 % 1.06 % 1.07 %
Net income as a % of average
common equity 18.37 19.48 18.61 17.43 15.85 14.83 15.65
Net interest margin % 5.11 5.21 5.21 5.27 5.00 4.76 4.88
Total capital to risk-adjusted
assets 13.57 13.80 13.18 13.20 11.92 11.94 12.09
Nonperforming assets as a % of
period-end loans and other
real estate 0.89 1.14 0.72 1.09 1.43 1.87 1.61
Reserve for loan losses as a %
of period-end loans 1.95 2.12 1.95 2.08 2.00 1.83 1.69
Net charge-offs as a % of
average loans 0.11 0.21 0.25 0.43 0.47 0.48 0.66
</TABLE>
SELECTED CONSOLIDATED FINANCIAL DATA OF FIRST SOUTHEAST
- ------------------------------------------------------------------------------
The following table sets forth in summary form certain consolidated financial
data of First Southeast. This summary should be read in conjunction with
Management's Discussion and Analysis and consolidated financial statements
included in this Proxy Statement-Prospectus.
<TABLE>
<CAPTION>
Three Months Ended
March 31 Years Ended December 31
------------------ ----------------------------
1994 1993 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Income Summary
(Thousands of dollars)
Net interest revenue $ 3,876 $ 3,518 $ 15,505 $ 15,361 $ 14,626
Provision for loan losses - 1,137 4,800 600 600
-------- -------- -------- -------- --------
Net interest revenue after
loan loss provision 3,876 2,381 10,705 14,761 14,026
Other operating revenue 634 743 2,844 4,774 (472)
Other operating expense 3,664 3,316 15,319 14,616 13,722
-------- -------- -------- -------- --------
Income (loss) before income
taxes and cumulative effect of
change in accounting principle 846 (192) (1,770) 4,919 (168)
Income tax expense (benefit) 214 (114) (1,061) 982 (224)
-------- -------- -------- -------- --------
Income (loss) before cumulative
effect of change in accounting
principle 632 (78) (709) 3,937 56
Cumulative effect of change
in accounting principle - 325 325 - -
-------- -------- -------- -------- --------
Net income (loss) $ 632 $ 247 $ (384) $ 3,937 $ 56
======== ======== ======== ======== ========
Per common share:
Net income (loss) before
cumulative effect of change
in accounting principle $ 5.93 $ (0.74) $ (6.65) $ 36.97 $ 0.53
Cumulative effect of change
in accounting principle - 3.05 3.05 - -
Net income (loss) 5.93 2.31 (3.60) 36.97 0.53
Dividends 9.35 - - 9.35 5.53
Selected Period-End Balances
(Thousands of dollars)
Total assets $422,306 $413,517 $423,882 $426,715 $435,339
Loans, net 237,016 242,476 241,201 249,677 287,726
Deposits 374,285 368,367 381,859 381,696 391,634
Long-term debt 6,000 7,500 6,000 9,100 11,000
Stockholders' equity 30,809 30,781 30,250 30,634 29,692
</TABLE>
COMPARATIVE PER COMMON SHARE DATA
- ---------
The following table presents selected comparative unaudited per share
data for Firstar Common Stock and First Southeast Common Stock on a
historical and pro forma combined basis and for First Southeast Common
Stock on a pro forma equivalent basis giving effect to the Merger on a
pooling-of-interests accounting basis.
This information is not necessarily indicative of the results of the
future operations of the combined entity or the actual results that would
have occurred had the Merger been consummated prior to the periods indicated.
<TABLE>
<CAPTION>
Quarter
Ended Years Ended December 31
March 31 -------------------------
1994 1993 1992 1991
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Firstar Corporation - Historical:
Net income $ 0.83 $ 3.15 $ 2.62 $ 2.14
Cash dividend declared 0.26 1.00 0.80 .705
Book value (at period end) 18.51 17.96 15.94 14.17
First Southeast Banking Corp - Historical
Net income $ 5.93 $ (3.60) $ 36.97 $ 0.53
Cash dividend declared 9.35 - 9.35 5.53
Book value (at period end) 289.32 284.08 287.68 260.06
Firstar-First Southeast - Pro Forma Combined:
Net income (1) $ 0.81 $ 3.06 $ 2.61 $ 2.08
Cash dividend declared(2) 0.26 1.00 0.80 .705
Book value (at period end)(3) 18.47 17.93 15.97 14.21
First Southeast Banking Corp. Common Stock -
Equivalent Pro Forma Combined(4):
Net income (1) $ 13.70 $ 51.77 $ 44.16 $ 35.19
Cash dividend declared 4.40 16.92 13.53 11.93
Book value (at period end) 312.48 303.35 270.19 240.41
</TABLE>
(1) The pro forma combined net income per share (based on weighted average
shares outstanding) is based upon the combined historical net income
for Firstar and First Southeast reduced for dividend payments on
Firstar's outstanding Series B Preferred Stock divided by the average
pro forma common shares of the combined entity.
(2) The pro forma combined dividends declared assume no changes in
historical dividends declared per share by Firstar.
(3) The pro forma combined book values per share of Firstar Common Stock
are based upon the historical total common equity for Firstar and First
Southeast divided by total pro forma common shares of the combined
entity assuming conversion of the First Southeast Common Stock as
stated in the Merger Agreements.
(4) The equivalent pro forma combined income, dividends and book value per
share of Firstr Southeast Common Stock represent the pro forma combined
amounts multiplied by the assumed exchange ratio of 16.91844, which
is based on the terms of the Merger Agreements.
HISTORICAL AND PRO FORMA SELECTED FINANCIAL CONTRIBUTIONS
- --
The following table sets forth certain consolidated financial data of
Firstar as of and for the quarter ended March 31, 1994 and the data on
a pro forma combined basis after giving effect to the acquisition of
First Southeast.
<TABLE>
<CAPTION>
First
Firstar Southeast Pro Forma
Historical Historical Combined
----------- ----------- -----------
For the quarter ended March 31, 1994: (thousands of dollars)
<S> <C> <C> <C>
Total revenue
Amount $ 297,762 $ 7,188 $ 304,950
Percentage of total 97.64% 2.36%
Net income
Amount $ 53,222 $ 632 $ 53,854
Percentage of total 98.83% 1.17%
At March 31, 1994:
Total assets
Amount $ 13,908,410 $ 422,306 $ 14,330,716
Percentage of total 97.05% 2.95%
Stockholders' equity
Amount $ 1,190,386 $ 30,809 $ 1,221,195
Percentage of total 97.48% 2.52%
Shares of Common Stock
Amount 64,318,011 1,801,577 66,119,588
Percentage of total 97.28% 2.72%
</TABLE>
MEETING INFORMATION
General
This Proxy Statement of First Southeast and
Prospectus of Firstar is being furnished in connection with the
solicitation by the Board of Directors of First Southeast of
proxies to be voted at the Special Meeting of shareholders of
First Southeast to be held on August 8, 1994, and any
adjournment thereof. The purpose of the Special Meeting and of
the solicitation is (i) to obtain approval of the holders of
First Southeast Common Stock of the Merger of First Southeast
with and into FCW pursuant to the Merger Agreements and
(ii) the transaction of such other business as may properly
come before the meeting or any adjournments thereof. Each copy
of this Proxy Statement-Prospectus mailed to holders of First
Southeast Common Stock is accompanied by a form of proxy for
use at the First Southeast Special Meeting.
The Merger Agreements provide for the acquisition of
First Southeast by Firstar, to be accomplished through the
statutory merger of First Southeast with and into FCW. Each of
the outstanding shares of First Southeast Common Stock, except
shares with respect to which the holders have exercised and
preserved in accordance with law their statutory dissenters'
rights, will be converted into the right to receive 16.91844
shares of Firstar Common Stock. See "THE PROPOSED
MERGER--Terms."
This Proxy Statement-Prospectus is also furnished by
Firstar to First Southeast shareholders as a prospectus in
connection with the issuance by Firstar of shares of Firstar
Common Stock upon consummation of the Merger. This Proxy
Statement-Prospectus, the attached Notice, and the form of
proxy enclosed herewith are first being mailed to shareholders
on or about July 8, 1994.
Date, Place and Time
The First Southeast Special Meeting will be held at
the offices of First Southeast, 303 Center Street, Lake Geneva,
Wisconsin, on August 8, 1994, at 9:00 a.m. (local time).
Record Date; Vote Required
The close of business on June 22, 1994, has been fixed
by the Board of Directors of First Southeast as the Record Date
for the determination of shareholders entitled to notice of and
to vote at the Special Meeting. On that date there were
outstanding and entitled to vote 106,486 shares of First
Southeast Common Stock, of which 105,886 were held by directors
or executive officers of First Southeast. Neither Firstar nor
any of its or FCW's directors or executive officers own any
shares of First Southeast Common Stock. Each outstanding share
of First Southeast stock entitles the record holder thereof to
one vote on all matters to be acted upon at the Special
Meeting. The affirmative vote of a majority of the issued and
outstanding shares of First Southeast Common Stock entitled to
vote is required to approve the Merger Agreements.
In order to induce Firstar to enter into the Merger
Agreements, all the shareholders of First Southeast entered
into the Voting Agreements with Firstar and First Southeast.
Pursuant to the Voting Agreements, all the outstanding shares
of First Southeast Common Stock on the Record Date will be
voted in favor of the Merger Agreements, thereby assuring
approval of the Merger Agreements at the Special Meeting. The
Shareholders have also agreed not to vote their shares in favor
of any acquisition of First Southeast by anyone other than
Firstar or its affiliates.
Voting and Revocation of Proxies
For the reasons described in more detail below under
"THE PROPOSED MERGER--Background of and Reasons for the
Merger," it is the opinion of the Board of Directors of First
Southeast that the Merger is in the best interests of the
holders of First Southeast Common Stock. ACCORDINGLY, THE
BOARD OF DIRECTORS OF FIRST SOUTHEAST UNANIMOUSLY RECOMMENDS
THAT HOLDERS OF FIRST SOUTHEAST COMMON STOCK VOTE "FOR"
APPROVAL OF THE MERGER AGREEMENTS.
Wisconsin law affords dissenters' rights to holders
of First Southeast Common Stock who object to the Merger
Agreements in accordance with statutory procedures. See "THE
PROPOSED MERGER--Rights of Dissenting Shareholders."
All properly executed proxies not revoked will be
voted at the Special Meeting in accordance with the
instructions contained therein. Proxies containing no
instructions will be voted "FOR" approval of the Merger
Agreements. If any other matters are properly brought before
the Special Meeting and submitted to a vote, all proxies will
be voted in accordance with the judgment of the persons voting
the proxies. Any shareholder executing and returning a proxy
may revoke it by later proxy received by, or by giving written
notice to, First Southeast or by attending the Special Meeting
and voting in person. However, the mere presence of a holder
of First Southeast Common Stock at the Special Meeting will not
operate to revoke a proxy previously executed and returned.
Failure to submit a proxy or to vote at the Special Meeting has
the same effect as a negative vote for purposes of approving or
disapproving the Merger Agreements. See "THE PROPOSED MERGER--
Rights of Dissenting Shareholders."
Solicitation of Proxies
The expenses incurred in connection with the
solicitation of proxies for the Special Meeting will be borne
by First Southeast. However, because this Proxy
Statement-Prospectus constitutes part of the Registration
Statement filed by Firstar under the Securities Act of 1933,
Firstar will bear the expense of preparing, filing and
duplicating this Proxy Statement- Prospectus. First Southeast
expects to solicit proxies primarily by mail; however,
directors of First Southeast who will not be specifically
compensated for such services, may also solicit proxies
personally or by telephone or other forms of communication. It
is not anticipated that anyone will be specifically engaged to
solicit proxies.
THE PROPOSED MERGER
The following description of the Merger is qualified
in its entirety by reference to the Merger Agreements, which
are incorporated by reference into this Proxy
Statement-Prospectus.
Background of and Reasons for the Merger
For many years, First Southeast has operated as a
corporation controlled by David A. Straz, Jr., First
Southeast's chief executive officer, who together with two
members of his family owns all of First Southeast's common
stock. During that period, First Southeast took actions which
the Board of Directors believed would be prudent to continue
First Southeast as an independent operation, although Mr. Straz
and First Southeast periodically received indications of
interest from other financial institutions as to their interest
in a possible combination transaction with First Southeast.
Because of Mr. Straz' substantial experience in the banking
field and his majority ownership of First Southeast, Mr. Straz
would generally evaluate the offers to determine whether they
represented an attractive opportunity.
In February 1992, First Southeast entered into a
conditional agreement with an unrelated bank holding company
for the acquisition of First Southeast. Because certain
conditions specified in the agreement were not met, the
agreement was terminated in March 1992. After the termination
of that agreement, Mr. Straz and First Southeast continued to
receive expressions of interest in the acquisition of First
Southeast by other financial institutions, including Firstar.
Although First Southeast held serious discussions with several
of these institutions, only the discussions with Firstar
progressed to a point where Mr. Straz believed that a firm
offer, acceptable to him, would likely be forthcoming.
After the initial discussions with Firstar, Firstar
was invited to conduct more intensive due diligence with
respect to First Southeast. After that due diligence, officers
of Firstar and Mr. Straz, on behalf of First Southeast, engaged
in negotiations regarding the terms of a possible acquisition.
Those discussions resulted in execution and announcement of the
Merger Agreements in February, 1994.
First Southeast Board Recommendation
The First Southeast Board believes that the Merger
represents an opportunity for holders of First Southeast Common
Stock to exchange their shares of First Southeast Common stock
at an attractive exchange ratio for a security with a greater
market liquidity. The Board of Directors also believes that
ownership of Firstar Common Stock presents an opportunity for
future appreciation, and represents a diminution of risk
because of the broader base of Firstar operations.
THEREFORE, THE BOARD OF DIRECTORS OF FIRST SOUTHEAST
HAS UNANIMOUSLY APPROVED THE MERGER AND RECOMMENDS APPROVAL OF
THE MERGER BY SHAREHOLDERS.
In making its recommendation, the First Southeast
Board has not sought the advice of an independent financial
advisor. Because of the controlling interest of Mr. Straz and
his family members, Mr. Straz' experience in the banking
industry, and his satisfaction with the terms and conditions of
the transaction, the Board does not believe that the expense of
such an advisor is warranted.
Terms
The Merger Agreements provide that First Southeast
will be merged with and into FCW, which will be the surviving
corporation.
Upon consummation of the Merger, all the issued and
outstanding shares of First Southeast Common Stock, except any
Dissenting Shares, will be acquired in exchange for Firstar
Common Stock or cash in lieu of any fractional shares of
Firstar Common Stock. Each of the shares of First Southeast
Common Stock that are to be converted into Firstar Common Stock
will be converted into the number of shares of Firstar Common
Stock that is equal to the quotient produced by dividing
(i) the purchase price per share, $558.31, by (ii) $33.00.
Therefore, the Merger exchange ratio will be 16.91844 shares of
Firstar Common Stock for each share of First Southeast Common
Stock.
No fractional shares of Firstar Common Stock will be
issued in the Merger. Each holder of First Southeast Common
Stock who would otherwise be entitled to receive a fractional
share will receive cash in an amount equal to the cash value of
the fraction, which cash value will be based upon the market
value of Firstar Common Stock as described above.
Voting and Stock Purchase Agreements of First Southeast's
Shareholders
The Shareholders entered into the Voting Agreements,
which provide that (a) the Shareholders will vote all their
shares of First Southeast Common Stock in favor of the Merger
at any shareholder meeting or, if their consent is sought by
First Southeast, consent to the Merger; (b) the Shareholders
will not vote in favor of or consent to the acquisition of
First Southeast by any party other than Firstar or its
affiliates prior to the termination of the Voting Agreements;
and (c) the subject shares will generally not be transferred.
Each Voting Agreement also provides that Firstar has
the exclusive right to purchase any or all of the shares of
First Southeast Common Stock owned by each Shareholder for
$558.31 per share, payable in cash, subject to any necessary
regulatory approval, after any events or circumstances that
lead Firstar reasonably to believe that First Southeast is
likely to materially breach the Merger Agreements. The
purchase price per share under the Voting Agreements is equal
to the Dollar Purchase Price Per Share specified in the Merger
Agreements. The Voting Agreements will terminate if the Merger
Agreements terminate.
Material Contacts Among Firstar and First Southeast
In 1990 and 1991 First Southeast and Firstar had
engaged in preliminary merger discussions but had determined
not to proceed at that time.
First Southeast's conditional merger agreement with
an unrelated bank holding company terminated in 1992. In
September 1993, Firstar and First Southeast again commenced
merger discussions; these ultimately resulted in execution of
the Merger Agreement. Since the commencement of these
negotiations, except for the Merger Agreements and the related
agreements entered into between the parties at the same time,
no material contracts or other similar arrangements have been
entered into between Firstar or its affiliates and First
Southeast or its affiliates.
Neither Firstar nor FCW nor any of their respective
directors or executive officers holds directly or indirectly
any shares of First Southeast Common Stock.
Conduct of Business Until the Merger
The Merger Agreements provide that First Southeast
and Firstar will take or refrain from taking certain actions
prior to the Closing Date.
After execution of the Merger Agreements, First
Southeast cannot pay any dividends or make any distributions on
First Southeast Common Stock other than cash dividends in
amounts not to exceed in the aggregate an amount equal to the
cash dividends that the shareholders of First Southeast would
have received from Firstar had they owned, after February 15,
1994, 1,801,577 shares of Firstar Common Stock on the record
dates in such quarters for the determination of Firstar
shareholders entitled to receive dividends. The Merger
Agreements also provide that First Southeast will not permit
the Banks to declare or pay any dividends or make any
distributions on their capital stock, except cash dividends in
an aggregate amount equal to the amount necessary to
(i) service existing indebtedness of First Southeast, (ii) fund
First Southeast's payment of cash dividends as described above,
(iii) pay ordinary and necessary operating expenses of First
Southeast on a basis consistent with prior years, and (iv) pay
expenses expressly contemplated by the Reorganization Agreement.
Under the Merger Agreements, First Southeast cannot
effect any change in its capitalization or that of the Banks
(except in connection with the Bank-level Merger discussed) or
any change in its corporate structure or methods of accounting
or tax reporting. First Southeast has also agreed not to
initiate, solicit or encourage any transactions competing with
the proposed Merger with FCW.
The Merger Agreements also provide that First
Southeast will, and will cause each of the Banks to, conduct
its business in substantially the same manner as conducted
prior to the date of the Merger Agreements and use its best
efforts to maintain and preserve its business organization
intact, retain its present employees and maintain its
relationships with customers. First Southeast will not, nor
will it permit the Banks to, enter into any transactions or
take any other action other than in the ordinary course of
business or as contemplated by the Merger Agreements, except
with the prior written consent of Firstar.
First Southeast and the Banks will cooperate with
Firstar and FCW to effect the bank mergers and the branch
transfer described in "THE PROPOSED MERGER--Management and
Operations of First Southeast after the Merger; Interests of
First Southeast Management in the Merger," contingent on the
Closing. First Southeast, pursuant to the Merger Agreements,
has agreed to withdraw its applications to the Wisconsin
Commissioner of Banking for approval of the Banks' charter
conversions and merger with each other. First Southeast has
agreed to cooperate with Firstar and FCW in effecting the
bank-level mergers and the closings of three bank branches
specified in the Reorganization Agreement, after the Closing.
Prior to the Closing, First Southeast and the Banks
must sell their life insurance policies on Mr. Straz, First
Southeast's investments in common stock of Southern Exchange
Bank and Wisconsin Energy Corp., and the Banks' out-of-state
loan participations. Mr. Straz or entities under his control
will purchase the life insurance policies and stock of Southern
Exchange Bank and may purchase the loan participations; these
assets have a value of approximately $5.5 million in the
aggregate. The stock of Wisconsin Energy Corp. has been sold.
Firstar has agreed to indemnify First Southeast from
certain damages it may incur under plant closing laws.
Firstar, as the sole shareholder of FCW, has approved
the Merger Agreements.
Date of the Merger
Under the BHCA, the Merger requires the prior
approval of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board"). It is anticipated that
the Federal Reserve Board will act on Firstar's application in
August or September, 1994. The Merger cannot take effect before
the 30th calendar day or, absent an extension granted by the Federal
Reserve Board, later than three months following the date of
approval by the Federal Reserve Board. See "THE PROPOSED
MERGER--Conditions to the Merger; Regulatory Approval."
Under the Merger Agreements, the Merger will occur
within five days of satisfaction of all of the conditions to
the Merger, including the expiration of the statutory waiting
period after Federal Reserve Board approval, or on such date as
Firstar and First Southeast may both agree to, and will take
effect upon the date FCW and First Southeast file Articles of
Merger with the Wisconsin Secretary of State. It is
anticipated that the Closing Date will be in September or
October, 1994.
Conditions to the Merger
The Merger Agreements provide that consummation of
the Merger is subject to certain conditions unless waived to
the extent waiver is permitted by applicable law. Such
conditions include the following, which are all the material
conditions:
a. The Merger Agreements must have been approved by the
requisite vote of the holders of a majority of the
issued and outstanding shares of First Southeast
Common Stock and holders of no more than 5% of the
issued and outstanding shares of First Southeast
Common Stock shall have asserted Dissenter's Rights.
See "MEETING INFORMATION--Record Date; Vote Required"
and "THE PROPOSED MERGER--Voting and Stock Purchase
Agreements of First Southeast's Shareholders."
b. The Firstar Common Stock to be issued in the Merger
must have been qualified or exempted under all
applicable state securities laws and there must have
been no stop order issued that suspends the
effectiveness of the Registration Statement of which
this Proxy Statement-Prospectus is a part.
c. The Merger must have been approved by the Federal
Reserve Board. See "THE PROPOSED MERGER--Date of the
Merger; Regulatory Approval."
d. There must not have been any material adverse change
in the financial condition, assets, liabilities,
prospects, results of operation or business of First
Southeast or either Bank from February 10, 1994, to
the Closing Date.
e. Continued accuracy of representations and warranties
by Firstar and First Southeast regarding, among other
things, the organization of the parties, financial
statements, capitalization, pending and threatened
litigation, enforceability of the Merger Agreements,
compliance with law, and tax matters.
f. As of the Closing Date, (a) there must not be any
litigation that was not disclosed prior to execution
of the Merger Agreements, pending or overtly
threatened before any court or other governmental
agency by the federal or any state government seeking
to restrain or prohibit the Merger, and (b) there
must not be any litigation that was not disclosed
prior to the execution of the Merger Agreements,
pending or overtly threatened nor any liability or
claim asserted against First Southeast or either Bank
that might result in a material adverse change in its
financial condition, results of operations or
business prospects.
g. Any review or examination of the financial condition
of First Southeast by Firstar and/or KPMG Peat
Marwick must not have disclosed material breaches of
the Merger Agreements.
h. Firstar must have received confirmation from KPMG
Peat Marwick, its certified public accountants,
approving the accounting treatment of the Merger as a
pooling of interests. See "THE PROPOSED
MERGER--Accounting Treatment of the Merger."
i. Firstar shall have had the opportunity to conduct an
audit of any First Southeast employee benefit plans.
j. As of the Closing Date, the allowance for loan losses
of each of the Banks must not be less than an amount
equal to 2.0% of its gross loans outstanding.
k. Firstar and FCW, on the one hand, and First
Southeast, on the other hand, shall each have
received opinions from Foley & Lardner that the
Merger will be treated as a tax-free reorganization
under the Code. See "THE PROPOSED MERGER--Certain
Federal Income Tax Consequences."
l. It is a condition to Firstar's obligation to close
that the Federal Reserve Bank of Chicago shall have
agreed that a formal agreement and a Memorandum of
Understanding regulating First Southeast shall not
apply to Firstar or FCW after the Closing. Firstar
has requested such an agreement by the Federal
Reserve Bank of Chicago. See "THE PROPOSED
MERGER--Regulatory Approvals."
m. Firstar shall have had an opportunity to conduct
environmental audits of the Banks' real property.
It is anticipated that all of the foregoing
conditions will be met.
In addition, unless waived, each party's obligation
to effect the Merger is subject to performance by the other
party of its obligations under the Merger Agreements and the
receipt of certain certificates from the other party and legal
opinions. See "THE PROPOSED MERGER--Conduct of Business Until
the Merger."
Regulatory Approval
The Merger is subject to prior approval by the
Federal Reserve Board under the BHCA, which requires that the
Federal Reserve Board take into consideration the financial and
managerial resources and future prospects of the respective
institutions and the convenience and needs of the communities
to be served. The BHCA prohibits the Federal Reserve Board
from approving the Merger if it would result in a monopoly or
be in furtherance of any combination or conspiracy to
monopolize or to attempt to monopolize the business of banking
in any part of the United States, or if its effect in any
section of the country may be substantially to lessen
competition or to tend to create a monopoly, or if it would in
any other manner be a restraint of trade, unless the Federal
Reserve Board finds that the anticompetitive effects of the
Merger are clearly outweighed in the public interest by the
probable effect of the transaction in meeting the convenience
and needs of the communities to be served. The Federal Reserve
Board has the authority to deny an application if it concludes
that the combined organization would have an inadequate capital
position.
Under the BHCA, the Merger may not be consummated
until the 30th day following the date of Federal Reserve Board
approval, during which time the United States Department of
Justice may challenge the Merger on antitrust grounds. The
commencement of an antitrust action would stay the
effectiveness of the Federal Reserve Board's approval unless a
court specifically orders otherwise. The BHCA provides for the
publication of notice and public comment on the applications
and authorizes the regulatory agency to permit interested
parties to intervene in the proceedings.
Firstar and FCW submitted an application for filing
with the Federal Reserve Bank of Chicago on April 27, 1994.
Comment on the application have been received by the Federal
Reserve Board, and it has requested additional information.
The application was returned "so that the required information
may be inserted." Firstar refiled the application on June 30,
and expects that it will be accepted in July.
In conjunction with the application for approval of
Merger, Firstar submitted a written request that the Federal
Reserve Bank of Chicago agree that the agreement among the
Reserve Bank, First Southeast and Mr. Straz dated August 14,
1984 (the "Formal Agreement"), and the Memorandum of
Understanding between the Reserve Bank and First Southeast
dated November 6, 1991 (the "MOU"), will not apply to Firstar
or FCW after the Closing. Firstar has had discussions with a
representative of the Reserve Bank who stated that the
requested termination of the Formal Agreement and the MOU is
likely to be granted.
There can be no assurance that the Federal Reserve
Board will approve the Merger, and if the Merger is approved,
there can be no assurance as to the date of such approval.
There can likewise be no assurance that the Department of
Justice will not challenge the Merger or, if such a challenge
is made, as to the result thereof. Finally, there can be no
assurance that the requested formal approval of the Federal
Reserve Bank of Chicago of termination of the Formal Agreement
and the MOU on the Closing Date will be granted.
Termination, Amendment and Waiver of Merger Agreements
Firstar and First Southeast may each waive, as to the
other, performance of any of the obligations and compliance
with any of the covenants or conditions of the Merger
Agreements (other than items (a), (b) and (c) in the
"Conditions to the Merger" section above) and may amend or
modify the Merger Agreements. Any such action by First
Southeast taken following a favorable vote on or consent to the
Merger by its shareholders may be taken only if, in the opinion
of the Board of Directors of First Southeast, the action would
not have a material adverse effect on the benefits intended for
its shareholders under the Merger Agreements.
The Merger Agreements may be terminated and the
Merger abandoned by the mutual written consent of the Board of
Directors of First Southeast and the Board of Directors or
Interstate Banking and Acquisitions Committee of Firstar at any
time prior to the Closing Date. In addition, the Merger may be
abandoned by (a) either First Southeast or Firstar if (i) any
condition set forth in Articles VII, VIII or IX of the
Reorganization Agreement has not been substantially satisfied
or waived in writing by October 31, 1994, (ii) any warranty or
representation made by the other party in the Merger Agreements
is discovered to have become untrue, incomplete or misleading,
where any such breach is likely to have a material adverse
impact on the other party and is not cured within ten business
days of notice, (iii) the other party commits one or more
material breaches of the Merger Agreements considering all such
breaches in the aggregate, where such breach has not been cured
within ten business days of notice, or (b) First Southeast if
the average composite closing prices per share of Firstar
Common Stock on the New York Stock Exchange and the Chicago
Stock Exchange on the ten consecutive trading days immediately
preceding the Closing Date is less than $27.00.
The obligations of each party to keep confidential
information received from the other under the Merger
Agreements, to coordinate the public release of information
about the Merger, and to pay its respective fees and expenses,
survive the termination of the Merger Agreements.
If the proposed Merger does not take place, other
than by reason of a breach by any party to the Merger
Agreements, there will be no liability on the part of First
Southeast or Firstar except that (a) each party will pay its
own fees and expenses incurred in connection with the
preparation and performance of the Merger Agreements, (b) in
connection with the preparation and filing of the Registration
Statement and compliance with state securities laws, Firstar
will bear the cost of preparation, filing and duplication of
the Registration Statement, (c) Firstar will reimburse First
Southeast and the Banks for any out-of-pocket fees and expenses
they incurred at the request and direction of Firstar, as
specified in the Reorganization Agreement, and (d) First
Southeast agrees to reimburse Firstar for the costs of the
environmental audits discussed in "THE PROPOSED
MERGER--Conditions to the Merger." In the event of termination
of the Merger Agreements caused by (a) willful breach of any
agreement or covenant contained therein, (b) any material
misrepresentation or breach of warranty, which was known to be
a misrepresentation or breach of warranty by First Southeast or
Firstar on February 10, 1994, or (c) the failure of any
condition precedent to the consummation of the Merger which has
failed because the non-terminating party did not exercise good
faith and best efforts toward the fulfillment of such
condition; then the terminating party shall be entitled to all
its legal and equitable remedies.
Management and Operations of First Southeast after the Merger;
Interests of First Southeast Management in the Merger
The Merger Agreements provide that, on the Closing
Date, First Southeast will be merged with and into FCW. The
surviving entity will be FCW and the separate corporate
existence of First Southeast will terminate. As a result of
the Merger, the surviving corporation will be wholly owned by
Firstar, and the Banks, which are now owned by First Southeast,
will be controlled by Firstar.
The officers and directors of FCW immediately prior
to the Merger will continue as the officers and directors of
the surviving corporation following the Merger. Following the
Merger, Firstar and FCW will manage and direct the operations
of the Banks as they manage and direct their present bank
subsidiaries. Immediately following the Closing Date, one or
more management representatives of Firstar will be added to the
Boards of the Banks.
Within a few months of the Closing Date, Firstar and
FCW intend to a) merge First Bank Southeast with FCW's
subsidiary, Firstar Bank Milwaukee, N.A., b) merge First Bank
Lake Geneva with FCW's subsidiary, Firstar Bank Lake Geneva,
N.A., c) close three Bank branches (transferring the loans and
deposits to other Firstar branches), and d) transfer one of
First Bank Southeast's former branches to Firstar Bank Lake
Geneva, N.A. Pursuant to the proposed Agreement to Merge
between First Bank Lake Geneva and Firstar Bank Lake Geneva,
N.A., Firstar will offer to purchase all of the outstanding
minority shares of First Bank Lake Geneva for at least $287.27
in cash per share. The dates for the bank-level mergers,
branch closings and purchase and assumption, which are subject
to regulatory approval, have not been determined at this time.
At the time of the bank-level mergers and purchase and
assumption, the officers of the Banks will become officers of
the surviving banks.
Firstar and Firstar Bank Milwaukee, N.A. have agreed,
in a letter to Mr. Straz dated February 10, 1994, to cause him
to be appointed to the Board of Directors of Firstar Bank
Milwaukee as soon as reasonably practicable following the
Closing Date.
It is presently anticipated that there will be no
other changes in management or other principal relationships
for Firstar, FCW, First Southeast or the Banks that will result
from this transaction.
Firstar, when reasonably practicable following the
Closing Date, intends to cause coverage under the Firstar
Corporation Pension Plan and the Firstar Corporation Thrift and
Sharing Plan to be extended to eligible employees of the Bank.
Certain Federal Income Tax Consequences
Firstar and First Southeast expect that the Merger
will be treated as a tax-free reorganization and that for
federal income tax purposes no gain or loss will be recognized
by any First Southeast shareholder upon receipt of Firstar
Common Stock pursuant to the Merger (except upon the receipt of
cash in lieu of fractional shares of Firstar Common Stock).
This discussion of tax consequences of the Merger assumes that
none of the Shareholders will exercise dissenters' rights. The
Internal Revenue Service has not been asked to rule upon the
tax consequences of the Merger and such request will not be
made. Instead, Firstar and First Southeast will rely upon the
opinion of Foley & Lardner, their joint tax counsel, as to certain
federal income tax consequences of the Merger. The opinion of
Foley & Lardner is based entirely upon the Code, regulations
now in effect thereunder, current administrative rulings and
practice, and judicial authority, all of which are subject to
change. Unlike a ruling from the Service, an opinion of
counsel is not binding on the Service and there can be no
assurance, and none is hereby given, that the Service will not
take a position contrary to one or more positions reflected
herein or that the opinion will be upheld by the courts if
challenged by the Service. EACH HOLDER OF FIRST SOUTHEAST
COMMON STOCK IS URGED TO CONSULT HIS OR HER OWN TAX AND
FINANCIAL ADVISORS AS TO THE EFFECT OF SUCH FEDERAL INCOME TAX
CONSEQUENCES ON HIS OR HER OWN PARTICULAR FACTS AND
CIRCUMSTANCES AND ALSO AS TO ANY STATE, LOCAL, FOREIGN OR OTHER
TAX CONSEQUENCES ARISING OUT OF THE MERGER.
Based upon the opinion of Foley & Lardner, which in
turn is based upon various representations and subject to
various assumptions and qualifications, the following federal
income tax consequences to the First Southeast shareholders
will result from the Merger:
(i) Provided that the Merger of First Southeast
with and into FCW qualifies as a statutory merger
under applicable law, the Merger will qualify as a
reorganization within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code, and First
Southeast, Firstar and FCW will each be a party to
the reorganization within the meaning of Section
368(b) of the Code.
(ii) No gain or loss will be recognized by the
holders of First Southeast Common Stock upon the
exchange of First Southeast Common Stock solely for
Firstar Common Stock pursuant to the Merger.
(iii) The First Southeast shareholder's basis in
the Firstar Common Stock received in the exchange
(including any fractional share interest to which he
or she may be entitled) will be the same as the basis
of the First Southeast Common Stock surrendered.
(iv) The holding period of the First Southeast
Common Stock received by a shareholder of First
Southeast pursuant to the Merger will include the
period during which the First Southeast Common Stock
surrendered was held, provided that the First
Southeast Common Stock surrendered was a capital
asset on the date of the Merger.
(v) A First Southeast shareholder receiving
cash in lieu of fractional share interests of First
Southeast Common Stock in the Merger will be treated
as if he or she actually received such fractional
share interests which were subsequently redeemed by
Firstar. The cash a First Southeast shareholder
receives will be treated as having been received as
full payment in exchange for stock redeemed as
provided in Section 302(a) of the Code.
The foregoing is only a general description of
certain anticipated federal income tax consequences of the
Merger without regard to the particular facts and circumstances
of the tax situation of each shareholder of First Southeast.
It does not discuss all of the consequences that may be
relevant to First Southeast shareholders entitled to special
treatment under the Code (such as insurance companies, dealers
in securities, exempt organizations or foreign persons). The
summary set forth above does not purport to be a complete
analysis of all potential tax effects of the transactions
contemplated by the Merger Agreements or the Merger itself. No
information is provided herein with respect to the tax
consequences, if any, of the Merger under state, local or
foreign tax laws.
Certain Differences in Rights of Shareholders
Firstar and First Southeast are both incorporated
under the laws of the State of Wisconsin and, accordingly, the
rights of both groups of shareholders are governed by Wisconsin
law, as well as such corporations' respective Articles of
Incorporation and Bylaws. Upon consummation of the Merger,
First Southeast shareholders will become Firstar shareholders
and their rights will be governed by Wisconsin law and
Firstar's Articles of Incorporation and Bylaws. Although it is
impractical to note all of the differences between statutory
and other rights of Firstar shareholders and First Southeast
shareholders, certain material differences are summarized below.
Takeover Statutes. Wisconsin law regulates a broad
range of "business combinations" between a Wisconsin
corporation with registered stock, such as Firstar, and an
"interested stockholder." Wisconsin law defines a "business
combination" as including a merger or a share exchange, sale of
assets, issuance of stock or rights to purchase stock and
certain related party transactions. An "interested
stockholder" is defined as a person who beneficially owns,
directly or indirectly, 10% of the outstanding voting stock of
a corporation or who is an affiliate or associate of the
corporation and beneficially owned 10% of the voting stock
within the last three years. In certain cases, Wisconsin law
prohibits a corporation from engaging in a business combination
with an interested stockholder for a period of three years
following the date on which the person became an interested
stockholder, unless the board of directors approved the
business combination or the acquisition of the stock prior to
the acquisition date. In such cases, business combinations
after the three-year restricted period are permitted only if
(i) the business combination is approved by a majority of the
outstanding voting stock not owned by the interested
stockholder and (ii) the consideration to be received by
shareholders meets certain requirements of the statute with
respect to form and amount. Under Section 180.1143(1) of the
Wisconsin Business Corporation Law, the restrictions on
business combinations do not apply to companies like First
Southeast which do not have voting stock registered or traded
on a national securities exchange or registered under the
Exchange Act.
Section 180.1150 of the Wisconsin Business
Corporation Law provides that in particular circumstances the
voting of shares of a Wisconsin "issuing public corporation" (a
Wisconsin corporation which has at least 100 Wisconsin resident
shareholders, 500 or more shareholders of record and total
assets exceeding $1 million) held by any person in excess of
20% of the voting power is limited to 10% of the full voting
power of such excess shares. Full voting power may be restored
under Section 180.1150 if a majority of the voting power of
shares represented at a meeting, including those held by the
party seeking restoration, are voted in favor of such
restoration.
Firstar is, and First Southeast is not, an "issuing
public corporation" under Wisconsin law.
In addition, Section 180.1132 of the Wisconsin
Business Corporation Law sets forth certain fair price
provisions which govern mergers and share exchanges with, or
sales of substantially all a Wisconsin issuing public
corporation's assets to, a 10% shareholder, mandating that any
such transaction meet one of two requirements. The first
requirement is that the transaction be approved by 80% of all
shareholders and two-thirds of "disinterested" shareholders,
which generally exclude the 10% shareholder. The second
requirement is the payment of a statutory fair price, which is
intended to insure that shareholders in the second step merger,
share exchange or asset sale receive at least what shareholders
received in the first step.
Further, Section 180.1134 of the Wisconsin Business
Corporation Law requires shareholder approval for certain
transactions in the context of a tender offer or similar action
for in excess of 50% of a Wisconsin issuing public
corporation's stock. Shareholder approval is required for the
acquisition of more than 5% of the corporation's stock at a
price above market value, unless the corporation makes an equal
offer to acquire all shares. Shareholder approval is also
required for the sale or option of assets which amount to at
least 10% of the market value of the corporation, but this
requirement does not apply if the corporation meets certain
minimum outside director standards.
Preferred Stock. The Restated Articles of
Incorporation of Firstar authorize the Board of Directors of
Firstar to issue up to 2,500,000 shares of preferred stock,
$1.00 par value. The Board of Directors may establish the
relative rights and preferences of preferred stock issued in
the future without shareholder action and issue such stock in
series. As of the date hereof, Firstar has reserved 600,000
shares of Series C Preferred Stock for issuance upon exercise
of the Preferred Stock Purchase Rights, as further described
below.
First Southeast has no authorized shares of Preferred
Stock and, accordingly, the rights of holders of First
Southeast Common Stock to receive dividends or payment in the
event of voluntary or involuntary dissolution, liquidation or
winding up of First Southeast are not subject to the prior
satisfaction of the rights of any other shareholders.
Directors. The Board of Directors of Firstar is
divided into three classes as nearly equal in number as
possible, with the directors in each class serving for
staggered three-year terms. At each annual meeting of
Firstar's shareholders, the successors to the class of
directors whose term expires at the time of such meeting are
elected by a majority of the votes cast, assuming a quorum is
present. A director of Firstar may be removed, with or without
cause, only by the affirmative vote of not less than 75% of the
then issued and outstanding shares taken at a special meeting
of shareholders called for that purpose.
All the directors of First Southeast are elected at
the annual meeting of shareholders by the majority of the votes
cast, assuming a quorum is present. A director of First
Southeast may be removed, with or without cause, by the
affirmative vote of the holders of a majority of the then
issued and outstanding stock of First Southeast cast at a
special meeting of shareholders called for that purpose.
Dissenters' Rights. Under Wisconsin law, dissenting
shareholders generally are entitled to receive payment of the
fair value of any of their shares in connection with a merger,
consolidation or sale of substantially all of the assets of a
corporation, other than in the regular course of business.
However, no dissenters' rights are available to any class of
stock listed on a national securities exchange or quoted on
NASDAQ on the applicable record date. Because Firstar Common
Stock is listed on the New York Stock Exchange, Firstar's
shareholders do not have rights of appraisal. Because First
Southeast Common Stock is not listed on a national securities
exchange or quoted on NASDAQ, First Southeast's shareholders
have the statutory appraisal rights described. See "THE
PROPOSED MERGER--Rights of Dissenting Shareholders" and Exhibit
A hereto.
Preferred Stock Purchase Rights. Firstar has adopted
a Shareholder Rights Plan, pursuant to which each share of
Firstar Common Stock entitles its holder to one-half of a
Preferred Stock Purchase Right. Under certain conditions, each
Preferred Stock Purchase Right entitles the holder to purchase
one one-hundredth of a share of Firstar's Series C Preferred
Stock at a price of $85, subject to adjustment. Recipients of
Firstar Common Stock in connection with the Merger will also
receive one Preferred Stock Purchase Right per share of Firstar
Common Stock. The description of the terms of the Preferred
Stock Purchase Rights are set forth in a Rights Agreement dated
as of January 19, 1989 (the "Rights Agreement") between Firstar
and Firstar Trust Company, as Rights Agent. The description of
the Preferred Stock Purchase Rights contained herein is
qualified in its entirety by reference to the Rights
Agreement. The rights will only be exercisable if a person or
group has acquired, or announced an intention to acquire, 20%
or more of the outstanding shares of Firstar Common Stock.
Under certain circumstances, including the existence of a 20%
acquiring party, each holder of a Preferred Stock Purchase
Right, other than the acquiring party, will be entitled to
purchase at the exercise price Firstar Common Stock having a
market value of two times the exercise price. In the event of
the acquisition of Firstar by another company subsequent to a
party acquiring 20% or more of Firstar Common Stock, each
holder of a Preferred Stock Purchase Right is entitled to
receive the acquiring company's common shares having a market
value of two times the exercise price. The rights may be
redeemed at a price of $.01 per right prior to the existence of
a 20% acquiring party, and thereafter, may be exchanged for one
common share per right prior to the existence of a 50%
acquiring party. The Preferred Stock Purchase Rights will
expire on January 19, 1999. The rights do not have voting or
dividend rights, and until they become exercisable, have no
dilutive effect on the earnings of Firstar. Under the rights
plan, the Board of Directors of Firstar may reduce the
thresholds applicable to the rights from 20% to not less than
10%.
First Southeast does not have a shareholder rights
plan.
Accounting Treatment of the Merger
It is anticipated that the acquisition of First
Southeast will be treated as a "pooling of interests" for
accounting purposes. Accordingly, under generally accepted
accounting principles, the assets and liabilities of First
Southeast will be recorded in the financial statements of
Firstar at their carrying values as of the Closing Date. See
"THE PROPOSED MERGER--Conditions to the Merger."
Resale of Firstar Common Stock
The shares of Firstar Common Stock to be issued in
the Merger to holders of First Southeast Common Stock have been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), and thus could be freely traded if there
were any holders of First Southeast Common Stock, who are not
"affiliates" of First Southeast (and are not affiliates of
Firstar at the time of the proposed resale). All three
shareholders of First Southeast are affiliates of First
Southeast. Pursuant to the Merger Agreements, Firstar has
received a written undertaking from each affiliate of First
Southeast to the effect that (a) the affiliate will not sell or
dispose of Firstar Common Stock acquired by such affiliate in
the Merger, except (i) under a separate registration for
distribution (which Firstar has not agreed to provide), or
(ii) pursuant to Rule 145 promulgated under the Securities Act,
or (iii) pursuant to some other exemption from registration;
and (b) the affiliate will not otherwise dispose of the Firstar
Common Stock or otherwise reduce his or her risk relative to
the Firstar Common Stock prior to the publication by Firstar of
an earnings statement covering at least 30 days of combined
operations after the Closing Date.
Rights of Dissenting Shareholders
Under the provisions of Section 180.1301 et seq. of
the Wisconsin Business Corporation Law, a copy of which is
attached to this Proxy Statement-Prospectus as Exhibit A, any
holder of record or beneficial shareholder of First Southeast
Common Stock has the statutory right to dissent from the Merger
and obtain payment of the fair value of his or her shares in
cash.
However, each of the shareholders of First Southeast
has contractually agreed with Firstar to vote in favor of the
Merger. See "THE PROPOSED MERGER--Voting and Stock Purchase
Agreements of First Southeast's Shareholders." Any holder
electing to exercise his or her statutory dissenters' rights in
breach of the Voting Agreements must deliver written notice of
his or her intent to demand payment for his or her shares to
First Southeast and not vote in favor of the Merger
Agreements. Such notice must be delivered to First Southeast
before the vote on the Merger Agreements is taken. A
shareholder may object as to less than all of the shares
registered in his name subject to the provisions of Section
180.1303 of the Wisconsin Business Corporation Law. A PROXY OR
VOTE AGAINST THE MERGER AGREEMENTS WILL NOT, OF ITSELF, BE
REGARDED AS A WRITTEN NOTICE OF INTENT TO DEMAND PAYMENT FOR
PURPOSES OF ASSERTING DISSENTERS' RIGHTS.
Within 10 days of the Merger, FCW will give a written
dissenters' notice to each dissenting shareholder who has made
demand in accordance with Section 180.1321(1), containing a
form for demanding payment, a statement indicating where the
holder must send the payment demand, an explanation of the
extent to which the transfer of shares will be restricted after
the payment demand is received and a date by which the payment
demand must be received by First Southeast. A holder to whom a
dissenters' notice is sent, must demand payment in writing and
certify whether he or she acquired beneficial ownership of the
shares before the date specified in the dissenters' notice.
As soon as the Merger is effected or upon receipt of
a demand for payment, whichever is later, FCW will pay each
holder who has complied with the provisions of Section 180.1301
et seq. the amount that the corporation estimates to be the
fair value of the holder's shares, plus accrued interest. Such
payment will be accompanied by a copy of FCW's latest available
financial statement, a statement of the corporation's estimate
of the fair value of the shares, an explanation of how the
interest was calculated, a statement of the dissenter's right
to demand payment under Section 180.1328 of the Wisconsin
Business Corporation Law if he or she is dissatisfied with the
payment and a copy of Sections 180.1301 to 180.1331 of the
Wisconsin Business Corporation Law.
FCW may elect to withhold the payment required by
Section 180.1325 from a dissenter unless the dissenter was the
beneficial owner of the shares before the date specified in the
dissenter's notice under Section 180.1322(2)(c) as the date of
the first announcement to news media or to shareholders of the
terms of the Merger. To the extent FCW makes such an election,
it must estimate the fair value of the shares, plus accrued
interest and pay that amount to each dissenter who agrees to
accept it in full satisfaction of his or her demand. FCW will
send with its offer a statement of its estimate of the fair
value of the shares, an explanation of how the interest was
calculated and a statement of the dissenter's right to demand
payment under Section 180.1328 if the dissenter is dissatisfied
with the offer.
Any dissenter may notify the corporation of his or
her estimate of the fair value of his or her shares and demand
payment of such estimate less any payment received from the
corporation or reject the corporation's payment or offer of
payment for any one of the following reasons: the dissenter
believes that the amount paid or offered by the corporation is
less than the fair value of his or her shares or that the
accrued interest is incorrectly calculated; the corporation
fails to make the payment within 60 days after the date for
demanding payment set out in the dissenters' notice; or First
Southeast fails to effect the Merger and does not return the
deposited shares within 60 days of the date set for demand of
payment.
In the event any holder of First Southeast Common
Stock fails to comply strictly with the applicable statutory
requirements, he or she will be bound by the terms of the
Merger Agreements and will not be entitled to payment for his
or her shares under such statute. If a shareholder complies
strictly with the applicable statutory requirements to perfect
a dissent, he or she will be entitled to payment under Section
180.1301 et seq. of the Wisconsin Business Corporation Law but
will be subject to contractual liability for breach of his or
her Voting Agreement with Firstar. Any holder of First
Southeast Common Stock who wishes to object to the Merger and
demand payment for his or her shares of First Southeast Common
Stock should consider consulting his or her own legal advisor.
Since an executed proxy relating to First Southeast
Common Stock on which no voting direction is made will be voted
at the Special Meeting in favor of the Merger Agreements, an
objecting shareholder who wishes to have his or her shares of
First Southeast Common Stock represented by proxy at the
Special Meeting but preserve his or her rights of appraisal
must mark his proxy either to vote against the Merger
Agreements or to abstain from voting thereon, make the required
objection and demand, and make the required submission of stock
certificates as described herein.
The foregoing, while a summary of all material
provisions of Section 180.1301 et seq. of the Wisconsin
Business Corporation Law, is qualified in its entirety by
reference to the text of such statutory provision, which is set
forth in Exhibit A hereto.
FIRSTAR CORPORATION
General
Firstar is a registered bank holding company
incorporated in Wisconsin in 1929. Firstar is the largest bank
holding company headquartered in Wisconsin. Firstar's 18 bank
subsidiaries in Wisconsin had total assets of $9.7 billion at
March 31, 1994. Its eleven Iowa banks, four Illinois banks and
one Minnesota bank had total assets of approximately $2.5
billion, $949 million and $1.1 billion, respectively, as of
March 31, 1994. Firstar has one bank in Phoenix, Arizona, with
total assets of $99 million. Firstar's principal subsidiary,
Firstar Bank Milwaukee, N.A., had total assets of $5.7 billion,
which represented 41 percent of Firstar's consolidated assets
at March 31, 1994, and is the largest commercial bank in
Wisconsin.
Firstar provides banking services throughout
Wisconsin and Iowa and in the Chicago, Minneapolis-St. Paul and
Phoenix metropolitan areas. Its Wisconsin bank subsidiaries
operate in 112 locations, with offices in eight of the ten
largest metropolitan population centers of the state, including
45 offices in the Milwaukee metropolitan area. Its Iowa bank
subsidiaries operate in 42 locations; its Illinois bank
subsidiaries in 15 locations; its Minnesota bank subsidiary in
24 locations; and its Arizona bank in three locations; and a
trust subsidiary in Florida in two locations. Firstar's bank
subsidiaries provide a broad range of financial services for
companies based in Wisconsin, Iowa, Illinois and Minnesota,
national business organizations, governmental entities and
individuals. These commercial and consumer banking activities
include accepting demand, time and savings deposits; making
both secured and unsecured business and personal loans; and
issuing and servicing credit cards. The bank subsidiaries also
engage in correspondent banking and provide trust and
investment services to individual and corporate customers.
Firstar Bank Milwaukee, N.A., Firstar Bank Cedar Rapids, N.A.
and Firstar Bank Madison, N.A. also conduct international
banking services consisting of foreign trade financing,
issuance and confirmation of letters of credit, funds
collection and foreign exchange transactions. Nonbank
subsidiaries provide retail brokerage services, trust and
investment services, residential mortgage banking activities,
title insurance, business insurance, consumer and credit
related insurance, and corporate computer and operational
services.
At March 31, 1994, Firstar and its subsidiaries
employed 7,376 full-time and 2,125 part-time employees, of
which approximately 943 full-time employees are represented by
a union under a collective bargaining agreement that expires on
August 31, 1996. Management considers its relations with its
employees to be good.
Competition
Banking and bank-related services is a highly
competitive business. Firstar's subsidiaries compete primarily
in Wisconsin and the Midwestern United States. Firstar and its
subsidiaries have numerous competitors, some of which are
larger and have greater financial resources. Firstar competes
with other commercial banks and financial intermediaries, such
as savings banks, savings and loan associations, credit unions,
mortgage companies, leasing companies and a variety of
financial services and advisory companies located throughout
the country.
Supervision
Firstar's business activities as a bank holding
company are regulated by the Federal Reserve Board under the
Bank Holding Company Act of 1956, as amended, which imposes
various requirements and restrictions on its operations. The
activities of Firstar and those of its banking and nonbanking
subsidiaries are limited to the business of banking and
activities closely related or incidental to banking.
The business of banking is highly regulated, and
there are various requirements and restrictions in the laws of
the United States and the states in which the subsidiary banks
operate, including the requirement to maintain reserves against
deposits and adequate capital to support their operations,
restrictions on the nature and amount of loans which may be
made by the banks, restrictions relating to investment
(including loans to and investments in affiliates), branching
and other activities of the banks.
Firstar's subsidiary banks with a national charter
are supervised and examined by the Comptroller of the
Currency. The subsidiary banks with a state charter are
supervised and examined by their respective state banking
agencies and either by the Federal Reserve if a member bank of
the Federal Reserve or by the FDIC if a nonmember. All of the
Firstar subsidiary banks are also subject to examination by the
Federal Deposit Insurance Corporation.
In recent years Congress has enacted significant
legislation which has substantially changed the federal deposit
insurance system and the regulatory environment in which
depository institutions and their holding companies operate.
The Financial Institutions Reform, Recovery and Enforcement Act
of 1989 ("FIRREA"), the Comprehensive Thrift and Bank Fraud
Prosecution and Taxpayer Recovery Act of 1990 and the Federal
Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") have significantly increased the enforcement powers
of the federal regulatory agencies having supervisory authority
over Firstar and its subsidiaries. Certain parts of such
legislation, most notably those which increase deposit
insurance assessments and authorize further increases to
recapitalize the bank deposit insurance fund, increase the cost
of doing business for depository institutions and their holding
companies. FIRREA also provides that all commonly controlled
FDIC insured depository institutions may be held liable for any
loss incurred by the FDIC resulting from a failure of, or any
assistance given by the FDIC, to any of such commonly
controlled institutions. Federal regulatory agencies have
implemented provisions of FDICIA with respect to taking prompt
corrective action when a depository institution's capital falls
to certain levels. Under the new rules, five capital
categories have been established which range from "critically
undercapitalized" to "well capitalized." Failure of a
depository institution to maintain a capital level within the
top two categories will result in specific actions from the
federal regulatory agencies. These actions could include the
inability to pay dividends, restricting new business activity,
prohibiting bank acquisitions, asset growth limitations and
other restrictions on a case by case basis.
In addition to the impact of regulation, commercial
banks are affected significantly by the actions of the Federal
Reserve Board as it attempts to control the money supply and
credit availability in order to influence the economy. Changes
to such monetary policies have had a significant effect on
operating results of financial institutions in the past and are
expected to have such an effect in the future; however, the
effect of possible future changes in such policies on the
business and operations of Firstar cannot be determined.
The following table sets out the risk-based capital
position of both Firstar Corporation and each of Firstar's bank
subsidiaries as of March 31, 1994. Both Firstar and all of the
subsidiaries exceeded the risk-based capital requirements as of
such date.
Firstar Corporation Bank Subsidiaries
Risk-Based Capital Ratios
March 31, 1994
Tier 1 Total
Capital Capital
Minimum Statutory Requirement 4.00% 8.00%
Firstar Corporation 11.48% 13.57%
Firstar Bank Milwaukee, N.A. 9.96 11.84
Firstar Bank Appleton 9.94 10.99
Firstar Bank Eau Claire, N.A. 10.81 12.07
Firstar Bank Fond du Lac, N.A. 10.68 11.94
Firstar Bank Grantsburg, N.A. 16.15 17.41
Firstar Bank Green Bay 11.34 12.60
Firstar Bank Lake Geneva, N.A. 14.63 15.89
Firstar Bank Madison, N.A. 12.49 13.74
Firstar Bank Manitowoc 12.05 13.31
Firstar Bank Minocqua 16.10 17.37
Firstar Bank Oshkosh, N.A. 9.96 11.21
Firstar Bank Portage 17.55 18.81
Firstar Bank Racine 14.50 15.76
Firstar Bank Rice Lake, N.A. 13.34 14.59
Firstar Bank Sheboygan, N.A. 10.02 11.28
Firstar Bank Wausau, N.A. 15.36 16.64
Firstar Bank Wisconsin Rapids, N.A. 13.69 14.94
Firstar Bank Ames 12.14 13.40
Firstar Bank Burlington, N.A. 12.55 13.81
Firstar Bank Cedar Falls 9.50 10.75
Firstar Bank Cedar Rapids, N.A. 9.93 11.18
Firstar Bank Council Bluffs 10.46 11.71
Firstar Bank Davenport, N.A. 10.67 11.93
Firstar Bank Des Moines, N.A. 11.60 12.85
Firstar Bank Mount Pleasant 11.66 12.91
Firstar Bank Ottumwa 12.78 14.03
Firstar Bank Red Oak, N.A. 12.86 14.05
Firstar Bank Sioux City, N.A. 9.25 10.46
Firstar Bank of Minnesota, N.A. 13.41 14.67
Firstar Bank DuPage 14.94 17.27
Firstar Bank North Shore 14.90 16.20
Firstar Bank Park Forest 12.11 16.15
Firstar Bank West, N.A. 13.41 13.36
Firstar Metropolitan Bank & Trust 17.64 18.87
Other Acquisitions and Transactions
Since the enactment of interstate banking statutes in
1986 by Wisconsin, Minnesota and Illinois, Firstar has actively
acquired banks within that three-state area. Following the
January 1, 1991 effective date of the interstate banking
statute in Iowa, Firstar completed the acquisition of eleven
banks in that state. Firstar has also acquired one bank in
Arizona, primarily to offer trust services to customers in that
state.
Firstar anticipates that it will acquire additional
banks in the Midwest region in the future. Firstar may pay
cash or issue common stock, debt securities, preferred stock or
combinations of the foregoing in connection with any such
acquisitions.
Firstar also will continue to monitor external
markets and may raise additional capital as needed and when
financially attractive by issuing common stock, debt
securities, preferred stock or combinations of the foregoing.
Recent Development
On June 9, 1994 Firstar issued a press release in which it
announced that it expected to take a second quarter 1994 charge against
earnings of approximately $22 million, or $13 million on an after-tax
basis. This would result in a reduction in net income of 20 cents per
share. Firstar earned net income of $53.2 million, or 83 cents per share,
in the first quarter of 1994 and $204.3 million, or $3.15 per share, in
1993.
The expected charge relates to unfunded overdrafts totaling $22
million resulting from a series of check transactions by two commercial
customers, who are affiliated with each other (the "Customers"). The
Customers have filed for bankruptcy and Firstar is unable to determine
what amount, if any, it might recover to reduce the overdrafts.
Firstar also has outstanding commercial loans to the Customers totaling
approximately $3.8 million which it believes are secured by inventory,
equipment, receivables and assets.
On June 27, 1994 a purported class action lawsuit was filed in the
United States District Court in Iowa alleging that Firstar improperly
set off proceeds belonging to the plaintiffs to reduce the amount of
the overdrafts owing to Firstar by the Customers. The plaintiffs
also allege that Firstar interfered with contracts between the
plaintiffs and the Customers and took certain other actions which
damaged the plaintiffs. The lawsuit seeks recovery of actual and
punitive damages of unspecified amounts from Firstar.
Incorporation of Certain Information by Reference
Additional information concerning Firstar, including
certain financial information, information regarding voting
securities of Firstar and principal holders thereof, and
information concerning directors and executive officers of
Firstar, is included in the documents filed by Firstar with the
Commission under the Exchange Act.
FIRST SOUTHEAST BANKING CORP. AND THE BANKS
General
First Southeast Banking Corp. ("First Southeast"), a
Wisconsin corporation, is a bank holding company registered
under the federal Bank Holding Company Act of 1956, as
amended. First Southeast was formed as a Wisconsin corporation
in 1974 to acquire and hold shares of a predecessor bank of
First Bank Southeast of Lake Geneva, N.A. (f/k/a First National
Bank of Lake Geneva) ("First Bank Lake Geneva"). In 1981,
First Southeast acquired the first predecessor bank of First
Bank Southeast, N.A. ("First Bank Southeast"), which was
previously owned by First Southeast's principal shareholder.
First Bank Southeast is headquartered in Milwaukee,
Wisconsin, and operates 13 full-service offices. Of these
offices, five are in Kenosha County, seven in Racine County and
one in Milwaukee County, all in southeastern Wisconsin. The
market area of First Bank Southeast is generally approximated
by counties in which it maintains offices and immediately
surrounding areas. First Bank Southeast is the product of the
mergers of five predecessor banks, which were acquired by First
Bank Southeast or its principal shareholder from 1969 through
1987. First Bank Southeast is wholly-owned by First Southeast,
except for First Bank Southeast directors' qualifying shares
which First Bank Southeast has the right to acquire.
First Bank Lake Geneva is headquartered in Lake
Geneva, Wisconsin, and operates ten full-service offices, of
which six are in Walworth County and four are in western
Kenosha County, all in Wisconsin. The market area for First
Bank Lake Geneva is Walworth County and western Kenosha County,
Wisconsin, and the immediately surrounding areas. First Bank
Lake Geneva is the product of the mergers of four predecessor
banks, which were acquired by First Southeast or its principal
shareholders from 1970 through 1987. First Bank Lake Geneva is
98.2% owned by First Southeast, including 0.7% owned by First
Bank Lake Geneva directors as directors' qualifying shares
which First Southeast has the right to acquire. The remaining
1.8% of First Bank Lake Geneva's capital stock is owned by 45
shareholders.
Services
First Southeast's subsidiary banks provide a wide
range of commercial and consumer banking services within their
markets. The Banks provide various types of loans, including
business loans, long and short term residential and commercial
real estate mortgage loans, and consumer lending. Agricultural
loans are part of First Bank Southeast's portfolio.
The Banks also provide a full range of deposit
products, including checking and savings accounts, certificates
of deposits and money market accounts and instruments. The
Banks also offer other financial-related services, including
safe deposit boxes, investment and brokerage services.
Competition
The subsidiary banks of First Southeast encounter
substantial competition from other commercial banks which
maintain offices in their market areas. Southeastern Wisconsin
markets are highly competitive. Most communities in which the
Banks maintain offices have at least one (and, in most cases,
many) other commercial banks which maintain full-service
offices there.
In addition to competition from commercial banks, the
banks compete with savings and loan associations, savings
banks, credit unions and other providers of financial services
which maintain offices in their communities, and many of which
offer substantially the same services as the subsidiary banks.
In addition, many other providers of financial services, such
as insurance companies, securities brokerage firms and
investment management firms also offer competition for many of
the particular services provided by the banks.
Properties
First Southeast's offices are located at 303 Center
Street, Lake Geneva, Wisconsin 53147, in a facility owned by
First Bank Lake Geneva. First Bank Southeast owns ten of its
facilities and leases the remaining three facilities. First
Bank Lake Geneva owns all ten of its facilities.
Regulation
First Southeast, as a bank holding company, and First
Bank Southeast and First Bank Lake Geneva, as national banks,
are subject to substantial regulation under federal law. Such
regulation and supervision is substantially similar to that to
which Firstar is subject. See "FIRSTAR
CORPORATION--Supervision" above.
Management
Directors
The following table sets forth information regarding
the directors of First Southeast. The directors are elected
annually.
Director
Name Principal Occupation Since
David A. Straz, Jr. Banker; President of First 1977
(1) Southeast; Chairman of First
Bank Southeast and First Bank
Lake Geneva
David A. Straz Vice President of First Southeast 1977
(1) and First Bank Southeast
________________________
(1) David A. Straz, Jr. is the son of David A. Straz
Executive Officers
The following table set forth information as to the
executive officers of First Southeast. The executive officers
are elected annually by First Southeast's Board of Directors.
The table also sets forth information as to certain key
executive officers of First Bank Southeast First Bank Lake
Geneva.
Officer
Name Office(s) Since
David A. Straz, Jr. * President (CEO) and Treasurer; 1969**
Chairman of First Bank Southeast
and First Bank Lake Geneva
David A. Straz* Vice President and Secretary 1977
Thomas E. Daniels President (CEO) of First Bank 1992
Southeast
Robert Fahey President (CEO) of First Bank 1993
Lake Geneva
At December 31, 1993, First Southeast and its
subsidiaries had 285 full-time equivalent employees.
________________________
* Designates executive officers of First Southeast
** Includes service as officer of a predecessor of one of the
Banks
Share Ownership
The following table sets forth information as to the
shares of First Southeast Common Stock which are owned by the
directors of First Southeast and by the directors and executive
officers of First Southeast as a group. There are no other
persons who own more than 5% of First Southeast's common stock.
Name Number of Shares Percent
David A. Straz, Jr. (1) 102,807 96.6%
David A. Straz (2) 3,079 2.9%
Directors and Executive
Officers as a Group (2) 105,886 99.5%
________________________
(1) Mr. Straz, Jr.'s address is 540 Gulf Boulevard, Belleair
Shore, Florida 34635.
(2) Excludes 600 shares beneficially owned by the spouse of
Mr. Straz.
Markets and Dividends
At May 31, 1994, First Southeast had three
shareholders of record. Because of the closely-held nature of
First Southeast securities, there has not been any market with
respect to shares of First Southeast Common Stock. Management
of First Southeast is unaware of any transactions in First
Southeast Common Stock since 1990.
The following table presents the annual dividend
payments per share of First Southeast Common Stock:
Calendar Year Dividends Paid Per Share
1991 $5.53
1992 $9.35
1993 $0.00
1994 (through May 31) $9.35
<TABLE>
First Southeast Banking Corp.
Composition of Loans
<CAPTION>
March 31, December 31,
-1994- -1993- -1992- -1991-
Amount Percent Amount Percent Amount Percent Amount Percent
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial 113,222 46.7% 117,879 47.8% 124,926 49.4% 149,246 51.9%
Real estate 1-4 family first mortgage 75,561 31.2% 77,027 31.2% 86,540 34.2% 99,345 34.5%
Other real estate mortgage 41,183 17.0% 38,310 15.5% 28,713 11.4% 23,198 8.1%
Installment and other 12,476 5.1% 13,360 5.4% 12,671 5.0% 15,937 5.5%
242,442 100.0% 246,576 100.0% 252,850 100.0% 287,726 100.0%
</TABLE>
<TABLE>
First Southeast Banking Corp.
Summary of Loan Loss Experience
<CAPTION>
Three Months
Ended March 31, Year Ended December 31,
1994 1993 1992 1991
<S> <C> <C> <C> <C>
Balance at beginning of period 5,375 3,173 3,246 3,093
Charge-offs:
Commercial 8 1,744 685 394
Real estate 4 813 64 3
Installment 6 53 66 57
Credit card 4 49 40 40
Total charge-offs 22 2,659 855 494
Loan recoveries:
Commercial 63 31 154 3
Real estate 0 0 0 0
Installment 8 22 13 37
Credit card 2 8 15 7
Total recoveries 73 61 182 47
Net loan charge-offs -51 2,598 673 447
Provision for loan losses 0 4,800 600 600
Balance at end of year 5,426 5,375 3,173 3,246
Ratio of net charge-offs to
average loans outstanding
during the period -0.02% 1.04% 0.25% 0.15%
Allowance for loan losses
to period-end loans 2.24% 2.18% 1.25% 1.13%
</TABLE>
<TABLE>
FIRST SOUTHEAST BANKING CORP.
CONDENSED CONSOLIDATED AVERAGE BALANCE SHEETS
NET INTEREST MARGIN AND RATE ANALYSIS
<CAPTION>
Year ended December 31, 1993 Year Ended December 31, 1992
Avg Balance Income/Expense Yield Avg Balance Income/Expense Yield
----------- -------------- ----- ----------- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Federal fund sold and other
short-term investments 16,313,383 211,121 1.29% 14,706,426 250,158 1.70%
Taxable investment securities 73,887,739 4,845,241 6.56% 68,987,596 6,193,365 8.98%
Nontaxable investment securities 38,792,061 1,816,230 4.68% 30,131,117 1,130,478 3.75%
Loans 249,712,858 20,401,249 8.17% 270,288,024 23,919,650 8.85%
___________ __________ _____ ___________ __________ _____
Average Earning Assets 378,706,040 27,273,841 7.20% 384,113,161 31,493,651 8.20%
___________ __________ _____ ___________ __________ _____
Interest Bearing Liabilities:
Time deposits 270,703,355 11,387,557 4.21% 281,683,834 15,336,769 5.44%
Securities sold under repurchase
agreements 657,500 13,821 2.10% 713,000 35,940 5.04%
Long-term debt 7,296,000 367,290 5.03% 10,045,000 759,872 7.56%
___________ __________ _____ ___________ __________ _____
Avg int bearing 278,656,855 11,768,668 4.22% 292,441,834 16,132,581 5.52%
___________ __________ _____ ___________ __________ _____
Net interest/margin 15,505,173 4.09% 15,361,070 4.00%
========== ===== ========== =====
Year ended December 31, 1991
Avg Balance Income/Expense Yield
----------- -------------- -----
Interest Earning Assets:
Federal fund sold and other
short-term investments 5,975,000 269,130 4.50%
Taxable investment securities 69,841,392 6,521,694 9.34%
Nontaxable investment securities 23,942,970 1,209,223 5.05%
Loans 302,058,726 30,399,223 10.06%
___________ __________ _____
Average Earning Assets 401,818,088 38,399,270 9.56%
___________ __________ _____
Interest Bearing Liabilities:
Time deposits 297,679,366 22,041,803 7.40%
Securities sold under repurchase
agreements 5,487,000 396,982 7.23%
Long-term debt 10,000,000 1,334,139 13.34%
___________ __________ _____
Avg int bearing 313,166,366 23,772,924 7.59%
___________ __________ _____
Net interest/margin 14,626,346 3.64%
========== =====
Three Months Three Months
Ended March 31, 1994 Ended March 31, 1993
Avg Balance Income/Expense Yield Avg Balance Income/Expense Yield
----------- -------------- ----- ----------- -------------- -----
Interest Earning Assets:
Federal fund sold and other
short-term investments 12,708,947 74,032 2.36% 10,879,637 69,400 2.59%
Taxable investment securities 80,840,253 1,130,291 5.67% 74,014,496 1,280,906 7.02%
Nontaxable investment securities 39,099,875 407,947 4.23% 37,797,013 424,428 4.55%
Loans 244,508,939 4,942,059 8.20% 249,546,557 4,900,771 7.96%
___________ __________ _____ ___________ __________ _____
Average Earning Assets 377,158,014 6,554,329 7.05% 372,237,702 6,675,505 7.27%
___________ __________ _____ ___________ __________ _____
Interest Bearing Liabilities:
Time deposits 267,294,036 2,573,512 3.90% 273,752,339 3,050,919 4.51%
Securities sold under repurchase
agreements 3,586,500 36,569 4.14% 1,250,000 12,259 3.98%
Long-term debt 6,000,000 68,278 4.62% 8,300,000 94,156 4.60%
___________ __________ _____ ___________ __________ _____
Avg int bearing 276,880,536 2,678,359 3.92% 283,302,339 3,157,334 4.52%
___________ __________ _____ ___________ __________ _____
Net interest/margin 3,875,970 4.17% 3,518,171 3.83%
========== ===== ========== =====
</TABLE>
<TABLE>
First Southeast Banking Corp.
Non-performing Assets
<CAPTION>
March 31 December 31,
-------- -----------------------------
1994 1993 1992 1991
----- ----- ----- ------
<S> <C> <C> <C> <C>
Nonaccrual loans 5,267 4,298 7,682 6,861
Loans past due 90 days or more 41 85 250 2,792
----- ----- ----- ------
Total non-performing loans 5,308 4,383 7,932 9,653
Other real estate owned 1,078 1,142 1,516 811
----- ----- ----- ------
Total non-performing assets 6,386 5,525 9,448 10,464
===== ===== ===== ======
Nonperforming assets as a percentage of:
Loans and other real estate 2.62% 2.23% 3.71% 3.63%
Total assets 1.52% 1.30% 2.21% 2.40%
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
FIRST SOUTHEAST BANKING CORP. AND SUBSIDIARIES
GENERAL
The following discussion and analysis provides
information regarding the historical results of operations and
financial condition of First Southeast Banking Corp. and
subsidiaries (First Southeast) for the three months ended March
31, 1994 and 1993 and for the years ended December 31, 1993,
1992 and 1991. This discussion and analysis should be read in
conjunction with the related consolidated financial statements
and notes thereto and the other financial information included
herein.
THREE MONTHS ENDED MARCH 31, 1994 COMPARED WITH THE THREE
MONTHS ENDED MARCH 31, 1993
Results of Operations
For the three months ended March 31, 1994, net income
increased from the same period in 1993 by $385,000 to
$632,000. Excluding the impact of adopting Statement of
Financial Accounting Standards No. 109 (SFAS 109) in 1993
discussed below, income before the cumulative effect of change
in accounting principle increased $710,000.
Net Interest Revenue
Net interest revenue increased by $358,000 or 10.2%
to $3,876,000 principally from a decrease in rates paid on
deposits from an average of 4.51% to 3.90% and an increase in
net average earning assets of $11,342,000. These changes were
partially offset by a decline in rates earned on average
interest earning assets from 7.27% to 7.05%.
Provision for Loan Losses
The amount charged to provision for loan losses is
based on management's evaluation of the loan portfolio.
Management determines the adequacy of the allowance for loan
losses based on past loan loss experience, current economic
conditions, composition of the loan portfolio and the potential
for future loss. First Southeast provided $1,138,000 in
provisions for loan losses in 1993 while no provisions were
made in 1994. The decrease in such provisions between 1993 and
1994 reflects, to some extent, a decrease in total
nonperforming loans at March 31, 1994 from a year earlier and a
decrease in loans outstanding at March 31, 1994 from
December 31, 1993. Nonperforming loans totalled $5,308,000 at
March 31, 1994 and $9,385,000 at March 31, 1993. The allowance
for loan losses stood at 2.24% of loans as of March 31, 1994 as
compared with 2.18% at December 31, 1993 and 1.25% at March 31,
1993. The increase in the allowance as a percentage of loans
primarily reflects additional provisions made throughout 1993
and net recoveries of $51,000 in the three months ended
March 31, 1994 compared with net charge-offs of $543,000 in the
same period of 1993.
Other Operating Revenue and Expenses
Other operating revenue decreased $109,000, or 14.7%,
to $634,000 from 1993 to 1994. This decline primarily relates
to proceeds of $175,000 from settlement of a lawsuit in 1993,
offset by increases in trust and investment management fees as
a result of increased trust assets under management from which
fees are derived, service charges and higher mortgage banking
revenue in 1994 resulting from gains on loans sold to Freddie
Mac. Other operating expenses increased $348,000 or 10.5% to
$3,664,000. Included in the increase in other operating
expenses were increases in supervisory examination expenses by
$69,000 resulting from an examination in the current period,
$94,000 in processing and other losses, and $58,000 in
occupancy and maintenance costs due principally from
depreciation on additions and increased expenses of snow
removal which occurred in 1994.
Income Taxes
Income tax expense was $214,000 as compared to a
benefit of $114,000 in 1993. The increase is due to the
corresponding increase in income before income taxes and the
cumulative effect of the adoption of SFAS 109.
Financial Condition
Total assets of $422,306,000 at March 31, 1994
decreased slightly from $423,882,000 at December 31, 1993.
During the same period, total deposits fell $7,574,000, or 2%,
to $374,285,000. Most of this decrease occurred primarily
within non interest-bearing accounts.
Capital
Total stockholders' equity decreased from $30,250,000
to $30,809,000 at March 31, 1994 resulting from year to date
income and adoption of SFAS 115, "Accounting for Certain
Investments in Debt and Equity Securities." The increase was
partially offset by the payment of a common stock dividend of
$996,000. SFAS 115 revises the accounting for investments in
debt and equity securities with readily determinable fair
values. SFAS 115 requires that securities available for sale,
as defined in the statement, be reported at fair value, with
unrealized gains or losses excluded from earnings and reported
as a separate component of stockholders' equity. This
accounting differs from First Southeast's policy in 1993 under
which such securities were accounted for at the lower of
amortized cost or market, with unrealized losses, if any,
included in earnings. First Southeast adopted SFAS 115 on
January 1, 1994. Adoption of SFAS 115 resulted in an increase
of stockholders' equity of approximately $1,173,000 after
providing for deferred taxes. During the period, an increase
in the interest rate environment resulted in a corresponding
decrease in the market value of securities available-for-sale.
The total amount of net appreciation on securities
available-for-sale at March 31, 1994 totalled $922,000, net of
deferred taxes.
Capital requirements set by federal regulatory
agencies establish minimum capital levels for First Bank
Southeast N.A. and First Bank Southeast of Lake Geneva, N.A.,
subsidiaries of First Southeast. These guidelines require
minimum Tier I capital of 4%, a Tier I leverage ratio of 3% and
total risk-based capital of 8% of risk-weighted assets. The
subsidiary banks and First Southeast, on a consolidated basis,
are in compliance with all such minimum capital guidelines.
Liquidity
The management of assets and liabilities provides for
the availability of funds to meet loan commitments, deposit
withdrawals and other maturing liabilities. Liquidity to
service these requirements is generated from maturing short and
long term assets, internally generated earnings and from new
deposits and borrowings. Management of First Southeast has
tended to rely on the maturity structure of loans, investments
available for sale, and transactions in federal funds to meet
liquidity needs. First Southeast does not rely on brokered
deposits as a source of liquidity. First Southeast's liquidity
management is not only as of a point in time, but also involves
the future estimated needs of the market area served by First
Southeast. First Southeast has maintained a high liquidity
ratio of rate sensitive assets to rate sensitive liabilities in
recent years. Such ratio has ranged between 128% and 136%
between 1990 and 1994, and at the same time, the ratio of total
loans to total deposits has ranged between 65% and 74%.
Recent Accounting Development
The Financial Accounting Standards Board (FASB)
recently issued SFAS 114, "Accounting by Creditors for
Impairment of a Loan." SFAS 114, which for First Southeast is
effective for 1995 financial reporting, specifies the
methodology to be used by creditors in establishing valuation
allowances for impaired loans. The adoption of SFAS 114 is not
expected to have a material effect on First Southeast.
1993 COMPARED WITH 1992 AND 1991
Results of Operations
For the year ended December 31, 1993, net loss was
($384,000), a decrease of $4,321,000 from 1992. Net income in
1993 included the cumulative effect of change in accounting
principle of adopting SFAS 109 amounting to $325,000.
Excluding this item, income before cumulative effect of change
in accounting principle decreased $4,646,000 to ($709,000) in
1992.
For the year ended December 31, 1992, net income was
$3,937,000, an increase of $3,881,000 from $56,000 a year
earlier.
Net Interest Revenue
Net interest revenue increased by $144,000 or 0.9% to
$15,505,000 in 1993. Although First Southeast experienced
decreases in both interest earning assets and interest bearing
liabilities, the decline in total interest bearing liabilities
was larger between years resulting in reduced interest
expense. This was accompanied by an overall decrease in
interest rates with a more rapid decrease in interest rates on
deposits and borrowed funds than on interest earning assets.
Average interest earning assets fell $5,407,000 to
$378,706,000. Average rates on interest earning assets
declined from 8.20% to 7.20% during the same timeframe.
Interest bearing liabilities decreased $13,785,000 to
$278,657,000. Average rates paid on such balances fell from
5.52% to 4.22%.
Net interest revenue increased by $735,000 or 5% to
$15,361,000 in 1992. This increase was attributable to an
overall decrease in interest rates paid on deposits and
borrowed funds. The average rate paid on such interest bearing
liabilities declined from 7.79% to 5.52% between 1991 and 1992;
the average rate on interest earning assets decreased from
9.56% to 8.20% during the same period.
Provision for Loan Losses
The amount charged to provision for loan losses is
based on management's evaluation of the loan portfolio.
Management determines the adequacy of the allowance for loan
losses based on past loan loss experience, current economic
conditions, composition of the loan portfolio and the potential
for future loss. The provision for loan losses increased from
$600,000 in 1992 to $4,800,051 in 1993 in recognition of
certain identified credit concerns, increased charge-offs,
levels of nonperforming loans above First Southeast's peer
group, and management's decision to increase the allowance for
loan losses to a level which is believed to be in line with
peer group averages.
The provision for loan losses was unchanged at
$600,000 between 1992 and 1991.
Other Operating Revenue And Expenses
Other operating revenue decreased by $1,930,000 to
$2,844,000 in 1993. Such decrease was primarily due to
$2,151,000 in gains recognized on securities in 1992.
Securities gains totalled $49,000 in 1993. Management of First
Southeast opted to sell securities in 1992 to recognize
significant appreciation and utilize certain tax carryforwards
from the previous year. Excluding the impact of these security
transactions, other operating revenue increased 6.5% or
$172,000 to $2,795,000 in 1993. Such increase was attributable
to approximately $71,000 in additional trust and investment
management fees as a result of increased trust assets under
management from which fees are derived, and mortgage banking
revenue of $66,000 including mortgage servicing fees, loan
origination fees and gains on loan sales which collectively
rose due to increased volume in response to low interest rates.
Other operating revenue increased by $5,245,000 to
$4,774,000 in 1992. Such increase was primarily due securities
gains of $2,150,000 recognized in 1992 when losses of
$2,930,000 were realized in 1991. Excluding security
transactions, other operating revenue increased $164,000 or
6.7% to $2,623,000 in 1992. Such increase in other operating
revenue was due to additional mortgage banking revenue
resulting from servicing and loan origination fees and
increased fee levels assessed to deposit customers.
Other operating expenses increased by $703,000 or
4.8% to $15,319,000 in 1993 due to a net increase of $885,000
of expense related to foreclosed properties resulting from
additional writedowns and costs incurred to dispose of selected
properties, offset by a $205,000 decrease in legal and
collection costs consistent with a decrease in nonperforming
loans.
Other operating expenses increased $843,000 or 6.1%
to $14,615,000 in 1992 due to increases in salaries and
employee benefits of $315,000 which relates to normal increases
in compensation and staffing levels; other real estate expense
of $318,000 resulting from increased writedowns and costs to
dispose of selected properties compared to the year earlier,
$259,000 related to legal and collection expenses associated
with the levels of nonperforming loans, and $194,000 attributed
to increased occupancy costs due to higher rental expenses,
real estate taxes and insurance costs. The increase in other
operating expenses was partially offset by a decrease in
miscellaneous expense, which included costs related to a claim
settlement which occurred in 1991.
Income Taxes
SFAS 109, "Accounting for Income Taxes," was issued
by the FASB in February 1992 and required a change from the
deferred method to the asset and liability method of accounting
for income taxes. Under the asset and liability method of SFAS
109, deferred income taxes are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under
SFAS 109, the effect on deferred taxes of a change in tax rates
is recognized in income in the period that includes the
enactment date. First Southeast adopted SFAS 109 in 1993
without restating prior years' financial statements. The
adoption of SFAS 109 resulted in the recognition of a reduction
in 1993 net loss by $325,000, as the cumulative effect of the
change in accounting.
Financial Condition
At December 31, 1993, total assets of $423,882,000
declined slightly from $426,715,000 a year earlier. During
1993, total loans decreased $6,275,000, or 2.5%, which was
offset by increases in investment securities. Total deposits
remained substantially unchanged from a year earlier. The
balance of the long-term debt decreased $3,100,000 between 1992
and 1993 to $6,000,000 as a result of principal paydowns.
Capital
Total stockholders' equity decreased $384,000 to
$30,250,000 from 1992 to 1993 as a result of First Southeast's
net loss. Stockholders' equity increased $2,942,000 from 1991
to 1992, primarily to a retention of earnings, after payment of
common stock dividends.
OPINIONS
Certain legal matters in connection with the Merger
will be passed upon for First Southeast by Quarles & Brady, 411
East Wisconsin Avenue, Milwaukee, Wisconsin 53202, and for
Firstar by Howard H. Hopwood III, Esq., Senior Vice President
and General Counsel of Firstar. Mr. Hopwood is a full-time
employee of Firstar and at March 31, 1994, directly or
beneficially owned approximately 20,049 shares of Firstar
Common Stock. He also holds 34,800 options to acquire Firstar
Common Stock under Firstar's 1988 Incentive Stock Plan.
EXPERTS
The consolidated financial statements of Firstar and
subsidiaries as of December 31, 1993 and 1992, and for each of
the years in the three- year period ended December 31, 1993,
incorporated by reference herein and elsewhere in the
registration statement have been incorporated by reference
herein and in the registration statement in reliance upon the
report of KPMG Peat Marwick, independent certified public
accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
The consolidated financial statements of First
Southeast as of and for the year ended December 31, 1993,
included herein and elsewhere in the registration statement
have been included herein and in the registration statement in
reliance upon the report of KPMG Peat Marwick, independent
certified public accountants, appearing elsewhere herein, and
upon the authority of said firm as experts in accounting and
auditing.
The consolidated financial statements of First
Southeast as of December 31, 1992, and for each of the years in
the two-year period ended December 31, 1992, included herein
and elsewhere in the registration statement have been included
herein and in the registration statement in reliance upon the
report of James M. Harmon & Co., Ltd., independent certified
public accountants, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing.
SHAREHOLDER PROPOSALS
If the Merger Agreements are approved, shareholders
of First Southeast will become shareholders of Firstar on the
Closing Date. Firstar welcomes comments or suggestions from
its shareholders. Firstar shareholders may submit proposals
for formal consideration at the 1995 annual meeting to Firstar
at the principal executive offices of Firstar, 777 East
Wisconsin Avenue, Milwaukee, Wisconsin 53202, prior to the
close of business on November 29, 1994. Firstar's Bylaws
establish advance notice procedures as to (1) business to be
brought before an annual meeting of shareholders other than by
or at the direction of the Board of Directors, (2) the
nomination, other than by or at the direction of the Board of
Directors, of candidates for election as directors and (3) the
request to call a special meeting of the shareholders. Any
shareholder who wishes to take such action should obtain a copy
of these Bylaws and may do so by written request addressed to
the Secretary of Firstar at the principal executive offices of
Firstar.
INDEX TO FIRST SOUTHEAST BANKING CORP.
CONSOLIDATED FINANCIAL STATEMENTS
Audited Consolidated Financial Statements:
KPMG Peat Marwick Independent Auditor's Report ......... F-1
James M. Harmon & Co., Ltd. Independent
Auditor's Report .................................... F-2
Consolidated Balance Sheets as of December 31,
1993 and 1992 ....................................... F-3
Consolidated Statements of Income for Each of the
Three Years in the Period Ended December 31, 1993 ... F-4
Consolidated Statements of Changes in Stockholders'
Equity for Each of the Three Years in the
Period Ended December 31, 1993 ...................... F-5
Consolidated Statements of Cash Flows for Each of the
Three Years in the Period Ended December 31, 1993 ... F-7
Notes to Consolidated Financial Statements ............. F-9
Unaudited Interim Financial Statements
Condensed Consolidated Balance Sheet ................ F-30
Condensed Consolidated Statements of Operations ..... F-31
Consolidated Statements of Cash Flows ............... F-32
Notes to Condensed Consolidated Financial Statements. F-33
Independent Auditors' Report
Board of Directors
First Southeast Banking Corp.:
We have audited the accompanying consolidated balance sheet of First Southeast
Banking Corp. and subsidiaries (Corporation) as of December 31, 1993 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year then ended. These consolidated financial statements are
the responsibility of the Corporation's management. Our responsibility
is to express an opinion on these consolidated financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of First Southeast Banking Corp. and subsidiaries at December 31, 1993
and the results of their operations and their cash flows
for the year ended December 31,1993, in conformity with generally accepted
accounting principles.
As discussed in note 8 to the consolidated financial statements, the
Corporation adopted the provisions of Statement of Financial Accounting
Standard 109 Accounting for Income Taxes in 1993.
February 4, 1994
INDEPENDENT AUDITORS' REPORT
March 8, 1993
To the Board of Directors
First Southeast Banking Corp. and subsidiaries
We have audited the accompanying consolidated balance sheet of First
Southeast Banking Corp. and subsidiaries (Corporation) as of December 31,
1992, and the related consolidated statements of operations, stockholder's
equity, and cash flows for each of the years in the two-year period ended
December 31, 1992. These consolidated financial statements are the
responsibility of the Corporation's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of First Southeast Banking Corp. and subsidiaries at December 31,
1992, and the results of their operations and their cash flows for each of
the years in the two-year period ended December 31, 1992 in conformity with
generally accepted accounting principles.
JAMES M. HARMON & CO., LTD.
Certified Public Accountants
/s/ James M. Harmon, CPA
James M. Harmon, CPA
<TABLE>
FIRST SOUTHEAST BANKING CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1993 and 1992
<CAPTION>
Assets 1993 1992
<S> <C> <C>
Cash and due from banks $ 27,414,914 29,282,632
Federal funds sold 10,100,000 10,150,000
Other short-term investments 5,063,914 7,312,851
Securities held for sale
(market value of $70,719,000
in 1993) (note 2) 68,619,058 -
Investment securities (market value
of $50,069,850 in 1993 and
$109,841,850 in 1992)
(note 2) 49,282,903 107,457,637
Loans (note 3) 246,575,508 252,850,208
Allowance for loan losses (note 4) 5,374,578 3,173,125
Loans, net 241,200,930 249,677,083
Bank premises and equipment,
net (note 5) 12,148,704 11,027,704
Foreclosed properties 1,142,427 1,516,031
Goodwill, net of amortization of
$2,288,542 and $2,007,850 2,083,996 2,364,688
Accrued interest receivable and
other assets (note 8) 6,824,836 7,925,947
Total assets $ 423,881,682 426,714,573
Liabilities and Stockholders' Equity
Deposits:
Demand $ 114,986,821 107,161,280
Time (note 6) 266,872,021 274,534,688
Total deposits 381,858,842 381,695,968
Securities sold under repurchase
agreements (note 2) 985,000 330,000
Long-term debt (note 7) 6,000,000 9,100,000
Other liabilities 4,474,602 4,555,536
Total liabilities 393,318,444 395,681,504
Minority interest 312,832 399,126
Stockholders' equity (notes 9 and 11):
Common stock, $1 par value;
200,000 shares authorized;
119,633 shares issued 119,633 119,633
Additional paid-in capital 12,613,397 12,613,397
Retained earnings 19,927,652 20,311,189
Treasury stock
13,147 shares at cost (2,410,276) (2,410,276)
Total stockholders' equity 30,250,406 30,633,943
Commitments and contingent
liabilities (notes 5, 13, 14,
15 and 16)
Total liabilities and stockholders'
equity $ 423,881,682 426,714,573
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
FIRST SOUTHEAST BANKING CORP.
AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 1993, 1992 and 1991
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Interest revenue:
Loans $ 20,401,249 23,919,650 30,399,223
Securities:
Taxable 4,845,241 6,193,365 6,521,694
Tax-exempt 1,816,230 1,130,478 1,209,223
Federal funds sold and other short-term
investments 211,121 250,158 269,130
Total interest revenue 27,273,841 31,493,651 38,399,270
Interest expense:
Deposits (note 6) 11,387,557 15,336,769 22,041,803
Securities sold under repurchase agreements 13,821 35,940 396,982
Long-term debt 367,290 759,872 1,334,139
Total interest expense 11,768,668 16,132,581 23,772,924
Net interest revenue 15,505,173 15,361,070 14,626,346
Provision for loan losses (note 4) 4,800,051 600,000 600,000
Net interest revenue after provision for loan
losses 10,705,122 14,761,070 14,026,346
Other operating revenue:
Service charges on deposit accounts 1,949,507 1,919,771 1,894,502
Securities gains (losses) 49,335 2,150,779 (2,930,256)
Trust and investment management fees 249,000 178,000 163,000
Mortgage banking revenue 166,365 100,684 51,812
Other 429,870 424,554 349,253
Total other operating revenue 2,844,077 4,773,788 (471,689)
Other operating expenses:
Salaries 5,840,042 5,671,046 5,380,721
Foreclosed properties, net 1,589,787 705,085 387,535
Net occupancy expense 1,452,843 1,422,425 1,584,870
Employee benefits 1,112,509 1,254,128 1,229,291
Legal and professional fees 1,070,602 1,042,589 1,028,712
FDIC insurance expense 895,071 865,950 830,915
Equipment expense 503,423 512,092 499,280
Other 2,854,459 3,142,243 2,780,887
Total other operating expense 15,318,736 14,615,558 13,722,211
Income (loss) before income taxes and cumulative
effect of change in accounting principle(1,769,537) 4,919,300 (167,554)
Income tax expense (benefit) (note 8) (1,061,000) 982,000 (224,000)
Income (loss) before cumulative effect of
change in accounting principle (708,537) 3,937,300 56,446
Cumulative effect on prior years of adoption
of Statement of Financial Accounting Standard
No. 109 325,000 - -
Net income (loss) $ (383,537) 3,937,300 56,446
Income (loss) per common share:
Income (loss) before cumulative effect
of change in accounting principle (6.65) 36.97 .53
Cumulative effect on prior years of adoption
of Statement of Financial Accounting
Standard No. 109 3.05 - -
Net income (loss) $ (3.60) 36.97 .53
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
FIRST SOUTHEAST BANKING CORP.
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Year ended December 31, 1993, 1992 and 1991
<CAPTION>
Allowance for
Additional net unrealized
Common paid-in Retained Treasury loss on marketable
stock capital earnings stock equity securities Total
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1990 $ 119,633 12,613,397 17,901,955 (2,180,981) (1,384,025) 27,069,979
Net income - - 56,446 - - 56,446
Dividends declared - - (588,868) - - (588,868)
Purchase of treasury stock - - - (229,295) - (229,295)
Change in net unrealized loss on
marketable equity securities - - - - 1,384,025 1,384,025
Balance at December 31, 1991 119,633 12,613,397 17,369,533 (2,410,276) - 27,692,287
Net income - - 3,937,300 - - 3,937,300
Dividends declared - - (995,644) - - (995,644)
Balance at December 31, 1992 119,633 12,613,397 20,311,189 (2,410,276) - 30,633,943
Net loss - - (383,537) - - (383,537)
Balance at December 31, 1993 $ 119,633 12,613,397 19,927,652 (2,410,276) - 30,250,406
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
FIRST SOUTHEAST BANKING CORP.AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Year ended December 31, 1993, 1992 and 1991
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (383,537) 3,937,300 56,446
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 4,800,051 600,000 600,000
Depreciation, amortization, and
accretion, net 1,444,306 686,021 680,000
Amortization of premiums on
investment securities, net 370,977 255,560 (32,850)
Securities (gains) losses (49,335) (2,150,779) 2,930,256
Deferred income taxes (1,353,000) (106,000) 16,000
Cumulative effect of change in
accounting principle (325,000) - -
Loss on bank premises and
foreclosed properties 1,061,852 220,216 83,207
Net increase in loans held for sale (277,200) (156,600) -
Decrease in minority interest 86,294 132,163 6,997
Decrease (increase) in accrued interest
receivable and other assets 2,779,109 (3,532,090) (1,236,003)
Increase (decrease) in other liabilities (80,934) 638,742 (5,529,031)
Net cash provided by (used in) operating
activities 8,073,583 524,533 (2,424,978)
Cash flows from investing activities:
Proceeds from sale of investments 2,713,661 64,215,582 21,479,339
Proceeds from maturity of investments 31,494,396 25,185,294 28,708,484
Purchase of investment securities (45,174,692) (100,227,707) (52,744,249)
Decrease in loans 1,702,653 38,386,786 25,943,404
Proceeds from sales of premises and equipment 30,466 367,620 11,266
Purchases of premises and equipment (2,370,352) (1,120,049) (351,726)
Proceeds from disposition of foreclosed
properties 1,645,756 803,574 3,966,230
Net cash provided by (used in) investing
activities (9,958,112) 27,611,100 27,012,748
</TABLE>
<TABLE>
FIRST SOUTHEAST BANKING CORP.AND SUBSIDIARIES
Consolidated Statement of Cash Flows, Continued
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in deposits $ 162,874 (9,937,766) (11,384,882)
Net increase (decrease) in securities sold
under repurchase agreements and
federal funds purchased 655,000 (766,000) (8,782,000)
Increase (decrease) of borrowings (3,100,000) (1,900,000) 2,000,000
Cash dividends paid - (995,644) (588,868)
Purchase of treasury stock - - (229,295)
Net cash used in financing activities (2,282,126) (13,599,410) (18,985,045)
Net increase (decrease) in cash and cash
equivalents (4,166,655) 14,536,223 5,602,725
Cash and cash equivalents:
Beginning of year 46,745,483 32,209,260 26,606,535
End of year $ 42,578,828 46,745,483 32,209,260
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 11,932,563 16,132,581 23,772,924
Income taxes 584,256 151,493 488,730
Supplemental schedule of noncash investing and
financing activities not described in the notes
to the consolidated financial statements:
Loans receivable satisfied through
foreclosure or acquisition of deeds
in lieu of foreclosure $ 2,428,000 1,023,000 6,314,000
Financing of sales of certain foreclosed
properties 1,015,000 427,000 2,639,000
See accompanying notes to consolidated financial statements.
</TABLE>
FIRST SOUTHEAST BANKING CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1993 and 1992
(1) Summary of Significant Accounting Policies
First Southeast Banking Corp. (Corporation) provides banking services to
individual and corporate customers through its wholly-owned subsidiary,
First Bank Southeast, National Association, and its 97% owned subsidiary,
First Bank Southeast of Lake Geneva, National Association (collectively
"Banks"). Minority interest in income (loss) of subsidiaries is included
other operating expense and was not material to any year presented.
The Corporation and the Banks are subject to the regulations of certain
federal and state agencies and undergoes periodic examinations by those
regulatory authorities. The accounting policies and principles followed
by the Corporation and the Banks which materially affect the determination
of financial position, results of operations and cash flows are summarized
below:
(a) Principles of Consolidation and Presentation
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles, and general practice within the
banking industry. All significant intercompany balances and transactions have
been eliminated in consolidation.
(b) Investment Securities
Securities include those held-for-sale and those held for investment.
Those classified as securities held-for-sale are carried at the lower of
amortized cost or market, determined on an aggregate basis. Investment
securities are those which management has the ability and intent to hold
to maturity, and are carried at amortized cost. Cost has been adjusted
for amortization of premiums and accretion of discounts using the
straight-line method. Investment securities would be written-down to market
value in the event that an impairment of value that is other than temporary
should become evident. Gains and losses on sales of securities are computed
on the basis of specific identification of securities sold.
(c) Loans
Loans are carried at the principal amounts outstanding. Unearned interest on
discounted loans is recognized as income using the sum-of-the-months' digits
method. Interest income is accrued on all non-discounted loans by applying the
contractual interest rate on to the amount outstanding, except where serious
doubt exists as to the collectibility of the loan, in which case the accrual
of interest ceases. Loans origination and commitment fees and certain direct
loan origination costs are deferred and the net amount amortized over the
contractual life of the loan as an adjustment of the related loans' yields.
Mortgage loans held for sale are valued at the lower of aggregate cost or
market. The market value of loans held for sale is determined by the price of
actual commitments to sell in the secondary market.
(d) Allowance for Loan Losses
A material estimate that is particularly susceptible to significant change in
the near term relates to the determination of the allowance for loan losses.
In connection with the determination of the allowance for loan losses,
management obtains independent appraisals for significant properties held as
collateral for loans.The allowance of loan losses is established by charges to
the provision for loan losses. Loan losses are recognized through charges to
the allowance. Subsequent recoveries are added to the reserve. The allowance
for loan losses is maintained at a level adequate to provide for potential
loan losses through charges to operating expense. The allowance is based
upon past loan loss experience and other factors which, in management's
judgment, deserve current recognition in estimating loan losses. Such other
factors considered by management include growth and composition of the loan
portfolio, the relationship of the allowance for loan losses to outstanding
loans and economic conditions. Management believes that the allowance for
loan losses is adequate. While management uses available information to
recognize losses on loans, future additions to the allowance may be necessary
based on changes in economic conditions. In addition, various regulatory
agencies, as an integral part of their examination process, periodically review
the allowance for losses on loans. Such agencies may require the recognition
of additions to the allowance based on their judgments about information
available to them at the time of their examination.
(e) Premises and Equipment
Premises and equipment are carried at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the related assets.
(f) Foreclosed Properties
Foreclosed properties represent property acquired through foreclosure or
acquisition of deed in lieu of foreclosure on loans for which the borrowers
have defaulted as to the payment of principal and interest. Foreclosed
properties are carried at the lower of the carrying value of the related loan
or fair value less the estimated costs to sell the property. Initial valuation
adjustments, if any, are charged to the allowance for loan losses. Subsequent
revaluations of properties which indicate reduced value are charged to expense.
Revenues and expenditures related to holding and operating foreclosed properties
are included in other operating expenses.
(g) Goodwill
Goodwill is amortized over fifteen years using the straight-line method.
(h) Income Taxes
Effective January 1, 1993, the Corporation adopted Statement of Financial
Accounting Standards No. 109 (Statement 109), Accounting for Income Taxes.
Statement 109 requires a change from the deferred method of accounting for
income taxes to the asset and liability method. Under the asset and liability
method, deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates in effect for the year in which those temporary differences
are expected to be recovered or settled. Under Statement 109, the effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. The Corporation has
reported the cumulative effect of the change in the method of accounting for
income taxes in the 1993 consolidated statement of operations.
(i) Earnings Per Share
Income (loss) per common share is based on the weighted average number of shares
outstanding during each year.
(j) Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, cash and cash
equivalents include cash, amounts due from banks, federal funds sold and all
other highly liquid debt instruments with a maturity at date of acquisition of
three months or less. The Corporation's bank subsidiaries are required to
maintain noninterest-bearing deposits on hand or with the Federal Reserve Bank.
At December 31, 1993 and 1992, those required reserves were satisfied by
currency and coin holdings.
(k) Other Proposed Accounting Changes
In May 1993, the FASB issued Statement 114, Accounting by Creditors for
Impairment of a Loan. Statement 114 standardizes how creditors should
recognize losses on impaired loans. Statement 114 specifically excludes
residential mortgage loans, consumer installment loans, loans measured at fair
value or at the lower of cost or fair value and leases from the scope of the
statement. Loans covered within the scope of Statement 114 are considered
impaired when, based upon current information and events, it is probable that
a creditor will be unable to collect all amounts due according to the
contractual terms of the loan agreement. The extent to which a loan is
impaired will be determined based on the present value of expected future cash
flows discounted at the loan's effective rate, except that a creditor may
measure impairment based on a loan's observable market price, or the fair
value of the collateral if the loan is collateral dependent. Statement 114 is
effective for financial statements for fiscal years beginning after December 15,
1994. Statement 114 is expected to be adopted in the first fiscal quarter in
the year ending December 31, 1995. The Corporation does not anticipate that
adoption will result in any material effect on operating results or financial
position. In May 1993, the FASB issued Statement 115, Accounting for Certain
Investments in Debt and Equity Securities. Statement 115 requires the
classification of debt and equity securities into one of three categories.
These categories include securities held-to-maturity and securities
available-for-sale. Securities classified as held-to-maturity are measured at
amortized cost. Securities classified as available-for-sale are carried at
fair value and unrealized holding gains and losses are excluded from earnings
and reported as a separate component of equity. Adoption of Statement 115
effective January 1, 1994 resulted in an increase of stockholders' equity of
approximately $1,173,000 after consideration of tax effects.
(l) Reclassifications
Certain amounts for prior years have been reclassified to conform to the 1993
presentation.
(2) Securities
<TABLE>
(a) Securities Held for Sale
The amortized cost and estimated market values of securities held for sale at
December 31, 1993 are as follows:
<CAPTION>
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
<S> <C> <C> <C> <C>
U.S. Treasury securities and obli-
gations of U.S. Government
agencies and corporations $ 15,519,887 183,929 (19,816) 15,684,000
Mortgage-backed securities 32,011,518 366,711 (31,229) 32,347,000
Corporate securities 21,087,653 1,621,040 (20,693) 22,688,000
Totals $ 68,619,058 2,171,680 (71,738) 70,719,000
</TABLE>
The amortized cost and estimated market value of securities held for sale at
December 31, 1993 by contractual maturity is shown below. Expected maturities
may differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
Estimated
Amortized market
cost value
Due in one year or less $ 6,721,161 6,787,000
Due after one year through five years 23,129,333 23,412,000
Due after five years through ten years 5,848,596 6,001,000
35,699,090 36,200,000
Equity securities 908,450 2,172,000
Mortgage-backed securities 32,011,518 32,347,000
$ 68,619,058 70,719,000
<TABLE>
(b) Investment Securities
The amortized cost and estimated market values of investment securities at
December 31, 1993 and 1992 are as follows:
<CAPTION>
1993
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
<S> <C> <C> <C> <C>
Obligations of states and
political subdivisions $ 39,429,846 843,663 (2,509) 40,271,000
Collateralized mortgage
obligations 9,242,207 - (54,207) 9,188,000
Other securities 610,850 - - 610,850
Totals $ 49,282,903 843,663 (56,716) 50,069,850
</TABLE>
<TABLE>
1992
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
<S> <C> <C> <C> <C>
U.S. Treasury securities
and obligations of U.S.
Government corpora-
tions and agencies $ 3,922,049 951 - 3,923,000
Obligations of states
and political subdivisions 38,154,275 570,627 (309,902) 38,415,000
Collateralized mortgage obligations 869,934 - (1,934) 868,000
Mortgage-backed securities 39,506,513 625,973 (187,486) 39,945,000
Corporate securities 24,394,016 1,764,588 (78,604) 26,080,000
Other securities 610,850 - - 610,850
Totals $107,457,637 2,962,139 (577,926) 109,841,850
</TABLE>
The amortized cost and estimated market value of investment securities at
December 31, 1993, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized market
cost value
<S> <C> <C>
Due in one year or less $ 7,528,351 7,562,000
Due after one year through five years 22,329,035 22,803,000
Due after five years through ten years 9,572,460 9,906,000
Due after ten years 9,242,207 9,188,000
Equity securities 610,850 610,850
$ 49,282,903 50,069,850
</TABLE>
Gross gains realized on sales of investment securities totaled $202,335,
$2,199,790 and $609,335 during 1993, 1992 and 1991, respectively. Gross
losses realized on sales of investment securities totaled $685,732 and
$3,702,766 during 1992 and 1991, respectively. Securities with carrying
values aggregating approximately $8,580,000 and $9,612,000 at December 31, 1993
and 1992, respectively, are pledged to secure public or trust deposits,
securities sold under repurchase agreements and for other purposes as
required by law.
(3) Loans
Loans classified by type at December 31, 1993 and 1992 are as follows:
1993 1992
Commercial and municipal $ 117,879,194 124,925,672
Real estate mortgage 115,336,562 115,252,750
Installment and other 13,359,752 12,671,786
$ 246,575,508 252,850,208
Mortgage loans serviced for other investors approximate $33,280,000,
$19,478,000 and $9,800,000, as of December 31, 1993, 1992 and 1991,
respectively. Included in loans are mortgage loans held for sale of
approximately $433,800, and $156,600, as of December 31, 1993 and 1992,
respectively.
Nonaccrual and past due loans at December 1993 and 1992 are as follows:
1993 1992
Nonaccrual $ 4,298,000 7,682,000
Past due 90 days or more, still accruing 85,000 250,000
The effect of nonperforming loans on interest revenue
is as follows:
1993
Interest at original contract rate $ 540,000
Interest collected 87,000
Net reduction of interest revenue $ 453,000
In the ordinary course of business, the Banks originate loans to related
parties, which include directors, executive officers, and associates of
such persons. Loans to these individuals are made on substantially
the same terms as comparable transactions with other persons and do not
involve more than the normal risk of collectibility. Loan activity of
related parties for 1993 is summarized as follows:
Balance, December 31, 1992 $ 1,566,000
Originations and renewals 729,000
Repayments (767,000)
Balance, December 31, 1993 $ 1,528,000
(4) Allowance for Loan Losses
An analysis of the allowance for loan losses is as follows:
1993 1992 1991
Balance, beginning of year $ 3,173,125 3,246,468 3,093,005
Provision charged to expense 4,800,051 600,000 600,000
Recoveries of loans previously charged-off 60,321 182,064 47,456
Loans charged-off (2,658,919) (855,407) (493,993)
Balance, end of year $ 5,374,578 3,173,125 3,246,468
(5) Premises and Equipment
Premises and equipment at December 31, 1993 and 1992 are summarized as follows:
1993 1992
Land and improvements $ 1,983,337 1,983,337
Buildings 10,129,565 9,922,452
Furniture, fixtures and leasehold improvements 6,967,319 5,491,590
19,080,221 17,397,379
Less accumulated depreciation and amortization 6,931,517 6,369,675
$ 12,148,704 11,027,704
The Corporation has agreements for rental of certain premises and equipment.
Under the terms of these agreements the Corporation has future non-cancelable
minimum lease payments as follows:
Year ending
December 31, Amount
1994 $ 196,000
1995 196,000
1996 169,000
1997 138,000
1998 and after 670,000
$ 1,369,000
Rent expense under these leases was approximately $207,000, $276,000 and
$220,000 in 1993, 1992 and 1991, respectively.
(6) Deposits
Time deposits include approximately $19,127,000 and $19,756,000 of
certificates of deposit of $100,000 or more at December 31, 1993 and 1992.
Interest expense on certificates of deposit of $100,000 or more
approximated $704,000, $1,386,000 and $1,246,000 in 1993, 1992
and 1991, respectively.
(7) Long-term Debt
Long-term debt consists of a term note whose outstanding balance is
due July 1, 1997, payable to LaSalle National Bank, N.A. (LaSalle),
Chicago, Illinois bearing interest at LaSalle's prime rate or London
inter bank offered rate (LIBOR) plus 1.2%. The note is collateralized
by the stock of First Bank Southeast of Lake Geneva, N.A. and the
personal guarantee of a stockholder of the Corporation. The Corporation
is restricted from incurring additional indebtedness without the prior
approval of the Federal Reserve Board.
1993 1992
Maximum month-end balance $ 9,100,000 10,000,000
Average balance 7,296,000 10,045,000
December 31 balance 6,000,000 9,100,000
Interest rate at December 31 4.45% 5.17%
(8) Income Taxes
Income tax expense (benefit) in the consolidated statements of
operations consists of the following:
Federal State Total
Year ended December 31, 1993
Current $ 292,000 - 292,000
Deferred (1,353,000) - (1,353,000)
(1,061,000) - (1,061,000)
Year ended December 31, 1992
Current $ 1,088,000 - 1,088,000
Deferred (106,000) - (106,000)
$ 982,000 - 982,000
Year ended December 31, 1991
Current $ (289,000) 49,000 (240,000)
Deferred 16,000 - 16,000
$ (273,000) 49,000 (224,000)
Income tax expense (benefit) differs from the amounts computed by applying
the U.S. federal income tax rate (34%) to income (loss) before income
taxes and the cumulative effect of change in accounting principle.
A reconciliation to actual tax expense follows:
1993 1992 1991
Tax expense (benefit) at statutory rate $ (602,000) 1,673,000 (57,000)
Tax-exempt income, net of disallowance (548,000) (367,000) (471,000)
Goodwill amortization 120,000 105,000 105,000
State income taxes - - 32,000
Capital loss carry over - (195,000) 195,000
Other, net (31,000) (234,000) (28,000)
Income tax expense (benefit) $(1,061,000) 982,000 (224,000)
As discussed in Note 1(h) the Corporation adopted Statement 109 in 1993
without restating prior years' financial statements. The adoption of
Statement 109 resulted in the recognition of an increase in 1993 net
income of $325,000, as the cumulative effect of the change in accounting.
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities at
December 31, 1993 are presented below:
1993
Deferred tax assets:
Loans, principally due to allowance for losses $ 2,285,000
Foreclosed properties 315,000
State net operating loss carryforwards 1,471,000
Other 571,000
Deferred tax assets 4,642,000
Valuation allowance (1,967,600)
2,674,400
Deferred tax liabilities:
Premises and equipment, principally
due to differences in depreciation (485,000)
Net deferred tax asset $ 2,189,400
At January 1, 1993, the balance of the valuation allowance approximated
$1,265,000. Such reserve increased in 1993 primarily due to increases in
state net operating loss carry forwards, and the state tax effect of
temporary differences.Included in other assets are deferred income tax
assets of $2,189,400 at December 31, 1993 and $511,400 at December 31,
1992. At December 31, 1993, the Corporation and its subsidiaries have
available alternative minimum tax carryforwards of $255,000 which are
carried forward indefinitely and state tax net operating loss carryforwards
of approximately $18,615,000, which begin to expire 1996 through 2008.
(9) Payment of Dividends
The Corporation relies partially on cash dividends received from the
subsidiary banks to fund its operating and dividend requirements. The
declaration and payment of cash dividends by the subsidiary banks to the
Corporation is restricted by certain statutory and regulatory limitations.
These restrictions limit cash dividends to current year net profits,
as defined, plus retained net profits from the past two years. At December 31,
1993, each of the subsidiary banks is precluded from paying a dividend to the
Corporation without prior approval from the office of the Comptroller of the
Currency.
(10) Employee Benefit Plans
The Corporation has a defined contribution plan which covers substantially
all employees. Contributions are made to the plan on behalf of each
participant in the amount of 5.25% of each participant's compensation plus
4.3% of each participant's excess compensation, as defined for such plan years.
Plan expense was approximately $360,000, $346,000 and $330,000 in 1993, 1992
and 1991, respectively.
(11) Capital
The Corporation and the Banks are subject to regulatory capital guidelines.
These guidelines require minimum Tier I capital of 3% of total assets and
4% of risk weighted assets, and total capital equal to 8% of risk-weighted
assets. The Corporation and the Banks are in compliance with all minimum
capital guidelines.
(12) Leases
The Corporation leases space in one of its buildings to tenants.
Noncancelable operating leases for such office space expire at various
dates over the next five years. Future minimum payments receivable
under noncancelable operating leases as of December 31, 1993 are:
Year
1994 $ 141,000
1995 77,000
1996 42,000
1997 15,000
1998 15,000
$ 290,000
Gross rental income in 1993, 1992 and 1991 was approximately $183,000,
$139,000 and 167,000, respectively.
(13) Financial Instruments With Off-Balance Sheet Risk
The subsidiary banks are party to financial instruments with off-balance
sheet risk in the normal course of business to meet the financing needs of
customers. These financial instruments include commitments to extend credit
and standby letters of credit and involve, to varying degrees, elements of
credit and interest rate risk in excess of the amounts recognized in the
consolidated financial statements. The contract amounts of those instruments
reflect the extent of involvement the banks have in particular classes of
financial instruments. The banks' exposure to credit loss in the event of
nonperformance by the other party to the financial instrument for commitments
to extend credit and standby letters of credit is represented by the
contractual notional amount of those instruments. The banks use the same
credit policies in making commitments and conditional obligations as they do
for instruments reflected in the consolidated financial statements.
A summary of significant off-balance sheet financial commitments at
December 31, 1993 and 1992 is as follows:
Financial instruments whose contract
amounts represent credit risk 1993 1992
Commitments to extend credit $ 24,964,000 21,168,000
Credit card lines 4,079,000 4,172,000
Standby letters of credit 1,476,000 1,291,000
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments are
expected to expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. Each customer's credit
worthiness is evaluated on a case-by-case basis. The amount of collateral
obtained if deemed necessary is based on management's credit evaluation of
the counterparty. Collateral held varies but may include accounts receivable,
inventory, property, plant and equipment, income-producing commercial
properties and negotiable securities. Credit card lines are unsecured
agreements to extend credit. Such commitments are reviewed periodically,
at which time the commitments may be maintained, increased, decreased or
canceled, depending upon an evaluation of the customer's creditworthiness
and other considerations. Standby letters of credit are conditional
commitments issued by the subsidiary banks to guarantee the performance
of a customer to a third party. The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending
loan facilities to customers. In some cases marketable securities are
pledged as collateral supporting those commitments.
(14) Regulatory and Other Commitments
The Corporation operates under a Memorandum of Understanding (MOU) with
the Federal Reserve Bank of Chicago. Specifically the Corporation and
its board of directors agreed to a number of requirements. Under the MOU,
the Corporation shall not declare or pay any dividends subsequent to 1992
nor increase its borrowings or incur any debt without the prior written
approval of the Federal Reserve Bank. The Corporation is subject to
various legal actions and proceedings in the normal course of business,
some of which involve substantial claims for compensatory or punitive damages.
Although litigation is subject to many uncertainties and the ultimate
exposure with respect to these matters cannot be ascertained, management
does not believe that the final outcome will have a material adverse effect
on the financial condition of the Corporation.
(15) Fair Value of Financial Instruments
Statement of Financial Accounting Standards 107, Disclosures about Fair Value
of Financial Instruments (Statements 107), requires disclosure of fair value
information about financial instruments for which it is practicable to
estimate that value, whether or not recognized in the consolidated balance
sheets. In cases where quoted market prices are not available,
fair values are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases,
could not be realized in immediate settlement of the instrument.
Statement 107 excludes certain financial instruments and all non-financial
instruments from its disclosure requirements. Accordingly, the aggregate
fair value amounts presented do not represent the underlying value of the
Corporation. The Corporation does not routinely measure the market value
of certain of its financial instruments because such measurements represent
point-in-time estimates of value. It is not the intent of the Corporation
to liquidate and therefore realize the difference between market value and
carrying value, and even if it were, there is no assurance that the estimated
market values could be realized. Thus the information presented may not
be relevant to predicting the Corporation's future earnings or cash flows.
The following methods and assumptions were used by the Corporation
in estimating its fair value disclosures for financial instruments:
Cash and cash equivalents - The carrying amounts of these assets are
reported in the consolidated balance sheets at approximately their
fair values.
Securities available for sale and investment securities - Fair values
for these assets are based on quoted market prices, where available.
If quoted market prices are not available, fair values are based on
quoted market prices of comparable instruments.
Loans - For variable-rate mortgage loans that reprice regularly and have
not experienced a significant change in credit risk, fair values are based
on carrying values. The fair value of fixed-rate residential mortgage loans
held for investment, commercial real estate loans, multi-family residential
property mortgage loans, consumer loans and commercial loans are estimated
using discounted cash flow analyses. The rates utilized for discounting
are the interest rates currently being offered for loans with similar
terms to borrowers of similar credit quality. For residential
construction loans, fair values are based on carrying values due to
the short-term nature of the loans.
The fair value of mortgage loan servicing rights for loans originated by
the banks has not been determined and is not presented below. These
rights, which consist of the banks' contractual right to service loans
for others, represent a future income producing intangible asset that
could be realized immediately be selling the rights to another institution.
The value of those rights, except to the extent that purchased mortgage
servicing rights exist, is not reflected in the Corporation's consolidated
balance sheets.
Deposits - The fair values disclosed for demand accounts are, by definition,
equal to the amount payable on demand at the reporting date (i.e., their
carrying value amounts). The fair values of fixed-rate certificates of
deposit are estimated using a discounted cash flow calculation that applies
current incremental interest rates being offered on certificates of
deposit to a schedule of aggregated expected monthly maturities of the
outstanding certificates of deposit.
Borrowings - The fair value of the Corporation's long-term borrowings
approximate the carrying value due to the interest rates floating at
market interest rates.
Off-Balance Sheet Items - The fair value of unused and open ended consumer
lines of credit was estimated using fees currently being charged and does
not include the value that relates to estimated cash flows from new loans
generated from existing lines of credit. The fair value of commitments to
extend credit was estimated using fees currently charged to enter into
such agreements. The fair value of commitments to sell loans is based on
the current market rates for such loans. The estimated fair values of the
Corporation's off-balance sheet items (note 13), are not material and
therefore are not included in the following schedule.
The carrying amounts and fair values of the Corporation's financial
instruments consist of the following at December 31, 1993 and 1992:
<TABLE>
<CAPTION>
1993 1992
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 42,578,828 42,578,828 49,745,483 49,745,483
Securities available for sale 68,619,058 70,719,000 - -
Investment securities 49,282,903 50,069,850 107,457,637 109,841,513
Loans, net 241,200,930 244,618,959 249,677,083 250,266,663
Financial liabilities:
Deposits:
Demand accounts 114,986,821 114,986,821 107,161,282 107,161,282
Time accounts 266,872,021 265,431,996 274,534,688 276,446,612
Securities sold under
repurchase agreements 985,000 985,000 330,000 330,000
Borrowings 6,000,000 6,000,000 9,100,000 9,100,000
</TABLE>
(16) Proposed Acquisition by Firstar Corporation
On February 10, 1994, the Corporation entered into a definitive agreement
with Firstar Corporation (Firstar) to exchange all outstanding shares of
common stock of the Corporation for common stock of Firstar.
The definitive agreement is subject to stockholder and regulatory approval.
(17) First Southeast Banking Corp. (Parent Company Only) Financial Information
Condensed Balance Sheet
December 31,
1993 1992
Cash $ 1,803,985 63,463
Due from subsidiaries 326,478 184,725
Investment in subsidiaries 31,596,377 34,099,927
Investment securities (market value of $1,264,000
and $1,548,000) 908,450 1,293,213
Goodwill, net of amortization 1,290,961 1,478,229
Other 1,155,347 2,822,466
$ 37,081,598 39,942,023
Liabilities and Stockholders' Equity
Note payable $ 6,000,000 9,100,000
Other 831,192 208,080
Stockholders' equity 30,250,406 30,633,943
$ 37,081,598 39,942,023
Condensed Statements of Operations
1993 1992 1991
Revenue:
Dividends received from Banks $ 2,651,870 2,402,436 2,628,220
Other dividend and interest income 82,403 141,291 105,565
Securities gain (losses) 40,391 1,439,728 (3,268,763)
Other 65,941 69,335 42,284
Total revenue 2,840,605 4,052,790 (492,694)
Expenses:
Interest 367,290 759,872 1,334,139
Goodwill amortization 187,267 187,267 187,267
Other 288,189 182,790 215,825
Total expenses 842,746 1,129,929 1,737,231
Income (loss) before income taxes and
equity in undistributed net income
(loss) of Banks 1,997,859 2,922,861 (2,229,925)
Income tax benefit 190,672 3,550 1,326,513
Income (loss) before
equity in undistributed
net income (loss) of Banks 2,188,531 2,926,411 (903,412)
Equity in undistributed net income
(loss) of Banks (2,572,068) 1,010,889 959,858
Net income (loss) $ (383,537) 3,937,300 56,446
<TABLE>
<CAPTION>
Condensed Statements of Cash Flows
1993 1992 1991
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (383,537) 3,937,300 56,446
Adjustments to reconcile net income to net
cash provided by operating activities:
Securities (gains) losses (40,391) (1,439,728) 1,384,025
Amortization 187,267 187,267 187,267
Decrease (increase) in other assets 1,540,798 (1,565,731) 615,412
Increase (decrease) in other liabilities 623,112 208,080 (4,414,522)
Equity in undistributed (net income)
loss of Banks 2,572,068 (1,010,889) (959,858)
Net cash provided by (used in) operating activities4,499,317 316,299 (3,131,230)
Cash flows from investing activities:
Proceeds from sales of investments 425,154 2,352,664 2,308,719
Purchase of common stock in Banks (83,949) (150,280) (15,566)
Net cash used in investing activities 341,205 2,202,384 2,293,153
Cash flows from financing activities:
Net increase (decrease) in borrowed funds (3,100,000) (1,900,000) 2,000,000
Dividends paid - (995,644) (588,868)
Purchase of treasury stock - - (229,295)
Net cash provided by (used in)financing activities(3,100,000) (2,895,644) 1,181,837
Net increase (decrease)in cashand cash equivalents 1,740,522 (376,961) 343,760
Cash and cash equivalents at beginning of year 63,463 440,424 96,664
Cash and cash equivalents at end of year $ 1,803,985 63,463 440,424
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 367,290 759,872 1,334,139
</TABLE>
The Corporation and the Banks utilize the services of an aviation service
of which the owner is a stockholder and director of the Corporation.
Fees paid to the aviation service during 1993, 1992 and 1991 totaled
approximately $33,000, $46,000 and $142,000, respectively.
FIRST SOUTHEAST BANKING CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
March 31, 1994
(Unaudited)
Assets
Cash and due from banks $ 29,312,227
Federal funds sold 9,000,000
Securities available-for-sale 76,177,111
Securities held-to-maturity
(market value of $47,059,000) 47,015,768
Loans 242,442,370
Allowance for loan losses (5,426,043)
Loans, net 237,016,327
Premises and equipment, net 13,072,070
Foreclosed properties 1,077,976
Goodwill, net of amortization of $2,358,716 2,013,822
Accrued interest receivable and other assets 7,620,591
Total assets $ 422,305,892
Liabilities and Stockholders' Equity
Deposits:
Demand $ 106,568,807
Time 267,716,051
Total deposits 374,284,858
Securities sold under
repurchase agreements (note 3) 6,188,000
Long-term debt 6,000,000
Other liabilities 4,701,434
Total liabilities 391,174,292
Minority interest 322,667
Stockholders' equity:
Common stock, $1 par value;
200,000 shares authorized;
119,633 shares iss 119,633
Additional paid-in capital 12,613,397
Retained earnings 19,563,967
Appreciation on securities available-for-sale,
net of deferred taxes 922,212
Treasury stock, 13,147 shares at cost (2,410,276)
Total stockholders' equity 30,808,933
Total liabilities and stockholders' equity $ 422,305,892
See accompanying notes to unaudited condensed consolidated financial statements.
FIRST SOUTHEAST BANKING CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three Months ended March 31, 1994 and 1993
(Unaudited)
1994 1993
Interest revenue:
Loans $ 4,942,059 4,900,771
Investment securities:
Taxable 1,130,291 1,280,906
Tax-exempt 407,947 424,428
Other 74,032 69,400
Total interest revenue 6,554,329 6,675,505
Interest expense:
Deposits 2,573,512 3,050,919
Securities sold under repurchase agreements 36,569 12,259
Long-term debt 68,278 94,156
Total interest expense 2,678,359 3,157,334
Net interest revenue 3,875,970 3,518,171
Provision for loan losses - 1,137,512
Net interest revenue
after provision for loan losses 3,875,970 2,380,659
Other revenue:
Service charges 470,676 453,234
Trust and investment management fees 62,000 44,000
Mortgage banking revenue 31,725 25,169
Other 69,532 220,775
Total other revenue 633,933 743,178
Other expenses:
Salaries and employee benefits 1,788,321 1,741,253
Other 1,875,622 1,574,644
Total other expenses 3,663,943 3,315,897
Income (loss) before income tax expense and
cumulative effect of change in accounting
principle 845,960 (192,060)
Income tax expense (benefit) 214,000 (114,000)
Income (loss) before cumulative effect of change
in accounting principle 631,960 (78,060)
Cumulative effect on prior years of adoption of
Statement of Financial Accounting Standards
No. 109 - 325,000
Net income $ 631,960 246,940
Income (loss) per common share:
Income (loss) before cumulative effect
of change in accounting principle $ 5.93 (0.74)
Cumulative effect on prior years of adoption
of Statement of Financial Accounting
Standards No. 109 - 3.05
Net income $ 5.93 2.31
See accompanying notes to unaudited condensed consolidated financial statements.
FIRST SOUTHEAST BANKING CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Three Months ended March 31, 1994 and 1993
(Unaudited)
1994 1993
Cash flows from operating activities:
Net income $ 631,960 246,940
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization, and accretion, net 229,136 204,074
Provision for loan losses - 1,137,512
Cumulative effect of change in accounting principle - (325,000)
Minority interest 9,835 56,332
Decrease (increase) in accrued interest receivable (795,755) 2,510,145
and other assets
Decrease in accrued expenses and other liabilities (248,246) (519,088)
Net cash provided by operating activities (173,070) 3,310,915
Cash flows from investing activities:
Net decrease in loans 4,184,603 6,063,845
Purchases of premises and equipment, net (1,081,983) (1,834,391)
Purchase of investment securities, net of maturities (3,893,628) (8,707,743)
Net change in foreclosed properties 64,451 (1,150,198)
Net cash used in investing activities (726,557 (5,628,487)
Cash flows from financing activities:
Net decrease in deposits (7,573,984) (13,008,670)
Net increase in securities
sold under repurchase agreements 5,203,000 1,840,000
Repayment of long-term debt - (1,600,000)
Cash dividends paid (995,645) -
Net cash provided by (used in) financing activities (3,366,629) (12,768,670)
Net decrease in cash and cash equivalents (4,266,256) (15,086,242)
Cash and cash equivalents:
Beginning of year 42,745,483 46,745,483
End of year $ 38,312,227 31,659,241
See accompanying notes to unaudited condensed consolidated financial statements.
FIRST SOUTHEAST BANKING CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 1994 and 1993
(Unaudited)
(1) General
The accounting and reporting policies of First Southeast Banking Corp. and
subsidiaries (First Southeast) conform to generally accepted accounting
principles and to general practices within the banking industry.
Significant accounting principles used by First Southeast are summarized
in Note 1 to the 1993 consolidated financial statements.
The condensed consolidated financial statements reflect adjustments, all
of which are of a normal recurring nature, and, in the opinion of management,
necessary for a fair statement of results for the interim periods.
The operating results for the three months ended March 31, 1994 are not
necessarily indicative of the results which may be expected for the entire
year. The accompanying condensed consolidated financial statements should
be read in conjunction with First Southeast's 1993 consolidated financial
statements and related notes.
(2) Allowance for Loan Losses
An analysis of the allowance for loan losses for the three months ended
March 31, 1994 and 1993 is as follows:
1994 1993
Balance, beginning of period $ 5,374,578 3,173,125
Provision charged to expense - 1,137,512
Recoveries of loans previously charged-off 73,465 15,080
Loans charged-off (22,000) (558,537)
Balance, end of period $ 5,426,043 3,767,180
(3) Nonperforming Loans
Nonperforming loans as of March 31, 1994 and 1993 are summarized as follows:
1994 1993
Nonperforming loans $ 5,308,000 9,385,000
(4) Long-term Debt
Long-term debt consists of a term note payable to LaSalle National Bank, N.A.
(LaSalle), Chicago, Illinois. Such note, with interest payable at LaSalle's
prime rate or the LIBOR plus 1.2%, is collateralized by the stock of First
Bank Southeast of Lake Geneva, N.A. and the personal guarantee of a
stockholder of First Southeast and is due July 1, 1997. First Southeast
is restricted from incurring additional indebtedness without prior
approval of the Federal Reserve Board.
EXHIBIT A
WISCONSIN STATUTES
CHAPTER 180. BUSINESS CORPORATIONS
SUBCHAPTER XIII. DISSENTERS' RIGHTS
Wis. Stat. | 180.1301 (1993)
180.1301 Definitions
In ss. 180.1301 to 180.1331:
(1) "Beneficial shareholder" means a person who is a beneficial owner of
shares held by a nominee as the shareholder.
(1m) "Business combination" has the meaning given in s. 180.1130 (3).
(2) "Corporation" means the issuer corporation or, if the corporate action
giving rise to dissenters' rights under s. 180.1302 is a merger or share
exchange that has been effectuated, the surviving domestic corporation or
foreign corporation of the merger or the acquiring domestic corporation or
foreign corporation of the share exchange.
(3) "Dissenter" means a shareholder or beneficial shareholder who is entitled
to dissent from corporate action under s. 180.1302 and who exercises that right
when and in the manner required by ss. 180.1320 to 180.1328.
(4) "Fair value", with respect to a dissenter's shares other than in a
business combination, means the value of the shares immediately before the
effectuation of the corporate action to which the dissenter objects, excluding
any appreciation or depreciation in anticipation of the corporate action unless
exclusion would be inequitable. "Fair value", with respect to a dissenter's
shares in a business combination, means market value, as defined in s. 180.1130
(9) (a) 1 to 4.
(5) "Interest" means interest from the effectuation date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all of the circumstances.
(6) "Issuer corporation" means a domestic corporation that is the issuer of
the shares held by a dissenter before the corporate action.
HISTORY: 1989 a. 303; 1991 a. 16.
Wis. Stat. | 180.1302 (1993)
180.1302 Right to dissent
(1) Except as provided in sub. (4) and s. 180.1008 (3), a shareholder or
beneficial shareholder may dissent from, and obtain payment of the fair value of
his or her shares in the event of, any of the following corporate actions:
(a) Consummation of a plan of merger to which the issuer corporation is a
party if any of the following applies:
1. Shareholder approval is required for the merger by s. 180.1103 or by the
articles of incorporation.
2. The issuer corporation is a subsidiary that is merged with its parent
under s. 180.1104.
(b) Consummation of a plan of share exchange if the issuer corporation's
shares will be acquired, and the shareholder or the shareholder holding shares
on behalf of the beneficial shareholder is entitled to vote on the plan.
(c) Consummation of a sale or exchange of all, or substantially all, of the
property of the issuer corporation other than in the usual and regular course of
business, including a sale in dissolution, but not including any of the
following:
1. A sale pursuant to court order.
2. A sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale will be distributed to the shareholders within one
year after the date of sale.
(d) Except as provided in sub. (2), any other corporate action taken pursuant
to a shareholder vote to the extent that the articles of incorporation, bylaws
or a resolution of the board of directors provides that the voting or nonvoting
shareholder or beneficial shareholder may dissent and obtain payment for his or
her shares.
(2) Except as provided in sub. (4) and s. 180.1008 (3), the articles of
incorporation may allow a shareholder or beneficial shareholder to dissent from
an amendment of the articles of incorporation and obtain payment of the fair
value of his or her shares if the amendment materially and adversely affects
rights in respect of a dissenter's shares because it does any of the following:
(a) Alters or abolishes a preferential right of the shares.
(b) Creates, alters or abolishes a right in respect of redemption, including
a provision respecting a sinking fund for the redemption or repurchase, of the
shares.
(c) Alters or abolishes a preemptive right of the holder of shares to acquire
shares or other securities.
(d) Excludes or limits the right of the shares to vote on any matter or to
cumulate votes, other than a limitation by dilution through issuance of shares
or other securities with similar voting rights.
(e) Reduces the number of shares owned by the shareholder or beneficial
shareholder to a fraction of a share if the fractional share so created is to be
acquired for cash under s. 180.0604.
(3) Notwithstanding sub. (1) (a) to (c), if the issuer corporation is a
statutory close corporation under ss. 180.1801 to 180.1837, a shareholder of the
statutory close corporation may dissent from a corporate action and obtain
payment of the fair value of his or her shares, to the extent permitted under
sub. (1) (d) or (2) or s. 180.1803, 180.1813 (1) (d) or (2) (b), 180.1815 (3) or
180.1829 (1) (c).
(4) Except in a business combination or unless the articles of incorporation
provide otherwise, subs. (1) and (2) do not apply to the holders of shares of
any class or series if the shares of the class or series are registered on a
national securities exchange or quoted on the national association of securities
dealers, inc., automated quotations system on the record date fixed to determine
the shareholders entitled to notice of a shareholders meeting at which
shareholders are to vote on the proposed corporate action.
(5) Except as provided in s. 180.1833, a shareholder or beneficial
shareholder entitled to dissent and obtain payment for his or her shares under
ss. 180.1301 to 180.1331 may not challenge the corporate action creating his or
her entitlement unless the action is unlawful or fraudulent with respect to the
shareholder, beneficial shareholder or issuer corporation.
HISTORY: 1989 a. 303; 1991 a. 16.
Wis. Stat. | 180.1303 (1993)
180.1303 Dissent by shareholders and beneficial shareholders
(1) A shareholder may assert dissenters' rights as to fewer than all of the
shares registered in his or her name only if the shareholder dissents with
respect to all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose behalf he
or she asserts dissenters' rights. The rights of a shareholder who under this
subsection asserts dissenters' rights as to fewer than all of the shares
registered in his or her name are determined as if the shares as to which he or
she dissents and his or her other shares were registered in the names of
different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares held
on his or her behalf only if the beneficial shareholder does all of the
following:
(a) Submits to the corporation the shareholder's written consent to the
dissent not later than the time that the beneficial shareholder asserts
dissenters' rights.
(b) Submits the consent under par. (a) with respect to all shares of which he
or she is the beneficial shareholder.
HISTORY: 1989 a. 303.
Wis. Stat. | 180.1320 (1993)
180.1320 Notice of dissenters' rights
(1) If proposed corporate action creating dissenters' rights under s.
180.1302 is submitted to a vote at a shareholders' meeting, the meeting notice
shall state that shareholders and beneficial shareholders are or may be entitled
to assert dissenters' rights under ss. 180.1301 to 180.1331 and shall be
accompanied by a copy of those sections.
(2) If corporate action creating dissenters' rights under s. 180.1302 is
authorized without a vote of shareholders, the corporation shall notify, in
writing and in accordance with s. 180.0141, all shareholders entitled to assert
dissenters' rights that the action was authorized and send them the dissenters'
notice described in s. 180.1322.
HISTORY: 1989 a. 303.
Wis. Stat. | 180.1321 (1993)
180.1321 Notice of intent to demand payment
(1) If proposed corporate action creating dissenters' rights under s.
180.1302 is submitted to a vote at a shareholders' meeting, a shareholder or
beneficial shareholder who wishes to assert dissenters' rights shall do all of
the following:
(a) Deliver to the issuer corporation before the vote is taken written notice
that complies with s. 180.0141 of the shareholder's or beneficial shareholder's
intent to demand payment for his or her shares if the proposed action is
effectuated.
(b) Not vote his or her shares in favor of the proposed action.
(2) A shareholder or beneficial shareholder who fails to satisfy sub. (1) is
not entitled to payment for his or her shares under ss. 180.1301 to 180.1331.
HISTORY: 1989 a. 303.
Wis. Stat. | 180.1322 (1993)
180.1322 Dissenters' notice
(1) If proposed corporate action creating dissenters' rights under s.
180.1302 is authorized at a shareholders' meeting, the corporation shall deliver
a written dissenters' notice to all shareholders and beneficial shareholders who
satisfied s. 180.1321.
(2) The dissenters' notice shall be sent no later than 10 days after the
corporate action is authorized at a shareholders' meeting or without a vote of
shareholders, whichever is applicable. The dissenters' notice shall comply with
s. 180.0141 and shall include or have attached all of the following:
(a) A statement indicating where the shareholder or beneficial shareholder
must send the payment demand and where and when certificates for certificated
shares must be deposited.
(b) For holders of uncertificated shares, an explanation of the extent to
which transfer of the shares will be restricted after the payment demand is
received.
(c) A form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action and that requires the shareholder or beneficial shareholder
asserting dissenters' rights to certify whether he or she acquired beneficial
ownership of the shares before that date.
(d) A date by which the corporation must receive the payment demand, which
may not be fewer than 30 days nor more than 60 days after the date on which the
dissenters' notice is delivered.
(e) A copy of ss. 180.1301 to 180.1331.
HISTORY: 1989 a. 303.
Wis. Stat. | 180.1323 (1993)
180.1323 Duty to demand payment
(1) A shareholder or beneficial shareholder who is sent a dissenters'
notice described in s. 180.1322, or a beneficial shareholder whose shares are
held by a nominee who is sent a dissenters' notice described in s. 180.1322,
must demand payment in writing and certify whether he or she acquired beneficial
ownership of the shares before the date specified in the dissenters' notice
under s. 180.1322 (2) (c). A shareholder or beneficial shareholder with
certificated shares must also deposit his or her certificates in accordance with
the terms of the notice.
(2) A shareholder or beneficial shareholder with certificated shares who
demands payment and deposits his or her share certificates under sub. (1)
retains all other rights of a shareholder or beneficial shareholder until these
rights are canceled or modified by the effectuation of the corporate action.
(3) A shareholder or beneficial shareholder with certificated or
uncertificated shares who does not demand payment by the date set in the
dissenters' notice, or a shareholder or beneficial shareholder with certificated
shares who does not deposit his or her share certificates where required and by
the date set in the dissenters' notice, is not entitled to payment for his or
her shares under ss. 180.1301 to 180.1331.
HISTORY: 1989 a. 303.
Wis. Stat. | 180.1324 (1993)
180.1324 Restrictions on uncertificated shares
(1) The issuer corporation may restrict the transfer of uncertificated
shares from the date that the demand for payment for those shares is received
until the corporate action is effectuated or the restrictions released under s.
180.1326.
(2) The shareholder or beneficial shareholder who asserts dissenters' rights
as to uncertificated shares retains all of the rights of a shareholder or
beneficial shareholder, other than those restricted under sub. (1), until these
rights are canceled or modified by the effectuation of the corporate action.
HISTORY: 1989 a. 303.
Wis. Stat. | 180.1325 (1993)
180.1325 Payment
(1) Except as provided in s. 180.1327, as soon as the corporate action is
effectuated or upon receipt of a payment demand, whichever is later, the
corporation shall pay each shareholder or beneficial shareholder who has
complied with s. 180.1323 the amount that the corporation estimates to be the
fair value of his or her shares, plus accrued interest.
(2) The payment shall be accompanied by all of the following:
(a) The corporation's latest available financial statements, audited and
including footnote disclosure if available, but including not less than a
balance sheet as of the end of a fiscal year ending not more than 16 months
before the date of payment, an income statement for that year, a statement of
changes in shareholders' equity for that year and the latest available interim
financial statements, if any.
(b) A statement of the corporation's estimate of the fair value of the
shares.
(c) An explanation of how the interest was calculated.
(d) A statement of the dissenter's right to demand payment under s. 180.1328
if the dissenter is dissatisfied with the payment.
(e) A copy of ss. 180.1301 to 180.1331.
HISTORY: 1989 a. 303.
Wis. Stat. | 180.1326 (1993)
180.1326 Failure to take action
(1) If an issuer corporation does not effectuate the corporate action
within 60 days after the date set under s. 180.1322 for demanding payment, the
issuer corporation shall return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the issuer corporation effectuates the corporate action, the
corporation shall deliver a new dissenters' notice under s. 180.1322 and repeat
the payment demand procedure.
HISTORY: 1989 a. 303.
Wis. Stat. | 180.1327 (1993)
180.1327 After-acquired shares
(1) A corporation may elect to withhold payment required by s. 180.1325
from a dissenter unless the dissenter was the beneficial owner of the shares
before the date specified in the dissenters' notice under s. 180.1322 (2) (c) as
the date of the first announcement to news media or to shareholders of the terms
of the proposed corporate action.
(2) To the extent that the corporation elects to withhold payment under sub.
(1) after effectuating the corporate action, it shall estimate the fair value of
the shares, plus accrued interest, and shall pay this amount to each dissenter
who agrees to accept it in full satisfaction of his or her demand. The
corporation shall send with its offer a statement of its estimate of the fair
value of the shares, an explanation of how the interest was calculated, and a
statement of the dissenter's right to demand payment under s. 180.1328 if the
dissenter is dissatisfied with the offer.
HISTORY: 1989 a. 303.
Wis. Stat. | 180.1328 (1993)
180.1328 Procedure if dissenter dissatisfied with payment or offer
(1) A dissenter may, in the manner provided in sub. (2), notify the
corporation of the dissenter's estimate of the fair value of his or her shares
and amount of interest due, and demand payment of his or her estimate, less any
payment received under s. 180.1325, or reject the offer under s. 180.1327 and
demand payment of the fair value of his or her shares and interest due, if any
of the following applies:
(a) The dissenter believes that the amount paid under s. 180.1325 or offered
under s. 180.1327 is less than the fair value of his or her shares or that the
interest due is incorrectly calculated.
(b) The corporation fails to make payment under s. 180.1325 within 60 days
after the date set under s. 180.1322 for demanding payment.
(c) The issuer corporation, having failed to effectuate the corporate action,
does not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set under s.
180.1322 for demanding payment.
(2) A dissenter waives his or her right to demand payment under this section
unless the dissenter notifies the corporation of his or her demand under sub.
(1) in writing within 30 days after the corporation made or offered payment for
his or her shares. The notice shall comply with s. 180.0141.
HISTORY: 1989 a. 303.
Wis. Stat. | 180.1330 (1993)
180.1330 Court action
(1) If a demand for payment under s. 180.1328 remains unsettled, the
corporation shall bring a special proceeding within 60 days after receiving the
payment demand under s. 180.1328 and petition the court to determine the fair
value of the shares and accrued interest. If the corporation does not bring the
special proceeding within the 60-day period, it shall pay each dissenter whose
demand remains unsettled the amount demanded.
(2) The corporation shall bring the special proceeding in the circuit court
for the county where its principal office or, if none in this state, its
registered office is located. If the corporation is a foreign corporation
without a registered office in this state, it shall bring the special proceeding
in the county in this state in which was located the registered office of the
issuer corporation that merged with or whose shares were acquired by the foreign
corporation.
(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the special proceeding.
Each party to the special proceeding shall be served with a copy of the petition
as provided in s. 801.14.
(4) The jurisdiction of the court in which the special proceeding is brought
under sub. (2) is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decision on the question
of fair value. An appraiser has the power described in the order appointing him
or her or in any amendment to the order. The dissenters are entitled to the same
discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the special proceeding is entitled to
judgment for any of the following:
(a) The amount, if any, by which the court finds the fair value of his or her
shares, plus interest, exceeds the amount paid by the corporation.
(b) The fair value, plus accrued interest, of his or her shares acquired on
or after the date specified in the dissenter's notice under s. 180.1322 (2) (c),
for which the corporation elected to withhold payment under s. 180.1327.
HISTORY: 1989 a. 303.
Wis. Stat. | 180.1331 (1993)
180.1331 Court costs and counsel fees
(1) (a) Notwithstanding ss. 814.01 to 814.04, the court in a special
proceeding brought under s. 180.1330 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court and shall assess the costs against the corporation,
except as provided in par. (b).
(b) Notwithstanding ss. 814.01 and 814.04, the court may assess costs against
all or some of the dissenters, in amounts that the court finds to be equitable,
to the extent that the court finds the dissenters acted arbitrarily, vexatiously
or not in good faith in demanding payment under s. 180.1328.
(2) The parties shall bear their own expenses of the proceeding, except that,
notwithstanding ss. 814.01 to 814.04, the court may also assess the fees and
expenses of counsel and experts for the respective parties, in amounts that the
court finds to be equitable, as follows:
(a) Against the corporation and in favor of any dissenter if the court finds
that the corporation did not substantially comply with ss. 180.1320 to 180.1328.
(b) Against the corporation or against a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously or not in good faith with respect to the
rights provided by this chapter.
(3) Notwithstanding ss. 814.01 to 814.04, if the court finds that the
services of counsel and experts for any dissenter were of substantial benefit to
other dissenters similarly situated, the court may award to these counsel and
experts reasonable fees to be paid out of the amounts awarded the dissenters who
were benefited.
HISTORY: 1989 a. 303.
