UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) June 30, 1998
---------------
1-2981
(Commission File Number)
---------------
FIRSTAR CORPORATION
(Exact name of Registrant as specified in its charter)
WISCONSIN 39-0711710
(State of incorporation) (I.R.S. Employer
Identification Number)
777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
(Address of Registrant's principal executive office)
414-765-4321
(Registrant's telephone number)
<PAGE>
ITEM 5. OTHER EVENTS
On June 30, 1998, Firstar Corporation, a Wisconsin corporation
("Firstar"), entered into an Agreement and Plan of Reorganization (the
"Merger Agreement") with and among Star Banc Corporation, an Ohio corporation
("Star Banc"), and Firstar (DE) Corporation, a Delaware corporation and a
newly-formed wholly-owned subsidiary of Firstar ("Firstar (DE)"), providing
for, among other things, the merger of Firstar with and into Firstar (DE) and
the merger of Star Banc with and into Firstar (DE). The joint press release
of Firstar and Star Banc announcing the Merger is filed as Exhibit 99.1 to
this Form 8-K.
In connection with the execution of the Merger Agreement, on July 1,
1998, Firstar, as issuer, and Star Banc, as grantee, entered into a Stock
Option Agreement (the "Star Banc Option Agreement"), providing for, among
other things, the grant of an option to Star Banc (the "Firstar Option") to
purchase, subject to the terms of the Stock Option Agreement, up to
28,963,830 fully paid and non-assessable shares of Firstar's Common Stock,
par value $1.25 per share ("Common Stock"), at a price of $39 per share (the
"Option Price"), provided however, that in no event shall the number of
shares of Common Stock for which the Firstar Option is exercisable exceed
19.9% of Firstar's issued and outstanding shares of Common Stock; and Star
Banc, as issuer, and Firstar, as grantee, also entered into a substantially
identical Stock Option Agreement (the "Star Banc Option Agreement" and,
together with the Firstar Option Agreement, the "Option Agreements").
In connection with the execution of the Merger Agreement, on June 30,
1998, Firstar entered into an amendment (the "Rights Amendment") to the
Rights Agreement dated as of January 19, 1989, between Firstar and Firstar
Trust Company (formerly known as First Wisconsin Trust Company), as Rights
Agent (the "Rights Agreement"), to the effect that Star Banc and its
affiliates shall not become an Acquiring Person (as defined in the Rights
Agreement) by reason of the execution of the Merger Agreement or the
consummation of the Merger or the entering into, or exercise of, the Option
Agreements.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits.
Exhibit
Number Title
- ------- -------
99.1 Press release of Firstar and Star Banc, dated July 1, 1998.
99.2 Investor presentation materials, dated as of July 1, 1998, regarding
the Merger.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIRSTAR CORPORATION
By: /s/ Howard H. Hopwood, III
---------------------------
Name: Howard H. Hopwood, III
Title: Senior Vice President and
General Counsel
Date: June 30, 1998
<PAGE>
Exhibit Index
Exhibit Number Title
- -------------- -----
99.1 Press release of Firstar and Star Banc dated July 1, 1998.
99.2 Investor presentation materials, dated July 1, 1998, regarding
the Merger.
Exhibit 99.1
CONTACT: Steve Dale (Star Media)
(513) 632-4524
David Moffett (Star Analysts)
(513) 632-4008
Patrick Strickler (Firstar Media)
(414) 765-4235
Jeff Weeden (Firstar Analysts)
(414) 287-3222
STAR BANC CORPORATION, FIRSTAR CORPORATION AGREE TO
MERGE, CREATING $38 BILLION MIDWEST BANKING FRANCHISE
$7.2 billion transaction will provide 12 percent EPS
accretion in 2000
CINCINNATI and MILWAUKEE (July 1, 1998) - Star Banc Corporation
(NYSE:STB) and Firstar Corporation (NYSE:FSR) today announced that they have
signed a definitive agreement to merge through an exchange of shares valued
at approximately $7.2 billion.
The merger would create the 21st largest bank holding company in
the United States, with assets of more than $38 billion, and deposits of $28
billion. The combined company will provide a full line of consumer banking,
commercial banking and trust and investment management services and products
to more than 3 million customers through its 14,000 employees and 720 branch
locations in eight Midwest states and Arizona, plus trust operations in
Florida.
Under the terms of the agreement, Firstar shareholders will receive
a tax-free exchange of 0.76 shares of common stock of the combined company
for each share of Firstar common stock. Shareholders of Star Banc will
retain one share of common stock in the combined company for each Star Banc
share. Based on Star Banc's closing stock price on June 30, 1998, this
represents a price of $48.55 for each Firstar share.
The combined company will be known as Firstar Corporation. Its
corporate headquarters will be located in Milwaukee, and its consumer banking
and specialized lending operations will be headquartered in Cincinnati.
Roger L. Fitzsimonds, chairman and chief executive officer of Firstar, will
become chairman of the board of the new company, and Jerry A. Grundhofer,
chairman, president and chief executive officer of Star Banc, will become
president and chief executive officer. The board of directors will comprise
18 representatives of Star Banc and 14 representatives of Firstar.
"Star Banc and Firstar are two successful banks with long and proud
histories that will now move up to the next plateau in financial services.
Together, that's what we will do," said Grundhofer. "Putting together these
two first-class banks creates a leading provider of financial services in the
Midwest region, with the opportunity to offer greater financial strength, a
<PAGE>
broader range of products and services, stronger technology and greater
efficiency to our customers and communities. This merger will provide
unmatched economic benefits for shareholders of both companies and will
position the combined company strategically to operate on a new and higher
level of banking going forward."
"We are delighted to be partnering with a bank so completely
compatible with our own," says Fitzsimonds. "Firstar and Star Banc have
strong community orientations, complementary high-tech quality products, and
a shared commitment to outstanding customer service. Each of us has
products, skills and resources to bring to the other. We look forward to a
seamless integration of our two companies into a single regional banking
leader and corporate citizen."
The transaction provides Firstar shareholders a premium of 27
percent over the value of their shares on June 30, 1998. It is estimated
that the combined company expects to incur pre-tax merger-related
restructuring charges of $325 million in 1998. The transaction, which will
be accounted for as a pooling of interests, is expected to be 5 percent
accretive to the combined company's earnings per share in 1999, and 12
percent accretive in 2000.
After the closing, the combined company expects to pay dividends at
an annual rate of $1.20 per common share. This approximates a continuation
of the current dividend rate paid on Firstar shares, adjusted for the
exchange ratio, which would represent an increase of 30 percent on the
current dividend rate paid on Star Banc shares.
Star Banc and Firstar estimate that they will reduce their expenses
by $174 million, with half of this saving achieved in 1999, and the remainder
in 2000. This cost saving represents 15 percent of the two companies'
current expense base, and would bring the combined company into line with
Star Banc's current efficiency ratio. The cost saving opportunities include
centralization of corporate activities, consolidation of data processing and
operations, optimization of commercial banking, retail branches and
alternative delivery channels for bank products and services, improvements in
technology, and reconfiguration of mortgage, credit card and asset management
businesses.
Additionally, the companies believe there is significant
opportunity for revenue synergies resulting from product cross-selling,
accelerated consumer loan growth, new product introduction, and
implementation of Star Banc's highly successful incentive-based compensation
program throughout the combined company. This program provides all employees
with incentive pay linked to selected measures of shareholder value. The
companies project these revenue enhancements at $42 million annually, with
one-half to be realized in 1999 and the rest in 2000.
The two companies have no geographical overlap, and no merger-
related branch closings are planned. As with any merger of this magnitude,
some job loss at both organizations will be unavoidable, primarily in
redundant headquarters and administrative positions. Customer-contact
positions will be virtually unaffected. The companies plan to minimize
actual job loss through normal attrition, voluntary separation programs and
redeployment of employees into other positions and locations.
<PAGE>
"When companies merge, customers must come first," said
Fitzsimonds. "Together, we have significant, successful experience in
business integration that minimizes disruption to customers. We will make
this transition a smooth and comfortable one." Customers of the merged
company will have access to 720 branches, more than 1,400 ATM's and a broad
range of electronic banking, PC banking and Internet banking products and
services.
"These banks have deep roots in both Cincinnati and Milwaukee, and
we intend to be leading corporate citizens in both cities long after our
merger is complete," said Grundhofer. "In this decade, Star Banc has become
synonymous with superior service and active community participation in
Cincinnati and all the communities we serve. We intend to maintain our
strong physical presence in our historical home town, to continue to improve
the breadth and quality of our service to customers, and to maintain our
commitment to community reinvestment, civic involvement and corporate
philanthropy."
The new company will have three vice chairmen who will all report
to Grundhofer: John A. Becker, currently president and chief operating
officer of Firstar, who will be the chief operating officer of the combined
company; David M. Moffett, currently executive vice president and chief
financial officer of Star Banc, who will be the chief financial officer of
the combined company; and Richard K. Davis, currently executive vice
president of Star Banc, who will be responsible for consumer banking.
The combined company's consumer banking operations, headed by
Davis, will be headquartered in Cincinnati. Davis will also be responsible
for all banking operations in the Greater Cincinnati market.
Star currently holds an outstanding Community Reinvestment Act
(CRA) rating, while Firstar Bank Milwaukee, N.A., is rated satisfactory.
Star and Firstar have committed to achieving an outstanding rating after the
merger. Star has also reconfirmed its new $5.15 billion community
development initiative, which was announced February 1998.
The transaction, which was approved by the boards of both
companies, is subject to normal shareholder and regulatory approvals. In
connection with the merger agreement, Star Banc and Firstar have each granted
the other an option for 19.9 percent of its common shares. The transaction
is expected to close in the fourth quarter of 1998 or early in the first
quarter of 1999.
Star Banc was advised in this transaction by the investment bank of
Credit Suisse/First Boston and the law firm of Wachtell, Lipton, Rosen &
Katz. Firstar was advised by the investment bank of Merrill Lynch and the
law firm of Simpson Thacher & Bartlett.
Founded in 1863, Star Banc is the parent corporation of Star Bank
and operates full-service banking locations in Ohio, Kentucky and Indiana, in
addition to Star Banc Finance Inc., a consumer finance company. Star will
enter the Tennessee market upon the completion of its previously announced
acquisition of Trans Financial, Inc. in August, 1998. Star a "Five Star
Service Guarantee," which pays them for inconvenience if they fail to receive
certain key banking benefits. Star Banc was the first U.S. bank to introduce
a "24 Hour Banking System," a fully integrated customer service and banking
convenience package that includes branch banking, voice-activated phone
<PAGE>
banking, PC banking, Super ATMs, video kiosk banking, and Internet banking.
For more information on Star Banc Corporation and its products and services,
visit its home page at http://www.starbank.com.
Firstar Corporation, (www.firstar.com) is a $20.4 billion financial
services company, headquartered in Milwaukee. Firstar distributes banking,
trust, insurance, securities brokerage and other financial services through
more than 240 banking offices in Wisconsin, Iowa, Minnesota, Illinois,
Arizona, and Florida, and an extensive correspondent banking network in the
Upper Midwest. Firstar has a significant investment management business;
through various affiliates it has more than $27 billion of assets under
management including those of the Firstar family of mutual funds. In
addition to its network of local bank offices, Firstar provides around the
clock telephone banking services known as Firstar Express, automated teller
machines, personal computer banking via Firstar Online and access to a broad
array of corporate information on the company's Internet home page.
# # #
This news release contains forward looking statements with respect to the
financial condition, results of operations and business of Star Banc
Corporation and assuming the consummation of the merger, a combined Firstar
and Star Banc, including statements relating to: the cost savings and
revenue enhancements and accretion to reported earnings that will be realized
from the merger; and the restructuring charges expected to be incurred in
connection with the merger. These forward looking statements involve certain
risks and uncertainties. Factors that may cause actual results to differ
materially from those contemplated by such forward looking statements
include, among other things, the following possibilities: expected cost
savings from the merger cannot be fully realized or realized within the
expected time; revenues following the merger are lower than expected;
competitive pressure among depository institutions increases significantly;
costs of the difficulties related to the integration of the business of
Firstar and Star Banc are greater than expected; changes in the interest rate
environment reduce interest margins; general economic conditions, either
nationally or in the states in which the combined company will be doing
business, are less favorable than expected; legislation or regulatory
requirements or changes adversely affect the business in which the combined
company will be engaged; and changes may occur in the securities market.
Exhibit 99.2
STAR BANC
CORPORATION
Merges with
FIRSTAR
July 1, 1998
Forward Looking Information
This presentation contains forward looking statements with respect to the
financial condition, results of operations and business of Star Banc
Corporation and Firstar Corporation assuming the consummation of the merger,
a combined Firstar and Star Banc, including statements relating to: (i) the
cost savings and revenue enhancements and accretion to reported earnings that
will be realized from the merger; and (ii) the restructuring charges expected
to be incurred in connection with the merger. These forward looking
statements involve certain risks and uncertainties. Factors that may cause
actual results to differ materially from those contemplated by such forward
looking statements include, among other things, the following possibilities:
(i) expected cost savings from the merger cannot be fully realized or
realized within the expected time; (ii) revenues following the merger are
lower than expected; (iii) competitive pressure among depository institutions
increase significantly; (iv) costs of the difficulties related to the
integration of the business of Firstar and Star are greater than expected;
(v) changes in the interest rate environment reduces interest margins; (vi)
general economic conditions, either nationally or in the states in which the
combined company will be doing business, are less favorable than expected;
(vii) legislation or regulatory requirements or changes adversely affect the
business in which the combined company will be engaged; and (viii) changes
may occur in the securities market.
<PAGE>
Transaction Summary
Name: Firstar Corporation
Headquarters: Milwaukee, Wisconsin
Structure: Pooling-of-interests
Tax-free exchange
Fixed Exchange Ratio: 0.76 share for each Firstar share
Price: $48.55 per share (Based on STB close on June
30)
$7.2 Billion Aggregate Transaction Value
Cross Option: 19.9% cross option agreements in place
Dividend: New Company intends to increase dividend
post-closing to provide Firstar shareholders
with a comparable dividend -- a 30% increase
to STB dividend
Timing: Subject to regulatory and shareholder
approvals Targeted to close fourth quarter
1998 or early first quarter 1999
Due Diligence: Completed, including year 2000 review
Senior Management: Chairman Roger Fitzsimonds
President & CEO Jerry Grundhofer
Vice Chairmen John Becker (COO)
Richard Davis
David Moffett (CFO)
Board of Directors: 18 members from Star Banc
14 members from Firstar
Transaction Pricing
Transaction multiples at $48.55 per share compare favorably to Star's trading
multiples:
<PAGE>
<TABLE>
<CAPTION>
Transaction Multiple
Transaction Star As % of Star's
Multiples<F1> Multiples<F1> Multiple
--------------------- --------------------- ------------------------
<S> <C> <C> <C>
Price as a Multiple to:
1998E EPS . . . . . . . . . . . . . . . . . . . . . 23.3x 24.1x 97%
1999E EPS . . . . . . . . . . . . . . . . . . . . . 21.4 20.0 107
1999E EPS Adjusted for Synergies<F2> . . . . . . . . 14.9 20.0 75
Book Value . . . . . . . . . . . . . . . . . . . . . 4.1 4.3 95
<FN>
<F1> Based on Star's price of $63.88 as of June 30, 1998.
<F2> Assumes full synergies are added to Firstar's 1999E net income.
Note: EPS estimates based on First Call.
</TABLE>
Transaction financially attractive to both sets of shareholders:
- Conservative assumptions yield immediate and meaningful accretion
- Increases Star Banc's EPS growth rate
Transaction financially attractive to both sets of shareholders:
Conservative assumptions yield immediate and meaningful accretion
Increases Star Banc's EPS growth rate
<PAGE>
Star Banc Stand Alone EPS - 19.6% CAGR
1994A - $1.28
1995A - $1.50
1996A - $1.79
1997A - $2.19
Star Banc Stand Alone EPS - 23.9% CAGR
1998E - $2.65
1999E - $3.20
2000E - $3.68
Pro Forma EPS - 23.9% CAGR
1998E - $2.69
1999E - $3.38
2000E - $4.13
Note: The difference between Star Banc Stand Alone EPS and Pro Forma EPS for
1999E is 6%; the difference for 2000E is 12%.
Note: Earnings estimates per First Call, June 30 1998.
<PAGE>
Pro forma company well positioned to continue record of revenue growth and
superior financial performance:
<TABLE>
<CAPTION>
Star Banc Firstar Combined<F3>
------------------- ------------------- -------------------
<S> <C> <C> <C>
Market Capitalization . . . . . . . . . . . . . . . . . . . . . $7BN $6BN $14BN
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 21 38
ROA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.90% 1.51% 2.12%
ROE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.1 17.2 23.8
Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . 47.9 59.2 45.4
Midwestern Deposit Ranking . . . . . . . . . . . . . . . . . . 15th 11th 4th
Ranking in Core Markets<F1> . . . . . . . . . . . . . . . . . . 8th 9th 2nd
States Served . . . . . . . . . . . . . . . . . . . . . . . . . 4 5<F2> 9<F2>
<FN>
<F1> Includes IA, KY, MN, OH and WI.
<F2> Excludes trust operations in Florida.
<F3> Includes full phase-in of synergies.
</TABLE>
Strategic Rationale
- -- Financially compelling for shareholders of both companies
- -- Merges proven revenue growth strategies with significantly enhanced
Midwestern footprint
- -- Diversifies geographic and business line concentrations while providing
critical mass in key business lines
A Unique Investment Opportunity
The Transaction Creates the 4th Largest Franchise in the Midwest...
<PAGE>
Star Banc Firstar
Ohio (6) Wisconsin (2)
Indiana Illinois
Kentucky (3) Iowa (3)
Tennessee Minnesota (4)
() Denotes market rank.
Transaction Enhances Top Ten Performance...
<TABLE>
<CAPTION>
Star Firstar Combined<F1>
------------------- ------------------- -------------------
<S> <C> <C> <C>
At March 31, 1998:
Efficiency Ratio . . . . . . . . . . . . . . . . . . . . . . . 48% 59% 45%
Non Interest Income/Revenue . . . . . . . . . . . . . . . . . . 31 40 38
ROA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.90 1.51 2.11
ROE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.1 17.2 23.8
NPAs/Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 0.39 0.39 0.39
At Close (12/31/98):
Tangible Equity/Tangible Assets . . . . . . . . . . . . . . . . 6.2% 7.7% 6.5%<F2>
<FN>
<F1> Includes full phase-in of synergies.
<F2> Includes effect of restructuring charge.
</TABLE>
... Capable of Achieving Industry Leading Financial Returns.
<PAGE>
ROE
Bank of New York 25%
PRO FORMA 24%
Norwest 23%
US Bancorp 22%
Comerica 22%
Suntrust 22%
Citicorp 22%
Mellon 21%
Bank Boston 21%
PNC Bank 21%
ROA
PRO FORMA 2.1%
Fifth Third 2.0%
Bank of New York 2.05%
US Bancorp 1.9%
Mellon 1.85%
Banc One 1.8%
Norwest 1.75%
Fleet 1.6%
Comerica 1.6%
National City 1.6%
Efficiency
Fifth Third 40%
PRO FORMA 45%
<PAGE>
US Bancorp 50%
Bank of New York 50%
BB&T 51%
Summit 51%
Mercantile 52%
Comerica 52%
Regions 53%
Citicorp 54%
Note: Rank among all regional banks greater than $25 BN assets, as of March
31, 1998 - which includes 29 banks. Based upon pro forma with full phase in
of projected synergies.
Star's Proven Growth Strategy...
<TABLE>
<CAPTION>
For the Year Ended Dec. 31,
--------------------------------------------------------------- CAGR
1994 1995 1996 1997 1994-1997
-------------- -------------- -------------- -------------- --------------
(Dollars in Millions)
<S> <C> <C> <C> <C> <C>
Net Interest Income (FTE) . . . . . . . . . . . $349.2 $381.6 $421.5 $465.3 10.0%
Non-Interest Income . . . . . . . . . . . . . . 117.0 138.1 170.5 204.6 20.5
------ ------ ------ ------
Revenues . . . . . . . . . . . . . . . . . . 466.2 519.7 592.0 669.9 12.8
Non-Interest Expenses . . . . . . . . . . . . . 260.3 286.2 303.2 321.8 7.3
Net Income . . . . . . . . . . . . . . . . . 116.6 136.6 158.4 194.8 18.7
Net Interest Margin . . . . . . . . . . . . . . 4.55% 4.44% 4.78% 4.94% --
Efficiency Ratio . . . . . . . . . . . . . . . 55.8 55.1 51.2 48.0 --
Non-Interest Income/Total Revenue . . . . . . . 25.1 26.6 28.8 30.5 --
</TABLE>
Based on Transitioning to Higher Yielding Loans...
<PAGE>
Star Banc Loan Portfolio
<TABLE>
<CAPTION>
As of December 31,
----------------------------------------------------------------------- CAGR
1993 1994 1995 1996 1997 1993 to 1997
------------ ------------ ------------ ------------ ------------ -------------
(Dollars in Billions)
<S> <C> <C> <C> <C> <C> <C>
Commercial . . . . . . . . . . . . . . . $2.9 $3.3 $3.5 $3.8 $4.2 10.2%
Consumer . . . . . . . . . . . . . . . . 1.4 1.8 2.2 2.6 3.0 20.3
Residential Mortgage . . . . . . . . . . 1.0 1.2 1.2 1.2 1.2 5.1
---- ---- ---- ---- ---- ----
Total Loans . . . . . . . . . . . . . $5.3 $6.2 $6.9 $7.6 $8.4 12.4%
</TABLE>
... Is Replicable in the Context of Firstar's Franchise...
Loan Portfolio Composition
<TABLE>
<CAPTION>
Star (Year End)
Firstar ------------------------------------------
Year End 1997 1993 1997
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . 57% 54% 50%
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 27 36
Residential Mortgage . . . . . . . . . . . . . . . . . . . . . 18 19 14
---- ---- ----
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 100% 100%
</TABLE>
... Since Firstar Operates in Similar Markets.
<PAGE>
<TABLE>
<CAPTION>
Star Firstar
Markets<F1> Markets Combined
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Number of Households (MM) . . . . . . . . . . . . . . . . . . . 7.5 8.1 15.6
Average Household Income . . . . . . . . . . . . . . . . . . . $46,884 $53,441 $50,396
Projected Household Growth . . . . . . . . . . . . . . . . . . 3.4% 3.5% 3.4%
Avg. MSA Share . . . . . . . . . . . . . . . . . . . . . . . . 8.3 11.3 9.9
<FN>
<F1> Includes impact of pending acquisitions.
Source: SNL Securities.
</TABLE>
New Firstar to Benefit from Achieving Critical Mass in Key Business Lines...
<TABLE>
<CAPTION>
Star Firstar Combined
At March 31, 1998 -------------------- -------------------- --------------------
(Dollars in Billions)
<S> <C> <C> <C>
Consumer Lending . . . . . . . . . . . . . . . . . . . . . . . $ 3.3 $ 3.5 $ 6.8
Commercial Lending . . . . . . . . . . . . . . . . . . . . . . 6.2 8.5 14.7
Asset Management
- -- Total AUM . . . . . . . . . . . . . . . . . . . . . . . . $11.0 $27.1 $38.1
- -- Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . 3.0 5.6 8.6
Mortgage Banking
- -- Originations<F1> . . . . . . . . . . . . . . . . . . . . . $ 2.7 $ 1.9 $ 4.6
- -- Servicing . . . . . . . . . . . . . . . . . . . . . . . . 14.4 5.7 20.1
<FN>
<F1> For the year ended December 31, 1997 pro forma for acquisitions.
</TABLE>
<PAGE>
... Enhanced Distribution Channels...
<TABLE>
<CAPTION>
Star Firstar Combined
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Branches 436 240 676
ATMs 992 451 1,443
-- Phone
Alternative Distribution Channels banking
-- PC/Internet
banking
</TABLE>
... Making The New Firstar a Truly Unique Investment Opportunity.
- -- Proven record of quality revenue/profitability growth
- -- Unique opportunity to extend proven combined management skills across an
enhanced operating platform
- -- Industry leading financial performance
Transaction Economics
- -- Significant EPS accretion based on conservative assumptions:
- 12% accretion does not include any earnings from excess capital
reinvestment
- -- Conservative expense savings assumptions -- $174 million pre-tax, 23% of
Firstar or 15% of combined expense base:
<PAGE>
- Compares to average of 27%, based on comparable transactions
- Brings Firstar's efficiency ratio in line with Star's
- -- Revenue enhancements equal to $42 million pre-tax, representing 2% of
New Firstar's total revenue
- -- Restructuring charge of $325 million pre-tax
Pro Forma Income Statement
Based on Street Estimates -- Fully Diluted, Before
Non-Recurring Items
<TABLE>
<CAPTION>
1998 1999 2000
-------------------- -------------------- --------------------
(Dollars in Millions)
<S> <C> <C> <C>
Projected Star Banc Net Income . . . . . . . . . . . . . . . . $ 294 $ 355 $ 407
Projected Firstar Net Income . . . . . . . . . . . . . . . . . 307 336 369
Cost Savings<F1> . . . . . . . . . . . . . . . . . . . . . . . -- 51 118
Revenue Enhancements . . . . . . . . . . . . . . . . . . . . . -- 14 29
------ ------ ------
Projected Net Income . . . . . . . . . . . . . . . . . . . . . $ 601 $ 756 $ 923
Projected Shares for Calculation of EPS (millions) . . . . . . 223.8 223.8 223.8
Original Star FD EPS . . . . . . . . . . . . . . . . . . . . . $ 2.65 $ 3.20 $ 3.68
Pro Forma FD EPS . . . . . . . . . . . . . . . . . . . . . . . 2.69 3.38 4.13
Accretion . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4% 5.5% 12.1%
<FN>
<F1> Net of cost of financing restructuring charge.
Note: Earnings estimates based on First Call as of June 30, 1998. Synergies
phased-in 50% in 1999 and 100% in 2000.
</TABLE>
<PAGE>
Cost Savings Opportunities
- -- Corporate activities
- Centralized staff units
- Single bank charter
- -- Data processing/operations consolidation and outsourcing
- -- Delivery system optimization
- Commercial/branch rationalization/reconfiguration
- Alternative delivery channels (call centers, PC banking, ATMs)
- -- Improved processes and staffing models
- -- Mortgage, credit card, and asset management business line consolidations
- -- Vendor leverage
<PAGE>
Expected Cost Savings
<TABLE>
<CAPTION>
Total<F1>
-------------------------------
(Dollars in Millions)
<S> <C>
Major Business Lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 60
Systems and Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
G&A/Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
-----
Annual Savings $174
=====
<FN>
<F1> Savings to be realized 50% in 1999 and 100% in 2000.
</TABLE>
Revenue Opportunities
- -- Implementation of Star's incentive based compensation program
- -- Product cross-selling opportunities
- -- Accelerated consumer loan growth
- -- New product introduction
Revenue Opportunities -- Incentive Compensation
Implementation of Star's "Pay-for-Performance" philosophy
<PAGE>
- -- All employees receive some incentive-based pay linked to shareholder
value
- -- Aligns management and employee goals
- -- Promotes selling, while encouraging efficiency and cost control
Revenues/FTE's vs. Incentive Comp Ratio
Revenues/FTE's ICR
1994 $126 6.3%
1995 $135 12.5%
1996 $148 14.3%
1997 $163 13.0%
Efficiency Ratio vs. Incentive Comp Ratio
Efficiency ICR
1994 55.8% 6.3%
1995 55.1% 12.5%
1996 51.2% 14.3%
1997 48.0% 13.0%
Merger Related Charges
<PAGE>
<TABLE>
<CAPTION>
Total
-------------------------------
(Dollars in Millions)
<S> <C>
Conversion Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 79
Employee Related . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Systems/Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Occupancy/Equipment Writedowns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
-----
Total Pre-Tax Merger-Related Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $325
=====
</TABLE>
Proven Management Experience
- -- Significant management experience
- -- Successful acquisition history
- -- Proven integration capabilities
Title at Years of
New Firstar Bank Experience
----------- ------ ------------
Roger L. Fitzsimonds Chairman Firstar 33
Jerry A. Grundhofer Pres. & CEO Wells Fargo, 30
Security Pacific/
BankAmerica, Star
John A. Becker VC, COO Firstar 31
Richard K. Davis VC Security Pacific/ 22
BankAmerica, Star
David M. Moffett VC, CFO Security Pacific/ 23
BankAmerica, Star
<PAGE>
Summary
Consistent With Strategy of the Companies
- -- Enhances long term growth prospects
- -- Stronger strategic position of franchise
Financially Compelling
- -- Double digit accretion based on conservative assumptions
- -- Strong capital ratios
- -- Top tier financial performance
Low Risk Transaction
- -- Proven management track records
- -- Achievable assumptions
- -- Significant integration experience
<PAGE>
Appendix
Comparative Performance Data
For the Quarter ended March 31, 1998
<TABLE>
<CAPTION>
Star Firstar Combined<F1>
-------------------- -------------------- --------------------
(Dollars in Millions)
<S> <C> <C> <C>
Net Interest Income, FTE . . . . . . . . . . . . . . . . . . . $614 $771 $1,385
Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 63 115
Non-Interest Income . . . . . . . . . . . . . . . . . . . . . . 297 516 855
Non-Interest Expense . . . . . . . . . . . . . . . . . . . . . 428 762 1,016
1998E Net Income . . . . . . . . . . . . . . . . . . . . . . . 294 307 748
Return on Assets . . . . . . . . . . . . . . . . . . . . . . . 1.90% 1.51% 2.12%
Return on Common Equity . . . . . . . . . . . . . . . . . . . . 20.1 17.2 23.8
Net Interest Margin . . . . . . . . . . . . . . . . . . . . . . 4.73 4.37 4.50
Efficiency Ratio . . . . . . . . . . . . . . . . . . . . . . . 47.9 59.2 45.4
Fee Income/Total Revenue . . . . . . . . . . . . . . . . . . . 31.4 40.0 38.2
<FN>
<F1> Includes full effect of synergies.
</TABLE>
<PAGE>
Loan Composition
At March 31, 1998
<TABLE>
<CAPTION>
Star(1) Firstar(2) Combined
--------------------------- --------------------------- ---------------------------
% of % of % of
Balance Total Balance Total Balance Total
------------ ------------ ------------ ------------ ------------ -------------
(Dollars in Millions)
<S> <C> <C> <C> <C> <C> <C>
Commercial & Commercial RE . . . . . . . $ 6,165 52% $ 8,473 59% $14,639 55%
1-4 Family RE . . . . . . . . . . . . . . 2,099 18 2,497 17 4,596 18
Retail and Other . . . . . . . . . . . . 3,592 30 3,380 24 6,972 27
------- ---- ------- ---- ------- ----
Total loans . . . . . . . . . . . . . $11,856 100% $14,350 100% $26,207 100%
======= ==== ======= ==== ======= ====
<FN>
<F1> Pro forma for Trans Financial and Banc One branches.
<F2> Pro forma for Cargill.
</TABLE>
<PAGE>
Deposit Composition
At March 31, 1998
<TABLE>
<CAPTION>
Star<F1> Firstar Combined
--------------------------- --------------------------- ---------------------------
% of % of % of
Balance Total Balance Total Balance Total
------------ ------------ ------------ ------------ ------------ -------------
(Dollars in Millions)
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing . . . . . . . . . . $ 2,346 18.0% $ 3,883 25.7% $ 6,229 22.1
Interest bearing
Money market . . . . . . . . . . . . . 2,196 16.8 3,170 21.0 5,366 19.0%
Other savings . . . . . . . . . . . . 2,626 20.1 3,128 20.7 5,754 20.4
Certificates . . . . . . . . . . . . . 5,886 45.1 4,944 32.7 10,830 38.4
------- ------ ------- ------ ------- ------
Total interest bearing . . . . . . . . 10,707 82.0 11,242 74.3 21,949 77.9
------- ------ ------- ------ ------- ------
Total deposits . . . . . . . . . . . . $13,053 100.0% $15,125 100.0% $28,178 100.0%
======= ====== ======= ====== ======= ======
<F1> Pro forma for Trans Financial, and Banc One branches.
</TABLE>
<PAGE>
Credit Quality
At or for the Quarter ended March 31, 1998
<TABLE>
<CAPTION>
Star Firstar Combined
-------------------- -------------------- --------------------
(Dollars in Millions)
<S> <C> <C> <C>
Total Loans . . . . . . . . . . . . . . . . . . . . . . . . . . $11,223 $13,827 $25,050
Nonperforming Loans . . . . . . . . . . . . . . . . . . . . . . 51 73 124
Nonperforming Assets . . . . . . . . . . . . . . . . . . . . . 58 80 138
Loan Loss Reserve . . . . . . . . . . . . . . . . . . . . . . . 174 219 393
NPLs/Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 0.46% 0.53% 0.50%
NPAs/Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 0.39 0.39 0.39
NCOs/Avg. Loans . . . . . . . . . . . . . . . . . . . . . . . . 0.42 0.46 0.44
Reserves/Loans . . . . . . . . . . . . . . . . . . . . . . . . 1.55 1.58 1.57
Reserves/NPLs 339.18 300.82 316.68
Reserves/NPAs 302.61 273.75 285.82
</TABLE>
Note: Data before Star's acquisition of Banc One branches and Firstar's
acquisition of Cargill leasing.
<PAGE>
Expanded Market Area
<TABLE>
<CAPTION>
Pro Forma Number of
Deposits Market Share Branches
-------------------- -------------------- --------------------
(Dollars in Millions)
<S> <C> <C> <C>
Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,040 5.4% 279
Wisconsin . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,951 12.1 118
Kentucky . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,716 8.2 109
Iowa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,311 5.8 49
Illinois . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,138 1.0 43
Minnesota . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,973 3.4 32
Indiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . 433 0.7 22
Tennessee . . . . . . . . . . . . . . . . . . . . . . . . . . . 412 0.7 16
Arizona . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160 0.4 4
</TABLE>
Source: SNL Securities. Data as of 6/30/97, adjusted for announced
transactions.
Creates Leading Midwest Banking Franchise -- Top MSA Markets
- -- Ranks among the top 5 in 11 of the 15 largest MSAs in which it operates
<PAGE>
<TABLE>
<CAPTION>
Total Market
Deposits Share of MSA Branches
MSA -------------------- -------------------- --------------------
<S> <C> <C> <C>
1. Milwaukee, WI . . . . . . . . . . . . . . . . . . . . . . $4.3 18.6% 41
2. Cincinnati, OH . . . . . . . . . . . . . . . . . . . . . . 3.3 14.4 87
3. Chicago, IL . . . . . . . . . . . . . . . . . . . . . . . 2.1 1.4 41
4. Minneapolis-St. Paul, MN . . . . . . . . . . . . . . . . . 2.0 5.7 32
5. Cleveland, OH . . . . . . . . . . . . . . . . . . . . . . 1.8 4.5 59
6. Columbus, OH . . . . . . . . . . . . . . . . . . . . . . . 1.0 4.4 34
7. Louisville, KY . . . . . . . . . . . . . . . . . . . . . . 0.9 6.2 21
8. Madison, WI . . . . . . . . . . . . . . . . . . . . . . . 0.8 15.8 9
9. Cedar Rapids, IA . . . . . . . . . . . . . . . . . . . . . 0.5 23.7 5
10. Dayton-Springfield, OH . . . . . . . . . . . . . . . . . . 0.5 5.5 28
11. Bowling Green, KY<F1> . . . . . . . . . . . . . . . . . . 0.4 36.4 6
12. Sheboygan, WI . . . . . . . . . . . . . . . . . . . . . . 0.4 31.4 2
13. Des Moines, IA . . . . . . . . . . . . . . . . . . . . . . 0.4 6.2 6
14. Hamilton-Middletown, OH . . . . . . . . . . . . . . . . . 0.3 13.4 17
15. Owensboro, KY . . . . . . . . . . . . . . . . . . . . . . 0.3 27.9 7
16. Lexington, KY . . . . . . . . . . . . . . . . . . . . . . 0.3 6.0 11
Source: SNL Securities. Data as of 6/30/97, adjusted for announced
transactions.
<FN>
<F1> Indicates market share in Federal Banking Market.
</TABLE>
