-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, b/0StMNeArAy5Iwm5m9oM6LHs8GG2aQkDzGupfCMD0vFHz3yKSprkTWiABjzL6VB BqQgZiKdT9UixMYhGZ4X9g== 0000912057-95-000643.txt : 19950515 0000912057-95-000643.hdr.sgml : 19950515 ACCESSION NUMBER: 0000912057-95-000643 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950210 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19950213 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST BANK SYSTEM INC CENTRAL INDEX KEY: 0000036104 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 410255900 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-06880 FILM NUMBER: 95509242 BUSINESS ADDRESS: STREET 1: 601 SECOND AVE S STREET 2: FIRST BANK PL CITY: MINNEAPOLIS STATE: MN ZIP: 55402-4302 BUSINESS PHONE: 6129731111 FORMER COMPANY: FORMER CONFORMED NAME: FIRST BANK STOCK CORP DATE OF NAME CHANGE: 19720317 8-K/A 1 FORM 8-K/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A - AMENDMENT NO. 4 CURRENT REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): February 13, 1995 ----------------- FIRST BANK SYSTEM, INC. ----------------------- (Exact name of registrant as specified in its charter) DELAWARE 1-6880 41-0255900 -------- ------ ---------- (State or other jurisdiction (Commission (I.R.S. Employer of Incorporation) File Number) Identification No.) 601 SECOND AVENUE SOUTH, MINNEAPOLIS, MINNESOTA 55402 ----------------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 612-973-1111 ------------ NOT APPLICABLE -------------- (Former name or former address, if changed since last report) On January 24, 1995, First Bank System, Inc. (FBS) consummated the previously announced acquisition of Metropolitan Financial Corporation (MFC). The undersigned registrant hereby amends its Current Report on Form 8-K filed on August 5, 1994, to revise the Pro Forma Financial Information as set forth in the pages attached hereto: Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (b) Pro Forma Financial Information - Proforma financial information, required to be filed pursuant to Item 7(b) of Form 8-K filed on August 5, 1994, reflecting the acquisition of Metropolitan Financial Corporation. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FIRST BANK SYSTEM, INC. By /s/ David J. Parrin -------------------------------- David J. Parrin Senior Vice President & Controller DATE: February 13, 1995 -2- Item 7(b) UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION The following unaudited Pro Forma Combined Balance Sheets as of September 30, 1994, December 31, 1993, and December 31, 1992 combine the historical consolidated balance sheets of FBS and MFC as if the Merger had been effective at each date, after giving effect to certain adjustments described in the attached Notes to Pro Forma Combined Financial Statements. The unaudited Pro Forma Combined Statements of Income and unaudited Pro Forma Combined Statements of Cash Flows for the nine months ended September 30, 1994, and for the years ended December 31, 1993, 1992 and 1991, present the combined results of operations of FBS and MFC as if the Merger had been effective at the beginning of each period, after giving effect to certain adjustments described in the attached Notes to Pro Forma Combined Financial Statements. The unaudited pro forma combined financial statements and accompanying notes reflect the application of the pooling of interests method of accounting for the MFC transaction. Under this method of accounting, the recorded assets, liabilities, shareholders' equity, income and expenses of FBS and MFC are combined and recorded at their historical amounts. The pro forma combined financial information included within is not necessarily indicative of the results of the future operations of the combined entity or the actual results that would have been achieved had the acquisition been consummated prior to the periods indicated. INDEX
PAGE ---- Pro Forma Combined Balance Sheet: September 30, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . F-2 December 31, 1993. . . . . . . . . . . . . . . . . . . . . . . . . . . F-3 December 31, 1992. . . . . . . . . . . . . . . . . . . . . . . . . . . F-4 Pro Forma Combined Statements of Income: Nine months Ended September 30, 1994 . . . . . . . . . . . . . . . . . F-5 Year ended December 31, 1993 . . . . . . . . . . . . . . . . . . . . . F-6 Year ended December 31, 1992 . . . . . . . . . . . . . . . . . . . . . F-7 Year ended December 31, 1991 . . . . . . . . . . . . . . . . . . . . . F-8 Pro Forma Combined Statements of Cash Flows: Nine months ended September 30, 1994 . . . . . . . . . . . . . . . . . F-9 Year ended December 31, 1993 . . . . . . . . . . . . . . . . . . . . . F-10 Year ended December 31, 1992 . . . . . . . . . . . . . . . . . . . . . F-11 Year ended December 31, 1991 . . . . . . . . . . . . . . . . . . . . . F-12 Notes to Pro Forma Combined Financial Statements . . . . . . . . . . . . . F-13
F-1 FIRST BANK SYSTEM, INC. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ACQUISITION OF METROPOLITAN FINANCIAL CORPORATION SEPTEMBER 30, 1994 (DOLLARS IN MILLIONS)
MERGER FBS MFC ADJUSTMENTS PRO FORMA HISTORICAL HISTORICAL (SEE NOTES) COMBINED ----------- ----------- ----------- ----------- ASSETS Cash and due from banks.......................................... $ 1,870 $ 82 $ (910) $ 1,042 Federal funds sold .............................................. 79 -- (13) 66 Securities purchased under agreements to resell and other short-term deposits................................... 281 31 312 Trading account securities....................................... 108 -- 108 Available-for-sale securities.................................... 3,377 629 1,502 5,508 Investment securities............................................ -- 1,626 (1,626) -- Loans............................................................ 19,110 5,266 24,376 Allowance for loan losses........................................ 437 40 16 493 ----------- ----------- ----------- ----------- Net loans...................................................... 18,673 5,226 (16) 23,883 Bank premises and equipment...................................... 392 101 (20) 473 Interest receivable.............................................. 138 45 183 Customers' liability on acceptances.............................. 116 -- 116 Other assets..................................................... 1,296 333 70 1,699 ----------- ----------- ----------- ----------- Total assets............................................... $ 26,330 $ 8,073 $ (1,013) $ 33,390 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY Domestic: Noninterest-bearing............................................ $ 6,030 $ 221 $ ( 39) $ 6,212 Interest-bearing............................................... 12,763 5,285 (922) 17,126 ----------- ----------- ----------- ----------- Total deposits............................................... 18,793 5,506 (961) 23,338 Federal funds purchased.......................................... 2,118 -- 2,118 Securities sold under agreements to repurchase................... 695 410 1,105 Other short-term funds borrowed.................................. 399 386 785 Long-term debt................................................... 1,265 1,137 2,402 Acceptances outstanding.......................................... 116 -- 116 Other liabilities................................................ 625 136 105 866 ----------- ----------- ----------- ----------- Total liabilities.......................................... 24,011 7,575 (856) 30,730 Shareholders' Equity Preferred stock................................................ 106 0 0 106 Common stock................................................... 145 1 26 172 Capital surplus................................................ 728 241 (74) 895 Retained earnings.............................................. 1,392 279 (132) 1,539 Treasury stock................................................. (52) (23) 23 (52) ----------- ----------- ----------- ----------- Total shareholders' equity................................. 2,319 498 (157) 2,660 ----------- ----------- ----------- ----------- Total liabilities and shareholders' equity............... $ 26,330 $ 8,073 $ (1,013) $ 33,390 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
See Notes to the unaudited Pro Forma Combined Financial Statements F-2 02/09/95 FIRST BANK SYSTEM, INC. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ACQUISITION OF METROPOLITAN FINANCIAL CORPORATION DECEMBER 31, 1993 (Dollars in Millions)
MFC ------------------------------ Merger FBS Adjustments Pro Forma Consolidated Historical (See Notes) Combined -------------- ------------------------------ ----------- ASSETS Cash and due from banks $ 1,682 $ 85 $11 $ 1,778 Federal funds sold 1,032 -- (13) 1,019 Securities purchased under agreements to resell and other short-term deposits 306 -- 306 Trading account securities 55 -- 55 Available-for-sale securities 3,319 773 (5) 4,087 Investment securities -- 943 943 Loans 18,779 4,729 23,508 Allowance for loan losses 423 43 466 ------------- ----------------------------- ------------ Net loans 18,356 4,686 23,042 Bank premises and equipment 382 92 (5) 469 Interest receivable 129 37 166 Customers' liability on acceptances 186 -- 186 Other assets 938 391 (10) 1,319 ------------- ----------------------------- ------------ Total assets $26,385 $7,007 ($22) $33,370 ------------- ----------------------------- ------------ ------------- ----------------------------- ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest-bearing $ 7,489 $ 254 $ 7,743 Interest-bearing 13,542 5,101 18,643 ------------- ----------------------------- ------------ Total deposits 21,031 5,355 26,386 Federal funds purchased 553 -- 553 Securities sold under agreements to repurchase 369 -- 369 Other short-term funds borrowed 412 165 577 Long-term debt 1,015 890 1,905 Acceptances outstanding 186 -- 186 Other liabilities 574 93 (4) 663 ------------- ----------------------------- ------------ Total liabilities 24,140 6,503 (4) 30,639 Shareholders' Equity Preferred stock 266 0 266 Common stock 144 0 26 170 Capital surplus 676 232 (56) 852 Retained earnings 1,328 285 (1) 1,612 Treasury stock (169) (13) 13 (169) ------------- ----------------------------- ------------ Total shareholders' equity 2,245 504 (18) 2,731 ------------- ----------------------------- ------------ Total liabilities and shareholders' equity $26,385 $7,007 ($22) $33,370 ------------- ----------------------------- ------------ ------------- ----------------------------- ------------
See Notes to unaudited Pro Forma Combined Financial Statements F-3 02/09/95 FIRST BANK SYSTEM, INC. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ACQUISITION OF METROPOLITAN FINANCIAL CORPORATION DECEMBER 31, 1992 (Dollars in Millions)
MFC ------------------------------ Merger FBS Adjustments Pro Forma Consolidated Historical (See Notes) Combined -------------- ------------------------------ ----------- ASSETS Cash and due from banks $1,916 $95 $10 $2,021 Federal funds sold 1,498 -- (13) 1,485 Securities purchased under agreements to resell and other short-term deposits 539 157 696 Trading account securities 94 -- 94 Available-for-sale securities 284 11 295 Investment securities 3,912 1,885 5,797 Loans 17,076 3,601 20,677 Allowance for loan losses 448 36 484 ------------- ----------------------------- ------------ Net loans 16,628 3,565 20,193 Bank premises and equipment 414 72 (4) 482 Interest receivable 148 36 184 Customers' liability on acceptances 183 -- 183 Other assets 1,009 326 (10) 1,325 ------------- ----------------------------- ------------ Total assets $26,625 $6,147 ($17) $32,755 ------------- ----------------------------- ------------ ------------- ----------------------------- ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest-bearing $6,011 $232 $6,243 Interest-bearing 15,177 4,975 20,152 ------------- ----------------------------- ------------ Total deposits 21,188 5,207 26,395 Federal funds purchased 674 -- 674 Securities sold under agreements to repurchase 448 -- 448 Other short-term funds borrowed 328 100 428 Long-term debt 822 319 1,141 Acceptances outstanding 183 -- 183 Other liabilities 664 94 (4) 754 ------------- ----------------------------- ------------ Total liabilities 24,307 5,720 (4) 30,023 Shareholders' Equity Preferred stock 379 0 379 Common stock 141 0 26 167 Capital surplus 658 149 (39) 768 Retained earnings 1,140 279 (1) 1,418 Treasury stock -- (1) 1 -- ------------- ----------------------------- ------------ Total shareholders' equity 2,318 427 (13) 2,732 ------------- ----------------------------- ------------ Total liabilities and shareholders' equity $26,625 $6,147 ($17) $32,755 ------------- ----------------------------- ------------ ------------- ----------------------------- ------------
See Notes to unaudited Pro Forma Combined Financial Statements F-4 FIRST BANK SYSTEM, INC. ACQUISITION OF METROPOLITAN FINANCIAL CORPORATION UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
FBS MFC SALE OF PRO FORMA (IN MILLIONS, EXCEPT SHARE DATA) HISTORICAL HISTORICAL SUBSIDIARY COMBINED - ----------------------------------------------------------------- ----------- ---------- ---------- ----------- INTEREST INCOME Loans............................................................ $1,091.5 $ 301.4 $1,392.9 Securities: Taxable........................................................ 151.7 91.9 243.6 Exempt from federal income taxes............................... 9.1 -- 9.1 Other interest income............................................ 18.0 4.7 22.7 ------- ---------- ------- Total interest income........................................ 1,270.3 398.0 1,668.3 INTEREST EXPENSE Deposits......................................................... 268.3 169.5 437.8 Federal funds purchased and repurchase agreements................ 60.1 6.4 66.5 Other short-term funds borrowed.................................. 10.0 11.3 21.3 Long-term debt................................................... 48.1 46.5 94.6 ------- ---------- ------- Total interest expense....................................... 386.5 233.7 620.2 ------- ---------- ------- Net interest income.............................................. 883.8 164.3 1,048.1 Provision for credit losses...................................... 70.0 9.6 79.6 ------- ---------- ------- Net interest income after provision for credit losses............ 813.8 154.7 968.5 NONINTEREST INCOME Trust fees....................................................... 117.5 -- 117.5 Credit card fees................................................. 128.7 -- 128.7 Service charges on deposit accounts.............................. 87.7 9.7 97.4 Edina Realty commission income................................... -- 27.8 $ (27.8) -- Insurance commissions............................................ 17.4 6.5 23.9 Securities gains................................................. (2.8) (0.1) (2.9) Other............................................................ 116.4 19.2 (0.4) 135.2 ------- ---------- ---------- ------- Total noninterest income..................................... 464.9 63.1 (28.2) 499.8 NONINTEREST EXPENSE Salaries......................................................... 292.9 50.5 (7.9) 335.5 Employee benefits................................................ 70.6 13.1 (1.3) 82.4 Net occupancy.................................................... 65.7 19.1 (5.6) 79.2 Furniture and equipment.......................................... 58.1 4.5 (1.0) 61.6 FDIC insurance................................................... 34.8 9.2 44.0 Professional services............................................ 23.6 4.2 (0.7) 27.1 Amortization of goodwill and other intangibles................... 28.4 3.9 (0.5) 31.8 Other............................................................ 208.3 63.2 (22.4) 249.1 ------- ---------- ---------- ------- Total noninterest expense.................................... 782.4 167.7 (39.4) 910.7 ------- ---------- ---------- ------- Income before income taxes....................................... 496.3 50.1 11.2 557.6 Applicable income taxes.......................................... 187.0 19.1 4.1 210.2 ------- ---------- ---------- ------- Net income....................................................... $ 309.3 $ 31.0 $ 7.1 $ 347.4 ------- ---------- ---------- ------- ------- ---------- ---------- ------- Net income applicable to common equity........................... $ 300.0 $ 338.1 ------- ------- ------- ------- EARNINGS PER COMMON SHARE Average common and common equivalent shares...................... 114,347,741 136,331,806 Primary and fully diluted net income............................. $2.62 $2.48
See Notes to unaudited Pro Forma Combined Financial Statements F-5 FIRST BANK SYSTEM, INC. ACQUISITION OF METROPOLITAN FINANCIAL CORPORATION UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1993
FBS MFC SALE OF PRO FORMA (IN MILLIONS, EXCEPT SHARE DATA) HISTORICAL HISTORICAL SUBSIDIARY COMBINED - ----------------------------------------------------------------- ------------ ---------- ---------- ----------- INTEREST INCOME Loans............................................................ $1,398.6 $ 331.9 $1,730.5 Securities: Taxable........................................................ 218.2 136.0 354.2 Exempt from federal income taxes............................... 14.6 -- 14.6 Other interest income............................................ 30.4 4.8 35.2 ----- ---------- ------- Total interest income........................................ 1,661.8 472.7 2,134.5 INTEREST EXPENSE Deposits......................................................... 423.7 231.8 655.5 Federal funds purchased and repurchase agreements................ 31.8 -- 31.8 Other short-term funds borrowed.................................. 19.0 1.2 20.2 Long-term debt................................................... 54.4 41.6 96.0 ----- ---------- ------- Total interest expense....................................... 528.9 274.6 803.5 ----- ---------- ------- Net interest income.............................................. 1,132.9 198.1 1,331.0 Provision for credit losses...................................... 125.2 7.8 133.0 ----- ---------- ------- Net interest income after provision for credit losses............ 1,007.7 190.3 1,198.0 NONINTEREST INCOME Trust fees....................................................... 146.1 -- 146.1 Credit card fees................................................. 137.1 -- 137.1 Service charges on deposit accounts.............................. 115.3 11.5 126.8 Edina Realty commission income................................... -- 35.3 $(35.3) 0.0 Insurance commissions............................................ 20.9 4.6 25.5 Securities gains................................................. 0.3 -- 0.3 Other............................................................ 149.9 37.1 (0.9) 186.1 ----- ---------- ---------- ------- Total noninterest income..................................... 569.6 88.5 (36.2) 621.9 NONINTEREST EXPENSE Salaries......................................................... 389.1 63.1 (9.4) 442.8 Employee benefits................................................ 86.3 14.8 (1.5) 99.6 Net occupancy.................................................... 93.4 23.2 (6.4) 110.2 Furniture and equipment.......................................... 72.7 5.3 (1.4) 76.6 FDIC insurance................................................... 46.4 11.1 57.5 Professional services............................................ 36.7 4.9 (1.1) 40.5 Amortization of goodwill and other intangibles................... 30.6 4.1 34.7 Merger, integration and restructuring............................ 72.2 3.5 75.7 Other............................................................ 273.1 62.3 (13.3) 322.1 ----- ---------- ---------- ------- Total noninterest expense.................................... 1,100.5 192.3 (33.1) 1,259.7 ----- ---------- ---------- ------- Income before income taxes....................................... 476.8 86.5 (3.1) 560.2 Applicable income taxes.......................................... 178.8 21.3 (1.5) 198.6 ----- ---------- ---------- ------- Net income....................................................... $ 298.0 $ 65.2 $ (1.6) $ 361.6 ------- ---------- ---------- ------- ------- ---------- ---------- ------- Net income applicable to common equity........................... $ 270.2 $ 333.8 ------- ------- ------- ------- EARNINGS PER COMMON SHARE Average common and common equivalent shares...................... 113,075,429 134,615,088 Primary and fully diluted net income............................. $2.39 $2.48
See Notes to unaudited Pro Forma Combined Financial Statements F-6 FIRST BANK SYSTEM, INC. ACQUISITION OF METROPOLITAN FINANCIAL CORPORATION UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1992
FBS MFC SALE OF PRO FORMA (IN MILLIONS, EXCEPT SHARE DATA) HISTORICAL HISTORICAL SUBSIDIARY COMBINED - ----------------------------------------------------------------- ------------ ---------- ---------- ----------- INTEREST INCOME Loans............................................................ $1,418.8 $ 268.2 $1,687.0 Securities: Taxable........................................................ 186.4 151.8 338.2 Exempt from federal income taxes............................... 12.0 -- 12.0 Other interest income............................................ 64.1 4.8 68.9 ------- ---------- ------- Total interest income........................................ 1,681.3 424.8 2,106.1 INTEREST EXPENSE Deposits......................................................... 568.7 234.3 803.0 Federal funds purchased and repurchase agreements................ 37.1 -- 37.1 Other short-term funds borrowed.................................. 14.3 2.8 17.1 Long-term debt................................................... 66.1 35.1 101.2 ------- ---------- ------- Total interest expense....................................... 686.2 272.2 958.4 ------- ---------- ------- Net interest income.............................................. 995.1 152.6 1,147.7 Provision for credit losses...................................... 183.4 8.3 191.7 ------- ---------- ------- Net interest income after provision for credit losses............ 811.7 144.3 956.0 NONINTEREST INCOME Trust fees....................................................... 127.8 -- 127.8 Credit card fees................................................. 116.9 -- 116.9 Service charges on deposit accounts.............................. 108.4 6.9 115.3 Edina Realty commission income................................... -- 32.1 $(32.1) 0.0 Insurance commissions............................................ 27.3 0.9 28.2 Securities gains................................................. 1.9 44.3 46.2 Other............................................................ 153.4 29.5 (1.8) 181.1 ------- ---------- ---------- ------- Total noninterest income..................................... 535.7 113.7 (33.9) 615.5 NONINTEREST EXPENSE Salaries......................................................... 388.7 48.8 (8.8) 428.7 Employee benefits................................................ 85.5 11.5 (1.4) 95.6 Net occupancy.................................................... 87.9 16.0 (6.2) 97.7 Furniture and equipment.......................................... 67.2 3.9 (1.3) 69.8 FDIC insurance................................................... 42.2 9.3 51.5 Professional services............................................ 38.7 4.8 (0.3) 43.2 Amortization of goodwill and other intangibles................... 25.2 4.0 29.2 Merger, integration and restructuring............................ 84.0 -- 84.0 Other............................................................ 294.9 49.6 (12.8) 331.7 ------- ---------- ---------- ------- Total noninterest expense.................................... 1,114.3 147.9 (30.8) 1,231.4 ------- ---------- ---------- ------- Income before income taxes....................................... 233.1 110.1 (3.1) 340.1 Applicable income taxes.......................................... 78.6 42.6 (1.4) 119.8 ------- ---------- ---------- ------- Income before extraordinary item and cumulative effect of changes in accounting principles........................................ 154.5 67.5 (1.7) 220.3 Extraordinary item............................................... -- (6.3) (6.3) Cumulative effect of changes in accounting principles............ 157.3 75.9 233.2 ------- ---------- ---------- ------- Net income....................................................... $ 311.8 $ 137.1 ($ 1.7) $ 447.2 ------- ---------- ---------- ------- ------- ---------- ---------- ------- Net income applicable to common equity........................... $ 281.6 $ 417.0 ------- ------- ------- ------- EARNINGS PER COMMON SHARE Average common and common equivalent shares...................... 105,361,022 124,670,657 Primary and fully diluted income before extraordinary item and cumulative effect of changes in accounting principles........... $1.18 $1.52 Primary and fully diluted net income............................. 2.67 3.34
See Notes to unaudited Pro Forma Combined Financial Statements F-7 FIRST BANK SYSTEM, INC. ACQUISITION OF METROPOLITAN FINANCIAL CORPORATION UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1991
FBS MFC SALE OF PRO FORMA (IN MILLIONS, EXCEPT SHARE DATA) HISTORICAL HISTORICAL SUBSIDIARY COMBINED - ----------------------------------------------------------------- ------------ ---------- ---------- ----------- INTEREST INCOME Loans............................................................ $1,624.3 $217.0 $1,841.3 Securities: Taxable........................................................ 221.1 159.9 381.0 Exempt from federal income taxes............................... 19.1 -- 19.1 Other interest income............................................ 97.5 30.1 127.6 ------- ---------- ------- Total interest income........................................ 1,962.0 407.0 2,369.0 INTEREST EXPENSE Deposits......................................................... 872.8 256.0 1,128.8 Federal funds purchased and repurchase agreements................ 57.9 -- 57.9 Other short-term funds borrowed.................................. 24.2 5.6 29.8 Long-term debt................................................... 100.3 40.3 140.6 ------- ---------- ------- Total interest expense....................................... 1,055.2 301.9 1,357.1 ------- ---------- ------- Net interest income.............................................. 906.8 105.1 1,011.9 Provision for credit losses...................................... 202.2 8.0 210.2 ------- ---------- ------- Net interest income after provision for credit losses............ 704.6 97.1 801.7 NONINTEREST INCOME Trust fees....................................................... 115.5 -- 115.5 Credit card fees................................................. 94.4 -- 94.4 Service charges on deposit accounts.............................. 97.2 5.4 102.6 Edina Realty commission income................................... -- 26.2 $(26.2) 0.0 Insurance commissions............................................ 27.2 -- 27.2 Securities gains................................................. 8.9 33.4 42.3 Other............................................................ 154.5 23.8 (1.9) 176.4 ------- ---------- ---------- ------- Total noninterest income..................................... 497.7 88.8 (28.1) 558.4 NONINTEREST EXPENSE Salaries......................................................... 371.7 39.5 (9.1) 402.1 Employee benefits................................................ 79.3 8.5 87.8 Net occupancy.................................................... 84.0 14.6 (5.9) 92.7 Furniture and equipment.......................................... 64.8 3.0 (1.4) 66.4 FDIC insurance................................................... 38.5 8.0 46.5 Professional services............................................ 37.8 2.3 (0.4) 39.7 Amortization of goodwill and other intangibles................... 21.6 5.4 27.0 Other............................................................ 271.6 42.8 (11.2) 303.2 ------- ---------- ---------- ------- Total noninterest expense.................................... 969.3 124.1 (28.0) 1,065.4 ------- ---------- ---------- ------- Income before income taxes....................................... 233.0 61.8 (0.1) 294.7 Applicable income taxes.......................................... 25.9 4.4 30.3 ------- ---------- ---------- ------- Net income....................................................... $ 207.1 $ 57.4 $ (0.1) $ 264.4 ------- ---------- ---------- ------- ------- ---------- ---------- ------- Net income applicable to common equity........................... $ 183.4 $ 240.7 ------- ------- ------- ------- EARNINGS PER COMMON SHARE Average common and common equivalent shares...................... 102,533,284 117,259,058 Primary net income............................................... $1.79 $2.05 Fully diluted net income......................................... 1.78 1.97
See Notes to unaudited Pro Forma Combined Financial Statements F-8 FIRST BANK SYSTEM, INC. ACQUISITION OF METROPOLITAN FINANCIAL CORPORATION UNAUDITED PRO FORMA COMBINED STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
MFC ---------------------------------------------- FBS SALE OF MERGER PRO FORMA (IN MILLIONS) HISTORICAL HISTORICAL SUBSIDIARY ADJUSTMENTS COMBINED - ------------------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income $ 309.3 $ 31.0 $ 7.1 -- $ 347.4 Net after tax effect of merger adjustments (131.2) (131.2) Adjustments to reconcile net income to net cash provided by operating activities: Provision for credit losses 70.0 9.6 16.5 96.1 Provision for merger and integration -- -- 120.9 120.9 Provision for deferred income taxes 36.0 10.2 (95.0) (48.8) Depreciation and amortization of bank premises and equipment 47.0 8.3 (1.0) 54.3 Amortization and write-downs of loan servicing related intangibles 13.3 13.8 27.1 Amortization of goodwill and other intangible assets 28.4 8.2 (0.5) 36.1 Write-downs of other real estate 1.2 -- 2.6 3.8 Changes in operating assets and liabilities, excluding the effects of purchase acquisitions: (Increase) decrease in trading account securities (53.8) -- (53.8) Decrease (increase) in loans held for sale 822.1 (34.3) 787.8 Increase in securities held for sale -- -- (1,502.0) (1,502.0) Decrease (increase) in accrued receivables 29.2 (5.1) 6.4 30.5 (Decrease) increase in accrued liabilities (38.1) 11.5 (13.6) 15.2 (25.0) Other - net (17.5) 21.0 3.5 ----------------------------------------------------------------------- Net cash provided by operating activities 1,247.1 74.2 (1.6) (1,573.0) (253.3) INVESTING ACTIVITIES Net cash provided (used) by: Interest-bearing deposits with banks 9.1 51.3 60.4 Loans outstanding of subsidiaries (325.4) (578.6) (904.0) Securities purchased under agreements to resell 24.5 -- 24.5 Securities transactions: Sales 749.6 241.5 1,626.0 2,617.1 Maturities 671.0 525.3 1,196.3 Purchases (787.3) (383.4) (1,170.7) Proceeds from sales/repayments of other real estate 49.9 39.0 88.9 Proceeds from sales of bank premises and equipment 3.5 -- 3.5 Purchases of bank premises and equipment (40.8) (7.7) 1.7 (46.8) Purchases of loans (29.9) (466.4) (496.3) Cash and cash equivalents of acquired subsidiaries 74.5 -- 74.5 Business dispositions (acquisitions), net of cash received (57.4) (49.8) (107.2) Other - net (12.2) 9.1 (3.1) ----------------------------------------------------------------------- Net cash provided (used) by investing activities 329.1 (619.7) 1.7 1,626.0 1,337.1 FINANCING ACTIVITIES Net cash provided (used) by: Deposits (3,748.4) (271.2) (961.0) (4,980.6) Federal funds purchased and securities sold under agreements to repurchase 1,585.2 410.0 1,995.2 Short-term borrowings (33.1) -- (33.1) Long-term debt transactions: Proceeds 359.7 1,029.1 1,388.8 Principal payments (125.1) (605.5) (730.6) Redemption of preferred stock (167.0) -- (167.0) Proceeds from dividend reinvestment, stock option, and stock purchase plans 16.9 8.5 25.4 Purchase of treasury stock and stock warrants (126.5) (10.0) (13.2) (149.7) Stock warrants exercised 5.1 1.2 6.3 Cash dividends (107.5) (19.8) (127.3) ----------------------------------------------------------------------- Net cash used by financing activities (2,340.7) 542.3 0.0 (974.2) (2,772.6) ----------------------------------------------------------------------- Change in cash and cash equivalents (764.5) (3.2) 0.1 (921.2) (1,688.8) Cash and cash equivalents at beginning of period 2,713.5 85.1 10.5 (13.2) 2,795.9 ----------------------------------------------------------------------- Cash and cash equivalents at end of period $1,949.0 $ 81.9 $ 10.6 ($934.4) $1,107.1 ----------------------------------------------------------------------- -----------------------------------------------------------------------
See Notes to Unaudited Pro Forma Combined Financial Statements F-9 FIRST BANK SYSTEM, INC. ACQUISITION OF METROPOLITAN FINANCIAL CORPORATION UNAUDITED PRO FORMA COMBINED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1993
MFC ---------------------------------------------- FBS SALE OF MERGER PRO FORMA (IN MILLIONS) HISTORICAL HISTORICAL SUBSIDIARY ADJUSTMENTS COMBINED - ------------------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income $ 298.0 $ 65.2 ($1.6) $ 361.6 Adjustments to reconcile net income to net cash provided by operating activities: Provision for credit losses 125.2 7.9 133.1 Provision for merger and integration 72.2 -- 72.2 Provision for deferred income taxes 64.0 11.6 75.6 Depreciation and amortization of bank premises and equipment 58.4 9.3 (1.3) 66.4 Amortization and write-downs of loan servicing related intangibles 55.5 13.5 69.0 Amortization of goodwill and other intangible assets 30.6 10.7 (0.6) 40.7 Write-downs of other real estate 18.1 4.5 (0.3) 22.3 Changes in operating assets and liabilities, excluding the effects of purchase acquisitions: (Increase) decrease in trading account securities 39.3 -- 39.3 Decrease (increase) in loans held for sale (379.8) (414.8) (794.6) Decrease in securities held for sale 429.9 660.1 5.1 1,095.1 Decrease (increase) in accrued receivables (10.2) 4.4 (5.8) (Decrease) increase in accrued liabilities (152.3) (21.7) (0.6) (174.6) Other - net (81.6) 7.1 0.8 (73.7) ----------------------------------------------------------------------- Net cash provided by operating activities 567.3 357.8 (3.6) 5.1 926.6 INVESTING ACTIVITIES Net cash provided (used) by: Interest-bearing deposits with banks 322.5 75.1 397.6 Loans outstanding of subsidiaries (1,428.3) (875.9) (2,304.2) Securities purchased under agreements to resell (93.4) -- (93.4) Securities transactions: Sales 46.8 0.1 46.9 Maturities 1,235.5 901.9 2,137.4 Purchases (889.4) (359.4) (1,248.8) Proceeds from sales/repayments of other real estate 99.5 35.3 134.8 Proceeds from sales of bank premises and equipment 31.5 -- 31.5 Purchases of bank premises and equipment (111.6) (23.1) 2.2 (132.5) Purchases of loans (32.6) (172.5) (205.1) Cash and cash equivalents of acquired subsidiaries -- 8.9 8.9 Business dispositions (acquisitions), net of cash received (3.0) (15.6) (18.6) Sale of unconsolidated subsidiaries 12.8 -- 12.8 Other - net (26.3) 48.0 0.3 22.0 ----------------------------------------------------------------------- Net cash provided (used) by investing activities (836.0) (377.2) 2.5 (1,210.7) FINANCING ACTIVITIES Net cash provided (used) by: Deposits (68.6) (530.5) (599.1) Federal funds purchased and securities sold under agreements to repurchase (198.9) -- (198.9) Short-term borrowings 57.0 -- 57.0 Long-term debt transactions: Proceeds 440.0 770.0 1,210.0 Principal payments (256.2) (221.8) 0.1 (477.9) Redemption of preferred stock (115.2) -- (115.2) Proceeds from dividend reinvestment, stock option, and stock purchase plans 34.5 15.9 50.4 Purchase of treasury stock and stock warrants (187.1) (11.9) (5.1) (204.1) Stock warrants exercised -- 0.9 0.9 Cash dividends (137.5) (13.5) 2.0 (149.0) ----------------------------------------------------------------------- Net cash used by financing activities (432.0) 9.1 2.1 (5.1) (425.9) ----------------------------------------------------------------------- Change in cash and cash equivalents (700.7) (10.3) 1.0 0.0 (710.0) Cash and cash equivalents at beginning of year 3,414.2 95.4 9.5 (13.2) 3,505.9 ----------------------------------------------------------------------- Cash and cash equivalents at end of year $2,713.5 $ 85.1 $10.5 ($13.2) $2,795.9 ----------------------------------------------------------------------- -----------------------------------------------------------------------
See Notes to Unaudited Pro Forma Combined Financial Statements F-10 FIRST BANK SYSTEM, INC. ACQUISITION OF METROPOLITAN FINANCIAL CORPORATION UNAUDITED PRO FORMA COMBINED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1992
MFC ---------------------------------------------- FBS SALE OF MERGER PRO FORMA (IN MILLIONS) HISTORICAL HISTORICAL SUBSIDIARY ADJUSTMENTS COMBINED - ------------------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income $311.8 $ 137.1 ($2.0) $ 446.9 Adjustments to reconcile net income to net cash provided by operating activities: Provision for credit losses 183.4 8.3 191.7 Provision for merger and integration 84.0 -- 84.0 Provision for deferred income taxes 22.2 24.6 46.8 Depreciation and amortization of bank premises and equipment 48.6 6.7 (0.8) 54.5 Amortization and write-downs of loan servicing related intangibles 14.3 2.9 17.2 Amortization of goodwill and other intangible assets 25.2 8.8 (0.6) 33.4 Write-downs of other real estate 47.5 4.5 (1.2) 50.8 Cumulative effect of accounting changes (157.3) (75.9) (233.2) Changes in operating assets and liabilities, excluding the effects of purchase acquisitions: (Increase) decrease in trading account securities 57.2 -- 57.2 Decrease (increase) in loans held for sale (191.4) (574.0) (765.4) Decrease in securities held for sale 183.4 1,308.0 1,491.4 Decrease (increase) in accrued receivables 23.3 3.8 (1.0) 26.1 (Decrease) increase in accrued liabilities 1.0 6.5 (1.2) 6.3 Other - net 15.0 6.4 1.1 22.5 ----------------------------------------------------------------------- Net cash provided by operating activities 668.2 867.7 (5.7) 1,530.2 INVESTING ACTIVITIES Net cash provided (used) by: Interest-bearing deposits with banks 85.7 (121.1) (35.4) Loans outstanding of subsidiaries 160.8 (417.0) (256.2) Securities purchased under agreements to resell (76.7) -- (76.7) Securities transactions: Sales 35.5 5.5 41.0 Maturities 970.7 503.3 1,474.0 Purchases (1,555.5) (1,025.5) (2,581.0) Proceeds from sales/repayments of other real estate 95.8 41.4 137.2 Proceeds from sales of bank premises and equipment 9.7 -- 9.7 Purchases of bank premises and equipment (99.3) (27.4) 1.6 (125.1) Purchases of loans (56.8) (104.9) (161.7) Cash and cash equivalents of acquired subsidiaries 197.1 3.6 200.7 Business dispositions (acquisitions), net of cash received 67.4 317.9 385.3 Other - net 33.2 (4.1) 29.1 ----------------------------------------------------------------------- Net cash provided (used) by investing activities (132.4) (828.3) 1.6 (959.1) FINANCING ACTIVITIES Net cash provided (used) by: Deposits 138.8 212.3 351.1 Federal funds purchased and securities sold under agreements to repurchase 12.5 -- 12.5 Short-term borrowings (32.5) (2.4) (34.9) Long-term debt transactions: Proceeds 160.8 2,019.3 2,180.1 Principal payments (294.2) (2,228.1) 0.2 (2,522.1) Redemption of preferred stock -- (0.8) (0.8) Proceeds from dividend reinvestment, stock option, and stock purchase plans 30.2 7.2 37.4 Stock warrants exercised -- 0.2 0.2 Cash dividends (103.3) (9.1) 3.1 (109.3) ----------------------------------------------------------------------- Net cash used by financing activities (87.7) (1.4) 3.3 (85.8) ----------------------------------------------------------------------- Change in cash and cash equivalents 448.1 38.0 (0.8) 485.3 Cash and cash equivalents at beginning of year 2,966.1 57.4 10.3 (13.2) 3,020.6 ----------------------------------------------------------------------- Cash and cash equivalents at end of year $3,414.2 $ 95.4 $ 9.5 ($13.2) $3,505.9 ----------------------------------------------------------------------- -----------------------------------------------------------------------
See Notes to Unaudited Pro Forma Combined Financial Statements F-11 FIRST BANK SYSTEM, INC. ACQUISITION OF METROPOLITAN FINANCIAL CORPORATION UNAUDITED PRO FORMA COMBINED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1991
MFC ---------------------------------------------- FBS SALE OF MERGER PRO FORMA (IN MILLIONS) HISTORICAL HISTORICAL SUBSIDIARY ADJUSTMENTS COMBINED - ------------------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income $ 207.1 $ 57.4 ($0.1) $ 264.4 Adjustments to reconcile net income to net cash provided by operating activities: Provision for credit losses 202.2 8.0 210.2 Provision for deferred income taxes 5.1 -- 5.1 Depreciation and amortization of bank premises and equipment 42.6 4.2 (0.9) 45.9 Amortization and write-downs of loan servicing related intangibles 5.5 -- 5.5 Amortization of goodwill and other intangible assets 21.6 8.3 (0.6) 29.3 Write-downs of other real estate 32.2 -- 0.8 33.0 Changes in operating assets and liabilities, excluding the effects of purchase acquisitions: (Increase) decrease in trading account securities (15.5) -- (15.5) Decrease (increase) in loans held for sale (132.3) 498.1 365.8 Decrease in securities held for sale 42.8 263.3 306.1 Decrease (increase) in accrued receivables (6.9) 11.0 0.1 4.2 (Decrease) increase in accrued liabilities (64.2) 2.7 (0.9) (62.4) Other - net (57.6) (9.3) (1.2) (68.1) --------------------------------------------------------------------- Net cash provided by operating activities 282.6 843.7 (2.8) 1,123.5 INVESTING ACTIVITIES Net cash provided (used) by: Interest-bearing deposits with banks (352.2) 33.5 (318.7) Loans outstanding of subsidiaries 1,104.1 (777.9) 326.2 Securities purchased under agreements to resell 114.1 -- 114.1 Securities transactions: Sales 794.2 -- 794.2 Maturities 686.6 248.1 934.7 Purchases (1,010.0) (692.9) (1,702.9) Proceeds from sales/repayments of other real estate 85.5 24.7 110.2 Proceeds from sales of bank premises and equipment 5.6 -- 5.6 Purchases of bank premises and equipment (53.3) (9.3) 1.4 (61.2) Purchases of loans (690.4) (144.5) (834.9) Business dispositions (acquisitions), net of cash received (241.8) -- 11.8 (230.0) Settlement of FSLIC covered assets -- 67.3 67.3 Other - net 47.7 (21.2) 26.5 --------------------------------------------------------------------- Net cash provided (used) by investing activities 490.1 (1,272.2) 13.2 (768.9) FINANCING ACTIVITIES Net cash provided (used) by: Deposits (233.0) 429.9 196.9 Federal funds purchased and securities sold under agreements to repurchase (367.7) -- (367.7) Short-term borrowings 32.7 (224.1) 0.2 (191.2) Long-term debt transactions: Proceeds 179.6 310.7 (1.6) 488.7 Principal payments (737.6) (441.8) 1.8 (1,177.6) Settlement of FSLIC notes receivable -- 365.8 365.8 Redemption of preferred stock 111.7 -- (13.2) 98.5 Proceeds from dividend reinvestment, stock option, and stock purchase plans 19.0 4.9 23.9 Stock warrants exercised -- -- -- Cash dividends (89.3) (9.3) (98.6) --------------------------------------------------------------------- Net cash used by financing activities (1,084.6) 436.1 0.4 (13.2) (661.3) --------------------------------------------------------------------- Change in cash and cash equivalents (311.9) 7.6 10.8 (13.2) (306.7) Cash and cash equivalents at beginning of year 3,278.0 49.8 (0.5) -- 3,327.3 --------------------------------------------------------------------- Cash and cash equivalents at end of year $2,966.1 $ 57.4 $ 10.3 ($13.2) $3,020.6 --------------------------------------------------------------------- ---------------------------------------------------------------------
See Notes to Unaudited Pro Forma Combined Financial Statements F-12 NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS NOTE A: BASIS OF PRESENTATION Effective January 24, 1995, First Bank System, Inc. ("FBS") completed the acquisition of Metropolitan Financial Corporation ("MFC"), a regional financial services holding company headquartered in Minneapolis, Minnesota, with $7.9 billion in assets, $5.5 billion in deposits and $347.6 million in shareholders' equity. FBS issued approximately 21.7 million shares of its common stock in exchange for all outstanding common stock of MFC. The merger with MFC was accounted for by FBS under the pooling of interests method of accounting in accordance with APB No. 16 and, accordingly, this method has been applied in the unaudited pro forma combined financial statements. Under this method of accounting, the recorded assets, liabilities, shareholders' equity, income, and expenses of FBS and MFC are combined and recorded at their historical amounts. Pursuant to the merger agreement certain adjustments were recorded by MFC in December 1994, primarily to accrue for specific, identified costs related to the merger that are expected to be incurred within one year of the closing and to establish additional credit loss reserves that may be necessary to reflect FBS' plans with respect to the anticipated timing of and strategies related to the disposition of problem assets. The amounts of merger- related costs included or disclosed in these unaudited pro forma combined financial statements reflect these adjustments recorded by MFC. The Unaudited Pro Forma Combined Balance Sheets are based on the unaudited consolidated balance sheets of FBS and MFC as of September 30, 1994, December 31, 1993 and December 31, 1992. The Unaudited Pro Forma Combined Statements of Income and Unaudited Pro Forma Combined Statements of Cash Flows are based on the unaudited consolidated statements of income and statements of cash flows of FBS and MFC. FBS expects to achieve operating cost savings primarily through reductions in staff, the consolidation and elimination of certain duplicate or excess office facilities, and the consolidation of certain data processing and other back office operations. The operating cost savings are expected to be achieved in various amounts at various times during the year subsequent to the closing and not ratably over, or at the beginning or end of, such period. No adjustment has been included in the unaudited pro forma combined financial statements for the anticipated operating cost savings. Certain amounts in the historical financial statements of MFC have been reclassified in the unaudited pro forma combined financial statements to conform to FBS' historical financial statement presentation. FBS completed the acquisition of Boulevard Bancorp, Inc. ("BBI") on March 25, 1994, and used the purchase method of accounting for the transaction. BBI, a holding company for four banks located in Chicago, Illinois, had $1.6 billion in assets and $1.2 billion in deposits. The unaudited statement of income for FBS for the nine months ended September 30, 1994, included the results of operations of BBI since its acquisition date of March 25, 1994. The unaudited pro forma combined statements of income do not include the results of operations of BBI prior to March 25, 1994 as they are immaterial. The FBS results of operations for the year ended December 31, 1993, included merger-related charges of $72.2 million ($50.0 million after tax) associated with the acquisition of Colorado National Bankshares, Inc. These charges include a $29.7 million provision for anticipated integration costs, system conversions, and customer communication costs and a $14.3 million write-down of premises and equipment related to redundant main office and branch facilities. Other charges, totaling $28.2 million, primarily involved severance. The FBS results of operations for the year ended December 31, 1992, included the effect of adopting two new accounting standards: Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," and SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions." Income from continuing operations before cumulative effect of changes in accounting principles for the year ended December 31, 1992, was reduced by $56.6 million as a result of increased income tax expense under SFAS No. 109 and $1.0 million for increased employee benefit expenses under SFAS No. 106. In addition, the net cumulative effect for prior years of adopting SFAS No. 109 and SFAS No. 106 resulted in a $157.3 million increase in net income in 1992. F-13 NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED) Also included in FBS results of operations for 1992 are merger-related charges of $124.0 million ($81.8 million after tax) associated with the acquisitions of Western Capital Investment Corporation and Bank Shares Incorporated. These charges included a $13.6 million provision for credit losses, a $26.4 million provision for losses on other real estate, and $84.0 million in merger, integration and conversion provisions. These provisions were made to reflect FBS' intentions with respect to the disposition of problem assets and to provide for anticipated merger-related costs. The MFC results of operations for the nine months ended September 30, 1994 include charges totaling $9.5 million (net of tax), or approximately $.30 per share, related to the planned merger with FBS and the tentative settlement of two class action lawsuits against MFC and its subsidiaries, Edina Realty, Inc. and Equity Title Services, Inc. Expenses related to the merger totaled $1.4 million. An accrual of $14 million was recorded in the third quarter for costs associated with the tentative settlement of the lawsuits. The settlement was announced in September 1994 and recived final court approval in January 1995. MFC's earnings in 1992 include $75,941,000 resulting from the cumulative effect of an accounting change related to the adoption of SFAS No. 109, "Accounting for Income Taxes" (SFAS 109). The prospective adoption of SFAS 109 resulted in an effective tax rate of nearly 39 percent in 1992 compared with 7 percent in 1991 and a tax benefit in 1990. The net effect of the adoption of SFAS 109 on current year net income was an increase of $41.5 million. NOTE B: SALE OF BRANCHES Subsequent to the Merger, FBS sold the deposit relationships associated with 63 excess branch locations. In addition, certain fixed assets which are used to service those deposit relationships were sold. NOTE C: CLASSIFICATION OF INVESTMENT SECURITIES Effective December 31, 1993, FBS adopted the provisions of Statement of Financial Accounting Standards ("SFAS") 115, "Accounting for Certain Investments in Debt and Equity Securities" and reported its entire $3.3 billion investment portfolio as available for sale. To align MFC's interest rate risk profile more closely with the parameters of FBS asset/liability management policies, MFC sold in January 1995 approximately $1.56 billion in mortgage-backed securities. Accordingly, the unaudited pro forma combined statements reflect the reclassification of MFC's investment securities to available for sale and the recording of an unrealized loss of $111 million. NOTE D: SALE OF REAL ESTATE BROKERAGE SUBSIDIARY Because of regulatory restrictions on nonbanking activities, FBS expects that within two years of the closing of the Merger, it will sell Edina Realty, Inc., MFC's real estate brokerage subsidiary. NOTE E: REORGANIZATION AND RESTRUCTURING ACCRUALS The pro forma statements include the additional accruals and reserves recorded by MFC in December 1994, pursuant to the Merger agreement, to reflect the plans of FBS with respect to the conduct of MFC's business following the Merger, including the anticipated timing of and strategies for the disposition of problem assets, and to provide for certain costs and expenses relating to the Merger. In December 1994, MFC established additional credit-related reserves of approximately $16.5 million and other real estate related reserves of $2.6 million, and established accruals aggregating approximately $120.9 million to reflect specific expenses and identified merger-related changes expected to be incurred within one year of closing. The accruals included a $13.9 million reserve for the expense of closing duplicate facilities, $56.5 million for the estimated costs related to severance, $50.5 million for systems and operations conversion and integration costs, required customer communications, and certain other merger-related costs. In addition, deferred tax benefits of $95 million and a deferred tax liability of $11 million related to the pro forma adjustments were recorded. These adjustments have not been included in the unaudited Pro Forma Combined Statements of Income or unaudited Pro Forma Combined Statements of Cash Flows, as they are not expected to have a continuing impact on FBS. F-14 NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION--(CONCLUDED) NOTE F: SHAREHOLDERS' EQUITY In conjunction with the closing of the Merger, each of the 488,750 outstanding shares of MFC preferred stock was converted into a right to receive $27.00 cash, plus any accumulated and unpaid dividends on such shares, and as a result, MFC's shareholders' equity in the unaudited Pro Forma Combined Balance Sheet has been reduced by $13.2 million. Common stock in the unaudited Pro Forma Combined Balance Sheet has been adjusted to reflect the par value of the FBS stock to be issued, with a related adjustment to capital surplus. Investment securities and capital surplus have been adjusted to reflect the retirement of MFC shares held by FBS prior to the merger. Retained earnings was adjusted to reflect the adjustments for merger- related costs as discussed above and the gain on the sale of the deposits. NOTE G: INCOME TAX PROVISIONS The income tax provision for adjustments related to the MFC acquisition reflected in the unaudited Pro Forma Combined Statements of Income have been computed at FBS' effective combined federal and state marginal tax rate. F-15 -----END PRIVACY-ENHANCED MESSAGE-----