Agreement and Plan of Merger between U.S. Bancorp and Firstar Corporation dated October 3, 2000

Contract Categories: Mergers & Acquisitions › Merger Agreements
Summary

U.S. Bancorp and Firstar Corporation entered into a merger agreement, completed on February 27, 2001, resulting in a combined company retaining the U.S. Bancorp name. Shareholders of the old U.S. Bancorp received 1.265 shares of the new U.S. Bancorp for each share held, while Firstar shareholders received one share for each share held. The agreement outlines the financial impact of the merger, including share exchange ratios and anticipated merger-related charges. The combined financial data is presented to show how the merger affects the new company's financial position and results.

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EX-2.1 2 c60610ex2-1.txt AGREEMENT AND PLAN OF MERGER, DATED 10/3/00 1 EXHIBIT 2.1 [US BANCORP LOGO(R)] UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION U.S. BANCORP The merger transaction between the former U.S. Bancorp ("old U.S. Bancorp") and Firstar Corporation ("Firstar") was completed on February 27, 2001, with the combined company retaining the U.S. Bancorp name (hereinafter referred to as "U.S. Bancorp"). Shareholders of the old U.S. Bancorp received 1.265 shares of common stock of U.S. Bancorp for each share of old U.S. Bancorp stock they held and Firstar shareholders received one share of common stock of U.S. Bancorp for each share of Firstar stock they held. The unaudited pro forma combined selected financial data of U.S. Bancorp for the most recent five years ended December 31, 2000 is shown on page 2. Pages 3 through 7 present the unaudited pro forma combined financial information and explanatory notes of U.S. Bancorp as of December 31, 2000 and for the years ended December 31, 2000, 1999 and 1998. The unaudited pro forma combined selected financial data, financial information and explanatory notes are presented to show the impact of the merger on U.S. Bancorp's historical financial positions and results of operations under the pooling-of-interests method of accounting. Under this method, the recorded assets, liabilities, shareholders' equity, income and expenses of both companies are combined and reflected at their historical amounts. The unaudited pro forma combined selected financial data of U.S. Bancorp gives effect to the merger as if the merger had been consummated at the beginning of the earliest period presented. The unaudited pro forma combined balance sheet of U.S. Bancorp as of December 31, 2000 assumes the merger was consummated on that date. The unaudited pro forma combined statements of income of U.S. Bancorp give effect to the merger as if the merger had been consummated at the beginning of the earliest period presented. The unaudited pro forma combined balance sheet of U.S. Bancorp as of December 31, 2000 reflects the effect of an estimated non-recurring pre-tax merger related charge of $800 million, as the underlying plans and actions have been substantially finalized. See note 3 on page 7 for additional information regarding this item. U.S. Bancorp presents net income, and the corresponding per share calculations, excluding merger charges and other nonrecurring items ("adjusted net income") in order to enhance the understanding and assessment of results of operations by highlighting net income attributable to normal, recurring operations of the business. Adjusted net income should not be viewed as a substitute for net income determined in accordance with GAAP. Furthermore, U.S. Bancorp's definition of "merger related charges and other nonrecurring items" may differ from that used by other companies. The table below shows net income, calculated in accordance with GAAP, and the corresponding per share calculations. It also presents adjusted net income and the corresponding per share calculations.
YEARS ENDED DECEMBER 31, -------------------------------------------------------- (DOLLARS IN MILLIONS, EXCEPT SHARE DATA) 2000 1999 1998 1997 1996 ---------------------------------------- -------- -------- -------- -------- -------- IN ACCORDANCE WITH GAAP: Net Income........................................... $2,875.6 $2,381.8 $2,132.9 $1,599.2 $1,918.6 Basic EPS............................................ 1.51 1.25 1.12 0.87 1.03 Diluted EPS.......................................... 1.50 1.23 1.10 0.85 1.01 EXCLUDING MERGER RELATED CHARGES AND OTHER NONRECURRING ITEMS: Adjusted net income.................................. $3,106.9 $2,799.0 $2,519.3 $2,124.0 $1,966.6 Adjusted basic EPS................................... 1.63 1.47 1.33 1.15 1.06 Adjusted diluted EPS................................. 1.62 1.45 1.31 1.13 1.04 -------- -------- -------- -------- --------
U.S. Bancorp expects to achieve substantial benefits as a result of the merger, including reduced operating expenses. No assurances can be given with respect to the ultimate level of financial benefits to be realized, if any. The combined pro forma earnings do not reflect anticipated financial expenses or benefits that may accrue as a result of the merger. The combined pro forma information is not indicative of the results of future operations, nor does it necessarily reflect what the historical results of U.S. Bancorp would have been had Firstar and the old U.S. Bancorp been combined during the periods presented. The combined pro forma information is based on historical financial information that has been presented in prior filings of Firstar and the old U.S. Bancorp with the Securities and Exchange Commission (the "SEC"). These pages are included as Item 7 in Form 8-K Current Report filed with the SEC on March 12, 2001. Additional copies are available by requesting a copy of this Form 8-K Current Report filed with the SEC (without exhibits) by contacting Investor Relations, U.S. Bancorp at 601 Second Avenue South, Minneapolis, Minnesota ###-###-####. Form 8-K Current Report is also available by visiting the U.S. Bancorp web site at WWW.USBANCORP.COM and clicking on Investor/Shareholder Information then SEC Filings. 2 U.S. BANCORP UNAUDITED PRO FORMA COMBINED SELECTED FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED DECEMBER 31, -------------------------------------------------------------------------- 2000 1999 1998 1997 1996 ------------ ------------ ------------ ----------- ----------- RESULTS OF OPERATIONS Interest income (fte).................... $ 12,313,205 $ 10,794,708 $ 10,570,848 $ 9,923,799 $ 9,287,780 Interest expense......................... 6,028,340 4,794,566 4,863,367 4,391,372 3,989,361 ------------ ------------ ------------ ----------- ----------- Net interest income (fte)................ 6,284,865 6,000,142 5,707,481 5,532,427 5,298,419 Noninterest income....................... 4,764,707 4,161,271 3,621,951 2,715,415 2,763,223 ------------ ------------ ------------ ----------- ----------- Net revenue.............................. 11,049,572 10,161,413 9,329,432 8,247,842 8,061,642 Noninterest expense...................... 5,654,701 5,572,749 5,374,116 4,917,046 4,491,076 Provision for loan losses................ 892,443 718,301 543,790 664,427 447,300 ------------ ------------ ------------ ----------- ----------- Pretax net income........................ 4,502,428 3,870,363 3,411,526 2,666,369 3,123,266 Net income............................... $ 2,875,619 $ 2,381,818 $ 2,132,850 $ 1,599,216 $ 1,918,571 PER SHARE DATA: Basic EPS................................ $ 1.51 $ 1.25 $ 1.12 $ 0.87 $ 1.03 Diluted EPS.............................. $ 1.50 $ 1.23 $ 1.10 $ 0.85 $ 1.01 ------------ ------------ ------------ ----------- ----------- AVERAGE BALANCES: Loans.................................... $118,663,241 $109,833,950 $102,652,396 $95,313,976 $88,046,126 Loans held for sale...................... 1,250,453 1,427,454 1,162,187 383,909 376,723 Investment securities.................... 17,816,780 19,804,145 21,589,707 19,571,828 19,777,743 Short-term investments................... 4,084,827 3,208,424 2,634,722 1,902,944 1,971,141 ------------ ------------ ------------ ----------- ----------- Total interest-earning assets............ 141,815,301 134,273,973 128,039,012 117,172,657 110,171,733 Total assets............................. 158,481,084 150,166,533 142,887,191 129,493,443 121,967,374 Non-interest bearing deposits............ 23,819,589 23,555,639 23,011,139 20,983,720 19,881,441 Interest-bearing deposits................ 79,605,369 76,364,563 75,927,767 72,338,107 69,905,470 ------------ ------------ ------------ ----------- ----------- Total deposits........................... 103,424,958 99,920,202 98,938,906 93,321,827 89,786,911 Short-term borrowings.................... 12,586,294 11,706,562 11,102,227 11,791,480 12,212,361 Long-term debt........................... 23,930,059 21,759,999 17,132,551 10,442,536 6,477,070 Shareholders' equity..................... 14,365,417 13,220,687 12,383,542 10,882,200 10,658,612 ------------ ------------ ------------ ----------- ----------- RATIOS: Return on average assets................. 1.81% 1.59% 1.49% 1.23% 1.57% Return on average common equity.......... 20.02% 18.02% 17.22% 14.70% 18.00% Net interest margin...................... 4.43% 4.47% 4.46% 4.72% 4.81% Noninterest expense to net revenue....... 51.18% 54.84% 57.60% 59.62% 55.71% Average equity to average total assets... 9.06% 8.80% 8.67% 8.40% 8.74% ------------ ------------ ------------ ----------- ----------- EXCLUDING MERGER RELATED CHARGES AND OTHER NONRECURRING ITEMS* Adjusted net income...................... $ 3,106,920 $ 2,798,969 $ 2,519,307 $ 2,123,993 $ 1,966,561 Return on average assets................. 1.96% 1.86% 1.76% 1.64% 1.61% Return on average common equity.......... 21.63% 21.17% 20.34% 19.66% 18.70% Noninterest expense to net revenue....... 48.02% 49.60% 51.24% 51.94% 54.07% ------------ ------------ ------------ ----------- ----------- RECONCILIATION OF ADJUSTED NET INCOME TO NET INCOME Adjusted net income...................... $ 3,106,920 $ 2,798,969 $ 2,519,307 $ 2,123,993 $ 1,966,561 Merger-related and restructuring charges................................ (348,695) (540,363) (631,692) (653,333) (248,818) Merger-related and restructuring gains... 48,051 235,800 SAIF Assessment.......................... (27,907) Applicable income taxes.................. 117,394 123,212 197,184 128,556 (7,065) ------------ ------------ ------------ ----------- ----------- Net income............................... $ 2,875,619 $ 2,381,818 $ 2,132,850 $ 1,599,216 $ 1,918,571 ============ ============ ============ =========== ===========
- ------------------------- * Items in this section have been adjusted for merger related charges, restructuring charges and the one-time SAIF assessment in 1996. The presentation of adjusted net income and related ratios, excluding "merger related charges and other nonrecurring items" as determined by Firstar and the old U.S. Bancorp, is intended to enhance the understanding and assessment of results of operations by highlighting net income attributable to normal, recurring operations of the business. Adjusted net income should not be viewed as a substitute for net income determined in accordance with GAAP. Furthermore, Firstar's and the old U.S. Bancorp's definition of "merger related charges and other nonrecurring items" may differ from that used by other companies. (fte)=fully taxable equivalent basis. 2 3 U.S. BANCORP UNAUDITED PRO FORMA COMBINED BALANCE SHEET AT DECEMBER 31, 2000 (DOLLARS IN THOUSANDS)
FIRSTAR PRO FORMA PRO FORMA CORPORATION U.S. BANCORP ADJUSTMENTS U.S. BANCORP ----------- ------------ ----------- ------------ ASSETS: Cash and due from banks................... $ 4,332,584 $ 4,142,000 $ -- $ 8,474,584 Money market investments.................. 200,276 457,000 657,276 Trading securities........................ -- 753,000 753,000 Investment securities: Available-for-sale................... 13,613,909 4,282,000 17,895,909 Held-to-maturity..................... 251,580 -- 251,580 ----------- ----------- --------- ------------ Total investment securities........ 13,865,489 4,282,000 -- 18,147,489 Loans: Commercial loans..................... 19,240,653 34,016,000 53,256,653 Real estate loans.................... 17,110,872 17,136,000 34,246,872 Retail loans......................... 17,354,315 17,939,000 35,293,315 ----------- ----------- --------- ------------ Total loans........................ 53,705,840 69,091,000 -- 122,796,840 Allowance for loan losses................. 720,083 1,067,000 1,787,083 ----------- ----------- --------- ------------ Net loans....................... 52,985,757 68,024,000 -- 121,009,757 Loans held for sale....................... 713,023 -- 713,023 Premises and equipment.................... 979,443 857,000 (103,000) 1,733,443 Intangible assets......................... 2,013,235 3,296,000 5,309,235 Other assets.............................. 2,495,085 5,525,000 8,020,085 ----------- ----------- --------- ------------ Total assets....................... $77,584,892 $87,336,000 $(103,000) $164,817,892 =========== =========== ========= ============ LIABILITIES: Deposits: Noninterest-bearing deposits............ $10,979,702 $15,653,000 $ -- $ 26,632,702 Interest-bearing deposits............... 45,298,229 37,604,000 82,902,229 ----------- ----------- --------- ------------ Total deposits..................... 56,277,931 53,257,000 -- 109,534,931 Short-term borrowings..................... 9,024,379 2,809,000 11,833,379 Long-term debt............................ 3,430,758 18,566,000 21,996,758 Trust preferred securities................ 445,835 950,000 1,395,835 Other liabilities......................... 1,877,659 3,114,000 424,000 5,415,659 ----------- ----------- --------- ------------ Total liabilities.................. 71,056,562 78,696,000 424,000 150,176,562 SHAREHOLDERS' EQUITY: Common stock.............................. 9,844 948,000 (938,823) 19,021 Surplus................................... 1,863,910 1,473,000 81,555 3,418,465 Retained earnings......................... 5,321,832 6,336,000 (527,000) 11,130,832 Treasury stock, at cost................... (747,836) (132,000) 857,268 (22,568) Accumulated other comprehensive income.... 80,580 15,000 95,580 ----------- ----------- --------- ------------ Total shareholders' equity......... 6,528,330 8,640,000 (527,000) 14,641,330 ----------- ----------- --------- ------------ Total liabilities and shareholders' equity.......................... $77,584,892 $87,336,000 $(103,000) $164,817,892 =========== =========== ========= ============
The accompanying notes are an integral part of the unaudited pro forma financial information. 3 4 U.S. BANCORP UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME YEAR ENDED DECEMBER 31, 2000 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
FIRSTAR PRO FORMA PRO FORMA CORPORATION U.S. BANCORP ADJUSTMENTS U.S. BANCORP ----------- ------------ ----------- ------------ INTEREST INCOME: Interest and fees on loans................... $4,475,880 $6,162,000 $ -- $10,637,880 Interest and fees on loans held for sale..... 98,510 -- 98,510 Interest on investment securities............ 895,315 284,700 1,180,015 Interest on money market investments......... 21,792 260,400 282,192 ---------- ---------- --------- ----------- Total interest income................. 5,491,497 6,707,100 -- 12,198,597 INTEREST EXPENSE: Interest on deposits......................... 1,950,936 1,667,900 3,618,836 Interest on short-term borrowings............ 548,128 233,600 781,728 Interest on long-term debt................... 293,476 1,334,300 1,627,776 ---------- ---------- --------- ----------- Total interest expense................ 2,792,540 3,235,800 -- 6,028,340 ---------- ---------- --------- ----------- Net interest income................ 2,698,957 3,471,300 -- 6,170,257 Provision for loan losses.................... 222,443 670,000 892,443 ---------- ---------- --------- ----------- Net interest income after provision for loan losses.................. 2,476,514 2,801,300 -- 5,277,814 NONINTEREST INCOME: Trust income................................. 452,323 473,900 926,223 Mortgage banking income...................... 164,822 -- 164,822 Service charges on deposits.................. 215,465 469,300 684,765 Credit card and ATM income................... 180,239 723,200 903,439 Investment products fees and commissions..... 23,008 359,100 382,108 Investment banking revenue................... -- 356,300 356,300 Trading account profits and commissions...... -- 252,500 252,500 All other income............................. 469,330 617,100 1,086,430 Investment securities gains, net............. 1,120 7,000 8,120 ---------- ---------- --------- ----------- Total noninterest income.............. 1,506,307 3,258,400 -- 4,764,707 NONINTEREST EXPENSE: Salaries..................................... 726,840 1,677,000 2,403,840 Pension and other employee benefits.......... 90,977 279,000 369,977 Equipment expense............................ 140,776 167,400 308,176 Occupancy expense -- net..................... 159,995 236,900 396,895 Goodwill and other intangible assets......... 121,836 235,500 357,336 All other expense............................ 528,482 941,300 1,469,782 Merger related expenses...................... 287,395 61,300 348,695 ---------- ---------- --------- ----------- Total noninterest expense............. 2,056,301 3,598,400 -- 5,654,701 ---------- ---------- --------- ----------- INCOME BEFORE TAX............................ 1,926,520 2,461,300 -- 4,387,820 Income tax................................... 642,901 869,300 1,512,201 NET INCOME................................... $1,283,619 $1,592,000 $ -- 2,875,619 ========== ========== ========= =========== PER SHARE: Basic earnings per common share.............. $ 1.33 $ 2.14 $ 1.51 Diluted earnings per common share............ 1.32 2.13 1.50 Average common shares -- basic (thousands)... 963,503 745,100 1,906,055 Average common shares -- diluted (thousands)................................ 972,482 747,900 1,918,576
The accompanying notes are an integral part of the unaudited pro forma financial information. 4 5 U.S. BANCORP UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME YEAR ENDED DECEMBER 31, 1999 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
FIRSTAR PRO FORMA PRO FORMA CORPORATION U.S. BANCORP ADJUSTMENTS U.S. BANCORP ----------- ------------ ----------- ------------ INTEREST INCOME: Interest and fees on loans.................... $3,968,923 $5,208,600 $ -- $9,177,523 Interest and fees on loans held for sale...... 102,685 -- 102,685 Interest on investment securities............. 921,807 307,900 1,229,707 Interest on trading securities................ 6,377 -- 6,377 Interest on money market investments.......... 21,920 160,200 182,120 ---------- ---------- --------- ---------- Total interest income.................. 5,021,712 5,676,700 -- 10,698,412 INTEREST EXPENSE: Interest on deposits.......................... 1,678,839 1,291,200 2,970,039 Interest on short-term borrowings............. 368,252 214,100 582,352 Interest on long-term debt.................... 331,475 910,700 1,242,175 ---------- ---------- --------- ---------- Total interest expense................. 2,378,566 2,416,000 -- 4,794,566 ---------- ---------- --------- ---------- Net interest income................. 2,643,146 3,260,700 -- 5,903,846 Provision for loan losses..................... 187,301 531,000 718,301 ---------- ---------- --------- ---------- Net interest income after provision for loan losses................... 2,455,845 2,729,700 -- 5,185,545 NONINTEREST INCOME: Trust income.................................. 427,346 459,700 887,046 Mortgage banking income....................... 151,736 -- 151,736 Service charges on deposits................... 181,348 434,600 615,948 Credit card and ATM income.................... 151,274 603,100 754,374 Investment products fees and commissions...... 41,153 347,700 388,853 Investment banking revenue.................... -- 245,400 245,400 Trading account profits and commissions....... -- 215,900 215,900 All other income.............................. 434,952 453,600 888,552 Investment securities gains/(losses) - net.... 14,762 (1,300) 13,462 ---------- ---------- --------- ---------- Total noninterest income............... 1,402,571 2,758,700 -- 4,161,271 NONINTEREST EXPENSE: Salaries...................................... 862,092 1,460,900 2,322,992 Pension and other employee benefits........... 137,550 248,400 385,950 Equipment expense............................. 147,821 160,100 307,921 Occupancy expense -- net...................... 167,788 204,600 372,388 Goodwill and other intangible assets.......... 120,831 165,600 286,431 All other expense............................. 539,304 824,900 1,364,204 Merger related and restructuring expenses..... 470,463 62,400 532,863 ---------- ---------- --------- ---------- Total noninterest expense.............. 2,445,849 3,126,900 -- 5,572,749 ---------- ---------- --------- ---------- INCOME BEFORE TAX............................. 1,412,567 2,361,500 -- 3,774,067 Income tax.................................... 537,249 855,000 1,392,249 ---------- ---------- --------- ---------- NET INCOME.................................... $ 875,318 $1,506,500 $ -- $2,381,818 ========== ========== ========= ========== PER SHARE: Basic earnings per common share............... $ 0.89 $ 2.07 $ 1.25 Diluted earnings per common share............. 0.87 2.06 1.23 Average common shares -- basic (thousands).... 987,488 727,531 1,907,815 Average common shares -- diluted (thousands)................................. 1,002,754 732,991 1,929,988
The accompanying notes are an integral part of the unaudited pro forma financial information. 5 6 U.S. BANCORP UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME YEAR ENDED DECEMBER 31, 1998 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
FIRSTAR PRO FORMA PRO FORMA CORPORATION U.S. BANCORP ADJUSTMENTS U. S. BANCORP ----------- ------------ ----------- ------------- INTEREST INCOME: Interest and fees on loans................... $3,928,140 $4,921,800 $ -- $8,849,940 Interest and fees on loans held for sale..... 84,844 -- 84,844 Interest on investment securities............ 1,002,273 366,400 1,368,673 Interest on trading securities............... 8,894 -- 8,894 Interest on money market investments......... 28,037 119,200 147,237 ---------- ---------- --------- ---------- Total interest income................. 5,052,188 5,407,400 -- 10,459,588 INTEREST EXPENSE: Interest on deposits......................... 1,843,674 1,391,000 3,234,674 Interest on short-term borrowings............ 381,985 212,700 594,685 Interest on long-term debt................... 290,908 743,100 1,034,008 ---------- ---------- --------- ---------- Total interest expense................ 2,516,567 2,346,800 -- 4,863,367 ---------- ---------- --------- ---------- Net interest income................ 2,535,621 3,060,600 -- 5,596,221 Provision for loan losses.................... 164,790 379,000 543,790 ---------- ---------- --------- ---------- Net interest income after provision for loan losses.................. 2,370,831 2,681,600 -- 5,052,431 NONINTEREST INCOME: Trust income................................. 375,258 413,000 788,258 Mortgage banking income...................... 202,590 -- 202,590 Service charges on deposits.................. 177,762 406,000 583,762 Credit card and ATM income................... 130,535 574,800 705,335 Investment products fees and commissions..... 44,862 229,700 274,562 Investment banking revenue................... -- 100,400 100,400 Trading account profits and commissions...... -- 118,100 118,100 All other income............................. 417,814 402,000 819,814 Investment securities gains.................. 16,530 12,600 29,130 ---------- ---------- --------- ---------- Total noninterest income.............. 1,365,351 2,256,600 -- 3,621,951 NONINTEREST EXPENSE: Salaries..................................... 953,309 1,210,900 2,164,209 Pension and other employee benefits.......... 172,990 222,300 395,290 Equipment expense............................ 160,737 153,400 314,137 Occupancy expense -- net..................... 169,467 187,400 356,867 Goodwill and other intangible assets......... 114,983 143,700 258,683 All other expense............................ 581,038 710,100 1,291,138 Merger and restructuring expenses............ 377,292 216,500 593,792 ---------- ---------- --------- ---------- Total noninterest expense............. 2,529,816 2,844,300 -- 5,374,116 ---------- ---------- --------- ---------- INCOME BEFORE TAX............................ 1,206,366 2,093,900 -- 3,300,266 Income tax................................... 400,916 766,500 1,167,416 ---------- ---------- --------- ---------- NET INCOME................................... $ 805,450 $1,327,400 $ -- $2,132,850 ========== ========== ========= ========== PER SHARE: Basic earnings per common share.............. $ 0.83 $ 1.81 $ 1.12 Diluted earnings per common share............ 0.81 1.78 1.10 Average common shares -- basic (thousands)... 970,420 733,898 1,898,801 Average common shares -- diluted (thousands)................................ 989,085 744,178 1,930,470
The accompanying notes are an integral part of the unaudited pro forma financial information. 6 7 U.S. BANCORP NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION NOTE 1 -- BASIS OF PRESENTATION The merger transaction between the former U.S. Bancorp ("old U.S. Bancorp") and Firstar Corporation ("Firstar") was completed on February 27, 2001, with combined company retaining the U.S. Bancorp name (hereinafter referred to as "U.S. Bancorp"). The unaudited pro forma combined financial information of U.S. Bancorp has been prepared under the pooling-of-interests method of accounting and is based on the historical consolidated financial statements of the two companies. A review of each company's respective accounting policies is being completed. As a result of this review, it will be necessary to restate certain amounts in the financial statements of U.S. Bancorp to conform to those accounting policies that will be followed. Any such restatements are not expected to be material, and therefore are not reflected in the unaudited pro forma combined financial information of U.S. Bancorp. NOTE 2 -- SHAREHOLDER'S EQUITY Under the terms of the merger agreement, Firstar shareholders received one share, and the old U.S. Bancorp shareholders 1.265 shares, of common stock of U.S. Bancorp for each share of Firstar and old U.S. Bancorp common stock, held at February 27, 2001, respectively. Old U.S. Bancorp had 752,921,723 shares of common stock outstanding at February 27, 2001, which was exchanged for approximately 952,445,980 shares of U.S. Bancorp's common stock. U.S. Bancorp currently has approximately 1,904,056,390 shares outstanding. The common stock line item in the unaudited pro forma combined balance sheet of U.S. Bancorp has been adjusted to reflect the fact that, in connection with the merger, the par value of shares of U.S. Bancorp was reduced from $1.25 per share to $0.01 per share. The pro forma treasury stock adjustment reflects the cancellation of shares held by Firstar, the old U.S. Bancorp or any of their wholly-owned subsidiaries (except for shares held in trust accounts, managed accounts and the like, or otherwise held in a fiduciary capacity that are beneficially owned by third parties (trust account shares) or shares held by Firstar or the old U.S. Bancorp or any of their subsidiaries in respect of a debt previously contracted (DPC shares)). NOTE 3 -- MERGER RELATED CHARGES In connection with the merger, management estimates U.S. Bancorp will incur pre-tax merger related charges of approximately $800 to $900 million. These are currently estimated to include $186 million in employee related costs, $312 million for conversions of systems and consolidation of operations, $103 million in occupancy and equipment charges (elimination of duplicate facilities and write-off of equipment) and $199 million in other merger related costs (including investment banking fees, legal, balance sheet restructuring charges and other costs). The remaining $100 million of merger related charges (primarily conversion of systems and consolidation of operations costs) that may be incurred will be evaluated by management on a cost/benefit analysis basis. These merger related costs may be incurred if future cost savings or future revenue enhancements can be derived. Estimated pre-tax merger related charges of $800 million have been reflected in the unaudited pro forma combined balance sheet of U.S. Bancorp as of December 31, 2000, as the underlying plan and actions have been finalized. However, they are not reflected in the unaudited pro forma combined income statements of U.S. Bancorp as they are not expected to have a continuing impact on the operations of U.S. Bancorp. The estimated pre-tax merger related charge, in connection with this merger, to be included in the first quarter ending March 31, 2001 is $500 million. This charge includes approximately $180 million of employee related costs, $9 million of occupancy and equipment charges, $48 million of conversion costs and $263 million of other merger related charges. It is anticipated that gains to be recognized in future quarters related to certain divestitures made in connection with the merger will reduce the other merger related costs to the estimated $199 million. 7