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) January 18, 1995
FLEET FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
RHODE ISLAND
(State or other jurisdiction of incorporation)
1-6366 05-0341324
(Commission File Number) (IRS Employer Identification No.)
50 Kennedy Plaza, Providence, Rhode Island 02903
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 401-278-5800
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
Pursuant to Form 8-K, General Instructions F,
Registrant hereby incorporates by reference the press
release attached hereto as Exhibit 28.
Item 7. Financial Statements and Other Exhibits.
Exhibit No. Description
Exhibit 28 Fleet Financial Group,
Inc. Press Release
Dated January 18, 1995
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, as amended, the Registrant has duly caused this report
to be signed in its behalf by the undersigned hereunto duly
authorized.
FLEET FINANCIAL GROUP, INC.
Registrant
By /s/ William C. Mutterperl
William C. Mutterperl
Senior Vice President and
General Counsel
Dated: January 18, 1995
Exhibit 28
Robert W. Lougee, Jr. Thomas L. Lavelle
Vice President and Director Manager, Media Relations
Financial Communications (401) 278-3003
(401) 278-5879
Fleet Financial Group Reports
Record Earnings of $613 Million for 1994;
Fourth Quarter Net Income of $165 Million Also New High
Providence, R.I., January 18, 1995: Fleet Financial Group
today reported record net income of $613 million for 1994, a
26% increase from the $488 million earned in 1993. Fully
diluted earnings per share were $3.75 for the year ended
December 31, compared to $3.01 a year earlier. 1994 was the
second consecutive year of record earnings at Fleet, and the
first year pre-tax earnings exceeded $1 billion.
"We are extremely pleased to report such a strong earnings
performance," said Terrence Murray, chairman and chief
executive officer. "The results are especially gratifying
given today's increasingly competitive financial services
industry and challenging interest rate environment."
Fourth quarter earnings, also a record, rose 21% to $165
million, or $1.05 per fully diluted share, versus $136 million,
or $.85 per fully diluted share, in the fourth quarter of 1993.
Murray said the earnings increase in 1994 was primarily the
result of significant expense control combined with lower
credit costs and steadily improving loan growth. "Through the
outstanding efforts of a strong management team and a dedicated
workforce, we were able to substantially improve our efficiency
ratio, further reduce the level of non-performing assets, and
show real growth in our loan portfolio," he said. "We believe
these efforts, coupled with a strengthening economy in the
Northeast and our strategic acquisitions, position us
exceptionally well for continued growth in 1995."
The corporation's return on assets (ROA) and return on
equity (ROE) showed significant improvement during the year.
ROA rose to 1.27% and ROE to 18.77% from 1.06% and 16.07%,
respectively, a year ago. Both ratios are the highest in the
history of the corporation. Fourth quarter ROA was 1.42%,
versus 1.14% in the same quarter of 1993, while ROE was 21.71%
versus 16.98%.
Eugene M. McQuade, executive vice president and chief
financial officer, noted that "Fleet experienced growth in both
commercial and consumer loans during the year, and we were
especially pleased to see increased loan volume in most of our
banking franchises." At December 31, 1994, loans totaled $27.5
billion which represented an increase of approximately $1.2
billion, or 5%, compared to the $26.3 billion at December 31,
1993. Moreover, loans have increased by approximately $500
million, or 7% on an annualized basis, from the $27.0 billion
at September 30, 1994.
During the fourth quarter, the corporation recorded $60
million of pre-tax income relating to a tax settlement with the
Internal Revenue Service. This income was offset by $24
million in charges at Fleet Finance relating to a $12 million
restructuring charge for its efficiency improvement program and
$12 million of additional OREO reserves. In addition, a loss
of $21 million on the sale of $2.5 billion in securities was
incurred to better position the corporation for a continued
rising interest rate environment, and a $9 million market
writedown on investments made by the corporation's venture
capital subsidiary was also recorded.
During 1994, Fleet announced several transactions that will
strengthen both its banking and financial services franchises.
Acquisition of the $1 billion Sterling Bancshares was completed
in the third quarter of 1994, and the acquisition of $2.5
billion NBB Bancorp is expected to be completed this month.
Also, Fleet's acquisition of Plaza Home Mortgage Corp. is
expected to close early in 1995, and Fleet recently announced
its intention to reacquire the publicly held shares of Fleet
Mortgage Group, its mortgage banking subsidiary.
In addition, Fleet increased its quarterly stock dividend
twice during the past year, with the payout rising from $.30
per share to $.40 per share, or $1.60 per share on an
annualized basis. The increase declared in October was the
fourth time in the past two years that Fleet has raised its
common stock dividend.
Income Statement
Net interest income totaled $2.0 billion for 1994, compared
to $2.1 billion in 1993. The net interest margin for 1994 was
4.64%, compared to 5.02% in 1993. The decrease of 38 basis
points was due principally to the rapid rise in interest rates
of 250 basis points during 1994 as the cost of deposits and
other sources of funds outpaced the increase in yield on
earning assets. Several actions were undertaken during the
year to restructure the securities portfolio and improve the
corporation's sensitivity to rising interest rates, including
the sale of $2.5 billion of securities during the fourth
quarter of 1994. These actions resulted in an increase in the
net interest margin of 30 basis points to 4.75% in the fourth
quarter of 1994 compared to the third quarter of 1994.
Credit loss provisions for 1994 were $62 million, compared
to $271 million in 1993, with the decline due to continued
improvements in asset quality and significant reductions in net
charge-offs. Net charge-offs were $104 million in 1994
compared to $290 million in 1993, a decrease of $186 million.
Credit loss provisions were $17 million in the fourth quarter
of 1994 and net charge-offs were $32 million compared to $55
million and $68 million, respectively, for the comparable
period in 1993.
Noninterest income, excluding securities gains/(losses)
totaled $1.17 billion during 1994 compared to $1.18 billion in
1993. Noninterest revenues were negatively impacted by a $51
million decrease in mortgage banking revenue due to the impact
of rising interest rates during 1994 on mortgage loans
originations. Noninterest income for the fourth quarter of
1994, excluding securities losses of $21 million, totaled $331
million compared to $296 million in 1993, excluding securities
gains of $23 million. Results for the fourth quarter of 1994
include the previously mentioned $60 million tax settlement and
a $9 million market writedown at Fleet Equity Partners.
Noninterest expense totaled $2.0 billion for the year ended
December 31, 1994, excluding $44 million of restructuring
charges. Excluding the $125 million restructuring charge and a
$90 million charge related to the accelerated amortization of
mortgage servicing assets recorded in 1993, noninterest expense
was reduced by approximately $185 million, or 8%. Significant
reductions were noted in employee compensation and several
other noninterest expense categories. These reductions are
attributable to the successful implementation of numerous cost
cutting strategies. Additionally, OREO expense declined by $18
million as nonperforming assets continued to decline in 1994.
At December 31, 1994, nonperforming assets totaled $518
million, a reduction of $83 million, or 14%, from $601 million
at December 31, 1993. Noninterest expenses totaled $504
million in the fourth quarter of 1994, compared to $552 million
in 1993. Fourth quarter results included a $12 million
restructuring charge related to an efficiency improvement study
and $12 million of additional OREO reserves at Fleet Finance.
Excluding such charges, noninterest expenses were $480 million
and the resulting efficiency ratio was 61.6%.
Earnings By Group
The Banking Group produced earnings of $597 million during
1994 (excluding security gains/losses), a 42% gain compared to
earnings of $422 million in 1993, and $165 million in fourth
quarter earnings, compared to $131 million in the fourth
quarter of 1993, an increase of 26%. Fourth quarter earnings
were positively impacted by lower credit quality costs and
reduced operating expenses.
Net income from the Financial Services Group last year rose
38% to $58 million (excluding restructuring charges), from the
$42 million earned by the Group a year earlier. Of the $58
million, Fleet Mortgage contributed $55 million versus $25
million in 1993, as 1994 earnings benefited from a less
volatile origination environment and a strengthening of its
servicing business. Fleet Credit, the company's equipment
leasing subsidiary, also had a strong year with earnings of $20
million, compared with $11 million a year ago. AFSA, Fleet's
student loan processing company, turned in an excellent
performance with earnings of $4.6 million, up 36% from the
year-earlier period with the completion of the first year of
its direct student loan contract with the federal government.
Fleet Finance's loss of $39 million ($31 million excluding the
restructure charge) compares to a $29 million loss in 1993.
During the fourth quarter of 1994, the corporation took several
actions at Fleet Finance to address asset quality concerns and
to improve efficiency. Those actions included recording an
additional $15 million in provision for credit losses,
recording $12 million in OREO reserves, and completing an
efficiency improvement study which resulted in a $12 million
restructuring charge.
In the fourth quarter of 1994 the Financial Services Group
recorded income of $3 million, compared to a loss of $11
million in the fourth quarter of 1993. Fleet Mortgage earned
$19 million and $12 million in the fourth quarters of 1994 and
1993, respectively, an increase of 58%, which is attributable
to increased mortgage servicing revenue in 1994 and accelerated
amortization of mortgage servicing assets during 1993.
Balance Sheet
Total assets at December 31, 1994 and 1993 were $48.8
billion and $47.9 billion, respectively. Total loans and
leases have increased from $26.3 billion at December 31, 1993
to $27.5 billion at December 31, 1994.
The reserve for credit losses was $953 million at December
31, 1994, representing 3.46% of loans, compared to $1 billion,
or 3.80% of loans, at December 31, 1993.
Stockholders' equity amounted to $3.4 billion at
December 31, 1994 compared to $3.6 billion at December 31,
1993. The decrease reflects the previously announced
repurchase of common shares in anticipation of the purchase of
New Bedford Bancorp.
All 1994 financial information has been restated to include
the acquisition of Sterling Bancshares as if it had occurred on
January 1, 1994.
Fleet Financial Group is a diversified financial services
company listed on the New York Stock Exchange (NYSE-FLT) with
approximately 1,200 offices nationwide. Its lines of business
include commercial and consumer banking, mortgage banking,
investment management, and mortgage and student loan processing.
(see comparative results attached)
<PAGE>
FLEET FINANCIAL GROUP
FINANCIAL HIGHLIGHTS
THREE MONTHS ENDED TWELVE MONTHS ENDED
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1994 1993 1994 1993
For the Period ($ in millions)
$165 $136 Net income $613 $488
493 522 Net interest income (a) 2,022 2,084
17 55 Provision for credit losses 62 271
Per Common Share
$1.05 $0.85 Fully diluted earnings $3.75 $3.01
32.38 33.38 Market value (period-end) 32.38 33.38
0.40 0.30 Cash dividends declared 1.40 1.025
22.23 22.84 Book value (period-end) 22.23 22.84
Operating Ratios
1.42% 1.14% Return on average assets 1.27% 1.06%
21.71 16.98 Return on average common equity 18.77 16.07
Return on average realized common
19.60 16.98 equity (b) 18.11 16.07
4.75 4.91 Net interest margin 4.64 5.02
6.93 7.59 Total equity/assets (period-end) 6.93 7.59
Tier 1 risk-based capital ratio
10.3 11.8 (Estimated) 10.3 11.8
Total risk-based capital ratio
14.5 16.6 (Estimated) 14.5 16.6
At Quarter End ($ in millions)
$48,757 $47,923 Assets $48,757 $47,923
27,541 26,310 Loans and leases 27,541 26,310
34,806 31,085 Deposits 34,806 31,085
3,380 3,639 Total stockholders' equity 3,380 3,639
Asset Quality ($ in millions)
$518 $601 Nonperforming assets $518 $601
Nonperforming assets as a % of loans,
1.88% 2.27% leases, and OREO 1.88% 2.27%
1.60 1.77 Nonperforming loans to period-end loans 1.60 1.77
Nonperforming assets as a % of total
1.06 1.25 assets 1.06 1.25
Reserve for credit losses to period-
3.46 3.80 end loans and leases 3.46 3.80
Reserve for Credit Losses ($ in millions)
$969 $1,015 Beginning reserve for credit losses $1,000 $1,029
17 55 Provision for credit losses 62 271
(48) (95) Gross charge-offs (186) (379)
16 27 Recoveries 82 89
(1) (2) Sales, puts to FDIC, other (5) (10)
953 1,000 Ending reserve for credit losses 953 1,000
(a) Fully taxable equivalent
(b) Excludes average unrealized losses on
securities available for sale.
<PAGE>
FLEET FINANCIAL GROUP
CONSOLIDATED INCOME STATEMENT
($ in thousands)
THREE MONTHS ENDED TWELVE MONTHS ENDED
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1994 1993 1994 1993
$ 835,255 $803,273 Interest income (FTE) $ 3,312,506 $ 3,245,687
342,528 280,880 Interest expense 1,290,583 1,161,381
- -----------------------------------------------------------------------------
492,727 522,393 Net interest income (FTE) 2,021,923 2,084,306
- -----------------------------------------------------------------------------
17,114 55,343 Provision for credit losses 62,130 270,724
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Net interest income after
475,613 467,050 provision for credit losses 1,959,793 1,813,582
- -----------------------------------------------------------------------------
Noninterest income:
84,587 110,734 Mortgage banking 362,587 414,086
Service charges, fees and
70,124 61,586 commissions 255,412 240,733
43,667 44,091 Investment services revenue 174,764 173,762
Securities available for sale
(21,185) 23,211 gains/(losses) (620) 282,444
132,607 79,495 Other 380,998 354,250
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309,800 319,117 Total noninterest income 1,173,141 1,465,275
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Noninterest expense:
222,245 250,070 Employee compensation and benefits 949,251 1,018,124
38,533 43,293 Occupancy 167,463 174,166
33,655 33,047 Equipment 133,183 129,787
18,267 19,937 Legal and other professional 75,294 74,479
17,202 17,657 FDIC assessment 69,965 75,854
20,013 14,656 Marketing 64,520 53,141
92,948 111,089 Other 384,040 422,777
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442,863 489,749 Subtotal 1,843,716 1,948,328
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17,216 41,620 Acquired servicing rights
amortization 85,349 239,940
Core deposit and goodwill
14,279 13,001 amortization 57,309 53,594
12,000 -- Restructuring charges 44,000 125,000
17,253 8,024 OREO expense 39,471 57,364
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60,748 62,645 Subtotal 226,129 475,898
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503,611 552,394 Total noninterest expense 2,069,845 2,424,226
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281,802 233,773 Income before income taxes 1,063,089 854,631
10,781 7,994 Tax-equivalent adjustment 40,233 33,192
101,379 86,897 Applicable income taxes 397,708 327,407
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169,642 138,882 Net income before minority interest 625,148 494,032
4,452 2,849 Minority interest 12,217 5,983
- ------------------------------------------------------------------------------
$ 165,190 $ 136,033 Net income $ 612,931 $ 488,049
- --------- ---------- ---------- ---------- -----------
<PAGE>
FLEET FINANCIAL GROUP
CONSOLIDATED BALANCE SHEETS
($ in millions)
Dec. 31, Sept. 30, Dec. 31,
1994 1994 1993
ASSETS:
Cash and cash equivalents $ 5,857 $ 2,349 $ 2,213
Securities available for sale:
1994 at market; 1993 at cost 10,353 12,779 12,577
Securities held to maturity 891 940 1,546
Loans and lease financing 27,541 27,048 26,310
Reserve for credit losses (953) (969) (1,000)
Mortgages held for resale 489 581 2,622
Acquired servicing rights 827 793 560
Premises and equipment 824 793 733
Accrued interest receivable 342 364 347
Other intangibles 339 349 353
Other assets 2,247 1,961 1,662
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Total assets $ 48,757 $ 46,988 $ 47,923
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LIABILITIES:
Deposits:
Demand $ 6,890 $ 6,272 $ 6,473
Regular savings, NOW,
money market 15,220 15,576 16,437
Time 12,696 11,764 8,175
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Total deposits 34,806 33,612 31,085
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Federal funds purchased and
repurchase agreements 2,846 2,576 1,961
Other short-term borrowings 3,105 2,540 6,146
Accrued expenses and
other liabilites 1,163 1,418 1,648
Long-term debt 3,457 3,396 3,444
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Total liabilities 45,377 43,542 44,284
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STOCKHOLDERS' EQUITY:
Preferred stock 379 379 501
Common stock 3,001 3,067 3,138
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Total stockholders' equity 3,380 3,446 3,639
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Total liabilities and
stockholders' equity $ 48,757 $ 46,988 $ 47,923
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<PAGE>
<TABLE>
FLEET FINANCIAL GROUP
CONSOLIDATED AVERAGE BALANCE SHEETS
($ in millions)
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
December 31, 1994 December 31, 1993 December 31, 1994 December 31, 1993
Average Average Average Average
Balance Rate Balance Rate Balance Rate Balance Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
$ 390 5.47% $ 9 3.11% Money market instruments $ 137 5.20% $ 184 3.00%
82 5.91 76 3.68 Trading account securities 73 4.99 79 4.05
12,962 6.16 13,738 6.27 Securities 15,438 5.99 12,938 6.85
27,193 9.00 26,247 8.31 Loans and leases 26,637 8.62 26,144 8.46
636 8.01 2,246 6.69 Mortgages held for resale 1,120 7.14 1,979 7.05
94 -- 165 -- Foreclosed property 120 -- 211 --
- ------------------------------------------------------------------------------------------------------------------------
41,357 8.03% 42,481 7.53% Total interest-earning assets 43,525 7.61% 41,535 7.81%
- ------------------------------------------------------------------------------------------------------------------------
332 -- 368 -- Accrued interest receivable 341 -- 348 --
(968) -- (1,021) -- Reserve for credit losses (986) -- (1,033) --
5,445 -- 5,395 -- Other assets 5,506 -- 5,116 --
- ------------------------------------------------------------------------------------------------------------------------
$ 46,166 -- $ 47,223 -- Total assets 48,386 -- 45,966 --
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Deposits:
$ 15,294 2.32% $ 16,181 1.85% Savings $ 15,956 2.08% $ 15,990 2.14%
10,581 4.91 8,498 4.26 Time 9,689 4.47 9,184 4.37
- ------------------------------------------------------------------------------------------------------------------------
25,875 3.38 24,679 2.68 Total interest-bearing deposits 25,645 2.98% 25,174 2.96%
- ------------------------------------------------------------------------------------------------------------------------
5,401 4.41 7,215 2.97 Short-term borrowings 7,645 3.85 5,971 3.02
3,480 7.09 3,701 6.46 Long-term debt 3,392 6.85 3,718 6.37
- ------------------------------------------------------------------------------------------------------------------------
34,756 3.91% 35,595 3.13% Total interest-bearing liabilities 36,682 3.52% 34,863 3.33%
- ------------------------------------------------------------------------------------------------------------------------
4.12% 4.40% Net interest spread 4.09% 4.48%
- ------------------------------------------------------------------------------------------------------------------------
Demand deposits and other noninterest-
6,786 -- 6,757 -- bearing time deposits 6,733 -- 6,429 --
1,272 -- 1,294 -- Other liabilities 1,388 -- 1,222 --
- ------------------------------------------------------------------------------------------------------------------------
42,814 -- 43,646 -- Total liabilities 44,803 -- 42,514 --
- ------------------------------------------------------------------------------------------------------------------------
3,352 -- 3,577 -- Stockholders' equity 3,583 -- 3,452 --
- ------------------------------------------------------------------------------------------------------------------------
$ 46,166 -- $ 47,223 -- Total liabilities and stockholders' equity $48,386 -- 45,966 --
- ------------------------------------------------------------------------------------------------------------------------
4.75% 4.91% Net interest margin 4.64% 5.02%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
