<PAGE> 1
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
May 17, 1995
---------------------------------
(Date of earliest event reported)
Fleet Financial Group, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Rhode Island 1-6366 05-0341324
- ---------------------------- ------------- ----------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) file number) Identification Number)
50 Kennedy Plaza
Providence, Rhode Island 02903
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
401-278-5800
----------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE> 2
Item 5. Other Events
Pending Merger
As previously reported, Fleet Financial Group, Inc. ("Fleet") and
Shawmut National Corporation ("Shawmut") have entered into an Agreement and
Plan of Merger dated February 20, 1995 (the "Merger Agreement") providing for
the merger of Shawmut with and into Fleet (the "Merger").
Fleet hereby files Unaudited Pro Forma Condensed Combined Financial
Statements and Notes thereto for the period ending March 31, 1995.
For additional information regarding the Merger, see Fleet's Current
Reports on Form 8-K dated February 20, 1995 and April 13, 1995.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Businesses Acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable
(c) Exhibits
The following exhibits are filed with this Current Report, except for
Exhibit 99.b, which is incorporated by reference from Shawmut's filing
as indicated.
<PAGE> 3
Exhibit Number Description
- ---------------- ------------------------------------------------------------
99.a. Unaudited Pro Forma Condensed Combined Financial Information
for Fleet Financial Group and Subsidiaries and Shawmut
National Corporation and Subsidiaries ("SNC") and Notes
thereto.
99.b. The following unaudited financial statements of SNC and
accompanying notes are incorporated by reference from SNC's
quarterly report on Form 10-Q for the quarter ended March 31,
1995 (File No. 1-10102): Consolidated Balance Sheet - March
31, 1995, Consolidated Statement of Income for the three
months ended March 31, 1995, Consolidated Statement of Cash
Flows and Consolidated Statement of Changes in Stockholders'
Equity for the three months ended March 31, 1995; Notes to
Consolidated Financial Statements (to the extent applicable
to the foregoing Financial Statements). (Portions of SNC's
Form 10-Q not specifically incorporated by reference are not
required for this Current Report and are not incorporated by
reference herein.)
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.
Fleet Financial Group, Inc.
---------------------------
(Registrant)
/s/ Robert C. Lamb, Jr.
------------------------
By: Robert C. Lamb, Jr.
Chief Accounting Officer
and Controller
Date: May 17, 1995
<PAGE> 1
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Combined Balance Sheet as
of March 31, 1995, and the Unaudited Pro Forma Condensed Combined Statement of
Income for the quarter ended March 31, 1995, give effect to the pending merger
(the "Merger") of Shawmut National Corporation ("Shawmut") into Fleet Financial
Group, Inc. ("Fleet") accounted for as a pooling of interests, the pending
merger (the "Northeast Merger") of Northeast Federal Corp. ("Northeast") into
Shawmut, the consummation of the merger (the "NBB Merger") of NBB Bancorp, Inc.
("NBB") into Fleet, the consummation of the merger (the "Plaza Merger") of Plaza
Home Mortgage Corp. ("Plaza") into Fleet, the consummation of the acquisition
(the "Barclays Acquisition") of substantially all of the assets of the Barclays
Business Finance Division of Barclays Business Credit, Inc. ("Barclays") by
Shawmut, and Fleet's repurchase (the "FMG Repurchase") of the publicly-held
shares of Fleet's majority-owned subsidiary, Fleet Mortgage Group, Inc.
("FMG"), each of which were or will be accounted for by the purchase method
of accounting, in each case as if such transactions had occurred on
January 1,1995. The Unaudited Pro Forma Condensed Combined Statement of Income
for the quarter ended March 31, 1994, give effect to the Merger as if the
Merger had occurred on January 1, 1994, and does not take into account the
effect of the Northeast Merger, the NBB Merger, the Plaza Merger, the Barclays
Acquisition and the FMG Repurchase since such transactions were or will be
accounted for under the purchase method of accounting.
The pro forma information is based on the historical consolidated
financial statements of Fleet, Shawmut, Northeast, NBB, Plaza, Barclays and FMG
and their subsidiaries under the assumptions and adjustments set forth in the
accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial
Statements. The pro forma condensed combined financial statements do not give
effect to the anticipated cost savings in connection with the Merger, the
Northeast Merger, the NBB Merger and the Plaza Merger or the effects of any
required regulatory divestitures.
The Unaudited Pro Forma Condensed Combined Financial Statements should
be read in conjunction with the consolidated historical financial statements of
Fleet and Shawmut, including the respective notes thereto. The pro forma data is
presented for comparative purposes only and is not necessarily indicative of the
combined financial position or results of operations in the future or of the
combined financial position or results of operations which would have been
realized had the acquisitions been consummated during the period or as of the
dates for which the pro forma data is presented.
Pro forma per share amounts for the combined Fleet and Shawmut entity
are based on the Common Exchange Ratio of 0.8922 shares of Fleet Common Stock
for each share of Shawmut Common Stock. In addition, the pro forma data assumes
the issuance of approximately 6,165,912 shares of Fleet Common Stock in the NBB
Merger, an exchange ratio of 0.415 shares of Shawmut Common Stock for each
outstanding share and stock option of Northeast, calculated as set forth in the
Shawmut/Northeast merger agreement, assuming for illustrative purposes only,
that the average closing price of Shawmut Common Stock used to determine such
exchange ratio is $27.625, the closing price of the Shawmut Common Stock on May
12, 1995.
<PAGE> 2
<TABLE>
<CAPTION>
FLEET FINANCIAL GROUP, INC. AND SHAWMUT NATIONAL CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1995 (A)
FLEET &
SHAWMUT
SHAWMUT PRO FORMA PRO FORMA
(DOLLARS IN THOUSANDS) FLEET PRO FORMA ADJUSTMENTS COMBINED
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 2,297,496 $ 1,498,130 $ - $ 3,795,626
Federal funds sold and securities purchased
under agreements to resell 249,912 296,565 - 546,477
Securities available for sale, at market 10,337,213 2,207,070 (d) (153,289) (f) 12,390,994 (d)
Securities held to maturity 951,834 9,716,428 (d) - 10,668,262 (d)
Loans and leases 29,498,399 22,073,657 - 51,572,056
Reserve for credit losses (965,958) (570,728) - (1,536,686)
Mortgages held for resale 654,976 44,181 - 699,157
Premises and equipment 687,046 349,954 - 1,037,000
Purchased mortgage servicing rights 1,049,460 39,800 - 1,089,260
Excess cost over net assets of subsidiaries acquired 473,402 479,552 - 952,954
Other intangibles 197,931 17,089 - 215,020
Other assets 2,382,327 1,413,855 155,912 (f)(g) 3,952,094
----------- ----------- --------- ------------
Total assets $47,814,038 $37,565,553 $ 2,623 $ 85,382,214
=========== =========== ========= ============
LIABILITIES and STOCKHOLDERS' EQUITY:
Deposits:
Demand $ 6,056,121 $ 4,014,951 - $ 10,071,072
Regular savings, NOW, money market 14,968,632 8,823,441 - 23,792,073
Time 11,809,164 10,231,602 - 22,040,766
----------- ----------- --------- ------------
Total deposits 32,833,917 23,069,994 - 55,903,911
----------- ----------- --------- ------------
Federal funds purchased and securities sold
under agreements to repurchase 2,915,847 7,299,551 - 10,215,398
Other short-term borrowings 3,243,395 1,723,357 - 4,966,752
Accrued expenses and other liabilities 1,277,299 510,421 361,868 (f)(g) 2,149,588
Long-term debt 3,623,176 2,397,444 - 6,020,620
----------- ----------- --------- ------------
Total liabilities 43,893,634 35,000,767 361,868 79,256,269
----------- ----------- --------- ------------
Stockholders' equity:
Preferred stock 378,815 303,185 - (e) 682,000
Common stock 141,731 1,287 108,333 (e) 251,351
Common surplus 1,534,246 1,486,770 (234,064) (e) 2,786,952
Retained earnings 2,017,904 813,227 (217,888) (g) 2,613,243
Net unrealized gain/(loss) on securities
available for sale (133,718) (37,411) (17,898) (f) (189,027)(d)
Treasury stock, at cost (18,574) (2,272) 2,272 (e) (18,574)
----------- ----------- --------- ------------
Total stockholders' equity 3,920,404 2,564,786 (359,245) 6,125,945
----------- ----------- --------- ------------
Total liabilities and stockholders' equity $47,814,038 $37,565,553 $ 2,623 $ 85,382,214
=========== =========== ========= ============
</TABLE>
See accompanying notes to the unaudited pro forma condensed combined
financial statements
<PAGE> 3
<TABLE>
<CAPTION>
SHAWMUT NATIONAL CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1995 (A)
PRO FORMA SHAWMUT
(DOLLARS IN THOUSANDS) SHAWMUT NORTHEAST ADJUSTMENTS PRO FORMA
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 1,549,100 $ 37,546 $(88,516)(h) $ 1,498,130
Federal funds sold and securities purchased
under agreements to resell 274,500 22,065 - 296,565
Securities available for sale, at market 2,074,880 (d) 132,190 (d) - 2,207,070 (d)
Securities held to maturity 7,798,357 (d) 1,967,386 (d) (49,315)(i) 9,716,428 (d)
Loans and leases 21,134,820 943,556 (4,719)(i) 22,073,657
Reserve for credit losses (559,210) (11,518) - (570,728)
Mortgages held for resale 42,715 1,466 - 44,181
Premises and equipment 328,605 27,349 (6,000)(i) 349,954
Purchased mortgage servicing rights 13,124 1,676 25,000 (i) 39,800
Excess cost over net assets of subsidiaries acquired 339,837 - 139,715 (j) 479,552
Other intangibles 16,976 113 - 17,089
Other assets 1,175,832 241,933 (3,910)(i) 1,413,855
----------- ----------- -------- -----------
Total assets $34,189,536 $ 3,363,762 $ 12,255 $37,565,553
=========== =========== ======== ===========
LIABILITIES and STOCKHOLDERS' EQUITY:
Deposits:
Demand $ 3,988,683 $ 26,268 $ $ 4,014,951
Regular savings, NOW, money market 8,108,268 715,173 - 8,823,441
Time 8,504,607 1,730,774 (3,779)(i) 10,231,602
----------- ----------- -------- -----------
Total deposits 20,601,558 2,472,215 (3,779) 23,069,994
----------- ----------- -------- -----------
Federal funds purchased and securities sold
under agreements to repurchase 7,299,551 - - 7,299,551
Other short-term borrowings 1,070,695 653,493 (831)(i) 1,723,357
Accrued expenses and other liabilities 435,203 49,578 25,640 (i) 510,421
Long-term debt 2,397,444 42,257 (42,257)(h)(i) 2,397,444
----------- ----------- -------- -----------
Total liabilities 31,804,451 3,217,543 (21,227) 35,000,767
----------- ----------- -------- -----------
Stockholders' equity:
Preferred stock 303,185 4 (4)(h)(k) 303,185
Common stock 1,221 155 (89)(k) 1,287
Common surplus 1,307,135 197,278 (17,643)(h)(k) 1,486,770
Retained earnings 813,227 (53,213) 53,213 (k) 813,227
Net unrealized gain/(loss) on securities
available for sale (37,411) 1,995 (1,995)(k) (37,411)(d)
Treasury stock, at cost (2,272) - - (2,272)
----------- ----------- -------- -----------
Total stockholders' equity 2,385,085 146,219 33,482 2,564,786
----------- ----------- -------- -----------
Total liabilities and stockholders' equity $34,189,536 $ 3,363,762 $ 12,255 $37,565,553
=========== =========== ======== ===========
</TABLE>
See accompanying notes to the unaudited pro forma condensed combined
financial statements
<PAGE> 4
<TABLE>
<CAPTION>
FLEET FINANCIAL GROUP, INC. AND SHAWMUT NATIONAL CORPORATIONw
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1995
FLEET
FLEET SHAWMUT PRO FORMA SHAWMUT
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) PRO FORMA PRO FORMA ADJUSTMENTS PRO FORMA
COMBINED
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Interest and fees on loans and leases $ 693,634 $ 459,185 $ - $ 1,152,819
Interest on securities 186,364 195,676 (1,279)(f) 380,761
------------ ------------ -------- ------------
Total interest income 879,998 654,861 (1,279) 1,533,580
Interest expense:
Deposits 251,079 174,116 - 425,195
Short-term borrowings 70,145 146,733 - 216,878
Long-term debt 66,761 39,769 - 106,530
------------ ------------ -------- ------------
Total interest expense 387,985 360,618 - 748,603
------------ ------------ -------- ------------
Net interest income 492,013 294,243 (1,279) 784,977
Provision for credit losses 20,332 750 - 21,082
------------ ------------ -------- ------------
Net interest income after provision for credit losses 471,681 293,493 (1,279) 763,895
------------ ------------ -------- ------------
Mortgage banking 98,384 4,370 - 102,754
Investment services revenue 46,233 30,845 - 77,078
Service charges, fees and commissions 80,943 55,112 - 136,055
Securities available for sale gains (losses) 664 2,602 - 3,266
Other noninterest income 82,045 10,641 - 92,686
------------ ------------ -------- ------------
Total noninterest income 308,269 103,570 - 411,839
------------ ------------ -------- ------------
Employee compensation and benefits 251,899 128,095 - 379,994
Occupancy and equipment 78,309 41,787 - 120,096
Purchased mortgage servicing rights amortization 28,262 1,734 - 29,996
FDIC assessment 18,090 12,648 - 30,738
Marketing 14,721 6,362 - 21,083
Core deposit and goodwill amortization 20,537 6,349 - 26,886
OREO expense 3,427 2,159 - 5,586
Merger-related charges - 36,853 (36,853)(g) -
Other noninterest expense 106,722 52,833 - 159,555
------------ ------------ -------- ------------
Total noninterest expense 521,967 288,820 (36,853) 773,934
------------ ------------ -------- ------------
Income before taxes 257,983 108,243 35,574 401,800
Applicable income taxes 103,877 41,714 14,229 159,820
------------ ------------ -------- ------------
Net income before minority interest 154,106 66,529 21,345 241,980
Minority interest - - - -
------------ ------------ -------- ------------
Net income $ 154,106 $ 66,529 $ 21,345 $ 241,980
============ ============ ======== ============
Net income applicable to common shares: (m) $ 151,643 $ 59,586 $ 232,574
============ ============ ============
Weighted average common shares outstanding: (l)
Primary 160,599,370 128,201,345 271,019,000
Fully diluted 160,635,463 128,201,345 271,075,083
Earnings per share:
Primary $0.94 $0.46 $0.86
Fully diluted $0.94 $0.46 $0.86
</TABLE>
See accompanying notes to the unaudited condensed combined
financial statements
<PAGE> 5
<TABLE>
<CAPTION>
FLEET FINANCIAL GROUP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1995 (A)
FLEET PRO FORMA FLEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) HISTORICAL ADJUSTMENTS (B) PRO FORMA
------------- --------------- ------------
<S> <C> <C> <C>
Interest and fees on loans and leases $ 681,500 $ 12,134 $ 693,634
Interest on securities 186,083 281 186,364
------------- -------- ------------
Total interest income 867,583 12,415 879,998
Interest expense:
Deposits 243,982 7,097 251,079
Short-term borrowings 69,718 427 70,145
Long-term debt 66,761 - 66,761
------------- -------- ------------
Total interest expense 380,461 7,524 387,985
------------- -------- ------------
Net interest income 487,122 4,891 492,013
Provision for credit losses 20,164 168 20,332
------------- -------- ------------
Net interest income after provision for credit losses 466,958 4,723 471,681
------------- -------- ------------
Mortgage banking 99,457 (1,073) 98,384
Investment services revenue 46,233 - 46,233
Service charges, fees and commissions 80,574 369 80,943
Securities available for sale gains (losses) 664 - 664
Other noninterest income 81,380 665 82,045
------------- -------- ------------
Total noninterest income 308,308 (39) 308,269
------------- -------- ------------
Employee compensation and benefits 241,164 10,735 251,899
Occupancy and equipment 74,688 3,621 78,309
Purchased mortgage servicing rights amortization 22,992 5,270 28,262
FDIC assessment 17,670 420 18,090
Marketing 14,641 80 14,721
Core deposit and goodwill amortization 17,609 2,928 20,537
OREO expense 3,261 166 3,427
Merger-related charges - - -
Other noninterest expense 105,654 1,068 106,722
------------- -------- ------------
Total noninterest expense 497,679 24,288 521,967
------------- -------- ------------
Income before taxes 277,587 (19,604) 257,983
Applicable income taxes 111,434 (7,557) 103,877
------------- -------- ------------
Net income before minority interest 166,153 (12,047) 154,106
Minority interest 2,014 (2,014) -
------------- -------- ------------
Net income $ 164,139 $(10,033) $ 154,106
============= ======== ============
Net income applicable to common shares: (m) $ $161,676 $ 151,643
============= ============
Weighted average common shares outstanding: (l)
Primary 158,818,106 160,599,370
Fully diluted 158,854,199 160,635,463
Earnings per share:
Primary $1.02 $0.94
Fully diluted $1.02 $0.94
</TABLE>
See accompanying notes to the unaudited condensed combined
financial statements
<PAGE> 6
<TABLE>
SHAWMUT NATIONAL CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1995 (A)
<CAPTION>
SHAWMUT
SHAWMUT BARCLAYS BARCLAYS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) HISTORICAL PRO FORMA (C) PRO FORMA
------------ ------------- ------------
<S> <C> <C> <C>
Interest and fees on loans and leases $ 421,960 $ 17,899 $ 439,859
Interest on securities 159,463 - 159,463
------------ ----------- ------------
Total interest income 581,423 17,899 599,322
Interest expense:
Deposits 146,547 - 146,547
Short-term borrowings 124,770 11,164 135,934
Long-term debt 39,769 - 39,769
------------ ----------- ------------
Total interest expense 311,086 11,164 322,250
------------ ----------- ------------
Net interest income 270,337 6,735 277,072
Provision for credit losses - - -
------------ ----------- ------------
Net interest income after provision for credit losses 270,337 6,735 277,072
------------ ----------- ------------
Mortgage banking 3,156 - 3,156
Investment services revenue 30,845 - 30,845
Service charges, fees and commissions 51,580 2,410 53,990
Securities available for sale gains (losses) (101) - (101)
Other noninterest income 10,629 - 10,629
------------ ----------- ------------
Total noninterest income 96,109 2,410 98,519
------------ ----------- ------------
Employee compensation and benefits 119,624 3,358 122,982
Occupancy and equipment 38,599 - 38,599
Purchased mortgage servicing rights amortization 846 - 846
FDIC assessment 10,961 - 10,961
Marketing 6,011 - 6,011
Core deposit and goodwill amortization 4,007 - 4,007
OREO expense 1,579 - 1,579
Merger-related charges 36,853 - 36,853
Other noninterest expense 47,933 1,571 49,504
------------ ----------- ------------
Total noninterest expense 266,413 4,929 271,342
------------ ----------- ------------
Income before taxes 100,033 4,216 104,249
Applicable income taxes 37,412 1,686 39,098
------------ ----------- ------------
Net income before minority interest 62,621 2,530 65,151
Minority interest - - -
------------ ----------- ------------
Net income $ 62,621 $ 2,530 $ 65,151
============ =========== ============
Net income applicable to common shares: (m) $ 56,652
============
Weighted average common shares outstanding: (l)
Primary 121,637,585
Fully diluted 121,637,585
Earnings per share:
Primary $0.47
Fully diluted $0.47
</TABLE>
See accompanying notes to the unaudited condensed combined
financial statements.
<PAGE> 7
<TABLE>
<CAPTION>
NORTHEAST
PRO FORMA SHAWMUT
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) NORTHEAST ADJUSTMENTS PRO FORMA
----------- ---------- -----------
<S> <C> <C> <C>
Interest and fees on loans and leases $ 19,247 $ 79 (i) $ 459,185
Interest on securities 34,158 2,055 (i) 195,676
----------- ---------- -----------
Total interest income 53,405 2,134 654,861
Interest expense:
Deposits 27,097 472 (i) 174,116
Short-term borrowings 10,730 69 (i) 146,733
Long-term debt 1,020 (1,020)(h) 39,769
----------- ---------- -----------
Total interest expense 38,847 (479) 360,618
----------- ---------- -----------
Net interest income 14,558 2,613 294,243
Provision for credit losses 750 - 750
----------- ---------- -----------
Net interest income after provision for credit losses 13,808 2,613 293,493
----------- ---------- -----------
Mortgage banking 1,214 - 4,370
Investment services revenue - - 30,845
Service charges, fees and commissions 1,122 - 55,112
Securities available for sale gains (losses) 2,703 - 2,602
Other noninterest income 12 - 10,641
----------- ---------- -----------
Total noninterest income 5,051 - 103,570
----------- ---------- -----------
Employee compensation and benefits 5,113 - 128,095
Occupancy and equipment 3,338 (150)(i) 41,787
Purchased mortgage servicing rights amortization 107 781 (i) 1,734
FDIC assessment 1,687 - 12,648
Marketing 351 - 6,362
Core deposit and goodwill amortization 14 2,328 (j) 6,349
OREO expense 580 - 2,159
Merger-related charges - - 36,853
Other noninterest expense 3,329 - 52,833
----------- ---------- -----------
Total noninterest expense 14,519 2,959 288,820
----------- ---------- -----------
Income before taxes 4,340 (346) 108,243
Applicable income taxes 1,823 793 41,714
----------- ---------- -----------
Net income before minority interest 2,517 (1,139) 66,529
Minority interest - - -
----------- ---------- -----------
Net income $ 2,517 $ (1,139) $ 66,529
=========== ========== ===========
Net income applicable to common shares: (m) $ 59,586
===========
Weighted average common shares outstanding: (l)
Primary 128,201,345
Fully diluted 128,201,345
Earnings per share:
Primary $0.46
Fully diluted $0.46
</TABLE>
See accompanying notes to the unaudited condensed combined
financial statements
<PAGE> 8
<TABLE>
FLEET FINANCIAL GROUP, INC. AND SHAWMUT NATIONAL CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1994
<CAPTION>
FLEET
SHAWMUT
PRO FORMA PRO FORMA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) FLEET SHAWMUT ADJUSTMENTS COMBINED
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Interest and fees on loans and leases $ 561,021 $ 305,759 - $ 866,780
Interest on securities 223,482 148,595 - 372,077
------------ ------------ ----------- ------------
Total interest income 784,503 454,354 - 1,238,857
Interest expense:
Deposits 161,193 85,668 - 246,861
Short-term borrowings 64,948 80,079 - 145,027
Long-term debt 54,615 16,112 - 70,727
------------ ------------ ----------- ------------
Total interest expense 280,756 181,859 - 462,615
------------ ------------ ----------- ------------
Net interest income 503,747 272,495 - 776,242
Provision for credit losses 22,386 3,000 - 25,386
------------ ------------ ----------- ------------
Net interest income after provision for credit losses 481,361 269,495 - 750,856
------------ ------------ ----------- ------------
Mortgage banking 100,359 4,127 - 104,486
Investment services revenue 44,466 29,417 - 73,883
Service charges, fees and commissions 70,159 48,473 - 118,632
Securities available for sale gains (losses) 166 (768) - (602)
Other noninterest income 79,400 7,475 - 86,875
------------ ------------ ----------- ------------
Total noninterest income 294,550 88,724 - 383,274
------------ ------------ ----------- ------------
Employee compensation and benefits 258,110 125,791 - 383,901
Occupancy and equipment 79,269 39,718 - 118,987
Purchased mortgage servicing rights amortization 30,955 1,268 - 32,223
FDIC assessment 18,092 11,771 - 29,863
Marketing 12,854 4,308 - 17,162
Core deposit and goodwill amortization 13,442 1,699 - 15,141
OREO expense 7,016 5,730 - 12,746
Restructuring charges 25,000 - - 25,000
Other noninterest expense 104,767 51,545 - 156,312
------------ ------------ ----------- ------------
Total noninterest expense 549,505 241,830 - 791,335
------------ ------------ ----------- ------------
Income before taxes 226,406 116,389 - 342,795
Applicable income taxes 88,349 39,115 - 127,464
------------ ------------ ----------- ------------
Net income before minority interest 138,057 77,274 - 215,331
Minority interest 2,495 - - 2,495
------------ ------------ ----------- ------------
Net income $ 135,562 $ 77,274 - $ 212,836
============ ============ =========== ============
Net income applicable to common shares: (m) $ 127,830 $ 73,415 $ 201,245
============ ============ ============
Weighted average common shares outstanding: (l)
Primary 161,163,854 117,818,951 267,555,327
Fully diluted 161,241,430 117,818,951 267,654,528
Earnings per share:
Primary $0.79 $0.62 $0.75
Fully diluted $0.79 $0.62 $0.75
</TABLE>
See accompanying notes to the unaudited pro forma condensed combined
financial statements
<PAGE> 9
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(a) The pro forma information presented is not necessarily indicative of the
results of operations or the combined financial position that would have
resulted had the Merger, the Northeast Merger, the NBB Merger, the Plaza Merger,
the Barclays Acquisition and the FMG Repurchase been consummated at the
beginning of the periods indicated, nor is it necessarily indicative of the
results of operations in future periods or the future financial position of the
combined entities. The NBB Merger was consummated on January 27, 1995, the
Barclays Acquisition was consummated on January 31, 1995, the Plaza Merger was
consummated on March 3, 1995 and the FMG Repurchase was consummated on February
28, 1995 with the follow-up merger consummated on April 30, 1995. It is
anticipated that the Merger will be consummated in the fourth quarter of 1995
and the Northeast Merger will be consummated in the second quarter of 1995.
Under generally accepted accounting principles ("GAAP"), the
assets and liabilities of Shawmut will be combined with those of Fleet at book
value. In addition, the statements of income of Shawmut will be combined with
the statements of income of Fleet as of the earliest period presented. Certain
reclassifications have been included in the Unaudited Pro Forma Condensed
Combined Balance Sheet and Unaudited Pro Forma Condensed Combined Statements of
Income to conform to Fleet's presentation. Certain transactions conducted in the
ordinary course of business between Fleet, Shawmut, Northeast, NBB, Barclays,
Plaza and FMG are immaterial and, accordingly, have not been eliminated.
The pro forma condensed combined financial statements do not give
effect to the anticipated cost savings in connection with the Merger and the
Northeast Merger or the effects of any required regulatory divestitures. While
no assurance can be given, Fleet and Shawmut expect to achieve cost savings of
approximately $400 million (pre-tax) within fifteen months following the Merger.
Such cost savings are expected to be realized primarily through reductions in
staff, elimination, consolidation or divestiture of certain branches and the
consolidation of certain offices, data processing and other redundant
back-office operations and staff functions. Cost reductions and branch
consolidations will come from both companies and will be spread throughout the
geographic region. Cost savings are also expected to be achieved in connection
with the Northeast Merger, the NBB Merger and the Plaza Merger. These cost
savings are expected to be approximately $25 million, $20 million and $15
million, respectively, and are expected to be achieved within the first twelve
months after the consummation of these respective mergers. The extent to which
cost savings will be achieved is dependent upon various factors beyond the
control of Fleet and Shawmut, including the regulatory environment, economic
conditions, unanticipated changes in business conditions, inflation and the
level of Federal Deposit Insurance Corporation assessments. Therefore, no
assurances can be given with respect to the ultimate level of cost savings to be
realized, or that such savings will be realized in the time-frame currently
anticipated. In addition, certain regulatory agencies may seek the divestiture
of certain assets and liabilities of the combined company following the Merger.
Such divestitures may affect certain pro forma combined financial statement
amounts, merger and restructuring costs and cost savings.
All dollar amounts included in these Notes to Unaudited Pro Forma
Condensed Combined Financial Statements are in thousands unless otherwise
indicated.
(b) Pro forma adjustments reflect the impact of the NBB Merger, the
Plaza Merger and the FMG Repurchase which were consummated on January 27, 1995,
March 3, 1995, and February 28, 1995, respectively, as if such transactions had
been consummated on January 1, 1995.
(c) Pro forma adjustments reflect the impact of the Barclays
Acquisition, which was consummated on January 31, 1995, as if it had been
consummated on January 1, 1995.
(d) Fleet is currently reviewing the investment securities portfolios
of Shawmut and Northeast to determine the classification of such securities as
either available for sale or held to maturity in connection with Fleet's
existing interest-rate risk position. As a result of this review, certain
reclassifications of Shawmut and Northeast investment securities may result. No
adjustments have been made to either the available for sale or the held to
maturity portfolios in the accompanying pro forma combined balance sheet to
reflect any such reclassification as management has not made a final
determination with respect to such matters. Any such
<PAGE> 10
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
reclassification will be accounted for in accordance with Financial Accounting
Standards Board Statement No. 115, "Accounting for Certain Investments in Debt
and Equity Securities," which requires that securities transferred from held to
maturity to available for sale be transferred at fair value with any unrealized
gain or loss, net of taxes, at the date of transfer recognized as a separate
component of stockholders' equity. At March 31, 1995, securities held to
maturity at Shawmut and Northeast had unrealized losses of $248,544 and $49,315,
respectively.
(e) Pro forma adjustments to common shares and common surplus at March
31, 1995, reflect the Merger accounted for as a pooling of interests, through:
(a) the exchange of 109,619,746 shares of Fleet Common Stock (using the Common
Exchange Ratio of 0.8922) for the 122,864,544 outstanding shares of Shawmut
Common Stock at March 31, 1995 (which includes the 6,563,760 shares of Shawmut
Common Stock issued to acquire all the outstanding shares of Northeast common
stock and stock options and excludes the 5,811,900 shares of Shawmut Common
Stock held by Fleet as of such date, which are assumed to be retired for
combining purposes), and (b) the exchange of shares of Fleet New Preferred Stock
for all shares of Shawmut Preferred on a share-for-share basis.
(f) Pro forma adjustments to securities available for sale at March 31,
1995, and to dividend income on securities for the quarter ended March 31, 1995,
reflect the elimination of 5,811,900 shares of Shawmut Common Stock held by
Fleet at March 31, 1995, and the corresponding dividend income recorded on such
shares. Pro forma adjustments to other assets and accrued expenses and other
liabilities at March 31, 1995, include the elimination of Fleet's dividend
receivable related to such shares and the elimination of Shawmut's corresponding
dividend payable. The Unaudited Pro Forma Condensed Combined Balance Sheet also
eliminates the after-tax unrealized gain on these securities recorded in equity
and the related deferred tax expense.
(g) A liability of $400,000 ($363,147 net of the $36,853 charge taken
by Shawmut in the first quarter of 1995) has been recorded in the Unaudited Pro
Forma Condensed Combined Balance Sheet to reflect management's best estimate of
merger and restructuring related charges in connection with the Merger. This
liability resulted in a $240,000 after-tax charge ($217,888 net of the after-tax
impact of the charge recorded by Shawmut in the first quarter of 1995) to
retained earnings in the Unaudited Pro Forma Condensed Combined Balance Sheet.
It is anticipated that substantially all of these charges will be paid during
the first 15 months subsequent to the Merger. During the first quarter of 1995
Shawmut recognized $36,853 of this charge due to the settlement of certain of
Shawmut's retirement benefits as a result of the execution of Shawmut's
agreement to merge with Fleet. This charge has been eliminated from the pro
forma income statement due to the nonrecurring nature of the charge. The
following table provides details of the estimated charges by type:
<TABLE>
<CAPTION>
Type of Cost ESTIMATED COSTS
------------ ----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Personnel ................ $255,000
Facilities and equipment . 68,000
Branch related ........... 37,000
Other merger expenses .... 40,000
--------
Total .................... $400,000
========
</TABLE>
Personnel related costs consist primarily of charges related to
employee severance, termination of certain employee benefits plans and employee
assistance costs for separated employees. Facilities and equipment charges
consist of lease termination costs and other facilities related exit costs
resulting from consolidation of duplicate headquarters and operational
facilities, and computer equipment and software write-offs due to duplication or
incompatibility. Branch related costs are primarily related to the cost of
exiting branches anticipated to be closed, including lease terminations and
equipment write-offs. The effect of the proposed charge has been reflected in
the Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 1995;
however, since the proposed charge is nonrecurring, it has not been reflected in
the pro forma combined statements of income.
<PAGE> 11
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(h) The pro forma adjustments to cash include the redemption of the
Northeast $8.50 Cumulative Preferred Stock, Series B based on the redemption
value of such stock at March 31, 1995 ($43,790), and the redemption of all of
the Northeast Uncertificated Debentures ("the Northeast Debentures") based on
the face value of the Northeast Debentures at March 31, 1995 ($44,726), as if
such redemptions had occurred on January 1, 1995, and a related adjustment to
eliminate the interest expense recorded on such debentures ($1,020) for the
quarter ended March 31, 1995.
(i) These pro forma adjustments reflect the purchase accounting
adjustments related to the assets acquired and liabilities assumed for the
Northeast Merger. These adjustments are based on the best available information
and may be different from the actual adjustments to reflect the fair value of
the net assets purchased as of the date of the acquisition.
<TABLE>
(j) Pro forma adjustment reflects adjustment for the excess cost over
net assets acquired for the Northeast Merger calculated as follows:
<S> <C>
Purchase price ................................ $181,701
Historical net tangible assets acquired ..... 102,429
Estimated fair value adjustments ............ 60,443
--------
Estimated fair value net assets ............... 41,986
--------
Excess cost over net assets of
subsidiaries acquired ..................... $139,715
========
</TABLE>
Adjustments have been made to the Unaudited Pro Forma Condensed
Combined Balance Sheet to reflect the recording of the intangible as calculated
above in accordance with the purchase method of accounting. Reflected in the
1995 Unaudited Pro Forma Condensed Combined Income Statement is an adjustment to
reflect the amortization of Northeast's excess cost over net assets of
subsidiaries acquired ("goodwill") over 15 years.
(k) The pro forma stockholders' equity accounts of Northeast have been
adjusted in the Unaudited Pro Forma Condensed Combined Balance Sheet to reflect
the elimination of the stockholders' equity accounts in accordance with the
purchase method of accounting. The Shawmut Pro Forma adjustments reflect the
issuance of 6,563,760 shares of Shawmut Common Stock in exchange for all of the
outstanding shares of Northeast common stock and stock options (assuming that
the exchange ratio in connection with the Northeast Merger is 0.415 which is
based on the closing sales price for Shawmut Common Stock on the Stock Exchange
on May 12, 1995).
(l) The Fleet Pro Forma weighted average shares outstanding for the
quarter ended March 31, 1995, reflect Fleet's historical weighted average shares
outstanding plus the one month effect of the issuance of 6,165,912 shares of
Fleet Common Stock in connection with the NBB Merger as if such Merger occurred
on January 1, 1995. The Shawmut Pro Forma weighted average shares outstanding
for the quarter ended March 31, 1995 reflect Shawmut's historical weighted
average shares outstanding plus the issuance of 6,563,760 shares of Shawmut
Common Stock in connection with the Northeast Merger as if such Merger occurred
on January 1, 1995. The Fleet/Shawmut Pro Forma weighted average shares
outstanding for the quarter ended March 31, 1995 reflect the Fleet Pro Forma
weighted average shares plus the converted Shawmut Pro Forma weighted average
shares outstanding (after adjustment to eliminate the 5,811,900 shares of
Shawmut Common Stock owned by Fleet, which are assumed to be retired for
combining purposes). Each share of Shawmut Common Stock is converted into 0.8922
shares of Fleet Common Stock.
(m) The Fleet/Shawmut Pro Forma net income applicable to common shares
reflects the sum of the Fleet Pro Forma net income applicable per common share
and the Shawmut Pro Forma net income applicable per common shares adjusted for
any Fleet/Shawmut Pro Forma adjustments.
