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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
November 15, 1995
---------------------------------------------
(Date of earliest event reported )
FLEET FINANCIAL GROUP, INC.
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(Exact name of registrant as specified in its charter)
RHODE ISLAND
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(State or other jurisdiction of incorporation)
1-6366 05-0341324
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(Commission File Number) (IRS Employer Identification No.)
50 Kennedy Plaza, Providence, Rhode Island 02903
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(Address of principal executive offices) (Zip Code)
(401) 278-5800
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Registrants telephone number, including area code:
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<PAGE>
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 Combined Financial Statements
and Notes thereto for the period ending September 30, 1995. On November 14,
1995, the Federal Reserve Board approved the merger application of Fleet and
Shawmut. For additional information regarding the Merger, see Fleets Current
Reports on Form 8-K dated February 20, 1995, February 21, 1995, April 13,
1995, May 17, 1995, June 21, 1995, August 11, 1995 and August 23, 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 Shawmuts filing as
indicated.
Exhibit Number
Description
99.a Unaudited Pro Forma 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 SNCs quarterly report on Form
10-Q for the quarter ended September 30, 1995 (File No. 1-10102):
Consolidated Balance Sheet - September 30, 1995, Consolidated Statements
of Income for the three and nine months ended September 30, 1995,
Consolidated Statement of Cash Flows and Consolidated Statement of
Changes in Stockholders Equity for the nine months ended September 30,
1995; Notes to Consolidated Financial Statements (to the extent
applicable to the foregoing Financial Statements). (Portions of SNCs
Form 10-Q not specifically incorporated by reference are not required
for this current Report and are not incorporated by reference herein.)
2
<PAGE>
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
Dated: November 15, 1995
3
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Combined Balance Sheet as of
September 30, 1995, and the Unaudited Pro Forma Combined Statements of Income
for the three and nine months ended September 30, 1995, give effect to the
merger (the "Merger") of Shawmut National Corporation ("Shawmut") into Fleet
Financial Group, Inc. ("Fleet") accounted for as a pooling of interests, 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 merger (the
"Northeast Merger") of Northeast Federal Corp. ("Northeast") into Shawmut,
the consummation of the acquisition (the "Barclays Acquisition") of
substantially all of the assets of Barclays Business Finance Division of
Barclays Business Credit, Inc. ("Barclays") by Shawmut, and Fleets repurchase
(the "FMG Repurchase") of the publicly-held shares of Fleets majority-owned
subsidiary, Fleet Mortgage Group, Inc. ("FMG"), each of which was 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 Combined Statements
of Income for the three and nine months ended September 30, 1994, give effect
to the Merger as if the Merger had occurred on January 1, 1994, and do not take
into account the effects of the NBB Merger, the Plaza Merger, the Northeast
Merger, the Barclays Acquisition or the FMG Repurchase since such transactions
were accounted for under the purchase method of accounting.
The pro forma information is based on the historical consolidated
financial statements of Fleet, Shawmut, NBB, Plaza, Northeast, Barclays, and
FMG and their subsidiaries under the assumptions and adjustments set forth in
the accompanying Notes to the Unaudited Pro Forma Combined Financial
Statements. The Unaudited Pro Forma Combined Financial Statements do not give
effect to the anticipated cost savings in connection with the Merger, the NBB
Merger, the Plaza Merger, or the Northeast Merger or the effects of any
regulatory required divestitures.
The Unaudited Pro Forma 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 information 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 information 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.
1
<PAGE>
<TABLE>
FLEET FINANCIAL GROUP, INC. AND SHAWMUT NATIONAL CORPORATION
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
September 30, 1995 (a)
<CAPTION>
Fleet
Pro Forma Shawmut
(Dollars in thousands) Fleet Shawmut Adjustments Combined
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 2,215,467 $ 1,301,537 $ 0 $ 3,517,004
Federal funds sold and securities
purchased under agreements to resell 265,298 282,600 0 547,898
Securities available for sale, at market 10,900,497 897,436 (d) (195,425)(f) 11,602,508 (d)
Securities held to maturity 698,636 7,198,762 (d) 0 7,897,398 (d)
Loans and leases 30,801,417 21,633,960 0 52,435,377
Reserve for credit losses (937,102) (510,569) 0 (1,447,671)
Mortgages held for resale 2,110,288 142,097 0 2,252,385
Premises and equipment 684,211 326,117 0 1,010,328
Purchased mortgage servicing rights 1,249,734 13,155 0 1,262,889
Excess cost over net assets of
subsidiaries acquired 458,742 488,140 0 946,882
Other intangibles 177,810 16,237 0 194,047
Other assets 2,236,300 1,267,281 167,331 (f)(g) 3,670,912
---------------- ---------------- ---------------- ----------------
Total assets $ 50,861,298 $ 33,056,753 $ (28,094) $ 83,889,957
============= ============= ============== ===============
LIABILITIES and STOCKHOLDERS' EQUITY:
Deposits:
Demand $ 6,397,759 $ 4,260,502 $ 0 $ 10,658,261
Regular savings, NOW, money market 14,594,487 8,222,807 0 22,817,294
Time 11,443,634 8,902,997 0 20,346,631
---------------- ---------------- ---------------- ----------------
32,435,880 21,386,306 0 53,822,186
Federal funds purchased and securities
under agreements to repurchase 4,106,578 4,710,495 0 8,817,073
Other short-term borrowings 5,071,791 1,110,056 0 6,181,847
Accrued expenses and other liabilities 1,119,301 378,974 348,280 (f)(g) 1,846,555
Long-term debt 3,767,181 2,967,079 6,734,260
---------------- ---------------- ---------------- ----------------
Total liabilities 46,500,731 30,552,910 348,280 77,401,921
Stockholders' equity:
Preferred stock 378,815 303,185 0 (e) 682,000
Common stock 141,947 1,294 102,990 (e)(f) 246,231
Common surplus 1,538,077 1,523,011 (433,951)(e)(f) 2,627,137
Retained earnings 2,251,399 896,164 (209,735)(g) 2,937,828
Net unrealized gain/(loss) on
securities available for sale 66,401 (12,309) (43,180)(f) 10,912 (d)
Treasury stock, at cost (16,072) (207,502) 207,502 (e) (16,072)
---------------- ---------------- ---------------- ----------------
Total stockholders' equity 4,360,567 2,503,843 (376,374) 6,488,036
---------------- ---------------- ---------------- ----------------
Total liabilities and stockholders'
equity $ 50,861,298 $ 33,056,753 $ (28,094) $ 83,889,957
================ ================ ================ ================
See accompanying notes to the unaudited pro forma combined financial statements
</TABLE>
2
<PAGE>
<TABLE>
FLEET FINANCIAL GROUP, INC. AND SHAWMUT NATIONAL CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
For the Three Months Ended September 30, 1995 (a)
<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 $ 758,646 $ 465,641 $ 0 $ 1,224,287
Interest on securities 184,805 132,141 (1,279)(f) 315,667
---------------- ---------------- ---------------- ----------------
Total interest income 943,451 597,782 (1,279) 1,539,954
Interest expense:
Deposits 264,346 185,024 0 449,370
Short-term borrowings 105,928 99,183 0 205,111
Long-term debt 70,912 51,774 0 122,686
---------------- ---------------- ---------------- ----------------
Total interest expense 441,186 335,981 0 777,167
---------------- ---------------- ---------------- ----------------
Net interest income 502,265 261,801 (1,279) 762,787
Provision for credit losses 27,274 0 0 27,274
---------------- ---------------- ---------------- ----------------
Net interest income after provision for credit losses 474,991 261,801 (1,279) 735,513
---------------- ---------------- ---------------- ----------------
Mortgage banking 135,491 1,521 0 137,012
Investment services revenue 46,870 33,702 0 80,572
Service charges, fees and commissions 72,115 57,159 0 129,274
Securities available for sale gains (losses) 6,577 38 0 6,615
Other noninterest income 79,981 14,780 0 94,761
---------------- ---------------- ---------------- ----------------
Total noninterest income 341,034 107,200 0 448,234
---------------- ---------------- ---------------- ----------------
Employee compensation and benefits 241,984 118,730 0 360,714
Occupancy and equipment 74,124 41,249 0 115,373
Mortgage servicing rights amortization 29,958 804 0 30,762
FDIC assessment 1,923 931 0 2,854
Marketing 20,530 6,975 0 27,505
Core deposit and goodwill amortization 21,073 7,356 0 28,429
OREO expense 3,741 979 0 4,720
Other noninterest expense 130,044 46,263 0 176,307
---------------- ---------------- ---------------- ----------------
Total noninterest expense 523,377 223,287 0 746,664
---------------- ---------------- ---------------- ----------------
Income before taxes 292,648 145,714 (1,279) 437,083
Applicable income taxes 115,288 54,287 (512) 169,063
---------------- ---------------- ---------------- ----------------
Net income $ 177,360 $ 91,427 $ (767) $ 268,020
================ ================ ================ ================
Net income applicable to common shares: (i) $ 174,897 $ 84,646 $ 258,776
================ ================ ================ ================
Weighted average common shares outstanding: (h)
Primary 161,754,119 124,170,392 269,118,397
Fully diluted 161,914,503 124,170,392 269,278,781
Earnings per share:
Primary $ 1.08 $ 0.68 $ 0.96
Fully diluted $ 1.08 $ 0.68 $ 0.96
</TABLE>
See accompanying notes to the unaudited pro forma combined financial statements
3
<PAGE>
<TABLE>
FLEET FINANCIAL GROUP, INC. AND SHAWMUT NATIONAL CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
For the Nine Months Ended September 30, 1995 (a)
<CAPTION>
Fleet
Shawmut
Fleet Shawmut Pro Forma Pro Forma
(Dollars in thousands, except per share data) Pro Forma Pro Forma Adjustments Combined
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Interest and fees on loans and leases $ 2,191,094 $ 1,397,984 $ 0 $ 3,589,078
Interest on securities 558,034 507,935 (3,837)(f) 1,062,132
---------------- ---------------- ---------------- ----------------
Total interest income 2,749,128 1,905,919 (3,837) 4,651,210
Interest expense:
Deposits 778,264 549,525 0 1,327,789
Short-term borrowings 272,019 375,636 0 647,655
Long-term debt 208,124 151,313 0 359,437
---------------- ---------------- ---------------- ----------------
Total interest expense 1,258,407 1,076,474 0 2,334,881
---------------- ---------------- ---------------- ----------------
Net interest income 1,490,721 829,445 (3,837) 2,316,329
Provision for credit losses 75,238 1,250 0 76,488
---------------- ---------------- ---------------- ----------------
Net interest income after provision for credit losses 1,415,483 828,195 (3,837) 2,239,841
---------------- ---------------- ---------------- ----------------
Mortgage banking 364,428 16,828 0 381,256
Investment services revenue 139,247 98,758 0 238,005
Service charges, fees and commissions 220,980 179,665 0 400,645
Securities available for sale gains (losses) 10,302 7,533 0 17,835
Other noninterest income 277,327 25,428 0 302,755
---------------- ---------------- ---------------- ----------------
Total noninterest income 1,012,284 328,212 0 1,340,496
---------------- ---------------- ---------------- ----------------
Employee compensation and benefits 738,416 373,927 0 1,112,343
Occupancy and equipment 227,614 122,141 0 349,755
Mortgage servicing rights amortization 103,851 3,419 0 107,270
FDIC assessment 38,048 25,824 0 63,872
Marketing 50,701 19,787 0 70,488
Core deposit and goodwill amortization 62,327 21,752 0 84,079
OREO expense 9,545 4,353 0 13,898
Merger-related charges 0 50,441 (50,441)(g) 0
Other noninterest expense 363,189 154,820 0 518,009
---------------- ---------------- ---------------- ----------------
Total noninterest expense 1,593,691 776,464 (50,441) 2,319,711
---------------- ---------------- ---------------- ----------------
Income before taxes 834,076 379,943 46,604 1,260,623
Applicable income taxes 330,424 143,847 18,642 492,913
---------------- ---------------- ---------------- ----------------
Net income $ 503,652 $ 236,096 $ 27,962 $ 767,710
================ ================ ================ ================
Net income applicable to common shares: (i) $ 496,262 $ 215,137 $ 739,361
================ ================ ================ ================
Weighted average common shares outstanding: (h)
Primary 161,180,293 122,687,885 266,681,634
Fully diluted 161,698,931 122,687,885 267,200,272
Earnings per share:
Primary $ 3.08 $ 1.75 $ 2.77
Fully diluted $ 3.07 $ 1.75 $ 2.77
</TABLE>
See accompanying notes to the unaudited pro forma combined financial statements
4
<PAGE>
<TABLE>
FLEET FINANCIAL GROUP, INC. AND SHAWMUT NATIONAL CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
For the Nine Months Ended September 30, 1995 (a)
<CAPTION>
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 $ 2,178,960 $ 12,134 $ 2,191,094
Interest on securities 557,753 281 558,034
---------------- ---------------- ----------------
Total interest income 2,736,713 12,415 2,749,128
Interest expense:
Deposits 771,167 7,097 778,264
Short-term borrowings 271,592 427 272,019
Long-term debt 208,124 0 208,124
---------------- ---------------- ----------------
Total interest expense 1,250,883 7,524 1,258,407
---------------- ---------------- ----------------
Net interest income 1,485,830 4,891 1,490,721
Provision for credit losses 75,070 168 75,238
---------------- ---------------- ----------------
Net interest income after provision for credit losses 1,410,760 4,723 1,415,483
---------------- ---------------- ----------------
Mortgage banking 365,501 (1,073) 364,428
Investment services revenue 139,247 0 139,247
Service charges, fees and commissions 220,611 369 220,980
Securities available for sale gains (losses) 10,302 0 10,302
Other noninterest income 274,648 2,679 277,327
---------------- ---------------- ----------------
Total noninterest income 1,010,309 1,975 1,012,284
---------------- ---------------- ----------------
Employee compensation and benefits 727,681 10,735 738,416
Occupancy and equipment 223,993 3,621 227,614
Mortgage servicing rights amortization 98,581 5,270 103,851
FDIC assessment 37,628 420 38,048
Marketing 50,621 80 50,701
Core deposit and goodwill amortization 59,399 2,928 62,327
OREO expense 9,379 166 9,545
Merger-related charges 0 0 0 -
Other noninterest expense 362,121 1,068 363,189
---------------- ---------------- ----------------
Total noninterest expense 1,569,403 24,288 1,593,691
---------------- ---------------- ----------------
Income before taxes 851,666 (17,590) 834,076
Applicable income taxes 337,981 (7,557) 330,424
---------------- ---------------- ----------------
Net income $ 513,685 $ (10,033) $ 503,652
================ ================ ================
Net income applicable to common shares: (i) $ 506,295 $ 496,262
================ ================ ================
Weighted average common shares outstanding: (h)
Primary 160,640,049 161,180,293
Fully diluted 161,158,687 161,698,931
Earnings per share:
Primary $ 3.15 $ 3.08
Fully diluted $ 3.14 $ 3.07
</TABLE>
See accompanying notes to the unaudited pro forma combined financial statements
5
<PAGE>
<TABLE>
FLEET FINANCIAL GROUP, INC. AND SHAWMUT NATIONAL CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
For the Nine Months Ended September 30, 1995 (a)
<CAPTION>
Shawmut Pro Forma Shawmut
(Dollars in thousands, except per share data) Historical Adjustments (c) Pro Forma
---------------- ---------------- ----------------
<S> <C> <C> <C>
Interest and fees on loans and leases $ 1,345,751 $ 52,233 $ 1,397,984
Interest on securities 447,519 60,416 507,935
---------------- ---------------- ----------------
Total interest income 1,793,270 112,649 1,905,919
Interest expense:
Deposits 500,451 49,074 549,525
Short-term borrowings 340,971 34,665 375,636
Long-term debt 151,313 0 151,313
---------------- ---------------- ----------------
Total interest expense 992,735 83,739 1,076,474
---------------- ---------------- ----------------
Net interest income 800,535 28,910 829,445
Provision for credit losses 0 1,250 1,250
---------------- ---------------- ----------------
Net interest income after provision for credit losses 800,535 27,660 828,195
---------------- ---------------- ----------------
Mortgage banking 14,490 2,338 16,828
Investment services revenue 98,758 0 98,758
Service charges, fees and commissions 175,337 4,328 179,665
Securities available for sale gains (losses) 1,257 6,276 7,533
Other noninterest income 25,406 22 25,428
---------------- ---------------- ----------------
Total noninterest income 315,248 12,964 328,212
---------------- ---------------- ----------------
Employee compensation and benefits 358,722 15,205 373,927
Occupancy and equipment 117,347 4,794 122,141
Mortgage servicing rights amortization 2,482 937 3,419
FDIC assessment 22,853 2,971 25,824
Marketing 19,038 749 19,787
Core deposit and goodwill amortization 16,634 5,118 21,752
OREO expense 3,263 1,090 4,353
Merger-related charges 50,441 0 50,441
Other noninterest expense 147,282 7,538 154,820
---------------- ---------------- ----------------
Total noninterest expense 738,062 38,402 776,464
---------------- ---------------- ----------------
Income before taxes 377,721 2,222 379,943
Applicable income taxes 141,065 2,782 143,847
---------------- ---------------- ----------------
Net income $ 236,656 $ (560) $ 236,096
================ ================ =============
Net income applicable to common shares: (i) $ 216,671 $ 215,137
================ =============
Weighted average common shares outstanding: (h)
Primary 123,191,200 122,687,885
Fully diluted 123,191,200 122,687,885
Earnings per share:
Primary $ 1.76 $ 1.75
Fully diluted $ 1.76 $ 1.75
</TABLE>
See accompanying notes to the unaudited pro forma combined financial statements
6
<PAGE>
<TABLE><CAPTION>
FLEET FINANCIAL GROUP, INC. AND SHAWMUT NATIONAL CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
For the Three Months Ended September 30, 1994
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 $ 602,665 $ 337,948 $ 0 $ 940,613
Interest on securities 246,880 151,882 (677)(f) 398,085
---------------- ---------------- ---------------- ----------------
Total interest income 849,545 489,830 (677) 1,338,698
Interest expense:
Deposits 207,555 107,691 0 315,246
Short-term borrowings 88,689 79,256 0 167,945
Long-term debt 59,533 36,969 0 96,502
---------------- ---------------- ---------------- ----------------
Total interest expense 355,777 223,916 0 579,693
---------------- ---------------- ---------------- ----------------
Net interest income 493,768 265,914 (677) 759,005
Provision for credit losses 10,599 0 0 10,599
---------------- ---------------- ---------------- ----------------
Net interest income after provision for credit losses 483,169 265,914 (677) 748,406
---------------- ---------------- ---------------- ----------------
Mortgage banking 93,150 3,828 0 96,978
Investment services revenue 43,806 28,520 0 72,326
Service charges, fees and commissions 63,012 63,891 0 126,903
Securities available for sale gains (losses) 1,385 768 0 2,153
Other noninterest income 78,822 5,923 0 84,745
---------------- ---------------- ---------------- ----------------
Total noninterest income 280,175 102,930 0 383,105
---------------- ---------------- ---------------- ----------------
Employee compensation and benefits 228,751 118,868 0 347,619
Occupancy and equipment 74,561 38,091 0 112,652
Mortgage servicing rights amortization 17,115 1,082 0 18,197
FDIC assessment 17,215 10,238 0 27,453
Marketing 17,226 4,523 0 21,749
Core deposit and goodwill amortization 14,010 2,000 0 16,010
OREO expense 10,132 1,113 0 11,245
Restructuring charges 7,000 0 0 7,000
Other noninterest expense 108,095 61,742 0 169,837
---------------- ---------------- ---------------- ----------------
Total noninterest expense 494,105 237,657 0 731,762
---------------- ---------------- ---------------- ----------------
Income before taxes 269,239 131,187 (677) 399,749
Applicable income taxes 102,241 45,912 (271) 147,882
---------------- ---------------- ---------------- ----------------
Net income before minority interest 166,998 85,275 (406) 251,867
Minority interest 3,105 0 0 3,105
---------------- ---------------- ---------------- ----------------
Net income $ 163,893 $ 85,275 $ (406) $ 248,762
================ ================ ================ ================
Net income applicable to common shares: (i) $ 161,430 $ 81,417 $ 242,441
================ ================ ================
Weighted average common shares outstanding: (h)
Primary 160,207,921 119,264,532 265,817,407
Fully diluted 160,208,842 119,264,532 265,818,628
Earnings per share:
Primary $ 1.01 $ 0.68 $ 0.91
Fully diluted $ 1.01 $ 0.68 $ 0.91
</TABLE>
See accompanying notes to the unaudited pro forma combined financial statements
7
<PAGE>
<TABLE>
FLEET FINANCIAL GROUP, INC. AND SHAWMUT NATIONAL CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
For the Nine Months Ended September 30, 1994
<CAPTION>
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 $ 1,740,445 $ 966,115 $ 0 $ 2,706,560
Interest on securities 707,322 449,710 (1,067)(f) 1,155,965
---------------- ---------------- ---------------- ----------------
Total interest income 2,447,767 1,415,825 (1,067) 3,862,525
Interest expense:
Deposits 543,893 283,959 0 827,852
Short-term borrowings 234,096 238,552 0 472,648
Long-term debt 170,035 89,163 0 259,198
---------------- ---------------- ---------------- ----------------
Total interest expense 948,024 611,674 0 1,559,698
---------------- ---------------- ---------------- ----------------
Net interest income 1,499,743 804,151 (1,067) 2,302,827
Provision for credit losses 45,016 3,000 0 48,016
---------------- ---------------- ---------------- ----------------
Net interest income after provision for credit losses 1,454,727 801,151 (1.067) 2,254,811
---------------- ---------------- ---------------- ----------------
Mortgage banking 278,000 17,015 0 295,015
Investment services revenue 131,097 87,002 0 218,099
Service charges, fees and commissions 194,704 179,308 0 374,012
Securities available for sale gains (losses) 20,564 0 0 20,564
Other noninterest income 220,828 20,247 0 241,075
---------------- ---------------- ---------------- ----------------
Total noninterest income 845,193 303,572 0 1,148,765
---------------- ---------------- ---------------- ----------------
Employee compensation and benefits 727,007 367,263 0 1,094,270
Occupancy and equipment 228,458 115,922 0 344,380
Mortgage servicing rights amortization 68,947 3,469 0 72,416
FDIC assessment 52,763 33,240 0 86,003
Marketing 44,507 15,594 0 60,101
Core deposit and goodwill amortization 42,217 5,472 0 47,689
OREO expense 22,217 10,218 0 32,435
Restructuring charges 32,000 39,800 0 71,800
Merger-related charges 0 100,900 0 100,900
Other noninterest expense 329,970 184,294 0 514,264
---------------- ---------------- ---------------- ----------------
Total noninterest expense 1,548,086 876,172 0 2,424,258
---------------- ---------------- ---------------- ----------------
Income before taxes 751,834 228,551 (1,067) 979,318
Applicable income taxes 296,328 84,671 (427) 380,572
---------------- ---------------- ---------------- ----------------
Net income before minority interest 455,506 143,880 (640) 598,746
Minority interest 7,765 0 0 7,765
---------------- ---------------- ---------------- ----------------
Net income $ 447,741 $ 143,880 $ (640) $ 590,981
================ ================ ================ ================
Net income applicable to common shares: (i) $ 435,083 $ 132,304 $ 566,747
================ ================ ================
Weighted average common shares outstanding: (h)
Primary 161,037,511 118,517,564 267,171,091
Fully diluted 161,163,382 118,517,564 267,296,962
Earnings per share:
Primary $ 2.70 $ 1.12 $ 2.12
Fully diluted $ 2.70 $ 1.12 $ 2.12
</TABLE>
See accompanying notes to the unaudited pro forma combined financial statements
8
<PAGE>
NOTES TO UNAUDITED PRO FORMA 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 NBB Merger, the Plaza Merger, the Northeast
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, the FMG Repurchase was consummated on February
28, 1995 and the Northeast Merger was consummated on June 9, 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 Combined
Balance Sheet and Unaudited Pro Forma Combined Statements of Income to conform
to Fleets 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 combined financial statements do not give effect to the
anticipated cost savings in connection with the Merger. 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 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 connection with the Merger, Fleet and Shawmut have signed definitive
agreements to divest 64 branches to comply with anti-trust concerns. The sale
will consist of approximately $2.6 billion in deposits and $1.9 billion in
loans. The negative impact of the divestitures are not expected to be material
to the business operations or financial condition of the corporation.
All dollar amounts included in these Notes to Unaudited Pro Forma 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.
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(c) Pro forma adjustments reflect the impact of the Barclays Acquisition,
which was consummated on January 31, 1995, and the Northeast Merger, which was
consummated on June 9, 1995, as if they had been consummated on January 1, 1995.
Pro forma adjustments also include interest expense on other short-term
borrowings to fund the repurchase of 6,483,665 shares of Shawmut Common Stock
issued in connection with the Northeast Merger.
(d) Fleet is currently reviewing the investment securities portfolio of
Shawmut to determine the classification of such securities as either available
for sale or held to maturity in connection with Fleets existing interest-rate
risk position. As a result of this review, certain reclassifications of
Shawmut investment securities may result. No adjustments have been made to
either the available for sale or the held to maturity portfolios in the
accompanying Unaudited 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 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 September 30, 1995, securities held to maturity at Shawmut had an unrealized
loss of $19,334.
(e) Pro forma adjustments to common shares and common surplus at September
30, 1995, reflect the Merger accounted for as a pooling of interests, through:
(a) the exchange of 104,284,005 shares of Fleet Common Stock (using the Common
Exchange Ratio of 0.8922) for the 116,884,112 outstanding shares of Shawmut
Common Stock at September 30, 1995 (which 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 September 30,
1995, and to dividend income on securities for the three and nine months ended
September 30, 1995 and 1994, reflect the elimination of 5,811,900 shares of
Shawmut Common Stock held by Fleet at September 30, 1995, and the corresponding
dividend income recorded on such shares. Pro forma adjustments to other assets
and accrued expenses and other liabilities at September 30, 1995, include the
elimination of Fleets dividend receivable related to such shares and the
elimination of Shawmuts corresponding dividend payable. The Unaudited Pro
Forma Combined Balance Sheet also eliminates the after-tax unrealized
gain on these securities recorded in equity and the related deferred tax
liability.
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<PAGE>
(g) A liability of $400,000 ($349,559 net of the $36,853 and $13,588
charges taken by Shawmut in the first and second quarters of 1995 respectively)
has been recorded in the Unaudited Pro Forma Combined Balance Sheet to reflect
managements best estimate of merger and restructuring related charges in
connection with the Merger. This liability resulted in a $240,000 after-tax
charge ($209,735 net of the after-tax impact of the charge recorded by Shawmut
in the first nine months of 1995) to retained earnings in the Unaudited Pro
Forma 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 Shawmuts retirement benefits as a result of the
execution of the merger agreement with Fleet. During the second quarter of 1995
Shawmut recognized $13,588 of this charge due to the vesting of certain
restricted stock upon shareholder approval of the Merger. These charges have
been eliminated from the pro forma income statements due to the nonrecurring
nature of the charges. The following table provides details of the estimated
merger and restructuring related charges by type:
Type of Cost Estimated Costs
------------ ---------------
(Dollars in
Thousands)
Personnel $255,000
Facilities and equipment 68,000
Branch related 37,000
Other merger expenses 40,000
---------
Total $400,000
========
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 Combined Balance Sheet as of September 30, 1995;
however, since the proposed charge is nonrecurring, it has not been reflected
in the Unaudited Pro Forma Combined Statements of Income.
(h) The Fleet Pro Forma weighted average shares outstanding for the nine
months ended September 30, 1995, reflect Fleets 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 three and nine months ended September 30, 1995,
reflect Shawmuts historical weighted average shares outstanding adjusted for
the repurchase of the shares of Shawmut Common Stock issued in connection with
the Northeast Merger as if such merger and repurchase had occurred on January 1,
1995. The Fleet/Shawmut Pro Forma weighted average shares outstanding for the
three and nine months ended September 30, 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). 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.
(i) 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 share adjusted for
any Fleet/Shawmut Pro Forma adjustments.
11
