UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 30, 1995
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period _________ to __________
Commission File Number 1-6366
FLEET FINANCIAL GROUP, INC.
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(Exact name of registrant as specified in its charter)
RHODE ISLAND 05-0341324
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(State or other jurisdiction of incorporation or organization) (IRS Employer
Identification No.)
50 KENNEDY PLAZA
PROVIDENCE, RHODE ISLAND 02903
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (401) 278-5800
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file reports) and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
----- -----
The number of shares of common stock of the Registrant outstanding as of October
31, 1995 was 140,151,659.
<PAGE>
FLEET FINANCIAL GROUP, INC.
FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 1995
TABLE OF CONTENTS OF INFORMATION REQUIRED IN REPORT
PAGE
----
PART I. ITEM 1. FINANCIAL INFORMATION
Consolidated Statements of Income
Three and Nine Months Ended September 30, 1995 and 1994 3
Consolidated Balance Sheets
September 30, 1995 and December 31, 1994 5
Consolidated Statements of Changes in Stockholders' Equity
Nine Months Ended September 30, 1995 and 1994 6
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1995 and 1994 7
Condensed Notes to Consolidated Financial Statements 8
PART I. ITEM 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II. ITEM 6. 24
SIGNATURES 25
EXHIBITS 26
2
<PAGE>
FLEET FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE><CAPTION>
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For the three months ended September 30
Dollars in millions, except per share amounts 1995 1994
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<S> <C> <C>
Interest and fees on loans and leases $758 $603
Interest on taxable securities 177 238
Interest on tax-exempt securities 8 9
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Total interest income 943 850
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Interest expense:
Deposits 264 208
Short-term borrowings 106 89
Long-term debt 71 59
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Total interest expense 441 356
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Net interest income 502 494
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Provision for credit losses 27 11
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Net interest income after provision for credit losses 475 483
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Noninterest income:
Mortgage banking 135 93
Service charges, fees, and commissions 72 63
Investment services revenue 47 44
Student loan servicing fees 17 15
Securities available for sale gains 7 1
Trading revenue 6 6
Other 57 58
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Total noninterest income 341 280
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Noninterest expense:
Employee compensation and benefits 242 229
Occupancy 38 44
Equipment 36 32
Mortgage servicing rights amortization 30 17
Core deposit and goodwill amortization 21 14
Legal and other professional 21 21
Marketing 21 17
FDIC assessment 2 17
Restructuring charge --- 7
Other 113 96
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Total noninterest expense 524 494
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Income before income taxes 292 269
Applicable income taxes 115 102
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Net income before minority interest 177 167
Minority interest --- 3
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Net income $177 $164
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Net income applicable to common shares $175 $161
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Fully diluted weighted average common shares outstanding: 161,914,503 160,208,842
Fully diluted earnings per share: $1.08 $1.01
Dividends declared 0.40 0.35
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</TABLE>
See accompanying Condensed Notes to Consolidated Financial Statements.
3
<PAGE>
FLEET FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE><CAPTION>
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For the nine months ended September 30
Dollars in millions, except per share amounts 1995 1994
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<S> <C> <C>
Interest and fees on loans and leases $2,179 $1,741
Interest on taxable securities 530 683
Interest on tax-exempt securities 28 24
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Total interest income 2,737 2,448
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Interest expense:
Deposits 771 544
Short-term borrowings 272 234
Long-term debt 208 170
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Total interest expense 1,251 948
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Net interest income 1,486 1,500
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Provision for credit losses 75 45
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Net interest income after provision for credit losses 1,411 1,455
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Noninterest income:
Mortgage banking 366 278
Service charges, fees, and commissions 221 185
Investment services revenue 139 131
Trading revenue 53 14
Student loan servicing fees 47 39
Securities available for sale gains 10 21
Other 174 177
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Total noninterest income 1,010 845
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Noninterest expense:
Employee compensation and benefits 728 727
Occupancy 115 129
Equipment 109 100
Mortgage servicing rights amortization 99 69
Core deposit and goodwill amortization 59 42
Legal and other professional 53 57
Marketing 51 44
FDIC assessment 38 53
Restructuring charges --- 32
Other 317 295
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Total noninterest expense 1,569 1,548
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Income before income taxes 852 752
Applicable income taxes 338 296
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Net income before minority interest 514 456
Minority interest --- 8
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Net income $ 514 $ 448
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Net income applicable to common shares $ 506 $ 435
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Fully diluted weighted average common shares outstanding: 161,158,687 161,163,382
Fully diluted earnings per share: $3.14 $2.70
Dividends declared 1.20 1.00
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</TABLE>
See accompanying Condensed Notes to Consolidated Financial Statements.
4
<PAGE>
FLEET FINANCIAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE><CAPTION>
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September 30, December 31,
Dollars in millions, except share amounts 1995 1994
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<S> <C> <C>
ASSETS
Cash, due from banks and interest-bearing deposits $ 2,215 $ 5,208
Federal funds sold and securities purchased under agreements to resell 265 649
Securities available for sale 10,900 10,353
Securities held to maturity (market value: $706 and $890) 699 891
Loans and leases 30,801 27,709
Reserve for credit losses (937) (953)
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Net loans and leases 29,864 26,756
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Mortgages held for resale 2,110 489
Mortgage servicing rights 1,250 827
Premises and equipment 684 656
Intangible assets 637 339
Accrued interest receivable 344 342
Other assets 1,893 2,247
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Total assets $50,861 $48,757
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LIABILITIES
Deposits:
Demand $ 6,398 $ 6,890
Regular savings, NOW, money market 14,594 15,220
Time 11,444 12,696
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Total deposits 32,436 34,806
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Federal funds purchased and securities sold under agreements to 4,107 2,846
repurchase
Other short-term borrowings 5,072 3,105
Accrued expenses and other liabilities 1,118 1,163
Long-term debt 3,767 3,457
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Total liabilities 46,500 45,377
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STOCKHOLDERS' EQUITY
Preferred stock 379 379
Common stock (shares issued: 141,947,169 in 1995 and 141,574,162 in
1994; shares outstanding: 141,527,125 in 1995 and 135,024,262 in 1994) 142 142
Common surplus 1,538 1,547
Retained earnings 2,252 1,936
Net unrealized gain (loss) on securities 66 (374)
Less: Treasury stock, at cost, 420,044 shares in 1995 and
6,549,900 shares in 1994 (16) (250)
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Total stockholders' equity 4,361 3,380
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Total liabilities and stockholders' equity $50,861 $48,757
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</TABLE>
See accompanying Condensed Notes to Consolidated Financial Statements.
5
<PAGE>
FLEET FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE><CAPTION>
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Net
Common Unrealized
Nine months ended September 30 Preferred Stock Common Retained Gain(Loss) Treasury
Dollars in millions, except share amounts Stock $1 Par Surplus Earnings on Stock Total
Securities
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<S> <C> <C> <C> <C> <C> <C> <C>
1994
Balance at December 31, 1993 $501 $137 $1,492 $1,509 $--- $--- $3,639
Net unrealized gain on securities available for sale
at January 1, 1994 224 224
Net income 448 448
Cash dividends declared on common stock ($1.00 per share) (138) (138)
Cash dividends declared on preferred stock (13) (13)
Redemption of preferred stock (122) (122)
Common stock issued in connection with employee
benefit and stock option plans 1 12 (1) 12
Adjustment of valuation reserve for securities
available for sale (475) (475)
Treasury stock purchases (196) (196)
Other-net 3 39 25 67
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Balance at September 30, 1994 $379 $141 $1,543 $1,830 $(251) $(196) $3,446
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1995
Balance at December 31, 1994 $379 $142 $1,547 $1,936 $(374) $(250) $3,380
Net income 514 514
Cash dividends declared on common stock ($1.20 per share) (169) (169)
Cash dividends declared on preferred stock (8) (8)
Common stock issued in connection with
employee benefit and stock option plans 8 15 23
Treasury stock issued in connection with
the acquisition of NBB (17) (21) 234 196
Adjustment of valuation reserve for securities
available for sale 440 440
Treasury stock purchases (15) (15)
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Balance at September 30, 1995 $379 $142 $1,538 $2,252 $66 $(16) $4,361
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</TABLE>
See accompanying Condensed Notes to Consolidated Financial Statements.
6
<PAGE>
FLEET FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE><CAPTION>
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Nine months ended September 30
Dollars in millions 1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 514 $ 448
Adjustments for noncash items:
Depreciation and amortization of premises and equipment 78 81
Amortization of servicing rights and other intangible assets 158 111
Provision for credit losses 75 45
Deferred income tax expense 79 29
Other gains on sales of assets (68) (27)
Originations and purchases of mortgages held for resale (7,853) (9,312)
Proceeds from sales of mortgages held for resale 6,324 11,354
Net decrease in trading account assets 50 23
(Increase) decrease in accrued receivables, net 26 (52)
Decrease in accrued liabilities, net (61) (176)
Other, net 39 99
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Net cash flow provided (used) by operating activities (639) 2,623
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities available for sale (12,418) (20,023)
Proceeds from maturities of securities available for sale 6,951 463
Proceeds from sales of securities available for sale 6,625 20,302
Purchases of securities held to maturity (492) (762)
Proceeds from maturities of securities held to maturity 683 617
Loans made to customers, nonbanking subsidiaries (882) (934)
Principal collected on loans made to customers, nonbanking
subsidiaries 632 779
Net cash and cash equivalents paid for businesses acquired (218) ---
Loans purchased from third parties (396) (13)
Proceeds from sales of loans 103 61
Net increase in loans and leases, banking subsidiaries (1,439) (752)
Proceeds from sales of OREO 56 68
Proceeds from sale of subsidiary --- 76
Acquisition of minority interest in subsidiary (158) ---
Purchases of premises and equipment (84) (137)
Purchases of acquired servicing rights (309) (316)
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Net cash flow used by investing activities (1,346) (571)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits (4,670) 1,902
Net increase (decrease) in short-term borrowings 3,159 (3,226)
Proceeds from issuance of long-term debt 1,223 230
Repayments of long-term debt (913) (360)
Redemption of preferred stock --- (122)
Repurchase of common stock (15) (196)
Cash dividends paid (176) (144)
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Net cash flow used by financing activities (1,392) (1,916)
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Net increase (decrease) in cash and cash equivalents (3,377) 136
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Cash and cash equivalents at beginning of the period 5,857 2,213
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Cash and cash equivalents at end of the period $2,480 $2,349
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</TABLE>
See accompanying Condensed Notes to Consolidated Financial Statements
7
<PAGE>
FLEET FINANCIAL GROUP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE 1. FINANCIAL STATEMENTS
The unaudited consolidated financial information included herein has been
prepared in conformity with the accounting principles and practices in Fleet
Financial Group, Inc.'s (Fleet, FFG or the Corporation) consolidated financial
statements included in the Annual Report on Form 10-K filed with the Securities
and Exchange Commission for the year ended December 31, 1994. The accompanying
interim consolidated financial statements contained herein are unaudited.
However, in the opinion of the Corporation, all adjustments consisting of normal
recurring items necessary for a fair statement of the operating results for the
periods shown, have been made. The results of operations for the nine months
ended September 30, 1995 may not be indicative of operating results for the year
ending December 31, 1995. Certain prior year and prior quarter amounts have been
reclassified to conform to current classifications.
NOTE 2. ACQUISITIONS
On February 20, 1995, Fleet and Shawmut National Corporation ("Shawmut")
entered into a definitive merger agreement providing for the merger of Shawmut
with and into Fleet. The combined institution will have in excess of $80 billion
in assets, $50 billion in deposits, and will be headquartered in Boston,
Massachusetts. The merger agreement provides that each share of Shawmut common
stock, other than shares held in Shawmut's treasury or directly or indirectly by
Fleet or its subsidiaries or by Shawmut or its subsidiaries (except for in both
cases shares held in a fiduciary capacity or in respect of debts previously
contracted), will be exchanged for 0.8922 shares of Fleet common stock on a
tax-free basis. It is anticipated that the transaction will be accounted for as
a pooling of interests. As a result of the merger, cost savings of approximately
$400 million 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. 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 and inflation. 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. Fleet and Shawmut expect to incur one-time merger expenses and
restructuring charges aggregating approximately $400 million in connection with
the merger. The merger is expected to be completed in the fourth quarter of 1995
and is subject to certain conditions, including the approval of federal and
state bank regulators. The shareholders of both companies have approved the
merger.
In connection with the Shawmut 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, including $1.1 billion in residential mortgages.
Due to the pending merger with Shawmut, certain financial data herein may
not be indicative of Fleet's future results of operations or financial position.
As previously disclosed in Form 10-Q filed with the Securities and
Exchange Commission for the quarter ended March 31, 1995, the Corporation
completed the purchases of NBB Bancorp, Inc. ("NBB"), Plaza Home Mortgage
Corporation ("Plaza") and the repurchase of the 19% publicly-held shares of
Fleet Mortgage Group, Inc., ("FMG") during the first quarter of 1995.
8
<PAGE>
FLEET FINANCIAL GROUP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
The information below presents, on a pro forma basis, certain historical
financial information for the Corporation, adjusted for each of the NBB, Plaza
and FMG transactions as if such transactions had been consummated on January 1,
1995 and 1994, respectively.
PRO FORMA RESULTS
- -----------------------------------------------------------
Nine months ended September 30
(Dollars in millions except per share data) 1995 1994
- -----------------------------------------------------------
PRO FORMA -FLEET, NBB, PLAZA AND FMG
Interest income $2,749 $2,561
Interest expense 1,258 1,011
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Net interest income 1,491 1,550
Provision for credit losses 75 48
Noninterest income 1,012 873
Noninterest expense 1,594 1,691
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Income before income taxes 834 684
Income taxes 331 275
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Net income 503 409
Dividends on preferred stock 8 13
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Net income available to common stockholders $ 495 $ 396
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Net income per common share $ 3.07 $ 2.45
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CORPORATION AS REPORTED
Net income $ 514 $ 448
Net income applicable to common stockholders 506 435
Net income per common share 3.14 2.70
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The pro forma results reflect the sale of NBB's entire securities
portfolio of approximately $1 billion as if such sales had occurred at the
beginning of each such period, elimination of any corresponding interest income
recognized on these securities, and the use of the proceeds from the sale of
these securities to reduce short-term borrowings and related interest expense
using a cost of funds rate of 5.44% and 4.62% for 1995 and 1994, respectively.
Similarly, the pro forma results reflect the sale of $157 million, $230 million
and $18 million of Plaza's mortgage-backed securities, adjustable-rate loans,
and deposits, respectively, as if such sales had occurred at the beginning of
each such period, the elimination of any corresponding interest income or
expense recognized, and the use of the net proceeds from these sales to reduce
short-term borrowings and related interest expense using a cost of funds rate of
5.98% and 4.05% for 1995 and 1994, respectively. Pro forma results reflect the
amortization of adjustments recorded to reflect the fair value of the net assets
acquired as of the date of acquisition as if the adjustments were recorded at
the beginning of the period. Additional funding costs for the purchase prices of
the acquisitions of NBB, Plaza and the 19% publicly-held shares of FMG have also
been reflected in the pro forma results.
NOTE 3. LONG TERM DEBT
During the first nine months of 1995, the Corporation issued $269 million
of its senior medium-term notes, all of which are due in 1996, $250 million of 7
1/8% senior notes due May 1, 2000 and $50 million of 6.09% senior notes due June
9, 2000. Subsequent to September 30, 1995, the Corporation issued $250 million
of 6.00% senior notes due October 26, 1998 and $165 million of senior medium
term notes with $150 million of floating rate notes maturing in 1998 and $15
million of 6.84% notes maturing in 2005. The Corporation intends to use the
proceeds of these issuances for general corporate purposes.
NOTE 4. SUPPLEMENTAL DISCLOSURE FOR STATEMENTS OF CASH FLOWS
CASH-FLOW DISCLOSURE
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Nine months ended September 30
Dollars in millions 1995 1994
- -------------------------------------------------------------
Supplemental disclosure for cash paid during
the period for:
Interest expense $1,262 $940
Income taxes, net of refunds 159 167
Supplemental disclosure of noncash
investing and financing activities:
Transfer of loans to foreclosed
property and repossessed equipment 56 54
Adjustment to unrealized gain (loss) on
securities available for sale 701 (395)
Assets acquired and liabilities assumed in business
combinations were as follows:
Assets acquired, net of cash and
cash equivalents paid 2,914 ---
Net cash and cash equivalents paid
for businesses acquired (218) ---
Liabilities assumed 2,500 ---
Treasury stock issued in connection
with businesses acquired 196 ---
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9
<PAGE>
PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
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Dollars in millions, Three months Nine months
except per share data ended September 30 ended September 30
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1995 1994 1995 1994
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EARNINGS
Net income $177 $164 $514 $448
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PER COMMON SHARE
Fully diluted
earnings $1.08 $1.01 $3.14 $2.70
Cash dividends
declared .40 .35 1.20 1.00
Book value 28.13 22.50 28.13 22.50
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OPERATING RATIOS
Return on average
assets 1.41 % 1.30 % 1.42 % 1.22 %
Return on common
equity 17.91 20.08 18.69 17.87
Efficiency ratio 61.50 63.00 62.20 64.10
Equity to assets
(period-end) 8.57 7.33 8.57 7.33
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AT SEPTEMBER 30
Total assets $50,861 $46,988 $50,861 $46,988
Stockholders' equity 4,361 3,446 4,361 3,446
Nonperforming assets 579 526 579 526
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Fleet reported net income of $177 million, or $1.08 per fully diluted
share, for the quarter ended September 30, 1995, compared to $164 million, or
$1.01 per fully diluted share, in the third quarter of 1994. Net income for the
first nine months of 1995 was $514 million, or $3.14 per share, compared with
$448 million, or $2.70 per share in the first nine months of 1994. Return on
average assets (ROA) and return on equity (ROE) were 1.41% and 17.91% for the
third quarter of 1995, respectively, and 1.30% and 20.08% for the third quarter
of 1994, respectively. These results reflect an improved net interest margin, an
increase in mortgage banking revenue, continued expense control, and steady
loan growth, as well as increased revenues from the NBB, Plaza and FMG
acquisitions consummated in the first quarter of 1995, partially offset by an
increase in mortgage servicing rights amortization and provision for credit
losses.
INCOME STATEMENT ANALYSIS
NET INTEREST INCOME
------------------------------------------------------------
Dollars in millions Three months Nine months
FTE basis ended ended
September 30 September 30
-----------------------------------------------------------
1995 1994 1995 1994
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Interest income $943 $850 $2,737 $2,448
Tax-equivalent adjustment 8 11 28 29
Interest expense 441 356 1,251 948
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Net interest income $510 $505 $1,514 $1,529
-----------------------------------------------------------
Net interest income on a fully taxable equivalent basis totaled $510
million for the three month period ended September 30, 1995 compared to $505
million for the same period of 1994. The $5 million increase was principally
caused by an 18 basis point increase in the net interest margin principally due
to an improvement in the mix of earnings assets as lower yielding securities
have been replaced with higher yielding loans and leases.
NET INTEREST MARGIN AND INTEREST-RATE SPREAD
- --------------------------------------------------------------------------------
Three months ended September 30,
1995 1994
- --------------------------------------------------------------------------------
Taxable equivalent Average Average
rates Balance Rate Balance Rate
Dollars in millions
- --------------------------------------------------------------------
Money market
instruments $ 764 6.25% $ 116 4.73%
Securities 11,208 6.35 17,425 5.81
Loans and leases 29,969 9.59 26,725 8.76
Mortgages held for
resale 1,907 7.77 775 7.43
Other 83 --- 113 ---
- --------------------------------------------------------------------
Total interest-earning
assets 43,931 8.61 45,154 7.57
- --------------------------------------------------------------------
Deposits 26,109 4.02 26,560 3.10
Short-term borrowings 8,125 5.17 8,530 4.13
Long-term debt 3,765 7.47 3,359 7.03
- --------------------------------------------------------------------
Interest-bearing 37,999 4.61 38,449 3.67
- --------------------------------------------------------------------
Interest-rate spread 4.00 3.90
Interest-free sources
of funds 5,932 6,705
- --------------------------------------------------------------------
Total sources of funds $43,931 3.98 $45,154 3.13
====================================================================
Net interest margin 4.63% 4.45%
====================================================================
10
<PAGE>
The net interest margin for the third quarter of 1995 increased 18 basis
points to 4.63% from the third quarter of 1994, primarily due to a reduction in
the securities portfolio as a result of actions taken during the last half of
1994 and an increase in higher yielding average loans outstanding, due to both
acquisitions and growth. These actions, coupled with numerous increases in the
Corporation's prime lending rate over the past year resulted in an increase in
the yield on interest earning assets from 7.57% in the third quarter of 1994 to
8.61% in the third quarter of 1995. Offsetting these increases was the overall
increase in the cost of funds resulting from customers moving into higher
yielding time deposits and the increased usage of wholesale deposits to fund
asset growth coupled with the impact of the numerous increases in short-term
borrowing rates by the Federal Reserve throughout 1994 and again in the first
quarter of 1995.
SECURITIES PORTFOLIO
- --------------------------------------------------------------
September 30, June 30,
Dollars in millions 1995 1995
- --------------------------------------------------------------
Carrying value $11,599 $11,327
Average maturity(a) 1.1 years 1.6 years
Yield(b) 6.21% 6.36%
- --------------------------------------------------------------
(a)Average maturity relates to debt securities only and is calculated using
repricing dates rather than contract maturities.
(b) Relates to debt securities only.
The three-month average balance of securities decreased from $17.4 billion
as of September 30, 1994 to $11.2 billion as of September 30, 1995. This $6.2
billion decrease reflects the Corporation's repositioning program undertaken
during 1994.
Average loans and leases for the three-month period ended September 30,
1995 increased $3.2 billion to $30.0 billion due primarily to the acquisition of
NBB which added approximately $1.3 billion in loans to Fleet's balance sheet, as
well as steady loan growth during the period. The substantial increase in the
yield on loans and leases from 8.76% for the third quarter of 1994 to 9.59% for
the third quarter of 1995 reflects the increase in Fleet's prime lending rate to
8.75% during the period.
Average mortgages held for resale increased $1.1 billion to $1.9 billion
as of September 30, 1995 from $.8 billion as of September 30, 1994 due to
increased loan production.
Average deposits decreased $451 million to $26.1 billion as of September
30, 1995 due to a $.7 billion increase in time deposits offset by a $1.2 billion
decrease in savings deposits. The net interest rate paid on average deposits
rose to 4.02% for the third quarter of 1995 compared to 3.10% for the same
period of 1994. The increase reflects several factors including a more
competitive environment for customer deposits and a shift in mix of deposits as
customers have migrated to higher yielding time deposits.
The $405 million decrease in average short-term borrowings corresponds in
part to the decrease in average securities, offset by an increase in mortgages
held for resale.
Average long-term debt increased $406 million due to the funding of
acquisitions and loan growth. In addition, the interest rate paid on long-term
debt increased 44 basis points as maturing lower-rate long-term debt was
replaced by new issuances of higher rate debt.
The contribution to the net interest margin of interest free sources
during the third quarter of 1995 was 63 basis points compared to 55 basis points
for the third quarter of 1994. Although the balance of interest-free sources of
funds decreased from $6.7 billion to $5.9 billion during the period, the
increase from 55 basis points to 63 basis points is the result of the increase
in cost of funds as interest-free sources of funds become more valuable during
periods of rising interest rates.
NONINTEREST INCOME
- -----------------------------------------------------------
Three months Nine months
Dollars in millions ended ended
September 30 September 30
- -----------------------------------------------------------
1995 1994 1995 1994
- -----------------------------------------------------------
Mortgage banking revenue $135 $ 93 $ 366 $278
Service charges, fees
and commissions 72 63 221 185
Investment services revenue 47 44 139 131
Trading revenue 6 6 53 14
Student loan servicing fees 17 15 47 39
FDIC loan administration
fees 5 18 16 42
Brokerage fees and
commissions 5 3 14 12
Insurance 4 4 11 12
Securities available for
sale gains 7 1 10 21
Other noninterest income 43 33 133 111
- -----------------------------------------------------------
Total noninterest income $341 $280 $1,010 $845
- -----------------------------------------------------------
Noninterest income totaled $341 million for the third quarter of 1995
compared to $280 million for the same period in 1994, an increase of 22%, and
$1,010 million for the first nine months of 1995 compared to $845 million for
the first nine months of 1994. The increase was due primarily to increases in
mortgage banking revenues, service charges, fees and commissions, and trading
revenues.
11
<PAGE>
MORTGAGE BANKING REVENUE
===============================================================
Three months Nine months
ended ended
September 30 September 30
Dollars in millions 1995 1994 1995 1994
- ---------------------------------------------------------------
Net loan servicing revenue $ 90 $73 $250 $201
Mortgage production revenue 27 1 52 28
Gains on sales of mortgage
servicing 18 19 64 49
===============================================================
Total mortgage banking revenue $135 $93 $366 $278
===============================================================
Mortgage banking revenue of $135 million in the third quarter of 1995
increased $42 million over the $93 million recorded in the same period of 1994.
This increase reflected a $26 million increase in mortgage production revenue
coupled with a 23% increase in loan servicing revenue from $73 million in the
third quarter of 1994 to $90 million in the third quarter of 1995. Mortgage
production revenue, which includes income derived from the loan origination
process and net gains on sales of mortgage loans, has been positively impacted
by a more favorable interest-rate environment in the third quarter of 1995.
Mortgage production revenue of $27 million for the third quarter of 1995
includes $14 million of income from the ongoing application of Statement of
Financial Accounting Standards No. 122, "Accounting for Mortgage Servicing
Rights" (SFAS 122). SFAS 122 requires that an entity recognize, as separate
assets, rights to service mortgage loans for others irrespective of how those
servicing rights are acquired by allocating the total cost of the loans between
the loan and the servicing rights thereto based on their relative fair values.
The Corporation adopted this statement as of April 1, 1995, with application to
transactions in which the Corporation acquires mortgage servicing rights through
either purchase or origination of mortgage loans and sells those loans with
servicing rights retained, and to impairment evaluations of all capitalized
mortgage servicing rights. The incremental impact of capitalizing originated
mortgage servicing rights in accordance with SFAS 122 resulted in an increase of
$23 million in mortgage production revenues for the nine months ended September
30, 1995.
Loan servicing revenue represents fees received for servicing residential
mortgage loans. The 23% increase in loan servicing revenue is attributable to
the $20 billion increase in the Corporation's servicing portfolio from $83
billion at September 30, 1994 to $103 billion at September 30, 1995. The
increase in the servicing portfolio is attributable primarily to several
acquisitions of servicing, including the acquisition of Plaza in the first
quarter which added $9.2 billion in servicing, and the purchase of $14 billion
of loan servicing from Household Financial Corporation in the second quarter.
The Corporation sold mortgage servicing rights of approximately $2.5 billion
and $1.7 billion in the third quarter of 1995 and 1994, respectively, resulting
in pre-tax gains of $18 million and $19 million, respectively. The Corporation's
decision to sell mortgage servicing rights depends on a variety of factors,
including the available markets and current market prices for such servicing
rights and the working capital requirements of the Corporation. Thus, the
likelihood or profitability of any such sales in the future cannot be predicted.
Service charges, fees and commissions increased $9 million to $72 million
for the third quarter of 1995 from $63 million for the third quarter of 1994.
These improved results primarily reflect the implementation of various fee
enhancement programs.
Investment services revenue increased $3 million, or 7%, from the third
quarter of 1994, due to the strengthening interest rate environment and
improvement in the bond market which resulted in an increase in the overall
value of assets managed. The investment services business had approximately
$47.5 billion and $44.5 billion in assets under administration and management at
September 30, 1995 and 1994, respectively.
The $2 million increase in student loan servicing fees from 1994 to 1995
is attributable to additional accounts added under the federal government's
direct student lending program. FDIC loan administration fees decreased $13
million from $18 million for the third quarter of 1994 to $5 million for the
third quarter of 1995, as the pool of loans being administered for the FDIC is
being resolved. The Corporation's agreement to administer these FDIC loans
expires on December 31, 1995.
TRADING REVENUE
=============================================================
Three months Nine months
ended ended
September 30 September 30
- -------------------------------------------------------------
Dollars in millions 1995 1994 1995 1994
- -------------------------------------------------------------
Interest-rate contracts $--- $1 $31 $(2)
Debt securities 3 3 12 9
Foreign exchange 3 2 10 7
=============================================================
Total trading revenue $6 $6 $53 $14
=============================================================
12
<PAGE>
Trading revenue of $6 million was flat with the corresponding third
quarter of 1994; however, the $39 million increase in total trading revenue for
the nine months ended September 30, 1995 over the same period of 1994 is
primarily attributable to a $33 million increase in gains on interest-rate
contracts. Trading income on interest-rate contracts consists of gains and
losses recorded on interest-rate contracts used in managing prepayment risk for
the mortgage servicing portfolio as well as net gains recorded on
customer-oriented interest-rate contracts. During the third quarter of 1995, the
Corporation recognized a net loss of $4 million relating to interest-rate
conracts used to mitigate the risk related to adverse changes in interest rates
and the potential resultant impairment to mortgage servicing rights affected by
prepayments. No gains or losses were recognized in the third quarter of 1994.
Additionally, the Corporation has recognized net gains of $26 million for the
nine months ended September 30, 1995 compared to net losses of $6 million for
the nine months ended September 30, 1994 on these instruments. The increase in
interest-rate contracts revenue is primarily due to increases in the value of
contracts used in managing the prepayment risk of the mortgage servicing
portfolio.
Other noninterest income increased $10 million from $33 million for the
three months ended September 30, 1994 compared to $43 million for the same
period of 1995, primarily due to a $6.1 million increase in gains on equity
capital investments produced by the Corporation's venture capital subsidiary,
Fleet Private Equity. During the third quarter of 1995, Fleet Private Equity
recognized gains of $10.1 million compared to $3.9 million in the third quarter
of 1994.
NONINTEREST EXPENSE
=========================================================
Three months Nine months
ended ended
September 30 September 30
- ---------------------------------------------------------
Dollars in millions 1995 1994 1995 1994
- ---------------------------------------------------------
Employee compensation and
benefits $242 $229 $ 728 $ 727
Occupancy 38 44 115 129
Equipment 36 32 109 100
Mortgage servicing rights
amortization 30 17 99 69
Core deposit and goodwill
amortization 21 14 59 42
Legal and other professional 21 21 53 57
Marketing 21 17 51 44
FDIC assessment 2 17 38 53
Printing and mailing 11 10 33 32
Telephone 11 9 33 28
Office supplies 8 7 25 22
Travel and entertainment 7 7 21 20
Credit card 6 12 17 31
OREO expense 4 10 9 22
Other 66 41 179 140
- ---------------------------------------------------------
Total operating noninterest
expense 524 487 1,569 1,516
- ---------------------------------------------------------
Restructuring charges --- 7 --- 32
- ---------------------------------------------------------
=========================================================
Total noninterest expense $524 $494 $1,569 $1,548
=========================================================
Noninterest expense for the third quarter of 1995 totaled $524 million
compared to $494 million for the third quarter of 1994. The increase is
primarily attributable to a $13 million increase in the amortization of mortgage
servicing rights (MSRs) coupled with increases in several other expense
categories, including amortization of intangibles and employee compensation and
benefits, as a result of the completion of the acquisitions of NBB and Plaza in
the first quarter of 1995 and the buyback of the FMG minority interest.
Additionally, expenses included the costs of several new business initiatives,
such as direct student loan originations, co-branded credit card marketing
expenses and the high volume requirements of tax processing services under
contract with the State of New York. The Corporation's efficiency ratio improved
to 61.5% for the third quarter of 1995 compared to 63.0% for the same period in
1994.
13
<PAGE>
Employee compensation and benefits increased $13 million, or 6%, primarily
due to the previously mentioned acquisitions and new business initiatives.
Mortgage servicing rights amortization increased $13 million to $30
million for the third quarter of 1995 compared to $17 million for the third
quarter of 1994. As previously stated, the increase in amortization is directly
related to the $20 billion increase in the servicing portfolio over September
30, 1994.
Core deposit and goodwill amortization expense increased $7 million on a
year to year comparison over the third quarter of 1994 due to the completion of
the NBB, Plaza and FMG transactions during the first quarter of 1995. OREO
expense decreased $6 million from the third quarter of 1994 compared to the
third quarter of 1995 reflecting a decrease in the level of OREO assets managed.
FDIC assessment charges decreased $15 million from $17 million for the
third quarter of 1994 to $2 million for the third quarter of 1995. The decrease
is attributable to the FDIC reducing the deposit premium from twenty-three cents
to four cents per $100 of domestic deposits. The refund was retroactive to June
1, 1995 and the Corporation expects to benefit from the lower rate on an ongoing
basis.
RESTRUCTURING CHARGES
- -------------------------------------------------------------
Nine months ended September 30
Dollars in millions 1995 1994
- -------------------------------------------------------------
Balance at beginning of year $58 $119
Provision charged against income --- 32
Cash outlays (38) (39)
Non-cash writedowns --- (36)
=============================================================
Balance at end of period $20 $ 76
=============================================================
The above table presents a summary of activity with respect to the
Corporation's restructuring charges for the nine month periods ended September
30, 1995 and 1994. The cash outlays made during the first nine months of 1995
relate primarily to severance costs. The Corporation's liquidity has not been
significantly affected by these cash outlays. During the first nine months of
1995, $13.3 million of incremental costs has been incurred relating to the
restructuring plan and has not been charged against the restructuring accrual.
It is anticipated that approximately $5 million of additional incremental
implementation costs will be incurred in 1995. The Corporation expects that the
remaining estimated accrual of $20 million at September 30, 1995 will be
sufficient to absorb the remaining restructuring related costs.
INCOME TAXES.
For the third quarter of 1995, the Corporation recognized income tax
expense of $115 million, an effective tax rate of 39.4%. Tax expense for the
same period of 1994 was $102 million, an effective tax rate of 38.0%.
EARNINGS BY SUBSIDIARY
-----------------------------------------------------
Three months Nine months
ended ended
September 30 September 30
-----------------------------------------------------
Dollars in 1995 1994 1995 1994
millions
-----------------------------------------------------
BANKING GROUP
New York $ 39 $ 48 $119 $147
Massachusetts 36 42 110 94
Rhode Island 39 37 105 103
Connecticut 19 22 65 56
Maine 12 8 28 23
New Hampshire 6 5 16 15
-----------------------------------------------------
Total Banking
Group 151 162 443 438
-----------------------------------------------------
FINANCIAL
SERVICES GROUP
Fleet Mortgage 26 16 72 33
Fleet Credit 7 5 20 15
Fleet Finance --- (8) (4) (11)
Other Financial
Services 10 5 26 14
-----------------------------------------------------
Total Financial
Services 43 18 114 51
Group
-----------------------------------------------------
PARENT (17) (16) (43) (41)
-----------------------------------------------------
TOTAL $177 $164 $514 $448
-----------------------------------------------------
The Banking Group generated $151 million and $162 million in earnings for
the third quarter of 1995 and 1994, respectively. These results reflect a $15
million (after-tax) increase in provision for credit losses resulting from a $20
million increase in net charge-offs from $9 million in the third quarter of 1994
to $29 million in the third quarter of 1995. These results also reflect the
completion of the acquisition of NBB in late January. The Banking Group
benefited from an increase in fee-based revenues which was attributable to the
implementation of various fee-producing programs and a reduction of FDIC
assessment fees as the assessment has been reduced from twenty-three cents to
four cents per $100 of domestic deposits retroactive to June 1, 1995, offset by
a decrease in FDIC loan administration fees due to reduced collections as the
portfolio generating administration fees continues to run-off. This group's
nonperforming assets increased $29 million from December 31, 1994, to $403
million due in part to the acquisition of NBB.
The Financial Services Group's earnings increased $25 million from $18
million for the third quarter of 1994 to $43 million in the third quarter of
1995. Fleet
14
<PAGE>
Mortgage, the Corporation's mortgage banking subsidiary, contributed
$26 million to Fleet's earnings for the quarter compared to earnings of $16
million in the third quarter of 1994. The improved results reflect both
increased loan servicing revenue, mortgage banking production revenue and
reduced operating expenses. Mortgage servicing rights amortization increased $13
million due to the increase in the size of the mortgage servicing portfolio.
Refer to the Noninterest Income section and the Noninterest Expense section for
more information on mortgage banking revenue and MSRs, respectively.
Fleet Credit reported net income of $7 million for the third quarter of
1995, a $2 million increase over the $5 million of net income reported in the
third quarter of 1994, reflecting an increase in lease volume.
Fleet Finance's earnings were minimal for the third quarter of 1995
compared to a loss of $8 million in the third quarter of 1994. The decreased
loss was primarily the result of a decrease in credit quality related expenses.
Earnings at Fleet's other financial services companies, which include the
Corporation's equity capital, student loan servicing, brokerage, and government
securities businesses, increased $5 million for the third quarter of 1995 over
the third quarter of 1994.
Fleet Private Equity had net income of $6 million for the third quarter of
1995, compared to $2 million for the third quarter of 1994. Results for the
third quarter of 1995 included $10 million (pretax) of gains on equity capital
investments compared to $4 million (pretax) for the same period in 1994. Fleet
Private Equity's investments are adjusted to their fair value in accordance with
generally accepted accounting principles for investment companies; accordingly,
these values may fluctuate given changes in economic and market conditions.
AFSA Data Corp., the Corporation's student loan servicing subsidiary,
contributed earnings of $2 million for the third quarter of 1995 compared to $1
million for the same period in 1994. This increase reflects an increase in loans
serviced as AFSA was named the primary servicer of the federal government's
direct student lending program late in 1994.
Option One, which was acquired in connection with the acquisition of Plaza
in the first quarter of 1995, earned $1 million in the third quarter of 1995.
Fleet Brokerage Securities, the Corporation's brokerage subsidiary, and
Fleet Securities, the Corporation's government securities subsidiary, each
earned $1 million for the third quarter of 1995 and 1994.
LINES OF BUSINESS
The financial performance of the Corporation is monitored by an internal
profitability measurement system, which produces line-of-business results and
key performance measures. The Corporation's major business units include
commercial banking, consumer banking, investment services and asset collection,
and financial, which also reflects the organizational structure of the
Corporation.
Guidelines are in place for assigning expenses that are not directly
incurred by businesses, such as overhead, operations, and technology expense.
Additionally, equity, loan loss provision, and loan loss reserves are assigned
on a risk-adjusted basis. The Corporation has developed a risk-adjusted
methodology that quantifies risk types, such as, credit, operating, market,
and fiduciary, within business units and assigns capital accordingly. Credit
risk is quantified using a risk grading system, which is applied consistently
across the company. Within each unit assets and liabilities are "match funded"
utilizing similar maturity, liquidity, and repricing information. All businesses
are evaluated on a fully taxed basis.
Management reporting concepts are periodically refined and results may be
restated from time to time to reflect methodological enhancements and/or
management organization changes. Although valuable in managing the enterprise,
no authoritative guidance exists for management accounting. Therefore, reported
results are not necessarily comparable with other companies' reported results.
15
<PAGE>
<TABLE><CAPTION>
SELECTED FINANCIAL HIGHLIGHTS BY LINE OF BUSINESS
-----------------------------------------------------------------------------------------------------------------------------
Investment
Services/Asset
Commercial Banking Consumer Banking Collection Financial Total
--------------------------------------- ------------------- ---------------- -------------------- -----------------------
3rd 3rd 3rd 3rd 3rd 3rd 3rd 3rd 3rd 3rd
Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr
1995 1994 1995 1994 1995 1994 1995 1994 1995 1994
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Dollars in thousands
Total revenues $375,723 $301,572 $611,921 $484,837 $91,745 $92,556 $212,551 $261,664 $1,291,940 $1,140,629
(a)
Net income 52,445 40,982 91,187 64,459 22,548 25,230 11,180 33,222 177,360 163,893
ROE 23.77 17.48 19.07 17.71 56.14 52.69 4.13 17.98 17.91 20.08
ROA 1.31 1.13 1.84 1.62 6.80 6.46 0.34 0.73 1.41 1.30
AVERAGE BALANCES:
Dollars in millions
Total assets $15,840 $14,440 $19,670 $15,803 $1,315 $1,548 $12,935 $18,272 $ 49,760 $ 50,063
Gross loans and
leases 14,238 13,080 13,448 11,906 950 1,164 1,333 575 29,969 26,725
Deposits 5,135 4,924 22,287 21,269 1,417 1,495 3,819 5,570 32,658 33,258
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated on an FTE basis.
COMMERCIAL BANKING
Commercial banking, which provides a full range of financial services to
corporate, commercial, governmental, real estate and leasing customers earned
$52 million of net income during the third quarter of 1995. This represented a
28% improvement over the third quarter of 1994. Net revenue growth was achieved
by loan growth of 9%, deposit growth of 4% and additional processing services
provided to government clients. The business also benefited from nonrecurring
transaction fees and repayments on acquired loans in excess of the balance to
which such loans had been written-down upon acquisition. The commercial banking
line of business generated an ROA of 1.31% and an ROE of 23.77% for the three
months ended September 30, 1995.
CONSUMER BANKING
Consumer banking, which includes retail and community banking, consumer
financing and the Corporation's major processing businesses, mortgage banking
and student loan servicing, achieved $91 million, or 51% of consolidated net
income, for the three months ended September 30, 1995. This represents an
increase of 41% from the three months ended September 30, 1994. This line of
business had an ROA of 1.84% and an ROE of 19.07% for the period.
CONSUMER BANKING - NET INCOME
- -----------------------------------------------------------
3rd 3rd
Quarter Quarter
Dollars in thousands 1995 1994
- -----------------------------------------------------------
Retail and Community Banking $60,881 $58,215
Mortgage Banking 27,523 12,988
Consumer Finance 1,197 (8,039)
Student Loan Servicing 1,586 1,295
- -----------------------------------------------------------
Total Consumer Banking $91,187 $64,459
- -----------------------------------------------------------
The retail and community banking segment, which represents the largest
portion of Fleet's consumer banking business, had net income of $61 million for
the quarter ended September 30, 1995 compared to $58 million in the third
quarter of 1994. This increase was primarily attributable to higher net interest
revenue, mainly caused by growth in the loan portfolio. Credit card outstandings
grew nearly 28% from the third quarter of 1994, while consumer mortgages, also
increased significantly, largely attributable to recent acquisitions. Small
business lending increased outstanding loans by 11% primarily because of the
introduction of new loan products uniquely tailored to this customer segment.
Core deposit runoff has stabilized at a lower rate and balances have increased
$1.1 billion mainly through acquisitions.
Fleet's mortgage banking operations contributed $28 million, or 30% of
total consumer banking net income, for the three months ended September 30,
1995, which is $15 million higher than the third quarter of 1994. These improved
results reflect the $20 billion increase in the servicing portfolio and
increased mortgage production income.
16
<PAGE>
The consumer finance business had income of $1 million for the three
months ended September 30, 1995, compared to a loss of $(8) million for the
three months ended September 30, 1994. These positive results reflect the first
quarter acquisition of Option One which contributed $1 million during the third
quarter of 1995.
INVESTMENT SERVICES AND ASSET COLLECTION
This line of business, which includes Fleet's investment management,
private banking, discount brokerage, equity capital, and asset collection
businesses, produced $23 million, or 13% of consolidated net income, for the
third quarter of 1995, compared to $25 million for the third quarter of 1994.
The $2 million earnings decline is attributable to the decrease in FDIC loan
administration fees in the Asset Collection business as the pool of loans being
administered for the FDIC is being resolved. As an offset to the decrease in
this business, Investment Services and Fleet Equity Partners demonstrated strong
gains over the third quarter of 1994. This growth is attributable to increased
revenues, resulting from strong gains in the equity and fixed income markets.
Additionally, market values increased in the Corporation's equity investment
unit. The overall line of business had an ROA of 6.80% and an ROE of 56.14%.
INVESTMENT SERVICES AND ASSET COLLECTION-NET INCOME
- ------------------------------- ------------ ------------
3rd 3rd
Quarter Quarter
Dollars in thousands 1995 1994
- ------------------------------- ------------ ------------
Investment Services $13,930 $11,737
Fleet Equity Partners 5,938 2,109
Asset Collection 2,680 11,384
- ------------------------------- ------------ ------------
Total Investment Services and
Asset Collection $22,548 $25,230
- ------------------------------- ------------ ------------
Fleet's investment management business consists of personal asset
management, endowment and custody services, employee benefit management, and
mutual funds. At September 30, 1995, the investment services business had
approximately $47.5 billion in assets under administration and management.
FINANCIAL
The financial line of business includes the results of the treasury and
the securities portfolio and trading groups. The financial function also
includes differences between legal and economic allocations of loan loss
provision, loss reserves, equity, and funds transfer pricing.
The financial line of business generated net income
of $11 million, or 6% of consolidated net income, for the three months ended
September 30, 1995, compared to $33 million for the three months ended September
30, 1994. The $22 million decrease is primarily attributable to a higher level
of legal loan loss provision compared to the economic, or sustainable, provision
charged to the Corporation's businesses.
17
<PAGE>
BALANCE SHEET ANALYSIS
SECURITIES
<TABLE><CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
September 30, 1995 June 30, 1995 December 31, 1994
------------------ ------------- -----------------
Dollars in millions Amortized Market Amortized Market Amortized Market
Cost Value Cost Value Cost Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Securities available for sale:
US Treasury and government agencies $ 5,387 $ 5,386 $ 4,753 $ 4,751 $ 2,577 $ 2,444
Mortgage-backed securities 4,761 4,757 5,146 5,119 7,897 7,465
Other debt securities 308 306 339 338 180 179
- --------------------------------------------------------------------------------------------------------------------------
Total debt securities 10,456 10,449 10,238 10,208 10,654 10,088
- --------------------------------------------------------------------------------------------------------------------------
Marketable equity securities 251 371 181 270 187 165
Other securities 80 80 113 113 100 100
- --------------------------------------------------------------------------------------------------------------------------
Total securities available for sale $10,787 $10,900 $10,532 $10,591 $10,941 $10,353
- --------------------------------------------------------------------------------------------------------------------------
Securities held to maturity:
State and municipal $ 651 $ 658 $ 686 $ 691 $ 843 $ 842
Other debt securities 48 48 50 52 48 48
- --------------------------------------------------------------------------------------------------------------------------
Total securities held to maturity $ 699 $ 706 $ 736 $ 743 $ 891 $ 890
- --------------------------------------------------------------------------------------------------------------------------
Total securities $11,486 $11,606 $11,268 $11,334 $11,832 $11,243
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The amortized cost of securities available for sale remained relatively
unchanged from June 30, 1995 to September 30, 1995. During the second quarter of
1995 the Corporation sold approximately $2.5 billion of U.S. Treasury Notes and
$1.5 billion of mortgage-backed securities and reinvested such proceeds in
shorter-term government agency securities resulting in a shortening of the
average maturity of the securities portfolio from 3.0 years as of December 31,
1994 to 1.1 years as of September 30, 1995. The Corporation does not anticipate
any significant negative impact to its net interest margin resulting from these
transactions. The valuation reserve on securities available for sale improved
significantly to an unrealized appreciation level of $113 million at September
30, 1995 from an unrealized appreciation level of $59 million at June 30, 1995,
due to significant improvements in the bond markets during the third quarter of
1995.
LOANS AND LEASES
- ----------------------------------------------------------------
September June December
Dollars in millions 30, 1995 30, 1995 31, 1994
- ----------------------------------------------------------------
Commercial and industrial $11,953 $11,868 $11,102
Consumer 7,958 7,996 7,882
Commercial real estate:
Construction 532 559 509
Interim/permanent 3,665 3,678 3,830
Residential real estate 5,135 4,429 2,937
Lease financing 1,558 1,423 1,288
Other --- 154 161
================================================================
Total loans and leases $30,801 $30,107 $27,709
================================================================
Total loans and leases increased $694 million from $30.1 billion at June
30, 1995 to $30.8 billion at September 30, 1995, representing an annualized
increase of 9.2%, due to continued steady growth in commercial loans and
residential real estate. Total loans and leases also increased $3.1 billion from
$27.7 billion at December 1994 primarily as a result of the acquisition of NBB
in the first quarter of 1995, which added $1.3 billion of principally
residential real estate loans, and steady loan growth in both the commercial and
industrial, and leasing portfolios during the period.
Commercial and industrial (C&I) loans increased $85 million, from June 30,
1995 to September 30, 1995, and $851 million from December 31, 1994 to September
30, 1995 due primarily to new loan originations experienced across nearly all
banking franchises.
CONSUMER LOANS
- ---------------------------------------------------------
Dollars in September June December
millions 30, 1995 30, 1995 31, 1994
- ---------------------------------------------------------
Home equity $4,364 $ 4,411 $ 4,474
Credit card 1,569 1,600 1,473
Student loans 1,171 1,143 1,089
Installment 774 761 757
Other 80 81 89
- ---------------------------------------------------------
Total $7,958 $ 7,996 $ 7,882
- ---------------------------------------------------------
Consumer loans of $7,958 million at September 30, 1995 remained relatively
unchanged compared to the $7,996 million at June 30, 1995 as slight decreases in
home equity and credit card balances were partially offset by an increase in the
student loan portfolio.
18
<PAGE>
Commercial real estate (CRE) loans decreased $40 million from June 30,
1995 to September 30, 1995 primarily due to large paydowns during the quarter.
Lease financing increased $135 million from June 30, 1995 to September 30, 1995
and $270 million from December 31, 1994 to September 30, 1995, as a result of
new lease originations.
Outstanding residential real estate loans secured by one-to four-family
residences were $5.1 billion at September 30, 1995, compared to $4.4 billion at
June 30, 1995. The $706 million increase was due to $899 million of residential
real estate loan purchases offset by principal paydowns occurring in the normal
course of business.
NONPERFORMING ASSETS(a)
- ---------------------------------------------------------
Dollars in millions C & I CRE Consumer Total
- ---------------------------------------------------------
Nonperforming loans
and leases:
Current or less than
90 days past due $ 37 $ 27 $ 8 $ 72
Noncurrent 107 83 240 430
OREO 6 38 33 77
- ---------------------------------------------------------
Total NPAs
September 30, 1995 $150 $148 $281 $579
- ---------------------------------------------------------
Total NPAs
June 30, 1995 $153 $175 $250 $578
=========================================================
Total NPAs
December 31, 1994 $134 $173 $211 $518
=========================================================
(a) Throughout this document, NPAs and related ratios do not include loans
greater than 90 days past due and still accruing interest ($138 million, $135
million and $96 million at September 30, 1995, June 30, 1995 and
December 31,1994, respectively), or assets subject to federal financial
assistance ($38 million, $47 million and $59 million at September 30, 1995,
June 30, 1995, and December 31, 1994, respectively).
Nonperforming assets (NPAs) remained constant over the period from June
30, 1995 to September 30, 1995. NPAs at September 30, 1995, as a percentage of
total loans, leases and OREO, and as a percentage of total assets were 1.87% and
1.14%, respectively, compared to 1.92% and 1.13%, respectively, at June 30,
1995.
ACTIVITY IN NONPERFORMING ASSETS
- -----------------------------------------------------------
3rd 2nd 3rd
Quarter Quarter Quarter
Dollars in millions 1995 1995 1994
- -----------------------------------------------------------
Balance at beginning of
period $578 $578 $564
Additions 162 177 102
Reductions:
Payments/interest
applied (87) (97) (74)
Returned to accrual (6) (16) (9)
Charge-offs/writedowns (42) (40) (30)
Sales/other (26) (24) (27)
- -----------------------------------------------------------
Total reductions (161) (177) (140)
- -----------------------------------------------------------
Balance at end of period $579 $578 $526
===========================================================
RESERVE FOR CREDIT LOSS ACTIVITY
- ----------------------------------------------------------
Nine months ended
September 30
Dollars in millions 1995 1994
- ----------------------------------------------------------
Balance at beginning of year $953 $1,000
Provision charged to income 75 45
Loans and leases charged off (173) (138)
Recoveries of loans and leases
charged off 51 67
Acquisition/other 31 (5)
- ----------------------------------------------------------
Balance at end of period $937 $ 969
- ----------------------------------------------------------
Ratio of net charge-offs to
average loans and leases .55% .36%
- ----------------------------------------------------------
Ratio of reserve for credit
losses to period-end loans
and leases 3.04 3.59
- ----------------------------------------------------------
Ratio of reserve for credit
losses to period-end NPAs 162 184
- ----------------------------------------------------------
Ratio of reserve for credit
losses to period-end
nonperforming
loans and leases 187 226
- ----------------------------------------------------------
Fleet's reserve for credit losses decreased $32 million from September 30,
1994 to $937 million at September 30, 1995. The September 30, 1995 reserve for
credit losses includes $31 million of reserves acquired in connection with
acquisitions completed during the first quarter of 1995. The first nine months
of 1995 provision for credit losses was $75 million, $30 million higher than the
prior year's first nine months. Net charge-offs increased to $122 million for
the first nine months of 1995 from $71 million for the same period in 1994 due
to a $16 million decrease in recoveries and a $35 million increase in
charge-offs primarily relating to credit card and consumer finance loans. Slight
deterioration of Fleet's credit quality ratios was noted when comparing the
first nine months of 1995 results to the same period of 1994 as nonperforming
asset levels have increased over that period.
19
<PAGE>
FUNDING SOURCES
- ----------------------------------------------------------------
September 30, June 30, December 31,
Dollars in millions 1995 1995 1994
- ----------------------------------------------------------------
Deposits:
Demand $ 6,398 $ 6,355 $ 6,890
Regular savings, NOW,
money market 14,594 14,735 15,220
Time:
Domestic 9,342 9,532 8,279
Foreign 2,102 2,408 4,417
- ----------------------------------------------------------------
Total deposits 32,436 33,030 34,806
- ----------------------------------------------------------------
Borrowed funds:
Federal funds purchased 2,580 3,109 1,410
Securities sold under
agreements to repurchase 1,527 1,476 1,436
Commercial paper 1,901 1,663 835
Other 3,171 2,927 2,270
- ----------------------------------------------------------------
Total borrowed funds 9,179 9,175 5,951
- ----------------------------------------------------------------
Notes and debentures 3,767 3,805 3,457
================================================================
Total $45,382 $46,010 $44,214
================================================================
Total deposits of $32.4 billion at September 30, 1995 remained relatively
constant when compared to $33.0 billion at June 30, 1995. Core deposit funding
levels (demand, regular savings, NOW and money market) also remained fairly
constant from June 30, 1995 representing a stabilization in the shift out of
these types of deposits and into higher yielding time deposits that had occurred
earlier in the year.
Total borrowed funds increased $4 million at September 30, 1995 from June
30, 1995; however, the Corporation has experienced a shift in the borrowing mix
as federal funds purchased has decreased by $529 million from $3.1 billion at
June 30, 1995 to $2.6 billion at September 30, 1995. Alternatively, commercial
paper has increased by $238 million from $1.7 billion at June 30, 1995 to $1.9
billion at September 30, 1995 and other borrowings have risen by $244 million to
$3.2 billion as of September 30, 1995. The change in the borrowing mix is
primarily attributable to an increase in mortgages held for resale at the
Corporation's mortgage banking subsidiary, FMG, which funds its growth primarily
with commercial paper.
ASSET AND LIABILITY MANAGEMENT
The asset/liability management process at Fleet ensures that the risk to
earnings fluctuations from changes in interest rates is prudently managed.
The following table represents the Corporation's interest-rate gap
position on September 30, 1995. Interest-rate gap analysis provides a static
analysis of the repricing characteristics of the entire balance sheet.
Therefore, the table represents a one-day position which is continually changing
and not necessarily indicative of the Corporation's position at any other time.
In addition to interest-rate gap analysis, the Corporation also analyzes
interest rate sensitivity through sophisticated asset/liability simulation
models.
INTEREST-RATE GAP ANALYSIS
<TABLE><CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Cumulatively Repriced Within
- --------------------------------------------------------------------------------------------------------------------------------
September 30, 1995
Dollars in millions 3 months 4 to 12
by repricing date or less months 1 to 5 years After 5 years Total
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Assets $29,238 $6,962 $8,588 $ 6,073 $50,861
Total Liabilities 23,979 7,564 9,238 10,080 50,861
Net Off Balance Sheet (4,484) 839 4,475 (830) ---
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Periodic Gap 775 237 3,825 (4,837) ---
Cumulative Gap 775 1,012 4,837 --- ---
Cumulative Gap as a percent of Total Assets 1.5% 2.0% 9.5%
- --------------------------------------------------------------------------------------------------------------------------------
Cumulative Gap as a percent of
Total Assets 12/31/94 (12.4%) (3.9%) 15.4%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
At September 30, 1995, the Corporation was 2.0% asset sensitive at the
one-year cumulative gap interval compared to 3.9% liability sensitive at
December 31, 1994. This change is primarily attributable to a reduction in the
average maturity of the securities portfolio from 3.0 years at December 31, 1994
to 1.1 years at September 30, 1995.
The off-balance sheet position is primarily comprised of interest-rate
swaps to manage interest-rate risk and to establish the proper interest-rate
risk profile within clearly defined and prudent parameters on the
20
<PAGE>
basis of the current interest-rate environment. Also, because interest-rate
swaps are used to alter the repricing characteristics of certain assets and
liabilities, the interest-rate sensitivity of specific portfolios is analyzed,
as well as the impact of interest-rate swaps on the entire balance sheet. On a
consolidated basis, the Corporation had $8.9 billion (notional amount) of
interest-rate risk management swaps with external counterparties at September
30, 1995.
INTEREST-RATE RISK-MANAGEMENT ANALYSIS
<TABLE><CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted
Assets/ Average Rate
September 30, 1995 Notional Liabilities Maturity Fair --------------
Dollars in millions Value Hedged (years) Value Receive Pay
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest-rate risk management swaps:
Receive fixed/pay variable $3,075 Variable rate
loans
1,605 Fixed rate
deposits
491 Long-term debt
------------
5,171 2.2 $26 6.33% 5.87%
- -----------------------------------------------------------------------------------------------------------------------------------
Pay fixed/receive variable 100 Long-term debt 0.8 (1) 6.35 7.94
- -----------------------------------------------------------------------------------------------------------------------------------
Basis swaps 35 Fixed rate
deposits
200 Long-term debt
2,147 Securities
------------
2,382 2.4 (7) 6.53 6.54
- -----------------------------------------------------------------------------------------------------------------------------------
Index amortizing swaps receive fixed/pay variable 1,242 Variable rate loans 1.3 (3) 5.50 5.75
- -----------------------------------------------------------------------------------------------------------------------------------
Total $8,895 2.1 $15 6.27% 6.06%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The basis swaps were executed to synthetically alter the interest-rate
characteristics of the GNMA ARMs to more closely match the interest-rate
characteristics of certain liabilities. In these swaps Fleet pays a floating
rate based on the one-year Treasury rate, mirroring coupon payments received on
the GNMA ARMs, and receives a floating rate based on one-year London Interbank
Offered Rate (LIBOR). These swaps were structured to match the repricing
characteristics of the GNMA ARMs.
Index-amortizing swaps are intended to mitigate the repricing sensitivity
of floating-rate assets and consequently are designated to prime-based loans.
Under the terms of the index-amortizing swaps, Fleet receives a fixed rate and
pays a floating rate based on the six-month LIBOR. Each index-amortizing swap
had an original minimum maturity of two years, a maximum maturity of three
years, and an amortization schedule based on six-month LIBOR. At the end of the
two-year minimum period, and at six-month intervals through the maximum
maturity, six-month LIBOR is reviewed against a specified range, which for Fleet
is 4.47% to 6.47%. If six-month LIBOR is below this range each of the swaps
would completely amortize (i.e., the swaps would mature); if six-month LIBOR is
above this range, none of the swaps would amortize; and if six-month LIBOR is
within this range, a portion of the notional amount would amortize. At September
30, 1995, six-month LIBOR was 5.94%.
In September, the two-year minimum period was reached for some of the swaps,
which partially amortized.
The interest-rate risk management swap activity for the three months ended
September 30, 1995 is summarized in the following table (all amounts are
notional amounts):
INTEREST-RATE RISK-MANAGEMENT SWAP ACTIVITY
- ------------------------------------------------------------
Receive Pay Index
Dollars in Fixed Fixed Basis AmortizingTotal
millions
- ------------------------------------------------------------
Balance at
June 30,1995 $3,891 $100 $2,232 $1,379 $7,602
Additions 1,700 --- 200 --- 1,900
Maturities (420) --- --- (137) (557)
Terminations --- --- (50) --- (50)
============================================================
Balance at
September 30, 1995 $5,171 $100 $2,382 $1,242 $8,895
============================================================
During the third quarter of 1995, the Corporation added $1.7 billion of
receive-fixed swaps primarily designated to prime-based loans. At September 30,
1995, Fleet had deferred gains relating to the termination of interest rate
swaps of $47 million (which will be amortized over a remaining life of
approximately 41 months) and deferred losses of $21 million (which will be
amortized over a remaining life of approximately 10 months). The amortization of
deferred gains and losses on terminated swaps is recognized as an adjustment to
the yield on
21
<PAGE>
the assets or liabilities to which the swaps were designated.
The maturities of the interest-rate management swaps are shown in the
following table.
MATURITIES OF THE INTEREST-RATE RISK MANAGEMENT SWAPS
- ------------------------------------------------------------------
September 30, Within 1 2 to 3 to 4 to After
1995 1 to 2 3 4 5 5 Total
Dollars in Year Years Years Years Years Years
millions
- ------------------------------------------------------------------
Notional amounts:
Receive-fixed $ 862 $2,219 $1,310 $ 75 $670 $35 $5,171
Pay-fixed 100 --- --- --- --- --- 100
Basis 200 --- 2,147 35 --- --- 2,382
Index-amortizing(a)1,042 --- --- --- 200 --- 1,242
- ------------------------------------------------------------------
Total $2,204 $2,219 $3,457 $110 $870 $35 $8,895
- ------------------------------------------------------------------
(a) The maturities of the index-amortizing swaps reflect the full extension.
LIQUIDITY
The primary sources of liquidity at the parent level are interest and
dividends from subsidiaries and access to the capital and money markets. The
Corporation's subsidiaries rely on cash flows from operations, core deposits,
borrowings, short-term high-quality liquid assets, and in the case of nonbanking
subsidiaries, funds from the parent for liquidity. During the first nine months
of 1995, the parent received $375 million in interest and dividends from
subsidiaries and paid $336 million in interest and dividends to third parties.
Dividends paid by the Corporation's banking subsidiaries are limited by various
regulatory requirements related to capital adequacy and historic earnings.
As shown in the consolidated statement of cash flows, cash and cash
equivalents decreased by $3.4 billion during the nine month period ended
September 30, 1995. The decrease was primarily due to increases in net loans
coupled with a net decrease in deposits and borrowings. Net cash used by
operating activities was mainly attributable to a net increase in originations
and purchases of mortgages held for resale. Net cash used by investing
activities was generally caused by a net increase in loans and leases at the
Corporation's banking subsidiaries. Net cash used by financing activities was
due to a net decrease in deposits partially offset by increases in short-term
borrowings and issuances of long-term debt.
At September 30, 1995 and December 31, 1994, the Corporation had total
commercial paper outstanding of $1.9 billion and $835 million, respectively. The
parent company had $693 million and $727 million of commercial paper outstanding
at September 30, 1995 and December 31, 1994, respectively, while the remaining
balance related to FMG. The Corporation has backup lines of credit to ensure
that funding is not interrupted if commercial paper is not available. Total
amount of funds available under these lines of credit was $1.0 billion at
September 30, 1995. Fleet had no outstanding balance under the line of credit.
Fleet has an effective universal shelf registration statement that
provides for the issuance of common and preferred stock, senior or subordinated
debt securities, and other securities with total amount of funds available of
approximately $603 million at September 30, 1995. In August 1995, the
Corporation issued $150 million of its senior medium-term notes, all of which
are due in 1996. Subsequent to September 30, 1995, the Corporation issued $250
million of 6.00% senior notes due October 26, 1998, and $165 million of senior
medium term notes thereby reducing the amount of funds available using the
universal shelf registration to $193 million. On October 24, 1995, the
Corporation filed a new registration statement for an additional $750 million
in securities which has not yet been declared effective by the Securities
and Exchange Commission.
FMG has a separate funding program that includes two revolving-warehouse
credit agreements which totaled $2.20 billion at December 31, 1994. On April 3,
1995, FMG renegotiated these agreements and incorporated the terms of these two
facilities into one credit facility totaling $1.8 billion. FMG has $560 million
outstanding under the new credit facility at September 30, 1995, compared to
$500 million at December 31, 1994. FMG also sells commercial paper to fund
short-term needs and had $1.2 billion and $108 million outstanding at September
30, 1995 and December 31, 1994, respectively. During the second quarter, FMG
filed a shelf registration providing for the issuance of debt securities and
warrants to purchase debt securities. During the third quarter, FMG issued $150
million of medium-term notes, which reduces the amount of funds available under
FMG's shelf registration to $150 million.
22
<PAGE>
CAPITAL
- ---------------------------------------------------------------
September 30, June 30, December 31,
1995 1995 1994
- ---------------------------------------------------------------
Risk-adjusted assets $39,494 $38,701 $35,498
Tier 1 risk-based
capital
(4% minimum) 9.49% 9.37% 10.08%
Total risk-based
capital
(8% minimum) 13.37 13.31 14.21
Leverage ratio 7.62 7.53 7.77
Common equity-to-assets 7.83 7.48 6.16
Total equity-to-assets 8.57 8.21 6.93
Tangible total
equity-to-assets 5.05 4.75 4.65
Capital in excess of
minimum
requirements:
Tier 1 risk-based $2,167 $2,079 $2,160
Total risk-based 2,121 2,055 2,203
Leverage 1,781 1,701 1,737
================================================================
At September 30, 1995, the Corporation exceeded all regulatory required
minimum capital ratios. The Corporation's risk-based regulatory ratios remained
consistent with June 30, 1995. Increases in risk-adjusted assets
from June 30, 1995 primarily reflects growth in the Corporation's loan and lease
portfolios.
RECENT ACCOUNTING DEVELOPMENTS
In October 1995, the FASB issued Statement No. 123, "Accounting for
Stock-Based Compensation," which establishes a fair value based method of
accounting for employee stock options and similar equity instruments. The
standard also permits companies to continue to measure compensation cost for
these plans using the current accounting method which is intrinsic value based.
Companies that elect to continue to use the intrinsic value method must provide
pro forma disclosure of net income and earnings per share as if the fair value
method of accounting had been applied. This standard is effective for the year
ended December 31, 1996. The Corporation expects to continue to use the
intrinsic value based method of accounting and will provide the additional
disclosure on the pro forma impact of the fair value based method under
Statement No. 123 in the 1996 annual report for awards granted in both 1995 and
1996.
23
<PAGE>
PART II. ITEM 6.
(a) Exhibit Index
Page of
Exhibit this
Number Report
4 Instruments defining the right of security holders, including
debentures *
11 Statement re-computation of per share earnings 26
12 Statement re-computation of ratios 28
27 Financial data schedule 29
* Registrant has no instruments defining the rights of holders of equity or
debt securities where the amount of securities authorized thereunder
exceeds 10% of the total assets of the registrant and its subsidiaries on a
consolidated basis. Registrant hereby agrees to furnish a copy of any such
instrument to the Commission upon request.
(b) Four Form 8-K's were filed during the period from July 1, 1995
to the date of the filing of this report.
- Current report on Form 8-K dated August 11, 1995 (filing the
Unaudited Pro Forma Condensed Combined Financial Statements as
of June 30, 1995, and notes thereto in connection with the
merger of the Registrant and Shawmut National Corporation.
- Current report on Form 8-K dated August 23, 1995 (reporting
the Registrant's and Shawmut's divestiture proposal).
- Current report on Form 8-K dated October 18, 1995 (reporting
the Registrant's third quarter earnings).
- Current report on Form 8-K dated October 26, 1995 (reporting
the issuance of $250,000,000 of 6% Senior Notes due 1998).
24
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Fleet Financial Group, Inc.
--------------------------
(Registrant)
/s/ Eugene M. McQuade
--------------------------
Eugene M. McQuade
Executive Vice President
Chief Financial Officer
/s/ Robert C. Lamb, Jr.
--------------------------
Robert C. Lamb, Jr.
Chief Accounting Officer
Controller
25
DATE: November 13, 1995
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER
4 Instruments defining the right of security holders, including
debentures *
11 Statement re-computation of per share earnings
12 Statement re-computation of ratios
27 Financial data schedule
* Registrant has no instruments defining the rights of holders of equity or
debt securities where the amount of securities authorized thereunder
exceeds 10% of the total assets of the registrant and its subsidiaries on a
consolidated basis. Registrant hereby agrees to furnish a copy of any such
instrument to the Commission upon request.
EXHIBIT 11
FLEET FINANCIAL GROUP, INC.
COMPUTATION OF EQUIVALENT SHARES AND PER SHARE EARNINGS
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE><CAPTION>
For the Three Months Ended September 30
---------------------------------------------------------------------------------------
1995 1994
----------------------------------------- ---------------------------------------
FULLY FULLY
PRIMARY DILUTED PRIMARY DILUTED
-------------------- -------------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Equivalent shares:
Average shares outstanding 141,724,542 141,724,542 139,842,907 139,842,907
Additional shares due to:
Stock options 626,211 695,040 874,550 875,771
Warrants 3,369,372 3,460,927 3,456,170 3,456,170
Dual convertible preferred stock 16,033,994 16,033,994 16,033,994 16,033,994
-------------------- -------------------- -------------------- -----------------
Total equivalent shares 161,754,119 161,914,503 160,207,621 160,208,842
-------------------- -------------------- -------------------- -----------------
Earnings per share
Net income $177,360 $177,360 $163,893 $163,893
Less: Preferred stock dividends (2,463) (2,463) (2,463) (2,463)
-------------------- -------------------- -------------------- -----------------
Adjusted net income $174,897 $174,897 $161,430 $161,430
-------------------- -------------------- -------------------- -----------------
Total equivalent shares 161,754,119 161,914,503 160,207,621 160,208,842
-------------------- -------------------- -------------------- -----------------
Earnings per share on net income $1.08 $1.08 $1.01 $1.01
-------------------- -------------------- -------------------- -----------------
</TABLE>
<PAGE>
EXHIBIT 11
FLEET FINANCIAL GROUP, INC.
COMPUTATION OF EQUIVALENT SHARES AND PER SHARE EARNINGS
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE><CAPTION>
For the Nine Months Ended September 30
---------------------------------------------------------------------------------------
1995 1994
----------------------------------------- ---------------------------------------
FULLY FULLY
PRIMARY DILUTED PRIMARY DILUTED
-------------------- -------------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Equivalent shares:
Average shares outstanding 140,897,668 140,897,668 140,750,735 140,750,735
Additional shares due to:
Stock options 542,738 766,098 868,108 927,822
Warrants 3,165,649 3,460,927 3,384,674 3,450,831
Dual convertible preferred stock 16,033,994 16,033,994 16,033,994 16,033,994
-------------------- -------------------- -------------------- -----------------
Total equivalent shares 160,640,049 161,158,687 161,037,511 161,163,382
-------------------- -------------------- -------------------- -----------------
Earnings per share
Net income $513,685 $513,685 $447,741 $447,741
Less: Preferred stock dividends (7,390) (7,390) (12,658) (12,658)
-------------------- -------------------- -------------------- -----------------
Adjusted net income $506,295 $506,295 $435,083 $435,083
-------------------- -------------------- -------------------- -----------------
Total equivalent shares 160,640,049 161,158,687 161,037,511 161,163,382
-------------------- -------------------- -------------------- -----------------
Earnings per share on net income $3.15 $3.14 $2.70 $2.70
-------------------- -------------------- -------------------- -----------------
</TABLE>
EXHIBIT 12
FLEET FINANCIAL GROUP, INC.
COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
EXCLUDING INTEREST ON DEPOSITS
($ IN THOUSANDS)
<TABLE><CAPTION>
Three months Nine months
ended ended
September 30 September 30 Year ended December 31
- -----------------------------------------------------------------------------------------------------------------------------------
1995 1995 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Net income (loss) Adjustments: $ 177,360 $ 513,685 $ 612,931 $ 488,049 $279,843 $ 97,672 $ (73,687)
(a) Applicable income taxes
(benefits) 115,288 337,981 397,708 327,407 228,526 55,176 (89,636)
(b) Fixed charges:
(1) Interest on borrowed
funds 176,840 479,716 526,397 417,301 386,275 449,544 782,814
(2) 1/3 of rent 7,434 22,749 33,706 34,217 29,672 23,033 19,121
- ------------------------------------------------------------------------------------------------------------------------------------
(c) Adjusted earnings $ 476,922 $1,354,131 $1,570,742 $1,266,974 $924,316 $625,425 $638,612
- ------------------------------------------------------------------------------------------------------------------------------------
Fixed charges [b(1) + b(2)] $ 184,274 $ 502,465 $ 560,103 $ 451,518 $415,947 $472,577 $801,935
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted earnings/fixed charges 2.59x 2.69x 2.80x 2.81x 2.22x 1.32x 0.80x*
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
INCLUDING INTEREST ON DEPOSITS
<TABLE><CAPTION>
Three Nine months
months ended
ended September 30 Year ended December 31
September
30
- -----------------------------------------------------------------------------------------------------------------------------------
1995 1995 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Net income (loss) $ 177,360 $ 513,685 $ 612,931 $ 488,049 $ 279,843 $ 97,672 $ (73,687)
Adjustments:
(a) Applicable income taxes
(benefits) 115,288 337,981 397,708 327,407 228,526 55,176 (89,636)
(b) Fixed charges:
(1) Interest on borrowed funds 176,840 479,716 526,397 417,301 386,275 449,544 782,814
(2) 1/3 of rent 7,434 22,749 33,706 34,217 29,672 23,033 19,121
(3) Interest on deposits 264,346 771,167 764,186 744,080 1,076,368 1,480,395 1,343,417
- -----------------------------------------------------------------------------------------------------------------------------------
(c) Adjusted earnings $ 741,268 $2,125,298 $2,334,928 $2,011,054 $2,000,684 $2,105,820 $1,982,029
- -----------------------------------------------------------------------------------------------------------------------------------
Fixed charges [b(1) + b(2) + b(3)] $ 448,620 $1,273,632 $1,324,289 $1,195,598 $1,492,315 $1,952,972 $2,145,352
- -----------------------------------------------------------------------------------------------------------------------------------
Adjusted earnings/fixed charges 1.65x 1.67x 1.76x 1.68x 1.34x 1.08x 0.92x*
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Note that earnings are inadequate to cover fixed charges, the deficiency
being $163,323 for both the ratio excluding and including interest on
deposits.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
September 30, 1995 consolidated financial statements and management's discussion
and analysis of financial condition and results of operations contained in the
Form 10-Q and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,208
<INT-BEARING-DEPOSITS> 7
<FED-FUNDS-SOLD> 265
<TRADING-ASSETS> 42
<INVESTMENTS-HELD-FOR-SALE> 10,900
<INVESTMENTS-CARRYING> 699
<INVESTMENTS-MARKET> 706
<LOANS> 30,801
<ALLOWANCE> (937)
<TOTAL-ASSETS> 50,861
<DEPOSITS> 32,436
<SHORT-TERM> 9,179
<LIABILITIES-OTHER> 1,118
<LONG-TERM> 3,767
<COMMON> 1,680
0
379
<OTHER-SE> 2,302
<TOTAL-LIABILITIES-AND-EQUITY> 50,861
<INTEREST-LOAN> 2,179
<INTEREST-INVEST> 558
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 2,737
<INTEREST-DEPOSIT> 771
<INTEREST-EXPENSE> 1,251
<INTEREST-INCOME-NET> 1,486
<LOAN-LOSSES> 75
<SECURITIES-GAINS> 10
<EXPENSE-OTHER> 1,569
<INCOME-PRETAX> 852
<INCOME-PRE-EXTRAORDINARY> 852
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 514
<EPS-PRIMARY> 3.15
<EPS-DILUTED> 3.14
<YIELD-ACTUAL> 4.72
<LOANS-NON> 579
<LOANS-PAST> 138
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 953
<CHARGE-OFFS> 173
<RECOVERIES> 51
<ALLOWANCE-CLOSE> 937
<ALLOWANCE-DOMESTIC> 937
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
