<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) November 14, 1996
FLEET FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
RHODE ISLAND
(State or other jurisdiction of incorporation)
1-6366 05-0341324
(Commission File Number) (IRS Employer Identification No.)
ONE FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: 617-292-2000
==============================================================================
<PAGE>
ITEM 5. OTHER EVENTS
------------
On May 1, 1996, Fleet Financial Group, Inc. ("Fleet") consummated the
merger (the "Merger") of Fleet Bank of New York, National Association ("FBNY"),
a wholly-owned subsidiary of Fleet, with and into NatWest Bank N.A. ("Natwest")
which shall continue its existence as the surviving bank under the name "Fleet
Bank N.A.". Pursuant to the terms of the Agreement and Plan of Merger (the
"Merger Agreement") dated December 19, 1995 between Fleet and National
Westminster Bank Plc ("NatWest Plc"), Fleet purchased from NatWest Plc the three
main operating entities of NatWest Bancorp ("Bancorp"), a wholly-owned, indirect
subsidiary of NatWest Plc: NatWest Bank N.A., NatWest (Delaware) and NatWest
Services Inc. The Merger Agreement also required that certain assets and
liabilities of NatWest be retained by Bancorp or transferred to other affiliates
of NatWest Plc. NatWest was a wholly-owned, direct subsidiary of National
Westminster Bancorp NJ, a New Jersey Corporation, which was a wholly-owned,
direct subsidiary of Bancorp, a Delaware corporation and a wholly-owned,
indirect subsidiary of NatWest Plc.
Fleet hereby files its Unaudited Pro Forma Combined Financial Statements
and Notes thereto in connection with the Merger as of September 30, 1996.
For additional information regarding the Merger, see the Registrant's
Current Reports on Form 8-K/A dated August 5, 1996 and April 5, 1996, and
Form 8-K dated August 15, 1996, May 15, 1996, May 1, 1996, March 25, 1996,
March 15, 1996 and December 19, 1995.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
The following exhibits are filed as part of this report:
99(a) Unaudited Pro Forma Combined Financial Statements and Notes Thereto
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed in its behalf
by the undersigned hereunto duly authorized.
FLEET FINANCIAL GROUP, INC.
(Registrant)
By: /s/ Robert C. Lamb, Jr.
-----------------------
Robert C. Lamb, Jr.
Chief Accounting Officer
Controller
Dated: November 14, 1996
<PAGE>
Exhbit
No. Description
- ------ -----------
99(a) Unaudited Pro Forma Combined Financial Statements and Notes Thereto
<PAGE>
EXHIBIT 99 (a)
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
On May 1, 1996, Fleet Financial Group, Inc. ("Fleet") consummated the
merger (the "Merger") of Fleet Bank of New York, National Association
("FBNY"), a wholly-owned subsidiary of Fleet, with and into NatWest Bank N.A.
("NatWest"), a wholly-owned indirect subsidiary of NatWest Plc, which shall
continue as the surviving bank under the name "Fleet Bank, N.A." (the
"Surviving Bank"). The following Unaudited Pro Forma Combined Statements of
Income for the nine months ended September 30, 1996 and for the year ended
December 31, 1995, give effect to the Merger accounted for by the purchase
method of accounting as if such transaction had occurred on January 1, 1995.
The pro forma information is based on the historical consolidated
financial statements of Fleet and National Westminster Bancorp, Inc.
("Bancorp") and their subsidiaries under the assumptions and adjustments set
forth in the accompanying Notes to the Unaudited Pro Forma Combined Financial
Statements. NatWest was a wholly-owned direct subsidiary of National
Westminster Bancorp NJ, a New Jersey corporation, which was a wholly-owned
direct subsidiary of National Westminster Bancorp, Inc., a Delaware
corporation. Bancorp was a wholly-owned indirect subsidiary of NatWest Plc.
Pursuant to the terms of the Merger Agreement, certain operating subsidiaries
of Bancorp, including its leasing subsidiary, and certain assets and
liabilities of NatWest were retained by Bancorp or transferred to other
affiliates of NatWest Plc. Such assets and liabilities are included as pro
forma adjustments in the Unaudited Pro Forma Combined Financial Statements.
The Unaudited Pro Forma Combined Financial Statements should be read in
conjunction with the consolidated financial statements of Fleet, filed in
Fleet's Quarterly Report on Form 10-Q for the quarter ended September 30,
1996 and Fleet's Annual Report on Form 10-K for the year ended December 31,
1995 and the consolidated financial statements of Bancorp, filed as Exhibit
99b to Fleet's Current Reports on Form 8-K dated May 15, 1996 and March 25,
1996. The pro forma information is presented for comparative purposes only
and is not necessarily indicative of the combined financial position or
results of operations in the future or of the combined financial position or
results of operations which would have been realized had the Merger been
consummated during the period or as of the date for which the pro forma
information is presented.
<PAGE>
<TABLE>
<CAPTION>
FLEET FINANCIAL GROUP, INC. AND NATWEST BANK N.A.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
For the Nine Months Ended September 30, 1996 (a)
Fleet /
Balance Sheet NatWest
Fleet NatWest Pro Forma Restructuring Pro Forma
(Dollars in millions, except per share data) Historical Pro Forma Adjustments Adjustments (d) Combined
---------- --------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Interest and fees on loans and leases $ 3,776 $ 484 $ - $ (51) $ 4,209
Interest on securities 577 137 (35)(b) (59) 620
---------- ----------- ------------ ------------- ----------
Total interest income 4,353 621 (35) (110) 4,829
Interest expense:
Deposits 1,299 190 - (18) 1,471
Short-term borrowings 251 90 - (75) 266
Long-term debt 300 1 9 (b) - 310
---------- ----------- ------------ ------------- ----------
Total interest expense 1,850 281 9 (93) 2,047
---------- ----------- ------------ ------------- ----------
Net interest income 2,503 340 (44) (17) 2,782
Provision for credit losses 148 171 - - 319
---------- ----------- ------------ ------------- ----------
Net interest income after provision for
credit losses 2,355 169 (44) (17) 2,463
---------- ----------- ------------ ------------- ----------
Mortgage banking 403 22 - - 425
Investment services revenue 274 5 - - 279
Service charges, fees and commissions 437 84 - - 521
Venture capital revenue 94 - - - 94
Student loan servicing fees 67 - - - 67
Securities available for sale gains 38 3 - - 41
Gain from branch divestitures 92 - - - 92
Other noninterest income 219 5 - - 224
---------- ----------- ------------ ------------- ----------
Total noninterest income 1,624 119 - - 1,743
---------- ----------- ------------ ------------- ----------
Employee compensation and benefits 1,184 168 - - 1,352
Occupancy and equipment 406 50 (1)(c) - 455
Mortgage servicing rights amortization 139 1 - - 140
Marketing 72 14 - - 86
Intangible asset amortization 96 25 (2)(c) - 119
Other noninterest expense 659 121 - - 780
---------- ----------- ------------ ------------- ----------
Total noninterest expense 2,556 379 (3) - 2,932
---------- ----------- ------------ ------------- ----------
Income before income taxes 1,423 (91) (41) (17) 1,274
Applicable income taxes 587 (48) (17) (7) 515
---------- ----------- ------------ ------------- ----------
Net income $ 836 $ (43) $ (24) $ (10) $ 759
========== =========== ============ ============= ==========
Net income applicable to common shares: (f) $ 783 $ (43) $ (31)(b) $ (10) $ 699
========== =========== ============ ============= ==========
Weighted average common shares outstanding: (g)
Primary 268,656,037 268,656,037
Fully Diluted 269,259,878 269,259,878
Earnings per share:
Primary $ 2.91 $ 2.60
Fully Diluted 2.91 2.60
See accompanying notes to the unaudited pro forma combined financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLEET FINANCIAL GROUP, INC. AND NATWEST BANK N.A.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
For the Four Months Ended April 30, 1996 (a)
NatWest
Bancorp Pro Forma NatWest
(Dollars in millions, except per share data) Historical Adjustments (e) Pro Forma
---------- --------- -----------
<S> <C> <C> <C>
Interest and fees on loans and leases $ 485 $ (1) $ 484
Interest on securities 138 (1) 137
----------- ----------- ------------
Total interest income 623 (2) 621
Interest expense:
Deposits 190 - 190
Short-term borrowings 82 8 90
Long-term debt 21 (20) 1
----------- ----------- ------------
Total interest expense 293 (12) 281
----------- ----------- ------------
Net interest income 330 10 340
Provision for credit losses 171 - 171
----------- ----------- ------------
Net interest income after provision
for credit losses 159 10 169
----------- ----------- ------------
Mortgage banking 22 - 22
Investment services revenue 5 - 5
Service charges, fees and commissions 84 - 84
Venture capital revenue - - -
Student loan servicing fees - - -
Securities available for sale gains 3 - 3
Gain from branch divestitures - - -
Other noninterest income 6 (1) 5
----------- ----------- ------------
Total noninterest income 120 (1) 119
----------- ----------- ------------
Employee compensation and benefits 168 - 168
Occupancy and equipment 51 (1) 50
Mortgage servicing rights amortization 1 - 1
Marketing 14 - 14
Intangible asset amortization 25 - 25
Other noninterest expense 234 (113) 121
----------- ----------- ------------
Total noninterest expense 493 (114) 379
----------- ----------- ------------
Income before income taxes (214) 123 (91)
Applicable income taxes (94) 46 (48)
----------- ----------- ------------
Net income $ (120) $ 77 $ (43)
=========== =========== ============
Net income applicable to common shares: (f) $ (120) $ 77 $ (43)
=========== =========== ============
See accompanying notes to the unaudited pro forma combined financial statements
</TABLE>
<PAGE>
<TABLE><CAPTION>
FLEET FINANCIAL GROUP, INC. AND NATWEST BANK N.A.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
For the Twelve Months Ended December 31, 1995 (a)
Fleet /
Balance Sheet NatWest
Fleet NatWest Pro Forma Restructuring Pro Forma
(Dollars in millions, except per share data) Pro Forma Pro Forma Adjustments Adjustments(d) Combined
----------- --------- ----------- -------------- --------
<S> <C> <C> <C> <C> <C>
Interest and fees on loans and leases $4,785 $1,499 $ - $ (279) $6,005
Interest on securities 1,365 641 (105)(b) (1,006) 895
----------- --------- -------- -------- ---------
Total interest income 6,150 2,140 (105) (1,285) 6,900
Interest expense:
Deposits 1,782 619 - (271) 2,130
Short-term borrowings 836 446 - (872) 410
Long-term debt 478 - 29 (b) - 507
----------- --------- -------- -------- ---------
Total interest expense 3,096 1,065 29 (1,143) 3,047
----------- --------- -------- -------- ---------
Net interest income 3,054 1,075 (134) (142) 3,853
Provision for credit losses 102 95 - - 197
----------- --------- -------- -------- ---------
Net interest income after provision for credit losses 2,952 980 (134) (142) 3,656
----------- --------- -------- -------- ---------
Mortgage banking 512 30 - - 542
Investment services revenue 322 16 - - 338
Service charges, fees and commissions 496 237 - - 733
Venture capital revenue 37 - - - 37
Student loan servicing fees 72 - - - 72
Securities available for sale gains 38 90 - - 128
Other noninterest income 387 143 - - 530
----------- --------- -------- -------- ---------
Total noninterest income 1,864 516 - - 2,380
----------- --------- -------- -------- ---------
Employee compensation and benefits 1,474 452 - - 1,926
Occupancy and equipment 468 136 (3)(c) - 601
Mortgage servicing rights amortization 196 2 - - 198
Marketing 94 52 - - 146
Intangible asset amortization 113 77 (33)(c) - 157
Merger and restructuring related charges 490 7 - - 497
Loss on assets held for sale or accelerated disposition 175 - - - 175
Other noninterest expense 787 237 - - 1,024
----------- --------- -------- -------- ---------
Total noninterest expense 3,797 963 (36) - 4,724
----------- --------- -------- -------- ---------
Income before income taxes 1,019 533 (98) (142) 1,312
Applicable income taxes 420 210 (52) (57) 521
----------- --------- -------- -------- ---------
Net income $599 $323 $ (46) $ (85) $791
=========== ========= ======== ======== =========
Net income applicable to common shares: (f) $404 $323 $ (88)(b) $ (85) $554
=========== ========= ======== ======== =========
Weighted average common shares outstanding: (g)
Primary 264,352,367 264,352,367
Fully Diluted 265,442,513 265,442,513
Earnings per share:
Primary $1.53 $2.10
Fully Diluted 1.52 2.09
</TABLE>
See accompanying notes to the unaudited pro forma combined financial statements
<PAGE>
FLEET FINANCIAL GROUP, INC. AND NATWEST BANK N.A.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
For the Twelve Months Ended December 31, 1995 (a)
<TABLE><CAPTION>
Fleet Pro Forma Fleet
(Dollars in millions, except per share data) Historical Adjustments(h) Pro Forma
-------------- -------------- -----------
<S> <C> <C> <C>
Interest and fees on loans and leases $4,721 $64 $4,785
Interest on securities 1,304 61 1,365
-------------- -------- --------------
Total interest income 6,025 125 6,150
Interest expense:
Deposits 1,726 56 1,782
Short-term borrowings 801 35 836
Long-term debt 478 - 478
-------------- -------- --------------
Total interest expense 3,005 91 3,096
-------------- -------- --------------
Net interest income 3,020 34 3,054
Provision for credit losses 101 1 102
-------------- -------- --------------
Net interest income after provision for credit losses 2,919 33 2,952
-------------- -------- --------------
Mortgage banking 511 1 512
Investment services revenue 322 - 322
Service charges, fees and commissions 492 4 496
Venture capital revenue 37 - 37
Student loan servicing fees 72 - 72
Securities available for sale gains 32 6 38
Other noninterest income 384 3 387
-------------- -------- --------------
Total noninterest income 1,850 14 1,864
-------------- -------- --------------
Employee compensation and benefits 1,448 26 1,474
Occupancy and equipment 459 9 468
Mortgage servicing rights amortization 190 6 196
Marketing 93 1 94
Intangible asset amortization 105 8 113
Merger and restructuring related charges 490 - 490
Loss on assets held for sale or accelerated disposition 175 - 175
Other noninterest expense 775 12 787
-------------- -------- --------------
Total noninterest expense 3,735 62 3,797
-------------- -------- --------------
Income before income taxes 1,034 (15) 1,019
Applicable income taxes 424 (4) 420
-------------- -------- -------------
Net income $610 $ (11) $599
============== ======== =============
Net income applicable to common shares: (f) $416 $ (12) $404
============== ======== =============
Weighted average common shares outstanding: (g)
Primary 264,796,217 264,352,367
Fully Diluted 265,886,363 265,442,513
Earnings per share:
Primary $1.57 $1.53
Fully Diluted 1.57 1.52
</TABLE>
See accompanying notes to the unaudited pro forma combined financial statements
<PAGE>
<TABLE><CAPTION>
FLEET FINANCIAL GROUP, INC. AND NATWEST BANK N.A.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
For the Twelve Months Ended December 31, 1995 (a)
NatWest
Bancorp Pro Forma NatWest
(Dollars in millions, except per share data) Historical Adjustments(e) Pro Forma
---------- -------------- ---------
<S> <C> <C> <C>
Interest and fees on loans and leases $1,508 $ (9) $1,499
Interest on securities 642 (1) 641
---------- -------- ---------
Total interest income 2,150 (10) 2,140
Interest expense:
Deposits 619 - 619
Short-term borrowings 420 26 446
Long-term debt 61 (61) 0
---------- -------- ---------
Total interest expense 1,100 (35) 1,065
---------- -------- ---------
Net interest income 1,050 25 1,075
Provision for credit losses 95 - 95
---------- -------- ---------
Net interest income after provision for credit losses 955 25 980
---------- -------- ---------
Mortgage banking 30 - 30
Investment services revenue 16 - 16
Service charges, fees and commissions 237 - 237
Venture capital revenue - - -
Student loan servicing fees - - -
Securities available for sale gains 90 - 90
Other noninterest income 145 (2) 143
---------- -------- ---------
Total noninterest income 518 (2) 516
---------- -------- ---------
Employee compensation and benefits 459 (7) 452
Occupancy and equipment 137 (1) 136
Mortgage servicing rights amortization 2 - 2
Marketing 56 (4) 52
Intangible asset amortization 78 (1) 77
Merger and restructuring related charges 10 (3) 7
Loss on assets held for sale or accelerated disposition - - -
Other noninterest expense 224 13 237
---------- -------- ---------
Total noninterest expense 966 (3) 963
---------- -------- ---------
Income before income taxes 507 26 533
Applicable income taxes 201 9 210
---------- -------- ---------
Net income $306 $17 $323
========== ======== =========
Net income applicable to common shares: (f) $306 $17 $323
========== ======== =========
</TABLE>
See accompanying notes to the unaudited pro forma combined financial statements
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(a) The pro forma information presented is not necessarily indicative of
the results of operations that would have resulted had the Merger been
consummated at the beginning of the period indicated, nor is it necessarily
indicative of the results of operations in future periods of the combined
entities. Under generally accepted accounting principles ("GAAP"), the assets
and liabilities of NatWest will be combined at market value with those of Fleet
with the excess of the purchase price over the net assets acquired allocated to
goodwill. On November 30, 1995, Fleet completed the merger (the "Shawmut
Merger") of Shawmut National Corporation ("Shawmut") with and into Fleet with
such merger accounted for as a pooling of interests. The historical results of
NatWest have been included in these Unaudited Pro Forma Combined Financial
Statements for the four months ended April 30,1996 and the twelve months ended
December 31, 1995.
The pro forma combined financial statements do not give effect to the
anticipated cost savings in connection with the Merger or the Shawmut Merger.
While no assurance can be given, Fleet expects to achieve cost savings of
approximately $200 million (pre-tax) within eighteen months following the
Merger. Cost savings of $400 million (pre-tax) are also expected to be achieved
in connection with the Shawmut Merger. Such cost savings are expected to be
achieved within the first fifteen months after the consummation of the Shawmut
Merger. Cost savings from both the Merger and the Shawmut Merger are expected to
be realized primarily through reductions in staff, elimination and consolidation
of certain branches, and the consolidation of certain offices, data processing
and other redundant back-office operations. The extent to which cost savings
will be achieved in connection with the Merger and the Shawmut Merger is
dependent upon various factors beyond the control of Fleet, 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. The NatWest results of
operations for the four months ended April 30, 1996 include $119 million
(after-tax) of charges, including loan loss provision and a property write-down,
recorded by Natwest prior to the consummation of the merger.
The pro forma information gives effect to the Merger as if the Merger had
occurred on January 1, 1995. In connection with the Merger, Fleet substantially
restructured its balance sheet to replace lower-yielding assets, primarily
securities and residential loans, with higher-earning assets acquired from
NatWest, and to replace higher-cost funding with lower-cost deposits acquired
from NatWest during the first quarter of 1996 (see note d). The pro forma
information gives effect to the balance sheet restructuring. However, due to
differences in market conditions and the balance sheet mix and size during 1995
and 1996 compared to the current market conditions and the current balance sheet
mix and size, pro forma results of operations may not be indicative of the
results of operations in the future or which would have resulted had the Merger
been consummated during the period for which the pro forma information is
presented.
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(b) On May 1, 1996, Fleet purchased NatWest for $2.7 billion in cash.
The following funding tranasctions occurred in conjunction with the Merger
and are reflected in the accompanying Unaudited Pro Forma Combined Financial
Sttaements. The $2.7 billion purchase price was funded through the issuance
of $600 million of preferred stock with a weighted average dividend rate of
6.94%, the issuance of $400 million of long-term debt with an average
borrowing rate of 7.20%, dividends of $1.375 billion received from Fleet
subsidiaries and asset sales within Fleet Bank N.A. totaling $325 million.
The source of funds for the $1.375 billion in dividends received from
subsidiaries were assumed to be the result of asset sales, primarily
securities. As part of this transaction, pro forma adjustments assume Fleet
raised an additional $675 million of short-term borrowings (primarily
commercial paper) to recapitalize certain of its subsidiaries which was
utilized by such subsidiaries to reduce short-term borrowings by $675
million. All funding transactions are assumed to have occurred as of January
1, 1995.
(c) Purchase accounting adjustments include adjustments to reflect the
estimated fair value of the assets acquired and liabilities assumed, the
elimination of NatWest's stockholder's equity, and the recording of goodwill
in accordance with the purchase method of accounting. Adjustments have been
made to the Unaudited Pro Forma Combined Income Statement to reflect the
recording of goodwill amortization as well as to eliminate any goodwill
amortization recorded at NatWest, in accordance with the purchase method of
accounting.
Purchase price $2,700
Historical net tangible assets acquired $3,252
Elimination of NatWest goodwill and core
deposit intangible (959) 2,293
-----------
Estimated fair value adjustments (277)
Estimated purchase price adjustment 24(1)
---------
Estimated fair value of net assets acquired 2,040
---------
Excess cost over net assets acquired (goodwill) $ 660
=========
(1) In accordance with the Merger Agreement, the purchase price was adjusted
based upon the final closing tangible equity of NatWest as of the
date of the Merger.
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Goodwill of $660 million has been estimated assuming a purchase price of $2.7
billion. The Merger Agreement provides for additional payments (the "Earnout")
to be made annually based upon the level of earnings from the NatWest franchise,
not to exceed $560 million during an eight year "Earnout Period", which will
commence on May 1, 1996 and end on April 30, 2004. Assuming full payout of the
Earnout, the total purchase price would be $3.26 billion resulting in an
increase to goodwill of $560 million. Such increase, if any, will be recorded
when earned during the Earnout Period and will be amortized over the remaining
life of the goodwill. Included in the pro forma adjustments is an increase to
goodwill amortization reflecting the amortization of the estimated payment
required for fiscal year 1995 under the Earnout assuming consummation of the
Merger as of January 1, 1995. This would result in an increase to goodwill of
$169 million at December 31, 1995 and additional goodwill amortization of
$8 million during the first nine months of 1996. This estimate is based on the
level of NatWest pro forma earnings and is not necessarily indicative of
payments that may be made, if any. Estimated fair value adjustments include
merger-related charges and other adjustments to reflect the estimated fair
value of assets being acquired and liabilities being assumed. Significant
adjustments include a liability of $250 million to reflect Fleet's best estimate
of merger-related charges. These merger related charges include personnel,
facilities, data processing and other transaction costs. Personnel charges
relate primarily to the costs of employee severance, the costs related to the
termination of certain employee benefit plans and employee assistance for
separated employees. Facilities charges are the result of the consolidation of
back-office operations, and consist of lease-termination costs, writedowns of
owned properties, and other facilities-related costs. Data processing costs
consist primarily of the write-off of duplicate or incompatible systems hardware
and software. Other merger expenses consist primarily of transaction-related
costs, such as professional and other fees. Goodwill due to the Merger is
assumed to be amortized on a straight line basis over 15 years.
(d) In conjunction with the Merger, Fleet and Bancorp took certain actions
to restructure the Combined Balance Sheet through the liquidation of low-return
assets and the reduction of borrowed funds. Since Fleet and Bancorp
restructured their respective balance sheets during the first quarter of 1996,
the Unaudited Pro Forma Combined Statements of Income assume different levels
of restructuring for the first nine months of 1996, when compared to the twelve
months ended December 31, 1995. The accompanying Unaudited Pro Forma Combined
Statements of Income assume the reduction of approximately $7.0 billion and
$19.9 billion of assets and an equal amount of borrowed funds for the nine
months ended September 30, 1996 and the twelve months ended December 31, 1995.
Balance sheet restructuring initiatives were substantially completed during the
first quarter of 1996. The assets assumed to be reduced include: approximately
$1.8 billion and $13.4 billion of securities with an average yield of 6.24% and
6.18% for 1996 and 1995, respectively; approximately $2.6 billion and $3.5
billion of loans, primarily residential real estate, with an average yield of
7.99% and 7.98% for 1996 and 1995, respectively; and approximately $2.6 billion
and $3.0 billion in federal funds sold with an average yield of 4.74% and 5.89%
for 1996 and 1995, respectively. The $7.0 billion and $19.9 billion of borrowed
funds assumed to be reduced include: approximately $5.7 billion and $14.6
billion of short-term borrowings with an average borrowing rate of 5.30% and
5.69% for 1996 and 1995, respectively; and $1.3 billion and $5.3 billion of
time deposits with an average borrowing rate of 5.33% and 5.89% for 1996 and
1995, respectively. Asset yields and funding costs have been estimated based
upon historical weighted average yields and funding costs of similar assets
and liabilities in the aggregate and may not be indicative of the results of
operations in the future or which would have been realized had such transactions
been consummated during the period for which the pro forma information is
presented. The balance sheet restructuring adjustments have been calculated
assuming a certain balance sheet size as well as a certain mix of balance
sheet assets (primarily securities and residential loans) to total assets during
the first nine months of 1996 and the year ended December 31, 1995. As a result,
restructuring assumptions may not be indicative of the results of operations in
the future or that would have been achieved had the Merger been consummated at
the beginning of the period indicated.
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(e) Pursuant to the Merger Agreement, certain operating subsidiaries of
Bancorp, including its leasing business, and certain assets and liabilities of
NatWest were retained by Bancorp. Pro forma adjustments reflect the approximate
impact of those assets not being purchased and liabilities not being assumed.
(f) The Fleet/NatWest Pro Forma net income applicable to common shares
reflects the sum of the Fleet Pro Forma net income applicable per common share
and the NatWest Pro Forma net income applicable per common share adjusted for
the purchase accounting, funding, and restructuring adjustments.
(g) The Fleet Pro Forma weighted average shares outstanding for the year
ended December 31, 1995, reflects the effect of reissuing treasury stock in
connection with the NBB Bancorp, Inc. ("NBB") and Northeast Federal Corp.
("Northeast") transactions as if such repurchase of common stock and reissuance
of treasury stock occurred on January 1, 1995.
(h) During 1995, Fleet also completed the merger (the "NBB Merger") of NBB
with and into Fleet, the merger (the "Plaza Merger") of Plaza Home Mortgage
Corp. ("Plaza") with and into Fleet, the merger (the "Northeast Merger") of
Northeast with and into Fleet, the acquisition (the "Barclays Acquisition") of
substantially all of the assets of Barclays Business Finance Division of
Barclays Business Credit, Inc. ("Barclays") by Fleet and Fleet's repurchase (the
"FMG Repurchase") of the publicly-held shares of Fleet's majority-owned
subsidiary, Fleet Mortgage Group, Inc. ("FMG"), each of which was accounted for
by the purchase method of accounting and each of which is included in the
Unaudited Pro Forma Combined Balance Sheet. Pro forma adjustments to the
Unaudited Pro Forma Combined Statements of Income reflect the impact of the NBB
Merger, the Barclays Acquisition, the FMG Repurchase, the Plaza Merger and the
Northeast Merger which were consummated on January 27, 1995, January 31, 1995,
February 28, 1995, March 3, 1995 and June 9, 1995, respectively, as if such
transactions had been consummated on January 1, 1995. Certain acquisitions
completed by NatWest during 1995 have not been reflected in the Unaudited Pro
Forma Combined Financial Statements due to immateriality.
