SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 5, 1996
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FLEET FINANCIAL GROUP, INC.
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(Exact name of registrant as specified in its charter)
RHODE ISLAND
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(State or other jurisdiction of incorporation)
1-6366 05-0341324
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(Commission File Number) (IRS Employer
Identification No.)
One Federal Street, Boston, Massachusetts 02110
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 617-292-2000
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<PAGE>
Item 5. Other Events.
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On December 19, 1995, Fleet entered into an Agreement and Plan of
Merger (the "Merger Agreement") with National Westminster Bank Plc
("NatWest Plc") providing for 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 of New York,
National Association". Pursuant to the terms of the Merger Agreement, Fleet
will purchase 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 requires that certain assets and liabilities of NatWest will be retained
by Bancorp or transferred to other affiliates of NatWest Plc. NatWest is a
wholly-owned, direct subsidiary of National Westminster Bancorp NJ, a New
Jersey corporation, which is a wholly-owned, direct subsidiary of National
Westminster Bancorp, Inc., a Delaware corporation and is a wholly-owned,
indirect subsidiary of NatWest Plc.
Fleet hereby files its Amended and Restated Unaudited Pro Forma Combined
Financial Statements and Notes thereto in connection with the Merger as of
December 31, 1995.
For additional information regarding the Merger, see the Registrant's
Current Report on Form 8-K dated December 19, 1995.
Item 7. Financial Statements and Exhibits.
---------------------------------
The following exhibits are filed as part of this report:
23 Consent of KPMG Peat Marwick, LLP (previously filed)
99(a) Amended and Restated Unaudited Pro Forma Combined
Financial Statements and Notes Thereto
99(b) Management's Discussion and Analysis; Selected Financial
Highlights; Supplemental Financial Information;
Consolidated Statements of Income for the years ended
December 31, 1995, 1994 and 1993; Consolidated Balance
Sheets as of December 31, 1995 and 1994; Consolidated
Statements of Changes in Stockholders' Equity, and
Consolidated Statements of Cash Flows for the years
ended December 31, 1995, 1994 and 1993 and footnotes
related thereto; Management's Report on Financial
Statements; and Report of Independant Auditors. (previously
filed)
2
<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.,
Controller
Dated: April 5, 1996
EXHIBIT 99(a)
The Registrant, Fleet Financial Group, Inc. hereby amends and restates
the following Exhibit 99(a) of Item 7 on Form 8-K previously filed with the
Securities and Exchange Commission on March 15, 1996.
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
On December 19, 1995, Fleet Financial Group, Inc. ("Fleet") entered
into an Agreement and Plan of Merger (the "Merger Agreement") with National
Westminster Bank, Plc ("NatWest Plc") providing for 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 Balance
Sheet as of December 31, 1995, and the Unaudited Pro Forma Combined
Statement of Income 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 is a wholly-owned direct subsidiary of
National Westminster Bancorp NJ, a New Jersey corporation, which is a
wholly-owned direct subsidiary of National Westminster Bancorp, Inc., a
Delaware corporation. Bancorp is 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 will be 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 on Form 8-K dated March 15, 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 acquisition 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 BALANCE SHEET
December 31, 1995 (a)
Fleet /
Balance Sheet NatWest
Fleet NatWest Pro Forma Restructuring Pro Forma
(Dollars in millions) Historical Pro Forma Adjustments Adjustments (d) Combined
----------- ----------- ----------- -------------- ----------
<S> <C> <C> <C> <c) <C>
ASSETS:
Cash and cash equivalents $ 4,505 $ 2,021 $ 0 $ 0 $ 6,526
Federal funds sold and securities purchased
under agreements to resell 61 2,965 0 (3,026) 0
Securities 19,331 3,033 (1,700) (b) (13,400) 7,264
Loans and leases 51,525 13,926 0 0 65,451
Reserve for credit losses (1,321) (255) 0 0 (1,576)
Mortgages held for resale 2,005 3,784 0 (3,500) 2,289
Premises and equipment 991 422 (88) (c) 0 1,325
Mortgage servicing rights 1,276 14 5 (c) 0 1,295
Excess cost over net assets acquired 935 982 (398) (c) 0 1,519
Other intangibles 181 25 242 (c) 0 448
Other assets 4,943 2,005 (12) (c) 0 6,936
----------- ----------- ----------- -------------- ----------
Total assets $ 84,432 $ 28,922 $ (1,951) $ (19,926) $ 91,477
=========== =========== =========== ============== ==========
LIABILITIES and STOCKHOLDERS' EQUITY:
Deposits:
Demand $ 12,305 $ 4,866 $ 0 $ 0 $ 17,171
Regular savings, NOW, money market 22,835 8,606 0 0 31,441
Time 21,982 7,534 0 (5,275) 24,241
----------- ----------- ----------- -------------- ----------
Total deposits 57,122 21,006 0 (5,275) 72,853
----------- ----------- ----------- -------------- ----------
Federal funds purchased and securities sold
under agreements to repurchase 7,425 2,049 (675) (b) (8,799) 0
Other short-term borrowings 5,144 1,804 675 (b) (5,852) 1,771
Accrued expenses and other liabilities 1,895 683 429 (c) 0 3,007
Long-term debt 6,481 0 400 (b) 0 6,881
----------- ----------- ----------- -------------- ----------
Total liabilities 78,067 25,542 829 (19,926) 84,512
----------- ----------- ----------- -------------- ----------
Stockholders' equity:
Preferred equity 399 0 600 (b) 0 999
Common equity 5,966 3,380 (3,380) (c) 0 5,966
----------- ----------- ----------- -------------- ----------
Total stockholders' equity 6,365 3,380 (2,780) 0 6,965
----------- ----------- ----------- -------------- ----------
Total liabilities and stockholders' equity $ 84,432 $ 28,922 $ (1,951) $ (19,926) $ 91,477
=========== =========== =========== ============== ==========
</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 BALANCE SHEET
December 31, 1995 (a)
<TABLE><CAPTION>
NatWest
Bancorp Pro Forma NatWest
(Dollars in millions) Historical Adjustments (e) Pro Forma
---------- ----------- ----------
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 2,022 $ (1) $ 2,021
Federal funds sold and securities purchased
under agreements to resell 2,965 0 2,965
Securities 3,036 (3) 3,033
Loans and leases 14,428 (502) 13,926
Reserve for credit losses (258) 3 (255)
Mortgages held for resale 3,784 0 3,784
Premises and equipment 543 (121) 422
Mortgage servicing rights 14 0 14
Excess cost over net assets acquired 982 0 982
Other intangibles 25 0 25
Other assets 2,074 (69) 2,005
---------- ----------- ----------
Total assets $ 29,615 $ (693) $ 28,922
========== =========== ==========
LIABILITIES and STOCKHOLDERS' EQUITY:
Deposits:
Demand $ 4,866 $ 0 $ 4,866
Regular savings, NOW, money market 8,606 0 8,606
Time 7,534 0 7,534
---------- ----------- ----------
Total deposits 21,006 0 21,006
---------- ----------- ----------
Federal funds purchased and securities sold
under agreements to repurchase 2,049 0 2,049
Other short-term borrowings 1,866 (62) 1,804
Accrued expenses and other liabilities 805 (122) 683
Long-term debt 654 (654) 0
---------- ----------- ----------
Total liabilities 26,380 (838) 25,542
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Stockholders' equity:
Preferred equity 0 0 0
Common equity 3,235 145 3,380
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Total stockholders' equity 3,235 145 3,380
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Total liabilities and stockholders' equity $ 29,615 $ (693) $ 28,922
========== =========== ==========
</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)
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 $ 0 $ (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 0 (271) 2,130
Short-term borrowings 836 446 0 (872) 410
Long-term debt 478 0 26 (b) 0 504
---------- -------- --------- -------------- ---------
Total interest expense 3,096 1,065 26 (1,143) 3,044
---------- -------- --------- -------------- ---------
Net interest income 3,054 1,075 (131) (142) 3,856
Provision for credit losses 102 95 0 0 197
---------- -------- --------- -------------- ---------
Net interest income after provision for credit losses 2,952 980 (131) (142) 3,659
---------- -------- --------- -------------- ---------
Mortgage banking 512 30 0 0 542
Investment services revenue 322 16 0 0 338
Service charges, fees and commissions 496 237 0 0 733
Securities available for sale gains 38 90 0 0 128
Other noninterest income 496 143 0 0 639
---------- -------- --------- -------------- ---------
Total noninterest income 1,864 516 0 0 2,380
---------- -------- --------- -------------- ---------
Employee compensation and benefits 1,474 452 (2)(c) 0 1,924
Occupancy and equipment 468 136 (4)(c) 0 600
Mortgage servicing rights amortization 196 2 1 (c) 0 199
FDIC assessment 70 21 0 0 91
Marketing 94 52 0 0 146
Intangible asset amortization 113 77 (21)(c) 0 169
OREO expense 16 6 0 0 22
Merger and restructuring related charges 490 7 0 0 497
Loss on assets held for sale or accelerated disposition 175 0 0 0 175
Other noninterest expense 701 210 0 0 911
---------- -------- --------- -------------- ---------
Total noninterest expense 3,797 963 (26) 0 4,734
---------- -------- --------- -------------- ---------
Income before income taxes 1,019 533 (105) (142) 1,305
Applicable income taxes 420 210 (64) (57) 509
---------- -------- --------- -------------- ---------
Net income $ 599 $ 323 $ (41) $ (85) $ 796
========== ======== ========= ============== =========
Net income applicable to common shares: (f) $ 404 $ 323 $ (86)(b) $ (85) $ 556
========== ======== ========= ============== =========
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>
<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 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 0 478
------------ ------------ ------------
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 0 322
Service charges, fees and commissions 492 4 496
Securities available for sale gains 32 6 38
Other noninterest income 493 3 496
------------ ------------ ------------
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
FDIC assessment 67 3 70
Marketing 93 1 94
Intangible asset amortization 105 8 113
OREO expense 15 1 16
Merger and restructuring related charges 490 0 490
Loss on assets held for sale or accelerated disposition 175 0 175
Other noninterest expense 693 8 701
------------ ------------ ------------
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>
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>
NatWest
Bancorp Pro Forma NatWest
(Dollars in millions, except per share data) Historical Adjustment(s) (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) -
----------- -------------- --------------
Total interest expense 1,100 (35) 1,065
----------- -------------- --------------
Net interest income 1,050 25 1,075
Provisions 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
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 amoritization 2 - 2
FDIC assessment 21 - 21
Marketing 56 (4) 52
Intangible asset amortization 78 (1) 77
OREO expense 6 - 6
Merger and restructuring related charges 10 (3) 7
Loss on assets held for sale or accelerated disposition - - -
Other noninterest expense 197 13 210
----------- -------------- --------------
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
=========== ============== ==============
See accompanying notes to the unaudited pro forma combined financial statements
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(a) The pro forma information presented is not necessarily indicative
of the results of operations or the combined financial position that would
have resulted had the Merger been consummated at the beginning of the
period indicated, nor is it necessarily indicative of the results of
operations in future periods or the future financial position 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 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 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 pro forma information gives effect to the Merger as if such Merger
had occurred on January 1, 1995. In connection with the Merger, Fleet
intends to substantially restructure 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 (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 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 acquisition been consummated during the period for which
the pro forma information is presented.
In connection with the Shawmut Merger, Fleet signed definitive
agreements to divest 64 branches to comply with anti-trust concerns. The
sales will consist of approximately $2.6 billion in deposits and $1.9
billion in loans. The negative impact of the divestitures is not expected
to be material to the business operations or financial condition of Fleet
and such impact has not been included in the accompanying Unaudited Pro
Forma Combined Financial Statements. No divestitures are anticipated from
the Merger.
During 1995, Fleet recorded pre-tax charges of $490 million relating
to the Shawmut Merger and $175 million related to Fleet's decision to sell
Fleet Finance, the corporation's Atlanta based consumer finance subsidiary,
and certain nonperforming assets that have been identified for accelerated
disposition. In connection with this charge, approximately $1.7 billion of
assets (primarily loans) were classified to held for sale or accelerated
disposition. The after-tax effect of these charges was $429 million.
During the fourth quarter of 1995, Fleet exchanged all of the corporation's
dual convertible preferred stock for 19.9 million shares of Fleet common
stock. As part of that transaction, $283 million of preferred equity was
reclassified to common equity and earnings available to common shareholders
was reduced by $0.59 per share. These transactions are reflected in the
accompanying Unaudited Pro Forma Combined Financial Statements.
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
All dollar amounts included in these Notes to Unaudited Pro Forma
Combined Financial Statements are in thousands unless otherwise indicated.
(b) The Merger Agreement provides for the payment of $2.7 billion in
cash at the closing; provided that Fleet may elect to pay (i) up to $175
million of the purchase price in shares of its common stock, $0.01 par
value (the "Common Stock") and (ii) up to $300 million of the purchase
price in shares of a new series of Fleet preferred stock with a stated
value of $250 per share. The Unaudited Pro Forma Combined Financial
Statements assume that no common stock is issued as part of the purchase
price and that no preferred stock is issued to NatWest PLC as part of the
purchase price. The following funding assumptions have been made in
conjunction with the Merger and are reflected in the accompanying Unaudited
Pro Forma Combined Financial Statements. The $2.7 billion purchase price
will be funded through the issuance of $600 million of preferred stock with
a dividend rate of 7.50%, the issuance of $400 million of long-term debt
with an average borrowing rate of 6.50%, and that the remaining $1.7
billion purchase price is funded through dividends received from Fleet
subsidiaries ($1.375 billion) and asset sales within Fleet Bank N.A. ($325
million). The source of funds for the $1.375 billion in dividends received
from subsidiaries is assumed to be the result of asset sales, primarily
securities. As part of this transaction, pro forma adjustments assume Fleet
raises an additional $675 million of short-term borrowings (primarily
commercial paper) to recapitalize certain of the subsidiaries and it is assumed
that such subsidiaries reduce short-term borrowings by $675 million. These
funding assumptions are based on the best information available as of the date
of the filing of these Unaudited Pro Forma Combined Financial Statements and
may be different from the actual adjustments to reflect the funding
transactions actually consummated. All funding transactions are assumed to
have occurred as of January 1, 1995.
(c) Purchase accounting adjustments include adjustments to reflect
the fair value of the assets acquired and liabilities assumed, the
elimination of NatWest's stockholder's equity, and the recording of
goodwill and core deposit intangible in accordance with the purchase method
of accounting. These adjustments are based on the best information
available as of the date of the filing of these Unaudited Pro Forma
Combined Financial Statements and may be different from the actual
adjustments to reflect the fair value of the net assets purchased as of
the date of consummation of the merger. Adjustments have been made to the
Unaudited Pro Forma Combined Balance Sheet to reflect the recording of
goodwill as well as to eliminate any goodwill balances previously recorded
at NatWest, in accordance with the purchase method of accounting.
Purchase price $2,700
Historical net tangible assets acquired $3,380
Elimination of NatWest goodwill and identifiable
intangibles (990) 2,390
-------
Estimated fair value adjustments (34)
Estimated purchase price adjustment (71)(1)
--------
Estimated fair value of net assets acquired 2,285
--------
Excess cost over net assets acquired (goodwill) $ 415
========
(1) In accordance with the Merger Agreement the purchase price will be
adjusted based upon the tangible equity of NatWest as of the closing
date of the Merger, The pro forma adjustment reflects the estimated
increase in the purchase price as if the Merger had been consummated
on December 31, 1995.
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Goodwill of $415 million has been estimated assuming a purchase price of
$2.7 billion which excludes any payments to be made under the earnout
agreements. 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 (a) on July 1, 1996 and end on June 30, 2004
if the closing occurs on or before June 30, 1996, or, if the closing occurs
after June 30, 1996, (b) on the first day of the fiscal quarter immediately
following such closing and end on the eighth anniversary of such first day
of such fiscal quarter. 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 of $169 million as of December 31, 1995, reflecting the estimated
payment required under the Earnout assuming consummation of the Merger as
of January 1, 1995. This estimate is based on the level of NatWest pro
forma earnings in 1995 and is not necessarily indicative of payments that
may be made, if any, upon consummation of the Merger. 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 core deposit intangible of
$150 million, net of tax, and a liability of $106 million, net of tax, to
reflect Fleet's best estimate of merger related charges. Goodwill due to
the Merger will be amortized on a straight line basis over 25 years. Other
identifiable intangible assets due to the Merger will be amortized over the
estimate period of benefit (primarily core deposit intangible, not
exceeding 10 years).
(d) In conjunction with or prior to the Merger, Fleet and Bancorp
will take certain actions to restructure the Combined Balance Sheet through
the liquidation of low-return assets and the reduction of borrowed funds.
These restructuring adjustments are reflected in the accompanying Unaudited
Pro Forma Combined Financial Statements. The accompanying Unaudited Pro
Forma Combined Financial Statements assume the reduction of approximately
$19.9 billion of assets and an equal amount of borrowed funds. The assets
assumed to be reduced include approximately $13.4 billion of securities
with an average yield of 6.18%, approximately $3.5 billion of loans,
primarily residential real estate, with an average yield of 7.98%, and
approximately $3.0 billion in federal funds sold with an average yield of
5.89%. The $19.9 billion of borrowed funds assumed to be reduced includes
approximately $14.6 billion of short-term borrowings with an average
borrowing rate of 5.69%, and $5.3 billion of time deposits with an average
borrowing rate of 5.89%. 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 as of 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. Also, due to
changing market conditions, balance sheet mix and balance sheet size
restructuring assumptions may differ as compared to the ultimate balance
sheet restructuring upon consummation of the Merger.
<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 will be 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 issuing 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 the 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 share 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.
