==============================================================================
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) August 5, 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 Amended and Restated Unaudited Pro Forma Combined
Financial Statements and Notes thereto in connection with the Merger as of
March 31, 1996.
For additional information regarding the Merger, see the Registrant's
Current Reports on Form 8-K dated May 15, 1996, May 1, 1996, April 5, 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) Amended and Restated Unaudited Pro Forma Combined Financial Statements
and Notes Thereto
99(b) Consolidated Statement of Condition of Bancorp as of March 31, 1996;
Bancorp's Consolidated Statements of Operations, Consolidated
Statements of Changes in Equity Capital and Consolidated Statements of
Cash Flows for the three month periods ended March 31, 1996 and 1995
(unaudited) (previously filed)
<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: August 5, 1996
<PAGE>
Exhbit
No. Description
- ------ -----------
99(a) Amended and Restated Unaudited Pro Forma Combined Financial Statements
and Notes Thereto
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 May 15, 1996.
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 Balance Sheet as of March 31, 1996, and
the Unaudited Pro Forma Combined Statements of Income for the three months ended
March 31, 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 indirect 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 March 31, 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 and 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>
FLEET FINANCIAL GROUP, INC. AND NATWEST BANK N.A.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
March 31, 1996 (a)
<TABLE><CAPTION>
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 $3,305 $1,668 $ 0 $ 0 $ 4,973
Federal funds sold and securities purchased
under agreements to resell 1,808 2,650 (750)(b) (2,650) 1,058
Securities 10,091 2,837 0 (1,800) 11,128
Loans and leases 47,559 13,763 (71)(c) 0 61,251
Reserve for credit losses (1,287) (252) 0 0 (1,539)
Mortgages held for resale 2,398 2,554 0 (2,554) 2,398
Premises and equipment 974 420 (38)(c) 0 1,356
Mortgage servicing rights 1,406 16 6 (c) 0 1,428
Excess cost over net assets acquired 907 964 (137)(c) 0 1,734
Other intangibles 164 24 (24)(c) 0 164
Other assets 4,798 1,050 162 (d) 0 6,010
------- ------- ----- ------- --------
Total assets $72,123 $25,694 $(852) $(7,004) $ 89,961
======= ======= ===== ======= ========
LIABILITIES and STOCKHOLDERS' EQUITY:
Deposits:
Demand $10,485 $4,454 $ 0 $ 0 $ 14,939
Regular savings, NOW, money market 21,783 8,453 0 0 30,236
Time 17,853 5,749 0 (1,332) 22,270
------- ------- ----- ------- --------
Total deposits 50,121 18,656 0 (1,332) 67,445
------- ------- ----- ------- --------
Federal funds purchased and securities sold
under agreements to repurchase 3,810 462 700 (b) (1,972) 3,000
Other short-term borrowings 3,363 2,142 675 (b) (3,700) 2,480
Accrued expenses and other liabilities 1,985 934 653 (c) 0 3,572
Long-term debt 6,000 45 400 (b) 0 6,445
------- ------- ----- ------- --------
Total liabilities 65,279 22,239 2,428 (7,004) 82,942
------- ------- ----- ------- --------
Stockholders' equity:
Preferred equity 824 0 175 (b) 0 999
Common equity 6,020 3,455 (3,455)(c) 0 6,020
------- ------- ----- ------- --------
Total stockholders' equity 6,844 3,455 (3,280) 0 7,019
------- ------- ----- ------- --------
Total liabilities and stockholders' equity $72,123 $25,694 $ (852) $(7,004) $89,961
======= ======= ===== ======= ========
</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
March 31, 1996 (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 $1,668 $ 0 $1,668
Federal funds sold and securities purchased
under agreements to resell 2,650 0 2,650
Securities 2,839 (2) 2,837
Loans and leases 14,163 (400) 13,763
Reserve for credit losses (255) 3 (252)
Mortgages held for resale 2,554 0 2,554
Premises and equipment 537 (117) 420
Mortgage servicing rights 16 0 16
Excess cost over net assets acquired 964 0 964
Other intangibles 24 0 24
Other assets 2,521 (1,471) 1,050
------- ------- -------
Total assets $27,681 $(1,987) $25,694
======= ======== =======
LIABILITIES and STOCKHOLDERS' EQUITY:
Deposits:
Demand $4,454 $ 0 $4,454
Regular savings, NOW, money market 8,453 0 8,453
Time 5,949 (200) 5,749
------- ------- -------
Total deposits 18,856 (200) 18,656
------- ------- -------
Federal funds purchased and securities sold
under agreements to repurchase 1,662 (1,200) 462
Other short-term borrowings 2,173 (31) 2,142
Accrued expenses and other liabilities 1,067 (133) 934
Long-term debt 643 (598) 45
------- ------- -------
Total liabilities 24,401 (2,162) 22,239
------- ------- -------
Stockholders' equity:
Preferred equity 0 0 0
Common equity 3,280 175 3,455
------- ------- -------
Total stockholders' equity 3,280 175 3,455
------- ------- -------
Total liabilities and stockholders' equity $27,681 $(1,987) $25,694
======= ======== =======
</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 Three Months Ended March 31, 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 $1,144 $ 370 $ 0 $ (51) $1,463
Interest on securities 193 110 (26)(b) (59) 218
---------- -------- --------- --------- --------
Total interest income 1,337 480 (26) (110) 1,681
Interest expense:
Deposits 402 147 0 (18) 531
Short-term borrowings 106 73 0 (75) 104
Long-term debt 105 1 7 (b) 0 113
---------- -------- --------- --------- --------
Total interest expense 613 221 7 (93) 748
---------- -------- --------- --------- --------
Net interest income 724 259 (33) (17) 933
Provision for credit losses 35 23 0 0 58
---------- -------- --------- --------- --------
Net interest income after provision for credit losses 689 236 (33) (17) 875
---------- -------- --------- --------- --------
Mortgage banking 124 9 0 0 133
Investment services revenue 87 4 0 0 91
Service charges, fees and commissions 119 59 0 0 178
Securities available for sale gains 18 3 0 0 21
Gain from branch divestitures 60 0 0 0 60
Other noninterest income 111 24 0 0 135
---------- -------- --------- --------- --------
Total noninterest income 519 99 0 0 618
---------- -------- --------- --------- --------
Employee compensation and benefits 348 124 0 0 472
Occupancy and equipment 118 37 (1)(c) 0 154
Mortgage servicing rights amortization 41 1 0 0 42
FDIC assessment 2 0 0 0 2
Marketing 22 10 0 0 32
Intangible asset amortization 25 19 (6)(c) 0 38
OREO expense 3 0 0 0 3
Other noninterest expense 199 46 0 0 245
---------- -------- --------- --------- --------
Total noninterest expense 758 237 (7) 0 988
---------- -------- --------- --------- --------
Income before income taxes 450 98 (26) (17) 505
Applicable income taxes 186 47 (13) (7) 213
---------- -------- --------- --------- --------
Net income $ 264 $ 51 $ (13) $ (10) $ 292
========== ======== ========= ========= ========
Net income applicable to common shares: (f) $ 251 $ 51 $ (20) (b) $ (10) $ 272
========== ======== ========= ========= ========
Weighted average common shares outstanding:(g)
Primary 268,352,754 268,352,754
Fully Diluted 268,376,014 268,376,014
Earnings per share:
Primary $ 0.94 $ 1.01
Fully Diluted 0.94 1.01
</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 Three Months Ended March 31, 1996 (a)
<TABLE><CAPTION>
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 $371 $(1) $370
Interest on securities 110 0 110
---------- ---------- ---------
Total interest income 481 (1) 480
Interest expense:
Deposits 147 0 147
Short-term borrowings 67 6 73
Long-term debt 15 (14) 1
---------- ---------- ---------
Total interest expense 229 (8) 221
---------- ---------- ---------
Net interest income 252 7 259
Provision for credit losses 23 0 23
---------- ---------- ---------
Net interest income after provision for credit losses 229 7 236
---------- ---------- ---------
Mortgage banking 9 0 9
Investment services revenue 4 0 4
Service charges, fees and commissions 59 0 59
Securities available for sale gains 3 0 3
Gain from branch divestitures 0 0 0
Other noninterest income 23 1 24
---------- ---------- ---------
Total noninterest income 98 1 99
---------- ---------- ---------
Employee compensation and benefits 124 0 124
Occupancy and equipment 38 (1) 37
Mortgage servicing rights amortization 1 0 1
FDIC assessment 0 0 0
Marketing 10 0 10
Intangible asset amortization 19 0 19
OREO expense 0 0 0
Other noninterest expense 45 1 46
---------- ---------- ---------
Total noninterest expense 237 0 237
---------- ---------- ---------
Income before income taxes 90 8 98
Applicable income taxes 44 3 47
---------- ---------- ---------
Net income $46 $5 $51
========== ========== =========
Net income applicable to common shares: (f) $46 $5 $51
========== ========== =========
</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 29 (b) 0 507
----------- --------- -------- -------- ---------
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 0 0 197
----------- --------- -------- -------- ---------
Net interest income after provision for credit losses 2,952 980 (134) (142) 3,656
----------- --------- -------- -------- ---------
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 0 0 1,926
Occupancy and equipment 468 136 (3)(c) 0 601
Mortgage servicing rights amortization 196 2 0 0 198
FDIC assessment 70 21 0 0 91
Marketing 94 52 0 0 146
Intangible asset amortization 113 77 (33)(c) 0 157
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 (36) 0 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 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>
<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 0 619
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 0 95
---------- -------- ---------
Net interest income after provision for credit losses 955 25 980
---------- -------- ---------
Mortgage banking 30 0 30
Investment services revenue 16 0 16
Service charges, fees and commissions 237 0 237
Securities available for sale gains 90 0 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 0 2
FDIC assessment 21 0 21
Marketing 56 (4) 52
Intangible asset amortization 78 (1) 77
OREO expense 6 0 6
Merger and restructuring related charges 10 (3) 7
Loss on assets held for sale or accelerated disposition 0 0 0
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
========== ======== =========
</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 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 (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 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 (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.
Pursuant to the Merger Agreement, the purchase price will be adjusted upward or
downward post closing based upon the tangible equity of NatWest as of the
closing date of the Merger. The following funding transactions occurred in
conjunction with the Merger and are reflected in the accompanying Unaudited Pro
Forma Combined Financial Statements. 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 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 $3,455
Elimination of NatWest goodwill and core
deposit intangible (971) 2,484
-----------
Estimated fair value adjustments (277)
Estimated purchase price adjustment (167)(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 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 March 31, 1996.
<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 of $167 million ($169 million net of $2 million of amortization for the
first quarter of 1996) as of March 31, 1996, reflecting the estimated payment
required for fiscal year 1995 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 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 began
restructuring 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 three months ended March 31, 1996, when compared to
the year 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 at March 31, 1996
and December 31, 1995, respectively. 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 as of March 31, 1996 and 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.
