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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) March 28, 1997
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
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ITEM 5. OTHER EVENTS
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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 December 31, 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 November 14, 1996, 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
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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: March 28, 1997
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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 year ended December 31, 1996 give effect to the Merger
accounted for by the purchase method of accounting as if such transaction had
occurred on January 1, 1996.
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 Annual Report on Form 10-K
for the year ended December 31, 1996 and the consolidated financial
statements of Bancorp, filed as Exhibit 99b to Fleet's Current Report on
Form 8-K dated May 15, 1996. The pro forma information is presented for
comparative purposes only and is not necessarily indicative of the results of
operations in the future or of the 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.
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<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, 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 $ 5,087 $ 484 $ - $ (51) $ 5,520
Interest on securities 755 137 (35)(b) (59) 798
------------- ----------- ----------- ------------ -----------
Total interest income 5,842 621 (35) (110) 6,318
Interest expense:
Deposits 1,754 190 - (18) 1,926
Short-term borrowings 295 90 - (75) 310
Long-term debt 390 1 9(b) - 400
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Total interest expense 2,439 281 9 (93) 2,636
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Net interest income 3,403 340 (44) (17) 3,682
Provision for credit losses 213 171 - - 384
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Net interest income after provision for credit losses 3,190 169 (44) (17) 3,298
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Mortgage banking 560 22 - - 582
Investment services revenue 372 5 - - 377
Service charges, fees and commissions 592 84 - - 676
Venture capital revenue 106 - - - 106
Student loan servicing fees 98 - - - 98
Securities available for sale gains 43 3 - - 46
Gain from branch divestitures 92 - - - 92
Other noninterest income 338 5 - - 343
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Total noninterest income 2,201 119 - - 2,320
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Employee compensation and benefits 1,607 168 - 1,775
Occupancy and equipment 550 50 (1)(c) - 599
Mortgage servicing rights amortization 188 1 - - 189
Marketing 97 14 - - 111
Intangible asset amortization 135 25 (10)(c) - 150
Other noninterest expense 883 121 - - 1,004
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Total noninterest expense 3,460 379 (11) - 3,828
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Income before income taxes 1,931 (91) (33) (17) 1,790
Applicable income taxes 792 (48) (17) (7) 720
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Net income $ 1,139 $ (43) $ (16) $ (10) $ 1,070
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Net income applicable to common shares: (f) $ 1,067 $ (43) $ (23)(b) $ (10) $ 991
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Weighted average common shares outstanding:
Primary 268,919,344 268,919,344
Fully Diluted 270,393,996 270,393,996
Earnings per share:
Primary $ 3.97 $ 3.68
Fully Diluted 3.95 3.66
</TABLE>
See accompanying notes to the unaudited pro forma combined financial statements
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<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
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Total interest income 623 (2) 621
Interest expense:
Deposits 190 - 190
Short-term borrowings 82 8 90
Long-term debt 21 (20) 1
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Total interest expense 293 (12) 281
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Net interest income 330 10 340
Provision for credit losses 171 - 171
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Net interest income after provision
for credit losses 159 10 169
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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
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Total noninterest income 120 (1) 119
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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
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Total noninterest expense 493 (114) 379
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Income before income taxes (214) 123 (91)
Applicable income taxes (94) 46 (48)
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Net income $ (120) $ 77 $ (43)
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Net income applicable to common shares: (f) $ (120) $ 77 $ (43)
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</TABLE>
See accompanying notes to the unaudited pro forma combined financial
statements
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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. The historical results of NatWest have been included
in these Unaudited Pro Forma Combined Financial Statements for the four
months ended April 30,1996. 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, 1996. 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
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.
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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
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, 1996.
(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
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Estimated fair value adjustments (277)
Estimated purchase price adjustment 24(1)
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Estimated fair value of net assets acquired 2,040
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Excess cost over net assets acquired (goodwill) $ 660
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(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.
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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. 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 to be sold, 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, principally during the
first quarter of 1996. The accompanying Unaudited Pro Forma Combined
Statements of Income assume the reduction of approximately $7.0 billion of
assets and an equal amount of borrowed funds for the year ended December 31,
1996. Balance sheet restructuring initiatives were substantially completed
during the first quarter of 1996. The assets assumed to be reduced include:
approximately $1.8 billion of securities with an average yield of 6.24% for
1996; approximately $2.6 billion of loans, primarily residential real estate,
with an average yield of 7.99% for 1996; and approximately
$2.6 billion in federal funds sold with an average yield of 4.74% for 1996.
The $7.0 billion of borrowed funds assumed to be reduced include:
approximately $5.7 billion of short-term borrowings with an average
borrowing rate of 5.30% for 1996; and $1.3 billion of time deposits with an
average borrowing rate of 5.33% for 1996. 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 year ended December 31, 1996.
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.
