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) May 14, 1999
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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, MA 02211
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 617-346-4000
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(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
As previously reported, Fleet Financial Group, Inc. ("Fleet") and
BankBoston Corporation ("BankBoston") have entered into an Agreement
and Plan of Merger (the "Merger Agreement") dated March 14, 1999
providing for the merger of BankBoston with and into Fleet (the
"Merger").
Fleet hereby files its Unaudited Pro Forma Condensed Combined
Financial Statements and Notes thereto for the period ended March
31, 1999.
Fleet also hereby files the consolidated balance sheets of
BankBoston at March 31, 1999 and December 31, 1998 and the related
consolidated statements of income for the three months ended March
31, 1999 and 1998.
For additional information regarding the Merger, see the
Registrant's Current Reports on Form 8-K dated March 14, 1999 and
April 2, 1999.
Item 7. Financial Statements and Other Exhibits.
The following exhibits are filed as part of this report:
Exhibit No. Description
----------- -----------
99(a) Unaudited Pro Forma Condensed Combined Financial
Statements and Notes thereto
99(b) Consolidated Financial Statements of BankBoston
(incorporated by reference to pages 32-41 of the
BankBoston Quarterly Report on Form 10-Q for the
three months ended March 31, 1999 [Commission File
Number 1-6522]). (Portions of BankBoston's Form
10-Q not specifically incorporated by reference
are not required for this Current Report and are
not incorporated by reference herein).
<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/ William C. Mutterperl
------------------------------------
William C. Mutterperl
Executive Vice President,
Secretary & General Counsel
Dated: May 14, 1999
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined balance sheet as of
March 31, 1999 and the unaudited pro forma condensed combined statements of
income for the three months ended March 31, 1999 and 1998 give effect to the
pending merger (the "merger") of Fleet Financial Group, Inc. ("Fleet") and
BankBoston Corporation ("BankBoston"), accounted for as a pooling of interests.
The merger, anticipated to be consummated in the fourth quarter of 1999 if not
earlier, is subject to shareholder and regulatory approval.
The unaudited pro forma condensed combined financial information is based
on the historical consolidated financial statements of Fleet and BankBoston
under the assumptions and adjustments set forth in the accompanying notes to the
unaudited pro forma condensed combined financial statements, and gives effect to
the merger as if the merger had been consummated at the beginning of the
earliest period presented. The unaudited pro forma condensed combined financial
statements do not give effect to the anticipated cost savings in connection with
the merger or the effects of any divestitures required by regulators.
The unaudited pro forma condensed combined financial statements should be
read in conjunction with the consolidated historical financial statements of
Fleet and BankBoston, including the respective notes to those statements. The
pro forma information is not necessarily indicative of the combined financial
position or the results of operations in the future or of the combined financial
position or the results of operations which would have been realized had the
merger been consummated during the periods or as of the dates for which the pro
forma information is presented.
Pro forma per share amounts for the combined Fleet and BankBoston entity
are based on the exchange ratio of 1.1844 shares of Fleet common stock, par
value $.01 per share, for each share of BankBoston common stock, par value $1.00
per share.
<PAGE>
FLEET FINANCIAL GROUP, INC. AND BANKBOSTON CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
as of March 31, 1999
<TABLE>
<CAPTION>
Pro Forma Pro Forma
(Dollars in millions) Fleet BankBoston Adjustments Combined
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS:
Cash, due from banks and interest-bearing deposits $ 4,857 $ 4,108 $ -- $ 8,965
Federal funds sold and securities purchased
under agreements to resell 5 3,655 -- 3,660
Securities 11,059 13,882 -- 24,941
Trading assets 670 4,213 -- 4,883
Loans and leases 73,683 42,775 -- 116,458
Reserve for credit losses (1,724) (758) -- (2,482)
Due from brokers/dealers 2,726 101 -- 2,827
Mortgages held for resale 2,155 -- -- 2,155
Premises and equipment 1,233 1,291 -- 2,524
Mortgage servicing rights 2,098 -- -- 2,098
Intangible assets 3,423 793 -- 4,216
Other assets 5,981 5,648 -- 11,629
--------- --------- --------- ---------
Total assets $ 106,166 $ 75,708 $ -- $ 181,874
========= ========= ========= =========
LIABILITIES and STOCKHOLDERS' EQUITY:
Deposits:
Domestic:
Noninterest-bearing $ 16,636 $ 6,298 $ -- $ 22,934
Interest-bearing 47,712 27,724 -- 75,436
Overseas:
Noninterest-bearing -- 1,534 -- 1,534
Interest-bearing 3,285 12,912 -- 16,197
--------- --------- --------- ---------
Total deposits 67,633 48,468 -- 116,101
--------- --------- --------- ---------
Federal funds purchased and securities sold
under agreements to repurchase 3,027 6,181 -- 9,208
Funds borrowed 3,001 7,697 -- 10,698
Due to brokers/dealers 3,823 218 -- 4,041
Notes payable 15,586 5,611 -- 21,197
Accrued expenses and other liabilities 3,484 2,570 650 (4b) 6,704
--------- --------- --------- ---------
Total liabilities 96,554 70,745 650 167,949
--------- --------- --------- ---------
Stockholders' equity:
Preferred stock 691 -- -- 691
Common stock 6 307 (304)(4a) 9
Common surplus 3,291 1,106 (127)(4a) 4,270
Retained earnings 5,602 3,982 (650)(4b) 8,934
Accumulated other comprehensive income 58 (37) -- 21
Treasury stock, at cost (36) (395) 431 (4a) --
--------- --------- --------- ---------
Total stockholders' equity 9,612 4,963 (650) 13,925
--------- --------- --------- ---------
Total liabilities and stockholders' equity $ 106,166 $ 75,708 $ -- $ 181,874
========= ========= ========= =========
</TABLE>
See Notes To The Unaudited Pro Forma Condensed Combined Financial Statements
<PAGE>
FLEET FINANCIAL GROUP, INC. AND BANKBOSTON CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
For the Three Months Ended March 31, 1999
<TABLE>
<CAPTION>
Pro Forma Pro Forma
(Dollars in millions, except per share amounts) Fleet BankBoston Adjustments Combined
-------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 1,559 $ 1,034 $ -- $ 2,593
Interest on securities and trading assets 173 229 -- 402
Other 46 109 -- 155
-------- -------- -------- --------
Total interest income 1,778 1,372 -- 3,150
-------- -------- -------- --------
Interest expense:
Deposits 424 473 -- 897
Funds borrowed 80 180 -- 260
Notes payable 201 84 -- 285
Other 39 -- -- 39
-------- -------- -------- --------
Total interest expense 744 737 -- 1,481
-------- -------- -------- --------
Net interest income 1,034 635 -- 1,669
-------- -------- -------- --------
Provision for credit losses 149 70 -- 219
-------- -------- -------- --------
Net interest income after provision for credit losses 885 565 -- 1,450
-------- -------- -------- --------
Noninterest income:
Investment services revenue 248 134 -- 382
Banking fees and commissions 193 154 -- 347
Credit card revenue 141 21 -- 162
Venture capital revenue 41 34 -- 75
Other 336 252 -- 588
-------- -------- -------- --------
Total noninterest income 959 595 -- 1,554
-------- -------- -------- --------
Noninterest expense:
Employee compensation and benefits 542 473 -- 1,015
Occupancy and equipment 162 109 -- 271
Intangible asset amortization 71 15 -- 86
Other 350 209 -- 559
-------- -------- -------- --------
Total noninterest expense 1,125 806 -- 1,931
-------- -------- -------- --------
Income before income taxes 719 354 -- 1,073
Applicable income taxes 281 131 -- 412
-------- -------- -------- --------
Net income $ 438 $ 223 $ -- $ 661
======== ======== ======== ========
Net income applicable to common shares $ 422 $ 223 $ -- $ 645
======== ======== ======== ========
Weighted average common shares outstanding
(in thousands):
Basic 568,546 295,935 -- 919,051 (4c)
Diluted 588,572 298,477 -- 942,088 (4c)
Per Common Share:
Basic $ 0.74 $ 0.75 $ -- $ 0.70 (4c)
Diluted 0.72 0.75 -- 0.68 (4c)
</TABLE>
See Notes To The Unaudited Pro Forma Condensed Combined Financial Statements
<PAGE>
FLEET FINANCIAL GROUP, INC. AND BANKBOSTON CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
For the Three Months Ended March 31, 1998
<TABLE>
<CAPTION>
Pro Forma Pro Forma
(Dollars in millions, except per share amounts) Fleet BankBoston Adjustments Combined
-------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 1,378 $ 1,012 $ -- $ 2,390
Interest on securities and trading assets 162 208 -- 370
Other 54 117 -- 171
-------- -------- -------- --------
Total interest income 1,594 1,337 -- 2,931
-------- -------- -------- --------
Interest expense:
Deposits 438 462 -- 900
Funds borrowed 84 207 -- 291
Notes payable 89 65 -- 154
Other 54 -- -- 54
-------- -------- -------- --------
Total interest expense 665 734 -- 1,399
-------- -------- -------- --------
Net interest income 929 603 -- 1,532
-------- -------- -------- --------
Provision for credit losses 92 140 -- 232
-------- -------- -------- --------
Net interest income after provision for credit losses 837 463 -- 1,300
-------- -------- -------- --------
Noninterest income:
Banking fees and commissions 176 131 -- 307
Investment services revenue 201 82 -- 283
Venture capital revenue 30 52 -- 82
Securities gains 51 25 -- 76
Credit card revenue 56 10 -- 66
Gains on sales of businesses -- 165 -- 165
Other 181 124 -- 305
-------- -------- -------- --------
Total noninterest income 695 589 -- 1,284
-------- -------- -------- --------
Noninterest expense:
Employee compensation and benefits 445 354 -- 799
Occupancy and equipment 154 94 -- 248
Intangible asset amortization 51 10 -- 61
Merger-related charges 73 -- -- 73
Other 274 203 -- 477
-------- -------- -------- --------
Total noninterest expense 997 661 -- 1,658
-------- -------- -------- --------
Income before income taxes 535 391 -- 926
Applicable income taxes 212 153 -- 365
-------- -------- -------- --------
Net income $ 323 $ 238 $ -- $ 561
======== ======== ======== ========
Net income applicable to common shares $ 311 $ 234 $ -- $ 545
======== ======== ======== ========
Weighted average common shares outstanding (in thousands):
Basic 567,778 292,542 -- 914,265 (4c)
Diluted 587,184 296,840 -- 938,761 (4c)
Per Common Share:
Basic $ 0.55 $ 0.80 $ -- $ 0.60 (4c)
Diluted 0.53 0.79 -- 0.58 (4c)
</TABLE>
See Notes To The Unaudited Pro Forma Condensed Combined Financial Statements
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
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 periods
indicated, nor is it necessarily indicative of the results of operations in
future periods or the future financial position of the combined company. It is
anticipated that the merger will be consummated in the fourth quarter of 1999,
if not earlier.
Under GAAP, the transaction will be accounted for as a pooling of
interests and, as such, the assets and liabilities of BankBoston will be
combined with those of Fleet at book value. In addition, the statements of
income of BankBoston will be combined with the statements of income of Fleet as
of the earliest period presented. The unaudited pro forma condensed combined
statements of income give effect to the merger as if the merger occurred at the
beginning of the earliest period presented. The unaudited pro forma condensed
combined balance sheet assumes the merger was consummated on March 31, 1999.
Certain reclassifications have been included in the unaudited pro forma
condensed combined balance sheet and unaudited pro forma condensed combined
statements of income to conform presentations.
Fleet and BankBoston anticipate that, in order to obtain regulatory
approval for the merger, the companies will be required to divest approximately
$13 billion of deposits, primarily in the Massachusetts, Connecticut and Rhode
Island markets. No adjustment has been included, however, in the unaudited pro
forma condensed combined financial statements for the anticipated divestitures.
The reduction in net income related to such divestitures is estimated to be $160
million post-tax.
Note 2. Accounting Policies and Financial Statement Classifications
The accounting policies of both companies are in the process of being
reviewed for consistency. As a result of this review, certain conforming
accounting adjustments may be necessary. The nature and extent of such
adjustments have not been determined but are not expected to be significant.
Transactions between Fleet and BankBoston that are not material in relation to
the pro forma financial information have not been eliminated from the pro forma
combined amounts.
Note 3. Merger- and Restructuring-Related Charges
A liability of $1 billion (pre-tax) has been recorded in the unaudited pro
forma condensed combined balance sheet to reflect Fleet's and BankBoston's best
estimate of merger- and restructuring-related charges in connection with the
merger. This liability resulted in a $650 million post-tax charge to retained
earnings in the unaudited pro forma condensed combined balance sheet. The
following table provides detail of the estimated charges by type, post-tax:
Estimated Costs
(Post-Tax)
Type of Cost (Dollars in millions)
- --------------------------------------------------------------------------------
Personnel $300
Technology and operations 150
Facilities 75
Branches 25
Transaction costs and other 100
- --------------------------------------------------------------------------------
Total $650
================================================================================
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS (Continued)
Personnel-related costs consist primarily of charges related to employee
severance, termination of certain employee benefits plans and employee
assistance costs for separated employees. Technology and operations costs
include accelerated depreciation in excess of normal scheduled depreciation and
certain liabilities that will be incurred as a result of the elimination of
duplicate systems. Facilities charges consist of lease termination costs and
other facilities-related exit costs, as well as accelerated depreciation in
excess of normal depreciation, resulting from consolidation of duplicate
headquarters and operation facilities. Branch-related costs are primarily
related to the cost of exiting branches anticipated to be closed, including
lease terminations and equipment write-offs. The effect of the proposed charge
has been reflected in the unaudited pro forma condensed combined balance sheet
as of March 31, 1999. However, since the proposed charge is nonrecurring, it has
not been reflected in the unaudited pro forma condensed combined statements of
income. In addition, it is estimated that $60 million (post-tax) in other
expenses related to the merger will be recognized in future periods as they are
incurred. These charges have not been reflected in the unaudited pro forma
condensed combined balance sheet as of March 31, 1999.
Note 4. Pro Forma Adjustments
(a) Pro forma adjustments to common stock, treasury stock and common
surplus at March 31, 1999, reflect the merger accounted for as a pooling of
interests, through: (1) the exchange of 351.3 million shares of Fleet common
stock (using the exchange ratio of 1.1844) for the 296.6 million outstanding
shares of BankBoston common stock at March 31, 1999, (2) the reclassification
adjustment to common stock to reflect the $.01 par value of Fleet common stock,
and (3) an adjustment for $431 million to reflect the retirement of BankBoston
treasury stock and the reissuance of Fleet treasury stock.
(b) Pro forma adjustments to accrued expenses and other liabilities and
retained earnings reflect the $1 billion merger- and restructuring-related
charge and a $350 million reduction in the deferred tax liability for the
anticipated tax benefit of such charge. For additional information on the
merger- and restructuring-related charges see Note 3.
(c) The pro forma combined weighted average common shares outstanding for
the three months ended March 31, 1999 and 1998 reflect Fleet weighted average
common shares outstanding plus the converted BankBoston weighted average common
shares outstanding. Each share of BankBoston common stock was converted into
1.1844 shares of Fleet common stock.
Note 5. Other Securities and Exchange Commission Filings
In connection with its proposed merger with BankBoston, Fleet will file a
Registration Statement on Form S-4 with the Securities and Exchange Commission
(the "Commission") registering Fleet common stock to be issued in connection
therewith. This Registration Statement, which may be subject to review and
comment by the Staff of the Commission, will include pro forma financial
information for Fleet and BankBoston. Such pro forma financial information may
differ from the pro forma financial information included herein.
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS (Continued)
NOTE 6. Selected Pro Forma Financial Information
The pro forma information included herein may be subject to change as a
result of the review of the classifications and the accounting policies of each
entity. Certain conforming adjustments may be necessary, but are not expected to
be material.
<TABLE>
<CAPTION>
Pro Forma Consolidated Three Months Ended March 31,
Summary of Operations: 1999 1998
-------- --------
<S> <C> <C>
Interest income (fully taxable equivalent) $ 3,162 $ 2,944
Interest expense 1,481 1,399
-------- --------
Net interest income (fully taxable equivalent) 1,681 1,545
Provision for credit losses 219 232
-------- --------
Net interest income after provision for credit
losses (fully taxable equivalent) 1,462 1,313
Noninterest income 1,554 1,284
Noninterest expense 1,931 1,658
Net income 661 561
Pro Forma Earnings Per Share:
Basic $ .70 $ .60
Diluted .68 .58
Weighted average basic shares outstanding (in thousands) 919,051 914,265
Weighted average diluted shares outstanding (in thousands) 942,088 938,761
Book value per common share $ 14.38 (a) $ N/A
Cash dividends declared per common share .27 .245
Pro Forma Consolidated Balance Sheet - Average Balances:
Total assets $183,023 $161,544
Securities 23,812 20,657
Loans, net of unearned income 115,185 106,309
Interest bearing deposit liabilities 91,874 85,754
Funds borrowed 21,447 19,223
Notes payable 18,724 8,602
Stockholders' equity 14,370 13,292
Pro Forma Consolidated Ratios:
Net interest margin (fully taxable equivalent) 4.37 % 4.46 %
Return on average assets 1.44 1.41
Return on average common stockholders' equity 18.90 17.94
Average stockholders' equity to average assets 7.85 8.23
Tier 1 risk-based capital ratio 6.49 (a) 7.00
Total risk-based capital ratio 10.90 (a) 11.22
Period-end reserve for credit losses to period-end
loans, net of unearned income 2.13 2.09
Net charge-offs to average loans, net of unearned income .76 .89
Period-end nonperforming assets to period-end
loans, net of unearned income and OREO .57 .68
</TABLE>
(a) Includes the effect of the $1 billion ($650 million post-tax) merger- and
restructuring-related charge, but does not include the gains anticipated
to be realized on the sales of branches and deposits which are expected to
occur during 2000.
