THIRD QUARTER 1994
____________________________________________________________________
____________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
"TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-10102
SHAWMUT NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 06-1212629
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
777 Main Street, Hartford, Connecticut 06115
One Federal Street, Boston, Massachusetts 02211
(Addresses of principal executive offices) (Zip Codes)
(203) 728-2000
(617) 292-2000
(Registrant's telephone numbers, including area codes)
Not applicable
(Former name, former address and former
fiscal year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past
90 days. Yes X No .
120,320,301 shares of the registrant's common stock, par value $0.01,
were outstanding as of October 26, 1994.
_____________________________________________________________________
Page # of pages: 39
The Exhibits Index, filed as a part of this report, appears on
page 1.
_____________________________________________________________________
_____________________________________________________________________
<TABLE>
FINANCIAL SUMMARY
<CAPTION>
September 30 September 30
(Dollars in Millions, Except Per Share Data) 1994 1993
Three Months Ended
<S> <C> <C>
Net income $ 85.3 $ 82.6
Return on average assets 1.09 % 1.10 %
Return on average common equity 16.52 18.60
Net interest margin (tax-equivalent basis) 3.78 4.05
Efficiency ratio 62.75 66.92
Per Common Share
Net income $ 0.68 $ 0.69
Dividends declared 0.20 0.10
Common shareholders' equity 16.32 15.04
Period End
Loans $ 17,736 $ 17,561
Reserve for credit losses 568 694
Assets 31,352 30,860
Deposits 19,519 18,866
Total shareholders' equity 2,129 1,943
Common shareholders' equity to total assets 6.22 % 5.67 %
Tier 1 capital ratio 8.47 8.39
</TABLE>
<TABLE>
TABLE OF CONTENTS AND FORM 10-Q CROSS-REFERENCE INDEX
<CAPTION> Page
Part I - Financial Information
Management's Discussion and Analysis of Financial Condition and Results of
<S> <C>
Operations (Item 2) 2
Financial Statements (Item 1):
Consolidated Statement of Income 21
Consolidated Balance Sheet 22
Consolidated Statement of Changes in Shareholders' Equity 23
Consolidated Statement of Cash Flows 24
Notes to Consolidated Financial Statements 25
Selected Statistical Information:
Consolidated Average Balance Sheet, Net Interest Income and
Interest Rates 30
Part II - Other Information
Legal Proceedings (Item 1) 33
Other Information (Item 5) 33
Exhibits and Reports on Form 8-K (Item 6) 33
Signatures 35
Exhibit 12 - Computation of ratio of Earnings to Fixed Charges 36
Exhibit 27 - Financial Data Schedule 37
Exhibit 99.1 - Shawmut National Corporation's press release dated
September 30, 1994 38
Exhibit 99.2 - Shawmut National Corporation's press release dated
September 30, 1994 39
</TABLE>
<PAGE>1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Shawmut National Corporation (the Corporation) reported net income for
the third quarter of 1994 of $85.3 million, or $.68 per common share, an
increase of $2.7 million from the $82.6 million, or $.69 per common
share, of net income reported in the third quarter of last year. Third
quarter results in 1993 included $13.5 million, or $.12 per common share,
of income tax benefits.
For the first nine months of 1994, net income was $143.9 million, or
$1.12 per common share, compared with income before cumulative effect of
accounting changes of $136.6 million, or $1.11 per common share for the
comparable period of 1993. The results for the first nine months of 1994
include $140.7 million ($99.8 million after tax, or $.84 per common share)
of merger and restructuring charges related to the costs to integrate three
acquisitions completed during the second quarter of 1994 and the expansion of
a cost management program as reported in the second quarter of 1994. Net
income for the first nine months of 1993 included restructuring charges
totaling $36.3 million primarily related to branch closings and personnel
reductions, a $20.0 million provision for foreclosed properties related
to the bulk sale of real estate loans and foreclosed properties and a
$14.1 million write down in the value of excess servicing rights in
various securitized loan portfolios. Also included in the results for
the first nine months of 1993 is a credit of $52.8 million representing
the cumulative effect of a change in accounting for income taxes and an
after-tax charge of $6.6 million relating to the adoption of a new
accounting standard for postemployment benefits. Net income for the first
nine months of 1993 was $182.8 million, or $1.52 per common share.
Asset quality continued to improve as nonaccruing loans plus foreclosed
properties decreased $139.4 million, or 32 percent, to $298.0 million at
September 30, 1994 from $437.4 million at December 31, 1993. The ratio
of nonaccruing loans plus foreclosed properties to loans plus foreclosed
properties declined to 1.68 percent at September 30, 1994 from 2.48
percent at December 31, 1993.
The reserve for credit losses was $567.8 million at September 30, 1994,
compared with $669.2 million at December 31, 1993. The ratio of the
reserve for credit losses to nonaccruing loans was 214 percent at
September 30, 1994, compared with 179 percent at December 31, 1993. Net
charge-offs were $26.3 million for the third quarter of 1994, equal to an
annualized rate of .60 percent of average loans outstanding, compared
with $42.8 million of net charge-offs for the third quarter of 1993 and a
rate of 1.00 percent of average loans outstanding. There was no
provision for credit losses in the third quarter of 1994, compared with
an $11.3 million provision in the third quarter of 1993.
Shareholders' equity increased $26.9 million to $2.1 billion, or 6.79
percent of total assets at September 30, 1994 from $2.1 billion, or 6.76
percent of total assets at December 31, 1993. The Corporation's and
principal subsidiary banks' Risk-based capital and Leverage ratios
exceeded the requirements for a well-capitalized financial institution at
September 30, 1994.
The Corporation's common stock closed at $20.75 per share on September
30, 1994, representing 127 percent of the $16.32 book value per common
share, compared with $21.75 per share and 134 percent of the $16.25 book
value per common share at December 31, 1993.
All prior year data in this report, except dividends per share and common
stock market prices, have been restated for the pooling of interests
acquisitions of Peoples Bancorp of Worcester, Inc., New Dartmouth Bank
and Gateway Financial Corporation, which occurred during the second
quarter of 1994. The Corporation also completed its acquisitions of West
Newton Savings Bank and Cohasset Savings Bank on September 30, 1994,
which were accounted for as purchases and did not have a material effect
on third quarter 1994 results of operations.
As previously discussed during the second quarter of 1994, the Corporation
announced on June 13, 1994 the signing of a definitive agreement to acquire
Northeast Federal Corp. of Hartford, Connecticut, with assets of
$3.3 billion at September 30, 1994. The transaction is expected to be
completed in early 1995.
<PAGE>2
<TABLE>
SUMMARY OF RESULTS OF OPERATIONS
<CAPTION>
Quarter ended
TAX-EQUIVALENT BASIS Sep 30 Jun 30 Mar 31 Dec 31 Sep 30
(in millions, except per share data) 1994 1994 1994 1993 1993
<S> <C> <C> <C> <C> <C>
Interest income $ 492.8 $ 474.6 $ 457.3 $ 466.2 $ 464.9
Interest expense 223.9 205.9 181.9 183.4 188.1
Net interest income 268.9 268.7 275.4 282.8 276.8
Provision for credit losses --- --- 3.0 10.2 11.3
Net interest income after provision
for credit losses 268.9 268.7 272.4 272.6 265.5
Noninterest income 91.7 93.9 88.7 97.3 100.3
Merger related charges 100.9
Restructuring related charges 39.8
Fair lending related charges 3.5
Other noninterest expenses 226.4 238.0 241.8 250.8 261.9
Income (loss) before income taxes 134.2 (16.1) 119.3 115.6 103.9
Tax-equivalent adjustment 3.0 3.0 2.9 3.1 3.6
Income taxes (benefit) 45.9 (0.4) 39.1 (33.7) 17.7
Net income (loss) $ 85.3 $ (18.7) $ 77.3 $ 146.2 $ 82.6
Return on average assets:
Before merger, restructuring
and other charges 1.09 % 1.05 % 1.02 % 1.92 % 1.10 %
Based on net income (loss) 1.09 (0.24) 1.02 1.89 1.10
Return on average common equity:
Before merger, restructuring
and other charges 16.52 15.40 15.47 32.07 18.60
Based on net income applicable
to common shares 16.52 (4.49) 15.47 31.57 18.60
Net interest margin 3.78 3.76 3.91 3.99 4.05
Efficiency ratio 62.75 65.37 65.72 64.50 66.92
Common share data:
Net income (loss) $ 0.68 $ (0.19) $ 0.62 $ 1.22 $ 0.69
Dividends declared 0.20 0.20 0.20 0.20 0.10
</TABLE>
<PAGE>3
RESULTS OF OPERATIONS
NET INTEREST INCOME
The Corporation's tax-equivalent net interest income was $268.9 million
for the third quarter of 1994, a decrease of $7.9 million, or 3 percent,
from $276.8 million in the third quarter of 1993. The decrease in
tax-equivalent net interest income reflects a higher level of
interest-earning assets, primarily securities, offset by an increase in
the Corporation's cost of funds, which outpaced the repricing of
interest-earning assets. Average loans increased $439 million to $17.5
billion in the third quarter of 1994 from $17.1 billion in the comparable
prior year period. Average securities increased $665 million to $10.1
billion in the third quarter of 1994 from $9.4 billion in the third
quarter of 1993. The growth in the securities portfolio resulted from a
strategy of maintaining balance sheet leverage as management continues to
selectively adjust the composition of the loan portfolio toward higher-
yielding lending products. This adjustment of the loan portfolio included
the deliberate reduction of approximately $1.1 billion in money market priced
commercial loans with narrow profit margins since December 31, 1993. An
analysis of net interest income is presented below.
<TABLE>
ANALYSIS OF NET INTEREST INCOME
<CAPTION>
Quarter ended
Sep 30 Jun 30 Mar 31 Dec 31 Sep 30
(in millions) 1994 1994 1994 1993 1993
INTEREST AND DIVIDEND INCOME
(tax-equivalent basis)
<S> <C> <C> <C> <C> <C>
Loans $ 333.8 $ 320.7 $ 301.5 $ 310.0 $ 312.3
Securities
Available for sale, at fair value 32.1 39.9 44.1
At lower of aggregate cost or fair value 62.7 58.9
Held to maturity 115.5 107.2 103.3 84.2 82.6
Residential mortgages held for sale 5.3 2.9 5.4 6.1 7.3
Short-term investments 5.9 3.7 2.8 2.7 3.4
Trading account securities 0.2 0.2 0.2 0.5 0.4
Total interest income 492.8 474.6 457.3 466.2 464.9
INTEREST EXPENSE
Deposits 107.7 90.6 85.7 92.7 98.3
Other borrowings 88.9 95.4 80.1 73.4 71.4
Notes and debentures 27.3 19.9 16.1 17.3 18.4
Total interest expense 223.9 205.9 181.9 183.4 188.1
NET INTEREST INCOME
(tax-equivalent basis) 268.9 268.7 275.4 282.8 276.8
Tax-equivalent adjustment 3.0 3.0 2.9 3.1 3.6
NET INTEREST INCOME $ 265.9 $ 265.7 $ 272.5 $ 279.7 $ 273.2
INTEREST RATE SPREAD
(tax-equivalent basis) 3.21 % 3.23 % 3.42 % 3.50 % 3.55 %
NET INTEREST MARGIN
(tax-equivalent basis) 3.78 % 3.76 % 3.91 % 3.99 % 4.05 %
</TABLE>
<PAGE>4
The net interest margin for the third quarter of 1994 was 3.78 percent, a
decrease of 27 basis points from 4.05 percent in the comparable prior
year quarter. The decline reflects the Corporation's interest-bearing
liabilities repricing faster than its interest-earning assets during the
rising interest rate environment over this period. During the third
quarter of 1994, the Corporation's short-term borrowing costs continued
to increase as a result of a rise in overall interest rates, however, the
net interest margin rose two basis points relative to the second quarter
of 1994 given the reduction in lower margin assets which offset the
increase in rates paid on retail deposits that occurred in the third
quarter of 1994. If further increases in interest rates occur, then the
resultant contraction of the spread between the Corporation's
interest-earning assets and funding sources could reduce the net
interest margin. A discussion of interest rate risk appears on page
12. An analysis of net interest margin is presented below.
Tax-equivalent net interest income was $813.0 million for the first nine
months of 1994, an increase of 1 percent from 802.1 million for the first
nine months of 1993. The net interest margin was 3.82 percent for the nine
months ended September 30, 1994, compared with 4.04 percent for the comparable
period a year ago.
<TABLE>
ANALYSIS OF NET INTEREST MARGIN
<CAPTION>
Quarter ended
Sep 30 Jun 30 Mar 31 Dec 31 Sep 30
(in millions) 1994 1994 1994 1993 1993
Net interest income (tax-equivalent
<S> <C> <C> <C> <C> <C>
basis $ 268.9 $ 268.7 $ 275.4 $ 282.8 $ 276.8
Average interest-earning assets
supported by:
Interest-bearing liabilities $ 24,034 $ 24,174 $ 23,831 $ 23,757 $ 23,175
Noninterest-bearing liabilities 4,361 4,408 4,455 4,494 4,208
Total interest-earning assets $ 28,395 $ 28,582 $ 28,286 $ 28,251 $ 27,383
Average yields and average rates
(tax-equivalent basis):
Interest-earning assets yield 6.91 % 6.65 % 6.51 % 6.57 % 6.77 %
Rate paid on interest-bearing
liabilities 3.70 3.42 3.09 3.07 3.22
Interest rate spread 3.21 % 3.23 % 3.42 % 3.50 % 3.55 %
Net interest margin 3.78 % 3.76 % 3.91 % 3.99 % 4.05 %
</TABLE>
PROVISION FOR CREDIT LOSSES
There was no provision for credit losses in the third quarter of 1994.
The provision for credit losses was $11.3 million in the third quarter of
1993. With current strong reserve coverage of nonaccruing loans and the
sustained improvement in the credit quality of the loan portfolio, the
Corporation does not currently anticipate that provisions for credit
losses will be necessary for the remainder of 1994 and possibly into
1995. Future levels of the reserve for credit losses and provisions for
credit losses may be affected by changes in economic conditions and loan
quality.
<PAGE>5
<TABLE>
NONINTEREST INCOME
<CAPTION>
Quarter ended
Sep 30 Jun 30 Mar 31 Dec 31 Sep 30
(in millions) 1994 1994 1994 1993 1993
Customer service fees:
Deposit transaction and other
<S> <C> <C> <C> <C> <C>
services $ 25.6 $ 24.2 $ 22.8 $ 23.0 $ 23.4
Cash management services 15.2 16.4 17.8 17.6 18.4
Credit and trade related services 5.5 5.2 5.0 2.2 2.4
Investment services and commissions 2.4 3.0 2.9 3.2 2.9
Total 48.7 48.8 48.5 46.0 47.1
Trust and agency fees:
Personal 17.9 19.2 18.7 18.2 18.4
Institutional 4.9 4.7 4.8 4.2 5.3
Corporate 3.6 2.9 3.6 4.7 3.9
Not for profit 2.1 2.3 2.3 2.4 2.3
Total 28.5 29.1 29.4 29.5 29.9
Other income:
Loan servicing 4.6 10.5 4.5 1.0 3.8
Trading account profits 1.0 1.3 1.2 1.3 1.5
Foreign exchange trading profits (losses) --- (1.1) (0.7) 2.7 0.2
Residential mortgage sales gains 0.9 0.1 1.0 2.8 4.5
FDIC assistance 2.2 3.5
Other 7.2 5.2 5.6 10.3 7.3
Total 13.7 16.0 11.6 20.3 20.8
Total 90.9 93.9 89.5 95.8 97.8
Securities gains (losses), net 0.8 --- (0.8) 1.5 2.5
Total noninterest income $ 91.7 $ 93.9 $ 88.7 $ 97.3 $ 100.3
Noninterest income, excluding securities gains and losses, was $90.9
million for the third quarter of 1994, a decrease of $6.9 million, or 7
percent, from $97.8 million for the third quarter of 1993, reflecting
modest growth in customer service fees offset by reductions in gains on
sales of residential mortgage loans and FDIC assistance.
Customer service fees increased $1.6 million to $48.7 million for the
third quarter of 1994 from $47.1 million for the comparable prior year
period. Higher levels of customer credit facilities increased credit and
trade related service fees $3.1 million for the third quarter of 1994.
Deposit transaction and other services increased $2.2 million due to an
increase in the volume of consumer related deposit transaction fees.
Offsetting these increases was a decrease in cash management fees of $3.2
million which reflects competitive price concessions. Trust and agency
fees declined $1.4 million to $28.5 million in the third quarter of 1994
from $29.9 million a year ago.
Other income declined $7.1 million to $13.7 million in the third quarter
of 1994 from $20.8 million in the third quarter of 1993. Gains on
residential mortgage loan sales declined $3.6 million, reflecting a lower
level of secondary market activity as rising interest rates through the
first nine months of 1994 continue to slow mortgage sales. FDIC
assistance, which relates to agreements between the FDIC and New
Dartmouth Bank, decreased by $3.5 million as the loan portfolio subject
to regulatory assistance continues to decline.
Noninterest income, excluding securities gains and losses, for the first
nine months of 1994 decreased $28.3 million, or 9 percent, to $274.3
million from $302.6 million for the first nine months of 1993.
<PAGE>6
</TABLE>
<TABLE>
NONINTEREST EXPENSES
<CAPTION>
Quarter ended
Sep 30 Jun 30 Mar 31 Dec 31 Sep 30
(in millions) 1994 1994 1994 1993 1993
<S> <C> <C> <C> <C> <C>
Compensation $ 97.9 $ 100.0 $ 102.2 $ 105.2 $ 105.2
Benefits 20.9 22.6 23.6 20.0 21.9
Occupancy 23.8 25.0 26.3 25.7 25.8
Equipment 14.2 13.1 13.4 14.3 13.2
Federal Deposit Insurance
Corporation Premiums 10.3 11.1 11.8 12.6 12.5
Communications 10.3 10.1 10.4 11.0 11.2
Advertising 4.5 6.6 4.5 5.8 4.8
Foreclosed properties expense 0.5 2.5 3.7 3.1 5.1
Other 43.4 46.1 43.9 46.6 50.9
Total 225.8 237.1 239.8 244.3 250.6
Merger related charges 100.9
Restructuring charges 39.8
Fair lending related charges 3.5
Foreclosed properties provision 0.6 0.9 2.0 6.5 11.3
Total noninterest expenses $ 226.4 $ 378.7 $ 241.8 $ 254.3 $ 261.9
Noninterest expenses, excluding foreclosed properties provision, were
$225.8 million for the third quarter of 1994, a decrease of $24.8
million, or 10 percent, from $250.6 million for the third quarter of
1993. This reduction reflects the results of cost management initiatives
implemented throughout the period which have included workforce
reductions, branch closings and consolidations and other expense control
actions, in addition to declining problem asset resolution costs. Also
contributing to the reduction in noninterest expenses were savings associated
with the initial consolidation of the acquired entities that occurred in the
second quarter of 1994. The Corporation expects that the continued
consolidation of the acquired entities will result in further reductions of
noninterest expenses.
Compensation expense decreased $7.3 million, or 7 percent, to $97.9
million for the third quarter of 1994 from $105.2 million for the
comparable prior year period. The decline in compensation expense
reflects reductions in personnel from the cost management actions
referred to above as well as savings associated with initial acquisition
consolidations. Full-time equivalent employees totaled 9,970 at
September 30, 1994, compared with 11,473 at September 30, 1993.
Foreclosed properties expense declined $4.6 million from $5.1 million in
the third quarter of 1993 to $.5 million in the 1994 period and reflects
the decline in the level of foreclosed properties at September 30, 1994
from the comparable prior year period.
Noninterest expenses, excluding foreclosed properties provision and
merger and restructuring related charges, totaled $702.7 million for the
first nine months of 1994, compared with $762.3 million for the first
nine months of 1993.
Merger related charges of $100.9 million recorded in the second quarter
of 1994 reflect the costs to integrate three acquisitions which closed
during that quarter as further discussed in Note 2 of Notes to
Consolidated Financial Statements on page 25. The merger related
charges include $18.9 million for severance and benefits costs for
workforce reductions; $39.4 million for the closure of duplicative
branches and facilities and cancellation of vendor contracts; $11.1
million for financial advisory, legal and accounting expenses; and $7.0
million for losses on the accelerated sales of foreclosed properties. In
addition, the sales of securities and disposition of residential loans of
the acquired entities to maintain an interest rate risk profile
consistent with that of the Corporation resulted in losses of $12.5
million and $12.0 million, respectively, which are included in merger
related charges. The sales of securities occurred in the second quarter
of 1994 and the disposition of residential loans occurred in the third
quarter of 1994. Accrued merger expenses totaled $42.7 million at
September 30, 1994.
<PAGE>7
Restructuring related charges of $39.8 million recorded in the second
quarter of 1994 reflect the expansion of the Corporation's cost
management program. The program includes an organizational streamlining
and the elimination of more than 600 full-time equivalent positions. The
expanded program has also identified cost reductions to be achieved
through improved management of occupancy costs and consolidation of
purchasing activities. The restructuring related charges include $26.6
million for severance and benefit related costs and $13.2 million for the
consolidation of branch and operations facilities and other costs. It is
anticipated that the restructuring program will be substantially
completed by the end of the first quarter of 1995. Accrued restructuring
expenses totaled $29.5 million at September 30, 1994.
Included in total noninterest expenses for the first nine months of 1993
are restructuring and other charges consisting of $36.3 million for
restructuring costs and a $14.1 million writedown in the value of excess
servicing rights. The carrying values of excess servicing rights of
various securitized consumer loan portfolios were reduced during the
first quarter of 1993 in view of prepayment experience and the decline in
interest rates.
</TABLE>
<TABLE>
PROVISION FOR FORECLOSED PROPERTIES
<CAPTION>
Quarter ended
Sep 30 Jun 30 Mar 31 Dec 31 Sep 30
(in millions) 1994 1994 1994 1993 1993
<S> <C> <C> <C> <C> <C>
Provision for foreclosed properties $ 0.6 $ 0.9 $ 2.0 $ 6.5 $ 11.3
</TABLE>
The provision for foreclosed properties was $.6 million for the third
quarter of 1994, compared with $11.3 million for the third quarter of
1993, or a decrease of $10.7 million. The decline in the foreclosed
properties provision during the third quarter of 1994 reflects the
decline in the level of foreclosed properties, the stabilization of
property values and the effective management of these assets.
The provision for foreclosed properties for the first nine months of 1994
was $3.5 million, compared with $70.1 million for the same period in
1993. Included in the foreclosed properties provision for the 1993
period are provisions of $20.0 million for the bulk sales of foreclosed
properties and $7.7 million relating to a $29.8 million pool of
commercial properties that were sold at auction.
INCOME TAXES
The provision for income taxes for the third quarter of 1994 was $45.9
million, representing an effective income tax rate of 35.0 percent. The
provision for income taxes was $17.7 million for the third quarter of
1993, representing an effective income tax rate of 31.1 percent,
excluding the recognition of income tax benefits associated with the
reduction of the deferred tax asset valuation allowance of $5.6 million
and changes in corporate income tax rates of $7.9 million.
The provision for income taxes for the nine months ended September 30,
1994 and 1993 was $84.7 million and $40.3 million, respectively,
representing an effective income tax rate of 34.9 percent (which excludes
a $5.0 million tax expense related to acquisitions) and 22.8 percent,
respectively. The 1994 and 1993 periods reflect a reduction in the
deferred tax asset valuation allowance of $1.5 million and $9.8 million,
respectively, as well as a tax benefit of $7.9 million during the third
quarter of 1993 that reflects changes in corporate income tax rates. The
Corporation adopted the new accounting standard for income taxes during
the first quarter of 1993 and the cumulative effect of this accounting
change was the recognition of a $52.8 million income tax benefit in the
first quarter of 1993.
The Corporation's net deferred federal tax asset was $219.2 million,
inclusive of a valuation allowance of $9.3 million, at September 30,
1994. Taxable income necessary to be generated in future periods to
realize this net deferred federal tax asset would be approximately $625
million. Deferred state tax assets, net of related federal tax, totaled
$107.1 million at September 30, 1994 and were reduced in their entirety
by a valuation allowance of the same amount.
<PAGE>8
FINANCIAL CONDITION
LOANS
The Corporation's loan portfolio was $17.7 billion at September 30, 1994,
relatively unchanged from $17.6 billion at December 31, 1993. The
Corporation has a diversified loan portfolio with the consumer portfolio
representing 48 percent of total loans at September 30, 1994. Commercial
and industrial loans represented 35 percent of total loans at that date.
Owner-occupied commercial real estate and investor/developer real estate
loans were 8 percent and 9 percent, respectively. The table on page 17
presents an analysis of the loan portfolio by type. The tables on pages
19 and 20 present an analysis of the loan portfolio by industry sector.
While the total amount of the loan portfolio remained unchanged at
September 30, 1994 compared with December 31, 1993, the mix of loans has
changed. Consumer lending, which includes residential mortgage, home
equity and installment loans, increased $535.2 million from $8.0 billion
at year end 1993 to $8.6 billion at September 30, 1994, primarily as a
result of growth in residential mortgages and automobile loans. The
Corporation sold approximately $244.0 million of fixed-rate residential
mortgages in the third quarter of 1994 that were previously transferred
from consumer loans to residential mortgages held for sale in the second
quarter of 1994.
Commercial and industrial loans declined from $6.4 billion at year end
1993 to $6.2 billion at September 30, 1994, or $192.2 million. Certain
sectors of the Corporation's commercial loan portfolio reflected growth
as specialized lending (radio, television and cable) and asset based
lending increased $249.9 million and $175.2 million, respectively, in
addition to growth in other targeted commercial sectors. These
increases were offset by reductions of approximately $1.1 billion in
certain money market priced commercial loans with narrow profit margins
since year end 1993.
Owner-occupied commercial real estate and investor/developer real estate
loans declined $204.8 million from $3.2 billion at year end 1993 to $3.0
billion at September 30, 1994, consistent with the overall decline in
commercial real estate lending.
A discussion of the credit quality of the Corporation's loan portfolio
begins on page 15.
SECURITIES
Securities classified as held to maturity and reported at amortized cost
increased $1.0 billion to $8.2 billion at September 30, 1994 from $7.2
billion at December 31, 1993. Securities classified as available for
sale totaled $2.1 billion at September 30, 1994, compared with $3.2
billion at December 31, 1993. Securities available for sale declined as
sales and maturities were reinvested in the held to maturity securities
portfolio. During the second quarter of 1994, the Corporation realigned
the securities portfolio of the acquired institutions to maintain its
interest rate risk profile through certain sales and reclassifications.
The Corporation uses a duration concept to quantify the exposure within its
securities portfolio to changes in the level of interest rate risk. Duration
is generally quoted in years and represents the price risk of an equivalent
maturity zero coupon bond. The higher the duration value, the greater the
interest rate risk. The hedge-adjusted duration of the Corporation's
available for sale and held to maturity securities portfolio was 1.90 years
and 2.46 years, respectively, at September 30, 1994.
Additional information regarding the Corporation's securities portfolio
is presented in Note 3 of Notes to Consolidated Financial Statements on
page 26.
<PAGE>9
DEPOSITS AND OTHER SOURCES OF FUNDS
Interest-bearing liabilities averaged $24.0 billion for the third quarter
of 1994, compared with $23.2 billion for the comparable period of 1993,
reflecting higher levels of interest-bearing deposits and notes and
debentures which supported the increase in average interest-earning
assets. Core deposits, which do not include large denomination
certificates of deposits, brokered retail deposits or foreign time
deposits, were $17.8 billion at September 30, 1994, compared with $18.1
billion at December 31, 1993.
Other borrowings, primarily securities sold under agreements to
repurchase and federal funds purchased, decreased $1.6 billion to $7.7
billion at September 30, 1994 from $9.3 billion at December 31, 1993 as
other borrowings have been replaced with note issuances under a bank note
facility. Notes and debentures increased $874.9 million to $1.6 billion
at September 30, 1994 from $758.9 million at December 31, 1993 as a
result of notes issued under a $2.0 billion bank note facility which was
established during the first quarter of 1994.
CAPITALIZATION
<TABLE>
The Corporation's Risk-based capital and Leverage ratios were as follows:
<CAPTION>
Sep 30 Jun 30 Mar 31 Dec 31 Sep 30
(in millions) 1994 1994 1994 1993 1993
<S> <C> <C> <C> <C> <C>
Shareholders' equity $ 2,129.3 $ 2,068.3 $ 2,130.0 $ 2,102.4 $ 1,943.1
Tier 1 capital 2,017.3 1,979.1 2,043.3 1,977.0 1,830.2
Total capital 2,857.7 2,813.6 2,903.8 2,862.0 2,706.4
Risk-weighted assets 23,824.6 23,303.3 22,956.4 22,490.8 21,805.1
Ratios:
Shareholders' equity to assets 6.79 % 6.74 % 6.82 % 6.76 % 6.30 %
Risk-based capital ratios
Tier 1 capital 8.47 8.49 8.90 8.79 8.39
Total capital 11.99 12.07 12.65 12.73 12.41
Leverage ratio 6.54 6.38 6.66 6.48 6.17
The Corporation's total shareholders' equity at September 30, 1994 was
$2.1 billion, or 6.79 percent of total assets, compared with $2.1
billion, or 6.76 percent of total assets, at December 31, 1993, an
increase of $26.9 million. The increase for the first nine months of
1994 reflects a $53.3 million charge reflecting the net after-tax
unrealized loss on the Corporation's $2.1 billion available for sale
securities portfolio. Further volatility in shareholders' equity may
occur as the fair value of the Corporation's available for sale
securities portfolio changes with market conditions.
The Corporation's Risk-based Tier 1 and Total capital ratios were 8.47
percent and 11.99 percent at September 30, 1994, respectively, compared
with 8.79 percent and 12.73 percent at December 31, 1993, respectively.
The Leverage ratio, a measure of Tier 1 capital to quarterly average
assets, increased to 6.54 percent at September 30, 1994 from 6.48 percent
at December 31, 1993 which reflects an increase in Tier 1 capital. Under
Federal banking regulations, an institution is deemed to be
well-capitalized if it has a Risk-based Tier 1 capital ratio of 6.00
percent or greater, a Risk-based Total capital ratio of 10.00 percent or
greater and a Leverage ratio of 5.00 percent or greater. The Corporation
exceeded the requirements for a well-capitalized financial institution at
September 30, 1994.
Bank regulatory agencies have issued proposed revisions to capital
adequacy guidelines for comment. One proposal would limit the amount of
deferred tax assets that could be used to meet risk-based capital
requirements. Another proposal would consider unrealized gains or losses
relating to securities classified as available for sale, which are
recorded as a separate component of shareholders' equity, as part of the
risk-based capital calculation. If both of these proposals were adopted
by bank regulatory agencies at September 30, 1994, the Corporation's
Risk-based Tier 1 capital, Total capital and Leverage ratios would have
been 8.30 percent, 11.83 percent and 6.42 percent, respectively. The
Corporation cannot determine whether, or in what form, these proposals
may be enacted.
<PAGE>10
The Corporation's two principal subsidiary banks' (Shawmut Bank
Connecticut and Shawmut Bank Massachusetts) Risk-based capital and
Leverage ratios were as follows:
Sep 30 Jun 30 Mar 31 Dec 31 Sep 30
(in millions) 1994 1994 1994 1993 1993
SHAWMUT BANK CONNECTICUT
<S> <C> <C> <C> <C> <C>
Shareholder's equity $ 1,201.3 $ 1,203.2 $ 1,233.0 $ 1,225.6 $ 1,096.5
Tier 1 capital 1,166.0 1,161.6 1,190.1 1,165.4 1,037.8
Total capital 1,323.6 1,315.8 1,339.7 1,311.0 1,170.8
Risk-weighted assets 12,468.1 12,183.2 11,769.3 11,431.4 10,394.8
Ratios:
Shareholder's equity to assets 7.60 % 7.64 % 7.82 % 7.76 % 7.43 %
Risk-based capital ratios
Tier 1 capital 9.35 9.53 10.11 10.19 9.98
Total capital 10.62 10.80 11.38 11.47 11.26
Leverage ratio 7.43 7.55 7.81 7.73 7.44
SHAWMUT BANK MASSACHUSETTS
Shareholder's equity $ 1,151.2 $ 1,051.1 $ 1,072.8 $ 1,074.8 $ 1,013.6
Tier 1 capital 1,099.4 1,026.0 1,048.8 1,033.7 983.2
Total capital 1,255.6 1,176.2 1,199.5 1,189.9 1,141.4
Risk-weighted assets 10,810.3 10,322.5 10,357.6 10,163.1 10,353.5
Ratios:
Shareholder's equity to assets 8.09 % 7.76 % 7.58 % 7.81 % 7.12 %
Risk-based capital ratios
Tier 1 capital 10.17 9.94 10.13 10.17 9.50
Total capital 11.61 11.39 11.58 11.71 11.02
Leverage ratio 8.17 7.45 7.55 7.54 7.15
The Corporation's principal subsidiary banks' Risk-based capital and
Leverage ratios exceeded the requirements for a well-capitalized
financial institution at September 30, 1994.
<PAGE>11
INTEREST RATE SENSITIVITY
The table below depicts the Corporation's interest rate sensitivity as of
September 30, 1994. Allocations of assets and liabilities, including
noninterest-bearing sources of funds, to specific periods are based upon
management's assessment of contractual or anticipated repricing
characteristics, adjusted periodically to reflect actual experience.
Those gaps are then adjusted for the net effect of off-balance sheet
financial instruments such as interest rate swaps, caps and floors, U.S.
Treasury combination option agreements and futures contracts.
</TABLE>
<TABLE>
<CAPTION>
Repricing Periods
Two- Four- Seven- Ten- Over
One three six nine twelve one
(in millions) month months months months months year Total
Short-term
investments
and other
interest
<S> <C> <C> <C> <C> <C> <C> <C>
earning assets $ 395 $ 111 $ 129 $ 635
Securities 429 470 450 $ 438 $ 384 $ 8,116 10,287
Loans 6,022 3,205 1,480 858 815 5,356 17,736
Total interest-
earning assets 6,846 3,786 2,059 1,296 1,199 13,472 28,658
Interest-bearing
deposits 1,974 2,072 1,758 1,803 1,368 6,161 15,136
Other borrowings 7,064 360 160 1 84 7,669
Notes and debentures 725 200 709 1,634
Noninterest-bearing
sources of funds 52 104 417 417 417 2,812 4,219
Total 9,815 2,536 2,335 2,421 1,785 9,766 28,658
Off-balance sheet
financial
instruments 537 1,706 (818) (49) (470) (906)
Interest rate
sensitivity
gap $ (2,432) $ 2,956 $ (1,094) $ (1,174) $ (1,056) $ 2,800
Cumulative gap $ (2,432) $ 524 $ (570) $ (1,744) $ (2,800) $ 0
Interest rate
sensitivity
gap as a
percent of
interest-
earning assets (8.5)% 10.3 % (3.8)% (4.1)% (3.7)%
Cumulative gap as
a percent of
interest-earning
assets (8.5)% 1.8 % (2.0)% (6.1)% (9.8)%
</TABLE>
INTEREST RATE RISK
As indicated in the interest rate sensitivity table, the twelve-month
cumulative gap, representing the total net assets and liabilities that
are projected to reprice over the next twelve months, was liability
sensitive in the amount of $2.8 billion at September 30, 1994. A
liability sensitive interest rate gap would tend to reduce earnings over
a period of rising interest rates, while declining rates would enhance
earnings. The effects of certain interest rate caps, corridors and swaptions
are not included in the interest rate sensitivity table, as the levels of
interest rate indices at which these instruments become operative have not
occurred. However, if these instruments were to become operative, they would
reduce the Corporation's interest rate sensitivity. Based on an analysis of a
100 basis point increase in interest rates, the twelve-month cumulative
liability sensitive gap at September 30, 1994 would decrease from $2.8 billion
to $2.3 billion through giving effect to these interest rate caps, corridors
and swaptions. The Corporation also utilizes modeling and other analytical
techniques to measure the effect on net interest income under different
interest rate scenarios. Given an immediate 100 basis point increase in
interest rates, the effect on net interest income would be a reduction of
approximately $21.2 million for the twelve-month period following
September 30, 1994.
<PAGE>12
The use of interest rate instruments such as interest rate swaps, caps
and floors and futures contracts are integrated into the Corporation's
interest rate risk management. The notional amounts of these instruments
are not reflected in the Corporation's balance sheet. However, these
instruments are included in the interest rate sensitivity table above for
purposes of analyzing interest rate risk.
At September 30, 1994, the Corporation had approximately $3.0 billion in
notional balances of interest rate swap contracts outstanding utilized for
the management of interest rate risk, representing an increase of $1.0
billion from $2.0 billion at December 31, 1993. The average final maturity
of the fixed-pay and fixed-receive interest rate swap agreements at
September 30, 1994 was approximately 3.3 years and 2.4 years, respectively.
Basis interest rate swap agreements have a final maturity of approximately
nine months. The Corporation also purchased options to enter into fixed-pay
interest rate swap contracts in future periods (swaptions). The notional
balances of interest rate swap contracts subject to option were $475 million
at September 30, 1994, with an exercise date of December 13, 1994.
In addition to the interest rate swap contracts, the Corporation utilizes
interest rate cap and floor agreements to manage interest rate risk. At
September 30, 1994, the Corporation had approximately $1.8 billion in
notional balances of purchased interest rate cap agreements outstanding.
Also outstanding were approximately $500 million in notional balances of
interest rate collar arrangements (consisting of a cap and a floor). In
addition, approximately $1.0 billion in notional balances of interest
rate agreements which consist of a simultaneous purchase and sale of a
cap, the combination of which are known as interest rate corridors, were
outstanding at September 30, 1994. Interest rate corridors are utilized
to protect the Corporation from a contraction in the interest rate spread
due to a moderate rise in interest rates. The average final maturity of
the interest rate cap portfolio at September 30, 1994 was approximately
1.2 years. The average final maturities of the interest rate collar
agreements at September 30, 1994 were less than one year. The fair value
of these interest rate instruments at September 30, 1994, which exclude
exchange-traded futures contracts, was approximately $38.0 million,
represents the estimated amount that the Corporation would recognize as a
loss if the agreements were terminated at that date. The unamortized
premium recorded in the Corporation's balance sheet related to interest
rate risk management agreements was $37.2 million at September 30, 1994.
Exchange-traded futures contracts are also used by the Corporation to
manage interest rate exposure. The notional balances of futures
contracts sold at September 30, 1994 were approximately $3.2 billion, an
increase of $690 million from $2.5 billion at December 31, 1993. At
September 30, 1994, the Corporation had entered into U.S. Treasury rate
futures contracts with approximately $631 million in notional balances to
manage the risk associated with the available for sale securities
portfolio. The unrealized gain of approximately $10.2 million at
September 30, 1994 relating to these contracts has been recorded as part
of the fair value of these securities. The remaining increase is
attributed to Eurodollar futures contracts used to manage interest rate
risk on the Corporation's funding sources. The unrealized gain related
to Eurodollar futures contracts at September 30, 1994 was approximately
$10.9 million. Maturities of the notional balances of futures contracts
sold are as follows: $1.1 billion in 1994; $1.4 billion in 1995; $.6
billion in 1996; and $.1 billion in 1997.
Activity for interest rate agreements utilized for the management of
interest rate risk for the first nine months of 1994 follows:
<TABLE>
<CAPTION>
Swaps
Notional Plain Plain Amortizing Futures
amounts fixed fixed fixed Caps and contracts
(millions) pay receive receive Basis corridors Floors Collars sold
Balance,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/93 $ 943 $ 141 $ 900 $ 3,356 $ 2,528
Additions 675 500 $ 300 1,100 $ 500 $ 500 24,740
Maturities 349 67 1,650 500
Settle-
ments 24,050
Balance,
9/30/94 $ 1,269 $ 74 $ 1,400 $ 300 $ 2,806 $ --- $ 500 $ 3,218
<PAGE>13
LIQUIDITY
Liquidity is the ability to meet cash needs arising from fluctuations in
loans, securities, deposits and other borrowings. The Corporation manages
liquidity on three levels: at a consolidated level; at the subsidiary
banks level; and at the parent company level. The parent company level
includes Shawmut National Corporation. In each case, the objectives
reflect management's most current assessment of economic and financial
factors that could affect funding activities.
The Corporation primarily manages its liquidity using an uncollateralized
purchased funds concept. Uncollateralized purchased funds (UPFs) consist
of federal funds purchased, large denomination certificates of deposit,
Eurodollar deposits and private placement notes. When measuring
liquidity, UPFs are offset by available short-term investments including
federal funds sold, bid-based money market loans, reverse repurchase
agreements, and unused repurchase agreement collateral (U.S. Government
and agency securities and highly liquid marketable securities).
The Corporation manages liquidity at the consolidated level and at the
subsidiary banks level by measuring the difference between the volume of
UPFs and the level of short-term investments and unused repurchase
agreement collateral and is managed consistent with the condition of the
Corporation's earnings, capital, asset quality and economic factors. At
September 30, 1994, UPFs were $2.6 billion. This was offset by $4.5
billion in short-term investments and unused repurchase agreement
collateral, leaving the Corporation with an excess of short-term
investments and unused repurchase agreement collateral over UPFs of $1.9
billion. Short-term investments and unused repurchase agreement
collateral exceeded the volume of UPFs by $1.5 billion at December 31,
1993. During the first quarter of 1994, the Corporation expanded its
available funding alternatives by establishing a $2.0 billion bank note
facility which provides access to other diversified funding sources.
Notes issued under this facility were $875 million at September 30, 1994.
The Corporation manages the parent company liquidity by measuring the
difference between the volume of short-term investments and short-term
funding sources and the parent company's ongoing obligations, including
debt maturities, interest payments and dividends. The parent company had
combined short-term borrowings of $168.6 million at September 30, 1994.
The parent company had combined cash and cash equivalents at September
30, 1994 of $225.8 million and securities, consisting of preferred stock
holdings, with a fair value of $295.8 million. Notes and debentures
totaled $749.1 million at September 30, 1994. There are no scheduled
maturities on notes and debentures in 1994 and 1995. Scheduled maturities
are $150 million in 1996.
</TABLE>
<TABLE>
RESERVE FOR CREDIT LOSSES
<CAPTION>
Quarter ended
Sep 30 Jun 30 Mar 31 Dec 31 Sep 30
(in millions) 1994 1994 1994 1993 1993
Reserve for credit losses at
<S> <C> <C> <C> <C> <C>
beginning of period $ 589.8 $ 638.5 $ 669.2 $ 694.1 $ 725.6
Provision charged to operations --- --- 3.0 10.2 11.3
Addition for loans purchased 4.3
Loans charged off
Gross (40.7) (60.5) (45.7) (53.0) (53.9)
Recoveries 14.4 11.8 12.0 17.9 11.1
Net (26.3) (48.7) (33.7) (35.1) (42.8)
Reserve for credit losses at
end of period $ 567.8 $ 589.8 $ 638.5 $ 669.2 $ 694.1
Net charge-offs (annualized)
to average loans 0.60 % 1.10 % 0.78 % 0.82 % 1.00 %
Reserve for credit losses to
net charge-offs (annualized) 5.40 x 3.03 x 4.75 x 4.76 x 4.06 x
Reserve for credit losses to loans 3.20 % 3.40 % 3.64 % 3.80 % 3.95 %
</TABLE>
<PAGE>14
The reserve for credit losses was $567.8 million at September 30, 1994,
compared with $669.2 million at December 31, 1993. The ratio of the
reserve for credit losses to loans was 3.20 percent at September 30,
1994, compared with 3.80 percent at December 31, 1993. An analysis of
the provision and reserve for credit losses is presented on page 18.
Net charge-offs were $26.3 million for the third quarter of 1994, equal
to an annualized rate of .60 percent of average loans, compared with
$42.8 million and 1.00 percent for the same period a year ago. A
discussion of the provision for credit losses is presented on page 5.
The Financial Accounting Standards Board issued FAS No. 114, "Accounting
By Creditors for Impaired Loans", in May 1993. The new accounting
standard requires that impaired loans, which are defined as loans where
it is probable that a creditor will not be able to collect both the
contractual interest and principal payments, be measured based on the
present value of expected future cash flows discounted at the loan's
effective rate when assessing the need for a loss accrual. The new
accounting standard is effective for the Corporation's financial
statements beginning January 1, 1995. The Corporation does not believe
adoption of the new accounting standard will have a material effect on
its financial position or results of operations.
<TABLE>
CREDIT QUALITY
NONACCRUING LOANS, RESTRUCTURED LOANS AND ACCRUING LOANS PAST DUE
90 DAYS OR MORE
<CAPTION>
Sep 30 Jun 30 Mar 31 Dec 31 Sep 30
(in millions) 1994 1994 1994 1993 1993
Nonaccruing loans
Commercial / real estate loans:
<S> <C> <C> <C> <C> <C>
Current $ 46.0 $ 50.8 $ 53.1 $ 63.6 $ 76.1
From 30 to 89 days past due 16.7 14.2 21.9 25.7 33.3
90 or more days past due 146.4 154.6 178.3 197.7 240.3
Total 209.1 219.6 253.3 287.0 349.7
Consumer loans:
Current 5.6 9.2 9.8 12.5 12.8
From 30 to 89 days past due 4.2 3.9 5.4 5.1 7.1
90 or more days past due 47.0 52.5 60.1 68.3 67.7
Total 56.8 65.6 75.3 85.9 87.6
Total nonaccruing loans $ 265.9 $ 285.2 $ 328.6 $ 372.9 $ 437.3
Restructured loans $ 31.1 $ 63.8 $ 63.6 $ 73.3 $ 87.7
Accruing loans past due
90 days or more $ 53.1 $ 47.8 $ 46.4 $ 42.6 $ 61.5
Nonaccruing loans to loans 1.50 % 1.65 % 1.87 % 2.12 % 2.49 %
Reserve for credit losses to
nonaccruing loans 214.00 207.00 194.00 179.00 159.00
</TABLE>
Nonaccruing loans were $265.9 million at September 30, 1994, compared
with $372.9 million at December 31, 1993. Approximately 19 percent of
nonaccruing loans were less than 30 days past due at September 30, 1994,
compared with approximately 20 percent at December 31, 1993. The ratio
of nonaccruing loans to loans improved to 1.50 percent at September 30,
1994 from 2.12 percent at December 31, 1993. The ratio of the reserve
for credit losses to nonaccruing loans was 214 percent at September 30,
1994, compared with 179 percent at December 31, 1993. The table on page
17 presents nonaccruing loans by loan type. Changes in nonaccruing
loans are presented in the table on page 18.
<PAGE>15
Restructured loans, which are loans with original terms that have been
modified as a result of a change in the borrower's financial condition,
were $31.1 million at September 30, 1994, compared with $73.3 million at
the end of 1993. Restructured loans included real estate
investor/developer loans and owner-occupied commercial real estate loans
of $20.9 million and $4.0 million, respectively, at September 30, 1994.
The yield from the portfolio of restructured loans was 7.53 percent for
the quarter ended September 30, 1994, compared with 6.39 percent for the
quarter ended September 30, 1993. The decline in restructured loans of
$32.7 million from $63.8 million at June 30, 1994 principally resulted
from loan sales that occurred in the third quarter of 1994.
Accruing loans past due 90 days or more, which are well secured and in
the process of collection, were $53.1 million at September 30, 1994,
compared with $42.6 million at December 31, 1993. These loans
represented .30 percent of loans outstanding at September 30, 1994.
Consumer loans represented 29 percent and 33 percent of accruing loans
past due 90 days or more at September 30, 1994 and December 31, 1993,
respectively.
The Corporation seeks to limit its exposure to individual and affiliated
borrowers. The ten largest nonaccruing loans totaled $44.1 million, or
.25 percent, of loans outstanding at September 30, 1994 and are presented
in the table on page 20. The ten largest nonaccruing loans at December
31, 1993 totaled $35.9 million.
<TABLE>
NONACCRUING LOANS PLUS FORECLOSED PROPERTIES
<CAPTION>
Sep 30 Jun 30 Mar 31 Dec 31 Sep 30
(in millions) 1994 1994 1994 1993 1993
<S> <C> <C> <C> <C> <C>
Nonaccruing loans $ 265.9 $ 285.2 $ 328.6 $ 372.9 $ 437.3
Foreclosed properties 32.1 42.5 51.5 64.5 94.7
Total $ 298.0 $ 327.7 $ 380.1 $ 437.4 $ 532.0
Nonaccruing loans plus foreclosed
properties to loans plus
foreclosed properties 1.68 % 1.89 % 2.16 % 2.48 % 3.01 %
</TABLE>
Nonaccruing loans plus foreclosed properties totaled $298.0 million at
September 30, 1994, a decline of $139.4 million, or 32 percent, from
$437.4 million at December 31, 1993. The ratio of nonaccruing loans plus
foreclosed properties to loans plus foreclosed properties was 1.68
percent at September 30, 1994, down from 2.48 percent at December 31,
1993.
<TABLE>
FORECLOSED PROPERTIES BY PROJECT TYPE
<CAPTION>
Sep 30 Jun 30 Mar 31 Dec 31 Sep 30
(in millions) 1994 1994 1994 1993 1993
<S> <C> <C> <C> <C> <C>
Retail $ 7.3 $ 8.0 $ 3.5 $ 4.0 $ 5.7
Residential 6.8 10.6 11.8 12.8 16.7
Land 3.5 7.1 9.4 10.7 13.5
Mixed use 3.2 3.1 1.1 2.1 4.4
Offices 3.1 5.0 4.4 8.6 13.1
Industrial 3.0 3.9 3.9 5.6 10.9
Hotels, resorts, inns 2.3 2.7 2.1 5.7 5.9
Residential developers
Condominium 0.8 1.1 1.6 1.6 1.9
Single family 0.5 0.3 1.6 1.6 2.0
Apartment/rental 0.2 0.2 0.5 0.9 2.4
Other 1.4 0.5 11.6 10.9 18.2
Total $ 32.1 $ 42.5 $ 51.5 $ 64.5 $ 94.7
Foreclosed properties decreased $32.4 million, or 50 percent, to $32.1
million at September 30, 1994, from $64.5 million at December 31, 1993,
primarily from continuing disposition efforts.
<PAGE>16
PORTFOLIO STATISTICS
The following tables set forth loan statistical information:
</TABLE>
<TABLE>
LOAN PORTFOLIO
<CAPTION>
Sep 30 Jun 30 Mar 31 Dec 31 Sep 30
(in millions) 1994 1994 1994 1993 1993
<S> <C> <C> <C> <C> <C>
Commercial and industrial $ 6,201.3 $ 5,992.7 $ 6,188.7 $ 6,393.5 $ 6,163.2
Owner-occupied commercial real estate 1,423.4 1,407.1 1,421.8 1,492.8 1,536.7
Real estate investor/developer
Commercial mortgage 1,401.3 1,461.0 1,518.7 1,526.5 1,558.9
Construction and other 150.5 150.9 152.1 160.7 178.6
Total investor/developer 1,551.8 1,611.9 1,670.8 1,687.2 1,737.5
Consumer
Residential mortgage 5,608.1 5,474.0 5,570.3 5,325.9 5,431.0
Home equity 1,628.8 1,609.9 1,580.1 1,637.8 1,692.5
Installment and other 1,322.5 1,233.5 1,127.5 1,060.5 1,000.6
Total consumer 8,559.4 8,317.4 8,277.9 8,024.2 8,124.1
Total 17,735.9 17,329.1 17,559.2 17,597.7 17,561.5
Reserve for credit losses (567.8) (589.8) (638.5) (669.2) (694.1)
Total $ 17,168.1 $ 16,739.3 $ 16,920.7 $ 16,928.5 $ 16,867.4
</TABLE>
<TABLE>
NONACCRUING LOANS BY LOAN TYPE
<CAPTION>
Sep 30 Jun 30 Mar 31 Dec 31 Sep 30
(in millions) 1994 1994 1994 1993 1993
<S> <C> <C> <C> <C> <C>
Commercial and industrial $ 59.3 $ 60.6 $ 63.6 $ 85.0 $ 94.7
Owner-occupied commercial real estate 59.8 67.5 72.8 79.6 97.2
Real estate investor/developer
Commercial mortgage 65.9 70.6 92.0 97.4 116.5
Construction and other 24.1 20.9 24.9 25.0 41.3
Total investor/developer 90.0 91.5 116.9 122.4 157.8
Consumer
Residential mortgage 46.2 48.8 61.2 71.7 71.0
Home equity 7.0 8.2 9.2 8.7 9.3
Installment and other 3.6 8.6 4.9 5.5 7.3
Total consumer 56.8 65.6 75.3 85.9 87.6
Total $ 265.9 $ 285.2 $ 328.6 $ 372.9 $ 437.3
</TABLE>
<PAGE>17
<TABLE>
CHANGES IN NONACCRUING LOANS
The changes in the Corporation's nonaccruing loans are summarized below:
<CAPTION>
Quarter ended
Sep 30 Jun 30 Mar 31 Dec 31 Sep 30
(in millions) 1994 1994 1994 1993 1993
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $ 285.2 $ 328.6 $ 372.9 $ 437.3 $ 492.4
New nonaccruing loans 64.5 65.4 49.7 59.3 76.8
Decreases in nonaccruing loans
Sales 0.4 5.8
Payments 35.9 34.2 33.4 60.7 45.3
Returns to accruing loans 6.5 12.3 9.9 20.2 36.8
Transfers to restructured loans 2.5 1.4 4.6 2.2
Transfers to foreclosed properties 7.5 2.6 5.0 2.8 3.2
Charge-offs 31.0 52.5 45.7 35.4 44.4
Total 83.8 108.8 94.0 123.7 131.9
Balance at end of period $ 265.9 $ 285.2 $ 328.6 $ 372.9 $ 437.3
</TABLE>
<TABLE>
PROVISION AND RESERVE FOR CREDIT LOSSES
<CAPTION>
Quarter ended
Sep 30 Jun 30 Mar 31 Dec 31 Sep 30
(in millions) 1994 1994 1994 1993 1993
Reserve for credit losses at
<S> <C> <C> <C> <C> <C>
beginning of period $ 589.8 $ 638.5 $ 669.2 $ 694.1 $ 725.6
Provision charged to operations --- --- 3.0 10.2 11.3
Addition for loans purchased 4.3
Loans charged off:
Commercial and industrial 4.6 6.0 8.3 12.7 11.7
Owner-occupied commercial real estate 4.5 3.0 5.5 8.9 8.1
Real estate investor/developer
Commercial mortgage 14.2 20.8 11.6 11.3 14.3
Construction and other 4.0 2.6 1.4 3.4 5.0
Total investor/developer 18.2 23.4 13.0 14.7 19.3
Consumer
Residential mortgage 9.4 12.8 14.2 7.8 9.9
Home equity 1.4 12.0 1.8 1.2 1.0
Installment and other 2.6 3.3 2.9 7.7 3.9
Total consumer 13.4 28.1 18.9 16.7 14.8
Total loans charged off 40.7 60.5 45.7 53.0 53.9
Recoveries on loans charged off:
Commercial and industrial 5.3 3.9 4.0 10.6 5.0
Owner-occupied commercial real estate 1.2 0.6 1.2 1.5 2.1
Real estate investor/developer 2.1 1.2 1.1 2.9 1.3
Consumer 5.8 6.1 5.7 2.9 2.7
Total recoveries 14.4 11.8 12.0 17.9 11.1
Net loans charged off 26.3 48.7 33.7 35.1 42.8
Reserve for credit losses at
end of period $ 567.8 $ 589.8 $ 638.5 $ 669.2 $ 694.1
</TABLE>
<PAGE>18
<TABLE>
COMMERCIAL AND INDUSTRIAL LOANS - BY INDUSTRY SECTOR
<CAPTION>
September 30, 1994 Charge-offs
Loans Third Year to
(in millions) outstanding Nonaccruing quarter date
<S> <C> <C> <C> <C>
Manufacturing $ 1,317.8 $ 17.1 $ 0.9 $ 4.4
Communications 1,186.2 4.3
Finance, insurance and
real estate 1,149.4 3.9 0.1 2.4
Services 899.4 5.5 1.3 2.1
Wholesale 577.1 8.7 0.7 0.7
Retail 488.8 3.2 0.3 1.6
Other 582.6 16.6 1.3 7.7
Total $ 6,201.3 $ 59.3 $ 4.6 $ 18.9
</TABLE>
<TABLE>
OWNER-OCCUPIED COMMERCIAL REAL ESTATE LOANS - BY INDUSTRY SECTOR
<CAPTION>
September 30, 1994 Charge-offs
Loans Third Year to
(in millions) outstanding Nonaccruing quarter date
<S> <C> <C> <C> <C>
Services $ 384.2 $ 7.1 $ 0.4 $ 1.0
Finance, insurance and
real estate 284.0 15.1 1.5 4.2
Manufacturing 192.1 8.1 0.2 0.7
Retail 170.3 14.7 1.4 3.3
Wholesale 112.2 2.9 0.2 0.3
Communications 38.7 1.5 0.1 0.3
Other 241.9 10.4 0.7 3.2
Total $ 1,423.4 $ 59.8 $ 4.5 $ 13.0
</TABLE>
<TABLE>
REAL ESTATE INVESTOR/DEVELOPER LOANS - BY PROJECT
<CAPTION>
September 30, 1994 Charge-offs
Loans Third Year to
(in millions) outstanding Nonaccruing quarter date
<S> <C> <C> <C> <C>
Apartment/rental $ 272.1 $ 15.7 $ 1.9 $ 5.4
Retail 259.7 4.9 1.1 2.4
Offices 230.0 14.2 8.0 11.8
Mixed use 169.5 9.6 2.4 6.1
Industrial 129.1 7.6 1.2 5.9
Special purposes 53.9 9.0 1.4 2.5
Research and development space 37.2 0.4 0.4
Land 28.0 9.0 0.5 2.1
Residential developers
Condominium 32.1 1.0 0.2 1.1
Single family 27.2 3.9 0.3 0.4
Hotels, resorts, inns 31.8 0.1 0.4 0.8
Other 281.2 15.0 0.4 15.7
Total $ 1,551.8 $ 90.0 $ 18.2 $ 54.6
</TABLE>
<PAGE>19
<TABLE>
CONSUMER LOANS - BY TYPE
<CAPTION>
September 30, 1994 Charge-offs
Loans Third Year to
(in millions) outstanding Nonaccruing quarter date
<S> <C> <C> <C> <C>
Residential mortgages $ 5,608.1 $ 46.2 $ 9.4 $ 36.4
Home equity lines 1,294.7 5.3 1.1 3.1
Indirect automobile 820.6 0.9 0.9 3.5
Home equity loans 334.1 1.7 0.3 * 12.1
Direct installment 432.7 1.0 0.2 0.9
Other 69.2 1.7 1.5 4.4
Total $ 8,559.4 $ 56.8 $ 13.4 $ 60.4
</TABLE>
<TABLE>
TEN LARGEST NONACCRUING LOANS AS OF SEPTEMBER 30, 1994
<CAPTION>
Loan Type (in millions)
<S> <C>
Real estate investor/developer: special purpose $ 7.1
Commercial: manufacturing 6.8
Real estate investor/developer: mixed use 6.5
Commercial: service 4.8
Real estate investor/developer: office 3.9
Real estate investor/developer: office, mixed use 3.9
Owner-occupied commercial real estate: industrial use 3.3
Commercial: wholesale 2.9
Real estate investor/developer: office 2.8
Commercial: wholesale 2.1
Total $ 44.1
</TABLE>
<PAGE>20
<TABLE>
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (unaudited)
<CAPTION>
Three months ended Nine months ended
September 30 September 30
(in thousands, except per share data) 1994 1993 1994 1993
INTEREST AND DIVIDEND INCOME
<S> <C> <C> <C> <C>
Loans $ 332,651 $ 310,832 $ 952,517 $ 933,970
Securities
Available for sale, at fair value 30,197 110,606
At lower of aggregate cost or fair value 58,204 174,120
Held to maturity 115,483 81,047 325,963 220,451
Residential mortgages held for sale 5,297 7,348 13,598 23,615
Federal funds sold and securities purchased
under agreements to resell 1,795 3,179 4,625 9,978
Interest-bearing deposits in other banks 4,180 265 7,857 737
Trading account securities 227 410 659 1,083
Total 489,830 461,285 1,415,825 1,363,954
INTEREST EXPENSE
Deposits 107,691 98,257 283,959 328,242
Other borrowings 88,935 71,384 264,454 189,051
Notes and debentures 27,290 18,418 63,261 54,775
Total 223,916 188,059 611,674 572,068
NET INTEREST INCOME 265,914 273,226 804,151 791,886
Provision for credit losses 11,267 3,000 45,764
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES 265,914 261,959 801,151 746,122
NONINTEREST INCOME
Customer service fees 48,691 47,087 146,008 140,455
Trust and agency fees 28,520 29,912 87,002 87,305
Securities gains, net 768 2,499 10,962
Other 13,692 20,834 41,292 74,855
Total 91,671 100,332 274,302 313,577
NONINTEREST EXPENSES
Compensation and benefits 118,868 127,043 367,263 375,006
Occupancy and equipment 38,091 39,052 115,922 123,801
Merger related charges 100,900
Restructuring related charges 39,800 36,319
Foreclosed properties provision and expense 1,113 16,397 10,218 95,497
Other 68,326 79,474 212,799 252,151
Total 226,398 261,966 846,902 882,774
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGES 131,187 100,325 228,551 176,925
Income taxes 45,912 17,727 84,671 40,298
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGES 85,275 82,598 143,880 136,627
Cumulative effect of changes in methods of
accounting 46,200
NET INCOME $ 85,275 $ 82,598 $ 143,880 $ 182,827
NET INCOME APPLICABLE TO
COMMON SHARES $ 81,417 $ 78,730 $ 132,304 $ 171,225
COMMON SHARE DATA
Income before cumulative effect
of accounting changes $ 0.68 $ 0.69 $ 1.12 $ 1.11
Net income 0.68 0.69 1.12 1.52
Weighted average shares outstanding 119,265 114,702 118,518 112,821
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>21
<TABLE>
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (unaudited)
<CAPTION>
September 30 December 31
(in thousands) 1994 1993
ASSETS
<S> <C> <C>
Cash and due from banks $ 1,460,897 $ 1,539,690
Interest-bearing deposits in other banks 214,582 13,252
Federal funds sold and securities purchased
under agreements to resell 278,960 71,500
Trading account securities 41,840 19,625
Residential mortgages held for sale 99,518 472,450
Securities
Available for sale, at fair value 2,086,786 3,189,616
Held to maturity
(fair value $7,910,887 and $7,228,796) 8,200,234 7,152,326
Loans, less reserve for credit
losses of $567,805 and $669,156 17,168,080 16,928,532
Premises and equipment 328,466 332,960
Foreclosed properties 32,112 64,518
Customers' acceptance liability 47,911 13,747
Other assets 1,392,279 1,304,589
Total assets $ 31,351,665 $ 31,102,805
LIABILITIES
Deposits
Demand $ 4,383,006 $ 4,755,036
Savings, money market and NOW accounts 8,905,338 8,976,640
Domestic time 5,712,980 4,763,463
Foreign time 517,824 246,740
Total deposits 19,519,148 18,741,879
Other borrowings 7,668,611 9,282,951
Acceptances outstanding 47,911 13,747
Accrued expenses and other liabilities 352,901 202,916
Notes and debentures 1,633,829 758,941
Total liabilities 29,222,400 29,000,434
SHAREHOLDERS' EQUITY
Preferred stock, without par value
Authorized - 10,000,000 shares
Outstanding - 1,263,700 and 1,275,000 shares 178,185 178,750
Preferred stock, $.01 par value
Authorized - 193,000 shares
Outstanding - 170,073 shares 15,215
Common stock, $.01 par value
Authorized - 300,000,000 and 150,000,000 shares
Issued - 119,589,597 and 117,550,211 shares 1,196 1,176
Surplus 1,270,347 1,237,177
Retained earnings 719,229 658,607
Net unrealized gain (loss) on securities available for sale (39,502) 13,789
Treasury stock, common stock at cost (8,398 and 106,487 shares) (190) (2,343)
Total shareholders' equity 2,129,265 2,102,371
Total liabilities and shareholders' equity $ 31,351,665 $ 31,102,805
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>22
<TABLE>
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
<CAPTION>
(in thousands) 1994 1993
<S> <C> <C>
SHAREHOLDERS' EQUITY at beginning of period, as restated $ 2,102,371 $ 1,731,543
PREFERRED STOCK
Purchase of preferred stock (11,300 shares) (565)
Redemption of preferred stock (170,073 and 177,000 shares) (15,215) (15,835)
COMMON STOCK , $.01 par value
Shares issued under Dividend Reinvestment
and Stock Purchase Plans (1,352,223 shares) 14
Shares issued under stock option and employee
benefit plans (687,163 and 266,746 shares) 6 2
Issuance of common stock (3,233,508 shares) 33
SURPLUS
Additional proceeds from:
Shares issued under Dividend Reinvestment
and Stock Purchase Plans 28,309
Shares issued under stock option
and employee benefit plans 4,861 2,227
Issuance of common stock 28,236
RETAINED EARNINGS
Net income 143,880 182,827
Cash dividends declared by the Corporation on:
Preferred stock (11,576) (11,602)
Common stock (67,973) (28,112)
Cash dividends declared by merged companies prior to mergers (1,143) (3,276)
Restricted stock awards 729 550
Reissuance of common stock from treasury (181) (11,254)
Redemption of preferred stock (3,114) (1,603)
NET UNREALIZED GAIN (LOSS) ON SECURITIES
Unrealized depreciation on securities available for sale (53,291)
Unrealized appreciation on securities at lower of
aggregate cost or fair value 23,370
TREASURY STOCK
Purchase of common stock (91,298 and 7,522 shares) (2,090) (166)
Reissuance of common stock under
Dividend Reinvestment and Stock Purchase Plans
(189,387 and 1,634,563 shares) 4,243 46,171
SHAREHOLDERS' EQUITY at end of period $ 2,129,265 $ 1,943,111
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>23
<TABLE>
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
<CAPTION>
Nine months ended
September 30
(in thousands) 1994 1993
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 143,880 $ 182,827
Adjustments to reconcile net income to cash
provided by operating activities:
Cumulative effect of changes in methods of accounting (46,200)
Provision for credit losses 3,000 45,764
Provision for foreclosed properties 3,512 70,055
Provision for merger and restructuring charges 140,700 36,319
Depreciation, amortization and other 80,723 84,278
Gains from the sale of loans, premises and equipment and other assets (6,711) (14,792)
Increase in securities reported at the lower of
aggregate cost or fair value (434,926)
Increase in trading account securities (22,215) (10,225)
Decrease in residential mortgages held for sale 616,932 146,205
Increase in other assets and accrued expenses
and other liabilities (65,655) (46,591)
CASH PROVIDED BY OPERATING ACTIVITIES 894,166 12,714
FINANCING ACTIVITIES
Increase (decrease) in total deposits 777,269 (1,128,446)
Increase (decrease) in other borrowings (1,614,340) 3,460,221
Proceeds from issuances of bank notes 875,000
Proceeds from issuance of subordinated notes 149,700
Principal payments on notes and debentures (285) (86,030)
Proceeds from issuances of common stock 37,252 65,415
Purchases of common and preferred stock (20,984) (17,604)
Cash dividends paid (76,852) (32,879)
CASH PROVIDED (USED) BY FINANCING ACTIVITIES (22,940) 2,410,377
INVESTING ACTIVITIES
Decrease (increase) in short-term investments (408,790) 25,013
Proceeds from sales of securities available for sale 3,411,401
Maturities of securities available for sale 505,760
Purchases of securities available for sale (3,176,753)
Maturities of securities held to maturity 1,238,340 1,366,186
Proceeds from sales of securities held to maturity 1,337,347
Purchases of securities held to maturity (2,029,137) (5,128,512)
Proceeds from sales of loans 31,056 496,858
Purchases of loans (487,415) (377,033)
Loans originated less principal collected (42,159) (543,036)
Purchases of premises and equipment and other assets (39,797) (24,185)
Proceeds from the sale of premises and equipment and other assets 47,475 81,142
CASH USED BY INVESTING ACTIVITIES (950,019) (2,766,220)
DECREASE IN CASH AND DUE FROM BANKS (78,793) (343,129)
Cash and due from banks at beginning of period 1,539,690 1,463,728
CASH AND DUE FROM BANKS AT END OF PERIOD $ 1,460,897 $ 1,120,599
ADDITIONAL CASH FLOW INFORMATION
Interest paid $ 594,535 $ 557,556
Income taxes paid $ 33,011 $ 20,107
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>24
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Shawmut National Corporation and its subsidiaries (the Corporation). These
financial statements reflect, in management's opinion, all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
of the Corporation's financial position and results of operations and cash
flows for the periods presented. Certain amounts for prior periods have been
reclassified to conform to current period presentation. These financial
statements should be read in conjunction with the financial statements and
notes thereto included in the Corporation's 1993 Annual Report on Form 10-K as
restated to give effect to the acquisitions further discussed in "Note 2 -
Acquisitions".
NOTE 2 - ACQUISITIONS
The Corporation completed its acquisitions of the following banking
organizations during the second quarter of 1994:
<TABLE>
<CAPTION>
Common
Assets at shares Exchange
(in thousands, except exchange ratio) March 31, 1994 issued ratio
<S> <C> <C> <C>
Peoples Bancorp of Worcester, Inc. (Peoples) - (May 23, 1994) $ 870,673 8,320 2.444
New Dartmouth Bank (New Dartmouth) - (June 6, 1994) $ 1,724,458 6,430 15.157
Gateway Financial Corporation (Gateway) - (June 27, 1994) $ 1,259,563 7,421 0.559
</TABLE>
These acquisitions were accounted for as poolings of interests and are reflected
in the consolidated financial statements as though the Corporation, Peoples, New
Dartmouth and Gateway had been combined as of the beginning of the earliest
period presented.
Merger related charges of $100.9 million were recorded to reflect the
integration of these acquisitions during the second quarter of 1994. The merger
related charges include $18.9 million for severance and benefits costs for
workforce reductions; $39.4 million for the closure of duplicative branches and
facilities and cancellation of vendor contracts; $11.1 million for financial
advisory, legal and accounting expenses; and $7.0 million for losses on the
accelerated sales of foreclosed properties. In addition, the sales of
securities (which occurred during the second quarter of 1994) and disposition of
residential loans of the acquired entities (which occurred during the third
quarter of 1994) to maintain an interest rate risk profile consistent with that
of the Corporation resulted in losses of $12.5 million and $12.0 million,
respectively, during the second quarter of 1994.
Net interest income and net income, as previously reported, for the three and
nine months ended September 30, 1993 are restated below:
<TABLE>
<CAPTION>
Three months Nine months
ended ended
(in thousands) Sept. 30, 1993 Sept. 30, 1993
Net interest income:
<S> <C> <C>
Peoples $ 9,297 $ 27,700
New Dartmouth 14,923 46,594
Gateway 12,249 35,508
The Corporation, as previously reported 236,757 682,084
Combined $ 273,226 $ 791,886
Net income:
Peoples $ 2,942 $ 8,587
New Dartmouth 4,722 14,110
Gateway 3,825 3,037
The Corporation, as previously reported 71,109 157,093
Combined $ 82,598 $ 182,827
</TABLE>
<PAGE>25
The Corporation also completed its acquisitions of West Newton Savings Bank,
with assets of $254 million, and Cohasset Savings Bank, with assets of
$78 million, on September 30, 1994, which were accounted for as purchases.
NOTE 3 - SECURITIES
<TABLE>
A summary of the amortized cost and fair value of securities classified as
available for sale at September 30, 1994 and December 31, 1993 is as follows:
<CAPTION>
September 30, 1994 December 31, 1993
Amortized Fair Amortized Fair
(in thousands) cost value cost value
U.S. Government and agency securities
<S> <C> <C> <C> <C>
U.S. Treasury $ 1,270,033 $ 1,229,587 $ 1,695,536 $ 1,693,153
Mortgage backed 214,012 219,290 730,321 756,253
Corporate mortgage backed and
other securities 436,589 416,545 488,286 486,877
Equity securities 226,829 221,267 254,194 253,179
State and municipal obligations 96 97 142 154
Total $ 2,147,559 $ 2,086,786 $ 3,168,479 $ 3,189,616
The amortized cost of securities classified as available for sale exceeded fair
value by approximately $60.8 million at September 30, 1994, consisting of
unrealized losses of approximately $74.1 million and unrealized gains of
approximately $13.3 million. As a result, net unrealized losses of $39.5 million
and net unrealized gains of $13.8 million on securities classified as available
for sale at September 30, 1994 and December 31, 1993, respectively, were included
as a separate component of shareholders' equity. These net unrealized losses and
gains are net of income tax effects of $21.3 million and $7.3 million,
respectively.
The amortized cost and fair value of securities classified as held to maturity at
September 30, 1994 and December 31, 1993 are summarized as follows:
September 30, 1994 December 31, 1993
Amortized Fair Amortized Fair
(in thousands) cost value cost value
U.S. Government and agency securities
Mortgage backed $ 3,837,372 $ 3,697,811 $ 3,332,189 $ 3,392,224
U.S. Treasury 1,965,083 1,874,528 1,713,534 1,709,539
Asset backed and other securities 2,397,779 2,338,548 2,106,603 2,127,033
Total $ 8,200,234 $ 7,910,887 $ 7,152,326 $ 7,228,796
The amortized cost of securities classified as held to maturity exceeded fair
value by approximately $289.3 million at September 30, 1994, consisting of
unrealized losses of approximately $293.9 million and unrealized gains of
approximately $4.6 million.
As part of the acquisitions completed during the second quarter of 1994, certain
securities previously classified as held to maturity by the acquired entities
were transferred to securities classified as available for sale and certain
securities classified as available for sale were sold in order to maintain the
Corporation's interest rate risk profile. The net loss recognized upon the sale
of these securities of $12.5 million is included in merger related charges for
the nine months ended September 30, 1994. The amortized cost and fair value of
the securities transferred from the held to maturity category to available for
sale were $112.1 million and $106.9 million, respectively. Also, securities
previously classified as available for sale by the acquired entities, with a fair
value of $377.5 million, were transferred to securities classified as held to
maturity.
The proceeds from sales of the securities classified as available for sale,
inclusive of certain securities previously classified as held to maturity by the
acquired entities, were $264.0 million, which resulted in gross realized losses
of $14.7 million and gross realized gains of $2.2 million during the second
quarter of 1994.
<PAGE>26
NOTE 4 - LOANS
The components of loans at September 30, 1994 and December 31, 1993, net of
unearned income of $40.7 million and $12.8 million, respectively, are summarized
below:
</TABLE>
<TABLE>
<CAPTION>
September 30, December 31,
(in thousands) 1994 1993
<S> <C> <C>
Commercial and industrial $ 6,201,338 $ 6,393,501
Owner-occupied commercial real estate 1,423,374 1,492,820
Real estate investor/developer
Commercial mortgage 1,401,260 1,526,457
Construction and other 150,486 160,740
Total investor/developer 1,551,746 1,687,197
Consumer
Residential mortgage 5,608,137 5,325,904
Home equity 1,628,743 1,637,773
Installment and other 1,322,547 1,060,493
Total consumer 8,559,427 8,024,170
Total 17,735,885 17,597,688
Less reserve for credit losses 567,805 669,156
Total $ 17,168,080 $ 16,928,532
</TABLE>
In connection with the acquisitions completed during the second quarter of 1994,
fixed-rate residential mortgage loans with a carrying amount of approximately
$244.0 million were transferred to residential mortgages held for sale at June
30, 1994 and subsequently sold during the third quarter of 1994. The
Corporation recognized a loss of $12.0 million to record these loans at the
lower of cost or market value, which is included in merger related charges for
the nine months ended September 30, 1994.
Loans totaling $15.1 million and $18.1 million were transferred to foreclosed
properties during the nine months ended September 30, 1994 and 1993,
respectively.
NOTE 5 - OTHER ASSETS AND ACCRUED EXPENSES AND OTHER LIABILITIES
<TABLE>
The components of other assets at September 30, 1994 and December 31, 1993 are
presented below:
<CAPTION>
September 30, December 31,
(in thousands) 1994 1993
<S> <C> <C>
Receivable for securities sold $ 83,088 $ 219,111
Net deferred income taxes 219,166 200,871
Accrued interest income 225,810 171,084
Cash surrender value of life insurance 155,241
Prepaid pension expense 124,864 128,302
Goodwill and other intangibles 151,506 109,671
Other 432,604 475,550
Total $ 1,392,279 $ 1,304,589
</TABLE>
<PAGE>27
The components of accrued expenses and other liabilities at September 30, 1994
and December 31, 1993 are presented below:
<TABLE>
<CAPTION>
September 30, December 31,
(in thousands) 1994 1993
<S> <C> <C>
Accrued interest expense $ 88,026 $ 70,887
Accrued dividends payable 27,930 24,090
Accrued postemployment benefits expense 9,233 8,400
Accrued postretirement health care and life insurance benefits expense 13,097 8,057
Accrued restructuring expenses 29,549 6,854
Accrued merger expenses 42,651
Payable for securities purchased 19,922 83
Other 122,493 84,545
Total $ 352,901 $ 202,916
</TABLE>
NOTE 6 - NOTES AND DEBENTURES
<TABLE>
The Corporation's notes and debentures at September 30, 1994 and December 31,
1993 are summarized below:
<CAPTION>
September 30, December 31,
(in thousands) 1994 1993
<S> <C> <C>
Floating rate senior notes due April 15, 1996 $ 250,000
Floating rate senior notes due June 21, 1995 200,000
5.50% senior notes due June 30, 1995 200,000
9.85% subordinated capital notes due June 1, 1999, net of discount 149,927 $ 149,915
8 7/8% notes due April 1,1996, net of discount 149,842 149,769
7.20% subordinated notes due April 15, 2003, net of discount 149,742 149,720
8 5/8% subordinated notes due December 15, 1999, net of discount 149,723 149,684
Floating rate senior notes due March 24, 1995 100,000
Floating rate senior notes due June 14, 1995 100,000
8 1/8% notes due February 1, 1997, net of discount 99,907 99,880
Floating rate subordinated notes due February 14, 1997 50,000 50,000
4.95% senior note due November 21, 1994 25,000
Other 9,688 9,973
Total $ 1,633,829 $ 758,941
</TABLE>
<PAGE>28
NOTE 7 - OTHER NONINTEREST INCOME AND NONINTEREST EXPENSES
<TABLE>
The components of other noninterest income for the three and nine months ended
September 30, 1994 and 1993 were as follows:
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
(in thousands) 1994 1993 1994 1993
<S> <C> <C> <C> <C>
Loan servicing $ 4,612 $ 3,831 $ 19,645 $ 15,031
Trading account profits 1,034 1,544 3,496 5,185
Foreign exchange trading profits (losses) 17 238 (1,814) 235
Residential mortgage sales gains 878 4,523 1,930 24,107
FDIC assistance 3,507 11,616
Other 7,151 7,191 18,035 18,681
Total $ 13,692 $ 20,834 $ 41,292 $ 74,855
</TABLE>
<TABLE>
The components of noninterest expenses for the three and nine months ended
September 30, 1994 and 1993 were as follows:
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
(in thousands) 1994 1993 1994 1993
<S> <C> <C> <C> <C>
Compensation $ 97,921 $ 105,185 $ 300,139 $ 308,851
Benefits 20,947 21,858 67,124 66,155
Total $ 118,868 $ 127,043 $ 367,263 $ 375,006
Occupancy $ 23,849 $ 25,841 $ 75,179 $ 79,652
Equipment 14,242 13,211 40,743 44,149
Total $ 38,091 $ 39,052 $ 115,922 $ 123,801
Foreclosed properties
Provision $ 583 $ 11,289 $ 3,512 $ 70,055
Expense 530 5,108 6,706 25,442
Total $ 1,113 $ 16,397 $ 10,218 $ 95,497
Federal Deposit Insurance Corporation
premiums $ 10,328 $ 12,532 $ 33,240 $ 39,721
Communications 10,315 11,244 30,862 34,920
Advertising 4,523 4,848 15,594 16,472
Excess servicing writedowns 14,150
Other 43,160 50,850 133,103 146,888
Total $ 68,326 $ 79,474 $ 212,799 $ 252,151
</TABLE>
<PAGE>29
CONSOLIDATED AVERAGE BALANCE SHEET, NET INTEREST INCOME AND INTEREST RATES
The following are the Corporation's average balance sheet, net interest income
and interest rates:
<TABLE>
<CAPTION>
Three months ended Three months ended
September 30, 1994 June 30, 1994
Average Average Average Average
(in millions) balance Interest rate balance Interest rate
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Loans $ 17,516 $ 333.8 7.58 % $ 17,674 $ 320.7 7.27 %
Securities
Available for sale, at fair
value 1,989 32.1 6.44 2,615 39.9 6.09
At lower of aggregate cost or
fair value
Held to maturity 8,090 115.5 5.70 7,743 107.2 5.54
Residential mortgages held for
sale 285 5.3 7.44 168 2.9 6.92
Short-term investments
Time deposits in other banks 346 4.1 4.81 215 2.1 3.96
Federal funds sold and securities
purchased under agreements to
resell 146 1.8 4.89 146 1.6 4.30
Trading account securities 23 0.2 3.87 21 0.2 4.55
Total interest-earning
assets 28,395 492.8 6.91 28,582 474.6 6.65
Reserve for credit losses (595) (633)
Cash and due from banks 1,478 1,464
Other assets 1,701 1,696
Total assets $ 30,979 $ 31,109
LIABILITIES
Savings, money market and
NOW accounts $ 8,923 42.3 1.88 % $ 8,827 38.2 1.74 %
Time certificates of deposit
of $100 thousand or more 1,041 14.1 5.39 531 7.0 5.31
Domestic time deposits 4,493 46.4 4.09 4,352 43.0 3.96
Foreign time deposits 431 4.9 4.50 255 2.4 3.79
Total interest-bearing
deposits 14,888 107.7 2.87 13,965 90.6 2.60
Federal funds purchased and
securities sold under
agreements to repurchase 6,513 73.6 4.48 8,000 78.0 3.91
Other borrowings 1,014 15.3 6.01 1,101 17.4 6.35
Total other borrowings 7,527 88.9 4.69 9,101 95.4 4.21
Notes and debentures 1,619 27.3 6.72 1,108 19.9 7.17
Total interest-bearing
liabilities 24,034 223.9 3.70 24,174 205.9 3.42
Demand deposits 4,462 4,457
Other liabilities 349 278
Total liabilities 28,845 28,909
Shareholders' equity 2,134 2,200
Total liabilities and
shareholders' equity $ 30,979 $ 31,109
Net interest income
(tax-equivalent basis) 268.9 3.78 268.7 3.76
Less tax-equivalent adjustment 3.0 3.0
Net interest income $ 265.9 $ 265.7
</TABLE>
<PAGE>30
CONSOLIDATED AVERAGE BALANCE SHEET, NET INTEREST INCOME AND INTEREST RATES
The following are the Corporation's average balance sheet, net interest income
and interest rates:
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 1994 December 31, 1993
Average Average Average Average
(in millions) balance Interest rate balance Interest rate
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Loans $ 17,170 $ 301.5 7.09 % $ 17,124 $ 310.0 7.19 %
Securities
Available for sale, at fair
value 2,960 44.1 5.73
At lower of aggregate cost or
fair value 4,374 62.7 5.79
Held to maturity 7,486 103.3 5.61 6,004 84.2 5.56
Residential mortgages held
for sale 312 5.4 6.90 351 6.1 6.86
Short-term investments
Time deposits in other banks 172 1.5 3.62 14 0.1 2.98
Federal funds sold and
securities purchased under
agreements to resell 169 1.3 3.19 341 2.6 3.04
Trading account securities 17 0.2 4.52 43 0.5 4.49
Total interest-earning
assets 28,286 457.3 6.51 28,251 466.2 6.57
Reserve for credit losses (668) (696)
Cash and due from banks 1,551 1,576
Other assets 1,584 1,496
Total assets $ 30,753 $ 30,627
LIABILITIES
Savings, money market and
NOW accounts $ 8,842 37.4 1.71 % $ 8,990 39.2 1.84 %
Time certificates of deposit
of $100 thousand or more 476 4.7 4.05 465 5.1 4.38
Domestic time deposits 4,259 42.0 4.00 4,463 46.3 4.11
Foreign time deposits 202 1.6 3.10 271 2.1 3.01
Total interest-bearing
deposits 13,779 85.7 2.52 14,189 92.7 2.59
Federal funds purchased and
securities sold under agreements
to repurchase 8,003 63.9 3.24 7,500 55.0 2.91
Other borrowings 1,289 16.2 5.11 1,253 18.4 5.83
Total other borrowings 9,292 80.1 3.50 8,753 73.4 3.33
Notes and debentures 760 16.1 8.48 815 17.3 8.47
Total interest-bearing
liabilities 23,831 181.9 3.09 23,757 183.4 3.07
Demand deposits 4,540 4,612
Other liabilities 264 275
Total liabilities 28,635 28,644
Shareholders' equity 2,118 1,983
Total liabilities and
shareholders' equity $ 30,753 $ 30,627
Net interest income
(tax-equivalent basis) 275.4 3.91 282.8 3.99
Less tax-equivalent adjustment 2.9 3.1
Net interest income $ 272.5 $ 279.7
</TABLE>
<PAGE>31
CONSOLIDATED AVERAGE BALANCE SHEET, NET INTEREST INCOME AND INTEREST RATES
The following are the Corporation's average balance sheet, net interest income
and interest rates:
<TABLE>
<CAPTION>
Three months ended
September 30, 1993
Average Average
(in millions) balance Interest rate
ASSETS
<S> <C> <C> <C>
Loans $ 17,077 $ 312.3 7.29 %
Securities
Available for sale, at fair
value
At lower of aggregate cost
or fair value 3,877 58.9 6.16
Held to maturity 5,537 82.6 5.91
Residential mortgages held
for sale 412 7.3 7.13
Short-term investments
Time deposits in other banks 36 0.2 2.96
Federal funds sold and
securities purchased under
agreements to resell 401 3.2 3.14
Trading account securities 43 0.4 3.81
Total interest-earning
assets 27,383 464.9 6.77
Reserve for credit losses (724)
Cash and due from banks 1,522
Other assets 1,580
Total assets $ 29,761
LIABILITIES
Savings, money market and
NOW accounts $ 9,062 42.6 1.90 %
Time certificates of deposit
of $100 thousand or more 518 6.2 4.76
Domestic time deposits 4,688 47.9 4.05
Foreign time deposits 205 1.6 3.00
Total interest-bearing
deposits 14,473 98.3 2.70
Federal funds purchased and
securities sold under
agreements to repuchase 6,973 54.8 3.12
Other borrowings 855 16.6 7.68
Total other borrowings 7,828 71.4 3.62
Notes and debentures 874 18.4 8.43
Total interest-bearing
liabilities 23,175 188.1 3.22
Demand deposits 4,436
Other liabilities 275
Total liabilities 27,886
Shareholders' equity 1,875
Total liabilities and
shareholders' equity $ 29,761
Net interest income
(tax-equivalent basis) 276.8 4.05
Less tax-equivalent adjustment 3.6
Net interest income $ 273.2
</TABLE>
<PAGE>32
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Shawmut Bank Connecticut, N.A., one of the
Corporation's subsidiaries, which served as indenture
trustee for certain healthcare receivable backed bonds
issued by certain special purpose subsidiaries (the
"Towers subsidiaries") of Towers Financial Corporation
("Towers"), has been named in a lawsuit filed in
federal court in Manhattan by purchasers of the bonds.
The suit seeks damages in an undetermined amount equal
to the difference between the current value of the
bonds and their face amount of approximately $200
million, plus interest, as well as punitive damages.
The Towers subsidiaries defaulted on the bonds and
Towers and the subsidiaries later filed for bankruptcy
protection. The complaint, which also names as a
defendant the company that issued a double-A rating on
the bonds, alleges that Towers engaged in a massive
fraud against bondholders which, according to the
complaint, should have been detected at an early stage
by the bond rating agency and the indenture trustee.
The Corporation believes that its actions were not the
cause of any loss by the bondholders, and it is
vigorously defending the action.
The Corporation is also subject to various other
pending and threatened lawsuits in which claims for
monetary damages are asserted. Management, after
consultation with legal counsel, does not anticipate
that the ultimate liability, if any, arising out of
such other pending and threatened lawsuits will have a
material effect on the Corporation's results of
operations or financial condition.
Item 5 Other Information
By press release dated September 30, 1994, the
Corporation announced that it had completed its
acquisition of Cohasset Savings Bank, of Cohasset,
Massachusetts. A copy of the press release is
incorporated in this Form 10-Q as Exhibit 99.1 to Part
II.
By press release dated September 30, 1994, the
Corporation announced that it completed its
acquisition of West Newton Savings Bank, of West
Newton, Massachusetts. A copy of the press release
is incorporated in this Form 10-Q as Exhibit 99.2 to
Part II.
Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation
S-K are listed on the Exhibits Index on page 1
of this report and are filed herewith or are
incorporated herein by reference.
(b) Reports on From 8-K - The Corporation filed
three reports on Form 8-K during the quarter
ended September 30, 1994.
<PAGE>33
The report dated July 15, 1994 (Items 5 and
7) reported that the Resolution Trust Corporation
had accepted the Corporation's bid, through its
newly formed subsidiary, Shawmut Bank, FSB, to
purchase The Guardian Bank, FSB, of Boca Raton,
Florida, for $3.8 million. The transaction was
effective at the close of business July 15, 1994.
The report filed a copy of the Corporation's July
18, 1994 press release.
The report dated August 2, 1994 (Items 5 and
7) reported that as a result of the completion of
its acquisitions of Peoples Bancorp of Worcester,
Inc. ("Peoples"), New Dartmouth Bank, ("New
Dartmouth"), and Gateway Financial Corporation
("Gateway"), which transactions were accounted
for as a pooling of interests, the Corporation's
consolidated financial statements and notes
thereto as of December 31, 1993 and December 31,
1992 and for the three years ended December 31,
1993 have been restated as though the
Corporation, Peoples, New Dartmouth and Gateway
had been combined as of the beginning of the
earliest period presented. The report filed a
copy of such restated combined financial
statements.
The report dated August 12, 1994 (Item 5)
published unaudited financial results of the
Corporation which reflected the acquisition of
Peoples, New Dartmouth and Gateway (all of which
were consummated in the second quarter of 1994
and accounted for as pooling of interests). The
publication of these unaudited financial results
was in connection with certain provisions of the
merger agreement between the Corporation and New
Dartmouth, and included at least 30 days of post
merger combined results of operations pursuant to
Securities and Exchange Commission Accounting
Series Release No. 135.
<PAGE>34
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
SHAWMUT NATIONAL CORPORATION
(Registrant)
Date: November 3, 1994 By (Joel B. Alvord)
-----------------
Joel B. Alvord
Chairman and
Chief Executive Officer
Date: November 3, 1994 By (Susan E. Lester)
-------------------
Susan E. Lester
Chief Financial Officer
(Principal Financial Officer
and Principal Accounting
Officer)
<PAGE>35
<TABLE>
SHAWMUT NATIONAL CORPORATION EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDEND REQUIREMENTS
<CAPTION>
Nine months
ended
(in thousands) September 30 Year ended December 31,
1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
EARNINGS
Income (loss) before income taxes,
extraordinary credit and
cumulative effect of accounting
changes $ 228,551 $ 289,476 $ 108,625 $ (169,223) $ (155,672) $ (203,206)
Portion of rents representative
of the interest factor 12,906 18,037 19,525 19,491 19,903 21,874
Interest on other borrowings 264,454 262,413 192,240 217,739 340,650 634,175
Interest on notes and debentures 62,628 70,646 59,321 60,436 63,105 66,287
Amortization of debt issuance cost 633 1,394 594 618 578 563
Earnings including interest on deposits 569,172 641,966 380,305 129,061 268,564 519,693
Interest on deposits 283,959 420,966 622,436 933,665 1,253,609 1,173,931
Earnings excluding interest on deposits $ 853,131 $1,062,932 $1,002,741 $1,062,726 $1,522,173 $1,693,624
FIXED CHARGES
Portion of rents representative
of the interest factor $ 12,906 $ 18,037 $ 19,525 $ 19,491 $ 19,903 $ 21,874
Interest on other borrowings 264,454 262,413 192,240 217,739 340,650 634,175
Interest on notes and debentures 62,628 70,646 59,321 60,436 63,105 66,287
Amortization of debt issuance cost 633 1,394 594 618 578 563
Fixed charges excluding interest on
deposits 340,621 352,490 271,680 298,284 424,236 722,899
Interest on deposits 283,959 420,966 622,436 933,665 1,253,609 1,173,931
Fixed charges including interest on
deposits $ 624,580 $ 773,456 $ 894,116 $1,231,949 $1,677,845 $1,896,830
COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDEND
REQUIREMENTS
Fixed charges excluding interest on
deposits $ 340,621 $ 352,490 $ 271,680 $ 298,284 $ 424,236 $ 722,899
Preferred stock dividend requirements 18,375 23,438 15,952 2,262 2,328 2,341
$ 358,996 $ 375,928 $ 287,632 $ 300,546 $ 426,564 $ 725,240
Fixed charges including interest on
deposits $ 624,580 $ 773,456 $ 894,116 $1,231,949 $1,677,845 $1,896,830
Preferred stock dividend requirements 18,375 23,438 15,952 2,262 2,328 2,341
$ 642,955 $ 796,894 $ 910,068 $1,234,211 $1,680,173 $1,899,171
RATIOS
Earnings to fixed charges
Excluding interest on deposits 1.67 x 1.82 x 1.40 x 0.43 x 0.63 x 0.72 x
Including interest on deposits 1.37 1.37 1.12 0.86 0.91 0.89
Earnings to combined fixed charges and
preferred stock dividend requirements
Excluding interest on deposits 1.59 1.71 1.32 0.41 0.63 0.70
Including interest on deposits 1.33 1.33 1.10 0.86 0.91 0.89
</TABLE>
<PAGE>36
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 1,460,897
<INT-BEARING-DEPOSITS> 214,582
<FED-FUNDS-SOLD> 278,960
<TRADING-ASSETS> 41,840
<INVESTMENTS-HELD-FOR-SALE> 2,086,786
<INVESTMENTS-CARRYING> 8,200,234
<INVESTMENTS-MARKET> 7,910,887
<LOANS> 17,735,885
<ALLOWANCE> 567,805
<TOTAL-ASSETS> 31,351,665
<DEPOSITS> 19,519,148
<SHORT-TERM> 7,668,611
<LIABILITIES-OTHER> 400,812
<LONG-TERM> 1,633,829
<COMMON> 1,196
0
178,185
<OTHER-SE> 1,949,884
<TOTAL-LIABILITIES-AND-EQUITY> 31,351,665
<INTEREST-LOAN> 952,517
<INTEREST-INVEST> 436,569
<INTEREST-OTHER> 26,739
<INTEREST-TOTAL> 1,415,825
<INTEREST-DEPOSIT> 283,959
<INTEREST-EXPENSE> 327,715
<INTEREST-INCOME-NET> 804,151
<LOAN-LOSSES> 3,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 846,902
<INCOME-PRETAX> 228,551
<INCOME-PRE-EXTRAORDINARY> 143,880
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 143,880
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 1.12
<YIELD-ACTUAL> 7.34
<LOANS-NON> 265,915
<LOANS-PAST> 53,058
<LOANS-TROUBLED> 31,133
<LOANS-PROBLEM> 350,106
<ALLOWANCE-OPEN> 673,443
<CHARGE-OFFS> 146,931
<RECOVERIES> 38,293
<ALLOWANCE-CLOSE> 567,805
<ALLOWANCE-DOMESTIC> 567,805
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 481,802
<PAGE>
</TABLE>
EXHIBIT 99.1
CONTACT:
Vincent Loporchio Brent DiGiorgio
(617) 292-3239 (203) 240-7632
FOR IMMEDIATE RELEASE
SHAWMUT ANNOUNCES COMPLETION OF COHASSET SAVINGS
ACQUISITION
BOSTON, MASS. AND HARTFORD, CONN., September 30, 1994 --
Shawmut National Corporation (NYSE: SNC) today announced
that it has completed its acquisition of Cohasset Savings
Bank (NASDAQ:CHTB) of Cohasset, Massachusetts, and
officially opened for business through its subsidiary
Shawmut Bank, N.A.
Shawmut originally announced a definitive agreement to
acquire Cohasset Savings for $16 in cash per fully diluted
Cohasset share, for a total of $16.9 million on March 2,
1994. Prior to the acquisition, Cohasset Savings had $78
million in assets and two branches, in Cohasset and North
Scituate.
With assets of $31.3 billion, Shawmut National Corporation
is a superregional bank holding company with a franchise of
over 300 branches and nearly 500 ATMs in four New England
states: Connecticut, Massachusetts, New Hampshire, and
Rhode Island. Shawmut is a leading provider of financial
services to consumers and small-to medium-sized businesses.
It also provides financial services to corporate customers,
correspondent banks, and government units throughout New
England and in select national markets.
<PAGE>38
EXHIBIT 99.2
CONTACT:
Vincent Loporchio Brent DiGiorgio
(617) 292-3239 (203) 240-7632
FOR IMMEDIATE RELEASE
SHAWMUT COMPLETES ACQUISITION OF WEST NEWTON SAVINGS
BOSTON, MASS. AND HARTFORD, CONN., September 30, 1994 --
Shawmut National Corporation (NYSE: SNC) today announced
that it has completed its acquisition of West Newton Savings
Bank (NASDAQ:WNSB) of West Newton, Massachusetts, and
officially opened for business through its subsidiary
Shawmut Bank, N.A.
Shawmut originally announced a definitive agreement to
acquire West Newton Savings for $45.4 million in cash, or
$25 per share, on March 7, 1994.
Prior to the acquisition, West Newton Savings had $254
million in assets and five offices, located in West Newton,
Lincoln, Sherborn, Sudbury and Wayland.
With assets of $31.3 billion, Shawmut National Corporation
is a superregional bank holding company with a franchise of
over 300 branches and nearly 500 ATMs in four New England
states: Connecticut, Massachusetts, New Hampshire, and
Rhode Island. Shawmut is a leading provider of financial
services to consumers and small-to medium-sized businesses.
It also provides financial services to corporate customers,
correspondent banks, and government units throughout New
England and in select national markets.
<PAGE>39
