FIRST QUARTER 1995
__________________________________________________________________________
__________________________________________________________________________
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 March 31, 1995
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) 986-2000
(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 .
122,170,832 shares of the registrant's common stock, par
value $0.01, were outstanding as of May 3, 1995.
_________________________________________________________________________
Total number of pages: 45
The Exhibits Index, filed as a part of this report, appears
on page 2.
__________________________________________________________________________
__________________________________________________________________________
<PAGE> 1
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
March 31 March 31
(in millions, except per share data) 1995 1994
<S> <C> <C>
Three Months Ended
Net income $ 62.6 $ 77.3
Return on average assets 0.76 % 1.02 %
Return on average common equity 10.98 15.47
Net interest margin (tax-equivalent basis) 3.55 3.91
Efficiency ratio 62.05 65.72
Per Common Share
Net income $ 0.47 $ 0.62
Dividends declared 0.22 0.20
Book value 17.06 16.41
End of Period Balances
Loans $ 21,135 $ 17,559
Reserve for credit losses 559 639
Total assets 34,190 31,247
Deposits 20,602 17,884
Common shareholders' equity 2,082 1,937
Shareholders' equity 2,385 2,130
Capital Ratios
Common shareholders' equity to total assets 6.09 % 6.20 %
Shareholders' equity to total assets 6.98 6.82
Tier 1 capital 7.37 8.90
Total capital 11.24 12.65
Leverage 6.21 6.66
</TABLE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS AND FORM 10-Q CROSS-REFERENCE INDEX
Page
<S> <C>
Part I - Financial Information
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Item 2): 3
Financial Statements (Item 1):
Consolidated Statement of Income 22
Consolidated Balance Sheet 23
Consolidated Statement of Changes in Shareholders' Equity 24
Consolidated Statement of Cash Flows 25
Notes to Consolidated Financial Statements 26
Selected Statistical Information:
Consolidated Average Balance Sheet, Net Interest Income
and Interest Rates 33
Part II - Other Information
Legal Proceedings (Item 1) 36
Other Information (Item 5) 38
Exhibits and Reports on Form 8-K (Item 6) 38
Signatures 43
Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges 44
Exhibit 27 - Financial Data Schedule 45
</TABLE>
<PAGE> 2
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
Shawmut National Corporation (the "Corporation") reported net income
for the first quarter of 1995 of $62.6 million, or $.47 per common
share, compared with net income of $77.3 million, or $.62 per common
share, for the first quarter of 1994. Included in first quarter 1995
results was a $36.9 million pre-tax charge ($23.1 million after-tax, or
$.19 per common share) related to the settlement of certain of the
Corporation's employee retirement benefits as a result of the execution
of the agreement to merge with Fleet Financial Group, Inc. ("Fleet").
Excluding this charge, net income for the first quarter of 1995 would
have been $85.7 million, or $.66 per common share, an increase of $8.4
million, or 11 percent, from the comparable prior year quarter.
On January 31, 1995, the Corporation completed its purchase of
substantially all the assets and assumption of certain liabilities of
the Business Finance Division of Barclays Business Credit, Inc., which
was renamed Shawmut Capital Corporation. The book value of the assets
acquired was approximately $2.3 billion and the book value of the
liabilities assumed was approximately $12.7 million. This acquisition
was accounted for under the purchase method of accounting. Therefore,
the results of operations of Shawmut Capital Corporation are included
in the Corporation's consolidated financial statements for the first
quarter of 1995 only from the date of purchase.
Net interest income on a taxable-equivalent basis for the first quarter
of 1995 was $273.2 million, a decrease of $2.2 million, or less than 1
percent, compared with $275.4 million for the first quarter of 1994.
Net interest margin on a taxable-equivalent basis declined to 3.55
percent from 3.91 percent for the same periods. Net interest income
and margin declined in the first quarter of 1995 when compared with the
prior year period as a result of rising interest rates, thereby
increasing the Corporation's cost of funds and more than offsetting the
increase in average interest-earning assets of $2.6 billion, or 9
percent, from the comparable prior year period.
There was no provision for credit losses for the first quarter of 1995,
compared with a $3.0 million provision for the first quarter of 1994.
The reserve for credit losses was $559.2 million at March 31, 1995,
compared with $542.1 million at December 31, 1994, reflecting reserves
that were purchased as part of the Shawmut Capital Corporation
acquisition. The ratio of the reserve for credit losses to nonaccruing
loans was 245 percent at March 31, 1995, compared with 242 percent at
December 31, 1994.
Nonaccruing loans plus foreclosed properties at March 31, 1995 totaled
$240.3 million, down $2.5 million, or 1 percent, from $242.8 million at
December 31, 1994. The ratio of nonaccruing loans plus foreclosed
properties to loans plus foreclosed properties declined to 1.14 percent
at March 31, 1995 from 1.31 percent at December 31, 1994.
Noninterest income, excluding securities gains and losses, was $95.4
million for the first quarter of 1995, compared with $89.5 million for
the prior year period, an increase of $5.9 million, or 7 percent. The
increase in the 1995 period reflects higher customer service and other
fees including revenues from Shawmut Capital Corporation and other
financial institutions purchased during 1994.
Noninterest expenses, excluding foreclosed properties provision and
merger related charges, were $228.7 million for the first quarter of
1995, a decrease of $11.1 million, or 5 percent, from $239.8 million
for the first quarter of 1994. The efficiency ratio, a measure of
operating expenses before special charges to net revenue, improved to
62.0 percent for the first quarter of 1995 from 65.7 percent for the
prior year period.
Return on average common equity decreased from 15.47 percent for the
first quarter of 1994 to 10.98 percent for the first quarter of 1995
and return on average assets decreased from 1.02 percent to .76 percent
over the same periods. Excluding the merger related charge, return on
average common equity and return on average assets were 15.45 percent
and 1.04 percent, respectively, for the first quarter of 1995.
<PAGE> 3
In connection with the acquisition of Shawmut Capital Corporation, the
Corporation completed a $125 million offering of 500,000 shares of
9.35% cumulative preferred stock with a stated value of $250 per share,
represented by depositary shares, on January 26, 1995 and the
Corporation's Shawmut Bank Connecticut subsidiary completed an offering
of $250 million of subordinated bank notes on February 14, 1995.
The Corporation's common stock closed at $26.375 per share on March 31,
1995, representing 155 percent of the $17.06 book value per common
share, compared with $16.375 per share and 98 percent of the $16.72
book value per common share at December 31, 1994.
On February 20, 1995, the Corporation and Fleet entered into an
agreement and plan of merger pursuant to which the Corporation will
merge with and into Fleet ("the Merger"). As a result of the Merger,
each share of the Corporation's $.01 par value common stock outstanding
will be converted into the right to receive .8922 shares of $1.00 par
value Fleet common stock. Each share of the various series of the
Corporation's preferred stock will be converted into the right to
receive an equivalent series of Fleet preferred stock. The Merger is
expected to be completed in the fourth quarter of 1995, and is subject
to the approval of the common stock shareholders of Fleet and the
Corporation, the receipt of various regulatory approvals, and the
satisfaction (or, where permissible, waiver) of certain other standard
closing conditions.
The Corporation announced in June 1994 the signing of a definitive
agreement to acquire Northeast Federal Corp. of Hartford, Connecticut,
with assets of $3.4 billion at March 31, 1995. The transaction is
expected to be completed in the second quarter of 1995.
For further information on the Corporation's merger and acquisitions,
see Note 2 of Notes to Consolidated Financial Statements on page 26.
TABLE 1 - SUMMARY OF RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Quarter ended
TAX-EQUIVALENT BASIS Mar 31 Dec 31 Sep 30 Jun 30 Mar 31
(in millions, except per share data) 1995 1994 1994 1994 1994
<S> <C> <C> <C> <C> <C>
Interest income $ 584.3 $ 524.6 $ 492.8 $ 474.6 $ 457.3
Interest expense 311.1 258.7 223.9 205.9 181.9
Net interest income 273.2 265.9 268.9 268.7 275.4
Provision for credit losses 3.0
Net interest income after provision for
credit losses 273.2 265.9 268.9 268.7 272.4
Noninterest income 95.3 104.2 91.7 93.9 88.7
Merger related charges 36.9 100.9
Restructuring related charges 39.8
Other noninterest expenses 228.7 224.5 226.4 238.0 241.8
Income (loss) before income taxes 102.9 145.6 134.2 (16.1) 119.3
Tax-equivalent adjustment 2.9 2.5 3.0 3.0 2.9
Income taxes (benefit) 37.4 49.6 45.9 (0.4) 39.1
Net income (loss) $ 62.6 $ 93.5 $ 85.3 $ (18.7) $ 77.3
Return on average assets:
Before merger and restructuring related
charges 1.04 % 1.17 % 1.09 % 1.05 % 1.02 %
Based on net income (loss) 0.76 1.17 1.09 (0.24) 1.02
Return on average common equity:
Before merger and restructuring related
charges 15.45 17.59 16.52 15.40 15.47
Based on net income (loss) applicable to
common shares 10.98 17.59 16.52 (4.49) 15.47
Net interest margin 3.55 3.65 3.78 3.76 3.91
Efficiency ratio 62.05 60.55 62.75 65.37 65.72
Common share data:
Net income (loss) $ 0.47 $ 0.74 $ 0.68 $ (0.19) $ 0.62
Dividends declared 0.22 0.22 0.20 0.20 0.20
</TABLE>
<PAGE> 4
CONSOLIDATED STATEMENT OF INCOME ANALYSIS
Net Interest Income
The Corporation's taxable-equivalent net interest income was $273.2
million for the first quarter of 1995, a decrease of $2.2 million, or
less than 1 percent, from $275.4 million for the first quarter of 1994.
This decline in taxable-equivalent net interest income was caused by
an increase in the Corporation's cost of funds as a result of rising
interest rates over this period, which outpaced the repricing of higher
levels of interest-earning assets, primarily loans. Average loans
increased $3.0 billion to $20.2 billion for the first quarter of 1995
from $17.2 billion for the comparable prior year period. The increase
in average loans included $1.7 billion due to the acquisition of
Shawmut Capital Corporation during the first quarter of 1995 and growth
of $810.2 million in commercial loans and $429.1 million in consumer
lending. Average securities decreased $420 million to $10.0 billion
for the first quarter of 1995 from $10.4 billion for the first quarter
of 1994 as a result of maturities being used to fund loan growth.
Average interest-bearing liabilities were $26.5 billion for the first
quarter of 1995, compared with $23.8 billion for the first quarter of
1994, reflecting higher levels of interest-bearing deposits and notes
and debentures which supported the increase in average interest-earning
assets. An analysis of net interest income is presented in Table 2.
TABLE 2 - ANALYSIS OF NET INTEREST INCOME
<TABLE>
<CAPTION>
Quarter ended
Mar 31 Dec 31 Sep 30 Jun 30 Mar 31
(in millions) 1995 1994 1994 1994 1994
<S> <C> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME
(tax-equivalent basis)
Loans $ 422.1 $ 360.6 $ 333.8 $ 320.7 $ 301.5
Securities
Available for sale, at fair value 35.8 35.5 32.1 39.9 44.1
Held to maturity 116.8 117.9 115.5 107.2 103.3
Residential mortgages held for sale 1.0 1.2 5.3 2.9 5.4
Short-term investments 8.1 8.9 5.9 3.7 2.8
Trading account securities 0.5 0.5 0.2 0.2 0.2
Total interest income 584.3 524.6 492.8 474.6 457.3
INTEREST EXPENSE
Deposits 146.5 122.3 107.7 90.6 85.7
Other borrowings 124.8 104.0 88.9 95.4 80.1
Notes and debentures 39.8 32.4 27.3 19.9 16.1
Total interest expense 311.1 258.7 223.9 205.9 181.9
NET INTEREST INCOME
(tax-equivalent basis) 273.2 265.9 268.9 268.7 275.4
Tax-equivalent adjustment 2.9 2.5 3.0 3.0 2.9
NET INTEREST INCOME $ 270.3 $ 263.4 $ 265.9 $ 265.7 $ 272.5
INTEREST RATE SPREAD
(tax-equivalent basis) 2.88 % 3.01 % 3.21 % 3.23 % 3.42 %
NET INTEREST MARGIN
(tax-equivalent basis) 3.55 % 3.65 % 3.78 % 3.76 % 3.91 %
</TABLE>
<PAGE> 5
The net interest margin on a taxable-equivalent for the first quarter
of 1995 was 3.55 percent, a decrease of 36 basis points from 3.91
percent for the comparable prior year quarter. Net interest margin for
the fourth quarter of 1994 was 3.65 percent. The decline in net
interest margin from the first quarter of 1994 reflects the liability
sensitive nature of the Corporation's balance sheet and the rising
interest rate environment over this period, resulting in
interest-bearing liabilities repricing faster than interest-earning
assets. The Corporation utilizes short-term borrowings as a source of
funding for a portion of its interest-earning assets, including federal
funds purchased and securities sold under agreements to repurchase. The
average interest rate paid on securities sold under agreements to
repurchase increased from 3.20 percent for the first quarter of 1994 to
5.83 percent for the first quarter of 1995, or an increase of 263 basis
points. Similarly, the average interest rate paid on federal funds
purchased increased from 3.29 percent to 5.97 percent, or 268 basis
points, over the same period. In recent quarters, the Corporation has
extended certain funding maturities while shortening asset maturities
to decrease balance sheet liability sensitivity. These risk reduction
activities have also contributed to the decline in net interest margin.
If interest rates continue to increase, the resultant contraction of
the spread between the Corporation's interest-earning assets and
liabilities would continue to reduce net interest margin. A discussion
of interest rate risk appears on page 11. An analysis of net interest
margin is presented in Table 3.
TABLE 3 - ANALYSIS OF NET INTEREST MARGIN
<TABLE>
<CAPTION>
Quarter ended
Mar 31 Dec 31 Sep 30 Jun 30 Mar 31
(in millions) 1995 1994 1994 1994 1994
<S> <C> <C> <C> <C> <C>
Net interest income (tax-equivalent basis) $ 273.2 $ 265.9 $ 268.9 $ 268.7 $ 275.4
Average interest-earning assets supported by:
Interest-bearing liabilities $ 26,539 $ 24,639 $ 24,034 $ 24,174 $ 23,831
Noninterest-bearing liabilities 4,362 4,440 4,361 4,408 4,455
Total average interest-earning assets $ 30,901 $ 29,079 $ 28,395 $ 28,582 $ 28,286
Average yields and average rates
(tax-equivalent basis):
Interest-earning assets yield 7.63 % 7.18 % 6.91 % 6.65 % 6.51 %
Rate paid on interest-bearing liabilities 4.75 4.17 3.70 3.42 3.09
Interest rate spread 2.88 % 3.01 % 3.21 % 3.23 % 3.42 %
Net interest margin 3.55 % 3.65 % 3.78 % 3.76 % 3.91 %
</TABLE>
Provision for Credit Losses
There was no provision for credit losses in the first quarter of 1995.
The provision for credit losses was $3.0 million in the first quarter
of 1994, which reflects the provisions made by acquired institutions.
With continuing increases in reserve coverage of nonaccruing loans and
improving credit quality in the loan portfolio, the Corporation does
not currently anticipate that provisions for credit losses will be
necessary in the first half and possibly all of 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> 6
TABLE 4 - NONINTEREST INCOME
<TABLE>
<CAPTION>
Quarter ended
Mar 31 Dec 31 Sep 30 Jun 30 Mar 31
(in millions) 1995 1994 1994 1994 1994
<S> <C> <C> <C> <C> <C>
Customer service fees:
Deposit transaction and other services $ 25.2 $ 25.1 $ 25.6 $ 24.2 $ 22.8
Cash management services 16.0 15.2 15.2 16.4 17.8
Credit and trade related services 7.0 5.9 5.5 5.2 5.0
Investment services and commissions 3.4 3.6 2.4 3.0 2.9
Total 51.6 49.8 48.7 48.8 48.5
Trust and agency fees:
Personal 18.4 17.3 17.9 19.2 18.7
Institutional 4.5 4.3 4.9 4.7 4.8
Corporate 5.7 6.9 3.6 2.9 3.6
Not-for-profit 2.2 2.0 2.1 2.3 2.3
Total 30.8 30.5 28.5 29.1 29.4
Other income:
Loan servicing 4.3 12.6 4.6 10.5 4.5
Trading account profits 1.3 1.0 1.0 1.3 1.2
Foreign exchange trading (1.2) 2.8 (1.1) (0.7)
Residential mortgage sales (0.1) (0.1) 0.9 0.1 1.0
Other 8.7 7.6 7.2 5.2 5.6
Total 13.0 23.9 13.7 16.0 11.6
Subtotal 95.4 104.2 90.9 93.9 89.5
Securities gains (losses), net (0.1) 0.8 (0.8)
Total noninterest income $ 95.3 $ 104.2 $ 91.7 $ 93.9 $ 88.7
</TABLE>
Noninterest income, excluding securities gains and losses, was $95.4
million for the first quarter of 1995, an increase of $5.9 million, or
7 percent, from $89.5 million for the first quarter of 1994, reflecting
increases in customer service and other fees as a result of the
acquisition of Shawmut Capital Corporation during the first quarter of
1995 and other financial institutions purchased during 1994.
Customer service fees increased $3.1 million to $51.6 million for the
first quarter of 1995 from $48.5 million for the comparable prior year
period. Credit and trade related fees increased $2.0 million given
higher levels of customer credit facilities and the two month impact of
Shawmut Capital Corporation. Deposit transaction and other services
increased $2.4 million due to price increases on consumer transaction
fees in 1994, increased usage of the Corporation's Convenience Plus
Card and the impact of fee standardization at acquired institutions.
Offsetting these increases was a decrease in cash management fees of
$1.8 million which reflects higher earnings credit rates for customer
deposit balances maintained in lieu of direct payments.
Trust and agency fees increased $1.4 million to $30.8 million for the
first quarter of 1995 from $29.4 million for the prior year quarter.
The improvement in the 1995 period resulted from the acquisition of the
processing services division of Poorman-Douglas (bankruptcy claims
processing) in the fourth quarter of 1994. Trust and other assets
under management totaled $15.1 billion at March 31, 1995, compared with
$15.3 billion at March 31, 1994.
Other income increased $1.4 million to $13.0 million for the first
quarter of 1995 from $11.6 million for the first quarter of 1994 as
other income attributed to the Shawmut Capital Corporation acquisition
for the 1995 period was $2.3 million. This was offset by declines in
gains on residential mortgage loans sales of $1.1 million, reflecting a
lower level of secondary market activity as rising interest rates over
this period continued to slow mortgage originations.
<PAGE> 7
TABLE 5 - NONINTEREST EXPENSES
<TABLE>
<CAPTION>
Quarter ended
Mar 31 Dec 31 Sep 30 Jun 30 Mar 31
(in millions) 1995 1994 1994 1994 1994
<S> <C> <C> <C> <C> <C>
Compensation $ 100.1 $ 91.9 $ 97.9 $ 100.0 $ 102.2
Benefits 19.6 19.0 20.9 22.6 23.6
Occupancy 23.8 24.2 23.8 25.0 26.3
Equipment 14.8 14.5 14.2 13.1 13.4
FDIC insurance premiums 11.0 10.5 10.3 11.1 11.8
Communications 11.4 12.2 10.3 10.1 10.4
Advertising 6.0 4.3 4.5 6.6 4.5
Goodwill amortization 4.0 2.6 2.0 1.8 1.7
Foreclosed properties expense 1.6 1.0 0.5 2.5 3.7
Other 36.4 43.8 41.4 44.3 42.2
Total 228.7 224.0 225.8 237.1 239.8
Merger related charges 36.9 100.9
Restructuring related charges 39.8
Foreclosed properties provision 0.5 0.6 0.9 2.0
Total noninterest expenses $ 265.6 $ 224.5 $ 226.4 $ 378.7 $ 241.8
Efficiency ratio 62.0 % 60.5 % 62.8 % 65.4 % 65.7 %
Full-time equivalent employees 9,536 9,565 9,970 10,495 11,002
</TABLE>
Noninterest expenses, excluding foreclosed properties provision and
merger related charges, were $228.7 million for the first quarter of
1995, a decrease of $11.1 million, or 5 percent, from $239.8 million
for the first quarter of 1994. First quarter 1995 noninterest expenses
include $9.0 million attributed to Shawmut Capital Corporation
since the acquisition date. Excluding the effects of Shawmut
Capital Corporation and other purchased financial institutions,
the decline in noninterest expenses of $28.5 million, or
12 percent, reflects the Corporation's continuing cost management
initiatives which included workforce reductions, branch consolidations
and other expense control actions as well as acquisition consolidations
that occurred during the second half of 1994.
Compensation and benefits expense decreased $6.1 million, or 5 percent,
to $119.7 million for the first quarter of 1995 from $125.8 million for
the comparable prior year period. First quarter 1995 amounts include
$5.9 million attributed to Shawmut Capital Corporation since the
acquisition date and approximately $2.9 million of stock incentive plan
adjustments which reflect the increase in the Corporation's common stock
price during the quarter that was influenced by the announcement of the
agreement to merge with Fleet. Excluding these two items, compensation
and benefits expense decreased $14.9 million, or 12 percent, attributable
to reductions in personnel from the cost management initiatives and
acquisition consolidations discussed above. Full-time equivalent
employees totaled 9,536 at March 31, 1995, compared with 11,002 at
March 31, 1994.
Advertising expense was $6.0 million for the first quarter of 1995, up
$1.5 million from $4.5 million for the prior year period as the
Corporation has increased marketing activities and related initiatives
for financial services products in its marketplace. Goodwill
amortization increased $2.3 million for the first quarter of 1995 from
$1.7 million for the first quarter of 1994, reflecting goodwill
associated with the acquisition of Shawmut Capital Corporation as well
as other financial institutions purchased in the latter part of 1994.
Foreclosed properties expense declined $2.1 million, or 57 percent, to
$1.6 million for the first quarter of 1995 from $3.7 million in the
comparable prior year quarter. There was no provision for foreclosed
properties for the first quarter of 1995, compared with $2.0 million
for the first quarter of 1994. The decline in foreclosed properties
expense and provision reflects the continued decline in the level of
foreclosed properties at March 31, 1995 from the comparable prior year
period.
<PAGE> 8
Merger related charges of $36.9 million relate to the settlement of
certain of the Corporation's employee retirement benefits as a result
of the execution of the agreement to merge with Fleet. Merger related
charges of $100.9 million recorded during the second quarter of 1994
reflect the costs to integrate three banking organizations which were
acquired and accounted for as poolings of interests. The merger
related charges included severance and benefits costs for workforce
reductions, closure of duplicative branches and facilities,
cancellation of vendor contracts, financial and advisory fees and
losses for disposition of loans and securities.
Restructuring related charges of $39.8 million, also recorded in the
second quarter of 1994, reflect the expansion of the Corporation's cost
management program and other cost initiatives. Restructuring related
charges included severance and benefit related costs for workforce
reductions, branch and operational facilities consolidation and other
costs.
Merger and restructuring related charges recorded during the second
quarter of 1994 are more fully discussed in the Corporation's Annual
Report on Form 10-K. Accrued merger and restructuring expenses totaled
$9.6 million and $9.2 million, respectively, at March 31, 1995.
Income Taxes
The provision for income taxes for the first quarter of 1995 was $37.4
million, representing an effective income tax rate of 37.4 percent. The
provision for income taxes for the first quarter of 1994, prior to a
reduction of the deferred tax asset valuation allowance of $1.5
million, was $40.6 million, or an effective income tax rate of 34.9
percent. The increase in the effective income tax rate for the 1995
period was due to a decline in the level of nontaxable income and an
increase in state income taxes.
The Corporation's net deferred federal tax asset at March 31, 1995 was
$153.3 million, compared with $165.0 million at December 31, 1994.
Taxable income necessary to be generated in future periods to realize
this net deferred federal tax asset at March 31, 1995 would be
approximately $410 million. Deferred state taxes, net of related
federal tax, totaled $92.0 million at March 31, 1995 and were reduced
in their entirety by a valuation allowance of the same amount.
CONSOLIDATED BALANCE SHEET ANALYSIS
Total assets at March 31, 1995 were $34.2 billion, up $1.8 billion, or
6 percent, from $32.4 billion at December 31, 1994.
Total loans were $21.1 billion at March 31, 1995, an increase of $2.6
billion, or 14 percent, from $18.5 billion at December 31, 1994. The
increase in loans from year-end 1994 was primarily due to the
acquisition of Shawmut Capital Corporation, which contributed $2.4
billion in loans outstanding at January 31, 1995, approximately ninety
percent of which were to borrowers located outside of New England.
Commercial and industrial loans increased from $7.0 billion at year-end
to $9.6 billion at March 31, 1995, due to the acquisition of Shawmut
Capital Corporation and modest growth in core lending sectors such as
financial institutions and national banking. Consumer lending, which
includes residential mortgage, home equity and installment loans,
decreased $44.0 million, or less than 1 percent, from year-end to $8.6
billion. Owner-occupied real estate loans increased from $1.4 billion
at year-end to $1.6 billion at March 31, 1995, an increase of $152.5
million, primarily due to loans added as part of the Shawmut Capital
Corporation acquisition. Investor/developer real estate loans declined
by $98.6 million from year-end, reflecting a selective reduction in
certain segments of this portfolio.
<PAGE> 9
The Corporation has a diversified loan portfolio with the commercial
and industrial portfolio representing 46 percent of total loans at
March 31, 1995. Consumer loans represented 41 percent of total loans
at that date. Owner-occupied commercial real estate and
investor/developer real estate loans were 7 percent and 6 percent,
respectively. An analysis of the Corporation's loan portfolio is
presented in Table 10 and by type in Tables 13 through 16. A
discussion of the credit quality of the Corporation's loan portfolio
begins on page 15.
Total securities decreased $119.0 million, or 1 percent, to $9.9
billion at March 31, 1995 from $10.0 billion at December 31, 1994.
Securities classified as held to maturity and reported at amortized
cost decreased $202.0 million to $7.8 billion at March 31, 1995 from
$8.0 billion at December 31, 1994. Securities classified as available
for sale totaled $2.1 billion at March 31, 1995, compared with $2.0
billion at December 31, 1994. 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 2.12 years and 2.27
years, respectively, at March 31, 1995 compared with 1.36 years and
2.37 years, respectively, at December 31, 1994. The increase in
duration of the available for sale securities portfolio from year-end
1994 was primarily due to first quarter 1995 settlements of interest
rate futures contracts used to manage interest rate exposure.
Additional information regarding the Corporation's securities portfolio
is presented in Note 3 of Notes to Consolidated Financial Statements on
page 27.
Total deposits at March 31, 1995 were $20.6 billion, down $144.7
million, or less than 1 percent, from $20.7 billion at year-end 1994.
Demand deposits decreased by $1.2 billion, or 23 percent, to $4.0
billion at March 31, 1995 from year-end 1994. Demand deposits at
December 31, 1994 reflected seasonally higher transaction related
balances of corporate and financial institution customers. Core
deposits, which do not include large denomination certificates of
deposit, brokered retail deposits or foreign time deposits, were $16.9
billion at March 31, 1995, compared with $18.3 billion at December 31,
1994. Domestic time deposits were $7.1 billion at March 31, 1995, up
$1.0 billion, or 16 percent, from year-end 1994, reflecting the
continued use of brokered retail deposits to reduce the Corporation's
reliance on short-term funding sources and, to a lesser extent, a
shifting of balances from savings and money market accounts. Foreign
time deposits were $1.5 billion at March 31, 1995, up $576.3 million,
or 66 percent, from year-end 1994, and were used to fund a portion of
the Shawmut Capital Corporation acquisition.
Other borrowings, primarily securities sold under agreements to
repurchase and federal funds purchased, increased $1.3 billion to $8.4
billion at March 31, 1995 from $7.1 billion at December 31, 1994. The
increase in other borrowings was primarily due to funding for the
acquisition of Shawmut Capital Corporation. In addition to other
borrowings, the Corporation's Shawmut Bank Connecticut subsidiary
completed an offering of $250 million of subordinated bank notes on
February 14, 1995 to partially fund the Shawmut Capital Corporation
acquisition. As a result of this offering and notes issued under an
existing bank note program, notes and debentures increased from $2.0
billion at year-end 1994 to $2.4 billion at March 31, 1995. On April
27, 1995, the Corporation's principal subsidiary banks established a
$3.0 billion bank note program which will provide for future bank note
issuances.
<PAGE> 10
TABLE 6 - INTEREST RATE SENSITIVITY GAP ANALYSIS
The table below depicts the Corporation's interest rate sensitivity as
of March 31, 1995. 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
and futures contracts.
<TABLE>
<CAPTION>
Repricing Periods
Two- Four- Seven- Ten- Over
One three six nine twelve one
(in millions) month months months months months year Total
<S> <C> <C> <C> <C> <C> <C> <C>
Short-term investments
and other interest-
earning assets $ 387 $ 22 $ 409
Securities 340 341 $ 377 $ 825 $ 331 $ 7,659 9,873
Loans 7,639 4,433 1,263 945 810 6,045 21,135
Total interest-
earning assets 8,366 4,796 1,640 1,770 1,141 13,704 31,417
Interest-bearing
deposits 2,745 1,996 2,157 1,499 1,349 6,867 16,613
Other borrowings 7,021 674 530 50 10 85 8,370
Notes and debentures 1,028 356 55 958 2,397
Noninterest-bearing
sources of funds 514 3,523 4,037
Total 10,794 3,540 2,687 1,549 1,414 11,433 31,417
Off-balance sheet
financial instruments 318 1,796 (945) (85) (122) (962)
Interest rate
sensitivity gap $ (2,110) $ 3,052 $ (1,992) $ 136 $ (395) $ 1,309
Cumulative gap $ (2,110) $ 942 $ (1,050) $ (914) $ (1,309) $ 0
Interest rate sensitivity
gap as a percent of
interest-earning assets (6.7)% 9.7 % (6.3)% 0.4 % (1.3)%
Cumulative gap as
a percent of
interest-earning assets (6.7)% 3.0 % (3.3)% (2.9)% (4.2)%
</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 $1.3 billion at March 31, 1995. 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 interest rate caps and corridors are included in the
interest sensitivity table to the extent that these instruments have
become operative. However, certain interest rate agreements have not
been included in the interest rate sensitivity table as the level of
interest rate indices at which these agreements become operative has
not been reached. Based on an analysis of a 100 basis point increase
in interest rates, the twelve-month cumulative liability sensitive gap
at March 31, 1995 would increase from $1.3 billion to $1.6 billion when
giving effect to these interest rate agreements. 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 $8.5 million
when compared with the amount of net interest income assumed to be
earned absent such an interest rate increase for the twelve-month
period following March 31, 1995.
<PAGE> 11
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 March 31, 1995, the Corporation had approximately $3.6 billion in
notional amounts of interest rate swap agreements outstanding utilized
for the management of interest rate risk, a decrease of $75 million
from $3.7 billion at December 31, 1994. Interest rate swap agreements
involve the exchange of fixed and variable rate interest payments based
upon a notional principal amount and maturity date. Interest rate swap
agreements are used to synthetically alter the maturity and repricing
characteristics of assets and liabilities.
In addition to interest rate swap agreements, the Corporation utilizes
interest rate cap and floor agreements to manage interest rate risk.
At March 31, 1995, the Corporation had approximately $1.0 billion in
notional amounts of purchased interest rate cap agreements outstanding.
In addition, approximately $1.0 billion in notional amounts of interest
rate cap 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 March 31, 1995. 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.
Exchange-traded futures contracts are also used by the Corporation to
manage interest rate exposure. The notional amounts of futures
contracts sold at March 31, 1995 were approximately $1.9 billion, a
decrease of $4.1 billion from $6.0 billion at December 31, 1994, due to
contract settlements during the first quarter of 1995. At March 31,
1995, the Corporation had entered into U.S. Treasury rate futures
contracts with approximately $246 million in notional amounts to manage
the risk associated with the available for sale securities portfolio.
The unrealized loss of approximately $1.0 million at March 31, 1995
relating to these contracts has been recorded as part of the fair value
of these securities. The remaining $1.6 billion in notional amounts of
futures contracts are used to manage interest rate risk on the
Corporation's funding sources. The unrealized gain related to these
Eurodollar futures contracts at March 31, 1995, which has been
deferred, was approximately $6.0 million. Maturities of the notional
amounts of futures contracts sold are as follows: $.9 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 three months 1995 follows:
<TABLE>
<CAPTION>
Swaps
Plain Plain Amortizing
fixed fixed fixed
Notional amounts (in millions) pay receive receive Basis
<S> <C> <C> <C> <C>
Balance, December 31, 1994 $ 1,659 $ 60 $ 1,349 $ 605
Maturities 38 37
Balance, March 31, 1995 $ 1,621 $ 60 $ 1,312 $ 605
Weighted average receive rate at period end 6.31% 8.97% 4.59% 6.32%
Weighted average pay rate at period end 6.01% 6.34% 6.35% 6.38%
Average final maturity at period end 3.1 years .25 years 1.97 years .41 years
</TABLE>
<PAGE> 12
<TABLE>
<CAPTION>
Other
Futures
contracts
Notional amounts (in millions) Caps Corridors Collars sold
<S> <C> <C> <C> <C>
Balance, December 31, 1994 $ 1,775 $ 1,031 $ 500 $ 6,005
Additions 2,271
Maturities 800 500
Settlements 6,392
Balance, March 31, 1995 $ 975 $ 1,031 $ -- $ 1,884
Average final maturity at period end 1.40 years 1.23 years 1.33 years
The fair value of interest rate instruments at March 31, 1995, which
exclude exchange-traded futures contracts, was approximately $10.7
million, and represents the estimated amount that the Corporation would
pay 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 $29.1 million at March 31, 1995.
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 (Shawmut National
Corporation) level.
The Corporation primarily manages its liquidity using an
uncollateralized purchased funds concept, consistent with the condition
of the Corporation's earnings, capital, asset quality and economic
environment. 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). At March 31, 1995, UPFs were $4.1 billion. This was
offset by $3.6 billion in short-term investments and unused repurchase
agreement collateral, leaving the Corporation with an excess of UPFs
over short-term investments and unused repurchase agreement collateral
of $.5 billion. Short-term investments and unused repurchase agreement
collateral exceeded the volume of UPFs by $1.5 billion at December 31,
1994. During the first quarter of 1994, the Corporation, through its
principal subsidiary banks, expanded its available funding alternatives
by establishing a $2.0 billion bank note program which provided access
to other diversified funding sources. Bank note issuances totaled $1.4
billion at March 31, 1995. On April 27, 1995, the banks established a
$3.0 billion bank note program which will provide for future bank
note issuances.
The Corporation manages the parent company's liquidity by measuring the
difference between the volume of short-term investments and short-term
funding sources and ongoing obligations, including debt maturities,
interest payments and dividends. The parent company had short-term
borrowings of $226.4 million and notes and debentures of $749.3 million
at March 31, 1995. The parent company had cash and cash equivalents at
March 31, 1995 of $352.3 million and securities with a fair value of
$264.8 million. There are no scheduled maturities on notes and
debentures in 1995. Scheduled maturities are $150 million in both 1996
and 1997.
<PAGE> 13
Capital
The Corporation's total shareholders' equity at March 31, 1995 was $2.4
billion, or 6.98 percent of total assets, compared with $2.2 billion,
or 6.78 percent of total assets, at December 31, 1994, an increase of
$187.9 million. In connection with the acquisition of Shawmut Capital
Corporation, on January 26, 1995, the Corporation completed a $125
million offering of 500,000 shares of 9.35% cumulative preferred stock
with a stated value of $250 per share, represented by depositary
shares. The increase in shareholders' equity for the first three
months of 1995 also reflects a $16.9 million decline in the net
after-tax unrealized loss on the Corporation's $2.1 billion available
for sale securities portfolio. Volatility in shareholders' equity may
occur in future periods as the fair value of the Corporation's
available for sale securities portfolio changes with market conditions.
The Corporation's Risk-based capital and Leverage ratios were as
follows:
</TABLE>
<TABLE>
<CAPTION>
Mar 31 Dec 31 Sep 30 Jun 30 Mar 31
(in millions) 1995 1994 1994 1994 1994
<S> <C> <C> <C> <C> <C>
Shareholders' equity $ 2,385.1 $ 2,197.2 $ 2,129.3 $ 2,068.3 $ 2,130.0
Tier 1 capital 2,061.4 2,091.0 2,017.3 1,979.1 2,043.3
Total capital 3,142.7 2,919.3 2,857.7 2,813.6 2,903.8
Risk-weighted assets 27,960.1 25,284.4 23,824.6 23,303.3 22,956.4
Ratios:
Shareholders' equity to assets 6.98 % 6.78 % 6.79 % 6.74 % 6.82 %
Risk-based capital
Tier 1 capital 7.37 8.27 8.47 8.49 8.90
Total capital 11.24 11.55 11.99 12.07 12.65
Leverage 6.21 6.62 6.54 6.38 6.66
The Corporation's Risk-based Tier 1 and Total capital ratios were 7.37
percent and 11.24 percent at March 31, 1995, respectively, compared
with 8.27 percent and 11.55 percent at December 31, 1994, respectively.
The Leverage ratio, a measure of Tier 1 capital to quarterly average
assets, was 6.21 percent at March 31, 1995, compared with 6.62 percent
at December 31, 1994. The decline in the Risk-based capital and Leverage
ratios during the first quarter of 1995 was due to the increase
in risk-weighted and other assets as a result of the acquisition of
Shawmut Capital Corporation. Tier 1 capital reflects the issuance of
the preferred stock offering while Total capital includes the issuance
of Shawmut Bank Connecticut subordinated bank notes. 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 March 31,
1995.
<PAGE> 14
The Corporation's principal subsidiary banks' (Shawmut Bank Connecticut
and Shawmut Bank Massachusetts) Risk-based capital and Leverage ratios
were as follows:
Mar 31 Dec 31 Sep 30 Jun 30 Mar 31
(in millions) 1995 1994 1994 1994 1994
SHAWMUT BANK CONNECTICUT
<S> <C> <C> <C> <C> <C>
Shareholder's equity $ 1,428.4 $ 1,236.4 $ 1,201.3 $ 1,203.2 $ 1,233.0
Tier 1 capital 1,183.5 1,202.9 1,166.0 1,161.6 1,190.1
Total capital 1,627.7 1,371.2 1,323.6 1,315.8 1,339.7
Risk-weighted assets 15,417.2 13,353.3 12,468.1 12,183.2 11,769.3
Ratios:
Shareholder's equity to assets 7.65 % 7.22 % 7.60 % 7.64 % 7.82 %
Risk-based capital
Tier 1 capital 7.68 9.01 9.35 9.53 10.11
Total capital 10.56 10.27 10.62 10.80 11.38
Leverage 6.62 7.51 7.43 7.55 7.81
SHAWMUT BANK MASSACHUSETTS
Shareholder's equity $ 1,147.5 $ 1,156.9 $ 1,151.2 $ 1,051.1 $ 1,072.8
Tier 1 capital 1,099.6 1,113.1 1,099.4 1,026.0 1,048.8
Total capital 1,258.5 1,273.4 1,255.6 1,176.2 1,199.5
Risk-weighted assets 11,669.1 11,165.2 10,810.3 10,322.5 10,357.6
Ratios:
Shareholder's equity to assets 7.88 % 8.02 % 8.09 % 7.76 % 7.58 %
Risk-based capital
Tier 1 capital 9.42 9.97 10.17 9.94 10.13
Total capital 10.78 11.40 11.61 11.39 11.58
Leverage 7.78 7.93 8.17 7.45 7.55
</TABLE>
<TABLE>
The Corporation's principal subsidiary banks' Risk-based capital and
Leverage ratios exceeded the requirements for a well-capitalized
financial institution at March 31, 1995.
CREDIT QUALITY
TABLE 7 - RESERVE FOR CREDIT LOSSES
Quarter ended
Mar 31 Dec 31 Sep 30 Jun 30 Mar 31
(in millions) 1995 1994 1994 1994 1994
<S> <C> <C> <C> <C> <C>
Reserve for credit losses at beginning
of period $ 542.1 $ 567.8 $ 589.8 $ 638.5 $ 669.2
Provision charged to operations 3.0
Addition for loans purchased 41.7 4.3
Loans charged off
Gross (33.4) (43.7) (40.7) (60.5) (45.7)
Recoveries 8.8 18.0 14.4 11.8 12.0
Net (24.6) (25.7) (26.3) (48.7) (33.7)
Reserve for credit losses at end of period $ 559.2 $ 542.1 $ 567.8 $ 589.8 $ 638.5
Net charge-offs (annualized)
to average loans 0.49 % 0.57 % 0.60 % 1.10 % 0.78 %
Reserve for credit losses to
net charge-offs (annualized) 5.67 x 5.28 x 5.40 x 3.03 x 4.75 x
Reserve for credit losses to loans 2.65 % 2.93 % 3.20 % 3.40 % 3.64 %
</TABLE>
<PAGE> 15
The reserve for credit losses was $559.2 million at March 31, 1995,
compared with $542.1 million at December 31, 1994. The increase of
$17.1 million reflects the addition of $41.7 million of reserves
purchased as part of the Shawmut Capital Corporation acquisition after
net loan charge-offs of $24.6 million for the quarter. The ratio of
the reserve for credit losses to loans was 2.65 percent at March 31,
1995, compared with 2.93 percent at December 31, 1994. An analysis of
the Corporation's credit loss experience is presented in Table 17. Net
charge-offs were $24.6 million for the first quarter of 1995, equal to
an annualized rate of .49 percent of average loans, compared with $33.7
million and .78 percent for the same period a year ago. A discussion
of the provision for credit losses is presented on page 6.
The Corporation adopted, on a prospective basis, Statement of Financial
Accounting Standards ("FAS") No. 114, "Accounting by Creditors for
Impairment of a Loan" ("FAS 114"), effective January 1, 1995. 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 at
the present value of expected future cash flows discounted at the
loan's effective interest rate or, as a practical expedient, the fair
value of collateral for collateral dependent loans, when assessing the
need for an impairment reserve. The Corporation had previously
considered the methods prescribed by FAS 114, as well as other matters,
when assessing the adequacy of the reserve for credit losses. As a
result, there was no effect on the Corporation's results of operations
from the adoption of the accounting standard. A further discussion of
the adoption of FAS 114 is included in Note 4 of Notes to Consolidated
Financial Statements on page 28.
TABLE 8 - NONACCRUING LOANS, RESTRUCTURED LOANS AND ACCRUING LOANS
PAST DUE 90 DAYS OR MORE
<TABLE>
<CAPTION>
Mar 31 Dec 31 Sep 30 Jun 30 Mar 31
(in millions) 1995 1994 1994 1994 1994
<S> <C> <C> <C> <C> <C>
Nonaccruing loans
Commercial / real estate loans:
Current $ 51.2 $ 51.5 $ 46.0 $ 50.8 $ 53.1
From 30 to 89 days past due 19.1 13.0 16.7 14.2 21.9
90 or more days past due 105.9 112.0 146.4 154.6 178.3
Total 176.2 176.5 209.1 219.6 253.3
Consumer loans:
Current 3.6 5.9 5.6 9.2 9.8
From 30 to 89 days past due 2.7 2.1 4.2 3.9 5.4
90 or more days past due 45.9 39.5 47.0 52.5 60.1
Total 52.2 47.5 56.8 65.6 75.3
Total nonaccruing loans $ 228.4 $ 224.0 $ 265.9 $ 285.2 $ 328.6
Restructured loans $ 29.8 $ 41.8 $ 31.1 $ 63.8 $ 63.6
Accruing loans past due 90 days or more $ 55.6 $ 43.3 $ 53.1 $ 47.8 $ 46.4
Nonaccruing loans to loans 1.08 % 1.21 % 1.50 % 1.65 % 1.87 %
Reserve for credit losses to
nonaccruing loans 245.00 242.00 214.00 207.00 194.00
</TABLE>
<PAGE> 16
Nonaccruing loans were $228.4 million at March 31, 1995, compared with
$224.0 million at December 31, 1994. Approximately 24 percent of
nonaccruing loans were less than 30 days past due at March 31, 1995,
compared with approximately 26 percent at December 31, 1994.
Nonaccruing loans increased by $14.1 million at March 31, 1995 as a
result of the acquisition of Shawmut Capital Corporation. During the
first quarter of 1995, $15.6 million of nonaccruing loans were
identified as assets for accelerated disposition, which included $13.0
million related to Shawmut Capital Corporation, and have been reported
at the lower of cost or fair market value as other assets. The ratio of
nonaccruing loans to loans improved to 1.08 percent at March 31, 1995
from 1.21 percent at December 31, 1994. The ratio of the reserve for
credit losses to nonaccruing loans was 245 percent at March 31, 1995,
compared with 242 percent at December 31, 1994. Nonaccruing loans by
loan type are presented in Table 11. Changes in nonaccruing loans are
presented in Table 12.
Restructured loans, which are loans with original terms that have been
modified as a result of a change in the borrower's financial condition,
totaled $29.8 million at March 31, 1995, compared with $41.8 million at
the end of 1994. Restructured loans included real estate
investor/developer loans and owner-occupied commercial real estate
loans of $22.9 million and $4.0 million, respectively, at March 31,
1995.
Accruing loans past due 90 days or more, which are well secured and in
the process of collection, were $55.6 million at March 31, 1995,
compared with $43.3 million at December 31, 1994. These loans
represented less than .3 percent of loans outstanding at March 31,
1995. Consumer loans represented 50 percent and 49 percent of accruing
loans past due 90 days or more at March 31, 1995 and December 31, 1994,
respectively.
TABLE 9 - NONACCRUING LOANS PLUS FORECLOSED PROPERTIES
<TABLE>
<CAPTION>
Mar 31 Dec 31 Sep 30 Jun 30 Mar 31
(in millions) 1995 1994 1994 1994 1994
<S> <C> <C> <C> <C> <C>
Nonaccruing loans $ 228.4 $ 224.0 $ 265.9 $ 285.2 $ 328.6
Foreclosed properties 11.9 18.8 32.1 42.5 51.5
Total $ 240.3 $ 242.8 $ 298.0 $ 327.7 $ 380.1
Nonaccruing loans plus foreclosed properties
to loans plus foreclosed properties 1.14 % 1.31 % 1.68 % 1.89 % 2.16 %
</TABLE>
Foreclosed properties decreased $6.9 million, or 37 percent, to $11.9
million at March 31, 1995 from $18.8 million at December 31, 1994.
Nonaccruing loans plus foreclosed properties totaled $240.3 million at
March 31, 1995, a decline of $2.5 million, or 1 percent, from $242.8
million at December 31, 1994. The ratio of nonaccruing loans plus
foreclosed properties to loans plus foreclosed properties was 1.14
percent at March 31, 1995, down from 1.31 percent at December 31, 1994.
<PAGE> 17
PORTFOLIO STATISTICS
The following tables set forth loan statistical information:
TABLE 10 - LOAN PORTFOLIO
<TABLE>
<CAPTION>
Mar 31 Dec 31 Sep 30 Jun 30 Mar 31
(in millions) 1995 1994 1994 1994 1994
<S> <C> <C> <C> <C> <C>
Commercial and industrial $ 9,644.2 $ 7,006.4 $ 6,201.3 $ 5,992.7 $ 6,188.7
Owner-occupied commercial real estate 1,564.5 1,412.0 1,423.4 1,407.1 1,421.8
Real estate investor/developer
Commercial mortgage 1,231.6 1,309.2 1,401.3 1,461.0 1,518.7
Construction and other 136.4 157.4 150.5 150.9 152.1
Total investor/developer 1,368.0 1,466.6 1,551.8 1,611.9 1,670.8
Consumer
Residential mortgage 5,541.2 5,592.1 5,608.1 5,474.0 5,570.3
Home equity 1,582.9 1,625.7 1,628.8 1,609.9 1,580.1
Installment and other 1,434.0 1,384.3 1,322.5 1,233.5 1,127.5
Total consumer 8,558.1 8,602.1 8,559.4 8,317.4 8,277.9
Total 21,134.8 18,487.1 17,735.9 17,329.1 17,559.2
Reserve for credit losses (559.2) (542.1) (567.8) (589.8) (638.5)
Total $ 20,575.6 $ 17,945.0 $ 17,168.1 $ 16,739.3 $ 16,920.7
</TABLE>
TABLE 11 - NONACCRUING LOANS BY LOAN TYPE
<TABLE>
<CAPTION>
Mar 31 Dec 31 Sep 30 Jun 30 Mar 31
(in millions) 1995 1994 1994 1994 1994
<S> <C> <C> <C> <C> <C>
Commercial and industrial $ 55.0 $ 36.0 $ 59.3 $ 60.6 $ 63.6
Owner-occupied commercial real estate 52.0 57.6 59.8 67.5 72.8
Real estate investor/developer
Commercial mortgage 64.5 66.9 65.9 70.6 92.0
Construction and other 4.7 16.0 24.1 20.9 24.9
Total investor/developer 69.2 82.9 90.0 91.5 116.9
Consumer
Residential mortgage 42.6 38.4 46.2 48.8 61.2
Home equity 7.2 6.5 7.0 8.2 9.2
Installment and other 2.4 2.6 3.6 8.6 4.9
Total consumer 52.2 47.5 56.8 65.6 75.3
Total $ 228.4 $ 224.0 $ 265.9 $ 285.2 $ 328.6
</TABLE>
<PAGE> 18
TABLE 12 - CHANGES IN NONACCRUING LOANS
The changes in the Corporation's nonaccruing loans are summarized below:
<TABLE>
<CAPTION>
Quarter ended
Mar 31 Dec 31 Sep 30 Jun 30 Mar 31
(in millions) 1995 1994 1994 1994 1994
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $ 224.0 $ 265.9 $ 285.2 $ 328.6 $ 372.9
New nonaccruing loans 66.1 49.5 64.5 65.4 49.7
Additions for loans purchased 14.1
Decreases in nonaccruing loans
Payments 34.7 40.5 35.9 35.4 32.2
Charge-offs 27.4 34.8 31.0 52.5 45.7
Transfers to foreclosed properties 5.8 4.4 7.5 1.4 6.2
Returns to accruing loans 4.9 11.6 6.5 12.3 9.9
Sales 1.7 0.4 5.8
Transfers to restructured loans 1.3 0.1 2.5 1.4
Total 75.8 91.4 83.8 108.8 94.0
Balance at end of period $ 228.4 $ 224.0 $ 265.9 $ 285.2 $ 328.6
</TABLE>
TABLE 13 - COMMERCIAL AND INDUSTRIAL LOANS - BY INDUSTRY SECTOR
<TABLE>
<CAPTION>
March 31, 1995
Loans Net charge-offs
(in millions) outstanding Nonaccruing (recoveries)
<S> <C> <C> <C>
Manufacturing $ 2,712.0 $ 10.2 $ (0.4)
Communications 1,590.6 3.5 0.2
Wholesale 1,528.1 18.0 (0.2)
Finance, insurance and
real estate 1,469.5 9.4 (0.1)
Services 1,091.1 7.7 (0.1)
Retail 677.2 3.9 0.1
Other 575.7 2.3 0.2
Total $ 9,644.2 $ 55.0 $ (0.3)
</TABLE>
<PAGE> 19
TABLE 14 - OWNER-OCCUPIED COMMERCIAL REAL ESTATE LOANS - BY INDUSTRY
SECTOR
<TABLE>
<CAPTION>
March 31, 1995
Loans Net
(in millions) outstanding Nonaccruing charge-offs
<S> <C> <C> <C>
Services $ 434.0 $ 7.7 $ 0.2
Manufacturing 281.3 7.7 0.7
Finance, insurance and
real estate 272.0 11.0 1.1
Retail 209.1 10.5 1.6
Wholesale 151.6 5.5 0.2
Communications 53.8 1.4 0.4
Other 162.7 8.2 0.4
Total $ 1,564.5 $ 52.0 $ 4.6
</TABLE>
TABLE 15 - REAL ESTATE INVESTOR/DEVELOPER LOANS - BY PROJECT
<TABLE>
<CAPTION>
March 31, 1995
Loans Net
(in millions) outstanding Nonaccruing charge-offs
<S> <C> <C> <C>
Retail $ 286.2 $ 9.9 $ 2.0
Apartment/rental 277.1 8.1 2.7
Offices 241.0 11.0 3.4
Mixed use 193.5 13.3 2.3
Industrial 121.8 5.4 2.6
Special purposes 58.2 6.9 0.1
Residential developers
Condominium 36.4 0.5 0.1
Single family 34.1 4.1 0.3
Research and development space 35.0 0.1
Hotels, resorts, inns 31.3 0.2 0.3
Land 27.2 5.4 0.6
Other 26.2 4.3 1.5
Total $ 1,368.0 $ 69.2 $ 15.9
</TABLE>
TABLE 16 - CONSUMER LOANS - BY TYPE
<TABLE>
<CAPTION>
March 31, 1995
Loans Net
(in millions) outstanding Nonaccruing charge-offs
<S> <C> <C> <C>
Residential mortgages $ 5,541.2 $ 42.6 $ 2.9
Home equity lines 1,220.0 5.8 0.6
Indirect automobile 1,074.7 1.2 0.7
Home equity loans 362.8 1.4
Direct installment 293.2 0.5 0.1
Other 66.2 0.7 0.1
Total $ 8,558.1 $ 52.2 $ 4.4
</TABLE>
<PAGE> 20
TABLE 17 - CREDIT LOSS EXPERIENCE
<TABLE>
<CAPTION>
Quarter ended
Mar 31 Dec 31 Sep 30 Jun 30 Mar 31
(in millions) 1995 1994 1994 1994 1994
<S> <C> <C> <C> <C> <C>
Reserve for credit losses at beginning
of period $ 542.1 $ 567.8 $ 589.8 $ 638.5 $ 669.2
Provision charged to operations 3.0
Addition for loans purchased 41.7 4.3
Loans charged off:
Commercial and industrial 2.7 4.6 4.6 6.0 8.3
Owner-occupied commercial real estate 6.0 7.1 4.5 3.0 5.5
Real estate investor/developer
Commercial mortgage 14.6 14.5 14.2 20.8 11.6
Construction and other 3.0 5.4 4.0 2.6 1.4
Total investor/developer 17.6 19.9 18.2 23.4 13.0
Consumer
Residential mortgage 4.2 7.5 9.4 12.8 14.2
Home equity 0.7 1.7 1.4 12.0 1.8
Installment and other 2.2 2.9 2.6 3.3 2.9
Total consumer 7.1 12.1 13.4 28.1 18.9
Total loans charged off 33.4 43.7 40.7 60.5 45.7
Recoveries on loans charged off:
Commercial and industrial 3.0 5.8 5.3 3.9 4.0
Owner-occupied commercial real estate 1.4 2.0 1.2 0.6 1.2
Real estate investor/developer 1.7 5.6 2.1 1.2 1.1
Consumer 2.7 4.6 5.8 6.1 5.7
Total recoveries 8.8 18.0 14.4 11.8 12.0
Net loans charged off 24.6 25.7 26.3 48.7 33.7
Reserve for credit losses at end of period $ 559.2 $ 542.1 $ 567.8 $ 589.8 $ 638.5
</TABLE>
<PAGE> 21
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31
(in thousands, except per share data) 1995 1994
<S> <C> <C>
INTEREST AND DIVIDEND INCOME
Loans $ 420,973 $ 300,374
Securities
Available for sale, at fair value 34,199 42,326
Held to maturity 116,796 103,281
Residential mortgages held for sale 987 5,385
Federal funds sold and securities purchased
under agreements to resell 4,230 1,261
Interest-bearing deposits in other banks 3,896 1,529
Trading account securities 342 198
Total 581,423 454,354
INTEREST EXPENSE
Deposits 146,547 85,668
Other borrowings 124,770 80,079
Notes and debentures 39,769 16,112
Total 311,086 181,859
NET INTEREST INCOME 270,337 272,495
Provision for credit losses 3,000
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES 270,337 269,495
NONINTEREST INCOME
Customer service fees 51,580 48,473
Trust and agency fees 30,845 29,417
Securities losses, net (101) (768)
Other 12,939 11,602
Total 95,263 88,724
NONINTEREST EXPENSES
Compensation and benefits 119,624 125,791
Occupancy and equipment 38,599 39,718
Merger related charges 36,853
Foreclosed properties provision and expense 1,579 5,730
Other 68,912 70,591
Total 265,567 241,830
INCOME BEFORE INCOME TAXES 100,033 116,389
Income taxes 37,412 39,115
NET INCOME $ 62,621 $ 77,274
NET INCOME APPLICABLE TO COMMON SHARES $ 56,652 $ 73,415
COMMON SHARE DATA
Net income $ 0.47 $ 0.62
Weighted average shares outstanding 121,638 117,819
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 22
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (unaudited)
<TABLE>
<CAPTION>
March 31 December 31
(in thousands) 1995 1994
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,485,358 $ 1,986,182
Interest-bearing deposits in other banks 63,742 439,936
Federal funds sold and securities purchased
under agreements to resell 274,500 308,700
Trading account securities 27,584 27,859
Residential mortgages held for sale 42,715 72,205
Securities
Available for sale, at fair value 2,074,880 1,991,853
Held to maturity (fair value $7,549,813 and $7,561,890) 7,798,357 8,000,382
Loans, less reserve for credit
losses of $559,210 and $542,116 20,575,610 17,945,027
Premises and equipment 328,605 329,780
Customers' acceptance liability 17,448 5,166
Other assets 1,500,737 1,291,521
Total assets $ 34,189,536 $ 32,398,611
LIABILITIES
Deposits
Demand $ 3,988,683 $ 5,161,182
Savings, money market and NOW accounts 8,108,268 8,649,988
Domestic time 7,052,017 6,058,769
Foreign time 1,452,590 876,314
Total deposits 20,601,558 20,746,253
Other borrowings 8,370,246 7,086,579
Acceptances outstanding 17,448 5,166
Accrued expenses and other liabilities 417,755 341,652
Notes and debentures 2,397,444 2,021,788
Total liabilities 31,804,451 30,201,438
SHAREHOLDERS' EQUITY
Preferred stock, without par value
Authorized - 10,000,000 shares
Outstanding - 1,763,700 and 1,263,700 shares 303,185 178,185
Common stock, $.01 par value
Authorized - 300,000,000 shares
Issued - 122,149,103 and 120,770,774 shares 1,221 1,208
Surplus 1,307,135 1,288,825
Retained earnings 813,227 783,223
Net unrealized loss on securities available for sale (37,411) (54,268)
Treasury stock, common stock at cost (93,747 shares) (2,272)
Total shareholders' equity 2,385,085 2,197,173
Total liabilities and shareholders' equity $ 34,189,536 $ 32,398,611
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 23
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31
(in thousands) 1995 1994
<S> <C> <C>
SHAREHOLDERS' EQUITY at beginning of period $ 2,197,173 $ 2,102,371
PREFERRED STOCK
Issuance of preferred stock (500,000 shares) 125,000
Purchase of preferred stock (11,300 shares) (565)
COMMON STOCK , $.01 par value
Shares issued under Dividend Reinvestment
and Stock Purchase Plans (835,981 and 280,548 shares) 8 3
Shares issued under stock option and employee
benefit plans (542,348 and 154,874 shares) 5 1
SURPLUS
Additional proceeds from:
Shares issued under Dividend Reinvestment
and Stock Purchase Plans 14,324 6,135
Shares issued under stock option
and employee benefit plans 8,174 1,311
Preferred stock issuance costs (4,188)
RETAINED EARNINGS
Net income 62,621 77,274
Cash dividends declared by the Corporation on:
Preferred stock (5,969) (3,859)
Common stock (26,850) (19,186)
Cash dividends declared by merged companies prior to merger (1,143)
Restricted stock awards 140 258
Reissuance of common stock from treasury 62 (174)
NET UNREALIZED LOSS ON SECURITIES
Unrealized appreciation (depreciation) on securities available
for sale 16,857 (35,230)
TREASURY STOCK
Purchase of common stock (110,679 and 61,667 shares) (2,575) (1,448)
Reissuance of common stock under Dividend Reinvestment
and Stock Purchase Plans (16,932 and 167,611 shares) 303 3,778
SHAREHOLDERS' EQUITY at end of period $ 2,385,085 $ 2,129,526
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 24
SHAWMUT NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31
(in thousands) 1995 1994
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 62,621 $ 77,274
Adjustments to reconcile net income to cash
provided (used) by operating activities:
Provision for credit losses 3,000
Provision for foreclosed properties 2,045
Provision for merger related charge 36,853
Depreciation, amortization and other 31,619 22,675
Gains from the sale of loans, premises and equipment
and other assets (3,640) (3,677)
Decrease (increase) in trading account securities 275 (570)
Decrease in residential mortgages held for sale 29,490 214,479
Increase in other assets and accrued expenses
and other liabilities (191,813) (42,483)
CASH PROVIDED (USED) BY OPERATING ACTIVITIES (34,595) 272,743
FINANCING ACTIVITIES
Decrease in total deposits (144,695) (857,705)
Increase in other borrowings 1,283,667 768,953
Proceeds from issuances of bank notes, net 126,000 100,000
Proceeds from issuance of subordinated bank notes 249,668
Principal payments on notes and debentures (74) (93)
Proceeds from issuances of common and preferred stock 143,688 11,054
Purchases of common and preferred stock (2,575) (2,013)
Cash dividends paid (30,429) (24,616)
CASH PROVIDED (USED) BY FINANCING ACTIVITIES 1,625,250 (4,420)
INVESTING ACTIVITIES
Decrease (increase) in short-term investments 410,394 (372,236)
Proceeds from sales of securities available for sale 170,199 1,187,352
Maturities of securities available for sale 20,384 354,920
Purchases of securities available for sale (228,283) (1,149,043)
Maturities of securities held to maturity 255,354 519,267
Purchases of securities held to maturity (60,517) (993,825)
Proceeds from sales of loans 54,102 13,112
Purchases of loans (2,415,844) (142,748)
Loans originated less principal collected (295,195) 130,136
Purchases of premises and equipment and other assets (12,244) (7,976)
Proceeds from the sale of premises and equipment and
other assets 10,171 11,372
CASH USED BY INVESTING ACTIVITIES (2,091,479) (449,669)
DECREASE IN CASH AND DUE FROM BANKS (500,824) (181,346)
Cash and due from banks at beginning of period 1,986,182 1,539,690
CASH AND DUE FROM BANKS AT END OF PERIOD $ 1,485,358 $ 1,358,344
ADDITIONAL CASH FLOW INFORMATION
Interest paid $ 258,353 $ 196,167
Income taxes paid $ 16,935 $ 5,142
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 25
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 1994 Annual Report on Form 10-K.
NOTE 2 - MERGER AND ACQUISITIONS
Completed Acquisition
On January 31, 1995, the Corporation purchased substantially all of the assets
and assumed certain of the liabilities of the Business Finance Division of
Barclays Business Credit, Inc., which was renamed Shawmut Capital Corporation,
for $2.6 billion, equal to the net book value of the assets acquired
and the liabilities assumed plus a premium of $290 million. Shawmut Capital
Corporation, based in Glastonbury, Connecticut, provides asset-based financing
to middle market companies through a network of offices nationwide. The
acquisition was accounted for under the purchase method of accounting. The
excess of the purchase price, including acquisition costs, over the fair value
of the net assets acquired of $201.1 million has been recorded as goodwill and
is being amortized over a 25 year period.
The following pro forma information presents the consolidated results of
operations for the Corporation for the three-month periods ended March 31,
1995 and 1994 as if the Shawmut Capital Corporation acquisition had occurred
at the beginning of the periods presented. In addition to combining the
historical results of operations of the Corporation and Shawmut Capital
Corporation, the pro forma information reflects adjustments for the estimated
effects of purchase accounting. The pro forma information may not be
indicative of the results of operations that would have occurred if the
acquisition had been consummated at the beginning of the periods presented.
<TABLE>
<CAPTION>
Three months ended
March 31,
(in thousands) 1995 1994
<S> <C> <C>
Net interest income $ 277,072 $ 285,300
Net income applicable to
common shares $ 58,208 $ 74,395
Earnings per share $ 0.48 $ 0.63
</TABLE>
Agreement and Plan of Merger
On February 20, 1995, the Corporation and Fleet Financial Group, Inc.
("Fleet"), a corporation organized and existing under the laws of the State
of Rhode Island, entered into an agreement and plan of merger, pursuant to
which the Corporation will merge with and into Fleet (the "Merger"). As a
result of the Merger, each share of the $.01 par value common stock of the
Corporation outstanding immediately prior to the effective time of the
Merger, other than shares held directly or indirectly by the Corporation or
Fleet, will be converted into the right to receive .8922 shares of $1.00 par
value common stock of Fleet.
<PAGE> 26
Each share of the Corporation's Preferred Stock with Cumulative and
Adjustable Dividends with a stated value of $50 per share, 9.30%
Cumulative Preferred Stock and 9.35% Cumulative Preferred Stock
outstanding immediately prior to the effective time of the Merger
will be converted into the right to receive one equivalent share of
each of the respective series of Fleet preferred stock.
The Merger is intended to constitute a tax-free transaction and to be
accounted for as a pooling of interests. It is anticipated that the
Merger will be consummated in the fourth quarter of 1995. The Merger
is subject to the approval of the common stock shareholders of Fleet
and the Corporation, the receipt of various regulatory approvals, and
the satisfaction (or, where permissible, waiver) of certain other
standard closing conditions.
Pending Acquisition
In June 1994, the Corporation entered into an agreement to acquire
Northeast Federal Corp. ("Northeast"). Northeast is a unitary savings
and loan holding company which provides financial services through
its subsidiary, Northeast Savings, F.A. As of March 31, 1995,
Northeast had assets of $3.4 billion, deposits of $2.5 billion and
stockholders' equity of $146.2 million. Northeast has 33 offices
located in Connecticut, Massachusetts and upstate New York. Pursuant
to the agreement, Northeast stockholders will receive shares of the
Corporation's common stock in exchange for Northeast shares in
accordance with the exchange ratio provisions set forth therein,
subject to a minimum exchange ratio of .415 and a maximum exchange
ratio of .507. The Northeast transaction may be terminated if the
transaction is not consummated on or before June 30, 1995 or if the
Corporation's common stock average price, as defined, is less than
$21.465 per share for the fifteen consecutive full trading days prior
to the date on which the last regulatory approval required to
consummate the transaction has been obtained and all statutory
waiting periods have expired and, therefore, resulting in Northeast
stockholders receiving less than $10.875 of the Corporation's common
stock. The transaction is expected to be completed in the second
quarter of 1995.
NOTE 3 - SECURITIES
The amortized cost and fair value of securities classified as
available for sale at March 31, 1995 and December 31, 1994 are
summarized as follows:
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
Amortized Fair Amortized Fair
(in thousands) cost value cost value
<S> <C> <C> <C> <C>
U.S. Government and agency securities
U.S. Treasury $ 1,256,774 $ 1,210,113 $ 1,275,041 $ 1,222,712
Mortgage backed 197,998 203,289 204,498 206,093
Equity securities 229,785 222,976 149,521 140,400
Corporate mortgage backed and other
securities 454,647 438,453 446,186 422,553
State and municipal obligations 47 49 96 95
Total $ 2,139,251 $ 2,074,880 $ 2,075,342 $ 1,991,853
</TABLE>
The amortized cost of securities classified as available for sale
exceeded fair value by approximately $64.4 million at March 31, 1995,
consisting of unrealized losses of approximately $70.3 million and
unrealized gains of approximately $5.9 million, and $83.5 million at
December 31, 1994, consisting of unrealized losses of approximately
$86.3 million and unrealized gains of approximately $2.8 million. As
a result, net unrealized losses of $37.4 million and $54.3 million on
securities classified as available for sale at March 31, 1995 and
December 31, 1994, respectively, after applicable income taxes, were
included as a separate component of shareholders' equity.
<PAGE> 27
The amortized cost and fair value of securities classified as held to
maturity at March 31, 1995 and December 31, 1994 are summarized as
follows:
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
Amortized Fair Amortized Fair
(in thousands) cost value cost value
<S> <C> <C> <C> <C>
U.S. Government and agency securities
Mortgage backed $ 3,480,571 $ 3,424,639 $ 3,556,103 $ 3,345,768
U.S. Treasury 1,944,625 1,872,904 1,953,820 1,838,679
Asset backed and other securities 2,373,161 2,252,270 2,490,459 2,377,443
Total $ 7,798,357 $ 7,549,813 $ 8,000,382 $ 7,561,890
</TABLE>
The amortized cost of securities classified as held to maturity
exceeded fair value by approximately $248.5 million at March 31,
1995, consisting of unrealized losses of approximately $252.2 million
and unrealized gains of approximately $3.7 million, and $438.5
million at December 31, 1994, consisting of unrealized losses of
approximately $439.6 million and unrealized gains of approximately
$1.1 million.
NOTE 4 - LOANS
The components of the Corporation's loan portfolio at March 31, 1995
and December 31, 1994, net of unearned income of $41.3 million and
$32.8 million, respectively, are summarized below:
<TABLE>
<CAPTION>
March 31, December 31,
(in thousands) 1995 1994
<S> <C> <C>
Commercial and industrial $ 9,644,259 $ 7,006,396
Owner-occupied commercial real estate 1,564,479 1,412,007
Real estate investor/developer
Commercial mortgage 1,231,637 1,309,224
Construction and other 136,384 157,391
Total investor/developer 1,368,021 1,466,615
Consumer
Residential mortgage 5,541,188 5,592,084
Home equity 1,582,874 1,625,662
Installment and other 1,433,999 1,384,379
Total consumer 8,558,061 8,602,125
Total 21,134,820 18,487,143
Less reserve for credit losses 559,210 542,116
Total $ 20,575,610 $ 17,945,027
</TABLE>
Loans totaling $5.8 million and $6.2 million were transferred to
foreclosed properties during the three months ended March 31, 1995
and 1994, respectively.
<PAGE> 28
The details of the Corporation's nonaccruing loans, restructured
loans and accruing loans past due 90 days or more at March 31, 1995
and December 31, 1994 are summarized as follows:
<TABLE>
<CAPTION>
March 31, December 31,
(in thousands) 1995 1994
<S> <C> <C>
Nonaccruing loans
Commercial and industrial $ 54,992 $ 35,982
Owner-occupied commercial real estate 51,969 57,560
Real estate investor/developer 69,171 82,921
Subtotal 176,132 176,463
Consumer 52,222 47,488
Total nonaccruing loans $ 228,354 $ 223,951
Restructured loans $ 29,810 $ 41,752
Accruing loans past due 90 days or more $ 55,566 $ 43,264
</TABLE>
The Corporation adopted, on a prospective basis, Statement of
Financial Accounting Standards ("FAS") No. 114 , "Accounting by
Creditors for Impairment of a Loan" ("FAS 114"), effective January 1,
1995. 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 at the present value of expected future cash
flows discounted at the loan's effective interest rate or, as a
practical expedient, the fair value of collateral for collateral
dependent loans, when assessing the need for an impairment reserve.
FAS 114 excludes smaller-balance homogeneous loans that are
collectively evaluated for impairment, such as residential mortgage
and consumer installment loans. The Corporation had previously
considered the methods prescribed by FAS 114, as well as other
matters, when assessing the adequacy of the reserve for credit
losses. As a result, there was no effect on the Corporation's
results of operations from the adoption of the accounting standard.
FAS 114 does not address when a creditor should record a direct
write-down of an impaired loan, nor does it address how a creditor
should assess the overall adequacy of the reserve for credit losses.
Therefore, the impairment reserves determined in accordance with FAS
114 should not be interpreted as the overall reserve for credit
losses.
The Corporation's criteria for and policies relating to nonaccruing
loans are consistent with the definition of impaired loans under FAS
114. Accordingly, the Corporation considers its nonaccruing loans to
be impaired loans as defined by FAS 114. Upon adoption of FAS 114,
the Corporation did not change its method of recognizing interest
income on impaired loans.
As indicated in the table above, at March 31, 1995 the recorded
investment in impaired loans, excluding consumer amounts, was $176.1
million. Nonaccruing loans included in other assets held for
accelerated disposition totaled $15.6 million at March 31, 1995.
Impairment reserves at March 31, 1995, determined in accordance with
FAS 114 and included as part of the Corporation's reserve for credit
losses, approximated $7.4 million. At March 31, 1995, approximately
$98.1 million of impaired loans which have been subjected to a
specific review did not require an impairment reserve, due primarily
to charge-offs. The average recorded investment in impaired loans,
excluding consumer amounts, during the quarter ended March 31, 1995
was $181.1 million. For the quarter ended March 31, 1995, the amount
of interest income recognized on impaired loans was immaterial.
<PAGE> 29
Restructured loans are loans with original terms which have been
modified as a result of a change in the borrowers financial condition
and are also required to be accounted for and reported in accordance
with FAS 114 for restructurings that occur subsequent to January 1,
1995. As indicated in the table above, at March 31, 1995 restructured
loans totaled $29.8 million. There were no loans included in this
amount that were restructured subsequent to January 1, 1995.
NOTE 5 - OTHER ASSETS AND ACCRUED EXPENSES AND OTHER LIABILITIES
The components of other assets at March 31, 1995 and December 31,
1994 are presented below:
<TABLE>
<CAPTION>
March 31, December 31,
(in thousands) 1995 1994
<S> <C> <C>
Goodwill and other intangibles $ 356,813 $ 154,488
Accrued interest income 238,225 227,654
Cash surrender value of life insurance 158,633 156,913
Net deferred income taxes 153,262 164,958
Prepaid pension expense 92,171 128,614
Foreclosed properties 11,905 18,831
Receivable for securities sold 10,000
Other 489,728 430,063
Total $ 1,500,737 $ 1,291,521
</TABLE>
The components of accrued expenses and other liabilities at March 31,
1995 and December 31, 1994 are presented below:
<TABLE>
<CAPTION>
March 31, December 31,
(in thousands) 1995 1994
<S> <C> <C>
Accrued interest expense $ 148,815 $ 96,082
Accrued dividends payable 32,819 30,429
Payable for securities purchased 17,634 2,000
Accrued postretirement health care and life insurance 15,784 13,117
benefits expense
Accrued merger expenses 9,557 13,772
Accrued restructuring expenses 9,227 19,045
Accrued postemployment benefits expense 7,377 8,645
Other 176,542 158,562
Total $ 417,755 $ 341,652
</TABLE>
<PAGE> 30
NOTE 6 - NOTES AND DEBENTURES
The Corporation's notes and debentures at March 31, 1995 and December
31, 1994 are summarized below:
<TABLE>
<CAPTION>
March 31, December 31,
(in thousands) 1995 1994
<S> <C> <C>
Shawmut National Corporation (parent company):
9.85% subordinated capital notes due June 1, 1999, net of discount $ 149,935 $ 149,931
8 7/8% notes due April 1,1996, net of discount 149,890 149,866
7.20% subordinated notes due April 15, 2003, net of discount 149,757 149,750
8 5/8% subordinated notes due December 15, 1999, net of discount 149,750 149,736
8 1/8% notes due February 1, 1997, net of discount 99,925 99,916
Floating rate subordinated notes due February 14, 1997 50,000 50,000
Total 749,257 749,199
Bank Subsidiaries:
Floating rate senior notes due 1995 and 1996 $ 943,000 $ 1,038,000
Fixed rate senior notes due 1995 and 1996 446,000 225,000
8 5/8% subordinated bank notes due
February 15, 2005, net of discount 249,672
Other 9,515 9,589
Total 1,648,187 1,272,589
Total $ 2,397,444 $ 2,021,788
</TABLE>
Floating rate senior notes issued under the Corporation's subsidiary
banks' note program at March 31, 1995 mature from three to thirteen
months and currently have interest rates of 5.99 to 6.48 percent.
The weighted average interest rate on the floating rate notes at
March 31, 1995 was 6.29 percent. Fixed rate senior notes issued
under the note program at March 31, 1995 mature from one to eleven
months and currently have interest rates of 5.50 to 7.03 percent.
The weighted average interest rate on the fixed rate notes at March
31, 1995 was 5.95 percent.
On February 14, 1995, Shawmut Bank Connecticut completed a $250
million offering of 8 5/8% subordinated bank notes due February 15,
2005. On April 27, 1995, Shawmut Bank Connecticut and Shawmut Bank
Massachusetts established a $3.0 billion bank note program which will
provide for future bank note issuances.
<PAGE> 31
NOTE 7 - OTHER NONINTEREST INCOME AND NONINTEREST EXPENSES
The components of other noninterest income for the three months ended
March 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
Three months ended
March 31,
(in thousands) 1995 1994
<S> <C> <C>
Loan servicing $ 4,293 $ 4,503
Trading account profits 1,254 1,165
Foreign exchange trading (1,237) (715)
Residential mortgage sales (125) 965
Other 8,754 5,684
Total $ 12,939 $ 11,602
</TABLE>
The components of noninterest expenses, excluding merger related
charges, for the three months ended March 31, 1995 and 1994 were as
follows:
<TABLE>
<CAPTION>
Three months ended
March 31,
(in thousands) 1995 1994
<S> <C> <C>
Compensation $ 100,060 $ 102,157
Benefits 19,564 23,634
Total $ 119,624 $ 125,791
Occupancy $ 23,826 $ 26,364
Equipment 14,773 13,354
Total $ 38,599 $ 39,718
Foreclosed properties
Provision $ 2,045
Expense $ 1,579 3,685
Total $ 1,579 $ 5,730
FDIC insurance premiums $ 10,961 $ 11,770
Communications 11,386 10,400
Advertising 6,011 4,478
Other 40,554 43,943
Total $ 68,912 $ 70,591
</TABLE>
Merger Related Charges
Merger related charges of $36.9 million relate to the settlement of
certain of the Corporation's employee retirement benefits as a result
of the execution of the agreement to merge with Fleet.
<PAGE> 32
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, 1995 December 31, 1994
Average Average Average Average
(in millions) balance Interest rate balance Interest rate
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Loans $ 20,248 $ 422.1 8.42 % $ 18,174 $ 360.6 7.89 %
Securities
Available for sale, at fair value 2,138 35.8 6.75 2,120 35.5 6.74
Held to maturity 7,888 116.8 5.94 8,106 117.9 5.81
Residential mortgages held for sale 48 1.0 8.21 31 1.2 7.36
Short-term investments
Time deposits in other banks 259 3.9 6.10 318 4.9 5.94
Federal funds sold and securities
purchased under agreements to resell 294 4.2 5.84 301 4.0 5.36
Trading account securities 26 0.5 8.30 29 0.5 6.05
Total interest-earning assets 30,901 584.3 7.63 29,079 524.6 7.18
Reserve for credit losses (563) (562)
Cash and due from banks 1,350 1,475
Other assets 1,836 1,670
Total assets $ 33,524 $ 31,662
LIABILITIES
Savings, money market and
NOW accounts $ 8,307 45.7 2.23 % $ 8,780 45.4 2.05 %
Time certificates of deposit
of $100 thousand or more 1,994 31.4 6.39 1,383 19.9 5.71
Domestic time deposits 4,596 53.6 4.73 4,474 49.3 4.37
Foreign time deposits 1,068 15.8 6.00 596 7.7 5.14
Total interest-bearing deposits 15,965 146.5 3.72 15,233 122.3 3.19
Federal funds purchased and securities
sold under agreements to repurchase 7,227 104.6 5.87 6,631 86.0 5.15
Other borrowings 1,113 20.2 7.34 915 18.0 7.74
Total other borrowings 8,340 124.8 6.06 7,546 104.0 5.47
Notes and debentures 2,234 39.8 7.17 1,860 32.4 6.94
Total interest-bearing liabilities 26,539 311.1 4.75 24,639 258.7 4.17
Demand deposits 4,218 4,442
Other liabilities 406 382
Total liabilities 31,163 29,463
Shareholders' equity 2,361 2,199
Total liabilities and shareholders'
equity $ 33,524 $ 31,662
Net interest income
(tax-equivalent basis) 273.2 3.55 265.9 3.65
Less tax-equivalent adjustment 2.9 2.5
Net interest income $ 270.3 $ 263.4
</TABLE>
<PAGE> 33
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
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> 34
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
March 31, 1994
Average Average
(in millions) balance Interest rate
ASSETS
<S> <C> <C> <C>
Loans $ 17,170 $ 301.5 7.09 %
Securities
Available for sale, at fair value 2,960 44.1 5.73
Held to maturity 7,486 103.3 5.61
Residential mortgages held for sale 312 5.4 6.90
Short-term investments
Time deposits in other banks 172 1.5 3.62
Federal funds sold and securities
purchased under agreements to resell 169 1.3 3.19
Trading account securities 17 0.2 4.52
Total interest-earning assets 28,286 457.3 6.51
Reserve for credit losses (668)
Cash and due from banks 1,551
Other assets 1,584
Total assets $ 30,753
LIABILITIES
Savings, money market and
NOW accounts $ 8,842 37.4 1.71 %
Time certificates of deposit
of $100 thousand or more 476 4.7 4.05
Domestic time deposits 4,259 42.0 4.00
Foreign time deposits 202 1.6 3.10
Total interest-bearing deposits 13,779 85.7 2.52
Federal funds purchased and securities
sold under agreements to repurchase 8,003 63.9 3.24
Other borrowings 1,289 16.2 5.11
Total other borrowings 9,292 80.1 3.50
Notes and debentures 760 16.1 8.48
Total interest-bearing liabilities 23,831 181.9 3.09
Demand deposits 4,540
Other liabilities 264
Total liabilities 28,635
Shareholders' equity 2,118
Total liabilities and shareholders'
equity $ 30,753
Net interest income
(tax-equivalent basis) 275.4 3.91
Less tax-equivalent adjustment 2.9
Net interest income $ 272.5
</TABLE>
<PAGE> 35
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 Towers subsidiaries defaulted on the bonds and Towers and
the subsidiaries later filed for bankruptcy protection. 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 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.
Shortly following the announcement on February 21, 1995 that
Fleet Financial Group, Inc. ("Fleet") and the Corporation had
executed an agreement and plan of merger (the "Merger
Agreement") pursuant to which the Corporation will merge with
and into Fleet (the "Merger"), certain alleged stockholders of
the Corporation filed seven purported class action lawsuits in
the Court of Chancery of the State of Delaware in and for New
Castle County (the "Court") against the Corporation, the
members of the Corporation's board of directors and Fleet. The
complaints all make similar allegations concerning the proposed
Merger. The plaintiffs allege, among other things, that the
defendants have engaged in a plan and scheme to enrich
themselves at the expense of the Corporation's public
stockholders; that the defendants have failed to fully disclose
the true value of the Corporation's assets and earnings power
and the future financial benefits which the defendants expect
to derive from the proposed Merger; that the defendants have
wrongfully failed and refused to seek a purchase of the
Corporation at the highest possible price and have sought to
chill potential offers for the Corporation; that the defendant
members of the Corporation's board of directors have breached
the fiduciary duties owed by them to the plaintiffs and the
members of the purported class; and that defendant Fleet has
induced and aided and abetted breaches of fiduciary duty by the
members of the Corporation's board of directors. The plaintiffs
seek, among other things, a declaration that the proposed
transaction is unfair, unjust and inequitable; an injunction
preliminarily enjoining the defendants from taking any steps
necessary to accomplish or implement the proposed Merger; and
an order requiring the
<PAGE> 36
defendants to compensate plaintiffs and the members of the
class for all losses and damages suffered and to be suffered by
them as a result of the acts and transactions complained of in
the complaints. The plaintiffs also seek the award of the costs
and disbursements of the action, including reasonable
attorneys', accountants' and experts' fees. The defendants
believe the allegations contained in the complaints are
entirely without merit and intend to contest them vigorously.
In addition, an alleged former stockholder of the Corporation
who claims to have sold shares of the Corporation's common
stock between December 11, 1994 and February 21, 1995 filed a
purported class action lawsuit on behalf of himself and all
other persons who sold the Corporation's common stock between
such dates in the United States District Court for the Eastern
District of New York against the Corporation. The plaintiff
alleges, among other things, that, prior to the execution of
the Merger Agreement, the Corporation violated Section 10(b) of
the Exchange Act and Rule 10b-5 promulgated thereunder by
disseminating false information and/or failing to disclose
material facts necessary in order not to mislead the investing
public and by artificially depressing the market price of the
Corporation's common stock as a result of these alleged acts
and omissions. In particular, the plaintiff alleges that on
December 11, 1994 a newspaper article reported that Mr. Alvord
had "stated that a merger for Shawmut was not in the cards and
that he would be charting a course for Shawmut as an
independent institution." The plaintiff contends that this
newspaper article constituted a representation by the
Corporation, that such alleged representation was materially
false and misleading when made and/or became materially
misleading, and that the Corporation had a duty to correct this
alleged representation as soon as it believed that the alleged
representation was no longer accurate. The plaintiff seeks an
order requiring the Corporation to compensate plaintiff and the
members of the class for all losses and damages suffered by
them as a result of the acts and omissions complained of in the
complaint. The plaintiff also seeks an award of the costs and
disbursements of the action, including reasonable attorneys',
accountants' and experts' fees. The Corporation denies that the
newspaper article referred to by the plaintiff contains any
such statement by Mr. Alvord and further believes the
allegations contained in the complaint are entirely without
merit and intends to contest them vigorously.
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.
<PAGE> 37
Item 5. Other Information
On May 2, 1995, Shawmut Bank Connecticut, N.A., one of the
Corporation's subsidiaries, issued $250 million in medium-term
bank notes under a new $3 billion bank note program established
for it and its affiliate, Shawmut Bank, N.A. The one year
notes issued carry a floating rate based upon the three-month
London Inter-Bank Offered Rate and are not callable. The issue
is rated A2 by Moody's Investors Service Inc. and BBB-plus by
Standard & Poor's Corp. The proceeds will be used for general
corporate purposes. The issue was offered and sold only to
accredited investors.
Item 6. 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 2 of this report and
are filed herewith or are incorporated herein by
reference.
(b) Reports on Form 8-K - The Corporation filed nine
reports on Form 8-K during the quarter ended March 31,
1995.
The report dated January 6, 1995 (Items 5 and 7)
reported that the Corporation and its subsidiary, Shawmut
Bank Connecticut, National Association (the "Bank"),
entered into a Purchase and Assumption Agreement (the
"Purchase and Assumption Agreement"), dated as of November
12, 1994, with Barclays Bank PLC and Barclays Business
Credit Inc. ("Business Credit") pursuant to which the Bank
agreed to purchase substantially all of the assets and to
assume certain liabilities of the Business Finance
Division of Business Credit. The transaction was
completed on January 31, 1995. Also reported was the
Corporation's agreement with Northeast Federal Corp.
("Northeast"), dated as of June 13, 1994, to acquire
Northeast (the "Merger Agreement"). The report filed a
copy of the Purchase and Assumption Agreement and a copy
of the Merger Agreement.
The report dated January 11, 1995, as amended by Form
8-K/A filed February 7, 1995, (Items 5 and 7) reported the
Purchase and Assumption Agreement with Barclays Bank PLC
and Business Credit, and the Merger Agreement with
Northeast, and filed:
(1) Consent of Price Waterhouse LLP.
(2) Consent of Deloitte & Touche LLP.
<PAGE> 38
(3) Financial Statements of Northeast Federal
Corp. as of December 31, 1993.
(4) Unaudited Financial Information of
Northeast Federal Corp. as of September 30, 1994.
(5) Shawmut National Corporation and
Subsidiaries, Northeast Federal Corp. and
Subsidiaries and Business Finance Division of
Barclays Business Credit, Inc. Unaudited Pro Forma
Condensed Financial Information.
(6) Financial Statements of Business Finance
Division of Barclays Business Credit, Inc. as of
December 31, 1993.
(7) Unaudited Financial Information of Business
Finance Division of Barclays Business Credit, Inc. as
of September 30, 1994.
(8) Press Release, dated January 11, 1995,
"Shawmut Comments on Agreement to Acquire Northeast
Federal."
The report dated January 17, 1995 (Item 7), filed a
press release of the Corporation, dated January 17, 1995,
entitled "Shawmut National Corporation reports fourth
quarter net income of $93.5 million, or $.74 per common
share."
The report dated January 26, 1995 (Item 7), filed:
(1) Underwriting Agreement, dated January 19,
1995, between the Registrant and Goldman, Sachs &
Co., ourselves and the several Underwriters named
therein, relating to the offer and sale of 5,000,000
Depositary Shares (the "Depositary Shares") each
representing a one-tenth interest in a share of 9.35%
Cumulative Preferred Stock (the "Preferred Stock").
(2) Form of the Preferred Stock Certificate.
(3) Deposit Agreement, dated as of January 26,
1995, among the Registrant, Chemical Bank, as
Depositary, and the holders from time to time of
Depositary Receipts.
(4) Certificate of Designation, dated January
26, 1995, setting forth the terms of the Preferred
Stock.
<PAGE> 39
The report dated February 7, 1995, as amended by Form
8-K/A filed April 13, 1995, (Items 5 and 7) reported that
the Corporation filed a Certificate of Increase of Series
A Junior Participating Preferred Stock with the state of
Delaware on February 6, 1995. In addition, the
Corporation reported that it announced, in a press release
entitled "Shawmut National Corporation Completes
Acquisition of Barclays Business Credit" the completion of
the acquisition of the assets and business of Barclays
Business Credit, the U.S. commercial finance operation of
Barclays PLC, for a cash premium of $290 million. The
report also incorporated, by reference to the April 13,
1995 filing of the Corporation's Current Report on Form
8-K, financial statements of the Business Finance Division
of Barclays Business Credit, Inc. as of and for the years
ending December 31, 1994 and 1993 and unaudited pro forma
condensed combined financial information for the
Corporation and subsidiaries, Fleet Financial Group, Inc.,
Northeast Federal Corp. and subsidiaries and the Business
Finance Division of Barclays Business Credit, Inc. The
report filed:
(1) Certificate of Increase of Series A Junior
Participating Preferred Stock.
(2) Press Release entitled "Shawmut National
Corporation Completes Acquisition of Barclays
Business Credit."
(3) Audited financial statements of the
Business Finance Division of Barclays Business
Division of Barclays Business Credit, Inc. as of and
for the years ending December 31, 1994 and 1993
(incorporated by reference to Exhibit 99.3 to the
Corporation's Current Report on Form 8-K (File No.
1-10102) filed April 13, 1995).
(4) Unaudited pro forma condensed combined
financial information for Shawmut National
Corporation and subsidiaries, Fleet Financial Group,
Inc., Northeast Federal Corp. and subsidiaries and
the Business Finance Division of Barclays Business
Credit, Inc. (incorporated by reference to Exhibit
99.4 to the Corporation's Current Report on Form 8-K
(File No. 1-10102) filed April 13, 1995).
The report dated February 20, 1995 (Items 5 and 7)
reported that on February 20, 1995, the Corporation and
Fleet Financial Group, Inc. ("Fleet") entered into an
Agreement and Plan of Merger providing, among other
things, for the merger (the "Merger") of the Corporation
with and into Fleet, with Fleet surviving the Merger. The
report filed:
<PAGE> 40
(1) Agreement and Plan of Merger, dated as of
February 20, 1995, between Shawmut National
Corporation and Fleet Financial Group, Inc.
(2) Stock Option Agreement, dated as of
February 20, 1995, between Shawmut National
Corporation and Fleet Financial Group, Inc.
(3) Stock Option Agreement, dated as of
February 20, 1995, between Fleet Financial Group,
Inc. and Shawmut National Corporation.
(4) Amendment, dated as of February 20, 1995,
to the Rights Agreement, dated as of February 28,
1989 by and between Shawmut National Corporation and
Chemical Bank, as Rights Agent.
The report dated February 21, 1995 (Items 5 and 7)
incorporated by reference and filed:
(1) Press Release, dated February 21, 1995,
entitled "Fleet and Shawmut Agree to Strategic Merger
in $3.7 Billion Transaction."
(2) Press Release, dated February 22, 1995,
entitled "Shawmut National Corporation -- Suspension
of Dividend Reinvestment and Stock Purchase Plan."
The report dated April 13, 1995 (Items 5 and 7)
reported that on February 20, 1995, the Corporation and
Fleet entered into the Merger Agreement providing, among
other things, for the Merger of the Corporation with and
into Fleet, with Fleet surviving the Merger. In addition,
it was reported that the Corporation entered into an
agreement with Northeast, dated as of June 13, 1994, to
acquire Northeast and that on January 31, 1995 Shawmut
Bank Connecticut, N. A. purchased substantially all of the
assets and assumed certain of the liabilities of the
Business Finance Division of Barclays Business Credit,
Inc. The report filed:
(1) Consent of KPMG Peat Marwick LLP.
(2) Consent of Deloitte & Touche LLP.
(3) Consent of Price Waterhouse LLP.
(4) Financial Statements of Fleet Financial
Group, Inc. as of December 31, 1994 and 1993.
<PAGE> 41
(5) Financial Statements of Business Finance
Division of Barclays Business Credit, Inc. as of
December 31, 1994 and 1993.
(6) Shawmut National Corporation and
Subsidiaries, Fleet Financial Group, Inc., Northeast
Federal Corp. and Subsidiaries and Business Finance
Division of Barclays Business Credit, Inc. Unaudited
Pro Forma Condensed Combined Financial Information.
The report dated April 19, 1995 (Item 7), filed a
press release of the Corporation, dated April 19, 1995,
entitled "Shawmut National Corporation reports first
quarter operating results of $85.7 million, or $.66 per
common share."
<PAGE> 42
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: May 12, 1995 By (Joel B. Alvord)
Joel B. Alvord
Chairman and
Chief Executive Officer
Date: May 12, 1995 By (Susan E. Lester)
Susan E. Lester
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
<PAGE> 43
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
<TABLE>
<CAPTION>
Three months
ended
(in thousands) March 31, Year ended December 31,
1995 1994 1993 1992 1991 1990
EARNINGS
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before income taxes,
extraordinary credit and cumulative
effect of accounting changes $ 100,033 $ 371,604 $ 289,476 $ 108,625 $ (169,223) $ (155,672)
Portion of rents representative
of the interest factor 3,973 16,891 18,037 19,525 19,491 19,903
Interest on other borrowings 124,770 368,347 262,413 192,240 217,739 340,650
Interest on notes and debentures 39,531 94,807 70,646 59,321 60,436 63,105
Amortization of debt issuance cost 238 844 1,394 594 618 578
Earnings including interest on deposits 268,545 852,493 641,966 380,305 129,061 268,564
Interest on deposits 146,547 406,346 420,966 622,436 933,665 1,253,609
Earnings excluding interest on deposits $ 415,092 $ 1,258,839 $ 1,062,932 $ 1,002,741 $ 1,062,726 $ 1,522,173
FIXED CHARGES
Portion of rents representative
of the interest factor $ 3,973 $ 16,891 $ 18,037 $ 19,525 $ 19,491 $ 19,903
Interest on other borrowings 124,770 368,347 262,413 192,240 217,739 340,650
Interest on notes and debentures 39,531 94,807 70,646 59,321 60,436 63,105
Amortization of debt issuance cost 238 844 1,394 594 618 578
Fixed charges excluding interest on
deposits 168,512 480,889 352,490 271,680 298,284 424,236
Interest on deposits 146,547 406,346 420,966 622,436 933,665 1,253,609
Fixed charges including interest on
deposits $ 315,059 $ 887,235 $ 773,456 $ 894,116 $ 1,231,949 $ 1,677,845
COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDEND
REQUIREMENTS
Fixed charges excluding interest on
deposits $ 168,512 $ 480,889 $ 352,490 $ 271,680 $ 298,284 $ 424,236
Preferred stock dividend requirements 9,535 24,117 23,438 15,952 2,262 2,328
$ 178,047 $ 505,006 $ 375,928 $ 287,632 $ 300,546 $ 426,564
Fixed charges including interest on
deposits $ 315,059 $ 887,235 $ 773,456 $ 894,116 $ 1,231,949 $ 1,677,845
Preferred stock dividend requirements 9,535 24,117 23,438 15,952 2,262 2,328
$ 324,594 $ 911,352 $ 796,894 $ 910,068 $ 1,234,211 $ 1,680,173
RATIOS
Earnings to fixed charges
Excluding interest on deposits 1.59 x 1.77 x 1.82 x 1.40 x 0.43 x 0.63 x
Including interest on deposits 1.32 1.42 1.37 1.12 0.86 0.91
Earnings to combined fixed charges and
preferred stock dividend requirements
Excluding interest on deposits 1.51 1.69 1.71 1.32 0.43 0.63
Including interest on deposits 1.28 1.38 1.33 1.10 0.86 0.91
</TABLE>
<PAGE> 44
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,485,358
<INT-BEARING-DEPOSITS> 63,742
<FED-FUNDS-SOLD> 274,500
<TRADING-ASSETS> 27,584
<INVESTMENTS-HELD-FOR-SALE> 2,074,880
<INVESTMENTS-CARRYING> 7,798,357
<INVESTMENTS-MARKET> 7,549,813
<LOANS> 21,134,820
<ALLOWANCE> 559,210
<TOTAL-ASSETS> 34,189,536
<DEPOSITS> 20,601,558
<SHORT-TERM> 8,370,246
<LIABILITIES-OTHER> 435,203
<LONG-TERM> 2,397,444
<COMMON> 1,221
0
303,185
<OTHER-SE> 2,080,679
<TOTAL-LIABILITIES-AND-EQUITY> 34,189,536
<INTEREST-LOAN> 420,973
<INTEREST-INVEST> 150,995
<INTEREST-OTHER> 9,455
<INTEREST-TOTAL> 581,423
<INTEREST-DEPOSIT> 146,547
<INTEREST-EXPENSE> 311,086
<INTEREST-INCOME-NET> 270,337
<LOAN-LOSSES> 0
<SECURITIES-GAINS> (101)
<EXPENSE-OTHER> 265,567
<INCOME-PRETAX> 100,033
<INCOME-PRE-EXTRAORDINARY> 62,621
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 62,621
<EPS-PRIMARY> 0.47
<EPS-DILUTED> 0.47
<YIELD-ACTUAL> 3.55
<LOANS-NON> 228,354
<LOANS-PAST> 55,566
<LOANS-TROUBLED> 29,810
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 542,116
<CHARGE-OFFS> 33,433
<RECOVERIES> 8,787
<ALLOWANCE-CLOSE> 559,210
<ALLOWANCE-DOMESTIC> 559,210
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
