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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
July 20, 1998
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(Date of earliest event reported)
Peoples Heritage Financial Group, Inc.
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(Exact name of registrant as specified in its charter)
Maine 0-16947 01-0437984
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
P.O. Box 9540, One Portland Square, Portland, Maine 04112-9540
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(Address of principal executive offices) (Zip Code)
(207) 761-8500
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year, if changed since last
report)
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Item 5. Other Events
On July 20, 1998, Peoples Heritage Financial Group, Inc. ("PHFG")
announced that it and SIS Bancorp, Inc. (the "Company") had entered into an
Agreement and Plan of Merger, dated as of July 20, 1998 (the "Agreement"), which
sets forth the terms and conditions pursuant to which the Company would be
merged with and into Peoples Heritage Merger Corp., a wholly-owned subsidiary of
PHFG (the "Merger"). The Agreement provides, among other things, that as a
result of the Merger, each outstanding share of common stock of the Company
(subject to certain exceptions) will be converted into the right to receive 2.25
shares of PHFG's common stock, plus cash in lieu of any fractional share
interest. Consummation of the Merger is subject to a number of conditions,
including, but not limited to, (i) the approval of the Agreement and the Merger
by the shareholders of the Company and (ii) the receipt of requisite regulatory
approvals.
Pursuant to the Agreement, the Company's Massachusetts-based banking
subsidiary, Springfield Institution for Savings, will be merged into PHFG's
Massachusetts-based banking subsidiary, Family Bank, FSB. It is PHFG's current
intention to conduct business in the market areas in which Springfield
Institution for Savings conducted business prior to such bank merger under the
name Springfield Institution for Savings. The Company's other banking
subsidiary, Connecticut-based Glastonbury Bank and Trust Company, will be held
as a separate institution.
Pursuant to the Agreement, one director of the Company will become a
director of PHFG and F. William Marshall, Jr., the Company's President and Chief
Executive Officer, will become an executive officer of PHFG and Vice Chairman of
PHFG's Senior Management Committee.
In connection with the Agreement, PHFG and the Company entered into a
Stock Option Agreement, dated as of July 20, 1998, pursuant to which the Company
granted PHFG an option (the "Option") to purchase up to 1,385,383 shares of the
Company's common stock (subject to adjustment as set forth therein), which
represents 19.9% of the Company's outstanding shares of common stock, at a
purchase price of $44.00 per share (subject to adjustment as set forth therein).
The Option will become exercisable upon the occurrence of certain events, as
specified in the Stock Option Agreement, none of which has occurred as of July
20, 1998.
The press release issued by PHFG and the Company with respect to the
announcement of the transaction described herein is attached hereto as Exhibit
99.1 and is hereby incorporated herein by reference in its entirety. Also
attached as Exhibit 99.2 and incorporated herein by reference are certain
forward-looking statements made by PHFG in connection with a presentation given
by PHFG to investment analysts on July 20, 1998.
The press release and the portions of the analyst presentation
incorporated herein by reference contain forward-looking statements with respect
to the financial condition, results of operations and business of PHFG upon
consummation of the Merger, including statements relating to: (a) the estimated
cost savings and accretion to reported earnings that will be realized from the
Merger; (b) the estimated impact on revenues of the Merger, and (c) the
restructuring charges
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expected to be incurred in connection with the Merger. These forward-looking
statements involve certain risks and uncertainties. Factors that may cause
actual results to differ materially from those contemplated by such
forward-looking statements include, among others, the following possibilities:
(1) estimated cost savings from the Merger cannot be fully realized within the
expected time frame; (2) revenues following the Merger are lower than expected;
(3) competitive pressure among depository institutions increases significantly;
(4) costs or difficulties related to the integration of the businesses of PHFG
and the Company are greater than expected; (5) changes in the interest rate
environment reduce interest margins; (6) general economic conditions, either
nationally or in the markets in which PHFG will be doing business, are less
favorable than expected; or (7) legislation or changes in regulatory
requirements adversely affect the businesses in which PHFG would be engaged.
On July 20, 1998, PHFG also issued a press release announcing its
earnings for the three and six months ended June 30, 1998. A copy of this press
release is attached hereto as Exhibit 99.3 and is hereby incorporated by
reference herein in its entirety.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(a) Not applicable.
(b) Not applicable.
(c) The following exhibits are included with this Report:
Exhibit 99.1 Press Release, dated July 20, 1998
Exhibit 99.2 Portions of Analysts Presentation
Exhibit 99.3 Press Release, dated July 20, 1998
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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.
PEOPLES HERITAGE FINANCIAL GROUP, INC.
By: /s/ Peter J. Verrill
-----------------------
Name: Peter J. Verrill
Title: Executive Vice President,
Chief Financial Officer and Treasurer
Date: July 20, 1998
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EXHIBIT 99.1
FOR IMMEDIATE RELEASE
FOR FURTHER INFORMATION:
AT PEOPLES HERITAGE FINANCIAL GROUP
BRIAN ARSENAULT, VICE PRESIDENT, CORPORATE COMMUNICATIONS
(207) 761-8517
AT SIS BANCORP
TING CHANG, VICE PRESIDENT, INVESTOR RELATIONS
(413) 748-8271
PEOPLES HERITAGE TO ACQUIRE SIS BANCORP
EXTENDS FRANCHISE INTO WESTERN MASSACHUSETTS AND CONNECTICUT
Portland, Maine, July 20, 1998 -- Peoples Heritage Financial Group, Inc.
(NASDAQ:PHBK), a multi-state bank and financial services holding company
headquartered in Portland, Maine, has reached a definitive agreement to
acquire Springfield, Massachusetts-based SIS Bancorp, Inc. (NASDAQ:SISB). The
acquisition will create a $12 billion banking company, materially enhance
Peoples' Massachusetts banking franchise and extend it into the western part
of the state. Peoples will also gain its initial presence in Connecticut
through SIS's Glastonbury Bank & Trust Company.
Under the terms of the merger agreement, shareholders of SIS will receive
2.25 shares of Peoples Heritage common stock for each whole share of SIS
common stock plus cash in lieu of any fractional share. Approximately 16.8
million shares of Peoples Heritage common stock will be issued in the
transaction, including shares issuable upon the exercise of substitute stock
options. The exchange will be tax free and accounted for as a pooling of
interests.
Based on a closing price of Peoples Heritage common stock of $25 7/16 per
share on July 17, 1998, the deal is valued at $427.7 million and SIS
shareholders will receive $57.23 of Peoples Heritage common stock for each
share of SIS common stock. The price equates to 3.13 times the book value of
SIS at March 31, 1998 and 21.4 times SIS estimated 1999 earnings.
"We continue to grow as planned, contiguous to our existing franchise through
the acquisition of another strong community bank," said William J. Ryan,
Chairman, President and Chief Executive Officer of Peoples Heritage.
<PAGE>
His comments were echoed by F. William Marshall, Jr., President and Chief
Executive Officer of SIS: "An essential factor in our decision to move
forward on this opportunity is Peoples Heritage's strong commitment to
serving local communities." Mr. Marshall will continue to serve as president
and chief executive officer of SIS and will be named Vice Chairman of the
Executive Management Committee of Peoples Heritage Financial Group.
Under the terms of the agreement, SIS Bank will continue to operate under its
own name. Glastonbury Bank & Trust Company, recently acquired by SIS, will
continue to operate as a Connecticut bank.
The agreement is subject to the receipt of the approval of the shareholders
of SIS and requisite regulatory approvals. It is anticipated that the
transaction will be completed by the end of 1998. As part of the agreement,
SIS gave Peoples Heritage an option to purchase 19.9 percent of its
outstanding common stock under certain circumstances.
Peoples Heritage has $9.8 billion in assets and operates 194 branches through
its three banking subsidiaries: Peoples Heritage Bank with Maine's leading
deposit market share, Bank of New Hampshire with that state's leading deposit
market share, and Family Bank in Massachusetts. The acquisition of SIS will
increase the number of the Company's banking offices in Massachusetts to 56
and create its first banking presence in Connecticut with eight offices,
mostly in central Connecticut. SIS has assets of $1.8 billion and the leading
market share in Hampden County in Massachusetts. Peoples Heritage will have
the eighth largest deposit market share in Massachusetts following completion
of the transaction.
A conference call on the acquisition announcement and Peoples' second quarter
earnings, also announced today, will be held at 10 a.m. eastern time.
(end)
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EXHIBIT 99.2
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Peoples Heritage Financial Group
Makes Strategic Acquisition of
SIS Bancorp
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Peoples Heritage Financial Group SIS Bancorp
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Strategic Rationale
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Compelling strategic fit
- - Extends New England's largest and most profitable community banking
franchise into Western Massachusetts and Central Connecticut
- - Continues top market share standard of performance
- - Brings new business lines to SIS markets and customers; e.g., indirect
auto, public finance, trust and insurance
Financially strong transaction
- - Accretive to EPS and ROE within the first year
- - Increases earnings growth
- - Positive projections based on conservative assumptions
High probability of success
- - PHBK proven integration skills applied to clean, well-
managed company
- - Pricing consistent with industry trends
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Peoples Heritage Financial Group SIS Bancorp
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Transaction Summary
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<TABLE>
<S> <C>
Fixed Exchange Ratio: 2.25 PHBK shares for each SISB share
Price Per Share: $57.23 per SISB share*
Transaction Value: $427.7 million
Accounting / Tax Treatment: Pooling of Interests / Tax Free Exchange
Lock-up Option: 19.9%
Due Diligence: Completed
Expected Closing: Late 1998
Caps / Collars: None
One-Time Merger Costs: $15.8 million (after tax)
Management Considerations: SISB President Marshall to join PHBK senior
management team, one SISB Director
to PHBK Holding Company Board
</TABLE>
* Based on PHBK's price of $25 7/16 on July 17, 1998
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Peoples Heritage Financial Group SIS Bancorp
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Transaction Multiples
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<TABLE>
<S> <C>
Recent PHBK Price Per Share: $25.4375
Exchange Ratio: 2.25 PHBK/SISB
Implied Price Per SISB Share: $57.23
Price / Stated 3/31/98 Book Value Per Share: 313%
Price / 1998 IBES Estimated Earnings Per Share: 23.4 x
Price / 1999 IBES Estimated Earnings Per Share: 21.4 x
Premium to Recent Market Price: 27%
</TABLE>
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Peoples Heritage Financial Group SIS Bancorp
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Peoples Heritage - A History of Impressive Growth
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<TABLE>
<CAPTION>
Pro Forma for SIS Bancorp
12/31/92 3/31/98 CAGR 3/31/98 CAGR
<S> <C> <C> <C> <C> <C>
Total Assets (MMs) $ 2,340 $10,031 31.9% $11,822 36.1%
Total Loans $ 1,660 $ 6,315 29.0% $ 7,153 32.1%
Total Deposits $ 1,897 $ 6,963 28.1% $ 8,268 32.4%
Shareholder's Equity $ 189 $ 745 29.4% $ 860 33.5%
Market Capitalization $ 81 $ 2,252 88.4% $ 2,662 94.5%
</TABLE>
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Peoples Heritage Financial Group SIS Bancorp
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Strengthens The Leading New England Community Bank Franchise
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- - Largest New England based community banking company.
- - SIS fills in important markets in Massachusetts and
significantly enhances franchise.
- - Strong market share in combined Hampshire and Hampden
counties in Massachusetts complements Family Bank dominance
in its markets
- - $11.8 billion in assets.
- - $8.3 billion in deposits.
- - Diversified $7.3 billion loan portfolio.
- - #1 deposit market share in Maine.
- - #1 deposit market share in New Hampshire.
- - #8 deposit market share in Massachusetts.
- - Adds Connecticut presence with Glastonbury Bank & Trust.
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Peoples Heritage Financial Group SIS Bancorp
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Building a More Powerful Franchise
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Map
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Peoples Heritage Financial Group SIS Bancorp
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Peoples Heritage Financial Group and SIS Bancorp Locations
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Map
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Peoples Heritage Financial Group SIS Bancorp
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Positive Impact on Financial Performance
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- - Increases earnings per share by 3 cents in 2000
- - Anticipated cost savings of 25% of SIS operating expenses
- - Revenue enhancements of $2.3 million in 1999 and $4.7
million in 2000
- - Increases market capitalization to $2.66 billion
- - SIS funding costs are lower than Peoples Heritage
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Peoples Heritage Financial Group SIS Bancorp
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Major Community Bank in New England
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<TABLE>
<CAPTION>
Company Total Assets Market Cap States of Operation
- ----------------------------- ------------ ---------- -------------------
<S> <C> <C> <C>
Peoples Heritage Financial Group $11,825 $2,665 MA, ME, NH, CT
Peoples Bank $ 9,150 $2,241 CT
Webster Financial Corp $ 9,100 $1,284 CT
UST Corporation $ 5,509 $1,176 MA
Banknorth Group Inc. $ 2,956 $ 610 MA, NH, VT
Vermont Financial Services $ 2,063 $ 368 MA, NH, VT
Chittenden Corp $ 1,994 $ 516 MA, VT
</TABLE>
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Peoples Heritage Financial Group SIS Bancorp
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Diversified Loan Portfolio
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<TABLE>
<CAPTION>
Peoples SIS Pro Forma % of
Loans (3/31/98) Heritage (1) Bancorp Combined Total
- --------------- ------------ ------- -------- -----
<S> <C> <C> <C> <C>
Residential Mortgages $2,338,831 $279,388 $2,618,219 36%
Consumer (2) 1,818,626 171,037 1,989,663 27%
Commercial Mortgages 1,409,598 188,273 1,597,871 22%
C & I 837,682 221,877 1,059,559 15%
- ----- ------- ------- --------- --
Total Loans $6,404,737 $860,575 $7,265,312
</TABLE>
(1) Includes CFX
(2) SIS consumer loans are only home equity loans
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Peoples Heritage Financial Group SIS Bancorp
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Diversified Deposit Base
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<TABLE>
<CAPTION>
Peoples SIS Pro Forma % of
Deposits (3/31/98) Heritage (1) Bancorp Combined Total
- ------------------ ------------ ------- --------- -----
<S> <C> <C> <C> <C>
CDs $ 3,141,749 $ 556,948 $ 3,698,697 45%
Savings 1,105,641 219,232 1,324,873 16%
Money Market / NOW 1,641,719 355,964 1,997,683 24%
Demand 1,073,944 177,258 1,251,202 15%
- ------ --------------- ----------- ------------ -----
Total Deposits $ 6,963,053 $ 1,309,402 $ 8,272,455
--------------- ----------- ------------
--------------- ----------- ------------
</TABLE>
(1) Includes CFX
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Peoples Heritage Financial Group SIS Bancorp
<PAGE>
Pro Forma Balance Sheet Data
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<TABLE>
<CAPTION>
Peoples SIS Pro Forma
Heritage (1) Bancorp Combined
------------ ----------- ------------
<S> <C> <C> <C>
Total Loans $ 6,404,737 $ 860,575 $ 7,265,312
Loan Loss Reserve 89,454 23,239 112,693
Intangible Assets 125,900 -- 125,900
Total Assets $10,030,947 $ 1,793,968 $ 11,824,915
----------- ----------- ------------
----------- ----------- ------------
Total Deposits $ 6,963,053 $ 1,309,402 $ 8,272,455
----------- ----------- ------------
----------- ----------- ------------
Shareholders' Equity $ 744,610 $ 128,185 857,034
----------- ----------- -------
----------- ----------- -------
Shares Outstanding (3/31/98) 88,358 6,970 104,041
Book Value Per Share $8.43 $18.39 $8.24
Tangible Book Value Per Share $7.00 $18.39 $7.03
</TABLE>
(1) Includes CFX Corp., acquired April 10, 1998.
(2) Includes $15.8 million after tax merger adjustment.
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Peoples Heritage Financial Group SIS Bancorp
<PAGE>
Earnings Per Share Analysis
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<TABLE>
<CAPTION>
1999 Estimate 2000 Estimate
------------- -------------
Operating Earnings (1): Dollars Per Share Dollars Per Share
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Peoples Heritage $154,447 $1.71 $169,892 $1.88
SIS Bancorp 18,770 20,741
After-Tax Synergies and Cost Savings (2) 7,712 7,982
After-Tax Revenue Enhancements (3) 2,283 4,734
----- -----
Pro Forma Operating Earnings $183,212 $1.72 $203,310 $1.91
Net Earnings Accretion / (Dilution) 0.47% 1.28%
Pro Forma Diluted Shares 106,645 106,737
</TABLE>
(1) 1999 earnings based on IBES consensus; 2000 assumes growth of approximately
10%
(2) Assumes 25% cost savings
(3) Revenue enhancements come from customer service fees, improved net interest
margin and new business lines
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Peoples Heritage Financial Group SIS Bancorp
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Additional Opportunities
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- - Conservative consolidation savings
- - Additional operating revenue opportunities:
- Customer growth
- Increased fee income
- Margin expansion
- - Deployment of surplus capital
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Peoples Heritage Financial Group SIS Bancorp
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Executive Summary
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- - Transaction is consistent with Peoples Heritage acquisition
strategy .
- Acquire well managed, quality companies.
- Acquire companies in attractive markets
- - SIS has built a strong franchise in Massachusetts and a
growing franchise in Connecticut.
- Transaction significantly improves PHBK's market
share in Massachusetts and provides entry into
Connecticut
- - Pricing is consistent with premiums paid for companies with SIS's
financial performance.
- PHBK shareholders will benefit from EPS accretion
and ROE improvement during the first year of
combined operation.
- - Solidifies PHBK's position as the largest and most profitable
New England Community bank.
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Peoples Heritage Financial Group SIS Bancorp
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Note on Forward Looking Information
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This presentation contains forward looking information for Peoples Heritage
Financial Group and SIS Bancorp on a stand alone basis and a pro forma combined
basis. Actual results may vary materially from the forward looking statements.
Factors which could result in material variations from forward looking
statements include, but are not limited to: changes in interest rates which
could affect net interest margins and net interest income; delays in cost
savings measures or a failure to realize anticipated cost savings; competitive
factors which could affect noninterest income, costs of deposits, and interest
income; and general economic conditions which could negatively affect the volume
of loan originations, the amount of loan losses and levels of noninterest
income.
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Peoples Heritage Financial Group SIS Bancorp
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EXHIBIT 99.3
FOR IMMEDIATE RELEASE
FOR FURTHER INFORMATION, CONTACT:
BRIAN ARSENAULT, VICE PRESIDENT, CORPORATE COMMUNICATIONS
(207) 761-8517
RECORD QUARTERLY OPERATING EARNINGS AT PEOPLES HERITAGE
Portland, Maine, July 20 , 1998 -- Peoples Heritage Financial Group, Inc.
(NASDAQ:PHBK) today announced record quarterly operating earnings of $32.4
million, or 36 cents per diluted share, for the second quarter ended June 30,
1998, up 27 percent from net earnings of $25.5 million, or 29 cents per diluted
share for the same quarter a year ago.
"We are gratified that we continue to generate record earnings,"
said William J. Ryan, Company Chairman, President and Chief
Executive Officer. "The record operating earnings reflect both
strong internal earnings growth and a continuation of our history
of solid acquisitions."
The quarter ended June 30, 1998 reflected for the first time additional
operating earnings from the acquisition of CFX Corporation, completed on April
10, 1998. All numbers were restated for the CFX acquisition. Earnings per share
numbers reflect the Company's two-for-one stock split on May 28, 1998.
Additionally, second quarter net income was affected by one-time after-tax
charges of $24.0 million related to the acquisition of CFX. As a result of those
one-time charges, net income for the quarter ended June 30, 1998 was $8.3
million, or 9 cents per diluted share.
Both net interest income and noninterest income for the second quarter ended
June 30, 1998 were up substantially over the same quarter a year ago, restated
for the CFX acquisition. Net interest income for the quarter ended June 30 ,1998
rose 8 percent to $90.8 million over the same quarter a year ago, reflecting
particularly heavy growth in mortgage lending and strong growth in commercial
and consumer loans as well.
<PAGE>
Noninterest income for the quarter ended June 30, 1998 increased by 50 percent
to $26.9 million as compared to $17.9 million for the second quarter of 1997.
Gains in mortgage banking fees because of strong mortgage volumes, increases
from trust and investment services and the addition of income from the Company's
insurance subsidiary, Morse, Payson & Noyes Insurance, acquired in late 1997,
were key factors in the strong noninterest income growth.
The quarter also saw strong performance in several key operating ratios. Return
on average equity for the quarter ended June 30, 1998, on an operating basis,
was a record 17.84%. Return on average assets for the quarter ended June 30,
1998, on an operating basis, was 1.33%, up from 1.27% for the same quarter a
year ago. The Company's operating efficiency ratio achieved a new quarterly low
of 55.98% for the quarter ended June 30, 1998.
The Company's book value per share was $8.27 at June 30, 1998 based on
87,565,134 shares outstanding. Shareholders' equity at June 30, 1998 was $724.0
million.
Peoples Heritage Financial Group is a $9.8 billion multi-state banking and
financial services holding company headquartered in Portland, Maine. The
Company's Maine banking subsidiary, Peoples Heritage Bank, operates 75 banking
offices throughout the state and holds Maine's number one deposit market share.
Bank of New Hampshire, the Company's New Hampshire banking subsidiary, operates
84 branches and enjoys New Hampshire's top deposit market share. Family Bank,
operating primarily in northeastern and central Massachusetts with four offices
in southern New Hampshire, currently has 31 Massachusetts branches. The Company
will soon expand its Massachusetts banking franchise and enter Connecticut for
the first time with the acquisition of SIS Bancorp, headquartered in
Springfield, Massachusetts, announced today.
A conference call on second quarter earnings and the acquisition announcement
will be held at 10 a.m. eastern time today. To participate, dial 888 850-2440,
confirmation code 502251.
(end)
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