-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WKvUgB/JsMxpF/cF2zLLm0nydviMD/ApdHObWmMxDtfRHuiEdS/Iti+vNzMbEFJS MO33eqgX1ocqxbpb1DWeCw== 0000912057-96-026501.txt : 19961118 0000912057-96-026501.hdr.sgml : 19961118 ACCESSION NUMBER: 0000912057-96-026501 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FLEET FINANCIAL GROUP INC CENTRAL INDEX KEY: 0000050341 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 050341324 STATE OF INCORPORATION: RI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06366 FILM NUMBER: 96665561 BUSINESS ADDRESS: STREET 1: ONE FEDERAL STREET CITY: BOSTON STATE: MA ZIP: 02211 BUSINESS PHONE: 6172922000 MAIL ADDRESS: STREET 1: ONE FEDERAL STREET CITY: BOSTON STATE: MA ZIP: 02211 FORMER COMPANY: FORMER CONFORMED NAME: FLEET FINANCIAL GROUP INC DATE OF NAME CHANGE: 19880110 FORMER COMPANY: FORMER CONFORMED NAME: INDUSTRIAL NATIONAL CORP DATE OF NAME CHANGE: 19820512 8-K 1 FLEET FINANCIAL 8K ============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) November 14, 1996 FLEET FINANCIAL GROUP, INC. (Exact name of registrant as specified in its charter) RHODE ISLAND (State or other jurisdiction of incorporation) 1-6366 05-0341324 (Commission File Number) (IRS Employer Identification No.) ONE FEDERAL STREET, BOSTON, MASSACHUSETTS 02110 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: 617-292-2000 ============================================================================== ITEM 5. OTHER EVENTS ------------ On May 1, 1996, Fleet Financial Group, Inc. ("Fleet") consummated the merger (the "Merger") of Fleet Bank of New York, National Association ("FBNY"), a wholly-owned subsidiary of Fleet, with and into NatWest Bank N.A. ("Natwest") which shall continue its existence as the surviving bank under the name "Fleet Bank N.A.". Pursuant to the terms of the Agreement and Plan of Merger (the "Merger Agreement") dated December 19, 1995 between Fleet and National Westminster Bank Plc ("NatWest Plc"), Fleet purchased from NatWest Plc the three main operating entities of NatWest Bancorp ("Bancorp"), a wholly-owned, indirect subsidiary of NatWest Plc: NatWest Bank N.A., NatWest (Delaware) and NatWest Services Inc. The Merger Agreement also required that certain assets and liabilities of NatWest be retained by Bancorp or transferred to other affiliates of NatWest Plc. NatWest was a wholly-owned, direct subsidiary of National Westminster Bancorp NJ, a New Jersey Corporation, which was a wholly-owned, direct subsidiary of Bancorp, a Delaware corporation and a wholly-owned, indirect subsidiary of NatWest Plc. Fleet hereby files its Unaudited Pro Forma Combined Financial Statements and Notes thereto in connection with the Merger as of September 30, 1996. For additional information regarding the Merger, see the Registrant's Current Reports on Form 8-K/A dated August 5, 1996 and April 5, 1996, and Form 8-K dated August 15, 1996, May 15, 1996, May 1, 1996, March 25, 1996, March 15, 1996 and December 19, 1995. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS --------------------------------- The following exhibits are filed as part of this report: 99(a) Unaudited Pro Forma Combined Financial Statements and Notes Thereto SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed in its behalf by the undersigned hereunto duly authorized. FLEET FINANCIAL GROUP, INC. (Registrant) By: /s/ Robert C. Lamb, Jr. ----------------------- Robert C. Lamb, Jr. Chief Accounting Officer Controller Dated: November 14, 1996 Exhbit No. Description - ------ ----------- 99(a) Unaudited Pro Forma Combined Financial Statements and Notes Thereto EX-99.(A) 2 FINANCIAL STATEMENTS EXHIBIT 99 (a) UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS On May 1, 1996, Fleet Financial Group, Inc. ("Fleet") consummated the merger (the "Merger") of Fleet Bank of New York, National Association ("FBNY"), a wholly-owned subsidiary of Fleet, with and into NatWest Bank N.A. ("NatWest"), a wholly-owned indirect subsidiary of NatWest Plc, which shall continue as the surviving bank under the name "Fleet Bank, N.A." (the "Surviving Bank"). The following Unaudited Pro Forma Combined Statements of Income for the nine months ended September 30, 1996 and for the year ended December 31, 1995, give effect to the Merger accounted for by the purchase method of accounting as if such transaction had occurred on January 1, 1995. The pro forma information is based on the historical consolidated financial statements of Fleet and National Westminster Bancorp, Inc. ("Bancorp") and their subsidiaries under the assumptions and adjustments set forth in the accompanying Notes to the Unaudited Pro Forma Combined Financial Statements. NatWest was a wholly-owned direct subsidiary of National Westminster Bancorp NJ, a New Jersey corporation, which was a wholly-owned direct subsidiary of National Westminster Bancorp, Inc., a Delaware corporation. Bancorp was a wholly-owned indirect subsidiary of NatWest Plc. Pursuant to the terms of the Merger Agreement, certain operating subsidiaries of Bancorp, including its leasing subsidiary, and certain assets and liabilities of NatWest were retained by Bancorp or transferred to other affiliates of NatWest Plc. Such assets and liabilities are included as pro forma adjustments in the Unaudited Pro Forma Combined Financial Statements. The Unaudited Pro Forma Combined Financial Statements should be read in conjunction with the consolidated financial statements of Fleet, filed in Fleet's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996 and Fleet's Annual Report on Form 10-K for the year ended December 31, 1995 and the consolidated financial statements of Bancorp, filed as Exhibit 99b to Fleet's Current Reports on Form 8-K dated May 15, 1996 and March 25, 1996. The pro forma information is presented for comparative purposes only and is not necessarily indicative of the combined financial position or results of operations in the future or of the combined financial position or results of operations which would have been realized had the Merger been consummated during the period or as of the date for which the pro forma information is presented.
FLEET FINANCIAL GROUP, INC. AND NATWEST BANK N.A. UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME For the Nine Months Ended September 30, 1996 (a) Fleet / Balance Sheet NatWest Fleet NatWest Pro Forma Restructuring Pro Forma (Dollars in millions, except per share data) Historical Pro Forma Adjustments Adjustments (d) Combined ---------- --------- ----------- ------------- ---------- Interest and fees on loans and leases $ 3,776 $ 484 $ - $ (51) $ 4,209 Interest on securities 577 137 (35)(b) (59) 620 ---------- ----------- ------------ ------------- ---------- Total interest income 4,353 621 (35) (110) 4,829 Interest expense: Deposits 1,299 190 - (18) 1,471 Short-term borrowings 251 90 - (75) 266 Long-term debt 300 1 9 (b) - 310 ---------- ----------- ------------ ------------- ---------- Total interest expense 1,850 281 9 (93) 2,047 ---------- ----------- ------------ ------------- ---------- Net interest income 2,503 340 (44) (17) 2,782 Provision for credit losses 148 171 - - 319 ---------- ----------- ------------ ------------- ---------- Net interest income after provision for credit losses 2,355 169 (44) (17) 2,463 ---------- ----------- ------------ ------------- ---------- Mortgage banking 403 22 - - 425 Investment services revenue 274 5 - - 279 Service charges, fees and commissions 437 84 - - 521 Venture capital revenue 94 - - - 94 Student loan servicing fees 67 - - - 67 Securities available for sale gains 38 3 - - 41 Gain from branch divestitures 92 - - - 92 Other noninterest income 219 5 - - 224 ---------- ----------- ------------ ------------- ---------- Total noninterest income 1,624 119 - - 1,743 ---------- ----------- ------------ ------------- ---------- Employee compensation and benefits 1,184 168 - - 1,352 Occupancy and equipment 406 50 (1)(c) - 455 Mortgage servicing rights amortization 139 1 - - 140 Marketing 72 14 - - 86 Intangible asset amortization 96 25 (2)(c) - 119 Other noninterest expense 659 121 - - 780 ---------- ----------- ------------ ------------- ---------- Total noninterest expense 2,556 379 (3) - 2,932 ---------- ----------- ------------ ------------- ---------- Income before income taxes 1,423 (91) (41) (17) 1,274 Applicable income taxes 587 (48) (17) (7) 515 ---------- ----------- ------------ ------------- ---------- Net income $ 836 $ (43) $ (24) $ (10) $ 759 ========== =========== ============ ============= ========== Net income applicable to common shares: (f) $ 783 $ (43) $ (31)(b) $ (10) $ 699 ========== =========== ============ ============= ========== Weighted average common shares outstanding: (g) Primary 268,656,037 268,656,037 Fully Diluted 269,259,878 269,259,878 Earnings per share: Primary $ 2.91 $ 2.60 Fully Diluted 2.91 2.60 See accompanying notes to the unaudited pro forma combined financial statements
FLEET FINANCIAL GROUP, INC. AND NATWEST BANK N.A. UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME For the Four Months Ended April 30, 1996 (a) NatWest Bancorp Pro Forma NatWest (Dollars in millions, except per share data) Historical Adjustments (e) Pro Forma ---------- --------- ----------- Interest and fees on loans and leases $ 485 $ (1) $ 484 Interest on securities 138 (1) 137 ----------- ----------- ------------ Total interest income 623 (2) 621 Interest expense: Deposits 190 - 190 Short-term borrowings 82 8 90 Long-term debt 21 (20) 1 ----------- ----------- ------------ Total interest expense 293 (12) 281 ----------- ----------- ------------ Net interest income 330 10 340 Provision for credit losses 171 - 171 ----------- ----------- ------------ Net interest income after provision for credit losses 159 10 169 ----------- ----------- ------------ Mortgage banking 22 - 22 Investment services revenue 5 - 5 Service charges, fees and commissions 84 - 84 Venture capital revenue - - - Student loan servicing fees - - - Securities available for sale gains 3 - 3 Gain from branch divestitures - - - Other noninterest income 6 (1) 5 ----------- ----------- ------------ Total noninterest income 120 (1) 119 ----------- ----------- ------------ Employee compensation and benefits 168 - 168 Occupancy and equipment 51 (1) 50 Mortgage servicing rights amortization 1 - 1 Marketing 14 - 14 Intangible asset amortization 25 - 25 Other noninterest expense 234 (113) 121 ----------- ----------- ------------ Total noninterest expense 493 (114) 379 ----------- ----------- ------------ Income before income taxes (214) 123 (91) Applicable income taxes (94) 46 (48) ----------- ----------- ------------ Net income $ (120) $ 77 $ (43) =========== =========== ============ Net income applicable to common shares: (f) $ (120) $ 77 $ (43) =========== =========== ============ See accompanying notes to the unaudited pro forma combined financial statements
FLEET FINANCIAL GROUP, INC. AND NATWEST BANK N.A. UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME For the Twelve Months Ended December 31, 1995 (a) Fleet / Balance Sheet NatWest Fleet NatWest Pro Forma Restructuring Pro Forma (Dollars in millions, except per share data) Pro Forma Pro Forma Adjustments Adjustments(d) Combined ----------- --------- ----------- -------------- -------- Interest and fees on loans and leases $4,785 $1,499 $ - $ (279) $6,005 Interest on securities 1,365 641 (105)(b) (1,006) 895 ----------- --------- -------- -------- --------- Total interest income 6,150 2,140 (105) (1,285) 6,900 Interest expense: Deposits 1,782 619 - (271) 2,130 Short-term borrowings 836 446 - (872) 410 Long-term debt 478 - 29 (b) - 507 ----------- --------- -------- -------- --------- Total interest expense 3,096 1,065 29 (1,143) 3,047 ----------- --------- -------- -------- --------- Net interest income 3,054 1,075 (134) (142) 3,853 Provision for credit losses 102 95 - - 197 ----------- --------- -------- -------- --------- Net interest income after provision for credit losses 2,952 980 (134) (142) 3,656 ----------- --------- -------- -------- --------- Mortgage banking 512 30 - - 542 Investment services revenue 322 16 - - 338 Service charges, fees and commissions 496 237 - - 733 Venture capital revenue 37 - - - 37 Student loan servicing fees 72 - - - 72 Securities available for sale gains 38 90 - - 128 Other noninterest income 387 143 - - 530 ----------- --------- -------- -------- --------- Total noninterest income 1,864 516 - - 2,380 ----------- --------- -------- -------- --------- Employee compensation and benefits 1,474 452 - - 1,926 Occupancy and equipment 468 136 (3)(c) - 601 Mortgage servicing rights amortization 196 2 - - 198 Marketing 94 52 - - 146 Intangible asset amortization 113 77 (33)(c) - 157 Merger and restructuring related charges 490 7 - - 497 Loss on assets held for sale or accelerated disposition 175 - - - 175 Other noninterest expense 787 237 - - 1,024 ----------- --------- -------- -------- --------- Total noninterest expense 3,797 963 (36) - 4,724 ----------- --------- -------- -------- --------- Income before income taxes 1,019 533 (98) (142) 1,312 Applicable income taxes 420 210 (52) (57) 521 ----------- --------- -------- -------- --------- Net income $599 $323 $ (46) $ (85) $791 =========== ========= ======== ======== ========= Net income applicable to common shares: (f) $404 $323 $ (88)(b) $ (85) $554 =========== ========= ======== ======== ========= Weighted average common shares outstanding: (g) Primary 264,352,367 264,352,367 Fully Diluted 265,442,513 265,442,513 Earnings per share: Primary $1.53 $2.10 Fully Diluted 1.52 2.09
See accompanying notes to the unaudited pro forma combined financial statements FLEET FINANCIAL GROUP, INC. AND NATWEST BANK N.A. UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME For the Twelve Months Ended December 31, 1995 (a)
Fleet Pro Forma Fleet (Dollars in millions, except per share data) Historical Adjustments(h) Pro Forma -------------- -------------- ----------- Interest and fees on loans and leases $4,721 $64 $4,785 Interest on securities 1,304 61 1,365 -------------- -------- -------------- Total interest income 6,025 125 6,150 Interest expense: Deposits 1,726 56 1,782 Short-term borrowings 801 35 836 Long-term debt 478 - 478 -------------- -------- -------------- Total interest expense 3,005 91 3,096 -------------- -------- -------------- Net interest income 3,020 34 3,054 Provision for credit losses 101 1 102 -------------- -------- -------------- Net interest income after provision for credit losses 2,919 33 2,952 -------------- -------- -------------- Mortgage banking 511 1 512 Investment services revenue 322 - 322 Service charges, fees and commissions 492 4 496 Venture capital revenue 37 - 37 Student loan servicing fees 72 - 72 Securities available for sale gains 32 6 38 Other noninterest income 384 3 387 -------------- -------- -------------- Total noninterest income 1,850 14 1,864 -------------- -------- -------------- Employee compensation and benefits 1,448 26 1,474 Occupancy and equipment 459 9 468 Mortgage servicing rights amortization 190 6 196 Marketing 93 1 94 Intangible asset amortization 105 8 113 Merger and restructuring related charges 490 - 490 Loss on assets held for sale or accelerated disposition 175 - 175 Other noninterest expense 775 12 787 -------------- -------- -------------- Total noninterest expense 3,735 62 3,797 -------------- -------- -------------- Income before income taxes 1,034 (15) 1,019 Applicable income taxes 424 (4) 420 -------------- -------- ------------- Net income $610 $ (11) $599 ============== ======== ============= Net income applicable to common shares: (f) $416 $ (12) $404 ============== ======== ============= Weighted average common shares outstanding: (g) Primary 264,796,217 264,352,367 Fully Diluted 265,886,363 265,442,513 Earnings per share: Primary $1.57 $1.53 Fully Diluted 1.57 1.52
See accompanying notes to the unaudited pro forma combined financial statements
FLEET FINANCIAL GROUP, INC. AND NATWEST BANK N.A. UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME For the Twelve Months Ended December 31, 1995 (a) NatWest Bancorp Pro Forma NatWest (Dollars in millions, except per share data) Historical Adjustments(e) Pro Forma ---------- -------------- --------- Interest and fees on loans and leases $1,508 $ (9) $1,499 Interest on securities 642 (1) 641 ---------- -------- --------- Total interest income 2,150 (10) 2,140 Interest expense: Deposits 619 - 619 Short-term borrowings 420 26 446 Long-term debt 61 (61) 0 ---------- -------- --------- Total interest expense 1,100 (35) 1,065 ---------- -------- --------- Net interest income 1,050 25 1,075 Provision for credit losses 95 - 95 ---------- -------- --------- Net interest income after provision for credit losses 955 25 980 ---------- -------- --------- Mortgage banking 30 - 30 Investment services revenue 16 - 16 Service charges, fees and commissions 237 - 237 Venture capital revenue - - - Student loan servicing fees - - - Securities available for sale gains 90 - 90 Other noninterest income 145 (2) 143 ---------- -------- --------- Total noninterest income 518 (2) 516 ---------- -------- --------- Employee compensation and benefits 459 (7) 452 Occupancy and equipment 137 (1) 136 Mortgage servicing rights amortization 2 - 2 Marketing 56 (4) 52 Intangible asset amortization 78 (1) 77 Merger and restructuring related charges 10 (3) 7 Loss on assets held for sale or accelerated disposition - - - Other noninterest expense 224 13 237 ---------- -------- --------- Total noninterest expense 966 (3) 963 ---------- -------- --------- Income before income taxes 507 26 533 Applicable income taxes 201 9 210 ---------- -------- --------- Net income $306 $17 $323 ========== ======== ========= Net income applicable to common shares: (f) $306 $17 $323 ========== ======== =========
See accompanying notes to the unaudited pro forma combined financial statements NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS (a) The pro forma information presented is not necessarily indicative of the results of operations that would have resulted had the Merger been consummated at the beginning of the period indicated, nor is it necessarily indicative of the results of operations in future periods of the combined entities. Under generally accepted accounting principles ("GAAP"), the assets and liabilities of NatWest will be combined at market value with those of Fleet with the excess of the purchase price over the net assets acquired allocated to goodwill. On November 30, 1995, Fleet completed the merger (the "Shawmut Merger") of Shawmut National Corporation ("Shawmut") with and into Fleet with such merger accounted for as a pooling of interests. The historical results of NatWest have been included in these Unaudited Pro Forma Combined Financial Statements for the four months ended April 30,1996 and the twelve months ended December 31, 1995. The pro forma combined financial statements do not give effect to the anticipated cost savings in connection with the Merger or the Shawmut Merger. While no assurance can be given, Fleet expects to achieve cost savings of approximately $200 million (pre-tax) within eighteen months following the Merger. Cost savings of $400 million (pre-tax) are also expected to be achieved in connection with the Shawmut Merger. Such cost savings are expected to be achieved within the first fifteen months after the consummation of the Shawmut Merger. Cost savings from both the Merger and the Shawmut Merger are expected to be realized primarily through reductions in staff, elimination and consolidation of certain branches, and the consolidation of certain offices, data processing and other redundant back-office operations. The extent to which cost savings will be achieved in connection with the Merger and the Shawmut Merger is dependent upon various factors beyond the control of Fleet, including the regulatory environment, economic conditions, unanticipated changes in business conditions and inflation. Therefore, no assurances can be given with respect to the ultimate level of cost savings to be realized, or that such savings will be realized in the time frame currently anticipated. The NatWest results of operations for the four months ended April 30, 1996 include $119 million (after-tax) of charges, including loan loss provision and a property write-down, recorded by Natwest prior to the consummation of the merger. The pro forma information gives effect to the Merger as if the Merger had occurred on January 1, 1995. In connection with the Merger, Fleet substantially restructured its balance sheet to replace lower-yielding assets, primarily securities and residential loans, with higher-earning assets acquired from NatWest, and to replace higher-cost funding with lower-cost deposits acquired from NatWest during the first quarter of 1996 (see note d). The pro forma information gives effect to the balance sheet restructuring. However, due to differences in market conditions and the balance sheet mix and size during 1995 and 1996 compared to the current market conditions and the current balance sheet mix and size, pro forma results of operations may not be indicative of the results of operations in the future or which would have resulted had the Merger been consummated during the period for which the pro forma information is presented. NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS (b) On May 1, 1996, Fleet purchased NatWest for $2.7 billion in cash. The following funding tranasctions occurred in conjunction with the Merger and are reflected in the accompanying Unaudited Pro Forma Combined Financial Sttaements. The $2.7 billion purchase price was funded through the issuance of $600 million of preferred stock with a weighted average dividend rate of 6.94%, the issuance of $400 million of long-term debt with an average borrowing rate of 7.20%, dividends of $1.375 billion received from Fleet subsidiaries and asset sales within Fleet Bank N.A. totaling $325 million. The source of funds for the $1.375 billion in dividends received from subsidiaries were assumed to be the result of asset sales, primarily securities. As part of this transaction, pro forma adjustments assume Fleet raised an additional $675 million of short-term borrowings (primarily commercial paper) to recapitalize certain of its subsidiaries which was utilized by such subsidiaries to reduce short-term borrowings by $675 million. All funding transactions are assumed to have occurred as of January 1, 1995. (c) Purchase accounting adjustments include adjustments to reflect the estimated fair value of the assets acquired and liabilities assumed, the elimination of NatWest's stockholder's equity, and the recording of goodwill in accordance with the purchase method of accounting. Adjustments have been made to the Unaudited Pro Forma Combined Income Statement to reflect the recording of goodwill amortization as well as to eliminate any goodwill amortization recorded at NatWest, in accordance with the purchase method of accounting. Purchase price $2,700 Historical net tangible assets acquired $3,252 Elimination of NatWest goodwill and core deposit intangible (959) 2,293 ----------- Estimated fair value adjustments (277) Estimated purchase price adjustment 24(1) --------- Estimated fair value of net assets acquired 2,040 --------- Excess cost over net assets acquired (goodwill) $ 660 ========= (1) In accordance with the Merger Agreement, the purchase price was adjusted based upon the final closing tangible equity of NatWest as of the date of the Merger. NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS Goodwill of $660 million has been estimated assuming a purchase price of $2.7 billion. The Merger Agreement provides for additional payments (the "Earnout") to be made annually based upon the level of earnings from the NatWest franchise, not to exceed $560 million during an eight year "Earnout Period", which will commence on May 1, 1996 and end on April 30, 2004. Assuming full payout of the Earnout, the total purchase price would be $3.26 billion resulting in an increase to goodwill of $560 million. Such increase, if any, will be recorded when earned during the Earnout Period and will be amortized over the remaining life of the goodwill. Included in the pro forma adjustments is an increase to goodwill amortization reflecting the amortization of the estimated payment required for fiscal year 1995 under the Earnout assuming consummation of the Merger as of January 1, 1995. This would result in an increase to goodwill of $169 million at December 31, 1995 and additional goodwill amortization of $8 million during the first nine months of 1996. This estimate is based on the level of NatWest pro forma earnings and is not necessarily indicative of payments that may be made, if any. Estimated fair value adjustments include merger-related charges and other adjustments to reflect the estimated fair value of assets being acquired and liabilities being assumed. Significant adjustments include a liability of $250 million to reflect Fleet's best estimate of merger-related charges. These merger related charges include personnel, facilities, data processing and other transaction costs. Personnel charges relate primarily to the costs of employee severance, the costs related to the termination of certain employee benefit plans and employee assistance for separated employees. Facilities charges are the result of the consolidation of back-office operations, and consist of lease-termination costs, writedowns of owned properties, and other facilities-related costs. Data processing costs consist primarily of the write-off of duplicate or incompatible systems hardware and software. Other merger expenses consist primarily of transaction-related costs, such as professional and other fees. Goodwill due to the Merger is assumed to be amortized on a straight line basis over 15 years. (d) In conjunction with the Merger, Fleet and Bancorp took certain actions to restructure the Combined Balance Sheet through the liquidation of low-return assets and the reduction of borrowed funds. Since Fleet and Bancorp restructured their respective balance sheets during the first quarter of 1996, the Unaudited Pro Forma Combined Statements of Income assume different levels of restructuring for the first nine months of 1996, when compared to the twelve months ended December 31, 1995. The accompanying Unaudited Pro Forma Combined Statements of Income assume the reduction of approximately $7.0 billion and $19.9 billion of assets and an equal amount of borrowed funds for the nine months ended September 30, 1996 and the twelve months ended December 31, 1995. Balance sheet restructuring initiatives were substantially completed during the first quarter of 1996. The assets assumed to be reduced include: approximately $1.8 billion and $13.4 billion of securities with an average yield of 6.24% and 6.18% for 1996 and 1995, respectively; approximately $2.6 billion and $3.5 billion of loans, primarily residential real estate, with an average yield of 7.99% and 7.98% for 1996 and 1995, respectively; and approximately $2.6 billion and $3.0 billion in federal funds sold with an average yield of 4.74% and 5.89% for 1996 and 1995, respectively. The $7.0 billion and $19.9 billion of borrowed funds assumed to be reduced include: approximately $5.7 billion and $14.6 billion of short-term borrowings with an average borrowing rate of 5.30% and 5.69% for 1996 and 1995, respectively; and $1.3 billion and $5.3 billion of time deposits with an average borrowing rate of 5.33% and 5.89% for 1996 and 1995, respectively. Asset yields and funding costs have been estimated based upon historical weighted average yields and funding costs of similar assets and liabilities in the aggregate and may not be indicative of the results of operations in the future or which would have been realized had such transactions been consummated during the period for which the pro forma information is presented. The balance sheet restructuring adjustments have been calculated assuming a certain balance sheet size as well as a certain mix of balance sheet assets (primarily securities and residential loans) to total assets during the first nine months of 1996 and the year ended December 31, 1995. As a result, restructuring assumptions may not be indicative of the results of operations in the future or that would have been achieved had the Merger been consummated at the beginning of the period indicated. NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS (e) Pursuant to the Merger Agreement, certain operating subsidiaries of Bancorp, including its leasing business, and certain assets and liabilities of NatWest were retained by Bancorp. Pro forma adjustments reflect the approximate impact of those assets not being purchased and liabilities not being assumed. (f) The Fleet/NatWest Pro Forma net income applicable to common shares reflects the sum of the Fleet Pro Forma net income applicable per common share and the NatWest Pro Forma net income applicable per common share adjusted for the purchase accounting, funding, and restructuring adjustments. (g) The Fleet Pro Forma weighted average shares outstanding for the year ended December 31, 1995, reflects the effect of reissuing treasury stock in connection with the NBB Bancorp, Inc. ("NBB") and Northeast Federal Corp. ("Northeast") transactions as if such repurchase of common stock and reissuance of treasury stock occurred on January 1, 1995. (h) During 1995, Fleet also completed the merger (the "NBB Merger") of NBB with and into Fleet, the merger (the "Plaza Merger") of Plaza Home Mortgage Corp. ("Plaza") with and into Fleet, the merger (the "Northeast Merger") of Northeast with and into Fleet, the acquisition (the "Barclays Acquisition") of substantially all of the assets of Barclays Business Finance Division of Barclays Business Credit, Inc. ("Barclays") by Fleet and Fleet's repurchase (the "FMG Repurchase") of the publicly-held shares of Fleet's majority-owned subsidiary, Fleet Mortgage Group, Inc. ("FMG"), each of which was accounted for by the purchase method of accounting and each of which is included in the Unaudited Pro Forma Combined Balance Sheet. Pro forma adjustments to the Unaudited Pro Forma Combined Statements of Income reflect the impact of the NBB Merger, the Barclays Acquisition, the FMG Repurchase, the Plaza Merger and the Northeast Merger which were consummated on January 27, 1995, January 31, 1995, February 28, 1995, March 3, 1995 and June 9, 1995, respectively, as if such transactions had been consummated on January 1, 1995. Certain acquisitions completed by NatWest during 1995 have not been reflected in the Unaudited Pro Forma Combined Financial Statements due to immateriality. -----END PRIVACY-ENHANCED MESSAGE-----